ANNUAL REPORT 2020
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Bapcor Limited Annual Report 2020 We are Asia Pacific’s leading provider
of vehicle parts, accessories, equipment,
service and solutions; operating out of
over 1000 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.
Annual General Meeting
Date 20 October 2020
Time: 1:30pm
Location: Virtual; refer to
Bapcor’s website for details
www.bapcor.com.au
Bapcor Limited
ACN 153 199 912
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Bapcor Limited Annual Report 2020
CONTENTS
BAPCOR OPERATIONS
Automotive Aftermarket Supply Chain
Chairman’s Report
Chief Executive Officer’s Report
5 Year Strategic Targets
Board of Directors
Executive Team
SEGMENTS
Segment Overview
Segment Review Trade
Segment Review Bapcor New Zealand
Segment Review Specialist Wholesale
Segment Review Retail
ENVIRONMENTAL, SOCIAL & GOVERNANCE
Sustainability Overview
Sustainability Framework
Ethical Supply Chain/Procurement
Environmental Sustainability
Practise Good Governance
FINANCIAL REPORTING
Director’s Report
FINANCIAL STATEMENTS
Financial Report
Shareholder Information
Corporate Directory
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BAPCOR GROUP BUSINESSES
Trade
Specialist Wholesalers
Retail
Service
Commercial Truck
Parts Group
Australia’s largest
aftermarket distributor
of Light and Heavy
commercial truck
parts and accessories.
Comprised of;
Don Kyatt Spare
Parts (QLD),
I Know Parts, H.I.M.
Spares, Japanese
Commercial Spares,
Japanese Trucks
Australia, He Knows
Truck Parts, Diesel
Drive and Truckline.
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.
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.
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.
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.
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AUTOMOTIVE AFTERMARKET SUPPLY CHAIN
Specialist Wholesalers
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Trade
Retail
Service
Consumer
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ANDREW HARRISON
CHAIRMAN
“Our values – ‘We Give a Damn, We are in it together, We get it done,
We do the right thing’ – are at the centre of everything we do and guide
our behaviours, interactions and decisions each and every day.”
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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 2020.
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The 2020 financial year presented unprecedented
challenges for Bapcor and the global community
more broadly. The COVID-19 pandemic and the
profound economic disruption it brought were
compounded by catastrophic bushfires and
widespread drought in Australia. Bapcor has
navigated these turbulent trading conditions
to deliver a record revenue performance, achieve
a resilient set of financial results, and emerge in
a strong position to drive growth into the future.
Many of Bapcor’s businesses are classified as an essential
service, reflecting the critical role our businesses play in
serving their local communities. Where possible, we moved
to ensure our parts supply network coverage and supply
chain maintained uninterrupted service especially for
essential services. As the potential impacts of the COVID-19
pandemic became evident, we strengthened our balance
sheet by completing a well-supported capital raising and
implemented a suite of operational initiatives to preserve
and manage cash flow.
We extended our participation in the commercial vehicle
sector with the acquisition of the Truckline and Diesel Drive
businesses. The Truckline business creates our heavy
commercial vehicle business with operations across
Australia, and now uniquely positions Bapcor as the provider
of replacement parts for all forms of on-road vehicles.
During the year, together with our team members, we
articulated Bapcor’s core values to capture the spirit of how
we conduct ourselves in business. Our values – ‘We Give a
Damn, We are in it together, We get it done, We do the right
thing’ – are at the centre of everything we do and guide our
behaviours, interactions and decisions each and every day.
We made progress toward our strategic targets, outlined
on page 10–11, and kept focus on our core strengths and
capabilities. The 5 year strategic targets for Bapcor remain
unchanged – albeit slightly behind due to delays in the
past year.
The health and safety of all of the Bapcor family remains
our utmost priority. In FY20, we invested in team member
well-being, with a primary focus on mental-health, and
professional development. We made improvements to
our safety processes, including the roll-out of an online
compliance and safety portal, and achieved a reduction
in lost-time injury frequency rates over the last 12 months.
Bapcor recognises a sustainable and successful business
is enhanced by the engagement of its stakeholders, not
only in the delivery of shareholder wealth but also in
creating shared value. In FY20, Bapcor became a signatory
to the UN Global Compact joining more than 10,000
companies and organisations that are committed to
promoting Global Compact’s Ten Principles on human
and workers’ rights, the environment and anti-corruption
efforts. We will continue to embed the UN’s guiding
principles into our environmental, social and governance
(ESG) strategy.
Consistent with our progress toward our ESG strategic
commitments, outlined on page 26–27, we continued our
work in advancing responsible sourcing practices, with a
primary focus on modern slavery and human rights within
our supply chain. We renewed and expanded our carbon
offset program for Burson’s fleet of more than 1,000 vehicles.
Our energy-saving LED replacement initiative continued
throughout our store network.
The Board announced a final dividend of 9.5 cents per share
fully franked, resulting in a full year fully franked dividend of
17.5 cents per share, an increase of 2.9% on last year’s fully
franked dividend. Given the solid financial position of the
company at 30 June 2020 the Board decided to suspend
the operation of the Dividend Reinvestment Plan for the
FY20 final dividend.
That Bapcor was able to achieve a record revenue year,
solid financial position and position the business for the
future in an operating environment presenting
unprecedented challenges, is a testament to the efforts
of our CEO, Darryl Abotomey, his leadership team, and the
dedication and passion of all Bapcor team members to
whom I extend my profound thanks, and the thanks of the
Board. As a mark of appreciation, the Board provided a
modest bonus to all Bapcor full-time and part-time team
members, to acknowledge their contribution as members
of the Bapcor family. This is the spirit that Bapcor is built on,
and the spirit that we want to take us forward. I would also
like to thank shareholders, franchisees, customers and
suppliers for their ongoing support and contribution to
Bapcor’s continued success.
Over the coming financial year, the Board will work to
ensure the continued growth and sustained success of
the Bapcor Group. While the year ahead will continue
to present challenges within an uncertain operating
environment, we are well placed to continue our organic
growth and network expansion, take advantage of
strategic acquisition opportunities, invest in infrastructure,
and progress toward our strategic targets.
Thank you for your ongoing support.
Andrew Harrison
Chairman
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DARRYL ABOTOMEY
MANAGING DIRECTOR AND CEO
“The strong trading results and a successful $236m equity issue, that
was supported by our shareholders, places Bapcor in a solid
position, ready to drive growth into the future.”
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CHIEF EXECUTIVE OFFICER’S REPORT
The 2020 financial year (FY20) was a year unlike
any other since Bapcor’s listing in April 2014 – or
indeed any I have encountered in my career.
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The bushfires and ongoing drought in Australia,
the COVID-19 pandemic and accompanying
restrictions in Australia, New Zealand and
Thailand, and the consequent adverse economic
conditions, had a combined impact on Bapcor’s
financial performance. In the face of these
extraordinary challenges, the outstanding trading
results achieved by the Bapcor family – our team
members, franchisees, customers and suppliers –
is especially pleasing.
Bapcor posted record revenue in FY20, powered by record
revenue and earnings in our Trade and Retail business
segments, and the addition of the Truckline and Diesel Drive
business to our Specialist Wholesale segment. The turbulent
trading conditions resulted in FY20 earnings falling below
FY19 earnings, indicated by EBITDA being down 4.1%.
This was the second highest earnings ever reported
by Bapcor. The strong trading results and a successful
$236m equity issue, that was supported by our
shareholders, places Bapcor in a solid position, ready
to drive growth into the future.
Bapcor’s closing share price on 30 June 2020 was $5.90,
up 5.7% on the prior year, providing a market capitalisation
in excess of $2b.
Revenue
Record revenue of $1,462.7m increased by 12.8% in FY20.
Includes the addition of the Truckline and Diesel Drive
businesses in December 2019 and the full twelve months
trading of the Commercial Vehicle Group (CVG).
Contributing to this result were record revenue from our
Burson Trade, Specialist Wholesale and Retail segments.
Earnings before interest, tax, depreciation and
amortisation (EBITDA)
EBITDA in FY20 decreased by 4.1% to $157.8m. Record EBITDA
was achieved by Burson Trade which increased 3.7% to
$81.1m, Retail EBITDA of $30.5m which increased 12.8% and
Specialist Wholesale which increased 8.7% to $50.3m. Bapcor
New Zealand EBITDA decreased by 14.0% to $19.6m as a result
of the government-mandated lockdown which heavily
affected trading conditions. Group costs increased due to
additional support area costs for information technology,
human resources, finance and supply chain as well as
increased provisions for doubtful debts and inventory.
KEY HIGHLIGHTS OF FY20 COMPARED
TO THE PRIOR YEAR’S RESULTS
For comparative purposes results exclude the
impact of the AASB 16 Leases accounting standard
changes adopted on 1st July 2019.
• Revenue growth of 12.8% to a record $1,462.7m
• Record revenue and EBITDA in all three major
segments – Burson Trade, Retail and Specialist
Wholesale Group.
• Same-store sales:
• Burson Trade +6.0% (incl. -11.4% in April 2020 –
the major period COVID-19 impacted the
business)
• Autobarn +9.5% (+20.7% in H2) (incl. +14.5%
company-owned, franchise stores +6.6%
• EBITDA down 4.1% to $157.8m
• NPAT down 5.5% to $89.1m, and
• $236m equity issue, increasing shares on issue
by c.20%.
Net Profit After Tax (NPAT)
FY20 NPAT was $89.1m, representing a 5.5% decrease on
the prior year. Including AASB 16 pro-forma NPAT reduces
by $0.4m to $88.7m.
Equity Issue
In May, $236M was raised through an issue of equity,
increasing shares on issue by c.20%. The capital raising
was strongly supported with placements substantially
oversubscribed. Placements were made with a pro-rata
issuing of shares to existing shareholders wherever possible.
Earnings Per Share (EPS)
EPS for FY20 was 30.36 cents, down 9.2% compared to
FY19. This was partially reduced due to the equity raise
undertaken in April and May 2020 to strengthen Bapcor’s
financial position.
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REVENUE ($M)
1,014
686
1,463
1,237
1,297
FY2016
FY2017
FY2018
FY2019
FY2020
EPS (CPS)*
24.4
17.9
33.4
31.0
30.4
FY2016
FY2017
FY2018
FY2019
FY2020
EBITDA & NPAT* ($M)
NPAT*
77.0
43.6
117.4
65.8
150.0
164.6
157.8
86.5
94.3
89.1
FY2016
FY2017
FY2018
FY2019
FY2020
Operational Performance
All Bapcor’s business segments performed well in an
unusual and unprecedented year. Specific details for each
business segment are covered in pages 16 to 25.
COVID-19 Impact
When the potential impact of the COVID-19 pandemic was
first evident Bapcor responded swiftly to, first and foremost,
ensure the safety and well-being of its team members,
customers and suppliers. We moved quickly to shore up the
reliability of our supply chain, and ensure our store network
coverage was maintained to provide the continuity of
service which the local communities we serve depend on.
We adapted business operations to align with the change
in trading conditions, resulting in a reduction of
approximately 5% of team members across the Group. In
addition, we took action to conserve cash by reducing all
discretionary expenditure including capital expenditure.
In April 2020, Bapcor implemented a share placement
and share purchase plan, raising $236m to strengthen
the financial position of the Group and ensure we were
best-placed to navigate potential impacts of the
pandemic.
Throughout FY20, Bapcor did not receive any Australian
Government support (e.g. JobKeeper) aside from a
Queensland Government payroll tax reimbursement. In
New Zealand, Bapcor received NZD $3.9m in government
support which was passed on in full to team members who
otherwise would have been stood down. Bapcor’s landlords
supported the business during the worst of the lockdowns,
accepting rental payment reductions of $1.5m. Bapcor has
supported its suppliers by ensuring payments were made
in full and on time.
The automotive aftermarket industry fundamentals are as
strong as ever, reinforcing the resilience of the industry.
There have been record sales of second-hand vehicles
since the pandemic hit as travellers seek social distancing
and a move away from public transport, and an anticipated
flow-on from more people using their vehicles for domestic
holidays. Equally, with breakdown parts and services in
particular classified as an essential service by both the
Australian and New Zealand Governments, the pandemic
highlighted the essential role our businesses provide in
keeping the economy moving.
DIVIDENDS PER SHARE (CENTS)
Warehouse Evolution
Total
Interim
17.0
17.5
15.5
13.0
11.0
5.0
5.5
7.0
7.5
8.0
FY2016
FY2017
FY2018
FY2019
FY2020
* Based on pro-forma results excluding AASB 16 Leases.
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Bapcor continues to plan for the future and the long-term
benefit of the Group, with the build of a highly automated,
bespoke, state-of-the-art 50,000m2 distribution centre in
Tullamarine, Victoria. Construction of the greenfield facility
is well underway and completion is expected during FY21.
The existing Bapcor Melbourne distribution centres will
progressively be transitioned to the new facility, delivering
meaningful increases in efficiency and reductions in
duplicated inventory holdings.
Other Major Projects
Bapcor continues to invest in a range of major projects that
will drive competitive advantage;
• Warehouse management system – a-state-of-the-art
warehouse management system was installed into the
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Nunawading distribution centre in January 2020 and will
progressively be implemented into all distribution centres
• Retail point of sale system- a new point of sale system
activities, greater supply chain efficiencies, as well as growth
in our own brand categories. We continue to be on the
look-out for suitable acquisition opportunities as they arise.
is being implemented into Autobarn
• Technology infrastructure – a major upgrade was
completed in December 2019
• Safety Data System – currently being implemented
• Category Leadership & Brand Management – first
categories underway in vehicle air-conditioning,
electrical accessories and off-road 4x4
• New e-Commerce platform to serve B2C and B2B will
be launched by March 2021
• New B2B catalogue and customer ordering system
is currently being launched in New Zealand
Leadership Changes
Greg Fox retired from the position of Chief Financial Officer
(CFO) & Company Secretary on 2 July 2020, after eight
years with Bapcor. I would like to acknowledge Greg’s
outstanding contribution in shaping Bapcor to be the
business it is today, and on behalf of the Bapcor family,
extend him our very best wishes for his retirement.
In July 2020, Noel Meehan was appointed to the role
of CFO & Company Secretary. Scott Elliott has been
appointed to the role of Executive General Manager –
Strategic Development and Investor Relations.
Outlook
We expect the positive market fundamentals to drive profit
growth in the future, and are excited about opportunities for
network expansion, improvements in our procurement
Given the current economic uncertainties, and unknown
future impacts the COVID-19 pandemic may have, Bapcor
is not in a position to provide a forecast of earnings for
the current year. An update on trading conditions will be
provided at the Annual General Meeting, scheduled for
20 October 2020.
Bapcor’s continued success is made possible by the
passion and commitment of its team members and
franchisees, and the on-going support of its suppliers
and customers. Together, and in the face of extraordinarily
challenging circumstances, the Bapcor family has, once
again, achieved exceptional results.
I express my profound thanks to everyone who has
contributed to this achievement, and for making Bapcor
the great business it is today.
Darryl Abotomey
Managing Director and
Chief Executive Officer
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BAPCOR 5 YEAR STRATEGIC TARGETS
Asia Pacific’s leading provider of vehicle parts,
accessories, equipment, service and solutions.
TRADE
Trade focussed “parts professionals” supplying workshops in Australia & New Zealand
SPECIALIST WHOLESALE (EX. COMMERCIAL VEHICLES)
#1 or #2 Industry category specialists in parts programs
COMMERCIAL VEHICLES: LIGHT (<20T) – HEAVY (>20T)
The only choice for commercial vehicle parts and accessories
RETAIL
Premium retailer of automotive accessories
Supplying the independents: parts, accessories & 4WD
SERVICES
Reliable & trusted car servicing at affordable prices
Supporting the independents
THAILAND
Bringing automotive aftermarket parts to Asia
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AUS Target Stores
Currently 186
35%
Own brand Target
Currently 31%
75
NZ Stores Target
Currently 73
35%
NZ Own brand
Target
Currently 30%
A$600m
AUS Target
Turnover
Currently A$415m
A$50m
NZ Target
Turnover
Currently A$30m
55%
Own brand
Target
Currently 45%
40
Light Location
Target
Currently 16
A$120m
Light Turnover
Target
Currently A$50m
50
Heavy Location
Target
A$220m
Heavy Turnover
Target
Currently 26
Currently A$105m
200
AUS Autobarn
Target Stores
Currently 134
(79 Company Owned)
500
AUS
Target Stores
Currently 102
>80
Locations
Target
Currently 6
200
Independents
Target Stores
Currently 188
100
Opposite Lock
Stores Target
Currently 72
35%
Own brand
Target
Currently 28%
80%
Intercompany
Sourcing Target
150
NZ
Target Stores
Currently 126
A$100m
Turnover
Target
Currently A$4m
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BOARD OF DIRECTORS
Over the coming financial year, the Board
will work to ensure the continued growth and
sustained success of the Bapcor Group.
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.
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.
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MARGARET ANNE HASELTINE
Independent,
Non-Executive Director
THERESE RYAN
Independent,
Non-Executive Director
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.
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.
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 15 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
majoring in accounting and
economics from the University of
Melbourne and is a Member of the
Australian Institute of Company
Directors.
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EXECUTIVE TEAM
Together, and in the face of extraordinarily
challenging circumstances, the Bapcor family
has, once again, achieved exceptional results.
DARRYL ABOTOMEY
Managing Director & Chief Executive Officer
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 15 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 FOX
Chief Financial Officer & Company Secretary (Retired 2 July 2020)
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
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 DRUMMY
Executive General Manager - SWG Engine Management
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.
Bapcor Limited Annual Report 2020
JEFF NICOL
Chief Operating Officer
Jeff joined Bapcor in July 2019. Jeff leads Bapcor’s logistics and centralised
IT functions; group procurement; and co-ordination of the group wide
branding strategy. Jeff has 20 years experience as a senior executive having
operated at Managing Director, CEO and GM level with commercial and
consumer-facing companies including Coates Hire and Bunnings. Jeff holds
an MBA and completed the Advanced Management Programme at Insead,
France. He is a graduate of the Australian Institute of Company Directors.
ALISON LAING
Executive General Manager - Human Resources
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 MAGILL
Executive General Manager - Trade
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 COCKAYNE
Executive General Manager - Retail
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 an MBA 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.
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SEGMENT OVERVIEW
Bapcor’s businesses provide a critical service for the
community in ensuring that replacement and service
parts are available for all on road vehicles, including for
emergency services vehicles.
Revenue
EBITDA1
Trade (exc. Asia)
Bapcor NZ
Specialist Wholesale
Retail
FY20
$’M
561.7
156.3
520.4
292.7
FY19
$’M
524.5
165.0
413.1
255.3
Unallocated / Head Office
(68.4)
(61.3)
1 Proforma results excluding AASB 16
2 Not meaningful
FY20 was a year unlike any other – the impact of
the bushfires and ongoing drought in Australia
compounded with the Covid-19 pandemic all
combined to have an adverse impact on Bapcor’s
financial performance. Despite these impacts
Bapcor performed strongly due to the diversity
and resilience across its business segments.
Bapcor employs more than 4,500 team members
in over 1,000 locations across Australia, New
Zealand and Thailand. We are proud of our team
members dedication to ensuring necessary parts
and services are available to keep the nation’s
vehicles, including cars, light and heavy duty
trucks and emergency vehicles operating. Bapcor
is in a very solid financial position to optimize on
opportunities as they arise.
Bapcor’s Trade businesses located across Australia, New
Zealand and Thailand, house amongst the widest range of
car parts in the world for over 4,000 makes and models. Our
core focus is the distribution of unique parts from over 1,000
suppliers through an extensive distribution network to
independent and chain mechanic workshops. In FY20,
Bapcor’s Trade businesses continued its network expansion
activity across Australia, New Zealand and Thailand,
increasing locations by 10. Own brand sales penetration
was also a key strategic initiative, providing enhanced
margin opportunity across a number of product categories.
The Precision Equipment business located in Australia and
New Zealand, provides a full range of superior automotive
workshop and wheel alignment equipment. The addition to
Change
%
7.1%
(5.2%)
26.0%
14.7%
NM2
FY20
$’M
81.1
19.6
50.3
30.5
(23.7)
FY19
$’M
78.2
22.9
46.3
27.1
(9.9)
Change
%
3.7%
(14.0%)
8.7%
12.8%
NM2
the Australian range of the Hunter brand resulted in sales
volumes growing rapidly.
Bapcor now has 5 Burson stores and a procurement office
operating in Thailand. This business has ramped up to the
point where in December 2019 the business made a positive
contribution for the month, just 18 months since the first
store was opened. There is strong demand in Thailand for
the Burson store concept and value proposition and next
steps for expansion are being appraised.
Intercompany sales across Bapcor grew by 16.6% which
mainly reflects increased sales from our Specialist
Wholesale segment into our Trade network in Australia and
New Zealand. The increase in intercompany sales reflects
the strategy to increase the proportion of “own brand”
product sold through Trade and Retail to at least 35%.
The Specialist Wholesale (SWG) Group
has expanded to 14 business units in FY20
including the acquisitions of Truckline
and Diesel Drive in December 2019.
SWG includes JAS, Baxters, Premier Auto Trade (PAT),
Federal Batteries, MTQ Engine Systems, Diesel Distributors
and Opposite Lock offering automotive aftermarket
products ranges for electrical accessories, lighting,
air-conditioning, engine management parts, diesel fuel
injection, turbochargers, batteries and 4WD accessories,
amongst many others. SW’s mechanically focused business
units include AAD, Bearing Wholesalers, AADi, Roadsafe,
Toperformance and the Commercial Vehicle Group
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Revenue
EBITDA1
FY20
$’M
561.7
156.3
520.4
292.7
FY19
$’M
524.5
165.0
413.1
255.3
Change
%
7.1%
(5.2%)
26.0%
14.7%
NM2
FY20
$’M
81.1
19.6
50.3
30.5
(23.7)
FY19
$’M
78.2
22.9
46.3
27.1
(9.9)
Change
%
3.7%
(14.0%)
8.7%
12.8%
NM2
Trade (exc. Asia)
Bapcor NZ
Specialist Wholesale
Retail
Unallocated / Head Office
(68.4)
(61.3)
1 Proforma results excluding AASB 16
2 Not meaningful
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comprising Truckline (heavy vehicle) and the light
commercial vehicle business which offer specialist product
categories of braking, bearings, suspension, driveshaft, light
and heavy commercial truck components.
The acquisition of Truckline heralded the
entrance into the heavy commercial vehicle
category which distinctively positions
Bapcor as the only Australian Aftermarket
vehicle parts organisation that can supply
parts for all on road vehicles.
The Retail segment includes Autobarn, Autopro, Sprint Auto
Parts, and the Midas and ABS workshop service brands, that
all sell direct to the public. In total the segment has 350
outlets of which 75% are franchised. During FY20, Retail grew
its Autobarn company owned stores to represent 60% of the
total 134 Autobarn stores within the network. Retail is highly
focussed on supporting its franchisees and ensuring the
brands owned by the Company are well represented.
The continued development of digital and online channels,
together with enhanced marketing and promotional
programs was furthered in FY20, providing further brand
recognition and generating record revenue.
Bapcor continued to roll-out training, career development,
health and safety programs across the group.
When COVID-19 was first evident Bapcor management
quickly moved to ensure the reliability of its supply chain, as
well as to ensure the safety and well-being of its team
members, customers and suppliers. This remains the primary
consideration for our business leading into FY21.
The group invested further in the areas of human resources,
finance, information technology, group operations and
marketing, to ensure that the business segments are able to
continue to grow whilst having adequate functional support.
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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.
REVENUE $561.7M
EBITDA $81.1M
Performance
Burson Trade continued to deliver strong growth in FY20
despite the impacts of the Australian bushfires and
COVID-19 restrictions. A successful sales promotion as
well as disciplined margin management and increases
in sourcing of own brand product ranges led to record
revenue and record EBITDA. Revenue of $561.7M was up 7.1%
on the prior year and EBITDA of $81.1M was up 3.7% on the
prior year. Burson same store sales were up 6% on FY19.
Own brand sales reached 31% of revenue.
The business continued its focus on
operational fundamentals including on
maintaining high levels of customer service
and was rewarded with excellent customer
satisfaction feedback and a solid growth in
revenue.
Continuing its growth strategy, Burson increased its store
locations by five in FY20, bringing the total number of
Burson Trade stores to 186 across Australia. The addition of
Business Development Managers early in the year provided
a renewed focus on the various demographics and
preferences of the workshop customers.
