Annual Report 2019
Contents
Automotive Aftermarket Supply Chain
5 Year Strategic Targets
Chairman’s Report
Chief Executive Officer’s Report
Board of Directors
Executive Team
Segment Overview
Trade
Bapcor New Zealand
Specialist Wholesale
Retail
Sustainability Overview
Director’s Report
Financial Report
Corporate Directory
03
04
06
08
12
14
16
18
20
22
24
26
37
75
148
Annual General Meeting
Date 1 November 2019
Time 1.30pm
Address Holding Redlich
Level 8, 555 Bourke Street
Melbourne VIC 3000
Bapcor Limited
ACN 153 199 912
Vision Statement
We are Australasia’s leading provider of
automotive aftermarket parts, accessories,
automotive equipment and services; operating
out of over 950 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.
Highlights
Group Revenue*
up by 4.8% to
$1,297m
NPAT*
Growth of 9.0%
$94.3m
EBITDA*
Growth of 9.8%
$164.6m
Locations
950+
Countries
Employees
3
4,500+
*Proforma
results excluding
discontinuing
operations.
01
Bapcor Limited Annual Report 2019 Bapcor Group Businesses
Specialist Wholesalers
Trade
Retail
Service
Burson Auto Parts
Australia’s leading
national distributor
of automotive parts,
accessories and
equipment to
automotive workshops.
Burson Auto Parts
Thailand
Provides a wide-range
of automotive parts and
accessories to trade and
retail customers through
a store network across
Bangkok.
Brake & Transmission
(BNT)
New Zealand’s premier
supplier of automotive
parts to workshops.
Precision Equipment
Leading trans-tasman
supplier of automotive
workshop equipment to
car dealerships, service
and repair workshops.
Truck & Trailer Parts
Operates in the heavy
haulage and general
commercial vehicle
aftermarket in New
Zealand.
Autobarn
The premium retail offering
throughout Australia,
providing customers with
exactly what they want
for their car. Autobarn
stores also fit what they
sell.
Autopro
Established in 1982,
Autopro is Australia’s
oldest independent
automotive aftermarket
parts and accessories
retailer.
Opposite Lock
Four-wheel drive specialist
accessory retail chain
operating in Australia and
selected export markets.
Offering a comprehensive
range of accessories
and equipment to suit all
popular 4x4s and SUVs.
Sprint Auto Parts
A South Australian icon,
Sprint outlets provide
a full range of quality
automotive parts and
accessories for both retail
and trade customers.
ABS
One-stop independently
operated shops for all
servicing needs; spanning
logbook services, brake,
clutch, cooling system,
suspension, steering and
all other mechanical
repairs or services.
Battery Town
New Zealand chain of
specialist auto electrical
services workshops.
Midas
Australia’s full auto
service experts, providing
car servicing, brakes,
suspension and all general
repair requirements for the
growing, and increasingly
diverse, automotive car
parc.
The Shock Shop
New Zealand’s largest
chain of dedicated
steering and suspension
specialist workshops.
HCB Technologies
Leading New Zealand
battery and associated
accessories supplier for
automotive, commercial,
marine and deep cycle
applications.
JAS Oceania
Leading trans-tasman
based supplier of quality
automotive electrical
parts and accessories
for passenger cars,
commercial vehicles,
agricultural machinery
and marine applications.
MTQ Engine Systems
Australia’s largest diesel
fuel injection and turbo
charger sales and service
provider to the trade.
Premier Auto Trade
Leading importer and
wholesaler of electronic
fuel injection, engine
management and service
components.
Roadsafe Automotive
Products &
Toperformance
Products
A wholesale distributor,
specialising in under car
and 4WD components,
offering Australia’s
most comprehensive
array of steering and
suspension components.
Toperformance Products
is a specialist high-end
suspension distributor to
the Australian market.
AAD
Specialises in the import,
re-manufacture and
wholesale of premium
quality brake, clutch,
steering, suspension,
cooling, engine and
servicing products.
AADi Australia
Specialist importer/
distributor of driveshaft/
CV, wheel bearing and
shock absorber products.
Autolign
New Zealand’s largest
specialised steering
and suspension product
importer and distributor.
Baxters
One of Australia’s largest
automotive electrical
parts distributors,
specialising in heavy
duty and industrial
applications.
Bearing Wholesalers
Australia’s top selling
distributor of automotive
bearings and provides
repairers with a
comprehensive range of
bearings, oil seals, drive
shafts, CV joints and
engine belts.
Commercial Truck
Parts Group
Comprised of Don Kyatt
Spare Parts (QLD), I Know
Parts, H.I.M. Spares,
Japanese Commercial
Spares, Japanese
Trucks Australia, and He
Knows Truck Parts. The
leading distributor of light
commercial truck parts
and accessories across
Australia.
Diesel Distributors
Leading supplier of spare
parts and components
for diesel fuel injection
systems.
Federal Batteries
Australian specialist
supplier of premium and
high-end quality batteries
for use across a wide
range of passenger and
vehicle applications.
02
Bapcor Limited Annual Report 2019 Automotive Aftermarket Supply Chain
Specialist Wholesalers
Trade
Retail
Service
Consumer
03
Bapcor Limited Annual Report 2019 Bapcor 5 Year Strategic Targets
Trade
57% Segment Contribution
Trade focussed “parts professionals” supplying
workshops in Australia & New Zealand
Specialist
Wholesale
27% Segment Contribution
#1 or #2 Industry category specialists in parts programs
Retail & Service
Retail
16% Segment Contribution
Premium retailer of automotive accessories
Supplying the independents: parts, accessories & 4WD
Retail & Service
Service
Reliable & trusted car servicing at affordable prices
Supporting the independents
Asia
Bringing automotive aftermarket parts to Asia
04
Bapcor Limited Annual Report 2019 230
AUS Target
Stores
Currently 181
75
NZ Target
Stores
Currently 58
25
NZ Relocation &
Refurb Target
Currently 6
35%
Own brand
Target
Currently 24%
A$600m
A$50m
AUS Target
Turnover
Currently A$437m
NZ Target
Turnover
Currently A$31m
40
CTPG Target
Locations
Currently 14
55%
Own brand
Target
Currently 45%
200
Independents
Target Stores
Currently 195
150
NZ
Target Stores
Currently 117
120
AUS Opposite Lock
Target Stores
Currently 84
35%
Own brand
Target
Currently 24%
90%
Intercompany
Sourcing Target
200
AUS Autobarn
Target Stores
Currently 134
500
AUS
Target Stores
Currently 119
TBD
Target
Locations
Currently 4
05
Bapcor Limited Annual Report 2019 06
Bapcor Limited Annual Report 2019 Chairman’s Report
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 2019 (FY19).
The 2019 financial year delivered
another record performance for
Bapcor, which saw exceptional
results in the face of softer trading
conditions. Sales were robust
across all Bapcor business segments.
Revenue, EBITDA and EPS recorded
strong growth, and net profit
after tax increased to a record
$94.3 million.
Bapcor’s geographic footprint
increased in FY19 to more than
950 locations across Australia,
New Zealand and Thailand. Bapcor
now employs more than 4,500 team
members in three countries.
In recent years, Bapcor has
acquired a considerable number
of businesses across the Trade,
Specialist Wholesale and Retail
segments. A key focus of the Board
in FY19 has been on continuing the
integration of these businesses into
the Group, optimising the benefits
of the new businesses, and increasing
intercompany sales.
In addition, we are building for the
future by undertaking significant
technology and infrastructure
investments in the areas of
warehousing, retail point of sale
and information technology (IT).
These investments will ensure Bapcor
systems and processes are fit for
purpose and well positioned in the
years to come.
The year saw excellent progress
in achieving Bapcor’s five-year
strategic targets, with an expanded
geographical footprint, growth of
our Specialist Wholesale businesses
and increased own brand and
intercompany sales.
The year ahead promises to be
another exciting one as we continue
to grow through network expansion
and strategic acquisitions, invest in
infrastructure, and progress toward
our strategic targets.
On behalf of the Board, I wish to
extend my thanks to our CEO Darryl
Abotomey, his leadership team, and
to all Bapcor team members for an
outstanding year.
Finally, I would like to express
my thanks to our shareholders,
franchisees, customers and
suppliers for their ongoing support
and continued contribution to
Bapcor’s success.
Andrew Harrison
Chairman
There were several notable
achievements in relation to Bapcor’s
Environmental, Social and
Governance (ESG) strategy. This
included establishing an ESG
governance process at Board level,
identifying sustainability risks, and
integrating these within the Group
risk management framework. We
also improved our responsible
sourcing practices, with a primary
focus on mitigating the risks of
modern slavery within our supply
chain. We reduced our environmental
impact through offsetting delivery
vehicle fleet emissions and LED
replacement programs. Bapcor
continues to support the
communities in which our businesses
operate through a wide range
of local and grass-root initiatives.
Further information about Bapcor’s
commitment to sustainability and
the ESG strategy can be found on
page 27 and on the Bapcor website.
In FY19, the Board announced an
increase of 9.7% on the full year
dividend, declaring a final dividend
of 9.5 cents per share fully franked,
resulting in a full year fully franked
dividend of 17.0 cents per share.
Over the coming financial year 2020
(FY20), the Board will work to ensure
the continued growth and sustained
success of the Bapcor Group on
behalf of our shareholders.
“Revenue, EBITDA
and EPS recorded
strong growth, and
net profit after tax
increased to a record
$94.3 million.”
07
Bapcor Limited Annual Report 2019 “Our
performance
demonstrates
the resilience of
our businesses
in the face of
challenging market
conditions.”
08
Bapcor Limited Annual Report 2019 Chief Executive Officer’s Report
The 2019 financial year (FY19)
delivered another set of record
financial results for the Bapcor
Group. Our performance
demonstrates the resilience
of our businesses in the face of
challenging market conditions.
Solid growth was achieved in our
Trade and Specialist Wholesale
businesses in Australia and New
Zealand, which comprise more
than 80% of Bapcor’s business.
The growth in these businesses
is evidenced in top-line revenue
growth, as well as margin and
earnings expansion. Retail also
achieved solid results in difficult
market conditions.
Bapcor’s results in FY19 were
enhanced by the acquisition of
the Commercial Truck Parts Group
(CTPG) that specialises in the sale
of light commercial truck spare parts
(you will see a lot of these vehicles
doing deliveries for online shopping).
The CTPG’s 14 locations form a
national footprint that provides
a platform for future growth in this
market segment.
Overall, the Group added 59 new
company locations throughout its
network in FY19. Bapcor now operates
in more than 950 locations across
Australia, New Zealand and Thailand.
Revenue
Revenue growth increased by 4.8% to
$1,297m, including the acquisition of
CTPG and a full twelve months of
trade from the FY18 acquisitions of
Tricor Equipment and AADi, offset by
the divestment of TRS.
Earnings before interest, tax,
depreciation and amortisation
(EBITDA)
EBITDA in FY19 increased by 9.8% to
$164.6m (11.7% excluding TRS
divestment). Trade EBITDA increased
by 8.5% to $78.2m as a result of
revenue margin and earnings
expansion. Bapcor New Zealand
EBITDA increased by 13.8% to $22.9m.
Specialist Wholesale EBITDA
increased by 20.0% with inclusion of
CTPG and growth in intercompany
sales. Retail EBITDA decreased by
6.0% due to greater investment in new
company stores and higher proportion
of immature loss-making stores.
Net Profit After Tax (NPAT)
NPAT grew 9.0% in FY19 to $94.3m,
representing a four-year CAGR of
42%. Excluding the TRS divestment,
NPAT growth was 11.2% on the prior
year. NPAT growth from continuing
operations reflects the sustained
growth trajectory of robust
underlying performance across
the Bapcor business segments and
the contribution from acquired
businesses.
Earnings Per Share (EPS)
For continuing operations, EPS grew
10.3% to 33.45 cents per share in FY19.
This increase continues a trend
continue a trend of year-on-year
growth, which has delivered a CAGR
of close to 25% over the last five
years.
Dividends Per Share
Bapcor declared a total FY19 fully
franked dividend of 17.0 cps. This
represents a CAGR of 18% over five
years and a 9.7% increase on the FY18
fully franked dividend.
Key highlights of FY19 compared
to the prior year’s results
Bapcor divested TRS in New Zealand on 3 July 2018. For comparative
purposes, the results including and excluding TRS from the prior year are:
Revenue growth of 4.8% to $1,297m (6.9% excluding TRS divestment)
Same-store sales:
Burson Trade +2.2% (+2.5% in H2)
BNT +5.3% (+5.9% in H2)
Autobarn +5.0% company-owned (+5.7% in H2),
franchise stores +0.2% overall
EBITDA growth of 9.8% to $164.6m (11.7% excluding TRS divestment)
NPAT growth of 9.0% to $94.3m (11.2% excluding TRS divestment), and
EPS growth of 8.0% to 33.45 cps (10.3% excluding TRS divestment).
09
Bapcor Limited Annual Report 2019 Chief Executive Officer’s Report
Operational Performance
Trade
Revenue from the Burson Trade
segment, consisting of Burson Auto
Parts and Precision Automotive
Equipment, grew by 4.6% with
same-store sales increasing 2.2%
(and 2.5% in H2 FY19). This top-line
growth was achieved despite intense
market competition, meaning there
were limited opportunities for general
price increases. EBITDA grew by 8.5%
and EBITDA margin was up 50 basis
points compared to FY18. The Burson
store network expanded to 181 stores
nationwide, an increase of 11 stores in
the year. We have also made solid
inroads into digital sales, with Burson
Trade now supplying more than $80m
of sales via its B2B online ordering
system.
People development remains a high
priority, particularly building a talent
pipeline of team members and future
leaders, and increasing their skills
and knowledge. Burson Trade ran a
variety of training and development
courses throughout the year.
Bapcor New Zealand (Bapcor NZ)
Bapcor NZ continued to perform
solidly. Excluding the impact of the
divestment of TRS, in FY19 revenue
increased by 7.4% and EBITDA
increased 13.8%. Bapcor NZ’s largest
business, the BNT trade business,
achieved same-store sales growth
of 5.3% (5.9% in H2 FY19). In addition
EBITDA margin grew by 80 basis
points compared to FY18. BNT
expanded its store network by four
during the year, to 58 stores. Newly
introduced own brand products have
achieved good success and
contributed to margin expansion
– along with ongoing improvements
in procurement costs and pricing
management. The Precision
Equipment business was also
introduced into NZ towards the end
of FY19.
Specialist Wholesale Group (SWG)
The Specialist Wholesale segment,
consisting of thirteen Specialist
Wholesale business units, increased
revenue by 13.4% and EBITDA by
20.0%. This reflects good growth,
particularly in the auto-electrical/
engine management businesses,
10
margin expansion, and the impact of
the newly acquired Commercial Truck
Parts businesses. The newly formed
Commercial Truck Parts Group
created a new growth platform in an
expanding sector. SWG EBITDA
margin increased by 60 basis points
compared to FY18. Intercompany
sales to Bapcor businesses grew by
35%, which reflects increased sales
from SWG into our Trade networks in
Australia and New Zealand, and into
Retail. There are a number of
intercompany sales programs in place
that will see a continued increase in
the amount of intercompany sales,
and also the proportion of own brand
products sold.
Retail
The Retail segment makes up less
than 20% of Bapcor’s revenue and
earnings and consists of Autobarn,
AutoPro and Sprint Auto Parts stores,
as well as Midas and ABS service
workshops. Revenue for FY19
increased by 6.8% compared to FY18,
largely due to an increase in the
number of company-owned stores as
well as underlying company-owned
store sales growth. Autobarn’s online
sales trebled through its Click &
Collect service and the introduction
of Click & Deliver. The Autobarn store
network consisted of 134 stores at
year end, six more than 30 June 2018.
The number of Autobarn company-
owned stores over the same period
grew from 48 to 66 and now
represents almost half of the
Autobarn network. Same-store sales
in Autobarn company-owned stores
was 5% (5.7% in H2 FY19) with
franchise store same-store sales
growth being flat. EBITDA decreased
by 6.0% compared to FY18 reflecting
the impact of the significant number
of new company stores that are loss
making in their initial phase, as well
as the challenging retail environment.
Asia
Our Asia expansion continues to
show positive early signs. While the
store rollout was slower than
targeted due to delays in store
refurbishments and product sourcing,
four greenfield stores were
operational across Bangkok at
30 June 2019. Good progress has
been made in selling to chain
workshops and the increase in store
earnings has been similar to the
Australian trade store experience.
Building For The Future
Bapcor’s strategic direction remains
unchanged and is published on our
website. Bapcor’s five-year strategic
targets focus on our core strengths
and capabilities and comprise
consistent, measureable targets
addressing: expanding our
geographical footprint, growing our
Specialist Wholesale businesses, and
developing sourcing initiatives to
increase own brand sales and
intercompany sales. A number of
targets have been revised upward
and new targets added. We report
on our progress toward these targets
on page 4-5.
We are progressing with IT and
infrastructure evolution projects to
ensure we are able to exceed our
customers’ expectations now and
into the future. We expect to finalise
the implementation of IT
infrastructure that will improve
systems redundancy and stability by
Q1 FY20. The first location for a new
Warehouse Management System will
go live in October 2019. The feasibility
and planning phase of our
Warehouse Evolution Program is
scheduled to conclude in H1 FY20.
A full roll-out of our new Retail
point-of-sale system will take place
during FY20.
To help drive change, we have
reinvigorated the Group Leadership
Team. Tim Cockayne has been
appointed to the role of Executive
General Manager – Retail. Steve
Drummy has taken the role of
Executive General Manager – SWG
Engine Management. Mathew
Cooper, who was Executive General
Manager – Development, has been
appointed to the role of Executive
General Manager – SWG
Mechanical. In July 2019, Jeff Nicol
was appointed to the new role of
Chief Operating Officer. Jeff leads
Bapcor’s supply chain, IT, Group
procurement and co-ordination of
the Group-wide branding strategy.
Bapcor Limited Annual Report 2019 A note on Electric Vehicles…
A frequent question I receive from
shareholders, and a prevalent topic
in the media, is the emergence of
electric vehicles (EVs). The hype does
not match the reality. In 2018, EVs in
Australia made up less than 1.0% of
new car sales and comprised less
than 0.5% of cars on Australian roads.
Modelling undertaken by the
Australian Government’s Department
of Infrastructure, Transport, Cities and
Regional Development suggests it
will be well into the 2030s before EVs
make up 50% of new car sales. As
there is a 10 to 15-year lag between
new vehicle sales and overall fleet
numbers, Bapcor’s projection,
consistent with the Department’s
modelling, is that EVs won’t form even
half of the Australian car parc until
well into the 2040s.
Our electrical and electronics
wholesale businesses are well-placed
to serve the changing needs of the
automotive aftermarket, and we will
continue to optimise the business to
meet the current and future needs of
our customers, as the businesses
have done for the past forty-plus
years as the composition of the car
parc has evolved.
Outlook
The fundamentals of the automotive
aftermarket remain positive and we
are excited about many
opportunities for the Bapcor Group,
including network growth,
procurement and supply chain
efficiencies, and own brand sales.
We are also continuing to invest in
technology and systems to support
the future growth of the business.
Bapcor is focussed on consolidating
and optimising its current portfolio of
businesses, as well as looking for new
opportunities as they arise.
Financial year 2020 (FY20) trading
has commenced in line with
expectations. Revenue and profit
growth are expected to continue in
FY20, with proforma NPAT projected
to grow by mid to high single digits.
EBITDA is expected to increase by
approximately two percentage
points above the forecast NPAT
growth due to the higher
depreciation charges from the
investments.
Bapcor’s continued growth would not
be possible without the focus and
dedication of all employees and
franchisees, and the support of our
suppliers and customers. Together,
this has again enabled us to deliver
an exceptional result.
I express my profound thanks to
everyone who has contributed to
making Bapcor the great business
it is today.
Darryl Abotomey
Managing Director and
Chief Executive Officer
Revenue ($M)
EPS ($M)
1,237
1,297
1,014
33.4
31.0
24.4
686
375
17.9
13.6
EBITDA & NPAT* ($M)
NPAT*
164.6
150.0
94.3
86.5
117.4
65.8
77.0
43.6
41.5
23.1
FY2015
FY2016
FY2017
FY2018
FY2019
FY2015
FY2016
FY2017
FY2018
FY2019
FY2015
FY2016
FY2017
FY2018
FY2019
Dividends per share
Total
Interim
17.0
15.5
13.0
11.0
5.0
5.5
7.0
7.5
8.7
4.0
FY2015
FY2016
FY2017
FY2018
FY2019
“Financial year 2020 trading
has commenced in line with
expectations. Revenue and
profit growth are expected
to continue in FY20”
11
Bapcor Limited Annual Report 2019 Board of Directors
12
Bapcor Limited Annual Report 2019 Therese Ryan
Independent,
Non-Executive Director
Margaret Anne Haseltine
Independent,
Non-Executive Director
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,
Darryl 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 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 Company
Directors.
Andrew Harrison
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 and a Member of the
Australian Institute of Company
Directors.
Margaret is a professional
Non-Executive Director, appointed
to the Bapcor Board in May 2016.
Margaret brings more than 30 years’
business experience in a broad range
of senior positions and 10 years
experience in board directorship.
Margaret has significant experience
in the areas of supply chain and
logistics, customer interface in the
FMCG sector, change management,
governance, and management.
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.
Jennifer Macdonald
Independent,
Non-Executive Director
Jennifer was appointed to the Board in
September 2018 as an Independent,
Non Executive Director and Chair
of the Audit & Risk Committee.
Jennifer is a professional company
director and has a strong and
extensive background in financial and
general management roles across a
range of industries and holds a Masters
of Entrepreneurship and Innovation
from Swinburne University, is a
Graduate Member of the Australian
Institute of Company Directors and a
Member of the Institute of Chartered
Accountants ANZ.
13
Bapcor Limited Annual Report 2019 Executive Team
Darryl Abotomey
Managing Director &
Chief Executive Officer
Greg Fox
Chief Financial Officer
& Company Secretary
Darryl is the Managing
Director & CEO of Bapcor
Limited, having been
appointed in October 2011.
He is also Chairman of
Bapcor Finance Pty Ltd.
Darryl has more than 10
years’ experience in the
automotive industry and
extensive knowledge in
business acquisitions,
mergers and strategy.
Previous Director and
Executive roles have been
with Repco, Paperlinx,
Amcor, Signcraft and CPI.
He holds a Bachelor of
Commerce majoring in
accounting and
economics from the
University of Melbourne.
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.
Mathew Cooper
Executive General
Manager -
SWG Mechanical
Steve Drummy
Executive General
Manager -
SWG Engine Mgmt
Mat has over 20 years’
experience in the
automotive, industrial and
public accounting sectors
throughout Australia and
Asia. Mat was appointed
to the role of EGM - SWG
Mechanical in October
2018. Mat is responsible
for Specialist Wholesale
Mechanical businesses.
Previously, Mat held the
role of EGM –
Development in Bapcor
and General Manager –
Commercial in ANA. He
holds a Masters of Business
Administration, Bachelor of
Commerce and Bachelor
of Law from Deakin
University and is a
Chartered Accountant.
Steve has over 25 years’
experience in the
manufacturing,
pharmaceutical, industrial,
wholesale, retail and
health sectors. He was
appointed to the role of
EGM - SWG Engine
Management in February
2019. Previously, Steve held
EGM and CFO roles in
businesses including
Australian Unity, Sonepar,
Hagemeyer, Blackwood’s
and News Limited. Steve is
responsible for Specialist
Wholesale businesses
including JAS, PAT, Baxter’s,
MTQ, Federal Batteries and
Opposite Lock.
14
Bapcor Limited Annual Report 2019 Alison Laing
Executive General
Manager -
Human Resources
Craig Magill
Executive General
Manager -
Trade
Tim Cockayne
Executive General
Manager -
Retail
Alison joined Bapcor in
May 2017. With more than
20 years’ Human Resources
experience Alison has
spent much of her career
partnering with senior
leaders to develop team
capability and drive
business outcomes and
has worked with
organisations such as
Orora, PaperlinX and Coles
Myer. Alison holds a
Bachelor of Commerce,
majoring in management
and industrial relations,
from the University of
Newcastle.
