Annual Report 2 014
ABN 91-074-444-018
Corporate directory
Directors
Wal Pisciotta
Non-Executive Chairman
Greg Roebuck
Managing Director
Richard Collins
Non-Executive Deputy Chairman
Ian Law
Non-Executive Director - from beginning of
the year until retired 30 September 2013
Jeffrey Browne
Non-Executive Director - appointed
16 December 2013
Pat O’Sullivan
Non-Executive Director
Kim Anderson
Non-Executive Director
Steve Kloss
Alternate Non-Executive Director
Company secretary
Cameron McIntyre
Principal registered office in Australia
Level 4, 449 Punt Road
Richmond Vic 3121
T: +61 3 9093 8600
F: +61 3 9093 8697
W: www.carsales.com.au
Share registry
Computershare Ltd
452 Johnston Street
Abbotsford Vic 3067
T: +61 3 9415 4000
F: +61 3 9473 2500
W: www.computershare.com
External auditor
PricewaterhouseCoopers
Freshwater Place
2 Southbank Boulevard
Southbank Vic 3006
Stock exchange
carsales.com Ltd is a public company listed
with the Australian Stock Exchange Limited
ASX: CRZ
carsales.com Ltd
Annual report - 30 June 2014
Contents
Chairman’s letter to shareholders
Managing Director’s review of operations
Directors’ report
Corporate Governance Statement
Financial report
Directors’ declaration
Independent auditor’s report to the members
Shareholder information
Page
7
9
13
43
55
99
100
102
Results for Announcement
to the Market
carsales.com Ltd
Full-year ended 30 June 2014
(Previous corresponding period: Full-year ended 30 June 2013)
Results for Announcement to the Market
Revenue from ordinary activities
Profit from ordinary activities after tax attributable to members
Net profit for the period attributable to members
Dividends / Distributions
2013 Final Dividend paid
2014 Interim Dividend paid
2014 Final Dividend declared
Up
10%
Up
Up
14%
14%
to
to
to
$’000
235,602
95,457
95,457
Amount
per security
Franked amount
per security
15.6 cents
14.7 cents
17.4 cents
15.6 cents
14.7 cents
17.4 cents
Record date for determining entitlements to the dividends
Dividend payable
1st October 2014
22nd October 2014
Net tangible assets
Net tangible assets backing per ordinary share is 39.99 cents (2013: 30.20 cents)
Other information required by Listing Rule 4.3A
Other information requiring disclosure to comply with Listing Rule 4.3A is contained
in the 30 June 2014 Financial Report.
carsales.com Limited Annual Report - 30 June 2014 | 3
With combined new car sales volumes of close to 10 million units each year across these markets, the prospects for strong long-term growth are immense. ““Wal Pisciotta Chairman’s Letter
to shareholders
Chairman’s letter
to shareholders
Dear Shareholders,
The Board is pleased to present to shareholders
the carsales.com Ltd’s Annual Report for the
financial year ending 30 June 2014. It has
been a year of significant achievement and
transformation at carsales and yet again we are
pleased to be presenting to shareholders another
year of exceptional financial performance.
Some of the major financial highlights of the past
12 months include:
• Revenue up 10% on previous corresponding
period (pcp) from $215.1m to $235.6m.
• Profit (EBITDA) up 15% on pcp from $120.1m
to $138.4m.
• EBITDA margins rising on pcp from 55.8% to
58.7%.
• Net profit (after tax) attributable to owners
of carsales.com Ltd up 14% on pcp from
$83.5m to $95.5m.
• Operating cash flow up 11% on pcp from
$89.1m to $98.7m.
The Board has declared a final 2014 dividend of 17.4
cents per share fully franked, taking the total dividends
paid for the year to 32.1 cents per share. The dividend
payment will have a record date of 1 October 2014 and
a payment date of 22 October 2014.
Each year I wonder at what point my letter to
shareholders will start to become a little repetitive and
every year the biggest problem I seem to have is how
to squeeze a year of very significant activity into just a
number of short paragraphs, so here goes once again…
FY2014 will be marked as a year that amongst many
things put us firmly on the global stage. With the
completion of high growth investments in Brazil
(Webmotors) and South Korea (SKENCARSALES)
along with our continued support in South East
Asia (iCar), we now have a portfolio of meaningful
investments in some of the fastest evolving car markets
in the world. With combined new car sales volumes
of close to 10 million units each year across these
markets, the prospects for strong long-term growth are
immense.
On the domestic front we have continued to be
very busy developing both new and existing market
opportunities. Our investment in Tyresales.com.au
has shown good signs of material potential to build
a meaningful position in the $5 billion tyre market.
Likewise, our most recent announcement of the
investment in Stratton Finance will strengthen our
current position in the private to private finance arena
and in not just cars, but across many of our other
market leading verticals.
Our core business remains and will continue to remain
the area of greatest focus. Once again we have
demonstrated the enormous capacity of our people
to develop new products and features that delight
our customers and consumers while at the same time
continuing to set us apart from our competition.
With such significant organic and inorganic growth
over the twelve months, the Board has been very
conscious of the stretch on management resources.
One of the ways in which we have been addressing this
has been by regularly spending time with executives
from right across the Company and I am pleased to
report to shareholders that Greg has done an excellent
job in building and developing a team of such great
depth and talent. As a Board we are confident that
we will meet all the exciting challenges these growth
opportunities will avail.
While the past twelve months have been marked by
significant progress and achievement they have not
been without tragedy and we mourned the loss of a
number of close colleagues, including Mr Ian Law who
lost his battle with cancer in September last year. Ian
had served on the Board on more than one occasion
since 2007 and he continues to be greatly missed by all
his friends at carsales.
In December last year we were also very fortunate to
welcome back to the carsales Board Mr Jeffrey Browne.
Jeffrey’s legal background and in depth knowledge of
both the advertising and media markets, as well as his
experience in the automotive industry are a significant
asset to the Board and we are very pleased to have him
back.
I say this every year and will say it once again and
that is that carsales.com Ltd continues to be very
well positioned for the future. We have many exciting
initiatives that we look forward to bringing to market
over the coming months that will enable us to continue
extending and reinforcing our core capabilities while
enabling the ongoing evolution and strength of our
people and culture.
On behalf of the Board of Directors, I would like to
once again thank our customers for their continued
endorsement and business; our shareholders for
their ongoing encouragement and support and Greg
Roebuck and his team for their ongoing passion,
commitment and dedication to the Company
producing yet another great year of significant
achievement.
Yours sincerely,
Wal Pisciotta
Chairman
13 August 2014
carsales.com Limited Annual Report - 30 June 2014 | 7
Managing Director’s
Review of operations
Managing Director’s
review of operations
Dear Shareholders,
FY14 was as usual, an eventful year for our great
business. We’ve continued to make acquisitions
(more on that later) and again demonstrated our
focus on world class innovation to move further
ahead in our marketplaces.
One of the newest members of the carsales family is
www.tyresales.com.au and it’s wonderful to see this
new brand have an immediate impact. Historically, the
Australian tyre market has been serviced by a small
number of large tyre retailers. This has resulted in widely
varying price points for the same tyre even within the
same franchise network. It’s also resulted in a lack of
transparent pricing for the consumer. The tyresales.
com.au business addresses these issues and offers
simple, online, low cost, compelling prices for what is
a very relevant purchase for our consumer base. Add
to this, we have (effectively) Australia’s largest fitment
network: our car dealers. This is truly a win-win-win for
the consumer, for the car dealer and for carsales.
This year was not without its challenges, with a number
of car companies requiring their dealers to cease the
listing of in-stock new cars on carsales (and other third
party) websites. While we believe this shift has had
negative outcomes for these brands, I’m very pleased
that the team at carsales were able to respond so
quickly to this policy shift and deliver solutions to meet
the needs of our consumers. There’s no doubt the new
car marketplace continues to evolve and rest assured
that carsales is at the forefront of addressing the needs
of the consumer, the dealers and the car companies.
MediaMotive - responsible for display advertising
across our network
As a result of this shift in new car inventory, we saw
some car companies lower their ad spend owing to a
perceived reduction in new car inventory. The great
thing for the Company was that consumers continued
to come in their droves looking for new cars. Our
“BNCA” - Brand New Cars Available - product provided
a great solution for consumers in their search for the
perfect car irrespective of a brand’s inventory policy.
Our consumer traffic looking for new cars is continuing
to grow every month as we remain the clear number
one destination for anyone looking for cars. We’re
confident that with so many in-market buyers, the ad
spend will follow the buyers.
The other verticals (bikesales/trucksales/boatsales/
etc.) continue to benefit from the need for advertisers
to reach a highly qualified in-market consumer. There
is NO better place for this in Australia other than on a
carsales owned site.
Mobile devices continue to proliferate and it’s wonderful
to be able to say that our solutions are not only market
leading, but award winning. Consistently rated over 4
stars (out of 5), our apps have been downloaded literally
millions of times. While the screen size of mobile means
advertising opportunities are fewer, the extremely high
engagement and targeted audience, are very attractive
to advertisers.
International / Acquisition update
Our International operations now include DataMotive
New Zealand; Redbook New Zealand, Thailand, Malaysia
and China; 30% of WebMotors Brazil; 22.9% of iCar Asia
(up from 19.9% a year ago) and more recently, 49.9% of
SKENCARSALES in Korea. We also acquired 50.1% of
Stratton Finance in July 2014.
We work closely with all our International partners
and while each of them are at different stages of
development, we are very pleased with our progress
to date. WebMotors for example has moved their
operations to the “cloud” and is poised to release an
updated version of their website powered by carsales
proprietary search engine: Ryvus. Our Stratton Finance
investment, enables us to leverage the many synergies
of a burgeoning private to private market, across not
just cars, but boats/bikes/caravans/etc. and provides us
with a simple, cost effective, online finance offering.
Private Seller - the market place for consumers
wanting to sell their cars; motorbikes etc.
This year saw us migrate all of our individual sites -
including all mobile sites - to a common seller platform.
This provides significant benefits in functionality to
all of our users irrespective of which of our sites they
use. A new Showcase product provides a high profile
opportunity for sellers and our Premium Plus product
accommodates time-poor consumers looking for a
professional photo service and assistance in the sales
process.
We are very proud of our vigilance and success in
keeping fraud, and fraudster elements of the internet,
from our site and it requires a substantial investment
in technology and people, but the result is a far safer
and clearly more trusted means to buy and sell. This in
in stark contrast to many of our competitors who are
seemingly comfortable to allow scammers to post fake
ads and send fake enquiries.
carsales.com Limited Annual Report - 30 June 2014 | 9
Managing Director’s
review of operations
(continued)
Dealer - the commercial seller part of the business,
includes dealers of cars, trucks, motorbikes, etc.
Along with a common seller platform for consumers,
we’ve invested in a completely new Autogate - the
system our dealers use to manage their inventories and
their enquiries. This new Autogate has been rolled out
to all of our non-car dealer customers, with the rollout
to car dealers about to commence. The improved
functionality is extensive and will provide even more
world class tools to help in the management of a
dealer’s online operations. Our non-car sites now all
have the option of “pay per lead” billing, which provides
truly accountable advertising.
This has been well received and ensures our business
is aligned to the same objectives as those of our
customers.
DataMotive - Provides data and services to
(predominantly) our dealer customers
Another strong performance this year from this key
part of the business. Further investment in great quality
data means consumers can accurately and confidently
compare cars, features, values and fit for purpose.
Our high value, low cost products continue to delight
our customers and add enormous value in a complex
marketplace.
Watch this space…
As regularly demonstrated over the years, the carsales.
com business prides itself on challenging the status-quo
and delivering world leading innovations. This core part
of our culture continues to be alive and well. By the time
you are reading this, we will have launched the latest
member of the carsales family and again it’s a world
first: www.pitchi.com Make sure you check it out!
In closing, we’ve had another great year, more world
class innovations, more investment in exciting markets,
an even greater lead over our competitors and
continued growth in all areas of the core business. As
a team we strive to be the best in the world and while
it is a high benchmark, I continue to be amazed and
extremely proud of what truly talented people we have
delivering on this objective. I’d like to publically thank
each and every one of them.
Yours sincerely,
Greg Roebuck
Managing Director and CEO
13 August 2014
10 | carsales.com Limited Annual Report - 30 June 2014
Mobile devices continue to proliferate and it’s wonderful to be able to say that our solutions are not only market leading, but award winning.““Greg Roebuck Directors’ Report
Directors’ report
Your directors present their report on the consolidated entity (referred to hereafter as the Group) consisting of
carsales.com Ltd, the entities it controlled and the investments in associates at the end of, or during, the year
ended 30 June 2014.
Directors
The following persons were directors of carsales.com Ltd during the financial year and up to the date of this
report unless indicated otherwise:
Wal Pisciotta
(Non-Executive Chairman)
Greg Roebuck
(Managing Director)
Richard Collins
(Non-Executive Deputy Chairman)
Ian Law
(Non-Executive Director - from beginning of the year until retired 30 September 2013)
Jeffrey Browne (Non-Executive Director - appointed 16 December 2013)
Pat O’Sullivan
(Non-Executive Director)
Kim Anderson
(Non-Executive Director)
Steve Kloss
(Alternate Non-Executive Director)
Principal activities
carsales.com Ltd principal activities during the course of the financial year consisted of online classified and
display advertising. As well as this carsales provides a number of software, data and other services predominantly
sold to customers in the automotive industry.
There have been no significant changes in these activities during the course of the last financial year.
Dividends - carsales.com Ltd
Dividends paid to members during the financial year were as follows:
Final fully franked cash dividend for the year ended 30 June 2013 of 15.6 cents
(2012 - 13.2 cents) per share paid on 25 September 2013.
Interim fully franked ordinary dividend for the year ended 30 June 2014 of 14.7
cents (2013 - 12.7 cents) per share paid on 2 April 2014.
2014
$’000
2013
$’000
37,052
45,100
34,957
29,986
72,009
75,086
In addition to the above dividends, since the end of the financial year the Directors have recommended the
payment of a final ordinary dividend of $41,408,000 (17.4 cents per fully paid ordinary share) to be paid on
22 October 2014 out of retained profits at 30 June 2014.
Operating and financial review
Group Financial Highlights
• FY2014 was another year of record financial performance with Group operating revenue rising to $235,602,000,
up 10% on the prior comparative period.
• Group earnings remained very strong with EBITDA up 15% on the prior comparative period to $138,410,000 and
EBITDA margins expanding to 59%.
• Profit attributable to the owners of carsales.com Ltd was $95,457,000, up 14% on the prior comparative period.
Directors’ report
carsales.com Limited Annual Report - 30 June 2014 | 13
carsales Domestic Highlights
• There were a number of highlights during the course of the year which contributed to the overall performance of
the business including:
• Dealer revenue up 8% on pcp overall. Key growth drivers being yield and growth in customer acquisition.
• Mediamotive up 8% on pcp and delivering a good result in a more challenging market.
• Private revenue grew by 12% on pcp, with a particularly strong H2 as a result of yield growth in
automotive, new product and a positive contribution from tyresales.
• Non-automotive verticals performing well.
• Marine, industry and Caravan & Camping dealer customers moved from subscription based charging
models to performance based.
• Dealer and Data Services once again performed strongly with revenue up 14% on pcp.
• On the 15th of July the Company announced that it had acquired a 50.1% interest in Stratton Finance Pty Ltd an
innovative finance business that focuses on technology and the internet as a key competitive advantage and
its primary channel for new customer acquisition. stratton.com.au is now one of the highest traffic generating
vehicle finance websites in Australia with over a million visitors per year.
carsales International Highlights
• The Company has recently acquired interests in online automotive advertising companies operating in high
growth international markets. These interests include:
• 49.9% in the equity of SKENCARSALES.com Ltd (South Korea) on 15/04/2014 the number one online
automotive classifieds company in South Korea.
• 30% in the equity of Webmotors SA (Brazil) on 28/06/2013 the number one online automotive classifieds
company in Brazil.
• 22.9% in the equity of iCar Asia Ltd (ASX:ICQ) on 14/03/2013 where 19.9% was acquired and a further 3%
was acquired on the 05/03/2014. iCar is the largest online automotive classifieds network in South East Asia.
• SKENCARSALES.com Ltd - Strong revenue growth of 35% on pcp for the two and a half months since acquiring
an interest in the Company in mid April 2014. Revenue growth largely as a result of growth in dealer yield.
carsales share of net profit after tax was $815,000. Significant opportunities exist in licensing carsales’ world
leading technology into the Korean market and good progress is being made in establishing strategic priorities.
• Webmotors SA - Revenue growth of 22% pcp predominately from dealer advertisement volume growth. carsales
share of net profit after tax was $4,609,000. Technology platform has been successfully migrated to Amazon
allowing significant product improvement in FY15, including the adopting of carsales Ryvus search technology.
Webmotors continues to grow its market share with its combined inventory (MeuCarango, CompreAuto and
WebMotors) now almost double that of its closest competitor.
• iCar Asia Ltd - carsales share of net loss after tax is estimated to be ($1,990,000). carsales continues to support
iCar’s position in Thailand, Indonesia and Malaysia evolve.
Outlook
• Domestic trading conditions in the first 6 weeks of FY2015 have remained solid. Expect to provide a more
detailed trading update at the October Annual General Meeting.
• Looking forward to further growth from tyresales and Stratton albeit at lower EBITDA margins than broader
carsales business. In addition, further opex in these areas as well as for our new site Pitchi, will likely result in
overall EBITDA margins more aligned to FY13.
• Anticipate further developments in relation to new vehicle product offerings.
• Development of the Stratton Finance partnership onto other verticals.
• Expect to continue focus on developing the market opportunities that exist in each of the international
investments.
14 | carsales.com Limited Annual Report - 30 June 2014
Directors’ report
Strategy
The strategy of the Company is to continue to strengthen and grow its core business units through ongoing
product innovation, while pro-actively seeking opportunities to leverage developed intellectual property in other
adjacent or geographic high growth markets.
Risk
Being a complex business in a growth market carries with it a number of risks that the Company manages
including but not limited to:
• Maintenance of professional reputation and brand name - The success of carsales is heavily reliant on its
reputation and branding. Unforeseen issues or events, which place carsales’ reputation at risk, may impact on
its future growth and profitability.
• Relationship with Dealers - carsales derives a significant proportion of its revenue from motor vehicle dealers.
A change in the size and/or structure of this market could impact carsales’ earnings. In particular, consolidation
of the market with fewer, larger dealers or increased manufacturer control of dealer’s online advertising activity
may impact upon the prospects of carsales.
In addition the majority of carsales’ revenue is generated under monthly agreements with motor vehicle dealers.
Should a significant number of dealers cancel or fail to renew their agreements, this may have an adverse effect
on the financial performance of carsales.
• Competition - the online automotive advertising industry is highly competitive. carsales’ performance could be
adversely affected if existing or new competitors reduce carsales’ market share from its current level.
• Downturn in the motor vehicle or general advertising market - the performance of carsales will continue to be
influenced by the overall condition of the motor vehicle market. The motor vehicle market is influenced by the
general condition of the Australian economy, which by its nature is cyclical and subject to change. In addition,
carsales derives a significant proportion of its revenue from display advertisers on its network of websites. A
decline in the advertising market as a result of broader economic influences could have a negative impact on
carsales’ earnings.
• Information Technology - carsales’ business operations rely on owned and 3rd party IT infrastructure and
systems. Any interruptions to these operations could impair carsales’ ability to operate its customer facing
websites which could have a negative impact on carsales’ performance.
• carsales’ future performance will also depend on its ability to monitor and manage major projects such as
website upgrades and other projects involving its IT infrastructure.
• International expansion - with the expansion of the business into new high growth international geographies the
Company becomes exposed to the macro economic environment of these markets outside of the traditional
markets the Company has operated in.
Significant changes in the state of affairs
During the financial year the Company continued to expand geographically by investing in South Korea’s
number one automotive classifieds company SKENCARSALES.com Ltd. The consideration for this investment
was $126,475,000. The Company added to its 19.9% investment in iCar Asia Ltd in March 2014 by acquiring an
additional 3% (22.9% held at 30 June 2014) of the equity in the Company at a cost of $7,179,000.
Both acquisitions were funded by a combination of cash and debt. The debt was acquired by extending an
existing facility held with National Australia Bank to $165,000,000. The facility matures on the 31 July 2017 and is
expected to be repaid from excess cash.
On 15 July 2014 the Company acquired 50.1% of Stratton Finance Pty Ltd an Australian based automotive finance
company.
The acquisition cost of Stratton Finance was $59,100,000. The acquisition was funded by an additional
$60,000,000 debt facility held with National Australia Bank. This facility will mature on 1 July 2015. It is intended
to review this facility with National Australia Bank during the course of the FY2015 financial year.
Directors’ report
carsales.com Limited Annual Report - 30 June 2014 | 15
Matters subsequent to the end of the financial year
No other matter or circumstance has arisen since 30 June 2014 that has significantly affected, or may affect:
(a) the Group’s operations in future financial years
(b) the results of those operations in future financial years, or
(c) the Group’s state of affairs in future financial years.
Sustainability
carsales.com Ltd is committed to being a corporate citizen of good standing and implementing practical
sustainability programs. carsales strives to be a green company; we aim to have the lowest possible negative
impact on the global or our local environment, community, society or economy.
carsales core values of enjoyment, respect, integrity, trust, communication and honesty (ENRITCH) support the
companies culture of ethical conduct. Over the past several months the Company has reviewed its sustainability
programs and engaged key stakeholders throughout the Company to build focus and involvement. carsales
contributes to the wider community through initiatives such as its Community Day program, where each
employee undertakes a day of volunteering in the community on an annual basis. The Company is also committed
to reducing its carbon footprint and is focused on areas such as waste management and becoming a paperless
office environment.
People & Culture
carsales is an employer of choice and aims to continually attract and retain the most talented people that can be
found in the market with the right values and expertise that fit the carsales culture.
The culture of carsales is one of inclusion, encouraged diversity and where people are provided with extensive
opportunities to learn and evolve in a fast paced and dynamic business environment.
Several years ago, carsales implemented the ‘carsales People Promise’ which is an ongoing program and
commitment of the Company to employees in the areas of culture and benefits, career development, health
and wellbeing, community, work life balance and reward and recognition. Each area contains several initiatives
designed towards ensuring carsales is a workplace where people work hard and are also rewarded through things
other than just financial incentives.
Employee engagement at carsales is a critical success factor and over time the Company has developed a
number of initiatives that build engagement. Each year all staff complete an Employee Opinion Survey (EOS)
that covers areas such as reward and recognition, communication, personal development and training, business
ethics, leadership and engagement. The survey results are reviewed by management and communicated to each
contributing department where employees discuss results and develop strategies for continuous improvement.
Annually senior executives will conduct ‘Discussion Groups’ with all employees of the Company in small groups.
The objective of these sessions is to provide people with a forum where they can be updated on the performance
of the Company, its strategy and initiatives. People are encouraged to challenge and ask questions on these topics
and feedback is discussed and actioned by senior management.
In the area of training and development there are a number of programs designed to support the learning and
development of employees to support both the retention and succession of our most valuable asset being our
people. Some of these programs include mentoring programs, CEO Scholarship awards and extensive availability
of internal training programs.
Workplace Health & Safety
carsales is committed to providing employees with a safe and healthy working environment. The Company has
an established Work, Health & Safety (WH&S) Committee and requires all employees to undertake annual WH&S
training. The compliance with WH&S training is monitored to ensure everyone is well versed and continually
reminded of safe working practices.