Precision Automotive Equipment (Precision) provides a total
workshop & lubrication equipment package to the
automotive industry. Precision is capable of providing
everything from workshop layout design, supply and
installation of all equipment and after installation sales
support across Brisbane, Sydney, Melbourne and Perth.
Precision achieved record revenue of $39.4M in FY20.
Achievements
Sales volume from one of the world’s leading wheel service
brands, Hunter, exclusively distributed by Precision in
Australia grew strongly with a refocusing on major workshop
chain clientele. The robust growth in the wheel servicing
category was offset by a flat year in the lifting equipment
category due to car dealerships slowing their expansion.
Burson ran one of its most successful ever customer
promotions over a six month period in FY20. This was a
major contributor to the revenue growth of 7.1%, however it
did have a negative impact on margin, especially in the first
half of the year. The margin rebounded in the second half of
the year following the end of the promotion.
An effective accomplishment was the launch of a virtual
Trade show to maintain connection with customers during
the disruption caused by COVID-19. While virtual connection
will never be the same as a live event it went a long way to
supporting the valuable customer network and their
businesses while showcasing Bursons growing range of
products.
Working capital efficiencies were significantly improved with
inventory as a percentage of sales improving compared to
prior years, in addition to historically low levels of aged
debtors, arising from a renewed focus on debtor collections.
Learnings
Adaption, pivoting and providing extensive support to team
members and customers alike has been driven by the
COVID-19 impacts on the Burson community. The associated
travel restrictions and safety protocols has driven the
business to transform its internal and external policies and
process. Virtual learning, face to face (where appropriate)
and online modules and webinars have been developed to
support team members and the Burson network to ensure
customer service and support are first class.
Community and Sustainability
Burson Trade’s partnership with Greenfleet continues to
offset carbon emissions related to its fleet of vehicles by
planting native biodiverse forests to help fight the impact of
climate change. Energy demands have further been reduced
after the installation of LEDs in all of the Victorian stores and
most of our NSW stores, with QLD transitioning in FY21.
Burson Trade continues to be involved in numerous charitable
fund-raising efforts in FY20 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.
Significant focus was reflected in the Burson Bushfire
Appeal raising over $50,000 for affected communities while
the continued dedication to supporting the Cerebral Palsy
Alliance through participating in the “Steptember” event
raised more than $17,000.
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Celebrating Australia’s long established automotive history,
Burson has continued to support the Victorian Historic
Racing Register along with debuting as the major sponsor
for the 33rd Summernats Festival in Canberra creating a
pop up garage to ensure automotive parts, tools and
equipment were available to attendees.
A highlight of the year has been the
formation of the Burson Auto Parts Racing
Team with vehicles prepared by Garry
Rogers Motorsport being driven by the
father and son team of Jason and Ben
Bargwanna.
THAILAND
Burson Thailand expanded its network to six locations in
FY20. Opening a new sourcing office in August 2019 enabled
a more proficient supply of emergency orders to its
customers and improvement of logistics for online sales.
Achievements
Rolling out the B2B cataloguing system is a key component
of Burson Thailand’s business plans to provide customers
with an ordering platform unique in Thailand. The platform
was largely finalised in FY20, however deployment was
delayed due to COVID-19, with the initiative now to be
launched in FY21. Burson Thailand’s strong focus on family
and shared responsibilities throughout the COVID-19 crisis
ensured that all staff were retained and customer
relationships nurtured as the exit out of restrictions continues.
Community & Sustainability
Concurrently with Bapcors sustainability initiatives, Burson
Thailand ensures all Greenfield stores are fitted with LED
lighting and has commenced a ‘cool room barrier’ program
to reduce the reliance on air conditioning. Continuing to
support the local community in which it operates the
business engages in charitable activities, including
providing orphanages in the MinBuri area with essentials so
they can continue their important caregiving services.
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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.
REVENUE $156.3M
EBITDA $19.6M
In its first full year of operation the Precision Equipment
business has firmly established itself in this industry segment
as a supplier of quality workshop equipment.
Significant investment was made in the development of
an online B2B e-commerce platform which will commence
rollout in FY21.
Learnings
The NZ Governments response to COVID-19 saw the whole
country enter a heavy five week lockdown. Bapcor adjusted
operations quickly to provide support to our customers who
provided essential services to the community. Team member
levels have been reduced and the company is well placed
heading into FY21.
Community and Sustainability
Bapcor NZ continues to be the cornerstone sponsor of the
Auto Super Shoppes Training Academy. The Academy
provides whole of industry support through co-ordination of
NZQA training programmes for individuals wishing to enter
the automotive trade. In FY20 support was provided by way
of new workshop equipment and specialist battery training.
Performance
Bapcor NZ had a challenging year, particularly due to the
government enforced lockdown in response to the
COVID-19 pandemic. Revenue decreased by 5.2% to
$156.3M and EBITDA was down by 14% compared to FY19.
Despite the negative impact of the
COVID-19 lockdown, the business recovered
strongly in June 2020, after the lockdown
restrictions were eased to surpass the
pre-COVID-19 monthly sales level that had
been set in February 2020 showcasing the
business’ resilience and ability to bounce
back from external challenges.
Bapcor NZ consists of Trade and Specialist Wholesale
businesses based in New Zealand across 81 locations. BNT,
the trade business, has 73 stores supplying automotive parts
and accessories to workshops, truck and trailer parts through
the Truck and Trailer Parts brand and equipment through
Precision Equipment. During the year three new BNT trade
locations were opened including the first co-located HCB/
BNT site in Petone, Wellington. The business also
consolidated into three “supersites” bringing the various
trading brands into one location. Own brand performance
continues to grow, with ‘Superiol’, a key own brand program,
gaining share volume across both the oil and filtration
categories. Own brand now represents 30% of sales.
Achievements
Bapcor NZ completed the design, construction and
relocation of a 6,000m2 National SWG Distribution Centre
(incorporating the HCB Auckland branch) to a new facility in
Auckland International Airport. The project team, supported
by excellent landlord and constructor relationships,
delivered both the building and relocation on budget, and
on time, with minimal disruption to operations. Some key
features of the site include state of art battery charging
and handling systems, as well as the incorporation of a high
quality, dedicated show room for the Precision Equipment
NZ operation.
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The Specialist Wholesale Group (SWG) segment
continued to expand during FY20 with the addition
of Truckline and Diesel Drive in December 2019.
SWG now comprises 14 business units.
REVENUE $520.4M
EBITDA $50.3M
Performance
SWG revenue of $520.4m increased 26%, and EBITDA grew
8.7%, compared to FY19. Excluding acquisitions, revenue
grew 5.5% and EBITDA declined 7.1%, reflecting the difficult
trading conditions with customers reducing inventory levels
during the impact of the COVID-19 pandemic, as well as
reflecting a greater investment made in our people and
marketing our products. We have invested in management,
finance, HR, and marketing capability in line with the scale
of the segment to support continued growth.
Revenue was boosted in the year with the acquisitions of
Diesel Drive and Truckline, and the full year revenue
contribution of the Don Kyatt (QLD) light commercial vehicle
group acquired in December 2018 in addition to the
broadening customer diversity across B2B channels, the
revitalisation of AAD’s Protex Brake Program and in store
merchandise customer support under the ‘hero reseller’
program.
The acquisition of Truckline, Australia’s
largest retailer and distributor of
aftermarket and OE truck and trailer parts
and accessories, exceeded expectations in
its first seven months as part of the Group.
Intercompany sales and own brand programs, which include
category leadership positions in vehicle air-conditioning,
electrical accessories and off-road 4x4, continue to drive
sales and margin growth through our Trade and Retail
segments across Australia and New Zealand.
Organic branch expansion, acquisitions, new product
innovations and own brand development led to a larger
product range and provided competitive market
alternatives.
Achievements
There continues to be an extensive focus on own brand
development which both broadened the product offer and
increased margin. Specific programs launched during the
year included a Hose Clamp program, an extensive air
conditioning program and a copper free brake pad program.
Learnings
The Specialist Wholesale segment continues to concentrate
on differentiating itself by maintaining true product
specialists with exceptional technical knowledge and
sourcing expertise. The business is continually assessing and
introducing new products and technologies.
Safety programs are at the forefront of the SW leaderships
mind. National Awareness safety programs have been
implemented to increase the visual messaging, daily
engagement and emphasis on monthly safety themes. This
frequent messaging for team members to focus on their
safety and avoid unsafe working situations has led to a
reduction in the number of, and severity of, incidents.
Sustainability projects/initiatives
As a wholesaler and importer the SW group has been very
attentive in ensuring its adherence to the Modern Slavery Act
through upholding overseas supplier partnerships and audits
to deliver sustainable work practices.
Product innovation such as the introduction of market
leading Copper Free Brake Pad Program at AAD significantly
reduces the level of copper braking residue on our roads
which may leach into waterways. Recycling and
remanufacturing programs across the businesses has not
only reduced waste and landfill but added value to
customers through these services, and generated proceeds
that were contributed to charity.
Future innovation in the Hybrid/Electric
Vehicle space has been a focus for PAT and
Federal Batteries to keep ahead of the
product development curve and provide
insights to customers on potential
environmental and cost impacts.
Community & key sponsorships
FY20 has seen many challenges affecting the local
community and team members Australia wide. The SW
team helped support the Red Cross Bushfire relief
fundraising via staff donation matching, and local support
via team BBQs for volunteer CFA firefighters (as well as
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special leave for our own brave team members). AAD
sourced products from bush fire affected small businesses
to collate into its thank you hampers for its valued
customers. The hampers contained a message akin to the
SW spirit: “All good things come from gratitude”.
Grass roots motorsport sponsorship through PAT’s
Raceworks program helped elevate awareness in the less
familiar racing pursuits including circuit, drifting and drag
racing while MTQ and Opposite Lock backed the SuperUtes
category. As an ambassador for the All 4 Adventure 4WD
program, Opposite Lock contributed to the promotion of
driver safety and awareness.
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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 and franchise stores.
REVENUE $292.7M
EBITDA $30.5M
Performance
The Retail segment consists of Autobarn, AutoPro and
Sprint Auto Parts stores, as well as Midas and ABS service
workshops. It was an outstanding year for the Retail
segment which achieved record revenue and earnings in
FY20, led by the Autobarn business. Revenue increased by
14.7% to $292.7m, and EBITDA increased by 12.8% compared
to FY19. In addition to the reported company revenue of the
retail segment, our franchisees also have revenue from their
sales to customers of c$300M.
Autobarn same store sales for the year were up 9.5% on last
year, with company stores up 14.5% and franchisee stores up
6.6%. In the months of May and June 2020, Autobarn same
store sales were up 51% year on year.
Autobarn’s exceptional result was driven by changes made
by the new management team to ensure consistency in
store standards and our customers’ experience, an increase
in the number of company operated stores to now
represent 59% of the network, higher levels of inventory
availability, brand awareness and compliance, and
changes in merchandising and promotions, as well as the
implementation of a state-of-the-art point-of-sale system.
Online sales delivered an impressive growth of more than
240% over the prior year. By year end the online sales
growth was up by more than 400%.
The other Retail brands of Autopro and Sprint Auto Parts,
and Service brands, Midas and ABS, which have 216
branches across Australia performed well during the year
despite variable trading conditions. We remain focussed on
supporting our independent operators, and ensuring
continuity of the essential service they provide to the local
communities in which they operate.
In FY20 the group invested in a new state
of the art retail point-of-sales system. As
the system is rolled out it will improve the
customer experience while supporting the
business to better understand the needs
of our customers.
Achievements
The number of Autobarn company-owned stores increased
by 13 to 79 representing over half of the Autobarn store
network. In addition there are 55 dedicated and highly
committed Autobarn franchise stores.
A core focus of the management team is investing in digital
channels while also expanding marketing programs and
implementing an improved omni-channel marketing
experience through catalogue, TVC, radio, digital, social
and e-commerce.
Expansion of own brand programs has enable increased
sales and gross margin for both the Autobarn and AutoPro
stores as well as ensuring price competitiveness.
Learnings
Adapting and supporting the company and franchised
stores and service workshops during the Bushfires and
COVID-19 solidified the previous year’s efforts to enforce
higher standards of compliance throughout the network
ensuring customer service, health, safety and wellbeing
were a priority.
Community and Sustainability
Retail and service company and franchisee stores are
encouraged to support their local communities at the grass
roots level beyond the supply of automotive parts and
accessories. The retail logos can be seen on many local
football and netball teams, contributing to community golf
and automobile clubs, fund raising events and sponsoring
numerous events including country wide ‘Show and Shine”
spectaculars displaying classic motoring history.
Retail team members and franchisees also united to
contribute to a wide range of charitable initiatives in
particular checking-in with their fellow team members for a
meaningful conversation as part of ‘RU OK? Day’ and raising
funds to support the Red Cross Bushfire Relief initiative.
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SUSTAINABILITY OVERVIEW
We are taking real and measurable action
in meeting Bapcor’s Environmental, Social
and Governance (ESG) commitments.
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 pursing growth and development
opportunities in the delivery of its strategic
objectives, Bapcor will not compromise the
health and wellbeing of its employees or its
reputation for being ‘Asia Pacific’s leading
provider of vehicle parts, accessories,
equipment and service and solutions’.
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.”
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SUSTAINABILITY FRAMEWORK
Our approach to sustainability is defined by our
Environmental, Social and Governance (ESG)
strategic framework. This strategic framework sets
out our integrated approach to ESG sustainability
as fundamental to what we do, underpinning our
corporate Code of Conduct and Our Values.
OUR VALUES
OUR CODE OF CONDUCT
BAPCOR’S ESG STRATEGY
Establish governance processes and system of continuous improvement
Ethical Supply
Chain /
Procurement
Ethical sourcing,
forging strong
supplier
relationships
and enhanced
transparency.
Environmental
Sustainability
Practise Good
Governance
Positively Impact
Our Community
Efficiently use
resources, optimise
our fleet and
reduce 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.
Bapcor Limited Annual Report 2020
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SUSTAINABILITY FRAMEWORK
We are proud of the achievements
we have made in FY20 toward
our ESG commitments.
Our commitment to sustainability
Progress on our sustainability journey is tracked against the
actions and timeframes set out for each priority area.
We are proud of the achievements we have made in FY20
toward our ESG commitments, which include: formalising our
commitment to the UN Global Compact Principles; working
to mitigate modern slavery risk within our supply chain;
renewing, and expanding, our commitment to offset
delivery vehicle fleet emissions, and rolling-out LED
replacement programs across our store network.
We have updated our targets for FY21 and beyond as we
continue our work towards our ESG strategic objectives to
reduce our environmental footprint; prioritise health and
safety, diversity and inclusion; the training and development
of our team members; and supporting our local
communities.
Priority 1: Develop Bapcor’s ESG Strategy
Objectives / Commitments:
I. Have regard to our responsibility to serve the communities in which our businesses operate.
II. Invest in areas viewed as 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 Bapcor’s progress in achieving the
objectives.
Actions:
1. Conduct governance process at Board level
2. Formalise our commitment to the UN Global Compact Principles
3. Monitor sustainability risk within the Risk Management Framework
4. Report annually to the UN Global Compact via our Communication on Progress
5. Instigate an Environmental Management System (continuous improvement)
Priority 2: Ethical Supply Chain / Procurement
Objectives / 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. Deloitte review of actions taken for compliance with the Modern Slavery Act (MSA)
2. Update Ethical Supply Chain / Procurement (ESC/P) Policy to reflect MSA passing
3. Training Business Procurement Leads on Modern Slavery legislation in Australia
4. Established Bi-annual Modern Slavery Working Group Meeting
5. Preparation of first Modern Slavery Statement
Timeline
Complete
Complete
Ongoing
Ongoing
FY21
Timeline
Complete
Complete
Complete
Complete
FY21
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Priority 3: Environmental Sustainability
Objectives / 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. Monitor and expand Group-wide initiative toward streamlining waste and recycling
2. Renew and expand 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
Objectives:
I. Commit to upholding Our Values and 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
4. Monitor and engage with our team members regarding satisfaction and retention
Timeline
Complete
Complete
Ongoing
Ongoing
FY21
Timeline
Ongoing
Ongoing
Ongoing
Ongoing
Priority 5: Positively Impact the Communities in which We Operate – Our Community
Objectives:
Proactively identify and engage with our stakeholders.
I.
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
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ETHICAL SUPPLY CHAIN / PROCUREMENT
With the Commonwealth Modern Slavery Act being
passed into legislation in 2018 and our first Statement
due in FY21, Bapcor continued to take a proactive
approach to assessing and mitigating the risks
of Modern Slavery in our supply chain.
As part of our internal audit service we engaged
Deloitte to undertake a review of our preparations
for compliance with the Commonwealth Modern
Slavery Act 2018 and provide guidance on any
amendments and future actions. A number of
opportunities were identified, and actions were
taken to further strengthen Bapcor’s approach.
In preparation for submission of our first Statement under
the Modern Slavery act, Bapcor’s 2018 ESC/P Policy and
Supplier Trading Agreement have been reviewed and
updated to reinforce our commitment to operating ethically
and in compliance with the Modern Slavery Act. These
reviews will also limit the risk of Modern Slavery occurring
within Bapcor, its supply chain or procurement operations,
or in any other business relationships.
This policy is available on our website and details our
expectations on team members, contractors and suppliers
with respect to modern slavery. As a further step, Bapcor’s
Whistleblower Policy has been reviewed and updated to
facilitate people outside our business, in particular former
team members and contractors, as well as suppliers and their
employees to report any concerns relating to Modern Slavery.
The human rights standards that underpin Bapcor’s ESC/P
Policy are the key tenets of the Modern Slavery Act. We
have now released our Human Rights policy (also available
on our website) which sets out Bapcor’s commitment to
protect and uphold fundamental human rights in all of our
businesses, operations and across all of our locations, by
conducting our business with due care pursuant to relevant
laws and regulations.
To support engagement of all key personnel across Bapcor’s
businesses involved in our supply chain, a bi-annual Modern
Slavery Working Group Meeting has been established and
training delivered on Modern Slavery legislation and the
requirements of Bapcor’s related policies.
Our approach, and processes, implemented to-date have
verified our belief that given the nature of Bapcor’s
businesses and the highly technical nature and automated
manufacturing processes of the products we sell, the risks
to our businesses under the Modern Slavery Act are very
low. Many of Bapcor’s reviewed suppliers have existing
policies and significant checks in place in regard to their
own supply chains.
Bapcor’s primary focus is to continue to engage with our
supply chain to reinforce our expectations, understand and
evaluate risk, and take appropriate action as necessary.
Bapcor Limited Annual Report 2020
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.
Carbon Offset
In FY20, we expanded our Carbon Offset Program,
continued the roll-out of LED replacements across our store
network, and realised further positive environmental
outcomes through our streamlined for waste and recycling
Group initiatives.
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.
Building on 2019, Bapcor’s partnership with Greenfleet
continues its focus on reducing greenhouse gas emissions
associated with the Burson Auto Parts company vehicle
fleet. In 2020, Bapcor has increased its commitment to
offset an additional 99 vehicles with Greenfleet to 1,019
vehicles. Bapcor’s renewed commitment offsets 5,616 tonnes
of carbon emissions.
Bapcor is pleased to be continuing its work with Greenfleet
to plant native biodiverse forests in Australia, which help
address the impacts of the recent bushfires, improve land
and water quality, provide critical habitat for native wildlife
and fight the impacts of climate change.
In 2020, Bapcor’s support will enable reforestation projects
such as restoring trees at Koala Crossing in Queensland to
restore vital habitat for koalas. Since partnering with
Greenfleet, Bapcor’s contribution will help plant over 40,000
native trees and revegetate 36 hectares of land, an area
equivalent of approximately 20 football fields
As part of the initiative, Burson delivery vehicles carry
stickers displaying that the vehicle is carbon offset through
native reforestation, and Bapcor team members are 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
Victorian Energy Efficiency Council’s guidelines.
In FY20, an additional 18 Autobarn stores across the
network now run LED’s as their primary lighting source,
contributing an additional $180,000 in cost savings and
more than 550,000 kW in energy savings. Over 90 Autobarn
stores in total have either converted to or use LED. Following
the additional store conversions, Autobarn’s annual energy
saving from the initiative is close to three million kW,
equating to an associated cost savings estimated to be
greater than $900,000 p.a.
Burson Auto Parts continued its LED replacement store
roll-out across its New South Wales store network in FY20,
having completed its Victoria LED replacement store
roll-out in FY19. Buron’s 51 stores across NSW are
anticipated to provide an additional cost saving of over
$200,000 and more than 630,000 kW in energy savings p.a.
Across all Victorian and NSW stores, the initiative is
estimated to deliver cost savings of approximately
$400,000 and 1.3 million kW in energy savings per annum.
The LED fitting store roll-out will be extended throughout
the country in FY21.
Projects Commenced In Prior Years:
Nunawading Distribution Centre LED conversion provides
energy savings of 800,000 kW annually.
Preston Office and Distribution Centre initiative continues to
deliver energy savings of 437,000 kW annually, and energy
reduction of 80%, following the transition of 1,000 LED fitting
replacements.
Waste and Recycling
Bapcor streamlines its waste and recycling management
processes across the business segments to deliver
improved environmental outcomes, including higher levels
of waste separation, greater quantities of recycling, and
fewer truck movements. Through the initiative to date, close
to 68,000 metric tonnes, or more than 66% of total waste,
has been diverted from landfill.
Packaging
Bapcor is committed to taking a sustainable approach
toward packaging. Bapcor product development teams
are encouraged to consider the environmental impact
throughout the product lifecycle, and to review and reduce
environmental impacts by seeking to understand the types
of packaging we use across our businesses.
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PRACTISE GOOD GOVERNANCE
At Bapcor our people are at the heart of our success,
which is why during FY20 we continued to develop and
implement programs to keep our team members safe
and healthy, connected and engaged.
Keeping Each Other Safe and Well
The focus on zero harm to keep each other safe and well
continued and accelerated across FY20. We launched the
Work Health and Safety (WHS) Policy, aligning the various
policies from across the Group, outlining how we honour our
commitment to keeping each other safe and well. The WHS
Policy is the cornerstone of our Safety Management System
(WHSMS) which is the framework that manages our
approach to safety, underpinned by a range of policies
and safe operating procedures.
We also invested in technology to support our approach
to safety launching software to ensure our team can easily
report and track safety incidents and actions to address
risks and hazards.
As well as the focus on keeping our team safe at work, we
emphasised the importance of wellness launching ‘Thrive’,
our wellbeing program. ‘Thrive’ is structured around four
pillars of wellbeing – mental, physical, financial and social.
With an initial focus on mental health and wellbeing, we are
proud to have partnered with The Black Dog Institute to
provide on-line learning about the signs and symptoms of
mental health issues and how to encourage and support
early intervention. As a part of this, team members also
have access to a range of apps, tools and information to
support their mental health.
G o v e r n ance Structure
People and
commitment
Processes
and practices
Bapcor Health
and Safety vision
and principles
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Bapcor Limited Annual Report 2020
Launching and Living Our Values
In mid 2019 we commenced the important process of
articulating our core company values by including more
than 100 team members in ten Values Workshops across
Australia and New Zealand. Through engaging team
members to share their stories and experiences about
what makes being a part of Bapcor special, we were able
to articulate and launch Our Values in October 2019.
Our Values are the common language that capture the
spirit of how we have always done things across our
businesses. They are used to shape and guide decisions
and behaviours across our Group each and every day.
Our Values are at the heart of everything we do and
continue to be embedded into our language, processes
and systems.
Supporting Learning and Development
We continued to support team members to achieve their
full potential in FY20, through various programs which form
Bapcor’s training and development suite. As a key
component of this we introduced our first ever, Group-wide
on-line learning management system with the launch of
CORE Learning. Through encouraging team members to “Log
in, Learn it, Love it” CORE Learning ensures learning can be
accessed anytime, anywhere through a desktop or mobile
device. The initial modules on CORE Learning include Code
of Conduct, Respect in the Workplace, Understanding
Mental Health in the Workplace and Infectious Diseases
Control. Further modules are under development and will
be rolled out through FY21 and beyond.
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Creating an Inclusive Workplace
Through continuing to foster a diverse and inclusive
workplace, Bapcor enhances our ability to attract, retain,
develop and motivate team members from the widest
possible talent pool. In FY20 Bapcor continued to identify
and initiate a range of activities to support diversity and
inclusion across the group. This focus saw the Group
Leadership Team participate in leadership training to
highlight and address unconscious bias.
