Annual
Report
2018
VISION STATEMENT
Australasia’s leading provider of automotive
aftermarket parts, accessories, automotive
equipment and services; operating out of over
800 locations across Australia, New Zealand
and Thailand.
Bapcor’s core business is the automotive
aftermarket. Our businesses span the
end-to-end aftermarket supply chain covering
Trade, Specialist Wholesale, Retail & Service.
CONTENTS
Automotive Aftermarket Supply Chain
Automotive Locations
Our History
Highlights
Chairman’s Report
Chief Executive Officer’s Report
Bapcor 5 Year Strategic Targets
Segment Overview
Trade
Bapcor New Zealand
Specialist Wholesale
Retail & Service
Sustainability Overview
Board of Directors
Executive Team
Directors’ Report
Financial Report
Corporate Directory
1
2
4
6
8
10
14
16
18
22
26
30
34
44
46
49
83
IBC
Bapcor Annual Report 2018
AUTOMOTIVE AFTERMARKET SUPPLY CHAIN
CONSUMER
Service*
Trade / Resellers*
Retail*
Specialist wholesale*
MANUFACTURERS
*Bapcor businesses participate
Annual General Meeting
Date: 29 October 2018
Time: 1.30pm – 2.30pm
Address: Level 28, 126 Phillip St, Sydney, NSW, 2000, Australia
Bapcor Limited
ACN 153 199 912
Bapcor Annual Report 2018
1
SHOCKSHOPtheauto safety experts AUTOMOTIVE LOCATIONS
WA
61
4 2
9
1 0
SA
102
8 3
6
1 3
NT
12
3
3
6
VIC
194
1 2 2
2 0
5 2
TAS
16
5
1
1 0
2
Bapcor Annual Report 2018 THAILAND
1
1
QUEENSLAND
161
2 7
4 3
9 1
ACT
6
1
2
3
NSW
166
2 0
4 5
1 0 1
Automotive
Trade
Specialist Wholesale
Retail & Service
NZ
106
2 4
5 7
2 5
3
Bapcor Annual Report 2018 OUR HISTORY
1986
Garry Johnson acquires
100% holding.
2005
Burson moves into
purpose built head office
and distribution centre in
Preston, Victoria.
2004
Burson opens its
50th store.
2011
Burson acquired by
MBO and Quadrant
Private Equity.
1971
Burson founded by Garry
Jonhson and Ron Burgoine
in Victoria, Australia.
4
Bapcor Annual Report 2018 2016
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.
2014
Burson Group Limited
lists on the Australian
Stock Exchange.
2015
Burson Group Limited acquires
Metcash Automotive Holdings
(since renamed Aftermarket
Network Australia or ANA).
2017
Burson acquires
Hellaby Holdings.
5
Bapcor Annual Report 2018 HIGHLIGHTS
6
Bapcor Annual Report 2018 GROUP REVENUE* UP BY 22% TO
1,237m
NPAT* GROWTH OF 32%
86.5m
EBITDA*: growth of 27.7%
$150.0m
EPS* 30.99cps
27%
Share Price CAGR since listing
Dividends per share 15.5c
37.7%
19.2%
Bapcor Limited is Australasia’s leading provider of automotive aftermarket parts,
accessories, automotive equipment and services, and motor vehicle servicing;
operating out of over 800 locations across Australia, New Zealand and Thailand.
Bapcor’s core business is the automotive aftermarket. Our automotive business
covers Trade, Specialist Wholesale, Retail & Service businesses.
*Proforma results excluding discontinuing operations.
7
Bapcor Annual Report 2018 CHAIRMAN’S REPORT
In the last 4 years,
Bapcor has delivered
'total shareholder
returns' of 275%
compared with the
ASX 200 average
return of 58% "
8
Bapcor Annual Report 2018 86.5m
NPAT (Pro-forma)
1,237m
REVENUE
On behalf of the Board and all
Bapcor team members I am
very proud to present Bapcor
Limited’s annual report for
the year ended 30 June 2018
('FY18').
The 2018 financial year was one of
remarkable growth for Bapcor. Revenue
growth rose 22% to $1.3 billion. Same
store sales were strong across all
segments. Net profit after tax increased
32% to $86.5m for continuing operations,
or 48% to $94.7m including divestments.
The focus of the Board this financial year
was on overseeing the consolidation of
the expanded Bapcor Group. This included
the integration of the Hellaby Holdings
businesses and alignment to the Group
structure, delivering synergies from
acquisitions, and capturing own brand
intercompany sourcing opportunities.
Since its IPO in April 2014 Bapcor has
undergone significant transformation.
From a trade business operating in 120
locations, the Group now covers the
automotive aftermarket supply chain
from end to end, and operates in over
800 locations across Australia, New
Zealand and more recently Thailand. The
automotive aftermarket supply chain is
depicted on page one, which also shows
Bapcor’s business units that operate in
each segment of the supply chain.
In FY18, Bapcor continued network
expansion activities. Burson Auto Parts
added 10 stores, bringing Burson’s total
across Australia to 170 stores. Autobarn
added 6 stores to now total 128 stores, of
which 48 are company owned and 80 are
franchised stores. Sales to franchisees
from the company’s warehouses also
increased.
Bapcor’s five year strategic targets
will ensure Bapcor maintains its strong
growth trajectory. Several targets have
been revised upwards, building on the
progress already made. Bapcor’s Trade
segment target is 230 stores in Australia
(an increase from the previous target
of 200) and 65 stores in New Zealand.
Bapcor’s premium retail offering Autobarn
is progressing toward 200 stores. The
Service segment target is 500 stores in
Australia and 150 in New Zealand.
I am also proud to announce the launch
of Bapcor’s environmental, social and
governance (ESG) strategy, which sets out
Bapcor’s commitment to sustainability in
regard to the ethical sourcing of products,
making efficient use of natural resources,
and investing in its people and the
communities in which Bapcor businesses
operate. The ESG strategy is aligned with
Bapcor’s company values and strategic
direction, to drive positive outcomes for
stakeholders, and the broader community.
Bapcor views investment in these areas
as an important driver of long-term
performance and value creation. Further
information about Bapcor’s commitment
to sustainability and the ESG strategic
framework can be found on page 34 and
on the Bapcor website.
In FY18, the Board announced an
increase of 19.2% on the full year
dividend, declaring a final dividend of
8.5 cents per share fully franked, resulting
in a full year fully franked dividend of
15.5 cents per share.
4 Year Performance
TSR
275%
77%
70%
58%
Bapcor
Comp. Group
(Average)
ASX 100
(Average)
ASX 200
(Average)
Since listing on the Australian Securities
Exchange (ASX) Bapcor has outperformed
the market by a significant margin. In the
last four years, Bapcor has delivered 'total
shareholder returns' of 275% compared
with the ASX 200 average return of 58%
over the same period.
In July 2018, we learned the sad news
inaugural Chairman of Bapcor Robert
McEniry passed away having lost his
battle with cancer. I wish to acknowledge
Robert’s enormous contribution to Bapcor,
guiding Bapcor to become the company it
is today, as well as my profound personal
sense of loss. I extend the condolences of
the Board, the CEO, and the entire Bapcor
family to Robert’s wife, family and friends.
The 2019 financial year promises to be
another exciting year for Bapcor. The
Group continues its extraordinary growth
through network expansion, and strategic
acquisitions.
A huge thanks is due to Darryl Abotomey,
his leadership team and the passion and
commitment of Bapcor team members for
an outstanding year.
Finally, I would like to express my
thanks to our shareholders, franchisees,
customers and suppliers for their
contribution to Bapcor’s continued
success and for their ongoing support.
Yours sincerely,
Andrew Harrison
Chairman
9
Bapcor Annual Report 2018
CHIEF EXECUTIVE OFFICER’S REPORT
Bapcor’s FY18
result was
reflected in its
share price,
ending the year
at $6.55.
Financial year 2018 was an
outstanding year for Bapcor,
building on an exceptional
record of consistent growth that
has been achieved since listing
on the Australian Securities
Exchange (ASX) in 2014.
Year on year improvement
was achieved by all business
segments, expansion of the
footprint of both trade and
retail stores continued, we made
further acquisitions in specialist
wholesale and entry into the
Asian market commenced.
The acquisition of Hellaby Holdings in FY17
was a key driver of the results achieved in
FY18. The integration of Hellaby automotive
businesses into the Bapcor group delivered
above expectations. In FY18, Bapcor
divested the discontinued operations of the
Hellaby acquisition, generating proceeds
of NZ$103m. These businesses also
contributed $7m net profit during the time
Bapcor owned them in FY18.
Bapcor’s performance in FY18 was
supported by a full twelve months trading
of the Hellaby automotive businesses
and the expansion of our store networks
in Australia and New Zealand.
Revenue* ($m)
EBITDA & NPAT* ($m)
1200
900
600
300
0
1,236.7
1,013.6
685.6
375.3
FY2015
FY2016
FY2017
FY2018
150
120
90
60
30
0
FY
NPAT*
150.0
117.4
77.0
86.5
65.8
30.2
36.0
41.5
43.6
16.0
19.3
23.1
FY2013
FY2014
FY2015
FY2016
FY2017
FY2018
* Based on continuing operations only and proforma results where appropriate.
10
Bapcor Annual Report 2018
Key highlights of FY18 in
comparison to the prior
year’s results:
• Revenue: growth of 22% to $1,237m
• Same Store Sales: Burson Trade +4.4%;
BNT +6.1%; Autobarn +4.7% company
owned, +1.4% franchise stores;
• EBITDA: growth of 27.7% to $150.0m.
• NPAT: growth of 31.6% to $86.5m
(+ 47.8% to $94.7m on a statutory
basis)
• EPS: growth of 27% to 30.99 cps
(+ 42.7% to 33.90 cps on a statutory
basis)
Revenue and Same Store Sales
Growth
Revenue growth was up 22% to $1,237m.
Growth was supported by the first full
twelve months trading of acquisitions,
including: the Hellaby Holdings
automotive businesses; Roadsafe; Baxters
Auto Electrical and MTQ Engine Systems.
The two acquisitions made in FY18, Tricor
Equipment and AADi, contributed revenue
for eleven months and one month,
respectively.
Earnings before interest, tax,
depreciation and amortisation
(EBITDA)
EBITDA in FY18 increased by 27.7% to
$150.0m. Trade EBITDA increased by
13.9% to $72.1m, with sales growth and
margin improvement. Bapcor New Zealand
increased by 144.3% on the FY17 6-month
contribution to $22.7m. Specialist
Wholesale increased by 37.7% with the
inclusion of Australian-based operations
of the Hellaby acquisition and growth
in intercompany sales. Retail & Service
EBITDA increased by 4.4% as a result of
top line growth, EBITDA decreased 0.5%
as a percentage of revenue due to greater
investment in new company stores.
Net Profit After Tax (NPAT)
NPAT grew 31.6% in FY18 to $86.5m.
Including discontinued operations,
statutory NPAT increased to $94.7m,
up 47.8% on FY17. NPAT growth from
continuing operations reflects the
underlying growth of Bapcor’s base
business across the Trade, Bapcor NZ,
Specialist Wholesale, Retail & Service
segments and contribution of acquisitions.
Earnings Per Share (EPS)
For continuing operations, EPS grew
27.0% to 30.99 cents per share in FY18.
EPS growth on a statutory basis was up
42.7%, to 33.90 cents per share. These
increases continue a sustained trend of
growth, which delivered 36.0% proforma
growth in FY17, 31.0% growth in FY16 and
19.1% growth in FY15.
Share Price
Bapcor’s FY18 result was reflected in its
share price, ending the year at $6.55.
Bapcor’s share price has since hit a
record high and market capitalisation of
more than $2.0 billion. This represents a
19.3% increase on the prior year, and an
exceptional increase of 260% since listing
on the Australian Securities Exchange
(ASX) in April 2014.
EPS (cps)* ($m)
Dividends per share
31.0
Interim
Final
24.4
17.9
13.6
6.0
5.0
4.7
4.0
8.5
7.0
7.5
5.5
FY2015
FY2016
FY2017
FY2018
FY2015
FY2016
FY2017
FY2018
35
30
25
20
15
10
5
0
11
Bapcor Annual Report 2018
CHIEF EXECUTIVE OFFICER’S REPORT
Operational Performance
Trade
Trade revenue was $501.6m in FY18.
Revenue growth was 7.8%, driven by same
store sales growth of 4.4%. The Burson
store network grew by 10 stores to 170.
Equipment sales were very strong, aided
by the acquisition of Tricor Engineering
in July 2017. People development remains
a high priority. Burson Trade conducted
26 development courses throughout the
year building a pipeline of trained staff
and equipping future leaders with the
skills and knowledge needed to contribute
to the ongoing success of Bapcor.
Bapcor New Zealand (Bapcor NZ)
Bapcor New Zealand, which comprises the
New Zealand based automotive operations
of the Hellaby acquisition, contributed
revenue of $177.9m in FY18, an increase
of 104.1% on FY17, which only included
the six months since the business was
acquired. On a comparable annualised
basis, Bapcor NZ achieved year on year
revenue growth of 5.7%. BNT same store
sales growth was 6.1% annualised. After
more than five years, the first new BNT
store was added to the network. Bapcor
NZ specialist wholesale businesses
recorded positive sales growth, supporting
intercompany sourcing initiatives.
Specialist Wholesale Group (SWG)
SWG (which now includes the Hellaby
SWG businesses based in Australia) had
revenue growth of 33.8% to $364.3m,
benefiting from the full year of FY17
acquisitions. Revenue growth was 11.0%
on a comparable annualised basis.
SWG segment developed significantly
in FY18 with the addition of wholesale
distributor AADi. Most SWG businesses
achieved revenue and profit growth in
FY18. Opportunities for intercompany
product range substitution have been
identified, with several projects already
implemented. In addition, a number of
business unit back office functions have
transitioned to shared services, achieving
economies of scale.
Retail & Service
Retail & Service revenue grew 8.2%
to $239.1m. Autobarn company store
revenue growth was a key driver of
this positive result with same store
sales of 4.7%, compared with 1.4% for
franchise stores. 38% of Autobarn’s 128
stores are company owned, with the
addition of 8 Greenfield and 9 franchise
conversions during the year. This means
we have tripled the number of company
stores in just two years. In a customer
satisfaction survey conducted by Roy
Morgan in June, Autobarn was rated
Australia’s top automotive store with
a customer satisfaction rating of 90%.
This result reflects Autobarn’s customer-
orientated focus.
The other franchised businesses of
Autopro, Sprint, Midas and ABS all
performed well in the year, with a
continued focus of Bapcor supporting
these independent operators, as well as
the independent operators maximising
the benefits of being part of a strong
franchised group.
Five Year Strategy
Bapcor’s strategic direction remains
unchanged. Bapcor will continue to focus
on its strengths and core capabilities.
Bapcor’s five year strategic targets
have clearly defined and measurable
objectives including to develop our store
network, support our franchised groups,
increase own brand penetration and
intercompany sourcing.
Our Australian Trade store target of 200
Australian stores has been revised upward
to 230 stores, with over 170 Burson stores
now in operation. Trade’s own brand target
has also increased 5% to 35%, as own
brand sales reached 23% in FY18.
Specialist Wholesale turnover was
$364m for Australia and $31m for New
Zealand, with targets of $450m and
$50m respectively. Own brand sales were
44%, as a result of greater volumes and
expanded product ranges. The target for
own brand sales in SWG is at least 55%,
and to increase intercompany sales.
Autobarn’s store network expansion to
200 stores is progressing in line with
expectations. Retail own brand sales
increased to 20%, on course to a target
of 35%. The Service segment strategy
forecasts a store network of 500 locations
Australia-wide and 150 in New Zealand,
aimed to maximise intercompany sourcing
opportunities.
Optimisation
The benefits from the Hellaby acquisition
optimisation program were announced
to investors in our mid-year update, with
total benefit in the range of $8m and
$11m. EBIT is expected to be delivered by
FY20, not including reductions in head
office costs. The optimisation benefits are
in addition to the returns indicated at the
time of the acquisition, which would result
in an indicative annual EPS growth in the
low 20’s by FY20. As has been previously
stated, the return on investment including
optimisation benefits will exceed the
original business case for the Hellaby
Holdings acquisition.
12
Bapcor Annual Report 2018 Warehouse Evolution Project
Bapcor’s goal is to be the most efficient
supply chain in the automotive
aftermarket and our warehousing
and logistics functions are evolving
to meet the requirements of Bapcor’s
businesses. The warehousing evolution
program remains a five to seven year
implementation. Two major projects have
commenced, being the implementation of
a Warehouse Management System (WMS)
and a freight optimisation program.
Board and Governance
Very sadly, in July 2018, the inaugural
Chairman of Bapcor, Robert McEniry
passed away having lost his battle
with cancer. Robert joined the Board
in the role of Chairman in April 2014.
Robert’s contribution to Bapcor was
enormous, guiding Bapcor to become the
company it is today. Robert was a mentor,
a guiding light and a mediator. Above all,
he was universally respected and trusted
in Bapcor, in the automotive industry,
in business and in his personal life. As a
Group we will miss Robert and continue
to celebrate his significant contribution
to Bapcor, the automotive industry and
the world.
As of April 2018, Andrew Harrison was
appointed Chairman of Bapcor. Andrew
has been a Non-Executive Director of
Bapcor since its listing on the ASX in
April 2014. I thank Andrew for taking on
this role and look forward to working with
him to continue the progress of this great
company. Bapcor will continue to ensure
the Board and the executive team have
an appropriate balance of skills, expertise
and experience to support the sustained
success of Bapcor.
Outlook
Financial year 2019 trading has
commenced in line with expectations.
Bapcor’s first store in Asia opened in
Bangkok, Thailand, with a further four
stores planned during this calendar year.
The New Zealand tyre and wheel specialist
business TRS was sold in July 2018 for
NZ$20m.
Revenue and profit growth is expected
to continue in FY19 with NPAT results
projected to be between 9% and 14%
above FY18 Continuing Operations NPAT.
Bapcor’s strategy will continue to focus on
optimisation of the Group and the vertical
integration of the business segments.
Bapcor’s outstanding performance and
sustained growth trajectory would not be
possible without the focus and dedication
of Bapcor’s employees and franchisees, as
well as the support of our customers and
suppliers which has again enabled us to
deliver an exceptional result.
I express my profound thanks for their
continued contribution to our great
business.
Yours sincerely,
Darryl Abotomey
Managing Director and
Chief Executive Officer
13
Bapcor Annual Report 2018 BAPCOR 5 YEAR STRATEGIC TARGETS
Trade
50% Segment contribution
Trade focussed “parts
professionals” supplying
workshops in Australia &
New Zealand
Specialist wholesale
30% Segment contribution
#1 or #2 Industry category
specialists in parts programs
Retail
20% Segment contribution
Premium Retailer of
Automotive Accessories
Supplying the independents:
parts, accessories & 4WD
Reliable & Trusted car servicing
at affordable prices
Supporting the independents
Bringing automotive
aftermarket parts to Asia
Service
Asia
the
SHOCK
SHOP
auto safety experts
14 Bapcor Annual Report 2018
230
AUS Target
Stores
65
NZ Target
Stores
25
NZ Relocation &
Refurb Target
35%
Own brand
Target
Now 170
Now 57
Now 5
Now 23%
A$450m
AUS Target
Turnover
A$50m
NZ Target
Turnover
Now A$364m
Now A$31m*
55%
Own brand
Target
Now 44%
*excludes TRS – since divested
200
AUS Autobarn
Target Stores
200
Independents
Target Stores
120
AUS OL
Target Stores
35%
Own brand
Target
Now 128
Now 210
Now 82
Now 20%
150
NZ Target
Stores
Now 23
500
AUS Target
Stores
Now 128
TBD
Target Locations
Now 1
90%
Intercompany
Sourcing
Target
15
Bapcor Annual Report 2018 SEGMENT OVERVIEW
Trade
Bapcor New Zealand
Highlights
Highlights
Including the recently acquired Tricor Engineering
business, the Burson Auto Parts and Precision
Automotive Equipment businesses recorded
revenue and EBITDA growth of 7.8% and 13.9%
respectively as compared to FY17.
For statutory purposes Bapcor NZ's trade and
specialist wholesale businesses are required to be
reported as their own segment. The Bapcor NZ
segment recorded a revenue and EBITDA increase
of 104.1% and 144.3% respectively against 6
months in FY17.
REVENUE
EBITDA
REVENUE
EBITDA
$501.6m $72.1m
$177.9m $22.7m
Operational results
Operational results
The increase in revenue of 7.8% included same store sales
growth of 4.4% (compared to 4.6% in FY17). Trade’s EBITDA
percentage was 0.8 percentage points above FY17 reflecting
the impact of margin management initiatives. In January 2018
a market wide selling price increase was implemented by Burson
Auto Parts that assisted the H2 FY18 EBITDA margin to grow
0.9 percentage points compared to H1 FY18.
Bapcor NZ’s results in FY18 include a full year of trading versus
six months in FY17. Bapcor NZ has performed very strongly and
contributed $22.7m EBITDA to the FY18 group results. Revenue
and EBITDA increased by 104.1% and 144.3% respectively. In
FY18 the Australian dollar versus the New Zealand dollar has
strengthened by approximately 3% versus the previous financial
year which negatively impacted EBITDA by $0.7m.
Strategy
Strategy
Trade consists of the businesses Burson Auto Parts, Precision
Automotive Equipment and the recently acquired Tricor
Engineering. The businesses are trade-focused “parts
professionals” supplying service workshops. Bapcor’s target
is to grow Burson Auto Parts’ store numbers via acquisitions
and greenfields from 170 stores at the end of June 2018 to 230
stores by 2023 with 35% home brand product content.
Bapcor New Zealand’s operations consist of its automotive
aftermarket trade businesses of BNT and Truck and Trailer
Parts, as well as its specialist wholesale automotive electrical
businesses of HCB (Batteries) and JAS Oceania. The strategy
is to grow the BNT business from its current 57 stores to 65 by
2021, as well as grow its electrical businesses organically and
potentially through acquisition. Bapcor NZ also has a target to
grow own brand content to 35%.
16 Bapcor Annual Report 2018
Specialist Wholesale
Retail & Service
Highlights
Highlights
Comprising a full 12 month contribution from the
recently acquired Australian based Hellaby business
units, the Specialist Wholesale segment achieved
revenue and EBITDA growth of 33.8% and 37.7%
respectively compared to FY17.
Revenue for the Retail & Service segment in
FY18 increased by 8.2% compared to FY17.
This results reflects the impact of a higher ratio
of company owned Autobarn stores versus
franchise operations.
REVENUE
EBITDA
REVENUE
EBITDA
$364.3m $38.6m
$239.1m $28.8m
Operational results
Operational results
Improved performance in the existing businesses and a
full year of trading from JAS Oceania, Premier Auto Trade,
Federal Batteries and Diesel Distributors delivered a strong
revenue result of $364m and EBITDA of $38.6m. Continued
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 FY19 with growing the level of intercompany sales
being a key business strategy.
Autobarn same store sales growth for company owned
stores was approximately 4.7% and for franchise stores was
approximately 1.4%. 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 decreased by 0.5 percentage
points from 12.5% in FY17 to 12.0% in FY18. EBITDA as a
percentage of sales increased by 0.9 percentage points in H2
FY18 compared to H1 FY18.
Strategy
Strategy
The Specialist Wholesale strategy objective is to be the
number one or number two industry category specialists
in the parts programs in which it operates. 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. The target is for the segment to attain at least $450m
in revenue by 2023.
The target is to grow to 200 Autobarn stores by 2023, with a
majority of growth being company owned stores. Own brand
content is also targeted to be 35%. The strategy is to supply
the independent parts stores via Bapcor’s extensive supply
chain capabilities and brand support while looking to vertically
integrate supply of product through its Trade and Specialist
Wholesale segments.