Craig has an extensive
career in the automotive
aftermarket 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 in February
2012 and is responsible for
all aspects of the Burson
Trade segment.
Tim joined the Bapcor
group in April 2019, and
has 30 years of retail
experience working across
various sectors within
specialty and big box retail
and is responsible for the
Autobarn, Autopro, Sprint,
Midas and ABS networks
within the Bapcor group.
Tim has worked for a
number of national retail
businesses with his most
recent role as CEO of the
Total Tools franchise
business where he
undertook a massive
growth program. Tim holds
a Masters of Business
Administration and is a
graduate of the Australian
Institute of Company
Directors.
Martin Storey
Executive General
Manager -
Bapcor New Zealand
Martin joined BNT in
September 2016, and was
appointed as Executive
General Manager - Bapcor
New Zealand in October
2018 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.
15
Bapcor Limited Annual Report 2019 Segment Overview
Resilience, solid growth and our team members’
ongoing engagement with the business were
evidenced in another record result for the
Bapcor Group in FY19.
Trade (exc. Asia)
Bapcor NZ (exc. TRS)
Specialist Wholesale
Retail
Revenue
EBITDA
FY19
$’M
524.5
165.0
413.1
255.3
FY18
$’M
501.6
153.6
364.3
239.1
Change
%
4.6%
7.4%
13.4%
6.8%
FY19
$’M
78.2
22.9
46.3
27.1
FY18
$’M
72.1
20.1
38.6
28.8
Change
%
8.5%
13.8%
20.0%
(6.0%)
The Trade and Specialist
Wholesale segments in Australia
and New Zealand make up more
than 80% of Bapcor’s business.
Our Trade businesses, which include
Burson Auto Parts, BNT and Burson
Thailand, supply parts for thousands
of vehicle makes and models,
amongst the widest range of cars in
the world. Trade businesses operate
by providing parts to workshops, with
orders generally delivered in less than
60 minutes. The service offering
necessitates a network of store
locations in close proximity to
mechanical workshops. In FY19,
Bapcor’s Trade businesses continued
its network expansion activity across
Australia, New Zealand and Thailand.
Own brand sales
penetration was also a
key strategic initiative,
providing enhanced
margin opportunity
across a number of
product categories.
The Precision Equipment business
which sits within the Burson Trade
segment, and provides a full range
of superior automotive workshop
equipment, added the Hunter
product range of wheel alignment
equipment. In late FY19, the Precision
Equipment business was introduced
into the New Zealand market and is
well-placed for growth in FY20.
The first twelve-months of Bapcor’s
operations in Thailand have been
positive, with a further three stores
opening in FY19, taking the
automotive parts and accessories
store footprint to four. Bapcor in
Thailand is generating goodwill
within local communities through
community-engagement activities
and is focusing on team member
training and development to
underpin further expansion. Work
is continuing on developing the
business’ parts catalogue and digital
B2B ordering system, which will
support the business to deliver its
unique value proposition to the local
customer base.
The Specialist Wholesale segment
expanded its automotive
aftermarket product supply range to
include light commercial truck parts
with the acquisition of Don Kyatt
(Qld) and related companies in
December 2018 leading to the
formation of the Commercial Truck
Parts Group. Along with the wider
Bapcor Groups key business strategy,
the focus of the Specialist Wholesale
business is on increased
intercompany sales for FY20, as it
continues to position itself as the
principal supplier to the Trade and
Retail segments. In FY20 further
expansion in our specialist wholesale
product ranges, including air
conditioning and commercial truck
parts will occur.
The Retail segment consists of retail
customer-focused business units
including Autobarn, Autopro and
Sprint Auto Parts, and the Midas and
ABS workshop service brands. During
FY19 Retail grew its Autobarn
company owned stores by 18 and
now represent 49% of Autobarn stores
with franchise stores representing
51%. This is consistent with Bapcor’s
strategy of increasing the Autobarn
store network predominantly through
company owned stores. A new
experienced Executive General
Manager Tim Cockayne was
appointed in April 2019 to head up
Retail. Key priorities for the Retail
segment in FY20 include improving
the performance of underperforming
and immature stores, and attention
to and support of store manager
training and development.
Investments to improve the Retail
segment’s technological capabilities
is underway with the implementation
of a new point-of-sales system, as
well as providing additional services
16
Bapcor Limited Annual Report 2019 Bapcor’s continued roll-out of health
and safety measures, training and
career development programs,
and pipeline of career opportunities
reflects our commitment to our
people. We are delighted that
a strong Bapcor team culture is
reflected in the positive results of
our employee engagement survey.
Our team members’ passion for the
business, enduring focus on customer
satisfaction, extensive network of
stores and comprehensive service
and product offering is reflected in
Bapcor’s FY19 financial performance.
to the Autobarn online sales platform
to increase online traffic and sales
conversions. The further development
of digital and online channels,
together with enhanced marketing
and promotional programs, are
expected to provide further brand
recognition, generating revenue
and an increase in own brand and
intercompany product penetration.
The Bapcor Group takes pride
in developing its specialist and
knowledgeable team, the Group’s
culture and capabilities, and an
unrelenting focus on excellence
in customer service. Bapcor employs
more than 4,500 team members
in more than 950 locations across
Australia, New Zealand and Thailand.
We are proud of our involvement in
programs and initiatives that support
local communities across our
extensive network and provide
our people with opportunities to
celebrate their cultural diversity and
connect with the wider communities
in which we live and work.
17
Bapcor Limited Annual Report 2019Segment Overview Segment Review Trade
Our team members knowledge & expertise
are paramount in our Trade segment which is
made up of Burson Auto Parts and Precision
Automotive Equipment.
Performance
Burson Trade continued to deliver
significant growth in FY19 in line with
its consistent track record of strong
financial performance. Burson Trade’s
operating revenue, same store sales
and EBITDA all increased during FY19.
Burson Trade encountered
competitive pressure during the year,
affecting sales and margin growth,
and the business responded by
doubling down efforts to ensure that
the business was operating at its
maximum efficiency. 11 new stores
were added to the fully company-
owned network, bringing the total
number of Burson Trade stores to
181 across Australia.
Precision Equipment delivered strong
performance, increasing sales margin
and EBITDA during FY19.
The Burson Trade Merchandise team
worked closely with Bapcors’
Specialist Wholesale Group
businesses to grow own brand sales.
Greater penetration of digital sales
continued, with more than $80m of
sales made through its B2B online
ordering system.
Achievements
Burson Trade’s ‘May One Day Sale’
was its biggest one-day trade event
in history, with takings of more than
double regular daily trading levels.
The equipment business introduced
the world’s leading wheel service
brand, Hunter, as the brand’s
exclusive Australian distributor,
adding another world-class brand
to our market-leading equipment
range.
In November 2018, Burson Trade
held its largest-ever Assistant
Manager and Sales Representative
four-day National Conference. The
aim of the event was to inform,
support and nurture more than 300
Burson Trade team members. The
conference formed an important part
of the commitment to the continued
development and career growth
opportunities for team members.
Learnings
Burson Trade operates in a highly
competitive and dynamic market
where it needs to react positively and
promptly. The focus of management
is ensuring that the company’s
growth plan is sustainable, while
balancing revenue and resourcing
requirements.
Burson Trade’s
greatest competitive
advantage is the
knowledge, capability
and passion of its
people.
The Trade segment has committed
to people retention and professional
development, by providing more
opportunities to improve team
member performance and career
opportunities through a suite of
training programs delivered at a
variety of levels within the business.
Community and Sustainability
Burson Trade recognises its
responsibility to all stakeholders in
addressing climate change. Burson
Trade’s energy use at its stores and
distribution centres has been
significantly reduced in recent years
with the national head office,
Victorian Distribution Centre and
every Burson Auto Parts store in
Victoria being fitted with LED lighting.
The business is on course to have LED
lighting installed in all NSW stores in
FY20 and this will be extended
throughout the country. Burson Trade,
in partnership with Bapcor, has also
joined forces with Greenfleet to
carbon-offset its entire fleet of
vehicles used across the Burson
Trade network.
Burson Trade was involved in
numerous charitable fund-raising
efforts in FY19 actively encouraging
stores to contribute to their local
community sports clubs and charities
through monetary and in-kind
donations at the grass-roots level
throughout the Burson Trade store
network. Through the efforts of our
team members, almost $100,000 was
donated to drought-relief for farmers.
During “Steptember”, more than 300
Burson Trade team members stepped
their way to earning the ‘highest
fundraising newcomer’ award, raising
$36,000 for the Cerebral Palsy
Alliance.
Revenue
$524.5m
EBITDA
$78.2m
Locations
185* (*incl Thailand)
18
Bapcor Limited Annual Report 2019 The business is also engaged in
charitable activities, such as
donating food to the SOS Children’s
Village in Bang Na. All Burson
Thailand stores are equipped with
LED lighting to minimise the business’
environmental impact.
Thailand
Burson Thailand continued its growth
in FY19, with expansion to its store
network. Throughout the financial
year, the business also focused on
making improvements to its service
model, market offering and attracting
chain workshop customers.
Achievements
• Three new stores opened across
Bangkok, including the first store in
a retail mall location
• Continued development of its
parts catalogue and B2B digital
ordering system
Improved supplier relationships
leading to better pricing and terms
•
• Continued sales and margin
growth, and
• Staff development; with ongoing
training to support and upskill
team members, and enhance
future career prospects.
Bapcor in Thailand recognises its
responsibilities in supporting the local
community in which it operates.
At a local level the Burson Thailand
business now employs 50 team
members.
185* (*incl Thailand)
19
Bapcor Limited Annual Report 2019Trade Segment Review New Zealand
Comprising trade, service and specialist wholesale
businesses the Bapcor NZ segment has enjoyed
a sound integration into the wider Bapcor group
since their acquisition in 2017.
Performance
Bapcor NZ saw continued growth
in revenue, margin and EBIT through
the year, despite industry challenges
and a soft economic environment.
The ongoing
development of a
wider branch network
and warehousing
facilities, expansion of
the own brand range
and enhanced people
engagement drove
greater performance
across the NZ Group.
Store network expansion and
refurbishment activity continued
in FY19. The BNT store network grew
to 58, with the addition of four new
stores. Own Brand penetration was
a strong focus during FY19, with the
introduction or expansion of several
product ranges, including the
“Superiol” lubricant range.
Following on from the success of the
Burson Trade Equipment business in
Australia, Precision Equipment New
Zealand was established at the end
of FY19 initially with key product
brands of Rotary and Summit.
Achievements
Several new properties and
relocations were undertaken
including co-locations at Manukau
and Christchurch of BNT and TATP,
new BNT stores at Cambridge,
Upper Hutt, Taupo and Silverdale,
a new Autolign Manukau store, the
relocation of BNT Mt Maunganui
and footprint expansion of BNT
Whakatane and Whanganui to
accommodate an expanded TATP
commercial parts presence. Both
the company’s profile and customer
engagement increased following
branch refurbishments and
relocations. Cooperation between
Bapcor businesses led to several
growth opportunities in NZ and
across Australian SWG businesses.
In FY19, own brand products in New
Zealand increased to 28.5% of overall
sales, with growth in exclusive brands
(+9.9%) and owned brands (+14.7%).
Own brand activity included the
introduction of Ultima shocks, a
widened Trans Pad range, Motorgear
timing kits and water pumps, the
Superiol lubricants range, along
with other range introductions and
extensions in the engine, steering
and suspension, and electrical
categories which are aimed
at positioning the segment for the
future and provide sustained
momentum into FY20 and beyond.
Specialist Wholesale Group in NZ
finalised its warehousing footprint
project. Construction has now
commenced on a 6,500sqm
purpose-built facility at Auckland
International Airport. This state-of-
the-art facility will mitigate capacity
constraints, enabling growth into the
future, and will incorporate the new
Precision Equipment operation and
provide overflow capacity for the
Trade operations.
The ‘Have Your Say’ employee
engagement survey showed a
pleasing lift in overall employee
engagement. In training and
development, the delivery of ‘sales
and management training programs
saw more than 200 team members
complete various leadership and
skills-learning activities. A further
20 branch and functional leaders
completed the performance
leadership course.
Learnings
In FY19 the Bapcor NZ segment
experienced soft trading conditions
in a highly competitive market place.
The Segment has and will continue
to take concerted actions in order to
address and overcome the industry
challenges it faces. Pricing pressure
was felt in several key service product
categories and the business has
made improvements in procurement
and pricing management processes
in order to maximise revenue and
margin earnings potential. Low
unemployment, coupled with
skill-shortages, are effecting the
segment’s ability to resource
appropriately and as a result the
business has continued to ramp-up
its training and development
activities to focus on team member
retention. Bapcor NZ supports the
Auto Super Shoppes Automotive
Academy that seeks to provide a
pipeline of passionate, skilled and
technically-equipped graduates
to the automotive industry.
Revenue
$165m
20
EBITDA
$22.9m
Locations
194
Bapcor Limited Annual Report 2019 Community & Sustainability
During the year the businesses
introduced recycled paper bags
into their networks, ahead of the
legislated plastic bag ban that
came into effect on 1 July 2019.
This was well received by staff,
customers and the wider industry.
“Shave for a Cure” is Leukaemia
& Blood Cancer New Zealand’s
signature fundraising event with
Bapcor NZ supporting the campaign
for the first time in 2019, matching the
donations from staff, their friends and
families, suppliers and customers,
and topped the fundraising
leader-board.
The ongoing support of grass-roots
motorsport continued with the 10th
year of sponsoring the BNT V8s and
one of its emerging star drivers,
Chelsea Herbert.
21
Bapcor Limited Annual Report 2019New Zealand
Segment Review Specialist Wholesale
Our Specialist Wholesale segment consists
of a number of companies that specialise
in the automotive aftermarket wholesale sector.
Performance
The Specialist Wholesale Group
(SWG) consists of thirteen Specialist
Wholesale business units which
source their respective range of
products for each make and
model of vehicle in Australia from
manufacturers around the world.
In FY19, the SWG segment recorded
solid underlying growth, particularly
across the auto-electrical/engine
management businesses. The
segment’s performance was
supported by the acquisitions
of the Commercial Truck Parts Group
(CTPG), Toperformance, and the
full-year trading impact of the AADi
Australia acquisition which took
place in FY18.
The underlying
Specialist Wholesale
Group (SWG) business
performed solidly,
with product programs
and cost initiatives
contributing to
margin expansion
and improved top
line performance.
Operational efficiency and
optimisation was a key focus during
the year, and restructuring activity
carried out in FY18 realised a full
twelve months of cost savings
and improvements in line with
expectations.
The SWG segment continued to
drive an increase in own brand
penetration, for both internal and
external customers. Notable
successes include:
• new rotor, friction, water pump
and radiator and ceramic pads
programs
improved saturation in own brand
lighting and battery programs
• the launch of the Icon brand,
•
which covers engine management
and fuel systems, and
• strong growth in air conditioning
category with focus on range
expansion and leveraging the
Group’s distribution network.
Achievements
Entry into the Japanese commercial
vehicle parts category with the
acquisition of Don Kyatt (Qld), I Know
Parts, He Knows Truck Parts and
Japanese Commercial Spares
established the foundations for the
Bapcor CTPG. Japanese Trucks
Australia, acquired in June 2019,
added four more locations,
expanding the CTPGs’ distribution
network to 14.
Toperformance, acquired in January
2019, is the exclusive truck, bus and
passenger vehicle distributor of Koni
shock absorbers, representing
a strong growth opportunity in the
premium shock absorber market for
the SWG segment.
Further SWG network expansions in
Port Headland, Tamworth and
improved coverage in major cities
ensures products are in close
proximity to the Group’s broadening
customer base.
The AAD business exited the
loss-making brake bonding
operations in FY19. This had been
part of the business for more than
40 years and AAD’s exit responds to
the progress of the market from
bonded brake shoes to brake pads
and commercial riveted brake shoes.
Learnings
The continued fragmentation in
the range of makes and models
of vehicles and the introduction of
new technologies in the Australian
automotive aftermarket highlights
the need to maintain a specialist
focus on the various categories of
parts required for vehicle servicing.
This gives Bapcor the ability to
leverage specialist expertise and
technical knowledge across the
Group. The continued growth and
development of new ranges within
the SWG segment will see the entry
into new market segments – as was
demonstrated through the move
into light commercial vehicle parts.
This also enables the segment to
leverage the assorted businesses’
unique product offerings, to provide
an improved product offering to
customers and deliver superior
outcomes as a collective.
Revenue
EBITDA
$413.1m
$46.3m
Locations
146
22
Bapcor Limited Annual Report 2019 Community and Sustainability
The commitment to cardboard
and paper recycling across the
network, and programs such as
JAS’ remanufactured alternator
and starter motor programs, are
a continual focus. The product
development teams are looking
at some progressive programs to
reduce environmental impacts and
these are expected to be launched
in FY20.
SWG team members continued
to support grass roots community
programs in FY19 along with other
charity and fundraising events such
as the fight against prostate cancer
and The Variety Bash motoring
charity event.
23
Bapcor Limited Annual Report 2019Specialist Wholesaler Segment Review Retail
Our friendly and attentive customer service is
an asset in our Retail segment which offers auto
parts and accessories via a network of company-
owned, franchise and satellite stores.
Community and Sustainability
More than 700 Retail and Service
team members were invited to
complete the Bapcor 2019 Employee
Engagement Pulse Survey. Of note
is the overall increase in the 10
performance measures that drive
engagement – particularly in the
area of “commitment to improving
performance”. The result show that
team members not only care about
doing a good job, but also what the
business is aiming to achieve and
how it’s going about it.
Retail team members also
contributed to a wide range of
charitable initiatives in FY19, including
celebrating cultural diversity with
a ‘taste of harmony’ lunch, dressing
down in denim for ‘Jeans for Genes
Day’ and checking-in with their
fellow team members for a
meaningful conversation as part
of ‘RU OK? Day’.
Performance
The Bapcor Retail segment consists
of Autobarn, AutoPro and Sprint Auto
Parts stores, as well as Midas and ABS
service workshops. Retail revenue
growth in FY19 was largely driven by
an increase in company-owned stores,
and favourable company-owned
same store sales growth. On line sales
continued its impressive growth, more
than doubling on the prior year, with
key drivers to the increase in sales
being the continued expansion of the
“click & collect” service offering, an
improved product range and the
launch of the “click and deliver”
direct-to-door delivery option.
Investment in a new point-of-sales
system will improve efficiency and
support the business to collect and
manage data leading to a better
customer experience and internal
efficiencies. The system is currently
being rolled out into the Autobarn
store network.
The leadership of the Retail segment
has evolved with the appointment
of a new Executive General Manager
and other management positions.
Achievements
The Autobarn store network consisted
of 134 stores at year end, six more than
30 June 2018. The number of Autobarn
company-owned stores over the same
period grew from 48 to 66 and now
represents almost half of the Autobarn
network.
Autobarn’s friendly and attentive
customer service was publicly
acknowledged as it won the Roy
Morgan “Auto Store of the Year” Award
for FY18. The Roy Morgan Customer
Satisfaction Awards are presented
on the basis of customer satisfaction
ratings from approximately 50,000
Australian consumers surveyed
throughout the year.
Learnings
Concerted efforts continue to be
made to promote the Retail brands
and to ensure the brands’ value and
key characteristics are consistently
represented throughout the store
networks. In FY19, the business took
a greater focus on enforcing higher
standards of compliance throughout
the network. The result was the
closure of some franchised stores.
While this had a short-term effect
of reducing the overall performance
of the segment, the action was taken
with a view toward the long-term
success of the brands, sustained
goodwill and value creation.
Revenue
$255.3m
EBITDA
$27.1m
Locations
647
24
Bapcor Limited Annual Report 2019 AUTOBARN LOWNDES RACING’S
IMPRESSIVE VICTORY AT THE
BATHURST 1000
The Autobarn Lowndes Racing entry
in the Virgin Australia Supercars won
the Bathurst 1000.
The result demonstrates the skill
and professionalism of the Triple
Eight Race Engineering Team and
reinforces their dominance of the
category.
Craig Lowndes has been an
important part of the Autobarn
brand and promotional program
for many years. His victory at
Mt Panorama on Sunday 7 October
2018 reinforces the value of that
commitment by Autobarn and
the wider Bapcor Group.
Image: Craig Lowndes
and Steven Richards,
Bathurst Winners
25
Bapcor Limited Annual Report 2019Retail Sustainability Overview
We are taking real and measurable action
in meeting Bapcor’s Environmental, Social
and Governance (ESG) commitments.
Our Approach
Our approach to sustainability
is defined by our Environmental,
Social and Governance (ESG)
strategic framework.
Our Vision
Bapcor Limited recognises that
a sustainable and successful
business is enhanced by engaging
stakeholders, delivering 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.
Bapcor’s Risk Appetite Statement
Bapcor’s risk appetite guides how much risk we are willing to seek or accept
to achieve our long-term strategic objectives.
“When pursuing growth and development
opportunities in the delivery of our strategic
objectives, Bapcor will not compromise the
health and wellbeing of our employees or our
reputation for being ‘Australasia’s leading
provider of aftermarket parts, accessories,
equipment and services’. Bapcor aims to
balance the risk and reward in the creation of
long-term stakeholder value, accepting and
managing commercial risks where Bapcor
has the willingness and capability to do so.”
26
Bapcor Limited Annual Report 2019 Our Sustainability Framework
Our sustainability framework sets out an integrated
approach to ESG sustainability as fundamental
to what we do, underpinning our corporate code
of conduct and our values.
Our Values
Our Code of Conduct
Bapcor’s ESG Strategy
Ethical Supply
Chain /
Procurement
Ethical sourcing,
forging strong
supplier
relationships
and enhanced
transparency.
Environmental
Sustainability
Practise Good
Governance
Positively Impact
Our Community
Making efficient
use of our
resources,
optimising
our fleet, and
reducing waste.
Engaging
stakeholders
and supporting
the communities
in which we
operate.
Upholding our
values and code
of conduct,
prioritising health
and safety,
training and
developing our
team members,
and fostering
a diverse and
welcoming
workplace.
27
Bapcor Limited Annual Report 2019 Our Sustainability Framework
Progress on our sustainability journey will be
tracked against the actions and timeframes
set out for each priority area.
Our commitment to sustainability
We are proud of the achievements
we have made in FY19 toward our
ESG commitments, which include:
establishing a sustainability
governance process at Board level;
integrating sustainability risks within
our risk management framework;
taking steps to mitigate modern
slavery risk within our supply chain;
offsetting delivery vehicle fleet
emissions and rolling-out LED
replacement programs across
our store network.
We have updated our targets for
FY20 and beyond, which include:
formalising our commitment to the
UN Global Compact Principles;
conducting risk-assessment processes
through our supply-chain; continuing
to reduce our environmental footprint;
prioritising health and safety,
inclusion, and the training and
development of our team members;
and supporting the communities in
which we operate.
Priority 1: Develop Bapcor’s ESG Strategy
Commitments:
I. Have regard to our responsibility to serve the communities in which our businesses operate.
II. Invest in areas viewed as important drivers of long-term performance and value creation.
III. The Board annually to set and review objectives in relation to ESG and to assess quarterly
Bapcor’s progress in achieving the objectives.
