Annual Report 2017
GROUP REVENUE*
48%
TRADE REVENUE^
11%
RETAIL & SERVICE
REVENUE^
28.3%
SPECIALIST WHOLESALE
REVENUE^
105.7%
TOTAL GROUP LOCATIONS*
800+
TABLE OF CONTENTS
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IBC
Contents
Highlights
Chairman’s Report
Board of Directors
Chief Executive Officer’s Report
Executive Team
Our Reach
Our History
Segment Overview
Trade
Retail & Service
Specialist Wholesale
Non-Core
Community and Sustainability
Directors’ Report
Auditor’s Independence Declaration
Financial Statements
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s report to the members
Information for Shareholders
Corporate Directory
Annual General Meeting
Date: 2 November 2017
Time: 1pm – 2pm
Address: Level 37, 101 Collins St,
Melbourne, VIC, 3000, Australia
Bapcor Limited
ACN 153 199 912
BAPCOR GROUP EBITDA*
52.4%
TO $117.4M
HIGHLIGHTS
NEW STORES ACROSS
AUSTRALIA
23
EBITDA MARGIN*
12%
GROUP NPAT (PROFORMA)
$71.5m
GROUP STATUTORY EPS*
36.4%
DIVIDENDS PER SHARE
18.2%
SHARE PRICE CAGR
44.5%
SINCE LISTING
BURSON TRADE STORES
160
*Continuing Operations ^Excluding Hellaby
Bapcor Limited is Australia’s leading provider of automotive aftermarket parts, accessories, automotive
equipment and services, and motor vehicle servicing; operating out of over 800 locations across Australia
and New Zealand.
Bapcor’s core business segment is the automotive aftermarket. Our automotive business segment covers
Trade, Retail & Service, and Specialist Wholesale businesses. Non-core Group businesses currently include
Footwear and Resource Services.
1
ANNUAL REPORT 2017
CHAIRM AN’S REPORT
“In the year ahead,
the focus of the Board
will be to oversee
the consolidation and
optimisation of the
expanded Bapcor
Group, and to support
the future strategy
of Bapcor to ensure
continued growth and
sustained success
on behalf of our
shareholders.”
2
BAPCOR NPAT (PRO-FORMA)
$71.5m
On behalf of the Board and all Bapcor team members, I’m proud to present Bapcor Limited’s
annual report for the year ending 30 June 2017.
Bapcor has a very clear vision and growth strategy. Bapcor’s
5 year strategic targets sees Burson Trade grow to 200 stores
(15 were added in FY2017), Retail’s Autobarn chain expand to
200 stores (8 were added in FY2017), and Specialist Wholesale
deliver revenue of $500m. We believe these targets will continue
to deliver strong growth for our shareholders. Further details of
the 5 year strategic targets can be found on the Bapcor website
(www.bapcor.com.au).
The Board has declared a final dividend in respect of FY2017 of
7.5 cents per share, fully franked, resulting in total dividends for
FY2017 of 13.0 cents, fully franked, representing an increase of
18.2% on FY2016.
In the year ahead, the focus of the Board will be to oversee the
consolidation and optimisation of the expanded Bapcor Group,
and to support the future strategy of Bapcor to ensure continued
growth and sustained success on behalf of our shareholders. The
2018 financial year ("FY2018") promises to be another exciting
year for Bapcor as the Group continues its growth trajectory
through continued improved performance of its existing
operations, network expansion, and strategic acquisitions.
I would personally like to thank our CEO, Darryl Abotomey, his
senior leadership team, and our dedicated and passionate Bapcor
team members for delivering yet another outstanding result.
Finally, I would like to express my thanks to our shareholders,
franchisees, customers and suppliers who have contributed to
Bapcor’s success and for their continued support.
Robert McEniry
Chairman
The 2017 financial year ("FY2017") has been another record
year of growth for Bapcor. Bapcor’s core automotive businesses
delivered revenue growth of 48% and strong sales growth. Net
profit after tax growth was 51% to $66m and 64% to $72m
when including non-core operations. Further details on this very
pleasing result are provided in the CEO and Directors’ reports.
Since its initial public offering in 2014, Bapcor’s journey has
been a very exciting one over a relatively short period of time.
Through a combination of sustained organic growth and strategic
acquisitions Bapcor Limited, previously known as Burson Group
Limited, has transformed from a business primarily focused on
the trade segment of the automotive aftermarket into a Group
which now covers the end-to-end automotive aftermarket supply
chain; with businesses in specialist wholesale, trade, retail and
service, operating across Australia and New Zealand.
Bapcor successfully completed a number of acquisitions in
FY2017, including Hellaby Holdings Limited which was acquired
in January 2017. Hellaby Holdings provides Bapcor with a
complementary fit of automotive businesses within the specialty
wholesale and trade segments in Australia and New Zealand.
The natural alignment of the acquisition will provide many
opportunities for future growth and improved efficiencies.
I would like to thank both existing and new shareholders for their
support in this acquisition, and welcome the Hellaby team to the
Bapcor Group.
In addition to the acquisition of Hellaby, Bapcor’s Specialist
Wholesale segment expanded with the acquisitions of Roadsafe,
Baxters Auto Electrical and MTQ Engine Systems. These newly
acquired businesses, combined with the strong performance of
the existing specialist wholesale businesses, delivered revenue
growth of 106% for the segment.
Bapcor’s Trade segment remains the engine room of the Group’s
financial performance. In FY2017 Burson Trade delivered revenue
growth of 11%. Combined with Hellaby's trade business, trade
now accounts for more than half of the total revenue generated
from Bapcor’s core automotive operations.
The Retail and Service segment delivered revenue growth
during the year of 28% and 2% same store sales growth. Our
franchise and company-owned store network expanded strongly
in the financial year via a combination of Greenfield sites and
acquisitions.
3
ANNUAL REPORT 2017 BOARD OF DIRECTORS
Robert McEniry
Independent,
Non Executive Chairman
Therese Ryan
Independent,
Non Executive Director
Darryl Abotomey
Managing Director and
Chief Executive Officer
Margaret Haseltine
Independent,
Non Executive Director
Andrew Harrison
Independent,
Non Executive Director
Robert was appointed
to the Bapcor Board
in March 2014 as an
Independent Non-
Executive Chairman.
Robert has extensive
experience in the
automotive industry
both in Australia and
overseas, holds a
Master of Business
Administration from the
University of Melbourne
and is a Member of the
Australian Institute of
Directors.
Therese was appointed
to the Board in March
2014 as an Independent,
Non-Executive Director.
Therese is a professional
non-executive director
and has extensive
experience as a senior
business executive and
commercial lawyer
working in widely
diversified businesses
in Australia and
internationally, holds
a Bachelor of Laws
from the University
of Melbourne and is a
Graduate Member of
the Australian Institute
of Directors.
Darryl was appointed to
the Board in October 2011
as Chief Executive Officer
and Managing Director.
Darryl has more than ten
years’ experience in the
automotive aftermarket
industry with extensive
experience in business
acquisitions, strategy,
finance, information
technology and general
management in
distribution and other
industrial businesses,
holds a Bachelor of
Commerce (Hons)
majoring in accounting
and economics from the
University of Melbourne
and is a Member of the
Australian Institute of
Directors.
Margaret brings more
than 30 years’ business
experience in a broad
range of senior positions
and 10 years experience
in broad directorship.
A proven executive
leader, Margaret has
significant experience
in the areas of supply
chain and logistics,
customer interface
in the FMCG sector,
change management,
governance, and
management within
a large corporate
environment. Margaret
holds a Bachelor of
Arts Degree, Diploma in
Secondary Teaching from
the Auckland University
and is a Fellow of the
Australian Institute of
Company Directors.
Andrew was appointed
to the Board in March
2014 as an Independent
Non-Executive Director.
Andrew is an experienced
company director and
corporate advisor with
public, private and
private equity owned
companies. Andrew, holds
a Bachelor of Economics
from the University of
Sydney and a Master of
Business Administration
from The Wharton
School at the University
of Pennsylvania, is a
Chartered Accountant
is and a Member of the
Australian Institute of
Directors.
4
BAPCOR ” We are proudly diverse at Bapcor but not resting
on our laurels and always looking to be better at
everything we do.”
5
ANNUAL REPORT 2017 CHIEF EXECUTIVE OFFICER’S REPORT
"Bapcor’s
achievements this
year have been
possible due to the
focus and dedication
of Bapcor’s team
members and
franchisees."
6
BAPCOR GROUP REVENUE* UP BY 48% TO
$1,014m
An exceptional set of financial results have been delivered in FY2017, with excellent growth achieved across
all measures and the acquisition of Hellaby Holdings exceeding expectations.
FY2017 has been another transformational year for Bapcor,
continuing a sustained trend of strong performance since Bapcor’s
initial public offering (IPO) in 2014. An exceptional set of financial
results have been delivered this financial year, with excellent
growth achieved across all measures and the acquisition of Hellaby
Holdings exceeding expectations.
A number of key acquisitions took place during the year, the most
sizeable being Hellaby Holdings Limited which Bapcor acquired in
January 2017.
It has been pleasing to see in the six months post-acquisition how
complementary Hellaby Automotive businesses have proven to
be with Bapcor’s existing operations. The acquisition, integration
and optimisation process has surpassed initial business case
projections. In addition, Hellaby produced an excellent result in
the six months to June 2017, demonstrating a very good return on
investment with further upside potential.
Bapcor has completed a strategic review of the Hellaby Resource
Services and Footwear businesses and have classified these
businesses as non-core operations. The Resource Services
and Footwear businesses are now progressing through a
divestment program.
Whilst Bapcor’s performance has been accelerated by the inclusion
of Hellaby, it has also been supported by the strong performance
of its underlying businesses, as well as by other acquisitions made
during the year including Roadsafe, Baxters Auto Electrical and
MTQ Engine Systems. In addition, Bapcor added 8 Autobarn and
15 Burson stores to our national network.
All acquisitions are performing well and have made positive
contributions to Bapcor’s growth throughout the year. A year
which has seen Bapcor grow to employ over 6,000 team
members and operate in more than 1,000 locations worldwide,
including over 800 locations and 3,700 team members in the core
automotive businesses.
The focus and dedication of Bapcor’s team members and
franchisees has again enabled us to deliver strong growth.
I’d like to express my thanks for their continued contribution to our
great business.
Key highlights for the continuing automotive business in
comparison to FY2016;
• Revenue – Growth of 48% to $1,014M; 77% growth when
including non-core operations.
• Same Store Sales – Burson Trade Up 4.6%; Autobarn Up 2%;
Brake & Transmission NZ (“BNT”) Up 8%.
• EBITDA pro-forma – Increased 52.4% to $117.4m.
• NPAT pro-forma – Increased 50.9% to $65.8m; 64.2% to
$71.5m when including non-core operations.
• EPS pro-forma – Up 36%; 48% including non-core operations.
Revenue and Same Store Sales Growth
Revenue growth was 48% to $1,014m or 77% to $1,210m when
including non-core operations in FY2017. Growth was largely
driven by: the acquisition of Hellaby Holdings, which contributed
six months of revenue; additional acquisitions including Roadsafe,
Baxters Auto Electrical and MTQ Engine Systems; 23 stores added
to the network, 8 Autobarn stores and 15 Burson stores; as well as
solid organic sales growth from existing stores.
Burson Trade revenue growth was 11% in FY2017 compared with
FY2016, and included 4.6% same store sales. Retail and Service
revenue increased 28.3%, including one additional month due to
the timing of the Metcash Auto acquisition in FY2016, and included
2% same store sales in Autobarn. Specialist Wholesale revenue
growth was 105.7%, driven by new acquisitions and underlying
growth. Hellaby Automotive contributed sales of $146.7m, and
generated 8% same store sales growth in its New Zealand
Trade business, and 7% same store sales growth in its Specialist
Wholesale business.
Earnings before interest, tax, depreciation
and amortization (EBITDA)
Proforma EBITDA in FY2017 increased by 52.4% on FY2016 to
$117.4m, or by 74.1% to $134.2m including non-core operations.
Burson Trade EBITDA increased by 22.2% to $63.3m, driven by
sales growth and margin improvement. As a percentage of sales,
Burson Trade EBITDA increased by 1.2 percentage points. Retail
and Service EBITDA increased by 30.3%, including one additional
month due to the timing of the Metcash Auto acquisition in
FY2016, including increased revenue and improved margin from
its underlying businesses. Specialist Wholesale EBITDA increased
by 141% in FY2017 driven by new acquisitions and complemented
by growth in intercompany sales. Hellaby Automotive contributed
$15.1m EBITDA, with improving profitability.
Net Profit After Tax (NPAT)
NPAT grew by 51% to $65.8m in FY2017 on a pro-forma basis or
increased by 64.2% to $71.5m including non-core operations. The
NPAT growth reflects the profit related to business acquisitions
and the solid growth of Bapcor’s existing businesses across each
of the Trade, Retail & Service and Specialist Wholesale business
segments.
Earnings Per Share (EPS)
EPS growth was significant in FY2017, up 36% on a pro-forma
basis or up 48% on a proforma basis including non-core
operation; continuing a positive trend of growth, which delivered
31.0% growth in FY2016 and 19.1% growth in FY2015.
7
ANNUAL REPORT 2017 SEGMENT
HIGHLIGHTS
OPERATIONAL RESULTS
STRATEGY
Trade delivered revenue
growth of 26% in FY2017.
Burson Trade, being Burson
Auto Parts and Precision
Automotive Equipment,
generated 11% revenue growth.
BNT Automotive, acquired
through the Hellaby Holdings
acquisition, contributed $62m
in revenue for the 6 months to
June 2017.
Burson Trade same store sales
increased by 4.6% in FY2017,
and experienced positive growth
in every state and region.
People development continues
to be a key priority, Burson
Trade ran 26 development
courses throughout the year
with over 600 participants.
BNT demonstrated excellent
same store sales growth
of 8%, and expanded into
commercial parts.
Bapcor’s Trade strategy is to
be the “parts professionals”
in supplying mechanical
workshops. Burson Trade
continued its progress toward
its 5 year strategic target of
200 stores Australia-wide, with
the addition of 15 new stores.
The segment made significant
progress toward its target
of 30% Own Brand products
reaching 22%.
The Retail & Service store
network stands at 385 stores,
comprised of 331 franchise
stores and 54 company owned
stores. Our network includes the
premium retail channel Autobarn
as well as Autopro, Sprint, 4WD
specialist Opposite Lock, and auto
service centres under the Midas,
ABS and The Shock Shop brands.
Revenue growth was 28% and
EBITDA increased 30% in FY2017,
with one additional month
included in comparison to FY2016
due to timing of the Metcash
Automotive Holdings acquisition.
Bapcor’s Specialist Wholesale
businesses are industry leaders
in their specialist key product
categories covering braking,
bearings, suspension, thermal
cooling, electrical, diesel,
4WD and batteries. Specialist
Wholesale experienced
significant growth in FY2017,
due to a combination of
acquisitions and organic growth;
revenue increased 106% and
EBIT increased by 141%.
Through the Hellaby Holdings
acquisition Bapcor acquired
assets classified as non-core to
its continuing operations; the
Resource Services Group and
Footwear business segments.
These non-core assets have
provided a good return on
investment in the six months to
June post-acquisition.
Autobarn same store sales
growth was 2% in FY2017.
With national campaigns
(up 10%), click and collect
(up 45%) and new loyalty
programs contributing to the
positive sales growth. Autobarn
achieved its single largest sales
day in history and its highest
greenfield growth in 20 years.
Service sales were at its highest
rate in over 10 years, and had its
highest average store sales ever.
FY2017 also saw the benefits
of the Metcash acquisition
optimisation program delivered
and the implementation of retail
franchisee incentive programs.
The Retail strategy remains
unchanged, Autobarn continues
to be the premium retailer of
automotive accessories, and has
continued its progress toward
200 stores with the addition of
8 stores to bring its total store
network to 122; comprising
91 franchise stores (75%) and 31
(25%) company owned stores.
Retail made progress on its
Own Brand products target of
35%, reaching 16% in FY2017. A
strategic review of Service has
been completed, our Service
strategy is to be 'the experts
at scheduled car servicing at
affordable prices'.
The Specialist Wholesale
segment expanded significantly
in FY2017 with the acquisition
of Hellaby Holdings as well as
specialist wholesale businesses
of Roadsafe, Baxters Auto
Electrical and MTQ Engine
Systems. All Specialist Wholesale
business units achieved
revenue and profit growth
in FY2017. Hellaby Holdings
Specialist Wholesale businesses
contributed $84.9m revenue in
the six months post-acquisition
and 7% same store sales growth.
Footwear and the TBS
component of Resource
Services have demonstrated
strong performance. For the six
month period post-acquisition,
Resource Services revenue was
$132m and proforma EBITDA
was $11m. Footwear recorded
$65m revenue and $6m EBITDA.
Specialist Wholesale made
great strides toward its 5 year
strategic target in FY2017,
with turnover in Australia
reaching $350m compared to
the strategic target of $450m.
In New Zealand, turnover was
$35m against the strategic
target of $50m. Intercompany
sales continued its year on year
growth trajectory.
Bapcor believes these
businesses will better achieve
their full potential with owners
focused on the respective
segments. Accordingly, a
divestment program for the
Resource Services Group
and Footwear is underway
and progressing through the
appropriate stages.
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8
BAPCORCHIEF EXECUTIVE OFFICER’S REPORT
"The Retail &
Service store
network stands
at 385 stores,
comprised of 331
franchise stores
and 54 company
owned stores."
9
ANNUAL REPORT 2017 Share Price
The sustained growth of Bapcor across all key indicators has
been reflected in the Group’s share price since listing on the
Australian Securities Exchange (ASX) in April 2014 at a price of
$1.82. At 30 June 2017 the share price has increased more than
200% since the IPO to $5.49.
Optimisation Program
Hellaby management have been highly cooperative in
assisting the transition of Hellaby businesses into the Bapcor
group. This has included gaining a greater understanding of
the businesses and looking at opportunities to optimise the
expanded Bapcor Group. In April 2017, all automotive business
unit managers met to discuss optimisation opportunities for
the Group. Approximately 75 opportunities were identified,
with the majority emanating from the Hellaby acquisition.
The opportunities identified were consolidated down to nine
categories, including; intercompany sales, direct and indirect
procurement, increased sales, strategic growth, shared services
and people development.
The benefit expected to be realised from the Optimisation
Program was announced to investors in July 2017. Total benefits
in the range of $8m and $11m EBIT are expected to be delivered
by FY2020, not including reductions in head office costs. The
optimisation benefits are in addition to the returns previously
indicated, which would result in an indicative EPS growth
percentage in the low 20’s by FY2020. The return on investment
including optimisation benefits will exceed the original business
case for the Hellaby Holdings acquisition.
Warehouse Evolution Project
Bapcor aims to be the most efficient in the automotive
aftermarket supply chain and we plan to evolve our warehousing
and logistics function into world class state of the art facilities.
External consultants have completed a 12-month review of our
distribution centres and developed a 5 to 7 year implementation
program which will prioritise a new warehouse management
system, port splitting on imports, transport contracts, and new
warehousing facilities utilising the latest technology. The project
is expected to cost c. $30m to $40m in capital expenditure and
project expenses and generate annual returns of $10m to $15m
EBIT by year 5.
Online Retailing and Electric Cars
Over the course of FY2017, two of the most frequently asked
questions from investors have been in regard to the topics of
on-line retailing and electric cars.
Bapcor has a growing online presence however with more than
75% of our business in Trade and Wholesale, we see minimal
online impact in these areas due to the high level of product
expertise as well as the requirement to deliver parts quickly
to workshops that necessitates an extensive store network.
Automotive parts are not currently amongst the most popular
online sales categories for Amazon or eBay. When international
players such as Amazon do enter the market, we anticipate their
primary focus will be on consumer goods such as electronics,
health & beauty, kitchen & home, etc. in the initial stages. If and
when new market entrants do introduce auto parts online, it’s
likely these will be consumer products which do not require
professional fitment or advice. It’s in these areas of fitment and
advice that Bapcor’s retail stores focus on. However, there may
be an opportunity for Bapcor businesses to further increase its
participation in the online channel for certain product categories.
Hybrid and electric cars in Australia currently make up just 2.2%
of the Australasian car parc. In the last quarter of FY2017, sales of
hybrid and electric cars accounted for only 1% of car sales. This
underlines what will be a very slow rate of change for the car
parc in Australia and New Zealand. Based on Bapcor’s projections,
it will be many years before electric cars reach a significant
portion of the car parc. This being said, Bapcor will continue to
evolve and adapt to the car parc as it has done so historically.
Bapcor is well placed to supply electronic components and
batteries, especially through our electrical and electronics
wholesale businesses. Bapcor is well prepared to deal with car
parc changes in the future, and we will continue to optimise the
business as is appropriate.
Revenue* ($m)
EBITDA* & NPAT* ($m)
1000
800
600
400
200
0
1,013.6
685.6
306.3
341.6
375.3
FY2013
FY2014
FY2015
FY2016
FY2017
* Based on continuing operations only and proforma results where appropriate
10
120
100
80
60
40
20
0
EBITDA
NPAT
36.0
19.3
41.5
23.1
117.4
65.8
77.0
43.6
FY2014
FY2015
FY2016
FY2017
BAPCORCHIEF EXECUTIVE OFFICER’S REPORT Bapcor’s strategy
will focus on
consolidating and
optimising the
business covering
the end-to-end
automotive
aftermarket supply
chain.
Outlook
The outlook for FY2018 is very positive, with continued business
and profit growth, and the inclusion of a full twelve months
trading of Hellaby Automotive, Roadsafe, Baxters Auto Electrical
and MTQ Engine Systems. NPAT from continuing operations is
forecast for further growth of circa 30%.
Bapcor’s strategy will focus on consolidating and optimising the
business covering the end-to-end automotive aftermarket supply
chain. Benefit from the vertical integration and optimisation
programs will begin to be realised in FY2018 with an estimated
EBIT benefit of $2 — $3m. Trade and Retail business segments will
continue to achieve organic growth and store network expansion.
Bapcor’s exceptional growth trajectory and robust performance
since its IPO in 2014 would not be possible without the
contribution of each and every Bapcor team member and
franchisee. It’s thanks to the unrelenting passion and drive of
Bapcor team members and franchisees that Bapcor continues
to be Australasia’s leading provider of aftermarket parts,
accessories, equipment and services.
Darryl Abotomey
Managing Director and Chief Executive Officer
EPS (cps)*
Dividends per share*
25
20
15
10
5
0
24.4
17.9
13.6
FY2015
FY2016
FY2017
15
12
9
6
3
0
Final
Interim
8.7
4.7
4.0
11.0
6.0
5.0
13.0
7.5
5.5
FY2015
FY2016
FY2017
11
ANNUAL REPORT 2017 EXECUTIVE TEAM
Darryl Abotomey
Managing Director
& Chief Executive Officer
Mathew Cooper
Executive General
Manager – Development
Colin Daly
Chief Executive Officer –
Hellaby Automotive Group
Paul Dumbrell
Chief Operating Officer –
Specialist Wholesale
Greg Fox
Chief Financial Officer and
Company Secretary
Darryl is the Managing
Director & CEO of Bapcor
Limited, having been
appointed in October 2011.
He is also Chairman of
Bapcor Finance Pty Ltd.
Darryl has more than
10 years’ experience in
the automotive industry
and extensive knowledge
in business acquisitions,
mergers and strategy.
Previous Director and
Executive roles have been
with Repco, Paperlinx,
Amcor, Signcraft and CPI.
He holds a Bachelor of
Commerce majoring in
accounting and economics
from the University of
Melbourne.
Mat has over 15 years’
experience in the
automotive, industrial
and public accounting
sectors. Mat commenced
as Executive General
Manager – Development
within Bapcor in February
2016 and previously was
the General Manager –
Commercial of the ANA
business. Prior, he held
other roles with Amcor,
General Motors and
Deloitte Touche Tohmatsu.
Mat is responsible
for the development,
co-ordination and
consolidation of strategies
and plans for the
expansion of Bapcor.
Colin has been the Chief
Executive Officer of
the Hellaby Automotive
Group since April 2013.
Colin has held senior
leadership roles in the
UK and NZ supermarket
sector, led Repco’s
businesses throughout
Australasia and was
CEO of Ideal and Rexel
Electrical distribution
businesses. Colin has
a Post Grad Diploma in
Operations Management
and is a member of the
New Zealand Institute of
Directors.
Paul has been in the
automotive industry
for over 15 years and
commenced with
Automotive Brands Group
in 2007 within their
marketing department.
Prior to his current
role, he was the Chief
Executive Officer of
Aftermarket Network
Australia under both
Metcash and Bapcor
ownership. Paul is now
responsible for the
Specialist Wholesale
segment including AAD,
Opposite Lock, Bearing
Wholesalers, Baxters,
Roadsafe and MTQ.
Greg has more than
25 years’ experience in the
automotive, industrial and
public accounting sectors.
Greg joined Bapcor as
Chief Financial Officer in
2012 with responsibility
for finance, legal, business
services, company
secretarial and plays a key
role in strategic initiatives.
Greg was previously Chief
Financial Officer at Atlas
Steels and at Plexicor,
which was a major
supplier to the automotive
industry. Greg also held
various senior financial
positions with Amcor after
commencing his career as
a Chartered Accountant.
12
BAPCOR
Grant Jarrett
Executive General
Manager – Operations
Alison Laing
Executive General Manager
– Human Resources
Craig Magill
Executive General
Manager – Trade
Peter Tilley
Executive General
Manager – Retail
Grant brings over
35 years’ experience in
the automotive industry
to Bapcor, holding
various senior roles at
components manufacturer
RMP, new vehicle
dealerships and within the
Automotive Brands Group.
Grant is responsible for
the Group’s distribution
centres and logistics as
well as merchandise and
product development,
wholesale sales,
replenishment and
events within the Retail
business unit.
Alison joined Bapcor as
the Executive General
Manager – Human
Resources in May 2017.
With more than 20 years’
Human Resources
experience Alison has
spent much of her career
partnering with senior
leaders to develop team
capability and drive
business outcomes
and has worked with
organisations such as
Orora, PaperlinX and
Coles Myer. Alison holds
a Bachelor of Commerce,
majoring in management
and industrial relations,
from the University of
Newcastle.
Craig has an extensive
career in the automotive
after-market industry
spanning more than
25 years. Starting as a
management cadet and
working through most of
the key operational and
sales positions in after-
market parts distributors.
Before joining Bapcor,
he was the General
Manager of RAC’S (WA)
automotive workshops,
which was preceded by
many years at Repco.
He holds a Masters in
Business from Melbourne
University. Craig joined
Bapcor February 2012
and is responsible for all
aspects of the Burson
Trade segment.
Peter is responsible
for the Company
and Franchise Retail
Operations for the
Autobarn, Autopro, Sprint,
Midas and ABS networks.
This includes development
and implementation of
retail programs across
brand marketing, retail
training, business field
support, property
management and new
store development. Peter
has spent over 30 years
in Retail and has worked
with a variety of national
retail businesses most
recently as GM Retail for
the Amcal and Guardian
Pharmacy networks.
13
ANNUAL REPORT 2017 OUR REACH THROUGH OVER 800 AUTOMOTIVE LOCATIONS
NO. OF LOCATIONS NORTHERN TERRITORY
13
NO. OF LOCATIONS WESTERN AUSTRALIA
60
NO. OF LOCATIONS SOUTH AUSTRALIA
101
10
41
9
3
6
4
13
82
6
NO. OF LOCATIONS VICTORIA
191
NO. OF LOCATIONS TASMANIA
14
14
BAPCOR NO OF LOCATIONS QUEENSLAND
159
AUTOMOTIVE
Trade
Retail & Service
Specialist Wholesale
40
93
26
NO OF LOCATIONS NEW SOUTH WALES
NO OF LOCATIONS NEW ZEALAND
159
2
3
1
42
101
16
50
119
22
4
9
1
NO OF LOCATIONS ACT
6
106
55
27
24
15
ANNUAL REPORT 2017 OUR HISTORY
2004
2005
Burson opens
its 50th store.
Burson moves
into purpose
built head office
and distribution
centre in Preston,
Victoria.
1971
Burson founded by
Garry Johnson and
Ron Burgoine in
Victoria, Australia.
1986
Garry Johnson
acquires 100%
holding.
16
2014
Burson Group
Limited lists on
the Australia
Securities
Exchange (ASX).
BAPCOR 2011
Burson acquired by
MBO and Quadrant
Private Equity.
2016
2017
Bapcor acquires
Hellaby Holdings.
Burson Group
Limited acquires
Precision Automotive
Equipment, Bearing
Wholesalers and
Sprint Auto Parts.
Burson Group
Limited becomes
Bapcor Limited.
Bapcor acquires
Roadsafe Automotive
Products, Baxters
Auto Electrical and
MTQ Engine Systems
(Aust) Pty Ltd.
2015
Burson Group
Limited acquires
Metcash Automotive
Holdings (renamed
Aftermarket Network
Australia or ANA).
17
ANNUAL REPORT 2017 SEGMENT OVERVIEW
18
BAPCOR Bapcor Limited is Australasia’s leading provider of
automotive aftermarket parts, accessories, automotive
equipment and services. Bapcor’s core business is the
automotive aftermarket operating throughout the supply
chain segments Trade, Retail & Service, and Specialist
Wholesale across Australia; and extending to New Zealand
with the recent acquisition of Hellaby Automotive.
TRADE
RETAIL & SERVICE
SPECIALIST WHOLESALE
NON-CORE
Bapcor is Australasia's leading trade
focused automotive aftermarket parts
distributor and operates in one of the most
complex car parcs in the world with over
400 makes and models.
Bapcor's focus is the distribution of auto
parts to independent and chain mechanic
workshops throughout Australia and New
Zealand. Bapcor distributes over 500,000
unique parts from over 1,000 suppliers
through an extensive distribution network.
Bapcor Trade similarly offer a complete
range of workshop equipment to fit-out and
maintain a workshop.
Bapcor’s ‘Retail & Service’ segment
distributes parts and accessories from a
wide variety of brands via a network of over
385 company-owned and franchise stores.
Bapcor’s auto service centres are trusted
household names in the Australian market
and are experts at scheduled car services
at affordable prices
As industry leaders, Bapcor's Specialist
Wholesale segment supplies an extensive
range of products through a vertically
integrated supply chain within the Bapcor
Group and to the broader Automotive
Aftermarket. Key product categories
include, braking, bearings, suspension,
thermal cooling, electrical, electric controls,
diesel, 4WD and batteries.
Principally sourced from overseas and
imported for supply to the industry, Bapcor's
extensive range of own branded products
is augmented by locally sourced premium
brands.
Hellaby Automotive
Hellaby Automotive was acquired as part
of the Hellaby Holdings Ltd takeover
in January 2017 and has locations in
New Zealand and Australia operating
across more than 120 locations.
Complementing Bapcor’s existing Trade
distribution and auto-electrical Specialist
Wholesale businesses, Hellaby introduces
BNT and Truck & Trailer Parts to the Trade
segment which supplies automotive and
truck parts and accessories to workshops
in New Zealand and is akin to the Burson
Automotive Business in Australia. Hellaby
Speciality Wholesale businesses that
operate trans-tasman include the supply of
auto-electrical components, batteries, diesel
fuel components and agricultural tyres
and wheels.
Integrating the Hellaby Automotive
business units under the existing Bapcor
segments of Trade and Specialty Wholesale
aligns the Bapcor group and its vision
as being Australasia's Leading Provider
of Aftermarket Parts, Accessories and
Services.
Bapcor is confident that the expanded
Bapcor businesses will work together to
capitalise on its optimisation program as
announced in July 2017. Bapcor estimates
that it will achieve optimisation benefits
over the next three years predominately
from the areas of direct and indirect
procurement, intercompany sourcing,
increased sales, freight, shared business
services and expansion in product ranges.
Accompanying the acquisition of the Hellaby
core automotive businesses were Resource
Services and Footwear; while these business
units provided a good return on assets for
the 6 months to June 2017, Bapcor have
deemed these businesses as non-core and
are currently undergoing a divestment
program.
19
ANNUAL REPORT 2017 SEGMENT REVIEW
Bapcor’s Trade segment is made up of Burson Auto Parts
and Precision Automotive Equipment in Australia along
with the New Zealand based BNT and Truck & Trailer Parts
companies.
It has also been a successful year of
integration for Precision Auto Equipment
to the Bapcor trade segment. A migration
of the company’s equipment product
offering has taken place and the sales
performance during this period is
tracking ahead of target.
BNT Automotive/Truck & Trailer
Parts New Zealand
BNT and TATP performed very strongly
throughout FY2017. The BNT group
comprises 53 BNT branded automotive
parts stores across New Zealand and two
TATP stores, providing a market leading
footprint of 55 automotive aftermarket
channels to market across the country.
