CEO’S MESSAGE
CONTENTS
Chair’s Message
CEO’s Message
3
4
Directors’ Report (including Operating and Financial Review) 5 - 23
Environment, Social and Governance
Financial Report
Auditor’s Independence Declaration
Consolidated Statement of Profit or Loss
Consolidated Statement of Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes In Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors Declaration
Independent Auditor’s Report
ASX Additional Information
Dividend Details
Corporate Information
24-30
31-102
32
33
34
35
36-37
38
39 - 102
103
104-107
108-109
110
111
2 AUB GROUP ANNUAL REPORT 2019
CHAIR’S MESSAGE
Dear Shareholders,
I am pleased to share AUB Group’s performance for Financial
Year 2020 as we deliver above guidance with our strongest
annual growth in profit since 2013. The Group delivered an
Underlying Net Profit After Tax (UNPAT) of $53.4m, an increase
of 15.2% from FY19, executed a major acquisition, made strong
progress on our Strategic Priorities, while maintaining a strong
balance sheet and capital position.
As a result, the Directors have declared a final fully franked
dividend of 35.5 cents per share, payable on 6 October 2020.
This, together with the interim dividend of 14.5 cents, results in a
full year dividend of 50.0 cents, an 8.7% increase on FY19 and a
a net underlying earnings payout ratio of 69.1%. Strong business
results as well as disciplined M&A growth led to an
improvement in Earnings per Share, despite the full year
dilutionary impact of our share issue in FY19. Divisionally, our
As a result, the Group has been pro-active in its response,
including prudent capital management, a deferral of our interim
dividend payment, a priority focus on debtors and dividend
receipts across the network, ongoing stress-testing and portfolio
reviews, as well as engaging with our underwriting partners to
provide broker and client hardship assistance programs. The
Group also agreed to mutually discontinue an acquisition of MGA
to preserve liquidity and funding in an uncertain economic
environment.
Financial Year 2020 was also the first full year of AUB Group
under the leadership of Mike Emmett as CEO and MD. The
pleasing financial results, progress on key strategic priorities
and a highly engaged network have been notable successes in
the period. The Board looks forward to continually challenging
and supporting Mike and the Executive team as they focus on
delivering on our shareholders’ growth ambitions.
Australian Broking and NZ business delivered double-digit
The Group acknowledges our responsibility to actively lead and
growth and whilst the majority of Agencies also performed
support Environmental, Social, and Governance (ESG) initiatives,
strongly, their results were offset by the impact of COVID-19 on
and to have clearly articulated governance principles. In FY20,
SURA Hospitality and ongoing weakness in the strata book. The
the Group has increased its focus on our ESG reporting, as
Health and Rehabilitation portfolio delivered robust growth as a
reported on page 25 of this report. The report shares our key
result of transformation efforts to improve efficiency and
ESG objectives, our plan to deliver and an overview of current
utilisation, and the Group executed an exit from our investment
progress. This includes key metrics on our emissions and our
in Allied Health on 1 April 2020.
Despite a challenging and uncertain macroeconomic
environment, our balance sheet remains strong, and the
Corporate entity was strongly cash generative with $50.6m in
operating cashflow and has access to $94.0m in cash and debt
funding, with a leverage ratio of 2.47:1 and a gearing ratio of
34.2% at 30 June 2020.
efforts to promote diversity in the workforce. The Group and our
partners continue to seek ways in which we can contribute to the
communities in which we operate, minimise the environmental
impact of our business activities and ensure the fair treatment of
our customers, employees and suppliers. Delivering on our
objectives is integral to safeguarding a stronger future for our
clients, partners, employees, and shareholders. Additionally, the
Board has also increased expectations for transparency on risk
The Group made successful progress on its strategic priorities
management activities and continues to pursue a strengthening
with key highlights that include an acquisition of BizCover,
of risk processes across the network (see page 9 for an
launch of our high-volume broking platform ExpressCover,
overview).
restructuring the Corporate Office to deliver $2.8m (after tax) in
full year savings, and optimised our portfolio through multiple
business mergers and portfolio realignments. We sold our
investment in Allied Health and delivered on 8 new and/or
enhanced refreshed insurer agreements.
Looking ahead, the Group’s strategic focus in FY21 will be an
evolution of the FY20 initiatives to create improved commercial
and operational outcomes. Our result in 2020 sets a new
benchmark for the future of AUB Group, and our focused effort
to enhance our growth drivers will be key to delivering on our
Notably, in February 2020 the Group undertook a major
growth ambitions.
acquisition of a 40% stake in BizCover, Australia’s leading online
commercial broking platform. The investment provides the
Group a share in a high-growth, scalable business model which
complements our core, expands our market share, provides
immediate and scalable access to the lucrative micro-SME
segment, whilst also securing the technology that under-pins
ExpressCover.
I would like to conclude by thanking all our employees and
partners for their contributions during the year. Our pleasing
results in FY20 are a reflection of their effort and commitment to
the Groups’ success and demonstrate a business that is built on
strong foundations by a focused and committed team.
On Tuesday 10 November 2020, we will be hosting our Annual
Financial Year 2020 has been a year of uncertainty for our
General Meeting in Sydney. The Directors and senior
clients, brokers and underwriting partners which included a
management team will be present and look forward to answering
catastrophic bushfire season, the ongoing drought and more
your questions on our FY20 performance, strategy, and outlook.
recently the impacts of the unprecedented COVID-19 pandemic.
David Clarke
Chair
AUB GROUP ANNUAL REPORT 2020 3
CEO’S MESSAGE
Dear Shareholders,
FY20 was an important year for AUB Group and I am proud to
share our strong full-year result for a period where we performed
above guidance, despite a challenging external economic
environment. The Group delivered on its FY19 commitment to
materially improve our short-term financial performance while
concurrently putting in place strategies that enable us to achieve
strong growth in Underlying NPAT for the medium and long term.
as variations in shareholdings with existing members. Our
technology agenda continues to expand with delivery of
enhancements to our core broking system together via the launch
of ExpressCover, our new high-volume quote platform, and
Sentinel, our new agency system, promising significant
improvements in process efficiency for the benefit of both
customers and AUB teams. Our approach to pairing and merging
businesses within the AUB network has led to a number of
consolidations and we are seeing improved margins from this
In FY20, our Underlying NPAT of $53.42m grew by 15.2% from
strategy. We have worked closely with our Insurance partners to
FY19, our best year-on-year growth since FY13. The Group’s
enhance our propositions for clients. In addition to new
Underlying EPS grew by 8.7% in comparison to FY19, partially
arrangements for ExpressCover agreed with six insurers, we have
diluted by the full-year impact of equity issued in FY19. The Board
announced significant new agreements with two of our major
has proposed an increased final dividend of 35.5 cents per share
insurance partners to provide substantially improved benefits to
giving a total dividend for FY20 of 50.0 cents per share, an increase
clients and brokers.
of 8.7%.
Australian Broking delivered growth of 14.6% in pre-tax profit,
underpinned by an improvement of 130bps in Underlying EBIT
2020 has been a challenging year, particularly managing the
ongoing impacts of the COVID-19 pandemic. The diversity of our
portfolio and a relatively defensive business model combined with
Margin. The result was the outcome of an ongoing focus to drive
our financial strength has underpinned the resilience of AUB
organic growth, increasing business efficiency, the impact of our
Group. Despite the uncertainty, our clients again placed their trust
40% investment in BizCover as well as an increase in Commercial
in us, leading to a historically high premium retention rate of 92%.
Lines Insurance premiums. New Zealand performed well, delivering
However, we are not taking the economic challenges lightly nor are
a 31.9% increase in pre-tax profit which was in part due to the full-
we complacent about the difficulties the economy will likely
year impact of our additional 50% acquisition of BWRS in FY19.
encounter in the coming period. The Group’s strong financial
The majority of businesses in the Australian Agencies division
position and insight across our portfolio allows us to adequately
performed well however this was offset by ongoing weakness in
anticipate and prepare for potential risks. Additionally, we’ve pro-
Strata together with the impact of COVID-19 on the Hospitality
actively engaged with our underwriting partners to offer client and
industry. In response, we have made good progress with a series of
broker hardship assistance programs. I am pleased at the efficient
initiatives to enhance performance and anticipate seeing benefits
way in which our teams and systems seamlessly transitioned to a
flow through in FY21. The attention on Health and Rehabilitation
work-from-home model and for many, we anticipate this will
Services in FY20 resulted in a significant uplift in the performance
become their new default. Our teams and our clients are important
of the division with improvements in revenue and a sharp
to us. We have kept our teams working and have provided them not
reduction in expenses. This culminated with an exit from Allied on
only with job security but also support during these uncertain
1 April 2020. We are pleased with the progress made to transform
times. As a result, the business has invested in a range of
the performance of Altius. Divisional results were complemented
technologies and dynamic staff engagement tools together with
by the benefits of our Head Office profit improvement plan which
policies that enable teams to receive financial incentives which
has so far delivered an annual run-rate benefit of $2.8m after tax,
allow people them to work productively whilst sharing in savings
with further benefits to be delivered in FY21.
The Group’s Balance Sheet remains strong as we prudently
managed capital in response to an uncertain business
environment. The Corporate entity generated a strong operating
the company may achieve. Our aim is to use the experience of
COVID-19 to fundamentally change how we engage with our staff
and our clients by using technology more creatively than ever
before.
cashflow of $50.6m, increased our long-term corporate debt facility
In FY21, we will continue to build on the momentum we have
to $250m and has access to $94.0m of cash and debt, positioning
created across our Strategic Priorities to deliver further benefits
us strongly to fund organic growth initiatives and make disciplined
and improve the Group’s profitability. As such, the Group will
acquisitions in FY21.
Our performance was driven by an ongoing emphasis on delivering
our Strategic Priorities, as set out at the start of FY20. I am pleased
with the progress as the results have set a foundation upon which
AUB Group can continue to deliver sustained growth, aligned to
our upgraded growth ambitions. In February, we undertook a 40%
investment in BizCover, a leading digital insurance platform. The
investment has positioned us for success in the attractive Micro-
SME segment whilst also securing the technology that under-pins
actively pursue strategically aligned M&A opportunities, execute on
margin improvement opportunities, increase the take-up of our new
technology platforms, pursue opportunities to simplify and optimise
the portfolio and look to further enhance insurer agreements for
the benefit of our clients and brokers.
The AUB of 2020 has more to offer current and prospective
members of our network. We are a fitter and more complete
organisation than ever before and are confident that the Group is
well placed for continued out-performance in future years. I look
our ExpressCover platform. The business has performed well since
forward to updating you on our progress..
acquisition and we anticipate that it will prove to be strongly
accretive in FY21 and future years. Additionally, we continued to
execute on several bolt-on acquisitions across the network as well
Michael Emmett
4 AUB GROUP ANNUAL REPORT 2020
Chief Executive Officer and Managing Director
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2020
DIRECTORS’
REPORT
AUB GROUP ANNUAL REPORT 2020
DIRECTORS
Your Directors submit their report for the year ended 30 June 2020. 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.
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2020
D.C. Clarke LB MAICD
(Non-Executive Chair)
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 BT
Financial Group. David has 40 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 Charter Hall Group, Fisher Funds
Management Limited and Resolution Life Australia Ltd.
Mr Clarke joined the Board on 3 February 2014 and was
elected Group Chairman on 26 November 2015. He is on
the Audit & Risk Management and Remuneration &
People Committees and Chairs the Nomination
Committee.
M.P.C. Emmett B Com, H.Dip. Acc CA (SA)
(CEO and Managing Director)
In addition to his role as Group CEO, Mike serves on
a number of boards for companies in Austbrokers,
AUB New Zealand, SURA and AUB Health and
Rehabilitation. Prior to joining AUB Group, he was
Group CEO for Cover-More, previously an ASX-listed
global travel insurer and now part of the Zurich
Group. Mike was previously QBE Group Executive,
Operations and EY Managing Partner of Financial
Services Advisory. Before moving to Australia, Mike
held senior roles in Finance and Consulting in the
UK and South Africa. Mike is also a Non-Executive
Director of 1st Group Limited
(ASX:1ST) and the Gold Coast Suns AFL Club.
R. J. Low B Com, FCA, GAICD
Robin Low was a partner at PricewaterhouseCoopers and
has over 30 years’ experience in financial services,
particularly insurance, and specialises in assurance and
risk management. Robin was appointed to the Board on 3
February 2014. She chairs the Audit & Risk Management
and is a member of the Nomination and Remuneration &
People Committees. Ms. Low is also a Director of ASX
listed companies: Appen Limited, IPH Limited and Marley
Spoon AG. Until February 2020, she was on the board of
ASX listed CSG Limited. She also serves on the boards of
Australian Reinsurance Pool Corporation, Gordian Runoff
Limited, and not-for-profit organisations: Public
Education Foundation, Primary Ethics and Guide Dogs
NSW/ACT. Ms Low is also on the audit committee of the
University of New South Wales, and a past Deputy Chair
of the Auditing and Assurance Standards Board.
6 AUB GROUP ANNUAL REPORT 2020
R. J. Carless BEc, MAICD
Ray Carless was appointed to the Board on 1 October
2010 and has over 40 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 & Risk Management, Nomination
and Remuneration & People Committees.
DIRECTORS (CONTINUED)
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2020
P. A. Lahiff BSc Agr, GAICD
Paul joined the Board on 1 October 2015. Paul was
previously Managing Director of Mortgage Choice Limited
(2003 - 2009) and prior to that was CEO and an Executive
Director of Heritage Bank and Permanent Trustee and held
senior roles in Westpac in Sydney and London.
Paul sits on the boards of NESS Super, Sezzle Ltd and
86 400 Holdings Pty Ltd. He is also the Chair of the Steering
Committee for ISO 20022 Migration for the Australian
Payments System.
Paul holds a BSc from Sydney University and is a Fellow of
the Australian Institute of Company Directors.
He is on the Audit & Risk Management, Nomination and
Chairs the Remuneration & People Committee.
Company Secretary
D. J Franks, BEc, CA, F Fin, FGIA, JP (Joint Company
Secretary)
David was appointed Joint Company Secretary of AUB Group Ltd
on 29 April 2020, having previously acted in this role between 20
December 2018 and 4 November 2019. With over 20 years in
finance and accounting, initially qualifying with Price Waterhouse
in their Business Services and Corporate Finance Divisions, David
has been CFO, Company Secretary and/or Director for numerous
ASX listed and unlisted public and private companies, in a range
of industries covering financial services, energy retailing,
transport, mineral exploration, technology, automotive, software
development and healthcare. David is a non-executive director of
JCurve Solutions Limited (ASX: JCS) and a director of the Automic
Group.
C. L. Rogers CFA, B Com, MBA, GAICD
Cath was appointed to the Board on 3 May 2018. She is a
Non Executive Director of Digital Wallet Pty Ltd (trading as
Beem It), a payments app funded by CommBank, NAB and
Westpac, a Director and co-founder of Digital Receipt
Exchange Limited and a member of the Commercialisation
Committee of the Heart Research Institute. Cath holds a
Bachelor of Commerce from the University of New South
Wales, an MBA from INSEAD, is a CFA Charterholder and
a graduate of the Australian Institute of Company
Directors. She was previously a Director of McGrath
Limited (2016-2018) and has held Senior roles in leading
investment and financial services organisations in Sydney
and overseas including AirTree Ventures, Anchorage
Capital Partners, Masdar Capital and Credit Suisse. Cath
is a member of the Audit & Risk Management, Nomination
and Remuneration & People Committees.
A K. T. Luu, BBus, LLB, MCom, LLM, FGIA, Dip IT (Joint
Company Secretary)
Allan joined AUB Group Ltd on 10 December 2018 as
General Counsel (Interim) and was appointed Joint
Company Secretary on 20 December 2018. He is a
solicitor with almost 20 years’ experience across a variety
of industries, including infrastructure, major projects and
technology. He was previously Legal Counsel at DXC
(formerly CSC) and the Transurban Group and General
Counsel and Company Secretary at a number of SMEs.
Prior to that, he was in private practice at K&L Gates,
Baker & McKenzie and Ogier. Allan also previously
lectured at the Sydney College of Law, Governance
Institute, University of Melbourne and RMIT.
Interests in the shares and options of the Company and related bodies corporate
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.
As at the date of this report, the interests of the Directors in the shares and options of AUB Group Limited were:
Number of
Options over
Ordinary
Shares
276,029
-
-
-
-
-
Number of
Ordinary Shares
-
25,395
19,446
19,685
6,000
10,334
M. P. C. Emmett
R. J. Carless
D. C. Clarke
R. J. Low
C. L. Rogers
P. A. Lahiff
7 AUB GROUP ANNUAL REPORT 2020
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2020
services, corporate health and wellness initiatives, training
and risk advice to clients. Fees are negotiated with
State/Territory-based scheme agents, as well as insurers
and clients.
OPERATING AND FINANCIAL REVIEW
Operating results for the year
In the year ended 30 June 2020 (FY20) net profit after tax
(Reported NPAT) attributable to equity holders of AUB Group
was $47.3 million (FY19: $48.4 million), a 2.3% decrease over
the prior year.
The decrease, despite an
in underlying
performance, was due to non-cash accounting adjustments
and acquisition costs (described in detail in Note 3 to the
Financial Report).
increase
If these items, together with the amortisation of intangibles
are excluded (as shown in the table below), the net profit
after tax (Underlying NPAT) was $53.4m in FY20 up 15.21%
on prior year (FY19: $46.4 million).
Underlying NPAT is a key measure used by management and
the board to assess and review business performance.
The Group has benefited from the increase in ownership in
Australian broking businesses (40% of Bizcover, 50% of WRI
Insurance Brokers and 10% of InterRisk) and New Zealand
broking business (50% of McDonald Everest) and other
portfolio acquisitions.
On a Reported NPAT basis, earnings per share reduced from
69.49 cents in prior year, to 64.10 cents for the current year.
The reduction is due mainly to the increase in the weighted
average number of shares on issue. Earnings per share based
on Underlying NPAT increased by 8.7% to 72.45 cents.
Results by operating division
Australian Broking – pre-tax profit for the year increased
by 14.6% to $62.1 million. Organic growth was assisted by
an increase in Commercial Lines insurance premiums
averaging 6.3% over the period. The current period
included redundancy costs amounting to $1.4 million, an
increased lapse provision of $1.3 million, as well as the
combined impact of reduced interest rates and lease
accounting changes of $2.2 million.
New Zealand – pre-tax profit for the year increased by
31.9% to $12.1million, primarily due to the acquisition of
an additional 50% of BWRS effective 1 January 2019.
Investment in NZ group management and infrastructure
(including technology) was made in order to support an
expanded business. NZbrokers continues to perform well
with growth in members and an improved membership
proposition including enhanced technology.
Australian Agencies – pre-tax profit for the year decreased
by 12.2% to $13.6 million. This was partially due to the
impact of COVID-19 on our clients in the hospitality
industry as well as ongoing process and pricing challenges
in strata. The latter is being remediated by the
implementation of a new IT system, cost reductions, and
amended contracts with insurers.
Health & Rehab – pre-tax profit increased by 330.3% ($3.2
million) to $4.2 million for the year, primarily due to
improved utilisation, reduced costs and a more diverse set
of services. On 1 April 2020, AUB Group sold its entire
ownership interest in the Allied Health business.
PRINCIPAL ACTIVITIES
AUB Group Limited (AUB Group or Group) is Australia and New
Zealand’s largest equity-based insurance broker network
driving approximately A$3.4billion GWP across its network of
94 businesses, servicing ~700,000 clients, over one million
policies across more than 450 locations.
In Australia, the Group has around 20 percent of the
commercial SME
insurance broking market share with
investment in 64 broking businesses, complemented by
established capabilities in life insurance broking, premium
funding, claims management and legal services.
In New Zealand, AUB Group holds equity stakes in 7 major
insurance broker partners, an agency, as well as ownership
of NZbrokers (the largest broking management group in
New Zealand) with presence in 151 locations.
The Group’s Agencies business has a portfolio of 18 specialist
agencies with access to delegated global underwriting capacity
for specialist insurance products.
The Group’s Risk Services division was discontinued during the
year. The Procare Group, which mainly provides services in loss
adjustment, investigations, claims management and claims
legal support, was moved to Australian Broking. Allied Health
Australia was sold and Altius Group is in a new division named
Health and Rehabilitation. The Health and Rehabilitation
division along with corporate head office are included within
the Support Services segment as neither are individually
reportable segments.
The Group owns equity stakes in our partner businesses, who
in turn provide trusted support and guidance to clients relating
to physical, people and financial risks. This is backed by
services that help our partners operate with less risk, manage
their businesses more profitably and ultimately achieve better
client outcomes. These services include technology support, a
centralised data centre capability, common broking and back
office platforms, human resources, risk, compliance and other
operational support services.
AUB Group primarily operates through four key business
segments. The Group’s core revenue is largely derived from
arranging insurance policies, and for other related products
and services. The amount of revenue earned is determined by
the size 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, income from insurance premium funding, fees
for services to insurers a nd revenue derived from insurers
reflecting the quality of the business placed. The segments
used for financial reporting purposes are:
1. Australian Broking: broking networks operating in
Australia which provide risk, insurance broking and
advisory services primarily to SME clients;
2. Australian Agencies: agencies which distribute and
manage specialist insurance products on behalf of
licensed insurance companies. These services are
available via risk advisers, in and outside the Group’s
broking networks;
3. New Zealand: broking networks operating in New
Zealand plus one agency, which provide risk and
insurance broking and advisory services primarily to SME
clients; and
4. Support Services: provides services complementary to
our insurance brokers and insurance agency companies.
Support Service entities earn fees for services such as
occupational health and safety consulting, injured worker
rehabilitation
8 AUB GROUP ANNUAL REPORT 2020
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2020
OPERATING AND FINANCIAL REVIEW
(CONTINUED)
Results by operating division (Continued)
Overall:
A strong performance in Australian Broking, acquisition
related growth in New Zealand and an improvement in
Health and Rehabilitation, offset slightly by a reduction in
profit in Australian Agencies. A reconciliation of the
operating results to the Annual Report operating segments
is set out below.
The borrowings by associates relate largely to funding of
acquisitions, premium funding and other financing activities.
BUSINESS STRATEGY
The Group’s strategic plan
involves ongoing business
improvement at partner-level through delivery of enabling
technologies, consolidation for scale and improved sector
specialisation, together with an ongoing disciplined approach
to mergers and acquisitions (M&A). Our partners will be
supported by a market leading broker value proposition
continually improving our partners’ ability to win in the market.
Shareholder returns
FY21 Strategic Priorities:
On an Underlying NPAT basis, earnings per share increased
by 8.7% over the prior year.
Average annual growth rate in earnings per share from
FY10 to FY20 on an underlying basis was 12.2%. Dividend
per share declared for FY20 totaled 50.0 cents, an increase
of 8.7% on prior year.
Reported EPS reduced from 69.49 cents in prior year, to
64.10 cents for the current year. The reduction is due mainly
to the increase in the weighted average number of shares on
issue.
Dividends
Cents
$’000
Final dividend recommended:
• on ordinary shares
35.5
26,206
Interim dividend declared
• on ordinary shares – interim1
Dividends paid in the year:
14.5
10,701
• on ordinary shares - final
32.5
23,888
34,589
1FY20 Interim dividend deferred from April 2020 and will be paid in
September 2020.
FINANCIAL CONDITION
Shareholders’ equity increased to $491.9 million from
$483.4 million at 30 June 2019, mainly due to current year
financial performance.
The Group generated positive cash flow from operating
activities before customer trust account movements of
$74.3m (2019: $54.2m). Cash flows used in investing
activities increased in FY20 due mainly to the 40%
investment in Bizcover. Cash flows from financing activities
increased over the previous year due to the financing of the
Bizcover transaction partially offset by a partial repayment
of Group borrowings. Cash held at the end of the period
totaled $243.2m ($84.4m, excluding $158.8m of monies
held in trust).
loans and borrowings
increased by
Interest-bearing
$127.3m to $231.8m as a result of financing the Bizcover
transaction, resulting in an increase in the debt to debt
plus equity ratio to 34.2% in the year (FY19 21.7%) on a look
through basis
including share of associates debt.
Borrowings by associates of $20.1m (FY19 $23.0m)2 are not
included in the Group balance sheet as these entities are
not consolidated.
2 Total debt of associates, after considering AUB Group’s percentage
shareholding.
9 AUB GROUP ANNUAL REPORT 2020
-
-
-
-
-
consolidate
redesign,
restructure portfolio
and
businesses to drive increased scale and create sector
specialisations to expand market leadership;
increase focus on business improvement initiatives at
partner-level to deliver operational efficiency (margins)
and above-market income growth;
continue to drive improvements in our partners’ client
value proposition;
expand on our technology focus to drive commercial and
operational value;
execute on strategically aligned acquisitions that drive
enhanced growth; and
-
deliver on our upgraded financial growth ambitions.
PROSPECTS FOR FUTURE FINANCIAL YEARS
AUB Group has benefited from investment in our core
capabilities, cost management and pricing tailwinds. We expect
pricing tailwinds to continue albeit at a slower rate. The Group
continues to hold a modest outlook on the underwriting cycle
with a premise that we are in the midst of a positive phase with
potential for extension considering recent ongoing losses in key
global underwriting markets.
During FY21 the Group anticipates strong growth from
Insurance Broking in Australia and New Zealand as well the
Agencies. This could be reduced by several factors:
-
-
planned shareholding sell-downs to support succession
planning in broker partners; and
unforeseen impacts of COVID-19.
RISK MANAGEMENT
The Group recognises that appropriate risk management is
required to enable delivery of its strategic objectives. The
Board, supported by the Board Audit & Risk Committee, has
responsibility for the effective oversight of material risks to
the business, setting the Group’s risk appetite and
tolerance, and reviewing the risk management framework,
including the identification, assessment, management and
monitoring of material risks.
The activities of the Board, and the Audit & Risk Committee
specifically, include:
- Board approval of the business strategy, which
encompasses the Group’s vision, purpose and strategy
statements designed to meet stakeholders’ needs;
-
implementation of Board approved operating plans and
budgets, as well as monitoring of progress against
these budgets, including the establishment and
monitoring of key performance indicators of both a
financial and non-financial nature;
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2020
SIGNIFICANT EVENTS AFTER THE BALANCE
DATE
On 25 August 2020, the Directors of AUB Group Limited
declared a final fully franked dividend on ordinary shares of
35.5 cents per share in respect of the 2020 financial year.
Based on the current number of ordinary shares on issue,
the total amount of the dividend is estimated to be
$26.21m.
Effective 1 August 2020, the Group acquired 73.15% of the
voting shares of Experien Insurance Services Pty Limited
(Experien). On this date Experien became a controlled
entity of the Group. The acquisition price includes issuance
of $5.60m in AUB Group shares based on a 14 day
volume weighted average price to 21 August 2020.
ENVIRONMENTAL REGULATION AND
PERFORMANCE
The Directors are satisfied that adequate systems are in
place for management of the Company’s environmental
responsibility and compliance with various requirements and
regulations. The Directors are not aware of any material
breaches to these requirements, and to the best of their
knowledge, all activities have been undertaken
compliance with environmental requirements. Refer to
the Environmental, So
page 24 for more details.
vernance Report on
cial and Go
in
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.
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.
INDEMNIFICATION OF AUDITORS
To the extent permitted by law, the Company has agreed to
indemnify its auditors, Ernst & Young Australia, as part of
the
its audit engagement agreement,
against claims by third parties arising from the audit
(for an unspecified amount). No payment has been
made
indemnify Ernst & Young during or since the
financial year.
terms of
to
RISK MANAGEMENT (CONTINUED)
-
approval of the Risk Management Framework, the
associated Risk Appetite Statement, and consideration of
the adequacy of risk treatments to remain within the
Board’s approved risk appetite and tolerances; and
-
oversight of policies, procedures and activities to support
the effective management of risk across the Group.
KEY BUSINESS RISKS
The Group is exposed to various risks in the course of its
operations and achievement of its strategic objectives.
Broad risk categories, which may impact the Group’s business
strategy and prospects for the future financial year include:
-
-
Strategic Risks: Adverse strategic decisions, improper
implementation of strategic decisions – including but not
limited to Merger & Acquisitions - a lack of
responsiveness to industry changes or exposure to
economic, market or demographic considerations that
negatively affect AUB Group’s market position, brand or
reputation.
Financial Risks: Unfavourable outcomes from
inappropriate management of customer advice, product
pricing, interest rate, foreign exchange, counterparty
credit, liquidity, and self-insurance risks as well as
adverse effects from capital structure and funding.
- Compliance & Legal Risks: Risk of AUB Group, including
its partner businesses, breaching its compliance and
legal obligations (including license conditions), leading to
reputational damage, fines, or breach of contract.
- Operational Risks: Losses arising from fraud, inadequate
or failed internal processes, systems or people or from
external events impacting operational capabilities.
- Partnering & Outsourcing Risks: The risk that services
performed by external service providers, including related
and third parties, are not managed in line with the
servicing contracts or standards required by the Board,
resulting in negative impacts to shareholders, partners
and/or customers.
- People Risks: Exposure to changes in personnel and an
inability to attract and retain quality and appropriate staff
to maintain overall business capability, including
inadequate succession planning.
SIGNIFICANT CHANGES IN THE STATE OF
AFFAIRS
With the exception of changes brought about by COVID-19,
there were no significant changes in the state of affairs of
the consolidated entity during the financial year, other than
acquisitions and disposals disclosed above.
COVID-19 saw many offices and teams working from home
for the last 3 months of the financial year. The Group’s
technology offering allowed our businesses to continue
with their staff operating remotely as required.
10 AUB GROUP ANNUAL REPORT 2020
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2020
REMUNERATION REPORT
Dear Shareholders
AUB Group is pleased to present its Remuneration Report for the year ended 30 June 2020. The report outlines the Group’s
remuneration philosophy, framework and outcomes.
The AUB Group remuneration framework is designed to support sustainable value for shareholders, partners and our people.
Progress in FY20 reflects a business strategy that has continued to evolve and deliver positive results.