Actions:
1. Establish a governance process at Board level.
2. Integrate salient sustainability risks in Bapcor’s Risk Management Framework.
3. Formalise our commitment to the UN Global Compact Principles.
4. Implement an Environmental Management System (system of continuous improvement).
Timeline
Complete
Complete
FY20
FY21
28
Bapcor Limited Annual Report 2019 Priority 2: Ethical Supply Chain / Procurement
Commitments:
I. Continually focus on our commitment toward ethical sourcing practices.
II. Build strong relationships with key suppliers to build on our positive contribution.
III. Enhance transparency within our supply chain and with key partners and stakeholders.
Actions:
1. Establish an Ethical Supply Chain / Procurement (ESC/P) Policy.
2. Initiate implementation of the ESC/P policy with Bapcor’s supplier base.
3. Develop structured risk assessment processes for Bapcor’s supplier base.
4. Continue to formalise ESC/P policy agreement and conduct risk assessment activities
across Bapcor’s supplier base.
Priority 3: Environmental Sustainability
Commitments:
I. Continuously reduce our environmental footprint and more efficiently use 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 toward emissions reductions in our business.
Actions
1. Establish Group-wide initiatives toward streamlining waste, recycling and packaging.
2. Implement a carbon offset program to offset vehicle fleet emissions.
3. Explore additional LED replacement opportunities across Group sites in Australia and NZ.
4. Review opportunities to improve fuel economy of the Bapcor fleet.
5. Develop a pathway toward emissions reductions in our business.
Priority 4: Practise Good Governance - Our People
Commitments:
I. Commit to upholding our Code of Conduct.
II. Commit to the training and professional development of our team members.
III. Promote and encourage health and safety activities and move toward Zero Harm.
IV. Foster a diverse, inclusive and accepting workplace.
Action
1. Conduct training and/or professional development programs for team members.
2. Group-wide Zero Harm reporting.
3. Establish, measure and monitor gender and cultural diversity statistics in workforce.
Timeline
Complete
Complete
Complete
FY20
Timeline
Complete
Complete
Ongoing
FY20
FY21
Timeline
Ongoing
Ongoing
Ongoing
4. Continue to monitor and engage with our team members regarding satisfaction and retention.
Ongoing
Priority 5: Positively Impact the Communities 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
Ongoing
Ongoing
29
Bapcor Limited Annual Report 2019 Ethical Supply Chain/Procurement
With the Modern Slavery Act being passed into
legislation in 2018, Bapcor took a proactive approach
to mitigating the risks of modern slavery with the
development of Bapcor’s Ethical Supply Chain/
Procurement (‘ESC/P’) Policy.
All international supplier visits
conducted by Bapcor will include
an assessment against the Bapcor
Modern Slavery Checklist: reaffirming
Bapcor’s updated Supplier Terms &
Conditions regarding Ethical Supply
Chains & Modern Slavery and Ethical
Supply Chain Policy, the supplier’s
ethical or human rights policy, the
availability of whistleblowing
services, on-site observations, and
reviewing labour conditions with
management.
As with our procedures to combat
modern slavery, the environmental
sustainability statements in the
ESC/P Policy reflect the foundation
upon which Bapcor will build, and
issues which will be prevalent in future
supplier negotiations.
This policy is available on our
website and was included in the
Bapcor 2018 annual report. As one
of the initial steps, the terms and
conditions of the Supplier Trading
Agreement for Bapcor’s Group
suppliers were updated to include
a statement on modern slavery,
and require a commitment and
confirmation from suppliers
regarding their supply chains.
All suppliers to Bapcor were provided
with a copy of the Bapcor ESC/P
Policy, in addition to these revised
terms and conditions, with the
intention that formal agreement from
suppliers will come as existing
agreements are renewed.
The human rights standards that
underpin Bapcor’s ESC/P Policy are
the key tenets of the Modern Slavery
Act. As further steps in implementing
the policy, Bapcor has developed a
structured risk assessment process to
identify modern slavery risks amongst
our supplier base, then provide
specific target areas for our product
teams to explore in more depth.
Given the nature of Bapcor’s
businesses and the highly technical
nature and automated
manufacturing processes of the
products we sell, we believe the risk
factors applying to our businesses
under the Modern Slavery Act to be
very low. Many of Bapcor’s suppliers
are large, global entities which have
existing and significant checks in
place in regard to their own supply
chains. Notwithstanding, we are
implementing the appropriate
processes to verify this.
Our key objective is to understand
risk, then consider our actions on a
case-by-case basis. Bapcor’s
preferred approach will be to work
with suppliers over time to improve
their compliance with the Modern
Slavery Act.
Bapcor wishes to avoid unintended
damage that disadvantaged workers
may incur, through high-impact
actions such as ceasing to trade –
which remains an option once other,
preferred paths have been pursued.
We also implemented a checklist to
be completed by our team during
visits to suppliers, particularly those
outside of Australia, which identifies
possible non-compliant areas.
30
Bapcor Limited Annual Report 2019 Environmental 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.
Bapcor implemented several
Group-wide projects in FY19,
including the Bapcor carbon
offset program, the continued
roll-out of LED replacements
across its store network, and
streamlined processes in order
to deliver improved outcomes for
waste, recycling and packaging.
Carbon Offset
Bapcor has committed to offset the
carbon footprint of every vehicle in
the Burson fleet, Bapcor’s largest
Group fleet. Bapcor is reducing its
carbon footprint and offsetting
emissions by contributing to
Australian reforestation projects that
protect the local environment,
capture carbon emissions, improve
soil and water quality, and restore
habitat for native wildlife.
Bapcor chose to collaborate with
Greenfleet for its carbon offset
program. Greenfleet is a leading
not-for-profit environmental
organisation committed to protecting
our climate by restoring our forests.
To date, Greenfleet has planted more
than 9.2 million native trees, offsetting
greenhouse gas emissions from
carbon-emitting activities within
businesses, including fleets, flights
and freight. Bapcor’s carbon offset
program will help revegetate an area
covering more than nine times that of
the MCG, involving the planting of
19,750 native trees anticipated to
capture 5,292 tonnes of carbon
emissions to help protect our climate.
As part of the initiative, Burson
delivery vehicles will carry stickers
displaying that the vehicle is carbon
offset through native reforestation,
and Bapcor team members will be
invited to take part in local
revegetation projects.
LED Efficiencies
Bapcor continued its roll-out of
LED replacements and installations
throughout its stores, offices and
distribution centres. LED lighting
provides equivalent light levels with
an estimated 60% reduction in energy
use and 40% reduction in energy
costs. As part of the initiative, all light
fittings are required to meet
Australian Standards and comply
with the Energy Efficiency Council’s
guidelines.
In FY19, an additional 16 Autobarn
stores across the network now run
LED’s as their primary lighting source,
contributing an additional $160,000
in cost savings and approximately
500,000 kW in energy savings. 77
Autobarn stores in total have either
converted to or use LED. Following
the additional store conversions,
Autobarn’s annual energy saving is
nearly 2.5 million kW, equating to an
associated cost savings estimated
at over $750,000.
Burson Auto Parts completed its
Victoria LED replacement store
roll-out in FY19, with all stores in the
state now fitted with LED lighting.
23 stores were converted to LED
fittings during the year, contributing
an expected cost saving of close to
$100,000 and more than 250,000 kW
in energy savings per annum. Across
all 116 Victorian stores, the initiative
is estimated to deliver cost savings
of approximately $500,000 and
1.5 million kW in energy savings per
annum. The business is on course to
complete its NSW LED replacement
store roll-out in FY20, and this will be
extended throughout the country.
Projects Commenced In Prior Years:
Nunawading Distribution Centre
predicted energy savings of 800,000
kW annually. The Preston Office
and Distribution Centre initiative
continues to forecast energy savings
of over 430,000 kW annually, an
energy reduction of 80%, following
the transition of 1,000 LED fitting
replacements.
Waste and Recycling
Bapcor has streamlined its waste
and recycling management
processes across the entire company,
to deliver improved levels of waste
separation, higher levels of recycling
and fewer truck movements. In FY19,
more than 71% of total waste, or
24,000 metric tonnes, was diverted
from landfill across the Bapcor Group
businesses.
Packaging
Bapcor is committed to taking
a sustainable approach toward
packaging. During the year, an
initial review was conducted across
Bapcor’s distribution centres,
warehouses and store network in
order to understand packaging
usage, internal planning, and
supplier awareness. Bapcor product
development teams have been
encouraged to review and reduce
environmental impacts by seeking
to understand the types of
packaging we use and why, and to
consider the environmental impact
throughout the product lifecycle.
31
Bapcor Limited Annual Report 2019 Practise Good Governance
At Bapcor our people are at the heart of our success,
which is why during FY19 we continued to develop and
implement programs to keep our team members safe
and healthy, connected and engaged.
Health and Safety Focus
The focus on Zero Harm further
increased in FY19 with Safety Risk
Registers now an operational tool
in all business units, together with
other safety initiatives, such as the
establishment of Safety Network
Action Planning (SNAP) groups
connecting safety leaders so they
can learn and share safety ideas.
We also ran a Mock Court to further
develop our safety leaders’, and the
businesses’, understanding of our
risks and obligations. Supporting
the wellbeing of our team was also
a priority, with the launch of a
Group-wide Employee Assistance
Program, adding to our existing
network of accredited Mental Health
First Aiders in Australia and New
Zealand, and supporting education
events such as RUOK? Day.
In late 2018 the “Speak Up” program
was launched across all parts of
Bapcor to provide team members
with avenues to raise issues or
concerns, anonymously if they
wish. As a part of this, an externally
managed whistleblower service
with a range of contact options
was established.
Our employee engagement survey
in 2019 rated “I understand the health
and safety standards expected of
me” and “My safety at work is
important to the business I work in”
as the highest rated statements in
the entire survey.
32
Communication and Engagement
To better connect and communicate
with team members across all parts
of the Group, our intranet CORE was
launched in December 2018, and our
newsletter Driven keeps team
members informed and updated
about what is happening across
Bapcor. After conducting the initial
“Have Your Say” Team Member
Engagement Survey in late 2017,
we carried out a pulse survey in May
2019 to check on our engagement
across the Group. Pleasingly, our
engagement index stayed in the top
half of the benchmark, at 66%, with
particularly positive feedback from
our team members around safety,
communication and diversity. Each
segment is now developing and
actioning plans to further enhance
engagement within their teams.
Training and Development
We continued to support team
members to achieve their full
potential in FY19, through various
programs which form Bapcor’s
training and development suite.
These include: the “Change Up” and
“Step Up” leadership development
programs in New Zealand; delivery
driver development programs in
Burson to provide learnings in parts
sales and customer service; and,
“Respect in the Workplace” programs
across a range of business units and
locations.
Team members in Australia and, for
the first time also those in New
Zealand, were offered the
opportunity to become shareholders
of Bapcor through the Employee
Share Purchase Plan. The take up of
the plan was pleasing and we will be
offering another Share Purchase Plan
in Australia and New Zealand in FY20.
Diversity and
Inclusion Stats
Women in the
workplace
Full-time
26%
25% in FY18
68%
64% in FY18
Part-time
or casual
32%
36% in FY18
Non-executive
Directors
75%
67% in FY18
Bapcor Limited Annual Report 2019 In the 2019 Bapcor employee
engagement survey, the question
of “The business I work in uses the
potential of all employees regardless
of gender, ethnicity or disability” was
one of the top performing areas of
improvement compared with the
2017 survey.
During FY19, Bapcor has developed
its job grading matrix (for non-award
positions) into which all positions in
the company are slotted. One of the
purposes of the matrix is to ensure
parity on pay regardless of who is
in the role. Progressively, we aim to
review every positon to ensure they
fit within the matrix parameters
or are amended over time.
Articulating Our Values
As the year came to a close, Bapcor
commenced the important process
of articulating its core company
values by including more than 100
team members, either self or peer
nominated, in Values Workshops.
Participation in one of the ten
workshops provided the opportunity
for these team members to share
their stories and experiences about
what makes being a part of Bapcor
special, and these thoughts are
being used to capture our core
values. We look forward to launching
these in FY20.
Diversity and Inclusion
Fostering a 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.
Bapcor has 26% women in the
workplace (25% in FY18): 68% in
full-time (64% Fy18); 32% part-time
or casual (36% in FY18) work; and
75% of Non-executive Directors
are women (67% in FY18).
33
Bapcor Limited Annual Report 2019 Positively Impact our community
Bapcor has always participated in the broader
communities in which we operate. Our Group provides
support to a wide variety of social, charitable and
sporting initiatives.
Steptember
“Steptember” is an annual
fundraising event held throughout
the world to raise vital funds for
cerebral palsy research and services.
For Steptember 2018, 278 team
members from Burson donned
pedometers to challenge themselves
to walk more than 10,000 steps a day
for a month, and along the way raise
funds for a great cause. We are
proud that Burson won the
Steptember Award for Highest
Fundraising Newcomer – a fantastic
achievement. The 76 teams’
fundraising total was $27,517.25 and
our corporate team donated a
further $8,000 for a total of $35,517.25.
Shave for a Cure
“Shave for a Cure” is Leukaemia and
Blood Cancer (LBC) New Zealand’s
signature fundraising event to help
those diagnosed with blood cancer
or related conditions, with six new
diagnoses every day. LBC receives
no government funding. BNT, along
with sister companies TATP, HCB
and the Bapcor NZ Head Office
supported Shave For A Cure
fundraising initiatives throughout
Shave Week in March 2019. Team
members at Bapcor NZ raised
$5,486.89, with the total contribution
accumulating to $10,973.78 after
Bapcor NZ matched the donations
made by team members, their friends
and families, suppliers and customers
and in doing so Bapcor NZ topped
the fundraising leader board for 2019.
This was again on display during
FY19. Among the highlights was
support for “Dress Like a Farmer Day”
for Australian drought relief,
“Steptember” to raise funds for
children with cerebral palsy, “Shave
for a Cure” in Bapcor New Zealand,
and “Taste of Harmony Day” when
the Retail segment celebrated its
cultural diversity. The Specialist
Wholesale Group businesses
continued to support grass roots
community programs in FY19 along
with other charity and fundraising
events, such as the fight against
prostate cancer and The Variety
Bash motoring charity event.
Dress Like a Farmer Day
On Friday 31 August 2018, Burson
team members (stores, valued
customers and head office) raised
$49,075 and Burson further
contributed $25,000, bringing the
total funds raised to $74,075 to
support Burrumbuttock Hay Runners,
which takes donated hay to
drought-affected farmers in
Australia, and Connecting
Communities, which provides relief
and support to those most in need
in rural and remote Australia.
34
Bapcor Limited Annual Report 2019 RUOK? DAY
On Thursday 13 September, 2018,
the Bapcor Group joined the fight
against suicide by supporting the
RUOK? Day campaign. This initiative
is a suicide-prevention charity in
Australia, with the mission to inspire
and empower everyone to
meaningfully connect with those
around them and support anyone
struggling with life. The aim of the
day was for Bapcor team members
to come together to raise awareness
and start the conversation.
Burson Racing
Burson Auto Parts continues its
support of the popular Touring Car
Masters Series in 2019, along with
the CAMS Rising Star Awards and
the CAMS Australian Formula 4
Championship, supporting the
development of junior level racing
drivers seeking to make their mark
in Australian motorsport.
Burson Auto Parts Rookie of 2018
Lochie Hughes, in the CAMS PAYCE
Australian Formula 4 Championship.
Auto Super Shoppes Academy
In 2017 Auto Super Shoppes
ambitiously started on the journey
to open an automotive training
academy. With a shortage of good
technicians, they knew they needed
an industry-led solution and they
wanted to be the ones to do it. The
Academy provides its students, who
are predominately young people,
with a pathway toward work-
readiness and provides the
automotive industry with a pipeline
of passionate, skilled and
technically-equipped graduates.
BNT is proud to be behind Auto Super
Shoppes Academy as a major
supporter of this industry-led
initiative. The Academy started with
high expectations and has achieved
a lot in its first year. At the end of 2019,
52 students successfully graduated
and were placed in full-time
employment.
Burson Thailand
Bapcor in Thailand has engaged in
supporting the local community in
which it operates through charitable
activities, such as donating food to
the SOS Children’s Village in Bang Na.
BNT V8s Championship,
Chelsea Herbert Sponsorship
BNT sponsors Chelsea Herbert,
a young high-performing V8 race
driver. The 2018–19 BNT V8s
Championship saw some pulsating
and competitive racing throughout
the six-round series. Chelsea
Herbert’s focus, drive and
determination saw her continued
success, with a podium finish at the
Teretonga Park, Invercargill circuit
on 20 January 2019.
35
Bapcor Limited Annual Report 2019 36
Bapcor Limited Annual Report 2019 Directors’ Report
30 June 2019
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 2019 (‘FY19’).
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:
Andrew Harrison
Independent, Non-Executive Chairman
Darryl Abotomey
Chief Executive Officer and Managing Director
Therese Ryan
Independent, Non-Executive Director
Margaret Haseltine
Independent, Non-Executive Director
Jennifer Macdonald
Independent, Non-Executive Director (appointed 1 September 2018)
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 network covering over 900 sites.
3. Significant changes in the state of affairs
On 3 July 2018, Bapcor successfully 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. 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, EBITDA of $2.6M and NPAT $1.8M in FY18.
On 30 November 2018, Bapcor acquired Don Kyatt Spare Parts (Qld) Pty Ltd, He Knows Truck Parts Pty Ltd, I Know Parts
and Wrecking Pty Ltd, Commercial Parts Pty Ltd and Commercial Spares Pty Ltd; collectively known as Commercial Truck
Parts. Throughout the year, Bapcor acquired the business operations of Toperformance, Allied Bearings and Japanese
Trucks Australia, as well as numerous franchised stores and set up new greenfield stores in most of its business segments.
Bapcor has established a presence in Thailand and as at 30 June 2019 operates four greenfield automotive parts stores.
Bapcor’s debt facility was refinanced and increased to $520M in June 2019 allocated across five providers, to replace
existing debt and will be utilised for general corporate purposes, working capital, capital expenditure and acquisitions.
The refinancing successfully extended Bapcor’s debt tenure and reduced the cost of funding.
4. Dividends
Fully franked dividends paid during the financial year were as follows:
27 September 2018
$23,821,000 (8.5 cents per share); $6,039,000 settled via DRP
12 April 2019
$21,185,000 (7.5 cents per share); $5,557,000 settled via DRP
The Board has declared a final dividend in respect of FY19 of 9.5 cents per share, fully franked. The final dividend will be
paid on 26 September 2019 to shareholders registered on 30 August 2019.
The final dividend takes the total dividends declared in relation to FY19 to 17.0 cents per share, fully franked, representing
an increase of dividends paid of 9.7% compared to the prior financial year. Dividends paid and declared in relation to FY19
represents 51.1% of pro-forma net profit after tax from continuing operations.
37
Bapcor Limited Annual Report 2019 Directors’ Report continued
30 June 2019
5. Review of operations
Bapcor achieved record revenue, net profit after tax (‘NPAT’) and earnings per share (‘EPS’) results in FY19.
Pro-forma from continuing operations – excluding TRS in FY18:
• Revenue increased by 6.9% from $1,212.3M to $1,296.6M
• Pro-forma earnings before interest, taxes, depreciation and amortisation (‘EBITDA’) increased by 11.7% to $164.6M
• Pro-forma NPAT increased by 11.2% to $94.3M
• Pro-forma EPS increased by 10.3% to 33.45 cents per share
Pro-forma from continuing operations:
• Revenue increased by 4.8% from $1,236.7M to $1,296.6M
• Pro-forma EBITDA increased by 9.8% to $164.6M
• Pro-forma NPAT increased by 9.0% to $94.3M
• Pro-forma EPS increased by 8.0% to 33.45 cents per share
Statutory from continuing operations:
• Revenue increased by 4.8% from $1,236.7M to $1,296.6M
• Statutory NPAT increased by 14.8% to $97.0M
• Statutory EPS increased by 13.8% to 34.40 cents per share
Net debt:
• Net debt at 30 June 2019 was $336.3M representing a leverage ratio of less than 2.0X (Net Debt : annualised EBITDA
allowing for a full twelve months of trading for acquisitions completed during FY19). Fixed charge cover was greater
than 3.0X.
The table below reconciles the pro-forma result to the statutory result for FY19 and FY18:
$’M
Statutory NPAT
Other gains adjustment
Finance cost adjustment
Depreciation and amortisation adjustment
Gain on divestment
Net reserve release to profit and loss
Restructuring and other activities
Tax adjustment
Pro-forma NPAT
TRS
Pro-forma NPAT exc. TRS
Note
1
2
3
4
5
6
7
8
9
FY19
97.0
(4.1)
0.3
-
-
-
1.7
(0.6)
94.3
-
94.3
Consolidated
FY18
Continuing
Operations
FY18
Discontinued
Operations
84.5
-
-
-
-
-
2.9
(0.9)
86.5
1.8
84.8
10.2
-
-
(4.2)
(7.0)
(0.4)
-
2.8
1.4
-
1.4
FY18
Total
94.7
-
-
(4.2)
(7.0)
(0.4)
2.9
1.9
87.9
1.8
86.1
1. NPAT attributable to members of Bapcor Limited
2. The current year other gains adjustment relates to a one off gain realised on the Baxters acquisition final deferred settlement.
3. The current year finance cost adjustment relates to the write off of borrowing costs performed due to the current year refinancing activity.
4. The prior year depreciation and amortisation adjustment relates to the depreciation and amortisation that would have occurred in the Resource
Services and Footwear divisions that was not recorded due to their held for sale status.
5. The prior year gain on divestment relates to the completion of the divestments of discontinued operations.
6. The prior year net reserve release relates to the release of net investment hedge and foreign currency reserves to the profit and loss on divestment of
discontinued operations.
7. The current year restructuring and other activities relates to consulting costs incurred relating to acquisitions that did not proceed as well as restructuring
activity that occurred within the Specialist Wholesale segment. The prior year related to one off 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.
9. TRS was divested 3 July 2018. In FY18 TRS contributed revenue of $24.3M, EBITDA of $2.6M and NPAT $1.8M. Refer to note 7 of the financial statements.
38
Bapcor Limited Annual Report 2019 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.
Pro-forma revenue and EBITDA for continuing operations by segment is as follows:
Trade
Bapcor NZ (exc. TRS)
Bapcor NZ – TRS
Specialist Wholesale
Retail
Unallocated / Head Office1
FY19
$M
524.5
165.0
-
413.1
255.3
(61.3)
Total continuing operations
1,296.6
Revenue
FY18
$M
501.6
153.6
24.3
364.3
239.1
(46.2)
1,236.7
Change
%
FY19
$M
4.6%
7.4%
(100.0%)
13.4%
6.8%
(32.7%)
4.8%
78.2
22.9
-
46.3
27.1
(9.9)
164.6
EBITDA
FY18
$M
72.1
20.1
2.6
38.6
28.8
(12.3)
150.0
Change
%
8.5%
13.8%
(100.0%)
20.0%
(6.0%)
20.0%
9.8%
1. Revenue relates to intersegment sales eliminations and Thailand operations.
EBITDA relates to Bapcor head office costs, intersegment EBITDA elimination, acquisition costs and costs associated with the Thailand operations.
5.1 Operating and financial review – Trade
The Trade segment currently consists of the Burson Auto Parts and Precision Automotive Equipment business units. This
segment is a distributor of:
• Automotive aftermarket parts and consumables to trade workshops for the service and repair of passenger and
commercial vehicles
• Automotive workshop equipment such as vehicle hoists and scanning equipment, including servicing of the equipment
• Automotive accessories and maintenance products to do-it-yourself vehicle owners.
The Trade segment had a successful FY19, and compared to FY18, recorded revenue growth of 4.6% and EBITDA growth of 8.5%.
The increase in revenue of 4.6% included same store sales growth of 2.2%. Trade’s EBITDA to revenue percentage was 0.5
percentage points above FY18 reflecting the impact of margin management initiatives, especially the reduction in cost of
goods sold through procurement initiatives.
During FY19, Burson Auto Parts continued to expand its store network with the number of stores increasing from 170 at 30
June 2018 to 181 at 30 June 2019. The increase of eleven stores consisted of seven greenfield store developments and four
acquisitions. The average cost per new greenfield store including inventory was $721,000.
