Carsales.Com Ltd Annual Report 2023

Plain-text annual report

Appendix 4E carsales.com Ltd ABN 91 074 444 018 Results for Announcement to the Market Full-year ended 30 June 2023 (Previous corresponding period: Full-year ended 30 June 2022) Revenue from continuing operations Profit for the year after tax Net profit for the period attributable to members Adjusted net profit1 for the period attributable to members Up Up Up Up 53% 302% 301% 43% to to to to A$’000 781,236 648,317 645,617 278,224 Dividends/Distribution 2022 Final Dividend paid 2023 Interim Dividend paid 2023 Final Dividend declared 2023 Final Dividend dates Record date for determining entitlements to the dividends Latest date for dividend reinvestment plan participation Dividend payable Net tangible assets backing per ordinary share2 Amount per security 24.50 cents 28.50 cents 32.50 cents Franked amount per security 24.50 cents 28.50 cents 16.25 cents 18 September 2023 19 September 2023 16 October 2023 30 June 2023 (295.9 cents) 30 June 2022 125.0 cents For growth vs the previous corresponding period on a constant currency basis, please refer to the Full Year Results Presentation for the year ended 30 June 2023 at https://shareholder.carsales.com.au/ 1. The Directors believe the presentation of adjusted net profit provides a useful measure to assess the performance of the Group. Adjusted net profit excludes certain non-recurring or non-cash items. Refer to Note 4(b) of the 30 June 2023 Financial Report 2. Net tangible assets exclude all right-of-use assets leased by the Group. 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 2023 Financial Report. Annual Report 2023 Contents Overview Our Operational Highlights Our Strategy The Evolution of our Strategy Chair and CEO Letter What we do Our Markets Our Brand Portfolio Our Marketplace Ecosystem Our Growth Engine FY23 Key Highlights People and Culture Governance Directors’ Report Corporate Governance Sustainability Report Taskforce on Climate-Related Financial Disclosures (TCFD) Report 2023 Our Board Our People and Culture Chair’s Message Remuneration Report Other Directors’ Report Disclosures Auditor’s Independence Declaration Financial Report Financial Statements Directors’ Declaration Independent Auditor’s Report Additional Information Shareholder Information Corporate Directory 02 04 05 06 10 10 11 12 13 14 18 28 32 32 34 54 56 58 78 81 82 154 155 160 162 carsales acknowledges the Traditional Custodians of Country throughout Australia and their connections to land, sea and community. We pay our respect to their Elders past and present and extend that respect to all Aboriginal and Torres Strait Islander peoples today. Globally, carsales recognises the significance of indigenous peoples’ communities, consistent with our efforts to build a culture that embraces diversity, equality and inclusion. carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTER carsales.com Ltd (ASX:CAR) is one of the largest digital marketplace business in the world. In Australia it has market- leading positions in automotive, motorcycle, caravan, marine, truck and equipment industries. The carsales network extends across the United States, South Korea and Latin America, employing more than 1,800 people, developing world class technology and advertising solutions that drive its businesses. In the US, Trader Interactive is a leading integrated platform of non-automotive marketplaces across the RV, powersports, truck and equipment industries. Encar.com in South Korea is the leading automotive digital marketplace and carsales’ Latin American businesses are the leading automotive digital marketplaces in Brazil and Chile. 01 carsales Annual Report 2023WHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORTOur Operational Highlights 42 million 18 billion Unique audience per month Page views 22 million Dealer leads delivered 7x In Digital Retailing car de-listings Great Place to Work® Awarded for the sixth consecutive year 410,000 Cars inspected by Encar 02 carsales Annual Report 2023 INTRODUCTION AND CHAIR/CEO LETTER WHAT WE DO AND OUR OPERATIONS OUR PEOPLE AND CULTURE DIRECTOR’S REPORT CORPORATE GOVERNANCE AND SUSTAINABILITY OUR BOARD AND REMUNERATION REPORT FINANCIAL REPORT 1.2b 48,000 2.2m Total sessions globally Subscribed dealers globally Vehicles online globally 48% increase Reconciliation Carbon neutral In instant offer transactions in Australia Our Reconciliation Action Plan was endorsed by Reconciliation Australia in our Australian business operations carsales Annual Report 2023 03 Our Strategy Our Vision To create #1 digital marketplaces for vehicles around the world Our Purpose Make Buying and Selling a Great Experience Our Strategic Pillars Our Customers Our People Deliver seamless, simple and personalised digital retail experiences Build a world-class culture to attract and retain the best talent Sustainable Growth Generate consistent long-term growth and nurture a business which future generations will be proud of Future Horizons Foster innovation to create new ideas, products and businesses 04 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTER WHAT WE DO AND OUR OPERATIONS OUR PEOPLE AND CULTURE DIRECTOR’S REPORT CORPORATE GOVERNANCE AND SUSTAINABILITY OUR BOARD AND REMUNERATION REPORT FINANCIAL REPORT The Evolution of Our Strategy 1997 carsales domain name registered 2005 carsales acquires PBL Media’s websites 2006 carsales hits 100,000 cars online 2009 carsales lists on the ASX 2010 carsales hits 200,000 cars online 2015 Launched in Australia, digital trade-in product Instant Offer 2014 Acquired 49.9% stake in Encar (South Korea) 2013 Launched ecommerce platform tyresales.com.au 2013 Acquired 30% stake in webmotors (Brazil) 2016 Launched vehicle inspection service RedBook Inspect 2016 Acquired controlling stake in chileautos (Chile) and soloautos (Mexico) 2017 Acquired remaining stake in Encar 2021 Acquired 49% stake in non-auto marketplace group Trader Interactive (US) 2023 Acquired further 40% of webmotors 2022 Acquired remaining stake in Trader Interactive 2021 Launched buy online service Select, in Australia 2021 Acquired digital tyre wholesaler tyreconnect carsales Annual Report 2023 05 Chair and CEO Letter Pat O’Sullivan Non-Executive Chair Cameron McIntyre Managing Director and CEO It has been a great year for the business and we are incredibly proud of what our teams at carsales have accomplished. We have delivered excellent financial results, made good progress executing our strategy and completed transformational acquisitions. We acquired controlling stakes in Trader Interactive and webmotors, which is a key milestone for the business as more than 50% of our revenue now comes from outside of Australia. We have built an incredible Australian business over the last 25 years and it is now complemented by an enviable portfolio of international assets. We see substantial growth opportunities in these large addressable markets over many years. This growth will continue to be powered by our passion for delivering the most frictionless buying and selling experience for our customers around the world. We remain constantly alert to competitors and sharply focused on execution heading into FY24. Our goal is to solidify and extend our market leadership positions in all our markets. Industry Context Industry conditions have started to normalise after a long period of volatility due to supply chain constraints and COVID-19-related conditions. As a result, automotive and non-automotive vehicle inventory levels have increased over the last 12 months, albeit they remain below pre-pandemic levels. Both new and used car prices have risen materially since the pandemic, but have stabilised since the second quarter of 2022. Despite these changes, as well as the impact of inflation and rising interest rates, we have continued to see robust levels of demand in all our key markets, reflecting the resilience of our business models through economic cycles. Acquisitions and Capital Raising It has been another very active year from an acquisition perspective. In September, we acquired the remaining 51% of Trader Interactive (now owning 100%) and have seen the business prosper since then. In March we were incredibly excited to acquire a further 40% stake in webmotors, the leading Brazilian automotive digital marketplace, to become the 70% majority owner. Santander bank retains a 30% equity stake and will continue their valuable contractual commercial relationship with the business. webmotors presents a compelling growth opportunity for carsales given Brazil is one of the largest and fastest- growing automotive markets in the world. webmotors has significant future growth opportunities through customer acquisition, national expansion, new product development and increasing finance penetration. Culturally, there is strong alignment between the carsales and webmotors teams, and we have demonstrated an excellent track record of delivering shareholder value by investing into international markets. Moving to 70% ownership will enable shareholders to capture the significant upside potential in the webmotors business. We successfully executed a A$0.5b renounceable entitlement offer to fund the webmotors transaction, which was very well supported by our retail and institutional shareholders. We chose this structure as it promotes fairness for our retail shareholders and it was pleasing to see we have been able to create value for the shareholders who participated in the raising. In July 2022, we successfully executed a A$1.2b non-renounceable entitlement offer to fund the Trader Interactive transaction, which was also very well supported by our shareholders. 06 carsales Annual Report 2023 INTRODUCTION AND CHAIR/CEO LETTER WHAT WE DO AND OUR OPERATIONS OUR PEOPLE AND CULTURE DIRECTOR’S REPORT CORPORATE GOVERNANCE AND SUSTAINABILITY OUR BOARD AND REMUNERATION REPORT FINANCIAL REPORT Financial Performance and Capital Management carsales has delivered an outstanding financial performance in FY23 and enters the new year with strong momentum. The Group delivered excellent growth across our three primary financial metrics of Proforma Revenue, Proforma EBITDA and Adjusted NPAT in FY23. Proforma revenue was up 18% on pcp to $942m, driven by double-digit growth across all our key markets. This reflects the strong value we continue to provide for our customers with growth coming from new customers and increasing adoption rates of new and existing products. Proforma Earnings before interest, tax and depreciation/amortisation (EBITDA) was up 19% to $496m with EBITDA margins of 53%. The strong earnings and margin performance are complemented by our continued investment in key projects and innovation to drive future growth. Adjusted Net Profit After Tax (NPAT) increased 43% to $278m driven by our strong underlying earnings growth and the contribution from new acquisitions. EPS was up 17% to 78.1¢ reflecting strong earnings growth partly offset by the additional shares on issue from recent capital raisings. The Board has declared a final FY23 dividend of 32.5¢ per share, bringing total dividends paid to shareholders for FY23 to 61¢ per share for the year. From a balance sheet perspective, $132m of the webmotors capital raise was used to strengthen carsales’ balance sheet, reducing leverage to 1.96x net debt to EBITDA ratio, which provides us with ongoing funding flexibility heading into FY24. We have retained our existing dividend payout policy of 80% of Adjusted net profit after tax. Operational Highlights We are very pleased with the progress of the Trader Interactive business since acquiring the remaining 51% in September (bringing our ownership to 100%). We are ahead of expectations in terms of executing on our investment thesis and delivering against the synergies we identified as part of the transaction. This has included delivery of new product, acquiring customers and investing in technology to drive future growth. Growth has accelerated in our Australian business, as we continue to invest in building an increasingly online buying and selling experience. We have extended our carsales Annual Report 2023 07 Chair and CEO Letter continued market leadership from both an audience and inventory perspective, reflected in the very strong performance of our private seller advertising segment over the last 12 months. Our ‘instant offer’ selling option continues to scale, which demonstrates the benefits of continued user improvements, better pricing, adding more dealers to the platform and developing consumer awareness through advertising campaigns. We only see continued upside potential over the next few years for this area of our business. In Brazil, the business has performed very strongly over the last 12 months. We have increased our market share in large areas outside of São Paulo and Rio de Janeiro, through acquiring new dealers, growing our audience and adding more private sellers. webmotors is uniquely positioned to capture market share with exceptional buyer and seller engagement metrics and a sophisticated suite of digital products. Encar in South Korea delivered another excellent performance this year, driven by the continued expansion of the Guarantee inspection product. Encar continues to make strong progress on its mission to facilitate online car transactions. This was reflected in the continued strong growth of its Encar Home digital retailing service. Looking towards FY24, each of our companies has a significant roadmap of both product and initiatives to continue delivering in line with our organisational strategy, and we are well positioned as we move into the new financial year. Our People We have an amazing team of passionate, committed and innovative people at carsales who are the driving force of our success. The team is driven by our purpose, which is to make buying and selling a great experience. As we add new geographies and businesses to our portfolio, it is incredibly important that we maintain and enhance our culture – there is great alignment and compatibility with the Trader Interactive and webmotors teams, which has resulted in a smooth integration of those businesses thus far. We hold hackathon events at carsales each year – a hackathon is an event where people and teams get to step away from their day-to-day roles and build out a new product, solve customer problems, improve the way we do something, learn new skills and collaborate with new people. There were some amazing ideas and products that stemmed from the hackathon, which had 42 teams and 300 participants from our businesses around the world, with particular focus on use cases for Artificial Intelligence. It was a good reminder of how 08 carsales Annual Report 2023 inventive our people are and it will be very exciting to see some of these ideas come to life over the next 12 months. These hackathons are just one example of how we embrace innovation at every level of the Company and our relentless focus on improving customer experience. We are principally operating a hybrid working model across our global business, which encourages people to collaborate physically in the office, but also allows people the freedom to work remotely if they choose. This model is working well, reflected in the speed of execution and delivery occurring across our global businesses, our very strong employee engagement scores, staff retention rates and job fill times. There is so much going on across our global business and this broad array of initiatives is only possible because our large team of talented people is executing strongly every day. Governance The Board is dedicating more focus to Environmental, Social and Governance (‘ESG’) issues, particularly given the growth in the Group’s global footprint. We are focused on reducing carsales’ impact on the environment and responding to risks associated with climate change. Last year we achieved carbon neutral status in our Australian business operations, and now our focus turns to achieving this in our international businesses in the next 12 months. The Task Force on Climate-related Financial Disclosures (TCFD) is a leading framework under which companies assess their climate- related risks and opportunities. In FY23, we have reported against this framework for this first time which is a good step forward for the Company. INTRODUCTION AND CHAIR/CEO LETTER WHAT WE DO AND OUR OPERATIONS OUR PEOPLE AND CULTURE DIRECTOR’S REPORT CORPORATE GOVERNANCE AND SUSTAINABILITY OUR BOARD AND REMUNERATION REPORT FINANCIAL REPORT In Brazil, the business has performed very strongly over the last 12 months. We have increased our market share in large areas outside of São Paulo and Rio de Janeiro, through acquiring new dealers, growing our audience and adding more private sellers. The carsales business has an important role to play in the education of consumers to support the world’s transition to an electric vehicle future. From a risk management perspective, cybersecurity and protecting customer and consumer data is a critical focus area for carsales particularly given threats are increasing in this space. We continue to invest heavily in our security infrastructure to ensure the integrity of our customer data and provide policies, training and education to our employees on responsible data use and cybersecurity. We cannot become complacent in this area and will continue to invest to ensure we keep pace with the changing risk management and security landscape. Whilst we cannot fully mitigate these risks, an effective risk and governance framework can help to reduce the impact of any event. Given our continued international expansion, we have also implemented subsidiary Boards with independent Directors in each of our key geographies of Australia, the US, South Korea and Brazil. This subsidiary governance framework allows the business to dedicate appropriate focus to local country risks in each of our jurisdictions. Diversity and inclusion are very important to carsales as we want all our people to feel valued, respected and have equal access to opportunities. We are a Workplace Gender Equality Agency (WGEA) Employer of Choice, and we are passionate about trying to correct the underrepresentation of females in technology roles. Towards a Successful FY24 Finally we would like to thank our customers for their partnership, our wonderful employees for their hard work and our shareholders for their support and encouragement. We look forward to working with you all in FY24. Pat O’Sullivan Non-Executive Chair Cameron McIntyre Managing Director and CEO carsales Annual Report 2023 09 What We Do carsales.com Ltd (ASX: CAR) is one of the largest online vehicle marketplace businesses in the world. We seek to empower our customers, making buying and selling vehicles as frictionless as possible. carsales employs more than 1,800 people across the world. Our Markets carsales built its name in Australia, but over the last 10 years we have increasingly become a global player. Our global markets have a combined population of 750 million people and car sales volumes of approximately 25 million per annum. The markets we have entered have been carefully selected based on criteria including macroeconomic attractiveness, digital maturity and market dynamics. We leverage our world-class technology and intellectual property to accelerate the growth in these businesses and have a strong track record of delivery. Our recent acquisitions of incremental stakes in Trader Interactive and webmotors have allowed us to deepen our exposure to the very attractive US (primarily caravans, powersports and trucks) and Brazil (auto) markets. 10 carsales Annual Report 2023 INTRODUCTION AND CHAIR/CEO LETTER WHAT WE DO AND OUR OPERATIONS OUR PEOPLE AND CULTURE DIRECTOR’S REPORT CORPORATE GOVERNANCE AND SUSTAINABILITY OUR BOARD AND REMUNERATION REPORT FINANCIAL REPORT Our Brand Portfolio 28m Monthly visits 212k Published inventory In Australia, we are market leaders in online classifieds in a number of industries including cars, motorbikes, boats, trucks and commercial equipment. More than one in five Australians visit our group of websites every month. We are still increasing our market share by digitising elements of the car buying journey and removing friction points to make it easier for consumers to buy and sell. 18m Monthly visits 1.3m Published inventory Market-leading platform of non-automotive marketplaces across RV, powersports, truck and equipment industries in the US. Non-automotive classifieds are less digitally mature than automotive markets meaning the business is well positioned to capture upside from further dealer penetration and monetisation across its key verticals. 25m Monthly visits 165k Published inventory Clear market leader in automotive classifieds in South Korea with a strong growth track record over the last 8 years. Strategy is to increase the penetration of premium services for dealers, consumers and OEMs. Key growth drivers include the Guaranteed inspection, Dealer Direct and Home Delivery products. 28m Monthly visits 407k Published inventory No.1 position in the large but competitive Brazil automotive market. Achieved very strong growth over the last 5 years since the major recession in Brazil ended. Substantial growth opportunity given the size and immaturity of the market. Key growth drivers include increased dealer and consumer penetration particularly in areas outside São Paulo and Rio de Janeiro. Dealer Finance is also a significant revenue opportunity. 6m Monthly visits 175k Published inventory Chileautos is a profitable and strong No.1 player in the Chile market with a strong growth trajectory through increased penetration and monetisation of dealers. Mexico is an earlier-stage investment. The focus for these assets is to grow market leadership with longer term monetisation upside. Sessions for websites in Australia, South Korea, United States, Brazil, Mexico and Chile for period 1 Jul 22 – 30 Jun 23. Google Analytics. Inventory published for websites in Australia, South Korea, United States, Brazil, Mexico, and Chile as at 30 Jun 23. carsales Annual Report 2023 11 Our Marketplace Ecosystem Dealers 48,000 dealers Dealer Tech Platforms Leads Ads Marketplaces Sell Buy 42 million unique audience/month Advertise 1.5 billion page views/month Consumers OEMs Instant Sale Digital trade-in 12 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTER WHAT WE DO AND OUR OPERATIONS OUR PEOPLE AND CULTURE DIRECTOR’S REPORT CORPORATE GOVERNANCE AND SUSTAINABILITY OUR BOARD AND REMUNERATION REPORT FINANCIAL REPORT Our Growth Engine Brand Key Segment Description Business Model Dealer Dealer vehicle listing Subscription and pay per lead Private Private seller listing Pay up-front until sold Media Digital advertising on websites Cost per view Data Research and Services Vehicle specification data Periodic subscription Dealer Marketplace Dealer vehicle listing Monthly subscription based on inventory Private Private seller listing Pay up-front Standard Ads Dealer vehicle listing Pay up-front until sold Guarantee Encar inspects and certifies car Pay per car inspected Dealer Direct Digital trade-in 24hr dealer auction, winning dealer pays Dealer Dealer vehicle listing Pay per lead Finance Finance application on vehicle ads Up-front commission on loan commencement Private Private seller listing Pay up-front until sold carsales Annual Report 2023 13 FY23 Key Highlights Continued growth in market leadership position resulted in strong performance in key dealer, private and media segments. Marketplaces Private Seller • Our focus on a strong value proposition, trust and safety features and achieving outcomes for sellers has further increased our position as the most preferred website to buy and sell cars • Increasing market share helped to drive private ad volume to the highest level in our history, reaching 100,000 listings • We are better aligning our value with price through our dynamic pricing engine, which increased private ad yield 16% vs. FY22 Most Preferred Website1 #2 carsales Private Listing and Yield Listings (left, 000) Yield (right) $200 52% 40% 31% 10.4x 2.6x 12% FY21 #2 carsales 6.7x 6% FY22 52% 5% FY23 40% 31% 6.7x 6% FY22 2.6x 12% FY21 10.4x Media and Membership 5% FY23 100 50 0 $150 $100 $50 $0 FY19 FY20 FY21 FY22 FY23 Listings (left, 000) Yield (right) $200 100 50 0 Dealer Depth FY19 FY20 FY21 FY22 FY23 $150 $100 $50 $0 • The media segement delivered the fourth • Depth products promote dealers’ cars to the top consecutive half of double digit growth. This was supported through the continued execution of new products and diversification into non- automotive categories of search results • Growth has increased as dealers look to optimise return on investment on our site and move inventory faster Revenue Media Revenue ($m) 35 Growth vs pcp +11% 30 25 20 15 10 5 0 35 30 +19% +10% +11% H1 21 H2 21 H1 22 H2 22 H1 23 H2 23 Revenue Growth vs pcp +19% +10% +11% +11% Depth Growth By Half 15% 10% 5% 0% -5% 12% 7% -2% 0% H1 FY22 H2 FY22 H1 FY23 H2 FY23 25 1. Study conducted by independent research agency, Nature Pty Ltd, “market brand health tracker Jun 23”. If you had to choose one tomorrow, which one would you most 20 prefer for buying or selling a new / used car? carsales.com.au vs. competitors. 15 10 14 5 0 H1 21 H2 21 H1 22 H2 22 H1 23 H2 23 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTER WHAT WE DO AND OUR OPERATIONS OUR PEOPLE AND CULTURE DIRECTOR’S REPORT CORPORATE GOVERNANCE AND SUSTAINABILITY OUR BOARD AND REMUNERATION REPORT FINANCIAL REPORT Outstanding performance in first year of full ownership, with strong synergy execution driving growth. • Completed the acquisition of the remaining 51% of • Increased dealer subscription volumes by 7% Trader Interactive in October 2022 • Grew inventory levels by 22% vs. pcp with very strong • Implemented key new dealer products including Lead growth in Powersports and Commercial truck industries Amplifier and Premium Select • Executed on Dynamic Pricing driving good growth in dealer and private ad yield • Executed price rises across all industries in March 2023 Published Inventory (000) Subscribed Dealers (000) 400 300 200 100 0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 RV Powersports Trucks Equipment RV Powersports Trucks Equipment Jun–22 Jun–23 Jun–22 Jun–23 carsales Annual Report 2023 15 FY23 Key Highlights continued Good FY23 performance supported by strong execution on Guarantee inspection product. • Strong growth in Guarantee Visits (M)1 Guarantee Penetration penetration driven by increasing volumes at existing inspection branches and the addition of four new sites • Good traffic and lead volume growth supported by improving market conditions in the second half of the year • Encar Home volumes grew strongly, up 43% on pcp with total eligible listings reaching 20,000 1. Google Analytics, sessions for period 1 Jul 22 – 30 Jun 23. 400 300 200 100 0 +10% FY22 FY23 50% 40% 30% 20% 10% 0% +15% Jun–22 Jun–23 16 carsales Annual Report 2023 INTRODUCTION AND CHAIR/CEO LETTER WHAT WE DO AND OUR OPERATIONS OUR PEOPLE AND CULTURE DIRECTOR’S REPORT CORPORATE GOVERNANCE AND SUSTAINABILITY OUR BOARD AND REMUNERATION REPORT FINANCIAL REPORT Excellent FY23 performance with strong operating metrics leading to double-digit revenue and EBITDA growth with margin expansion. Completed the acquisition of a further 40% of webmotors in April 2023, increasing ownership from 30% to 70% • Outstanding revenue and EBITDA growth driven by: - Double-digit lead volume growth - Increase in revenue per dealer (yield) through an increase in premium products and the proportion of chargeable leads - 4% increase in inventory with supply conditions normalising • Dynamic pricing engine implemented in June 2023 increasing private ad yield Inventory Dealer Leads 500 400 300 200 100 0 +4% Jun–22 Jun–23 FY22 FY23 carsales Annual Report 2023 17 People and Culture A place where you are truly a big part of something big. 85% of our global team members recommend carsales as a great place to work* carsales is a values-driven business fuelled by a strong, purpose-led employer brand. We are passionate about building a world-class culture where our team can be their authentic selves and do their best work. Our competitive advantage lies in our people and our culture, and both of these elements allow us to build and nurture a sustainable company that future generations will be proud of. Our people are our greatest asset and providing them with a supportive, equitable and inclusive working environment ensures that we continue to attract, develop and retain the best talent. 18 carsales Annual Report 2023 * Average score based on aggregated results of all Employee Opinion Surveys run across our global businesses (1,558 respondents). INTRODUCTION AND CHAIR/CEO LETTER WHAT WE DO AND OUR OPERATIONS OUR PEOPLE AND CULTURE DIRECTOR’S REPORT CORPORATE GOVERNANCE AND SUSTAINABILITY OUR BOARD AND REMUNERATION REPORT FINANCIAL REPORT We are proud to have been recognised for the sustained effort that we have placed into building our first-class culture and being a leader in digital careers. Awarded to carsales Australia Awarded to webmotors Awarded to Chileautos Awarded to Encar Many of these accolades have been achieved through our people being surveyed by independent third parties and sharing feedback on their lived working experience at carsales: • Great Place to Work® - eight consecutive years in Brazil and six consecutive years in Australia. • Workplace Gender Equality Agency (WGEA) Employer of Choice and certified Breastfeeding Friendly Workplace for nine consecutive years. • Australian Association of Graduate Employers (AAGE) Top Graduate Employer for four of the past five years, and Top Intern Employer for the past two years. carsales Annual Report 2023 19 People and Culture continued When it comes to career growth, we provide our people with big opportunities to make a big impact. One of the ways we do this is through our Global Talent Exchange Program, a unique opportunity for our team members to spend four weeks working in one of our businesses around the globe. No matter which marketplace business our people work in or where they are located around the globe, every member of our team gets to be a big part of something big. When it comes to career growth, we provide our people with big opportunities to make a big impact. One of the ways we do this is through our Global Talent Exchange Program. This is an intensive, on-the-job equivalent of a student exchange program whereby our people have the chance to build their professional network in one of our global businesses, experience a new culture, language, way of working and business environment, and develop a deeper understanding of how another one of our international businesses operates. We also offer many other learning and development opportunities both locally and globally including mentoring, hackathons, leadership development, web code academies and other soft and technical skills workshops. Whilst our Group continues to experience significant global growth, we always strive to feel small. Small enough to quickly change tack, learn from different departments, and connect authentically with leadership. We want everyone to be heard, have the opportunity to contribute meaningfully, and grow with the business. 20 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTER WHAT WE DO AND OUR OPERATIONS OUR PEOPLE AND CULTURE DIRECTOR’S REPORT CORPORATE GOVERNANCE AND SUSTAINABILITY OUR BOARD AND REMUNERATION REPORT FINANCIAL REPORT We value feedback from our teams and have multiple mechanisms in place to understand what’s important to them. This includes our global Employee Opinion Survey (EOS), which we run twice per year. We also run regular in-country town halls hosted by the local leadership team as well as quarterly global catch-ups hosted by the global Executive Leadership Team (ELT). These catch-ups take place on Zoom and always have the chat and Q&A functionality enabled, which allows any participant to ask a question or raise anything that may be on their mind. carsales Annual Report 2023 21 People and Culture continued Global Connection Keeping our teams connected across the globe is important to us. In April, several of our Australia-based global ELT members visited Trader Interactive (US), Chileautos (Chile) and webmotors (Brazil) to hear their thoughts, gain insights and share more about our global business and strategy. This trip was an opportunity for those teams to connect with our leaders and learn more about the wider carsales group, and the ELT enjoyed seeing the growth opportunities and energy in each of the businesses. The feedback from the trip was overwhelmingly positive, with many comments from team members highlighting our strong people focus. It truly reinforced that we are collectively a big part of something big. In July we also welcomed our global People, Product and Technology leaders to Melbourne. For many, this was their first time meeting their peers from other businesses across the Group in person, and it was the perfect opportunity to build social connection and collaborate as collective leadership teams. A key theme that ran through each of these teams’ offsites was how we continue to work together to grow even bigger and scale. 