Through our health and wellbeing program within our People Promise, the Company has developed many
different programs such as annual flu shots, in house massage, provision of healthy food options and counselling
services to support both the physical and mental health requirements of our employees.
16 | carsales.com Limited Annual Report - 30 June 2014
Directors’ report
Community
Through the People Promise the Company has a number of different community focused initiatives designed to
provide the company and employees with avenues to support both charity and community based causes.
Some of these initiatives include the provision of company wide support of charities that employees select based
on need and relevance.
Over the past twelve months both the Company and employees have actively participated in raising money for:
Movember Foundation - A global men’s health charity committed to changing the face of men’s health. With an
official presence in 21 countries, the Movember Foundation is committed to driving significant improvements for
the prioritised men’s health issues - prostate cancer, testicular cancer and mental health.
Peter MacCallum Cancer Institute - A major centre for cancer treatment, professional oncologist training, and
oncology research in Australia.
In the area of community, employees are provided with a community day each year to enable them to participate
in community based service activities. Over the past twelve months employees have participated in a number of
community based activities which amongst others have supported Sacred Heart Mission, Salvation Army and the
Million Paws Walk.
Diversity
carsales values a diverse and inclusive working environment and has developed programs which support this
objective.
carsales has developed a ‘Women in Leadership’ program which is designed for women in leadership roles at
carsales. The purpose of the program is to connect women from different areas in the workplace so they can
share their experiences and learn from one another.
The network meets regularly to discuss the role of women in leadership, the challenges they are facing as well
as techniques and opportunities to continue their personal and career growth. This will in turn create new role
models at carsales while the shared learning will aid personal development and increase the possibility for career
advancement.
The Company regularly runs a program called ‘Lunch with a Leader’, that is offered to employees and enables
them to hear the stories of leaders in the community and business from diverse backgrounds and ask questions.
The program is designed to build knowledge and understanding of employees that have come from various
backgrounds.
Ethical Conduct and Corporate Governance Policy
carsales core values of integrity and honesty contained within the philosophy of ENRITCH are central to the
culture of the business. The business through the Employee Opinion Survey (EOS) directs employees to respond
to questions relating to ethical business behaviour and company performance in this area is annually assessed by
management.
The Company has also developed Code of Conduct that is published on the Company shareholder website and a
Whistle blower policy to ensure that employees understand their available avenues for the reporting and handling
of ethical and business related issues.
Environmental regulation
The Group is not subject to any significant environmental regulation in respect of its activities.
Directors’ report
carsales.com Limited Annual Report - 30 June 2014 | 17
Information on directors
Wal Pisciotta
(Non-Independent Non-Executive Chairman)
Appointed: 25 June 1996
Experience and expertise
Wal has over 40 years experience in supplying computer
services to the automotive industry and is also the
Chairman of Pentana Solutions Pty Ltd. Wal holds a
Bachelor of Science Degree in Business Administration
from the University of Alabama (United States) and
has been the Chairman of carsales.com Ltd since its
inception.
Interests in shares and options
14,647,129 ordinary shares held in carsales.com Ltd.
No options or performance rights held over ordinary
shares in carsales.com Ltd.
Greg Roebuck
(Managing Director)
Appointed: 25 June 1996
Experience and expertise
Greg was the original architect of carsales.com Ltd;
has been on its Board since inception and Managing
Director and CEO since May of 2002. Greg is a Fellow
of the Australian Institute of Company Directors. He
has over 30 years experience in providing technology
solutions to the Australian Automotive Industry. Greg
studied computer science at RMIT (Melbourne). In July
2009 Greg won the Ernst & Young Entrepreneur of
the Year Award for the Southern Region of Australia in
technology & emerging industries: software, hardware,
telecommunications, digital media and health sciences.
He then went on to win the Ernst & Young Entrepreneur
of the Year Award for Australia in November 2009.
Interests in shares and options
4,988,505 ordinary shares held in carsales.com Ltd.
866,067 options and 112,992 performance rights held
over ordinary shares in carsales.com Ltd.
Richard Collins
(Independent Non-Executive Deputy Chairman)
Appointed: 17 July 2000
Experience and expertise
Richard has been a director of carsales.com Ltd since
2000 and has over 35 years experience as Dealer
Principal, currently holding Ford, Toyota, Subaru, Suzuki,
and Isuzu Franchises. Richard holds a Bachelor of
Commerce Degree from Melbourne University.
Interests in shares and options
991,750 ordinary shares held in carsales.com Ltd.
No options or performance rights held over ordinary
shares in carsales.com Ltd.
Pat O’Sullivan
(Independent Non-Executive Director)
Appointed: 29 June 2007
Experience and expertise
Pat was the Chief Operating Officer and Finance Director
of Nine Entertainment Co Pty Limited (formerly PBL
Media Pty Ltd) a position he held from February 2006
before resigning on the 29th June 2012. Before that, Pat
was the Chief Financial Officer of Optus, a position he
held for over five years. Previously, he held a number
of positions at Goodman Fielder and Burns Philp. Pat
is a member of The Institute of Chartered Accountants
in Ireland and The Institute of Chartered Accountants
in Australia, and is a graduate of the Harvard Business
School’s Advanced Management Programme. He also
served as a Director and Company Secretary of Nine
Entertainment Co Pty Limited and was Chairman of
Ninemsn. Pat is currently a non-executive director of
iiNet, iSentia, Little Company of Mary Health Care and
chairman of HealthEngine.
Interests in shares and options
5,376 ordinary shares held in carsales.com Ltd.
No options or performance rights held over ordinary
shares in carsales.com Ltd.
Ian Law
(Independent Non-Executive Director)
Appointed: 21 April 2011
Retired: 30 September 2013
Experience and expertise
Ian was the former Chief Executive Officer of PBL Media
(now Nine Entertainment Co Pty Limited). Prior to his
career at PBL Media, Ian was CEO of ACP Magazines
Ltd. His previous roles included Managing Director and
Chief Executive Officer of West Australian Newspaper
Holdings Ltd; and Chairman of Ninemsn Limited. Ian had
more than 30 years experience in the publishing and
broadcasting industry; and also had extensive experience
in the online and digital sector.
Interests in shares and options
No ordinary shares held in carsales.com Ltd.
No options or performance rights held over ordinary
shares in carsales.com Ltd.
Kim Anderson
(Independent Non-Executive Director)
Appointed: 16 June 2010
Experience and expertise
Kim is the Chief Executive Officer of The Reading Room
(thereadingroom.com), a community/social networking
site for readers and is a Non-Executive Director of the
STW Group, and a member of the Sydney University
Press Advisory Board. Kim has more than 28 years
experience in various advertising and media executive
positions within companies such as Southern Star
Entertainment, PBL and Ninemsn.
Interests in shares and options
10,000 ordinary shares held in carsales.com Ltd.
No options or performance rights held over ordinary
shares in carsales.com Ltd.
18 | carsales.com Limited Annual Report - 30 June 2014
Directors’ report
Jeffrey Browne
(Independent Non-Executive Director)
Appointed: 16 December 2013
Experience and expertise
Jeffrey practiced as a commercial lawyer in Sydney
and Melbourne for 22 years before joining the Nine
television Network, initially as Executive Director and
later becoming Managing Director, with responsibility
for all Network operations. His legal experience saw
him involved in a wide range of matters concerning
dealers and motor vehicle manufacturers as well other
multi-national OEM’s. Jeffrey is also Chairman of Holden
Special Vehicles where he has been a director or
Chairman for over 12 years. Jeffrey’s media experience
includes broad management responsibilities and the
development and implementation of new broadcast and
digital platforms.
Interests in shares and options
No ordinary shares held in carsales.com Ltd.
No options or performance rights held over ordinary
shares in carsales.com Ltd.
Steve Kloss
(Alternate Non-Executive Director)
Appointed: 28 October 2005
Experience and expertise
Steve has more than 24 years experience in supplying
computer services to the automotive industry and is
currently Chief Executive Officer at Pentana Solutions
Pty Ltd. Steve holds a Bachelor of Business degree from
Monash University.
Interests in shares and options
2,774,500 ordinary shares held in carsales.com Ltd.
No options or performance rights held over ordinary
shares in carsales.com Ltd.
Company secretary
Cameron McIntyre holds the role of Company Secretary
and is the Chief Financial Officer of carsales.com Ltd.
Cameron joined carsales in 2007 and has over 20 years
experience in finance and administration. Cameron
holds a Degree in Economics from La Trobe University
(Melbourne), he is a Certified Practicing Accountant and
a graduate of the Harvard Business School’s General
Management Program.
Interests in shares and options
206,649 ordinary shares held in carsales.com Ltd.
238,763 options and 52,260 performance rights held
over ordinary shares in carsales.com Ltd.
Meetings of directors
The numbers of meetings of the Company’s board of directors and of each board committee held during the year
ended 30 June 2014 and the numbers of meetings attended by each director were:
W Pisciotta (Board Chairman)
G Roebuck
R Collins (Chairman - Remuneration and Nomination)
I Law
J Browne
P O'Sullivan (Chairman - Audit and Risk management)
K Anderson
S Kloss (Alternate Director)
Full meetings
of directors
Meetings of committees
Audit and risk
Remuneration and
nomination
A
13
16
14
3
7
16
15
12
B
16
16
16
5
7
16
16
16
A
**
**
3
0
**
4
4
**
B
**
**
4
1
**
4
4
**
A
2
**
1
0
**
1
**
**
B
2
**
2
1
**
1
**
**
A = Number of meetings attended
B = Number of meetings held during the time the director held office or was a member of the committee during the year
** = Not a member of the relevant committee
Directors’ report
carsales.com Limited Annual Report - 30 June 2014 | 19
Remuneration report
The remuneration report is set out under the following main headings:
Principles used to determine the nature and amount of remuneration.
Details of remuneration.
Service agreements.
Share-based compensation.
Additional information.
The information provided in this remuneration report has been audited as required by section 308(3C) of the
Corporations Act 2001.
Principles used to determine the nature and amount of remuneration
The objective of the Group’s executive reward framework is to ensure reward for performance is competitive
and appropriate for the results delivered. The framework aligns executive reward with achievement of strategic
objectives, the creation of value for shareholders and conforms with market practice for delivery of reward.
The Board ensures that executive reward satisfies the following key criteria for good reward governance practices:
• Competitiveness and reasonableness.
• Acceptability to shareholders.
• Performance linkage / alignment of executive compensation.
• Transparency.
In consultation with external remuneration consultants, the Company has structured an executive remuneration
framework that is market competitive and complimentary to the reward strategy of the organisation.
Alignment to shareholders’ interests:
• Has economic profit as a core component of plan design.
• Focuses on sustained growth in shareholder wealth, consisting of dividends, growth in share price and
delivering constant return on assets as well as focusing the executive on key non-financial drivers of value.
• Attracts and retains high calibre executives.
Alignment to program participants’ interests:
• Rewards capability and experience.
• Reflects competitive reward for contribution to growth in shareholder wealth.
• Provides a clear structure for earning rewards.
• Provides recognition for contribution to operational performance.
The framework provides a mix of fixed and variable pay along with a blend of short-term and long-term
incentives. As executives gain seniority within the Group, the balance of this mix shifts to a higher proportion of
‘’at risk’’ rewards.
The Board has established a remuneration and nomination committee which provides advice on remuneration,
incentive policies and practices, as well as specific recommendations on remuneration packages and other terms
of employment for the Managing Director, other senior executives and non-executive directors.
Non-executive directors
Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of,
the Directors.
Directors’ fees
The current base remuneration was last approved by shareholders at the Annual General Meeting held on 26
October 2012.
Non-executive directors’ fees are determined within an aggregate directors’ fee pool limit, which is periodically
recommended for approval by shareholders. The maximum payable to be shared by all non-executive directors
currently stands at $900,000 per annum. The Directors determine how these are to be shared by the Directors.
The Board will from time to time invite a remuneration specialist to conduct a review and benchmarking of fees.
The annualised fees paid to the Board are comfortably below the $900,000 pool approved by shareholders.
20 | carsales.com Limited Annual Report - 30 June 2014
Directors’ report
The following fee table applies:
Chairman fee
Deputy Chairman fee
Base Director fee
Alternate Director fee
First Committee
Second Committee
$
157,162
115,000
102,497
51,250
10,250
13,666
Executive pay
In May 2013, the Board concluded a review of the carsales.com Short-term Incentive (“STI”) and Long-term
Incentive (“LTI”) programs. The review was conducted with the assistance of remuneration consultant Hay
Group. The objective of the Hay Group engagement was to critically evaluate the executive incentive program in
particular the LTI program to ensure that its structure:
• Supports the retention of KMPs
• Drives long-term Shareholder value creation
• Aligns broadly with the expectations of Shareholders, while at the same time not hindering the strategic
objectives of the Company.
As a result of this review the Board identified a number of enhancements to the Company’s current remuneration
framework outlined below including the introduction of a Deferred Short-term Incentive (“DSTI”) structure. The
objective of the DSTI is to more closely align executive remuneration to best practice, strengthen alignment to
long-term shareholder interests and support the longer term retention of key executives.
The executive pay and reward framework has five components:
• Base pay and benefits
• Short-term performance incentive
• Deferred Short-term Incentive
• Long-term Incentive
• Other remuneration such as superannuation.
Base pay and benefits
Structured as a total employment cost package which may be delivered as a combination of cash and prescribed
non-financial benefits at the executives’ discretion.
Executives are offered a competitive base pay that comprises the fixed component of pay and rewards. External
remuneration consultants are engaged from time to time provide analysis and advice to ensure base pay is set to
reflect the market for a comparable role. Base pay for executives is reviewed annually to ensure the executive’s
pay is competitive within the market. An executive’s pay is also reviewed on promotion.
There are no guaranteed base pay increases included in any executive’s contract.
Benefits
Executives receive salary continuance insurance cover that is also provided to all other carsales employees. The
policy is held with OnePath Life Ltd
Executives may structure their remuneration to include benefits such as car allowances.
Superannuation
Retirement benefits are provided via defined contributions to approved superannuation funds. Under current
legislation carsales permits superannuation choice for all employees. The Company default superannuation fund is
held with Asteron. Other retirement benefits may be provided directly by the Group if approved by shareholders.
Short-term Incentives (STI)
Short-term Incentives (STI) are paid to key executives in the form of an annual cash payment on the achievement
of objectives as described below.
The size of the STI opportunity available to each key executive is based on their accountabilities and impact of the
role on the organisation or business unit(s) that they lead.
Directors’ report
carsales.com Limited Annual Report - 30 June 2014 | 21
The Remuneration and Nomination Committee regularly considers appropriate targets and key performance
indicators (KPI’s) to link the STI plan and the level of payout if targets are met. This includes setting any maximum
payout under the STI plan, and minimum levels of performance to trigger payment of an STI. The Committee
may also make recommendations to the Board for discretionary STI payments in rare circumstances where an
executive performance warrants it.
The KPI’s linked to STI plans contain 3 major components and within each component are a series of objectives:
• Financial performance (50 - 75% of On-target Earnings Value): The financial objectives set against key
executives relate to performance against the Board approved annual budget. The targets set in this
component of the plan will normally relate to the achievement against:
(a)
(b)
(c)
Company Revenue
Company EBITDA
Business Revenue and EBITDA, where relevant.
This section of the plan also enables the executive to earn up to an additional 75% of on-target earnings for over
achievement against each of the above mentioned objectives.
Budgeted financial objectives are always set in the context of ensuring that the Company is mindful of expected
consensus earnings.
• Project delivery (15 - 50% of On-target Earnings Value): The project objectives set involve the execution of
pre-determined project targets that each key executive is responsible for the delivery of. Projects will include
the deployment of new products, large business initiatives or market objectives.
There is no ability for a key executive to earn more than the on-target KPI value in this section of the plan.
• People & culture (10 - 15% of On-target Earnings Value): carsales is a business that prides itself on having a
highly engaged and motivated workforce with a strong sense of values, culture and passion for what we do.
The people and culture section of the plan is designed to ensure that key management are incented to
nurture and build on these principles and values. Each key executive has performance objectives which
include:
(a) Development and maintenance of succession plans
(b) Salary and performance reviews being completed on a timely basis
(c) Staff retention rates
(d) Annual Employee Opinion Survey results performance
There is no ability for a key executive to earn more than the on-target KPI value in this section of the plan.
The Remuneration and Nomination Committee is responsible for assessing whether the KPI’s are met and whether
or not STI’s will be paid.
The STI payments may be adjusted up or down in line with under or over achievement against the target
performance levels. This is at the discretion of the Remuneration and Nomination Committee.
The review of STI targets and payments is conducted on an annual basis.
Key executives that leave during the financial year are paid a pro-rata share of their STI entitlements unless their
departure is under adverse conditions.
Deferred Short-term Incentive (DSTI)
Deferred Short-term Incentives (DSTI) are paid to key executives in the form of an annual award of performance
rights on the achievement of the objectives outlined below and are not exercisable for a further 12 months.
The size of the DSTI opportunity available to each executive, like the STI, is based on the accountabilities and
impact of the executives’ role in the organisation.
The vesting of a DSTI award is linked entirely to the achievement of an Earnings Per Share (EPS) objective that
is set each year by the Board. The EPS target value established takes into consideration both the annual budget
earnings objectives and market determined consensus earnings expectations.
Please see share-based compensation for further information.
22 | carsales.com Limited Annual Report - 30 June 2014
Directors’ report
Long-term Incentives (LTI)
Long-term Incentives are provided to certain employees via the carsales.com Ltd Employee Option Plan. See
share-based compensation for further information.
Group Performance
The graph below shows the Group’s profitability (Revenue and EBIT) over the past five years.
FY
2014
FY
2013
FY
2012
FY
2011
FY
2010
$135.1
$117.6
$235.6
$215.1
$184.2
$152.5
$97.9
$81.1
$123.1
$62.2
The EBIT excludes the share of gains and losses from associates.
$ Millions
Revenue
EBIT
The following table shows relationship between remuneration of key management personnel and carsales.com Ltd
performance:
2010
2011
2012
2013
2014
Profit for the year attributable to owners of carsales.com Ltd ($'000)
43,235
58,260
71,589
83,516
95,457
Basic earnings per share (cents)
18.6
25.0
30.6
35.5
40.2
Dividend payments ($'000)
33,408
41,346
51,035
75,086
72,009
Dividend payout ratio (%)
Increase/(decrease) in share price (%)
Total KMP incentives as percentage of profit for the year (%)
77.3
19.3
4.0
71.0
(1.3)
4.2
71.3
27.7
4.4
89.9
75.4
57.2
3.4
15.5
3.8
Directors’ report
carsales.com Limited Annual Report - 30 June 2014 | 23
Details of Remuneration
Amounts of remuneration
Details of the remuneration of directors, key management personnel of the Group (as defined in AASB 124 Related
Party Disclosures) and specified executives of carsales.com Ltd and the carsales.com Ltd Group are set out in
the following tables. The cash bonuses are dependent on the satisfaction of performance conditions as set out
in the section headed “Short-term Incentives” and “Deferred Short-term Incentives” above and payments against
performance caps are set out below. LTI’s are dependent on the satisfaction of EPS and employment conditions
as set out in the section headed “Share-based payments” later in the report. All other elements of remuneration
are not directly related to performance.
The key management personnel of the Group are the Directors of carsales.com Ltd (see pages 18 -19 above) and
those key executives that report directly to the Managing Director being:
• Cameron McIntyre
Chief Financial Officer, Company Secretary
• Damian Hardy
Dealer & Data Services Director
• Anthony Saines
Commercial Director
• Ajay Bhatia
Chief Information Officer
• Paul Barlow
Strategy Director
Key management personnel
Key management personnel have service agreements determining base salary, performance based cash bonuses
and participation in the Company Employee Option Plan. They have no fixed employment terms and no special
termination payment conditions. All agreements provide for dismissal due to gross misconduct. Remuneration is
reviewed annually by the Remuneration and Nomination Committee.
G Roebuck
Managing
Director
C McIntyre
Chief Financial
Officer
A Bhatia
Chief
Information
Officer
A Saines
Commercial
Director
P Barlow
Strategy
Director
D Hardy
Dealer &
Data Services
Director
Base Salary *
1,202,655
600,000
405,000
400,000
370,000
320,000
Participation in cash
bonus plans
Strategy Group
STI plan
Strategy Group
STI plan
Strategy Group
STI plan
Strategy Group
STI plan
Strategy Group
STI plan
Strategy Group
STI plan
Participation in DSTI plans
Performance
Rights
Performance
Rights
Performance
Rights
Performance
Rights
Performance
Rights
Performance
Rights
Participation in LTI plans
Performance
Rights and
Options
Performance
Rights and
Options
Performance
Rights and
Options
Performance
Rights and
Options
Performance
Rights and
Options
Performance
Rights and
Options
Termination notice period
6 month by
either party
6 month by
either party
6 month by
either party
6 month by
either party
6 month by
either party
6 month by
either party
Non-compete period
6 month by
either party
6 month by
either party
6 month by
either party
6 month by
either party
6 month by
either party
6 month by
either party
* Base Salary (including superannuation) as at 30 June 2014. Key management personnel received a salary increase on 1 July 2013.
24 | carsales.com Limited Annual Report - 30 June 2014
Directors’ report
Key management personnel of the Group
2014
Short-term employee benefits
Deferred
Short-
term
Incentive
Post-
employ-
ment
benefits
Long-
term
benefits
Share-based
payments
Non-executive directors
Wal Pisciotta
Richard Collins
Pat O'Sullivan
Ian Law
Kim Anderson
Jeffrey Browne
Steve Kloss (Alternate)
Cash
salary
and
fees
$
167,412
127,154
103,201
28,927
103,201
51,249
51,250
Sub-total
Non-executive directors
632,394
Executive director
Cash
bonus
$
Non
monetary
benefits
$
Perfor-
mance
rights
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Super-
annuation
$
-
11,762
9,546
2,676
9,546
-
-
33,530
Long
service
leave
$
Options
$
Perfor-
mance
rights
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$
167,412
138,916
112,747
31,603
112,747
51,249
51,250
665,924
Greg Roebuck
1,184,880
660,000
4,366
81,521
17,775
155,196
422,269
448,185
2,974,192
Other key management personnel and executives (Group)
Cameron McIntyre
582,225
210,325
Damian Hardy
Anthony Saines
Ajay Bhatia
Paul Barlow
302,225
75,208
382,225
193,775
387,225
157,881
352,225
103,844
-
-
-
-
-
67,934
35,597
37,500
37,364
17,775
17,775
17,775
17,775
20,303
173,047
203,321
1,274,930
8,429
85,361
99,292
623,887
13,413
106,979
122,214
873,881
13,470
83,481
98,249
795,445
22,418
17,775
11,381
56,376
64,956
628,975
Total key management
personnel compensation
(Group)
3,823,399
1,401,033
4,366
282,334
140,180
222,192
927,513
1,036,217
7,837,234
Directors’ report
carsales.com Limited Annual Report - 30 June 2014 | 25
Key management personnel of the Group
2013
Short-term employee benefits
Deferred
Short-
term
Incentive
Post-
employ-
ment
benefits
Long
term
benefits
Share-based
payments
Cash
bonus
$
Non
monetary
benefits
$
Perfor-
mance
rights
$
Non-executive directors
Wal Pisciotta
Richard Collins
Pat O'Sullivan
Ian Law
Kim Anderson
Steve Kloss (Alternate)
Cash
salary
and
fees
$
156,251
115,891
96,542
118,947
96,542
47,833
Sub-total
Non-executive directors
632,006
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Executive director
Greg Roebuck
951,208
550,000
39,783
Other key management personnel and executives (Group)
Cameron McIntyre
552,127
170,000
Damian Hardy
Anthony Saines
Ajay Bhatia
Paul Barlow
283,530
57,175
358,530
175,000
363,530
100,000
333,530
63,206
-
-
-
-
-
Total key management
personnel compensation
(Group)
3,474,461
1,115,381
39,783
Super-
annuation
$
-
10,430
8,689
10,705
8,689
-
38,513
Long
service
leave
$
Options
$
Perfor-
mance
rights
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$
156,251
126,321
105,231
129,652
105,231
47,833
670,519
16,470
28,719
402,603
272,938
2,261,721
16,470
22,913
205,108
129,804
1,096,422
16,470
16,470
16,470
3,937
7,332
7,143
127,555
64,358
553,025
141,436
81,126
779,894
122,961
60,733
670,837
16,470
6,287
88,505
42,509
550,507
137,333
76,331
1,088,168
651,468
6,582,925
-
-
-
-
-
-
-
-
-
-
-
-
-
-
STI & DSTI Payments (cash & performance rights) achievement against on-target earning.