The new stores are located in Mitchell in the Australian Capital Territory; Artarmon, Batemans Bay, Five Dock, Katoomba,
Lithgow and Nowra in New South Wales; Murwillumbah and Mansfield in Queensland; Devonport in Tasmania and
Ravenhall in Victoria.
During the year, inventory holdings increased by $7.0M (excluding new stores) due mainly to the build-up of new product
ranges including the Hunter equipment product range as well as the expansion of existing ranges.
5.2 Operating and financial review – Bapcor NZ (excluding TRS)
Bapcor NZ consists of Trade and Specialist Wholesale businesses based in New Zealand operating across 79 locations.
BNT is the predominant business with 58 stores supplying automotive parts and accessories to workshops, plus two truck
and trailer parts locations through the Truck and Trailer Parts brand. BNT is similar in nature to Bapcor’s Burson Auto Parts
business in Australia. During FY19 BNT commenced an automotive workshop equipment business which sells vehicle hoists
and scanning equipment. This business is expected to grow substantially in the future.
Bapcor NZ also includes the specialist wholesale businesses of HCB – batteries, Autolign – steering and suspension,
Diesel Distributors, and JAS – auto electrical. The FY18 result also included TRS, a tyre and wheel business predominantly
supplying the agricultural market which was divested on 3 July 2018.
39
Bapcor Limited Annual Report 2019 Directors’ Report continued
30 June 2019
Bapcor NZ performed strongly achieving revenue growth of 7.4% and EBITDA growth of 13.8% compared to FY18. EBITDA to
revenue percentage was 0.8 percentage points above FY18.
Bapcor NZ’s largest business, BNT, achieved same store sales growth of 5.3% reflecting market share growth due to the
success of organisation changes, price management, range expansion and people engagement initiatives. During FY19,
BNT continued to expand its store network with the number of stores increasing from 54 at 30 June 2018 to 58 at 30 June
2019. The increase of four stores related to greenfield store developments in Silverdale, Taupo, Cambridge and Upper
Hutt. The average cost per new store including inventory was $322,000. BNT improved its margin during the financial year
predominately due to the impact of procurement initiatives including the launch of home branded oils, suspension and
brake pads.
During the year, inventory holdings increased by $4.9M (excluding new stores and adjusted for foreign currency) due to
the build-up of new product ranges (including equipment) and expansion of existing ranges.
5.3 Operating and financial review – Specialist Wholesale
The Specialist Wholesale segment consists of operations that specialise in sourcing replacement parts for the
automotive aftermarket. The businesses include AAD, Bearing Wholesalers, Opposite Lock, Baxters, MTQ, Roadsafe, JAS
Oceania, Premier Auto Trade, Federal Batteries, Diesel Distributors and AADi and operations acquired in FY19 of the
Commercial Truck Parts group (Don Kyatt Spare Parts (Qld), He Knows Truck Parts, I Know Parts and Wrecking, Commercial
Parts and Commercial Spares), Toperformance, Allied Bearings and Japanese Trucks Australia.
The Specialist Wholesale segment achieved revenue growth of 13.4% and EBITDA growth of 20.0% compared to FY18.
EBITDA to revenue percentage was 0.6 percentage points above FY18. Especially notable was the increase in revenue
and earnings of the auto electrical businesses. The volume and product groups that the Specialist Wholesale segment
supplies into other Bapcor group businesses continued to grow strongly during the year. As a key business strategy, the
Specialist Wholesale segment will continue to increase the level of intercompany sales.
During the year, inventory holdings increased by $3.1M (excluding acquisitions) due to the build-up of new product ranges
in air conditioning, batteries and other new products.
5.4 Operating and financial review – Retail
The Retail segment consists of business units that are retail customer focused, and include the Autobarn, Autopro and
Sprint Auto Parts retail store brands, and the Midas and ABS workshop service brands. The majority of this segment is
franchised stores and workshops.
Revenue for the Retail segment in FY19 increased by 6.8% compared to FY18 which includes the impact of a higher ratio of
company owned stores versus franchise operations. Autobarn same store sales growth for company owned stores was
approximately 5% and for franchise stores approximately 0.2%. As a result of the higher mix of company owned stores
generating a higher level of sales relative to profit, the FY19 EBITDA to revenue percentage of 10.6% was 1.4 percentage
points below FY18. EBITDA in FY19 was 6.0% lower compared to FY18, impacted by competitive pressure, economic
conditions, new stores and lower wholesale sales to franchise stores.
Bapcor has continued to grow the number of company owned Autobarn stores via both greenfield Autobarn stores as
well as conversion of franchise stores to company owned stores. The total number of Autobarn stores at 30 June 2019 was
134 stores, a net increase of six stores since 30 June 2018. The number of company owned stores increased from 48 to 66,
with the 18 new stores consisting of ten greenfield stores, the conversion of nine franchise operations and the closure of
one store. The percentage of company owned Autobarn stores at 30 June 2019 was 49%, up from 38% at 30 June 2018.
At 30 June 2019 the total number of company owned and franchise stores in the Retail segment was 365 consisting of
Autobarn 134 stores, Autopro 77 stores, Sprint Auto Parts 35 stores and Midas and ABS 119 stores.
During the year, inventory holdings decreased by $4.6M (excluding new stores) due to a focus on inventory reduction
initiatives.
5.5 Operating and financial review – Unallocated / Head Office
The Unallocated / Head Office segment consists of all elimination and head office costs or adjustments that are not in
the control of the other segments, as well as the results of the Thailand operations. It also includes the elimination of
intercompany sales and EBITDA. Unallocated costs decreased from $12.3M in FY18 to $9.9M in FY19 which was primarily
due to a higher level of central rebate income from procurement activities.
Intercompany sales increased by 34.5% during the year, reflecting a higher proportion of product sourced internally and
increasing the volume of “own brand” product.
40
Bapcor Limited Annual Report 2019 During the year, inventory holdings for the Thailand based operations increased by $1.9M due to the opening of three
additional stores, bringing the total number of stores to four.
5.6 Financial Position - Capital Raising and Debt
In September 2018, Bapcor issued 830,414 shares to participating shareholders under its Dividend Reinvestment Plan, in
respect of the FY18 final dividend. In December 2018, Bapcor issued 1,396,952 shares as part consideration for the
Commercial Truck Parts acquisition. In April 2019, Bapcor issued 1,008,479 shares to participating shareholders under its
Dividend Reinvestment Plan, in respect of the FY19 interim dividend. As a result of these issues, ordinary shares on issue
increased from 280,244,752 as at 30 June 2018 to 283,480,597 as at 30 June 2019.
Bapcor’s debt facility was refinanced and increased to $520M in June 2019 allocated across five providers, to replace
existing debt and will be utilised for general corporate purposes, working capital, capital expenditure and acquisitions.
The refinancing successfully extended Bapcor’s debt tenure and reduced the cost of funding.
Net debt at 30 June 2019 was $336.3M representing a leverage ratio of less than 2.0X (Net Debt : annualised EBITDA allowing
for a full twelve months of trading for acquisitions completed during FY19). Fixed charge cover was greater than 3.0X.
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 and Precision Automotive Equipment. The business units are
trade-focussed “parts professionals” businesses supplying service workshops. Bapcor’s target is to grow Burson Auto
Parts’ store numbers via acquisitions and greenfields from 181 stores at the end of June 2019 to 230 stores with 35% home
brand product content.
Bapcor New Zealand
Bapcor New Zealand’s operations consist of its automotive aftermarket businesses of BNT, Precision Automotive
Equipment (NZ), Autolign and Truck and Trailer Parts, as well as the automotive electrical businesses of HCB, JAS Oceania
and Diesel Distributors (NZ). The strategy is to grow the BNT business from its current 58 stores to 75, 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%.
Specialist Wholesale
The Specialist Wholesale business strategy 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 operates are brake, bearings,
electrical, suspension, 4WD, cooling, diesel, engine control systems and the recently added commercial vehicle parts.
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.
Retail
Autobarn – The premium retailer of automotive accessories, Autobarn had 134 stores at the end of 30 June 2019 including
66 company owned stores. The target is to grow to 200 Autobarn stores, 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 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 these 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 119 stores at 30 June 2019 of which 111 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.
41
Bapcor Limited Annual Report 2019 Directors’ Report continued
30 June 2019
Asia
Bapcor has commenced an expansion into South East Asia, initially into Thailand. Currently there are four greenfield
stores selling automotive parts and accessories to workshops and retail customers. Bapcor sees significant potential to
grow this footprint, once the concept is proven in Thailand. The initial twelve months of operations have been positive.
Competitive advantages
Team Members – Our team members are the key to our success. 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, NZ and Asia 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.
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. Through its retail businesses Bapcor has online sales channels, including ‘click and collect’ and ‘click and
deliver’. In the trade and wholesale channels the group offers electronic ‘B2B’ trading including an extensive parts catalogue.
In the trade business Bapcor’s fast delivery capabilities, wide product range and knowledgeable people are the key to
Bapcor’s customer offering which on-line businesses cannot match. Bapcor does not believe on-line competition will
have a material impact on Bapcor’s trade business.
There is increased interest and production of electric vehicles. As Bapcor’s target market is parts and accessories for
vehicles greater than four 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 and NZ 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.
42
Bapcor Limited Annual Report 2019 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 (as is the case with Bapcor’s
competitors), 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 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 team members. 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 networks, 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 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 focussed customer service business and its team members 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 team members 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. Bapcor is
investing in upgrading its systems to ensure they are suitable for current trading with the objective of providing a
competitive advantage.
9. Likely development and expected results of operations
In FY19 Bapcor delivered another record result in sales and earnings, and a solid growth in earnings per share despite the
year being a comparatively tough year with softer trading conditions than recent years across most of Bapcor’s
businesses. The softer trading conditions were largely driven by the decline in consumer confidence in the Australian and
NZ markets due to falling housing prices, share market performance and political uncertainty. A higher level of
competition including price discounting by competitors to attract business also impacted the business.
Bapcor will continue to focus on its core strategies (which have not changed), including organic growth, increased footprint,
improved margin, especially through higher own brand sales to deliver continually increasing sales and earnings. The main
current focus is to consolidate and optimise the businesses Bapcor has acquired over the past four years.
FY20 has started positively across all of Bapcor’s business segments, however there continues to be underlying economic
uncertainty. Given the uncertain conditions Bapcor is forecasting proforma net profit after tax to increase in middle to
high single digit percentages in FY20.
43
Bapcor Limited Annual Report 2019 Directors’ Report continued
30 June 2019
10. Information on directors
Name:
Title:
Qualifications:
Experience and expertise:
Andrew Harrison
Independent, Non-Executive Director and Chairman
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 and has
previously held non-executive directorships with public, private and private
equity owned companies. Andrews’s former executive positions include Chief
Financial Officer of Seven Group Holdings, Group Finance Director of Landis and
Gyr, and Chief Financial Officer of Alesco Limited. Andrew has also worked
as a corporate advisor in Australia, the United States and the United Kingdom.
Other current directorships:
Andrew is currently Chairman of WiseTech Global Limited and on the board of
Moorebank Intermodal Company.
Former directorships (last 3 years):
Estia Health Limited, Xenith IP Limited and IVE Group Limited
Special responsibilities:
Chairman
Member of the Audit and Risk Committee
Member of the Nomination and Remuneration Committee
Interests in shares:
68,570 ordinary shares
Name:
Title:
Qualifications:
Experience and expertise:
Darryl Abotomey
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 led Bapcor since 2011 and has more than thirteen years’ experience
in the automotive aftermarket industry. Darryl has extensive experience in
business acquisitions, strategy, finance, information technology and general
management in distribution and other industrial businesses. Darryl was a former
Director and Chief Financial Officer of Exego Group (Repco). He has also
previously held directorships with The Signcraft Group, PaperlinX Limited,
CPI Group Limited and Pinegro Products Pty Ltd.
Other current directorships:
Former directorships (last 3 years):
None
None
Interests in shares:
Interests in rights:
1,641,323 ordinary shares
549,491 performance rights
44
Bapcor Limited Annual Report 2019 Name:
Title:
Qualifications:
Experience and expertise:
Therese Ryan
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. Therese has over 20 years’
experience across executive and board appointments within the automotive
industry. 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, WA Super
and Sustainable Timber Tasmania.
Former directorships (last 3 years):
None
Special responsibilities:
Chair of the Nomination and Remuneration Committee
Member of the Audit and Risk Committee
Interests in shares:
34,730 ordinary shares
Name:
Title:
Qualifications:
Experience and expertise:
Margaret Haseltine
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 ten years’ experience in board directorship. A proven executive
leader, Margaret has significant experience in the areas of supply chain and
logistics, customer interface in the FMCG sector, change management,
governance, and management within a large corporate environment. Previously,
she held various senior positions with Mars Food Australia, including CEO,
spanning a 20-year career.
Other current directorships:
Margaret is currently a board member of Southern Hospitality Ltd and Bagtrans
Pty. Ltd. (Chairman) and Newcastle Permanent Building Society.
Former directorships (last 3 years):
Fantastic Holdings Ltd.
Special responsibilities:
Member of the Audit and Risk Committee (appointed as Member 1 September 2018)
Chair of the Audit and Risk Committee (resigned as Chair 1 September 2018)
Member of the Nomination and Remuneration Committee
Interests in shares:
32,125 ordinary shares
45
Bapcor Limited Annual Report 2019 Directors’ Report continued
30 June 2019
Name:
Title:
Qualifications:
Experience and expertise:
Jennifer Macdonald (appointed 1 September 2018)
Independent, Non-Executive Director
Masters of Entrepreneurship and Innovation from Swinburne University
Graduate Diploma from the Securities Institute of Australia
Bachelor of Commerce from Deakin University
Graduate of the Australian Institute of Company Directors
Chartered Accountant
Jennifer is a professional company director currently serving on the board and
audit committee of a number of ASX-listed companies. Jennifer has previously
held various senior management positions with ASX-listed and global companies,
including as CFO and interim CEO at Helloworld Limited, and CFO and General
Manager International at REA Group Ltd.
Other current directorships:
Jennifer is currently a board member of Australian Pharmaceuticals Ltd,
Redflow Ltd and Redbubble Ltd.
Former directorships (last 3 years):
None
Special responsibilities:
Chair of the Audit and Risk Committee (appointed 1 September 2018)
Member of the Nomination and Remuneration Committee (appointed
1 September 2018)
Interests in shares:
10,254 ordinary shares
Note; ‘former directorships (last 3 years)’ quoted above are directorships held in the last 3 years for listed entities only and excludes directorships of all other
types of entities.
11. Company secretary and officers
Current Chief Financial Officer and Company Secretary
Gregory Lennox Fox (2 March 2012 – present)
Greg has more than 30 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’) and of each Board committee held during the
year ended 30 June 2019, and the number of meetings attended by each director were:
Full Board
Nomination and
Remuneration Committee*
Audit and Risk Committee*
Attended
Held
Attended
Held
Attended
Held
Andrew Harrison
Darryl Abotomey*
Therese Ryan
Margaret Haseltine
Jennifer Macdonald**
9
9
9
9
6
9
9
9
9
7
3
-
3
2
2
3
-
3
3
2
4
-
4
4
3
4
-
4
4
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 Committee are Jennifer Macdonald (Chair from 1 September 2018), Margaret Haseltine (Chair between 4 April 2018
– 30 August 2018), Andrew Harrison and Therese Ryan. Darryl Abotomey, whilst not a member of the Audit and Risk Committee, attended all Audit and
Risk Committee meetings by invitation from the Committee.
The members of the Nomination and Remuneration Committee are Therese Ryan (Chair), Andrew Harrison, Margaret Haseltine and Jennifer Macdonald.
Darryl Abotomey, whilst not a member of the Nomination and Remuneration Committee, attended all Nomination and Remuneration Committee
meetings by invitation from the Committee
** Jennifer Macdonald was appointed as an Independent, Non-Executive Director, Chair of the Audit and Risk Committee and Member of the Nomination
and Remuneration Committee on 1 September 2018.
46
Bapcor Limited Annual Report 2019
13. Remuneration report
The Bapcor Board is very pleased to share with you our Remuneration Report for the financial year ended 30 June 2019.
The performance and growth of Bapcor consistently delivered by its executive and team members since listing on
the Australian Securities Exchange (‘ASX’) in 2014 is again a key feature of the Company’s results in FY19. In the face
of increasingly challenging market conditions some of the significant outcomes of another successful year include
4.8% increase in revenue from continuing operations from $1,236.7M to $1,296.6M and pro-forma net profit after tax
(‘NPAT’) from continuing operations of 9.0% from $86.5M to $94.3M. In addition, statutory NPAT from continuing
operations increased by 14.8% from $84.5M to $97.0M.
FY19 delivered record results in every financial metric.
The following chart shows total return to shareholders over the previous four years:
90%
80%
80%
70%
60%
50%
40%
30%
20%
0%
Source: KPMG
Bapcor
Comp. Group
(Average)
ASX 100
(Average)
ASX 200
(Average)
Consistently delivering strong results requires Bapcor to attract and retain the leadership talent that can shape and
deliver the strategy. The Board is very aware that to do this executive key management personnel (‘KMP’) should be
appropriately rewarded for their skills, experience and achievements and to ensure this the following approach has
been taken to remuneration:
Fixed remuneration is set to provide market competitive, appropriate remuneration to attract, retain and motivate
our talented team in a highly competitive and increasingly challenging market. In FY19 modest increases were made
to KMP pay based on independent market remuneration benchmarking which, as in previous years, targeted 50th
percentile of the benchmark, with a range of plus or minus 20%.
Providing rewards and incentives to drive outperformance is the focus of the other elements of our remuneration
approach with targets to deliver the strategy and shareholder growth established each year after in-depth
consideration by the Bapcor Board.
The Short Term Incentive (‘STI’) is structured by the Board through setting aggressive targets for both financial and
non-financial indicators that reward our executive KMP for delivering on our growth strategy; this requires executive
KMP to take measured risks that benefit our investors in the short term as well as continuing to build the foundations
and capital investments that contribute to the long term sustainability of the business. STI payments are primarily
awarded for achieving and exceeding the NPAT or earnings before interest and tax (‘EBIT’) targets that are
established at levels greater than prior year. They also include achieving improvements in working capital levels.
Non-financial targets for each executive KMP are also an important feature of the STI and are designed to drive
elements of the strategy such as safety, people, customer, compliance, environmental, governance and
optimisation.
47
Bapcor Limited Annual Report 2019 Directors’ Report continued
30 June 2019
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. After consideration, the
Board retains the view that this is a reliable and transparent way to measure long term shareholder value aligning
the interests of our executive KMP with the interests of our investors. Once again, we believe our investors will be
pleased with a compound annual statutory EPS growth rate over five years of 31.5% and that the executive team
that achieves such strong and consistent results should be rewarded for its efforts. The Board also reports that 38.6%
of the three year tranche of the FY17 LTI and 50.0% of the FY17 LTI plan allocated to the CEO vested.
To deliver on our strategy; engaged, high calibre team members in every part of the Group are vital to accomplish
financial targets and provide shareholder value. Ensuring all Bapcor team members are safe, engaged and able to
realise their full potential is essential to the Group’s success and in FY19 the focus on team member engagement
and development therefore continued. Bapcor launched a Group-wide intranet, CORE, to connect and
communicate with all team members regardless of their role, business or location in the Group. An increasing focus
on talent saw consistent succession, talent and performance review approaches across the Group with a range of
training programs conducted to enhance capability, including our leaders and sales force. After the initial
Group-wide team member engagement survey was conducted in late 2017, Bapcor again undertook the “Have Your
Say” Engagement Survey in FY19 with over 3,000 team members participating to achieve a response rate of 72%.
The results were again pleasing and reflective of the positive culture of Bapcor and the effectiveness of the actions
taken, particularly in the areas of safety and communication, since the last survey.
Bapcor is still a young business but with a very long history and FY19 saw a number of changes and renewal in the
executive team. This created the opportunity to bring new leaders, skills and experiences to the executive team
that will further shape and grow Bapcor into the future. Being able to attract new, high calibre executives to lead
Bapcor has also confirmed our remuneration approach is meeting market expectations. The Board continues to be
delighted that the executive team, and the Bapcor team more broadly, which has achieved the financial and
non-financial results that have consistently improved returns to our shareholders and which provide a solid
foundation for the sustained performance of the Company.
48
Bapcor Limited Annual Report 2019 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 Overview
14.2 Remuneration governance
14.3 Remuneration framework
14.4 Key management personnel
14.5 Executive remuneration
14.6 Cash and realisable remuneration
14.7 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 five years
Bapcor has grown in size and complexity since it listed on the ASX in 2014. Over these five years financial performance has
consistently improved as have the returns delivered to shareholders.
Remuneration Analysis FY14 - FY19
% increases of Market Cap, Revenue, Pro-forma NPAT and Executive KMP Fixed Remuneration
e
s
a
e
r
c
n
i
%
500%
450%
400%
350%
300%
250%
200%
150%
100%
50%
0%
E-KMP fixed $M
FY14
1.66
E-KMP roles at year end
5
Avg fixed $000’s
333
FY15
1.87
6
312
FY16
2.87
7
410
FY17
3.91
9
435
FY18
4.96
9
551
FY19
4.89
9
543
Market Cap
NPAT
Revenue
E-KMP
Fixed Rem
49
Bapcor Limited Annual Report 2019
Directors’ Report continued
30 June 2019
14.1.2 Key Questions
Key Questions
How is FY19 executive remuneration
different from FY18?
Were there any increases to
non-executive directors in FY19?
How much STI was earned by the
executives for FY19 and what were
the reasons for the level of
payment?
Our Approach
The approach to executive remuneration remains consistent with FY18. Modest
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.
No. Non-executive directors’ fees were not increased during the year.
STIs earned by executive KMP are based on targets established by the Board 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 FY19 was
$1,492,000 which is 43.3% of the maximum that could have been paid.
As no awards exceeded the target value, there has been no deferred
components in FY19.
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 4.8% over FY18
• Group pro-forma EBIT from continuing operations increase of 9.8% over FY18
• Group pro-forma NPAT from continuing operations increase of 9.0% over FY18
• Statutory NPAT from continuing operations increase of 14.8% over FY18.
Each executive KMP also has specific personal objectives agreed at the
beginning of the year that 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
corporate governance. 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 and investor relations.
Although STI payments have been made in FY19, the level of payments in comparison
with FY18 demonstrates that the Board continues to set demanding stretch targets
each year and that market conditions have become increasingly challenging.
What LTI grants have vested in FY19?
What was the basis for the vesting
of those grants?
The three year tranche of the LTI granted to ten executives on 24 December 2016,
being 66% of the total number vested, was independently tested by a third party
against the company’s FY19 TSR and EPS performance. The extent to which they
vested is as follows:
Relative TSR Rights: Bapcor’s TSR performance ranked at the 40th percentile of
the comparator group. This resulted in none of the tranche vesting.
Compound annual growth rate (‘CAGR’) of EPS: Bapcor’s CAGR of statutory EPS
was 24.4%. This resulted in 100% of the tranche vesting.
The LTI granted to the CEO on 4 December 2017, being 100% of the total number
granted, was independently tested by a third party against the company’s FY19
TSR and EPS performance. The extent to which they vested is as follows:
Relative TSR Rights: Bapcor’s TSR performance ranked at the 41st percentile of
the comparator group. This resulted in none of the tranche vesting.
CAGR of EPS: Bapcor’s CAGR of statutory EPS was 24.4%. 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.
50
Bapcor Limited Annual Report 2019 Key Questions
Our Approach
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.
Did the Board make any one-off
payment to executive KMP in FY19?
Did the Board exercise discretion
when determining the payments
under the STI plan?
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. The Board continues
with the view that three years is the appropriate performance period to drive a
sustainable business, grow shareholder value and retain talented executive KMP.
There were no one-off payments to executive KMPs in FY19.
STIs are structured to include personal objectives that contribute to the
longer-term strategy and sustainability of the business. These personal
objectives may be non-financial or not numeric in nature and, as such, some
judgement is required by the Board to assess the achievement of these
objectives.
