Continuing our
global journey
Annual Report
2018
Contents
Our Vision
carsales helps many
thousands of people
across the world buy,
sell and research
vehicles – every day
of the year.
Our vision is to empower our customers, making
buying and selling vehicles easy and frictionless
for everyone – consumers, dealers and
manufacturers alike.
From a first car to a dream car; from a vital
tool of trade to the latest boating passion
purchase; we empower buyers and sellers of
all types, giving them confidence when they
transact online, regardless of level of expertise,
whether its their first purchase or their 50th.
carsales built its name in Australia and today
we are extending our know-how and industry
leading platforms across the globe as we broaden
the reach of our business.
We build strong partnerships throughout our
eco-system and we empower our people to
deliver world-class customer-centric solutions
which help all our customers buy, sell and own
with confidence.
Whether it’s a car, a motorcycle, a caravan, a truck,
a boat or a combine harvester, we deliver the
same level of technology and deep knowledge to
ensure buyers, sellers, owners and advertisers have
rewarding outcomes.
Our Purpose
Our Performance
Our Financial Performance
2
4
6
Chair and Chief Executive Officer’s Report 8
Review of the Year
Our Future
Our Commercial Business Performance
Our Consumer Business Performance
Our Global Business Performance
The carsales World
The Automotive Year
Our Brands
Promoting Our Brands
Directors’ Report
Our People and Our Culture
Corporate Governance
Environmental, Social and
Governance Report
Our Environmental Commitments
Our Board
Our Executive Leadership Team
Our Remuneration Chair’s Letter
Remuneration Report
Other Directors’ Report Disclosures
Auditor’s Independence Declaration
Financial Statements
Directors’ Declaration
Independent Auditor’s Report
to the Members
Shareholder Information
Corporate Directory
10
17
18
20
22
24
27
34
36
38
42
50
50
51
52
54
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57
85
90
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ABN 91 074 444 018
01
Annual Report 2018carsales.com Limited Our Purpose
Every carsales person
comes to work each day
focussed on improving
the experience for our
customers – be it buying,
selling or using vehicles.
02
At carsales we want every interaction
with our team and businesses to be
positive. We understand that buying
or selling a car can be an uncertain
process. That’s why we work to make
the experience as easy as possible.
We empower our customers with
knowledge; automate where possible
to create frictionless processes and
back up our technology with award-
winning personal customer service.
As a business we are focused on
successful outcomes for our customers.
We view our products as the best route
to a result and therefore continually
strive to develop innovative products
which have a demonstrable benefit for
our customers. We do this by asking
questions… Does it empower and
provide insight? How does it make
things easier? Does it reduce friction?
Does it benefit everyone?
The carsales Group has reinforced
its position as Australia’s number
one online destination for buying and
selling cars, motorcycles, trucks, boats,
caravans and machinery. By combining
news and reviews on our classified sites,
and services such as vehicle inspections,
tyres, finance, warranties and insurance
for consumers we make buying and
selling easier. We pride ourselves on
providing unique solutions for all
our customers.
carsales’ commercial customers are vital
to the strength of the business and we
continue to work hard to deliver them
improved solutions and results. We have
further strengthened and built more
meaningful relationships with dealers,
manufacturers and media agencies and
this is delivering significantly for the
business. We strive to be regarded by our
customers as valued, easy to deal with
partners and focused on their growth.
This year has been a year of evolution
domestically and transformation
internationally.
Our market-leading Australian news
and classifieds sites are augmented
by classifieds businesses in Argentina,
Brazil, Chile, Mexico and South Korea.
The importance of these international
businesses cannot be underestimated
as we look to export our proven IP
and technology to maximise the
opportunities presented by them.
With the acquisition of the remaining
50.1% of SK Encar in FY18, our
international portfolio represents around
20% of the carsales Group’s revenue
result. With enormous potential to
grow international revenues further,
every employee is challenged to
‘a global first’ attitude. This ensures
we act as one global business to build
and accelerate the transformation
of our international assets.
Annual Report 2018carsales.com Limited The carsales Group is committed to
being a transparent business and having
a positive impact on the community in
all the countries in which we operate.
We have worked hard to build our
reputation as a trusted leader in our
markets. We value and protect this
position and strive to build it via diverse
initiatives, our employment practices
and through our charitable arm, the
carsales Foundation.
Many of these initiatives are detailed in
our inaugural Environmental, Social and
Governance report which is available on
the carsales shareholder website.
Most importantly, they reflect our desire
to be not only global leaders in terms of
customer outcomes and shareholder
returns, but also to be an employer of
choice and genuinely positive corporate
citizens.
Annual Report 2018
carsales.com Limited
03
Our Performance
459.4 million
User sessions on all carsales sites
around the world in FY18*
31,271
Car dealer customers around the world as at 30 June 2018
861,449
Cars for sale around the world
144,000
Number of inspections done
by RedBook Inspect in FY18
+154%
carsales is the most referred site for buying and selling
cars versus our nearest competitor
Source: Nature Research Australia, June 2018.
1.8x
more time spent on carsales than nearest competitor
Source: Nielsen DCR, June 2018.
* Source Google Analytics - Includes sessions on desktop, mobi and app for the following sites: carsales.com.au, redbook.com.au,
motoring.com.au, boatsales.com.au, bikesales.com.au, caravancampingsales.com.au, trucksales.com.au, constructionsales.com.au,
farmmachinerysales.com.au, carfacts.com.au, carpoint.com.au, boatpoint.com.au, redbookinspect.com.au, soloautos.mx,
chileautos.cl and demotores.com.ar
04
carsales.com Limited
Annual Report 2018
Australian
Customer
Service
Performance
92,717
phone calls answered
41,519
emails responded to
5,452
live chats
88.4%
average service level
80%
average customer
satisfaction rating
700+
unique help centre articles
Annual Report 2018
carsales.com Limited
05
Our Financial Performance
Revenue
EBITDA
Adjusted NPAT*
$444.0m $204.6m $131.0m
up 19% year on year
up 16% year on year
up 10% year on year
CAGR 17.2%
CAGR 10.3%
CAGR 8.2%
444.0
204.6
131.0
176.5
170.4
154.3
138.4
119.1
110.5
101.8
95.5
372.1
344.1
311.8
235.6
FY14
FY15
FY16
FY17
FY18
FY14
FY15
FY16
FY17
FY18
FY14
FY15
FY16
FY17
FY18
(millions)
(millions)
(millions)
06
Annual Report 2018carsales.com Limited Year ending 30 June 2018
Revenue
– Online Advertising Services
– Data, Research and Services
– Latin America
– Asia
– Finance and Related Services
Total revenue
Total operating expenses (before Interest, depreciation and amortisation)
EBITDA
EBITDA margin
Depreciation and amortisation
EBIT
Net finance costs
Profit before tax
Income tax expense
Profits from associates
Non-controlling interests (NCI)
Adjusted net profit after tax*
Total adjustments
Reported net profit after tax
Adjusted earnings per share (cents)*
Reported earnings per share (cents)
A$ Millions
Growth
FY18
FY17
$M
%
295.6
41.9
8.2
29.9
68.4
444.0
(239.4)
204.6
46%
(12.7)
191.9
(9.8)
182.1
(54.6)
6.9
(3.4)
131.0
269.1
39.3
4.9
3.4
55.4
372.1
(195.6)
176.5
47%
(8.8)
167.7
(6.9)
160.8
(48.3)
10.1
(3.5)
119.1
53.8
184.8
(9.6)
109.5
54.0
76.3
49.4
45.4
26.5
2.6
3.3
26.5
13.0
71.9
(43.8)
10%
7%
68%
778%
24%
19%
(22%)
28.1
16%
(3.9)
24.2
(2.9)
21.3
(6.3)
(3.5)
0.1
11.9
63.4
75.3
4.7
30.9
(44%)
14%
(43%)
13%
(13%)
(31%)
5%
10%
661%
69%
10%
68%
* The table above is presented on an adjusted basis. Adjusted NPAT and earnings per share are post non-controlling interests and exclude certain non-recurring or
non-cash items relating to financing, investments and acquired intangible amortisation. See Note 6 of the financial statements for reconciliation to reported NPAT
and earnings per share.
07
Annual Report 2018carsales.com Limited
Chair and Chief Executive Officer’s Report
It has been another enormously positive year at carsales,
with many objectives achieved and challenges overcome.
We leave FY18 in great shape and look forward to the
year ahead.
We are pleased to report another
year of record financial performance
with revenue up 19% on pcp to
$444.0 million. Our core classifieds
businesses continue to perform well,
supported by double digit revenue
growth across our major adjacencies
including tyresales, Stratton Finance
and RedBook Inspect. Our international
companies continue to develop towards
their potential and we are pleased with
the contributions each has made over
the past 12 months.
Earnings before interest, tax and
depreciation/amortisation (EBITDA) was
up 16% to $204.6 million with EBITDA
margins contracting slightly to 46%.
This performance reflects the ongoing
expansion of core business margins, as
the Company continues to utilise its
operating leverage, offset once again by
our fast-growing early stage lower
margin businesses.
Adjusted Net Profit After Tax (NPAT)
increased 10% to $131.0 million
reflecting strong returns to shareholders
in a year of continued investment in the
business for long-term growth.
Operational Performance
Market conditions over the past twelve
months were good for used cars and
remained patchy month to month for
new car sales volumes. Amongst the
proof points of this was the growth in
used car lead volumes through the year,
average time to sell declining and solid
growth in traffic to the carsales site year
on year, proving yet again the strength
of the carsales brand in the automotive
ecosystem.
The past 12 months have seen
significant development in technology
for both domestic and international
markets. We have focused on delivering
valuable trade products to support the
needs of our dealer customers and
launched several new capabilities
throughout the year. Partly facilitated
by the opening of our technology hub
in Santiago, Chile we have been able
to deploy a number of new apps (both
Android and iOS) to support our
domestic and Latin American dealer
requirements. With such a large number
of sites to maintain, we looked closely
at the performance of several sites,
and decommissioned those that were
underperforming to re-focus resources
onto other parts of the business with
greater need and opportunity. In addition
to this, the team also replaced our
existing ERP platform with Netsuite and
introduced Salesforce CRM which will
enable our support capabilities to scale
with the business moving forward.
Our consumer and commercial business
units have continued to drive innovation
to create new capabilities and enhance
consumer experience over the past year.
The evolution of products such as our
dealer AutoGate app, SMS enquiry
facility and codeless calling, advertising
depth automation, lead and data
distribution, and Cyclops (our AI image
recognition system) are just a few
examples of the effort going into
strengthening our market leading
products. These investments in core
business capability will continue and
we have a great deal to look forward
to over the coming twelve months.
Cameron McIntyre
Managing Director
and CEO
Richard Collins
Non-Executive Chair
08
Annual Report 2018carsales.com Limited One of our primary long-term strategic
objectives is the expansion of our
business into high growth international
markets and 2018 saw that objective
continue to strengthen significantly with
the acquisition of the remaining 50.1%
of SK Encar from the SK group in South
Korea and the acquisition of the
remaining 35% of soloautos in Mexico.
Both of these businesses represent
strong long-term growth opportunities
for carsales through the deployment of
both intellectual property and
technology.
The past 12 months have seen
significant developments in our
Latin American markets in particular
Mexico, Chile and Argentina through
the deployment of carsales technology.
As a result of the work done to date we
have seen substantial growth in the key
operating metrics of customer numbers,
traffic and inventory which we are
confident will continue into 2019. In
Brazil, our Webmotors business has
again demonstrated the value that can
be created over time with the right
strategy and capability with stunning
double-digit growth across all financial
and operating metrics.
Board & Governance Changes
Over the past twelve months, there have
been a number of developments at a
Board level. In March this year Chairman
Mr Jeffrey Browne retired as a director
of the Company. In July 2018 after a
lengthy search we welcomed Mr Kee
Wong to the Board of the Company.
Kee is a passionate entrepreneur,
technologist and car lover who comes
with exceptional experience as both an
executive and company director with a
deep knowledge of the Asian market.
The Board looks forward to working
with Kee over the years to come.
Over the course of the year the
Company completed its first ESG Report
(Environment, Social & Governance
Report) which describes the many things
we are proud to do as an organisation
in this area. The report is available for
shareholders to read at bit.ly/esg-reprt.
People & Culture
Our people and business culture are
two of our most important business
assets and once again in FY18 we have
continued to invest heavily in this area.
Our staff turnover and engagement
measures are at the strongest levels
they have ever been.
We have continued to improve our
bench strength with our 2018 graduate
intake program, having recruited six
graduates across both commercial and
technology disciplines and our 2019
program looks to be even better having
received over 700 applications for
another six available places.
The Company has a strong culture of
diversity and inclusion and this year we
were proud to again receive the WGEA
Employer of Choice award. Building on
this achievement, we rolled out several
new flexible leave options to support
and encourage our diversity goals.
Debt & Capital Management
The Company regularly reviews its
capital structure to ensure we are
maximising shareholder returns. As a
result of the Company completing the
acquisition of the remaining 50.1%
of SK Encar the Company has taken
the opportunity to secure its long-term
debt funding. Through the development
of a syndicate of six leading banks the
Company completed a competitive five
year $545 million debt funding facility
in July 2018 (details can be found in
Note 29 of this report) of which only
around $450 million is currently
drawn down.
The Board has declared a final FY18
dividend payment of 23.7 cents per
share fully franked, bringing the total
FY18 dividends to 44.2 cents per share
and representing an increase year on
year of 10%.
The Board believes that the current
dividend payout ratio of 82% reflects
an appropriate balance between
profit distribution to shareholders
and reinvestment in the future growth
in earnings.
Towards a Successful FY19
We are extremely grateful to the team
we have at carsales. Our success is a clear
and direct result of their passion and
dedication to the Company. Our people
are the envy of the markets they serve
and we would like to publicly thank each
and every one of them for what they
bring to our business each day.
Finally, on behalf of the Board we
would like to thank all of our customers,
partners and investors around the world
for their support and engagement over
the past 12 months and we look forward
to working with you all in FY19.
Cameron McIntyre
Managing Director
and CEO
Richard Collins
Non-Executive Chair
09
Annual Report 2018carsales.com Limited Review of the Year
Cameron McIntyre
CEO & Managing Director
It has been an incredible 12 months and I’m very proud of the milestones
the business has reached and the opportunities we have created.
There are too many highlights to
single out, but internationalising our
technology, deploying new CRM and
ERP platforms and the strength of our
Commercial team are key. The feedback
received throughout the year was very
encouraging.
Our Consumer businesses have all
shown strong growth and demonstrated
once again the depth of our innovation
capability. Internationally, we are making
real progress and, with the acquisition
of SK Encar, we are not just developing
capability but also scale.
Our people are our most valuable asset
and this year I’ve been very pleased with
the way the executive team has come
together. The commitment, leadership
and engagement of the team has been
outstanding.
Personally, the step up to the CEO role
has been a great privilege. The support
of the Board, customers, shareholders
and former CEO, Greg Roebuck, has
been invaluable.
It has been a great year for both me
and the Company, with plenty to
look forward to in the coming year.
Ajay Bhatia
Managing Director – Consumer
The Consumer business unit has done a stellar job in FY18 and, as a result,
has grown year on year revenue by over 20%. In addition to this impressive
result, the team has set volume records for several products including tyres,
CarFacts reports, warranty policies and car inspections sold. We also sold a
record number of cars this year via Instant Offer, supported by our auction
house partner, Pickles.
Important and pleasing progress has
been made in our Net Promoter Score
and Customer Satisfaction scores. All
consumer lines look very healthy, further
cementing our relationship with our
consumers and thereby, strengthening
our market position.
In tandem with the consumer business,
the product team has had a huge year
with a focus on end-to-end solutions for
our consumers, dealers and OEMs.
Some of the highlights include a new
version of LiveMarket, an enhanced
payment offering, introduction of SMS
leads for dealers and a streamlined
depth product offering for our sellers.
I am incredibly proud of the way the
team has had a laser focus on talent,
team work, a superior product offering
and, importantly, our customers.
10
carsales.com Limited
Annual Report 2018
Nicole Birman
General Counsel and Company Secretary
The legal team prides itself on partnering with the business to facilitate its goals.
Our role is to work with the team to find ways to accomplish their plans while
avoiding legal complications and minimising risk.
The work involved in closing the
acquisition of the remaining 50.1% of
SK Encar was a standout for the year;
the complexities of dealing in overseas
markets have challenged the legal team
and it has truly delivered.
This year saw significant developments
in privacy and data security regulations.
The commencement of a new data
breach regime in Australia and the GDPR
in the European Union have significantly
increased the focus on privacy and data
within carsales. I am extremely proud of
the work the legal team has done in
developing a new privacy framework for
carsales’ operations around the world.
From a Company Secretarial perspective,
publishing the Company’s first ever ESG
report took immense work and it was
very pleasing to see the report released
on the carsales’ shareholder website.
For many years, carsales has done
admirable work in the human capital and
social space, and it was gratifying to see
that work captured for our stakeholders.
The Board and I have also invested
in relationships with key stakeholders,
and we are confident that these
stakeholders are now more
knowledgeable than ever about
our business.
Andrew Demery
Chief Financial Officer
It’s been a year where carsales has again grown customer numbers,
launched new products and optimised others, entered new markets and
added to our portfolio of businesses internationally.
We’ve taken a large step towards
deploying a reliable, flexible and scalable
back-of-house platform, enabling us to
meet our own needs and the needs of
customers, today and into the future.
No less important was our debt
refinancing that was successfully
completed in July 2018. This refinance
gives us funding certainty and flexibility
out for the next 5 years and
demonstrates the credit strength
of the business.
The team’s efforts to design and rollout
a new ERP, CRM, billing and reporting
platform with minimal business
interruption is something of which I’m
immensely proud of. This milestone was
testament to the collaborative culture
across the business, where a cross-
functional team was able to come
together and, on top of their day jobs,
apply the innovative thinking for which
we are famous in our consumer facing
products to the more prosaic but no less
important matters of customer service,
fulfilment and relationship
management.
Annual Report 2018
carsales.com Limited
11
Review of the Year continued
Michael Holmes
Executive Director – Dealer
The Dealer team enjoyed its first full year as part of the Commercial business
unit, and the benefits of the change didn’t take long to surface.
There were numerous projects
throughout the year that highlighted
our effectiveness and efficiency as a
group, but the Dealer Services project
encapsulated true teamwork and
collaboration from all of our
stakeholders. The strategy that
underpinned this group was one of
carsales being easy to do business with,
and ultimately moving from just another
supplier to a true business partner.
Hosting carsales’ Las Vegas NADA
Conference trip this year was a
highlight. However, I’m even more
pleased I’m still here to write this post
after entertaining around 180 Australian
car dealers at the ‘carsales Australia
Party’.
After nearly 30 years, I still truly enjoy
being a part of the Australian dealer
community and the camaraderie that it
offers and I still get a kick out of visiting
dealerships throughout the country.
As a team we have a very customer
centric approach to our business. It’s a
mantra our team lives by, and which is
starting to show through in our Dealer
Sentiment and Satisfaction scores. We’re
not perfect by any stretch, but the
improvement is constant.
We operated in good stead this year
through the relationships we’ve
developed with our clients irrespective
of their size, location, ownership or
affiliation.
Jo Allan
Chief People Officer
Creating employee experiences that deliver on the strategic pillars of the
business has continued to be the focus of People & Culture this year.
Key initiatives we have delivered
include the introduction of a suite
of creative flexible leave options, our
Next Gear graduate program and the
growth of Becoming a White Ribbon
accredited employer and for the third
year being recognised as a WGEA
Employer of Choice are also real
highlights of the year. Our CEO
Scholarship was awarded to someone
based in our office in Argentina –
proof positive of the internationalisation
of the carsales business.
People & Culture is a close knit team
who are passionately focussed on
attracting and retaining our talent at
carsales. A highlight for the team was
being recognised as a HRD Innovative
Team in January of this year and I
couldn’t be prouder of all of their hard
work and dedication to making carsales
a great place to work.
On a personal note, I am very proud of
the evolution of our diversity strategy
and how we have focused on creating a
workplace that supports everyone –
regardless of life stage. Our culture is
evolving but watching everyone truly
embrace change shows that we are set
up for the years to come.
12
carsales.com Limited
Annual Report 2018
Kellie Cordner
Chief Marketing Officer
Bringing together the marketing, content and editorial teams into a single
unit has resulted in a stellar year of achievements particularly around the
growth and engagement of our audiences.
I’m exceptionally proud of the
campaigns over the past year that I feel
made the people of carsales all walk
just a little taller. The multi-award
winning AutoAds campaign stands out
as a key highlight. To see the team work
through something that has never been
done before was extremely rewarding as
was the overwhelmingly positive
sentiment from our customers.
Our portfolio of brands goes from
strength to strength with market
leadership in both preference and
trust. The growth in traffic across all
our sites with all marketing channels
contributing is most pleasing. May
broke our carsales.com.au traffic
record with over 23 million sessions
– up 19% on May 2017.
The exceptional growth in performance
marketing and the continual
optimisation by the dedicated group to
drive the conversion of our visitors has
seen record results in attribution.
We have invested time and effort in
shifting our content mix and formats
which has delivered significant growth
in engagement as we strive to meet the
needs of today’s ever curious, time poor
consumer. The rewards of increased
visitation to our portfolio of sites
continues via our commitment to best
practice SEO and our trade team has
done a stellar job in dialling up our
industry thought leadership.
Jason Blackman
Chief Information Officer
Establishing a technical hub in Santiago (Chile) was a step-change in FY18.
Successfully integrating the new team into our existing operation means
we can operate cohesively and collaboratively as one (despite the challenges
of time zone and distance) is a key achievement for the business.
We are all proud that the hub adds
to our ability to build and operate
products that are suitable for use
around the world.
I am also exceptionally proud of how
our wider team has come together to
deliver new products and features for
both our domestic and international
customers. Some key examples include
our AutoGate Mobile Applications and
new retail sites across Latin America.
Our team has also done a fantastic
job promoting diversity and building
our talent pipeline, especially in the
technology space where there is a
continued and real opportunity for
greater female participation.
We have successfully run a number
of initiatives and events working with
schools and universities to help build
the next generation of technologists
at carsales.
Annual Report 2018
carsales.com Limited
13
Review of the Year continued
Anthony Saines
Managing Director – Commercial
FY18 has been eventful. We brought together the primary B2B business
units of Dealer, Media and OEM for the first time under the Commercial
business unit banner. As with any large-scale change management project
there have been the occasional tears, tantrums and hiccups (and not all
mine!), but I’m delighted with how the team has come together to display
a unified front to our customers.
We’re not completely there yet. In fact,
we’ve only just embarked on what will
be an evolving journey, but our first
financial year as a combined entity has
only served to whet the appetite for
what can be achieved.
Our investments in data, analytics and
insights continue to bear fruit. RedBook
IQ, carsales Communities and our Takata
recall service are all data-driven solutions
to industry challenges. Our pre- and
post-launch lead generation service
has proven to stimulate substantial
incremental demand for manufacturers
launching new models. We continue to
integrate with manufacturer and dealer
CRMs via AutoGate.
We aim not just to be suppliers to our
diverse client base but to genuinely
add value and partner with them.
Our solutions have never been more
ROI-focussed and effective in helping
them understand, engage and convert
their customers.
Paul Barlow
Managing Director – International
The end of FY18 marked five full years since our first international
acquisition in Webmotors and the growing success we are now seeing
in the business is a fantastic reward.
Another big highlight was the
acquisition of SK Encar in South Korea.
This is a fantastic business with a great
management team to drive growth.
In May we held our second International
Conference with the leaders of our
businesses in South Korea, Brazil, Chile,
Argentina and Mexico coming together
to embrace the carsales culture.
This year we have completed the
foundations for carsales to become
a truly global business.
It’s hard not to get excited by that!
Since becoming a strategic partner in
Webmotors mid-2013, we have been
very hands-on, giving the business its
own identity as the clear number one
online auto vertical in Brazil. We have
sought to reinvent the business through
quality management, product and
technology and the application of a new
business model. It is extremely pleasing
to now see the results as proof of what
we do works!
It is exciting that we have deployed
another carsales executive internationally,
this time into our soloautos business
based in Guadalajara. Together with
our previous carsales executive placement
into chileautos in Santiago, we are now
well positioned to further accelerate
each business.
14
carsales.com Limited
Annual Report 2018
Country highlight
Australia
229,215
Cars for sale on carsales.com.au
as at 30 June 2018
12%
revenue growth pcp
Annual Report 2018
carsales.com Limited
15
Country highlight
South
Korea
69,326
Cars for sale on SK Encar
as at 30 June 2018
14%
Underlying revenue growth pcp
16
carsales.com Limited
Annual Report 2018
Our Future
As one of Australia’s
original disruptors, we
appreciate as well as
anyone the need to
understand and be ready
to exploit the opportunities
of the future, whilst being
across market evolution
and competitive dynamics
that impact the business
today.
Data underpins our business and powers
an innovative suite of targeted
advertising solutions, used by a range of
industry partners to provide relevant
offers to consumers. We will continue to
invest in and deploy data science and
artificial intelligence across the business
to assist with processing improvements,
providing insights and time-saving
opportunities for all our customers.
As one of Australia’s most well-regarded
technology innovators, we understand
how vital continuous improvement is to
our success. We have a global outlook
and strive to attract, retain, empower
and celebrate a truly diverse workforce
that is empowered to deliver world-class
solutions.
It is the desire and determination of
our people to seek new ways to improve
the experiences of our customers and
deliver the next wave of technology
innovation to revolutionise the mobility
landscape.
The changes that are coming to the
automotive market will eventually
change the way people think about
mobility and transportation. Electric
vehicles, autonomous vehicles, the
demise of diesel engines, new models
of ownership all provide exciting
opportunities for our business in the
future. Our business is well placed
to take advantage of these changes.
No other business has the strength of
trusted relationships with consumers,
manufacturers, dealers, financiers and
insurers. Our packaging of solutions for
customers will ever increase, and while
the long-term future for carsales may
not be only about buying and selling
cars, the Company will continue to
be at the front of new trends and be
central to the way people interact with
mobility and transportation.
We are constantly investing in our
future and in future technologies.
Our early stage investments in
businesses such as PromisePay and
RateSetter are bearing fruit for the
business today. Our investment in new
technologies and programs like voice
search, big data, blockchain, Artificial
Intelligence, machine learning and the
Stanford Cities of the Future program
play a part in our future as we seek
to create a truly frictionless experience
in buying, selling and using vehicles.
17
Annual Report 2018carsales.com Limited
Our Commercial Business Performance
This is the first full year
that the new Commercial
team has been together
and while the journey
has been positive, we
are now starting to see
the advantages this new
unified business unit brings
to customers. The carsales
team is increasingly
regarded as a true partner
to our commercial
customers adding genuine
value and return on
investment in both our
relationships and solutions.
We continue to be the industry thought
leader and have increased investment in
publishing independent research
and providing insights to dealers,
manufacturers (OEMs) and media
agencies. Key highlights of this program
included the publication of the the
‘2017 Auto Buying Journey Study’,
quarterly market updates, and a library
of short courses, learning events and
webinars. These are proving to be
popular and well regarded by our
diverse customer base and add to
our reputation as a leading industry
educator and source of valuable
business intelligence.
Dealers
Our national dealer team now totals
over 110 people, making it the largest
field team in the country servicing our
industry. This is a reflection of our
commitment to our dealer relationships
and dedication to delivering great
results across our dealer network.
We have worked hard to deepen
and strengthen our relationships
with dealers and the industry this
year and it is paying dividends.
Our new bundled offerings (including
display, promote and leads products)
and our extremely popular ‘Main Events’
product, have gained considerable
market traction this year.
We have launched a range of new
offerings for larger corporate clients
such as our consultancy arm, which
focusses on deep-diving into the
sales and operations of a dealership,
offering strategy and direction for
business owners.
Our AutoGate platform is the industry’s
leading dealer management software
and we have continued to invest in
it to ensure that managing leads and
inventory is easier and more effective,
through both functionality improvements,
app enabled delivery and advanced
data and insights. The new Promote
automation engine is being introduced
making it easy and frictionless for
dealers to purchase Promote through
AutoGate. Dealers are able to specify
a budget and our proprietary algorithm
selects appropriate cars for the most
effective promote product.
The new AutoGate app (iOS and
Android) allows dealers to easily
manage stock; whilst the AutoGate
reporting dashboard helps dealers
make better-informed business
decisions. We are seeing significant
uptake of the AutoGate app as it gives
today’s dealership the mobile solution
that its staff need. We will continue
adding to the app enhancements
to user experience over the next 12
months. This year we also launched
SMS Call Connect on mobile and apps,
making it easy for consumers to enquire
on cars through SMS and the response
from consumers has been phenomenal.
18
Annual Report 2018carsales.com Limited The continued investment in new forms
of native advertising for manufacturers
and agencies allows us to strengthen
the value proposition we provide our
partners. We don’t focus on pushing
products but rather obsess about
providing insights and outcome. The
strengthening of the relationships with
manufacturers has led to greater
collaboration. Campaigns around
“carsales Car of the Year” and
“Australia’s Best Driver’s Car Award” as
well as sponsored content such as the
‘carsales Challenge’ are proving popular.
We have also been working closely with
the industry on the Takata Airbag Recall.
The carsales Takata Recall Service is an
example of how the smart utilisation of
carsales audience and data (in
combination with NEVDIS, The National
Exchange of Vehicle and Driver
Information System) can help with the
biggest vehicle safety issue Australia has
ever faced. We have been able to help
the industry engage with consumers,
drive cut-through and significantly
improve recall rates.
The introduction of two-way lead
integration, feeding leads to and back
from CRM systems from AutoGate,
offers more transparency for dealerships
of their activity and performance while
our new updated version of LiveMarket
for dealers delivers better functionality
and integration into AutoGate.
Manufacturers and Agencies
Our RedBookIQ insights tools are
proving increasingly central to OEMs’
decision making and the majority of
the top OEMs now have access to at
least one module of this SaaS tool.
We continue to roll out new vehicle
and brand solutions for our partners,
including a ‘Pre-Launch’ product that
delivers pre-qualified demand to
manufacturers prior to the official
launch of a vehicle. We have had eight
major car launches achieve success with
this innovative product since debuting it
in November.
Data-based recommendation products
and native ads that leverage the carsales
user experience and our unique assets
and insights continue to grow,
delivering a win for our audience and
win for our advertising partners.
Integration and functionality continue
to evolve with video, mobile and other
enhancements.
19
Annual Report 2018carsales.com Limited Our Consumer Business Performance
This year we have seen
extremely promising
results from a full year
of operation for the new
Consumer team. The
consumer business has
delivered strong double-
digit revenue growth
across core and adjacent
business lines.
20
In July 2017, we commenced a project
that optimised the value we provide to
private sellers. Not only were prices
aligned to value (under a tiered pricing
structure, based on anticipated selling
price of a car), but a newly-designed
‘user experience’ interface, based on
well-established behavioural economics
heuristics, helped optimise sales
conversion and upsells. This well-
executed price change helped contribute
to the stellar performance from private
revenue during the financial year.
The performance of our adjacent
businesses have been particularly strong
throughout the year and as a result,
tyresales, RedBook Inspect, Instant Offer,
RedBook Warranty and CarFacts, have
set all-time records for sales and
performance.
tyresales has grown strongly and is now
a significant player in the Australian tyre
market. We completed the acquisition
of a further 25% of this business in
August 2017 giving carsales the majority
holding in the Company. Sales have
increased well and this year we sold
37% more tyres than the previous year.
RedBook Inspect has continued strong
growth this financial year with an
ever-improving trajectory. The business
has continued to grow its already
substantial client base in all verticals,
most notably ride share, finance and
the dealer spaces. The underlying
technology behind the business has
and will continue to deliver marked
improvements in margins through
a more efficient workforce and the
expansion into new and potentially very
lucrative markets.
CarFacts reports have proved extremely
popular with consumers on the back of
better site integration and demand for
increased peace of mind for consumers.
Indeed, FY18 has been a record year for
the reports, with sales increasing 69%.
We have worked hard to improve the
integration and customer service for
Instant Offer (our offer to purchase a
consumer’s vehicle supported by our
auction partner Pickles) and this has
resulted in record volumes of consumers
making use of the time saving service.
PayProtect (our money transfer solution)
has grown on an exponential basis with
a 95% increase year on year on the
number of vehicles, totalling many
millions of dollars being transacted
through the service. Our dedication to
always improving the user experience
and streamlining customer service is
showing great results. Not only are we
now seeing use of PayProtect on
non-auto verticals but consumers are
more comfortable using the platform for
higher and higher value transactions.
We will look to further expand this
service into multiple areas of our
business whilst bolstering the offering
with new and exciting developments
making buying and selling even easier.
We have expanded a number of
Depth products for our private sellers,
such as Showcase, allowing them to
differentiate their ads, leading to a
decreased time to sell and better
customer experience.
Annual Report 2018carsales.com Limited
Activities range from testing new
marketing messages to product feature
preferences during the development
stage. The insights gathered from the
community are helping shape business
decisions and ensuring the consumer
is at the forefront of our design. This
innovation led to carsales being a finalist
in the New Community category in
Vision Critical’s annual “Visionary
Awards” for APAC which recognises
the best in customer intelligence within
the region.
As we continue to improve and extend
our AI applications we have seen an
11% higher completion rate for private
seller ads when users opt to use the
Cyclops image recognition feature on
apps (iOS or Android), delivering
improved customer and business
outcomes. Further streamlining of the
sell process on apps will continue in the
coming months to improve the
customer experience.
This period has also been about what
the business stopped doing as much as
what it continued doing. We
successfully decommissioned a number
of sites that were not regarded as core
business – partsales, boatpoint, carpoint
and quicksales – and this has led to
resources being focused on growth
areas of the business.
Our Membership has grown by 17%
year on year and we have seen a 120%
increase in revenue directly attributable
to members. We have seen members
register nearly 75,000 cars in the
carsales garage this year.
We have extensively improved our
consumer user experience and this
has led to the introduction of several
key products such as codeless calls
and SMS, leading to an improved
consumer experience and higher leads
to our dealers.
We have also invested significantly
in our Customer Experience and Voice
of Customer team, which reviews
customer feedback across all channels,
identifies common themes and trending
issues, then works with the product
teams to resolve the issues. Once a fix is
in place, impact on customer experience
metrics (such as Customer Satisfaction
and NPS) is monitored and where
possible, customers are informed
of changes made as a result of their
feedback. The goal is to continue to
improve the customer experience within
the buying, selling and owning journeys.
Improvements in customer experience
help drive customer retention, loyalty
and lifetime value.
In November, we launched ‘The Loop’,
our insights community made up of
almost 5,000 carsales members.
