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Synacor Inc.Annual Report 2019
ABN 91 074 444 018
Annual Report 2019carsales.com Ltd carsales.com Ltd (ASX: CAR) is the largest
online automotive, motorcycle and marine
classifieds business in Australia, attracting more
Australians interested in buying and selling cars,
motorcycles, trucks, caravans and boats than
any other group of websites.
Together with its subsidiaries employing more than 600 people
in Australia and 1200 globally, carsales develops world-leading
technology and advertising solutions that empower people to
move freely through our marketplaces.
The carsales.com Ltd Network has operations across the world
and has interests in leading automotive classifieds businesses in
Brazil, South Korea, Mexico, Chile and Argentina.
Contents
Our Purpose
Our Business
Our Global Presence
Our Operations
Financial Performance
Chair and CEO letter
Our Strategy
Our Australian Business
Our Australian Commercial Business
Our Australian Consumer Business
Our International Businesses
Future Horizons
Data and Innovation at carsales
Directors’ Report
Directors’ Report – People
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
2
4
6
7
8
10
13
14
16
20
24
28
30
32
36
42
42
43
44
46
48
49
78
Auditor’s Independence Declaration 82
Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
Corporate Directory
83
150
151
157
159
carsales.com Ltd
Annual Report 2019
1
Our Purpose
We empower people
to move freely through
our world-leading
marketplaces.
2
carsales.com Ltd
Annual Report 2019
We focus on successful outcomes
for our customers
Innovation is part of our DNA
Our products and services are frictionless
and we are easy to deal with
We think ‘global first’
We aspire to give our customers the know-
how and confidence to transact
Our team never settles and always strives
for world-class customer-centric solutions
carsales.com Ltd
Annual Report 2019
3
Our Business
carsales is the No.1 online
automotive classifieds
business in Australia, with
a growing global presence
in Asia and Latin America.
4
carsales.com Ltd
Annual Report 2019
“ From an innovative disruptor to a clear
industry leader - today carsales is the
go-to place to buy and sell vehicles in
Australia. Our growing global footprint
in 11 countries with around 1200
employees positions us well for long-
term sustainable growth.”
carsales was established in 1997 and quickly grew to become
Australia’s number one online destination for buying and selling
cars, motorcycles, trucks, boats, caravans and machinery.
We seek to empower our customers, making buying and
selling vehicles easy and convenient for everyone – consumers,
dealers and manufacturers alike.
In Australia we provide a range of classified advertising services
across our network of sites to dealers, consumers and corporate
customers. Our offering is enhanced by our other value-added
services such as software services, specification data, vehicle
news and reviews, stocking and pricing tools for dealers, data
and insights for all of our customers, finance, inspections,
warranty and tyre products.
Our Australian classified network of sites has more inventory,
more unique visitors, deeper engagement and is trusted by more
consumers than any of our competitors. carsales’ commercial
customers are core to the strength of the business and we
continue to innovate to deliver new solutions and results that
support and improve the success of their businesses.
carsales built its name in Australia and today our know-how
and industry leading platforms extend across the globe. We
continue to broaden the reach of our operations with interests
in leading classified marketplaces in high-growth, developing
markets in Brazil, South Korea, Chile, Mexico and Argentina.
We leverage our world-class technology and IP to accelerate
the growth of our eco-systems in each market to deliver
world-class customer-centric solutions which help all
customers buy, sell and own with confidence.
carsales is a WGEA employer of choice and is White Ribbon
accredited with a workforce of over 1200 highly talented
and motivated people globally. From our origins as a technology
start-up, innovation has remained a part of our DNA. It reflects
our desire to be not only a global leader in terms of customer
outcomes and shareholder returns, but also to be an employer
of choice and a genuinely impactful corporate citizen.
carsales.com Ltd
Annual Report 2019
5
Our Global Presence
We have a huge global presence and
are a global leader in digital automotive
advertising. Our international markets
represent a massive opportunity, with
7x more cars sold in our international
markets than Australia¹.
Mexico
• FTEs: 72
Chile
• FTEs: 50
• c.40,000 listings
• c.85,000 listings
• c.3m visits per month
• c.5m visits per month
China, Malaysia,
Thailand & NZ
Malaysia, Indonesia
& Thailand (11.8% stake)
• FTEs: 32
• FTEs: 403
• c.400,000 listings
• c.11m visits per month
Brazil (30% stake)
• FTEs: 166
Argentina
• FTEs: 39
South Korea
• FTEs: 210
Australia
• FTEs: 6362
• c.520,000 listings
• c.25,000 listings
• c.100,000 listings
• c.210,000 listings
• c.28m visits per month
• c.1m visits per month
• c.18m visits per month
• c.24m visits per month
1. Includes South Korea, Argentina, Brazil, Chile and Mexico. Source: New car volumes: MarkLines Automotive Portal (TSE: 3901) Used car volumes: management estimates.
2. Excludes Stratton.
All businesses 100% owned unless otherwise stated.
6
carsales.com Ltd
Annual Report 2019
Our Operations
Our Global
Markets
Our Australian
Markets
Our People
>1billion user sessions 2.47x more time
93%
per annum on all carsales sites
around the world1
spent on carsales.com.au than nearest
competitor in Australia2
of our people feel that our work
environment is open and inclusive
>32,500 car dealer
customers around the world3
>144,000 inspections 85%
per annum conducted by RedBook
Inspect in Australia in FY19
of our people believe that management
genuinely cares about their wellbeing
>850k cars for sale
around the world at any point
in time3
>90%
Certified
of Australian car dealers are on the
carsales platform4
as Great Place To Work® employer 2018
and 2019 Top Graduate Employer
5 countries
in which we have leading positions5
Most preferred
Accredited
site for buying and selling cars in
Australia (+378% vs nearest competitor)6
WGEA Employer of Choice and
White Ribbon employer
1. Period: Jul-18 – Jun-19. 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, demotores.com.ar, encar.com and webmotors.com.br. 2. Source: Nielsen DCR, June 2019. 3. Aggregate from
automotive websites in Australia, South Korea, Brazil, Mexico, Argentina and Chile as at 30 June 2019. 4. IBISWorld Motor Vehicle Dealers - Australia Market Research Report, total
carsales subscribers / total dealers. 5. In countries with controlling stakes: Australia, Brazil, South Korea, Argentina and Chile. 6. Study conducted by independent research agency,
Nature Pty Ltd, “market brand health tracker 2019” June 2019. You said you would go to the following for buying a new / used / selling car. If you had to choose one tomorrow,
which one would you most prefer?
7
Annual Report 2019carsales.com Ltd Financial Performance
Revenue**
Adjusted EBITDA*
Adjusted NPAT*
$417.5m
up 11% year on year
$210.1m
up 7% year on year
$131.3m
up 3% year on year
CAGR 13%
CAGR 10%
CAGR 8%
417.5
376.9
210.1
196.1
131.3
127.8
116.6
106.1
319.0
166.0
154.5
97.9
283.1
142.7
254.5
FY15
FY16
FY17
FY18
FY19
FY15
FY16
FY17
FY18
FY19
FY15
FY16
FY17
FY18
FY19
($ millions)
($ millions)
($ millions)
*
**
Adjusted EBITDA and NPAT stated above is on a continuing basis and post non-controlling interests and excludes certain non-recurring or non-cash items relating to restructuring,
bad debts, financing, investments and acquired intangible amortisation.
FY18 revenue, EBITDA and Adjusted NPAT have been restated to reflect the adoption of AASB15. FY15-FY17 figures have not been restated as the impact would not be material.
8
carsales.com Ltd
Annual Report 2019
Year ended 30 June 2019
Revenue
Online Advertising Services
Data, Research and Services
carsales Asia
carsales Latin America
Total revenue
Total operating expenses
Adjusted EBITDA*
EBITDA margin
Depreciation and amortisation
EBIT
Net finance costs
Profit before tax
Income tax expense
Profits from associates
Non-controlling interests (NCI)
Adjusted NPAT*(continuing)
Adjustments
Reported net profit after tax (continuing)
Reported net profit after tax (discontinued)
A$ millions
Growth
FY19
FY18**
$m
%
300.1
43.2
65.1
9.1
417.5
(207.4)
296.8
42.2
29.7
8.2
376.9
(180.8)
3.3
1.0
35.4
0.9
40.6
(26.6)
1%
2%
119%
11%
11%
(15%)
196.1
210.1
50.3% 52.0%
(11.7)
(16.2)
14.0
7%
(4.5)
(38%)
193.9
(13.4)
184.4
(9.7)
9.5
(3.7)
5%
(38%)
180.5
(53.3)
3.7
0.4
174.7
(52.5)
6.6
(1.0)
5.8
(0.8)
(2.9)
N/A
3%
(1%)
(44%)
N/A
131.3
2.0
127.8
54.5
3.5
(52.5)
3%
N/A
133.3
(48.0)
182.3
2.3
(49.0)
(50.3)
(27%)
(2187%)
Adjusted earnings per share (cents)*
Reported earnings per share from continuing operations (cents)*
53.9
54.7
52.7
75.2
1.2
(20.5)
2%
(27%)
*
**
Adjusted EBITDA and Adjusted NPAT stated above is on a continuing operations basis and post non-controlling interests and excludes certain non-recurring or non-cash
items related to restructuring, bad debts, financing, investments and acquired intangible amortisation.
FY18 revenue, EBITDA and Adjusted NPAT have been restated to reflect the adoption of AASB15.
9
Annual Report 2019carsales.com Ltd
Chair and CEO letter
Pat O’Sullivan
Non-Executive
Chair
Cameron McIntyre
Managing Director
and CEO
We are very pleased with the Company’s
performance and our ability to respond to
challenging market conditions in order to deliver
continued growth while investing for the long
term. This result is testament to the strength,
resilience and diversified nature of our business,
as well as our investment in new products and
entry into new markets.
We are pleased to report another year of solid financial
performance with revenue up 11% on pcp to $417.5m.
In more challenging economic conditions, our core classifieds
businesses continue to perform well, with our dealer business
proving resilient with 7% revenue growth on pcp. Our
international companies continue to grow and we are pleased
with the contributions each has made over the past 12 months.
Adjusted earnings before interest, tax, depreciation and
amortisation (EBITDA) was up 7% to $210.1m with EBITDA
margins contracting slightly to 50.3%. This performance
reflects the ongoing expansion of margins in our core
business, as the Company continues to utilise its operating
leverage, offset by lower margins in our early stage businesses.
Adjusted Net Profit After Tax (NPAT) increased 3% to $131.3m
reflecting strong returns to shareholders in a year of continued
investment in the business for long-term growth.
10
Our Purpose and Strategy
Over the past 12 months we have refreshed our purpose
and strategy to reflect the evolution of global automotive
and mobility markets and focus on the opportunities that
lie ahead. Our purpose, “empowering people to move
freely through world-leading marketplaces” reflects both
our heritage as a classified advertising business and the
complementary products and services that are now vital
to consumers as they make mobility choices. Our strategic
evolution reflects the growing significance of our international
businesses as part of the Group’s operations and future as we
leverage more of our Australian IP and technology globally.
Operational Performance
The continued growth of the business over the last 12 months
has been particularly pleasing given the impact of challenging
economic conditions on consumer sentiment during the period.
Our diverse revenue streams and ongoing commitment to
developing new products and entering new markets have
stood the business in good stead at a time when Australian
market conditions for new vehicle sales have been adversely
impacted by economic uncertainty, tightening credit availability
and the impact of falling property values. At an industry level,
changes to lending regulations for dealers, challenges in
sourcing new car stock from Europe and car companies
reducing advertising budgets have all been headwinds.
Annual Report 2019carsales.com Ltd Whilst the market for new cars has been challenging, the
used car market has continued to grow. During the year we
recorded growth in used car lead volumes, a decline in average
time to sell and excellent growth in traffic to the carsales site.
This is a testament to the ongoing strength of the carsales
brand as Australia’s No.1 site for buying and selling cars
and demonstrates the counter cyclical characteristics of our
business model and strength of our diversified earnings base.
As the market leader, we have been working hard to develop
new car advertising solutions for our customers. Innovation
in this area has culminated in several changes to our new
car advertising products which has led to a positive customer
response and an increase in new car inventory on the
carsales site.
Our international businesses have continued to show great
progress over the past 12 months. In January last year we
acquired the remaining 50.1% of SK Encar from the SK business
in South Korea and since then we have helped the business
define its growth agenda and potential. Webmotors in Brazil
is going from strength to strength and is in an excellent position
to continue to grow over the coming years. Our investments
in other parts of Latin America are also progressing well as we
focus on driving operational performance and move towards
strengthening earnings.
The past 12 months have seen significant technology
innovation and development for both our Australian and
international markets. Our technology hub in Chile has
continued to improve its product development capability
and technical operational support (increased support outside
of the normal operational hours). At the same time the
business has undergone significant investment in globalising
its technology platforms. We expect to see global platform
parity across much of our technology from early FY20 which
will be beneficial for our existing markets and enhance our
ability to enter new markets.
In December 2018 we elected to write down our 50.1%
investment in Stratton Finance largely due to the impact
of regulatory changes in lending, the tightening of credit
availability and impact that this was having on Stratton’s
core business.
Following a strategic review in June, the Board took the
decision to treat the Stratton business as an asset held for
sale on the carsales FY19 Balance Sheet. We continue to
believe that the finance market is attractive in supporting
our core business over the long-term and will continue to
develop opportunities for customers in this part of the
market in the future.
“ Our international
businesses
have continued
to show great
progress over
the past twelve
months”
11
Annual Report 2019carsales.com Ltd Chair and CEO letter continued
At the Annual General Meeting we announced a disappointing
start to the financial year for our display advertising sales
which had been partly the result of market conditions as
well as our upfront trading performance. The team worked
hard throughout the remainder of the year to address these
challenges and it’s pleasing to see this performance improve
particularly in Q4 of FY19.
Board & Governance Changes
Over the past 12 months there have been a number of
developments at Board level. In January 2019 Richard Collins
retired as Chair of the Board after 19 years of excellent service
as a Director and was replaced by Pat O’Sullivan. Pat has been
a Director since 2007 and was previously the Chair of the
Audit and Risk Management Committee.
As the business has continued to evolve in size and complexity
the Board took the decision to establish a separate Risk
Management Committee. The newly formed Risk Management
Committee is now being chaired by Edwina Gilbert.
In May 2019 we announced the appointment to the
Board of David Wiadrowski. David brings to carsales 25 years
of experience with PricewaterhouseCoopers where he had
a focus on technology, infocoms, entertainment and media
and was the lead audit partner for a number of major media
companies. David was appointed to the position of Chair
of the Audit Committee in May 2019.
People & Culture
Our people and culture have always been critical to the
business’ success. Our staff turnover levels have remained
at near record lows and staff engagement measures have
continued to be strong, as demonstrated by our Great Place
To Work® certification in July this year.
The success and popularity of the carsales Graduate Program
has continued this year as demonstrated by more than 1,000
applications being received for four positions available.
Pleasingly, the Company was ranked fourth on the AAGE
(Australian Association of Graduate Employers) Top Graduate
Employers list for 2019 after only our first year of running the
graduate program.
As a business we pride ourselves on our inclusive work
environment. In fact 93% of our people feel that our work
environment is open, inclusive and that we accept individual
difference. This inclusiveness is not only important to our
culture but provides us with a distinct competitive advantage
in attracting and retaining talent. Aside from our ongoing
WGEA Employer of Choice accreditation, we also became
proud members of Welcome Here and Inclusive Australia in 2019.
12
Driving greater employee engagement with our strategy and
purpose was identified as a key priority during the year. The
Executive Leadership Team led a campaign to engage employees
on our strategic program called GPS2022 which included
focusing on the things that are important to us as an
organisation as well as where we see ourselves in the future.
As part of the journey to becoming a truly global company
this year we included the international businesses in our CEO
Scholarship awards and Employee Opinion Surveys (EOS) and
launched a global code of conduct and a whistle-blower policy
to ensure that we maintain the high standards of our
organisation at a global level.
Debt & Capital Management
The Company regularly reviews its capital structure to ensure we
are maximising shareholder returns. The Group’s $545m debt
funding facility provides significant flexibility when considering
future capital management opportunities as well as corporate
development. The Board has declared a final FY19 dividend
payment of 25.0 cents per share fully franked, bringing the
total FY19 dividends to 45.5 cents per share and representing
an increase year on year of 3%. The Board believes that the
current dividend payout ratio of 85% reflects an appropriate
balance between profit distribution to shareholders and
reinvestment in the future growth in earnings.
Towards a Successful FY20
FY20 promises to be another year of significant opportunity
for carsales. We anticipate that the Company will continue
to perform strongly and are confident that it is well placed
for future growth. This is a direct result of the passion,
talent and dedication of our people and we would like
to publicly thank each and every one of you for what you
bring to our business each day.
Finally, on behalf of the Board we would like to thank all of
our customers, partners and shareholders around the world
for their support and engagement over the past 12 months
and we look forward to working with you all in FY20.
Pat O’Sullivan
Non-Executive Chair
Cameron McIntyre
Managing Director
and CEO
Annual Report 2019carsales.com Ltd Our Strategy
OUR PURPOSE
Empower people to move freely through our world-leading marketplaces
OUR STRATEGIC PILLARS
OUR ENABLERS
Digital marketplaces
To grow our leadership in digital automotive
classified solutions globally for our consumer
and commercial customers
Data
Be a ‘best-in-class’ data-driven company, using
our unrivalled data and analytics to help customers
maximize outcomes and grow their businesses
Value-added services
To build a compelling ecosystem of services
that support dealers, OEMs, corporate customers
and private consumers through the buying, selling
and ownership of vehicles
People
To be an employer of choice and destination
for talent by continuously evolving our culture
of inclusion, learning, leadership, performance
and passion
Future horizons
As the automotive markets evolve we seek
opportunities for growth
Technology
To build world-class global platform-based
software services that exceed the expectations
of our customers
OUR UNIQUE CULTURE
Our DNA
Innovation | Simplicity | Customer focus
Our Values
Enjoyment | Respect | Integrity
Communication | Honesty
OUR CHOSEN GEOGRAPHIC MARKETS
Australia | South Korea | Brazil | Mexico | Chile | Argentina
carsales.com Ltd
Annual Report 2019
13
Our Australian Business
carsales is the leader in digital automotive advertising in Australia, which is reinforced by value-added services that keep us
at the forefront of customers’ minds.
Reporting
Segments
Key
customers
FY19 revenue
(A$m)
Key Products
and Services
Online Classifieds:
Dealer
Dealers
154
Online Classifieds:
Display
Dealers, OEM
and corporates
Data, Research &
Services
Online Classifieds:
Private
Dealers, OEM
Consumers
64
43
82
Dealer classified products: new and
used vehicle subscriptions, enquiries,
listings. Dealer depth premium listing
products.
Non-classified advertising products:
sponsorship banner advertising, native
products, sponsored content, video,
finance and insurance.
RedBook, carfacts, LiveMarket pricing
tools, dealer services product suite.
Private seller classified products:
standard and premium listings, Instant
Offer, tyresales, RedBook Inspect.
Customer
Groups
Commercial
Consumer
Key Brands
14
carsales.com Ltd
Annual Report 2019
Key carsales Australia stats
18% YoY
27,256,241
sessions1
21% YoY
7,590,087
users1
16% YoY
438,335,581
page views1
81% YoY
2,048,710
editorial sessions1
197,603,937
total minutes spent on site1
Enquiry by Source1
26%
sms
30%
phone calls
Traffic by device1
20%
desktop
11%
andriod app
44%
email
41%
mobile
28%
IOS app
80%
of the traffic to carsales
was via a mobile device
1. carsales internal data (Google Analytics), Q4 2019
15
Annual Report 2019carsales.com Ltd
Our Australian Commercial Business
Commercial key stats
Over 6,000
dealer customers across the
carsales Network
Over 90%
of Australian car dealers use
carsales to advertise vehicles1
21 billion
ad impressions are delivered by
the carsales Network each year
Every minute
we list a car for a dealer
1. IBISWorld Motor Vehicle Dealers – Australia Market Research Report, total carsales subscribers/total dealers
FY20 Commercial Opportunities
NEW CAR
NATIVE &
VIDEO
SALES
EFFECTIVENESS
Optimising our new car offerings
that support the needs of both
customers & consumers in their
new car buying experience.
Focus on native, audience and
video products delivering new
opportunities to connect with our
engaged audience, particularly
on mobile devices.
Enhancing our operations through
increased automation & programmatic
platforms along with self service and
enhanced attribution and ROI to
demonstrate how we best get results
for our clients.
16
Annual Report 2019carsales.com Ltd The Commercial business delivered pleasing revenue growth
over the period in some of the most challenging market
conditions in the business’ history. New vehicle sales declined
industry wide by 8% in the 12 months to June 2019 reflecting
tightened credit availability, changes to lending regulations for
dealers, as well as some new car stock import challenges.
However, as is typically the case, when new car sales were
challenged, dealer used car sales were buoyant as consumers
seek better value vehicle options. This reflects the counter
cyclical characteristics of our core business model and strong
diversification of our earnings base.
The used dealer business delivered a robust performance with
solid growth in used car lead volumes together with a decline
in average time to sell driving 7% pcp revenue growth in the
dealer segment. The launch of our depth automation product
– which helps boost efficiency and save time for dealers
promoting their stock online – was well received by the market
with an overall 8% growth in average monthly active depth
users/subscribers on pcp. However, overall depth revenue
growth was impacted in the second half by dealers moderating
their discretionary marketing spend in response to the
challenging economic conditions. Around 20% of our
dealer ads are depth, with plenty of runway for further
growth ahead.
DEALER
PRODUCTS
OEM
Drive increased depth product
penetration rates by demonstrating
ROI and launching new dealer
finance product.
Stronger OEM relationships with
solutions tailored to deliver value
through brand engagement,
enquiries & sales.
17
Annual Report 2019carsales.com Ltd Our Australian Commercial Business continued
As an innovative market leader and utilising customer feedback,
we launched a range of refreshed new car advertising solutions
for our customers during the year, with more to come in FY20.
These solutions will attract more new car inventory onto carsales
and enable dealers to highlight the reasons to buy from their
dealership. Dealer and OEM response has been positive and
we have seen an increase in new car inventory on the carsales
site since the products were launched.
Our display business had a challenging year with revenue
down 13% on pcp which was partly the result of market
conditions as well as our upfront trading performance earlier
in the year. The appointment of Simon Ryan as Managing
Director Commercial Business in February 2019 provided a good
opportunity to assess our product capability, restructure the
team and drive new and better outcomes for advertisers.
Despite car companies reducing advertising budgets more
aggressively in the second half, the ability of the team to
adjust and pivot our strategies enabled us to achieve better
commercial outcomes, particularly in the fourth quarter.
As an example of this, the evolution of display into video,
programmatic, sponsored content and new customer
personalisation will support carsales’ leadership position
and create new levels of customer interest and satisfaction
in what is a highly visited platform.
The Commercial team has focused heavily on what success
looks like and how we get there. Understanding the potential
for growth and working closely as a team means we remain
focused on maximising outcomes for our customers, clients
and partners in the year ahead.
18
Annual Report 2019carsales.com Ltd Dealer Customers – Products and Solutions
Find Great Stock
Instant Offer
LiveTrade
Appraisal and
Pricing Tools
LiveMarket
Appraisal Solutions
Photography
Photography carsales
Image Library User
generated video
Publish to Site
Publish your stock to
carsales.com.au and
other sites (including
dealer’s own sites)
Promote Your
Dealership
Main Event packages
Display Advertising
and Audience 360
Website Templates
Lead
Management
AutoGate
AutoGate Pro
Inventory
Management
AutoGate
AutoGate Pro
Boost Your
Stock’s Reach
Ultimate Boost, Top Spot,
Showcase, Top Deal and
Multi List
Build Buyer Trust
RedBook Inspect
mobile inspections
carfacts history
reports
carsales.com Ltd
Annual Report 2019
19
Our Australian Consumer Business
Consumer key stats
6 million
members across the
carsales Network
1.2 million
unique vehicle listings per year
378%1
most preferred site to buy and
sell – more than our nearest
competitor
9.7 million
minutes of viewed video
content in FY19
1. Study conducted by independent research agency, Nature Pty Ltd, “market brand health tracker 2019”
June 2019. You said you would go to the following for buying a new / used / selling car. If you had to
choose one tomorrow, which one would you most prefer?
FY20 Consumer Opportunities
PRIVATE SELLER
MEMBERSHIP
INSTANT OFFER
Continue optimising our private
seller tiers and premium ad
products to drive improved
penetration and yield.
Increase our personalised
content available to members
and leverage the services of our
adjacent businesses to reduce
friction in the buy/sell process.
Continue to optimise the Instant
Offer process and continue to
grow our partner base to drive
increased transaction volume.
20
Annual Report 2019carsales.com Ltd Our goal is to facilitate a frictionless buying, selling and
ownership experience for our consumers. carsales has
the largest and most engaged audience with over 23 million
unique visitors each month and is Australia’s most trusted
automotive marketplace.
Notwithstanding tough market conditions we grew our
carsales traffic by over 10% year on year whilst also improving
the effectiveness of our marketing spend. We continued to
remain visible at some of Australia’s most watched sporting
events (State of Origin, AFL, Big Bash League) and continued
our ambassador relationship with Daniel Ricciardo.
Overall private revenue growth at 4% on pcp reflected solid
underlying core private ads revenue growth, offset by more
tempered growth in our lower margin adjacent services such
as tyresales and RedBook Inspect. Private core ads continued
to perform well with the ongoing optimisation of tiering and
increased premium ad penetration delivering revenue growth.
We launched our user generated video product during the year
allowing consumers (and dealers) to include video on their
listings as a further way to differentiate and promote their
vehicle to buyers.
TYRESALES
INSPECTIONS
Continue to build breadth
and scale through improved
conversion rates and focus
on product margins.
Leverage our investment in
technology and capability to
broaden the scale and scope
of inspection services provided.
21
Annual Report 2019carsales.com Ltd Our Australian Consumer Business continued
Our Instant Offer product, which provides consumers a
hassle-free way to sell or dispose of their vehicle quickly,
evolved across the year and the introduction of more
purchasing partners in the second half of the year saw
strong pcp volume and revenue growth.
carsales has a range of other services to provide confidence
to buyers and our carfacts and warranty products continued
to perform well this year. Our RedBook Inspect business
provides a range of inspection services from ridesharing
inspections to pre-purchase inspections for consumers and
dealers and delivered comparable revenue to FY18. The mix
of inspections changed over the year as ridesharing inspections
were impacted by policy changes at major ridesharing
companies. This was offset by pleasing growth in consumer
vehicle inspections. We have continued to invest in our
inspection technology and capability and are well positioned
to deliver improved efficiency and future growth.
tyresales’ revenue growth slowed as we work to optimise
conversion rates to reduce reliance on short-term pricing
initiatives to win market share. The passenger tyre market is
worth over $4 billion in Australia and there are several new
supply arrangements in the pipeline that will allow us to bring
back strong growth to this business in the coming year.
We recently announced a partnership with Viva Energy
Australia (a Shell Licensee) to give discounts to carsales
members on fuel purchases, which we expect to launch
in the coming months. This is part of our ongoing effort to
strengthen our member value proposition for our 6 million
plus members, alongside increasing personalisation and value
where consumers add their cars to the carsales garage.
22
carsales.com Ltd
Annual Report 2019
We connect buyers and sellers through frictionless
marketplaces and marketing solutions
Buyer requirements
Best content for research.