What were the FY19 STI performance
measures for KMP’s?
Section 14.5.1 and 14.5.2 of this report provides more details of the performance
measures for FY19.
How did the Board establish the STI
performance measures for FY19?
As in prior financial years, 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
executive KMP. Also there were targets for reducing working capital. Therefore
70% of the target STI award is tied to these financial measures. All above target
STI awards are based on the financial measures.
Achievement of the non-financial measures aligns to the strategy and underpins
the future growth and sustainability of the Company.
Is there provision for deferral of STI
and what if any has been deferred?
Yes. Payment to executive KMP of the STI component that is above target is
deferred for twelve months. For FY19 there were no deferred amounts. Deferred
amounts from FY18 of $602,763 will be paid in August 2019.
Were those executive KMP who have
not remained in their role paid an
STI?
The Board exercised its discretion under the rules of the plan in determining if STIs
would be paid to the executive KMP who have not continued in their role. Those
KMP who left the business were not paid any STI and those who have remained
with Bapcor and transitioned to other roles were paid an STI.
How does the company determine
the number of LTI Performance
Rights to grant?
What clawback provisions are in
place?
The weighted average face value of shares is used to calculate the number of LTI
Performance Rights granted.
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.
Has the company made any loans
to the executives in FY19?
No loans were provided to any executive KMP in FY19.
51
Bapcor Limited Annual Report 2019 Directors’ Report continued
30 June 2019
14.2 Remuneration governance
Bapcor Board
• 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.
• Has discretion to exercise clawback provisions should any material financial misstatements arise.
Nomination and Remuneration
Committee (NRC)
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.
External Advisors
• 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 FY19 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.
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52
Bapcor Limited Annual Report 2019
14.3 Remuneration framework
14.3.1 Executive remuneration structure
Fixed Annual Reward (FAR)
+
Total Remuneration
=
Short Term Incentive (STI)
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
70% financial targets
30% personal objectives
(which may be non-financial)
Financial targets are NPAT for
CEO/CFO and EBIT for other
executive KMP. Working
capital targets apply to all
KMP.
Payment threshold is 95% of
target
Personal objectives include
safety, team, talent and
strategic growth.
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
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 FY19 remuneration mix
+
Long Term Incentive (LTI)
Reward long term sustainable
performance that delivers
shareholder returns
Performance Rights which do
not attract dividends or
voting rights
Vest after three years with
sale of vested shares
restricted for twelve months
50% TSR
50% EPS
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 FY19 Pay Mix
35%
35%
30%
45%
32%
23%
CEO
Other KMP
0%
20%
40%
60%
80%
100%
Fixed remuneration
Maximum STI
Maximum LTI
53
Bapcor Limited Annual Report 2019 Directors’ Report continued
30 June 2019
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. This includes non-executive and executive directors as well as executive leaders. The KMP during FY19 and their
positions are those in the following table.
Position
Board Chair
Member Audit and Risk Committee
Member Nomination and Remuneration Committee
Chair Nomination and Remuneration Committee
Member Audit and Risk Committee
Member Nomination and Remuneration Committee
Member Audit and Risk Committee (reappointed as Member 1 September 2018)
Chair Audit and Risk Committee (resigned as Chair 1 September 2018)
Chair Audit and Risk Committee (appointed 1 September 2018)
Member Nomination and Remuneration Committee (appointed 1 September 2018)
Managing Director and Chief Executive Officer
Chief Financial Officer and Company Secretary
Executive General Manager, Trade
Chief Operating Officer, Strategic Marketing and Bapcor New Zealand
(resigned 14 September 2018)
Executive General Manager, Bapcor NZ (appointed 1 October 2018)
Chief Operating Officer, Specialist Wholesale (resigned 23 October 2018)
Executive General Manager, Specialist Wholesale – Mechanical (appointed
24 October 2018)
Executive General Manager, Strategic Development (ceased 24 October 2018)
Executive General Manager, Specialist Wholesale – Engine Management
(appointed 22 February 2019)
Executive General Manager, Retail (ceased 29 April 2019)
Executive General Manager, Retail (appointed 29 April 2019)
Executive General Manager, Logistics (ceased 30 April 2019)
Executive General Manager, Human Resources
Name
Non-executive Directors (‘NED’)
Andrew Harrison
Therese Ryan
Margaret Haseltine
Jennifer Macdonald
Executive Director
Darryl Abotomey
Executive KMP
Greg Fox
Craig Magill
Colin Daly
Martin Storey
Paul Dumbrell
Mathew Cooper
Steve Drummy
Peter Tilley
Tim Cockayne
Grant Jarrett
Alison Laing
54
Bapcor Limited Annual Report 2019 14.5 FY19 executive remuneration
The following sections explain FY19 executive KMP remuneration:
14.5.1 Financial performance over the last five 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
14.5.1 Financial performance over the last five years
Bapcor’s financial performance over the last five 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 five 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 (cents)1
Increase/(decrease) in pro-forma EPS – TERP adjusted
Statutory NPAT $m2
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
Increase/(decrease) in statutory NPAT
1,581.6%
123.4%
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
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%
30.97
26.9%
94.7
47.8%
33.88
42.6%
15.5
19.2%
6.55
19.3%
1,835.6
2019
1,296.6
4.8%
94.3
9.0%
33.45
8.0%
97.0
2.4%
34.40
1.5%
17.0
9.7%
5.58
(14.8%)
1,581.8
1. EPS has been adjusted to take into consideration the impact of rights issues performed 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 FY19 STI performance metrics and outcomes
Participants in the STI Plan have a target cash payment that is a percentage of their fixed annual remuneration with
financial and non-financial targets established by the Board each year. Actual STI payments may be below, at or above
that target depending on the achievement of these financial and non-financial objectives. For the financial objectives,
no incentive payment is awarded if the threshold of 95% of the target performance is not met.
70% of the target STI opportunity of the executive KMP is contingent on meeting financial objectives of either annual
NPAT or EBIT and working capital. The FY19 objectives set by the Board were at levels significantly higher than the
previous year’s achievement, with the threshold measure higher than the FY18 actual result.
30% of target STI is subject to meeting other annual personal objectives which may include both financial and
non-financial measures.
55
Bapcor Limited Annual Report 2019 Directors’ Report continued
30 June 2019
Type of
performance
measure and
weighting at
target
KMP Performance measure
FY19 performance
CEO and CFO is Group NPAT.
Other Group executives is Group EBIT.
Business segment executives is EBIT of the business segment they lead and
Group EBIT.
All KMP have targets for reducing working capital.
The Group target was set significantly higher than the FY18 actual result and
was set in the context of the business strategy and growth objectives.
Financial
70%
< Threshold
Threshold
Target
Maximum
Percentage of FAR
CEO
Nil
28.5%
38.5%
83.5%
CFO
Nil
20%
28%
58%
Other KMP
Nil
20%
28%
58%
Threshold level is 95% of target and requires significant improvement over FY18
actual result.
Pro-forma NPAT for
FY19 was $94.3M, a
9.0% increase over
FY18.
Pro-forma
continuing
operations EBIT
performance
increased 9.8% over
FY18.
EBIT by business
segment varied as
detailed in the
financial report.
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 FY18
• People: with objectives requiring individual and team development, culture
strategies, succession planning, and training and development outcomes
• Customer engagement: including objectives to measure and improve
A detailed
explanation of the
group’s
achievements in the
non-financial areas
are contained in
section 5 of the
Directors’ Report.
customer sentiment
Personal
(which may be
non-financial)
30%
• Strategic acquisitions: with objectives requiring the identification of
suitable businesses for acquisition, 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, governance and risk management: requiring processes and
procedures to ensure achievement of compliance requirements and the
identification and management of risk
• Major projects: for the achievement of milestones, deliverables and
benefits of major projects such as the Retail Point of Sale (POS) and
Warehouse Management System (WMS) implementation
56
Bapcor Limited Annual Report 2019 The following table shows the actual STI outcomes for each of the executive KMP for FY19:
KMP
D Abotomey
G Fox
C Magill
C Daly
M Storey
P Dumbrell
M Cooper
S Drummy
P Tilley
T Cockayne2
G Jarrett
A Laing
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 $1
Deferred STI $
55%
40%
40%
40%
40%
40%
40%
40%
40%
40%
40%
40%
100.0%
70.0%
70.0%
70.0%
70.0%
70.0%
70.0%
70.0%
70.0%
70.0%
70.0%
70.0%
42.5%
46.2%
47.4%
0.0%
47.5%
0.0%
49.0%
30.2%
19.6%
0.0%
33.4%
46.3%
57.5%
53.8%
52.6%
100.0%
52.5%
100.0%
51.0%
69.8%
80.4%
100.0%
66.6%
53.7%
541,646
221,570
185,842
-
95,689
-
161,265
31,158
55,836
-
86,683
111,918
-
-
-
-
-
-
-
-
-
-
-
-
1. The actual STI awarded values have been adjusted to reflect the term of the KMP during the financial year. Those KMP who departed Bapcor during FY19
forfeited any STI. The period of employment during FY19 are detailed in note 14.7.1
2. T Cockayne was appointed 29 April 2019 and hence was not eligible for an STI for FY19.
The STI performance measures are tested after the end of the relevant financial year. The resulting figures may differ from
the amounts shown above.
14.5.3 STI payment, deferral and clawback
Where STI awards have been achieved, payments under the STI Plan are made after the release of full year financial
results to the ASX with the exception of any portion of an award above the target up to the maximum award.
The amount of any STI award above target is deferred for a period of twelve months. The deferred amount is payable to
the executive after the release of the year ending 30 June 2020 financial results. In FY19 there were no deferred STI
amounts.
All STI 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. 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. The Board
also 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.
57
Bapcor Limited Annual Report 2019 Directors’ Report continued
30 June 2019
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 at no cost to the participant.
The key terms of the LTI under which grants were made in FY19 and prior years are as follows:
Administration
Who participates?
What is the LTI opportunity?
Performance Rights
The LTI is administered by the Board.
In FY19 executive KMP who were employed at the commencement of the
financial year were invited to participate.
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 FY19 provides for the Performance
Rights, upon satisfaction of the vesting conditions, to convert into a fully paid
ordinary share for each vested right. The Performance Rights do not carry any
voting rights or dividend entitlements.
How was the number of
Performance Rights determined?
For the grants made in FY19, 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 period
Performance is assessed over a performance period specified at the time of the
grant. The performance period for the LTI opportunities granted in FY19 are set
out following this table.
Performance measures
Each executive is granted two tranches of Performance Rights.
50% of the total grant value of Performance Rights granted to the executive
under each tranche are subject to the satisfaction of a TSR performance hurdle
for the relevant performance period (‘TSR Rights’), and 50% are subject to
satisfaction of an EPS performance hurdle for the relevant performance period
(‘EPS Rights’).
These are described in more detail in the section following this table.
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 FY19 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 five 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.
Shares
Participation in new issues
Limitations
Trustee
Quotation
58
Bapcor Limited Annual Report 2019 Amendments
Clawback
Other terms
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 FY19 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.
In relation to FY19 an offer to participate was made to seven of Bapcor’s executive KMPs. These allocated Performance
Rights have a performance period that ends 30 June 2021 at which time the performance hurdles are tested.
Grant date
Performance hurdle
Performance period
Test date
Expiry date
Quantity granted
Exercise price
26/9/18
29/10/18
Relative TSR
EPS
Relative TSR
EPS
1/7/18 to 30/6/21
1/7/18 to 30/6/21
30/6/21
26/9/33
30/6/21
29/10/33
113,096
113,099
85,443
85,443
Nil
Nil
Fair value at grant date
$4.860
$7.010
$3.970
$6.140
Other conditions
Restriction on sale to 30/6/22
Restriction on sale to 30/6/22
Share price on valuation date
Volatility
Dividend yield
Risk free rate
$7.48
24.47%
2.35%
2.13%
$6.53
24.86%
2.35%
2.01%
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%
59
Bapcor Limited Annual Report 2019 Directors’ Report continued
30 June 2019
TSR for Bapcor and the companies in the Comparator Group will be calculated as follows:
• TSR will be measured between 30 June 2018 and 30 June 2021 (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 ten trading days up to and including 30 June at the start and end date of the Performance Period.
The Comparator Group for the FY19 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
AAD
AHG
API
ARB
BRG
CTD
DMP
FLT
GEM
GUD
HVN
IEL
IVC
JBH
MTS
NVT
PMV
SUL
TME
WEB
Ardent Leisure Group
Automotive Holdings Group Ltd
Australian Pharmaceutical Industries Limited
ARB Corp Ltd
Breville Group Ltd
Corporate Travel Management Ltd
Domino's Pizza Enterprises Ltd
Flight Centre Travel Group Ltd
G8 Education Ltd
GUD Holdings Ltd
Harvey Norman Holdings Ltd
IDP Education Ltd
InvoCare Ltd
JB Hi-Fi Ltd
Metcash Limited
Navitas Ltd
Premier Investments Ltd
Super Retail Group Ltd
Trade Me Group Ltd
Webjet Ltd
Earnings per share growth
Fifty per cent of the Performance Rights granted to a participant will vest by reference to an EPS performance hurdle that
measures the basic EPS on a normalised basis over the performance period. Each tranche of Performance Rights subject
to an EPS hurdle will vest as follows:
• The Board has determined that the EPS hurdle will be based on a compound annual growth rate (‘CAGR’) of basic
EPS of between 7.5% and 15%, respectively, over the Performance Period.
• The starting point for these EPS rights is the FY17 actual statutory EPS of 23.76 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:
60
Bapcor Limited Annual Report 2019 Bapcor's compound annual EPS growth over the
performance period
Percentage of EPS Rights Vesting
Less than 7.5%
7.5%
Nil
20%
Greater than 7.5% and less than 15%
Pro-rata straight-line vesting
Equal to or greater than 15%
100%
If vesting conditions are met, Performance Rights granted in FY19 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 FY19 the following Performance Rights were independently tested by third parties:
The three year tranche of the LTI granted to ten executives on 24 December 2016, being 66% of the total number vested,
was independently tested by a third party against the company’s FY19 TSR and EPS performance. The extent to which
they vested is as follows:
Relative TSR Rights: Bapcor’s TSR performance ranked at the 40th percentile of the comparator group. This resulted in
none of the tranche vesting.
Compound annual growth rate (‘CAGR’) of EPS: Bapcor’s CAGR of statutory EPS was 24.4%. This resulted in 100% of the
tranche vesting.
The LTI granted to the CEO on 4 December 2017, being 100% of the total number granted, was independently tested by a
third party against the company’s FY19 TSR and EPS performance. The extent to which they vested is as follows:
Relative TSR Rights: Bapcor’s TSR performance ranked at the 41st percentile of the comparator group. This resulted in
none of the tranche vesting.
CAGR of EPS: Bapcor’s CAGR of statutory EPS was 24.4%. 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.
61
Bapcor Limited Annual Report 2019 Directors’ Report continued
30 June 2019
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 FY19 STI award that is not deferred and is paid in August 2019.
The table also includes the value of previous years’ deferred STI and LTI awards that vested during FY19 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.
Executive
KMP
D Abotomey
G Fox
C Magill
C Daly
M Storey
P Dumbrell
M Cooper
S Drummy
P Tilley
T Cockayne
G Jarrett
A Laing
Fixed
remuneration1
$
FY19 cash STI2
$
1,275,000
685,000
560,000
106,112
288,016
151,233
470,000
147,288
406,767
76,438
370,630
345,000
541,646
221,570
185,842
-
95,689
-
161,265
31,158
55,836
-
86,683
111,918
Previous year awards that
vested during FY19
Prior year
deferred STI
received3
$
Vested and
unrestricted LTI4
$
Total received
and realisable
during FY19
$
476,048
102,200
20,147
-
-
-
4,368
-
-
-
-
-
1,921,503
869,902
498,734
58,228
-
550,148
97,377
-
91,996
-
102,738
-
4,214,197
1,878,672
1,264,723
164,340
383,704
701,381
733,010
178,446
554,599
76,438
560,051
456,918
Total cash in
respect of FY19
$
1,816,646
906,570
745,842
106,112
383,704
151,233
631,265
178,446
462,603
76,438
457,313
456,918
1. Fixed remuneration is the aggregate of cash salary, superannuation and fringe benefits and has been adjusted for the term of the KMP within the
financial year.
2. FY19 cash STI is the amount accrued and payable in respect of FY19 STI opportunity. It is the cash amount to be paid in August 2019 and does not include
any deferred amount in respect of the FY18 or FY19 STI award. It will differ to the amount in section 14.7.1 as it doesn’t included any adjustment relating to
prior year under or over accrual. KMP that left during the year forfeited their right to a FY19 STI.
3. Prior year deferred STI received is the STI amount awarded in August 2018 in respect of FY18 and deferred for twelve months. It is to be paid in August 2019.
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 which was in the range of $6.14 to $7.43 per share.
62
Bapcor Limited Annual Report 2019 14.7 Statutory details of remuneration
The statutory remuneration disclosures for the year ended 30 June 2019 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. 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
63
Bapcor Limited Annual Report 2019 Directors’ Report continued
30 June 2019
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Bapcor Limited Annual Report 2019
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65
Bapcor Limited Annual Report 2019
Directors’ Report continued
30 June 2019
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:
1 May 2019
Term of agreement:
3 years (to 30 April 2022)
Details:
Other KMP
Fixed annual remuneration was increased to $1,275,000 (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.
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
Leave
Restraint of trade
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 50% and 60% of the
executive’s FAR.
The executive KMP are subject to a three to six month notice period both by the
company and by the executive.
Each contract includes provisions requiring the executive to maintain the
confidentiality of company information.
Each contract provides for leave entitlements, as a minimum, in accordance with
respective legislation
Each contract includes restraint of trade provisions for a period after termination
of employment.
66
Bapcor Limited Annual Report 2019 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 $1,200,000 was approved by shareholders at the AGM on 29 October 2018.
The following fee policy for the Board and Committees took effect from 1 July 2016 and remained unchanged in FY19.
NED type
Chairman
Member
Board
$
280,000
110,000
Nomination and
Remuneration Committee
$
Audit & Risk Committee
$
20,000
10,000
20,000
10,000
All fee amounts are inclusive of compulsory superannuation obligations.
Fees paid to NEDs in FY19 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 McEniry1
A Harrison1
M Haseltine
T Ryan
J Macdonald2
Financial year
Board fees
$
Committee fees
$
Superannuation
$
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
-
209,961
272,268
134,225
100,720
100,457
100,457
100,457
83,342
-
-
-
-
21,494
18,313
18,265
27,397
27,397
22,730
-
-
16,193
20,531
14,355
11,279
11,279
12,146
12,146
9,764
-
Total
$
-
226,154
292,799
170,074
130,312
130,000
140,000
140,000
115,836
-
1. R McEniry resigned 4 April 2018 and A Harrison became Chair from that date.
2. J Macdonald was appointed as an Independent, Non-Executive Director 1 September 2018.
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.
67
Bapcor Limited Annual Report 2019 Directors’ Report continued
30 June 2019
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68
Bapcor Limited Annual Report 2019
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69
Bapcor Limited Annual Report 2019
Directors’ Report continued
30 June 2019
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 /
Ceased to be
KMP
Balance at the
end of the
year
2019
Directors
A Harrison
T Ryan
M Haseltine
J Macdonald
56,869
33,868
31,327
-
-
-
-
-
1,701
862
798
254
10,000
-
-
10,000
D Abotomey
1,535,533
105,790
Other KMP
G Fox
C Magill
C Daly
518,823
589,566
-
P Dumbrell
1,785,230
22,451
13,180
14,719
71,730
41,858
7,837
59,816
39,855
38,378
40,487
-
-
-
-
-
(200,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
(7,837)
(1,845,046)
68,570
34,730
32,125
10,254
1,641,323
390,553
631,424
-
-
-
62,306
(51,558)
(55,206)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,601,566
405,751
3,615
20,000
(200,000)
(1,959,647)
2,871,285
D Abotomey
1,860,246
275,287
43,163
56,869
32,976
15,713
-
-
-
-
594,195
827,360
2,817,313
8,500
-
-
124,628
71,452
21,230
13,951
13,180
14,719
-
-
892
614
-
-
-
-
-
-
-
-
-
-
15,000
-
-
-
-
-
-
-
-
-
-
(600,000)
(200,000)
(309,246)
(1,053,313)
-
-
-
(43,163)
-
-
-
-
-
-
-
-
-
-
-
56,869
33,868
31,327
1,535,533
518,823
589,566
1,785,230
22,451
13,180
14,719
6,256,335
534,447
1,506
15,000
(2,162,559)
(43,163)
4,601,566
M Cooper
P Tilley
G Jarrett
Total
2018
Directors
R McEniry
A Harrison
T Ryan
M Haseltine
Other KMP
G Fox
C Magill
P Dumbrell
M Cooper
P Tilley
G Jarrett
Total
70
Bapcor Limited Annual Report 2019 14.7.6 Total shares under option or right to KMP
Date granted
Vest date
Expiry date
Performance rights plans
Exercise price
of rights
Quantity
20/12/16
4/12/17
4/12/17
26/09/18
29/10/18
Total shares under option of right
14.7.7 Loans to executive KMP
No loans were made to executive KMP in FY19.
30/06/19
30/06/19
30/06/20
30/06/21
30/06/21
n/a
n/a
n/a
n/a
n/a
$0.00
$0.00
$0.00
$0.00
$0.00
148,997
177,603
466,097
226,195
170,886
1,189,778
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 five 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 $2,449,000 and as at 30 June 2019, the outstanding balance on these loans to
executive KMP is $601,000. There are no outstanding loans to the CEO or the CFO.
71
Bapcor Limited Annual Report 2019 Directors’ Report continued
30 June 2019
15. Matters subsequent to the end of the financial year
Apart from the dividend declared as disclosed in note 24, no other matter or circumstance has arisen since 30 June 2019
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 $281,100 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 35 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 35 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 39 of the directors’ report.
22. Indemnity of auditor
The company has agreed to indemnify their auditors, PricewaterhouseCoopers, to the extent permitted by law, against
any claim by a third party arising from the company’s breach of their agreement with PricewaterhouseCoopers. The
indemnity stipulates that the company will meet the full amount of any such liabilities including a reasonable amount of
legal costs.
72
Bapcor Limited Annual Report 2019 23. Rounding of amounts
The company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to ‘rounding-off’. Amounts in this report have been rounded off in accordance with that
Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the directors
Andrew Harrison
Chairman
Darryl Abotomey
Chief Executive Officer and Managing Director
21 August 2019
Melbourne
73
Bapcor Limited Annual Report 2019
Auditor’s Independence Declaration
Auditor’s Independence Declaration
As lead auditor for the audit of Bapcor Group Limited for the year ended 30 June 2019, I declare that
to the best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Bapcor Group Limited and the entities it controlled during the period.
Jason Perry
Partner
PricewaterhouseCoopers
Melbourne
21 August 2019
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
74
Bapcor Limited Annual Report 2019
Financial Statements
For the year ended 30 June 2019
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
76
78
79
80
81
137
138
148
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 21 August 2019. The directors have
the power to amend and reissue the financial statements.