Members complete two or three
research activities a month, with an
outstanding average response rate of
around 28% across all activities to date.
21
Annual Report 2018carsales.com Limited
Our Global Business Performance
This year has been pivotal
in each of carsales’
overseas businesses
and delivering a platform
for future growth. Our
international businesses
comprise around 20%
of the Group’s revenue
giving us the scale to
truly think ‘global’ in
everything we do.
22
This year marks five years since our first
overseas investment in Webmotors,
which at the time was fighting for the
number one auto vertical website
position in Brazil. From the outset of the
carsales investment, Webmotors
underwent enormous change in mindset
and structure while Brazil was
experiencing a very tough macro-
economic environment.
Led by a combination of carsales IP,
operational excellence, investment
in product and technology and a great
partnership with Banco Santander,
we fast forward to this year to see the
macro-economic environment in Brazil
starting to improve and Webmotors
the clear number one auto vertical
in Brazil with excellent growth in
operational and financial metrics.
The success of what we have set out to
achieve with the Webmotors business
gives us the confidence and a blueprint
for our other Latin American businesses
that are still in the earlier phases of our
growth strategy.
We continue to strengthen our strong
market position in Chile through the
implementation of carsales’ IP and the
continued investment in the chileautos
team as well as new products and
technology. The year also saw chileautos
partner with Scotiabank to deliver new
consumer finance leads; leveraging the
Stratton experience in Australia this
added an important part of our adjacent
market strategy.
The appointment of an Argentinian
based senior online advertising GM in
the Demotores business in November
2017 signalled a number of structural
changes to position the business for
sustained growth. Along with the
Demotores website transitioning onto
carsales technology, the important
operational metric goals of traffic and
inventory were redefined; traffic was
refocused to ensure a sustainable
organic base was used as the
cornerstone and inventory, which
increased over 70% year on year,
was made a key focus.
December 2017 saw us increase the
ownership of our Mexican business to
100%, along with the secondment of a
senior carsales executive to Guadalajara
to run the soloautos business. These
two moves underpin the level of
confidence we have in executing our
long-term strategy not only in Mexico
but also in each of our Latin American
businesses. From an operational
perspective, the highlights for soloautos
were significant traffic and leads, which
both grew at well over 200% year on
year, with a strong focus on quality and
sustainability.
In January 2018 carsales acquired the
remaining 50.1% in our South Korean
business SK Encar, from the SK Group,
making it our biggest investment to
date. SK Encar continues to deliver
strong organic growth from its clear
number one auto vertical position with
its guaranteed vehicles and inspections
products performing particularly well.
SK Encar remains a significant
opportunity to grow the business in
Korea through increased dealer
penetration, yield improvements and a
focus on diversifying the revenue base
through investment in display, data and
adjacent market products over time.
Annual Report 2018carsales.com Limited
In May 2018 we held our second
International Conference with
representatives from each of our
overseas businesses attending. The
sessions focused on harnessing and
capitalising on the intangible assets
of carsales and its people. This is
already proving pivotal as we head
into the new financial year.
23
Annual Report 2018carsales.com Limited The carsales World
carsales.com Ltd
Stratton Finance
Team: 544
Offices: Melbourne, Sydney, Perth,
Adelaide and Brisbane
Team: 235
Offices: Melbourne, Sydney and
Brisbane
SK Encar – South Korea
Team: 169
Office: Seoul
tyresales
Team: 20
Offices: Perth and Melbourne
RedBook Inspect
Team: 52
Office: Sydney
soloautos – Mexico
chileautos – Chile
Team: 62
Offices: Guadalajara, Mexico City
and Monterrey
Team: 56
Office: Santiago
Demotores – Argentina
Webmotors – Brazil*
Team: 41
Office: Buenos Aires
Team: 168
Office: São Paulo
RedBook International
Team: 29
China
Office: Beijing
Thailand
Office: Bangkok
Malaysia
Office: Kuala Lumpur
New Zealand
Office: Auckland
* Reflects minority shareholding investments.
24
carsales.com Limited
Annual Report 2018
Expanding global network
Australia
229,215
Cars
Latin America
562,908
Cars
South Korea
69,326
Cars
For sale on carsales Group sites
as at 30 June 2018
Annual Report 2018
carsales.com Limited
25
Country highlight
Brazil
406,554
Cars for sale on Webmotors
as at 30 June 2018
28%
Underlying revenue growth
pcp
26
carsales.com Limited
Annual Report 2018
The Automotive Year
Mike Sinclair, carsales’
Director of Content, looks
back at the Australian
automotive year.
With an ever-increasing trend to video
consumption, we provided almost
7.2 million minutes of editorial video
to users at our sites. Add in the
motoring.com.au YouTube channel
and that compounds to around
23 years’ worth in total!
Here’s just a cross-section of the
stories that made FY18, the automotive
year it was…
It’s hackneyed to say the automotive
marketplace is dynamic, but it’s the truth.
Consider just the Australian automotive
vertical in isolation – over 55 active
brands, many with model lines-ups
that verge on encyclopaedic. There are
macro trends in terms of downsizing
and body styles (did someone mention
SUVs?). And then, there is the arrival
or preparatory stages of what will be
an inevitable step-change from internal
combustion to the battery and fuel
cell future…
The short version: there’s no shortage of
things to talk about; and a corresponding
growing expectation from consumers
that this massive cross-section of
information is available on-demand.
In satisfying this demand, carsales’
content team served more than
50 million editorial pages in FY18
in the auto vertical alone.
27
Annual Report 2018carsales.com Limited The Automotive Year continued
Our journey for the past 12 months
carsales’ own Daniel Ricciardo
was on a roll as we raced
into FY18. Five consecutive
podium finishes had the
young Aussie at the top
of many F1 pundits’ lists.
Grey: the automotive colour
to have in 2017. Audi’s
‘Nardo Gray’ was über
popular with car-buyers who
wanted to standout without
resorting to primary colours.
What has become a
worldwide recall sadly hit
home Down Under in July 17
when NSW Police announced
a faulty airbag had been
implicated in the death of a
local driver. Takata would be
an ongoing issue for the auto
industry globally for all of
FY18 and some time to come.
Holden delivers the Australian
auto media its first prototype
drive of the ZB Commodore,
the all-new German-built
large car it will launch in
2018, just two months ahead
of its factory closure. Our
initial impressions are pretty
positive but we note that
consumers will need some
convincing.
28
carsales.com Limited
Annual Report 2018
Despite being given the green
light to import low-volume,
hypercars like the Bugatti
Chiron, Australians will still be
unable to register them under
proposed new personal
vehicle import rules.
Confusion reigns – and
to an extent it still does…
Another milestone of sorts
as the Australian new car
marketplace starts the final
steps of migration from local
production. In September,
Victoria Police is the first
Aussie force to announce
it will go European for its
choice of pursuit car – BMW
gets the nod…
The end of an era… Toyota
(October 6), then Holden
(October 20) cease
production in Australia.
Although the writing had
been on the wall, the finality
of the last shifts and the last
cars off the production lines
hit home with the nation
– especially so in the case
of Holden. The last of over
7,687,000 Holdens was,
fittingly, a V8-engined manual
SS-V sedan. Red, of course.
Locally muscle-car production
may have perished, but proof
Australia is set to remain a
performance orientated
market isn’t hard to come by.
Our pitched battle between
the first factory right-hand
drive generation of Mustang
and Kia’s brand-building
twin-turbo Stinger GT
attracted significant audience
and put more than a few
noses out of joint.
Annual Report 2018
carsales.com Limited
29
The Automotive Year continued
The profile of carsales Car of
the Year has steadily risen
and it’s now, rightfully, one
of the best recognised
consumer new car awards
Down Under. In 2016,
controversially, it was taken
out by an SUV for the first
time… And in November
2017, it was another
all-wheel drive that was
awarded the top gong –
the Land Rover Discovery
In time for Xmas, Holden
revealed full specifications
and pricing for its new
Commodore -- a step change
for one of Australia’s most
iconic new car badges. The
fully imported Commodore
has its detractors but judging
by consumer engagement
with our stories, there’s no
shortage of interest in the
new Holden flagship.
Promising improved
efficiency, better refinement
and a traditional ‘big car’
drive experience, the new
Commodore’s success will be
a bellwether for Holden’s
relationship with Australians.
Who was 2017’s largest
automaker? The results
arrived in January 2018 and
probably surprised a few.
With the addition of
Mitsubish’s sales, the
Renault-Nissan alliance
overtook the Volkswagen
Group to record a total of
around 10.61 million units.
Nissan accouncted for more
than half (5.82m), Renault
sold 3.76m and Mitsubishi’s
tally was 1.03m. The
Australian auto industry
posted another record in
2017. According to official
VFACTS figures, 1,189,116
vehicles were registered,
surpassing 2016’s all-time
record of 1,178,133 vehicles
by nearly 11,000 units, or
just under one per cent.
History was made in February
2018 with Australia’s first
ever compulsory automotive
recall. The volume of vehicles
affected by potentially faulty
Takata airbags globally is
staggering – Down Under
the proportion of the current
fleet could end up as high as
one in four. Issuing its first
compulsory automotive
safety recall, the Australian
Government initially decreed
around 2.3 million cars be
recalled. That number has
continued to grow.
30
carsales.com Limited
Annual Report 2018
Aussies love performance
cars – and they adore utes…
So, what about a very
different sort of performance
pick-up? Ford delivered
that to Aussie off-road
petrolheads in the shape of
the twin-turbo desert-racing
style Ranger Raptor and we
went along for the ride in
the prototype. Developed in
Australia for the rest of the
world, the Raptor sets new
standards for one-tonne
pick-up dynamic performance.
Even at its elevated price tag,
Ford has a hit on its hands.
For a brand in decline, even
if only temporarily, to another
that can do little wrong and
is carving itself mass market
share and new niches all at
once… Hyundai’s first hot
hatch, the i30N arrived in
Australia in Q1 of 2018.
Designed and engineered of
Hyundai’s best and brightest,
it served notice (yet again)
of the marque’s global
strength… Our verdict:
“This is a serious effort and
expect other N models to
follow to change the brand’s
image once and for all.”
That carsales cap bounded
on to the top step of the
Formula 1 podium in April
– atop carsales ambassador,
Daniel Ricciardo. Ricciardo
picked off five top rivals in
the closing laps of the 2018
Chinese Grand Prix in
Shanghai with brilliant
overtaking – the best of all
a decisive final move on the
Mercedes-AMG of Valtteri
Bottas. It was carsales’ global
ambassador’s sixth F1 victory,
but not his last for 2018 –
just weeks later, Ricciardo
won at Monaco.
Ford emerged from more
than 18 months of mourning
following its Broadmeadows
production closures to
announce it was back into
Supercars with Mustang.
In a fillip for Australia’s
premier motorsport category
Ford Australia boss Graeme
Whickman officially
confirmed the return of the
marque to Supercars racing
(in 2019) via DJR Team
Penske and Tickford Racing.
But it wasn’t all good news
for Ford, as the Federal Court
fined the company $10m
over its handling of
complaints relating to cars
equipped with its PowerShift
dual-clutch automated
transmissions following a
2017 Australian Competition
& Consumer Commission
case against Ford.
Annual Report 2018
carsales.com Limited
31
The Automotive Year continued
It talked about bringing sexy
back – we’re not sure it ever
had it… But Australia’s
number one car brand Toyota
previewed a very different
sort of Corolla as the new
Japanese financial year
kicked off. The new Corolla
is evidence that in the
post-local-production,
post-fleet-dominated
marketplace, Toyota needs
to produce cars Australians
want, not have, to buy…
Dismiss Toyota’s styling,
marketing and engineering
muscle at your peril.
Closing factories may not be
good for your image or
media/consumer sentiment
scores but it appears to be
good for your bottom line. In
May Ford Australia
announced it had returned
to profit (just $27m) for the
first time since 2010, while
GM Holden announced a
$156.8m after-tax profit for
2017. Just a few weeks later,
Toyota followed suit
announcing a $137m
after-tax profit for the
2017-18 Japanese fiscal year
ending in March.
A famous Australian name is
aiming high with its return to
automotive production. Sir
Jack Brabham won three
world F1 championships and
started a racing dynasty that
continues today. And now
the Brabham name will be
borne by a supercar with the
credentials to compete with
McLaren, Ferrari,
Lamborghini and others. The
Brabham BT-62 was unveiled
the UK but will be built in
Australia. In small numbers,
for sure, but with high tech,
high precision and one
would hope, high margins.
Perhaps that’s a way forward
for auto manufacturing
Down Under… Small scale,
high desirability…
Perhaps the biggest smile of
the FY18 was reserved for
the boss of Alfa Romeo
Australia, Steve Zanlunghi.
After a rocky debut in 2017,
the super-stylish, super-fast
and occasionally furious Alfa
Romeo Guilia QV returned to
Australia’s Best Driver’s Car
– and won. As automation
continues its inexorable
march into the automotive
space, ABDC stands alone in
finding the purest, most-
engaging elements of the
experience behind the wheel.
At the pointy end of the
Italian marque’s global
renaissance, the Alfa Romeo
Giulia QV turned heads and
won hearts. Bravissimo…
32
carsales.com Limited
Annual Report 2018
Country highlight
Chile
92,759
Cars for sale on chileautos
as at 30 June 2018
40%
Revenue growth pcp
Annual Report 2018
carsales.com Limited
33
Our Brands
Domestic
International
* reflects minority holding.
34
*
Annual Report 2018carsales.com Limited Country highlight
Mexico
34,395
Cars for sale on soloautos.mx
as at 30 June 2018
82%
Revenue growth pcp
Annual Report 2018
carsales.com Limited
35
Promoting Our Brands
Utilising the mass reach
of sporting moments on
Australian television for
brand saliency coupled
with the targeting power
of digital and social the
carsales brand program for
2018 ensured a presence
and impact commensurate
with Australia’s no.1 which
drove record traffic, growth
and engagement.
Prominent perimeter signage
throughout the entirety of the AFL and
NRL seasons including State of Origin
and the highly anticipated ‘Ashes’
summer of international cricket, ensured
our presence during the most watched
TV programs of the year. The heightened
exposure of these events allows us to
reinforce our leadership messaging and
maintain saliency throughout the year.
carsales’ international cricket signage
was complemented by ongoing
sponsorship of the Melbourne
Renegades’ male and female Big Bash
League (BBL) squads. For the second
year, the carsales brand was featured
in a variety of prominent Renegade
on-field assets; from the playing and
training jerseys to on-ground and
perimeter signage.
With Renegades’ success we were able
to capitalise on semi-final appearances
averaging almost a million viewers
per night.
Throughout the year the performance
marketing team drove record results
in terms of traffic and made solid gains
around return on investment via our
search engine marketing and
remarketing programs, both
domestically and around the globe for
our portfolio of brands. A less visible
form of marketing but equally the
quintessential quiet achiever in the
marketing mix driving traffic and
conversions across the portfolio.
Early 2018 saw the renewal of our
partnership with Daniel Ricciardo.
The last 12 months have been an
exciting journey following Daniel’s
Formula One World Championship
quest from Melbourne through Europe,
Asia, the Americas and the Middle East.
As was the case in season 2017, the
carsales logo will continue to ride with
Daniel on the chin of his helmet for
every race of the season and on the side
of his team cap for every media moment
on race weekends.
Daniel was an integral part of our
overall brand strategy to help
Australians buy and sell a car with ease
and confidence in 2017. He fronted our
national out-of-home campaign that
reinforced carsales as the number one
destination for buying and selling a car
and was at his charismatic best in the
‘Auto Reply’ video series.
We further leveraged Daniel Ricciardo
through our 20th Birthday celebrations.
Consumers were given the chance to
win a trip for two to Austin to meet
Daniel at the United States F1 Grand
Prix. In addition, we also gave away
hundreds of gift cards and Red Bull
Racing caps.
The more they engaged with us, the
more chances they had to win. The
campaign was supported with a
significant above-the-line presence in
radio and out-of-home, as well as a
range of digital executions. During the
campaign period, we saw a lift in traffic
with 2.3m additional sessions to the site
and attracted thousands of entires.
36
Annual Report 2018carsales.com Limited videos
created
video
views
743,000
4.1M
50
50,000
items of media
coverage secured
Social
engagements
In Mexico we further leveraged Daniel
with a helmet changeover and outdoor
campaign to support solo-autos and
held a function with key customers in
Mexico City.
The carsales brand was back in market
again throughout Summer utilising
radio, digital and out-of-home
advertising to reinforce carsales as
the number one destination for buying
and selling a car and our laser focus
on all things auto.
The trade marketing team focused
on increasing the education offering
to dealers and improving thought
leadership in the industry. We introduced
webinars and email short courses,
in addition to continuing to publish
whitepapers and various data insight-led
products. In FY18 these included an
update of The Journey to Vehicle
Ownership, the carsales Communities
Audience Segment whitepaper and our
quarterly Auto Market Watch reports.
Our non-auto verticals have also enjoyed
a strong year in terms of traffic
performance and content evolution
and strong brand metrics.
Verticals such as caravans, motorcycles
and boats have very strong engagement.
Especially pleasing is the growth of our
largely B2B content verticals: trucks,
farms and construction.
In these verticals and autos alike, there
is a growing appetite for co-branded
and sponsored content, which the
team rolled out in beta format
to meet the demand.
AutoAds
In 2018 we took our marketing to a new level of personalisation launching
AutoAds, an innovative campaign that gave every private seller the option to
create and share a unique car commercial. Each ad included the seller’s name,
their car’s make and model and photos, its odometer reading and price.
After listing their car on carsales.com.au, sellers received an email with five
personalised ads. They were asked to select which ‘car ad theme’ best matched
their second-hand wheels: Tough, City, Adventure, Family or Luxury.
Once they had chosen their AutoAd, consumers could share it with their
Facebook community. By giving consumer’s compelling, personalised content
to enjoy, they willingly shared it with their friends and in doing so, endorsed
carsales by spreading the AutoAds story.
Through mass personalisation and the creation of over 750,000 individual car
commercials, AutoAds managed to achieve the reach and scale of awareness
that is normally only possible through paid media, for free, within Facebook.
We supported the campaign with a small media budget across social channels
and on our carsales network, as well as embedding all five of every seller’s
AutoAds within their ad listing for all potential buyers to enjoy.
Over the course of the eight-week AutoAds campaign, we improved preference
for selling on carsales by six points compared to our competitors. AutoAds also
improved the time to sell a car on carsales.com.au by 5.6%. Show Award and
two Cannes Lions Advertising Awards in 2018.
Carpool, the carsales lifestyle content
stream now in its second year continued
to go from strength to strength via our
celebrity drive content series featuring
host comedian Tommy Little and Aussie
celebs such as Rebecca Maddern, Scotty
James, Ella Hooper and our very own
Daniel Ricciardo. This, coupled with the
ever popular car hacks, aims to talk to
those who would classify themselves
as car drivers not car lovers. Equal parts
entertaining and educational it extends
the reach of our content to a wider
& larger audience continuing to build
our universal appeal.
37
Annual Report 2018carsales.com Limited
Directors’ Report
YOUR DIRECTORS PRESENT THEIR REPORT ON THE CONSOLIDATED ENTITY (REFERRED
TO HEREAFTER AS THE GROUP) CONSISTING OF CARSALES.COM LTD AND THE
ENTITIES IT CONTROLLED AT THE END OF, OR DURING, THE YEAR ENDED 30 JUNE 2018.
Operational and Financial
Review
Principle Activities
carsales is the Australian automotive
classified market leader and facilitates
anyone to buy and sell a car, bike, boat,
caravan and much more across our
network of sites (set out on page 34).
Our key services, customers and
geographies include:
Online Advertising Services
carsales Online Advertising Services can
be broken into two key product sets –
classified advertising and display
advertising services.
Classified advertising allows customers
(including dealers and consumers)
to advertise automotive and non-
automotive goods and services for sale
across the carsales Network. Classified
advertising typically allows a customer
to advertise their red brand X, model Y
car with 20,000km for $10,000 on a
carsales website. This segment includes
services such as subscriptions, lead fees
and priority placement services (depth
products) across automotive and
non-automotive websites.
Display advertising typically involves
corporate customers, such as
automotive manufacturers/importers,
finance and insurance companies etc,
placing advertisements on carsales
Network websites. These advertisements
typically display the product or service
offerings of the corporate advertiser
such as a special offer on new utes by
manufacturer Z, or save 10% on
insurance this month only etc, as banner
advertisements or other sponsored links.
Online advertising includes carsales’
investment in tyresales.com.au which
is an online tyre retailer that allows
consumers to transact and purchase
tyres; and RedBook Inspect which
provides inspection services published
online as part of classified
advertisements.
carsales Asia
Online Automotive Classifieds:
• SK ENCARSALES.COM Ltd (operations
in South Korea) – 100%
• iCar Asia Limited (operations in
Indonesia, Malaysia and Thailand)
– 13.1% (Available-for-Sale)
Data, Research and Services
The carsales divisions of RedBook,
LiveMarket, DataMotive and DataMotive
Business Intelligence provide various
solutions to a range of customers
including manufacturers/importers,
dealers, industry bodies, and finance
and insurance companies. They offer
products including software, analysis,
research and reporting, valuation
services, website development and
hosting as well as photography services.
Automotive Data Services:
• Auto Information Limited
(New Zealand) – 100%
• RedBook Automotive Services (M) Sdn
Bhd (Malaysia) – 100%
• RedBook Automotive Data Services
(Beijing) Limited (China) – 100%
• Automotive Data Services (Thailand)
Company Limited – 100%
Finance and Related Services
Online Automotive Classifieds:
carsales Latin America
• Webmotors S.A. (operations in Brazil)
– 30% (equity accounted)
• carsales Mexico SAPI de CV
(soloautos) (operations in Mexico)
– 100%
• Chileautos SpA (operations in Chile)
– 83.3%
• Demotores Chile SpA (operations
in Chile) – 100%
• Demotores S.A. (operations in
Argentina) – 100%
• Demotores Colombia S.A.S.
(operations in Colombia) – 100%
Finance and Related Services includes
the Stratton Finance Pty Ltd subsidiary,
which provides innovative finance
arrangements for vehicles, boats, and
other leisure items, vehicle procurement
and other related services to customers.
Revenues arise from commissions paid
by finance providers and other related
service providers. It also includes the
equity accounted associates RateSetter
Australia Pty Ltd and available-for-sale
accounted investment PromisePay
Pte Ltd.
International
carsales has operations in overseas
countries through subsidiaries, equity
accounted associate investments and
available-for-sale financial assets as set
out below (subsidiaries unless otherwise
stated):
38
Annual Report 2018carsales.com Limited Group Financial Results
FY18 was a strong year of financial
performance across the Group. It was
marked by both evolution as we
continue to strengthen our domestic
market position and deliver on our
strategy of growth in core digital
advertising and data services and
complementary adjacent businesses.
It also saw transformation in our
international markets with the
acquisition of the remaining 50.1% of
SK ENCARSALES.COM Ltd (SK Encar).
FY18 was another year of record
financial performance with Group
operating revenue rising to $444.0m,
up 19% on the prior comparative
period (pcp).
Group earnings remained solid with
EBITDA up 16% on pcp to $204.6m
and EBITDA margins of 46%.
Excluding the impact of the acquisition
of SK Encar, revenue and EBITDA grew
12% and 8% on pcp respectively.
Adjusted NPAT attributable to the
owners of carsales.com Ltd was
$131.0m, up 10% on pcp. Reported
NPAT attributable to the owners of
carsales.com Ltd was $184.8m, up
$75.3m on pcp, principally reflecting the
fair value gain recorded on the step
acquisition of the remaining 50.1% of
SK Encar.
The Directors believe the additional
information on International Financial
Reporting Standards (IFRS) measures
included in this report is relevant and
useful in measuring the financial
performance of the Group. In particular,
the presentation of ‘adjusted net profit’
and ‘adjusted earnings per share’
provides the best measure to assess the
performance of the Group by excluding
certain non-recurring or non-cash items
relating to financing, investments
and acquired intangible amortisation
from the reported IFRS measures. A
reconciliation of reported net profit to
adjusted net profit is set out in Note 6.
carsales Domestic Highlights
Data, Research and Services
Data, Research and Services revenue
was up 7% to $41.9m. There was
continued demand for our Data,
Research and Services from OEMs,
with the business drawing on its
investments in data and analytics to
address changing customer needs in an
increasingly data driven market place.
There was continued solid growth from
LiveMarket, driven by volume growth
and yield. Our RedBook business
continues to expand its product range,
with the launch of our new warranty
product, and increase capabilities to
display solid growth.
Finance and Related Services
Finance and Related Services revenue
was up 24% to $68.4m, with gross
profit up 11% on pcp to $49.9m. This
reflected solid growth in core finance
revenues of 10% to $46.5m and strong
growth in low margin other products
revenue of 66% on pcp to $21.9m. The
volume of loans and average loan value
financed grew between FY17 and FY18,
but was offset by lower yields being
achieved on reduced average volume
bonuses. The second half experienced a
more challenging lending environment,
particularly as lenders start responding
to the impending ASIC Finance and
Insurance regulation changes and
potential outcomes of the Banking
Royal Commission.
Core domestic segments of Online
Advertising Services and Data, Research
and Services exhibited good revenue
growth of 10% and 7% respectively,
reflecting a solid performance from core
digital advertising products.
Growth was supported by an
acceleration in our adjacent businesses
(particularly tyresales and RedBook
Inspect) and premium listing/depth
products across both dealer and
private sellers.
Online Advertising Services
• Dealer revenue was up 8% on pcp
to $143.9m reflecting both solid
growth in revenue from traditional
transactional revenue products
(subscriptions, leads and listings)
as well as continued growth in the
demand for premium listing and
depth products. This was supported
by new product initiatives such as
SMS lead delivery, codeless calls and
the AutoGate launch app that drive
better outcomes for dealers.
• Private revenue was up 21% on pcp
to $78.9m reflecting both strong
growth from adjacent markets
(particularly tyresales and RedBook
Inspect) and yield enhancements
in core private online ads, which
benefited from the implementation
of price tiers and an increase in the
take up of premium listing products.
Time to sell for private sellers
continues to reduce year on year,
supporting carsales, value proposition.
• Display revenue was up 3% to
$72.8m which was a resilient result
in a competitive market. Our insights
and analytics capability continues to
be integrated with the core display
product set making our products
stickier and enabling better targeting
of our solutions. Our relationships
with OEMs continue to improve
across the board with refreshed
products such as mobile video display
ads, certified pre-owned programs
and ‘Main Events’ continuing to
deliver significant value for customers.
39
Annual Report 2018carsales.com Limited Directors’ Report continued
Domestic Operations
Costs were well controlled across the
business leading to EBITDA up 16%
on pcp to $204.6m. EBITDA margins
declined slightly from 47% to 46%
reflecting the growth of lower margin
products and investment in the cost
base for future growth in the Finance
segment, and the increased contribution
of lower margin adjacent services,
particularly tyresales and RedBook
Inspect. Underlying core domestic
business margins improved 1% on pcp.
Depreciation and amortisation increased
by $7.4m on the prior period reflecting
acquisition intangible asset amortisation
and depreciation of capitalised labour
supporting group wide integration and
globalisation projects. Net finance costs
fell by $0.4m to $6.5m driven by
gains on non-cash non-controlling
interests option fair value movements
partly offset by increased cash interest
costs on higher average debt levels
through the year after the acquisition
of the remaining 50.1% of SK Encar
in January 2018.
carsales International Highlights
carsales holds a number of investments
across the Latin American and Asian
regions. The international business
segments in total contributed $38.1m
to Group revenue – up 359% on the
prior year.
carsales Asia
The major investment in the Asian
region is in South Korea (SK Encar)
which was 49.9% owned by the Group
until January 2018 when the remaining
50.1% of the business was acquired
for $243m and the business became
a subsidiary. SK Encar delivered a solid
result with FY18 underlying local
currency revenue growth of 15%
on pcp and EBITDA growth on pcp of
10%, with growth rates accelerating in
the second half positioning the business
well for the future. The Company also
operates its RedBook data business
throughout Asia which showed solid
revenue growth of 11% on pcp.
carsales Latin America
The Group’s largest investment in
the Latin America region is in Brazil
(Webmotors) which the Group owns a
30% stake in Webmotors recorded very
strong growth in underlying local
40
currency full year revenue and EBITDA
of 28% and 81% in FY18 on pcp
respectively, supported by improving
economic conditions and dealer
education regarding the value in
Webmotors premium offerings.
The Company also holds controlling
interests in online automotive
advertising companies operating in
the Latin American region in Mexico,
Chile and Argentina which positions
carsales as the number one automotive
classified network in Latin America.
Given the significant opportunity in
this region, our focus is to grow
market leadership and strengthen
product and technology capabilities
through implementation of carsales’
IP and technology and the success of
this strategy has been demonstrated
through revenue growth of 68% on pcp
to $8.2m across the region and improved
operating metrics in each business.
Outlook
Our domestic core business performance
in July has remained solid. We expect
our domestic adjacent businesses to
continue to build scale and complement
this growth similar to FY18. We also
expect our premium listing and promote
products to continue to grow.
We anticipate revenue, EBITDA and
NPAT growth will remain solid in the
domestic core business. Assuming
market conditions are stable, we also
anticipate a solid performance in our
Finance and Related Services business.
Assuming market conditions remain
stable in Brazil, we anticipate continued
strong local currency revenue and
earnings growth in FY19 for
Webmotors. In South Korea, we are
expecting solid revenue and earnings
growth in FY19 for SK Encar.
Integration of core carsales IP and
technology into our Chilean, Mexican
and Argentine businesses will continue.
In Chile we expect this to drive a good
uplift in underlying revenue and
earnings in FY19. In Mexico and
Argentina, we expect this to drive good
growth in revenue and key performance
metrics in FY19. However, we are also
planning continued investment in
technology, marketing and innovation in
these businesses to aggressively pursue
clear market leadership.
Risk
Being a complex business operating 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 and its businesses
around the world 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 motor vehicle
dealers and automotive manufacturers
(OEMs) – carsales derives a significant
proportion of its revenue from motor
vehicle dealers and OEMs. A change
in the size and/or structure of this
market could impact carsales’
earnings. In particular, consolidation
of the dealer market with fewer,
larger dealers or increased
manufacturer control of dealers’
online advertising activity may impact
upon the prospects of carsales. In
addition, a significant proportion 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, or
constrain carsales’ ability to command
market-leading prices for products
and services.
• Downturn in the Australian economy,
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 or
significant change in the advertising
market as a result of broader
economic influences or changing
advertiser trends that could have a
negative impact on carsales’ earnings.
Annual Report 2018carsales.com Limited
• Cyber Security – the cyber threat to
companies around the world is
growing and unrelenting, carsales as
an online business is not immune to
these risks. carsales is vigilant and
proactive in its approach to cyber
security, investing resources to meet
the challenges of a complex cyber
environment in order to protect our
customers’ data. A cyberattack or
hack of carsales’ systems could have
serious impact on the Company’s
reputation, operational and financial
performance.
• Information Technology – carsales’
business operations rely on owned
and 3rd party IT infrastructure and
systems, including reliance on
Amazon Web Services and other
cloud service providers. Any
interruption to these operations or
loss of customer data could impair
carsales’ ability to operate its
customer facing websites which could
have a negative impact on carsales’
financial performance and reputation.
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 macroeconomic
environment of these markets as well
as to fluctuations in exchange rates.
The Company may not be able to fully
recoup its investment in these markets
should it not be able to accelerate the
growth of its businesses through the
implementation of carsales’ business
models, intellectual property and
technologies.
• Financial Regulations and credit
availability – the Group is exposed to
various regulatory environments across
the markets and geographies in which
it operates. In particular, the Stratton
Finance Group must comply with
applicable financial legislation (such
as the National Consumer Credit
Protection Act) as well as relevant ASIC
instruments. Changes to regulations
in the future, or a reduction in the
availability of credit from Stratton’s
lending panel could result in a material
reduction in finance related revenues
and profitability.
41
Annual Report 2018carsales.com Limited Our People and Our Culture
carsales has maintained its
reputation as a fast paced
and dynamic workplace.
We have achieved this
through our passionate
people who are the
foundation of carsales’
success via innovation,
collaboration and in the
delivery of our products
and services.
The focus throughout FY18 has been
to continue to foster a healthy and
sustainable workplace environment; one
which enables our people to continually
improve and grow. We are proud to
offer an enviable workplace culture that
is reflected in each and every carsales
workplace.
carsales has been able to ensure
continuous business growth by
implementing the latest technology,
ensuring there are strategies in place
that support sustainable growth and,
most importantly, by listening to our
people. Throughout the year, we have
been pleased to establish regularly
check in opportunities via multiple
channels. These include hosting an
International Conference in Melbourne,
rolling out annual Engagement Surveys
across the board and Round Table
Discussion Groups which foster open
and honest conversation between all
people within the Company.
These communication platforms
contribute to how the Company is
able to recruit, reward and enable
ongoing success of our people.
The carsales investment in its people is
underpinned by a set of unique values
and behaviours that stem from our
EnRICH philosophy. These values foster
an environment which supports all
people to reach their full potential while
delivering value to the community and
our shareholders.
All of the team at carsales are aligned
to these guiding qualities. Throughout
the year, our recognition program
celebrates individuals who bring our
vision, purpose and EnRICH values
and behaviours to life in everything
they do.
These values have been part of carsales’
fabric for the past 21 years and are in
no way limited by geographical location.
Through EnRICH, carsales has continued
to build a better business.
Michael Chindamo, User Experience Lead
“Whether it be innovation when we
communicate throughout a project, research
a problem, collectively brainstorm or user test
a design solution, the end result of anything
we create, produce or deliver has innovation
encapsulated at the very core in many forms
and different levels.”
42
Annual Report 2018carsales.com Limited
College, in Richmond. These workshops
have provided an incredible opportunity
for both carsales people and Melbourne
Girls School to come together with
a common purpose of supporting
the next generation of leaders in the
digital industry.
The carsales Foundation
In early 2016, we formed the carsales
Foundation, with the vision to positively
impact the community and show our
commitment to making positive changes
in all markets in which we operate.
The carsales Foundation is our registered
charity and is another way for us to
connect with our community. We do
this in two ways, education and our
community grant program.
We are proud to support young people
through education and we offer a
scholarship to support this.
In the community
As carsales continues to evolve and
expand, so has our commitment to
leave a positive impact on the various
areas of the world we touch. This
includes the research and development
of products and services that simplify
life for customers and by continuing
to invest in our people.
Our teams are passionate about
community engagement and have used
their Community Day to participate in
the RSPCA Million Paws Walk, volunteer
at St Kilda Mums and the Hamodova
Cafe. Our people have used their
community hours to mentor students
at Monash University in the final years
of their study.