17
Bapcor Annual Report 2018 SEGMENT REVIEW
Bapcor’s Australian Trade segment
is made up of Burson Auto Parts and
Precision Automotive Equipment.
SNAPSHOT
REVENUE
$501.6m 7.8%
EBITDA
$72.1m
13.9%
LOCATIONS
170
10
The Auto Parts Professionals
Bapcor’s Australian Trade segment
is made up of Burson Auto Parts and
Precision Automotive Equipment.
Burson Auto Parts continued its
aggressive growth reinforcing its
market leading status. The Precision
Automotive Equipment business matured
operationally to deliver excellent results.
The 2018 Financial year was another
strong performing year for Bapcor’s
Australian trade segment, returning
$501.6m in revenue and EBITDA of $72.1m.
The increase in revenue of 7.8% included
same store sales growth of 4.4%. Trade’s
EBITDA percentage was 0.8 percentage
points above FY17 reflecting the impact
of margin management initiatives.
In January 2018 a market wide selling
price increase was implemented by Burson
Auto Parts that assisted the H2 FY18
EBITDA margin to grow 0.9 percentage
points compared to H1 FY18.
During FY18, Burson Auto Parts continued
to expand its store network with the
number of stores increasing from 160
at 30 June 2017 to 170 at 30 June 2018.
The increase consisted of 7 greenfield
store developments and 3 acquisitions.
18
TradeBapcor Annual Report 2018 e
d
a
r
T
Timothy Vriend, Burson Auto Parts
Cranbourne (VIC) Store Manager suitably
proud after winning 2018 Store of the Year
for his region.
19
Bapcor Annual Report 2018 SEGMENT REVIEW
Burson Auto Parts and
Precision Automotive
Equipment
Burson Auto Parts has grown significantly
during FY18, with 10 new stores added to
the fully company owned and operated
network, taking the Burson Auto Parts
store total to 170 across each state and
territory of Australia. Same store sales
growth across the year reached 4.4%, a
pleasing result in a competitive market.
A key milestone for the Trade segment
was achieving a total revenue result
breaking the $500M threshold for the
first time. Projects currently underway to
sustain this achievement include putting
significant effort into re-structuring
Burson's pricing to ensure market
competitiveness as well as maintaining
trading margins.
The Precision Automotive Equipment
business has grown significantly in the
last financial year through acquisition
and organic growth. A strong focus on
teamwork and new business underpinned
this excellent result.
Investing in Our People
Significant steps have been taken
throughout the Trade segment to evolve
its business structure for future growth by
investing in zone, regional and equipment
resources.
Burson continued to invest heavily in its
learning and development program with
more training days applied to its staff than
ever before. This investment continues
to pay significant dividends, helping our
people to grow and preparing people to
fill the pipeline as the network expands
rapidly.
Burson and Precision Store Managers
annual conference integrated with one
of the biggest automotive aftermarket
events in the Asia Pacific region; Bapcor's
Convention and Trade Expo. Held in
Singapore in April 2018 the conference
was both an educational and team building
experience within the Trade segment and
collaboratively across the greater Bapcor
network.
Burson Auto Parts and
Precision Automotive
Equipment
The Trade segment currently consists
of the Burson Auto Parts and Precision
Automotive Equipment business units
including the recent acquisition of Tricor
Engineering which specialising in the
supply and installation of lubrication
equipment in the Car Dealership and
Heavy Vehicle Workshop market.
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
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Bapcor Annual Report 2018 No team was more focused or
worked harder to achieve the result.
Mario Baric, Burson Regional Manager, VIC
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Cranbourne Team Members: Jeff Wadell, (Store 2IC), Timothy Vriend (Store Manager), Sharon George (Sales Person).
Customer Service – The Key to
Success
High levels of engagement, speed and
expert advice is at the core of the Burson
Auto Parts passion for customer service.
Opening as a Greenfield store in 2016 the
Burson team located in Cranbourne were
very proud and excited to win the 2018
“Store of the Year” for their region.
The team understood the criteria for
success of the store and ticked all the
necessary boxes to be deserved winners
of the prestigious award.
Based in Bangkok,
Burson Auto Parts
Thailand continues
the same great
service provided by
Burson in Australia.
Burson Auto Parts’ first store in the central Bangkok suburb of Bangbon.
Burson Autoparts launches in Thailand
Burson Auto Parts Thailand is Bapcor Limited’s first exciting step into the Asia
automotive parts market. Supplying do-it-yourself (DIY) consumers and garage
and fleet customers with a wide range of premium-quality OE and aftermarket
automotive parts, car accessories, car care products, tools, safety gear and
workshop equipment, Burson Auto Parts Thailand provides a unique product
and service offering to the Thai automotive aftermarket.
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Bapcor Annual Report 2018
SEGMENT REVIEW
Bapcor NZ has enjoyed a sound
integration into the wider Bapcor group
since their acquisition in 2017.
SNAPSHOT
REVENUE
$177.9m 104.1%
EBITDA
$22.7m 144.3%
LOCATIONS
57
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Specialist in automotive
aftermarket trade & wholesale
supply
Bapcor NZ is the leading aftermarket
parts and specialist wholesale supply
group to the automotive trade across
New Zealand.
Acquired as part of the Hellaby Holdings
purchase in 2017, this year has seen
New Zealand align operations, and
support functions, to mirror the Australian
business structure. Separate trade and
specialist wholesale business groups
have been formed, with the key support
functions of HR, Finance, Marketing and
Supply Chain serving all operations.
Bapcor NZ’s results in FY18 include a
full year of trading versus six months
in FY17. Bapcor NZ has performed very
strongly and contributed $22.7m EBITDA
to the FY18 group results. Revenue and
EBITDA increased by 104.1% and 144.3%
respectively. In FY18 the Australian
dollar versus the New Zealand dollar
has strengthened by approximately 3%
versus the previous financial year which
negatively impacted EBITDA by $0.7m.
As Bapcor NZ's largest business, Brake
and Transmission NZ (BNT) achieved same
store sales growth of 6.1% reflecting the
success of organisational changes, range
expansion, people engagement initiatives
and underlying market growth.
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Bapcor New ZealandBapcor Annual Report 2018
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Bapcor Annual Report 2018
SEGMENT REVIEW
Specialist Wholesale: Positive
sales growth
The Specialist Wholesale group comprises
the automotive electrical businesses of
HCB (Batteries), JAS Oceania, NZ Brake
Co and Diesel Distributors, coupled with
steering and suspension specialists
Autolign. Operating across 19 sites
from Auckland to Dunedin the group
recorded positive sales growth on FY17;
largely driven by enhanced operational
performance.
The introduction of the Varta premium
battery range has provided sales
momentum into new markets and
customers. Continued prospects for
growth are positive as vehicle stop start
technology continues to increase.
Sales to the auto electrical sector grew
7% reflecting an improved inventory
profile and expanded sales focus. One key
initiative was the expansion within BNT of
the wider rotating electrical range, leading
to strong momentum heading into 2019.
The specialist steering and suspension
importer and distributor, Autolign enjoyed
strong performance across its regional
branches. Expansion of the Auckland
property footprint, and the ongoing
introduction of new products to the
network will provide a sound platform for
further growth.
Sales growth to OEM trailer manufacturers
continued at a high rate as the key
product brands continued to gain wide
acceptance across the market.
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Bapcor Annual Report 2018 Trade: Performed Strongly throughout FY18
The Trade group consists of market
leading automotive aftermarket
businesses BNT and Truck & Trailer Parts
(TATP), operating 57 stores across the
country.
BNT and TATP performed strongly
throughout FY18. The businesses
continued their cooperation and
sales integration activities that were
commenced in the prior year. Specialist
TATP sales personnel are embedded
within BNT branches in addition to the two
standalone TATP branches in Auckland
and Christchurch respectively.
Major franchise chain sales growth of
7.4%, contributed to excellent overall year
on year sales growth of 6.6%. In TATP
revenue growth of 135% was delivered by
the TATP direct branches, consolidating
on the prior years’ growth of 220%.
The commercial category grew 27% year
on year with the leveraging of the BNT
network supporting the direct branch and
OEM volumes.
Significant improvements were made in
terms of pricing governance, inventory
ranging and cataloguing which all provide
solid platforms for further gains in FY19.
The opening of the first new BNT store
location in over 5 years, located in Gore,
is the precursor for further strategic
network expansion activities in the first
half of FY19
New Zealand has enjoyed a sound
integration into the wider Bapcor
group. The Bapcor NZ businesses are
positioned well for further revenue and
earnings growth in FY19, based upon the
continuation of existing growth centric
programs, strong people focused activities
whilst leveraging off the wider Bapcor
support network.
Bapcor NZ Trade & Specialist Wholesale representatives at the Singapore Conference in April 2018.
Improving the engagement of customers and
team members
The Bapcor NZ businesses have a series of product range, business efficiency and
people initiatives that are targeted at improving the engagement of customers
and team members alike. Of special note is the development and launch of
multiple Own Brand product programs; ones that will support the market leading
stable of non-proprietary brands the businesses enjoy today.
Internal resources will continue to be directed to the design, development and
implementation of technology based tools that provide internal clarity around
sales and margin performance, coupled with significantly improved insights
around customer spend patterns.
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also has a target to
grow home brand
content to 35%.
FY18 Key Initiative Highlights
Salesforce effectiveness – dynamic sales
and margin reporting tools have been
deployed to all Branch Managers and
Sales Representatives.
Trade Day – an annual, targeted trade
sales event, that was expanded to include
the TATP and Autolign businesses, resulting
in a 19% year on year improvement.
Network Property project –
commencement of the network expansion,
relocation and refresh program focused
on strategic new operations and expanded
or upgraded facilities across all business
groups.
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Bapcor Annual Report 2018
SEGMENT REVIEW
Bapcor’s Australian Specialist Wholesale
segment consists of a number of
companies that specialise in the
automotive aftermarket wholesale sector.
SNAPSHOT
REVENUE
$364.3m 33.8%
EBITDA
$38.6m 37.7%
LOCATIONS
104
Australia’s largest automotive
wholesale distribution
channels
Bapcor’s Australian Specialist Wholesale
segment consists of multiple companies
that specialise in the automotive
aftermarket wholesale sector, supplying
national distributors, re-sellers and
specialists directly.
The companies included in this segment
are AAD, JAS, Premier Auto Trade (PAT),
Bearing Wholesalers, Baxters, MTQ Engine
Systems, Roadsafe, Federal Batteries and
Diesel Distributors,
Strengthening this segment’s automotive
aftermarket industry reach was the
leading supplier of constant velocity
driveline products in Australia, joining the
group in May 2018, AADi Australia Pty Ltd.
Bapcor’s Australian Specialist Wholesale
segment revenue grew from $272m to
$364m during the last financial year, with
a 37.7 % increase in EBITDA. This result
was driven from a full year of trading from
the Hellaby automotive Australian based
businesses and significant investment
in category expansion, strengthening
customer relationships and the marketing
of its Own brands.
The reach of Bapcor’s Specialist Wholesale
segment now includes a total of 104
locations across Australia.
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Joe Lopizzo – Warehouse Manager – AAD
Derrimut
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Bapcor Annual Report 2018
SEGMENT REVIEW
Inter-Company Sourcing
Program
The inter-company sourcing program is
a major pillar of the Bapcor Specialist
Wholesale business strategy, enabling
the company to market premium quality
automotive aftermarket product ranges
distributed through the company’s own
businesses.
Highlights of this program over the past
12 months include:
• Opposite Lock (4WD) Own brand
lighting range launched
• Bearing Wholesalers Timing Belt Kit
Own brand launch into BNT
• Roadvision lighting range launched
into Retail Division
Launch of products into Burson Trade
• Bearing Wholesalers Hub replacement
range
• Bearing Wholesalers Own brand Timing
Belt Kit
• Motorgear Radiator range
• Roadsafe 4x4 Range
• PAT Fuel Pump and Hose range
• PAT Switches
Van Le - Process Worker - AAD Derrimut
Industry leaders in their specialist product categories
The Bapcor Specialist Wholesale segment
continues to be one of Australia’s largest
automotive wholesale distribution
channels for under-car / driveline
parts, aftermarket diesel fuel injection
components, electrical components and
turbo charger products.
The inter-company sourcing program has
contributed significantly to the segments
strong sales growth during the last
financial year. The establishment of inter-
company sourced product ranges has
increased to 14.6% in the 2018 financial
year.
The businesses included within this
segment are either the market leader
or second to the market leader within
their specialised area of the automotive
aftermarket.
In January 2018, all of the Bapcor
Specialist Wholesale businesses in
Australia were organised into a single
reporting structure with restructured
managerial leadership, reporting to
one person.
The success of the inter-company sourcing
program was the result of detailed cross
company workshops that identified the
key strategic opportunities to leverage
the company’s specialist wholesale IP and
category management expertise.
This strategy will continue to identify
further product category growth and
expansion opportunities to both retail
and trade market channels along with
other specialised wholesale businesses
in the future.
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Product Range Growth
Bapcor Specialist Wholesale product
range growth in the new financial year
will cover several automotive aftermarket
product sectors, led by the automotive air
conditioning and climate control sector,
with other priority categories to follow.
Continued progress to increase the
volume and product groups that the
Specialist Wholesale segment sells
into other Bapcor group businesses
will continue in FY19 with growing the
level of intercompany sales being a key
business strategy.
Our people are
some of the most
experienced in the
aftermarket, enabling
AAD to regularly lead
the way in product
development and
customer service.
www.aad.com.au
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Cliff Nunn - Store Person - AAD Derrimut
Gary Scriva, an Automotive Re-Conditioner specialising in brake boosters - AAD Derrimut.
AAD is Australia’s largest brake
remanufacturing centre.
With a combined history of over 30 years, AAD – Australian Automotive Distribution
is the coming together of ATAP-Australia Truck & Auto Parts, IBS Auto Solutions,
Partco, Garrmax & MCB- Melbourne Clutch & Brake. The group specialises in
the import, manufacture, remanufacture and wholesale of quality brake, clutch,
suspension, cooling, engine and service products for both passenger and
commercial vehicles.
Bapcor Annual Report 2018
The Retail & Service segment offers
auto parts and accessories via a
network of company-owned, franchise
and satellite stores.
SNAPSHOT
REVENUE
$239.1m
8.2%
EBITDA
$28.8m
4.4%
LOCATIONS
460
5
Premium retailer of
automotive accessories
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 highly
respected workshop service brands Midas
and ABS.
Revenue for the Retail & Service segment
in FY18 increased by 8.2% compared to
FY17 which includes the impact of a higher
ratio of company owned stores versus
franchise operations. Same store sales
growth for Autobarn franchise stores
was approximately 1.4% and for company
owned stores approximately 4.7%.
EBITDA as a percentage of sales
decreased by 0.5 percentage points
from 12.5% in FY17 to 12.0% in FY18,
predominately as a result of the higher
mix of company owned stores generating
a higher level of sales relative to profit.
In addition to the 4WD specialist Opposite
Locks retail footprint of 82 nationwide
stores, at 30 June 2018 the total number
of company owned and franchised stores
in the Retail segment was 378 consisting
of Autobarn 128 stores, Autopro 84 stores,
Sprint Auto Parts 38 stores and Midas and
ABS 128 stores.
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Retail & ServiceBapcor Annual Report 2018SEGMENT REVIEW
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Jessica Feehan: Store Manager, Autobarn
Cranbourne, 2018 Franchisee of the Year
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Bapcor Annual Report 2018
SEGMENT REVIEW
Australia’s Premium
Automotive Aftermarket
Retailer
As Australia’s premium automotive
aftermarket retailer, Autobarn store teams
continued to deliver on the high standards
of service, product choice and value that
the contemporary shopper has come to
expect. Driven by an ethos of continuous
improvement in our brand standards,
ongoing offer regeneration and dedication
to customer care, the Autobarn network
performance lifted again. Bapcor has
continued to grow the number of company
owned Autobarn stores via both Greenfield
and conversion of selected franchise
stores to company ownership. The total
number of Autobarn stores at 30 June
2018 was 128 stores, a net increase of 6
stores since 30 June 2017. The number
of company owned stores increased from
31 to 48, with the 17 new stores consisting
of 8 Greenfield stores and the conversion
of 9 franchise operations.
The percentage of company owned
Autobarn stores is now 38%, up from
25% at 30 June 2017.
Bapcor continues to provide extensive
support to Autopro, Australia’s oldest
and largest independent automotive
aftermarket parts and accessories retailer
and the continuously expanding Sprint
Auto Parts.
Autopro has been an important part of
the automotive aftermarket for over
35 years, and provide a quality automotive
offer for both retail and trade customers.
The 84 Autopro franchisees have
extensive local knowledge and expertise
and continue to be an important part of
communities across Australia. Sprint Auto
Parts has been a strong brand in South
Australia for over 25 years consisting of
franchised and satellite stores across the
State. Sprint Auto Parts has embarked
on a store refurbishment program as it
reinforces its position as an iconic South
Australian business.
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Service: Experts at scheduled
car servicing at affordable
prices
In the Service division, the trusted
household name with over 40 years’
experience in the Australian market,
Midas continued its evolution to a fully
franchised store network, with new
franchisees located at Blacktown and
Rockdale in Sydney, Sunbury in Melbourne
and Magill in Adelaide.
ABS also continued to capitalise upon its
position as a brake specialty and general
servicing business.
Since 1981, ABS has stayed true to its
mission to provide customers with
the best automotive services possible,
including the best customer service
and the most professional care for your
vehicle, which means customers can have
peace of mind that your family is travelling
safely all year round
From humble beginnings in Fitzroy, FY18
saw increased brand awareness deliver
strong store sales results in the brand’s
key markets of Melbourne and Adelaide.
Bapcor considers Service a potential
growth area due to the industry
consolidation opportunities and the
potential to vertically integrate supply of
product through its Trade and Specialist
Wholesale segments.
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At Autobarn, we know cars…
and We know how to get you
there
This year the Autobarn experience was
delivered to many more Australians with
store numbers increasing to 128. This
included a fourth store in Tasmania and
the return of the Autobarn brand to the
Northern Territory. We celebrated our
Franchisee store of the year winners at
Autobarn Cranbourne. Autobarn also
launched an exciting new partnership with
Velocity Frequent Flyer. We recognised the
appeal of the Velocity program to millions
of Australians and have seen a rapid
uptake of the program.
An integrated supply
chain distributes to
an Australia-wide
network of 128
Autobarn, 84 Autopro,
38 Sprint and 82
Opposite Lock stores.
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Franchisee of the Year – The Feehan Family
Autobarn Cranbourne
John and Frances Feehan joined the Autobarn franchise group in 2005, with
daughter Jessica coming on board as Store Manager in 2007. Originally intended
to be a ‘gap’ year, Jessica quickly became an integral part of the Autobarn
team and has continued to successfully manage the store. In 2015, Autobarn
Cranbourne was devastated by a break-in and arson attempt that necessitated
a complete rebuild. Since that time, John, Frances and Jessica have taken the
store from strength to strength, demonstrating some of the highest operational
standards in the network.
The Feehan Family & Autobarn Franchisee of the Year 2018 winners. Jessica Feehan (Store Manager),
John and Frances Feehan (Franchisees).
Bapcor Annual Report 2018
SUSTAINABILITY OVERVIEW
DEVELOPING BAPCOR’S ENVIRONMENTAL,
SOCIAL AND GOVERNANCE (ESG) STRATEGY
Our Vision
Bapcor Limited recognises a sustainable
and successful business is enhanced by
the engagement of stakeholders, delivery
of shareholder wealth and optimising
business operations in a socially and
environmentally responsible manner.
Bapcor seeks to take an integrated
approach towards economic,
environmental and social sustainability,
aligning company values and strategic
direction with positive outcomes for
Bapcor’s stakeholders, and the wider
communities in which we operate.
Our Approach
Our approach to sustainability
is defined by our Environmental,
Social and Governance (ESG)
strategic framework.
Our strategic framework sets out our
integrated approach to ESG sustainability
as fundamental to what we do,
underpinning our corporate code of
conduct and our values.
Progress on our
sustainability journey
will be tracked
against the actions
and timeframes
set out for each
priority area.
OUR SUSTAINABILITY FRAMEWORK
OUR VALUES
OUR CODE OF CONDUCT
BAPCOR’S ESG STRATEGY
Ethical Supply
Chain/Procurement
• Ethical sourcing
• Forging strong
supplier relationships
• Enhanced
transparency
Environmental
Sustainability
• Efficient use of
resources
• Optimising our fleet
• Reducing waste
Practice Good
Governance
• Upholding our values
& code of conduct
• Training and
developing our team
members
• Encouraging
a diverse and
welcoming workplace
Positively Impact
Our Community
• Engaging
stakeholders
• Promoting health and
safety
• Supporting our
community
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Bapcor Annual Report 2018
OUR COMMITMENT TO SUSTAINABILITY
Priority 1: Developing Bapcor’s ESG Strategy
Objectives / Commitments:
I. Have regard to our responsibility to serve the communities in which our businesses operate.
II.
Invest in areas viewed as an important driver of long-term performance and value creation.
III. The Board to annually set and review objectives in relation to ESG; and assess annually Bapcor’s progress in achieving the objectives.
Actions:
1. Establish ESG Policy
2. Establish Governance process at Board level
3. Integrate salient sustainability risks in current Risk Management Framework
4. Implement an Environmental Management System (continuous improvement)
Priority 2: Ethical Supply Chain / Procurement
Commitments:
I. Continually focus on our commitment towards ethical sourcing practices.
II. Build strong relationships with key suppliers, to build on our positive contribution.
III. Enhance transparency within our supply chain, key partners and stakeholders.
Actions:
1. Establish Ethical Supply Chain / Procurement (ESC/P) Policy
2. Initiate Implementation of the ESC/P policy with Bapcor’s supplier base
Priority 3: Environmental Sustainability
Commitments:
Timeline
Complete
FY19
FY19
FY21
Timeline
FY19
From FY19
I. Continuously improve reduction of our footprint and more efficient use of resources; such as energy, water, raw materials, packaging and
consumables, where practical to do so.
II. Develop good recycling practices, minimise waste in offices, stores and warehouses with a goal of creating a greener workplace.
III. Develop a pathway towards emissions reductions in our business.
Actions
1. Establish Group-wide initiatives towards streamlining waste, recycling & packaging processes
2. Explore additional LED replacement opportunities across Group sites in Australia & New Zealand
3. Review areas for opportunities to improve fuel economy of Bapcor fleet
4. Develop a pathway towards emissions reductions in our business
Priority 4: Practice Good Governance - Our People
Commitments:
I. Commit to upholding our Code of Conduct.
II. Commit to training and professional development of our team members.
III. Promote and encourage health and safety activities; towards Zero Harm.
IV. Foster a diverse, engaged and inclusive workplace culture.
Action
1. Conduct training and/or professional development programs for team members
2. Establish Zero Harm group-wide reporting processes
3. Establish, measure & monitor gender & cultural diversity statistics in the workforce
4. Continue to monitor and engage with our team members (satisfaction & retention)
Priority 5: Positively Impact Our Community In Which We Operate - Our Community
Commitments:
I. Proactively identify and engage with our stakeholders.
II. Provide support for a wide variety of social, charitable and sporting initiatives.
III. Encourage employees to support their local community and foster a culture of workplace giving.
Action
1. Support a wide variety of social, charitable and sporting initiatives
2. Encourage team members to support their local community and foster a culture of workplace giving and support
Timeline
FY19
FY19
FY20
FY21
Timeline
Ongoing
Ongoing
Ongoing
Ongoing
Timeline
Ongoing
Ongoing
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Bapcor Annual Report 2018
ETHICAL SUPPLY CHAIN/
PROCUREMENT
Committed to ethical supply chain and
procurement practices
Operating our supply chain and procurement operations in an ethical
manner, is a core pillar of Bapcor’s value system.