Short-Term Incentives (STI) and Long-Term Incentives (LTI) for staff and senior management have been allocated in accordance
with the Company and individual objectives and are detailed further throughout the report.
Key people and culture highlights over the year ended 30 June 2020 have included the following:
Review of STI and LTI Programs
A review of the Short-Term and Long-Term Incentive Programs for staff was undertaken during FY20 to ensure incentives
supported the remuneration philosophy. The Remuneration & People Committee has endorsed the introduction of an STI deferral
program for certain senior managers replacing their participation in the Long-Term Incentive Program. The Senior Executive Team
will continue to participate in the company Long-Term Incentive Program.
Culture
This year, the Remuneration & People Committee has continued to focus on building a culture of shared accountability, embedding
the AUB Group purpose and values across the business and determining how we measure success. The AUB Board acknowledges
its role in establishing and maintaining an effective culture. Over the course of FY20 a key set of organisational culture metrics
has been agreed and is regularly reported on.
Diversity and Inclusion
The Remuneration & People Committee has untaken a review of key people related policies including the Group Diversity and
Inclusion Policy. The review included updates to recruitment, selection and succession processes and the agreement to introduce
annual measurable objectives for achieving gender diversity.
AUB Group Academy
AUB Group is committed to developing and investing in its people. To ensure the Group continues to offer market leading
programs, a newly created Education Committee has been formed with key representatives across the Network. The Education
Committee will focus on training and education, industry advocacy, research and reporting including the review of current
offerings, key partnerships and memberships.
Non-Executive Director Development
This year, the Remuneration & People Committee introduced a Non-Executive Director training and development register to
support the continued development of the Group’s Non-Executive Directors.
Paul Lahiff
Chair
Remuneration & People Committee
11 AUB GROUP ANNUAL REPORT 2020
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2020
REMUNERATION REPORT (CONTINUED)
The Directors of AUB Group Ltd (the Company) present the
Remuneration Report (the Report) for the Company for the
financial year ended 30 June 2020 (FY20). This report forms
part of the Directors’ Report and has been audited in
accordance with section 300A of the Corporations Act 2001
(Cth). The Report details the remuneration arrangements
for the Company’s Key Management Personnel (KMP)
comprising the Company’s Non-Executive Directors, the
Executive Director and the Chief Financial Officer for FY20
and other senior Executives for FY19.
Details of Key Management Personnel
KMP are those persons with, directly or indirectly, the
greatest authority and responsibility for planning, directing
and controlling the activities of the business that can
materially affect the performance of the Group during the
financial year.
The table below outlines the KMP of the Company in FY20.
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
individuals;
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.
Non-Executive Director Remuneration
Name
Position
Objective
Non- Executive Directors
David Clarke
Ray Carless
Robin Low
Paul Lahiff
Non-Executive Chair
Non-Executive Director
Non-Executive Director
Non-Executive Director
Cath Rogers
Non-Executive Director
Executive Director
Michael Emmett
Managing Director and Chief
Executive Officer
Senior Executive
Mark Shanahan
Chief Financial Officer
During the current year, changes were made to a number
of senior roles that were previously included for KMP
reporting purposes. These roles focus primarily on specific
business units and will no longer be included for KMP
reporting purposes.
For KMP disclosures, from 1 July 2019, the only persons
that have overall responsibility for planning, directing and
controlling the activities of AUB are the Non-executive
Directors plus the Chief Executive Officer and Chief
Financial Officer.
Governance
The Chief Executive Officer (CEO) has responsibility for
implementation of the Company’s Remuneration Policies
and making recommendations to the Remuneration &
People Committee of the Board of Directors of the
Company on remuneration outcomes for the Company’s
senior executives and other employees.
for
The Committee is responsible for reviewing compensation
the Directors, CEO and Senior
arrangements
Executives, including the Company’s KMP and making
recommendations in that regard for determination by the
Board. The Committee comprises all Non-Executive
Directors of the Board.
12 AUB GROUP ANNUAL REPORT 2020
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.
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
2018 Annual General Meeting to increase the aggregate
available remuneration to $850,000 per year to reflect
prevailing market conditions.
Remuneration paid to Non-Executive Directors is normally
reviewed by the Committee and determined by the Board
every second year. This last review was carried out in FY18
by Guerdon & Associates.
A review was not conducted in the current year. In light of
circumstances brought on by COVID-19, it was decided that
there would be no change to Non-Executive Director
remuneration for FY21. A market comparison will be
undertaken in April/May 2021 and this will be used to review
remuneration for the FY22 year.
The total amount paid to Non-Executive Directors for FY20
was $681,000 from the maximum available pool of $850,000.
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 serves. The Chair of the
Board receives an all-inclusive fee irrespective of the
Committees on which he serves. The Chairs of the Audit &
Risk Committee and the Remuneration & People Committee
receive an additional fee to recognise the additional
workload that these positions entail. If a Non-Executive
Director serves on a subsidiary board a further fee is
payable. Non-Executive Directors do not receive retirement
benefits other
the
superannuation guarantee charge, nor do they participate in
any incentive programs, but they may be reimbursed for
expenses reasonably incurred in the course of carrying out
their duties as a Non-Executive Director of the Company.
than amounts paid by way of
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2020
REMUNERATION REPORT (CONTINUED)
Non-Executive Director Remuneration (continued)
From 1 July 2019 to 30 June 2020 each Non-Executive
Director received annual fees as set out in the table
below:
Name
Board
Audit & Risk Management
Committee
Remuneration & People
Committee
Nomination Committee
Subsidiary Boards
Chair
Member
$210,000
$105,000
$21,000
$10,000
-
$0
-
-
-
$10,000
The remuneration of Non-Executive Directors for the year
ended 30 June 2020 is detailed in Tables 3 and 4 on pages
20 & 21 of this report.
CEO and Group Executive remuneration
Objective
The Company aims to reward executives with a level and
mix of remuneration commensurate with their position and
responsibilities within the Company so as to:
-
-
-
-
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;
rewards with
link
performance of the Company; and
the strategic goals and
ensure total remuneration is competitive by market
standards.
Structure
Remuneration consists of the following key elements:
-
-
-
fixed remuneration;
variable remuneration – short term incentive (STI);
and
variable remuneration – long-term incentive (LTI).
To ensure the Committee is fully informed when making
remuneration decisions, it seeks external remuneration
advice as needed.
The Group Executive includes the CEO, CFO and heads of
key divisions:
-
-
-
Australian Broking;
Australian Agencies; and
New Zealand.
13 AUB GROUP ANNUAL REPORT 2020
CEO Target Remuneration Mix
Fixed
STI
LTI
37%
37%
26%
The above table excludes the impact of 200,000 sign-on
options.
Group Executive (ex-CEO) Target Remuneration Mix
Fixed
STI
LTI
25%
37%
38%
The Group Executive (ex-CEO) Target Remuneration Mix
table above excludes the Chief Broking Officer as that
position was filled in July 2020.
Fixed remuneration
It is the Company’s practice to have fixed remuneration at
market median and total remuneration at the upper
quartile.
Objective
The objective of the fixed remuneration component is to
attract and retain talented executives to the Company. The
setting process consists of a review of company-wide,
relevant
business unit and
comparative remuneration in the market and internally and,
where appropriate, external advice on policies and
practices.
individual performance,
Structure
Group Executives are given the opportunity to receive their
fixed remuneration in a variety of forms including cash and
fringe benefits such as motor vehicles.
The fixed remuneration component of the KMP of the
Group is detailed in Tables 3 and 4 on pages 20 & 21 of this
report.
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2020
REMUNERATION REPORT (CONTINUED)
Variable remuneration – short term incentive
Objective
The objective of the short-term incentive (STI) program is
to link the achievement of the Group’s operational targets
with the remuneration received by the employees charged
with meeting those targets.
The total potential STI is available at a set level so as to
provide sufficient incentive to employees to achieve the
operational targets and such that the cost to the Group is
reasonable in the circumstances.
Structure
The Group sets targets and each employee has set
personal objectives against which their performance is
evaluated.
A behavioural gateway
the
is
performance review process and operates to reduce an
incentive payment should there be conduct that is
inconsistent with the Company’s values, irrespective of
performance.
incorporated
into
On an annual basis, a rating is determined for each
employee based on an evaluation of their performance
against predetermined objectives. This rating is then
applied to an allocated STI opportunity. This amount is
then scaled up or down to reflect performance against the
agreed objectives. The objectives 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 employee, thereby ensuring it is
aligned with shareholders’ interests. The aggregate of
annual STI payments available for employees is subject to
review by the Committee and approval of the Board.
Payments made are delivered as a cash bonus in the
following reporting period.
As a retention strategy, some senior managers who report
to Group Executives are subject to a deferred STI payment
where a portion of the relevant year’s STI will be paid out
two years after the end of the performance period, subject
to continued employment with the AUB Group.
The table below provides a summary of key balanced
scorecard objectives and outcomes for the CEO for FY20.
Measure
Objective
Financial
Risk
Processes
IT Systems
Australian
Broking
Health &
Rehab
Network
Deliver Group
Underlying
NPAT above set
year on year
growth rates.
Mature risk and
compliance
people and
frameworks.
Implement
identified
systems that
enable broker
efficiency.
Progress key
business
specialisations
and
consolidations.
Remediate
profitability of
division.
Network partner
satisfaction with
Group CEO.
Base
Allocation
Achieved
FY20
$
%
50%
$300,000
150%
$450,000
8.33%
$50,000
100%
$50,000
16.66%
$100,000
150%
$150,000
8.33%
$50,000
150%
$75,000
8.33%
$50,000
150%
$75,000
8.33%
$50,000
150%
$75,000
Variable remuneration – long term incentive
Objective
The objective of the long-term incentive plan (LTIP) is to
reward Group Executives in a manner that aligns this
element of remuneration with the creation of shareholder
wealth. 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 relevant long-term performance hurdles.
CEO Variable Remuneration - STI
Structure
The CEO has a base short-term incentive (STI) of 70% of
fixed remuneration up to a maximum of 105%. In practice
for a given financial year the CEO may earn between 0%
and 105% of fixed remuneration.
LTI grants to Executives are delivered in the form of
performance options.
The following were selected as the measures for the LTIP
in FY17 to FY19:
a)
b)
Total Shareholder Return
including share price
appreciation and the amount of any dividends or
capital returns (TSR) measured against the S&P/ASX
Small Ordinaries Index (the Target Group) determined
by the relevant VWAP in the 60 day period leading up
to the relevant date in respect of the testing period;
and
Compound annual growth rate (CAGR) of the
Underlying Earnings Per Share for the measurement
period calculated based on the Underlying NPAT
divided by weighted average number of ordinary
shares in the Company on issue during the relevant
financial year.
14 AUB GROUP ANNUAL REPORT 2020
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2020
REMUNERATION REPORT (CONTINUED)
Variable
(Continued)
remuneration
–
long
term
incentive
Exercise conditions for options granted in FY17 to FY19
are as follows.
For FY20 the following were selected as measures for the
LTIP as approved at the 2019 AGM:
a)
returns
(TSR) measured against
Total Shareholder Return including share price
appreciation and the amount of any dividends or
capital
the
constituents of the S&P/ASX Small Ordinaries
Industrials Index (AXSID) (Comparator Group) as at
1 July each year, determined by the relevant VWAP in
the 60 day period leading up to the relevant date in
respect of the testing period.
a)
b)
Subject to satisfaction of the performance hurdles
referred to in paragraphs below, options will vest and
become capable of exercise on the date on which the
Company’s audited Financial Report 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 Report for the fourth financial year
ending after the grant are lodged with the Australian
Securities Exchange (the Second Test Date);
Average Annual Growth Rate (AAGR) of
the
Underlying Earnings Per Share for the measurement
period calculated based on the underlying NPAT
divided by weighted average number of ordinary
shares in the Company on issue during the relevant
financial year.
b) Options comprised 60% EPS options and 40% TSR
options and will vest and may be exercised at the First
Test Date and the Second Test Date, subject to the
Participant being an employee of the Company or a
subsidiary of the Company at the time of exercise, and
the performance hurdles as follows:
It is believed the differing measures of TSR and AAGR
improved alignment between comparative
provide
shareholder return and reward for executives.
The S&P/ASX Small Ordinaries Industrials Index (AXSID)
is the most relevant benchmark as it comprises a sub-set
of ASX listed companies of relatively similar market
capitalisation and excludes resources focused companies.
The 12 month comparison against the benchmark outlined
below.
Option exercise conditions
All options issued before 1 July 2016 have now lapsed. For
vesting conditions on those options refer to the FY19
Annual Report.
i.
ii.
iii.
if all of the options do not become exercisable on
the First Test Date and the performance
outcomes on the Second Test Date are higher
than on the First Test Date an additional number
of options will become exercisable that is equal
to the difference between the number of options
which became exercisable on the First Test Date
and the number of options which are exercisable
on the Second Test Date;
any options which have not become exercisable
by the Second Test Date lapse and are of no
further force or effect; and
all options have further restrictions on their
disposal or the disposal of any shares acquired
on their exercise for a further two years from
vesting of those options.
15 AUB GROUP ANNUAL REPORT 2020
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2020
REMUNERATION REPORT (CONTINUED)
Option exercise conditions (Continued)
Exercise conditions for options granted in FY17 to FY19:
T he EPS O ptions
CAGR over period
Percentage Vesting
Less than 4%
Equal to 4%
0%
25%
Between 4% and 7%
Straight line vesting between 25%
Equal to 7%
and 50%
50%
Between 7% and 10%
Straight line vesting between 50%
Equal to or greater than 10% 100%
and 100%
T he T SR O ptions
Total Shareholder Return
Percentage Vesting
Less than target group
Equal to target group
0%
50%
Greater than target group
Straight line vesting between 50%
Greater than 150% of target 100%
and 100%
For FY20, exercise conditions for options granted are as
follows:
a) Subject to satisfaction of the performance hurdles
referred to in paragraphs below, options will vest and
become capable of exercise on the date on which the
Company’s audited Financial Report for the third
financial year ending after the grants are lodged with
the Australian Securities Exchange;
b) Options comprise 60% EPS options and 40% TSR
options and will vest and may be exercised, 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);
c) For options issued from 1 July 2019 onwards, there is
no further retest if options do not vest at the end of
the performance period nor do they have any further
restrictions on their disposal or the disposal of any
shares acquired on their exercise;
d)
that any sign-on options satisfy
In addition to 3 year options, the CEO was granted
200,000 sign-on options that vest over 5 years. One
third of the sign-on options will be tested over a 3 year
performance period (three year test date). To the
the
extent
performance hurdles at this point, they will remain on
foot and will vest and become exercisable following
the end of the 5 year performance period, subject to
the CEO's continued employment with the Company
(subject to the cessation of employment provisions
included
and
the remaining two thirds of the Performance Options,
and any Performance Options that did not satisfy the
performance hurdles at the three year test date, will
be tested over the full 5 year performance period.
contract);
his
in
16 AUB GROUP ANNUAL REPORT 2020
Any Performance Options that do not vest at the end of
lapse. The
the 5 year performance period, will
performance hurdles for the 5 year options are the same
as the 3 year options; and
e) Where in the opinion of the Board:
i.
ii.
iii.
a participant in the Company’s LTIP has acted
fraudulently or dishonestly, engaged in serious
misconduct or materially breached his or her
duties or obligations to the Company or any of its
subsidiaries;
the participant has been involved in a material
misstatement, error or omission in the Financial
Report of the Company or any of its subsidiaries;
or
the Company is required or entitled by law to
reclaim remuneration from the participant,
then the Board may determine all or any of the
following:
iv.
v.
vi.
that any options (whether or not capable of
exercise) held by the participant will lapse;
any shares held by the participant as a result of
exercise of the options will be deemed to be
forfeited; or
where the participant has sold, encumbered or
otherwise transferred shares it received as a result
of exercise of the options, the participant must
repay to the Company as a debt all or part of the
proceeds or benefit received from the sale,
encumbrance or transfer of those shares.
Exercise conditions for options granted in FY20 onwards:
T he EPS O ptions
AAGR over period
Percentage Vesting
Less than 5%
Equal to 5%
0%
50%
Between 5% and 7%
Straight line vesting between 50%
Equal to or greater than 7% 100%
and 100%
T he T SR O ptions
Total Shareholder Return
Percentage Vesting
Less than 50th percentile of
0%
the target group
Equal to 50th percentile of
50%
the target group
Between 50th percentile and
Pro rata straight line vesting
75% percentile of the target
between 50% and 100%
group
Greater than or equal to the
100%
75th percentile of the target
group
See Note 16 of the Financial Report for further details of
performance options.
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2020
REMUNERATION REPORT (CONTINUED)
Company performance and the link to remuneration
STI Outcomes
Short-term incentives are based on Underlying NPAT
growth and balanced scorecard outcomes.
Long-term incentives are based on Underlying EPS
Growth and Total Shareholder Returns (TSR).
The table below provides a summary of the Company’s
performance for the current and prior years:
For FY19, an STI cash bonus of $0.882m was provided in the
FY19 Financial Report based on estimates at that time. Of this,
$0.698m was paid in FY20 based outcomes of performance
objectives after finalisation of the FY19 annual STI process.
The Committee considered STI for FY20 and has provided for
a pool in the sum of $3.567m for employees, senior managers
and Group Executives.
2020
2019
2018
2017
2016
Cash bonuses
3.567 0.882
2.176
2.861
1.417
($m)
2020 2019
2018
2017
2016
Underlying NPAT ($m)1
53.4
46.4
44.6
40.4
37.6
TSR (%)2
5.2
-10.5
14.9
39.3
8.7
Share price ($)
14.70
10.44
13.58
12.99
10.10
Underlying EPS (cents)
72.5
66.6
68.8
62.3
58.8
Change in share price ($)
4.26
-3.14
0.59
2.89
1.10
Dividends paid (cents)3
50.0
46.0
45.5
42.0
40.0
1 The financial information in this table has been derived from the audited
Financial Report. The Underlying NPAT and Underlying EPS are non-
IFRS financial information and as such have not been audited in
accordance with Australian Accounting Standards.
2 TSR for the 12 months to 30 June.
3 2020 Dividends paid (cents) of 50c per share includes the April 2020
dividend that was deferred until 3 September 2020.
17 AUB GROUP ANNUAL REPORT 2020
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2020
REMUNERATION REPORT (CONTINUED)
LTI Outcomes
The LTI outcomes for FY20 are tested at the date that the Company lodges its audited Financial Report with the Australian
Securities Exchange. Once lodged, it is possible for the Company's Underlying EPS and TSR for the relevant measurement period
comprising FY17 to FY20 to be calculated. The Committee will meet and determine whether vesting conditions have been met and
in turn make a recommendation in this respect for the Board's determination. LTIP grants for FY21 will also be determined at this
meeting.
The LTI grants for FY20 and movements in all unvested options previously granted to Senior Employees and the former CEO
are summarised in the LTIP tables below:
Options
GROUP EXECUTIVES (including KMP's)
LTIP Financial Year (tranche)
Opening
Issued
Lapsed
Exercised
Remaining
Earliest
vesting date
Lapse date
2016 (11th)
2017 (12th)
2018 (13th)
2019 (14th)
2020 (15th - 5 year options)
2020 (15th - 3 year options)
28,645
85,405
73,941
63,417
-
-
-
-
-
-
28,645
-
-
-
-
37,438 21,886
31,614
30,503
-
-
26,081
42,327
32,914
24-Jan-20
24-Jan-24
23-Nov-20
23-Nov-24
31-Oct-21
31-Oct-25
200,000
101,219
- -
200,000
31-Aug-24
31-Aug-28
- -
101,219
31-Aug-22
31-Aug-26
Total
251,408
301,219
128,200
21,886
402,541
Former CEO
LTIP Financial Year (tranche)
Opening
Issued
Lapsed
Exercised
Remaining
vesting date
Lapse date
Earliest
2016 (2nd)
Total
99,920
99,920
-
-
99,920
99,920
-
-
-
-
-
-
Shares issued as a result of the exercise of options
CEO Remuneration
During FY20, 21,886 options were exercised to acquire
shares in AUB Group Limited under the LTIP.
From 1 July 2019, Mr Emmett received a fixed remuneration
of $852,000.
Mr Emmett has a base short-term incentive (STI) of
$600,000 up to a maximum of $900,000. The STI is subject
to personal and Group performance hurdles.
On 19 December 2019, Mr Emmett was granted 200,000
performance options over ordinary shares (sign-on grant)
and a further 76,029 performance options (annual grant),
under the LTIP. The LTI grant is subject to achievement of
earnings per share target growth criteria and relative total
shareholder returns criteria.
Other Key Management Personnel
Other KMP have
letters of offer of employment or
employment contracts with no fixed term, and mutual
termination rights on prior notice for varying periods of up to
six months. Details of remuneration are contained in Tables
3 and 4.
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 402,541 unissued
ordinary shares under options as part of the LTIP that have
not vested. Refer to Note 16 of the Financial Report 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.
CEO Employment Contract
The current CEO, Mr Michael Emmett, is employed under an
ongoing Executive Agreement, with a mutual termination right
on 12 months’ notice.
The Company may terminate his contract at any time
without notice if serious misconduct has occurred.
On termination for cause, Mr Emmett is only entitled to that
portion of remuneration that is fixed, and only up to the
date of termination. On termination for cause any unvested
options are immediately forfeited.
18 AUB GROUP ANNUAL REPORT 2020
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2020
REMUNERATION REPORT (CONTINUED)
Table 1: Shares held in AUB Group Limited at 30 June 2020
Shares held in AUB Group Limited at 30 June 2020
30-Jun-19
during year
during year
Balance at
Shares acquired
Shares
disposed
Directors
R. J. Carless
D. C. Clarke
R. J. Low
P. A. Lahiff
C. L. Rogers
M. P. C. Emmett
Executives
M. Shanahan
K. McIvor1
N. Thomas1
Total
22,932
11,646
12,917
10,334
-
-
2,227
1,950
10,383
72,389
2,463
7,800
6,768
-
-
-
-
-
6,000
-
1,341
-
-
24,372
-
-
-
1,950
10,383
12,333
Balance at
30-Jun-20
25,395
19,446
19,685
10,334
6,000
-
3,568
-
-
84,428
1K. McIvor and N. Thomas were deemed to have disposed of their total shareholding on the date they ceased being a KMP.
Table 2: Option holdings of Key Management Personnel
Options held at 30 June
beginning of
Granted as
Options
lapsed/
end of period
Vested/
Not vested/not
Balance at
Options
Balance at
Total options at year end
2020
Director
M. P. C. Emmett
Executives
M. Shanahan
Total
period 01-Jul-19
remuneration
exercised
forfeited
30-Jun-20
exercisable
exercisable
-
276,029
- -
276,029
12,011 13,882
- -
25,893
12,011 289,911
- -
301,922
-
-
-
276,029
25,893
301,922
The outstanding options have an exercise price of $NIL.
During the current year a total of 301,219 zero priced options were issued (289,911 to KMP).
There are no loans outstanding owing by Key Management Personnel at 30 June 2020.
19 AUB GROUP ANNUAL REPORT 2020
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2020
REMUNERATION REPORT (CONTINUED)
Compensation of Directors and other Key Management Personnel
Table 3: Statutory Reporting Basis – period ending 30 June 2020
The table below outlines senior management team remuneration as calculated in accordance with accounting standards
and the Corporations Act 2001 (Cth) requirements. The amounts shown are equal to the amount expensed in the Company’s
Financial Report for the particular year.
Short-term
Cash short
Non
Post
Share- based
employment
payment
Salary &
fees
$
term
incentive1
$
monetary
Super-
benefits
annuation
$
$
Equity
options2
$
Total per-
Total
formance
Remuneration
related
$
%
191,781
191,781
90,004
90,001
105,023
105,023
127,151
124,201
95,890
105,023
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
18,219
18,219
24,996
24,999
9,977
9,977
8,849
11,799
9,110
9,977
-
-
-
-
-
-
-
-
-
-
210,000
210,000
115,000
115,000
115,000
115,000
136,000
136,000
105,000
115,000
-
-
-
-
-
-
-
-
-
-
809,864 875,000 17,696
25,000 559,115
2,286,675
62.72%
238,719 82,911 5,361
7,212
-
334,202
24.81%
- -
-
-
-
-
-
472,718 175,028 33,437
17,500 144,918
843,601
30.10%
211,837
-
-
7,500
219,337
0.00%
415,773 452,669 2,659
25,000 73,124
969,225
54.25%
409,401 74,623 3,487
25,000 26,610
539,121
18.78%
- -
-
-
-
-
-
256,372 67,470 1,404
25,000
212,098
-
-
-
-
350,246
12.00%
212,098
0.00%
- -
-
-
-
-
-
149,522 31,076 22,376
12,746 31,045
246,765
25.17%
- -
-
-
-
-
-
651,037
-
-
-
-
651,037
0.00%
- -
-
-
-
-
-
265,106 62,203
69,238
-
-
306
19,231
5,769
-
-
346,540
14.75%
75,314
0.00%
- -
-
-
-
-
-
352,059 73,271 2,560
25,000 53,250
506,140
25.00%
- -
-
-
-
-
-
332,451 126,021 1,902
24,999 49,075
534,448
32.76%
Year
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2019
2020
2019
2020
2019
2019
2020
2019
2020
2019
2020
2019
2019
2020
2019
2020
2019
30 June 2020
N on Executive D irectors
D. C. Clarke
R. J. Carless
P. A. Lahiff
R. J. Low
C. L. Rogers
Executive D irector
M. P. C. Emmett
M. P. L. Searles
During Employment
Post Employment
Executives
M. Shanahan
E. Henderson
During Employment
Post Employment
F. Pasquini
K. McIvor3
S. Vohra
During Employment
Post Employment
N. Thomas
A. Zissis
T otal R emuneration
T otal R emuneration
2020
2019
1,835,486
4,236,587
1,327,669
692,603
20,355
70,834
121,151
244,928
632,239
304,899
3,936,900
5,549,851
Statutory remuneration represents the accounting expense of remuneration in the financial year. It includes salary remuneration, annual and long service
leave payments, the amortisation expense of deferred share awards previously granted and an accrual for STIs.
1 STI amounts included above relate to the accrued provision in respect of the current year’s performance that will be paid during the following financial year.
The 2020 amounts have been approved by the Remuneration Committee.
2 Share based payments are calculated on the accrued cost to the Company recognising that options issued to KMP will vest over 3 years (5 years for CEO
sign on options) after taking into account a 60 -100% probability that the Group will achieve the performance hurdles required for those options to vest.
3 Total remuneration for K McIvor is in respect of his role as Managing Director of New Zealand operations.
20 AUB GROUP ANNUAL REPORT 2020
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2020
REMUNERATION REPORT (CONTINUED)
Compensation of Directors and other Key Management Personnel (continued)
Table 4 – Cash and vesting basis - period ending 30 June 2020
The table below outlines remuneration received individually during the year including the prior year STI paid in cash in
the reporting year and the benefit received from vesting of shares granted under the Employee Share Option Scheme.
Short-term
Cash short
Non
Post
Share- based
employment
payment
Salary &
fees
$
term
incentive1
$
monetary
Super-
benefits
annuation
$
$
Equity
options2
$
Total per-
Total
formance
Remuneration
related
$
%
191,781
191,781
90,004
90,001
105,023
105,023
127,151
124,201
95,890
105,023
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
809,864 182,466 17,696
238,719
-
5,361
18,219
18,219
24,996
24,999
9,977
9,977
8,849
11,799
9,110
9,977
25,000
7,212
-
-
-
-
-
-
-
-
-
-
-
-
- -
-
-
-
-
472,718 450,784 33,437
17,500 1,943,536
2,917,975
210,000
210,000
115,000
115,000
115,000
115,000
136,000
136,000
105,000
115,000
-
-
-
-
-
-
-
-
-
-
1,035,026
17.63%
251,291
-
-
0.00%
0.00%
219,337
-
-
-
-
-
-
-
593,432
477,888
25.28%
18.78%
-
-
360,246
212,098
19.26%
0.00%
-
-
211,837
-
-
7,500
415,773 150,000 2,659
409,401 40,000
3,487
25,000
25,000
- -
77,470
256,372
-
-
1,404
25,000
212,098
-
-
-
-
- -
173,816
149,522
- -
651,037 47,929
- -
167,485
265,106
69,238
-
- -
161,110
352,059
22,376
12,746 115,323
473,783
25.17%
-
-
-
-
-
-
-
-
-
-
-
698,966
0.00%
-
-
-
306
19,231 115,394
-
5,769
567,216
17.95%
75,314
0.00%
-
-
-
-
-
2,560
25,000
111,670
652,400
25.00%
30-Jun-20
N on Executive D irectors
D. C. Clarke
R. J. Carless
P. A. Lahiff
R. J. Low
C. L. Rogers
Executive D irector
M. P. C. Emmett
M. P. L. Searles
During Employment
Post Employment
Executives
M. Shanahan
E. Henderson
During Employment
Post Employment
F. Pasquini
K. McIvor3
S. Vohra
During Employment
Post Employment
N. Thomas
A. Zissis
Year
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2019
2020
2019
2020
2019
2019
2020
2019
2020
2019
2020
2019
2019
2020
2019
2020
2019
T otal R emuneration
T otal R emuneration
2020
2019
1,835,486
332,466
20,355
4,236,587
1,268,594
70,834
121,151
244,928
- -
150,000
332,451
-
-
1,902
24,999
-
-
-
-
-
509,352
32.76%
2,309,458
2,285,923
8,106,866
1 STI amounts paid during each financial year for performance during the prior financial year based on agreed KPIs.
2 The actual remuneration relating to share based payments is based on the market value on the date the options were exercised multiplied by the actual
number of options vested during the year.
3 Total remuneration for K McIvor in respect of his Group Executive role and Managing Director of New Zealand operations role.