Consolidated statement of comprehensive income
For the year ended 30 June 2019
Revenue from continuing operations
Other gains
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
Consolidated
Note
4
15
2019
$’000
2018
$’000
1,296,582
1,236,681
4,053
-
(688,811)
(667,290)
(276,491)
(260,123)
(19,632)
(27,599)
(43,556)
(12,077)
(14,127)
(20,189)
(23,766)
(47,646)
(10,836)
(12,963)
(50,384)
(46,098)
(932)
(17,100)
(15,267)
(702)
(15,582)
(13,452)
134,659
118,034
(38,127)
(33,655)
96,532
84,379
-
9,941
5
5
5
6
Profit after income tax expense for the year
7
96,532
94,320
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
8,947
(632)
(9,248)
3,834
8,315
(5,414)
104,847
88,906
22
(446)
96,978
96,532
(336)
94,656
94,320
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes
76
Bapcor Limited Annual Report 2019 Consolidated
Note
2019
$’000
2018
$’000
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
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
25
25
25
25
25
25
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes
(164)
-
(164)
(157)
(214)
(371)
105,011
80,669
-
105,011
8,608
89,277
104,847
88,906
Cents
Cents
34.40
34.27
30.24
30.09
-
-
34.40
34.27
3.63
3.62
33.88
33.71
77
Bapcor Limited Annual Report 2019 Consolidated statement of financial position
As at 30 June 2019
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Total current assets
Non-current assets
Trade and other receivables
Property, plant and equipment
Intangibles
Deferred tax
Other
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Derivative financial instruments
Income tax
Provisions
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
Equity attributable to the owners of Bapcor Limited
Non-controlling interest
Total equity
Consolidated
Note
2019
$’000
2018
$’000
8
9
18
10
11
12
6
13
14
18
15
16
18
17
20
21
22
23
47,610
40,154
162,494
146,700
326,147
287,337
897
1,720
537,148
475,911
48
60,745
734,529
18,424
2,412
78
52,590
677,736
17,755
3,447
816,158
751,606
1,353,306
1,227,517
183,645
187,753
494
2,856
47,208
124
2,442
52,342
234,203
242,661
380,376
326,488
349
16,191
330
15,692
396,916
342,510
631,119
585,171
722,187
642,346
623,536
606,456
7,308
89,110
(3,645)
37,138
719,954
639,949
2,233
2,397
722,187
642,346
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
78
Bapcor Limited Annual Report 2019 Consolidated statement of changes in equity
For the year ended 30 June 2019
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
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
Consolidated
Balance at 1 July 2018
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)
Dividends paid (note 24)
Balance at 30 June 2019
Contributed
equity
$’000
Other
$’000
Reserves
$’000
Accumulated
losses /
Retained
earnings
$’000
Non-
controlling
Interests
$’000
Total
equity
$’000
602,571
(1,896)
(202)
(17,067)
6,561
589,967
-
-
-
8,380
-
-
-
-
-
-
-
-
-
-
-
(2,599)
-
-
-
-
-
94,656
(336)
94,320
(5,379)
-
(35)
(5,414)
(5,379)
94,656
(371)
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
Contributed
equity
$’000
Other
$’000
Reserves
$’000
Retained
earnings
$’000
Non-
controlling
Interests
$’000
Total
equity
$’000
610,951
(4,495)
(3,645)
37,138
2,397
642,346
-
-
-
20,746
-
-
-
-
-
-
-
-
(3,666)
-
-
96,978
(446)
96,532
8,033
-
282
8,315
8,033
96,978
(164)
104,847
-
2,920
-
-
-
-
-
(45,006)
-
-
-
-
20,746
2,920
(3,666)
(45,006)
631,697
(8,161)
7,308
89,110
2,233
722,187
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
79
Bapcor Limited Annual Report 2019 Consolidated statement of cash flows
For the year ended 30 June 2019
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 of expenses
Net cash from/(used in) investing activities
Cash flows from financing activities
Share issue transaction costs
Purchase of treasury shares
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
Note
2019
$’000
2018
$’000
1,421,923
1,353,533
(1,291,290)
(1,205,282)
130,633
148,251
(12,093)
(1,041)
-
(6,769)
(1,964)
(654)
(14,487)
(14,668)
(932)
(702)
(36,439)
(38,063)
65,641
85,431
(43,731)
(18,061)
(21,667)
(7,600)
1,468
14,394
(15,086)
(9,954)
(14,678)
(966)
776
93,690
(75,197)
53,782
-
(3,666)
(414)
(2,599)
54,100
(103,838)
(33,410)
(31,781)
(1,545)
(24)
15,479
(138,656)
5,923
40,154
1,533
557
39,755
(158)
47,610
40,154
26
29
11
12
20
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
80
Bapcor Limited Annual Report 2019 Notes to the consolidated financial statements
30 June 2019
Basis of preparation
Note 1. Significant accounting policies
Note 2. Critical accounting judgements, estimates and assumptions
Group performance
Note 3. Segment information
Note 4. Revenue
Note 5. Expenses
Note 6. Income tax
Note 7. Discontinued operations
Assets and liabilities
Note 8. Current assets - trade and other receivables
Note 9. Current assets - inventories
Note 10. Non-current assets - trade and other receivables
Note 11. Non-current assets - property, plant and equipment
Note 12. Non-current assets - intangibles
Note 13. Non-current assets - other
Note 14. Current liabilities - trade and other payables
Note 15. Current liabilities - provisions
Note 16. Non-current liabilities - borrowings
Note 17. Non-current liabilities - provisions
Note 18. Derivative financial instruments
Note 19. Fair value measurement
Capital structure, financing and risk management
Note 20. Equity - issued capital
Note 21. Equity - reserves
Note 22. Equity - retained profits
Note 23. Equity - non-controlling interest
Note 24. Equity - dividends
Note 25. Earnings per share
Note 26. Reconciliation of profit after income tax to net cash from operating activities
Note 27. Financial risk management
Group structure
Note 28. Related party transactions
Note 29. Business combinations
Note 30. Deed of cross guarantee
Note 31. Parent entity information
Note 32. Interests in subsidiaries
Other
Note 33. Related party transactions - key management personnel disclosures
Note 34. Share-based payments
Note 35. Remuneration of auditors
Note 36. Commitments and contingent liabilities
Note 37. Net tangible assets
Note 38. Events after the reporting period
82
86
86
89
90
91
94
97
99
100
100
101
105
105
106
107
109
110
111
112
114
115
115
116
117
119
120
124
124
127
129
130
131
131
135
136
136
136
81
Bapcor Limited Annual Report 2019 Notes to the consolidated financial statements
30 June 2019
Note 1. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out either in the
respective notes or 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.
The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial
performance or position of the consolidated entity.
AASB 9 Financial Instruments
The consolidated entity has adopted AASB 9 from 1 July 2018, using the full retrospective method of adoption. The
standard 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. No changes from the
classification and measurement for financial assets were identified and the impact for changes to incorporate an
expected credit losses method was not significant hence no comparatives have been restated.
The foreign currency forwards and interest rate swaps in place as at 30 June 2018 qualified as cash flow hedges under
AASB 9. The consolidated entity’s risk management strategies and hedge documentation are aligned with the
requirements of AASB 9 and these relationships are therefore treated as continuing hedges.
AASB 15 Revenue from Contracts with Customers
The consolidated entity has adopted AASB 15 from 1 July 2018, using the retrospective method of adoption. The standard
introduces a five step model to determine the quantum and timing of revenue:
1. Identify whether a contract exists
2. Identify the explicit and implicit promises in the contract to deliver goods and/or services to a customer (performance
obligations)
3. Determine the transaction price payable by the customer
4. Determine how to allocate the transaction price to the goods and/or services
5. Determine when to recognise revenue based on when ‘control’ over the goods and/or service transfers to a customer.
On adoption of the standard, the consolidated entity reviewed the potential performance obligations under its revenue
contract. As the majority of the consolidated entity’s revenue is derived from over the counter sale of goods the adoption
of this standard did not have a material financial impact hence no comparatives have been restated.
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 financial assets and liabilities at fair value through profit or loss, financial assets at fair value through other
comprehensive income 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.
82
Bapcor Limited Annual Report 2019 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 31.
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 2019 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.
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.
83
Bapcor Limited Annual Report 2019 Notes to the consolidated financial statements
30 June 2019
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.
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.
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.
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.
84
Bapcor Limited Annual Report 2019 Rounding of amounts
The company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to ‘rounding-off’. Amounts in this report have been rounded off in accordance with that
Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2019.
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 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, an 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 under the modified retrospective adoption method and
as such will not restate comparative amounts for the year prior to first adoption.
On adoption, the consolidated entity is expecting to recognise right-of-use assets in the range of $145M-$160M, with
lease liabilities of approximately $145M-$165M. Any difference arising will be adjusted through opening retained earnings.
The consolidated entity is also expecting that, all things being equal, the year ending 30 June 2020 net profit before tax
will decrease in the range of $0.5M-$1.5M as a result of adopting the new rules.
In modelling these scenarios, the Directors have made certain assumptions and judgements in relation to economic
conditions including, but not limited to: the incremental borrowing rates, composition of the lease portfolio, and likely
exercise of renewal options that may cause the actual output to differ from that concluded in FY19.
Operating cash flows are expected to increase and financing cash flows decrease in the range of $45M-$50M as
repayment of the principal portion of the lease liabilities will be classified as cash flows from financing activities.
Banking covenants will not be impacted by this standard as any changes due to AASB 16 have been excluded from the
banking covenant calculations.
85
Bapcor Limited Annual Report 2019 Notes to the consolidated financial statements
30 June 2019
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 within the next financial year are included
in the following notes to the consolidated financial statements:
•
•
•
•
•
•
•
Note 8 - Current assets - trade and other receivables
Note 9 - Current assets - inventories
Note 11 - Non-current assets - property, plant and equipment
Note 12 - Non-current assets - intangibles
Note 15 - Current liabilities - provisions
Note 29 - Business combinations
Note 34 - Share-based payments
Note 3. Segment information
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
Bapcor NZ
Specialist Wholesale
Retail
Represents the trade focused automotive aftermarket parts distribution to independent and
chain mechanic workshops. Includes the operations of Burson Auto Parts and Precision
Automotive Equipment.
Represents the operations of Brake & Transmission, Autolign, Diesel Distributors and HCB
Technologies.
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, Premier Auto
Trade, AADi, Don Kyatt Spare Parts (Qld), He Knows Truck Parts, I Know Parts and Wrecking,
Commercial Parts, Commercial Spares, Toperformance and Japanese Trucks Australia.
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.
The consolidated entity’s Thailand based operations have been included in the Unallocated/Head Office supporting
segment as they are considered immaterial in nature for the financial periods.
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.
86
Bapcor Limited Annual Report 2019
Operating segment information
Consolidated - 2019
Revenue
Sales
Total segment revenue
Intersegment sales
Total revenue
EBITDA
Intersegment EBITDA
Depreciation and amortisation
Finance costs
Acquisition costs
Profit before income tax expense
Income tax expense
Profit after income tax expense
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
Trade
$’000
Bapcor NZ
$’000
Specialist
Wholesale
$’000
Retail
$’000
Unallocated
/ Head Office
$’000
Total
$’000
524,531
524,531
164,965
164,965
413,119
413,119
255,253
255,253
860
860
1,358,728
1,358,728
(62,146)
1,296,582
78,247
22,854
45,466
27,065
(4,978)
168,654
(696)
(17,100)
(15,267)
(932)
134,659
(38,127)
96,532
306,765
244,890
461,586
299,144
40,921
1,353,306
101,946
39,954
70,161
48,145
370,913
1,353,306
631,119
631,119
87
Bapcor Limited Annual Report 2019 Notes to the consolidated financial statements
30 June 2019
Note 3. Segment information (continued)
Operating segment information (continued)
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
Geographical information
Australia
New Zealand
Other
Trade
$’000
Bapcor NZ
$’000
Specialist
Wholesale
$’000
Retail
$’000
Unallocated
/ Head Office
$’000
Total
$’000
501,591
501,591
177,850
177,850
364,343
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
100,024
30,551
82,502
42,084
330,010
1,227,517
585,171
585,171
Geographical
non-current assets
2019
$’000
2018
$’000
626,801
169,858
1,075
561,417
171,946
488
797,734
733,851
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.
Significant accounting policies
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.
88
Bapcor Limited Annual Report 2019 Note 4. Revenue
From continuing operations
Revenue from contracts with customers
Revenue from continuing operations
Disaggregation of revenue
The disaggregation of revenue from contracts with customers is as follows:
Geographical regions
Australia
New Zealand
Thailand
Intersegment sales
Timing of revenue recognition
Goods transferred at a point in time
Services transferred over time
Intersegment sales
Consolidated
2019
$’000
2018
$’000
1,296,582
1,236,681
1,296,582
1,236,681
Consolidated
2019
$’000
2018
$’000
1,192,903
1,105,048
164,965
177,850
860
-
(62,146)
(46,217)
1,296,582
1,236,681
1,328,426
1,250,741
30,302
(62,146)
32,157
(46,217)
1,296,582
1,236,681
Significant accounting policies
Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is expected to be
entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the
consolidated entity: identifies the contract with a customer; identifies the performance obligations in the contract;
determines the transaction price which takes into account estimates of variable consideration and the time value of
money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone
selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance
obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised.
Sale of goods
Revenue from the sale of goods is recognised at the point in time when the customer obtains control of the goods,
which is generally at the time of delivery.
Rendering of services - franchise and other service fees
Revenue from services are recognised over time as the services are rendered in line with the customer contract terms.
89
Bapcor Limited Annual Report 2019 Notes to the consolidated financial statements
30 June 2019
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
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
2019
$’000
2018
$’000
9,356
4,331
2,946
467
8,297
3,890
2,861
534
17,100
15,582
824
108
932
459
243
702
15,009
13,452
258
-
15,267
13,452
42,208
40,895
Defined contribution superannuation expense
18,065
16,075
90
Bapcor Limited Annual Report 2019 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 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
Gain on deferred settlement
Adjustment recognised for prior periods
Difference in overseas tax rates
Income tax expense
Consolidated
2019
$’000
2018
$’000
38,930
33,318
(299)
(504)
-
610
(273)
3,929
38,127
37,584
38,127
-
33,655
3,929
38,127
37,584
200
(499)
(299)
1,345
(735)
610
134,659
118,034
-
13,870
134,659
131,904
40,398
39,571
280
(410)
-
(1,216)
(504)
(421)
211
(657)
(1,963)
-
(273)
695
38,127
37,584
91
Bapcor Limited Annual Report 2019 Notes to the consolidated financial statements
30 June 2019
Note 6. Income tax (continued)
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:
Opening balance
Charged to profit or loss
Charged to equity
Additions through business combinations (note 29)
Charged to other comprehensive income
Adjustment recognised for prior periods
Foreign currency translation
Derecognised on divestment
Closing balance
Consolidated
2019
$’000
2018
$’000
1,954
11,714
1,985
15,084
8,708
39,445
1,769
13,392
2,296
13,850
8,337
39,644
830
1,301
191
1,665
42,131
(23,707)
394
597
41,936
(24,181)
18,424
17,755
41,936
(200)
(471)
2,590
866
(1,786)
139
(943)
43,677
(1,345)
(58)
790
(338)
(443)
(347)
-
42,131
41,936
92
Bapcor Limited Annual Report 2019 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:
Opening balance
Credited to profit or loss
Charged/(credited) to equity
Finalisation of prior year business combinations
Foreign currency translation
Adjustment recognised for prior periods
Closing balance
Consolidated
2019
$’000
2018
$’000
5,642
17,565
344
6,158
17,643
249
23,551
24,050
156
131
23,707
(23,707)
24,181
(24,181)
-
-
24,181
(499)
25,013
(735)
25
-
58
(58)
(97)
(78)
108
(30)
23,707
24,181
Significant accounting policies
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.
93
Bapcor Limited Annual Report 2019 Notes to the consolidated financial statements
30 June 2019
Significant accounting policies (continued)
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.
Note 7. Discontinued operations
Description
The discontinued operations in the prior financial period relate to the business units of Footwear and Resource Services
that were acquired as part of the Hellaby Holdings Limited acquisition and deemed held for sale on acquisition and
subsequently successfully divested. The divestment in the current financial period relates to the TRS business unit of the
Bapcor NZ segment that occurred 3 July 2018. This was not classified as a discontinued operation in the prior period.
Financial performance information of discontinued operations
Consolidated
2019
$’000
2018
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
27,245
118,402
145,647
(28,135)
(111,093)
(139,228)
6,419
(2,771)
3,211
6,859
(3,929)
2,930
7,011
-
7,011
9,941
Footwear
Resource Services
Total revenue
Footwear
Resource Services
Total expenses
Profit before reserve reclassification
Foreign currency reserve reclassification
Net investment hedge reserve reclassification
Profit before income tax expense post reserve reclassifications
Income tax expense
Profit after income tax expense
Gain before income tax
Income tax expense
Gain after income tax expense
Profit after income tax expense from discontinued operations
94
Bapcor Limited Annual Report 2019 Financial performance information of divested operations
TRS
Total revenue
TRS
Total expenses
Profit before income tax expense
Income tax expense
Profit after income tax expense from divested operations
Consolidated
2019
$’000
2018
$’000
-
-
-
-
-
-
-
24,349
24,349
(21,831)
(21,831)
2,518
(735)
1,783
There was no profit or loss contribution to the consolidated entity from the divested TRS business unit in the current
financial period as the divestment occurred 3 July 2018.
Carrying amounts of assets and liabilities disposed
Assets held for sale
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Property, plant and equipment
Intangibles
Deferred tax asset
Total assets
Liabilities held for sale
Trade and other payables
Income tax
Provisions
Total liabilities
Net assets
Consolidated
2019
$’000
2018
$’000
-
110,963
1,243
2,404
5,497
218
123
10,012
943
-
-
-
-
-
-
-
20,440
110,963
-
52,190
1,497
709
451
-
-
-
2,657
52,190
17,783
58,773
95
Bapcor Limited Annual Report 2019 Notes to the consolidated financial statements
30 June 2019
Note 7. Discontinued operations (continued)
Details of the disposal
Net cash sale consideration, net of divestment costs paid
Carrying amount of net assets disposed
Net accrued consideration to be received
Accrued divestment and warranty costs
Cash proceeds used to settle intercompany debt
Derecognition of non-controlling interest
Derecognition of equity reserves
Gain on disposal before income tax
Gain on disposal after income tax
Consolidated
2019
$’000
2018
$’000
18,238
(17,783)
-
-
-
-
(455)
-
-
93,690
(58,773)
1,516
(859)
(31,506)
1,527
1,416
7,011
7,011
Cash flow information
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. Accordingly, the below table shows the cash
flow information relating to the divested TRS business unit only.
Net cash from operating activities
Net cash used in investing activities
Net increase in cash and cash equivalents from divested operations
Consolidated
2019
$’000
2018
$’000
-
-
-
3,054
(108)
2,946
Significant accounting policies
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.
96
Bapcor Limited Annual Report 2019 Note 8. Current assets - trade and other receivables
Trade receivables
Less: Allowance for credit notes
Less: Allowance for expected credit losses (trade receivables)
Customer loans
Less: Allowance for expected credit losses (customer loans)
Other receivables
Prepayments
Consolidated
2019
$’000
2018
$’000
143,352
134,735
(1,325)
(5,560)
(1,280)
(5,971)
136,467
127,484
933
(605)
328
18,268
7,431
25,699
1,352
(805)
547
12,586
6,083
18,669
162,494
146,700
Trade receivables are non-interest bearing and repayment terms vary by business unit. The total allowance for expected
credit losses including the amount held in non-current receivables is $6,235,000 (2018: $6,918,000). This includes
specifically identified provisions of $5,471,000 (2018: $6,292,000) and an estimated credit loss provision on the remaining
trade receivables and customer loan balances of $764,000 (2018: $626,000).
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, $633,000 (2018: $292,000) are non-interest bearing. $418,000 (2018: $1,281,000) of loans have a
weighted average annual interest rate of 9.8% (2018: 10.2%).
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 10 are as follows:
Current and not due
31 - 60 days
61 - 90 days
91+ days
1. Prior year comparatives have been restated to reflect the adoption of AASB 9 Financial Instruments from 1 July 2018.
Consolidated
2019
$’000
20181
$’000
75,952
43,386
10,619
6,886
77,072
36,083
9,551
5,403
136,843
128,109
97
Bapcor Limited Annual Report 2019 Notes to the consolidated financial statements
30 June 2019
Note 8. Current assets - trade and other receivables (continued)
Movements in the allowance for expected credit losses of trade receivables and customer loans including the
non-current portion from note 10 are as follows:
Opening balance
Net additional provisions recognised
Additions through business combinations
Amounts utilised for debt write-off
Foreign currency translation
Derecognised on divestment
Closing balance
Consolidated
2019
$’000
2018
$’000
6,918
8,288
158
576
70
88
(1,360)
(1,484)
(20)
(37)
(44)
-
6,235
6,918
Bapcor recognised a loss of $158,000 (2018: $70,000) in respect of impaired receivables during the financial year.
Significant accounting policies
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method, less any allowance for specific debtors and general expected credit losses. Trade receivables are
generally due for settlement within 30 to 60 days.
Other receivables are recognised at amortised cost, less any allowance for specific debtors and general expected
credit losses.
Impairment
The impairment methodology applied depends on whether there has been a significant increase in credit risk, whereby
specific provision will be applied to trade and other receivables not expected to be collected and expected credit losses
associated with the trade and other receivables.
In assessing the expected credit losses, the consolidated entity first considers any specific debtors that have objective
evidence that the consolidated entity will not be able to collect all amounts due according to the original terms of the
receivables, taking into consideration the indicators of significant financial difficulties of the debtor, probability that the
debtor will enter bankruptcy and default or delinquency in payments. The consolidated entity then applies the simplified
approach to measuring expected credit losses, which uses a lifetime expected loss allowance, on the balance of
receivables. To measure the expected credit losses, trade receivables have been grouped based on aging.
Critical accounting judgements, estimates and assumptions
The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is assessed by
taking into account the ageing of receivables, historical collection rates and specific knowledge of the individual
debtor’s financial position.
98
Bapcor Limited Annual Report 2019 Note 9. Current assets - inventories
Stock in transit - at cost
Stock on hand - at cost
Less: Provision for slow moving inventory
Consolidated
2019
$’000
2018
$’000
14,341
15,271
355,453
318,905
(43,647)
(46,839)
311,806
272,066
326,147
287,337
Total stock on hand and in transit has increased by $35.6M since 30 June 2018, of which new greenfield stores, business
acquisitions, divestments and foreign currency translation account for $21.1M. The remaining $14.5M relates to investment
in new and existing ranges and the impact of cyclical purchases as discussed in the ‘Operating and financial review’
section of the Directors’ Report.
Movements in provision for slow moving inventory
Opening balance
Additional provisions recognised against profit1
Additions through business combinations2
Inventory written off against provision3
Foreign currency translation
Derecognised on divestment
Closing balance
Consolidated
2019
$’000
2018
$’000
(46,839)
(53,985)
(580)
(3,505)
4,155
236
2,886
(1,977)
(1,224)
9,920
427
-
(43,647)
(46,839)
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.
Significant accounting policies
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.
Critical accounting judgements, estimates and assumptions
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.
99
Bapcor Limited Annual Report 2019 Notes to the consolidated financial statements
30 June 2019
Note 10. Non-current assets - trade and other receivables
Customer loans
Less: Allowance for expected credit losses
Consolidated
2019
$’000
2018
$’000
118
(70)
48
220
(142)
78
Customer loans relate to loans with franchisees. Refer to note 8 for further information on these customer loans.
Note 11. Non-current assets - property, plant and equipment
Plant and equipment - at cost
Less: Accumulated depreciation
Motor vehicles - at cost
Less: Accumulated depreciation
Consolidated
2019
$’000
2018
$’000
76,415
(35,065)
41,350
34,093
(14,698)
19,395
62,105
(27,310)
34,795
29,850
(12,055)
17,795
60,745
52,590
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 2017
Additions
Additions through business combinations
Disposals
Foreign currency translation
Transfers in/(out)
Depreciation expense
Balance at 30 June 2018
Additions
Additions through business combinations (note 29)
Disposals
Divested
Foreign currency translation
Transfers in/(out)
Depreciation expense
Balance at 30 June 2019
100
Plant and
equipment
$’000
Motor
vehicles
$’000
Total
$’000
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
14,902
513
(429)
(119)
107
937
(9,356)
17,795
6,765
526
(934)
(4)
48
(470)
(4,331)
52,590
21,667
1,039
(1,363)
(123)
155
467
(13,687)
41,350
19,395
60,745
Bapcor Limited Annual Report 2019 Note 11. Non-current assets - property, plant and equipment (continued)
Significant accounting policies
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.
