2
0
1
6
A
N
N
U
A
L
R
E
P
O
R
T
2 0 1 6 A N N U A L R E P O R T
5 YEAR FINANCIAL SUMMARY
Year ended 31 December
OPERATING RESULTS
REVENUE
EBITDA
Depreciation and amortisation
Impairment charge
EBIT
Finance costs
PROFIT BEFORE TAX
Income tax expense
Non-controlling interest in subsidiary
ATTRIBUTABLE PROFIT AFTER TAX
OPERATING STATISTICS
Basic earnings per share - cents
Dividends per share - cents
Dividend franking - %
As at 31 December
FUNDS EMPLOYED
Contributed equity
Reserves
Retained earnings
Non-controlling interest in subsidiary
Total equity
Non-current liabilities
Current liabilities
Total liabilities
TOTAL FUNDS EMPLOYED
REPRESENTED BY
Property plant and equipment
Intangibles
Available-for-sale investments
Other non-current assets
Property assets held for resale
Other current assets
TOTAL ASSETS
OTHER STATISTICS
Net tangible asset backing per share - $
Shares on issue - ‘000
Number of shareholders
Total Debt (1)
Net debt (total debt less bailment finance
less cash) - $’000
Gearing ratio (debt/debt plus equity) - %
Gearing ratio (net debt/net debt plus total equity) -%
2016
$’000
2015
$’000
2014
$’000
2013
$’000
2012
$’000
3,833,222
179,776
(13,993)
-
165,783
(24,378)
141,405
(35,879)
(1,542)
103,984
3,246,376
163,077
(13,216)
(7,610)
142,251
(21,293)
120,958
(33,943)
(798)
86,217
2,858,113
138,081
(12,583)
(578)
124,920
(22,080)
102,840
(26,150)
(460)
76,230
2,672,813
122,252
(12,354)
-
109,898
(23,188)
86,710
(22,748)
(353)
63,609
2,642,535
114,819
(11,595)
323
103,547
(24,812)
78,735
(23,184)
(181)
55,370
55.4
35.0
100
2016
$’000
364,449
55,398
335,779
8,166
763,792
319,846
670,796
990,642
47.6
32.0
100
2015
$’000
296,060
105,375
293,435
8,139
703,009
228,479
557,922
786,401
43.0
27.0
100
2014
$’000
242,070
99,020
242,480
7,486
591,056
241,875
525,067
766,942
36.4
23.0
100
2013
$’000
231,205
108,612
198,369
939
539,125
246,082
431,658
677,740
34.0
20.0
100
2012
$’000
206,277
90,636
171,113
510
468,536
238,192
471,350
709,542
1,754,434
1,489,410
1,357,998
1,216,865
1,178,078
354,710
298,908
264,817
22,505
-
813,494
1,754,434
2.44
190,493
5,206
769,525
291,298
160,762
281,817
35,440
-
720,093
292,485
165,733
234,391
30,233
27,781
607,375
344,956
125,259
195,195
5,764
21,612
524,079
350,862
117,521
162,590
3,926
23,963
519,216
1,489,410
1,357,998
1,216,865
1,178,078
2.95
184,074
5,062
614,280
2.38
178,519
4,517
579,799
2.34
176,548
4,636
514,889
2.06
170,687
4,300
513,332
266,035
172,611
198,467
199,001
200,674
50.2
25.8
46.6
19.7
49.5
25.1
48.8
27.0
52.3
30.0
1
Bailment Finance
Bailment finance is a form of financing peculiar to the motor industry, which is provided by financiers on a vehicle by vehicle basis. It is short-term in nature,
is generally secured by the vehicle being financed and is principally represented on the borrower’s balance sheet as vehicle inventory with the liability reflected
under current liabilities. Because of its short-term nature, it is excluded from net debt and the corresponding gearing ratio.
CONTENTS
AP Eagers Foundation
Company Profile
Board of Directors
Executive Management
Directors’ Report
Auditor’s Declaration of Independence
Financial Statements
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
Corporate Directory
2
4
5
5
6
20
21
27
85
86
91
93
ANNUAL
GENERAL MEETING
Our Annual General Meeting will be held at our registered office,
5 Edmund Street, Newstead, Queensland, on Wednesday 24 May
2017 at 9.00 am.
FINANCIAL
CALENDAR
2016 financial year end
31 December 2016
Full year results announcement
22 February 2017
Final dividend announcement
22 February 2017
Final dividend record date
30 March 2017
Final dividend payment date
Annual General Meeting
Half year end
18 April 2017
24 May 2017
30 June 2017
Half year results announcement *
23 August 2017
Interim dividend announcement *
23 August 2017
Interim dividend record date *
Mid-September 2017
Interim dividend payment date *
Early October 2017
2017 financial year end
31 December 2017
* estimate only, subject to changes notified to the ASX.
1
ANNUAL REPORT 2016 COMMUNITY
DRIVEN
In 2016 we continued our long history
of supporting local communities,
charities and philanthropic
organisations through various
fundraising activities including the
Adtrans Annual Golf Day, Newcastle’s
Mates in Action Program, employee
giving and corporate donations.
These activities raised in excess of
$700,000 throughout the year.
2
Numerous charities and worthwhile causes benefitted from
our fund-raising initiatives during 2016, including Variety – the
Children’s Charity, Mates in Action, Endeavour Foundation,
Cambodia Challenge, Camp Quality, Mater Miracles, Heart
Foundation, Whip Around for Rio, Dynami Australia, Biggest
Morning Tea, Guide Dogs SA/NT, World’s Greatest Shave,
Leukaemia Foundation plus many more.
Our commitment to community support for over 100 years led
to the establishment of the A.P. Eagers Foundation in 2013.
By utilising the growing scale of our dealership network, the
Foundation enhances our ability to support the communities in
which we operate.
Images (clockwise from top left):
4. Anthony Carter Memorial Scholarship (Klosters)
1. Mates in Action & Rescue Helicopter Service
5. Adtrans Charity Golf Day (Adtrans Cars)
(Highway Ford & Hyundai)
6. Meals on Wheels (Klosters)
2. Variety – The Children’s Charity (Stillwell Trucks)
7. Variety Bash Kermit Car (Adtrans Trucks)
3. The Great Endeavour Rally (Brisbane Motor Auctions)
8. National Tree Day (Torque Toyota)
VISION
To actively contribute in meaningful and sustainable ways to
communities, families in need and other worthy causes.
MISSION
To provide support and assistance to these community-focussed
initiatives, by engaging the collaboration of A.P. Eagers and its
automotive industry network, employees and other stakeholders.
OBJECTIVES
>
To encourage and support engagement by A.P. Eagers
and its stakeholders in these initiatives.
>
>
>
To secure voluntary assistance through financial support,
sponsorship, skills transfer and in-kind donations to
worthy and well-run organisations and other causes.
To deliver 100 cents of every dollar donated to the
intended recipients.
To operate with the highest standards of integrity.
ANNUAL REPORT 2016
3
COMPANY PROFILE
ABOUT US
A.P. Eagers Limited is a pure automotive retail group with our main
operations in Queensland, Adelaide, Darwin, Melbourne, Sydney, the
Newcastle/Hunter Valley region of New South Wales and Tasmania.
We represent a diversified portfolio of automotive brands, including
all 20 of the top 20 selling car brands in Australia and 10 of the top
11 selling luxury car brands. In total, we represent 33 car brands
and 14 truck and bus brands.
Our core business consists of the ownership and operation of motor
vehicle dealerships. We provide full facilities including the sale of
new and used vehicles, service, parts and the facilitation of allied
consumer finance. To complement our vehicle dealerships, we also
operate a substantial motor vehicle auction business, Brisbane
Motor Auctions.
Our operations are generally provided through strategically
clustered dealerships, many of which are situated on properties
owned by us, with the balance leased.