G Roebuck
C McIntyre
D Hardy
A Saines
A Bhatia
P Barlow
Actual STI Payment
Actual DSTI Payment
$
% Paid
% Forfeited
$
% Paid
% Forfeited
660,000
210,325
75,208
193,775
157,881
103,844
118%
140%
125%
138%
211%
138%
0%
0%
0%
0%
0%
0%
81,521
67,934
35,597
37,500
37,364
22,418
68%
68%
68%
68%
68%
68%
32%
32%
32%
32%
32%
32%
26 | carsales.com Limited Annual Report - 30 June 2014
Directors’ report
STI & DSTI Payments (cash & performance rights) achievement against maximum entitlement
All Key Management Personnel and Executives received grants which were less than their maximum potential
STI & DSTI entitlements with the exception of Ajay Bhatia.
Mr Bhatia received the following:
Current Year Grant $
Name
Maximum Potential
STI & DSTI
STI - Cash
Component
DSTI - Performance
Rights
Total Grant of STI
& DSTI
Paid above
Maximum Potential
Ajay Bhatia
166,563
157,881
37,364
195,245
29,682
Mr Bhatia received an STI payment which was $46,282 above maximum potential which was awarded by the
Board as a result of Mr Bhatia’s outstanding performance in product development and innovation throughout
2014.
The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:
Fixed remuneration
At risk - STI
At risk - DSTI
At risk - LTI*
Directors of carsales.com Ltd
2014
%
2013
%
Wal Pisciotta
Greg Roebuck
Richard Collins
Pat O'Sullivan
Ian Law
Kim Anderson
Jeffrey Browne
Steve Kloss
100
46
100
100
100
100
100
100
100
46
100
100
100
100
-
100
Other key management personnel of the Group
Cameron McIntyre
Damian Hardy
Anthony Saines
Ajay Bhatia
Paul Barlow
49
52
48
52
60
53
55
49
58
65
2014
%
-
22
2013
%
-
24
-
-
-
-
-
-
16
12
22
20
17
-
-
-
-
-
-
16
10
22
15
11
2014
%
2013
%
-
3
-
-
-
-
-
-
5
6
4
5
4
-
-
-
-
-
-
-
-
-
-
-
-
-
2014
%
-
29
2013
%
-
30
-
-
-
-
-
-
30
30
26
23
19
-
-
-
-
-
-
31
35
29
27
24
* Since the Long-term Incentive and Deferred Short-term Incentive are provided exclusively by way of options and performance rights, the
percentages disclosed reflect the value of remuneration consisting of options and performance rights, based on the value expensed during
the year.
Service agreements
There are no service agreements between the Company and its non-executive directors. The Company’s
constitution requires that director’s remuneration be determined at Annual General Meetings. There are no
agreements to pay benefits to non-executive directors upon termination.
Remuneration and other terms of employment for the Managing Director and key management personnel are
formalised in service agreements. Unless otherwise stated each of these agreements provide for the provision of
base salary and in some circumstances the provision of other benefits such as commissions, cash bonuses, car
allowances and where eligible participation in the Company’s Employee Option Plan. None of the agreements
provide for any payment of benefits upon termination of employment, other than for accrued employee benefits
and statutory or contractual notice periods. Details of payments made under the agreements are shown earlier in
this note.
All executives have on-going terms of agreement with the Group. Agreements can be terminated on the basis of
performance, long-term illness or otherwise by agreement.
Directors’ report
carsales.com Limited Annual Report - 30 June 2014 | 27
Employee Share Trust
In July 2011 carsales.com Ltd established an Employee Share Trust (EST) to oversee the administration of all
current and future share option and performance rights plans. The Trustee of the EST is Computershare Plan
Manager Pty Ltd.
As well as streamlining administration of the plans, the structure enables the Trustee to buy carsales.com Ltd
shares on market, or issue new carsales shares for delivery to employees exercising vested share options or
performance rights. The establishment of the EST does not have any negative change to the rights of employees
in the various plans, or on shareholders.
Share-based compensation
Options and performance rights
Options and performance rights are granted under the carsales.com Ltd Employee Option Plan which was
established via a prospectus lodged with ASIC in 2000. The Board of Directors determines who shall be invited
to participate in the plan. Options and performance rights under this plan are issued for no cash consideration.
Options and performance rights are issued subject to vesting rules and expiry periods. Options and performance
rights vest on fixed dates provided that employment has not been terminated, and for senior executives, when
EPS targets have been achieved.
EPS targets relating to Senior Executive options and performance rights, together with the Company’s actual
achievements are as follows:
LTI
Minimum Entitlement
Maximum Entitlement
Actual Achieved
Grant
Year ending 30 June 2012
Year ending 30 June 2013
Vesting
Date
Aug-12
Aug-13
Aug-14
Aug-14
% payable
EPS target
% payable
EPS target
% payable
EPS
50%
50%
50%
50%
0.282
0.329
0.375
0.366
100%
100%
100%
100%
0.296
0.346
0.395
0.402
100%
100%
100%
100%
0.306
0.355
0.402
0.402
DSTI
Minimum Entitlement
Maximum Entitlement
Actual Achieved
Grant
Vesting
Date
% payable
EPS target
% payable
EPS target
% payable
EPS
Year ending 30 June 2014
Aug-14
50%
0.396
100%
0.416
68%
0.402
The exercise price of each option is fixed by the Board of Directors when the options and performance rights
are issued. Amounts received on the exercise of options are recognised as share capital. The performance rights
have a $0 exercise price and are converted to shares when all vesting conditions have been met. Options and
performance rights granted under the plan carry no dividend or voting rights.
Senior executives who leave the Company have 30 days from their date of departure to exercise any vested
options they may be holding unless such departure is under adverse conditions. In exceptional circumstances, and
at the Board’s discretion, senior executives may be allowed to exercise unvested options in future periods when
they vest.
28 | carsales.com Limited Annual Report - 30 June 2014
Directors’ report
Alignment of Managing Director and senior executive employees
Options and performance rights issued to the Managing Director contain the same terms, conditions and
performance targets as those issued to senior executive employees.
The Company has each year also used its Long-term Incentive plan to issue options and performance rights to
a select number of key staff members to support retention of talent. These awards are not linked to particular
performance targets and vest three years from the grant date.
The Deferred Short-term Incentive (DSTI) program is only available to the Managing Director and senior executive
employees.
Since listing on the ASX in September 2009 the Board has reviewed a number of different incentive structures
that align the terms and performance target methodologies with those of respected peers in our sector, as well
as the interests of shareholders in ensuring management are incented to deliver high performance outcomes over
the long-term.
The Company has selected EPS to be the most appropriate target on which to apply its Long-term Incentive and
Deferred Short-term Incentive programs. The rationale for this choice has historically been as a result of having
only a small pool of relevant peers, being other ASX listed online businesses, and the lack of liquidity in the stock
of both the Company until March 2011 and some appropriate peers. The Board continues to believe that EPS is the
most appropriate measure that best aligns the interest of shareholders with those of management.
The following award details are outlined for all unvested grants.
Deferred Short-term Incentive (DSTI)
The vesting of performance rights is subject to the achievement of a financial year ending 30 June 2014 earnings
per share target. The Board, in considering appropriate performance targets, believes EPS is the most effective
measure in ensuring alignment with the interests of shareholders.
The minimum and maximum EPS target for the performance rights to vest has been set by the Board. In
considering the appropriate EPS target, the Board has used the historical earnings performance of the Company,
forward looking market consensus earnings expectations and other internal forward looking plans as inputs for
determining the appropriate objective.
Performance Rights will not be capable of exercise if at the testing date the minimum targeted growth rate has
not been achieved.
11,343 performance rights were issued to the Managing Director on 25 October 2013, with an exercise price of
$0.00. These performance rights were approved by shareholders at the AGM held on 25 October 2013.
In addition, 42,357 performance rights were issued to senior executives on 25th October 2013, with an exercise
price of $0.00, and with the same conditions as those of the Managing Director.
Performance Rights will be capable of exercise if at the testing date the EPS target has been achieved or
exceeded as follows;
• If the EPS achieved is equal to the minimum target, 50% of the performance rights will be capable of exercise
• If the EPS achieved is between the minimum and maximum targets, vested performance rights will be capable
of exercise on a pro-rata basis between 50% and 100%.
• If the EPS achieved is equal to or exceeds the maximum target, 100% of the performance rights will be capable
of exercise.
The performance conditions applying to the Performance Rights will be tested at 30 June 2014.
Subject to the performance conditions being satisfied, performance rights may be exercised after the Board
releases the 2015 Annual Report to the ASX.
Directors’ report
carsales.com Limited Annual Report - 30 June 2014 | 29
FY2012 Award
(Issue dates 26 October 2011 Managing Director, March 2012 senior executive employees)
321,034* options and 87,720* performance rights were issued to the Managing Director on 26 October 2011, with
an exercise price of $4.69 for employee share options and $0.00 for performance rights. These options were
approved by shareholders at the AGM held on 26 October 2011.
*There was a decrease of 21,566 options and an increase of 3,811 performance rights due to a change in valuation.
In addition, 716,100 options and 175,385 performance rights were issued to senior executives on 26 October 2011,
with an exercise price of $4.69 for employee share options and $0.00 for performance rights, and with the same
conditions as those of the Managing Director.
Subject to the performance conditions being satisfied, options and performance rights may, unless otherwise
waived by the Board, be exercised as follows:
• 25% with a testing date 30 June 2012 (Year 1), exercisable after the Board releases the 2012 Annual Report to
the ASX.
• 25% with a testing date 30 June 2013 (Year 2), exercisable after the Board releases the 2013 Annual Report to
the ASX.
• 50% with a testing date 30 June 2014 (Year 3), exercisable after the Board releases the 2014 Annual Report to
the ASX.
Attributable options and performance rights which have not achieved the EPS target on the applicable testing
date:
• in Year 1, will be carried forward to the testing date for Year 2,
• in Year 2, will be carried forward in aggregate to the testing date for Year 3,
• in Year 3, will lapse.
Minimum and maximum EPS targets for the options and performance rights have been set for each of the 3 years
of the vesting period. The target for the third year, namely the period ending 30 June 2014, has been set at a
minimum aggregate growth rate over the three year period of 24.6% and a maximum aggregate growth rate over
the three year period of 29.9%.
Options and performance rights will be capable of exercise in tranches if, at the relevant testing date, the EPS
target for the relevant period has been achieved or exceeded as follows:
• If the EPS achieved is equal to the minimum target, 50% of the vested options and performance rights will be
capable of exercise.
• If the EPS achieved is equal to or exceeds the maximum target, 100% of the vested options and performance
rights will be capable of exercise.
• If the EPS achieved is between the minimum and maximum targets, vested options and performance rights will
be capable of exercise on a pro-rata basis between 50% and 100%.
216,005 options and 68,873 performance rights were issued to several other select employees on 25 March 2012.
The expiry date of this award is five years from the grant date.
30 | carsales.com Limited Annual Report - 30 June 2014
Directors’ report
FY2013 Award
(Issue date 26 October 2012 Managing Director, and senior executive employees)
198,603 options and 69,640 performance rights were issued to the Managing Director on 26 October 2012, with
an exercise price of $5.93 for employee share options and $0.00 for performance rights. These options were
approved by shareholders at the AGM held on 26 October 2012.
In addition, 346,406 options and 121,466 performance rights were issued to senior executives on 26 October 2012,
with an exercise price of $5.93 for employee share options and $0.00 for performance rights, and with the same
conditions as those of the Managing Director.
Subject to the performance conditions being satisfied, options and performance rights may, unless otherwise
waived by the Board, be exercised as follows:
• 40% with a testing date 30 June 2014 (Year 2), exercisable after the Board releases the 2014 Annual Report to
the ASX.
• 60% with a testing date 30 June 2015 (Year 3), exercisable after the Board releases the 2015 Annual Report to
the ASX.
Attributable options and performance rights which have not achieved the EPS target on the applicable testing
date:
• in Year 2, will be carried forward in aggregate to the testing date for Year 3,
• in Year 3, will lapse.
Minimum and maximum EPS targets for the options and performance rights have been set for each of the 2 years
of the vesting period. The target for the third year, namely the period ending 30 June 2015, has been set at a
minimum aggregate growth rate over the three year period of 15.2% and a maximum aggregate growth rate over
the three year period of 24.0%.
Options and performance rights will be capable of exercise in tranches if, at the relevant testing date, the EPS
target for the relevant period has been achieved or exceeded as follows:
• If the EPS achieved is equal to the minimum target, 50% of the vested options and performance rights will be
capable of exercise.
• If the EPS achieved is equal to or exceeds the maximum target, 100% of the vested options and performance
rights will be capable of exercise.
• If the EPS achieved is between the minimum and maximum targets, vested options and performance rights will
be capable of exercise on a pro-rata basis between 50% and 100%.
182,863 options and 66,117 performance rights were issued to several other select employees on the 26th October
2012.
The expiry date of this award is five years from the grant date.
Directors’ report
carsales.com Limited Annual Report - 30 June 2014 | 31
FY2014 Award
(Issue date 25 October 2013 Managing Director and senior executive employees)
134,213 options and 50,874 performance rights were issued to the Managing Director on 25 October 2013, with
an exercise price of $9.10 for employee share options and $0.00 for performance rights. These options were
approved by shareholders at the AGM held on 25 October 2013.
In addition, 168,404 options and 63,835 performance rights were issued to senior executives on 25th October
2013, with an exercise price of $9.10 for employee share options and $0.00 for performance rights, and with the
same conditions as those of the Managing Director.
The vesting of the options and performance rights issued are subject to the achievement of an EPS target with a
testing date of 30 June 2016 and are exercisable after the Board releases the 2016 Annual Report to the ASX.
The minimum and maximum EPS target for the Options and Performance Rights have been set by the Board. In
considering the appropriate EPS target, the Board has used the historical earnings performance of the Company,
forward looking market consensus earnings expectations and other internal forward looking plans as inputs for
determining the appropriate objective.
The minimum EPS target required for any of the awarded Options and Performance Rights to vest is a target
that will require the Company to achieve an EPS value that will reflect double digit compound annual growth rate
(“CAGR”) in EPS between the baseline year ending 30 June 2013 and the testing year ending 30 June 2016.
The Company will publish in the FY2016 Annual Report the minimum and maximum EPS target that was
applicable to the grant, along with the actual EPS achieved by the Company in that relevant year.
Options and performance rights will be capable of exercise, at the relevant testing date, the EPS target for the
relevant period has been achieved or exceeded as follows:
• If the EPS achieved is equal to the minimum target, 50% of the vested options and performance rights will be
capable of exercise.
• If the EPS achieved is equal to or exceeds the maximum target, 100% of the vested options and performance
rights will be capable of exercise.
• If the EPS achieved is between the minimum and maximum targets, vested options and performance rights will
be capable of exercise on a pro-rata basis between 50% and 100%.
105,456 options and 82,331 performance rights were issued to several other select employees on the 25th October
2013.
The expiry date of this award is five years from the grant date.
32 | carsales.com Limited Annual Report - 30 June 2014
Directors’ report
The terms and conditions of each grant of options and performance rights affecting remuneration in the current
or a future reporting period are as follows:
Grant date
Date
exercisable
Expiry date
Exercise
price
Value at
grant date
%
Vested
Performance
achieved
July 2007
July 2007
June 2009
June 2014
June 2009
September 2014
March 2010
October 2012
October 2014
October 2010
August 2011
October 2015
October 2010
August 2012
October 2015
October 2010
August 2013
October 2015
October 2011
October 2011
August 2012
October 2016
August 2013
October 2016
October 2011
August 2014
October 2016
October 2011
August 2013
October 2016
October 2011
August 2014
October 2016
$1.75
$1.75
$3.89
$4.90
$4.90
$4.90
$4.69
$4.69
$4.69
$0.00
$0.00
$0.55
$0.55
$2.01
$0.95
$1.16
$1.32
$0.96
$1.10
$1.19
$4.54
$4.36
October 2012
August 2014
October 2017
$5.93
$2.33
October 2012
August 2015
October 2017
$5.93
$2.43
October 2012
August 2014
October 2017
$0.00
$6.96
October 2012
August 2015
October 2017
$0.00
$6.73
October 2013
August 2016
October 2018
$9.10
$3.91
October 2013
August 2015
October 2018
$0.00
$10.58
October 2013
August 2016
October 2018
$0.00
$10.32
100
100
100
100
100
100
100
100
N/A
100
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
To be
determined
Yes
To be
determined
To be
determined
To be
determined
To be
determined
To be
determined
To be
determined
To be
determined
To be
determined
$0.00 exercise price represents performance rights.
When exercisable, each option is convertible into one ordinary share upon payment of the exercise price by the
option holder, provided that the option holder complies with the rules of the carsales.com Ltd Employee Option
Plan. Performance rights will automatically be converted to one ordinary share upon the vesting date provided the
holder complies with the rules of carsales.com Ltd Employee Option Plan.
Options and performance rights not exercised expire where (a) the expiry date applicable to the option or
performance right is reached, (b) 30 days post the employee ceasing to be employed by carsales.com Ltd or their
employment is terminated, (c) where EPS vesting conditions are not met, or (d) where there has been a special
circumstance, then within 90 days after that special circumstance has occurred or as specified by the Board.
Details of options and performance rights granted over ordinary shares in the Company provided as remuneration
to each director of carsales.com Ltd and each of the key management personnel of the Parent Entity and the
Group are set out below.
Further information on the options and performance rights is set out in note 31 to the financial statements.
Directors’ report
carsales.com Limited Annual Report - 30 June 2014 | 33
Executive director
G Roebuck
Other Key management personnel
and executives (Group)
C McIntyre
D Hardy
A Saines
A Bhatia
P Barlow
Number
of options
granted
during the
year 2014
Number of
performance
rights granted
during the
year 2014
$ Value of
options at
grant date
2014
$ Value of
performance
rights at grant
date 2014
Number of
options and
performance
rights vested
during the
year 2014
134,213
62,217
525,001
644,996
354,709
44,738
19,173
25,564
19,173
12,782
26,411
12,221
14,908
12,467
7,964
175,002
275,004
74,999
99,999
74,999
49,999
127,401
155,199
130,004
82,995
156,649
102,899
110,405
100,067
68,552
Shares provided on exercise of remuneration options and performance rights
Details of ordinary shares in the Company provided as a result of the exercise of options by each director of
carsales.com Ltd and other key management personnel of the Group are set out below.
Date of exercise
of options and
performance rights
Number of ordinary
shares issued on
exercise of options
and performance
rights during the year
Value at
exercise
date *
Directors of carsales.com Ltd
G Roebuck
August 2013
374,450
2,418,684
Other key management personnel and executives of the Group
C McIntyre
D Hardy
A Saines
A Bhatia
P Barlow
August 2013
August 2013
August 2013
August 2013
August 2013
156,649
170,914
110,405
100,067
229,370
1,001,936
1,110,128
700,956
617,721
1,561,236
* The value at the exercise date of options and performance rights that were granted as part of remuneration and were exercised during
the year has been determined as the intrinsic value of the options and performance rights at that date.
The amounts paid per ordinary share by each director and other key management personnel on the exercise of
options and performance rights at the date of exercise were as follows:
Exercise date
August 2013
August 2013
August 2013
August 2013
Amount paid per share
$3.89
$4.90
$4.69
$0.00
No amounts are unpaid on any shares issued on the exercise of option.
Additional information
Details of remuneration: Share-based compensation benefits
For each grant of options and performance rights, the percentage of the available grant that vested, in the
financial year, and the percentage that was forfeited because the person did not meet the service and
performance criteria is set out below. The vesting periods for options and performance rights are detailed above.
No options and performance rights will vest if the conditions are not satisfied, hence the minimum value of the
options and performance rights yet to vest is nil. The value of the options and performance rights yet to vest has
been determined as the amount of the grant date fair value of the options and performance rights that is yet to
be expensed.
34 | carsales.com Limited Annual Report - 30 June 2014
Directors’ report
G Roebuck
C McIntyre
D Hardy
A Saines
A Bhatia
P Barlow
Share-based compensation benefits (options and performance rights)
Financial year
granted
2011
2012
2012
2013
2013
2014
2014
2011
2012
2012
2013
2013
2014
2014
2011
2012
2012
2013
2013
2014
2014
2011
2012
2012
2013
2013
2014
2014
2011
2012
2012
2013
2013
2014
2014
2011
2012
2012
2013
2013
2014
2014
Vested
%
100
100
-
-
-
-
-
100
100
-
-
-
-
-
100
100
-
-
-
-
-
100
100
-
-
-
-
-
100
100
-
-
-
-
-
100
100
-
-
-
-
-
Forfeited
%
Financial years
in which grant
may vest
Minimum
total value
of grant
yet to vest
$
Maximum
total value
of grant
yet to vest
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2015*
2015*
2016*
2016*
2017*
2015*
2015*
2016*
2016*
2017*
2015*
2015*
2016*
2016*
2017*
2015*
2015*
2016*
2016*
2017*
2015*
2015*
2016*
2016*
2017*
2015*
2015*
2016*
2016*
2017*
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
22,205
34,546
234,706
76,364
802,939
-
-
11,457
14,546
98,824
63,640
267,648
-
-
5,642
7,272
49,412
33,345
114,706
-
-
7,160
9,090
61,764
35,129
152,938
-
-
5,070
7,272
49,412
35,001
114,706
-
-
3,752
4,764
32,364
20,998
76,469
* Vesting is contingent upon board approval. Options are exercisable after the Board release the results to ASX in August each year.
Directors’ report
carsales.com Limited Annual Report - 30 June 2014 | 35
The following tables show the number of:
(i) Option holdings and performance rights
The numbers of options and performance rights over ordinary shares in the Company held during the financial
year by each director of carsales.com Ltd and other key management personnel of the Company, including their
personally related parties, are set out below.
2014
Directors of carsales.com Ltd
W Pisciotta
R Collins
G Roebuck
P O'Sullivan
I Law
S Kloss (Alternate)
K Anderson
-
-
-
-
Other key management personnel of the Group
D Hardy
C McIntyre
A Saines
A Bhatia
P Barlow
(ii) Share holdings
280,049
376,523
247,826
203,855
301,379
Balance at
start of the
year
Granted as
compensation
(including
performance
rights)
Exercised
Balance at
end of the
year
Vested and
exercisable
Unvested
-
-
-
-
-
-
-
-
-
-
-
-
1,157,079
196,430
(374,450)
979,059
310,517
668,542
-
-
-
-
31,394
71,149
40,472
31,640
20,746
-
-
-
-
-
-
-
-
(170,914)
(156,649)
(110,405)
(100,067)
(229,370)
140,529
291,023
177,893
135,428
92,755
-
-
-
-
-
-
-
-
-
-
-
-
-
140,529
291,023
177,893
135,428
92,755
The numbers of shares in the Company held during the financial year by each director of carsales.com Ltd and
other key management personnel of the Group, including their personally related parties, are set out below. There
were no shares granted during the reporting period as compensation.