Sales growth of 9% from major franchise
chain stores contributed to BNT’s FY2017
total year on year sales growth result of
8% and wiith the support of TATP’s 220%
sales revenue growth from direct account
sales and marketing expertise, BNT’s
commercial vehicle segment saw year on
year sales grow by 42% during FY2017.
North Island based BNT store performance
was very strong with a significant
increase in sales that offset the impact
of earthquake events in the South Island.
Focus has been placed on BNT store
network optimisation, with a number of
store relocation and expansion activities
completed with additional branch location
improvements identified.
Since becoming a part of the Bapcor
group in January 2017, significant focus
has been placed on process integration
and learnings between the Australian
and New Zealand businesses. This has
been instrumental in achieving consistent
sales disciplines and margin performance
across the group.
Burson Auto Parts and BNT are renowned
for their continually ascending trade
market leadership within each of their
territories. The trade segment has
also embarked on a detailed store
benchmarking program, as part of the
company’s continuous process of best
practice development across its store
network.
Bapcor’s Trade segment has performed
strongly throughout FY2017. During
this period the company’s extensive
automotive trade operations across
Australia have returned solid same store
sales and EBIT growth.
The New Zealand based Brake &
Transmission NZ (“BNT”) and Truck &
Trailer Parts’ ("TATP") businesses have
been a part of the Bapcor trade segment
for the second half of FY2017, with sales and
profit performance having exceeded the
company’s expectations.
Burson Auto Parts
Burson Auto Parts has grown significantly
during FY2017, with 15 new stores added
to the fully company owned and operated
national network, taking the Burson Auto
Parts store total to 160 across each state
and territory of Australia. Same store
sales growth across the year reached
4.6%.
Burson Auto Parts attributes the
impressive store sales growth results
throughout the national network to
a number of factors. The first being
continued investment in learning and
development for its store staff and
management personnel. During FY2017,
Bapcor organised and delivered more
training days to focus on building the
capabilities of its Burson Auto Parts
staff teams than ever before in order to
facilitate the company's continued growth
along with its leadership status as the
Australian automotive trade’s supplier
of choice.
The company has also invested in
programs that have been designed to
provide business support to its Australian
trade customers, assisting in areas such
as sales training and marketing. This has
further enhanced Burson Auto Parts’
trade customer loyalty.
20
BAPCOR “Bapcor’s Trade segment
continues to perform very
strongly with strong store and
sales growth. The successful
integration of strategically
aligned businesses in both
Australia and New Zealand
has also contributed to
the segment’s strong 2017
Financial Year results.”
Craig Magill – Executive General
Manager, Bapcor Trade.
Image: David Anderson, Store Manager, Burson – Mitcham Store
21
ANNUAL REPORT 2017TRADE There are now 160 stores in the Burson
Auto Parts national network with 15 new
stores added in strategic automotive
repairer locations during 2017. Same store
sales growth across the year reached 4.6%.
Image: Above: Burson – Mitcham Store Team Members,
Kristofer Lethborg, Kim Hamilton, Todd Lewis and
David Anderson – Store Manager
22
BAPCORTRADESEGMENT REVIEW Precision Automotive Equipment is one of Australia’s
leading suppliers of automotive workshop equipment to
car dealerships, service and repair franchise groups and
independent repairers. This recent acquisition to Bapcor’s
trade segment is performing beyond its investment
expectations.
Development of
Burson Auto Parts’
high quality own
brand automotive
aftermarket product
range is continuing to
generate increased
sales and profit for the
business. Expanded
ranges across many
product groups are
being developed.
There are 53 BNT Automotive stores across the North and
South Islands of New Zealand. Store performance has been
strong with year on year sales growth of 8%. The expansion
and relocation of key stores during FY2017 is set to continue.
Truck and Trailer Parts in New Zealand operates in the
heavy haulage and general commercial vehicle aftermarket.
23
ANNUAL REPORT 2017 SEGMENT REVIEW
The Retail and Service division reported very
strong earnings growth in FY2017 with good
performance from all business units which include
Autobarn, Autopro, Sprint Auto Parts, CarParts,
The Shock Shop, Midas and ABS.
The Retail and Service segment delivered
revenues of $221.0m an increase of 28.3%
on FY2016, with an EBITDA of $28.2m up
30.3% on the FY2016 results. EBITDA as
a percentage of sales increased by 0.2
percentage points from 12.6% in FY2016
to 12.8% in FY2017. As at June 30 2017 the
total number of company and franchised
stores in the Retail and Service segment
reached 385 consisting of 122 Autobarn,
86 Autopro and 38 Sprint Auto Parts
stores with 139 Midas and ABS Service
Centres.
Autobarn remains the premium retailer
of automotive parts and accessories
in Australia. During FY2017 Autobarn
delivered a solid performance in a very
competitive retail environment. FY2017
saw growth in a number of key categories
where Autobarn can offer a full solution
to the consumer with range, advice and
fitment on a number of key categories.
Autobarns full service offer, in-store
product fitment, extensive range and high
profile stores differentiates Autobarn in
the automotive retail segment.
Autobarn continued to grow the store
network in line with our growth targets.
During FY2017 Autobarn store numbers
increased by 8 to 122. Company stores
now represent 25% of the network with
the remaining 75% operating under our
franchise program. Bapcor will continue to
evolve both the Autobarn store design to
provide an enhanced consumer shopping
experience and its marketing and support
programs.
FY2018 will see more store growth along
with refurbishments of existing stores.
Our franchisees are incredibly important
to the growth and development of the
Autobarn brand in Australia; they offer
an unparalleled level of knowledge and
experience that sets them apart. Bapcor
has given a firm commitment to continue
to support our franchisees with the
extensive services we provide.
The Bapcor business continues to offer
extensive support to the other Bapcor
franchise groups which include Autopro
and Sprint Auto Parts. Autopro has been
part of the automotive aftermarket
landscape in Australia for over 35 years
providing high levels of service in the
markets that they operate. The Autopro
group are majority franchise operated
and benefit from the support Bapcor
can provide with retail catalogues, brand
support and product access via our
extensive supply chain capabilities. Sprint
Auto Parts has had its first full year under
Bapcor ownership delivering a solid result
to the group. Sprint Auto Parts are a
primarily franchisee operated group with
the majority of their stores located in
South Australia.
Opposite Lock are a network of
4 wheel drive specialist stores. With
the continuing growth of 4 wheel drive
vehicles in Australia, the Opposite Lock
offer remains highly relevant. Opposite
Lock stores offer a comprehensive range
of quality products, years of experience
and can provide the right solutions for
the 4 wheel drive enthusiast. With stores
throughout Australia, the Opposite Lock
team are all 4WD enthusiasts, ensuring
that consumers are being guided
and supported by the best experts in
the nation.
The Service division delivered a solid
performance in FY2017. Midas posted its
most successful sales result in the last
10 years. The 89 store Midas network
included the addition of 4 new franchisees
to the system and a new location in
Ballarat, Victoria. Well positioned with
its combination of brake specialty and
general servicing consumer offer the
ABS group also delivered a solid FY2017
performance including great results for
the franchisee of the new store located in
Midland, Western Australia.
24
BAPCOR Image: Alex Goljanin, Autobarn Team Member, Nunawading
25
ANNUAL REPORT 2017RETAIL & SERVICE Autobarn is the premium retail offering
in our network.
With over 120 stores throughout Australia, the team at
Autobarn can help customers get exactly what it is they
want for their car.
Providing customers with the latest in car audio, keeping
their car looking show room new, making sure the engine
gets the care it needs or finding just the right parts and
tools to do it yourself, the Autobarn team can help.
Autobarn stores also fit what they sell on site including
wiper blades, light globes, car audio, dash cams, batteries,
roof racks, storage pods and seat covers.
ABS Automotive Service Centres are a network of automotive
specialists operating across Australia.
ABS is a one stop shop for all servicing needs; spanning logbook
services, brake, clutch, cooling system, suspension, steering and
any other mechanical repairs or services.
26
BAPCORRETAIL & SERVICESEGMENT REVIEW Established in 1982, Autopro is Australia’s oldest
independent automotive aftermarket parts and accessories
retailer.
Autopro stores are locally owned and operated and therefore
can respond to their community’s unique needs by adding
specialised ranges to their core offer.
Autopro dealers are very knowledgeable about all
things automotive and provide customers with the right
information and advice to keep them out on the road.
Opposite Lock is a chain of over 70 4WD specialist accessory
stores in Australia and selected export markets. OL offers a
comprehensive range of accessories and equipment to suit
all popular 4x4s and SUV’s.
Encompassed within the Hellaby
acquisition and located across 26 stores,
The Shock Shop is New Zealand’s largest
chain of dedicated steering and suspension
specialist workshops. With the largest
range of Shock Absorbers each Shock
Shop owner is a dedicated professional,
committed to providing customers with
specialist knowledge and expertise in a
very specialist area of vehicle performance.
Sprint Auto Parts is a South Australian icon in the
automotive aftermarket servicing the local community for
33 years.
The 40 Sprint branded outlets take to market and promote
a full range of quality automotive parts and accessories for
both the retail and trade customer.
Midas has been well known in the Australian automotive
service and maintenance landscape for more than 40 years.
Midas stores across Australia today are full auto service
experts, providing car servicing, brakes, suspension and all
general repair requirements for the growing and ever more
diverse automotive car parc.
It is the Midas goal to be the most technically proficient
automotive service group in Australia.
27
ANNUAL REPORT 2017 SEGMENT REVIEW
Bapcor’s Specialist Wholesale segment consists of a
number of companies that specialise in the automotive
aftermarket wholesale sector, supplying national
distributors, re-sellers and repairers directly.
Companies comprising the Specialist
Wholesale segment are AAD, Bearing
Wholesalers, Baxters, MTQ Engine
Systems, Roadsafe, Autolign, Diesel
Distributors, Premier Auto Trade (PAT),
Federal Batteries, HCB Technologies, TRS
Tyre & Wheel (TRS) and JAS. All but two of
these companies were acquired by Bapcor
during FY2017.
The combination of these companies
has formed one of Australasia’s largest
automotive wholesale distribution
channels for electrical parts, under-car
parts and aftermarket diesel fuel injection
and turbo charger products.
Bapcor’s Specialist Wholesale segment
initiated a highly productive strategy to
cross-pollinate the specialisations of the
12 companies across Australia and New
Zealand during FY2017.
Bapcor’s strategic intent with all of
the Specialist Wholesale companies
is to develop each of them to become
either the number one or number two
business within their specific automotive
aftermarket specialisations. Bapcor’s
focus is on developing the companies
people, product range and service to
ensure this outcome.
The segment has been focused on
identifying opportunities between the
businesses and providing Bapcor with
significant competitive advantages in
relation to the internal sourcing and
development of own brand and exclusively
branded automotive aftermarket products.
An extensive inter-company product
range replacement program initiated
during FY2017 continues to gain pace,
taking maximum advantage of the vast
range development opportunities that
exist among all of the Bapcor Specialist
Wholesale companies.
Consolidation of company sites across
Australia during FY2017 has resulted in
significant cost reductions and increases
in operational efficiencies. Four of the
Specialist Wholesale segment companies,
Federal Batteries, Diesel Distributors, JAS
and PAT were consolidated into single
sites in both Townsville and Perth. Further
consolidation of JAS and PAT operations
into single sites ensued in Brisbane and
Adelaide. An additional benefit of these
locational consolidations is their closer
proximity to their customers.
These efficiencies, along with increased
sales of lighting and power products,
delivered the JAS Group year on year
sales growth of 24% during FY2017.
In New Zealand, TRS performed strongly
in difficult market conditions primarily
due to the downturn in dairy related
activity. Trading conditions recovered
significantly during the second half of
FY2017 providing an encouraging outlook
moving forward.
HCB continues to perform to high levels
in New Zealand and achieved an almost
double digit sales increase.
Bapcor’s Specialist Wholesale companies
are extensively located throughout
Australia and New Zealand giving it
unparalleled channels to trans tasman
aftermarket customers. The majority
of these companies service multiple
industries across both metropolitan and
rural areas.
Bapcor’s successful integration of these
strong performing companies has
contributed significantly to Bapcor's
successful FY2017 results.
28
BAPCOR Image: Lidan Zhao (Chloe), Storeperson, Nunawading Distribution Centre
29
ANNUAL REPORT 2017SPECIALIST WHOLESALE The Specialist Wholesale segment expanded significantly
in FY2017 with the acquisition of Hellaby Holdings as well
as specialist wholesale businesses of Roadsafe, Baxters
Auto Electrical and MTQ Engine Systems. The combination
of these specialist wholesale companies has formed one
of Australasia’s largest automotive wholesale distribution
channels for electrical parts, under-car parts and
aftermarket diesel fuel injection and turbo charger products.
AAD specialises in the import,
manufacture, re-manufacture and
wholesale of premium quality brake,
clutch, steering, suspension, cooling,
engine and servicing products. AAD
enjoys market leadership with the
industry’s most comprehensive
parts range.
Baxters is one of Australia’s
largest automotive electrical parts
distributors, specialising in heavy duty
and industrial applications. Operating
from 10 locations across the country,
Baxters deliver the latest technological
innovations to the aftermarket.
Australia’s top selling distributor
of automotive bearings, Bearing
Wholesalers provides repairers with
a comprehensive range of bearings,
oil seals, drive shafts, CV joints
and engine belts among a total of
35 product classifications.
Autolign is New Zealand’s largest
specialised steering and suspension
product importer and distributor.
The company supplies world renowned
automotive suspension components
to wholesalers, resellers and the
trade. Autolign also represents leading
suspension and ride performance
product manufacturers including
Monroe, Bilstein, Nolathane, Tein
and others across New Zealand.
The company has nine branches
located throughout the country and
support their suspension product sales
with industry leading technical support.
Diesel Distributors is a leading
supplier of spare parts and
components for Diesel fuel injection
systems. The Australian company is
also a national distributor of global
brands Delphi, Bosch, HKT, Hartridge,
Denso and Stanadyne.
Federal Batteries is an Australian
specialist supplier of premium and
high end quality batteries for use
across a wide range of passenger
and commercial vehicle applications.
With more than 60 years of combined
experience in the battery industry,
Federal Batteries also has strong
distribution alliances with many of the
world’s leading Battery manufacturers.
These include Johnson Controls, East-
Penn Manufacturing, Optima Batteries,
Varta, Enersys Amara Raja, Remco, US
Battery and Lifeline Batteries.
A leading New Zealand battery and
associated accessories supplier for
automotive, commercial, marine
and deep cycle applications. HCB
Technologies supplies premium
quality products from nine
strategically located outlets across
the country.
Premier Auto Trade is a leading
importer and wholesaler of electronic
fuel injection, engine management
and service components, and is a
major supplier to the Australian
automotive aftermarket. Premier Auto
Trade carries one of Australia’s most
extensive ranges of these specialised
components, from the World’s leading
manufacturers, specialising in genuine
and original equipment (OEM) products
including Delphi, Bosch, Pierburg,
Standard Motor Products, Denso,
Bougicord, VDO, Walker Products,
Walbro, Hitachi, Bremi, FAE, TE
Automotive, Hella and Valeo.
Premier Auto Trade distributes
throughout Australia via its reputable
network of specialist resellers, national
distributors and leading automotive
retail groups. Premier Auto Trade also
exports to several other countries in
the region.
TRS Tyre & Wheel is New Zealand’s
leading importer and distributor of
agricultural and industrial tyre and
wheel products. TRS provides the
country’s most comprehensive range
of agricultural and industrial tyre
and wheel products. TRS is also the
only company in New Zealand that
custom manufactures wheels for many
agricultural and industrial applications.
The company’s superb engineering
capabilities and dedication to customer
service has earned its solid leadership
status.
For 40 years Roadsafe has proudly
serviced the Australian aftermarket.
As a wholesale distributor, marketing
nationally, specialising in undercar
and 4wd components, Roadsafe
offer Australia’s most comprehensive
array of steering and suspension
components to the aftermarket,
including a well-rounded program
of 4wd components and associated
accessories.. Dealing with Roadsafe
represents genuine savings, while still
having access to experienced staff and
high quality products.
30
BAPCORSPECIALIST WHOLESALESEGMENT REVIEW JAS is a leading trans tasman based
supplier of quality automotive electrical
parts and accessories for passenger
cars, commercial vehicles, agricultural
machinery and marine applications.
With more than 2,000 replacement
starter motor and alternator part
numbers available to repairers across
New Zealand and Australia, JAS supplies
an unrivalled range of applications with
genuine quality, dependable and price
competitive products.
MTQ Engine Systems is the country’s largest Diesel fuel
injection and turbo charger sales and service provider to the
trade. MTQ operates from nine locations across Australia
equipped with the latest specification diagnostic, repair
and dynamometer equipment. MTQ is both an authorised
distributor and service dealer for the world’s leading brands
of turbo chargers and Diesel fuel injection parts. MTQ also
services the mining, marine, rail, earth moving, transport,
agriculture and power generation industries.
31
ANNUAL REPORT 2017 SEGMENT REVIEW
Through the Hellaby Holdings acquisition Bapcor acquired
assets classified as non-core to its continuing operations;
the Resource Services Group and Footwear business
segments. These non-core assets have provided a solid
return on investment in the six months to June 2017.
“We knocked on the doors
of heavy industrial
companies and asked
them to show us the jobs
no one else could do....
The work no one else
wanted to do. The projects
others said were just too
hard.”
Footwear Group
New Zealand’s largest footwear retail
group was acquired by Bapcor as part of
the Hellaby acquisition in January 2017.
The retail footwear chain Hannahs and
Number One Shoes employ over 1,000
staff and has 117 locations throughout New
Zealand.
Management estimate that the Footwear
Group holds a 25% share of the New
Zealand footwear market through its
two retail brands. Traditional bricks and
mortar retail continue to provide growth
opportunities for the brands despite a
tough retail environment which has seen
the decline of competitors across New
Zealand. Online shopping continues to
provide both opportunities and increasing
competitive pressure which the Footwear
Group continue to evolve with as they aim
to strategically drive more sales through
their online channels and their ‘click &
collect’ capability through their network
of own brand stores.
Under the effective management of
experienced retail specialists H2 FY2017
saw Footwear’s EBITDA increase by 29%
above H2 FY2016 to $6m.
The Resource Services division comprises
two businesses, Contract Resources and
TBS. The Resource Services business
operates in Australia, New Zealand, the
Middle East and the Americas. These
businesses provide highly specialised,
essential maintenance solutions to
industrial clients, particularly in the oil
and gas industries.
The Footwear division comprises two retail
networks in New Zealand, Hannahs and
Number One Shoes, across 117 stores.
Both the Contract Resources and
Footwear assets have been deemed non-
core and a process to divest these assets
is underway.
Resource Services Group
Resource Services Group is a long term
partnership business providing highly
specialised, essential maintenance
solutions to industrial clients that make
their plants and businesses efficient
and safe.
In FY2016, the Resource Services Group
consisted of one business, Contract
Resources, which is 85% owned by Bacpor
Ltd and 15% by three of the founding
management members. Going into FY2017,
Contract Resources was joined by the TBS
Group which was acquired on 1 July 2016
and is 100% owned by Bapcor.
Recognised as an industry leader in
New Zealand in its areas of service
provision, TBS is a specialist industrial
asset maintenance provider with an award-
winning approach to safety. TBS has
approximately 450 employees working
across New Zealand and holds preferred
contractor status with key clients as a
result of their high quality workmanship,
integrated operations management
systems while achieving superior health
and safety performance.
Resource Services reported revenue of
$132m and proforma EBITDA of $11m in
H2 FY2017 up 90.5% above H2 FY2016
largely due to the acquisition of the
TBS Group.
32
BAPCOR CR’s currently part of a team at Longford, Victoria installing vessel internals on a newly constructed Gas Conditioning Plant.
33
ANNUAL REPORT 2017NON-CORE S
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S
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Contract Resources was founded in
New Zealand back in 1989 by five
people passionate about offering clients
specialised industrial services that were
uncompromising on quality and safety.
The company today has grown to at
times 2000 employees across a network
spanning five continents. With three of
the founding partners still working in the
business, this entrepreneurial approach
to service delivery still lives on in the
company today.
The TBS Group was founded over 45 years ago, and from its
inception has had a reputation for delivering a quality product,
on time and with the least fuss to our clients. This reputation
has grown to the point where we are now the preferred or sole
provider to a significant number of infrastructure asset owners.
Our company motto is “We Do It Right” and this embodies
everything we stand for and strive for in the projects we undertake.
BAPCORSEGMENT REVIEW
“We are very proud
of our heritage
at Hannahs.
We have provided
New Zealand
families with
quality footwear
for almost
150 years”
Hannahs and Number One
Shoes work together to
maximise synergies between
the groups to maximise
resources and market
share, whilst ensuring brand
positioning of each entity
within the New Zealand
market is maintained.
With a proud history in New
Zealand for 150 years in
2018, Hannahs stocks quality
international brands such as
Clarks, Hush Puppies, Steve
Madden and Keds for men,
women and children as well
as well-known local brands
such as Pulp, Noir and
Creatures of Comfort which
take on-trend, international
influence catered to the New
Zealand market. Number
One Shoes continues to
offer a wide range of value
footwear including licenced
kids products.
35
ANNUAL REPORT 2017FOOTWEAR ” The 17th annual FICU led by
Four Wheel Drive Queensland
with the Queensland Parks and
Wildlife Service, was supported
by Opposite Lock.”
COMMUNITY AND SUSTAINABILITY
Value Statement:
Economic, Environmental
and Social Sustainability
Bapcor recognises a sustainable and
successful business is impacted by the
engagement of employees, delivery
of shareholder wealth and optimising
business operations in an affordable,
social and environmentally responsible
manner.
Bapcor takes an integrated approach,
aligning company values and strategic
direction with positive outcomes for
Bapcor’s stakeholders, and the wider
community in which we operate.
Bapcor views investment in these areas
as an important driver of long-term
performance and value creation.
Bapcor’s Head Office Makes The Switch
Bapcor’s Preston Head Office and Distribution Centre
underwent a complete changeover of all light fittings to
LED lighting. The initiative provides equivalent light levels
while using less energy and heat, and extending lamp life.
All light fittings meet Australian Standards and comply with
the Victorian Energy Efficient Council..
Light fittings changed over
An energy reduction of
1,000
80%
437,000
Annual energy saving of (kW)
36
BAPCOR Fraser Island Clean Up 2017
The 2017 edition witnessed more than 700
volunteers from the 4x4 community across
Australia give their time and energy to lend a hand.
With approximately 120 kilometres of beachfront
to cover and tough, windy conditions, it was a
tremendous effort by all, with a total of over
1100 bags of rubbish collected!
Volunteers in attendance
Vehicles participating
700
300
1,100
25
Total rubbish bags filled
Four Wheel Drive Clubs
Recycle at work
As well as energy reduction initiatives, Bapcor’s Preston
Head Office has made big inroads in paper reduction and
is on the road to transitioning toward a paper free future.
Over 450,000 sheets of paper have been removed from
the office and won’t be replaced – with storage moving
online. Further paper reduction initiatives see employee
files now being stored electronically and the roll out of an
online expense management system.
At store level, the Bapcor network continues its
commitment to good recycling practices and energy
reduction initiatives. In addition to the regular vehicle
servicing and maintenance of tyre pressures to sustain
efficiency and reduce fuel consumption, Burson Auto
Parts stores like the Richmond team are always looking
to reduce their footprint and create a greener workplace;
cutting monthly paper consumption by a third, and
reducing plastic bag and foam cup usage.
37
ANNUAL REPORT 2017 ” Feel safe and help
others feel safe – report
improper conduct or
inappropriate behaviour.”
Zero Harm The Zero Harm safety
culture one of Bapcor’s key values.
Bapcor has implemented health and
safety policies and procedures led by
strong leadership to promote a zero
harm culture that is reinforced through
supervision and training across office,
store and distribution premises.
Towards Zero:
• Zero injuries
• Zero safety incidents
• Zero traffic infringements
• Zero road accidents
Whistleblower Hotline Bapcor strives to ensure all its
team members feel safe and are treated fairly at work,
by encouraging employees to feel confident in reporting
any issues to an externally managed and independent
hotline service. The service has trained and experienced
consultants available to take a telephone call, letter or
email in a secure and confidential manner.
Work Safety
Bapcor treats
workplace safety as
a core value of what
we stand for as a
business.
In FY2017, Bapcor
implemented Group
wide Lost Time
Injury (LTI) reporting
measures to provide
visibility at the highest
level on workplace
safety.
Bapcor's ongoing
commitment to
reducing LTI’s is
seen in our ongoing
monitoring and
reporting and
remedial and
educative actions
administered where
necessary.
LTI’s will be
benchmarked and
continue to be
measured closely in
future as an important
performance indicator.
38
Global Corporate Walking Challenge
It’s the second time Bapcor has entered the Global Corporate
Walking Challenge, with over 40 team members signed up
from Bapcor’s Preston and Nunawading offices, to take part in
a journey over 100 days alongside thousands of participants
from around the world. Teams compete in a Global Challenge
to improve their physical and psychological health, track their
progress, and boost their motivation and engagement levels.
BAPCORCOMMUNITY AND SUSTAINABILITY
Diversity at Bapcor Bapcor is committed to progressing diversity within the workplace and is an equal
opportunity employer. Bapcor strongly advocates for the benefits that are realised from having different talents,
experiences and perspectives that comes from hiring, developing and retaining a diverse workforce.
Women on the Bapcor Board
(excluding CEO) – 2/4, 50%
Women in the workforce
Bapcor acknowledges the positive outcomes and benefits that can be achieved
through a diverse workplace including the ability to attract, retain and motivate
team members from the widest possible pool of available talent. With this in mind
Bapcor has identified a range of activities that will support gender diversity across
the Group. These initiatives include formalising current practices into policies
regarding family and careers’ responsibilities as well as developing a policy for
flexible working arrangements. The focus on developing people leaders and
providing them with the tools to support diversity will continue through a broader
implementation of the Leadership Development Program and education regarding
unconscious bias.
Female
Male
Women in the workplace – 26.3%
Women in full-time work – 22.9%
Women in Part-Time Work – 41.1%
39
ANNUAL REPORT 2017
Blue September aims to reduce the impact of prostate
cancer on Australian men by raising awareness through
the Prostate Cancer Foundation of Australia. The Autobarn,
ABS and Midas brands have raised in excess of $250,000
through their involvement with the cause.
Burson Rookie Of The Year The Burson Auto Parts Rookie
of the Year Award is open to drivers under the age of
18 competing in the CAMS Jayco Australian Formula 4
Championship. Winners receive a special medal and the
overall winner at the conclusion of the championship
receives a prize of $20,000 towards competing in their
next CAMS Jayco Australian Formula 4 championship.
To raise awareness of men’s health
issues such as prostate cancer,
testicular cancer and men’s suicide
the Opposite Lock team participated
in the annual 'Movember' fundraising
campaign by growing a moustache
during November. The team, in-
conjunction with the Automotive
Brands Group (ABG) Social Club, raised
over $3,400.
Biggest Morning
Tea An impressive
$1,270 was raised by
AAD Derrimut for
the Cancer Council
Australia’s Biggest
Morning Tea, helping
raise vital funds for
cancer research,
prevention programs,
advocacy and support
services.
40
BAPCORCOMMUNITY AND SUSTAINABILITY Pink Ribbon Day 2017 The Nunawading and Preston
offices participated in a pink inspired bake-off and raised
a grand total of over $1,400 to support breast cancer
awareness and research.
Youth Sport
Involvement Initially
funding a full set of
replacement football
jumpers, Bapcor
has supported
Rupertswood Football
Clubs junior football
program, located in
Sunbury, Victoria for
the last three years.
Rupertswood is a
community based club,
which encourages
participation at
all levels of ability.
The junior football
program has 11 teams
playing from under
10’s through to under
16.5’s.
Community Involvement
Bapcor recognises its responsibility to serve the
communities in which its businesses operate. The Bapcor
Group supports a wide variety of social, charitable and
sporting initiatives across Australia and New Zealand.
Employees are encouraged to support their local
community and foster a culture of workplace giving.
Organisations which have benefited from Bapcor’s support
in FY2017 include:
The Pyjama Foundation Fundraiser
NZ – St John Fundraiser
Fraser Island Clean Up
Purple Bra Day WA
Young Care
Motor Neuron Disease Australia
BeyondBlue
Kids with Cancer
Breast Cancer Foundation Australia
Prostate Cancer Foundation of Australia #getchecked
Run for Kids (Royal Childrens Hospital Good Friday Appeal)
Breast Cancer – Pink Pallet Campaign
ANA The Colour Run NIGHT!
Cancel Council
Pink Ribbon Day
Mo-Vember Foundation – Men’s Health
Blue September – Prostate Cancer Foundation of Australia and
The Australian Cancer Research Foundation
Biggest Morning Tea/Cancer Council
Camp Quality – Laughter is the best Medicine
41
ANNUAL REPORT 2017 Bapcor Limited
(formerly Burson Group Limited)
ABN 80 153 199 912
Lodged with the ASX under Listing Rule 4.3A
These financial statements are the consolidated financial
statements of the consolidated entity consisting of Bapcor Limited
and its subsidiaries. The financial statements are presented in the
Australian currency.
Bapcor Limited is a company limited by shares, incorporated and
domiciled in Australia. Its registered office and principal place of
business is:
Bapcor Limited
61–63 Gower Street
Preston VIC 3072
A description of the nature of the consolidated entity’s
operations and its principal activities is included in the Directors’
Report commencing on page 43, which is not part of these
financial statements.
The financial statements were authorised for issue by the
Directors’ on 18 August 2016. The Directors have the power
to amend and reissue the financial statements.
42
BAPCOR DIRECTORS’ REPORT
The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the
‘consolidated entity’) consisting of Bapcor Limited (referred to hereafter as the ‘company’ or ‘parent entity’) and the entities it
controlled at the end of, or during, the year ended 30 June 2017 (‘FY17’).
1. Directors
The following persons were directors of Bapcor Limited during the whole of the financial year and up to the date of this report,
unless otherwise stated:
Robert McEniry
Darryl Abotomey
Andrew Harrison
Therese Ryan
Margaret Haseltine
Independent Non-Executive Chairman
Chief Executive Officer and Managing Director
Independent, Non-Executive Director
Independent, Non-Executive Director
Independent, Non-Executive Director
2. Principal activities
During the year the principal activities of Bapcor were the sale and distribution of motor vehicle aftermarket parts and accessories,
automotive equipment and services, and motor vehicle servicing.
Bapcor is one of the largest automotive aftermarket parts, accessories, equipment and services supplier in Australasia with a
continuing operations store network covering over 850 sites.
3. Significant changes in the state of affairs
On 27 September 2016, Bapcor announced a cash takeover offer for 100% of the shares in Hellaby Holdings Limited (‘Hellaby’),
a publicly listed entity on the New Zealand stock exchange (NZX: HBY). Bapcor was successful in its offer, assuming control over
Hellaby on 13 January 2017. The transaction was finalised in March 2017 and Hellaby was delisted from the New Zealand stock
exchange accordingly.
Hellaby comprises of three divisions — Automotive, Resource Services and Footwear. The divisions of Resource Services and Footwear
are considered non-core and are being actively marketed and are at various stages through a potential divestment program.
The Hellaby Automotive division comprises respected, well established, market leading wholesale and distribution businesses with
over 120 locations in both New Zealand and Australia. The business units include Brake and Transmission (‘BNT’), HCB Technologies
(‘HCB’), Diesel Distributors, JAS Oceania, Federal Batteries and Premier Auto Trade (‘PAT’) and are complementary to Bapcor’s
existing Trade distribution and auto-electrical Specialist Wholesale businesses.
The Footwear retail division comprises two retail chains; Hannahs and No.1 Shoes; across 117 stores in New Zealand. The Resource
Services division provides highly specialised, essential maintenance solutions to industrial clients. These two divisions are considered
non-core and it is Bapcor’s intention to divest them.
The Hellaby acquisition was fully funded by a combination of cash and debt facilities, being a new acquisition facility with the Australia
and New Zealand Banking Group ('ANZ'), and $181.3M capital raised in September 2016 via a placement of shares to institutional
investors, and a share purchase plan offer to existing Bapcor shareholders.
During the financial year, Bapcor also completed a number of other acquisitions including Baxters Pty Ltd (‘Baxters’), MTQ Engine
Systems Pty Ltd (‘MTQ’) and Roadsafe Automotive (‘Roadsafe’) expanding the depth and breadth of its Specialist Wholesale offering.