Bapcor has 25% women in the workplace (26% in FY19):
67% in full-time (68% in FY19); 33% part-time or casual work
(32% in FY19); and 75% of Non-executive Directors are
women (75% in FY19).
DIVERSITY STATISTICS
• Women in the workplace 25%
(26% in FY19)
• Full-time 67%
(68% in FY19)
• Part-time or casual 33%
(32% in FY19)
• Non-executive Directors 75%
(75% in FY19)
Bapcor Limited Annual Report 2020
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POSITIVELY IMPACT OUR COMMUNITY
The Bapcor Group engages with the local
communities in which we operate. Our team members
support a wide variety of social, charitable
and sporting initiatives.
With the impact of bushfire, drought and the
COVID-19 pandemic, the role Bapcor plays in
participating in the broader communities in which
we operate has never been more important.
Bapcor team members in Australia engage in a variety of
charitable causes and community initiatives, this was
highlighted in FY20 through, the Burson Bushfire Appeal Day
to help support firefighters and communities devastated by
bushfires, R U OK? Day to join the fight for suicide prevention
and promote conversation, and the Dry July foundation
with our ‘No Bourbon Burson’ team to raise funds for cancer
services. In New Zealand, team members came together to
raise funds for children with cerebral palsy with Steptember.
The Burson Thailand business continued to engage with its
community through charitable initiatives and awareness
campaigns, such as its support for MinBuri orphanages
and the ‘Kid in Car’ road safety campaign.
NO BOURBON BURSON
R U OK DAY?
AUTO SUPER SHOPPES ACADEMY
Burson team members supported and
donated to the Burson Dry July team
‘No Bourbon Burson’. The team
successfully took on the challenge of
an alcohol-free July. Together they
raised funds instrumental in helping
Dry July Foundation raise over $10
million Australia wide for cancer
services, to make a real difference to
the lives of people affected by cancer.
Pearcedale Baxter Junior Football club
Burson sponsors Pearcedale Baxter
Junior Football club. The ‘Mighty Dales’
provide boys and girls teams across a
broad range of age groups. The club
provides an environment for greater
community engagement and social
networks for its players and parents
alike, and plays an important and
effective role in providing health and
fitness outcomes for young people.
On the 12th of September 2019, R U
OK? Day events were held across
Bapcor offices with guest speakers,
Peter Biggs, Lifeline Counsellor, and
Davis Schwarz, former AFL player,
sharing their story and starting some
very meaningful conversations.
RU OK? Day is an Australian suicide
prevention charity initiative with
a mission to inspire and empower
everyone to meaningfully connect
with those around them and support
those struggling with life.
The Auto Super Shoppes Academy,
founded in 2017, 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. The academy
provides an industry-led solution to
address skill shortages. BNT is proud
to be a major supporter of the Auto
Super Shoppes Academy. At the end
of 2020, 23 students successfully
graduated and were placed in
full-time employment. Bringing
students placed into employment to
66 in full-time employment since the
initiative’s inception.
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Bapcor Limited Annual Report 2020
BURSON BUSHFIRE APPEAL DAY
Swan City Youth Service (SCYS) Inc
Burson Racing
On Tuesday 10th December, Burson
Auto Parts team members wore red
and collected donations for the
Australian Red Cross to help support
our brave firefighters and communities
facing the devastating fires sweeping
Australia, helping raise more than
$22,000 and Burson further
contributed $25,000 bringing the
total funds raised to over $47,000.
In our Specialist Wholesale segment,
the Engine Management team helped
support the Red Cross Bushfire relief
fundraising via staff donation
matching, and local support via team
BBQs for volunteer CFA firefighters (as
well as special leave for our own brave
team members)
Burson supports the SCYS in Midland,
WA. For more than 30 years, the SCYS
has provided transformational change
predominantly working with “at risk”
marginalised young people with
complex needs, facing challenges
across a wide range of areas,
including substance abuse, mental
health support, and accommodation
assistance. Its annual Wine and
Cheese Night for community partners
and supporters took place on
Thursday 13 August and showcased
the important role the SCYS plays.
Burson Auto Parts supports the future
stars of Australian Motorsport. The
Australian Young Driver of the Year is
awarded to drivers who show potential
to progress to the sport’s higher levels,
many of whom have achieved
significant career milestones in their
junior careers. In March 2020, Edan
Thornburrow (pictured) took out the
honour of 2019 Australian Young Driver
of the Year at the Australian
Motorsport Awards.
Burson Thailand
Bapcor in Thailand engaged in
supporting the local community in
which it operates through charitable
activities, including providing
orphanages in the MinBuri area with
essentials so they can continue their
important caregiving services.
The Thailand team launched a Road
Safety campaign to do their part to
help curb the road toll. The campaign’s
Road Safety sticker can be seen on the
back of cars in the Bangkok area.
Salvation Army Christmas Appeal
Steptember
“Steptember” is an annual fundraising
event held throughout the world to
raise vital funds for cerebral palsy
research and services. 21 teams from
across the Bapcor NZ segment
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.
The Bapcor and Burson head office
team raised funds, including 79 books
and toys, for the Salvation Army and
Berry Street Christmas Appeals to
support Victoria’s most vulnerable
children, and provide hope to all
Australian’s battling tough times.
Power, Strength and Vulnerability
Cricket Cup.
In February Bearing Wholesalers
pledged its support for the ‘Power,
Strength and Vulnerability’ Cup charity
cricket match in Victoria. Power,
Strength & Vulnerability is an online
resource devoted to reducing the
stigma around mental health and
providing help for those in need.
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DIRECTORS’ REPORT
AS AT 30 JUNE 2020
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 2020 (‘FY20’).
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
2. PRINCIPAL ACTIVITIES
During the year the principal activities of Bapcor were the sale and distribution of vehicle parts, accessories, automotive
equipment, service and solutions.
Bapcor is one of the largest suppliers of vehicle parts, accessories, equipment, service and solutions in Asia Pacific with
an operational network covering over 1,000 locations.
3. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
FY20 was a year of unpredicted and unexpected events, including the Australian bushfires and drought as well as the
international effect of the COVID-19 pandemic with enforced government lockdowns and restrictions on business. Bapcor,
like most other businesses, was impacted negatively by these events. However the resilience of the business was once again
shown, with the rapid recovery experienced once COVID-19 lockdowns were eased. When the epidemic was first affecting
China, Bapcor took swift action to ensure our supply chain was not adversely affected. Also, when the pandemic started
to affect Australia and New Zealand, management quickly took steps to ensure the safety of our team members, customers
and suppliers. Discretionary expenditure was minimised as were capital investments. Expenditure was reduced in line with
the reduction in sales.
In April 2020 Bapcor implemented a share placement and share purchase plan, raising $231.5M (net of costs), to underpin
the financial strength of the business and ensure we were well placed during the impacts of the pandemic and to capitalise
on opportunities that may arise. The equity issues were solidly supported by shareholders – with both being substantially
oversubscribed.
Business efficiencies were reviewed in May 2020 across all businesses resulting in a reduction of approximately 5% of
team members.
The group committed to a new Tullamarine Victoria Distribution Centre – which will be approximately 50,000m2. The state
of the art facility will include a highly automated storage system called “goods to person”. This facility is due to be
completed by the second half of FY21. Following commissioning of the new facility, all Bapcor’s current Melbourne
distribution centres will progressively be transitioned to the new facility, delivering significant increases in efficiency and
reductions in duplicated inventory holdings.
Bapcor continues to invest in upgrading the technology it utilises. In FY20, a state of the art warehouse management
system was implemented in one of the distribution centres and will be progressively rolled out into others. A significant
upgrade in the central computer hardware systems was completed and a new “retail point of sale” system launched.
Further investments in Bapcor’s digital platforms are underway.
On 2 December 2019, Bapcor acquired the business operations of Truckline and Diesel Drive which now form part of the
Commercial Truck Parts group and improves the offering of both heavy and Japanese commercial truck spare parts.
Throughout the year, Bapcor also acquired the smaller business operations of AFI, Brakeforce, Brookers, and RTS, as well
as numerous retail franchised stores and set up new greenfield stores in most of its business segments.
Bapcor has also expanded its presence in Thailand and as at 30 June 2020 operates six automotive parts stores
around Bangkok.
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DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
4. DIVIDENDS
Fully franked dividends paid during the financial year were as follows:
26 September 2019
$26,931,000 (9.5 cents per share); $7,274,000 settled via DRP*
13 March 2020
$22,763,000 (8.0 cents per share); $6,770,000 settled via DRP*
* Dividend Reinvestment Plan (DRP)
The Board has declared a final dividend in respect of FY20 of 9.5 cents per share, fully franked. The final dividend will be paid
on 11 September 2020 to shareholders registered on 31 August 2020.
The final dividend takes the total dividends declared in relation to FY20 to 17.5 cents per share, fully franked, representing
an increase of dividends paid of 2.9% compared to the prior financial year. Dividends paid and declared in relation to FY20
represents 61.7% of pro-forma net profit after tax.
5. REVIEW OF OPERATIONS
Statutory:
• Revenue increased by 12.8% from $1,296.6M to $1,462.7M
• Statutory earnings before interest, taxes, depreciation and amortisation (‘EBITDA’) increased by 26.4% to $211.2M
• Statutory net profit after tax (‘NPAT’) decreased by 18.4% to $79.2M
• Statutory earnings per share (‘EPS’) decreased by 21.6% to 26.97 cents per share
Pro-forma excluding the impact of adopting AASB 16 Leases:
• Revenue increased by 12.8% from $1,296.6M to $1,462.7M
• Pro-forma EBITDA decreased by 4.1% to $157.8M
• Pro-forma NPAT decreased by 5.5% to $89.1M
• Pro-forma EPS decreased by 9.2% to 30.36 cents per share
Pro-forma including the impact of adopting AASB 16 Leases:
• Revenue increased by 12.8% from $1,296.6M to $1,462.7M
• Pro-forma EBITDA increased by 31.9% to $217.1M
• Pro-forma NPAT decreased by 5.9% to $88.7M
• Pro-forma EPS decreased by 9.6% to 30.23 cents per share
Net debt:
• Pro-forma net debt2 at 30 June 2020 was $109.2M representing a leverage ratio of approximately 0.7X (pro-forma net
debt : last twelve months pro-forma EBITDA annualised for new acquisitions, noting that the annualised pro-forma
EBITDA for the Truckline acquisition was $1.5M).
The tables below reconcile the pro-forma results to the statutory results for FY20 and FY19:
$’M
Statutory NPAT
Victorian DC Consolidation
Other activities
Other gains adjustment
Finance cost adjustment
Tax adjustment
Pro-forma NPAT inc. AASB 16
AASB 16 Leases adjustment
Tax adjustment
Pro-forma NPAT exc. AASB 16
Consolidated
Note
1
2
3
4
5
6
7
6
FY20
79.2
11.6
1.7
-
-
(3.8)
88.7
0.6
(0.2)
89.1
FY19
97.0
-
1.7
(4.1)
0.3
(0.6)
94.3
-
-
94.3
2. Pro-forma net debt is calculated as statutory net debt excluding the impact of lease liabilities and adjusting for the net derivative financial
instruments position which is consistent with banking covenant requirements. Refer to note 18 of the financial report for a reconciliation between
statutory and pro-forma net debt.
38
Bapcor Limited Annual Report 2020
DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
5. REVIEW OF OPERATIONS continued
$’M
Statutory net profit before tax (‘NPBT’)
Add back depreciation and amortisation
Add back finance costs
Statutory EBITDA
Victorian DC Consolidation
Other activities
Other gains adjustment
Pro-forma EBITDA inc. AASB 16
AASB 16 Leases adjustment
Pro-forma EBITDA exc. AASB 16
F
I
N
A
N
C
A
L
I
R
E
P
O
R
T
I
N
G
Consolidated
Note
8
2
3
4
7
FY20
111.4
80.1
19.8
211.2
4.2
1.7
-
217.1
(59.3)
157.8
FY19
134.7
17.1
15.3
167.0
-
1.7
(4.1)
164.6
-
164.6
$’M
NPAT
Note
1
Weighted average number
of ordinary shares
Earnings per share (cps)
Consolidated
FY20
FY19
Stat
79.2
293.6
26.97
Pro-forma
inc. AASB 16
Pro-forma
exc. AASB 16
88.7
293.6
30.23
89.1
293.6
30.36
Stat
Pro-forma
97.0
281.9
94.3
281.9
34.40
33.45
1. NPAT attributable to members of Bapcor Limited.
2. The Victorian DC Consolidation relates to the significant items incurred in relation to the new Tullamarine Victoria Distribution Centre and includes
the recognition of provisions for restructure and make good as well as the accelerated depreciation of property, plant and equipment and right-of-
use assets. Refer to note 17 of the financial report for further details.
3. The other activities in current and prior period relates to one off consulting costs incurred relating to acquisitions that did not proceed or are
considered major acquisitions.
4. The prior period other gains adjustment relates to a one off gain realised on the Baxters acquisition final deferred settlement payment.
5. The prior period finance cost adjustment relates to the write off of borrowing costs performed due to refinancing activities.
6. The tax adjustment reflects the tax effect of the above adjustments based on local effective tax rates.
7. The current period AASB 16 Leases adjustment relates to the adoption of the standard effective 1 July 2019 for which comparatives have not been
restated. Refer to note 3 of the financial report for further details.
8. Depreciation in the current period includes the right-of-use assets depreciation from the adoption of AASB 16 Leases of $58.5M.
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.
Revenue and pro-forma EBITDA excluding AASB 16 Leases by segment is as follows:
Revenue
Pro-forma EBITDA exc. AASB 16
Trade
Bapcor NZ
Specialist Wholesale
Retail
FY20
$M
561.7
156.3
520.4
292.7
FY19
$M
524.5
165.0
413.1
255.3
Unallocated / Head Office*
(68.4)
(61.3)
Total
1,462.7
1,296.6
Change
%
7.1%
(5.2%)
26.0%
14.7%
(11.4%)
12.8%
FY20
$M
81.1
19.6
50.3
30.5
(23.7)
157.8
FY19
$M
78.2
22.9
46.3
27.1
(9.9)
164.6
Change
%
3.7%
(14.0%)
8.7%
12.8%
(141.9%)
(4.1%)
* 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.
Bapcor Limited Annual Report 2020
39
DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
5. REVIEW OF OPERATIONS continued
5.1 Operating and financial review – Trade
The Trade segment 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.
In FY20, Burson Trade was impacted by the Australian bushfires and drought as well as the COVID-19 restrictions, especially
in April 2020, however it was still able to deliver record revenue and EBITDA. Compared to FY19, the Trade segment recorded
revenue growth of 7.1% and EBITDA growth of 3.7%.
The increase in revenue of 7.1% included same store sales growth of 6% (compared to 2.2% in FY19). Burson did record
negative same store sales in April 2020 of 11.4% - the major period that COVID-19 impacted this business. Trade’s EBITDA
to revenue percentage was 0.5 percentage points below FY19 reflecting the impact of lower gross margin as a result of
pricing pressure due to market competition and the impact of a sales promotion to attract new business.
During FY20, Burson continued to expand its store network with the number of stores increasing from 181 at 30 June 2019
to 186 at 30 June 2020. The increase of five stores consisted of four greenfield store developments and one acquisition.
The average cost per new greenfield store including inventory was $717,000.
The new stores are located in Emerald, Kawana Waters and Manunda in Queensland and Wangaratta and Werribee in Victoria.
The Precision Equipment business achieved record revenue of $39.4M, despite a fall in demand from new car dealerships,
and continues to grow strongly.
During the year, inventory holdings decreased by $3.1M (excluding new stores) due to a focus on improving inventory
efficiency during the second half of FY20.
5.2 Operating and financial review – Bapcor NZ
Bapcor NZ consists of Trade and Specialist Wholesale businesses based in New Zealand operating across 81 locations.
BNT is the predominant business with 73 stores supplying automotive parts and accessories to workshops, truck and trailer
parts through the Truck and Trailer Parts brand. BNT is similar in nature to Bapcor’s Burson Auto Parts business in Australia.
Bapcor NZ also includes the specialist wholesale businesses of HCB – batteries, Autolign – steering and suspension,
JAS – auto electrical and Precision Equipment NZ – vehicle workshop equipment.
The COVID-19 pandemic had a large impact on Bapcor NZ, with the government required lockdowns heavily affecting
trading ability in the second half of FY20. In FY20, revenue declined by 5.2% and EBITDA by 14% compared to FY19. EBITDA
to revenue percentage was 1.3 percentage points below FY19.
Same store sales growth in FY20 for Bapcor NZ’s largest business, BNT, declined by 9% largely reflecting the impact of the
COVID-19 restrictions. Prior to the restrictions being put in place in March 2020, same store sales growth were flat. For the
period of March to June 2020, same store sales were down by 26%. During FY20, BNT continued to expand its store network
with the number of stores increasing from 70 at 30 June 2019 to 73 at 30 June 2020. The increase of three stores related to
greenfield store developments. The average cost per new store including inventory was $483,000.
During the year, inventory holdings decreased by $4.8M (excluding new stores and adjusted for foreign currency) due to
a focus on improving inventory quality and realignment to reduced demand as a response to the COVID-19 pandemic.
5.3 Operating and financial review – Specialist Wholesale
The Specialist Wholesale segment consists of operations that specialise in automotive aftermarket wholesale and include
AAD, Bearing Wholesalers, Opposite Lock, Baxters, MTQ, Roadsafe, JAS Oceania, Premier Auto Trade, Federal Batteries,
Diesel Distributors, AADi, the Commercial Truck Parts group as well as the recent acquisitions of Truckline and Diesel Drive
that occurred 2 December 2019.
The Specialist Wholesale segment achieved revenue growth of 26.0% and EBITDA growth of 8.7% compared to FY19. FY20
included the full year impact of the acquisition of the Don Kyatt (Qld) light commercial truck group in December 2018.
Excluding this and the Truckline and Diesel Drive acquisitions from FY20, revenue grew by 5.5% and EBITDA declined by 7.1%.
These two recent acquisitions have exceeded expectations in the first seven months operating as part of the Bapcor Group.
Due to the significant increase in size of the Specialist Wholesale segment, Bapcor has increased the investment in people
resources for management, finance, human resources and marketing.
EBITDA to revenue percentage declined 1.5 percentage points below FY19 as a result of the Truckline acquisition and the
increased investment in people resources. The volume and product groups that the Specialist Wholesale segment supplies
into other Bapcor group businesses grew by 16.6% on FY19.
During the year, inventory holdings increased by $0.7M (excluding acquisitions).
40
Bapcor Limited Annual Report 2020FINANCIAL REPORTING DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
5. REVIEW OF OPERATIONS continued
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 brands, and the Midas and ABS workshop service brands. The majority of this segment is franchised stores and
workshops, although an increasing proportion of Autobarn stores are now company owned.
The Retail segment achieved record revenue and EBITDA for FY20. Revenue increased by 14.7% compared to FY19. Autobarn
same store sales growth for company owned stores was 14.5% and for franchise stores was 6.6%. For the second half of FY20,
Autobarn achieved same store sales of 20.7%, of which the April to June 2020 quarter delivered same store sales growth of
33%. Company owned store growth was higher than franchise store growth reflecting the maturing of previously opened
greenfield stores as well as the performance improvement of franchise stores that were converted to company stores.
FY20 EBITDA to revenue percentage of 10.4% was 0.2 percentage points below FY19. EBITDA in FY20 was 12.8% higher
compared to FY19, predominately reflecting the improvements in Autobarn company owned stores and increased sales
through franchisees.
Bapcor has continued to grow the number of company owned Autobarn stores via both greenfield Autobarn stores as well
as some select conversion of franchise stores to company owned stores. The total number of Autobarn stores at 30 June 2020
was 134 stores, the same number as at 30 June 2019. The number of company owned stores increased from 66 to 79, with the
13 new stores consisting of two greenfield stores and the conversion of eleven franchise operations. The percentage of
company owned Autobarn stores at 30 June 2020 was 59%, up from 49% at 30 June 2019.
At 30 June 2020 the total number of company owned and franchise stores in the Retail segment was 350 consisting of
Autobarn 134 stores, Autopro 80 stores, Sprint Auto Parts 34 stores and Midas and ABS 102 stores.
During the year, inventory holdings increased by $6.2M (excluding new stores) due to product range extensions and a policy
of increasing stock holdings in the stores to support increased sales levels.
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 increased from $9.8M in FY19 to $23.7M in FY20 which was primarily
due to increased investment in support functions such as human resources, legal, governance and IT as well as additional
provisions that have been prudently taken in light of the COVID-19 pandemic for potential impacts to debtor collections
and stock obsolescence.
Intercompany sales increased by 16.6% compared to FY19, reflecting a higher proportion of sourcing product internally and
increasing the volume of “own brand” product.
The head office result includes the Thailand operations which recorded revenue of $4.2M and an EBITDA loss of $0.7M with
Bapcor’s share of the Thailand business being 51%. During the year, inventory holdings for the Thailand based operations
increased by $0.3M.
5.6 Financial Position - Capital Raising and Debt
In September 2019, Bapcor issued 1,054,992 shares to participating shareholders under its Dividend Reinvestment Plan,
in respect of the FY19 final dividend. In March 2020, Bapcor issued 1,205,595 shares to participating shareholders under
its Dividend Reinvestment Plan, in respect of the FY20 interim dividend.
During April and May 2020, Bapcor raised $236.1M of share capital in order to strengthen its balance sheet and increase
funding flexibility through the issue of 40,909,091 shares under a placement to institutional investors, and the issue of
12,762,225 shares under a share purchase plan offer to existing shareholders.
As a result of the issues of shares described above, ordinary shares on issue increased from 283,480,597 as at 30 June 2019
to 339,412,500 as at 30 June 2020.
The adoption of AASB 16 Leases increases reportable net debt by the inclusion of $181.8M of lease liabilities as at 30 June
2020. Given this is excluded from a banking covenant perspective, pro-forma net debt has also been disclosed. Pro-forma
net debt at 30 June 2020 was $109.2M representing a leverage ratio of approximately 0.7X (pro-forma net debt : last twelve
months pro-forma EBITDA annualised for new acquisitions).
41
Bapcor Limited Annual Report 2020FINANCIAL REPORTING DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
6. STRATEGY
Bapcor’s strategy is to be Asia Pacific’s leading provider of vehicle parts, accessories, equipment, service and solutions.
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 186 stores at the end of June 2020 to 230 stores with at least 35% home
brand product content.
Bapcor NZ
Bapcor NZ’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 73 stores to over 85, as well as grow its electrical
businesses organically and potentially through acquisition. Bapcor NZ also has a target to grow home brand content to
more than 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 parts for light and heavy commercial vehicles.
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 2020 including
79 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 exceed 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 102 stores at 30 June 2020 of which 100 were franchised. Bapcor considers Service a potential
growth area due to the industry consolidation opportunities and the potential to vertically integrate supply of product
through its Trade and Specialist Wholesale segments and will actively expand this segment.
Asia
Bapcor has commenced an expansion into South East Asia, initially into Thailand. Currently there are six 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 two years of operations has achieved positive momentum.
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. Bapcor is investing in technology and new distribution facilities such as the new
Distribution Centre at Tullamarine in Victoria to ensure it has a state of the art supply chain.
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.
42
Bapcor Limited Annual Report 2020FINANCIAL REPORTING DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
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 predominately driven by the number of kilometres travelled, with the number of kilometres travelled by
passenger and light commercial vehicles not normally 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. With the impact of COVID-19, demand for second hand vehicles has increased as people
seek to ensure social distancing with reduced reliance on public transport, as well as the expected increase in domestic
holidays utilising motor vehicles. All of these factors lead to more demand for vehicle servicing, replacement parts and
maintenance.
Online channels to market is now a common medium for retail businesses albeit only a small percentage of automotive retail
sales are online. Through our 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. Bapcor is investing in expanding its online capabilities, including in a new eCommerce platform.
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 online competition will have
a material impact on Bapcor’s trade business over the next few years.
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 19 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 any impact to the Bapcor business within the next
ten years as minimal.
8. KEY BUSINESS RISKS
There are a number of factors that could have an effect on the financial prospects of Bapcor. These include:
Pandemic risk - As has been shown in the past six months, a pandemic which results in restrictions on doing business, will
have an impact on Bapcor. Pandemic, as well as other risks such as bushfires are unpredictable by their very nature. Once
such situations are evident Bapcor will move swiftly to minimise the impact on its revenue, profitability and cash.