2014
Directors of carsales.com Ltd
Ordinary shares
W Pisciotta
R Collins
G Roebuck
S Kloss (Alternate)
K Anderson
P O'Sullivan
Other key management personnel of the Group
Ordinary Shares
D Hardy
C McIntyre
A Saines
A Bhatia
P Barlow
Balance at the
start of the year
Received
during the year
on the exercise
of options
Other changes
during the year
Balance at end
of the year
(101,593)
14,770,700
14,872,293
991,750
5,432,891
2,774,500
10,000
5,376
383,737
217,000
8,604
3,000
3,461
-
-
-
374,450
(768,836)
-
-
-
170,914
156,649
110,405
100,067
229,370
-
-
-
(148,078)
(150,000)
(103,525)
(99,996)
(200,376)
991,750
5,038,505
2,774,500
10,000
5,376
406,573
223,649
15,484
3,071
32,455
36 | carsales.com Limited Annual Report - 30 June 2014
Directors’ report
Loans to key management personnel
During the ordinary course of business Mr G Roebuck will routinely owe money to, or be owed money by, the
Company for expense reimbursement. As at 30 June 2014 Mr Roebuck owed the Company $22,512.39. This amount
has been paid in full.
Other transactions with key management personnel
(i) Directors of carsales.com Ltd
W Pisciotta is a director and shareholder of Pentana, which entered into a relationship agreement with carsales.
com Ltd in 2010 for the supply of data and services. Under the contract, Pentana supplies data for the exclusive
use of carsales.com Ltd in return for a fixed annual payment, plus a percentage of revenues generated through
Pentana Solutions. The term of the contract is 5 years from March 2010.
R Collins is a shareholder of automotive dealerships which utilised the Group’s services under terms and conditions
no more favourable than dealing with other customers at arm’s length in the same circumstances.
Shares under option and performance rights
Unissued ordinary shares of carsales.com Ltd under option at the date of this report are as follows:
Date options granted
Expiry date
Issue price
of shares
Number under
options
Number under
performance rights
Jul-2007
Mar-2010
Oct-2010
Mar-2011
Oct-2011
Oct-2011
Mar-2012
Mar-2012
Oct-2012
Oct-2012
Oct-2012
Oct-2012
Oct-2013
Oct-2013
Oct-2013
Oct-2013
Sep-2014
Oct-2014
Oct-2015
Oct-2015
Oct-2016
Aug-2014
Mar-2017
Mar-2015
Oct-2017
Aug-2014
Aug-2015
Oct-2015
Oct-2018
Aug-2015
Aug-2016
Oct-2016
$1.75
$3.89
$4.90
$4.90
$4.69
$0.00
$4.69
$0.00
$5.93
$0.00
$0.00
$0.00
$9.10
$0.00
$0.00
5,000
30,625
175,000
100,000
659,387
164,283
710,338
406,156
133,735
52,379
74,888
116,219
59,805
53,700
114,709
39,247
No option or performance rights holder has any right under the options or performance rights to participate in
any other share issue of the Company. No options or performance rights have been issued post 30 June 2014.
2,250,839
644,682
Directors’ report
carsales.com Limited Annual Report - 30 June 2014 | 37
Shares issued on the exercise of options and performance rights
The following ordinary shares of carsales.com Ltd were issued during the year ended 30 June 2014 on the exercise
of options granted under the carsales.com Ltd Employee Option Plan. No amounts are unpaid on any of the shares.
Date options and performance rights exercised
Issue price
of shares
Number of
shares issued
Jul-2013
Jul-2013
Aug-2013
Aug-2013
Aug-2013
Aug-2013
Aug-2013
Aug-2013
Sep-2013
Sep-2013
Oct-2013
Nov-2013
Dec-2013
May-2014
May-2014
$2.00
$3.89
$0.00
$1.75
$2.00
$3.89
$4.69
$4.90
$3.89
$2.00
$4.90
$4.90
$4.90
$4.90
$4.90
10,000
10,000
67,819
2,000
5,000
109,375
222,960
892,347
7,500
5,000
165,000
85,000
10,000
30,000
25,000
1,647,001
Insurance of officers
During the financial year, carsales.com Ltd paid a D&O insurance premium of $43,859 to insure the Directors,
Officers and Company Secretary of the Group.
The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be
brought against the officers in their capacity as officers of entities in the Group, and any other payments arising
from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities
that arise from conduct involving a willful breach of duty by the officers or the improper use by the officers of
their position or of information to gain advantage for themselves or someone else or to cause detriment to the
Company. It is not possible to apportion the premium between amounts relating to the insurance against legal
costs and those relating to other liabilities.
Prospectus Liability Insurance covers losses (such as damages and defence costs) in respect of claims (such as
proceedings) against both the Company and its directors and officers, in respect of statements and information in
the prospectus and related presentations. Prospectus Liability Insurance Policies are placed for a period of up to 7
years.
Indemnification of directors and officers
All current directors and officers are indemnified under a deed of indemnity, insurance and access.
Non-audit services
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where
the auditor’s expertise and experience with the Company are important.
Details of the amounts paid or payable to the auditor (PwC) for audit and non-audit services provided during the
year are set out below.
The Board of Directors has considered the position and, in accordance with advice received from the Audit
and Risk Management Committee, is satisfied that the provision of the non-audit services is compatible with
the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are
satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor
independence requirements of the Corporations Act 2001 for the following reasons:
• all non-audit services have been reviewed by the Audit and Risk Committee to ensure they do not impact the
impartiality and objectivity of the auditor.
38 | carsales.com Limited Annual Report - 30 June 2014
Directors’ report
• none of the services undermine the general principles relating to auditor independence as set out in APES 110
Code of Ethics for Professional Accountants.
During the year the following fees were paid or payable for non-audit services provided by the auditor of the
parent entity, its related practices and non-related audit firms:
Other assurance services
PwC Australian firm
Due diligence services
Controls assurance services
Due diligence fees paid to PricewaterhouseCoopers network firms
Total remuneration for other assurance services
Taxation services
PwC Australian firm
Tax compliance services
Tax consulting and tax advice on acquisitions
Total remuneration for taxation services
Consolidated
2014
$
2013
$
165,543
-
91,755
257,298
64,439
61,880
126,319
289,000
15,000
-
304,000
48,000
61,000
109,000
Total remuneration for non-audit services
383,617
413,000
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is
set out on page 40.
Rounding of amounts
The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments
Commission, relating to the ‘rounding off’ of amounts in the Director’s Report. Amounts in the Director’s Report
have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to
the nearest dollar.
Auditor
PwC continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors.
Wal Pisciotta
Chairman
Greg Roebuck
Managing Director and CEO
Sydney, 13 August 2014
Directors’ report
carsales.com Limited Annual Report - 30 June 2014 | 39
40 | carsales.com Limited Annual Report - 30 June 2014
There’s no doubt the new car marketplace continues to evolve and rest assured that carsales is at the forefront of addressing the needs of the consumer, the dealers and the car companies.““Greg Roebuck Corporate Governance
Statement
Corporate Governance Statement
Introduction
The Board of the Company is responsible for the governance of the Company and its controlled entities
(the Group).
The Board is committed to achieving and demonstrating the highest standards of corporate governance
and ensuring that good corporate governance is a fundamental part of the culture and business practice
of the Group. The Board also continually reviews the governance framework and practices of the
Company to ensure that they meet the interests of all stakeholders.
A description of the Group’s main corporate governance practices are set out below.
All of these practices, unless otherwise stated, were in place for the entire year. They comply with the ASX
Corporate Governance Principles and Recommendations (including 2010 Amendments), unless otherwise stated.
1. Principle: Laying Solid Foundations for management and oversight
1.1 The Board of Directors
The Board has adopted a formal charter that details the functions and responsibilities of the Board.
A copy of the Board Charter is available in the shareholder centre of the Company website at
www.carsales.com.au.
1.2 The Board’s responsibilities include:
setting strategies, directions and monitoring and reviewing of these strategic objectives;
reviewing and ratifying internal controls, codes of conduct and legal compliance;
reviewing the Company’s accounts;
• protecting and enhancing the value of the assets of the Company;
•
•
•
• approval and review of the operating budget and strategic plan for the Company;
• evaluating performance and determining the remuneration of the Managing Director and senior executives;
• ensuring the significant risks facing the Company have been identified and adequate control monitoring and
reporting mechanisms are in place;
• approval of transactions relating to acquisitions, divestments and capital expenditure above delegated
authority limits;
• approval of financial and dividend policy; and
• appointment of the Managing Director.
1.3 Matters specifically reserved for the Board
The Board has reserved for itself the following matters, which are in addition to any matters expressly required by
law or other regulation to be approved by the Directors:
•
setting the corporate objective of the Company and approving business strategies and plans of the Company
designed to meet that objective;
• approving changes to the Company’s capital structure and dividend policy;
• approval of the Annual Budget;
• appointing and removing the Managing Director and carrying out succession planning for the Managing Director
as applicable;
reviewing the performance of the Managing Director, his/her remuneration and contractual arrangements;
•
• appointing and removing senior executives on the recommendation of the Managing Director;
•
Managing Director
•
reviewing the performance and remuneration of senior executives on the review and recommendation of the
reviewing the composition of the Board and Board Committees, the independence of Directors, the Board’s
performance and carrying out succession planning for the Chairman and other Non-Executive Directors;
reviewing the performance of management and the Company, including in relation to the corporate governance,
risk management, internal controls and compliance frameworks, systems, policies and processes adopted by the
•
Company;
• dealing with any matters in excess of any specific delegations that the Board may from time to time delegate to
the Managing Director and senior executives; and
• approving the communication to shareholders and to the public of the half-year and full-year results and generally
any public statements which reflect issues of the Company’s policy or strategy that the Board deems material.
carsales.com Limited Annual Report - 30 June 2014 | 43
1.4 Board committees
The Board has established the following Board Committees to assist it in the discharge of its responsibilities:
• Audit and Risk Management Committee; and
• Remuneration and Nomination Committee.
Each Board Committee operates under a formal charter that is made publicly available in the shareholder centre
of the Company website at www.carsales.com.au.
An outline of the responsibilities of the Audit and Risk Management Committee is also contained within Section
4.1 of this Statement.
An outline of the responsibilities of the Remuneration and Nomination Committee is also contained within Section
8.1 of this Statement.
1.5 Relationship between directors and management
Subject to the Company’s Constitution and matters specifically reserved for the Directors, the Directors delegate
responsibility for day-to-day management of the Company to the Managing Director. The Non-Executive Directors
do not participate in the day to day affairs or management of the Company.
1.6 Role of the Managing Director
The Managing Director has responsibility for the day-to-day management of the Company, providing leadership
and managing and overseeing the interfaces between the Company and the public and to act as the principal
representative for the Company.
The Managing Director periodically reviews management development and will report to the Board on the
outcome of these reviews on an as required basis.
1.7 Senior executive performance
The performance of the Managing Director and his direct reports are evaluated annually. The Company has
documented a ‘Process for evaluation of performance’ policy which is made publicly available in the shareholder
centre of the Company website at www.carsales.com.au.
All direct reports of the Managing Director are evaluated by the Managing Director and the performance
evaluation of the Managing Director is facilitated by the Chairman, with ultimate oversight by the Board.
The evaluation of the Managing Director involves an assessment of a range of factors including the overall
performance of the Company and the achievement of specific pre-determined goals.
During the reporting period, a performance evaluation for senior executives (including the Managing Director) has
taken place in accordance with this process.
2. Principle: Structuring the Board to add value
2.1 Board size:
The Company’s Constitution includes provisions for the number of directors, casual vacancies and additional
directors, appointment and removal of directors by General Meeting and retirement of directors.
The Company’s Constitution specifically provides that the Company is to have not less than three, nor more than
12 directors.
44 | carsales.com Limited Annual Report - 30 June 2014
2.2 Board composition
The current members of the Board and their skills, experience, expertise, qualifications, term of office,
relationships affecting independence, their independent status and membership of committees are set out in the
Directors’ Report under the heading ‘’Information on Directors’’.
At the date of this report, the Board consists of 6 directors (a majority of which are independent directors),
comprising:
• 4 independent non-executive directors,
• 1 non-independent non-executive director, (the Chairman); and
• 1 executive director being the Managing Director
The Board comprises the following directors:
Mr G Roebuck (Managing Director)
Mr W Pisciotta (Non-Independent Non-Executive Chairman)
Mr I law (Independent Non-Executive Director - retired 30 September 2013)
Mr P O’Sullivan (Independent Non-Executive Director)
Mr R Collins (Independent Non-Executive Director)
Ms K Anderson (Independent Non-Executive Director)
Mr J Browne (Independent Non-Executive Director - appointed 16 December 2013)
Mr S Kloss (Alternate Non-Executive Director)
2.3 Term of office
The Company’s Constitution specifies that all non-executive directors must retire from office no later than the
third annual general meeting (AGM) following their last election. Where eligible, a director may stand for re-
election.
2.4 Remuneration and Nomination Committee
The Company’s Remuneration and Nomination Committee is responsible for assisting the Board in developing
criteria for Board membership, identifying specific individuals for nomination and establishing processes for the
review of the performance of individual directors and the Board as a whole.
A copy of the Remuneration and Nomination Committee Charter is made publicly available in shareholder centre
of the Company website at www.carsales.com.au.
The Remuneration and Nomination Committee consists of the following directors:
Mr R Collins - Committee Chairman (Independent)
Mr W Pisciotta
Mr I Law (Independent - retired 30 September 2013)
Mr J Browne (Independent - appointed 27 February 2014
Mr Pat O’Sullivan (Independent - appointed 24 October 2013, resigned 27 February 2014).
Details of these directors’ attendance at Remuneration and Nomination Committee meetings are set out in the
Directors’ Report on page 19.
The Remuneration and Nomination Committee consists of a majority of independent directors, is chaired by an
independent chair and has at least 3 members.
Additional detail relating to role and responsibilities of the Remuneration and Nomination Committee is contained
within Section 8.1 of this statement.
carsales.com Limited Annual Report - 30 June 2014 | 45
2.5 Appointment & re-election of board members
The Company has developed a ‘Procedure for the selection and appointment of directors’ which is made publicly
available in the shareholder centre of the Company website at www.carsales.com.au.
In addition to the specific skills, knowledge and experience deemed necessary for a suitable candidate,
consideration is given to:
•
the extent to which the candidate is likely to contribute to the overall effectiveness of the Board and work
constructively with the existing directors;
•
the integrity of the candidate;
• whether the candidate would be prepared to question, challenge and offer critiques;
• whether the candidate had a proven track record of creating value for shareholders;
• a commitment by the candidate to the highest standards of governance;
•
the nature of existing positions held by the appointee including directorships or other relationships and the
impact that each may have on the appointee’s ability to exercise an independent judgment; and
• whether the candidate will bring an independent point of view to the Board’s decision making process.
The composition of the Board is to be reviewed annually by the Board and the Chairman is to assess the Board’s
effectiveness.
2.6 Independence of directors
All directors, whether independent or not, are required to act in the best interests of the Company and to exercise
unfettered and independent judgment.
The independence of each of the non-executive directors is reviewed, at least annually.
In assessing the independence of directors, the Board has regard to the provisions of the ASX Corporate
Governance Council, ‘Corporate Governance Principles and Recommendations’ (2nd ed).
The Company defines an independent director as a non-executive director (i.e. not a member of management)
who is free of any business or other relationship that could materially interfere with or could reasonably be
perceived to materially interfere with the exercise of his or her unfettered and independent judgment and ability
to act in the best interests of the Company.
When assessing the independent status of a director, the Board will consider whether the Director:
•
is a substantial shareholder of the Company or an officer of, or otherwise associated directly with, a substantial
shareholder of the Company;
is employed, or has previously been employed in an executive capacity by the Company or another group
•
member, and there has not been a period of at least three years between ceasing such employment and serving
on the Board;
• has within the last three years been a principal of a material professional adviser or a material consultant to the
Company or another group member, or an employee materially associated with the service provided;
•
is a material supplier or customer of the Company or other group member, or an officer of or otherwise
associated directly or indirectly with a material supplier or customer; and
• has a material contractual relationship with the Company or another group member other than as a director.
In assessing each director’s independence the Board will consider the effect of a director’s business and other
relationships and interests from the perspective of both the Company and the Director.
The Board may determine that a director is independent notwithstanding the existence of a relationship of the
kind referred to above. It is considered that all non-executive directors are independent except Mr Wal Pisciotta
for the reasons set out below.
Mr Wal Pisciotta, the Chairman, has been a director of the Company since inception and is a substantial
shareholder of the Company. Accordingly, he is not considered to be an independent director. However, given Mr
Pisciotta’s substantial experience in the car industry of over 41 years the Company believes that it is valuable to
have a Chairman with such depth of experience and skill. Given the specialist nature of the Company’s activities,
an independent chairman is not regarded as necessary.
With regard to other non-executive directors, any real or potential conflicts of interest are dealt with by
procedures consistent with Corporations Act requirements which are designed to ensure that conflicted
directors do not take part in the decision-making process on relevant issues. On this basis, it is believed that their
independence on all other issues is not compromised.
46 | carsales.com Limited Annual Report - 30 June 2014
2.7 Role of the Chairman
The roles of the Chairman and Managing Director are separate and the Chairman is a non-executive director.
The role of the Chairman are set out in the Board Charter and include being responsible for managing the Board
effectively, providing leadership to the Board and being the interface with the Managing Director.
The Chairman has the authority to act and speak for the Board and liaise with the Company’s stakeholders
between meetings, subject to any agreed consultation processes.
The Board has appointed the role of Deputy Chairman & Lead Independent Director. The role of the Deputy
Chairman & Lead Independent Director is to act as the Chair of the Board in the absence of the Chairman.
In instances where the Chairman may be conflicted the Deputy Chairman & Lead Independent Director will be
responsible for taking a leadership role in those matters. In addition, this role will co-ordinate any assessment of
the performance of the Chairman with other non-executive directors.
2.8 Director conduct
When exercising their powers and responsibilities as directors, and when acting as a representative of the
Company, directors are expected to comply with all relevant laws and regulations and abide by the Company’s
Code of Conduct.
A copy of the Company’s ‘Code of Conduct’ is made publicly available in the shareholder centre of the Company
website at www.carsales.com.au.
2.9 Conflict and declaration of interests
Directors are required to take all reasonable steps to avoid actual, potential or perceived conflicts of interests.
The Corporations Act 2001 and the Company’s Constitution require directors to disclose any conflicts of interest
and, in certain circumstances, to abstain from participating in any discussion or voting on matters in which they
have a material personal interest.
It is expected that directors will be sensitive to actual and perceived conflicts of interest that may arise and it is
something to which they are expected to give ongoing consideration in view of the dynamic and rapidly changing
nature of the Company’s business.
The Board has developed procedures to be followed:
• by a director who believes he or she may have a conflict of interest or material personal interest;
for the holding of or the continuation of a meeting where it is proposed that a meeting will discuss any matter
•
which gives rise or may give rise to a conflict or a real sensible possibility of a conflict of interest; and
•
for the monitoring and reporting of a director’s interest to ensure that the Company complies with the obligations
pursuant to the Corporations Act 2001 and the ASX Listing Rules.
Entities connected with the Directors that had material business dealings with the Group during the year, are
described in note 25 to the financial statements. In accordance with the Board Charter, the Directors concerned
declared their interests in those dealings to the Company and took no part in decisions relating to them or the
preceding discussions. In addition, those directors did not receive any papers from the Company pertaining to
those dealings.
2.10 Induction and training
The appointment of any new director will be made by, and in accordance with, a formal letter of appointment
which details the key terms and conditions relative to that appointment.
All new directors appointed undertake an induction program, coordinated by the Company Secretary, to assist
them in fulfilling their duties and responsibilities. The induction program will ensure that any new director is
appropriately introduced to the Company, its operations and personnel and are acquainted with the industry
within which the Company operates.
2.11 Board meetings
The number of Board and Board Committee meetings held during the year along with the attendance by directors
is set on page 19 of this report.
Meetings and proceedings of the Board are governed by the relevant provisions of the Company’s Constitution.
carsales.com Limited Annual Report - 30 June 2014 | 47
2.12 Performance of the Board, its committees and individual directors
The Company has developed a ‘Process for evaluation of performance’ of the Board, Board Committees, individual
directors and senior executives. This process is documented and made publicly available in the shareholder centre
of the Company website at www.carsales.com.au.
The process involves an annual assessment of the performance of the Board, and senior executives and, for the
Board, includes an assessment as to the extent to which the Board achieved its stated objectives. In relation to the
performance of committees and individual directors, regular dialogue and feedback takes place during the year
between the Chairman and directors. An assessment has been undertaken within the last 12 months.
2.13 Access to independent professional advice
The Board and each Board Committee has authority to retain, at the Company’s expense, such legal, accounting
or other advisers, consultants or experts as it considers necessary from time to time in the performance of its
duties.
An individual director may engage separate independent counsel or advisors, at the expense of the Company, in
appropriate circumstances, with the approval of the Chairman or by resolution of the Board.
3. Principle: Promote ethical and responsible decision making
The Company, including its directors and senior executives, are committed to maintaining the highest standards of
integrity and seek to ensure all its activities are undertaken with efficiency, honesty and fairness.
The Company also maintains a high level of transparency regarding its actions consistent with the need to
maintain the confidentiality of commercial-in-confidence material and, where appropriate, to protect the
shareholders’ interests.
3.1 Restrictions on dealing in securities
The Company has developed a ‘Securities Trading Policy’ relating to trading in the Company’s securities by
directors, officers and certain other employees of the Group.
This policy is documented and made publicly available in the shareholder centre of the Company website at
www.carsales.com.au.
3.2 Code of conduct
The Company has developed a ‘Code of Conduct’ Policy (Code) which has been fully endorsed by the Board and
applies to all directors and employees. The Code is designed to ensure that it reflects the highest standards of
behaviour and professionalism and the practices necessary to maintain confidence in the Group’s integrity and to
take into account legal obligations and reasonable expectations of the Company’s stakeholders.
In summary, the Code requires that at all times all company personnel act with the utmost integrity, objectivity
and in compliance with the letter and the spirit of the law and company policies.
The Code is documented and made publicly available in the shareholder centre of the Company website at
www.carsales.com.au.
3.3 Approach to diversity
The Company has established a ‘Diversity Policy which is publicly available in the shareholder centre of the
Company website at www.carsales.com.au.
The policy includes requirements for the Board to establish measurable objectives for achieving gender diversity
and for the Board to assess annually both the objectives and progress in achieving them. These objectives and
progress towards achieving them are outlined below:
48 | carsales.com Limited Annual Report - 30 June 2014
Diversity policy
Objectives
Initiatives
Outcomes
Continue to grow the
number of women
performing senior
roles from external
appointments
Continue to implement
career development
programs to prepare
women within the
carsales business
to take on more senior
roles
Create an environment
that women network
and mentor each other
to progress their careers
within carsales
Implement workplace
flexibility programs to
create a workplace that
women can meet both
family and
work responsibilities
Educating managers
on the importance of a
diverse workforce.