We are committed to continually improving our sourcing practices to
ensure we at all times, conduct business ethically.
We are focused on building and maintaining appropriate relationships with
our supplier partners, that optimise Bapcor’s shareholder value whilst
simultaneously contributing positively to the communities in which we
operate.
During the 2019 financial year, Bapcor has established and initiated
implementation across our supplier base of a formal ethical supply chain /
procurement policy. This policy is published on the Bapcor website.
The Core tenants of Bapcor’s ethical supply chain /
procurement policy
✔ Compliance with laws: Ensuring all business is conducted legally
✔ Gifts, gratuities and entertainment: Clear boundaries are in
for all countries in which Bapcor and our suppliers operate.
place around employee behaviours when managing our supplier
relationships.
✔ Environmental sustainability: Management of hazardous
materials and waste in a legal manner as a starting point, but
exploring further on how to support greenhouse emission
reductions, to drive energy efficiency, increase recycling etc.
✔ Health and safety: Ensuring all Bapcor supply chain and
procurement operations are conducted in a manner that legally and
philosophically protects our employees, contractors and those of or
suppliers.
✔ Labour: Bapcor has already initiated measures ahead of the
impending Modern Slavery Act. Bapcor are fully engaged and
philosophically supportive of the Act’s objectives and we are
working closely with our supplier base to ensure that compliance
extends right along the supply chain.
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Bapcor Annual Report 2018SUSTAINABILITY OVERVIEW 37
Bapcor Annual Report 2018 ENVIRONMENTAL SUSTAINABILITY
A group-wide approach to sustainability
Bapcor is committed to optimising its business operations in an
environmentally responsible manner to make the most efficient
use of its resources, and reduce its environmental footprint.
In FY18, Bapcor initiated several group-wide projects aimed at
developing its waste & recycling, and packaging practices in order
to streamline processes and enhance outcomes.
Bapcor also continued the roll-out of LED replacements across its
store network, offices and distribution centres.
Waste and Recycling
Bapcor has appointed a single provider to manage waste and
recycling across the entire company. The impact of a sole
provider for the group will result in more accurate reporting, and
provide greater clarity around our impact on the environment,
including measuring key indicators such as diversion from
landfill and emission levels. This will enable us to monitor our
environmental impact group-wide, and provide the ability to set
and manage internal environmental impact targets.
From an operational point of view, the new regime will result in
greater levels of waste separation, higher levels of recycling and
fewer truck movements. Starting with our five main Distribution
Centres, we are replacing general waste bulk bins with smaller
and more mobile bins for general waste while concurrently
altering our internal processes to eliminate the potential of
waste stream cross contamination. Specific bins for non-coloured
plastics will be introduced to promote recycling and we are also
considering the use of compacting technology for general waste
to stretch our collection frequencies.
We are also introducing new baling technology to some sites,
allowing us to produce 100kg – 200kg cardboard bales which will
be accepted directly by recyclers, replacing the need for larger
cardboard bins that often have much of their capacity filled by
air pockets. Previously discarded timber pallets will be reused
to collect bales, and we are investigating additional ways we can
reuse, recycle or dispose of excess pallets.
At store level, we are conducting a full review of services
to determine the appropriateness of bin sizes, collection
frequencies and separation protocols where possible.
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Bapcor Annual Report 2018SUSTAINABILITY OVERVIEW Packaging
A full review is underway into the use of packaging throughout Bapcor’s distribution centres, warehouses and store network.
Although packaging at Bapcor is unlikely to be eliminated entirely, we believe that by understanding exactly what types of
packaging we use, and for what reasons, our overall impact on the environment will be reduced.
We believe that a sustainable approach towards packaging must be supported by a robust understanding of usage, proper
planning, and partnering with environmentally conscious suppliers.
It is our intent to reduce our use of packaging and consolidate purchases into fewer key suppliers to help reduce required truck
movements and allow for greater control over what packaging is being used as part of our distribution operations.
LED Efficiencies
During the financial year Bapcor continued its roll-out of
LED replacements and installations throughout its store,
office and Distribution Centre locations. The initiative
provides equivalent light levels while using less energy and
heat, and extending lamp life. All LED replacements meet
Australian Standards and certified by the Victorian Energy
Efficiency Council.
Reduction in
energy use
Reduction of
overall costs
60%
40%
61 Autobarn stores have already unlocked the energy efficient
potential of LED lighting with an average 60% reduction
in energy use, and 40% reduction of overall costs. In
operational terms, this has resulted in annual energy saving
of nearly 2,000,000 kW’s representing a cost saving of circa
$600,000.
The Nunawading Distribution Centre was converted
to LED lighting, enabling future energy savings of
800,000 kW p.a.
61STORES
CONVERTED
Our Preston Office and DC initiative continues to save Bapcor
437,000 kW p.a.
due to an 80% energy useage reduction following the
transition of
1,000 LED replacements.
39
Bapcor Annual Report 2018
PRACTICE GOOD GOVERNANCE
At Bapcor we take pride in developing our culture, team and
capability with a focus on zero harm, specialist knowledge
and excellence in customer service.
Training and Development
Enabling every team member to realise their full potential
continues to be a focus across Bapcor. A wide range of training
and development programs and activities continue across the
group which has seen an increased focus on on-line training in
Burson Trade. The ongoing focus on leadership development
has continued across the group with more than 160 leaders and
aspiring leaders participating in the Management Leadership
Development Program (MLDP), 'Burson Ready' in Australia and
the 'Change Up' program in New Zealand.
Burson’s Management & Leadership Development Program (MLDP) program
Zero Harm
Fostering a culture of Zero Harm is fundamental at Bapcor. We continue to focus
on enhancing this through implementing safety policies and procedures across the
group supported by strong leadership, training and development. During the year
a Safety Risk Profile was conducted to further understand our risks and to better
focus our safety initiatives and activities into the future. Health and wellness are
also essential elements of a commitment to Zero Harm and Bapcor encourages
this through a range of programs and activities including training and accrediting
Mental Health First Aiders, promoting and supporting RUOK? Day and actively
participating in the Virgin Pulse Global Walking Challenge for a third year.
40
Bapcor Annual Report 2018SUSTAINABILITY OVERVIEW Diversity and Inclusion
Creating diverse and inclusive workplace enhances
Bapcor’s ability to attract, retain and motivate team
members from the widest possible talent pool. Bapcor
continues to identify and action a range of initiatives
to support diversity and inclusion across the group
such as formalising policies regarding family and
carer’s responsibilities.
Non-Executive Directors:
Women: 67%*
*(at reporting date)
67%
Women in the workplace:
Women in full-time work:
Women in part-time work:
25%
64%
36%
Culture and
Engagement
Engaged teams are critical to Bapcor’s
previous, current and future success.
As a part of constantly improving our
culture, in late 2017 we partnered with
InSync to undertake the group-wide
“Have Your Say” engagement survey.
Pleasingly, over 71% of our team took
the time to share their views about how
we can make Bapcor an even better
place to work and, at 67%, Bapcor’s
team member engagement is in the
top half of the benchmark. There are a
range of activities underway at group,
segment and site level to further
improve our team member engagement.
DISTING U
R
O
F
ISHED ACH
I
E
V
E
M
ENT
•
I
N
BRONZE
AWARD
2017
N
RE P O R T
I
•
G
East Coles Corporate
Perfomance Awards
BEST BOARD
BEST CEO
BEST CFO
BEST COMPANY
BEST GROWTH PROSPECTS
BEST INVESTMENT DESIRABILITY
BEST INVESTMENT RELATIONS
41
Bapcor Annual Report 2018
POSITIVELY IMPACT OUR COMMUNITY
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.
In FY18, Bapcor businesses gave their time and raised awareness and funds for a wide variety of good causes.
Aussie Muscle Car Run
The Leukaemia Foundation has held the
Aussie Muscle Car Run since 2011 raising
over $2 million dollars to help families
facing blood cancer diagnosis. The run
is open to all cars replicating those that
competed in Bathurst during the 1960’s
& 1970’s.
Rob Wann, from Midas Darlington,
competed in the Aussie Muscle Car Run in
his 1971 VG Valiant “Car 34 - Team Pacer”
The run started at Sydney and covered
over 1900 kilometres to Adelaide. Rob’s
team finished in 16th and raised over
$5,750, (well over their $4,000 target).
Rob will again be raising funds in the 2018
Aussie Muscle Car Run held in late October.
R U OK Day
Mental health and team member wellness are vital elements in
establishing a positive and supportive workplace culture where
team members feel valued. Bapcor encourages supporting
RUOK? Day to promote mental health awareness and suicide
prevention. RUOK?’s mission is suicide prevention and for a
world with more human connection. RUOK? Day encourages
people to ask those around them if they're OK, and provide time
to truly listen to the response. The day provides a greater focus
on a simple act and can help people in difficult circumstances
to feel more connected with those around them and their
community.
42
Images: Midas Darlington, Midas Darlington 2, Team Pacer 1 &
Team Pacer 2.
Bapcor Annual Report 2018SUSTAINABILITY OVERVIEW ABS Colac West Cricket, Football and Netball Clubs
Sport is incredibly important for bringing people together and getting children active in sports. With strong ties to the
community, ABS Colac continues its great service to the local area by sponsoring the Colac West Cricket Club and the
annual Colac & District Football & Netball league Reserves Cup which covers the greater Colac, Lorne, Apollo Bay and
Simpson districts.
ABS Colac had the privilege of presenting the Reserves Cup to
the grand final Winners.
Chelsea Herbert - First woman to win the BNT
V8's Championship
BNT celebrated its 10th year sponsoring the BNT V8 super car
racing last season, including individual sponsorship of 19 year old
Chelsea Herbert. Competing alongside male competitors, young
up and coming driver Chelsea Herbert became the first woman
to win the BNT V8's Touring Car Championships in New Zealand.
The Big Raffle
MTQ Engine Systems multiple fundraising efforts, including
‘The Big Raffle’ throughout FY2018 has resulted in more than
$10,000 being donated to the Prostate Cancer Foundation
of Australia. The foundation raises awareness and provides
support, information and advocacy to men and their families
affected by prostate cancer.
Chelsea Herbert: The first woman to step on top of the V8's podium.
Burson Auto Parts continues to support the grass roots level
of Australian motorsport by sponsoring the CAMS Future Star
Awards for the third year in a row while also co-presenting the
Australian Formula 4 Championship. The CAMS Future Star
Awards identify outstanding young motor racing talent through
state, national and club level racing category awards.
17 Year old Riley MacQueen: Awarded the 2017 NSW/ACT Burson Future
Star Award
Community Involvement
Some of the charities and foundations which have benefited
from Bapcor’s support over the last 12 months include:
Cancer Council Australia
Step-tember
Movember Foundation
Starlight Foundation
Smith Family Toy and Book
Appeal
Virgin Pulse Walking
Challenge
Movember Breakfast
Dry July Foundation
Pink Ribbon Day
Save-A-Dog Victoria
R U OK Day
Royal Children’s Hospital
Good Friday Appeal
Beyond Blue
Camp Quality Escarpade
Soldier On
Women’s Auxiliary Air Force
Leukemia Foundation
Prostate Cancer Foundation
of Australia
43
Bapcor Annual Report 2018 BOARD OF DIRECTORS
Andrew Harrison
Independent,
Non Executive Chairman
Margaret Haseltine
Independent,
Non Executive Director
Therese Ryan
Independent,
Non Executive Director
Darryl Abotomey
Managing Director and
Chief Executive Officer
44
Bapcor Annual Report 2018 Andrew Harrison
Independent, Non Executive Chairman
Therese Ryan
Independent, Non Executive Director
Andrew was appointed Chairman of the
Bapcor Board in April 2018 after being
an Independent, Non-Executive Director
of the Board since March 2014. 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.
Margaret Haseltine
Independent, Non Executive Director
Margaret was appointed to the Board in
May 2016 as an Independent, Non-Executive
Director. Margaret brings more than 30
years’ business experience in a broad range
of senior positions and 10 years experience
in board directorship. A professional
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.
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 Abotomey
Managing Director and Chief
Executive Officer
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.
Vale – Robert
James Hunter
McEniry
(1947 – 2018)
On Wednesday 4th July we learned
the sad news that the inaugural
Chairman of Bapcor, Robert
McEniry had passed away having
lost his battle with cancer.
In 2013 when Bapcor (then Burson
Group) was looking at doing an
IPO and listing on the ASX, we
searched for an appropriate person
to head the Board as its Chairman.
Robert joined the Board in the
role of Chairman, having had an
extensive background in the car
industry and being an avid car
enthusiast. Robert’s contribution
has been enormous in guiding
Bapcor to become the significant
business it is today. Robert was a
mentor, a guiding light, a mediator.
Above all he was universally
respected and trusted in Bapcor,
in the automotive industry, in
business and in his personal life.
As a business we will miss Robert,
but celebrate his significant
contribution to Bapcor, to the
automotive industry and to
the world.
R.I.P Our dear friend,
Robert James Hunter McEniry
45
Bapcor Annual Report 2018 EXECUTIVE TEAM
Darryl Abotomey
Managing Director &
Chief Executive Officer
Greg Fox
Chief Financial Officer and
Company Secretary
Mathew Cooper
Executive General Manager –
Development
Grant Jarret
Executive General Manager – Logistics
Alison Laing
Executive General Manager –
Human Resources
Martin Storey
Executive General Manager –
Bapcor New Zealand
Craig Magill
Executive General Manager – Trade
Peter Tilley
Executive General Manager – Retail
Paul Dumbrell
Chief Operating Officer –
Specialist Wholesale
46
Bapcor Annual Report 2018 Darryl Abotomey
Managing Director & Chief
Executive Officer
Greg Fox
Chief Financial Officer and
Company Secretary
Mathew Cooper
Executive General Manager –
Development
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.
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.
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.
Grant Jarret
Executive General Manager – Logistics
Grant brings nearly 40 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 functions
as well as inventory replenishment and
events within the Retail business unit.
Alison Laing
Executive General Manager –
Human Resources
Martin Storey
Executive General Manager –
Bapcor New Zealand
Alison joined Bapcor as the Executive
General Manager – Human Resources in 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.
Martin joined BNT Group in September
2016, being recently appointed as
Executive General Manager - Bapcor
New Zealand to lead our New Zealand
businesses. Martin grew up in the Bay of
Plenty, and worked in a number of local and
national businesses, as well as spending
some time working overseas. In 2001, he
joined Fletcher Building, holding several
senior sales and general management
positions over 15 years.
Craig Magill
Executive General Manager – Trade
Peter Tilley
Executive General Manager – Retail
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 aftermarket 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 and wholesale
programs across marketing, merchandise,
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.
Paul Dumbrell
Chief Operating Officer –
Specialist Wholesale
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 Australian
Specialist Wholesale businesses including
AAD, Opposite Lock, Bearing Wholesalers,
Baxters, Roadsafe, MTQ, JAS, Premier Auto
Trade and Diesel Distributors.
47
Bapcor Annual Report 2018 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 49, which is not part of these financial
statements.
The financial statements were authorised for issue by the Directors’
on 22 August 2018. The Directors have the power to amend and
reissue the financial statements.
48
Bapcor Annual Report 2018
DIRECTORS’ REPORT
The Directors present their report, together with the financial statements, on the consolidated entity (‘consolidated entity’) consisting
of Bapcor Limited (‘company’ or ‘parent entity’) and the entities it controlled at the end of, or during, the year ended 30 June 2018
(‘FY18’).
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
Andrew Harrison
Independent Non-Executive Chairman (resigned 4 April 2018)
Independent, Non-Executive Chairman (appointed Chairman 4 April 2018)
Independent, Non-Executive Director (to 4 April 2018)
Darryl Abotomey
Chief Executive Officer and Managing Director
Therese Ryan
Independent, Non-Executive Director
Margaret Haseltine
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 800 sites.
3. Significant changes in the state of affairs
During FY18 Bapcor’s operations included its principal automotive activities as well as the non-core businesses of Footwear and
Resource Services which were acquired as part of the Hellaby Holdings Limited (‘Hellaby’) acquisition in January 2017. These non-core
businesses are disclosed as discontinued operations and were successfully divested during FY18.
For the first time, Bapcor’s Financial Report reflect a full year of results relating to the Hellaby automotive business acquisition.
In the second half of FY18, there was a reorganisation of the reporting structure of the ex-Hellaby Australian automotive wholesale
operations and as a result these operations are now included as part of the Specialist Wholesale segment rather than within
the Bapcor New Zealand segment. This represents a change compared to Bapcor’s reporting of the FY17 and H1 FY18 results.
The comparative FY17 results have been adjusted to reflect this change.
Bapcor completed a number of acquisitions in FY18 including Tricor Engineering (‘Tricor’) and AADi Australia Pty Ltd and A&F
Drive Shaft Repair Qld Pty Ltd (‘AADi’) expanding the depth and breadth of its offering through the Trade and Specialist Wholesale
segments. There were also a number of acquisitions of independent automotive parts stores that now trade under the Burson Auto
Parts or Autobarn brands.
During FY18 Bapcor entered into a tri-party joint venture in Thailand holding 51% of the shares of the incorporated entity Car Bits
Asia., Co. Ltd (‘CarBits’). At the end of FY18, CarBits opened the first store in Thailand trading as Burson Auto Parts. This is the first
store of four to five planned to open in calendar year 2018 which will test the trading model prior to possible future expansion.
4. Dividends
Fully franked dividends paid during FY18 were as follows:
29 September 2017
$20,882,000 (7.5 cents per share); $4,896,000 settled via DRP
27 April 2018
$19,569,000 (7.0 cents per share); $3,774,000 settled via DRP
The Board has declared a final dividend in respect of FY18 of 8.5 cents per share, fully franked. The final dividend will be paid on 27
September 2018 to shareholders registered on 31 August 2018.
The final dividend takes the total dividends declared in relation to FY18 to 15.5 cents per share, fully franked, representing an increase
of dividends paid of 19.2% compared to the prior financial year. Dividends paid and declared in relation to FY18 represents 50.3% of
pro-forma net profit after tax from continuing operations.
49
Bapcor Annual Report 2018
5. Review of operations
The key highlights of Bapcor’s financial results for FY18 were:
• Revenue from continuing operations increased by 22.0% from $1,013.6m to $1,236.7m
• Pro-forma earnings before interest, taxes, depreciation and amortisation (‘EBITDA’) from continuing operations increased by 27.7%
to $150.0m
• Pro-forma net profit after tax (‘NPAT’) from continuing operations increased by 31.6% to $86.5m
• Pro-forma EPS based on NPAT from continuing operations increased by 27.0% to 30.99 cents per share
• Statutory NPAT increased by 47.8% to $94.7m
• Statutory earnings per share (‘EPS’) increased by 42.7% to 33.90 cents per share
• Net debt at 30 June 2018 was $289.5m representing a leverage ratio of less than 2.0X (Net Debt : last twelve months EBITDA).
The table below reconciles the pro-forma result to the statutory result for FY18 and FY17:
Consolidated
2017
Continuing
Operations
2017
Discontinued
Operations
53.7
10.3
$’m
Statutory NPAT
Costs associated with the
Hellaby acquisition
Interest adjustment
Depreciation and amortisation
adjustment
Gain on divestment
Net reserve release to profit
and loss
Restructuring activities
Tax adjustment
Pro-forma NPAT
2018
Continuing
Operations
2018
Discontinued
Operations
Note
1
2
3
4
5
6
7
8
84.5
10.2
—
—
—
—
—
2.9
(0.9)
86.5
—
—
(4.2)
(7.0)
(0.4)
—
2.8
1.4
2018
Total
94.7
—
—
(4.2)
(7.0)
(0.4)
2.9
1.9
87.9
15.3
(0.7)
—
—
—
—
(2.5)
65.8
2017
Total
64.0
15.3
(0.7)
—
—
(6.4)
(6.4)
—
—
—
2.0
5.9
—
—
—
(0.5)
71.7
Notes:
1. NPAT attributable to members of Bapcor Limited.
2. Relates to one off costs incurred during FY17 for the acquisition of Hellaby. These costs included professional advisory fees, target defence costs, finance costs
relating to the bridging facility and refinancing, restructuring costs, one time elimination of intercompany profit in stock and other costs.
3. The prior year 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.
4. The depreciation and amortisation adjustment relates to the depreciation and amortisation in the Resource Services and Footwear divisions that was not
recorded in the statutory accounts due to their held for sale status.
5. The gain on divestment relates to the completion of the divestments of discontinued operations.
6. Relates to the release of net investment hedge and foreign currency reserves to the profit and loss on divestment of Contract Resources and Footwear.
7. Relates to one off costs incurred during FY18 relating to restructuring activities including redundancies, site exit costs and recognition of onerous leases.
8. The tax adjustment reflects the tax effect of the above adjustments based on local effective tax rates.
The Directors’ Report includes references to pro-forma results to exclude the impact of the adjustments 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.
50
Bapcor Annual Report 2018DIRECTORS’ REPORT Pro-forma revenue and EBITDA for continuing operations by segment is as follows:
Revenue
EBITDA
Trade
Bapcor NZ
Specialist Wholesale
Retail and Service
2018
$’m
501.6
177.9
364.3
239.1
2017
$’m2
Change
%
465.1
87.1
272.3
221.0
7.8%
104.1%
33.8%
8.2%
Unallocated/Head Office1
(46.2)
(31.9)
(44.7%)
Total continuing operations
1,236.7
1,013.6
22.0%
It is worth noting that in FY18, every business segment increased its EBITDA compared to FY17.
2018
$’m
72.1
22.7
38.6
28.8
(12.3)
150.0
2017
$’m2
63.3
9.3
28.0
27.6
(10.8)
117.4
Change
%
13.9%
144.3%
37.7%
4.4%
(13.4%)
27.7%
Notes:
1. Revenue relates to intersegment sales eliminations. EBITDA includes intersegment EBITDA and acquisition costs.
2. Reclassifications in FY17 between segments have occurred to present them consistently with the FY18 reorganisation of the business segments to ensure
comparability.
5.1 Bapcor aftermarket supply chain
CONSUMER
Service*
the
SHOCK
SHOP
auto safety experts
Trade/Resellers*
Retail*
Wholesale
MANUFACTURERS
51
Bapcor Annual Report 2018 5.2 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 a successful FY18, and compared to FY17, recorded revenue growth of 7.8% and EBITDA growth of 13.9%.
The increase in revenue of 7.8% included same store sales growth of 4.4% (compared to 4.6% in FY17). Trade’s EBITDA to revenue
percentage was 0.8 percentage points above FY17 reflecting the impact of margin management initiatives.
During FY18, Burson Auto Parts continued to expand its store network with the number of stores increasing from 160 at 30 June 2017
to 170 at 30 June 2018. The increase of 10 stores consisted of 7 greenfield store developments and 3 acquisitions. The average cost
per new greenfield store including inventory was $658,000.
The new stores are located in Narellan, Bathurst and Kempsey in New South Wales; Kingston in Tasmania; Albion, Ashmore and
Hervey Bay in Queensland; and Dandenong South, Hastings and Grovedale in Victoria.
Trade also successfully completed the acquisition of Tricor Engineering during the first half of FY18. Tricor Engineering is a business
specialising in the supply and installation of lubrication equipment in the Car Dealership and Heavy Vehicle Workshop market and
operates out of the Precision Automotive Equipment business unit.
5.3 Operating and financial review – Bapcor New Zealand
Bapcor New Zealand (previously Hellaby Automotive and excluding the Australian wholesale operations) consists of Trade and
Specialist Wholesale businesses based in New Zealand operating across more than 80 locations.
BNT is the predominant business with 57 stores supplying automotive parts and accessories to workshops, plus truck and trailer
parts through the Truck and Trailer Parts brand. BNT is similar in nature to Bapcor’s Burson Automotive business in Australia.