22 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTER WHAT WE DO AND OUR OPERATIONS OUR PEOPLE AND CULTURE DIRECTOR’S REPORT CORPORATE GOVERNANCE AND SUSTAINABILITY OUR BOARD AND REMUNERATION REPORT FINANCIAL REPORT An Engaged Global Team An important way for us to understand what drives our people is by seeking out feedback via our Employee Opinion Survey (EOS). We have had a robust engagement framework in place for our Australian business for over a decade. This year, we took that framework global and ran our EOS in each of our international businesses. This represented over 1500 employees, and for the first time we have an aggregated global view on employee sentiment. Our Australian engagement score remains high at 77%, which is 3% above the New Tech Australia industry benchmark. This benchmark is provided to us by Culture Amp, our survey platform provider, and represents ~1.4 million questions answered by 35,000 employees across 277 Australian organisations. These are highly valuable insights for us as it gives us an indication of how we are performing against the wider technology industry in Australia. Our global engagement score for the Group is currently sitting at 73%, which is a positive result for our first year of global reporting. We view this score as an opportunity and look forward to seeing it grow as we continue to build on our global employee experience, roll out additional initiatives, and bring our businesses closer together. The highest scoring factors for the Group were: Diversity (91% favourable), Management (83% favourable) and Work & Life Blend (82% favourable). We are passionate about providing our people with the flexibility they need to balance their work and personal commitments, and in many of our markets, including Australia, Chile and the US our teams are given the autonomy to choose to work from whichever location they feel they will do their best work in – whether this be one of our offices, their home, or a blend of the two. Our teams greatly appreciate this flexibility, as evidenced by our survey results. We were also pleased to see management score so highly, as providing our people leaders with learning and development opportunities to hone their skills has been a focus across all our markets. carsales Annual Report 2023 23 People and Culture continued Global EOS Highlights (1,558 Respondents, 78% Response Rate) Statement In my organisation gender-based harassment and sexual harassment is not tolerated I have the flexibility I need to manage work and other commitments My immediate supervisor/manager genuinely supports equality between genders I know how my work contributes to the goals of my Company My manager genuinely cares about my wellbeing I feel I am part of a team We hold ourselves and our team members accountable for results I would recommend carsales as a great place to work I am able to arrange time out from work when I need to We have enough autonomy to perform our jobs effectively I am proud to work for carsales Average favourable result 93% 91% 88% 88% 86% 86% 86% 85% 85% 84% 83% 24 carsales Annual Report 2023 INTRODUCTION AND CHAIR/CEO LETTER WHAT WE DO AND OUR OPERATIONS OUR PEOPLE AND CULTURE DIRECTOR’S REPORT CORPORATE GOVERNANCE AND SUSTAINABILITY OUR BOARD AND REMUNERATION REPORT FINANCIAL REPORT Diversity, Equity and Inclusion (DEI) We have long been committed to fostering an inclusive work environment where all our people feel valued, respected and have equal access to opportunities. We embrace and celebrate all the diverse qualities of our team, and remaining focused on this forms part of our 3-year global strategy. Our diverse workforce provides a wide range of perspectives, which allows us to innovate, attract and retain top talent, and better understand and represent our diverse customer base. We tailor our approach to diversity, equity and inclusion to suit the various markets in which we operate. We regularly discuss DEI with our global businesses to gain insights about which groups are currently underrepresented in their communities or facing societal challenges – and as things change, we evolve our strategy accordingly. For carsales Australia, gender diversity remains a challenge and this is why we put much of our focus into initiatives such as our internal Women in Tech program and supporting community organisations including Go Girl Go For IT and CS in Schools. The feedback from our global EOS results indicate that our DEI efforts are well received, with Diversity being the highest scoring factor across the Group, scoring 91% favourable. carsales Annual Report 2023 25 People and Culture continued In 2023 we were ranked # 24 in the top 100 companies globally for gender equality by Equileap, a leading provider of gender equality data and insights. Equileap reviewed 3,787 companies that are listed on a major index or in one of 23 developed markets, representing 102 million employees globally. Their Gender Equality Scorecard™ consists of 19 criteria including gender balance across the workforce, the gender pay gap, paid parental leave and anti-sexual harassment policies. This year, the Australian business is proud to have published its first Reflect Reconciliation Action Plan (RAP) (available on our shareholder website), endorsed by Reconciliation Australia. This RAP lays the foundations for implementing meaningful, long term reconciliation initiatives throughout the business and strengthening relationships with Aboriginal and Torres Strait Islander peoples, with the hope that it will assist with growing representation of First Nations peoples within the Company. The custom artwork created for our RAP and shared here is titled ‘Travelling on Country’ and tells the story of carsales. This piece was created for us by Riki Salam from We are 27 Creative. 26 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTER WHAT WE DO AND OUR OPERATIONS OUR PEOPLE AND CULTURE DIRECTOR’S REPORT CORPORATE GOVERNANCE AND SUSTAINABILITY OUR BOARD AND REMUNERATION REPORT FINANCIAL REPORT Our webmotors team elevates the voices of minorities within their business through the support of several affinity groups – also known as employee resource groups – including Pride Motors (LGBTIQA+), Black Motors (afro descendants) and Web Girls (females). Anyone in the business can join one or more of these groups that they feel connected to and, with the support of a team leader, meet monthly to discuss topics related to the community that they represent. These groups come up with ideas and initiatives that the business can implement to further support them and build awareness. These affinity groups also play a key role in creating community, fostering a sense of belonging and creating a sense of understanding and allyship across the wider business. Our people build and deliver our products, provide outstanding service to our customers, and help us to achieve our purpose and deliver on our vision. Our people- focused culture is something that we continually iterate and grow, to ensure it remains our competitive advantage. Most importantly, we are never done – we recognise we have so much opportunity across our market-leading businesses around the globe, and our people are instrumental in achieving and executing on those opportunities. We are proud to have delivered another stellar year with our highly engaged team supporting us and driving our success every step of the way. carsales Annual Report 2023 27 Directors’ Report Your directors present their report on the consolidated entity (referred to hereafter as the Group or carsales) consisting of carsales.com Ltd and the entities it controlled at the end of, or during, the year ended 30 June 2023 (FY23). 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 • Redbook Asia – provides automotive data services in New Zealand, Malaysia, Thailand and China. North America carsales operates digital non-automotive marketplaces in the United States and Canada through its subsidiary Trader Interactive. Carsales moved from 49% ownership to 100% of Trader Interactive in September 2022 and now consolidated the financial performance accordingly. Latin America carsales also operates digital automotive marketplaces in Brazil, Mexico and Chile. carsales’ operating entity in Brazil is webmotors. carsales increased its ownership stake from 30% of webmotors to 70% in April 2023 and now consolidates the financial performance accordingly. carsales owns 100% of its operating entities in Mexico and Chile. Investments This segment comprises the Group’s standalone investments in the consumer and wholesale tyre markets and vehicle inspections. The subsidiaries included in this group are tyresales.com.au, tyreconnect and Redbook Inspect. In addition the Group has investment stakes in PromisePay Pte Ltd and MX51 Pty Ltd, which are accounted for as financial asset investments. These businesses provide innovative fintech products. Operational and Financial Review Principal Activities carsales is one of the largest online vehicle marketplace businesses in the world. In Australia, carsales has market leading positions in the automotive, motorcycle, caravan, marine, truck and equipment industries. carsales also has a growing global presence with market leading positions in the US, South Korea, Brazil and Chile. Please refer to Our Strategy and Our Brand Portfolio sections for further information on our strategy and portfolio of businesses. Our key services, customers and geographies for continuing operations include: Australia - 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 and finance companies, 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. Australia - 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. 28 carsales Annual Report 2023 INTRODUCTION AND CHAIR/CEO LETTER WHAT WE DO AND OUR OPERATIONS OUR PEOPLE AND CULTURE DIRECTOR’S REPORT CORPORATE GOVERNANCE AND SUSTAINABILITY OUR BOARD AND REMUNERATION REPORT FINANCIAL REPORT Review of Results and Operation Pro-forma Revenue Pro-forma EBITDA Adjusted Revenue Adjusted EBITDA Adjusted NPAT Reported Revenue Reported EBITDA Reported NPAT attributable to owners of carsales.com Ltd Adjusted Earnings Per Share (Cents) Reported Earnings Per Share (Cents) Final Dividend Per Share (Cents) Financial Summary In FY23, the Group achieved Reported Revenue growth of 53%, Reported EBITDA growth of 49% and Reported Net Profit After Tax (Reported NPAT) growth of 301% compared to the year ended 30 June 2022 (FY22 or the prior comparative period (pcp)). In FY23, the Group achieved Proforma Revenue growth of 18%, Proforma EBITDA growth of 19% and Adjusted Net Profit After Tax (Adjusted NPAT) growth of 43% compared to FY22. 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 ‘Proforma Revenue’ ‘Proforma EBITDA’, ‘adjusted net profit’ and ‘adjusted earnings per share’ provides the best measure to assess the performance of the Group by excluding certain non-recurring or non-cash items relating to rebates, M&A costs, restructuring, financing, investments and acquired intangible amortisation from the reported IFRS measures. A reconciliation of reported net profit to adjusted net profit is set out in Note 4(b). Proforma metrics show the business on a like for like basis by normalising for acquisitions made through the period. $A Millions Growth FY22 FY23 798 416 510 271 195 509 269 161 66.5 54.9 24.5 942 496 781 425 278 781 400 646 78.1 181.3 32.5 $’s 144 80 271 154 83 272 131 485 11.6 126.4 8.0 % 18 19 53 57 43 53 49 301 17 230 33 Key drivers Proforma revenue growth of 18% reflects an excellent performance across the Group’s portfolio of high quality marketplace businesses. Proforma EBITDA growth of 19% reflects this excellent revenue performance combined with a good balance of investing in key strategic growth areas while sensibly managing discretionary costs. Adjusted net profit after tax was up 43% which reflects the EBITDA growth as well as the contribution from the acquisitions of additional stakes in Trader Interactive and webmotors throughout the year. $942m 18% $496m 19% Proforma revenue Proforma EBITDA $278m 43% 78.1¢ 17% Adjusted NPAT Adjusted EPS % comparisons show growth vs the prior corresponding period carsales Annual Report 2023 29 Directors’ Report continued Segment Review Dealer Private Media Online Advertising Data, Research and Services Australia Asia North America Latin America Investments Pro-forma Revenue Online Advertising Data, Research and Services Australia Asia North America Latin America Investments Pro-forma EBITDA A$ Millions Growth FY22 183.8 69.4 54.5 307.7 44.1 351.7 95.4 195.5 99.0 56.5 798.1 197.8 28.8 226.6 48.1 111.2 31.8 (1.9) 415.8 FY23 203.0 89.9 60.6 353.4 45.6 399.1 103.9 239.4 138.9 60.9 942.2 229.0 29.6 258.6 52.5 140.0 47.7 (3.0) 495.7 $m’s 19.2 20.5 6.1 45.8 1.6 47.3 8.5 43.9 39.9 4.4 144.1 31.2 0.8 32.0 4.4 28.8 15.9 (1.2) 80.0 % 10 30 11 15 4 13 9 22 40 8 18 16 3 14 9 26 50 n.m. 19 Australia – Online Advertising Services • Overall Revenue for the segment was up 15%, reflecting the extension of the Group’s market leadership position in Australia, recording double digit revenue growth in each key customer area of Dealer, Private and Media. EBITDA grew 16% with an EBITDA margin of 65%, which reflects good cost management whilst continuing to invest in key growth projects. • Dealer revenue was up 10% on pcp to $203m reflecting solid growth in revenue from leads, inventory promotion and other value added products. We have continued to provide a compelling return on investment for our dealer customers throughout FY23. • Private revenue was up 30% on pcp to $89.9m reflecting strong growth in private ad volumes and yield and increasing penetration of our Instant Offer product. • Media revenue was up 11% to $60.6m which is testament to the execution of our strategy to diversify our product and customer portfolio. Australia – Data, Research and Services Data, Research and Services revenue was up 4% to $45.6m, reflecting the continued demand for our Data, Research and Services from OEMs, dealers and corporate customers. There was solid growth from our core Redbook data business which continued to grow volume and yield. Segment Adjusted EBITDA was up 3% on pcp reflecting continued prudent cost management and operating cost leverage. 30 carsales Annual Report 2023 INTRODUCTION AND CHAIR/CEO LETTER WHAT WE DO AND OUR OPERATIONS OUR PEOPLE AND CULTURE DIRECTOR’S REPORT CORPORATE GOVERNANCE AND SUSTAINABILITY OUR BOARD AND REMUNERATION REPORT FINANCIAL REPORT Asia carsales Asia revenue was up 9% to $103.9m primarily reflecting the performance of the Encar.com business in South Korea. Revenue growth in South Korea was driven by the increased uptake of the Guarantee vehicle inspection service, more vehicles listed on the site and increasing penetration of the Encar Home (online buying) product. Good growth in Adjusted EBITDA of 9% reflects the good growth in revenue combined with continued investment in key growth initiatives, including expanding the guarantee and online trade in services. North America Trader Interactive revenue was up 22% to $239.4m primarily reflecting the excellent growth in dealer volume, dealer yield and private ads. Revenue growth has accelerated since carsales moved to 100% ownership, reflecting the execution of planned product and technology synergies. All verticals are consistently delivering audience traffic growth on pre COVID levels. Excellent growth in Adjusted EBITDA of 26% reflects the strong operating leverage potential of the business as it continues to build scale. Latin America Latin America revenue was up 40% on pcp largely reflecting the performance of webmotors in Brazil, where revenue was up 41% on pcp. This resulted from the continued execution of the national expansion plan, which produced a strong increase in dealer numbers and yield volumes. EBITDA growth of 50% reflects this strong revenue growth combined with continued marketing and product investment to support the future growth of the business. The Chile business also performed strongly throughout FY23. carsales Annual Report 2023 31 Corporate Governance Sustainability Report carsales is committed to being ethical, transparent and accountable in everything we do. At carsales, we take our ability to have a positive impact on society extremely seriously. 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. 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 2023 Sustainability Report, available on our Corporate Governance page of our investor website at https://shareholder.carsales.com. au/governance/. 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 FY23 Corporate Governance Statement addresses the recommendations contained in the fourth edition of the ASX Principles and Recommendations and is available on our website at https://shareholder.carsales.com.au/governance/. This report outlines the Company’s approach to assessing, mitigating and managing a range of social, environmental and governance ESG risks, which is overseen by the Company’s Board and managed by the carsales’ Executive Leadership Team. It provides insight into our unique culture, how we attract and retain the very best talent, 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. 32 carsales Annual Report 2023 INTRODUCTION AND CHAIR/CEO LETTER WHAT WE DO AND OUR OPERATIONS OUR PEOPLE AND CULTURE DIRECTOR’S REPORT CORPORATE GOVERNANCE AND SUSTAINABILITY OUR BOARD AND REMUNERATION REPORT FINANCIAL REPORT 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. carsales Annual Report 2023 33 Taskforce on Climate-Related Financial Disclosures (TCFD) Report 2023 In this Report Section 1. Introduction Section 2. Governance Section 3. Strategy Section 4. Risk management Section 5. Metrics and targets 34 36 39 48 49 Section 1. Introduction Climate change is one of the greatest challenges facing our world today. It continues to pose significant risks to our environment, economy and society more broadly. We believe that all companies have an obligation to do what they can to protect the environment and we intend to remain accountable and take responsibility for implementing positive change. As a digital business that does not extract or process any materials, we recognise that our environmental impact is low compared to many other companies. However, we acknowledge that our marketplaces facilitate the buying and selling of vehicles which contribute to greenhouse gas emissions. Our commitment to the environment and a more sustainable future is unwavering, with Sustainable growth being a key pillar of carsales’ global strategy. We have implemented a climate strategy which is linked to this and goes beyond addressing our own direct environmental footprint, by also aiming to provide support to our customers, the industries we operate in, and the broader community. In order to safeguard our business from the effects of climate change, it is vital that our strategy takes into account the potential risks and opportunities, and that we build resilience to withstand the impact of this global issue. In 2022, our Australian business operations became certified carbon neutral under the Australian Government’s carbon-neutral certification program Climate Active. We have continued to take steps to achieve our climate- related targets throughout 2023, and we continue towards our goal of achieving carbon neutrality across our global operations by 2024. With growing pressure from investors, emerging focus from regulators and continued social pressure, it is increasingly expected that companies provide meaningful and useful disclosure about climate-related risks that could impact their business and how management are responding to these risks. In response, the Taskforce on Climate-Related Financial Disclosures (TCFD) released climate-related financial disclosure recommendations in 2017 designed to help companies provide better information on the above, for greater transparency and to support informed capital allocation. carsales is committed to the transparent reporting and continuous improvement of its climate-related practices, performance and progress and as such, we have voluntarily adopted reporting against TCFD’s recommendations in 2023. We have prepared this report with reference to the guidance per the TCFD’s latest publication ‘Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures’. This is the first-time adoption of these recommendations by carsales. Whilst we have made good progress in our climate-related reporting, we acknowledge that further work is required to enhance our reporting, particularly in relation to our international businesses. This report is structured in line with the four pillars of the TCFD, specifically: Governance, Strategy, Risk management and Metrics and targets. 34 carsales Annual Report 2023CORPORATE GOVERNANCE AND SUSTAINABILITY Governance The organisation’s governance around climate-related risks and opportunities. Strategy The actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning. Risk management The process used by the organisation to identify, assess and manage climate-related risks. Metrics and targets The metrics and targets used to assess and manage relevant climate-related risks and opportunities. These four pillars are supported by 11 recommended disclosures intended to assist users in understanding how the organisation considers and assesses climate-related risks and opportunities. Summary of the TCFD recommendations and how they have been addressed Recommendation Supporting recommended disclosure Governance • Describe the Board’s oversight of climate-related risks and opportunities Disclose the organisation’s governance around climate- related risks and opportunities. • Describe management’s role in assessing and managing climate-related risks and opportunities Strategy • Describe the climate-related risks and opportunities the organisation Disclose the actual and potential impacts of climate- related risks and opportunities on the organisation’s businesses, strategy, and financial planning where such information is material. has identified over the short, medium, and long-term • Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning • Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario Where this is discussed in our report Section 2: Governance Section 3: Strategy Risk management • Describe the organisation’s processes for identifying and assessing Disclose how the organisation identifies, assesses, and manages climate-related risks. climate-related risks • Describe the organisation’s processes for managing climate-related risks • Describe how processes for identifying, assessing and managing climate-related risks are integrated into the organisation’s overall risk management. Section 4: Risk management Metrics and targets Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material. • Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process Section 5: Metrics and targets • Disclose Scope 1 and 2 (and Scope 3 if appropriate) greenhouse gas (GHG) emissions and the related risks • Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets 35 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORTTaskforce on Climate-Related Financial Disclosures (TCFD) Report 2023 continued Section 2: Governance Board carsales is committed to strong corporate governance, which we believe underpins sustainable value creation for investors and other stakeholders. We have incorporated climate governance into our existing governance framework and are continuing to instill accountability for climate change related risks throughout our business and value chain. For our Board and Global Executive Leadership Team (Global ELT), the environment remains an important consideration when developing and implementing our strategy, operational plans and objectives. The key environmental areas of focus which underpin our climate strategy are: Environmental, social and governance (ESG) matters form part of the Company’s general risk framework and are often discussed and considered in Board meetings. In addition, to ensure this important area receives the focus it requires, the Board established a Sustainability Committee, chaired by Kee Wong, to provide specialist oversight over ESG matters which may impact on our business, reputation and ongoing sustainability. All members of the Sustainability Committee are independent of the business and can challenge management on its progress in the area. The Sustainability Committee meets three times per year and operates in accordance with its charter, which is publicly available on the carsales shareholder website at https://shareholder. carsales.com.au/charters/. Reducing our emissions, energy management and carbon neutrality The committee plays a vital role in assisting the Board in developing carsales’ climate-related strategies, which are aimed at minimising our impact on the environment. Waste management Customer and other stakeholder influence The actions we have taken in relation to the above are detailed further in Section 3 of this report. We have set climate-related targets that support and give direction to our efforts and provide motivation and accountability towards their achievement. These are detailed further in Section 5 of this report. carsales has formulated specific action plans to ensure that the necessary measures are implemented in order to achieve each target effectively. The Sustainability Committee reports to the Board on the progress towards achievement of these climate-related targets. The Committee also monitors and reports to the Board on environmental trends and views of external stakeholders, to ensure that we address the important issues as part of our climate strategy. 36 carsales Annual Report 2023 CORPORATE GOVERNANCE AND SUSTAINABILITY The following diagram provides an outline of our organisational structure and how climate change is embedded within: Managing Director and CEO Global ELT Senior Leadership Team Responsible for the successful implementation of climate-related strategies and plans and assisting in identifying climate related risks carsales Board Oversees approach to ESG, approves climate strategy and targets, monitors progress toward achievement Audit Committee Consideration of impact of climate change on financial performance, financial position and reporting obligations Sustainability Committee Specialist oversight of ESG matters, formulation of climate strategy, development and monitoring of climate targets Risk Management Committee Discuss key risks facing our business, including climate-related risks People & Culture Committee Consideration of ESG related metrics for inclusion in carsales’ incentive plans Third party assurance and specialist advice 37 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORTTaskforce on Climate-Related Financial Disclosures (TCFD) Report 2023 continued Management Climate change is a key strategic and operational consideration for our business. As outlined above, accountability for climate change related risks is embedded throughout our business and as such, all members of the Global ELT and Senior Leadership Team have a level of responsibility for the successful The below table illustrates some examples of this: implementation of climate-related strategies and plans and assisting in identifying climate-related risks. Each of our senior leaders provides insight into their areas of expertise and identify climate change related issues that present the greatest risks and opportunities for carsales. Department Sustainability Finance Product / Editorial Corporate development All departments Person in charge Executive General Manager of Corporate Affairs, Employer Brand and Sustainability, General Counsel and Company Secretary Responsibility • Monitoring emerging climate issues • Ensuring compliance with our environmental reporting obligations • Monitoring and calculation of our carbon footprint • Overseeing the implementation of emission reduction initiatives Chief Financial Officer Chief Product and Data Officer Chief Strategy Officer Various • Identification and assessment of how climate- related risks and opportunities could impact on the financial performance and financial position of carsales • Research and monitoring of issues/trends in the electric vehicle market, to develop products or content related to electric, hybrid and other low emission vehicles for our customers and wider community • Assessment of • Meeting assigned emissions reduction objectives* whether investments are strategically and culturally aligned with carsales and share our commitment to climate change and ESG more broadly *Our climate strategy, which is detailed further in Section 3, is accompanied by the formulation of specific objectives and the delegation of responsibility for these to key members of our Global ELT and Senior Leadership Team. These objectives are designed to reduce emissions and waste or implement sustainable products/ services and those responsible report on the progress toward achieving them on a regular basis. Management and the Board also engage external specialists as required, to assist in formulating carbon reduction strategies, evaluating our carbon footprint and to provide third party assurance over the associated emissions data. Various formal and informal channels are used to share information on climate change and to discuss climate- related risks within the business, including in the regular Global ELT and Senior Leadership Team meetings. 38 carsales Annual Report 2023CORPORATE GOVERNANCE AND SUSTAINABILITY Section 3: Strategy Our strategic response to climate change We have continued to progress and build upon our climate strategy throughout 2023, which focuses on what we can do as an organisation to support the transition to a low carbon economy. This is underpinned by 3 key focus areas: Reducing our emissions, energy management and carbon neutrality carsales supports the transition to a low-carbon economy and we are committed to playing our part in reducing greenhouse gas (GHG) emissions and minimising our environmental impact. We believe this is essential for the long-term performance and success of our company. Our Australian business operations are certified carbon neutral under the Australian Government’s carbon neutral certification program Climate Active. Climate Active curates what is considered one of the world’s most rigorous carbon neutrality certifications programs and this achievement solidifies our commitment to minimising environmental impact, reducing emissions, and championing positive climate action. Attaining this certification forms a key part of our broader climate strategy. The certification was achieved through initiatives aimed at reducing our energy consumption, which includes the energy used to heat, light and power our work premises. An outline of some of these energy reducing initiatives is provided below: • Installing low wattage, low energy, power efficient globes in all our offices and using lighting sensors to ensure lights are turned off when not in use; • Employing zoned air conditioning to reduce power and switch off outside office hours; • Condensing our utilised office space; and • Moving storage of all carsales data to the cloud. Further, our Melbourne head office is certified as carbon neutral through the National Australian Built Environment Rating System (NABERS) and has achieved a 4.5-star NABERS energy rating and a 6-star NABERS water rating. The achievement of carbon neutrality was supported by carbon offsetting initiatives, whereby we offset 100% of our Australian carbon emissions through investment in community, conservation and renewable energy projects, both locally and internationally. During the FY22 year, we offset 7,776 tonnes of CO2 to neutralise our Scope 1, 2 and 3 emissions. 39 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORTTaskforce on Climate-Related Financial Disclosures (TCFD) Report 2023 continued Looking ahead We have implemented an emissions reduction strategy whereby we have committed to reducing our Australian business operations’ emissions intensity by 30% per FTE by 2030 compared to our FY2022 baseline. We plan to achieve this through reducing Scope 1 and 2 emissions intensity by 100% and Scope 3 intensity by 20%. Scope 1 emissions will be reduced by: Scope 2 emissions will be reduced by: Scope 3 emissions will be reduced by: • Working with our landlords around Australia to explore continued ways to reduce our energy consumption – including installation of solar, where possible. In addition, we are currently investigating the feasibility of switching to green energy and/or carbon neutral electricity in our offices across Australia and hope to commence transitioning to this over the next 1-3 years, in a phased approach. • Installation of energy reduction systems e.g. LED lighting. • Investigating moving fleet vehicles from internal combustion engine to hybrid or electric vehicles over the next 5–7 years. This will reduce scope 1 emissions by approximately 90%. • In the interim, we will transition the fuel usage of our fleet from gasoline and diesel to unleaded gasoline with E10 blend. The fuel transition will be as follows: in the next two years, 30% of our fleet will use E10 blend. In the next five years, 50% of our fleet will use E10 blend. In the next 5–7 years, 80% of our fleet will use E10 blend. This will decrease our scope 1 emissions by approximately 80%. Travel • Employee educational campaign around the environmental impact of travel. • Review of travel policies and, where possible, continue to use technology to connect, thus avoiding unnecessary travel and associated environmental impacts. We estimate this will reduce travel by 20%. • Work with our external travel management provider to ascertain where and how we can travel sustainability and offset emissions at the time of travel. Offsetting our flights will reduce 3.9% of our scope 3 emissions. Data centres and cloud operations • Continue to store 100% of our data in the cloud. • Work with our cloud provider, Amazon Web Services, to determine how we can function in a more sustainable manner in the cloud to reduce our emission footprint as they work towards their own target of being powered by 100% renewable energy by 2025. This will reduce 2.6% of our scope 3 emissions. Employee commute • Employee commute is difficult to influence, as it is in the hands of our employees. Where possible, we will encourage our people to switch to public transport, car-pooling, cycling or walking. At our head office in Melbourne, we have end of trip facilities for our team and our location is well connected to many bike paths, making riding to work an attractive option. We also offer our Victorian team the ability to buy discounted 365-day myki passes through the myki Commuter Club, to further encourage our employees to use public transport. This will reduce 20% of emissions from employee commute. Working from home • Offer employees educational opportunities on how to save energy in their home office such as considering switching to Greenpower or installing solar panels. This, alongside educating staff on how to improve their waste management practices when working from home, will reduce working from home emissions by 20%. Postage and Couriers • Seek out green suppliers that are Climate Active certified and that report on their emissions and/or work with suppliers that have an electric or hybrid fleet. This will reduce 15% of our postage and courier emissions by 2030. IT equipment • Seek out green suppliers that are Climate Active certified and report on their emissions. • Invest in high quality items that do not need to be replaced regularly. We have recently implemented hot-desking in our Melbourne office due to a large proportion of our team now working from home permanently. This will reduce IT equipment emissions by 20%. Telecommunications • Seek out green suppliers that are Climate Active and report on their emissions. This will reduce telecommunication emissions by 30%. Food and Beverage • For a more accurate measure of emissions, we will investigate a more accurate data capture method in the next three years, to breakdown spend across food types. This will allow carsales to identify the food and beverage types being purchased with the highest emission footprint. From here, we can enforce a policy to phase out these high emitting food and beverage types. This will reduce food emissions by 50%. 