As a technology business, our team
has devoted a significant amount of
time by working with the community
to help demonstrate what careers in
technology can look like.
With a particular focus on improving
and maintaining connections with
young women, our people and culture
team had have developed a strategy
and educational program to develop
talent and boost interest in technology-
based careers.
Bringing tech to the
community
The carsales team are agents of
change, both in the workplace and
in the community. carsales is first and
foremost a technology company and
our people are passionate about sharing
their knowledge and skills with internal
and external communities.
One of the ways we are achieving
this has been through the creation
of technology learning programs,
which include:
• Kids Coding Camp: launched in 2018,
this event attracted 43 participants
(21 females and 22 males) between
the ages of six to 13 years. Across
two days, participants learned the
fundamentals of coding, took part
in interactive tech-based workshops
and heard from our tech industry
leaders on what a career in technology
at carsales can look like.
• Go4Tech: this workshop series
is an opportunity for employees in
technology to share their knowledge
and passion with their colleagues.
Workshops were focused on coding
and beginner-level tech functionalities.
More than 240 employees have taken
part in these sessions.
The Company has been able to continue
to empower those in the community,
with a particular focus on supporting
young women to understand what
a career in STEM can be. Throughout
the last 12 months, carsales has created
a network of inspired and passionate
individuals, who have developed and
led educational programs for varying
age and skill level, to see what working
in technology can encompass.
At carsales 2018 has seen a profound
shift in how our people in technology
share knowledge. An example of this
is where our people have proudly
volunteered time and industry
experience to develop comprehensive
education modules and workshops
for young women at Melbourne Girls
43
Annual Report 2018carsales.com Limited
Our People and Our Culture continued
Tam Cao, AI Software Engineer
In the carsales AI team, we embrace innovations.
It is in our DNA. Every day, we are constantly
looking for and applying the latest innovations and
technologies to bring the best possible services to
our users and customers. From simplifying the listing
process to making suggestions on how our users
can increase their chance of getting as much as they
can for their listing or even protecting them from
online threats while using our services, innovation
opens up a world of possibility. We believe that
innovation is the only way forward in the fast
evolving digital market place that carsales is in.
In 2018, this fund was allocated to a
‘Women in IT Scholarship’ at Swinburne
University. Through this scholarship, we
have been able to financially empower a
woman to undertake tertiary education
that will support a career in the
technology industry.
Currently, women are underrepresented
in technology and the carsales
Foundation’s goal is that this scholarship
will support a female with a
demonstrated academic ability and
desire to undertake undergraduate
studies in the field of Information
Technology at Swinburne University.
In addition to the scholarship, carsales
has provided internship experience to
the scholarship recipient and she has
successfully gained a place in our 2019
carsales Next Gear graduate program.
carsales was also an active member of
the Campaign for Marriage Equality and
began a multi year sponsorship of the
Ally Award at the annual LGBTI Awards.
Our Culture
We work in a fast paced and dynamic
business environment which means that
attracting and retaining the best talent
is essential to our sustained success. Our
people are highly skilled, experienced
and have shared values and behaviours
at their core.
carsales is always looking at ways to
provide more opportunities for its
people to learn and we work hard to
provide a diverse environment that is
inclusive and collaborative, with a strong
social conscience.
A diverse and inclusive working
environment provides a wide range of
perspectives, innovation, engagement
and improved operational performance.
To achieve this environment we promote
a workforce that embraces and respects
diversity and inclusion through our
Diversity and Inclusion Council as well as
our diversity strategy.
A sense of pride exists within each and
every carsales employee, when it comes
to the embodying our diversity
commitments. It has become part of our
everyday life at carsales.
44
We believe that everyone has a role to
play in creating a successful flexible
working arrangement, from employees
taking control of a work/life balance to
our leadership team recognising the
benefits of working flexibly and
supporting those who have opted for
these arrangements.
We support employees in requesting
arrangements that allow for flexibility
around where, when, and for how long
they work. Some examples include:
varying work hours, working from
home, time off in lieu, flexing to
part-time, and working different hours
at different times.
We have accommodated stepped
retirement plans, staggered return to
work following parental leave and
serious illness, and absence from or
reduced hours of work to accommodate
approved career-related studies.
In 2018 we again showed our
commitment to flexibility by introducing
more initiatives such as a School Holiday
program in our Richmond office, and
more flexible leave options including:
increasing our paid parental leave;
increasing access to personal leave; and
providing early access to long service
leave.
Gender Equality
From 2015, carsales been a Workforce
Gender Equality Agency (WGEA)
Employer of Choice. The citation is in
recognition of our systematic and
strategic approach to the journey of
achieving a gender diverse workplace.
We see that it sets the very minimum
that we must achieve moving forward
and we will always work to exceed the
expectations of WGEA year on year.
Annual Report 2018carsales.com Limited In addition to our diversity strategy, we also have a set of specific gender equality objectives that we focus on:
Objectives
Initiatives
Outcomes
In FY18 43.8% of appointments were female,
62.5% of and the managerial appointments
were female. Executive Leadership Team is
comprised of 30% females.
Development programs had 39% female
attendance.
44% of promotions in FY18 were female staff
members.
Our 2019 Next Gear Graduate program intake
has a 50/50 gender split.
The FY18 mentor program had 40% female
participants.
Female networking groups hosted several
sessions throughout the year and the business
collectively celebrated International Women’s
Day investing in an inspiring female world
champion guest speaker.
In FY18, 24 members of the carsales team took
parental leave and carsales is currently
supporting nine team members returning from
a period of parental leave with formal flexible
working arrangements.
Continue to grow the
number of women in senior
roles and professions where
women are traditionally
under represented.
Continue to implement
career development
programs to prepare women
within the business to take
on more senior roles.
Foster an inclusive culture
and environment in which
women network and
mentor each other to
progress their careers within
carsales.
Continue to enhance
flexible workplace
arrangements for both
women and men. Enabling
our people to manage
work/life commitments
and preferences.
Ongoing unconscious bias education of
managers on the importance of a diverse
workforce and an executive-led Diversity
Steering Committee.
Maintaining quotas for recruitment shortlists.
Reviewing all job advertisements for gender
bias.
Current initiatives include training and
development programs including
communication, presentation, management
and influence skills training.
Continued the Next Gear Graduate Program
creating coaching and development
opportunities.
We have a carsales mentor program available
to all of our people.
We support various women’s networking
groups including sponsoring events such as
Changing the Ratio and women in tech events.
Delivered Coding 101 workshops for our
people as well as formed a team of women to
work with local schools to encourage increased
participation of females in STEM.
Celebration of International Women’s Day.
In FY18 we made significant advancements in
our flexible leave options including:
• Increased paid parental leave from 12 to 16
weeks (plus five additional days of paid leave
during the first months returning to work to
assist with the transition).
• In addition to our two weeks paid leave for
secondary caregivers, we have also provided
access to an additional 10 days of sick /
career’s leave.
• Introduced the ability to purchase additional
one or two weeks of annual leave per year.
• Provided for early access to long service leave
after seven years of continuous service
(usually 10 years depending on state
legislation).
45
Annual Report 2018carsales.com Limited Our People and Our Culture continued
In September 2017, carsales was proud
to become one of 122 Australian
employers formally recognised as a
White Ribbon Workplace Accredited
workplace. This accreditation recognises
our commitment to preventing violence
against women and has enabled us to
be a leader in continuing the
conversation to call out inappropriate
behaviour in the workplace and society.
Becoming a White Ribbon accredited
workplace has seen carsales strive
towards a continued positive workplace
culture for all our people with an
emphasis on highlighting policies,
procedures, training and open
communication. All these elements
contribute to an environment that
addresses gender inequality and
empowering our people to recognise
and educate their peers and those
around them to the importance of
preventing and standing up to gender-
based violence.
Through our accreditation, team
members who may be experiencing
domestic violence or a family crisis have
immediate access to up to five days of
paid leave for the purpose of seeking
medical, legal or psychological
assistance; attending court appearances;
counselling; participating in an
immediate family member’s
rehabilitation; relocation; or to make
other safety arrangements.
Most recently, in May 2018, our CEO,
Cameron McIntyre endorsed the
Victorian Government’s Respect
Women: Call it out campaign. This
campaign is the first of its kind and
encourages Victorian men to intervene
and call out sexism and gender
inequality. This is an extension of the
ongoing programs carried out at
carsales.
This financial this year has seen carsales
seek new opportunities to create
meaningful relationships with the wider
Australian community. An example of
this has been with the recent
partnership with WISE Employment.
carsales has proudly collaborated with
WISE Employment to find opportunities
for their clients to move towards safe
and stable employment. This partnership
has seen numerous employment
opportunities open up within various
departments and teams within the
Company, with more recruitment
opportunities to be explored in the new
year.
46
Trudi Sampola, Marketing
Transformation Director
“This year I am leading the
development of a global creative
framework. This approach will be
the building blocks to align our
global marketing efforts and in
turn, add value and smarts to
each international office and
their local marketing programs.
This is innovation that drives
value for all our carsales global
businesses.”
Annual Report 2018carsales.com Limited
The decision to partner with WISE
Employment was simple. WISE
Employment is passionate about
providing support and services that
empower all people within the
community to find employment,
regardless of their personal challenges.
Wise Employment has tailored
employment programs, initiatives
and workshops to support its clients
to find meaningful work which in turn
continues to ensure carsales attracts
and retains top talent throughout the
business. Through this partnership,
carsales hopes to continue to build
on its culture of equal opportunity
and ensuring all our people continue
to adopt a non-biased attitude when
it comes to diversity in the workplace.
Learning and Development
We are focused on providing access
to opportunities to support the
development, retention and succession
of our people. Some of these training
and development programs include
mentoring programs, our annual CEO
Scholarship, leadership development,
conferences, online learning plus
internal and external training programs.
Lauren Smith
Head of Product
– Media & Agency
Innovation at carsales is fuelled by data, customer
insights, and collaboration.
We use product BETAs in partnership with key
brands who share our passion for innovation,
to test, learn, iterate and create premium media
solutions that deliver real results.
Playing to our strengths has enabled us to be
one of the most innovative publishers in this
market, with products that deliver a great
experience for our audience, return on
investment for our partners and scalable
solutions that can serve the carsales business
locally and abroad.
This year, more than 5,802 hours
of training was provided to our team.
carsales’ Expert Series is one of our most
successful learning and development
programs. This is a series of sessions run
by internal experts designed to share
best practice, improve knowledge and
understand department and industry
developments and strategies.
Some of the Expert Series run in FY18
includes Coding 101, Tone of Voice,
Voice of Customer and Understanding
the International Business.
We invest in innovation and creating
a business for the future. We are
committed to providing an attractive
workplace for the next generation and
we are proud to offer career progression
opportunities.
As a global business, we now have
pathways that enable people to move
across our office locations.
This year we have seen our people based
in Australia take on both long and short-
term working opportunities overseas.
47
Annual Report 2018carsales.com Limited Our People and Our Culture continued
Looking locally, carsales has grown its
leadership program, with a refreshed
focus on supporting our leaders to
continue to support high-performing
and vibrant teams. In addition, we
provide training and development
programs, with an emphasis on
communication, presentation and
management training.
Hackathons
carsales encourages innovation
and disruption from within. carsales
Hackathons are a great example of this.
Twice a year we give our team creative
freedom to spend three days generating
concepts and working prototypes to
benefit the Company, our customers
and our consumers. A number of
Hackathon initiatives have already been
developed and implemented into our
range of products and services.
The carsales Hackathons have become
collaborative events, with teams
including people from a variety of teams.
These events are vital to building our
employee engagement and connecting
with the wider community.
The June carsales Hackathon introduced
its first Community Award where
members of the public were invited to
experience the event, share consumer
insights and select a winner.
Our graduates work through three
rotations across their 18-month paid
internship and receive individual
mentoring, a rotational buddy and
constant professional learning
opportunities and support from their
peers and the wider senior leadership
team. Our graduates receive exposure
across the carsales portfolio and
have already made a real impact
and contribution to the culture
and Company.
Graduate Program
carsales’ Next Gear graduate program
was kicked off in FY18. The 18-month
program has two separate streams in
our Commercial and Technology areas
and is an opportunity for individuals at
the beginning of their professional
journey to make a real impact in roles
and projects that will help grow the
carsales business.
Health and Wellbeing
carsales strives to ensure all team
members live balanced and fulfilling lives.
We foster four pillars of health (mental,
physical, emotional and financial) to
support this across our employee
community.
A Health and wellbeing events that run
throughout the year and across our
Australian offices include: boot camp,
pilates, yoga, meditation and financial
education.
Furthermore, our people are passionate
about taking health and wellbeing into
their own hands and have created social
running groups and year-round team
sports, including pool and table tennis
competitions.
48
Annual Report 2018carsales.com Limited Country highlight
Argentina
29,200
Cars for sale on Demotores
as at 30 June 2018
232%
Revenue growth pcp
Annual Report 2018
carsales.com Limited
49
Corporate Governance
carsales is committed to
being ethical, transparent
and accountable in
everything that it does.
We believe this is essential for
the long-term performance and
sustainability of our Company
and supports the interests of our
shareholders and other stakeholders.
The Board of Directors is responsible
for ensuring that the Company has
an appropriate corporate governance
framework to protect and enhance
Company performance and build
sustainable value for shareholders.
This corporate governance framework
acknowledges the ASX Corporate
Governance Council’s Corporate
Governance Principles and
Recommendations (ASX Principles
and Recommendations) and is designed
to support our business operations,
deliver on our strategy, monitor
performance and manage risk.
Our FY18 Corporate Governance
Statement addresses the
recommendations contained in
the third edition of the ASX Principles
and Recommendations and is available
on our website at bit.ly/esg-reprt.
Environmental, Social and Governance Report
with risk management policies to the
Board’s Audit and Risk Management
Committee (ARMC).
Read the full ESG report “Driving The
Future: Our Sustainable Business” on
our Corporate Governance page of the
website at bit.ly/esg-reprt.
carsales’ approach to assessing,
mitigating and managing ESG risk is
overseen by the Company’s Board and
managed by the carsales’ Executive
Leadership Team. The Company also has
an ESG working party that advises
management on ESG issues and
undertakes the Company’s reporting.
The Board is responsible for establishing
and overseeing the Company’s risk
management framework. It has
delegated the specific duty of
developing and monitoring compliance
This year we launched
our first Environmental,
Social and Governance
(ESG) Report, ‘Driving the
future: Our sustainable
business’. At carsales, we
take our ability to have a
positive impact on society
extremely seriously. We
want carsales to be known
for behaving fairly and
responsibly, earning the
trust put in us by our
customers, employees,
shareholders and the
community in general.
50
Annual Report 2018carsales.com Limited Our Environmental Commitments
We are consciously
building a sustainable
business. We understand
that resources are finite
and it is important for us
to protect the world in
which we operate. While
the nature of our business
has a low environmental
impact, and we are not
subject to any specific
environmental legislation,
we aim to minimise our
environmental footprint.
We seek to manage our impact on
the environment by monitoring and
reducing resource use, maintaining
carbon neutrality, having regard to the
sustainability of our supply chain and
occupying and creating innovative and
sustainable workplaces. carsales actively
supports environmental awareness
campaigns and is a signatory to
Sustainable Victoria’s Take2 campaign,
We aim to design and rent premises in
line with sustainability best practice, to
continually improve our sustainability
practices, and to partner with suppliers
with high quality sustainability practices.
Our goal is to lower our environmental
footprint by utilising a number of
measures to minimise waste,
consumption of materials, energy and
water, including employing sustainable
cleaning, waste and recycling practices,
including using recycled materials and
removing personal waste paper bins
from desks to ensure all waste is
recycled in the correct manner. As a
business we only purchase 100%
recycled paper and enforce printing
limits including default double-sided,
black and white printing.
Since one of our main environmental
impacts is our office footprint, we have
worked with our landlords to create
sustainable workspaces. We have
installed low wattage, low energy,
power efficient globes; use lighting
sensors to ensure lights are turned off
when not in use; and employ zoning air
conditioning to reduce power or switch
off outside office hours.
We have installed filtered water taps in
offices to reduce the purchase of
bottled water and supply crockery and
steel cutlery to all employee hubs and
tea points within our offices to reduce
disposable consumables, and have
installed water efficient dishwashers and
efficient bathrooms.
Our head office in Richmond, which
houses the highest number of our
people, is certified as a 4.5-star NABERS-
rated building while our state-of-the-art
Sydney premises are yet to be certified.
We have installed video conferencing
facilities and use Skype for Business
across the Company to connect sites
and reduce the need for travel and
promote recycling of battery and mobile
phones to reduce landfill. Our use of
green IT and cloud-based solutions has
lowered our environmental footprint
significantly.
Data centre efficiency
Our move to cloud-based solutions such
as Amazon Web Services (AWS) helps
deliver on our commitment to reduce
our environmental footprint. Our key
partners AWS and Equinix both are
publicly committed to power their data
centres with 100% renewable energy.
By working with AWS and Equinix, we
benefit from their continuous desire to
increase the energy efficiency of data
facilities and equipment, the innovation
of the design and manufacture of
servers, storage, and networking
equipment to reduce energy.
AWS has a long-term commitment to
achieve 100% renewable energy usage
for its global infrastructure footprint.
AWS also focuses on reducing water
usage in its data centres, and evaluating
climate patterns for each AWS region to
select the most energy and water
efficient cooling method. It is also
implementing on-site water treatment
technologies that allow it to further
reduce water consumption and AWS
utilises non-potable, recycled water for
cooling when possible.
51
Annual Report 2018carsales.com Limited Our Board
Richard Collins
Non-Executive
Chair
Richard has been a
Director of carsales.com
Ltd since 2000. Richard
holds a degree in
Commerce from
Melbourne University,
majoring in Economics
and Company Law.
He spent 10 years
with the Ford Motor
Company and has over
30 years’ experience
as a Dealer Principal,
currently holding Ford,
Toyota, Subaru, Suzuki,
Isuzu Ute and Skoda
franchises. Richard is
also a member of the
Board of AADA
(Australian Automotive
Dealer Association).
Richard has long
acted as the voice
of the automotive dealer
on the Board, providing
insight into the
Company’s largest
customer segment with
a distinguished career as
a dealer principal and a
business operator.
Cameron
McIntyre
Chief Executive
Officer and
Managing
Director
Cameron was appointed
Managing Director and
CEO of carsales.com Ltd
in 2017. Prior to this,
Cameron held the
positions of Chief
Operating Officer (since
October 2014), and
Chief Financial Officer
and Company Secretary
for the previous seven
years, including for the
IPO of the Company in
2009. Cameron has over
25 years of finance and
operational experience.
Cameron holds a degree
in Economics from La
Trobe University,
Melbourne, is a
graduate of the General
Management Program
at Harvard Business
School and is a Certified
Practicing Accountant
(CPA).
Cameron brings
unparalleled knowledge
of the business and
significant experience
in strategy and
management
to the Board.
Wal Pisciotta
OAM
Non-Executive
Director and
Co-Founder
Wal has more than
35 years’ experience
in supplying computer
services to the
automotive industry.
Wal holds a Bachelor
of Science degree in
Business Administration
from the University of
Alabama (United States)
and was the Chair
carsales.com Ltd since
its inception until
August 2015. Wal was
recognised with the
Medal of the Order
of Australia for his
services to the Australian
Automotive Industry in
the 2016 Queen’s
Birthday Honours.
Wal brings to the Board
extensive knowledge of
the IT needs of the
automotive industry
as well as his extensive
knowledge of the
business, having been a
driving force from
its inception.
Kim Anderson
Non-Executive
Director
Patrick
O’Sullivan
Non-Executive
Director
Kim is the former
CEO and founder
of Reading Room
Inc/Bookstr.com, a
community/social
networking site for
readers, a Non-Executive
Director of WPP
Australia and New
Zealand, Director of The
Sax Institute. Recently
Kim has joined the
Board of Marley Spoon
and was appointed chair
of Beem It. Kim has
more than 25 years’
experience in various
advertising and media
executive positions
within companies
such as Southern Star
Entertainment, the Nine
Network, PBL and
Ninemsn.
Kim provides an
abundance of
experience and
knowledge in the
advertising and
marketing industries.
Kim also has extensive
experience on
ASX listed Boards,
including as Chair
of Remuneration
Committees.
Pat has been a Director
of the Company since
2007 and 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 until June 2012.
Pat is a member of The
Institute of Chartered
Accountants in Ireland
and Australia. He is a
graduate of the Harvard
Business School’s
Advanced Management
Program. He also served
as a Director and
Company Secretary of
Nine Entertainment Co
Pty Limited and was
Chair of Ninemsn.
Pat brings immense
financial and regulatory
expertise to the Board,
Chairing the Audit and
Risk Management
Committee. Pat also
provides the Board with
insights relating to
operations of
global companies.
52
Annual Report 2018carsales.com Limited Edwina Gilbert
Kee Wong
Steve Kloss
Nicole Birman
Non-Executive
Director
Non-Executive
Director
Alternate Non-
Executive Director
Company
Secretary
Nicole is an experienced
corporate lawyer who
holds the position of
General Counsel and
Company Secretary at
carsales.com Ltd. Nicole
has a Bachelor of Laws
(Hons) and Bachelor of
Arts from Monash
University. Before joining
carsales, Nicole acted
as in-house legal counsel
for Medibank Private
and REA Group. Previous
to this Nicole worked for
Minter Ellison, one of
Australia’s premier legal
firms where her areas
of specialty included
intellectual property law.
Edwina has worked
in the automotive
industry since 2003, and
is currently Dealer
Principal of Gillen
Motors and Director
of Phil Gilbert Motor
Group, managing
200 staff with two
brands in two busy
metropolitan locations.
Edwina was the Chair of
the Hyundai NSW Dealer
Council and a member
of the Hyundai National
Dealer Council from
2010 – 2015. Edwina
holds a Bachelor of Laws
and Bachelor of Arts
from Sydney University
and practiced
commercial law before
moving into the
automotive industry.
Edwina brings significant
OEM knowledge along
with experience
operating dealerships
with a `digital first’
marketing approach.
Edwina’s background in
law also contributes to
the regulatory
capabilities of the Board.
Kee is an entrepreneur
with a background and
qualifications in
Engineering, Information
technology and
Business. Kee has started
several businesses and
has made investments
across a number of
industries which include
technology, services,
retail, food and
beverage, trading and
property.
Steve has more than
25 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 and is an
experienced board
Director.
Kee has experience in IT
and management
consulting and was a
senior executive at IBM
running part of
its e-business group in
the Asia Pacific region,
including Australia
and New Zealand.
He is founder and
managing director of
e-Centric Innovations,
an IT/Management
consulting firm
operating in Australia,
Malaysia and Singapore.
Kee’s appointment
enhances the Board’s
knowledge of
technology and product
as well as providing
valuable insight into
markets outside of
Australia in which the
Company operates.
53
Annual Report 2018carsales.com Limited Our Executive Leadership Team
Cameron
McIntyre
Chief Executive
Officer and
Managing
Director
Cameron was appointed
Managing Director
and CEO of carsales.com
Ltd in 2017. Prior to
this, Cameron held the
positions of Chief
Operating Officer (since
October 2014), and
Chief Financial Officer
and Company Secretary
for the previous seven
years, including for the
IPO of the Company in
2009. Cameron has over
25 years of finance and
operational experience.
Cameron holds a
degree in Economics
from La Trobe University,
Melbourne, is a graduate
of the General
Management Program
at Harvard Business
School and is a
Certified Practicing
Accountant (CPA).
Jo Allan
Chief People
Officer
Paul Barlow
Ajay Bhatia
Nicole Birman
Managing Director
– International
Managing Director
– Consumer
General Counsel
and Company
Secretary
Jo is the Chief People
Officer at carsales.com
Ltd. She joined the
business in 2008 and
is responsible for all
aspects of people and
culture across the
carsales network.
She has over 15 years’
experience holding
senior roles in people
and culture,
remuneration,
communication and has
extensive experience in
major transformation
programs. She has built
the people and culture
function at carsales to
what it is today and
holds a Bachelor of
Business and a Bachelor
of Communication from
Monash University.
Paul joined carsales
in 2009 and is
responsible for carsales’
international growth
strategy and operations.
Paul is a Director of SK
Encar in South Korea,
Webmotors in Brazil,
soloautos in Mexico,
chileautos in Chile and
Demotores in Argentina
as well as tyresales. Paul
has been involved in
technology solutions in
the automotive industry
since 1988 and over 20
years in the online
classifieds space
including co-founding
a digital start-up and
leading it through
acquisition. Paul has
a Masters in Business
Systems from Monash
University.
Nicole is the General
Counsel and Company
Secretary of carsales.
com Ltd. Nicole is an
experienced commercial
lawyer, having practised
law at one of Australia’s
premier law firms before
moving to work in the
legal functions of some
of Australia’s most
prominent businesses.
For the past 10 years
Nicole has been
advising leading online
companies as in-house
counsel. Nicole holds a
Bachelor of Laws (Hons)
and a Bachelor of Arts
from Monash University.
Ajay is the Managing
Director of the
Consumer Business and
leads the group that
brings together all
consumer facing parts of
the business. Ajay was
previously the Chief
Product and Information
Officer, responsible for
all aspects of product
management, software
development,
infrastructure and IT
operations. Ajay has
held several technical
and commercial
leadership positions
ranging from GM
Commercial, Product
Director, and Technology
Director to CIO. Ajay
holds a Bachelor’s
degree in Engineering
from University of
Technology, Sydney
and a Masters in
Management. Ajay was
awarded Australian CIO
of the year for 2015 by
CEO Magazine Ltd.
54
Annual Report 2018carsales.com Limited Jason Blackman
Kellie Cordner
Andrew Demery
Michael Holmes
Anthony Saines
Chief Information
Officer
Chief Marketing
Officer
Chief Financial
Officer
Executive Director
– Dealer
Managing Director
– Commercial
Jason is responsible for
all technology decisions
across the Company
to streamline the
carsales business both
domestically and
internationally. Jason
joined carsales in 2012,
becoming CIO in 2017.
He has experience across
a variety of industries,
including digital media,
utilities, manufacturing,
finance and defence in
both Australia and New
Zealand. Jason holds a
Bachelor of Accounting
from the University of
South Australia, a
Bachelor in Technology
from RMIT.
Kellie Cordner is the
Chief Marketing Officer
at carsales.com Ltd.
Joining the business
in April 2015, Kellie
is responsible for all
aspects of Marketing
and Content across
the carsales portfolio.
Kellie holds a Bachelor
of Business degree
from Monash University.
She has over 20 years
experience in a range
of senior roles in
Marketing, Product &
Strategy across the retail
and media industries.
She has been a member
of the Monash University
Marketing industry
advisory board for
the past 5 years.
Andrew joined carsales.
com Ltd as Chief
Financial Officer in
December 2014. Prior
to joining carsales
Andrew held a
number of roles with
PricewaterhouseCoopers
in both Australia and
the UK providing a wide
range of assurance,
capital markets and
consulting services
across the media,
telecom, technology
and travel industries.
Andrew is a member
of the Institute of
Chartered Accountants
of Scotland (CA) and
holds a degree in Physics
from the University
of London.
Michael is responsible
for the thousands
of carsales dealer
customers across
Australia. He was
previously General
Manager - Dealer Sales
and Development at
carsales. A 25-year
veteran of the Australian
motor industry, he has
been with carsales since
2013. He was previously
Motor Dealer Manager
for Allianz, National
Sales Director of Fairfax’s
Drive.com.au, National
Manager of Motor
Trades Division for QBE
Insurance. Michael also
worked in the retail
motor trade (metro
and regional) for over
7 years, as a Finance
and Insurance Manager.
He is currently studying
for his MBA and is a
member of Advisory
Boards for three
separate start up
digital ventures.
Anthony runs the B2B
arms of the carsales
domestic business,
incorporating the
operations of our
commercial facing
businesses and including
the revenues and
relationships with
dealers, manufacturers
and media agencies.
Anthony was previously
Director – Media and
OEM at carsales.
Anthony holds an MBA
and since moving to
Australia has held a
number of senior roles
in the online advertising
industry. Anthony is a
long-standing Board
member of the
Interactive Advertising
Bureau (IAB), the peak
trade association for
online advertising in
Australia, and his career
includes senior executive
positions at Sensis,
DoubleClick and a Board
role at Adstream Pty Ltd.
55
Annual Report 2018carsales.com Limited Our Remuneration Chair’s Letter
Dear Shareholder,
On behalf of the Board, I am pleased to present the Remuneration Report for FY18.
Over the past twelve months, I have continued to enjoy speaking with a wide variety of
stakeholders and hearing their views on what information shareholders want to see captured in
our Remuneration Report. As a result, you will see more changes to our Remuneration Report this
year, as the Remuneration and Nomination Committee continues in its objective to deliver
information to our shareholders in the most effective and meaningful way possible.
Following the valuable feedback we received from our shareholders and their representatives over
the past 12 months, we will be making some changes to the long-term incentive plan for FY19. These changes include using face
value rather than fair value for the allotment of performance rights, and replacing NPAT with earnings per share in the financial
performance measures. In addition to this we have commenced the disclosure of our LTI awards targets on a prospective basis,
starting with the FY18 incentive plan.
Set out below are some of the key remuneration outcomes which occurred during the FY18 financial year.
• There were no changes in the remuneration packages of any Senior Executive during the reporting period. With the
appointment of Cameron McIntyre in March 2017 and subsequent re-structure of the executive team along with their
responsibilities, the most recent change in remuneration was effective from 1 April 2017 as outlined in the 2017 Annual
Report.
• In order to simplify the structure and reflect the increasing time demands of the Board from the 1 March 2018 the Board
modified its fee structure as outlined in section 5.7.
• The Short-Term Incentive (STI) outcome for Senior Executives was considerably higher than FY17 as the business performed
significantly better than last year with revenue growth exceeding expectations and adjusted NPAT on expectations. The Board
was also pleased with the execution of specific projects that were given to executives to complete and our staff engagement
is at record levels.
• The Long-Term Incentive (LTI) achieved the minimum required growth rate of 7.4% CAGR in adjusted Earnings per share over
the 3-year vesting period.
As in previous years, in this report the Company is voluntarily disclosing the actual cash remuneration received by Senior Executives,
in addition to the statutory reporting obligations. The Remuneration and Nomination Committee believes that carsales’
remuneration framework is fully aligned with and supports the Group’s financial and strategic goals.
As always, we welcome your feedback on our Remuneration Report and look forward to discussions with many of you over the
coming year.
Yours sincerely
Kim Anderson
Chair of the Remuneration and Nomination Committee
56
Annual Report 2018carsales.com Limited
Remuneration Report
1. Introduction
The Board has established a Remuneration and Nomination Committee which provides guidance on remuneration, incentive policies
and practices, and undertakes regular remuneration benchmarking in order to make specific recommendations on remuneration
packages and other terms of employment for the CEO, Senior Executives and Non-Executive Directors (together Key Management
Personnel).
Further information on the purpose and duties of the Remuneration and Nomination Committee is contained in its Charter, which is
available from the Company’s investor website at shareholder.carsales.com.au.
The term ‘Senior Executives’ refers to the CEO and those executives with responsibility and authority for planning, directing and
controlling the activities of the Company throughout the year, namely:
Cameron McIntyre Managing Director and Chief Executive Officer
Ajay Bhatia
Anthony Saines
Paul Barlow
Andrew Demery
Managing Director – Consumer
Managing Director – Commercial
Managing Director – International
Chief Financial Officer
Reflecting the seniority of the role of Chief Financial Officer of the Company, Mr Andrew Demery became a Senior Executive
effective 1 July 2017.
Mr Kee Wong was appointed as a director of the Company effective 9 July 2018 which is the only change in Key Management
Personnel (KMPs) between 30 June 2018 and the date of publication. As Mr Wong was appointed after the end of the 2018
financial year he is not included in any of the tables setting out the remuneration for FY18.
The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001.
2. Remuneration principles
2.1 Principles used to determine the nature and amount of remuneration for FY18
The governance of Senior Executive remuneration is a core focus of the Remuneration and Nomination Committee.
The objective of the Company’s executive remuneration framework is to ensure that reward for performance is competitive and
appropriate for the Company results delivered, and to attract and retain top talent. The framework aligns Senior Executive
remuneration with the achievement of strategic objectives and creation of long-term value for shareholders. The framework is
informed by market practice and adapted to the Company’s current position in relation to its strategic plan.
The Board ensures that the Senior Executive remuneration framework satisfies the following key criteria for good remuneration
governance practices:
Alignment to shareholders’ long-term interests:
• Has economic profit as a core component of plan design.
• Focuses on sustained growth in shareholder return, consisting of dividends, growth in share price, constant return on assets,
as well as focuses on key non-financial drivers of value such as innovation and culture.
• Attracts and retains high calibre executives.
• Transparency.
Alignment to participants’ interests:
• Rewards capability, experience and performance.
• Reflects competitive remuneration for contribution to growth in shareholder wealth.
• Provides a clear structure and goals for earning remuneration.
• Provides recognition for contribution to operational performance.
To ensure the remuneration framework is market competitive and therefore meets the objective to retain talent, the Company
will from time to time benchmark remuneration structures against relevant peers.
57
Annual Report 2018carsales.com Limited
Remuneration Report continued
The Company considers relevant peers to be ASX listed companies that are similar in size, structure and industry to that of carsales.
The Company accepts that while this peer group is small it is the most relevant group from which talent competition arises.
Increasingly the Company also considers global competitors for talent to be relevant, but has focused on companies with an
Australian presence for the purposes of this remuneration framework in the current year.
The Company notes that no remuneration recommendations were received from external parties in 2018.
2.2 FY18 Remuneration structure
Senior Executive remuneration for FY18 is comprised of following components as detailed below.
Component
Fixed cash
salary and
superannuation
Short-term
incentive (STI)
Description
Senior Executives are offered a competitive fixed cash salary
including superannuation. These are structured as a total
employment cost package that may be delivered as a
combination of cash and prescribed non-financial benefits
at the Senior Executive’s discretion. Each Senior Executive’s
package is reviewed annually, or subsequent to promotion,
by the Remuneration and Nomination Committee. There is
no guaranteed cash salary and superannuation increase
included in any Senior Executive’s contract.
Statutory retirement benefits are provided via contributions
to approved superannuation funds. Under current legislation
carsales permits superannuation choice for all employees.
The Company default superannuation fund is held with
MLC.
The STI plan is an annual incentive based award paid to
Senior Executives on the achievement of certain financial
and strategic objectives. The performance conditions
attached to the FY18 STI award are 70% financial and 30%
company-wide strategic, personal, and cultural objectives.