We own $299 million of prime real estate positioned in high profile,
main road locations in Brisbane, Sydney, Melbourne, Adelaide and
Newcastle.
DIVIDENDS AND EPS GROWTH
We have paid a dividend to shareholders every year since listing in
1957, and a record dividend in 15 of the past 16 years. A.P. Eagers
also has a track record of delivering Earnings Per Share (EPS)
growth from acquisitions. Further information about our acquisition
growth can be viewed on our website, www.apeagers.com.au.
ORIGINS
Our origins trace back to 1913 when Edward Eager and his son,
Frederic, founded their family automotive business, E.G. Eager &
Son Ltd, which continues today as a wholly-owned subsidiary of A.P.
Eagers Limited.
After establishing the first motor vehicle assembly plant in
Queensland in 1922, the business secured the distributorship of
General Motors’ products in Queensland and northern New South
Wales in 1930 and listed as a public company in 1957 under the
name Eagers Holdings Limited.
A merger in 1992 with the listed A.P. Group Limited saw the addition
of a number of new franchises and our name change to A.P. Eagers
Limited. Further new franchises and geographic diversification
have since followed.
GROWTH
Since 2000, our sales revenue has increased from $500 million
to more than $3.8 billion, profit after tax has increased from $4.3
million to $105.5 million in 2016 and the number of employees has
increased from 600 to 4,500.
We expanded into the Northern Territory with the acquisition of
Bridge Toyota in 2005.
In 2007, we established ourselves on the Gold Coast with the
acquisition of Surfers City Holden.
The addition of Kloster Motor Group in the Newcastle/Hunter
Valley region in 2007 heralded our advance into New South Wales.
Our operations in that state grew with the acquisition of Bill
Buckle Auto Group in Sydney’s northern beaches region including
Brookvale in 2008.
4
In 2010, we acquired the publicly listed Adtrans Group Limited,
being South Australia’s premier car retailer and the operator
of truck and bus dealerships in New South Wales, Victoria and
South Australia. This represented our direct entry into the South
Australian, Victorian and truck markets. We also acquired
Caloundra City Autos Group in Queensland’s growing Sunshine
Coast region in 2010.
Further expansion of our truck and bus operations occurred in late
2010 with the addition of six new franchises in New South Wales,
Victoria and South Australia.
Daimler Trucks Adelaide and Eblen Motors were acquired in 2011
and Main North Nissan and Renault and Unley Nissan and Renault,
Adelaide, were acquired in 2013, to complement our existing
operations in South Australia.
A strategic holding in listed Automotive Group Holdings Limited
(AHG) was acquired in 2012, providing us with exposure to the West
Australian market. This investment represented 19.99% of AHG,
valued at $262 million, at the end of 2016.
Northern Beaches Land Rover and Jaguar were added to our Bill
Buckle operations at Brookvale during 2013.
A new business, Precision Automotive Technology, was established
in 2013 to source and distribute our own range of car care products
under the brand names, Perfexion and 365+.
In 2014, our Queensland operations expanded through the
acquisition of Ian Boettcher Motors representing Mazda, Nissan,
Volkswagen, Suzuki and Proton in Ipswich, and the Craig Black
Group representing Toyota, Hyundai, Volkswagen, Mitsubishi
and Great Wall at multiple locations in south-west and central
Queensland. Volvo Sunshine Coast and Reynella Subaru were also
added to the group during 2014.
2016 saw further growth with the acquisition of Motors Group
Tasmania, including state-wide representation for Holden, HSV,
Hyundai, Citroen, Isuzu Trucks, Volvo Trucks, Mack Trucks and UD
Trucks, together with the Victorian businesses Silver Star Motors
(Mercedes-Benz) in Doncaster and Burwood, Mercedes–Benz
Ringwood and Waverley Toyota in Glen Waverley. These businesses
represent 12 car and truck brands.
Our representation in regional Queensland also saw substantial
growth in 2016 with the acquisition of the Crampton Automotive and
Tony Ireland Groups, representing Holden, Hyundai, Mercedes-
Benz, Citroen, Peugeot, Jaguar, Land Rover, Subaru, Chrysler
Jeep Dodge and Isuzu Trucks, and taking us into new geographic
territories including Toowoomba, Townsville and Hervey Bay.
In late 2016 we launched our first Carzoos retail stores at Westfield
Garden City and North Lakes, in Brisbane, introducing an entirely
new way for customers to buy and sell used cars. Carzoos is
supported by our new finance initiative, Simplr. Further Carzoos
stores are scheduled to launch in 2017.
FURTHER INFORMATION
Please visit www.apeagers.com.au for further information about
A.P. Eagers Limited.
BOARD OF DIRECTORS
Timothy Boyd Crommelin BCom, FSIA, FSLE
Chairman of Board, Member of Audit, Risk & Remuneration Committee
David Arthur Cowper BCom, FCA
Director, Chairman of Audit, Risk & Remuneration Committee
Independent, non-executive Director since February 2011.
Executive Chairman of Morgans Financial Ltd. Director of
Senex Energy Ltd (appointed October 2010) and Australian
Cancer Research Foundation. Member of the University of
Queensland Senate. Broad knowledge of corporate finance, risk
management and acquisitions and over 40 years’ experience in
the stockbroking and property industry.
Martin Andrew Ward BSc (Hons), FAICD
Managing Director, Chief Executive Officer
Joined the Company in July 2005. Appointed Chief Executive Officer
in January 2006. Appointed Managing Director in March 2006. Motor
vehicle dealer. Director of Australian Automotive Dealer Association
Limited (appointed January 2014). Former Chief Executive Officer of
Ford Motor Company’s Sydney Retail Joint Venture.
Nicholas George Politis BCom
Director
Non-executive Director since May 2000. Motor vehicle dealer.
Executive Chairman of WFM Motors Pty Ltd, A.P. Eagers Limited’s
largest shareholder. Vast automotive retail industry experience and
Director of a substantial number of proprietary limited companies.
Daniel Thomas Ryan BEc, MBus, FAICD
Director
Non-executive Director since January 2010. Director and Chief
Executive Officer of WFM Motors Pty Ltd, A.P. Eagers Limited’s
largest shareholder. Director of a substantial number of proprietary
limited companies. Significant management experience in
automotive, transport, manufacturing and retail industries.
Independent, non-executive Director since July 2012. Chartered
accountant, with more than 35 years in the profession. Former
partner of Horwath Chartered Accountants and Deloitte
Touche Tohmatsu. Former Chairman of Horwath’s motor
industry specialisation unit for six years. Area of professional
specialisation while at Horwath and Deloitte was in providing
audit, financial and taxation services to public and large private
companies in the motor industry.
Marcus John Birrell
Director, Member of Audit, Risk & Remuneration Committee from
29 March 2017
Non-executive Director since July 2016. Director of Australian
Automotive Dealer Association Limited (appointed January 2014).
A distinguished career in the automotive industry, including 38
years at manufacturer, financier and retail level and 21 years as
Executive Chairman of Birrell Motors Group.
Sophie Alexandra Moore BBus, CA, FFin
Director & Chief Financial Officer
Director since 29 March 2017. Commenced with the Company
as Chief Financial Officer in August 2015. In her executive
capacity, Sophie is responsible for the group’s accounting,
taxation, internal audit and treasury functions. Admitted as a
chartered accountant in 1997. Previous senior finance roles with
PricewaterhouseCoopers and Flight Centre Travel Group Limited.
Peter William Henley FAIM, MAICD
Director, Member of Audit, Risk & Remuneration Committee,
Retired 22 February 2017
Independent, non–executive Director from December 2006
until retirement on 22 February 2017. Director of Thorn Group
Ltd (appointed May 2007, retired August 2016). Former Deputy
Chairman of MTQ Insurance Services Ltd. Former Chairman
and Chief Executive Officer of GE Money Motor Solutions. Over
30 years’ local and international experience in the financial
services industry.