40 carsales Annual Report 2023 INTRODUCTION AND CHAIR/CEO LETTER WHAT WE DO AND OUR OPERATIONS OUR PEOPLE AND CULTURE DIRECTOR’S REPORT CORPORATE GOVERNANCE AND SUSTAINABILITY OUR BOARD AND REMUNERATION REPORT FINANCIAL REPORT carsales Annual Report 2023 41 Taskforce on Climate-Related Financial Disclosures (TCFD) Report 2023 continued Customer and other stakeholder influence Our customers are the reason we exist and their expectations regarding climate-related issues are critical to us. As a marketplace business, we recognise our role as a facilitator in the buying and selling of cars as well as non-automotive leisure, industry and lifestyle assets such as motorbikes, boats, caravans, trucks and the like. All of these assets contribute to greenhouse gas emissions. The rapid onset of climate change has focused attention on the potential for vehicle choice to play an active role in reducing emissions. The evolution from largely internal combustion engine (ICE) vehicles to battery electric and other low emission vehicles is a significant step change in the industry and carsales has an important role to play in assisting to facilitate this change through the education of our consumers. While it will always be the buyer’s right to choose, we believe that buyers should be equipped do so from an informed position. carsales is already one of the leaders in the provision of independent content related to electric, hybrid and other low emission vehicles in the Australian marketplace. We continuously build out this content to help educate consumers, offer advice, and improve understanding around electric vehicle (EV) adoption. Our website features an Electric Hub (available at https:// www.carsales.com.au/electric-cars/) which is a one-stop shop for all things electric – from the latest EV news and buying advice to expert reviews on all the key EV brands. This includes EV Ready, a short questionnaire which helps the consumer to determine whether they are “ready” to purchase an EV, then recommends brand new EVs which are best suited to them based on their current set up, budget and driving habits. We will continue to look for ways to reduce our greenhouse gas emissions going forward. carsales is currently progressing in the independent evaluation of its carbon emissions across its international businesses as part of our target to achieve carbon neutrality on a global scale. We are also updating our emissions reduction strategy to include international operations. Waste management The major forms of waste generated in our offices include: • Items such as paper, cans and bottles, which are sorted and recycled; • Personal waste and non-recyclable materials, mostly going to landfill; and • E-waste, such as computers, laptops, mobile phones, monitors etc. We have employed various waste management initiatives to reduce our waste as much as possible, such as: • Employed sustainable cleaning, waste and recycling practices; • Purchased 100% recycled paper, where possible; • Re-used or recycled 85% of redundant electronic equipment, where possible, including donating to charitable organisations. We have partnered with Tyre Stewardship Australia, which seeks to effectively reduce the environmental, health and safety impacts of passenger tyres which reach the end of their life in Australia each year and develop viable markets for these end-of life (worn out) tyres, including those sold by our tyres business. Looking ahead • We are committed to achieving our recycling target of 40% by 2025, for our Australian business. • We plan to audit our landfill waste to identify if anything else could be recycled. To go further, we will implement circular economy principles and targets to not only recycle waste, but also reuse and repair what we can to avoid e-waste where possible. This will reduce our waste emissions by 50% by 2030. • We will continue to identify ways to reduce our waste generation and investigate additional ways to divert e-waste from landfill. • We will share waste avoidance practices via companywide newsletters and will investigate implementing an internal sustainability policy. 42 carsales Annual Report 2023 CORPORATE GOVERNANCE AND SUSTAINABILITY We also launched a podcast series called ‘Watts Under the Bonnet’ aimed at keeping listeners up to date with the latest developments in the world of EVs. carsales is a member of the Electric Vehicle Council. As a member, we intend to play an active role in driving EV facilitation in Australia. We believe carsales has an important role to play in facilitating this change, whether by providing clear, easy to understand and independent information on new automotive technologies or as a path to reduce emissions. The number of EVs advertised on carsales.com.au continues to grow, with over 2,000 electric and over 4,000 hybrid vehicle advertisements now appearing on our website1. We have also improved our EV search filters to include battery range, capacity and plug type, making it easier for consumers to search for EVs. Globally, there are over 6,000 electric and over 13,000 hybrid vehicle advertisements appearing across our marketplaces1. 1. Data as of 30 June 2023. Key climate risks and opportunities In developing our broader climate strategy, we have performed a qualitative assessment whereby we considered the most material climate-related risks affecting our business, the potential impact and how we plan to manage these risks. We understand that climate change also poses an opportunity for our business and as such the relevant opportunities have also been considered as part of our assessment. The principle of ‘materiality’ helps us to prioritise the issues of greatest importance to our company. By focusing on the most material issues, we aim to maximise our contribution towards a greener future and create meaningful and sustainable value for our business and stakeholders. Management is responsible for determining the risks which are considered material in line with the carsales risk management framework and proposing the risk rating assigned to each, for consideration of the Board and Sustainability Committee. The level of inherent risk and also the presence of any mitigating factors and controls are considered when determining the risk rating (low, medium or high). The risk rating and timeframe allows the Board and Global ELT to prioritise each risk accordingly. Risks are also categorised dependent on whether they are risks related to the transition to a lower-carbon economy (Transition Risks) or risks related to the physical impacts of climate change (Physical Risks). We considered the potential impacts of each material risk and opportunity on the business and its operations across various time horizons – short (1-5 years), medium (5-15 years) and long term (15+ years), as well as under three climate change scenarios aligned to those of the Intergovernmental Panel on Climate Change (IPCC), being global warming of 1.5°C, 2.0°C and 4.0°C above pre-industrial levels by 2100. 43 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORTTaskforce on Climate-Related Financial Disclosures (TCFD) Report 2023 continued Key climate risks and opportunities facing carsales Time- frame Short term Relevant scenarios All scenarios (1.5°C, 2°C, 4°C) Is it also an opportunity? Yes - if we can adapt our business model and product offerings globally to suit the change in consumer preferences and OEM operating models, this also presents an opportunity for our business to strengthen our market position. carsales’ response We aim to be a market leading digital marketplace for EVs and fuel-efficient vehicles. We will continue to adapt to the changing landscape and consumer preferences and seek to capitalise on opportunities presented by electrification. We will also continue to help educate consumers and explore new ways to improve understanding around EV adoption. Risk type Risk rating Transition High Risk Increased environmental awareness and demand for sustainable products and services Potential strategic, business and financial impact With increased awareness of the environmental impact of ICE vehicles, consumer preferences may continue to shift towards EVs or more fuel-efficient vehicles. This presents a risk that demand for our online marketplaces declines, thus adversely impacting our financial performance, if we do not adapt accordingly. As EV OEMs continue to penetrate the vehicle market, there is a further risk for our business given that many EV manufacturers operate via direct selling models instead of via dealerships and online marketplaces. In addition, there is a risk that dealerships (our primary customers) become less profitable as EVs require less servicing. Transition Medium Awareness of the environmental impact of our tyres business is increasing, specifically in relation to the disposal of worn-out tyres and the diesel emissions caused by freight to customers. There is a risk that demand for our tyre products will decline if we cannot demonstrate a commitment to reducing the carbon footprint of our tyres business. Short term All scenarios (1.5°C, 2°C, 4°C) Yes - optimising freight to customers and therefore diesel consumption represents an opportunity to reduce freight costs and therefore increase profitability. Our tyres business has partnered with Tyre Stewardship Australia, which seeks to responsibly dispose of or develop viable markets for end-of life tyres. We are working on optimising our freight to customers to reduce the frequency of deliveries and therefore reduce diesel emissions. Environmental impact of the Online Tyre Retail and Wholesale business 44 carsales Annual Report 2023CORPORATE GOVERNANCE AND SUSTAINABILITY Risk Reputational risk due to connection with the automotive industry Risk type Risk rating Potential strategic, business and financial impact Is it also an opportunity? Yes - this presents an opportunity if we can meet the expectations of our consumers, investors and other stakeholders and present ourselves as a leading company with respect to our climate response. Transition Medium The automotive industry is subject to public scrutiny due to its impact on the environment. Given our role in facilitating the buying and selling of vehicles, there is a risk of brand impact and reduced demand for our products and services if we fail to demonstrate a contribution towards climate change mitigation. There is also a risk that we do not meet the ESG criteria of investors, limiting access to capital required to fund projects and expansion plans, given the increasing focus placed on ESG factors when making investment decisions. Time- frame Relevant scenarios Short to medium term All scenarios (1.5°C, 2°C, 4°C) carsales’ response We are certified carbon neutral in respect of our Australian business operations and have committed to achieving carbon neutrality globally. Clear and time bound emissions and waste reduction targets have been set and reporting on the progress towards these targets to the market will take place annually. Refer to Section 5 of this report. In addition, we continue to help educate consumers, offer advice, and improve understanding around EV adoption. The appropriate structures and processes are in place to allow for continuous monitoring of emerging climate-related issues, so they can be addressed promptly and appropriately. Refer to Section 2 of this report. We continue to make progress in our climate-related reporting, including adopting the TCFD recommended disclosures in FY23. 45 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORTTaskforce on Climate-Related Financial Disclosures (TCFD) Report 2023 continued Risk Acquired businesses not operating in accordance with carsales’ sustainable growth strategy Risk type Risk rating Potential strategic, business and financial impact Is it also an opportunity? Transition Medium A key pillar of carsales’ No global strategy is to deliver long term growth through early stage investments and to continue to invest in inorganic growth that extends or deepens our core business globally. There is a risk that businesses we acquire are not operating in an environmentally conscious manner, representing an inconsistency with our sustainable values. This could result in damage to our brand and reputation. Increased costs associated with climate action Transition Low Climate action poses a financial risk to our business in the form of increased costs, including: • Those to ensure adherence to any newly introduced climate regulations, or monetary penalties and further legal proceedings for non-compliance. • Those involved in implementing resource efficient and sustainable practices. Yes - implementing sustainable practices presents an opportunity to enhance our reputation as a climate conscious organisation, improve employee satisfaction, retention and attraction, achieve energy efficiency and reduce exposure to future fossil fuel price increases in the long term. Time- frame Relevant scenarios Short to medium term All scenarios (1.5°C, 2°C, 4°C) Short to medium term All scenarios (1.5°C, 2°C, 4°C) carsales’ response Detailed due diligence processes are undertaken prior to the completion of any acquisition or early stage investment. All investments must be strategically and culturally aligned with carsales and share our commitment to ESG. We are currently working with our international businesses to achieve carbon neutrality globally by 2024. Knowledge sharing on environmentally friendly practices as well as opportunities presented by electrification takes place across our global business. We are continuously monitoring for changes to or introduction of new climate-related regulations which impact our business. Implementing sustainable practices is key to achieving our climate strategy and demonstrating our commitment to the environment. While we acknowledge that the implementation of these practices will require considerable investment, the associated cost is lower on a relative basis given carsales’ emission intensity is low when compared to other companies. Further, we believe that the long-term benefits to our company and society more broadly greatly outweigh the costs. 46 carsales Annual Report 2023Risk type Risk rating Transition Low Risk Increase in cost of resources due to scarcity concerns Is it also an opportunity? No Potential strategic, business and financial impact As resources such as fossil fuels become more scarce, the cost of producing electricity may increase, meaning higher utility costs for our business and our consumers. Further, if the price of crude oil and battery metals increase due to limited supply, the cost of purchasing and operating a vehicle may increase. Physical High Increased frequency/ severity of extreme weather and climate-related natural disasters. No Major weather events such as floods and bushfires could present a disruption to our operations. It also poses a risk to the safety of our staff and customers and a risk of increased operational and insurance costs. Such weather events could also impact automotive and recreational vehicle dealers, who are our key customer segment, resulting in them being unable to operate for a period of time and impacting on our revenue generating ability. CORPORATE GOVERNANCE AND SUSTAINABILITY carsales’ response We believe that our energy reduction initiatives (outlined earlier in this section) will work to reduce our exposure to electricity price increases. We continue to explore ways to further reduce our energy consumption. Our digital marketplaces offer a wide range of vehicles for all budgets and also include fuel efficient vehicles, thus providing options for consumers looking for a vehicle which costs less to purchase and operate. While the cost of resources required for EV batteries may increase due to scarcity concerns, we expect the overall cost of EVs to decline as technology advances and production scales up. Our crisis management plan is reviewed regularly to ensure it remains up-to-date and relevant in order to respond to extreme weather events. Further, we ensure our office staff are equipped to work from remote locations. The risk of natural disasters impacting our dealer network is mitigated given dealers are dispersed across the countries we operate in. As demonstrated during the COVID-19 pandemic and other recent extreme weather events, we are able to support our customers where possible in the occurrence of such events. Time- frame Relevant scenarios Medium term All scenarios (1.5°C, 2°C, 4°C) Medium to long term 2°C and 4°C scenarios 47 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORTTaskforce on Climate-Related Financial Disclosures (TCFD) Report 2023 continued Resilience of carsales’ strategy At carsales, our vision is to create #1 digital marketplaces for vehicles around the world and we are passionate about exceeding the needs of our customers, achieving sustainable growth and building a world-class working culture. The completion of the above analysis has helped to strengthen our understanding of the climate-related risks faced by our business, our response to those risks, the associated mitigating factors and thus the resilience of our strategy. Overall, we consider that our exposure to both physical and transitional risks is lower relative to other companies. Nonetheless, we have the appropriate structures and processes in place to respond to these risks and are well-positioned to navigate a range of possible climate outcomes. We will continue to test the resiliency of our strategy to emerging climate risks and against each climate change scenario. As the world continues to adapt and respond to climate change, opportunities for our business will emerge and evolve. We will adapt and build upon our climate and broader company strategy in order to capitalise on these opportunities as appropriate. We aim to continue investing in emission reduction initiatives and the development of new products and services that support the transition to a low carbon economy, as well as further educating our employees and consumers. Section 4: Risk management We view climate change as a risk for carsales as it poses a threat to many facets of our business, while also presenting various opportunities. Climate-related risk management is integrated with our existing risk management framework. Environmental and climate-related risks continue to gain increasing attention and visibility, and are constantly evolving. Therefore, it is essential to monitor and respond to emerging trends, regulatory changes and potential for disruption across the industry and we believe that we have the appropriate structures in place to do so. carsales has a comprehensive risk management process to identify, assess, mitigate, control and monitor business, financial and climate-related risks. 1 Identiﬁcation 3 Monitoring Risk management process 2 Assessment 3 Control 48 carsales Annual Report 2023 INTRODUCTION AND CHAIR/CEO LETTER WHAT WE DO AND OUR OPERATIONS OUR PEOPLE AND CULTURE DIRECTOR’S REPORT CORPORATE GOVERNANCE AND SUSTAINABILITY OUR BOARD AND REMUNERATION REPORT FINANCIAL REPORT carsales’ Board is responsible for ensuring that there is an appropriate corporate governance framework in place to protect and enhance our performance and build sustainable value for our shareholders. The Board Charter states that it is the responsibility of the Board to ensure that the significant risks facing the company have been identified and that adequate control, monitoring and reporting mechanisms are in place. This includes climate- related risks. The Risk Management Committee (RMC) was set up to assist the Board in carrying out its risk management responsibilities. The RMC approaches its risk oversight based on the company’s level of ownership of operations locally and offshore. Climate-related risks are also managed by our Sustainability Committee. We recognise that managing risk is a continual process and an integral part of the management of the business. In addition to the RMC, the company has a separate management committee comprising Global ELT and Senior Leadership Team members, to assist in tracking and escalating risks. carsales maintains a formal risk register which captures material and other potential risks to the business and assesses the nature, likelihood and materiality of the impact of each risk. carsales uses the results of the assessment to inform its risk management strategy. A review and update of its formal risk register is conducted at least twice a year. Each risk on the company’s risk register has at least two owners – including at least one Global ELT member and at least one senior manager. The risk owners are tasked with monitoring the risks by reference to agreed metrics and reporting on these metrics periodically to the Board, as well as formulating appropriate responses and control measures. Our Risk Management Policy demonstrates commitment to the principles of risk management and ensuring a consistent and effective approach to managing risk within the workplace, including climate-related risks. Further, we maintain good working relationships with external advisers, who provide insight into specialist areas such climate change risk and carbon management. Please refer back to Section 3 for climate risks identified and our response to each. Our approach to risk management is detailed further in carsales’ 2023 Sustainability Report: https://shareholder.carsales.com.au/governance/ Section 5: Metrics and targets Climate-related targets: Managing our climate impact We have set targets that support and give direction to our efforts and provide momentum, motivation and accountability towards their achievement. We have also linked each target to the United Nations (UN) Sustainable Development Goals (SDG), to demonstrate how our efforts contribute towards a global common goal of addressing the world’s most urgent sustainability challenges and creating a better future for all. carsales Annual Report 2023 49 Taskforce on Climate-Related Financial Disclosures (TCFD) Report 2023 continued The table below details our climate-related targets, how we are progressing against each and the next steps to be taken: Target Status Next steps Relevant SDG goal Relevant SDG target Existing from FY22 Carbon neutrality of AU business operations Achieved and ongoing We will maintain carbon neutrality by: 7.3) By 2030, double the global rate of improvement in energy efficiency. 12.2) By 2030, achieve the sustainable management and efficient use of natural resources. 7) Ensure access to affordable, reliable, sustainable and modern energy for all. 12) Ensure sustainable consumption and production patterns. 12) Ensure sustainable consumption and production patterns. 12.6) Encourage companies, especially large and transnational companies, to adopt sustainable practices and to integrate sustainability information into their reporting cycle. • Continuing to invest in carbon offset projects that align to our business strategy. • Progressing the emissions reduction strategy for our Australian business. See below for timebound targets which have been set to assist in achieving our emissions reduction strategy. The next step will involve completing the baseline greenhouse gas (GHG) inventory assessment for our international operations. This will allow us to commence investment in projects to offset our global carbon footprint and implement a carbon emissions reduction strategy for our international businesses. This report has been prepared with reference to the recommendations of the TCFD. We will continue to evolve our environmental reporting to meet the requirements of the relevant frameworks and our stakeholders’ expectations. Achieved (see below) In progress Implement carbon emissions reduction strategy with timebound targets for the Australian business Achieve carbon neutrality across controlled global operations with emission reduction strategy, by 2024 Report against TCFD Achieved and ongoing 50 carsales Annual Report 2023 CORPORATE GOVERNANCE AND SUSTAINABILITY Target Status Next steps Relevant SDG goal Relevant SDG target New in FY23 Reduction in our emissions intensity per FTE by 30% by 2030 compared to a FY22 baseline, for our Australian business operations Implement carbon emissions reduction strategy with timebound targets for our international businesses by 2025 Recycling target for 2025 of 40% for our Australian business In progress In progress To achieve this target, Scope 1 and 2 intensity will be reduced by 100% and Scope 3 intensity emissions reduced by 20%. Our emissions reduction strategy is detailed further in Section 3. Future activity To be commenced following completion of GHG inventory assessment. This will also be informed by the learnings from our Australian emission reduction strategy. To achieve this, we will audit landfill waste monthly to identify if anything could have been recycled. Further, we will investigate additional ways to divert e-waste from landfill and educate our staff on recycling and waste avoidance practices. 7.3) By 2030, double the global rate of improvement in energy efficiency. 12.2) By 2030, achieve the sustainable management and efficient use of natural resources. 7) Ensure access to affordable, reliable, sustainable and modern energy for all. 12) Ensure sustainable consumption and production patterns. 12.5) By 2030, substantially reduce waste generation through prevention, reduction, recycling and reuse. 12) Ensure sustainable consumption and production patterns. Our current emissions reduction strategy outlines our commitment to reducing our Australian business operations’ emissions intensity by 30% per FTE by 2030 compared to our FY22 baseline. The Science Based Targets initiative (SBTi) advises that a company’s targets should be determined on a baseline that uses the same methodology that an organisation is currently using to establish its footprint. As we are currently in the process of determining our global emissions footprint. carsales intends to release revised targets in FY24 once we have a clear understanding of what our global footprint looks like. We will provide further information on this once the project has been completed, along with a global emission reduction plan to achieve these targets. 51 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORT Taskforce on Climate-Related Financial Disclosures (TCFD) Report 2023 continued Climate-related metrics: Measuring our climate impact Our total greenhouse gas emissions Pangolin Associates Pty Ltd were engaged to conduct a comprehensive assessment of the GHG emissions accountable to the Australian operations of carsales in FY22 during our Climate Active data collection process. This included the subsidiaries of Automotive Data Services Pty Ltd, Automotive Exchange Pty Ltd, Tyresales Pty Ltd, Tyreconnect Pty Ltd, CS Motion Australia Pty Ltd, CS Motion Technologies Pty Ltd, CS Motion Development Pty Ltd, Lformation Pty Ltd, i-Motor Pty Ltd and Redbook Inspect Pty Ltd. Based on best available data, the estimated total carbon emissions for carsales was 7,689.5 tonnes of carbon dioxide equivalents (tCO2-e). This total includes indirect contributions along the supply chain (scope 3 emissions). Excluding scope 3 emissions, our carbon emissions were 672.6 tCO2-e. The results of our assessment are summarised below: Operational Boundary Associated Inventory/Service Scope 1 Scope 2 Scope 3 Total Scope 1 & 2 Transport fuels (land and sea), Refrigerants Purchased electricity Accommodation and facilities, Cleaning and chemicals, Food and beverage, Flights, ICT services and equipment, Office equipment and supplies, Postage, courier and freight, Products, Professional Services, Waste, Water, Working from home. (tCO2-e/yr) 2022 (tCO2-e/yr) 2021 185.6 487.0 194.3 622.3 7,016.9 3,324.6 7,689.5 4,141.1 672.6 816.6 Emissions by Scope Emissions by Type 6.3% 2.4% Scope 1 Scope 2 Scope 3 91.3% Methodology Accommodation and facilities Postage, courier and freight Cleaning and chemicals Electricity Flights Food and beverage ICT services and equipment Oﬃce equipment and supplies Products Professional Services Refrigerants Transport (Land and Sea) Waste Water Working from home The GHG assessment and the calculation of emissions was prepared in accordance with The GHG Protocol: A Corporate Accounting and Reporting Standard (Revised Edition), as per the TCFD’s recommendations, as well as the following guidelines: Our assessment includes all GHGs covered by the Kyoto Protocol, in addition to carbon dioxide. These are then multiplied by their relative Global Warming Potential (GWP), which is an index used to convert the non-carbon dioxide gases to a carbon dioxide equivalent. • Corporate Value Chain (Scope 3) Standard published by the World Resource Institute (WRI) and World Business Council for Sustainable Development (WBCSD) • International Standards Organisation ISO 14064-1:2018 Greenhouse gases - Part 1: Specification with guidance at the organisation level for quantification and reporting of greenhouse gas emissions and removals • Australian National Greenhouse Accounts Factors (https:// www.dcceew.gov.au/sites/default/files/documents/ national-greenhouse-accounts-factors-2022.pdf) 52 The GHG reporting period is aligned to the previous financial reporting year. As mentioned above, the emissions reported currently only include our Australian operations. The completeness and timeliness of our GHG reporting will improve each year as we revisit and refine the methodology and underlying dataset. Our GHG emissions data has been verified by GPP Audit Pty Limited, an independent 3rd party. carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTER WHAT WE DO AND OUR OPERATIONS OUR PEOPLE AND CULTURE DIRECTOR’S REPORT CORPORATE GOVERNANCE AND SUSTAINABILITY OUR BOARD AND REMUNERATION REPORT FINANCIAL REPORT carsales Annual Report 2023 53 Our Board Patrick O’Sullivan Non-Executive Chair Cameron McIntyre Chief Executive Officer and Managing Director Wal Pisciotta OAM Non-Executive Director and Co-Founder Pat is the Chair of the carsales Board of Directors, a position he has held since 2019, having been a Director of the Company since 2007. Pat is a member of The Institute of Chartered Accountants in Ireland and Australia, and a graduate of the Harvard Business School’s Advanced Management Program. Pat is currently the Chair of the Board of Technology One Limited and SiteMinder Ltd. Previously Pat was the Chief Operating Officer and Finance Director of Nine Entertainment Co Pty Limited (formerly PBL Media Pty Ltd), a position he held from February 2006 until June 2012. He also served as a Director and Company Secretary of Nine Entertainment Co Pty Limited and was Chair of Ninemsn. Pat brings immense financial, regulatory and governance expertise to the Board, and was the Chair of the Audit and Risk Management Committee prior to being appointed as Chair of the Board. Pat also provides the Board with valuable 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 (from 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 29 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, mergers and acquisitions and management to the Board. Wal has more than 35 years’ experience in supplying computer services to the automotive industry and was Chair of the Company’s Board from its inception until August 2015. Wal holds a Bachelor of Science degree in Business Administration from the University of Alabama (United States). He 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 consummate 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 founding. Kim has more than 30 years’ of experience as a CEO and senior executive in a range of marketing and media companies including Southern Star Entertainment, PBL and Ninemsn and Reading Room Inc (bookstr.com) of which she was CEO and founder. Kim is currently a Non-Executive Director of InvoCare Limited, Infomedia Limited, SiteMinder Limited and the Sax Institute, a national not-for profit leader in promoting the use of research evidence in health policy. She was formerly a Non-Executive Director of Marley Spoon AG and WPP AUNZ until the completion of its takeover by WPP PLC in April 2021. She has also served as a Fellow of the University of Sydney Senate. Kim holds a Bachelor of Arts from the University of Sydney and a Graduate Diploma in Library Information Science from UTS. Kim provides an abundance of experience and knowledge in the marketing, media and entertainment industries. Kim also has extensive experience on ASX listed boards, including as Chair of Remuneration Committees and is the Chair of the Company’s People and Culture Committee. Kim Anderson Non-Executive Director 54 carsales Annual Report 2023 INTRODUCTION AND CHAIR/CEO LETTER WHAT WE DO AND OUR OPERATIONS OUR PEOPLE AND CULTURE DIRECTOR’S REPORT CORPORATE GOVERNANCE AND SUSTAINABILITY OUR BOARD AND REMUNERATION REPORT FINANCIAL REPORT Edwina holds a Bachelor of Laws and Bachelor of Arts from Sydney University, practising commercial law before transitioning into the automotive industry. Edwina has worked in the automotive industry since 2003 as Managing Director until 2020 and is currently the Chair of the Phil Gilbert Motor Group. Edwina has held numerous Industry Advisory positions including NSW Chair of the Hyundai Dealer Council from 2010 to 2015. She is currently on the board of the peak industry body representing franchised new car dealers in Australia, the Australian Automotive Dealer’s Association. Edwina brings significant OEM knowledge along with executive experience operating dealerships with a digital first marketing approach and has deep operational and commercial acumen. Edwina has chaired the Company’s Risk Committee since it was established in January 2019. Edwina Gilbert Non-Executive Director Kee is an entrepreneur with a Bachelor of Engineering (Hons.), a Graduate Diploma in Computing and an MBA. Kee was awarded a Fellow of Monash University in 2010 and Distinguished Alumni in 2014. He 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 Wong Non-Executive Director Kee 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 is currently a Non- Executive Director of the Australian Energy Market Operator and InvoCare Limited and is the Chair of the Company’s Sustainability Committee. Kee expands the Board’s knowledge of technology and product, and enhances the entrepreneurial spirit of the Board, 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 and Media and Yahoo during his time with PwC. David holds a Bachelor of Commerce from the University of NSW and is currently a Non-Executive Director of oOh!Media Ltd and Life 360 Inc and Chair of WageSplitter Pty Ltd. 