Competition risk - The Australian, NZ and Thai automotive aftermarket parts and accessories distribution industries are
competitive and Bapcor may face increased competition from existing competitors (including through downward price
pressure), new competitors that enter the industry, vehicle manufacturers, and new technologies or technical advances in
vehicles or their parts. Increased competition could have an adverse effect on the financial performance, industry position
and future prospects of Bapcor.
Increased bargaining power of customers - A significant majority of Bapcor’s sales are derived from repeat orders from
customers. Bapcor may experience increased bargaining power from customers due to consolidation of existing workshops
forming larger chains, greater participation of existing workshops in purchasing and buying groups, and closure of
independent workshops resulting in greater market share of larger chains. An increase in bargaining power of customers
may result in a decrease in prices or loss of customer accounts, which may in turn adversely affect Bapcor’s sales and
profitability.
Supplier pressure or relationship damage - Bapcor’s business model depends on having access to a wide range of
automotive parts, in particular parts with established brands that drive customer orders. An increase in pricing pressure
from suppliers or a damaged relationship with a supplier may increase the prices at which Bapcor procures parts or limit
Bapcor’s ability to procure parts from that supplier. If prices of parts increase, Bapcor will be required to pass on or absorb
the price increases, which may result in a decreased demand for Bapcor’s products or a decrease in profitability. If Bapcor
is no longer able to order parts from a key supplier, Bapcor may lose customer orders and accounts, resulting in lower sales.
Any decline in demand, sales or profitability may have an adverse effect on Bapcor’s business and financial performance.
Exchange rate risk - A large proportion of Bapcor’s parts are sourced from overseas, either indirectly through local suppliers
or directly by Bapcor. This exposes Bapcor to potential changes in the purchase price of products due to exchange rate
movements. Historically Bapcor has been able to pass on the majority of the impact of foreign exchange movements
through to the market. If the situation arises where Bapcor is not able to recoup foreign exchange driven cost increases,
this may lead to a decrease in profitability. To mitigate this risk, Bapcor enters into forward exchange contracts based on
expected purchases for the upcoming twelve months.
43
Bapcor Limited Annual Report 2020FINANCIAL REPORTING DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
8. KEY BUSINESS RISKS continued
Managing growth and integration risk - The integration of acquired businesses and the continued strategy of growing the
store network will require Bapcor to integrate these businesses and where appropriate upscale its operational and financial
systems, procedures and controls and expand and retain, manage and train its employees. There is a risk of a material
adverse impact on Bapcor if it is not able to manage its expansion and growth efficiently and effectively, or if the
performance of new stores or acquisitions does not meet expectations. Bapcor senior management take an active role in
the integration of acquired businesses.
Expansion - A key part of Bapcor’s growth strategy is to increase the size of its store network, which it intends to achieve
through store acquisitions and greenfield developments. If suitable acquisition targets are not able to be identified;
acquisitions are not able to be made on acceptable terms; or suitable greenfield sites are not available, this may limit
Bapcor’s ability to execute its growth strategy within its expected timeframe. Further, new stores may not prove to be as
successful as Bapcor anticipates including due to issues arising from integrating new businesses. This could negatively
impact Bapcor’s financial performance and its capacity to pursue further acquisitions. Bapcor senior management take an
active role in the rollout and progress of store expansion.
Franchise regulations - Bapcor has a large franchise network within its Retail 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 staff and senior management are key to
maintaining the level of operational service to its customers, as well as executing Bapcor’s strategy. Any significant turnover
of staff or loss of key senior management has the potential to disrupt the profitability and growth of the business. Senior
management risk is somewhat managed through notice period and non-compete contractual obligations, succession
planning and long term incentives.
Information technology - All of Bapcor’s business operations rely on information technology platforms. Any sustained
unplanned downtime due to system failures, cyber-attack or any other reason has the potential to have a material impact
on the ability for Bapcor to service its customers. Bapcor’s business units operate with a number of different operating
systems making it less likely that any unplanned downtime will occur across the entire business.
9. LIKELY DEVELOPMENT AND EXPECTED RESULTS OF OPERATIONS
In July 2020, all of Bapcor’s businesses performed strongly. Retail same store sales were c50% above the prior year, Burson
Trade up c15%, New Zealand up c15% and Specialist Wholesale up c15%. Also, Thailand achieved record revenue.
In early August 2020, in relation to the COVID-19 pandemic, the Victorian Government mandated closures of many
Melbourne based businesses for six weeks. This included the closure of all of Bapcor’s Melbourne Retail stores, restrictions on
all other businesses and a reduction of 30% of warehouse staffing. It is not yet possible to determine the financial impact of
such restrictions. This has come at a time when there is strong performance in all of Bapcor’s businesses across Australia,
New Zealand and Thailand.
44
Bapcor Limited Annual Report 2020FINANCIAL REPORTING DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
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 Vend Limited and
is 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:
85,389 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 fourteen 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:
1,431,154 ordinary shares
581,448 performance rights
45
Bapcor Limited Annual Report 2020FINANCIAL REPORTING DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
10. INFORMATION ON DIRECTORS continued
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:
40,256 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 Bagtrans Pty. Ltd. (Chairman),
Droppoint (Chairman) and Newcastle Permanent Building Society.
Former directorships (last 3 years):
None
Special responsibilities:
Member of the Audit and Risk Committee
Member of the Nomination and Remuneration Committee
Interests in shares:
39,849 ordinary shares
46
Bapcor Limited Annual Report 2020FINANCIAL REPORTING DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
10. INFORMATION ON DIRECTORS continued
Name:
Title:
Qualifications:
Experience and expertise:
Jennifer Macdonald
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 Property Guru Pte. Ltd, Australian
Pharmaceuticals Ltd and Redbubble Ltd.
Former directorships (last 3 years):
Redflow Ltd.
Special responsibilities:
Chair of the Audit and Risk Committee
Member of the Nomination and Remuneration Committee
Interests in shares:
23,363 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
Previous Chief Financial Officer and Company Secretary
Gregory Lennox Fox (2 March 2012 – 2 July 2020)
Greg retired on 2 July 2020, after a successful eight years as Chief Financial Officer and Company Secretary. Greg joined
Bapcor in 2012 with responsibility for finance, legal, company secretarial and played 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.
Current Chief Financial Officer and Company Secretary
Noel Meehan (2 July 2020 – present)
Noel joined Bapcor on 2 July 2020 as Chief Financial Officer and Company Secretary following a successful career as Chief
Financial Officer at Toll Group, Chief Finance Officer at Treasury Wines Estates Limited, Executive Director Finance and other
roles at Orica Limited and various positions at Qantas. Noel is a Fellow of the Australian Society of Certified Practising
Accountants and a Member of the Australian Institute of Company Directors.
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 2020, 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
12
12
12
11
12
12
12
12
12
12
3
-
3
3
3
3
-
3
3
3
4
-
4
3
4
4
-
4
4
4
Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee.
* The members of the Audit and Risk Committee are Jennifer Macdonald (Chair), Andrew Harrison, Therese Ryan and Margaret Haseltine.
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.
47
Bapcor Limited Annual Report 2020FINANCIAL REPORTING
DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
13. REMUNERATION REPORT
The Bapcor Board is pleased to share with you our Remuneration Report for the financial year ended 30 June 2020.
Since listing on the Australian Securities Exchange (‘ASX’) in 2014, Bapcor, its executive and team members have consistently
performed and delivered growth. This continued in FY20, even with the business being impacted by a number of unpredicted
and unprecedented events including the ongoing drought in Australia and the bushfires across the Australian eastern
seaboard during what is typically one of the busiest trading periods. The enormity of these events and their impact on the
business was then surpassed by the COVID-19 global pandemic. COVID-19 initially disrupted much of our supply chain from
China then having the most significant impact on Bapcor’s businesses in Australia, New Zealand and Thailand with
government imposed lockdowns, especially in New Zealand where the restrictions were the most severe requiring our business
to effectively shut down with 48 hours’ notice.
Despite the impact of the drought, bushfires and COVID-19 we consider that Bapcor and its executive leadership team has
continued to perform strongly delivering a 12.8% increase in revenue to $1,463M and pro-forma net profit after tax (‘NPAT’)
of $89.1M (excluding the impact of AASB 163) which is a 5.5% reduction from the prior year. Statutory NPAT was $79.2M, which
included expensing $11.7M of transition costs relating to the new consolidated DC being built at Tullamarine in Victoria.
The following chart shows total return to shareholders over the previous five years:
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Source: KPMG
Bapcor
Comp. Group
(Average)
ASX 100
(Average)
ASX 200
(Average)
FY20 was a year unlike any other – the impact of the COVID-19 restrictions in Australia, New Zealand and Thailand, the
bushfires in Australia and the ongoing drought across Australia. Each of these events had a negative impact on the Bapcor
business, as they did on the economy generally.
However, in spite of the impact of these events Bapcor’s businesses have performed incredibly strongly. The Burson Trade
business achieved record revenue and record earnings, the Retail business delivered record sales and record earnings, and
the new truck parts businesses have performed strongly. Bapcor has also invested in updating its digital capabilities with
investments in computer infrastructure, implementing a tier one warehouse management system, and a new retail point of
sale system as well as expansion of stores in Thailand and the development of a new mega distribution centre which is
underway in Tullamarine, Victoria. This is in addition to the 43 new locations that were added to Bapcor’s network during
FY20 bringing the network to approximately 1,040 sites throughout Australia, New Zealand and Thailand.
When COVID-19 impacted China in January 2020 and had the potential to disrupt the group’s supply chain, management
moved swiftly to ensure availability of product. When COVID-19 impacted Australia and New Zealand, management acted
quickly to ensure the safety of team members, customers and suppliers. Steps were taken to conserve cash by minimising
discretionary expenditure, ceasing capital and expansion investment where sensible, reducing people resources in line
with forecasted sales reduction and positioning the business for the duration of the government mandated restrictions. In
addition the company’s gearing was reviewed, with the decision to undertake a share placement and share purchase plan
3. On 1 July 2019, Bapcor adopted AASB 16 Leases and as per the transition provisions the comparative periods have not been adjusted. The
pro-forma results excluding AASB 16 Leases include an adjustment to remove the impact of this standard adoption allowing comparability with
prior periods. Refer to details contained within the Directors’ Report.
48
FINANCIAL REPORTINGBapcor Limited Annual Report 2020 DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
13. REMUNERATION REPORT continued
to underpin the company’s financial strength. All these steps were put into place, at the same time as guiding the business
through the challenges of operating an essential service of providing replacements vehicle parts to keep cars and trucks
operating.
To be able to consistently deliver strong results and navigate through times of increasing economic uncertainty, it is
essential that Bapcor attracts and retains a talented leadership team that can envision and deliver the strategy. The Board
is very mindful that to attract and retain a talented and committed leadership team, executive key management personnel
(‘KMP’) should be appropriately rewarded for their achievements as well as their skills and experience. Bapcor’s approach
to remuneration to ensure this includes:
Setting fixed remuneration that is appropriate and market competitive to attract, retain and motivate our talented team
in a highly competitive market at a time when there is increasing economic uncertainty. In FY20 modest fixed remuneration
increases were made to KMP. These increases were based on independent market remuneration benchmarking which,
as in previous years, targeted the 50th percentile of the benchmark, with a range of plus or minus 20%.
Given the economic challenges and uncertainty created by COVD-19, all executive KMP and Directors voluntarily took
a reduction in their base remuneration of up to 30% for two months in the latter part of FY20.
Providing incentives to propel outperformance is the purpose of the other elements of our remuneration approach. These
are underpinned by targets, established each year after in-depth consideration by the Bapcor Board, that will deliver the
strategy and provide shareholder growth.
The Short Term Incentive (‘STI’) plan is structured by the Board to reward our executive KMP for delivering on our growth
strategy with aggressive targets for both financial and non-financial indicators. To realise an STI, executive KMP need to
face into challenges and take measured risks that will benefit our investors in the short term and continue to build the
foundations and capital investments for long term sustainability. Primarily, STI payments are awarded for achieving and
exceeding the NPAT or earnings before interest and tax (‘EBIT’) targets as well as improvements in working capital levels.
Normally, these financial targets are set at levels greater than prior year. The targets that were set for FY20 obviously did
not take account of the unforeseen circumstances of COVID-19, the bushfires or the drought – all of which are beyond the
control of management. Taking into consideration these unforeseen circumstances and reflecting the extraordinary
achievements of the executive leadership team in the face of this, the Board has exercised its discretion in accordance with
the rules of the STI plan and has revised the minimum threshold at which payment for achievement of these financial targets
is made – noting that the targets themselves have not changed from those set at the beginning of FY20 which were set
above the prior year and with consideration of market expectations at that time. In addition to financial targets, the STI
includes non-financial targets for each executive KMP designed to drive key elements such as safety, people, long term
strategy, compliance and governance. The Board also considered whether to defer FY20 STI payments and determined not
to amend the normal payment process where only above target achievements are deferred for twelve months.
Bapcor has a variety of short term incentive plans across the business units, all aimed at driving solid results and to
encourage engagement by all team members. The contribution of all team members during FY20 is acknowledged and
appreciated, with a once off special “thank you” incentive of $300 to be given to full time permanent team members and
$150 to part time permanent team members, by way of Bapcor gift cards.
Since Bapcor’s initial public offering (‘IPO’) in 2014, the Long Term Incentive (‘LTI’) has consistently measured relative
shareholder return (‘TSR’) and statutory earnings per share (‘EPS’) growth. The view of the Board continues to be 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. As an incentive intended to drive long term shareholder value there have been no changes
made or discretion applied to the LTI in FY20 despite the economic conditions. Once again, we believe our investors will
be pleased with a compound annual statutory EPS growth rate over five years of 10.9% and that the executive team that
achieves such strong and consistent results over the long term should be rewarded for its efforts. The Board also reports
that 49.5% of the FY18 LTI plan allocated to the CEO and KMP’s vested.
As well as a capable and committed executive leadership team, Bapcor needs engaged, high calibre team members in
every part of the Group to enact the strategy, accomplish financial targets and provide shareholder value. Ensuring all
Bapcor team members are safe, engaged and able to realise their full potential remains, as it has always been, essential
to the Group’s success. In FY20 the focus on team member engagement and development continued, at the heart of which
was articulating and embedding Our Values. To establish the shared language for Our Values, Bapcor engaged more than
100 team members in cross-business unit workshops across Australia and New Zealand. This culminated in October 2019
when we launched Our Values of:
• We give a damn …
• We are in it together …
• We get it done …
• We do the right thing …
49
FINANCIAL REPORTINGBapcor Limited Annual Report 2020 DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
13. REMUNERATION REPORT continued
Our Values guide our decision making across the Group and are brought to life through being embedded in processes such
as performance reviews. In the spirit of Our Values, safety has continued to be a priority across the Group with a range of
improvements, programs and initiatives. A new Bapcor Work, Health and Safety (‘WHS’) Policy was launched in September
2019 to align the various policies from across the Group. The new WHS Policy is the cornerstone of the framework to lead and
manage our approach to safety risks and is underpinned by a range of policies and safe operating procedures that form
part of our Safety Management System. Pleasingly, the ongoing focus on keeping each other safe and well has seen a
reduction of 9% in our twelve month rolling lost time injury frequency rate (‘LTIFR’) from 6.51 in June 2019 to 5.92 in June 2020.
Part of our focus on safety also includes wellbeing and we were pleased to launch the Thrive Wellbeing Program in May
2020. Thrive provides training, tools, resources and information across four pillars of mental, physical, financial and social
wellness. Our initial focus is on mental health and as a part of this, in addition to our existing Employee Assistance Program
(EAP), we were pleased to provide all team members with on-line training and tools from the Black Dog Institute. After
launching our Group-wide intranet, CORE, in December 2018 to connect and communicate with all team members
regardless of their role, business or location, we continued to develop this throughout FY20 and were pleased to launch
CORE Learning in May 2020 as our platform for on-line learning.
With the issues and uncertainty created by COVID-19, bushfires and drought, FY20 has been a year unlike any ever
experienced by Bapcor. The Board is extremely pleased with the efforts, focus and determination of the executive team,
and the Bapcor team more broadly, to achieve the financial and non-financial results that consistently improve returns
to our shareholders and support all our stakeholders, even in the face of the unprecedented economic uncertainty.
As we move into FY21, the Board has approved a special short term incentive plan for achieving financial targets in the first
quarter of the year. The purpose of this special incentive plan is to ensure a strong start to the new financial year especially
in light of the uncertain and challenging circumstances around COVID-19 and the underlying economic conditions. This plan
is in addition to the standard full year short term incentive plan. The full year FY21 STI targets have been set and are in line
with current market expectations, however these will be reviewed at the end of the first quarter based on the prevailing
market conditions.
50
FINANCIAL REPORTINGBapcor Limited Annual Report 2020 DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
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 (non-statutory)
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 six years
Bapcor has continued to grow in size and complexity since it listed on the ASX in 2014. Over these six years financial
performance has consistently improved as have the returns delivered to shareholders.
REMUNERATION ANALYSIS FY14 - FY20
% increases of Market Cap, Revenue, Pro-forma NPAT and Executive KMP Fixed Remuneration
Market Cap
NPAT
Revenue
E-KMP Fixed
Rem
e
s
a
e
r
c
n
i
%
500%
450%
400%
350%
300%
250%
200%
150%
100%
50%
0%
E-KMP fixed $M
E-KMP roles at year end
Avg fixed $000’s
FY14
1.66
5
333
FY15
1.87
6
312
FY16
2.87
7
410
FY17
3.91
9
435
FY18
4.96
9
551
FY19
4.89
9
543
FY20
5.07
9
564
51
Bapcor Limited Annual Report 2020FINANCIAL REPORTING
DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
14.1.2 Key Questions
Key Questions
How is FY20 executive remuneration
different from FY19?
Were there any changes in to
executive remuneration during FY20
in response to COVID-19 and other
events?
Our Approach
The approach to executive remuneration remains consistent with FY19. Modest
adjustments were made to executive remuneration based on independent market
benchmarks with executive remuneration remaining 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.
Yes. All executive KMP volunteered a remuneration reduction of up to 30% for two
months in the latter part of FY20.
Were there any increases to
non-executive directors in FY20?
Yes. Non-executive directors’ base fees were increased by 3% at the beginning
of FY20.
Were there any changes to
executive remuneration in FY20?
Were there any changes to
non-executive director fees during
FY20 in response to COVID-19 and
other events?
How much STI was earned by the
executives for FY20 and what were
the reasons for the level of payment?
The last time Directors base fees were increased was 1 July 2016. Committee fees
have not been increased since 1 July 2016.
Increases in executive remuneration were made in line with recommendations
provided by the independent advisors – Godfreys. The CEO received a 3% increase
in his fixed remuneration. Other KMP increases varied depending on the
benchmarking. The target STI for KMP (excluding the CEO) was increased from 40%
to 50% of Total Fixed Remuneration (‘TFR’) and the maximum increased from 70% to
75% of TFR. These changes were as recommended based on the benchmarking
data provided by Godfreys.
Yes. All non-executive directors volunteered a 30% base fee reduction for two
months in the latter part of FY20.
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 FY20 was
$2,220,926 which is 52.8% of the maximum that could have been paid.
The Board’s view is that executive KMP have performed extremely well in
navigating the economic impacts of COVID-19, bushfires and drought and, as
such, has exercised its discretion by reducing the threshold at which payment for
STI financial targets are made to 75% of target from 95% of target. Incentives are
based on various components of the company’s financial performance including:
• Revenue increase
• Pro-forma EBIT
• Group pro-forma NPAT
• Working Capital to sales percentage
•
Inventory to sales percentage
As no awards exceeded the target value, there has been no deferred components
in FY20.
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.
52
Bapcor Limited Annual Report 2020FINANCIAL REPORTING DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
14.1.2 Key Questions continued
Key Questions
Did the Board exercise discretion
when determining the payments
under the STI plan?
Our Approach
Yes. The Board exercised its discretion reducing the threshold at which payment
for STI financial targets are made from 95% to 75% of the original target given the
unexpected economic impacts of the COVID-19 pandemic in Australia, New
Zealand and Thailand, and the bushfires and drought in Australia.
In addition, the Chief Financial Officer, Greg Fox, was deemed to be a good leaver
given his significant contribution to the growth and success of Bapcor and his FY20
STI payment will be made.
Also, as in prior financial years, the STIs are structured to include personal
objectives that contribute to the longer-term strategy and sustainability of the
business and may be non-financial or not numeric in nature. As such, some
judgement is required by the Board to assess the achievement of these personal
objectives.
What were the FY20 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 FY20.
How did the Board establish the STI
performance measures for FY20?
How did the Board determine the
75% threshold that was applied in
FY20 for STI’s?
The Board has again determined that the focus of the executive team should be
on growing NPAT for the CEO and CFO and Revenue and EBIT for all other
executive KMP as well as targets for reducing working capital. Therefore 70% of the
target STI award is tied to financial measures. Any above target STI awards are
entirely 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.
NPAT target took into consideration analysts’ consensus expectations at the start
of the financial year.
Refer to 14.5.2 for more details.
The unexpected and unforeseen impact of the bushfires and the COVID-19
pandemic contributed to analysts’ consensus forecasts of Bapcor’s NPAT reducing
to approximately 75% of their original forecasts for FY20. The Board considered
that this was a reasonable proxy for market expectations, and based the
threshold for STI’s on this expectation. The Board did not amend the NPAT target
for FY20 that was set at the beginning of the financial year.
Did Bapcor receive any government
incentives or support during
COVID-19 – e.g. Jobkeeper
In Australia no Bapcor business has received any subsidy such as Jobkeeper or
benefit such as deferred payments of tax except for a Queensland payroll tax
reimbursement.
No benefits have been received in Thailand.
In New Zealand Bapcor received a wage subsidy of $3.9M, of which 100% was paid
to team members. In addition, Bapcor topped up the wages of New Zealand team
members to pre-COVID levels although there was no obligation to do so. This
ensured we retained our talented team allowing the New Zealand business to
re-open swiftly once restrictions were lifted. During the twelve week period the
subsidy was applicable to, Bapcor paid an additional $4.1M to team members.
The subsidy did not contribute to NPAT.
Bapcor NZ’s revenue fell by up to 80% during the lockdown.
Yes. Under the rules of the plan the component of the STI that is above target is
deferred for twelve months. In FY20, there was no achievement above target and
therefore no deferred amounts. There are also no deferred amounts from FY19
requiring payment in August 2020.
Is there provision for deferral of STI
and what if any has been deferred?
53
Bapcor Limited Annual Report 2020FINANCIAL REPORTING DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
14.1.2 Key Questions continued
Key Questions
What LTI grants have vested in
FY20?
What was the basis for the vesting
of those grants?
Did the Board exercise any
discretion in the vesting of LTIs in
FY20 given the economic impacts
of COVID-19 and other events?
What is the performance period
for the LTIs?
How does the company determine
the number of LTI Performance
Rights to grant?
What clawback provisions are in
place?
Did the Board make any one-off
payment to executive KMPs in FY20?
Has the company made any loans
to the executives in FY20?
Are any STI’s paid to other team
members?
Our Approach
The three year tranche of the LTI granted to 9 executives on 4 December 2017
being 76.2% of the total number granted, was independently tested by a third
party against the company’s FY20 TSR and EPS performance. The extent to which
they vested is as follows:
Relative TSR Rights: Bapcor’s TSR performance ranked at the 64.2% percentile of
the comparator group. This resulted in 78.4% of TSR rights vesting.
Compound annual growth rate (‘CAGR’) of EPS: Bapcor’s CAGR of EPS was 7.6%.
This resulted in 20.6% 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.
No. As a long-term plan designed to achieve long-term outcomes for investors
and consistent with the approach since the IPO, the Board has not exercised any
discretion or made any amendments to the vesting of LTIs.
The Chief Financial Officer, Greg Fox, was deemed to be a good leaver given his
significant contribution to the growth and success of Bapcor and will receive the
LTI which vested in FY20.
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.
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.
No. There were no one-off payments to executive KMPs in FY20.
No loans were provided to any executive KMP in FY20.
Bapcor has a range of incentive plans to encourage and reward performance.
These incentive plans apply to all levels of the organisation. In FY20 Bapcor will
make a discretionary payment to acknowledge all eligible team members
contribution during the challenging events in FY20.
54
Bapcor Limited Annual Report 2020FINANCIAL REPORTING DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
14.2 Remuneration governance
l
s
r
e
d
o
h
e
k
a
t
s
y
e
k
r
e
h
t
o
d
n
a
s
r
e
d
o
h
e
r
a
h
s
h
t
i
w
n
o
i
t
a
t
l
u
s
n
o
C
l
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
recommending to the Board 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 FY20 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. Guerdon Associates
provided during FY20 a review of the
remuneration plans with a focus on
the impact of COVID-19, and were
paid $23,550 excluding GST and
disbursements for their services.