In FY14, 64% of our senior leadership appointments
have been women.
Mentoring program,
Living Leadership
training and development
programs
The Company’s mentoring program currently
consists of 53% women. Of our leadership and
management programs, 33% of attendees were
women and 50% of FY14 promotions within the
business have been female.
Women in Leadership
Program
This program has membership of 21 females in
leadership positions from across the business. The
Group has again grown this year which reflects
the higher % of senior leadership appointments
being women. Meetings have involved attending
external leadership events and speakers, including
a member of the carsales board.
Paid parental leave, part
time, flexible re-entry into
the business from the
period of parental leave
In FY14, 8 members of the team took maternity
leave and we are currently supporting 11 women
with flexible working arrangements.
On 3 June 2014, as per the Workplace Gender Equality Act 2012, we submitted our report with the Workplace
Gender Equality Agency. This report provided information on our policies and gender diversity numbers across
the business. This report is available on the Company shareholder website at www.carsales.com.au
carsales.com Limited Annual Report - 30 June 2014 | 49
4. Principle: Safeguard integrity in financial reporting
4.1 Audit and Risk Management Committee
The Audit and Risk Management Committee consists of the following non-executive directors:
Mr I Law - Committee Chairman (Independent - retired 30 September 2013)
Mr R Collins (Independent)
Mr P O’Sullivan - Committee Chairman (Independent)
Ms K Anderson (Independent)
Details of these directors’ qualifications, the number of meetings of the Audit and Risk Management Committee
held and director’s attendance at these meetings are detailed in the Directors’ report on page 19.
The Audit and Risk Management Committee operates in accordance with a charter which is publicly available in
the shareholder centre of the Company website at www.carsales.com.au.
The responsibilities of the Committee include:
• external reporting;
• external audit;
•
•
internal control and risk management; and
related party transactions.
In fulfilling its responsibilities, the Audit and Risk Management Committee:
•
•
receives regular reports from management and the external auditors;
reviews the processes the Managing Director and Chief Financial Officer have in place to support
their certifications to the Board;
reviews any significant disagreements between the Auditors and management, irrespective of
•
whether they have been resolved;
• meets separately with the external auditors at least twice a year without the presence of
management; and
• provides external auditors with a clear line of direct communication at any time to either the Chair of
the Audit and Risk Management Committee or the Chair of the Board.
The Audit and Risk Management Committee has authority, within the scope of its responsibilities, to seek any
information it requires from any employee or external party.
4.2 Written affirmations
The Board has received from the Managing Director and the Chief Financial Officer written affirmations
concerning the Company’s financial statements as set out in the Directors’ Declaration on page 99.
4.3 External audit
The Company appoints external auditors who clearly demonstrate quality and independence.
The Company has a process to ensure the independence and competence of the Company’s external auditor
including the Audit and Risk Management Committee reviewing any non-audit work to ensure that it does not
conflict with audit independence.
Information on procedures for the selection and appointment of the external auditor and for the rotation of
external audit engagement partners are detailed in the Committee’s Charter which is publicly available in the
shareholder centre of the Company website at www.carsales.com.au.
The performance of the external auditor is reviewed as required taking into consideration assessment of
performance, existing value and tender costs.
An analysis of fees paid to the external auditors, including a break-down of fees for non-audit services, is
disclosed in note 23 to the financial statements. It is the policy of the external auditors to provide an annual
declaration of their independence to the Audit and Risk Management Committee.
The external auditor will attend the Annual General Meeting and be available to answer shareholder questions
about the conduct of the audit and the preparation and content of the Audit Report.
50 | carsales.com Limited Annual Report - 30 June 2014
5 Principle: Making timely and balanced disclosures
5.1 Continuous disclosure
The Company has established a policy that contains the key obligations of directors and employees of
the Company in relation to continuous disclosure to help ensure compliance with its ASX Listing Rule and
Corporations Act 2001 obligations and also to ensure accountability at a senior executive level for that
compliance.
As an ASX Listed entity, the Company has an obligation under the ASX Listing Rules to maintain an informed
market in its securities. Accordingly, the Company ensures that the market is advised of all information required
to be disclosed under the Listing Rules and the Corporations Act 2001 which the Company believes would or may
have a material effect on the price or value of the Company’s securities.
The policy is documented and made publicly available in the shareholder centre of the Company website at www.
carsales.com.au.
6. Principle: Respect the rights of shareholders
6.1 Communicating with shareholders
The Company has developed a ‘Shareholder Communication Policy’ which is publicly available in the shareholder
centre of the Company website at www.carsales.com.au.
The Company is committed to ensuring that shareholders, regulators and the wider investment community are
informed of all major developments affecting the Company in a timely and effective manner.
Information is communicated in a number of ways including:
• annual and half-yearly reports;
• market disclosures in accordance with the continuous disclosure protocol;
• updates on operations and developments;
• announcements on the Company’s website;
• market briefings; and
• presentation at general meetings.
Shareholders are encouraged to attend and participate at the Annual General Meeting and the full text of notices
and accompanying materials will be included on the Company’s website.
The shareholder centre of the Company website www.carsales.com.au currently carries the following information
for the shareholders:
• all market announcements and related information which is posted immediately after release to the ASX;
• details relating to the Company’s directors and senior executives; and
• board and board committee charters and other corporate governance documents.
7. Principle: Recognising and managing risk
7.1 Risk management
The Company’s Board Charter provides that it is the responsibility of the Board to ‘ensure that the significant risks
facing the Company have been identified and that adequate control monitoring and reporting mechanisms are in
place’.
The Company’s Audit and Risk Management Charter also provides that the role of the Committee is to assist the
Board in carrying out its accounting, auditing, financial reporting and risk management responsibilities.
Both the ‘Board Charter’ and the ‘Audit and Risk Management Charter’ are publicly available in the shareholder
centre on the Company website at www.carsales.com.au.
The Company has also developed a ‘Risk Management Policy’ which is publicly available in the shareholder centre
of the Company website at www.carsales.com.au.
carsales.com Limited Annual Report - 30 June 2014 | 51
The Company seeks to take and manage risk in ways that will generate and protect shareholder value and
recognises that the management of risk is a continual process and an integral part of the management and
corporate governance of the business.
The Company acknowledges that it has an obligation to all stakeholders, including shareholders, customers,
employees, contractors and the wider community and that the efficient and effective management of risk is
critical to the Company meeting these obligations and achieving its strategic objectives.
7.2 Written Affirmations
The Board has received from the Managing Director and the Chief Financial Officer written affirmation that, to
the best of their knowledge and belief, the integrity of the financial statements is founded on a sound system of
risk management and internal compliance and control which implements the policies adopted by the Board and
that the Company’s risk management and internal compliance and control system is operating efficiently and
effectively in all material respects insofar as they relate to financial reporting risks.
Management has reported to the Board as to the effectiveness of the Company’s management of its material
business risks.
8. Principle: Remunerate fairly and responsibly
8.1 Remuneration and Nomination Committee
The Remuneration and Nomination Committee’s purpose, duties, membership and structure are documented in
the ‘Remuneration and Nomination Charter’ which is publicly available in the shareholder centre of the Company
website at www.carsales.com.au. The Company has also developed a ‘Remuneration Policy’ for the Company
which details how the Company remunerates its non-executive directors and senior executives. This policy is also
publicly available in the shareholder centre of the Company website at www.carsales.com.au.
The Company’s Remuneration Policy contains a prohibition on directors and senior executives from entering into
transactions or arrangement which limits the economic risk of participating in unvested entitlements.
The Remuneration and Nomination Committee consists of the following Directors:
Mr R Collins - Committee Chairman (Independent)
Mr W Pisciotta
Mr I Law (Independent - retired 30 September 2013)
Mr J Browne (Independent - appointed 27 February 2014)
Mr P O’Sullivan (Independent - appointed 24 October 2013, resigned 27 February 2014)
Details of these directors’ attendance at Remuneration and Nomination Committee meetings are set out in the
Directors’ Report on page 19.
The Remuneration and Nomination Committee consists of a majority of independent directors, is chaired by an
independent chairman and has at least 3 members.
The Remuneration and Nomination Committee reviews and makes recommendations to the Board on
remuneration, recruitment, retention and termination policies and procedures applicable to senior executives and
directors. In addition the Committee will facilitate an efficient mechanism for examination of the selection and
appointment practices of the Company.
When a new director is to be appointed, the Remuneration and Nomination Committee reviews the range of
skills, experience and expertise on the Board, identifies its needs and prepares a short-list of candidates with
appropriate skills and experience. Where necessary, advice is sought from independent search consultants.
The Board then appoints the most suitable candidate who must stand for election at the next Annual General
Meeting of the Company.
52 | carsales.com Limited Annual Report - 30 June 2014
The specific matters the Committee may consider include a review of:
• senior executives and directors’ remuneration and incentives, including the link between company and
individual performance;
• current industry best practice;
• different methods for remunerating senior executives and directors;
• existing or proposed share option schemes or other incentive schemes;
• superannuation arrangements;
•
retirement, termination benefits and payments for senior executives;
• professional indemnity and liability insurance policies;
• considering the appropriate size and composition of the Board;
• consider and implement a plan for identifying, assessing and enhancing director competencies;
• developing a process for evaluation of the performance of the Board, its committees and directors;
•
reviewing the skills, experience and expertise represented on the Board and determining whether those
skills meet the required skills identified;
•
recommending changes to the membership of the Board;
• making recommendations to the Board on candidates it considers appropriate for appointment;
•
•
reviewing the retiring non-executive director’s performance and making recommendations to the Board as
to whether the Board should support the nomination of a retiring non-executive director; and
reviewing the Company’s succession planning to maintain an appropriate balance of skills, experience and
expertise on the Board.
8.2 Remuneration arrangements
8.2.1 Board and non-executive directors
The remuneration policy for the Board and the remuneration of each director is set out in the Remuneration
Report which forms part of the Directors’ Report.
8.2.2 Senior executives
Information on the performance evaluation and structure of remuneration for the Company’s senior executives
can be found in the Remuneration Report, which forms part of the Directors’ Report.
carsales.com Limited Annual Report - 30 June 2014 | 53
Financial Report
Contents
Financial statements
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors’ declaration
Independent auditor’s report to the members
Page
56
57
58
59
60
99
100
This financial report covers the financial statement of the consolidated entity consisting of carsales.com Ltd,
its subsidiaries, investments in associates and a joint venture. The financial report is presented in the Australian
currency.
carsales.com Ltd is a company limited by shares, incorporated and domiciled in Australia. Its registered office
and principal place of business is:
carsales.com Ltd
Level 4, 449 Punt Road
Richmond Vic 3121
A description of the nature of the consolidated entity’s operations and its principal activities is included in the
Chairman’s letter to shareholders on page 7, the Managing Director’s review of operations on page 9, and in the
Directors’ Report on page 13-39, each of which are not part of this financial report.
The financial report was authorised for issue by the directors on 13 August 2014. The directors have the power
to amend and reissue the financial report.
Through the use of the internet, we have ensured that our corporate reporting is timely and complete. All press
releases, financial reports and other information are available at our shareholder’s centre on our website:
www.carsales.com.au
For queries in relation to our reporting please call +61 (3) 9093 8600.
carsales.com Limited Annual Report - 30 June 2014 | 55
Consolidated statement of comprehensive income
For the year ended 30 June 2014
Notes
2014
$’000
2013
$’000
Revenue from continuing operations
Sale of goods and services
Other revenue from ordinary activities
Revenue from continuing operations
Other Income
Expenses
Sales and marketing expenses
Operations and administration
Service development and maintenance
Other expenses
Finance costs
Share of net profit/(loss) from associates
accounted for using the equity method
Profit before income tax
Income tax expense
Profit from continuing operations
Other comprehensive income
Items that may be reclassified to profit or loss:
5
6
7
7
8
Exchange differences on translation of foreign operations
21(a)
235,602
474
236,076
1
215,118
1,343
216,461
5
(61,860)
(57,791)
(18,151)
(17,182)
(3,309)
(3,388)
3,434
135,621
(39,349)
96,272
(20,689)
(16,516)
(2,553)
(5)
(232)
118,680
(35,164)
83,516
(1,047)
95,225
85
83,601
Total comprehensive income for the year
Profit is attributable to:
Owners of carsales.com Ltd
Non-controlling interests
Total comprehensive income for the year is attributable to:
Owners of carsales.com Ltd
Non-controlling interests
Earnings per share based on profit from continuing operations,
attributable to the ordinary equity holders of the parent entity:
Basic earnings per share
Diluted earnings per share
95,457
83,516
27(b)
815
-
96,272
83,516
27(b)
94,410
815
95,225
83,601
-
83,601
Cents
Cents
30
30
40.2
40.0
35.5
35.2
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
56 | carsales.com Limited Annual Report - 30 June 2014
Consolidated statement of financial position
As at 30 June 2014
ASSETS
Current assets
Cash and cash equivalents
Receivables
Total current assets
Non-current assets
Notes
2014
$’000
2013
$’000
9
10
26,042
35,384
61,426
15,140
31,262
46,402
Investments accounted for using the equity method
27(c)
240,426
104,187
Property, plant and equipment
Intangible assets
Deferred tax assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Payables
Borrowings
Current tax liabilities
Provisions
Deferred revenue
Total current liabilities
Non-current liabilities
Provisions
Borrowings
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained earnings
Non-controlling interests
Total equity
11
13
12
15
14
16
17
18
19
20
21(a)
21(b)
27(b)
4,402
92,269
5,916
343,013
404,439
22,740
9,842
9,349
3,818
5,535
51,284
938
164,841
165,779
217,063
187,376
77,603
17,695
90,946
1,132
187,376
4,732
81,192
6,638
196,749
243,151
19,220
54,525
7,544
3,334
5,297
89,920
721
-
721
90,641
152,510
70,104
14,908
67,498
-
152,510
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
carsales.com Limited Annual Report - 30 June 2014 | 57
Consolidated statement of changes in equity
For the year ended 30 June 2014
Attributable to owners of carsales.com Ltd
Contributed
equity
$’000
Reserves
$’000
Retained
earnings
$’000
61,749
7,568
59,068
Balance at 1 July 2012
Profit for the year
Exchange differences on translation of foreign
operations
Total comprehensive income for the year
-
-
-
Transactions with owners in their capacity as owners:
Contributions of equity upon exercise of employee
share options
8,355
Dividends paid
Increase in share-based payment reserve inclusive
of tax
-
-
-
85
85
-
-
83,516
-
83,516
-
(75,086)
7,255
-
Balance at 30 June 2013
70,104
14,908
67,498
Profit for the year
Exchange differences on translation of foreign
operations
Total comprehensive income for the year
-
-
-
-
95,457
(1,047)
-
(1,047)
95,457
Transactions with owners in their capacity as owners:
Contributions of equity upon exercise of employee
share options
7,499
Non-controlling interests on acquisition of
subsidiaries
Dividends paid
Increase in share-based payment reserve inclusive
of tax
-
-
-
-
-
-
-
-
(72,009)
3,834
-
Non-Con-
trolling
Interest
$’000
-
-
-
-
-
-
-
-
815
-
815
-
317
-
-
Total
equity
$’000
128,385
83,516
85
83,601
8,355
(75,086)
7,255
152,510
96,272
(1,047)
95,225
7,499
317
(72,009)
3,834
Balance at 30 June 2014
77,603
17,695
90,946
1,132
187,376
The above Consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
58 | carsales.com Limited Annual Report - 30 June 2014
Consolidated statement of cash flows
For the year ended 30 June 2014
Notes
2014
$’000
Cash flows from operating activities
Receipts from customers (incl GST)
Payments to suppliers and employees (incl GST)
Interest received
Interest paid
Income taxes paid
Net cash inflow from operating activities
29
254,341
(118,734)
474
(3,065)
(34,323)
98,693
2013
$’000
234,760
(112,452)
1,343
(5)
(34,510)
89,136
Cash flows from investing activities
Investment in subsidiaries
Investment in associates
Payments for property, plant and equipment
Payments for domain names
Net outstanding receipts
Payments for computer software
Proceeds from disposal of other assets
Payment for investment in Joint Venture
Dividends received from associates
(8,400)
-
(133,897)
(104,169)
(948)
(529)
-
(331)
1
-
665
(944)
(13)
2,427
(264)
13
(250)
-
Net cash (outflow) from investing activities
(143,439)
(103,200)
Cash flows from financing activities
Proceeds from issues of shares and other equity securities
Proceeds from borrowings
Repayment of borrowings
Dividends paid to company shareholders
Net cash inflow/(outflow) from financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at end of year
7,499
183,500
(63,342)
(72,009)
55,648
10,902
15,140
26,042
22
9
8,355
55,000
-
(75,086)
(11,731)
(25,795)
40,935
15,140
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
carsales.com Limited Annual Report - 30 June 2014 | 59
Contents of the notes to the consolidated financial statements
Notes
Page
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
Summary of significant accounting policies
Financial risk management
Critical accounting estimates and judgements
Segment information
Revenue
Other income
Expenses
Income tax expense
Current assets - Cash and cash equivalents
Current assets - Receivables
Non-current assets - Property, plant and equipment
Non-current assets - Deferred tax assets
Non-current assets - Intangible assets
Current liabilities - Borrowings
Current liabilities - Payables
Current liabilities - Provisions
Deferred revenue
Non-current liabilities - Provisions
Non-current liabilities - Borrowings
Contributed equity
Reserves and retained earnings
Dividends
Remuneration of auditors
Commitments
Related party transactions
Business combination
Interests in other entities
Events occurring after the reporting period
Reconciliation of profit after income tax to net cash inflow from operating activities
Earnings per share
Share-based payments
Parent entity financial information
61
68
71
71
74
74
74
74
75
75
77
78
79
80
80
81
81
81
81
81
84
85
86
87
87
88
90
93
93
94
95
97
60 | carsales.com Limited Annual Report - 30 June 2014
Notes to the consolidated financial statements
1. Summary of significant accounting policies
The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below.
These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements
are for the consolidated entity consisting of carsales.com Ltd and its subsidiaries.
(a) Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards,
other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations
and the Corporations Act 2001. carsales.com Ltd is a for-profit entity for the purpose of preparing the financial
statements.
(i) Compliance with International Financial Reporting Standards
The financial report of carsales.com Ltd complies with International Financial Reporting Standards (IFRS) as issued by
the International Accounting Standards Board (IASB).
(ii) Historical cost convention
These financial statements have been prepared under the historical cost convention.
(iii) Critical accounting estimates
The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates.
It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The
areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to
the financial statements, are disclosed in note 3.
(iv) Financial statement presentation
The accounting policies adopted are consistent with those of the previous financial year.
(v) Going concern
The financial statements have been prepared on a going concern basis..
(b) Principles of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of carsales.com Ltd
(‘’company’’ or ‘’parent entity’’) as at 30 June 2014 and the results of all subsidiaries for the year then ended. carsales.
com Ltd and its subsidiaries together are referred to in this financial report as the Group or the Consolidated Entity.
Subsidiaries are all those entities over which the Group has the power to govern the financial and operating policies,
generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential
voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls
another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated
from the date that control ceases.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Company
(refer to note 1(h)).
Intercompany transactions, balances and unrealised gains on transactions between companies are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted
by the Company.
Investments in subsidiaries are accounted for at cost in the individual financial statements of carsales.com Ltd.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income
statement, statement of comprehensive income, statement of changes in equity and balance sheet respectively
(ii) Associates
Associates are all entities over which the Group has significant influence but not control or joint control, generally
accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted
for using the equity method of accounting, after initially being recognised at cost. The Group’s investment in associates
includes goodwill identified on acquisition. Acquisition related costs of associates are capitalised.
The Group’s share of its associates’ post-acquisition profits or losses is recognised in profit or loss, and its share of post-
acquisition other comprehensive income is recognised in other comprehensive income. The cumulative post-acquisition
movements are adjusted against the carrying amount of the investment. Dividends receivable from associates are
recognised as reduction in the carrying amount of the investment.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other
unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made
payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s
interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment
of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency
with the policies adopted by the Group.
Notes to the consolidated financial statements
carsales.com Limited Annual Report - 30 June 2014 | 61
(iii) Joint ventures
The interest in a joint venture partnership is accounted for using the equity method after initially being recognised at
cost. Under the equity method, the share of the profits or losses of the partnership is recognised in profit or loss, and the
share of post-acquisition movements in in other comprehensive income is recognised in other comprehensive income.
(iv) Employee Share Trust
The Group has formed a trust to administer the Group’s employee share scheme. This trust is consolidated, as the
substance of the relationship is that the trust is controlled by the Group.
(c) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision maker. The chief operating decision maker has been identified as the Managing Director.
(d) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are
presented in Australian dollars, which is carsales.com Ltd’s functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the
dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and
from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in the consolidated statement of comprehensive income.
(iii) Group companies
The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy)
that have a functional currency different from the presentation currency are translated into the presentation currency as
follows:
• Assets and liabilities for each consolidated statement of financial position presented are translated at the closing
rate at the date of that balance sheet.
• Income and expenses for each consolidated statement of comprehensive income are translated at average
exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the
transaction dates, in which case income and expenses are translated at the dates of the transactions).
• All resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of
borrowings are taken to other comprehensive income. When a foreign operation is sold or any borrowings forming part
of the net investment are repaid, a proportionate share of such exchange differences are recognised in the consolidated
statement of comprehensive income, as part of the gain or loss on sale where applicable.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of
the foreign operation and translated at the closing rate.
(e) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net
of returns, trade allowances and amounts collected on behalf of third parties. Where services have not been provided
but the Company is obligated to provide the services in the future, revenue recognition is deferred. Where the Group has
utilised the services of a sales agency to sell advertising services on behalf of the Group, the sale is recorded at a value
net of sales commissions paid to the sales agency.
Revenue is recognised for the major business activities as follows:
(i) Advertising services
A sale is recorded when a customer’s advertisement has been displayed or when a referral has been generated leading to
an enforceable claim by the Group.
(ii) Data and other services
A sale is recorded when data and other services have been provided to a customer leading to an enforceable claim by
the Group.
(iii) Interest income
Interest income is recognised on a time proportionate basis using the effective interest method. When a receivable
is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow
discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest
income. Interest income on impaired loans is recognised using the original effective interest rate.
(iv) Dividends
Dividends are recognised as revenue when the right to receive payment is established.
(v) R&D Tax Rebate
The R&D 10% taxable rebate is recognised as other income.
62 | carsales.com Limited Annual Report - 30 June 2014
Notes to the consolidated financial statements
(f) Income tax
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the
applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to
temporary differences and to unused tax losses.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred
income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a
business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred
income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance
sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax
liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and
tax bases of investments in foreign operations where the Company is able to control the timing of the reversal of the
temporary differences and it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and
liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities
are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise
the asset and settle the liability simultaneously.
Tax consolidation legislation
carsales.com Ltd and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation.
The head entity, carsales.com Ltd, and the controlled entities in the tax consolidated group account for their own current
and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to
be a standalone taxpayer in its own right.
In addition to its own current and deferred tax amounts, carsales.com Ltd also recognises the current tax liabilities (or
assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled
entities in the tax consolidated group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts
receivable from or payable to other entities in the Company.
(g) Leases
Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are
classified as finance leases. Finance leases are capitalised at the lease’s inception at the fair value of the leased property
or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance
charges, are included in other short-term and long-term payables. Each lease payment is allocated between the liability
and finance cost. The finance cost is charged to the profit or loss over the lease period so as to produce a constant
periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment
acquired under finance leases is depreciated over the asset’s useful life or over the shorter of the asset’s useful life and
the lease term if there is no reasonable certainty that the Group will obtain ownership at the end of the lease term.
