Appendix 4E
carsales.com Ltd
ABN 91 074 444 018
Results for Announcement to the Market
Full-year ended 30 June 2020
(Previous corresponding period: Full-year ended 30 June 2019)
Revenue from continuing operations
Profit for the year after tax
Net profit for the period attributable to members
Adjusted net profit* for the period attributable to members
Down
Up
Up
Up
(5.25%)
38.84%
36.49%
6.17%
to
to
to
to
A$’000
395,585
116,953
114,668
138,189
Dividends/Distribution
2019 Final Dividend paid
2020 Interim Dividend paid
2020 Final Dividend declared
2020 final dividend dates
Record date for determining entitlements to the dividends
Latest date for dividend reinvestment plan participation
Dividend payable
Amount
per security
25.0 cents
22.0 cents
25.0 cents
Franked
amount
per security
25.0 cents
22.0 cents
25.0 cents
23rd September 2020
24th September 2020
7th October 2020
Net tangible assets backing per ordinary share**
30 June 2020
30 June 2019
(138.1 cents)
(128.9 cents)
30 June 2019
Restated***
(158.4 cents)
*
The presentation of adjusted net profit provides the best measure to assess the performance of the Group by excluding COVID-19 Dealer Support Package, fair value gain
arising from discontinuing the equity method (net of NCI), gain on associate investment dilution (net of NCI), loss on disposal of subsidiary, one-off transaction and restructure
costs, one-off bad debt expenses, changes in fair value of put option liabilities and deferred consideration, one-off tax adjustment, option unwinding discount and non-cash
acquired intangible amortisation from the reported IFRS measure. This is further detailed in Note 5(b).
** Net tangible assets exclude all right-of-use assets leased by the Group.
*** See Note 31 for details about restatements for changes in accounting policies.
Other information required by Listing Rule 4.3A
Other information requiring disclosure to comply with Listing Rule 4.3A is contained in the 30 June 2020 Financial Report.
I
Annual Report 2020carsales.com Ltd Annual Report 2020
ABN 91 074 444 018
Annual Report 2020carsales.com Ltd Corporate Governance
Environmental, Social and
Governance Report
Our Board
Our Remuneration Chair’s Message
Remuneration Report 2020
Other Directors’ Report Disclosures
Auditor’s Independence Declaration
Financial Statements
Directors' Declaration
Independent Auditor's Report to
the Members of carsales.com Ltd
Shareholder Information
Corporate Directory
35
35
36
38
40
62
66
68
139
140
146
148
Contents
Our Business
Our Purpose
Our Global Presence
Our Operational Highlights
Financial Performance
Chair and CEO Letter
Our Strategy
COVID-19 Response and Impact
Our Australian Business
Our International Business
Future Horizons
Our People. Our Culture.
Directors’ Report
01
02
04
05
06
08
13
14
16
20
24
25
31
Our Business
carsales.com Ltd (ASX: CAR)
is a global leader in digital automotive
marketplaces, holding market leading
positions in Australia, South Korea,
Brazil, Chile, Argentina and Mexico.
Headquartered in Melbourne, Australia the
business employs c.1,200 employees across
the world and is a member of the S&P/ASX100.
1
Annual Report 2020carsales.com Ltd Our Purpose
We empower people
to move freely through
our world-leading
marketplaces.
Our Approach
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 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 2020
2
3
carsales.com Ltd
Annual Report 2020
Our Global Presence
We have a global presence and our
international markets present a massive
opportunity for carsales to consolidate
itself as the global leader in digital
automotive advertising.
Mexico #1
• FTEs: 63
• c.45,000 listings
• c.4m visits per month
Brazil (30% stake) #1
• FTEs: 163
• c.500,000 listings
• c.31m visits per month
South Korea #1
• FTEs: 259
• c.113,000 listings
• c.22m visits per month
China, Malaysia,
Thailand & NZ
• FTEs: 32
Chile #1
• FTEs: 35
• c.75,000 listings
• c.4.5m visits per month
Malaysia,
Indonesia & Thailand
(11.7% stake) #1
• FTEs: 413
• c.400,000 listings
• c.12m visits per month
Argentina #1
• FTEs: 31
• c.18,000 listings
• c.0.9m visits per month
Australia #1
• FTEs: 629
• c.150,000 listings
• c.34m visits per month
#1 represents market leading positions.
Data presented above are based on management estimates from July 2019 to June 2020.
All businesses 100% owned unless otherwise stated.
4
Annual Report 2020carsales.com Ltd Our Operational Highlights
Our Global
Markets
Our Australian
Market
Our People
>1billion user sessions 2x more time
per annum on all carsales sites
around the world up 7% on pcp1
spent on carsales.com.au than the
nearest competitor in Australia2
93%
of our people feel that we are staying
connected as a team during the
COVID-19 pandemic
>33,700 car dealer
customers around the world3
>4.89m Unique Audience 90%
record audience levels (+40% YoY)2
of our people would recommend carsales
as a great place to work
>760k cars for sale
around the world at any point
in time3
>90%
of Australian car dealers are on the
carsales platform4
Certified
as a Great Place to Work® employer
2019 and 2020 and WGEA Employer
of Choice 2015–2020
6 countries
in which we have leading positions5
Most trusted
Ranked #1
place for buying and selling cars in
Australia (+118% vs nearest competitor)6
in the Technology section of AAGE Top
Graduate Employer for 2020 (#4 in overall)
1. Period: July 2019 – June 2020. 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, Monthly average,
June 2020. 3. Aggregate from automotive websites in Australia, South Korea, Brazil, Mexico, Argentina and Chile as at 30 June 2020. 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, Mexico and Chile.
6. Study conducted by independent research agency, Nature Pty Ltd, “market brand health tracker 2020”. You said you would go to the following for buying a new / used /
selling a car. If you had to choose one tomorrow, which one would you most prefer?
5
carsales.com Ltd
Annual Report 2020
Financial Performance
Adjusted Revenue*
$423.1m
up 1% year on year
Adjusted EBITDA*
$231.8m
up 6% year on year
Adjusted NPAT*
$138.2m
up 6% year on year
Adjusted earnings
per share
56.4 cents
up 6% year on year
Dividend per share
47.0 cents
up 3% year on year
FY20
FY19
FY18
FY17
FY16
FY20
FY19
FY18
FY17
FY16
FY20
FY19
FY18
FY17
FY16
FY20
FY19
FY18
FY17
FY16
FY20
FY19
FY18
FY17
FY16
423.1m
417.5m
376.9m
319.0m
283.1m
231.8m
217.9m
201.6m
169.8m
157.7m
138.2m
130.2m
127.1m
116.2m
105.9m
56.4 cents
53.4 cents
52.4 cents
48.1 cents
44.0 cents
47.0 cents
45.5 cents
44.2 cents
40.2 cents
37.3 cents
CAGR
11%
CAGR
10%
CAGR
7%
CAGR
6%
CAGR
6%
* Adjusted Revenue, 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
COVID-19 Dealer Support Package, fair value gain arising from discontinuing the equity method (net of NCI), gain on associate investment dilution (net of NCI), loss on disposal
of subsidiary, one-off transaction and restructure costs, one-off bad debt expenses, changes in fair value of put option liabilities and deferred consideration, one-off tax adjustment,
option unwinding discount and non-cash acquired intangible amortisation.
FY18 revenue, EBITDA and Adjusted NPAT have been restated to reflect the adoption of AASB15. FY16-FY17 figures have not been restated as the impact would not be material.
FY16-FY19 Adjusted EBITDA and NPAT have been restated to reflect the adoption of AASB16.
6
Annual Report 2020carsales.com Ltd Year ended 30 June 2020
Adjusted Revenue
Online Advertising
Data, Research and Services
Total Australia
carsales Asia
carsales Latin America
Total International
Total Adjusted 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 operations)
Adjustments
Reported NPAT (continuing operations)
Reported Revenue (continuing operations)
Reported EBITDA (continuing operations)
Adjusted Earnings per share (cents)
Reported Earnings per share (cents)
A$ millions
Growth
FY20
FY19**
$'m
%
296.7
43.3
340.0
75.5
7.6
83.1
423.1
191.3
231.8
55%
28.2
203.6
14.3
189.3
56.5
4.7
0.7
138.2
(18.3)
119.9
395.6
202.0
56.4
48.9
300.1
43.2
343.3
65.1
9.1
74.2
417.5
199.6
217.9
52%
23.4
194.5
15.5
179.0
52.9
3.7
0.4
130.2
1.9
132.1
417.5
212.9
53.4
54.2
(3.4)
0.1
(3.3)
10.4
(1.5)
8.9
5.6
8.3
13.9
(1%)
0%
(1%)
16%
(16%)
12%
1%
4%
6%
(4.8)
(21%)
9.1
1.2
10.3
(3.6)
1.0
0.3
8.0
n/a
(12.2)
(21.9)
(10.9)
5%
8%
6%
(7%)
27%
57%
6%
n/a
(9%)
(5%)
(5%)
3.0
(5.3)
6%
(10%)
* Adjusted Revenue, EBITDA and 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 COVID-19 Dealer Support Package, fair value gain arising from discontinuing the equity method (net of NCI), gain on associate investment dilution (net of NCI),
loss on disposal of subsidiary, one-off transaction and restructure costs, one-off bad debt expenses, changes in fair value of put option liabilities and deferred consideration,
one-off tax adjustment, option unwinding discount and non-cash acquired intangible amortisation.
**FY19 results have been restated to reflect the adoption of AASB16.
7
Annual Report 2020carsales.com Ltd
Chair and CEO Letter
Pat O’Sullivan
Non-Executive Chair
Cameron McIntyre
Managing Director
and CEO
FY2020 has been a year of great reward but
significant challenge, more so than any other
year outside of the Global Financial Crisis (GFC)
in 2008 at carsales. We have taken substantial
steps forward over the past twelve months and
leave FY20 in good shape and looking towards
the year that is ahead of us.
reflects the ongoing expansion of core business margins as
the Company continues to utilise its operating leverage
and focus on cost, while also investing in the future, exiting
under-performing businesses and re-focusing faster growing
lower margin businesses to profitability.
Adjusted Net Profit After Tax (NPAT) increased 6% to
$138.2m and the Board has declared a final FY20 dividend
of 25.0 cents per share bringing total dividends paid to
shareholders for FY20 to 47.0 cents per share.
It has been the most eventful and challenging year in the
Company’s recent history and we are all very proud of
what has been accomplished. Some of the more significant
milestones include but aren’t limited to:
• Excellent progress in the development of key strategic
priorities across domestic and global markets.
• In the face of extreme adversity with the worst bushfires
in Australia on record and a global pandemic, the Company
has made significant contributions to the support of others
far beyond normal and demonstrated clear social
responsibility and leadership through truly unique
market conditions.
• Delivery of solid financial performance despite the
headwinds experienced in the second half of the year.
We are extremely pleased with how the business has
performed this year given the impact of COVID-19 and the
bushfires in Australia. The investments made in growing our
capability in both Australia and across our international
markets while at the same time protecting and supporting our
customers through this challenging period has been something
the entire business has been very proud of.
The Group delivered growth across our three primary financial
metrics of Adjusted Revenue, Adjusted EBITDA and Adjusted
NPAT. This is a testament to the resilience of our business
model and reinforces the merits of our long-term strategy
of diversifying our products and the markets in which
we operate.
FY20 revenue was down 5% on pcp to $395.6m (excluding
COVID-19 Dealer Support Rebate revenue was up 1% on pcp
to $423.1m). Adjusted Earnings before interest, taxes and
depreciation/amortisation (EBITDA) was up 6% to $231.8m
with EBITDA margins expanding to 55%. This performance
carsales.com Ltd
Annual Report 2020
8
The Company has made
significant contributions to the
support of others far beyond
normal and demonstrated
clear social responsibility
and leadership through truly
unique market conditions.
Our Strategy & Purpose
As a business our core purpose is to “empower people
to move freely through our world-leading marketplaces”.
Over the past 12 months we have continued to develop
our capability inside our three strategic pillars of digital
marketplaces (domestic & international), value-added
services and future horizons.
Particularly pleasing has been the launch of new products
into domestic and international marketplaces, the
standardisation of our retail platforms making them
deployable anywhere in the world, the progress we have
made in globalising our trade platforms, the refocus of
finance opportunities towards dealer products and the
development of membership and data focused capabilities.
However, there are some areas that continue to remain
challenging despite our best efforts. For instance we continue
to persevere in the area of supporting dealers in selling new
cars with the launch of the EPIC sale event, the launch
of new car product packages and improving showroom
functionality. We are pleased with the progress we have
made here but there is more to do.
Bushfires and COVID-19
In January this year we were all terribly saddened by the
catastrophic devastation caused by the bushfires seen
around Australia but particularly on the east coast.
As a company we were concerned for the welfare of our
customers, their property and the communities they serve
and felt it was appropriate to do what we could to support
them. These support efforts were in two areas, the first was
through fund raising where the Company raised over
$160,000 that was contributed to the Red Cross Bushfire
Appeal. The second area of support was direct to customers
9
in bushfire affected areas who were supported by the
Company waiving January subscription fees. In total
the Company made a contribution of over $210,000.
In mid-March the Company like the rest of the world
encountered the challenges imposed by COVID-19 and its
impact on consumer and commercial activity. Throughout
the March to June period the Company identified and
responded to business impacts exceptionally well and
below is a summary of the major elements of those
impacts and responses.
Major Business Impacts:
• Traffic to our sites throughout Q4 was exceptionally
resilient and we saw pcp growth throughout.
• Enquiry volumes to dealers and private seller advertising fell
sharply in mid-March but began to recover in mid-April and
by the end of June had recovered to normal levels.
• New car sales volumes have been challenging for some time
but pcp volume declines were particularly acute in Q4,
which was reflected in media advertising spend and
impacted display advertising revenue.
• Being a global pandemic many of the impacts above were
also experienced across our portfolio of international
businesses with the exception of South Korea.
• Face to face customer visitation ceased with many customers
standing down either partially or fully large parts of their
workforces and consolidating dealerships.
• carsales offices closed in all locations (except in South Korea)
at various stages during Q4 and staff seamlessly moved to
working remotely.
Annual Report 2020carsales.com Ltd Chair and CEO Letter continued
Major Business Responses:
At the start of the pandemic the Company established and
upheld three core decision making principles.
• The first of these has been the need to support customers
and the industries that have supported the Company for
over 23 years. During the pandemic with a decline in
consumer car buying activity and many customers standing
down staff and temporarily closing dealerships, the business
decided as market leaders we needed to take an early,
strong and supporting position commencing with the
announcement of the COVID-19 Dealer Support Package on
23 March 2020. The support put in place included providing
a 100% rebate in April, providing a 50% rebate in May,
providing a 100% rebate on new car services in June and,
extending credit by an additional 30 days on March to May
accounts. We also provided customers with access to the
carsales Employee Assistance Program (EAP) to help support
individuals directly impacted by the crisis. In addition the
Company ran weekly webinars for customers so they could
receive live market performance data, tips on selling in
a COVID-19 environment and hear from other industry
leaders. These efforts in providing relief saw the Company
invest $28m back into supporting its customer base over Q4.
• The second decision making principle has been to ensure
we protect the Company’s greatest asset being its people.
Throughout the pandemic the business committed to
ensuring there were no redundancies, although around
250 customer-facing staff were partially or fully stood down
as customer activity declined and all executives and the
Board took 20% salary reductions in Q4. Over the course
of those three months the Company hosted weekly
webinars for the entire business around the world to
keep people together and with an open and direct line
of communication to executives.
• The third decision making principle has been to ensure the
Company is well protected and there were many actions
taken to ensure this. The Company focused on global cost
reduction efforts in areas such as marketing, labour cost
(incentive, commission and executive fixed remuneration
reductions and access to the Federal Government's
JobKeeper program) along with other discretionary spending
areas. The Company also refinanced a tranche of debt which
was maturing in 2021, and increased its debt funding and
debt covenant headroom to ensure its ability to weather
any longer term disruption and continue to honour its
dividend policy.
We are pleased to report that despite the unprecedented
conditions of the second half of FY20 the resilience of the
business has been pleasing, and the Company has performed
exceptionally well. All other things being equal, we expect
the Company to benefit from its resilience and the decisions
in FY21 and beyond.
10
Annual Report 2020carsales.com Ltd Operational Performance
Australia
The past twelve months have been both productive and
challenging. Traffic to the carsales site remained strong
throughout the year generating more than 34.3m sessions
in the month of June up 40% on pcp. This exceptional traffic
performance has translated to carsales extending its lead over
its nearest competitor to now boasting 3.44 times their traffic.
Likewise, it was a similar story of growth for other sites such
as boatsales, bikesales and trucksales demonstrating the
strength of our brands in the minds of consumers.
Once again the used car market has remained particularly
resilient and continued to perform well. Amongst the proof
points of this was the strength in used car lead volumes
throughout the year but particularly in the second half of
Q4 where it was at record levels driving average time to sell
down as inventory turnover increased.
As has been consistently reported through the year, market
conditions for new vehicle sales have been persistently difficult
and have continued to weaken as a result of bushfires,
COVID-19, tightening credit availability and job losses
particularly through Q4. The new car market is a relatively
small part of the carsales Australia business but where the
challenge continues to be felt is in media advertising which
we look forward to seeing stabilise over the coming months.
Following a strategic review of the Stratton business the
Company conducted a sale process which was completed
in April 2020 and saw the sale of its 50.1% interest in
Stratton to a third party. Stratton remains an external
advertising customer and the Company continues to believe
the finance market is an opportunity to support its core
business over the long term. As a result the Company has
shifted its strategic focus in finance to areas that support
the finance offers of dealers.
International
The past twelve months has continued to see significant
development in technology for both our domestic and
international markets. We are now in the enviable position
of being able to simultaneously deploy much of our retail
product across both our domestic and international markets.
A worthy demonstration of this was the launch of badges in
Q4 in Australia and LATAM to help dealers communicate their
contactless capabilities in a COVID-19 environment. The rapid
deployment of this product was welcomed across all markets
and in the past would not have been possible at such speed
and economy. Now our focus shifts to building similar
capabilities in relation to our trade product suite. In addition
to bolstering our international businesses, this will enable us
to quickly enter new markets with a compelling offering to
the local trade.
11
Annual Report 2020carsales.com Ltd Chair and CEO Letter continued
Our international businesses have continued to evolve well
over the past twelve months and we are pleased with the
progress that is being made across these markets. Encar,
our South Korean company, grew strongly throughout the
year, including through the COVID-19 pandemic. Great
progress continues to be made there particularly with the
strong expansion of Guarantee product, the strength in media
sales, and new products such as Dealer Direct. Webmotors
in Brazil is going from strength to strength but was disrupted
through Q4 as a result of COVID-19, as were our other
LATAM companies. However, across all of these markets we
are in an excellent position to continue to grow well over
the coming years.
People & Culture
The long-term business success of the Company has been
built on the capability, loyalty and culture of the team. In
FY20 more so than any other year these traits were displayed
in abundance by all. Our staff turnover levels continue to
remain at near record lows and staff engagement measures
were the strongest they have ever been.
Our Graduate Program went from strength to strength and
in 2020 we continue to be ranked 4th best in the country
and 1st in IT hardware or software companies on the AAGE
(Australian Association of Graduate Employers) Top Graduate
Employers list.
As a business we pride ourselves on our inclusive work
environment. We are an Alliance Member of Inclusive
Australia, Welcome Here and a WGEA Employer of Choice
all of which we are very proud of. We continue to build
a workplace environment that is open, inclusive and that
accepts individual differences as our inclusiveness is not only
important to our business culture but also provides us
with a strong and distinct competitive advantage in
attracting talent.
With the global impact of the COVID-19 pandemic we
used this as an opportunity to focus on further developing
engagement and collaboration across all of our international
and domestic businesses. Regular communication and weekly
webinars updating the business around the globe saw very
strong engagement of the entire team. A global survey in late
May saw favourable scores around leadership, communication
and awareness in the 90%’s which was very pleasing and
gives us a good platform for continuing to develop the strong
carsales culture in other countries.
Debt & Capital Management
The Company has maintained a strong balance sheet
throughout FY20 and regularly reviews its capital structure
to ensure it is maximising shareholder returns and providing
certainty and consistency when it comes to dividend payment
in uncertain times like these. The Group’s debt funding
facility provides significant flexibility when considering future
capital management opportunities as well as corporate
development and the Company is conservatively leveraged
at around 1.6x Net Debt (excluding AASB 16 lease liabilities)
to Adjusted EBITDA.
To further strengthen its position the Company undertook
a refinancing exercise in June which saw the total debt facility
being resized to $650m (from $545m) and the maturity of
its Tranche A debt being moved from July 2021 to July 2024.
The refinancing and extension was oversubscribed by a
syndicate of bank lenders, reflecting the resilience and
strength of the carsales business.
Towards a successful FY21
FY20 proved to be another year of significant challenges
and opportunity for carsales. Despite the challenges of FY20
our successes are very clearly the direct result of the decision
making, passion and dedication of our people. carsales
people are the envy of the markets they serve and we would
like to thank publicly once again each and every one of them
for what they bring to our business each day.
Finally, on behalf of the Board we would like to thank all of
our customers, partners and investors around the world for
their support and engagement over the past twelve months
and we look forward to working with you all in FY21.
Pat O’Sullivan
Non-Executive Chair
Cameron McIntyre
Managing Director
and CEO
12
Annual Report 2020carsales.com Ltd Our Strategy
Empower people to move freely through our world-leading marketplaces
OUR STRATEGIC PILLARS
Digital marketplaces
To grow our leadership in digital
automotive classified solutions
globally for our consumer
and commercial customers
Value-added services
ToTo build a compelling ecosystem
of services that support dealers,
OEMs, corporate customers and
private consumers through the
buying, selling and ownership
of vehicles
Future horizons
Leveraging consumer insights
and industry trends to explore
new opportunities in core and
adjacent markets, and beyond
supported by
OUR ENABLERS
Data
Be a ‘best-in-class’ data-driven
company, with our unrivalled data
and analytics to help customers
understand their audience
and commercial clients to
grow their businesses
People
To be an employer of choice
and destination for talent by
continuously evolving our culture
of inclusion, learning, leadership,
performance and passion
Technology
To build 'best-in-class' global
platform-based software services
that exceed the expectations of
our customers and drive continued
growth in the carsales business
OUR UNIQUE CULTURE
DNA
Innovation | Simplicity | Customer focus
Our Values
Enjoyment | Respect | Integrity
Communication | Honesty
OUR CHOSEN GEOGRAPHIC MARKETS
Australia | South Korea | Brazil | Mexico | Chile | Argentina
13
Annual Report 2020carsales.com Ltd COVID-19 Response and Impact
Our Australian customers and
people have endured an extremely
difficult FY20, first through the
severe bushfire season and later
the global pandemic. Throughout
the pandemic, the business has
been focused on three priorities:
> supporting our industry/
customers,
> supporting our people; and
> supporting our business.
14
Annual Report 2020carsales.com Ltd Actions to support our industry/customers
During early March, we observed the steady escalation
of the impact of COVID-19 in Australia. This escalation
included social distancing measures and restrictions on
movements which significantly impacted activity in the
automotive industry. Given the severe impact on our
customers, we took the decision to provide a range of
assistance measures including financial, counselling,
education and product support.
We took these decisions prior to the government announcing
its major wage support packages and are proud about
the decisive nature and magnitude of our response. These
measures have been well received by our customers and
we believe this will strengthen our relationship with our
customers going forward.
Financial support
The total support provided to dealers approximated $28m
which contributed to reducing dealers’ short-term operating
costs and demonstrates carsales’ commitment to supporting
the Australian industry it serves. carsales provided a 100%
rebate in April, provided a 50% rebate in May and provided
a 100% rebate on new car services in June. carsales also
extended payment terms over March to May period by
30 days and provided access for customers to our employee
counselling service at no charge.
Product innovation and educational support
carsales also launched new products to enable dealers to
communicate more effectively with their customers in a
COVID-19 environment. This included ‘Buy from Home’
badges which help consumers engage with sellers without
having to leave their home.
Sellers can highlight services they offer, including home
test drives, video calls, finance applications and trade-in
valuations. Currently there are over 40,000 listings which
feature the distinctive ‘Buy from Home’ badge on
carsales.com.au. With many open air trade shows
cancelled, our caravancampingsales.com business
launched its first-ever Great Outdoors Online Expo,
offering hundreds of show-special deals on caravans,
campervans, motorhomes and camper trailers.
carsales has also held multiple webinars throughout the
crisis to ensure our customers are up to date with industry
support measures and the latest insights of what we are
seeing through our platform.
Actions to support our people
The health and wellbeing of our people has been paramount
throughout this crisis. Our people have shown amazing
resilience and dedication and have guided the business
skillfully through this extremely challenging period.
There have been significant pressures and strains placed
on our people and accordingly we have implemented
a range of measures to help support them. A number
of these measures are detailed in the People & Culture
section of this report.
Actions to support our business
Cost management
Given the financial impact associated with the crisis,
carsales implemented a number of cost savings initiatives
to mitigate the impact of reduced market activity and
lower revenue.
This cost management program was carefully balanced
to support the short-term performance of the business as
well as its long-term strategic priorities and growth agenda.
The cost management initiatives included the following:
• Board and Executive remuneration reduced by 20%
from 1 April 2020 to 30 June 2020;
• Approximately 250 employees in Australia were stood
down temporarily, with most of these on a partial basis.
This was predominantly in external customer-facing
roles where activities had been impacted by changes
to customer’s operations resulting from government
restrictions and social distancing measures; and
• Reduction of other discretionary costs across the business
such as outdoor brand marketing.
Debt refinance and dividends
carsales’ strong balance sheet and prudent gearing levels
enabled it to support its customers and employees through
the crisis. In June, carsales confirmed it had refinanced,
extended and increased its debt facilities which further
strengthens this position heading into FY21.
The resilient performance of the business has also
enabled carsales to maintain its dividend payments
and future commitments.
15
Annual Report 2020carsales.com Ltd Our Australian Business
Key Brands
Key carsales Australia stats
4.89m
unique audience
34.3m
sessions
2.5m
editorial sessions
up 40% YOY1
up 40% YOY1
up 97% YOY1
+900k
dealer used cars sold via carsales
platform per annum2
+14.5b
ad impressions delivered by the
carsales network per annum3
1m
referral clicks driven to
OEM website each quarter3
>6m
members across the
carsales network3
1.7m
unique listings
per year3
12.5m
minutes of network
video content in FY203
1. Source: Nielsen DCR, June 2020.
2. Aggregate from automotive websites in Australia as at 30 June 2020.
3. carsales internal data.
16
Annual Report 2020carsales.com Ltd We connect buyers and sellers through frictionless marketplaces and provide ongoing value
during each stage of the ownership lifecycle.
BUY
Provide consumers with the
best inventory selection
and allow them to buy with
knowledge and confidence.
Buyer value offering
• Quality and breadth of inventory
• Expert reviews and comparisons
• Price indicators for transparency
• Car history reports for confidence
• Vehicle inspections for peace of mind
OWN
We provide valuable market
intelligence and offers
to our car owners.
Owner value offering
• Current and future resale value
• Regular updates on market demand
• Ongoing fuel discounts
• Best deals on new tyres and fitment
SELL
We have the largest
and most qualified buying
audience, with a range of
flexible selling options.
Seller value offering
• Largest audience
• Multiple retail ad options for flexibility
• Option to sell via the wholesale
channel for speed
• Tools to assist with price setting
• Virtual number to protect personal
information
17
Annual Report 2020carsales.com Ltd Our Australian Business continued
Australian Business Highlights
We have made excellent progress this year advancing our strategic pillars by growing
our digital marketplace leadership, advancing our eco-system of value-added services
and continuing to invest in our future horizon opportunities for growth.
Growing our audience and market leadership
carsales has the largest and most engaged consumer audience. Our continued
investment and innovation to improve the onsite experience for our customers
has driven strong growth in our audience metrics and market leadership position
this year. We responded to the unique challenges presented by COVID-19, updating
the presentation of a dealer’s stock items to include easy to understand badges
that highlight key information around services, capabilities and sanitisation.
+8%
FY20 audience visits
Growing ‘Instant Offer’
Our 'Instant Offer' product provides a fast and convenient option for consumers
to sell their car through carsales. We have continued to optimise our user experience
and conversion through both refinements to our proprietary pricing engine and
expansion of our wholesale supply network. This has resulted in a material uplift
in revenue and yield in our core private business.
+33%
FY20 lead to
sale conversion
Increasing depth revenue
Our customers can promote their listings and attract more interest from buyers through
our depth products. These products continue to demonstrate good growth, providing
our dealers and private sellers with the opportunity to differentiate their listings in
a congested market, reducing time to sell and increasing stock turn rates.
+94%
Number of dealers using
depth automation vs pcp
Improving our new car offering
carsales launched a redeveloped New Car Showroom In January 2020. The new
site offers improved searching options on model variants and better access to
new car deals. This improved consumer experience has driven a significant uplift
in both engagement and revenue outcomes from a new car perspective.
+17%
FY20 new car
showroom leads
18
Annual Report 2020carsales.com Ltd Growing our membership base and customer personalisation
We launched our Owner Accelerate program which provides our members with access to
personalised, real-time insights on their vehicle, such as current demand and resale value.
We also deployed MyFeed, an AI based tool that provides carsales users with a personalised
native content experience based on their search behaviour and preferences. These initiatives
resulted in a significant uplift in both the size and engagement of carsales members.
+45%
Cars in our Virtual
Membership Garage
Strong performance from our Consumer, Industry
and Leisure (CIL) Business
carsales operates a number of market leading non-automotive classified websites
including bikes, boats, caravans, trucks and heavy equipment. These websites have
demonstrated strong growth over the last year, leveraging carsales’ market leading
technology platform and deploying innovative customer solutions through
COVID-19, including our recent online caravan trade show.
19
+10%
FY20 CIL revenue growth
Annual Report 2020carsales.com Ltd Our International Business
Our International investment strategy
01.
Establish clear leading position
Increase sustainable quality audience
and traffic through SEO optimisation
and brand marketing
Deploy key technology programs to
drive optimal consumer and dealer
user experience
02.
Monetise and extend clear
leading position
Educate and articulate value to
dealers and drive focus on conversion
from lead to sale
Rapid increase in penetration of
key dealer and OEM products
Aggressive dealer acquisition
resulting in increased listing volumes
Regional expansion
Pursue local complementary partner
integrations e.g. finance, insurance etc
Expand profitability via scalable
revenue growth
03.