On 30 June 2017, Bapcor successfully refinanced its debt facilities establishing a new $500M debt facility with pre-existing lenders
ANZ and Westpac Banking Corporation, as well as two new lenders being The Bank of Tokyo-Mitsubishi UFJ and The Hongkong and
Shanghai Banking Corporation. Proceeds were used to repay the existing debt facilities including the acquisition facility for the
acquisition of Hellaby.
4. Dividends
Fully franked dividends paid during the financial year were as follows:
30 September 2016
21 April 2017*
14,781,000 (6.0 cents per share)
15,278,000 (5.5 cents per share)
* $4,558,000 of the interim dividend for the year ended 30 June 2017 was settled under the Dividend Reinvestment Plan.
The Board has declared a final dividend in respect of the current financial year of 7.5 cents per share, fully franked. The final dividend
will be paid on 29 September 2017 to shareholders registered on the record date of 31 August 2017. Bapcor’s Dividend Reinvestment
Plan which was implemented on 16 February 2017 will be in operation for this final FY17 dividend.
The final dividend takes the total dividends declared in relation to the current financial year to 13.0 cents per share, fully franked,
representing an increase of dividends paid of 18.2% compared to the prior financial year. Dividends paid and declared in relation to
the current financial year represents 56.7% of statutory net profit after tax (‘NPAT’).
43
ANNUAL REPORT 2017 5. Review of operations
The key highlights of Bapcor’s financial results for FY17 were:
• Revenue from continuing operations increased by 47.8% compared to FY16, from $685.6M to $1,013.6M
• Statutory earnings before interest, taxes, depreciation and amortisation (‘EBITDA’) from continuing operations increased by
33.7% to $103M
• Pro-forma EBITDA from continuing operations increased by 52.4% to $117.4M
• Statutory NPAT from continuing operations increased by 23.3% to $53.7M
• Pro-forma NPAT from continuing operations increased by 50.9% compared to FY16, from $43.6M to $65.8M
• Statutory NPAT including contribution from discontinued operations increased by 46.5% to $63.8M
• Pro-forma NPAT including contribution from discontinued operations increased by 64.2% compared to FY16, from
$43.6M to $71.5M
• Pro-forma EPS based on NPAT from continuing operations increased by 36.4% compared to FY16 to 24.4 cents per share
• Pro-forma EPS based on NPAT including contribution from discontinued operations increased by 48.4% compared to FY16 to
26.5 cents per share
• Net debt at 30 June 2017 was $381.9M representing a leverage ratio of less than 2.5X (Net Debt : FY17 EBITDA) on an annualised
pro-forma EBITDA including discontinued operations basis allowing for a full twelve months of trading for acquisitions made during
FY17 (the leverage ratio on a non-annualised EBITDA basis was 2.9X).
The table below reconciles the pro-forma result to the statutory result for FY17 and FY16.
Statutory NPAT
Costs associated with the Hellaby acquisition
Interest adjustment
Depreciation and amortisation adjustment
Tax adjustment
Pro-forma NPAT
Notes on pro-forma adjustments:
Consolidated
2017
Continuing
Operations
$’M
2017
Discontinued
Operations
$’M
53.7
15.3
(0.7)
—
(2.5)
65.8
10.1
—
—
(6.4)
2.0
5.7
2017
Total
$’M
63.8
15.3
(0.7)
(6.4)
(0.5)
71.5
Notes
1
2
3
4
2016
$’M
43.6
—
—
—
—
43.6
1.
2.
3.
Relates to one off costs incurred during the acquisition of Hellaby. These costs related to professional advisory fees, target defensive costs, finance costs
relating to the bridging facility and refinancing, restructuring costs, one time elimination of intercompany profit in stock and other costs.
The interest adjustment reflects the additional interest expense that would have been incurred if the Hellaby related capital raising did not occur due to the
reduction in borrowings between the time of the capital raising and the payment for Hellaby shares.
The depreciation and amortisation adjustment relates to the depreciation and amortisation that would have occurred in the Resource Services and Footwear
divisions that was not recorded due to their held for sale status.
4. The tax adjustment reflects the tax effect of the Hellaby transaction costs and the finance, depreciation and amortisation adjustments based on local effective
tax rates.
Note: The Directors’ Report includes references to pro-forma results to exclude the impact of Hellaby related acquisition costs as detailed above. The directors
believe the presentation of non-IFRS financial measures are useful for the users of this financial report as they provide additional and relevant information that
reflect the underlying financial performance of the business. Non-IFRS financial measures contained within this report are not subject to audit or review.
44
BAPCORDIRECTORS’ REPORT continued Pro-forma revenue and EBITDA by segment is as follows:
Trade
Retail & Service
Specialist Wholesale
Hellaby Automotive
Unallocated/Head Office1
Total continuing operations
Assets held for sale
Total
1. Includes intersegment sales eliminations.
2017
$’M
465.1
221.0
212.7
146.7
(31.9)
1,013.6
196.6
1,210.2
Revenue
2016
$’M
419.1
172.3
103.4
Change
%
11.0%
28.3%
105.7%
(9.2)
(246.7%)
685.6
47.8%
685.6
76.5%
2017
$’M
63.3
28.2
22.9
15.1
(12.1)
117.4
16.9
134.3
EBITDA
2016
$’M
51.8
21.6
9.5
(5.9)
77.0
Change
%
22.2%
30.3%
141.1%
(107.1%)
52.4%
77.0
74.3%
One of the largest contributors to Bapcor’s increase in revenue and profit was the acquisition of Hellaby. In addition, the results
reflect the acquisitions of Baxters, MTQ and Roadsafe (all within the Specialist Wholesale segment) which were completed
during the first half of FY17. FY17 also includes a full twelve months results of acquisitions made during FY16 including
Aftermarket Network Australia Pty Ltd (previously Metcash Automotive Holdings Pty Ltd), Sprint Auto Parts and Bearing Wholesalers.
Further details of the operating and financial performance of each segment follows below.
5.1 Operating and financial review — Trade
The Trade segment currently consists of the Burson Auto Parts and Precision Automotive Equipment business units. This segment is
a distributor of:
• Automotive aftermarket parts and consumables to trade workshops for the service and repair of passenger and
commercial vehicles
• Automotive workshop equipment such as vehicle hoists and scanning equipment, including servicing of the equipment
• Automotive accessories and maintenance products to do-it-yourself vehicle owners.
The Trade segment had another successful year recording revenue and EBITDA growth of 11.0% and 22.2% respectively.
The increase in revenue of 11.0% in FY17 included same store sales growth of 4.6% (compared to 4.6% in FY16) with every state
recording positive growth. Same store sales growth in H2 FY17 was below H1 FY17 due to the comparative period in H2 FY16 including
selling price increases above the rate recorded in H2 FY17. Whilst growing its revenue Trade was also successful in growing its gross
margin percentage, which increased by 1.2 percentage points compared to FY16. The increase in gross margin percentage was a result
of supplier negotiations as well as ongoing price management.
During FY17, Burson Auto Parts continued to expand its store network with the number of stores increasing from 145 at 30 June 2016
to 160 at 30 June 2017. The increase of 15 stores consisted of three individual store acquisitions and twelve greenfield store
developments including a conversion of a company owned ABS store. The average cost per new store including inventory was
$774,000.
The new stores are located as follows:
• Acquisitions — Colac in Victoria; Gladstone in Queensland; and Raymond Terrace in New South Wales.
• Greenfields — Oxenford and Warwick in Queensland; Grafton, Griffith, Hornsby, Morisset and Taree in New South Wales;
Tuggeranong in the Australian Capital Territory; and Canningvale, Joondalup, Mandurah and Midvale in Western Australia.
The cost of doing business (‘CODB’) percentage decreased by 0.3 percentage points in FY17 mainly as a result of FY16 including costs
associated with the bedding down of the new Trade Brisbane Distribution Centre and costs associated with the start-up stores in
Western Australia.
As a result of the increased gross margin and lower CODB, EBITDA as a percentage of sales increased by 1.3%. In total EBITDA
increased by $11.5M to $63.3M or by 22.2%.
The Trade businesses continue to see aggressive price competition. In particular, the Western Australian market continues to be
very price competitive resulting in lower margins. Bapcor remains committed to its strategy to grow the store network across
Western Australia.
A key focus for the Trade business is the development and training of employees. A total of 26 development training courses were
conducted throughout FY17, with over 600 employees attending, as well as the continual provision of online training in areas such
as safe driving.
45
ANNUAL REPORT 2017 5.2 Operating and financial review — Retail & Service
The Retail & Service segment consists of business units that are retail customer focused, and include the Autobarn, Autopro,
Sprint Auto Parts and Car Parts retail store brands, and the Midas and ABS workshop service brands. The majority of this segment is
franchised stores and workshops. There are also 54 company owned stores.
The Retail segment performed well during the year recording EBITDA of $28.2M compared to $21.6M in FY16, an increase of 30.3%.
Revenue increased by 28.3% to $221.0M which includes the impact of a higher ratio of company owned stores versus franchise
operations. As a result of the higher mix of company owned stores generating a higher level of sales relative to profit, EBITDA as a
percentage of sales increased by 0.2 percentage points from 12.6% in FY16 to 12.8% in FY17.
Bapcor has previously stated its intention of growing the number of company owned Autobarn stores via both new Autobarn store
locations as well as some select conversion of franchise stores to company owned stores. The total number of Autobarn stores at
30 June 2017 was a record high 122 stores, a net increase of eight stores since 30 June 2016. The number of company owned stores
increased from 15 to 31, with the 16 new stores consisting of seven greenfield stores and the conversion of nine franchise operations.
The percentage of company owned Autobarn stores is now 25%, up from 14% at 30 June 2016. Autobarn achieved its largest single
trading day in June 2017; catalogues delivered were up 7% and click and collect sales increased by 45%.
At 30 June 2017 the total number of company owned and franchise stores in the Retail segment was 385 consisting of Autobarn
122 stores, Autopro 86 stores, Sprint Auto Parts 38 stores and Midas and ABS 139 stores.
Bapcor has completed a strategic review of the Service businesses and based on the level of vertical integration as well as potential
growth opportunities, it has been decided to retain and grow this business. In FY17 Midas achieved its highest average sales per store.
5.3 Operating and financial review — Specialist Wholesale
The Specialist Wholesale segment consists of the operations that specialise in automotive aftermarket wholesale and include AAD,
Bearing Wholesalers and Opposite Lock, as well as Baxters, MTQ and Roadsafe that were acquired during FY17.
Baxters and Roadsafe were acquired by Bapcor in August 2016, while MTQ was acquired in November 2016. These entities form part
of Australia’s largest automotive electrical, under car parts, and aftermarket diesel fuel injection and turbocharger distributorship.
With a nationwide network, these entities service rural and metropolitan areas and multiple industries. The newly acquired businesses
performed strongly in the months they formed part of the group, and have exceeded their investment business cases to date.
The original Specialist Wholesale business of AAD performed well growing both revenue and profit. AAD gross margin percentage was
above FY16. Including the full year impact of FY16 acquisitions as well as the acquisitions completed during FY17, Specialist Wholesale
revenue increased 105.7% and EBITDA by 141.1%.
Good progress was made during the financial year to increase the volume and product groups that the Specialist Wholesale segment
sells into other Bapcor group businesses and this will continue in FY18 with growing the level of intercompany sales being a key
business strategy.
5.4 Operating and financial review — Hellaby Automotive1
The Hellaby Automotive business was acquired in January 2017 as part of the takeover of Hellaby. The Hellaby Automotive business
consists of Trade and Specialist Wholesale businesses located in New Zealand and Australia and operates across more than
120 locations.
In New Zealand, Trade operates from 65 locations, of which BNT is the predominant business operating from 53 stores supplying
automotive and truck parts and accessories to workshops. BNT is similar to Bapcor’s Burson Auto Parts business that operates in
Australia. Also in New Zealand are the Specialist Wholesale businesses of JAS Oceania NZ — an auto electrical business, HCB — a
battery business, Diesel Distributors — a distributor of diesel fuel components, and TRS — a tyre and wheel business predominantly
supplying the agricultural market.
In Australia, Hellaby Automotive operates the auto electrical businesses of JAS Oceania, PAT and Federal Batteries, as well as
Diesel Distributors.
Hellaby Automotive performed strongly and above the acquisition business case in H2 FY17 contributing EBITDA of $15.1M. EBITDA
was up 20.7% compared to H1 FY17 and 28.5% higher than H2 FY16. BNT achieved same store sales growth of 8.0%. In the future,
Hellaby Automotive will be reported as part of Bapcor’s Trade and Specialist Wholesale segments.
5.5 Operating and financial review — Unallocated/Head Office
The Unallocated/Head Office segment consists of all elimination and head office costs or adjustments that are not in the control of
the other segments. Unallocated costs increased from $5.9M in FY16 to $12.1M in FY17 due largely to $3.1M of intercompany profit
in stock eliminations, the inclusion of Hellaby head office costs of $2.0M and an increase on normal acquisition associated costs of
$0.5M. Additional resources were also employed in head office due to the significant increase in size of the business. As of end of
September 2017, Hellaby head office costs will be reduced to approximately $1.5M per annum.
1. Historical metrics are presented for comparative purposes only and have been sourced from internal management reports.
46
BAPCORDIRECTORS’ REPORT continued 5.6 Operating and financial review — Assets Held for Sale2
As part of the acquisition of Hellaby, Bapcor acquired the divisions of Resource Services and Footwear. These assets have been
deemed non-core and a process to divest these assets is underway.
The Resource Services division comprises two businesses, Contract Resources and TBS. The Resource Services business operates
in Australia, New Zealand, the Middle East and the Americas. These businesses provide highly specialised, essential maintenance
solutions to industrial clients, particularly in the oil and gas industries. Resource Services’ EBITDA of $11.0 in H2 FY17 was 90.5%
above H2 FY16 year largely due to the acquisition of TBS which was effective 1 July 2016.
The Footwear division comprises two retail networks in New Zealand, Hannahs and No.1 Shoes, across 117 stores. After experiencing
challenging retail conditions in previous years, the Footwear business is now under the management of experienced retail specialists,
and in H2 FY17 Footwear’s EBITDA of $5.9M was 28.5% above H2 FY16.
5.7 Financial position — Capital raising and debt
The number of ordinary shares on issue in Bapcor increased in August 2016 by 500,000, due to the issue of shares by Bapcor to the
vendors of Baxters Pty Ltd as part consideration for that acquisition.
In H1 FY17, Bapcor raised $181.3M of share capital to fund its acquisition of Hellaby through the issue of 28,205,129 shares under a
placement to institutional investors, and the issue of 3,115,772 shares under a share purchase plan offer to existing shareholders.
In September 2016, Bapcor issued a further 138,519 shares to participating employees under the Bapcor Employee Salary Sacrifice
Share Plan.
In April 2017, Bapcor issued 816,309 shares to participating shareholders under its Dividend Reinvestment Plan, in respect of the FY17
interim dividend.
As a result of the issues of shares described above, ordinary shares on issue increased from 245,857,351 as at 30 June 2016 to
278,633,080 as at 30 June 2017.
Bapcor’s external debt facility was refinanced and increased to $500M during the year allocated across four providers, to replace
current existing debt and for future general corporate purposes, capital expenditure and acquisitions.
Net debt of $381.9M represented a leverage ratio of less than 2.5X on an annualised EBITDA basis allowing for a full twelve months of
trading for acquisitions completed during FY17.
6. Strategy
Bapcor’s strategy is to be Australasia’s leading provider of motor vehicle aftermarket parts and accessories, automotive equipment
and services, and motor vehicle servicing.
Trade
Trade consists of the businesses Burson Auto Parts, Precision Automotive Equipment and the recently acquired Tricor Engineering.
The business units are trade focussed “parts professionals” businesses supplying service workshops. Bapcor’s target is to grow
Burson Auto Parts’ store numbers from 160 at the end of June 2017 to 200 stores by 2021 with 30% home brand product content.
Retail & Service
Autobarn — The premium retailer of automotive accessories, Autobarn had 91 franchise stores and 31 company owned stores at
30 June 2017 with a target to grow to 200 stores by 2023, with a majority of growth being company owned stores, and 35% home
brand product content.
Independents — The independents group consists of the franchise stores of Autopro, Car Parts and Sprint Auto Parts. The
strategy is to supply the independent parts stores via Bapcor’s extensive supply chain capabilities and brand support. There were
215 independent stores at 30 June 2017. The target is to maintain the number of independent stores at over 200 and convert these
stores to Burson Auto Parts or Autobarn stores when commercially sensible opportunities arise.
Service — The service business consists of the brands Midas and ABS and aims to be experts at scheduled car servicing at affordable
prices. There were 139 stores at 30 June 2017 of which 125 were franchised.
Specialist Wholesale
The Specialist Wholesale business strategy objective is to be the number one or number two industry category specialists in the parts
programs in which it operates. The parts programs in which the Specialist Wholesale segment has historically operated are brake,
bearings, electrical, suspension, 4WD, cooling, engine and gaskets.
The Specialist Wholesale businesses are focused on maximising internal sales, developing private label product ranges, and the
evaluation of its distribution footprint including opportunities for shared facilities.
2. EBITDA metrics are presented for comparative purposes only and have been sourced from internal management reports.
47
ANNUAL REPORT 2017 Hellaby optimisation
Following an internal review of the optimisation opportunities from the Hellaby acquisition, $8M to $11M in EBIT benefits have been
identified in direct and indirect procurement, intercompany sourcing, freight, increased sales through expanded product ranges,
developing shared services and optimising category expertise. These benefits are in addition to the forecast benefits of the Hellaby
acquisition that were announced at the time of the acquisition and the reduction in Hellaby head office costs from an annual $6M to
$7M, to approximately $1M.
Strategic divestments
Bapcor is continuing the process of divestment of non-core assets. Further announcements regarding the divestments will be made at
the appropriate time.
Competitive advantages
People — Bapcor has a strong and experienced management team and a proven record of attracting, retaining and growing key talent
across the group. Training and development of team members are a priority for the group.
Supply Chain — strength of distribution network ensures fast delivery to trade customers who rely on quick access to parts to
improve service time to their customers.
Diversification — extensive breadth and depth of product range and capability across the group provides multiple revenue streams
and continues to drive intercompany sales and margin improvement opportunities, whilst spreading reliance on profitability.
7. Industry trends
The automotive aftermarket parts market in Australasia continues to experience growth based on:
i. population growth;
ii. increasing number of vehicles per person;
iii. change in the age mix and complexity of vehicles (i.e. more vehicles in the four years or older range); and
iv. an increase in the value of parts sold.
Demand for automotive parts, accessories and services is resilient as vehicle maintenance is critical to operating a vehicle. Vehicle
servicing is driven by the number of kilometres travelled, with the number of kilometres travelled by passenger and light commercial
vehicles not significantly impacted by economic conditions. Volatility in new vehicle sales does not directly impact demand as parts
distributed by Bapcor are predominantly used to service vehicles that are aged four years or older.
Original equipment manufacturers ('OEMs') are ceasing to manufacture cars in Australia. Ford ceased production in October 2016, and
Toyota and Holden have announced production will cease in October 2017. Bapcor does not expect demand for parts to be affected by
the decline in the Australian vehicle manufacturing industry, as Bapcor distributes parts for a wide range of vehicle makes and models
irrespective of where the vehicle is manufactured, and demand for Bapcor’s services is driven by the total number of registered
vehicles on the road in Australia and not the location of vehicle manufacture.
On-line channels to market is now a common medium for retail businesses albeit only a small percentage of automotive retail
sales are on-line. Amazon has announced its intention to start trading in the Australian market at some point in the future and it is
expected this will present a market place for Automotive parts and accessories. Due to its fast delivery capabilities, wide product
range and knowledgeable people being the key to Bapcor’s customer offering which on-line businesses cannot match, Bapcor does
not believe the introduction of on-line competition will have a material impact to Bapcor’s business.
There is increased interest and production of electric vehicles. As Bapcor’s target market is vehicles greater than three to four
years old, and due to the large size of the conventional vehicle car parc and how long it would take for electric vehicles to become a
meaningful percentage of the total number of vehicles on the road, Bapcor considers that any impact to the Bapcor business within
the foreseeable future is minimal.
48
BAPCORDIRECTORS’ REPORT continued 8. Key business risks
There are a number of factors that could have an effect on the financial prospects of Bapcor. These include:
Competition risk — The Australian automotive aftermarket parts and accessories distribution industry is competitive and Bapcor may
face increased competition from existing competitors (including through downward price pressure), new competitors that enter the
industry, vehicle manufacturers, and new technologies or technical advances in vehicles or their parts. Increased competition could
have an adverse effect on the financial performance, industry position and future prospects of Bapcor.
Increased bargaining power of customers — A significant majority of Bapcor’s sales are derived from repeat orders from customers.
Bapcor may experience increased bargaining power from customers due to consolidation of existing workshops forming larger
chains, greater participation of existing workshops in purchasing and buying groups, and closure of independent workshops resulting
in greater market share of larger chains. An increase in bargaining power of customers may result in a decrease in prices or loss of
customer accounts, which may in turn adversely affect Bapcor’s sales and profitability.
Supplier pressure or relationship damage — Bapcor’s business model depends on having access to a wide range of automotive parts,
in particular parts with established brands that drive customer orders. An increase in pricing pressure from suppliers or a damaged
relationship with a supplier may increase the prices at which Bapcor procures parts or limit Bapcor’s ability to procure parts from that
supplier. If prices of parts increase, Bapcor will be required to pass on or absorb the price increases, which may result in a decreased
demand for Bapcor’s products or a decrease in profitability. If Bapcor is no longer able to order parts from a key supplier, Bapcor may
lose customer orders and accounts, resulting in lower sales. Any decline in demand, sales or profitability may have an adverse effect
on Bapcor’s business and financial performance.
Exchange rate risk — A large proportion of Bapcor’s parts are sourced from overseas, either indirectly through local suppliers or
directly by Bapcor. This exposes Bapcor to potential changes in the purchase price of products due to exchange rate movements.
Historically Bapcor has been able to pass on the majority of the impact of foreign exchange movements through to the market. If the
situation arises where Bapcor is not able to recoup foreign exchange driven cost increases, this may lead to a decrease in profitability.
To mitigate this risk, Bapcor enters into forward exchange contracts based on expected purchases for the upcoming twelve months.
Managing growth and integration risk — The integration of acquired businesses and the continued strategy of growing the store
network will require Bapcor to integrate these businesses and where appropriate upscale its operational and financial systems,
procedures and controls and expand and retain, manage and train its employees. There is a risk of a material adverse impact
on Bapcor if it is not able to manage its expansion and growth efficiently and effectively, or if the performance of new stores or
acquisitions does not meet expectations. Bapcor senior management take an active role in the integration of acquired businesses.
Expansion — A key part of Bapcor’s growth strategy is to increase the size of its store network, which it intends to achieve through
store acquisitions and greenfield developments. If suitable acquisition targets are not able to be identified; acquisitions are not able
to be made on acceptable terms; or suitable greenfield sites are not available, this may limit Bapcor’s ability to execute its growth
strategy within its expected timeframe. Further, new stores may not prove to be as successful as Bapcor anticipates including due
to issues arising from integrating new businesses. This could negatively impact Bapcor’s financial performance and its capacity to
pursue further acquisitions. Bapcor senior management take an active role in the rollout and progress of store expansion.
Divestments — As part of the acquisition of Hellaby, two non-core divisions were acquired, being Resource Services and Footwear.
It is Bapcor’s intention to divest these businesses in an orderly manner. There is a risk these divestments could take longer or will be
at lower value than expected.
Franchise regulations — Bapcor has a large franchise network within its Retail & Service segment. Changes in franchise law or
regulations may have an impact on the responsibilities of the franchisor or the operations of these franchise businesses. Bapcor
senior management seek ongoing professional advice to monitor any developments.
ACCC new car retailing industry market study — The Australian Competition and Consumer Commission (‘ACCC’) is currently
conducting a review into the new car retailing industry that includes a review into consumer guarantees, access to technical
information and fuel consumption and emissions. This study has the potential to influence Bapcor’s ability to access technical data
from OEMs and also Bapcor’s workshop customers. Bapcor have provided a submission into this study and will continue to monitor
the ACCC findings.
9. Likely development and expected results of operations
Bapcor expects to continue to see growth in FY18 due to a number of factors as follows:
• A full twelve months of results will be included for the Hellaby acquisition (six months in FY17) as well as other acquisitions made
during FY17;
• Forecasted intra business synergies as a result of the Hellaby acquisition; and
• Continued store network growth and solid performance in the underlying businesses.
Trading trends in July and for the month to date of August have been consistent with expectations.
As a result of the above Bapcor is forecasting FY18 NPAT from continuing operations to be circa 30% above FY17 pro-forma NPAT
from continuing operations.
49
ANNUAL REPORT 2017 10. Information on directors
Robert McEniry, Independent, Non-Executive Director and Chairman
Qualifications:
Experience and expertise:
Other current directorships:
Master of Business Administration from the University of Melbourne
Member of the Australian Institute of Company Directors
Robert has extensive experience in the automotive industry both in Australia and overseas.
Robert’s former roles include President and Chief Executive Officer (and Chairman)
of Mitsubishi Motors Australia Ltd, Chief Executive Officer of Nucleus Network Ltd,
Chief Executive Officer of South Pacific Tyres Ltd, and board member of the Executive
Committee for the Federal Chamber of Automotive Industries.
Robert is currently on the boards of Multiple Sclerosis Ltd, Australian Home Care
Services Ltd (Chairman), Automotive Holdings Group Ltd and Stillwell Motor
Group Ltd (Chairman).
Former directorships (last 3 years):
None
Special responsibilities:
Chair of the Board
Member of the Nomination and Remuneration Committee
Member of the Audit and Risk Committee
Interests in shares:
43,163 ordinary shares
Darryl Abotomey, Chief Executive Officer and Managing Director
Qualifications:
Experience and expertise:
Bachelor of Commerce majoring in accounting and economics from the University of
Melbourne.
Member of the Australian Institute of Company Directors
Darryl has more than ten years’ experience in the automotive aftermarket industry.
Darryl has extensive experience in business acquisitions, strategy, finance, information
technology and general management in distribution and other industrial businesses.
Darryl was a former Director and Chief Financial Officer of Exego Group (Repco). He has
also previously held directorships with The Signcraft Group, PaperlinX Limited, CPI Group
Limited and Pinegro Products Pty Ltd.
Other current directorships:
Former directorships (last 3 years):
None
None
Interests in shares:
Interests in rights:
1,860,246 ordinary shares
381,077 performance rights
Andrew Harrison, Independent, Non-Executive Director
Qualifications:
Experience and expertise:
Bachelor of Economics from the University of Sydney
Master of Business Administration from The Wharton School at the University
of Pennsylvania
Member of the Australian Institute of Company Directors
Chartered Accountant
Andrew is an experienced company director and corporate advisor. Andrew has
previously held executive and non-executive directorships with public, private and private
equity owned companies; including as Chief Financial Officer of Seven Group Holdings,
Group Finance Director of Landis and Gyr, and Chief Financial Officer and a director of
Alesco Limited. Andrew was previously a Senior Manager at Gresham Partners Limited,
an Associate at Chase Manhattan Bank (New York) and a Senior Manager at Ernst &
Young (Sydney and London).
Other current directorships:
Andrew is currently on the boards of Estia Health Limited, WiseTech Global Limited,
Xenith IP Limited and IVE Group Limited
Former directorships (last 3 years):
None
Special responsibilities:
Chair of the Audit and Risk Committee
Member of the Nomination and Remuneration Committee
Interests in shares:
56,869 ordinary shares
50
BAPCORDIRECTORS’ REPORT continued Therese Ryan, Independent, Non-Executive Director
Qualifications:
Experience and expertise:
Bachelor of Laws from the University of Melbourne
Graduate of the Australian Institute of Company Directors
Therese is a professional non-executive director and has extensive experience as a senior
business executive and commercial lawyer working in widely diversified businesses in
Australia and internationally. Previously, she was Vice President and General Counsel
of General Motors International Operations based in Shanghai, Assistant Secretary of
General Motors Corporation and prior to that General Counsel and Company Secretary
of GM Holden.
Other current directorships:
Therese is currently a board member of the Victorian Managed Insurance Authority,
VicForests, Gippsland Water and WA Super
Former directorships (last 3 years):
None
Special responsibilities:
Chair of the Nomination and Remuneration Committee
Member of the Audit and Risk Committee
Interests in shares:
32,976 ordinary shares
Margaret Haseltine, Independent, Non-Executive Director
Qualifications:
Experience and expertise:
Bachelor of Arts Degree
Diploma in Secondary Teaching from the Auckland University
Fellow of the Australian Institute of Company Directors
Margaret has more than 30 years’ business experience in a broad range of senior
positions, and ten years’ experience in board directorship. A proven executive leader,
Margaret has significant experience in the areas of supply chain and logistics, customer
interface in the FMCG sector, change management, governance, and management within
a large corporate environment. Previously, she held various senior positions with Mars
Food Australia, including CEO, spanning a 20-year career.
Other current directorships:
Margaret is currently a board member of Southern Hospitality Ltd, Bagtrans Pty. Ltd.
(Chairman) and Stuart Alexander and Co Pty Ltd
Former directorships (last 3 years):
Fantastic Holdings Ltd
Special responsibilities:
Member of the Nomination and Remuneration Committee
Member of the Audit and Risk Committee
Interests in shares:
15,713 ordinary shares
Former directorships (last 3 years) quoted above are directorships held in the last 3 years for listed entities only and excludes
directorships of all other types of entities.
11. Company secretary and officers
Current Chief Financial Officer and Company Secretary:
Gregory Lennox Fox (2 March 2012 — present)
Greg has more than 25 years’ experience in the automotive, industrial and public accounting sectors. Greg joined Bapcor as Chief
Financial Officer in 2012 with responsibility for finance, legal, company secretarial and plays a key role in strategic initiatives. Greg was
previously Chief Financial Officer at Atlas Steels and at Plexicor, which was a major supplier to the automotive industry. Greg also held
various senior financial positions with Amcor Ltd after commencing his career as a chartered accountant.
51
ANNUAL REPORT 2017 12. Meetings of directors
The number of meetings of the company’s Board of Directors (‘the Board’) and of each Board committee held during the year ended
30 June 2017, and the number of meetings attended by each director were:
Robert McEniry
Darryl Abotomey1
Andrew Harrison
Therese Ryan
Margaret Haseltine
Full Board
Nomination and
Remuneration Committee
Audit and Risk Committee
Attended
Held
Attended
Held
Attended
Held
13
13
13
13
13
13
13
13
13
13
3
—
3
3
3
3
—
3
3
3
4
—
4
4
4
4
—
4
4
4
Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee.
1.
The members of the Audit and Risk Committee are Andrew Harrison (Chair), Therese Ryan, Margaret Haseltine and Robert McEniry. By invitation from the
Audit and Risk Committee, Darryl Abotomey attended all Audit and Risk Committee meetings.
The members of the Nomination and Remuneration Committee are Therese Ryan (Chair), Robert McEniry, Andrew Harrison and Margaret Haseltine.
By invitation from the Nomination and Remuneration Committee, Darryl Abotomey attended all Nomination and Remuneration Committee meetings.
13. Remuneration report — Introduction from Bapcor’s Independent Non-Executive Directors
The independent non-executive directors of Bapcor are pleased to present the 2017 Remuneration Report.
The format and presentation of the Remuneration Report has changed this year to reflect feedback we have had from shareholders
and make it more extensive and to more clearly detail the link between Bapcor remuneration and the company’s performance.
13.1 Remuneration increases
Bapcor operates in a highly competitive market, and is focused on profitable growth. We have been so successful that executive pay
and board fees have failed in successive years to keep pace with Bapcor’s size and complexity. This presents an unacceptable risk that
we may not be able to attract and retain the expertise and experience required for an ever-demanding business. So again this year we
have adjusted remuneration to reflect the changing nature and challenge of the tasks facing our directors and executives. The increase
in remuneration is well below the growth of the company, whether measured in market capitalisation, revenue, earnings or share price.
Remuneration Analysis FY14 — FY17
% increases of Market Cap, Revenue, Pro-forma NPAT and KMP Fixed Remuneration
e
s
a
e
r
c
n
i
%
350%
300%
250%
200%
150%
100%
50%
0%
Market Cap
Pro-forma NPAT
Revenue
KMP Fixed Rem
Exec KMP Fixed $M
Exec KMP number
Avg per Exec $000’s
FY14
1.66
5
333
FY15
1.87
6
312
FY16
2.87
7
410
FY17
3.91
9
435
52
BAPCORDIRECTORS’ REPORT continued
Realising the potential issue the increased executive and director remuneration could create for some investors, we engaged an
external adviser to benchmark remuneration. The results confirmed our initial assessment that substantial remuneration increases
were required. Hence, we acted by adjusting fixed remuneration for executives, and board fees for non-executive directors:
• an increase of 39% in fixed pay for the Chief Executive Officer and Managing Director (‘CEO’);
• an increase of broadly 28% in fixed pay for executive Key Management Personnel (‘KMP’) (excluding CEO); and
• an average increase of 40% in board director fees.