EXECUTIVE MANAGEMENT
Keith Thomas Thornton BEc
General Manager Queensland & Northern Territory
Denis Gerard Stark LLB, BEc
General Counsel & Company Secretary
Commenced in July 2002. Licensed motor dealer. Responsible
for all operational issues in Queensland and Northern
Territory from June 2007 to 31 December 2016. In January
2017, appointed Chief Operating Officer – Cars, with national
responsibility for the group’s car operations. Significant retail
and wholesale experience in volume, niche and prestige
industry sectors. Prior industry experience with various
manufacturers. Director of Australian Automotive Dealer
Association Limited (appointed September 2014).
Commenced in January 2008. Responsible for overseeing the
company secretarial, legal, work health & safety, insurance and
investor relations functions and property portfolio. Previous
company secretarial and senior executive experience with public
companies. Admitted as a solicitor in Queensland in 1994 and
Victoria in 1997.
5
ANNUAL REPORT 2016 DIRECTORS’ REPORT
The Directors of A.P. Eagers Limited ABN 87 009 680 013 (the Company) present their report together with the consolidated financial
report of the Company and its controlled entities (the Group), for the year ended 31 December 2016 and the auditor’s report thereon.
DIRECTORS
The Directors of the Company at any time during or since the end of the year, and their qualifications, experience and special
responsibilities, are detailed on page 5.
COMPANY SECRETARY
The Company Secretary and his qualifications and experience are detailed on page 5.
DIRECTORS’ MEETINGS
The number of Directors’ meetings (including meetings of committees of Directors) and number of meetings attended by each Director
during the year were:
Board Meetings
Audit, Risk &
Remuneration Committee Meetings
Held
Attended
Held
Attended
8
8
8
8
8
8
4
8
8
8
8
8
8
4
4
-
-
4
-
4
-
3
-
-
3
-
4
-
T B Crommelin(1)
N G Politis
M A Ward
P W Henley(1)
D T Ryan
D A Cowper(1)
M J Birrell(2)
(1) Audit, Risk & Remuneration Committee members.
(2) Mr Birrell was appointed as a Director on 27 July 2016.
PRINCIPAL ACTIVITIES
The Group’s principal activities during the year consisted of the selling of new and used motor vehicles, distribution and sale of parts,
accessories and car care products, repair and servicing of vehicles, provision of extended warranties, facilitation of finance and leasing
in respect of motor vehicles, and the ownership of property and investments. The products and services supplied by the Group were
associated with, and integral to, the Group’s motor vehicle dealership operations. There were no significant changes in the nature of the
Group’s activities during the year.
6
FINANCIAL & OPERATIONAL REVIEW
The Directors are pleased to report a record 2016 statutory Net Profit Before Tax (NPBT) of $141.4 million. This compares to a Net Profit
Before Tax of $121.0 million in 2015, an increase of 16.9% on the previous corresponding period (pcp). Net Profit After Tax was $105.5
million in 2016 compared to $87.0 million in 2015, an increase of 21.3% on the pcp. Earnings per share (basic) for 2016 were 55.4 cents
compared to 47.6 cents on the pcp, an increase of 16.2%.
Profit Comparison
Statutory EPS (basic) cents
Statutory profit after tax
Statutory profit before tax
Impairment adjustments (1)
Freehold Property adjustments (reversal)
Goodwill impairment
Business acquisition costs (2)
GST refunds (3)
Underlying profit before tax
Underlying profit after tax (4)
Underlying EPS (basic) cents
Notes
Full Year to
December 2016
$Million
Full Year to
December 2015
$ Million
55.4
105.5
141.4
(1.2)
-
1.8
(4.5)
137.5
100.2
53.3
47.6
87.0
121.0
2.1
5.5
0.2
(2.4)
126.4
91.7
50.7
% Change
16.2%
21.3%
16.9%
8.8%
9.3%
5.2%
(1) Represents the aggregate value of freehold property fair value adjustments (positive and negative) to the Statement of Profit and Loss and non-cash
impairment of the goodwill associated with the National Truck Division.
(2) Business acquisition costs include taxes, legal and other costs associated with business acquisitions.
(3) Benefit from tax refunds associated with previous years’ GST payments
(4) Underlying profit after tax includes the adjustments per Note (1) above, and the related tax impact at 30% equating to $1.1 million charge in 2016
(2015: $1.6 million benefit).
Record trading performances in South Australia and New South Wales’ Hunter Region, significant improvement in National Truck
operations and solid contributions from businesses acquired during the year helped offset the decline in Queensland. Although the
Queensland and Northern Territory division continued to perform at historically strong levels, its year-on-year performance was down
which was reflective of the exceptional hail driven market dynamics in 2015. Increased dividend income from our strategic investment in
Automotive Holdings Group Ltd (AHG) and gains on sale of investments and property also contributed to the Group’s record result in 2016.
7
ANNUAL REPORT 2016 Dividends
Due to strong operational cash flow and increased earnings per
share (EPS), a fully franked final dividend of 22.0 cents per share
(2015: 20.0 cents) has been approved for payment on 18 April 2017
to shareholders who are registered on 30 March 2017 (Record
Date). When combined with the interim dividend of 13.0 cents paid
in October 2016, the total dividend based on 2016 earnings is 35.0
cents per share (2015: 32.0 cents) fully franked, an increase of 9%
on 2015. The Company’s dividend reinvestment plan (DRP) will
not operate in relation to the final dividend.
Dividends paid to members during the year under review were
as follows:
Year ended 31 December
Final ordinary dividend for the
year ended 31 December 2015 of
20.0 cents (2014: 18.0 cents) per
share paid on 15 April 2016
Interim ordinary dividend of
13.0 cents (2015: 12.0 cents) per
share paid on 7 October 2016
2016
$’000
2015
$’000
37,015
32,239
24,625
61,640
22,089
54,328
External Environment
According to Federal Chamber of Automotive Industry statistics,
Australia’s new motor vehicle sales increased by 2.0% in 2016
to 1,178,133 units compared to a 3.8% increase in 2015. Whilst
growth reduced in 2016 this represents a record year of sales
exceeding the previous set in 2015.
New vehicle sales in Western Australia and Queensland
decreased on the pcp by -5.6% and -1.1%, respectively. Strong
growth was experienced in New South Wales (4.4%), ACT (4.3%),
South Australia (3.9%) and Victoria (3.4%).
Private sales decreased by -5.8% but this was more than offset
by a 13.0% increase in business sales. Luxury brands such as
Audi, BMW, Mercedes-Benz, Land Rover, Volvo, Jaguar, Mini,
Lexus, Porsche and Infiniti all recorded record sales as their
respective lower-priced product offerings captured market
share, with entry to new model segments key to a large part
of this growth. This segment grew from 10.4% to 11.4% of total
market share. Traditional fuel vehicles made up 99% of all new
vehicle sales with the sale of electric vehicles reducing 80% to
219 units in 2016.
Australian manufactured vehicles represented only 7.4% (2015:
8.4%) of new cars sold in the national market in 2016.
Business Initiatives
During 2016 our car retailing acquisitions expanded into
new geographic territories, including Melbourne, Tasmania,
Toowoomba, Hervey Bay and Townsville. Many existing brands
represented by A.P. Eagers were included in this geographical
expansion along with a new franchise relationship with
Mercedes-Benz passenger cars at Doncaster and Ringwood
in Victoria and at Toowoomba in Queensland. The disciplined
integration of these acquisitions has created EPS growth during
2016, and most importantly has laid the foundation for further
EPS growth from these business units during 2017 as the full
operational benefits are extracted from these acquisitions.