55
Bapcor Limited Annual Report 2020FINANCIAL REPORTING
DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
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
+
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
Structure
Measures
Base salary, superannuation
and non-cash benefits such
as motor vehicles
70% financial targets
30% personal objectives (which
may be non-financial)
50% TSR
50% EPS
Annual performance review
and independent market
based remuneration
benchmarks
Financial targets are NPAT for
CEO/CFO and EBIT for all
executive KMP. Revenue and
working capital targets apply
to all KMP.
Personal objectives include
safety, team, talent, strategic
growth, governance and
investor relations.
Drives growth as financial
targets are set at a growth
level to the previous year and
personal targets reward the
actions that build a
sustainable business
TSR > 50% companies in
comparable peer group
Compound annual growth
rate of EPS ≥ 7.5% with
maximum vesting at 15%.
Motivates executives to take
a long-term view of company
performance and links reward
the investors’ experience.
Link to strategy and
performance
Business complexity requires
highly skilled executives to
deliver performance that
meets shareholder
expectations
14.3.2 FY20 remuneration mix
FY20 EXECUTIVE KMP POTENTIAL MAXIMUM PAY MIX
CEO
35%
35%
30%
Fixed remuneration
Maximum STI
Other KMP
45%
33%
22%
Maximum LTI
0%
20%
40%
60%
80%
100%
56
Bapcor Limited Annual Report 2020FINANCIAL REPORTING DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
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 FY20 and
their positions are those in the following table.
Name
Non-executive Directors (‘NED’)
Andrew Harrison
Therese Ryan
Margaret Haseltine
Jennifer Macdonald
Executive Director
Darryl Abotomey
Executive KMP
Greg Fox
Craig Magill
Martin Storey
Mathew Cooper
Steve Drummy
Tim Cockayne
Jeff Nicol
Alison Laing
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
Chair Audit and Risk Committee
Member Nomination and Remuneration Committee
Managing Director and Chief Executive Officer
Chief Financial Officer and Company Secretary (resigned 2 July 2020)*
Executive General Manager, Burson Trade
Executive General Manager, Bapcor NZ
Executive General Manager, Specialist Wholesale – Mechanical
Executive General Manager, Specialist Wholesale – Engine Management
Executive General Manager, Retail
Chief Operating Officer (appointed 8 July 2019)
Executive General Manager, Human Resources
* On Greg Fox’s resignation, Noel Meehan was appointed Chief Financial Officer and Company Secretary and as such was not considered a KMP
during FY20 but will be included from FY21.
57
Bapcor Limited Annual Report 2020FINANCIAL REPORTING DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
14.5 FY20 executive remuneration
The following sections explain FY20 executive KMP remuneration:
14.5.1 Financial performance over the last six 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 six years
Bapcor’s financial performance over the last six 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 six complete financial years since it listed
on 23 April 2014. The table excludes the impact of AASB 16 Leases.
Revenue from continuing operations $m
Increase/(decrease) in revenue
Pro-forma NPAT from continuing operations $m2,3
Increase/(decrease) in pro-forma NPAT
Pro-forma EPS from continuing operations (cents)1,3
2015
375.3
9.9%
23.1
19.7%
13.62
Increase/(decrease) in pro-forma EPS – TERP adjusted
19.1%
Statutory NPAT $m2
19.5
2016
685.6
82.7%
43.6
88.7%
17.85
31.0%
43.6
65.8
50.9%
24.40
36.7%
64.0
Increase/(decrease) in statutory NPAT
1,581.6%
123.4%
47.0%
Statutory EPS – TERP adjusted (cents)1
13.62
Increase/(decrease) in statutory EPS – TERP adjusted
19.1%
Dividend declared (cents per share)
Increase/(decrease) in dividend declared
Share price 30 June $
8.7
n/a
3.40
17.85
31.0%
11.0
23.76
33.1%
13.0
26.4%
18.2%
5.52
5.49
2017
2018
2019
2020
1,013.6
1,236.7
1,296.6
1,462.7
47.8%
22.0%
86.5
31.6%
30.97
26.9%
94.7
47.8%
33.88
42.6%
15.5
19.2%
6.55
4.8%
94.3
9.0%
33.45
8.0%
97.0
2.4%
12.8%
89.1
(5.5%)
30.36
(9.2%)
79.2
(18.4%)
34.40
26.97
1.5%
17.0
9.7%
5.58
(21.6%)
17.5
2.9%
5.90
5.7%
Increase/(decrease) in share price
60.4%
62.4%
(0.5%)
19.3%
(14.8%)
Market capitalisation $m 30 June
746.9
1,357.1
1,529.7
1,835.6
1,581.8
2,002.5
1. Where appropriate, 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
3. Excludes the impact of AASB 16 Leases
14.5.2 FY20 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. Given the economic impact of
the COVID-19 pandemic and other events in FY20 such as bushfires and drought, the Board has exercised its discretion and
reduced the threshold for payment of financial objectives from 95% to 75% of the target performance. This has been done to
recognise the achievement and commitment of executive KMP in delivering results for all stakeholders during
unprecedented conditions.
70% of the target STI opportunity of the executive KMP is contingent on meeting financial objectives of a combination of
annual Revenue, NPAT, EBIT, working capital to sales percentage and inventory to sales percentage. The FY20 objectives
set by the Board were at levels higher than the previous year’s achievement.
The remaining 30% of target STI is subject to meeting other annual personal objectives which are non-financial measures.
The unexpected and unforeseen impact of the bushfires and the COVID-19 pandemic contributed to analysts’ consensus
forecasts of Bapcor’s NPAT reducing to approximately 75% of their original forecasts for FY20. The Board considered that this
was a reasonable proxy for market expectations, and based the threshold for STI’s on this expectation. The Board did not
amend the NPAT target for FY20 that was set at the beginning of the financial year – which took into consideration analysts’
consensus at that time.
58
Bapcor Limited Annual Report 2020FINANCIAL REPORTING DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
The Board considered whether the FY20 STI payments should be deferred in part or full however determined that as
no KMP earned above the target incentive that they would not be deferred which is consistent with Bapcor’s policy.
Type of
performance
measure and
weighting at
target
Financial
70%
KMP Performance measure
FY20 performance
CEO and CFO is Group Revenue, Group EBIT, Group NPAT and working capital
to sales percentage.
Other Group executives is Revenue, Group EBIT and working capital to sales
percentage.
Business segment executives is Revenue and EBIT of the business segment
they lead and Group EBIT.
All KMP have targets for reducing working capital mainly measured through
inventory to sales percentage.
The Group target was set higher than the FY19 actual result and was set in the
context of the business strategy and growth objectives. The target took into
consideration analysts’ consensus for Bapcor at that time.
Pro-forma NPAT for
FY20 was $89.1M,
a 5.5% reduction
over FY19.
Pro-forma EBIT of
$138.7M was down
by 6.0% compared
to FY19.
EBIT by business
segment varied as
detailed in the
financial report.
Group working capital
to sales percentage
reduced to 17.9% from
21.0% in the prior year.
Inventory to sales
percentage was
reduced in most of the
business segments.
A detailed explanation
of the group’s
achievements in the
non-financial areas
are contained in
section 5 of the
Directors’ Report.
Percentage of FAR
CEO
38.5%
83.5%
CFO
35%
60%
Other KMP
35%
60%
Target
Maximum
There are 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 including the development and introduction
of a new Work, Health and Safety Policy, including a safety management
system to underpin the policy. The introduction of a safety risk registers in
each business with action items and quarterly review of the progress on
action items. A reduction in the LTIFR (actual was down on prior year by 9%).
Introduction of a Wellbeing program, including an Employee Assistance
Program.
Implementation of improved and reliable safety metrics was a core focus
and will be for the coming year.
• People: with objectives requiring individual and team development,
engagement strategies, talent management and succession planning,
and training and development outcomes. A group wide intranet was also
launched as a focal point for information to team members. A major target
was the introduction of “Bapcor’s Values.”
• Customer engagement: including objectives to measure and improve
customer sentiment. Significant improvements were made as evidenced by
independent customer surveys undertaken during the year.
• Strategic acquisitions: with objectives requiring the identification of
suitable businesses for acquisition, implementation of the business case
and results regarding achieving the business case. A number of
acquisitions were successfully completed during the year, with the major
one being the acquisition of Truckline in December 2019. This strategic
expansion positions Bapcor in the heavy commercial truck market and
expands our core truck parts business so we now cover all forms of vehicles
on road – the only business in Australia that covers all facets. The Truckline
acquisition is already exceeding the targets set at time of acquisition.
Personal
(which may be
non-financial)
30%
59
Bapcor Limited Annual Report 2020FINANCIAL REPORTING DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
Type of
performance
measure and
weighting at
target
Personal
(which may be
non-financial)
30%
KMP Performance measure
FY20 performance
A detailed explanation
of the group’s
achievements in the
non-financial areas
are contained in
section 5 of the
Directors’ Report.
• Organic growth: for each business segment objectives are set to deliver
organic growth and market share gains. The main measure of same store
sales was exceeded in FY20 with Burson trade being over 6% for the year
and Autobarn 9.5%. NZ was behind the prior year due to COVID-19
lockdowns.
• New stores: the number of new stores required in business units to achieve
growth targets. These targets were impacted in FY20 by COVID-19 with the
targets not being achieved.
• Systems and processes: with objectives focused on the long term
sustainability of the company in areas such as information technology and
logistics. In this area key targets were around implementation of a retail
“point of sale” system to replace the 25 year old legacy system; upgrade
of the central computing infrastructure to ensure reliability; achieve savings
on telecommunications costs.
• Compliance, governance and risk management: requiring processes and
procedures to ensure achievement of compliance requirements and the
identification and management of risk
Continued
• Major projects: for the achievement of milestones, deliverables and
benefits of major projects such as the Warehouse Management System
(WMS) implementation into Nunawading warehouse and achieve efficiency
gains as well as prove them system for the new Victorian central DC. The
new Victorian DC at Tullamarine is our other significant project. It will
feature a state of the art automated storage system and will consolidate
over 10 warehouses into one highly efficient facility, resulting in significant
reductions in operating costs and inventory holdings. This project needs to
be delivered effectively, efficiently and to achieve the operation efficiency
improvements.feature a state of the art automated storage system and
will consolidate over 10 warehouses into one highly efficient facility, resulting
in significant reductions in operating costs and inventory holdings. This
project needs to be delivered effectively, efficiently and to achieve the
operation efficiency improvements.
60
Bapcor Limited Annual Report 2020FINANCIAL REPORTING DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
The following table shows the actual STI outcomes for each of the executive KMP for FY20:
KMP
D Abotomey
G Fox
C Magill
M Storey
M Cooper
S Drummy
T Cockayne
J Nicol
A Laing
Total
Target STI as
a % of FAR
Maximum STI as
a % of FAR
Actual
STI as a % of
maximum
STI forfeited
as a % of
maximum
Actual STI
awarded $
Deferred
STI $
55%
50%
50%
50%
50%
50%
50%
50%
50%
100.0%
75.0%
75.0%
75.0%
75.0%
75.0%
75.0%
75.0%
75.0%
45.2%
57.2%
64.9%
51.3%
52.4%
53.9%
58.9%
53.1%
54.7%
54.8%
42.8%
35.1%
48.7%
47.6%
46.1%
41.1%
46.9%
45.3%
593,070
302,438
280,025
159,216
192,568
175,738
198,902
163,207
155,762
2,220,926
-
-
-
-
-
-
-
-
-
-
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. Any deferred amount is payable to the
executive after the release of the year ending 30 June 2021 financial results. In FY20 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.
61
Bapcor Limited Annual Report 2020FINANCIAL REPORTING DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
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 FY20 and prior years are as follows:
Administration
Who participates?
What is the LTI opportunity?
Performance Rights
The LTI is administered by the Board.
In FY20 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 FY20 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 FY20, 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 FY20 are set out
following this table.
Performance measures
Each executive is granted two tranches of Performance Rights.
Shares
Participation in new issues
Limitations
Trustee
Quotation
Amendments
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 FY20 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.
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 FY20 or prior years.
62
Bapcor Limited Annual Report 2020FINANCIAL REPORTING DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
Clawback
Other terms
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 FY20 an offer to participate was made to 9 of Bapcor’s executive KMPs. These allocated Performance Rights
have a performance period ending 30 June 2022 at which time the performance hurdles are tested. A summary of the terms
are in the following table:
Grant date
6/09/2019
1/11/2019
Performance hurdle
Relative TSR
EPS
Relative TSR
EPS
Performance period
1/07/2019 to 30/06/2022
1/07/2019 to 30/06/2022
Test date
Expiry date
Quantity granted
Exercise price
30/06/2022
16/09/2034
30/06/2022
16/09/2034
177,794
177,794
104,780
104,780
Nil
Nil
Fair value at grant date
$5.64
$5.64
$5.64
$5.64
Other conditions
Restriction on sale to 30/06/2023
Restriction on sale to 30/06/2023
Share price on valuation date
Volatility
Dividend yield
Risk free rate
$6.78
25.52%
2.51%
0.83%
Relative total shareholder return hurdle
$7.04
25.21%
2.41%
0.79%
Fifty per cent of the Performance Rights granted to a participant will vest subject to a TSR performance hurdle that
assesses performance by measuring capital growth in the share price together with income returned to shareholders,
measured over the performance period against a Comparator Group of companies. The Performance Rights will vest
by reference to Bapcor’s TSR performance ranking against this Comparator Group of companies, as follows:
Bapcor’s TSR relative to the Comparator Group
over the performance period
Percentage of TSR Rights vesting
Less than 50th percentile
Equal to 50th percentile
Nil
50%
Greater than 50th percentile and less than 75th percentile
Pro-rata straight-line vesting
Equal to or greater than 75th percentile
100%
TSR for Bapcor and the companies in the Comparator Group will be calculated as follows:
• TSR will be measured between 30 June 2019 and 30 June 2022 (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.
63
Bapcor Limited Annual Report 2020FINANCIAL REPORTING DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
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
APE
ARB
BGP
BRG
CKF
CTD
DMP
FLT
GUD
HVN
IEL
IVC
JBH
KGN
KMD
PMV
RBD
SLK
SUL
TPW
WEB
AP Eagers
ARB Corporation
Briscoe Group Australasia
Breville Group
Collins Foods
Corporate Travel Management Ltd
Domino's Pizza Enterprises Ltd
Flight Centre Travel Group Ltd
GUD Holdings Ltd
Harvey Norman Holdings Ltd
IDP Education Ltd
InvoCare Ltd
JB Hi-Fi Ltd
Kogan.com Ltd
Kathmandu Holdings
Premier Investments
Restaurant Brands New Zealand
SeaLink Travel Group
Super Retail Group
Temple & Webster Group
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 FY19 actual statutory EPS of 34.4 cents per share.
• Basic EPS is calculated in accordance with AASB 133 Earnings Per Share.
• The proportion of the EPS Rights that vest at the end of the Performance Period will be determined as follows:
Bapcor's compound annual EPS growth
over the performance period
Percentage of EPS Rights Vesting
Less than 7.5%
7.5%
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 FY20 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 FY20 the following Performance Rights were independently tested by third parties:
The LTI granted to 5 executives on 4 December 2017, was independently tested by a third party against the company’s FY20
TSR and EPS performance. The extent to which they vested is as follows:
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Bapcor Limited Annual Report 2020FINANCIAL REPORTING DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
Relative TSR Rights: Bapcor’s TSR performance ranked at the 64.2 percentile of the comparator group. This resulted in 78.4%
of the tranche vesting.
Compound annual growth rate (‘CAGR’) of EPS: Bapcor’s CAGR of EPS was 7.6%. This resulted in 20.6% of the tranche vesting.
The LTI granted to the CEO on 4 December 2017, was independently tested by a third party against the company’s FY20 TSR
and EPS performance. The extent to which they vested is as follows:
Relative TSR Rights: Bapcor’s TSR performance ranked at the 64.2 percentile of the comparator group. This resulted in 78.4%
of the tranche vesting.
CAGR of EPS: Bapcor’s CAGR of EPS was 7.6%. This resulted in 20.6% 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.
14.6 Cash and realisable remuneration (non-statutory)
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 FY20 STI award that is not deferred and is paid in August 2020.
The table also includes the value of previous years’ deferred STI and LTI awards that vested during FY20 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
Fixed
remuneration1
$
FY20 cash STI2
$
Total cash in
respect of FY20
$
D Abotomey
1,251,000
593,070
1,844,070
G Fox
C Magill
M Storey
M Cooper
S Drummy
T Cockayne
J Nicol
A Laing
Total
671,000
547,000
393,000
467,000
421,000
429,000
391,000
362,000
302,438
280,025
159,216
192,568
175,738
198,902
163,207
155,762
973,438
827,025
552,216
659,568
596,738
627,902
554,207
517,762
4,932,000
2,220,926
7,152,926
Previous year awards that vested
during FY20
Prior year
deferred STI
received3
$
Vested
and unrestricted
LTI4
$
Total received
and realisable
during FY20
$
-
-
-
-
-
-
-
-
-
-
663,303
449,753
262,450
-
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-
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-
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1,423,191
1,089,475
552,216
909,459
596,738
627,902
554,207
517,762
1,625,397
8,778,323
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. This includes the voluntary reductions taken by the KMP during the year.
2. FY20 cash STI is the amount accrued and payable in respect of FY20 STI opportunity. It is the cash amount to be paid in August 2020. It will differ to
the amount in section 14.7.1 as it doesn’t include any adjustment relating to prior year under or over accrual.
3. There is no prior year deferred STI.
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 $6.27 per share.
14.7 Statutory details of remuneration
The statutory remuneration disclosures for the year ended 30 June 2020 are detailed below under the following headings
and are prepared in accordance with Australian Accounting Standards (AASBs).
14.7.1 Remuneration of KMP
14.7.2 Service agreements
14.7.3 NED remuneration
14.7.4 Share-based compensation
14.7.5 Equity instrument disclosures relating to KMP
14.7.6 Total shares under option or right to KMP
14.7.7 Loans to KMP
65
Bapcor Limited Annual Report 2020FINANCIAL REPORTING DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
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Bapcor Limited Annual Report 2020FINANCIAL REPORTING
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67
Bapcor Limited Annual Report 2020FINANCIAL REPORTING
DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
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 $1,313,250 (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
75% 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.
68
Bapcor Limited Annual Report 2020FINANCIAL REPORTING DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
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 2019.
NED type
Chairman
Member
Board
$
288,400
113,300
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 FY20 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.
Note – for two months during FY20 NED’s voluntary reduced their base remuneration by 30% due to COVID-19.
NED
A Harrison
M Haseltine
T Ryan
J Macdonald1
Financial year
Board fees
$
Committee fees
$
Superannuation
$
2020
2019
2020
2019
2020
2019
2020
2019
249,013
272,268
98,636
100,720
98,640
100,457
98,640
83,342
-
-
17,411
18,313
26,118
27,397
26,118
22,730
21,003
20,531
11,425
11,279
12,282
12,146
12,282
9,764
Total
$
270,016
292,799
127,472
130,312
137,040
140,000
137,040
115,836
1. 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.
69
Bapcor Limited Annual Report 2020FINANCIAL REPORTING DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
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70
Bapcor Limited Annual Report 2020FINANCIAL REPORTING
DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
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71
Bapcor Limited Annual Report 2020FINANCIAL REPORTING
DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
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
2020
Directors
A Harrison
T Ryan
M Haseltine
J Macdonald
68,570
34,730
32,125
10,254
-
-
-
-
D Abotomey
1,641,323
88,802
Other KMP
G Fox
C Magill
M Cooper
390,553
631,424
62,306
18,143
10,476
9,845
-
980
905
290
-
-
-
-
16,819
4,546
6,819
12,819
6,819
6,819
6,819
9,173
Total
2,871,285
127,266
2,175
70,633
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
M Cooper
P Tilley
G Jarrett
22,451
13,180
14,719
71,730
41,858
7,837
59,816
39,855
38,378
40,487
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(305,790)
(182,518)
(200,000)
(53,806)
(742,114)
-
-
-
-
-
(200,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(7,837)
(1,845,046)
85,389
40,256
39,849
23,363
1,431,154
232,997
448,719
27,518
2,329,245
68,570
34,730
32,125
10,254
1,641,323
390,553
631,424
-
-
-
62,306
(51,558)
(55,206)
-
-
Total
4,601,566
405,751
3,615
20,000
(200,000)
(1,959,647)
2,871,285
72
Bapcor Limited Annual Report 2020FINANCIAL REPORTING DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
14.7.6 Total shares under option or right to KMP
Date granted
Vest date
Expiry date
Exercise price
of rights
Quantity
Performance rights plans
4/12/17
26/09/18
29/10/18
6/09/19
1/11/19
Total shares under option of right
30/06/20
30/06/21
30/06/21
30/06/22
30/06/22
n/a
n/a
n/a
n/a
n/a
$0.00
$0.00
$0.00
$0.00
$0.00
387,741
189,710
170,886
355,588
209,560
1,313,485
14.7.7 Loans to executive KMP
No loans were made to executive KMP in FY20 and there are no outstanding loans to any KMP.
73
Bapcor Limited Annual Report 2020FINANCIAL REPORTING DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
15. MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
In early August 2020, in relation to the COVID-19 pandemic, the Victorian Government mandated closures of many
Melbourne based businesses for six weeks. As discussed in section 9 of the Directors’ Report, it is not yet possible to
determine the financial impact of these restrictions. Any further government restrictions may also affect the operations
and earnings of Bapcor, of which the impact cannot be determined at this time.
On 11 August 2020, Bapcor announced the appointment of two new Non-Executive Directors effective 1 September 2020,
Mr James Todd and Mr Mark Powell.
Apart from these matters and the dividend declared as per section 4 of the Directors’ Report, no other matter or
circumstance has arisen since 30 June 2020 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 FY20 financial year, the company paid a premium of $400,000 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 37 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 37 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 76 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.
74
Bapcor Limited Annual Report 2020FINANCIAL REPORTING DIRECTORS’ REPORT Continued
AS AT 30 JUNE 2020
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
19 August 2020
Melbourne
Darryl Abotomey
Chief Executive Officer and Managing Director
75
Bapcor Limited Annual Report 2020FINANCIAL REPORTING
AUDITOR’S INDEPENDENCE DECLARATION
Auditor’s Independence Declaration
As lead auditor for the audit of Bapcor Limited for the year ended 30 June 2020, I declare that to the
best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Bapcor Limited and the entities it controlled during the period.
Jason Perry
Partner
PricewaterhouseCoopers
Melbourne
19 August 2020
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
76
Bapcor Limited Annual Report 2020
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2020
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors’ declaration
Independent auditor’s report to the members of Bapcor Limited
Shareholder information
Corporate directory
78
79
80
81
82
137
138
145
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 19 August 2020. The directors have the
power to amend and reissue the financial statements.