Notwithstanding these adjustments, fixed and total remuneration remain below the median for peer companies.
Executive short-term and long-term incentive pay opportunities remain the same percentage of fixed pay and are contingent on
achieving growth objectives.
13.2 FY17 performance and remuneration outcomes
FY17 was another very successful year for the company with outstanding efforts and outcomes from the executives and all
employees. Significant outcomes for the year include:
•
•
•
•
•
•
Increase in revenues of 76.5% to $1,210.2M, including revenue of $196.6M from non-core businesses
Increase in net profit after tax (‘NPAT’) of 46.5% to $63.8M
Increase in pro-forma NPAT of 64.2% to $71.5M
Increase in pro-forma earnings per share (‘EPS’) of 48.4%
Increase in dividends of 18.2% to 13.0 cents per share
Integration of the Aftermarket Network Australia Pty Ltd (previously Metcash Automotive Holdings Pty Ltd) business
successfully executed
• Acquisition of Hellaby and a number of Specialist Wholesale businesses
The incentive pay outcomes detailed in this report are a direct result of exceeding short-term incentive (‘STI’) targets primarily based
on exceeding NPAT and earnings before interest and tax (‘EBIT’) budgets. At the time the budgets were set, they exceeded market
expectations, including the benefits of acquisitions.
Non-financial targets of up to 30% also play a key role particularly as they contribute to the longer-term sustainability of the business.
As a result of achieving and exceeding the group’s objectives, on average 81% of the maximum FY17 STI was awarded to executive
KMP. The Board is pleased with this outcome as it reflects the experience enjoyed by shareholders.
The long-term incentive (‘LTI’) measures of relative total shareholder return (‘TSR’) and EPS growth have been consistently applied
since the initial public offering (‘IPO’). The Board is pleased that management exceeded maximum LTI requirements for both TSR and
EPS, so that 100% of the relevant tranches of the FY14 and FY15 LTI’s vested.
13.3 FY17 & FY18 equity grant for the CEO
At our 2016 Annual General Meeting (‘AGM’) we asked our shareholders to approve a three year grant of LTI to our CEO. The resolution
did not receive majority shareholder support, so the planned LTI opportunity was not granted to the CEO. Feedback indicated that
annual tranches were preferred and that there was insufficient detail in respect of the proposed grants of equity for a majority of
shareholders to approve the resolution. Therefore, the Notice of Meeting for this year’s AGM will provide more specific detail of the
annual LTI to be granted to the CEO and for which the Board will seek shareholder approval.
The Board will again seek approval for the LTI grant with performance measured from FY17. The basis of the grant will be detailed in
the Notice of Meeting for the 2017 AGM and reflects the goals and objectives set by the board for the management team, including
the CEO at that time. The Board believes it is essential the CEO is subject to exactly the same LTI performance requirements
as his management team. The management team are operating on this assumption, and the Board considers it prudent these
expectations be met.
We will also be seeking approval for the CEO LTI grant with performance measured from FY18. The performance requirements
and grant basis will be consistent with that applying to other executives.
We trust that between the attached Remuneration Report and the details that will be contained in the Notice of Meeting for the
2017 AGM that we have provided sufficient details for the number of rights for both grants to receive shareholder support.
On behalf of the independent non-executive directors of the Board, we recommend the following Remuneration Report to you.
53
ANNUAL REPORT 2017 14. Remuneration report — Overview
Key Items
Our Approach
How is FY17 executive
remuneration different
from FY16?
Fixed remuneration for FY17 was adjusted to position it around 90% of the median of the comparator
peer companies, based on the information obtained from the independent advisor retained by the Board,
Godfrey Remuneration Group.
Why has fixed
remuneration of KMP
been increased?
The CEO was not granted an LTI in FY17 as the majority of shareholders did not approve the resolution
put to the AGM.
The Board obtained independent market data (from Godfrey Remuneration Group) to ensure that
executive and non-executive KMP were fairly compensated for their position.
The company has experienced significant growth in the size and complexity of the business, geographical
scope, number of employees and revenues since the IPO in 2014. Consequently, increases to the fixed
remuneration of executive KMP were considered by the Board to be fair and appropriate, necessary to
ensure market equity, and to mitigate against the risk of losing key people, and of regretted executive
turnover.
It should be noted that, notwithstanding the increases in FY17, fixed and total remuneration of executive
KMP remain below the median for peer companies. Also, since the FY17 review the company has acquired
Hellaby Holdings Limited in New Zealand and numerous other businesses.
The independent market review of board fees undertaken by Godfrey Remuneration Group indicated that
board fees were below market levels for comparable roles in peer companies. This was largely because of
the company’s growth as outlined above. Accordingly the non-executive director (‘NED’) fees were adjusted
to a level that remains below the median of the peer group based on the independent market data.
Average NED fees increased by 40%, excluding Margaret Haseltine who commenced in May 2016.
How much STI was earned
by the executives for FY17
and what were the reasons
for the level of payment?
STIs earned by executive KMP are based on targets set at the beginning of the financial year. The STIs
at target level are 70% financial measures and 30% personal objectives. At maximum level, the STIs are
weighted 83.5% and 80% to financial measures respectively for the CEO and other executives.
The aggregate of STI paid to the executive KMP for FY17 performance was $2,121,000 (excluding Colin
Daly who commenced with Bapcor as part of the Hellaby acquisition) which is 81% of the maximum that
could have been paid to them.
As the awards exceeded the target value, $607,000 will be deferred and paid to the executives in August 2018.
These payments were made because the company’s financial performance exceeded target against
a range of measures including:
• Group pro-forma NPAT increase of 64.2% over FY16
• Group pro-forma EBITDA increase of 74.3% over FY16
• Group revenue from continuing operations increase of 47.8% over FY16
For each executive KMP, specific personal objectives are agreed at the beginning of the year and
these are measured against actual performance at the end of the year. The objectives include such areas
as safety, progression and succession, employee development, employee engagement, strategic growth,
same store sales growth, customer satisfaction, corporate compliance and governance and investor
relations.
The Board sought the approval of shareholders for flexibility in the grant of equity to the CEO over the
following three years. Feedback indicated that there was insufficient detail in respect of the proposed
grants of equity for a majority of shareholders to approve the resolution.
The Notice of Meeting for this year’s AGM will provide more specific detail of the LTI to be granted to
the CEO and for which the Board will seek shareholder approval. The Board will seek approval for two
tranches of LTI to be granted to the CEO, one for performance from FY17 and one for performance
from FY18.
The Board wants to ensure that the CEO is aligned with other members of the executive team in his
focus on board priorities as well as aligned to growth in shareholder value. Therefore a grant was
communicated to the CEO, subject to shareholder approval.
One tranche of the LTI granted to five executives on 11 April 2014, being 65% of the total number
granted, was independently tested by a third party against the company’s FY17 TSR and EPS
performance. The extent to which they vested is as follows:
Relative TSR Rights: Bapcor’s TSR performance ranked at the 100th percentile of the comparator group.
This resulted in 100% of the tranche vesting.
Why was the CEO’s
equity grant for FY17
not approved by the
shareholders at the AGM
in October 2016?
Why grant an LTI
opportunity to the
CEO encompassing
FY17 performance?
What LTI grants have
vested in FY17?
What was the basis for
the vesting of those
grants?
54
BAPCORDIRECTORS’ REPORT continued Key Items
Our Approach
What LTI grants have
vested in FY17?
Compound annual growth rate (‘CAGR’) of EPS: Bapcor’s CAGR of EPS was 30.4%. This resulted in
100% of the tranche vesting.
What was the basis for
the vesting of those
grants?
One tranche of the LTI granted to eleven executives on 24 December 2015, being 35% of the total
number granted, was independently tested by a third party against the company’s FY17 TSR and EPS
performance. The extent to which they vested is as follows:
(continued)
Relative TSR Rights: Bapcor’s TSR performance ranked at the 80th percentile of the comparator group.
This resulted in 100% of the tranche vesting.
CAGR of EPS: Bapcor’s CAGR of EPS was 36.5%. This resulted in 100% of the tranche vesting.
Shares from vested Performance Rights remain under a restriction on sale for a further twelve months,
reflecting further alignment of executive and shareholder interests.
What is the performance
period for the LTIs?
The grants of LTI in the years up to and including FY17 were for performance periods of two and three
years, with both tranches having a further twelve month restriction on sale for vested LTI.
The FY18 LTI opportunity will be subject to a minimum performance period of three years with a further
twelve month restriction on sale for vested LTI.
Are you disclosing the
executive KMP cash and
realisable pay in FY17?
Yes. Recognising an increasing interest in it from some proxy advisers and investors, in addition to the
required statutory format, the Board is disclosing cash paid and the value of vested deferred awards. Some
payments are for performance in previous years (e.g. where there has been an STI deferral). Accordingly,
cash and realisable pay is not an absolute indicator of pay for performance in this particular year.
Section 15.5 of this report provides the detail.
There were no one-off payments to executive KMP in FY17.
A payment of $6,000 was made to Margaret Haseltine, a non-executive director in FY17 for the
additional workload required of her in respect of her role on the Board of Hellaby Holdings Limited
during its acquisition and while it remained a listed entity in New Zealand. Refer to section 15.6.3.
The personal objective component of the STI’s requires some degree of judgement as to the
achievement of the objectives as these are not all based on numeric outcomes.
Section 15.5.2 and 15.5.3 of this report provides more details of the performance measures for FY17.
In summary, the CEO could earn:
• 38.5% of fixed remuneration for meeting the NPAT target (which was set significantly higher than
FY16 actual NPAT), and
• 83.5% of his fixed remuneration if the NPAT target was exceeded by more than 10%, and
• up to 16.5% of fixed remuneration for meeting personal objectives in respect of safety, progression
and succession, people development, strategic growth (including acquisitions), organic growth,
delivery of optimisation benefits, employee engagement and customer satisfaction, corporate
governance and shareholder relations.
The Board determined that the focus of the executive team should be on growing NPAT for group
management and EBIT for business segment managers. For this reason, 70% of the target STI award
is tied to these financial measures. All above target STI is based on the financial measures.
Achievement of the non-financial measures will underpin the future growth and sustainability of
the company.
The Board’s current policy is to defer for twelve months the amount of STI awarded to executive KMP
that is above target.
For the period from listing in FY14 to FY17 there has been no change to the methodology used to
calculate the number of LTI Performance Rights granted.
Responding to investor feedback, for FY18 the company proposes to change from using a fair-value
calculation methodology to the weighted average face value of shares in the interests of better
transparency. The transition to this methodology will not disadvantage executives and will be fully
detailed in the Notice of Meeting for the AGM.
No. It is noted that there is no outstanding loan balance for the CEO.
Did the Board make
any one-off payment to
executive KMP in FY17?
Did the Board exercise
discretion when
determining the payments
under the STI plan?
What were the FY17 STI
performance measures
for KMP?
How did the Board
determine the STI
performance measures
for FY17?
Is there provision for
deferral of STI and what
if any has been deferred?
Has the company changed
the method it uses to
determine the number
of LTI Performance Rights
to grant?
Has the company made
any loans to the executives
in FY17?
55
ANNUAL REPORT 2017 15. Remuneration report (audited)
The directors present the Remuneration Report setting out the principles, policy and practices adopted by the Bapcor Board
in respect of remuneration for the group’s non-executive and executive KMP in accordance with the requirements of the
Corporations Act 2001 and its Regulations.
The Remuneration Report is set out under the following main headings:
15.1
Principles used to determine the nature and amount of remuneration
15.2
Key management personnel
15.3
15.4
15.5
Remuneration governance
Executive remuneration
Cash and realisable remuneration
15.6
Statutory details of remuneration
The information provided in this Remuneration Report, which forms part of the Directors’ Report has been audited as required by
section 308(3C) of the Corporations Act 2001.
15.1 Principles used to determine the nature and amount of remuneration
The Board and Nomination and Remuneration Committee (‘NRC’) consider executive KMP remuneration should be structured in a
way that provides fair, market competitive fixed remuneration with an at-risk remuneration opportunity that will focus executives on
achieving company objectives and aligning their interests with shareholder outcomes.
At all times, the Board retains discretion to continually review and adjust the remuneration framework and structures in response
to corporate changes, the commercial environment, shareholder feedback, good governance practices and market demands.
Fees and payments to NEDs reflect the demands and responsibilities of the directors. NED fees and payments are reviewed annually
by the NRC.
The Board obtains external, independent specialist advice on remuneration and benchmarking to inform its decisions.
56
BAPCORDIRECTORS’ REPORT continued 15.2 Key management personnel
Bapcor’s KMP, as defined by AASB 124 Related Party Disclosures, are those people with the authority and responsibility for planning,
directing and controlling the activities of the consolidated entity, directly or indirectly, and includes non-executive and executive
directors. The KMP as at 30 June 2017 and their position are those in the following table.
Name
Position
Non-executive Directors
Robert McEniry
Andrew Harrison
Therese Ryan
Margaret Haseltine
Executive Director
Board Chair
Member Audit and Risk Committee
Member Nomination and Remuneration Committee
Chair Audit and Risk Committee
Member Nomination and Remuneration Committee
Chair Nomination and Remuneration Committee
Member Audit and Risk Committee
Member Nomination and Remuneration Committee
Member Audit and Risk Committee
Darryl Abotomey
Chief Executive Officer and Managing Director
Other KMP
Greg Fox
Mathew Cooper
Paul Dumbrell
Grant Jarrett
Craig Magill
Peter Tilley
Alison Laing1
Colin Daly2
Chief Financial Officer and Company Secretary
Executive General Manager, Strategic Development
Chief Operating Officer, Specialist Wholesale
Executive General Manager, Operations
Executive General Manager, Burson Trade
Executive General Manager, Retail & Service
Executive General Manager, Human Resources
Chief Executive Officer, Hellaby Automotive
1. Alison Laing commenced May 2017.
2. Colin Daly joined on acquisition of Hellaby effective Jan 2017.
15.3 Remuneration governance
The NRC is responsible for reviewing the remuneration framework to ensure it remains fit for purpose and, as appropriate, making
recommendations to the Board on how it should be structured for the company at a particular time. The NRC’s charter can be found
at www.bapcor.com.au/about/governance.
Remuneration quantum and structure for executive and non-executive KMP are determined by the Board after considering
recommendations made by the NRC.
The NRC meets regularly throughout the year to review and understand the effectiveness of the remuneration arrangements for
the business, to assess executive KMP performance, to determine recommendations in respect of changes in fixed remuneration,
STI awards and outcomes, and LTI awards and outcomes, among other matters.
The NRC and the Board have absolute discretion in determining the outcomes of incentive arrangements to ensure anomalous
outcomes do not arise. This discretion can be exercised for both positive and negative adjustments to incentive outcomes to ensure
the outcomes reflect the shareholders’ experience.
The NRC seeks external advice and assistance as it considers appropriate. During FY17 and in respect of FY17, the NRC engaged
Godfrey Remuneration Group to provide benchmarking reports in respect of executive KMP remuneration and NED fees and to
assist with setting the comparator group for the relative TSR measure of the LTI. That work resulted in Godfrey Remuneration Group
providing remuneration recommendations as defined in section 9B of the Corporations Act 2001 in respect of the quantum and mix
of the executive KMP remuneration and in respect of the NED fees. Godfrey Remuneration Group was paid $30,000 excluding GST
and disbursements for these services.
The Board and the NRC have protocols in place to ensure the engagement of the remuneration advisers is and was independent of
management and able to be carried out free of any undue influence. The Board is satisfied the recommendations were made free
of any undue influence by KMP about whom the recommendations may relate.
During FY17, the NRC also engaged the services of Guerdon Associates to provide assistance in respect of market practices and
trends, remuneration frameworks and structures, stakeholder engagement, and disclosures. Guerdon Associates did not provide
any remuneration recommendations as defined in section 9B of the Corporations Act 2001.
57
ANNUAL REPORT 2017 15.4 Executive remuneration
The following sections explain FY17 executive KMP remuneration:
15.4.1
Executive remuneration structure
15.4.2
Financial performance over the last three years
15.4.3
STI performance metrics and outcomes
15.4.4
STI payment, deferral and clawback
15.4.5
LTI plan
15.4.6
LTI outcomes
15.4.1 Executive remuneration structure
The Board has implemented a total remuneration structure or executive KMP remuneration comprising:
Component
of total
remuneration
How is it delivered?
Purpose
How does it link to company performance?
To provide competitive, market
based fixed remuneration for senior
executives. The level of FAR is set
with regard for the scope of the
position, and the knowledge, skill and
experience required of the individual
to perform the role.
To motivate executives to achieve
specific financial and non-financial
objectives and reward them in line
with the actual achievements.
To motivate executives to take a long-
term view of company performance,
reward them in line with the
company’s performance over the
longer term, and to link their reward
with the investors’ experience.
The value of the Performance Rights
will increase in line with an increasing
shareholder return for investors
and, as such, is effective in retaining
executives.
The complexity of the business requires
highly skilled executives to achieve
a company performance that meets
shareholder expectations.
Company and individual performance
are considered during the annual
remuneration review.
The key financial metric is NPAT
for the group and EBIT for business
segments with a threshold requirement
of 95% of target. The target is set at a
growth level to the prior year so that
executives will be rewarded only if the
company achieves growth.
The non-financial measures include
objectives for safety, people
management, sustainability, compliance,
and optimisation of acquisitions that
are the foundation of a sustainable
company performance.
Vesting of half of the Performance
Rights is contingent on Bapcor’s total
shareholder return (‘TSR’) being
better than 50% of the companies in a
comparable peer group.
The other half of the Performance
Rights will only vest if the company’s
compound annual growth rate of EPS is
not less than 7.5%, with the maximum
vesting at a compound annual growth
rate of 15%.
Performance is measured over 24 and
36 months with shares from the vested
Performance Rights restricted from sale
for a further twelve months.
Fixed annual
remuneration
(‘FAR’)
Comprises base salary,
superannuation and non-cash
benefits such as motor vehicles.
Paid in cash after results
released except for any
amount above target.
Any amount paid for above
target performance is deferred
for twelve months and paid
in cash after release of the
following year’s results, subject
to claw back provisions.
Awards are made in the form
of Performance Rights, which
do not attract dividends or
voting rights.
STI
LTI
58
BAPCORDIRECTORS’ REPORT continued The specific details of the STI and LTI opportunities are explained in the sections below.
The pay mix of the executive KMP in FY17 is shown below:
Executive
Fixed remuneration
Maximum STI
Maximum LTI
CEO
CFO
Other KMP
50%
48%
50%
50%
28%
30%
0%1
24%
20%
Total
100%
100%
100%
1.
The CEO was not granted an LTI opportunity. The resolution for the grant of equity to the CEO, who is an executive director, was not approved by a majority of
shareholders at the AGM in October 2016.
15.4.2 Financial performance over the last three years
Bapcor’s financial performance over the last three years will assist readers to understand the context of the remuneration framework,
management’s performance and how the company’s performance impacts the remuneration outcomes for the executive KMP.
The table below shows measures of Bapcor’s financial performance over the three complete financial years since it listed on
23 April 2014.
Revenue from continuing operations $m
Increase/(decrease) in revenue
Pro-forma NPAT $m
Increase/(decrease) in pro-forma NPAT
Dividend declared (cents per share)
Increase/(decrease) in dividend declared
Share price 30 June $
Increase/(decrease) in share price
Market capitalisation $m 30 June
Pro-forma EPS — TERP adjusted (cents)1
Increase/(decrease) in pro-forma EPS — TERP adjusted
2015
375.3
9.9%
23.1
19.7%
8.7
n/a
3.40
60.4%
746.9
13.62
19.1%
2016
685.6
82.7%
43.6
88.7%
11.0
26.4%
5.52
62.4%
1,357.1
17.85
31.0%
2017
1,013.6
47.8%
71.5
64.2%
13.0
18.2%
5.49
(0.05%)
1,529.7
26.54
48.4%
1.
2015 EPS has been adjusted to take into consideration the impact of the rights issue performed in 2016 and the impact on the number of shares as per
AASB 133 Earnings Per Share
59
ANNUAL REPORT 2017 15.4.3 STI performance metrics and outcomes
Participants in the STI plan have a target cash payment that is a percentage of their fixed annual remuneration. Actual STI payments
may be below, at or above that target depending on the achievement of financial and non-financial objectives set each year by the
Board. 70% of the target STI opportunity of the executive KMP is contingent on meeting annual NPAT objectives for group and EBIT
objectives for business segments. 30% of target STI is subject to meeting other annual non-financial objectives.
No incentive payment for financial performance is payable if the threshold of 95% of financial target performance is not met.
Weighting of
performance
measure at
target
70%
Performance measure
At the group level, NPAT is the primary financial metric and by business
segment EBIT is the primary financial objective. They were selected by the
Board to focus management on achieving a growth in profit that would deliver
significant returns to shareholders.
For executive KMP, the financial metric is the group NPAT for group executives,
whereas the financial targets for business segment executives are split between
EBIT of the business segment they manage and group EBIT.
The group target was set significantly higher than the FY16 actual result and
was set in the context of the business strategy and growth objectives.
FY17 performance
Reported pro-forma NPAT for
FY17 was $71.5M, a 64.2% increase
over FY16.
The group NPAT performance was
above target and above maximum.
EBIT by business segment varied as
detailed in the financial report.
< Threshold
Threshold
Target
Maximum
Percentage of FAR
CEO
Nil
28.5%
38.5%
83.5%
CFO
Nil
20%
28%
48%
EGM
Nil
20%
28%
48%
Other KMP
Nil
20%
28%
48%
Threshold level is 95% of target and requires significant improvement over FY16
actual result.
30%
Non-financial objectives were set for each of the executive KMP (as well
as other managers) and have a common stream as well as specific targets
by business segment. As the executives’ roles differ and performance
expectations vary accordingly, the weightings of the measures may vary
for each executive. This is because each will have a particular focus on the
business segment they manage.
A detailed explanation of the group’s
achievements in the non-financial
areas are contained in section 5 of
this Directors’ Report.
There is a range of metrics across the following criteria that are applicable to
the executive KMP depending on their role and accountabilities:
• Safety: requiring improved performance year on year.
• Strategic acquisitions: with objectives requiring the identification of
suitable businesses for acquisition, implementation of the business case and
optimal integration.
• Organic growth: for each business segment, organic growth targets and
market share gains.
• Systems and processes: with objectives focused on the long term
sustainability of the company covering areas of information technology and
warehousing and distribution.
• Human resources: with objectives requiring people development, culture
strategies, succession planning, training and development outcomes, and
employee engagement.
• Business unit: objectives involving store growth and customer engagement.
• Compliance and governance: requiring processes and procedures to ensure
achievement of compliance requirements.
• Optimisation projects: for achieving optimisation from acquisitions and
improved cost structures.
60
BAPCORDIRECTORS’ REPORT continued The following table shows the actual STI outcomes for each of the executive KMP for FY17:
KMP
Darryl Abotomey
Greg Fox
Mathew Cooper
Paul Dumbrell
Grant Jarrett
Craig Magill
Peter Tilley
Colin Daly1
Alison Laing2
Target STI as a
% of FAR
Maximum STI
as a % of FAR
Actual STI as a
% of maximum
STI forfeited
as a % of
maximum
55%
40%
40%
40%
40%
40%
40%
40%
n/a
100.0%
60.0%
60.0%
60.0%
60.0%
60.0%
60.0%
60.0%
n/a
95.0%
92.9%
83.7%
70.5%
42.6%
82.1%
42.4%
78.8%
n/a
5.0%
7.1%
16.3%
29.5%
57.4%
17.9%
57.6%
21.2%
n/a
Actual STI
awarded
$
1,015,402
320,340
195,780
192,374
93,294
204,385
99,216
108,698
n/a
1. Colin Daly joined Bapcor as part of the Hellaby acquisition in January 2017. The Hellaby plan was continued until June 2017.
2. Alison Laing joined Bapcor in May 2017 and is not eligible to participate in STI or LTI until 1 July 2017.
The STI performance measures are tested annually after the end of the relevant financial year.
15.4.4 STI payment, deferral and clawback
Where STI awards have been determined, payments under the STI plan are made immediately after the release of full year financial
results to the ASX except in relation to any portion of an award above the target up to the maximum award.
The amount of STI award above target is deferred for a period of twelve months. The deferred amount is payable to the executive
immediately after the release of the year ending 30 June 2018 financial results.
All payments are in cash.
Awards are subject to claw back for any material financial misstatements that are subsequently determined in respect of Bapcor’s
performance for the relevant period.
61
ANNUAL REPORT 2017 15.4.5 LTI plan
The LTI is contingent on company performance over a two and three year performance period. Payments are rights to acquire shares
(‘Performance Rights’). Performance Rights are granted at the start of the performance period. Vesting of Performance Rights varies
with the extent that performance requirements have been met. On vesting, the Performance Rights entitle the executive to receive
fully paid shares in the company.
The key terms of the LTI under which grants were made in FY17 and prior years are as follows:
Administration
The LTI is administered by the Board.
Who participates?
In FY17 executive KMP, other than the CEO, and a number of other senior executives were invited
to participate.
What is the LTI
opportunity?
The CEO did not participate in the FY17 LTI opportunity because majority shareholder approval was not
received.
The LTI opportunity is the grant of Performance Rights that will vest on satisfaction of the applicable
performance, service or other vesting conditions specified in the offer at the time of the grant. The Board
sets the terms and conditions on which it will offer Performance Rights under the LTI, including the vesting
conditions, at the time of the offer.
Performance Rights
The LTI opportunity granted to participants in FY17 provides for the Performance Rights, upon satisfaction
of the vesting conditions, to convert into a fully paid ordinary share for each vested right. The Performance
Rights do not carry any voting rights or dividend entitlements.
How was the number
of Performance Rights
determined?
For the grants made in FY17, the number of Performance Rights was determined by dividing the executive’s
LTI value by the fair value of the Performance Rights at the time of grant.
For grants of LTI in FY18 and beyond, the Board intends to determine the number of equity instruments to
allocate by dividing the executive’s LTI value by the face value of a Bapcor share for better transparency.
The transition to the face value allocation methodology will be at no disadvantage to executive participants.
Performance period
Performance is assessed over a performance period specified at the time of the grant. The performance
period for the LTI opportunities granted in FY17 are set out following this table.
The Board intends the performance period for the grants of LTI to be made in FY18 will be for three years.
Performance measures
Each executive is granted two tranches of Performance Rights.
50% of the total grant value of Performance Rights granted to the executive under each tranche are
subject to the satisfaction of a TSR performance hurdle for the relevant performance period (‘TSR Rights’),
and 50% are subject to satisfaction of an EPS performance hurdle for the relevant performance period
(‘EPS Rights’).
These are described in more detail in the section following this table.
Shares
Fully paid ordinary shares allocated on conversion of Performance Rights rank equally with the other issued
ordinary shares and carry the same rights and entitlements, including dividend and voting rights. Shares
may be issued by Bapcor or acquired on or off market by a nominee or trustee on behalf of Bapcor, then
transferred to the participant.
Participation in new
issues
Performance Rights granted in FY17 and earlier do not confer on a participant the right to participate
in new issues of shares or other securities in Bapcor, including by way of bonus issues, rights issues or
otherwise.
Limitations
Trustee
Quotation
Amendments
The number of shares to be received by participants on the conversion of the Performance Rights must not
exceed 5% of the total number of issued shares over a 5 year period.
Bapcor may appoint a trustee for the purpose of administering the LTI, including to acquire and hold shares,
or other securities of the company, on behalf of participants or otherwise for the purposes of the LTI.
Performance Rights are not quoted on the ASX. Bapcor will apply for official quotation of any shares issued
under the LTI, in accordance with the ASX Listing Rules and having regard for any disposal restrictions in
place under the LTI.
To the extent permitted by the ASX Listing Rules, the Board retains the discretion to vary the terms and
conditions of the LTI. This includes varying the number of Performance Rights or the number of shares to
which a participant is entitled upon a reorganisation of the capital of Bapcor. No discretion to vary LTI terms
and conditions was made in FY17 or prior years.
Other terms
Shares acquired on the conversion of vested Performance Rights cannot be sold for a period of
twelve months from vesting date. Performance Rights cannot be transferred, encumbered or hedged.
The LTI contains other terms relating to the administration, variation, suspension and termination of the LTI.
62
BAPCORDIRECTORS’ REPORT continued In FY17 an offer to participate in the LTI was made to nine of Bapcor’s senior executives. Each executive’s LTI opportunity comprised
two tranches whereby:
• 34% of the allocated Performance Rights have a performance period that ends on 30 June 2018 at which time the performance
hurdles for this tranche are tested; and
• 66% of the allocated Performance Rights have a performance period that ends on 30 June 2019 at which time the performance
hurdles for this tranche are tested.
A summary of the terms for the Performance Rights granted in FY17 is set out in the following table.
Grant date
Tranche 1
20/12/2016
Tranche 2
20/12/2016
Performance hurdle
Relative TSR
EPS CAGR
Relative TSR
EPS CAGR
Performance period
1/07/2016 to 30/06/2018 1/07/2016 to 30/06/2018 1/07/2016 to 30/06/2019 1/07/2016 to 30/06/2019
Test date
Expiry date
Quantity granted
Exercise price
30/06/2018
Once tested
30/06/2019
Once tested
77,891
46,395
145,742
91,647
Nil
Nil
Fair value at 1/07/2016
$3.1696
$5.3213
$3.2883
$5.2293
Other conditions
Restriction on sale to 30/06/2019
Restriction on sale to 30/06/2020
Relative total shareholder return hurdle
Fifty per cent of the Performance Rights granted to a participant will vest subject to a TSR performance hurdle that assesses
performance by measuring capital growth in the share price together with income returned to shareholders, measured over the
performance period against a Comparator Group of companies. The Performance Rights will vest by reference to Bapcor’s TSR
performance ranking against this Comparator Group of companies, as follows:
Bapcor’s TSR relative to the Comparator Group over the performance period
Percentage of TSR Rights vesting
Less than 50th percentile
Equal to 50th percentile
Nil
50%
Greater than 50th percentile and less than 75th percentile
Pro-rata straight-line vesting
Equal to or greater than 75th percentile
100%
TSR for Bapcor and the companies in the Comparator Group will be calculated as follows:
• TSR will be measured between 30 June 2016 and 30 June 2018 or 2019 ('Performance Period');
• For the purpose of this measurement, dividends will be assumed to have been re-invested on the ex-dividend date;
• Tax and any franking credits (or equivalent) will be ignored; and
• For the purpose of this measurement, the share price of Bapcor and the Comparator Group companies will be averaged over the
ten trading days up to and including 30 June at the start and end date of the Performance Period.
63
ANNUAL REPORT 2017 The Comparator Group for the FY17 LTI is set out below. The Board has the discretion to adjust the Comparator Group to take
into account events including but not limited to takeovers, suspensions, mergers or demergers that might occur during the
Performance Period.
ASX Code
AAD
AHG
ARB
BRG
CTD
DMP
FLT
GEM
GUD
GXL
HVN
IVO
JBH
MTR
MYR
NVT
PMV
RFG
SUL
TME
Company Name
Ardent Leisure Group
Automotive Holdings Group
ARB Corporation Limited
Breville Group Limited
Corporate Travel Management Limited
Domino’s Pizza Enterprises Ltd
Flight Centre Travel Group
G8 Education Ltd
GUD Holdings Ltd
Greencross Limited
Harvey Norman Holdings Ltd
InvoCare Limited
JB Hi-Fi Limited
Mantra Group Ltd
Myer Holdings Limited
Navitas Limited
Premier Investments Limited
Retail Food Group Limited
Super Retail Group Limited
Trade Me Group Ltd
Earnings per share growth
Fifty per cent of the Performance Rights granted to a participant will vest by reference to an EPS performance hurdle that measures
the basic EPS on a normalised basis over the performance period. Each tranche of Performance Rights subject to an EPS hurdle will
vest as follows:
• The Board has determined that the EPS hurdle will be based on a compound annual growth rate (‘CAGR’) of basic EPS of between
7.5% and 15%, respectively, over the Performance Period.
• The starting point for these EPS rights is the FY16 Actual EPS of 17.85 cents per share.
• Basic EPS is calculated in accordance with AASB 133 Earnings Per Share.