Of the award achieved, 75% is paid as a cash payment and
the remaining 25% is awarded in equity (performance
rights), the vesting of which is deferred for an additional 12
months subject to a continued service condition.
The size of the STI opportunity available to each Senior
Executive is based on their accountabilities and impact of
their role on the organisation or business unit(s) which they
lead.
The maximum STI payable for Senior Executives is capped at
60% of base salary (including superannuation), except for
the CEO, who has a cap of 87% of base salary (including
superannuation).
Purpose
Competitive fixed cash salary including
superannuation provides compensation and
recognition for the Senior Executive’s day to
day work and responsibilities.
The Company seeks to ensure its fixed
salary component is competitive with
industry peers to attract and retain key
talent, taking into account each individual
Senior Executive’s experience, capabilities
and performance.
The STI aligns remuneration with short-term
goals of the Company which support
shareholder value, taking into account
the Company’s immediate priorities.
The STI plan provides Senior Executives with
specific incentive to drive overachievement
of key financial and strategic, personal and
cultural targets, as determined by the
Board.
By deferring payment of 25% of the award
in equity for 12 months subject to a
continuing service condition, the STI
encourages talent retention as well as
aligns the Senior Executive’s interests with
those of shareholders.
The plan is able to distinguish between
Senior Executives to reward the individual’s
performance.
58
Annual Report 2018carsales.com Limited
Component
Long-term
incentive (LTI)
Description
LTIs are an equity based award paid to Senior Executives on
the achievement of long-term performance conditions,
measured over a three year period.
70% of the LTI award is linked to financial measures and is
satisfied through the issuance of performance rights. The
remaining 30% of the LTI award is linked to strategic
milestones and is satisfied through the issuance of options.
The options and performance rights under this plan are
issued for no cash consideration, but are subject to vesting
rules and expiry periods. Options and performance rights
vest on fixed dates, provided that employment has not been
terminated, and relevant targets have been achieved.
LTIs are awarded to eligible employees via the carsales.com
Ltd Employee Option Plan which was established via
a prospectus lodged with ASIC in 2000. Upon
recommendation by the Remuneration and Nomination
Committee, the Board determines who shall be eligible
to participate in the plan.
Deferred
incentives
Other benefits
From FY18, the Company retired the separate deferred
short-term incentive (DSTI) plan, instead opting to defer 25%
of the STI award for a given year for a period of 12 months.
However, the FY17 DSTI award was performance tested at
30 June 2017 and met the minimum EPS target as set out
in the 2017 Annual Report with 78% of the award vesting,
subject to the continued service condition.
This award vests immediately after the Board releases the
2018 Annual Report to the ASX.
Senior Executives receive salary continuance insurance cover
that is also provided to all other carsales employees. The
policy is held with OnePath Life Ltd, but is not allocated on
an individual employee basis.
Purpose
The LTI incentivises management to deliver
high performance outcomes over the long
term in a structure that aligns remuneration
with the interests of shareholders.
The Company includes strategic milestones
in its LTI plan to recognise that there
are important projects the Company
is undertaking to promote future
sustainability and growth, which should not
be sacrificed for short-term financial return.
The 3 year vesting period is designed to
both encourage the Senior Executives to
always consider the long-term future of
the Company in their decisions and also to
operate as a retention tool to incentivise
high performing executives to remain with
the Company. In light of the various
objectives of the plan, it is important that
the targets set are both challenging and
achievable.
By having a significant portion of Senior
Executives’ potential remuneration tied to
the Company’s equity, the Board ensures
alignment between the interests of Senior
Executives and shareholders.
As part of its drive to simplify the
Company’s remuneration framework,
the Board removed this component and
incorporated a deferred aspect to the
STI plan as detailed above.
This insurance cover is part of the carsales
‘People Promise’ provided to all employees
of the Group.
59
Annual Report 2018carsales.com Limited Remuneration Report continued
2.3 Engagement with shareholders and proxy advisors
Each year, the Company proactively engages with proxy advisors on a regular basis to ensure that they have a good understanding
of the Company’s remuneration structure and decisions and are in a position to provide insightful advice to their clients.
The Company views these meetings as an opportunity to receive valuable feedback on issues of importance to our shareholders
and to ensure it is across the trends being seen in the market.
Over the course of FY18, the representatives of the Company have met with the following proxy advisors:
• Ownership Matters;
• ACSI;
• CGI Glass Lewis;
• ISS; and
• the Australian Shareholders’ Association.
3. Company five year financial performance
One of the key tenets of the Company’s remuneration framework is to closely align Senior Executive pay and Company
performance. The Company provides shareholders with an overview of the Company’s performance for the five-year period ending
30 June 2018 within the Remuneration Report to enable an assessment of whether the Company has been successful in aligning
Senior Executive and shareholder interest.
The graphs below demonstrate carsales’ financial performance over the past five years along with how that performance has
translated to shareholders in the form of earnings per share (EPS), share price performance and to KMP total remuneration shown
as a percentage of adjusted profit for the year.
Adjusted EPS and KMP
remuneration
Dividend payment
and ratio
Share price and
movement percentage
10
8
6
4
2
%
o
i
t
a
R
110
100
90
80
m
$
70
60
50
40
30
100
90
80
%
o
i
t
a
R
70
$
16
14
12
10
8
6
4
2
0
60
40
20
0
¢
-20
-40
FY14
FY15
FY16
FY17
FY18
FY14
FY15
FY16
FY17
FY18
Dividend payments
in respective year
Dividend
payout ratio
Closing
share price
Share price
movement (cents)
FY14
FY15
FY16
FY17
FY18
Adjusted
EPS
KMP % of
adjusted NPAT
s
t
n
e
c
S
P
E
d
e
t
s
u
d
A
j
60
50
40
30
20
10
0
60
Annual Report 2018carsales.com Limited
4. Remuneration snapshot
4.1 Cash based benefits that were realised in FY18
To make it easier for our shareholders to understand the actual amounts KMPs received in the current financial year,
the Company has opted to include additional disclosures to those required under the Australian Accounting Standards
and the Corporations Act 2001.
The figures in the tables below are in addition to the disclosures made in section 4.2 (which provides a breakdown of Senior
Executive remuneration in accordance with statutory requirements and Australian Accounting Standards). The tables below are
designed to reflect value of benefits that have actually been received by the Non-Executive Directors and Senior Executives in FY17
and FY18 rather than the value received on an accounting treatment basis and have not been prepared in accordance with the
Australian Accounting Standards.
• The amounts shown in the table include cash salary, superannuation, non-monetary benefits and STI payable in cash
under the STI plan in respect of that year.
• The tables show the value of DSTI and LTI awards that have been earned as a result of performance in previous financial
years but was subject to a restriction period that ended either in June or August 2018 (June or August 2017 for the FY17
financial year).
• The DSTI value in the table reflects the net value of shares received by the Senior Executive. The net value is calculated
as the quantity of shares received at the 30 June 2018 closing share price (30 June 2017 closing share price for the FY17
financial year).
• The LTI values in the table reflect the net value of options and shares received by the Senior Executive. The net value
is calculated as the quantity of shares and options received at the 30 June 2018 share price (30 June 2017 closing share
price for the FY17 financial year), less the exercise cost of converting options to shares.
2018
Name
Jeffrey Browne
Richard Collins
Wal Pisciotta
Pat O’Sullivan
Kim Anderson
Edwina Gilbert
Steve Kloss (Alternate)
Sub-total Non-Executive Directors
Executive Directors
Cameron McIntyre
Other Senior Executives
Ajay Bhatia
Anthony Saines
Paul Barlow
Andrew Demery
Total Key Management Personnel
compensation (Group)
Cash salary
(includes
super-
annunation)
$
211,144
250,606
126,667
180,000
180,000
152,424
45,833
1,146,674
Non-
Monetary
benefits
$
-
-
-
-
-
-
-
STI payable
as cash
$
-
-
-
-
-
-
-
-
Other
$
-
-
-
-
-
-
-
-
Value of DSTI
performance
rights that
became
unrestricted $
-
-
-
-
-
-
-
-
Value of
LTI that
FY18
became
total
unrestricted
$
$
211,144
-
250,606
-
126,667
-
180,000
-
180,000
-
152,424
-
-
45,833
- 1,146,674
1,269,615
785,000
710,000
590,000
440,000
4,941,289
-
-
-
-
-
-
-
-
-
-
-
-
622,875
119,611
566,898 2,578,999
297,795
309,323
234,210
161,100
1,625,303
65,785
66,021
47,847
23,917
323,181
245,925 1,394,505
323,453 1,408,797
164,767 1,036,824
93,775 718,792
1,394,818 8,284,591
61
Annual Report 2018carsales.com Limited
Remuneration Report continued
2017
Name
Jeffrey Browne
Richard Collins
Wal Pisciotta
Pat O’Sullivan
Kim Anderson
Edwina Gilbert
Steve Kloss (Alternate)
Sub-total Non-Executive
Directors
Executive Directors
Greg Roebuck
(Retired 17/03/2017)
Cameron McIntyre(i)
(Appointed 17/03/2017)
Other Senior Executives
Ajay Bhatia
Anthony Saines
Paul Barlow
Chris Polites(ii)
Total Key Management
Personnel compensation
(Group)
Cash salary
(includes
super-
annunation)
$
290,909
216,250
120,000
175,000
171,023
140,833
110,000
1,224,015
Non-
Monetary
benefits
$
-
-
-
-
-
-
-
-
Value of DSTI
performance
rights that
became
unrestricted
$
-
-
-
-
-
-
-
-
Value of LTI
that became
FY17
unrestricted
total
$
$
290,909
-
216,250
-
120,000
-
175,000
-
171,023
-
140,833
-
110,000
-
- 1,224,015
Other
$
-
-
-
-
-
-
-
-
STI payable
as cash
$
-
-
-
-
-
-
-
-
1,400,461
61,387 2,245,215
257,250
-
- 3,964,313
1,189,196
-
-
322,500
105,403
- 1,617,099
743,751
669,876
561,126
309,959
6,098,384
-
-
-
-
-
-
-
-
61,387 2,245,215
155,575
208,250
161,700
102,900
1,208,175
57,969
58,181
42,163
28,984
292,700
957,295
-
936,307
-
764,989
-
-
441,843
- 9,905,861
(i) Cameron McIntyre was a Senior Executive for the entire year, as Chief Operating Officer up until his appointment as Managing Director and CEO
on 17 March 2017.
(ii) Chris Polites resigned on 22 March 2017 and ceased being a Senior Executive from that date.
62
Annual Report 2018carsales.com Limited
4.2 Accounting based benefits
The tables below have been prepared in accordance with the requirements of the Corporations Act and relevant Australian
Accounting Standards. The figures provided under the share based payments columns are based on accounting values and
do not reflect actual cash amounts received by Senior Executives in FY18.
2018
Short-term
employee benefits
Cash
salary
and fees
$
Non-
monetary
benefits
$
Cash
Bonus
$
Deferred
Short-
Term
Incentive
Perfor-
mance
rights
$
Super-
annuation
Super-
annuation
$
Long-
term
benefits
Long
service
leave
$
Share-based
payments
Perfor-
mance
rights
$
Options
$
Other
$
Total
$
Non-Executive
Directors
Jeffrey Browne
Richard Collins
Wal Pisciotta
Pat O’Sullivan
Kim Anderson
Edwina Gilbert
Steve Kloss
(Alternate)
Sub-total
Non-Executive
Directors
211,144
231,441
103,667
164,384
164,384
139,200
45,833
1,060,053
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19,165
23,000
15,616
15,616
13,224
-
86,621
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
211,144
250,606
126,667
180,000
180,000
152,424
45,833
1,146,674
Executive
Directors
Cameron
McIntyre
Other Senior
Executives
Ajay Bhatia
Anthony Saines
Paul Barlow
Andrew Demery
Total Key
Management
Personnel
compensation
(Group)
1,249,566
622,875
- 132,804
20,049 21,831 164,036
309,794
-
2,520,955
764,951
685,000
565,000
419,951
297,795
309,323
234,210
161,100
-
-
-
-
66,618
68,357
50,980
30,344
20,049 13,349 61,823
25,000 12,034 71,061
9,936 39,963
25,000
5,708 23,533
20,049
107,939
121,777
67,796
42,953
-
-
-
-
1,332,524
1,292,552
992,885
703,638
4,744,521 1,625,303
- 349,103
196,768 62,858 360,416
650,259
-
7,989,228
63
Annual Report 2018carsales.com Limited Remuneration Report continued
Short-term
employee benefits
Cash
salary
and fees
$
Non-
monetary
benefits
$
Cash
Bonus
$
Deferred
Short-
Term
Incentive
Perfor-
mance
rights
$
Superan-
nuation
Superan-
nuation
$
Long-
term
benefits
Long
service
leave
$
Share based
payments
Perfor-
mance
rights
$
Options
$
Other
Total
290,909
197,489
120,000
159,817
159,636
128,615
110,000
1,166,466
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
18,761
15,183
11,387
12,218
57,549
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
290,909
216,250
120,000
175,000
171,023
140,833
-
110,000
- 1,224,015
1,375,942
257,250
61,387
(19,637)
24,519
141,160 (382,245)
(446,583) 986,107 1,997,900
1,169,580
322,500
-
92,643
19,616
80,037
(5,880)
15,241
- 1,693,737
724,135
650,260
541,510
295,901
155,575
208,250
161,700
102,900
5,923,794 1,208,175
-
-
-
-
61,387
50,951
51,136
37,059
15,000
227,152
19,616
19,616
19,616
14,058
174,590
14,669
12,946
10,198
3,593
975,884
8,975
952,753
12,100
778,996
6,486
362,273
(33,322)
262,603 (421,147) (437,103) 986,107 7,985,558
1,963
(1,555)
2,427
(35,857)
-
-
-
-
2017
Non-
Executive
Directors
Jeffrey Browne
Richard Collins
Wal Pisciotta
Pat O’Sullivan
Kim Anderson
Edwina Gilbert
Steve Kloss
(Alternate)
Sub-total
Non-
Executive
Directors
Executive
Directors
Greg Roebuck
(Retired
17/03/2017)
Cameron
McIntyre (ii)
(Appointed
17/03/2017)
Other Senior
Executives
Ajay Bhatia
Anthony Saines
Paul Barlow
Chris Polites (iii)
Total Key
Management
Personnel
compensation
(Group)
(i) The negative share based payments reflect the reversal of the accounting provision for the FY17 Long-Term Incentive award which did not meet the minimum
threshold required for performance rights to vest, and for Mr Roebuck the lapsing of the FY18 LTI award on his retirement.
(ii) Cameron McIntyre was a Senior Executive for the entire year, as Chief Operating Officer up until his appointment as Managing Director and CEO
on 17 March 2017.
(iii) Chris Polites resigned on 22 March 2017 and ceased being a Senior Executive from that date.
64
Annual Report 2018carsales.com Limited
4.3 Remuneration Mix (percentage of total remuneration)
For the Senior Executives and Managing Director, the relative proportions of target remuneration which are variable and those that
are fixed based on amounts earned (or granted in the case of the LTI) in the financial year are as follows:
Executive KMP
Cameron McIntyre
Ajay Bhatia
Anthony Saines
Paul Barlow
Andrew Demery
Total fixed
remuneration
%
35%
49%
48%
52%
52%
STI (at Cap)
%
30%
29%
29%
31%
31%
LTI grant
%
35%
22%
23%
17%
17%
Total variable
remuneration
%
65%
51%
52%
48%
48%
Non-executive Directors all have 100% fixed remuneration.
5. Remuneration outcomes
5.1 Service conditions
All Senior Executives have service agreements determining cash salary, superannuation, performance based cash bonus opportunity
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. The termination notice period is 6 months
by either party and there is a 6 month non-compete period.
All Senior Executives are entitled to participate in the STI and LTI plans. The separate DSTI plan has been discontinued. From FY18
a portion of the STI achievement will be deferred for 12 months.
5.2 Cash salary and superannuation
Annual cash salary and superannuation entitlements of Senior Executives for FY18 is set out below:
Name
C McIntyre
A Bhatia
A Saines
P Barlow
A Demery
Annual cash salary and superannuation
from 1 July 2017 to 30 June 2018
$1,269,615
$785,000
$710,000
$590,000
$440,000
Actual cash paid to each Senior Executive is shown in the cash remuneration tables in section 4.1. No Senior Executives received
a salary increase during the year. No Senior Executive elected to receive a proportion of their salary package in the form of
non-financial benefits.
5.3 FY18 STI plan (cash bonus and deferred equity grant) and outcomes
The Remuneration and Nomination Committee annually considers appropriate targets and key performance indicators (KPIs)
to link the STI plan and the level of payout if targets are met. This includes recommending to the Board the maximum payout under
the STI plan and minimum levels of performance to trigger payment of an STI.
The Remuneration and Nomination Committee is responsible for assessing whether the KPIs are met and whether or not STIs will
be paid and making a recommendation to the Board. The Board maintains discretion to review the performance against individual
targets and the overall outcome of the STI award and ensure it is congruent with the overall performance of the Company and
of the individual Senior Executive, within the participant’s maximum STI opportunity.
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Annual Report 2018carsales.com Limited Remuneration Report continued
5.3.1 FY18 Short-Term Incentive Plan Structure
Participants
Award vehicle
Senior Executives
Subject to the achievement of the relevant financial and strategic targets:
FY18 Short-Term Incentive Plan Summary
• 75% of the award is made as a cash payment; and
• 25% is awarded in equity (performance rights), vesting of which is deferred for an additional
12 months subject to a continued service condition. Performance rights are issued for no cash
consideration. No dividends are payable until the performance rights vest into ordinary shares
at the conclusion of the 12 month period.
Performance period
12 months, commencing 1 July 2017 and ending on 30 June 2018.
Performance measures
For the deferred equity portion the award vests after the publication of the 2019 Annual Report,
subject to the continued service condition being achieved.
The STI plan incorporates both financial and non-financial performance measures. The performance
measures and their relative weightings are:
Category
Financial
Non-financial
Measures
Look through revenue
Adjusted NPAT
Strategic and personal objectives
People and culture metrics
Weighting
35%
35%
20%
10%
Selection of
Performance
Measures
In setting the performance measures for the FY18 STI plan, the Board considered the early stage of
many of the Company’s international investments. To account for the stage of these investments, the
Board considered it appropriate to include a look through revenue measure to ensure focus is placed
on growing these businesses by all Senior Executives.
Determination of
payout linked to
performance
Adjusted NPAT was selected by the Board to ensure that Senior Executives are focused on both top and
bottom line growth so profits are being generated for shareholders.
The adoption of non-financial measures recognises the importance of strategic initiatives which
correlate to the Company’s business strategy and the critical role culture and employee satisfaction
play in the Company’s success.
For each measure, there is a minimum threshold. If this is not achieved, no award will be made for
that portion of the STI.
A sliding scale for each measure applies to the achievement of financial and non-financial measures
from the minimum performance threshold, through to 100% for ‘on target’ performance and up
to an individual’s STI cap for exceeding target.
To protect the commercial sensitivity of each objective outcome the Company has used the following
references and applied a relevant reference to the plan objective:
• Exceeded – The actual objective outcome exceeded the target objective outcome.
• On target – The actual objective outcome was equal to the target objective outcome.
• Partial achievement – The actual objective outcome while below the target objective outcome
was still high enough that some achievement was reported.
• Missed – The actual objective outcome was materially below the target objective outcome,
or below the minimum threshold set for achievement.
Ceasing to be an
employee
Senior Executives that leave during the relevant period may be paid a portion of their STI at the Board’s
discretion. In the case of a good leaver the Board may grant a pro-rata share of STI entitlements.
Where a Senior Executive is considered a bad leaver no pro-rata share is granted.
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Annual Report 2018carsales.com Limited
5.3.2 FY18 Short-Term Incentive Plan Award and Objective Outcomes
The Board has conducted an assessment of the performance of plan objectives and the information below describes each
component of the plan’s performance outcomes.
5.3.2.1 70% Financial Measures
The financial objectives relate to performance against Board approved annual key financial targets of the Company, ensuring
that the Company is mindful of expected consensus earnings expectations.
The achievement of the financial measures were:
Metric
Look through revenue
Adjusted NPAT
Achievement
Exceeded
Met
Look through revenue is defined as ordinary revenue reported for the consolidated Group adjusted for the ownership percentage
held for the group of consolidated subsidiaries, and adding in the Group’s ownership share of the underlying revenue for equity
accounted associates.
Adjusted NPAT is defined as the Group net profit after tax and non-controlling interests and excludes acquired intangible asset
amortisation and any material one-off transactions of a corporate nature, such as gains/losses on business disposals, non-cash
associate revaluations, impact of capital reorganisations, or other significant non-recurring corporate transaction costs as determined
by the Board, consistent with the adjusted NPAT that is disclosed when reporting the Company’s annual results. The Board also
retains discretion to alter the adjusted NPAT hurdle in exceptional circumstances to ensure there is no material advantage or
disadvantage due to matters outside management’s control that would materially affect adjusted NPAT. The Board believes this
metric gives the best reflection of the underlying trading performance of the Group and is an appropriate earnings metric to
align to Shareholder value.
Both the look through revenue and adjusted NPAT metrics exclude any corporate activity (such as acquisitions) made after the date
of the AGM notice. Specifically, the look-through revenue and adjusted NPAT measured achievement was adjusted to exclude the
impact of the acquisition of the remaining 50.1% of SK Encar and 35% of soloautos the Company did not own, which occurred in
January 2018 and December 2017 respectively.
This section of the plan enables the Senior Executive to earn up to 105% of 175% on-target earnings for over achievement against
each of the above mentioned objectives (subject to the application of each individuals STI cap).
This translated to an overall payout of between 77%-123% of on-target earnings for the Senior Executives.
5.3.2.2 30% Strategic Objectives
The 30% Strategic Objectives portion of the STI is measured against:
• successful project delivery recognising the importance of strategic projects which may not have an immediate financial impact
on the Company;
• achievement of people and culture targets recognising the vital role the Company’s culture plays in its success; and
• individual goals of the executive recognising the unique role each of our executives play in the Company’s operations.
Project and Individual delivery (20% of On-target Earnings Value)
The project objectives involve the execution of pre-determined project targets for which the Senior Executive team is responsible.
Projects may include the deployment of new products and technology, developing new markets or improving particular important
performance metrics. This section of the plan enables the Senior Executive to earn up to an 10% of 30% on-target earnings for
over achievement against each of the above mentioned objectives (subject to the application of each individuals STI cap).
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Annual Report 2018carsales.com Limited
Remuneration Report continued
There were 5 projects in FY18, four of which are common to all Senior Executives and one specific to the Senior Executive’s
responsibilities. Common objectives relate to customer satisfaction, technology development, new revenue streams and new
commercial products. Due to commercial sensitivity, each specific project objective is not outlined below. Achievement was
as follows.
• Two project objective – Exceeded
• Two project objectives – On Target
• No project objectives – Partial achievement or Missed
This translated to an overall payout of between 22%-24% of on-target earnings for the Senior Executives.
People and culture (10% of On-target Earnings Value)
carsales prides itself on having a highly engaged and motivated workforce with a strong sense of values, culture and passion.
The people and culture section of the plan is designed to ensure that Senior Executives are incentivised to nurture and build
on these principles and values. Each Senior Executive has performance objectives to ensure there is ongoing development and
enhancement of Company culture. The performance of this is measured through the annual Employee Engagement Survey.
This section of the plan enables the Senior Executive to earn up to 15% of on-target earnings for over achievement against the
above mentioned objective (subject to the application of each individuals STI cap).
Overall the Employee Engagement metric was exceeded. This translated to an overall payout of 15% of on-target earnings
for each Senior Executive.
5.3.3 Overall STI financial outcomes
2018
C McIntyre
A Bhatia
A Saines
P Barlow
A Demery
Actual STI awarded
$
830,500
397,060
412,430
312,280
214,800
% of
target awarded
161%
143%
114%
137%
134%
% of target
forfeited
-
-
-
-
-
STI cap
$
1,100,000
471,000
425,000
354,000
264,000
% of STI
cap awarded
76%
84%
97%
88%
81%
Under the FY18 STI plan 25% of the awarded STI is awarded in equity, vesting of which is deferred for an additional 12 months
subject to a continued service condition.
2018
C McIntyre
A Bhatia
A Saines
P Barlow
A Demery
Actual STI
awarded
$
830,500
397,060
412,430
312,280
214,800
Paid in cash
$
622,875
297,795
309,323
234,210
161,100
Amount
deferred
in equity
$
207,625
99,265
103,108
78,070
53,700
Number of
performance
rights awarded
13,956
6,672
6,931
5,248
3,610
13,956 performance rights will be issued to Mr McIntyre as the CEO after the release of this report to the ASX in August 2018,
with an exercise price of $0.00. These performance rights were approved by shareholders at the AGM held on 27 October 2017.
22,461 performance rights will be issued to Senior Executives after the release of this report to the ASX in August 2018, with an
exercise price of $0.00.
The number of performance rights awarded was determined by multiplying the actual STI awarded for the FY18 year by 25%
and then divided by the volume weighted average price of the Company’s Shares for the 20 trading days prior to 1 July 2018,
which was $14.87.
Subject to the continued service condition being satisfied, unless otherwise waived by the Board, Performance Rights will vest after
the Board releases the 2019 Annual Report to the ASX.
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Annual Report 2018carsales.com Limited
5.4 2017 DSTI plan outcome
The amounts payable under this award based on the accounting Black Scholes valuations are as follows:
2018
C McIntyre
A Bhatia
A Saines
P Barlow
A Demery
Actual DSTI award vesting
Forfeited
%
22%
22%
22%
22%
22%
Vested
%
78%
78%
78%
78%
78%
Vested
$
78,000
42,899
43,053
31,202
15,597
Forfeited
$
22,000
12,100
12,143
8,800
4,399
The cash value to each Senior Executive of the 2017 DSTI vesting based on the 30 June 2018 share price is as follows:
2018
C McIntyre
A Bhatia
A Saines
P Barlow
A Demery
Actual DSTI cash value at 30 June 2018
Vested
$
119,611
65,785
66,021
47,847
23,917
Vested
%
78%
78%
78%
78%
78%
Forfeited
%
22%
22%
22%
22%
22%
Forfeited
$
33,736
18,555
18,621
13,495
6,746
5.5 LTI plans
There are three years of unvested LTI awards which have performance periods that include the FY18 financial year as follows:
Financial year of grant Performance period
FY16
FY17
FY18
1 July 2015 – 30 June 2018
1 July 2016 – 30 June 2019
1 July 2017 – 30 June 2020
Relevant performance year
to determine vesting
FY18
FY19
FY20
Vesting date
August 2018
August 2019
August 2020
The terms of each financial year award are set out below and vary for each year.
Ceasing employment
Senior Executives who leave the Company have 30 days from their date of departure to exercise any vested options unless such
departure is under adverse conditions. In exceptional circumstances, and at the Board’s discretion, Senior Executives may be allowed
to retain unvested options and performance rights and exercise them in a future period when they vest.
Clawback
If the Board in its reasonable opinion determines that a plan participant has engaged in any of the following conduct, the Board
may declare that all, or some, of the Participant’s Options, Performance Rights or ordinary shares held under the plan are forfeited:
(a) cessation of employment, other than for special circumstances, redundancy or by mutual agreement between the Board
and the Participant;
(b) material breach of the Participant’s obligations to the Company or a Subsidiary;
(c) behaviour that brings the Company or Group into disrepute.
Hedging Policy
The Company’s Option Plan specifically prohibits a plan participant from entering into any scheme, arrangement, agreement
(including options and derivative products) or other hedging transaction under which the participant may alter or limit the economic
benefit or risk to be derived from options, irrespective of future changes in the market price of any Company shares. Where a plan
participant enters, or purports to enter, into any such scheme, arrangement or agreement, all options will immediately lapse.
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Annual Report 2018carsales.com Limited Remuneration Report continued
5.5.1 Unvested Long-Term Incentive Plan Structure – FY18 Grant Vesting FY20
Participants Eligible employees under the carsales.com Ltd Employee Option Plan, established via a prospectus lodged with ASIC
Long-Term Incentive Plan Summary – FY18 Grant
Award
vehicle
in 2000. Upon recommendation by the Remuneration and Nomination Committee, the Board determines who
is eligible to participate in the plan.
The LTI awards are a combination of options and performance rights and are issued for no cash consideration.
The 70% of the LTI award that is subject to financial performance measures are paid in performance rights.
The 30% of the LTI award that is subject to strategic objectives are paid in options.
Options and performance rights are issued subject to vesting rules and expiry periods and vest on fixed dates
provided employment has not been terminated, and targets have been achieved.
No dividends are paid during the performance period and until the rights or options vest /are exercised
by the Senior Executive.
Performance
period
Performance
measures
Options and performance rights issued to the CEO contain the same terms, conditions and performance targets
as those issued to Senior Executives.
Performance is measured over a three year period to 30 June 2020.
The expiry date of the FY18 award is fifteen years from the grant date.
Financial measures
70% of the award is tested pursuant to a financial matrix with measures of look through revenue Cumulative
Annual Growth Rate (CAGR) growth and adjusted NPAT CAGR growth. A minimum ‘gate’ threshold for both these
metrics must be achieved in the performance period prior to any award vesting. If the minimum target for either
measure is not achieved, then no award will vest.
Max target
Looking through
revenue CAGR growth
Min target
Mid target –
65% vesting
Maximum target
– 100% vesting
Minimum target
– 30% vesting
Below threshold – no payment
Adjusted NPAT CAGR growth
Note: diagram
not to scale
Min target
Max target
The targets have been set as follows:
Look through revenue
Adjusted NPAT
Minimum CAGR
5.5%
5.3%
Maximum CAGR
11.3%
10.1%
Look through revenue is defined as ordinary revenue reported for the consolidated Group adjusted for the
ownership percentage held for the group of consolidated subsidiaries, and adding in the Group’s ownership share
of the underlying revenue for equity accounted associates.
Adjusted NPAT is defined as the Group net profit after tax and non-controlling interests and excludes acquired
intangible asset amortisation and any material one-off transactions of a corporate nature, such as gains/losses
on business disposals, non-cash associate revaluations, impact of capital reorganisations, or other significant
non-recurring corporate transaction costs as determined by the Board, consistent with the adjusted NPAT that
is disclosed when reporting the Company’s annual results. The Board also retains discretion to alter the adjusted
NPAT hurdle in exceptional circumstances to ensure there is no material advantage or disadvantage due to matters
outside management’s control that would materially affect adjusted NPAT. The Board believes this metric gives
the best reflection of the underlying trading performance of the Group and is an appropriate earnings metric to
align to Shareholder value.
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Annual Report 2018carsales.com Limited
Long-Term Incentive Plan Summary – FY18 Grant
Both the look through revenue and adjusted NPAT metrics exclude any corporate activity (such as acquisitions) made
after the date of the AGM notice (26 September 2017) with the exception that should the Group dispose of any
group businesses or acquire additional equity stakes in any existing group businesses the CAGR targets for both
look through revenue and adjusted NPAT will be altered to maintain the underlying CAGR growth rates targeted
for the 2020 financial year. The Board also retains discretion to adjust the CAGR growth rates to include the impact
of any strategically important acquisitions made during the performance period such that management is not
materially advantaged or disadvantaged from entering into further acquisitions where it is in Shareholders’
interests to do so.
The look through revenue CAGR and adjusted NPAT CAGR each make up 50% of the targets for the award to vest.
The award will be capable of vesting and exercise if at the testing date the look through revenue and adjusted NPAT
CAGR targets have been achieved or exceeded as follows:
• If either the look through revenue or adjusted NPAT CAGR minimum targets are not achieved, then
no Performance Rights will be capable of exercise.
• If the minimum target is achieved for both measures, 30% of the Performance Rights will vest.
• If the maximum target is achieved or exceeded for both measures, 100% of the Performance Rights will vest.
• Provided the minimum of both targets are met, then there will be a pro-rata allocation of Performance Rights
between the minimum of 30% and the maximum of 100% according to the results achieved for each target.
Strategic Measures
30% of the award is tested against strategic objectives.
Objectives are as follows:
• International revenue growth, reflecting the strategic importance of this to the long-term success of the Group;
• Growth in Australian non-classified automotive products and services revenues, reflecting the importance of
the diversification of the revenue base from the Group’s traditional product set; and
• Successful development and deployment of the Group’s technology into the core business and leveraging this
into adjacent market and international businesses.
Each strategic objective above will make up 10% of the overall value of the LTI (30% in total). The options for each
objective will be capable of vesting and exercise if at the testing date the objectives have been achieved or exceeded
as follows (the achievement of the objectives is determined by the Board):
• If the objective is not achieved, then no options will be capable of exercise.
• If the objective is partly achieved, then 50% of the options for that objective will be capable of exercise
(5% of the total LTI value); and
• If the objective is fully achieved, then 100% of the options for that objective will be capable of exercise
(10% of the total LTI value).
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Annual Report 2018carsales.com Limited Remuneration Report continued
Long-Term Incentive Plan Summary – FY18 Grant
Selection of
Performance
measures
Financial
For FY18 the Board took the unique approach of adopting the same financial measures for the STI and LTI. It made
this decision on the basis of the Company’s priorities and position at that time to ensure the focus on key financial
metrics remain sharp for the long-term.
The look through revenue measure was adopted to ensure that the Company’s international investments, which
represent a strong contributor to the Company’s medium to long-term growth, are provided with sufficient support
and attention to grow in this phase of their lifecycle. It was important not to limit this to just the current year under
the STI plan, but to position these businesses for sustained growth in the longer term.
The Board adopted the adjusted NPAT measure to ensure that Senior Executives to ensure revenue translates
to profits, increasing shareholder value.
The Board adopted a matrix to determine outcomes, which has a minimum ‘gate’ threshold be achieved in the
performance period for both financial metrics prior to any performance rights vesting. This ensures that Senior
Executives are incentivised to grow both earnings and revenue, and not sacrifice one over the other. Similarly, it
aligns the objectives of the Senior Executives with those of the Company’s shareholders over the three year period.
Strategic
Strategic milestones recognise that there are important projects the Company is undertaking to promote future
sustainability and growth, and these should not be sacrificed for short-term return. The successful completion
of the strategic milestones will be paid in Options to align the expected long-term benefit of these projects.