Our all-new Carzoos retail store aimed at delivering a
completely new way for customers to buy and sell used cars was
launched in September 2016 at Westfield Garden City shopping
centre in southern Brisbane. A second store opened in North
Lakes in northern Brisbane in November. Carzoos is supported
by the Company’s new finance initiative, Simplr, aimed at
providing a completely new and entirely consumer-centric
finance option that leverages the Group’s extensive portfolio of
partner finance providers.
Redevelopment of the Group’s Newstead dealership properties
continues with the opening of the new Volkswagen dealership
in April 2016. The redevelopment of Land Rover and Jaguar
dealerships commenced in June and is expected to be
completed in April 2017 when the Company exits two thirds of
the Fortitude Valley site.
The strategic 19.99% shareholding in AHG as at 31 December
was valued at $262.0 million based on their closing share price
of $3.95 per share (2015: $4.52). Whilst not included in the
Company’s Statutory Profit after Tax, a before tax unrealised
loss of $37.8 million resulting from the reduction in AHG’s end
of year share price, has been recognised in the Statement of
Comprehensive Income for the 2016 year.
Financial Performance
Total revenue increased by 18.1% to $3.8 billion in 2016 (2015:
$3.2 billion), with all business units reflecting increases in
vehicle sales. The additional contribution from new business
acquisitions and strong trading in the NSW car division also
combined to boost total revenue. On a like-for-like basis,
revenue increased by 5.3% compared to the pcp.
EBITDA increased by 10.2% to $179.8 million (2015: $163.1
million). EBITDA/Revenue of 4.7% (2015: 5.0%) was down
as compared to pcp while the NPBT/Sales ratio remained
consistent at 3.7% (2015: 3.7%). On an underlying basis NPBT/
Sales for 2016 was 3.6%, down from 3.9% in 2015.
8
DIRECTORS’ REPORT CONTINUED A before tax profit of $1.1 million (net) was realised on the early settlement of the property in Woolloongabba in 2016, as compared
to a $3.0 million gain on sale of properties in 2015. Furthermore, a profit before tax of $1.2 million was realised on the revaluation of
a property at Brookvale, offsetting a revaluation decrement recorded against the same property in 2010. This $1.2 million positive
compared to a $2.1 million loss before tax realised on the revaluation of a property in 2015.
Borrowing costs increased by 14.5% to $24.4 million (2015: $21.3 million), reflecting higher average debt (including additional bailment
finance for the businesses acquired in 2016) being partially offset by lower margins and interest rates. The increase in depreciation
and amortisation costs by 5.9% to $14.0 million (2015: $13.2 million) reflects the additional depreciation on businesses and associated
property acquired in 2016 and higher development and refurbishment capital expenditure in 2016 which increased to $19.3 million from
$18.9 million in 2015.
Business acquisition costs of $1.8 million were expensed in the financial year relating to the Birrell, Crampton Automotive and Tony
Ireland Group acquisitions, compared to $0.2 million in 2015.
The Company’s net cash provided by operating activities was $110.7 million in 2016 (2015: $84.6 million). This increase was due to
contributions from acquisitions made in 2016, improved profitability together with lower tax payments compared to 2015 which included
capital gains tax paid on the properties sold in 2014.
Results Summary
Consolidated results
Year Ended 31 December
Revenue from operations
Other revenue
Total revenue
Earnings before interest, tax, depreciation and amortisation and impairment
(EBITDA)
Depreciation and Amortisation
Impairment charge/net reversal
Earnings before interest and tax (EBIT)
Borrowing costs
Profit before tax
Income tax expense
Profit after tax
Non-controlling interest in subsidiaries
Attributable profit after tax
Earnings per share - basic
This report is based on accounts which have been audited.
2016
$’000
2015
$’000
Increase/
(Decrease)
3,779,738
3,201,755
53,484
44,621
3,833,222
3,246,376
179,776
(13,993)
163,077
(13,216)
18.1%
19.9%
18.1%
10.2%
5.9%
-
(7,610)
(100.0%)
165,783
(24,378)
141,405
(35,879)
105,526
(1,542)
103,984
142,251
(21,293)
120,958
(33,943)
87,015
(798)
86,217
55.4 cents
47.6 cents
16.5%
14.5%
16.9%
5.7%
21.3%
-
20.6%
16.4%
9
ANNUAL REPORT 2016 Segments (1)
The Profit contribution from the Company’s Car Retail segment
was 6.8% higher at $104.6 million compared to $98.0 million in
2015. Revenue increased by 19.5%, with the increase primarily
attributable to the strong trading in NSW and contribution from the
acquired Birrell, Crampton Automotive and Tony Ireland groups.
The strong trading was also reflected in the service departments
with the focus on service retention, transactional margins and
workshop efficiency all driving a record service result.
The National Truck Division (Truck Retail segment) delivered
a significantly improved profit performance of $6.3 million
compared to a $3.2 million loss in 2015 which included the
goodwill impairment write down of $5.5 million. Revenue
increased by 5.4% reflecting strong performance in all
departments including significantly improved profits from the
used truck and service divisions.
The value of the property portfolio increased to $299 million
as at 31 December 2016 compared to $249 million as at 31
December 2015 due primarily to the acquisition of five properties
during the year including three dealership sites for the
Mercedes-Benz business in Victoria and favourable adjustments
to property fair values. The Property segment profit contribution
of $28.2 million was higher than the previous year of $16.3
million, due to the $1.1 million gain realised on settlement of
a Woolloongabba property together with property valuation
increases of $12.1 million primarily in the Queensland portfolio,
of which $1.2 million was recognised as profit before tax.
The Investment segment registered a pre-tax loss of $24.0
million for 2016 as compared to a gain of $61.1 million for the
pcp, due primarily to an unrealised revaluation loss on the AHG
investment of $37.8 million. This reflected a 31 December 2016
AHG closing share price of $3.95 per share compared to $4.52
as at 31 December 2015.
(1) Note: changes in fair value of property and investments are recognised as
profit and loss adjustments for segment reporting purposes but are not
recorded in the Group’s Statutory Net Profit After Tax
Financial Position
Our financial position and interest coverage remained strong,
although total debt and gearing ratios increased during 2016
as a result of additional debt to fund the acquisition of new
businesses, property and AHG shares. $50 million in cash
received from property sales during the year was also used to
fund these acquisitions.
EBITDA Interest Cover (EBITDA/Borrowing costs) was 7.4 times
as at 31 December 2016 compared to 7.0 times as at June 2016
and 7.6 times as at 31 December 2015.
Corporate debt (Term and Capital Loan Facility) net of cash on
hand as at 31 December 2016 was higher at $266.0 million (2015:
$171.5 million) and total debt including vehicle bailment net of
cash on hand was higher at $751.9 million as compared to $576.7
million at 31 December 2015. The increase was primarily due
to additional debt drawn down to fund the Birrell and Crampton
Automotive Group acquisitions and additional bailment finance
consistent with seasonal inventory movements and related to
businesses acquired during the year.
Total gearing (Debt /Debt + Equity), including bailment inventory
financing and finance leases, was 50.2% as at 31 December
2016, as compared to 46.6% as at 31 December 2015. Bailment
finance is cost effective short-term finance secured against
vehicle inventory on a vehicle by vehicle basis. Gearing excluding
bailment and finance leases and including cash on hand, was
25.8% as at 31 December 2016 compared to 19.6% at the end
of 2015. During the year, additional debt of $73.4 million was
drawn down to fund the business and property acquisitions and
additional shares acquired in AHG.
Total inventory levels increased to $625.0 million at 31 December
2016 from $530.2 million at 31 December 2015 primarily due to
additional new and used car/truck inventory from the Birrell,
Crampton Automotive and Tony Ireland Group acquisitions.
Net tangible assets reduced to $2.44 per share as at 31
December 2016, compared to $2.95 per share as at 31 December
2015, due to increased intangibles acquired as part of Birrell,
Crampton Automotive and Tony Ireland Group acquisitions and
lower value of AHG investment.