Leverage clear leading position
Yield growth through premium
products that drive ROI for dealers
and consumers
Optimise adjacency strategy
to drive additional growth
Achieve 55%+ EBITDA margins
via scalable growth
Key carsales International stats
5 countries
(excl. Australia)
in No. 1 market
leading positions
13%
look through
revenue growth
34%
leads volume
growth YoY
20
Annual Report 2020carsales.com Ltd Encar (South Korea)
Impressive FY20 results given challenging conditions. Encar has maintained its position as
the trusted source for buying and selling vehicles. This success has been achieved through:
Increased penetration and strong expansion of the Encar
Guarantee Vehicle program
The product confirms:
• The car exists at the dealership
• The car has not been involved in any accidents damaging the main frame
• The specifications of the car are advertised correctly
For consumers, the Guarantee provides peace of mind and comfort when purchasing
the car from a dealer. For dealers, Guarantee cars receive more leads, sell faster and
hold price better.
There is continued potential to expand the number of branches in FY21.
Growing penetration of the Dealer Direct Product
Multiple dealers participate in a 24-hour auction for a consumer's car.
Due to the competitive nature of the process, the consumer accepts a price that is
usually only 5-15% lower than what they would ordinarily receive in a private sale
process, but in a faster and more efficient way.
The successful dealer pays a success fee as well as a recurring flat monthly fee to
participate in auctions.
New Home Delivery product (launched in July 2019), bringing
the entire searching, inspection and buying process online
Once the customer has chosen the vehicle and applied for the service, Encar
consultants carry out the Guarantee inspection.
The customer makes full payment to an escrow service and once delivery is made,
the payment is released to the dealer. Customers have a 7-day cooling off period
to access refunds.
Strengthening its market leading positioning
This year the business saw growth in its unique audience numbers, traffic to site
and its search engine optimisation strength to greatly increase its overall audience
leadership over competitors.
21
+52%
Revenue growth year on year
• Opening of 9 new branches
in FY20 combined with better
utilisation of existing branches
•
Increase in yield achieved
through price rise in FY20
+199%
Product usage in H2
• 365 participating dealers
in FY20
• Strong run rates into FY21
+6.2x
Order fulfillment volume
since launch date
Expected to grow in FY21
and become a meaningful
revenue contributor
+15%
Increase in visits vs pcp
+14%
Increase in leads vs pcp
Annual Report 2020carsales.com Ltd Our International Business continued
Webmotors (Brazil)
This year, Webmotors has continued on its journey as setting the standard in what innovation
and a growth mindset can achieve. The business has displayed an exceptional level of resilience
to challenging market conditions whilst consolidating its No.1 market position. Key highlights include:
Enhancement of the Consumer Finance Product
Growth driven by a digital integration with Santander bank, which allows seamless
credit assessment, including approval into Cockpit, Webmotors’ CRM tool:
• Consumer enters personal information and social security number
• Banco Santander offers pre-approval and a personalised interest rate
• The Webmotors app issues a unique voucher to the consumer
• The consumer scans the voucher at the dealership to initiate the loan
By bringing the consumer's awareness of the dealer’s finance offering early in
the sale process, we are improving finance conversion rates for our dealers.
+300%
Growth achieved vs pcp
Finance revenue now
a material contributor,
comprising more than
15% of overall revenue
Commencement of a large scale regional expansion plan
In H2 FY20, Webmotors commenced aggressively expanding into regional
areas outside of the Sao Paulo area, delivering a material uplift in dealer numbers,
traffic and leads.
The onset of the COVID-19 pandemic has put this plan on hold but highlights
the opportunity for the business to grow organically once the plan recommences.
+1,000
New dealers vs pcp
Leads up 60 – 70%
in certain regions
Product and technology innovation through COVID-19 crisis
Webmotors provided dealers with free access to Webmotors CRM + smart subscription,
rolled out an in-app video conferencing feature and launched a car delivery service.
+57%
Leads growth
The dealers are responsible for the digital contract generation, signing and delivery
of the vehicle:
• Identify listings with delivery badges
• Request photos and price negotiation with dealers
• The contract is arranged by the dealer
• The vehicle is delivered to the consumer by the dealer
Access to the advanced subscription will be monetised commencing July 2020
onwards as Webmotors saw a strong up-take during the free trial period.
22
Annual Report 2020carsales.com Ltd LATAM (Chile, Mexico and Argentina)
FY20 has been a challenging year in our LATAM markets. First with the civil unrest in Chile
followed by the global pandemic. We have focused on continuing to deploy our world-class
technology and products to ensure we drive our market leadership as we emerge from the crisis.
Key highlights include:
carsales Global Platform deployment
We strive to think global in everything we do in order to achieve
our strategy of having best-in-class global platform-based services.
This year, we saw the deployment of our retail front end Global Platform
enabling the efficient roll out of carsales' suite of products into LATAM.
Launched Universidad soloautos & Demotores Campus
Launched in FY20, this learning opportunity provides local dealers in Mexico
and Argentina the ability to participate in a unique program that offers
access to our experts and showcases how data and insights can produce
smarter business interactions.
New Products
Launched
• Premium Ads
• Top Spot
• Have You Considered
• WhatsApp Leads
•
•
Inspect Pro
Instant Offer
>1,000
Attendees to webinars
in LATAM
Developed key third party partnerships
In FY20, each local marketplace developed key partnerships in the business
community to bolster offerings, in efforts to further strengthen clear market
leadership positions.
New Commercial
Partnerships
• Vehicle history reports
•
• Financing partnerships
Instant Offer partnerships
23
Annual Report 2020carsales.com Ltd Future Horizon
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.
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 2% of our total
Australian onsite inventory (hybrid and pure electric vehicles)
and about 9% of Australian new car sales in June 2020.
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 investment in new technologies and
programs like voice search, big data, blockchain, Artificial
Intelligence and machine learning 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.
24
Annual Report 2020carsales.com Ltd Our People. Our Culture.
Our people across the globe make our business
a success. We continue to work with passion,
united by our purpose – to empower people
to move freely through our world-leading
marketplaces.
A year of listening
Our business has a proud history and big future. We are
always striving to be a global employer of choice which means
that feedback from our people is essential for us to evolve.
Each year we gather feedback through our global engagement
survey and pulse surveys with over 80% participation rates.
This year was one where we embraced many new ways
of working. Unprecedented events such as the COVID-19
pandemic and the Australian bushfires have tested everyone's
resilience. What our people have done in the last 12 months
has been nothing short of impressive – with each and every
individual demonstrating focus on the task ahead, passion
in how we approach our work, our customers, stakeholders
and most importantly – each other.
We are proud of our high-performance and inclusive culture.
2020 has also shown us the importance of connectedness.
From weekly carsales catch-ups hosted by Cameron and
the ELT, to making sure we start every meeting by asking
"How are you?", we are committed to being there for
each other.
It is the passion of our people that has again led us to being
formally acknowledged as a Great Place to Work in 2020 by
Great Place to Work Australia for the second consecutive year.
This recognition truly reflects how committed our people are
and how committed we are to our people.
In March 2020, the nine-month refurbishment
project of our office in Cremorne officially
concluded. This was a significant investment
in our office environment, and was done to
enable our people to come together to connect,
socialise and showcase achievements. Some
of the changes to our office through the
refurbishment include the introduction of
additional collaborative spaces, integrated
smart technology, an end-of-trip facility,
electric charging stations, change-rooms,
and an auditorium.
Our surveys show that our team is staying connected –
even while working remotely. During the COVID-19 pandemic
we put many additional support measures in place and 93%
of our people identified that they have adapted well to the
change in working environment, with an additional 82% of
our people agreeing that we are collaborating and innovating
well with each other to get the job done.
Results have also shown that our people remain proud to
work for carsales. Our people have told us they value the
support and balance that is provided by the business and
further, 85% of our people have shared that they believe
their manager genuinely cares about their wellbeing.
The carsales Graduate Program
Going from strength to strength, our Graduate Program has
continued to attract the brightest and most impressive talents.
We’re proud of the program that gives our graduates a broad
carsales experience and provides formal mentoring and support
from our talented people. This year we received almost 1,500
applications for our 2021 program – making it extremely
difficult for us to choose from such impressive talents.
The program is targeted to enhance the growth areas
of our business – with a key focus in Data and Insights,
Artificial Intelligence, Quality Assurance, DevOps and Product
Development. We were proud to be recognised again this
year as an Australian Association of Graduate Employers
(AAGE) Top Graduate Employer, and even further privileged
to be placed #1 in the Technology Company category.
25
Annual Report 2020carsales.com Ltd
Photographer, Tim Carrafa
carsales.com Ltd Annual Report 2020
26
26
Our People. Our Culture. continued
Case study – Our people responding
to crisis in the community
Just like our core values guide us in the workplace, they also
fuel our work in the community. There is no doubt that the
final months of FY20 have been impacted by the social, health
and economic crisis that has unfolded across the globe. We are
proud of the way our people have responded and the efforts
we have made to support our team, our customers and
the wider community.
In January, our people had a clear focus – to support those
across the country who had been directly impacted by the fires
that ravaged much of Australia’s east coast. The team rallied
together and through the carsales Foundation, the business
donated $160,000 to the Australian Red Cross bushfire
appeal. The leadership team and Board also agreed to offer
additional support to customers who had been impacted by
bushfires. The generosity did not end with financial offerings,
the team also rallied to showcase communities who would
benefit from local tourism efforts through Show the Esky
challenges and editorial content.
Simultaneously, we were preparing ourselves for the World
Health Organisation's declaration of the COVID-19 pandemic.
The impact of COVID-19 and the true devastation it has had
on nations is unparalleled – with some of these being markets
in which our business operates. From as early as January,
our people were reminded that their health and safety is the
number one priority. All travel was rescheduled, the Company
prepared the network and technology capabilities to ensure
business continuity and in early March – all people in the team
were asked to work remotely. We are really proud of how
our people have adapted to the change in operating rhythms
and continued to service our customers and consumers
through this time.
carsales has continued to offer businesses in the community
directly impacted by the restrictions financial reprieve
throughout the months of March to June. We have supported
our dealer customers with regular webinars led by our Industry
experts, released dozens of products that make the buying
and selling process easier during this pandemic and also
ensured that we were constantly able to provide a free-flow
of communication and connection between our people,
leadership team and those businesses in the community we
work with. Despite the financial offerings, what we are most
proud to have done was extend our Employee Assistance
Program to our clients and customers – to ensure that each
and every person would have access to a professional
psychologist that could provide support 24/7.
27
Learning and Development
Our people thrive off sharing knowledge, it’s a fundamental
element to our culture. We know that learning looks and
feels different for everyone – so carsales provides many
different learning opportunities.
Talking about learning and development is formalised through
our Supercharge program. Supercharge is unique to carsales
and was developed using data and feedback from our people,
collected over nine years. It is a structured and aligned
framework with a focus on career, learning, feedback and
reflection. What sets it apart is that it's agile and can be
customised based on teams and tailored to individuals.
Throughout the calendar year, there are four main conversations
that are scheduled with each team member and their manager,
and all are focused on areas of development and growth.
This year our combined learning and development program
saw more than 1,200 hours utilised across the business,
ranging from our Mentoring and Buddy program, knowledge
sharing workshops, soft skills training, online learning, external
conferences, Spanish lessons, our CEO Scholarship and a range
of other external professional development workshops.
Learning does not just flow in one direction at carsales.
We love to share what we know with each other. Our Expert
Series where our own talented people deliver workshops on
their area of expertise are the most popular learning sessions,
with attendance reaching over 100 people in many of the
sessions. We also learned about gratitude via our Gratitude
Challenge where we spent 30 days asking everyone to share
what they were grateful for. This was a unique way to remind
us to frame our thinking and celebrate positives.
Our people are also proud to share their skills and knowledge.
Throughout the year we grew our network to support the next
generation of innovators and this includes supporting people
through mentoring, internships and work experience. In the
past 12 months we have deepened our relationship with
Monash University and La Trobe University to create pathways
and opportunities for graduates.
Annual Report 2020carsales.com Ltd Our People. Our Culture. continued
Hackathons
Innovation is at the core of our culture
and Hackathons are one of our biggest
internal events of the year. A Hack is
about giving our talented team the
creative freedom to spend three days
generating concepts and working
prototypes to benefit our customers
and our consumers.
In 2019, our Hackathon was focused on
our GPS2022 strategy and the concept
of global. We had more than 20 teams,
with 360 people from across the globe
involved. It was an excellent display of
innovation and our three award
recipients ranged from new product
ideation, how our business can continue
to add value in the marketplace and
how we can use our platform to begin
the conversation on what the future of
mobility looks like.
Hackathons are not just about ideas,
we like to bring those ideas to life.
One of the ideas in our 2019 Hack
to enhance and streamline our search
functionality across our sites was proudly
released in March across a number of
our websites – with the intention of it
going onto our global platform in the
coming months. It will be one of the
most used features across our sites and
is just another way in which we are able
to simplify our consumer experience.
carsales.com Ltd Annual Report 2020
28
These four pillars have seen our people extend their generosity
in various ways from donating to the annual Smith Family
Christmas Appeal, being actively involved in the Learning For
Life program, mentoring students in years 9 to 11 through
The Smith Family’s platform or using the carsales Foundation
as a way to highlight a cause in the community.
This year, we have closely partnered with the CS in Schools
program. CS in Schools exists to help schools create relevant
and meaningful education by providing a complete DigiTech
pathway for all secondary students, developing teacher
confidence to teach digital technology, and creating industry
connections with schools. This year, 11 of our passionate
developers spent half a day each week for 12 weeks
supporting teachers from across eight secondary schools
– all with the goal to help the future generation understand
and be interested in technology.
carsales Foundation
Our culture extends beyond impressive statistics. In the past
12 months our people have significantly engaged with the
local and wider community. We encourage people to take
initiative with their annual Community Day and to volunteer
with a cause that is close to their heart. We also prioritise
giving back via the carsales Foundation. The 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.’ The Foundation’s
four core pillars clearly define how we can make a real impact.
These pillars are:
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
The Foundation supports a female to study
Technology at Swinburne University through
a Women in IT scholarship.
Pillar 3: Prevention of family & domestic violence
Donating to shelters and family support networks.
Pillar 4: Primary and secondary school education
Providing support to primary and secondary school
kids under financial hardship, via The Smith Family.
29
Annual Report 2020carsales.com Ltd Our People. Our Culture. continued
Diversity and Inclusion
carsales is proud to be a workplace that promotes, respects
and embraces diversity and inclusion. We firmly believe in
fostering a supportive and inclusive environment that values
and encourages the ideas, capabilities and experiences of our
team. Some of the things we are proud of this year were:
• For the fifth consecutive year, we achieved the Workforce
Gender Equality Agency Employer of Choice citation. This
reflects our ongoing commitment to achieving a gender
diverse workplace.
• Our CEO, Cameron McIntyre has again been active within
the community as a WGEA Pay Equity Ambassador and a
board member for Inclusive Australia.
• We continue to have conversations in the workplace on
promoting respectful relationships and preventing violence
against women.
• We sponsored the Man with a Pram event which is designed
to bring fathers and families together across the country to
build stronger local communities and raise awareness and
funds for programs that support fathers and families.
• On one of the most important days on the carsales calendar,
we celebrated International Women’s Day. This year we
invited the very impressive Dr Jessica Gallagher – a record-
breaking Paralympian, sport ambassador and all round
trailblazer to share her journey as someone who embodies
the #eachforequal spirit.
• We were proud to maintain being a Breastfeeding
accredited workplace.
• We have invested a lot in training around Diversity and
Inclusion for our people which has meant that in the last
12 months 268 people have completed ‘Understanding
unconscious bias’, 261 people have undertaken
‘Understanding diversity and inclusion’ training and 46
have completed ‘Strategies for tackling unconscious bias’.
• We celebrated IDAHOBIT – International Day Against
Homophobia, Biphobia, Interphobia & Transphobia
– right across Australia and continue to be a workplace
that supports the Welcome Here project.
30
• Our Women In Tech (WIT) program is proactive in seeking
opportunities to promote young women to consider
a career in technology. Their passion is to break down
perceptions and empower young people to understand
technology is part of everyday life.
• In FY19/20 our WIT program was involved in the sponsorship
of Go Girl 2020, hosted monthly lunch and learn sessions
to support the professional development, proudly sponsored
a paid internship with carsales for a female completing the
Coder Academy x Code Like a Girl bootcamp, created and
built a number of selling platforms for the carsales
Foundation internal fund raising efforts and also shared
their story via the carsales Medium blog page. The WIT
participants at carsales encourage all people within the
business to come along to their sessions and become
involved in this incredibly important conversation.
• We love meeting the kids of carsales and in FY20, our Kids
Coding Camp returned for the third year, with more than
45 children (ranging from 5 to 12-year olds) coming into
our Melbourne office across two days to learn from a unique
curriculum focused on building excitement on what
technology can do as well as providing exposure
to machine learning, Mbots and more.
Annual Report 2020carsales.com Ltd Directors’ Report
International
carsales has multiple operations outside of Australia through
subsidiaries, equity accounted associate investments and
financial asset investments as set out below (subsidiaries
unless otherwise stated):
carsales Asia
• South Korea – Encar.com. This is our major business
in this segment. Encar.com is the market leading
digital automotive classified business in South Korea
(100% owned).
• South East Asia – iCar Asia Limited. iCar Asia is the leading
online automotive portal in South East Asia with operations
in Indonesia, Malaysia and Thailand (11.7% owned, held
as an investment).
• Redbook Asia – provides automotive data services
in Malaysia, Thailand and China.
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%
In addition, the Group has small investments in other
companies including RateSetter Australia Pty Ltd and
PromisePay Pte Ltd, both of which are accounted for as
financial asset investments. Both businesses 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, and other
leisure items, vehicle procurement and other related services
to customers. Revenues arise from commissions paid by finance
providers and other related service providers. The Group
finalised the sale of Stratton Finance Pty Ltd in April 2020.
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 2020.
Operational and Financial Review
Principal Activities
carsales is the leading digital automotive marketplace in
Australia, with a growing global presence in Asia and Latin
America. We are the go-to place to buy and sell cars, bikes,
boats, trucks, caravans and much more across our network
of sites (set out on page 16 and 20).
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 media
advertising services.
• Classified advertising allows our private and dealer
customers to advertise automotive and non-automotive
goods and services for sale across the carsales network.
This segment includes products such as subscriptions,
lead fees, listing fees and priority placement services
(depth products).
• Media advertising involves carsales’ corporate customers,
such as automotive manufacturers/importers, finance
and insurance companies etc., placing display advertising
for their brand or vehicle on carsales’ websites. These
advertisements typically display the product or service
offerings of the corporate advertiser as banner
advertisements, video content or other sponsored links.
• Online advertising includes carsales’ investments in tyresales
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
This segment comprises a diverse range of solutions for our
customers including software as a service, research and
reporting, valuations, appraisals, website development
and hosting and photography services.
31
Annual Report 2020carsales.com Ltd Directors’ Report continued
Group Financial Results
Impact of COVID-19 on our operating environment
The increasing severity of social distancing measures imposed
in Australia across March 2020 significantly impacted the
automotive industry and our customers, which translated
into a reduction in buying and selling activity on carsales.
In support of our dealers, carsales provided a 100% rebate
in April, provided a 50% rebate in May and provided a 100%
rebate on new car services in June. As infection rates declined
and social distancing measures have been eased, we observed
a strong recovery in transaction activity in the Australian
automotive industry from late April to the end of June.
In South Korea, our Encar business has performed very well
throughout FY20 and has not been significantly impacted
by COVID-19, with the spread of the virus well controlled
in South Korea to date. Increasing infection rates in the
LATAM region have significantly impacted the automotive
sector in our countries of operation comprising Brazil,
Mexico, Chile and Argentina.
Financial Review
In a very challenging environment, the Group delivered a
pleasing financial performance in FY20, highlighting the
underlying resilience of the carsales business model. Group
operating revenue from continuing operations decreased 5%
to $395.6m on the prior comparative period (pcp). However,
excluding the rebates provided in support of our dealers in
April to June, Adjusted Revenue grew 1% on pcp. Adjusted
EBITDA from continuing operations was up 6% on pcp to
$231.8m with EBITDA margins of 55% reflecting continued
operating leverage in our business and the benefit of our cost
saving program to mitigate the impact of the COVID-19
pandemic. Adjusted NPAT from continuing operations
attributable to the owners of carsales.com Ltd was $138.2m,
up 6% on pcp. Reported NPAT attributable to the owners of
carsales.com Ltd was $119.9m, down 9% on pcp, principally
reflecting the impact of the support package provided to our
dealer customers.
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 Revenue’ ‘ Adjusted EBITDA’,
‘Adjusted Net Profit After Tax’ 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 rebates, restructuring, financing, tax,
investments and acquired intangible amortisation from the
reported IFRS measures. A reconciliation of Reported Net Profit
After Tax to Adjusted Net Profit After Tax is set out in Note 5.
Revenue
All references to revenue outcomes below reflect ‘Adjusted
Revenue’ outcomes which add back the rebates provided
to our dealers in April, May and June.
Online Advertising Services
• Dealer Adjusted Revenue was up 10% on pcp to $168.7m
reflecting both solid growth in revenue from traditional
transactional products (particularly lead volumes) as well as
continued growth in the demand for premium listing and
depth products. Lead volume growth was driven by multiple
factors including a resilient used car market, growing our
audience share, and likely changes in car buying behaviour
due to COVID-19. We continue to grow the use of our
promote products through increasing the sophistication
of our product set as well as continuing to educate our
customers about the benefits of priority listings.
• Private revenue was down 5% on pcp to $77.8m reflecting
the negative impact of the COVID-19 pandemic on volumes
in our key product areas of private online ads, inspections
and tyresales in the second half of the financial year. In the
first half of the financial year, Private revenue was up 7%
driven by increasing penetration of our Instant Offer product
and tyresales volume growth.
• Media revenue was down 22% to $50.2m which reflected
very challenging market conditions in the automotive
advertising market, with new car sales down 14% in
FY20 on pcp. The COVID-19 pandemic exacerbated an
already weak new car market with new car sales down
27% in Q4 of FY20 which translated into a material
reduction in OEM advertising budgets. Our significantly
improved native and video product portfolio enabled
us to partly mitigate the sharp decline in the advertising
market and leaves the business in a good position for
when the advertising market recovers.
Data, Research and Services
Data, Research and Services Adjusted Revenue was flat at
$43.3m, reflecting the negative impact of the COVID-19
pandemic in the second half of the financial year as well as
the intentional exit of some low margin products and contracts
in the first half of the year. The underlying demand for our
Data, Research and Services from OEMs, dealers and corporate
customers continues to be solid 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 solid growth from our trust products, including
carfacts and warranty, as our core RedBook business continued
to grow volume and yield.
32
Annual Report 2020carsales.com Ltd carsales International
carsales Asia
carsales Asia revenue was up 16% to $75.5m primarily
reflecting the performance of the Encar.com business in
South Korea which is the primary component of this segment.
Underlying revenue growth of 17% in South Korea was driven
by the increased uptake of the Guarantee vehicle inspection
service, the growth in vehicles listed on the site, attaining
additional share of media spend by OEM customers and
increasing penetration of the Dealer Direct (Instant Offer)
product. The Company also operates its RedBook data
business throughout Asia which showed solid revenue
growth of 6% on pcp.
carsales Latin America
The Company owns online automotive advertising companies
operating in Mexico, Chile and Argentina. Combined revenue
down 16% in the region comprises very good growth in
Mexico, offset by weakness in Chile and Argentina. Revenue
growth rates in all countries have been impacted by the
increasing COVID-19 infection rates and socal distancing
measures in the LATAM region.
The Group’s largest investment in the Latin America region is
in Brazil (Webmotors) where the Group owns a 30% stake in
Webmotors – the revenue performance of this business is not
included in the consolidated results as it is equity accounted.
In FY20, Webmotors recorded good local currency revenue
growth of 17% on pcp reflecting the continued expansion
of dealer numbers and website traffic as well as an increasing
contribution from finance revenues.
Adjusted EBITDA and Adjusted NPAT
Operating costs of $191.3m were down $8.3m or 4% on
pcp resulting in Adjusted EBITDA being up 6% on pcp to
$231.8m. Adjusted EBITDA margins increased from 52%
to 55% reflecting continued operating leverage in our
business, the benefit of our cost saving program to mitigate
the impact of the COVID-19 pandemic. The benefits of these
savings flowed through to Adjusted NPAT, which was also
up 6% on pcp to $138.2m.
Reported Revenue, Reported EBITDA and Reported NPAT
metrics were all lower than Adjusted metrics, largely
reflecting the impact of the COVID-19 Dealer Support
Package provided to our dealers. A reconciliation of
Reported and Adjusted metrics is included in the Financial
Statements and Investor Presentation.
33
Annual Report 2020carsales.com Ltd • Private:
– Private listing volumes had largely recovered to
pre-COVID-19 levels in July 2020.
– Listing volumes now being impacted by stage 4 metro
Melbourne restrictions. Other states still performing well,
recording pre-COVID-19 listing volumes.
– Lower volumes in tyresales expected in FY21 reflecting
Q4 run rate and metro Melbourne restrictions.
• Media and new car market:
– Improving signs in new car activity in June and July,
with some recovery in media revenue run rate against
pcp. Stage 4 restrictions in Melbourne could impact this
recovery. Expecting media revenue to be lower than
pcp in the first half.
International
• South Korea:
– At the start of FY21, key operating metrics of inventory,
listing volumes and traffic are all growing well reinforcing
continued good growth in revenue and EBITDA on pcp.
• Brazil:
– Despite high continuing infection rates, we have observed
a good rebound in key metrics since June as Brazil emerges
from lockdown. Traffic, leads and revenue are now
showing growth on pcp in early FY21.
• LATAM
– Key operating metrics still impacted by continuing
restrictions in Chile, Mexico and Argentina. Profitability
being well managed through strong cost control. In a good
position to leverage unserviced consumer demand and
recent product development investment as countries
emerge from COVID-19 restrictions.
Directors’ Report continued
FY21 Trading Observations
Overall Summary
• COVID-19 continues to create uncertainty in our operating
environment.
• We remain committed to supporting our people through
these challenging times.
• While lockdowns in most regions have been lifted, Metro
Melbourne and Regional Victoria are currently in stage 4
and 3 lockdowns and localised lockdowns in other
jurisdictions remain a real possibility.
• We will continue to focus on managing costs.
• We remain committed to investing in product and market
leading positions.
• Business is well diversified across geography and product –
international now represents 19% of look-through
EBITDA, significant diversification in Australia across
states and territories.
• Used car market has proven very resilient with volumes
rebounding quickly after lockdowns have been lifted,
business has limited exposure to new car market.
• Trends coming out of COVID-19 very positive for carsales
– continued digital adoption, increased propensity for
car ownership.
• Business is well funded with low gearing, strong liquidity
and strong cash generation to fund growth capital
and dividends.
Specific Trading Observations
Given the continuing uncertainty due to COVID-19, we are
not providing specific guidance on our financial expectations
for FY21. We do, however provide the following current
trading observations.
Australia
• Dealer:
– In July 2020, overall lead volumes grew strongly on the
prior corresponding period (pcp).
– Lead volumes in Victoria are now being impacted by the
metro Melbourne restrictions. Other states still showing
strong growth on pcp.
– Implemented Dealer support package for metro
Melbourne dealers – 100% rebate on all fees from
6th of August 2020 until stage 4 restrictions are lifted.
34
Annual Report 2020carsales.com Ltd Corporate Governance
Environmental, Social
and Governance Report
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.
This corporate governance framework acknowledges the
ASX Corporate Governance Council’s Corporate Governance
Principles and Recommendations (ASX Principles and
Recommendations) and is designed to support our business
operations, deliver on our strategy, monitor performance and
manage risk. Our FY20 Corporate Governance Statement
addresses the recommendations contained in the fourth
edition of the ASX Principles and Recommendations and is
available on our website at http://shareholder.carsales.com.au/
Investor-Centre/.
At carsales, we take our ability to have a positive
impact on society extremely seriously.
carsales is pleased that many of its shareholders are interested
to learn more about the Company’s approach to governance,
and its social and environmental impact. To this end, carsales
has published its Environmental, Social and Governance Report
for 2020, available on our Corporate Governance page of our
investor website at http://shareholder.carsales.com.au/
Investor-Centre/.
This report outlines the Company’s approach to assessing,
mitigating and managing ESG risk, which is overseen by the
Company’s Board and managed by the carsales’ Executive
Leadership Team. It includes the considerable work we do to
identify potential risks to the Company and implement detailed
plans to protect Shareholders’ interests. It also provides insight
into our unique culture, how we attract and retain the very
best talents, and seek to have a positive impact on our industry
and community. Finally, while we have a low environmental
impact as an online business, it addresses the Company’s
environmental efforts.
35
Annual Report 2020carsales.com Ltd Our Board
Patrick O’Sullivan
Cameron McIntyre
Wal Pisciotta OAM
Non-Executive Chair
Chief Executive Officer
and Managing Director
Non-Executive Director
and Co-Founder
Kim Anderson
Non-Executive
Director
Edwina Gilbert
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 Fellow
Certified Practising
Accountant (FCPA).
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. 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
recommenced her
position with the
Hyundai National Dealer
Council in 2019. 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.
36
Annual Report 2020carsales.com Ltd Kee Wong
David Wiadrowski
Steve Kloss
Nicole Birman
Non-Executive
Director
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.
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.
David has over 25 years’
experience as a partner
of PwC, including 5
years as the Chief
Operating Officer of
PwC Assurance where
he was responsible for
managing the firm’s
largest business unit,
and 5 years practicing in
the firm’s Indonesian
office, where in addition
to his responsibility as an
audit partner he was
responsible for the firm’s
IT platform.
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.
In addition to his
outstanding financial
credentials, David brings
strong commercial
acumen to the Board,
derived from his
extensive experience at
PwC and board roles at
Vocus, Life360 and more
recently oOh!Media.
37
Annual Report 2020carsales.com Ltd Our Remuneration Chair’s Message
Dear Shareholders,
On behalf of the Board, I am pleased to present the Remuneration Report for the year ended 30 June 2020 (FY20).
During this unprecedented economic environment, the Board has undertaken an extensive review and deliberation of Executive
KMP remuneration outcomes with the aim to strike a fair and reasonable balance between recognition, reward for management
and delivery of performance for shareholders.