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Annual Report 2018carsales.com Limited
The following unvested awards are outstanding for the FY18 award:
Award
Date
27/10/2017
27/10/2017
Number
of options
115,243
96,804
Number of
performance
rights
72,530
60,925
Options
exercise
price
$
11.41
11.41
Performance
rights exercise
price
$
0
0
Vesting
Date
August 2020
August 2020
Managing Director
Other Senior Executives
5.5.2 Unvested Plan Structure for FY17 award vesting in FY19
Long-Term Incentive Plan Summary – FY17 Grant
Participants
Eligible employees under the carsales.com Ltd Employee Option Plan, established via a prospectus lodged with
ASIC in 2000. Upon recommendation by the Remuneration and Nomination Committee, the Board determines
who is eligible to participate in the plan.
Award vehicle The LTI awards are a combination of options and performance rights and are issued for no cash consideration.
40% of the total value of the award is awarded in options with an exercise price of $12.23, being the volume
weighted average price of the Company’s Shares for the 21 days prior to 1 July 2016.
60% of the total value of the award is awarded in performance rights with a $0 exercise price.
Options and performance rights are issued subject to vesting rules and expiry periods and vest on fixed dates
provided employment has not been terminated, and RTSR and/or EPS targets have been achieved.
No dividends are paid during the performance period and until the rights or options vest / are exercised by the
Senior Executive. Amounts received on the exercise of options are recognised as share capital.
Options and performance rights issued to the CEO contain the same terms, conditions and performance targets
as those issued to Senior Executives.
Performance
period
Performance is measured over a three-year period to 30 June 2019. The expiry date of the FY17 award is fifteen
years from the grant date.
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Annual Report 2018carsales.com Limited Remuneration Report continued
Performance
measures
The FY17 award is subject to both EPS (70% of total award) and Relative Total Shareholder Return (RTSR) (30%
of total award) targets.
Long-Term Incentive Plan Summary – FY17 Grant
EPS Measure
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 a significant compound annual growth rate
(CAGR) in EPS between the baseline year and the testing year.
The Company will publish in its FY19 Annual Report the minimum and maximum EPS target that was applicable
to the grant, along with the actual EPS achieved by the Company in the relevant year.
Options and performance rights subject to the EPS target will be capable of exercise, at the relevant testing date
if the EPS target for the relevant period has been achieved or exceeded as follows:
• if the EPS achieved is equal to the minimum target, 70% 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; and
• 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 70% and 100%.
In considering the appropriate EPS target, the Board uses 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.
Minimum and maximum EPS targets for the options and performance rights were set for the period ending
30 June 2019 and the award of options and performance rights was approved by shareholders at the 2016
AGM on 25 October 2016.
RTSR Measure
The RTSR metric measures the returns provided to carsales shareholders over a 3 year period from 1 July 2016
to 30 June 2019, including movements in share price and dividends paid. The RTSR metric is adjusted for any
significant corporate share capital restructuring (for example a stock split or rights issue). The Company’s actual
TSR is then compared against a comparator group to create a RTSR metric.
The comparator group used in the RTSR calculation is the ASX200 as at 30 June 2016.
Options and performance rights subject to the RTSR target will be capable of exercise, at the relevant testing
date if the RTSR target for the relevant period has been achieved or exceeded as follows:
• if the relative ranking against the comparator group is below the 50th percentile no performance rights
or options will be capable of exercise;
• if the relative ranking against the comparator group is at the 50th percentile 50% performance rights
or options will be capable of exercise;
• if the relative ranking against the comparator group is between the 50th percentile and the 75th percentile
performance rights or options will be capable of exercise on a straight line pro-rata basis from 50% to 100%;
and
• if the relative ranking against the comparator group is at or above the 75th percentile 100% performance rights
or options will be capable of exercise.
The minimum and maximum EPS and RTSR targets for the options and performance rights have been set by
the Board, with a testing date of 30 June 2019 and are exercisable after the Board releases the Annual Report
to the ASX for FY19.
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Annual Report 2018carsales.com Limited
Long-Term Incentive Plan Summary – FY17 Grant
Selection of
performance
measures
The rationale for the choice of EPS as a target has been historically as a result of having only a small pool of
relevant comparable peers, being other ASX listed online corporations, and the direct alignment to changes in
shareholder wealth. However following feedback from shareholders who sought an additional performance metric
be added by the Company to the LTI plan, the Board introduced a second performance measure being Relative
Total Shareholder Return (RTSR) for awards made under the FY17 LTI plan, as well as the EPS target.
The Company selected the ASX 200 as the comparator group for the RTSR metric as there are not enough similar
domestic peers of appropriate size and risk profile to make a customised comparator group meaningful.
The following unvested awards are outstanding for the FY17 award:
Award
Date
28/10/2016
Number
of options
149,907
Number of
performance
rights
31,287
Options
exercise
price
$
12.23
Performance
rights exercise
price
$
0
Vesting
Date
August 2019
28/10/2016
247,347
51,625
12.23
0
August 2019
Managing
Director
Other Senior
Executives
5.5.3 Long-Term Incentive Plan Structure – FY16 Grant vesting in FY18
Long-Term Incentive Plan Summary – FY16 Grant
Participants
Award vehicle
Eligible employees under the carsales.com Ltd Employee Option Plan, established via a prospectus lodged with
ASIC in 2000. Upon recommendation by the Remuneration and Nomination Committee, the Board determines
who is eligible to participate in the plan.
The LTI awards are a combination of options and performance rights and are issued for no cash consideration.
50% of the total value of the award is awarded in options with an exercise price of $10.24, being the volume
weighted average price of the Company’s Shares for the 21 days prior to 1 July 2015.
Options and performance rights are issued subject to vesting rules and expiry periods and vest on fixed dates
provided employment has not been terminated, and EPS targets have been achieved.
50% of the total value of the award is awarded in performance rights with a $0 exercise price.
No dividends are paid during the performance period and until the rights or options vest/are exercised by the
Senior Executive. Amounts received on the exercise of options are recognised as share capital.
Options and performance rights issued to the CEO contain the same terms, conditions and performance targets
as those issued to Senior Executives.
Performance is measured over a three-year period to 30 June 2018. The expiry date of the FY16 award is five
years from the grant date.
Performance
period
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Annual Report 2018carsales.com Limited Remuneration Report continued
Performance
measures
Options and performance rights for the FY16 award are subject to an EPS target. They are capable of exercise,
at the testing date of 30 June 2018 if the EPS target for the relevant period has been achieved or exceeded as
follows:
Long-Term Incentive Plan Summary – FY16 Grant
• if the EPS achieved is equal to the minimum target, 70% 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; and
• 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 70% and 100%.
Minimum and maximum EPS targets for the options and performance rights were set for the period ending 30
June 2018 and the award of options and performance rights was approved by shareholders at the 2015 AGM
on 23 October 2015. The achievement against the targets set for the year ended 30 June 2018 are set out
below this table.
EPS targets exclude any corporate activity associated with mergers and acquisitions, corporate or capital
re-organisations that have occurred after 23 October 2015.
The rationale for the choice of EPS as a target for the FY16 LTI plan was a result of having only a small pool of
relevant comparable peers, being other ASX listed online corporations, and the direct alignment to changes in
shareholder wealth from the growth in earnings per share.
Selection of
performance
measures
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Annual Report 2018carsales.com Limited
5.5.3.1 FY16 LTI award achievement
EPS targets relating to Senior Executive options and performance rights, together with the Company’s actual achievements are as
follows:
LTI
Grant
Year ending 30 June 2016
Minimum entitlement Maximum entitlement
Vesting date % payable EPS target ($) % payable EPS target ($) % payable
August 2018
100%
0.588
0.529
70%
72.9%
Actual achieved
EPS target ($)
0.535
The actual EPS achieved for the LTI grant vesting in August 2018 of $0.535 per share is below the reported FY18 EPS of $0.763
cents per share and the FY18 adjusted EPS of $0.540. In calculating the achieved EPS of $0.535 per share the Company excluded
the earnings and related costs from the following acquisitions and investments that occurred after the AGM Notice of Meeting
date of 21 September 2015:
• soloautos – acquired October 2015
• chileautos – acquired March 2016
• PromisePay – acquired May 2016
• Demotores Group – acquired February 2017
• SK ENCARSALES.COM Ltd – acquired January 2018
In addition, all of the one-off items of a corporate nature incurred in the FY18 year excluded in calculating adjusted NPAT (such
as the net fair value gain on the step acquisition of associate) as set out in note 6 to the accounts have been excluded from the
calculation of the achieved EPS. The actual EPS achieved above includes a pro-forma adjustment to include SK ENCARSALES.COM Ltd
at 49.9% ownership by carsales for the full period to 30 June 2018 to reflect the same ownership basis on which the EPS targets
were originally set in FY16.
The amounts payable (cash value at 30 June 2018) under the LTI grant vesting in August 2018 are as follows:
2018
C McIntyre
A Bhatia
A Saines
P Barlow
A Demery
Vested
$
566,898
245,925
323,453
164,767
93,775
Vested
%
72.9%
72.9%
72.9%
72.9%
72.9%
Forfeited
%
27.1%
27.1%
27.1%
27.1%
27.1%
Forfeited
$
210,739
91,419
120,243
61,250
34,858
5.6 Non-monetary benefits and other payments
Senior Executives receive salary continuance insurance cover that is also provided to all other carsales employees. The policy is held
with OnePath Life Ltd, but is not allocated on an individual employee basis.
5.7 Non-Executive Directors’ remuneration
The current base remuneration pool was approved by shareholders at the Annual General Meeting held on 23 October 2015.
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 $1,500,000 per
annum. The Directors determine how these are to be shared by the Directors.
Fees and payments to Non-Executive Directors are determined by the demands that are made on their time, as well as their
responsibilities. Non-Executive Directors receive fixed, rather than variable pay.
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 $1,500,000 pool approved by shareholders.
77
Annual Report 2018carsales.com Limited Remuneration Report continued
The following fee table applies:
Chair fee
Deputy Chair fee
Base Director fee
Alternate Director fee*
First committee
Second committee
Committee Chair fee
Committee Member fee
1 July 2017
fee table
$
295,000
140,000
120,000
110,000
25,000
30,000
N/A
N/A
1 March 2018
fee table
$
340,000
N/A
140,000
N/A
N/A
N/A
35,000
15,000
* Alternate Director fees were payable up to 27 November 2017 after which the Board determined that fees should only apply for full time Directors of the Company.
On 1 March 2018 a new structure for Board fees was introduced. The fees for Committee membership and Committee Chair were
amended to reflect the increasing time and responsibility performing the duties of a Chair of a Committee. Prior to 1 March 2018,
the Board determined that the fee for a Second Committee should be slightly higher than the First Committee fee to recognise
the significant additional time required of members serving on two Board committees.
The Non-Executive Directors had the following committee and other roles during the year:
From 1 July 2017 – 28 February 2018:
Name
J Browne*
R Collins*
W Pisciotta
P O’Sullivan
K Anderson
E Gilbert
Board
Chair
✓
Board
Deputy Chair
✓
Audit and Risk
Management
Committee
member
Nomination and
Remuneration
Committee
member
✓
✓
✓
✓
✓
✓
Subsidiary
Board
member
✓
* Mr Browne retired as Chair of the Board and a Director on 23 March 2018 and Mr Collins became Board Chair at that time.
From 1 March 2018 – 30 June 2018:
Name
R Collins
W Pisciotta
P O’Sullivan
K Anderson
E Gilbert
Audit and Risk
Management
Committee Chair
Board
Chair
✓
✓
Audit and Risk
Management
Committee
member
Nomination and
Remuneration
Committee Chair
Nomination and
Remuneration
Committee
member
✓
✓
✓
✓
✓
Steven Kloss was remunerated as an Alternate Director for Mr Wal Pisciotta up until 1 December 2017. From 1 December 2017,
the Company and Mr Kloss agreed that the position of Alternate Director would not be remunerated. Mr Kloss is invited to attend
all Board meetings to ensure he is adequately informed on all matters in the event he is required to step in for Mr Pisciotta.
78
Annual Report 2018carsales.com Limited
5.8 Additional information
5.8.1 Minimum Shareholding Requirements
Board
The Company requires all Board members to hold the equivalent of one year’s base Director’s fees in equity after 24 months Board
membership. All Board members currently meet this requirement.
Senior Executives
The Company does not have a documented minimum shareholding requirement for Senior Executives, but encourages Senior
Executives to hold shares in the Company and requests the CEO to raise the issue of shareholding with any Senior Executive who
does not hold what is viewed by the Board as a reasonable amount of Company shares. In addition, through the LTI plan the Board
is able to incorporate a significant portion of a Senior Executive’s total remuneration in equity to ensure alignment with
shareholders’ interests.
5.8.2 STI, DSTI and LTI Payments (cash, options & performance rights) achievement against maximum entitlement
All Senior Executives received grants that were equal to or less than their maximum potential STI & DSTI entitlements. The relative
proportions of remuneration which are linked to performance and those that are fixed based on the accounting values table in
section 4.2 are as follows:
At risk – STI
At risk – DSTI
At risk – LTI
2018
%
2017
%
2018
%
2017
%
2018
%
2017
%
Cash salary and
superannuation
2017
%
2018
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
–
–
–
–
–
–
–
–
–
–
–
–
–
51
75
25
19
60
56
60
63
78
72
73
N/D
22
24
24
24
16
22
21
N/D
Name
Non-Executive
Directors
Jeffrey Browne
Richard Collins
Wal Pisciotta
Pat O’Sullivan
Kim Anderson
Edwina Gilbert
Steve Kloss
(Alternate)
Executive
Directors
Cameron
McIntyre
Other Senior
Executives
Ajay Bhatia
Anthony Saines
Paul Barlow
Andrew
Demery*
* Not disclosed as Andrew Demery was not considered a KMP in FY17.
–
–
–
–
–
–
–
5
5
5
5
4
–
–
–
–
–
–
–
5
5
5
5
N/D
–
–
–
–
–
–
–
19
13
15
11
9
–
–
–
–
–
–
–
1
1
1
1
N/D
79
Annual Report 2018carsales.com Limited Remuneration Report continued
5.8.3 Share based compensation disclosures
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
October 2012
October 2012
October 2014
October 2014
October 2015
October 2015
October 2015
October 2016
October 2016
October 2016
October 2016
October 2016
October 2017
October 2017
July 2018
Date exercisable
August 2014
August 2015
August 2017
August 2017
August 2017
August 2018
August 2018
August 2018
August 2019
August 2019
August 2019
August 2019
August 2020
August 2020
August 2019
Expiry date
October 2017
October 2017
October 2019
October 2019
October 2020
October 2020
October 2020
October 2031
October 2031
October 2031
October 2031
October 2031
October 2032
October 2032
October 2033
Exercise
price
$
$5.93
$5.93
$10.71
$0.00
$0.00
$10.24
$0.00
$0.00
$0.00
$0.00
$12.23
$12.23
$0.00
$11.41
$0.00
Value at
grant date
$
$2.33
$2.43
$2.36
$9.12
$8.74
$1.86
$8.44
$9.86
$9.49
$4.87
$1.10
$0.98
12.06
3.25
13.87
Vested
%
100
75
–
–
80
73
73
78
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Performance
achieved
Yes
Yes
No(i)
No(i)
Yes
Yes
Yes
Yes(ii)
To be determined
To be determined
To be determined
To be determined
To be determined
To be determined
Yes(iii)
(i) LTI options and performance rights granted in October 2014 that were exercisable in August 2017 did not vest as a result of the Company not meeting
the minimum EPS target which had been set.
(ii) Subject to satisfactory completion of the remaining service period 78% of this award is expected to vest in August 2018 based on the performance
achievements tested at 30 June 2017 as set out in the FY17 annual report.
(iii) Relates to performance rights granted under the FY18 STI plan for the 25% portion of the total STI award that is deferred in equity. Subject to satisfactory
completion of the remaining service period this award is expected to vest in August 2019.
$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 at the earliest of (a) the expiry date applicable to the option or performance
right, (b) 30 days post the employee ceasing to be employed by carsales.com Ltd, (c) where EPS or RTSR vesting conditions are not
met at the relevant date, 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.
80
Annual Report 2018carsales.com Limited
Details of options and performance rights granted over ordinary shares in the Company provided as remuneration to each of the
Senior Executives are set out below:
Number of
options granted
during the
year 2018
Number of
performance
rights granted
during the
year 2018
Value of
options at
grant date
2018
$
Value of
performance
rights at grant
date 2018
$
Number of
options and
performance
rights vested
during the year
2018
115,243
86,486
375,001
1,068,573
93,281
32,268
32,268
18,439
13,829
26,980
27,239
16,853
12,314
105,000
105,000
60,000
45,000
337,542
341,124
212,788
155,070
42,426
52,910
28,956
15,292
Name
Executive Directors
C McIntyre
Senior Executives
A Bhatia
A Saines
P Barlow
A Demery
Further information on the options and performance rights is set out in Note 25 to the financial statements.
5.8.4 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 Senior Executive are set out below.
Name
Directors of carsales.com Ltd
C McIntyre
Senior Executives
A Bhatia
A Saines
P Barlow
A Demery
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*
$
August 2017
August 2017
August 2017
August 2017
-
9,150
5,032
5,050
3,660
-
125,813
69,190
69,438
50,325
-
* 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.
5.8.5 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.
81
Annual Report 2018carsales.com Limited
Remuneration Report continued
Share-based compensation benefits (options and performance rights)
Name
C McIntyre
A Bhatia
A Saines
P Barlow
A Demery
Financial year
granted
2016
2017
2017
2018
2018
2016
2017
2017
2018
2018
2016
2017
2017
2018
2018
2016
2017
2017
2018
2018
2016
2017
2017
2018
2018
Vested
%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Forfeited
%
27
22
-
-
-
27
22
-
-
-
27
22
-
-
-
27
22
-
-
-
27
22
-
-
-
Financial years in
which grant
may vest
2018*
2018*
2019*
2019*
2020*
2018*
2018*
2019*
2019*
2020*
2018*
2018*
2019*
2019*
2020*
2018*
2018*
2019*
2019*
2020*
2018*
2018*
2019*
2019*
2020*
Minimum total
value of grant
yet to vest
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Maximum total
value of grant
yet to vest
$
255,152
78,000
157,574
104,231
955,884
109,349
42,899
78,789
49,832
267,644
145,797
43,053
98,486
51,761
267,644
72,901
31,202
55,153
39,192
152,944
42,732
15,597
27,575
26,958
114,709
* Vesting is contingent upon Board approval. Options are exercisable after the Board releases the results to ASX in August each year.
82
Annual Report 2018carsales.com Limited
(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.
2018
Name
Non-Executive
Directors
J Browne
R Collins
W Pisciotta
P O’Sullivan
K Anderson
E Gilbert
S Kloss
(Alternate)
Executive
Directors
C McIntyre
Other Senior
Executives
A Bhatia
A Saines
P Barlow
A Demery
Granted as
compensation
(including
performance
rights) Exercised Forfeited
Balance at
start of the
year
Other
change
Balance at
the end of
the year
Vested and
exercisable(i)
Unvested
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
317,591
187,773
(9,150)
(33,967)
153,436
190,485
106,516
52,543
52,576
52,576
30,044
22,533
(5,032)
(5,050)
(3,660)
-
(15,381)
(19,277)
(10,481)
(5,543)
–
–
–
–
–
–
–
-
-
-
-
-
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
462,247
93,280
368,967
185,599
218,734
122,419
69,533
42,426
52,911
28,956
15,291
143,173
165,823
93,463
54,242
(i) Represents performances rights under the FY17 DSTI award and options and performance rights under FY16 LTI grant that will vest immediately after the release
of the 2018 annual report to the ASX.
83
Annual Report 2018carsales.com Limited Remuneration Report continued
(ii) Share holdings
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 Company, including their personally related parties, are set out below. There were no shares
granted during the reporting period as compensation.
2018
Name
Non-Executive Directors
Ordinary shares
J Browne
R Collins
W Pisciotta
P O’Sullivan
K Anderson
E Gilbert
S Kloss (Alternate)
Executive Directors
C McIntyre
Other Senior Executives
A Bhatia
A Saines
P Barlow
A Demery
Received
during the
year on the
exercise of
options
Balance at
the start of
the year
Other
changes
during the
year
Balance at
end of the
year
30,000
591,282
11,154,733
9,650
15,000
25,000
2,774,500
–
–
–
–
–
–
–
(30,000)
4,406
(2,318,435)
5,350
-
-
-
170,762
9,150
1,135
16,000
30,000
–
5,032
5,050
3,660
–
–
–
–
–
–
-
595,688
8,836,298
15,000
15,000
25,000
2,774,500
179,912
6,167
21,050
33,660
–
5.8.6 Other transactions with Key Management Personnel
Conflicts and transactions with KMP are handled in accordance with the Board Charter available at
shareholder.carsales.com.au/Investor-Centre/
(i) Directors of carsales.com Ltd
W Pisciotta is a shareholder and S Kloss (Alternate Director) is the Managing Director and shareholder of Pentana Solutions Pty Ltd,
which renewed its relationship agreement with carsales.com Ltd in 2017 for a further 4 years for the supply of data and services.
Mr Pisciotta and Mr Kloss absented themselves from all Board discussions on the renewal and review of the agreement and only
those directors who are independent of Pentana Solutions were involved in the approval of the agreement. Under the contract,
Pentana Solutions supplies data for the exclusive use of carsales.com Ltd in return for a fixed annual payment, plus additional service
fees based on the revenues generated through Pentana Solutions. The total amount paid to Pentana for services during FY18 was
$1,341,000, a reduction of 60% for the PCP.
The relationship between the Company and Pentana provided a strong basis for carsales’ success in the advertising of dealer
vehicles. It provided carsales with access to a significant amount of dealer inventory in near real time for publishing on the website.
While there are now more ways for dealers to send inventory to online classified sites, the Pentana relationship still provides a
benefit to carsales and is negotiated on a commercial and arms’ length basis.
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. The total amount paid to carsales by
automotive dealerships of which R Collins is a shareholder is approximately $445,000.
E Gilbert is a Director 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. The total amount paid to carsales by automotive
dealerships of which E Gilbert is a shareholder is approximately $225,000.
Neither Mr Collins nor Ms Gilbert receive any additional benefits to their dealerships from their participation on the Company Board.
84
Annual Report 2018carsales.com Limited
Other Directors’ Report Disclosures
5.8.7 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
Oct-13
Oct-14
Oct-15
Oct-15
Oct-16
Oct-16
Oct-17
Oct-17
Expiry date
Oct-18
Oct-19
Oct-20
Oct-20
Oct-31
Oct-31
Oct-32
Oct-32
Issue price of
shares
$
$9.10
$10.71
$10.24
$0.00
$12.23
$0.00
$11.41
$0.00
Number under
options
32,272
27,448
566,926
-
865,916
-
364,674
1,857,236
Number under
performance
rights
-
-
-
121,467
-
211,702
229,506
562,675
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 2018.
5.8.8 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 2018 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
August 2017
August 2017
September 2017
October 2017
October 2017
November 2017
December 2017
February 2018
March 2018
June 2018
Issue price
of shares
$
$9.10
$0.00
$5.93-$9.10
$9.10-$10.71
$0.00
$9.10-$10.71
$9.10
$10.71
$9.10-$10.71
$9.10-$10.71
Number
of shares
issued
2,237
35,691
200,368
1,433
11,416
7,873
3,835
5,565
9,339
12,287
290,044
85
Annual Report 2018carsales.com Limited
Other Directors’ Report Disclosures continued
Other Directors’ Report Disclosures continued continued
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:
Richard Collins Non-Executive Chair – Appointed Chair on 23 March 2018
Jeffrey Browne Non-Executive Chair – Retired from the Board on 23 March 2018
Cameron McIntyre Managing Director
Wal Pisciotta Non-Executive Director
Kim Anderson Non-Executive Director
Pat O’Sullivan Non-Executive Director
Edwina Gilbert Non-Executive Director
Kee Wong Non-Executive Director – Appointed to the Board on 9 July 2018
Steve Kloss Alternate Non-Executive Director
The number of full Board meetings attended, and sub-committee meetings attended where a Board member is a member of that
sub-committee are set out below:
Meetings of Directors
Jeffrey Browne (Chair until 23 March 2018)
Richard Collins (Chair from 23 March 2018)
Cameron McIntyre
Wal Pisciotta
Kim Anderson
Pat O'Sullivan
Edwina Gilbert
Steve Kloss (alternate director)
Full scheduled
meetings of
directors
Short
teleconference
meetings of
directors
A
9
13
13
13
13
13
13
13
B
7
13
13
13
13
13
13
12
A
2
2
2
2
2
2
2
2
B
1
2
2
1
1
2
2
1
Ad hoc
meetings
of directors
B
A
3
3
3
3
3
3
1
3
3
3
3
3
3
3
2
3
A = Number of meetings held during the time the director held office during the year
B = Number of meetings attended
Director name
Pat O’Sullivan (Chair)
Kim Anderson
Richard Collins (resigned from Committee 28 February 2018)
Edwina Gilbert (appointed to Committee 28 February 2018)
Number of Audit and Risk
Management Committee
meetings during tenure
4
4
3
1
Number of Audit and Risk
Management Committee
meetings attended
4
4
3
1
Kee Wong was appointed to the Audit and Risk Committee on 31 July 2018.
Director name
Kim Anderson (Chair)
Pat O’Sullivan
Edwina Gilbert
Scheduled meetings of
Remuneration and Nomination
committee
Ad hoc meetings of
Remuneration and Nomination
committee
A
2
2
2
B
2
2
2
A
2
2
2
B
2
2
2
A = Number of meetings held during the time the director held office during the year
B = Number of meetings attended
86
Annual Report 2018carsales.com Limited
Dividends – carsales.com Ltd
Dividends paid to members during the financial year were as follows:
Final fully franked ordinary dividend for the year ended 30 June 2017 of 21.5 cents
(2016: 19.5 cents) per share paid on 19 October 2017.
Interim fully franked ordinary dividend for the year ended 30 June 2018
of 20.5 cents (2017: 18.7 cents) per share paid on 17 April 2018.
2018
$’000
52,035
2017
$’000
47,028
49,719
101,754
45,146
92,174
At the end of the financial year the Directors have recommended the payment of a fully franked final ordinary dividend of
$57,683,000 (23.7 cents per share) to be paid on 10 October 2018 out of retained earnings at 30 June 2018.
Significant changes in the state of affairs
During the financial year the Company continued to expand in international markets by acquiring the remaining 50.1% of SK
ENCARSALES.COM Ltd in South Korea for $243,428,000 in January. Further details are set out in Note 21 to the financial
statements. Further matters are set out in the Operational and Financial Review on pages 38 to 41.
Matters subsequent to the end of the financial year
As set out in Note 29 to the financial statements on 3rd July 2018 the Company successfully completed the refinance of its
syndicated revolving loan facilities. Pursuant to this refinance, the Company established a new $545 million debt facility under
a Common Terms Deed with tranches that mature in 3 and 5 years. On 4th July 2018, the Company also entered into AUD:KRW
Non-Deliverable Cross Currency Swaps with the syndicate banking group with a total notional value of A$335.0 million, with
A$125.0 million having a maturity of 3 years and A$210.0 million a maturity of 5 years. Aside from this, no matter or
circumstance has arisen since 30 June 2018 that has significantly affected, or may affect:
(a) the Group’s operations in future financial years, or
(b) the results of those operations in future financial years, or
(c) the Group’s state of affairs in future financial years.
Insurance of officers
During the financial year, carsales.com Ltd paid a premium to insure the Directors and officers of the Company and its
Australian-based controlled entities. The contract of insurance prohibits disclosure of the nature of the liability and the amount
of the premium.
Indemnification of Directors and officers
All current Directors and officers are indemnified under a deed of indemnity, insurance and access.
87
Annual Report 2018carsales.com Limited
Other Directors’ Report Disclosures continued
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 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 Management Committee to ensure they do not impact
the impartiality and objectivity of the auditor; and
• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics
for Professional Accountants.
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
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
Other advisory services
Other services
Total remuneration for non-audit services
2018
$’000
2017
$’000
94,400
94,400
226,214
226,214
161,671
28,056
189,727
86,526
63,102
149,628
67,867
37,850
351,994
413,692
88
Annual Report 2018carsales.com Limited
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 90.
Rounding of amounts
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191,
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.
Corporate governance report
As allowed under the ASX Corporate Governance Principles and Recommendations (Third Edition) the Company has included its
report on compliance with the principles in the year to 30 June 2018 in the Corporate Governance section of the Investor Centre
on the carsales website. The full report can be found at the following URL: http://shareholder.carsales.com.au/Investor-
Centre/?page=Corporate-Governance
This report is made in accordance with a resolution of Directors.
Richard Collins
Chair
Melbourne
21 August 2018
Cameron McIntyre
Managing Director and CEO
89
Annual Report 2018carsales.com Limited
Auditor’s Independence Declaration
As lead auditor for the audit of carsales.com Limited and its controlled entities for the year ended 30 June 2018, I declare that
to the best of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of carsales.com Limited and the entities it controlled during the period.
Lisa Harker
Partner
PricewaterhouseCoopers
Melbourne
21 August 2018
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
90
Annual Report 2018carsales.com Limited
Financial Statement Contents
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
92
93
94
95
96
Key performance
Capital and financial
risk management
Other assets and liabilities
Group structure
Other
7. Capital risk management
14. Trade and other receivables 20. Interest in
1. Segment
information
2. Revenue
8. Cash and cash equivalents
15. Property, plant
and equipment
3. Expenses
9. Borrowings
16. Intangible assets
other entities
21. Business
combinations
and disposals
22. Related party
transactions
24. Remuneration
of auditors
25. Share-based
payments
26. Parent entity
financial
information
4. Income tax
10. Contributed equity
17. Payables and provisions
23. Deed of cross
guarantee
27. Contingent
liabilities
5. Reconciliation of
profit after income
tax to net cash
inflow from
operating activities
6. Earnings per
share
11. Reserves and
retained earnings
18. Other financial liabilities
12. Dividends
19. Commitments
13. Financial risk management
Directors’ declaration
Independent auditor’s report
to the members of carsales.com Ltd
Shareholder information
143
144
150
28. Other
accounting
policies
29. Events
occurring after
the reporting
period
Annual Report 2018
carsales.com Limited
91
Consolidated Statement of Comprehensive Income continued
Consolidated Statement of Comprehensive Income
For the Year Ended 30 June 2018
For the Year Ended 30 June 2018
Revenue from continuing operations
Sale of goods and services
Revenue from continuing operations
Expenses
Costs of sale
Sales and marketing expenses
Service development and maintenance
Operations and administration
Earnings before interest, taxes, depreciation and amortisation
Depreciation and amortisation expense
Finance income
Finance costs
Share of net profit from associates accounted for using the equity method
Gain/(loss) on associates fair value adjustment and investment dilution
Net gain on step acquisition of associate
Profit before income tax
Income tax expense
Profit from continuing operations
Other comprehensive income
Items that may be reclassified to profit or loss:
Exchange differences on translation of foreign operations
Reclassification of exchange differences on step acquisition of associate
Recycled share of remeasurement of net defined benefit liability of associates
Movement in defined benefit scheme reserve
Changes in the fair value of available-for-sale financial assets
Other comprehensive income for the year
Notes
2
2018
$’000
2017
$’000
444,009
444,009
372,114
372,114
(48,585)
(106,118)
(38,760)
(45,941)
204,605
(17,363)
395
(6,942)
5,143
1,251
57,019
244,108
(55,901)
188,207
10,032
(14,551)
185
(35)
(715)
(5,084)
(34,030)
(93,358)
(31,351)
(36,878)
176,497
(9,966)
640
(7,517)
8,498
(6,877)
–
161,275
(48,261)
113,014
(8,575)
–
148
–
29
(8,398)
9
9
20(c)
20(e)
21
4(a)
11(a)
11(a)
11(a)
Total comprehensive income for the year
183,123
104,616
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
184,843
3,364
188,207
109,479
3,535
113,014
179,931
3,192
183,123
101,145
3,471
104,616
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
6
6
Cents
76.3
76.0
Cents
45.4
45.3
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
92
Annual Report 2018carsales.com Limited Consolidated Statement of Financial Position continued
Consolidated Statement of Financial Position
As at 30 June 2018
As at 30 June 2018
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Total current assets
Non-current assets
Investments accounted for using the equity method
Available-for-sale financial assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Other receivables
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Other financial liabilities
Current tax liabilities
Provisions
Deferred revenue
Total current liabilities
Non-current liabilities
Trade and other payables
Borrowings
Other financial liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained earnings
Non-controlling interests
Total equity
Notes
8
14
20(c)
20(d)
15
4(d)
16
14
17
9
18
17
17
9
18
4(e)
17
2018
$’000
2017
$’000
65,061
67,337
2,038
134,436
68,150
19,797
13,909
9,415
658,955
5,859
776,085
39,795
48,404
833
89,032
224,472
13,301
7,289
5,144
199,954
–
450,160
910,521
539,192
50,580
246,024
1,300
15,819
7,598
1,991
323,312
278
208,734
20,349
20,898
1,129
251,388
42,002
1,755
–
9,982
6,040
6,713
66,492
–
191,299
–
2,923
1,318
195,540
574,700
262,032
335,821
277,160
10
11(a)
11(c)
119,541
(24,427)
234,696
6,011
335,821
105,861
14,149
151,607
5,543
277,160
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
93
Annual Report 2018carsales.com Limited Consolidated Statement of Changes in Equity continued
Consolidated Statement of Changes in Equity
For the Year Ended 30 June 2018
For the Year Ended 30 June 2018
Balance at 1 July 2016
Profit for the year
Exchange differences on translation
of foreign operations
Share of remeasurement of net defined
benefit liability of associates
Changes in the fair value of
available-for-sale financial assets
Total comprehensive income for the year
Transactions with owners in their
capacity as owners:
Contributions of equity upon exercise
of employee share options
Share capital contributed by
non-controlling interests
Dividends paid to members of the parent
Dividends paid to non-controlling interests
Decrease in share-based payment reserve
inclusive of tax
Balance at 30 June 2017
Balance at 1 July 2017
Profit for the year
Exchange differences on translation
of foreign operations
Reclassification of exchange difference
on step acquisition of associate
Recycled share of remeasurement of net defined
benefit liability of associates
Movement in defined benefit scheme reserve
Changes in the fair value of
available-for-sale financial assets
Total comprehensive income for the year
Transactions with owners in their
capacity as owners:
Contributions of equity upon exercise
of employee share options
Dividends paid to members of the parent
Dividends paid to non-controlling interests
Increase in share-based payment reserve
inclusive of tax
Non-controlling interests on acquisition
of subsidiary
Transactions with non-controlling interests
Balance at 30 June 2018
Attributable to owners
of carsales.com Ltd
Notes
Contributed
equity
$’000
99,026
–
–
–
–
–
11(a)
Retained
earnings
$’000
134,302
109,479
Non-
controlling
interests
$’000
4,180
3,535
Total
equity
$’000
260,370
113,014
–
–
(64)
(8,575)
–
148
Reserves
$’000
22,862
–
(8,511)
148
29
(8,334)
–
109,479
–
3,471
29
104,616
10(b)
467
12
–
6,368
–
–
–
–
–
–
–
467
–
(92,174)
–
150
–
(2,258)
150
(85,806)
(2,258)
–
105,861
(379)
14,149
–
151,607
–
5,543
(379)
277,160
Notes
Contributed
equity
$’000
105,861
Reserves
$’000
14,149
Retained
earnings
$’000
151,607
184,843
Non-
controlling
interests
$’000
5,543
3,364
Total
equity
$’000
277,160
188,207
–
–
–
–
–
–
10,204
(14,551)
185
(35)
–
–
–
–
(172)
10,032
–
–
–
(14,551)
185
(35)
(715)
(4,912)
–
184,843
–
3,192
(715)
183,123
11(a)
11(a)
11(a)
10(b)
12
20(c)
1,623
12,057
–
–
–
–
–
(101,754)
–
–
–
(2,592)
1,623
(89,697)
(2,592)
–
3,226
–
–
3,226
11(a)
–
–
119,541
–
(36,890)
(24,427)
–
–
234,696
1,122
(1,254)
6,011
1,122
(38,144)
335,821
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
94
Annual Report 2018carsales.com Limited Consolidated Statement of Cash Flows continued
Consolidated Statement of Cash Flows
For the Year Ended 30 June 2018
For the Year Ended 30 June 2018
Cash flows from operating activities
Receipts from customers (including GST)
Payments to suppliers and employees (including GST)
Income taxes paid
Net cash inflow from operating activities
Cash flows from investing activities
Investment in subsidiaries, net of cash acquired
Investment in associates
Investment in available-for-sale financial assets
Payments for property, plant and equipment
Payments for intangible assets
Interest received
Proceeds from sale of property, plant and equipment
Proceeds from sale of business
Dividends received from associates
Capital reduction in associates
Net cash (outflow)/inflow from investing activities
Cash flows from financing activities
Proceeds from issues of shares and other equity securities
Proceeds from borrowings
Repayment of borrowings
Dividends paid to non-controlling interests
Dividends paid to Company shareholders
Purchase of non-controlling interests
Interest paid
Net cash inflow/(outflow) from financing activities
Effects of exchange rates on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at end of year
Notes
2018
$’000
2017
$’000
467,930
(295,822)
(52,774)
119,334
403,815
(235,272)
(43,767)
124,776
5
(231,226)
(466)
(764)
(3,548)
(5,214)
395
169
–
1,550
–
(239,104)
1,623
334,525
(74,820)
(2,592)
(89,697)
(13,592)
(10,120)
145,327
(6,654)
(1,040)
–
(2,395)
(469)
640
38
1,402
11,994
13,511
17,027
467
73,510
(107,576)
(2,258)
(85,806)
–
(7,561)
(129,224)
(291)
(1,493)
25,266
39,795
65,061
11,086
28,709
39,795
12
8
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
95
Annual Report 2018carsales.com Limited Notes to the Consolidated Financial Statements continued
Notes to the Consolidated Financial Statements
30 June 2018
30 June 2018
About this report
This Financial Report covers the consolidated financial statements of the consolidated entity consisting of carsales.com Ltd, its
subsidiaries and investments in associates. 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 Chair and Chief
Executive Officer’s Report to shareholders on page 8, and in the Directors’ Report on page 38, each of which are not part
of this Financial Report.