Outlook and Strategy Update
The national new vehicle market continues to grow with low
interest rates supporting customer affordability and exceptional
product offerings driving customer demand.
Strategically, the Company remains focussed on automotive
retail and a two-pronged approach of driving value from existing
business through process improvement, operating synergies,
portfolio management and organic growth, whilst taking
advantage of value adding acquisition opportunities as they
present themselves.
Key focus areas for 2017 are:
> Delivering further EPS growth from the Birrell Group,
Crampton Automotive Group and Tony Ireland Group
acquisitions;
>
>
>
Implementing appropriate operational changes in response
to any announcement by ASIC regarding regulatory rule
changes for Finance & Insurance (18 month lead time
expected);
The ongoing development and optimisation of our existing used
car business model now re-launched and branded Zooper;
The further expansion of the all-new Carzoos and Simplr
business model following the opening of two shopping
centre stores in 2016;
> Continued redevelopment and reorganisation of inner city
Brisbane facilities (Newstead, Woolloongabba and Windsor)
to provide improved long-term solutions for all stakeholders;
>
Further rationalisation of our Parts business to reduce the
cost base, improve efficiency and eliminate sub-economic
business trading terms;
> A renewed focus on all business processes to deliver the
optimal operating cost; and
> Earnings accretive dealership and ancillary market
acquisitions.
10
DIRECTORS’ REPORT CONTINUED SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
REMUNERATION REPORT
In the Directors’ opinion there was no significant change in the
state of affairs of the Group during the financial year that is not
disclosed in this report or the consolidated financial report.
MATTERS SUBSEQUENT TO THE END OF THE
FINANCIAL YEAR
The Directors are not aware of any matter or circumstance not
dealt with in this report or the consolidated financial report
that has arisen since the end of the year under review and has
significantly affected or may significantly affect the Group’s
operations, the results of those operations or the state of affairs
of the Group in future financial years.
ENVIRONMENTAL REGULATION
The Group’s property development and service centre
operations are subject to various environmental regulations.
Environmental licences are held for particular underground
petroleum storage tanks.
Planning approvals are required for property developments
undertaken by the Group in relevant circumstances. Authorities
are provided with appropriate details and to the Directors’
knowledge developments during the year were undertaken in
compliance with planning requirements in all material respects.
Management works with regulatory authorities, where
appropriate, to assist compliance with regulatory requirements.
There were no material adverse environmental issues during
the year to the Directors’ knowledge.
1. Principles Used to Determine Remuneration
The board as a whole is responsible for recommending and
reviewing the remuneration arrangements of non-executive
Directors, whilst the board (excluding the Chief Executive
Officer) reviews the performance of the Chief Executive Officer
on a continual basis and ensures the reward framework is
appropriate. To assist the board, the Audit, Risk & Remuneration
Committee reviews and makes recommendations regarding
these remuneration arrangements.
The Chief Executive Officer in consultation with the Chairman
reviews the performance of the Group’s senior executives on an
ongoing basis and ensures the appropriateness of their reward
framework.
Remuneration packages are intended to properly reflect the
individual’s duties and responsibilities, be competitive in
attracting, retaining and motivating staff of the highest quality
and be aligned to shareholder interests.
The remuneration framework for executives has been
developed to provide, where appropriate, a high proportion of
“at risk” remuneration. This is designed to reflect competitive
reward for contribution to growth in Group profits and
shareholder wealth.
In considering the impact of the Group’s performance on
shareholder wealth, the Directors have regard to various factors
including the following metrics:
Statutory NPAT ($ million)
Statutory Earnings per share - basic (c)
Dividend per share (c)
Share Price at year end ($)
2016
105.5
55.4
35
9.22
2015
87.0
47.6
32
12.70
2014
76.7
43.0
27
5.98
2013
64.0
36.4
23
4.96
2012
55.6
34.0
20
4.38
11
ANNUAL REPORT 2016 2. Non-executive Directors’ Remuneration Framework
Non-executive Directors are remunerated for their services by
way of fees (and where applicable, superannuation) from the
maximum amount approved for that purpose by shareholders
in general meeting, currently $750,000 per annum, which was
fixed at the annual general meeting in 2015.
For the year under review, non-executive Director fees were
$85,000 per annum plus superannuation, and the Chairman’s
fee was $100,000 per annum plus superannuation.
The board, with the assistance of the Audit, Risk &
Remuneration Committee, annually reviews non-executive
Director fees, taking into account relevant market conditions.
Non-executive Directors do not participate in schemes
designed for the remuneration of executives, equity schemes
or retirement allowance programmes, nor do they receive
performance-based bonuses.
3. Executives’ Remuneration Framework
(a) Base Pay
Each executive is offered a competitive base pay to reflect the
market for a comparable role. Base pay is reviewed annually and
on promotion to ensure it remains competitive with the market.
It may be delivered as a combination of cash and superannuation
that the executive elects to salary sacrifice.
(b) Benefits
Executives receive benefits including the provision of fully
maintained motor vehicles, personal health and fitness
programs and, in the case of the Chief Executive Officer,
personal insurance. Retirement benefits are delivered under
superannuation funds providing accumulation benefits. No lump
sum defined benefits are provided.
(c) Short-term Performance Incentives
(i)
Incentive / Bonus
Non-commission based key management personnel are eligible
to receive short-term incentive payments of up to 30% of their
base salary in accordance with contractual arrangements.
This is not available to commission based key management
personnel, the Chief Executive Officer or non-executive
Directors. The allocations are determined on a discretionary
basis during annual review by the Chief Executive Officer in
consultation with the Chairman after considering individual
and Company achievements and performances.
(ii) Commission Structure
A commission structure is included in the remuneration for
the General Manager Queensland and Northern Territory. The
commission is set at a percentage of net profit before tax of relevant
business units and is therefore based on measurable business
performance and designed to improve shareholder value.
(d) Executive Incentive Plan (EIP)
The EIP was approved by shareholders at the annual general
meeting in 2013. It is intended as both a long-term and short-
term incentive for key management personnel, focussing
on corporate performance and the creation of shareholder
value over multi-year periods. The EIP is not available to non-
executive Directors.
Through the EIP, executives are driven to improve the Company’s
performance and shareholder return. This is accomplished
through the grant of performance rights and options which
reward the achievement of pre-determined Group performance
hurdles and allow executives to share in the Company’s growth.
The performance hurdles are explained in further detail below.
A performance right is a right to be given a fully paid ordinary
share in the Company at a nil exercise price upon the
achievement of performance hurdles.
An option is a right to be given a fully paid ordinary share upon
payment of an exercise price and achievement of performance
hurdles. The exercise price is the market share price on or
about the grant date or when the executive agreed in principle to
participate in the plan.
The performance rights and options are divided into separate
tranches for each annual performance period. Each tranche of
options may be further divided into sub-tranches. The tranches
and sub-tranches are tested against the performance hurdles
for the relevant performance period.
(i) Performance Hurdles
Pre-determined performance hurdles for the relevant
performance period must be achieved for performance rights
and options to vest. Performance hurdles include:
>
>
>
the Company must meet the applicable EPS hurdle (as
described below).
the Company must meet any prescribed interest cover ratio,
being at least 2.5 times.
the executive must remain permanently employed by the
Group.
All performance hurdles for a performance period must be
met for the relevant rights and options to vest. The board does,
however, retain discretion to waive hurdles in exceptional
circumstances where it is believed to be in the Company’s best
interests to do so.
(ii) EPS Hurdles
A separate EPS performance hurdle applies for each tranche
or sub-tranche of performance rights and options. These EPS
hurdles are pre-determined using a base-line EPS when the
participant agreed to join the plan.
The Company must achieve a minimum of 7% annual
compound growth in diluted EPS above the base-line before
any performance rights or options will vest for the performance
period, with 10% annual compound growth required for all
performance rights and options to vest for the period.