21 AUB GROUP ANNUAL REPORT 2020
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2020
REMUNERATION REPORT (CONTINUED)
Table 5: Number of options granted as part of remuneration
Fair value per
option at grant
Exercise price
date ($)
per option ($)
Year ended
First exercise
Last exercise
30 June 2020 (Grant year FY20) Granted no. Grant date (see note 16)
(see note 16) Expiry date
date
date
Directors
M. P. C Emmett (3 year options)
76,029 19-Dec-19
M. P. C Emmett (5 year options)
200,000 19-Dec-19
9.37
8.91
0.00
0.00
31-Aug-26
31-Aug-22
31-Aug-26
31-Aug-28
31-Aug-24
31-Aug-28
Executives
M. Shanahan (3 year options)
13,882 19-Dec-19
9.37
0.00
31-Aug-26
31-Aug-22
31-Aug-26
T otal
289,911
The fair value above is the weighted average price of the EPS options and the TSR options at the date the options were granted.
All options were issued with an exercise price of $NIL and the expiry date of the options is four years after the vesting date.
Table 6: Value of options granted as part of remuneration to KMP (Consolidated)
(Includes options vested or lapsed during the year)
Shares issued on exercise of
options
Percentage of
Value of
remuneration
Paid per share
Number of
Number of
options
consisting of value
Number of
on shares
Options
Options
Value of
exercised
share based
shares issued
issued on
vested
lapsed
options granted
during the year
during the
year2
payments incurred
during the year3
options
options
on exercise of
exercise of
during the
during the
%
No.
$
year
No.
year
No.
30 June 2020
Directors
M. P. C Emmett
- Sign-on grant4
- Annual grant1
Executives
M. Shanahan1
$
2,080,000
850,000
155,201
$
-
-
-
14.70
9.80
- -
- -
- -
- -
7.54
- -
- -
T otal
3,085,201
-
-
-
-
1 Total gross value of options granted during the year which will vest over three years if all performance hurdles required for options to vest, are met.
2 Total value of options exercised during the year is calculated based on the fair value of the options at grant date multiplied by the number of options
exercised.
3 Share based payments as a percentage of remuneration is calculated on the accrued cost to the Company recognising that options issued to KMP will
vest over 3 years after taking into account a 60 - 100% probability that the Group will achieve the performance hurdles required for those options to
vest.
4 Total gross value of options granted during the year includes 200,000 sign on options that will vest over five years if all performance hurdles required
for options to vest are met.
22 AUB GROUP ANNUAL REPORT 2020
DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2020
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. J. Carless
D. C. Clarke
M. P. C. Emmett
P. A. Lahiff
R. J. Low
C. L. Rogers
Directors’
Audit & Risk
Meetings
Management
Nomination
Remuneration &
People
Meetings of Committees
18
17
18
18
16
18
17
6
6
6
6
6
6
6
2
2
2
2
2
2
2
6
6
6
6
6
6
6
1 Mr. Emmett was not a member of any committee but attended all possible committee meetings as an invitee. All other Directors were eligible to attend all
meetings held.
Committee membership
As at the date of this report, the Company had an Audit & Risk Committee, Remuneration & People Committee and a Nomination
Committee of the Board of Directors. Members acting on the committees of the Board during the year were:
Audit & Risk Management
Remuneration & People
Nomination
R. J. Low (Chair)
P. A. Lahiff (Chair)
D. C. Clarke (Chair)
R. J. Carless
D. C. Clarke
P. A. Lahiff
C. L. Rogers
ROUNDING
R. J. Carless
D. C. Clarke
R. J. Low
C. L. Rogers
R. J. Carless
P. A. Lahiff
R. J. Low
C. L. Rogers
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 instrument "Rounding in Financial/Directors' Reports"
2016/191. The Company is an entity to which this legislative instrument applies.
AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES
The Directors received an independence declaration from the auditors of AUB Group Limited. Refer to page 32 of the Annual
Report.
Non-audit services provided to the AUB Group by the entity’s auditor, Ernst & Young, in the financial year ended 30 June 2020
were predominantly in relation to tax matters. Other services included independent investigation and reviews. 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) Cth. 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 23 of the Financial Report.
Signed in accordance with a resolution of the Directors.
D.C. Clarke
Chair
M. P. C. Emmett
Chief Executive Officer and Managing Director
Sydney, 25 August 2020
Sydney, 25 August 2020
23 AUB GROUP ANNUAL REPORT 2020
AUDITOR’S INDEPENDENCE DECLARATION
YEAR ENDED 30 JUNE 2020
ENVIRONMENTAL
SOCIAL, AND
GOVERNANCE
REPORT
AUB GROUP ANNUAL REPORT 2020
STATEMENT OF VALUES
At AUB Group we are guided by a universal set of values that describe the focus of our efforts. Our goal is for all of our
decisions and actions to reflect these core values. We believe that putting our values into practice creates the greatest
benefits for our shareholders, partners, employees, suppliers and communities in which we serve.
ASPIRATIONAL
We are progressive, explore opportunities for growth
and continually raise the bar
– We aren’t afraid to fail, we learn from our mistakes and look for opportunities to improve and grow.
– We take ownership, break outside our bubble and challenge the status quo.
– We expect, encourage and value different opinions to get the best outcome.
– We seek opportunities to develop and have a good understanding of our competitors, the industry
and economy.
PARTNERSHIP AND RELATIONSHIP DRIVEN
We are respectful, collaborative and seek to amplify potential
– We take time to understand each other’s objectives and drivers before making a decision.
– We confront difficult situations head on, if we see or hear something that is unacceptable we act.
– We value and are respectful of each other’s time and contribution, we actively listen to and
acknowledge each other.
– We find synergies with partners, following through on commitments, communicate early and seek
to understand individual circumstances.
GENUINE
We are easy to deal with, honest and fair
– We listen to requests, if we have to say no, we say no respectfully and provide an explanation as
to why.
– When we say we will do something, we will do it. We are careful not to over promise.
– We willingly step into conversations that might be uncomfortable having prepared ourselves
by setting clear intentions and being prepared to listen with compassion.
– We are in ongoing conversations with each other to create clarity and transparency.
RESOURCEFUL
We are creative and agile in our delivery of the best outcome
– We take the initiative to be self-motivated, we apply a growth mindset and support people
and processes to change and grow.
– We know our strengths, we collaborate and network to share knowledge.
– We know when not to over complicate things, we are respectful of each other’s time.
– We are forward thinking and provide opportunities to test ideas, we change to improve.
25
CONSOLIDATEDSTATEMENTOFPROFITORLOSSYEARENDED30JUNE 2020AUB GROUP ANNUAL REPORT 2020 33ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2020 AUB GROUP ANNUALREPORT202033 ENVIRONMENT, SOCIAL AND GOVERNANCE
AUB Group is committed to being a responsible and sustainable business. We believe it makes good business sense to have
environmental, social and governance (ESG) policies and practices where doing the right thing by our people, our partners, our
environment and the communities in which we operate is part of our ethos.
We are a services based organisation operating in local communities with a limited environmental footprint and limited exposure
to supply chain risks such as modern slavery.
AUB Group considers ESG from the perspectives of the environment, fair treatment of customers, employees and suppliers,
ethical decision making and contribution to the community.
OUR ENVIRONMENTAL COMMITMENT
Environmental sustainability is integral to helping our clients realise a stronger, more protected future.
We are committed to monitoring our own environmental footprint, even though we have limited exposure. AUB Group has a
corporate social responsibility policy that reflects the Group’s ESG stance. The policy is provided to our partner firms for them to
adopt. The policy requires a robust environmental management approach. Future iterations of the policy will explore more ways
in which our businesses can assess climate risks and promote sustainability.
OUR OBJECTIVES
HOW WE ARE ACHIEVING OUR OBJECTIVES
Monitor and reduce
water and energy
consumption
Reducing and consolidating office space.
Reducing water and energy consumption.
Measuring Scope 1 & 2 emissions across the AUB Group (see
Emissions section) for further consideration.
Piloting a “1 in 5” program for Sydney based Agency and Head Office
staff, where staff work from home 4 days a week.
Promoting the use of green buildings, including AUB Group’s new head
office in North Sydney, which features:
– 5.5 Star NABERS Energy rating and a 4.0 Star NABERS Water rating
Energy efficient lighting.
7 buildings in the target emissions group have an Energy Rating
(Average 4.6), 5 have a Water Rating (Average 4.0) and 2 have a
Waste Rating (Average 2.8).
Active encouragement of recycling with paper, glass and aluminum and
printer toner cartridge recycling stations encouraged in each office.
Where possible, offices are in central locations near public transport
hubs. Most employees travel to and from work via public transport
(train, bus, ferry) or active transport (walking and cycling).
Video and audio communication is encouraged in order to reduce air
and road travel.
Procurement of environmentally-friendly office supplies is encouraged.
Hard copy corporate brochures and business cards have moved to
online versions. Annual report printing has been reduced by half.
Printers are set to print double-sided output.
Minimise waste, and
encourage the reuse
and recycling of
waste items
Promote sustainable
transport to
employees, clients
and suppliers
Support sustainable
procurement and
other sustainable
work practices
26
CORPORATEINFORMATIONABN60 000 000 71534 AUB GROUP ANNUAL REPORT 2020 ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 202034AUB GROUP ANNUALREPORT2020 EMISSIONS1
AUB Group is committed to being a responsible and sustainable organisation. For the first time we are reporting our Scope 1
and 2 emissions, which will form the benchmark for future emissions reporting.
FY20 Emissions Performance
AUB Group’s emissions reporting covers the Group’s head office and the Group’s partners’ tenanted offices and car fleets
(where relevant). Our primary measure of these activities are scope 1 and 2 emissions1:
– Scope 1 emissions are direct emissions relating to our business operations. In AUB Group’s case this covers emissions
from car fleets, and
– Scope 2 emissions are indirect emissions relate to our business operations, such as the emissions generated by power
we purchase from the electricity grid.
SCOPE 1 & 2 EMISSIONS
% COMPOSITION
2,000
1,500
1,000
500
0
12
17
71
Scope 1 – Diesel & Petrol Combustion
Scope 2 – Electricity from National Grid
Total Scope 1 & 2
Scope 1 – Diesel Combustion - Transport
Scope 1 – Petrol Combustion - Transport
Scope 2 –Electricity from National Grid
1
Scope 1 and 2 emissions are prepared according to the National Greenhouse and Energy Reporting Act 2007 (‘NGER Act’). Following the NGER Act’s
guidelines, we report on emissions where the AUB Group has operational control over the facility, thus excludes Scope 3 emissions. Emissions reported
includes both Australia and New Zealand.
Emission factors AUB Group have monitored in FY20:
Scope 2 Emissions tCO2-e/sqm
Scope 1 & 2 Emissions tCO2-e/employee
Our commitment
We will continue to monitor our emissions across the AUB Group and explore initiatives to reduce them where sensible.
0.06
1.22
27
CONSOLIDATEDSTATEMENTOFPROFITORLOSSYEARENDED30JUNE 2020AUB GROUP ANNUAL REPORT 2020 33ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2020 AUB GROUP ANNUALREPORT202033 We actively support workplace diversity and inclusion and are
committed to developing and caring for our people.
Workplace diversity and inclusion
AUB Group strives to create an inclusive workplace where individuals can reach their full potential and its strategy supports
the recruitment, retention and development of the most diverse talent.
A review of the AUB Group’s Diversity and Inclusion Policy was undertaken during the performance year with updates
to our recruitment, selection and succession processes. Further aspects of diversity including in respect of women
in leadership, age diversity and cultural diversity will be considered by the Remuneration and People committee to be
included in the AUB Group’s Diversity and Inclusion Policy.
WORKFORCE (%)
AUB BOARD MEMBERS (%)
41
33
67
45
PROMOTIONS (%)
Female
Male
RESIGNATIONS (%)
34
55
59
66
28
CORPORATEINFORMATIONABN60 000 000 71534 AUB GROUP ANNUAL REPORT 2020 ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 202034AUB GROUP ANNUALREPORT2020 Workplace health and safety
We are committed to ensuring we provide a safe workplace
for our people that is focused on a total wellbeing strategy.
A review of the AUB Group’s WHS policies has been
completed over the performance year to ensure the physical
and psychological safety of our people. Incident and
grievance reporting form part of the regular metrics reporting
to AUB Group’s Remuneration and People Committee and
Audit and Risk Committee.
AUB Group and some partner businesses are piloting
moving our workforce from a high density office based
model to a more flexible and agile way of working, resulting
in a significant decrease in commuting time, environmental
impact and economic cost and better work life balance.
AUB Group Academy
AUB Group is committed to investing in the development of
its people. The AUB Group continues to offer market leading
programs and a new Education Committee has been formed
with key representatives from our network. The Committee
will focus on training and education, industry advocacy,
research and reporting including the review of current
offerings, key partnerships and memberships.
AUB Group also offers support for learning and development
programs and assistance with further study through financial
assistance programs.
Employee Engagement
Our people’s perspective and input is important to us and we
are committed to continuing to provide a platform to gain
regular feedback and insight. As we move to a more flexible
and agile workforce with our people working remotely, AUB
Group has undertaken a review of the employee engagement
platform and will be moving to an online diagnostic tool
that provides more regular surveys, insights and reports
to management teams.
Preparing for the Future
A number of structural changes have been made over the
performance year to prepare our workforce for the future.
As we bring our Partners closer to AUB Group and continue
to review individual performance on a regular basis, it
provides the opportunity to identity key talent and ensure
we have the right skills, capability and experience to deliver
current initiatives and build our succession pipeline for
the future.
Human Rights and Modern Slavery
AUB Group has no tolerance for modern slavery breaches
and is committed to achieving best practice and continual
improvement in combating all forms of modern slavery
such as forced labour, human trafficking and debt bondage.
AUB Group understands it must comply with all modern
slavery legal obligations as an ASX listed company and is
in the process of identifying and managing risks within its
business and supply chain.
Through its supply chain, AUB Group understands it has
the potential to cause, contribute or be directly linked to
modern slavery. AUB Group expects the business and supply
chain to implement controls and to perform monitoring
to avoid causing, contributing to or being complicit with
modern slavery. By continually reviewing, investigating,
screening, reporting, training and implementing contractual
obligations, AUB Group seeks to ensure it is doing all it can
to eradicate modern slavery practices such as forced labour,
debt bondage, deceptive recruiting, human trafficking and
child labour.
AUB Group encourages all employees and business partners
to verbalise their concerns if they feel that modern slavery is
occurring within its business practices or supply chain, either
by reporting internally or through AUB Group’s anonymous
reporting service.
AUB Group’s ESG strategy promotes ethical and sustainable
practices, in particular respecting human rights through
developing high quality and ethical partnerships with
suppliers and service providers. AUB Group strictly
complies with relevant laws and expects the same from
all stakeholders. AUB Group supports mutual respect
between employees and management and is an equal
opportunity employer.
CORPORATE GOVERNANCE
The AUB Group Board of Directors is responsible for the
corporate governance of AUB Group Limited. The Board
guides and monitors the business and affairs of AUB Group
on behalf of stakeholders and its activities are governed by
the Constitution. The Board structure is summarised here:
Board
Board
Committees
Senior
Management
Team
Management Risk
& Compliance
Committee
Audit & Risk
Committee
Nomination
Committee
Remuneration &
People Committee
29
CONSOLIDATEDSTATEMENTOFPROFITORLOSSYEARENDED30JUNE 2020AUB GROUP ANNUAL REPORT 2020 33ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 2020 AUB GROUP ANNUALREPORT202033 PARTNERING AND CONNECTING
WITH OUR COMMUNITY
AUB Group and our network partners are committed to
supporting community organisations including charities
and sporting clubs through fundraising, sponsorship
and volunteering.
Because our partners are spread through a variety
of communities, AUB Group adopts an approach of
decentralised community support. Individual partners
determine the best approach to engage with and support
their local communities.
Over a million dollars in donations and sponsorships were
made and hundreds of hours were given to volunteering
and charity event participation in FY20. Being part of the
community in this way enables our Partners to deliver social
value to their community.
FUTURE COMMITMENT
AUB Group and its Partners will continue to seek ways in
which we can contribute to the communities that support
us, minimise the environmental impact of our business
activities and ensure the fair treatment of our customers,
employees and suppliers.
Delivering on our corporate responsibility statement policy
is integral to safeguarding a stronger future for our clients,
partners, employees and shareholders.
CORPORATE GOVERNANCE (CONTINUED)
Our Corporate Governance Statement is founded on
the ASX Corporate Governance Council’s Principles and
Recommendations. The Statement is periodically reviewed
and, if necessary, revised to reflect the changing nature of
the industry.
The responsibilities of the Board of Directors and those
functions reserved to the Board, together with the
responsibilities of the Chief Executive Officer are set out
in our Board Charter. To assist with governance AUB Group
has established Board Committees and policies.
In FY20, AUB Group implemented, revised and updated
a number of policies (effective 1 July 2020). For copies
of policies and charters noted in this section, please visit
the AUB Group website and navigate to Who we are >
Corporate governance.
Privacy and security
AUB Group’s Cyber Security Policy provides guidance to
member firms on reducing the probability of cyber-attacks,
as well as on managing and mitigating any attacks that may
eventuate. Further, the Cyber Security Policy, together with
cyber audits performed on a regular basis, ensures that AUB
Group is adhering to all regulatory obligations and maintaining
appropriate risk management standards in this continually
evolving risk category.
Regular vulnerability scans and penetration tests are
performed on AUB Group’s infrastructure and externally
facing systems to minimise the risk of successful cyber-
attacks on AUB Group’s systems and platforms.
All data obtained is backed up on a daily basis on all
managed systems and minimum IT security standards
are maintained.
AUB Group is committed to protecting the privacy of all
sensitive information collected as part of its business
operations. The AUB Group Privacy Policy sets out the
principles that AUB Group follows in collecting, using, holding,
disclosing and otherwise managing personal information.
All reasonable steps are taken to ensure that personal
information held is protected from misuse, interference,
loss from unauthorised access, modification and
unwarranted disclosure.
30
CORPORATEINFORMATIONABN60 000 000 71534 AUB GROUP ANNUAL REPORT 2020 ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTYEAR ENDED 30 JUNE 202034AUB GROUP ANNUALREPORT2020 DIRECTORS’ REPORT
YEAR ENDED 30 JUNE 2020
FINANCIAL
REPORT
8 AUB GROUP ANNUAL REPORT 2019
AUDITOR’S INDEPENDENCE DECLARATION
YEAR ENDED 30 JUNE 2020
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
Auditor’s Independence Declaration to the Directors of AUB Group Limited
As lead auditor for the audit of the financial report of AUB Group Limited for the year ended 30 June 2020, I declare to
the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the
audit; and
b) 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
Michael Wright
Partner
25 August 2020
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
AUB GROUP ANNUAL REPORT 2020 32
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
YEAR ENDED 30 JUNE 2020
Revenue from contract with customers
Other Income
Share of profit of associates
Cost to provide services and administrative expenses
Finance costs
Notes
4 (i)
4 (ii)
4 (iii)
4 (iv)
4 (v)
C onsolida te d
2020
$’000
2019
$’000
303,456
276,396
2,328
29,571
3,415
27,367
(258,478)
(245,031)
(8,529)
68,348
(6,596)
55,551
Adjustments to carrying value of associates, goodwill, contingent consideration
payments and put option liability
4(vi)
1,790
5,424
Profit / (loss) from sale or dilution of interests in associates, controlled entities and
broking / agency portfolios
4(vii)
Profit before income tax
Income tax expense
N e t Profit Afte r Ta x
Net Profit after tax for the period attributable to:
Equity holders of the parent
Non-controlling interests
(2,739)
67,399
1,155
62,130
5
(11,299)
(12,958)
5 6 ,1 0 0
4 9 ,1 7 2
47,254
8,846
48,361
811
5 6 ,1 0 0
4 9 ,1 7 2
64.10
63.95
69.49
69.41
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
6
6
The above Consolidated Statement of Profit or Loss (SOPL) should be read in conjunction with the notes to the Financial Report.
AUB GROUP ANNUAL REPORT 2020 33
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
YEAR ENDED 30 JUNE 2020
N e t Profit a fte r ta x for the pe riod
Other comprehensive income
Other comprehensive income to be reclassified to profit or loss in subsequent
periods:
Net movement in foreign currency translation reserve
Income tax benefit relating to currency translation
Other comprehensive income after income tax for the period
C onsolida te d
2019
$'000
2020
$'000
56,100 49,172
(2,141)
972
- -
(2,141)
972
Tota l com pre he nsive incom e a fte r ta x for the pe riod
5 3 ,9 5 9
5 0 ,1 4 4
Total comprehensive income after tax for the period attributable to:
Equity holders of the parent
Non-controlling interests
45,440 49,192
8,519
952
5 3 ,9 5 9
5 0 ,1 4 4
The above Consolidated Statement of Other Comprehensive Income (SOCI) should be read in conjunction with the notes to the
Financial Report.
34 AUB GROUP ANNUAL REPORT 2020
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
YEAR ENDED 30 JUNE 2020
Notes
C onsolida te d
2019
$'000
2020
$'000
ASSETS
Current Assets
Cash and cash equivalents
Cash and cash equivalents - Trust
Trade and other receivables*
Lease Net Investment
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
Right of Use asset**
Lease Net Investment
Deferred Tax Asset
Total Non-current Assets
Tota l Asse ts
LIABILITIES
Current Liabilities
Trade and other payables*
Deferred revenue from contracts with customers
Income tax payable
Provision for employee entitlements
Lease Liabilities**
Interest-bearing loans and borrowings
Total Current Liabilities
Non-current Liabilities
Trade and other payables
Provisions
Deferred tax liabilities
Lease liabilities**
Interest bearing loans and borrowings
Total Non-current Liabilities
Tota l Lia bilitie s
N e t Asse ts
EQU ITY
Issued capital
Retained earnings
Foreign currency translation reserve
Put Option Reserve
Share based payments reserve
Equity a ttributa ble to e quity holde rs of the pa re nt
Non-controlling interests
Tota l Equity
10
10
11
14
8
12
14
14
5
15
5
14
17
15
5
14
17
18
15
16
84,374
158,777
68,539
529
348
312,567
111
40
271,041
11,676
385,497
23,546
2,776
14,538
709,225
70,016
149,981
79,592
-
8
299,597
133
393
127,453
14,559
401,146
-
-
12,645
556,329
1 ,0 2 1 ,7 9 2
8 5 5 ,9 2 6
215,186
6,243
9,366
17,494
8,224
11,104
267,617
547
3,664
15,999
21,443
220,666
262,319
216,528
5,590
6,533
15,432
-
18,945
263,028
1,021
3,362
19,587
-
85,530
109,500
5 2 9 ,9 3 6
3 7 2 ,5 2 8
4 9 1 ,8 5 6
4 8 3 ,3 9 8
258,947
179,005
(1,442)
(14,778)
8,469
255,662
171,168
372
(19,919)
7,820
4 3 0 ,2 0 1
4 1 5 ,1 0 3
61,655
68,295
4 9 1 ,8 5 6
4 8 3 ,3 9 8
*30 June 2019 balances have been restated to ensure comparability between periods, see Note 2.2.
**On 1 July 2019, the Group adopted AASB 16: Leases on a modified retrospective basis, and as permitted by the accounting st andard,
financial statements for the prior reporting period has not been restated, see Note 2.2.
The above Consolidated Statement of Financial Position (SOFP) should be read in conjunction with the notes to the Financial
Report.
AUB GROUP ANNUAL REPORT 2020 35
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 30 JUNE 2020
Attributable to equity holders of the parent
Issued
Retained
Foreign
currency
translation
capital
earnings
reserve
Share
Put
option
reserve
based
payment
reserve
$'000
$'000
$'000
$'000
$'000
Non-
controlling
interest
Total
equity
Total
$'000
$'000
$'000
2 5 5 ,6 6 2 1 7 1 ,1 6 8
3 7 2 (1 9 ,9 1 9 )
7 ,8 2 0 4 1 5 ,1 0 3
6 8 ,2 9 5
4 8 3 ,3 9 8
-
279
-
- - 279
7 286
2 5 5 ,6 6 2 1 7 1 ,4 4 7
3 7 2 (1 9 ,9 1 9 )
7 ,8 2 0 4 1 5 ,3 8 2
6 8 ,3 0 2
4 8 3 ,6 8 4
-
-
-
47,254
-
- - 47,254 8,846
56,100
-
(1,814)
-
-
(1,814)
(327)
(2,141)
4 7 ,2 5 4
(1 ,8 1 4 )
-
-
4 5 ,4 4 0
8 ,5 1 9
5 3 ,9 5 9
C onsolida te d
At 1 July 2 0 1 9
Impact due to change in
accounting standard*
R e sta te d ba la nce a t 1 July
2 0 1 9
Net Profit After tax for the year
Other comprehensive income
Tota l com pre he nsive
incom e for the ye a r
Tra nsa ctions with owne rs in the ir
ca pa city a s owne rs:
Adjustment relating to (decrease)
in interest resulting in losing
control (see Note 7)
Adjustment relating to
increase/(decrease) in interest
resulting in no change in control
(see Note 9)
Transfer to put option reserve &
impact of put option release**
-
-
- - -
-
-
-
(5,355)
(5,355)
(1,246)
- - -
(1,246)
(1,439)
(2,685)
(3,861)
-
5,141
-
1,280
Cost of share-based payment
- - -
- 455
455
Tax benefit related to employee
share trust transactions
- - -
- 194 194
Capital issued under DRP
3,285
- -
- - 3,285
-
-
-
-
1,280
455
194
3,285
Equity dividends
-
(34,589)
-
- -
(34,589)
(8,372)
(42,961)
At 3 0 June 2 0 2 0
2 5 8 ,9 4 7 1 7 9 ,0 0 5
(1 ,4 4 2 ) (1 4 ,7 7 8 )
8 ,4 6 9 4 3 0 ,2 0 1
6 1 ,6 5 5
4 9 1 ,8 5 6
*The Group adopted AASB 16: Leases on a modified retrospective basis, which resulted in an adjustment to retained earnings of $279,000 on 1 July
2019, being the cumulative effect upon initial application of the standard. As permitted by the accounting standard, financial statement for the prior
reporting period has not been restated. See Note 2.2 for further details.
**On 1 April 2020 the Group disposed of all its shares in Allied Health Australia Pty Ltd extinguishing the related put option liability. On that date the
put option liability of $1.28m was derecognised directly against the put option reserve. There was no impact to the profit and loss.
The above Consolidated Statement of Changes in Equity (SOCIE) should be read in conjunction with the notes to the Financial
Report.
36 AUB GROUP ANNUAL REPORT 2020
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 30 JUNE 2020
Attributable to equity holders of the parent
Foreign
currency
translation
reserve
Share
based
payment
reserve
Put
option
reserve
Issued
capital
Retained
earnings
$'000
$'000
$'000
$'000
$'000
Non-
controlling
interest
Total
equity
Total
$'000
$'000
$'000
1 4 1 ,7 0 8 1 6 4 ,8 3 9
(4 5 9 ) (2 6 ,4 0 3 )
6 ,8 6 1 2 8 6 ,5 4 6
6 5 ,8 7 0 3 5 2 ,4 1 6
C onsolida te d
At 1 July 2 0 1 8
Net Profit After Tax for the year
-
48,361
-
- - 48,361 811
49,172
Other comprehensive income
-
- 831
- - 831 141 972
Tota l com pre he nsive
incom e for the ye a r
Tra nsa ctions with owne rs in the ir
ca pa city a s owne rs:
Adjustment relating to
increases/(decrease) in interests
in controlled entities (see Note 9)
Non-controlling interests relating
to new acquisitions (see Note 7)
-
4 8 ,3 6 1
8 3 1
-
-
4 9 ,1 9 2
9 5 2
5 0 ,1 4 4
-
(5,194)
-
- -
(5,194)
(3,080)
(8,274)
- - -
-
-
- 14,320 14,320
Transfer to put option reserve
Cost of share-based payment
-
-
(6,484)
-
-
-
- 773 773
6,484
- - - -
-
-
773
186
202
Tax benefit related to employee
share trust transactions
- - -
- 186 186
Exchange rate movements
-
- -
- - - 202
Proceeds from capital raising
116,353
- -
- - 116,353
Share issue expenses
(2,399)
- -
- -
(2,399)
-
-
116,353
(2,399)
Equity dividends
-
(30,354)
-
- -
(30,354)
(9,969)
(40,323)
At 3 0 June 2 0 1 9
2 5 5 ,6 6 2 1 7 1 ,1 6 8
3 7 2 (1 9 ,9 1 9 )
7 ,8 2 0 4 1 5 ,1 0 3
6 8 ,2 9 5
4 8 3 ,3 9 8
AUB GROUP ANNUAL REPORT 2020 37
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED 30 JUNE 2020
C ASH FLOWS FR OM OPER ATIN G AC TIVITIES
Receipts from customers
Dividends received from others
Dividends/trust distributions received from associates
Interest received
Management fees received from associates / related entities
Payments to suppliers and employees
Income tax paid
Interest paid
Interest paid - lease liabilities*
Net cash from operating activities before customer trust account movements
Net increase /(decrease) in cash held in customer trust accounts
NET CASH FLOWS FROM OPERATING ACTIVITIES
C ASH FLOWS FR OM IN VESTIN G AC TIVITIES
Payments for acquisition of consolidated entities, net of cash acquired
Cash Inflow (outflow) from sale/deconsolidation of controlled entities
Payment for new associates and increases in holdings in associates
Proceeds from reduction in interests in associates
Advance settlement for sale of associates
Proceeds from reduction in interests in controlled entities
Payment for increase in interests in controlled entities
Payment for contingent consideration on prior year acquisitions
Payment for new broking portfolios purchased
Proceeds from sale of broking portfolios
Proceeds from sale of other financial assets
Proceeds from sale of plant and equipment
Payment for plant and equipment and capitalised projects
Advances to related entities
Repayment/(advances) of loans to associates / related entities
C onsolida te d
2020
$'000
2019
$'000
Notes
330,204
284,228
-
24,400
2,328
11,417
36
26,371
3,379
13,736
(265,514)
(255,555)
4 (v)
10
7 (a)
7 (b)
8
8
8
9
9
15
(15,101)
(7,074)
(1,470)
79,190
12,114
91,304
(4,316)
(4,135)
(141,230)
4,491
-
1,250
(3,692)
(5,398)
(2,733)
738
1
165
(1,873)
(1,336)
573
(12,038)
(5,886)
-
54,271
15,257
69,528
(13,748)
1,184
(1,938)
-
3,400
3,262
(12,308)
(3,934)
(5,028)
327
5
770
(7,171)
(1,666)
28
NET CASH FLOWS (USED IN) INVESTING ACTIVITIES
(157,495)
(36,817)
C ASH FLOWS FR OM FIN AN C IN G AC TIVITIES
Dividends paid to shareholders**
Dividends paid to shareholders of non-controlling interests
Net proceeds from issue of share capital
Increase in borrowings
Repayment of borrowings
Payments of principal for lease liabilities*
NET CASH FLOWS (USED IN)/FROM FINANCING ACTIVITIES
NET (DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at beginning of the period
Impact as a result of foreign exchange
10
10
10
(20,603)
(8,372)
-
142,451
(14,510)
(9,168)
89,798
23,607
(30,354)
(9,969)
113,197
4,216
(48,808)
-
28,282
60,993
219,997
158,657
(454)
347
Cash and cash equivalents at the end of the period
10
243,151
219,997
*On 1 July 2019, the Group adopted AASB 16: Leases on a modified retrospective basis, and as permitted by the accounting standard, financial information for
the prior reporting period has not been restated. For the period ended 30 June 2020, the total cash outflow for leases recognised under AASB 16 was $11.94m.