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2020
Revenue from continuing operations
Note
Other income and 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
Income tax expense
Profit after income tax expense for the year
Other comprehensive income
Items that may be reclassified to profit or loss
Foreign currency translation
Changes in the fair value of cash flow hedges
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Profit for the year is attributable to:
Non-controlling interest
Owners of Bapcor Limited
Total comprehensive income for the year is attributable to:
Non-controlling interest
Owners of Bapcor Limited
Basic earnings per share
Diluted earnings per share
5
6
7
7
7
8
Consolidated
2020
$’000
2019
$’000
1,462,747
1,296,582
3,222
4,053
(782,473)
(688,811)
(321,565)
(276,491)
(21,762)
(30,885)
(19,632)
(27,599)
(60,846)
(43,556)
(12,001)
(18,393)
(5,028)
(1,827)
(80,052)
(19,765)
(12,077)
(14,127)
(50,384)
(932)
(17,100)
(15,267)
111,372
134,659
(32,655)
(38,127)
78,717
96,532
(4,640)
(3,216)
8,947
(632)
(7,856)
8,315
70,861
104,847
24
(455)
79,172
(446)
96,978
78,717
96,532
159
(164)
70,702
105,011
70,861
104,847
Cents
Cents
27
27
26.97
26.85
34.40
34.27
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes
78
Bapcor Limited Annual Report 2020
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2020
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Other assets
Total current assets
Non-current assets
Trade and other receivables
Property, plant and equipment
Right-of-use assets
Intangibles
Deferred tax
Other assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Lease liabilities
Derivative financial instruments
Income tax
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
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
2020
$’000
2019
$’000
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
10
11
20
12
10
14
13
15
8
12
16
19
20
17
18
19
20
17
22
23
24
25
126,300
163,993
363,049
131
297
47,610
162,494
326,147
897
-
653,770
537,148
-
75,179
157,990
757,437
34,710
881
1,026,197
48
60,745
-
734,529
18,424
2,412
816,158
1,679,967
1,353,306
222,204
183,645
58,672
4,652
2,030
41,871
-
494
2,856
47,208
329,429
234,203
229,072
380,376
123,136
-
16,271
-
349
16,191
368,479
396,916
697,908
631,119
982,059
722,187
869,418
623,536
1,397
109,432
980,247
1,812
7,308
89,110
719,954
2,233
982,059
722,187
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
Bapcor Limited Annual Report 2020
79
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2020
Consolidated
Contributed
equity
$’000
Other
$’000
Reserves
$’000
Retained
earnings
$’000
Non-
controlling
Interests
$’000
Total
equity
$’000
Balance at 1 July 2018
610,951
(4,495)
(3,645)
37,138
2,397
642,346
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 22)
Share-based payments (note 23)
Treasury shares (note 22)
Dividends paid (note 26)
-
-
-
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)
Balance at 30 June 2019
631,697
(8,161)
7,308
89,110
2,233
722,187
Consolidated
Contributed
equity
$’000
Other
$’000
Reserves
$’000
Retained
earnings
$’000
Non-
controlling
Interests
$’000
Total
equity
$’000
Balance at 1 July 2019
631,697
(8,161)
7,308
89,110
2,233
722,187
Adjustment for change in
accounting policy (note 3)
-
-
-
(9,156)
-
(9,156)
Balance at 1 July 2019 - restated
631,697
(8,161)
7,308
79,954
2,233
713,031
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 22)
Share-based payments (note 23)
Treasury shares (note 22)
Dividends paid (note 26)
-
-
-
246,955
-
-
-
-
-
-
-
-
(1,073)
-
-
79,172
(455)
78,717
(7,890)
-
34
(7,856)
(7,890)
79,172
(421)
70,861
-
1,979
-
-
-
-
-
(49,694)
-
-
-
-
246,955
1,979
(1,073)
(49,694)
Balance at 30 June 2020
878,652
(9,234)
1,397
109,432
1,812
982,059
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
80
Bapcor Limited Annual Report 2020
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2020
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
Borrowing costs
Transaction costs relating to acquisition of business
Income taxes paid
F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
Consolidated
Note
2020
$’000
2019
$’000
1,616,318
1,421,923
(1,364,672)
(1,291,290)
251,646
130,633
(2,023)
(449)
(11,607)
(1,827)
(12,093)
(1,041)
(14,487)
(932)
(35,487)
(36,439)
Net cash from operating activities
28
200,253
65,641
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 used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Share issue transaction costs
Purchase of treasury shares
Net proceeds/(repayments) from borrowings
Dividends paid
Repayment of lease liabilities
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
31
14
15
22
22
22
26
(55,697)
(16,911)
(30,528)
(8,020)
1,334
-
(43,731)
(18,061)
(21,667)
(7,600)
1,468
14,394
(109,822)
(75,197)
236,147
(4,623)
(1,073)
(152,200)
-
-
(3,666)
54,100
(35,650)
(33,410)
(54,552)
-
-
(1,545)
(11,951)
15,479
78,480
47,610
210
5,923
40,154
1,533
Cash and cash equivalents at the end of the financial year
126,300
47,610
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
Bapcor Limited Annual Report 2020
81
Basis of preparation
Note 1. Significant accounting policies
Note 2. Critical accounting judgements, estimates and assumptions
Note 3. Adoption of AASB 16 Leases
Group performance
Note 4. Segment information
Note 5. Revenue
Note 6. Other income and gains
Note 7. Expenses
Note 8. Income tax
Note 9. Discontinued operations
Assets and liabilities
Note 10. Trade and other receivables
Note 11. Inventories
Note 12. Other assets
Note 13. Right-of-use assets
Note 14. Property, plant and equipment
Note 15. Intangibles
Note 16. Trade and other payables
Note 17. Provisions
Note 18. Borrowings
Note 19. Lease liabilities
Note 20. Derivative financial instruments
Note 21. Fair value measurement
Capital structure, financing and risk management
Note 22. Issued capital
Note 23. Reserves
Note 24. Retained profits
Note 25. Non-controlling interest
Note 26. Dividends
Note 27. Earnings per share
Note 28. Reconciliation of profit after income tax to net cash from operating activities
Note 29. Financial risk management
Group structure
Note 30. Related party transactions
Note 31. Business combinations
Note 32. Deed of cross guarantee
Note 33. Parent entity information
Note 34. Interests in subsidiaries
Other
Note 35. Related party transactions - key management personnel disclosures
Note 36. Share-based payments
Note 37. Remuneration of auditors
Note 38. Commitments and contingent liabilities
Note 39. Events after the reporting period
82
83
85
85
88
9 1
92
92
93
96
97
99
100
100
102
103
107
107
109
1 1 1
1 1 2
113
114
1 1 6
1 1 7
1 1 7
118
1 1 9
120
1 2 1
125
125
128
130
1 3 1
132
133
135
136
136
Bapcor Limited Annual Report 2020FINANCIAL STATEMENTS30 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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. Refer to note 3 for
details of the adoption of AASB 16 Leases.
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 (‘IFRS’) 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.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only.
Supplementary information about the parent entity is disclosed in note 33.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Bapcor Limited (‘company’
or ‘parent entity’) as at 30 June 2020 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 on consolidation. 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.
83
Bapcor Limited Annual Report 202030 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTE 1. SIGNIFICANT ACCOUNTING POLICIES continued
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.
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.
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.
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.
84
Bapcor Limited Annual Report 2020FINANCIAL STATEMENTS30 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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 10 - Trade and other receivables
• Note 11 - Inventories
• Note 14 - Property, plant and equipment
• Note 15 - Intangibles
• Note 17 - Provisions
• Note 19 - Lease liabilities
• Note 31 - Business combinations
• Note 36 - Share-based payments
NOTE 3. ADOPTION OF AASB 16 LEASES
This note explains the impact of the adoption of AASB 16 Leases on the consolidated entity’s financial statements and
discloses the new accounting policies and critical accounting judgements, estimates and assumptions that have been
applied from 1 July 2019.
Leasing activities and how these are accounted for
The consolidated entity leases various properties, equipment and vehicles. Lease terms are negotiated on an individual
basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants,
but leased assets may not be used as security for borrowing purposes.
Prior to 1 July 2019, leases of property and equipment were classified as operating leases. Payments made under operating
leases (net of any incentives received from the lessor) were charged to the income statement, within occupancy expenses.
From 1 July 2019, the consolidated entity applied a single recognition and measurement approach for all leases of which
it is the lessee, except for low-value assets. The consolidated entity recognised lease liabilities to make lease payments and
right-of-use assets representing the right to use the underlying assets. Leases are recognised as a right-of-use asset and
a corresponding liability at the date at which the leased asset is available for use by the consolidated entity. Each lease
payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease
period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The
right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
Impact on the financial statements
The consolidated entity has adopted AASB 16 Leases using the modified retrospective method from 1 July 2019, and has not
restated comparatives, as permitted under the specific transitional provisions in the standard. The reclassifications and
adjustments arising from the new leasing rules are therefore recognised in the opening balance sheet on 1 July 2019.
In applying AASB 16 Leases for the first time, the consolidated entity has used the following practical expedients permitted
by the standard:
•
•
•
•
•
the use of a single discount rate to a portfolio of leases with reasonably similar characteristics;
reliance on previous assessments on whether leases are onerous;
the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of the initial application;
the accounting for operating leases for low value leases; and
the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
On adoption of AASB 16 Leases, the consolidated entity recognised lease liabilities in relation to leases which had previously
been classified as ‘operating leases’ under the principles of AASB 117 Leases. These liabilities were measured at the present
value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of 1 July 2019. The
weighted average lessee’s incremental borrowing rate applied to the lease liabilities on 1 July 2019 was 4.0%.
The associated right-of-use assets for leases were measured on a retrospective basis as if the AASB 16 Leases standard had
been applied since the commencement date, but discounted using the lessee’s incremental borrowing rate at the date of
initial application.
85
Bapcor Limited Annual Report 202030 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTE 3. ADOPTION OF AASB 16 LEASES continued
The change in accounting policy affected the following items in the balance sheet on 1 July 2019 (a positive number reflects
an increase):
Assets
Property, plant and equipment (note 14)
Deferred tax assets (note 8)
Right-of-use assets (note 13)
Total assets
Liabilities
Trade and other payables
Provisions (note 17)
Deferred tax liabilities (note 8)
Lease liabilities
Total liabilities
Equity
Retained earnings (note 24)
The recognised right-of use assets relate to the following types of assets:
Properties
Motor vehicles
Changes in
Consolidated
1 July 2019
$’000
(691)
47,204
145,064
191,577
(862)
(1,349)
43,295
159,649
200,733
(9,156)
Consolidated
1 July 2019
$’000
142,250
2,814
145,064
A reconciliation of the operating leases commitments note provided in the 30 June 2019 accounts to the adopted lease
liability is as follows:
Operating lease commitments as at 1 July 2019 (note 38)
Add: adjustments as a result of a different treatment of options included
Less: discounting impact
Add: adjustments for changes in underlying lease composition
Lease liability on adoption
Of which are:
Current lease liabilities
Non-current lease liabilities
Consolidated
1 July 2019
$’000
138,967
31,293
(18,532)
7,921
159,649
53,013
106,636
159,649
86
Bapcor Limited Annual Report 2020FINANCIAL STATEMENTS30 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 3. ADOPTION OF AASB 16 LEASES continued
Segment EBITDA, assets and liabilities for June 2020 all changed as a result of the change in accounting policy. The
following table shows the impact of the adoption (a positive number reflects an increase to the financial measure):
Changes in
Consolidated – 30 Jun 2020
Trade
$’000
Bapcor NZ
$’000
Specialist
Wholesale
$’000
Retail
$’000
Unallocated
/ Head Office
$’000
Total
$’000
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
15,565
7,258
12,639
23,794
-
59,255
-
53,458
6,324
-
(527)
(154)
(373)
168,970
168,970
181,808
181,808
40,256
25,670
28,410
68,744
5,890
45,901
26,808
30,778
78,321
-
Earnings per share for the 30 June 2020 financial year decreased by 0.13 cents per share as a result of the adoption of AASB 16
Leases.
COVID-19-related rent concessions
The consolidated entity has elected to apply AASB 2020-4 Amendments to Australian Accounting Standards – COVID-19-
Related Rent Concessions which provides a practical expedient that permits lessees not to assess whether rent concessions
that occur as a direct consequence of the COVID-19 pandemic and meet specified conditions are lease modifications and,
instead, to account for those rent concessions as if they were not lease modifications. This has been applied to all rent
concessions that meet the requirements of the practical expedient and has been quantified as a benefit of $1.5M in the
FY20 financial year.
87
Bapcor Limited Annual Report 202030 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTE 4. 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
Represents the trade focused automotive aftermarket parts distribution to independent
and chain mechanic workshops. Includes the operations of Burson Auto Parts and Precision
Automotive Equipment.
Bapcor NZ
Represents the operations of Brake & Transmission, Autolign and HCB Technologies.
Specialist Wholesale
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, Toperformance, Commercial Truck Parts group including the recently acquired
operations of Diesel Drive and Truckline.
Retail
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.
Operating segment information
AASB 16 Leases was adopted using the modified retrospective approach and as such the comparatives have not been
restated (refer to note 3). Therefore, the current and comparative operating segment information are not directly comparable.
88
Bapcor Limited Annual Report 2020FINANCIAL STATEMENTS30 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. SEGMENT INFORMATION continued
Consolidated - 2020
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
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
561,651
561,651
156,317
156,317
520,359
292,685
520,359
292,685
4,185
4,185
96,678
26,903
62,694
57,647
(29,804)
1,535,197
1,535,197
(72,450)
1,462,747
214,118
( 1 ,1 02 )
(80,052)
(19,765)
(1,827)
111,372
(32,655)
78,717
336,050
268,829
557,039
378,845
139,204
1,679,967
147,398
63,358
118,598
133,801
234,753
1,679,967
697,908
697,908
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
89
Bapcor Limited Annual Report 202030 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTE 4. SEGMENT INFORMATION continued
Geographical information
Australia
New Zealand
Other
Geographical
non-current assets
2020
$’000
800,310
189,908
1,269
2019
$’000
626,801
169,858
1,075
991,487
797,734
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.
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.
90
Bapcor Limited Annual Report 2020FINANCIAL STATEMENTS30 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 5. REVENUE
Revenue from contracts with customers
Sales revenue
Total revenue
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 recognition4
Goods transferred at a point in time
Services transferred over time
Intersegment sales
Consolidated
2020
$’000
2019
$’000
1,462,747
1,296,582
1,462,747
1,296,582
Consolidated
2020
$’000
2019
$’000
1,374,695
1,192,903
156,317
164,965
4,185
860
(72,450)
(62,146)
1,462,747
1,296,582
1,506,734
1,330,637
28,463
(72,450)
28,091
(62,146)
1,462,747
1,296,582
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 service fees
Revenue from services are recognised over time as the services are rendered in line with the customer contract terms.
4. The prior year split for timing of revenue recognition has been restated to reflect current disclosure methodology and allow comparability.
91
Bapcor Limited Annual Report 202030 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTE 6. OTHER INCOME AND GAINS
Gain on settlement of deferred consideration
Rental income
Other income and gains
Consolidated
2020
$’000
2019
$’000
-
4,053
3,222
3,222
-
4,053
In the prior year the consolidated entity completed the Baxters acquisition deferred settlement which resulted in a gain of
$4,053,000 being recognised in the statement of comprehensive income.
The current year rental income relates to rental recoveries from franchise locations. This was previously offset against rental
expense within occupancy expenses pre-adoption of AASB 16 Leases.
NOTE 7. EXPENSES
Profit before income tax includes the following specific expenses:
Depreciation and amortisation expense
Plant and equipment
Motor vehicles
Properties right-of-use assets
Motor vehicles right-of-use assets
Amortisation
Make good provision
Acquisition and divestment costs
Professional consultant costs
Other transaction costs
Finance costs
Interest and finance charges paid/payable
Interest and finance charges paid/payable on lease liabilities
Borrowing cost write offs due to refinancing process
Leases
Minimum lease payments
Short-term and low value lease payments
Superannuation expense
Consolidated
2020
$’000
2019
$’000
10,818
5,126
57,116
1,431
3,640
1,921
80,052
766
1,061
1,827
13,441
6,324
-
9,356
4,331
-
-
2,946
467
17,100
824
108
932
15,009
-
258
19,765
15,267
-
220
220
42,208
-
42,208
Defined contribution superannuation expense
20,502
18,065
92
Bapcor Limited Annual Report 2020FINANCIAL STATEMENTS30 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 8. INCOME TAX
Income tax expense
Current tax on profits for the year
Deferred tax expense
Adjustment recognised for prior periods
Total income tax expense
Deferred tax included in income tax expense comprises:
Decrease/(increase) in deferred tax assets
Increase/(decrease) in deferred tax liabilities
Deferred tax expense
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense
Tax at the statutory tax rate of 30%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Acquisition costs
Gain on deferred settlement
Adjustment recognised for prior periods
Difference in overseas tax rates
Other
Income tax expense
Consolidated
2020
$’000
2019
$’000
36,685
38,930
(2,929)
(1,101)
(299)
(504)
32,655
38,127
(6,045)
3,116
(2,929)
200
(499)
(299)
111,372
134,659
33,412
40,398
548
-
(1,101)
(347)
143
280
(1,216)
(504)
(421)
(410)
32,655
38,127
93
Bapcor Limited Annual Report 202030 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTE 8. 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
Lease liabilities
Other
Amounts recognised in equity:
Transaction costs on share issue
Cash flow hedge
Share-based payment
Deferred tax asset
Set off deferred tax liabilities pursuant to set-off provisions
Net deferred tax asset
Movements:
Opening balance
Credited/(charged) to profit or loss
Credited/(charged) to equity
Additions through business combinations (note 31)
Charged to other comprehensive income
Derecognised on divestment
Adjustment for change in accounting policy (note 3)
Other
Closing balance
Consolidated
2020
$’000
2019
$’000
1,155
12,765
3,144
18,584
53,908
10,974
1,954
11,714
1,985
15,084
-
8,708
100,530
39,445
1,366
1,351
1,425
4,142
830
191
1,665
2,686
104,672
42,131
(69,962)
(23,707)
34,710
18,424
42,131
6,045
536
7,836
920
-
47,204
41,936
(200)
(471)
2,590
866
(943)
-
-
(1,647)
104,672
42,131
94
Bapcor Limited Annual Report 2020FINANCIAL STATEMENTS30 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 8. INCOME TAX continued
Deferred tax liability
Deferred tax liability comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Customer contracts
Trademarks
Right-of-use assets
Other
Amounts recognised in equity:
Cash flow hedge
Deferred tax liability
Set off deferred tax liabilities pursuant to set-off provisions
Net deferred tax liability
Movements:
Opening balance
Charged/(credited) to profit or loss
Charged/(credited) to equity
Adjustment on change in accounting policy (note 3)
Closing balance
Consolidated
2020
$’000
2019
$’000
5,206
17,514
47,242
-
5,642
17,565
-
344
69,962
23,551
-
156
69,962
23,707
(69,962)
(23,707)
-
-
23,707
3,116
(156)
43,295
24,181
(499)
25
-
69,962
23,707
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.
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.
95
Bapcor Limited Annual Report 202030 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTE 9. DISCONTINUED OPERATIONS
Description
The discontinued operations in the prior financial period relate to the sale of the TRS business unit of the Bapcor NZ segment
that occurred 3 July 2018. Given the timing of the disposal, there was no profit or loss or cash flow contribution to the
consolidated entity in the prior financial period.
Carrying amounts of assets and liabilities disposed
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Property, plant and equipment
Intangibles
Deferred tax asset
Total assets
Trade and other payables
Income tax
Provisions
Total liabilities
Net assets
Details of the disposal
Net cash sale consideration, net of divestment costs paid
Carrying amount of net assets disposed
Derecognition of equity reserves
Gain on disposal before income tax
Gain on disposal after income tax
Consolidated
2020
$’000
2019
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
1,243
2,404
5,497
218
123
10,012
943
20,440
1,497
709
451
2,657
17,783
Consolidated
2020
$’000
2019
$’000
-
-
-
-
-
18,238
(17,783)
(455)
-
-
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
coordinated 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 2020FINANCIAL STATEMENTS30 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 10. TRADE AND OTHER RECEIVABLES
Current assets
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
Non-current assets
Customer loans
Less: Allowance for expected credit losses
Consolidated
2020
$’000
2019
$’000
147,925
143,352
(1,623)
(8,522)
(1,325)
(5,560)
137,780
136,467
562
(562)
-
17,436
8,777
26,213
933
(605)
328
18,268
7,431
25,699
163,993
162,494
-
-
-
118
(70)
48
163,993
162,542
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 $9,084,000 (2019: $6,235,000). This includes specifically
identified provisions of $7,562,000 (2019: $5,471,000) and an estimated credit loss provision of $1,522,000 (2019: $764,000).
The increase is due to the current level of economic uncertainty in light of the COVID-19 pandemic.
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, $343,000 (2019: $633,000) are non-interest bearing. $219,000 (2019: $418,000) of loans have a
weighted average annual interest rate of 10.5% (2019: 9.8%).
Other receivables relate to rebate and other non-trading receivables which 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 are as follows:
Current and not due
31 - 60 days
61 - 90 days
91+ days
Consolidated
2020
$’000
2019
$’000
98,709
32,246
5,202
1,623
75,952
43,386
10,619
6,886
137,780
136,843
97
Bapcor Limited Annual Report 202030 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTE 10. TRADE AND OTHER RECEIVABLES continued
Movements in the allowance for expected credit losses of trade receivables and customer loans 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
2020
$’000
2019
$’000
6,235
3,882
1,080
(2,102)
(11)
-
6,918
158
576
(1,360)
(20)
(37)
9,084
6,235
Bapcor recognised a loss of $3,882,000 (2019: $158,000) 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 2020FINANCIAL STATEMENTS30 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 11. INVENTORIES
Current assets
Stock in transit - at cost
Stock on hand - at cost
Less: Provision for slow moving inventory
Consolidated
2020
$’000
2019
$’000
23,863
14,341
395,039
355,453
(55,853)
339,186
(43,647)
311,806
363,049
326,147
Total stock on hand and in transit has increased by $49.1M since 30 June 2019, of which new greenfield stores, business
acquisitions, absorption costing and foreign currency translation account for $49.7M. The remaining ($0.6M) decrease
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 profit
Additions through business combinations
Inventory written off against provision
Foreign currency translation
Derecognised on divestment
Closing balance
Consolidated
2020
$’000
2019
$’000
(43,647)
(46,839)
(4,857)
(9,333)
1,844
140
-
(580)
(3,505)
4,155
236
2,886
(55,853)
(43,647)
The additional provisions recognised against profit has increased compared to prior financial year due to the current level
of economic uncertainty in light of the COVID-19 pandemic.
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 202030 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTE 12. OTHER ASSETS
Current assets
Employee loans
Non-current assets
Make good asset
Employee loans
Consolidated
2020
$’000
2019
$’000
297
-
881
-
881
1,178
1,170
1,242
2,412
2,412
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. There are no loans outstanding to key management personnel
as at 30 June 2020.
NOTE 13. RIGHT-OF-USE ASSETS
Non-current assets
Properties - right-of-use
Less: Accumulated depreciation
Motor vehicles - right-of-use
Less: Accumulated depreciation
Consolidated
2020
$’000
2019
$’000
210,573
(55,055)
155,518
3,786
(1,314)
2,472
157,990
-
-
-
-
-
-
-
100
Bapcor Limited Annual Report 2020FINANCIAL STATEMENTS30 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 13. RIGHT-OF-USE ASSETS 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 30 June 2019
Adjustment for change in accounting policy (note 3)
Restated balance at 1 July 2019
Additions
Additions through business combinations (note 31)
Disposals
Remeasurement
Exchange differences
Depreciation expense
Accelerated depreciation expense*
Property
$’000
Motor vehicles
$’000
Total
$’000
-
142,250
142,250
24,731
16,150
(2,945)
32,982
(534)
(52,027)
(5,089)
-
2,814
2,814
557
1,042
(13)
(474)
(23)
-
145,064
145,064
25,288
17,192
(2,958)
32,508
(557)
(1,431)
(53,458)
-
(5,089)
Balance at 30 June 2020
155,518
2,472
157,990
* Accelerated depreciation relates to the Victorian DC Consolidation project and is based on the estimated exit dates of each site. Refer to note 17
for more information.
Significant accounting policies
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost,
which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or
before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except
where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing
the underlying asset, and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated
useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the
leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are
subject to impairment or adjusted for any remeasurement of lease liabilities.
The consolidated entity has elected not to recognise a right-of-use asset and corresponding lease liability for
short-term leases with terms of twelve months or less and leases of low-value assets. Lease payments on these assets
are expensed to profit or loss as incurred.
101
Bapcor Limited Annual Report 202030 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTE 14. PROPERTY, PLANT AND EQUIPMENT
Non-current assets
Plant and equipment - at cost
Less: Accumulated depreciation
Motor vehicles - at cost
Less: Accumulated depreciation
Consolidated
2020
$’000
2019
$’000
99,960
(45,114)
54,846
36,963
(16,630)
20,333
76,415
(35,065)
41,350
34,093
(14,698)
19,395
75,179
60,745
The amount of work in progress included in plant and equipment is $11,663,000 (2019: $3,586,000) and relates to projects
that are not yet completed and therefore are not being depreciated.
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 2018
Additions
Additions through business combinations
Disposals
Divested
Foreign currency translation
Transfers in/(out)
Depreciation expense
Balance at 30 June 2019
Plant and
equipment
$’000
Motor
vehicles
$’000
Total
$’000
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
Adjustment for change in accounting policy (note 3)
-
(691)
(691)
Restated balance at 1 July 2019
41,350
18,704
60,054
Additions
Additions through business combinations (note 31)
Disposals
Transfers in/(out)
Foreign currency translation
Accelerated depreciation expense*
Depreciation expense
Balance at 30 June 2020
22,621
1,204
(436)
988
(63)
(983)
7,907
30,528
130
(824)
(419)
(39)
-
1,334
(1,260)
569
(102)
(983)
(9,835)
(5,126)
(14,961)
54,846
20,333
75,179
* Accelerated depreciation relates to the Victorian DC Consolidation project and is based on the estimated exit dates of each site. Refer to note 17
for more information.