• The proportion of the EPS Rights that vest at the end of the Performance Period will be determined as follows:
Bapcor’s compound annual EPS growth over the performance period
Percentage of EPS Rights Vesting
Less than 7.5%
Equal to 7.5%
Greater than 7.5% and less than 15%
Equal to or greater than 15%
Nil
20%
Pro-rata straight-line vesting
100%
If vesting conditions are met, Performance Rights granted in FY17 will convert into fully paid ordinary shares of the company.
Shares that are allocated in respect of each tranche will be subject to a restriction on sale for twelve months from vesting of the
Performance Rights.
64
BAPCORDIRECTORS’ REPORT continued 15.4.6 LTI outcomes
During FY17 the following Performance Rights were independently tested by a third party;
• One tranche of the LTI granted to five executives on 11 April 2014, being 65% of the total number granted, was tested against the
company’s FY17 TSR and EPS performance. The extent to which they vested is as follows.
Relative TSR Rights: Bapcor’s TSR performance ranked at the 100th percentile of the comparator. This resulted in 100% of the
tranche vesting.
CAGR of EPS: Bapcor’s CAGR of EPS was 30.4%. This resulted in 100% of the tranche vesting.
• One tranche of the LTI granted to eleven executives on 24 December 2015, being 35% of the total number granted, was tested
against the company’s FY17 TSR and EPS performance. The extent to which they vested is as follows.
Relative TSR Rights: Bapcor’s TSR performance ranked at the 80th percentile of the comparator group. This resulted in 100% of the
tranche vesting.
CAGR of EPS: Bapcor’s CAGR of EPS was 36.5%. This resulted in 100% of the tranche vesting.
Shares from vested Performance Rights remain under a restriction on sale for a further twelve months, reflecting further alignment
of executive and shareholder interests.
15.5 Cash and realisable remuneration
The following table shows the total cash remuneration received by executive KMP in respect of FY17. The total cash payments
received are made up of fixed remuneration inclusive of superannuation and benefits and the amount of the FY17 STI award that is
not deferred and is paid in August 2017.
The table also includes the value of previous years’ deferred STI and LTI awards that vested during FY17 and became realisable. These
values differ from the values in the table in section 15.6.1 that shows the accounting expense for both vested and unvested awards.
The table does not show values for vested LTI that are not realisable because they remain under restriction on sale for twelve months
after vesting.
Executive KMP
Darryl Abotomey
Greg Fox
Mathew Cooper
Paul Dumbrell
Grant Jarrett
Craig Magill
Peter Tilley
Colin Daly5
Alison Laing6
Previous year awards that
vested during FY17
Fixed
remuneration1
$
FY17 cash
STI2
$
Total cash
in respect
of FY17
$
Prior year
deferred STI
received3
$
Vested and
unrestricted
LTI4
$
Total received
and realisable
during FY17
$
1,068,300
587,565
1,655,865
129,178
575,000
230,000
805,000
390,000
156,000
546,000
400,810
373,334
415,000
390,004
229,806
44,999
182,000
582,810
93,294
466,628
166,000
99,216
581,000
489,220
108,698
338,504
—
44,999
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,785,043
805,000
546,000
582,810
466,628
581,000
489,220
338,504
44,999
1. Fixed remuneration is the aggregate of cash salary, superannuation and fringe benefits.
2.
FY17 cash STI is the amount accrued and payable in respect of FY17 STI opportunity. It is the cash amount to be paid in August 2017 and does not include any
deferred amount in respect of the FY17 STI award.
3. Prior year deferred STI received is the STI amount awarded in August 2016 in respect of FY16 and deferred for twelve months. It is to be paid in August 2017.
4. Vested and unrestricted LTI is the value of the vested LTI on the day it is no longer under restriction on sale. The value is the closing share price on the date
the LTI is no longer subject to restriction on sale. The FY14 LTI that vested during FY17 was restricted on sale until 1 Aug 2017.
5. Colin Daly is Chief Executive — Hellaby Automotive and has been included from when Bapcor took effective control of Hellaby in January 2017.
6. Alison Laing commenced as Executive General Manager — Human Resources in May 2017.
65
ANNUAL REPORT 2017 15.6 Statutory details of remuneration
The statutory remuneration disclosures for the year ended 30 June 2017 are detailed below under the following headings and are
prepared in accordance with Australian Accounting Standards (AASBs).
15.6.1
Remuneration of KMP
15.6.2
Service agreements
15.6.3
NED remuneration
15.6.4
Share-based compensation
15.6.5
Equity instrument disclosures relating to KMP
15.6.6
Total shares under option or right to KMP
15.6.7
Loans to KMP
66
BAPCORDIRECTORS’ REPORT continued 15.6.1 Remuneration of KMP
Short term benefits
Post
employment
benefits
Long
term
benefits
Share
based
payments
Percentage of remuneration
fixed and at risk
Cash salary
and fees5
$
Bonus4
$
Non-
monetary
$
Super-
annuation
$
2017
NED
Robert McEniry
260,384
Andrew Harrison
Therese Ryan
126,700
126,700
Margaret Haseltine
123,080
Executive Director
—
—
—
—
Darryl Abotomey
1,043,300 1,005,402
Other KMP
Greg Fox
Craig Magill
551,112
305,340
395,384
203,185
Paul Dumbrell1
372,179
192,374
Mathew Cooper
370,384
190,780
Peter Tilley
Grant Jarrett
Colin Daly2
Alison Laing3
Total
2016
NED
360,175
352,083
99,216
93,294
222,912
108,698
40,724
—
4,345,117 2,198,289
$
$
—
—
—
—
Robert McEniry
170,000
Andrew Harrison
Therese Ryan
Margaret Haseltine
Executive Director
97,800
97,800
6,780
Darryl Abotomey
745,000
562,678
Other KMP
Greg Fox
Craig Magill
430,693
232,400
301,902
165,474
Paul Dumbrell
368,716
159,775
Mathew Cooper
292,656
140,070
Peter Tilley
282,304
124,350
Grant Jarrett
316,360
136,069
Total
3,110,011
1,520,816
—
—
—
—
—
—
—
—
—
—
—
—
—
$
—
—
—
—
—
—
—
—
—
—
—
—
Long
service
leave
$
—
—
—
—
Equity
settled
$
Total
$
Fixed
%
At risk —
STI
%
At risk —
LTI
%
—
—
—
—
280,000
100%
140,000
100%
140,000
100%
136,000
100%
—
—
—
—
—
—
—
—
19,616
13,300
13,300
12,920
25,000
16,555
334,616 2,424,873
45%
41%
14%
19,616
19,616
21,250
19,616
21,250
21,250
6,894
4,275
9,256
263,113
1,148,437
51% 26%
23%
6,590
152,397
777,172
54% 26% 20%
6,894
166,372
759,069
53% 25% 22%
6,173
111,639
698,592
5,310
109,405
595,356
5,469
111,185
583,281
57%
65%
65%
27%
17%
16%
—
4,173
—
—
338,504
68%
32%
49,172
100%
—
16%
18%
19%
—
—
217,903
60,420 1,248,727 8,070,456
$
16,150
9,291
9,291
644
$
—
—
—
—
$
—
—
—
—
$
%
%
%
186,150
100%
107,091
100%
107,091
100%
7,424
100%
—
—
—
—
—
—
—
—
25,000
11,917
355,697
1,700,292
46%
33%
21%
19,207
19,547
17,743
17,442
17,743
17,817
7,178
5,178
160,518
849,996
54%
27%
93,000
585,101
56% 28%
5,852
77,194
629,280
62% 26%
5,011
4,179
50,728
505,907
62% 28%
47,925
476,501
64% 26%
5,303
53,521
529,070
64% 26%
19%
16%
12%
10%
10%
10%
169,875
44,618 838,583 5,683,903
1. Paul Dumbrell took 6.8 weeks leave without pay during FY17.
2. Colin Daly is Chief Executive — Hellaby Automotive and has been included from when Bapcor took effective control of Hellaby in January 2017.
3. Alison Laing commenced as Executive General Manager — Human Resources in May 2017.
4. As per the prior year financial report, bonuses in relation to the sale of ANA in FY16 have been excluded from the above table.
5. Cash salary and fees includes accrued annual leave.
67
ANNUAL REPORT 2017 15.6.2 Service agreements
Remuneration and other terms of employment for KMP are formalised in service agreements. Details of these agreements are
as follows.
Name
Title
Darryl Abotomey
Chief Executive Officer and Managing Director
Agreement commenced
21 April 2014
Term of agreement
5 years (to 30 April 2019)
Details
Fixed annual remuneration was increased to $1,068,300 (inclusive of superannuation). This is
adjusted annually. Fixed remuneration and incentives are based on independent advice from
Godfrey Remuneration Group.
Bapcor or Darryl may terminate his employment contract by giving the other twelve months’
written notice before the proposed date of termination, or in Bapcor’s case, payment in lieu of
notice. Bapcor may terminate Darryl’s employment immediately and without payment in lieu
of notice in certain circumstances including for any serious misconduct. Darryl’s employment
contract also includes a restraint of trade period of twelve months.
Other KMP
Each of Bapcor’s executive KMP is employed under an individual employment agreement. The provisions of the employment
agreements include:
Contract terms
The commencement dates vary and all contracts are open ended.
Fixed annual remuneration
Each executive’s contract specifies the FAR inclusive of superannuation, motor vehicle, non-cash
benefits and FBT thereon. The amount for each executive is as set out earlier in this report.
Review of FAR
Variable pay
Notice period
Confidentiality
Leave
Restraint of trade
The executives’ FAR is subject to annual review with no obligation on the company to
make changes.
Each executive is eligible to participate in the company’s incentive arrangements that can
vary from time to time. The maximum STI opportunity is 60% of the executive’s FAR and the
maximum LTI opportunity is between 40% and 50% of the executive’s FAR.
The executive KMP are subject to a three to six month notice period both by the company and
by the executive.
Each contract includes provisions requiring the executive to maintain the confidentiality of
company information.
Each contract provides for leave entitlements, as a minimum, as per the National
Employment Standard.
Each contract includes restraint of trade provisions for a period after termination
of employment.
As Alison Laing commenced employment in May 2017, she has not participated in STI or LTI opportunities for FY17, but will do so in
future years. Colin Daly has participated for part of the FY17 year in the former Hellaby STI plan and will participate in the Bapcor LTI.
68
BAPCORDIRECTORS’ REPORT continued 15.6.3 NED remuneration
Fees and payments to NEDs reflect the demands and the responsibilities of the directors. NED fees and payments are reviewed
annually by the NRC. The NRC seeks to set fees at a level that will attract and retain high calibre NEDs who have a diverse range of
experience, skills and qualifications to enable effective oversight of management and the company. The NRC may, from time to time,
receive advice from independent remuneration consultants to ensure NED fees and payments are competitive, appropriate and in line
with the market.
The maximum aggregate fee pool of $1,000,000 was approved by shareholders at the AGM on 21 October 2016.
A review of NED remuneration was undertaken by the NRC in August 2016. The NRC engaged Godfrey Remuneration Group to
undertake an independent benchmarking of NED fees. The review determined that the base board fees and committee fees were
significantly below market levels for the workload commitments particularly given the company’s growth and complexity.
The following fee policy for the board and committees took effect from 1 July 2016.
NED type
Chairman
Member
Board
$
280,000
110,000
Nomination &
Remuneration Committee
$
Audit & Risk
Management Committee
$
20,000
10,000
20,000
10,000
All fee amounts are inclusive of compulsory superannuation obligations.
Fees paid to NEDs in FY17 are set out in the following table. Fees are paid in cash and NEDs were not granted options or share rights
in FY17. NEDs are not entitled to any payment on retirement or resignation from the Board. Directors may also be reimbursed for
expenses properly incurred by the director in connection with the affairs of Bapcor including travel and other expenses whilst
attending to company affairs.
An additional amount of $6,000 was paid to Margaret Haseltine for the additional workload required of her in respect of her role on
the Board of the Hellaby Holdings Limited during its acquisition and while it remained a listed entity in New Zealand.
NED
Robert McEniry
Andrew Harrison
Therese Ryan
Margaret Haseltine
Financial
year
2017
2016
2017
2016
2017
2016
2017
2016
Board fees
$
258,646
162,600
100,002
85,000
100,002
85,000
105,948
5,997
Committee fees
$
Superannuation $
—
7,400
27,273
12,800
27,273
12,800
18,267
783
18,949
16,150
12,091
9,291
12,091
9,291
11,800
644
Total
$
277,595
186,150
139,367
107,091
139,367
107,091
136,016
7,424
Shares held by NEDs
The Board has a policy of encouraging directors to increase their holding of shares in the company so that over time it reaches a
minimum level of one times the base board fees. The current shareholding interests of the NEDs is set out in section 15.6.5.
69
ANNUAL REPORT 2017 15.6.4 Share-based compensation
The following table outlines the details of the LTI grants outstanding for each executive KMP participant and other movements in
options and performance rights in the year. As options will not vest if the performance conditions are not satisfied, the minimum
value of the option yet to vest is nil. Fair value is calculated in accordance with Bapcor’s accounting policy as discussed in note 1 of the
financial statements. There were no amounts paid and there were no amounts outstanding or due from KMP in relation to the grant of
options during the year.
KMP
Grant date
Quantity
granted
Vest date
Exercise
price
$
Value at
grant date1
$
Vested
%
Quantity
vested
Quantity
remaining
Forfeited/
lapsed
%
Value
expensed
this year2
$
Darryl Abotomey 24/04/2014
70,071
30/06/2016
220,089
30/06/2017
24/12/2015
55,198
30/06/2017
105,790
30/06/2018
Greg Fox
24/04/2014
31,778
30/06/2016
99,814
30/06/2017
24/12/2015
24,814
30/06/2017
47,558
30/06/2018
20/12/2016
24,605
30/06/2018
46,995
30/06/2019
Craig Magill
24/04/2014
18,114
30/06/2016
24/12/2015
56,894
30/06/2017
14,558
30/06/2017
27,901
30/06/2018
20/12/2016
14,206
30/06/2018
27,135
30/06/2019
—
—
—
—
—
—
—
—
382,342
24%
70,071
—
0% 112,063
220,089
574,449
0%
—
55,198
0% 222,553
173,398
24%
31,778
—
0% 60,987
105,790
258,243
0%
307,393
0%
—
—
99,814
24,814
47,558
24,605
46,995
0% 100,048
0% 102,078
93,634
24%
18,114
—
0%
34,763
151,505
0%
177,485
0%
Paul Dumbrell
24/12/2015
21,230
30/06/2017
—
220,940
0%
40,688
30/06/2018
20/12/2016
19,470
30/06/2018
37,188
30/06/2019
Mathew Cooper
24/12/2015
13,951
30/06/2017
26,738
30/06/2018
20/12/2016
13,351
30/06/2018
25,501
30/06/2019
Peter Tilley
24/12/2015
13,180
30/06/2017
25,261
30/06/2018
20/12/2016
13,351
30/06/2018
Grant Jarrett
24/12/2015
25,501
30/06/2019
14,719
28,211
30/06/2017
30/06/2018
20/12/2016
12,495
30/06/2018
23,865
30/06/2019
—
—
—
—
—
—
—
243,244
0%
145,189
0%
166,799
0%
137,168
0%
166,799
0%
153,186
0%
156,102
0%
—
—
—
—
—
—
—
—
—
—
56,894
14,558
27,901
14,206
27,135
21,230
40,688
19,470
37,188
13,951
26,738
13,351
25,501
13,180
25,261
13,351
25,501
14,719
28,211
12,495
23,865
0% 58,696
0% 58,938
0% 85,597
0% 80,775
0% 56,249
0% 55,390
0%
54,015
0% 55,390
0% 59,347
0%
51,838
Total
1,240,220
3,507,876
119,963 1,120,257
1,248,727
1. Value at grant date has been determined as the fair value of performance rights at grant.
2.
Value expensed this year is the current years expense calculated by allocating the fair value (determined at grant), of the performance rights, over the relevant
vesting period as required by the Accounting Standards.
70
BAPCORDIRECTORS’ REPORT continued 15.6.5 Equity instrument disclosures relating to KMP
The numbers of ordinary voting shares in the company held during the financial year by each director and other KMP, including their
personally related parties, are set out below.
2017
Directors
Robert McEniry
Andrew Harrison
Therese Ryan
Margaret Haseltine
Darryl Abotomey
Other KMP
Greg Fox
Craig Magill
Paul Dumbrell
Mathew Cooper
Peter Tilley
Grant Jarrett
Total
2016
Directors
Robert McEniry
Andrew Harrison
Therese Ryan
Margaret Haseltine
Darryl Abotomey
Other KMP
Greg Fox
Craig Magill
Paul Dumbrell1
Mathew Cooper
Peter Tilley
Grant Jarrett
Total
Received during
the year
Retail share
offer
Purchase of
shares
Sale of shares
Balance at the
end of the year
Balance at
start of the
year
40,294
44,000
32,976
—
—
—
—
—
2,869
2,869
—
153
1,787,306
70,071
2,869
762,417
809,246
2,817,313
—
—
—
31,778
18,114
—
—
—
—
—
—
—
—
—
—
—
10,000
—
15,560
—
—
—
—
8,500
—
—
—
—
—
—
—
(200,000)
—
—
—
—
—
43,163
56,869
32,976
15,713
1,860,246
594,195
827,360
2,817,313
8,500
—
—
6,293,552
119,963
8,760
34,060
(200,000) 6,256,335
27,473
30,000
22,483
—
1,559,526
656,193
1,078,714
—
—
—
—
3,374,389
—
—
—
—
—
—
—
—
—
—
—
—
12,821
14,000
10,493
—
727,780
306,223
503,400
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
40,294
44,000
32,976
—
(500,000)
1,787,306
(199,999)
762,417
(772,868)
809,246
4,695,525
(1,878,210)
2,817,313
—
—
—
—
—
—
—
—
—
1,574,717
4,695,523
(3,351,077) 6,293,552
1. The issue of shares to Paul Dumbrell (via his related entities) in FY16 occurred as part of the ANA acquisition settlement.
71
ANNUAL REPORT 2017 15.6.6 Total shares under option or right to KMP
Date granted
Performance rights plans
24/04/2014
24/12/2015
24/12/2015
20/12/2016
20/12/2016
Total shares under option of right
Vest date
Expiry date
Exercise price
of rights
30/06/2017
30/06/2017
30/06/2018
30/06/2018
30/06/2019
n/a
n/a
n/a
n/a
n/a
$0.00
$0.00
$0.00
$0.00
$0.00
Quantity
376,797
157,650
302,147
97,478
186,185
1,120,257
15.6.7 Loans to executive KMP
During FY16, loans were made to executive KMP (Darryl Abotomey, Greg Fox and Craig Magill) and some other executives to assist in
the purchase of shares under the retail component of the Entitlements Offer in that year. These loans are secured by the underlying
shares. The loans are interest bearing and are repayable on the earlier of sale of the underlying shares, termination of employment
or 5 years from the date of the loan. Any remuneration in relation to over achievement of target STIs is to be applied to repay the
outstanding loan balance. The total amount of loans made during FY16 to executive KMP was $3,050,000. Subsequent to the loans
being made, there have been repayments of $1,696,000 and as at 30 June 2017, the outstanding balance on these loans to executive
KMP is $1,354,000. There are no outstanding loans to the CEO.
16. Matters subsequent to the end of the financial year
On 3 July 2017, Bapcor purchased Tricor Engineering ('Tricor') for a total of $2.4M of which $1.0M is deferred over the next two years.
Tricor specialises in the supply and installation of lubrication equipment in the car dealership and heavy vehicle workshop market.
The business will operate within the Precision Automotive Equipment business within the Trade segment.
Apart from the dividend declared as discussed above, no other matter or circumstance has arisen since 30 June 2017 that has
significantly affected, or may significantly affect the consolidated entity’s operations, the results of those operations, or the
consolidated entity’s state of affairs in future financial years.
17. Environmental regulation
The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or State law.
18. Indemnity and insurance of officers
During the financial year, the company paid a premium of $190,250 in respect of a contract to insure the directors and executives of
the company against a liability for costs that may be incurred in defending civil or criminal proceedings that may be brought against
the directors, in their capacity as a director, except where there is a lack of good faith.
19. Proceedings on behalf of the company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the
company, or to intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of
the company for all or part of those proceedings.
20. Auditor
PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001.
72
BAPCORDIRECTORS’ REPORT continued 21. Remuneration of auditors
Details of the amounts paid or payable to the auditor for audit and non-audit services provided during the financial year by the
auditor are outlined in note 29 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another
person or firm on the auditor’s behalf), is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 29 to the financial statements do not compromise the external
auditor’s independence requirements of the Corporations Act 2001 for the following reasons:
• all non-audit services have been reviewed and approved to ensure that they do not impact the integrity 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 issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the
auditor’s own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or
jointly sharing economic risks and rewards.
22. 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 74
of the Directors’ Report.
23. Rounding of amounts
The company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments
Commission, relating to ‘rounding-off’. Amounts in this report have been rounded off in accordance with that Corporations Instrument
to the nearest thousand dollars, or in certain cases, the nearest dollar.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the directors
Robert McEniry
Chairman
23 August 2017
Melbourne
Darryl Abotomey
Chief Executive Officer and Managing Director
73
ANNUAL REPORT 2017
AUDITOR’S INDEPENDENCE DECLARATION
Bapcor Limited
Directors' report (continued)
30 June 2017
Auditor’s Independence Declaration
As lead auditor for the audit of Bapcor Limited for the year ended 30 June 2017, 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 Bapcor Limited and the entities it controlled during the period.
Daniel Rosenberg
Partner
PricewaterhouseCoopers
Melbourne
23 August 2017
PricewaterhouseCoopers, ABN 52 780 433 757 74
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.
74
BAPCOR
FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 JUNE 2017
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors’ declaration
Independent auditor’s report to the members of Bapcor Limited
Shareholder information
Corporate directory
76
78
79
80
81
130
131
137
IBC
General information
The financial statements cover Bapcor Limited as a consolidated entity consisting of Bapcor Limited and the entities it controlled at
the end of, or during, the year. The financial statements are presented in Australian dollars, which is Bapcor Limited’s functional and
presentation currency.
Bapcor Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal
place of business is:
61 Gower Street, Preston VIC 3072 AUSTRALIA
A description of the nature of the consolidated entity’s operations and its principal activities are included in the Directors’ Report,
which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 23 August 2017. The directors have
the power to amend and reissue the financial statements.
75
ANNUAL REPORT 2017 Revenue from continuing operations
Expenses
Cost of sales
Employee benefits expense
Freight
Advertising
Administration
Motor vehicles
IT & communications
Occupancy
Acquisition costs
Depreciation and amortisation expense
Finance costs
Profit before income tax expense from continuing operations
Income tax expense
Profit after income tax expense from continuing operations
Profit after income tax expense from discontinued operations
Profit after income tax expense for the year
Other comprehensive income
Items that may be reclassified to profit or loss
Foreign currency translation
Changes in the fair value of cash flow hedges
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Profit for the year is attributable to:
Non-controlling interest
Owners of Bapcor Limited
Total comprehensive income for the year is attributable to:
Non-controlling interest:
Continuing operations
Discontinued operations
Total non-controlling interest
Owners of Bapcor Limited:
Continuing operations
Discontinued operations
Total owners of Bapcor Limited
Consolidated
Note
2017
$’000
2016
$’000
1,013,553
685,629
5
5
5
6
7
(552,683)
(382,679)
(209,013)
(132,714)
(17,982)
(23,773)
(11,470)
(17,324)
(42,026)
(25,956)
(9,113)
(10,441)
(6,499)
(6,912)
(37,027)
(23,897)
(8,482)
(13,527)
(9,766)
79,720
(1,149)
(10,055)
(4,858)
62,116
(25,988)
(18,534)
53,732
10,098
43,582
—
63,830
43,582
(891)
(1,967)
(2,858)
—
(1,256)
(1,256)
60,972
42,326
(214)
—
23
64,044
43,582
63,830
43,582
—
(244)
(244)
—
—
—
52,524
42,326
8,692
61,216
—
42,326
60,972
42,326
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
76
BAPCORCONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 30 June 2017
Earnings per share for profit from continuing operations attributable
to the owners of Bapcor Limited
Basic earnings per share
Diluted earnings per share
Earnings per share for profit from discontinued operations attributable
to the owners of Bapcor Limited
Basic earnings per share
Diluted earnings per share
Earnings per share for profit attributable to the owners of Bapcor Limited
Basic earnings per share
Diluted earnings per share
Consolidated
2017
Cents
2016
Cents
19.93
19.83
17.89
17.82
3.75
3.73
23.76
23.64
—
—
17.89
17.82
Note
40
40
40
40
40
40
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
77
ANNUAL REPORT 2017 Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Assets held for sale
Total current assets
Non-current assets
Trade and other receivables
Property, plant and equipment
Intangibles
Deferred tax asset
Other
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Derivative financial instruments
Income tax
Provisions
Liabilities relating to assets held for sale
Total current liabilities
Non-current liabilities
Borrowings
Derivative financial instruments
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Equity attributable to the owners of Bapcor Limited
Non-controlling interest
Total equity
Consolidated
Note
2017
$’000
2016
$’000
8
9
10
27
11
12
13
14
6
15
16
27
17
18
19
27
20
21
22
23
24
39,755
135,784
261,627
40
178,860
616,066
22,392
87,304
163,020
—
—
272,716
296
49,781
573
36,213
647,831
362,207
18,664
4,061
7,247
4,466
720,633
410,706
1,336,699
683,422
174,768
121,507
1,780
3,455
32,131
70,842
420
6,236
26,607
—
282,976
154,770
429,747
148,184
637
33,372
1,374
12,874
463,756
162,432
746,732
317,202
589,967
366,220
600,675
416,427
(202)
845
(17,067)
(51,052)
583,406
366,220
6,561
—
589,967
366,220
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
78
BAPCORCONSOLIDATED STATEMENT OF FINANCIAL POSITION as at 30 June 2017
Consolidated
Balance at 1 July 2015
Profit after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs
Share-based payments
Dividends paid
Note
Contributed
equity
$’000
337,390
Reserves
$’000
Accumulated
losses
$’000
Total equity
$’000
441
(70,906)
266,925
—
—
—
—
43,582
(1,256)
—
43,582
(1,256)
(1,256)
43,582
42,326
22
21
25
79,037
—
—
—
1,660
—
—
79,037
1,660
—
(23,728)
(23,728)
Balance at 30 June 2016
416,427
845
(51,052)
366,220
Consolidated
Note
Balance at 1 July 2016
Profit/(loss) after income tax
expense for the year
Other comprehensive income
for the year, net of tax
Total comprehensive income
for the year
Transactions with owners
in their capacity as owners:
Contributions of equity,
net of transaction costs
Non-controlling interests on
acquisition
Share-based payments
Treasury shares
Dividends paid
21
24
22
21
25
Contributed
equity
$’000
416,427
—
—
—
186,144
—
—
—
—
Other
$’000
Reserves
$’000
Accumulated
losses
’000
Non-controlling
Interests
$’000
Total equity
$’000
—
—
—
—
—
—
—
(1,896)
—
845
(51,052)
—
366,220
—
64,044
(214)
63,830
(2,828)
—
(30)
(2,858)
(2,828)
64,044
(244)
60,972
—
—
1,782
—
—
—
—
—
—
(30,059)
—
186,144
6,804
—
—
—
6,804
1,782
(1,896)
(30,059)
Balance at 30 June 2017
602,571
(1,896)
(201)
(17,067)
6,560
589,967
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
79
ANNUAL REPORT 2017CONSOLIDATED STATEMENT OF CHANGES IN EQUITYfor the year ended 30 June 2017 Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Payments for new store initial inventory purchases
Borrowing costs
Transaction costs relating to acquisition of business
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Consolidated
Note
2017
$’000
2016
$’000
1,114,521
771,029
(994,123)
(702,626)
120,398
68,403
(11,532)
(9,288)
(8,482)
(30,002)
61,094
(6,150)
(3,957)
(1,029)
(18,004)
39,263
39
Payment for purchase of business, net of cash and cash equivalents
35
(373,238)
(289,012)
Payment for deferred settlements
Payments for property, plant and equipment
Payments for intangibles
Proceeds from disposal of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Share issue transaction costs
Purchase of treasury shares
Repayment of acquired loans via acquisition
Net proceeds from borrowings
Dividends paid
Borrowing transaction costs
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
13
14
21
21
21
35
19
25
(6,511)
—
(15,096)
(12,020)
(1,120)
974
(2,149)
471
(394,991)
(302,710)
182,022
54,306
(4,596)
(1,896)
(79,487)
(1,068)
—
—
283,429
148,800
(25,501)
(23,728)
(2,618)
(367)
351,353
177,943
17,456
(85,504)
22,392
107,896
(93)
—
Cash and cash equivalents at the end of the financial year
8
39,755
22,392
Note: the consolidated statement of cash flows represents the statement of cash flows of the continuing operations only. Discontinued
operation's cash flows have been excluded as cash flow disclosures are not required for disposal groups that are classified as held for
sale on acquisition in accordance with AASB 5 Non-current Assets Held for Sale and Discontinued Operations.
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
80
BAPCORCONSOLIDATED STATEMENT OF CASH FLOWSfor the year ended 30 June 2017
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2017
Note 1. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the AASB and the Corporations Act 2001, as appropriate for for-profit oriented entities. These financial
statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board
(‘IASB’).
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of
available-for-sale financial assets, financial assets and liabilities at fair value through profit or loss, investment properties, certain
classes of property, plant and equipment and derivative financial instruments.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management
to exercise its judgement in the process of applying the consolidated entity’s accounting policies. The areas involving a higher degree
of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in
note 2.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only.
Supplementary information about the parent entity is disclosed in note 34.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Bapcor Limited (‘company’ or ‘parent
entity’) as at 30 June 2017 and the results of all subsidiaries for the year then ended. Bapcor Limited and its subsidiaries together are
referred to in these financial statements as the ‘consolidated entity’.
Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity when the
consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect
those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control
is transferred to the consolidated entity. They are de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity 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
consolidated entity.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without
the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the
book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent.
Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of comprehensive income,
statement of financial position and statement of changes in equity of the consolidated entity. Losses incurred by the consolidated
entity are attributed to the non-controlling interest in full, even if that results in a deficit balance.
Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-
controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The consolidated
entity recognises the fair value of the consideration received and the fair value of any investment retained together with any gain
or loss in profit or loss.
Operating segments
Operating segments are presented using the ‘management approach’, where the information presented is on the same basis as the
internal reports provided to the Chief Operating Decision Makers (‘CODM’). The CODM is responsible for the allocation of resources
to operating segments and assessing their performance.
Foreign currency translation
The financial statements are presented in Australian dollars, which is Bapcor Limited’s functional and presentation currency.
81
ANNUAL REPORT 2017 Note 1. Significant accounting policies (continued)
Transactions and balances
Foreign currency transactions are translated into Australian dollars 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 financial year-end
exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss, except when
deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date.
The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates, which
approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in
other comprehensive income through the foreign currency reserve in equity.
The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed.
Goodwill and fair value adjustments arising on the acquisition Note 1. Significant accounting policies (continued) of a foreign
operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns,
trade allowances, rebates and amounts collected on behalf of third parties.
Revenue is recognised when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to
the consolidated entity and specific criteria have been met for each of the revenue activities as described below. Where estimates are
used, they are based on historical results, taking into consideration the type of customer, the type of transaction and the specifics of
each arrangement.
Sale of goods
A sale is recorded when goods have been delivered to the customer, the customer has accepted the goods and collectability of the
related receivables is probable.
Rendering of services - franchise and service fees
Revenue from the provision of franchise and advertising services is recognised on an accruals basis.
Revenue from the provision of accounting and information technology support services is recognised on a periodical as-delivered basis.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
Income tax
The income tax expense or benefit for the period is the tax payable on that period’s taxable income based on the applicable income
tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences,
unused tax losses and the adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets
are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:
• When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction
that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or
• When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of
the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
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.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets
recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount
to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future
taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current
tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same
taxable entity or different taxable entities which intend to settle simultaneously.
82
BAPCORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedfor the year ended 30 June 2017 Discontinued operations
A discontinued operation is a component of the consolidated entity that has been disposed of or is classified as held for sale and that
represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of
such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued
operations are presented separately on the face of the statement of comprehensive income.
Discontinued operations adhere to the accounting policies of the consolidated entity except for the following specific recognition and
measurement policies only relating to the discontinued operations:
Revenue recognition and measurement:
Sale of services and unbilled revenue (specific to the Resource Services discontinued operation):
Where services are charged on the basis of actual time and materials incurred, revenue is recognised as costs are incurred. Revenue is
generally calculated based on contractual billing rates for the services performed. To the extent that services rendered have not been
invoiced at balance date but are billable under agreed contractual terms, an amount is recorded as unbilled revenue in the balance
sheet as part of assets held for sale.