Highest quality inventory with
the widest selection.
Trust and safety tools to instil
confidence in the purchase.
Price indicators to know when
a great deal is on offer.
Compelling finance deals.
Buy
Owner requirements
Real-time and accurate
car valuation.
Extended warranties.
Best deals on new tyres
and fitment.
Next car recommendations.
Monitor due dates for periodic
requirements such as registration
and insurance.
Own
Sell
Seller requirements
Largest and most qualified
in-market audience.
Choice to sell to the wholesale
or retail market to maximise
speed or price.
Tools to price accurately.
Protect personal information.
Secure payment options.
carsales.com Ltd
Annual Report 2019
23
Our International Businesses
International key stats
4 countries
(excl. Australia)
25%
8%
39%
in No.1 position
listings volume growth
year on year
lead volume growth
year on year
look through
revenue growth
“ FY19 saw the
Group taking
transformational
steps into
becoming a
truly global
business”
We are delivering on our international growth strategy with
strong financial performance and improved operational metrics
across the international portfolio.
Our focus remains on clear market leadership for our digital
marketplaces in each geography leveraging our Australian
technology and IP coupled with a strong country presence.
As each business matures, we continue to rollout value-added
services to further reinforce our market position and grow
earnings.
As our first international acquisition (as a hands-on, strategic
partner), Webmotors in Brazil has benefitted greatly from
carsales. This continues to be the case as the business model
and product suite evolve and through a great relationship
with our partner Banco Santander the platform establishes
itself as the number one auto classifieds vertical in Brazil.
Webmotors is a clear role model for our majority owned
Latin American businesses to follow.
FY19 was our first full year of owning 100% of the SK Encar
business in South Korea. A focus on maintaining the winning
SK Encar culture along with introducing more of the proven
carsales IP and technology has supported Encar’s clear position
as the number one auto vertical platform. The business
performed particularly well against the backdrop of a softer
economy in the second half and was supported by growth
in the SK Encar’s ‘Guaranteed’ inspection products, which have
continued to drive revenue growth and increase trust
between consumers and dealers in the marketplace.
In December 2018, we purchased the remaining 17%
of chileautos to consolidate our ownership to 100%.
We are continuing to focus on investing in the business
to enable it to further strengthen its leadership position.
24
Annual Report 2019carsales.com Ltd FY19 saw the continued implementation of our global
technology platform into our Latin American businesses.
Technologies such as CallConnect and products such as
membership features have been rolled out to our Latin
American businesses, helping them to take further advantage
of being on the carsales platform. These businesses will gain a
unique advantage over their competitors as this work towards
global platform parity continues.
As a truly global business we remain focused on the integration
of carsales’ back office functions into our wholly-owned
international subsidiaries. Marketing led the way during the
year by producing global marketing strategies that could be
deployed in any country. To help accommodate this we saw the
re-branding of businesses in Mexico (soloautos) and Argentina
(Demotores) to the “carsales blue” accompanied by the
“carsales swish”. In addition our Australian-based People
& Culture team introduced our Employment Opinion Survey
(EOS) into Mexico, Chile and Argentina as part of our efforts
to embed the carsales culture globally. The results so far have
been fantastic.
We continue to look for opportunities to build our portfolio
of international assets. Our international strategy is still in its
early stages. With a clear criteria for entering new markets and
experience in leveraging and integrating the carsales IP with
other platforms, we will continue to invest in our portfolio to
deliver sustainable growth and strong shareholder returns for
the long term.
Our International investment strategy
01.
Establish clear leading
position
02.
Monetise and extend clear
leading position
03.
Leverage clear leading
position
Increase sustainable quality
audience and traffic through SEO
optimisation and brand marketing
Educate and articulate value
to dealers and drive focus on
conversion from lead to sale
Yield growth through premium
products that drive ROI for dealers
and consumers
Deploy key technology programs to
drive optimal consumer and dealer
user experience
Aggressive dealer acquisition
resulting in increased listing
volumes
Pursue local complementary
partner integrations e.g. finance,
insurance
Rapid increase in penetration of
key dealer and OEM products
Optimise adjacency strategy to
drive additional growth
Regional expansion
Expand profitability via scalable
revenue growth
Achieve 55%+ EBITDA margins
via scalable growth
25
Annual Report 2019carsales.com Ltd Our International Businesses continued
SB Kim
CEO | South Korea
carsales
position
GDP
(AUD trillion)1
Population
(m)1
Automotive classifieds
spend ($bn)2
Annual
car sales (m)3
Implied market
opportunity (A$m)4
Potential revenue
opportunity4 vs FY19
#1
2.38
51
0.5+
5.8
388
7 x
This was Encar’s first full year as a subsidiary of carsales after four
years of joint venture with the SK Group in Korea.
The Korean auto classifieds market has great growth potential,
given the large domestic automotive market. This potential has
not yet been fully realised due to the unique market dynamics
including regulations separating the distribution channels of
new cars and used cars, leading to a highly fragmented used
car dealership landscape, and strong domestic OEM players
such as Hyundai and Kia.
the delivery of underlying local currency revenue growth of 13%.
The business continues to build scale with dealers and OEMs as
the market opportunity is addressed despite more challenging
economic conditions in the second half.
We will maintain our clear market leadership by continuing to
innovate and deliver more value-added services. Operationally,
we migrated to an agile production system and process and
introduced a more transparent and performance-driven
management scheme.
In FY19 we focused on addressing trust in the used car market
by introducing an industry-wide innovative product called
“Guaranteed,” which verifies and photographs dealer vehicles
so consumers can purchase with confidence. This contributed to
With the lessons we have learned throughout FY19, the team
is excited that by bringing together carsales’ world-class global
know-how and Encar’s insights into the local Korean market
we will be able to achieve strong growth in the years ahead.
Inés Guitarte
CEO | Argentina
carsales
position
GDP
(AUD trillion)1
Population
(m)1
Automotive classifieds
spend ($bn)2
Annual
car sales (m)3
Implied market
opportunity (A$m)4
Potential revenue
opportunity4 vs FY19
#1
0.76
44
0.8+
2.8
124
56 x
It has been two years since carsales acquired the Demotores
business, which is now the clear No.1 auto classified vertical
in Argentina with the highest quality traffic and inventory.
as CallConnect and dealer surveys. Media agencies and OEMs
provide consistent feedback that Demotores is the best auto
option for branding and performance campaigns.
While the Argentinian economy is going through a challenging
period with hyperinflation and the new car market contracting,
the delivery of 13% pcp revenue growth was very pleasing.
These enhancements were delivered alongside investment in
our offices, the commencement of training programs for our
employees and communicating our brand values to our teams.
During the year Demotores delivered a new user experience
across mobile and app (including rebranding to carsales
colours) as well as implementing the carsales private seller
technology platform. On the dealer side, we launched campus,
our dealer digital training program and our unique tools such
Demotores has achieved a great deal with plenty more to
come. We’re ready and excited to see the Demotores business
continue its growth in the years ahead.
1. Source: World Bank
2. Source: management estimates
3. Source: New Car: MarkLines Automotive Portal (TSE: 3901)
4. International revenue opportunity based on replicating core carsales’ Australian share of Australian GDP
26
Annual Report 2019carsales.com Ltd Eduardo Jurcevic
CEO | Brazil
carsales
position
GDP
(AUD trillion)1
Population
(m)1
Automotive classifieds
spend ($bn)2
Annual
car sales (m)3
Implied market
opportunity (A$m)4
Potential revenue
opportunity4 vs FY19
#1
2.76
209
2.0+
13.3
446
9 x
Total inventory of over 520,000, 9 million monthly unique visitors
and over 13,000 dealers are some of the all-time highest
operational metrics achieved by the Webmotors business in
the last year, illustrating our strong and growing trajectory.
This delivered strong revenue growth of 35% in FY19.
A refreshed user experience launched in April 2018 supported
by a strong marketing campaign has provided a much better
user experience and delivered higher levels of credit conversion
and dealer leads.
We also released Cockpit and CRM Smart, two important tools
that brought a full CRM to our dealers, integrating in just one
place all the information relative to their stock, leads and close
market competitors. We continue to develop and deploy high
end intelligence solutions to our dealers, supporting them to make
the best business decisions.
In terms of our commercial offer to dealers, we innovated with
Hot Deals (locally called Feirões), a promotion to buyers via an
online and offline campaign that offers better financial conditions
(in a partnership with Banco Santander) valid for specific periods
of the year.
In the year ahead, we will keep working on new solutions for our
users aligned to a rapidly changing market. We expect to
strengthen our brand awareness and audience in more remote
areas of the country to further consolidate our position as the
clear No.1 auto classified site in Brazil.
Andres Cooper
CEO | Chile
carsales
position
GDP
(AUD trillion)1
Population
(m)1
Automotive classifieds
spend ($bn)2
Annual
car sales (m)3
Implied market
opportunity (A$m)4
Potential revenue
opportunity4 vs FY19
#1
0.44
18
0.3+
1.5
72
15 x
This year we reached record numbers in our business: more
than 1,000 dealers on the platform, more than 91,000 vehicles
available for sale and revenues increased by 17% on pcp.
As the clear No.1 auto classified site in Chile we maintain and
grow our leadership position by delivering a quality service to
our customers and delivering world-class technologies, which
is something we are doing with carsales’ support.
A new mobile user experience was implemented during the year
as well as CallConnect, LiveMarket and vehicle inspection products
designed to give more transparency to consumers. We also
provided more inventory management and lead management
tools to automotive companies and have grown relationships
with industry leaders, with whom we are able to share our
business vision.
We have ambitious growth plans for the years ahead. Through
new products (Instant Offer, University, depth products, among
others) we will continue to create value for our clients and enable
them to offer a more comprehensive and competitive service.
Matt Earle
CEO | Mexico
carsales
position
GDP
(AUD trillion)1
Population
(m)1
Automotive classifieds
spend ($bn)2
Annual
car sales (m)3
Implied market
opportunity (A$m)4
Potential revenue
opportunity4 vs FY19
#2
1.81
129
0.8+
5.0
293
266 x
FY19 was a pleasing year for soloautos with strong growth
in revenue of 64% on pcp. We made significant progress in
implementing and executing on key projects as we continue
to move towards our stated goal of becoming the clear No.1
auto classified site in Mexico.
we released new dealer packages including new products, services
and pricing. These were well received by our dealer network,
which continues to grow, with record levels of paying dealers.
Our display business has grown supported by marketing
campaigns and the integration of carsales IP and technology.
soloautos continues to improve its key operational metrics of
traffic, inventory and leads. The focus continues to be on quality,
which we believe distinguishes us in the market and which our
clients and consumers continue to value highly. During the year
The market in Mexico is still relatively immature from an online
adoption perspective and is highly competitive. Nevertheless, we
believe the long-term potential is immense and will continue to
invest in providing the best experience for our commercial and
consumer customers.
27
Annual Report 2019carsales.com Ltd
Future Horizons
A number of ‘mega-trends’ will
shape the transport sector in
the medium to long term...
ELECTRIC
VEHICLES
AUTONOMOUS
VEHICLES
SHARED
VEHICLES
ON-DEMAND
SERVICES
... and carsales is uniquely
positioned to respond to and
benefit from these trends.
28
carsales.com Ltd
Annual Report 2019
As one of Australia’s original
technology disruptors, we have
a clear appreciation of the need to
be ready to exploit the opportunities
of the future as global mega-trends
begin to influence our markets.
There are a number of global mega-trends that will have
a profound impact on how the world thinks about mobility
and transportation over the next 50 years and our business
is well placed to take advantage of these changes.
The most obvious and immediate change is the shift towards
electric vehicles which comprise around 1% of our total
Australian onsite inventory (hybrid and pure electric vehicles)
and about 4% of Australian new car sales in June 2019.
Our core products and services stand to benefit from the
consumer demand towards these vehicles as we provide a
clear comparison between all of the available vehicles types
and technologies in the market, whether new or used, fossil
fuel, electric or hybrid.
Autonomy in vehicles is still in its infancy, although many
new vehicles incorporate basic autonomous functions such
as adaptive cruise control and lane keeping assist. As these
technologies become more common, we expect consumer
demand for vehicles with those features to increase, leading
to greater transaction volume in the market place as safety
conscious consumers look to upgrade their vehicles. Fully
autonomous ‘door-to-door’ capability in vehicles remains
the ultimate goal for the automotive industry but on current
progress it will take many decades to become the most
common vehicle type on our roads.
The sharing economy and on-demand services are changing
old business models, such as ridesharing companies disrupting
the taxi industry, but are not yet changing the dynamics of
traditional car ownership in our markets. Car subscriptions
are being trialled by OEMs in selected markets to test
consumer appetite and tailor the business model for potential
wider mass-market launch in years to come. As an aggregator
of inventory, carsales is well positioned to take advantage of
these shifts, allowing consumers to cross-shop the existing
and future models of car ownership/usage against each other
across various manufacturers.
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.
No other business has the strength of trusted relationships
with consumers, manufacturers, dealers, financiers and
insurers that we have. While the long-term future for carsales
may not be only about buying and selling cars, the Company
will continue to be at the forefront of new trends and be
central to the way people interact with mobility and
transportation.
29
Annual Report 2019carsales.com Ltd Data and Innovation at carsales
Data is core to our business. Vehicle specification data
powers our RedBook business, our real time vehicle
inventory data powers our LiveMarket pricing tool and our
onsite activity from our audience enables our non-classified
advertising products, site personalisation and user tailored
marketing efforts. We are only scratching the surface
of what is possible with our data assets to enhance
our existing products and services and develop new
ways to provide value to our customers.
Innovation is part of our DNA. The world-leading technology
that underpins our platforms is built by a team of over
180 passionate developers globally and enables us to
leverage our data assets and market position to drive
superior outcomes for customers. FY19 has been a year
where we have continued to raise the bar on innovation
with a number of exciting new initiatives and products
being rolled out.
30
carsales.com Ltd
Annual Report 2019
Instant Offer
Instant Offer prices consumer vehicles in real time based
on market conditions and our data to make the consumer
an offer to purchase the vehicle. The Instant Offer process
was substantially improved during the year, including more
sophisticated pricing algorithms and the introduction of
more purchasing partners.
Video products
A number of new video products were released this year
including native ad video units throughout our sites, deeper
editorial video content integration onto listings and user
generated video available to dealers and private sellers
to augment their vehicle listings.
Member Centre & fuel
Our Member Centre is our one-stop shop for our consumers
to manage their enquiries, save cars and searches as well
as pricing information about their current car. In FY20 we
will be launching a partnership with Viva Energy Australia,
a Shell Licensee, to provide fuel discounts to our members
which will drive further engagement with our audience.
RedBook Inspect Technology
Our RedBook Inspect business has invested heavily in
technology to improve the quality and efficiency of the
inspection process. Over time we expect this technology
to be deployed outside of the existing inspections business
to address growth opportunities such as self-inspections.
carsales.com Ltd
Annual Report 2019
31
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 2019.
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.
Our key services, customers and geographies for continuing
operations 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 Network 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, 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, video content 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 to a range of corporate and private
consumers which may be published online as part of classified
advertisements.
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. This segment also includes
display and consumer advertising related to these divisions.
International
carsales has operations in overseas countries through
subsidiaries, equity accounted associate investments and
financial assets at fair value through other comprehensive
income as set out below (subsidiaries unless otherwise stated):
carsales Asia
Online Automotive Classifieds:
• SK ENCARSALES.COM Ltd (operations in South Korea) – 100%
• iCar Asia Limited (operations in Indonesia, Malaysia and
Thailand) – 11.8% financial asset at fair value through other
comprehensive income
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%
carsales Latin America
Online Automotive Classifieds:
• Webmotors S.A. (operations in Brazil) - 30%
(equity accounted)
• carsales Mexico SAPI de CV (soloautos) (operations
in Mexico) - 100%
• Chileautos SpA (operations in Chile) – 100%
• Demotores Chile SpA (operations in Chile) – 100%
• Demotores S.A. (operations in Argentina) – 100%
32
Annual Report 2019carsales.com Ltd Other Equity Investments
In addition the Group has small stakes in other equity
investments which includes the equity accounted associates
RateSetter Australia Pty Ltd and financial asset accounted
investment PromisePay Pte Ltd, both of which provide innovative
fintech products to consumer and commercial customers.
Finance and Related Services –
Discontinued Operations
The previously disclosed Finance and Related Services Segment
includes the Stratton Finance Pty Ltd subsidiary, which provides
innovative finance arrangements for vehicles, boats, other
leisure items, vehicle procurement and other related services to
customers. Revenues arise from commissions paid by finance
providers and other related service providers. The Group
announced in June 2019 that it is conducting a strategic review
and pursuing the sale of its 50.1% interest in Stratton. Timing
of a potential sale of carsales’ interest in Stratton will be
determined following the completion of the strategic review,
but is expected to be within 12 months, and hence the results
of Stratton have been presented as a discontinued operation.
Group Financial Results
The Group delivered a pleasing financial performance in
FY19 against a backdrop of challenging economic conditions
during the period. With new car sales down 8% year on year,
Australian market conditions were affected by economic
uncertainty, tightening credit availability and the impact of
falling property values while economic softness had an impact
on some of our International markets such as Argentina and
South Korea. Our core domestic business performed well over
the period with used car volumes being resilient and we
continued to strengthen our domestic market position and
deliver on key growth initiatives in core digital advertising
and data services and complementary value-added services.
The period also saw continued progress in our International
markets with improvements across key financial and
operational metrics.
Group operating revenue from continuing operations increased
11% to $417.5m on the prior comparative period (pcp).
Group earnings remained solid with adjusted EBITDA from
continuing operations up 7% on pcp to $210.1m and EBITDA
margins of 50.3%. Adjusted NPAT from continuing operations
attributable to the owners of carsales.com Ltd was $131.3m,
up 3% on pcp. Reported NPAT attributable to the owners
of carsales.com Ltd was $85.3m, down $99.3m on pcp,
principally reflecting the fair value gain recorded on the step
acquisition of the remaining 50.1% of SK Encar in FY18 and
the impairment recorded against the carrying value of the
investment in Stratton in FY19.
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 EBITDA’, ‘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 restructuring,
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 7.
carsales Domestic Highlights
Core domestic segments of Online Advertising Services and
Data, Research and Services delivered revenue growth of 1%
and 2% respectively, reflecting a solid performance from core
dealer and private ad products, offset by weaker performance
in the display business.
Online Advertising Services
• Dealer revenue was up 7% on pcp to $153.9m 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. Used enquiry volume remained resilient
in a declining new car market reflecting the strong value
proposition for consumers of used cars. The launch of our
promote automation product made it easier for dealers to
purchase depth products during the year.
• Private revenue was up 4% on pcp to $82.1m reflecting
solid growth from yield enhancements in core private online
ads, which benefited from the continued optimisation 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. Overall
revenue growth in private was tempered by lower revenue
growth in our adjacent businesses of tyresales, which
focused on testing new pricing strategies in the year to
improve margins, and RedBook Inspect which reduced its
reliance on lower margin rideshare inspections.
• Display revenue was down 13% to $64.1m which reflected
challenging market conditions in the auto advertising
market, with new car sales down 8% on pcp causing OEM
customers to reduce marketing budgets over the year.
Operational performance improved over the year with
a restructured team, refreshed go-to-market strategy and
the launch of new products delivering benefits. The launch
of our new car products and enhanced video product suite
in the second half of FY19 leaves the business well
positioned for growth as the market cycle turns.
33
Annual Report 2019carsales.com Ltd Directors’ Report continued
Data, Research and Services
Data, Research and Services revenue was up 2% to $43.2m.
There was continued demand for our Data, Research and
Services from OEMs, dealers and corporate customers, 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
our trust products, including carfacts and warranty, as our core
RedBook business continued to grow volume and yield. Overall
revenue growth was impacted by the reduction in low margin
revenue products and contracts in the year, which were
removed from some product bundles with little impact to
the segment’s profitability.
Domestic Operations
Costs were well controlled across the business leading to
Adjusted EBITDA up 7% on pcp to $210.1m. Adjusted EBITDA
margins declined slightly from 52.0% to 50.3% reflecting the
profitability of lower margin adjacent services, particularly
tyresales and RedBook Inspect. Underlying core domestic
business margins improved 1% on pcp. Reported EBITDA
was $205.2m with the Group incurring one-off costs for
restructuring and FY18 bad debt write-offs relating to the
implementation of a new ERP system, totalling $4.9m.
Depreciation and amortisation increased by $8.7m on the prior
period reflecting acquired intangible asset amortisation and
depreciation of capitalised labour supporting Group wide
integration and globalisation projects. Net finance costs fell by
$3.8m to $2.6m 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 $74.2m to Group revenue –
up 96% 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 FY19 underlying local
currency revenue growth of 13% on pcp and EBITDA growth
on pcp of 13%. The growth of the guaranteed inspection
product was a highlight of the year, with a number of new
branches opened to support growth outside of the main cities.
Display growth also continued as the business obtained
additional share of media spend from OEM and finance and
insurance clients. The Company also operates its RedBook data
business throughout Asia which showed solid revenue growth
of 9% on pcp.
carsales Latin America
The Group’s largest investment in the Latin America region is
in Brazil (Webmotors) where the Group owns a 30% stake in
Webmotors. In FY19 Webmotors recorded very strong growth
in underlying local currency full year revenue and EBITDA of
35% and 54% on pcp respectively, supported by improving
economic conditions and dealer education regarding the value
of Webmotors premium offerings. The Company also holds
controlling interests in online automotive advertising companies
operating in Mexico, Chile and Argentina which positions
carsales as the number one automotive classified network
across 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. The success of this strategy has been
demonstrated through revenue growth of 11% on pcp to
$9.1m across the region and improved operating metrics in
each business notwithstanding more challenging economic
conditions, particularly in Argentina.
Finance and Related Services –
Discontinued Operation
Underlying Finance and Related Services revenue was down
17% to $57.0m, and EBITDA was down 71% to $2.4m. This
reflected a tough lending environment throughout the year,
as lenders responded to the Banking Royal Commission and
the availability of credit became more challenging. The ASIC
Finance and Insurance regulation changes that applied from
November 2018 reduced yields on settled finance across the
broker industry. A significant cost reduction program in the
second half of the year will improve profitability going forward.
Outlook
carsales assumes a gradual recovery in Australian automotive
market conditions across the year, supported by lower interest
rates, an improved lending environment, a recovering property
sector and recent tax changes.
There has been a solid start to the year in carsales’ Core
Australian Dealer, Private and Data businesses. In Display, the
business is anticipating an improving trajectory across FY20,
albeit market conditions remain challenging in this segment.
It is also expected that the domestic adjacent businesses of
tyresales and RedBook Inspect will show good growth in FY20.
34
Annual Report 2019carsales.com Ltd In Brazil and Korea, growth rates are expected to be similar to
FY19. There is also no anticipation of a further deterioration in
the South Korean economy as a result of the ongoing trade
dispute with Japan.
websites. A decline or significant change in the advertising
market as a result of broader economic influences or
changing advertiser trends could have a negative impact
on carsales’ earnings.
It is expected that there will be improving profitability in the
Group’s Chilean business and a similar level of investment in
the Mexican and Argentinian businesses compared with FY19.
Overall, Group Revenue, Adjusted EBITDA and Adjusted NPAT
growth is expected to be solid in FY20*.
* Growth from ‘AASB 16 – Leases’ restated FY19 result.
Risk
Being a complex business operating in growth markets 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 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. Inparticular, 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
• 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 (presented as discontinued
operations) 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.
35
Annual Report 2019carsales.com Ltd Directors’ Report - People
People
Our people are paramount to our success. Their future-focused
mindset combined with a passionate approach to the work that
they do enables us to achieve our purpose – to empower people
to move freely through our world-leading marketplaces. carsales
operates in a fast-paced and continually evolving environment
so attracting and retaining the best talent is key to our ongoing
success. This year we have focused on embedding a growth
agenda across each area of our businesses and reinforcing the
role that every individual and team plays to execute our strategy.
We have continued to invest in our people with a focus on
building a culture that values open communication and timely
feedback. Regularly reviewing and iterating the touch points
along our employees lifecycle has allowed us to continue to
create exceptional employee experiences for our people.
We work hard to foster the diverse and inclusive environment
that we are so proud of and we are always looking for new
opportunities to further build on this. The carsales values of
Enjoyment, Respect, Integrity, Communication and Honesty
(EnRICH) continue to be at the heart of everything we do.
These values guide our behaviour and the qualities are
entrenched in every facet of the organisation.
The carsales Culture
Our culture is one that has been built on a healthy sense of
paranoia, taking risks and learning from mistakes. Our growth
has not swayed us from operating in this ‘disruptive’ way and
we continue to reap the benefits. By equipping our people
with the latest technology and tools, we are able to achieve
consistent operational excellence and deliver exceptional value
to our customers and shareholders. This mindset means that
there’s no limit to what we can achieve, particularly when it’s
underpinned by our overarching connection to our established
values and behaviours.
85%
of our people have shared that they
believe their manager genuinely cares
about their wellbeing.
86%
We value feedback and establishing
complete loops of communication at
all stages of our people’s career and
progression. This is reflected by 86% of
our people sharing they know how their
work contributes to the goals of carsales.
36
Our EnRICH values – which were created by our people and
for our people – keeps us grounded. We reference them
regularly including during our recruitment process so that
we’re always focused on bringing people into the business
who will positively contribute to our culture. EnRICH helps
us embed exciting new internal initiatives into our teams
and is key to driving us forward and building on our unique
sense of connection.
Each year we encourage our people to participate in providing
feedback via our Global Engagement Survey and in 2018 we
introduced another feedback loop by conducting a Global
Pulse Survey. This is a shorter version of our full engagement
survey focusing on the key metrics impacting on our
employees’ engagement. These are opportunities for the
business to continue to build on its high-performance culture
and to pivot and re-establish goals and priorities to ensure that
our people are being heard and actions made to positively
impact the business.
The continued internationalisation of carsales and our focus on
a global mindset has seen us further nurture the relationships
with our international teams throughout FY19. Some of the
ways we have been able to achieve this include rolling out our
bi-annual employee opinion surveys to our global teams and
the utilisation of cross-functional collaboration through digital
channels as a knowledge sharing opportunity. We’ve increased
our use of video as a means to share important business
updates in a timely and universally accessible way and the
Executive Leadership Team members have spent time visiting
each of our offices throughout the year to check-in and ensure
each of our workplaces enable our people to grow and
succeed in all that they do.
In the past 12 months, we have had members of our team
with different expertise travel across the globe to knowledge
share and help with various projects in our International
businesses. This has dramatically increased collaboration and
knowledge sharing across our growing global marketplaces.
A Career at carsales
Our employee value proposition is unique and provides us
with a competitive advantage when it comes to attracting and
retaining talent. We continue to evolve our culture of inclusion,
learning, leadership, performance and passion. We want to be
known as an employer of choice and a destination for top talent.
Our people initiatives focus on all stages of careers so that our
team are exposed to development opportunities and are given
sufficient support to be successful. Part of our strategy is to
create a work environment that is flexible and promotes a
healthy work-life balance. This is driven from our leadership
Annual Report 2019carsales.com Ltd Technology is in our DNA
We’re committed to developing our people and
strengthening our cross continental capability.
Our “Tech Hub” - located in Santiago, Chile has
grown to more than 20 people in two years. This
team works closely with our team in Australia and
the collaborative relationships that have developed
have had a positive impact on the outcomes we
deliver to all of our customers.