12
DIRECTORS’ REPORT CONTINUED As these “at risk” earnings are demonstrably linked to the
creation of shareholder value, it is considered that if an EPS
hurdle is not achieved at the end of a 12 month performance
period, re-testing would be appropriate to allow for market
reaction to the Company’s longer term strategic initiatives. In
these circumstances, re-testing would take place 12 months later.
If the EPS hurdle is not achieved on the re-test, it may be re-tested
a second time a further 12 months later. However, there cannot
be more than two re-tests. Performance rights and options
immediately lapse if they do not vest on the second re-test.
(iii) CEO’s Participation in EIP
At the Company’s annual general meeting in 2014, shareholders
approved the Chief Executive Officer, Mr Ward, participating in
the EIP for the five years from 2015 to 2019. With 96.6% of proxy
votes in favour or at the Chairman’s discretion, shareholders
approved the following:
> Mr Ward’s performance hurdles are measured over the five
year period 2015 to 2019.
> Before any of Mr Ward’s performance rights or options will
vest for an individual year, the Company must achieve at
least 7% annual compound growth in diluted EPS above the
base-line EPS. The base-line was set at the diluted EPS for
2013. This base-line was used in order to give shareholders
visibility of the base-line before they approved Mr Ward’s
rights and options at the annual general meeting in 2014.
>
For 100% of Mr Ward’s performance rights and options to vest
for the five years, the Company must achieve at least 10%
annual compound growth in diluted EPS above the base-line.
The cost to the Company of Mr Ward’s participation in the EIP is
determined as follows:
>
>
There has been no increase to the average annual cost to the
Company of Mr Ward’s participation in the EIP since 2010.
If 100% of the performance rights and options are to vest
over the five year period 2015 to 2019 (requiring at least 10%
annual compound growth in diluted EPS for five years), the
recognised cost of the plan will average $850,000 per annum
being the fair value at grant date. However, accounting
standards require that the cost be recognised based on the
progressive recognition of each share option grant over its
expected vesting period, as shown in the remuneration table
on page 16, which results in a higher overall cost of the EIP
in the earlier years and a lower cost in later years. On the
assumption that all performance hurdles will be achieved
over the five year period, the total cost recognised in each
year will be as shown in the following graphs.
>
If no performance hurdles at all were to be achieved over the
five year period, then no performance rights or options would
vest and the plan would cost the Company zero dollars.
> By way of comparison, if only 50% of the performance rights
and options by value were to vest each year over the five year
period (requiring 7% annual compound growth in diluted
EPS for five years), the cost of the plan would be on average
$425,000 per annum for 5 years.
Accounting accrual
6
3
2
2
2
1
,
1
8
4
9
4
0
9
4
8
8
5
5
1
s
’
0
0
0
$
1500
1200
900
600
300
0
Average annual cost
0
5
8
0
5
8
0
5
8
0
5
8
0
5
8
1500
1200
s
’
0
0
0
$
900
600
300
0
0
2014
2015
2016
2017
2018
2019
2014
2015
2016
2017
2018
2019
Accounting accrual cost of CEO’s participation in EIP
– progressive recognition based, assuming all
performance hurdles are achieved.
Average annual cost of CEO’s participation in EIP,
assuming all performance hurdles are achieved.
13
ANNUAL REPORT 2016 (iv) Grants to Key Management Personnel
The following tables show details of current grants of performance rights and options over unissued ordinary shares, which were
granted to key management personnel in or before the year under review. No rights or options were granted to, lapsed or were
exercised by, key management personnel during or after the year under review, except as shown in these tables.
Chief Executive Officer
Tranche
No.
Grant Date
No.
granted
No.
lapsed
No.
exercised (1) Fair value
No.
granted
No.
lapsed
No.
exercised (1) Fair value
End of 1st
performance
period
Performance Rights
Options
1
2
3
4
5
4 Jul 2014
83,661
4 Jul 2014
87,268
4 Jul 2014
4 Jul 2014
4 Jul 2014
91,006
94,866
99,067
-
-
-
-
-
83,661
$5.08
467,032
-
-
-
-
$4.87
452,127
$4.67
447,368
$4.48
420,792
$4.29
416,666
-
-
-
-
-
50,000
$0.91
31 Dec 2015
$0.94
31 Dec 2016
Status
Vested without
re-testing
Vested without
re-testing
$0.95
31 Dec 2017
Unvested
$1.01
31 Dec 2018
Unvested
$1.02
31 Dec 2019
Unvested
-
-
-
-
(1) Performance rights are automatically exercised upon vesting. 50,000 options that vested for 2015 were exercised during the year under review.
Options and rights that were exercised during the year under review were valued at $1,275,714 on the day of exercise.
General Manager Queensland and Northern Territory
Performance Rights
Options
No.
granted
No.
lapsed
No.
exercised (1) Fair value
Tranche
No.
1
2
3
4
5
6
7
8
9
Grant Date
29 Oct 2009
29 Oct 2009
29 Oct 2009
29 Oct 2009
29 Oct 2009
-
-
-
-
-
4 Jul 2014
19,685
4 Jul 2014
20,533
4 Jul 2014
4 Jul 2014
21,413
22,321
23,310
10
4 Jul 2014
No.
granted
104,165
203,805
202,705
203,805
199,470
-
-
-
-
-
-
-
-
-
-
19,685
$5.08
109,890
-
-
-
-
$4.87
106,382
$4.67
105,263
$4.48
$4.29
99,009
98,039
-
-
-
-
-
-
-
-
-
-
No.
lapsed
No.
exercised (1) Fair value
End of 1st
performance
period
-
-
-
-
-
-
-
-
-
-
104,165
$0.36
31-Dec-10
203,805
$0.37
31-Dec-11
202,705
$0.37
31-Dec-12
203,805
$0.37
31-Dec-13
199,470
$0.38
31-Dec-14
-
-
-
-
-
$0.91
31-Dec-15
$0.94
31-Dec-16
$0.95
31-Dec-17
$1.01
31-Dec-18
$1.02
31-Dec-19
Status
Vested without
re-testing
Vested without
re-testing
Vested without
re-testing
Vested without
re-testing
Vested without
re-testing
Vested without
re-testing
Vested without
re-testing
Unvested
Unvested
Unvested
(1) Performance rights are automatically exercised upon vesting. 913,950 options that had vested for the years 2010 to 2014 were exercised during the year under
review. Options and rights that were exercised during the year were valued at $9,391,103 on the day of exercise.
14
DIRECTORS’ REPORT CONTINUED
General Counsel & Company Secretary
Performance Rights
Options
No.
granted
No.
lapsed
No.
exercised (1) Fair value
-
-
-
-
-
-
-
Grant Date
1 Jun 2010
1 Jun 2010
27 Mar 2013
27 Mar 2013
27 Mar 2013
27 Mar 2013
27 Mar 2013
Tranche
No.
1
2
3
4
5
6
7
8
9
10
11
12
4 July 2014
2,460
4 Jul 2014
2,566
4 Jul 2014
4 Jul 2014
4 Jul 2014
2,676
2,790
2,913
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,460
$5.08
No.
granted
52,640
60,850
26,880
26,880
26,040
25,510
25,250
13,736
-
-
-
-
$4.87
13,297
$4.67
$4.48
$4.29
13,157
12,376
12,254
No.
lapsed
No.
exercised (1) Fair value
End of 1st
performance
period
-
-
-
-
-
-
-
-
-
-
-
-
52,640
$0.52
31-Dec-11
60,850
$0.53
31-Dec-12
-
-
-
-
-
-
-
-
-
-
$0.93
31-Dec-13
$0.93
31-Dec-14
$0.96
31-Dec-15
$0.98
31-Dec-16
$0.99
$0.91
31-Dec-17
31-Dec-15
$0.94
31-Dec-16
$0.95
$1.01
$1.02
31-Dec-17
31-Dec-18
31-Dec-19
Status
Vested without
re-testing
Vested without
re-testing
Vested without
re-testing
Vested without
re-testing
Vested without
re-testing
Vested without
re-testing
Unvested
Vested without
re-testing
Vested without
re-testing
Unvested
Unvested
Unvested
-
-
-
-
-
-
-
-
-
-
-
-
(1) Performance rights are automatically exercised upon vesting. 113,490 options that had vested for the years 2011 and 2012 were exercised during the year under
review. Options and rights that were exercised during the year were valued at $917,092 on the day of exercise.