Where services are under a fixed price arrangement then the percentage-of-completion method of contract accounting is applied.
When the outcome of fixed price contracts can be measured reliably, revenue is recognised based on the proportion of work
performed to date relative to the estimated total contract costs. When the outcome of fixed price contracts cannot be measured
reliably, revenue is recognised only to the extent of the expenses incurred under the contract that are expected to be recoverable.
If these services have not been invoiced at balance date but are billable, an amount is recorded as unbilled revenue in the balance
sheet as part of assets held for sale.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the consolidated
entity’s normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within twelve months after
the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at
least twelve months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the consolidated entity’s normal operating cycle; it
is held primarily for the purpose of trading; it is due to be settled within twelve months after the reporting period; or there is no
unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. All other liabilities are
classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid
investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value.
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest
method, less any provision for impairment. Trade receivables are generally due for settlement within 30 to 60 days.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off
by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is objective
evidence that the consolidated entity will not be able to collect all amounts due according to the original terms of the receivables.
Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and default
or delinquency in payments (more than 60 days overdue) are considered indicators that the trade receivable may be impaired.
The amount of the impairment allowance is the difference between the asset’s carrying amount and the present value of estimated
future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted
if the effect of discounting is immaterial.
Other receivables are recognised at amortised cost, less any provision for impairment.
Inventories
Stock in transit is stated at the lower of cost and net realisable value. Cost comprises of purchase and delivery costs, net of rebates
and discounts received or receivable.
Stock on hand is stated at the lower of cost and net realisable value. Cost comprises of purchase and delivery costs, net of rebates
and discounts received or receivable.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the
estimated costs necessary to make the sale.
83
ANNUAL REPORT 2017 Note 1. Significant accounting policies (continued)
Derivative financial instruments
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured
to their fair value at each reporting date. The accounting for subsequent changes in fair value depends on whether the derivative is
designated as a hedging instrument, and if so, the nature of the item being hedged.
Derivatives are classified as current or non-current depending on the expected period of realisation.
Cash flow hedges
Cash flow hedges are used to cover the consolidated entity’s exposure to variability in cash flows that is attributable to particular
risks associated with a recognised asset or liability or a firm commitment which could affect profit or loss. The effective portion of the
gain or loss on the hedging instrument is recognised in other comprehensive income through the cash flow hedges reserve in equity,
whilst the ineffective portion is recognised in profit or loss. Amounts taken to equity are transferred out of equity and included in the
measurement of the hedged transaction when the forecast transaction occurs.
Cash flow hedges are tested for effectiveness on a regular basis both retrospectively and prospectively to ensure that each hedge is
highly effective and continues to be designated as a cash flow hedge. If the forecast transaction is no longer expected to occur, the
amounts recognised in equity are transferred to profit or loss.
If the hedging instrument is sold, terminated, expires, exercised without replacement or rollover, or if the hedge becomes
ineffective and is no longer a designated hedge, the amounts previously recognised in equity remain in equity until the forecast
transaction occurs.
Hedges of a net investment
Hedges of a net investment in a foreign operation include monetary items that are considered part of the net investment. Gains or
losses on the hedging instrument relating to the effective portion of the hedge are recognised directly in equity whilst gains or losses
relating to the ineffective portion are recognised in profit or loss. On disposal of the foreign operation, the cumulative value of any
such gains or losses recognised directly in equity is transferred to profit or loss.
Plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. 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 consolidated entity and the cost of the item can be
measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other
repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of plant and equipment over their expected
useful lives as follows:
Plant and equipment
Motor vehicles
2-15 years
3-7 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.
An item of plant and equipment is derecognised upon disposal or when there is no future economic benefit to the consolidated entity.
Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. Any revaluation surplus reserve
relating to the item disposed of is transferred directly to retained profits.
Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an
assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement
conveys a right to use the asset.
A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the risks and
benefits incidental to the ownership of leased assets, and operating leases, under which the lessor effectively retains substantially all
such risks and benefits.
Finance leases are capitalised. A lease asset and liability are established at the fair value of the leased assets, or if lower, the present
value of minimum lease payments. Lease payments are allocated between the principal component of the lease liability and the
finance costs, so as to achieve a constant rate of interest on the remaining balance of the liability.
Leased assets acquired under a finance lease are depreciated over the asset’s useful life or over the shorter of the asset’s useful life
and the lease term if there is no reasonable certainty that the consolidated entity will obtain ownership at the end of the lease term.
Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on a straight-line basis over the
term of the lease.
84
BAPCORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedfor the year ended 30 June 2017 Intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the
date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not
amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at
cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible
assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method
and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life
are accounted for prospectively by changing the amortisation method or period.
Goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for impairment, or
more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated
impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed.
Brands and trademarks
Brands and trademarks are recognised as intangible assets where a registered trademark is acquired with attributable value.
They are valued using a relief from royalty method and are considered indefinite life intangibles and are not amortised unless there
is an intention to discontinue their use in which it is amortised over the estimated remaining useful life.
Customer contracts
Customer contracts acquired in a business combination are amortised on a straight-line basis over the period of their expected
benefit, being their finite life which is currently between 10 and 20 years.
Software
Costs incurred in acquiring, developing, and implementing new software are recognised as intangible assets only when it is probable
that future economic benefits associated with the item will flow to the consolidated entity and the cost of the item can be measured
reliably. The expenditure capitalised comprises all directly attributable costs, including costs of materials, services, licenses and direct
labour. Software is amortised on a straight-line basis over the period of their expected benefit, being their finite life which is currently
between 2 and 4 years.
Impairment of assets
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually
for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are
reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-use. The value-in-use is the present value
of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to
which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit.
Trade and other payables
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year
and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts are
unsecured and are usually paid within 30 to 90 days of recognition.
Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are
subsequently measured at amortised cost using the effective interest method.
Where there is an unconditional right to defer settlement of the liability for at least twelve months after the reporting date, the loans
or borrowings are classified as non-current.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that
some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no
evidence that it is probable that some or all of the facility will be drawn down, the fee is amortised on a straight-line basis over the
term of the facility.
Provisions
Provisions are recognised when the consolidated entity has a present (legal or constructive) obligation as a result of a past event, it
is probable the consolidated entity will be required to settle the obligation, and a reliable estimate can be made of the amount of the
obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at
the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material,
provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage
of time is recognised as a finance cost.
85
ANNUAL REPORT 2017 Note 1. Significant accounting policies (continued)
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled wholly
within twelve months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled.
Long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within twelve months of the reporting date are
measured at the present value of expected future payments to be made in respect of services provided by employees up to the
reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of
employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on
corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
Share-based payments
Share-based compensation benefits are provided to employees via the Long-Term Incentive ('LTI') plan. The fair value of performance
rights granted under the LTI is recognised as an employee benefit expense over the period during which the employees become
unconditionally entitled to the rights and options with a corresponding increase in equity.
The total amount to be expensed is determined by reference to the fair value of the rights and options granted, which includes any
market performance conditions and the impact of any non-vesting conditions but excludes the impact of any service and non-market
performance vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are
expected to vest which are revised at the end of each reporting period. The impact of the revision to original estimates, if any, is
recognised in profit or loss, with a corresponding adjustment to equity.
The fair value is measured at grant date and the expense recognised over the life of the plan. The fair value is independently
determined using a Black-Scholes or similar option pricing model that takes into account the exercise price, the term of the option,
the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield
and the risk-free interest rate for the term of the option.
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value
is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence
of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they
act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use.
Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value,
are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects the significance
of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels are
determined based on a reassessment of the lowest level of input that is significant to the fair value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not
available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation.
Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which
includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources
of data.
Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from
the proceeds.
86
BAPCORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedfor the year ended 30 June 2017 Dividends
Dividends are recognised when declared during the financial year and no longer at the discretion of the company.
Business combinations
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, the liabilities incurred and the equity interests issued. The consideration transferred also includes the fair value of any
asset or liability resulting from a contingent consideration arrangement and the fair value of any pre-existing equity interest in the
subsidiary.
Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in
a business combination are, with limited exceptions, measured initially at their fair values at the acquisition-date. On an acquisition-
by-acquisition basis, any non-controlling interest in the acquiree is recognised either at fair value or at the non-controlling interest’s
proportionate share of the acquiree’s net identifiable assets.
Business combinations (continued)
The excess of the consideration transferred and the amount of any non-controlling interest in the acquiree 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 subsidiary acquired and the measurement of all amounts has been reviewed, 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.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Bapcor Limited, 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 financial year and excluding treasury shares.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after
income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average
number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
Goods and Services Tax (‘GST’) and other similar taxes
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 the 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 in other receivables or other payables in the 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 flows.
Rounding of amounts
The company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments
Commission, relating to ‘rounding-off’. Amounts in this report have been rounded off in accordance with that Corporations Instrument
to the nearest thousand dollars, or in certain cases, the nearest dollar.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have
not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2017. The consolidated entity’s
assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the consolidated
entity, are set out below.
87
ANNUAL REPORT 2017 Note 1. Significant accounting policies (continued)
AASB 9 Financial Instruments
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard replaces all previous
versions of AASB 9 and completes the project to replace IAS 39 Financial Instruments: Recognition and Measurement. AASB 9
introduces new classification and measurement models for financial assets. A financial asset shall be measured at amortised cost, if
it is held within a business model whose objective is to hold assets in order to collect contractual cash flows, which arise on specified
dates and are solely repayable of principal and interest. All other financial instrument assets are to be classified and measured at
fair value through profit or loss unless the entity makes an irrevocable election on initial recognition to present gains and losses on
equity instruments (that are not held-for-trading) in other comprehensive income (‘OCI’). For financial liabilities, the standard requires
the portion of the change in fair value that relates to the entity’s own credit risk to be presented in OCI (unless it would create an
accounting mismatch). New simpler hedge accounting requirements are intended to more closely align the accounting treatment
with the risk management activities of the entity. New impairment requirements will use an ‘expected credit loss’ (‘ECL’) model to
recognise an allowance. Impairment will be measured under a 12-month ECL method unless the credit risk on a financial instrument
has increased significantly since initial recognition in which case the lifetime ECL method is adopted. The standard introduces
additional new disclosures. The consolidated entity will adopt this standard from 1 January 2018. The consolidated entity is still
assessing the impact of its adoption but do not expect it to be material.
AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard provides a single standard
for revenue recognition. The core principle of the standard is that an entity will recognise revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange
for those goods or services. The standard will require: contracts (either written, verbal or implied) to be identified, together with
the separate performance obligations within the contract; determine the transaction price, adjusted for the time value of money;
allocation of the transaction price to the separate performance obligations on a basis of relative stand-alone selling price of each
distinct good or service and recognition of revenue when each performance obligation is satisfied. Credit risk will be presented
separately as an expense rather than adjusted to revenue. For goods, the performance obligation would be satisfied when the
customer obtains control of the goods. For services, the performance obligation is satisfied when the service has been provided.
For performance obligations satisfied over time, an entity would select an appropriate measure of progress to determine how much
revenue should be recognised as the performance obligation is satisfied. Contracts with customers will be presented in an entity’s
statement of financial position as a contract liability, a contract asset, or a receivable, depending on the relationship between the
entity’s performance and the customer’s payment. Sufficient quantitative and qualitative disclosure is required to enable users to
understand the contracts with customers; the significant judgements made in applying the guidance to those contracts; and any assets
recognised from the costs to obtain or fulfil a contract with a customer.
The consolidated entity will adopt this standard from 1 January 2018 and has commenced obtaining and tracking information in
relation to the quantification of this change on its different revenue streams but the impact of its adoption is yet to be completed by
the consolidated entity.
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard replaces AASB 117 Leases
and for lessees will eliminate the classifications of operating leases and finance leases. Subject to exceptions, a ‘right-of-use’ asset
will be capitalised in the statement of financial position, measured at the present value of the unavoidable future lease payments
to be made over the lease term. The exceptions relate to short-term leases of twelve months or less and leases of low-value assets
(such as personal computers and small office furniture) where an accounting policy choice exists whereby either a ‘right-of-use’ asset
is recognised or lease payments are expensed to profit or loss as incurred. A liability corresponding to the capitalised lease will also
be recognised, adjusted for lease prepayments, lease incentives received, initial direct costs incurred and an estimate of any future
restoration, removal or dismantling costs. Straight-line operating lease expense recognition will be replaced with a depreciation
charge for the leased asset (included in operating costs) and an interest expense on the recognised lease liability (included in finance
costs). In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when compared
to lease expenses under AASB 117. However EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results will be
improved as the operating expense is replaced by interest expense and depreciation in profit or loss under AASB 16. For classification
within the statement of cash flows, the lease payments will be separated into both a principal (financing activities) and interest (either
operating or financing activities) component. For lessor accounting, the standard does not substantially change how a lessor accounts
for leases.
The consolidated entity will adopt this standard from 1 July 2019 and has commenced obtaining and tracking information in relation
to the quantification of this change. Given the number of operating leases in relation to warehouse and stores that the consolidated
entity has in place, it is expected that this change will have a material impact on the balance sheet in particular via the recognition of
the respective right-of-use asset and corresponding liability. The consolidated entity will continue to assess the quantification of this
change and the impact of its adoption.
88
BAPCORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedfor the year ended 30 June 2017 Note 2. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the
reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets,
liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical
experience and on other various factors, including expectations of future events, management believes to be reasonable under the
circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements,
estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities (refer to the respective notes) within the next financial year are discussed below.
Share-based payment transactions
The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value is determined by using either the Binomial or Black-Scholes model
taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions
relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the
next annual reporting period but may impact profit or loss and equity. Refer to note 41.
Provision for impairment of receivables
The provision for impairment of receivables assessment requires a degree of estimation and judgement. The level of provision is
assessed by taking into account the ageing of receivables, historical collection rates and specific knowledge of the individual debtor’s
financial position. Refer to notes 9 and 12.
Provision for slow moving inventory
The provision for slow moving inventory assessment requires a degree of estimation and judgement. The level of the provision
is assessed by taking into account the recent sales experience, the ageing of inventories and other factors that affect inventory
obsolescence. Refer to note 10.
Estimation of useful lives of assets
The consolidated entity determines the estimated useful lives and related depreciation and amortisation charges for its property,
plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or
some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated
lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down. Refer to
notes 13 and 14.
Goodwill and other indefinite life intangible assets
The consolidated entity tests annually, or more frequently if events or changes in circumstances indicate impairment, whether
goodwill and other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated
in note 1. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These
calculations require the use of assumptions, including estimated discount rates based on the current cost of capital and growth rates
of the estimated future cash flows. Refer to note 14.
Deferred consideration
The deferred consideration liability is the difference between the total purchase consideration, usually on an acquisition of a
business combination, and the amounts paid or settled up to the reporting date, discounted to net present value. The consolidated
entity applies provisional accounting for any business combination. Any reassessment of the liability during the provisional period is
adjusted for retrospectively as part of the fair value of consideration. Thereafter, at each reporting date, the deferred consideration
liability is reassessed against revised estimates and any increase or decrease in the net present value of the liability will result in a
corresponding gain or loss to profit or loss. The increase in the liability resulting from the passage of time is recognised as a finance
cost. Refer to notes 17 and 20.
Business combinations
As discussed in note 1, business combinations are initially accounted for on a provisional basis. The fair value of assets acquired,
liabilities and contingent liabilities assumed are initially estimated by the consolidated entity taking into consideration all available
information at the reporting date. Fair value adjustments on the finalisation of the business combination accounting is retrospective,
where applicable, to the period the combination occurred and may have an impact on the assets and liabilities, depreciation and
amortisation reported. Refer to note 35.
89
ANNUAL REPORT 2017 Note 3. Restatement of comparatives
Change in accounting policy
In November 2016, the IFRS Interpretations Committee ('IFRIC') provided clarification on the recognition of deferred tax liabilities
on intangible assets with an indefinite useful lives. The guidance determined that indefinite does not mean unlimited or infinite,
but is only used because the amortisation period is arbitrary due to the fact that the end of the life is not known. The IFRIC noted
that non-amortisation did not necessarily mean that the entity will recover the carrying amount of that asset only through sale
and not through use. Based on this clarification, the company has elected to change its accounting policy and recognise deferred
tax liabilities on its intangible assets with indefinite useful lives on the basis that recovery is through use. The adjustment has been
made retrospectively.
The impact of this change to the prior year statement of financial position was an increase to both deferred tax liability and goodwill
of $13,367,000.
Reclassifications
The financial statements contain reclassifications of prior year disclosures to ensure comparability with the current year presentation.
Note 4. Operating segments
Description of segments
The consolidated entity has identified four operating segments based on the internal reports that are reviewed and used by the Board
of Directors (who are identified as the Chief Operating Decision Makers (‘CODM’)) in assessing performance and in determining the
allocation of resources including capital allocations.
The operating results of the consolidated entity are currently reviewed by the CODM and decisions are based on four operating
segments which also represent the four reporting segments, as follows:
Trade
Retail & Service
Specialist Wholesale
Hellaby Automotive
Represents the trade focused automotive aftermarket parts distribution to independent and chain
mechanic workshops. Includes the operations of Burson Auto Parts and Precision Automotive
Equipment.
Represents the retail focused accessory stores that are positioned as the first choice destination for
both the everyday consumer and automotive enthusiast as well as the service areas of Bapcor. Includes
the operations of Autobarn, Autopro, Sprint Auto Parts, Midas and ABS.
Includes the specialised wholesale distribution areas of the organisation that focus on a specific
automotive area. Includes the operations of AAD, Baxters, Bearing Wholesalers, MTQ Engine Systems
and Roadsafe.
Represents the recently acquired Hellaby business including the operations of Brake & Transmission,
Autolign, Diesel Distributors, Federal Batteries, HCB Technologies, JAS Oceania, Premier Auto Trade,
and TRS Tyre & Wheel.
There is likely to be changes in reportable segments in the near future as the Hellaby businesses become integrated into the
consolidated entity.
Segment revenue
Intersegment transactions are carried out at arm’s length and eliminated on consolidation. The revenue from external parties
reported to the CODM is measured in a manner consistent with that in the statement of comprehensive income.
Segment EBITDA
Segment performance is assessed on the basis of segment EBITDA. Segment EBITDA comprises expenses which are incurred in the
normal trading activity of the segments and excludes the impact of depreciation, amortisation, interest, share-based payments and
other items which are determined to be outside of the control of the respective segments.
90
BAPCORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedfor the year ended 30 June 2017 Operating segment information
Consolidated — 2017
Revenue
Sales
Total segment revenue
Intersegment sales
Discontinued operations (note 7)
Total revenue
EBITDA
Intersegment EBITDA
Depreciation and amortisation
Finance costs
Acquisition costs
Discontinued operations (note 7)
Profit before income tax expense
Income tax expense
Profit after income tax expense
Assets
Segment assets
Held for sale assets (note 11)
Total assets
Liabilities
Segment liabilities
Held for sale liabilities (note 18)
Total liabilities
Trade
$’000
Retail &
Service
$’000
Specialist
Wholesale
$’000
Hellaby
Automotive
$’000
Unallocated/
Head Office
$’000
Total
$’000
465,102
220,996
465,102
220,996
212,715
212,715
146,670
146,670
—
—
63,296
28,190
22,948
15,057
(12,397)
1,045,483
1,045,483
(31,930)
196,603
1,210,156
117,094
(5,599)
(13,527)
(9,766)
(8,482)
15,135
94,855
(31,025)
63,830
280,947
274,241
196,610
358,191
47,850
1,157,839
178,860
1,336,699
91,273
37,549
30,493
44,794
471,781
675,890
70,842
746,732
91
ANNUAL REPORT 2017 Note 4. Operating segments (continued)
Operating segment information (continued)
Consolidated — 2016
Revenue
Sales
Total segment revenue
Intersegment sales
Total revenue
EBITDA
Intersegment EBITDA
Depreciation and amortisation
Finance costs
Acquisition costs
Profit before income tax expense
Income tax expense
Profit after income tax expense
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
Trade
$’000
Retail &
Service
$’000
Specialist
Wholesale
$’000
Unallocated/
Head Office1
$’000
419,139
419,139
172,264
172,264
103,423
103,423
—
—
51,794
20,915
9,517
(2,711)
Total
694,826
694,826
(9,197)
685,629
79,515
(1,337)
(10,055)
(4,858)
(1,149)
62,116
(18,534)
43,582
274,887
263,943
123,482
21,110
683,422
683,422
88,760
36,786
12,337
179,319
317,202
317,202
1.
There has been reclassification of inter-segment transactions from the Unallocated/Head Office segment to the segment they relate to, to ensure
comparability between years.
Geographical information
Australia
New Zealand
Sales to
external customers
Geographical
non-current assets
2017
$’000
2016
$’000
2017
$’000
2016
$’000
926,638
685,629
531,719
403,459
86,915
—
1,013,553
685,629
170,250
701,969
—
403,459
The geographical non-current assets above are exclusive of, where applicable, financial instruments, deferred tax assets and balances
such as intercompany and investments that are eliminated on consolidation. It only pertains to the continuing operations of the
consolidated entity.
Revenue is allocated to geographical segments on the basis of where the sale is recorded.
92
BAPCORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedfor the year ended 30 June 2017 Note 5. Expenses
Profit before income tax from continuing operations includes the following specific expenses:
Depreciation and amortisation expense
Plant and equipment
Motor vehicles
Amortisation
Make good provision
Acquisition costs
Professional consultant costs
Transaction success fees paid to advisors
Other transaction costs
Finance costs
Interest and finance charges paid/payable
Borrowing cost write-offs due to refinancing process
Rental expense relating to operating leases
Minimum lease payments
Superannuation expense
Consolidated
2017
$’000
2016
$’000
5,519
4,012
3,667
329
4,593
2,604
2,476
382
13,527
10,055
2,369
3,793
2,320
8,482
9,185
581
9,766
652
—
497
1,149
4,858
—
4,858
31,902
26,122
Defined contribution superannuation expense
13,740
8,596
93
ANNUAL REPORT 2017 Note 6. Income tax
Income tax expense
Current tax on profits for the year
Deferred tax expense
Adjustment recognised for prior periods
Relating to discontinued operations
Income tax expense is attributable to:
Profit from continuing operations
Profit from discontinued operations
Deferred tax included in income tax expense comprises:
Increase in deferred tax assets
Decrease in deferred tax liabilities
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense from continuing operations
Profit before income tax expense from discontinued operations
Tax at the statutory tax rate of 30%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Acquisition costs
Other
Adjustment recognised for prior periods
Difference in overseas tax rates
Amounts charged/(credited) directly to equity
Deferred tax assets
Amounts charged/(credited) directly to other comprehensive income
Deferred tax assets
Deferred tax liabilities
94
Consolidated
2017
$’000
2016
$’000
26,907
(610)
(309)
5,037
31,025
19,319
(638)
(147)
—
18,534
25,988
18,534
5,037
31,025
—
18,534
(561)
(49)
(610)
79,720
15,135
94,855
(638)
—
(638)
62,116
—
62,116
28,457
18,635
2,134
321
(309)
422
7
39
(147)
—
31,025
18,534
(1,359)
(1,359)
(1,329)
228
(1,101)
(321)
(321)
(1,263)
—
(1,263)
BAPCORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedfor the year ended 30 June 2017 Deferred tax asset
Deferred tax asset comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Property, plant and equipment
Employee benefits
Trade and other receivables
Inventory
Other
Amounts recognised in equity:
Transaction costs on share issue
Amounts recognised in other comprehensive income:
Cash flow hedge
Share-based payment
Total deferred tax asset
Set off deferred tax liabilities pursuant to set-off provisions
Net deferred tax asset
Movements in deferred tax asset
Opening balance
Credited to profit or loss
Charged to equity
Charged to other comprehensive income
Additions through business combinations (note 35)
Adjustment recognised for prior periods
Foreign currency translation
Closing balance
Consolidated
2017
$’000
2016
$’000
2,259
11,737
2,663
15,810
8,520
1,671
8,417
2,269
7,368
6,419
40,989
26,144
1,359
321
447
882
1,329
538
725
1,263
43,677
27,728
(25,013)
(20,481)
18,664
7,247
27,728
561
1,038
66
13,778
53
453
11,925
638
321
1,263
13,628
(47)
—
43,677
27,728
95
ANNUAL REPORT 2017
Note 6. Income tax (continued)
Deferred tax liability
Deferred tax liability comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Customer contracts
Trademarks
Other
Amounts recognised in other comprehensive income:
Cash flow hedge
Total deferred tax liability
Set off deferred tax liabilities pursuant to set-off provisions
Net deferred tax liability
Movements in deferred tax liability
Opening balance
Credited to profit or loss
Charged to other comprehensive income
Additions through business combinations (note 35)
Adjustment recognised for prior periods
Closing balance
Consolidated
2017
$’000
2016
$’000
6,688
17,721
376
7,053
13,367
61
24,785
20,481
228
—
25,013
20,481
(25,013)
(20,481)
—
20,481
(49)
228
—
78
—
—
4,353
20,420
—
(17)
25,013
20,481
96
BAPCORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedfor the year ended 30 June 2017 Note 7. Discontinued operations
The discontinued operations relate to the business units of Footwear and Resource Services that were acquired as part of the Hellaby
Holdings Limited acquisition and deemed assets held for sale on acquisition. Refer to notes 11 and 18 for further information.
Financial performance information
Revenues
Footwear
Resource Services
Expenses
Footwear
Resource Services
Profit before income tax expense
Income tax expense
Profit after income tax expense from discontinued operations
Consolidated
2017
$’000
2016
$’000
64,697
131,906
196,603
(59,498)
(121,970)
(181,468)
15,135
(5,037)
10,098
—
—
—
—
—
—
—
—
—
Cash flow disclosures are not required for disposal groups that are classified as held for sale on acquisition in accordance with
AASB 5 Non-current Assets Held for Sale and Discontinued Operations.
Note 8. Current assets — cash and cash equivalents
Australian dollars
New Zealand dollars
United States dollars
Other currencies
Consolidated
2017
$’000
29,772
6,965
3,017
1
2016
$’000
19,210
—
3,107
75
39,755
22,392
97
ANNUAL REPORT 2017
Note 9. Current assets — trade and other receivables
Trade receivables
Less: Provision for impairment of receivables
Customer loans
Less: Provision for impairment of customer loans
Other receivables
Prepayments
Consolidated
2017
$’000
2016
$’000
126,524
80,489
(8,296)
118,228
1,366
(851)
515
12,118
4,923
17,041
(6,963)
73,526
2,040
(840)
1,200
9,086
3,492
12,578
135,784
87,304
Trade receivables are non-interest bearing and repayment terms vary by business unit. The amount of provision for impairment
of trade receivables has been measured as the difference between the carrying amount of the trade receivables and the estimated
future cash flows expected to be received from the relevant debtors.
Customer loans relate to loans with franchisees. Loans with repayment terms of less than twelve months are classified as current.
Non-current customer loans are discounted to their present value. Of the total customer loans balance including the non-current
portion disclosed in note 12, $265,000 (2016: $678,000) are non-interest bearing. $1,704,000 (2016: $2,427,000) of loans have a
weighted average annual interest rate of 9.9% (2016: 9.1%).
Other receivables are non-interest bearing. Receivables with repayment terms of less than twelve months are classified as current.
These receivables are all neither past due nor impaired.
The ageing of the net trade receivables and loans above (including the non-current portion from note 12) are as follows:
Current and not due
31 — 60 days
61 — 90 days
91 — 120 days
Consolidated
2017
$’000
84,431
28,424
6,184
—
2016
$’000
47,245
22,405
5,519
130
119,039
75,299
As at 30 June the amount of the provision for impairment of receivables and loans was $9,454,000 (2016: $8,295,000) represented
by:
• Provision for trade doubtful debts $7,130,000 (2016: $6,576,000)
• Provision for credit notes $1,166,000 (2016: $387,000)
• Provision for customer loans $1,158,000 (2016: $1,332,000) Bapcor recognised a loss of $254,000 (2016: $447,000) in respect of
impaired receivables during the financial year.
98
BAPCORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedfor the year ended 30 June 2017
Movements in the provision for impairment of receivables and loans
Opening balance
Additional provisions recognised
Additions through business combinations (note 35)
Amounts used
Foreign currency translation
Change in provision from re-measurement
Closing balance
Note 10. Current assets — inventories
Stock in transit — at cost
Stock on hand — at cost
Less: Provision for slow moving inventory
Consolidated
2017
$’000
8,295
254
2,846
(1,356)
(9)
(576)
2016
$’000
532
447
7,949
(633)
—
—
9,454
8,295
Consolidated
2017
$’000
13,325
2016
$’000
6,496
302,287
181,213
(53,985)
(24,689)
248,302
156,524
261,627
163,020
The current year increase in provision for slow moving inventory is due to the Hellaby and other acquisition fair value adjustments
consistent with the Bapcor provision policy. Refer to note 35.
Note 11. Current assets — assets held for sale
Footwear
Resource Services
Consolidated
2017
$’000
27,391
151,469
178,860
2016
$’000
—
—
—
As part of the Hellaby Holdings Limited acquisition, the two acquired business segments of Footwear and Resource Services were
immediately deemed assets held for sale at the time of acquisition. The consolidated entity has been actively marketing the sale of
the Hellaby Resource Services Limited, Number 1 Shoes Limited and R Hannah & Co Limited subsidiaries, with completion expected
during H1 FY18. The assets and liabilities of these business segments are classified as held for sale as at 30 June 2017 and the results
from acquisition to the year ended 30 June 2017 have been reported as discontinued operations (refer note 7).
AASB 5 Non-current Assets Held for Sale and Discontinued Operations requires that when the disposal group is acquired as part of a
business combination, it is measured at fair value less costs to sell. The fair value less costs to sell have been determined to be NZD
$84.1M and NZD $15.5M, for Resource Services and Footwear respectively. The assets held for sale component has been grossed up by
the current book value of the associated liabilities which are reported in note 18, as well as the net cash on hand as at 30 June 2017
as these disposals are intended to be net of debt and cash balances. Net cash as at 30 June 2017 for these business segments was
NZD $9.0M and NZD $4.7M for Resource Services and Footwear respectively.
Refer to note 29 for information relating to the determination of the fair value of the assets held for sale.
99
ANNUAL REPORT 2017 Note 12. Non-current assets — trade and other receivables
Customer loans
Less: Provision for impairment of receivables
Consolidated
2017
$’000
603
(307)
296
2016
$’000
1,065
(492)
573
Customer loans relate to loans with franchisees. Refer to note 9 for further information on these customer loans.
Note 13. Non-current assets — property, plant and equipment
Plant and equipment — at cost
Less: Accumulated depreciation
Motor vehicles — at cost
Less: Accumulated depreciation
Consolidated
2017
$’000
55,016
(22,409)
32,607
27,396
(10,222)
17,174
49,781
2016
$’000
40,997
(17,174)
23,823
19,654
(7,264)
12,390
36,213
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Plant and
equipment
$’000
14,046
7,334
7,122
(86)
Motor
vehicles
$’000
9,011
4,686
1,712
(415)
(4,593)
(2,604)
23,823
9,399
4,722
(210)
(1)
393
(5,519)
32,607
12,390
5,697
4,182
(685)
(5)
(393)
(4,012)
17,174
Total
$’000
23,057
12,020
8,834
(501)
(7,197)
36,213
15,096
8,904
(895)
(6)
—
(9,531)
49,781
Consolidated
Balance at 1 July 2015
Additions
Additions through business combinations
Disposals
Depreciation expense
Balance at 30 June 2016
Additions
Additions through business combinations (note 35)
Disposals
Foreign currency translation
Transfers in/(out)
Depreciation expense
Balance at 30 June 2017
100
BAPCORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedfor the year ended 30 June 2017 Note 14. Non-current assets — intangibles
Goodwill
Trademarks
Customer contracts
Less: Accumulated amortisation
Software
Less: Accumulated amortisation
Consolidated
2017
$’000
2016
$’000
561,843
289,231
59,443
44,581
25,543
(3,251)
22,292
8,959
(4,706)
4,253
25,543
(1,519)
24,024
7,306
(2,935)
4,371
647,831
362,207
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2015
Additions
Additions through business combinations
Disposals
Amortisation expense
Balance at 30 June 2016
Additions
Additions through business combinations (note 35)
Foreign currency translation
Amortisation expense
Balance at 30 June 2017
Computer
software
$’000
Customer
contracts
$’000
Trade names
$’000
—
56
—
24
Goodwill
$’000
98,317
—
Total
$’000
99,854
2,149
25,487
44,557
190,914
262,682
—
(1,519)
—
—
—
—
(2)
(2,476)
1,537
2,069
1,724
(2)
(957)
4,371
24,024
44,581
289,231
362,207
1,101
716
—
(1,935)
4,253
—
—
—
(1,732)
19
—
1,120
14,889
273,599
289,204
(47)
—
(986)
—
(1,033)
(3,667)
22,292
59,442
561,844
647,831
101
ANNUAL REPORT 2017 Note 14. Non-current assets — intangibles (continued)
Impairment testing
Impairment testing of assets including goodwill and other intangible assets occurs each year on 31 March balances or when
impairment indicators arise. The recoverable amount of assets including goodwill and other indefinite useful life intangible assets is
determined based on value-in-use calculations at an individual or a combination of cash-generating units ('CGU') up to the operating
segment level, with the exception outlined below in relation to the Hellaby acquired goodwill. These calculations require the use of key
assumptions on which management has based its cash flow projections, as well as pre-tax discount rates.