For shareholders, the performance outcomes of the Company have remained strong, with carsales continuing to perform in
the top 15% of both the ASX 100 and 200 for Total Shareholder Returns (TSR) over the past three years and top 10% for
the past 12 months. The Company’s share price at 30 June 2017 was $11.52 and the closing share price at 30 June 2020
was $17.74, which, combined with $1.33 of cumulative franked dividends paid over three years, equated to a TSR of 66%
(18% compound annual growth rate over the three years). Given the strong balance sheet, the Board’s belief in the long-term
performance potential of the Company and the need for consistency and certainty for shareholder returns, the Board has
not changed the dividend pay-out policy.
The Company prides itself on having a strong sense of values, culture and passion. I was proud that we have once again
been recognised as a Workforce Gender Equality Agency Employer of Choice, a certified Great Place To Work®, an AAGE
Top Graduate Employer and maintained our strong culture of engagement over the past twelve months.
Our customers have been challenged with the devastating impacts of the bushfires and the significant impacts of the COVID-19
pandemic. We are proud that during these turbulent times we supported our dealer customers with significant rebates (100%
in April, 50% in May and 100% on new cars services in June), extended credit terms and access to the Company’s Employee
Assistance Program counselling services. This $28m support package, while challenging for the Company, was the right thing
to do to improve the dealer network’s long-term viability. The response from our customers has further enhanced our market
leadership, as well as built additional goodwill and loyalty.
Our Executive KMPs also reacted swiftly to minimise impacts on shareholders, with an extensive cost management
program including recommending and implementing a 20% reduction in Board Director fees and Executive KMP salaries,
reducing marketing spend and reinforcing our strong balance sheet by refinancing the existing debt facility.
Board response to strike received at AGM
At the 2019 AGM, the Company received a ‘first strike’ against the Remuneration Report. The Board takes shareholder concerns
seriously and, since the meeting, has engaged extensively with shareholders and proxy advisers to understand their concerns.
These meetings provided the Board with further perspectives for consideration when reviewing the FY20-22 LTI structure.
As a result, the Board addressed the concerns by increasing the weighting of the financial component of the plan to 70%
and decreasing the weighting on strategic measures to 30% (previously 60% financial and 40% strategic) and extended this
change to the FY20 STI plan as well. In addition, the Board reinstated a minimum threshold on both financial performance
measures of the plan.
While listening and acknowledging the feedback from stakeholders, the Board must also consider how to balance the need
for remuneration plans to engage and fairly reward Executive KMP for their contribution to the business’ long-term success.
As such, although a threshold has been re-introduced for financial measures under the LTI plan, the Board decided to introduce
a non-linear vesting schedule to reflect the difficulty in achieving higher growth.
Company performance
Despite the economic downturn felt from the effects of COVID-19, the Company has performed very well under strong
Executive KMP leadership.
For FY20, a summary of business outcomes are as follows:
• Company Adjusted Net Profit After Tax (NPAT) was up by 6% compared to 2019 and up 9% compared to 2018.
• Look through Adjusted revenue was up 3% compared to 2019 and up 11% compared to 2018.
• Adjusted earnings per share (EPS) from continuing operations of 56.4 cents per share was up 6% compared to the prior year.
• TSR for FY20 was 35%.
38
Annual Report 2020carsales.com Ltd Executive KMP Remuneration Outcomes
The Board has taken a considered view of Executive KMP remuneration outcomes, reflecting on the impact that COVID-19 will
have across both FY20 and FY21. It is important to note that prior to COVID-19, the Company was on track to meet the financial
thresholds of both the FY20 STI and LTI plans and would have overachieved on several of the metrics.
When assessing strategic objectives in both the LTI and STI plans, the Board uses a scorecard of three key measures: on-time
delivery, on budget, and a positive contribution to the bottom line.
Below is a summary of the STI and LTI outcomes:
• FY20 STI
– Financial (70% of the plan) – The Company did not achieve the threshold financial targets of the FY20 plan, which resulted
in a 0% outcome. In the absence of the COVID-19 Dealer Support Package, the Company would have exceeded the
threshold for look through revenue, however no discretion was applied by the Board. Adjusted NPAT was over the threshold
level of achievement of 3% however, the Board considered past shareholder feedback and the magnitude of the adjustments
for the year, including the Dealer Support Package and JobKeeper wage subsidy, and determined that exercising negative
discretion by using Reported NPAT was appropriate.
– Strategic (30% of the plan) – A scorecard outcome of 93% for the strategic objectives of the plan was achieved.
– A total outcome of 28% was achieved.
• FY18-20 LTI
– Financial (70% of the plan) – The vested outcome for the financial component of the plan was 46%.
– Strategic (30% of the plan) – A vested outcome of 30% for the strategic objectives of the plan was achieved.
– A total vested outcome of 76% was achieved.
The Board exercised discretion and determined that it was appropriate to vest the financial component of the FY18-20 LTI plan
at the mid-target, which equates to vesting 66% of the financial component of the plan. This decision was made by the Board
on the following basis:
• The Board acknowledged the strength of response in cost management and shareholder performance (measured through TSR)
over the last 12 months (35%) and three years (66%), and the financial performance of the business.
• Dividends remained in place throughout the period and were consistent with our pay-out policy.
• Executive KMP and Senior Management took a 20% reduction in salaries and made no redundancies.
• The Board strongly supports Executive KMP and Senior Management decisions to assist customers through the COVID-19
pandemic with a $28m Dealer Support Package provided for in April, May and June as it protects the Company’s long-term
interests. The Board acknowledges that Executive KMP took this action despite the likely detrimental impact to individual
remuneration outcomes.
• The Company was on track to deliver against both financial performance metrics for the FY18-20 LTI, up to the impact
of COVID-19 in March 2020.
We believe our approach fairly recognises the outcomes and value creation that our Executive KMP team has achieved for
the business and shareholders.
Committee priorities for FY21
We will continue to monitor the Executive KMP remuneration framework to ensure we maintain the strong link between
performance and reward and to drive the long-term business focus in this economic climate. The Board and the Executive
KMP team have been working effectively to ensure the Company recovers quickly from the COVID-19 pandemic and believe
we have an energised and capable team to achieve this.
As always, we welcome your feedback on our Remuneration Report and look forward to discussions with many of you over
the coming year. We also wish yourself and your families good health during these challenging times.
Yours sincerely
Kim Anderson
Chair of the Remuneration and Nomination Committee
39
Annual Report 2020carsales.com Ltd Remuneration Report 2020
In this Report
1. Board Response to Strike Received
40
6.
Executive KMP Statutory
Remuneration Disclosure
2. Who is Covered in this Report
2.1 Key Management Personnel
3.
Summary of the Executive KMP
Remuneration Framework
3.1 Executive remuneration strategy
and link to Company performance
3.2 Remuneration mix
3.3 Timeline for delivery of remuneration
4.
Remuneration Outcomes and Link
to Performance
4.1 Company Five-year Financial Performance
4.2 Executive KMP Realised Remuneration
Snapshot – FY20
4.3 Short-Term Incentive Plan – Key Features
and Outcomes
4.4 Long-Term Incentive (LTI) Plan – Key Features
and Outcomes
4.5 Fixed Remuneration Outcomes
6.1 Accounting based benefits
7. Executive Service Agreements
8. Executive KMP Equity Disclosures
8.1 STI and LTI Payments (cash, options & performance
rights) achievement against maximum entitlement
8.2 Share-based compensation disclosures
8.3 Shares provided on exercise of remuneration
options and performance rights
8.4 Share-based compensation benefits
8.5 Shares under option and performance rights
8.6 Shares issued on the exercise of options and
performance rights
9. Non-Executive Director Fees
9.1 Accounting based benefits
9.2 Share holdings
9.3 Other transactions
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5. Remuneration Governance
5.1 Engagement with shareholders and proxy advisors
54
55
Independent Audit of the Report
The information provided in this Remuneration Report has been audited as required by section 308(3C) of the
Corporations Act 2001.
1. Board Response to Strike Received
At the 2019 AGM, whilst the majority of shareholder votes were cast in favour (68%) of the adoption of the 2019 Remuneration
Report, there were 32% of votes cast against, constituting a ‘first strike’ under the Corporations Act 2001. Keen to understand
concerns, the Board has engaged extensively with shareholders and proxy advisers, and issued a release in January 2020 outlining
key changes which addressed their concerns.
The key concerns identified by shareholders are outlined below as well as the changes made in January 2020 by the Board
in response:
Shareholder concerns raised
FY20 LTI Plan increase in strategic performance
measures by 10% to 40% of total award
resulting in reduction of financial performance
measure weightings to 60%.
FY20 LTI Plan removal of threshold
performance gateway.
Greater transparency needed with strategic
performance outcomes within the
Remuneration Report.
Board response
Performance measures have been restored to 30% strategic and 70%
financial performance, similar to prior years.
After consideration of feedback received by shareholders on the LTI
performance measures mentioned above, a further step was made by the
Board to adjust the STI Plan performance measures to 30% strategic and
70% financial performance for consistency.
Threshold gateway restored however non-linear vesting schedule introduced
to reflect the difficulty in achieving higher growth stretch targets for
Executive KMP with greater line of sight to an award.
We have provided further transparency on strategic performance
achievements within the STI and LTI performance outcome sections of
this year’s report to provide greater transparency on how outcomes
have translated into remuneration awarded.
40
Annual Report 2020carsales.com Ltd 2. Who is Covered in this Report
This Remuneration Report details the performance and remuneration of Key Management Personnel (KMP), comprising
Non-Executive Directors and members of the Executive Leadership Team (herein referred to as Executive KMP) who have
the authority and responsibility for planning, directing and controlling the activities of the Company during FY20.
2.1 Key Management Personnel
The Company’s KMP in FY20 are listed in the table below, including the new role of Managing Director – Australia and newly
appointed Chief Financial Officer. There were no changes to Non-Executive Directors throughout the year.
Name
Non-Executive Directors
Patrick O’Sullivan
Walter Pisciotta
Kim Anderson
Edwina Gilbert
Kee Wong
David Wiadrowski
Steve Kloss
Executive KMP
Cameron McIntyre
Ajay Bhatia1
Paul Barlow
William Elliott2
Former Executive KMP
Simon Ryan
Andrew Demery
Position
Chair
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director (Alternate)
Managing Director and Chief Executive Officer
Managing Director – Australia
Managing Director – International
Chief Financial Officer (commenced as KMP 16 January 2020)
Managing Director – Commercial (ceased as KMP 2 December 2019)
Chief Financial Officer (ceased as KMP 31 October 2019)
1. Ajay Bhatia assumed responsibility for all Australian focused operations including Consumer, Dealer, Media, OEM, Commercial Excellence and Sales Operations, effective
December 2019. Prior to this, Ajay held the outgoing role of Managing Director – Consumer.
2. William Elliott stepped into the Acting Chief Financial Officer role from October 2019 and the Board appointed William into the Chief Financial Officer role, effective January
2020. At this time William assumed full responsibilities of the role and was determined a KMP as defined by AASB 124 Related Party Disclosures. Remuneration disclosed
for William is reported from his commencement date as CFO in January 2020.
3. Summary of the Executive KMP Remuneration Framework
3.1 Executive remuneration strategy and link to Company performance
The delivery of our Company purpose and strategy is supported by our remuneration principles and framework. We are guided
by our remuneration principles when designing remuneration plans and making quantum decisions within our remuneration
framework, which support the execution of our business strategy.
The strategic measures for our Company's remuneration plans are taken from areas of focus in the GPS 2022 strategy to ensure
that the wider company is aligned in both remuneration & strategy.
41
Annual Report 2020carsales.com Ltd Purpose: Empower people to move freely through our world-leading marketplaces
Delivered through three strategic pillars:
Enabled by:
Grow Digital
marketplaces
Build value-added
services
Seek future
horizons
Our
People
Best-in-class
Data
Best-in-class
Technology
Underpinned by our Remuneration Principles
Market Competitive
Ensure the Company has the flexibility to attract, motivate and retain high-calibre
talent in a competitive market.
Alignment
The alignment of Executive KMP interests with those of shareholders’ and our customers are
paramount to business success. We believe in a pay for performance culture and
through this encourage Executives to build and maintain a reasonable shareholding.
Link to Company strategy
Our focus is on value-add objectives that contribute to achieving our purpose so that
we reward what truly impacts business growth.
Reward the right outcomes
We encourage responsible decision making that is made in the best interests of our
customers and shareholders and align reward outcomes accordingly.
Reinforcing business goals and objectives via our Remuneration Framework
Remuneration Component
Alignment to performance
Alignment to principles and strategy
Fixed Remuneration (FR)
Comprises base salary and superannuation
Set at a market competitive level in relation
to the scope, complexity, capabilities and
individual performance in the role.
Set to attract, retain and engage the best
people to design and lead the delivery
of our strategy.
Short-Term Incentive (STI)
Annual incentive opportunity. Delivered as
75% cash and 25% deferred performance
rights for a 12-month period, subject to
continued service.
Long-Term Incentive (LTI)
Granted in 70% performance rights
and 30% options with a three-year
vesting period.
Provides recognition for day-to-day,
operational activities in the role.
Performance assessed using a Group
Performance scorecard against:
• Financial measures (70%) – Adjusted
NPAT and look through revenue,
weighted equally.
• Strategic measures (30%) – Pre-determined
projects, engagement metrics and
individually assigned business objectives.
Performance assessed against:
• Financial measures (70%) comprising
Cumulative Annual Growth Rate for: Look
through revenue and Adjusted NPAT
(FY18-20) and EPS (FY19-21 & FY20-22).
• Strategic milestone measures (30%)
including International revenue growth,
growth in Australian non-classified
automotive products and successful
development and deployment of the
Group’s technology into its adjacent
markets and international businesses.
Linked to the Company’s key strategic
priorities which directly contribute
towards the execution of long-term
strategy each year.
The 25% of the award that is deferred
into equity supports Executives’ alignment
with shareholder interests, as well as
Executive retention.
Targeting profitable, sustained growth in
revenue and shareholder wealth creation.
The three-year vesting period encourages
consideration of long-term decision making
and value creation, as well as operating
as a retention tool.
With a significant portion of potential
remuneration based on carsales equity,
the Board provides alignment between
the interests of Executives with shareholders.
Non-monetary benefits: Employees receive salary continuance insurance cover. It is not allocated on an individual basis.
42
Remuneration Report continuedAnnual Report 2020carsales.com Ltd 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 2020. However we have
received guidance and advice from Ernst & Young on what is happening in the market during these complex times.
3.2 Remuneration mix (percentage of total remuneration)
Within the remuneration framework, our focus has been to strengthen the levels of performance-based remuneration which has
been prominent in any remuneration decisions that have been made. As such, our remuneration mix (at maximum) includes
at least 50% variable pay.
The figure below shows the remuneration mix at maximum opportunity for FY20, comprising Fixed Remuneration, STI cash,
STI deferred and LTI granted.
The actual remuneration mix will vary based on Group and individual performance each year.
3.3 Timeline for delivery of remuneration
The diagram below provides a summarised timeline of when the FY20 remuneration opportunity is delivered.
Fixed Remuneration
Base salary/Super (100%)
Short-Term Incentive
Cash (75%)
Deferred performance
rights (25%)
Long-Term Incentive
Performance rights/Options
(100%)
Performance Year
Year 1
Year 2
Year 3
43
Fixed RemunerationMD & CEOMD AustraliaMD InternationalCFOSTI CashSTI DeferredLTI35%22%8%8%35%40%23%29%50%25%9%16%46%18%6%30%Annual Report 2020carsales.com Ltd 4. Remuneration Outcomes and Link to Performance
One of the key principles of the Company’s remuneration framework is to align Executive KMP remuneration outcomes with
Company performance. This section provides a summary of the Company’s five-year financial performance outcomes and the
link to remuneration outcomes over this period.
4.1 Company Five-year Financial Performance
The Company’s financial performance over the past five years along with how that performance has translated to shareholders
in the form of earnings per share (EPS) and total shareholder return (TSR) is demonstrated in the graphs below.
Look through1 Adjusted Revenue2 ($m)
Adjusted NPAT ($m)2
500
400
300
200
100
0
CAGR 10%
424.7
93.5
436.6
105.5
331.2
331.1
394.1
67.2
326.9
334.5
44.0
290.5
300.2
34.1
266.1
FY16
FY17
FY18
FY19
FY20
carsales Domestic
carsales International
150
120
90
60
30
0
CAGR 7%
127.1
130.2
138.2
116.2
105.9
FY16
FY17
FY18
FY19
FY20
Adjusted EPS and KMP remuneration
Cumulative TSR (last five years)
)
s
t
n
e
c
(
S
P
E
d
e
t
s
u
d
A
j
60
50
40
30
20
10
0
CAGR 6%
10
100%
52.4
53.4
56.4
48.1
44.0
FY16
FY17
FY18
FY19
FY20
%
o
i
t
a
R
8
6
4
2
80%
60%
40%
20%
0%
95%
32%
FY16
FY17
FY18
FY19
FY20
Adjusted EPS
KMP % of Adjusted NPAT
carsales
ASX200 Total Returns
1. carsales "look through" methodology: For equity accounted associates and consolidated subsidiaries, add the total revenue or EBITDA for the period of ownership within
the reporting period multiplied by the % ownership over the period. Some "look through" numbers involve the disclosure of non-IFRS information.
2. Adjusted Revenue 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 Dealer
COVID-19 Dealer Support Package, fair value gain arising from discontinuing the equity method (net of NCI), gain on associate investment dilution (net of NCI), loss on disposal
of subsidiary, one-off transaction and restructure costs, one-off bad debt expenses, changes in fair value of put option liabilities and deferred consideration, one-off tax
adjustment, option unwinding discount and non-cash acquired intangible amortisation. FY16-FY19 results have been restated to reflect the adoption of AASB 16.
44
Remuneration Report continuedAnnual Report 2020carsales.com Ltd
Executive KMP Remuneration Outcomes
Dividend Per Share and Payout Ratio
100
80
60
40
20
0
%
85%
85%
73%
76%
55%
57%
40%
49%
32%
28%
0%
0%
FY16
FY17
FY18
FY19
FY20
5-Year
50.0
40.0
s
t
n
e
C
30.0
20.0
10.0
0.0
CAGR 6%
44.2
45.5
47.0
40.2
37.3
FY16
FY17
FY18
FY19
FY20
87.0
85.0
83.0
81.0
%
79.0
77.0
75.0
STI Outcome (% of max)
LTI Vesting Outcome (% of max)
Dividend per share
Dividend payout ratio
4.2 Executive KMP Realised Remuneration Snapshot – FY20
The table below provides actual amounts received by the Executive KMP for FY20. This table is an additional disclosure to those
required under the Australian Accounting Standards and the Corporations Act 2001, and is provided to assist shareholders in
understanding realised outcomes. These figures include the STI and LTI outcomes, as well as the Executive KMP’s Fixed
Remuneration reflecting a 20% reduction for the months of April to June 2020.
Name
Executive KMP
Cameron McIntyre
Ajay Bhatia
Paul Barlow
William Elliott5
Former Executive KMP
Simon Ryan6
Andrew Demery7
Total FY20
Total FY19
Year
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
Fixed
remun-
eration1
$
1,349,000
1,350,000
807,500
824,250
588,525
619,500
144,487
-
388,541
379,874
259,584
520,000
3,537,637
3,693,624
Cash STI
Earned2
$
259,434
275,512
136,500
121,714
88,465
92,424
36,750
-
-
59,969
-
70,682
521,149
620,301
Vested
deferred
STI3
$
120,330
188,825
53,149
90,272
40,359
71,005
-
-
-
-
-
48,843
213,838
398,945
Vested
LTI4
$
1,575,022
305,211
441,001
152,611
252,007
106,821
37,805
-
-
-
-
53,404
2,305,835
618,047
Total
$
3,303,786
2,119,548
1,438,150
1,188,847
969,356
889,750
219,042
-
874,985
719,843
509,083
692,929
7,314,402
5,610,917
Other
$
-
-
-
-
-
-
486,444
280,000
249,499
-
735,943
280,000
1. Fixed Remuneration earned in the financial year (base salary and superannuation). Figures for C McIntyre, A Bhatia, P Barlow and W Elliott reflect 20% reduction in Fixed
Remuneration for the months of April 2020 to June 2020.
2. Cash STI earned in relation to performance under the STI plan during the financial year.
3. Vested deferred STI is the value of deferred STI earned as a result of performance in the prior financial year, subject to a restriction period that ended in August 2020.
The STI value calculated as the number of rights that vested multiplied by the 30 June 2020 closing share price (30 June 2019 closing share price for the FY19 financial year).
4. Vested LTI is the value of performance rights and options that vested in August 2020. Values are calculated as the number of rights and options received multiplied by the
30 June 2020 closing share price (30 June 2019 closing share price for the FY19 financial year), less the exercise cost of converting options to shares. For example FY20
is reported as the FY18 LTI grant which vested in August 2020.
5. William Elliott commenced as KMP effective 16 January 2020. Pro rata Fixed Remuneration figures provided from 16 January 2020 to 30 June 2020. The STI cash figure
represents the full FY20 STI figure paid.
6. Simon Ryan ceased employment with the Company effective 2 December 2019 and received a payment of $486,444, being 6 months in lieu of notice consistent with his
employment contract. In FY19, Simon Ryan received a sign on bonus in the form of 16,706 Zero Exercise Priced Options to the amount of $200,000 upon commencement,
as well as a $80,000 cash bonus. These amounts are included as "Other" remuneration.
7. Andrew Demery ceased employment with the Company effective 31 October 2019. The amount of $249,499 relates to 3 months notice and separation payment received.
This amount is included as "Other" remuneration.
45
Annual Report 2020carsales.com Ltd FY20 outcomes and the use of negative and positive Board discretion
FY20 STI Plan Financial metrics: While the Adjusted NPAT performance threshold was met (threshold $133.8m, actual $138.2m),
which under the plan would result in a 72% payout for this financial measure, the Board considered past shareholder feedback
and the magnitude of the adjustments for the year, including the Dealer Support Package and JobKeeper wage subsidy, and
determined that exercising negative discretion by using Reported NPAT was appropriate.
FY18-20 LTI Plan Financial metrics: While the Adjusted NPAT performance threshold was met (threshold $134.5m, actual
$138.2m), the look through revenue performance hurdle was not achieved (threshold $413.3m, actual $409.1m). However,
the Board undertook a thorough review and determined it was appropriate to exercise some discretion to vest the financial
component of the FY18-20 LTI plan at the mid-target, which equates to vesting 66% of the financial component of the plan.
This decision was made on the following basis:
• The Board acknowledged the strong returns delivered for shareholders (measured through TSR) over the last 12 months
(35%) and three years (66%), and the financial performance of the business which achieved an Adjusted NPAT growth
outcome of 6% over the past 12 months and Adjusted NPAT growth of 4% CAGR for the last three years.
• Dividends remained in place throughout the period and were consistent with company pay-out policy.
• Executive KMP and Senior Management rapidly implemented cost management initiatives including a 20% reduction in salary
from April to June, and there were no staff redundancies as a result of constraints imposed by COVID-19.
• The Company was on track to deliver against both financial performance metrics for the FY18-20 LTI, up to the impact of
COVID-19 in March 2020.
• The Board strongly supports Executive KMP and Senior Management decisions to assist customers through the COVID-19
pandemic with a $28m Dealer Support Package provided for in April, May and June to protect the Company’s long-term
interests in ensuring the viability of its customer base, albeit it had a direct negative impact on the FY20 results. Without
the Dealer Support Package, both financial components of the FY18-20 plan would have vested.
• The value of the Board's discretion exercised was $0.8m for the KMP Executives.
The Board believes this approach fairly recognises the outcomes and value creation that our Executive KMP team has achieved
for the business and for shareholders.
Executive KMP Five-year Incentive Outcomes
A summary of short and long-term incentive outcomes over a five-year period is given in the table below.
Executive KMP Remuneration Outcomes
STI outcome (average % of maximum)
LTI vesting outcome (% of maximum)
FY16
84.9%
0.0%
FY17
55.1%
0.0%
FY18
85.3%
72.9%
FY19
31.9%
49.4%
FY20
28.0%
76.0%
4.3 Short-Term Incentive Plan – Key Features and Outcomes
The key features of the Short-Term Incentive (STI) plan for the year ended 30 June 2020 are detailed in the table below.
Feature
Description
Performance
period
STI Opportunity
Approach
Eligible Executives participate in the annual STI plan with an earning opportunity that is ‘at risk’ subject
to specific pre-determined Group and individual performance measures being met. All performance
measures chosen support the delivery of our strategy and create sustainable value for all stakeholders.
Aligned with the financial year, 1 July 2019 to 30 June 2020.
The STI opportunity varies in accordance with role size, complexity and direct accountability. Market
benchmarking references are also taken into consideration. The maximum (capped) opportunity for
award represents outstanding levels of performance. Executive KMP capped levels, referenced as
a percentage of Fixed Remuneration are:
Role
CEO
Other Executive KMP
Maximum (cap)
87% of Fixed Remuneration
Between 50% to 76% of Fixed Remuneration
46
Remuneration Report continuedAnnual Report 2020carsales.com Ltd Feature
Delivery of award The STI award is delivered 75% in cash and 25% in equity (performance rights) that is deferred for
Approach
Performance
measures and
weightings
Selection of
Performance
Measures
an additional 12 months subject to a continued service condition. No dividends are payable until
the performance rights vest into ordinary shares at the conclusion of the 12-month hold period.
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 individual objectives
People & Culture
Weighting
35%
35%
20%
10%
Financial Measures:
Look through revenue
Look through revenue is the ordinary revenue
from continuing operations reported for the
consolidated Group, adjusted for the
ownership percentage held by the Group of
consolidated subsidiaries, and adding in the
Group’s ownership share of the underlying
revenue for equity accounted associates.
Adjusted Net Profit After Tax (NPAT)
Adjusted NPAT is the Group net profit after tax and
non-controlling interests from continuing operations.
It 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 set by the Board.
The Board selected these financial performance measures for the FY20 STI plan considering the stage
of growth for many of the Company’s international investments. As such, it was deemed appropriate
to continue Executives’ focus on both top and bottom line growth, while also providing a basis for
year-on-year comparison of consistent measures to be made. Adjusted NPAT was considered by the
Board as an excellent reflection of the underlying Group trading performance and is an appropriate
earnings metric aligned to shareholder value. The financial performance outcomes are provided within
the STI outcomes of the report.
Non-financial measures within the plan recognises the importance of key strategic priorities and
employee engagement in achieving business transformation. The Board decides on pre-determined
strategic performance objective targets at the beginning of the performance period which are linked
to our longer-term strategy and value creation for our shareholders. The strategic objective outcomes
are provided within the STI outcomes section of the report.
47
Annual Report 2020carsales.com Ltd Feature
Link of
performance
and reward
Approach
For each measure, there is a minimum threshold of performance required to be met before any pay-out
is awarded for that portion of the STI.
An incremental scale applies in accordance with achievement of financial measures, with the intention
to motivate and fairly reward exceptional performance outcomes. The achievement of non-financial
performance measures is assessed through a rating scale, with Satisfactory performance allocated 50%,
Above Expectations allocated 75% and Exceptional 100%.
Maximum 100%
Threshold 50%
(Non-financial)
Threshold 25%
(Financial)
Minimum 0%
Threshold
Stretch
Financial
Non-financial
Cessation of
employment
If a member of the ELT 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.
Performance outcomes against STI Measures for FY20
STI outcomes are calculated using a performance scorecard with 70% weighting on financial measures and 30% weighting
on non-financial measures. All outcomes are measured on Group performance, subject to a strategic objective for each individual.
All strategic objectives support the execution of our GPS 2022 strategy.
The Board’s assessment of the CEO’s performance in the 2020 financial year is outlined below.
Measure
Weighting
Performance
Outcome
STI
Outcome
Commentary
Financial
Look through
revenue
Adjusted NPAT
Strategic
Video and
display evolution
35% Did Not Qualify
0% Did not qualify for payment. (Threshold $413.3m,
Actual $409.1m).
35% Qualified
0% Above threshold performance achieved. (Threshold $133.8m,
Actual $138.2m) Refer to section 4.2 for further details.
4%
Exceptional
4% carsales media revenue performance in FY20 has
outperformed the industry benchmark for automotive brand
advertising (the Standard Media Index). The carsales team
released a product called My Feed (personalised feed with
Video Ads). The revenue earned from My Feed was 15%
above expectations while Video Revenue was 168% higher
than last year primarily driven by our native video products
(including My Feed).
48
Remuneration Report continuedAnnual Report 2020carsales.com Ltd Measure
New car
Weighting
4%
Performance
Outcome
Satisfactory
Operational
Excellence
4%
Exceptional
Global Platform
4%
Exceptional
Individual KPI
4%
Exceptional
STI
Outcome
Commentary
2% carsales media revenue performance in FY20 has outperformed
the industry benchmark for automotive brand advertising
(the Standard Media Index).
New packages released achieved around 80% of available
inventory published in what was the worst new car sales
market in a generation.
New Car Showroom delivered a 117% uplift in Media revenue
(as attributed to Showroom) and had a major makeover last
year which has proven to be very popular with consumers and
advertisers alike. Leads from showroom are now double what
they were last year and feedback from advertisers have been
very positive. There was a 200% uplift in click through rates.
4% Derived material operational efficiencies from both a revenue
and cost perspective through continued investment in
customer relationship management software. Evidenced
by a 22% increase in our CRM Net Promoter score.
4% Excellent progress has been made over the past 12 months in
the development of global platform capability across multiple
verticals and LATAM markets. A key element of this objective
was to deliver Control Panel to LATAM dealer customers.
4% Reviewed and re-positioned major adjacent market businesses
being Finance and tyresales. In the case of Finance the
strategic review and ultimate disposal of Stratton to support
the repositioning of dealer and consumer finance product was
completed. tyresales is a business that required change to
improve profitability, which was achieved during April to June.
People
Group employee
opinion survey
results
10% Exceptional
10% • Recognised as a Workforce Gender Equality Agency
Employer of Choice, a certified Great Place To Work®
and an AAGE Top Graduate Employer.
• COVID-19 employee engagement pulse survey results have
evidenced that the Company has maintained a strong
engagement culture.
• Strong leadership and visibility within a year of
unprecedented events.