102
Bapcor Limited Annual Report 2020FINANCIAL STATEMENTS30 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 14. 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 15. INTANGIBLES
Non-current assets
Goodwill
Trademarks
Customer contracts
Less: Accumulated amortisation
Software
Less: Accumulated amortisation
Consolidated
2020
$’000
2019
$’000
665,712
646,442
59,069
59,194
25,872
(8,450)
17,422
24,150
(8,916)
15,234
25,606
(6,688)
18,918
17,010
(7,035)
9,975
757,437
734,529
The amount of work in progress included in software is $12,679,000 (2019: $6,457,000) and relates to projects that are not yet
completed and therefore are not being amortised.
103
Bapcor Limited Annual Report 202030 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTE 15. 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:
Goodwill
$’000
Trademarks
$’000
Customer
contracts
$’000
Computer
software
$’000
Total
$’000
594,118
58,979
20,560
Consolidated
Balance at 1 July 2018
Additions
Additions through business combinations
Disposals
Divested
Foreign currency translation
Transfers in/(out)
Amortisation expense
-
55,778
-
(9,983)
6,529
-
-
-
-
-
-
215
-
-
Balance at 30 June 2019
646,442
59,194
Additions
Additions through business combinations
(note 31)
Disposals
Foreign currency translation
Transfers in/(out)
Amortisation expense
-
23,113
(179)
(3,664)
-
-
-
-
-
(125)
-
-
92
-
-
-
-
-
(1,734)
18,918
267
-
-
-
-
(1,763)
4,079
7,508
15
(1)
(29)
82
(467)
(1,212)
9,975
7,753
-
(23)
(25)
(569)
(1,877)
677,736
7,600
55,793
(1)
(10,012)
6,826
(467)
(2,946)
734,529
8,020
23,113
(202)
(3,814)
(569)
(3,640)
Balance at 30 June 2020
665,712
59,069
17,422
15,234
757,437
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. The testing was regularly updated and assessed up until the
date of this financial report.
Cash flow projections were based on management forecast expectations based on the FY21 budget and the latest 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.
A weighted average scenario approach was used for the cash flows in order to account for further uncertainty introduced
by the unexpected COVID-19 pandemic.
The following key assumptions were used in testing for impairment:
• Pre-tax discount rate: 12.66% (2019: 12.71%5) which reduced due to the inclusion of the lease liabilities into the gearing
calculation from the adoption of AASB 16 Leases
• Terminal value growth rate beyond 5 years: 1.80% (2019: 1.80%)
• Forecast year on year revenue and EBITDA margin growth ranges as follows:
CGU
Trade
Bapcor NZ*
Specialist Wholesale*
Retail
Revenue growth
EBITDA margin growth
2.1% - 2.8%
4.5% - 12.2%
1.8% - 8.0%
1.7% - 3.7%
0.1 - 0.4 percentage points
0.3 - 2.3 percentage points
0 - 0.9 percentage points
(0.2) – (0.1) percentage points
*
First year growth is reflective of a comparison to the base year of FY20, which was impacted by COVID-19.
5. The 2019 Annual Report disclosed a pre-tax discount rate of 11.81%. The difference is due to a computational error in converting the 2019 discount
rate from post-tax to pre-tax for disclosure purposes only.
104
Bapcor Limited Annual Report 2020FINANCIAL STATEMENTS30 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 15. INTANGIBLES continued
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, Autopro brand and ABS 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 2020 by $1.6M. This
decreased from $5.1M at 31 December 2019 due to a higher asset base.
Financial metric
Discount rate
+ 5% change
- 5 % change
Impairment of $15.1M
Increase headroom to $20.6M
Revenue growth (average)
Increase headroom to $5.7M
Impairment of $2.5M
EBITDA margin (average)
Increase headroom to $17.5M
Impairment of $14.3M
Terminal growth rate
Increase headroom to $3.7M
Impairment of $0.5M
Autopro brand
The recoverable amount of the Autopro brand is estimated to approximate its carrying amount at 30 June 2020. This has not
changed since previously reported.
Financial metric
Discount rate
+ 5% change
- 5 % change
Impairment of $0.3M
Increase headroom by $0.4M
Revenue growth (average)
No material change
Terminal growth rate
No material change
Impairment of $0.1M
No material change
ABS brand
The recoverable amount of the ABS brand is estimated to approximate its carrying amount at 30 June 2020.
Financial metric
Discount rate
+ 5% change
Impairment of $0.2M
Revenue growth (average)
No material change
Terminal growth rate
No material change
- 5 % change
No material change
Impairment of $0.1M
No material change
There have been no further indicators of impairment after the impairment testing date of 31 March 2020 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
Consolidated
2020
$’000
2019
$’000
111,274
149,857
110,762
158,339
268,348
243,438
136,233
133,903
665,712
646,442
105
Bapcor Limited Annual Report 202030 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTE 15. INTANGIBLES continued
Other intangible assets:
Bapcor NZ
Specialist Wholesale
Retail
Unallocated
Consolidated
2020
$’000
2019
$’000
5,448
20,804
50,172
67
5,569
20,903
51,554
86
76,491
78,112
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 2 and 5 years. Large scale projects are individually
assessed as part of the approval process and determination of finite life may exceed this range.
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.
106
Bapcor Limited Annual Report 2020FINANCIAL STATEMENTS30 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 16. TRADE AND OTHER PAYABLES
Current liabilities
Trade payables
Accrued expenses
Consolidated
2020
$’000
2019
$’000
171,478
50,726
142,444
41,201
222,204
183,645
Refer to note 29 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.
NOTE 17. PROVISIONS
Current liabilities
Employee benefits
Deferred settlements
Make good provision
Onerous lease provision
Restructuring provision
Non-current liabilities
Employee benefits
Deferred settlements
Make good provision
Onerous lease provision
Consolidated
2020
$’000
2019
$’000
34,896
969
2,017
-
3,989
29,464
16,946
-
798
-
41,871
47,208
3,306
1,500
11,465
-
4,065
2,434
9,141
551
16,271
16,191
58,142
63,399
Deferred settlements
This provision represents the obligation to pay consideration following the acquisition of a business. It is measured at the
present value of the estimated liability.
As at 30 June 2020, the following deferred settlements are provided for:
• Toperformance; currently provided at nil (2019: $500,000)
• Tricor; currently provided at nil (2019: $477,000)
• AADi; currently provided at $969,000 (2019: $1,903,000)
• Commercial Truck Parts group of entities; currently provided at $1,500,000 (2019: $16,500,000)
During the previous 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 was presented in the
statement of comprehensive income as ‘other gains’.
107
Bapcor Limited Annual Report 202030 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTE 17. PROVISIONS continued
Make good provision
The 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.
During FY20 an incremental $1.4M was provided for the locations involved in the Victorian DC Consolidation project. Refer
to ‘Restructuring provision’ below for further information.
Onerous lease provision
In the previous year, this provision represented the present value of the estimated costs, net of any sub-lease revenue that
would be incurred until the end of the lease terms where the obligation is expected to exceed the economic benefit to be
received.
Onerous lease provisions are now accounted for under AASB 16 Leases and have been reclassified on adoption of the
standard. Refer to note 3 for further details.
Restructuring provision
On the 10th February 2020, Bapcor approved a new state of the art 50,000m2 distribution centre to be built at Tullamarine in
Victoria to consolidate its Melbourne warehouses. Construction of the facility is underway and includes state of the art goods
to person technology with completion expected during FY21.
This provision represents the estimated termination costs relating to the potential closure of a number of sites for this project.
As well as the $4.0M restructuring provision, other items recognised within the FY20 financial year relating to this project include:
• $1.0M accelerated depreciation relating to property, plant and equipment (refer to note 14),
• $5.1M accelerated depreciation relating to the property right-of-use assets (refer to note 13),
• $1.4M make good provision (refer to ‘Make good provision’ above), and
• $0.2M of consultant and legal fees.
Movements in provisions
Movements in each class of provisions during the current financial year, other than employee benefits, are set out below:
Consolidated - 2020
Carrying amount at the start of the year
Adjustment for change in accounting policy (note 3)
Restated balance at 1 July 2019
Additional provisions recognised
Additions through business combinations (note 31)
Amounts used
Foreign currency translation
Deferred
settlements
$’000
Make good
$’000
Onerous lease
$’000
Restructure
$’000
19,380
-
19,380
74
-
(16,985)
-
9,141
-
9,141
1,694
3,277
(593)
(37)
1,349
(1,349)
-
-
-
-
-
-
-
-
-
3,989
-
-
-
3,989
Carrying amount at the end of the year
2,469
13,482
Amounts not expected to be settled within the next twelve months
The current provision for employee benefits includes all unconditional entitlements where employees have completed the
required period of service and also those where employees are entitled to pro-rata payments in certain circumstances. The
entire amount is presented as current, since the consolidated entity does not have an unconditional right to defer settlement.
However, based on past experience, the consolidated entity does not expect all employees to take the full amount of accrued
leave or require payment within the next twelve months.
The following amounts reflect leave that is not expected to be taken within the next twelve months:
Employee benefits obligation expected to be settled after twelve months
5,982
6,158
Consolidated
2020
$’000
2019
$’000
108
Bapcor Limited Annual Report 2020FINANCIAL STATEMENTS30 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 17. PROVISIONS continued
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.
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected
to be settled wholly within twelve months of the reporting date are measured at the amounts expected to be paid
when the liabilities are settled.
Long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within twelve months of the reporting
date are measured at the present value of expected future payments to be made in respect of services provided by
employees up to the reporting date using the projected unit credit method. Consideration is given to expected future
wage and salary levels, experience of employee departures and periods of service. Expected future payments are
discounted using market yields at the reporting date on corporate bonds with terms to maturity and currency that
match, as closely as possible, the estimated future cash outflows.
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 18. BORROWINGS
Non-current liabilities
Secured bank loans
Less: unamortised transaction costs capitalised
Consolidated
2020
$’000
2019
$’000
230,982
382,960
(1,910)
(2,584)
229,072
380,376
Refer to note 29 for further information on financial risk management.
Bapcor has a $520M debt facility with ANZ, Westpac, MUFG Bank, HSBC and MetLife. The debt facility comprises funding in
three, five and seven year tranches commencing from June 2019 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 purposes
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 required to be less than 3.0X and the fixed cover charge ratio required to be greater
than 1.75X.
109
Bapcor Limited Annual Report 202030 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTE 18. 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
2020
$’000
2019
$’000
517,500
517,500
230,982
382,960
286,518
134,540
•
Total facilities available at 30 June was $520M (2019: $520M). The amount used in the above table excludes $2.5M (2019: $2.5M) of facility which
relates to bank guarantees under the working capital tranche.
Net debt reconciliations
Cash and cash equivalents
Lease liabilities
Borrowings excluding unamortised transaction costs capitalised
Statutory net debt
Add: Lease liabilities
Add/(less): Net derivative financial instruments
Pro-forma net debt as per debt facility agreement6
Consolidated
2020
$’000
2019
$’000
126,300
(181,808)
47,610
-
(230,982)
(382,960)
(286,490)
(335,350)
181,808
(4,521)
-
54
(109,203)
(335,296)
A reconciliation of statutory net debt at the beginning and end of the current and previous financial year is set out below:
Consolidated
Balance at 30 June 2018
Cash flows
Foreign currency translation
Balance at 30 June 2019
Cash
$’000
Lease
liabilities
$’000
Borrowings
$’000
Total
$’000
40,154
5,923
1,533
47,610
-
-
-
-
(328,391)
(368,545)
(54,100)
(469)
(48,177)
1,064
(382,960)
(335,350)
Adjustment for change in accounting policy (note 3)
-
(159,649)
-
(159,649)
Restated balance at 1 July 2019
47,610
(159,649)
(382,960)
(494,999)
Cash flows
Additions through business combinations (note 31)
Foreign currency translation
78,481
-
209
(2,791)
(19,368)
-
152,200
227,890
-
(222)
(19,368)
(13)
Balance at 30 June 2020
126,300
(181,808)
(230,982)
(286,490)
6. During the second half of FY20 it was agreed with the facility lenders to exclude the cash adjustment relating to non-controlling interest.
Hence, the FY19 pro-forma net debt has been restated from $336.3M to $335.3M due to this change in methodology.
110
Bapcor Limited Annual Report 2020FINANCIAL STATEMENTS30 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 18. BORROWINGS continued
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.
NOTE 19. LEASE LIABILITIES
Current liabilities
Lease liability - Properties
Lease liability - Motor vehicles
Non-current liabilities
Lease liability - Property
Lease liability - Motor vehicles
Consolidated
2020
$’000
2019
$’000
57,149
1,523
58,672
122,173
963
123,136
181,808
-
-
-
-
-
-
-
Refer to note 29 for further information on financial risk management.
Significant accounting policies
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the
present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in
the lease or, if that rate cannot be readily determined, the consolidated entity’s incremental borrowing rate. Lease
payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on
an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option
when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable
lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are
remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate
used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability
is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying
amount of the right-of-use asset is fully written down.
Critical accounting judgements, estimates and assumptions
In determining the lease term, the consolidated entity considers all facts and circumstances that create an economic
incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after
termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not
terminated). The assessment is reviewed on an ongoing basis as well as if there is a significant event or change in
circumstances that is within its control and affects its ability to exercise (or not to exercise) any option to renew.
111
Bapcor Limited Annual Report 202030 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTE 20. DERIVATIVE FINANCIAL INSTRUMENTS
Current assets
Forward foreign exchange contracts - cash flow hedges
131
897
Consolidated
2020
$’000
2019
$’000
Current liabilities
Forward foreign exchange contracts - cash flow hedges
Interest rate swap contracts - cash flow hedges
Non-current liabilities
Interest rate swap contracts - cash flow hedges
Refer to note 29 for further information on financial risk management.
Refer to note 21 for further information on fair value measurement.
(4,576)
(76)
(4,652)
-
(4,521)
(459)
(35)
(494)
(349)
54
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.
112
Bapcor Limited Annual Report 2020FINANCIAL STATEMENTS30 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 21. 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 - 2020
Assets
Derivative financial instruments
Total assets
Liabilities
Derivative financial instruments
Deferred settlements
Total liabilities
Consolidated - 2019
Assets
Derivative financial instruments
Total assets
Liabilities
Derivative financial instruments
Deferred settlements
Total liabilities
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
Level 1
$’000
-
-
-
-
-
-
-
-
-
-
131
131
4,652
-
4,652
-
-
-
2,469
2,469
131
131
4,652
2,469
7,121
Level 2
$’000
Level 3
$’000
Total
$’000
897
897
843
-
843
-
-
-
19,380
19,380
897
897
843
19,380
20,223
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.
113
Bapcor Limited Annual Report 202030 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTE 21. 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 22. ISSUED CAPITAL
Ordinary shares
Treasury shares
Movements in ordinary share capital
Details
Balance
Issue for Dividend Reinvestment Plan
Issue on acquisition
Consolidated
2020
Shares
2019
Shares
2020
$’000
2019
$’000
339,412,500
283,480,597
878,652
631,697
-
-
(9,234)
(8,161)
339,412,500
283,480,597
869,418
623,536
Date
1 July 2018
27 September 2018
4 December 2018
Shares
$’000
280,244,752
610,951
830,414
1,396,952
1,008,479
6,039
9,150
5,557
Issue for Dividend Reinvestment Plan
12 April 2019
Balance
Issue for Dividend Reinvestment Plan
Issue for Dividend Reinvestment Plan
30 June 2019
283,480,597
631,697
26 September 2019
13 March 2020
1,054,992
1,205,595
7,274
6,770
Issue from Capital Raising - Institutional Placement
22 April 2020
40,909,091
180,000
Issue from Capital Raising - Retail Placement
25 May 2020
12,762,225
Share issue transactions costs
April - June 2020
Deferred tax credit recognised directly in equity
April - June 2020
-
-
56,147
(4,623)
1,387
Balance
30 June 2020
339,412,500
878,652
During April and May 2020, Bapcor raised $236.1M of share capital to strengthen its balance sheet and increase funding
flexibility through the issue of 40,909,091 shares under a placement to institutional investors, and the issue of 12,762,225 shares
under a share purchase plan offer to existing shareholders. The total cost of this capital raising was $4,623,000 which was
recognised as a reduction to the proceeds in equity.
114
Bapcor Limited Annual Report 2020FINANCIAL STATEMENTS30 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 22. ISSUED CAPITAL continued
Movements in treasury shares
Details
Balance
Return of employee shares
Purchase of treasury shares
Date
1 July 2018
1 July 2018
Shares
$’000
-
(800)
(4,495)
-
12-13 September 2018
(490,201)
(3,666)
Utilisation of treasury shares for LTI
14 September 2018
491,001
-
Balance
Purchase of treasury shares
Utilisation of treasury shares for LTI
Balance
Ordinary shares
30 June 2019
9-12 September 2019
17 September 2019
-
(154,875)
154,875
(8,161)
(1,073)
-
30 June 2020
-
(9,234)
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 $6.94 (2019: $7.48) 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.
115
Bapcor Limited Annual Report 202030 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTE 23. RESERVES
Foreign currency reserve
Cash flow hedge reserve
Share-based payments reserve
Foreign currency reserve
Consolidated
2020
$’000
2019
$’000
(6,140)
(3,181)
10,718
(1,466)
35
8,739
1,397
7,308
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:
Consolidated
Balance at 1 July 2018
Revaluation
Deferred tax
Share-based payment expense
Foreign currency translation
Cancellation on divestment
Balance at 30 June 2019
Revaluation
Deferred tax
Share-based payment expense
Foreign currency translation
Foreign
currency
reserve
$’000
Cash flow
hedge reserve
$’000
Share-based
payments
reserve
$’000
Total
$’000
(10,131)
-
-
-
7,714
951
(1,466)
-
-
-
(4,674)
667
(685)
201
-
8
(156)
35
(4,543)
1,327
-
-
5,819
-
1,068
1,852
-
-
8,739
-
(240)
2,219
(3,645)
(685)
1,269
1,852
7,722
795
7,308
(4,543)
1,087
2,219
-
(4,674)
Balance at 30 June 2020
(6,140)
(3,181)
10,718
1,397
116
Bapcor Limited Annual Report 2020FINANCIAL STATEMENTS30 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 24. RETAINED PROFITS
Retained profits at the beginning of the financial year
Adjustment for change in accounting policy (note 3)
Retained profits at the beginning of the financial year - restated
Profit after income tax expense for the year
Dividends paid (note 26)
Retained profits at the end of the financial year
NOTE 25. NON-CONTROLLING INTEREST
Investment in Car Bits Asia, Thailand
Opening balance
Non-controlling interest loss for the financial year
Foreign currency revaluation
Closing balance
Consolidated
2020
$’000
2019
$’000
89,110
(9,156)
79,954
37,138
-
37,138
79,172
96,978
(49,694)
(45,006)
109,432
89,110
Consolidated
2020
$’000
2019
$’000
2,233
(455)
34
2,397
(446)
282
1,812
2,233
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.
117
Bapcor Limited Annual Report 202030 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTE 26. DIVIDENDS
Dividends
Dividends paid during the financial year were as follows:
Final dividend for the year ended 30 June 2019 (2019: 30 June 2018) of 9.5 cents
(2019: 8.5 cents) per ordinary share *
Interim dividend for the year ended 30 June 2020 (2019: 30 June 2019) of 8.0 cents
(2019: 7.5 cents) per ordinary share **
Consolidated
2020
$’000
2019
$’000
26,931
23,821
22,763
21,185
49,694
45,006
* $7,274,000 (2019: $6,039,000) of the final dividend for the year ended 30 June 2019 (2019: 30 June 2018) was settled under the Dividend Reinvestment Plan.
** $6,770,000 (2019: $5,557,000) of the interim dividend for the year ended 30 June 2020 (2019: 30 June 2019) was settled under the Dividend
Reinvestment Plan.
The Board has declared a final dividend in respect of FY20 of 9.5 cents per share, fully franked. The final dividend will be paid
on 11 September 2020 to shareholders registered on 31 August 2020.
The final dividend takes the total dividends declared in relation to FY20 to 17.5 cents per share, fully franked, representing
an increase of dividends paid of 2.9% compared to the prior financial year. Dividends paid and declared in relation to FY20
represents 61.7% of pro-forma net profit after tax.
Franking credits
Consolidated
2020
$’000
2019
$’000
Franking credits available for subsequent financial years based on a tax rate of 30%
90,797
80,460
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.
118
Bapcor Limited Annual Report 2020FINANCIAL STATEMENTS30 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 27. EARNINGS PER SHARE
Profit after income tax
Non-controlling interest
Consolidated
2020
$’000
2019
$’000
78,717
455
96,532
446
Profit after income tax attributable to the owners of Bapcor Limited
79,172
96,978
Basic earnings per share
Diluted earnings per share
Cents
Cents
26.97
26.85
34.40
34.27
Number
Number
Weighted average number of ordinary shares used in calculating basic earnings per share
293,608,644
281,885,783
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares
1,291,262
1,113,893
Weighted average number of ordinary shares used in calculating diluted earnings
per share
294,899,906
282,999,676
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.
119
Bapcor Limited Annual Report 202030 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTE 28. 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
Finance lease interest unwind
Other gain
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Increase in inventories
Decrease/(increase) in other operating assets
Increase/(decrease) in trade and other payables
Increase/(decrease) in provision for income tax
Increase in other operating liabilities
Net cash from operating activities
Consolidated
2020
$’000
2019
$’000
78,717
96,532
80,052
17,100
(50)
134
670
-
2,219
6,324
(104)
86
604
258
1,852
-
-
(4,053)
3,605
(6,892)
(10,574)
(32,856)
1,234
33,732
(1,190)
5,380
(2,201)
(7,015)
1,122
1,208
200,253
65,641
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.
120
Bapcor Limited Annual Report 2020FINANCIAL STATEMENTS30 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 29. 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 **
Lease liabilities
Total financial liabilities
Consolidated
2020
$’000
2019
$’000
126,300
155,216
131
47,610
155,111
897
281,647
203,618
222,204
183,645
4,652
2,469
843
19,380
230,982
382,960
181,808
-
642,115
586,828
*
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.
121
Bapcor Limited Annual Report 202030 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTE 29. FINANCIAL RISK MANAGEMENT continued
Consolidated - 2020
% change
AUD strengthened
AUD weakened
Effect
on profit
before tax
$’000
Effect on
equity
$’000
Effect
on profit
before tax
$’000
Effect on
equity
$’000
% change
Derivative financial
instruments
Other financial assets
Other financial liabilities
1%
1%
1%
-
(500)
567
67
666
-
-
666
(1%)
(1%)
(1%)
-
510
(579)
(69)
(681)
-
-
(681)
AUD strengthened
AUD weakened
Consolidated - 2019
% change
Effect
on profit
before tax
$’000
Effect on
equity
$’000
Effect
on profit
before tax
$’000
Effect on
equity
$’000
% change
Derivative financial
instruments
Other financial assets
Other financial liabilities
1%
1%
1%
-
(372)
329
(43)
333
-
-
333
(1%)
(1%)
(1%)
-
380
(336)
44
(340)
-
-
(340)
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
2020
2019
Weighted
average
interest rate
%
Balance
$’000
Weighted
average
interest rate
%
Balance
$’000
2.56%
2.54%
230,982
(20,000)
3.47%
2.44%
382,960
(40,000)
Net exposure to cash flow interest rate risk
210,982
342,960
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 $590,000 (2019: $1,329,000).
The amount recognised in other comprehensive income net of tax in relation to interest rate swaps was $104,000
(2019: ($32,000)).
122
Bapcor Limited Annual Report 2020FINANCIAL STATEMENTS30 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 29. 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 note 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
2020
$’000
2019
$’000
286,518
134,540
*
The unused facility value excludes any facility that relates to bank guarantees. Refer to note 18 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.