The Financial Report was authorised for issue by the Directors on 21 August 2018. 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.
These financial statements have been streamlined where key information is grouped together for ease of understanding and
readability. The notes include information which is required to understand the financial statements and is material and relevant to
the operations, financial position and performance of the Group. Information is considered material and relevant if, for example:
• the amount in question is significant because of its size or nature;
• it is important for understanding the results of the Group;
• it helps to explain the impact of significant changes in the Group’s business – for example, acquisitions; or
• it relates to an aspect of the Group’s operations that is important to its future performance.
Navigating this report
The notes are organised into the following sections:
• key performance: provides a breakdown of the key individual line items in the financial statements that the Directors consider
most relevant to understanding performance and shareholder returns for the year and summarises the accounting policies,
judgements and estimates relevant to understanding these line items;
• capital and financial risk management: provides information about the capital management practices of the Group, the
Group’s exposure and management of various financial risks and explains how these affect the Group’s financial position
and performance;
• other assets and liabilities: provides information on other balance sheet assets and liabilities that do not materially affect
performance or give rise to material financial risk;
• group structure: explains aspects of the group structure, such as our portfolio of associate accounted investments and
acquisitions and how these have affected the financial position and performance of the Group; and
• other: provides information on items which require disclosure to comply with Australian Accounting Standards and other
regulatory pronouncements, however, are not considered critical in understanding the financial performance or position
of the Group.
Significant and other accounting policies that summarise the measurement basis used and presentation policies and are relevant
to an understanding of the financial statements are provided throughout the notes to the financial statements.
96
Annual Report 2018carsales.com Limited Key reporting highlights
Notes containing information relevant to understanding significant changes to the Group’s affairs and performance in the current
year are as follows:
• the Group recorded record revenue and EBITDA – Note 1;
• full year dividend declared – Note 12;
• acquisition of the remaining 50.1% of SK ENCARSALES.COM Ltd (SK Encar) – Note 21; and
• new debt facilities entered into on 3rd July 2018 – Note 29.
Key estimates and judgements
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 set out below:
• goodwill impairment testing – Note 16(a);
• valuation of share-based payments – Note 25;
• fair value on acquisition of the remaining 50.1% of SK ENCARSALES.COM Ltd (SK Encar) – Note 21;
• carrying value of equity accounted investment in Webmotors – Note 20(c);
• fair value of put options liability – Note 18; and
• trade receivables and provisioning – Note 14.
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. FY17 payroll
costs for subsidiaries have been reclassified based on the relevant function.
(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) Financial statement presentation
The accounting policies adopted are consistent with those of the previous financial year unless otherwise stated.
(iv) Going concern
The financial statements have been prepared on a going concern basis. At 30 June 2018, the Group was in a net current liability
position of $188,876,000, principally driven by the $246,000,000 borrowings current liability drawn down to purchase the
50.1% of SK ENCARSALES.COM Ltd in January 2018 that is repayable in January 2019. As set out in Note 29, the Group’s main
debt facilities were refinanced on 3 July 2018, with the existing current liabilities repaid and the maturity of the new facilities
being 3–5 years from initial drawdown.
Basis of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of carsales.com Ltd (‘Company’ or
‘parent entity’) as at 30 June 2018 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.
97
Annual Report 2018carsales.com Limited Notes to the Consolidated Financial Statements continued
30 June 2018
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); and
• 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.
Foreign currency translation
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.
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.
Rounding of amounts
The Company is of a kind referred to in ASIC Corporations Instrument 2016/191, 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 Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
New Accounting Standards and Interpretations
The Group has applied the following standards and amendments for the first time for its annual reporting period commencing
1 July 2017:
• Amendment to AASB 7: Statement of Cash Flow requiring entities to provide disclosures regarding the changes in liabilities
arising from financing activities; and
• Amendment to AASB12: Income Taxes provides guidance on consideration of tax law restrictions for the sources of taxable
profits against which it may make deductions on the reversal of that deductible temporary difference and the determination of
future taxable profits.
The adoption of these amendments did not have any impact on the amounts recognised in the current period or any prior period
and is not likely to affect future periods.
98
Annual Report 2018carsales.com Limited KEY PERFORMANCE
1. Segment information
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 CEO.
Management has determined the operating segments based on the reports reviewed by the CEO that are used to make
strategic decisions.
(a) Description of segments
The Group principally operates in five business segments: namely Online Advertising Services, Data, Research and Services,
Latin America, Asia, and Finance and Related Services.
Online Advertising Services
carsales.com Ltd Online Advertising Services can be broken into two key product sets being classified advertising and display
advertising services.
Classified advertising allows customers (including dealers and consumers) to advertise automotive and non-automotive goods
and services for sale across the carsales Network. Classified advertising typically allows a customer to advertise their red Brand X,
model Y car with 20,000km for $10,000 on a carsales website. This segment includes services such as subscriptions, lead fees
and priority placement services across automotive and non-automotive websites.
Display advertising typically involves corporate customers such as automotive manufacturers/importers, finance and insurance
companies etc, placing advertisements on carsales Network websites. 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, as banner advertisements or other sponsored links.
Online Advertising Services includes carsales’ investment in tyresales.com.au which is an online tyre advertisement website that
allows consumers to transact and purchase tyres.
Data, Research and Services
The carsales.com Ltd divisions of RedBook, 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.
International segments
carsales.com Ltd has operations in overseas countries through subsidiaries, equity accounted associate investments and available-
for-sale financial assets as set out below. With the acquisition of the remaining 50.1% of SK ENCARSALES.COM Ltd in January 2018,
the Group has split the previous International segment into Latin America and Asia.
Latin America
Online Automotive Classifieds:
• Webmotors S.A.(operations in Brazil) – 30%
• Chileautos SpA (operations in Chile) – 83.3%
• carsales Mexico SAPI de CV (operations in Mexico) – 100%
• Demotores Chile SpA (operations in Chile) – 100%
• Demotores S.A. (operations in Argentina) – 100%
• Demotores Colombia S.A.S. (operations in Colombia) – 100%
99
Annual Report 2018carsales.com Limited Notes to the Consolidated Financial Statements continued
30 June 2018
Asia
Online Automotive Classifieds:
• iCar Asia Limited (operations in Indonesia, Malaysia and Thailand) – 13.1%
• SK ENCARSALES.COM Ltd (operations in South Korea) – 100%
Automotive Data Services:
• Auto Information Limited (New Zealand) – 100%
• RedBook Automotive Services (M) Sdn Bhd (Malaysia) – 100%
• RedBook Automotive Data Services (Beijing) Limited (China) – 100%
• Automotive Data Services (Thailand) Company Limited – 100%
Finance and Related Services
Finance and Related Services includes the Stratton Finance Pty Ltd (50.1%) subsidiary that provides innovative vehicle finance
arrangements, vehicle procurement and other related services to customers. Segment revenues arise from commissions paid by
finance providers and other related service providers. It also includes the equity accounted associate RateSetter Australia Pty Ltd
(18.6%) and PromisePay Pte Ltd (7.1% – equity accounted until January 2018).
(b) Segment analysis
2018
Segment revenue
Segment revenue (Note 1(c)(i))
Total segment revenue
Online
Advertising
Services
$’000
Data,
Research
and Services
$’000
Latin
America
$’000
295,591
295,591
41,888
41,888
8,215
8,215
Finance and
Related
Services
$’000
Total
$’000
68,447
68,447
444,009
444,009
Asia
$’000
29,868
29,868
Gross profit
266,001
41,382
8,215
29,868
49,958
395,424
EBITDA
Depreciation and amortisation
Net interest expense
Profit before income tax
Income tax expense
Share of profit/(loss) from associates
Net gain on step acquisition
of associate
Gain on associate dilution
Non-controlling interests
Profit for the year
Segment assets
Deferred tax assets
Unallocated assets
Total assets
156,075
25,109
(2,541)
15,842
10,120
3,628
3,489
(1,974)
57,019
1,251
128,813
15,967
86,377
469,030
79,573
204,605
(17,363)
(6,547)
180,695
(55,901)
5,143
57,019
1,251
(3,364)
184,843
779,760
9,415
121,346
910,521
100
Annual Report 2018carsales.com Limited 2017
Segment revenue
Segment revenue (Note 1(c)(i))
Total segment revenue
Online
Advertising
Services
$’000
Data,
Research
and Services
$’000
International*
$’000
Finance and
Related
Services
$’000
Total
$’000
269,131
269,131
39,314
39,314
8,313
8,313
55,356
55,356
372,114
372,114
Gross profit
245,904
39,119
8,313
44,748
338,084
EBITDA
Depreciation and amortisation
Net interest expense
Profit before income tax
Income tax expense
Share of profit/(loss) from associates
Associate fair value revaluation loss
Gain on associate dilution
Non-controlling interests
Profit for the year
Segment assets
Deferred tax assets
Unallocated assets
Total assets
142,710
23,378
(93)
10,502
9,992
(7,145)
(1,494)
268
111,847
15,687
249,698
78,626
176,497
(9,966)
(6,877)
159,654
(48,261)
8,498
(7,145)
268
(3,535)
109,479
455,858
5,144
78,190
539,192
* The International Segment above has not been restated into separate Asia and Latin America segments consistent with FY18 as the Asia segment was not material
prior to the acquisition of SK ENCARSALES.COM Ltd in January 2018.
(c) Notes to, and forming part of, the segment information
(i) Segment revenue and gross profit
Segment revenue is derived from sales to external customers as set out in the table above. The nature of the segment revenue
is as described in Note 1(a) above. Gross profit is revenue less costs of sale.
(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, trade receivables, available-for-sale financial assets and investments accounted for using
equity method. Unallocated assets include property, plant and equipment, intangibles and other assets utilised across multiple
segments. All unallocated assets are assessed by the chief operating decision maker at a consolidated entity level.
(iv) Liabilities
Liabilities are not reported to the chief operating decision maker by segment. All liabilities are assessed at a consolidated entity level.
101
Annual Report 2018carsales.com Limited Notes to the Consolidated Financial Statements continued
30 June 2018
2. Revenue
From continuing operations
Sales revenue
Sale of services
Sale of goods
2018
$’000
2017
$’000
396,771
47,238
444,009
338,250
33,864
372,114
Recognition and measurement
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 Group 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
Revenue 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. Subscription services and short-term time based contracts are recognised across the period
to which they relate.
(ii) Sale of goods – retail
Revenue is recorded when goods have been provided to a customer leading to an enforceable claim by the Group.
(iii) Finance and related services
Fees and commissions are recognised on an accruals basis when the service has been provided or on completion of the underlying
transaction. Used car disposal revenue and cost of goods are recognised gross (revenue being the fair value of the cash received
for the sale of the vehicle, and the cost of goods being the trade in price of the vehicle).
(iv) Dividends
Dividends are recognised as revenue when the right to receive payment is established.
(v) R&D tax rebate
The research and development claim of the Company gives rise to a tax offset and this tax offset is recognised as other income.
102
Annual Report 2018carsales.com Limited 3. Expenses
Profit before income tax includes the following specific expenses:
Total employee benefits
Defined contribution superannuation expense
Defined benefit expense – SK ENCARSALES.COM Ltd
Research and development
Minimum lease payments
Recognition and measurement
(i) Retirement benefit obligations
2018
$’000
2017
$’000
102,107
7,623
480
6,043
7,767
86,231
7,376
–
6,044
6,275
Employees of the Group are entitled to benefits on retirement, disability or death from the Group’s various retirement benefit plans.
The carsales.com Ltd and the Group’s Australian subsidiaries have a number of defined contribution plans as required by Australia
law. The defined contribution plans receive fixed contributions from the relevant employing Australian 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 carsales.com Ltd retirement plan. Employees of subsidiary companies in Australia are
members of the relevant defined contribution plans operated by the subsidiary companies. Employees of International subsidiaries
(except South Korea) are members of various government insurance and retirement schemes where the Company is required to
make mandatory deductions from employee pay to contribute towards these schemes.
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.
SK ENCARSALES.COM Ltd, the Group’s subsidiary in South Korea, operates a defined benefit plan, under which amounts to
be paid as retirement benefits are determined by reference to a formula based on employee’s earnings and years of service.
The defined benefit asset or liability comprises the present value of the defined benefit obligation, less past service costs and
actuarial gains and losses not yet recognised and less the fair value of plan assets out of which the obligations are to be
settled. The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method.
The discount rate used in calculating the present value of defined benefit obligations is determined by reference to market
yields at the end of the reporting period on high quality corporate bonds of a term consistent with the term of the post-
employment benefit obligations. Re-measurements, comprising of actuarial gains and losses, the effect of the asset ceiling,
excluding net interest, and the return on plan assets, are recognised immediately in the statement of financial position
with a corresponding debit or credit to retained earnings through OCI in the period in which they occur.
Re-measurements are not reclassified to profit or loss in subsequent periods. Past service costs are recognised in profit or loss
on the earlier of:
• The date of the plan amendment or curtailment; and
• The date that the Company recognised restructuring-related costs.
(ii) 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 an 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 three to five years. Internally capitalised labour cost
are treated as an operating cash outflow in the consolidated statements of cash flows.
(iii) Leases
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. 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.
103
Annual Report 2018carsales.com Limited Notes to the Consolidated Financial Statements continued
30 June 2018
4. Income tax
(a) Income tax expense
Current tax
Adjustments for current tax of prior periods
Deferred tax
Adjustments for deferred tax of prior periods
Deferred income tax expense included in income tax expense comprises:
(Increase)/Decrease in deferred tax assets
Increase/(Decrease) in deferred tax liabilities
(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% (2017 – 30.0%)
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
Non-assessable income (R&D tax offset)
Share options
Sundry items
Adjustment for prior periods
Recognition of previously unrecognised tax losses
Share of (profit)/losses from associates
Non-taxable gain on associate dilution
Net gain on step acquisition of associate (non-assessable)
Withholding Tax on distribution of SK Encar pre-acquisition profits
Non-deductible impairment loss
Income tax expense
2018
$’000
59,270
(1,321)
(2,656)
608
55,901
(2,355)
307
(2,048)
2018
$’000
244,108
73,232
(272)
(172)
799
(557)
(156)
(1,543)
(375)
(17,106)
2,051
–
55,901
2017
$’000
49,244
(1,464)
(903)
1,384
48,261
808
(327)
481
2017
$’000
161,275
48,383
(300)
168
576
(80)
–
(2,549)
(80)
–
–
2,143
48,261
(c) Amounts recognised directly into equity
Aggregate current and deferred tax arising in the reporting period and not recognised in the Income Statement or other
comprehensive income but directly (credited) or debited to equity:
Current tax – debited/(credited) directly to equity
Net deferred tax – (credited)/debited directly to equity
2018
$’000
52
(1,252)
(1,200)
2017
$’000
(474)
598
124
104
Annual Report 2018carsales.com Limited (d) Deferred tax assets
The balance comprises temporary differences attributable to:
Employee
benefits
$’000
2,145
Employee
Share
Trust
$’000
1,714
Doubtful
debts
$’000
564
Expense
accruals
$’000
1,756
Intangibles
$’000
(490)
Tax losses
$’000
215
Other
$’000
174
At 1 July 2016
(Charged)/credited to the
profit or loss
Debited directly to equity
Exchange differences
At 30 June 2017
Acquisition of subsidiary
(Charged)/credited to
the profit or loss
Credited directly to equity
Exchange differences
At 30 June 2018
(475)
–
–
1,670
14
1,054
–
–
2,738
(474)
(124)
–
1,116
–
52
1,200
–
2,368
(305)
–
–
259
–
317
–
–
576
97
–
–
1,853
582
(90)
–
–
2,345
(670)
–
–
(1,160)
–
(539)
–
–
(1,699)
1,166
–
(2)
1,379
–
1,559
–
8
2,946
Total
$’000
6,078
(808)
(124)
(2)
5,144
671
2,355
1,200
45
9,415
2017
$’000
3,338
1,806
5,144
(147)
–
–
27
75
2
–
37
141
2018
$’000
4,601
4,814
9,415
Deferred tax assets to be recovered within 12 months
Deferred tax assets to be recovered after more than 12 months
Certain liability balances are shown as part of deferred tax assets, as they originate in the same jurisdiction as, and can be offset
against, other deferred tax assets. The liability balance for intangibles shown as part of deferred tax assets relates to in-house
developed and capitalised software in Australia.
(e) Deferred tax liabilities
The balance comprises temporary differences attributable to:
At 1 July 2016
Charged/(credited) to the profit or loss
Intangibles recognised from business acquisition
At 30 June 2017
Charged/(credited) to the profit or loss
Intangibles recognised from business acquisition
Exchange differences
At 30 June 2018
Intangibles
$’000
1,729
(327)
1,521
2,923
(770)
17,129
539
19,821
Withholding
Tax*
$’000
-
-
-
-
1,077
-
-
1,077
Total
$’000
1,729
(327)
1,521
2,923
307
17,129
539
20,898
* Represents South Korean Withholding Tax provided on undistributed profits that is expected to be remitted.
105
Annual Report 2018carsales.com Limited Notes to the Consolidated Financial Statements continued
30 June 2018
Deferred tax liabilities expected to be settled within 12 months
Deferred tax liabilities expected to be settled after more than 12 months
2018
$’000
2,614
18,284
20,898
2017
$’000
342
2,581
2,923
Recognition and measurement
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.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting
period in the countries where the Company’s subsidiaries and associates operate and generate taxable income. Management
periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject
to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to tax authorities.
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 nor 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 controlled entities 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.
Where there are current and deferred tax balances attributable to amounts recognised directly in equity, there are also recognised
directly in equity.
Tax consolidation legislation
The Company and its wholly-owned Australian 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 Group.
106
Annual Report 2018carsales.com Limited Critical accounting estimates and assumptions used for income tax
Uncertain tax positions
The Group applies its current understanding of the tax law to estimate tax liabilities where the ultimate tax position is uncertain.
When the tax position is ultimately determined or tax laws change, the actual tax liability may differ from this current estimate.
Research and development claim
The research and development claim available to the Company is estimated in the accounts because a full assessment of the
position cannot be made by the year end. It is the policy of the Company to only bring to account that preliminary portion of
expenses that is reasonably expected to be claimable at period end.
5. Reconciliation of profit after income tax to net cash inflow from operating activities
Profit for the year
Depreciation and amortisation
Non-cash employee benefits expense - share-based payments
Loss on disposal of assets
Net finance related costs
Share of (profit) of associates
Withholding Tax on distribution of SK Encar pre-acquisition profits
(Gain)/Loss on associate fair value adjustment and investment dilution
Net gain on step acquisition of associate
Other
Change in operating assets and liabilities:
(Increase) in trade debtors
(Increase)/Decrease in inventory
(Increase)/Decrease in deferred tax assets
Capitalised labour
(Decrease)/Increase in trade creditors and other liabilities
(Decrease)/Increase in deferred revenue
Increase in provision for income taxes payable
Increase in deferred tax liabilities
Increase in other provisions
Net cash inflow from operating activities
2018
$’000
188,207
17,363
2,025
(59)
6,547
(5,143)
2,051
(1,251)
(57,019)
–
(15,758)
(1,205)
(2,400)
(11,739)
(2,408)
(4,722)
2,630
846
1,369
119,334
2017
$’000
113,014
9,966
(255)
90
7,137
(8,498)
–
6,877
–
(84)
(4,604)
279
934
(9,218)
4,843
113
3,349
822
11
124,776
107
Annual Report 2018carsales.com Limited Notes to the Consolidated Financial Statements continued
30 June 2018
6. Earnings per share
(a) Reported earnings per share
Reported profit attributable to equity holders of the Company
Weighted average number of ordinary shares
Dilutive impact of potential ordinary shares*
Total weighted average number of ordinary shares
used in EPS calculation
Reported earnings per share/cents
2018
Basic earnings per share
2017
Diluted earnings per share
2017
184,843,000 109,479,000 184,843,000 109,479,000
242,371,937 241,383,158 242,371,937 241,383,158
491,188
749,616
2018
–
–
242,371,937 241,383,158 243,121,553 241,874,346
45.3
45.4
76.0
76.3
*The dilutive impact of potential ordinary shares represents unexercised options and performance rights as at the balance date 30 June 2018 (2017: 30 June 2017).
(b) Adjusted earnings per share
Reported profit attributable to equity holders of the Company
Less: gain on associate dilution
Less: net gain on step acquisition of associate
Less: associate one-off tax loss/(gain)
Less: changes in fair value of put option liabilities and deferred
consideration
Add: Withholding Tax on SK Encar pre-acquisition profits
Add: finance cost write off
Add: option unwinding discount
Add: associate fair value revaluation loss
Add: acquired intangibles amortisation
Adjusted profit attributable to equity holders of the Company
Adjusted earnings per share/cents**
2018
Basic earnings per share
2017
Diluted earnings per share
2017
184,843,000 109,479,000 184,843,000 109,479,000
(268,000)
–
(804,000)
(939,000)
(57,019,000)
–
(939,000)
(57,019,000)
–
(268,000)
–
(804,000)
2018
–
–
–
–
7,145,000
3,578,000
(4,019,000)
2,051,000
397,000
341,000
–
5,330,000
–
–
–
–
7,145,000
3,578,000
130,985,000 119,130,000 130,985,000 119,130,000
49.3
(4,019,000)
2,051,000
397,000
341,000
–
5,330,000
49.4
54.0
53.9
** The directors believe the presentation of “adjusted earnings per share” provides the best measure to assess the performance of the Group by excluding one-off
net gain on step acquisition of associate, gain on associate dilution, associate one-off tax gain, option movement in fair value, finance cost write off, option
unwinding discount, associate fair value revaluation loss and non-cash acquired intangible assets amortisation from the reported IFRS measure.
Recognition and measurement
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; and
• by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements
in ordinary shares issued during the year.
Diluted earnings per share 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.
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 25.
108
Annual Report 2018carsales.com Limited CAPITAL AND FINANCIAL RISK MANAGEMENT
7. Capital risk management
The Company’s capital position at 30 June is as follows:
Borrowings (Note 9)
Less: cash and cash equivalents (Note 8)
Net debt
Contributed equity (Note 10)
Reserves (Note 11(a))
Retained earnings (Note 11(c))
Non-controlling interests
Total equity
Total capital
2018
$’000
454,758
(65,061)
389,697
119,541
(24,427)
234,696
6,011
335,821
2017
$’000
193,054
(39,795)
153,259
105,861
14,149
151,607
5,543
277,160
725,518
430,419
The Company’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can
continue to provide returns for shareholders and benefits for other stakeholders and to maintain an 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.
As disclosed in Note 29 the Group entered into a new borrowing facility on 3rd July 2018.
There are no externally imposed capital requirements.
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.
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 14) and
receivables in the consolidated statement of financial position.
8. Cash and cash equivalents
Cash and cash equivalents
2018
$’000
65,061
2017
$’000
39,795
Recognition and measurement
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 that 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.
Risk exposure
The Company’s exposure to interest rate risk is discussed in Note 9. The maximum exposure to credit risk at the reporting date
is the carrying amount of each class of cash and cash equivalents mentioned above.
109
Annual Report 2018carsales.com Limited Notes to the Consolidated Financial Statements continued
30 June 2018
9. Borrowings
At 30 June 2018 carsales.com Ltd had a syndicated revolving loan facility agreement (‘agreement’) provided by a syndicate of
financiers comprising National Australia Bank Limited (NAB), Australia and New Zealand Banking Group Limited (ANZ) and
Hongkong and Shanghai Banking Corporation (HSBC) for a total of $511 million of committed facilities.
Borrowings under this loan facility bear interest at a floating rate of BBSY Bid plus a margin, with margin determined by
reference to the leverage ratio of the Gearing Group.
In addition to the existing $265 million commitment, to fund the purchase of the remaining 50.1% in SK ENCARSALES.COM Ltd
in January 2018, the Company upsized its loan facility. A new $246 million facility was established with a 1 year tenor, and
consequentially, is presented as a current liability at 30 June 2018. The Company completed a full refinance of the $511 million
of facilities on 3rd July 2018 as set out in Note 29.
In February 2018, Stratton Finance Pty Ltd entered into a $4.2 million loan facility with the NAB. The facility is interest only for
3 years with monthly repayments of $165,000 to commence in March 2021 with the remaining balance to be repaid in full on
expiry in February 2022. The interest rate consists of NAB’s business lending rate plus a customer margin and is set at the
beginning of each pricing period (month).
Bank loan – carsales.com Ltd
Bank loan – Stratton Finance Pty Ltd
Finance lease – RedBook Inspect Pty Ltd
Less: Unamortised borrowing costs
Comprising:
Current borrowings
Non-current borrowings
Finance income
Finance income
Finance cost
Interest and finance charges paid/payable on financial liabilities
Unwinding of discount on put options liabilities
Changes in fair value of put option liabilities and contingent consideration
2018
$’000
450,000
4,225
767
454,992
(234)
454,758
246,024
208,734
454,758
2018
$’000
395
2018
$’000
(10,620)
(341)
4,019
(6,942)
2017
$’000
187,500
5,545
508
193,553
(499)
193,054
1,755
191,299
193,054
2017
$’000
640
2017
$’000
(7,517)
–
–
(7,517)
Recognition and measurement
Finance income is recognised on a time proportionate basis using the effective interest method. When a receivable is impaired,
the Group reduces the carrying amounts 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 finance income. Finance income
on impaired loans is recognised using the original effective interest rate.
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.
110
Annual Report 2018carsales.com Limited Fees paid on the establishment of loan facilities are recognised net against the loan and amortised on a straight-line basis over
the term of the facility.
Borrowings are derecognised 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.
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.
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 AASB 7 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. Cash and cash equivalents draw interest at variable interest rates, while the interest on the overdraft
facility was 8.8% (2017: 8.8%). As at reporting date, the Group had $454,225,000 (2017: $193,045,000) variable rate
borrowings at a weighted average interest rate of 3.3% (2017: 3.0%). carsales.com Ltd has a Board-approved treasury policy and
treasury strategy for the management of interest rate risk. The Company did not hedge against interest rate risk in the FY18 or
FY17 financial year. The Board keeps the decision to actively hedge interest rate risk under regular review. Any derivative contracts
will be entered into solely for interest rate risk and currency risk management and no speculative hedging is permitted under the policy.
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 had access to the following undrawn borrowing facilities at the end of the reporting period:
Floating rate
– Expiring within one year
– Expiring within one to five years
Liquidity risk
Maturities of financial liabilities
2018
$’000
3,400
61,000
64,400
2017
$’000
3,400
77,500
80,900
The following table sets out the Group’s exposure to liquidity risk. The amounts disclosed in the table are the contractual
undiscounted cash flows.
111
Annual Report 2018carsales.com Limited Notes to the Consolidated Financial Statements continued
30 June 2018
Contractual maturities of financial liabilities
Group – at 30 June 2018
Non-derivatives
Non-interest bearing payables
Variable rate borrowings
Fixed rate borrowings
Total non-derivatives
Derivatives
Other financial liabilities
Total derivatives
Group – at 30 June 2017
Non-derivatives
Non-interest bearing payables
Variable rate borrowings
Fixed rate borrowings
Total non-derivatives
Derivatives
Other financial liabilities
Total derivatives
0 – 12
months
$’000
Between 1
and 2 years
$’000
Between 2
and 5 years
$’000
Total
contractual
cash flows
$’000
-
206,436
270
206,706
278
4,227
270
4,775
50,858
461,006
565
512,429
Carrying
amount
(assets)/
liabilities
$’000
50,858
454,225
533
505,616
-
-
20,349
20,349
21,649
21,649
21,649
21,649
–
1,741
262
2,003
–
–
–
193,714
262
193,976
42,002
197,210
526
239,738
42,002
192,546
508
235,056
–
–
–
–
–
–
50,580
250,343
25
300,948
1,300
1,300
42,002
1,755
2
43,759
–
–
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.
Summarised sensitivity analysis
The following table summarises the sensitivity of the Group’s financial assets and financial liabilities to interest rate risk.
Liquidity risk
At 30 June 2018
Financial assets
Cash and cash equivalents
Financial liabilities
Borrowings
Total increase/(decrease)
At 30 June 2017
Financial assets
Cash and cash equivalents
Financial liabilities
Borrowings
Total increase/(decrease)
112
Interest rate risk
-100 bps
+100 bps
Carrying
amount
$’000
Profit
$’000
Other equity
$’000
Profit
$’000
Other equity
$’000
65,061
(471)
(471)
471
471
(454,225)
3,248
2,777
3,248
2,777
(3,248)
(2,777)
(3,248)
(2,777)
Interest rate risk
-100 bps
+100 bps
Carrying
amount
$’000
Profit
$’000
Other equity
$’000
Profit
$’000
Other equity
$’000
39,795
(325)
(325)
325
325
(193,045)
2,097
1,772
2,097
1,772
(2,097)
(1,772)
(2,097)
(1,772)
Annual Report 2018carsales.com Limited 10. Contributed equity
(a) Share capital
Ordinary shares
Fully paid
Recognition and measurement
Ordinary shares are classified as equity.
Notes
2018
Shares
2017
Shares
2018
$’000
2017
$’000
10(b) 242,982,207 241,785,292
242,982,207 241,785,292
119,541
119,541
105,861
105,861
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.
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.
(b) Movements in ordinary share capital
Date
1 July 2016
September 2016
October 2016
October 2016
November 2016
February 2017
March 2017
April 2017
May 2017
June 2017
30 June 2017
Date
1 July 2017
August 2017
August 2017
September 2017
October 2017
October 2017
October 2017
November 2017
December 2017
February 2018
March 2018
April 2018
June 2018
30 June 2018
Details
Opening balance
Exercise of employee options
Exercise of employee performance rights
Dividend Reinvestment Plan
Exercise of employee options
Exercise of employee options
Exercise of employee options
Dividend Reinvestment Plan
Exercise of employee options
Exercise of employee options
Balance
Details
Opening balance
Exercise of employee options
Exercise of employee performance rights
Exercise of employee options
Dividend Reinvestment Plan
Exercise of employee options
Exercise of employee performance rights
Exercise of employee options
Exercise of employee options
Exercise of employee options
Exercise of employee options
Dividend Reinvestment Plan
Exercise of employee options
Balance
Number
of shares
241,123,298
Issue price
47,557 $4.69–$5.93
$0.00
30,200
$11.92
206,250
$9.10
6,071
11,279 $5.93–$9.10
2,625 $5.93–$9.10
$11.20
4,862 $5.93–$9.10
3,972 $5.93–$9.10
349,178
241,785,292
Number
of shares
241,785,292
2,237
35,691
200,368
468,702
Issue price
11,416
$9.10
$ 0.00
$5.93–$9.10
$12.97
1,433 $9.10–$10.71
$ 0.00
7,873 $9.10–$10.71
$ 9.10
3,835
5,565
$ 10.71
9,339 $9.10–$10.71
$13.63
12,287 $9.10–$10.71
438,169
242,982,207
$’000
99,026
237
–
2,459
55
84
21
3,909
41
29
105,861
$’000
105,861
20
–
1,205
6,081
15
–
83
35
60
88
5,976
117
119,541
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 25.