**Excludes DRP which is a non-cash item, refer to Note 18 for further details.
38 AUB GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
1. CORPORATE INFORMATION
The consolidated financial statements are those of AUB
Group Limited (the parent 'Company') and all entities that
AUB Group Limited controlled (together the 'Group') from
time to time during the year and at the reporting date.
The financial report of AUB Group Limited for the year
ended 30 June 2020 was authorised for issue in accordance
with a resolution of the directors on 25 August 2020.
AUB Group Limited is a for profit company limited by shares
incorporated in Australia whose shares are publicly traded
on the Australian Securities Exchange.
The principal activities during the year of entities within the
consolidated Group were the provision of services across
Australia and New Zealand for insurance broking, agency,
and distribution of ancillary products within the support
services businesses.
The registered office and principal place of business of the
Company is Level 14, 141 Walker Street, North Sydney
NSW 2060, Australia.
2.1 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
a) Basis of preparation of the financial report
The financial report is a general purpose financial report
which has been prepared
in accordance with the
requirements of the Corporations Act 2001, Australian
Accounting
authoritative
pronouncements of the Australian Accounting Standards
Board.
Standards
other
and
The financial report has been prepared under the historical
cost convention, as modified by applying fair value
accounting to certain financial assets and financial
liabilities (including derivative instruments) measured at
Fair Value through Profit or Loss (FVTPL) or in other
comprehensive income (OCI).
The financial report is presented in Australian dollars ($)
and all values are rounded to the nearest $1,000 (where
rounding is applicable), unless otherwise stated, under the
option available to the Company under ASIC instrument
"Rounding in Financial / Directors' Reports" 2016/191. The
functional currency of the Group and all segments other
than New Zealand is Australian Dollars. The New Zealand
segment's functional currency is New Zealand dollars. The
New Zealand segment's result is converted to Australian
dollars for presentation in the Group's financial statements.
The Company is an entity to which this legislative
instrument applies.
Certain comparative information has been revised in this
financial report to conform with the current period's
presentation.
b) Statement of compliance
financial statement complies with Australian
The
Accounting Standards as
issued by the Australian
Accounting Standards Board and International Financial
Reporting Standards ('IFRS') as issued by the International
Accounting Standards Board
IFRS
Interpretations Committee ('IFRIC').
('IASB')
and
c) Basis of consolidation
Information from the financial statements of controlled
entities is included from the date the parent entity obtains
control until such time as control ceases. Generally, there
is a presumption that a majority of voting rights results in
control. To support this presumption, the Group also
considers all relevant facts and circumstances in assessing
whether it has control over an entity, including rights arising
from contractual arrangements with the entity and/or other
vote holders of the entity.
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
policies.
Company
Adjustments are made to ensure conformity with the
Group's accounting policies.
accounting
consistent
using
All intercompany balances and transactions, including
unrealised profits arising from intra-group transactions,
have been eliminated in the consolidated accounts.
Non-controlling interests represent the portion of profit or
loss and net assets in subsidiaries which are not 100%
owned by the Group. These are presented separately in the
Consolidated Statement of Profit or Loss and within equity
in the consolidated Statement of Financial Position.
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
translation
entity
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 Consolidated Statement of Profit or Loss.
together with any accumulated
AUB GROUP ANNUAL REPORT 2020 39
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
Measurement of contingent considerations
Contingent considerations terms vary between transactions
but generally involve using the weighted average expected
future profits of the company being acquired to compute the
current liability. See Note 7(a) for further details.
Re-estimation of put options financial liability
A financial liability has been recognised representing an
estimate of the value the Group could be required to pay on
the future exercise by holders of put options. The Group re-
estimates put options financial liability at the reporting date,
taking into account the estimated future outcomes for
income or profit, on which the purchase price will be
determined. Historical trends and any relevant external
factors are taken into account in determining the likely
outcome. See Note 15 for further details.
Expected Credit Loss - COVID-19
Whilst the subsidiaries and associates of the Group are
diversified across industry sectors and customer segments,
there may be some limited cases of customers experiencing
short to medium term liquidity issues which may increase the
risk of non-collectability in particular in relation to polices
where customers are not required to maintain insurance
under a legislative instrument. See Note 11 for further
details.
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. The fair value of
options has been valued taking into account the vesting
period, expected dividend payout and the share price at the
date the options were granted. See Note 16 for further
details.
Deferred Tax Assets
Deferred tax assets (DTA) are recognised for deductible
temporary differences as management considers that it is
probable that future tax profits will be available to utilise
those temporary differences. Judgement is required in
relation to DTAs recognised in relation to carry forward
losses. The future profitability of each entity or tax
consolidation group (if a part of a tax consolidation group)
needs to be assessed including where a capital loss is made,
the probability of a future capital gain to offset the carrying
forward capital loss. See Note 5 for further details.
2.1 SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)
d) Significant accounting judgements, estimates and
assumptions
to make
The preparation of the financial statements requires
management
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
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.
its
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 are found in the relevant notes to the financial
statements.
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 and for any identifiable intangibles and
investments in associates that have an indicator of
impairment. This requires an estimation of the recoverable
amount of the cash-generating units to which the goodwill
is allocated. COVID-19 was considered in our assessment
of (1) EBIT market multiples, (2) required return on equity
in relation to Discounted Cash Flow (DCF) models and (3)
in DCF models. The
future cash
assumptions used in this estimation of recoverable amount
and the carrying amount of goodwill are discussed in Note
13.
flow projections
.
40 AUB GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
2.2 CHANGES IN ACCOUNTING POLICIES AND
DISCLOSURES
The accounting policies and methods of computation are
the same as those adopted in prior years except for the
restatement of comparative balances, and new and
amended accounting standards which came into effect on 1
July 2019, both of which are detailed below.
The 30 June 2020 financial statements, and respective notes
to the financial statements have been prepared
in
accordance with the new and amended accounting
standards. The accounting policies in the notes below have
also been updated to reflect the new and amended
accounting standards in effect during the year.
The 30 June 2019 comparatives have been prepared in
accordance with
the previous accounting standards
applicable for that period, except for the restatement of
comparative balance for Trade Receivables and Trade
Payables (detailed below), and Segment Reporting (see
Note 3). The relevant accounting policies for 30 June 2019
can be found in the Group's 2019 Annual Report.
The Group has applied the following standards and
amendments for the first time for the annual reporting
period commencing 1 July 2019:
-
-
-
-
-
AASB 16 Leases;
AASB 2017-6 Amendments to Australian Accounting
Standards – Prepayment Features with Negative
Compensation;
AASB 2017-7 Amendments to Australian Accounting
Standards – Long-term Interests in Associates and Joint
Ventures;
AASB 2018-1 Amendments to Australian Accounting
Standards – Annual Improvements 2015-2017 Cycle;
and
Interpretation 23 Uncertainty over
Treatments.
Income Tax
The Group also elected to adopt the following amendments
early:
-
AASB 2018-7 Amendments to Australian Accounting
Standards – Definition of Material.
AASB 16: Leases
AASB 16 came into effect and was adopted by the Group on
1 July 2019, replacing AASB 117: Leases and related
accounting interpretations. The Group applied the modified
retrospective approach under paragraph C8(b)(ii).
The Group has lease contracts for various items of property,
plant and equipment, which are recognised on the balance
sheet at commencement of the lease, with the exception of
short-term leases not exceeding 12 months and leases of
low-value assets.
The Group applied practical expedients and the exemptions
to short-term leases and low-value underlying assets
available in the accounting standard.
Pursuant to some of its lease agreements, the Group has the
option to renew the lease for a period of up to ten years. The
Group applies judgement and considers all relevant factors
in assessing whether it is reasonably certain to exercise an
option. This assessment is performed periodically, and when
the Group is reasonably certain to exercise an option to
extend the duration of a lease, that option is then taken into
account in calculating or recalculating the right-of-use asset
and lease liability.
Impact of adoption of AASB 16
The Group adopted AASB 16 on a modified retrospective
basis, and as permitted by the standard, the comparatives
have not been restated. Upon adoption on 1 July 2019, the
Group recognised a right-of-use asset of $37.18m and a
lease liability of $37.19m, which was not materially different
to the assessment at 30 June 2019. The impact of AASB 16
on retained earnings was $0.28m.
The controlled entities of the group applied a range of
incremental borrowing rates between 3.18% and 5.71%
(weighted average discount rate of 4.56%).
The implementation of AASB 16 resulted in an increase to
the Group’s leasing expense of $1.37m and hence a reduction
of the Group’s profit before tax of $1.37m (net of non-
controlling interest $1.18m). Additionally AUB's post tax
share of associate profits reduction was $0.31m.
The Group had to change its accounting policies as a result
of adopting AASB 16. Refer to details below and in Note 14.
Transitional disclosure
The other amendments listed above did not have any
material impact on the amounts recognised in prior periods
and are not expected to significantly affect the current or
future periods.
The following table sets out a reconciliation between the
lease commitments measured under the previous leasing
accounting standard AASB 117 and disclosed at 30 June 2019
in the Annual Report, and the lease liability prepared under
the new accounting standard AASB 16, which came into
effect on 1 July 2019. As permitted by AASB 16, the Group
applied the exemptions to short-term leases and low-value
assets, and the relevant values of these exemptions are set
out in the table on the following page.
AUB GROUP ANNUAL REPORT 2020 41
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
2.2 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES (continued)
AASB 16: Leases (continued)
O perating lease commitments at 30 June 2019 under AASB 117
Less:
-
-
-
-
commitments relating to outgoings
commitments relating to leases of low-value assets
commitments relating to short-term leases
discount upon application of AASB 16*
Add:
-
-
Other lease payments
lease options expected to be exercised
Lease liability at 1 July 2019 under AASB 16
$'000
40,603
(2,126)
(93)
(282)
(4,151)
151
3,085
37,187
*AASB 16 requires the lessee to measure the lease liability at the present value of the remaining lease payments. The present value calculation
involves the discount of the lease payments using the lessee’s incremental borrowing rate. For the Group, upon application of the weighted
average incremental borrowing rate of 4.56%, the total discount upon application of AASB 16 on 1 July 2019 was $4.15m.
Restatement of comparative balances:
from customers
insurers
As a result of further domestic and international discussion
on the impacts of adoption of AASB 9 and AASB 15, the
Group has reassessed its policy in relation to recognition of
for premiums and
amounts due
broking/agency
on
amounts payable
operations (collectively referred to as fiduciary balances). As
the Group is not liable for the underlying insurance premium,
the Group acts as an agent in the collection of these balances
from policy holders and as such these balances do not meet
the definition of a financial liability or financial asset
respectively.
to
The Group recognises amounts due from customers in
relation to uncollected fees and commissions due to the
Group for services rendered, adjusted for expected credit
loss. The Group recognises amounts due to insurers for
premiums collected but yet to be transferred to the insurer.
The 30 June 2019 balances have been restated to ensure
comparability between reporting periods.
There is no impact to the Statement of Profit or Loss,
Statement of Cashflows, or the associated notes as a result
of the above policy change. The Group continues to only
recognise the portion of commission and fees due to the
Group for the services rendered to the extent the related
performance obligations have been satisfied.
The table below summarises the impact of the restatement to the 30 June 2019 balances.
F inancial Statement Balance
Previously
Reported
$'000
Amount due from customers on broking / agency operations
196,951
11
(163,717)
30 June 2019
Note
Change
Restated
$'000
( 163,717)
15
(163,717)
$'000
33,234
79,592
149,581
( 163,717)
222,118
-
483,398
Trade and other receivables (current)
Amount payable on broking / agency operations
T rade and other payables ( current)
NET ASSET S
243,309
313,298
385,835
483,398
42 AUB GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
3. 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 is organised into four
business units which have been identified as separate
reportable segments as follows:
1. Australian Broking: assess the insurable risks and risk
appetite of customers and sources relevant insurance
products from insurers and underwriters which meets
the needs of the customer. Post policy binding services
primarily include claims handling services on behalf of
the customer (claims preparation). Customers are
generally comprised of Small and Medium Enterprise
(SME) businesses, however services are also provided
to large institutions and individuals.
2. Australian Agencies: assess risk profile and pricing of
policies requested by brokers on behalf of the insurer.
Post policy binding services primarily include claims
handling services on behalf of the insurer (claims
processing). Customers are generally comprised of
brokers operating within the SME insurance industry
sector.
3. New Zealand: provides broking and agency services
within the New Zealand market. Operations are
centrally monitored and managed by AUB Group NZ
head office. As a distinct overseas operation and
investment, performance of the segment is separately
monitored.
4. Support Services: provides a diversified range of
services to support the Broking, Agency, and New
Zealand segments, and external clients. Services
includes post claim rehabilitation, investigation, loss
adjusting, legal, and AUB Group head office support.
These sub segments are not individually reportable.
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.
As a result of organic growth and acquisitions, the Australian
Agencies segment and the New Zealand segment have
become separately reportable. Australian Broking, Australian
Agencies, and New Zealand was previously reported in a
single
Insurance
Intermediaries.
operating
segment
known
as
Due to the continued decline of the Risk Services entities as
a proportion of the Group, the segment is no longer
individually reportable and has been aggregated within the
Support Service segment.
Each segment, except Support Services, contains entities
which operate within a uniform regulatory environment, and
contains similar characteristics in relation to customer profile
and operational risks. Comparatives have been restated
accordingly.
Underlying Net Profit Before Tax
Performance of segments are reviewed by CODM on an
Underlying Net Profit Before Tax (UNPBT) basis. UNPBT
excludes the effects of non-recurring events or other items
not representative of the underlying operationsitems of
income and expenditure which do not represent the
underlying performance of the Group and segments of the
Group, such as restructuring costs, acquisition costs, fair
value gain/losses, profits on sale, amortisation of broking
registers and impairments. Such items are considered to be a
result of non-recurring events or non-representative of the
underlying operations of the Group and segments of the
Group. UNPBT also excludes non-controlling interest to
reflect the performance attributable to the shareholders of the
Group.
AUB GROUP ANNUAL REPORT 2020 43
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
3. OPERATING SEGMENTS (continued)
UNPBT reconciles to the Statutory Profit before income tax within the Statement of Profit or Loss (SOPL) as follows:
Note
Consolidated
2020
$'000
2019
$'000
SOPL
67,399
62,130
8(e)
4(iii),4(iv)
4(v)
9,926
11,132
353
8,562
8,937
696
4(vi)
(1,790)
(5,424)
4(vii)
4 (iv)
2,739
(1,155)
2,550
(1,228)
1,709
-
-
-
-
3,189
(16,176)
(10,099)
76,614
66,836
(23,199)
(20,457)
53,415
46,379
Profit before income tax
Add back / (less):
-
-
-
-
-
-
-
-
-
-
Share of associates' tax
Amortisation of broking registers
Interest Unwind on put option liability
Adjustments to carrying value of associates, goodwill, estimates for contingent
consideration and movements in put option liability
Profit / (loss) from sale / dilution of interests in controlled entities, associates and
insurance portfolios
Impairment of the Right of Use Asset and Onerous Lease Expense
Group share of associate profit on sale/dilution of interests in their controlled entities,
associates and insurance portfolios
Legal, due diligence and debt costs
Austbrokers Canberra remediation
Non-Controlling Interests
Underlying Net Profit Before T ax
-
tax effects of the above items
Underlying Net Profit After T ax
Segment F inancial Performance
Inter-segment revenue*
Revenue from external customers
Total revenue and other income
30 June 2020
Australian
Australian
Broking
Agencies New Zealand
$'000
2,160
$'000
$'000
-
-
Support
Services
$'000
6,969
Total
$'000
9,129
160,599
46,960
46,623
51,602
305,784
162,759
46,960
46,623
58,571
314,913
Share of Net Underlying Profits of Associates accounted for using
the equity method before amortisation on broking registers and
income tax expense
T otal income
Less: Expenses
Total underlying cost to provide services and administrative
expenses**
Inter-segment expenses*
Interest paid and other borrowing costs
Non-controlling interest
35,976
2,223
1,442
-
39,641
198,735
49,183
48,065
58,571
354,554
-
-
-
-
-
(118,130)
(32,729)
(32,025)
(63,045)
(245,929)
(4,630)
(2,352)
(2,147)
-
(9,129)
(1,372)
-
(750)
(4,584)
(6,706)
(12,456)
(472)
(1,058)
(2,190)
(16,176)
Underlying Profit Before T ax
62,147
13,630
12,085
( 11,248)
76,614
44 AUB GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
3. OPERATING SEGMENTS (continued)
Segment F inancial Performance
Inter-segment revenue*
$'000
1,691
30 June 2019
Australian
Australian
Broking***
Agencies New Zealand
Support
Services
$'000
$'000
$'000
Total
$'000
-
-
7,464
9,155
Revenue from external customers
147,470
48,761
30,947
52,633
279,811
T otal revenue and other income
149,161
48,761
30,947
60,097
288,966
Share of Net Underlying Profits of Associates accounted for using
the equity method before amortisation on broking registers and
income tax expense
T otal income
Less: Expenses
31,782
2,054
2,374
-
36,210
180,943
50,815
33,321
60,097
325,176
Total underlying cost to provide services and administrative
expenses**
Inter-segment expenses*
Interest paid and other borrowing costs
Non-controlling interest
Underlying Profit Before T ax
(113,934)
(32,875)
(18,851)
(67,526)
(233,186)
(4,211)
(2,327)
(2,617)
-
(9,155)
(1,485)
(7,095)
(74)
(21)
(516)
(3,825)
(5,900)
(2,178)
(805)
(10,099)
54,218
15,518
9,159
( 12,059)
66,836
*Management fees and interest on loans are recognised as revenue within the Support Services segment, and as an expense within other segments.
**Excludes non-operation expenses, refer to preceding table for reconciliation between statutory profit and underlying profit before tax.
*** Procare was previously within the Support Services segment. From 1 July 2020 the entity's results have been included in the Australian Broking
segment and the 2019 comparative restated for comparability.
Segment Non-Current Assets
The total of non-current assets other than financial instruments and deferred tax assets are provided in the following graphs.
The measurement of segment non-current assets follows the accounting policies of the Group.
2020
58,940
8%
133,779
19%
63,889
10%
438,079
63%
2019
60,396
11%
129,601
24%
59,186
11%
294,501
54%
Intangible assets such as Goodwill, and investment in associates have been presented within the segment the respective underlying operations
is contained.
Disaggregated information by segment of the carrying value of associates are disclosed in Note 8.
The Group adopted AASB 16 on 1 July 2019 under a modified retrospective approach and has not restated its prior year comparative balance,
refer to Note 2.2 for further details. The current year non-current asset balances includes a right of use asset balance.
AUB GROUP ANNUAL REPORT 2020 45
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
4. REVENUE AND EXPENSES
Revenue recognition
Revenue from contracts with customers
The Group will recognise as revenue the amount of the
transaction price that
is allocated to the performance
obligation, excluding any amounts highly probable of
significant reversal, when the performance obligation has been
satisfied.
Australian Broking, Australian Agencies, and New Zealand
segments
Commission, brokerage and fees
In most instances the Group receives short-term advances
from its customers, being the receipt of the premium and fees
on bound policies prior to due date to the insurer. Using the
practical expedient in AASB 15, the Group does not adjust the
promised amount of consideration for the effects of a
significant financing component if it expects, at contract
inception, that the period between the transfer of the promised
service to the customer and when the customer pays for that
service will be one year or less.
Non Variable component
Policy Issuance
Commission, brokerage and fee income is generated by brokers
primarily through assessment of insurable risks and risk
appetite of customers and sourcing relevant
insurance
products from insurers and underwriters which meets the
needs of the customer. For agencies services are provided to
brokers (the customer), through assessment of risk profile and
pricing of policies requested by brokers.
The Group recognised commissions, brokerage and fee
revenue at invoice date on the basis that: (a) the Group acts
primarily as an agent of the customer when acting in the
capacity as a broker, and as an agent of the insurer while acting
in the capacity as an agent; (b) the Group’s performance
obligations are distinct from those of the insurer; and (c) the
Group’s performance obligations are predominantly completed
prior to the inception of the insurance policy, the invoice date
is the relevant date to recognise the fixed components of
revenue.
Claims handling
Claims handling for agencies refers to claims processing on
behalf of insurers. In certain arrangements (separate contract
or distinct clause within binding agreements with insurers) the
cost per claim processed is separately identifiable. For such
claims the revenue is recognised over time based on the
number of claims processed and the percentage of completion
of claims assessment in progress at the balance sheet date.
Variable components
The Group recognises the variable amount of revenue only to
the extent that it is highly probable that a significant reversal
of revenue will not occur when the uncertainty associated with
the variability is resolved.
46 AUB GROUP ANNUAL REPORT 2020
Claims handling and premium settlement activities
In most arrangements for agencies claims handling services
forms part of the binding arrangement with insurers. Claims
handling for brokers refers to claims preparation services on
behalf of the insured. Premium settlement refers to post policy
issuance activities such as payment processing and
bordereaux/settlement reporting.
Revenue associated with claims handling services and premium
settlement activities is recognised over time as the services are
provided to the customer and variable consideration
is
constrained to reflect potential cancellations.
Premium Funding Commissions
Premium funding companies provide services to a similar
customer base as the brokers within the Group. The services
provided by these companies involve short term lending of the
upfront Gross Written Premium ('GWP') in return for the
principal loan repaid over the term of the insurance cover plus
interest and fees.
The Group receives commission from Premium Funding
companies on successful referral of customers contingent on
the customer's ongoing repayments. Additionally the Group
receives commissions payments on volume based incentives
provided typically as a percentage of GWP based on hurdle
targets, with a minimum floor to generate the volume based
incentive payments. Such arrangements exist at both the Group
and individual broker level, subsequently the outcome of
broker/agencies may be contingent on both future sale volume
and performance of related entities contributing to the scheme.
The Premium Funding Commission is recognised monthly by the
Group on receipt of cash or notification by the Premium Funding
Company on the commission due to the Group. No component
of the commission is deferred as no ongoing obligation exists for
the Group.
Profit Commissions
Profit Commissions refer to the share of profits provided to the
broker or agencies by the insurer in relation to the book of
policies (the 'book') bound by the broker or agency in any given
underwriting year. Insurers calculate the profit based on the
GWP less any cost incurred to maintain the book, and satisfy its
obligations under the policies within the book such as claim
acquisition, and maintenance costs. The variable consideration
is contingent on the performance of the book and in particular
the quantum of claims.
The Group recognises profit commission at the earlier of:
-
-
-
receipt of payment;
receipt of the insurers' advice of the amount earned; or
where the recipient is an agency who administers the
related claims handling services, the point at which the
profit commission no longer contains a highly probable risk
of significant reversal of revenue.
Future years profit commissions could be impacted if the policy
lapse rates increase compared to prior years due to COVID-19.
There have been no known impacts to profit commissions in the
current financial year.
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
4. REVENUE AND EXPENSES (continued)
Support Services segment
Fees
Fee revenue earned is recognised upon issue of an invoice for
services rendered, plus an accrual for a percentage of
completion of any work in progress (including a profit margin),
which has yet to be invoiced, but for which the Group has an
enforceable right of payment. No ongoing performance
obligation exists after the issuance of the invoice.
Other Revenue
Other income is recognised when the service has been
performed and the right to receive the payment is established.
Management fees from related entities
Management fees and other revenue are recognised over time
as the performance obligation is satisfied.
Interest income
Interest income is recognised as interest accrues using the
effective interest method.
Dividends and Distributions from trusts
Dividends and distributions from trusts are recognised when
the shareholder's right to receive the payment is established.
Share of profits of associates
The Group recognises its share of profits of associates using the
equity accounted method, being the recognition of a post-tax
share of profits at the Group's economic interest of each
associate. The share of profits excludes any fair value changes
or impairments incurred within the associate as a result of a
downstream transaction such as bolt on acquisitions or changes
in control. Additionally differences between the Group and entity
accounting policies are adjusted at the Group level, primarily in
relation to intangibles recognised by the acquirer (i.e. the Group)
which were not recognised at the associate level. The
amortisation of such intangibles over its useful life (generally 10
years) is separately disclosed.
COVID-19 Impact
Some controlled entities and associates of the Group have
experienced declines in revenue in certain industry sectors and
customer segments as a result of COVID-19, for example in the
hospitality and entertainment sectors. The impact of lost sales
or decreases in coverage cannot be quantified accurately due to
the number of non COVID-19 related variables which may
impact on the decision making of customers. The Group has
increased Expected Credit Loss (ECL) provisions where
required. The adjustment attributable to COVID-19 was $1.37m
($1.28m net of NCI), refer to Note 11 for further details.
i)
Revenue from contracts with customers
Commission, brokerage and fee Income
Management fees from related entities
Other revenue
Total revenue from contracts with customers
Recognised at a point in time
Recognised over time
ii)
O ther income
Dividends from other persons / corporations
Interest from related persons / corporations
Interest from other persons / corporations
Total other income
Dividends are recognised at a point in time, whilst interest is recognised over time.
iii)
Share of p rofit of asso ciates
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
Share of profit of associates are recognised using the equity accounted method.
Consolidated
2019
2020
$'000
$'000
287,559
257,319
11,417
4,480
13,736
5,341
303,456
276,396
215,534
87,922
198,193
78,203
-
762
1,566
2,328
36
65
3,314
3,415
33,437
29,929
(3,866)
(2,562)
29,571
27,367
AUB GROUP ANNUAL REPORT 2020 47
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
4. REVENUE AND EXPENSES (continued)
Expenses
Expenses including salaries and wages, business technology
and software costs, insurance, advertising and marketing, and
interest are recognised as incurred or as services are provided
to the Group.
Salary related statutory obligations such as long service leave
is accrued on a probability weighted basis to the vesting date.
Assumptions are applied in relation to annual and long service
leave with respect to expected wage growths and risk free
discount rates over the next 10 years.
Amortisation of broker registers are conducted on a straight
line basis over the useful life of the asset, generally 10 years.
Amortisation of Right of Use Asset is made on a straight line
basis over the shorter of the lease term and the estimated
useful life of the underlying asset. The Right of Use Asset
incorporates fixed rental increases, with changes based on
indexes and rental market reviews incorporated when such
changes are known. The Group applies practical expedients in
relation to short term (less than 12 months) and low value (less
than $7,000 AUD) leases. Such leases are recognised on a
straight line basis of the expected gross expense over the term
of the lease.
Depreciation / Amortisation of all other assets are recognised
on a straight line basis over the useful life of the asset, refer to
Note 25 for more details.
Commission expenses are sub agent and referral fees paid to
another party in return for introductory services on insurances
brokered by the Group. The expense is recognised in full when
the related insurance policy is invoiced.
Legal fees / acquisition costs are recognised as they are
incurred except in relation to acquisition of a non-financial
asset, borrowing facility, or associates. The costs that are
directly attributable to
bringing the asset to its intended use are capitalised and
depreciated over the useful life of the asset. The costs directly
attributable to obtaining funding are capitalised and amortised
over the term of the facility to a maximum of 5 years. The cost
directly attributable to acquisition of an associate is capitalised
as part of the carrying value of the associate.
Further disclosures in relation in relation to non-operating gains
and losses such as fair value adjustments to carrying value or
gains / losses from sale are made in the indicated Notes 7-9.
COVID-19 Impact
The Group entered into a sub-lease agreement with an external
party in relation to its previous head office lease. The agreement
executed on 25 May 2020 resulted in an impairment of the Right
of Use Asset, leasehold improvements and make good asset
totalling $1.23m. Of the impairment loss recognised, $0.46m is
attributable to COVID-19 where negotiated terms of a sub-lease
substantially changed to the final executed agreement. In
relation to the retained space, a $0.31m loss was recognised as
a result of the decline in square meter rental rates. As the
retained space (29%) remains unoccupied, an impairment of the
right of use asset was recognised resulting in a loss of $0.45m,
which is not attributable to COVID-19.
The Group is undergoing an exercise to consolidate it’s leases
which during the year resulted in the premises of a controlled
entity being vacated and readily available for sub lease. As the
rental space remains unoccupied, an impairment of the right of
use asset was recognised resulting in a loss of $1.32m, which is
not attributable to COVID-19.
The total impairment of the Right of Use Asset was $2.55m, of
which $0.77m was attributable to COVID-19. Refer to Note 14
for further details.