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. David Wiadrowski Non-Executive Director Susan has over 25 years’ experience focused on both strategy and operations for brand-led businesses in transformative scale-up or turnaround growth with multi-product, multi-channel portfolios across diverse international markets. More recently Susan was the Chief Growth and Brand Officer for The a2 Milk Company. In that role, she had responsibility for all aspects of customer experience, brand development and innovation; co-led the company’s ASX listing; and had shared responsibility for the global P&L, business growth strategy, and crisis and risk management programs. Susan is currently a Non-Executive Director and member of the remuneration committee for Made Group, Deputy Chair and member of the Audit, Finance and Risk Committee of St Aloysius College and Managing Partner of reThink | Massasso Advisory Group, where she advises a diverse range of brand-led organisations, early stage founders and emerging leaders. Susan holds a Bachelor of Commerce (Accounting and Marketing) from the University of Sydney and is a graduate of the Australian Institute of Company Directors. Susan Massasso Non-Executive Director Nicole is an experienced General Counsel and Company Secretary with 20 years’ experience in the law, primarily working with online businesses. Nicole holds a Bachelor of Laws (Hons) and Bachelor of Arts from Monash University, and a certificate in corporate governance from INSEAD Business School. Before joining carsales, Nicole was in-house legal counsel for Medibank Private Ltd and REA Group Ltd. Prior to this Nicole worked for Minter Ellison, one of Australia’s premier legal firms, with a focus practice area of intellectual property. Nicole Birman Company Secretary carsales Annual Report 2023 55 Our People and Culture Chair’s Message Dear Shareholders, On behalf of the Board, I am pleased to present carsales’ FY23 Remuneration Report. This year the business has delivered strong double-digit revenue and EBITDA growth, whilst continuing the Company’s expansion into international markets with the acquisition of Trader Interactive and increasing our ownership of webmotors. These investments are the result of a very well-executed growth and acquisition strategy, leveraging the Company’s core expertise while showcasing the business’s ability to successfully integrate and realise the benefits of transformative acquisitions. This strong performance has again delivered positive outcomes for shareholders this financial year, including maintaining our attractive dividend policy. Company Performance The Company has again produced strong results in FY23, summarised as follows: • 18% proforma revenue growth, 19% EBITDA growth and 43% Adjusted NPAT growth. • 78.1 cents Adjusted Earnings Per Share (EPS) from continuing operations, reflecting a CAGR of 11.5% from FY21–23. • Ranked in the 73rd percentile for Relative TSR from FY21 to FY23. Executive KMP Changes in FY23 To support the Company’s international expansion and to reflect the importance of the contribution that these businesses make, in March 2023 the Executive Leadership Team restructured to include the CEO’s of each of our international businesses. This change was designed to support the ongoing growth within each business, ensuring a Group focus where competitive advantage through intellectual property and synergies can be achieved. This was a well-timed and executed strategic change and is already seeding the strong performance outcomes that you can see in this Annual Report. As a result of this change, Paul Barlow, Managing Director of carsales Australia, is no longer classified as a KMP, effective 1 March 2023. Paul’s role has primary accountability for the Company’s Australian operations, which by design, has less focus on the broader carsales Group. This is consistent with the approach to the Company’s CEOs in each country. The Board is pleased to see the depth of talent that the Company has in all its international businesses. The evolution of the ELT structure to a global leadership group is reflective of where the business is today, and pleasingly 56 provides additional pipelines for succession planning and career paths within the organisation. Remuneration Outcomes All FY23 remuneration outcomes align with the strategic objectives and performance outcomes of the Company for the fiscal year. The Board’s approach to remuneration ensures alignment between employee and shareholder outcomes. Below is a summary of Fixed Remuneration, STI and LTI outcomes: FY23 Remuneration Changes • Managing Director & Chief Executive Officer Cameron McIntyre’s fixed remuneration increased by 10% in FY23. With Cameron’s last fixed remuneration change being in FY21, this increase was important to continue to align his role with market benchmarks, to reflect the growth in the size and accountability of his role and to reward Cameron’s continued strong performance. • Chief Financial Officer, William Elliott, received an increase of 16.7%, which is to continue to align his role to market benchmarks as well as in recognition of his strong performance. FY23 STI • Financial (70% of the plan) – The Company delivered a strong result for shareholders, exceeding proforma Revenue and EBITDA targets, resulting in a 105% achievement against the 70% weighting allocated to the financial objectives. • Strategic (30% of the plan) – All strategic objectives were achieved against a balanced scorecard, which led to 30% achievement of the 30% weighting allocated to the strategic objectives. • A total outcome of 135% was achieved compared to the FY22 STI outcome of 103%. FY21-23 LTI • Financial (70% of the plan) – The team achieved a ranking in the 73rd percentile for Relative TSR and achieved solid performance for Adjusted EPS, resulting in a 58.9% vesting outcome of the 70% weighting allocated to the financial objectives. As noted on page 8 of the 2020 Notice of Annual General Meeting, due to the exceptional circumstances of COVID-19, the Board vested the FY18–20 LTI financial objectives at the mid-target. To ensure executive KMPs did not gain material advantage from that discretion, the Adjusted EPS outcome implied by mid-target vesting was used as the starting point for the FY21–23 LTI’s base year calculation. carsales Annual Report 2023OUR BOARD AND REMUNERATION REPORT This year has seen significant business growth. This has been achieved by the exceptional talent the Company has throughout all levels of the business, and the strong leadership of our Executive team. • Strategic (30% of the plan) – All strategic objectives were achieved against a balanced scorecard, which led to a 30% achievement of the 30% weighting allocated to the strategic objectives. • A total vested outcome of 88.9% was achieved compared to the FY20-22 outcome of 75.7%. 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. We believe this approach fairly recognises the outcomes and value creation that our Executive KMP’s and leadership team have delivered for the business and shareholders. Non-Executive Director Fees A review of Non-executive Directors fees was also conducted in FY23, taking into consideration the market benchmarking for positions at relevant ASX listed organisations of comparable size and complexity. As part of this review, it was determined that an increase of 2.5% to the Chair fee, base director fees, Chair of Committee fees and Member of Committee fees was required to fairly compensate Non-Executive Directors for their services. Board Structure As part of our Board renewal plan, we were pleased to welcome Susan Massasso to the Board in June 2023. Susan is an experienced Non-Executive Director, advisor and executive with a strong track record in strategy, growth and international market development. Susan will become a member of the Sustainability Committee and the People and Culture Committee. The Board took the opportunity to review Board Committee membership, which has resulted in some changes. Further details can be found in the Corporate Governance statement in this Annual Report. Company Culture This year has seen significant business growth. This has been achieved by the exceptional talent the Company has throughout all levels of the business, and the strong leadership of our Executive team. The Company’s culture continues to evolve with an increasing global view. The Board was delighted to see employee engagement being measured globally and the ELT’s continued focus on creating a strong Company culture. It was pleasing to see that as a result of that focus, 85% of our people see the Company as a great place to work; 83% of our team are proud to work for the business; and 91% of our people believe in the Company’s commitment to diversity. This year we were again proud to be recognised as a Workforce Gender Equality Agency Employer of Choice, a certified Great Place to Work® in Australia, AFR Best Places to Work, an AAGE Top Intern program employer, Top Graduate Employer and we remain an accredited Family Friendly Workplace. This recognition is acknowledgement of the Company’s strong culture and continued ability to attract and retain top talent. Committee Priorities for FY24 The People and Culture Committee will continue to closely monitor the effectiveness of the Executive KMP remuneration framework. Our focus remains on continuing to engage, motivate and retain Executives in a highly competitive talent market, whilst aligning with shareholder interests. As always, we welcome your feedback on our Remuneration Report and look forward to discussions with many of you over the coming year. Yours sincerely Kim Anderson Chair of the People and Culture Committee 57 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYFINANCIAL REPORTRemuneration Report 2023 In this Report 1. Who is Covered in this Report 2. Summary of the Executive KMP Remuneration Framework 3. Remuneration Outcomes and Link to Performance 4. Remuneration Governance 5. Executive KMP Statutory Remuneration Disclosure 6. Executive KMP Service Agreements 7. Executive KMP Equity Disclosures 8. Non-Executive Director Fees 58 59 61 71 72 72 72 76 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. 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 had the authority and responsibility for planning, directing, and controlling the activities of the Company during FY23. 1.1 Key Management Personnel The Company’s KMP in FY23 are listed in the table below: Name Non-Executive Directors Patrick O’Sullivan Walter Pisciotta Kim Anderson Edwina Gilbert Kee Wong David Wiadrowski Susan Massasso Steve Kloss Executive KMP Cameron McIntyre William Elliott Paul Barlow Position Term as KMP Non-Executive Chair Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director (from 14 June 2023) Non-Executive Director (Alternate until 4 November 2022) Full year Full year Full year Full year Full year Full year Part year Part year Managing Director (MD) and Chief Executive Officer (CEO) Chief Financial Officer (CFO) Managing Director – carsales Australia (KMP until 28 February 2023) Full year Full year Part year 58 carsales Annual Report 2023 OUR BOARD AND REMUNERATION REPORT 2. Summary of the Executive KMP Remuneration Framework 2.1 Executive remuneration strategy and link to Company performance When designing remuneration plans and making decisions within our remuneration framework, we are guided by our remuneration principles which support the execution of our business strategy. The strategic measures for our Company’s remuneration plans are taken from areas of focus from our Company strategy. This ensures we align priorities across the wider Company in both remuneration and strategy. Our vision: create #1 digital marketplaces around the world Customer Sustainable Growth People Our Voyager 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 Link to Company strategy Reward the right outcomes 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 Senior Executives to build and maintain a reasonable shareholding. Our focus is on value-add objectives that contribute to achieving our purpose so that we reward what truly impacts business growth. 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. Provides recognition for day to day, operational activities 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. Performance assessed using a Company Performance scorecard against: • Financial measures (70%) – Proforma Revenue1 and Proforma EBITDA1, weighted equally. • Strategic measures (30%) – Pre-determined projects, business and people objectives. Linked to the Company’s key strategic priorities which directly contribute towards the execution of long-term strategy. The 25% of the award that is deferred into equity supports Executives’ alignment with shareholder interests, as well as Executive retention. Long-term Incentive (LTI) Performance assessed against: Granted in 100% performance rights with a three-year vesting period. • Financial measures (70%) comprising Adjusted Earnings Per Share (Adjusted EPS) and Relative Total Shareholder Return (Relative TSR), weighted equally. • Non-financial strategic milestone measures (30%) including international business performance metrics; trust and brand metrics and domestic business milestones. Targeting sustained growth in profitability 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 and shareholders. Non-monetary benefits: Employees are provided with salary continuance insurance cover. It is not allocated on an individual basis. 1. Proforma revenue reflects ordinary revenue in accordance with IFRS, adjusted to reflect 100% ownership of Trader Interactive and 30% ownership of webmotors in both the current and historical comparative periods. Proforma EBITDA reflects Earnings before Interest, Tax, Depreciation and Amortisation on a consistent ownership basis with proforma revenue. It also excludes certain non-operating and non-recurring items as outlined on page 96 of the annual report to best reflect the underlying performance of the business. 59 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYFINANCIAL REPORTRemuneration Report 2023 continued To ensure remuneration is market competitive, the Company will seek advice from external remuneration consultants on an as needs basis to benchmark Executive KMP 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 the competition for talent arises. Increasingly, the Company also considers global competitors for talent to be relevant, but remains focused on Australian listed companies with a global presence for the purpose of benchmarking. In FY23, the Board engaged Ernst & Young (EY) and Mercer Consulting as its independent remuneration advisors. While carsales sought input from EY and Mercer Consulting, no remuneration recommendations, as defined by the Corporations Act 2001, were provided. External advice is used as a guide only and does not serve as a substitute for Directors’ thorough consideration of remuneration outcomes. 2.2 Remuneration Mix (percentage of total remuneration) Within the remuneration framework, a key focus has been on strengthening performance-based remuneration. As such, our remuneration mix (at maximum) includes at least 50% in the form of variable remuneration. The figure below shows the remuneration mix at maximum opportunity for FY23, comprising Fixed Remuneration, STI cash, STI deferred and LTI granted. The actual remuneration mix will vary based on Company and individual performance each year. 2.3 Timeline for Delivery of Remuneration The diagram below provides a summarised timeline of when the FY23 remuneration opportunity is delivered. Fixed Remuneration Base salary/Super (100%) Short-term Incentive Cash (75%) Deferred performance rights (25%) Long-term Incentive Performance rights (100%) Performance Year Year 1 Year 2 Year 3 60 Fixed RemunerationMD & CEOSTI CashSTI DeferredLTI31%32%11%27%CFO48%27%9%16%carsales Annual Report 2023 OUR BOARD AND REMUNERATION REPORT 3. 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. 3.1 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. Remuneration Performance Measures Proforma Revenue1 ($m) Proforma EBITDA1 ($m) Adjusted EPS2 1000 900 800 700 600 500 400 300 200 100 0 CAGR 10% 851 749 647 581 595 FY19 FY20 FY21 FY22 FY23 600 500 400 300 200 100 0 CAGR 12% 100 CAGR 11% 462 402 363 296 311 FY19 FY20 FY21 FY22 FY23 ) s t n e c ( S P E d e t s u d A j 75 50 25 0 78.1 66.5 58.4 53.6 50.6 FY19 FY20 FY21 FY22 FY23 Dividend and payout ratio Share price year end ($) Cumulative TSR (last 5 years) Other Performance Metrics ) s t n e c ( S P D 70 60 50 40 30 20 10 0 61.0 50.0 45.5 47.0 47.0 47.5 47.5 50.0 44.2 45.5 FY19 FY20 FY21 FY22 FY23 100 % o i t a R 90 80 70 60 30 25 20 15 10 5 0 23.8 19.8 18.4 17.5 13.5 80% 60% 40% 20% 0% -20% 73% 26% FY19 FY20 FY21 FY22 FY23 FY19 FY20 FY21 FY22 FY23 Dividend per share Dividend payout ratio (%) Share price carsales ASX200 Total Returns Five-year Incentive Outcomes Executive KMP Remuneration Outcomes STI outcome (average % of maximum) LTI vesting outcome (% of maximum) FY19 31.9% 49.4% FY20 FY21 FY22 FY23 28.0% 100.0% 103.0% 135.0% 76.0% 30.0% 75.7% 88.9% 1. Proforma revenue reflects ordinary revenue in accordance with IFRS, adjusted to reflect 100% ownership of Trader Interactive and 30% ownership of webmotors in both the current and historical comparative periods. Proforma EBITDA reflects Earnings before Interest, Tax, Depreciation and Amortisation on a consistent ownership basis with proforma revenue. It also excludes certain non-operating and non-recurring items as outlined on page 96 of the annual report to best reflect the underlying performance of the business. 2. In accordance with AASB133, historical EPS has been restated based on an adjustment factor to take into account the new shares issued in connection with the Trader Interactive and webmotors acquisitions. 61 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYFINANCIAL REPORT Remuneration Report 2023 continued 3.2 Executive KMP Realised Remuneration Snapshot – FY23 The table below provides actual amounts received by the Executive KMP for FY23. This table is an additional disclosure to those required under the Australian Accounting Standards and the Corporations Act 2001. It has been provided to assist shareholders in understanding realised outcomes. Name Executive Director Cameron McIntyre Other Senior Executives William Elliott Paul Barlow1 Total FY23 Total FY22 Year FY23 FY22 FY23 FY22 FY23 FY22 Fixed remun- eration2 $ 1,650,000 1,500,000 700,000 562,500 533,333 685,000 2,883,333 2,747,500 Other $ Cash STI earned3 $ Vested deferred STI4 $ Vested LTI5 $ Total $ – – – – – – – – 1,676,093 1,280,348 539,594 389,202 1,675,977 1,556,227 5,541,664 4,725,777 393,750 278,223 412,500 385,731 2,482,343 1,944,302 117,266 76,425 108,381 108,467 765,241 574,094 265,559 – 157,371 207,931 2,098,907 1,764,158 1,476,575 917,148 1,211,585 1,387,129 8,229,824 7,030,054 1. Paul Barlow ceased being a KMP from 1 March 2023 due to the business restructure that resulted in Paul being responsible for the Australian business in the same way as the Company CEOs across the globe run their respective businesses. With that change, his role has increased accountability for the Company’s Australian operations, it also means the role has less influence in the planning, directing, and controlling activities across the wider carsales Group and is therefore no longer classified as KMP. FY23 amounts represent the period 1 July 2022 to 28 February 2023 for fixed remuneration, with STI and LTI outcomes disclosed being pro-rated over the same period. 2. Fixed remuneration earned in the financial year (base salary and superannuation). 3. Cash STI earned in relation to performance under the STI plan during the financial year. 4. 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 ends in August 2023. The STI value is calculated as the number of rights that vested multiplied by the 30 June 2023 closing share price (30 June 2022 closing share price for the FY22 financial year). 5. Vested LTI is the value of performance rights that vest in August 2023. Values are calculated as the number of rights received multiplied by the 30 June 2023 closing share price (30 June 2022 closing share price for the FY22 financial year). For example, FY23 is reported as the FY21 LTI grant which vest in August 2023. 3.3 Fixed Remuneration Outcomes Fixed remuneration is generally positioned between the median and the 75th percentile of the relevant market, which allows the flexibility required to attract and retain high calibre Executives. Name Cameron McIntyre William Elliott Paul Barlow1 1. Represents annual fixed remuneration for the FY23 year. $ 1,650,000 700,000 800,000 Actual fixed remuneration paid to members of the Executive KMP is shown in the remuneration tables in section 3.2 of this report. 62 carsales Annual Report 2023OUR BOARD AND REMUNERATION REPORT A benchmarking exercise was undertaken in FY23. Mercer Consulting was engaged to extract market data based on outcomes from an agreed ASX-listed peer group. This peer group consisted of 23 ASX-listed companies that were selected with consideration to organisation size and industry. Market data was presented in accordance with appropriate job size of each role, allowing for a relevant market review to be undertaken. Within the FY23 annual review, effective 1 July 2022, Cameron McIntyre received a fixed remuneration increase of 10%, recognising his continued strong performance, the increase in the size and accountability of his role in line with business growth as well as better aligning him to the market. William Elliott received an increase of 16.7% to continue to better align his fixed remuneration to market in accordance with his continued strong performance in the Company’s CFO role. There were no changes in fixed remuneration for Paul Barlow. 3.4 Short-term Incentive Plan – Key Features and Outcomes The key features of the STI plan for the year ended 30 June 2023 are detailed in the table below. Feature Description Performance period STI Opportunity Approach Eligible Executive KMPs participate in the annual STI plan with an earning opportunity that is ‘at risk’ subject to specific pre-determined Group 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 2022 to 30 June 2023. The STI opportunity varies in accordance with role size, complexity and direct accountability. Market benchmarking references are also taken into consideration. The STI Target opportunity represents expected performance for the Group. The maximum (capped) opportunity represents outstanding levels of performance. Executive KMP capped levels, referenced as a percentage of Fixed Remuneration (FR) are: Role CEO CFO Target STI1 100% 55.6% Maximum STI2 135% 75% Delivery of award Performance measures and weightings The STI award is delivered 75% in cash and 25% in equity (performance rights) that is deferred for 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 Proforma revenue Proforma EBITDA Strategic objectives Weighting 35% 35% 30% Performance threshold and maximum These measures are calculated on a constant currency basis to remove the effect of fluctuations in FX rates when assessing performance outcomes. A minimum performance threshold must be achieved in the performance period prior to any award vesting. The threshold and maximum performance for FY23 have been set as follows: Measure Proforma revenue Proforma EBITDA Threshold 3.0% growth 3.0% growth Maximum 12.0% growth 12.0% growth For FY24 the proforma revenue and EBITDA thresholds have been raised from 3.0% growth to 5.0% growth. 1. The Target STI opportunity is represented as a percentage of fixed remuneration. 2. FY23 maximum STI is capped at 135% of the target opportunity. 63 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYFINANCIAL REPORTRemuneration Report 2023 continued Feature Selection of Performance Measures Approach Financial Measures: Proforma revenue Proforma revenue reflects ordinary revenue in accordance with IFRS, adjusted to reflect 100% ownership of Trader Interactive and 30% ownership of webmotors in both the current and historical comparative periods. Proforma Earnings Before Interest, Tax, Depreciation and, Amortisation (EBITDA) Proforma EBITDA reflects Earnings before Interest, Tax, Depreciation and Amortisation on a consistent ownership basis with Proforma revenue. It also excludes certain non-operating and non-recurring items as outlined on page 96 of the annual report to best reflect the underlying performance of the business. Link of performance and reward Non-financial measures within the plan recognise 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. For each measure, there is a minimum threshold of performance required which needs 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 Partial Achievement allocated 75% and Full Achievement allocated 100%. Strategic objectives are capped at 100%. Maximum 150% (Financial) Maximum 100% (Non-ﬁnancial) Target 100% (Financial) Threshold 75% (Non-ﬁnancial) Threshold 30% (Financial) Minimum 0% Threshold Stretch Financial Non-ﬁnancial Cessation of employment If an Executive KMP ceases employment with the Company prior to any awards being paid, unless the Board determines otherwise, the Executive KMP will forfeit any awards to be paid for the performance period. 64 carsales Annual Report 2023 OUR BOARD AND REMUNERATION REPORT Performance outcomes against STI Measures for FY23 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. The Board’s assessment of the Executive KMP’s performance in the 2023 financial year is outlined below. Measure Weighting Threshold Actual Performance Payout % Commentary Proforma revenue 35% $771m $851m 52.5% • Strong performance achieved, well above threshold. Proforma EBITDA 35% $414m $462m 52.5% • Strong performance achieved, well Strategic Create and implement an enhanced ecosystem for innovation to continue to achieve growth and maintain a culture of innovation. Deliver short-term synergies from recent acquisitions that deliver shareholder value. Engagement and Sentiment 10% Achieved 10% 10% Achieved 10% above threshold. • Successfully delivered a program to structure innovation internally and externally – examples include the creation of an Early Stage Investments program that has already delivered several minor investment opportunities, an internal innovation kickstart platform that has seen innovation ideas enter the funnel each quarter since its inception, the creation of carsales Next which launches adjacent innovations to our core business, and successful delivery of the Group’s first global hackathon. • Synergies were delivered on time and in accordance with acquisition business cases, delivering good growth in revenue, earnings and shareholder value. 10% Achieved 10% • A consistent global view of employee engagement was established across the Group achieving a global engagement rating of 73% which was a strong result compared to global technology benchmarks. Total 100% 135% 65 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYFINANCIAL REPORTRemuneration Report 2023 continued Overall STI Financial Outcomes The following table provides the FY23 STI outcomes awarded to Executive KMP. Under the FY23 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. FY2023 Cameron McIntyre William Elliott Paul Barlow2 Actual STI awarded $ 2,234,790 525,000 550,000 75% Cash $ 1,676,093 393,750 412,500 25% Deferred in Equity $ 558,697 131,250 137,500 Number of performance rights awarded1 23,465 5,512 5,775 STI Target $ 1,655,400 388,889 407,407 STI actual as a % of STI Target % 135% 135% 135% 1. Number of performance rights to be awarded is based on the 20 trading day VWAP up to and including 30 June 23. 2. The actual STI awarded for Paul Barlow represents the full year STI award pro-rated for the period that he was KMP period from 1 July 2022 to 28 February 2023. 2022 Deferred STI Outcome The 2022 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 KMP of their STI based on the 30 June 2023 share price. 2022 Cameron McIntyre William Elliott Paul Barlow DSTI value (Black Scholes) Vested $ 512,184 111,309 154,313 Vested % 100% 100% 100% DSTI value (30 June 2023 share price) Vested % 100% 100% 100% Vested $ 539,594 117,266 162,572 3.5 FY21-23 Long-term Incentive Plan – Key Features Feature Approach Description Opportunity Eligible Executive KMPs 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 Executive KMP’s 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 a percentage of Fixed Remuneration (FR) is: Role CEO CFO Maximum (cap) 94.7% of FY21 Fixed Remuneration 50.0% of FY21 Fixed Remuneration Performance and vesting period Performance is measured over three financial years. Any performance rights that do not vest following testing will lapse. 66 carsales Annual Report 2023OUR BOARD AND REMUNERATION REPORT Feature Approach Delivery Allocation approach Performance measures and weightings In FY21 the Board decided to simplify the FY21-23 LTI plan to have only one equity vehicle, rather than two. As such, one hundred percent (100%) of the opportunity in FY23 will be granted as performance rights (PRs), with vesting subject to financial metrics and strategic objectives being met as well as an ongoing service condition. No dividends are paid during the performance period, until the rights vest. The number of performance rights granted are calculated as follows: $ Fixed Remuneration (FR) x Award face value (% FR) ÷ $ Share price (Performance rights) = Number of PRs (100% 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 and including 30 June 2020. The performance measures and their relative weightings are: Category Financial Strategic Measures Adjusted EPS Relative TSR Growth in international business performance metrics that reflect the strategic importance of this segment to the Group as a whole Trust and brand metrics that represent the importance of reputation to the Group’s success Domestic business milestones that indicate successful implementation of the Group’s strategic roadmap Weighting 35% 35% 10% 10% 10% Performance Threshold and Maximum A minimum performance threshold must be achieved in the performance period prior to any award vesting. The threshold and maximum performance for FY21–23 and other currently operating LTI plans (for further information) have been set as follows: Year FY21–23 FY22–24 FY23–25 Measure Relative TSR Adjusted EPS Relative TSR Adjusted EPS Relative TSR Adjusted EPS Threshold 50th percentile 3.0% CAGR 50th percentile 3.0% CAGR 50th percentile 3.0% CAGR Maximum 75th percentile 10.0% CAGR 75th percentile 10.0% CAGR 75th percentile 10.0% CAGR 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. This discretion was applied by the Board where the acquisition of Trader Interactive was added to the FY21-23 LTI base year EPS to ensure there was no material advantage to Executives as a result of the acquisition. For FY24, the Board intends to increase the Adjusted EPS Threshold from 3.0% to 5.0% growth. 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. 67 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYFINANCIAL REPORTRemuneration Report 2023 continued Feature Approach Performance Level Financial Below Threshold Between Threshold and Maximum: Adjusted EPS Relative TSR Strategic Not achieved Partial achievement Full achievement Financial Measures: Vesting % 0% From 30% to 100% From 50% to 100% 0% 50% 100% Adjusted EPS Adjusted EPS is defined as earnings per share calculated by dividing the Adjusted NPAT 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. Relative TSR TSR calculates the return Shareholders would earn if they held a notional number of Shares over a period of time. It measures the change in the Company’s Share price, together with the value of dividends during the relevant period, assuming that the dividends are re-invested into new Shares. Relative TSR compares the Company’s TSR performance against the TSR of a bespoke peer group of companies. The Board believes that the chosen measures ensure alignment of LTI vesting outcomes to shareholder interests. In determining the financial measures’ targets, the Board considers the earnings performance of the Company, forward looking market consensus 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 long-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. The Board has retained Adjusted EPS as a performance measure to support alignment with Company specific financial outcomes, whilst introducing Relative Total Shareholder Return (RTSR) as a new market based performance measure, to enhance alignment of Executive remuneration outcomes with that of shareholders. The peer group chosen comprises of ASX200 companies in the media and entertainment, retailing and information technology sectors. In addition, there are three international peer companies in the peer group reflecting the Company’s global footprint. A full listing of the peer group was provided in the 2020 Notice of Annual General Meeting documentation on the ASX web page. Vesting Schedule Selection of Performance Measures 68 carsales Annual Report 2023OUR BOARD AND REMUNERATION REPORT Feature Approach Malus and Clawback If the Board, in its reasonable opinion, determines that a plan participant has engaged in any of the following conduct, the Board may declare that all, or some, of the participant’s options or performance rights held under the plan are forfeited: Ceasing Employment Hedging Policy Change of Control (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. Executive KMPs who leave the Company have 30 days from their date of departure to exercise any vested options they may have, unless such departure is under adverse conditions. In exceptional circumstances, and at the Board’s discretion, Executive KMPs may be allowed to retain unvested options (from current or prior year operating LTI plans) and performance rights in a future period when they vest. This would be subject to testing against performance criteria. 