113
Annual Report 2018carsales.com Limited Notes to the Consolidated Financial Statements continued
30 June 2018
11. Reserves and retained earnings
(a) Reserves
Share-based payment reserve
Foreign currency translation reserve
Recycled share of remeasurement of net defined benefit liability of associates
Defined benefit scheme reserve
Available-for-sale asset revaluation reserve
Non-controlling interests acquisition reserve
(i) Share-based payment reserve
Balance 1 July
Option expense
Tax on Employee Share Trust charged to equity
Balance 30 June
2018
$’000
26,004
(12,820)
–
(35)
(686)
(36,890)
(24,427)
22,778
2,026
1,200
26,004
2017
$’000
22,778
(8,473)
(185)
–
29
–
14,149
23,157
(255)
(124)
22,778
The share-based payments reserve is used to recognise the fair value of options and performance rights issued and vested.
(ii) Foreign currency translation reserve
Balance 1 July
Reclassification of exchange differences on step acquisition of associate
Currency translation differences arising during the year
Balance 30 June
(8,473)
(14,551)
10,204
(12,820)
38
–
(8,511)
(8,473)
Exchange differences arising on translation of the foreign operations are taken to the foreign currency translation reserve, as
described in ‘Basis of preparation’ and accumulated within a separate reserve within equity. The reserve is recognised in profit
and loss when the net investment is disposed of.
(iii) Share of remeasurement of net defined benefit liability of associates
Balance 1 July
Share of remeasurement of net defined benefit liability of associates
Balance 30 June
(iv) Defined benefit scheme reserve
Balance 1 July
Actuarial gains /(losses) – other comprehensive income
Balance 30 June
(v) Available-for-sale asset revaluation reserve
Balance 1 July
Changes in the fair value of available-for-sale financial assets
Balance 30 June
(vi) Non-controlling interests acquisition reserve
Balance 1 July
Transactions with non-controlling interests
Recognition of put option reserve
Balance 30 June
114
(185)
185
–
–
(35)
(35)
29
(715)
(686)
–
(12,863)
(24,027)
(36,890)
(333)
148
(185)
–
–
–
–
29
29
–
–
–
–
Annual Report 2018carsales.com Limited (b) Other reserves
Transactions with non-controlling interests
On 1 August 2017 carsales.com Ltd acquired the remaining 50.0% stake of Automotive Exchange Pty Ltd for a consideration
of $11.0 million giving carsales 100% control and ownership of Automotive Exchange Pty Ltd.
On 21 August 2017 carsales.com Ltd acquired an additional 25.0% stake of tyresales Pty Ltd for a consideration of $1.5 million
giving carsales 75% control and ownership of tyresales Pty Ltd.
On 14 December 2017 carsales.com Ltd acquired the remaining 35% stake of carsales Mexico SAPI de CV (‘soloautos’)
for a consideration of $1.7 million giving carsales 100% control and ownership of soloautos.
On 19 January 2018 carsales.com Ltd acquired the remaining 50.1% stake of SK ENCARSALES.COM Ltd for a consideration
of $240.8 million giving carsales 100% control and ownership of SK ENCARSALES.COM Ltd.
Recognition of put option reserve
The Group has put options over its non-controlling interests.
The amount that may become payable under the option on exercise is initially recognised at the present value of the redemption
amount within other financial liabilities with a corresponding charge directly to equity. The liability is subsequently accreted through
finance charges up to the redemption amount that is payable at the date at which the option first becomes exercisable – Note 9.
(c) Retained earnings
Movements in retained earnings were as follows:
Balance 1 July
Net profit for the year
Dividends
Balance 30 June
2018
$’000
151,607
184,843
(101,754)
234,696
2017
$’000
134,302
109,479
(92,174)
151,607
12. 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.
(a) Ordinary shares
Final fully franked cash dividend for the year ended 30 June 2017 of 21.5 cents
(2016: 19.5 cents per fully paid ordinary share plus a special dividend of 1.4 cents)
per fully paid ordinary share paid on 19 October 2017 (2016: 17 October 2016).
Final fully franked ordinary dividend for the year ended 30 June 2017 of 21.5 cents
(2016: 19.5 cents) – satisfied through the issuance of shares under the Dividend
Reinvestment Plan.
Interim fully franked cash dividend for the year ended 30 June 2018 of 20.5 cents
(2017: 18.7 cents) per fully paid share paid on 17 April 2018 (2017: 20 April 2017)
Interim fully franked ordinary dividend for the year ended 30 June 2018 of 20.5 cents
(2017: 18.7 cents) per share – satisfied through issuance of shares under the Dividend
Reinvestment Plan.
Total dividends paid
2018
$’000
2017
$’000
45,953
44,569
6,082
52,035
2,459
47,028
43,744
41,237
5,975
49,719
101,754
3,909
45,146
92,174
115
Annual Report 2018carsales.com Limited Notes to the Consolidated Financial Statements continued
30 June 2018
(b) Dividends not recognised at year end
In addition to the above dividends, since year end, the Directors have recommended the
payment of a final dividend of 23.7 cents per fully paid ordinary share (2017: final dividend
21.5 cents). The aggregate amount of the declared dividend expected to be paid on 10
October 2018 out of retained earnings at 30 June 2018, but not recognised as a liability
at year end, is
(c) Franked dividends
Franking credits available for subsequent financial years based on a tax rate of 30.0% (2017:
30.0%)
2018
$’000
2017
$’000
57,683
51,984
2018
$’000
2017
$’000
41,541
45,860
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.
(d) Dividend Reinvestment Plan (DRP)
The carsales.com Ltd DRP will be maintained for the 2018 final dividend, offering shareholders the opportunity to acquire
further ordinary shares in carsales. The DRP will not be offered at a discount and the price will be calculated using the daily
volume weighted average sale price of carsales.com Ltd shares sold in the ordinary course of trading on the ASX during the
five days after, but not including, the Record Date 25 September 2018. The last date for shareholders to nominate their
participation in the DRP is 5:00pm (AEST) on 26 September 2018. Shares issued under the DRP will rank equally with carsales.
com Ltd existing fully paid ordinary shares. Shareholders eligible to participate in the DRP are currently limited to those whose
registered address on the carsales.com Ltd share registry is in Australia or New Zealand.
Eligible shareholders who wish to participate in the DRP can make their elections online at www.computershare.com.au/
easyupdate/CAR or complete the DRP form, which will be sent to shareholders for completion and submission to Computershare
Investor Services Pty Ltd (carsales share registry). Further information can be obtained from Computershare on 1300 850 505.
13. 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.
116
Annual Report 2018carsales.com Limited (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), the South Korean Won (KRW), the Mexican Peso (MXP), the Chilean Peso (CLP) and
Argentine Peso (ARS).
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. The Company does net
investment hedge quasi-equity intercompany loans used to fund investments in subsidiaries, but does not net investment hedge
the carrying value of associates in the balance sheet. Trading and dividend cash flows between associates and the Group are not
hedged unless the cash flows are significant and the amount and future payment date are certain.
The Company entered into AUD:KRW Non-Deliverable Cross Currency Swaps on 4th July 2018 as set out in Note 29.
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’s share of the reported net profits of our significant overseas associates
and subsidiaries through potential movements in exchange rates are as follows:
Impact on profit:
AUD to KRW
AUD to BRL
AUD to MXP
AUD to CLP
AUD to ARS
Net Movement
Impact on equity:
AUD to KRW
AUD to BRL
AUD to MXP
AUD to CLP
AUD to ARS
Net Movement
(ii) Price risk
(+5% to -5%)
(+5% to -5%)
(+5% to -5%)
(+5% to -5%)
(+5% to -5%)
(+5% to -5%)
(+5% to -5%)
(+5% to -5%)
(+5% to -5%)
(+5% to -5%)
2018
$’000
-5%
355.4
172.8
(59.9)
55.9
(89.5)
434.7
2018
$’000
-5%
21,300
2,800
610
1,069
222
26,001
2017
$’000
-5%
390.7
144.2
(81.3)
34.8
(29.5)
458.9
2017
$’000
-5%
6,893
3,032
284
1,037
209
11,455
2018
$’000
5%
(355.4)
(172.8)
59.9
(55.9)
89.5
(434.7)
2018
$’000
5%
(21,300)
(2,800)
(610)
(1,069)
(222)
(26,001)
2017
$’000
5%
(390.7)
(144.2)
81.3
(34.8)
29.5
(458.9)
2017
$’000
5%
(6,893)
(3,032)
(284)
(1,037)
(209)
(11,455)
The Group’s exposure to equity securities price risk arises from the 13.1% investment in iCar Asia Limited held by the Group and
classified in the balance sheet as an available-for-sale financial asset (see Note 20(d)). Changes in the fair value are recognised
directly in other comprehensive income.
A movement in the valuation of this asset by 5% would have an impact of $0.6 million to the profit result.
Other than the investment in iCar Asia Limited, the Group is not exposed to significant price equities risk.
117
Annual Report 2018carsales.com Limited Notes to the Consolidated Financial Statements continued
30 June 2018
(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 14.
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
Interest rate risk is set out in Note 9.
(d) Liquidity risk
Liquidity risk is set out in Note 9.
(e) Fair value estimation
Financial assets and liabilities that are carried at fair value are measured by the following fair value measurement hierarchy:
i. Level 1: the fair value of financial instruments traded in active markets is based on quoted market prices at the end of the
reporting period;
ii. Level 2: the fair value of financial instruments that are not traded in an active market is determined using valuation techniques
that maximise the use of observable market data and rely as little as possible on entity specific estimates. If all significant inputs
required to fair value an instrument are observable, the instrument is included in level 2; and
iii. Level 3: if one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
Financial asset / liability
Fair value approach
Quoted equity instrument
Measured at fair value through OCI
Unquoted equity instrument
Measured at fair value through OCI
Derivative financial liabilities
Measured at fair value through profit or loss
Level
1
3
3
2018
11,770
8,027
21,649
2017
13,301
–
–
Level 1
• This balance represents the available-for-sale investment in iCar Asia Limited which is listed on the ASX and therefore has a
readily determinable market value.
Level 3
• This balance represents the following:
– the value of carsales non-listed available for sale equity investments ($8.0 million), which primarily comprises the investment
in PromisePay Pte Ltd ($7.3 million). The carrying value of these investments reflects the valuation implied by capital raising
completed in the last 12 months; and
– the value of put options recognised at fair value ($21.6 million). Refer Note 18 for further information.
118
Annual Report 2018carsales.com Limited OTHER ASSETS AND LIABILITIES
14. Trade and other receivables
Current
1-3 months
Over 3 months
Trade receivables
Accrued income
Other receivables
Prepayments
Trade and other receivables
Impaired
receivables
2018
$’000
143
700
2,008
2,851
Not impaired
receivables
2018
$’000
33,784
5,450
13,855
53,089
Total
receivables
2018
$’000
33,927
6,150
15,863
55,940
Provision
2018
$’000
143
700
2,008
2,851
Carrying
value
2018
$’000
33,784
5,450
13,855
53,089
5,084
2,161
7,003
67,337
Carrying
value
2017
$’000
36,916
2,223
755
39,894
3,312
2,033
3,165
48,404
Other receivables (non-current)
5,859
–
Recognition and measurement
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, data services or finance services.
Collectability of trade receivables is reviewed on an ongoing basis. Debts that 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.
The aging of receivables in the current financial year is skewed towards older receivables than the comparative period. This has
been driven by the ERP system migration to netsuite and an on-going program of work to allocate customer receipts against
invoices migrated from the previous system, and consolidated customer payments that cover a number of separate customer
accounts. As a result the over 3 months balance is conservatively stated as there are likely to be customer receipts presented
as current offsetting with aged receivable balances.
Over 50% of the receivables balance aged over 3 months is made up of large commercial customer groups with significant
ongoing relationships, and therefore the Group is confident with the recoverability of these amounts. The aging as at year end is
presented on the most conservative basis, which resulted in a materially larger provision for doubtful debts. Based on the historic
debt write offs, the Group does not anticipate a significant increase in unprovided bad debt risk.
(a) Impaired trade receivables
The individually impaired receivables mainly relate to customers that are in unexpectedly difficult economic situations. The creation
and release of the provision for impaired receivables has been included in ‘operations 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) Accrued income
Services provided in the current reporting period are recognised on accrual basis. Settlement is generally within 30 days.
119
Annual Report 2018carsales.com Limited Notes to the Consolidated Financial Statements continued
30 June 2018
(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.
Other non-current receivables represent deposits paid in relation to long-term leases by SK ENCARSALES.COM Ltd.
(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.
15. Property, plant and equipment
Plant and
equipment
$’000
Motor
vehicles
$’000
Leasehold
improvements
$’000
At 30 June 2018
Cost
Accumulated depreciation
Net book amount
At 30 June 2017
Cost
Accumulated depreciation
Net book amount
12,549
(8,828)
3,721
8,076
(6,126)
1,950
1,115
(404)
711
705
(213)
492
Total
$’000
29,639
(15,730)
13,909
15,975
(6,498)
9,477
8,763
(3,916)
4,847
17,544
(10,255)
7,289
Recognition and measurement
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 and peripherals
3 – 5 years
3 – 10 years
3 – 5 years
• Leased plant and equipment
10 – 15 years or minimum lease period if shorter
• Leasehold improvements
3 – 10 years or minimum lease period if shorter
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.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the consolidated
statement of comprehensive income.
Recognition and measurement
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.
120
Annual Report 2018carsales.com Limited 16. Intangible assets
At 1 July 2016
Cost
Accumulated amortisation and impairment
Net book amount
Year ended 30 June 2017
Opening net book amount
Acquisition of subsidiaries
Additions
Disposals
Amortisation charge
Reclassifications of intangible assets**
Exchange differences
Closing net book amount
At 30 June 2017
Cost
Accumulated amortisation and impairment
Net book amount
Year ended 30 June 2018
Opening net book amount
Acquisition of subsidiaries
Additions
Disposals
Amortisation charge
Reclassifications of intangible assets***
Exchange differences
Closing net book amount
At 30 June 2018
Cost
Accumulated amortisation and impairment
Net book amount
Computer
Software
$’000
Brands and
customer
relationships
$’000
Other
intangible
assets*
$’000
Goodwill
$’000
169,757
–
169,757
169,757
4,686
–
–
–
(3,329)
(1,433)
169,681
169,681
–
169,681
169,681
361,651
–
–
–
–
10,666
541,998
541,998
–
541,998
26,438
(13,583)
12,855
12,855
707
9,908
–
(6,104)
–
(47)
17,319
37,899
(20,580)
17,319
17,319
2,818
18,165
(14)
(9,263)
119
(169)
28,975
55,625
(26,650)
28,975
9,253
(868)
8,385
8,385
1,140
–
–
(1,359)
4,340
(25)
12,481
14,709
(2,228)
12,481
12,481
77,861
–
–
(5,115)
–
2,325
87,552
94,925
(7,373)
87,552
Total
$’000
210,036
(18,467)
191,569
191,569
6,533
9,979
–
(7,749)
1,140
(1,518)
199,954
4,588
(4,016)
572
572
–
71
–
(286)
129
(13)
473
4,775
(4,302)
473
227,064
(27,110)
199,954
473
174
86
–
(180)
(119)
(4)
430
199,954
442,504
18,251
(14)
(14,558)
–
12,818
658,955
4,888
(4,458)
430
697,436
(38,481)
658,955
* Other intangible assets include database, domain names and other.
** Reclassifications reflect the fair value adjustment of the brand and customer relationships intangibles acquired as part of business combinations.
The reclassification from goodwill includes the net deferred tax effect of the brand intangibles being reclassified.
*** Reclassifications include minor adjustments for other intangible assets.
Recognition and measurement
(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.
121
Annual Report 2018carsales.com Limited Notes to the Consolidated Financial Statements continued
30 June 2018
(ii) Computer software
Software includes capitalised development costs being an internally generated intangible asset.
Costs incurred in developing products or systems and costs incurred in acquiring software and licences that will contribute
to future period financial benefits through revenue generation and/or cost reduction are capitalised to software and systems.
(iii) Brands and customer relationships
Acquired brands represent the value of brands in acquired subsidiaries and businesses that are separately fair valued at the date
of acquisition from the remaining goodwill. Acquired brands are written off over a 10-year period.
Acquired customer relationships have a finite useful life and are carried at fair value at acquisition date less accumulated amortisation
and impairment losses. Amortisation is calculated using the straight-line method to allocate the cost of the asset over its estimated
useful life, which is between seven to 12 years.
(iv) Other intangible assets
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
• Brand intangibles
• Customer relationships
4–5 years
5–10 years
10 years
10 years
7–12 years
(a) Cash generating units
Goodwill is allocated to the Group’s cash-generating units (CGUs) and tested annually to determine whether they have
suffered any impairment. 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).
A segment-level summary of the goodwill allocation is presented below.
2018
Online Advertising Services
Data, Research and Services
Stratton Finance Group
Mexico
Chile
Argentina
Latin America
South Korea
Asia
2017
Online Advertising Services
Data, Research and Services
Stratton Finance Group
Mexico
Chile
Argentina
International
122
Total
$’000
73,876
14,541
58,698
147,115
5,018
18,224
1,745
24,987
369,896
369,896
541,998
Total
$’000
72,076
14,541
58,698
145,315
4,112
17,324
2,930
24,366
169,681
Annual Report 2018carsales.com Limited (b) Impairment testing and key assumptions
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,
which includes carsales’ equity held associate investments. 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.
Key assumptions
Both value in use and fair value less cost to sell valuation methods have been employed in determining the recoverable amounts
of CGUs. Both methods are predicated on cash flow projections which necessitates the adoption of assumptions and estimates.
The key assumptions and estimates used in management’s calculations primarily relate to:
• Five or ten year cash flow forecasts sourced from internal budgets and long-term forecasts;
• Terminal value growth rates applied to the period beyond the five to ten year cash flow forecasts; and
• Pre-tax discount rates, used to discount the cash flows to present value.
‘Best estimates’ have been used in formulating the assumptions and estimates. However, changes in any of the key assumptions,
including increases in discount rates or changes in operating conditions may cause the recoverable amount of CGUs to fall below
their carrying amounts, resulting in an impairment loss being recognised.
The key assumptions for each CGU are detailed as follows:
CGU
Online Advertising Services
Data, Research and Services
Stratton Finance Group
Chile
Mexico
Valuation method
Value in use
Value in use
Value in use
Value in use
Fair value less costs to sell
Years of
cash flow
projection
5
5
5
5
10
2018
2017
2018
2017
Terminal
growth rate
Pre-tax
discount rate
2.5%
2.5%
3.0%
3.0%
3.0%
2.5%
2.5%
3.0%
3.0%
3.0%
13.8%
13.8%
14.0%
14.1%
15.9%
13.8%
13.8%
14.0%
13.8%
15.9%
Given the recent nature of the Demotores acquisition in Argentina and the SK ENCARSALES.COM Ltd (SK Encar) acquisition in
South Korea, the recoverable amounts for Argentina and South Korea have been based on fair values less costs to sell supported
with reference to the transaction price.
(c) Impact of possible changes in key assumptions
As part of management’s impairment review for the period ended 30 June 2018, the carrying value of the Stratton Finance Group
CGU was compared with a value in use discounted cash flow model. The model indicated no impairment is required at 30 June 2018.
The model’s cash flow projections are based on the Board approved budget for the next 5 years.
The valuation outcome is predicated on Stratton’s ability to grow its core finance revenue at levels slightly above those achieved
in FY18 and at improved margins. This assumption could be impacted by two key external factors going into FY19:
• The ASIC (Flexible Credit Cost Arrangements) legislative changes, which will come into operation in November 2018; and
• The uncertainty of any potential impacts on asset backed lending markets associated with the Financial Services Royal Commission.
Given it is too premature to assess the impact of these items, management has not factored in any potential impacts from these
two external factors in its forecast. Management anticipates that over the next 6 months greater certainty on the potential
impacts will arise as any regulatory changes are announced and/or come into force.
While the estimated recoverable amount of the Stratton Finance Group CGU was greater than its carrying value, there is limited
head room and any adverse change in certain key assumptions would result in an impairment to goodwill to be recognised. The
calculations are sensitive to changes in the key assumptions as follows:
• an increase in the post tax discount rate of 1% would result in an impairment of $6.0m;
• a decrease in the terminal growth rate of 1% would result in an impairment of $7.1m;
• a decrease in revenue growth rates of 1% would result in an impairment of $7.9m; and
• an increase in operating expense growth rates of 1% would result in an impairment of $9.5m.
123
Annual Report 2018carsales.com Limited
Notes to the Consolidated Financial Statements continued
30 June 2018
17. Payables and provisions
Trade and other payables
Trade payables
Accrued expenses
Other payables
Total payables
Other payables – non-current
Provisions
Employee benefits – current
Employee benefits – non-current
Total employee benefits
Recognition and measurement
(i) Payables
2018
$’000
22,225
22,120
6,235
50,580
2017
$’000
18,133
20,739
3,130
42,002
278
–
7,598
1,129
8,727
6,040
1,318
7,358
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year that are unpaid.
The amounts are unsecured and are usually paid within 30 days of recognition.
(ii) 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.
(iii) Other long-term employee benefit obligations
The liability for long service leave and annual leave that 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 high-quality corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future
cash outflows.
(iv) Bonus plans
The Group recognises a liability and an expense for bonuses based on a formula that takes into consideration the profit
attributable to the Company’s shareholders after certain adjustments as well as other metrics set out in the Remuneration
Report. The Company recognises a provision where contractually obliged or where there is a past practice that has created
a constructive obligation.
124
Annual Report 2018carsales.com Limited 18. Other financial liabilities
Other liabilities – current
Put options – non-current
2018
$’000
1,300
20,349
21,649
2017
$’000
–
–
–
During the year ended 30 June 2018, the Group entered into a number of put and call option contracts in relation to the
remaining shares held by non-controlling interests in subsidiaries acquired. The most significant put option relates to Appraisal
Solutions Pty Ltd.
Where risks and rewards of ownership of the non-controlling interests under these put option contracts do not transfer to the
Group the estimated future liability for each put option contract is recognised in the balance sheet, with the initial recognition
being through the transactions with non-controlling interests reserve and subsequent changes to fair value recognised as finance
income/expense. The put options valuation are based on contractual multiples of future earnings of the acquired subsidiaries for
a defined period and are valued at 30 June 2018 based on forecasts of earnings for each acquired subsidiary. These liabilities are
discounted to present value using a discount rate of 4.0%, with the unwind of the discount being recognised as a finance expense.
19. 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 eighteen months. The Company has entered into a five-year extension
on the lease which will commence from October 2019. 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
2018
$’000
2017
$’000
8,877
28,037
6,877
43,791
6,223
11,934
1,044
19,201
Bank guarantee facility
Guarantees in respect of bank facilities drawn down but not included in the accounts of the Group are $3.69 million
(2017: $3.65 million).
125
Annual Report 2018carsales.com Limited Notes to the Consolidated Financial Statements continued
30 June 2018
GROUP STRUCTURE
20. Interests in other entities
(a) Material subsidiaries
The Group’s principal subsidiaries at 30 June 2018 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.
Name of entity
Webpointclassifieds Pty Ltd
Equipment Research Group Pty Ltd
Discount Vehicles Australia Pty Ltd
Automotive Data Services Pty Ltd
Auto Information Limited
RedBook Automotive Services (M) Sdn Bhd
RedBook Automotive Data Services (Beijing) Limited
Automotive Data Services (Thailand) Company Limited
tyresales Pty Ltd
Auto Exchange Holdings Pty Ltd
Automotive Exchange Pty Ltd
carsales.com Investments Pty Ltd
carsales Holdings Pty Ltd
carsales.com Ltd Employee Share Trust
carsales Finance Pty Ltd
Carconnect Pty Ltd
Stratton Finance Pty Ltd
Stratton Franchise Pty Ltd
Stratton Marine And Outdoor Finance Pty Ltd
RedBook Inspect Pty Ltd
carsales Latam Pty Ltd
carsales Mexico SAPI de CV
carsales Chile SpA
Chileautos SpA
carsales Foundation Pty Ltd
carsales Argentina Pty Ltd
Demotores Holdings LLC
Demotores Chile SpA
Demotores S.A.
Demotores Colombia S.A.S.
Automotive Online Publishing Solutions S.A de C.V.
SK ENCARSALES.COM Ltd**
AS1 Holdings Pty Ltd
Appraisal Solutions Australia Pty Ltd
Place of
business/
country of
incorporation
Australia
Australia
Australia
Australia
New Zealand
Malaysia
China
Thailand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Mexico
Chile
Chile
Australia
Australia
United States
of America
Chile
Argentina
Colombia
Mexico
South Korea
Australia
Australia
Ownership interest
held by the Group*
2017
%
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
50.0
100.0
50.0
100.0
100.0
100.0
100.0
50.1
50.1
50.1
43.8
50.1
100.0
65.0
100.0
83.3
100.0
100.0
2018
%
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
75.0
100.0
100.0
100.0
100.0
100.0
100.0
50.1
50.1
50.1
43.8
50.1
100.0
100.0
100.0
83.3
100.0
100.0
100.0
100.0
100.0
100.0
60.0
100.0
100.0
60.0
100.0
100.0
100.0
100.0
–
–
–
–
Ownership
interest held by
non-controlling
interests
Principal
activities
2018
%
–
–
–
–
–
–
–
–
25.0
–
–
–
–
–
–
49.9
49.9
49.9
56.2
49.9
–
–
–
16.7
–
–
–
–
–
–
40.0
–
–
40.0
2017
%
–
–
–
–
–
–
–
–
50.0
–
50.0
–
–
–
–
49.9
49.9
49.9
56.2
49.9
–
35.0
–
16.7
–
–
–
–
–
–
–
–
–
–
(1)
(2)
(1)
(2)
(2)
(2)
(2)
(2)
(3)
(4)
(1)
(4)
(4)
(5)
(4)
(6)
(6)
(6)
(6)
(7)
(4)
(1)
(4)
(1)
(8)
(4)
(4)
(1)
(1)
(1)
(1)
(1)
(4)
(7)
*The proportion of ownership interest is equal to the proportion of voting power held.
**On 19 January 2018 carsales.com Ltd acquired the remaining 50.1% stake of SK ENCARSALES.COM Ltd giving carsales 100% control and ownership.
(1) Classified advertising.
(2) Data and research.
(3) Online retail.
(4) Holding company.
(5) Share trust company.
(6) Finance and related services.
(7) Car inspection.
(8) Trustee company.
126
Annual Report 2018carsales.com Limited (i) Subsidiaries
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 21).
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.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated, statement of comprehensive
income, statement of changes in equity and balance sheet respectively.
(ii) 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.
(b) Non-controlling interests (NCI)
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 intercompany eliminations.
30 June 2018
Summarised balance sheet
Current assets
Current liabilities
Non-current assets
Non-current liabilities
Net assets
Accumulated NCI
30 June 2017
Summarised balance sheet
Current assets
Current liabilities
Non-current assets
Non-current liabilities
Net assets
Accumulated NCI
tyresales
$’000
Stratton
Group
$’000
RedBook
Inspect
$’000
chileautos
$’000
Other
$’000
3,023
(2,514)
465
–
974
243
tyresales
$’000
3,113
(3,007)
175
–
281
140
12,497
(15,879)
21,517
(4,448)
13,687
3,026
Stratton
Group
$’000
12,724
(18,546)
20,737
(3,894)
11,021
1,994
3,077
(1,471)
1,175
(509)
2,272
1,133
3,127
(433)
241
–
2,935
487
1,348
(156)
4,434
-
5,626
1,121
RedBook
Inspect
$’000
chileautos
$’000
Auto
Exchange
$’000
soloautos
$’000
1,892
(832)
776
(506)
1,330
663
1,922
(365)
117
–
1,674
288
4,064
(1,525)
163
–
2,702
1,351
1,201
(647)
4,379
(17)
4,916
1,107
127
Annual Report 2018carsales.com Limited Notes to the Consolidated Financial Statements continued
30 June 2018
tyresales
$’000
Stratton
Group
$’000
RedBook
Inspect
$’000
chileautos
$’000
Other
$’000
694
193
–
–
4,676
2,041
1,009
–
2,112
1,054
584
–
1,173
197
–
2
(119)
(48)
-
45
tyresales
$’000
Stratton
Group
$’000
RedBook
Inspect
$’000
chileautos
$’000
Auto
Exchange
$’000
soloautos
$’000
(4)
(2)
–
–
4,674
2,348
1,008
–
1,339
668
200
–
881
150
–
(54)
2,581
1,290
1,050
–
(2,627)
(919)
–
(10)
tyresales
$’000
Stratton
Group
$’000
RedBook
Inspect
$’000
chileautos
$’000
Other
$’000
(373)
14
–
1,940
(482)
(3,484)
(359)
(2,026)
982
(356)
(597)
29
477
–
–
477
(114)
(1,472)
2,745
1,159
Stratton
Group
$’000
RedBook
Inspect
$’000
chileautos
$’000
Auto
Exchange
$’000
soloautos
$’000
6,265
(1,377)
(3,749)
893
(760)
(74)
59
576
–
–
576
3,294
(123)
(2,100)
(2,012)
(35)
–
1,071
(2,047)
1,085
1,139
tyresales
$’000
1,127
(51)
9
30 June 2018
Summarised statement of
comprehensive income
Profit/(loss) for the period
Profit/(loss) allocated to NCI
Dividends paid to NCI
Other comprehensive income
30 June 2017
Summarised statement
of comprehensive income
Profit/(loss) for the period
Profit/(loss) allocated to NCI
Dividends paid to NCI
Other comprehensive income
30 June 2018
Summarised cash flows
Cash flows from operating
activities
Cash flows from investing activities
Cash flows from financing activities
Net increase/(decrease) in cash
and cash equivalents
30 June 2017
Summarised cash flows
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Net increase/(decrease) in cash
and cash equivalents
128
Annual Report 2018carsales.com Limited (c) Interests in associates
Name of entity
Place of
business/
country of
incorporation
Webmotors S.A.
iCar Asia Limited
SK ENCARSALES.COM Ltd(1)
RateSetter Australia Pty Ltd(2)
PromisePay Pte Ltd(3)
Total equity accounted investments
Brazil
Australia
South Korea
Australia
Singapore
% of ownership interest
Nature of
relationship
Measurement
method
2018
%
30.0
–
–
18.6
–
2017
%
30.0
–
49.9
20.5
10.1
Associate
Associate
Associate
Associate
Associate
Equity method
Equity method
Equity method
Equity method
Equity method
Name of entity
Webmotors S.A.
iCar Asia Limited
SK ENCARSALES.COM Ltd(1)
RateSetter Australia Pty Ltd(2)
PromisePay Pte Ltd(3)
Total equity accounted investments
Quoted fair value
2018
$’000
–
–
–
–
–
–
2017
$’000
–
–
–
–
–
–
Carrying amount
2018
$’000
58,810
–
–
9,340
–
68,150
2017
$’000
63,678
–
144,759
9,520
6,515
224,472
Share of Profit
2018
$’000
3,628
–
3,489
(1,431)
(543)
5,143
2017
$’000
3,028
(1,241)
8,204
(1,019)
(474)
8,498
(1) On 19 January 2018, the SK ENCARSALES.COM Ltd investment was transferred from an associate to a consolidated subsidiary as a result of the 100% acquisition
of this business.
(2) RateSetter is equity accounted for as carsales exercises significant influence over this entity through the right to appoint a director to the Board.
(3) On 9 January 2018, carsales’ Non-Executive Director stepped down from the Board of PromisePay. As a result the investment in PromisePay is accounted for as an
available-for-sale financial asset from this date.
(i) 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.
(ii) Contingent liabilities in respect of associates
Contingent liabilities – associates
Contingent liabilities relating to liabilities of the associate for which the Company is severally liable
2018
$’000
453
2017
$’000
482
129
Annual Report 2018carsales.com Limited Notes to the Consolidated Financial Statements continued
30 June 2018
(iii) Summarised financial information for significant associates
Webmotors S.A.
Summarised balance sheet
Total current assets
Total non-current assets
Total current liabilities
Total non-current liabilities
Net assets
Group’s share in %
Group’s share in $
Goodwill
Acquired intangibles
Carrying amount
Reconciliation of carrying value
Opening carrying value
Capital return
Profit for the period
Amortisation of intangibles
Other comprehensive income
Dividends received
Transfer to consolidated subsidiary
Closing carrying value
30 June
2018
$’000
33,003
22,817
(8,285)
–
47,535
30%
14,261
38,454
6,095
58,810
63,678
–
4,200
(571)
(6,947)
(1,550)
–
58,810
30 June
2017
$’000
31,553
23,002
(9,933)
–
44,622
30%
13,387
42,865
7,426
63,678
83,381
(13,511)
3,632
(604)
(2,377)
(6,843)
–
63,678
SK ENCARSALES.COM Ltd*
30 June
2017
$’000
25,164
10,029
(8,496)
(5,446)
21,251
30 June
2018
$’000
–
–
–
–
–
–
–
–
–
–
144,759
–
4,352
(863)
4,316
–
(152,564)
–
49.9%
10,604
120,530
13,625
144,759
145,710
–
9,963
(1,759)
(4,004)
(5,151)
–
144,759
Summarised statement of comprehensive income
Revenue
Profit from continuing operations
Other comprehensive income
Total comprehensive income
carsales share
Profit from continuing operations
Other comprehensive income
Total
Dividends received from associates and joint venture entities
Webmotors S.A.
30 June
2018
$’000
53,814
14,000
–
14,000
3,629
(6,947)
(3,318)
1,550
30 June
2017
$’000
44,568
12,108
–
12,108
3,028
(2,377)
651
6,843
SK ENCARSALES.COM Ltd*
30 June
2017
$’000
45,016
19,965
30 June
2018
$’000
25,890
8,721
89
8,810
3,489
4,316
7,805
–
129
20,094
8,204
(4,004)
4,200
5,151
* On 19 January 2018, the SK ENCARSALES.COM Ltd investment was transferred from an associate to a consolidated subsidiary as a result of the 100% acquisition
of this business.
130
Annual Report 2018carsales.com Limited (iv) Webmotors
Under accounting standards, there is no requirement to annually test for impairment in relation to carsales’ equity held associate
investments. Instead the Company is required to consider whether there are any triggers for impairment in relation to these
investments. In light of the decline of the economy in Brazil in FY17, management has performed an impairment assessment with
respect to the carrying value of the equity accounted investment in Webmotors. This review was performed using a value in use
cash flow model.
This model was prepared on the same basis as the impairment testing model used for goodwill and incorporates cash flow
projections based on the Board approved budget for the next 5 years. A growth rate beyond the budget 5 year period of 4.5% and
a pre-tax discount rate of 21.6% has been used in the model.