93%
of our people agree that we’ve established
a work environment that is open, inclusive
and accepts individual differences which
reflects our strong commitment to
diversity and inclusion.
team who recognise the benefits of flexibility and balance.
We try to be a leader in this space and some of what we offer
includes: flexibility around where, when, and for how long our
people work; generous paid parental leave; early access to long
service leave; and refuel days. We also offer additional support
services such as breastfeeding facilities (we are an accredited
Breastfeeding Friendly Workplace) and school holiday programs
in our Melbourne office which further demonstrates our
commitment to flexibility at work. Our focus for the future is
to continue to refine and develop our policies – as we look to
ensure each person is supported in their career, be it a graduate
in their first taste of professional life, someone considering
retirement options or an individual hoping to explore how
to integrate career-related study into their life.
These elements have continued to showcase our business as
an attractive place to work and we were pleased to be formally
acknowledged as Great Place To Work® in 2018 by Great Place
To Work Australia. It is through the development and continued
investment in our people that carsales will continue to grow and
be viewed as a great place to work.
Learning and Development
We’re life-long learners at carsales and believe that investment
in training and development will inspire our people to be
challenged and grow. In FY19 we unveiled a new performance
and careers framework and development program called
Supercharge. Supercharge is completely unique to carsales
and was developed using data and feedback from our people.
80%
92%
Innovation is core to our success and our
DNA. We are proud that over 80% of
our people feel like they are encouraged
to be innovative regardless of whether
their ideas succeed.
Work-life balance is important to carsales
and we’re proud that 92% of our people
feel like they can take time out from work
when they need to. From flexible working
arrangements to the suite of new leave
options introduced in 2018 – we have
something for everyone.
The team analysed nine years worth of feedback from
onboarding, engagement and exit surveys and ran a series of
focus groups to get a clear picture of what our people wanted
from their career and development at carsales. This has resulted
in a structured and aligned framework with a focus on career,
development, goal alignment and regular feedback – delivered
in an agile and customisable format that isn’t a ‘one size fits all’.
In addition, we have continued to focus on offering training and
development programs to support our people including:
• Our annual CEO scholarship – an indication of our investment
in the future of our people and that we are more than just
a place of employment. Our 2019 winner came from our
Sydney office, and 2018 saw our first international recipient
of the award from the Demotores business in Argentina.
• Mentoring and buddy programs – everyone at carsales can
participate in our annual company-wide mentor program,
either as a mentor or a mentee. Both roles are aimed at
helping employees to learn, grow, develop and achieve
their goals. The program is designed to help provide insight,
perspective and inspiration in the areas that matter most to
the individual.
• Expert Series – these sessions are run by members of our
very own talented team and are some of our most popular
training opportunities. These are designed to share best
practice and knowledge across the business. It’s also an
opportunity for our team members to explore potential
career paths and opportunities in departments outside
of their own. Throughout FY19 we ran 11 Expert Series
sessions covering topics including Artificial Intelligence,
Voice of Customer, Behavioural Economics and Product.
• Regular participation in conferences and external
knowledge sharing events.
• Our revamped Women In Tech program – over time this
program has successfully built opportunities for our women
to share their skills with younger generations and spend
time in the community. It has also provided the opportunity
for our females in technology to network with each other
and their peers in the industry. As part of the relaunch, the
group decided to adopt a quarterly learning focus, with the
first topic being AWS. Over a four-month period, the group
met fortnightly to study different topics relating to AWS,
build on their presentation skills and share learnings. The
goal of the quarter has been to provide a structured path
for learning towards AWS certification. At the end of every
quarter we provide an opportunity to reflect on learnings,
discuss future opportunities and celebrate our successes
with a networking lunch.
37
Annual Report 2019carsales.com Ltd Directors’ Report - People continued
Throughout the year, we delivered over 1,204 hours
of training which includes more than 396 hours of Spanish
lessons, 11 Expert Series, 60 participants in our mentoring
program, as well as online learning and external courses.
Our graduate program has gone from strength to strength.
We saw our second cohort of graduates enter the business
in 2019, rotating through many of our teams including
Data, Product, AI, Finance, Marketing, QA, Membership
and DevOps. This year we received in excess of 1000
applications for our 2020 graduate intake – an increase
of over 40%. We participated in the Australian Association
of Graduate Employers (AAGE) Top Graduate Employers
survey for the first time and we were thrilled to be voted #4
on the list by our graduates.
Diversity and Inclusion
carsales is proud to be a workplace that promotes, respects
and embraces diversity and inclusion at all levels. We firmly
believe in fostering a supportive and inclusive environment that
values and encourages the ideas, capabilities and experiences
of our global and diverse workforce to realise their full potential.
In FY19 we were the proud recipient of the WGEA Employer
of Choice citation for the fourth consecutive year which is
recognition of our ongoing commitment to achieving a gender
diverse workplace. We see ourselves as a business that takes
a leadership position on gender diversity and our CEO, Cameron
McIntyre, sets the tone as a WGEA Pay Equity Ambassador
and a board member for Inclusive Australia. We also continue
to hold our White Ribbon Workplace accreditation, which
recognises our commitment to promoting respectful
relationships and preventing violence against women.
As a technology business, our people have devoted a significant
amount of time contributing to our community, with a particular
focus on improving and maintaining connections with young
women and encouraging them to pursue careers in IT. carsales
was a key sponsor and participant in the bi-annual Go Girl
program in August 2018. This program, run by the Victorian ICT
for Women network and was attended by over 2000 female
students. The day provided an opportunity for students to gain
an understanding of what a career in technology looks like
through workshops and lectures with our team.
This year we were also a proud sponsor of Super Daughter
Day. This event was aimed at 5 – 12 year olds and offered
them an opportunity to explore the world of STEM. We had
over 10 volunteers donate their time to run workshops using
M Bot robotics and scratch programming.
38
For the second year running, we hosted our internal Kids Code
Camp for our people’s children. Over two days, 25 kids aged
between 4 – 12 years old joined us for a series of coding
activities with robots. This program offered a great opportunity
for the kids to see what their parents do and for our team of
volunteers to share their skills, knowledge and enthusiasm for
technology with a younger generation.
We continued to work with a local girls high school to deliver
coding classes to students in years 7 – 11. These were held
over a lunch time and saw a group of dedicated volunteers
deliver hands-on workshops on coding in Python. We also
sponsored the IT Takes Spark conference which brings together
STEM teachers and students. Through our sponsorship we
were able to support a group of teachers and students from
a regional Victorian school to attend the event.
We have also continued to build on our links with the student
community by supporting and donating our time to the Uni
Hack program, Monash Post-graduate Mentoring Program
and supporting students by providing work experience
opportunities and donating time to give specialist lectures,
tours of our business and presentations to students across
a number of different universities and interest groups.
Annual Report 2019carsales.com Ltd Technology is in our DNA
Our Hackathons involve people from across the business
coming up with innovative ideas to improve what we do.
They are global and empower everyone to be creative
and collaborate to enhance our customer experience.
We’ve seen more than 300,000 code releases over the
past 12 months, every single one of which improves our
customer experience.
We continue to focus on the following gender equality objectives as part of our diversity strategy:
Objectives
Initiatives
Outcomes
Continue to grow the
number of women in senior
roles and professions where
women are traditionally
under represented.
Reviewing all job advertisements to ensure
gender neutral wording.
Ensuring female representation in all
interview panels.
Ensuring that there is gender diversity
in all succession planning reviews.
45% of all appointments in FY19 were female.
33% of all managerial appointments were female.
30% of our Executive Leadership Team are females.
Continue to implement career
development programs to
prepare women within the
business to take on more
senior roles.
Current initiatives include training and
development programs that cover topics such
as communication, presentation, management
and influencing skills training.
Continued development of our Next Gear
Graduate Program.
carsales mentoring program which runs
twice per year.
Achieved a 50/50 gender split in our 2019
and 2020 cohorts of graduates.
37% of FY19 promotions went to female
team members.
32% female participation in our mentor
program for FY19.
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.
Support of internal networking opportunities
such as our Women In Tech (WIT).
Delivery of internal and external coding workshops
by our people.
Support of STEM related initiatives including the
Women in STEM Decadel Plan, speaking on panel
events relating to diversity and inclusion.
Celebration of International Women’s Day.
Sponsored Go Girl, Go For IT and Super Daughter
Day events which are focused on encouraging
females to pursue STEM careers, and are attended
by our female tech team members.
19 team members participating in the Monash
University mentoring program.
Fortnightly Women in Tech catch ups with a
quarterly learning & development focus on topics
such as AWS and data.
16 weeks of paid parental leave (plus five additional
days of paid leave during the first months returning
to work to assist with the transition).
In FY19 we had 24 females and 1 male employee
take primary carer’s leave, and 21 males take
secondary carer’s leave.
We had a 96% return to work rate following
parental leave in FY19.
We’ve had 27 team members who are parents
with caring responsibilities access formal flexible
working arrangements.
In addition to our two weeks paid leave for
secondary caregivers, we have also provided access
to an additional 10 days of sick/carer’s leave.
Ability to purchase additional one or two weeks
of annual leave per year.
Early access to long service leave after seven years
of continuous service (usually 10 years depending
on state legislation).
Access to sick/carers leave to take up to two
‘Refuel Days’ per annum which can be used to do
something such as take a day off to move house,
to celebrate their birthday or simply just a mental
health break.
39
Annual Report 2019carsales.com Ltd Directors’ Report - People continued
FY19 has also seen carsales continue to build on our D&I
initiatives in other focus areas including disability and the
LGBTIQ+ space. We became proud members of the Welcome
Here project. Welcome Here supports organisations to create
and promote environments that are visibly welcoming and
inclusive of Lesbian, Gay, Bi, Trans, Intersex and Queer
(LGBTIQ) communities. All of our Australian offices now
display the Welcome Here membership sticker and charter,
so that all of our people and visitors know the values we
uphold as a business in terms of supporting and welcoming
the LGBTIQ community. We have also celebrated IDAHOBIT –
International Day Against Homophobia, Biphobia, Interphobia
& Transphobia – right across Australia. Acknowledging days
such as these builds on our commitment to creating a safe
and welcoming work environment for everyone, drives positive
social change, and demonstrates that we not only welcome
LGBTIQ+ diversity but we celebrate it too.
Hackathons
Innovation is at the core of our culture and our Hackathons
provide a valuable opportunity to bring our people from across
the business together to collaborate and create ideas to
improve carsales and help our customers.
One of our 2018 Hackathon ideas delivered our people with
an entirely new way of communicating this year. Ask Me
Anything (AMA) is an anonymous portal through which any
employee can ask a question about any subject – such as our
future direction and business strategy, office facilities or
benefits we offer. The questions are live streamed on the
carsales blog, can be up voted by peers, and are answered
by the most appropriate person in the organisation. These
answers are live streamed to all employees. Hackathon ideas
like this are a true testament to our innovative DNA.
Community
The carsales Foundation is our independent, registered charity
that was created to formalise our community outreach
programs, and the vision is simple: ‘To positively impact our
community by promoting inclusion and supporting equal
access to education’. Establishing links and strengthening
partnerships with the community and groups that are close
to the hearts of our people has been an important part of
who we are. In FY19 we refreshed the Foundation’s focus
areas and defined four clear pillars:
• Pillar 1 Community Grants - anyone in our business
can nominate a charity that they are passionate about
to receive a grant of up to $500.
• Pillar 2 University education – supporting a female to study
Technology at Swinburne University through a Women in
IT scholarship.
• Pillar 3 Prevention of family & domestic violence – donating
to shelters, family support networks and White Ribbon.
• Pillar 4 Primary and secondary school education – providing
support to primary and secondary school children under
financial hardship.
To support our primary and secondary school education focus
we have aligned ourselves with The Smith Family. Our team
donated over $1,200 to purchase 57 toy and book packs as
a contribution to The Smith Family 2018 Christmas Appeal.
We are also sponsoring seven students around Australia
through their Learning For Life program. Learning For Life
recognises the extra support that disadvantaged children need
to stay in school and our sponsorship money goes towards
providing financial assistance to cover the cost of school
related supplies. We also have 13 team members who have
volunteered to be mentors through The Smith Family to help
students in years 9 to 11 by providing general encouragement,
advice and guidance regarding their post school plans.
Since it was established in 2016, our people have raised close
to $50,000 for the carsales Foundation, and those funds have
then been distributed to the community. In the past year we’ve
donated to a number of fantastic charities nominated by our
people including Movember, The Gutsy Group, The Aftershock
and Rivers Gift. We’re proud to have established strong links
and strengthened our partnerships with the wider community
and charities that are close to the hearts of our people.
Health and Wellbeing
We have continued to deliver our wide range of employee
benefits relating to health, wellbeing and work-life balance
which sit under our carsales People Promise offering. Our Health
and Wellbeing program is aimed at addressing the four pillars
of health – mental, physical, emotional and financial. We offer
discounts on health insurance, gym memberships, optical
providers and sports medicine clinics. We also offer a calendar
of health and wellbeing events throughout the year. Some
of the classes that we have offered include HIIT training, boot
camp, pilates, yoga and meditation. We had 210 team
members take up our annual flu shot offering in the lead up
to the winter months, and ran seminars on topics including
stress management, resilience and managing superannuation
and finances.
40
Annual Report 2019carsales.com Ltd Technology is in our DNA
We’re rolling out educational programs for the
community – with a focus in supporting Women
in Tech we’re showcasing how technology and
STEM is an exciting option for women.
Case Study: Women in Tech
Our first Swinburne scholarship recipient, Stephanie
McDonald, has graduated from her Computer Science degree
and was accepted into the tech stream of the 2019 carsales
Next Gear Graduate Program. She has almost completed her
first 6-month rotation and shared her experience:
“My interest in the world of tech began with my sister.
I saw her begin her career in tech and saw all the amazing
opportunities that lay before her. Then it was encouraged by
an amazing IT teacher at my high school in Victoria, who went
above and beyond to show me what I was capable of. It was
thankful to this individual that I was able to access challenges
that had me thinking beyond the class time and I found myself
constantly creating and extending classwork to keep me
thinking. It was through this teacher that I really began to
believe that there was a place for me in technology if I
continued to pursue my passion.
Throughout my degree, I was always looking for new
opportunities and ways to advance my learning. I found the
scholarship offered by the carsales Foundation. Writing my
application, I realised just how eager I really was to share my
passion and enthusiasm around technology. From the impact it
can have on society, the reliance we all have on it and just how
much value it can add to one’s life – how unreal that there was
a company built on that exact same passion. Little did I know
that this scholarship would completely change what I thought
I was capable of and the direction of my career.
I loved the technical side of tech, it’s why I chose to do
computer science. However, I had no faith in my abilities to
code and when I compared myself to my classmates I thought
I could never catch up. As part of the Foundation scholarship,
I participated in two 6-week internships at carsales. These
were without a doubt, definitely the scariest weeks of my final
year at uni. However, I never felt anywhere near the level of
self-doubt I did in my uni classes. The people within the tech
teams here at carsales were so supportive and kind and really
gave me that sense of confidence that I had been trying to
instil in other young women in my life. I look back now
and marvel at how these brilliant people could share in my
excitement of getting basically 3 lines of code to work and
make me feel so proud of the tiny, miniscule change I had
made. Following my internship and completion of my studies
- applying for the graduate program was an easy decision.
I never imagined myself working anywhere other than carsales
after I graduated because I never realised how much of a
positive impact a company, its culture and its brilliant people
could have on me, my ability to learn and my motivation to
push myself to take on new challenges and I wasn’t going to
give up the opportunity to start my career in this environment.
Fast forward to today and I’m a few months into my Graduate
program rotations. I have never been more excited to go to
work and to see what I am going to accomplish and learn
today, tomorrow and the day after that and the day after
that. The internship allowed me to come into the graduate
program prepared for the constant change and learning that
technology in a fast-paced world. I’m now no longer fending
off a panic attack when I get given a completely new task,
rather I’m excited to see all the new things I will learn. My
team is incredibly supportive and helpful and is why I have
been able to throw everything I have into learning and
building my skills. I’ve joined the Women in Tech group – this
group of women is phenomenal, everyone is both motivating
and inspiring and prove exactly why we need to continue
on our mission of shifting perceptions of women in IT.
When I started my degree I never believed I could be a software
developer, this scholarship showed me that if I set my mind to
it I can shape my tech career in whatever way I want. This is
what excites me about tech in the future, I’m excited to see
the changes ahead and mould my own career and see where
it takes me. I’m also excited by the changing attitudes of the
little girls and boys that have started learning coding in school,
having volunteered at a few events I can see that these kids
more and more believe that tech is for everyone.”
carsales.com Ltd
Annual Report 2019
41
Corporate Governance
carsales is committed to being
ethical, transparent and accountable
in everything we do.
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.
Our 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 FY19 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
We have issued our second Environmental,
Social and Governance (ESG) Report,
‘Driving the future: Our sustainable business
2019’. 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.
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
42
management framework. It has delegated the specific duty of
developing and monitoring compliance with risk management
policies to the Board’s Risk Management Committee (RMC).
We are extremely proud of the culture and business we have
built at carsales – we know that people are at the core of
everything we do, and continuing to attract and retain the
very best talent will be key to our continued success. In addition
to our people, other key drivers of our success are our world-
leading technology and the unparalleled data and insights
we have in the automotive industry. Accordingly, cyber security
and data protection are always top of mind for us.
As an online business, we have a low environmental impact
compared to many other categories of companies. However,
we believe it is incumbent on every business and individual to
be aware of their environmental impact and have this in mind
in relevant decisions whether on a day to day basis or for more
significant projects.
Read the full ESG report ‘Driving The Future: Our Sustainable
Business 2019’ on our Corporate Governance page of the
website at bit.ly/esg-reprt.
Annual Report 2019carsales.com Ltd 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.
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. We use recycled
materials and have removed 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; supply crockery
and steel cutlery at all employee hubs and tea points within
our offices to reduce disposable consumables; have installed
water efficient dishwashers and bathroom filters.
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. We have focused on reducing our higher
impact travel activities such as air travel, reducing this by
approximately 33% in FY19. We 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
During the year we closed out last legacy fixed site hosting
facilities and completed our move to 100% cloud-based
solutions such as Amazon Web Services (AWS). This 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 activities to increase the energy efficiency of data facilities
and equipment and the innovation of design and manufacture
of servers, storage, and networking equipment to reduce
energy. 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 utilises
non-potable, recycled water for cooling when possible.
43
Annual Report 2019carsales.com Ltd Our Board
Patrick O’Sullivan
Cameron McIntyre
Wal Pisciotta OAM
Kim Anderson
Edwina Gilbert
Non-Executive Chair
Chief Executive Officer
and Managing Director
Non-Executive Director
and Co-Founder
Non-Executive
Director
Non-Executive
Director
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, and was
the Chair of the Audit
and Risk Management
Committee prior to
being appointed as
Chair of the Board in
2019. Pat also provides
the Board with insights
relating to operations
of global companies.
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 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 of
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 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 and a Director
of The Sax Institute. Kim
is also on 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.
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.
44
Annual Report 2019carsales.com Ltd Kee Wong
Non-Executive
Director
David Wiadrowski
Steve Kloss
Nicole Birman
Non-Executive
Director
Alternate Non-
Executive Director
Company Secretary
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.
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.
David is an ASX director
with strong commercial
acumen and financial
credentials derived from
extensive experience at
PwC and board roles
at Vocus and Life360.
David’s passion for
business comes from his
role as a Partner at PwC,
including 5 years as the
Chief Operating Officer
of PwC Assurance
where he was
responsible for
managing the firm’s
largest business unit.
David has extensive
experience working
with companies in the
technology, infocoms
and entertainment and
media industries, having
been the lead audit
partner for clients
including Network Ten,
APN News & Media and
Yahoo during his time
with PwC.
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.
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.
45
Annual Report 2019carsales.com Ltd Our Executive Leadership Team
Cameron McIntyre
Jo Allan
Paul Barlow
Ajay Bhatia
Nicole Birman
Chief Executive Officer
and Managing Director
Chief People Officer
Managing Director
– International
Managing Director
– Consumer
General Counsel and
Company Secretary
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 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, and
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.com
Ltd 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
of carsales.com Ltd
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.
46
Annual Report 2019carsales.com Ltd Jason Blackman
Kellie Cordner
Andrew Demery
Michael Holmes
Simon Ryan
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 6 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.
Simon joined carsales.
com Ltd in February 2019
and runs the B2B arms of
the carsales domestic
business which brings
together all commercial
facing businesses and
relationships with dealers,
manufacturers and media
agencies. Simon has
more than 25 years of
experience in media and
prior to being appointed
at carsales, Simon has
held various roles at
Dentsu Aegis Network,
including most recently
as ANZ CEO. Simon holds
a Business & Advertising
Federation of Australia
qualification and under
Simon’s leadership DAN
ANZ was recognised by
RECMA as the leading
communications group
in Australia for the past
three years and Agency
of the Year on a number
of occasions.
47
Annual Report 2019carsales.com Ltd Our Remuneration Chair’s Letter
Dear Shareholders,
On behalf of the Board, I am pleased to present the Remuneration Report for FY19. The Board is committed to ensuring our
remuneration strategies align to outcomes that support our sustainable growth over the long-term and drive consistent
shareholder value.
In FY19, we continued to focus on ensuring that the Company’s remuneration framework is designed to incentivise our Senior
Executives to deliver on our long-term strategy, maintain focus on the resulting business outcomes while retaining our high-
performing and innovative culture.
The Company prides itself on having a strong sense of value, culture and passion and operates in a highly dynamic environment.
This year I was proud that we have again been recognised as a Workforce Gender Equality Agency Employer of Choice, a certified
Great Place To Work® and maintained our strong culture of engagement in the face of changing market conditions.
This year has seen a number of significant challenges in the media, finance and new car markets. It is important that our approach
to remuneration maintains flexibility to allow the Company to attract, motivate and retain high-calibre executives who can
address these challenges while still maintaining our culture and values. We believe we have achieved an appropriate balance
between this flexibility and our responsibility to our shareholders.
In this report, we outline the Company’s remuneration strategy and detail how the Company’s performance in the past financial
year has translated into remuneration outcomes for our Senior Executives.
The Board sets strong financial targets for the Company as well as strategic non-financial objectives, all designed to support the
Company’s long-term growth and strategy. The Company’s performance in FY19 as tested against the targets set has resulted
in overall lower total remuneration for Senior Executives than in the previous year. While it is not the Board’s preference for
executive remuneration to trend backwards, the Board considers the outcomes to be appropriate and responsible.
As in previous years, in this report the Company is voluntarily disclosing the actual cash remuneration received by our 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
48
Annual Report 2019carsales.com Ltd Remuneration Report
The Company prides itself on its achievement of business outcomes and sets out to ensure the remuneration strategy provides
the right balance of performance and reward, allowing to attract, motivate and retain high-calibre executives able to lead the
business within a geographically diverse and dynamic environment.
Contents
1. Key Management Personnel
2. Senior Executive Remuneration Strategy, Governance and Framework
3. Company 5-year Financial Performance
4. Remuneration Snapshot
5. Remuneration Outcomes
1. Key Management Personnel
This report covers Key Management Personnel (KMP), comprising Non-Executive Directors and Senior Executives who have the
responsibility and authority for planning, directing and controlling the activities of the Company for the year ended 30 June 2019.
Position
Chair (appointed Chair from 4 January 2019)
Director
Director
Director
Director (appointed from 9 July 2018)
Director (appointed from 23 May 2019)
Director (Alternate)
Chair (ceased as KMP on 4 January 2019)
Name
Non-Executive Directors
Patrick O’Sullivan
Walter Pisciotta
Kim Anderson
Edwina Gilbert
Kee Wong
David Wiadrowski
Steve Kloss
Former Non-Executive Directors
Richard Collins
Senior Executives
Cameron McIntyre
Ajay Bhatia
Simon Ryan
Paul Barlow
Andrew Demery
Former Executives
Anthony Saines
Managing Director and Chief Executive Officer
Managing Director – Consumer
Managing Director – Commercial (commenced on 4 February 2019)
Managing Director – International
Chief Financial Officer
Managing Director – Commercial (ceased as KMP on 15 January 2019)
Term as KMP
Full Year
Full Year
Full Year
Full Year
Part Year
Part Year
Full Year
Part Year
Full Year
Full Year
Part year
Full Year
Full Year
Part Year
The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001.
49
Annual Report 2019carsales.com Ltd 2. Senior Executive Remuneration Strategy, Governance and Framework
The objective of the Company’s executive remuneration framework is to ensure that reward for performance is competitive
and appropriate to deliver the Company’s results, and to attract and retain high-calibre talent. The framework aligns Senior
Executives 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.
2.1 Principles used to determine the nature and amount of remuneration for FY19:
The governance of Senior Executive remuneration is a core focus of the Remuneration and Nomination Committee. 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
ALIGNMENT TO
PARTICIPANTS’
INTERESTS
• Has economic profit as a core component of plan design as well
as key non-financial drivers of value such as innovation and culture
• Focus on sustained growth in shareholder return
• Attracts and retains high-calibre executives
• Transparency
• Reflects competitive remuneration for contribution to growth
in shareholder wealth
• Rewards capability, experience and performance
• Provides recognition for contribution to operational performance
• Provides a clear structure and goals for earning remuneration
To ensure the remuneration framework is market competitive and the Company is able to retain high-calibre talent, the Company
will seek advice from external remuneration consultants to benchmark remuneration against relevant peers, being ASX listed
companies that are relative 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 2019.
2.2 Governance
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, the 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.
2.2.1 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 they 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 its
shareholders and to ensure it is across the trends being seen in the market.
50
Annual Report 2019carsales.com LtdRemuneration Report continued Over the course of FY19, representatives of the Company met with the following proxy advisors:
• Ownership Matters;
• ACSI;
• CGI Glass Lewis;
• ISS; and
• the Australian Shareholders’ Association.
2.3 FY19 Remuneration structure
Senior Executive remuneration for FY19 comprised the following components as detailed below.
Description
Purpose
Fixed
remuner-
ation
Fixed remuneration comprises base salary and statutory
superannuation contributions. This may be delivered
as a combination of cash and prescribed non-financial
benefits as elected by each individual. Fixed remuneration
is reviewed annually, or subsequent to a promotion, by
the Remuneration and Nomination Committee. There
is no guaranteed fixed remuneration increase included
in any Senior Executive’s contract.
To provide remuneration in recognition of day-to-day
work and responsibilities.
The Company seeks to ensure its fixed remuneration
is competitive with industry peers to attract and
retain key talent, taking into account individual
experience, capabilities and performance.
Short-term
incentive
(STI)
The STI plan is an annual incentive based award paid
on the achievement of financial and strategic objectives.
The performance metrics attached to the FY19 STI award
are 70% financial outcomes 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 is based on the
evaluation of each role. The maximum STI payable is
capped at 60% of fixed remuneration, except for the
CEO, who has a cap of 87% of fixed remuneration.
The STI aligns remuneration with the short-term
goals of the Company which support shareholder
value, taking into account the Company’s
immediate priorities.
The plan is designed to drive overachievement of
key financial and strategic, personal and cultural
objectives as determined by the Board.
By deferring 25% of the award in equity for 12
months, subject to a continuing service condition,
the STI encourages talent retention as well as aligns
Senior Executive’s interests with those of
shareholders.
The plan is able to distinguish between Senior
Executives to reward the individual’s performance.
51
Annual Report 2019carsales.com Ltd Description
Purpose
Long-term
incentive
(LTI)
The LTI plan is an equity based award provided 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.