Total
100%
28%
The Board assessed the achievement of all other Executive KMP’s individual performance component outcomes and determined
all had exceeded performance expectations. As mentioned above, this component of the plan is the only objective within the
STI plan that is assessed on an individual performance basis and accounts for 4% weighting within the overall plan.
49
Annual Report 2020carsales.com Ltd Overall STI financial outcomes
The following table provides the FY20 STI outcomes awarded to Executive KMP. Under the FY20 STI plan 25% of the awarded
STI is provided in equity, with vesting deferred for an additional 12 months subject to a continued service condition.
Actual STI
awarded
$
345,912
182,000
117,953
49,000
Cash
$
259,434
136,500
88,465
36,750
Number of
performance
rights
awarded
4,902
2,579
1,672
694
Deferred
$
86,478
45,500
29,488
12,250
STI
Maximum
$
1,235,400
650,000
421,260
175,000
STI actual as
a % of STI
Maximum
%
28
28
28
28
FY20
Cameron McIntyre
Ajay Bhatia
Paul Barlow
William Elliott
2019 Deferred STI Outcome
The 2019 deferred STI will qualify to vest upon release of this Annual Report to the ASX by the Board. The table below provides
the award value based on the accounting Black Scholes valuations, as well as the cash value to each Executive of their STI based
on the 30 June 2020 share price.
Cameron McIntyre
Ajay Bhatia
Paul Barlow
DSTI value (Black Scholes)
Vested
%
100%
100%
100%
Vested
$
96,793
42,753
32,464
DSTI value (30 June 2020
share price)
Vested
$
120,330
53,149
40,359
Vested
%
100%
100%
100%
4.4 Long-Term Incentive (LTI) Plan – Key Features and Outcomes
Feature
Approach
Description
Opportunity
Eligible Executives participate in the LTI plan, with an opportunity that is ‘at risk’ subject to specific
pre-determined Group performance measures being met over a three-year period. The plan is designed
to align Executives’ interests with those of shareholders.
The LTI opportunity reflects accountabilities and influence over the Company’s long-term performance
within each role. Market benchmarks are also referenced in determining the LTI opportunity. The
maximum face value of LTI that can be granted, referenced as to Executive KMP a percentage of Fixed
Remuneration is:
Role
CEO
Other Executive KMP
Maximum (cap)
100% of Fixed Remuneration
70% of Fixed Remuneration
Performance and
vesting period
Delivery
Performance is measured over three financial years. The expiry date of the award is fifteen years from
the grant date.
70% of the opportunity is granted as performance rights (PRs), with vesting subject to financial
performance measures and ongoing service. The remaining 30% is granted as options, with vesting
subject to strategic objectives being met and ongoing service. No dividends are paid during the
performance period, until the rights or options vest and are exercised.
50
Remuneration Report continuedAnnual Report 2020carsales.com Ltd
Feature
Approach
Allocation
approach
The number of performance rights and options granted are calculated as follows:
Performance
measures and
weightings
$ FR
(At time of grant)
x
Award face value
(%FR)
÷
$ Share price
(Performance rights)
$ Black Scholes Price
(Options)
=
=
Number of PRs
(70% of Award)
Number of Options
(30% of Award)
The share price used was the Volume Weighted Average Price of the Company’s ordinary shares for
the 20 trading days up to 30 June 2020.
The performance measures and their relative weightings are:
Category
Financial
(PRs)
Strategic
(Options)
Measures
Look through revenue
Adjusted EPS
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
Achieve specified milestones which relate to projects that address
developments within the automotive industry
Weighting
35%
35%
10%
10%
10%
Performance
Threshold and
Maximum
Financial Targets: A minimum ‘gate’ threshold for both look through revenue and Adjusted Earnings
Per Share (EPS) must be achieved in the performance period prior to any award vesting. The threshold
and maximum performance for FY20 and other currently operating LTI plans have been set as follows:
Year
2020
2019
2018
Measure
Look through revenue
Adjusted EPS
Look through revenue
Adjusted EPS
Look through revenue
Adjusted NPAT
Threshold
CAGR
3.0%
3.0%
5.0%
5.0%
5.5%
5.3%
Maximum
CAGR
10.0%
10.0%
10.0%
10.0%
11.3%
10.1%
Financial metrics used exclude corporate activity (such as acquisitions) made after the AGM notice date,
with the exception of any disposal of businesses or acquisitions of additional equity stakes in any existing
businesses, where the CAGR targets will be altered to maintain the underlying CAGR growth rates
targeted for the financial year. The Board 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
when it is in shareholders’ interests to do so.
Strategic Targets: The release of targets that were used to assess performance will be provided
upon completion of each three-year performance period, due to competitive advantage information
being withheld.
51
Annual Report 2020carsales.com Ltd Feature
Approach
Vesting Schedule
Financial Performance Level
Below Threshold
Between Threshold and Target: Both EPS and look through revenue
Maximum
Strategic Performance Level
Not achieved
Partial achievement
Full achievement
Financial Measures:
Vesting %
0%
From 25% to 100%
100%
Vesting %
0%
50%
100%
Selection of
Performance
Measures
Malus and
Clawback
Ceasing
Employment
Hedging Policy
Adjusted EPS
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 influence that would
materially affect Adjusted EPS.
Look through revenue
Look through revenue is the ordinary
revenue from continuing operations
reported for the consolidated Group,
adjusted for the ownership percentage
held by the group of consolidated
subsidiaries, and adding in the Group’s
ownership share of the underlying
revenue for equity accounted associates.
The Board recognises the balance required in measuring both long-term revenue growth but also
safeguarding bottom-line financial performance with an EPS growth measure concurrently, ensuring
alignment of LTI vesting outcomes to shareholder interests. In determining the growth targets for
financial measures’ targets, the Board considers the historical revenue and earnings performance of the
Company, forward looking market consensus revenue and earnings expectations, the overall purpose of
the award and the long-term best interests of the Company. Based on these factors, the Board believes
that the growth targets that have been set are appropriate in all the circumstances.
Non-financial measures within the plan recognise the importance that key strategic priorities and
people engagement have in achieving ongoing business transformation and evolution. The Board has
selected pre-determined strategic performance objectives which are linked to the Company's longer
term strategy and are therefore key in improving long-term financial performance and value for our
shareholders. Key factors in determining these outcomes are delivery on time, on budget and contribution
to the bottom line.
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.
Members of the ELT 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, Executives may be allowed to retain unvested options and performance rights
and exercise them in a future period when they vest.
The Company’s Equity 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.
52
Remuneration Report continuedAnnual Report 2020carsales.com Ltd Feature
Approach
Change of Control While the Board maintains discretion in relation to unvested options, the default treatment for unvested
options subject to performance conditions is that a pro-rata number will vest based on the extent to
which applicable performance conditions have been satisfied. For unvested options and performance
rights subject to only continuing service conditions, the pro-rata number will vest based on the
proportion of the period that has lapsed.
There are currently three years of unvested LTI awards with performance periods that include the 2020 financial year.
Financial year of grant
FY18-20
FY19-21
FY20-22*
Performance period
1 July 2017 – 30 June 2020
1 July 2018 – 30 June 2021
1 July 2019 – 30 June 2022
Performance year to
determine vesting
FY20
FY21
FY22
Vesting dates
August 2020
August 2021
August 2022
* FY20-22 grant of equity to Cameron McIntyre was not approved by shareholders at the October 2019 AGM. As such no grant of equity has been offered to Cameron McIntyre
in FY20, however approval will be sought at the AGM later this year.
Performance outcomes against LTI Measures
FY18-20 LTI performance and awarded outcomes
The Board’s assessment of performance against the FY18-20 LTI performance measures is outlined below.
Measure
Financial
Look through revenue
Adjusted NPAT
Strategic
International revenue
growth
Growth in Australian
non-classified
automotive products
and services revenue
Successful
development and
deployment of the
Group’s technology
into its core, adjacent
markets and
international businesses
Weighting
%
Performance
Outcome
Vesting
outcome
Commentary
35% Not achieved
35% Not achieved
46%
Discretion applied by the Board for a mid-point vesting.
Refer to section 4.2 for further details.
10% Full achievement
10% Strong double digit international revenue and
earnings growth, through deployment of technology
and IP into our international markets.
10% Full achievement
10% Very strong double digit CAGR* revenue
growth in tyresales and RedBook Inspect,
our key adjacent businesses.
10% Full achievement
10% • Development and deployment of retail platforms
across desktop and mobile automotive sites
throughout wholly owned LATAM businesses,
along with search and AWS infrastructure.
• Product developed in Australia with rapid
deployment within international markets and
non-automotive vertical markets within Australia.
Total
30%
76%
* CAGR – Cumulative Annual Growth Rate
53
Annual Report 2020carsales.com Ltd 4.5 Fixed Remuneration Outcomes
Fixed Remuneration is generally positioned between the median and the 75th percentile of the relevant market, which allows
flexibility required to attract and retain high-calibre Executive KMP. The annual Fixed Remuneration entitlements of the Executive
KMP for FY20 is set out below:
Name
Cameron McIntyre
Ajay Bhatia
Paul Barlow
William Elliott
Simon Ryan
Andrew Demery
Annual Fixed Remuneration from
1 July 2019 to 30 June 2020
$
1,420,000
850,000
619,500
350,000
920,000
520,000
Actual Fixed Remuneration paid to members of the Executive KMP is shown in the remuneration tables in section 4.2, which
includes a 20% reduction in Fixed Remuneration for the period 1 April 2020 to 30 June 2020 (overall 5.4% reduction in Fixed
Remuneration paid in FY20).
Within the FY20 annual review, effective 1 July 2019, the CEO Fixed Remuneration increased by 5.2%, recognising strong
performance within the role and better market alignment. The MD-Australia was also allocated an increased Fixed
Remuneration of 3.0%.
5. Remuneration Governance
The Board has ensured robust governance processes are in place for remuneration matters within the Company. The below
diagram provides a summary of the remuneration governance framework.
Board
The Board takes guidance and reviews recommendations from the Remuneration and Nomination Committee and makes
decisions on remuneration strategy and outcomes for Executive KMP and Non-Executive Directors.
Remuneration and Nomination Committee
The Remuneration and Nomination Committee reviews recommendations made by management where appropriate and
makes recommendations to the Board on remuneration and other terms of employment applicable to Executive KMP and
Non-Executive Directors. In addition, the Remuneration and Nomination Committee will facilitate an efficient mechanism for
examination of the selection and appointment practices of the Company as well as cultural, diversity and inclusion practices.
Management
The CEO makes recommendations to the
Remuneration and Nomination Committee
on performance and remuneration
outcomes for direct reports.
Management may attend Committee
meetings as required however do
not participate in formal discussions
or decision making involving their
own remuneration.
Independent remuneration
advisors
The Remuneration and Nomination
Committee may engage independent
remuneration advisors if needed
to assist the Board in making
remuneration decisions. Any advice
is used as one of many factors taken
into consideration by the Board.
Other Board committees
The Risk Management Committee
and Audit Committee may advise
the Remuneration and Nomination
Committee on relevant risk and
reputation or relevant financial
outcome matters that arise.
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: shareholder.carsales.com.au.
54
Remuneration Report continuedAnnual Report 2020carsales.com Ltd 5.1 Engagement with shareholders and proxy advisors
This year, members of the Board have proactively engaged with many of its largest shareholders many times during the
year. Meetings with proxy advisors have also occurred on a regular basis to try to ensure they have a good understanding
of the Company’s remuneration structure and decisions, and are in a position to provide insightful advice to their clients.
The Company views these meetings as an opportunity to receive valuable feedback on issues of importance to its shareholders
and to ensure it is across the trends being seen in the market.
Over the course of FY20, representatives of the Company met with the following proxy advisors:
• Ownership Matters;
• CGI Glass Lewis;
• ISS; and
• Australian Shareholders’ Association.
6. Executive KMP Statutory Remuneration Disclosure
6.1 Accounting based benefits
The table below has been prepared in accordance with the requirements of the Corporations Act 2001 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 Executive KMP in FY20.
Short-term
benefits
Post
Employ-
ment
Long-
term
benefits
Long
Service
Leave
$
Share-based payments
LTI
perform-
ance
rights
LTI
options
$
Deferred
STI
Super-
annuation1
$
21,003
20,531
92,021 385,512
43,180
38,675 152,638 (159,455)
198,314
121,487
Salary1
$
Cash STI
$
Year
Name
Executive Director
Cameron McIntyre FY20 1,327,997 259,434
FY19 1,329,469 275,512
Other Executive KMP
Ajay Bhatia
Paul Barlow
FY20 786,497 136,500
FY19 803,719 121,714
88,465
FY20 567,522
92,424
FY19 594,500
36,750
FY20 134,767
-
-
FY19
Former Executive KMP
Simon Ryan3
William Elliott2
Andrew Demery4
Total KMP FY20
Total KMP FY19
FY20 378,040
FY19 371,319
FY20 252,583
FY19 499,469
-
59,969
-
70,682
3,447,406 521,149
3,598,476 620,301
21,003
20,531
21,003
25,000
9,720
-
10,501
8,555
7,001
20,531
90,231
95,148
Other
$
Total5
$
- 2,327,461
- 1,778,857
- 1,245,081
- 1,045,620
- 855,894
- 792,439
- 199,704
-
-
22,685
20,622
13,454
15,106
5,084
-
44,332 154,170
(34,431)
71,218
88,451
31,111
(16,691)
55,431
4,798
6,178
-
-
79,894
42,247
45,888
26,669
2,407
-
(3,128) 486,444 881,676
-
10,537
(718)
3,128 280,000 734,226
-
10,537
718
(18,420) 249,499 457,979
(24,595)
12,419
(20,508)
- 640,500
16,639
10,384
(16,582)
39,377
63,177 196,598 608,336
304,955 735,943 5,967,795
85,505 329,201 (227,159) 210,170 280,000 4,991,642
1. Salary and Superannuation figures for C McIntyre, A Bhatia, P Barlow and W Elliott reflect 20% reduction in Fixed Remuneration for the months of April 2020 to June 2020.
2. William Elliott commenced as KMP effective 16 January 2020. Pro rata Fixed Remuneration figures provided from 16 January 2020 to 30 June 2020. The STI cash figure
represents the full FY20 STI figure paid.
3. Simon Ryan ceased employment with the Company effective 2 December 2019. Simon received a payment of 6 months in lieu of notice consistent with his
employment contract. In FY19, Simon Ryan received a sign on bonus in the form of 16,706 Zero Exercise Priced Options to the amount of $200,000 upon commencement,
as well as a $80,000 cash bonus. These amounts are included as "Other" remuneration.
4. Andrew Demery ceased employment with the Company effective 31 October 2019. The amount of $249,499 relates to 3 months notice and separation payment received.
This amount is included as "Other" remuneration.
5. Former Executives who ceased employment with carsales during FY19 are not disclosed in the table above. Refer to FY19 Remuneration Report for details.
55
Annual Report 2020carsales.com Ltd 7. Executive Service Agreements
All ELT members 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 six months by either party and there is a six-month non-compete period.
8. Executive KMP Equity Disclosures
8.1 STI and LTI Payments (cash, options & performance rights) achievement against maximum entitlement
All Executive KMP 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 6.1 are as follows:
Name
Executive Director
Cameron McIntyre
Other Executive KMP
Ajay Bhatia
Paul Barlow
William Elliott
Former Executive KMP
Simon Ryan
Andrew Demery
Cash salary and
superannuation
2020
%
2019
%
60
66
70
76
99
106
78
81
80
-
91
83
At risk – STI
2020
%
2019
%
At risk – DSTI
2020
%
2019
%
At risk – LTI
2020
%
2019
%
11
11
10
18
-
-
15
11
12
-
8
11
4
4
4
3
1
3
9
7
7
-
1
6
25
19
16
3
-
(9)
(2)
1
1
-
-
-
8.2 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 2016
October 2016
October 2016
October 2016
October 2016
October 2017
October 2017
August 2018
October 2018
October 2018
August 2019
October 2019
October 2019
Date exercisable Expiry date
August 2018
August 2018
August 2018
August 2019
August 2019
August 2019
August 2019
August 2020
August 2020
August 2019
August 2021
August 2021
August 2020
August 2022
August 2020
October 2020
October 2020
October 2031
October 2031
October 2031
October 2031
October 2031
October 2032
October 2032
August 2019
October 2033
October 2033
August 2034
October 2034
October 2034
Exercise
price
$
$10.24
$0.00
$0.00
$0.00
$0.00
$12.23
$12.23
$0.00
$11.41
$0.00
14.87
$0.00
$0.00
$13.54
$0.00
Value at
grant date
$
$1.86
$8.44
$9.86
$9.49
$4.87
$1.10
$0.98
$12.06
$3.25
$13.87
$1.53
$10.93
$14.27
$3.43
$13.81
Vested
%
73
73
78
76.6
-
76.6
-
n/a
n/a
100
n/a
n/a
n/a
n/a
n/a
Performance
achieved
Yes
Yes
Yes
Yes
No
Yes
No
Yes(i)
Yes(ii)
Yes
To be determined
To be determined
Yes(iii)
To be determined
To be determined
(i)
(ii)
(iii)
LTI performance rights granted in October 2017 will apply 65.7% of this award that is expected to vest in August 2020 based on the EPS performance achievements
tested at 30 June.
LTI options granted in October 2017 that were exercisable in August 2020 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.
56
Remuneration Report continuedAnnual Report 2020carsales.com Ltd 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.
Details of options and performance rights granted over ordinary shares in the Company provided as remuneration to Executive
KMP are set out below:
Name
Executive Directors
C McIntyre
Executive KMP
A Bhatia
P Barlow
W Elliott
Number of
options
granted
during the
year 2020
Number of
performance
rights
granted
during the
year 2020
Value of
options at
grant date
2020
$
Value of
performance
rights at
grant date
2020
$
Number of
options and
performance
rights vested
during the
year 2020
-
4,902
-
87,227
162,906
30,602
17,487
-
20,674
12,012
694
105,002
60,001
-
295,724
172,504
12,356
45,613
26,065
3,910
Further information on the options and performance rights is set out in Note 29 to the financial statements.
8.3 Shares provided on exercise of remuneration options and performance rights
Details of ordinary shares in the Company provided as a result of the exercise of options by each Executive KMP
are set out below.
Name
Executive Directors
C McIntyre
C McIntyre
Other Executive KMP
A Bhatia
A Bhatia
P Barlow
P Barlow
W Elliott
Former Executive KMP
S Ryan
A Demery
A Demery
Date of
exercise of
options and
performance
rights
Shares
issued on
exercise of
options and
performance
Value at
exercise
date*
$
Aug 19
Sep 19
Aug 19
Sep 19
Aug 19
Sep 19
Oct 19
Sep 19
Aug 19
Nov 19
28,485
70,693
445,221
1,149,468
13,937
41,781
10,333
51,240
632
16,706
6,152
25,710
217,835
642,592
161,505
829,576
9,954
256,938
96,156
406,218
* 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.
57
Annual Report 2020carsales.com Ltd
8.4 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 in section 4 above. No options and performance rights
will vest if the conditions are not satisfied (subject to Board discretion), 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.
Name
C McIntyre
C McIntyre
C McIntyre
A Bhatia
A Bhatia
A Bhatia
P Barlow
P Barlow
P Barlow
W Elliott
W Elliott
W Elliott
Financial
year granted
2018
2019
2020
2018
2019
2020
2018
2019
2020
2018
2019
2020
Vested
%
78%
-
-
78%
-
-
78%
-
-
78%
-
-
Financial
years in
which grant
may vest
2020*
2021*
2022*
2020*
2021*
2022*
2020*
2021*
2022*
2020*
2021*
2022*
Maximum
total value
of grant yet
to vest
$
73,530
913,908
8,066
20,588
236,937
293,423
11,765
135,394
168,340
1,765
20,306
-
Forfeited
%
22%
-
-
22%
-
-
22%
-
-
22%
-
-
* Vesting is contingent upon Board approval. Options are exercisable after the Board releases the results to ASX in August each year.
8.4.1 Option holdings and performance rights
The numbers of options and performance rights over ordinary shares in the Company held by Executive KMP, including their
personally related parties, are set out below.
Name
Executive Directors
C McIntyre
Other Executive KMP
A Bhatia
P Barlow
W Elliott
Former Executive KMP
S Ryan
A Demery
Granted as
remun-
eration
(incl. perf.
rights)
Exercised
Forfeited
Other
change
Balance at
the end of
the year
Vested and
exercisable Unvested
Balance at
start of
the year
694,798
6,783
(99,178)
(83,100)
212,374
156,435
14,134
51,693
30,102
-
(55,718)
(61,573)
(632)
(41,551)
(29,087)
-
-
-
-
-
519,303
83,564
435,739
166,798
95,877
13,502
-
-
3,636
166,798
95,877
9,866
52,437
97,522
1,476
-
(16,706)
(31,862)
-
(14,542)
(37,207)
(51,118)
-
-
-
-
-
-
58
Remuneration Report continuedAnnual Report 2020carsales.com Ltd 8.4.2 Equity holdings
The numbers of shares in the Company held during the financial year by Executive KMP including their personally related parties,
are set out below. There were no shares granted during the reporting period as compensation.
Executive Director
C McIntyre
Other Executive KMP
A Bhatia
P Barlow
W Elliott
Former Executive KMP
S Ryan
A Demery
Received
during the
year on the
exercise of
options
Other
changes
during the
year
Balance
1 Jul 19
Balance
30 Jun 20
202,500
99,178
(70,693)
230,985
1,135
40,623
-
-
4,206
55,718
61,573
632
16,706
31,862
(12,744)
(37,462)
-
(16,706)
(18,855)
44,109
64,734
632
-
17,213
8.5 Shares under option and performance rights
Unissued ordinary shares of carsales.com Ltd under option at the date of this report are as follows:
Date options granted
Oct-15
Oct-16
Oct-17
Oct-17
Oct-18
Oct-18
Aug-19
Oct-19
Oct-19
Expiry date
Oct-20
Oct-31
Oct-32
Oct-32
Oct-33
Oct-33
Aug-34
Oct-34
Oct-34
Issue price
of shares
$10.24
$12.23
$11.41
$0.00
$14.87
$0.00
$0.00
$13.54
$0.00
Number
under
options
45,610
218,110
295,990
-
445,532
-
-
139,245
-
1,144,487
Number
under
performance
rights
-
-
-
186,281
-
159,387
19,784
-
82,335
447,787
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 2020.
8.6 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 2020 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-19
Sep-19
Oct-19
Oct-19
Nov-19
Dec-19
Feb-20
May-20
Jun-20
59
Issue price
of shares
$
$0.00
$10.24 – $12.23
$12.23
$0.00
$10.24 – $12.23
$10.23 – $12.23
$10.23 – $12.23
$10.23 – $12.23
$10.23 – $12.23
Number
of shares
104,271
287,911
9,053
19,499
41,941
37,030
14,248
3,339
19,236
536,528
Annual Report 2020carsales.com Ltd
9. Non-Executive Director Fees
Non-Executive Directors receive fees as determined within an aggregate Directors’ fee pool limit, which is periodically
recommended for approval by shareholders. The maximum payable to be shared by all Non-Executive Directors currently stands
at $1,500,000 per annum. The current base remuneration pool was approved by shareholders at the Annual General Meeting
held on 23 October 2015.
Fees and payments to Non-Executive Directors are determined by the demands that are made on their time, as well as their
responsibilities. 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. No adjustments
to fees were made in FY20, with the exception for the period of 1 April 2020 to 30 June 2020 during which the Board elected
to reduce their fees by 20% to contribute to cost savings for the business during this time.
The following fee table applies:
Appointment
Chair fee
Base Director fee
Committee Chair fee
Committee Member fee
Minimum Shareholding Requirements
1 July 2019
fee table
$
340,000
140,000
35,000
15,000
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.
9.1 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 Non-Executive Directors in FY20.
Short-term
benefits
Post
Employ-
ment
Salary
and fees
$
Cash STI
$
Super-
annuation
$
Long-
term
benefits
Long
Service
Leave
$
Share-based payments
LTI
perform-
ance
rights
LTI
options
$
Deferred
STI
Name
Year
Non-Executive Directors
Patrick O’Sullivan
Walter Pisciotta
Kim Anderson
Edwina Gilbert
Kee Wong
David Wiadrowski
Total FY20
Total FY19
FY20 302,445
FY19 260,900
FY20 134,475
FY19 130,137
FY20 164,840
FY19 173,516
FY20 177,854
FY19 165,145
FY20 147,489
FY19 140,505
FY20 168,137
20,948
FY19
1,095,240
891,151
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20,924
18,908
12,775
12,363
15,660
16,484
16,896
15,688
14,011
13,348
12,363
1,990
92,629
78,781
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Other
$
Total1
$
- 323,369
- 279,808
- 147,250
- 142,500
- 180,500
- 190,000
- 194,750
- 180,833
- 161,500
- 153,853
- 180,500
-
22,938
- 1,187,869
- 969,932
1. Former Directors who ceased employment with carsales during FY19 are not disclosed in the table above. Refer to FY19 Remuneration Report for details.
60
Remuneration Report continuedAnnual Report 2020carsales.com Ltd 9.2 Share holdings
The numbers of shares in the Company held during the financial year by each Director of carsales.com Ltd, including their
personally related parties, are set out below.
Non-Executive Directors
Ordinary shares
P O'Sullivan
W Pisciotta
K Anderson
E Gilbert
K Wong
D Wiadrowski
S Kloss (Alternate)
Received
during the
year on the
exercise of
options
Other
changes
during the
year
Balance
1 Jul 19
Balance
30 Jun 20
23,268
8,836,298
15,000
25,833
11,295
1,580
2,774,500
-
-
-
-
-
-
-
-
(388,000)
539
928
1,500
2,520
-
23,268
8,448,298
15,539
26,761
12,795
4,100
2,774,500
9.3 Other transactions
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 and S Kloss are shareholders 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 Pty Ltd was approximately $622,038. The total amount paid to carsales from
Pentana Solutions Pty Ltd was approximately $155,023.
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 approximately $448,243. E Gilbert did not receive any
additional benefits to their dealerships from their participation on the Company Board.
61
Annual Report 2020carsales.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
Cameron McIntyre Managing Director
Wal Pisciotta
Non-Executive Director
Kim Anderson
Non-Executive Director
Edwina Gilbert
Non-Executive Director
Kee Wong
Non-Executive Director
David Wiadrowski Non-Executive Director
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:
Director name
Full scheduled meetings
of Directors
Short teleconference
meetings of Directors
Ad hoc meetings
of Directors
Pat O’Sullivan
Cameron McIntyre
Wal Piscotta
Kim Anderson
Edwina Gilbert
Kee Wong
David Wiadrowski
Steve Kloss (Alternate Director)
A
12
12
12
12
12
12
12
12
B
12
12
11
12
12
10
12
11
A
2
2
2
2
2
2
2
2
B
2
2
1
2
2
1
2
2
A
6
6
6
6
6
6
6
6
B
6
6
5
6
6
6
6
5
A = Number of meetings held during the time the Director held office during the year
B = Number of meetings attended
Director name
David Wiadrowski (Chair)
Kim Anderson
Edwina Gilbert
Director name
Edwina Gilbert (Chair)
David Wiadrowski
Kee Wong
Number of Audit
Committee meetings
during tenure
Number of Audit
Committee meetings
attended
6
6
6
6
6
6
Number of Risk
Management Committee
meetings during tenure
Number of Risk
Management Committee
meetings attended
2
2
2
2
2
2
62
Annual Report 2020carsales.com Ltd Director name
Kim Anderson (Chair)
Edwina Gilbert
Kee Wong
Wal Pisciotta
Number of Remuneration
and Nomination
Committee meetings
during tenure
Number of Remuneration
and Nomination
Committee meetings
attended
6
6
6
6
6
6
5
5
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 2019 of 25.0 cents (2018: 23.7 cents)
per fully paid ordinary share paid on 9 October 2019 (2018: 10 October 2018).
Interim fully franked dividend for the year ended 30 June 2020 of 22.0 cents (2019: 20.5 cents)
per fully paid share paid on 15 April 2020 (2019: 5 April 2019)
2020
$’000
2019
$’000
61,184
57,640
53,960
49,989
115,144
107,629
At the end of the financial year the Directors have recommended the payment of a fully franked final ordinary dividend of
$61,403,000 (25.0 cents per share) to be paid on 7 October 2020 out of retained earnings at 30 June 2020.
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 page 31.
Matters subsequent to the end of the financial year
On 5 July 2020 carsales.com Ltd successfully completed a refinance of Tranche A of its syndicated revolving loan facilities.
Pursuant to this refinance, the Company upsized its existing Tranche A by a further $105.0 million, bringing it to a $440.0 million
facility, and extended the tenor out to 5 July 2024.
Facility
Tranche A
Tranche B
Total
New
commitment
$’000
440,000
210,000
650,000
Drawn at
report
release date
$’000
335,000
210,000
545,000
New
maturity
date
5 July 2024
4 July 2023
As part of the refinance, Commonwealth Bank of Australia (“CBA”) has joined the existing banking syndicate, entering into a
bilateral facility agreement with the Company under the Common Terms Deed documentation structure. Borrowings under the
debt facilities bear interest at a floating rate of BBSY Bid plus a margin, with margin based on a net leverage ratio of the Group,
consistent with the previous facility.
Further, subsequent to year end, two swaps having a maturity of three years (which were due to terminate in July 2021) were
closed out and the average notional amount is now $210.0 million.
Aside from the above, 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.
63
Annual Report 2020carsales.com Ltd Other Directors’ Report Disclosures continued
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.
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 Committees to ensure they do not impact
the impartiality and objectivity of the auditor; and
• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics
for Professional Accountants.
During the year the following fees were paid or payable for non-audit services provided by the auditor of the parent entity,
its related practices and non-related audit firms:
Other assurance services
Due diligence services
Total remuneration for other assurance services
Taxation services
Tax compliance services, including review of Company income tax returns
Australian and International tax consulting and tax advice on mergers and acquisitions
Total remuneration for taxation services
Other services
Other services
Total remuneration for other services
Total remuneration for non-audit services
2020
$
223,000
223,000
103,717
157,271
260,988
68,512
68,512
552,500
2019
$
31,620
31,620
98,960
122,585
221,545
30,553
30,553
283,718
64
Annual Report 2020carsales.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 66.
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 Directors'
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 (Fourth Edition) the Company has included
its report on compliance with the principles in the year to 30 June 2020 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
Melbourne
18 August 2020
Cameron McIntyre
Managing Director and CEO
65
Annual Report 2020carsales.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 2020, I declare that to the best of my
knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of carsales.com Limited and the entities it controlled during the period.