Over the last financial year the Brazilian economy has shown sustained signs of recovery which has manifested itself in a return to
GDP growth, lower interest rates and an increase in sales of new cars. This has corresponded with an improved financial
performance for Webmotors with local currency revenue and EBITDA being 28% and 81% higher than their respective FY17
comparative results.
Should the Brazilian economy decline resulting in an increase in the post tax discount rate of 7%, or a reduction in the forecast
compound annual EBITDA growth rate by 8% over the next 5 year forecast period, the value in use model would be approximately
equal to the carrying value of the investment in Webmotors.
In light of the magnitude of the above required adjustments, management does not believe that a reasonably possible change in
any of the key assumptions supporting the value in use model would lead to impairment in the carrying value of Webmotors.
(d) Available-for-sale financial assets
Name of Entity
iCar Asia Limited
PromisePay Pte Ltd
Other equity investments
Total available-for-sale financial assets
Ownership interest
2017
%
15.6
-
-
2018
%
13.1
7.3
N/A
At 1 July
Transfer from equity accounted associates
Acquisition of available-for-sale financial assets
Exchange differences recognised through other comprehensive income
(Loss)/Gain recognised through other comprehensive income
At 30 June
Recognition and measurement
Carrying Amount
2018
$’000
11,770
7,253
774
19,797
2017
$’000
13,301
–
–
13,301
2018
$’000
13,301
6,437
764
10
(715)
19,797
2017
$’000
–
13,272
–
–
29
13,301
Investments are designated as available-for-sale financial assets if they do not have fixed maturities and fixed or determinable
payments, and management intends to hold them for the medium to long-term. Financial assets that are not classified into
any of the other categories (at FVPL, loans and receivables or held-to-maturity investments) are also included in the available-
for-sale category.
The financial assets are presented as non-current assets unless they mature, or management intends to dispose of them within
12 months of the end of the reporting period.
131
Annual Report 2018carsales.com Limited Notes to the Consolidated Financial Statements continued
30 June 2018
(e) Fair value adjustment and investment dilution
Associate dilution
Fair value adjustment on transfer to available-for-sale financial assets
Total fair value adjustment and investment dilution
Associate dilution
2018
$’000
1,251
–
1,251
2017
$’000
268
(7,145)
(6,877)
As a result of a change in the Company’s holding of investments in associates, there is a gain on associate dilution
of $1,251,000 (2017: $268,000).
21. Business combinations and disposals
(a) SK ENCARSALES.COM Ltd (SK Encar) acquisition
On 22 December 2017 carsales.com Ltd signed a purchase agreement to purchase the remaining 50.1% stake of South Korea’s
SK ENCARSALES.COM Ltd (SK Encar), giving carsales 100% control and ownership of South Korea’s number one online auto
classifieds business. The purchase consideration for the remaining 50.1% of KRW205 billion (A$240.8 million) was paid on
19 January 2018 and funded with new short-term debt facilities entered into with our existing bank syndicate. An additional
consideration of A$2.6 million for working capital was paid in April 2018.
Pursuant to AASB3, the transaction is treated as a step-acquisition which occurs when the buyer in a business combination has
a previously held equity interest in a target and acquires an additional interest in the target that results in the buyer obtaining
control. In a step acquisition scenario, the acquirer is required to revalue it’s existing stake to ‘fair value’ and recognise a gain
for the excess over the previously held equity interest.
The details of acquisition are below:
(i) Purchase consideration
Purchase consideration – cash outflow
Working capital adjustment
Purchase consideration for the 50.1%
Fair value of pre-existing 49.9% interest
Total purchase consideration
(ii) Net gain on revaluation
$’000
240,794
2,634
243,428
202,755
446,183
In accordance with the accounting policy above, the Group has re-measured its previously held equity interest in SK
ENCARSALES.COM Ltd at the acquisition date fair value immediately prior to the business combination. The Group has
recognised a net gain on the step acquisition of A$57 million, being the difference between the acquisition-date fair value
of its existing 49.9% ownership in SK Encar (A$202.8 million), the carrying value of its investment in SK Encar as an associate
(A$152.6 million) and the impact of historical foreign exchange movements and hedging losses on the investment balance
(A$6.8 million). This gain has been recognised as ‘net gain on step acquisition’ in the consolidated income statement.
Fair value of previously held interest
Less: carrying value of SK Encar investment as an associate
Add: reclassification of exchange differences and hedging losses
Net gain on step acquisition
$’000
202,755
(152,564)
50,191
6,828
57,019
132
Annual Report 2018carsales.com Limited (iii) Details on net assets and liabilities acquired
Initial accounting
The assets and liabilities acquired are estimated as follows:
Cash and cash equivalents
Trade and other receivables
Plant and equipment
Intangible assets
Customer relationship
Brands
Computer software
Deferred tax assets
Trade and other payables
Special compensation payment liability
Tax liabilities
Deferred tax liabilities
Other liabilities
Net identifiable assets acquired
Add: Goodwill
Net assets acquired
$’000
30,923
7,523
5,766
38,205
39,656
1,492
671
(5,443)
(7,904)
(3,207)
(17,129)
(3,121)
87,432
358,751
446,183
The goodwill is attributable to SK Encar’s strong position in its market, it’s customer database, brand presence, the high profitability
of the business and synergies benefits expected to be created by this acquisition.
Goodwill is not expected to be deductible for tax purposes.
Acquired receivables
The fair value of trade and other receivables includes trade receivables which are expected to be collected in full.
(iv) Revenue and profit contribution
SK Encar contributed revenue of $26.2 million and net profit of $4.2 million for the period from 19 January 2018 to 30 June
2018. This net profit amount includes amortisation of acquired intangibles.
If the acquisition had occurred on 1 July 2017, the contribution to consolidated revenue and consolidated profit for the Group
would have been $52.0 million and $7.3 million respectively. Profit has been calculated based on the subsidiary results and
includes the additional amortisation that would have been charges from 1 July in relation to acquired intangible assets, together
with the consequential tax effects.
(v) Acquisition-related costs
Acquisition-related costs for this acquisition amounting to $0.5 million have been excluded from the total consideration and have
been recognised as an expense in the period ended 30 June 2018, within the ‘operations and administration’ line item in the
consolidated statement of comprehensive income.
(vi) Purchase consideration – cash outflow
Outflow of cash to acquire subsidiary, net of cash acquired
Cash consideration
Less: cash acquired
Add: special compensation liability paid
Net outflow of cash – investing activities
$’000
243,428
(30,923)
7,904
220,409
133
Annual Report 2018carsales.com Limited Notes to the Consolidated Financial Statements continued
30 June 2018
(b) Demotores acquisition
On 24th February 2017, carsales.com Ltd acquired 100% acquisition of the Demotores Group which consists of Demotores Chile
SpA, Demotores S.A, Demotores S.A.S. and Demotores Holding LLC.
Details of the purchase consideration, the net assets acquired and goodwill are as follows:
Purchase consideration:
Cash paid
Working capital adjustment
The assets and liabilities acquired are estimated as follows:
Cash and cash equivalents
Accounts receivable
Plant and equipment
Intangible assets
Trade and other payables
Deferred tax liabilities
Net assets
Add: Goodwill
Net assets acquired
(i) Finalisation of Demotores acquisition accounting
$’000
6,667
(216)
6,451
80
1,275
78
1,847
(861)
(372)
2,047
4,404
6,451
Given that the acquisition occurred close to the previous financial year end, the final net asset valuation and allocation of the
purchase price to acquired assets was preliminary. In accordance with the Group’s accounting policy, the accounting for the
acquisition of Demotores Group was finalised during the current year and the preliminary step acquisition balances have been
updated accordingly.
(ii) Working capital adjustment
A working capital adjustment of $216,000 has been received by carsales.com Ltd from the vendor during the year ended
30 June 2018.
134
Annual Report 2018carsales.com Limited 22. Related party transactions
(a) Subsidiaries
Interests in subsidiaries are set out in Note 20.
(b) Key Management Personnel compensation
Short-term employee benefits
Deferred short-term employee benefits
Post-employment benefits
Long-term employment benefits
Share-based payments
Other termination
2018
$
6,369,824
349,102
196,768
62,857
1,010,675
-
7,989,226
2017
$
7,193,356
227,152
174,590
262,603
(858,250)
986,107
7,985,558
(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 goods and services to related parties
Purchases of goods and services
Purchases of goods and services from related parties
2018
$
2017
$
1,316,090
1,318,262
1,424,114
3,461,834
All transactions were made on normal commercial terms and conditions, at market rates and includes transactions with associates.
(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
2018
$
2017
$
233,982
164,996
524,303
923,774
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.
135
Annual Report 2018carsales.com Limited Notes to the Consolidated Financial Statements continued
30 June 2018
23. Deed of cross guarantee
The following controlled entities have entered into a Deed of Cross Guarantee:
Company
carsales.com Ltd
carsales Holdings Pty Ltd
carsales Finance Pty Ltd
Auto Exchange Holdings Pty Ltd
Automotive Data Services Pty Ltd
carsales.com Investments Pty Ltd
Discount Vehicles Australia Pty Ltd
Equipment Research Group Pty Ltd
Webpointclassifieds Pty Ltd
carsales Latam Pty Ltd
carsales Foundation Pty Ltd
carsales Argentina Pty Ltd
Automotive Exchange Pty Ltd
AS1 Holdings Pty Ltd
Financial year entered into agreement
30 June 2015
30 June 2015
30 June 2015
30 June 2015
30 June 2015
30 June 2015
30 June 2015
30 June 2015
30 June 2015
30 June 2016
30 June 2016
30 June 2017
30 June 2018
30 June 2018
The companies that are party to this deed guarantee the debts of the others and represent the ‘Closed Group’ from the date
of entering into the agreement.
These wholly-owned entities have been relieved from the requirement to prepare a Financial Report and Directors’ Report
under Class Order 98/1418 (as amended) issued by the Australian Securities and Investments Commission.
(a) Consolidated statement of comprehensive income
Set out below is a consolidated statement of comprehensive income for the year ended 30 June 2018 of the Closed Group.
Consolidated statement of comprehensive income
Revenue from continuing operations
Sale of goods and services
Revenue from continuing operations
Expenses
Costs of sale
Sales and marketing expenses
Service development and maintenance
Operations and administration
Earnings before interest, taxes, depreciation and amortisation
Depreciation and amortisation expense
Finance income
Finance costs
Dividends received
(Loss)/gain on associates fair value adjustment and investment dilution
Profit before income tax
Income tax expense
Profit from continuing operations
Total comprehensive income for the year
Profit is attributable to:
Owners of carsales.com Ltd
Non-controlling interests
136
2018
$’000
2017
$’000
300,329
300,329
271,510
271,510
(3,809)
(61,750)
(28,415)
(28,333)
178,022
(9,398)
1,175
(14,530)
14,761
(1,018)
169,012
(48,092)
120,920
109,900
(195)
(56,780)
(20,407)
(30,327)
163,801
(7,251)
992
(7,053)
14,109
(11,656)
152,942
(45,493)
107,449
107,481
120,745
175
120,920
107,449
–
107,449
Annual Report 2018carsales.com Limited (b) Consolidated statement of financial position
Set out below is a consolidated statement of financial position as at 30 June 2018 of the Closed Group.
Consolidated statement of finance position
Current assets
Cash and cash equivalents
Trade and other receivables
Total current assets
Non-current assets
Investments
Available-for-sale financial assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Other receivables
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Other financial liabilities
Current tax liabilities
Provisions
Deferred revenue
Total current liabilities
Non-current liabilities
Borrowings
Other financial liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
2018
$’000
30,477
53,783
84,260
541,660
19,797
2,925
4,943
108,096
22,442
699,863
2017
$’000
22,001
41,746
63,747
307,540
13,301
2,885
3,102
91,830
14,742
433,400
784,123
497,147
23,241
246,000
1,300
11,240
5,939
1,066
288,786
204,000
20,349
906
225,255
21,068
–
–
8,818
4,718
6,107
40,711
187,000
–
989
187,989
514,041
228,700
270,082
268,447
119,541
(9,405)
159,946
270,082
105,861
22,838
139,748
268,447
137
Annual Report 2018carsales.com Limited Notes to the Consolidated Financial Statements continued
30 June 2018
OTHER
24. 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
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
Other services
Total remuneration for other services
Total remuneration of PricewaterhouseCoopers
(b) Non-PwC audit firms
Audit and other assurance services
Audit and review of financial statements
Total remuneration for audit and other assurance services
Total auditors’ remuneration
2018
$
2017
$
606,447
94,400
700,847
419,850
226,214
646,064
161,671
28,056
189,727
86,526
63,102
149,628
67,867
67,867
958,441
37,850
37,850
833,542
31,529
31,529
989,970
33,039
33,039
866,581
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.
138
Annual Report 2018carsales.com Limited 25. Share-based payments
Share-based compensation benefits are provided to employees via the carsales.com Ltd Option Plan.
Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expense
were $2,025,000 (2017: ($255,000)).
Employee Option Plan
Set out below are summaries of options and performance rights granted under the plan:
2018
Grant date Expiry date
Oct 2012 Oct 2017/
Mar 2018
Oct 2013 Oct 2018
Oct 2014 Oct 2019
Oct 2014 Oct 2019
Oct 2015 Oct 2020
Oct 2015 Oct 2020
Oct 2016 Oct 2031
Oct 2016 Oct 2031
Oct 2017 Oct 2032
Oct 2017 Oct 2032
Total
Balance at
start of
the year
Number
195,148
61,141
423,084
104,182
611,160
175,501
886,824
215,336
–
–
Exercise
price
$5.93
$9.10
$10.71
$0.00
$10.24
$0.00
$12.23
$0.00
$11.41
$0.00
Options
granted
during
the year
Number
–
Performance
rights
granted
during
the year
Number
–
–
–
–
–
–
–
–
365,365
–
–
–
–
–
–
–
–
–
229,941
Total
exercised
during
the year
Number
(195,148)
Expired or
lapsed
during
the year
Number
–
Balance at
the end of
the year
Number
–
Vested and
exercisable
at end of
the year
Number
–
Other*
–
(28,869)
(18,920)
(11,416)
–
(35,691)
–
–
–
–
–
(376,716)
(92,766)
(44,234)
(18,343)
(20,908)
(3,634)
(691)
(435)
–
–
–
–
–
–
–
–
–
32,272
27,448
–
566,926
121,467
865,916
211,702
364,674
229,506
32,272
27,448
–
–
–
–
–
–
–
2,672,376
365,365
229,941
(290,044)
(557,727)
2,419,911
59,720
Weighted average exercise price
$8.74
$11.41
$0.00
$5.59
$8.52
$8.74
$9.84
2017
Grant date
Oct 2011
Oct 2012
Oct 2013
Oct 2013
Oct 2014
Oct 2014
Oct 2015
Oct 2015
Oct 2016
Oct 2016
Total
Expiry date
Oct 2016
Oct 2017/
Mar 2018
Oct 2018
Oct 2018
Oct 2019
Oct 2019
Oct 2020
Oct 2020
Oct 2031
Oct 2031
Options
granted
during
the year
Number
–
–
Performance
rights
granted
during
the year
Number
–
–
–
–
–
–
–
–
1,377,659
–
1,377,659
–
–
–
–
–
–
–
332,612
332,612
Balance at
start of
the year
Number
36,257
216,720
374,626
142,001
638,459
219,865
862,520
269,774
–
–
2,760,222
Exercise
price
$4.69
$5.93
$9.10
$0.00
$10.71
$0.00
$10.24
$0.00
$12.23
$0.00
Total
exercised
during
the year
Number
(36,257)
(21,572)
Expired or
lapsed
during
the year
Number
–
–
(18,537)
(30,200)
–
–
–
–
–
–
(106,566)
(294,948)
(111,801)
(215,375)
(115,683)
(251,360)
(94,273)
(3,636)
(632)
(1,087,708)
Balance at
the end of
the year
Number
–
195,148
Vested and
exercisable
at end of
the year
Number
–
195,148
Other*
–
–
61,141
–
–
–
423,084
–
104,182
–
611,160
–
175,501
–
886,824
(487,199)
(116,644)
215,336
(603,843) 2,672,376
61,141
–
–
–
–
–
–
–
256,289
Weighted average exercise price
$7.44
$12.23
$0.00
$4.38
$7.00
$8.74
$6.69
*Other change reflect options and performance rights outstanding at cessation of employment.
139
Annual Report 2018carsales.com Limited
Notes to the Consolidated Financial Statements continued
30 June 2018
The estimate of the weighted average share price at the date of exercise of options exercised regularly during the year ended
30 June 2018 is estimated to be approximately $13.96 (2017: approximately $11.56).
The weighted average remaining contractual life of share options outstanding at the end of the period was 10.65 years
(2017: 8.58 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. Senior Executives’ vesting conditions, including EPS targets, are noted in the Remuneration Report on page 66.
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 $0.00 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 2018 is $3.25 (2017: $1.10). The assessed
value at grant date of performance rights granted during the year ended 30 June 2018 is $12.06 (2017: between $9.49 and $9.86).
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.
The model inputs for options and performance rights granted during the year ended 30 June 2018 included:
Exercise price
Grant date
Expiry date
Share price at grant date
Expected price volatility of the Company’s shares
Expected dividend yield
Risk-free interest rate
Options
2018
$11.41
2017
$12.23
Performance rights
2017
2018
$0.00
$0.00
October 2017 October 2016 October 2017 October 2016
October 2032 October 2031 October 2032 October 2031
$11.05
23.0%
3.8%
1.7%
$11.05
23.0%
3.8%
1.8%
$13.74
25.9%
3.2%
2.5%
$13.74
25.9%
3.2%
2.5%
The expected price volatility is based on historical volatility adjusted for any expected changes to future volatility due to publicly
available information.
140
Annual Report 2018carsales.com Limited 26. 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
Total equity
Profit or loss for the year
Total comprehensive income
2018
$’000
2017
$’000
81,936
902,732
984,668
451,928
232,063
683,991
119,541
16,933
164,203
300,677
57,443
433,914
491,357
28,501
188,215
216,716
105,861
22,864
145,916
274,641
119,911
123,589
120,613
123,618
Recognition and measurement
The financial information for the parent entity, carsales.com Ltd, has been prepared on the same basis as the consolidated
financial statements, except as set out below.
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 16 for details of impairment
accounting policies.
(b) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2018 or 30 June 2017.
27. Contingent liabilities
The Group and the parent entity from time to time may incur obligations arising from litigation or other contracts entered into in
the normal course of business. Neither the Group or parent entity have any material contingent liabilities where the probability of
outflow in any settlement is greater than remote as at 30 June 2018 or 30 June 2017 other than the associates contingent
liabilities as set out in Note 20(c).
141
Annual Report 2018carsales.com Limited Notes to the Consolidated Financial Statements continued
30 June 2018
28. Other accounting policies
The following standards will be applicable in future reporting periods 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 significant impact aside from
as specifically set out below:
• AASB 9 Financial Instruments (effective application date for the Group 1 July 2018)
– AASB’s new impairment model introduces an expected credit loss model when assessing impairment of financial instruments.
For the Group, this means a change in how the impairment of trade receivables is assessed. These changes are not expected
to result in a material impact on the financial statements.
• AASB 15 Revenue from Contracts with Customers (effective application date for the Group 1 July 2018)
– AASB’s new revenue model is based on the principal that revenue is recognised when control of a good or service transfers
to a customer – the notion of control replaces the existing notion of risks and rewards. It also clarifies how the consideration
should be allocated between different deliverables in a contract.
– Management has assessed the effects of applying the new standard on the Group’s financial statements and has concluded
that the application of the standard would not result in a material adjustment to the comparative financial information.
carsales will report for the first time under the new standard for the full year ending June 2019 (interim December 2018) and
the Group intends to apply the full retrospective approach and will apply the AASB 15 requirements to the comparative period.
AASB 16 Leases (effective application date for the Group 1 July 2019)
– AASB 16 will result in almost all leases being recognised on the balance sheet, as the distinction between operating and
finance leases has been removed. Under the new standard, an asset (the right to use the leased item) and a financial liability
to pay rentals are recognised. The only exceptions are short-term and low-value leases.
– As at the reporting date, the Group had non-cancellable operating lease commitments of $43.8 million, see Note 19. The
Group has not estimated the amount of right-of-use assets and lease liabilities that will have to be recognised on adoption
of the new standard and how this may affect the Group’s profit or loss. The new standard is mandatory for carsales for the
full year ending June 2020 and at this stage, the Group does not intend to adopt the standard before its effective date. The
Group has not yet determined which transition approach to apply.
29. Events occurring after the reporting period
On 3rd July 2018 carsales.com Ltd successfully completed the refinance of its syndicated revolving loan facilities. Pursuant to this
refinance, the Company established a new A$545.0 million debt facility under a Common Terms Deed (CTD) documentation
structure, as follows:
Tranche
Tranche A
Tranche B
Total
Commitment ($m)
$335.0
$210.0
$545.0
Drawn at close ($m)
$335.0
$115.0
$450.0
Maturity date
5 July 2021
4 July 2023
At close, the loan facilities provided under the Company’s existing $511 million facility, of which $246.0 million were classified as
current were repaid in full and cancelled.
Six financiers are part of the new syndicate and each of these financiers entered into a bilateral facility agreement with the
Company under the CTD documentation structure. The new syndicate comprises NAB, ANZ, HSBC, Westpac Banking Corporation,
MUFG Bank Ltd and Bank of China.
Borrowings under the new debt facilities bear interest at a floating rate of BBSY Bid plus a margin, with margin based on a net
leverage ratio of the Group.
On 4th July 2018, the Company also entered into AUD:KRW Non-Deliverable Cross Currency Swaps with the syndicate banking
group with a total notional value of A$335.0 million, with A$125.0 million having a maturity of 3 years and A$210.0 million a
maturity of 5 years. These derivative instruments swap AUD floating rates with South Korean Won Fixed rates, thus synthetically
creating A$335.0 million of fixed rate debt. These swaps will be treated as a hedge of the net investment in SK ENCARSALES.COM Ltd
from inception.
Aside from this refinance, no matter or circumstance has occurred subsequent to period end that has significantly affected,
or may significantly affect, the operations of the Group the results of those operations or the state of affairs of the Group or
economic entity in subsequent financial years.
142
Annual Report 2018carsales.com Limited Directors’ Declaration continued
Directors’ Declaration
30 June 2018
30 June 2018
In the Directors’ opinion:
(a) the financial statements and notes set out on pages 91 to 142 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 2018 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.
The basis of preparation 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 CEO, and Chief Financial Officer required by
section 295A of the Corporations Act 2001.
Cameron McIntyre
Managing Director and CEO
Melbourne
21 August 2018
143
Annual Report 2018carsales.com Limited Independent Auditor’s Report continued
Independent Auditor’s Report
To the members of carsales.com Limited
To the members of carsales.com Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of carsales.com Limited (the Company) and its controlled entities (together the Group or carsales)
is in accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its financial performance for the year
then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
• the consolidated statement of financial position as at 30 June 2018
• the consolidated statement of comprehensive income for the year then ended
• the consolidated statement of changes in equity for the year then ended
• the consolidated statement of cash flows for the year then ended
• the notes to the consolidated financial statements, which include a summary of significant accounting policies
• the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit of the financial report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and
the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical
responsibilities in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
144
Annual Report 2018carsales.com Limited Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from material misstatement.
Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial report
as a whole, taking into account the geographic and management structure of the Group, its accounting processes and controls
and the industry in which it operates.
Materiality
• For the purpose of our audit we used overall materiality of $9.1 million, which represented approximately 5% of the Group’s
adjusted profit before income tax. Profit before income tax was adjusted to exclude the net gain recognised on the step
acquisition of SK ENCARSALES.COM Limited (SK Encar) of $57.0 million.
• We applied this threshold, together with qualitative considerations, to determine the scope of our audit and the nature,
timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial report as a whole.
• We chose Group profit before income tax because in our view, it is the benchmark against which the performance of the
Group is most commonly measured and it is a generally accepted benchmark. We adjusted profit before income tax to add
back the net gain recognised on the step acquisition of SK Encar, because it represented a significant one-off gain that did
not affect the underlying operations of the Group.
• We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonly acceptable
thresholds.
Audit scope
• Our audit focused on where the Group made subjective judgements; for example, significant accounting estimates involving
assumptions and inherently uncertain future events.
• carsales operates across five operating segments, being online advertising services, data, research and services, Latin America,
Asia and finance and related services. Its head office function is based in Melbourne, Australia.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
report for the current period. The key audit matters were addressed in the context of our audit of the financial report as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Further, any commentary on the
outcomes of a particular audit procedure is made in that context. We communicated the key audit matters to the Audit and Risk
Management Committee.
145
Annual Report 2018carsales.com Limited Independent Auditor’s Report continued continued
Independent Auditor’s Report continued
To the members of carsales.com Limited
To the members of carsales.com Limited
Key audit matter
How our audit addressed the key audit matter
Carrying value of goodwill related to Stratton
Finance Group
Refer to note 16 Intangible assets
Included within Intangible assets at 30 June 2018 is the
goodwill for Stratton Finance Group of $58.7 million
(30 June 2017: $58.7 million). We focussed on impairment
testing for Stratton due to the impact of volume capacity
constraints experienced by a major lender in FY17.
The impairment test was undertaken using a value in use
discounted cash flow model as described in note 16 (b) of the
financial report. The following assumptions were judgemental:
We evaluated the cash flow forecasts used to assess the
carrying value of the Stratton Finance Group cash generating
unit. This included:
• compared the budgeted cash flows for FY19 used in the
model with the FY19 budget
• considered the key factors and underlying drivers for growth
in the context of Stratton Finance Group’s future plans
• tested the calculations in the cash flow model for
• Five year cash flow forecast sourced from the FY19 budget
mathematical accuracy.
and long term forecasts for FY20 to FY23
• The long term growth rate applied to the forecast cash
flows in the terminal year
• Discount rate used to discount the estimated cash flows.
Management have included disclosure in the financial
report detailing the impact of reasonably possible changes
in key assumptions on the level of headroom in the
impairment model.
We considered this to be a key audit matter because the
goodwill is material, the calculated recoverable amount
was sensitive to a reasonably possible change in certain
assumptions and there was judgement involved in
determining the key assumptions.
We compared actual EBITDA for FY16 to FY18 to the Board
approved budget for the same period. This was done in order
to assess the level of historical accuracy of cash flow forecasts.
With the assistance of our valuation experts, we evaluated the
appropriateness of the discount rate and long term growth rate
assumptions used in the cash flow forecast, by comparing them
to our independently calculated acceptable range.
We performed a sensitivity analysis by reducing cash flow growth
rates, terminal growth rates and increasing the discount rate.
We also considered the adequacy of disclosures made in relation
to impairment testing of the assets in the cash generating unit in
light of the requirements of Australian Accounting Standards.
146
Annual Report 2018carsales.com Limited Key audit matter
How our audit addressed the key audit matter
Accounting for the SK Encar business combination
Refer note 21 (a) Business combinations and disposals
On 19 January 2018 carsales acquired the remaining 50.1%
of SK Encar, giving carsales 100% control of the online auto
classifieds business. Total purchase consideration was
$446.2 million.
The transaction was accounted for as a step acquisition in
accordance with Australian Accounting Standards. This involved
a number of complex judgements by the Group including:
• Estimation of fair value of carsales’ existing 49.9% holding
in SK Encar including the allocation of a control premium.
The fair value uplift was required to be recorded as a gain
under Australian Accounting Standards.
• Calculation of net foreign exchange gains relating to carsales’
existing investment in SK Encar previously recognised in other
comprehensive income, that were reclassified to profit or loss.
• Identification of acquired assets and liabilities and estimation
of fair value for initial recognition, particularly the customer
relationship asset and SK Encar brand name. carsales was
assisted by an independent valuation expert.
• Determination that the special compensation payment
related to the recipients’ previous employment and the
associated accounting treatment.
Accounting for the acquisition of SK Encar was a key audit
matter given its financial significance to the carsales Group
and the extent of judgements involved.
Assisted by PwC valuation experts in aspects of our work,
our procedures included the following, amongst others:
• Evaluated the Group’s accounting against the requirements
of Australian Accounting Standards, and the sale and
purchase agreement.
• Assessed the fair value of acquired assets and liabilities
recognised, including:
– considered the discount rate assumption
– evaluated key assumptions including the attrition rate
used to value the customer relationship asset and the
royalty rate used to value the SK Encar brand name
– assessed the valuation methodology in light of the
requirements of Australian Accounting Standards
– assessed the competence and capability of the
Group’s expert.
• Checked that the fair value of carsales’ existing 49.9%
was consistent with the acquisition price paid for SK Encar
and the control premium was within an acceptable range.
• Checked the gain on remeasurement of the previously
held interest was recognised in the profit or loss.
• Considered the adequacy of the business combination
disclosures in light of the requirements of Australian
Accounting Standards.
147
Annual Report 2018carsales.com Limited Independent Auditor’s Report continued continued
Independent Auditor’s Report continued
To the members of carsales.com Limited
To the members of carsales.com Limited
Key audit matter
How our audit addressed the key audit matter
Carrying value of equity accounted investment
in Webmotors S.A.
Refer to note 20 (c) Interests in associates
At 30 June 2018 the investment in associate Webmotors S.A.
was $58.8 million (30 June 2017: $63.7 million). The investment
was tested for impairment due to previous declines in the
Brazilian economy.
We evaluated the cash flow forecasts used to assess the carrying
value of carsales’ investment in Webmotors S.A. This included
comparing the budgeted cash flows used in the model with
the budget formally approved by the Board.
The investment was tested for impairment using a value
in use discounted cash flow model as set out in note 20 (c)
of the financial report. The following assumptions were
judgemental:
• Five year cash flow forecast sourced from the FY19 budget
and long term forecasts for FY20 to FY23
We also assessed the cash flow forecasts in the model by
considering the key factors and underlying drivers for growth
in the context of Webmotors S.A.’s future plans.
We tested the calculations in the cash flow model for
mathematical accuracy.
• The long term growth rate applied to the forecast cash
flows in the terminal year
• Discount rate used to discount the estimated cash flows.
We compared actual performance to budget for FY17 and
the first half of FY18. This was done in order to assess the level
of historical accuracy of cash flow forecasts.
We considered this to be a key audit matter because the
investment in Webmotors S.A. is material and there is
judgement involved in determining the key assumptions
to be used for the purposes of impairment testing.
With the assistance of our valuation experts, we evaluated the
appropriateness of the discount rate and long term growth rate
assumption used in the cash flow forecast, by comparing them
to our independently calculated acceptable range.
We performed a sensitivity analysis by reducing cash flow growth
rates and increasing the discount rate.
We also considered the adequacy of disclosures made in relation
to impairment testing in light of the requirements of Australian
Accounting Standards.
148
Annual Report 2018carsales.com Limited Other information
The directors are responsible for the other information. The other information comprises the information included in the annual
report for the year ended 30 June 2018, but does not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information identified above and, in doing
so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the
audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance
with Australian Accounting Standards and Corporations Act 2001 and for such internal control as the directors determine is
necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement,
whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors
either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards
Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our auditor’s report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 57 to 84 of the directors’ report for the year ended 30 June 2018.
In our opinion, the remuneration report of carsales.com Limited for the year ended 30 June 2018 complies with section 300A
of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report,
based on our audit conducted in accordance with Australian Auditing Standards.
PricewaterhouseCoopers
Lisa Harker
Partner
Melbourne
21 August 2018
149
Annual Report 2018carsales.com Limited Shareholder Information continued
Shareholder Information
30 June 2018
30 June 2018
The shareholder information set out below was applicable as at 30 June 2018.
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
Options and
performance
rights
4
33
9
31
6
83
Redeemable
preference
shares
–
–
–
–
–
–
Shares
9,905
6,392
792
440
81
17,610
Convertible
notes
–
–
–
–
–
–
There were 275 holders of less than a marketable parcel of ordinary shares.
150
Annual Report 2018carsales.com Limited 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
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
BNP Paribas Nominees Pty Ltd
National Nominees Limited
BNP Paribas Noms Pty Ltd
Essena Pty Ltd
Citicorp Nominees Pty Limited
Billkaren Pty Ltd
Australian Foundation Investment Company Limited
Four Us Pty Ltd
Citicorp Nominees Pty Limited
Mr Andrew Gajtan Curmi
Australian Foundation Investment Company Limited
Gregory Paul Roebuck
Mrs Anne Beirne
Milton Corporation Limited
Steven Kloss Pty Ltd
AMP Life Limited
Kilienz Pty Ltd
Options and performance rights issued under the carsales.com
Employee Option Plan to take up ordinary shares
Ordinary shares
Number
held
84,488,522
41,665,126
15,353,191
9,511,453
7,091,044
4,284,590
3,281,284
2,133,090
2,075,500
2,070,449
1,926,555
1,174,766
1,160,500
1,106,389
1,073,968
1,000,000
995,000
987,000
964,945
818,048
183,161,420
Percentage
of issued
shares
34.8
17.1
6.3
3.9
2.8
1.8
1.4
0.9
0.9
0.9
0.8
0.5
0.5
0.5
0.4
0.4
0.4
0.4
0.4
0.3
75.4
Number
on issue
Number
of holders
2,419,911
83
151
Annual Report 2018carsales.com Limited Shareholder Information continued
30 June 2018
C. Substantial holders
Substantial holders in the Company are set out below:
Hyperion Asset Management
D. Voting rights
The voting rights attaching to each class of equity securities are set out below:
Number held
13,386,553
Percentage
5.5
(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.
152
Annual Report 2018carsales.com Limited Corporate Directory
Directors
Richard Collins
(Non-Executive Chair)
(Appointed Chair on 23 March 2018 – formerly
Non-Executive Deputy Chair)
Cameron McIntyre
(Managing Director and CEO)
Jeffrey Browne
(Non-Executive Chair)
(Retired 23 March 2018)
Wal Pisciotta OAM
(Non-Executive Director)
Pat O’Sullivan
(Non-Executive Director)
Kim Anderson
(Non-Executive Director)
Edwina Gilbert
(Non-Executive Director)
Kee Wong
(Non-Executive Director)
(Appointed 9 July 2018)
Steve Kloss
(Alternate Non-Executive Director)
Company secretary
Nicole Birman
Registered office
Level 4, 449 Punt Road
Richmond Vic 3121
T +61 3 9093 8600
F +61 3 9093 8697
carsales.com.au
Share registry
Computershare Ltd
452 Johnston Street
Abbotsford Vic 3067
T +61 3 9415 4000
F +61 3 9473 2500
computershare.com
External auditor
PricewaterhouseCoopers
2 Riverside Quay
Southbank Vic 3006
Stock Exchange
carsales.com Ltd is a public
company listed with the Australian
Securities Exchange Limited
ASX: CAR
153
Annual Report 2018carsales.com Limited