Critical accounting judgements, estimates and assumptions
The consolidated entity determines the estimated useful lives and related depreciation charges for its property,
plant and equipment assets. The useful lives could change significantly as a result of technical innovations or some
other event. The depreciation 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.
Note 12. Non-current assets - intangibles
Goodwill
Trademarks
Customer contracts
Less: Accumulated amortisation
Software
Less: Accumulated amortisation
Consolidated
2019
$’000
2018
$’000
646,442
594,118
59,194
58,979
25,606
(6,688)
18,918
17,010
(7,035)
9,975
25,520
(4,960)
20,560
9,925
(5,846)
4,079
734,529
677,736
101
Bapcor Limited Annual Report 2019
Notes to the consolidated financial statements
30 June 2019
Note 12. Non-current assets - intangibles (continued)
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 2017
Additions
Additions through business combinations
Finalisation of prior year business combinations
Foreign currency translation
Amortisation expense
Goodwill
$’000
Trademarks
$’000
Customer
contracts
$’000
Computer
software
$’000
561,844
59,442
22,292
Total
$’000
647,831
966
10,199
32,296
4,253
966
-
-
-
10,199
32,573
(10,498)
-
-
-
(277)
(186)
-
-
-
-
-
(11)
(10,695)
(1,732)
(1,129)
(2,861)
Balance at 30 June 2018
594,118
58,979
20,560
Additions
-
Additions through business combinations (note 29)
55,778
Disposals
Divested
Foreign currency translation
Transfers in/(out)
Amortisation expense
-
(9,983)
6,529
-
-
-
-
-
-
215
-
-
92
-
-
-
-
-
(1,734)
4,079
7,508
15
(1)
(29)
82
(467)
(1,212)
677,736
7,600
55,793
(1)
(10,012)
6,826
(467)
(2,946)
Balance at 30 June 2019
646,442
59,194
18,918
9,975
734,529
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: 11.81% (2018: 11.96%)
• Terminal value growth rate beyond five years (set at current CPI): 1.80% (2018: 1.90%)
• Forecast year on year revenue and EBITDA margin growth ranges as follows:
CGU
Trade
Bapcor NZ
Specialist Wholesale
Retail
Revenue growth
EBITDA growth
2.3% - 3.2%
3.1% - 5.2%
3.6% - 3.8%
2.4% - 2.8%
0 - 0.2 percentage points
0 - 0.5 percentage points
0 - 0.4 percentage points
0 - 0.3 percentage points
102
Bapcor Limited Annual Report 2019 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 CGU and Autopro brand are relatively more sensitive to changes in trading conditions. The following tables
show sensitivities of a +5%/-5% change to the major financial metrics within the calculations:
Retail CGU
The recoverable amount of the Retail CGU is estimated to exceed its carrying amount at 30 June 2019 by $12.2M.
Financial metric
Discount rate
+ 5% change
- 5 % change
Impairment of $3.2M
Increase headroom by $17.4M
Revenue growth (average)
Increase headroom by $1.0M
Decrease headroom by $1.0M
EBITDA margin growth (average)
Increase headroom by $14.9M
Impairment of $2.7M
Terminal value
Autopro brand
Increase headroom by $2.2M
Decrease headroom by $2.2M
The recoverable amount of the Autopro brand is estimated to approximate its carrying amount at 30 June 2019.
Financial metric
Discount rate
Revenue growth (average)
Terminal value
+ 5% change
Impairment of $0.4M
No material change
No material change
- 5 % change
Increase headroom by $0.4M
Impairment of $0.2M
Impairment of $0.1M
There have been no further indicators of impairment after the impairment testing date of 31 March 2019 up until the date
of this report.
The balances of goodwill and other intangible assets excluding computer software allocated to each segment as at 30
June were:
Goodwill:
Trade
Bapcor NZ
Specialist Wholesale
Retail
Other intangible assets excluding computer software:
Bapcor NZ
Specialist Wholesale
Retail
Unallocated
Consolidated
2019
$’000
2018
$’000
110,762
158,339
243,438
133,903
109,071
161,947
191,586
131,514
646,442
594,118
Consolidated
2019
$’000
2018
$’000
5,569
20,903
51,554
86
5,356
20,998
53,185
-
78,112
79,539
103
Bapcor Limited Annual Report 2019 Notes to the consolidated financial statements
30 June 2019
Note 12. Non-current assets - intangibles (continued)
Significant accounting policies
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.
Tradenames
Tradenames (including brands) 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 two and five years. Large scale projects are individually
assessed as part of the approval process and determination of finite life may exceed this range.
Critical accounting judgements, estimates and assumptions
The consolidated entity determines the estimated useful lives and related amortisation charges for its finite life intangible
assets. The useful lives could change significantly as a result of technical innovations or some other event. The
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.
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 above. 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.
104
Bapcor Limited Annual Report 2019 Note 13. Non-current assets - other
Make good asset
Employee loans
Consolidated
2019
$’000
2018
$’000
1,170
1,242
2,412
1,261
2,186
3,447
Employee loans were made to key management personnel and other personnel to assist in the purchase of shares. These loans
are secured by the underlying shares acquired. The loans are interest bearing and are repayable on the earlier of sale of the
underlying shares, termination of employment or five years from the date of the loan in cash, and cannot be settled by the
employees returning the shares to the company.
Note 14. Current liabilities - trade and other payables
Trade payables
Accrued expenses
Consolidated
2019
$’000
2018
$’000
142,444
146,165
41,201
41,588
183,645
187,753
Refer to note 27 for further information on financial risk management.
Significant accounting policies
The trade payable and accrued expense 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.
105
Bapcor Limited Annual Report 2019 Notes to the consolidated financial statements
30 June 2019
Note 15. Current liabilities - provisions
Employee benefits
Deferred settlements
Onerous lease provision
Consolidated
2019
$’000
2018
$’000
29,464
16,946
798
29,079
22,337
926
47,208
52,342
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 17 for details on non-current portion):
•
•
•
•
•
•
Precision Automotive; currently provided at nil (2018: $646,000)
Baxters Pty Ltd; currently provided at nil (2018: $20,972,000)
Tricor; currently provided at $477,000 (2018: $953,000)
AADi; currently provided at $1,903,000 (2018: $1,833,000)
Commercial Truck Parts group of entities; currently provided at $16,500,000 (2018: Nil)
Toperformance; currently provided at $500,000 (2018: Nil)
During the financial year, the consolidated entity completed the Baxters acquisition deferred settlement payment for
$16,926,000 which resulted in the remaining provision of $4,053,000 being released to profit. This has been presented in the
statement of comprehensive income as ‘other gains’.
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:
Consolidated
2019
$’000
2018
$’000
Employee benefits obligation expected to be settled after twelve months
6,158
5,282
Significant accounting policies
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.
106
Bapcor Limited Annual Report 2019 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.
Critical accounting judgements, estimates and assumptions
The deferred settlements 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 settlement 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.
Note 16. Non-current liabilities - borrowings
Secured bank loans
Less: unamortised transaction costs capitalised
Consolidated
2019
$’000
2018
$’000
382,960
328,391
(2,584)
(1,903)
380,376
326,488
Refer to note 27 for further information on financial risk management.
Refinancing
In June 2019, the consolidated entity refinanced its debt facilities establishing a new $520M debt facility with the pre-existing
lenders ANZ, Westpac, MUFG Bank and HSBC, as well as a new lender being Metropolitan Life Insurance Company (MetLife).
The new debt facility comprises funding in three, five and seven year tranches as follows:
•
•
•
•
$200M three year tranche, available for general corporate purposes;
$150M five year tranche, available for general corporate purposes;
$100M seven year tranche, available for general corporate purposes; and
$70M 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 $1,545,000 (2018: $23,000) were incurred during the refinancing, and are being amortised over the life of the
refinanced tranches and will be expensed to finance costs as effective interest expense in the statement of comprehensive
income. As part of the refinancing activity, capitalised borrowing costs relating to the refinanced tranches of $278,000 (2018:
Nil) were expensed to finance costs. As at 30 June total borrowing costs of $2,584,000 (2018: $1,903,000) have not yet been
amortised through the statement of comprehensive income.
107
Bapcor Limited Annual Report 2019
Notes to the consolidated financial statements
30 June 2019
Note 16. Non-current liabilities - borrowings (continued)
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
2019
$’000
2018
$’000
517,500
497,500
382,960
328,391
134,540
169,109
• Total facilities available at 30 June was $520M (2018: $500M). The amount used in the above table excludes $2.5M (2018: $2.5M) of facility which relates
to bank guarantees under the working capital tranche.
Net debt reconciliations
Cash and cash equivalents
Cash and cash equivalents relating to non-controlling interest
Borrowings excluding unamortised transaction costs capitalised
Net derivative financial instruments
Net debt
A reconciliation of net debt at the beginning and end of the current financial year is set out below:
Consolidated
2019
$’000
2018
$’000
47,610
(1,019)
40,154
(2,481)
(382,960)
(328,391)
54
1,266
(336,315)
(289,452)
Consolidated
Balance at 30 June 2018
Cash flows
Foreign currency translation
Cash
$’000
Cash relating
to NCI
$’000
Borrowings
$’000
Derivatives
$’000
Total
$’000
40,154
(2,481)
(328,391)
5,923
1,533
1,787
(325)
(54,100)
(469)
1,266
(1,239)
27
54
(289,452)
(47,629)
766
(336,315)
Balance at 30 June 2019
47,610
(1,019)
(382,960)
Significant accounting policies
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.
108
Bapcor Limited Annual Report 2019 Note 17. Non-current liabilities - provisions
Employee benefits
Deferred settlements
Make good provision
Onerous lease provision
Consolidated
2019
$’000
2018
$’000
4,065
2,434
9,141
551
3,459
2,067
8,725
1,441
16,191
15,692
Deferred settlements and onerous lease provision
Refer to note 15.
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 the current financial year, other than employee benefits, are set out below:
Consolidated - 2019
Carrying amount at the start of the year
Additional provisions recognised
Additions through business combinations
Amounts transferred to current
Amounts used
Change in provision from re-measurement
Foreign currency translation
Derecognised on divestment
Carrying amount at the end of the year
Deferred
settlements
$’000
2,067
70
1,500
(1,203)
-
-
-
-
2,434
Make good
$’000
8,725
467
821
-
(315)
(322)
75
(310)
9,141
Onerous
lease
$’000
1,441
-
344
(1,273)
-
-
39
-
551
Significant accounting policies
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.
109
Bapcor Limited Annual Report 2019 Notes to the consolidated financial statements
30 June 2019
Note 18. Derivative financial instruments
Current assets
Forward foreign exchange contracts - cash flow hedges
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
Consolidated
2019
$’000
2018
$’000
897
1,720
(459)
(35)
(494)
(349)
54
(116)
(8)
(124)
(330)
1,266
Refer to note 27 for further information on financial risk management.
Refer to note 19 for further information on fair value measurement.
Significant accounting policies
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.
110
Bapcor Limited Annual Report 2019 Note 19. 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 - 2019
Assets
Derivative financial instruments
Total assets
Liabilities
Derivative financial instruments
Deferred consideration
Total liabilities
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
Level 1
$’000
-
-
-
-
-
-
-
-
-
-
897
897
843
-
843
-
-
-
19,380
19,380
897
897
843
19,380
20,223
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
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 settlements are 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.
Significant accounting policies
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.
111
Bapcor Limited Annual Report 2019 Notes to the consolidated financial statements
30 June 2019
Note 19. Fair value measurement (continued)
Significant accounting policies (continued)
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.
Note 20. Equity - issued capital
Ordinary shares
Treasury shares
Movements in ordinary share capital
Details
Balance
Issue for Dividend Reinvestment Plan
Hellaby transaction costs (net of tax)
Issue for Dividend Reinvestment Plan
Balance
Issue for Dividend Reinvestment Plan
Issue on acquisition
Issue for Dividend Reinvestment Plan
Consolidated
2019
Shares
2018
Shares
2019
$’000
2018
$’000
283,480,597 280,244,752
631,697
-
-
(8,161)
610,951
(4,495)
283,480,597 280,244,752
623,536
606,456
Date
1 July 2017
29 September 2017
27 April 2018
Shares
$’000
278,633,080
602,571
932,347
-
679,325
4,896
(290)
3,774
30 June 2018
280,244,752
610,951
27 September 2018
4 December 2018
12 April 2019
830,414
1,396,952
1,008,479
6,039
9,150
5,557
Balance
30 June 2019
283,480,597
631,697
112
Bapcor Limited Annual Report 2019 Movements in treasury shares
Details
Balance
Return of employee shares
Purchase of treasury shares
Date
1 July 2017
1 July 2017
Shares
$’000
(200,000)
(1,896)
(22)
-
14 September 2017
(480,686)
(2,599)
Utilisation of treasury shares for LTI
14 September 2017
680,708
-
Balance
Return of employee shares
Purchase of treasury shares
30 June 2018
1 July 2018
-
(4,495)
(800)
-
12-13 September 2018
(490,201)
(3,666)
Utilisation of treasury shares for LTI
14 September 2018
491,001
-
Balance
30 June 2019
-
(8,161)
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 $7.48 (2018: $5.40) per share.
Significant accounting policies
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.
113
Bapcor Limited Annual Report 2019 Notes to the consolidated financial statements
30 June 2019
Note 21. Equity - reserves
Foreign currency reserve
Cash flow hedge reserve
Share-based payments reserve
Consolidated
2019
$’000
2018
$’000
(1,466)
(10,131)
35
8,739
667
5,819
7,308
(3,645)
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.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Foreign
currency
reserve
$’000
Cash flow
hedge
reserve
$’000
Share-based
payments
reserve
$’000
Net
investment
hedge
reserve
$’000
Total
$’000
(918)
-
-
-
2,771
(11,984)
-
(10,131)
-
-
-
-
7,714
951
(1,466)
(2,519)
3,999
(1,101)
-
-
89
199
667
(685)
201
8
-
-
(156)
35
3,883
-
(284)
2,220
-
-
-
5,819
-
1,068
-
1,852
-
-
8,739
(648)
2,473
17
-
(3,211)
-
1,369
-
-
-
-
-
-
-
-
(202)
6,472
(1,368)
2,220
(440)
(11,895)
1,568
(3,645)
(685)
1,269
8
1,852
7,714
795
7,308
Consolidated
Balance at 1 July 2017
Revaluation
Deferred tax
Net investment hedge
Reclassified to profit and loss (note 7)
Foreign currency translation
Cancellation on divestment
Balance at 30 June 2018
Revaluation
Deferred tax
Foreign currency translation
Share-based payment expense
Foreign currency translation
Cancellation on divestment
Balance at 30 June 2019
114
Bapcor Limited Annual Report 2019 Note 22. Equity - retained profits
Retained profits/(accumulated losses) at the beginning of the financial year
Profit after income tax expense for the year
Dividends paid (note 24)
Retained profits at the end of the financial year
Note 23. Equity - non-controlling interest
Investment in Car Bits Asia, Thailand
Opening balance
Non-controlling interest on incorporation
Non-controlling interest loss for the financial year
Foreign currency revaluation
Closing balance
Consolidated
2019
$’000
2018
$’000
37,138
96,978
(17,067)
94,656
(45,006)
(40,451)
89,110
37,138
Consolidated
2019
$’000
2018
$’000
2,397
-
(446)
282
-
2,554
(122)
(35)
2,233
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.
Resource Services
Opening balance
Non-controlling interest loss for the period
Finalisation of prior year business combinations
Divestment of non-controlling interest
Closing balance
Consolidated
2019
$’000
2018
$’000
-
-
-
-
-
6,561
(214)
(4,820)
(1,527)
-
As part of the acquisition of Hellaby Holdings Limited in FY17, the acquired Resource Services group had a non-controlling
interest which was divested in FY18.
115
Bapcor Limited Annual Report 2019 Notes to the consolidated financial statements
30 June 2019
Note 24. Equity - dividends
Dividends
Dividends paid during the financial year were as follows:
Final dividend for the year ended 30 June 2018 (2018: 30 June 2017) of 8.5 cents
(2018: 7.5 cents) per ordinary share *
Interim dividend for the year ended 30 June 2019 (2018: 30 June 2018) of 7.5 cents
(2018: 7.0 cents) per ordinary share **
Consolidated
2019
$’000
2018
$’000
23,821
20,882
21,185
19,569
45,006
40,451
* $6,039,000 (2018: $4,896,000) of the final dividend for the year ended 30 June 2018 (2018: 30 June 2017) was settled under the Dividend Reinvestment Plan.
** $5,557,000 (2018: $3,774,000) of the interim dividend for the year ended 30 June 2019 (2018: 30 June 2018) was settled under the Dividend Reinvestment Plan.
The Board has declared a final dividend in respect of FY19 of 9.5 cents per share, fully franked. The final dividend will be
paid on 26 September 2019 to shareholders registered on 30 August 2019.
The final dividend takes the total dividends declared in relation to FY19 to 17.0 cents per share, fully franked, representing
an increase of dividends paid of 9.7% compared to the prior financial year. Dividends paid and declared in relation to FY19
represents 51.1% of pro-forma net profit after tax from continuing operations.
Franking credits
Consolidated
2019
$’000
2018
$’000
Franking credits available for subsequent financial years based on a tax rate of 30%
80,460
51,234
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
Significant accounting policies
Dividends are recognised when declared during the financial year and no longer at the discretion of the company.
116
Bapcor Limited Annual Report 2019 Note 25. Earnings per share
Earnings per share for profit from continuing operations
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
Earnings per share for profit from discontinued operations
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
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
Consolidated
2019
$’000
2018
$’000
96,532
84,379
446
122
96,978
84,501
Cents
Cents
34.40
34.27
30.24
30.09
Consolidated
2019
$’000
2018
$’000
-
-
-
-
-
9,941
214
10,155
Cents
3.63
3.62
Cents
Consolidated
2019
$’000
2018
$’000
96,532
94,320
446
336
96,978
94,656
Cents
Cents
34.40
34.27
33.88
33.71
117
Bapcor Limited Annual Report 2019 Notes to the consolidated financial statements
30 June 2019
Note 25. Earnings per share (continued)
Weighted average number of ordinary shares
Number
Number
Weighted average number of ordinary shares used in calculating basic earnings per share
281,885,783
279,416,138
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares
1,113,893
1,407,835
Weighted average number of ordinary shares used in calculating diluted earnings per share
282,999,676 280,823,973
The weighted average number of ordinary shares for 2018 has been restated for the effect of the rights issues performed
in accordance with AASB 133 Earnings Per Share.
Note: The 2018 comparatives have been restated for an immaterial difference to the weighted average number of ordinary shares and to include the
non-controlling interest earnings into the earnings per share for profit from continuing and discontinuing operations.
Significant accounting policies
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.
118
Bapcor Limited Annual Report 2019 Note 26. 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
Write off of capitalised borrowing costs
Non-cash share-based payment expense
Other gain
Consolidated
2019
$’000
2018
$’000
96,532
94,320
17,100
15,582
(104)
86
604
258
1,852
(4,053)
(60)
858
604
-
2,220
-
Component relating to discontinued operations
-
(9,942)
Change in operating assets and liabilities:
Increase in trade and other receivables
Increase in inventories
Decrease/(increase) in other operating assets
Increase/(decrease) in trade and other payables
Increase/(decrease) in provision for income tax
Increase/(decrease) in other operating liabilities
Net cash from operating activities
(6,892)
(32,856)
(2,201)
(7,015)
1,122
1,208
(8,873)
(20,151)
936
12,764
(1,013)
(1,814)
65,641
85,431
Significant accounting policies
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.
119
Bapcor Limited Annual Report 2019 Notes to the consolidated financial statements
30 June 2019
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.
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 settlements
Borrowings **
Total financial liabilities
Consolidated
2019
$’000
2018
$’000
47,610
155,111
897
40,154
140,695
1,720
203,618
182,569
183,645
187,753
843
454
19,380
24,404
382,960
328,391
586,828
541,002
* 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.
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.
120
Bapcor Limited Annual Report 2019
AUD strengthened
AUD weakened
Consolidated - 2019
% change
Derivative financial instruments
Other financial assets
Other financial liabilities
1%
1%
1%
Effect
on profit
before tax
Effect on
equity
% change
Effect
on profit
before tax
Effect on
equity
-
(372)
329
(43)
333
-
-
333
(1%)
(1%)
(1%)
-
380
(336)
44
(340)
-
-
(340)
Consolidated - 2018
% change
Effect
on profit
before tax
Effect on
equity
% change
Effect
on profit
before tax
Effect on
equity
AUD strengthened
AUD weakened
Derivative financial instruments
Other financial assets
Other financial liabilities
1%
1%
1%
-
(398)
367
(31)
262
-
-
262
(1%)
(1%)
(1%)
-
406
(374)
32
(267)
-
-
(267)
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
2019
2018
Weighted
average
interest rate
%
3.47%
2.44%
Weighted
average
interest rate
%
3.62%
2.39%
Balance
$’000
382,960
(40,000)
342,960
Balance
$’000
328,391
(60,000)
268,391
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 $1,329,000 (2018: $1,189,000).
The amount recognised in other comprehensive income net of tax in relation to interest rate swaps was ($32,000) (2018:
$209,000).
121
Bapcor Limited Annual Report 2019 Notes to the consolidated financial statements
30 June 2019
Note 27. Financial risk management (continued)
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 10. No
trade receivables have an external credit rating, and management classify trade receivables on aging profiles.
As well as identifying specific expected credit losses, the consolidated entity has adopted a lifetime expected loss
allowance in estimating expected credit losses on the remaining trade receivable balances through the use of a
provisions matrix using fixed rates of credit loss provisioning. These provisions are considered representative across all
customers of the consolidated entity based on recent sales experience, historical collection rates and forward-looking
information that is available.
Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include
the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual
payments for a period greater than one year.
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 *
Consolidated
2019
$’000
2018
$’000
134,540
169,109
* The unused facility value excludes any facility that relates to bank guarantees. Refer to note 16 for further information.
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.
122
Bapcor Limited Annual Report 2019 Consolidated - 2019
Trade and other payables
Borrowings *
Deferred consideration
Total non-derivatives
Derivatives
Interest rate swaps
Forward foreign exchange contracts
Total derivatives
Consolidated - 2018
Trade and other payables
Borrowings *
Deferred settlements
Total non-derivatives
Derivatives
Interest rate swaps
Forward foreign exchange contracts
Total derivatives
Between
1 and 2
years
$’000
Between
2 and 5
years
$’000
Over
5 years
$’000
Remaining
contractual
maturities
$’000
1 year or less
$’000
-
-
183,645
310,658
107,540
444,888
-
-
19,485
310,658
107,540
648,018
183,645
13,345
16,985
213,975
35
459
494
-
13,345
2,500
15,845
349
-
349
-
-
-
Between
1 and 2
years
$’000
Between
2 and 5
years
$’000
Over
5 years
$’000
1 year or less
$’000
187,753
13,424
23,039
224,216
8
116
124
-
169,707
2,000
171,707
105
-
105
-
186,195
-
186,195
225
-
225
-
-
-
-
-
-
-
-
-
-
384
459
843
Remaining
contractual
maturities
$’000
187,753
369,326
25,039
582,118
338
116
454
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);
• Fixed charge cover ratio not below 1.75:1 (EBITDA plus Rent : Net Total Cash Interest plus Rent)
123
Bapcor Limited Annual Report 2019 Notes to the consolidated financial statements
30 June 2019
Note 28. Related party transactions
Parent entity
Bapcor Limited is the parent entity. Refer to note 31 for supplementary information about the parent entity including
internal dividends received.
Subsidiaries
Interests in subsidiaries are set out in note 32.
Key management personnel
Disclosures relating to key management personnel are set out in note 33 and the remuneration report included in the
directors’ report.