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 without prior authorisation from the Company, such options will immediately lapse. While the Board maintains discretion in relation to unvested options and performance rights, 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 2023 financial year. Financial year of grant FY21-23 FY22-24 FY23-25 Performance period 1 July 2020 – 30 June 2023 1 July 2021 – 30 June 2024 1 July 2022 – 30 June 2025 Performance year to determine vesting FY23 FY24 FY25 Vesting dates August 2023 August 2024 August 2025 69 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYFINANCIAL REPORTRemuneration Report 2023 continued FY21-23 Performance outcomes against LTI Measures LTI performance and awarded outcomes The Board’s assessment of performance against the FY21-23 LTI performance measures is outlined below. Measure Financial Relative TSR Weighting Performance outcome Vesting outcome Commentary 35% Achieved 25.6% • This outcome reflects a ranking in the 73rd percentile over 3 years compared to our peer group. Adjusted EPS1 35% Achieved 33.3% • Solid actual performance of 11.5% CAGR Strategic International revenue growth 10% Full Achievement Deliver a compelling reason for more users to log in to mitigate the 3rd party cookie elimination. 10% Full Achievement Deliver the globalisation of our trade capability. 10% Full Achievement in Adjusted EPS. Achievement for the purpose of this plan was adjusted down to 9% due to the increased base year starting point and TI acquisition adjustment. See footnote below for further details. 10% • Strong double digit revenue growth across the international portfolio supported by excellent performance in South Korea and Brazil over the last three years. 10% • Doubled the proportion of logged-in users through simplifying the log-in process and launching member-only products such as additional pricing insights. Delivering our Customer Data Platform (CDP) further mitigates 3rd party cookie risk. 10% • Successfully applied our trade IP in multiple markets, with all our markets now having functional dealer lead and inventory management. Total 100% 88.9% 1. As noted on page 8 of the 2020 Notice of Annual General Meeting, due to the exceptional circumstances of COVID-19, the Board vested the FY18-20 LTI financial objectives at the mid-target. To ensure executive KMPs did not gain material advantage from that discretion, the Adjusted EPS outcome implied by mid-target vesting was used as the starting point for the FY21-23 EPS base year calculation. The acquisition of Trader Interactive was built into the base year EPS to ensure there was no material advantage to executives as a result of the acquisition. 70 carsales Annual Report 2023 OUR BOARD AND REMUNERATION REPORT 4. 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 People and Culture Committee and makes decisions on remuneration strategy and outcomes for Executive KMP and Non-Executive Directors. People and Culture Committee The People and Culture 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 People and Culture 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 People and Culture 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 People and Culture Committee may engage independent remuneration advisors if needed to assist the Board in making remuneration decisions. Other Board committees The Risk Management Committee and Audit Committee may advise the People and Culture Committee on relevant risk and reputation or relevant financial outcome matters that arise. Any advice is used as one of many factors taken into consideration by the Board. Further information on the purpose and duties of the People and Culture Committee is contained in its Charter, which is available from the Company’s investor website: https://shareholder.carsales.com.au/charters. 4.1 Engagement with shareholders and proxy advisors Members of the Board have proactively engaged with several of its largest Shareholders throughout the year. Proxy advisors are invited to meet with representatives of the Board throughout the year 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 FY23, representatives of the Company met with the following proxy advisors: • Ownership Matters; • CGI Glass Lewis; and • ACSI – Australian Council of Superannuation Investors. 71 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYFINANCIAL REPORTRemuneration Report 2023 continued 5. Executive KMP Statutory Remuneration Disclosure 5.1 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 members of the Executive KMP in FY23. Short-term benefits Post Employ- ment Long- term benefits Share-based payments Salary and fees $ Cash STI $ Super- annu- ation Long Service Leave $ Deferred STI $ LTI perfor- mance rights $ LTI options $ Other $ Total $ 1,624,708 1,676,093 1,280,348 1,476,432 25,292 23,568 68,678 23,595 556,164 1,873,951 296,893 416,269 238,376 4,645 – 6,063,262 – 3,521,750 674,708 538,932 514,364 661,432 393,750 278,223 412,500 385,731 2,813,780 2,482,343 1,944,302 2,676,796 25,292 23,568 18,969 23,568 69,553 70,704 30,512 27,300 9,255 50,387 108,445 101,282 244,023 125,660 44,961 85,878 210,978 101,677 120,473 43,566 783,501 2,328,952 385,420 622,620 – 355 18,667 1,036 257,043 6,036 – 1,493,945 999,217 – – 1,286,410 – 1,286,193 – 8,843,617 – 5,807,160 Year Name Executive Director Cameron McIntyre Other Senior Executives William Elliott FY23 FY22 FY23 FY22 FY23 FY22 Paul Barlow Total KMP FY23 Total KMP FY22 Paul Barlow ceased being a KMP from 1 March 2023 due to the business restructure that resulted in Paul being responsible for the Australian business in the same way as the Company CEOs across the globe run their respective businesses. With this change, his role has increased accountability for the Company’s Australian operations, it also means the role has less influence in the planning, directing, and controlling activities across the wider carsales Group and is therefore no longer classified as KMP. FY23 amounts represent the period 1 July 2022 to 28 February 2023 for fixed remuneration, with full year STI and LTI outcomes disclosed being pro-rated over the same period. 6. Executive KMP Service Agreements All Executive KMP have service agreements determining fixed remuneration (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. 7. Executive KMP Equity Disclosures 7.1 STI and LTI payments (cash, options and 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 5.1 are as follows: Name Executive Director Cameron McIntyre Other Senior Executives William Elliott Paul Barlow Cash salary and superannuation 2023 % 2022 % At risk – STI 2023 % 2022 % At risk – DSTI 2023 % 2022 % At risk – LTI 2023 % 2022 % 28 49 42 43 58 57 28 26 32 36 28 30 9 9 8 12 9 9 35 16 18 9 5 4 72 carsales Annual Report 2023OUR BOARD AND REMUNERATION REPORT – – – 4 2 3 , 2 5 5 7 1 , 8 2 2 1 5 , 0 6 3 8 5 , 2 3 3 5 6 , 2 2 2 9 6 , 9 6 7 2 5 , 7 3 – 1 9 2 , 8 4 6 4 , 4 4 7 9 , 9 1 7 3 , 5 3 2 9 , 4 1 3 4 , 7 0 0 8 , 3 1 – – 0 7 3 , 7 8 6 9 , 3 – 7 7 9 , 8 4 3 8 , 4 5 2 8 , 6 1 0 7 , 0 2 6 4 1 , 1 1 8 4 2 , 9 9 – – – ) 6 6 2 0 7 1 , ( % 3 3 ) 3 2 6 9 4 , ( 6 0 8 0 1 5 , % 0 0 1 1 7 8 8 4 1 , 2 2 - g u A 9 1 - g u A 4 5 3 1 . – – – – – – – – – – – – – – – – – – – – – – – – – – – ) 2 0 8 6 0 8 , ( % 0 8 ) 6 3 4 8 5 , ( ) 8 6 7 6 0 2 , – – – – – – ) 4 4 2 7, 3 4 ( % 0 0 1 ) 4 6 1 1 2 , ( – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – ) 8 5 8 5 8 , ( % 0 0 1 ) 6 5 1 4 , ( – – – – – – – – – – – – – – – – ) 1 0 0 0 4 , ( % 7 6 ) 8 5 6 1 1 , ( ) 0 0 0 0 2 , ( ) 2 4 6 3 1 1 , ( % 0 8 ) 1 3 2 8 , ( ) 8 1 1 9 2 , ( – – – – – – – – – – – ) 5 5 8 1 2 1 , – – – – – – – – – – ( % 0 0 1 ) 8 9 8 5 , ( – – – – – – – – – – – – – – – – – – – – – – – – ( % 0 2 ) 6 7 9 4 1 , ( , 0 7 5 3 1 0 1 % 0 0 1 , 2 1 4 3 7 , 2 2 - g u A 9 1 - g u A – – – – – – – – – – – – – – – – – – – – – – 3 2 - g u A 0 2 - g u A 3 2 - g u A 0 2 - g u A 4 4 2 7 3 4 , % 0 0 1 4 6 1 1 2 , 2 2 - g u A 1 2 - g u A – – – – – – – – – – – – – – – – – – – – – 4 2 - g u A 1 2 - g u A 4 2 - g u A 1 2 - g u A 3 2 - g u A 2 2 - g u A 5 2 - g u A 2 2 - g u A 5 2 - g u A 2 2 - g u A 3 2 - g u A 0 2 - g u A 3 2 - g u A 0 2 - g u A 8 5 8 5 8 , % 0 0 1 6 5 1 4 , 2 2 - g u A 1 2 - g u A – – – – – – – – – – – – – – – 4 2 - g u A 1 2 - g u A 4 2 - g u A 1 2 - g u A 3 2 - g u A 2 2 - g u A 5 2 - g u A 2 2 - g u A 5 2 - g u A 2 2 - g u A – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – % 3 3 % 0 2 ) 9 2 8 5 , ( ) 9 0 1 2 , ( 0 6 7 2 4 1 , % 0 0 1 0 4 3 0 1 , 2 2 - g u A 9 1 - g u A – – – – – – 3 2 - g u A 0 2 - g u A 3 2 - g u A 0 2 - g u A 5 5 8 1 2 1 , % 0 0 1 8 9 8 5 , 2 2 - g u A 1 2 - g u A – – – – – – – – – – – – – – – 4 2 - g u A 1 2 - g u A 4 2 - g u A 1 2 - g u A 3 2 - g u A 2 2 - g u A 5 2 - g u A 2 2 - g u A 5 2 - g u A 2 2 - g u A – – – – – – – – – 1 0 0 0 6 , % 0 0 1 7 8 4 7 1 , 2 2 - g u A 9 1 - g u A 4 5 3 1 . 3 4 3 . 1 8 3 1 . 1 4 7 1 . 3 0 3 1 . 6 6 0 2 . 1 3 8 1 . 1 3 4 1 . 1 6 2 2 . 0 4 0 2 . 7 5 3 1 . 1 4 7 1 . 3 0 3 1 . 6 6 0 2 . 1 3 8 1 . 1 3 4 1 . 1 6 2 2 . 0 4 0 2 . 7 5 3 1 . 3 4 3 . 1 8 3 1 . 1 4 7 1 . 3 0 3 1 . 6 6 0 2 . 1 3 8 1 . 1 3 4 1 . 1 6 2 2 . 0 4 0 2 . 7 5 3 1 . 2 1 4 3 7 , 4 2 3 2 5 , 5 7 1 8 2 , 4 6 1 1 2 , 2 1 5 0 6 , 3 8 5 2 3 , 3 5 6 2 2 , 2 9 6 9 6 , 7 2 5 7 3 , 1 9 2 8 , 4 6 4 4 , 6 5 1 4 , 4 7 9 9 , 1 7 3 5 , 3 2 9 4 , 1 3 4 7 , 0 0 8 3 1 , 7 8 4 7 1 , 0 4 3 0 1 , 0 7 3 7 , 8 6 9 3 , 8 9 8 5 , 7 7 9 8 , 4 3 8 4 , 5 2 8 6 , 1 0 7 0 2 , 6 4 1 1 1 , , 1 7 8 8 4 1 s n o i t p O s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i n o r e m a C e r y t n I c M e m a N m a i l l i W t t o i l l E l d o S / d e s i c r e x E d e t i e f r o F / d e s p a L d e t s e V 3 2 0 2 e n u J 0 3 3 2 0 2 e n u J 0 3 e u l a V % r e b m u N e u l a V % r e b m u N e u l a V % r e b m u N e t a D - r e x e n U t a e l b a s i c d e t s e V - r e x E d n a t a e l b a s i c g n i t s e V r i a F y t i u q E e t a D t n a r G e s i c r e x E t a e u l a V r e b m u N e c i r P t n a r G d e t n a r G f o e p y T y t i u q e e r e w , d e t s e v n e h t h c h w i f o s r a e y r o i r p n i r o 3 2 Y F g n i r u d P M K e v i t u c e x E o t d e t n a r g s t h g i r e c n a m r o f r e p d n a s n o i t p o f o g n i t s i l l l u f a s l i l a t e d w o e b e b a t e h T l d e t i e f r o f / d e s p a l d n a d e s i c r e x e , d e t s e v , d e t n a r g y t i u q e – s e r u s o l c s i d n o i t a s n e p m o c d e s a b - e r a h S 2 7 . . 3 2 Y F g n i r u d d e t i e f r o f / d e s p a l r o d e s c r e x e i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s t h g R i s n o i t p O w o l r a B l u a P 73 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYFINANCIAL REPORT Remuneration Report 2023 continued Notes to table on previous page: 1. $0.00 exercise price represents performance rights. 2. Percentage of the available grant that vested in the financial year. 3. Percentage of the available grant that was forfeited due to not meeting the service and performance criteria set. 4. 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. 5. No options and performance rights will vest if the conditions are not satisfied, hence the minimum value of the options and performance rights yet to vest is nil. The value of the options and performance rights yet to vest has been determined as the amount of the grant date fair value of the options and performance rights that is yet to be expensed. Options and performance rights not exercised expire at the earliest of (a) the expiry date applicable to the option or performance rights, (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. Further information on the options and performance rights is set out in Note 26 to the financial statements. 7.3 Shares provided on exercise of options and performance rights Details of ordinary Shares in the Company provided as a result of the exercise of options by each member of the Executive KMP are set out below. Number of ordinary Shares issued on exercise of options and performance rights during the year Value at exercise date* $ Cost to exercise options $ Net benefit Date of exercise of options and performance rights Aug-22 79,600 1,774,279 – 1,774,279 Aug-22 Aug-22 Sep-22 4,156 14,129 11,658 92,632 314,938 253,445 – – (157,849) 92,632 314,938 95,596 Name Executive Director Cameron McIntyre Other Senior Executives William Elliott Paul Barlow Paul Barlow * 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. 7.4 Equity holdings The number 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. Name Executive Director Cameron McIntyre Other Senior Executives William Elliott Paul Barlow Received during the year on the exercise of options/rights Balance 1 July 22 Other changes during the year Balance 30 June 23 333,294 79,600 (20,000) 392,894 7,287 103,811 4,156 25,787 2,694 1,552 14,137 131,150 74 carsales Annual Report 2023OUR BOARD AND REMUNERATION REPORT 7.5 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/rights granted Oct-16 Oct-17 Oct-18 Oct-19 Oct-19 Oct-20 Oct-21 Feb-22 Dec-22 Dec-22 Expiry date Oct-31 Oct-32 Aug-36 Oct-34 Oct-35 n/a n/a n/a n/a n/a Issue price of Shares $ $12.23 $11.41 $14.87 $13.54 $13.54 $0.00 $0.00 $0.00 $0.00 $0.00 Number under options 60,332 25,353 45,066 21,027 99,248 – – – – – 251,026 Number under performance rights – – – – – 159,601 93,095 83,821 52,877 255,477 644,871 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 2023. 7.6 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 2023 on the exercise of options and performance rights 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-22 Aug-22 Sep-22 Oct-22 Dec-22 Feb-23 Mar-23 Jun-23 Issue price of Shares $ $0.00 $11.41 – $14.87 $13.54 $14.87 $14.87 $13.54 $14.87 $13.54 Number of Shares $ 176,655 20,757 45,788 1,974 1,974 8,744 1,974 1,166 75 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYFINANCIAL REPORTRemuneration Report 2023 continued 8. Non-Executive Director Fees Non-Executive Directors receive fees within an aggregate Directors’ fee pool limit, which is periodically proposed for approval by Shareholders. The maximum payable to be shared by all Non-Executive Directors currently stands at $2,000,000 per annum. The current base remuneration pool was approved by Shareholders at the Annual General Meeting held on 29 October 2021. Fees and payments to Non-Executive Directors are determined by the demands that are made on their time, as well as their responsibilities. The annualised fees paid to the Board are below the $2,000,000 pool approved by Shareholders. The following fee table applies: Appointment Chair fee Base Director fee Committee Chair fee Committee Member fee 1 January 2022 fee table $ 370,000 147,000 35,000 15,000 1 January 2023 fee table $ 379,250 150,675 35,875 15,375 Minimum Shareholding Requirements 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. 8.1 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 Non-Executive Directors in FY23. Short-term benefits Post Employ- ment Salary and fees $ Cash STI $ Super- annuation $ Long- term benefits Long Service Leave $ Share based payments LTI perfor- mance rights Deferred STI LTI options Other $ Total $ Name Non-Executive Directors Patrick O’Sullivan Year Kim Anderson Edwina Gilbert Walter Pisciotta FY23 FY22 FY23 FY22 FY23 FY22 FY23 FY22 FY23 FY22 David Wiadrowski FY23 FY22 FY23 FY22 Susan Massaso Kee Wong Total FY23 Total FY22 349,333 346,432 148,439 147,273 194,253 183,584 194,253 192,727 194,253 171,393 194,253 183,584 6,715 – 1,281,499 1,224,993 – – – – – – – – – – – – – – – – 25,292 23,568 15,586 14,727 20,397 18,358 20,397 19,273 20,397 17,139 20,397 18,358 705 – 123,171 111,423 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 374,625 – 370,000 – 164,025 – 162,000 – 214,650 – 201,942 – 214,650 – 212,000 – 214,650 – 188,532 – 214,650 – 201,942 7,420 – – – – 1,404,670 – 1,336,416 Table reflects the Non-Executive Director fee increase effective 1 January 2023. 76 carsales Annual Report 2023OUR BOARD AND REMUNERATION REPORT 8.2 Share holdings The number 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. Name Non-Executive Directors Ordinary shares P O’Sullivan W Pisciotta K Anderson E Gilbert K Wong D Wiadrowski S Massasso 8.3 Other transactions Balance 1 July 22 Other changes during the year Balance 30 June 23 26,597 8,278,919 18,229 32,060 14,626 10,102 – 8,749 625,064 5,996 11,592 4,811 3,485 – 35,346 8,903,983 24,225 43,652 19,437 13,587 – Conflicts and transactions with KMP are handled in accordance with the Board Charter available at http://shareholder.carsales.com.au/Investor-Centre/. (i) Directors of carsales.com Ltd W Pisciotta is a shareholder of Pentana Solutions Pty Ltd, which has a commercial relationship with the Company. Mr Pisciotta was absent from all Board discussions related to any commercial arrangement with Pentana Solutions. The total amount paid by carsales to Pentana Solutions Pty Ltd in FY23 was approximately $1,844,613. The total amount paid to carsales by Pentana Solutions Pty Ltd in FY23 was approximately $78,023. 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 Director in FY23 was approximately $1,444,736. E Gilbert did not receive any additional benefits to her dealerships from her participation on the Company Board. 77 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYFINANCIAL REPORTOther 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 Susan Massasso Non-Executive Director (from 14 June 2023) Steve Kloss Alternate Non-Executive Director (until 4 November 2022) 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 Pat O’Sullivan Cameron McIntyre Wal Piscotta Kim Anderson Edwina Gilbert Kee Wong David Wiadrowski Susan Massasso Steve Kloss (alternate director) A = Number of meetings held during the time the director held office during the year. B = Number of meetings attended. Full scheduled meetings of directors Short teleconference meetings of directors A 13 13 13 13 13 13 13 1 5 B 13 13 11 13 13 13 13 1 3 A 1 1 1 1 1 1 1 - - B 1 1 - 1 1 1 1 - - Director name David Wiadrowski (Chair) Kim Anderson Edwina Gilbert Number of Audit Committee meetings during tenure 5 5 5 Number of Audit Committee meetings attended 5 5 5 Number of Risk Management Committee meetings during tenure 3 3 3 Number of Risk Management Committee meetings attended 3 3 3 Number of People and Culture Committee meetings during tenure 4 4 4 4 Number of People and Culture Committee meetings attended 4 4 4 2 Director name Edwina Gilbert (Chair) David Wiadrowski Kee Wong Director name Kim Anderson (Chair) Edwina Gilbert Kee Wong Wal Pisciotta 78 carsales Annual Report 2023 OUR BOARD AND REMUNERATION REPORT Director name Kee Wong (Chair) Kim Anderson David Wiadrowski Sustainability Committee meetings during tenure 3 3 3 Number of Sustainability Committee meetings attended 3 3 3 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 2022 of 24.5 cents (2021: 22.5 cents) per fully paid ordinary share paid on 17 October 2022 (2021: 18 October 2021). Interim fully franked dividend for the year ended 30 June 2023 of 28.5 cents (2022: 25.5 cents) per fully paid share paid on 18 April 2023 (2022: 19 April 2022) 2023 $’000 86,019 2022 $’000 63,527 100,132 72,068 186,151 135,595 At the end of the financial year the Directors have recommended the payment of a 50% franked final ordinary dividend of $122,508,000 (32.5 cents per share) to be paid on 16 October 2023 out of retained earnings at 30 June 2023. 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 28. Matters subsequent to the end of the financial year No matters or circumstances have occurred subsequent to period end that have 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. 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. 79 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYFINANCIAL REPORTOther Directors’ Report Disclosures continued 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: Other assurance services Due diligence services Other assurance services Total remuneration for other assurance services Taxation services Tax compliance services, including review of Company income tax returns Total remuneration for taxation services Total remuneration for non-audit services 2023 $ 2022 $ 607,500 – 607,500 250,700 126,498 377,198 153,000 153,000 149,004 149,004 760,500 526,202 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 81. Rounding of amounts The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to the ‘rounding off’ of amounts in the Director’s Report. Amounts in the Director’s Report have been rounded off in accordance with that Class Order to the nearest thousand dollars or, in certain cases, to the nearest dollar. Auditor PwC continues in office in accordance with section 327 of the Corporations Act 2001. Corporate governance report As allowed under the ASX Corporate Governance Principles and Recommendations (Fourth Edition) the Company has included its report on compliance with the principles in the year to 30 June 2023 in the Corporate Governance section of the Investor Centre on the carsales website. The full report can be found at the following URL: https://shareholder. carsales.com.au/governance/. This report is made in accordance with a resolution of Directors. Pat O’Sullivan Chair Melbourne 13 August 2023 80 Cameron McIntyre Managing Director and CEO carsales Annual Report 2023 Auditor’s Independence Declaration OUR BOARD AND REMUNERATION REPORT Auditor’s Independence Declaration As lead auditor for the audit of carsales.com Limited for the year ended 30 June 2023, 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. Sam Lobley Partner PricewaterhouseCoopers Melbourne 13 August 2023 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. 81 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYFINANCIAL REPORT Financial Statement Contents Consolidated Financial Statements Other Assets And Liabilities Consolidated statement of comprehensive income 83 14. 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 preparation Key estimates and judgements Corporate information Key Performance 1. Segment information 2. Revenue from contracts with customers 3. Other income and expenses 4. Earnings per share 5. Income tax 84 85 87 88 88 88 89 92 94 95 97 6. Reconciliation of cash flows 103 15. Property, plant and equipment 16. Leases 17. Intangible assets 18. Payables and provisions Group Structure 19. Interests in other entities 20. Business combination 21. Parent entity financial information 22. Deed of cross guarantee 23. Related party transactions Items Not Recognised 24. Events occurring after the reporting period 148 Other 25. Remuneration of auditors 26. Share-based payments Financing and Risk Management 27. Other significant accounting policies 7. Borrowings 8. Cash and cash equivalents 9. Financial assets and liabilities and fair value management 10. Financial risk management Equity 11. Contributed equity 12. Reserves 13. Dividends 105 106 107 110 115 116 119 Directors’ Declaration Independent Auditor’s Report to the Members of carsales.com Ltd Shareholder Information Corporate Directory 82 carsales Annual Report 2023 120 121 123 126 130 131 139 144 145 147 149 150 152 154 155 160 162 Consolidated Statement of Comprehensive Income For the Year Ended 30 June 2023 Notes 2023 $’000 2022 $’000 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 Impairment loss and business closure expenses Net gain on step acquisition of associates Share of net profit from associates accounted for using the equity method Profit before income tax Income tax expense Profit for the year Other comprehensive income Items that may be reclassified to profit or loss: Exchange differences on translation of foreign operations Reclassification of exchange differences on step acquisition of associates Remeasurement of post-employment benefit obligations Movement in net investment hedge (net of tax) Movement in cash flow hedge (net of tax) 2 3 17,18,19(c) 20 19(c) 5(a) 20 9 781,236 781,236 (60,538) (127,552) (62,793) (129,990) 400,363 (107,018) 8,103 (55,947) – (37,642) 486,528 5,307 699,694 (51,377) 648,317 15,770 (83,110) 239 (10,433) 1,820 509,077 509,077 (50,026) (87,794) (34,849) (67,459) 268,949 (46,691) 477 (16,730) 289 – – 17,176 223,470 (62,016) 161,454 30,105 – (919) – (14,004) Items that will not be reclassified to profit or loss: Changes in financial assets at fair value (net of tax) 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 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 (6,257) (81,971) 12,372 27,554 566,346 189,008 645,617 2,700 648,317 562,501 3,845 566,346 160,816 638 161,454 188,370 638 189,008 Notes 2023 Cents Restated 2022** Cents 4 4 181.3 181.1 54.9 54.8 * ** EBITDA noted above is profit before interest income, interest expense, income taxes, depreciation, amortisation, impairment loss and business closure expenses, net gain on step acquisition of associates and share of net profit from associates accounted for using the equity method. Earnings per share for the year ended 30 June 2022 has been restated, in accordance with AASB 133, for the effects of the capital raises executed during the current financial year to fund the purchase of the remaining 51% in Trader Interactive and the additional 40% stake in webmotors. Refer to Note 4 for details. The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. 83 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORTConsolidated Statement of Financial Position As at 30 June 2023 ASSETS Current assets Cash and cash equivalents Trade and other receivables Derivative assets Inventory 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 Other financial liabilities Provisions Contract liabilities – deferred revenue Total current liabilities Non-current liabilities Other payables Lease liabilities Borrowings Other financial liabilities Deferred tax liabilities Provisions Total non-current liabilities Total liabilities Net assets EQUITY Contributed equity Reserves Retained earnings Non-controlling interests Total equity Notes 2023 $’000 2022 $’000 8 14 9 19(c) 9,19(d) 15 16 5 17 14 18 16 7 9 18 16 7 9 5 18 198,709 136,629 – 2,475 337,813 – 25,354 21,313 58,583 39,330 4,180,985 21,280 4,346,845 4,684,658 91,313 11,173 26,098 12,683 1,136 27,576 14,814 184,793 108 59,299 1,145,999 8,991 155,136 5,703 1,375,236 1,560,029 3,124,629 117,452 74,741 5,526 3,222 200,941 917,648 36,896 14,654 56,475 17,215 603,320 13,968 1,660,176 1,861,117 48,758 8,061 113 36,717 – 10,996 11,022 115,667 1,241 56,370 649,626 1,153 18,994 4,657 732,041 847,708 1,013,409 11 12 19(b) 2,451,802 (83,530) 700,736 55,621 3,124,629 769,959 (1,865) 243,466 1,849 1,013,409 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. 84 carsales Annual Report 2023Consolidated Statement of Changes in Equity For the Year Ended 30 June 2023 Attributable to owners of carsales.com Ltd Notes Contributed equity $’000 769,959 – Reserves $’000 (1,865) – Retained earnings $’000 243,466 645,617 Non- Total controlling equity interests $’000 $’000 1,849 1,013,409 648,317 2,700 Balance at 1 July 2022 Profit for the year Items that may be reclassified to profit or loss Exchange differences on translation of foreign operations Reclassification of exchange differences on step acquisition of associates Remeasurement of post-employment benefit obligations Movement in net investment hedge (net of tax) Movement in cash flow hedge (net of tax) Items that will not be reclassified to profit or loss Changes in financial assets at fair value (net of tax) through other comprehensive income Total comprehensive income for the year Transfer of loss on disposal of equity investment at fair value through other comprehensive income to retained earnings Transactions with owners in their capacity as owners: Contributions of equity upon exercise of employee share options Contributions of equity net of transaction costs and tax Increase in share-based payment reserve inclusive of tax Dividends paid to company shareholders net of transaction costs Dividends paid to non-controlling interests Non-controlling interest on acquisition of subsidiary Transactions with non-controlling interests Balance at 30 June 2023 20 9 11 11 12 – – – – – – – – 14,625 – 1,145 15,770 (83,110) 239 (10,433) 1,820 – – – – – – – – (83,110) 239 (10,433) 1,820 (6,257) (83,116) – 645,617 – 3,845 (6,257) 566,346 2,196 (2,196) – – – 1,295 – 1,669,587 – 4,874 1,295 1,669,587 – – – 4,874 – – – 10,961 – – – (186,151) – – (568) (175,190) (568) – – 2,451,802 – (5,619) (83,530) – – 700,736 46,690 46,690 3,805 (1,814) 55,621 3,124,629 85 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORTConsolidated Statement of Changes in Equity cont. For the Year Ended 30 June 2023 Balance at 1 July 2021 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 Movement in cash flow hedge (net of tax) Items that will not be reclassified to profit or loss Changes in financial assets at fair value (net of tax) through other comprehensive income Total comprehensive income for the year Transfer of gain on disposal of equity investment at fair value through other comprehensive income to retained earnings Transactions with owners in their capacity as owners: Contributions of equity upon exercise of employee share options Contributions of equity net of transaction costs and tax 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 2022 Attributable to owners of carsales.com Ltd Notes Contributed equity $’000 755,357 – Reserves $’000 (21,440) – Retained earnings $’000 204,819 160,816 Non- controlling interests $’000 1,765 638 Total equity $’000 940,501 161,454 9 11 11 12 – – – – – – 6,120 (1,436) – 9,918 – – 769,959 30,105 (919) (14,004) – – – – – – 30,105 (919) (14,004) 12,372 27,554 – 160,816 – 638 12,372 189,008 (13,426) 13,426 – – – – – – – – 6,120 (1,436) 5,690 – – (243) (1,865) – (135,595) – – 243,466 – – (549) (5) 1,849 5,690 (125,677) (549) (248) 1,013,409 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 86 carsales Annual Report 2023Consolidated Statement of Cash Flows For the Year Ended 30 June 2023 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 non-controlling interests, associates and subsidiaries (net of cash acquired and loans to associate) Proceeds from/(investment in) term deposits with maturity greater than 90 days Proceeds from financial instruments held for investing activities Proceeds from sale of financial assets at fair value through other comprehensive income Payments for property, plant and equipment Payments for intangible assets Interest received Proceeds from sale of property, plant and equipment Dividends received from associates Net cash outflow from investing activities Cash flows from financing activities Proceeds from issues of shares and other equity securities (net of transaction costs) Proceeds from borrowings Repayment of borrowings Payment of loan establishment fees Principal elements of lease payments Deposits paid for leases Payment of Trader Interactive external debt on acquisition Dividends paid to company shareholders Dividends paid to non-controlling interests Interest paid Net cash inflow from financing activities Effects of exchange rates on cash and cash equivalents Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of the financial year The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. Notes 2023 $’000 2022 $’000 827,551 (432,348) (95,941) 299,262 549,461 (282,938) (62,880) 203,643 6(a) (1,584,586) (849,036) 19(c) 20(a)(vii) 19(b) 14,252 85,191 4,634 (8,942) (78,064) 8,279 329 5,334 (1,553,573) 1,686,587 2,814,182 (2,325,447) (5,475) (10,137) (2,250) (597,256) (186,151) (568) (58,492) 1,314,993 20,575 81,257 117,452 198,709 (14,593) 54,472 25,385 (7,882) (40,391) 477 511 – (831,057) 4,930 716,403 (112,141) (699) (7,836) (2,166) – (125,677) (549) (10,175) 462,090 (1,228) (166,552) 284,004 117,452 87 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORTNotes to the Consolidated Financial Statements 30 June 2023 Basis of preparation carsales.com Ltd is a for-profit entity for the purpose of preparing the financial statements. The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of carsales.com Ltd (‘Company’ or ‘parent entity’) as at 30 June 2023 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’. 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. 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 estimation uncertainty is predominantly related to the fair value on acquisition of the additional equity interests in webmotors and Trader Interactive (Note 20), fair value measurement and recoverable amount assessments for intangible assets (Note 17), financial assets and liabilities at fair value through other comprehensive income (Note 9), as well as deferred tax assets relating to tax losses and uncertain tax positions (Note 5). Other areas with a level of estimation include trade receivables (Note 14) and research and development (R&D) claims (Note 5). 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 13 August 2023. 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: shareholder.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. 88 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 2023KEY PERFORMANCE This section provides information 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. Effective for the year ended 30 June 2023, the Group has disaggregated the Americas segment into two separate segments called “North America” which comprises of Trader Interactive and “Latin America” which comprises of webmotors, Chileautos and Soloautos. The rationale behind changing the operating and reporting segments is to better align with the operating group structure and the manner in which financial information is reported to the chief operating decision maker internally. The prior year comparatives have also been restated to reflect this. The Group principally operates in six business segments which are described below: Operating segment Australia – Online Advertising Services Australia – Data, Research and Services Nature of operations and primary source of revenue Online Automotive Classifieds, Display Advertising services and Finance Commission. Automotive Data Services including software, analysis, research and reporting, valuation services, website development, hosting and photography services. Geographical location Australia Australia Australia – carsales investments North America Latin America Asia This segment also includes display and consumer advertising related to these divisions. Online Tyre Retail and Wholesale and Inspection Services. Australia Online Automotive Classifieds, Display Advertising services and Automotive Data Services. Online Automotive Classifieds, Display Advertising services, Automotive Data Services and Finance Commission. Online Automotive Classifieds, Display Advertising services and Automotive Data Services. United States of America, Canada Brazil, Chile and Mexico South Korea, Malaysia, Thailand, China and Indonesia 89 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORT 1. Segment information continued Segment analysis Australia – Online Advertising Services $’000 353,428 214,133 Australia – Data, Research and Services $’000 45,641 29,629 Australia – carsales investments $’000 60,894 (6,825) North America $’000 183,016 100,809 Latin America $’000 34,377 10,111 Asia $’000 103,880 52,506 Total $’000 781,236 400,363 (107,018) (37,642) (47,844) (100) – – (721) 6,128 – 5,307 228,662 17,132 10,621 2,816,935 778,716 486,528 (51,377) (2,700) 645,617 464,844 4,316,910 39,330 198,709 129,709 4,684,658 2023 Segment revenue EBITDA* Depreciation and amortisation expense Impairment loss and business closure expenses** Net finance costs Share of net profit/(loss) from associates accounted for using the equity method Net gain on step acquisition of associates Income tax expense Non-controlling interests Profit for the year attributable to owners of carsales.com Ltd Segment assets Deferred tax assets Cash and cash equivalents Unallocated assets Total assets * ** EBITDA noted above is profit before interest income, interest expense, income taxes, depreciation, amortisation, impairment loss and business closure expenses, net gain on step acquisition of associates and share of net profit from associates accounted for using the equity method. Relates to the impairment of goodwill and intangible assets allocated to the Tyres CGU (refer to Note 17(a)), the write down of the intangible assets attributed to the Placie business which ceased operations during the period, provision for costs associated with the closure of the Mexico business as well as the write down of the investment in Skedgo which was classified as an associate. Refer to Note 17 and 19(c). The contributions of Placie and related businesses up to the date of closure and the comparative period are not considered material to the Group’s consolidated results and therefore are not reclassified to discontinued operations. As the applicable assets of Placie and related businesses were written-off or sold during the year they are no longer included in the Statement of Financial Position. Remaining liabilities relating to Placie and related businesses are not material to the Group as at 30 June 2023. 