48 AUB GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
4. REVENUE AND EXPENSES (continued)
iv)
Expenses
Salaries and wages
Commission expense
Depreciation
Amortisation of broking registers
Amortisation of capitalised project costs
Amortisation of right of use asset
Impairment of the right of use asset
Rent
Business technology and software costs
Insurance
Travel costs
Legal fees / acquisition costs
Advertising and marketing
Audit fees
Share based payments
Other expenses
Total cost to provide services and administrative expenses
v)
F inance costs
Interest paid and other borrowing costs
Interest unwind on lease liability
Interest unwind on put option liability
Total finance costs
Consolidated
2020
$'000
2019
$'000
165,431
164,348
12,040
12,465
3,377
7,266
1,076
9,876
2,550
3,770
10,259
7,411
7,499
2,811
2,921
1,539
455
3,432
6,375
1,503
-
-
12,945
7,613
6,078
7,935
5,025
3,070
1,749
773
20,197
11,720
258,478
245,031
6,706
1,470
353
8,529
5,900
-
696
6,596
vi)
Adjustments to carrying value of associates, goodwill, contingent consideration
payments and put option liability
Adjustments to carrying value of entities (to fair value) on the date they became controlled entities
2,862
17,162
(see Notes 7(a))
Adjustment to contingent consideration on acquisition of controlled entities, and
541
44
associates (see Note 13)
Remeasurement of put option liability (refer to Note 13)
4,214
7,179
Impairment charge relating to the carrying value of associates and goodwill (see Notes 8 & 13)
(5,827)
(18,961)
Total adjustments to carrying value of associates, goodwill, contingent consideration payments and
put option liability
vii)
Profit/( loss) from sale or dilution of interests in controlled entities, associates and
insurance portfolios
(Loss)/Profit from sale of deconsolidation of controlled entities (see Note 7(b))
Profit/(loss) from sale/dilution in interest in associates (see Note 8)
Profit/(loss) from sale of insurance broking / agency portfolios
Total (loss)/profit from sale or dilution of interests in controlled entities and insurance portfolios
1,790
5,424
(4,700)
1,192
2,975
(1,014)
(2,739)
-
(37)
1,155
AUB GROUP ANNUAL REPORT 2020 49
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
5. 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 Consolidated 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 Consolidated 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.
Tax consolidation
For the purposes of income taxation, AUB Group Limited (AUB) entered into a Consolidated Tax Group with its 100% owned
subsidiaries. Tax consolidation results in the controlled entity 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 formally notified
the Australian Taxation Office of its adoption of the tax consolidation regime.
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 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 period, 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.
Effective Tax Rate
AUB Group is conscious of its social responsibility to pay corporate taxes. The Group’s effective Australian corporate tax rate for
30 June 2020 was 30.51% (2019: 30.52%). The information reported by the Australian Taxation Office (ATO) (as prescribed by
statute) in respect of corporate tax entities will not necessarily provide the complete picture, particularly for organisations such as
the AUB Group that receive the majority of its income through franked dividends.
The AUB Group consists of AUB Group Limited, the parent entity and ASX listed entity, plus over 130 businesses wholly or partly
owned by the parent entity, including associates.
50 AUB GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
5. INCOME TAX (continued)
Effective Tax Rate (continued)
The AUB Tax Consolidation Group (AUB TCG), comprises only AUB Group Limited (the parent entity) and its 100% wholly owned
entities. The primary income of the AUB TCG is the receipt of franked dividend income received from the partly owned entities.
Given tax has already been paid in respect of the franked dividends, the AUB TCG is entitled to a credit equal to that tax. That is,
the franking credits attaching to the dividends reflect tax that has already been paid by the individual entity paying the dividends.
While the franking credits represent tax paid, they are reflected in the income tax return of the AUB TCG as an offset against AUB’
s gross tax, thereby reducing the amount disclosed as ‘tax payable’. Accordingly, the amount disclosed by the ATO their report is
after the franking credits have been taken into account.
Major components of income tax expense
Consolidated Statement of Profit or Loss
Current income tax
Current income tax charge
Adjustment for prior years
Deferred tax credit
Origination and reversal of temporary differences
Total income tax expense in Consolidated Statement of Profit or Loss
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% (2019: 30%)
Impact of:
Rebateable dividends
Equity accounted income from associates
Non-taxable distributions from associates operating as trusts
Non-deductible gains/losses on sale
Tax Losses not recognised
Income taxed at different tax rates on overseas operations
Movement in Put options liability
Consolidated
2020
$'000
2019
$'000
19,261
16,725
(186)
(8)
(7,776)
(3,759)
11,299
12,958
67,399
62,130
20,220
18,639
-
(11)
(9,662)
(5,611)
(218)
(480)
708
477
(104)
96
1,240
(183)
(1,264)
(1,945)
Adjustments to carrying value of entities (to fair value) on the date they became controlled entities or
(859)
(5,149)
deconsolidated
Adjustments to contingent consideration on acquisition of controlled entities and associates
Impairment charge relating to the carrying value of associates and controlled entities
(Over)/ under provision prior year
Non-deductible expenses/other
(162)
1,748
(186)
601
(13)
5,688
(8)
695
Income tax expense reported in the Consolidated Statement of Profit or Loss
11,299
12,958
Income tax payable
9,366
6,533
AUB GROUP ANNUAL REPORT 2020 51
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
5. INCOME TAX (continued)
Consolidated
Consolidated
Statement of Financial
Statement of Profit or
Position
2020
$'000
2019
$'000
Loss
2020
$'000
2019
$'000
Deferred income tax
Deferred income tax at 30 June relates to the following:
Deferred tax liability
Income accrued not yet assessable and other
2,150
2,930
(780)
646
Unamortised value of broking registers
Deferred tax relating to broking registers acquired
Acquisition of controlled entities
15,230
6,643
708
11,930
17
Tax credit on insurance broking registers amortisation expense
(2,106)
(1,916)
(2,106)
(1,916)
Deferred income tax liabilities
Deferred tax asset
15,999
19,587
Provisions and accruals not yet claimed for tax purposes and other
11,005
8,189
(2,816)
(4,132)
Carry forward capital losses
Carry forward operating losses
(Disposal)/Acquisition of controlled entities
Deferred income tax assets
Deferred tax credits
2,250
-
(2,250)
-
1,467
1,643
176
1,643
(184)
2,813
14,538
12,645
(7,776)
(3,759)
Deferred tax assets for tax losses incurred are recognised to the extent that the Group expects the carry forward losses to be utilised
in the future. Unused tax losses not recognised as deferred tax assets at 30 June 2020 was $1.24m (2019: $1.24m). Unused capital
losses not recognised as deferred tax assets at 30 June 2020 was $0.48m (2019: $nil).
52 AUB GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
6. EARNINGS PER SHARE (EPS) / DIVIDENDS PAID AND PROPOSED
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), 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:
-
-
-
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.
a) Earnings Per Share (EPS)
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
47,254
48,361
Consolidated
2020
$'000
2019
$'000
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)
b) Changes in weighted average number of shares
2020
2019
Thousands
Thousands
Shares
Shares
73,724
69,593
172
81
73,896
69,674
64.10
63.95
69.49
69.41
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.
AUB GROUP ANNUAL REPORT 2020 53
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
6. EARNINGS PER SHARE (EPS) / DIVIDENDS PAID AND PROPOSED (continued)
d)
Equity dividends on ordinary shares:
Dividends paid or recognised as a liability during the year
Final franked dividend for financial year ended 30 June 2018: 32.0 cents
Interim franked dividend for financial year ended 30 June 2019: 13.5 cents
Final franked dividend for financial year ended 30 June 2019: 32.5 cents
Interim franked dividend for financial year ended 30 June 2020 14.5 cents
(payment deferred to 3 September 2020)
Total dividends paid/provided in current year
In addition to the above, dividends paid to non-controlling interests totalled $8.37m (2019: $9.97m).
Dividends proposed and not recognised as a liability
Final franked dividend for financial year ended 30 June 2019: 32.5 cents
Final franked dividend for financial year ended 30 June 2020: 35.5 cents
Dividends paid and accrued per share (cents per share)
Dividends proposed per share (cents per share) not recognised at balance date
e)
F ranking C redit Balance
The amount of franking credits available for the subsequent financial year are:
C onsolidated
2020
$'000
2019
$'000
-
-
20,431
9,923
23,888
10,701
-
-
34,589
30,354
-
23,888
26,206
-
26,206
23,888
50.00
35.50
46.00
32.50
-
-
franking account balance as at the end of the financial year at 30% (2019: 30%)
38,630
36,423
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
2,966
535
41,596
36,958
-
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
(15,817)
(10,238)
The amount of franking credits available for future reporting periods after payment of dividend
25,779
26,720
The tax rate at which paid dividends have been franked is 30% (2019: 30%).
Dividends proposed and accrued will be franked at the rate of 30% (2019: 30%).
54 AUB GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
7. BUSINESS COMBINATIONS AND TRANSACTIONS INVOLVING LOSS OF CONTROL
a) Business combinations
A major strategy of the Group is to acquire part ownership in insurance broking, agency and other insurance intermediary
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.
The business combinations referred to below relate to insurance broking and agency businesses in Australia except Brokerweb Risk
Services Limited (BWRS) which is a broker incorporated in New Zealand.
The acquisition method of accounting is used to account for all business combinations. Consideration transferred is measured as
the fair value of the assets given, shares issued or liabilities assumed at the date of exchange. All acquisition costs including legal
fees are charged against profits to acquisition and legal fees (see Note 4(iv)) as incurred except stamp duty which is recognised in
income tax expense (see Note 5) 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 Consolidated Statement of Profit or Loss.
Where there is a change in ownership and the Group loses control, the gain or loss will be recognised in the Consolidated Statement
of Profit or Loss and the carrying value of non-controlling interests is derecognised. Refer to Note 9 for all transactions between
owners.
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 Consolidated Statement of Profit or Loss. 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
recognised in the Consolidated Statement of Financial Position at fair value.
When a business combination occurs, the acquiree's identifiable assets and liabilities are measured at their fair value at the date
of the exchange transaction to determine the amount of any goodwill associated with the transaction. Any previously held interests
of the acquiree is remeasured to fair value, with the movement reflected in the Consolidated Statement of Profit or Loss as either
a profit or loss. 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.
When the Group increases their interest in a company leading to the Group obtaining control in the company the Group derecognises
the investment in associate and recognises the acquiree's identifiable assets and liabilities measured at their fair value in line with
other business combinations. The shares held immediately preceding the Group obtaining control is remeasured based on the
implicit value of the shares acquired, resulting in a fair value gain or loss. The cumulative amount recognised through Other
Comprehensive Income is reclassified to profit or loss when the control assumption changes.
Non-Controlling Interest is initially measured at fair value.
a) i) During the current period, the following transactions occurred:
-
On 30 September 2019, a controlled entity, acquired the operations of Yesberg Insurance Brokers Limited for an initial upfront
payment of $1.44m, with an expected contingent consideration payable within 2 years of $1.26m. On this date, the operations
of Yesberg was integrated into the operations of that controlled entity.
Goodwill of $2.23m (non-controlling interest of $0.24m) has been recognised in relation to the business combination. The
acquisition has been provisionally accounted for as the initial accounting for the business combination is incomplete at the
reporting date. The accounting is expected to be completed within 12 months of the acquisition date.
The measurement of the contingent consideration is a significant judgement. The contingent considerations are based on fixed
multiples of the revenue of the acquired portfolio for the 12 months ended 30 September 2020 and 20 September 2021 less
previous consideration paid. The minimum and maximum contingent consideration payable is nil, and unlimited respectively.
The expected contingent consideration has been computed using the weighted average expected revenue for the 12 months
ended 30 September 2020 and 30 September 2021.
-
A&I Member Services Pty Ltd was renamed Austbrokers Member Services (AMS) on 3 December 2019. During the current
year, the Group acquired an additional 50% of AMS for $1 and effective 1 October 2019, it became a controlled entity.
Business Acquired
T ransaction date( s)
A&I Member Services Pty Ltd
WRI Brokers Pty Ltd
01-Oct-19
01-Apr-20
T otal consideration paid for all additional interest acquired
Less cash acquired
N et C ash paid
Goodwill arising on acquisition related to the Group
2019
%
50.00
49.90
2020
% / $ '000
100.00
100.00
5,000
684
4,316
9,184
AUB GROUP ANNUAL REPORT 2020 55
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
7. BUSINESS COMBINATIONS AND TRANSACTIONS INVOLVING LOSS OF CONTROL
(continued)
a) i) During the current period, the following transactions occurred (cont inued):
-
Effective 1 April 2020, AUB Group Limited acquired a further 50% of voting shares in WRI Insurance Brokers Pty Ltd (WRI) for
$5.00m increasing its shareholding to 100%. On this date WRI and its controlled entities became controlled entities of the
Group. A fair value gain of $0.85m was recognised in relation to the original 50% of shares.
ASSET S
Cash
Receivables
Property plant and equipment
Intangibles
Total Assets
LIABILIT IES
Payables and provisions
Borrowings
Deferred Tax Liabilities
Total Liabilities
Net Assets
Less Non-controlling interest
NET ASSETS ATTRIBUTABLE TO PARENT ENTITY
Carrying value of investment in associate
Acquisition price of controlled entity
Adjustment to carrying value of associate ( to fair value) on the date
WRI became a controlled entity
Total purchase price / fair value of acquisition
Goodwill & broking register arising on acquisition relating to the Group*
Goodwill & broking register arising on acquisition relating to non controlling interests
Fair value of
assets and
$'000
684
2,690
364
169
3,907
2,503
1,061
208
3,772
135
-
135
2,146
5,000
854
8,000
8,578
-
* A deferred tax liability was recognised in relation to the broking register of $0.71m which is not included in the numbers presented above.
The total Revenue and Net Profit recognised during the financial year ended 30 June 2020 was $2.41m and $0.88m respectively.
Had the entities been acquired at the beginning of the financial year ended 30 June 2020, the Revenue and Net Profits would have
been $5.61m and $1.21m respectively.
56 AUB GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
7. BUSINESS COMBINATIONS AND TRANSACTIONS INVOLVING LOSS OF CONTROL
(continued)
a) ii) During the previous period, the following transactions occurred:
Entity
T ransaction
date( s)
2019
2018
Increase in voting shares of controlled entities
% / $ '000
Adroit Holdings Pty Limited *
Adroit Equity Investments Pty Limited **
Northlake Holdings Pty Ltd
Cinesura Entertainment Pty Ltd
Brokerweb Risk Services Ltd
Primesure Insurance Brokers Ltd
MIG Fire and General Ltd
01-Jul-18
01-Jul-18
01-Oct-18
01-Jan-19
01-Jan-19
01-Mar-19
01-Apr-19
T otal consideration paid for all additional interest acquired
Less deferred consideration payable
Less cash acquired on consolidation (including cash available in insurance broking
accounts)
Less carrying value of associates immediately prior to becoming a controlled entity
Net Cash Paid
Goodwill arising on acquisition related to the Group
Goodwill arising on acquisition relating to non-controlling interests
Net increase/(decrease) in non-controlling interest
94
40
63
100
100
90
100
120,017
4,296
50,763
51,210
13,748
99,263
4,849
14,320
%
50
-
50
50
50
-
-
*The Company directly holds 90% of the economic interest of Adroit Holding Pty Ltd, with a further 4% held through a commonly controlled entity.
The Group holds 100% of voting rights of Adroit Holding Pty Ltd.
** The Group holds 40% of economic interest and 100% of voting rights within Adroit Equity Investments Pty Limited. As the Group is able to make
unilateral decisions, we have assessed the entity as being controlled by the Group.
The total Revenue and Net Profit recognised during the financial year ended 30 June 2019 in relation to the previous year
acquisitions were $49.56m, and $7.55m respectively. Had the entities been acquired at the beginning of the financial year ended 30
June 2019, the Revenue and Net Profits would have been $59.25m and $11.33m respectively.
-
Effective 1 July 2018, the Group acquired a further 44% of the shares (but 50% of the voting rights) of Adroit Holdings Pty Ltd
(Adroit), increasing its shareholding to 94%. On this date, Adroit ceased to be an associate and became a controlled entity. The
purchase price for the additional 44% of Adroit was $21.70m.
- On 1 October 2018, the Group acquired a further 15.8% of the voting shares of Northlake Holdings Pty Ltd (Northlake),
increasing its shareholding to 65.8%. On this date, Northlake ceased to be an associate and became a controlled entity. The
purchase price for the additional 15.8% of Northlake was $1.49m.
- On 1 January 2019, the Group acquired a further 50% of the voting shares of Cinesura Entertainment Pty Ltd (Cinesura),
increasing its shareholding to 100%. On this date, Cinesura ceased to be an associate and became a controlled entity. The
purchase price for the additional 50% of Cinesura was $2.18m including a deferred payment of $0.56m.
- On 1 January 2019, a controlled entity acquired a further 50% of the voting shares of BWRS, increasing its shareholding to
100%. On this date, BWRS ceased to be an associate and became a controlled entity. The purchase price for the additional 50%
of BWRS was $37.87m.
- On 1 March 2019, a controlled entity acquired a further 90% of the voting shares of Primesure Insurance Brokers Ltd
(Primesure) for $2.60m. The settlement date was deferred until September 2019.
- On 1 April 2019, a controlled entity acquired 100% of the business assets of MIG Fire and General Ltd (MIG) for $2.68m including
a deferred payment of $0.85m.
AUB GROUP ANNUAL REPORT 2020 57
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
7. BUSINESS COMBINATIONS AND TRANSACTIONS INVOLVING LOSS OF CONTROL
(continued)
a) ii) During the previous period, the following transactions occurred (continued):
Fair values of the assets and liabilities of acquired entities.
ASSET S
Cash
Receivables
Investment in associates
Property plant and equipment
Intangibles
Total Assets
LIABILIT IES
Payables and provisions
Borrowings
Deferred Tax Liabilities
Total Liabilities
Net Assets
Less Non controlling interest
NET ASSET S AT T RIBUT ABLE T O PARENT ENT IT Y
Carrying value of investment in associate / controlled entity
Acquisition price of controlled entity
Deferred consideration on acquisition of controlled entity
F air value adjustment on the date the Associate became a controlled entity
Total purchase price / fair value of Acquisition / disposal
Goodwill arising on acquisition relating to the Group
Goodwill arising on acquisition relating to non-controlling interests
Goodwill reduction on deconsolidation of controlled entities
Cash outflow on acquisition is as follows:
Net cash acquired on consolidation or reduction on deconsolidation of controlled entities
Cash (paid) on acquisition / cash received on disposal
Fair value of assets
Fair value of assets
and liabilities of
and liabilities of
BWRS
Northlake, MIG,
Adroit and Cinesura
$'000
21,009
18,019
7,552
390
21,829
68,799
34,874
18,743
6,112
59,729
9,070
(1,239)
7,831
16,491
37,867
-
10,520
64,878
57,047
-
-
21,009
(37,867)
Primesure
$'000
29,754
27,091
-
2,453
23,691
82,989
49,954
7,262
5,367
62,583
20,406
(8,232)
12,174
17,556
26,644
4,296
6,643
55,139
42,216
4,849
-
29,754
(26,644)
Net cash inflow/( outflow) on acquisition or deconsolidation of controlled
entities ( including cash available in insurance broking trust accounts)
( 16,858)
3,110
58 AUB GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
7. BUSINESS COMBINATIONS AND TRANSACTIONS INVOLVING LOSS OF CONTROL
(continued)
b) Loss of Control
When a 100% disposal occurs the Group derecognises all assets and liabilities previously recognised in relation to the disposed
entity including associated goodwill. A gain or loss is recognised in relation to the disposal based on the difference between the
carrying value of net assets (including goodwill) associated with the entity and the sale price.
When a partial disposal occurs leading to the Group losing control of the entity, the Group derecognises all assets and liabilities
previously recognised in relation to the disposed entity including associated goodwill with an investment in associate recognised in
relation to the remaining interest continued to be held by the Group. A gain or loss is recognised in relation to the disposal based
on the difference between the share (portion of interest being disposed) of net assets (including goodwill) associated with the entity
and the sale price.
b) i) During the current period, the following transactions occurred:
-
Effective 1 February 2020, AUB Group disposed its shares in Austbrokers Central Coast Pty Ltd (ABCC) for 470,348 newly
issued shares in Markey Group Pty Ltd increasing the Group's shareholding by 16.00%. Immediately the Group disposed of
235,174 of its shares (16.00%) in Markey Group Pty Ltd to the other shareholders for $2.19m such that AUB equity interest
retained at 50%. On this date Austbrokers Central Coast Pty Ltd and its controlled entities ceased to be controlled entities of
the Group and become controlled entities of Markey Group Pty Ltd.
- On 1 April 2020, the Group disposed all of its voting shares in Allied Health Pty Ltd (Allied) for $2.25m (Net present value
$2.07m), including a post disposal dividend of $0.15m. Sale proceeds other than $0.15m will be received over a 5 year period.
On 1 April 2020 Allied ceased to be a controlled entity. An after tax loss on sale of $0.65m was recognised.
Entity
T ransaction date
2020
2019
Decrease in voting shares of controlled entity - current year
Austbrokers Central Coast Pty Ltd
Allied Health Australia Pty Ltd
Decrease in voting shares of controlled entity - previous year
Austbrokers C E MacDonald Pty Ltd
01-Feb-20
01-Apr-20
01-Nov-18
% / $ '000
0.0
0.0
2019
0.0
%
80.0
60.0
2018
100.0
b) ii) During the previous period, the following transactions occurred:
- On 1 November 2018, the Group disposed 100% of the voting shares in Austbrokers C E MacDonald Pty Ltd (CEM) to an
associate for $2.69m. On this date it ceased to be a controlled entity.
AUB GROUP ANNUAL REPORT 2020 59
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
7. BUSINESS COMBINATIONS AND TRANSACTIONS INVOLVING LOSS OF CONTROL
(continued)
Carrying value of assets and liabilities on the date of deconsolidation of
ABCC, Allied and CEM
ASSET S
Cash
Receivables
Property plant and equipment
Right of use asset
Intangibles
Deferred tax asset
Total Assets
LIABILIT IES
Payables and provisions
Lease liability
Borrowings
Income tax provision
Total Liabilities
Net Assets
2020
ABCC
$'000
2,001
2,596
51
115
2,371
11
2020
Allied
$'000
2,284
900
396
279
9,125
184
2019
CEM
$'000
1,501
1,573
166
-
1,404
-
7,145
13,168
4,644
1,366
3,057
3,796
117
14
12
3,939
3,206
286
14
218
1,884
11,284
-
93
-
3,150
1,494
-
Less N on controlling interest on date of deconsolidation
( 841)
( 4,514)
N ET ASSET S AT T R IBU T ABLE T O PAR EN T EN T IT Y
2,365
6,770
1,494
Original cost base of deconsolidated entity
AUB Group carrying value adjustments to date of deconsolidation
F air value adjustment on date the entity became an associate
T otal cost transferred to carrying value of associate on
deconsolidation
Sale proceeds - received
Sale proceeds - deferred settlement
Sale proceeds - scrip for scrip share swap
Less : carrying value of voting shares sold
(Profit) / Loss on deconsolidation of controlled entities before tax
Tax (credit) / expense - on to sale of voting shares*
Loss / ( Profit) after tax on deconsolidation of controlled entity
1,543
822
2,008
4,373
-
-
4,373
4,373
-
-
-
-
-
-
-
150
1,920
-
6,770
4,700
(4,052)
-
-
-
-
2,686
-
-
1,494
(1,192)
404
648
( 788)
C ash outflow on acquisition / disposal is as follows:
Net cash reduction on deconsolidation of controlled entities
(2,001)
(2,284)
(1,501)
Cash received on disposal
N et cash ( outflow) on deconsolidation of controlled entities
( including cash available in insurance broking trust accounts)
Goodwill reduction on deconsolidation of controlled entity
Net decrease in non controlling interest on deconsolidation
-
150
2,686
( 2,001)
( 2,134)
1,185
2,371
841
9,125
4,514
1,746
-
*Of the $4.1m tax credit recognised $1.80m has been offset against current year capital gains, with the remaining $2.25m carried
forward to be utilised against future capital gains.
60 AUB GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
8. 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.
The financial statements of the associates are used by the Group to apply the equity method. The reporting dates of the associates
and the 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 Statement of
Profit or Loss reflects the Group's share of the results of operations of the associates.
Refer to Note 13 Impairment Testing of Identifiable Intangible Assets and Goodwill.
When the Group partially disposes its interest in an associate but continues to maintain significant influence, the carrying value of
the investment in associate is reduced by the proportion of interest disposed compared to the total interest held by the Group
immediate proceeding the partial disposal. A gain or loss is recognised as the difference between the sale proceeds and the carrying
value of the portion of interest being disposed.
When the Group sells or contributes to an associate an interest in a subsidiary that constitutes a business as defined in AASB 3,
the gain or loss resulting from the sale or contribution is recognised in full.
During the current period, the following transactions occurred:
Entity
Increase in investment in Associates
Rosser Underwriting Limited
Dawson Insurance Brokers (Rotorua) Ltd
Austbrokers Member Services Pty Ltd
McDonald Everest Insurance Brokers Limited
BizCover Pty Limited
Countrywide Insurance Holdings Pty Limited
T otal consideration paid for all additional interest acquired
Less contingent consideration payable
T otal cash consideration paid for all additional interest acquired
Decrease in investment in Associates
Austbrokers AEI Transport Pty Ltd
R.G Financial Services Pty Ltd
Insurance Advisernet Australia Pty Limited
Insurance Advisernet Holdings Pty Limited
Workers Compensation and Risk Specialists Pty Ltd
Austbrokers Affinity Pty Ltd
Markey Group Pty Ltd
Gard Insurance Solutions Pty ltd
T otal consideration received for all interest disposed
Less carrying value of shares being sold
Net gain/( loss) on disposal of interest - see Note 4 ( vii)
2020
2019
T ransaction date( s)
% / $ '000
01-Jul-19
01-Jul-19
01-Oct-19
01-Dec-19
01-Feb-20
01-Apr-20
01-Jul-19
01-Jul-19
01-Sep-19
01-Sep-19
01-Jan-20
31-Jan-20
01-Feb-20
01-Sep-19
35.7
50.0
100.0
44.7
40.0
49.9
142,027
797
141,230
40.0
-
47.5
47.5
-
-
49.9
-
7,891
4,916
2,975
%
22.3
50.0
50.0
-
-
49.9
50.0
50.0
49.9
49.9
40.0
40.0
49.9
25.0
AUB GROUP ANNUAL REPORT 2020 61
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
8. INVESTMENT IN ASSOCIATES (continued)
-
On 1 July 2019 AUB Group NZ Limited, a controlled entity of the Group paid NZ$0.91m for new shares issued by Dawson
Insurance Brokers (Rotorua) Ltd to maintain its shareholding in the associate at 50%. The Group's effective ownership is 44.7%.
-
-
-
-
-
-
-
-
On 1 July 2019, the Group disposed of 10% of Austbrokers AEI Transport Pty Ltd for $3.40m reducing its voting shares from
50% to 40%. The cash consideration was receipted on 28 June 2019.
On 1 September 2019, the Group disposed of 2.4% of Insurance Advisernet Australia Pty Limited and Insurance Advisernet
Holdings Pty Ltd for $1.68m.
On 1 December 2019, AUB Group NZ Limited, a controlled entity, acquired 50% of the voting rights within McDonald Everest
Insurance Brokers Limited for an initial upfront payment of NZ$1.38m with an expected contingent consideration payable within
2 years of NZ$1.12m. The Group's effective ownership is 44.7%.
Assessment of the contingent consideration is a significant judgement. The contingent considerations are based on fixed
multiples of the Earnings Before Interest, Tax, and Amortisation (EBITA) of the entity for the 12 months ended 30 June 2020
and 30 June 2021 less previous consideration paid. The minimum and maximum contingent consideration payable is clawback
of the initial upfront payment, and unlimited respectively. The expected contingent consideration has been computed using the
weighted average expected EBITA for the 12 months ended 30 June 2020 and 30 June 2021.
Effective 1 February 2020, AUB Group Limited acquired 40% of the voting shares of BizCover Pty Limited (BizCover) for
$133.99m. On this date BizCover became an associate of the Group. BizCover is a scalable and high growth commercial
insurance platform that allows SME clients to purchase a variety of insurance products.
Effective 1 February 2020, AUB Group swapped 80% of its shares in Austbrokers Central Coast Pty Ltd for newly issued shares
in Markey Group Pty Ltd increasing the Group's shareholding by 16.66%. Immediately the Group disposed 16.66% of its shares
in Markey Group Pty Ltd to the minority shareholders for $2.19m. On this date Austbrokers Central Coast Pty Ltd and its
controlled entities ceased to become a controlled entities of the Group and become controlled entities of Markey Group Pty
Ltd.
On 1 April 2020, the Group paid $2.14m for new shares issued by Countrywide Insurance Holding Pty Ltd to maintain its
shareholding in the associate at 49.9%.
On 1 April 2020, the Group purchased all remaining shares of WRI Insurance Brokers Pty Limited (WRI) for $5.00m. On this
date WRI became a controlled entity of the Group. Refer to Note 7(a) for further details.
During the previous period, the following transactions occurred:
Entity
T ransaction date( s)
New associates acquired or additional interest acquired during the period:
Rosser Underwriting Limited
01-Jul-18
T otal consideration paid for all interest acquired
Less contingent consideration payable
T otal cash consideration paid for all interest acquired
Consolidated
2018
$'000
-
2019
$'000
22.3
1,292
-
1,292
During the previous period, further adjustments to contingent considerations relating to prior year acquisitions resulted in a net
decrease in estimates previously recognised by the Consolidated Group by $0.22m.
Entity
T ransaction date( s)
Associates now controlled (see Note 7)
Adroit Holdings Pty Limited *
Northlake Holdings Pty Ltd
Associates acquired on obtaining control of Adroit Holdings Pty Limited
NRIG Pty Ltd
Claims Pty Ltd
01-Jul-18
01-Oct-18
01-Jul-18
01-Jul-18
2019
%
94.0
65.8
50.0
50.0
2018
%
50.0
50.0
-
-
*On 1 July 2018 the Group acquired a further 44% of the voting shares in Adroit Holdings Pty Ltd (Adroit). On that date Adroit became a controlled
entity.