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Company as lessee
are classified as operating leases (note 24). Payments made under operating leases (net of any incentives received from
the lessor) are charged to the profit or loss on a straight-line basis over the period of the lease.
(h) Business combinations
The acquisition method of accounting is used to account for all business combinations, including business combinations
involving entities or businesses under common control, regardless of whether equity instruments or other assets
are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets
transferred, the liabilities incurred and the equity interests issued by the Company. The consideration transferred
also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity
interest in the subsidiary. Contingent payments classified as debt are subsequently remeasured through profit or loss.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited
exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the
Company recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s
proportionate share of the acquiree’s net identifiable assets.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the
acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the Company’s share of the
net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable
assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised
directly in profit or loss as a discount on purchase. If the Company recognises previously acquired deferred tax assets
after the initial acquisition accounting is completed these will be recorded directly in profit or loss.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their
present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate
at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
Notes to the consolidated financial statements
carsales.com Limited Annual Report - 30 June 2014 | 63
(i) Impairment of assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually
for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other
assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may
not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For
the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating
units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the
impairment at each reporting date.
(j) Cash and cash equivalents
For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call
with financial institutions, other short-term, highly liquid investments with original maturities of three months or less
that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value,
and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the consolidated statement of
financial position.
(k) Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for
impairment. Trade receivables are due for settlement generally within 30 days following the provision of advertising or
data services.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written
off by reducing the carrying amount directly. An allowance account (provision for impairment of trade receivables) is
used when there is objective evidence that the Group will not be able to collect all amounts due according to the original
terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or
financial reorganisation and default or delinquency in payments (more than 30 days overdue) are considered indicators
that the trade receivable is impaired. The amount of the impairment allowance is the difference between the asset’s
carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.
Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial.
The amount of the impairment loss is recognised in the consolidated statement of comprehensive income within
the ‘operations and administration’ expense. When a trade receivable for which an impairment allowance had been
recognised becomes uncollectable in a subsequent period, it is written off against the allowance account. Subsequent
recoveries of amounts previously written off are credited against other expenses in the consolidated statement of
comprehensive income.
(l) Investments and other financial assets
The Group classifies its investments in the following categories: financial assets at fair value, loans and receivables and
held-to-maturity investments. The classification depends on the purpose for which the investments were acquired.
Management determines the classification of its investments at initial recognition and re-evaluates this designation at
each reporting date.
(i) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in
an active market. They are included in current assets, except for those with maturities greater than 12 months after
the reporting date which are classified as non-current assets. Loans and receivables are included in trade and other
receivables (note 10) and receivables in the consolidated statement of financial position. Refer to note 1(k) for details of
the impairment policy for trade receivables.
(m) Property, plant and equipment
Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is
directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only
when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item
can be measured reliably. All other repairs and maintenance are charged to the profit or loss during the financial period in
which they are incurred.
Depreciation on assets is calculated using the straight line method to allocate their cost, net of their residual values, over
their estimated useful lives, as follows:
• Vehicles
• Furniture, fittings and equipment
• Computer hardware & peripherals
3 - 5 years
3 - 8 years
3 - 4 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is
greater than its estimated recoverable amount (note 1(i)).
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the
consolidated statement of comprehensive income.
64 | carsales.com Limited Annual Report - 30 June 2014
Notes to the consolidated financial statements
(n) Intangible assets
(i) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable
assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in
intangible assets. Goodwill is not amortised. Instead, goodwill is tested for impairment annually, or more frequently if
events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment
losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. Each of those cash-generating units
represents the Group’s investment in each primary operating segment (note 4).
(ii) IT development: Software, domain names and database
Costs incurred in developing products or systems and costs incurred in acquiring software and licenses that will
contribute to future period financial benefits through revenue generation and/or cost reduction are capitalised to
software and systems. Redbook database costs capitalised to date include direct payroll and payroll related costs
of employees’ time spent on developing the database. These intangible assets have finite lives and are subject to
amortisation on a straight line basis. The useful lives for these assets are as follows:
• Software
• Domain Names
• Database
4 years
5 years
10 years
(iii) Research and development
Research expenditure is recognised as an expense as incurred. Costs incurred on development projects (relating to the
design and testing of new or improved services) are recognised as intangible assets when it is probable that the project
will, after considering its commercial and technical feasibility, be completed and generate future economic benefits and
its costs can be measured reliably. The expenditure capitalised comprises all directly attributable costs, including costs
of materials, services, direct labour and an appropriate proportion of overheads. Other development expenditures that
do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an
expense are not recognised as an asset in a subsequent period. Capitalised development costs are recorded as intangible
asset and amortised from the point of which the asset is ready for use on a straight line basis over its useful life, which
varies from 3 to 5 years.
(o) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which
are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.
(p) Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured
at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is
recognised in the profit or loss over the period of the borrowings using the effective interest method. Fees paid on
the establishment of loan facilities, which are not incremental costs relating to the actual draw-down of the facility, are
recognised net against the loan and amortised on a straight-line basis over the term of the facility.
Borrowings are removed from the consolidated statement of financial position when the obligation specified in the
contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has
been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred
or liabilities assumed, is recognised in other income or other expenses.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the
liability for at least 12 months after the balance sheet date.
(q) Borrowing costs
Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is
required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed.
(r) Employee benefits
(i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to
be settled within 12 months after the end of the period in which the employees render the related service are recognised
in respect of employees’ service up to the end of the reporting period and are measured at the amount expected to
be paid when the liabilities are settled. The liability for annual leave and accumulating sick leave is recognised in the
provision for employee benefits. All other short-term employee benefit obligations are presented as payables.
(ii) Other long-term employee benefit obligations
The liability for long service leave and annual leave which is not expected to be settled within 12 months after the end of
the period in which the employees render the related services is recognised in the provision for employee benefits and
measured as the present value of expected future payments to be made in respect of services provided by employees
up to the end of the reporting period using the projected unit credit method. Consideration is given to expected
future wage and salary levels, experience of employee departures and period of service. Expected future payments are
discounted using market yields at the end of the reporting period on national government bonds with terms to maturity
and currency that match, as closely as possible, the estimated future cash outflows.
Notes to the consolidated financial statements
carsales.com Limited Annual Report - 30 June 2014 | 65
(iii) Retirement benefit obligations
All employees of the Group are entitled to benefits on retirement, disability or death from the Group’s superannuation
plan. The Group has a defined contribution plan. The defined contribution plan receives fixed contributions from Group
companies and the Group’s legal or constructive obligation is limited to these contributions. The employees of the parent
entity are all members of the defined contribution section of the Group’s plan.
Past service costs are recognised immediately in profit or loss, unless the changes to the superannuation fund are
conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the
past service costs are amortised on a straight-line basis over the vesting period.
(iv) Share-based payments
Share-based compensation benefits are provided to employees via the carsales.com Ltd Option Plan. Information relating
to these schemes is set out in note 31.
The fair value of options granted under the carsales.com Ltd Option Plan is recognised as an employee benefit expense
with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during
which the employees become unconditionally entitled to the options or performance rights.
The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into
account the exercise price, the term of the option or performance right, the vesting and performance criteria, the impact
of dilution, the non-tradeable nature of the option or performance right, the share price at grant date and expected price
volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option or
performance right.
(v) Bonus plans
The Group recognises a liability and an expense for bonuses and profit-sharing based on a formula that takes into
consideration the profit attributable to the Company’s shareholders after certain adjustments. The Company recognises
a provision where contractually obliged or where there is a past practice that has created a constructive obligation.
(s) Contributed equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares, options or performance rights are shown in equity as a
deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options or
performance rights for the acquisition of a business are not included in the cost of the acquisition as part of the purchase
consideration.
Shares bought back by the Company that have not been cancelled at the balance sheet date are presented within the
treasury share reserve as a deduction from equity. When the shares are cancelled the value of the shares are transferred
to the share capital reserve.
(t) Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the
discretion of the entity, on or before the end of the financial year but not distributed at balance date.
(u) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
•
the profit attributable to equity holders of the Company, excluding any costs of servicing equity other than
ordinary shares
• by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus
elements in ordinary shares issued during the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
•
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares,
and
the weighted average number of additional ordinary shares that would have been outstanding assuming the
•
conversion of all dilutive potential ordinary shares.
(v) Rounding of amounts
The Company is of a kind referred to in Class order 98/100, issued by the Australian Securities and Investments
Commission, relating to the ‘’rounding off’’ of amounts in the financial report. Amounts in the financial report have been
rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar.
(w) New accounting standards and interpretations
Certain new accounting standards and interpretations have been published that are mandatory for 30 June 2014
reporting periods and have been adopted by the Group. The Group’s assessment of the impact of these new standards
and interpretations is set out below.
66 | carsales.com Limited Annual Report - 30 June 2014
Notes to the consolidated financial statements
The Group has applied the following standards in their year-end reporting commencing 1 July 2013:
• AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests in
Other Entities, revised AASB 127 Separate Financial Statements and AASB 128 Investments in Associates and Joint
Ventures and AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and
Joint Arrangements Standards (effective 1 January 2013).
• AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising from
AASB 13 (effective 1 January 2013). AASB 13 was released in September 2011. It explains how to measure fair value
and aims to enhance fair value disclosures. The Group does not use fair value measurements extensively. The net
fair value of cash and cash equivalents and non-interest bearing monetary financial assets and non-interest bearing
financial liabilities of the consolidated entity approximates their carrying amounts. There are no off balance sheet
financial instruments in place. The fair value of current borrowings approximates the carrying amount, as the
impact of discounting is not significant.
• AASB 2012-5 Amendments to Australian Accounting Standard arising from Annual Improvements - 2009-2011
Cycle (effective 1 January 2013).
• AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel
Disclosure Requirements (effective 1 July 2013).
In July 2011 the AASB decided to remove the individual key management personnel (KMP) disclosure requirements
from AASB 124 Related Party Disclosures, to achieve consistency with the international equivalent standard and
remove a duplication of the requirements with the Corporations Act 2001. While this will reduce the disclosures
that are currently required in the notes to the financial statements, it will not affect any of the amounts recognised
in the financial statements. The amendments apply from 1 July 2013 and cannot be adopted early:
• AASB 9 Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB
9 and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010)
(effective for annual reporting periods beginning on or after 1 January 2013).
AASB 9 Financial Instruments addresses the classification, measurement and de-recognition of financial assets and
financial liabilities. The standard is not applicable until 1 January 2015 but is available for early adoption.
• AASB 2012-2 Amendments to Australian Accounting Standard - Disclosures - Offsetting Financial Assets and
Financial Liabilities (effective 1 January 2013).
No material impact in the financial statements as a result of the adoption of the above standards.
The following standards are applicable and the Group will adopt the standards upon the operative date. The Group is
assessing the impact of these standards however they are not expected to have a significant impact:
• Annual Improvements to IFRSs 2010-2012 Cycle and Annual Improvements to IFRSs 2011-2013 Cycle
(effective 1 July 2014).
• Defined Benefit Plans: Employee Contributions - Amendments to IAS 19 (effective 1 January 2014).
• AASB 2012-3 Amendments to Australian Accounting Standard - Offsetting Financial Assets and Financial Liabilities
(effective 1 January 2014).
• AASB 2013-3 Amendments to AASB 136 - Recoverable Amount Disclosures for Non-Financial Assets
(effective 1 January 2014).
• AASB 2013-5 Amendments to Australian Accounting Standards - Investment Entities (effective 1 January 2014).
The following standards are not applicable to carsales.com Ltd and therefore there is no impact on the Group:
• Revised AASB 119 Employee Benefits, AASB 2011-10 Amendments to Australian Accounting Standards arising from
AASB 119 (September 2011) and AASB 2011-11 Amendments to AASB 119 (September 2011) arising from Reduced
Disclosure Requirements (effective 1 January 2013).
• AASB 1053 Application of Tiers of Australian Accounting Standards and AASB 2010-2 Amendments to Australian
Accounting Standards arising from Reduced Disclosure Requirements (effective 1 July 2013).
• AASB 2010-9 Amendments to Australian Accounting Standards - Severe Hyperinflation and Removal of Fixed
Dates for First-time Adopters [AASB 1] and AASB 2010-10 Further Amendments to Australian Accounting
Standards - Removal of Fixed Dates for First-time (effective 1 January 2011/1 January 2013). Adopters [AASB 2009-
11 & AASB 2010-7].
• AASB 2011-5 Amendments to Australian Accounting Standards - Extending Relief from Consolidation, the Equity
Method and Proportionate Consolidation and AASB 2011-6 Amendments to Australian Accounting Standards -
Extending Relief from Consolidation, the Equity Method and Proportionate Consolidation - Reduced Disclosure
Requirements (effective 1 July 2013).
• AASB Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine and AASB 2011-12 Amendments
to Australian Accounting Standards arising from Interpretation 20 (effective 1 January 2013).
• AASB 2012-1 Amendments to Australian Accounting Standards - Fair Value Measurement - Reduced Disclosure
Requirements [AASB 3, AASB 7, AASB 13, AASB 140 & AASB 141] (effective 1 July 2013).
• AASB Interpretation 21 Levies (effective 1 January 2014).
• AASB 2013-4 Amendments to Australian Accounting Standards - Novation of Derivatives and Continuation of
Hedge Accounting - [AASB 139] (effective 1 January 2014).
• Hedge Accounting and Amendments to IFRS 9, IFRS 7 and IAS 39.
Notes to the consolidated financial statements
carsales.com Limited Annual Report - 30 June 2014 | 67
(x) Parent entity financial information
The financial information for the parent entity, carsales.com Ltd, disclosed in note 32 has been prepared on the same
basis as the consolidated financial statements, except as set out below.
(i) Investments in subsidiaries
Investments in subsidiaries are accounted for at cost in the financial statements of carsales.com Ltd. Dividends received
from subsidiaries are recognised in the parent entity’s profit or loss, rather than being deducted from the carrying
amount of these investments. Investments in subsidiaries are tested for impairment whenever changes in events or
circumstances indicate that the carrying amount may not be recoverable. Such events may include receipt of dividends,
refer note 1(i) for details of impairment accounting policies.
(ii) Tax consolidation legislation
carsales.com Ltd and its wholly owned Australian controlled entities have implemented the tax consolidation legislation.
Refer note 1(f).
(y) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the tax authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of
the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included with other receivables or payables in the consolidated
statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flow.
2. Financial risk management
The Group’s activities expose it to a variety of financial risks: credit risk, interest rate risk and liquidity and foreign
exchange risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and
seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses different methods
to measure different types of risk to which it is exposed.
Risk management is the responsibility of the Chief Financial Officer (CFO) and follows approved policies of the Board of
Directors. The CFO identifies, evaluates and hedges financial risks in close cooperation with the Group’s operating units.
(a) Market risk
(i) Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures,
primarily with respect to the Brazilian Real (BRL) and the Korean Won (KRW).
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in
foreign currency that is not the entity’s functional currency.
Hedging contracts are sometimes used to manage foreign currency exchange risk. The Company has a treasury strategy
and a treasury policy and will actively hedge any major known commitments using forward exchange contracts. For
instance during the financial year the Company acquired a 49.9% interest in SKENCARSALES.com Ltd in Korea. In
funding this acquisition the Company entered into a forward exchange contract where 117,500,000,000 KRW was
hedged against the Australian dollar (AUD) at the time in which contracts with the vendor were signed with defined
funding delivery dates. This was the only foreign exchange hedge entered into during the course of the year.
The analysis below reflects management’s view of possible movements in relevant foreign currencies against the
Australian dollar. The table summarises the range of possible outcomes that would affect the Group’s net profit and
equity as a result of foreign currency movements.
The estimated impact on carsales.com Ltd share of the reported net profits of our overseas associates through potential
movements in exchange rates are as follows:
Impact on profit:
AUD to KRW
AUD to BRL
Net Movement
(+5% to -5%)
(+5% to -5%)
$’000
-5%
38.9
219.5
258.4
2014
$’000
+5%
(43.0)
(242.6)
(285.6)
68 | carsales.com Limited Annual Report - 30 June 2014
Notes to the consolidated financial statements
Impact on equity:
AUD to KRW
AUD to BRL
Net Movement
(ii) Price Risk
(+5% to -5%)
(+5% to -5%)
$’000
-5%
6,686
4,855
11,541
2014
$’000
+5%
(6,049)
(4,393)
(10,442)
The Group is not exposed to significant equities price risk.
(b) Credit risk
Credit risk of the Group arises predominantly from outstanding receivables from customers.
The Group’s credit risk on its receivables is recognised on the consolidated statement of financial position at the carrying
amount of those receivable assets, net of any provisions for doubtful debts. There are no significant concentrations of
receivables within the Group. Receivable balances are monitored on an ongoing basis with the result that the Group’s
exposure to bad debts is not considered to be material.
Details of impaired and past due receivables are disclosed in note 10.
Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. For banks and
financial institutions, only independently rated parties with a minimum rating of ‘A’ are accepted by carsales.com Ltd.
(c) Interest rate risk
The Group’s main interest rate risk arises from long-term borrowings. The Group’s fixed rate borrowings and receivables
are carried at amortised cost. They are therefore not subject to interest rate risk as defined in AASB7 since neither the
carrying amount nor the future cash flows will fluctuate because of a change in market rates.
The consolidated entity’s exposure to the cash flow risk of changes in market interest rates relates primarily to the
cash at bank and the cash advance facility. The interest rate applicable at year end on the cash at bank was 2.5%, while
the interest on the cash advance facility was 4.0% (2013 - 4.7%). As at reporting date, the Group had $175,000,000
(2013 - $55,000,000) variable rate borrowings at a weighted average interest rate of 3.9% (2013 - 4.7%). The variable
interest rate may have an impact on cash flow, but this impact is not considered material. carsales.com Ltd has a recently
approved a treasury policy and treasury strategy for the management of interest rate risk which at 30 June 2014 had not
been implemented. The Company does not currently hedge against interest rate risk, however will adopt a strategy in
FY2015 that will see 50% of interest rate exposures in forecast borrowings hedged via a SWAP instrument.
(d) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of
funding through an adequate amount of committed credit facilities and the ability to close out market positions. The
Group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity
profiles of financial assets and liabilities.
Financing arrangements
The Group has access to the following undrawn borrowing facilities at the end of the reporting period:
Floating rate
- Expiring within one year (overdraft and bill facility)
- Expiring beyond one year (cash advance facility)
2014
$’000
3,000
-
3,000
2013
$’000
13,000
40,000
53,000
Notes to the consolidated financial statements
carsales.com Limited Annual Report - 30 June 2014 | 69
Maturities of financial liabilities
The following table sets out the Group’s exposure to liquidity risk. The amounts disclosed in the table are the contractual
undiscounted cash flows.
Contractual maturities of
financial liabilities
Group - at 30 June 2014
Non-derivatives
Non-interest bearing payables
Variable rate borrowings
Fixed rate borrowings
0 - 12
months
$’000
22,741
10,000
-
Between
1 and 2
years
$’000
Between
2 and 5
years
$’000
Total
contractual
cash flows
$’000
Carrying
Amount
(assets)/
liabilities
$’000
-
-
12,540
171,803
-
-
22,741
194,343
-
22,741
174,683
-
Total non-derivatives
32,741
12,540
171,803
217,084
197,424
Group - at 30 June 2013
Non-derivatives
Non-interest bearing payables
Variable rate borrowings
Fixed rate borrowings
Total non-derivatives
19,220
57,475
-
76,695
-
210
-
210
-
-
-
-
19,220
57,685
-
19,220
57,685
-
76,905
76,905
(e) Net fair value of financial assets and liabilities
The net fair value of cash and cash equivalents and non-interest bearing monetary financial assets and non-interest
bearing financial liabilities of the consolidated entity approximates their carrying amounts. There are no off-balance sheet
financial instruments in place.
(f) Fair value estimation
Summarised sensitivity analysis
The following table summarises the sensitivity of the Group’s financial assets and financial liabilities to interest rate risk.
At 30 June 2014
Financial assets
Cash and cash equivalents
Accounts receivable
Financial liabilities
Trade payables
Borrowings
Total increase/(decrease)
Carrying
amount
$’000
26,042
34,721
(6,477)
(175,000)
Interest rate risk
-100 bps
+100 bps
Profit
$’000
Other equity
$’000
Profit
$’000
Other equity
$’000
(168)
(168)
168
168
-
-
1,750
1,582
-
-
1,750
1,582
-
-
-
-
(1,750)
(1,582)
(1,750)
(1,582)
70 | carsales.com Limited Annual Report - 30 June 2014
Notes to the consolidated financial statements
At 30 June 2013
Financial assets
Cash and cash equivalents
Accounts receivable
Financial liabilities
Trade payables
Borrowings
Carrying
amount
$’000
15,140
30,222
(1,728)
(55,000)
Interest rate risk
-100 bps
+100 bps
Profit
$’000
Other equity
$’000
Profit
$’000
Other equity
$’000
(376)
(376)
376
376
-
-
-
-
-
-
-
-
-
-
-
-
Total increase/(decrease)
(376)
(376)
376
376
3. Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under
the circumstances.
(a) Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
(i) Estimated impairment of goodwill
The Company tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy
stated in note 1(n). The recoverable amounts of cash-generating units have been determined based on value-in-use
calculations. These calculations require the use of assumptions. Refer to note 13 for details of these assumptions and the
potential impact of changes to the assumptions.
(ii) Employee options and performance rights
Fair value of employee options and performance rights: refer to details of assumptions in note 31.
4. Segment information
Management has determined the operating segments based on the reports reviewed by Key Management Personnel that
are used to make strategic decisions.
(a) Description of segments
The Group principally operates in three business segments: namely Online Advertising Services, Data and Research
Services and International.
Online Advertising Services
carsales.com Ltd online advertising offerings can be broken into two key product sets being classified advertising and
display advertising services.
Classified advertising is currently the major product offering of the Company and encompasses both private sellers
and dealer customers. Classified advertising typically involves the owner of a specific item, such as a 2004 Red brand x
car with 23,242 kilometres or a brand new Blue brand x motorbike with sidecar etc; advertising their item for sale via a
particular medium, which in the case of carsales, is through its online websites.
Display advertising, typically involves corporate customers such as automotive manufacturers/importers, finance and
insurance companies etc, placing advertisements on carsales.com Ltd’s website. These advertisements typically display
the product or service offerings of the corporate advertiser such as a special offer on new utes by manufacturer x, or
save 10% on insurance this month only etc.
Data and Research Services
The carsales.com Ltd divisions of Redbook Australia, LiveMarket, DataMotive and DataMotive Business Intelligence
provide various solutions to a range of customers including manufacturers/importers, dealers, industry bodies, finance
and insurance companies offering products including software, analysis, research and reporting, valuation services,
website development and hosting as well as photography services. This segment also includes display and consumer
advertising related to these divisions.
Notes to the consolidated financial statements
carsales.com Limited Annual Report - 30 June 2014 | 71
International
carsales.com Ltd has significantly increased its investments in overseas Associates with our international holdings
comprising:
Automotive Data Services:
- Auto Information Ltd (New Zealand) - 100%
- Red Book Automotive Services (M) Sdn Bhd (Malaysia) - 100%
- Red Book Automotive Data Services (Beijing) Ltd (China) - 100%
- Automotive Data Services (Thailand) Company Ltd - 100%
Online automotive classifieds:
- Webmotors (operation in Brazil) - 30%
- iCar Asia (operation in Indonesia, Malaysia and Thailand) - 22.9%
- SKENCARSALES (operation in South Korea) - 49.9%.