90 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 2023 RESTATED** 2022 Segment revenue EBITDA* Depreciation and amortisation expense Net finance costs Changes in fair value of put options Share of net profit/(loss) from associates accounted for using the equity method Income tax expense Non-controlling interests Profit for the year attributable to owners of carsales.com Ltd Segment assets Deferred tax assets Cash and cash equivalents Unallocated assets Total assets Australia – Online Advertising Services $’000 307,208 194,888 Australia – Data, Research and Services $’000 44,068 28,792 Australia – carsales investments $’000 56,489 (1,877) North America $’000 – – Latin America $’000 5,957 (1,640) Asia $’000 95,355 48,786 Total $’000 509,077 268,949 (14) – – 12,100 5,090 – (46,691) (16,253) 289 17,176 (62,016) (638) 204,495 17,013 30,852 857,099 82,952 160,816 446,973 1,639,384 17,215 117,452 87,066 1,861,117 * EBITDA noted above is profit before interest income, interest expense, income taxes, depreciation, amortisation, impairment loss and business closure expenses, net gain on step acquisition of associates and share of net profit from associates accounted for using the equity method. ** Balances for the year ended 30 June 2022 have been restated with the change to operating segments. Segment assets are measured in the same way as in the financial statements. Segment assets include goodwill, trade and other 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. Liabilities are not reported to the chief operating decision maker by segment. All liabilities are assessed at a consolidated entity level. 91 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORT2. Revenue from contracts with customers Accounting policy The Group derives revenue from the transfer of goods and services over time and at a point in time in the following product and reporting segment. 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, a contract liability is recognised. Type of revenue Dealer leads Reporting segment Online Advertising/Latin America/Asia Dealer listings Online Advertising/North America/Latin America/Asia Listing depth products Online Advertising/North America/Latin America/Asia Private listing Online Advertising /North America/Latin America/Asia Instant offer Online Advertising Bundled products Online Advertising/North America/Latin America/Asia Sponsorship advertising Online Advertising/North America/Latin America/Asia Performance advertising and contracts Subscription services Sale of goods Online Advertising /North America/Latin America/Asia Online Advertising/Data, Research and Services/North America/Latin America/Asia carsales investments Inspection services carsales investments/Asia Finance commission Online Advertising/Latin America Recognition criteria Lead revenues are recognised at a point in time upon delivery of the lead to the dealers’ lead management system. Dealer listings usually have a definite end date to the advertisement and where they do not, an average duration is calculated. 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). Revenue is recognised at a point in time upon satisfaction of the performance obligation, that being the acceptance of the instant offer by the seller and thus the facilitation of the successful sale by the seller to an official buyer. 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. Revenues from performance advertising and performance contracts are recognised when the performance measure occurs and is generated (e.g. cost per click). Subscription revenues are recognised over the subscription period. Revenues are recognised at a point in time when goods have been provided to a customer. Revenue from vehicle inspection services are recognised when the inspection service is performed. Commission revenue is recognised at a point in time when a customer finances the purchase of a vehicle with a 3rd party through the carsales network. Contracts with customers do not include a significant financing component. As a practical expedient, the Group recognises any incremental costs of obtaining a contract, which mainly consist of sales commissions, as an expense when incurred given the amortisation period of the asset that would have been recognised is one year or less. 92 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 2023Disaggregation 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: Australia – Online Advertising Services $’000 Australia – Data, Research and Services $’000 Australia – carsales investments $’000 North America $’000 Latin America $’000 Asia $’000 Total $’000 353,428 45,641 60,894 183,016 34,377 103,880 781,236 188,032 165,396 9,452 36,189 60,894 – 18,986 164,030 18,028 16,349 47,050 56,830 342,442 438,794 Australia – Online Advertising Services $’000 Australia – Data, Research and Services $’000 Australia – carsales investments $’000 North America $’000 Latin America $’000 Asia $’000 Total $’000 307,208 44,068 56,489 170,664 136,544 7,807 36,261 56,489 – – – – 5,957 95,355 509,077 345 5,612 35,599 59,756 270,904 238,173 2023 Total revenue from external customers Revenue is recognised At a point in time Over time RESTATED* 2022 Total revenue from external customers Revenue is recognised At a point in time Over time * The allocation of revenues for the year ended 30 June 2022 between the Group’s operating segments have been restated to align with the new operating segments. 93 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORT3. Other income and expenses Accounting Policy (i) Defined benefit obligations 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, past service costs and actuarial gains and losses not yet realised, 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, net interest and the return on plan assets, are recognised immediately in the statement of financial position. Actuarial gains and losses result in a corresponding debit or credit to reserves through OCI in the period in which they occur. Net interest and the return on plan assets are recognised in the Consolidated Statement of Comprehensive Income. (ii) Finance costs 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. 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. Total profit before income tax includes the following specific expenses: Employee benefits Defined contribution superannuation expense Defined benefit expense – ENCARSALES.COM, Ltd. Interest – borrowings Interest – leases Other finance costs Hedging costs Amounts reclassified to income statement from Cash Flow Hedge Reserve Total finance costs 2023 $’000 162,609 15,610 2,101 49,312 2,066 1,897 (3,016) 5,688 55,947 2022 $’000 96,174 12,081 1,562 9,378 1,563 2,129 (2,028) 5,688 16,730 94 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 20234. Earnings per share Accounting Policy Basic earnings per share is calculated by dividing: • the profit attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares; • by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account: • the post 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 26. (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 Dilutive impact of renounceable entitlement offer Total weighted average number of ordinary shares used in EPS calculation Reported earnings per share/cents Basic earnings per share Diluted earnings per share 2023 Restated 2022 2023 Restated 2022 645,617,000 356,175,047 – – – 160,816,000 282,482,797 – – 10,304,524 645,617,000 356,175,047 108,630 241,679 – 160,816,000 282,482,797 85,592 336,695 10,304,524 356,175,047 181.3 292,787,321 54.9 356,525,356 181.1 293,209,608 54.8 95 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORT4. Earnings per share continued (b) Adjusted earnings per share* Basic earnings per share Diluted earnings per share 2023 2022 Restated 2023 Restated 2022 Reported profit attributable to equity holders of the Company Add: Dealer Support Package (net of tax) Add: M&A and Restructuring costs (net of tax) Less: Financing Cost, Hedge and FX (net of tax) Add: Acquired intangible amortisation (net of tax) Less: Net gain on step acquisition of associates Add: Impairment of investments and business closure costs Add: Trader Interactive non-recurring costs Adjusted profit attributable to equity holders of the Company for continuing operations Adjusted earnings per share/cents for continuing operations* 645,617,000 – 20,576,000 (291,000) 48,952,000 (486,528,000) 37,642,000 12,256,000 160,816,000 321,000 1,416,000 2,882,000 22,962,000 – – 6,431,000 645,617,000 – 20,576,000 (291,000) 48,952,000 (486,528,000) 37,642,000 12,256,000 160,816,000 321,000 1,416,000 2,882,000 22,962,000 – – 6,431,000 278,224,000 194,828,000 278,224,000 194,828,000 78.1 66.5 78.0 66.4 * The Directors believe the presentation of “adjusted earnings per share” provides a useful 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. The tax benefit associated with the other deductible amortisation (included in Note 5(b)) arising from the Trader acquisition is included within adjusted profit. Earnings per share for the year ended 30 June 2022 has been restated, in accordance with AASB 133, for the effects of the capital raises executed during the current financial year to fund the purchase of the remaining 51% in Trader Interactive and the additional 40% stake in webmotors. 96 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 2023 5. Income tax Accounting Policy The income tax expense or benefit 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. On 8 October 2021, 136 countries reached an agreement for a two-pillar approach to international tax reform (“the OECD agreement”). Among other things, Pillar One proposes a reallocation of a proportion of tax to market jurisdictions, while Pillar Two seeks to apply a global minimum effective tax rate of 15%. The tax reform is not applicable for the Group, as carsales does not meet the relevant threshold. Adoption of Voluntary Tax Transparency Code On 3 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. 97 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORT5. 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. 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 expenses included in income tax expense comprises: Increase in deferred tax assets Decrease in deferred tax liabilities 2023 $’000 62,565 (2,019) (8,776) (393) 51,377 (765) (8,011) (8,776) 2022 $’000 65,120 (684) (2,517) 97 62,016 (678) (1,839) (2,517) 98 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 2023(b) Numerical reconciliation of income tax expense Profit from continuing operations before income tax expense Tax at the Australian tax rate of 30.0% (2022 – 30.0%) Tax effect of amounts which are not deductible/(taxable) in calculating taxable income: Non-assessable income (R&D tax offset) (a) Share options (b) Sundry items Non-deductible amortisation Adjustment for prior periods Current year losses for which no deferred tax has been recognised or tax losses written off (c) Tax relating to net profit from associates (d) Income tax differential (effect of foreign tax rates) (e) Net gain on step acquisition of associates (non-assessable) (f) Non-deductible impairment (g) Other deductible amortisation Income tax expense 2023 $’000 699,694 209,908 (475) (1,557) (968) 789 (2,412) 5,917 (1,592) (27,130) (126,102) 7,548 (12,549) 51,377 2022 $’000 223,470 67,041 (395) (1,523) 3,084 1,098 (587) 1,591 (5,153) (3,140) – – – 62,016 (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 equity 2023 $’000 (681) 3,330 2,649 2022 $’000 (31) 9,913 9,882 Explanation of key tax items: (a) The Group’s utilisation of research and development tax incentives. (b) Amount relating to the provision of equity incentives. (c) 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. (d) The Group’s share of associates’ results taken up in Group results, net of tax expense. (e) The Group’s profits are taxed at prevailing statutory rates which vary to the Australian statutory tax rate (as noted in the table below). (f) Non-assessable gain on step acquisition of webmotors and Trader Interactive. (g) Relates to impairment of Tyres business and Placie business as well as business closure costs expected for Mexico. 99 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORT5. Income Tax continued Statutory tax rates: Country Australia New Zealand Malaysia China Thailand South Korea USA Brazil Chile Mexico (d) Effective tax rate Profit before income tax expense (A) Income tax expense (B) Effective tax rate (B/A) 2023 30% 28% 24% 25% 20% 21% 21% 34% 27% 30% 2022 30% 28% 24% 25% 20% 22% 21% 34% 27% 30% 2023 $’000 699,694 51,377 7% 2022 $’000 223,470 62,016 28% The effective tax rate of the Group for 2023 was affected by non-taxable gains on step acquisition of associates, without which the effective tax rate for the year would have been 25%. The effective tax rate of the Group for 2022 was affected by tax relating to net profit from associates, without which the effective tax rate for the year would have been 30%. Tax losses Unused tax losses for which no deferred tax asset has been recognised Potential tax benefit 2023 $’000 14,339 4,241 2022 $’000 29,287 9,203 The unrecognised tax losses were incurred by loss making subsidiaries that are not likely to generate taxable income in the foreseeable future. They will be carried forward for at least five years. 100 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 2023(e) Deferred tax assets The balance comprises temporary differences attributable to: Employee benefits $’000 3,466 Employee Share Trust $’000 2,155 Doubtful debts $’000 295 Expense accruals $’000 2,751 Intan- gibles $’000 (2,539) Tax losses $’000 2,163 Other $’000 8,924 Total $’000 17,215 (1,157) 742 921 1,669 (2,326) (104) 1,020 765 – – (11) – – – – – – – – (506) (517) 21,787 – 21,787 12 2,321 – 2,886 – 1,216 – 4,420 – (4,865) 68 23,914 – 9,438 80 39,330 3,328 2,109 658 4,511 (3,079) 2,219 8,095 17,841 219 965 (363) (1,760) 540 – – – – 1,077 678 (246) (1,165) – (919) (81) 3,466 – 2,155 – – 295 – 2,751 – (2,539) (56) 2,163 (2) 8,924 (139) 17,215 At 1 July 2022 (Charged)/credited to profit or loss Credited/(charged) directly to equity Acquired tax losses Exchange differences At 30 June 2023 At 1 July 2021 (Charged)/credited to profit or loss Credited/(charged) directly to equity Exchange differences At 30 June 2022 Deferred tax assets expected to be recovered within 12 months Deferred tax assets expected to be recovered after more than 12 months 2023 $’000 13,456 25,874 39,330 2022 $’000 10,375 6,840 17,215 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. 101 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORTIntangibles $’000 12,734 (8,011) – 146,521 444 151,688 Fair Value Investment $’000 4,602 – (1,154) – – 3,448 Derivatives $’000 1,658 – (1,658) – – – 16,766 (1,839) – (1,366) (827) 12,734 4,911 – (309) – – 4,602 10,098 – (8,440) – – 1,658 2023 $’000 8,011 147,125 155,136 Total $’000 18,994 (8,011) (2,812) 146,521 444 155,136 31,775 (1,839) (8,749) (1,366) (827) 18,994 2022 $’000 3,498 15,496 18,994 5. Income Tax continued (f) Deferred tax liabilities The balance comprises temporary differences attributable to: At 1 July 2022 Charged/(credited) to the profit or loss Charged/(credited) directly to equity Acquired intangibles Exchange differences At 30 June 2023 At 1 July 2021 Charged/(credited) to the profit or loss Charged directly to equity Acquired intangibles Exchange differences At 30 June 2022 Deferred tax liabilities expected to be settled within 12 months Deferred tax liabilities expected to be settled after more than 12 months 102 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 20236. Reconciliation of cash flows (a) Reconciliation of profit after income tax to net cash inflow from operating activities Profit for the year Depreciation and amortisation Impairment loss and business closure expenses Non-cash employee benefits expense – share-based payments Gain on disposal of assets Net finance related costs Share of net profit from associates accounted for using the equity method Bad debts written-off Changes in fair value of put options Building refurbishment incentive income Net gain on step acquisition of associates Other Change in operating assets and liabilities: (Increase) in trade debtors Decrease/(Increase) in inventory Decrease in deferred tax assets (Decrease)/Increase in trade creditors and other liabilities Increase in contract liabilities – deferred revenue (Decrease)/Increase in provision for income taxes payable (Decrease) in deferred tax liabilities Increase in other provisions Net cash inflow from operating activities 2023 $’000 648,317 107,018 37,642 2,683 (168) 47,844 (5,307) 1,287 (257) (584) (486,528) 2,202 (8,644) 849 504 (1,648) 37 (46,077) (643) 735 299,262 2022 $’000 161,454 46,691 – 2,098 (145) 17,240 (17,176) 185 (289) (584) – 4,089 (10,219) (2,256) 129 3,321 395 596 (2,903) 1,017 203,643 103 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORT6. Reconciliation of cash flows continued (b) 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. Liabilities from financing activities Other financial liabilities/assets Borrowings $’000 (649,739) Lease liabilities $’000 (64,431) Other financial liabilities $’000 (1,153) Derivative (liabilities)/ assets $’000 – Lease deposits $’000 12,125 (488,734) – – – (29,814) – – 10,137 (15,298) (1,989) 316 – – – – (85,191) – – – – – – (8,790) – – (257) 85,191 – 2,250 – – – – – – Total $’000 (703,198) (561,538) (15,298) (1,989) 316 (38,604) 85,191 (257) (6,459) 2,649 (1,172,097) 793 – (70,472) – 73 (10,127) – – – 166 – 14,541 (5,500) 2,722 (1,238,155) Liabilities from financing activities Other financial liabilities/assets Borrowings $’000 (43,230) Lease liabilities $’000 (63,352) Other financial liabilities $’000 (1,172) Derivative (liabilities)/ assets $’000 33,658 Lease deposits $’000 10,464 (604,262) – – – – – (2,247) (649,739) 7,836 (7,617) (1,652) – – 354 – (64,431) – – – (243) 289 – (27) (1,153) – – – (33,658) – – – – 2,166 – – – – (505) – 12,125 Total $’000 (63,632) (594,260) (7,617) (1,652) (33,901) 289 (151) (2,274) (703,198) 2023 Opening balance Net cash flows from financing activities Acquisitions – leases Modification – leases Termination – leases Acquisitions and NCI transactions Fair value through OCI (net of tax) Fair value through P&L Foreign exchange adjustments Other changes Closing balance 2022 Opening balance Net cash flows from financing activities Acquisitions – leases Modification – leases Fair value through OCI (net of tax) Fair value through P&L Foreign exchange adjustments Other changes Closing balance 104 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 2023FINANCING 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. When managing capital, the Group aims to optimise the capital structure in order to maximise returns to shareholders, reduce the cost of capital and provide flexibility for strategic investment. 7. Borrowings Accounting policy Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised net against the loan and amortised on a straight-line basis over the term of the facility. Borrowings are derecognised from the consolidated statement of financial position when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in other income or other expenses. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed in the period in which the expense is incurred. Current borrowings Non-current borrowings 2023 $’000 26,098 1,145,999 1,172,097 2022 $’000 113 649,626 649,739 (a) Bank debt At 30 June 2023 carsales.com Ltd had a syndicated revolving loan facility and established a $1,100.0 million debt facility under a Common Terms Deed (CTD) documentation structure, as follows: Tranche B Tranche C Total Commitment $’000 850,000 250,000 1,100,000 Drawn at close $’000 586,100 100,000 686,100 Maturity date 14 September 2025 14 September 2027 Ten 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 Limited (HSBC), Westpac Banking Corporation (WBC), Commonwealth Bank of Australia (CBA), MUFG Bank Limited, Bank of China (BOC), Sumitomo Mitsui Banking Corporation (SMBC), Mizuho Bank, Ltd and BNP Paribas. 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. 105 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORTThe Group has access to the following undrawn bank facilities at the end of the reporting period: Floating rate – Expiring within one year – Expiring within two to five years 2023 $’000 – 413,900 413,900 2022 $’000 – 249,000 249,000 In addition, the Group had bank loan facilities denominated in Brazilian Real (BRL), of which $25.7 million is due in the next 12 months and $10.2 million is due later than 12 months. (b) US Private Placement debt At 30 June 2023, the Group had long-term, fixed rate notes on issue to investors in the US Private Placement market. The notes are denominated in US dollars and are issued in three tranches, as follows: Series A – 7 year Series B – 8 year Series C – 9 year Total Face value USD$’000 100,000 100,000 100,000 300,000 Carrying value $’000 150,921 150,921 150,921 452,763 Interest rate 5.88% 5.92% 5.96% Maturity date 2 July 2030 2 July 2031 2 July 2032 Interest is payable semi-annually to noteholders. (c) Bank guarantee facility Guarantees in respect of bank facilities drawn down but not included in the accounts of the Group are $4.0 million (2022: $4.0 million). 8. 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. Cash at bank Short-term deposits and other liquid investments* Total cash and cash equivalents 2023 $’000 161,013 37,696 198,709 2022 $’000 117,387 65 117,452 * Other liquid investments comprise cash allocated to investment funds, where the funds are readily available for withdrawal upon request. 106 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 20239. 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. 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. Trade and other receivables Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost, less the loss allowance. Due to the short-term nature of the receivables, the carrying amount is assumed to approximate their fair value. The balance of trade and other receivables are disclosed in Note 14. Financial assets at fair value through other comprehensive income Refer Note 19(d) for the accounting policy on financial assets at fair value through other comprehensive income. 107 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORT 9. Financial assets and liabilities and fair value measurement continued Financial assets and liabilities that are carried at fair value are measured by the following fair value measurement hierarchy: 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; 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 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 Financial assets measured at fair value through OCI Quoted equity instruments which are listed on the Australian Securities Exchange (“ASX”)(i) Derivative financial assets(ii) Unquoted financial assets(iii) Financial liabilities measured at fair value through profit or loss Other financial liabilities – current(iv) Other financial liabilities – non-current(iv) Level 2023 $’000 2022 $’000 1 2 3 3 3 – – 25,354 (1,136) (8,991) 10,455 5,526 26,441 – (1,153) (i) (ii) (iii) During the year, the Group sold its investment in Plenti Group Ltd. The sale resulted in cash received of $7.0 million and the $2.2 million loss on disposal was recycled from the Financial Asset FVOCI reserve to retained earnings. Refer to Note 19(d) for more details. The balance at 30 June 2022 represents forward foreign exchange contracts which were held for the purpose of hedging the Trader Interactive purchase. The forward exchange contracts were valued at the present value of future cash flows based on the forward exchange rates at the balance sheet date. There are no forward contracts outstanding as at 30 June 2023. Investments in unquoted financial assets are measured at fair value through other comprehensive income and includes PromisePay Pte Ltd, mx51 Group Pty Ltd, Adfixus Pty Ltd and other equity investments, refer to Note 19(d). The fair value of the investments in PromisePay Pte Ltd and mx51 Group Pty Ltd have been calculated either with reference to the latest capital raise or based on an independent valuation performed during the year. The fair value of other equity investments is based on capital contributions and adjusted for independent valuation performed by the fund managers on a quarterly basis. (iv) Other financial liabilities are mainly put option and contingent consideration liabilities which are based on the future earnings of an acquired subsidiary for a defined period and were valued at financial year end based on the forecast of earnings for the acquired subsidiary. 108 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 2023(a) Derivative assets and liabilities During FY23, the Group held hedging instruments used to hedge the exposure to variability in cash flows attributable to highly probable forecast transactions. Specifically, the Group held forward foreign exchange contracts which matured and were closed out prior to 30 June 2023. These were entered to protect against foreign exchange fluctuations relating to the acquisition of the remaining 51% interest in Trader Interactive and the additional 40% interest in webmotors, which were completed in FY23. Refer to Note 20(a) and (b) for further details. The Group also has a net investment hedge (NIH) in place using debt instruments, to protect against the variability in cash flows from its investment in Trader Interactive, which has a USD functional currency. Refer to Note 10 (a). The Group previously held cross-currency interest rate swaps which were closed out in a prior period. During the year, $5.7 million (2022: $5.7 million) was recycled from the cash flow hedge reserve to the income statement as a finance cost with no amount remaining in reserves at 30 June 2023. The following tables detail information regarding forward foreign exchange (FX) contracts and 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. All derivative assets and liabilities were closed out as at 30 June 2023. Movement in cash flow hedge reserve Balance at 1 July 2022 Add: Change in fair value of hedging instrument recognised in OCI Less: Reclassified to purchase consideration for acquisitions Less: Reclassified from OCI to profit or loss Less: Deferred tax/current tax liability Balance at 30 June 2023 Movement in cash flow hedge reserve Balance at 1 July 2021 Add: Change in fair value of hedging instrument recognised in OCI Less: Reclassified to equity accounted investment Less: Reclassified from OCI to profit or loss Less: Deferred tax/current tax liability Balance at 30 June 2022 CCIRS $’000 (5,688) Forward Exchange Contracts $’000 3,868 Total Cashflow Hedge Reserve $’000 (1,820) - 84,658 84,658 - 5,688 - - (60,113) (3,016) (25,397) - (60,113) 2,672 (25,397) - CCIRS $’000 (11,376) Forward Exchange Contracts $’000 23,560 Total Cashflow Hedge Reserve $’000 12,184 - - 5,688 - (5,688) 26,339 (36,101) (2,028) (7,902) 3,868 26,339 (36,101) 3,660 (7,902) (1,820) 109 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORT10. 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 focusses 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 Executive General Manager of Tax, Treasury, Risk and Systems and the Chief Financial Officer (CFO) and follows approved policies of the Board of Directors. They identify, evaluate and hedge 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 (MXP), the US Dollar (USD) and the Chilean Peso (CLP). 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 carsales.com Ltd has an investment in Trader Interactive, which has a USD functional currency. As a result of the difference in functional currencies, the Group is exposed to foreign exchange risk upon translation of cash flows from USD to AUD. To protect against this risk, the Group has taken out USD denominated debt via the issuance of $US300.0 million in US private placement notes (refer to Note 7). This has been designated as a NIH for accounting purposes. The hedge has been assessed as effective given there is a clear economic relationship as both the hedging instrument (USD debt) and hedged item (investment in Trader Interactive) are referenced to the same foreign exchange rate (AUD/USD), credit risk is not expected to dominate the value changes that result from the economic relationship and the hedge ratio is 1:1. The effective portion of the gain or loss on the hedging instrument is recognised in other comprehensive income (in the foreign currency translation reserve – FCTR) while any ineffective portion is recognised in profit or loss. Ineffectiveness may arise due to differences in the fair value of the hedged item and the hedging instrument. Prior to this, the Group had denominated a portion ($US365.0 million) of its syndicated debt facility in USD, which was also designated as a NIH for accounting purposes. This debt was settled upon the issue of the USPP notes in June 2023. The Group also entered into and closed out forward foreign exchange contracts (FECs) to sell USD for AUD during June 2023. The FECs had a notional value of $US365.0 million and were held from 13 June 2023 until they matured and were settled on 27 June 2023. The FECs were also designated as a NIH for accounting purposes. For details of movements in NIH taken to FCTR, please refer to Note 12. There was no hedge ineffectiveness for the NIH recognised in the profit or loss for the year ended 30 June 2023. No other material hedging arrangements are in place at reporting date. 110 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 2023Material 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): Impact on profit: AUD to KRW AUD to BRL AUD to MXP AUD to CLP AUD to USD Net Movement Impact on equity: AUD to KRW AUD to BRL AUD to MXP AUD to CLP AUD to USD Net Movement Hedge Sensitivity (+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%) 2023 $’000 -5% 1,230 498 (140) 65 3,310 4,963 22,889 7,134 (1,296) 285 19,567 48,579 2022 $’000 -5% 1,096 261 (123) 69 417 1,720 21,333 2,771 (1,048) 201 40,814 64,071 2023 $’000 +5% (1,230) (498) 140 (65) (3,310) (4,963) (22,889) (7,134) 1,296 (285) (19,567) (48,579) 2022 $’000 +5% (1,096) (261) 123 (69) (417) (1,720) (21,333) (2,771) 1,048 (201) (40,814) (64,071) There are no active cash flow or fair value hedges at 30 June 2023. (ii) Price risk During the year, the Group sold its investment in Plenti Group Ltd (see Note 19(d)). As such, the Group is no longer exposed to significant equity securities price risk. (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. 111 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORT 10. Financial risk management continued Material arrangements in place at the reporting date The net trade receivables balance at 30 June 2023 was $107.8 million (2022: $44.3 million). See below for the aging profile of net trade receivables. 2023 $’000 2022 $’000 Note Gross Receiv- ables* 84,259 Expected loss rate 0-0.5% Loss allowance** 66 Gross Receiv- ables* 35,163 Expected loss rate 0-0.5% Loss allowance** 68 9,762 1% 5,889 2.5-5% 3,123 7.5-10% 3,896 50-80% 58 148 72 636 8,378 1% 798 2.5-5% 298 7.5-10% 58 31 38 427 50-80% 100 4,718 111,647 14 60-100% 2,749 3,729 461 45,525 80-100% 950 1,245 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 * Gross receivables include unapplied credits. ** Loss allowance is calculated on gross receivables balance excluding unapplied credits. 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 Allowance recognised on receivables acquired through business combinations Receivables written off during the year as uncollectible Closing loss allowance at 30 June 2023 $’000 1,245 1,219 1,378 (113) 3,729 2022 $’000 2,633 576 – (1,964) 1,245 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. 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. 112 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 2023(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. 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 $718.4 million (2022: $649.5 million) variable rate borrowings at a weighted average interest rate of 6.58% (2022: 1.8%). The borrowings are contractually repriced every three months and to that extent are also exposed to the risk of future changes in market interest rates. 