62 AUB GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
8. INVESTMENT IN ASSOCIATES (continued)
Investments carrying value:
Associated entities - unlisted shares
Associated entities (and their controlled entities)
Australian Broking
Austbrokers ABS Aviation Pty Ltd
Austbrokers AEI Transport Pty Ltd
Austbrokers Dalby Insurance Brokers Pty Ltd
Austbrokers Hiller Marine Pty Ltd
Austbrokers Member Services Pty Ltd*
Austbrokers RIS Pty Ltd
Austbrokers SPT Pty Ltd
Austral Insurance Brokers Pty Ltd
BizCover Pty Limited
Bluestone Insurance Pty Ltd
Brett Grant and Associates Pty Ltd
Broker Claims Pty Ltd
Countrywide Insurance Holdings Pty Ltd
Global Assured Finance Pty Ltd
HQ Insurance Pty Ltd
Insurance Advisernet Australia Pty Ltd/ Insurance Advisernet Australia Unit Trust
Insurance Advisernet Holdings Pty Ltd / Insurance Advisernet Holdings Unit Trust
JMD Ross Insurance Brokers Pty Ltd
KJ Risk Group Pty Ltd
Lea Insurance Broking Pty Ltd/ Lea Insurance Broking Unit Trust
Markey Group Pty Ltd
MGA Management Services Pty Ltd
Nexus (Aust) Pty Ltd
NRIG Pty Ltd
Oxley Insurance Brokers Pty Ltd / Coffs Harbour Insurance Brokers Unit Trust
Oxley Insurance Brokers Pty Ltd / Port Macquarie Insurance Brokers Unit Trust
Peter L Brown & Associates Pty Ltd
R.G Financial Services Pty Ltd
Rivers Insurance Brokers Pty Ltd
SRG Group Pty Ltd
Supabrook Pty Ltd
The Procare Group Pty Ltd **
Western United Financial Services Pty Ltd
WRI Insurance Brokers Pty Ltd*
2020
%
2019
%
Consolidated
2020
$'000
2019
$'000
271,041
127,453
50.0
40.0
50.0
50.0
100.0
49.9
50.0
50.0
40.0
50.0
50.0
47.5
49.9
49.9
49.7
47.5
47.5
50.0
49.0
50.0
49.9
49.9
50.0
25.0
37.5
49.9
50.0
-
49.9
50.0
49.9
50.0
49.9
100.0
50.0
50.0
50.0
50.0
50.0
49.9
50.0
50.0
556
7,893
2,691
-
-
2,563
4,573
1,632
-
135,983
-
395
9,724
2,573
-
-
2,603
4,652
1,491
-
-
50.0
50.0
47.0
49.9
49.9
49.7
49.9
49.9
50.0
49.0
50.0
49.9
49.9
50.0
25.0
37.5
49.9
50.0
50.0
49.9
50.0
49.9
50.0
49.9
50.0
1,569
1,597
-
-
5,197
2,441
-
-
4,568
4,607
15,962
16,738
407
1,343
1,647
5,406
6,616
618
1,262
1,729
5,553
3,876
20,728
18,232
7,049
7,257
78
170
-
777
-
4,819
2,030
706
78
188
671
703
7
4,643
1,859
728
13,750
12,484
2,085
-
2,001
2,827
250,798
111,537
AUB GROUP ANNUAL REPORT 2020 63
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
8. INVESTMENT IN ASSOCIATES (continued)
Investments at carrying value:
Australian Agencies
Fleetsure Pty Ltd
Longitude Insurance Underwriting Agency Pty Ltd
Millennium Underwriting Agency Pty Ltd
Sura Professional Risks Pty Ltd
Gard Underwriting Solutions Pty Ltd
Tasman Underwriting Pty Ltd
New Z ealand
Dawson Insurance Brokers (Rotorua) Ltd
Commercial and Rural Insurance Limited
McDonald Everest Insurance Brokers Limited
Rosser Underwriting Limited (agency)
Support Services
T otal carrying value of associates
2020
2019
%
%
Consolidated
2020
$'000
2019
$'000
50.0
38.5
18.4
50.0
-
50.0
44.7
44.7
44.7
35.7
50.0
38.5
18.4
50.0
25.0
50.0
44.7
44.7
-
22.3
3,781
3,805
534
477
734
551
1,367
1,177
-
512
177
481
6,671
6,925
5,306
3,418
2,359
2,489
4,576
3,141
-
1,274
13,572
8,991
-
-
271,041
127,453
* As a result of an increase in shareholding during the year, the Group acquired control of the entity. See Note 7 for further details.
** The Procare Group Pty Ltd offers rehabilitation, investigation, and loss adjusting services. Due to the integration of Procare within the Australian
Broking arm of the Group they are included within Australian Broking for segment reporting.
Other information in respect of associated entities which carry on business directly or through controlled entities.
a) The principal activity of each associate is insurance broking, except for associates owned by Austagencies Pty Ltd and Rosser
Underwriting Limited in New Zealand which are agents for insurance underwriters and The Procare Group Pty Ltd which offers
rehabilitation, investigation, and loss adjusting services.
b) There have been no significant subsequent events affecting the associates' profits for the period.
c) There have been two impairments relating to the investment in associates during the current year. During the previous year
there was one impairment relating to the investment in associates (see Note 4(vi)).
d) All associates, including unit trusts, were incorporated or established in Australia, except for associates owned by AUB Group
NZ Limited which is a controlled entity incorporated in New Zealand.
64 AUB GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
8. INVESTMENT IN ASSOCIATES (continued)
e) The Group's share of associates' revenue and net profits:
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
f)
Reconciliation of carrying value of associates:
Balance at the beginning of the period
Associate acquired through new controlled entity
Acquisition of associates
Disposal or dilution of interest in associates
Profit on sale of associates
Reclassification of investment in associates to controlled entities
Reclassification of investment in controlled entities to associates
Share of associates’ profit after income tax
Impairment loss on carrying value of associates
Adjustment to carrying value of associates due to impact of AASB 15
Impact of AASB 15 acquired through new controlled entity
Dividends/trust distributions received
Net foreign exchange and other movements
Balance at the end of the period
g)
The entity's share of the assets and liabilities of associates:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Consolidated
2020
$'000
2019
$'000
125,743
113,030
43,363
38,491
(3,866)
(2,562)
39,497
35,929
(9,926)
(8,562)
29,571
27,367
127,453
155,888
-
142,027
(7,891)
2,975
7,552
1,938
-
-
(2,146)
(34,193)
4,373
-
29,571
27,367
(378)
-
-
(3,868)
(1,435)
(253)
(24,400)
(26,371)
(543)
828
271,041
127,453
221,482
283,006
71,461
61,827
(201,286)
(269,321)
(20,686)
(12,184)
70,971
63,328
AUB GROUP ANNUAL REPORT 2020 65
%
56.6
90.0
90.5
57.5
56.9
60.0
56.4
53.7
89.3
55.0
94.0
75.0
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
9. SHARES IN CONTROLLED ENTITIES
New acquisition of controlled entities or transaction which lead to the Group obtaining or losing control in an entity during the
current and previous period are disclosed in Note 7. The following transactions involve transactions between owners where there
is no change in the control assessment.
During the current period, the following transactions occurred:
Entity
Increase in voting shares
Altius Group Holdings Pty Ltd and its controlled entities
Adroit Hume Pty Limited
T ransaction date( s)
2020
2019
01-Jul-19
01-Jul-19
% / $ '000
56.9
95.0
InterRISK (Australia) Pty Ltd and its controlled entities
01-Aug-19, 01-Oct-19, 01-Dec-19
100.0
Adroit MHL Insurance & Risk Pty Limited
AB Phillips Group Pty Ltd and its controlled entities
Adroit FS Pty Limited
ABFS (VIC) Pty Ltd
ABFS (SA) Pty Ltd
AUB Group NZ Limited*
Insurance Investment Solutions Pty Ltd
Adroit Holdings Pty Ltd
Austbrokers Canberra Pty Ltd
T otal consideration paid for all interest acquired
Less adjustment to non-controlling interest
T ransfer to retained earnings on equity transactions between owners
* During the year the Parent acquired a further $3.85m of share in AUB
Group NZ Limited to maintain it's shareholding at 89.3%.
Decrease in voting shares
01-Oct-19
09-Oct-19
01-Nov-19
01-Jan-20
01-Jan-20
01-Jan-20
01-Jan-20
01-Jan-20
01-Apr-20
62.3
57.5
95.0
95.0
74.3
89.3
65.0
95.0
85.0
3,692
(1,738)
( 1,954)
Austbrokers Coast to Coast Pty Ltd and its controlled entity
01-Oct-19
51.0
75.0
T otal consideration received for all interest disposed
Less adjustment to non-controlling interest
Less Capital Gains Tax payable
T ransfer to retained earnings on equity transactions between owners
1,250
(299)
(243)
708
66 AUB GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
9. SHARES IN CONTROLLED ENTITIES (continued)
During the previous period, the following transactions occurred:
Entity
Increase in voting shares
AB Phillips Group Pty Ltd and its controlled entities
SURA Hospitality Pty Ltd
AUB Group NZ Limited and its controlled entities
Altius Group Holdings Pty Ltd and its controlled entities
Cinesura Entertainment Pty Ltd
Film Insurance Underwriting Agencies Pty Ltd
Insurance Brokers Alliance Ltd
ABFS (NSW) Pty Ltd
Adroit MHL Unit Trust
Citycover Insurance Brokers Pty Ltd
Adroit Sandhurst Pty Ltd
T otal consideration paid for all additional interest acquired
Deferred Consideration Payable
Total adjustment to non-controlling interest
T ransfer to retained earnings on equity transactions between owners
Decrease in voting shares
Austbrokers City State Pty Ltd and its controlled entities
Bruce Park Pty Ltd
SURA Construction Pty Ltd
SURA Engineering Pty Ltd
Runacres and Associates Limited and its controlled entities
ABS Unit Trust Pty Ltd
T otal consideration received for all interest disposed
Add Deferred Consideration Receivable
Total adjustment to non-controlling interest
T ransfer to retained earnings on equity transactions between owners
T ransaction date( s)
2019
2018
%
56.6
85.0
80.0
55.3
50.0
95.0
73.7
75.0
80.4
75.0
94.1
70.0
75.3
100.0
100.0
76.0
100.0
01-Jul-18
01-Jul-18
01-Jul-18
01-Dec-18
01-Jan-19
01-Jan-19
01-Jan-19
01-Jan-19
01-Feb-19
01-Apr-19
% / $ '000
56.9
100.0
89.3
56.6
100.0
100.0
89.3
95.0
95.0
95.0
01-Apr-19
100.0
12,308
741
(5,767)
( 7,282)
70.0
56.9
60.0
60.0
75.1
90.0
3,262
1,513
(2,687)
2,088
01-Jul-18
01-Jul-18
01-Jul-18
01-Jul-18
01-Oct-18
01-Jan-19
AUB GROUP ANNUAL REPORT 2020 67
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
9. SHARES IN CONTROLLED ENTITIES (continued)
N ame and Interests in controlled entities:
All controlled entities are incorporated in Australia except for AUB Group NZ Ltd and its controlled
entities which are incorporated in New Zealand, and comprise:
Australian Broking
AB Phillips Group Pty Ltd and its controlled entities
Adroit Holdings Pty Ltd and its controlled entities
ABFS (NSW) Pty Ltd and its controlled entities
Austbrokers Canberra Pty Ltd
Austbrokers Central Coast Pty Ltd and its controlled entities**
Austbrokers Coast to Coast Pty Ltd and its controlled entity
Austbrokers CityState Pty Ltd and its controlled entity
Austbrokers Life Pty Ltd
Austbrokers Member Services Pty Ltd*
Austbrokers RWA Pty Ltd and its controlled entity
Austbrokers Southern Pty Ltd
Austbrokers Sydney Pty Ltd and its controlled entities
Austbrokers Trade Credit Pty Ltd
Citycover (Aust) Pty Ltd
Comsure Insurance Brokers Pty Ltd and controlled entities
Finsura Holdings Pty Ltd and its controlled entities
InterRISK Australia Pty Ltd and its controlled entities
McNaughton Gardiner Insurance Brokers Pty Ltd and its controlled entity (MGIB)
North Coast Insurance Brokers Pty Ltd and its controlled entity (NCFS)
Northlake Holdings Pty Ltd (Country Wide Insurance Brokers WA)
Terrace Insurance Brokers Pty Ltd and controlled entity
WRI Insurance Brokers Pty Ltd*
Australian Agencies
Austagencies Pty Ltd and its controlled entities
N ew Z ealand
AUB Group NZ Limited and its controlled entities
Support Services - Australia
Allied Health Australia Pty Ltd and its controlled entities**
Altius Group Holdings Pty Ltd and its controlled entities
Adept Insurance Brokers Pty Ltd and its controlled entity
AEI Holdings Pty Ltd / AEI Insurance (Brokers) Pty Ltd
AHL Insurance Brokers (Aust) Pty Ltd
AUB Group Business Centre Pty Ltd
AUB Group Services Pty Ltd
AUB International Pty Ltd
Austbrokers Investments Pty Ltd
Austbrokers Employee Share Acquisition Schemes Trust
Austbrokers Pty Ltd
Australian Bus and Coach Underwriting Agency Pty Ltd
Kyros Cook & Associates Pty Ltd
Shield Underwriting Holdings Pty Ltd
*As a result of an increase in shareholding during the year, the Group acquired control of the entity.
**Due to loss of control or disposal during the year, these entities were deconsolidated see Note 7(b).
68 AUB GROUP ANNUAL REPORT 2020
C onsolidated
2020
%
2019
%
57.5
95.0
95.0
85.0
-
51.0
70.0
100.0
100.0
60.0
80.0
100.0
75.0
95.0
80.0
70.0
100.0
70.0
70.0
65.8
53.7
100.0
56.9
94.0
95.0
75.0
80.0
75.0
70.0
100.0
50.0
60.0
80.0
100.0
75.0
95.0
80.0
70.0
90.5
70.0
70.0
65.8
53.7
50.0
100.0
100.0
89.3
89.3
-
56.9
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
60.0
56.6
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
10. CASH AND CASH EQUILVALENTS
Cash and cash equivalents, and cash and cash equivalents - trusts (trust cash), in the Consolidated Statement of Financial Position
comprise cash at bank, in hand and short-term deposits with an original maturity of three months or less.
Although there is a concentration of cash and cash equivalents held with major banks, the lifetime expected credit losses on cash
and cash equivalents are insignificant.
Trust cash relates to cash held for insurance premiums received from policyholders which will ultimately be paid to insurers.
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 Consolidated Statement of Cash Flows, cash and cash equivalents as defined above are shown net of
outstanding bank overdrafts.
CASHF LO W F RO M O PERAT ING ACT IVIT IES
Profit after tax for the period
Equity accounted (profits) after income tax
Dividends/trust distributions received from associates
Amortisation of intangibles
Amortisation of capitalised project costs
Amortisation and impairment of Right of Use Asset
Depreciation of fixed assets
Share options expensed
Net movement in put option liability (including interest unwind)
Profit/Loss from sale of insurance portfolios and controlled entities
Adjustments to carrying value of entities (to fair value) on the date they
became controlled entities or deconsolidated (see notes 7(c),(d))
Impairment charge relating to the carrying value of associates and goodwill
Remeasurement of contingent consideration
Changes in assets and liabilities
Decrease/(increase) in trade and other receivables
(Increase)/decrease in trade and other payables
Increase in deferred revenue from customers
Increase in trust payables*
(Decrease)/increase in provisions
(Increase) in deferred tax asset
(Decrease)/increase in deferred tax liability
(Decrease) in provision for tax
Net cash flows from operating activities
Summary of cash and cash equivalents:
Cash and cash equivalents
Cash and cash equivalents - Trust
T otal cash and cash equivalents
Consolidated
2019
$'000
2020
$'000
56,100
49,172
(29,571)
(27,367)
24,400
7,266
1,076
12,426
3,377
455
(3,861)
2,739
26,371
6,375
1,503
-
3,432
773
(6,483)
(1,155)
(2,862)
(17,162)
5,827
(541)
18,961
(44)
8,807
8,695
653
8,148
(8,028)
(2,602)
(3,801)
(7,775)
6,300
776
15,824
(893)
(995)
5,742
2,601
(3,827)
91,304
69,528
84,374
70,016
158,777
149,981
243,151
219,997
*30 June 2019 balances have been restated to ensure comparability between periods, see Note 2.2.
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 Consolidated Statement of Financial Position.
AUB GROUP ANNUAL REPORT 2020 69
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
10. CASH AND CASH EQUILVALENTS (continued)
Changes in Liabilities arising from Financing Activities
Listed below are the disclosure requirements in respect of the changes in the liabilities arising from financing activities, including
both changes arising from cash flows and non-cash changes (such as foreign exchange gains or losses).
Foreign
exchange
New
Consolidated
New
consolidated
entity/
Year ended 30 June 2020
$'000
$'000
$'000
$'000
$'000
$'000
$'000
1 July 2019 Cash flows
movement
Acquisitions
Other
deconsolidation 30 June 2020
Current interest bearing loans and borrowings
(excluding items listed below)
Current lease liability*
Current hire purchase contracts
Non current interest bearing loans and
borrowings (excluding items listed below)
Unsecured Loan Other
Non current lease liability*
Non current hire purchase contracts
18,470
(8,466)
10,467
(3,891)
373
434
-
-
-
85,115
135,689
(737)
102
100
26,720
(5,277)
415
184
-
-
-
-
1,648
-
-
-
-
-
T otal liabilities from financing activites
141,662
118,773
( 737)
1,648
-
-
-
-
-
-
-
-
91
10,095
-
-
-
-
-
-
8,224
807
220,067
202
21,443
599
91
261,437
Foreign
exchange
New
consolidated
New
Year ended 30 June 2019
$'000
$'000
$'000
$'000
1 July 2018 Cash flows
movement
Acquisitions
Other
$'000
entity 30 June 2019
$'000
$'000
Current interest bearing loans and borrowings
(excluding items listed below)
8,302
2,405
Current hire purchase contracts
468
(95)
-
-
Non current interest bearing loans and
borrowings (excluding items listed below)
Unsecured Loan Other
Non current hire purchase contracts
111,621
(46,010)
1,798
147
664
(45)
(847)
-
-
T otal liabilities from financing activities
121,202
( 44,592)
1,798
-
-
-
-
-
-
-
-
-
-
-
-
7,763
18,470
-
373
17,706
85,115
-
598
102
415
26,067
104,475
*On 1 July 2019, the Group adopted AASB 16 Leases on a modified retrospective basis. As permitted under the standard the comparative period was
not restated.
70 AUB GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
11. TRADE AND OTHER RECEIVABLES
Trade and other receivables which generally have 30 day credit terms, are initially recognised at fair value and subsequently
measured at amortised cost.
The Group recognises amounts due from customers in relation to uncollected fees and commissions due to the Group for services
rendered, adjusted for the expected credit loss.
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 12 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.
Other receivables - loan receivables and short term intercompany funding to related entities.
Loans and receivables 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
Consolidated Statement of Profit or Loss when the loans and receivables are derecognised or impaired, as well as through the
amortisation process.
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.
For Trade receivables and Other receivables, an allowance is made for anticipated losses based upon historical information,
adjusted for forward-looking information, and specific credit information of counterparties where available.
Amounts overdue more than 30 days are assumed to have a significant increase in credit risk. Amounts due from customers on
broking/agency operations are generally cancelled after 90 days (60 days overdue, assumed default date) in line with binding
agreements.
Based on historical records on other loans and receivables, debts overdue by 90 days have a significant risk of default, as such
debts overdue by 90 days are assumed to be in default by the Group, and the net (of ECL) receivable reduced to the expected
recoverable amount (taking into consideration any collateral or security associated with the debt) less costs of recoveries.
Lifetime Expected Credit Losses (ECL) are recorded on receivables, including trade and other receivables, interest-bearing loan
assets, investments and other financial assets. The Group applies the simplified approach to its trade receivables, and measures
the loss allowance at an amount equal to lifetime expected credit losses.
For amounts due from customers of broking/ agency operations and amounts due from clients in respect of premium funding
operations, an allowance is made for anticipated lapses and cancellations based upon historical information, adjusted for forward-
looking information. The provision for lapses 7.0% (2019: 3.9%) provides an amount for expected cancellations and loss of
commissions and fees.
The current year increase is mainly attributable to COVID-19. As described Note 2.1 (d) such factors have heightened the risk of
default in certain industry sectors and customer segments.
AUB GROUP ANNUAL REPORT 2020 71
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
11. TRADE AND OTHER RECEIVABLES (continued)
Commercial loans to controlled entities and associates are secured over the shares of the non AUB Group shareholders of the
lendee company. Other related party loans are generally provided for purchase of shares in a controlled entity or associate to a
related party, where the shares acquired forms collateral in the loan deed. All other loans and receivables, including intercompany
and short term loans to controlled entities and associates are unsecured. The valuation of shares held as security exceed the total
loans receivable for the year ended 30 June 2020, and 30 June 2019.
Current
Trade receivables
Amount due from customers on broking / agency operations
Amounts due from clients in respect of premium funding operations
Related party receivables
Other receivables- related entities
Total trade and other receivables (current)
Consolidated
2019
$'000
37,271
33,234
2,285
6,802
79,592
2020
$'000
26,816
32,152
3,320
6,251
68,539
The total trade and other receivables (current) includes an ECL adjustment of $2.84m (2019: $1.29m).
INTANGIBLE ASSETS AND GOODWILL
12.
Capitalised project costs
Costs associated with maintaining software programs are recognised as an expense as incurred. Development costs that are directly
attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as
intangible assets where the following criteria are met:
i)
it is technically feasible to complete the software so that it will be available for use;
ii) management intends to complete the software and use or sell it;
iii) there is an ability to use or sell the software;
iv) it can be demonstrated how the software will generate probable future economic benefits; and
v) adequate technical, financial and other resources to complete the development and to use or sell the software are available,
and the expenditure attributable to the software during its development can be reliably measured.
Directly attributable costs that are capitalised as part of the software include employee costs and an appropriate portion of relevant
overheads.
Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use.
Research expenditure and development expenditure that do not meet the criteria above are recognised as an expense as incurred.
Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.
Assessments are made on a project by project basis on the expected life of the intangible with a maximum useful life of 5 years
adopted by the Group.
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.
72 AUB GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
12.
INTANGIBLE ASSETS AND GOODWILL (continued)
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. Impairment losses recognised for goodwill are not subsequently reversed.
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 (2019: 10 to 15 years) for broking portfolios/client relationships and 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 Consolidated Statement of Profit or Loss 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 Consolidated Statement of Profit or Loss when
the asset is derecognised.
Capitalised project
Insurance broking
costs
$'000
Goodwill
$'000
registers
$'000
Total
$'000
Consolidated
Year ended 30 June 2020
Cost
Balance at the beginning of the year
3,345
340,910
96,530
440,785
Additional businesses and portfolios acquired
Acquisition of controlled entities
Deconsolidation of controlled entities
Additional capitalised project acquired
Disposal businesses and portfolios
Impairment charge
Translation of foreign exchange rate movements
Total Intangibles
Amortisation
Balance at the beginning of the year
Deconsolidation of controlled entities
Disposal / impairment of capitalised project
Amortisation current year
Disposals of broking portfolios
Translation of foreign exchange rate movements
Accumulated amortisation
Summary
Net carrying amount at beginning of year
Net carrying amount at end of year
-
-
-
1,472
(139)
-
(14)
2,966
6,218
(11,496)
-
(1,643)
(5,449)
(2,085)
1,032
2,360
(655)
-
-
-
(812)
3,998
8,578
(12,151)
1,472
(1,782)
(5,449)
(2,911)
4,664
329,421
98,455
432,540
772
-
(129)
1,076
-
(3)
1,716
2,573
2,948
-
-
-
-
-
-
-
340,910
329,421
38,867
(655)
-
7,266
-
(151)
45,327
57,663
53,128
39,639
(655)
(129)
8,342
-
(154)
47,043
401,146
385,497
AUB GROUP ANNUAL REPORT 2020 73
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
12.
INTANGIBLE ASSETS AND GOODWILL (continued)
Capitalised project
Insurance broking
costs
$'000
Goodwill
$'000
registers
$'000
Total
$'000
C onsolidated
Year ended 30 June 2019
C ost
Balance at the beginning of the year
2,737
242,499
Additional businesses and portfolios acquired
Acquisition of controlled entities
Deconsolidation of controlled entities
Additional capitalised project acquired
Disposal businesses and portfolios
Disposal / impairment of capitalised project
Impairment charge
Translation of foreign exchange rate movements
Total Intangibles
Amortisation
Balance at the beginning of the year
Deconsolidation of controlled entities
Disposal / impairment of capitalised project
Amortisation current year
Disposals of broking portfolios
Translation of foreign exchange rate movements
Accumulated amortisation
Summary
Net carrying amount at beginning of year
Net carrying amount at end of year
-
-
-
1,706
-
(1,113)
-
15
4,651
109,703
(1,403)
-
(631)
-
(15,094)
1,185
54,956
1,500
39,927
(343)
-
-
-
-
300,192
6,151
149,630
(1,746)
1,706
(631)
(1,113)
(15,094)
490
1,690
3,345
340,910
96,530
440,785
383
-
(1,114)
1,503
-
-
772
-
-
-
-
-
-
-
32,712
(342)
-
6,375
-
122
33,095
(342)
(1,114)
7,878
-
122
38,867
39,639
2,354
2,573
242,499
340,910
22,244
57,663
267,097
401,146
Intangible assets are attributable to the following controlled entities.
i) G oodwill
Austagencies Pty Ltd and its controlled entities
Adroit Holdings Pty Ltd and its controlled entities
AUB Group NZ Limited and its controlled entities
Altius Group Pty Ltd and its controlled entities
Other controlled entities
Total goodwill
ii) Insurance Broking R egisters
Adroit Holdings Pty Ltd and its controlled entities
AUB Group NZ Limited and its controlled entities
Other controlled entities
Total Insurance Broking Register
74 AUB GROUP ANNUAL REPORT 2020
R emaining amortisation period
( years)
2020
8.0
8.5
2019
9.0
9.5
C onsolidated
2019
$'000
50,817
39,806
87,231
50,817
112,239
340,910
2020
$'000
50,942
39,806
87,038
39,573
112,062
329,421
10,187
27,695
15,246
53,128
11,460
30,987
15,216
57,663
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
13.
IMPAIRMENT
Impairment of non-financial assets other than Intangibles and Goodwill
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.
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 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.
No such indicators were noted in the current or prior year and subsequently no impairments recorded.
Intangibles and Goodwill
The Group determines whether goodwill is impaired at least on an annual basis. Ongoing reviews of the performance of each
cash generating unit (CGU) is carried out regularly to determine if any CGU shows new indicators of impairment.
The recoverable amount of the intangible assets and goodwill is determined based on the higher of the estimate of fair value
of the 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
interdependent and have similar characteristics.
The CGU represent the lowest level within the Group at which the goodwill is monitored for internal management purposes.
Australian Broking entities, New Zealand entities and Support Services entities are viewed as separate CGUs at the entity
level for impairment purposes, whilst the Australian Agency businesses have each been aggregated into a single CGU.
To conduct impairment testing, the Group compares the carrying value with the recoverable amount of each CGU.
The recoverable amount is based on the higher of:
- Fair value - based on maintainable earnings; or
- Value in use - based on a discounted cash flow model.
Fair value
The Group maintains a policy to seek independent advice on multiples every 3 years from an appropriate valuations firm. The
Group sought independent advice in 2019 to determine the appropriate earnings before interest and tax (EBIT) multiple used
to determine fair value. The Weighted Average Cost of Capital (WACC) is based on the cost of capital calculated for each
CGU after taking into account: market risks; a risk loading recognising, the size of the business, current borrowing interest
rates, borrowing capacity of the businesses, and the risk free rate.
In relation to COVID-19 impacts on multiples, we have considered the following:
- Any distressed sale may reflect the circumstances specific to an entity and is may not be reflective of market multiples.
- No entities within the Group have liquidity issues requiring their disposal or impacting their ability to operate.
- Our stressed multiple testing simulated the headroom outcomes for each CGU if a deterioration in the multiples occur.
Except those CGUs impaired (see below) all other CGUs were supportable under stressed multiple testing.
AUB GROUP ANNUAL REPORT 2020 75
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
13.
IMPAIRMENT (continued)
Fair value (continued)
Key assumptions for the fair value methodology
2020
2019
Fair value is based on estimates of maintainable earnings. The appropriate pre tax
maintainable earnings for each CGU is multiplied by a multiple from within the range, depending
7 - 9.75 times 7 - 9.75 times
on the type of business carried out by the CGU.
The risk free rate (before risk margin).
1%
1.8%
Multiples have been determined after factoring in the following assumed sustainable long term profit growth.
up to 2%
up to 2%
Value in use
Where the Value In Use methodology 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 (DCF) for the next 5 years based on the
forecast profitability. The valuation takes into account the weighted average cost of capital (WACC) for those CGUs and also
looks at the expected long term growth rate with a terminal value calculation at the end of 5 years. This methodology will
result in a better estimate valuation for entities where historic performance may not factor in the medium and long term
expected growth from this business.
As a result of the potential impact of COVID-19 a further 0.5% risk premium was added to the equity required rate of return.
During the current year, five CGU's (2019: three CGU's) were valued using the value in use methodology. All other CGUs were
supportable using the fair value methodology.
Key assumptions for the value in use methodology
Post tax discount rates (WACC).
2020 %
2019 %
9.4% - 11.7% 8.9% - 10.8%
Short term revenue growth rate - used in discount cash flow assumptions (1-5 years).
2.5% - 5.0% 2.5% - 4.0%
Long term revenue growth rate.
1.5% -2.0% 1.5% -2.0%
The fair value measurements were categorised as level 3 fair value based on the inputs in the valuation technique used (see
Note 22).
The resulting recoverable amounts derived from the appropriate measures described above are compared to the carrying
value for each CGU and in the event that the carrying value exceeds the recoverable amount, an impairment loss is recognised.