(b) Segment analysis
2014
Segment revenue
Segment revenue (note 4(c)(i))
Total segment revenue
EBITDA (note 4(c)(ii))
Depreciation and amortisation
Net interest expense
Profit before income tax
Income tax expense
Share of gain from associates
Non-controlling interests
Profit for the year
Online
Advertising
$’000
Data and
Research
$’000
International
$’000
Total
$’000
203,864
203,864
120,256
29,131
29,131
16,747
2,607
2,607
1,407
3,434
235,602
235,602
138,410
(3,309)
(2,914)
132,187
(39,349)
3,434
(815)
95,457
Segment assets (note 4(c)(iii))
100,463
19,393
240,426
360,282
Deferred tax assets
Unallocated assets
Total assets
5,916
38,241
404,439
72 | carsales.com Limited Annual Report - 30 June 2014
Notes to the consolidated financial statements
215,118
215,118
120,127
(2,553)
1,338
118,912
(35,164)
(232)
83,516
212,672
6,638
23,841
243,151
Online
Advertising
$’000
Data and
Research
$’000
International
$’000
Total
$’000
187,206
187,206
105,511
25,604
25,604
13,383
2,308
2,308
1,233
2013
Segment revenue
Segment revenue (note 4(c)(i))
Total segment revenue
EBITDA (note 4(c)(ii))
Depreciation and amortisation
Net interest income
Profit before income tax
Income tax expense
Share of losses from associates
and a joint venture
(232)
Profit for the year
Segment assets (note 4(c)(iii))
86,759
21,610
104,303
Deferred tax assets
Unallocated assets
Total assets
(c) Notes to, and forming part of, the segment information
(i) Segment revenues
Segment revenues are derived from sales to external customers as set out in the table above. The nature of the segment
revenues are as described in note 4(a) above.
(ii) Segment EBITDA
The consolidated entity’s chief operating decision maker assesses the performance of the segments based on a measure
of EBITDA. Interest revenue and expense, depreciation and amortisation are not reported to the chief operating decision
maker by segment. These items are assessed at a consolidated entity level.
(iii) Segment assets
Segment assets include goodwill and trade receivables. Unallocated assets include property, plant and equipment,
intangibles and other assets. All unallocated assets are assessed by the chief operating decision maker at a consolidated
level.
(iv) Liabilities
Liabilities are not reported to the chief operating decision maker by segment. All liabilities are assessed at a consolidated
entity level.
Notes to the consolidated financial statements
carsales.com Limited Annual Report - 30 June 2014 | 73
5. Revenue
From continuing operations
Sales revenue
Sale of services
Other revenue
Interest
6. Other income
Net gain on disposal of property, plant and equipment
7. Expenses
Profit before income tax includes the following specific expenses:
Total employee benefits
Foreign exchange losses (gains)
Interest and finance charges paid/payable
Research and development
Defined contribution superannuation expense
Depreciation and amortisation expense
Minimum lease payments
8. Income tax expense
(a) Income tax expense
Current tax
Deferred tax
Adjustments for current tax of prior periods
Deferred income tax (revenue) expense included in income tax expense
comprises:
Decrease (Increase) in deferred tax assets (note 12)
2014
$’000
2013
$’000
235,602
215,118
474
236,076
1,343
216,461
2014
$’000
1
2013
$’000
5
2014
$’000
2013
$’000
43,559
44,188
47
3,388
8,115
3,391
3,309
3,858
2014
$’000
38,934
450
(35)
(10)
5
7,904
3,087
2,553
3,469
2013
$’000
35,031
60
73
39,349
35,164
450
450
60
60
Current tax of $2,331,000 has been directly recognised in equity, related to share based payments.
74 | carsales.com Limited Annual Report - 30 June 2014
Notes to the consolidated financial statements
(b) Numerical reconciliation of income tax
expense to prima facie tax payable
Profit from continuing operations before income tax expense
Tax at the Australian tax rate of 30.0% (2013 - 30.0%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Tax offset for R&D
Deferred tax on share options transferred to the Employee Share Trust
Sundry items
Adjustments for current tax of prior periods
Tax on share of (profit)/losses from associates
Total income tax expense
2014
$’000
135,621
40,686
(140)
(320)
188
(35)
(1,030)
39,349
2013
$’000
118,680
35,604
(873)
(94)
384
73
70
35,164
(c) Tax consolidation legislation
carsales.com Ltd and its wholly-owned Australian controlled entities implemented the tax consolidation
legislation from 1 July 2006. The accounting policy in relation to this legislation is set out in note 1(f).
9. Current assets - Cash and cash equivalents
Cash in hand
Bank balances
2014
$’000
7
26,035
26,042
2013
$’000
3
15,137
15,140
(a) Risk exposure
The Company’s exposure to interest rate risk is discussed in note 2. The maximum exposure to credit risk at the
reporting date is the carrying amount of each class of cash and cash equivalents mentioned above.
(b) Cash at bank and in hand
Cash in hand is non-interest bearing. Bank balances attracted interest at an average rate of 2.6% (2013: 3.5%).
10. Current assets - Receivables
Net trade receivables
Trade receivables
Provision for impairment of receivables (note 10(a))
Prepaid general
Receivables from related parties are disclosed under note 25.
2014
$’000
34,721
(808)
33,913
1,471
35,384
2013
$’000
30,222
(746)
29,476
1,786
31,262
Notes to the consolidated financial statements
carsales.com Limited Annual Report - 30 June 2014 | 75
(a) Impaired trade receivables
The ageing of these receivables is as follows:
1 to 3 months
3 to 6 months
Over 6 months
2014
$’000
2013
$’000
330
152
326
808
287
128
331
746
As at 30 June 2014 current trade receivables of the Group with a nominal value of $808,000 (2013 - $746,000) were
impaired. The amount of the provision was $808,000 (2013 - $746,000). The individually impaired receivables mainly
relate to customers which are in unexpectedly difficult economic situations.
Movements in the provision for impairment of receivables are as follows:
At 1 July
Provision for impairment recognised during the year
Receivables written off during the year as uncollectable
At 30 June
2014
$’000
746
215
(153)
808
2013
$’000
937
111
(302)
746
The creation and release of the provision for impaired receivables has been included in ‘operational and administration’
expenses in the consolidated statement of comprehensive income. Amounts charged to the provision account are
generally written off when there is no expectation of recovering additional cash.
(b) Past due but not impaired
As of 30 June 2014, trade receivables of $5,729,000 (2013 - $4,401,000) were past due but not impaired. These relate to
a number of independent customers for whom there is no recent history of default. The ageing of these trade receivables
is as follows:
Up to 3 months
3 to 6 months
2014
$’000
5,329
400
5,729
2013
$’000
4,333
68
4,401
(c) Other receivables
These amounts generally arise from transactions outside the usual operating activities of the Group. Interest is not
charged and collateral is not normally obtained.
The other classes within trade and other receivables do not contain impaired assets and are not past due. Based on the
credit history of these other classes, it is expected that these amounts will be received when due.
(d) Fair value and credit risk
Due to the short-term nature of these receivables, their carrying amount is assumed to approximate their fair value.
The maximum exposure to credit risk at the reporting date is the carrying amount of each class of receivables
mentioned above. Refer to note 2 for more information on the risk management policy of the Company and the
credit quality of the entity’s trade receivables.
76 | carsales.com Limited Annual Report - 30 June 2014
Notes to the consolidated financial statements
11. Non-current assets - Property, plant and equipment
Plant and
equipment
$’000
Motor
vehicles
$’000
Leasehold
improvements
$’000
At 1 July 2012
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2013
Opening net book amount
Additions
Asset disposal
Depreciation charge
Closing net book amount
At 30 June 2013
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2014
Opening net book amount
Acquisition of subsidiary
Additions
Asset disposal
Depreciation charge
Closing net book amount
At 30 June 2014
Cost
Accumulated depreciation
Net book amount
2,600
(1,720)
880
880
645
(1)
(625)
899
3,036
(2,137)
899
899
10
551
(1)
(589)
870
3,442
(2,572)
870
60
(27)
33
33
7
(6)
(5)
29
42
(13)
29
29
38
14
-
(32)
49
94
(45)
49
Total
$’000
7,135
(2,096)
5,039
5,039
944
(8)
(1,243)
4,732
7,838
(3,106)
4,732
4,475
(349)
4,126
4,126
292
(1)
(613)
3,804
4,760
(956)
3,804
3,804
4,732
-
383
-
(704)
3,483
5,143
(1,660)
3,483
48
948
(1)
(1,325)
4,402
8,679
(4,277)
4,402
Notes to the consolidated financial statements
carsales.com Limited Annual Report - 30 June 2014 | 77
12. Non-current assets - Deferred tax assets
2014
$’000
2013
$’000
The balance comprises temporary differences attributable to:
Employee benefits
Doubtful debts
Expense provisions and accruals
Share options in the Employee Share Trust
Movements:
Opening balance at 1 July
Credited to the profit or loss (note 8)
Credited directly to equity
Closing balance at 30 June
Deferred tax assets to be recovered within 12 months
Deferred tax assets to be recovered after more than 12 months
1,017
205
839
3,855
5,916
6,638
(450)
(272)
5,916
4,683
1,233
5,916
At 1 July 2012
(Charged)/credited to the profit or loss (note 8)
Credited directly to equity
At 30 June 2013
(Charged)/credited to the profit or loss (note 8)
Credited directly to equity
At 30 June 2014
Employee
benefits
$’000
Employee
Share Trust
$’000
1,088
129
-
1,217
(200)
-
1,017
2,405
99
1,604
4,108
19
(272)
3,855
Other
$’000
1,601
(288)
-
1,313
(269)
-
1,044
1,217
224
1,089
4,108
6,638
5,094
(60)
1,604
6,638
5,192
1,446
6,638
Total
$’000
5,094
(60)
1,604
6,638
(450)
(272)
5,916
78 | carsales.com Limited Annual Report - 30 June 2014
Notes to the consolidated financial statements
13. Non-current assets - Intangible assets
Domain
names
and other
$’000
Computer
software*
$’000
Intangible
asset:
Database
$’000
Goodwill
$’000
At 1 July 2012
Cost
77,444
2,621
5,699
Accumulated amortisation and impairment
-
(1,303)
(4,452)
Total
$’000
86,929
(6,319)
80,610
80,610
1,892
(1,310)
81,192
1,165
(564)
601
601
25
(119)
507
77,444
1,318
1,247
77,444
-
-
77,444
1,318
13
(386)
945
1,247
1,854
(805)
2,296
Accumulated amortisation and impairment
-
(1,689)
(5,251)
(684)
(7,624)
77,444
2,634
7,547
1,191
88,816
Net book amount
Year ended 30 June 2013
Opening net book amount
Additions
Amortisation charge **
Closing net book amount
At 30 June 2013
Cost
Net book amount
Year ended 30 June 2014
Opening net book amount
Additions
Acquisition of subsidiary
Amortisation charge **
77,444
945
2,296
507
81,192
77,444
-
8,421
-
945
529
-
2,296
3,617
494
(487)
(1,374)
507
-
-
(123)
384
81,192
4,146
8,915
(1,984)
92,269
Closing net book amount
85,865
987
5,033
At 30 June 2014
Cost
85,865
3,153
11,704
1,190
101,912
Accumulated amortisation and impairment
-
(2,166)
(6,671)
(806)
(9,643)
Net book amount
85,865
987
5,033
384
92,269
* Software includes capitalised development costs being an internally generated intangible asset.
** Amortisation is included in other expenses in the consolidated statement of comprehensive income.
Notes to the consolidated financial statements
carsales.com Limited Annual Report - 30 June 2014 | 79
(a) Impairment tests for goodwill
Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to segment.
A segment-level summary of the goodwill allocation is presented below.
2014
Online Advertising
Data and Research
2013
Online Advertising
Data and Research
Australia
$’000
Total
$’000
70,715
15,150
70,715
15,150
85,865
85,865
62,294
15,150
77,444
62,294
15,150
77,444
The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash
flow projections based on financial budgets covering a five-year period. Cash flows beyond the five-year period are
extrapolated using the estimated growth rates stated below. The growth rate does not exceed the long-term average
growth rate for the business in which the CGU operates.
(b) Key assumptions used for value-in-use calculations
CGU
Online Advertising
Data and Research
Growth rate**
Discount rate***
2014
%
2.5
2.5
2013
%
2.5
2.5
2014
%
4.3
4.3
2013
%
6.4
6.4
The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow
projections based on approved budgets.
** Weighted average growth rate used to extrapolate cash flows beyond the budget period
*** In performing the value-in-use calculations for each CGU, the Company has applied pre-tax discount rates to discount the
forecast future attributable pre-tax cash flows.
(c) Impact of possible changes in key assumptions
Management do not consider that a reasonable change in any of the key assumptions would lead to impairment.
14. Current liabilities - Borrowings
Commercial bill
2014
$’000
9,842
2013
$’000
54,525
The commercial bill with the National Australia Bank is $10,000,000 net of establishment fees of $158,000.
15. Current liabilities - Payables
Trade payables
Accrued expenses
Other payables
Details of related party payables are disclosed under note 25.
2014
$’000
6,477
14,482
1,781
22,740
2013
$’000
1,728
15,201
2,291
19,220
80 | carsales.com Limited Annual Report - 30 June 2014
Directors’ report
16. Current liabilities - Provisions
Employee benefits
17. Deferred revenue
Deferred advertising services revenue - see note 1(e)
18. Non-current liabilities - Provisions
Employee benefits
19. Non-current liabilities - Borrowings
Bank loan
2014
$’000
3,818
2013
$’000
3,334
2014
$’000
5,535
2013
$’000
5,297
2014
$’000
938
2013
$’000
721
2014
$’000
164,841
2013
$’000
-
This bank loan is part of an established facility of $165,000,000, net of establishment fees of $159,000, with the National
Australia Bank and has an expiry date of 31 July 2017. In addition a facility of $60,000,000 was established in July 2014
with the National Australia Bank. This facility was put in place in order to fund the acquisition of Stratton Finance and will
expire on 31 July 2015.
20. Contributed equity
(a) Share capital
Ordinary shares
Fully paid
Notes
2014
Shares
2013
Shares
20(b)
237,828,965
236,181,964
237,828,965
236,181,964
2014
$’000
77,603
77,603
2013
$’000
70,104
70,104
Directors’ report
carsales.com Limited Annual Report - 30 June 2014 | 81
(b) Movements in ordinary share capital
Date
Details
1 July 2012
Opening balance
August 2012
Exercise of employee options
August 2012
Exercise of employee performance rights
September 2012
Exercise of employee options
September 2012
Exercise of employee options
September 2012
Exercise of employee options
September 2012
Exercise of employee options
September 2012
Exercise of employee options
September 2012
Exercise of employee options
October 2012
Exercise of employee options
October 2012
Exercise of employee options
October 2012
Exercise of employee options
October 2012
Exercise of employee options
October 2012
Exercise of employee options
November 2012
Exercise of employee options
November 2012
Exercise of employee options
November 2012
Exercise of employee options
November 2012
Exercise of employee options
December 2012
Exercise of employee options
February 2013
Exercise of employee options
March 2013
Exercise of employee options
March 2013
Exercise of employee options
March 2013
Exercise of employee options
April 2013
April 2013
April 2013
May 2013
June 2013
June 2013
June 2013
Exercise of employee options
Exercise of employee options
Exercise of employee options
Exercise of employee options
Exercise of employee options
Exercise of employee options
Exercise of employee options
Number
of shares
233,689,223
Issue
price
$’000
61,749
72,703
61,551
10,000
70,000
590,000
250,000
332,653
13,029
10,000
10,000
20,000
25,000
8,469
10,000
5,000
531,250
52,117
7,500
15,000
120,000
190,000
12,500
7,500
12,500
8,469
22,500
5,000
5,000
15,000
$4.69
$0.00
$1.75
$2.15
$2.00
$3.89
$4.90
$4.69
$1.75
$2.15
$2.00
$4.90
$4.69
$1.75
$2.00
$3.89
$4.69
$3.89
$3.89
$2.00
$3.89
$4.90
$3.89
$4.90
$4.69
$3.89
$1.75
$2.00
$3.89
341
-
18
150
1,180
973
1,630
61
18
22
40
122
40
18
10
2,066
244
29
58
240
739
61
29
61
40
88
9
10
58
30 June 2013
Balance
236,181,964
70,104
82 | carsales.com Limited Annual Report - 30 June 2014
Notes to the consolidated financial statements
(b) Movements in ordinary share capital
Date
Details
July 2013
July 2013
Opening balance
Exercise of employee options
Exercise of employee options
August 2013
Exercise of employee options
August 2013
Exercise of employee options
August 2013
Exercise of employee options
August 2013
Exercise of employee options
August 2013
Exercise of employee options
August 2013
Exercise of employee performance rights
September 2013
Exercise of employee options
September 2013
Exercise of employee options
October 2013
Exercise of employee options
November 2013
Exercise of employee options
December 2013
Exercise of employee options
March 2014
Exercise of employee options
May 2014
Exercise of employee options
Number
of shares
236,181,964
10,000
10,000
2,000
5,000
109,375
222,960
892,347
67,819
5,000
7,500
165,000
85,000
10,000
30,000
25,000
Issue
price
$2.00
$3.89
$1.75
$2.00
$3.89
$4.69
$4.90
$0.00
$2.00
$3.89
$4.90
$4.90
$4.90
$4.90
$4.90
$’000
70,104
20
39
4
10
425
1,046
4,372
-
10
29
808
417
49
147
123
Balance
237,828,965
77,603
(c) Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in
proportion to the number of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote,
and upon a poll each share is entitled to one vote.
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
(d) Employee share scheme
Information relating to the employee share scheme, including details of shares issued under the scheme, is set out in
note 31.
(e) Options and performance rights
Information relating to the carsales.com Ltd Employee Option Plan, including details of options and performance rights
issued, exercised and lapsed during the financial year and options and performance rights outstanding at the end of
the financial year, is set out in note 31.
(f) Capital risk management
The Company’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that
they can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
Consistent with others in the industry, the Group monitors its capital on an ongoing-basis.
There are no externally imposed capital requirements.
Notes to the consolidated financial statements
carsales.com Limited Annual Report - 30 June 2014 | 83
The Company’s capital position at 30 June 2014 and 30 June 2013 was as follows:
Total payables and borrowings
Less: cash and cash equivalents
Net debt
Total equity
Total capital
21. Reserves and retained earnings
(a) Reserves
Share-based payment reserve
Foreign currency translation reserve
Movements:
Share-based payment reserve
Balance 1 July
Option expense
Tax on Employee Share Trust charged to equity
Balance 30 June
Movements:
Foreign currency translation reserve
Balance 1 July
Currency translation differences arising during the year
Balance 30 June
(b) Retained earnings
Movements in retained earnings were as follows:
Balance 1 July
Net profit for the year
Dividends
Balance 30 June
Notes
15, 14, 19
2014
$’000
197,425
2013
$’000
73,745
9
(26,042)
(15,140)
171,383
187,376
358,759
58,605
152,510
211,115
2014
$’000
18,735
(1,040)
17,695
14,901
1,775
2,059
18,735
7
(1,047)
(1,040)
2014
$’000
67,498
95,457
2013
$’000
14,901
7
14,908
7,646
3,360
3,895
14,901
(78)
85
7
2013
$’000
59,068
83,516
(72,009)
(75,086)
90,946
67,498
84 | carsales.com Limited Annual Report - 30 June 2014
Notes to the consolidated financial statements
(c) Nature and purpose of reserves
(i) Share-based payment reserve
The share-based payments reserve is used to recognise the fair value of options and performance rights issued but not
exercised.
(ii) Foreign currency translation reserve
Exchange differences arising on translation of the foreign operations are taken to the foreign currency translation
reserve, as described in note 1(d) and accumulated within a separate reserve within equity. The reserve is recognised in
profit and loss when the net investment is disposed of.
22. Dividends
(a) Ordinary shares
Final fully franked cash dividend for the year ended 30 June 2013 of 15.6 cents
(2012 - 13.2 cents) per share paid on 25 September 2013.
Interim ordinary dividend for the year ended 30 June 2014 of 14.7 cents (2013 -
12.7 cents) per fully paid share paid on 2 April 2014. (10 April 2013). Fully franked
(2013 - fully franked) based on tax paid @ 30%.
Total dividends provided for or paid
Paid in cash
(b) Dividends not recognised at year end
In addition to the above dividends, since year end the Directors have recommended
the payment of 17.4 cents per fully paid ordinary share, (2013 - final dividend 15.6
cents) fully franked based on tax paid at 30%. The aggregate amount of the proposed
dividend expected to be paid on 22nd October 2014 out of retained earnings at 30
June 2014, but not recognised as a liability at year end, is
2014
$’000
2013
$’000
37,052
45,100
34,957
72,009
72,009
29,986
75,086
75,086
2014
$’000
2013
$’000
41,408
36,827
(c) Franked dividends
Franking credits available for subsequent financial years based on a tax rate of
30.0% (2013 - 30.0%)
31,853
30,721
The above amounts represent the balance of the franking account as at the end of the reporting period, adjusted for:
(a) franking credits that will arise from the payment of the amount of the provision for income tax.
(b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date, and
(c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
The consolidated amounts include franking credits that would be available to the parent entity if distributable profits of
subsidiaries were paid as dividends.
Notes to the consolidated financial statements
carsales.com Limited Annual Report - 30 June 2014 | 85
23. Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its
related practices and non-related audit firms:
(a) PricewaterhouseCoopers
PricewaterhouseCoopers firm
Audit and review of financial reports
Controls and assurance services
Due diligence services
Total remuneration for audit and other assurance services
Taxation services
Tax compliance services, including review of Company income tax returns
International tax consulting and tax advice on mergers and acquisitions
Total remuneration for taxation services
Other services
2014
$
2013
$
190,000
190,000
-
165,543
355,543
15,000
289,000
494,000
64,439
61,880
126,319
48,000
61,000
109,000
Due diligence fees paid to PricewaterhouseCoopers network firms
Total remuneration of PricewaterhouseCoopers
91,755
573,617
-
603,000
(b) Non-PwC audit firms
Audit and other assurance services
Audit and review of financial statements
Total remuneration for audit and other assurance services
Taxation services
Tax compliance services
Total remuneration for taxation services
Total remuneration of non-PricewaterhouseCoopers audit firms
Total auditors' remuneration
2014
$
2013
$
11,705
11,705
11,685
11,685
51,782
51,782
63,487
637,104
48,444
48,444
60,129
663,129
It is the Company’s policy to employ PwC on assignments additional to their statutory audit duties where PwC’s
expertise and experience with the Company are important. These assignments are principally tax advice and due
diligence reporting on acquisitions, or where PwC is awarded assignments on a competitive basis. It is the Company’s
policy to seek competitive tenders for all major consulting projects.
86 | carsales.com Limited Annual Report - 30 June 2014
Notes to the consolidated financial statements
24. Commitments
Non-cancellable operating leases
The Group leases offices in a number of locations. The most significant of these leases is the Melbourne head office
where the lease is a non-cancellable operating lease expiring within 6 years. Upon renewal date, the Company has the
option to renew the lease for a further 2 years at terms which are negotiable. The Group also leases various motor cars
and printers under non-cancellable operating leases.
Commitments for minimum lease payments in relation to non-cancellable
operating leases are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
25. Related party transactions
(a) Subsidiaries
IInterests in subsidiaries are set out in note 27.