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 2023 Financial assets Cash and cash equivalents Financial liabilities Variable rate borrowings Total increase/(decrease) At 30 June 2022 Financial assets Cash and cash equivalents Financial liabilities Variable rate borrowings Total increase/(decrease) Interest rate risk -100 bps +100 bps Carrying amount $’000 Note Profit $’000 Other equity $’000 Profit $’000 Other equity $’000 198,709 (2,960) (2,960) 2,960 2,960 7 (718,364) 9,866 6,906 9,866 6,906 (9,866) (6,906) (9,866) (6,906) 117,452 (1,261) (1,261) 1,261 1,261 7 (649,532) 5,973 4,712 5,973 4,712 (5,973) (4,712) (5,973) (4,712) 113 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORT10. Financial risk management continued (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 Borrowings Less: cash and cash equivalents Less: term deposits Net debt Note 7 8 14 2023 $’000 1,172,097 (198,709) (856) 972,532 2022 $’000 649,739 (117,452) (14,593) 517,694 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 and include expected future interest payments. At 30 June 2023 Non-derivatives Non-interest bearing payables Variable rate borrowings Fixed rate borrowings Lease liabilities Other financial liabilities Total non-derivatives At 30 June 2022 Non-derivatives Non-interest bearing payables Variable rate borrowings Fixed rate borrowings Lease liabilities Other financial liabilities Total non-derivatives 0–12 Months $’000 91,313 26,800 382 14,426 1,136 134,057 Between 1 and 2 years $’000 Between 2 and 5 years $’000 Over 5 Years $’000 Total contractual cash flows $’000 Carrying amount liabilities $’000 108 8,887 607 18,655 5,982 34,239 – 729,693 – 18,513 4,686 752,892 – – 479,567 31,986 – 511,553 91,421 765,380 480,556 83,580 11,804 1,432,741 91,421 718,364 453,733 70,472 10,127 1,344,117 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 48,758 – 119 9,379 – 58,256 1,241 213,400 98 8,655 1,153 224,547 – 449,233 – 20,820 – 470,053 – – – 34,576 – 34,576 49,999 662,633 217 73,430 1,153 787,432 49,999 649,532 207 64,431 1,153 765,322 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. 114 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 2023EQUITY This section provides information about the capital management practices of the business. 11. 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. Movement in ordinary fully paid shares during the period Balance at 1 July 2022 Issue of shares and exercise of options and performance rights under the carsales.com Ltd Employee Option and Share Plan Dividend Reinvestment Plan (DRP) Capital raised Less: transaction costs arising on share issues, including via DRP Deferred tax recognised directly in equity Balance at 30 June 2023 Balance at 1 July 2021 Exercise of options and performance rights under the carsales.com Ltd Employee Option Plan Dividend Reinvestment Plan (DRP) Capital raised Less: transaction costs arising on share issues, including via DRP Deferred tax recognised directly in equity Balance at 30 June 2022 Number of shares 282,845,469 275,202 522,457 93,090,419 – – 376,733,547 $’000 769,959 1,295 10,992 1,715,485 (45,423) (506) 2,451,802 281,966,582 755,357 450,847 428,040 – – – 282,845,469 6,120 9,918 – (1,190) (246) 769,959 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 26. 115 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORT12. Reserves Nature and purpose of reserves The share-based payments reserve is used to recognise the movement in 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 Note 27 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 holds 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. The Group also had a cash flow hedge reserve. Refer to Note 9 and 10 for more details on current hedging arrangements. 116 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 2023Share- based payment $’000 39,157 Foreign currency translation $’000 5,060 Post- employment benefits $’000 (1,044) Financial Asset FVOCI $’000 2,732 NCI acquisition $’000 (40,929) Cash flow hedge $’000 (1,820) Other Reserves $’000 (5,021) Total Reserves $’000 (1,865) – – – – – – – – 4,874 14,625 (83,110) – – (10,433) – – 239 – – – – – – – – – (6,257) (78,918) 239 (6,257) – – – – 2,196 – – – – – – – – – – – 44,031 – (73,858) – (805) – (1,329) (5,619) (46,548) – – – 1,820 – – 1,820 – – – – – – – – – – – 14,625 (83,110) 239 1,820 (10,433) (6,257) (83,116) – 2,196 – 4,874 – (5,021) (5,619) (83,530) Balance at 1 July 2022 Items that may be classified to profit or loss Exchange differences on translation of foreign operations Reclassification of exchange differences on step acquisition of associates Remeasurement of post-employment benefit obligations Movement in cash flow hedge (net of tax) Movement in net investment hedge (net of tax) Items that will not be reclassified to profit or loss Changes in financial assets at fair value (net of tax) through other comprehensive income Total comprehensive income for the year Transfer of gain on disposal of equity investment at fair value through other comprehensive income to retained earnings 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 2023 117 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORT12. Reserves continued Share- based payment $’000 33,467 Foreign currency translation $’000 (25,045) Post- employment benefits $’000 (125) Financial Asset FVOCI $’000 3,786 NCI acquisition $’000 (40,686) Cash flow hedge $’000 12,184 Other Reserves $’000 (5,021) Total Reserves $’000 (21,440) – – – – – – 5,690 – 39,157 – – – 30,105 – – – – (919) – – 12,372 30,105 (919) 12,372 – – – (13,426) – – – – – – – – – – – (14,004) – (14,004) – – – – – – – 30,105 (919) (14,004) 12,372 27,554 – (13,426) – 5,690 – 5,060 – (1,044) – 2,732 (243) (40,929) – (1,820) – (5,021) (243) (1,865) Balance at 1 July 2021 Items that may be classified to profit or loss Exchange differences on translation of foreign operations Remeasurement of post-employment benefit obligations Movement in cash flow hedge (net of tax) Items that will not be reclassified to profit or loss Changes in financial assets at fair value (net of tax) through other comprehensive income Total comprehensive income for the year Transfer of gain on disposal of equity investment at fair value through other comprehensive income to retained earnings 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 2022 118 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 2023 13. Dividends Accounting Policy 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. The dividends were proposed/payable as follows: Interim dividend paid for the half year ended 31 December – fully franked at the tax rate of 30% Final dividend proposed/paid for the year ended 30 June – 50% franked (2022: fully franked) at the tax rate of 30% Dividends paid in cash or satisfied by the issue of shares under the dividend reinvestment plan Paid in cash Satisfied by issue of shares Proposed but not yet paid or issued Interim dividend paid for the half year 31 December Final dividend declared/paid for the year ended 30 June 2023 $’000 2022 $’000 100,132 72,068 122,508 222,640 86,019 158,087 93,899 6,233 122,508 222,640 67,764 4,304 86,019 158,087 Cents per share 28.5 32.5 Cents per share 25.5 24.5 The Group has $20.6 million of franking credits as at 30 June 2023 (2022: $15.7 million). The impact on the franking account of the dividend recommended by the Directors since year end, but not recognised as a liability at year end is $26.3 million. Dividend Reinvestment Plan (DRP) The carsales.com Ltd DRP will be maintained for the 2023 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 18 September 2023. The last date for shareholders to nominate their participation in the DRP is 5:00pm (AEST) on 19 September 2023. 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. 119 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORTOTHER 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. 14. 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 10. (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 include 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 10. Current assets Trade receivables Loss allowance (see Note 10) Trade receivables Accrued income Other receivables Term deposits* Prepayments Trade and other receivables Lease deposits Other Non-current assets – Other receivables * Term deposits are short term in nature with the average period being 12 months. 120 2023 $’000 111,647 (3,729) 107,918 877 10,338 856 16,640 136,629 14,451 6,829 21,280 2022 $’000 45,525 (1,245) 44,280 955 5,585 14,593 9,328 74,741 12,125 1,843 13,968 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 202315. Property, plant and equipment Accounting Policy 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 • Plant and equipment 3 – 5 years 3 – 10 years • Leasehold improvements 3 – 10 years or minimum lease period if shorter 121 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORTTotal $’000 14,654 8,940 4,265 (117) (6,531) 102 21,313 10,500 4,822 806 – (4,041) 81 12,168 35,820 (23,652) 12,168 64,347 (43,034) 21,313 8,886 5,170 24 (145) (3,252) (183) 10,500 27,878 (17,378) 10,500 12,815 7,882 291 (362) (5,744) (228) 14,654 45,393 (30,739) 14,654 15. Property, plant and equipment continued Plant and equipment $’000 Motor vehicles $’000 Leasehold improvements $’000 Year ended 30 June 2023 Opening net book amount Additions Acquired through business combination Disposals Depreciation charge Exchange differences Closing net book amount At 30 June 2023 Cost Accumulated depreciation Net book amount Year ended 30 June 2022 Opening net book amount Additions Acquired through business combination Disposals Depreciation charge Exchange differences Closing net book amount At 30 June 2022 Cost Accumulated depreciation Net book amount 3,409 2,710 3,137 (66) (2,092) 17 7,115 25,084 (17,969) 7,115 3,401 1,847 236 (29) (2,012) (34) 3,409 745 1,408 322 (51) (398) 4 2,030 3,443 (1,413) 2,030 528 865 31 (188) (480) (11) 745 15,434 (12,025) 3,409 2,081 (1,336) 745 122 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 202316. 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 two to fifteen 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 consist: • 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. The Group recognises the lease payments associated with short-term and low-value leases as an expense on a straight-line basis over the lease term. 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. 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 • Motor vehicles Expected lease period Contractual lease period • Leased plant and equipment Contractual lease period 123 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORT16. Leases continued 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). 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 improvements 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 Properties $’000 Right-of- use Motor vehicle and Equipment $’000 Total $’000 56,475 11,634 (340) 2,250 (10,882) (554) 58,583 384 1,611 – – (361) (66) 1,568 4,582 (3,014) 1,568 111,562 (52,979) 58,583 56,091 10,023 (340) 2,250 (10,521) (488) 57,015 106,980 (49,965) 57,015 (a) Right-of-use assets: Year ended 30 June 2023 Opening net book amount Additions and acquired through business combination Terminations Remeasurement of lease modification Depreciation charge Exchange differences Closing net book amount At 30 June 2023 Cost Accumulated depreciation Net book amount 124 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 2023Right-of-use Properties $’000 Right-of- use Motor vehicle and Equipment $’000 55,080 8,017 2,190 (8,838) (358) 56,091 96,541 (40,450) 56,091 Year ended 30 June 2022 Opening net book amount Additions Remeasurement on lease modification Depreciation charge Exchange differences Closing net book amount At 30 June 2022 Cost Accumulated depreciation Net book amount (b) Lease Liabilities: Year ended 30 June Opening lease liabilities Additions and assumed through business combination Terminations Remeasurement of lease modification Lease payments Interest charge Exchange differences Closing lease liabilities At 30 June Current lease liabilities Non-current lease liabilities Total lease liabilities Total $’000 55,614 8,304 2,202 (9,289) (356) 56,475 534 287 12 (451) 2 384 2,985 (2,601) 384 99,526 (43,051) 56,475 2023 $’000 64,431 15,298 (316) 1,989 (12,196) 2,059 (793) 70,472 11,173 59,299 70,472 2022 $’000 63,352 7,617 – 1,652 (9,399) 1,563 (354) 64,431 8,061 56,370 64,431 125 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORT17. 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 at which the asset is ready for use on a straight-line basis over 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, trademarks and customer relationships Acquired brands and trademarks 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 period of between 10 and 15 years. 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 7–20 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 and trademarks • Customer relationships 4-5 years 10-15 years 7–20 years • Other (domain names and database) 5–10 years 126 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 2023Year ended 30 June 2023 Opening net book amount Additions Acquired through business combination Transfer/measurement period adjustments Disposals Amortisation charge Impairment charge Exchange differences Closing net book amount At 30 June 2023 Cost Accumulated amortisation and impairment Net book amount Goodwill* $’000 Computer software** $’000 Brands, trademarks and customer relationships $’000 Other intangible assets $’000 483,934 – 2,716,044 – – – (19,240) (46,710) 3,134,028 66,750 64,074 29,820 – – (33,926) (7,033) 1,236 120,921 52,468 13,765 938,291 – – (55,683) (1,172) (22,077) 925,592 168 225 51 – – – – – 444 Total $’000 603,320 78,064 3,684,206 – – (89,609) (27,445) (67,551) 4,180,985 3,153,789 (19,761) 3,134,028 282,778 (161,857) 120,921 1,027,008 (101,416) 925,592 1,858 (1,414) 444 4,465,433 (284,448) 4,180,985 * ** For impairment of goodwill, refer to Note 17(a) During the period, a strategic decision was made to discontinue the operations of Placie, carsales’ digital mobility platform. The assets associated with this platform largely consist of software assets which have been written down to nil and an impairment loss has been recognised in the consolidated statement of comprehensive income. Year ended 30 June 2022 Opening net book amount Additions Acquired through business combination Transfer/measurement period adjustments Disposals Amortisation charge Exchange differences Closing net book amount At 30 June 2022 Cost Accumulated amortisation and impairment Net book amount Goodwill $’000 Computer software $’000 Brands, trademarks and customer relationships $’000 Other intangible Assets $’000 480,008 – 19,240 3,868 – – (19,182) 483,934 484,454 (520) 483,934 49,410 40,385 1,105 (498) (4) (23,272) (376) 66,750 159,917 (93,167) 66,750 66,390 6 1,182 (3,909) – (8,437) (2,764) 52,468 91,726 (39,258) 52,468 1,297 – 2 (1,122) – – (9) 168 1,358 (1,190) 168 Total $’000 597,105 40,391 21,529 (1,661) (4) (31,709) (22,331) 603,320 737,455 (134,135) 603,320 127 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORT17. Intangible assets continued (a) Impairment testing Key Assumption/Accounting Estimates 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 method adopted in estimating the fair value is considered to be level 3 in the fair value hierarchy (refer to Note 9 for explanation of the valuation hierarchy). The key assumptions and estimates used in management’s calculations primarily relate to: (a) Five or 10-year cash flow forecasts sourced from internal budgets and long-term forecasts (b) terminal value growth rates applied to the period beyond the five to 10-year cash flow forecasts; and (c) post-tax discount rates, used to discount the cash flows to present value. The cash flow projections have been: (d) derived from management forecasts based on next year’s board approved budgeted result, with the remaining years based on management forecasts; and (e) 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. 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. Australia – Online Advertising Services Segment Australia – Data, Research and Services Segment Tyres CGU (Australia – carsales investments) Redbook Inspect CGU (Australia – carsales investments) North America Brazil LATAM* Latin America Segment South Korea RedBook International Asia Segment 2023 $’000 111,008 15,941 – 818 2,101,499 527,128 21,529 548,657 355,705 400 356,105 3,134,028 2022 $’000 86,421 15,941 19,240 818 – – 18,026 18,026 343,089 400 343,489 483,935 * Due to an internal restructure and a change in the way that goodwill is monitored for internal management purposes effective 1 July 2022, the Group has aggregated the Chile and Mexico CGUs to form a new CGU called “LATAM”. Any goodwill which was previously allocated to the Chile and Mexico CGUs has been reallocated to the LATAM CGU in FY23. The prior year comparative has also been restated to reflect this. 128 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 2023Key assumptions As well as management cash flow projections (including revenue growth and margin assumptions), other key assumptions for each significant CGU are detailed as follows: Terminal growth rate Post-tax discount rate Valuation method Value in use CGU Australia – Online Advertising Services Australia – Data, Research and Services Value in use Tyres CGU (Australia – carsales investments) Value in use Brazil North America LATAM South Korea Fair value less costs to sell* Fair value less costs to sell Value in use Fair value less costs to sell Years of cash flow projection 5 5 5 n/a 10 5 10 2023 2.5% 2.5% 2.3% n/a 2.5% 2.9% 2.3% 2022 2.3% 2.3% 2.3% – – 2.7% 2.0% 2023 8.3% 8.3% 9.8% n/a 9.0% 11.6% 10.0% 2022 8.8% 8.8% 10.7% – – 11.3% 10.7% * Given the recent nature of the acquisition of the additional 40% stake in webmotors S.A in Brazil on 28 April 2023, the recoverable amount for the Brazil CGU has been based on fair value less costs to sell supported with reference to the transaction price. Tyres CGU impairment During the year, the Group recognised a non-cash impairment charge against the carrying value of the Tyres CGU. As at 30 June 2023, the carrying value of the Tyres CGU was compared with the value in use determined via a discounted cash flow model. The carrying value exceeded its value in use by $22.2 million and an impairment loss of this amount has been recognised in the consolidated statement of comprehensive income. The carrying value of the remaining goodwill in the Tyres CGU post impairment is nil. The current economic environment has resulted in the Tyres business experiencing softer demand for its products, as well as higher freight and warehousing costs, which has adversely affected the performance and outlook for this CGU. The key assumptions used in determining the Tyres CGU impairment charge are outlined above. Impact of reasonable possible changes in key assumptions The remaining 51% of the Trader Interactive (North America CGU) business was acquired on 30 September 2022 and the Group has only owned 100% of this business for 9 months at balance date. As such the North America CGU has minimal headroom at 30 June 2023. The North America CGU impairment model is sensitive to changes in the compound annual revenue growth rate assumption across the 10 year cash flow projection period. A moderate reduction to the forecast compound annual revenue growth rate across the projection period would, with all other assumptions remaining unchanged, reduce the headroom to nil. 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 other CGUs to exceed their recoverable amount. 129 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORT18. Payables and provisions Accounting Policy Trade and other payables These amounts include 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. The Group recognises a liability in accrued expenses 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 liability where contractually obliged or where there is a past practice that has created a constructive obligation. Employee benefits provisions Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months after the end of the period in which the employees render the related service. 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. 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. Trade and other payables Trade payables Accrued expenses Other payables Total trade and other payables Provisions Employee benefits – current Employee benefits – non-current Other provisions – current* Other provisions – non-current Total provisions 2023 $’000 23,763 40,651 26,899 91,313 12,764 1,257 14,812 4,446 33,279 2022 $’000 10,986 34,010 3,762 48,758 9,879 1,269 1,117 3,388 15,653 * Other provisions includes estimated costs associated with the planned closure of the Mexican business, legal costs and other. The costs associated with the planned closure of the Mexican business are included in the impairment loss and business closure expenses in the Consolidated Statement of Comprehensive Income. 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 2023 or 30 June 2022. Other commitments The Group has other contractual commitments of $2.5 million at 30 June 2023 (2022: $3.1 million). 130 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 2023GROUP 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. 19. 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. The Group’s principal subsidiaries at 30 June 2023 are set out on the next page. 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. 131 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORT19. Interests in other entities continued Ownership interest held by the Group* Ownership interest held by non- controlling interests Place of business/ country of incorporation Australia Australia Australia Australia New Zealand Malaysia 2023 % 100.0 100.0 100.0 100.0 100.0 100.0 2022 % 100.0 100.0 100.0 100.0 100.0 100.0 2023 % – – – – – – 2022 % – – – – – – Principal activities (1) (2) (1) (2) (2) (2) Operating Segment (i) (ii) (i) (ii) (vi) (vi) China 100.0 100.0 Thailand Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Mexico Mexico Chile Chile Australia Australia United States of America Chile Argentina Colombia South Korea Australia Australia Australia Australia Australia Australia Australia Australia Australia United States of America 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 92.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 99.2 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 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 99.2 100.0 100.0 100.0 97.3 100.0 100.0 100.0 100.0 100.0 100.0 100.0 – – – – – – – – – 8.0 – – – – – – – – – – – – – – 0.8 – – – – – – – – – – – – – – – – – – – 20.0 – – – – – – – – – – – – – – 0.8 – – – 2.7 – – – – – – (2) (2) (3) (4) (1) (4) (4) (5) (4) (6) (1) (4) (7) (4) (1) (1) (4) (1) (7) (4) (4) (1) (1) (1) (1) (4) (2) (1) (1) (1) (1) (3) (4) (4) (4) (vi) (vi) (iii) (i) (i) (v) (vi) n/a (iv) (iii) (i) n/a n/a (v) (v) (v) (v) (v) n/a (v) (v) (v) (v) (v) (vi) (i) (ii) (iii) (iii) (iii) (iii) (iii) (iii) (iii) (iv) Name of entity Webpointclassifieds Pty Ltd Equipment Research Group Pty Ltd Discount Vehicles Australia Pty Ltd Automotive Data Services Pty Ltd Auto Information Limited RedBook Automotive Services (M) Sdn Bhd RedBook Automotive Data Services (Beijing) Limited Automotive Data Services (Thailand) Company Limited tyresales Pty Ltd Auto Exchange Holdings Pty Ltd Automotive Exchange Pty Ltd carsales.com Investments Pty Ltd carsales Holdings Pty Ltd carsales.com Ltd Employee Share Trust carsales North America Holdings Pty Ltd (formerly “carsales Finance Pty Ltd”) RedBook Inspect Pty Ltd Programmatic Solutions Pty Ltd carsales Treasury Pty Ltd carsales Foundation carsales Latam Pty Ltd carsales Mexico SAPI de CV Promotora de Servicio y Ventas Especializadas, S. de R.L. de C.V. carsales Chile SpA Chileautos SpA carsales Foundation Pty Ltd carsales Argentina Pty Ltd Demotores Holdings LLC Demotores Chile SpA Demotores S.A. Demotores Colombia S.A.S ENCARSALES.COM, Ltd AS1 Holdings Pty Ltd Appraisal Solutions Pty Ltd carsales ESI Pty Ltd CS Motion Technologies Pty Ltd CS Motion Development Pty Ltd CS Motion Australia Pty Ltd Tyreconnect Pty Ltd Transport Ventures Pty Ltd carsales Tyre Holding Pty Ltd carsales Holding US, LLC (USA) 132 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 2023Trader Interactive, LLC SSI, LLC Trader Canada Holdings, Inc. Trader Interactive Holdings Canada, ULC NatCo Trading Corporation Webmotors S.A. LOOP Gestao de Patios S.A. Car10 Tecnologia e Informacao S.A. United States of America United States of America Canada Canada United States of America Brazil Brazil Brazil 100.0 49.0 100.0 100.0 100.0 100.0 70.0 51.0** 66.7** 49.0 49.0 49.0 49.0 30.0 – – – – – – – 30.0 49.0 33.3 – – – – – n/a n/a n/a (4) (4) (4) (4) (4) (1) (8) (8) (iv) (iv) (iv) (iv) (iv) (v) (v) (v) * ** The proportion of ownership interest is equal to the proportion of voting power held. The proportion of ownership interest is equal to the proportion of voting power held by webmotors (a subsidiary of the Group). The Group’s indirect ownership in Car10 and LOOP is 46.7% and 35.7% respectively. Principal activities (1) Classified advertising (2) Data and research (3) Online retail (4) Holding company (5) Share trust company (6) Vehicle inspection services (7) Trustee company Operating segment (i) Australia – Online Advertising Services (ii) Australia – Data, Research and Services (iii) Australia – carsales investments (iv) North America (v) Latin America (vi) Asia (8) Digital automotive and payment technology products (b) Non–controlling interests (NCI) for continuing operations Set out below is summarised financial information for each subsidiary that has a material non-controlling interest. The amounts disclosed for each subsidiary include balances payable to and receivable from other Group subsidiaries. Control was obtained over Webmotors S.A during the current year, refer to Note 20(b). Prior to this, the investment in this entity was classified as an associate and as such NCI was not previously recognised. There were no non-controlling interests in the prior period that were material to the Group. The summarised statement of comprehensive income and net increase in cash and cash equivalents below for webmotors is for the period from the date of acquisition to 30 June 2023. Summarised balance sheet For the year ended 30 June 2023 Current assets Non-current assets Current liabilities Non-current liabilities Net assets Accumulated NCI Summarised statement of comprehensive income For the period 28 April 2023 to 30 June 2023 Profit for the period Other comprehensive income Total comprehensive income Profit for the period allocated to NCI Total comprehensive income allocated to NCI Dividends paid to NCI For the period 28 April 2023 to 30 June 2023 Net increase/(decrease) in cash and cash equivalents webmotors $’000 96,055 687,973 (49,307) (66,940) 667,781 48,653 webmotors $’000 3,748 25,740 29,488 1,687 2,832 - webmotors $’000 8,264 133 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORT19. Interests in other entities continued Name of Entity Webmotors S.A. Other Total (c) Interests in Associates Accumulated NCI $’000 48,653 6,968 55,621 Profit for the year allocated to NCI $’000 1,687 1,013 2,700 Total comprehensive income allocated to NCI $’000 2,832 1,013 3,845 Accounting Policy 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. 134 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 2023The Group holds interests in the following associates: Name of entity Webmotors S.A. Skedgo Pty Ltd Trader Interactive LLC Place of business/ country of incorporation Brazil Australia United States of America 2023 % – – – 2022 % Nature of relationship 30.0 Associate 20.6 Associate 49.0 Associate Measurement method Equity method Equity method Equity method % of ownership interest Name of entity Webmotors S.A.(i) Skedgo Pty Ltd(ii) Trader Interactive LLC(i) Total equity accounted investments Quoted fair value Carrying amount Share of profit/(loss) 2023 $’000 – – – 2022 $’000 – – – 2023 $’000 – – – 2022 $’000 58,191 2,358 857,099 2023 $’000 6,127 (99) (721) 2022 $’000 5,090 (14) 12,100 – – – 917,648 5,307 17,176 (i) (ii) During the year, control was obtained over Trader Interactive LLC and Webmotors S.A (refer to Note 20) and as such the investments in these entities were reclassified from associates to consolidated subsidiaries. The investment in Skedgo Pty Ltd was disposed of in June 2023 for non-cash consideration of $1.3 million and a $0.9 million loss on disposal was recognised within impairment loss and business closure expenses in the Consolidated Statement of Comprehensive Income. (i) Movement in the carrying amount of significant equity accounted investments For the year ended 30 June 2023 Carrying amount at 1 July 2022 Share of profit for the year Amortisation expense relating to fair value adjustments (net of tax) Foreign exchange impact – other comprehensive income Dividends received Reclassification to consolidated subsidiary Reclassification of promissory notes receivable Carrying amount at 30 June 2023 Trader Interactive LLC 49% ownership* $’000 857,099 Webmotors S.A. 30% ownership** $’000 58,191 2,877 (3,600) 63,214 – (897,891) (21,699) – 6,475 (348) 4,606 (3,078) (65,846) – – * ** As of 30 September 2022, Trader Interactive LLC is now 100% owned and controlled by the Group. Refer to Note 20 for details. As a result, the investment was reclassified from an associate to a consolidated subsidiary. As of 28 April 2023, webmotors S.A. is now 70% owned and controlled by the Group. Refer to Note 20 for details. As a result, the investment was reclassified from an associate to a consolidated subsidiary. 135 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORT19. Interests in other entities continued For the year ended 30 June 2022 Carrying amount at 1 July 2021 Acquisition of investment using equity method (cash) Acquisition of promissory notes receivable (cash)* Transaction costs capitalised Gain on acquisition hedge (net of tax) Share of profit for the year Amortisation expense relating to fair value adjustments (net of tax) Foreign exchange impact – other comprehensive income Dividends receivable Carrying amount at 30 June 2022 Trader Interactive LLC 49% ownership $’000 – Webmotors S.A. 30% ownership $’000 53,581 794,708 19,084 15,849 (36,101) 28,092 (15,992) 51,459 – 857,099 – – – – 5,478 (388) 1,776 (2,256) 58,191 * The Group acquired 49% of interest bearing promissory notes in the entity to the value of $19.0 million at the acquisition date, which were extinguished upon completion of the acquisition of the 51% remaining interest in Trader Interactive. (ii) Summarised financial information for significant associates The tables below provide summarised financial information for the associates that are 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. For the year ended 30 June 2023 Revenue Profit/(loss) from continuing operations Other comprehensive income Total comprehensive income/(loss) Group’s share Profit/(loss) from continuing operations Foreign exchange impacts – other comprehensive income* Total comprehensive income * Relates to translation of the equity accounted investment. Trader Interactive LLC 1 July 2022 to 30 September 2022 $’000 56,664 (1,471) – (1,471) (721) 63,214 62,493 Webmotors S.A. 1 July 2022 to 28 April 2023 $’000 104,747 20,424 – 20,424 6,127 4,606 10,733 136 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 2023For the year ended 30 June 2022 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 and capitalised transaction costs Acquired intangibles (net of tax) Share-based payments recognised directly in equity Promissory notes receivable acquired Foreign exchange impacts Carrying amount Revenue Profit from continuing operations Other comprehensive income Total comprehensive income Group’s share Profit from continuing operations Foreign exchange impacts – other comprehensive income Total comprehensive income (iii) Contingent liabilities in respect of associates Contingent liabilities – associates Contingent liabilities relating to liabilities of Webmotors S.A. for which the Company is severally liable Contingent liabilities relating to liabilities of Trader Interactive LLC for which the Company is severally liable Trader Interactive LLC 49% ownership $’000 52,604 17,192 (18,018) (606,717) (554,939) 49.0% (271,920) 902,424 207,900 (3,300) 20,267 1,728 857,099 Webmotors S.A. 30% ownership $’000 62,150 63,123 (45,064) (198) 80,011 30.0% 24,003 31,001 3,187 – – – 58,191 158,639 92,726 24,695 24,695 12,100 51,459 63,559 16,966 16,966 5,090 1,776 6,866 2023 $’000 2022 $’000 n/a n/a 186 – 137 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORT19. Interests in other entities continued (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 9. 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 9 for details of the valuation techniques used to value the investment. % of ownership Carrying amount Name of entity Quoted financial assets Plenti Group Ltd (formerly ‘RateSetter Australia Pty Ltd’) (i) Unquoted financial assets PromisePay Pte Ltd (ii) mx51 Group Pty Ltd (ii) Adfixus Pty Ltd (ii) Other equity investments (iii) Total financial assets at fair value through other comprehensive income 2023 % – 18.4 2.5 9.9 n/a 2022 % 9.5 18.4 3.3 – n/a At 1 July Acquisition of financial assets at fair value through other comprehensive income Sale 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 2023 $’000 2022 $’000 – 10,455 4,255 2,589 1,500 17,010 4,101 4,409 – 17,931 25,354 36,896 2023 $’000 36,896 2,363 (6,997) 503 (7,411) 25,354 2022 $’000 49,529 1,313 (26,698) 698 12,054 36,896 (i) Plenti Group Ltd During the year, the Group sold its investment in Plenti Group Ltd. The sale resulted in cash received of $7.0 million and the $2.2 million loss on disposal was recycled from the Financial Asset FVOCI reserve to retained earnings. (ii) PromisePay, mx51 Group and Adfixus The Group holds equity interests in the following entities which are not publicly listed: PromisePay Pte Ltd, mx51 Group Pty Ltd and Adfixus Pty Ltd. The Group reviewed the valuation of its interest in these entities. Refer to Note 9 for details of the valuation approach. (iii) Other equity investments This balance relates to investments in unlisted US based venture capital fund assets. 138 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 202320. Business combination Accounting Policy The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the: • fair values of the assets transferred • liabilities incurred to the former owners of the acquired business • equity interests issued by the Group • fair value of any asset or liability resulting from a contingent consideration arrangement, and • fair value of any pre-existing equity interest in the subsidiary. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets. Acquisition-related costs are expensed as incurred. The excess of the: • consideration transferred, • amount of any non-controlling interest in the acquired entity, and • acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised directly in profit or loss as a bargain purchase. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value, with changes in fair value recognised in profit or loss. If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurement are recognised in profit or loss. 139 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORT20. Business combination continued (a) Trader Interactive On 27 June 2022, carsales.com Ltd announced that it had exercised its call option to acquire the remaining 51% in Trader Interactive LLC. On 30 September 2022, the acquisition of the remaining stake in Trader Interactive was completed for $1,183.2 million (excluding transaction costs), resulting in the Group gaining control over Trader Interactive. The acquisition was funded via a $1,207.0 million accelerated non-renounceable entitlement offer and an upsize of the Group’s existing debt facilities. Pursuant to AASB 3 Business Combinations, the transaction is treated as a step-acquisition which occurs when the buyer in a business combination has a previously held equity interest in a target and acquires an additional interest in the target that results in the buyer obtaining control. In a step acquisition scenario, the acquirer is required to revalue its existing stake to ‘fair value’ and recognise a gain for the excess over the previously held equity interest. The details of the acquisition are below: (i) Purchase consideration Cash paid for the additional interest acquired Working capital adjustment Fair value of pre-existing interest held Hedge gain (net of tax) Total purchase consideration (ii) Net gain on revaluation $’000 1,238,736 (259) 1,120,527 (55,567) 2,303,437 In accordance with the accounting policy above, the Group has re-measured its previously held equity interest in Trader Interactive at the acquisition date fair value immediately prior to the business combination. The Group has recognised a net gain on the step acquisition of $337.9 million, being the difference between the acquisition-date fair value of its existing ownership in Trader Interactive ($1,120.5 million), the carrying value of its investment in Trader Interactive as an associate ($897.9 million) and the impact of historical foreign exchange movements on the investment balance ($115.3 million). This gain has been recognised within ‘Net gain on step acquisition of associates’ in the Consolidated Statement of Comprehensive Income. Fair value of previously held interest Less: carrying value of Trader Interactive investment as an associate Add: reclassification of exchange differences Net gain on step acquisition of associate (iii) Cash flow hedge $’000 1,120,527 (897,891) 115,269 337,905 In June 2022, the Group entered into forward foreign exchange contracts for USD with a total notional value of $1,213.4 million and a maturity of September 2022. These contracts were designated as a cash flow hedge to protect against foreign exchange fluctuations relating to purchase of the remaining 51% of Trader Interactive. Unrealised hedge gains and losses were recognised in the cash flow hedge reserve net of tax. In September 2022, the forward contracts were settled resulting in a net cash inflow of $83.7 million. The net gain was recycled from the cash flow hedge reserve and the effective portion of $55.6 million formed part of the consideration paid for Trader Interactive. The ineffective portion ($3.0 million) was recognised in the Consolidated Statement of Comprehensive Income within finance costs. 140 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 2023 (iv) Details of net assets and liabilities acquired Cash and cash equivalents Trade and other receivables Property, plant and equipment Right-of-use assets Other receivables Other financial assets Trade and other payables Contract liabilities – deferred revenue Lease liabilities (C) Provisions Current tax liabilities Lease liabilities (NC) Net identifiable assets acquired Customer relationships Trade names Software Goodwill Deferred tax liability recognised on intangible assets acquired Identifiable intangible assets acquired Deferred tax assets relating to tax losses Net assets acquired Initial accounting Fair value recognised on acquisition $’000 31,365 12,315 1,228 2,257 3,446 171 (628,949) (3,755) (1,922) (2,252) (232) (5,630) (591,958) 617,226 152,363 8,396 2,179,377 (84,540) 2,872,822 22,573 2,303,437 Both the net asset value and the allocation of the purchase price to acquired assets is still preliminary. In particular, the fair values assigned to intangible assets and deferred taxes are still being assessed and may be subject to change. The acquisition accounting including tax related impacts will be finalised within 12 months of the acquisition date. The goodwill is attributable to the workforce and synergistic benefits that are expected to be created by this acquisition. (v) Acquired receivables The fair value of trade and other receivables is equal to the gross contractual amount. Trade receivables are expected to be collected in full. (vi) Revenue and profit before tax from continuing operations From the date of acquisition, the additional 51% investment in Trader Interactive contributed $182.6 million of revenue and $69.5 million to the profit from continuing operations of the Group. If the acquisition had occurred on 1 July 2022, the contribution to consolidated revenue and consolidated profit for the Group would have been $239.4 million and $68.0 million respectively. Profit has been calculated based on the subsidiary results and includes the additional amortisation that would have been charged from 1 July in relation to acquired intangible assets, together with the consequential tax effects. (vii) Borrowings Immediately prior to the completion of the acquisition, Trader Interactive had $570.5 million in external borrowings with Credit Suisse and a further $48.5 million in promissory notes payable held by the shareholders of Trader Interactive, including carsales.com Ltd. The Group had previously acquired 49% ($21.7 million) of the promissory notes in September 2021 as part of its initial investment in Trader Interactive. On 30 September 2022, as part of the transaction to acquire the remaining share of Trader Interactive, the Group paid $570.5 million to settle the debt with Credit Suisse including associated fees. A further $26.8 million was paid to the former shareholders of Trader Interactive to fully acquire the promissory notes. At 30 June 2023, intercompany loans to the same value have been recognised between carsales and Trader Interactive. These loans are eliminated upon consolidation of Trader Interactive into the Group’s results. 141 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORT20. Business combination continued (b) webmotors On 28 April 2023 carsales.com Ltd acquired an additional 40% of Webmotors S.A. (“webmotors”) for $368.7 million (excluding transaction costs), increasing the Group’s interest from 30% to 70% and resulting in the Group gaining control over this business. The acquisition was funded via a $508.4 million pro-rata accelerated renounceable entitlement offer. Pursuant to AASB 3 Business Combinations, the transaction is treated as a step-acquisition which occurs when the buyer in a business combination has a previously held equity interest in a target and acquires an additional interest in the target that results in the buyer obtaining control. In a step acquisition scenario, the acquirer is required to revalue its existing stake to ‘fair value’ and recognise a gain for the excess over the previously held equity interest. The details of the acquisition are below: (i) Purchase consideration Cash paid for the 40% interest acquired Working capital adjustment Fair value of pre-existing 30% interest held Hedge gain (net of tax) Total purchase consideration (ii) Net gain on revaluation $’000 373,231 – 246,628 (4,546) 615,313 In accordance with the accounting policy above, the Group has re-measured its previously held equity interest in webmotors at the acquisition date fair value immediately prior to the business combination. The Group has recognised a net gain on the step acquisition of $148.6 million, being the difference between the acquisition-date fair value of its existing 30% ownership in webmotors ($246.6 million), the carrying value of its investment in webmotors as an associate ($65.8 million) and the impact of historical foreign exchange movements on the investment balance ($32.2 million loss). In calculating the net gain on the step acquisition, the Group applied a control premium of 13.5%. This gain has been recognised within ‘Net gain on step acquisition of associates’ in the Consolidated Statement of Comprehensive Income. Fair value of previously held interest Less: carrying value of webmotors investment as an associate Less: reclassification of exchange differences Net gain on step acquisition of associate (iii) Cash flow hedge $’000 246,628 (65,846) (32,159) 148,623 In March 2023 the Group entered into a foreign currency forward exchange contracts to swap AUD for USD with a total notional value of USD$239.5m and a maturity of 28 April 2023. The Group then entered into a non-deliverable foreign currency forward contract to swap USD equal to BRL$1,240.0m (USD$239.5m), with a maturity of 2 May 2023. These contracts were designated as a cash flow hedge to protect against foreign exchange fluctuations relating to purchase of the additional 40% stake in webmotors. Unrealised hedge gains and losses were recognised in the cashflow hedge reserve net of tax. In May 2023, the forward contracts were settled resulting in a net cash inflow of $6.4 million. The hedge was 100% effective and the net gain of $4.5 million was recycled from the cashflow hedge reserve and formed part of the consideration paid for webmotors. 142 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 2023(iv) Details of net assets and liabilities acquired Cash and cash equivalents Trade and other receivables Property, plant and equipment Right-of-use assets Other receivables Current tax asset Trade and other payables Borrowings Lease liabilities (C) Provisions Lease liabilities (NC) Net identifiable assets Customer relationships Trade names Software Deferred tax liability recognised on intangible assets acquired Identifiable intangible assets Non-controlling shareholder interest in net assets Goodwill Net assets acquired Initial accounting Fair value recognised on acquisition $’000 28,785 40,635 2,919 1,277 11,211 7,249 (23,081) (29,815) (363) (2,786) (1,147) 34,884 118,473 39,936 21,425 (57,547) 122,287 (45,820) 503,962 615,313 Both the net asset value and the allocation of the purchase price to acquired assets is still preliminary. In particular, the fair values assigned to intangible assets and deferred taxes are still being assessed and may be subject to change. The acquisition accounting including tax related impacts will be finalised within 12 months of the acquisition date. The goodwill is attributable to the workforce and synergistic benefits that are expected to be created by this acquisition and is not expected to be deductible for tax purposes. (v) Acquired receivables The fair value of trade and other receivables is $40.6 million. The gross contractual amount for trade receivables due is $42.0 million, with a loss allowance of $1.4 million recognised on acquisition. (vi) Revenue and profit before tax from continuing operations From the date of acquisition, the additional 40% investment in webmotors contributed $26.4 million of revenue and $3.7 million to the profit from continuing operations of the Group. If the acquisition had occurred on 1 July 2022, the contribution to consolidated revenue and consolidated profit for the Group would have been $131.1 million and $27.3 million respectively. Profit has been calculated based on the subsidiary results and includes the additional amortisation that would have been charged from 1 July in relation to acquired intangible assets, together with the consequential tax effects. (vii) Non-controlling interests The Group elected to recognise the non-controlling interests at its proportionate share of the acquired net identifiable assets. 143 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORT21. 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 17 for details of impairment accounting policies. In addition to its own current and deferred tax amounts, carsales.com Ltd also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group. The entities have also entered into a tax funding agreement under which the wholly owned entities fully compensate the company for any current tax payable assumed and are compensated by the Company for any current tax receivable and deferred taxes relating to unused tax losses or unused tax credits that are transferred to carsales.com Ltd under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly owned entities’ financial statements. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable or payable to other entities in the Group. Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly owned tax consolidated entities. Where the parent entity has provided financial guarantees in relation to loans and payables of subsidiaries for no compensation, the fair values of these guarantees are accounted for as contributions and recognised as part of the cost of the investment. (a) Summary financial information Balance sheet Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Shareholders’ equity Issued capital Reserves Retained earnings Total equity Profit for the year Total comprehensive income 2023 $’000 2022 $’000 76,684 3,478,658 3,555,342 64,396 813,147 877,543 2,677,799 2,451,802 27,773 198,224 2,677,799 279,198 274,761 91,222 1,660,157 1,751,379 76,517 771,242 847,759 903,620 769,959 26,289 107,372 903,620 113,067 111,434 (b) Contingent liabilities of the parent entity The parent entity did not have any contingent liabilities as at 30 June 2023 or 30 June 2022. 144 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 202322. 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 North America Holdings Pty Ltd (formerly 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 Tyresales Pty Ltd Appraisal Solutions Pty Ltd carsales Tyre Holding Pty Ltd Transport Ventures Pty Ltd Tyreconnect Pty Ltd Programmatic Holdings Pty Ltd CS Motion Holdings Pty Ltd CS Motion Development 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 30 June 2021 30 June 2021 30 June 2022 30 June 2022 30 June 2022 30 June 2022 30 June 2022 30 June 2022 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 Revenue from continuing operations Revenue from contracts with customers Revenue from continuing operations Expenses Operating expenses Earnings before interest, taxes, depreciation and amortisation Depreciation and amortisation expense Finance income Finance costs Fair value in put options Share of net profit from associates accounted for using the equity method Net gain on step acquisition of associate Impairment loss and business closure expenses Dividends income Profit before income tax Income tax expense Profit from continuing operations Total comprehensive income for the year 2023 $’000 2022 $’000 436,818 436,818 391,568 391,568 (145,124) 291,694 (32,199) 5,860 (54,305) – 6,027 148,623 (28,024) 7,639 345,315 (43,896) 301,419 299,178 (173,043) 218,525 (25,331) 996 (18,193) 289 – – – 4,371 180,657 (52,906) 127,751 140,426 145 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORT 22. Deed of cross guarantee continued (b) Consolidated statement of financial position Set out below is a consolidated statement of financial position as at 30 June 2023 of the Closed Group. Consolidated statement of financial position Current assets Cash and cash equivalents Trade and other receivables Derivative assets Inventory Total current assets Non-current assets Investments accounted for using the equity method and subsidiaries 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 Other financial liabilities Provisions Contract liabilities – deferred revenue Total current liabilities Non-current liabilities Trade and other payables Borrowings Lease liabilities Deferred tax liabilities Other financial liabilities Provisions Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Retained earnings Total equity 146 2023 $’000 2022 $’000 35,311 76,943 – 2,065 114,319 3,098,881 25,354 3,205 36,015 15,766 149,312 16,579 3,345,112 3,459,431 35,179 3,885 14,936 1,136 9,063 4,663 68,862 – 681,983 42,677 5,899 5,333 1,165 737,057 805,919 2,653,512 2,451,802 (28,533) 230,243 2,653,512 42,075 56,833 5,526 3,222 107,656 537,689 36,896 4,349 38,076 15,226 158,734 793,072 1,584,042 1,691,698 37,142 3,303 29,560 – 9,036 4,216 83,257 – 649,533 45,017 6,615 1,153 1,069 703,387 786,644 905,054 769,959 27,021 108,074 905,054 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 202323. 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) Key Management Personnel compensation Short-term employee benefits Deferred short-term employee benefits Post-employment benefits Long-term employment benefits Share-based payments (b) Transactions with other related parties The following transactions occurred with related parties: Sale of goods and services to related parties Purchase of goods and services from related parties 2023 $ 6,578,402 783,500 191,944 108,445 2,585,996 10,248,287 2022 $ 7,593,015 715,083 199,803 89,729 78,466 8,676,096 2023 $ 1,417,354 1,914,982 2022 $ 1,282,428 1,741,001 All transactions were made at arms-length, on normal commercial terms and conditions and at market rates. This also includes transactions with associates. (c) Outstanding balances arising from sales/purchases of goods and services The following balances are outstanding at the end of the reporting period in relation to transactions with related parties: Current receivables (sale of goods and services) Other related parties Current payables (purchase of goods and services) Other related parties 2023 $ 2022 $ 43,585 83,115 145,366 12,718 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. 147 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORTITEMS 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. 24. Events occurring after the reporting period No matters or circumstances have occurred subsequent to period end that have 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. 148 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 2023OTHER 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. 25. 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 Other assurance services Total remuneration for audit and other assurance services Taxation services 2023 $ 2022 $ 1,142,545 607,500 – 1,750,045 820,590 250,700 126,498 1,197,788 Tax compliance services, including review of Company income tax returns Total remuneration for taxation services Total remuneration of PricewaterhouseCoopers Australia 153,000 153,000 1,903,045 149,004 149,004 1,346,792 (b) Network firms of PricewaterhouseCoopers Australia Audit and other assurance services Audit and review of Financial Reports Total remuneration for audit and other assurance services Total remuneration of network firms of PricewaterhouseCoopers Australia 313,356 313,356 313,356 217,014 217,014 217,014 Total remuneration for PricewaterhouseCoopers 2,216,401 1,563,806 (c) Non-PwC audit firms Audit and review of Financial Reports Tax compliance services Total remuneration for Non-PwC audit firms Total auditors’ remuneration 306,579 – 306,579 296,529 22,382 318,911 2,522,980 1,882,717 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 compliance services 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. 149 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORT26. 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 $2,683,334 (2022: $2,097,675). Employee Option Plan Set out below are summaries of options and performance rights granted under the plan: 2023 Opening balance Granted during the year Exercised during the year Expired or lapsed during the year Closing balance Vested and exercisable at 30 June 69,961 28,442 51,449 244,714 394,566 $13.33 – 130,084 161,491 58,697 190,727 – 540,999 $0.00 935,565 $5.62 – – – – – – (9,629) (3,089) (6,383) (63,276) (82,377) $13.41 – – – (61,163) (61,163) $13.54 60,332 25,353 45,066 120,275 251,026 $13.25 60,332 25,353 45,066 120,275 251,026 $13.25 – – – – 316,847 316,847 $0.00 316,847 $0.00 (117,958) – (58,697) – – (176,655) $0.00 (259,032) $4.26 (12,126) (1,890) – (13,811) (8,493) (36,320) $0.00 (97,483) $8.50 – 159,601 – 176,916 308,354 644,871 $0.00 895,897 $3.71 – – – – – – $0.00 251,026 $13.25 Exercise price Grant date Options Oct 2016 Oct 2017 Oct 2018 Oct 2019 Total options Weighted average exercise price $12.23 $11.41 $14.87 $13.54 Performance rights Oct 2018 Oct 2019 Oct 2020 Aug 2021 Feb 2022 Dec 2022 Total performance rights Weighted average exercise price Total of plan Weighted average exercise price $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 150 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 20232022 Exercise price Grant date Options Oct 2016 Oct 2017 Oct 2018 Oct 2019 Total options Weighted average exercise price $12.23 $11.41 $14.87 $13.54 Performance rights Oct 2018 Oct 2019 Aug 2020 Oct 2020 Aug 2021 Feb 2022 Total performance rights Weighted average exercise price Total of plan Weighted average exercise price $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 Opening balance Granted during the year Exercised during the year Expired or lapsed during the year Closing balance Vested and exercisable at 30 June 88,221 51,491 426,452 285,056 851,220 $13.94 152,563 153,938 14,461 201,820 – – 522,782 $0.00 1,374,002 $8.64 – – – – – – – – – – 58,697 226,533 285,230 $0.00 285,230 $0.00 (18,260) (22,588) (369,739) – (410,587) $14.56 (8,519) – (14,461) – – – (22,980) $0.00 (433,567) $13.79 – (461) (5,264) (40,342) (46,067) $13.67 (144,044) (23,854) – (40,329) – (35,806) (244,033) $0.00 (290,100) $2.17 69,961 28,442 51,449 244,714 394,566 $13.33 – 130,084 – 161,491 58,697 190,727 540,999 $0.00 935,565 $5.62 69,961 28,442 51,449 – 149,852 $12.98 – – – – – – – $0.00 149,852 $12.98 The estimate of the weighted average share price at the date of exercise of options exercised regularly during the year ended 30 June 2023 is estimated to be approximately $22.16 (2022: approximately $24.92). The weighted average remaining contractual life of share options and rights outstanding at the end of the period was 6.41 years (2022: 9.72 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 58. 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. 151 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORT26. Share-based payments continued Fair value of options and performance rights granted The fair value of the performance rights was determined using a Black Scholes model for those rights with non-market based vesting conditions and using the Monte Carlo method for those rights with market-based vesting conditions. The model inputs for performance rights granted during the year ended 30 June 2023 included: Grant date Share price at grant date Fair value Term Expected price volatility of the Company’s shares Expected dividend yield Risk-free interest rate 15 Aug 22 Non- Market Based $22.90 $22.61 1.00 33.0% 2.5% 3.6% 8 Dec 22 Market Based (35%) $21.71 $13.57 2.70 32.6% 2.3% 3.1% 8 Dec 22 Non-Market Based (65%) $21.71 $20.40 2.70 32.6% 2.3% 3.1% The expected price volatility is based on historical volatility adjusted for any expected changes to future volatility due to publicly available information. No performance rights have a cost to exercise. 27. 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 recognised as 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. 152 Notes to the Consolidated Financial Statements cont.30 June 2023carsales Annual Report 2023(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 tax 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 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 2023 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. 153 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORTDirectors’ Declaration In the Directors’ opinion: (a) the financial statements and notes set out on pages 83 to 153 as it stands now 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 2023 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. Signed in accordance with a resolution of Directors. Cameron McIntyre Managing Director and CEO Melbourne 13 August 2023 154 carsales Annual Report 2023Independent Auditor’s Report to the Members of Carsales.com Ltd 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 2023 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 2023 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 significant accounting policies and other explanatory information 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 & 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. 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 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. 155 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORTIndependent Auditor’s Report to the Members of Carsales.com Ltd cont. 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. The Group operates in the online automotive classifieds markets and is headquartered in Australia. It has operations in Australia, North America, Asia, and Latin America. Materiality ● For the purpose of our audit we used overall Group materiality of $12.5m, which represents approximately 5% of the Group’s profit before tax from continuing operations, excluding the net gain on step acquisition of associates and impairment loss and business closure expenses. ● 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 adjusted profit before tax because, in our view, it is the benchmark against which the performance of the Group is most commonly measured. We adjusted for the net gain on step acquisition of associates and impairment loss and business closure expenses because these are one off in nature. ● We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonly acceptable thresholds. Audit Scope ● Our audit focused on where the Group made subjective judgements; for example, significant accounting estimates involving assumptions and inherently uncertain future events. ● We tailored the scope of our audit to ensure that we performed sufficient work to give an opinion on the financial report as a whole, taking into account the geographic structure of the Group, the significance and risk profile of each business, the accounting processes and controls and the industry in which the Group operates. ● Component auditors in the United States, South Korea and Brazil performed procedures over the Trader Interactive, Encar and Webmotors businesses respectively. The component auditors performed their work under our instruction and supervision. Our involvement included visiting certain locations, meeting with the component audit teams, issuing written instructions and reviewing a selection of component auditor workpapers. 156 carsales Annual Report 2023 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. Key audit matter How our audit addressed the key audit matter Carrying value of goodwill, brands, trademarks and customer relationships for South Korea and North America CGUs (Refer to note 17) At 30 June 2023, the Group has: We performed the following procedures, amongst others: ● Tested the mathematical accuracy of key underlying calculations in the impairment models. ● ● $3,134.0m of goodwill, of which $355.7m relates to the South Korea CGU and $2,101.5m million relates to the North America CGU $925.6m of brands, trademarks and customer relationships, which include those assets within the South Korea and North America CGUs. The Group tests these intangible assets for impairment on an annual basis. The recoverability is assessed on a fair value less costs to sell basis, using impairment models prepared using discounted cash flows. This requires the Group to make significant judgements and assumptions, including estimation of forecast cash flows, terminal value growth rates and discount rates. The carrying value of intangible assets in the North America and South Korea CGUs is a key audit matter due to both the significance of the balances and the degree of subjectivity in the judgements and assumptions. ● Compared the forecast cash flows used in the impairment models with the most recent budgets approved by the Board. ● Assessed the historical accuracy of the Group’s cash flow forecasts by comparing prior budgets to actual performance. ● Compared growth rate assumptions used in the impairment models to historical results, external data sources such as economic and industry forecasts and similar established businesses within the carsales portfolio. ● 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 external market data and comparable companies. ● Considered the disclosures made in note 17, in light of the requirements of Australian Accounting Standards. Step-acquisition accounting for Trader Interactive and webmotors (Refer to note 20) On 30 September 2022, the Group completed the acquisition of the remaining 51% of Trader Interactive for $1,183.2m. The initial 49% equity accounted investment in Trader Interactive was disposed of on this date resulting in a net gain of $337.9m. On 28 April 2023, the Group completed the acquisition of an additional 40% shareholding in webmotors for $368.7m having previously acquired a 30% We performed the following procedures, amongst others for both acquisitions: ● Read the purchase agreements and other selected key documents associated with the transactions and evaluated the Group’s accounting against Australian Accounting Standards. ● With the assistance of our internal valuation experts, we assessed the provisional values of the acquired identifiable intangible assets recognised by: 157 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORT Independent Auditor’s Report to the Members of Carsales.com Ltd cont. Key audit matter How our audit addressed the key audit matter shareholding. The initial 30% equity accounted investment was disposed of on this date resulting in a net gain of $148.6m. The Group undertook a purchase price allocation exercise for both acquisitions in order to calculate the provisional values of identifiable intangible assets. The accounting for the acquisitions is provisional at the time of authorisation of the financial report. The accounting for these acquisitions is a key audit matter due to the significance of the gain to the Group’s result for the year and the judgements made by the Group to determine the fair value of the additional interests acquired. ○ Considering the valuation methodology in light of the requirements of Australian Accounting Standards. ○ Assessing key assumptions used in the valuation by comparing them to external market data and comparable companies. ● ● Tested the mathematical accuracy of the underlying calculations. Assessed if Group’s gain on disposal of the previously held equity accounted investments was appropriately recognised in the consolidated statement of comprehensive income in accordance with Australian Accounting Standards. ● Considered the disclosures made in note 20, in light of the requirements of Australian Accounting Standards. 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 2023, 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 158 carsales Annual Report 2023 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. Report on the remuneration report Our opinion on the remuneration report We have audited the remuneration report included in pages 58 to 77 of the directors’ report for the year ended 30 June 2023. In our opinion, the remuneration report of carsales.com Limited for the year ended 30 June 2023 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 Sam Lobley Partner Melbourne 13 August 2023 159 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORT Shareholder Information The shareholder information set out below was applicable as at 30 June 2023. A. Distribution of equity securities Class of equity security Ordinary shares Holding 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Convertible notes No. of holders No. of holders No. of holders No. of holders Shares Options and performance rights Redeemable preference shares 14,349 6,960 974 584 79 22,946 1 11 4 12 1 29 – – – – – – – – – – – – There were 404 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: Ordinary shares Number held 128,665,157 63,054,566 49,117,522 14,133,690 13,321,331 9,052,513 7,415,810 6,777,680 4,336,087 3,305,427 3,126,261 3,025,000 2,393,551 2,351,277 2,143,704 2,029,521 1,876,758 1,875,000 1,260,500 1,200,000 320,461,355 Percentage of issued shares 34.15 16.74 13.04 3.75 3.54 2.40 1.97 1.80 1.15 0.88 0.83 0.80 0.64 0.62 0.57 0.54 0.50 0.50 0.33 0.32 85.07 HSBC Custody Nominees (Australia) Limited Citicorp Nominees Pty Limited J P Morgan Nominees Australia Pty Limited BNP Paribas Nominees Pty Ltd (DRP) National Nominees Limited BNP Paribas Nominees Pty Ltd (AGENCY LENDING DRP A/C) Netwealth Investments Limited (WRAP SERVICES A/C) Australian Foundation Investment Company Limited Clear-Way Investments Pty Ltd (JAMES FAMILY A/C) Washington H Soul Pattinson & Company Limited BNP Paribas Nominees Pty Ltd (HUB24 CUSTODIAL SERV LTD DRP) Essena Pty Ltd UBS Nominees Pty Limited Steven Kloss Pty Ltd (KLOSS FAMILY A/C) Mutual Trust Pty Ltd Four Us Pty Ltd (GREG & KAREN ROEBUCK FAMILY) Citicorp Nominees Pty Limited (COLONIAL FIRST STATE INV A/C) Billkaren Pty Ltd (ROBINSON FAMILY A/C) Mr Andrew Gajtan Curmi Balfour Pines Pty Ltd (DUX FAMILY A/C) 160 carsales Annual Report 2023 Shareholder Information cont. Options and performance rights issued under the carsales.com Ltd Employee Option Plan to take up ordinary shares C. Substantial holders Substantial holders in the Company are set out below: Bennelong Funds Management Group Pty Ltd D. Voting rights The voting rights attaching to each class of equity securities are set out below: Number on issue Number of holders 895,897 29 Number held 24,778,228 Percentage 6.58 (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. 161 carsales Annual Report 2023INTRODUCTION AND CHAIR/CEO LETTERWHAT WE DO AND OUR OPERATIONSOUR PEOPLE AND CULTUREDIRECTOR’S REPORTCORPORATE GOVERNANCE AND SUSTAINABILITYOUR BOARD AND REMUNERATION REPORTFINANCIAL REPORTCorporate 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) Susan Massasso (Non-Executive Director) (Appointed as a Director on 14 June 2023) Steve Kloss (Alternate Non-Executive Director) (Retired as a Director on 4 November 2022) 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 162 carsales Annual Report 2023carsales Annual Report 2023 163 164 carsales Annual Report 2023

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