No reasonably possible change in key assumptions would result in the recoverable amount of a CGU that is material to the
Group's total intangible assets, goodwill and investment in associates, being significantly less than the carrying value included
in the accounts.
When making an acquisition, the Group may 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 generally made to the carrying value.
During the current year, due to current market conditions further adjustments to contingent considerations in respect of
current and prior year acquisitions resulted in a net reduction (previous year increase) to the estimates previously recognised
by the Consolidated Group of $0.54m (2019: $0.04m). Where the revised contingent consideration estimates were below the
original estimated contingent consideration payments, a corresponding and offsetting impairment charge may be recognised.
The reduction in contingent consideration lead to an impairment of $nil (2019: $0.04m).
76 AUB GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
13.
IMPAIRMENT (continued)
Impairment - current year
Based on the continuing market condition impacting two Support Services CGUs, the carrying values of the intangibles in
these entities was impaired by a total of $5.45m ($3.20m net of non-controlling interests). The CGU's were subject to put
option arrangements during the year which have been re-estimated during the year. The movement in the fair value of those
put options was determined to be a reduction of $4.21m resulting in a net credit to the Consolidated Statement of Profit or
Loss of $0.97m (net of non-controlling interests). On 1 April 2020 due to the sale of Allied Health Australia Pty Ltd, the related
put option liability was derecognised.
Impairment - previous year
Two associates in the broking segment were valued during the financial year using the value in use methodology. The
valuations used cash flow projections were based on previous year forecasts which are no longer supportable due to loss of
revenue in the current year as a result of continuing market competition. For valuation purposes, more conservative growth
assumptions have been incorporated for future periods resulting in the carrying values now being higher than the recoverable
amounts. Based on the outcomes of these valuations the Group has recognised an impairment loss on these two CGU's
totalling $3.87m.
This impairment represents 0.7% of the Group's 2019 investment in associates and controlled entities. The impairment loss
was charged to the income statement (see Note 4(vi)).
Based on the continuing market condition impacting two Support Services CGUs, the carrying values of the intangibles in
these entities was impaired by a total of $15.05m ($8.71m net of non-controlling interests). The CGU's are subject to put
option arrangements which have been re-estimated at 30 June 2019. At 30 June 2019, the movement in the fair value of those
put options was determined to be a reduction of $6.48m resulting in a net charge to the Consolidated Statement of Profit or
Loss of $2.23m (net of non-controlling interests).
Reductions in contingent consideration and impairment adjustments relating
to controlled entities
Impairment adjustments relating to investments in associates
Impairment charge relating against Goodwill
Total
Adjustments attributable to non-controlling interests
Net adjustment attributable to equity holders of the parent
Contingent consideration
Impairment charges
adjustments
2020
$'000
(541)
-
-
(541)
65
(476)
2019
$'000
(44)
-
-
(44)
-
(44)
2020
$'000
-
379
5,449
5,828
2019
$'000
44
3,868
15,049
18,961
(2,250)
(6,336)
3,578
12,625
AUB GROUP ANNUAL REPORT 2020 77
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
14. LEASES
The Group has entered into leases for premises, car parking and fixed assets for periods of up to ten years. As lessee, the
Group has the option over some leases to extend the term of the lease for periods of up to ten years. The Group has no
restrictions placed upon the lessee by entering into these leases.
AASB 16: Leases was adopted by the Group on 1 July 2019 on a modified retrospective basis, and as permitted by the
accounting standard, financial information for the prior reporting period has not been restated.
The table below outlines the movement in the Group's Right of use asset and lease liabilities for Property and car parking.
The Group had no leases for Plant and Equipment which did not meet the short term or low value exemptions.
During the year the Group sub leased one of its leases, derecognising the Right of Use asset and immediately recognising a
Lease Net Investment asset representing the net preset value of all future net cash flows expected from the sub lease.
30 June 2020
Balance at the beginning of the period
Additions during the period
Impairment of LNI or ROU assets
Disposals and transfers during the period
Lease Net Investment
Right of Use
(LNI)
$'000
Asset (ROU)
$'000
-
3,305
-
-
37,187
2,302
(2,550)
(3,517)
Consolidated
Lease
Liability
$'000
37,187
2,302
-
645
Net
$'000
-
3,305
(2,550)
(4,162)
T otal right- of- use asset/ Lease Liability
3,305
33,422
40,134
( 3,407)
Sub lease proceeds/depreciation/lease principal payments during the period
-
(9,876)
(10,467)
591
Net carrying value at the end of the period
3,305
23,546
29,667
( 2,816)
Commitments - AASB 16 Lease Liabilities ( discounted)
-Not later than one year
Current Lease Liabilities
-Later than one year and not later than five years
-Later than five years
Non Current Lease Liabilities
Total Lease Liabilities
Set out in the table below are the amounts recognised during the period in profit or loss resulting from the
Group's leases.
Amortisation expense of right-of-use asset
Interest expense on lease liabilities
Impairment of the Right of Use Asset
Short-term lease expense
Low-value lease expense
Other lease expenses
Consolidated
2019
2020
$'000
8,224
8,224
20,648
795
21,443
29,667
9,876
1,470
2,550
2,842
138
790
$'000
-
-
-
-
-
-
-
-
-
-
-
12,945
T otal recognised in profit or loss
17,666
12,945
78 AUB GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
15. 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.
The Group recognises amounts due to insurers for premiums collected but yet to be transferred to the insurer.
Deferred revenue from contracts with customers
Revenue from broking and agency activities are partially (2.5%, 2019: 2.5%) deferred for premium settlement and claims
handling services. The amount of deferral is based on historic data (on time and cost such activities) adjusted for any forward
looking anticipated changes, and margin on service of a standalone service (based on available external data). The revenue
is recognised over time, generally 90 days for premium settlement, and within 12 months for claims handling.
Put option financial liability and reserve
AUB Group Limited 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 3-15 months.
The Group recognises put options financial liability initially at present value of the value the Group could be required to pay
on the future exercise by holders of the put options. After initial recognition, put options financial liability is subsequently
measured at amortised cost using the effective interest method. The Group re-estimates put options financial liability at the
reporting date, taking into account the estimated future outcomes for income or profit, on which the purchase price will be
determined. The Group recalculates the carrying amount of these put options financial liability by computing the present
value of estimated future cash flows at the financial liability’s original effective interest rate. The adjustment is recognised
through the Consolidated Statement of Profit or Loss as income or expense. Movements in the put option liability are
ultimately transferred to the Put Option Reserve.
Whilst this obligation will only be payable in the event that non-controlling shareholders put their remaining shares to the
Group, a liability has been recognized in relation to the put option. The financial liability will be derecognised when the put
option expires unexercised. At balance date there has been no indication from the non-controlling shareholders that they
wish to exit their respective businesses and put their shares to the Group.
Current
Trade payables
Amount payable on broking / agency operations
Put option liability
Dividend Payable
Contingent or deferred consideration payables
Other payables - related entities
Other payables - other
Total trade and other payables (current)
Non- current
Contingent consideration payables
Put option liability
Other payables - related entities
Other payables - other
Total trade and other payables (non-current)
Consolidated
2019
2020
$'000
$'000
24,222
157,729
14,778
10,701
2,848
194
4,714
30,513
149,581
19,919
-
5,651
1,530
9,334
215,186
216,528
547
-
-
-
547
872
-
-
149
1,021
AUB GROUP ANNUAL REPORT 2020 79
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
15. TRADE AND OTHER PAYABLES (continued)
Included in trade and other payable are the following deferred and 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
Contingent consideration payments recognised on acquisition of new controlled entities.
Foreign currency translation movements
Interest recognised in original contingent consideration at net present value
Balance at the end of the year
Consolidated
2020
$'000
2019
$'000
6,523
2,447
(5,398)
(541)
-
207
157
2,981
5,037
(3,934)
(44)
2,289
3
191
3,395
6,523
During the year, an amount of $3.86m (2019: $6.48m) has been credited to the Consolidated Statement of Profit or Loss in
relation to changes in the fair value of the put option liabilities, recognising that the value of those CGU's have decreased
during the period.
During the year, the Group disposed all its shares in Allied Health Australia Pty Ltd (see Note 7(b)), at which point the
associated put option held by the minority shareholders was extinguished and related liability derecognised.
Reasonably possible changes in assumptions will change these deferred payments as follows:
-
-
If the full year 2021 operating profit declines by 10% compared to the current forecast, a reduction of $0.38m (2019: $NIL)
in the deferred consideration would result.
If the full year 2021 operating profit increases by 10% compared to the current forecast, an increase of $0.38m (2019:
$NIL) in the deferred consideration would result.
80 AUB GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
16. SHARE-BASED PAYMENT PLANS
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 options is included below.
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 conditions is included in the determination of fair value at grant date. The Consolidated Statement of Profit or Loss
charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that
period.
The Share Based Payment reserve is used to record the value of equity benefits provided to employees and directors as part
of their remuneration.
For options vesting based on earnings per share hurdles, 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.
For options issued based on Total Shareholder Return (TSR) hurdles, an expense is recognised based on the Group's meeting
market expectations.
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 6).
Employee Share Option Plan
The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of and movements in share
options issued during the year:
Share Options movements (applicable to each relevant financial period):
30 June 20
30 June 19
30 June 20
30 June 19
As at
As at
As at
As at
No.
No.
WAEP ($)
WAEP ($)
Outstanding at the beginning of the period
Granted during the period
Options exercised, lapsed or forfeited during the period relating to options
previously issued:
- 2015
- 2016
- 2017
- 2018
- 2019
351,328
526,308
301,219
79,364
-
(27,861)
(128,565)
(199,117)
(59,324)
(31,614)
(8,105)
(3,314)
(30,503)
(15,947)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Outstanding at the end of the year
402,541
351,328
0.00
0.00
Share options are granted to senior executives by the ultimate parent company, AUB Group Limited.
The share-based payments expense recognised in the Consolidated Statement of Profit or Loss is included in Note 4(iv))
Expenses.
AUB GROUP ANNUAL REPORT 2020 81
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
16. SHARE-BASED PAYMENT PLANS (continued)
The number of options outstanding is represented by:
Financial year options
issued
Option grant date
Earliest exercise
Valuation*
date
$
- 2016
- 2016
- 2017
- 2017
- 2018
- 2019
- 2020
- 2020
23-Nov-15
23-Nov-18
07-Apr-16
01-Jan-19
08-Dec-16
23-Nov-18
24-Jan-17
24-Jan-20
23-Nov-17
23-Nov-20
31-Oct-18
19-Dec-19
19-Dec-19
31-Oct-21
31-Aug-22
31-Aug-24
7.31
7.90
9.36
8.99
11.83
10.72
9.37
8.91
Options outstanding at the end of the year
* Valuation is based on the weighted average price of shares on the date the options were issued.
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
As at
30 June
2020
-
-
-
26,081
42,327
32,914
101,219
200,000
402,541
As at
30 June
2019
19,067
99,920
9,578
85,405
73,941
63,417
-
-
351,328
-
-
-
-
-
200,000 Performance options were granted to the CEO on 19 December 2019. All performance options were issued at an
exercise price of $NIL and are exercisable after 31 August 2024, if performance hurdles are met. The volume weighted
average share price for the 5 business days prior to the date the options were issued was $11.80. The options were
valued using an average price of $10.40 for EPS options and $6.68 for TSR options (weighted average price of $8.91).
See below for terms and exercise conditions for options issued during the financial year ended 30 June 2020.
101,219 performance options were granted on 19 December 2019, including 76,029 performance options granted to the
CEO. All performance options were issued at an exercise price of $NIL and are exercisable after 31 August 2022, if
performance hurdles are met. The volume weighted average share price for the 5 business days prior to the date the
options were issued was $11.80. The options were valued using an average price of $11.18 for EPS options and $6.66 for
TSR options (weighted average price of $9.37). See below for terms and exercise conditions for options issued during
FY20.
21,886 options issued 23 January 2017 vested during the year and were exercised on 16 March 2018. The remaining
26,081 unvested options issued during 2017 will be retested based on the results for the 4 years to 30 June 2020 and if
vesting conditions are not met the unvested options will lapse.
128,565 share options lapsed due to vesting conditions not being met.
191,166 share options issued in 2017, 2018, and 2019 lapsed due to various staff members no longer employed.
During the previous year the following options were granted, exercised or lapsed
-
-
-
-
-
79,364 (63,417 after lapses due to staff resignations) share options were granted on 31 October 2018, exercisable 3 years
from 31 October 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 $11.90. 60% of these options are subject to Earnings Per Share hurdles
and 40% are subject to total shareholder return hurdles. The options were valued using an average price of $11.93 for
EPS options and $8.90 for TSR options (weighted average price of $10.72). All options were issued on the same terms
and conditions as options issued in the previous year.
27,861 options issued in 2015 lapsed due to vesting conditions not being met.
29,769 options issued in 2015, 2016, 2017, 2018 and 2019 lapsed due to various staff members no longer employed.
46,634 options issued 23 November 2015 vested on 23 November 2018 due to vesting conditions being met. The
remainder were retested after 30 June 2019 and vesting conditions were not met and the balance of 28,645 options
lapsed.
150,080 options issued 7 April 2016 vested on 1 January 2019 due to vesting conditions being met. The remainder were
retested after 30 June 2019 and vesting conditions were not met and the balance of 99,920 options lapsed.
The fair value of all options has been valued 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 2020 is 6.22 years (30 June
2019: 5.67 years).
82 AUB GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
16. SHARE-BASED PAYMENT PLANS (continued)
Vesting conditions for Performance options
The following option exercise conditions apply to all options issued before 1 July 2019;
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.
iii.
iv.
v.
vi.
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%;
equal to 7% per annum, 50% of the Options will become exercisable;
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; or
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 Date Compound Growth is
higher than the First Test Compound Growth then 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 First Test Date and the performance criteria on the
Second Test Date are higher than on the first 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 ANNUAL REPORT 2020 83
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
16. SHARE-BASED PAYMENT PLANS (continued)
Vesting conditions for Performance options (continued)
The following option exercise conditions apply to all options issued after 1 July 2019;
Performance Options
-
-
-
-
-
-
-
-
Each Performance Option is a right to receive one fully-paid ordinary share in the Company or at the Board’s discretion,
an equivalent cash payment;
The Performance Options will only vest to the extent that the performance hurdles and ongoing employment conditions
(set out below) are satisfied over the relevant performance periods;
Each grant of Performance Options have been divided into two components, which will each be subject to a separate
performance hurdle. The Board considers that this structure has the benefit of both a relative test that reflects the
Company’s performance against the market and an objective test reflective of management’s performance in growing
earnings per share;
60% of the Performance Options will be subject to a hurdle based on the average annual growth rate (AAGR) of the
underlying earnings per share (EPS) hurdles (EPS Options); and
40% of the Performance Options will be subject to a hurdle based on the relative total shareholder return (TSR) of the
Company compared to the TSR of the constituents of the S&P/ASX Small Ordinaries Industrials Index (AXSID) (TSR
Options).
Performance Options will only vest if participants remain in ongoing employment over the relevant performance period
(subject to the cessation of employment provisions);
Performance Period for all options issued in FY20 will commence on 1 July 2019;
Performance Period - 200,000 CEO 5 year options;
One third of the Performance Options will be tested over a 3 year performance period (three year test date). To the extent
that any performance Options satisfy the performance hurdles at this point, they will remain on foot and will vest and
become exercisable following the end of the 5 year performance period, subject to the CEO's continued employment with
the Company (subject to the cessation of employment provisions included in his contract); and
The remaining two thirds of the Performance Options, and any Performance Options that did not satisfy the performance
hurdles at the three year test date, will be tested over the full 5 year performance period.
Any Performance Options that do not vest at the end of the 5 year performance period, will lapse.
-
Performance Period - 3 year options;
The performance hurdles for 101,219 Performance Options (89,911 granted to Key Management Personnel) will be tested
over a 3 year performance period; and
Any Performance Options that do not vest at the end of the 3 year performance period, will lapse.
EPS Options
-
-
-
For the purposes of calculating the AAGR, an underlying form of earnings per share will be utilised (Underlying EPS)
being, in respect of any financial year, the consolidated net profit after tax of the Company for that year excluding fair
value adjustments to the carrying values of associates, profit on sale of entities and assets or deconsolidation of
controlled entities, contingent consideration adjustments, impairment charges and amortisation of intangibles
(Underlying NPAT) divided by the weighted average number of shares on issue during the financial year. Other
adjustments to the Underlying NPAT calculation may be made in limited circumstances where the Board considers it to
be appropriate;
The percentage of the EPS Options that satisfy the EPS performance hurdle will be determined by reference to the AAGR
(expressed as a percentage) of Adjusted EPS from the year ending 30 June 2019 (being, 66.6 cents) to;
The Underlying EPS for the performance options granted in FY20 will be based on the outcome for the year ending 30
June 2022 (for the 3 year Performance Options and for one third of the 5 year Performance Options); and
The Underlying EPS for the year ending 30 June 2024 will be used for the remaining two thirds of the 5 year Performance
Options which have not been tested, and any 5 year Performance Options which did not satisfy the EPS performance
hurdle at the three year test date.
Subject to satisfaction of the AAGR performance hurdles, the number of EPS Options that will vest either 3 years or 5 years
after grant date; is as follows:
-
-
-
Equal to but not less than 5.0% AAGR, 50% of the Options will become exercisable;
Between 5% and 7% AAGR, the percentage of performance 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 0.04%
additional growth over 5%; and
Equal to or greater than 7% AAGR, 100% of the Performance Options will become exercisable.
84 AUB GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
16. SHARE-BASED PAYMENT PLANS (continued)
Vesting conditions for Performance options (continued)
TSR options
TSR Options will be measured by comparing the TSR of the Company with the TSRs of the constituents of the S&P/ASX Small
Ordinaries Industrials Index (AXSID) (Comparator Group) as at 1 July 2019.
The percentage of the TSR Options that satisfy the TSR performance hurdle will be determined as set out below;
-
-
Less than 50th percentile of the Comparator Group, 0% of the Options will become exercisable;
50th percentile of the Comparator Group, 50% of the Options will become exercisable;
- Between 50th percentile and 75th percentile of the comparator Group, straight line satisfaction of the performance hurdle
between 50% and 100% of the options will become exercisable;
-
-
75th percentile of the Comparator Group or higher, 100% of the Options will become exercisable;
The Board has the discretion to adjust the Comparator Group, including to take into account acquisitions, mergers, or
other relevant corporate actions or delisting; and
TSR measures the growth in the Company’s share price together with the value of dividends paid during the period,
assuming that all those dividends are re-invested into new shares.
Unless the Board determines otherwise, for the purpose of calculating the growth in the Company’s share price over the
performance period, the following opening and closing share prices will be used:
a)
for the opening share price, the volume weighted average share price (VWAP) during the 60 trading days ending on the
first day of the performance period, and
b)
for the closing share price, the VWAP during the 60 trading days ending on 30 June 2022 or 30 June 2024 (as applicable).
Key Terms of Performance options
Exercise price: The exercise price of the Performance Options is nil.
Expiry date for options: Performance Options will lapse 4 years after the earliest exercise date if they have not been exercised
by that date, unless the Board determines a different date.
Disposal restrictions: If the Performance Options vest and are exercised, the shares issued are unrestricted. Disposal of
shares issued on exercise of the Performance Options will be subject to the Company’s securities trading policy. The option
holders may not sell, assign, transfer or otherwise deal with, or grant a security interest over Performance Options without
the prior written approval of the Board or as required by law.
Participation in new issues and bonus issues: Performance Options carry no entitlement to participate in new issues of
shares by the Company prior to the vesting and exercise of the Performance Option. In the event of a bonus issue,
Performance Options will be adjusted in the manner required by the Listing Rules.
Reorganisation: If any reorganisation (including consolidation, subdivision, reduction or return) of the issued capital of the
Company is effected, Performance Options will be adjusted in the manner required by the Listing Rules.
Voting and dividend rights: Performance Options will not attract dividends or distributions and voting rights until the
Performance Options vest and shares are allocated on their exercise, whether or not the shares are subject to disposal
restrictions. Income tax will be the responsibility of the option holders.
Ranking of shares issued: The ordinary shares in the Company issued upon exercise of the Performance Options will rank
equally with the existing ordinary shares in the Company on issue, except for entitlements which had a record date before
the date of issue of those shares.
AUB GROUP ANNUAL REPORT 2020 85
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
17.
INTEREST BEARING LOANS AND BORROWINGS
Interest-bearing liabilities are initially recognised at fair value of the consideration received, net of any directly attributable
transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised
cost.
Gains and losses are recognised in profit or loss when the liabilities are derecognised.
Borrowing costs are amortised over the term of the loan.
Current
Secured bank loan *
Hire purchase contracts
Unsecured loan - other
Total interest bearing loans and borrowings (current)
Non- current
Secured bank loan *
Hire purchase contracts
Total interest bearing loans and borrowings (non-current)
* Summary of secured bank loans
AUB Group Limited syndicated finance facility (see below)
Hunter Premium Funding
Macquarie Bank
Bendigo Bank
St George Bank
National Australia Bank
Commonwealth Bank
Total secured bank loans
Consolidated
2020
$'000
2019
$'000
10,095
18,470
807
202
373
102
11,104
18,945
220,067
85,115
599
415
220,666
85,530
-
192,045
55,513
17,521
18,445
9,061
6,065
2,530
1,926
1,014
9,358
6,691
8,272
2,567
2,739
230,162
103,585
Group Borrowing facilities as at 30 June 2020
The facilities are subject to financial undertakings and warranties typical of facilities of this nature and have sub-limits for
various purposes including acquisitions.
AUB Group Limited secured a syndicated, multi-currency debt facility comprising Australia and New Zealand Banking Group
Limited (ANZ) and Macquarie Bank Limited (Macquarie) for $250m (30 June 2019: ANZ and St George Bank Limited (STG)
for $150m). This facility includes an advance in NZ$ totalling NZ$45m (2019: NZ$45m). The debt facility expires on 6
December 2022 with mechanism for a one year extension on agreement of both parties.
AUB Group Limited also has a facility with St George Bank relating to rental guarantees and credit card facilities totalling
$8m (30 June 2019: $8m).
In addition to the syndicated debt facility provided to AUB Group Limited, controlled entities within the group have also
negotiated other facilities with other banks as shown 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.
During the current and prior years, there were no defaults or breaches of terms and conditions of any of these facilities.
86 AUB GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
17. INTEREST BEARING LOANS AND BORROWINGS (continued)
G roup Borrowing facilities as at 30 June 2020
Facility provider
Type of
Total
Undrawn
Amount
Borrowing
Current
Non
Expiry Date
Interest
Variable
Borrowing
Facility
Amount
Utilised
Amount
Current
$'000
$'000
$'000
$'000
$'000
$'000
Rate
/ Fixed
% (Var/fix)
AUB G roup Limited
Syndicated
Loan Facility
207,955
57,955
150,000
150,000
- 150,000
6/12/2022
finance facility
Loan facility
42,045
42,045
42,045
42,045
6/12/2022
1.85
2.01
Total Syndicated
250,000
57,955
192,045
192,045
-
192,045
facility
Credit Cards
1,500
1,397
103
St George Bank
Bank
Guarantees
6,500
3,898
2,602
-
-
-
-
-
-
6/12/2022
17.45
6/12/2022
1.70
Var
Var
Var
Var
Facilities arranged by other controlled entities
Hunter Premium
Funding
Loan facility
18,686
1,165
17,521
17,521
2,006
15,515
01/11/2025
2.46 - 3.63
Var
Between
& 16/04/2030
Between
Macquarie Bank
Loan facility
9,340
279
9,061
9,061
704
8,357
15/06/2022
4.45 - 5.65
Var
& 30/06/2033
Between
St George Bank
Loan facility
4,838
2,308
2,530
2,530
185
2,345
30/06/2022
2.39 - 3.72
Var
Finance facilities
with other banks
Loan facility
12,011
3,005
9,005
9,005
7,200
1,805
30/08/2020
2.46 - 4.76
Var
& 16/04/30
& 30/06/2024
Between
T otal Borrowing F acilities
302,875
70,007 232,867 230,162 10,095 220,067
AUB GROUP ANNUAL REPORT 2020 87
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
17.
INTEREST BEARING LOANS AND BORROWINGS (continued)
G roup Borrowing facilities as at 30 June 2019
Name of facility
Type of
provider
Borrowing
Total
Undrawn
Amount
Borrowing
Facility
Amount
Utilised
Amount
Current
Non
Interest
Variable /
Current
Expiry Date
Rate
Fixed
$'000
$'000
$'000
$'000
$'000
$'000
% (Var/fix)
AUB G roup Limited
Syndicated finance
facility
Loan
Facility
Loan
facility NZ$
106,987
94,487
12,500
12,500
43,013
-
43,013
43,013
Total Syndicated
150,000
94,487
55,513
55,513
facility
St George
Credit Cards
1,500
1,050
450
Bank
Guarantees
6,500
3,758
2,742
-
-
-
-
-
-
-
Facilities arranged by other
controlled entities
12,500
6/12/2021
3.18
Var
43,013
6/12/2021
3.41
Var
55,513
-
-
6/12/2021
17.45
6/12/2021
1.70
Hunter Premium
Funding
Loan facility
19,208
763
18,445
18,445
-
18,445
02/11/2025 &
Between
15/03/2029
Between
St George Bank
Loan facility
11,447
3,175
8,272
8,272
6,802
1,470
3/07/2019
& 16/11/2023
4.00 -
4.24
2.76 -
6.20
Var
Var
Var
Var
Macquarie Bank
Loan facility
10,833
1,474
9,359
9,359
550
8,809 15/06/2022
4.90
Var
Finance facilities
with other banks
Loan facility
15,111
3,001
12,010
11,996 11,118
878
1/07/2019
& 30/06/2033
Between
2.76 -
13.99
Var
T otal Borrowing F acilities
214,599 107,708 106,791 103,585 18,470
85,115
88 AUB GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
18.
ISSUED CAPITAL
Issued Capital opening balance
Issued Capital under dividend reinvestment plan
Proceeds from capital raising as a result of the accelerated pro-rata non-renounceable entitlement
offer
Share issue expenses (net of tax)
Issued Capital
Number of Shares on Issue (ordinary shares fully paid)
Movements in number of shares on issue
Beginning of the financial year
Number of shares issued during period - dividend reinvestment plan
Number of shares issued during period - options exercised on 16 March 2020
Number of shares issued during period - options exercised on 23 November 2018
Number of shares issued during period - options exercised on 28 February 2019
Number of shares issued during period - non-renounceable entitlement offer
Total Shares on Issue
2020
$'000
255,662
3,285
-
-
258,947
Consolidated
2019
$'000
141,708
-
116,353
(2,399)
255,662
Shares No.
Shares No.
73,818,757
73,502,778
73,502,778
63,846,476
294,093
21,886
-
-
-
-
-
46,634
150,080
9,459,588
73,818,757
73,502,778
Weighted average number of shares on issue at end of period
73,723,720
69,593,019
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 share capital is recognised at the fair value of the consideration received by the company, net of issue costs.
Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company.
During the period;
-
-
294,093 new shares were issued on 8 October 2019 as a result of the dividend reinvestment plan. New shares were
issued at $11.1816 based on 5 day VWAP for period 23 September 2019 to 27 September 2019.
21,886 shares were issued on 16 March 2020 as a result of options being exercised under the Employee Long Term
Incentive plan. New shares were issued at $12.8442 based on 5 day VWAP period ending 13 March 2020.
During the previous period;
AUB Group Limited issued 9,459,588 shares raising $116,353,032 via a fully underwritten 4 new shares issued for every 27
shares held, accelerated pro-rata non-renounceable entitlement offer at $12.30 per share.
-
-
-
-
On 23 November AUB Group Limited issued 7,984,478 shares to institutional shareholders raising $98,209,879 and on 6
December 2018 issued a further 1,475,110 shares to retail and institutional shareholders raising $18,143,153.
o
Proceeds from the Entitlement Offer was used to provide additional financial flexibility for growth initiatives and
to fund the acquisitions. Underwriting and other costs associated with the capital raising have been charged
against the capital raised.
The Institutional Entitlement Offer was conducted from 12 November 2018 to 13 November 2018. The Retail Entitlement
Offer opened on 19 November 2018 and closed on 29 November 2018. The entitlement offer was fully underwritten.
46,634 shares were issued on 23 November 2018 upon exercise of performance option due to vesting conditions being
met. New shares were issued at $11.8996 based on 5 day VWAP for period 18 November 2018 to 23 November 2018.
150,080 shares were issued on 28 February 2019 upon exercise of performance option due to vesting conditions being
met. New shares were issued at $12.95 based on 5 day VWAP for period 22 February 2019 to 28 February 2019.
New shares issued as a result of non-renounceable entitlement offer, upon exercise of performance options and as a result
of the dividend reinvestment plan ranked equally in all respects with existing shares.
Of the total shares issued up to 30 June 2020, 17,229 have restrictions whereby the shares cannot be sold before 23 November
2020 and a further 19,724 have restrictions whereby the shares cannot be sold before 23 January 2022, unless an employee
resigns at which time the restrictions cease.
AUB GROUP ANNUAL REPORT 2020 89
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
19. PARENT ENTITY INFORMATION
ASSET S
Cash and cash equivalents
Current Assets
Non-current Assets
Total Assets
LIABILIT IES
Current Liabilities
Non-current Liabilities - Interest bearing loans and borrowings
Total Liabilities
NET ASSET S
EQ UIT Y
Issued capital
Share based payments
Retained earnings
T O T AL SHAREHO LDERS EQ UIT Y
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
T otal comprehensive income after tax for the period
2020
$'000
2019
$'000
35,060
47,286
17,140
75,911
444,725
268,374
527,071
361,425
14,870
192,044
206,914
4,452
55,513
59,965
320,157
301,460
258,947
255,662
8,469
52,741
7,820
37,978
320,157
301,460
45,610
3,742
49,352
-
22,980
(670)
22,310
-
49,352
22,310
O T HER INF O RMAT IO N
Guarantees entered into by the parent entity in relation to the debts of its controlled entities or associates:
AUB Group Limited has guaranteed loan facilities provided to controlled entities and associates in
proportion to its shareholding.