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 three-year vesting period encourages
consideration of the long-term future of the
Company in decision making as well as operating
as a retention tool. In light of the various objectives
of the plan, it is important that the targets set are
both challenging and achievable.
With a significant portion of potential remuneration
tied to the Company’s equity, the Board ensures
alignment between the interests of Senior
Executives and shareholders.
Other
Benefits
Senior Executives receive salary continuance insurance
cover that is provided to all carsales employees. The policy
is held with MetLife Insurance Limited, but is not allocated
on an individual employee basis.
This insurance cover is part of the carsales
‘People Promise’ provided to all employees of
the Company.
3. Company 5-year Financial Performance
One of the key principles of the Company’s remuneration framework is to closely align Senior Executive reward outcomes and
Company performance. The Company provides shareholders with an overview of the Company’s performance for the five-year
period ended 30 June 2019 within the Remuneration Report, to enable an assessment of whether the Company has been
successful in aligning Senior Executive and shareholder interests.
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
e
r
a
h
s
r
e
p
s
t
n
e
c
S
P
E
d
e
t
s
u
d
A
j
60
50
40
30
20
10
0
10
8
6
4
2
%
m
$
130
110
90
70
50
30
100
90
80
70
%
FY15
FY16
FY17
FY18
FY19
FY15
FY16
FY17
FY18
FY19
Adjusted EPS
KMP % Adjusted NPAT
Dividend Payments in respective year
Dividend Payout Ratio
52
Share price and movement percentage
Lookthrough revenue and Adjusted NPAT*
$
x
x
%
20
300.0
$
x
x
x
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
60
40
0
-20
450.0
400.0
350.0
250.0
200.0
150.0
100.0
FY15
FY16
FY17
FY18
FY19
FY15
FY16
FY17
FY18
FY19
Closing Share Price
Share Price Movement (cents)
Lookthrough revenue (m)
Adjusted NPAT(m)
100
%
140
120
80
60
40
Annual Report 2019carsales.com LtdRemuneration Report continued
Adjusted EPS* and KMP remuneration
Dividend payment and ratio
e
r
a
h
s
r
e
p
s
t
n
e
c
S
P
E
d
e
t
s
u
d
A
j
60
50
40
30
20
10
0
10
8
6
4
2
%
m
$
130
110
90
70
50
30
100
90
80
70
%
FY15
FY16
FY17
FY18
FY19
FY15
FY16
FY17
FY18
FY19
Adjusted EPS
KMP % Adjusted NPAT
Dividend Payments in respective year
Dividend Payout Ratio
Share price and movement percentage
Lookthrough revenue and Adjusted NPAT*
$
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
x
x
x
x
60
40
450.0
400.0
350.0
%
20
300.0
$
x
0
-20
250.0
200.0
150.0
100.0
140
120
100
%
80
60
40
FY15
FY16
FY17
FY18
FY19
FY15
FY16
FY17
FY18
FY19
Closing Share Price
Share Price Movement (cents)
Lookthrough revenue (m)
Adjusted NPAT(m)
*
Look through revenue is presented on a continuing basis for FY15-FY19 (excluding Stratton Finance which is a discontinued operation). Look through revenue for FY15-FY17
has not been restated for the adoption of AASB15 - Revenue from contracts with customers as the impact would not be material. Adjusted EPS and Adjusted NPAT are
presented on a continuing basis for FY18 and FY19 but FY15-FY17 is presented as reported in those financial years.
4. Remuneration Snapshot
4.1 Cash based benefits that were realised in FY19
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 table 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 table below is
designed to reflect the value of remuneration that has actually been received by the Non-Executive Directors and Senior
Executives in FY18 and FY19 rather than the value received on an accounting treatment basis, and has not been prepared in
accordance with the Australian Accounting Standards.
Fixed remuneration and Cash STI relates to amounts that were received during the year, and vested deferred STI and vested LTI
represent equity vesting from prior years after meeting a restricted testing period.
53
Annual Report 2019carsales.com Ltd
Fixed
remuner-
ation1
$
Other
$
Cash STI
earned2
$
Vested
deferred
STI3
$
Vested LTI4
$
Total
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
279,808
180,000
142,500
126,667
190,000
180,000
180,833
152,424
153,853
-
22,938
-
-
45,833
170,000
250,606
-
211,144
275,512
622,875
188,825
119,611
305,211
566,898
2,119,548
2,578,999
Name
Non-Executive Directors
Patrick O’Sullivan
Walter Pisciotta
Kim Anderson
Edwina Gilbert
Kee Wong
David Wiadrowski
Steve Kloss (Alternate)
Year
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
Former Non-Executive Directors
Richard Collins
279,808
180,000
142,500
126,667
190,000
180,000
180,833
152,424
153,853
-
22,938
-
-
45,833
170,000
250,606
-
211,144
FY19
FY18
FY19
FY18
FY19
FY18
1,350,000
1,269,615
Jeffrey Browne
Executive Directors
Cameron McIntyre
Other Senior Executives
Ajay Bhatia
Simon Ryan
Paul Barlow
Andrew Demery
Former Executives
Anthony Saines5
Total KMP FY19
Total KMP FY18
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
824,250
785,000
379,874
-
619,500
590,000
520,000
440,000
-
-
280,000
-
-
-
-
-
121,714
297,795
59,969
-
92,424
234,210
70,682
161,100
90,272
65,785
-
-
71,005
47,847
48,843
23,917
152,611
245,925
-
-
106,821
164,767
53,404
93,775
1,188,847
1,394,505
719,843
-
889,750
1,036,824
692,929
718,792
312,336
710,000
5,145,892
4,941,289
484,630
-
764,630
-
-
309,323
620,301
1,625,303
93,776
66,021
492,721
323,181
-
323,453
618,047
1,394,818
890,742
1,408,797
7,641,591
8,284,591
1.
Fixed remuneration earned in the financial year (base salary and superannuation).
2. Cash STI earned in relation to performance under the STI plan during the financial year.
3.
Vested deferred STI is the value of the deferred STI earned as a result of performance in the prior financial year but was subject to a restriction period that ended in
August 2019. The STI value calculated as the number of rights that vested multiplied by the 30 June 2019 closing share price (30 June 2018 closing share price for
the FY18 financial year).
Vested LTI is the value of performance rights and options that vested in August 2019. Rights and options values are calculated as the number of rights and options
received multiplied by the 30 June 2019 closing share price (30 June 2018 closing share price for the FY18 financial year), less the exercise cost of converting options
to shares. For example FY19 is reported as the FY17 LTI grant which vested in August 2019.
Anthony Saines ceased as a KMP on 15 January 2019. It was agreed Anthony would receive the allocated 2019 Deferred STI shares upon vesting in August 2019.
4.
5.
54
Annual Report 2019carsales.com LtdRemuneration Report continued 4.2 Accounting based benefits
The table below has 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 FY19.
Short-term benefits
Salary and
fees
$
Cash STI
$
Post
Employ-
ment
Super-
annu-
ation
$
Long-
term
benefits
Long
Service
Leave
$
Share based payments
Defe-
rred
STI
LTI
perfor-
mance
rights
LTI
options
Other
$
Total
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
18,908
15,616
12,363
23,000
16,484
15,616
15,688
13,224
13,348
-
1,990
-
-
-
10,266
19,165
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
279,808
180,000
142,500
126,667
190,000
180,000
180,833
152,424
153,853
-
22,938
-
-
45,833
170,000
250,606
-
211,144
275,512
622,875
20,531
20,049
38,675 152,638 (159,455) 121,487
21,831 132,804 309,794 164,036
- 1,778,857
- 2,520,955
Year
Kim Anderson
Walter Pisciotta
Name
Non-Executive Directors
Patrick O’Sullivan
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
David
Wiadrowski
Edwina Gilbert
Kee Wong
260,900
164,384
130,137
103,667
173,516
164,384
165,145
139,200
140,505
-
20,948
-
-
45,833
Steve Kloss
(Alternate)
Former Non-Executive Directors
Richard Collins
FY19
FY18
FY19
FY18
159,734
231,441
-
211,144
FY19 1,329,469
FY18 1,249,566
Jeffrey Browne
Executive Directors
Simon Ryan
Cameron
McIntyre
Other Senior Executives
Ajay Bhatia
FY19
FY18
FY19
FY18
FY19
FY18
FY19
FY18
Andrew Demery
Paul Barlow
803,719
764,951
371,319
-
594,500
565,000
499,469
419,951
121,714
297,795
59,969
-
92,424
234,210
70,682
161,100
20,531
20,049
8,555
-
25,000
25,000
20,531
20,049
20,622
13,349
718
-
15,106
9,936
10,384
5,708
71,218
(34,431)
66,618 107,939
-
10,537
-
-
55,431
50,980
39,377
30,344
(16,691)
67,796
(16,582)
42,953
42,247
61,823
- 1,045,620
- 1,332,524
734,226
-
792,439
992,885
640,500
703,638
3,128 280,000
-
-
-
-
-
-
26,669
39,963
16,639
23,533
Former Executives
Anthony Saines 1
Total KMP FY19
Total KMP FY18
FY19
FY18
10,266
-
302,070
309,323
25,000
685,000
4,951,431
620,301 194,461
4,744,521 1,625,303 196,768
1. Anthony Saines ceased employment as a KMP on 15 January 2019.
-
51,761
68,357 121,777
742,445
-
12,034
- 1,292,552
85,505 380,962 (227,159) 210,170 658,348 6,874,019
- 7,989,228
62,858 349,103 650,259 360,416
- 378,348
71,061
55
Annual Report 2019carsales.com Ltd 4.3 Remuneration mix (percentage of total remuneration)
The relative proportions of fixed remuneration, STI (at cap) and LTI in each Senior Executive’s remuneration package is provided
in the diagram below.
Cameron McIntyre
36%
32%
32%
Ajay Bhatia
51%
30%
19%
Simon Ryan
Paul Barlow
Andrew Demery
56%
34%
10%
53%
53%
32%
33%
15%
14%
Total Fixed Remuneration %
STI (at Cap) %
LTI grant %
Non-Executive Directors receive 100% fixed remuneration.
5. Remuneration Outcomes
5.1 Service Conditions
All Senior Executives have service agreements determining fixed remuneration comprising cash salary and superannuation and
performance based variable reward comprising STI opportunity and participation in the Company’s LTI 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.
5.2 Fixed Remuneration (base salary and superannuation)
Fixed remuneration is generally positioned between the median and the 75th percentile of the relevant market, which allows
flexibility required to retain high-calibre Senior Executives. The annual fixed remuneration entitlements of the Senior Executives
for FY19 is set out below:
Name
C McIntyre
A Bhatia
S Ryan
P Barlow
A Demery
A Saines
Annual fixed remuneration from
1 July 2018 to 30 June 2019
$1,350,000
$824,250
$920,000
$619,500
$520,000
$745,500
Actual fixed remuneration paid to Senior Executives is shown in the remuneration tables in section 4.1. Within the FY19 annual
review, the CEO’s fixed remuneration increased by 6.3% and other Senior Executives increased by 5.0% with the exception of
the CFO who received an increase of 18.2% as a market adjustment. No Senior Executives elected to receive a proportion of
their salary package in the form of non-financial benefits.
56
Annual Report 2019carsales.com LtdRemuneration Report continued 5.3 FY19 STI plan (cash bonus and deferred equity grant) and outcomes
The Remuneration and Nomination Committee annually determine 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, whether or not STIs will be
paid and making recommendations to the Board on these matters. The Board maintains discretion to review the performance
against individual targets and the overall outcome of the STI award, to ensure it is congruent with the overall performance of
the Company and of the individual Executive, within the participant’s maximum STI opportunity.
5.3.1 FY19 Short-Term Incentive Plan Structure
Participants
Senior Executives
Award vehicle
Subject to the achievement of the relevant financial and strategic targets:
• 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.
12 months, commencing 1 July 2018 and ended on 30 June 2019.
For the deferred equity portion, the award vests after the publication of the 2020 Annual Report,
subject to the continued service condition being achieved.
Performance
period
Performance
measures
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 FY19 STI plan, the Board took into consideration the early
stage of many of the Company’s international investments. Look through revenue was considered an
appropriate measure to account for the stage of these investments, with a continued focus on growing
these businesses. Adjusted NPAT was selected by the Board to ensure a focus on both top and bottom
line growth so profits are being generated for shareholders.
The non-financial measures within the plan recognises the importance of strategic initiatives which
correlate to the Company’s business strategy as well as the critical role culture and employee satisfaction
play in the Company’s success.
57
Annual Report 2019carsales.com Ltd Link of
performance
and reward
For each measure, there is a minimum threshold of performance required to be met before any pay-out
is awarded for each particular 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.
Cessation of
employment
If a Senior Executive ceases employment with the Company prior to any awards being paid, unless the
Board determines otherwise, the Executive will forfeit any awards to be paid for the performance period.
5.3.2 FY19 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
Partial Achievement
Missed
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’s 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 2018 AGM notice. Specifically, the look through revenue and adjusted NPAT measured achievement was adjusted
to exclude the impact of the acquisition of the remaining 16.7% of chileautos that the Company did not already own, which
occurred in December 2018. Look through revenue also included 50.1% of the revenue of Stratton Finance which is presented as
a discontinued operation in the financial statements.
In December 2018 the Company announced the recognition of a $47.8m non-cash impairment charge against its 50.1%
investment in Stratton Finance as a result of several external factors that had adversely impacted the valuation of the Company
including ASIC regulatory changes in November 2018. The associated impairment charge was included in the calculation of
adjusted NPAT performance.
58
Annual Report 2019carsales.com LtdRemuneration Report continued This section of the plan enables Senior Executives to earn up to 100% of on-target earnings for over achievement against each
of the above mentioned objectives (subject to the application of each individual’s STI cap).
Achievement of the financial measures in the FY19 STI plan translated to an overall payout of 15% of on-target earnings for
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 Senior Executives recognising the unique role each of our executives play in the Company’s operations.
The strategic objectives involve the execution of pre-determined project targets for which the Senior Executives are responsible.
Projects may include the deployment of new products and technology, developing new markets or improving important strategic
performance metrics. This section of the plan enables Senior Executives to earn up to 10% of on-target earnings for over
achievement against each of the above mentioned objectives (subject to the application of each individual’s STI cap).
There were 5 projects in FY19, four of which are common to all Senior Executives and one specific to each individual’s set
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.
• Three project objectives – Exceeded
• One project objective – On-target
• Individual project objective – Missed (1), On-target (1), Exceeded (3)
Achievement of the strategic objectives of the FY19 STI plan translated to an overall payout of 21% to 28% of on-target
earnings for Senior Executives.
The Company prides itself on having a highly engaged and motivated workforce with a strong sense of values, culture and
passion. The people and culture component of the plan is designed to ensure Senior Executives are incentivised to nurture and
build on these principles and values. The performance of this is measured through the annual Employee Engagement Survey,
based on Group results. Senior Executives have the potential 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 was based on the Employee Opinion Survey results and also being
recognised by the Great Place To Work® Institute. This translated to an overall payout of 13% to 15% of on-target earnings
for each Senior Executive.
5.3.3 Overall STI financial outcomes
2019
C McIntyre
A Bhatia
S Ryan
P Barlow
A Demery
Actual STI
awarded
$
367,350
162,285
79,959
123,232
94,243
% of target
awarded
67%
58%
54%
56%
50%
% of target
forfeited
STI cap
$
33% 1,174,500
494,550
42%
552,000
46%
371,700
44%
312,000
50%
% of STI
cap
awarded
31%
33%
14%
33%
30%
The Board used discretion when assessing the CEO’s STI outcome, in particular noting his outstanding performance in relation to
areas of the business that were undergoing significant external challenges, including new car sales and media, and achievement
of overall cost management.
Under the FY19 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.
59
Annual Report 2019carsales.com Ltd 2019
C McIntyre
A Bhatia
S Ryan
P Barlow
A Demery
Actual STI
awarded
$
367,350
162,285
79,959
123,232
94,243
Paid in cash
$
275,513
121,714
59,969
92,424
70,682
Deferred
in equity
$
91,837
40,571
19,990
30,808
23,561
Number of
perfor-
mance
rights
awarded
6,783
2,996
1,476
2,275
1,740
6,783 performance rights will be issued to Mr McIntyre as the CEO after the release of this report to the ASX in August 2019,
with an exercise price of $0.00. These performance rights were approved by shareholders at the AGM held on 26 October 2018.
8,487 performance rights will be issued to Senior Executives after the release of this report to the ASX in August 2019, with an
exercise price of $0.00.
The number of performance rights awarded was determined by multiplying the actual STI awarded for the FY19 year by 25%
and then dividing the volume weighted average price of the Company’s shares for the 20 trading days prior to 1 July 2019,
which was $13.54.
Subject to the continued service condition being satisfied, unless otherwise waived by the Board, performance rights will vest
after the Board releases the 2020 Annual Report to the ASX.
5.4 Deferred Component of the 2018 STI
The amounts payable under this award based on the accounting Black Scholes valuations are as follows:
2019
C McIntyre
A Bhatia
A Saines
P Barlow
A Demery
Actual DSTI
award
vesting
Vested
%
100%
100%
100%
100%
100%
Vested
$
193,570
92,541
96,133
72,790
50,071
The cash value to each Senior Executive of the 2019 deferred component of their STI based on the 30 June 2019 share price is as
follows:
2019
C McIntyre
A Bhatia
A Saines
P Barlow
A Demery
60
Actual DSTI
award
vesting
Vested
%
100%
100%
100%
100%
100%
Vested
$
188,825
90,272
93,776
71,005
48,843
Annual Report 2019carsales.com LtdRemuneration Report continued 5.5 LTI plans
There are three years of unvested LTI awards which have performance periods that include the FY19 financial year as follows:
Financial year of grant
FY17
FY18
FY19
Performance period
1 July 2016 – 30 June 2019
1 July 2017 – 30 June 2020
1 July 2018 – 30 June 2021
Relevant performance year
to determine vesting
FY19
FY20
FY21
Vesting Dates
August 2019
August 2020
August 2021
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.
Change of control
In the event of a change in control, while the Board maintains discretion in relation to unvested options, the default treatment will be:
(a) for unvested options subject to performance conditions, a pro-rata number will vest based on the extent to which applicable
conditions have been satisfied;
(b) for unvested options subject to only continuing service conditions, the pro-rata number will vest based on the proportion of
the period that has lapsed.
5.5.1 Unvested Long-Term Incentive Plan Structure - FY19 Grant Vesting FY21
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.
There is 70% of the LTI awarded in performance rights, subject to financial performance measures and
30% awarded in options, subject to strategic objectives being met. Options and performance rights are
issued subject to vesting rules and expiry periods. They vest on fixed dates provided employment has not
been terminated, and targets are achieved.
No dividends are paid during the performance period until the rights or options vest and are exercised
by the Senior Executive.
Options and performance rights issued to the CEO contain the same terms, conditions and performance
targets as those issued to other Senior Executives.
61
Annual Report 2019carsales.com Ltd Performance
period
Performance
measures
Performance is measured over a three-year period to 30 June 2021.
The expiry date of the FY19 award is fifteen years from the grant date.
Financial measures
70% of the award is tested pursuant to a financial matrix with Cumulative Annual Growth Rate measures
for look through revenue and adjusted earnings per share (EPS). A minimum ‘gate’ threshold for both
these metrics must be achieved in the performance period prior to any award vesting.
The targets have been set as follows:
Look through revenue
Adjusted EPS
Minimum
CAGR
5%
5%
Maximum
CAGR
10%
10%
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 EPS is defined as earnings per share calculated by dividing the adjusted net profit after tax
attributable to equity holders of the Company during the relevant period by the weighted average
number of Ordinary Shares outstanding during the relevant period. The Board also retains discretion
to alter the adjusted EPS 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
EPS. The Board believes this metric gives an accurate 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 EPS metrics exclude any corporate activity (such as
acquisitions) made after the date of the AGM notice (25 September 2018), 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 EPS will be altered
to maintain the underlying CAGR growth rates targeted for the 2021 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 EPS 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 EPS CAGR targets have been achieved or exceeded as follows:
• If either the look through revenue or adjusted EPS 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.
62
Annual Report 2019carsales.com LtdRemuneration Report continued Performance
measures
continued
Strategic Measures
30% of the award is tested against strategic objectives.
Objectives are as follows:
• Growth in international business performance metrics that reflect the strategic importance of this
segment to the Group as a whole;
• Growth in Australian classified and non-classified automotive products and services, reflecting the
importance of the diversification of the Group’s traditional product set; and
• Achievement of specified milestones which relate to projects that address the development of the
automotive industry.
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).
The following unvested awards are outstanding for the FY19 award:
Award
Date
26/10/2018
26/10/2018
Number of
options
177,632
93,422
Number of
perfor-
mance
rights
63,551
33,423
Options
exercise
price
$
14.87
14.87
Perfor-
mance
rights
exercise
price
$
0
0
Vesting
Date
Aug-21
Aug-21
CEO
Other Senior Executives
5.5.2 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 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.
There is 70% of the LTI awarded in performance rights, subject to financial performance measures and
30% awarded in options, subject to strategic objectives being met. Options and performance rights are
issued subject to vesting rules and expiry periods. They vest on fixed dates provided employment has not
been terminated, and targets are achieved.
No dividends are paid during the performance period until the rights or options vest and are exercised
by the Senior Executive.
Options and performance rights issued to the CEO contain the same terms, conditions and performance
targets as those issued to other Senior Executives.
Performance
period
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.
63
Annual Report 2019carsales.com Ltd Performance
measures
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
Min target
Max target
Note: diagram not to scale
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. This measure was adopted
to ensure that Company’s international investments, which represent a strong contributor to Company’s
medium to long-term growth, are provided with sufficient support and attention to grow in this phase
of their life cycle.
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 an accurate 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 (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.
64
Annual Report 2019carsales.com LtdRemuneration Report continued
Performance
measures
continued
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).
The following unvested awards are outstanding for the FY18 award:
Award
Date
27/10/17
27/10/17
Number of
options
115,243
64,536
Number of
perfor-
mance
rights
72,530
40,617
Options
exercise
price
$
11.41
11.41
Perfor-
mance
rights
exercise
price
$
0
0
Vesting
Date
Aug-20
Aug-20
CEO
Other Senior Executives
65
Annual Report 2019carsales.com Ltd 5.5.3 Unvested Plan Structure for FY17 award vesting in FY19
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 other Senior Executives.
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.
The FY17 award is subject to both EPS (70% of total award) and Relative Total Shareholder Return
(RTSR) (30% of total award) targets.
Performance
period
Performance
measures
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 has published 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%.
66
Annual Report 2019carsales.com LtdRemuneration Report continued Performance
measures
continued
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
ended 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.
The following awards have been performance tested in the year for the FY17 award:
Award
Date
28/10/16
28/10/16
Number of
options
149,907
153,655
Number of
perfor-
mance
rights
31,287
32,070
Options
exercise
price
$
12.23
12.23
Perfor-
mance
rights
exercise
price
$
0
0
Vesting
Date
Aug-19
Aug-19
CEO
Other Senior Executives
67
Annual Report 2019carsales.com Ltd 5.5.3.1 FY17 LTI award achievement
EPS and TSR targets relating to Senior Executives options and performance rights options and performance rights, together with
the Company’s actual achievements are as follows:
LTI
Grant
Year ended
30 June
2017
Minimum entitlement
Maximum entitlement
Actual achieved
Vesting
date Measure % payable
70%
EPS
August
Target ($) % payable
100%
0.516
Target ($) % payable
76.60%
0.562
Target ($)
0.539
2019
TSR
50% 50th percentile
100% 75th percentile
0.00% 43rd percentile
The actual EPS achieved for the LTI grant vesting in August 2019 of $0.539 per share is above the reported FY19 EPS of $0.350
cents per share and the same as the FY19 adjusted EPS of $0.539. In calculating the achieved EPS of $0.539 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 27 September 2016:
• Demotores Group – acquired February 2017
• SK ENCARSALES.com Ltd – acquired January 2018
• Appraisal Solutions Pty Ltd – acquired April 2018
In addition, with the exception of the items set out below, all of the one-off items of a corporate nature incurred in FY19 were
excluded in calculating adjusted NPAT (such as the gain on associate dilution and changes in the valuation of put option liabilities)
as set out in Note 7 to the accounts have been excluded from the calculation of the achieved EPS.
As noted above in December 2018 the Board announced an impairment charge would be made against the investment in
Stratton Finance and while this charge was included in the FY19 STI calculations it was not included in the testing of the FY17
LTI EPS calculations. The Board concluded that it was reasonable to isolate the impact of the impairment charge as the Company
had no visibility of the regulatory change which led to the impairment at the time the award was granted. The one-off charges
impacting EBITDA (being restructuring costs and FY18 bad debt write-offs) set out in Note 7 have been included in the
calculation of the actual EPS achieved above.
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 2019 to reflect the same ownership basis on which the EPS targets were originally set in FY17.
The amounts payable (cash value at 30 June 2019) under the LTI grant vesting in August 2019 are as follows:
Summary - EPS & TSR
Paid
$
305,211
152,611
106,821
53,404
Paid
$
305,211
152,611
106,821
53,404
Paid
%
49.4%
49.4%
49.4%
49.4%
Paid
%
76.6%
76.6%
76.6%
76.6%
Forfeited
%
50.6%
50.6%
50.6%
50.6%
Forfeited
%
23.4%
23.4%
23.4%
23.4%
Forfeited
$
312,986
156,494
109,547
54,772
Forfeited
$
93,235
46,619
32,634
16,316
2019
C McIntyre
A Bhatia
P Barlow
A Demery
EPS only
2019
C McIntyre
A Bhatia
P Barlow
A Demery
68
Annual Report 2019carsales.com LtdRemuneration Report continued TSR
2019
C McIntyre
A Bhatia
P Barlow
A Demery
Paid
$
-
-
-
-
Paid
%
0.0%
0.0%
0.0%
0.0%
Forfeited
%
100.0%
100.0%
100.0%
100.0%
Forfeited
$
219,750
109,875
76,913
38,457
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 MetLife Insurance Limited, but is not allocated on an individual employee basis.
Simon Ryan received a sign on bonus of $200,000 in the form of 16,706 zero priced options and a $80,000 paid in cash as
compensation for foregoing entitlements from his previous employer upon termination.
Anthony Saines received a final payment of $484,630 comprising payment in lieu of notice and outstanding leave entitlements.
5.7 Non-Executive Directors’ remuneration
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 is $1,500,000 per annum as
approved by shareholders at the Annual General Meeting held on 23 October 2015. 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.
The following fee table applies:
Appointment
Chair fee
Base Director fee
Committee Chair fee
Committee Member fee
The Non-Executive Directors had the following committees and other roles during the year:
From 1 July 2018 – 4 January 2019:
1 July 2019
fee table
$
340,000
140,000
35,000
15,000
Name
R Collins
P O’Sullivan
W Pisciotta
K Anderson
E Gilbert
K Wong
Board Chair
Audit and Risk
Management
Committee
Remuneration
and Nomination
Committee
Chair
Member
Member
Member
Member
Chair
Member
69
Annual Report 2019carsales.com Ltd From 4 January 2019 – 23 May 2019:
Name
P O’Sullivan
W Pisciotta
K Anderson
E Gilbert
K Wong
From 23 May 2019 – 30 June 2019:
Name
P O’Sullivan
W Pisciotta
K Anderson
E Gilbert
K Wong
D Wiadrowski
Board Chair
Audit and Risk
Management
Committee
Member
Remuneration
and Nomination
Committee
Member
Member
Interim Chair
Member
Chair
Member
Board Chair
Audit Committee
Remuneration
and Nomination
Committee
Risk Management
Committee
Member
Member
Chair
Member
Chair
Member
Member
Chair
Member
Member
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 all 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 each Senior Executive’s total remuneration in equity to ensure alignment
with shareholders’ interest.