(b) Key management personnel compensation
Short-term employee benefits
Deferred short-term employee benefits
Post-employment benefits
Long-term employment benefits
Share-based payments
2014
$’000
2013
$’000
3,828
14,621
598
19,047
3,279
12,726
3,897
19,902
2014
$
2013
$
5,228,798
4,629,625
282,334
140,180
222,192
-
137,333
76,331
1,963,730
1,739,636
7,837,234
6,582,925
(c) Transactions with other related parties
The following transactions occurred with related parties, the nature of which are described in the remuneration report.
Sales of goods and services
Sale of services to related parties
Purchases of goods and services
Purchases of goods and services from related parties
2014
$
2013
$
772,284
573,027
3,652,135
3,365,979
All transactions were made on normal commercial terms and conditions, at market rates and includes transactions with
associates.
Notes to the consolidated financial statements
carsales.com Limited Annual Report - 30 June 2014 | 87
(d) Outstanding balances arising from sales/purchases of goods and services
The following balances are outstanding at the end of the reporting period in relation to transactions with related
parties:
Current receivables (sales of goods and services)
Other related parties
Current payables (purchases of goods and services)
Other related parties
2014
$
2013
$
135,710
126,033
805,886
503,537
There is no allowance account for impaired receivables in relation to any outstanding balances, and no expense has
been recognised in respect of impaired receivables due from related parties.
26. Business combination
(a) Stratton acquisition
On 15 July 2014 carsales.com Ltd acquired 50.1% of Stratton Finance Pty Ltd (Stratton), an innovative vehicle finance
business and long-term customer of carsales.com Ltd.
Purchase consideration:
Cash Paid
The assets and liabilities acquired are estimated as follows:
Cash and cash equivalents
Trade and other receivables
Plant and equipment
Inventory
Deferred tax assets
Intangible assets
Trade and other payables
Provisions
External loans
Tax liabilities
Net assets
Outside shareholders interests
Goodwill
Net assets acquired
$’000
59,118
4,425
3,355
1,701
1,035
100
3,064
(5,954)
(725)
(593)
(3,464)
2,944
(1,469)
57,643
59,118
88 | carsales.com Limited Annual Report - 30 June 2014
Notes to the consolidated financial statements
The goodwill is attributable to the workforce, Stratton’s strong position in a high growth market, its customer database,
the high profitability of the business and synergistic benefits expected to be created by this acquisition. The goodwill is
not expected to be deductible for tax purposes.
(i) Initial accounting
Both the net asset value and the allocation of the purchase price to acquired assets are still preliminary. In particular,
the fair values assigned to intangible assets are still being assessed and may be subject to change. The acquisition
accounting will be finalised within 12 months of the acquisition date.
(ii) Acquired receivables
The fair value of trade and other receivables is $1,681,000 which includes trade receivables with a fair value of $1,527,000.
No trade receivables are considered uncollectable.
(iii) Non-controlling interest
In accordance with the accounting policy set out in note 1(h), the Group will recognise the non-controlling interests in
Stratton at fair value rather than at the proportionate share of net identifiable assets. The fair value of the non-controlling
interest will be determined with reference to the purchase price of the acquired interest, as this represented a transaction
between a willing buyer and independent willing sellers.
The current ownership structure of Stratton is as follows:
carsales.com Ltd
Non-controlling interests
D'Azur Holdings Pty Ltd
Other minor shareholders
50.1%
35.4%
14.5%
100.0%
(iv) Revenue and profit contribution
As the acquisition date for Stratton was after 30 June 2014 no associated revenues or profits are included in the reported
results.
(v) Year end
The Stratton Group has a 30 June year-end which aligns with that of carsales.com Ltd.
(vi) Acquisition related costs
Acquisition costs totalling $182,202 have been recognised in the consolidated income statement in “operations and
admininstration”.
Notes to the consolidated financial statements
carsales.com Limited Annual Report - 30 June 2014 | 89
27. Interests in other entities
(a) Material subsidiaries
The Group’s principal subsidiaries at 30 June 2014 are set out below. Unless otherwise stated, they have share capital
consisting solely of ordinary shares that are held directly by the Group and the proportion of ownership interests held
equals the voting rights held by the Group. The country of incorporation or registration is also their principal place of
business.
Place of business/
country of
incorporation
Ownership interest
held by the Group *
Ownership interest
held by non-controlling
interests
Principal
activities
Name of entity
2014
%
2013
%
2014
%
2013
%
Webpointclassifieds Pty Ltd
Australia
100.0
100.0
Equipment Research Group Pty Ltd
Australia
100.0
100.0
Discount Vehicles Australia Pty Ltd
Australia
100.0
100.0
Automotive Data Services Pty Ltd
Australia
100.0
100.0
Auto Information Limited
New Zealand
100.0
100.0
Red Book Automotive Services (M) Sdn
Bhd
Malaysia
100.0
100.0
Red Book Automotive Data Services
(Beijing) Limited
China
100.0
100.0
Automotive Data Services (Thailand)
Company Limited
Thailand
100.0
100.0
Tyresales Pty Ltd **
Australia
50.0
Automotive Exchange Holdings Pty Ltd
Australia
100.0
Automotive Exchange Pty Ltd
Australia
50.0
-
-
-
carsales.com Investments Pty Ltd
Australia
100.0
100.0
carsales Holding Pty Ltd
Australia
100.0
carsales Finance Pty Ltd
Australia
100.0
carsales.com Ltd Employee Share Trust
Australia
-
-
-
-
-
-
-
-
-
-
-
-
50.0
-
50.0
-
-
-
-
* The proportion of ownership interest is equal to the proportion of voting power held.
** In 2013 carsales.com Ltd did not have control and Tyresales Pty Ltd was accounted for under AASB128.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Classified
advertising
Data and
research
Classified
advertising
Data and
research
Data and
research
Data and
research
Data and
research
Data and
research
Online retail
Holding
company
Classified
advertising
Holding
company
Holding
company
Holding
company
Employee
Share Trust
90 | carsales.com Limited Annual Report - 30 June 2014
Notes to the consolidated financial statements
(b) Non-controlling interests (NCI)
Interest in:
Share capital
Retained earnings
2014
$’000
2013
$’000
100
1,032
1,132
-
-
-
Set out below is summarised financial information for each subsidiary that has non-controlling interests that are material
to the Group. The amounts disclosed for each subsidiary are before inter-company eliminations.
Tyresales
Auto Exchange
30 June
2014
$’000
30 June
2013
$’000
30 June
2014
$’000
30 June
2013
$’000
1,420
(1,275)
428
573
80
40
536
(358)
200
378
-
-
-
-
-
-
-
-
-
-
2,827
(1,220)
102
1,709
1,550
775
182
(68)
-
114
-
-
-
-
-
-
-
-
-
-
Summarised balance sheet
Current assets
Current liabilities
Non-current assets
Net assets
Summarised statement of comprehensive income
Profit for the period
Profit/(loss) allocated to NCI
Summarised cash flows
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net increases in cash and cash equivalents
(c) Interests in associates and joint ventures
Place of
business/ country
of incorporation
% of ownership
interest
Nature of
relationship
Measurement
method
Quoted fair value
Carrying amount
Name of
entity
2014
%
2013
%
2014
$’000
30.0
Associate
Equity method
-
2013
$’000
-
2014
$’000
93,323
2013
$’000
90,535
Webmotors SA
Brazil
iCar Asia
Indonesia
SKENCARSALES
South Korea
Tyresales *
Australia
Total equity accounted investments
30.0
22.9
49.9
-
19.9
Associate
Equity method
57,106
16,537
19,146
13,431
-
Associate
Equity method
50.0
Joint Venture
Equity Method
-
-
-
-
127,957
-
-
221
240,426
104,187
* Tyresales in 2013 was a joint venture but it is now consolidated.
Notes to the consolidated financial statements
carsales.com Limited Annual Report - 30 June 2014 | 91
(i) Commitments and contingent liabilities in respect of associates and joint ventures
Commitments - joint ventures and associates
Contingent liabilities - associates
Contingent liabilities relating to liabilities of the associate for which the
company is severally liable
(ii) Summarised financial information for associates and joint ventures
2014
$’000
2013
$’000
1,230
-
Webmotors SA
iCar Asia Ltd
SKENCARSALES Pty Ltd
30 June
2014
$’000
30 June
2013
$’000
30 June
2014
$’000*
30 June
2013
$’000
30 June
2014
$’000
30 June
2013
$’000
Summarised balance sheet
Total current assets
Total non-current assets
98,753
16,059
93,518
9,252
15,593
7,391
16,815
7,670
13,955
30,818
Total current liabilities
(5,569)
(3,757)
(1,523)
(1,905)
(3,527)
Total non-current liabilities
-
-
Net assets
Group's share in %
Group's share in $
Goodwill
Carrying amount
109,242
99,013
30.0
32,773
60,550
93,323
30.0
29,704
60,831
90,535
Reconciliation of carrying value
Opening carrying value
90,535
-
Investment in associate
Profit/(loss) for the period
Other comprehensive income
Dividends received
430
4,609
(1,607)
(644)
90,535
-
-
-
(1,831)
19,630
22.9
4,495
14,651
19,146
13,431
7,705
(1,990)
-
-
(1,858)
20,722
19.9
4,124
9,307
13,431
-
13,634
(203)
-
-
(8,184)
33,062
49.9
16,499
111,458
127,957
-
126,475
815
667
-
Closing carrying value
93,323
90,535
19,146
13,431
127,957
Summarised statement of comprehensive income
Revenue
35,455
Profit from continuing operations
15,363
Other comprehensive income
Total comprehensive income
Carsales share
Profit from continuing operations
Comprehensive income
Total
Dividends received from associates
and joint venture entities
(1,607)
13,756
4,609
(1,607)
3,002
644
-
-
-
-
-
-
-
-
1,991
500
(9,448)
(1,020)
-
-
4,923
1,633
667
(9,448)
(1,020)
2,300
(1,990)
(203)
-
-
815
667
(1,990)
(203)
1,482
-
-
-
* These numbers are management estimates based on market available data.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
92 | carsales.com Limited Annual Report - 30 June 2014
Notes to the consolidated financial statements
28. Events occurring after the reporting period
On the 15 July 2014 carsales.com Ltd acquired 50% of Stratton Finance Pty Ltd out of additional funding acquired
post 30 June 2014 (details are included under note 19). Details of this acquisition can be found in Note 26 - Business
combination.
29. Reconciliation of profit after income tax to net cash inflow
from operating activities
Profit for the year
Depreciation and amortisation
Profit on sale of assets
Non-cash employee benefits expense - share-based payments
Share of (profit)/losses of associates and joint venture partnership
Net exchange differences
Change in operating assets and liabilities:
(Increase) in trade debtors
Decrease/(Increase) in deferred tax assets
Decrease in other operating assets
Increase/(Decrease) in trade creditors
(Decrease)/Increase in other operating liabilities
Increase/(Decrease) in provision for income taxes payable
Decrease/(Increase) in loan establishment fees*
Increase in other provisions
Net cash inflow from operating activities
* The loan establishment fees have been netted off against the borrowings in the balance sheet.
2014
$’000
96,272
3,309
(1)
1,775
(3,434)
(22)
(4,437)
722
315
4,749
(3,219)
1,805
158
701
98,693
2013
$’000
83,516
2,553
(5)
3,360
232
85
(4,169)
(1,544)
723
(249)
6,379
(1,697)
(475)
427
89,136
Notes to the consolidated financial statements
carsales.com Limited Annual Report - 30 June 2014 | 93
30. Earnings per share
(a) Basic earnings per share
From continuing operations attributable to the ordinary equity holders
of the Company
Total basic earnings per share attributable to the ordinary equity holders
of the Company
(b) Diluted earnings per share
From continuing operations attributable to the ordinary equity holders
of the Company
Total diluted earnings per share attributable to the ordinary equity holders
of the Company
(c) Reconciliation of earnings used in calculating earnings per share
Basic earnings per share
Profit from continuing operations
Diluted earnings per share
2014
Cents
40.2
40.2
40.0
40.0
2013
Cents
35.5
35.5
35.2
35.2
2014
$’000
2013
$’000
95,457
83,516
Profit attributable to the ordinary equity holders of the Company used in
calculating diluted earnings per share
95,457
83,516
(d) Weighted average number of shares used as denominator
Weighted average number of ordinary shares used as the denominator in
calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
Options outstanding
Weighted average number of ordinary shares and potential ordinary shares
used as the denominator in calculating diluted earnings per share
2014
2013
237,466,757
235,244,384
1,322,631
1,814,145
238,789,388
237,058,529
(e) Information on the classification of securities
(i) Options and performance rights
Options and performance rights granted to employees under the carsales.com Ltd Employee Option Plan are
considered to be potential ordinary shares and have been included in the determination of diluted earnings per
share to the extent to which they are dilutive. The options and performance rights have not been included in the
determination of basic earnings per share. Details relating to the options are set out in note 31.
94 | carsales.com Limited Annual Report - 30 June 2014
Notes to the consolidated financial statements
31. Share-based payments
(a) Employee Option Plan
Set out below are summaries of options and performance rights granted under the plan:
Expiry
date
Exercise
price
Balance at
start of the
year
Number
Options
granted
during the
year
Number
Performance
rights
granted
during the
year
Number
Total
exercised
during the
year
Number
Expired
during the
year
Number
Balance at
end of the
year
Number
Vested and
exercisable
at end of
the year
Number
Grant
Date
2014
Jul 2007
Jun 2014
Jul 2007
Sep 2014
$1.75
$1.75
2,000
5,000
Sep 2008
Sep 2013
$2.00
20,000
Mar 2010
Oct 2014
$3.89
157,500
Oct 2010
Oct 2015
$4.90
1,067,347
Mar 2011
Oct 2015
$4.90
450,000
Oct 2011
Oct 2016
$4.69
882,347
Oct 2011
Oct 2016
$0.00
201,554
Mar 2012
Mar 2017
$4.69
208,247
Mar 2012
Mar 2017
$0.00
66,399
Oct 2012
Oct 2017
$5.93
727,850
Oct 2012
Oct 2017
$0.00
257,223
Oct 2013
Oct 2018
$9.10
Oct 2013
Oct 2018
$0.00
-
-
-
-
-
-
-
-
-
-
-
-
-
-
408,073
-
-
-
-
-
-
-
-
-
-
-
-
-
-
208,383
(2,000)
-
(20,000)
(126,875)
(892,347)
-
-
-
-
-
-
-
5,000
5,000
-
-
30,625
30,625
175,000
175,000
(315,000)
(35,000)
100,000
100,000
(222,960)
(67,819)
-
-
659,387
167,933
133,735
-
-
-
-
-
-
(43,964)
164,283
(14,020)
52,379
(17,462)
710,388
(6,311)
250,912
(1,917)
406,156
(727)
207,656
-
-
-
-
-
-
-
Total
4,045,467
408,073
208,383
(1,647,001)
(119,401)
2,895,521
478,558
Weighted average exercise price
$4.33
$9.10
$0.00
$4.55
$4.18
$4.57
$4.71
Notes to the consolidated financial statements
carsales.com Limited Annual Report - 30 June 2014 | 95
Balance at
Options
granted
rights
granted
Total
Vested and
exercised
Expired
Balance at
exercisable
Exercise
start of the
during the
during the
during the
during the
end of the
at end of
Performance
year
Number
year
Number
year
Number
year
Number
year
Number
year
Number
the year
Number
Grant Date
Expiry
date
2013
Jul 2007
Jun 2014
Oct 2007
Oct 2012
price
$1.75
$2.15
42,000
80,000
Sep 2008
Sep 2013
$2.00
520,000
Jul 2009
Jul 2014
$2.00
240,000
Dec 2009
Jun 2014
$3.89
250,000
Mar 2010
Oct 2014
$3.89
946,250
Oct 2010
Oct 2015
$4.90
1,450,000
Mar 2011
Oct 2015
$4.90
485,000
Oct 2011
Oct 2016
$4.69
1,037,134
Oct 2011
Oct 2016
$0.00
263,105
Mar 2012
Mar 2017
$4.69
216,005
Mar 2012
Mar 2017
$0.00
68,873
Oct 2012
Oct 2017
$5.93
Oct 2012
Oct 2017
$0.00
-
-
-
-
-
-
-
-
-
-
-
-
-
-
727,850
-
-
-
-
-
-
-
-
-
-
-
-
-
-
257,223
(35,000)
(80,000)
(500,000)
(240,000)
(250,000)
(788,750)
(382,653)
-
-
-
-
-
-
-
7,000
7,000
-
-
20,000
20,000
-
-
-
-
157,500
157,500
1,067,347
342,347
-
(35,000)
450,000
-
(154,787)
(61,551)
-
-
882,347
130,812
201,554
-
-
-
-
(7,758)
208,247
(2,474)
66,399
-
-
727,850
257,223
-
-
-
-
-
Total
5,598,367
727,850
257,223
(2,492,741)
(45,232)
4,045,467
657,659
Weighted average exercise price
$3.90
$5.93
$0.00
$3.35
$4.60
$4.33
$4.49
The Director’s estimate of the weighted average share price at the date of exercise of options exercised regularly during
the year ended 30 June 2014 is estimated to be approximately $10.61 (2013: approximately $7.71).
The weighted average remaining contractual life of share options outstanding at the end of the period was 2.99 years
(2013 - 3.12 years).
The establishment of the carsales.com Ltd Employee Option Plan was undertaken under a prospectus lodged with ASIC
in 2000. Staff eligible to participate in the plan are those invited by the Board of Directors.
Options and performance rights are granted under the plan for no consideration with conditions including a vesting
period and expiry date. For senior executives vesting conditions, including EPS targets, are noted in the Remuneration
Report on page 28.
Options and performance rights granted under the plan carry no dividend or voting rights.
When exercisable, each option is convertible into one ordinary share in return for payment of the option’s exercise price.
Each performance rights is convertible into one ordinary share for $0 exercise price, upon satisfaction of all vesting
requirements.
The exercise price of options is set in advance by the Board of Directors.
Fair value of options and performance rights granted
The assessed fair value at grant date of options granted during the year ended 30 June 2014 is $3.91 (2013 - between
$2.33 and $2.43). The assessed value at grant date of performance rights granted during the year ended 30 June 2014
ranged between $10.32 and $10.58 (2013 - between $6.73 and $6.96). The fair value at grant date is determined using a
Black-Scholes option pricing model that takes into account the exercise price, the term of the option and performance
right, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the
expected dividend yield and the risk free interest rate for the term of the option.
96 | carsales.com Limited Annual Report - 30 June 2014
Notes to the consolidated financial statements
The model inputs for options granted during the year ended 30 June 2014 included:
(a) Options are granted for no consideration. For vesting dates for senior executives, refer page 33.
(b) Exercise price: $9.10 (2013: $5.93).
(c) Grant date: October 2013 (2013: October 2012).
(d) Expiry date: October 2018 (2013: October 2017).
(e) Share price at grant date: $10.55 (2013: $7.71).
(f) Expected price volatility of the Company’s shares: 34% (2013: 34%).
(g) Expected dividend yield: 2.5% (2013: 3.4%).
(h) Risk-free interest rate: 4.1% (2013: 3.04%).
The model inputs for performance rights granted during the year ended 30 June 2014 included:
(a) Performance rights are granted for no consideration. For vesting dates for senior executives, refer page 33.
(b) Exercise price: $0.
(c) Grant date: October 2013 (2013: October 2012).
(d) Expiry date: October 2018 (2013: October 2017)
(e) Share price at grant date: $10.55 (2013: $7.71)
(f) Expected price volatility of the Company’s shares: 34% (2013: 34%)
(g) Expected dividend yield: 2.5% (2013: 3.4%)
(h) Risk-free interest rate: 4.1% (2013: 3.04%)
The expected price volatility is based on historical volatility adjusted for any expected changes to future volatility
due to publicly available information.
(b) Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period as part of employee
benefit expense were as follows:
Options and performance rights issued under employee option plan
32. Parent entity financial information
(a) Summary financial information
Balance sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Shareholders’ equity
Issued capital
Reserves
Retained earnings
Profit or loss for the year
Total comprehensive income
2014
$’000
1,775
2013
$’000
3,360
Parent entity
2014
$’000
2013
$’000
53,553
344,352
397,905
60,190
166,008
226,198
77,603
17,711
76,393
171,707
81,759
81,759
42,095
199,074
241,169
97,195
721
97,916
70,105
14,902
58,246
143,253
70,223
70,223
(b) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2014 or 30 June 2013.
Notes to the consolidated financial statements
carsales.com Limited Annual Report - 30 June 2014 | 97
Directors’ declaration
& Auditor’s report
Directors’ declaration
In the Directors’ opinion:
(a) the financial statements and notes set out on pages 55 to 97 are in accordance with the Corporations Act
2001, including:
(i) Complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements.
(ii) Giving a true and fair view of the consolidated entity’s financial position as at 30 June 2014 and of its
performance for the financial year ended on that date..
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board.
The Directors have been given the declarations by the Managing Director and Chief Financial Officer required by
section 295A of the Corporations Act 2001.
Greg Roebuck
Managing Director
Sydney, 13 August 2014
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100 | carsales.com Limited Annual Report - 30 June 2014
carsales.com Limited Annual Report - 30 June 2014 | 101
Shareholder information
The shareholder information set out below was applicable as at 13 August 2014.
A. Distribution of equity securities
Holding
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Class of equity security
Ordinary shares
Shares
5,416
4,495
704
469
85
11,169
Options and
performance
rights
Redeemable
preference
shares
Convertible
notes
25
29
7
30
5
96
-
-
-
-
-
-
-
-
-
-
-
-
There were 137 holders of less than a marketable parcel of ordinary shares.
B. Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest holders of quoted equity securities are listed below:
Name
J P Morgan Nominees Australia Limited
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
Clear Way Investments Pty Ltd
Citicorp Nominees Pty Limited
BNP Paribas Noms Pty Ltd
RBC Investor Services Australia Nominees Pty Limited
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
Four Us Pty Ltd
National Nominees Limited
Steven Kloss Pty Ltd
Billkaren Pty Ltd
Essena Pty Ltd
Essena Pty Ltd
Kilienz Pty Ltd
UBS Nominees Pty Ltd
AMP Life Limited
Mr Andrew Gajtan Curmi
Gregory Paul Roebuck
102 | carsales.com Limited Annual Report - 30 June 2014
Ordinary shares
Number held
Percentage of
issued shares
59,937,101
34,845,495
30,108,458
14,000,000
11,305,891
6,021,905
4,546,207
3,903,641
3,747,375
2,926,555
2,803,995
2,482,000
2,250,000
1,711,722
1,646,555
1,400,000
1,337,270
1,312,434
1,160,500
1,024,450
25.2
14.7
12.7
5.9
4.8
2.5
1.9
1.6
1.6
1.2
1.2
1.0
1.0
0.7
0.7
0.6
0.6
0.6
0.5
0.4
188,471,554
79.2
Options and performance rights issued under the carsales.com Ltd Employee
Option Plan to take up ordinary shares
2,895,521
96
Number
on issue
Number
of holders
C. Substantial holders
Substantial holders in the Company are set out below:
Hyperion Asset Management
JCP Investment Partners
FIL Investment Management Australia
Number
held
28,703,183
16,413,962
14,891,613
Percentage
12.1
6.9
6.3
D. Voting rights
The voting rights attaching to each class of equity securities are set out below:
(a) Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a
poll each share shall have one vote.
(b) Options
No voting rights.
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104 | carsales.com Limited Annual Report - 30 June 2014
Notes to the consolidated financial statements