Chief Financial Officer
Tranche
No.
Grant Date
No.
granted
No.
lapsed
No.
exercised (1) Fair value
No.
granted
No.
lapsed
No.
exercised (1) Fair value
End of 1st
performance
period
Performance Rights
Options
1
2
3
4
5
12 Jun 2015
2,227
12 Jun 2015
4,624
12 Jun 2015
12 Jun 2015
12 Jun 2015
4,796
4,975
5,167
-
-
-
-
-
2,227
$8.98
14,084
-
-
-
-
$8.65
27,027
$8.34
$8.04
$7.74
26,143
25,316
25,000
-
-
-
-
-
-
-
-
-
-
$1.42
31 Dec 2015
$1.48
31 Dec 2016
Status
Vested without
re-testing
Vested without
re-testing
$1.53
31 Dec 2017
$1.58
31 Dec 2018
$1.60
31 Dec 2019
Unvested
Unvested
Unvested
(1) Performance rights are automatically exercised upon vesting. No options were exercised during the year under review. Rights that were exercised during the
year were valued at $24,742 on the day of exercise.
Further details of the performance rights and options granted under the EIP are specified in notes 36 and 37 to the consolidated
financial report.
4. Hedging
The board has adopted a policy which prohibits any Director or employee who participates in an equity plan from using derivatives,
hedging or similar arrangements to reduce or eliminate the risk associated with the plan in relation to unvested securities or securities
that are subject to trading restrictions, without the Chairman’s approval. Any breach will result in forfeiture or lapsing of the unvested
securities or additional performance hurdles or trading restrictions being imposed, at the board’s discretion.
5. Executive Employment Agreements
Executives who are key management personnel are employed under common employment agreements. The agreements do not
have a finite term, can be terminated by either employer or employee giving three months’ notice and do not contain any termination
payment arrangements. The board has discretion to extend the termination notice period that may be given to an executive and to make
payments upon termination, as appropriate.
15
ANNUAL REPORT 2016
The Chief Executive Officer’s employment agreement differs from that of other executives as follows:
(a) The Company may terminate the Chief Executive Officer’s employment if he is unable to satisfactorily perform his duties due to
illness, injury or accident for a period of six months or for cause. Termination for any other reason may entitle the Chief Executive
Officer to a termination benefit equivalent to two times annual remuneration at the time of termination, subject to any limit imposed
by law.
(b) The Chief Executive Officer may terminate his employment agreement on six months’ notice unless otherwise agreed with the
Company.
6. Details of Remuneration
Key management personnel include Directors and executives who have authority and responsibility for planning, directing and
controlling the activities of the Group. Remuneration details of key management personnel are set out in the following tables.
Short-term benefits
Post-
employment
benefits
Bonus &
commission (4)
$
Non-monetary
& other
benefits (1)
$
Super-
annuation
benefits
$
Salary & fees
$
Share-based
payments
Performance
Rights &
Options (2) (3)
$
Performance
-related
percentage
%
Total
$
100,000
1,200,000
85,000
85,000
85,000
85,000
42,500
1,682,500
-
-
-
-
-
-
-
-
635
9,500
-
110,135
136,556
35,000
948,336
2,319,892
635
635
635
635
275
140,006
8,075
8,075
8,075
8,075
4,038
80,838
-
-
-
-
-
93,710
93,710
93,710
93,710
46,813
948,336
2,851,680
200,004
819,230
62,663
19,616
223,138
1,324,651
286,677
73,000
46,554
27,234
55,218
488,683
306,006
62,400
30,116
22,253
101,330
522,105
792,687
954,630
139,333
69,103
379,686
2,335,439
-
41
-
-
-
-
-
79
26
31
2016
Directors
T B Crommelin
Chairman
M A Ward
Managing Director
N G Politis
Non-executive Director
P W Henley
Non-executive Director
D T Ryan
Non-executive Director
D A Cowper
Non-executive Director
M J Birrell
Non-executive Director (5)
Executives
K T Thornton
General Manager Qld & NT
D G Stark
General Counsel &
Company Secretary
S A Moore
Chief Financial Officer
(1) Includes benefits such as the provision of motor vehicles, insurance policy costs and the movement in the provision for the individual’s employee entitlements.
(2) Performance rights and options granted under the EIP are valued using a binomial tree methodology. A pre-determined value of the portion of the rights
and options attributable to the year under review has been expensed in the income statement in conformity with AASB 2 and reflected in each recipient’s
remuneration. In each year, performance rights and options vested under the EIP for the previous year. Vesting is subject to the achievement of performance
hurdles as previously detailed in this Remuneration Report.
(3) The share-based payment is based on progressive recognition of each award grant over its expected vesting period, which results in an increased cost in the
earlier years of the EIP and a reduced cost in later years on the assumption that all performance hurdles will be achieved over the five year period. For further
details, refer to commentary on page 13 under the heading “CEO’s Participation in EIP” of which the treatment of share plan expense is applicable to all key
management personnel.
(4) For Mr Thornton, this is a commission representing a percentage of net profit before tax of relevant business units and is therefore based on measurable
business performance and designed to improve shareholder value. No commission is included for any other key management personnel.
(5) Mr Birrell was appointed as a Director on 27 July 2016.
16
DIRECTORS’ REPORT CONTINUED Short-term benefits
Post-
employment
benefits
Bonus &
commission (5)
$
Non-monetary
& other
benefits (1)
$
Super-
annuation
benefits
$
Salary & fees
$
Share-based
payments
Performance
Rights &
Options (2) (3)
$
Performance
-related
percentage
%
Total
$
100,000
1,200,000
85,000
85,000
85,000
85,000
1,640,000
-
-
-
-
-
-
-
742
9,500
-
110,242
177,416
35,000
1,122,362
2,534,778
742
742
742
742
8,075
8,075
8,075
8,075
-
-
-
-
93,817
93,817
93,817
93,817
181,128
76,800
1,122,362
3,020,290
200,000
931,645
131,025
19,307
264,085
1,546,062
192,500
52,500
68,794
18,288
105,790
437,872
265,000
97,000
73,386
25,175
75,438
535,999
125,000
25,000
782,500
1,106,145
16,858
290,063
6,923
69,693
66,664
240,445
511,977
2,760,378
-
44
-
-
-
-
77
36
32
38
2015
Directors
T B Crommelin
Chairman
M A Ward
Managing Director
N G Politis
Non-executive Director
P W Henley
Non-executive Director
D T Ryan
Non-executive Director
D A Cowper
Non-executive Director
Executives
K T Thornton
General Manager Qld & NT
S G Best
Chief Financial Officer (4)
D G Stark
General Counsel &
Company Secretary
S A Moore
Chief Financial Officer (4)
(1) Includes benefits such as the provision of motor vehicles, insurance policy costs and the movement in the provision for the individual’s employee entitlements.
This includes $67,300 as a provision for long service leave for Mr Ward, $81,019 for Mr Thornton, $37,731 for Mr Best and $46,213 for Mr Stark.
(2) Performance rights and options granted under the EIP are valued using a binomial tree methodology. A pre-determined value of the portion of the rights
and options attributable to the year under review has been expensed in the income statement in conformity with AASB 2 and reflected in each recipient’s
remuneration. In each year, performance rights and options vested under the EIP for the previous year. Vesting is subject to the achievement of performance
hurdles as previously detailed in this Remuneration Report.