70
Annual Report 2019carsales.com LtdRemuneration Report continued 5.8.2 STI 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 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:
Cash salary and
superannuation
2019
%
2018
%
At risk - STI
2019
%
2018
%
At risk - DSTI
2019
%
2018
%
At risk – LTI
2019
%
2018
%
100
100
100
100
100
100
100
78
81
91
80
83
93
100
100
100
100
100
100
100
51
60
0
60
63
56
-
-
-
-
-
-
-
15
11
8
12
11
0
-
-
-
-
-
-
-
25
22
0
24
24
24
-
-
-
-
-
-
-
9
7
1
7
6
7
-
-
-
-
-
-
-
5
5
0
5
4
5
-
-
-
-
-
-
-
(2)
1
0
1
0
0
-
-
-
-
-
-
-
19
13
0
11
9
15
Name
Non-Executive
Directors
Patrick O’Sullivan
Walter Pisciotta
Kim Anderson
Edwina Gilbert
Kee Wong
David Wiadrowski
Richard Collins
Executive Director
Cameron McIntyre
Senior Executives
Ajay Bhatia
Simon Ryan
Paul Barlow
Andrew Demery
Anthony Saines
71
Annual Report 2019carsales.com Ltd 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 2015
October 2015
October 2015
October 2016
October 2016
October 2016
October 2016
October 2016
Date exercisable
August 2017
August 2018
August 2018
August 2018
August 2019
August 2019
August 2019
August 2019
Expiry date
October 2020
October 2020
October 2020
October 2031
October 2031
October 2031
October 2031
October 2031
Exercise
price
$
$0.00
$10.24
$0.00
$0.00
$0.00
$0.00
$12.23
$12.23
Value at
grant date
$
$8.74
$1.86
$8.44
$9.86
$9.49
$4.87
$1.10
$0.98
October 2017
August 2020
October 2032
$0.00
12.06
October 2017
July 2018
August 2020
August 2019
October 2032
October 2033
October 2018
August 2021
October 2033
October 2018
July 2019
August 2021
August 2020
October 2033
October 2034
11.41
$0.00
14.87
$0.00
$0.00
3.25
13.87
1.53
10.93
14.27
Vested
%
80
73
73
78
n/a
-
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Perfor-
mance
achieved
Yes
Yes
Yes
Yes
Yes(i)
No(ii)
Yes(i)
No(ii)
To be
determined
To be
determined
Yes
To be
determined
To be
determined
Yes (iii)
(i)
(ii)
(iii)
LTI options and performance rights granted in October 2016 will apply 76.6% of this award that is expected to vest in August 2019 based on the EPS performance
achievements tested at 30 June 2019.
LTI options and performance rights granted in October 2016 that were exercisable in August 2019 which were aligned to a TSR measure did not vest as a result of the
Company not meeting the minimum TSR target which had been set.
Relates to performance rights granted under the FY19 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 2020.
$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.
72
Annual Report 2019carsales.com LtdRemuneration Report continued Details of options and performance rights granted over ordinary shares in the Company provided as remuneration to each
of the Executive Leadership Team are set out below:
Number of
options granted
during the year
2019
Number of
performance
rights granted
during the year
2019
Value of options
at grant date
2019
$
Value of
performance
rights at grant
date 2019
$
Number of
options and
performance
rights vested
during the year
2019
177,632
70,334
271,937
791,574
98,093
46,053
26,316
26,316
21,053
19,472
10,891
11,690
9,272
70,503
40,287
40,287
32,230
222,891
124,001
135,405
107,180
49,046
-
34,332
17,166
Name
Executive
Director
C McIntyre
Senior
Executives
A Bhatia
S Ryan
P Barlow
A Demery
Further information on the options and performance rights is set out in Note 27 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 and performance rights by each Senior
Executive are set out below.
Name
Executive Director
C McIntyre
Senior Executives
A Bhatia
A Bhatia
A Saines
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 2018
22,588
341,531
August 2018
September 2018
August 2018
February 2019
August 2018
August 2018
10,222
32,204
12,819
40,091
6,963
4,206
154,557
484,348
193,823
517,575
105,281
63,596
*
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.
73
Annual Report 2019carsales.com Ltd 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.
Share-based compensation benefits (options and performance rights);
Name
C McIntyre
C McIntyre
C McIntyre
C McIntyre
A Bhatia
A Bhatia
A Bhatia
A Bhatia
S Ryan
P Barlow
P Barlow
P Barlow
P Barlow
A Demery
A Demery
A Demery
A Demery
Financial
year
granted
2017
2018
2019
2019
2017
2018
2019
2019
2019
2017
2018
2019
2019
2017
2018
2019
2019
Vested
%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Forfeited
%
50.6%
-
-
-
50.6%
-
-
-
-
50.6%
-
-
-
50.6%
-
-
-
Financial
years in
which
grant may
vest
2019*
2020*
2020*
2021*
2019*
2020*
2020*
2021*
2021*
2019*
2020*
2020*
2021*
2019*
2020*
2020*
2021*
Minimum
total value
of grant
yet to vest
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Maximum
total value
of grant
yet to vest
$
9,994
1,102,936
16,131
945,580
4,997
308,817
7,712
245,149
140,087
3,498
176,472
6,066
140,087
1,749
132,357
4,173
112,070
*
Vesting is contingent upon Board approval. Options are exercisable after the Board releases the results to ASX in August each year.
74
Annual Report 2019carsales.com LtdRemuneration Report continued (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.
2019
Name
Non-Executive
Directors
P O’Sullivan
W Pisciotta
K Anderson
E Gilbert
K Wong
D Wiadrowski
R Collins
Executive Directors
C McIntyre
Other Senior
Executives
A Bhatia
S Ryan
P Barlow
A Demery
A Saines
Granted
as
compens-
ation
(including
perform-
ance
rights)
Balance at
start of
the year
Exercised
Forfeited
Balance at
the end
of the
year
Other
change
Vested
and exerc-
isable Unvested
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
496,214
255,139
(22,588)
(33,967)
200,980
-
132,900
75,076
72,188
69,201
52,437
40,979
32,195
6,931
(42,426)
-
(6,963)
(4,206)
(52,910)
(15,381)
-
(10,481)
(5,543)
(19,277)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
694,798
70,693
624,106
212,374
52,437
156,435
97,522
6,932
-
16,706
21,993
11,086
-
212,374
35,731
134,442
86,437
6,932
75
Annual Report 2019carsales.com Ltd (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.
2019
Non-Executive Directors
Ordinary shares
P O’Sullivan
W Pisciotta
K Anderson
E Gilbert
K Wong
D Wiadrowski
S Kloss (Alternate)
R Collins
Executive Directors
C McIntyre
Other Senior Executives
A Bhatia
S Ryan
P Barlow
A Demery
A Saines
Balance at
the start of
the year
Received
during the
year on the
exercise of
options
Other
changes
during the
year
Balance at
end of the
year
15,000
8,836,298
15,000
25,000
-
-
2,774,500
595,688
-
-
-
-
-
-
-
-
8,268
-
-
833
11,295
1,580
-
(595,688)
23,268
8,836,298
15,000
25,833
11,295
1,580
2,774,500
-
179,912
22,588
-
202,500
6,167
-
33,660
-
21,050
-
-
6,963
4,206
8,950
(5,032)
-
-
-
(30,000)
1,135
-
40,623
4,206
-
5.8.6 Other transactions with Key Management Personnel
Conflicts and transactions with KMP are handled in accordance with the Board Charter available at http://shareholder.carsales.
com.au/Investor-Centre/.
(i) Directors of carsales.com Ltd
W Pisciotta is a shareholder of Pentana Solutions Pty Ltd, which has a commercial relationship with the Company. Mr Pisciotta
and Mr Kloss were absent from all Board discussions related to any commercial arrangement of Pentana Solutions and only those
directors who are independent of Pentana Solutions were involved in the approval of the agreement. The total amount paid by
carsales to Pentana Solutions was $1,571,408.
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, was $422,708.
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 up until his departure from the Company, was $345,594.
Neither Mr Collins nor Ms Gilbert received any additional benefits to their dealerships from their participation on the
Company Board.
76
Annual Report 2019carsales.com LtdRemuneration Report continued 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
Aug-17
Oct-14
Oct-15
Oct-16
Oct-16
Oct-17
Oct-17
Oct-18
Oct-18
Feb-19
Expiry date
Aug-19
Oct-19
Oct-20
Oct-31
Oct-31
Oct-32
Oct-32
Oct-33
Oct-33
Feb-34
Issue price
of shares
$
$0.00
$10.71
$10.24
$12.23
$0.00
$11.41
$0.00
$14.87
$0.00
$0.00
Number
under
options
-
24,667
215,500
631,658
-
311,432
-
495,204
-
16,706
1,695,167
Number
under
perform-
ance rights
48,448
-
-
-
123,076
-
196,000
-
177,157
-
544,681
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 2019.
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 2019 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
Aug-18
Aug-18
Sep-18
Oct-18
Oct-18
Nov-18
Dec-18
Feb-19
Mar-19
Apr-19
May-19
Issue price of shares
$
$ 9.10
$ 0.00
$ 9.10 - $ 10.71
$ 9.10 - $ 10.71
$ 0.00
$ 10.24
$ 10.24
$ 10.24
$ 10.24
$ 10.24
$ 10.24 - $ 10.71
Number of shares
$
3,835
104,111
118,015
21,835
20,579
2,281
3,041
46,174
35,051
7,206
1,316
77
Annual Report 2019carsales.com Ltd Other Directors’ Report Disclosures
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:
Pat O’Sullivan
Non-Executive Chair
Appointed Chair on 4 January 2019
Richard Collins
Non-Executive Chair
Retired from the Board on 4 January 2019
Cameron McIntyre
Managing Director
Wal Pisciotta
Non-Executive Director
Kim Anderson
Non-Executive Director
Edwina Gilbert
Non-Executive Director
Kee Wong
Non-Executive Director
Appointed to the Board on 9 July 2018
David Wiadrowski
Non-Executive Director
Appointed to the Board on 23 May 2019
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
Richard Collins (Chair until 4 January 2019)
Pat O’Sullivan (Chair from 4 January 2019)
Cameron McIntyre
Wal Pisciotta
Kim Anderson
Edwina Gilbert
Kee Wong (appointed 9 July 2018)
David Wiadrowski (appointed 23 May 2019)
Steve Kloss (alternate director)
Full scheduled
meetings of
directors
Short
teleconference
meetings of
directors
A
6
12
12
12
12
12
12
2
12
B
4
12
12
12
12
12
12
2
8
A
1
2
2
2
2
2
2
-
2
B
1
2
2
0
2
2
2
-
1
Ad hoc
meetings
of directors
B
A
0
1
3*
4
4
4
3
4
4
4
4
4
4
4
0
1
2
4
*Mr O’Sullivan did not attend the ad hoc meeting at which Chair appointment was determined due to conflict of interest.
A = Number of meetings held during the time the director held office during the year
B = Number of meetings attended
During FY19 the Audit and Risk Committee was split into two separate sub-committees and so attendance for each sub-
committee is reported separately below:
Director name
Pat O’Sullivan (Chair until 4 January 2019)
Kim Anderson
Edwina Gilbert (Interim Chair from 4 January 2019)
Kee Wong
Number of Audit and Risk
Management Committee
meetings during tenure
4
4
4
4
Number of Audit and Risk
Management Committee
meetings attended
4
4
4
4
78
Annual Report 2019carsales.com Ltd Director name
David Wiadrowski (Chair)
Kim Anderson
Edwina Gilbert
Director name
Edwina Gilbert (Chair)
David Wiadrowski
Kee Wong
Director name
Kim Anderson (Chair)
Pat O’Sullivan
Edwina Gilbert
Kee Wong
Wal Pisciotta
Number of Audit Committee
meetings during tenure
1
1
1
Number of Audit Committee
meetings attended
1
1
1
Number of Risk Management
Committee meetings during
tenure
1
1
1
Number of Risk Management
Committee meetings attended
1
1
1
Number of Remuneration and
Nomination Committee
meetings during tenure
4
3
4
1
1
Number of Remuneration and
Nomination Committee
meetings attended
4
3
4
1
0
Dividends – carsales.com Ltd
Dividends paid to members during the financial year were as follows:
Final fully franked dividend for the year ended 30 June 2018 of 23.7 cents (2017: 21.5 cents)
per fully paid ordinary share paid on 10 October 2018 (2017: 19 October 2016).
Interim fully franked dividend for the year ended 30 June 2019 of 20.5 cents
(2018: 20.5 cents) per fully paid share paid on 5 April 2019 (2018: 17 April 2018)
2019
$’000
57,640
2018
$’000
52,035
49,989
49,719
107,629
101,754
At the end of the financial year the Directors have recommended the payment of a fully franked final ordinary dividend of
$61,150,000 (25.0 cents per share) to be paid on 9 October 2019 out of retained earnings at 30 June 2019.
Significant changes in the state of affairs
During the financial year the Company continued to deliver on its strategy both domestically and internationally. Further details
are set out in the Operational and Financial Review on pages 32 to 35.
Matters subsequent to the end of the financial year
No matter or circumstance has arisen since 30 June 2019 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.
79
Annual Report 2019carsales.com Ltd
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 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:
Audit and other assurance services
Due diligence services
Total remuneration for audit and other assurance services
Taxation services
Tax compliance services, including review of Company income tax returns
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 for non-audit services
2019
$’000
31,620
31,620
2018
$’000
94,400
94,400
98,960
122,585
221,545
161,671
28,056
189,727
30,553
30,553
67,867
67,867
283,718
351,994
80
Annual Report 2019carsales.com Ltd 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 82.
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 2019 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.
Pat O’Sullivan
Chair
Cameron McIntyre
Managing Director and CEO
Melbourne
20 August 2019
81
Annual Report 2019carsales.com Ltd
Auditor’s Independence Declaration
Auditor’s Independence Declaration
As lead auditor for the audit of carsales.com Limited for the year ended 30 June 2019, 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
Melbourne
20 August 2019
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.
82
Annual Report 2019carsales.com Ltd Financials 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
84
86
87
89
90
Key
performance
1. Changes in
accounting
policies
Capital and
financial risk
management
8. Capital risk
management
Other assets
and liabilities
Group
structure
Other
15. Trade and other
receivables
21. Interests in other
entities
26. Remuneration
of auditors
2. Segment
information
9. Cash and cash
equivalents
16. Property, plant
and equipment
22. Business
combinations
and disposals
27. Share-based
payments
3. Revenue from
contracts with
customers
10. Borrowings
17. Intangible
assets
23. Discontinued
operations
28. Parent entity
financial
information
4. Expenses
11. Contributed
equity
18. Payables and
provisions
24. Related party
transactions
29. Contingent
liabilities
5. Income tax
12. Reserves
19. Other financial
and retained
earnings
liabilities
25. Deed of cross
guarantee
30. Events
occurring after
the reporting
period
13. Dividends
20. Commitments
6. Reconciliation
of profit after
income tax to net
cash inflow from
operating activities
7. Earnings
per share
14. Financial risk
management
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
150
151
157
carsales.com Ltd
Annual Report 2019
83
Consolidated Statement of Comprehensive Income
For the Year Ended 30 June 2019
Continuing operations
Revenue from contracts with customers
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
Changes in fair value of put options
Share of net profit from associates accounted for using the equity method
Gain on associates investment dilution
Net gain on step acquisition of associate
Profit before income tax
Income tax expense
Profit from continuing operations
Net result after tax from discontinued operations (attributable to the equity
holders of the Company)
Profit for the year
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
Remeasurement of post-employment benefit obligations
Loss on net investment hedge
Loss on cash flow hedge
Items that will not be reclassified to profit or loss:
Changes in financial assets at fair value through other comprehensive income
Other comprehensive income for the year
Total comprehensive income for the year
Profit is attributable to:
Owners of carsales.com Ltd
Non-controlling interests
Total comprehensive income for the year is attributable to:
Owners of carsales.com Ltd
Non-controlling interests
84
Notes
3
2019
$’000
*Restated
2018
$’000
417,494
417,494
376,863
376,863
10
10
21(c)
21(e)
22
5(a)
23
12(a)
12(a)
12(a)
12(a)
(33,691)
(81,330)
(32,986)
(64,261)
205,226
(24,284)
1,211
(15,066)
11,253
3,124
2,069
-
183,533
(50,204)
133,329
(29,870)
(68,927)
(26,017)
(55,966)
196,083
(15,628)
362
(10,766)
4,019
5,143
1,251
57,019
237,483
(53,869)
183,614
(47,712)
85,617
4,301
187,915
11,866
-
-
642
(450)
(12,163)
(1,634)
(1,739)
83,878
85,274
343
85,617
83,432
446
83,878
10,032
(14,551)
185
(35)
-
-
(715)
(5,084)
182,831
184,556
3,359
187,915
179,644
3,187
182,831
Annual Report 2019carsales.com Ltd Consolidated Statement of Comprehensive Income continued
For the Year Ended 30 June 2019
Total profit for the year is attributable to owners of carsales.com Ltd
Continuing operations
Discontinued operations
Earnings per share for profit attributable to the ordinary equity holders
of the parent company:
Basic earnings per share
Diluted earnings per share
Earnings per share for profit from continuing operations, attributable
to the ordinary equity holders of the parent entity:
Basic earnings per share
Diluted earnings per share
Notes
23
2019
$’000
*Restated
2018
$’000
133,252
(47,978)
85,274
182,296
2,260
184,556
Cents
*Restated
Cents
7
7
7
7
35.0
34.9
54.7
54.6
76.1
75.9
75.2
75.0
*See Note 1 for details about restatements for changes in accounting policies.
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
85
Annual Report 2019carsales.com Ltd Consolidated Statement of Financial Position
As at 30 June 2019
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Assets classified as held for sale
Total current assets
Non-current assets
Investments accounted for using the equity method
Financial assets at fair value through other comprehensive income
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
Liabilities directly associated with assets classified as held for sale
Total current liabilities
Non-current liabilities
Trade and other payables
Borrowings
Other financial liabilities
Derivative liabilities
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained earnings
Non-controlling interests
Total equity
2019
$’000
*Restated
2018
$’000
Notes
9
15
23(c)
21(c)
21(d)
16
5(d)
17
15
18
10
19
18
23(c)
18
10
19
19
5(e)
18
11
12(a)
12(c)
94,411
61,238
-
36,060
191,709
76,668
19,905
10,512
16,123
600,619
7,363
731,190
922,899
34,126
248
-
8,585
6,815
5,277
23,002
78,053
29
474,314
9,538
17,445
20,928
912
523,166
601,219
321,680
135,372
(29,694)
209,934
6,068
321,680
65,061
67,337
2,038
-
134,436
68,150
19,797
13,909
9,415
658,955
5,859
776,085
910,521
50,226
246,024
1,300
15,819
7,598
4,761
-
325,728
278
208,734
20,349
-
20,898
1,129
251,388
577,116
333,405
119,541
(24,427)
232,289
6,002
333,405
*See Note 1 for details about restatements for changes in accounting policies.
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
86
Annual Report 2019carsales.com Ltd Consolidated Statement of Changes in Equity
For the Year Ended 30 June 2019
Attributable to owners
of carsales.com Ltd
Notes
Contributed
equity
$’000
-
-
105,861
-
Reserves
$’000
-
-
14,149
-
Retained
earnings
$’000
151,607
(2,120)
149,487
184,556
Non-
controlling
interests
$’000
5,543
(4)
5,539
3,359
Total
equity
$’000
277,160
(2,124)
275,036
187,915
12(a)
12(a)
12(a)
-
-
-
-
-
-
10,204
(14,551)
185
(35)
(715)
-
-
-
-
-
(172)
10,032
-
-
-
-
(14,551)
185
(35)
(715)
(4,912)
184,556
3,187
182,831
11(b)
1,623
-
-
-
1,623
13
12(a)
-
12,057
-
-
-
119,541
3,226
-
-
-
(101,754)
-
-
(36,890)
(24,427)
-
-
232,289
-
-
(2,592)
1,122
(1,254)
6,002
3,226
(89,697)
(2,592)
1,122
(38,144)
333,405
Balance at 1 July 2017
Impact of change in accounting policy*
Restated balance at 1 July 2017
Restated profit for the year*
Items that may be classified to profit or loss
Exchange differences on translation
of foreign operations
Reclassification on exchange difference
on step acquisition of associate
Recycled share of remeasurement of net
defined benefit liability of associate
Remeasurement of post-employment
benefit obligations
Items that will not be reclassified
to profit or loss
Changes in financial assets at fair value
through other comprehensive income
Total comprehensive income for
the year
Transactions with owners in their
capacity as owners:
Contributions of equity upon exercise
of employee share options
Increase in share-based payment reserve
inclusive of tax
Dividends paid to members of the parent
Dividends paid to non-controlling interests
Non-controlling interests on acquisition
of subsidiary
Transaction with non-controlling interests
Balance at 30 June 2018
*See Note 1 for details about restatement for changes in accounting policies.
87
Annual Report 2019carsales.com Ltd Consolidated Statement of Changes in Equity continued
For the Year Ended 30 June 2019
Attributable to owners
of carsales.com Ltd
Contributed
equity
$’000
Notes
Reserves
$’000
Retained
earnings
$’000
Non-
controlling
interests
$’000
119,541
-
119,541
-
(24,427)
-
(24,427)
-
234,696
(2,407)
232,289
85,274
6,011
(9)
6,002
343
Total
equity
$’000
335,821
(2,416)
333,405
85,617
12(a)
12(a)
12(a)
12(a)
-
-
-
-
-
-
11(b)
2,412
13
12(a)
-
13,419
-
-
-
135,372
11,763
642
(12,163)
(450)
-
-
-
-
103
11,866
-
-
-
642
(12,163)
(450)
(1,634)
(1,842)
-
85,274
-
446
(1,634)
83,878
-
(562)
-
-
-
(107,629)
-
-
(2,863)
(29,694)
-
-
209,934
-
-
2,412
-
-
(898)
1,064
(546)
6,068
(562)
(94,210)
(898)
1,064
(3,409)
321,680
Balance at 1 July 2018 as originally
presented
Impact of change in accounting policy*
Restated balance at 1 July 2018
Profit for the year
Items that may be classified to profit or loss
Exchange differences on translation
of foreign operations
Remeasurement of post-employment
benefit obligations
Loss on cash flow hedge
Loss on net investment hedge
Items that will not be reclassified
to profit or loss
Changes in financial assets at fair value
through other comprehensive income
Total comprehensive income for the year
Transactions with owners in their
capacity as owners:
Contributions of equity upon exercise
of employee share options
Decrease in share-based payment reserve
inclusive of tax
Dividends paid to members of the parent
Dividends paid to non-controlling interests
Non-controlling interests on acquisition
of subsidiary
Transaction with non-controlling interests
Balance at 30 June 2019
*See Note 1 for details about restatement for changes in accounting policies.
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
88
Annual Report 2019carsales.com Ltd Consolidated Statement of Cash Flows
For the Year Ended 30 June 2019
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 financial assets at fair value through other comprehensive income
Payments for property, plant and equipment
Payments for intangible assets
Interest received
Proceeds from sale of property, plant and equipment
Dividends received from associates
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from issues of shares and other equity securities
Proceeds from borrowings
Repayment of borrowings
Proceeds from financial instruments
Dividends paid to non-controlling interests
Dividends paid to company shareholders
Purchase of non-controlling interests
Interest paid
Net cash (outflow)/inflow 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 – discontinued operations
Cash and cash equivalents at the end of the financial year
Notes
2019
$’000
2018
$’000
517,549
(328,301)
(57,394)
131,854
467,930
(295,822)
(52,774)
119,334
6
-
(1,330)
(1,676)
(3,813)
(5,147)
1,226
23
2,301
(8,416)
2,412
521,133
(495,626)
1,543
(898)
(94,210)
(3,409)
(16,395)
(85,450)
(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
383
(291)
38,371
65,061
(9,021)
94,411
25,266
39,795
-
65,061
13
23(c)
9
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
89
Annual Report 2019carsales.com Ltd Notes to the Consolidated Financial Statements
30 June 2019
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
The Financial Report was authorised for issue by the Directors on 20 August 2019. 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 shareholders’ 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, presentation policies and are relevant
to an understanding of the financial statements are provided throughout the notes to the financial statements.
90
Annual Report 2019carsales.com Ltd
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’s performance – Note 2;
• full year dividend declared – Note 13;
• the adoption of the new accounting standards for financial instruments and revenue from contracts with customers – Note 1; and
• the Group’s investment in Stratton Finance is presented as a held for sale asset and discontinued items – Note 23.
Key estimates and judgements
The preparation of financial statements in conformity with IFRS 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 17 and Note 23; and
• carrying value and held for sale classification of Stratton – Note 23.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards,
other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations
and the Corporations Act 2001. carsales.com Ltd is a for-profit entity for the purpose of preparing the financial statements.
(i) Compliance with International Financial Reporting Standards
The Financial Report of carsales.com Ltd complies with International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB).
(ii) Historical cost convention
These financial statements have been prepared under the historical cost convention.
(iii) Financial statement presentation
The accounting policies adopted are consistent with those of the previous financial year unless otherwise stated. FY18
comparative numbers have been restated to take into account the following matters:
• adoption of AASB15 Revenue from Contracts with Customers – Note 1;
• adoption of AASB9 Financial Instruments – Note 1;
• FY18 payroll costs and certain operating expenses for subsidiaries have been reclassified based on the relevant function and
nature to ensure consistency across the Group; and
• The Group’s investment in Stratton Finance Group (previously classified as the ‘Finance and Related Services’ segment) is
presented as a held for sale asset and the Group has consequently adopted AASB5 Non-current Assets Held for Sale and
Discontinued Operations – Note 23. The results of the Stratton Finance Group for the current and comparative periods
have been classified as discontinued operations in the statement of comprehensive income and all related note disclosures.
The Group has disclosed a single amount in the statement of comprehensive income representing the post-tax profit or loss
of discontinued operations. The associated assets and liabilities are presented as held for sale within the balance sheet and are
excluded from all related note disclosures in 2019. The comparative balance sheet remains unchanged. The consolidated
statement of cash flows have been presented on a gross basis comprising both continuing and discontinued operations.
The Group has separately disclosed the net cash flows attributable to each of operating, investing and financing activities
of discontinued operations in Note 23.
(iv) Going concern
The financial statements have been prepared on a going concern basis.
91
Annual Report 2019carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2019
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 2019 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.
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 been restated for 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.
92
Annual Report 2019carsales.com Ltd KEY PERFORMANCE
1. Changes in accounting policies
AASB15 Revenue from Contracts with Customers
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 clarified how the consideration
should be allocated between different deliverables in a contract.
The Group has adopted AASB15 Revenue from Contracts with Customers effective from 1 July 2018. The Group has
applied the fully retrospective approach and applied the AASB15 requirements to the comparative period resulting in
a restatement to the opening retained earnings as at 1 July 2017 and 1 July 2018, whilst revenues were restated for
the year ended 30 June 2018 and were recognised in accordance with AASB15 for the year ended 30 June 2019.