Bapcor New Zealand also includes the Specialist Wholesale businesses of HCB — batteries, Autolign — steering and suspension
specialists, and JAS — auto electrical. The FY18 results also included TRS, a tyre and wheel business predominantly supplying the
agricultural market which was divested in early FY19.
Bapcor New Zealand’s results in FY18 include a full year of trading versus six months in FY17. Bapcor New Zealand has performed very
strongly and contributed $22.7m EBITDA to the FY18 group results. Revenue increased by 104.1% and EBITDA increased by 144.3%.
EBITDA to revenue percentage increased to 12.8% in FY18, compared to 10.7% in FY17. In FY18 the Australian Dollar versus the New
Zealand dollar has strengthened by approximately 3% versus the previous financial year which negatively impacted EBITDA by $0.7m.
As Bapcor New Zealand’s largest business, BNT achieved same store sales growth of 6.1% reflecting the success of organisational
changes, range expansion, people engagement initiatives and underlying market growth. The first new BNT store in over five years
was opened in December 2017 in Gore, New Zealand. Further new stores will follow.
5.4 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, Opposite Lock, Baxters, MTQ, Roadsafe, as well as JAS Oceania, Premier Auto Trade, Federal Batteries and Diesel
Distributors that were previously aligned to the Bapcor New Zealand segment.
The Specialist Wholesale segment achieved revenue growth of 33.8% and EBITDA growth of 37.7% compared to FY17. This is partly
due to the business units of JAS Oceania, Premier Auto Trade, Federal Batteries and Diesel Distributors now being included for the
full twelve months in FY18, as well as improved performance in the existing businesses. EBITDA to revenue percentage increased to
10.6% in FY18, compared to 10.3% in FY17. Continued 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 FY19 with growing the
level of intercompany sales being a key business strategy.
5.5 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 and there are 67 company owned stores.
52
Bapcor Annual Report 2018DIRECTORS’ REPORT Revenue for the Retail & Service segment in FY18 increased by 8.2% compared to FY17 which includes the impact of a higher ratio of
company owned stores versus franchise operations. Autobarn same store sales growth for franchise stores was approximately 1.4%
and for company owned stores approximately 4.7%. 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 decreased by 0.5 percentage points from 12.5% in FY17 to 12.0% in FY18.
EBITDA as a percentage of sales increased by 0.9 percentage points in H2 FY18 compared to H1 FY18. EBITDA in FY18 increased 4.4%
over the prior year.
Bapcor has continued to grow the number of company owned Autobarn stores via both greenfield Autobarn stores as well as some
select conversion of franchise stores to company owned stores. The total number of Autobarn stores at 30 June 2018 was 128 stores,
a net increase of 6 stores since 30 June 2017. The number of company owned Autobarn stores increased from 31 to 48, with the
17 new stores consisting of 8 greenfield stores and the conversion of 9 franchise operations. The percentage of company owned to
total Autobarn stores at 30 June 2018 was 38%, up from 25% at 30 June 2017.
At 30 June 2018 the total number of company owned and franchise stores in the Retail & Service segment was 378 consisting of
Autobarn 128 stores, Autopro 84 stores, Sprint Auto Parts 38 stores and Midas and ABS 128 stores.
5.6 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 business segments. Unallocated costs increased from $10.8m in FY17 to $12.3m in FY18 due largely to an increase in
business as usual acquisition costs of $0.7m as well as the additional resource and other costs associated with the increased size
of the overall business.
5.7 Operating and financial review — Discontinued Operations
As part of the acquisition of Hellaby in January 2017, Bapcor acquired the businesses of Resource Services and Footwear. These assets
were deemed non-core and reported as held for sale. During FY18, these businesses were all successfully divested. Total proceeds
less costs to sell these divestments was $94.3m (NZD $102.8m) which was higher than the estimate of $87.7m (NZD $94.7m) estimate
disclosed as part of the 31 December 2017 Financial Report.
In FY18, the discontinued operations contributed $145.6m revenue and $10.2m net profit after tax to the consolidated group. The net
profit after tax contribution included $7.0m gain from the divestments.
5.8 Financial Position — Capital Raising and Debt
In September 2017, Bapcor issued 932,347 shares to participating shareholders under its Dividend Reinvestment Plan, in respect of
the FY17 final dividend. In April 2018, Bapcor issued 679,325 shares to participating shareholders under its Dividend Reinvestment
Plan, in respect of the FY18 interim dividend. As a result of these issues, ordinary shares on issue increased from 278,633,080 as at
30 June 2017 to 280,244,752 as at 30 June 2018.
Net debt at 30 June 2018 was $289.5m representing a leverage ratio of less than 2X (Net Debt: last twelve months EBITDA).
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 Equip ment and the recently acquired Tricor Engineering.
The business units are trade-focused “parts professionals” businesses supplying service workshops. Bapcor’s target is to grow Burson
Auto Parts’ store numbers via acquisitions and greenfields from 170 stores at the end of June 2018 to 230 stores by 2023 with 35%
home brand product content.
Bapcor New Zealand
Bapcor New Zealand’s operations consist of its automotive aftermarket businesses of BNT and Truck and Trailer Parts, as well as its
automotive electrical businesses of HCB and JAS Oceania. The strategy is to grow the BNT business from its current 57 stores to 65
by 2021, as well as grow its electrical businesses organically and potentially through acquisition. Bapcor New Zealand also has a target
to grow home brand content to 35%.
53
Bapcor Annual Report 2018 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 control systems 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. Specialist Wholesale growth may also include
acquisitions where they are complementary to the current product group offerings. The target is for Specialist Wholesale segment
to be at least $450m in revenue by 2023.
Retail & Service
Autobarn — The premium retailer of automotive accessories, Autobarn had 128 stores at the end of 30 June 2018 including 48 company
owned stores. The target is to grow to 200 Autobarn stores by 2023, with a majority of growth being company owned stores. Home
brand content is also targeted to be 35%.
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. Bapcor’s strategy is to
strongly support the independent stores.
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 128 stores at 30 June 2018 of which 118 were franchised. Bapcor consider Service a potential growth area due to
the industry consolidation opportunities and the potential to vertically integrate supply of product through its Trade and Specialist
Wholesale segments and will actively expand this segment.
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 improvements opportunities, whilst spreading reliance on profitability.
7. Industry trends
The automotive aftermarket parts market in Australia continues to experience growth based on:
a. population growth;
b. increasing number of vehicles per person;
c. change in the age mix and complexity of vehicles (i.e. more vehicles in the four years or older range); and
d. 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 have ceased manufacturing cars in Australia. Ford ceased production in October 2016, and Toyota
and Holden ceased production in October 2017. Bapcor has not experienced and 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 commenced trading in the Australian market and at some point in the future it is expected this may 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. Bapcor’s Autobarn brand has launched online capabilities in both ‘click & collect’ and ‘click & deliver’.
54
Bapcor Annual Report 2018DIRECTORS’ REPORT There is increased interest and production of electric vehicles. As Bapcor’s target market is vehicles greater than 3 to 4 years old, and
due to the large size of the conventional vehicle car parc (approximately 18 million) and how long it would take for electric and hybrid
vehicles to become a meaningful percentage of the total number of vehicles on the road (currently less than two percent), Bapcor
considers that any impact to the Bapcor business within the foreseeable future is minimal.
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.
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 and implement appropriate changes.
People risk — Bapcor is a highly focused customer service business and its staff and senior management are key to maintaining the
level of operational service to its customers, as well as executing Bapcor’s strategy. Any significant turnover of staff or loss of key
senior management has the potential to disrupt the profitability and growth of the business. Senior management risk is somewhat
managed through notice period and non-compete contractual obligations, succession planning and long term incentives.
Information technology — All of Bapcor’s business operations rely on information technology platforms. Any sustained unplanned
downtime due to system failures, cyber-attack or any other reason has the potential to have a material impact on the ability for
Bapcor to service its customers. Bapcor’s business units operate with a number of different operating systems making it less likely
that any unplanned downtime will occur across the entire business.
55
Bapcor Annual Report 2018 9. Likely development and expected results of operations
Bapcor expects to continue to see growth in FY19 due to a number of factors including 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.
Bapcor is forecasting continued revenue and profit growth in FY19. Consensus predictions of EBITDA of approximately $170m are
reasonable, leading to an increase in NPAT of between 9% and 14% above FY18 proforma NPAT.
10. Information on directors
Robert McEniry (sadly, Robert passed away on 4 July 2018)
Title:
Qualifications:
Experience and expertise:
Independent, Non-Executive Director and Chairman (resigned 4 April 2018)
Master of Business Administration from the University of Melbourne
Member of the Australian Institute of Company Directors
Robert had 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.
Other current directorships:
Robert held positions 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):
Special responsibilities:
None
Chair of the Board (resigned 4 April 2018)
Member of the Nomination and Remuneration Committee (resigned 4 April 2018)
Member of the Audit and Risk Management Committee (resigned 4 April 2018)
Interests in shares:
Nil (resigned 4 April 2018)
Andrew Harrison
Title:
Qualifications:
Experience and expertise:
Independent, Non-Executive Director and Chairman (appointed 4 April 2018)
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):
Special responsibilities:
None
Chairman (appointed 4 April 2018)
Member of the Audit and Risk Management Committee (resigned as Chair 4 April 2018)
Member of the Nomination and Remuneration Committee
Interests in shares:
56,869 ordinary shares
56
Bapcor Annual Report 2018DIRECTORS’ REPORT Darryl Abotomey
Title:
Qualifications:
Experience and expertise:
Chief Executive Officer and Managing Director
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:
None
Former directorships
(last 3 years):
None
Interests in shares:
1,535,533 ordinary shares
Interests in rights:
484,395 performance rights
Therese Ryan
Title:
Qualifications:
Experience and expertise:
Independent, Non-Executive Director
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 VicForests, Gippsland Water and WA Super.
Former directorships
(last 3 years):
Special responsibilities:
None
Chair of the Nomination and Remuneration Committee
Member of the Audit and Risk Management Committee
Interests in shares:
33,868 ordinary shares
Margaret Haseltine
Title:
Qualifications:
Experience and expertise:
Independent, Non-Executive Director
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
10 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 and Bagtrans Pty. Ltd. (Chairman).
Former directorships
(last 3 years):
Special responsibilities:
Fantastic Holdings Ltd.
Chair of the Audit and Risk Management Committee (appointed to Chair 4 April 2018)
Member of the Nomination and Remuneration Committee
Interests in shares:
31,327 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.
57
Bapcor Annual Report 2018 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.
12. Meetings of directors
The number of meetings of the company’s Board of Directors (‘the Board’) held during the year ended 30 June 2018, and the number
of meetings attended by each director were:
Robert McEniry**
Andrew Harrison
Darryl Abotomey*
Margaret Haseltine
Therese Ryan
Full Board
Nomination and
Remuneration Committee
Audit and Risk Committee
Attended
Held
Attended
Held
Attended
Held
5
11
11
11
11
7
11
11
11
11
3
4
—
4
4
3
4
—
4
4
2
3
—
3
3
2
3
—
3
3
Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee.
*
The members of the Audit and Risk Management Committee are Margaret Haseltine (Chair), Andrew Harrison and Therese Ryan. By invitation from the Audit
and Risk Management Committee, Darryl Abotomey attended all Audit and Risk Management Committee meetings.
The members of the Nomination and Remuneration Management Committee are Therese Ryan (Chair), Andrew Harrison, and Margaret Haseltine. By invitation
from the Nomination and Remuneration Committee, Darryl Abotomey attended all Nomination and Remuneration Committee meetings.
** Robert McEniry resigned from the Board on 4 April 2018.
13. Remuneration report
The Bapcor Board is very pleased to share with you our Remuneration Report for the financial year ended 30 June 2018.
Since listing on the Australian Securities Exchange (‘ASX’) in 2014, Bapcor, its executive and team members have consistently
delivered outstanding financial results and value for our shareholders. This performance and growth is again a key feature of the
Company’s results for FY18. Some of the significant outcomes of another very successful year include a 22.0% increase in revenue
from continuing operations from $1,013.6m to $1,236.7m and pro-forma net profit after tax (‘NPAT’) of 31.6% from $65.8m to
$86.5m. In addition, statutory NPAT increased by 47.8% from $64.0m to $94.7m.
The following chart shows total return to shareholders over the previous four years:
300%
250%
200%
150%
100%
50%
0%
Source: KPMG
58
Bapcor
Comp. Group (Average)
ASX 100 (Average)
ASX 200 (Average)
Bapcor Annual Report 2018DIRECTORS’ REPORT
The Board is very conscious of the fact that these outstanding achievements reflect the leadership and talent of the executive key
management personnel (‘KMP’) and that they should be appropriately rewarded.
We have approached remuneration as follows:
For fixed remuneration our focus is to provide competitive, appropriate remuneration aimed at retaining and motivating our talented
team in what is now a highly competitive market. As Bapcor has continued to grow and become more complex, in FY18 increases
were made to KMP pay based on independent market remuneration benchmarking. Consistent with previous years, we targeted
50th percentile of the benchmark, with a range of plus or minus 20%.
For the other elements of our remuneration strategy, the focus is to provide an incentive for targeted performance, with targets
being considered in depth by the Bapcor Board each year.
The Short Term Incentive (‘STI’) payments are primarily driven by meeting and exceeding NPAT or earnings before interest and
tax (‘EBIT’). The Board sets aggressive stretch targets for both indicators. Non-financial targets for each executive KMP are also a
key feature. In respects of all elements, the Board’s approach is to set targets that encourage our executive KMP to deliver on our
growth strategy and to take considered risks, benefitting our investors in the short term, but also establishing or improving the
building blocks that contribute to the long term sustainability of the business.
The Long Term Incentive (‘LTI’) measures of relative shareholder return (‘TSR’) and statutory earnings per share (‘EPS’) growth
have been consistently applied since Bapcor’s initial public offering (‘IPO’) in 2014. The Board is cognisant of the fact that there
may be other measures favoured by various commentators and, after consideration, retains the view that this is a consistent and
transparent way to measure long term shareholder value, and that it aligns the interests of our KMP with the interests of our
investors. We believe our investors will be delighted with a compound annual statutory EPS growth rate over four years of 43.3%
which has been achieved through a lot of very hard work and a well-considered and sustainable strategy, and that a management
team that achieves such outstanding results should be rewarded for its extraordinary efforts. The Board is very pleased to report
that that 100% of the three year tranche of the FY15 LTI and 98.2% of the two year tranche of the FY16 LTI vested.
To deliver on our strategy, in addition to our executive KMP, engaged, high calibre team members in every part of the Group are
necessary to achieve financial targets and provide shareholder value. Over recent years there has been a focus on team member
development to ensure the requirements of a growing business are met and in FY18 Bapcor undertook a Group-wide team member
engagement survey with a response rate of 71% and pleasing results. Based on the insights gained from this survey, there are a
range of activities underway at Group, business unit and site level to further improve and enhance the culture and engagement of
the team. Ensuring all Bapcor team members are safe, able to realise their full potential and engaged is essential to the Group’s
success.
The Board is delighted that the executive team, and the Bapcor team more broadly, continues to achieve the financial and non-
financial results that have consistently improved returns to our shareholders and which provide a solid foundation for sustained
performance.
59
Bapcor Annual Report 2018 14. 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 Key Management Personnel (‘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:
14.1
14.2
14.3
14.4
14.5
14.6
14.7
Overview
Remuneration governance
Remuneration framework
Key management personnel
Executive remuneration
Cash and realisable remuneration
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.
14.1 Overview
14.1.1 Financial performance and remuneration over the last four years
Bapcor has grown in size and complexity in the four years since it listed on the ASX. During this time financial performance has
consistently improved as have the returns provided to shareholders.
Remuneration Analysis FY14—FY18
% increase of Market Cap, Revenue Pro-forma NPAT an Executive KMP Fixed Remuneration
e
s
a
e
r
c
n
i
%
500%
450%
400%
350%
300%
250%
200%
150%
100%
50%
0%
Market Cap
Pro-forma NPAT
Revenue
E-KMP Fixed Rem
E-KMP fixed $M
E-KMP number at year end
Avg fixed $000’s
FY14
1.66
5
333
FY15
1.87
6
312
FY16
2.87
7
410
FY17
3.91
9
435
FY18
4.93
9
548
60
Bapcor Annual Report 2018DIRECTORS’ REPORT
14.1.2 Key Questions
Key Questions
Our Approach
How is FY18 executive
remuneration different from
FY17?
Adjustments have been made to executive remuneration based on independent market
benchmarks. Executive remuneration remains positioned at 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.
Were there any increases to
non-executive directors in
FY18?
No. Non-executive directors fees were not increased during the year.
How much STI was earned by
the executives for FY18 and
what were the reasons for the
level of payment?
STIs earned by executive KMP are based on targets established at the beginning of the financial
year. The STIs at target level are 70% financial measures and 30% personal objectives with
payment for achievement greater than target deferred for one year. 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 performance in FY18 was $2,729,000 which is
80.4% of the maximum that could have been paid.
As the awards exceeded the target value, $602,000 has been deferred and will be paid to the
executives in August 2019.
STI payments were made as the company’s financial performance exceeded target against a range
of measures including:
• Group revenue from continuing operations increase of 22.0% over FY17
• Group pro-forma EBIT from continuing operations increase of 29.4% over FY17
• Group pro-forma NPAT from continuing operations increase of 31.6% over FY17
• Statutory NPAT increase of 47.8% over FY17.
Each executive KMP also has specific personal objectives agreed at the beginning of the year
and these are measured against actual performance at the end of the year. These objectives
align to the strategic goals of Bapcor. All executive KMP have personal objectives relating to
safety, talent and succession, team member development, team member engagement, strategic
growth and the optimisation of synergies from acquisitions. Given their area of accountability
other personal objectives include new store and same store sales growth, customer satisfaction,
own brand development, improvements in IT systems, corporate compliance and governance and
investor relations.
What LTI grants have vested
in FY18?
What was the basis for the
vesting of those grants?
The three year tranche of the LTI granted to 11 executives on 24 December 2015, being 65% of the
total number vested, was independently tested by a third party against the company’s FY18 TSR
and EPS performance. The extent to which they vested is as follows:
Relative TSR Rights: Bapcor’s TSR performance ranked at the 90th percentile of the comparator
group. This resulted in 100% of the tranche vesting.
Compound annual growth rate (‘CAGR’) of EPS: Bapcor’s CAGR of statutory EPS was 43.3%.
This resulted in 100% of the tranche vesting.
The two year tranche of the LTI granted to 10 executives on 20 December 2016, being 35% of the
total number granted, was independently tested by a third party against the company’s FY18 TSR
and EPS performance. The extent to which they vested is as follows:
Relative TSR Rights: Bapcor’s TSR performance ranked at the 74th percentile of the comparator
group. This resulted in 97.2% of the tranche vesting.
CAGR of EPS: Bapcor’s CAGR of statutory EPS was 37.8%. 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 years
and three years, with tranches having a further twelve month restriction on sale for vested LTI.
From FY18 the LTI opportunity is subject to a performance period of three years with a further
twelve month restriction on sale for vested LTI.
61
Bapcor Annual Report 2018 Key Questions
Our Approach
Did the Board make any
one-off payment to executive
KMP in FY18?
Did the Board exercise
discretion when determining
the payments under the STI
plan?
What were the FY18 STI
performance measures for
KMPs?
How did the Board establish
the STI performance
measures for FY18?
Is there provision for deferral
of STI and what if any has
been deferred?
How does the company
determine the number of LTI
Performance Rights to grant?
Has the company made any
loans to the executives in
FY18?
There were no one-off payments to executive KMPs in FY18.
STIs include personal objectives, which may be non-financial, as these contribute to the longer-
term sustainability of the business. As such, some degree of judgement is required as to the
achievement of these objectives as they are not all based on numeric outcomes.
Section 14.5.1 and 14.5.2 of this report provides more details of the performance measures for FY18.
As in the previous financial year, the Board determined that the focus of the executive team should
be on growing NPAT for the CEO and CFO and EBIT for all other managers. Therefore 70% of the
target STI award is tied to this financial measure. All above target STI awards are based on the
financial measures.
Achievement of the non-financial measures will underpin the future growth and sustainability of
the company.
Yes. Payment to executive KMP of the STI component that is above target is deferred for twelve
months. For FY18 a total of $602,000 has been deferred until August 2019.
From FY18 the weighted average face value of shares is used to calculate the number of LTI
Performance Rights granted.
No loans were provided to any executive KMP in FY18.
62
Bapcor Annual Report 2018DIRECTORS’ REPORT 14.2 Remuneration governance
Bapcor Board
s
r
e
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o
h
e
k
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t
s
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e
k
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e
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C
• Overall accountability for Bapcor’s remuneration approach
• Determines remuneration quantum and structure for executive and non-executive KMP after considering
recommendations made by the NRC
• Has ultimate discretion in determining the outcomes of incentive arrangements to ensure anomalous outcomes
do not arise. This discretion may be exercised for both positive and negative adjustments to incentive outcomes to
ensure these outcomes reflect the experience of shareholders.
Nomination and Remuneration Committee (NRC)
External Advisors
Meets regularly to:
• understand and review the effectiveness of the
remuneration arrangements
• review the remuneration framework to ensure it
remains fit for purpose
• make recommendations to the Board on the
structure of the remuneration framework
• make recommendations to the Board regarding in
fixed remuneration, STI awards and outcomes, and
LTI awards and outcomes
• Has absolute discretion in determining the
outcomes of incentive arrangements to ensure
anomalous outcomes do not arise. This discretion
may be exercised for both positive and negative
adjustments to incentive outcomes to ensure these
outcomes reflect the experience of shareholders.
• assess executive KMP performance
• NRC’s charter can be found at www.bapcor.com.au/
about/governance.
• NRC seeks external advice and assistance from
independent remuneration consultants as it
considers appropriate.
• Protocols are in place with the Board and NRC to
ensure the engagement of remuneration advisors
is independent of management and is able to be
carried out free of any undue influence
• During FY18 the NRC engaged Godfrey
Remuneration Group to provide benchmarking
reports in respect of executive KMP remuneration
and NED fees. This 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 $35,000 excluding GST and
disbursements for these services.
63
Bapcor Annual Report 2018
14.3 Remuneration framework
14.3.1 Executive remuneration structure
Fixed Annual Reward (FAR)
+ Short Term Incentive (STI)
+ Long Term Incentive (STI)
Total Remuneration =
Purpose
Attract, motivate and retain high
calibre talent
Motivate and reward performance
in current year
Method of payment Cash and benefits
Annual cash payment
Payment for achievement beyond
target deferred for twelve months
Reward long term sustainable
performance that delivers
wshareholder returns
Performance Rights which do not
attract dividends or voting rights
Vest after 3 years with sale of
vested shares restricted for
twelve months
Structure
Measures
Base salary, superannuation
and non-cash benefits such as
motor vehicles
Annual performance review
and independent market based
remuneration benchmarks
Link to strategy
and performance
Business complexity requires
highly skilled executives to
deliver performance that meets
shareholder expectations
14.3.2 FY18 remuneration mix
70% financial targets
30% personal objectives
50% TSR
50% EPS
(which may be non-financial)
Financial targets are NPAT for
CEO/CFO and EBIT for other
executive KMP
Payment threshold is 95% of
target
Personal objectives include safety,
team, talent and sustainability
Drives growth as financial targets
are set at a growth level to the
previous year and personal targets
reward the actions that build a
sustainable business
TSR > 50% companies in
comparable peer group
Compound annual growth rate
of EPS ≥7.5% with maximum
vesting at 15%
Motivates executives to take
a long-term view of company
performance and links reward
the investors’ experience
Executive KMP Potential Maximum FY18 Pay Mix
CEO
35%
35%
30%
CFO/COO
46%
27%
27%
Other Exec KMP
47%
29%
24%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Fixed remuneration
Maximum STI
Maximum LTI
64
Bapcor Annual Report 2018DIRECTORS’ REPORT
14.4 Key management personnel
As defined by AASB 124 Related Party Disclosures, Bapcor’s Key Management Personnel (‘KMP’) are those leaders 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 during FY18 and their positions are those in the following table.