Lisa Harker
Partner
PricewaterhouseCoopers
Melbourne
18 August 2020
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.
66
Annual Report 2020carsales.com Ltd 67
carsales.com Ltd
Annual Report 2020
Financial Statement Contents
FINANCIAL STATEMENTS
Consolidated Statement of Comprehensive Income 69
OTHER ASSETS AND LIABILITIES
15. Trade and other receivables
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Basis of consolidation
Key reporting highlights
Key estimates and judgements
Basis of preparation
Corporate information
KEY PERFORMANCE
1. Segment information
2. Revenue from contracts with customers
3. Other income and expenses
4. Income tax
5. Earnings per share
6. Reconciliation of profit after income tax
to net cash inflow from operating activities
FINANCING AND RISK MANAGEMENT
7. Cash and cash equivalents
8. Borrowings
9. Changes in assets and liabilities arising
from financing activities
10. Financial assets and liabilities
and fair value measurement
11. Financial risk management
EQUITY
12. Contributed equity
13. Reserves and retained earnings
14. Dividends
71
72
74
75
75
75
75
76
77
80
82
83
87
90
91
91
93
94
96
102
103
106
16. Property, plant and equipment
17. Leases
18. Intangible assets
19. Payables and provisions
GROUP STRUCTURE
20. Interests in other entities
21. Discontinued operations
22. Parent entity financial information
23. Deed of cross guarantee
24. Related party transactions
ITEMS NOT RECOGNISED
25. Commitments
26. Contingent liabilities
27. Events occurring after the reporting period
OTHER
28. Remuneration of auditors
29. Share-based payments
30. Other significant accounting policies
31. Changes in accounting policies
DIRECTORS’ DECLARATION
INDEPENDENT AUDITOR'S REPORT TO
THE MEMBERS OF CARSALES.COM LTD
SHAREHOLDER INFORMATION
CORPORATE DIRECTORY
107
108
110
113
116
117
124
127
128
130
131
131
131
132
133
135
136
139
140
146
148
68
Annual Report 2020carsales.com Ltd
Consolidated Statement of Comprehensive Income
For the Year Ended 30 June 2020
Notes
2
2020
$’000
*Restated
2019
$’000
395,585
395,585
417,494
417,494
3
3
10
20(c)
20(c)
20(d)
4(a)
21
13, 20(b)
13
13
13
13
(32,878)
(73,543)
(29,512)
(57,613)
202,039
(36,351)
640
(14,974)
7,228
4,177
-
9,753
(472)
172,040
(50,205)
121,835
(4,882)
116,953
(32,343)
(983)
3,532
(1,246)
3,967
(27,073)
89,880
114,668
2,285
116,953
87,572
2,308
89,880
(33,691)
(83,838)
(31,547)
(55,554)
212,864
(31,394)
1,211
(17,139)
11,253
3,124
2,069
-
-
181,988
(49,823)
132,165
(47,932)
84,233
11,866
642
(450)
(12,163)
(1,634)
(1,739)
82,494
84,011
222
84,233
82,169
325
82,494
Continuing operations
Revenue from contracts with customers
Total 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
Fair value gain arising from discontinuing the equity method
Loss on disposal of subsidiary
Profit before income tax
Income tax expense
Profit from continuing operations
Net result after tax from discontinued operations
Profit for the year
Other comprehensive income
Items that may be reclassified to profit or loss:
Exchange differences on translation of foreign operations
Remeasurement of post-employment benefit obligations
Gain/(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 for the year 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
69
Annual Report 2020carsales.com Ltd Consolidated Statement of Comprehensive Income continued
For the Year Ended 30 June 2020
Total profit for the year is attributable to owners of carsales.com Ltd from:
Continuing operations
Discontinued operations
Earnings per share for profit attributable to the ordinary equity holders
of the parent entity:
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
Earnings per share for loss from discontinued operations, attributable
to the ordinary equity holders of the parent entity:
Basic earnings per share
Diluted earnings per share
*See Note 31 for details about restatements as a result of changes in accounting policies.
2020
$’000
*Restated
2019
$’000
119,943
(5,275)
114,668
132,088
(48,077)
84,011
2020
Cents
*Restated
2019
Cents
46.8
46.7
48.9
48.8
34.5
34.4
54.2
54.1
(2.1)
(2.1)
(19.7)
(19.7)
Notes
21
5
5
5
5
5
5
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
70
Annual Report 2020carsales.com Ltd
Consolidated Statement of Financial Position
As at 30 June 2020
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
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
Right-of-use assets
Deferred tax assets
Intangible assets
Other receivables
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Lease liabilities
Borrowings
Current tax liabilities
Provisions
Deferred revenue
Liabilities directly associated with assets classified as held for sale
Total current liabilities
Non-current liabilities
Other payables
Lease liabilities
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
Notes
7
15
21
20(c)
20(d)
16
17
4
18
15
19
17
8
4
19
19
21
19
17
8
10
11
4
19
12
13
13
2020
$’000
*Restated
2019
$’000
179,937
54,329
-
234,266
51,197
40,718
13,760
51,520
15,704
584,888
7,096
764,883
999,149
30,784
6,638
174
19,018
7,112
8,759
-
72,485
202
54,333
544,070
-
14,179
15,564
1,104
629,452
701,937
297,212
149,817
(56,253)
202,885
763
297,212
94,411
61,238
45,667
201,316
76,668
19,905
10,512
55,225
18,547
600,619
7,363
788,839
990,155
29,962
6,228
248
8,585
6,815
9,441
33,663
94,942
29
57,485
474,314
9,538
17,445
20,928
912
580,651
675,593
314,562
135,372
(29,694)
203,361
5,523
314,562
*See Note 31 for details about restatements as a result of changes in accounting policies.
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
71
Annual Report 2020carsales.com Ltd Consolidated Statement of Changes in Equity
For the Year ended 30 June 2020
Attributable to owners
of carsales.com Ltd
13, 20(b)
13
13
13
13
Balance at 1 July 2019, as previously reported
Impact of changes in accounting policy*
*Restated balance at 1 July 2019
Profit for the year
Items that may be reclassified to profit or loss
Exchange differences on translation
of foreign operations
Remeasurement of post-employment
benefit obligations
Loss on cash flow hedge
Gain 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
Increase in share-based payment reserve
inclusive of tax
Dividends paid to company shareholders
Dividends paid to non-controlling interests
Transactions with non-controlling interests
Balance at 30 June 2020
Notes
31
Contributed
equity
$’000
135,372
-
135,372
-
Retained
earnings
$’000
209,934
(6,573)
203,361
114,668
Non-
controlling
interests
$’000
6,068
(545)
5,523
2,285
Total
equity
$’000
321,680
(7,118)
314,562
116,953
-
-
-
-
23
(32,343)
-
-
-
(983)
(1,246)
3,532
Reserves
$’000
(29,694)
-
(29,694)
-
(32,366)
(983)
(1,246)
3,532
3,967
(27,096)
-
114,668
-
2,308
3,967
89,880
-
-
-
-
-
-
12
4,493
-
-
-
4,493
13, 29
14
20
13
-
9,952
-
-
149,817
4,392
-
-
(3,855)
(56,253)
-
(115,144)
-
-
202,885
-
-
(5,185)
(1,883)
763
4,392
(105,192)
(5,185)
(5,738)
297,212
*See Note 31 for details about restatements as a result of changes in accounting policies.
72
Annual Report 2020carsales.com Ltd Notes
31
Contributed
equity
$’000
119,541
-
119,541
-
Attributable to owners
of carsales.com Ltd
Retained
earnings
$’000
232,289
(5,310)
226,979
84,011
Non-
controlling
interests
$’000
6,002
(424)
5,578
222
Total
equity
$’000
333,405
(5,734)
327,671
84,233
-
-
-
-
103
11,866
-
-
-
642
(12,163)
(450)
Reserves
$’000
(24,427)
-
(24,427)
-
11,763
642
(12,163)
(450)
(1,634)
(1,842)
-
84,011
-
325
(1,634)
82,494
-
-
-
-
-
-
12
2,412
13, 29
14
20
13
13
-
13,419
-
-
-
135,372
-
(562)
-
-
-
(2,863)
(29,694)
-
-
2,412
-
(107,629)
-
-
-
203,361
-
-
(898)
1,064
(546)
5,523
(562)
(94,210)
(898)
1,064
(3,409)
314,562
13, 20(b)
13
13
13
13
Balance at 1 July 2018, as previously reported
Impact of changes in accounting policy*
*Restated balance at 1 July 2018
*Restated profit for the year
Items that may be reclassified 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 company shareholders
Dividends paid to non-controlling interests
Non-controlling interests on acquisition
of subsidiary
Transactions with non-controlling interests
Balance at 30 June 2019
*See Note 31 for details about restatements as a result of changes in accounting policies.
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
73
Annual Report 2020carsales.com Ltd Consolidated Statement of Cash Flows
For the Year Ended 30 June 2020
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
Payment for investment in associates
Payment for 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
Proceeds from disposal of subsidiaries (net of transaction costs)
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
Payment of loan establishment fees
Principal elements of lease payments
(Payments)/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 from financing activities
Effects of exchange rates on cash and cash equivalents
Net increase in cash and cash equivalents (including cash flows from
discontinued operations)
Cash and cash equivalents at the beginning of the financial year
Add back: Cash outflow from discontinued operations
Less: Cash and cash equivalents transferred to assets classified as held for sale
Cash and cash equivalents at the end of the financial year
*See Note 31 for details about restatements as a result of changes in accounting policies.
2020
$’000
*Restated
2019
$’000
Notes
489,707
(275,961)
(42,305)
171,441
517,549
(302,089)
(57,394)
158,066
6
-
(2,394)
(9,056)
(24,532)
605
197
5,330
-
(29,850)
4,493
147,330
(77,453)
(463)
(6,826)
(897)
(395)
(105,192)
(4,394)
(14,828)
(58,625)
(1,330)
(1,676)
(3,813)
(22,876)
1,226
23
-
2,301
(26,145)
2,412
521,133
(495,626)
-
(5,934)
1,543
(898)
(94,210)
(3,409)
(18,944)
(93,933)
(2,241)
383
80,725
94,411
4,801
-
179,937
38,371
65,061
-
(9,021)
94,411
14
21
21
7
The above consolidated statement of cash flows includes both continuing and discontinued operations. Amounts related
to discontinued operations are disclosed in Note 21.
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
74
Annual Report 2020carsales.com Ltd
Notes to the Consolidated Financial Statements
30 June 2020
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 2020 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'.
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:
(i) the Group’s performance – Note 1;
(ii) full year dividend declared – Note 14;
(iii) the adoption of the new accounting standards for leases – Note 17 and Note 31;
(iv) the sale of the Group’s interest in Stratton Finance – Note 21.
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 ongoing COVID-19 pandemic has increased the estimation uncertainty in the preparation of these financial statements.
The estimation uncertainty is predominantly related to the fair value measurement and recoverable amount assessments for
intangible assets (Note 18), financial assets at fair value through other comprehensive income (Note 20(d)), investments
accounted for using the equity method (Note 20 (c)) and trade receivables (Note 15).
As a result of the challenging trading conditions during April and May 2020 in particular, the Group put certain measures in
place including the COVID-19 Dealer Support Package (Note 2) and a number of cost saving initiatives. The financial statements
have been prepared on a going concern basis. The Directors have made this assessment on the basis that the Group has a strong
balance sheet and prudent gearing levels. On 5 July 2020 the Group successfully completed a refinance of Tranche A of its
syndicated revolving loan facilities, upsizing Tranche A by a further $105.0 million (Note 27). At 30 June 2020 carsales had
a net debt position of $439.5 million (Note 11(d)), a net debt to EBITDA leverage ratio of 2.2 times EBITDA and a strong liquidity
position with $179.9 million in available cash.
Other areas with a level of estimation include deferred tax assets relating to tax losses, uncertain tax positions and Research
and Development (R&D) claim (Note 4).
Basis of preparation
carsales.com Ltd is a for-profit entity for the purpose of preparing the financial statements.
These general purpose financial statements:
(i) Have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board and the Corporations Act 2001.
(ii) Comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
(iii) Have been prepared on a going concern basis.
(iv) Have been prepared under the historical cost convention except for the revaluation of financial assets and liabilities
(including derivative instruments) measured at fair value through other comprehensive income.
Amounts in the financial statements are presented in Australian dollars with all values rounded to the nearest thousand dollars,
or in certain cases, the nearest dollar, in accordance with the Australian Securities and Investments Commission Corporations
Instrument 2016/191.
Accounting policies adopted are consistent with those of the previous financial year, with the exception of the areas described
in Note 31.
75
Annual Report 2020carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2020
Corporate Information
carsales.com Ltd (the ‘Company’) 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 18 August 2020. The Directors have the power to amend
and reissue the Financial Report.
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.
76
Annual Report 2020carsales.com Ltd
KEY PERFORMANCE
This section 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.
1. Segment information
Accounting policy
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 Chief Executive Officer (‘CEO’).
Management has determined the operating segments based on the reports reviewed by the CEO that are used to make
strategic decisions.
The Group’s operating segments are determined firstly based on location, and secondly by function, of the Group’s
operations. The Group principally operates in four business segments which are described below:
Operating
segment
Online Advertising
Services – Australia
Geographical
location
Australia
Nature of operations and primary source of revenue
Online automotive classifieds and media 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.
Our media business typically involves corporate customers such as automotive
manufacturers/importers, finance and insurance companies etc, placing
advertisements on carsales network websites.
Online Advertising Services also 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
Automotive data services including software, analysis, research and reporting,
valuation services, website development, hosting and photography services.
Australia
Latin America
(LATAM)
This segment also includes media and consumer advertising related to
these divisions.
Online automotive classifieds and media advertising services.
• Webmotors S.A. – 30%
• Chileautos SpA – 100%
• carsales Mexico SAPI de CV – 100%
• Demotores Chile SpA – 100%
• Demotores S.A. – 100%
Asia
Online automotive classifieds, media advertising services and automotive
data services.
• ENCARSALES.COM Ltd – 100%
• Auto Information Limited – 100%
• RedBook Automotive Services (M) Sdn Bhd – 100%
• RedBook Automotive Data Services (Beijing) Limited – 100%
• Automotive Data Services (Thailand) Company Limited – 100%
• iCar Asia Limited – 11.7%
Percentage reflects ownership interests in the entities.
77
Brazil, Chile,
Mexico and
Argentina
South Korea,
Malaysia, China,
Thailand and
Indonesia
Annual Report 2020carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2020
1. Segment information continued
Discontinued operations (previously 'Finance and Related Services')
The previously disclosed Finance and Related Services Segment included the Stratton Finance Pty Ltd subsidiary which provided
innovative finance arrangements for vehicles, boats, other leisure items, vehicle procurement and other related services to
customers. The Group announced in June 2019 that it was pursuing the sale of its 50.1% interest in Stratton and hence the
results of Stratton were presented as discontinued operations since June 2019. The sale process was subsequently finalised
on 30 April 2020. Details of the transaction are disclosed in Note 21.
(a) Segment analysis
2020
Segment revenue (Note 1(b)(i))
EBITDA (Note 1(b)(ii))
Depreciation and amortisation
Net finance costs
Changes in fair value of put options
Share of net profit from associates accounted
for using the equity method
Fair value gain arising from discontinuing
the equity method
Loss on disposal of subsidiary
Income tax expense
Loss from discontinued operations
Non-controlling interests
Profit for the year attributable
to owners of carsales.com Ltd
Segment assets (Note 1(b)(iii))
Deferred tax assets
Cash and cash equivalents
Unallocated assets
Total assets
*Online
Advertising
Services
$’000
273,199
142,801
*Data,
Research
and Services
$’000
39,258
23,191
Latin
America
$’000
7,616
(4,685)
Asia
$’000
75,512
40,732
154,271
33,581
79,656
470,284
Total
$’000
395,585
202,039
(36,351)
(14,334)
7,228
4,177
9,753
(472)
(50,205)
(4,882)
(2,285)
114,668
737,792
15,704
179,937
65,716
999,149
* Revenue includes the impacts of the COVID-19 Dealer Support Package. Refer Note 2 for details.
78
Annual Report 2020carsales.com Ltd *Restated 2019
Segment revenue (Note 1(b)(i))
EBITDA (Note 1(b)(ii))
Depreciation and amortisation
Net finance costs
Changes in fair value of put options
Share of net profit from associates
accounted for using the equity method
Gain on associate investment dilution
Income tax expense
Loss from discontinued operations
Non-controlling interests
Profit for the year attributable
to owners of carsales.com Ltd
Segment assets (Note 1(b)(iii))
Assets classified as held for sale
Deferred tax assets
Cash and cash equivalents
Unallocated assets
Total assets
Online
Advertising
Services
$’000
300,112
159,063
Data,
Research
and Services
$’000
43,147
24,813
Latin
America
$’000
9,131
(5,487)
Asia
$’000
65,104
34,475
174,957
19,079
97,970
483,903
Total
$’000
417,494
212,864
(31,394)
(15,928)
11,253
3,124
2,069
(49,823)
(47,932)
(222)
84,011
775,909
45,667
18,547
94,411
55,621
990,155
*See Note 31 for details about restatements as a result of changes in accounting policies
(b) Notes to, and forming part of, the segment information
(i) Segment revenue
Segment revenue is derived from sales to external customers as set out in Note 1(a) above.
(ii) Segment EBITDA
The consolidated entity’s chief operating decision maker assesses the performance of the segments based on a measure of EBITDA.
Interest revenue and expense, depreciation and amortisation are not reported to the chief operating decision maker by segment.
These items are assessed at a consolidated entity level.
(iii) Segment assets
Segment assets are measured in the same way as in the financial statements. Segment assets include goodwill, trade receivables,
brands, customer relationships, property, plant and equipment, right-of-use assets, financial assets at fair value through
other comprehensive income and investments accounted for using equity method. Unallocated assets include intangible
and other assets utilised across multiple segments. All unallocated assets are assessed by the chief operating decision maker
at a consolidated entity level.
(iv) Segment liabilities
Liabilities are not reported to the chief operating decision maker by segment. All liabilities are assessed at a consolidated entity level.
79
Annual Report 2020carsales.com Ltd
Notes to the Consolidated Financial Statements continued
30 June 2020
2. Revenue from contracts with customers
Accounting policy
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
Dealer leads
Reporting segment
Online Advertising
(Dealer)/LATAM/Asia
Recognition criteria
Lead revenues are recognised at a point in time upon delivery of the lead
to the dealers’ lead management system.
Dealer listings
Online Advertising
(Dealer)/LATAM/Asia
Listing depth
products
Private listing
Online Advertising
(Dealer/Private)/
LATAM/Asia
Online Advertising
(Private)/LATAM/Asia
Bundled
products
Online Advertising
(Dealer)/LATAM/Asia
Sponsorship
advertising
Online Advertising
(Media)/LATAM/Asia
Dealer listings have a definite end date to the advertisement. Revenues
are recognised over the period during which the listing is displayed on
the carsales network.
Transaction value is allocated to customer service obligations based on
the fair value and revenue is recognised over the period during which
the product is displayed on the carsales network.
Private listings remain effective until the consumer removes the advertisement.
Revenues are recognised over the average number of days advertisements
are displayed (based on historical trends).
Includes the combination of dealer advertising products and corporate media
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.
Performance
advertising and
contracts
Subscription
services
Online Advertising
(Media)/LATAM/Asia
Revenues from performance advertising and performance contracts are
recognised when the performance measure occurs and is generated
(e.g. cost per click).
Online Advertising
(Dealer/Media)/Data,
Research and Services/
LATAM/Asia
Subscription revenues are recognised over the subscription period.
Sale of goods
Online Advertising
(Dealer/Private)
Revenues are recognised at a point in time when goods have been provided
to a customer.
Inspection
services
Online Advertising
(Dealer/Private)/Asia
Revenue from vehicle inspection services are recognised when the inspection
service is performed.
R&D tax rebate Online Advertising
The research and development claim of the Company gives rise to a tax
offset and this tax offset is recognised as other income.
80
Annual Report 2020carsales.com Ltd (a) 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:
2020
Dealer
Private
Media
Total revenue from external customers
Revenue is recognised:
At a point in time
Over time
Online
Advertising
Services
$’000
146,407
77,822
48,970
273,199
Data,
Research
and Services
$’000
Latin
America
$’000
Asia
$’000
Total
$’000
39,258
7,616
75,512
395,585
157,650
115,549
9,330
29,928
225
7,391
24,431
51,081
191,636
203,949
As part of a Dealer Support Package offered to dealer customers in response to COVID-19, carsales provided a rebate for all fixed
and variable fees for dealer customers invoiced in April, provided a 50% rebate on invoices in May and provided a 100% rebate
on invoices relating to new car services in June. carsales also extended payment terms during March to May by an additional
30 days and provided access for customers to our counselling service at no charge. The total support provided to dealers was
$27.5 million. Revenue above is net of these rebates.
2019
Dealer
Private
Media
Total revenue from external customers
Revenue is recognised:
At a point in time
Over time
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
164,203
135,909
11,608
31,539
277
8,854
20,946
44,158
197,034
220,460
81
Annual Report 2020carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2020
3. Other income and expenses
Accounting policy
(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.
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) Finance income
Finance income is recognised on a time proportionate basis using the effective interest method. When a receivable
amount 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.
(iii) Finance cost
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. 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. The unwinding of the discount on put option liabilities are recognised as a finance expense.
Under new accounting standards, refer Note 31 for details, lease payments are allocated between principal and finance
cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of
interest on the remaining balance of the liability for each period.
(iv) JobKeeper
Receipts from the Australian JobKeeper program are accounted for as government grants and are included in personnel
expenses as a contra amount. There are no unfulfilled conditions or other contingencies attaching to these grants.
82
Annual Report 2020carsales.com Ltd Total profit before income tax includes the following specific expenses:
Employee benefits
JobKeeper grants
Defined contribution superannuation expense
Defined benefit expense – ENCARSALES.COM Ltd
Finance Income
Finance Costs
Interest and finance charges
Interest on leases
Unwinding of discount on put options liabilities
Total finance costs
* See Note 31 for details about restatements as a result of changes in accounting policies.
4. Income tax
Accounting policy
2020
$’000
87,112
(5,328)
7,515
1,167
*Restated
2019
$’000
89,331
-
7,921
985
640
1,211
(13,126)
(1,848)
-
(14,974)
(14,624)
(2,073)
(442)
(17,139)
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 in the countries where the Company’s subsidiaries and associates operate and generate taxable income. The Group
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 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. Where there are current and deferred tax
balances attributable to amounts recognised directly in equity, they are also recognised directly in equity.
The Group parent 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.
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 all relevant recommended additional disclosures of Part A
of the Code.
83
Annual Report 2020carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2020
4. Income tax continued
Key Assumption/Accounting Estimates
Deferred tax assets relating to tax losses
The Group recognises deferred tax assets relating to carry forward tax losses to the extent there are sufficient taxable
temporary differences relating to the same taxable authority and the same subsidiary against which the unused tax losses
can be utilised. However, utilisation of the tax losses also depends on the ability of the entity to satisfy certain tests at the
time the losses are recouped. During the year, management determined that tax losses relating to two entities no longer
satisfied these tests and were subsequently written off. Deferred tax assets relating to tax losses incurred by those two
entities during the year ended 30 June 2020 are not recognised.
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 (R&D) 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.
(a) Income tax expense
Current tax
Adjustments for current tax of prior periods
Deferred tax
Adjustments for deferred tax of prior periods
Deferred income tax expense included in income tax expense comprises:
Increase/(decrease) in deferred tax assets
(Decrease)/increase in deferred tax liabilities
* See Note 31 for details about restatements as a result of changes in accounting policies.
(b) Numerical reconciliation of income tax expense
Profit from continuing operations before income tax expense
Tax at the Australian tax rate of 30.0% (2019: 30.0%)
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
Non-assessable income – R&D tax offset1
Share options2
Non-taxable gain on put option revaluation3
Sundry items
Adjustment for prior periods
Current year losses for which no deferred tax has been recognised or tax losses written off4
Tax relating to net profit from associates5
Non-taxable gains relating to associates6
Withholding tax on distribution of foreign subsidiary profits7
Income tax differential (effect of foreign tax rates)8
Income tax expense
* See Note 31 for details about restatements as a result of changes in accounting policies.
84
2020
$’000
53,502
(2,320)
(2,349)
1,372
50,205
2,117
(4,466)
(2,349)
2020
$’000
172,040
51,612
(228)
(284)
(2,168)
92
(948)
6,036
(1,370)
(1,355)
1,508
(2,690)
50,205
*Restated
2019
$’000
52,948
(689)
(2,436)
-
49,823
(3,535)
1,099
(2,436)
*Restated
2019
$’000
181,988
54,596
(330)
(832)
(3,243)
1,123
(689)
522
(1,218)
(310)
2,540
(2,336)
49,823
Annual Report 2020carsales.com Ltd (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 – credited directly to equity
Net deferred tax – debited/(credited) directly to equity9
2020
$’000
(587)
67
(520)
2019
$’000
(353)
(4,339)
(4,692)
Explanation of key tax items:
1. Group’s utilisation of research and development tax incentives.
2. Amounts relating to the provision of equity incentives.
3. Amount relating to revaluation of put options – see Note 10.
4. Amount relating to tax losses for which a deferred tax asset has not been recognised. The majority of these losses
may be carried forward for between 5 and 10 years. Also includes amount relating to the write-off of tax losses for
which a deferred tax asset had previously been recognised.
5. The Group's share of associates' results taken up in Group results, net of tax expense.
6. Non-assessable gain derived on the revaluation or dilution of equity interests held in an associate.
7. Withholding tax paid/estimated to be payable on dividend distributions.
8. The Group's profits are taxed at prevailing statutory rates which vary to the Australian statutory tax rate (as noted
in the table below).
9. Related to equity incentives and cross-currency interest rate swap.
Statutory tax rates:
Country
Australia
New Zealand
Malaysia
China
Thailand
South Korea
USA
Argentina
Chile
Mexico
(d) Effective tax rate
Profit before income tax expense (A)
Income tax expense (B)
Effective tax rate (B/A)
2020
30%
28%
24%
25%
20%
22%
21%
35%
27%
30%
2019
30%
28%
24%
25%
20%
22%
21%
35%
27%
30%
2020
$’000
172,040
50,205
29%
*Restated
2019
$’000
181,988
49,823
27%
* See Note 31 for details about restatements as a result of changes in accounting policies.
The effective tax rate for 2020 was affected by the non-taxable gains relating to associates and put options, tax losses not
recognised and prior period over/under provisions, without which the effective tax rate for the year would have been 28%.
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 (after restating for the effects of AASB 16) would have been 28%.
85
Annual Report 2020carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2020
4. Income tax continued
(e) Tax losses
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit
2020
$'000
18,952
6,031
2019
$'000
1,920
576
The unrecognised tax losses were incurred by loss making subsidiaries that are not likely to generate taxable income in the
foreseeable future. They are carried forward for at least five years.
(f) Deferred tax assets
The balance comprises temporary differences attributable to:
Employee
benefits
$’000
3,658
Employee
Share
Trust
$’000
907
Doubtful
debts
$’000
688
Expense
accruals
$’000
1,516
Intan-
gibles
$’000
(1,454)
Tax
losses
$’000
5,430
Hedges
$’000
5,234
Other
$’000
2,568
Total
$’000
18,547
140
91
-
(40)
3,758
912
-
1,910
2,738
2,368
1,297
(566)
-
(895)
(396)
19
-
-
45
-
-
733
576
112
-
-
-
(813)
(239)
(2,655)
-
1,316
(2,115)
-
-
703
-
-
(1,693)
-
(620)
2,155
(980)
-
4,254
-
-
3,884
(68)
(660)
15,704
2,345
(1,699)
2,946
(650)
245
2,614
-
-
2,581
11,855
482
3,534
-
(179)
-
-
-
-
-
5,234
-
4,339
-
(130)
-
-
(495)
-
(1,070)
(111)
3,658
907
688
1,516
(1,454)
5,430
5,234
2,568
18,547
At 1 July 2019
Credited/(charged)
to the profit or loss
Credited/(charged)
directly to equity
Exchange differences
At 30 June 2020
*Restated at
1 July 2018
Credited/(charged)
to the profit or loss
(Charged)/credited
directly to equity
Deferred tax assets
classified as held
for sale
Exchange differences
*Restated at
30 June 2019
Deferred tax assets to be recovered within 12 months
Deferred tax assets to be recovered after more than 12 months
* See Note 31 for details about restatements as a result of changes in accounting policies.
2020
$’000
7,904
7,800
15,704
*Restated
2019
$’000
6,933
11,614
18,547
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 deferred tax asset on the unrealised derivative liability, in both FY19 and FY20, directly into equity
(against the cash flow and net investment hedge reserves).
86
Annual Report 2020carsales.com Ltd (g) Deferred tax liabilities
The balance comprises temporary differences attributable to:
At 1 July 2019
Credited to the profit or loss
Exchange differences
At 30 June 2020
At 1 July 2018
(Credited)/charged to the profit or loss
Deferred tax liabilities related to assets classified as held for sale
Exchange differences
At 30 June 2019
Deferred tax liabilities expected to be settled within 12 months
Deferred tax liabilities expected to be settled after more than 12 months
5. Earnings per share
Accounting Policy
Basic earnings per share is calculated by dividing:
Intangibles
$’000
17,461
(1,116)
(781)
15,564
Withholding
Tax
$’000
3,467
(3,350)
(117)
-
19,821
(1,274)
(1,230)
144
17,461
1,077
2,373
-
17
3,467
2020
$’000
1,116
14,448
15,564
Total
$’000
20,928
(4,466)
(898)
15,564
20,898
1,099
(1,230)
161
20,928
2019
$’000
4,741
16,187
20,928
• 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 29.