The Group has performed a review of all revenue and income streams including assessment of significant products and
services provided to customers to identify any potential pricing or performance obligations which would be accounted for
differently under the new standard. Based on this review, a small number of products were identified where revenue has
been deferred under the new standard to match the completion of implicit performance obligations within the contract.
Impact on the financial statements
As a result of the changes in the Group’s accounting policies, prior year financial statements had to be restated to reflect the
retrospective approach applied in adopting the accounting policies.
Consolidated statement of financial position
Trade and other payables
Deferred revenue
Retained earnings
Non-controlling interests
Consolidated statement of financial position
Trade and other payables
Deferred revenue
Retained earnings
Non-controlling interests
Consolidated statement of comprehensive income
– for continuing operations
Revenue from contracts with customers
Costs of sale
Basic earnings per share
Diluted earnings per share
30 June 2017
As originally
presented
$’000
42,002
6,713
151,607
5,543
30 June 2018
As originally
presented
$’000
50,580
1,991
234,696
6,011
30 June 2018
As originally
presented
$’000
444,009
(48,585)
76.3
76.0
Adoption
of AASB15
$’000
(126)
2,250
(2,120)
(4)
Adoption
of AASB15
$’000
(354)
2,770
(2,407)
(9)
1 July 2017
Restated
$’000
41,876
8,963
149,487
5,539
1 July 2018
Restated
$’000
50,226
4,761
232,289
6,002
Adoption
of AASB15
$’000
(519)
227
(0.2)
(0.1)
Discontinued
operations*
$’000
(66,627)
18,488
(0.9)
(0.9)
30 June 2018
Restated
$’000
376,863
(29,870)
75.2
75.0
* Intercompany transactions between the discontinued operations and the continuing Group have been presented on a gross basis. See Note 23 for details about
discontinued operations on standalone basis.
93
Annual Report 2019carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2019
1. Changes in accounting policies continued
AASB9 Financial Instruments
AASB9 sets out requirements for recognising and measuring financial assets and financial liabilities. This standard replaces
AASB139 Financial Instruments: Recognition and Measurement.
The Group has adopted AASB9 Financial Instruments on 1 July 2018 and performed a review of its current classification
and measurement of financial assets and liabilities for compliance with the requirements of the new standard. The main
impacts for the Group are the classification of equity investments and measuring impairment of trade receivables.
The Group has elected to present in other comprehensive income (OCI) fair value gains and losses of all equity investments
that are not held to trade. Investments classified as available-for-sale financial assets at 30 June 2018 are now classified
as financial assets at fair value through other comprehensive income. Changes in fair value which were previously taken
through other comprehensive income but could subsequently be taken to profit or loss, will no longer be reclassified to
profit or loss. This election is irrevocable under AASB9 Financial Instruments and any gain or loss will not be recycled on
disposal of the equity investment from other comprehensive income to profit or loss.
AASB9 introduces an expected credit loss model for impairment of financial assets. The Group has reviewed the
requirements of the ‘expected credit loss’ model and applied this in assessing the level of required loss allowance.
The application of this model did not identify any material differences compared to the previous methodology.
The Group has elected to adopt the new general hedge accounting model in AASB9 in respect to the AUD:KRW Cross
Currency Swaps entered into on the 4th of July 2018. This requires the Group to ensure that hedge accounting relationships
are aligned with its risk management objectives and strategy and to apply a more qualitative and forward looking
approach to assessing hedge effectiveness. As the cross currency swaps were entered into in the current financial year,
there was no reclassification or restatement as a result of the application of the new hedge accounting model.
New accounting standard not yet effective
AASB16 Leases (effective application date for the Group 1 July 2019)
AASB16 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-of-use leased item) and a financial liability
to pay rentals are recognised. The only exceptions are short-term and low-value leases.
The Group has reviewed all of the leasing arrangements over the last year in light of new lease accounting rules in
AASB16. The standard will affect primarily the accounting for the Group’s operating leases.
Approach of adoption
The Group intends to apply the fully retrospective approach upon the mandatory adoption date of 1 July 2019 and will
apply the AASB16 requirements to the comparative period which will result in a restatement to the opening retained
earnings on 1 July 2018. Right-of-use assets for leases will be measured on transition as if the accounting standards had
always been applied since the inception of the leases.
94
Annual Report 2019carsales.com Ltd Impact of adoption
As at the reporting date, the Group had non-cancellable operating lease commitments of $32.8 million - see Note 20.
Of these commitments, approximately $0.1 million relates to short-term leases which will be recognised on a straight-line
basis as an expense in profit or loss.
For the remaining lease commitments the Group expects to recognise right-of-use assets of approximately $64.2 million,
lease liabilities of $74.3 million and net current assets will be $6.7 million lower due to the presentation of a portion of
the lease liability as a current liability.
The Group expects that restated net profit after tax would decrease by approximately $1.8 million for the financial year
ended 30 June 2019 as a result of adopting the new rules. Restated adjusted EBITDA is expected to increase by
approximately $8.6 million, as the operating lease payments were included in EBITDA, but the amortisation of the
right-of-use assets and interest on the lease liabilities are excluded from EBITDA upon adoption. Operating cash flows
will increase and financing cash flows will decrease by approximately $8.6 million as repayment of the principal portion
of the lease liabilities will be reclassified as cash flows from financing activities.
2. 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 reporting 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 previously Finance and Related Services (classified as discontinued operations and
treated in accordance with AASB5 Non-current Assets Held for Sale and Discontinued Operations).
Online Advertising Services – Australia
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 as well as RedBook Inspect which provides inspection services to a
range of corporate and private consumers which may be published online as part of classified advertisements.
Data, Research and Services – Australia
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.
95
Annual Report 2019carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2019
2. Segment information continued
International Segments
carsales.com Ltd has operations in overseas countries through subsidiaries, equity accounted associate investments and
financial assets at fair value through other comprehensive income as set out below. The Group splits out the International
segment into Latin America (LATAM) and Asia.
Latin America (LATAM)
Online Automotive Classifieds:
• Webmotors S.A. (operations in Brazil) – 30%
• Chileautos SpA (operations in Chile) – 100%
• carsales Mexico SAPI de CV (operations in Mexico) – 100%
• Demotores Chile SpA (operations in Chile) – 100%
• Demotores S.A. (operations in Argentina) – 100%
Asia
Online Automotive Classifieds:
• iCar Asia Limited (operations in Indonesia, Malaysia and Thailand) – 11.8%
• 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%
(Percentage reflects ownership interests in the entities).
Discountinued operations (previously “Finance and Related Services”)
The previously disclosed Finance and Related Services Segment includes the Stratton Finance Pty Ltd subsidiary which
provides innovative finance arrangements for vehicles, boats, other leisure items, vehicle procurement and other related
services to customers. Revenues arise from commissions paid by finance providers and other related service providers. The
Group announced in June 2019 that it is conducting a strategic review and pursuing the sale of its 50.1% interest in
Stratton. Timing of a potential sale of carsales’ interest in Stratton will be determined following the completion of the
strategic review, but is expected to be within 12 months, and hence the results of Stratton have been presented as a
discontinued operation.
96
Annual Report 2019carsales.com Ltd
(b) Segment analysis
2019
Total segment revenue
Online
Advertising
Services
$’000
300,112
Data,
Research
and Services
$’000
43,147
Latin
America
$’000
9,131
Asia
$’000
65,104
Total
$’000
417,494
Gross profit
267,395
42,173
9,131
65,104
383,803
EBITDA
Depreciation and amortisation expense
Net interest expense
Changes in fair value of put options
Profit before income tax
Income tax expense
Share of profit from associates
Share of loss from associates – unallocated
Gain on associate investment dilution
Loss from discontinued operations
Non-controlling interests
Profit for the year
Segment assets
Assets classified as held for sale
Deferred tax assets
Unallocated assets
Total assets
154,268
24,789
(5,869)
32,038
5,150
125,232
17,215
96,645
471,080
205,226
(24,284)
(13,855)
11,253
178,340
(50,204)
5,150
(2,026)
2,069
(47,712)
(343)
85,274
710,172
36,060
16,123
160,544
922,899
97
Annual Report 2019carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2019
2. Segment information continued
Restated
2018
Total segment revenue
Online
Advertising
Services
$’000
296,777
Data,
Research
and Services
$’000
42,150
Latin
America
$’000
8,201
Asia
$’000
29,735
Total
$’000
376,863
Gross profit
267,390
41,667
8,201
29,735
346,993
EBITDA
Depreciation and amortisation expense
Net interest expense
Changes in fair value of put options
Profit before income tax
Income tax expense
Share of profit from associates
Share of loss from associates – unallocated
Gain on associate investment dilution
Net gain on step acquisition of associate
Profit from discontinued operations
Non-controlling interests
Profit for the year
Segment assets
Assets previously presented in finance and related
services
Deferred tax assets
Unallocated assets
Total assets
158,335
24,597
(2,556)
15,707
3,628
3,489
57,019
196,083
(15,628)
(10,404)
4,019
174,070
(53,869)
7,117
(1,974)
1,251
57,019
4,301
(3,359)
184,556
128,813
15,967
90,825
469,030
704,635
84,007
9,415
112,464
910,521
(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 Note 2(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, brands, customer relationships, financial assets at fair value through
other comprehensive income 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.
98
Annual Report 2019carsales.com Ltd 3. Revenue from contracts with customers
(a) Recognition and measurement
Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent that it is
probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Amounts disclosed
as revenue are net of returns, agency commissions, trade allowances, rebates 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.
Type of revenue Reporting Segment
Dealer leads
Online Advertising (Dealer) /
LATAM / Asia
Online Advertising (Dealer) /
LATAM / Asia
Dealer listings
Listing depth
products
Online Advertising (Dealer /
Private) / LATAM / Asia
Private listings
Online Advertising (Private) /
LATAM / Asia
Bundled
products
Online Advertising (Dealer) /
LATAM / Asia
Sponsorship
advertising
Online Advertising (Display) /
LATAM / Asia
Performance
advertising and
contracts
Subscription
services
Sale of goods
R&D tax rebate
Online Advertising (Display) /
LATAM / Asia
Online Advertising (Dealer /
Display) / Data, Research and
Services / LATAM / Asia
Online Advertising (Dealer /
Private)
Online Advertising
Recognition criteria
Lead revenues are recognised at a point in time upon delivery
of the lead to the dealers’ lead management system.
Dealer listings have a definite end date to the advertisement.
Revenues are recognised on a straight-line basis over the
defined period.
Transaction value is allocated to customer service obligations
based on the fair value and revenue is recognised on a straight-
line basis over the defined period.
Private listings remain effective until the consumer removes the
advertisement. Revenues are recognised on a straight-line basis
over the average number of days advertisements are displayed
(based on historical trends).
Includes the combination of dealer advertising products and
corporate display services under one single contractual price.
Whilst the products are bundled, each individual service has its
own distinct performance obligations and stand-alone selling
prices (used to determine the fair value of each service). Revenue
is recognised over time as performance obligations are fulfilled.
Revenues from sponsorship advertising are recognised in the
period over which the advertisements are placed or displayed,
depending on the type of contract.
Revenues from performance advertising and performance
contracts are recognised when the performance measure occurs
and is generated (e.g. cost per click).
Subscription revenues are recognised on a straight-line basis
over the contract period.
Revenues are recognised when goods have been provided to
a customer leading to an enforceable claim by the Group.
The research and development claim of the Company gives rise
to a tax offset and this tax offset is recognised as other income.
99
Annual Report 2019carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2019
3. Revenue from contracts with customers continued
(b) Disaggregation of revenue from contracts with customers
The Group derives revenue from the transfer of goods and services over time and at a point in time in the following major
segments:
2019
Dealer
Private
Display
Total Revenue from external customers
Timing of revenue recognition
At a point in time
Over time
Restated
2018
Dealer
Private
Display
Total Revenue from external customers
Timing of revenue recognition
At a point in time
Over time
4. Expenses
Online
Advertising
Services
$’000
153,895
82,097
64,120
300,112
Data,
Research
and Services
$’000
Latin
America
$’000
Asia
$’000
Total
$’000
43,147
9,131
65,104
417,494
138,190
161,922
7,854
35,293
22
9,109
20,539
44,565
166,605
250,889
Online
Advertising
Services
$’000
143,953
78,900
73,924
296,777
Data,
Research
and Services
$’000
Latin
America
$’000
Asia
$’000
Total
$’000
42,150
8,201
29,735
376,863
129,485
167,292
8,971
33,179
25
8,176
8,860
20,875
147,341
229,522
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
2019
$’000
88,934
7,931
642
6,495
8,626
Restated
2018
$’000
73,997
5,991
480
6,043
6,807
100
Annual Report 2019carsales.com Ltd Recognition and measurement
(i) Retirement benefit obligations
Employees of the Group are entitled to benefits on retirement, disability or death from the Group’s various retirement
benefit plans. carsales.com Ltd and the Group’s Australian subsidiaries have a number of defined contribution plans as
required by Australian 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 obligations, 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. Remeasurements, 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 reserves through OCI in the period in which they occur.
Remeasurements 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 recognises 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 four to five years. Internally capitalised labour cost are treated as an operating cash outflow in the consolidated
statement 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.
101
Annual Report 2019carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2019
5. 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) in deferred tax assets
Increase in deferred tax liabilities
2019
$’000
52,948
(689)
(2,055)
-
50,204
(3,154)
1,099
(2,055)
(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% (2018: 30.0%)
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
Non-assessable income – R&D tax offset (a)
Share options (b)
Non-taxable gain on put option revaluation (c)
Sundry items
Adjustment for prior periods
Recognition of previously unrecognised tax losses
Share of profit from associates (d)
Non-taxable gain on associate investment dilution (e)
Net gain on step acquisition of associate (non-assessable)
Withholding Tax on distribution of SK Encar profits (f)
Income tax differential – effect of foreign tax rates (g)
Income tax expense
2019
$’000
183,533
55,060
(330)
(832)
(3,243)
1,562
(689)
-
(1,218)
(310)
-
2,540
(2,336)
50,204
Restated
2018
$’000
56,920
(1,321)
(2,339)
609
53,869
(2,037)
307
(1,730)
Restated
2018
$’000
237,483
71,245
(272)
(277)
(1,103)
2,583
(557)
(156)
(1,758)
(187)
(17,106)
2,051
(594)
53,869
(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 directly to equity
Net deferred tax – (credited) directly to equity (h)
2019
$’000
(353)
(4,339)
(4,692)
Restated
2018
$’000
52
(1,252)
(1,200)
102
Annual Report 2019carsales.com Ltd Explanation of key tax items
(a) Group’s utilisation of research and development tax incentives
(b) Amounts relating to the provision of equity incentives
(c) Amount relating to revaluation of put options – see Note 19.
(d) The Group’s share of associates’ results taken up in Group results, net of tax expense
(e) Non-assessable gain derived on the dilution of equity interests held in an associate
(f) Withholding tax paid/estimated to be payable on dividend distributions
(g) The Group’s profits are taxed at prevailing statutory rates which vary to the Australian statutory tax rate
(as noted in the table below)
(h) Related to equity incentives and cross currency interest swap
Statutory tax rates
The Group’s international profits are taxed at local statutory (or preferred) rates varying from the Australian statutory tax rate,
as follows:
Australia
New Zealand
Malaysia
China
Thailand
South Korea
USA
Argentina
Chile
Mexico
Effective tax rate
Profit before income tax expense (A)
Income tax expense (B)
Effective tax rate (B/A)
2019
30%
28%
24%
25%
20%
22%
21%
35%
27%
30%
2018
30%
28%
24%
25%
20%
22%
21%
35%
27%
30%
2019
$’000
183,533
50,204
27%
2018
$’000
237,483
53,869
23%
The effective tax rate for 2018 was positively affected by the non-taxable gain on associate dilution and step acquisition, without which the effective tax rate for
the year would have been 30%.
The effective tax rate for 2019 was positively affected by the non-taxable gain on put option revaluation and associate contributions, without which the effective tax
rate for the year would have been 29%.
103
Annual Report 2019carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2019
5. Income tax continued
(d) Deferred tax assets
The balance comprises temporary differences attributable to:
Employee
benefits
$’000
1,670
14
Employee
Share
Trust
$’000
1,116
-
Doubtful
debts
$’000
259
-
Expense
accruals
$’000
1,853
582
1,054
-
-
2,738
1,297
-
(396)
19
3,658
52
1,200
-
2,368
(566)
(895)
-
-
907
317
-
-
576
112
-
-
-
688
(90)
-
-
2,345
(650)
-
(179)
-
1,516
Intan-
gibles
$’000
(1,160)
-
(539)
-
-
(1,699)
245
-
-
-
(1,454)
Tax
losses
$’000
1,379
-
1,559
-
8
2,946
2,614
-
-
(130)
5,430
At 1 July 2017
Acquisition of subsidiary
(Charged)/credited to
the profit or loss
Credited directly to equity
Exchange differences
At 30 June 2018
(Charged)/credited to
the profit or loss
Credited directly to equity
Deferred tax assets
classified as held for sale
Exchange differences
At 30 June 2019
Hedges
$’000
-
-
Other
$’000
27
75
Total
$’000
5,144
671
2,355
1,200
45
9,415
3,154
4,339
2
-
37
141
102
-
(99)
-
144
(674)
(111)
16,123
-
-
-
-
-
5,234
-
-
5,234
Deferred tax assets to be recovered within 12 months
Deferred tax assets to be recovered after more than 12 months
2019
$’000
6,634
9,489
16,123
2018
$’000
4,601
4,814
9,415
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.
The Group has recorded a separate deferred tax asset on the unrealised hedge liability at the end of FY19 directly into equity
(against the hedge reserves).
104
Annual Report 2019carsales.com Ltd (e) Deferred tax liabilities
The balance comprises temporary differences attributable to:
At 1 July 2017
Charged/(credited) to the profit or loss
Intangibles recognised from business acquisition
Exchange differences
At 30 June 2018
Charged/(credited) to the profit or loss
Deferred tax liabilities attached to assets classified as held for sale
Exchange differences
At 30 June 2019
Intangibles
$’000
2,923
(770)
17,129
539
19,821
(1,274)
(1,230)
144
17,461
Withholding
Tax*
$’000
-
1,077
-
-
1,077
2,373
-
17
3,467
*Represents South Korean Withholding Tax provided on undistributed profits that is expected to be remitted.
Deferred tax liabilities expected to be settled within 12 months
Deferred tax liabilities expected to be settled after more than 12 months
2019
$’000
4,741
16,187
20,928
Total
$’000
2,923
307
17,129
539
20,898
1,099
(1,230)
161
20,928
2018
$’000
2,614
18,284
20,898
Adoption of Voluntary Tax Transparency Code
On 3rd of May 2016, the Australian Treasurer released a Voluntary Tax Transparency Code (the TTC). The TTC recommends
additional tax information be publicly disclosed to help educate the public about large corporate compliance with
Australia’s tax laws. The Group fully supports the TTC and signed up to it from the financial year ended 30 June 2019.
Accordingly, the income tax disclosures in this note include the recommended additional disclosure of Part A of the Code.
105
Annual Report 2019carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2019
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 or loss. Deferred income tax is
determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are
expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax
bases of investments in 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, they 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), 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.
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.
106
Annual Report 2019carsales.com Ltd 6. Reconciliation of profit after income tax to net cash inflow from
operating activities
Profit for the year
Depreciation and amortisation
Impairment loss
Non-cash employee benefits expense – share-based payments
Loss/(Profit) on disposal of assets
Net finance related costs
Share of profit from associates
Withholding Tax on distribution of SK Encar pre-acquisition profits
Gain on associate fair value adjustment and investment dilution
Net gain on step acquisition of associate
Bad debts written-off
Change in operating assets and liabilities:
Increase in trade debtors
Decrease/(Increase) in inventory
Increase in deferred tax assets
Capitalised labour
Decrease in trade creditors and other liabilities
Increase/(Decrease) in deferred revenue
(Decrease)/Increase in provision for income taxes payable
Increase in deferred tax liabilities
Increase in other provisions
Net cash inflow from operating activities
7. Earnings per share
(a) Reported earnings per share
Earnings per share for profit attributable to the ordinary
equity holders of the Company:
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
Earnings per share for profit from continuing operations
attributable to the ordinary equity holders of the Company:
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
2019
$’000
85,617
25,940
47,809
(21)
2
2,807
(3,124)
-
(2,069)
-
3,063
(3,205)
1,397
(2,691)
(17,729)
(1,031)
810
(7,209)
1,083
405
131,854
2018
$’000
187,915
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)
(4,430)
2,630
846
1,369
119,334
2019
Restated
2018
85,274,000 184,556,000
Basic earnings per share Diluted earnings per share
Restated
2018
85,274,000 184,556,000
243,631,320 242,371,937 243,631,320 242,371,937
749,616
496,916
2019
-
-
243,631,320 242,371,937 244,128,236 243,121,553
75.9
76.1
35.0
34.9
2019
Restated
2018
Basic earnings per share Diluted earnings per share
Restated
2018
133,252,000 182,296,000 133,252,000 182,296,000
243,631,320 242,371,937 243,631,320 242,371,937
749,616
496,916
2019
-
-
243,631,320 242,371,937 244,128,236 243,121,553
75.0
75.2
54.6
54.7
*The dilutive impact of potential ordinary shares represents unexercised options and performance rights as at the balance sheet date
107
Annual Report 2019carsales.com Ltd
Notes to the Consolidated Financial Statements continued
30 June 2019
7. Earnings per share continued
(b) Adjusted earnings per share
Reported profit attributable to equity holders of the Company
Adjusted for: Net result after tax from discontinued operations
Less: gain on associate investment dilution
Less: net gain on step acquisition of associate
Less: associate one-off tax gain
Less: changes in fair value of put option liabilities
and deferred consideration
Add: finance cost write-off
Add: restructure costs (net of tax)**
Add: option unwinding discount
Add: bad debt write-off (net of tax)**
Add: acquired intangibles amortisation
Adjusted profit attributable to equity holders of the Company
for continuing operations
Adjusted earnings per share/cents for continuing operations***
2019
Basic earnings per share Diluted earnings per share
Restated
2018
85,274,000 184,556,000
(2,260,000)
47,978,000
(939,000)
(1,552,000)
(57,019,000)
-
2,051,000
-
Restated
2018
85,274,000 184,556,000
(2,260,000)
47,978,000
(939,000)
(1,552,000)
(57,019,000)
-
2,051,000
-
2019
(11,253,000)
-
1,287,000
442,000
2,161,000
6,988,000
(4,019,000)
397,000
-
341,000
-
4,670,000
(11,253,000)
-
1,287,000
442,000
2,161,000
6,988,000
(4,019,000)
397,000
-
341,000
-
4,670,000
131,325,000 127,778,000 131,325,000 127,778,000
52.6
52.7
53.9
53.8
** Adjusted EBITDA is presented after these items prior to tax charge at 30%.
*** 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
restructure costs, one-off bad debt expenses, net gain on step acquisition of associate, gain on associate investment 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;
• 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 27.
108
Annual Report 2019carsales.com Ltd CAPITAL AND FINANCIAL RISK MANAGEMENT
8. Capital risk management
The Company’s capital position at 30 June is as follows:
Borrowings (Note 10)
Derivative liabilities (Note 19)
Less: cash and cash equivalents (Note 9)
Net debt
Contributed equity (Note 11)
Reserves (Note 12(a))
Retained earnings (Note 12(c))
Non-controlling interests
Total equity
Total capital
2019
$’000
474,562
17,445
(94,411)
397,596
135,372
(29,694)
209,934
6,068
321,680
Restated
2018
$’000
454,758
-
(65,061)
389,697
119,541
(24,427)
232,289
6,002
333,405
719,276
723,102
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 benefits for other stakeholders and to maintain an optimal capital structure
to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares or sell assets to reduce debt.
Consistent with others in the industry, the Group monitors its capital on an ongoing basis.
There are no externally imposed capital requirements.
Investments and other financial assets
The Group classifies its investments in the following categories: financial assets at fair value, loans and receivables,
and amortised cost. 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 15) in the consolidated statement of financial position.
109
Annual Report 2019carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2019
9. Cash and cash equivalents
Cash and cash equivalents
2019
$’000
94,411
2018
$’000
65,061
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 10. The maximum exposure to credit risk at the reporting
date is the carrying amount of each class of cash and cash equivalents mentioned above.
10. Borrowings
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$545.0 million debt facility under a Common Terms Deed (CTD) documentation
structure as follows:
Tranche
Tranche A
Tranche B
Total
Commitment ($’000)
$335,000
$210,000
$545,000
Drawn at close ($’000)
$335,000
$140,000
$475,000
Maturity date
5 July 2021
4 July 2023
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 National Australia Bank Limited (NAB),
Australia and New Zealand Banking Group Limited (ANZ), Hongkong and Shanghai Banking Corporation (HSBC), Westpac
Banking Corporation (WBC), MUFG Bank Ltd and Bank of China.
Borrowings under this loan facility 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 have been treated as a hedge of interest rates and carsales net
investment in SK ENCARSALES.COM Ltd from inception.
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
110
2019
$’000
2018
$’000
475,000
-
848
475,848
(1,286)
474,562
248
474,314
474,562
450,000
4,225
767
454,992
(234)
454,758
246,024
208,734
454,758
Annual Report 2019carsales.com Ltd Finance income
Finance income
Finance cost
Interest and finance charges paid/payable on financial liabilities
Unwinding of discount on put options liabilities
2019
$’000
1,211
2019
$’000
(14,624)
(442)
(15,066)
Restated
2018
$’000
362
Restated
2018
$’000
(10,425)
(341)
(10,766)
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.
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 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 8.1% (2018: 8.8%).
The Group’s main interest rate risk arises from long-term borrowings with variable rates. As at reporting date, the
Group had $475,000,000 (2018: $454,225,000) variable rate borrowings at a weighted average interest rate of 3.2%
(2018: 3.3%). The borrowings are periodically contractually repriced every three months and to that extent are also
exposed to the risk of future changes in market interest rates. During FY19, the Group entered into $335 million
AUD:KRW Non-Deliverable Cross Currency Interest Swaps to protect the Group against interest rate exposures.
carsales.com Ltd has a Board-approved treasury policy and treasury strategy for the management of interest rate risk. 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.
The Group’s fixed rate borrowings and receivables are carried at amortised cost. They are therefore not subject to interest
rate risk as defined in AASB7 since neither the carrying amount nor the future cash flows will fluctuate because of a change
in market rates.
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.
111
Annual Report 2019carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2019
10. Borrowings continued
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
2019
$’000
-
70,000
70,000
2018
$’000
3,400
61,000
64,400
The following table sets out the Group’s exposure to liquidity risk. The amounts disclosed in the table are the contractual
undiscounted cash flows.
Contractual maturities of financial liabilities
Group – at 30 June 2019
Non-derivatives
Non-interest bearing payables
Variable rate borrowings
Fixed rate borrowings
Total non-derivatives
Derivatives
Other financial liabilities – held for trading
Cross currency swap – cash flow hedge
Total derivatives
Restated
Group - at 30 June 2018
Non-derivatives
Non-interest bearing payables
Variable rate borrowings
Fixed rate borrowings
Total non-derivatives
Derivatives
Other financial liabilities – held for trading
Total derivatives
0 – 12
months
$’000
Between 1
and 2 years
$’000
Between 2
and 5 years
$’000
Total
contractual
cash flows
$’000
Carrying
amount
liabilities
$’000
34,126
-
263
34,389
-
-
-
50,226
250,343
25
300,594
1,300
1,300
-
-
546
546
9,538
-
9,538
29
476,715
-
476,744
34,155
476,715
809
511,679
34,155
473,798
764
508,717
-
17,445
17,445
9,538
17,445
26,983
9,538
17,445
26,983
-
206,436
270
206,706
278
4,227
270
4,775
50,504
461,006
565
512,075
50,504
454,225
533
505,262
-
-
20,349
20,349
21,649
21,649
21,649
21,649
Net fair value of financial assets and liabilities
The net fair value of cash and cash equivalents, 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.