Name
Position
Non-executive Directors (‘NED’)
Robert McEniry
(resigned 4 April 2018)
Andrew Harrison
Margaret Haseltine
Therese Ryan
Executive Director
Darryl Abotomey
Executive KMP
Greg Fox
Mathew Cooper
Colin Daly
Paul Dumbrell
Grant Jarrett
Alison Laing
Craig Magill
Peter Tilley
Board Chair
Member Audit and Risk Committee
Member Nomination and Remuneration Committee
Board Chair (from 4 April 2018)
Chair Audit and Risk Committee (to 4 April 2018)
Member Audit and Risk Committee
Member Nomination and Remuneration Committee
Member Nomination and Remuneration Committee
Member Audit and Risk Committee (to 4 April 2018)
Chair Audit and Risk Committee (from 4 April 2018)
Chair Nomination and Remuneration Committee
Member Audit and Risk Committee
Managing Director and Chief Executive Officer
Chief Financial Officer and Company Secretary
Executive General Manager, Strategic Development
Chief Operating Officer, Strategic Marketing and Bapcor New Zealand
Chief Operating Officer, Specialist Wholesale
Executive General Manager, Logistics
Executive General Manager, Human Resources
Executive General Manager, Burson Trade
Executive General Manager, Retail & Service
14.5 FY18 executive KMP remuneration
The following sections explain FY18 executive KMP remuneration:
14.5.1 Financial performance over the last four years
14.5.2 STI performance metrics and outcomes
14.5.3 STI payment, deferral and clawback
14.5.4 LTI plan
14.5.5 LTI outcomes
65
Bapcor Annual Report 2018 14.5.1 Financial performance over the last four years
Bapcor’s financial performance over the last four 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 four complete financial years since it listed on 23 April 2014.
Revenue from continuing operations $m
Increase/(decrease) in revenue
Pro-forma NPAT from continuing operations $m2
Increase/(decrease) in pro-forma NPAT
Pro-forma EPS from continuing operations — TERP adjusted (cents)1
Increase/(decrease) in pro-forma EPS — TERP adjusted
Statutory NPAT $m2
Increase/(decrease) in statutory NPAT
Statutory EPS – TERP adjusted (cents)1
Increase/(decrease) in statutory EPS — TERP adjusted
Dividend declared (cents per share)
Increase/(decrease) in dividend declared
Share price 30 June $
Increase/(decrease) in share price
Market capitalisation $m 30 June
2015
375.3
9.9%
23.1
19.7%
13.62
19.1%
19.5
2016
685.6
82.7%
43.6
88.7%
17.85
31.0%
43.6
1,581.6%
123.4%
13.62
19.1%
8.7
n/a
3.40
60.4%
746.9
17.85
31.0%
11.0
26.4%
5.52
62.4%
1,357.1
2017
1,013.6
47.8%
65.8
50.9%
24.40
36.7%
64.0
47.0%
23.76
33.1%
13.0
18.2%
5.49
(0.5%)
1,529.7
2018
1,236.7
22.0%
86.5
31.6%
30.99
27.0%
94.7
47.8%
33.90
42.7%
15.5
19.2%
6.55
19.3%
1,835.6
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.
2. NPAT attributable to members of Bapcor Limited.
14.5.2 FY18 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. No incentive payment for financial performance is payable if the threshold of 95% of financial target performance is not met.
70% of the target STI opportunity of the executive KMP is contingent on meeting annual NPAT or EBIT objectives. The FY18
objectives were set by the Board at levels significantly higher than the previous year’s achievement, with the threshold measure
higher than the FY17 actual result.
30% of target STI is subject to meeting other annual personal objectives which may include both financial and non-financial measures.
66
Bapcor Annual Report 2018DIRECTORS’ REPORT FY18 performance
Reported statutory Group
NPAT for FY18 was $94.7m,
a 47.8% increase over FY17.
Pro-forma continuing
operations EBIT
performance increased
29.4% over FY17.
EBIT by business segment
varied as detailed in the
financial report.
A detailed explanation of
the group’s achievements in
the non-financial areas are
contained in section 5 of the
Directors’ Report.
Type of performance measure
and weighting at target
KMP Performance measure
Financial
70%
CEO and CFO is Group NPAT.
Other Group executives is Group EBIT.
Business segment executives is EBIT of the business segment they
manage and Group EBIT.
The group target was set significantly higher than the FY17 actual
result and was set in the context of the business strategy and
growth objectives.
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
Threshold
Target
Maximum
Threshold level is 95% of target and requires significant
improvement over FY17 actual result.
Personal
(which may be non-financial)
30%
There is a range of metrics across the following criteria that
are applicable to the executive KMP depending on their role
and accountabilities, several objectives are shared across all
executive KMP:
• Safety: various objectives requiring improved performance year
on year including, for all executive KMP, a reduction in lost time
injuries (LTIs) of 20% on FY17
• People: with objectives requiring individual and team
development, culture strategies, succession planning, and
training and development outcomes
• Team member engagement: shared objective amongst all
executive KMP to undertake a Group wide team member
engagement survey with a response rate of at least 65%
• Customer engagement: including objectives to measure and
improve customer sentiment
• Strategic acquisitions and divestments: with objectives
requiring the identification of suitable businesses for acquisition,
or divestment, implementation of the business case and results
regarding achieving the business case
• Organic growth: for each business segment objectives are set to
deliver organic growth and market share gains
• New stores: the number of new stores required in business units
to achieve growth targets
• Systems and processes: with objectives focused on the long
term sustainability of the company in areas such as information
technology and logistics
• Compliance and governance: requiring processes and
procedures to ensure achievement of compliance requirements
• Optimisation projects: for achieving optimal benefits from
acquisitions and improved cost structures
67
Bapcor Annual Report 2018 The following table shows the actual STI outcomes for each of the executive KMP for FY18:
KMP
Darryl Abotomey
Greg Fox
Mathew Cooper
Colin Daly
Paul Dumbrell
Grant Jarrett
Alison Laing
Craig Magill
Peter Tilley
Target STI
as a % of
FAR
Maximum
STI as a %
of FAR
Actual STI
as a % of
maximum
STI forfeited
as a % of
maximum
Actual STI
awarded
$
Deferred
STI
$
55%
40%
40%
40%
40%
40%
40%
40%
40%
100.0%
60.0%
60.0%
60.0%
60.0%
60.0%
60.0%
60.0%
60.0%
95.0%
92.9%
68.4%
69.9%
70.3%
65.2%
67.0%
69.7%
65.2%
5.0%
7.1%
31.6%
30.1%
29.7%
34.8%
33.0%
30.3%
34.8%
1,130,548
476,048
362,200
102,200
172,368
209,965
202,560
158,355
120,540
204,820
168,130
4,368
—
10,560
—
—
8,820
—
The STI performance measures are tested annually after the end of the relevant financial year.
14.5.3 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 2019 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.
14.5.4 LTI plan
The LTI is contingent on company performance over a 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.
68
Bapcor Annual Report 2018DIRECTORS’ REPORT The key terms of the LTI under which grants were made in FY18 and prior years are as follows:
Administration
The LTI is administered by the Board.
Who participates?
In FY18 executive KMP were invited to participate.
What is the LTI opportunity?
Performance Rights
How was the number
of Performance Rights
determined?
Performance period
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.
The LTI opportunity granted to participants in FY18 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.
For the grants made in FY18, the number of Performance Rights was determined by dividing the
executive’s LTI value by the face value of a Bapcor share at the time of grant.
Performance is assessed over a performance period specified at the time of the grant. The
performance period for the LTI opportunities granted in FY18 are set out following this table.
Performance measures
Each executive is granted two tranches of Performance Rights.
Shares
Participation in new issues
Limitations
Trustee
Quotation
Amendments
Clawback
Other terms
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.
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.
Performance Rights granted in FY18 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.
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 FY18 or prior years.
The Board has absolute discretion where it is determined a change in circumstances has occurred
including material financial misstatements or some other event or series of events. Further, the
Board has absolute discretion where a participant has engaged in fraudulent or dishonest conduct,
or has engaged in or is being investigated for conduct which may adversely affect Bapcor’s
financial position or reputation.
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.
69
Bapcor Annual Report 2018 In FY18 offers to participate in the LTI included:
• In relation to FY17 for the Chief Operating Officer, Strategic Marketing and Bapcor New Zealand (C Daly), these allocated
Performance Rights have a performance period that ends 30 June 2018 and 30 June 2019 at which time the performance hurdles
are tested. This offer is in line with the FY17 offer that was previously made to other executives and was extended to the Chief
Operating Officer, Strategic Marketing and Bapcor New Zealand as he joined Bapcor with the acquisition of Hellaby Holdings Ltd
where he was previously the Chief Executive Officer, Hellaby Automotive.
Grant date
Performance hurdle
Performance period
Test date
Expiry date
Quantity granted
Exercise price
Fair value at 15/08/17
Other conditions
Tranche 1
15/08/17
Tranche 2
15/08/17
Relative TSR
EPS
Relative TSR
EPS
1/07/16 to 30/06/18
1/07/16 to 30/06/18
1/07/16 to 30/06/19
1/07/16 to 30/06/19
30/06/18
Once tested
4,999
$2.892
Nil
2,978
$5.411
30/06/18
Once tested
9,354
5,882
Nil
$3.037
$5.301
Restriction on sale to 30/06/19
Restriction on sale to 30/06/20
• In relation to FY17 for the CEO and Managing Director (D Abotomey) following the successful passing of a resolution at the AGM.
These allocated Performance Rights have a performance period that ends 30 June 2019 at which time the performance hurdles
are tested.
Grant date
Performance hurdle
Performance period
Test date
Expiry date
Quantity granted
Exercise price
Face value at 1/07/17
Other conditions
4/12/17
Relative TSR
EPS
1/07/16 to 30/06/19
30/06/19
Once tested
88,802
88,801
Nil
$5.328
$5.328
Restriction on sale to 30/06/20
• In relation to FY18 an offer to participate was made to all nine of Bapcor’s executive KMPs. These allocated Performance Rights
have a performance period that ends 30 June 2020 at which time the performance hurdles are tested.
4/12/17
Relative TSR
EPS
1/07/17 to 30/06/20
30/06/20
Once tested
283,535
283,532
Nil
$5.328
$5.328
Restriction on sale to 30/06/21
Grant date
Performance hurdle
Performance period
Test date
Expiry date
Quantity granted
Exercise price
Face value at 1/07/17
Other conditions
70
Bapcor Annual Report 2018DIRECTORS’ REPORT 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 2017 and 30 June 2020 (the 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
10 trading days up to and including 30 June at the start and end date of the Performance Period.
The Comparator Group for the FY18 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
Company Name
APE
AAD
API
AHG
ARB
BRG
CAR
CTD
GUD
JBH
MTR
MTS
MYR
NVT
PMV
PRY
RFG
AP Eagers Limited
Ardent Leisure Group
Australian Pharmaceutical Industries Limited
Automotive Holdings Group
ARB Holdings Group
Breville Group Limited
carsales.com Limited
Corporate Travel Management Limited
GUD Holdings Limited
JB Hi-Fi Limited
Mantra Group Ltd
Metcash Limited
Myer Holdings Limited
Navitas Limited
Premier Investments Limited
Primary Health Care Limited
Retail Foods Group Limited
71
Bapcor Annual Report 2018 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%
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 FY18 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.
14.5.5 LTI outcomes
During FY18 the following Performance Rights were independently tested by third parties:
The three year tranche of the LTI granted to 11 executives on 24 December 2015, being 65% of the total number vested, was
independently tested by a third party against the company’s FY18 TSR and EPS performance. The extent to which they vested
is as follows:
Relative TSR Rights: Bapcor’s TSR performance ranked at the 90th percentile of the comparator group. This resulted in 100% of the
tranche vesting.
Compound annual growth rate (‘CAGR’) of EPS: Bapcor’s CAGR of statutory EPS was 43.3%. This resulted in 100% of the tranche
vesting.
The two year tranche of the LTI granted to 10 executives on 20 December 2016, being 35% of the total number granted, was
independently tested by a third party against the company’s FY18 TSR and EPS performance. The extent to which they vested is
as follows:
Relative TSR Rights: Bapcor’s TSR performance ranked at the 74th percentile of the comparator group. This resulted in 97.2% of
the tranche vesting.
CAGR of EPS: Bapcor’s CAGR of statutory EPS was 37.8%. 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.
72
Bapcor Annual Report 2018DIRECTORS’ REPORT 14.6 Cash and realisable remuneration
The following table shows the total cash remuneration received by executive KMP in respect of financial year. The total cash payments
received are made up of fixed remuneration inclusive of superannuation and benefits and the amount of the FY18 STI award that is
not deferred and is paid in August 2018.
The table also includes the value of previous years’ deferred STI and LTI awards that vested during FY18 and became realisable.
These values differ from the values in the table in section 14.7.1 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 from sale for
twelve months after vesting.
Previous year awards
that vested during FY18
Fixed
remuneration1
$
FY18 cash
STI2
$
Total cash
in respect
of FY18
$
Prior year
deferred STI
received3
$
Vested and
unrestricted
LTI4
$
Total
received
and
realisable
during FY18
$
1,190,000
654,500
1,844,500
427,837
395,901
2,668,238
650,000
260,000
910,000
420,000
168,000
588,000
500,871
209,965
710,836
90,340
39,780
—
480,000
192,000
672,000
10,374
405,000
158,355
563,355
300,000
120,540
420,540
—
—
490,000
196,000
686,000
38,385
102,344
430,000
168,130
598,130
—
—
179,545
1,179,885
—
—
—
—
—
627,780
710,836
682,374
563,355
420,540
826,729
598,130
Executive KMP
D Abotomey
G Fox
M Cooper
C Daly
P Dumbrell
G Jarrett
A Laing
C Magill
P Tilley
1. Fixed remuneration is the aggregate of cash salary, superannuation and fringe benefits.
2. FY18 cash STI is the amount accrued and payable in respect of FY18 STI opportunity. It is the cash amount to be paid in August 2018 and does not include any
deferred amount in respect of the FY18 STI award.
3. Prior year deferred STI received is the STI amount awarded in August 2017 in respect of FY17 and deferred for twelve months. It is to be paid in August 2018.
4. Vested and unrestricted LTI is the value of the vested LTI on the day it is no longer under restriction from sale. The value is the closing share price on the date
the LTI is no longer subject to restriction from sale. The FY15 LTI that vested during FY18 was restricted from sale until 1 August 2019.
14.7 Statutory details of remuneration
The statutory remuneration disclosures for the year ended 30 June 2018 are detailed below under the following headings and are
prepared in accordance with Australian Accounting Standards (AASBs).
14.7.1 Remuneration of KMP
14.7.2 Service agreements
14.7.3 NED remuneration
14.7.4 Share-based compensation
14.7.5 Equity instrument disclosures relating to KMP
14.7.6 Total shares under option or right to KMP
14.7.7 Loans to KMP
73
Bapcor Annual Report 2018 %
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74
Bapcor Annual Report 2018DIRECTORS’ REPORT
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75
Bapcor Annual Report 2018
14.7.2 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 $1,190,000 (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
Review of FAR
Variable pay
Notice period
Confidentiality
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.
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 70% 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.
Leave
Each contract provides for leave entitlements, as a minimum, in accordance with respective legislation.
Restraint of trade
Each contract includes restraint of trade provisions for a period after termination of employment.
76
Bapcor Annual Report 2018DIRECTORS’ REPORT 14.7.3 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.
The following fee policy for the Board and Committees took effect from 1 July 2016 and remained unchanged in FY18.
NED type
Chairman
Member
Board
$
280,000
110,000
Nomination and Remuneration
Committee
$
Audit and 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 FY18 are set out in the following table. Fees are paid in cash and NEDs were not granted options or share rights.
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.
NED
R McEniry
A Harrison
M Haseltine
T Ryan
Financial
year
Board fees
$
Committee fees
$
Superannuation
$
2018
2017
2018
2017
2018
2017
2018
2017
209,961
258,646
134,225
100,002
100,457
105,948
100,457
100,002
—
—
21,494
27,273
18,265
18,267
27,397
27,273
16,193
18,949
14,355
12,091
11,279
11,800
12,146
12,091
Total
$
226,154
277,595
170,074
139,367
130,000
136,016
140,000
139,367
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 14.7.5.
77
Bapcor Annual Report 2018 14.7.4 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. LTI grants made to FY17 were on the basis of fair value calculated in accordance with Bapcor’s
accounting policy as discussed in note 1 of the financial statements. From FY18 the weighted average face value of shares is used to
calculate the number of LTI Performance Rights granted. 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 date
$1
Vested
%
Quantity
vested
Quantity
remaining
Forfeited/
lapsed
%
Value
expensed
this year
$1
D Abotomey 24/04/14
70,071
30/06/16
220,089
30/06/17
24/12/15
55,198
30/06/17
105,790 30/06/18
4/12/17
177,603
30/06/19
201,002 30/06/20
G Fox
24/04/14
31,778 30/06/16
99,814
30/06/17
24/12/15
24,814
30/06/17
47,558 30/06/18
20/12/16
24,605
30/06/18
46,995
30/06/19
4/12/17
73,194 30/06/20
M Cooper
24/12/15
13,951
30/06/17
26,738 30/06/18
20/12/16
13,351
30/06/18
25,501
30/06/19
4/12/17
39,412 30/06/20
C Daly
15/08/17
7,977
30/06/18
15,236
30/06/19
4/12/17
46,919 30/06/20
P Dumbrell
24/12/15
21,230
30/06/17
40,688 30/06/18
20/12/16
19,470 30/06/18
37,188 30/06/19
4/12/17
54,051 30/06/20
G Jarrett
24/12/15
14,719
30/06/17
28,211
30/06/18
20/12/16
12,495
30/06/18
23,865
30/06/19
4/12/17
38,005 30/06/20
A Laing
4/12/17
28,152 30/06/20
78
382,342
100%
574,449
34%
1,564,369
0%
70,071
220,089
55,198
—
—
—
—
—
—
105,790
177,603
201,002
173,398
100%
258,243
34%
307,393
304,052
0%
0%
145,189
34%
166,799
163,719
90,156
194,903
0%
0%
0%
0%
220,940
34%
243,244
224,529
0%
0%
153,186
34%
156,102
167,619
116,945
0%
0%
0%
31,778
99,814
24,814
—
—
—
—
13,951
—
—
—
–
—
—
—
21,230
—
—
—
—
—
—
—
47,558
24,605
46,995
73,194
—
26,738
13,351
25,501
39,412
7,977
15,236
46,919
—
40,688
19,470
37,188
54,051
14,719
—
—
—
—
—
—
28,211
12,495
23,865
38,005
28,152
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
0%
—
0% 124,092
0% 521,456
0%
—
0%
55,786
0% 102,078
0%
101,351
0%
31,364
0% 55,390
0%
54,573
0%
35,148
0% 64,968
0%
47,727
0%
80,775
0%
74,843
0%
33,092
0%
51,838
0% 52,625
0% 38,982
Bapcor Annual Report 2018DIRECTORS’ REPORT KMP
Grant
date
Quantity
granted
Vest
date
Exercise
price
$
Value at
grant date
$1
Vested
%
Quantity
vested
Quantity
remaining
Forfeited/
lapsed
%
Value
expensed
this year
$1
C Magill
24/04/14
18,114 30/06/16
56,894
30/06/17
24/12/15
14,558
30/06/17
27,901
30/06/18
20/12/16
14,206 30/06/18
27,135
30/06/19
4/12/17
45,981 30/06/20
P. Tilley
24/12/15
13,180
30/06/17
25,261
30/06/18
20/12/16
25,261
30/06/18
25,501
30/06/19
4/12/17
40,351 30/06/20
—
—
—
—
—
—
—
93,634
100%
151,505
34%
177,485
191,008
0%
0%
137,168
34%
166,799
157,874
0%
0%
18,114
56,894
14,558
—
—
—
—
13,180
—
—
—
—
—
—
—
27,901
14,206
27,135
45,981
—
25,261
13,351
25,501
40,351
0%
—
0%
32,728
0% 58,938
0% 63,669
0%
29,631
0% 55,390
0%
55,873
Total
2,008,103
6,683,049
654,410 1,353,693
1,822,317
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.
14.7.5 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.
Balance at
start of
the year
Received
during
the year
Dividend
reinvestment
plan
Purchase
of shares
Sale of
shares
Resigned
from role
Balance at
the end of
the year
2018
Directors
R McEniry
A Harrison
M Haseltine
T Ryan
D Abotomey
Other KMP
G Fox
M Cooper
C Daly
P Dumbrell
G Jarrett
A Laing
C Magill
P Tilley
Total
43,163
56,869
15,713
32,976
—
—
—
—
1,860,246
275,287
594,195
124,628
8,500
—
2,817,313
—
—
827,360
—
13,951
—
21,230
14,719
—
71,452
13,180
—
—
614
892
—
—
—
—
—
—
—
—
—
—
—
15,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(600,000)
(200,000)
—
—
(1,053,313)
—
—
(309,246)
—
(43,163)
—
—
—
—
—
—
—
—
—
—
—
—
—
56,869
31,327
33,868
1,535,533
518,823
22,451
—
1,785,230
14,719
—
589,566
13,180
6,256,335
534,447
1,506
15,000
(2,162,559)
(43,163) 4,601,566
79
Bapcor Annual Report 2018 2017
Directors
R McEniry
A Harrison
M Haseltine
T Ryan
D Abotomey
Other KMP
G Fox
M Cooper
P Dumbrell
G Jarrett
C Magill
P Tilley
Total
Balance at
start of
the year
Received
during
the year
Dividend
reinvestment
plan
Purchase
of shares
Sale of
shares
Resigned
from role
Balance at
the end of
the year
40,294
44,000
—
32,976
—
—
—
—
2,869
2,869
153
—
1,787,306
70,071
2,869
762,417
31,778
—
2,817,313
—
809,246
—
—
—
—
18,114
—
—
—
—
—
—
—
—
10,000
15,560
—
—
—
8,500
—
—
—
—
—
—
—
—
—
(200,000)
—
—
—
—
—
6,293,552
119,963
8,760
34,060
(200,000)
—
—
—
—
—
—
—
—
—
—
—
—
43,163
56,869
15,713
32,976
1,860,246
594,195
8,500
2,817,313
—
827,360
—
6,256,335
14.7.6 Total shares under option or right to KMP
Date granted
Performance rights plans
24/12/15
20/12/16
20/12/16
15/08/17
15/08/17
4/12/17
4/12/17
Total shares under option of right
14.7.7 Loans to executive KMP
No loans were made to executive KMP in FY18.
Vest date
Expiry date
Exercise price of rights
Quantity
30/06/18
30/06/18
30/06/19
30/06/18
30/06/19
30/06/19
30/06/20
n/a
n/a
n/a
n/a
n/a
n/a
n/a
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
302,147
97,478
186,185
7,977
15,236
177,603
567,067
1,353,693
During FY16, loans were made to several executive KMP 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 $2,408,000 and as at 30
June 2018, the outstanding balance on these loans to executive KMP is $642,000. There are no outstanding loans to the CEO or the CFO.
15. Matters subsequent to the end of the financial year
On 3 July 2018, the consolidated entity sold the TRS Tyre and Wheel business in New Zealand (‘TRS’) to Trelleborg Wheel Systems,
a subsidiary of Swedish listed Trelleborg AB for NZD $20m. Final completion is outstanding at the time of this financial report.
TRS is a distributor of tyres for agricultural, materials handling and construction vehicles in New Zealand, specialising in tyres and
complete wheels for tyre and tractor dealers.
80
Bapcor Annual Report 2018DIRECTORS’ REPORT TRS contributed revenue of $24.3m and profit before tax of $2.5m in FY18.