87
Annual Report 2020carsales.com Ltd
Notes to the Consolidated Financial Statements continued
30 June 2020
Basic earnings
per share
Diluted earnings
per share
*Restated
2019
*Restated
2019
2020
2020
84,011,000
84,011,000 114,668,000
114,668,000
245,034,776 243,631,320 245,034,776 243,631,320
133,811
363,105
224,015
316,166
-
-
-
-
245,034,776 243,631,320 245,574,957 244,128,236
34.4
34.5
46.8
46.7
Basic earnings
per share
Diluted earnings
per share
2020
*Restated
2019
*Restated
2019
119,943,000 132,088,000 119,943,000 132,088,000
245,034,776 243,631,320 245,034,776 243,631,320
133,811
363,105
224,015
316,166
2020
-
-
-
-
245,034,776 243,631,320 245,574,957 244,128,236
54.1
54.2
48.8
48.9
Basic earnings
per share
Diluted earnings
per share
2020
(5,275,000)
*Restated
2019
(48,077,000)
*Restated
2019
(48,077,000)
245,034,776 243,631,320 245,034,776 243,631,320
133,811
363,105
224,015
316,166
(5,275,000)
2020
-
-
-
-
245,034,776 243,631,320 245,574,957 244,128,236
(19.7)
(19.7)
(2.1)
(2.1)
5. Earnings per share continued
(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 options
Dilutive impact of performance rights
Total weighted average number of ordinary shares used
in EPS calculation
Reported earnings per share/cents
*See Note 31 for details about restatements as a result of changes in accounting policies.
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 options
Dilutive impact of performance rights
Total weighted average number of ordinary shares used
in EPS calculation
Reported earnings per share/cents
*See Note 31 for details about restatements as a result of changes in accounting policies.
Earnings per share for loss from discontinued operations
attributable to the ordinary equity holders of the Company:
Reported loss attributable to equity holders of the Company
Weighted average number of ordinary shares
Dilutive impact of options
Dilutive impact of performance rights
Total weighted average number of ordinary shares used
in EPS calculation
Reported earnings per share/cents
*See Note 31 for details about restatements as a result of changes in accounting policies.
88
Annual Report 2020carsales.com Ltd (b) Adjusted earnings per share
Reported profit attributable to equity holders
of the Company
Adjusted for: Net result after tax from
discontinued operations
Add: COVID-19 Dealer Support Package (net of tax)**
Less: gain on associate investment dilution (net of NCI)
Less: changes in fair value of put option liabilities
and deferred consideration
Add: other adjusting items (net of tax)**
Add: one-off tax adjustment
Add: option unwinding discount
Add: bad debt write-off (net of tax)**
Add: acquired intangibles amortisation (net of tax)**
Less: fair value gain arising from discontinuing
the equity method (net of NCI)
Add: loss on disposal of subsidiary
Adjusted profit attributable to equity holders
of the Company for continuing operations
Adjusted earnings per share/cents for
continuing operations***
Basic earnings
per share
Diluted earnings
per share
2020
*Restated
2019
2020
*Restated
2019
114,668,000
84,011,000 114,668,000
84,011,000
5,275,000
19,284,000
-
48,077,000
-
(1,552,000)
5,275,000
19,284,000
-
48,077,000
-
(1,552,000)
(7,228,000)
2,005,000
3,727,000
-
-
7,128,000
(11,253,000)
1,287,000
-
442,000
2,161,000
6,988,000
(7,228,000)
2,005,000
3,727,000
-
-
7,128,000
(11,253,000)
1,287,000
-
442,000
2,161,000
6,988,000
(7,142,000)
472,000
-
-
(7,142,000)
472,000
-
-
138,189,000 130,161,000 138,189,000 130,161,000
56.4
53.4
56.3
53.3
See Note 31 for details about restatements as a result of changes in accounting policies.
*
** 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
significant one-off items of income and expense to arrive at an adjusted profit measure which reflects the underlying financial performance of the Group.
89
Annual Report 2020carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2020
6. Reconciliation of profit after income tax to net cash inflow
from operating activities
Profit for the year
Depreciation and amortisation
Impairment loss (discontinued operations – Note 21)
Non-cash employee benefits expense – share-based payments
Loss on disposal of assets
Profit on termination of leases
Net finance related costs
Gain on associate fair value adjustment and investment dilution
Fair value gain arising from discontinuing the equity method
Share of net profit from associates accounted for using the equity method
Loss on disposal of subsidiaries
Bad debts written-off
Changes in fair value of put options
Foreign exchange differences
Change in operating assets and liabilities:
Decrease/(increase) in trade debtors
(Increase)/decrease in inventory
Decrease/(increase) in deferred tax assets
(Decrease) in trade creditors and other liabilities
Increase in deferred revenue
Increase/(decrease) in provision for income taxes payable
(Decrease)/increase in deferred tax liabilities
Increase in other provisions
Net cash inflow from operating activities
*See Note 31 for details about restatements as a result of changes in accounting policies.
2020
$’000
116,953
36,351
4,450
3,480
112
(74)
14,844
-
(9,753)
(4,177)
1,676
133
(7,228)
(39)
11,993
(281)
3,941
(8,915)
3,365
10,732
(6,594)
472
171,441
*Restated
2019
$’000
84,233
33,733
47,809
(21)
2
-
16,609
(2,069)
-
(3,124)
-
3,063
(11,253)
-
(3,205)
1,397
(3,166)
(5,195)
4,974
(7,209)
1,083
405
158,066
The reconciliation of profit after income tax to net cash inflow from operating activities includes both continuing and
discontinued operations.
90
Annual Report 2020carsales.com Ltd
FINANCING AND RISK MANAGEMENT
This section 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.
7. Cash and cash equivalents
Accounting Policy
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.
The Company's exposure to interest rate risk is discussed in Note 11 Financial Risk Management. The maximum exposure
to credit risk at the reporting date is the carrying amount of each class of cash and cash equivalents mentioned below.
Cash and cash equivalents
8. Borrowings
Accounting Policy
2020
$’000
179,937
2019
$’000
94,411
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 as 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 in the period in which
the expense is incurred.
91
Annual Report 2020carsales.com Ltd
Notes to the Consolidated Financial Statements continued
30 June 2020
8. Borrowings continued
Bank loan – carsales.com Ltd
Other debt – RedBook Inspect Pty Ltd
Less: Unamortised borrowing costs
Comprising:
Current borrowings
Non-current borrowings
2020
$’000
545,000
370
545,370
(1,126)
544,244
174
544,070
544,244
2019
$’000
475,000
848
475,848
(1,286)
474,562
248
474,314
474,562
At 30 June 2020 carsales.com Ltd had a syndicated revolving loan facility and established a $545.0 million debt facility under
a Common Terms Deed (CTD) documentation structure as follows:
Facility
Tranche A
Tranche B
Total
Commitment ($’000)
335,000
210,000
545,000
Drawn at close ($’000)
335,000
210,000
545,000
Maturity date
5 July 2021
4 July 2023
Six financiers are part of the syndicate and each of these financiers entered into a bilateral facility agreement with the Company
under the CTD documentation structure. The 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.
The Group has complied with all debt covenants throughout the reporting period.
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 two to five years
2020
$’000
-
-
-
2019
$’000
-
70,000
70,000
On 5 July 2020, the Company completed a full refinance of its facilities which increased the existing Tranche A facilities by
a further $105.0 million and extended the maturity date to 5 July 2024, as set out in Note 27.
92
Annual Report 2020carsales.com Ltd 9. Changes in assets and liabilities arising from financing activities
The table below shows cash and non-cash changes in assets and liabilities for which cash flows were, or will be, classified as
financing activities in the Consolidated Statement of Cash Flows.
This disclosure, which is a requirement of AASB 107 Statement of Cash Flows, allows users to understand changes in the balance
of certain liabilities such as borrowings. It also includes certain assets where cash flows have been, or will be, included in cash
flows from financing activities. This disclosure identifies changes from cash flows as well as non-cash changes such as acquisitions,
movement in fair value and exchange differences.
Liabilities from
financing activities
Other financial
liabilities/assets
Borrowings
$’000
(474,562)
(69,877)
-
-
-
-
-
-
-
(112)
Lease
liabilities
$’000
(63,713)
6,826
(2,681)
(1,538)
331
-
-
-
158
-
Other
financial
liabilities
$’000
(9,538)
-
-
-
-
-
-
9,538
-
-
Other
finance
receivables/
(payables)
$’000
296
897
-
-
-
(2,092)
-
-
-
-
Derivative
liabilities
$’000
(17,445)
-
-
-
-
-
3,266
-
-
-
Total
$’000
(564,962)
(62,154)
(2,681)
(1,538)
331
(2,092)
3,266
9,538
158
(112)
307
(544,244)
(354)
(60,971)
-
-
-
(14,179)
-
(899)
(47)
(620,293)
(454,758)
(25,507)
-
-
-
-
-
1,202
4,501
(474,562)
(77,067)
5,934
(3,220)
-
-
-
(112)
-
10,752
(63,713)
(21,649)
-
-
(442)
-
11,253
-
1,300
-
(9,538)
-
-
-
-
(17,445)
-
-
-
-
(17,445)
-
(1,543)
-
1,839
-
-
-
-
(553,474)
(21,116)
(3,220)
1,397
(17,445)
11,253
(112)
2,502
-
296
15,253
(564,962)
2020
Opening balance
Net cash flows from financing activities
Acquisitions – leases
Modification – leases
Termination – leases
Finance costs
Fair value through OCI (including tax)
Fair value through profit or loss
Foreign exchange adjustments
Other changes
Movement in liabilities directly
associated with assets classified
as held for sale
Closing balance
2019
Opening balance
Net cash flows from financing activities
Acquisitions – leases
Finance costs
Fair value through OCI (including tax)
Fair value through profit or loss
Foreign exchange adjustments
Other changes
Liabilities directly associated with assets
classified as held for sale
Closing balance
93
Annual Report 2020carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2020
10. Financial assets and liabilities and fair value measurement
Accounting Policy
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 gain or loss
on the hedging instrument that has been accumulated in the FCTR 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 as:
• 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 the cross-currency interest rate swaps are excluded from the designation of that
financial instrument as the hedging instrument. Changes in fair value of the foreign currency basis spread of the
financial instrument is accumulated in the CFHR, and is amortised to profit or loss on a rational basis over the term
of the hedging item.
Both the cash flow hedge and the net investment hedge have been assessed as being 100% effective (see note below).
Further 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 11.
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 interest rate swaps, 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.
For the 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.
Financial assets at fair value through other comprehensive income
Refer Note 20(d) for accounting policy on financial assets at fair value through other comprehensive income.
94
Annual Report 2020carsales.com Ltd 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 interest rate swaps
Unquoted financial assets
Other financial liabilities
Fair value approach
Measured at fair value through OCI
Level
1
Measured at fair value through OCI
Measured at fair value through OCI
Measured at fair value through profit or loss
2
3
3
(a) Valuation techniques used to determine fair values
Level 1
2020
$'000
13,601
(14,179)
27,117
-
2019
$'000
9,766
(17,445)
10,139
(9,538)
• 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 Rate Swaps (Swaps) entered on 4 July 2018.
These swaps protect the Group against defined foreign currency and interest rate exposures. The net investment hedge
protects the Group against foreign exchange risk relating to net investment in ENCARSALES.COM Ltd. The cash flow hedge
protects the Group against the variability of cash flows derived from carsales.com Ltd’s AUD floating rate debt issuance.
Management assessed the hedges as being effective and therefore the fair value movement has been recorded through the
net investment and cash flow hedge reserves. The fair value of $14.2 million in relation to these swaps has been recorded
as a non-current liability in the balance sheet. The swaps were independently valued at balance date based on the contracted
fixed interest rate and the market forward interest rate. Projected cash flows are discounted using discount factors interpolated
off the zero-coupon curve. The fair values of the swaps are adjusted for non-performance risk for both carsales and the bank
counterparties (using bilateral credit/debit valuation adjustments).
Level 3
• Investments in unquoted financial assets measured at fair value through other comprehensive income include: RateSetter
Australia Pty Ltd ($19.1 million), PromisePay Pte Ltd ($2.7 million) and other equity investments ($5.3 million). Refer Note 20(d)
for further details. RateSetter’s valuation was derived from management’s internal calculation based on revenue multiples of
comparable public companies (peers). The valuation is sensitive, any changes in revenue for RateSetter or changes in the group
of comparable companies used would result in a change in the fair value of the investment under this valuation approach.
In relation to PromisePay Pte Ltd, a business restructure occurred in March 2020, resulting in the divestment of Assembly
Payments Pte Ltd into a separate joint venture. The fair value of the investment in Assembly Payments Pte Ltd was based
on the equity price the new Joint Venture partner paid as part of the March 2020 restructure. The fair value of the remaining
investment in PromisePay Pte Ltd was based on the independent valuation performed during the period.
• The value of put options recognised at fair value is $nil (2019: $9.5 million). The put options valuations were based on
contractual multiples of future earnings of the acquired subsidiaries for a defined period and were valued at financial year
end based on forecasts of earnings for each acquired subsidiary. The most significant put option at 30 June 2019 related to
Appraisal Solutions Australia Pty Ltd. In February 2020, the Group purchased the remaining 40% stake in Appraisal Solutions
thereby extinguishing the put option liabilities as at year ended 30 June 2020. All other put options existed at 30 June 2019
have lapsed during the year ended 30 June 2020. Movements in the fair value of put options during the year resulted in
a gain of $7.2 million (2019: $11.3 million) recognised in the profit and loss.
There were no transfers between levels during the year.
95
Annual Report 2020carsales.com Ltd
Notes to the Consolidated Financial Statements continued
30 June 2020
10. Financial assets and liabilities and fair value measurement continued
(b) Valuation processes
The Group finance department 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:
• Unquoted financial assets – revenue multiple for comparable public companies (peers), latest capital raising and
independent valuations.
• Put option liabilities – earnings growth factor and risk adjusted discount rate.
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.
11. 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 leaders.
(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 (MXN), 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.
Risk management policy
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. Trading and dividend
cash flows between associates, subsidiaries and the Group are not hedged unless the cash flows are significant and the amount
and future payment date are certain.
Material arrangements in place at reporting date
On 4th July 2018, the Company entered into AUD:KRW Non-Deliverable Cross-Currency Interest Rate Swaps with the syndicate
banking group with a total notional value of $335.0 million, with $125.0 million having a maturity of three years and
$210.0 million a maturity of five years. These derivative instruments swap AUD floating rates with South Korean Won fixed
rates, thus synthetically creating $335.0 million of fixed rate debt. The swaps hedge the variability in floating interest rates
on bank debt and fluctuations in exchange rates relating to carsales net investment in ENCARSALES.COM Ltd. Subsequent
to 30 June 2020, the two swaps having a maturity of three years (which were due to terminate in July 2021) were closed out.
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 or losses on the hedging instrument is recognised in profit or loss only when the hedged transaction
impacts the profit or loss.
96
Annual Report 2020carsales.com Ltd Carrying
amount of
hedging
instrument
Assets/
(Liabilities)
$’000
Current
notional
amount
$’000
Change in
value of
hedging
instrument
$’000
Change in
value of
hedged
item
$’000
Ineffect-
iveness
$’000
CFHR
opening
balance
before tax
Dr/(Cr)
$’000
Movement
in CFHR
Dr/(Cr)
$’000
Closing
CFHR
before tax
Dr/(Cr)
$’000
335,000
(19,243)
(1,225)
(1,305)
335,000
5,064
(14,179)
4,490
3,265
4,490
3,185
335,000
(18,018)
(18,018)
(18,018)
335,000
573
(17,445)
573
(17,445)
573
(17,445)
-
-
-
-
-
-
18,018
1,138
19,156
n/a
18,018
n/a
1,138
n/a
19,156
-
18,018
18,018
n/a
-
n/a
18,018
n/a
18,018
2020
Cash flow hedges
Cross-currency
interest rate swap
Net investment
hedge
Cross-currency
interest rate swap
Total
2019
Cash flow hedges
Cross-currency
interest rate swap
Net investment
hedge
Cross-currency
interest rate swap
Total
The following table details the average notional principal amounts, average contract FX rate and the average fixed interest rate
of the hedging instrument (cross-currency interest rate swap) at the end of the financial year:
Weighted Average of the Hedging Instrument
< 1 year
2 – 5 years Over 5 years
1 – 2 years
827.83
1.41
335
827.83
1.41
335
828.13
1.48
214
827.83
1.41
335
827.83
1.41
335
828.13
1.48
214
-
-
-
-
-
-
2020
Cross-currency interest rate swap
Average contracted FX rate (AUD/KRW)
Average contracted fixed interest rate (%)
Average notional amount* ($ million)
*Subsequent to 30 June 2020, two swaps were closed out in July 2020, refer to Note 27 for details.
2019
Cross-currency interest rate swap
Average contracted FX rate (AUD/KRW)
Average contracted fixed interest rate (%)
Average notional amount ($ million)
97
Annual Report 2020carsales.com Ltd
Notes to the Consolidated Financial Statements continued
30 June 2020
11. Financial risk management continued
Material exposures and sensitivity
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 (excluding derivatives in separate table below):
Impact on profit:
AUD to KRW
AUD to BRL
AUD to MXN
AUD to CLP
AUD to ARS
Net Movement
Impact on equity:
AUD to KRW
AUD to BRL
AUD to MXN
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%)
2020
$’000
-5%
843
244
(181)
40
(83)
863
20,770
2,326
(675)
288
136
22,845
2019
$’000
-5%
623
245
(153)
21
(81)
655
22,557
3,077
(581)
307
234
25,594
2020
$’000
+5%
(843)
(244)
181
(40)
83
(863)
(20,770)
(2,326)
675
(288)
(136)
(22,845)
2019
$’000
+5%
(623)
(245)
153
(21)
81
(655)
(22,557)
(3,077)
581
(307)
(234)
(25,594)
Cash flow hedge sensitivity
Management has also calculated the impact on the balance sheet for the year as a result of a +/- 5% variance change in the
Cross-Currency Interest Rate Swap below (a positive impact means a reduction in the carrying value of the liability and a negative
impact means an increase in the carrying value of the liability):
Cross-Currency Interest Rate Swap
AUD/KRW
+ 5%
- 5%
(ii) Price risk
2020
$’000
2019
$’000
16,465
(18,186)
16,540
(18,265)
The Group’s exposure to equity securities price risk arises from the 11.7% 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 20(d)).
Changes in the fair value are recognised directly in other comprehensive income as an irrevocable election was made by
the Group on adoption of AASB 9 Financial Instruments.
A movement in the value of this asset upwards or downwards 5% would increase or decrease its carrying value by $0.7 million
with a corresponding debit or credit recognised in other comprehensive income.
Other than the investment in iCar Asia Limited, the Group is not exposed to significant price equities risk.
98
Annual Report 2020carsales.com Ltd (b) Credit risk
Credit risk of the Group arises predominantly from outstanding receivables from customers and from its financing activities,
including deposits with financial institutions.
Risk management policy
It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures,
which may include an assessment of their financial position, past experience and industry reputation, depending on the
amount of credit to be granted.
Receivables balances are monitored on an ongoing basis. The Group applies the AASB 9 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 reporting date 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.
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.
Material arrangements in place at the reporting date
The net trade receivables balance at 30 June 2020 was $37.4 million (2019: $50.0 million). See below for the aging profile of net
trade receivables.
Gross
receivables
34,154
843
1,089
320
1,532
2,408
40,346
Note
15
2020
$’000
Expected
loss rate
0-0.5%
1.0%
2.5-5.0%
7.5-10%
50-80%
80-100%
Loss
allowance
26
22
21
39
542
2,275
2,925
Gross
receivables
42,051
3,176
3,422
676
1,076
2,594
52,995
2019
$’000
Expected
loss rate
0-0.5%
1.0%
2.5-5.0%
7.5-10%
50-80%
80-100%
Loss
allowance
45
33
86
70
556
2,170
2,960
Current
More than 30 days past due
More than 60 days past due
More than 90 days past due
More than 120 days past due
More than 180 days past due
Total
The loss allowance for trade receivables as at 30 June reconciles to the opening loss allowance as follows:
Opening loss allowance as at 1 July
Increase in loss allowance recognised in profit or loss during the year
Receivables written off during the year as uncollectible
Closing loss allowance at 30 June
2020
$’000
2,960
555
(590)
2,925
2019
$’000
2,851
109
-
2,960
Trade receivables are written-off when there is no reasonable expectation of debt 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.
99
Annual Report 2020carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2020
11. Financial risk management continued
Material exposures and sensitivity
The Group’s maximum exposures to credit risk at balance date in relation to each class of recognised financial assets is the
carrying amount of those assets.
(c) Interest rate risk
The consolidated entity’s exposure to the cash flow risk of changes in market interest rates relates primarily to cash at bank and
long-term borrowings. Cash and cash equivalents draw interest at variable interest rates. Bank overdrafts are at a fixed interest
rate 6.5% (2019: 8.1%).
Risk management policy
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.
Material arrangements in place at the reporting date
The Group has $545.0 million (2019: $475.0 million) variable rate borrowings at a weighted average interest rate of 1.6%
(2019: 3.2%). 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. The Group also has $335.0 million AUD:KRW Non-Deliverable Cross-
Currency Interest Swaps to protect the Group against interest rate exposures.
Material exposures and sensitivity
The following table summarises the sensitivity of the Group’s financial assets and financial liabilities to interest rate risk.
At 30 June 2020
Financial assets
Cash and cash equivalents
Financial liabilities
Variable rate borrowings
Total increase/(decrease)
At 30 June 2019
Financial assets
Cash and cash equivalents
Financial liabilities
Variable rate borrowings
Total increase/(decrease)
Interest rate risk
-100 bps
+100 bps
Carrying
amount
$’000
Profit
$’000
Other
equity
$’000
Profit
$’000
Other
equity
$’000
179,937
(1,120)
(1,120)
1,120
1,120
(545,000)
4,870
3,750
4,870
3,750
(4,870)
(3,750)
(4,870)
(3,750)
94,411
(804)
(804)
804
804
(475,000)
4,700
3,896
4,700
3,896
(4,700)
(3,896)
(4,700)
(3,896)
100
Annual Report 2020carsales.com Ltd Management also calculated the impact on the carrying value of the hedge liability in the event of a +/- 100 bps change in
interest rates (a positive impact means a reduction in the carrying value of the liability and a negative impact means an increase
in the carrying value of the liability):
Cross-Currency Interest Rate Swap
AUD BBSY
+ 100 bps
- 100 bps
KRW KORIBOR
+ 100 bps
- 100 bps
June 2020
$’000
June 2019
$’000
(18)
21
74
(74)
7,639
(7,882)
10,881
(11,322)
(d) Liquidity risk
Prudent liquidity risk management entails 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.
Risk management policy
The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles
of financial assets and liabilities. The Group maintains borrowing facilities to enable the Group to borrow funds when necessary.
Material arrangements in place at reporting date
Net debt
Borrowings (Note 8)
Derivative liabilities (Note 11)
Lease liabilities (Note 17)
Less: cash and cash equivalents (Note 7)
Net debt
2020
$’000
544,244
14,179
60,971
(179,937)
439,457
*Restated
2019
$’000
474,562
17,445
63,713
(94,411)
461,309
* See Note 31 for details about restatements as a result of changes in accounting policies.
Material exposures – contractual maturities of financial liabilities
The following table sets out the Group’s exposure to liquidity risk. The amounts disclosed in the table are the contractual
undiscounted cash flows.
At 30 June 2020
Non-derivatives
Non-interest bearing payables
Variable rate borrowings
Fixed rate borrowings
Lease liabilities
Total non-derivatives
Derivatives
Cross-currency interest rate swap
Total derivatives
0 – 12
months
$’000
Between
1 and 2
years
$’000
Between
2 and 5
years
$’000
Over
5 years
$’000
Total
contractual
cash flows
$’000
Carrying
amount
liabilities
$’000
30,784
-
271
7,989
39,044
-
335,587
174
6,083
341,844
202
210,184
-
14,691
225,077
-
-
-
43,116
43,116
30,986
545,771
445
71,879
649,081
30,986
543,911
333
60,971
636,201
-
-
-
-
14,179
14,179
-
-
14,179
14,179
14,179
14,179
101
Annual Report 2020carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2020
11. Financial risk management continued
*Restated
At 30 June 2019
Non-derivatives
Non-interest bearing payables
Variable rate borrowings
Fixed rate borrowings
Lease liabilities
Other financial liabilities – held for trading
Total non-derivatives
Derivatives
Cross-currency interest rate swap
Total derivatives
0 – 12
months
$’000
Between
1 and 2
years
$’000
Between
2 and 5
years
$’000
Over
5 years
$’000
Total
contractual
cash flows
$’000
Carrying
amount
liabilities
$’000
29,962
-
263
8,137
-
38,362
-
-
546
7,495
9,538
17,579
29
476,715
-
15,016
-
491,760
-
-
-
48,290
-
48,290
29,991
476,715
809
78,938
9,538
595,991
29,991
473,798
764
63,713
9,538
577,804
-
-
-
-
17,445
17,445
-
-
17,445
17,445
17,445
17,445
*See Note 31 for details about restatements as a result of changes in accounting policies.
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.
EQUITY
This section provides information about the capital management practices of the business.
12. Contributed equity
Accounting Policy
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.
(a) Share capital
Ordinary shares fully paid
Notes
12(b)
2020
Shares
2019
Shares
245,613,817 244,347,196
245,613,817 244,347,196
2020
$’000
149,817
149,817
2019
$’000
135,372
135,372
102
Annual Report 2020carsales.com Ltd (b) Movements in ordinary share capital
Movement in ordinary shares during the period
Balance at 1 July 2019
Exercise of options and performance rights under the carsales.com Ltd Employee Option Plan
Dividend Reinvestment Plan
Balance at 30 June 2020
Balance at 1 July 2018
Exercise of options and performance rights under the carsales.com Ltd Employee Option Plan
Dividend Reinvestment Plan
Balance at 30 June 2019
Number
of shares
244,347,196
536,528
730,093
245,613,817
242,982,207
363,444
1,001,545
244,347,196
$’000
135,372
4,493
9,952
149,817
119,541
2,412
13,419
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 29.
13. Reserves and retained earnings
Nature and purpose of reserves
The share-based payments reserve is used to recognise the fair value of options and performance rights issued
and vested.
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 or loss when the net investment is disposed of.
The Group had 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 in the NCI acquisition reserve. 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.
103
Annual Report 2020carsales.com Ltd
Notes to the Consolidated Financial Statements continued
30 June 2020
13. Reserves and retained earnings continued
(a) Reserves
Share-
based
payment
$’000
25,442
Foreign
currency
translation
$’000
(1,057)
Post-
employ-
ment
benefits
$’000
607
Financial
asset
FVOCI
$’000
(2,320)
NCI
acquisition
$’000
(39,753)
Cash
flow
hedge
$’000
(12,163)
Net
investment
hedge
$’000
(450)
Other
Reserves
$’000
-
Total
reserves
$’000
(29,694)
-
-
-
-
-
-
(32,366)
-
-
-
(983)
-
3,930
-
-
-
-
-
-
-
3,967
(28,436)
(983)
3,967
4,392
-
-
-
-
-
-
-
-
-
-
-
-
(1,246)
-
-
-
-
-
(398)
-
(1,246)
(398)
-
-
-
-
-
-
(32,366)
(983)
(1,246)
3,532
3,967
(27,096)
-
-
-
4,392
-
29,834
-
(29,493)
-
(376)
-
1,647
1,166
(38,587)
-
(13,409)
-
(848)
(5,021)
(5,021)
(3,855)
(56,253)
Balance at 1 July 2019
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
Gain/(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:
Increase in share-based
payment reserve inclusive
of tax
Transaction with non-
controlling interests
Balance at 30 June 2020
104
Annual Report 2020carsales.com Ltd Share-
based
payment
$’000
26,004
Foreign
currency
translation
$’000
(12,820)
Post-
employ-
ment
benefits
$’000
(35)
Financial
asset
FVOCI
$’000
(686)
NCI
acquisition
$’000
(36,890)
Cash
flow
hedge
$’000
-
Net
investment
hedge
$’000
-
Other
Reserves
$’000
-
Total
reserves
$’000
(24,427)
Balance at 1 July 2018
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:
Decrease in share-based
payment reserve inclusive
of tax
Transaction with non-
controlling interests
Balance at 30 June 2019
-
-
-
-
-
-
11,763
-
-
-
-
-
642
-
-
-
(1,634)
11,763
642
(1,634)
-
-
-
-
-
-
-
-
-
-
-
-
-
(12,163)
-
-
-
-
-
(450)
-
(12,163)
(450)
-
-
-
-
-
-
-
-
-
-
-
11,763
642
(12,163)
(450)
(1,634)
(1,842)
(562)
(2,863)
(29,694)
(562)
-
-
-
-
25,442
-
(1,057)
-
607
-
(2,320)
(2,863)
(39,753)
-
(12,163)
-
(450)
Transaction with non-controlling interests
On 16 August 2019 carsales.com Ltd acquired a further 29.9% stake of RedBook Inspect Pty Ltd for a consideration of
$2.5 million giving carsales 80% ownership of RedBook Inspect Pty Ltd.
On 21 February 2020 carsales.com Ltd acquired the remaining 40% stake of Appraisal Solutions Australia Pty Ltd for a
consideration of $1.9 million giving carsales 100% ownership of Appraisal Solutions Australia Pty Ltd.
Recognition of non-controlling interests acquisition reserve
The Group previously had put options over some of its non-controlling interests. As at June 2020 the value of put options is $nil.
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.
105
Annual Report 2020carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2020
13. Reserves and retained earnings continued
(b) Retained earnings
Movements in retained earnings were as follows:
Balance 1 July
Impact of changes in accounting policy
Restated balance 1 July
Net profit for the year
Dividends
Balance 30 June
*See Note 31 for details about restatements as a result of changes in accounting policies.
14. Dividends
Accounting Policy
2020
$’000
209,934
(6,573)
203,361
114,668
(115,144)
202,885
*Restated
2019
$’000
232,289
(5,310)
226,979
84,011
(107,629)
203,361
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.
Declared and paid during the period (fully-franked at 30%)
Final dividend per fully paid share for the year ended 30 June 2019: 25.0 cents
(2018: 23.7 cents) paid in cash
Final dividend per fully paid share for the year ended 30 June 2019: 25.0 cents
(2018: 23.7 cents) satisfied through the issuance of shares under the Dividend
Reinvestment Plan
Interim dividend per fully paid share for the year ended 30 June 2020: 22.0 cents
(2019: 20.5 cents) paid in cash
Interim dividend per fully paid share for the year ended 30 June 2020: 22.0 cents
(2019: 20.5 cents) satisfied through the issuance of shares under the Dividend
Reinvestment Plan
Total dividends provided for or paid
Proposed and unrecognised as a liability (fully-franked at 30%)
Final dividend per fully paid ordinary share for 2020: 25.0 cents (2019: 25.0 cents)
Proposed dividend is expected to be paid on 7 October 2020 out of retained earnings
at 30 June 2020 but is not recognised as a liability at year end
Franking credit balance (based on a tax rate of 30%)
Franking credits available for future years, adjusted for franking credits and debits that
will arise from the settlement of liabilities or receivables for income tax and dividends
after the end of the year
2020
$’000
2019
$’000
54,881
50,262
6,303
7,378
50,311
43,948
3,649
115,144
6,041
107,629
61,403
61,150
25,348
43,462
106
Annual Report 2020carsales.com Ltd
Dividend Reinvestment Plan (DRP)
The carsales.com Ltd DRP will be maintained for the 2020 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 23 September 2020. The last date for shareholders to nominate their participation in
the DRP is 5:00pm (AEST) on 24 September 2020. 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.