112
Annual Report 2019carsales.com Ltd Derivatives
Classification of derivatives
The Company designates derivatives as hedging instruments in respect of foreign currency risk and interest rate risk in fair
value hedges, cash flow hedges, or hedges of net investments in foreign operations as appropriate. Hedges of foreign
exchange risk on firm commitments are accounted for as cash flow hedges.
Derivatives are only used for economic hedging purposes and not as speculative investments. However, where derivatives
do not meet the hedge accounting criteria, they are classified as ‘held for trading’ for accounting purposes and are
accounted for at fair value through profit or loss. The hedges are presented as current assets or liabilities to the extent
they are expected to be settled within 12 months after the end of the reporting period.
Cash flow hedges
Cash flow hedges are accounted for as follows: the fair value gain or loss associated with the effective portion of the
derivative is recognised initially in other comprehensive income (cash flow hedge reserve – CFHR) and then recycled to
the income statement in the same period that the hedged item affects the income statement. Any ineffective portion
of the gain or loss on the hedging instrument is recognised in the income statement immediately.
Hedges of net investments in foreign operations
The Company uses net investment hedges to mitigate the foreign exchange risk arising from the Group’s net investments in
foreign operations. Net investment hedges are accounted for similar to cash flow hedges, in that the effective portion of
the gain or loss on the hedging instrument shall be recognised in other comprehensive income (in the foreign currency
translation reserve – FCTR) while the ineffective portion shall be recognised in profit or loss. The cumulative gains or losses
on the hedging instrument that has been accumulated in the foreign currency translation reserve shall be reclassified
from equity to profit or loss as a reclassification adjustment on the disposal or partial disposal of the foreign operation.
The Company designates the cross currency interest rate swap contracts in:
• cash flow hedges of interest rate exposure on foreign currency borrowings; and
• hedges of net investments in foreign operations.
The foreign currency basis spread of a cross currency interest rate swap is excluded from the designation of that financial
instrument as the hedging instrument. Changes in fair value of the foreign currency basis spread of a financial instrument
is accumulated in the cost of hedging reserve, and is amortised to profit or loss on a rational basis over the term of the
hedging relationship.
Both the cash flow hedge and the net investment hedge have been assessed as being 100% effective (see note below).
The details of the fair values of the derivative instruments used for hedging purposes and the movements in the
reserves in equity are disclosed in Note 14(e).
113
Annual Report 2019carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2019
10. Borrowings continued
Hedging reserves
The following tables detail information regarding the cross currency interest rate swaps designated in cash flow hedge
or net investment hedge relationships at the end of the reporting period and their related hedged items. The cash flow hedge
reserve represents the cumulative amount of gains and losses on hedging instruments deemed effective in cash flow hedges.
The cumulative deferred gains and losses on the hedging instrument is recognised in profit or loss only when the hedged
transaction impacts the profit or loss.
Carrying
amount of
hedging
instrument
Assets/
(Liabilities)
$’000
Current
notional
amount
$’000
Carrying
amount of
hedging
instrument
$’000
Change in
value of
hedging
instrument
$’000
Change in
value of
hedged
item
$’000
CFHR
opening
balance
before tax
Dr/(Cr)
$’000
Movement
in CFHR
Dr/(Cr)
$’000
Closing
CFHR
before tax
Dr/(Cr)
$’000
Cash flow hedges
Cross currency interest
rate swap
Net investment hedge
Cross currency interest
rate swap
Total
335,000
(18,018)
(18,018)
(18,018)
335,000
573
(17,445)
573
(17,445)
573
(17,445)
-
-
-
-
-
-
18,018
18,018
-
18,018
-
18,018
There were no reclassifications from the cash flow hedge reserve to profit or loss during the period in relation to the cross
currency swaps.
Hedge effectiveness
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective
effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging
instrument.
For the cross currency swap, the Company enters into hedge relationships where the critical terms of the hedging
instrument match exactly with the terms of the hedged item. Therefore it has adopted a 1:1 ratio. The Company
therefore performs a qualitative assessment of effectiveness. If changes in circumstances affect the terms of the hedged
item such that the critical terms no longer match exactly with the critical terms of the hedging instrument, a hypothetical
derivative method is used to assess effectiveness.
The Company enters into interest rate swaps that have similar critical terms as the hedged item, such as reference rate,
reset dates, payment dates, maturities and notional amount. As all critical terms matched during the year, the economic
relationship was 100% effective.
114
Annual Report 2019carsales.com Ltd Quantitative information
The following table details the average notional principal amounts, average contract FX rate and the average fixed interest rate
of the hedging instrument (cross currency interest rate swap) at the end of the financial year:
Cross currency interest rate swap
Average contracted FX Rate (AUD/KRW)
Average contracted fixed interest rate (%)
Average notional amount ($ million)
Cash flow hedge sensitivity
Weighted Average of the Hedging Instrument
<1 year
1 – 2 years
2 – 5 years
827.83
1.4113
335
827.83
1.4113
335
828.13
1.4777
214
Over 5
years
-
-
-
For illustrative purposes the Company has calculated the impact on the balance sheet for the year in the event of a +/- 100 bps
change in interest rates as shown in the table below (a positive impact means a reduction in the carrying value of the derivative
liability and a negative impact means an increase in the carrying value of the derivative liability):
Cross Currency Interest Rate Swap
AUD BBSY
+ 100 bps
- 100 bps
KRW KORIBOR
+ 100 bps
- 100 bps
Foreign exchange risk sensitivity
As at 30 June 2019
$’000
As at 30 June 2018
$’000
74
(74)
10,881
(11,322)
-
-
-
-
For illustrative purposes the Company has calculated the impact on the balance sheet for the year in the event of a +/- 5%
variance change in the AUD/KRW foreign exchange rate (a positive impact means a reduction in the carrying value of the
derivative liability and a negative impact means an increase in the carrying value of the derivative liability):
Cross Currency Interest Rate Swap
AUD/KRW
+ 5%
- 5%
Fair value measurement
As at 30 June 2019
$’000
As at 30 June 2018
$’000
16,540
(18,265)
-
-
The methods and assumptions used in determining the fair value of derivatives are disclosed in Note 14(e).
115
Annual Report 2019carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2019
10. Borrowings continued
Summarised sensitivity analysis
The following table summarises the sensitivity of the Group’s financial assets and financial liabilities to interest rate risk.
Interest rate risk
-100 bps
+100 bps
Carrying
amount
$’000
Profit
$’000
Other
equity
$’000
Profit
$’000
Other
equity
$’000
94,411
(804)
(804)
804
804
(473,798)
4,701
3,897
4,701
3,897
(4,701)
(3,897)
(4,701)
(3,897)
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)
Notes
2019
Shares
2018
Shares
2019
$’000
2018
$’000
11(b) 244,347,196 242,982,207
244,347,196 242,982,207
135,372
135,372
119,541
119,541
At 30 June 2019
Financial assets
Cash and cash equivalents
Financial liabilities
Borrowings
Total increase/(decrease)
At 30 June 2018
Financial assets
Cash and cash equivalents
Financial liabilities
Borrowings
Total increase/(decrease)
11. Contributed equity
(a) Share capital
Ordinary shares
Fully paid
Recognition and measurement
Ordinary shares are classified as equity.
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.
116
Annual Report 2019carsales.com Ltd (b) Movements in ordinary share capital
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
Date
1 July 2018
August 2018
August 2018
September 2018
October 2018
October 2018
October 2018
November 2018
December 2018
February 2019
March 2019
April 2019
April 2019
May 2019
30 June 2019
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
Details
Opening balance
Exercise of employee options
Exercise of employee performance rights
Exercise of employee options
Exercise of employee options
Dividend Reinvestment Plan
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
Exercise of employee options
Balance
Issue
price
Number
of shares
241,785,292
2,237
35,691
200,368
468,702
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
Issue
price
Number
of shares
242,982,207
$9.10
3,835
104,111
$0.00
118,015 $9.10-$10.71
21,835 $9.10-$10.71
$14.40
512,252
$0.00
20,579
$10.24
2,281
$10.24
3,041
$10.24
46,174
$10.24
35,051
$12.35
489,293
7,206
$10.24
1,316 10.24-$10.71
244,347,196
$’000
105,861
20
-
1,205
6,082
15
-
83
35
60
88
5,975
117
119,541
$’000
119,541
35
-
1,199
204
7,378
-
23
31
473
359
6,041
74
14
135,372
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 27.
117
Annual Report 2019carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2019
12. Reserves and retained earnings
(a) Reserves
Share-based payment reserve
Foreign currency translation reserve
Post-employment benefit obligations reserve
Financial asset at fair value through other comprehensive income
Non-controlling interests acquisition reserve
Cash flow hedge reserve
Net investment hedge reserve
(i) Share-based payment reserve
Balance 1 July
Option expense
Tax on Employee Share Trust charged to equity
Balance 30 June
2019
$’000
25,442
(1,057)
607
(2,320)
(39,753)
(12,163)
(450)
(29,694)
26,004
(20)
(542)
25,442
2018
$’000
26,004
(12,820)
(35)
(686)
(36,890)
-
-
(24,427)
22,778
2,026
1,200
26,004
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 on associate
Currency translation differences arising during the year
Balance 30 June
2019
$’000
2018
$’000
(12,820)
-
11,763
(1,057)
(8,473)
(14,551)
10,204
(12,820)
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) Post-employment benefit obligations reserve
Balance 1 July
Remeasurement of post-employment benefit obligations
Balance 30 June
(iv) Financial asset at fair value through other comprehensive income
Balance 1 July
Changes in the fair value of equity instruments at fair value through other comprehensive
income
Balance 30 June
2019
$’000
2018
$’000
(35)
642
607
(686)
(1,634)
(2,320)
-
(35)
(35)
29
(715)
(686)
118
Annual Report 2019carsales.com Ltd (v) Non-controlling interests acquisition reserve
Balance 1 July
Transactions with non-controlling interests
Recognition of non-controlling interests acquisition reserve
Balance 30 June
(vi) Cash flow hedge reserve
Balance 1 July
Decrease in cash flow hedge reserve
Balance 30 June
(vii) Net investment hedge reserve
Balance 1 July
Decrease in net investment hedge reserve
Balance 30 June
2019
$’000
2018
$’000
(36,890)
(2,863)
-
(39,753)
-
(12,163)
(12,163)
-
(450)
(450)
-
(12,863)
(24,027)
(36,890)
-
-
-
-
-
-
(b) Other reserves
Transactions with non-controlling interests
On 6th December 2018 carsales.com Ltd acquired the remaining 16.7% stake of Chileautos SpA for a consideration of $3.4 million
giving carsales 100% control and ownership of Chileautos SpA.
Recognition of non-controlling interests acquisition reserve
The Group has put options over some of 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
– refer Note 10.
(c) Retained earnings
Movements in retained earnings were as follows:
Balance 1 July
Impact of change in accounting policy
Restated balance 1 July
Net profit for the year
Dividends
Balance 30 June
2019
$’000
232,289
-
232,289
85,274
(107,629)
209,934
Restated
2018
$’000
151,607
(2,120)
149,487
184,556
(101,754)
232,289
119
Annual Report 2019carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2019
13. 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 2018 of 23.7 cents
(2017: 21.5 cents) per fully paid ordinary share paid on 10 October 2018 (2017: 19 October 2016).
Final fully franked ordinary dividend for the year ended 30 June 2018 of 23.7 cents (2017: 21.5
cents) per fully paid ordinary share – satisfied through the issuance of shares under the Dividend
Reinvestment Plan.
Interim fully franked cash dividend for the year ended 30 June 2019 of 20.5 cents
(2018: 20.5 cents) per fully paid ordinary share paid on 5 April 2019 (2018: 17 April 2018)
Interim fully franked ordinary dividend for the year ended 30 June 2019 of 20.5 cents
(2018: 20.5 cents) per fully paid ordinary share – satisfied through issuance of shares under
the Dividend Reinvestment Plan.
Total dividends paid
(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 25.0 cents per fully paid ordinary share (2018: final dividend
23.7 cents). The aggregate amount of the declared dividend expected to be paid on 9 October
2019 out of retained earnings at 30 June 2019, 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%
(2018: 30.0%)
2019
$’000
2018
$’000
50,262
45,953
7,378
57,640
6,082
52,035
43,948
43,744
6,041
49,989
5,975
49,719
107,629
101,754
2019
$’000
2018
$’000
61,150
57,683
2019
$’000
2018
$’000
43,462
41,541
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 2019 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 2019. The last date for shareholders to nominate their participation in
the DRP is 5:00pm (AEST) on 26 September 2019. 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.
120
Annual Report 2019carsales.com Ltd 14. Financial risk management
The Group’s activities expose it to a variety of financial risks: foreign exchange risk, price risk, credit risk, interest rate risk and
liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to
minimise potential adverse effects on the financial performance of the Group. The Group uses different methods to measure
different types of risk to which it is exposed.
Risk management is the responsibility of the Chief Financial Officer (CFO) and follows approved policies of the Board of Directors.
The CFO identifies, evaluates and hedges financial risks in close cooperation with the Group’s operating units.
(a) Market risk
(i) Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily
with respect to the Brazilian Real (BRL), the South Korean Won (KRW), the Mexican Peso (MXP), the Chilean Peso (CLP) and the
Argentinian Peso (ARS). Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities
denominated in a currency that is not the functional currency of the relevant group entity.
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 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
(+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%)
2019
$’000
-5%
623.0
245.2
(152.6)
20.8
(80.9)
655.5
2019
$’000
-5%
22,557
3,077
(581)
307
234
25,594
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
2019
$’000
5%
(623.0)
(245.2)
152.6
(20.8)
80.9
(655.5)
2019
$’000
5%
(22,557)
(3,077)
581
(307)
(234)
(25,594)
*
The table above does not include the AUD:KRW Non-Deliverable Cross Currency Swaps that was entered into as a hedge of the net investment
in SK ENCARSALES.COM Ltd. The details of this hedge is set out in Note 10.
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)
121
Annual Report 2019carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2019
14. Financial risk management continued
(ii) Price risk
The Group’s exposure to equity securities price risk arises from the 11.8% investment in iCar Asia Limited held by the Group
and classified in the balance sheet as a financial asset at fair value through other comprehensive income (see Note 21(d)).
Changes in the fair value are recognised directly in other comprehensive income as an irrevocable election made by the Group
with adoption of AASB9 Financial Instruments – refer Note 1.
A movement in the valuation of this asset by 5% would have an impact of $0.5 million to the other comprehensive income result.
Other than the investment in iCar Asia Limited, the Group is not exposed to significant price equities risk.
(b) Credit risk
Credit risk of the Group arises predominantly from outstanding receivables from customers.
The Group applies the AASB9 simplified approach to measuring expected credit losses which uses a lifetime expected loss
allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared
credit risk characteristics and the days past due.
The expected loss rates are based on the payment profiles of sales over a period of 24 months before 30 June 2019 and the
corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current
and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables.
On that basis, the loss allowance as at the year ended 30 June 2019 on adoption of AASB9 was determined as follows:
30 June 2019
Expected loss rate
Gross carrying amount
– trade receivables $’000
Loss allowance
Current
0-0.5%
42,051
45
More than
30 days
past due
1.0%
More than
60 days
past due
2.5-5.0%
More than
90 days
past due
7.5-10%
More than
120 days
past due
50-80%
More than
180 days
past due
80-100%
Total
-
3,176
33
3,422
86
676
70
1,076
556
2,594
2,170
52,995
2,960
Closing loss allowance as at 30 June 2018 (calculated under AASB139)
Amounts restated through opening retained earnings*
Opening loss allowance as at 1 July 2018 (calculated under AASB9)
Increase in loss allowance recognised in profit or loss during the year
Closing loss allowance as at 30 June 2019
2019
$’000
2,851
-
2,851
109
2,960
*
The Group considered the requirements of the “expected credit loss” model against the opening provision balance and did not identify any material difference in
the level of the required provision and therefore has not recorded an adjustment through opening retained earnings.
Trade receivables are written-off when there is no reasonable expectation of recovery. Indicators that there is no reasonable
expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group,
and a failure to make contractual payments for a period greater than 180 days past due. Impairment losses on trade receivables
are presented as net impairment losses within operating profit. Subsequent recoveries of amounts previously written-off are
credited against the same line item.
The Group recorded a $3.1 million bad debt write-off on the consolidated statement of comprehensive income during the year
ended 30 June 2019. This write-off reflects the impact of customer receipt allocation issues associated with the implementation
of the new ERP system in FY18. These allocation issues have been rectified and are confined to FY18 specific receivable
balances. The collection experience relating to FY19 revenue is at normal levels and no additional abnormal bad debt write-offs
associated with this issue are anticipated. The loss allowance model above has been derived based on historical normalised levels
and does not consider this abnormal one-off write-off.
122
Annual Report 2019carsales.com Ltd 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.
Previous accounting policy for impairment of trade receivables
In the prior year, the impairment of trade receivables was assessed based on the incurred loss model. Individual receivables which
were known to be uncollectible were 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.
Receivables for which an impairment provision was recognised were written-off against the provision when there was
no expectation of recovering additional cash.
(c) Interest rate risk
Interest rate risk is set out in Note 10 Borrowings.
(d) Liquidity risk
Liquidity risk is set out in Note 10 Borrowings.
(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 (such as publicly traded derivatives and equity
securities) 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 which 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
Quoted equity instrument
Derivative financial liabilities
– cross currency swaps
Unquoted equity instrument*
Other financial liabilities
* Carrying value approximates fair value
Fair value approach
Measured at fair value through OCI
Measured at fair value through OCI
Measured at fair value through OCI
Measured at fair value through profit or loss
Level
1
2
3
3
2019
9,766
17,445
10,139
9,538
2018
11,770
-
8,027
21,649
Valuation techniques used to determine fair values
Level 1
• This balance represents the investment in iCar Asia Limited which is listed on the ASX and therefore has a readily determinable
market value.
Level 2
• This balance represents the AUD:KRW Non-Deliverable Cross Currency Interest Swaps (Swaps) entered on 4 July 2018. These
swaps protect the Group against defined foreign currency and interest rate exposures. The hedge against foreign exchange
risk are treated as a hedge against the net investment in SK ENCARSALES.COM Ltd. The protection against the variability
of cash flows derived from carsales.com Ltd’s AUD floating rate debt issuance is treated as a cash flow hedge. Management
assessed the hedge being effective and therefore the fair value movement has been recorded through the net investment
and cash flow hedge reserves. The fair value of $17.4 million in relation to these swaps have been recorded as a non-current
liability in the balance sheet.
123
Annual Report 2019carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2019
14. Financial risk management continued
Level 3
• This balance represents the following:
– the value of carsales’ non-listed equity investments ($10.1 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 ($9.5 million). Refer Note 19 for further information.
There were no transfers between levels during the year.
Valuation processes
The finance department of the Group performs the valuations required for financial reporting purposes, including level 3 fair
values. This team reports directly to the Chief Financial Officer (CFO) and the Audit Committee (AC). Discussions of valuation
processes and results are held between the CFO, AC and the valuation team at least once every six months, in line with the
Group’s half-yearly reporting periods.
The main level 3 inputs used by the Group are derived and evaluated as follows:
• Discount rates for other financial liabilities based on corporate bonds
• Estimated growth rates used in ascertaining future earnings for put options
Changes in level 2 and 3 fair values are analysed at the end of each reporting period during the half-yearly valuation discussion
between the CFO, AC and the valuation team. As part of this discussion the team presents a report that explains the reason for
the fair value movements.
OTHER ASSETS AND LIABILITIES
15. Trade and other receivables
Current assets
Trade receivables
Loss allowance (see Note 14(b))
Trade receivables
Accrued income
Other receivables
Prepayments
Trade and other receivables
2019
$’000
52,995
(2,960)
50,035
2,933
2,731
5,539
61,238
2018
$’000
55,940
(2,851)
53,089
5,084
2,161
7,003
67,337
Non-current assets – other receivables
7,363
5,859
Recognition and measurement
(a) Classification of trade receivables
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of
business. They are generally due for settlement within 30 to 45 days following the provision of advertising, data
services and sale of goods and therefore are all classified as current.
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less loss allowance.
Details about the Group’s impairment policies and the calculation of the loss allowance are provided in Note 14(b).
(b) Accrued income
Services provided in the current reporting period are recognised on accrual basis. Settlement is generally within 30 days.
(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.
124
Annual Report 2019carsales.com Ltd Recognition and measurement (continued)
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 property 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.
Information about the impairment of trade receivables and the Group’s exposure to credit risk, foreign currency risk and
interest rate risk can be found in Note 14 and Note 10.
16. Property, plant and equipment
Plant and
equipment
$’000
Motor
vehicles
$’000
Leasehold
improvements
$’000
Total
$’000
At 1 July 2017
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2018
Opening net book amount
Acquisition of subsidiaries
Additions
Disposals
Depreciation charge
Depreciation charge – discontinued operations
Exchange differences
Closing net book amount
At 30 June 2018
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2019
Opening net book amount
Additions
Disposals
Assets classified as held for sale
Depreciation charge
Depreciation charge – discontinued operations
Exchange differences
Closing net book amount
At 30 June 2019
Cost
Accumulated depreciation
Net book amount
8,076
(6,126)
1,950
1,950
1,195
1,781
(94)
(818)
(337)
44
3,721
12,549
(8,828)
3,721
3,721
1,423
(14)
(608)
(1,361)
(264)
24
2,921
11,044
(8,123)
2,921
705
(213)
492
492
173
173
-
(152)
-
25
711
1,115
(404)
711
711
703
-
(9)
(212)
(3)
27
1,217
1,832
(615)
1,217
8,763
(3,916)
4,847
17,544
(10,255)
7,289
4,847
4,399
1,594
-
(1,427)
(71)
135
9,477
7,289
5,767
3,548
(94)
(2,397)
(408)
204
13,909
15,975
(6,498)
9,477
29,639
(15,730)
13,909
9,477
1,687
-
(2,361)
(2,574)
(71)
216
6,374
13,909
3,813
(14)
(2,978)
(4,147)
(338)
267
10,512
14,847
(8,473)
6,374
27,723
(17,211)
10,512
125
Annual Report 2019carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2019
16. Property, plant and equipment continued
Recognition and measurement
Property, plant and equipment is stated at historical cost less accumulated 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
3-5 years
3-10 years
• Computer hardware and peripherals
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.
126
Annual Report 2019carsales.com Ltd
17. Intangible assets
At 1 July 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
Amortisation charge – discontinued operations
Reclassifications of intangible assets
Exchange differences
Closing net book amount
At 30 June 2018
Cost
Accumulated amortisation and impairment
Net book amount
Year ended 30 June 2019
Opening net book amount
Acquisition of subsidiaries
Additions**
Disposals
Amortisation charge
Amortisation charge – discontinued operations
Impairment loss
Assets classified as held for sale
Exchange differences
Closing net book amount
At 30 June 2019
Cost
Accumulated amortisation and impairment
Net book amount
Computer
Software
$’000
Brands and
customer
relationships
$’000
Other
intangible
assets*
$’000
Goodwill
$’000
169,681
-
169,681
169,681
361,651
-
-
-
-
-
10,666
541,998
541,998
-
541,998
541,998
446
-
-
-
-
(47,809)
(10,888)
6,322
490,069
37,899
(20,580)
17,319
17,319
2,818
18,165
(14)
(8,602)
(661)
119
(169)
28,975
55,625
(26,650)
28,975
28,975
-
21,424
-
(12,353)
(985)
-
(3,890)
762
33,933
14,709
(2,228)
12,481
12,481
77,861
-
-
(4,449)
(666)
-
2,325
87,552
94,925
(7,373)
87,552
87,552
-
-
-
(7,699)
(333)
-
(4,100)
788
76,208
Total
$’000
227,064
(27,110)
199,954
199,954
442,504
18,251
(14)
(13,231)
(1,327)
-
12,818
658,955
4,775
(4,302)
473
473
174
86
-
(180)
-
(119)
(4)
430
4,888
(4,458)
430
697,436
(38,481)
658,955
430
-
152
(10)
(85)
-
-
(75)
(3)
409
658,955
446
21,576
(10)
(20,137)
(1,318)
(47,809)
(18,953)
7,869
600,619
537,878
(47,809)
490,069
70,948
(37,015)
33,933
89,977
(13,769)
76,208
4,943
(4,534)
409
703,746
(103,127)
600,619
* Other intangible assets include database, domain names and other.
**
The difference between additions and payments for intangible assets on the consolidated statement of cash flows is attributable to development costs
capitalised internally.
127
Annual Report 2019carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2019
17. Intangible assets continued
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.
(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 amortised 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
3-5 years
5-10 years
10 years
10 years
• Customer relationships
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).
128
Annual Report 2019carsales.com Ltd
A segment-level summary of the goodwill allocation is presented below.
Online Advertising Services
Data, Research and Services
Discontinued operations (previously “Stratton Finance Group”)
Mexico
Chile
Argentina
Latin America
South Korea
Asia
2019
$’000
73,876
14,541
-
5,478
18,547
1,250
25,275
2018
$’000
73,876
14,541
58,698
5,018
18,224
1,745
24,987
376,377
376,377
369,896
369,896
490,069
541,998
(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. With the exception of the carrying value of Stratton’s goodwill which has been separately discussed in Note
23 Discontinued Operations, 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
• post-tax discount rates, used to discount the cash flows to present value.
Each of these assumptions and estimates are based on a ‘best estimate’ at the time of performing the valuation.
However, increases in discount rates or changes in other key assumptions, such as operating conditions or financial
performance, may cause the recoverable amount of CGUs to fall below their carrying amounts, resulting in an impairment
loss being recognised.
The cash flow projections have been:
• derived from management forecasts based on next year’s budgeted result, with the remaining years based on
management forecasts; and
• compiled using a combination of past experience, current performance and market position as well as structural
changes and economic factors which have been derived based on external data and internal analysis.
129
Annual Report 2019carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2019
17. Intangible assets continued
The key assumptions for each significant CGU are detailed as follows:
CGU
Online Advertising Services
Data, Research and Services
Chile
South Korea
Mexico
Valuation method
Value in use
Value in use
Value in use
Fair value less costs to sell
Fair value less costs to sell
Impact of possible changes in key assumptions
Years of
cash flow
projection
5
5
5
10
10
Terminal
growth rate
2019
2.5%
2.5%
3.0%
2.5%
3.0%
2018
2.5%
2.5%
3.0%
N/A
3.0%
Post-tax
discount rate
2019
9.4%
9.4%
10.3%
10.4%
12.0%
2018
9.6%
9.6%
10.5%
N/A
11.1%
The Directors and management have considered and assessed reasonably possible changes for other key assumptions and have
not identified any instances that could cause the carrying amount of the CGUs above to exceed its recoverable amount.
2019
$’000
13,176
14,461
6,489
34,126
Restated
2018
$’000
21,871
22,120
6,235
50,226
29
278
6,815
912
7,727
7,598
1,129
8,727
18. Payables and provisions
Trade and other payables
Trade payables
Accrued expenses
Other payables
Total trade and other payables
Other payables – non-current
Provisions
Employee benefits – current
Employee benefits – non-current
Total employee benefits
130
Annual Report 2019carsales.com Ltd Recognition and measurement
(i) Payables
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 and annual 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 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.