On 1 August 2018, the consolidated entity exercised an option to make final settlement of the Baxter’s deferred contingent
consideration which was recorded as a current liability in the financial statements.
Apart from the dividend declared as discussed above, no other matter or circumstance has arisen since 30 June 2018 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.
16. Environmental regulation
The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or State law.
17. Indemnity and insurance of officers
During the financial year, the company paid a premium of $210,750 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.
18. 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.
19. Auditor
PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001.
20. Non-audit services
Details of the amounts paid or payable to the auditor for 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.
21. Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 82
of the Directors’ Report.
22. 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
Andrew Harrison
Chairman
22 August 2018
Melbourne
Darryl Abotomey
Chief Executive Officer and Managing Director
81
Bapcor Annual Report 2018
AUDITOR’S INDEPENDENCE DECLARATION
Auditor’s Independence Declaration
As lead auditor for the audit of Bapcor Limited for the year ended 30 June 2018, I declare that to the
best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Bapcor Limited and the entities it controlled during the period.
Jason Perry
Partner
PricewaterhouseCoopers
Melbourne
22 August 2018
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331 MELBOURNE VIC 3001
T: +61 3 8603 1000, F: +61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
82
82
Bapcor Annual Report 2018
BAPCOR LIMITED
ABN 80 153 199 912
Financial Report
30 June 2018
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
Corporate directory
84
86
87
88
89
143
144
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 22 August 2018. The Directors
have the power to amend and reissue the financial statements.
Bapcor Annual Report 2018
83
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June 2018
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
Note
Consolidated
2018
$’000
2017
$’000
1,236,681
1,013,553
5
5
5
6
7
22
(667,290)
(552,683)
(260,123)
(209,013)
(20,189)
(23,766)
(17,982)
(23,773)
(47,646)
(42,026)
(10,836)
(12,963)
(46,098)
(702)
(15,582)
(13,452)
118,034
(9,113)
(10,441)
(37,027)
(8,482)
(13,527)
(9,766)
79,720
(33,655)
(25,988)
84,379
9,941
53,732
10,098
94,320
63,830
(9,248)
3,834
(5,414)
88,906
(336)
94,656
94,320
(891)
(1,967)
(2,858)
60,972
(214)
64,044
63,830
(157)
(214)
(371)
—
(244)
(244)
80,669
52,524
8,608
89,277
8,692
61,216
88,906
60,972
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
84
Bapcor Annual Report 2018 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 June 2018
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
2018
cents
2017
cents
Note
39
39
39
39
39
39
30.22
30.06
19.93
19.83
3.56
3.54
3.75
3.73
33.90
33.73
23.76
23.64
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
85
Bapcor Annual Report 2018 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
for the year ended 30 June 2018
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
Retained profits/(accumulated losses)
Equity attributable to the owners of Bapcor Limited
Non-controlling interest
Total equity
Consolidated
2018
cents
2017
$’000
Note
8
9
26
10
11
12
13
6
14
15
26
16
17
18
26
19
20
21
22
23
40,154
146,700
287,337
1,720
39,755
135,784
261,627
40
—
178,860
475,911
616,066
78
52,590
677,736
17,755
3,447
296
49,781
647,831
18,664
4,061
751,606
720,633
1,227,517
1,336,699
187,753
174,768
124
2,442
52,342
1,780
3,455
32,131
—
70,842
242,661
282,976
326,488
429,747
330
637
15,692
33,372
342,510
463,756
585,171
746,732
642,346
589,967
606,456
600,675
(3,645)
(202)
37,138
(17,067)
639,949
583,406
2,397
6,561
642,346
589,967
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
86
Bapcor Annual Report 2018 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
as at 30 June 2018
Consolidated
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:
Contributed
equity
$’000
416,427
—
—
—
Contributions of equity, net of transaction
costs (note 20)
186,144
Non-controlling interests on acquisition
(note 23)
Share-based payments (note 21)
Treasury shares (note 20)
Dividends paid (note 24)
Balance at 30 June 2017
Consolidated
Balance at 1 July 2017
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 (note 20)
Share-based payments (note 21)
Treasury shares (note 20)
Finalisation of prior year business
combinations (note 34)
Divestment of non-controlling
interest (note 23)
Creation of non-controlling
interest on incorporation (note 23)
Dividends paid (note 24)
Balance at 30 June 2018
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
—
—
1,781
—
—
—
—
—
—
(30,059)
—
186,144
6,805
—
—
—
6,805
1,781
(1,896)
(30,059)
—
—
—
—
602,571
(1,896)
(202)
(17,067)
6,561
589,967
Contributed
equity
$’000
602,571
Other
$’000
(1,896)
Reserves
$’000
Accumulated
losses
$’000
Non-
controlling
Interests
$’000
Total equity
$’000
(202)
(17,067)
6,561
589,967
—
—
—
8,380
—
—
—
—
—
—
—
—
—
—
—
(2,599)
—
—
—
—
—
94,656
(336)
94,320
(5,379)
—
(5,379)
94,656
(35)
(371)
(5,414)
88,906
—
1,936
—
—
—
—
—
—
—
—
—
—
—
—
—
—
8,380
1,936
(2,599)
(4,820)
(4,820)
(1,527)
(1,527)
2,554
2,554
(40,451)
—
(40,451)
610,951
(4,495)
(3,645)
37,138
2,397
642,346
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
87
Bapcor Annual Report 2018 CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 June 2018
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Net cash converted
Payments for new store initial inventory purchases
Payments relating to restructuring activities
Payments associated with discontinued operations
Borrowing costs
Transaction costs relating to acquisition of business
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Payment for purchase of business, net of cash and cash equivalents
Payment for deferred settlements
Payments for property, plant and equipment
Payments for intangibles
Proceeds from disposal of property, plant and equipment
Proceeds from divestment of businesses
Net cash from/(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/(repayments) from borrowings
Dividends paid
Borrowing transaction costs
Net cash from/(used in) financing activities
Net increase 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
Cash and cash equivalents at the end of the financial year
Consolidated
2018
$’000
2017
$’000
Note
1,353,533
1,114,521
(1,205,282)
(994,123)
148,251
120,398
(6,769)
(1,964)
(654)
(14,668)
(702)
(11,532)
—
—
(9,288)
(8,482)
(38,063)
(30,002)
85,431
61,094
(15,086)
(373,238)
(9,954)
(6,511)
(14,678)
(15,096)
(966)
776
93,690
(1,120)
974
—
53,782
(394,991)
—
182,022
(414)
(2,599)
(4,596)
(1,896)
—
(79,487)
(103,838)
283,429
(31,781)
(25,501)
(24)
(2,618)
(138,656)
351,353
557
39,755
(158)
17,456
22,392
(93)
40,154
39,755
38
34
12
13
7
20
20
34
18
24
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.
88
Bapcor Annual Report 2018 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 June 2018
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 33.
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 2018 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.
89
Bapcor Annual Report 2018 Note 1. Significant accounting policies (continued)
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.
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 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.
90
Bapcor Annual Report 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 30 June 2018 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.
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.
91
Bapcor Annual Report 2018 Note 1. Significant accounting policies (continued)
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 and also
by an application of a percentage of aged debt. 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.
92
Bapcor Annual Report 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 30 June 2018 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.
93
Bapcor Annual Report 2018
Note 1. Significant accounting policies (continued)
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.
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 5 years. Large scale projects are individually assessed as part of the approval process and determination of finite life
may exceed this range.
94
Bapcor Annual Report 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 30 June 2018 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.
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.
95
Bapcor Annual Report 2018 Note 1. Significant accounting policies (continued)
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.
Dividends
Dividends are recognised when declared during the financial year and no longer at the discretion of the company.
96
Bapcor Annual Report 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 30 June 2018 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.
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.
97
Bapcor Annual Report 2018 Note 1. Significant accounting policies (continued)
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 2018. 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.
AASB 9 Financial Instruments
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. AASB 9 addresses the classification,
measurement and derecognition of financial assets and financial liabilities, introduces new rules for hedge accounting and a new
impairment model for financial assets.
The consolidated entity will adopt this standard from 1 July 2018. The consolidated entity has commenced the assessment of the
impact of its adoption and has not identified any changes from either the classification and measurement for financial assets or
hedge accounting requirements changes, however is still assessing any potential impact for the impairment changes under an
expected credit losses method which may impact the calculation of the provision for doubtful debts.
AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. This new standard will replace
AASB 118 Revenue which covers revenue arising from the sale of goods and the rendering of services and AASB 111 Construction
Contracts which covers construction contracts.
The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer and
permits either a full retrospective or a modified retrospective approach for the adoption.
The consolidated entity will adopt this standard from 1 July 2018 and has performed an initial assessment of the impact of this
change. Given the majority of the consolidated entity’s revenue is derived from over the counter sale of goods with no above normal
industry expected warranties provided or loyalty programs in place, it is not expected that this adoption will have a material impact.
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 will result in almost all leases being recognised on the balance sheet, as the distinction between operating and finance leases is
removed. Under the new standard, as asset (the right to use the leased item) and a financial liability to pay rentals are recognised.
The only exceptions are short-term and low-value leases.
The consolidated entity will adopt this standard from 1 July 2019 and has engaged with an external lease solution provider to
consolidate the required leasing information in order to perform quantification of this change which is still underway. 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 as well as the income statement. The consolidated entity will continue to work with the external lease solution
provider to assess the quantification of this change and the impact of its adoption.
98
Bapcor Annual Report 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 30 June 2018 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 40.
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 8 and 11.
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 9.
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 12 and 13.
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 13.
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 note 16 and 19.
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 34.
99
Bapcor Annual Report 2018 Note 3. Restatement of comparatives
Reclassifications
The financial statements contain reclassification 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
CEO and Managing Director (who is identified as the Chief Operating Decision Maker (‘CODM’)) and is supported by the other
members of the Board of Directors where required 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
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.
Bapcor NZ (previously
Hellaby Automotive)
Specialist Wholesale
Represents the operations of Brake & Transmission, Autolign, HCB Technologies and TRS Tyre & Wheel.
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,
Roadsafe, Diesel Distributors, Federal Batteries, JAS Oceania, and Premier Auto Trade.
Retail & Service
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.
During FY18 there was a reallocation of the Bapcor NZ Australian business units of Diesel Distributors, Federal Batteries, JAS Oceania
and Premier Auto Trade to the Specialist Wholesale segment reflecting the change in business organisation structure. The prior year
comparatives have been adjusted to reflect this change.
The Thailand based operations have been included in the Unallocated/Head Office supporting segment as they are considered
immaterial in nature for the financial period.
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.
100
Bapcor Annual Report 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 30 June 2018 Operating segment information
Consolidated — 2018
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
Total assets
Liabilities
Segment liabilities
Total liabilities
Trade
$’000
Bapcor NZ
$’000
Specialist
Wholesale
$’000
Retail &
Service
$’000
Unallocated/
Head Office
$’000
Total
$’000
501,591
501,591
177,850
364,343
177,850
364,343
239,114
239,114
—
—
1,282,898
1,282,898
(46,217)
145,647
1,382,328
72,123
22,708
38,633
28,784
(11,546)
150,702
(2,932)
(15,582)
(13,452)
(702)
13,870
131,904
(37,584)
94,320
291,888
230,040
373,980
283,528
48,081
1,227,517
1,227,517
100,024
30,551
82,502
42,084
330,010
585,171
585,171
101
Bapcor Annual Report 2018 Note 4. Operating segments (continued)
Consolidated — 2017
Restated
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 10)
Total assets
Liabilities
Trade
$’000
Bapcor NZ
$’000
Specialist
Wholesale
$’000
Retail &
Service
$’000
Unallocated/
Head Office
$’000
Total
$’000
465,102
465,102
87,121
87,121
272,264
220,996
272,264
220,996
—
—
63,296
9,295
28,050
27,579
(11,126)
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
205,397
349,404
274,241
47,850
1,157,839
178,860
1,336,699
Segment liabilities
91,273
23,866
51,421
37,549
471,781
675,890
Held for sale liabilities (note 17)
Total liabilities
Geographical information
Australia
New Zealand
Other
70,842
746,732
Sales to
external customers
Geographical
non-current assets
2018
$’000
2017
$’000
1,058,831
926,638
177,850
86,915
—
—
2018
$’000
561,417
171,946
488
2017
$’000
531,719
170,250
—
1,236,681
1,013,553
733,851
701,969
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.
102
Bapcor Annual Report 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 30 June 2018 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 and divestment 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
2018
$’000
2017
$’000
8,297
3,890
2,861
534
5,519
4,012
3,667
329
15,582
13,527
459
—
243
702
13,452
—
13,452
2,369
3,793
2,320
8,482
9,185
581
9,766
40,895
31,902
Defined contribution superannuation expense
16,075
13,740
103
Bapcor Annual Report 2018 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
Total income tax expense
Income tax expense is attributable to:
Profit from continuing operations
Profit from discontinued operations
Total income tax expense
Deferred tax included in income tax expense comprises:
Decrease/(increase) in deferred tax assets
Decrease in deferred tax liabilities
Total deferred tax expense
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
Gain on divestment
Adjustment recognised for prior periods
Difference in overseas tax rates
Income tax expense
Consolidated
2018
$’000
2017
$’000
33,318
26,907
610
(273)
3,929
(610)
(309)
5,037
37,584
31,025
33,655
25,988
3,929
5,037
37,584
31,025
1,345
(735)
610
(561)
(49)
(610)
118,034
13,870
79,720
15,135
131,904
94,855
39,571
28,457
211
(657)
(1,963)
(273)
695
2,134
321
—
(309)
422
37,584
31,025
104
Bapcor Annual Report 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 30 June 2018 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/(charged) to profit or loss
Credited/(charged) to equity
Additions through business combinations (note 34)
Charged to other comprehensive income
Adjustment recognised for prior periods
Foreign currency translation
Closing balance
Consolidated
2018
$’000
2017
$’000
1,769
13,392
2,296
13,850
8,337
2,259
11,737
2,663
15,810
8,520
39,644
40,989
1,301
1,359
394
597
991
447
882
1,329
41,936
43,677
(24,181)
(25,013)
17,755
18,664
43,677
(1,345)
(58)
790
(338)
(443)
(347)
27,728
561
1,038
13,778
66
53
453
41,936
43,677
105
Bapcor Annual Report 2018 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/(credited) to equity
Additions through business combinations (note 34)
Finalisation of prior year business combinations (note 34)
Foreign currency translation
Adjustment recognised for prior periods
Closing balance
Consolidated
2018
$’000
2017
$’000
6,158
17,643
249
6,688
17,721
376
24,050
24,785
131
228
24,181
25,013
(24,181)
(25,013)
—
—
25,013
20,481
(735)
(97)
—
(78)
108
(30)
(49)
228
4,353
—
—
—
24,181
25,013
106
Bapcor Annual Report 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 30 June 2018 Note 7. Discontinued operations
Description
The discontinued operations relate to the businesses of Footwear and Resource Services that were acquired in the prior year as
part of the Hellaby Holdings Limited acquisition and deemed held for sale on acquisition. During the year they were all successfully
divested. Refer to notes 10 and 17 for further information.
Financial performance information
Footwear
Resource Services
Total revenue
Footwear
Resource Services
Total expenses
Profit before reserve reclassification
Foreign currency reserve reclassification
Net investment hedge reserve reclassification
Total reserve reclassifications
Profit before income tax expense post reserve reclassifications
Income tax expense
Profit after income tax expense
Gain on divestment before income tax
Income tax expense
Gain on divestment after income tax expense
Profit after income tax expense from discontinued operations
Carrying amounts of assets and liabilities divested
Assets held for sale
Total assets
Liabilities held for sale
Total liabilities
Net assets
Consolidated
2018
$’000
27,245
118,402
2017
$’000
64,697
131,906
145,647
196,603
(28,135)
(59,498)
(111,093)
(121,970)
(139,228)
(181,468)
6,419
(2,771)
3,211
440
6,859
(3,929)
15,135
—
—
—
15,135
(5,037)
2,930
10,098
7,011
—
7,011
9,941
Consolidated
2018
$’000
110,963
110,963
52,190
52,190
58,773
—
—
—
10,098
2017
$’000
—
—
—
—
—
107
Bapcor Annual Report 2018 Note 7. Discontinued operations (continued)
Details of the divestments
Net cash sale consideration*
Carrying amount of net assets divested
Net accrued consideration to be received
Accrued divestment and warranty costs
Cash proceeds used to settle intercompany debt
Derecognition of non-controlling interest (note 23)
Foreign currency reserve reclassification
Gain on divestment before income tax
Gain on divestment after income tax
* Net of divestment costs and minority interest payments.
Consolidated
2018
$’000
93,690
(58,773)
1,516
(859)
(31,506)
1,527
1,416
7,011
7,011
2017
$’000
—
—
—
—
—
—
—
—
—
The Footwear and Contract Resources (North America component only) businesses were divested effective 30 September 2017, the
Contract Resources (excluding the North America component) business effective 31 October 2017 and the TBS business effective
31 March 2018.
The Contract Resources (excluding the North America component) divestment was finalised in March 2018 with a NZD $5.0M
(AUD $4.6m) working capital settlement received, which is included in the net cash sale consideration amount in the table above.
The final completion consideration for TBS is yet to be finalised.
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.
108
Bapcor Annual Report 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 30 June 2018 Note 8. 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
2018
$’000
2017
$’000
134,735
126,524
(7,251)
127,484
1,352
(805)
547
12,586
6,083
18,669
(8,296)
118,228
1,366
(851)
515
12,118
4,923
17,041
146,700
135,784
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 11, $292,000 (2017: $265,000) are non-interest bearing. $1,281,000 (2017: $1,704,000) of loans have a
weighted average annual interest rate of 10.2% (2017: 9.9%).
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 11) are as follows:
Current and not due
31 — 60 days
61 — 90 days
Consolidated
2018
$’000
82,001
40,355
5,753
2017
$’000
84,431
28,424
6,184
128,109
119,039
As at 30 June the amount of the provision for impairment of receivables and loans was $8,198,000 (2017: $9,454,000) represented by:
• Provision for trade doubtful debts $5,971,000 (2017: $7,130,000)
• Provision for credit notes $1,280,000 (2017: $1,166,000)
• Provision for customer loans $947,000 (2017: $1,158,000)
Bapcor recognised a loss of $420,000 (2017: $254,000) in respect of impaired receivables during the financial year.
109
Bapcor Annual Report 2018 Note 8. Current assets — trade and other receivables (continued)
Movements in the provision for impairment of receivables and loans are as follows:
Opening balance
Additional provisions recognised
Additions through business combinations
Amounts used
Foreign currency translation
Change in provision from re-measurement
Closing balance
Note 9. Current assets — inventories
Stock in transit — at cost
Stock on hand — at cost
Less: Provision for slow moving inventory
Movements in provision for slow moving inventory
Balance at 1 July 2017
Additional provisions recognised against profit1
Additions through business combinations2
Inventory written off against provision3
Foreign currency translation
Consolidated
2018
$’000
9,454
420
88
(1,484)
(44)
(236)
2017
$’000
8,295
254
2,846
(1,356)
(9)
(576)
8,198
9,454
Consolidated
2018
$’000
15,271
2017
$’000
13,325
318,905
302,287
(46,839)
(53,985)
272,066
248,302
287,337
261,627
53,985
1,977
1,224
(9,920)
(427)
46,839
Notes:
1. Represents inventory provisions raised during the normal course of business for slow moving and obsolete inventory and charged against profit.
2. Represents inventory provisions created for acquired businesses to record inventory in line with Bapcor policy.
3. Represents physical disposal and destruction of obsolete inventory which had been previously provided. This relates largely to inventory acquired as part of
the Metcash Automotive and Hellaby Automotive acquisitions which were recognised as slow moving or obsolete at the time of acquisition and provided for
in line with Bapcor policy.
110
Bapcor Annual Report 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 30 June 2018 Note 10. Current assets — assets held for sale
Footwear
Resource Services
Consolidated
2018
$’000
—
—
—
2017
$’000
27,391
151,469
178,860
As part of the Hellaby Holdings Limited acquisition in the prior year, the two acquired businesses of Footwear and Resource Services
were immediately deemed assets held for sale at the time of acquisition. During the year ending 30 June 2018, these held for sale
businesses were divested. The results of these held for sale businesses have been reported as discontinued operations. Refer to
notes 7 and 17 for further information.
Refer to note 28 for information relating to the determination of the fair value of the assets held for sale.
Note 11. Non-current assets — trade and other receivables
Customer loans
Less: Provision for impairment of receivables
Consolidated
2018
$’000
220
(142)
78
2017
$’000
603
(307)
296
Customer loans relate to loans with franchisees. Refer to note 8 for further information on these customer loans.
Note 12. Non-current assets — property, plant and equipment
Plant and equipment — at cost
Less: Accumulated depreciation
Motor vehicles — at cost
Less: Accumulated depreciation
Consolidated
2018
$’000
62,105
2017
$’000
55,016
(27,310)
(22,409)
34,795
32,607
29,850
(12,055)
17,795
27,396
(10,222)
17,174
52,590
49,781
111
Bapcor Annual Report 2018 Note 12. Non-current assets — property, plant and equipment (continued)
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
23,823
9,399
4,722
(210)
(1)
393
Motor
vehicles
$’000
12,390
5,697
4,182
(685)
(5)
(393)
Total
$’000
36,213
15,096
8,904
(895)
(6)
—
(5,519)
(4,012)
(9,531)
32,607
9,338
946
(117)
(50)
368
17,174
5,340
190
(599)
(52)
(368)
49,781
14,678
1,136
(716)
(102)
—
(8,297)
(3,890)
(12,187)
34,795
17,795
52,590
Consolidated
2018
$’000
2017
$’000
594,118
561,844
58,979
59,442
25,520
(4,960)
20,560
9,925
(5,846)
4,079
25,543
(3,251)
22,292
8,959
(4,706)
4,253
677,736
647,831
Consolidated
Balance at 1 July 2016
Additions
Additions through business combinations
Disposals
Foreign currency translation
Transfers in/(out)
Depreciation expense
Balance at 30 June 2017
Additions
Additions through business combinations (note 34)
Disposals
Foreign currency translation
Transfers in/(out)
Depreciation expense
Balance at 30 June 2018
Note 13. Non-current assets — intangibles
Goodwill
Trademarks
Customer contracts
Less: Accumulated amortisation
Software
Less: Accumulated amortisation
112
Bapcor Annual Report 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 30 June 2018 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 2016
Additions
Additions through business combinations (note 34)
Foreign currency translation
Amortisation expense
Balance at 30 June 2017
Additions
Additions through business combinations (note 34)
Finalisation of prior year business combinations (note 34)
Foreign currency translation
Amortisation expense
Balance at 30 June 2018
Computer
software
$’000
Customer
contracts
$’000
Trade
names
$’000
Goodwill
$’000
Total
$’000
4,371
24,024
44,581
289,231
362,207
1,101
716
—
(1,935)
4,253
966
—
—
(11)
—
—
—
(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
—
—
—
—
—
—
(277)
(186)
—
—
10,199
32,573
966
10,199
32,296
(10,498)
(10,695)
—
(2,861)
(1,129)
(1,732)
4,079
20,560
58,979
594,118
677,736
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. 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% (2017: 11.96%)
• Terminal value growth rate beyond 5 years (set at current CPI): 1.90% (2017: 1.30%)
• Forecast year on year revenue and EBITDA margin growth ranges as follows:
CGU
Trade
Bapcor NZ
Specialist Wholesale
Retail & Service
Revenue growth
EBITDA growth
2.0% — 5.1%
3.0% — 3.1%
3.6% — 5.5%
4.2% — 4.6%
0 — 0.2 percentage points
0 — 0.4 percentage points
0 — 0.4 percentage points
0 — 0.7 percentage points
A reasonable possible change in assumptions would not cause the carrying value of the CGUs to exceed its recoverable amount in
the Trade, Specialist Wholesale and Bapcor NZ CGU’s. The Retail & Service CGU and Autopro brand are relatively more sensitive to
changes in trading conditions.