10,561
18,941
AUB Group Ltd has guaranteed lease facilities provided to associates in proportion to its shareholding.
705
-
Total Guarantees
Contingent liabilities
11,266
18,941
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. We
have assessed the impact of COVID-19 on our associates’ and controlled entities’ liquidity positions and noted no significant
deterioration. 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, refer Note 20.
90 AUB GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
20. COMMITMENTS AND CONTINGENCIES
Commitments - G roup excluding AASB 16 Lease Liabilities
- Not later than one year
- Later than one year and not later than five years
- Later than five years
Commitments - Associate excluding AASB 16 Lease Liabilities
- Not later than one year
- Later than one year and not later than five years
- Later than five years
On 1 July 2019 the Group adopted AASB 16: Leases on a modified retrospective basis. As permitted by
the accounting standard, financial statement for the prior reporting period has not been restated. For
AASB 16 lease commitments refer to Note 14.
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.
Consolidated
2020
$'000
1,979
2,799
-
2019
$'000
10,870
26,500
3,233
4,778
40,603
485
288
-
3,109
6,572
1,018
773
10,699
7,934
705
8,639
9,969
-
9,969
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. We
have assessed the impact of COVID-19 on our associates’ liquidity positions and noted no significant deterioration. At balance
date no liability has arisen in relation to these indemnities.
Previous year comparatives includes all contingent lease liabilities that were recognised in the current year as Right of use
assets under AASB 16 - lease liabilities - see Note 14.
Put / call options
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.
Other than shown on Note 15, at balance date no liability has arisen in relation to these arrangements.
21. SUBSEQUENT EVENTS
On 25 August 2020, the Directors of AUB Group Limited declared a final dividend on ordinary shares in respect of the
2020 financial year. The total amount of the dividend is $26,205,659 which represents a fully franked dividend of 35.5
cents per share. The dividend has not been provided for in the 30 June 2020 financial statements.
Effective 1 August 2020, the Group acquired 73.15% of the voting shares of Experien Insurance Services Pty Limited
(Experien). On this date Experien became a controlled entity of the Group. The acquisition price includes issuance of $5.60m
in AUB Group shares based on a 14 day volume weighted average price to 21 August 2020.
AUB GROUP ANNUAL REPORT 2020 91
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
22. FINANCIAL INSTRUMENTS
Financial risk management objectives and policies
The Group's principal financial instruments comprise receivables, loans, cash and short-term deposits, payables, lease
liabilities, 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
Refer to Note 10 Cash, and Note 11 Trade and Other Receivables.
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 has
established comprehensive risk reporting that reflects expectations of management of expected settlement of financial assets
and liabilities.
The Group's main borrowing facilities are provided by a syndicated facility comprising ANZ Bank Ltd and Macquarie Bank
Limited, although some controlled entities have arranged borrowing facilities with other banks. The terms of these
arrangements have been disclosed in Note 17 Interest bearing loans and borrowings.
The Company considers the maturity of its financial assets and projected cash flows from operations to monitor liquidity risk.
Liquidity risk arises in the event that the financial assets/liabilities are not able to be realised/settled for the amounts
disclosed in the accounts on a timely basis.
As a result of uncertainty caused by COVID-19, AUB Group maintained a high level of cash ($84.37m, see Note 10) and
undrawn debt ($71.66m, see Note 17). These balances were not required to be utilised to support the Group but will be
maintained for the time that the Group deems prudent as opposed to reducing debt.
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 2020 with comparatives based on conditions existing at 30 June 2019.
The risk implied from the values shown in the table below, 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.
92 AUB GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
22. FINANCIAL INSTRUMENTS (continued)
The table summarises the maturity profile of the Group's financial assets and financial liabilities based on contractual
undiscounted payments;
F inancial Assets
Due not later than 6 months
6 months to not later than one year
Later than one year and not later than five years
Later than five years
F inancial Liabilities
Due not later than 12 months
Later than one year and not later than five years
Later than five years
Consolidated
2019
$'000
297,308
2,289
526
-
2020
$'000
307,343
5,224
151
-
312,718
300,123
(240,757)
(241,861)
(795)
(215,554)
(86,551)
-
(483,413)
(302,105)
c) Fair Values of recognised assets and liabilities.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The fair value measurement is based on the presumption that the transaction
to sell the asset or transfer the liability takes places either:
-
-
in the principal market for the asset or liability; or
in the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or lability is measured using the assumptions that market participants would use when pricing the
asset or liability, assuming that the market participants act in their economic best interests.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to
measure the fair value, maximising the use of relevant observable inputs and minimising the unobservable inputs.
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 is
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(a).
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.
The consolidated entity's put option liabilities are categorised as level 3.
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 in
a current transaction between willing parties, other than in a forced or liquidation sale.
AUB GROUP ANNUAL REPORT 2020 93
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
22. FINANCIAL INSTRUMENTS (continued)
The following methods and assumptions were used to estimate the fair values:
-
-
-
-
-
The fair value of loans and notes and other financial assets has been calculated using market interest rate.
Long-term fixed-rate and variable-rate receivables/borrowings are evaluated by the Group based on parameters such as
interest rates and individual creditworthiness of the customer. Based on this evaluation, allowances are taken into
account for the expected losses of these receivables. Market values have been used to determine the fair value of
securities.
Fair values of the Group’s interest-bearing borrowings and loans are determined by using the DCF method using discount
rate that reflects the issuer’s borrowing rate as at the end of the reporting period.
The fair value of unquoted instruments, loans from banks and other financial liabilities (including put option liability),
obligations under leases, as 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.
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. Refer to Note 15 for further information.
There were no material differences between the book value and the fair value of the Group's financial assets and liabilities.
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. 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.
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.
F inancial assets
Cash and cash equivalents (including trust account balance)
Loans - related entities
Loans - other
Total financial assets
F inancial liabilities
Loans and other borrowings
Net exposure to interest rate movements
Consolidated
2020
$'000
2019
$'000
243,151
219,997
40
348
393
8
243,539
220,398
(231,770)
(104,475)
11,769
115,923
Borrowings fixed for a period greater than 12 months have been excluded from the table above.
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. In 2020 there are no fixed interest components in the current and non-
current interest bearing loans and borrowings totalling $231.77m (2019: $104.48m). All borrowings are based on variable
interest rates. See Note 17 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.
94 AUB GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
22. FINANCIAL INSTRUMENTS (continued)
Market Risk (continued)
At year end, had interest rates moved as illustrated in the table below, with all other variables held constant, post-tax profits
and equity would have been affected as follows:
Judgements of reasonably possible movements.
Consolidated
+0.50% (50 basis points) (2019 +0.50% (50 basis points))
-0.50% (50 basis points) (2019 -0.50% (50 basis points))
Post tax profits
Impacts directly to Equity
Higher/ (lower)
Higher/ (lower)
2020
$'000
59
(59)
2019
$'000
578
(578)
2020
$'000
-
-
2019
$'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.
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 controlled 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 and
results is shown in Note 13.
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 Group'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 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 and equity would have been affected as follows:
Judgements of reasonably possible movements.
Consolidated (Group direct investment in New Zealand)
-NZ $0.10 (ten cents) (2019 -NZ $0.10 (ten cents)
+NZ $0.10 (ten cents) (2019 +NZ $0.10 (ten cents)
Post tax profits
Impacts directly to Equity
Higher/ (lower)
Higher/ (lower)
2020
$'000
2019
$'000
2020
$'000
2019
$'000
-
-
-
-
12,084
4,986
(12,084)
(4,986)
AUB GROUP ANNUAL REPORT 2020 95
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
22. 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 using the gearing ratio. The gearing ratio is calculated as contingent considerations payable plus
total borrowings of controlled entities and our share of total borrowings of associates divided by total equity, total borrowings
of controlled entities and our share of total borrowings of associates and contingent consideration payable.
The 2019 monitoring was based on a different gearing ratio model, which excluded share of associate borrowings.
The gearing ratios at 30 June were as follows;
Debt to equity ratio
Consolidated
2020
$'000
2019
$'000
Interest bearing loans and borrowings - controlled entities (see Note 17)
231,770
104,475
Interest bearing loans, borrowings & contingent consideration payable - associates (AUB Group share)
20,055
23,031
Contingent consideration payable (see Note 15)
Total equity
Total equity and borrowings
Gearing Ratio - debt/(debt plus equity)
f) Put Option
3,395
6,523
491,856
483,398
747,076
617,427
34.2%
21.7%
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, refer Note 20.
Other than shown on Note 15, at balance date no liability has arisen in relation to these arrangements.
96 AUB GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
23. AUDITORS' REMUNERATION
Amounts received or due to Ernst & Young (Australia and NZ) for:
Audit of the financial statements of the Group
Audit of the financial statements of controlled entities
Other assurance related services
Other - including taxation services
Total
Amounts received or due to non Ernst & Young audit firms for:
Audit of the financial statements of controlled entities
Other assurance related services
Other - taxation services
Total
Total Auditors' Remuneration
24. RELATED PARTY DISCLOSURES
a) Details of Key Management Personnel (KMP)
The directors of the company in office throughout the year and until the date of signing this
report are:
D. C. Clarke
R. J. Carless
P. A. Lahiff
R. J. Low
C. L. Rogers
Chairman (non-executive)
Director (non-executive)
Director (non-executive)
Director (non-executive)
Director (non-executive)
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.C. Emmett
M. Shanahan
Director and Chief Executive Officer
Chief Financial Officer
b) There are no loans outstanding owing by KMP at 30 June 2020 (2019: NIL)
c) Compensation of KMP’s by Category
Salary, fees and short term incentives
Post Employment
Other Long-Term
Termination Benefits
Share-based Payment
2020
$
369,698
576,030
28,050
78,033
C onsolidated
2019
$
419,653
688,821
103,107
87,739
1,051,811
1,299,320
317,633
362,759
77,346
91,843
12,350
75,062
486,822
450,171
1,538,633
1,749,491
3,183,510
5,000,024
121,151
244,928
-
-
-
-
632,239
304,899
3,936,900
5,549,851
d) STI amounts included above relate to the accrued provision in respect of the current year’s performance that will be paid
during the following financial year. The 2020 amounts have been approved by the Remuneration Committee.
AUB GROUP ANNUAL REPORT 2020 97
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
24. RELATED PARTY DISCLOSURES (continued)
e) The following related party transactions occurred during the year:
i. Transactions with related parties in parent, controlled entities and associates.
Entities within the Consolidated Group charge associates $11,416,988 (2019: $13,735,542) management fees for
expenses incurred and services rendered. Entities within the Consolidated Group invest in trusts managed by related
parties. These transactions are at normal commercial terms and conditions. Entities within the Consolidated Group
provide funds to other related entities within the Group. These funds are interest bearing, excluding small working capital
advances, and are repayable on demand. See Note 11 for amounts receivable from related parties $6,250,898 (2019:
$6,801,827) and Note 15 for payables to related parties $193,741 (2019: $1,529,411).
Entities within the Consolidated G roup have advanced funds to other related
parties.
Adroit Horizon Pty Ltd
Austbrokers Aviation Pty Ltd
Austbrokers Hiller Marine Pty Ltd
Brian Reedy
Barreto Family Trust
Blackfish Pty Ltd
Blair Arnot
Bluestone
Cameron Hollis
Commercial and Rural Insurance Limited
Craig Walker
Cruden & Read Pty Ltd
Damian Price
Dawson Insurance Brokers (Rotorua) Ltd
David Crick
Gard Insurance Pty Ltd
Geebeejay Pty Ltd
Longitude Insurance Pty Ltd
Maurice Carmeri
McDonald Everest
Medicean Pty Ltd
Michael Holbrook
NRIG Pty Ltd
Paul Brown
Paul Wilkes
Rebecca Wilson
Rosser Underwriting Ltd
Sally Underwood
Sura Professional Risk Pty Ltd
Tasman Underwriting Pty Ltd
Tim Parry
The Guild Group
Venrick Pty Ltd
98 AUB GROUP ANNUAL REPORT 2020
Consolidated
2019
2020
$
36,564
9,732
357,204
348,282
4,445
21,154
$
-
11,136
321,350
339,278
4,438
24,079
781,449
904,686
48,825
18,042
69,000
-
548,071
55,941
-
6,745
-
-
269,058
45,759
490,203
54,072
158,961
7,505
-
346,365
2,500
1,350,582
5,000
8,434
120,150
133,434
97,784
63,036
781,449
50,000
445,512
48,950
-
-
599,520
167,901
63,950
1,048
153,062
-
-
904,686
50,000
508,761
48,950
1,318,909
94,624
739,422
-
8,847
-
-
-
3,870
6,250,898
6,801,827
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
24. RELATED PARTY DISCLOSURES (continued)
O ther payables - related parties
Beaubella Investments Pty Ltd
Derick Borean
D Saunders
Gard Insurance Pty Ltd
LaTrobe Insurance Brokers (Vic) Pty Ltd
Paul Dlitvich
Richard Forby
RW Investment Pty Ltd
Samkris Pty Ltd
Stempel Pty Ltd
The Guild Group
Theodorus Sanders
Trickey & Proctor Insurance Agencies Pty Ltd
Tim Parry
ii. Transactions with other related parties.
Consolidated
2019
2020
$
-
-
2,877
33,503
-
-
-
148,151
-
4,893
4,317
-
-
-
$
96,997
340,618
-
-
169,744
17,192
340,619
-
37,310
-
-
2,221
522,365
2,345
193,741
1,529,411
Entities within the Consolidated Group charge associated entities interest on interest
bearing loans. Total interest charged for the period was $17,974 (2019: $19,477).
The interest charged is on normal commercial terms and conditions.
KJ Risk Group Pty Ltd
344,673
344,673
374,641
374,641
No further loans have been advanced to members of the economic entity (2019: $NIL). During the year members of the
economic entity have repaid loans issued by AUB Group Services Pty Ltd totalling $29,968 (2019: $28,523). The balance
outstanding at 30 June 2020 was $344,673 (2019: $374,641).
A member of the Group Executive, K. McIvor, has a 10.7% (2019 10.7%) interest in the voting shares of a controlled entity,
AUB Group NZ Limited.
iii. Transactions with directors and director-related entities.
Entities within the Consolidated 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 Notes 24(b) and 24(c), there were no other transactions with director or director
related entities.
AUB GROUP ANNUAL REPORT 2020 99
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
25. OTHER POLICIES
Other Policies
For the basis of preparation, significant accounting policies, and changes to accounting refer to Note 2.
For accounting policies on material balances refer to notes above.
Current versus non-current classification
The Group presents assets and liabilities in the Consolidated Statement of Financial Position based on current and non-current
classification.
An asset is current when it is:
-
-
-
-
expected to be realised, or intended to be sold, or consumed in the normal operating cycle;
expected to be realised within twelve months after the reporting period;
held primarily for the purpose of trading; or
cash or cash equivalents unless restricted from being exchanged or used to settle a liability for at least twelve months after
the reporting period.
An liability is current when:
-
-
-
-
it is expected to be settled in the normal operating cycle;
it is held primarily for the purpose of trading;
it is due to be settled within twelve months after the reporting period; or
there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
The Group classifies all other assets and liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
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.
Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive income
and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net
investment is disposed of.
Property, plant and equipment
Property, 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
-
Plant and equipment
5 to 8 years.
5 to 10 years.
Impairment
The carrying value of property, 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.
100 AUB GROUP ANNUAL REPORT 2020
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
25. OTHER POLICIES (continued)
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.
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 accumulated superannuation funds by entities within the Group are charged against profits
when due.
Make Good Provision
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.
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 future labour costs. These uncertainties may result in future
expenditure differing from the amounts currently provided. The provision recognised for each premises 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 Consolidated Statement of Financial Position by adjusting both the expense or asset and the provision.
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 Consolidated Statement of Financial Position.
Cash flows are included in the Consolidated Statement of Cash Flows on a gross basis and the GST component of cash flows
arising 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.
Non-controlling Interests
This is measured at their proportionate share of the identifiable net assets and proportion of goodwill.
AUB GROUP ANNUAL REPORT 2020 101
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 30 JUNE 2020
26. ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE
Accounting Standards issued but not yet effective
There are a number of new accounting standards and amendments issued, but not yet effective, none of which have been
early adopted by the Group in this Financial Report. The new standards and amendments, when applied in future periods, are
not expected to have a material impact on the financial position of the Group.
AASB 17: Insurance contracts
AASB 17 was issued in July 2017, replacing AASB 4: Insurance Contracts, AASB 1023: General Insurance Contracts and AASB
1038: Life Insurance Contracts. The new standard establishes principles for the recognition, measurement and disclosure of
insurance contracts issued.
The Group is in the business of providing risk management, advice and risk solutions, distributing insurance policies through
its network of insurance brokers and agencies. The Group does not issue insurance contracts or reinsurance contracts, and
accordingly, does not expect the financial impact of AASB 17 to be material.
AASB 2018 – 6 Amendments to Australian Accounting Standards – Definition of a Business (effective 1 July 2020)
This amends AASB 3: Business Combinations and clarifies the definition of a business to assist entities in determining
whether a transaction should be accounted for as a business combination or as an asset acquisition.
The group does not expect the financial impact of AASB 2018 - 6 to be material as substantially all business combinations
entered into by the Group will continue to meet the definition of a business combination once the amendments come into
effect.
102 AUB GROUP ANNUAL REPORT 2020
DIRECTORS’ DECLARATION
YEAR ENDED 30 JUNE 2020
In the opinion of the directors:
(a) the financial statements and notes of the consolidated entity are in accordance with the Corporations Act 2001 (Cth),
including:
i. giving a true and fair view of the consolidated entity’s financial position as at 30 June 2020 and of its performance
for the year ended on that date;
ii. complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and
the Corporations Regulations 2001;
(b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in
Note 2.1; and
(c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable.
(d) 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 (Cth) for the financial year ended 30 June 2020.
On behalf of the Board
D.C. Clarke
Chair
M. P. C. Emmett
Chief Executive Officer and Managing Director
Sydney, 25 August 2020
Sydney, 25 August 2020
AUB GROUP ANNUAL REPORT 2020 103
INDEPENDENT AUDITOR’S REPORT
YEAR ENDED 30 JUNE 2020
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
Independent Auditor's Report to the Members of AUB Group Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of AUB Group Limited (the Company) and its subsidiaries (collectively the Group), which
comprises the consolidated statement of financial position as at 30 June 2020, consolidated statement of profit or loss,
consolidated statement of other comprehensive income, consolidated statement of changes in equity and consolidated
statement of cash flows for the year then ended, notes to the financial statements, including a summary of significant
accounting policies, and the directors’ declaration.
In our opinion the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
a) giving a true and fair view of the consolidated financial position of the Group as at 30 June 2020 and of its consolidated
financial performance for the year ended on that date; and
b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further
described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the
Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of
the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including
Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our
other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in
forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description
of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Financial Report section of
our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to
respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures,
including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying
financial report.
104 AUB GROUP ANNUAL REPORT 2020
Liability limited by a scheme approved under Professional Standards Legislation
A member firm of Ernst & Young Global Limited
INDEPENDENT AUDITOR’S REPORT
YEAR ENDED 30 JUNE 2020
Carrying value of goodwill, insurance broker register intangible assets and investment in associates, and put option
liabilities.
Financial report reference: Notes 2, 7, 8, 12 and 13
Why significant
investment
Goodwill, other
in
intangible assets and
associates totals $656 million and represent 64% of total
assets. This was a key audit matter as the determination of
insurance broker register
whether or not goodwill,
intangible assets and
in associates are
impaired, involves complex and subjective judgments by
the Group about the future results of relevant parts of the
business.
investment
The key inputs and judgments involved in the impairment
assessment include:
Determination of Cash Generating Units (‘CGUs’);
Applicable Revenue and Earnings Before Interest and
Tax (EBIT) multiples;
Forecast cash flows including assumptions on revenue
and expense growth;
Discount rates, and Terminal growth rates within
Discounted Cashflow (DCF) models; and
Stress testing of key assumptions.
Economic and entity specific factors are incorporated into
the EBIT multiples or DCFs used in the impairment
assessments. The Group’s CGUs operate in a diversified
number of industries within the insurance broking and
underwriting sector in Australia and New Zealand as well
as the provision of support services.
The Group has more than 50 individual CGUs that can be
impacted by changes in the macro-environment as a result
of COVID-19 as well as positive or adverse impacts from
specific industries or natural events.
The future results of insurance brokers and underwriting
agencies are exposed to insurance premium rates, volumes
and commission rates, and broker fees. Similarly, the
support services entities are likely to be affected by any
changes in state-based workers compensation scheme
arrangements.
Put Options liabilities contain significant estimates in their
valuation. The key inputs are:
Applicable EBIT multiples; and
Forecast EBIT.
How our audit addressed the key audit matter
Our audit procedures included the following:
We assessed the Group’s determination of CGUs.
We evaluated the Group’s process regarding impairment
assessments of goodwill, other
intangible assets and
investment in associates to determine any asset impairments.
We evaluated the competence, capabilities and objectivity of
management’s expert who advised management on EBIT
multiples
segments,
across
geographical regions, and CGUs.
the Group’s
operating
We involved our valuation specialists to assist in assessing the
appropriateness of the impairment models including key
inputs into the models such as the applicable EBIT multiples
and discount rates.
We tested the mathematical accuracy of the impairment
models and agreed relevant data back to the latest budgets,
actual results and other supporting documentation.
We assessed the reasonableness of the cash flow forecasts by
comparing them to our understanding of the industry’s external
factors affecting revenue growth.
We independently developed expectations regarding the
impairment testing results based on our understanding of the
business, external industry trends and experience and the
Group’s historic business activity. We evaluated the Group’s
impairment testing results against those expectations.
We evaluated the estimated useful
life attributed to
identifiable insurance broking register intangible assets.
We assessed the Group’s sensitivity analysis and evaluated
whether any reasonably foreseeable change in assumptions
could lead to an impairment.
We assessed the adequacy of the disclosures in note 13 to the
financial report.
We assessed the relationship between the impairment models
and the model used by the Group to value the recognised put
option. This included consistency, where relevant, of key
inputs into the models allowing for the different time horizons
of cash flows.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
AUB GROUP ANNUAL REPORT 2020 105
INDEPENDENT AUDITOR’S REPORT
YEAR ENDED 30 JUNE 2020
Decentralised operations
Financial report reference: Notes 2.1, 8 and 9
d
Why significant
The Group comprises more than 80 subsidiaries and
associates (‘components’) with operations in Australia and
New Zealand.
This was a key audit matter as the individual components
are wide ranging in size with each business operation
having different customer profiles and products. The
decentralised and varied nature of these operations require
significant oversight by the Group to monitor the activities,
review component financial reporting and undertake the
Group consolidation procedures.
number
The Group consolidation is a complex exercise in terms of
consolidation
components
the
entries/adjustments given the significant acquisitions,
disposals and changes in ownership of subsidiaries and
associates over the years.
and
of
The financial reports of a number of controlled entities and
associates are audited by component auditors and
therefore the assessment of the adequacy of the
procedures of other auditors was considered significant to
the audit.
How our audit addressed the key audit matter
Our audit procedures included the following:
We assessed the effectiveness of relevant controls over the
including centralised
Group’s decentralised structure,
monitoring controls at the Group, segment and individual
component level, focused on key performance metrics and risk
reporting.
We planned and scoped our audit by size and risk across all
components of the Group to determine the extent of audit work
to be undertaken at each location. Instructions were sent to all
component auditors including specific instructions asking
them to consider current period and recurring risks within the
Group.
Components subject to audit in aggregate represented more
than 95% by Revenue and Total Assets of the Group. All other
Components were subject to a review (which is not an audit).
We liaised directly with the component audit teams of the
significant entities to evaluate the adequacy of the auditor’s
work, through review of underlying audit work, the scoping of
key audit areas, planning and execution of audit procedures,
significant areas of estimation and judgment, and audit
findings.
We assessed
the
the Group consolidation,
mathematical
the
of
accuracy
appropriateness of elimination entries and adjustments and
agreed the components’ results in the consolidation to the
audited clearances from other auditors.
consolidation,
including
the
We analysed the financial information of all components,
including those not considered as individually significant.
Procedures included discussions with Group management
about the components’ financial performance, and an
assessment as to whether there was any matters arising that
required explanation or additional procedures.
Information Other than the Financial Report and Auditor’s Report
The directors are responsible for the other information. The other information comprises the information included in the Group’s
2020 Annual Report, but does not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance
conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise
appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors 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 control as the directors determine is
necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement,
whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless the directors
either intend to liquidate the Group or cease operations, or have no realistic alternative but to do so.
106 AUB GROUP ANNUAL REPORT 2020
Liability limited by a scheme approved under Professional Standards Legislation
A member firm of Ernst & Young Global Limited
INDEPENDENT AUDITOR’S REPORT
YEAR ENDED 30 JUNE 2020
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken
on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain
professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide
a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt
on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to
draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate,
to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the
financial report represents the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within
the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance
of the Group audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence,
and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence,
and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the
financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless
law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh
the public interest benefits of such communication.
Report on the Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 11 to 22 of the Directors’ Report for the year ended 30 June 2020.
In our opinion, the Remuneration Report of the AUB Group Limited for the year ended 30 June 2020, complies with section 300A
of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based
on our audit conducted in accordance with Australian Auditing Standards.
Ernst & Young
Michael Wright
Partner
Sydney, 25 August 2020
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
AUB GROUP ANNUAL REPORT 2020 107
ASX ADDITIONAL INFORMATION
YEAR ENDED 30 JUNE 2020
Additional information required by the ASX Limited and not shown elsewhere in this report is as follows. The information is
current as at 12 August 2020.
a) Distribution of equity securities
Ordinary share capital
-
-
73,818,757 fully paid ordinary shares are held by 1,617 individual shareholders. All issued shares carry one vote per share
and carry the rights to dividends.
36,953 ordinary shares issued on exercise of options under the Senior Executive Option Plan are held in escrow in
accordance with the Plan.
Options
-
402,541 options are held by 8 individual option holders.
Options do not carry a right to vote.
The number of shareholders, by size of holding, in each class are:
Number of
shareholders
F ully paid
F ully paid
ordinary
ordinary
O ptions
shares
shares ( % )
22 68,269,864
110 2,988,754
135 1,027,913
514 1,308,467
223,759
644
1,425
132
73,818,757
100%
93%
4%
1%
2%
0%
1
7
-
-
-
8
Range of shareholding
100,001 and over
10,001 – 100,000
5,001 – 10,000
1,001 – 5,000
1 – 1000
Holding less than a marketable parcel
108 AUB GROUP ANNUAL REPORT 2020
b)
Substantial shareholders
Perpetual Limited
Challenger Limited
Greencape Capital Pty Ltd
Wellington Management Group LLP
Pendall Group Limited
c)
Twenty largest holders of quoted equity securities
O rdinary shareholders
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED
NATIONAL NOMINEES LIMITED
UBS NOMINEES PTY LTD
MILTON CORPORATION LIMITED
MIRRABOOKA INVESTMENTS LIMITED
BRISPOT NOMINEES PTY LTD
MASFEN SECURITIES LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
NETWEALTH INVESTMENTS LIMITED
MRS GAELEEN ENID ROUVRAY
INVIA CUSTODIAN PTY LIMITED
NEWECONOMY COM AU NOMINEES PTY LIMITED
MARKEY INVESTMENTS PTY LTD
MR STEPHEN SPENCE ROUVRAY
BOND STREET CUSTODIANS LIMITED
ASX ADDITIONAL INFORMATION
YEAR ENDED 30 JUNE 2020
Date of Notice
Number
F ully Paid
Percentage
06-August-2020
8,562,349
11.60%
27-July-2020 7,234,010
31-July-2020 5,604,516
18-March-2020 4,899,108
10-August-2020 4,374,916
9.80%
7.59%
6.64%
5.93%
F ully paid
Number
Percentage
27,045,070
20,869,294
6,116,406
3,146,609
2,525,837
2,269,978
1,296,633
1,292,991
620,000
484,175
460,091
371,098
313,610
240,805
236,723
195,554
151,974
148,709
147,805
123,136
36.64%
28.27%
8.29%
4.26%
3.42%
3.08%
1.76%
1.75%
0.84%
0.66%
0.62%
0.50%
0.42%
0.33%
0.32%
0.26%
0.21%
0.20%
0.20%
0.17%
68,056,498
92.20%
AUB GROUP ANNUAL REPORT 2020 109
DIVIDEND DETAILS
Dividend Details
Dividend
Interim*
Final**
Amount
Franking
Ex Date
Record Date
Payment Date
14.5c
35.5c
Fully Franked
Fully Franked
5/03/2020
7/09/2020
6/03/2020
8/09/2020
3/09/2020
8/10/2020
* The Dividend Reinvestment Plan (DRP) arrangements remains activated.
** The Interim Dividend that was due to be paid in April 2020 was deferred until 3rd September 2020.
110 AUB GROUP ANNUAL REPORT 2020
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 5-24.
Directors
D. C. Clarke (Chair)
M. P. C Emmett (Chief Executive Officer and Managing Director)
R. J. Carless
R. J. Low
P.A. Lahiff
C. L. Rogers
Company Secretaries
D. J. Franks
A. K. T. Luu
Annual General Meeting
The Annual General Meeting of AUB Group Limited will be held
on Tuesday 10th of November 2020 at 10.00am.
Registered Office and Principal Place of Business
AUB Group Limited
Level 14, 141 Walker Street
North Sydney NSW 2060
P: + 61 2 9935 2222
W: www.aubgroup.com.au
ACN: 000 000 715
Share Register
Link Market Services Limited
Level 12, 680 George Street
Sydney NSW 2000
P: 1300 554 474
(Outside Australia +61 2 8280 7100)
AUB Group Limited shares are listed on the
Australian Securities Exchange (ASX: AUB)
Auditors
Ernst & Young
200 George Street
Sydney NSW 2000
CORPORATE INFORMATION
AUB GROUP ANNUAL REPORT 2020 111