19. Other financial liabilities
Other financial liabilities – current
Put options – non-current
Derivative liabilities – non-current
2019
$’000
-
9,538
17,445
26,983
2018
$’000
1,300
20,349
-
21,649
The Group has a number of put 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 valuations are based on contractual multiples of future earnings of the acquired subsidiaries for a defined
period and are valued at 30 June 2019 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 unwinding of the discount being recognised as a finance expense.
131
Annual Report 2019carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2019
20. 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 three 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
2019
$’000
2018
$’000
8,881
22,233
1,706
32,820
8,877
28,037
6,877
43,791
Bank guarantee facility
Guarantees in respect of bank facilities drawn down but not included in the accounts of the Group are $4.6 million
(2018: $3.69 million).
Other commitments
The Group has other contractual commitments of $9.1 million at 30 June 2019 (2018: $nil).
132
Annual Report 2019carsales.com Ltd GROUP STRUCTURE
21. Interests in other entities
(a) Material subsidiaries
The Group’s principal subsidiaries at 30 June 2019 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.
Ownership interest
held by the Group *
Ownership interest
held by non-controlling
interests
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.
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
Mexico
South Korea
Australia
Australia
2019
%
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
100.0
100.0
100.0
100.0
100.0
100.0
60.0
100.0
100.0
60.0
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
60.0
100.0
100.0
60.0
2019
%
-
-
-
-
-
-
-
-
25.0
-
-
-
-
-
-
49.9
49.9
49.9
56.2
49.9
-
-
-
-
-
-
-
-
-
40.0
-
-
40.0
*
The proportion of ownership interest is equal to the proportion of voting power held.
2018
%
-
-
-
-
-
Principal
activities
(1)
(2)
(1)
(2)
(2)
-
-
-
25.0
-
-
-
-
-
-
49.9
49.9
49.9
56.2
49.9
-
-
-
16.7
-
-
-
-
-
40.0
-
-
40.0
(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)
(4)
(7)
133
Annual Report 2019carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2019
21. Interests in other entities continued
(a) Material subsidiaries
(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.
(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 deconsolidated from
the date that control ceases.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Company (refer Note 22).
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, consolidated statement of changes in equity and consolidated statement of financial position 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 2019
Summarised balance sheet
Current assets
Current liabilities
Non-current assets
Non-current liabilities
Net assets
Accumulated NCI
Restated
30 June 2018
Summarised balance sheet
Current assets
Current liabilities
Non-current assets
Non-current liabilities
Net assets
Accumulated NCI
134
tyresales
$’000
RedBook
Inspect
$’000
chileautos
$’000
3,523
(4,872)
811
-
(538)
(134)
2,744
(1,925)
1,920
(771)
1,968
982
5,104
(1,255)
442
-
4,291
-
tyresales
$’000
RedBook
Inspect
$’000
chileautos
$’000
3,023
(2,553)
465
-
935
234
3,077
(1,471)
1,175
(509)
2,272
1,133
3,127
(454)
241
-
2,914
487
Other
$’000
989
(529)
4,511
-
4,971
930
Other
$’000
1,348
(156)
4,434
-
5,626
1,121
Annual Report 2019carsales.com Ltd 30 June 2019
Summarised statement of comprehensive income
Profit/(loss) for the period
Profit/(loss) allocated to NCI
Dividends paid to NCI
Other comprehensive income
Restated
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 2019
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 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
tyresales
$’000
RedBook
Inspect
$’000
chileautos
$’000
Other
$’000
(1,474)
(368)
-
-
1,047
522
674
-
1,310
59
-
(2)
(565)
(174)
121
105
tyresales
$’000
RedBook
Inspect
$’000
chileautos
$’000
Other
$’000
667
186
-
-
2,112
1,054
584
-
1,154
197
-
2
(119)
(48)
-
45
tyresales
$’000
RedBook
Inspect
$’000
chileautos
$’000
Other
$’000
479
8
-
487
2,616
(1,212)
(1,455)
(51)
889
(284)
(1)
604
tyresales
$’000
RedBook
Inspect
$’000
chileautos
$’000
(373)
14
-
(359)
982
(356)
(597)
29
477
-
-
477
(479)
(32)
(304)
(815)
Other
$’000
(114)
(1,472)
2,745
1,159
135
Annual Report 2019carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2019
21. Interests in other entities continued
(c) Interests in associates
Name of entity
Webmotors S.A.
SK ENCARSALES.COM Ltd(1)
RateSetter Australia Pty Ltd(2)
PromisePay Pte Ltd(3)
Skedgo Pty Ltd
Total equity accounted investments
Name of entity
Webmotors S.A.
SK ENCARSALES.COM Ltd(1)
RateSetter Australia Pty Ltd(2)
PromisePay Pte Ltd(3)
Skedgo Pty Ltd
Total equity accounted investments
% of ownership interest
Place of business/
country of incorporation
Brazil
South Korea
Australia
Singapore
Australia
2019
%
30.0
-
16.7
-
20.0
2018
%
Nature of
relationship
30.0 Associate
- Associate
18.6 Associate
- Associate
- Associate
Measurement
method
Equity method
Equity method
Equity method
Equity method
Equity method
Quoted fair value
Carrying amount
Share of Profit
2019
$’000
-
-
-
-
-
-
2018
$’000
-
-
-
-
-
-
2019
$’000
64,626
-
9,533
-
2,509
76,668
2018
$’000
58,810
-
9,340
-
-
68,150
2019
$’000
5,150
-
(1,875)
-
(151)
3,124
2018
$’000
3,628
3,489
(1,431)
(543)
-
5,143
(1)
(2)
(3)
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.
RateSetter is equity accounted for as carsales exercises significant influence over this entity through the right to appoint a director to the Board.
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 a financial asset at fair value through other comprehensive income from this date.
(i) Associates
Associates are all entities over which the Group has significant influence but no 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
2019
$’000
2018
$’000
344
453
136
Annual Report 2019carsales.com Ltd (iii) Summarised financial information for significant associates
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
Profit for the period
Amortisation of intangibles
Other comprehensive income
Dividends received
Transfer to consolidated subsidiary
Closing carrying value
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
2019
$’000
30 June
2018
$’000
SK ENCARSALES.COM Ltd*
30 June
2018
$’000
30 June
2019
$’000
42,121
31,207
(11,708)
-
61,620
30%
18,486
40,277
5,863
64,626
58,810
5,697
(547)
2,967
(2,301)
-
64,626
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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
144,759
4,352
(863)
4,316
-
(152,564)
-
Webmotors S.A.
30 June
2019
$’000
30 June
2018
$’000
SK ENCARSALES.COM Ltd*
30 June
2018
$’000
30 June
2019
$’000
67,779
18,989
-
18,989
5,150
2,967
8,117
2,301
53,814
14,000
-
14,000
3,629
(6,947)
(3,318)
1,550
-
-
-
-
-
-
-
-
25,890
8,721
89
8,810
3,489
4,316
7,805
-
*
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.
137
Annual Report 2019carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2019
21. Interests in other entities continued
(d) Financial assets at fair value through other comprehensive income
% of ownership
Carrying amount
Name of entity
iCar Asia Limited
PromisePay Pte Ltd
Other equity investments
Total financial assets at fair value through other
comprehensive income
2019
%
11.8
7.3
N/A
2018
%
13.1
7.3
N/A
At 1 July
Transfer from equity accounted associates
Acquisition of financial assets at fair value through other comprehensive income
Exchange differences recognised through other comprehensive income
Loss recognised through other comprehensive income
At 30 June
2019
$’000
9,766
7,253
2,886
2018
$’000
11,770
7,253
774
19,905
19,797
2019
$’000
19,797
-
1,676
66
(1,634)
19,905
2018
$’000
13,301
6,437
764
10
(715)
19,797
Recognition and measurement
Investments are designated as financial assets at fair value through other comprehensive income if they do not have
fixed maturities and fixed or determinable payments, and management intends to hold them for the medium to long-
term. The Group has irrevocably elected at initial recognition to recognise in this category. These are strategic investments
and the Group considers this classification to be more relevant. Note 1 explains the changes in accounting policy.
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.
(e) Associate investment dilution
Gain on associate investment dilution
Associate investment dilution
2019
$’000
2,069
2018
$’000
1,251
As a result of a change in the Company’s holding of investments in associates, there is a gain on associate investment dilution
of $2,069,000 (2018: $1,251,000).
138
Annual Report 2019carsales.com Ltd 22. Business combinations and disposals
(a) SK ENCARSALES.COM (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 initial accounting for the acquisition was only provisionally determined at the end of the prior reporting period. The
necessary fair valuation of consideration and net assets acquired has now been finalised and is reflected in the amounts
detailed below.
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 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
775
(5,443)
(8,335)
(3,207)
(17,129)
(3,162)
87,064
359,119
446,183
The respective changes to the reported provisional fair value of net assets acquired are:
• Increase in special compensation liability by $0.4 million as a result of an increased insurance cost following the special
compensation payment done pre-acquisition.
• Increase of $0.04 million due to the adoption and retrospective application of AASB15 Revenue from Contracts with
Customers, resulting in an increase to the deferred revenue balance at acquisition date.
• Increase in deferred tax asset by $0.1 million to recognise future tax benefit associated with the revised fair value in accordance
with AASB15 and AASB3 restatements.
The resulting impact of the above fair value adjustment is to increase the value of goodwill on acquisition to $446.2 million.
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 synergy benefits expected to be created by this acquisition.
Goodwill is not expected to be deductible for tax purposes.
Net gain on revaluation
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 fair value has
been determined using valuation techniques based on the equity value at acquisition date and excludes any control premium
applicable to the controlling interest. The Group has recognised a net gain on the step acquisition of A$57.0 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.
139
Annual Report 2019carsales.com Ltd
Notes to the Consolidated Financial Statements continued
30 June 2019
22. Business combinations and disposals continued
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
23. Discontinued operations
(a) Stratton Finance Group
Stratton goodwill impairment – half year ended 31 December 2018
$’000
202,755
(152,564)
50,191
6,828
57,019
During the half-year ended 31 December 2018, carsales recognised a non-cash impairment charge against the carrying value
of its 50.1% investment in Stratton Finance Pty Ltd. As at 31 December 2018, the carrying value of the Stratton CGU was
compared with the value in use discounted cash flow model. As at 31 December 2018, the carrying value of Stratton exceeded
its value in use by $47.8 million and an impairment loss of this amount was recognised in the income statement. The carrying
value of the remaining goodwill in the Stratton CGU post impairment is $10.9 million.
In carsales’ FY18 Financial Report, the Directors identified that certain external factors had the potential to adversely impact
the valuation of the Stratton Finance CGU, including ASIC legislative changes on car financing which came into effect in
November 2018 and the continued tight credit market conditions. The identified external factors have impacted Stratton
in FY19 resulting in the impairment.
The key assumptions used in determining Stratton impairment charge are as follows:
CGU
Stratton Finance Group Value in use
Valuation
method
Years of
cash flow
projection
5
31 December
2018
Terminal growth rate
3.00%
30 June
2018
3.00%
31 December
2018
Post-tax discount rate
9.75%
30 June
2018
9.75%
Discontinued operations – financial year ended 30 June 2019
On 13th June 2019, the Group announced its strategic review and intention to sell its 50.1% interest in Stratton Finance Pty Ltd
(“Stratton”), the vehicle finance broking business. As a result of this process, Stratton Finance Group is classified as a discontinued
operation in the FY19 financial statements and presented as a current asset held for sale.
Impairment assessment under AASB136
Pursuant to AASB5, the remaining carrying value of Stratton following the impairment charge is required to be tested for
impairment under AASB136 immediately before being classified as held for sale. The disposal group is required to be measured
at fair value less costs to sell based on the best evidence available at the reporting date.
Management has used the fair value less costs to sell valuation method for this impairment test. The outcome of the analysis
indicates that recoverable amount supports the carrying value and no impairment is required. As the asset is being held for sale,
management have assessed the likely amount that will be recovered through sale and have determined a range of achievable
proceeds based on future business profitability and trading multiples as well as considering comparable transactions in the
market to calculate recoverable amount.
140
Annual Report 2019carsales.com Ltd (b) Financial performance and cash flow information
The financial performance and cash flow information are for the year ended 30 June 2019 and 30 June 2018.
Revenue from contracts with customers
Expenses
Cost of sales
Other operating expenses
Earnings before interest, taxes, depreciation and amortisation
Depreciation and amortisation expense
Net finance costs
Impairment loss
(Loss)/Profit before income tax
Income tax expense
(Loss)/Profit after income tax
Less: non-controlling interests
(Loss)/Profit after income tax from discontinued operations
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash inflow/(outflow) from financing activities
Net increase/(decrease) in cash
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
2019
$’000
57,030
(16,625)
(38,039)
2,366
(1,656)
(205)
(47,809)
(47,304)
(408)
(47,712)
(266)
(47,978)
3,569
(965)
193
2,797
6,224
9,021
2018
$’000
68,515
(18,488)
(41,797)
8,230
(1,735)
(162)
-
6,333
(2,032)
4,301
(2,041)
2,260
1,940
(482)
(3,484)
(2,026)
8,250
6,224
The discontinued operations have been presented on a standalone basis including intercompany transactions with the
continuing Group.
(c) Assets and liabilities of disposal group classified as held for sale
The following assets and liabilities were reclassified as held for sale in relation to the discontinued operations as at 30 June 2019.
Assets classified as held for sale
Cash and cash equivalents
Trade and other receivables
Inventories
Property, plant and equipment
Computer software and other intangible assets
Deferred tax assets
Brands
Goodwill
Total assets of disposal group held for sale
Liabilities directly associated with assets classified as held for sale
Trade and other payables
Borrowings
Current tax liabilities
Deferred revenue
Provisions
Deferred tax liabilities
Total liabilities of disposal group held for sale
2019
$’000
9,021
3,793
641
2,978
3,965
674
4,100
10,888
36,060
15,558
4,501
13
295
1,405
1,230
23,002
2018
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
141
Annual Report 2019carsales.com Ltd
Notes to the Consolidated Financial Statements continued
30 June 2019
23. Discontinued operations continued
Non-current assets (or disposal group) are not depreciated or amortised while they are classified as held for sale. Interest and
other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised.
The carrying value of the Stratton disposal group has been determined using the lower of the existing carrying value and the fair
value less costs to sell method based on the proceeds expected to be achieved from the disposal process. The proceeds achieved
through the disposal process are uncertain at the date of this report and could result in a material gain or loss compared to the
carrying value at 30 June 2019.
24. Related party transactions
(a) Subsidiaries
Interests in subsidiaries are set out in Note 21.
(b) Key Management Personnel compensation
Short-term employee benefits
Deferred short-term employee benefits
Post-employment benefits
Long-term employment benefits
Share-based payments
2019
$
6,230,081
380,962
194,461
85,505
(16,990)
6,874,019
2018
$
6,369,824
349,102
196,768
62,857
1,010,675
7,989,226
(c) Transactions with other related parties
The following transactions occurred with related parties, the nature of which are described in the Remuneration Report.
Sale of goods and services
Sale of goods and services to related parties
Purchase of goods and services
Purchase of goods and services from related parties
2019
$
2018
$
1,376,300
1,316,090
1,595,639
1,424,114
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 (sale of goods and services)
Other related parties
Current payables (purchase of goods and services)
Other related parties
2019
$
2018
$
150,500
233,982
406,474
524,303
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.
142
Annual Report 2019carsales.com Ltd 25. 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 2019 of the Closed Group.
Consolidated statement of comprehensive income
Revenue from continuing operations
Revenue from contracts with customers
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
Changes in fair value of put options
Dividends received
Loss on associates fair value adjustment
Impairment loss
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
2019
$’000
Restated
2018
$’000
301,480
301,480
300,205
300,205
(4,729)
(57,611)
(21,504)
(39,445)
178,191
(12,564)
1,773
(15,020)
11,253
4,054
-
(47,809)
119,878
(43,771)
76,107
62,632
76,107
-
76,107
(3,809)
(61,968)
(28,214)
(28,316)
177,898
(9,398)
1,175
(10,511)
(4,019)
14,761
(1,018)
-
168,888
(48,092)
120,796
109,776
120,621
175
120,796
143
Annual Report 2019carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2019
25. Deed of cross guarantee continued
(b) Consolidated statement of financial position
Set out below is a consolidated statement of financial position as at 30 June 2019 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
Financial assets at fair value through other comprehensive income
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
Trade and other payables
Borrowings
Other financial liabilities
Derivative liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
144
2019
$’000
45,094
53,713
98,807
542,868
19,905
2,248
9,317
113,292
6,429
694,059
792,866
20,004
-
-
2,690
6,283
3,398
32,375
20,645
473,798
9,538
17,445
912
522,338
554,713
238,153
Restated
2018
$’000
30,477
53,783
84,260
541,660
19,797
2,925
4,943
108,096
22,442
699,863
784,123
23,241
246,000
1,300
11,240
5,939
3,270
290,990
-
204,000
20,349
-
906
225,255
516,245
267,878
135,372
(23,439)
126,220
238,153
119,541
(9,405)
157,742
267,878
Annual Report 2019carsales.com Ltd OTHER
26. 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 Australia
Audit and other assurance services
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
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 Australia
(b) Network firms of PricewaterhouseCoopers Australia
Audit and other assurance services
Audit and review of Financial Reports
Total remuneration for audit and other assurance services
Total remuneration of PricewaterhouseCoopers
(c) 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
2019
$
2018
$
583,263
31,620
614,883
575,493
94,400
669,893
98,960
122,585
221,545
161,671
28,056
189,727
30,553
30,553
866,981
67,867
67,867
927,487
129,902
129,902
30,954
30,954
996,883
958,441
33,297
33,297
1,030,180
31,529
31,529
989,970
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.
145
Annual Report 2019carsales.com Ltd
Notes to the Consolidated Financial Statements continued
30 June 2019
27. 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 ($21,000) (2018: $2,025,000).
Employee Option Plan
Set out below are summaries of options and performance rights granted under the plan:
2019
Expiry
date
Grant
date
Oct 2013 Oct 2018
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
Aug 2018 Aug 2019
Oct 2018 Aug 2033
Oct 2018 Aug 2033
Feb 2019
Feb 2034
Total
Weighted average exercise price
Exercise
price
$9.10
$10.71
$10.24
$0.00
$0.00
$12.23
$11.41
$0.00
$0.00
$14.87
$0.00
$0.00
2018
Exercise
price
Grant
date
Expiry
date
Oct 2017/
Oct 2012
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
Weighted average exercise price
$5.93
$9.10
$10.71
$0.00
$10.24
$0.00
$12.23
$0.00
$11.41
$0.00
Balance at
start of
the year
32,272
27,448
566,926
121,467
211,702
865,916
364,674
229,506
-
-
-
-
2,419,911
$8.74
Options
granted
during the
year
-
-
-
-
-
-
-
-
-
499,152
-
-
499,152
$14.87
Performance
rights
granted
during the
year
-
-
-
-
-
-
-
-
48,448
-
178,569
16,706
243,723
$0.00
Total
exercised
during the
year
(29,929)
(2,225)
(206,600)
(91,894)
(32,796)
-
-
-
-
-
-
-
(363,444)
$6.64
Expired or
lapsed
during the
year
(2,343)
(556)
(144,826)
(29,573)
(55,829)
(234,258)
(53,242)
(33,506)
-
(3,948)
(1,412)
-
Balance at
the end of
the year
-
24,667
215,500
-
123,077
631,658
311,432
196,000
48,448
495,204
177,157
16,706
(559,493) 2,239,849
$9.43
$9.01
Vested and
exercisable
at end of
the year
-
24,667
215,500
-
-
-
-
-
-
-
-
16,706
256,873
$9.62
Balance at
start of
the year
Options
granted
during the
year
Performance
rights
granted
during the
year
Total
exercised
during the
year
Expired or
lapsed
during the
year
Balance at
the end of
the year
Vested and
exerciable
at the end
of the year
195,148
61,141
423,084
104,182
611,160
175,501
886,824
215,336
-
-
2,672,376
$8.74
-
-
-
-
-
-
-
-
365,365
-
365,365
$11.41
-
-
-
-
-
-
-
-
-
229,941
229,941
$0.00
(195,148)
(28,869)
(18,920)
(11,416)
-
(35,691)
-
-
-
-
(290,044)
$5.59
-
-
(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
(557,727) 2,419,911
$8.74
$8.52
-
32,272
27,448
-
-
-
-
-
-
-
59,720
$9.84
146
Annual Report 2019carsales.com Ltd The estimate of the weighted average share price at the date of exercise of options exercised regularly during the year ended
30 June 2019 is estimated to be approximately $14.27 (2018: approximately $13.96).
The weighted average remaining contractual life of share options outstanding at the end of the period was 10.37 years
(2018: 10.65 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 49.
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 2019 is $1.53 (2018: $3.25). The assessed
fair value at grant date of performance rights granted during the year ended 30 June 2019 is $10.93 (2018: $12.06).
The model inputs for options and performance rights granted during the year ended 30 June 2019 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
Performance rights
2019
$14.87
October 2018
August 2033
$12.36
27.9%
3.2%
2.5%
2018
$11.41
October 2017
October 2032
$13.74
25.9%
3.2%
2.5%
2019
$0.00
October 2018
August 2033
$12.36
27.9%
3.2%
2.5%
2018
$0.00
October 2017
October 2032
$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.
147
Annual Report 2019carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2019
28. 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 for the year
Total comprehensive income
2019
$’000
Restated
2018
$’000
93,338
919,723
1,013,061
195,548
554,710
750,258
135,372
2,847
124,584
262,803
81,936
902,732
984,668
454,132
232,063
686,195
119,541
16,933
161,999
298,473
70,213
119,788
83,736
120,490
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 17
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 2019 or 30 June 2018.
148
Annual Report 2019carsales.com Ltd 29. 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 nor the parent entity have any material contingent liabilities where the
probability of outflow in any settlement is greater than remote as at 30 June 2019 or 30 June 2018 other than the associates
contingent liabilities as set out in Note 21(c).
30. Events occurring after the reporting period
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.
149
Annual Report 2019carsales.com Ltd Directors’ Declaration
In the Directors’ opinion:
(a) the financial statements and notes set out on pages 83 to 149 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 2019 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
20 August 2019
150
Annual Report 2019carsales.com Ltd Independent Auditor’s Report
Independent auditor’s report
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)
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 2019 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 2019
• 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.
151
Annual Report 2019carsales.com Ltd Independent Auditor’s Report continued
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 $9.2 million, which represents approximately 5% of the Group’s
profit before income tax from continuing operations.
• 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 from continuing operations because, in our view, it is the metric against which
the performance of the Group is measured. Profit before tax from continuing operations excludes the financial performance
of carsales’ 50.1% interest in Stratton Finance Group, including recognition of the $47.8 million goodwill impairment loss,
given Stratton Finance Group was classified as held for sale and as a discontinued operation at 30 June 2019.
• We utilised 5% based on our professional judgement, noting that it is also within the range of commonly acceptable profit
related 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 reporting segments, being Online Advertising Services, Data, Research and Services, Latin America,
Asia and Finance and related services (discontinued operation). 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.
152
Annual Report 2019carsales.com Ltd Key audit matter
How our audit addressed the key audit matter
Carrying value of SK Encar goodwill
Refer to note 17 Intangible assets
The South Korean operating segment includes $376.4 million
of goodwill at 30 June 2019 relating to the SK Encar cash
generating unit (CGU).
In order to assess recoverability of the goodwill, the Group
prepared a fair value less costs to sell model as at 30 June
2019 to determine if the carrying value of goodwill was
supported by future forecast cash flows, discounted to present
value.
The recoverability of the SK Encar goodwill was a key audit
matter given its significance to the Group and the judgements
and assumptions required in assessing the CGU’s fair value less
costs to sell, including forecast cash flows, growth rates and
the discount rate
Our procedures included the following, amongst others:
• evaluated the Group’s cash flow forecasts and the process by
which they were developed.
• compared the 2020 forecast to the board approved budget.
• assessed the Group’s ability to make reliable forecasts by
comparing actual performance for 2019 to the board
approved budget.
• compared growth rate assumptions with those used in the
acquisition model that supported the acquisition of SK Encar
in 2018.
• assessed the cash flow forecasts by considering the key
factors and underlying drivers for growth.
• performed sensitivity analysis on growth rates and the
discount rate.
• considered recent transactions as an indicator of fair value.
We evaluated the Group’s discount rate and terminal growth
rate calculation, including whether the method used was
appropriate and the estimate was reasonable, with the
assistance of our internal valuation experts.
We considered the disclosures made in note 17 regarding
impairment testing and key assumptions, in light of the
requirements of Australian Accounting Standards.
153
Annual Report 2019carsales.com Ltd Independent Auditor’s Report continued
Key audit matter
How our audit addressed the key audit matter
Carrying value of the investment in Stratton
Finance Group
Refer to note 23 Discontinued operations
During 2019 goodwill in Stratton Finance Group was impaired
by $47.8 million due to the impact of ASIC legislative changes
on car financing which came into effect in November 2018 and
the continued tight credit market conditions. The carrying value
of the remaining goodwill was $10.9 million at 30 June 2019.
In relation to the $47.8 million impairment charge recorded in
December 2018, we assessed the Group’s estimates of forecast
cash flows, discount rate and terminal growth rate. We checked
that the difference between recoverable amount and the
carrying amount of the CGU’s assets and liabilities equated to
the impairment charge.
In June 2019 carsales announced its intention to sell its 50.1%
interest in Stratton Finance Group and at 30 June 2019 it was
classified as held for sale and as a discontinued operation. This
necessitated a further assessment of the recoverability of the
Stratton Finance Group CGU at 30 June 2019.
The recoverability of the Stratton Financial Group CGU was
a key audit matter given its significance to the Group, the
impairment charge recognised and the judgements and
assumptions required in assessing the CGU’s fair value less
costs to sell.
Our procedures to further assess the recoverability of the
Stratton Finance Group CGU at 30 June 2019 included the
following, amongst others:
• assessed if the Stratton Finance disposal group was measured
at the lower of its carrying amount and fair value less costs
to sell.
• evaluated the estimate of fair value less costs to sell including
consideration of forecast earnings and the trading multiple to
value the disposal group.
We also considered the disclosures made in the financial report
and note 23 Discontinued operations, in the light of the
requirements of Australian Accounting Standards.
154
Annual Report 2019carsales.com Ltd
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 2019, 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 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 that we obtained prior to the date of this auditor’s report,
we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing
to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors
determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material
misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the 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.
155
Annual Report 2019carsales.com Ltd Independent Auditor’s Report continued
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of 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 49 to 77 of the directors’ report for the year ended 30 June 2019.
In our opinion, the remuneration report of carsales.com Limited for the year ended 30 June 2019 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
20 August 2019
156
Annual Report 2019carsales.com Ltd Shareholder Information
The shareholder information set out below was applicable as at 30 June 2019.
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
43
52
27
21
1
144
Redeemable
preference
shares
-
-
-
-
-
-
Shares
10,091
6,746
834
461
75
18,207
Convertible
notes
-
-
-
-
-
-
There were 321 holders of less than a marketable parcel of ordinary shares. There were no redeemable preference shares
or convertible notes outstanding.
B. Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest holders of quoted equity securities are listed below:
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
BNP Paribas Nominees Pty Ltd
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