There have been no further indicators of impairment after the impairment testing date of 31 March 2018 up until the date of
this report.
113
Bapcor Annual Report 2018 Note 13. Non-current assets — intangibles (continued)
Impairment testing (continued)
The balances of goodwill and other intangible assets excluding computer software allocated to each segment as at 30 June were:
Goodwill
Trade
Retail & Service
Specialist Wholesale*
Bapcor NZ*
Other intangible assets
Retail & Service
Specialist Wholesale*
Bapcor NZ*
Consolidated
2018
$’000
2017
$’000
109,071
106,529
131,514
191,586
161,947
126,738
193,725
134,851
594,118
561,843
Consolidated
2018
$’000
2017
$’000
53,185
20,998
5,356
54,815
21,146
5,774
79,539
81,735
* The prior year values have been reclassified to reflect the impact of the move of the Australian Bapcor NZ subsidiaries to be under the Specialist
Wholesale segment.
Note 14. Non-current assets — other
Make good asset
Employee loans
Consolidated
2018
$’000
1,261
2,186
3,447
2017
$’000
1,085
2,976
4,061
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.
114
Bapcor Annual Report 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 30 June 2018 Note 15. Current liabilities — trade and other payables
Trade payables
Accrued expenses
Refer to note 27 for further information on financial risk management.
Note 16. Current liabilities — provisions
Employee benefits
Deferred settlements
Onerous lease provision
Consolidated
2018
$’000
2017
$’000
146,165
133,966
41,588
40,802
187,753
174,768
Consolidated
2018
$’000
29,079
22,337
926
52,342
2017
$’000
27,191
4,267
673
32,131
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, the following deferred settlements are provided for (across both current and non-current deferred settlement
provisions; refer to note 19 for details on non-current portion):
• Precision Automotive; currently provided at $646,000 (2017: $1,594,000)
• Baxters Pty Ltd; currently provided at $20,972,000 (2017: $20,288,000)
• Tricor; currently provided at $953,000 (2017: Nil)
• AADi; currently provided at $1,833,000 (2017: Nil)
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.
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
Consolidated
2018
$’000
5,282
2017
$’000
4,742
115
Bapcor Annual Report 2018 Note 17. Current liabilities — liabilities relating to assets held for sale
Footwear
Resource Services
Eliminations
Consolidated
2018
$’000
—
—
—
—
2017
$’000
8,184
63,000
(342)
70,842
The prior year liabilities relating to assets held for sale related to the Footwear and Resource Services businesses which were deemed
to be held for sale on business combination of Hellaby Holdings Limited and subsequently divested during FY18. Refer to notes 7
and 10 for further information.
Note 18. Non-current liabilities — borrowings
Secured bank loans
Less: unamortised transaction costs capitalised
Consolidated
2018
$’000
2017
$’000
328,391
432,229
(1,903)
(2,482)
326,488
429,747
Refer to note 27 for further information on financial risk management.
Bapcor has a $500M debt facility with ANZ, Westpac, The Bank of Tokyo-Mitsubishi UFJ and The Hongkong and Shanghai Banking
Corporation. The 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 less than 3.0X and the fixed cover charge ratio being greater than 1.75X. Refer to note 27 for
further information.
Borrowing costs of $23,000 (2017: $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 total borrowing costs of $1,903,000 (2017: $2,482,000) have not yet been amortised through the statement of
comprehensive income.
116
Bapcor Annual Report 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 30 June 2018 Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Bank loans including overdraft*
Used at the reporting date
Bank loans including overdraft*
Unused at the reporting date
Bank loans including overdraft*
Consolidated
2018
$’000
2017
$’000
497,500
497,500
328,391
432,229
169,109
65,271
* Total facilities available at 30 June was $500M (2017: $500M). The amount used in the above table excludes $2.5m (2017: $2.5m) of facility which relates to
bank guarantees under the working capital tranche.
Note 19. Non-current liabilities — provisions
Employee benefits
Deferred settlements
Make good provision
Onerous lease provision
Consolidated
2018
$’000
3,459
2,067
8,725
1,441
2017
$’000
2,644
20,913
8,169
1,646
15,692
33,372
Deferred settlements and onerous lease provision
Refer to note 16.
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.
Movements in provisions
Movements in each class of provision during FY18, other than employee benefits, are set out below:
Consolidated — 2018
Carrying amount at the start of the year
Additional provisions recognised
Additions through business combinations
Amounts transferred to current
Amounts used
Foreign currency translation
Carrying amount at the end of the year
2,067
8,725
Deferred
consideration
$’000
Make good
$’000
Onerous
lease
$’000
20,913
8,169
19
2,048
(20,913)
—
—
534
100
—
(13)
(65)
1,646
579
—
(285)
(466)
(33)
1,441
117
Bapcor Annual Report 2018 Note 20. Equity — issued capital
Ordinary shares
Treasury shares
Consolidated
2018
Shares
2017
Shares
2018
$’000
2017
$’000
280,244,752 278,633,080
610,951
602,571
—
(200,000)
(4,495)
(1,896)
280,244,752 278,433,080
606,456
600,675
Movements in ordinary share capital
Details
Balance
Date
1 July 2016
Issue for Baxters Pty Ltd acquisition
3 August 2016
Exempt Employee Share Scheme offer
9 September 2016
Issue for Hellaby Holdings Limited acquisition
— Institutional placement (net of costs)
30 September 2016
Issue for Hellaby Holdings Limited acquisition
— Retail placement (net of costs)
4 December 2016
Issue for Dividend Reinvestment Plan
21 April 2017
Share issue transactions costs
Deferred tax credit recognised directly in equity
Shares
$’000
245,857,351
416,427
500,000
138,519
2,780
734
28,205,129
161,051
3,115,772
816,309
—
—
16,288
4,558
(648)
1,381
Balance
30 June 2017
278,633,080
602,571
Issue for Dividend Reinvestment Plan
29 September 2017
Hellaby transaction costs (net of tax)
Issue for Dividend Reinvestment Plan
27 April 2018
932,347
—
679,325
4,896
(290)
3,774
Balance
30 June 2018
280,244,752
610,951
Movements in treasury shares
Details
Balance
Treasury shares purchased
Utilisation of treasury shares for LTI
Balance
Return of employee shares
Purchase of treasury shares
Utilisation of treasury shares for LTI
Balance
Date
1 July 2016
16 December 2016
16 December 2016
30 June 2017
1 July 2017
14 September 2017
14 September 2017
30 June 2018
Shares
$’000
—
—
(351,344)
(1,896)
151,344
—
(200,000)
(1,896)
(22)
—
(480,686)
(2,599)
680,708
—
—
(4,495)
118
Bapcor Annual Report 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 30 June 2018 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 (2017: $5.40) per share.
Note 21. Equity — reserves
Foreign currency reserve
Cash flow hedge reserve
Share-based payments reserve
Net investment hedge reserve
Consolidated
2018
$’000
(10,131)
667
5,819
—
2017
$’000
(918)
(2,519)
3,883
(648)
(3,645)
(202)
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.
119
Bapcor Annual Report 2018 Note 21. Equity — reserves (continued)
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2016
Revaluation
Deferred tax
Share-based payment expense
Foreign currency translation
Balance at 30 June 2017
Revaluation
Deferred tax
Share-based payment expense
Reclassified to profit and loss (note 7)
Foreign currency translation
Cancellation on divestment
Balance at 30 June 2018
Foreign
currency
reserve
$’000
—
—
—
—
(918)
(918)
—
—
—
2,771
(11,984)
—
(10,131)
Cash flow
hedge
reserve
$’000
(1,256)
(1,860)
541
—
56
(2,519)
3,999
(1,101)
—
—
89
199
667
Share-
based
payments
reserve
$’000
Net
investment
hedge
reserve
$’000
2,101
—
157
1,625
—
3,883
—
(284)
2,220
—
—
—
—
(631)
(17)
—
—
(648)
2,473
17
—
(3,211)
—
1,369
Total
$’000
845
(2,491)
681
1,625
(862)
(202)
6,472
(1,368)
2,220
(440)
(11,895)
1,568
5,819
—
(3,645)
Note 22. Equity — retained profits/(accumulated losses)
Accumulated losses at the beginning of the financial year
Profit after income tax expense for the year
Dividends paid (note 24)
Retained profits/(accumulated losses) at the end of the financial year
Consolidated
2018
$’000
2017
$’000
(17,067)
(51,052)
94,656
64,044
(40,451)
(30,059)
37,138
(17,067)
120
Bapcor Annual Report 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 30 June 2018 Note 23. Equity — non-controlling interest
Resource Services
Balance at 1 July
Non-controlling interest acquired on business combination
Non-controlling interest loss for the period
Foreign currency revaluation
Finalisation of prior year business combinations (note 34)
Divestment of non-controlling interest
Balance at 30 June
Consolidated
2018
$’000
2017
$’000
6,561
—
(214)
—
(4,820)
(1,527)
—
6,805
(214)
(30)
—
—
—
6,561
As part of the prior year acquisition of Hellaby Holdings Limited, the acquired Resource Services held for sale asset had a non-
controlling interest that was material to the consolidated entity. Refer to note 34. This non-controlling interest was divested on the
sale of the Contract Resources business unit that formed part of the Resource Services held for sale asset. The amounts relating to
this non-controlling interest and subsequent transactions are represented above.
Investment in Car Bits Asia, Thailand
Balance at 1 July
Non-controlling interest on incorporation
Non-controlling interest loss for the period
Foreign currency revaluation
Balance at 30 June
Consolidated
2018
$’000
2017
$’000
—
2,554
(122)
(35)
2,397
—
—
—
—
—
In March 2018, the consolidated group entered into a tri-party joint venture in Thailand holding 51% of the shares of the incorporated
entity Car Bits Asia., Co. Ltd for the purposes of opening the Burson stores in Thailand. The consolidated group is considered to have
effective control.
Note 24. Equity — dividends
Dividends
Dividends paid during the financial year were as follows:
Final dividend for the year ended 30 June 2017 (2017: 30 June 2016) of 7.5 cents
(2017: 6.0 cents) per ordinary share*
Interim dividend for the year ended 30 June 2018 (2017: 30 June 2017) of 7.0 cents
(2017: 5.5 cents) per ordinary share**
Consolidated
2018
$’000
2017
$’000
20,882
14,781
19,569
15,278
40,451
30,059
* $4,896,000 of the final dividend for the year ended 30 June 2017 was settled under the Dividend Reinvestment Plan.
** $3,774,000 (2017: $4,558,000) of the interim dividend for the year ended 30 June 2018 (2017: 30 June 2017) was settled under the Dividend
Reinvestment Plan.
121
Bapcor Annual Report 2018
Note 24. Equity — dividends (continued)
The Board has declared a final dividend in respect of FY18 of 8.5 cents per share, fully franked. The final dividend will be paid on
27 September 2018 to shareholders registered on 31 August 2018.
The final dividend takes the total dividends declared in relation to FY18 to 15.5 cents per share, fully franked, representing an increase
of dividends paid of 19.2% compared to the prior financial year. Dividends paid and declared in FY18 represents 50.3% of pro-forma
net profit after tax from continuing operations.
Franking credits
Franking credits available for subsequent financial years based on a tax rate of 30%
Consolidated
2018
$’000
51,234
2017
$’000
38,252
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 25. 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 (19.0) (2017: (16.0)) cents per share.
Net assets per share at 30 June was $2.25 (2017: $2.12) per share.
122
Bapcor Annual Report 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 30 June 2018 Note 26. Derivative financial instruments
Current assets
Forward foreign exchange contracts — cash flow hedges
1,720
40
Consolidated
2018
$’000
2017
$’000
Current liabilities
Forward foreign exchange contracts — cash flow hedges
Interest rate swap contracts — cash flow hedges
Non-current liabilities
Interest rate swap contracts — cash flow hedges
(116)
(8)
(124)
(330)
1,266
(1,780)
—
(1,780)
(637)
(2,377)
Refer to note 27 for further information on financial risk management.
Refer to note 28 for further information on fair value measurement.
Note 27. 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.
123
Bapcor Annual Report 2018 Note 27. Financial risk management (continued)
The consolidated entity holds the following financial instruments:
Financial assets
Cash and cash equivalents
Trade and other receivables*
Derivative financial instruments
Total financial assets
Financial liabilities
Trade and other payables
Derivative financial instruments
Deferred consideration
Borrowings**
Total financial liabilities
Consolidated
2018
$’000
2017
$’000
40,154
140,695
1,720
39,755
131,157
40
182,569
170,952
187,753
174,768
454
24,404
2,417
25,180
328,391
432,229
541,002
634,594
* Trade and other receivables in the table excludes prepayments which are not classified as financial instruments.
** Borrowings excludes any unamortised transaction costs capitalised.
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 — 2018
% change
Effect
on profit
before tax
Effect on
equity
% change
AUD strengthened
AUD weakened
Effect
on profit
before tax
Derivative financial instruments
Other financial assets
Other financial liabilities
1%
1%
1%
—
(398)
367
(31)
262
—
—
262
(1%)
(1%)
(1%)
—
406
(374)
32
Effect on
equity
267
—
—
267
124
Bapcor Annual Report 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 30 June 2018 Consolidated — 2017
% change
Effect
on profit
before tax
Effect on
equity
% change
AUD strengthened
AUD weakened
Effect
on profit
before tax
Derivative financial instruments
Other financial assets
Other financial liabilities
1%
1%
1%
—
(287)
259
(28)
589
—
943
1,532
(1%)
(1%)
(1%)
—
293
(264)
Effect on
equity
(601)
—
(962)
29
(1,563)
In FY18, a net gain of $3.2m has been recognised in the discontinued operations income statement which relates to the favourable
repayment of NZD denominated loans.
Price risk
The consolidated entity is not exposed to any significant price risk.
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
2018
2017
Weighted
average
interest
rate
%
3.62%
2.39%
Weighted
average
interest
rate
%
3.30%
2.39%
Balance
$’000
328,391
(60,000)
268,391
Balance
$’000
432,229
(60,000)
372,229
As at 30 June, if the weighted average interest rate of the bank borrowings had changed by a factor of +/—10%, interest expense
would increase/decrease by $505,000 (2017: $1,427,000).
The amount recognised in other comprehensive income net of tax in relation to interest rate swaps was $209,000 (2017: $516,000).
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:
1. The consolidated entity has a strict code of credit for all customers, including obtaining agency credit information, confirming
references and setting appropriate credit limits.
2. Derivative counterparties and cash transactions are limited to high quality independently rated financial institutions with a
minimum rating of ‘A’.
3. Concentrations of credit risk are minimised by undertaking transactions with a large number of customers.
4. 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 8 and 11. No trade receivables have an
external credit rating, and management classify trade receivables on aging profiles.
125
Bapcor Annual Report 2018 Note 27. Financial risk management (continued)
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 overdraft*
* The unused facility value excludes any facility that relates to bank guarantees. Refer to note 18 for further information.
Consolidated
2018
$’000
169,109
2017
$’000
65,271
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 — 2018
Trade and other payables
Borrowings*
Deferred consideration
Total non-derivatives
Derivatives
Interest rate swaps
Forward foreign exchange contracts
Total derivatives
Consolidated — 2017
Trade and other payables
Borrowings*
Deferred consideration
Total non-derivatives
Derivatives
Interest rate swaps
Forward foreign exchange contracts
Total derivatives
1 year or
less
$’000
Between 1
and 2 years
$’000
Between 2
and 5 years
$’000
187,753
13,424
23,039
224,216
—
—
169,707
186,195
2,000
171,707
—
186,195
8
116
124
105
—
105
225
—
225
1 year or
less
$’000
Between 1
and 2 years
$’000
Between 2
and 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
Over 5
years
$’000
Remaining
contractual
maturities
$’000
—
—
—
—
—
—
—
187,753
369,326
25,039
582,118
338
116
454
Over 5
years
$’000
Remaining
contractual
maturities
$’000
—
—
—
—
—
—
—
174,768
499,328
26,438
700,534
637
1,780
2,417
* 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.
126
Bapcor Annual Report 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 30 June 2018 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.
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); and
• Fixed charge cover ratio not below 1.75:1 (EBITDA plus Rent : Net Total Cash Interest plus Rent).
Note 28. 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 — 2018
Assets
Derivative financial instruments
Total assets
Liabilities
Derivative financial instruments
Deferred consideration
Total liabilities
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
—
—
—
—
—
1,720
1,720
454
—
454
—
—
—
24,404
24,404
1,720
1,720
454
24,404
24,858
127
Bapcor Annual Report 2018 Note 28. Fair value measurement (continued)
Consolidated — 2017
Assets
Derivative financial instruments
Assets held for sale
Total assets
Liabilities
Derivative financial instruments
Liabilities held for sale
Deferred consideration
Total liabilities
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
—
—
—
—
—
—
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 29. 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
Total auditor remuneration
128
Consolidated
2018
$’000
2017
$’000
622,752
510,000
61,594
60,602
49,600
106,000
111,194
166,602
733,946
676,602
61,905
333,010
121,799
65,451
187,250
249,155
88,102
12,000
100,102
433,112
983,101
1,109,714
Bapcor Annual Report 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 30 June 2018 Note 30. Commitments and contingent liabilities
Commitments
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 contracts*
Other commitments in relation to facility construction and consumable purchases*
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
2018
$’000
2017
$’000
3,372
555
—
—
2,982
343
483
1,571
3,927
5,379
40,792
73,171
5,463
40,650
72,802
6,257
119,426
119,709
3,840
5,879
19
4,298
7,110
291
9,738
11,699
*
The commitments in relation to performance of contracts and facility construction and consumable purchases in the prior year 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
There are no unrecorded contingent liabilities (2017: Nil).
Note 31. Related party transactions
Parent entity
Bapcor Limited is the parent entity. Refer to note 33 for supplementary information about the parent entity including internal
dividends received.
Subsidiaries
Interests in subsidiaries are set out in note 35.
Key management personnel
Disclosures relating to key management personnel are set out in note 32 and the Remuneration Report included in the
Directors’ Report.
129
Bapcor Annual Report 2018 Note 32. 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
Amounts recovered by deferred FY17 STI
Closing balance
Consolidated
2018
$
8,114
236
68
1,822
10,240
Consolidated
2018
$’000
1,354
(583)
(129)
642
2017
$
6,543
218
60
1,249
8,070
2017
$’000
1,780
(426)
—
1,354
Refer to the audited Remuneration Report within the Directors’ Report for further details on key management personnel
compensation, as well as note 14 for further details on the loans made to key management personnel.
Note 33. Parent entity information
Set out below is the supplementary information about the parent entity.
Parent
2018
$’000
2017
$’000
(9,809)
(18,276)
51,337
108,000
41,528
89,724
Statement of comprehensive income
Loss after income tax
Internal dividend income
Total comprehensive income
130
Bapcor Annual Report 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 30 June 2018 Parent
2018
$’000
2017
$’000
—
—
681,085
672,422
—
—
—
—
606,456
600,675
5,819
41,528
4,014
89,724
(40,451)
(30,059)
67,733
8,068
681,085
672,422
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
Note 34. Business combinations
FY18 acquisitions
The consolidated entity acquired the net assets of the following businesses:
• Autobarn Auburn
• Autobarn Bendigo
• Autobarn Chirnside Park
• Autobarn Doncaster
• Autobarn Launceston
• Autobarn Noosa
• Autobarn O’Conner
• Autobarn Penrith
• Autobarn Waurn Ponds
• Autopro Bathurst
• Autopro Seymour
• Oxford Motor Spares
• Tricor Engineering (‘Tricor’)
• Ultra Cheap Spares
The consolidated entity also acquired 100% of the shares in the following companies:
• AADi Australia Pty Ltd and A&F Drive Shaft Repair QLD Pty Ltd (‘AADi’)
These acquisitions were made to strengthen the Bapcor offering as well as increase the company store network presence.
131
Bapcor Annual Report 2018 Note 34. Business combinations (continued)
The assets and liabilities recognised as a result of these acquisitions are set out below. Store business combinations have been
aggregated. These are provisional at the time of this report and the fair values are to be finalised within the acquisition period of
twelve months from acquisition date.
Cash and cash equivalents
Trade and other receivables
Inventories
Plant and equipment
Motor vehicles
Deferred tax asset
Trade and other payables
Provisions
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Cash paid
Deferred and contingent consideration
Debt forgiven
Cash used to acquire business, net of cash acquired:
Cash consideration
Less: cash and cash equivalents
Net cash used
Tricor
Fair value
$’000
AADi
Fair value
$’000
Other
Fair value
$’000
—
—
75
78
119
37
—
(73)
236
2,133
2,369
1,455
914
—
415
2,126
904
10
33
126
(298)
(111)
3,205
2,421
5,626
3,804
1,822
—
17
7
4,580
858
38
627
(169)
(568)
5,390
5,645
11,035
10,259
—
776
2,369
5,626
11,035
1,455
—
3,804
(415)
10,259
(17)
1,455
3,389
10,242
Goodwill in relation to these acquisitions relates to the anticipated future probability of their contribution to the consolidated entity’s
total business.
Each of the 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.
Refer to note 5 for details on acquisition related costs incurred.
Deferred and contingent consideration
Deferred consideration has been estimated and provided for on the Tricor and AADi acquisitions and are currently accrued at
$953,000 and $1,833,000 respectively as at 30 June 2018 (notes 16 and 19).
132
Bapcor Annual Report 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 30 June 2018 FY17 acquisitions
In the previous financial year the consolidated entity made the following acquisitions:
• Autobarn Beenleigh
• Autobarn Burleigh Heads
• Autobarn Nambour
• Autobarn Orange
• Autobarn Virginia
• Autopro Colac
• Autopro Gawler
• Autopro Gladstone
• Autopro Raymond Terrace
• Baxters Pty Ltd
• Hellaby Holdings Limited
• MTQ Engine Systems (Aust) Pty Ltd
• Roadsafe Automotive Products
There have been no material change to these business combinations except for the Hellaby Holdings Limited acquisition as per
the below:
Trade receivables
Inventories
Assets held for sale
Plant and equipment
Intangible assets
Deferred tax asset
Trade and other payables
Deferred tax liability
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
30 June
2018
Fair value
$’000
30 June
2017
Fair value
$’000
36,280
65,581
121,341
5,328
11,107
9,952
36,280
65,581
163,334
5,328
11,384
9,952
(34,984)
(34,984)
(3,009)
(3,087)
(59,624)
(64,423)
(8,323)
(1,065)
(8,323)
(1,065)
(79,487)
(79,487)
(1,985)
(6,805)
61,112
93,685
273,573
241,000
334,685
334,685
The change to the held for sale valuation relate to the finalisation of working capital of the discontinued operating divisions of Hellaby
Holdings Limited.