OTHER ASSETS AND LIABILITIES
This section provides information on other balance sheet assets and liabilities that do not materially affect performance or give
rise to material financial risk.
15. Trade and other receivables
Accounting Policy
(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 the loss allowance.
Details about the Group’s impairment policies and the calculation of the loss allowance are provided in Note 11.
(b) Accrued income
Services provided in the current reporting period are recognised on an 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.
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 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 11.
107
Annual Report 2020carsales.com Ltd
Notes to the Consolidated Financial Statements continued
30 June 2020
15. Trade and other receivables continued
Current assets
Trade receivables
Loss allowance (see Note 11)
Trade receivables
Accrued income
Other receivables
Prepayments
Trade and other receivables
Non-current assets – other receivables
16. Property, Plant & Equipment
Accounting Policy
2020
$’000
40,346
(2,925)
37,421
4,049
7,592
5,267
54,329
7,096
2019
$’000
52,995
(2,960)
50,035
2,933
2,731
5,539
61,238
7,363
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 expenses are charged to the profit or loss during the financial
period in which they are incurred.
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.
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:
• Motor vehicles
3 – 5 years
• Plant and equipment
3 – 10 years
• Leasehold improvements
3 – 10 years or minimum lease period if shorter
108
Annual Report 2020carsales.com Ltd Plant and
equipment
$’000
Motor
vehicles
$’000
Leasehold
improve-
ments
$’000
Total
$’000
10,512
9,015
(288)
(5,234)
(245)
13,760
6,374
6,713
-
(3,150)
(64)
9,873
21,356
(11,483)
9,873
35,521
(21,761)
13,760
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
Year ended 30 June 2020
Opening net book amount
Additions
Disposals
Depreciation charge
Exchange differences
Closing net book amount
At 30 June 2020
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
2,921
2,105
(171)
(1,610)
(177)
3,068
12,390
(9,322)
3,068
3,721
1,423
(14)
(608)
(1,361)
(264)
24
2,921
11,044
(8,123)
2,921
1,217
197
(117)
(474)
(4)
819
1,775
(956)
819
711
703
-
(9)
(212)
(3)
27
1,217
1,832
(615)
1,217
109
Annual Report 2020carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2020
17. Leases
The Group leases properties (commercial office premises and retail properties), motor vehicles and equipment. The Group’s
leases are typically for fixed periods between 2 to 15 years and may include extension options. Lease terms are negotiated
on an individual lease basis and may contain a wide range of different terms and conditions. None of the Group’s lease
agreements impose any covenants, however leased assets may not be used as security for borrowing purposes.
Payments made under operating leases, less any incentives received from the lessor, were previously charged to profit or
loss on a straight-line basis over the period of the lease pursuant to the requirements of AASB 117. In applying AASB 16,
a right-of-use asset representing the right to use the underlying asset and a corresponding lease liability representing the
obligation to make lease payments are recognised at the date at which the leased asset is available for use by the Group.
Right-of-use assets are measured at cost comprising the following:
• ● the initial measurement of the lease liability;
• ● any lease payments made in advance of the lease commencement date less any incentives received;
• ● any initial direct costs; and
• ● an estimate of any costs to dismantle and remove the asset at the end of the lease.
The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier
of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-
use assets for impairment when such indicators exist.
At the lease commencement date, the Group measures the lease liability at the present value of the lease payments
unpaid at that date, discounted using the interest rate implicit in the lease where that rate is readily available or using
the Group’s incremental borrowing rate at the time the lease was entered into.
Lease payments included in the measurement of the lease liability consists of:
• ● fixed payments less any incentives receivable;
• ● variable payments based on an index or rate;
• ● amounts expected to be payable under a residual value guarantee; and
• ● payments arising from options reasonably certain to be exercised.
Subsequent to initial measurement, the liability is reduced for payments made and increased for interest incurred. The
liability is remeasured to reflect any reassessment or modification, or if there are changes to in-substance fixed payments.
When the lease liability is remeasured, a corresponding adjustment is made to the value of the right-of-use asset.
Deferred tax accounting
Lease payments are generally deductible whilst interest and depreciation expenses on these leases remain non-deductible.
As a result, a net deferred tax asset has been recognised in relation to the temporary differences arising from the
right-of-use assets and lease liabilities. The policy adopted for tax purposes is to recognise the deferred tax gross on
the right-of-use assets and lease liability balances.
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:
• Properties
Expected lease period
• Motor vehicles
Contractual lease period
• Leased plant and equipment Contractual lease period
110
Annual Report 2020carsales.com Ltd
Key Assumption/Accounting Estimates
Extension and termination options are included in a number of the Group’s property leases. The extension and
termination options are exercisable only by the Group and not by the respective lessor. In determining the lease term,
which forms part of the initial measurement of the right-of-use asset and lease liability, management considers all facts
and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination
option. Extension options (or periods after termination options) are only included in the lease term if the lease is
reasonably certain to be extended (or not terminated).
In determining the lease term, management considers all facts, circumstances and available options that create an
economic incentive to exercise an extension option, or not exercise a termination option.
The following factors are normally the most relevant when assessing the extension options on the property lease:
• If there are significant penalties to terminate (or not extend), the Group is typically reasonably certain to extend
(or not terminate).
• If any leasehold improvement are expected to have a significant remaining value, the Group is typically reasonably
certain to extend (or not terminate).
• Otherwise, the Group considers other factors including historical lease duration and the costs and business disruption
required to replace the leased properties.
Most extension options in properties have been included in the lease liability because the Group could not replace the
assets without significant cost or business disruption.
The lease term is reassessed if an option is actually exercised (or not exercised) or the Group becomes obliged to exercise
(or not exercise) it. The assessment of reasonable certainty is only revised if a significant event or change in circumstances
occurs, which affects this assessment and that is within the control of the lessee Group.
Right-of-use assets:
Year ended 30 June 2020
Opening net book amount
Additions
Terminations
Remeasurement of lease modification
Depreciation charge
Exchange differences
Closing net book amount
At 30 June 2020
Cost
Accumulated depreciation
Net book amount
Right-of-use
Properties
$’000
54,191
2,093
(303)
1,622
(6,930)
(51)
50,622
Right-of-use
Motor
vehicles
$’000
994
588
-
-
(697)
(4)
881
Right-of-use
Equipment
$’000
40
-
-
-
(21)
(2)
17
Total
$’000
55,225
2,681
(303)
1,622
(7,648)
(57)
51,520
78,233
(27,611)
50,622
2,650
(1,769)
881
83
(66)
17
80,966
(29,446)
51,520
111
Annual Report 2020carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2020
17. Leases continued
Year ended 30 June 2019
Opening net book amount
Additions
Depreciation charge
Depreciation charge – discontinued operations
Assets classified as held for sale
Exchange differences
Closing net book amount
At 30 June 2019
Cost
Accumulated depreciation
Net book amount
Lease Liabilities:
Year ended 30 June
Opening lease liabilities
Additions
Terminations
Remeasurement of lease modification
Lease payments
Lease payments – discontinued operations
Interest charge
Interest charge – discontinued operations
Liabilities classified as held for sale
Exchange differences
Closing lease liabilities
At 30 June
Current lease liabilities
Non-current lease liabilities
Total lease liabilities
Right-of-use
Properties
$’000
67,951
2,492
(6,555)
(683)
(9,116)
102
54,191
Right-of-use
Motor
vehicles
$’000
793
728
(534)
-
-
7
994
Right-of-use
Equipment
$’000
59
-
(21)
-
-
2
40
Total
$’000
68,803
3,220
(7,110)
(683)
(9,116)
111
55,225
75,519
(21,328)
54,191
2,009
(1,015)
994
85
(45)
40
77,613
(22,388)
55,225
2020
$’000
63,713
2,681
(331)
1,538
(8,320)
-
1,848
-
-
(158)
60,971
6,638
54,333
60,971
2019
$’000
77,067
3,220
-
-
(7,638)
(845)
2,073
476
(10,752)
112
63,713
6,228
57,485
63,713
112
Annual Report 2020carsales.com Ltd 18. Intangible assets
Accounting Policy
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.
Computer software
Software includes capitalised development costs being an internally generated intangible asset.
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
costs are treated as an investing cash outflow in the consolidated statement of cash flows.
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.
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 7 to 12 years.
The following intangible assets have finite lives and are subject to amortisation on a straight-line basis. The useful lives
for these assets are as follows:
• Computer software
• Brands
• Customer relationships
3-5 years
10 years
7-12 years
• Other (domain names and database) 5-10 years
Year ended 30 June 2020
Opening net book amount
Additions
Capitalised development costs
Disposals
Amortisation charge
Exchange differences
Closing net book amount
At 30 June 2020
Cost
Accumulated amortisation and impairment
Net book amount
Computer
Software
$’000
33,933
170
23,618
(1,475)
(15,060)
(4)
41,182
Brands and
customer
relationships
$’000
76,208
-
-
-
(8,333)
(2,191)
65,684
Other
intangible
assets*
$’000
409
3
-
-
(76)
53
389
Total
$’000
600,619
173
23,618
(2,726)
(23,469)
(13,327)
584,888
92,715
(51,533)
41,182
87,051
(21,367)
65,684
4,926
(4,537)
389
662,325
(77,437)
584,888
Goodwill
$’000
490,069
-
-
(1,251)
-
(11,185)
477,633
477,633
-
477,633
113
Annual Report 2020carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2020
18. Intangible assets continued
Year ended 30 June 2019
Opening net book amount
Acquisition of subsidiaries
Additions
Capitalised development costs
Disposals
Amortisation charge
Amortisation charge – discontinued operations
Impairment – discontinued operations
Assets classified as held for sale
Exchange differences
Closing net book amount
At 30 June 2019
Cost
Accumulated amortisation and impairment
Net book amount
* Other intangible assets include database, domain names and other.
(a) Impairment testing
Key Assumption/Accounting Estimates
Computer
Software
$’000
28,975
-
699
20,725
-
(12,353)
(985)
-
(3,890)
762
33,933
Brands and
customer
relationships
$’000
87,552
-
-
-
-
(7,699)
(333)
-
(4,100)
788
76,208
Other
intangible
assets*
$’000
430
-
152
-
(10)
(85)
-
-
(75)
(3)
409
Goodwill
$’000
541,998
446
-
-
-
-
-
(47,809)
(10,888)
6,322
490,069
Total
$’000
658,955
446
851
20,725
(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
Goodwill and intangible assets that have an indefinite useful life are allocated to a cash generating unit (‘CGU’) or
a group of CGUs and are tested annually for impairment. Other assets are tested for impairment whenever events
or changes in circumstances indicate that the carrying amount may not be recoverable, which includes carsales’
interests in associates. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds
its recoverable amount.
Both value in use and fair value less cost to sell valuation methods have been employed in determining the recoverable
amounts of CGUs. Both methods are predicated on cash flow projections which necessitates the adoption of assumptions
and estimates.
The key assumptions and estimates used in management’s calculations primarily relate to:
• five or ten-year cash flow forecasts sourced from internal budgets and long-term forecasts;
• terminal value growth rates applied to the period beyond the five to ten-year cash flow forecasts; and
• post-tax discount rates, used to discount the cash flows to present value.
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.
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.
114
Annual Report 2020carsales.com Ltd Cash generating units
Goodwill is allocated to the Group’s cash generating units (CGUs) which are then tested annually to determine whether they
have suffered any impairment. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets
(cash generating units).
A segment and CGU-level summary of the goodwill allocation is presented below.
Online Advertising Services Segment
Data, Research and Services Segment
– Mexico
– Chile
– Argentina
Latin America Segment
– South Korea
– RedBook International
Asia Segment
Key assumptions
2020
$’000
72,076
15,941
3,595
15,585
769
19,949
369,267
400
369,667
477,633
2019
$’000
72,076
15,941
5,478
18,547
1,250
25,275
376,377
400
376,777
490,069
As well as management cash flow projections, other key assumptions for each significant CGU are detailed as follows:
CGU
Online Advertising Services Value in use
Valuation method
Data, Research and Services Value in use
Value in use
Chile
Fair value less costs to sell
South Korea
Years of
cash flow
projection
Terminal
growth rate
2020
5
5
5
10
2.0%
2.0%
3.0%
2.5%
Post-tax
discount rate
2019
2.5%
2.5%
3.0%
2.5%
2020
8.7%
8.7%
9.0%
10.4%
2019
9.4%
9.4%
10.3%
10.4%
Impact of reasonable possible changes in key assumptions
As part of management’s impairment review for the period ended 30 June 2020, the carrying value of the Chile CGU was
compared with a value in use discounted cash flow model. The model indicated no impairment is required. The model’s cash
flow projections are based on the Board approved budget for the next 5 years. The valuation outcome is sensitive to the
underlying performance of the Chilean economy and management’s ability to successfully introduce new products, increase
prices and thereby increase yield. Management’s cash flows assume that the business will recover from COVID-19 in early
calendar year 2021. Depending on the duration of the COVID-19 pandemic and to what extent the business is affected in
the medium to longer term, it may have an impact on the future cash flow growth assumptions applied to calculate recoverable
amount. In the event that future EBITDA CAGR of at least five percent was not achieved over the forecast period, then that
would result in an impairment of the Chile CGU.
115
Annual Report 2020carsales.com Ltd
Notes to the Consolidated Financial Statements continued
30 June 2020
18. Intangible assets continued
carsales also has goodwill related to CGUs in Mexico and Argentina where the businesses are currently loss making in line with
management’s expectations due to immature monetisation rates. These CGUs are forecast to be profitable in the future such that
the carrying value of goodwill is supportable, however the recoverable amounts are close to the carrying amounts. Management
has based its current estimates of future cash flows on the expectation that the businesses will recover from COVID-19 in early
calendar year 2021. Depending on the duration of the COVID-19 pandemic and to what extent the businesses are affected
in the medium to long term, it may result in impairment losses in future periods. We note goodwill for Mexico and Argentina
is insignificant compared to total goodwill carried by the Group.
carsales will continue to assess the impact to the business should the COVID-19 pandemic extend beyond our current estimates
and will update the appropriate assumptions for calculating the recoverable amounts as more clarity on the impact of COVID-19
is obtained.
The Directors and management have considered and assessed reasonably possible changes for the key assumptions and have not
identified any instances that could cause the carrying amount of the Online Advertising Services, Data, Research and Services and
South Korea CGUs to exceed its recoverable amount.
19. Payables and provisions
Accounting Policy
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.
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 services. They 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.
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.
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.
Deferred revenue
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.
116
Annual Report 2020carsales.com Ltd Trade and other payables
Trade payables
Accrued expenses
Other payables
Total trade and other payables
Deferred revenue
Other payables – non-current
Provisions
Employee benefits – current
Employee benefits – non-current
Total employee benefits
2020
$’000
6,053
19,067
5,664
30,784
2019
$’000
5,893
21,019
3,050
29,962
8,759
9,441
202
29
7,112
1,104
8,216
6,815
912
7,727
GROUP STRUCTURE
This section 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.
20. Interests in other entities
(a) Material subsidiaries
(i) Subsidiaries
Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies, generally
accompanying a shareholding of more than 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. The purchase method
of accounting is used to account for the acquisition of subsidiaries by the Company.
Subsidiaries disposed of are de-consolidated from the date that control ceases.
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 presented 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.
117
Annual Report 2020carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2020
20. Interests in other entities continued
The Group’s principal subsidiaries at 30 June 2020 are set out below. Unless otherwise stated, they have share capital consisting
solely of ordinary shares that are held directly by the Group and the proportion of ownership interests held equals the voting
rights held by the Group. The country of incorporation or registration is also their principal place of business.
Place of
business/
country of
incorporation
Australia
Australia
Australia
Australia
New Zealand
China
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 Malaysia
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
Thailand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Demotores Holdings LLC
Demotores Chile SpA
Demotores S.A.
ENCARSALES.COM Ltd****
AS1 Holdings Pty Ltd
Appraisal Solutions Australia Pty Ltd***
Australia
Australia
Australia
Mexico
Chile
Chile
Australia
Australia
United States
of America
Chile
Argentina
South Korea
Australia
Australia
Ownership interest
held by the Group *
Ownership interest
held by non-
controlling interests
2020
%
100.0
100.0
100.0
100.0
100.0
100.0
2019
%
100.0
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
-
-
-
-
80.0
100.0
100.0
100.0
100.0
100.0
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
100.0
100.0
60.0
2020
%
-
-
-
-
-
-
-
-
25.0
-
-
-
-
-
-
-
-
-
-
20.0
-
-
-
-
-
-
-
-
-
-
-
-
2019
%
-
-
-
-
-
-
Principal
activities
(1)
(2)
(1)
(2)
(2)
(2)
-
-
25.0
-
-
-
-
-
-
49.9
49.9
49.9
56.2
49.9
-
-
-
-
-
-
-
-
-
-
-
40.0
(2)
(2)
(3)
(4)
(1)
(4)
(4)
(5)
(4)
(6)
(6)
(6)
(6)
(7)
(4)
(1)
(4)
(1)
(8)
(4)
(4)
(1)
(1)
(1)
(4)
(2)
*
**
***
The proportion of ownership interest is equal to the proportion of voting power held.
Stratton Finance Pty Ltd and its controlled entities have been disposed of during the year ended 30 June 2020. Refer Note 21 for details of the sale.
The Group has purchased a further stake in RedBook Inspect Pty Ltd and Appraisal Solutions Australia Pty Ltd during the year ended 30 June 2020. Refer Note 13 for details
of the transactions.
**** SK ENCARSALES.COM Ltd was rebranded to ENCARSALES.COM Ltd during the year ended 30 June 2020.
118
Annual Report 2020carsales.com Ltd Principal activities
(1) Classified advertising.
(2) Data and research.
(3) Online retail.
(4) Holding company.
(5) Share trust company.
(6) Finance and related services.
(7) Vehicle inspection services.
(8) Trustee company.
(b) Non-controlling interests (NCI) for continuing operations
Set out below is summarised financial information for each subsidiary that has non-controlling interests which are material
to the Group. The amounts disclosed for each subsidiary are before intercompany eliminations.
For the year ended 30 June 2020
Summarised balance sheet
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Accumulated NCI
Summarised statement of comprehensive income
Profit/(loss) for the year
Other comprehensive income
Total comprehensive income
Profit/(loss) for the year allocated to NCI
Dividends paid to NCI
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
Other (1)
$’000
3,254
1,424
(6,436)
-
(1,758)
(439)
(1,218)
-
(1,218)
(305)
-
520
(373)
-
147
2,160
2,474
(3,163)
(550)
921
177
(621)
-
(621)
(77)
200
3,006
(967)
(1,005)
1,034
444
3,000
(325)
-
3,119
-
273
23
296
(115)
84
214
(3)
(240)
(29)
119
Annual Report 2020carsales.com Ltd
Notes to the Consolidated Financial Statements continued
30 June 2020
20. Interests in other entities continued
Restated*
For the year ended 30 June 2019
Summarised balance sheet
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Accumulated NCI
Summarised statement of comprehensive income
Profit/(loss) for the year
Other comprehensive income
Total comprehensive income
Profit/(loss) for the year allocated to NCI
Dividends paid to NCI
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
(1) 'Other' represents other individually immaterial non-controlling interests.
* See Note 31 for details about restatement as a result of changes in accounting policies.
(c) Interests in associates
Accounting Policy
tyresales
$’000
RedBook
Inspect
$’000
Other (1)
$’000
3,523
811
(4,872)
-
(538)
(134)
(1,474)
-
(1,474)
(368)
-
479
8
-
487
2,744
2,526
(2,283)
(1,044)
1,943
970
1,036
-
1,036
517
674
2,999
(1,595)
(1,455)
(51)
989
4,839
(543)
(331)
4,954
923
(578)
105
(473)
(179)
121
(458)
(56)
(304)
(818)
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 acquiring an interest in an associate 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.
At each reporting date, the Group determines whether there is objective evidence that the investment in the associate or
joint venture is impaired. If there is such evidence, the Group recognises the loss as share of profit of an associate or joint
venture in the Consolidated Statement of Comprehensive Income.
120
Annual Report 2020carsales.com Ltd Name of entity
Webmotors S.A.
RateSetter Australia Pty Ltd(1)
Skedgo Pty Ltd
Place of business/
country of
incorporation
Brazil
Australia
Australia
% of ownership interest
2020
%
30.0
-
20.0
2019
%
Nature of
relationship
30.0 Associate
16.7 Associate
20.0 Associate
Measurement
method
Equity method
Equity method
Equity method
Name of entity
Webmotors S.A.
RateSetter Australia Pty Ltd(1)
Skedgo Pty Ltd
Total equity accounted investments
Quoted fair value
Carrying amount
Share of Profit/(loss)
2020
$’000
-
-
-
-
2019
$’000
-
-
-
-
2020
$’000
48,842
-
2,355
51,197
2019
$’000
64,626
9,533
2,509
76,668
2020
$’000
5,114
(783)
(154)
4,177
2019
$’000
5,150
(1,875)
(151)
3,124
(1) During the year, the Group’s interest in RateSetter ceased being an associate and was classified as a financial asset at fair value through other comprehensive income.
This occurred as a result of the sale of Stratton Finance Pty Ltd and given Stratton’s previous interest in RateSetter. Refer Note 20(d).
(i) Movement in the carrying amount of significant equity accounted investments
Carrying amount at 1 July
Profit for the year
Amortisation of intangibles
Foreign exchange impacts – other comprehensive income
Dividends receivable/received
Carrying amount at 30 June
Webmotors S.A.
2020
$’000
64,626
5,604
(490)
(16,674)
(4,224)
48,842
2019
$’000
58,810
5,697
(547)
2,967
(2,301)
64,626
121
Annual Report 2020carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2020
20. Interests in other entities continued
(ii) Summarised financial information for significant associates
The tables below provide summarised financial information for the associate that is material to the Group. The information
disclosed reflects the amounts presented in the financial statements of the relevant associate and not the Company’s share
of those amounts.
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
Revenue
Profit from continuing operations
Other comprehensive income
Total comprehensive income
carsales' share
Profit from continuing operations
Foreign exchange impacts – other comprehensive income
Total comprehensive income
Dividends receivable/received from associates and joint venture entities
(iii) Impairment of associates
Webmotors S.A.
30 June 2020
$’000
37,713
34,207
(18,098)
(2,950)
50,872
30%
15,262
29,750
3,830
48,842
30 June 2019
$’000
42,121
31,207
(11,708)
-
61,620
30%
18,486
40,277
5,863
64,626
74,551
18,679
-
18,679
5,114
(16,674)
(11,560)
4,224
67,779
18,989
-
18,989
5,150
2,967
8,117
2,301
Key Assumption/Accounting Estimates
The Group assesses impairment of investments in associates where there is objective evidence that the carrying value
of the investment may exceed its recoverable amount. The recoverable amount of an investment is the higher of its
fair value less costs of disposal and its value in use. The determination of recoverable amount requires the estimation
and discounting of future cash flows. These estimates include establishing forecasts of future financial performance,
discount rates and terminal growth rates. Each of these is 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 investments to fall below their carrying amounts,
resulting in an impairment loss being recognised.
Under Australian accounting standards, there is no requirement to annually test for impairment in relation to carsales’ equity held
associate investments. Instead the Company is required to consider whether there are any triggers for impairment in relation to
these investments. Considering the COVID-19 crisis and the subsequent decline of the economy in Brazil in FY20, management
determined that indicators of impairment existed at 30 June 2020. As such, management has performed an impairment
assessment with respect to the carrying value of the equity accounted investment in Webmotors. This review was performed
using a value in use cash flow model.
This model was prepared on the same basis as the impairment testing models used for CGUs which carry goodwill (refer to
Note 18) and incorporates cash flow projections based on management’s forecasts for the next 5 years. A terminal growth rate
beyond the 5-year period of 3.3% and a post-tax discount rate of 12.2% has been used in the model.
122
Annual Report 2020carsales.com Ltd Impact of possible changes in key assumptions
The Directors and management have considered and assessed reasonably possible changes for key assumptions and have not
identified any instances that could cause the carrying amount of the CGU to exceed its recoverable amount.
(iv) Contingent liabilities in respect of associates
Contingent liabilities – associates
Contingent liabilities relating to liabilities of the associates for which the Company
is severally liable
(v) Associate investment dilution
Gain on associate investment dilution
2020
$’000
2019
$’000
211
344
2020
$’000
-
2019
$’000
2,069
(d) Financial assets at fair value through other comprehensive income
Accounting Policy
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 to account for investments which are not held for trading at fair value through other
comprehensive income. These are strategic investments and the Group considers this classification to be more relevant.
Financial assets that are carried at fair value are measured by the fair value measurement hierarchy referred to in Note 10.
On disposal of these equity investments, any related balance with the FVOCI reserve is reclassified to retained earnings.
Key Assumption/Accounting Estimates
The fair value of financial instruments that are not traded in an active market is determined using valuation techniques.
The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each
balance date. Refer to Note 10 for details of the valuation techniques used to value the investments.
Name of entity
Quoted financial assets
iCar Asia Limited
Unquoted financial assets
RateSetter Australia Pty Ltd
PromisePay Pte Ltd
Other equity investments
Total financial assets at fair value through
other comprehensive income
% of ownership
Carrying amount
2020
%
11.7
12.5
7.3
N/A
2019
%
2020
$’000
2019
$’000
11.8
13,601
9,766
-
7.3
N/A
19,062
2,727
5,328
-
7,253
2,886
40,718
19,905
123
Annual Report 2020carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2020
20. Interests in other entities continued
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
Gain/(loss) recognised through other comprehensive income
At 30 June
(i) RateSetter
2020
$’000
19,905
14,410
2,394
42
3,967
40,718
2019
$’000
19,797
-
1,676
66
(1,634)
19,905
The Group previously accounted for its investment in RateSetter (both carsales and Stratton had an 8.3% interest in RateSetter)
using the equity method. The Group made a strategic decision in December 2019 to relinquish control over the right to
a RateSetter Board seat, thereby losing the right to exert significant influence over the business.
Pursuant to this change, the Group ceased equity accounting for RateSetter and in accordance with accounting standards the
Group was required to fair value the investment at that point, resulting in the recognition of a $9.8 million gain in profit or loss.
Refer Note 10 for details of the valuation techniques used to value the investments.
Stratton’s 8.3% interest in RateSetter was distributed to its shareholders by way of a dividend of $9.6 million during the period,
of which $4.8 million was paid to NCI. From that point onwards, the Group made an irrevocable election to recognise the
investment as a financial asset at fair value through other comprehensive income. Refer to Note 10 for the valuation approach
for this asset.
(ii) PromisePay
Following a business restructure during the year, the Group reviewed the valuation of its interest in PromisePay Pte Ltd.
Refer to Note 10 for details of the valuation approach.
21. Discontinued operations
On 30 April 2020, the Group sold its 50.1% interest in Stratton Finance Pty Ltd ('Stratton') for a consideration of $7.0 million.
This resulted in a loss of $1.2 million, after deducting the net assets and transaction costs. The loss on the sale of the discontinued
operations is included in the discontinued operations of the Group, net of related tax.
Stratton was classified as a discontinued operation and presented as a current asset in the Consolidated Statement of Financial
Position from June 2019 until the sale was finalised in April 2020.
As the sale process had not been finalised as at 31 December 2019, the carrying value of the Stratton disposal group was
determined using the lower of the existing carrying value and the fair value less costs to sell method pursuant to AASB 5
Non-current Assets Held for Sale and Discontinued Operations. The carrying value exceeded the fair value of consideration
expected to be received at the time and the Group recognised a non-cash impairment charge of $4.5 million in the Consolidated
Statement of Comprehensive Income for the year ended 30 June 2020.
124
Annual Report 2020carsales.com Ltd (a) Financial performance and cash flow information
The financial performance and cash flow information are for the 10 months ended 30 April 2020 and the year ended
30 June 2019.
Revenue from contracts with customers
Expenses
Cost of sales
Other expenses
Depreciation and amortisation expenses
Net finance costs
Impairment loss
Loss on sale of the subsidiary before income tax (see (b) below)
Loss before income tax
Income tax expense
Loss after income tax
Less: non-controlling interests
Loss after income tax from discontinued operations
Net cash (outflow)/inflow from operating activities
Net cash outflow from investing activities
Net cash outflow from financing activities
Net (decrease)/increase in cash
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the period/financial year
* See Note 31 for details about restatements as a result of changes in accounting policies.
April
2020
$’000
36,478
*Restated
2019
$’000
57,030
(8,493)
(26,524)
-
(510)
(4,450)
(1,204)
(4,703)
(179)
(4,882)
(393)
(5,275)
(3,157)
(1,065)
(579)
(4,801)
9,021
4,220
(16,625)
(37,194)
(2,339)
(681)
(47,809)
-
(47,618)
(314)
(47,932)
(145)
(48,077)
4,412
(965)
(650)
2,797
6,224
9,021
The discontinued operations have been presented on a standalone basis including intercompany transactions with the
continuing Group.
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.