123
Bapcor Limited Annual Report 202030 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTE 29. FINANCIAL RISK MANAGEMENT continued
Consolidated - 2020
Trade and other payables
Borrowings *
Deferred consideration
Lease liabilities
Total non-derivatives
Derivatives
Interest rate swaps
Forward foreign exchange contracts
Total derivatives
Consolidated - 2019
Trade and other payables
Borrowings *
Deferred settlements
Total non-derivatives
Derivatives
Interest rate swaps
Forward foreign exchange contracts
Total derivatives
1 year or less
$’000
Between
1 and 2
years
$’000
Between
2 and 5
years
$’000
Over
5 years
$’000
Remaining
contractual
maturities
$’000
222,204
8,345
1,000
59,490
291,039
76
4,576
4,652
183,645
13,345
16,985
213,975
35
459
494
-
-
-
222,204
120,327
32,507
103,770
264,949
1,500
49,317
171,144
-
68,110
100,617
-
17,419
121,189
2,500
194,336
683,989
-
-
-
-
13,345
2,500
15,845
349
-
349
-
-
-
-
-
-
76
4,576
4,652
Between
2 and 5
years
$’000
Over
5 years
$’000
Remaining
contractual
maturities
$’000
-
-
183,645
310,658
107,540
444,888
-
-
19,485
310,658
107,540
648,018
-
-
-
-
-
-
384
459
843
1 year or less
$’000
Between
1 and 2
years
$’000
* Borrowings contractual cash flows includes an interest component based on the drawn/undrawn ratio and interest rate applicable as at reporting
date until maturity of the loan facility
Fair value of financial instruments
The fair value of financial assets and liabilities disclosed in the statement of financial position do not differ materially from
their carrying values.
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)
124
Bapcor Limited Annual Report 2020FINANCIAL STATEMENTS30 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 30. RELATED PARTY TRANSACTIONS
Parent entity
Bapcor Limited is the parent entity. Refer to note 33 for supplementary information about the parent entity including internal
dividends received.
Subsidiaries
Interests in subsidiaries are set out in note 34.
Key management personnel
Disclosures relating to key management personnel are set out in note 35 and the remuneration report included in the
directors’ report.
NOTE 31. BUSINESS COMBINATIONS
Current financial year acquisitions
The consolidated entity acquired the net assets of the following businesses:
• Autobarn Albury
• Autobarn Bayswater
• Autobarn Browns Plains
• Autobarn Capalaba
• Autobarn Coffs Harbour
• Autobarn Dural
• Autobarn Preston
• Autobarn Shepparton
• Autobarn Tweed Heads
• Autobarn Wagga Wagga
• Autobarn Warriewood
• Autopro Emerald
• Australian Fuel Injection South
• Brakeforce
• Brookers
• Diesel Drive
• Opposite Lock Adelaide
• Regional Transport Spares
• Truckline
These acquisitions were made to strengthen the Bapcor offering as well as increase the company store network presence.
125
Bapcor Limited Annual Report 202030 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTE 31. BUSINESS COMBINATIONS continued
The assets and liabilities recognised as a result of these acquisitions are set out below. The store and smaller business
combinations have been aggregated. These are provisional at the time of this report and the fair values are to be finalised
within the acquisition period of twelve months from acquisition date.
Cash and cash equivalents
Trade and other receivables
Inventories
Plant and equipment
Motor vehicles
Right-of-use assets
Deferred tax asset
Trade and other payables
Provisions
Lease liability
Net assets acquired
Goodwill
Truckline
Fair value
$’000
Diesel Drive
Fair value
$’000
Other
acquisitions
Fair value
$’000
Total
$’000
18
11,679
22,513
837
-
9,360
4,023
(9,247)
(2,683)
(11,536)
24,964
4,414
-
1,392
4,769
63
115
839
900
(462)
(225)
(839)
6,552
12,207
7
331
3,904
304
15
6,993
2,913
(1,905)
(842)
(6,993)
4,727
6,492
25
13,402
31,186
1,204
130
17,192
7,836
(11,614)
(3,750)
(19,368)
36,243
23,113
Acquisition-date fair value of the total consideration
transferred
29,378
18,759
11,219
59,356
Representing:
Cash paid
Debt forgiven
Cash used to acquire business, net of cash acquired:
Cash consideration
Less: cash and cash equivalents
29,378
18,758
-
1
29,378
18,759
29,378
18,758
(18)
-
7,586
3,633
11,219
7,586
(7)
55,722
3,634
59,356
55,722
(25)
Net cash used
29,360
18,758
7,579
55,697
Goodwill in relation to these acquisitions relates to the anticipated future probability of their contribution to the
consolidated entity’s total business.
The Diesel Drive acquisition contributed revenue of $7,260,000 and net profit after tax of $924,000 to the consolidated
group since acquisition on 2 December 2019. Based on historical management results that have not been reviewed or
audited and excluding any transitional impacts, the contribution to revenue and net profit after tax if the Diesel Drive
acquisition had occurred on 1 July 2019 is estimated to have been $13,007,000 and $1,799,000 respectively.
The Truckline acquisition contributed revenue of $57,367,000 and net profit after tax of $1,880,000 to the consolidated group
since acquisition on 2 December 2019. Based on historical management results that have not been reviewed or audited and
excluding any transitional impacts, the contribution to revenue and net profit after tax if the Truckline acquisition had
occurred on 1 July 2019 is estimated to have been $101,159,000 and $3,186,000 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 7 for details on acquisition related costs incurred.
Prior financial year acquisitions
No material changes have occurred to the prior financial year acquisitions.
126
Bapcor Limited Annual Report 2020FINANCIAL STATEMENTS30 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 31. BUSINESS COMBINATIONS continued
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
127
Bapcor Limited Annual Report 202030 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTE 32. 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 Corporations Instrument 2016/785 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 for the year, net of tax
Total comprehensive income for the year
Equity - retained profits
Retained profits at the beginning of the financial year
Profit after income tax expense
Dividends paid
Retained profits at the end of the financial year
2020
$’000
2019
$’000
1,242,725
1,101,430
(1,159,734)
(994,221)
82,991
(24,493)
107,209
(30,486)
58,498
76,723
(7,890)
7,921
50,608
84,644
2020
$’000
2019
$’000
41,404
58,498
9,687
76,723
(49,694)
(45,006)
50,208
41,404
128
Bapcor Limited Annual Report 2020FINANCIAL STATEMENTS30 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 32. DEED OF CROSS GUARANTEE continued
Statement of financial position
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Other
Non-current assets
Trade and other receivables
Property, plant and equipment
Right-of-use assets
Intangibles
Deferred tax
Other assets
Intercompany 7
Investments
Total assets
Current liabilities
Trade and other payables
Lease liabilities
Derivative financial instruments
Income tax
Provisions
Non-current liabilities
Borrowings
Lease liabilities
Derivative financial instruments
Provisions
Total liabilities
Net assets
Equity
Issued capital
Reserves7
Retained profits
Total equity
2020
$’000
2019
$’000
103,714
134,479
303,065
89
297
31,647
133,414
269,893
801
-
541,644
435,755
-
64,804
129,627
536,510
31,988
881
17,631
48
54,430
-
511,005
15,403
2,412
13,138
451,859
427,035
1,233,300
1,023,471
1,774,944
1,459,226
195,487
50,046
4,341
1,569
38,669
290,112
217,090
100,827
-
14,755
332,672
154,850
-
249
1,988
44,162
201,249
368,616
-
349
13,146
382,111
622,784
583,360
1,152,160
875,866
869,418
232,534
50,208
623,536
210,926
41,404
1,152,160
875,866
7. The prior year comparative has been restated to reclassify between intercompany and reserves, reflecting a correction to the treatment of the
reinstatement of the investment and subsequent removal of goodwill and assets of the entities not included in the Closed Group.
129
Bapcor Limited Annual Report 202030 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTE 33. 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
Parent
2020
$’000
2019
$’000
(13,830)
-
(5,626)
18,753
(13,830)
13,127
Parent
2020
$’000
2019
$’000
-
-
853,543
669,207
-
-
-
-
869,418
623,537
10,718
(13,830)
(49,694)
36,931
8,739
13,127
(45,006)
68,810
853,543
669,207
130
Bapcor Limited Annual Report 2020FINANCIAL STATEMENTS30 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 34. 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:
Principal place of business /
Country of incorporation
Ownership interest
2020
2019
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
Australia
Australia
Australia
Thailand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australian Automotive Electrical Wholesale Pty Ltd
Australia
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 *
Precision Equipment New Zealand
(previously Hellaby Investment No 8 Ltd) *
Hellaby Resource Services Ltd **
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
These subsidiaries are non-trading.
*
** These subsidiaries are non-trading and are in the process of being wound up.
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%
131
Bapcor Limited Annual Report 202030 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTE 35. RELATED PARTY TRANSACTIONS - KEY MANAGEMENT PERSONNEL DISCLOSURES
Compensation
Short-term employee benefits8
Post-employment benefits
Long-term benefits
Share-based payments
Loans
Opening balance
Amounts repaid
Amounts recovered by deferred STI
Closing balance
Consolidated
2020
$’000
2019
$’000
7,733
6,800
245
76
2,234
239
71
1,751
10,288
8,861
Consolidated
2020
$’000
2019
$’000
601
(601)
-
-
642
(59)
18
601
Refer to the audited Remuneration Report within the Directors’ Report for further details on key management personnel
compensation, as well as note 12 for further details on the loans made to key management personnel. There are no other
transactions with key management personnel.
8. The prior year short-term employee benefits has been restated from the previously reported $7,407,000 due to the deferred bonus from FY18 being
incorrectly included. This has been restated in the Remuneration Report as well.
132
Bapcor Limited Annual Report 2020FINANCIAL STATEMENTS30 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 36. 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 three year performance and the payments are rights to acquire shares (‘Performance
Rights’). Refer to the audited Remuneration Report within the Directors’ Report for further information on the LTI.
In relation to the FY20 year an offer to participate in the LTI was made to nine of Bapcor’s senior executives. These allocated
Performance Rights have a performance period that ends on 30 June 2022 at which time the performance hurdles are
tested. A summary of the terms for the Performance Rights granted in the current financial year is in the following table:
Grant date
6/09/19
1/11/19
Performance hurdle
Relative TSR
EPS
Relative TSR
EPS
Performance period
1/07/19 to 30/06/22
1/07/19 to 30/06/22
Test date
Expiry date
Quantity granted
Exercise price
30/06/22
16/09/34
30/06/22
16/09/34
177,794
177,794
104,780
104,780
Nil
Nil
Fair value at grant date*
$4.87
$6.32
$5.13
$6.61
Other conditions
Restriction on sale to 30/06/23
Restriction on sale to 30/06/23
Share price on valuation date
Volatility
Dividend yield
Risk free rate
$6.78
25.52%
2.51%
0.83%
$7.04
25.21%
2.41%
0.79%
*
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.
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.
133
Bapcor Limited Annual Report 202030 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTE 36. SHARE-BASED PAYMENTS continued
Where there is no specific expiry date, the Performance Rights lapse if the vesting conditions are not met.
Shares will be subject to a restriction on sale for twelve months from vesting of the Performance Rights.
Set out below are summaries of Performance Rights granted under the LTI:
2020
Grant date
Vesting date
20/12/2016
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
06/09/2019
30/06/2022
01/11/2019
30/06/2022
2019
Grant date
Vesting date
02/12/2015
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
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
182,220
177,603
466,097
226,195
170,886
-
-
-
-
-
-
-
355,588
209,560
(66,073)
(88,802)
-
-
-
-
-
(116,147)
(88,801)
(40,351)
(36,485)
-
-
-
-
-
425,746
189,710
170,886
355,588
209,560
1,223,001
565,148
(154,875)
(281,784)
1,351,490
Exercise
price
Balance at
the start of
the year
Granted
Exercised
$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
-
-
1,472,471
-
-
-
-
-
-
-
-
226,195
170,886
397,081
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
(2,016)
(140)
(37,188)
(15,236)
-
-
-
-
182,220
-
-
177,603
(100,970)
466,097
-
-
226,195
170,886
(223,734)
(146,574)
(112,856)
(7,837)
-
-
-
-
-
-
(491,001)
(155,550)
1,223,001
The weighted average exercise price for the Performance Rights exercised in the current financial year was $6.94 (2019: $7.48).
The weighted average contractual lives are 1.76 years (2019: 1.63 years).
The expense arising from share-based payment transactions relating to the LTI during the year as part of employee
benefits expense was $2,219,000 (2019: $1,852,000).
Note: The numbers in the disclosures above 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.
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.
134
Bapcor Limited Annual Report 2020FINANCIAL STATEMENTS30 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 36. SHARE-BASED PAYMENTS continued
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.
NOTE 37. 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
Other services - network firms
Tax compliance services
Consulting services
Consolidated
2020
2019
603,502
596,502
-
-
-
25,850
7,000
32,850
603,502
629,352
-
-
-
105,762
15,218
120,980
Total auditor remuneration
603,502
750,333
135
Bapcor Limited Annual Report 202030 JUNE 2020NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFINANCIAL STATEMENTS F
I
N
A
N
C
A
L
I
S
T
A
T
E
M
E
N
T
S
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2020
NOTE 38. COMMITMENTS AND CONTINGENT LIABILITIES
Commitments
Commitments
Committed at the reporting date but not recognised as liabilities, payable:
Guarantees in relation to leases
Guarantees in relation to performance of contracts*
Supply of equipment*
Operating lease commitments
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
Committed at the reporting date and recognised as assets, receivable:
Within one year
One to five years
More than five years
Consolidated
2020
$’000
2019
$’000
4,454
5,130
12,718
3,391
-
-
22,302
3,391
-
-
-
-
-
-
-
-
47,450
84,727
6,790
138,967
2,908
5,650
239
8,797
*
The commitments of guarantees in relation to performance of contracts and supply of equipment relate to the Victorian DC Consolidation project.
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. In the current year, these have been replaced by
the disclosures required under AASB 16 Leases.
Contingent liabilities
There are no contingent liabilities (2019: Nil).
The divestment of the non-core businesses of Footwear and Contract Resources as well as the TRS business unit in previous
financial years include standard indemnity and warranty clauses as is customary in these type of transactions.
NOTE 39. EVENTS AFTER THE REPORTING PERIOD
In early August 2020, in relation to the COVID-19 pandemic, the Victorian Government mandated closures of many
Melbourne based businesses for six weeks. As discussed in section 9 of the Directors Report, it is not yet possible to
determine the financial impact of such restrictions. Any further government restrictions may also affect the operations and
earnings of Bapcor, of which the impact cannot be determined at this time.
On 11 August 2020, Bapcor announced the appointment of two new Non-Executive Directors effective 1 September 2020,
Mr James Todd and Mr Mark Powell.
Apart from these matters and the dividend declared as disclosed in note 26, no other matter or circumstance has arisen
since 30 June 2020 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 2020
DIRECTOR’S DECLARATION
30 JUNE 2020
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 2020 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
•
•
•
I
’
D
R
E
C
T
O
R
S
D
E
C
L
A
R
A
T
O
N
I
• 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 32 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
19 August 2020
Melbourne
Darryl Abotomey
Chief Executive Officer and Managing Director
Bapcor Limited Annual Report 2020 137
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BAPCOR LIMITED
Independent auditor’s report
To the members of Bapcor Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Bapcor Limited (the Company) and its controlled entities (together
the Group) is in accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the Group's financial position as at 30 June 2020 and of its financial
performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
●
●
●
●
●
●
the consolidated statement of financial position as at 30 June 2020
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the notes to the consolidated financial statements, which include a summary of significant
accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial report
section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence
Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
138
Bapcor Limited Annual Report 2020
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BAPCOR LIMITED continued
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion
on the financial report as a whole, taking into account the geographic and management structure of the
Group, its accounting processes and controls and the industry in which it operates.
Materiality
● For the purpose of our audit we used overall Group materiality of $6.1 million, which represents
approximately 5% of the Group’s profit before tax adjusted for the Victorian DC Consolidation costs.
● We applied this threshold, together with qualitative considerations, to determine the scope of our audit and
the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the
financial report as a whole.
● We chose Group adjusted profit before tax because, in our view, it is the benchmark against which the
performance of the Group is most commonly measured.
● We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonly
acceptable thresholds.
Audit Scope
● Our audit focused on where the Group made subjective judgements; for example, significant accounting
estimates involving assumptions and inherently uncertain future events.
● Audit procedures were performed on the Australian and New Zealand operations assisted by local component
auditors in New Zealand under the supervision of the Group engagement team.
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
Bapcor Limited Annual Report 2020 139
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 15) $724.8m
At 30 June 2020, the Group recognised $665.7 million
of goodwill and $59.1 million of intangible assets with
indefinite lives.
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 models (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:
●
●
cash flow forecasts, including the terminal
value forecasts
short-term and future growth rates in revenue
and EBITDA margin
●
the discount rate adopted in the models
● application of probability weightings to cash
flow forecasts representing different recovery
scenarios post COVID-19.
The rapidly developing COVID-19 pandemic has meant
assumptions regarding the economic outlook and the
impacts on the Group’s estimates are uncertain,
increasing the degree of judgement required in
determining the recoverable amount of goodwill and
intangible assets with indefinite lives. Specifically, this
includes judgements regarding the impact of COVID-19
on forward looking information, including short term
and future growth rates, terminal value forecasts and
application of probability weightings to cash flow
forecasts.
Our audit procedures included, amongst others:
●
●
●
●
●
●
●
●
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
Assessing whether the grouping of CGUs
appropriately included the assets, liabilities
and cash flows directly attributable to each
CGU and an allocation of corporate assets and
overheads
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
Assessing the Group’s historical ability to
forecast cash flows by comparing budgets to
reported actual results for the past 3 years
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
Considering whether the application of
probability weightings to the cash flow
forecasts was reasonable and consistent with
the Group’s post COVID-19 recovery scenario
planning
Assessing the sensitivity to change of key
assumptions used in the models that either
individually or collectively would result in the
impairment of assets
Together with PwC valuation experts,
evaluating whether:
o discount rates used in the models
appropriately reflected the risks of the
140
Bapcor Limited Annual Report 2020INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BAPCOR LIMITED continued
Key audit matter
How our audit addressed the key audit matter
Given the level of judgement applied by the Group, and
the financial significance 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.
CGUs by considering relevant industry
and market factors
o the models applied to test goodwill and
intangible assets with indefinite lives for
impairment included the appropriate
inputs as required under Australian
Accounting Standards
●
Testing the mathematical accuracy of the
models on a sample basis.
We also considered the adequacy of disclosures in
note 15, including those regarding the key
assumptions, in accordance with the requirements
of the Australian Accounting Standards.
Carrying value of Inventory
(Refer to note 11) $363.0m
Our audit procedures included the following, amongst
others:
At 30 June 2020, the Group recorded a provision for
aged and slow-moving inventory of $55.9 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.
●
●
●
Considering whether all the necessary
inventory balances were included in the
inventory provision calculation
Evaluating whether the methodology applied
to the provision calculation was consistent
with that applied in the prior year and was in
accordance with Australian Accounting
Standards
Testing the movement in the inventory
provision, including agreeing a sample of
inventory written off to supporting
documentation such as Board approvals
● Considering the adequacy of disclosures in
note 11 in light of the requirements of the
Australian Accounting Standards.
Lease accounting and adoption of new
Australian Accounting Standard AASB 16
Leases (AASB 16)
(Refer to notes 3, 13 and 19)
On 1 July 2019, the Group adopted AASB 16 and as a
result, applied new accounting policies for leasing from
that date.
As at 30 June 2020, the Group recognised the
following:
We performed the following procedures amongst
others:
●
●
For a sample of lease agreements, we tested
the mathematical accuracy of the Group’s
calculations of the relevant RoU asset and
lease liability.
For a sample of lease agreements, agreed key
inputs, including the lease term, fixed and
variable payments and termination and
141
Bapcor Limited Annual Report 2020INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BAPCOR LIMITED continued
Key audit matter
How our audit addressed the key audit matter
● Right-of-use (RoU) assets: $158.0 million
● Lease liabilities (current and non-current):
$181.8 million
We considered this to be a key audit matter given:
●
●
●
The financial year ended 30 June 2020 is the
first year of reporting under AASB 16 and the
Group has a number of lease arrangements
the financial significance of RoU assets and
Lease liabilities
the judgement required by the Group in
determining the lease term where a lease
contract contains an option to extend or
terminate the lease
● the complexity of applying the requirements
of AASB 16 to lease contracts with variable
lease payments.
●
●
●
●
●
●
extension options, to the supporting lease
contracts
For a sample of lease contracts that contain an
option to extend or terminate the lease, we
assessed whether the key assumptions used by
the Group to determine the lease term were
reasonable in the context of the requirements
of Australian Accounting Standards
For a sample of lease agreements, assessed the
appropriateness of the accounting treatment
of the variable lease payments in the context
of the requirements of the Australian
Accounting Standards
Considered whether the calculation of
incremental borrowing rates is consistent with
the requirements of the Australian Accounting
Standards
For a sample of lease agreements, assessed
whether the application of incremental
borrowing rates is consistent with the
requirements of the Australian Accounting
Standards
For a sample of lease agreements, performed a
recalculation of RoU assets and lease
liabilities
Considered whether all lease contracts were
included in the Group’s calculation of the RoU
asset and the Lease liability by considering
whether all known warehouse and store
locations were included in the calculation
● Evaluated the adequacy of the disclosures in
notes 3, 13 and 19 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 2020, 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.
142
Bapcor Limited Annual Report 2020INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BAPCOR LIMITED continued
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:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our
auditor's report.
143
Bapcor Limited Annual Report 2020INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BAPCOR LIMITED continued
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BAPCOR LIMITED continued
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 48 to 73 of the directors’ report for the
year ended 30 June 2020.
In our opinion, the remuneration report of Bapcor Limited for the year ended 30 June 2020 complies
with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the remuneration
report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the remuneration report, based on our audit conducted in accordance with Australian
Auditing Standards.
PricewaterhouseCoopers
Jason Perry
Partner
Melbourne
19 August 2020
144
Bapcor Limited Annual Report 2020
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 19 August 2020 (‘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
8,528
3,756,863
8,089
20,096,142
1,869
1,132
13,211,644
23,979,684
53
278,371,167
19,671
339,412,500
1.11
5.92
3.89
7.07
82.01
100.00
%
-
-
-
22.61
77.39
100%
Holders of less than a marketable parcel of $500 included in above total
341
5,498
2.2 Distribution of holders of performance rights
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 +
Total
Total
holders
Performance
Rights
-
-
-
6
4
-
-
-
305,628
1,045,862
10
1,351,490
Bapcor Limited Annual Report 2020 145
FINANCIAL REPORTING 3. TWENTY LARGEST QUOTED EQUITY SECURITY HOLDERS
The Company only has one class of quoted securities, being ordinary shares. The names of the twenty largest holders of
ordinary shares, the number of ordinary shares and the percentage of capital held by each holder is as follows:
Name
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
National Nominees Limited
BNP Paribas Nominees Pty Ltd
Garrmar Investments Pty Ltd
Sandhurst Trustees Ltd
Netwealth Investments Limited
D Abotomey
AMP Life Limited
Equity Trustees Wealth Services Limited
UBS Nominees Pty Ltd
Schram Investments Pty Ltd
C Magill
JMB Family Investments Pty Ltd
Gwynvill Trading Pty Ltd
R Carpenter
Sir Moses Montefiore Jewish Home
P Ruffy
Nulis Nominees (Australia) Limited
Other Shareholders
Total Shareholders
4. SUBSTANTIAL HOLDERS
Ordinary Shares
Number Held
% of Issued
Capital
107,354,226
62,430,410
40,239,102
28,545,609
20,662,078
6,522,699
2,704,656
1,646,710
1,431,154
964,665
893,334
527,888
510,619
448,719
356,819
318,726
275,255
263,319
248,415
245,935
276,590,338
62,822,162
31.63
18.39
11.86
8.41
6.09
1.92
0.80
0.49
0.42
0.28
0.26
0.16
0.15
0.13
0.11
0.09
0.08
0.08
0.07
0.07
81.49
18.51
339,412,500
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
Challenger Limited
Vanguard Group
Number Held
18,340,351
16,974,862
% of Issued
Capital
5.40
5.00
146
Bapcor Limited Annual Report 2020SHAREHOLDER INFORMATION ContinuedFINANCIAL REPORTING 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
1,351,490 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.
147
Bapcor Limited Annual Report 2020SHAREHOLDER INFORMATION ContinuedFINANCIAL REPORTING 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
Noel Meehan
Notice of annual general meeting
The details of the annual general meeting of Bapcor Limited are:
Date: 20 October 2020
Time: 1:30pm
Location: Virtual; refer to Bapcor’s website for details.
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
148
CORPORATE INFORMATION30 JUNE 2020Bapcor Limited Annual Report 2020