133
Bapcor Annual Report 2018 Note 35. 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
Bapcor Services Pty Ltd (formerly ACN 610 722 168)
Burson Automotive Pty Ltd
Car Bitz & Accessories Pty Ltd
Aftermarket Network Australia Pty Ltd
Automotive Brands Group Pty Ltd
Midas Australia Pty Ltd
Specialist Wholesalers Pty Ltd
MTQ Engine Systems (Aust) Pty Ltd
Baxters Pty Ltd
Bapcor Australia Pty Ltd (formerly Hellaby Australia Pty Ltd)
Diesel Distributors Australia Pty Ltd
Bapcor Automotive Australia Pty Ltd
(formerly Hellaby Automotive Australia Pty Ltd)
Ryde Batteries Pty Ltd
Ryde Batteries (Wholesale) Pty Ltd
Federal Batteries Qld Pty Ltd
Principal place of business/
Country of incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Bapcor Auto Electrical Pty Ltd (formerly Hellaby Auto Electrical Pty Ltd) Australia
Premier Auto Trade Pty Ltd
JAS Oceania Pty Ltd
Australian Automotive Electrical Wholesale Pty Ltd
Low Voltage Pty Ltd
Hellaby Auto Fuel Pty Ltd***
ACN 119 121 729 Pty Ltd (formerly TRS Tyre & Wheel Pty Ltd)***
Bapcor New Zealand Ltd (formerly Hellaby Holdings Ltd)
Bapcor Automotive Ltd (formerly Hellaby Automotive Ltd)
Brake & Transmission NZ Ltd
Diesel Distributors Ltd
TRS Tyre & Wheel Ltd
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
Bapcor Services New Zealand Ltd (formerly Truck & Trailer Parts Ltd)
New Zealand
HCB Technologies Ltd
Hellaby Resource Services Ltd*
Hellaby Investment No 8 Ltd*
Generator Fund Ltd***
Renouf Corporation International
Benequity Properties, LLC
Bapcor International Pty Ltd
Car Bits Asia Co. Ltd
134
New Zealand
New Zealand
New Zealand
New Zealand
United States
United States
Australia
Thailand
Ownership interest
2018
%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
2017
%
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%
51.0%
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%
—
—
Bapcor Annual Report 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 30 June 2018 Name
AADi Australia Pty Ltd
A&F Drive Shaft Repair Queensland Pty Ltd
Dasko Ltd**
Hellaby Brands Ltd***
Hellaby Investments Number 10 Ltd***
Hellaby Investment No 13 Ltd***
Hellaby Investment No 14 Ltd***
Hellaby Investment No 15 Ltd***
Number 1 Shoes Ltd*
R Hannah & Co Ltd*
TBS Group Ltd*
TBS Farnsworth Ltd*
Total Bridge Services JV*
T.B.S. Coatings Ltd*
TBS Remcon Ltd*
Crow Refractory Ltd*
Contract Resources Investments Ltd*
Contract Resources South America Ltd*
Principal place of business/
Country of incorporation
Australia
Australia
New Zealand
New Zealand
New Zealand
New Zealand
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) Ltd*
Contract Resources Holdings Pty Ltd*
Contract Resources Finance Pty Ltd*
Contract Resources Australia Pty Ltd*
Contract Resources Equipment Pty Ltd*
DDT International Pty Ltd*
Contract Resources Pty Ltd*
CR Travel Pty Ltd*
Contract Resources (Karratha) Pty Ltd*
Contract Resources USA Inc*
Contract Resources Ltd LLC*
Catalyst Handling Resources Holdings LLC*
Catalyst Handling Resources Ltd*
Catalyst Handling Resources LLC*
JACR (JV)*
New Zealand
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
2018
%
100.0%
100.0%
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2017
%
—
—
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
50.0%
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%
*
These subsidiaries relate to the disposed Footwear and Resource Services business units of the Hellaby Holdings Ltd acquisition. A number of these entities
relate to the holding structure that was not disposed of and are in the process of being wound up.
** Dasko Ltd was amalgamated into HCB Technologies Ltd during the financial period.
*** These subsidiaries are non-trading. Some were wound up during the financial period and others are in the process of being wound up.
135
Bapcor Annual Report 2018 Note 36. Deed of cross guarantee
The following entities are party to a deed of cross guarantee entered into in June 2017 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 Ltd
Burson Automotive Pty Ltd
Aftermarket Network Australia Pty Ltd
Specialist Wholesalers 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
Bapcor Services Pty Ltd (formerly ACN 610 722 168)
Australian Automotive Electrical Wholesale Pty Ltd
Diesel Distributors Australia Pty Ltd
Federal Batteries Qld Pty Ltd
Bapcor Australia Pty Ltd (formerly Hellaby Australia Pty Ltd)
Bapcor Automotive Australia Pty Ltd
(formerly Hellaby Automotive Australia Pty Ltd)
Bapcor Auto Electrical Pty Ltd (formerly Hellaby Auto Electrical Pty Ltd)
Hellaby Auto Fuel Pty Ltd
JAS Oceania Pty Ltd
Low Voltage Pty Ltd
Premier Auto Trade Pty Ltd
Ryde Batteries Pty Ltd
Ryde Batteries (Wholesale) Pty Ltd
ACN 119 121 729 (formerly TRS Tyre & Wheel Pty Ltd)
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.
Statement of comprehensive income
Revenue
Expenses
Profit before income tax expense
Income tax expense
Profit after income tax expense
Other comprehensive income
Changes in fair value of cash flow hedges
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Equity — retained profits/(accumulated losses)
Accumulated losses at the beginning of the financial year
Profit after income tax expense
Dividends paid
Retained profits/(accumulated losses) at the end of the financial year
Statement of financial position
Current assets
Cash and cash equivalents
Trade and other receivables
136
2018
$’000
2017
$’000
1,057,362
922,348
(949,937)
(844,420)
107,425
77,928
(29,103)
(25,001)
78,322
52,927
(5,378)
(5,378)
2,191
2,191
72,944
55,118
2018
$’000
2017
$’000
(28,184)
(51,052)
78,322
52,927
(40,451)
(30,059)
9,687
(28,184)
2018
$’000
2017
$’000
28,322
124,535
30,905
114,618
Bapcor Annual Report 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 30 June 2018 Inventories
Derivative financial instruments
Income tax refund due
Non-current assets
Trade and other receivables
Property, plant and equipment
Intangibles
Deferred tax
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
Intercompany
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits/(accumulated losses)
Total equity
243,988
221,179
1,090
—
27
1,045
397,935
367,774
78
296
49,096
46,679
506,788
426,157
10,260
3,447
—
10,356
4,061
30,879
340,416
334,685
910,085
853,113
1,308,020
1,220,887
160,855
150,446
89
2,341
50,512
934
4,998
30,195
213,797
186,573
315,197
429,747
330
12,868
153,531
637
28,402
—
481,926
458,786
695,723
645,359
612,297
575,528
606,456
600,676
(3,846)
3,036
9,687
(28,184)
612,297
575,528
137
Bapcor Annual Report 2018 Note 37. Events after the reporting period
On 3 July 2018, the consolidated entity sold the TRS Tyre and Wheel business in New Zealand (‘TRS’) to Trelleborg Wheel Systems,
a subsidiary of Swedish listed Trelleborg AB for NZD $20m. Final completion is outstanding at the time of this financial report.
TRS is a distributor of tyres for agricultural, materials handling and construction vehicles in New Zealand, specialising in tyres and
complete wheels for tyre and tractor dealers.
TRS contributed revenue of $24.3m and profit before tax of $2.5m in FY18.
On 1 August 2018, the consolidated entity exercised an option to make final settlement of the Baxter’s deferred contingent
consideration which was recorded as a current liability in note 16.
Apart from the dividend declared as disclosed in note 24, no other matter or circumstance has arisen since 30 June 2018 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 38. Cash flow information
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
Unwinding of the discount on deferred settlements
Amortisation of capitalised borrowing costs
Non-cash share-based payment expense
Component relating to discontinued operations
Change in operating assets and liabilities:
Increase in trade and other receivables
Increase in inventories
Decrease/(increase) in other operating assets
Increase in trade and other payables
Decrease in provision for income tax
Decrease in other operating liabilities
Net cash from operating activities
Net debt reconciliation
Consolidated
Cash and cash equivalents
Cash and cash equivalents relating to non-controlling interest
Borrowings excluding unamortised transaction costs capitalised (note 18)
Net derivative financial instruments (note 26)
Net debt
138
Consolidated
2018
$’000
2017
$’000
94,320
63,830
15,582
13,527
(60)
858
604
(80)
833
752
2,220
1,625
(9,942)
(10,098)
(8,873)
(20,151)
936
12,764
(1,013)
(1,814)
(396)
(12,450)
(1,027)
10,737
(3,623)
(2,536)
85,431
61,094
2018
$’000
40,154
(2,481)
(328,391)
1,266
(289,452)
Bapcor Annual Report 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 30 June 2018 Note 39. Earnings per share
Earnings per share for profit from continuing operations
Profit after income tax attributable to the owners of Bapcor Limited
84,379
53,732
Consolidated
2018
$’000
2017
$’000
Basic earnings per share
Diluted earnings per share
cents
30.22
30.06
cents
19.93
19.83
Consolidated
2018
$’000
2017
$’000
Earnings per share for profit from discontinued operations
Profit after income tax attributable to the owners of Bapcor Limited
9,941
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
3.56
3.54
cents
3.75
3.73
Consolidated
2018
$’000
2017
$’000
94,320
63,830
336
214
94,656
64,044
cents
33.90
33.73
cents
23.76
23.64
Number
Number
Weighted average number of ordinary shares
Weighted average number of ordinary shares used in calculating basic earnings per share
279,252,093 269,599,050
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares
1,407,835
1,337,272
Weighted average number of ordinary shares used in calculating diluted earnings per share
280,659,928 270,936,322
The weighted average number of ordinary shares for 2017 has been restated for the effect of the rights issues performed in
accordance with AASB 133 Earnings Per Share.
139
Bapcor Annual Report 2018 Note 40. Share-based payments
The Long Term Incentive (‘LTI’) plan is intended to assist in the motivation, retention and reward of nominated senior executives. The
LTI is a payment contingent on two or 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 FY18 the following offers were made to eligible participants:
• In relation to the FY17 year for the Chief Executive — Hellaby Automotive (C Daly). These allocated Performance Rights have
a performance period that ends 30 June 2018 and 30 June 2019 in line with the FY17 offer that was previously made to other
executives at which time the performance hurdles are tested.
Grant date
Performance hurdle
Performance period
Test date
Expiry date
Quantity granted
Exercise price
Fair value at 15/08/171
Other conditions
Share price on valuation date
Volatility
Dividend yield
Risk free rate
Tranche 1
15/08/17
Tranche 2
15/08/17
Relative TSR
EPS
Relative TSR
EPS
1/07/16 to 30/06/18 1/07/16 to 30/06/18 1/07/16 to 30/06/19 1/07/16 to 30/06/19
30/06/18
Once tested
30/06/19
Once tested
4,999
2,978
9,354
5,882
Nil
Nil
$2.89
$5.41
$3.04
$5.30
Restriction on sale to 30/06/19
Restriction on sale to 30/06/20
$5.51
27.71%
2.09%
1.66%
$5.51
27.71%
2.09%
1.76%
• In relation to the FY17 year for the CEO and Managing Director (D Abotomey) following the successful passing of a resolution at the
FY17 Annual General Meeting. These allocated Performance Rights have a performance period that ends 30 June 2019 at which
time the performance hurdles are tested.
Grant date
Performance hurdle
Performance period
Test date
Expiry date
Quantity granted
Exercise price
Fair value at 4/12/171
Other conditions
Share price on valuation date
Volatility
Dividend yield
Risk free rate
4/12/17
Relative TSR
EPS
1/07/16 to 30/06/19
30/06/19
Once tested
88,802
$2.842
Nil
88,801
$5.372
Restriction on sale to 30/06/20
$5.57
26.80%
2.33%
1.74%
1. The fair value represents the value used to calculate the accounting expense as required by accounting standards.
140
Bapcor Annual Report 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 30 June 2018 • In relation to the FY18 year an offer to participate in the LTI was made to nine of Bapcor’s senior executives. These allocated
Performance Rights have a performance period that ends on 30 June 2020 at which time the performance hurdles are tested.
Grant date
Performance hurdle
Performance period
Test date
Expiry date
Quantity granted
Exercise price
Fair value at 4/12/171
Other conditions
Share price on valuation date
Volatility
Dividend yield
Risk free rate
4/12/17
Relative TSR
EPS
1/07/17 to 30/06/20
30/06/20
Once tested
283,535
283,532
Nil
$3.059
$5.249
Restriction on sale to 30/06/21
$5.57
26.80%
2.33%
1.88%
1. The fair value represents the value used to calculate the accounting expense as required by accounting standards.
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%
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%
7.5%
Greater than 7.5% and less than 15%
Equal to or greater than 15%
Nil
20%
Pro-rata straight-line vesting
100%
Performance Rights issued up to 30 June 2017 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.
For Performance Rights issued on or after 1 July 2017, if vesting conditions are met, the Performance Rights are converted into fully
paid ordinary shares of the Company at the election of the Participant.
There is no specific expiry date, however the Performance Rights lapse if the vesting conditions are not met.
Shares will be subject to a restriction on sale for twelve months from vesting of the Performance Rights.
141
Bapcor Annual Report 2018 Note 40. Share-based payments (continued)
Set out below are summaries of Performance Rights granted under the LTI:
2018
Grant date
24/04/14
01/07/15
01/07/15
01/08/15
01/08/15
01/07/16
01/07/16
01/07/17
2017
Vesting date
30/06/17
30/06/17
30/06/18
30/06/17
30/06/18
30/06/18
30/06/19
30/06/20
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
475,362
128,868
246,986
76,478
146,574
124,286
—
—
—
—
—
7,977
237,389
192,839
—
567,067
(475,362)
(128,868)
—
—
—
—
—
(23,252)
223,734
(76,478)
—
—
—
—
—
—
(9,414)
(17,981)
—
146,574
122,849
412,247
—
567,067
1,435,943
767,883
(680,708)
(50,647)
1,472,471
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
24/04/14
24/04/14
01/07/15
01/07/15
01/08/15
01/08/15
01/07/16
01/07/16
30/06/16
30/06/17
30/06/17
30/06/18
30/06/17
30/06/18
30/06/18
30/06/19
$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
—
—
—
—
—
—
—
—
124,286
237,389
(151,344)
—
—
—
—
—
—
—
1,225,612
361,675
(151,344)
—
—
—
—
—
—
—
—
—
—
475,362
128,868
246,986
76,478
146,574
124,286
237,389
1,435,943
The weighted average exercise price for the Performance Rights exercised in FY18 was $5.4007 (2017: $5.3958).
The weighted average contractual lives are 1.74 years (2017: 1.48 years).
The expense arising from share-based payment transactions relating to the LTI during the year as part of employee benefits expense
was $2,220,000 (2017: $1,625,000).
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 (‘ESSSP’). The ESSSP
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.
142
Bapcor Annual Report 2018NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSfor the year ended 30 June 2018 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
2018 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 36 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
Andrew Harrison
Chairman
22 August 2018
Melbourne
Darryl Abotomey
Chief Executive Officer and Managing Director
143
Bapcor Annual Report 2018
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF BAPCOR LIMITED
Independent auditor’s report
To the members of Bapcor Group Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Bapcor Group 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 2018 and of its
financial performance for the year then ended
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
●
●
●
●
●
●
the consolidated statement of financial position as at 30 June 2018
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the consolidated statement of comprehensive income 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
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331 MELBOURNE VIC 3001
T: +61 3 8603 1000, F: +61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
144
144
Bapcor Annual Report 2018
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
Materiality
● For the purpose of our audit we used overall Group materiality of $5.5 million, which represents
approximately 5% of the Group’s 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.
● We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonly
acceptable thresholds.
Audit Scope
● Our audit focused on where the Group made subjective judgements; for example, significant accounting
estimates involving assumptions and inherently uncertain future events.
● Audit procedures were performed on the Australian and New Zealand operations assisted by local component
auditors in New Zealand under the supervision of the Group engagement team.
● Our engagement team included valuation experts to assist in the audit procedures over 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. We communicated the key audit matters to the
Audit and Risk Committee.
145
145
Bapcor Annual Report 2018
Key audit matter
How our audit addressed the key audit matter
Carrying value of goodwill and intangible
assets with indefinite lives
Refer to note 13 $653million
In assessing the models, our audit procedures
included, amongst others:
▪ At 30 June 2018, the Group recognised
$594million of goodwill and $58.9million of
intangible assets with indefinite lives (trade
names).
▪ At least annually, an impairment test is
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’
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 consolidated
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 intangible assets and the
amount of any resulting impairment (if any).
The most significant areas of judgement relate
to:
o cash flow forecasts, including the terminal
value forecast
o short-term and future growth rates in
revenue and EBITDA margin
o the discount rate adopted in the models
o relief from royalty rate, in determining the
fair value less costs to sell value of trade
names.
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.
▪ Assessing whether the division of the Group’s
goodwill and intangible assets into CGUs, was
consistent with our knowledge of the Group’s
operations and internal Group reporting,
based on discussions with Management 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 to each
CGU 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.
▪ Assessing the Group’s historical ability to
forecast cash flows by comparing budgets with
reported actual results for the past year.
▪ Assessing the sensitivity to change of key
assumptions used in the models that either
individually or collectively would be required
for assets to be impaired.
▪ Together with PwC valuation experts,
evaluating whether the discount rates used in
the models appropriately reflected the risks of
the CGUs by comparing the discount rates to
industry and market factors.
▪
Together with PwC valuation experts,
assessing whether the value in use models
used to test Goodwill for impairment included
the appropriate inputs as required under
Australian Accounting Standards.
▪ With the assistance of PwC valuation experts,
assessing whether the appropriate valuation
method was used to determine fair value less
costs to sell for tradenames; in addition
assessing whether the key inputs into the fair
value calculation were appropriate including
discount rate used, relief from royalty rate and
marketing and administration cost recharge.
146
146
Bapcor Annual Report 2018INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BAPCOR LIMITED
Key audit matter
How our audit addressed the key audit matter
▪ Testing the mathematical accuracy of the
models’ calculations on a sample basis.
▪ Considering the adequacy and accuracy of
disclosures in note 13, including those
regarding the key assumptions, in accordance
with the requirements of Australian
Accounting Standards.
Carrying value of Inventory
Refer to note 9 $287.3 million
Our audit procedures included the following,
amongst others:
▪ The Group’s inventory is held at the lower of
▪ Considering whether all the necessary
cost or net realisable value.
▪ At 30 June 2018, the Group recorded a
provision for aged and slow moving inventory
of $46.8million. The provision is estimated
based on the application of judgemental
provisioning rates to aged and slow moving
inventory categories. Specific provisioning for
items where the known net realisable value is
lower than cost are also recorded.
▪ We consider this to be a key audit matter
because of the significant judgement and
estimation required by the Group in
determining the net realisable value of
inventory and the potentially material impact
that the provision could have on the financial
report.
Accounting for the sale of discontinued
businesses
Refer to note 7
The Group sold a number of businesses during
the financial year ended 30 June 2018, which
were all classified as held-for-sale assets at 30
June 2017. They were acquired as part of the
Hellaby Holdings Limited (“Hellaby”) acquisition
during the year ended 30 June 2017.
As part of the finalisation of the Hellaby
acquisition accounting, the fair value determined
for assets classified as held-for-sale was finalised
(refer to note 34 in the financial statements). This
resulted in an increase to Goodwill in the current
year of $32.5million.
We considered this a key audit matter because of
inventory balances were included in the
inventory provision calculation.
▪ Evaluating whether the methodology applied
to the provision calculation was consistent
with that applied in the prior year.
▪ Testing the movement in the inventory
provision, including agreeing a sample of
inventory written off to supporting
documentation such as board approvals.
▪ Considered the adequacy and accuracy of
disclosures in note 9 in light of the
requirements of Australian Accounting
Standards.
Our audit procedures included the following,
amongst others:
▪ Agreeing the fair value of consideration
received by the Group, for all the
businesses sold during the year, to the
relevant third party sale and purchase
agreements, and agreeing a sample of
payments received to the Group’s bank
records.
▪ Testing the Group’s finalisation of
acquisition accounting of the Hellaby
acquisition, including:
▪ Agreeing a sample of revisions to
the fair value of assets acquired
as for held-for-sale to supporting
sale and purchase agreements
147
147
Bapcor Annual Report 2018
Key audit matter
How our audit addressed the key audit matter
the significant judgement required by the Group
in estimating the fair values of assets classified as
held for sale in finalising the Hellaby acquisition
accounting and the material impact on the
financial report of the change to acquisition
accounting arising from the change to fair values.
▪ Testing the accuracy of the
revised allocation of Goodwill on
acquisition.
▪ Considering the adequacy of the
disclosures made in note 7 and note 34,
in light of the requirements of Australian
Accounting Standards.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the Group's annual report for the year ended 30 June 2018, but does not
include the financial report and our auditor’s report thereon. Prior to the date of this auditor's report,
the other information we obtained included the Director’s Report and Corporate Directory. We expect
the remaining other information to be made available to us after the date of this auditor's report,
including Highlights, Chairman’s Report, Board of Directors, Chief Executive Officer’s Report,
Executive Team, Our Reach, Our History, Segment Overview, Community & Sustainability and
Information for Shareholders.
Our opinion on the financial report does not cover the other information and we do not and will not
express an opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
If, based on the work we have performed on the other information 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 no realistic alternative but to do so.
148
148
Bapcor Annual Report 2018INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BAPCOR LIMITED
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 60 to 80 of the directors’ report for the
year ended 30 June 2018.
In our opinion, the remuneration report of Bapcor Group Limited for the year ended 30 June 2018
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
PricewaterhouseCoopers
Jason Perry
Partner
Melbourne
22 August 2018
149
149
Bapcor Annual Report 2018
SHAREHOLDER INFORMATION
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 22 August 2018 (‘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
5,955
2,989,884
7,031
1,823
1,072
18,046,700
13,143,687
22,746,654
58
223,317,827
15,939
280,244,752
1.07
6.44
4.69
8.12
79.68
100.00
%
—
—
—
14.74
85.26
100%
Holders of less than a marketable parcel of $500 included in above total
162
1,741
2.2 Distribution of holders of performance rights
Total
holders
Performance
Rights
—
—
—
5
7
12
—
—
—
217,062
1,255,409
1,472,471
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 +
Total
150
Bapcor Annual Report 2018 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 (Australia) Limited
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
National Nominees Limited
BNP Paribas Nominees Pty Ltd
Garrmar Investments Pty Ltd
Glendale Investment Group Pty Ltd
Mutual Trust Pty Ltd
D Abotomey
Netwealth Investments Limited
AMP Life Limited
Schram Investments Pty Ltd
Sandhurst Trustees Ltd
Shoppee Nominees Pty Ltd
C Magill
Australian Executor Trustees Limited
UBS Nominees Pty Ltd
JMB Family Investments Pty Ltd
Buttonwood Nominees Pty Ltd
Forsyth Barr Custodians Ltd
Other Shareholders
Total Shareholders
Ordinary Shares
Number
Held
% of Issued
Capital
96,182,157
39,286,918
25,551,221
20,050,003
18,846,739
6,922,699
1,764,000
1,612,070
1,535,533
1,423,793
1,366,155
1,102,507
949,600
934,567
589,566
473,777
374,592
400,000
326,462
281,671
34.32
14.02
9.12
7.15
6.73
2.47
0.63
0.58
0.55
0.51
0.49
0.39
0.34
0.33
0.21
0.17
0.13
0.14
0.12
0.10
219,974,030
60,270,722
78.50
21.50
280,244,752
100.00
151
Bapcor Annual Report 2018 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
BT Investment Management
FMR LLC
Paradice Investment Management Pty Ltd
Number
Held
17,381,473
16,844,711
15,243,705
% of
Issued
Capital
6.20
6.01
5.44
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
1,472,471 unlisted performance rights have been granted to 12 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.
152
Bapcor Annual Report 2018SHAREHOLDER INFORMATION CORPORATE DIRECTORY
Directors
Andrew Harrison (Independent, Non-Executive Director and Chairman)
Darryl Abotomey (Chief Executive Officer and Managing 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:
Registered office
Share register
Auditor
Date:
Time:
29 October 2018
1.30pm
Address: Allens
Level 28, 126 Phillip Street
Sydney NSW 2000
61 Gower Street
Preston VIC 3072
Australia
Computershare Investor Services Pty Ltd
452 Johnston Street
Abbotsford VIC 3067
Australia
Ph: +61 3 9415 4000
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
RM# BAP-18001
Bapcor Annual Report 2018