Cash flow projections were derived from management forecasts based on the five year strategic plan. This has been compiled based
on 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.
The following key assumptions were used in testing for impairment:
• Pre-tax discount rate: 11.96% (2016: 10.42%)
• Terminal value growth rate beyond 5 years (set at current CPI): 1.30% (2016: 1.70%)
• Forecast year on year revenue and EBITDA margin growth ranges as follows:
CGU
Trade
Retail & Service
Specialist Wholesale
Revenue growth
3.0% — 4.8%
3.1% — 6.8%
3.0% — 3.6%
EBITDA growth
0 — 0.3 percentage points
0 — 0.6 percentage points
0 — 0.2 percentage points
A reasonable possible change in assumptions would not cause the carrying value of the CGUs to exceed its recoverable amount.
Hellaby acquired goodwill
In relation to the recent Hellaby acquisition, goodwill of $241,000,000 was acquired. Management have performed impairment testing
using fair value less cost to sell with reference to the fair value being the purchase price paid at acquisition with no impairment
indicators being noted since acquisition.
There have been no further indicators of impairment after the impairment testing date of 31 March 2017 up until the date of
this report.
The balances of goodwill and other intangible assets excluding computer software allocated to each segment as at 30 June were:
Consolidated
2017
$’000
2016
$’000
106,529
126,738
88,420
240,156
105,261
125,116
58,854
—
561,843
289,231
54,815
16,298
10,622
81,735
56,456
12,149
—
68,605
Goodwill:
Trade
Retail & Service
Specialist Wholesale
Hellaby Automotive
Other intangible assets:
Retail & Service
Specialist Wholesale
Hellaby Automotive
102
BAPCORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedfor the year ended 30 June 2017
Note 15. Non-current assets — other
Make good asset
Employee loans
Consolidated
2017
$’000
1,085
2,976
4,061
2016
$’000
941
3,525
4,466
Employee loans were made to key management personnel and other personnel to assist in the purchase of shares. These loans are
secured by the underlying shares acquired. The loans are interest bearing and are repayable on the earlier of sale of the underlying
shares, termination of employment or five years from the date of the loan in cash, and cannot be settled by the employees returning
the shares to the company.
Note 16. Current liabilities — trade and other payables
Trade payables
Accrued expenses
Refer to note 28 for further information on financial risk management.
Note 17. Current liabilities — provisions
Employee benefits
Deferred settlements
Onerous lease provision
Consolidated
2017
$’000
133,966
40,802
2016
$’000
95,871
25,636
174,768
121,507
Consolidated
2017
$’000
27,191
4,267
673
32,131
2016
$’000
20,124
5,570
913
26,607
Deferred settlements
This provision represents the obligation to pay consideration following the acquisition of a business. Some of these are only due to
the vendor if certain future targets are met. It is measured at the present value of the estimated liability.
As at 30 June 2017, the following deferred settlements are provided for (across both current and non-current deferred settlement
provisions; refer to note 20 for details on non-current portion):
• Sprint Auto Parts; currently provided at $3,298,000
• Precision Automotive; currently provided at $1,594,000
• Baxters Pty Ltd; currently provided at $20,288,000
Onerous lease provision
This provision represents the present value of the estimated costs, net of any sub-lease revenue that will be incurred until the end of
the lease terms where the obligation is expected to exceed the economic benefit to be received.
103
ANNUAL REPORT 2017 Note 17. Current liabilities — provisions (continued)
Amounts not expected to be settled within the next twelve months
The current provision for employee benefits includes all unconditional entitlements where employees have completed the required
period of service and also those where employees are entitled to pro-rata payments in certain circumstances. The entire amount is
presented as current, since the consolidated entity does not have an unconditional right to defer settlement. However, based on past
experience, the consolidated entity does not expect all employees to take the full amount of accrued leave or require payment within
the next twelve months.
The following amounts reflect leave that is not expected to be taken within the next twelve months:
Employee benefits obligation expected to be settled after twelve months
Note 18. Current liabilities — liabilities relating to assets held for sale
Footwear
Resource Services
Eliminations
Consolidated
2017
$’000
4,742
2016
$’000
4,345
Consolidated
2017
$’000
8,184
63,000
(342)
70,842
2016
$’000
—
—
—
—
The liabilities relating to assets held for sale relate to the Footwear and Resource Services business segments which were deemed to
be held for sale on business combination of Hellaby Holdings Limited. Refer to note 11 for further information.
The liabilities relating to Resource Services includes a contingent consideration payable of $6,800,000.
On 2 April 2013 Hellaby Holdings Limited entered into a deed with the non-controlling shareholders of Contract Services Investments
Limited which included a put and call option. The liability is currently measured at fair value based on the fair value being attributed
to the held for sale Resource Services business segment and the respective non-controlling shareholders interest held.
All other liabilities have been measured in accordance with the accounting policies of the consolidated entity.
Note 19. Non-current liabilities — borrowings
Secured bank loans
Less: unamortised transaction costs capitalised
Refer to note 28 for further information on financial risk management.
Consolidated
2017
$’000
2016
$’000
432,229
148,800
(2,482)
(616)
429,747
148,184
104
BAPCORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedfor the year ended 30 June 2017 Refinancing
On 30 June 2017, the consolidated entity successfully refinanced its debt facilities establishing a new $500M debt facility with the
pre-existing lenders ANZ and Westpac, as well as two new lenders being The Bank of Tokyo-Mitsubishi UFJ and The Hongkong and
Shanghai Banking Corporation. Proceeds were used to repay the existing debt facilities including the bridging loan for the acquisition
of Hellaby Holdings Limited. The $500M debt facility comprises funding in three and five year tranches as follows:
• $200M three year tranche, available for general corporate purposes;
• $250M five year tranche, available for general corporate purposes;
• $50M three year tranche, available for working capital requirements.
The facility is secured by way of a fixed and floating charge over Bapcor’s assets. There were no changes to the debt covenants
with the net leverage ratio being >3.0X and the fixed cover charge ratio being >1.75X. Refer to note 28 for further information.
As part of the refinancing process, the unamortised transactions costs that related to the pre-existing debt facilities of $581,000
was expensed in the statement of comprehensive income and accounted for as part of finance costs.
Borrowing costs of $2,482,000 were incurred in establishing the new facility, and are being amortised over the life of the facility and
will be expensed to finance costs as effective interest expense in the statement of comprehensive income. As at 30 June 2017 total
borrowing costs of $2,482,000 (2016: $616,000) have not yet been amortised through the statement of comprehensive income.
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Bank loans including overdraft1
Used at the reporting date
Bank loans including overdraft1
Unused at the reporting date
Bank loans including overdraft1
Consolidated
2017
$’000
2016
$’000
497,500
184,850
432,229
148,800
65,271
36,050
1.
Total facilities available at 30 June was $500M (2016: $200M). The amount used in the above table excludes $2.5M (2016: $15.2M) of facility which relates to
bank guarantees under the working capital tranche.
105
ANNUAL REPORT 2017 Note 20. Non-current liabilities — provisions
Employee benefits
Deferred settlements
Make good provision
Onerous lease provision
Consolidated
2017
$’000
2,644
20,913
8,169
1,646
2016
$’000
1,821
7,178
2,512
1,363
33,372
12,874
Deferred settlements and onerous lease provision
Refer to note 17.
Make good provision
This provision represents the present value of the estimated costs to make good the premises leased by the consolidated entity at the
end of the respective lease terms. The current year increase in make good provision is due to the Hellaby and other acquisition (refer
note 35) fair value adjustments consistent with the Bapcor's make good provision policy.
Movements in provisions
Movements in each class of provision during the current financial year, other than employee benefits, are set out below:
Consolidated — 2017
Carrying amount at the start of the year
Additional provisions recognised
Additions through business combinations (note 35)
Amounts used
Foreign currency translation
Movement between current and non-current classification
Unwinding of discount
Carrying amount at the end of the year
Deferred
consideration
$’000
Make good
$’000
Onerous lease
$’000
7,178
—
28,622
(17,086)
—
1,302
897
2,512
386
5,322
(34)
(17)
—
—
20,913
8,169
1,363
—
1,058
(428)
—
(347)
—
1,646
106
BAPCORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedfor the year ended 30 June 2017 Note 21. Equity — issued capital
Ordinary shares
Treasury shares
Movements in ordinary share capital
Details
Opening balance
Issue for Baxters Pty Ltd acquisition
Exempt Employee Share Scheme offer
Consolidated
2017
Shares
2016
Shares
2017
$’000
2016
$’000
278,633,080
245,857,351
602,571
416,427
(200,000)
—
(1,896)
—
278,433,080
245,857,351
600,675
416,427
Date
Shares
$’000
1 July 2016
245,857,351
416,427
3 August 2016
9 September 2016
500,000
138,519
2,780
734
30 September 2016
28,205,129
161,051
Issue for Hellaby Holdings Limited acquisition — Institutional placement (net of
costs)
Issue for Hellaby Holdings Limited acquisition — Retail placement (net of costs)
4 November 2016
Issue for Dividend Reinvestment Plan
Transactions costs arising on share issue
Deferred tax credit recognised directly in equity
21 April 2017
3,115,772
816,309
—
—
16,288
4,558
(648)
1,381
Closing balance
30 June 2017
278,633,080
602,571
Movements in treasury shares
Details
Opening balance
Treasury shares purchased
Allocation as part of the FY14 LTI
Closing balance
Date
1 July 2016
Shares
$’000
—
—
16 December 2016
(351,344)
(1,896)
16 December 2016
151,344
—
30 June 2017
(200,000)
(1,896)
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion to the
number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the company does not have a
limited amount of authorised capital.
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.
Treasury shares
The average purchase price of treasury shares during the period was $5.40 per share.
107
ANNUAL REPORT 2017 Note 22. Equity — reserves
Foreign currency reserve
Cash flow hedge reserve
Share-based payments reserve
Net investment hedge reserve
Consolidated
2017
$’000
(918)
(2,519)
3,883
(648)
(202)
2016
$’000
—
(1,256)
2,101
—
845
Foreign currency reserve
This reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign operations
to Australian dollars.
Cash flow hedge reserve
This reserve is used to recognise the effective portion of the gain or loss of cash flow hedge instruments that is determined to be an
effective hedge.
Share-based payments reserve
This reserve is used to recognise the value of equity benefits provided to employees and directors as part of their remuneration, and
other parties as part of their compensation for services.
Net investment hedge reserve
This reserve is used to recognise the effective portion of the gain or loss of net investment hedge instruments that is determined to
be an effective hedge.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Foreign
currency
reserve
$’000
Cash flow
hedge reserve
$’000
Share-based
payments
reserve
$’000
Net investment
hedge reserve
$’000
—
—
—
—
—
—
—
—
(918)
(918)
—
(1,794)
—
538
(1,256)
(1,860)
—
541
56
441
—
1,081
579
2,101
—
1,625
157
—
(2,519)
3,883
(648)
—
—
—
—
—
—
(17)
—
Total
$’000
441
(1,794)
1,081
1,117
845
1,625
681
(862)
(202)
(631)
(2,491)
Consolidated
Balance at 1 July 2015
Revaluation
Share-based payment expense
Deferred tax
Balance at 30 June 2016
Revaluation
Share-based payment expense
Deferred tax
Foreign currency translation
Balance at 30 June 2017
108
BAPCORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedfor the year ended 30 June 2017 Note 23. Equity — accumulated losses
Accumulated losses at the beginning of the financial year
Profit after income tax expense for the year
Dividends paid (note 25)
Accumulated losses at the end of the financial year
Note 24. Equity — non-controlling interest
Resource Services — Asset Held for Sale acquired
Resource Services — Liability Held for Sale acquired
Resource Services — Net Assets Held for Sale acquired
Non-controlling interest acquired
Non-controlling interest loss for the period
Foreign currency revaluation
Consolidated
2017
$’000
2016
$’000
(51,052)
(70,906)
64,044
43,582
(30,059)
(23,728)
(17,067)
(51,052)
Consolidated
2017
$’000
129,780
(46,851)
82,929
6,805
(214)
(30)
6,561
2016
$’000
—
—
—
—
—
—
—
As part of the current year acquisition of Hellaby Holdings Limited, the acquired Resource Services held for sale asset has a non-
controlling interest that is material to the consolidated entity. Refer to note 35. The amounts relating to this non-controlling interest
and subsequent transactions are as represented above.
109
ANNUAL REPORT 2017
Note 25. Equity — dividends
Dividends paid during the financial year were as follows:
Final dividend for the year ended 30 June 2016 (2016: 30 June 2015) of 6.0 cents (2016: 4.7 cents) per
ordinary share
Interim dividend for the year ended 30 June 2017 (2016: 30 June 2016) of 5.5 cents (2016: 5.0 cents)
per ordinary share1
Consolidated
2017
$’000
14,781
2016
$’000
11,497
15,278
12,231
30,059
23,728
1.
In the current year, $4,558,000 of the interim dividend for the year ended 30 June 2017 was settled under the Dividend Reinvestment Plan.
The Board has declared a final dividend in respect of the current financial year of 7.5 cents per share, fully franked. The final dividend
will be paid on 29 September 2017 to shareholders registered on 31 August 2017.
The final dividend takes the total dividends declared in relation to the current financial year to 13.0 cents per share, fully franked,
representing an increase of dividends paid of 18.2% compared to the prior financial year. Dividends paid and declared in relation to
the current financial year represents 56.7% of net profit after tax.
Franking credits
Franking credits available for subsequent financial years based on a tax rate of 30%
Consolidated
2017
$’000
2016
$’000
38,252
28,480
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
• franking credits that will arise from the payment of the amount of the provision for income tax at the reporting date
• franking debits that will arise from the payment of dividends recognised as a liability at the reporting date
• franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date
Note 26. Net tangible assets
A large proportion of the consolidated entity's assets are intangible in nature, consisting of goodwill, customer contracts and
trademarks acquired on business combination as well as software. These assets as well as any deferred taxes are excluded from the
calculation of net tangible assets per security.
Net tangible assets per share at 30 June was (16.0) (2016: 1.6) cents per share.
Net assets per share at 30 June was $2.12 (2016: $1.49) per share.
110
BAPCORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedfor the year ended 30 June 2017 Note 27. Derivative financial instruments
Current assets
Forward foreign exchange contracts — cash flow hedges
Current liabilities
Forward foreign exchange contracts — cash flow hedges
Non-current liabilities
Interest rate swap contracts — cash flow hedges
Consolidated
2017
$’000
2016
$’000
40
—
(1,780)
(420)
(637)
(2,377)
(1,374)
(1,794)
Refer to note 28 for further information on financial risk management.
Refer to note 29 for further information on fair value measurement.
Note 28. Financial risk management
Financial risk management objectives
The consolidated entity’s activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk
and interest rate risk), credit risk and liquidity risk. The consolidated entity’s overall risk management program focuses on the
unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the consolidated
entity. The consolidated entity uses derivative financial instruments such as forward foreign exchange contracts to hedge certain
risk exposures. Derivatives are exclusively used for hedging purposes, i.e. not as trading or other speculative instruments. The
consolidated entity uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity
analysis in the case of interest rate, foreign exchange and other price risks, ageing analysis for credit risk and beta analysis in respect
of investment portfolios to determine market risk.
Risk management is carried out by senior finance executives (‘finance’) under policies approved by the Board of Directors (‘the
Board’). These policies include identification and analysis of the risk exposure of the consolidated entity and appropriate procedures,
controls and risk limits. Finance identifies, evaluates and manages financial risks within the consolidated entity’s operating units.
Finance reports to the Board on a monthly basis.
The consolidated entity holds the following financial instruments:
Financial assets
Cash and cash equivalents
Trade and other receivables1
Derivative financial instruments
Financial liabilities
Trade and other payables
Derivative financial instruments
Deferred consideration
Borrowings2
1. Trade and other receivables in the table excludes prepayments which are not classified as financial instruments.
2. Borrowings excludes any unamortised transaction costs capitalised.
Consolidated
2017
$’000
2016
$’000
39,755
131,157
40
22,392
84,385
—
170,952
106,777
174,768
121,507
2,417
25,180
1,794
12,748
432,229
148,800
634,594
284,849
111
ANNUAL REPORT 2017 Note 28. Financial risk management (continued)
Market risk
Foreign currency risk
The consolidated entity undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk
through foreign exchange rate fluctuations, primarily with respect to the United States dollar and the New Zealand dollar.
Foreign exchange risk arises from future commercial transactions, primarily the purchase of inventory for sales, recognised financial
assets and financial liabilities and net investments in foreign operations.
In order to protect against exchange rate movements, the consolidated entity has entered into forward foreign exchange contracts.
These contracts are hedging highly probable forecasted cash flows for the ensuing financial year. Management has a risk
management policy to hedge between 25% and 100% of anticipated foreign currency transactions for the subsequent twelve months.
As well as this the consolidated entity also has foreign currency loans to offset foreign investments which create a natural hedge
against foreign currency fluctuations.
The following table demonstrates the sensitivity to a change in the Australian dollar against other currencies, with all other variables
held constant. The impact on profit before tax is due to changes in the fair value of monetary assets and liabilities. The pre-tax impact
on equity is due to changes in the fair value of forward exchange contracts designated as cash flow hedges as well as foreign currency
loans designated as net investment hedges.
Consolidated — 2017
Derivative financial instruments
Other financial assets
Other financial liabilities
Consolidated — 2016
Derivative financial instruments
Other financial assets
AUD strengthened
AUD weakened
Effect on profit
before tax
$’000
Effect on
equity
$’000
Effect on profit
before tax
$’000
% change
% change
1%
1%
1%
—
(287)
259
(28)
589
—
943
1,532
(1%)
(1%)
(1%)
—
293
(264)
29
Effect on
equity
$’000
(601)
—
(962)
(1,563)
AUD strengthened
AUD weakened
% change
1%
1%
Effect on profit
before tax
$’000
Effect on
equity
$’000
—
(31)
(31)
204
—
204
% change
(1%)
(1%)
Effect on profit
before tax
$’000
Effect on
equity
$’000
—
31
31
(209)
—
(209)
Price risk
The consolidated entity is not exposed to any significant price risk.
112
BAPCORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedfor the year ended 30 June 2017 Interest rate risk
The consolidated entity’s main interest rate risk arises from long-term borrowings. The interest rate and term for bank borrowings is
determined at the date of each drawdown.
Borrowings obtained at variable rates expose the consolidated entity to cash flow interest rate risk. The consolidated entity, from time
to time, enters into interest rate swap contracts under which it receives interest at variable rates and pays interest at fixed rates to
manage the risk of adverse fluctuations in the floating interest rate on its borrowings.
As at the reporting date, the consolidated entity had the following variable rate borrowings and interest rate swap
contracts outstanding:
Consolidated
Borrowings (principal)
Less: amounts covered by interest rate swaps
Net exposure to cash flow interest rate risk
2017
2016
Weighted
average
interest rate
%
3.30%
2.39%
Weighted
average
interest rate
%
3.35%
2.39%
Balance
$’000
432,229
(60,000)
372,229
Balance
$’000
148,800
(60,000)
88,800
As at 30 June 2017, if the weighted average interest rate of the bank borrowings had changed by a factor of +/- 10%, interest expense
would increase/decrease by $1,427,000 (2016: $499,000).
The amount recognised in other comprehensive income net of tax in relation to interest rate swaps was $516,000 (2016: ($637,000)).
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the consolidated
entity. Credit risk is managed in the following ways:
• The consolidated entity has a strict code of credit for all customers, including obtaining agency credit information, confirming
references and setting appropriate credit limits.
• Derivative counterparties and cash transactions are limited to high quality independently rated financial institutions with a
minimum rating of ‘A’.
• Concentrations of credit risk are minimised by undertaking transactions with a large number of customers.
•
In some instances the consolidated entity holds collateral over its trade receivables and loans in the form of personal guarantees
and charges under the Personal Property Securities Register.
The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions
for impairment of those assets, as disclosed in the statement of financial position and notes 9 and 12.
Liquidity risk
Vigilant liquidity risk management requires the consolidated entity to maintain sufficient liquid assets (mainly cash and cash
equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable.
The consolidated entity manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by
continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities.
Financing arrangements
Unused borrowing facilities at the reporting date:
Bank loans including overdraft1
1. The unused facility value excludes any facility that relates to bank guarantees. Refer to note 19 for further information.
Consolidated
2017
$’000
2016
$’000
65,271
36,050
113
ANNUAL REPORT 2017 Note 28. Financial risk management (continued)
Remaining contractual maturities
The following tables detail the consolidated entity’s remaining contractual maturity for its financial instrument liabilities. The tables
have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial
liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual
maturities and therefore these totals may differ from their carrying amount in the statement of financial position.
Consolidated — 2017
Non-derivatives
Trade payables
Borrowings1
Deferred consideration
Derivatives
Interest rate swaps
Forward foreign exchange contracts
Consolidated — 2016
Non-derivatives
Trade payables
Borrowings1
Deferred consideration
Derivatives
Interest rate swaps
Forward foreign exchange contracts
1 year or less
$’000
Between
1 and 2 years
$’000
Between
2 and 5 years
$’000
Over 5 years
$’000
174,768
16,633
4,369
—
—
16,633
466,062
22,069
—
195,770
38,702
466,062
—
1,780
1,780
116
—
116
521
—
521
—
—
—
—
—
—
—
1 year or less
$’000
Between
1 and 2 years
$’000
Between
2 and 5 years
$’000
Over 5 years
$’000
121,507
4,633
8,195
134,335
—
420
420
—
4,633
5,019
9,652
—
—
—
—
149,186
—
149,186
1,374
—
1,374
—
—
—
—
—
—
—
Remaining
contractual
maturities
$’000
174,768
499,328
26,438
700,534
637
1,780
2,417
Remaining
contractual
maturities
$’000
121,507
158,452
13,214
293,173
1,374
420
1,794
1.
Borrowings’ contractual cash flows includes an interest component based on the drawn/undrawn ratio and interest rate applicable as at reporting date until
maturity of the loan facility.
Fair value of financial instruments
The fair value of financial assets and liabilities disclosed in the statement of financial position do not differ materially from their
carrying values.
114
BAPCORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedfor the year ended 30 June 2017 Capital risk management
The consolidated entity’s policy is to maintain a capital structure for the business which ensures sufficient liquidity and support for
business operations, maintains shareholder and market confidence, provides strong stakeholder returns and positions the business
for future growth. In assessing capital management both equity and debt instruments are taken into consideration. The ongoing
maintenance of this policy is characterised by:
• ongoing cash flow forecast analysis and detailed budgeting processes which, combined with continual development of banking
relationships, is directed at providing a sound financial positioning for the consolidated entity’s operations and financial
management activities; and
• a capital structure that provides adequate funding for potential acquisition and investment strategies, building future growth in
shareholder value. The loan facility can be partly used to fund significant investments as part of this growth strategy.
The consolidated entity is not subject to externally imposed capital requirements, other than contractual banking covenants and
obligations. All bank lending requirements have been complied with during the year and at the date of this report, which include
the following covenants:
• Net leverage ratio not exceeding 3.00:1 (Net Debt : EBITDA);
• Fixed charge cover ratio not exceeding 1.75:1 (EBITDA plus Rent : Net Total Cash Interest plus Rent).
Note 29. Fair value measurement
Fair value hierarchy
The following tables detail the consolidated entity’s financial instruments, measured or disclosed at fair value, using a three level
hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
or indirectly.
Level 3: Unobservable inputs for the asset or liability.
Consolidated — 2017
Assets
Derivative financial instruments
Assets held for sale
Liabilities
Derivative financial instruments
Liabilities held for sale
Deferred consideration
Consolidated — 2016
Liabilities
Derivative financial liabilities
Deferred consideration
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
—
—
—
—
—
—
—
40
—
40
2,417
—
—
2,417
—
40
178,860
178,860
178,860
178,900
—
70,842
25,180
96,022
2,417
70,842
25,180
98,439
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
—
—
—
1,794
—
1,794
—
12,748
12,748
1,794
12,748
14,542
115
ANNUAL REPORT 2017 Note 29. Fair value measurement (continued)
Fair value hierarchy (continued)
There were no transfers between levels during the financial year.
Derivative financial instruments carried at fair value are forward foreign exchange contracts and floating interest rate to fixed interest
rate swaps. These are considered to be Level 2 financial instruments because their measurement is derived from inputs other than
quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Deferred consideration is considered to be a Level 3 financial instrument because inputs in valuing this instrument are not based on
observable market data. The fair value of this instrument is determined based on an estimated discounted cash flow analysis.
Assets and liabilities held for sale are considered to be a Level 3 financial instrument because inputs in valuing these assets are not
based on observable market data. The fair value of these instruments are determined based on information obtained by management
during the sale process (e.g. indicative bids, adviser estimates) as well as estimates derived on earning multiples.
Note 30. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by PricewaterhouseCoopers, the auditor of the
company, and its network firms:
Audit services — PricewaterhouseCoopers
Audit or review of the financial statements
Other services — PricewaterhouseCoopers
Tax compliance services
Consulting services
Audit services — network firms
Audit or review of the financial statements
Other services — network firms
Tax compliance services
Consulting services
Consolidated
2017
$
2016
$
510,000
310,000
60,602
106,000
166,602
54,315
11,302
65,617
676,602
375,617
333,010
88,102
12,000
100,102
433,112
—
—
—
—
—
Total auditor remuneration
1,109,713
375,617
116
BAPCORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedfor the year ended 30 June 2017 Note 31. Commitments and contingent liabilities
Commitments
Committed at the reporting date but not recognised as liabilities, payable:
Guarantees in relation to leases
Letters of credit in relation to the purchase of inventory
Guarantees in relation to performance of contracts1
Other commitments in relation to facility construction and consumable purchases1
Operating lease payables — continuing operations
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
More than five years
Operating lease receivables — continuing operations
Committed at the reporting date and recognised as assets, receivable:
Within one year
One to five years
More than five years
Consolidated
2017
$’000
2016
$’000
2,982
3,455
343
483
1,571
—
—
—
5,379
3,455
40,650
72,802
6,257
119,709
28,397
54,642
11,823
94,862
4,298
7,110
291
7,047
11,774
1,202
11,699
20,023
1.
The commitments in relation to performance of contracts and facility construction and consumable purchases relate to the discontinued operations of
Resource Services
Operating lease commitments includes contracted amounts for various retail outlets, warehouses, offices and plant and equipment
under non-cancellable operating leases with, in some cases, options to extend. The leases have various escalation clauses. On renewal,
the terms of the leases are renegotiated.
Contingent liabilities
Other than the put and call option disclosed in note 18, there are no other unrecorded contingent liabilities (2016: Nil).
117
ANNUAL REPORT 2017 Note 32. Related party transactions
Parent entity
Bapcor Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 36.
Key management personnel
Disclosures relating to key management personnel are set out in note 33 and the audited Remuneration Report included in the
Directors’ Report.
Note 33. Related party transactions — key management personnel disclosures
Compensation
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
Loans
Opening balance
Amounts repaid
Closing balance
Consolidated
2017
$’000
2016
$’000
6,543
4,631
218
60
1,249
8,070
1,780
(426)
1,354
170
45
839
5,685
3,050
(1,270)
1,780
Refer to the audited Remuneration Report within the Directors’ Report for further details on key management personnel
compensation, as well as note 15 for details on the loans made to key management personnel.
118
BAPCORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedfor the year ended 30 June 2017 Note 34. Parent entity information
Set out below is supplementary information about the parent entity.
Statement of comprehensive income
Loss after income tax
Internal dividend income
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Other reserves
Current year profits/(losses)
Dividends paid
Prior years retained earnings
Total equity
Parent
2017
$’000
2016
$’000
(18,276)
108,000
(5,161)
—
89,724
(5,161)
Parent
2017
$’000
2016
$’000
—
—
672,422
426,596
—
—
—
—
600,675
416,427
4,014
89,724
2,101
(5,161)
(30,059)
(23,728)
8,068
36,957
672,422
426,596
Note 35. Business combinations
Current financial year acquisitions
The consolidated entity acquired the net assets of the following businesses:
• Roadsafe Automotive Products (‘Roadsafe’)
• Autopro Raymond Terrace
• Autopro Gladstone
• Autopro Colac
• Autopro Gawler
• Autobarn Burleigh Heads
• Autobarn Beenleigh
• Autobarn Nambour
• Autobarn Orange
• Autobarn Virginia
The consolidated entity also acquired 100% of the following companies:
• Baxters Pty Ltd (‘Baxters’) in July 2016
• MTQ Engine Systems (Aust) Pty Ltd (‘MTQ’) in November 2016
• Hellaby Holdings Limited (‘Hellaby’) in January 2017
These acquisitions were made to strengthen the Bapcor offering as well as to enter the New Zealand market via the
Hellaby acquisition.
119
ANNUAL REPORT 2017 Note 35. Business combinations (continued)
Current financial year acquisitions (continued)
The assets and liabilities recognised as a result of these acquisitions are set out below. Non-material business combinations have
been aggregated. Acquisitions still within the acquisition period of twelve months from acquisition date are provisional at the time
of this report.
Hellaby
Roadsafe
Baxters
MTQ
Other
Fair value
$’000
Fair value
$’000
Fair value
$’000
Fair value
$’000
Fair value
$’000
Cash and cash equivalents
Trade and other receivables
Inventories
Assets held for sale
Plant and equipment
Intangible assets
Deferred tax assets
Deferred tax liabilities
Trade and other payables
Liabilities held for sale
Provisions
Bank overdraft
Bank loans
Net assets attributable to non-controlling interests
Net assets acquired
Goodwill
Acquisition-date fair value of the
total consideration transferred
Representing:
Cash paid
Shares issued
Deferred and contingent consideration
Debt forgiven
Cash used to acquire business, net of cash acquired:
Cash consideration
Add: bank overdraft
Less: cash and cash equivalents
Net cash used
11
219
2,296
—
56
—
378
—
(380)
—
(834)
—
—
—
—
36,280
65,581
163,334
5,328
11,384
9,952
(3,087)
(34,984)
(64,423)
(8,323)
(1,065)
(79,487)
(6,805)
93,685
241,000
2
1,163
1,300
—
200
1,886
410
(566)
(506)
—
(446)
—
—
—
3,443
7,824
—
4,875
8,294
—
1,177
1,772
1,428
(532)
1,112
4,512
8,686
—
2,132
562
1,610
(169)
(3,937)
(3,740)
—
(2,637)
—
—
—
—
(1,134)
(316)
—
—
11,627
13,008
12,068
8,722
1,746
3,045
334,685
11,267
24,635
20,790
4,791
334,685
11,267
—
—
—
—
—
—
2,124
2,780
19,731
—
20,790
4,117
—
—
—
—
—
674
4,791
334,685
11,267
24,635
20,790
334,685
11,267
2,124
20,790
4,116
1,065
—
—
(2)
316
—
—
(1,112)
—
(11)
335,750
11,265
2,440
19,678
4,105
Goodwill in relation to these acquisitions relates to the anticipated future probability of their contribution to the consolidated entity’s
total business.
120
BAPCORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedfor the year ended 30 June 2017 The Hellaby business acquisition took place on 13 January 2017 when control was deemed to have been in place. Refer to the segment
disclosures for details of continuing operations contribution since acquisition at note 4. The discontinued operations contribution
are disclosed in note 7. The contribution of the continuing operations of the Hellaby acquisition if the acquisition had taken place on
1 July 2016 (excluding any acquisition accounting adjustments) would have been an incremental revenue of $142.3M and EBITDA of
$10.6M to the consolidated entity.