Note 29. Business combinations
Current financial year acquisitions
The consolidated entity acquired the net assets of the following businesses:
• Autobarn Bundall
• Autobarn Gympie
• Autobarn Hervey Bay
• Autobarn Kawanah Waters
• Autobarn Maryborough
• Autobarn Mile End
• Autobarn Moonah
• Autobarn Warners Bay
• Autopro Batemans Bay
• Autopro Five Dock
• Allied Bearings
• Hoistman
• King Auto Parts
• Japanese Trucks Australia
• Toperformance
The consolidated entity also acquired 100% of the shares in the following companies, collectively referred to as
Commercial Truck Parts on 30 November 2018:
• Don Kyatt Spare Parts (Qld) Pty Ltd
• He Knows Truck Parts Pty Ltd
•
• Commercial Parts Pty Ltd
• Commercial Spares Pty Ltd
I Know Parts and Wrecking Pty Ltd
These acquisitions were made to strengthen the Bapcor offering as well as increase the company store network
presence.
124
Bapcor Limited Annual Report 2019
Note 29. Business combinations (continued)
The assets and liabilities recognised as a result of these acquisitions are set out below. The net asset business
combinations have been aggregated. The fair values are provisional at the time of this report and are to be finalised
within the acquisition period of twelve months from acquisition date.
The Commercial Truck Parts fair value is materially consistent with the estimated position presented in the 31 December
2018 Financial Report.
Cash and cash equivalents
Trade and other receivables
Inventories
Plant and equipment
Motor vehicles
Software
Deferred tax asset
Trade and other payables
Provisions
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Cash paid
Shares issued
Deferred settlement
Debt forgiven
Cash used to acquire business, net of cash acquired:
Cash consideration
Less: cash and cash equivalents
Net cash used
Commercial
Truck Parts
Fair value
$’000
Other
acquisitions
Fair value
$’000
29,114
5,187
7,896
401
336
15
1,334
(1,897)
(1,780)
8
781
3,554
112
190
-
1,256
(169)
(912)
40,606
4,820
48,048
7,730
88,654
12,550
63,004
9,150
16,500
-
9,849
-
500
1,204
88,654
11,553
63,004
(29,114)
33,890
9,849
(8)
9,841
Goodwill in relation to these acquisitions relates to the anticipated future probability of their contribution to the
consolidated entity’s total business.
The Commercial Truck Parts acquisition contributed revenue of $20,212,000 and net profit after tax of $2,900,000 to the
consolidated group since acquisition on 30 November 2018. Based on management results that have not been reviewed
or audited, the contribution to revenue and net profit after tax if the Commercial Truck Parts acquisition had occurred on
1 July 2018 is estimated to have been $36,561,000 and $5,673,000 respectively.
Each of the other 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 revenue or profit since acquisition date.
Refer to note 5 for details on acquisition related costs incurred.
125
Bapcor Limited Annual Report 2019 Notes to the consolidated financial statements
30 June 2019
Note 29. Business combinations (continued)
Deferred settlements
Deferred consideration has been estimated and provided for on the Commercial Truck Parts and Toperformance
Products acquisitions and are currently accrued at $16,500,000 and $500,000 respectively as at 30 June 2019 (refer
notes 15 and 17).
Prior financial year acquisitions
No material changes have occurred to the prior financial year acquisitions.
Significant accounting policies
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.
Critical accounting judgements, estimates and assumptions
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.
126
Bapcor Limited Annual Report 2019 Note 30. 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
Bapcor Services Pty Ltd
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
Diesel Distributors Australia Pty Ltd
Ryde Batteries (Wholesale) Pty Ltd
Federal Batteries Qld Pty Ltd
Premier Auto Trade Pty Ltd
JAS Oceania Pty Ltd
Australian Automotive Electrical Wholesale Pty Ltd
Low Voltage Pty Ltd
Bapcor Australia 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
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Equity - retained profits
Retained profits/(accumulated losses) at the beginning of the financial year
Profit after income tax expense
Dividends paid
Retained profits at the end of the financial year
2019
$’000
2018
$’000
1,101,430
1,057,362
(994,221)
(949,937)
107,209
(30,486)
107,425
(29,103)
76,723
78,322
7,921
(5,378)
84,644
72,944
2019
$’000
2018
$’000
9,687
76,723
(28,184)
78,322
(45,006)
(40,451)
41,404
9,687
127
Bapcor Limited Annual Report 2019 Notes to the consolidated financial statements
30 June 2019
Note 30. Deed of cross guarantee (continued)
Statement of financial position
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Non-current assets
Trade and other receivables
Property, plant and equipment
Intangibles
Deferred tax
Other
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
Total equity
128
2019
$’000
2018
$’000
31,647
133,414
269,893
801
435,755
48
54,430
511,005
15,403
2,412
427,035
1,010,333
28,322
124,535
243,988
1,090
397,935
78
49,096
506,788
10,260
3,447
340,416
910,085
1,446,088
1,308,020
154,850
160,855
249
1,988
44,162
201,249
89
2,341
50,512
213,797
368,616
315,197
349
13,146
190,373
572,484
330
12,868
153,531
481,926
773,733
695,723
672,355
612,297
623,536
606,456
7,415
41,404
(3,846)
9,687
672,355
612,297
Bapcor Limited Annual Report 2019 Note 31. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of comprehensive income
Loss after income tax
Internal dividend income
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Other reserves
Current year profits/(losses)
Dividends paid
Prior years retained earnings
Total equity
2019
$’000
2018
$’000
(5,626)
18,753
(9,809)
51,337
13,127
41,528
2019
$’000
2018
$’000
-
-
669,207
681,085
-
-
-
-
623,537
606,456
8,739
13,127
5,819
41,528
(45,006)
(40,451)
68,810
67,733
669,207
681,085
129
Bapcor Limited Annual Report 2019 Notes to the consolidated financial statements
30 June 2019
Note 32. 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
Bapcor International Pty Ltd
Car Bits Asia Co. Ltd
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
AADi Australia Pty Ltd
A&F Drive Shaft Repair Queensland Pty Ltd
Diesel Distributors Australia Pty Ltd
Ryde Batteries (Wholesale) Pty Ltd
Federal Batteries Qld Pty Ltd
Premier Auto Trade Pty Ltd
JAS Oceania Pty Ltd
Australian Automotive Electrical Wholesale Pty Ltd
Low Voltage Pty Ltd
Don Kyatt Spare Parts (Qld) Pty Ltd
He Knows Truck Parts Pty Ltd
I Know Parts and Wrecking Pty Ltd
Commercial Spares Pty Ltd
Commercial Parts Pty Ltd
Bapcor New Zealand Ltd
Bapcor Automotive Ltd
Brake & Transmission NZ Ltd
Diesel Distributors Ltd
Bapcor Services New Zealand Ltd
HCB Technologies Ltd
Renouf Corporation International
Benequity Properties, LLC
Bapcor Australia Pty Ltd *
Hellaby Resource Services Ltd *
Hellaby Investment No 8 Ltd *
Bapcor Automotive Australia Pty Ltd **
Ryde Batteries Pty Ltd **
Bapcor Auto Electrical Pty Ltd **
Hellaby Auto Fuel Pty Ltd **
ACN 119 121 729 Pty Ltd **
Generator Fund Ltd **
TRS Tyre & Wheel Ltd **
Principal place of business /
Country of incorporation
Ownership interest
2019
%
2018
%
Australia
Australia
Australia
Thailand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
United States
United States
Australia
New Zealand
New Zealand
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
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%
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%
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%
* These subsidiaries are non-trading and are in the process of being wound up.
** These subsidiaries were wound up or divested during the period.
130
Bapcor Limited Annual Report 2019 Note 33. Related party transactions - key management personnel disclosures
Compensation
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
Loans
Opening balance
Amounts repaid
Amounts recovered by deferred STI
Consolidated
2019
$’000
2018
$’000
7,407
239
71
1,751
8,114
236
68
1,822
9,468
10,240
Consolidated
2019
$’000
2018
$’000
642
(59)
18
601
1,354
(583)
(129)
642
Refer to the audited Remuneration Report within the Directors’ Report for further details on key management personnel
compensation, as well as note 13 for further details on the loans made to key management personnel.
Note 34. 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.
131
Bapcor Limited Annual Report 2019 Notes to the consolidated financial statements
30 June 2019
In relation to the FY19 year an offer to participate in the LTI was made to seven of Bapcor’s senior executives. These
allocated Performance Rights have a performance period that ends on 30 June 2021 at which time the performance
hurdles are tested.
A summary of the terms for the Performance Rights granted in the current and prior financial years are set out in the
following tables:
Grant date
Performance hurdle
Performance period
Test date
Expiry date
Quantity granted
Exercise price
26/9/18
29/10/18
Relative TSR
EPS
Relative TSR
EPS
1/7/18 to 30/6/21
1/7/18 to 30/6/21
30/6/21
26/9/33
30/6/21
29/10/33
113,096
113,099
85,443
85,443
Nil
Nil
Fair value at grant date1
$4.860
$7.010
$3.970
$6.140
Other conditions
Restriction on sale to 30/6/22
Restriction on sale to 30/6/22
Share price on valuation date
Volatility
Dividend yield
Risk free rate
$7.48
24.47%
2.35%
2.13%
$6.53
24.86%
2.35%
2.01%
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%
Nil
20%
Greater than 7.5% and less than 15%
Pro-rata straight-line vesting
Equal to or greater than 15%
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.
132
Bapcor Limited Annual Report 2019 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.
Performance Rights lapse if the vesting conditions are not met or on the expiry date (if applicable).
Shares will be subject to a restriction on sale for twelve months from vesting of the Performance Rights.
Set out below are summaries of Performance Rights granted under the LTI:
2019
Grant date
Vesting date
24/12/2015
30/06/2018
24/12/2015
30/06/2018
20/12/2016
30/06/2018
15/08/2017
30/06/2019
20/12/2016
30/06/2019
15/08/2017
30/06/2019
04/12/2017
30/06/2019
04/12/2017
30/06/2020
26/09/2018
30/06/2021
29/10/2018
30/06/2021
2018
Grant date
Vesting date
24/04/2014
30/06/2017
24/12/2015
30/06/2017
24/12/2015
30/06/2017
24/12/2015
30/06/2018
24/12/2015
30/06/2018
20/12/2016
30/06/2018
15/08/2017
30/06/2019
20/12/2016
30/06/2019
15/08/2017
30/06/2019
04/12/2017
30/06/2018
04/12/2017
30/06/2019
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
$0.00
$0.00
223,734
146,574
114,872
7,977
219,408
15,236
177,603
567,067
-
-
-
-
-
-
-
-
-
-
226,195
170,886
(223,734)
(146,574)
(112,856)
(7,837)
-
-
(2,016)
(140)
-
-
-
-
-
-
-
-
-
-
(37,188)
182,220
(15,236)
-
-
177,603
(100,970)
466,097
-
-
226,195
170,886
1,472,471
397,081
(491,001)
(155,550)
1,223,001
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
$0.00
$0.00
$0.00
475,362
128,868
76,478
246,986
146,574
124,286
-
237,389
-
-
-
-
-
-
-
-
-
7,977
-
15,236
177,603
567,067
(475,362)
(128,868)
(76,478)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(23,252)
223,734
-
146,574
(9,414)
114,872
-
7,977
(17,981)
219,408
-
-
-
15,236
177,603
567,067
1,435,943
767,883
(680,708)
(50,647)
1,472,471
The weighted average exercise price for the Performance Rights exercised in the current financial year was $7.48 (2018: $5.40).
The weighted average contractual lives are 1.63 years (2018: 1.74 years).
The expense arising from share-based payment transactions relating to the LTI during the year as part of employee
benefits expense was $1,852,000 (2018: $2,220,000).
Note: The numbers in the disclosures below include amounts relating to employees that are not key management personnel and therefore differ to those
presented in audited Remuneration Report within the Directors’ Report.
133
Bapcor Limited Annual Report 2019 Notes to the consolidated financial statements
30 June 2019
Note 34. Share-based payments (continued)
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.
Significant accounting policies
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.
Critical accounting judgements, estimates and assumptions
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.
134
Bapcor Limited Annual Report 2019 Note 35. 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
Consolidated
2019
$’000
2018
$’000
596,502
622,752
25,850
7,000
61,594
49,600
32,850
111,194
629,352
733,946
-
61,905
105,762
15,218
121,799
65,451
120,981
187,250
120,981
249,155
750,333
983,101
135
Bapcor Limited Annual Report 2019 Notes to the consolidated financial statements
30 June 2019
Note 36. 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
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
2019
$’000
2018
$’000
3,391
-
3,372
555
47,450
84,727
6,790
40,792
73,171
5,463
138,967
119,426
2,908
5,650
239
8,797
3,840
5,879
19
9,738
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 contingent liabilities (2018: Nil).
The divestment of the non-core businesses of Footwear and Contract Resources performed in the prior financial year as
well as TRS in the current financial year includes standard indemnity and warranty clauses as is customary in these type
of transactions.
Note 37. 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 2019 was (10.9) cents per share (2018: (19.0) cents per share).
Net assets per share at 30 June 2019 was $2.48 (2018: $2.25) per share.
Note 38. Events after the reporting period
Apart from the dividend declared as disclosed in note 24, no other matter or circumstance has arisen since 30 June 2019
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.
136
Bapcor Limited Annual Report 2019 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 2019 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 30 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
Darryl Abotomey
Chief Executive Officer and Managing Director
21 August 2019
Melbourne
137
Bapcor Limited Annual Report 2019
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 2019 and of its financial
performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
(cid:404)
(cid:404)
(cid:404)
(cid:404)
(cid:404)
(cid:404)
the consolidated statement of financial position as at 30 June 2019
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the notes to the consolidated financial statements, which include a summary of significant
accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant
to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities
in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
138
Bapcor Limited Annual Report 2019
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
Materiality
(cid:404) For the purpose of our audit we used overall Group materiality of $6.6 million, which represents
approximately 5% of the Group’s profit before tax.
(cid:404) 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.
(cid:404) We chose Group profit before tax because, in our view, it is the benchmark against which the performance of
the Group is most commonly measured.
(cid:404) We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonly
acceptable thresholds.
Audit Scope
(cid:404) Our audit focused on where the Group made subjective judgements; for example, significant accounting
estimates involving assumptions and inherently uncertain future events.
(cid:404)
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.
104
139
Bapcor Limited Annual Report 2019
Independent auditor’s report to the members of Bapcor Limited
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.
Key audit matter
How our audit addressed the key audit matter
Carrying value of goodwill and intangible
assets with indefinite lives
Refer to note 12 [$734.5 million]
In assessing the models, our audit procedures included,
amongst others:
At 30 June 2019, the Group recognised $646.4
million of goodwill and $59.2 million of intangible
assets with indefinite lives (trade names).
At least annually, an impairment test is performed
by the Group over the goodwill and intangible
assets with indefinite lives, in each of the Group’s
cash generating units (CGUs) based on a ‘value in
use’ discounted cash flow model or ‘fair value less
cost of disposal’ model (the models). Impairment
losses for identified shortfalls in value are
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 with indefinite lives, and the
amount of any resulting impairment (if
applicable). The key assumptions applied by the
Group include:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
cash flow forecasts, including the terminal
value forecast
short-term and future growth rates in revenue
and EBITDA margin
the discount rate adopted in the models
relief from royalty rate in determining the fair
value less cost to sell of trade names
(cid:404) Assessing whether the allocation of the
Group’s goodwill and intangible assets into
CGUs was consistent with our knowledge of
the Group’s operations and internal Group
reporting
(cid:404) Assessing whether the grouping of CGUs
appropriately included the assets, liabilities
and cash flows directly attributable to each
CGU and an allocation of corporate overheads
(cid:404) Evaluating forecast cash flows used in the
models for consistency with the Group’s most
up-to-date budgets and business plans
formally approved by the Board of Directors
(cid:404) Assessing the Group’s historical ability to
forecast cash flows by comparing budgets to
reported actual results for the past year
� Considering whether the cash flows used in
the model were reasonable and based on
supportable assumptions by comparing actual
cash flows for previous years to forecast cash
flows and evaluating the support available
from the Group for significant differences in
actual and forecast cash flows
(cid:404) Assessing the sensitivity to change of key
assumptions used in the models that either
individually or collectively would result in the
impairment of assets
105
140
Bapcor Limited Annual Report 2019
Key audit matter
How our audit addressed the key audit matter
Given the level of judgement applied by the Group, and
the magnitude of the goodwill and intangible assets
with indefinite lives recognised in the Group’s
consolidated statement of financial position, we
determined that this continues to be a key audit matter.
(cid:404) Together with PwC valuation experts,
evaluating whether:
o discount rates used in the models
appropriately reflected the risks of the
CGUs by considering relevant industry
and market factors
o
o
o
the value in use models applied to test
goodwill for impairment included the
appropriate inputs as required under
Australian Accounting Standards
the fair value less costs of disposal
valuation method used to determine fair
value for trade names was the best basis
upon which to infer value of the trade
names
the key inputs to the fair value less costs
of disposal including the discount rate,
relief from royalty rate, and marketing
and administration cost recharges were
appropriate by reference to comparable
market transactions to enable a reliable
estimate to be made
(cid:404) Testing the mathematical accuracy of the
models on a sample basis.
We also considered the adequacy of disclosures in
note 12, including those regarding the key
assumptions, in accordance with the requirements
of Australian Accounting Standards.
Carrying value of Inventory
Refer to note 9 [$326.1 million]
Our audit procedures included the following, amongst
others:
At 30 June 2019, the Group recorded a provision for
aged and slow-moving inventory of $43.6 million. The
provision is calculated by applying judgemental
provisioning rates to aged and slow-moving inventory
categories. Specific provision is also recorded for items
where the known net realisable value is lower than cost.
We considered this to be a key audit matter because of
the significant judgement required by the Group in
determining the net realisable value of inventory and
the potentially material impact that changes in the
provision could have on the financial report.
(cid:404) Considering whether all the necessary
inventory balances were included in the
inventory provision calculation
(cid:404) Evaluating whether the methodology applied
to the provision calculation was consistent
with that applied in the prior year and was in
accordance with Australian Accounting
Standards
(cid:404) Testing the movement in the inventory
provision, including agreeing a sample of
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Bapcor Limited Annual Report 2019
Independent auditor’s report to the members of Bapcor Limited
Key audit matter
How our audit addressed the key audit matter
inventory written off to supporting
documentation such as Board approvals
(cid:404) Considering the adequacy of disclosures in
note 9 in light of the requirements of
Australian Accounting Standards.
Accounting for the acquisition of Commercial
Truck Parts Group
Refer to note 29
Our procedures included the following, amongst
others:
The Group acquired Commercial Truck Parts Group in
November 2018 for $88.7 million paid to the vendors
($59.5 million net of cash acquired) in a combination
of cash, deferred consideration and the issue of new
shares in Bapcor.
The Group has recognised the fair value of assets and
liabilities for the acquired business, which included
goodwill of $48.0 million.
We considered this a key audit matter because of the
significant judgement involved by the Group in the
following areas:
(cid:120) Determining the acquisition date
(cid:120) Estimating the purchase consideration,
particularly in respect of deferred consideration
payable subject to certain conditions
(cid:120)
Identifying all assets and liabilities of the newly
acquired business and estimating the fair value of
each asset and liability for initial recognition by
the Group.
(cid:120) Evaluating the Group’s accounting against
the requirements of Australian Accounting
Standards, key transaction agreements, our
understanding of the business acquired and
its industry and legal correspondence
(cid:120) Assessing the determination of the
acquisition date against supporting
documentation including ASX
announcements, relevant share registers and
the requirements of Australian Accounting
Standards
(cid:120) Assessing the fair value of the purchase
consideration by comparing a sample of
payments to bank records and ASX take over
announcements
(cid:120) Assessing the Group’s evaluation whether the
conditions required for the deferred
consideration to be paid were likely to be met
in the future
(cid:120) Assessing the fair values of the acquired
assets and liabilities recognised including
assessing the existence of identifiable
intangible assets
(cid:120) Evaluating the adequacy of the disclosures
made in note 29 in light of the requirements
of Australian Accounting Standards
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 30 June 2019, 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 Directors' Report and Corporate Directory. We expect the
remaining other information to be made available to us after the date of this auditor's report.
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Bapcor Limited Annual Report 2019
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
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, 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.
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.
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Bapcor Limited Annual Report 2019
Independent auditor’s report to the members of Bapcor Limited
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in the Directors’ Report for the year ended 30 June
2019.
In our opinion, the remuneration report of Bapcor Group Limited for the year ended 30 June 2019
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
PricewaterhouseCoopers
Jason Perry
Partner
Melbourne
21 August 2019
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Bapcor Limited Annual Report 2019
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 21 August 2019 (‘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
6,750
3,203,144
7,039
17,841,110
1,618
11,684,073
870
18,901,807
62 231,850,463
1.13
6.29
4.12
6.67
81.78
16,339 283,480,597
100.00
Holders of less than a marketable parcel of $500 included in above total
262
4,437
2.2 Distribution of holders of performance rights
Range
1 – 1,000
1,001 – 5,000
5,001 – 1, 000
10,001 – 100,000
100,001 +
Total
Total
holders
Performance
Rights
%
-
-
-
6
4
-
-
-
274,964
948,037
10
1,223,001
-
-
-
22.48
77.52
100%
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Bapcor Limited Annual Report 2019 Shareholder Information
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
BNP Paribas Nominees Pty Ltd
National Nominees Limited
Garrmar Investments Pty Ltd
EQT Wealth Services Limited
Mutual Trust Pty Ltd
D Abotomey
AMP Life Limited
Netwealth Investments Limited
Glendale Investment Group Pty Ltd
Shoppee Nominees Pty Ltd
UBS Nominees Pty Ltd
Schram Investments Pty Ltd
Daycliff Pty Ltd
C Magill
ANZ Trustees Limited
Equity Trustees Wealth Services Limited
JMB Family Investments Pty Ltd
Other Shareholders
Total Shareholders
4. Substantial holders
Ordinary Shares
Number Held
% of Issued
Capital
87,541,080
49,418,664
32,003,640
20,719,723
16,454,319
6,922,699
2,217,763
1,815,176
1,641,323
1,499,330
1,384,878
1,000,000
934,567
864,821
809,164
806,877
631,424
593,620
563,041
400,000
228,222,109
55,258,488
30.88
17.43
11.29
7.31
5.80
2.44
0.78
0.64
0.58
0.53
0.49
0.35
0.33
0.31
0.29
0.28
0.22
0.21
0.20
0.14
80.51
19.49
280,244,752
100.00
As at the Reporting Date, the names of the substantial holders of the Company and the number of equity securities in
which those substantial holders and their associates have a relevant interest, as disclosed in substantial holding notices
given to the Company, are as follows:
Name
FMR LLC
Vanguard Group
Paradice Investment Management Pty Ltd
Number Held
% of Issued
Capital
16,844,711
14,309,060
14,219,603
5.94
5.05
5.02
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Bapcor Limited Annual Report 2019 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
1,223,001 unlisted performance rights have been granted to 10 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.
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Bapcor Limited Annual Report 2019 Corporate directory
30 June 2019
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)
Jennifer Macdonald (Independent, Non-Executive Director)
Company secretary
Gregory Fox
Notice of annual general meeting
The details of the annual general meeting of Bapcor Limited are:
Date: 1 November 2019
Time: 1.30pm
Address: Holding Redlich, Level 8, 555 Bourke Street, Melbourne VIC 3000
Registered office
61 Gower Street
Preston VIC 3072
Australia
Share register
Computershare Investor Services Pty Ltd
452 Johnston Street
Abbotsford VIC 3067
Australia
Ph: +61 3 9415 4000
Auditor
PricewaterhouseCoopers
2 Riverside Quay
Southbank VIC 3006
Australia
Stock exchange listing
Bapcor Limited shares are listed on the Australian Securities Exchange
(ASX code: BAP)
Website
www.bapcor.com.au
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Bapcor Limited Annual Report 2019