(b) Details of the sale of the subsidiary
Cash consideration received
Less: transaction costs relating to the sale
Less: carrying amount of net assets sold
Add: non-controlling interests
Loss on sale before income tax
Income tax expense
Loss on sale after income tax
125
2020
$’000
7,000
(1,352)
(8,215)
1,363
(1,204)
-
(1,204)
Annual Report 2020carsales.com Ltd
Notes to the Consolidated Financial Statements continued
30 June 2020
21. Discontinued operations continued
The major classes of assets and liabilities of the Stratton operations as at Disposal Date were as follows:
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Total current assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Computer software and other intangible assets
Brands
Goodwill
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Lease liabilities
Current tax liabilities
Deferred revenue
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets directly associated with disposal group
30 April
2020
$’000
4,220
2,453
922
7,595
2,853
8,771
4,160
4,100
6,439
26,323
33,918
8,620
330
423
312
177
1,106
10,968
4,478
9,975
282
14,735
25,703
8,215
(c) Assets and liabilities of disposal group classified as held for sale in the prior year
In the prior comparative period, the Group classified its Stratton operations as a current asset held for sale. Stratton’s results
of a $47.9 million* loss was disclosed as discontinued operations in the prior comparative period in the Consolidated Statement
of Comprehensive Income while assets classified as held for sale of $45.7 million* and liabilities associated with the held for sale
assets of $33.7 million* were presented as current in the Consolidated Statement of Financial Position. Refer to the 30 June 2019
financial statements for details of the results of Stratton for 2019 and the assets and liabilities classified as held for sale at
30 June 2019.
* See Note 31 for details about restatements as a result of changes in accounting policies.
126
Annual Report 2020carsales.com Ltd 22. Parent entity financial information
Accounting Policy
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 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 to Note 18
for details of impairment accounting policies.
(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
* See Note 31 for details about restatements as a result of changes in accounting policies.
(b) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 June 2020 or 30 June 2019.
2020
$’000
*Restated
2019
$’000
163,884
999,741
1,163,625
202,928
671,187
874,115
149,817
8,381
131,312
289,510
93,338
969,446
1,062,784
198,334
607,304
805,638
135,372
2,847
118,927
257,146
127,529
69,325
128,987
55,803
127
Annual Report 2020carsales.com Ltd
Notes to the Consolidated Financial Statements continued
30 June 2020
23. Deed of cross guarantee
The following controlled entities have entered into a Deed of Cross Guarantee:
Company
carsales.com Ltd
carsales Holdings Pty Ltd
carsales Finance Pty Ltd
Auto Exchange Holdings Pty Ltd
Automotive Data Services Pty Ltd
carsales.com Investments Pty Ltd
Discount Vehicles Australia Pty Ltd
Equipment Research Group Pty Ltd
Webpointclassifieds Pty Ltd
carsales Latam Pty Ltd
carsales Foundation Pty Ltd
carsales Argentina Pty Ltd
Automotive Exchange Pty Ltd
AS1 Holdings Pty Ltd
Financial year entered into agreement
30 June 2015
30 June 2015
30 June 2015
30 June 2015
30 June 2015
30 June 2015
30 June 2015
30 June 2015
30 June 2015
30 June 2016
30 June 2016
30 June 2017
30 June 2018
30 June 2018
The companies that are party to this deed guarantee the debts of the others and represent the ‘Closed Group’ from the date
of entering into the agreement.
These wholly-owned entities have been relieved from the requirement to prepare a Financial Report and Directors’ Report under
Class Order 98/1418 (as amended) issued by the Australian Securities and Investments Commission.
(a) Consolidated statement of comprehensive income
Set out below is a consolidated statement of comprehensive income for the year ended 30 June 2020 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 income
Impairment loss
Fair value gain arising from discontinuing the equity method
Loss on disposal of subsidiaries
Profit before income tax
Income tax expense
Profit from continuing operations
Total comprehensive income for the year
* See Note 31 for details about restatements as a result of changes in accounting policies.
128
2020
$’000
*Restated
2019
$’000
274,071
274,071
301,480
301,480
(4,373)
(48,323)
(20,097)
(36,569)
164,709
(19,694)
1,264
(14,722)
7,228
43,848
(4,450)
5,217
(1,675)
181,725
(43,629)
138,096
139,553
(4,729)
(57,946)
(21,094)
(35,107)
182,604
(16,469)
1,773
(16,802)
11,253
4,054
(47,809)
-
-
118,604
(43,391)
75,213
61,741
Annual Report 2020carsales.com Ltd (b) Consolidated statement of financial position
Set out below is a consolidated statement of financial position as at 30 June 2020 of the Closed Group.
Consolidated statement of financial position
Current assets
Cash and cash equivalents
Trade and other receivables
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
Right-of-use assets
Deferred tax assets
Intangible assets
Other receivables
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Lease liabilities
Current tax liabilities
Provisions
Deferred revenue
Total current liabilities
Non-current liabilities
Trade and other payables
Borrowings
Lease liabilities
Other financial liabilities
Derivative liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
* See Note 31 for details about restatements as a result of changes in accounting policies.
129
2020
$’000
*Restated
2019
$’000
138,327
51,493
189,820
45,094
53,713
98,807
527,516
40,718
6,216
45,792
12,414
114,299
12,197
759,152
948,972
17,080
3,390
12,104
6,425
2,755
41,754
21,171
543,910
51,499
-
14,179
984
631,743
673,497
275,475
542,868
19,905
2,248
47,517
11,741
113,292
6,429
744,000
842,807
20,005
2,886
2,690
6,283
3,398
35,262
20,645
473,798
52,717
9,538
17,445
912
575,055
610,317
232,490
149,817
(17,699)
143,357
275,475
135,372
(23,439)
120,557
232,490
Annual Report 2020carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2020
24. Related party transactions
The Group has identified the parties it considers to be related and the transactions conducted with those parties. Other than
those disclosed below, no other related party transactions have been identified.
(a) Subsidiaries
Interests in subsidiaries are set out in Note 20.
(b) Key Management Personnel compensation
Short-term employee benefits
Deferred short-term employee benefits
Post-employment benefits
Long-term employment benefits
Share-based payments
2020
$
5,799,738
196,598
182,860
63,177
913,291
7,155,664
2019*
$
6,230,081
380,962
194,461
85,505
(16,990)
6,874,019
* Former Executives and Directors who ceased employment with carsales during FY19 are included in the table above. Refer to FY19 Remuneration Report for details.
(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 to related parties
Purchase of goods and services from related parties
2020
$
970,380
883,584
2019
$
1,376,300
1,595,639
All transactions were made on normal commercial terms and conditions, at market rates and includes transactions with associates.
(d) Outstanding balances arising from sale/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
2020
$
2019
$
124,675
150,500
14,008
406,474
There is no allowance accounted for impaired receivables in relation to any outstanding balances, and no expense has been
recognised in respect of impaired receivables due from related parties.
130
Annual Report 2020carsales.com Ltd ITEMS NOT RECOGNISED
This section of the notes provides information about material items that are not recognised in the financial statements as they
do not yet satisfy the recognition criteria.
25. Commitments
Non-cancellable operating leases
The Group leases offices in a number of locations in Australia and around the world. The most significant of these leases is the
Melbourne global head office where the lease is a non-cancellable lease expiring in September 2024. The leases have varying
terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated. The Group also leases various
motor vehicles and printers under non-cancellable leases.
From 1 July 2019, the Group has recognised right-of-use assets for these leases and restated prior year balances under a fully
retrospective approach, see Note 17 and Note 31 for further information on adoption of AASB 16 Leases.
Bank guarantee facility
Guarantees in respect of bank facilities drawn down but not included in the accounts of the Group are $2.4 million
(2019: $4.6 million).
Other commitments
The Group has other contractual commitments of $7.4 million at 30 June 2020 (2019: $9.1 million).
26. 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 2020 or 30 June 2019 other than the associates
contingent liabilities as set out in Note 20(c).
27. Events occurring after the reporting period
On 5 July 2020 carsales.com Ltd successfully completed a refinance of Tranche A of its syndicated revolving loan facilities.
Pursuant to this refinance, the Company upsized its existing Tranche A by a further $105.0 million, bringing it to a $440.0 million
facility, and extended the tenor out to 5 July 2024.
Facility
Tranche A
Tranche B
Total
New
Commitment
$'000
440,000
210,000
650,000
Drawn at report
release date
$'000
335,000
210,000
545,000
New maturity date
5 July 2024
4 July 2023
As part of the refinance, Commonwealth Bank of Australia (“CBA”) has joined the existing banking syndicate, entering into
a bilateral facility agreement with the Company under the Common Terms Deed documentation structure. Borrowings under
the debt facilities bear interest at a floating rate of BBSY Bid plus a margin, with margin based on a net leverage ratio of the
Group, consistent with the previous facility.
Further, subsequent to year end, two swaps having a maturity of three years (which were due to terminate in July 2021) were
closed out and the average notional amount is now $210.0 million.
Aside from the above, 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.
131
Annual Report 2020carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2020
OTHER
This section 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.
28. 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
2020
$
614,052
223,000
837,052
2019
$
583,263
31,620
614,883
103,717
130,932
234,649
98,960
122,585
221,545
68,512
68,512
1,140,213
30,553
30,553
866,981
164,111
164,111
129,902
129,902
Taxation services
Tax compliance services, including review of Company income tax returns
Total remuneration for taxation services
Total remuneration of network firms of PricewaterhouseCoopers Australia
26,339
26,339
190,450
-
-
129,902
Total remuneration for PricewaterhouseCoopers
1,330,663
996,883
(c) Non-PwC audit firms
Audit and review of Financial Reports
Tax compliance services
Total remuneration for Non-PwC audit firms
Total auditors’ remuneration
30,802
779
31,581
1,362,244
33,297
-
33,297
1,030,180
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.
132
Annual Report 2020carsales.com Ltd
29. Share-based payments
Share-based compensation benefits are provided to employees via the carsales.com Ltd Employee Option Plan.
Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expense
were $3,480,000 (2019: income $21,000).
Employee Option Plan
Set out below are summaries of options and performance rights granted under the plan:
2020
Expiry date
Grant date
Options
Oct 2014
Oct 2015
Oct 2016
Oct 2017
Oct 2018
Oct 2019
Total options
Weighted average exercise price
Oct 2019
Oct 2020
Oct 2031
Oct 2032
Aug 2033
Oct 2034
Performance rights
Oct 2031
Oct 2016
Aug 2019
Aug 2017
Oct 2032
Oct 2017
Aug 2033
Oct 2018
Feb 2034
Feb 2019
Aug 2034
Aug 2019
Oct 2019
Oct 2034
Total performance rights
Weighted average exercise price
Exercise
price
Opening
Balance
$10.71
$10.24
$12.23
$11.41
$14.87
$13.54
24,667
217,021
631,658
311,432
495,204
-
1,679,982
$12.58
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
123,076
48,448
196,000
177,157
16,706
-
-
561,387
$0.00
Granted
during
the year
Exercised
during
the year
Expired
or lapsed
during
the year
Closing
balance
Vested and
exercisable
at 30 June
-
-
-
-
-
139,245
139,245
$13.54
-
-
-
-
-
21,260
82,335
103,595
$0.00
(22,814)
(168,369)
(206,390)
-
-
-
(397,573)
$11.30
(73,801)
(48,448)
-
-
(16,706)
-
-
(138,955)
$0.00
(1,853)
(3,042)
(207,158)
(15,442)
(49,672)
-
-
45,610
218,110
295,990
445,532
139,245
(277,167) 1,144,487
$13.13
$12.63
(49,275)
-
(9,719)
(17,770)
-
(1,476)
-
(78,240)
$0.00
-
-
186,281
159,387
-
19,784
82,335
447,787
$0.00
-
45,610
218,110
-
-
-
263,720
$11.89
-
-
-
-
-
-
-
-
$0.00
Total of plan
Weighted average exercise price
2,241,369
$9.43
242,840
$7.76
(536,528)
$8.37
(355,407) 1,592,274
$9.43
$9.85
263,720
$11.89
133
Annual Report 2020carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2020
29. Share-based payments continued
2019
Expiry date
Grant date
Options
Oct 2013
Oct 2014
Oct 2015
Oct 2016
Oct 2017
Oct 2018
Total options
Weighted average exercise price
Oct 2018
Oct 2019
Oct 2020
Oct 2031
Oct 2032
Aug 2033
Performance rights
Oct 2015
Oct 2016
Aug 2017
Oct 2017
Oct 2018
Feb 2019
Total performance rights
Weighted average exercise price
Oct 2020
Oct 2031
Aug 2019
Oct 2032
Aug 2033
Feb 2034
Exercise
price
Opening
Balance
$9.10
$10.71
$10.24
$12.23
$11.41
$14.87
32,272
27,448
566,926
865,916
364,674
-
1,857,236
$11.38
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
121,467
211,702
-
229,506
-
-
562,675
$0.00
Granted
during
the year
Exercised
during
the year
Expired
or lapsed
during
the year
Closing
balance
Vested and
exercisable
at 30 June
-
-
-
-
-
499,152
499,152
$14.87
-
-
48,448
-
178,569
16,706
243,723
$0.00
(29,929)
(2,225)
(205,079)
-
-
-
(237,233)
$10.10
(91,894)
(32,796)
-
-
-
-
(124,690)
$0.00
(2,343)
(556)
(144,826)
(234,258)
(53,242)
(3,948)
-
24,667
217,021
631,658
311,432
495,204
(439,173) 1,679,982
$12.58
$11.48
(29,573)
(55,830)
-
(33,506)
(1,412)
-
(120,321)
$0.00
-
123,076
48,448
196,000
177,157
16,706
561,387
$0.00
-
24,667
215,500
-
-
-
240,167
$10.29
-
-
-
-
-
16,706
16,706
$0.00
Total of plan
Weighted average exercise price
2,419,911
$8.74
742,875
$9.99
(361,923)
$6.62
(559,494) 2,241,369
$9.43
$9.01
256,873
$9.62
The estimate of the weighted average share price at the date of exercise of options exercised regularly during the year ended
30 June 2020 is estimated to be approximately $16.07 (2019: approximately $14.27).
The weighted average remaining contractual life of share options outstanding at the end of the period was 12.68 years
(2019: 10.37 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 40.
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 right is convertible
into one ordinary share for $0.00 exercise price, upon satisfaction of all vesting requirements.
134
Annual Report 2020carsales.com Ltd Fair value of options and performance rights granted
The assessed fair value at grant date of options granted during the year ended 30 June 2020 is $3.43 (2019: $1.53). The
assessed fair value at grant date of performance rights granted during the year ended 30 June 2020 is $13.80 (2019: $10.93).
The model inputs for options and performance rights granted during the year ended 30 June 2020 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
2020
$13.54
Oct 2019
Oct 2034
$15.75
29.1%
3.3%
0.8%
2019
$14.87
Oct 2018
Aug 2033
$12.36
27.9%
3.2%
2.5%
2020
$0.00
Aug 2019, Oct 2019
Aug 2034, Oct 2034
$14.77, $15.75
29.1%
3.3%
0.7%
2019
$0.00
Oct 2018
Aug 2033
$12.36
27.9%
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.
30. Other significant accounting policies
(a) 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.
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.
135
Annual Report 2020carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2020
30. Other significant accounting policies continued
(b) 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.
(c) New and amended Accounting Standards and Interpretations
(i) New and amended Accounting Standards and Interpretations issued and effective
Refer to Note 31 for the new Accounting Standards and Interpretations which became effective from 1 July 2019 and the
corresponding impact of those changes on the Group’s financial results. Apart from these changes, the Group has not
adopted any new or amended Accounting Standards and Interpretations this year that have had a material impact on
the Group or the Company.
(ii) Accounting standards and Interpretations issued but not yet effective
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2020 reporting
periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity
in the current or future reporting periods and on foreseeable future transactions.
31. Changes in accounting policies
AASB 16 Leases
AASB 16 provides a comprehensive model for the identification of lease arrangements and their treatment in the financial
statements. On adoption of AASB 16, the Group recognised lease liabilities in relation to leases which had previously been
classified as ‘operating leases’ under the principles of AASB 117 and a corresponding asset to reflect the right-of-use of these
lease items, with the exception of short-term or low-value leases with payments recognised as an expense in profit or loss on
a straight-line basis over the lease term. Short-term leases are leases with a lease term of 12 months or less. Low-value leases
comprise small items of office and IT related equipment.
Approach on adoption
The Group adopted AASB 16 under the fully retrospective approach, where comparatives have been restated. The opening
consolidated statement of financial position as at 1 July 2018 has been restated, as well as the consolidated statement of
financial position, consolidated statement of comprehensive income and consolidated statement of cash flows for the
applicable comparative periods. The new accounting policies are disclosed in Note 17.
The Group has also elected not to reassess whether a contract is, or contains, a lease at the date of initial application. Instead, for
contracts entered into before the transition date the Group relied on its assessment made applying AASB 117 and Interpretation
4 Determining whether an Arrangement contains a Lease.
136
Annual Report 2020carsales.com Ltd (a) Measurement of lease liabilities
On adoption of AASB 16, the Group recognised lease liabilities in relation to leases which had previously been classified as
“operating leases” under the principles of AASB 117. Lease liabilities were measured at the present value of the remaining lease
payments over the lease term inclusive of option extension periods where it was reasonably certain to be exercised, discounted
using the Company’s incremental borrowing rate as of the inception of the lease.
Operating lease commitments disclosed as at 30 June 2019
Add: adjustment as a result of different treatment of extension options on existing lease agreements
Less: short-term leases recognised on a straight-line basis as expenses
Total operating lease commitments subject to AASB 16 adoption at 30 June 2019
Discounted using the lessee’s incremental borrowing rate
Less: lease liabilities forming part of the disposal group classified as held for sale
Lease liabilities from continuing operations as at 1 July 2019
Of which are:
Current lease liabilities
Non-current lease liabilities
30 June 2019
$’000
32,820
61,208
(78)
93,950
74,464
(10,751)
63,713
6,228
57,485
63,713
(b) Measurement of right-of-use assets
The associated right-of-use assets are measured on transition as if the accounting standards had always been applied since the
inception of the lease, with the right-of-use assets depreciated since lease inception.
The right-of-use assets relate to the following type of assets:
Properties
Equipment
Motor vehicles
Total right-of-use assets
30 June 2020
$’000
50,622
17
881
51,520
30 June 2019
$’000
54,191
40
994
55,225
(c) Impact on the financial statements
The adoption of AASB 16 has had the following impact on the current financial year when compared with the treatment
of leases under AASB 117:
• net increase in EBITDA from continuing operations of $8.4 million; and
• net decrease in net profit after tax from continuing operations of $0.6 million.
The Group has applied AASB 16 retrospectively without using the simplified transitional approach permitted under AASB 16.
The tables below show the adjustments recognised for each individual line item as at 1 July 2018 and 30 June 2019. Line
items that were not affected by the changes have not been included. As a result, the sub-totals and totals disclosed cannot
be recalculated from the numbers provided.
137
Annual Report 2020carsales.com Ltd Notes to the Consolidated Financial Statements continued
30 June 2020
31. Changes in accounting policies continued
Consolidated statement of financial position
Right-of-use assets
Deferred tax assets
Trade and other payables
Lease liabilities (current)
Lease liabilities (non-current)
Retained earnings
Non-controlling interests
Consolidated statement of comprehensive income
– continuing operations for the year ended
Operating expenses
EBITDA
Depreciation and amortisation
Net finance costs
Profit before tax
Income tax expense
Net result after tax from discontinued operations
(attributable to the equity holders of the Company)
Basic earnings per share (continuing operations)
Diluted earnings per share (continuing operations)
Consolidated statement of financial position
Right-of-use assets
Deferred tax assets
Assets classified as held for sale
Lease liabilities (current)
Lease liabilities (non-current)
Liabilities directly associated with assets classified as held for sale
Retained earnings
Non-controlling interests
Consolidated statement of cash flows
Operating activities
Payments to suppliers and employees (including GST)
Financing activities
Principal elements of lease payments
Interest paid
138
1 July 2018
As originally
presented
$’000
-
9,415
50,226
-
-
232,289
6,002
30 June 2019
As originally
presented
$’000
(178,577)
205,226
(24,284)
(13,855)
183,533
(50,204)
Adoption of
AASB 16
$’000
68,803
2,440
(90)
3,300
73,767
(5,310)
(424)
1 July 2018
Restated
$’000
68,803
11,855
50,136
3,300
73,767
226,979
5,578
Adoption of
AASB 16
$’000
7,638
7,638
(7,110)
(2,073)
(1,545)
381
30 June 2019
Restated
$’000
(170,939)
212,864
(31,394)
(15,928)
181,988
(49,823)
(47,712)
(220)
(47,932)
54.7
54.6
(0.5)
(0.5)
54.2
54.1
30 June 2019
As originally
presented
$’000
-
16,123
36,060
-
-
23,002
209,934
6,068
30 June 2019
As originally
presented
$’000
Adoption of
AASB 16
$’000
55,225
2,424
9,607
6,228
57,485
10,661
(6,573)
(545)
30 June 2019
Restated
$’000
55,225
18,547
45,667
6,228
57,485
33,663
203,361
5,523
Adoption of
AASB 16
$’000
30 June 2019
Restated
$’000
(310,572)
8,483
(302,089)
-
(16,395)
(5,934)
(2,549)
(5,934)
(18,944)
Annual Report 2020carsales.com Ltd Directors’ declaration
In the Directors’ opinion:
(a) the financial statements and notes set out on pages 68 to 138 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 2020 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
18 August 2020
139
Annual Report 2020carsales.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 2020 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 2020
• 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 (including Independence Standards) (the Code) that are relevant to our audit of the financial report
in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
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.
140
Annual Report 2020carsales.com Ltd 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 $8.6 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 benchmark against
which the performance of the Group is most commonly measured and is a generally accepted benchmark.
• We selected a 5% threshold based on our professional judgement, noting that it is 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.com Limited operates across five reporting segments, being Online Advertising Services, Data, Research and Services,
Latin America, Asia and Finance and Related Services (discontinued operation), as described in note 1 of the financial report.
Its head office function is based in Melbourne, Australia.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
report for the current period. The key audit matters were addressed in the context of our audit of the financial report as
a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Further, any
commentary on the outcomes of a particular audit procedure is made in that context. We communicated the key audit
matters to the Audit Committee.
141
Annual Report 2020carsales.com Ltd Independent auditor’s report continued
Key audit matter
How our audit addressed the key audit matter
Carrying value of goodwill for South Korea and Chile
(Refer to note 18 Intangible assets)
The Group’s intangible assets included $477.6 million
of goodwill at 30 June 2020, of which $369.3 million
related to the South Korea cash generating unit (CGU)
and $15.6 million related to the Chile CGU. Goodwill
was required to be tested for impairment in accordance
with Australian Accounting Standards.
In order to test for impairment of goodwill, the Group
prepared impairment models which forecast cash flows,
discounted to their present value. The valuation method
used to test for impairment was fair value less costs to sell
for South Korea and value in use for Chile.
The carrying value of goodwill for the South Korea CGU
was a key audit matter given it was significant to the
Group and there were judgements and assumptions
involved in estimating the cash flow forecasts and other
key assumptions, particularly discount rate and terminal
growth rate. We had particular focus on the carrying
value of goodwill for the Chile CGU as the impairment
model was sensitive to the impact of reasonable possible
changes in key assumptions related to the five year cash
flow forecast.
We performed the following procedures, amongst others:
• Tested the mathematical accuracy of the calculations made
in the impairment models.
• Compared the forecast cash flows used in the impairment
models with the FY21 budgets.
• Assessed the historical accuracy of the Group’s cash flow
forecasts by comparing prior budgets to actual performance.
• Assessed the reasonableness and supportability of the cash
flow forecasts by considering the key factors upon which
they were based and the underlying drivers for growth.
• Compared growth rate assumptions used in the
impairment models to historical results and economic
and industry forecasts.
• Assessed the allocation of assets and liabilities to the CGUs.
• For the South Korean CGU, we considered whether it would
be possible to determine a reliable estimate of the amount
obtainable in an arm’s length transaction between
knowledgeable and willing parties, by determining fair
value less costs to sell.
• With the assistance of our internal valuation experts, we
assessed the discount rates and terminal growth rates used
in the impairment models by comparing them to market data,
comparable companies and industry research.
• We evaluated sensitivity analyses and noted that the
recoverable amount of the Chile CGU was sensitive to the
impact of reasonable possible changes in key assumptions
related to the five year cash flow forecast.
• We considered the disclosures made in note 18, in light
of the requirements of Australian Accounting Standards.
142
Annual Report 2020carsales.com Ltd Key audit matter
How our audit addressed the key audit matter
Carrying value of equity accounted investment
in Webmotors S.A.
(Refer to note 20 (c) Interests in associates)
The Group's investments accounted for using the equity
method included a $48.8 million investment in Webmotors
S.A. at 30 June 2020. The investment was tested for
impairment given there was an impairment indicator,
being the COVID-19 pandemic and its impact on the
Brazilian economy.
In order to assess recoverability of the investment in
Webmotors S.A., the Group prepared a value in use
impairment model and compared the recoverable amount
to the carrying value of the investment. The conclusion
reached was the investment was not impaired.
The assessment of the carrying value of the investment
in Webmotors S.A. was a key audit matter given it was
significant to the Group and there were judgements and
assumptions involved in estimating the cash flow forecasts
and other key assumptions, particularly discount rate and
terminal growth rate.
Impairment and disposal of investment in Stratton
Finance Pty Ltd
(Refer to note 21 Discontinued operations)
carsales.com Limited disposed of their 50.1% interest in
Stratton Finance Pty Ltd (Stratton) on 30 April 2020 for
$7.0m and recorded a loss on sale of $1.2m. The previously
disclosed Finance and Related Services Segment in the
Group financial statements included Stratton. In the prior
comparative period, following the announcement of the
Group’s intention to dispose of Stratton, it was classified
as held for sale and as a discontinued operation.
The discontinued operation recorded a loss after income tax
of $5.3 million for the year ended 30 June 2020 (2019: loss
of $48.1 million), including an impairment loss of $4.5 million
(2019: impairment loss of $47.8 million).
Impairment and disposal of Stratton was a key audit matter
given the accounting impacts were non-routine and required
specific disclosure in the Group financial report.
We performed the following procedures, amongst others:
• Evaluated management’s assessment of the indicators
of impairment.
• Tested the mathematical accuracy of the calculations made
in the impairment model.
• Compared the forecast cash flows used in the impairment
model with the FY21 budget.
• Assessed the historical accuracy of the Group’s cash flow
forecasts by comparing prior budgets to actual performance.
• Assessed the reasonableness and supportability of the cash
flow forecasts by considering the key factors upon which
they were based and the underlying drivers for growth.
• Compared growth rate assumptions used in the impairment
model to historical results and economic and industry forecasts.
• With the assistance of our internal valuation experts, we
assessed the discount rate and terminal growth rate used
in the impairment model by comparing them to market data,
comparable companies and industry research.
• We considered the disclosures made in note 20 (c) in light
of the requirements of Australian Accounting Standards.
We performed the following procedures, amongst others:
• Read the terms of the Sale Agreement.
• Agreed the net sale proceeds to bank statements.
• Assessed the carrying value of the consolidated assets and
liabilities disposed of.
• Recalculated the loss on sale by comparing the carrying value
of Stratton’s consolidated assets and liabilities to consideration
received, less the costs of sale.
• Evaluated the presentation of Stratton as a discontinued
operation, in the consolidated statement of comprehensive
income, the consolidated statement of financial position,
the consolidated statement of cash flows and the notes
to the financial report.
• We considered the disclosures made in note 21 in light
of the requirements of Australian Accounting Standards.
143
Annual Report 2020carsales.com Ltd Independent auditor’s report continued
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 2020, 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.
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: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part
of our auditor's report.
144
Annual Report 2020carsales.com Ltd Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 40 to 61 of the directors’ report for the year ended 30 June 2020.
In our opinion, the remuneration report of carsales.com Limited for the year ended 30 June 2020 complies with section 300A
of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report,
based on our audit conducted in accordance with Australian Auditing Standards.
PricewaterhouseCoopers
Lisa Harker
Partner
Melbourne
18 August 2020
145
Annual Report 2020carsales.com Ltd
Shareholder Information
The shareholder information set out below was applicable as at 30 June 2020.
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
No. of
holders
10
19
10
19
2
60
Redeemable
preference
shares
No. of
holders
-
-
-
-
-
-
Shares
No. of
holders
11,360
6,086
724
400
76
18,646
Convertible
notes
No. of
holders
-
-
-
-
-
-
There were 360 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 PTY LIMITED
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD
AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED
ESSENA PTY LTD
BILLKAREN PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
FOUR US PTY LTD
NETWEALTH INVESTMENTS LIMITED
AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED
MILTON CORPORATION LIMITED
MR ANDREW GAJTAN CURMI
GREGORY PAUL ROEBUCK
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED – A/C 2
CITICORP NOMINEES PTY LIMITED
AUSTRALIAN UNITED INVESTMENT COMPANY LIMITED
146
Ordinary shares
Number
held
86,822,434
41,571,425
14,902,056
9,874,939
6,089,061
4,781,079
3,716,648
3,080,000
2,055,500
2,038,424
1,961,872
1,926,555
1,365,626
1,316,389
1,197,000
1,160,500
1,073,968
972,186
932,200
800,000
187,637,862
Percentage
of issued
shares
35.3
16.9
6.1
4.0
2.5
1.9
1.5
1.3
0.8
0.8
0.8
0.8
0.6
0.5
0.5
0.5
0.4
0.4
0.4
0.3
76.3
Annual Report 2020carsales.com Ltd Options and performance rights issued under the carsales.com
Employee Option Plan to take up ordinary shares
C. Substantial holders
Substantial holders in the Company are set out below:
The Vanguard Group, Inc
Number
on issue
Number
of holders
1,083,234
60
Number held
13,175,525
Percentage
5.36
D. Voting rights
The voting rights attaching to each class of equity securities are set out below:
(a) Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share
shall have one vote.
(b) Options
No voting rights.
147
Annual Report 2020carsales.com Ltd
Corporate Directory
Directors
Pat O’Sullivan
(Non-Executive Chair)
Cameron McIntyre
(Managing Director and CEO)
Wal Pisciotta OAM
(Non-Executive Director)
Kim Anderson
(Non-Executive Director)
Edwina Gilbert
(Non-Executive Director)
Kee Wong
(Non-Executive Director)
David Wiadrowski
(Non-Executive Director)
Steve Kloss
(Alternate Non-Executive Director)
Company secretary
Nicole Birman
Registered office
Level 4, 449 Punt Road Richmond Vic 3121
T +61 3 9093 8600
F +61 3 9093 8697
carsales.com.au
Share registry
Computershare Ltd
452 Johnston Street Abbotsford Vic 3067
T +61 3 9415 4000
F +61 3 9473 2500
computershare.com
External auditor
PricewaterhouseCoopers
2 Riverside Quay Southbank Vic 3006
Stock Exchange
carsales.com Ltd is a public company listed with
the Australian Securities Exchange Limited
ASX: CAR
148
Annual Report 2020carsales.com Ltd