Each of the other business acquisitions took place on different dates and are heavily integrated into the consolidated entity’s
operations and as such it is impractical to disclose the amount of profit since acquisition date. The amount of revenue contributed by
these acquisitions for FY17 are as follows:
Business
Baxters
Roadsafe
MTQ
Acquired
Jul-16
Aug-16
Nov-16
Revenue in FY17
$37.2M
$10.3M
$28.8M
Refer to note 5 for details on acquisition related costs incurred.
Deferred and contingent consideration
A contingent consideration has been estimated and provided for on the Baxters acquisition and is currently accrued at $20,288,000
which is based on expected future earnings. This payment is due to the vendor if certain future targets are met.
Net assets attributable to non-controlling interests
As part of the Hellaby business acquisition, within the Resource Services division there existed a minority interest in relation to a
number of the Contract Services subsidiaries. The fair value attributable to this minority interest has been determined by reference
to the fair value of that part of the business at the percentage held by the minority interest.
Prior financial year acquisitions
In the previous financial year the consolidated entity made the following acquisitions:
• Aftermarket Network Australia Pty Ltd (formerly Metcash Automotive Holdings Pty Ltd)
• Bearing Wholesalers
• DB’s Auto One
• Precision Equipment
•
Illawarra Auto Spares
• Revvin’s Auto Parts
• QAH North Geelong
• Sprint Auto Parts
• Manning River Autoparts
Due to an accounting policy change as outlined in note 3, a retrospective adjustment was made during the current year to recognise
deferred tax liabilities on the indefinite life trademarks acquired as part of the above acquisitions. The impact of this adjustment
to deferred tax liability and goodwill in the prior year was $13,367,000. No other material change to these business combinations
occurred during the current year.
121
ANNUAL REPORT 2017 Note 36. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with
the accounting policies of the consolidated entity:
Name
Bapcor Finance Pty Ltd (formerly Burson Finance Pty Ltd)
Burson Automotive Pty Ltd
Car Bitz & Accessories Pty Ltd
Aftermarket Network Australia Pty Ltd (formerly Metcash Automotive
Holdings Pty Ltd)
Specialist Wholesalers Pty Ltd (formerly Australian Automotive
Distribution Pty Ltd)
Automotive Brands Group Pty Ltd
Midas Australia Pty Ltd
ACN 610 722 168
MTQ Engine Systems (Aust) Pty Ltd
Baxters Pty Ltd
Hellaby Holdings Limited
Hellaby Automotive Limited
Brake & Transmission NZ Limited
Dasko Limited
HCB Technologies Limited
Diesel Distributors Limited
TRS Tyre & Wheel Limited
Truck & Trailer Parts Limited ***
Hellaby Automotive Australia Pty Limited
Ryde Batteries Pty Limited
Ryde Batteries (Wholesale) Pty Limited
Federal Batteries Qld Pty Limited
Diesel Distributors Australia Pty Limited
TRS Tyre & Wheel Pty Limited ***
Hellaby Auto Electrical Pty Limited
JAS Oceania Pty Limited
Australian Automotive Electrical Wholesale Pty Ltd
Low Voltage Pty Limited
Premier Auto Trade Pty Limited
Hellaby Auto Fuel Pty Limited ***
Hellaby Australia Pty Limited
Renouf Corporation International
Benequity Properties, LLC
Hellaby Investment No 13 Limited ***
Hellaby Investment No 14 Limited ***
Discount Shoe Warehouse Limited ***
Generator Fund Limited ***
Hellaby Brands Limited ***
Number 1 Shoes Limited *
122
Principal place of business/
Country of incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
United States
United States
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
Ownership interest
2017
%
100.0%
100.0%
100.0%
2016
%
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%
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%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
BAPCORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedfor the year ended 30 June 2017 Name
R Hannah & Co Limited *
Hellaby Resource Services Limited **
TBS Group Limited **
TBS Farnsworth Limited **
Total Bridge Services JV **
T.B.S. Coatings Limited **
TBS Remcon Limited **
Crow Refractory Limited **
Hellaby Investment No 8 Limited **
Hellaby Investments Number 10 Limited **
Contract Resources Investments Limited **
Contract Resources South America Limited **
Principal place of business/
Country of incorporation
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
Nexxo Contract Resources Do Brasil Manuseio De Catalisadores Ltda JV **
United States
Contract Resources (New Zealand) Limited **
New Zealand
Contract Resources Holdings Pty Limited **
Contract Resources Finance Pty Limited **
Contract Resources Australia Pty Limited **
Contract Resources Equipment Pty Limited **
DDT International Pty Limited **
Contract Resources Pty Limited **
CR Travel Pty Limited **
Contract Resources (Karratha) Pty Limited **
Contract Resources USA Inc **
Contract Resources Limited LLC **
Catalyst Handling Resources Holdings LLC **
Catalyst Handling Resources Ltd **
Catalyst Handling Resources LLC **
JACR (JV) **
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
United States
United States
United States
Trinidad & Tobago
United States
The Kingdom
of Saudi Arabia
Contract Resources Technical and Industrial Services LLC **
Oman
Contract Resources Oilfield Services LLC **
Contract Resources Oilfield Services WLL **
United Arab Emirates
Qatar
Ownership interest
2017
%
100.0%
100.0%
100.0%
100.0%
50.0%
100.0%
100.0%
100.0%
100.0%
100.0%
85.0%
85.0%
42.5%
85.0%
85.0%
85.0%
85.0%
85.0%
85.0%
85.0%
85.0%
85.0%
85.0%
85.0%
68.0%
68.0%
68.0%
41.7%
85.0%
85.0%
85.0%
2016
%
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
*
These subsidiaries relate to the Footwear business unit of the Hellaby Holdings Limited acquisition performed in the current period and are held for sale.
** These subsidiaries relate to the Resource Services business unit of the Hellaby Holdings Limited acquisition performed in the current period and are held for
sale. Minority shareholding is held in the intermediate group holding company, Contract Resources Investments Limited, except for the United States entities
where there is an additional minority interest of 20%.
*** These subsidiaries are non-trading.
123
ANNUAL REPORT 2017 Note 37. Deed of cross guarantee
The following entities are party to a deed of cross guarantee under which each company guarantees the debts of the others.
The companies below represent a ‘Closed Group’ for the purposes of the class order outlined below.
• Bapcor Limited
• Bapcor Finance Pty Limited (formerly Burson Finance Pty Limited)
• Burson Automotive Pty Limited
• Aftermarket Network Australia Pty Ltd (formerly Metcash Automotive Holdings Pty Ltd)
• Specialist Wholesalers Pty Ltd (formerly Australian Automotive Distribution Pty Ltd)
• Automotive Brands Group Pty Ltd
• Midas Australia Pty Ltd
• MTQ Engine Systems (Aust) Pty Ltd
• Baxters Pty Ltd
• Car Bitz & Accessories Pty Ltd
• ACN 610 722 168
• Australian Automotive Electrical Wholesale Pty Limited
• Diesel Distributors Australia Pty Limited
• Federal Batteries Qld Pty Limited
• Hellaby Australia Pty Limited
• Hellaby Automotive Australia Pty Limited
• Hellaby Auto Electrical Pty Limited
• Hellaby Auto Fuel Pty Limited
• JAS Oceania Pty Limited
• Low Voltage Pty Limited
• Premier Auto Trade Pty Limited
• Ryde Batteries Pty Limited
• Ryde Batteries (Wholesale) Pty Limited
• TRS Tyre & Wheel Pty Limited
By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare financial statements and
Directors’ Report under Class Order 98/1418 issued by the Australian Securities and Investments Commission.
Set out below is a consolidated statement of comprehensive income and statement of financial position of the Closed Group.
2017
$’000
2016
$’000
922,348
685,629
(844,420)
(623,513)
77,928
(25,001)
52,927
62,116
(18,534)
43,582
2,191
2,191
(1,256)
(1,256)
55,118
42,326
Statement of comprehensive income
Revenue
Expenses
Profit before income tax expense
Income tax expense
Profit after income tax expense
Other comprehensive income
Changes in the fair value of cash flow hedges
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
124
BAPCORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedfor the year ended 30 June 2017 Equity — accumulated losses
Accumulated losses at the beginning of the financial year
Profit after income tax expense
Dividends paid
Accumulated losses at the end of the financial year
Statement of financial position
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Income tax refund due
Non-current assets
Trade and other receivables
Property, plant and equipment
Intangibles
Deferred tax asset
Other
Intercompany
Investments
Total assets
Current liabilities
Trade and other payables
Derivative financial instruments
Income tax
Provisions
Non-current liabilities
Borrowings
Derivative financial instruments
Provisions
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
2017
$’000
2016
$’000
(51,052)
(70,906)
52,927
43,582
(30,059)
(23,728)
(28,184)
(51,052)
2017
$’000
2016
$’000
30,905
114,618
221,179
27
1,045
22,392
87,304
163,020
—
—
367,774
272,716
296
46,679
573
36,213
426,157
362,207
10,356
4,061
30,879
334,685
7,247
4,466
—
—
853,113
410,706
1,220,887
683,422
150,446
121,507
934
4,998
30,195
186,573
420
6,236
26,607
154,770
429,747
148,184
637
28,402
458,786
645,359
1,374
12,874
162,432
317,202
575,528
366,220
600,676
416,427
3,036
845
(28,184)
(51,052)
575,528
366,220
125
ANNUAL REPORT 2017 Note 38. Events after the reporting period
On 3 July 2017, Bapcor purchased Tricor Engineering ('Tricor') for a total of $2.4M of which $1.0M is deferred over the next two years.
Tricor specialises in the supply and installation of lubrication equipment in the car dealership and heavy vehicle workshop market.
The business will operate within the Precision Automotive Equipment business within the Trade segment.
Apart from the dividend declared as disclosed in note 25, no other matter or circumstance has arisen since 30 June 2017 that
has significantly affected, or may significantly affect the consolidated entity’s operations, the results of those operations, or the
consolidated entity’s state of affairs in future financial years.
Note 39. Reconciliation of profit after income tax to net cash from operating activities
Profit after income tax expense for the year
Adjustments for:
Depreciation and amortisation
Net gain on disposal of property, plant and equipment
Amortisation of capitalised borrowing costs
Amortisation of share-based payment
Component relating to discontinued operations
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Increase in inventories
Decrease/(increase) in other operating assets
Increase/(decrease) in trade and other payables
Increase/(decrease) in provision for income tax
Decrease in other operating liabilities
Net cash from operating activities
Consolidated
2017
$’000
2016
$’000
63,830
43,582
13,527
9,673
(80)
752
1,625
(10,098)
(32)
459
1,081
—
(396)
631
(12,450)
(20,382)
(1,027)
10,737
(3,623)
(1,703)
13,859
(11,230)
1,676
(54)
61,094
39,263
126
BAPCORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedfor the year ended 30 June 2017 Note 40. Earnings per share
Earnings per share for profit from continuing operations
Profit after income tax attributable to the owners of Bapcor Limited
53,732
43,582
Consolidated
2017
$’000
2016
$’000
Basic earnings per share
Diluted earnings per share
Cents
19.93
19.83
Cents
17.89
17.82
Consolidated
2017
$’000
2016
$’000
Earnings per share for profit from discontinued operations
Profit after income tax attributable to the owners of Bapcor Limited
10,098
—
Basic earnings per share
Diluted earnings per share
Earnings per share for profit
Profit after income tax
Non-controlling interest
Profit after income tax attributable to the owners of Bapcor Limited
Basic earnings per share
Diluted earnings per share
Cents
3.75
3.73
Cents
—
—
Consolidated
2017
$’000
2016
$’000
63,830
43,582
214
—
64,044
43,582
Cents
23.76
23.64
Cents
17.89
17.82
Number
Number
Weighted average number of ordinary shares
Weighted average number of ordinary shares used in calculating basic earnings per share
269,599,050 243,646,174
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares
1,337,272
935,184
Weighted average number of ordinary shares used in calculating diluted earnings per share
270,936,322 244,581,358
The weighted average number of ordinary shares for 2016 has been restated for the effect of the rights issues performed in
accordance with AASB 133 Earnings Per Share.
127
ANNUAL REPORT 2017 Note 41. Share-based payments
Long Term Incentive plan
The Long Term Incentive ('LTI') plan is intended to assist in the motivation, retention and reward of certain senior executives. The LTI
is a payment contingent on two and three year performance and the payments are rights to acquire shares ('Performance Rights').
Refer to the audited Remuneration Report within the Directors’ Report for further information on the LTI.
In FY17 an offer to participate in the LTI was made to nine of Bapcor’s senior executives. Each executive’s LTI opportunity comprised
two tranches whereby:
• 34% of the allocated Performance Rights have a performance period that ends on 30 June 2018 at which time the performance
hurdles for this tranche are tested; and
• 66% of the allocated Performance Rights have a performance period that ends on 30 June 2019 at which time the performance
hurdles for this tranche are tested.
A summary of the terms for the Performance Rights granted in the current and prior financial years are set out in the following
tables:
2017
Grant date
Tranche 1
20/12/2016
Tranche 2
20/12/2016
Performance hurdle
Relative TSR
EPS
Relative TSR
EPS
Performance period
1/07/2016 to 30/06/2018 1/07/2016 to 30/06/2018 1/07/2016 to 30/06/2019 1/07/2016 to 30/06/2019
Test date
Expiry date
Quantity granted
Exercise price
30/06/2018
Once tested
Nil
77,891
Fair value at 20/12/2016
$2.696
46,395
$5.265
30/06/2019
Once tested
Nil
145,742
$2.897
91,647
$5.160
Other conditions
Restriction on sale to 30/06/2019
Restriction on sale to 30/06/2020
2016
Grant date
Tranche 1
24/12/2015
Tranche 2
24/12/2015
Performance hurdle
Relative TSR
EPS
Relative TSR
EPS
Performance period
1/07/2016 & 1/08/2016 to
30/06/2017
1/07/2016 & 1/08/2016 to
30/06/2017
1/07/2016 & 1/08/2016 to
30/06/2018
1/07/2016 & 1/08/2016 to
30/06/2018
Test date
Expiry date
Quantity granted
Exercise price
30/06/2017
Once tested
30/06/2018
Once tested
102,673
102,673
196,780
196,780
Nil
Nil
Fair value at 24/12/2015
$3.368
$3.958
$3.196
$3.842
Other conditions
Restriction on sale to 30/06/2018
Restriction on sale to 30/06/2019
Relative total shareholder return (‘TSR’) hurdle
Fifty per cent of the Performance Rights granted to a participant will vest subject to a TSR performance hurdle that assesses
performance by measuring capital growth in the share price together with income returned to shareholders, measured over the
performance period against a Comparator Group of companies. The Performance Rights will vest by reference to Bapcor’s TSR
performance ranking against this Comparator Group of companies, as follows:
Bapcor’s TSR relative to the Comparator Group over the performance period
Percentage of TSR Rights vesting
Less than 50th percentile
Equal to 50th percentile
Nil
50%
Greater than 50th percentile and less than 75th percentile
Pro-rata straight-line vesting
Equal to or greater than 75th percentile
100%
128
BAPCORNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continuedfor the year ended 30 June 2017 Earnings per share (‘EPS’) growth
Fifty per cent of the Performance Rights granted to a participant will vest by reference to an EPS performance hurdle that measures
the basic EPS on a normalised basis over the performance period. Each tranche of Performance Rights subject to an EPS hurdle will
vest as follows:
Bapcor’s compound annual EPS growth over the performance period
Percentage of EPS Rights Vesting
Less than 7.5%
Equal to 7.5%
Greater than 7.5% and less than 15%
Equal to or greater than 15%
Nil
20%
Pro-rata straight-line vesting
100%
There is no expiry date. The Performance Rights are exercised as soon as the vesting conditions are met. If vesting conditions are
met, Performance Rights will automatically convert into fully paid ordinary shares of the company. Shares that are allocated in
respect of each tranche will be subject to a restriction on sale for twelve months from vesting of the Performance Rights.
Set out below are summaries of Performance Rights granted under the LTI:
Grant date
Vesting date
Exercise price
Balance at the
start of the year
Granted
Exercised
Expired/
forfeited/
other
Balance at the
end of the year
2017
24/04/2014
30/06/2016
24/04/2014
30/06/2017
1/07/2015
1/07/2015
1/08/2015
1/08/2015
1/07/2016
1/07/2016
30/06/2017
30/06/2018
30/06/2017
30/06/2018
30/06/2018
30/06/2019
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
151,344
475,362
128,868
246,986
76,478
146,574
—
—
1,225,612
—
—
—
—
—
—
124,286
237,389
361,675
(151,344)
—
—
—
—
—
—
—
(151,344)
—
—
—
—
—
—
—
—
—
—
475,362
128,868
246,986
76,478
146,574
124,286
237,389
1,435,943
Grant date
Vesting date
Exercise price
Balance at the
start of the year
Granted
Exercised
Expired/
forfeited/
other
Balance at the
end of the year
2016
24/04/2014
30/06/2016
24/04/2014
30/06/2017
1/07/2015
1/07/2015
1/08/2015
1/08/2015
30/06/2017
30/06/2018
30/06/2017
30/06/2018
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
151,344
475,362
—
—
—
—
—
—
128,868
246,986
76,478
146,574
626,706
598,906
—
—
—
—
—
—
—
—
—
—
—
—
—
—
151,344
475,362
128,868
246,986
76,478
146,574
1,225,612
The weighted average exercise price for the Performance Rights exercised in FY17 was $5.3958 (2016: N/a).
The weighted average contractual lives are 1.48 years (2016: 1.54 years). The expense arising from share-based payment transactions
relating to the LTI during the year as part of employee benefits expense was $1,625,000 (2016: $1,081,000).
Refer to note 1 for details on the fair value determination of the share-based payments.
Employee Salary Sacrifice Share plan
During the financial year, Bapcor issued shares to employees via an Employee Salary Sacrifice Share plan (‘ESSS’). The ESSS allowed
eligible employees to acquire up to $1,000 of shares from their pre-tax wages. The value of this share-based payment transaction is
deemed immaterial to the financial statements.
129
ANNUAL REPORT 2017 DIRECTORS’ DECLARATION
In the directors’ opinion:
• the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations
Regulations 2001 and other mandatory professional reporting requirements;
• the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board as described in note 1 to the financial statements;
• the attached financial statements and notes give a true and fair view of the consolidated entity’s financial position as at
30 June 2017 and of its performance for the financial year ended on that date;
• there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and
payable; and
• at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group will be
able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee
described in note 37 to the financial statements.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
Robert McEniry
Chairman
23 August 2017
Melbourne
Darryl Abotomey
Chief Executive Officer
130
BAPCOR
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF BAPCOR LIMITED
Independent auditor’s report
To the shareholders of Bapcor Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Bapcor 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 2017 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 2017
the Consolidated statement of comprehensive income for the year then ended
the Consolidated statement of changes in equity for the year then ended
the Consolidated statement of cash flows for the year then ended
the Notes to the consolidated financial statements, which include a summary of Significant
accounting policies
the directors’ declaration
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant
to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities
in accordance with the Code.
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
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.
131
131
ANNUAL REPORT 2017
132
BAPCORINDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BAPCOR LIMITED continued We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial report as a whole, taking into account the geographic and management structure of the Group, its accounting processes and controls and the industry in which it operates. Materiality • For the purpose of our audit we used overall group materiality of $4.1 million, which represents approximately 5% of the Group’s adjusted profit before tax. • We applied this threshold, together with qualitative considerations, to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial report as a whole. • We chose Group profit before tax because, in our view, it is the metric against which the performance of the Group is most commonly measured. Adjustments have been made for business combination transactions costs as they are considered to be unusual or infrequently occurring items impacting profit and loss. • 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 areas where the Group made subjective judgements; for example, significant accounting estimates involving assumptions and inherently uncertain future events. • Audit procedures were performed on the Australian and New Zealand operations assisted by local component auditors in New Zealand under the instruction and supervision of the group engagement team. • Our team included specialists in taxation and experts in valuations to assist in the audit procedures over the fair value of intangible assets identified in the Hellaby Holdings Limited acquisition and goodwill impairment. 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. Key audit matter How our audit addressed the key audit matter Accounting for acquisition of Hellaby Holdings Limited Refer to note 35 of the financial report The Group made a number of acquisitions during the financial year ended 30 June 2017. The most significant completed was the Our audit procedures included the following, amongst others: • Considering whether the relevant evidence, including share registers and ASX announcements by the Group, was consistent with the Group’s determination 132 Key audit matter
acquisition of Hellaby Holdings Limited
(Hellaby) in January 2017 for $334.6 million.
As per note 35 of the financial statements, the
Group has recognised the fair value of assets
and liabilities for each acquired business,
which included identifiable intangible assets
totalling $11.4 million and goodwill of $241
million. The fair value of assets held for sale at
acquisition amounted to $163.3 million,
representing the Resource Services Group and
Footwear business acquired as part of the
Hellaby acquisition.
The fair value of assets held for sale has been
determined based on indicative bids, adviser
estimates and estimates derived from earnings
multiples (as described in note 29 of the
financial statements).
We focused on this matter because of the
significant judgement involved in the Group
estimating the fair values of net assets acquired
and the material impact on the financial report
of the acquisition.
How our audit addressed the key audit matter
of the acquisition date of Hellaby based
on the requirements of Australian
Accounting Standards.
• Agreeing the fair value of consideration
paid to third party records, including
agreeing a sample of payments to bank
records, and ASX take over
announcements.
• Assessing the Group’s identification of
intangible assets, including consideration
of whether the intangibles identified were
complete. These procedures were
performed with the support of PwC
valuation experts.
• Assessing valuations of identified
intangibles by testing the mathematical
accuracy of valuation calculations,
agreement of a sample of key valuation
inputs to source documents and
consideration of the appropriateness of a
sample of other key valuation inputs,
including the discount rate used.
Agreeing inputs used in the calculation to
those assessed in the Group’s expert
report. These procedures were performed
with the support of PwC valuation
experts.
• Consideration of the competence,
qualifications, experience and objectivity
of the Group’s valuation experts who
assisted with the Group’s valuations
adopted for the Hellaby acquisition.
• Assessment of identification of business
units held for sale in the acquisition in
accordance with accounting standards.
• Consideration of the adequacy of the
disclosures made in note 35, including
with regard to the requirements of
Australian Accounting Standards.
Carrying value of goodwill and intangible
assets with indefinite lives
Refer to note 14 of the financial report
At 30 June 2017, the Group recognised
$561.8m of goodwill and $59.4m of intangible
assets with indefinite lives (trademarks).
At least annually, an impairment test is
Goodwill and intangible assets with indefinite
lives
In assessing the models, our audit procedures
included, amongst others:
• Assessing whether the grouping of CGUs (which
was up to the Group’s operating segments) used to
test impairment was appropriate in light of how
133
133
ANNUAL REPORT 2017
Key audit matter
performed by the Group to assess whether the
carrying value of the goodwill and intangible
assets with indefinite lives, in each of the
Group’s cash generating units (CGUs) are
recoverable based on a ‘value in use’, using a
discounted cashflow model, or ‘fair value less
costs of disposal’ model (the models). Where a
shortfall in value is identified, an impairment
charge is recognised in the Consolidate
statement of comprehensive income.
Significant judgement is required by the Group
to estimate the key assumptions in the models
to determine the recoverable amount of the
goodwill and the amount of any impairment.
The most significant areas of judgment relate
to:
• cash flow forecasts, including the terminal
value forecast;
• short-term and future growth rates in
revenue and EBITDA margin; and
• the discount rate adopted in the models.
Given the level of judgement applied by the
Group and the magnitude of the goodwill and
intangible assets with indefinite lives
recognised on the Group’s Consolidated
statement of financial position we determined
that this was a key audit matter.
How our audit addressed the key audit matter
synergies were shared across the Group’s business
based on our consideration of internal Group
reporting, discussions and our understanding of
the operation of the Group’s business.
• Assessing whether the grouping of CGUs
appropriately included the assets, liabilities and
cash flows directly attributable and a reasonable
allocation of corporate overheads.
• Testing that forecast cash flows used in the
models were consistent with the Group’s most up-
to-date budgets and business plans formally
approved by the Board and assessing whether the
key assumptions used in the models were
reasonable based on supporting evidence.
• Assessing the Group’s forecasting ability by
comparing budgets with reported actuals.
• As part of our sensitivity analysis on key
assumptions in the models, considering changes
in the Group’s assumptions used in the models.
• With the assistance of PwC valuation experts,
evaluating the appropriateness of the discount
rates by assessing the reasonableness of the
relevant inputs to the calculation against industry
and market factors.
• Testing the mathematical accuracy of the
models’ calculations.
• Considered the adequacy and accuracy of
disclosures in note 14, including those regarding
the key assumptions, in accordance with the
requirements of Australian Accounting Standards.
Carrying value of Inventory
Refer to note 10 of the financial report
At 30 June 2017 the Group recognised
inventory of $261.6 million.
The Group’s inventory is held at the lower of
cost or net realisable value. Cost includes the
purchase price of inventory, landing costs,
such as freight and are reduced for related
supplier rebates.
The Group has recorded a provision for aged
and slow moving inventory of $54 million. The
provision is estimated based on the application
of judgemental provisioning rates to aged and
slow moving inventory categories. Specific
Our audit procedures included the following,
amongst others:
• Considering if all inventory balances were
included in the provision calculation.
• An evaluation of whether the
methodology applied to calculate the
provision was consistent with that applied
in the prior year.
• Assessing the Group’s historical ability to
make estimates by testing a sample of
products included in the prior year
inventory provision, including comparing
the estimated recoverable amount to the
134
134
BAPCORINDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BAPCOR LIMITED continued
Key audit matter
provisioning for items where the known net
realisable value is lower than cost are also
recorded.
How our audit addressed the key audit matter
actual gross margin earned on those
products sold in the financial year and the
clearance rate achieved.
We consider this to be a key audit matter
because of the significant judgement and
estimation involved by the Group in
determining the net realisable value of
inventory and the potentially material impact
on the financial report.
• Testing of the mathematical accuracy of
the provision calculation.
•
• Evaluating whether the provision for
inventory was adequate by assessing:
the gross margins recognised by the
Group; and
the inventory turnover ratio and ageing,
including a comparison to the prior year.
•
Other information
The directors are responsible for the other information. The other information included in the Group’s
annual report for the year ended 30 June 2017 comprises the Director’s Report and Corporate
Directory (but does not include the financial report and our auditor’s report thereon), which we
obtained prior to the date of this auditor’s report. We also expect other information to be made
available to us after the date of this auditor's report, including the Chairman’s Report, CEO’s Report,
Corporate Governance Statement, Segment overview, Community & Sustainability and Shareholder
Information.
Our opinion on the financial report does not cover the other information and we do not and will not
express any opinion or form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
If, based on the work we have performed on the other information 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.
When we read the other information not yet received as identified above, if we conclude that there is a
material misstatement therein, we are required to communicate the matter to the directors and use
our professional judgement to determine the appropriate action to take.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have has no realistic alternative but to do so.
135
135
ANNUAL REPORT 2017
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor’s report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 20 to 38 of the directors’ report for the
year ended 30 June 2017.
In our opinion, the remuneration report of Bapcor Limited for the year ended 30 June 2017 complies
with section 300A of the Corporations Act 2001.
Responsibilities
The directors of Bapcor Limited 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
Daniel Rosenberg
Partner
Melbourne
23 August 2017
136
136
BAPCORINDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BAPCOR LIMITED continued
SHAREHOLDER INFORM ATION
In accordance with ASX Listing Rule 4.10, the company provides the following information to shareholders not elsewhere disclosed in
this Annual Report. The information provided is current as at 23 August 2017 (‘reporting date’).
1. Corporate Governance Statement
Bapcor (‘the company’) has prepared a Corporate Governance Statement which sets out the corporate governance practices that were
in operation throughout the financial year for the company. In accordance with ASX Listing Rule 4.10.3, the Corporate Governance
Statement will be available for review on the company’s website www.bapcor.com.au, and will be lodged with ASX at the same time that
this Annual Report is lodged with ASX.
2. Distribution and number of shareholders of equity securities
The distribution and number of holders of equity securities on issue in the company as at the reporting date, and the number of
holders holding less than a marketable parcel of the company’s ordinary shares, based on the closing market price as at the reporting
date, is as follows:
2.1 Distribution of ordinary shareholders
Range
1 — 1,000
1,001 — 5,000
5,001 — 10,000
10,001 — 100,000
100,001 +
Total
Total holders
Shares
% of Issued
Capital
4,633
2,510,073
6,363
16,724,850
1,848
13,416,808
1,161
23,964,043
0.90
6.00
4.82
8.60
59 222,017,306
79.68
14,064 278,633,080
100.00
Holders of less than a marketable parcel of $500 included in above total
182
6,085
2.2 Distribution of holders of performance rights
Range
1 — 1,000
1,001 — 5,000
5,001 — 10,000
10,001 — 100,000
100,001 +
Total
Total holders
Performance
Rights
—
—
—
6
5
11
—
—
—
%
—
—
—
415,023
1,020,920
28.90
71.10
1,435,943
100.00
137
ANNUAL REPORT 2017 3. Twenty largest quoted equity security holders
The company only has one class of quoted securities, being ordinary shares. The names of the twenty largest holders of ordinary
shares, the number of ordinary shares and the percentage of capital held by each holder is as follows:
Name
HSBC Custody Nominees
J P Morgan Nominees Australia
BNP Paribas Nominees Pty Ltd
Citicorp Nominees Pty Limited
National Nominees Limited
Garrmar Investments Pty Ltd
Glendale Investment Group Pty
Bond Street Custodians Limited
Netwealth Investments Limited
D Abotomey
AMP Life Limited
Schram Investments Pty Ltd
One Managed Investment
Shoppee Nominees Pty Ltd
Forsyth Barr Custodians Ltd
UBS Nominees Pty Ltd
BT Portfolio Services Limited
Invia Custodian Pty Limited
C Magill
Warbont Nominees Pty Ltd
Other Shareholders
Total Shareholders
Ordinary Shares
Number Held
87,697,774
36,742,072
23,754,242
22,723,071
21,075,272
7,372,699
2,817,313
2,532,449
1,938,267
1,689,912
1,657,961
1,514,557
1,247,961
1,234,567
1,159,096
999,951
925,730
859,520
809,246
700,362
219,452,022
59,181,058
% of Issued
Capital
31.47
13.19
8.53
8.16
7.56
2.65
1.01
0.91
0.70
0.61
0.60
0.54
0.45
0.44
0.42
0.36
0.33
0.31
0.29
0.25
78.78
21.22
278,633,080
100.00
4. Substantial holders
As at the reporting date, the names of the substantial holders of the company and the number of equity securities in which those
substantial holders and their associates have a relevant interest, as disclosed in substantial holding notices given to the company, are
as follows:
Name
FMR LLC
Commonwealth Bank of Australia
BT Investment Management
Number Held
16,844,711
14,312,201
14,245,535
% of Issued
Capital
6.05
5.14
5.11
138
BAPCORSHAREHOLDER INFORMATION continued 5. Voting rights
The voting rights attaching to each class of equity securities are set out below:
5.1 Ordinary shares
At a general meeting of the company, every holder of ordinary shares present in person or by proxy, attorney or representative has
one vote on a show of hands and on a poll, one vote for each ordinary share held.
5.2 Performance rights
Performance rights do not carry any voting rights.
6. Unquoted equity securities
1,435,943 unlisted performance rights have been granted to 11 persons. There are no persons who hold 20% or more of performance
rights that were not issued or acquired under an employee incentive scheme.
7. Voluntary escrow
There are no securities subject to voluntary escrow in the company as at the reporting date.
8. On-market buy-back
The company is not currently conducting an on-market buy-back.
139
ANNUAL REPORT 2017 Corporate Information
Directors
Robert McEniry (Independent, Non-Executive Director and Chairman)
Darryl Abotomey (Chief Executive Officer and Managing Director)
Andrew Harrison (Independent, Non-Executive Director)
Therese Ryan (Independent, Non-Executive Director)
Margaret Haseltine (Independent, Non-Executive Director)
Company secretary
Gregory Fox
Notice of annual general meeting
The details of the annual general meeting of Bapcor Limited are:
Date: 2 November 2017
Time: 1.00pm (Melbourne time)
Address: Level 37, 101 Collins Street, Melbourne VIC 3000.
Registered office
61 Gower Street
Preston VIC 3072
Australia
Share register
Computershare Investor Services Pty Ltd
452 Johnston Street
Abbotsford VIC 3067
Australia
Ph: +61 3 9415 4000
Auditor
PricewaterhouseCoopers
2 Riverside Quay
Southbank VIC 3006
Australia
Stock exchange listing
Bapcor Limited shares are listed on the Australian Securities Exchange (ASX code: BAP)
Website
www.bapcor.com.au
140
BAPCOR ANNUAL REPORT 2017RM-17076