(3) The share-based payment is based on progressive recognition of each award grant over its expected vesting period, which results in an increased cost in the
earlier years of the EIP and a reduced cost in later years on the assumption that all performance hurdles will be achieved over the five year period. For further
details, refer to commentary on page 13 under the heading “CEO’s Participation in EIP” of which the treatment of share plan expense is applicable to all key
management personnel.
(4) With the appointment of Ms Moore as Chief Financial Officer on 3 August 2015, Mr Best ceased in his capacity as Chief Financial Officer and a member of key
management personnel. This table therefore includes Mr Best’s remuneration for the period ending 3 August 2015.
(5) For Mr Thornton, this includes a commission of $846,645, which is set at a percentage of net profit before tax of relevant business units and is therefore based
on measurable business performance and designed to improve shareholder value. No commission is included for any other key management personnel.
17
ANNUAL REPORT 2016 7. Relevant Interest in the Company’s Shares Held by Key Management Personnel
At
01-Jan-16
$
Dividend
Reinvestment
Plan
$
Executive
Incentive
Plan
$
Purchases
$
Sales
$
At
31-Dec-16
$
4,115,085
68,079,091
111,825
0
357,229
8,248
0
448,135
145,624
0
0
0
0
0
0
0
0
0
0
0
133,661
0
0
0
0
0
0
12,641
340,048
4,000
0
21,057
3,805
2,000,000
50,000
4,211,387
0
68,419,139
2,733
113,092
0
0
0
0
0
378,286
12,053
2,000,000
933,635
115,950
2,227
0
0
0
953,185
121,000
0
428,585
140,574
2,227
73,265,237
-
1,185,473
2,381,551
1,126,918
75,705,343
At
01-Jan-15
$
Dividend
Reinvestment
Plan
$
Executive
Incentive
Plan
$
Purchases
$
Sales
$
At
31-Dec-15
$
2,854,170
66,085,596
107,215
0
339,229
8,248
390,620
174,785
71,244
0
0
0
0
0
0
0
0
0
0
0
3,760,915
0
2,500,000
4,115,085
0
0
0
0
0
57,515
258,345
74,380
0
1,993,495
4,610
0
18,000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
68,079,091
111,825
0
357,229
8,248
448,135
433,130
145,624
0
70,031,107
-
4,151,155
2,016,105
2,500,000
73,698,367
2016
Directors
M A Ward
N G Politis
P W Henley
D T Ryan
T B Crommelin
D A Cowper
M J Birrell
Executives
K T Thornton
D G Stark
S A Moore
2015
Directors
M A Ward
N G Politis
P W Henley
D T Ryan
T B Crommelin
D A Cowper
Executives
K T Thornton
S G Best
D G Stark
S A Moore
18
DIRECTORS’ REPORT CONTINUED DIRECTORS’ INTERESTS
The relevant interest of each Director in the shares, rights and options issued by the Company as at the date of this report are as follows:
Ordinary Shares (fully paid)
Share Options
Performance Rights
T B Crommelin
N G Politis
M A Ward
P W Henley
D T Ryan
D A Cowper
M J Birrell
383,286
68,521,091
4,211,387
113,092
-
15,053
2,000,000
-
-
-
-
2,153,985 (1)
372,207 (1)
-
-
-
-
-
-
-
-
(1) Share options and performance rights vest only if performance hurdles are met in accordance with the Executive Incentive Plan, as described in the
Remuneration Report.
SHARES UNDER OPTION
NON-AUDIT SERVICES
182,857 options and 33,863 performance rights were granted
by the Company over unissued fully paid ordinary shares during
the year under review. No options or performance rights have
been granted since the end of the year. 3,167,690 shares were
issued as a result of the exercise of options and 164,031 shares
were issued on the vesting of performance rights during or
since the year under review. At the date of this report, there are
8,505,216 unissued shares under option and 752,108 unvested
performance rights.
INDEMNIFICATION AND INSURANCE
The Company’s constitution provides that, to the extent
permitted by law, the Company must indemnify each person who
is or has been a Director or Secretary against liability incurred
in or arising out of the discharge of duties as an officer of the
Company or out of the conduct of the business of the Company
and specified legal costs. The indemnity is enforceable without
the person having to incur any expense or make any payment,
is a continuing obligation and is enforceable even though the
person may have ceased to be an officer of the Company.
At the start of the financial year under review and at the start
of the following financial year, the Company paid insurance
premiums in respect of Directors and Officers liability insurance
contracts. The contracts insure each person who is or has been
a Director or executive officer of the Company against certain
liabilities arising in the course of their duties to the Company
and its controlled entities. The Directors have not disclosed
details of the nature of the liabilities covered or the amount of
the premiums paid in respect of the insurance contracts as such
disclosure is prohibited under the terms of the contracts.
A copy of the auditor’s Independence Declaration as required
under section 307C of the Corporations Act 2001 is attached and
forms part of this report.
The Company may decide to employ its auditor on assignments
additional to their statutory audit duties where the auditor’s
expertise or experience with the Group is important.
Details of the amounts paid or payable to the auditor for audit
and non-audit services provided to the Group during the year
are set out in note 34 to the consolidated financial report.
In accordance with advice received from the Audit, Risk &
Remuneration Committee, the Directors are satisfied that the
provision of the non-audit services was compatible with the
general standard of independence for auditors imposed by
the Corporations Act 2001 and did not compromise the auditor
independence requirements of the Act because all non-audit
services were reviewed by the Committee to ensure they did
not impact the partiality and objectivity of the auditor.
ROUNDING OF AMOUNTS TO NEAREST THOUSAND DOLLARS
The Company is of a kind referred to in Class Order 98/100
issued by the Australian Securities & Investments Commission,
relating to the “rounding off” of amounts in the Directors’ report
and financial report. Amounts in the Directors’ report and
financial report have been rounded off to the nearest thousand
dollars in accordance with that Class Order.
This report is made in accordance with a resolution of the
Directors.
AUDITOR
Deloitte Touche Tohmatsu continues in office as auditor of
the Group in accordance with section 327 of the Corporations
Act 2001.
Martin Ward
Director
Brisbane, 22 February 2017
19
ANNUAL REPORT 2016 AUDITOR’S DECLARATION OF INDEPENDENCE
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Level 25 and 26, Riverside Centre
123 Eagle Street
Brisbane, QLD, 4000
Australia
Phone: +61 7 3308 7000
www.deloitte.com.au
The Board of Directors
A.P. Eagers Limited
5 Edmund Street
Newstead, QLD 4006
22 February 2017
Dear Board Members
A.P. Eagers Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the directors of A.P. Eagers Limited.
As lead audit partner for the audit of the financial statements of A.P. Eagers Limited for the financial
year ended 31 December 2016, I declare that to the best of my knowledge and belief, there have
been no contraventions of:
(i)
the auditor independence requirements of the Corporations Act 2001 in relation to the
audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely,
DELOITTE TOUCHE TOHMATSU
Stephen Tarling
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
20
FINANCIAL
STATEMENTS
Statement of Profit or Loss
Statement of Profit or Loss and
Other Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to and forming part of the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
Corporate Directory
22
23
24
25
26
27
85
86
91
93
21
ANNUAL REPORT 2016 STATEMENT OF PROFIT OR LOSS
FOR THE YEAR ENDED 31 DECEMBER 2016
Revenue
Other gains and losses excluding impairment
Share of net profits of associate
Changes in inventories of finished goods and work in progress
Raw materials and consumables purchased
Employee benefits expense
Finance costs - net
Depreciation and amortisation expense
Impairment of non-current assets
Other expenses
Profit before tax
Income tax expense
Profit for the year
Attributable to:
Owners of A.P. Eagers Limited
Non-controlling interests
Earnings per share:
Basic earnings per share
Diluted earnings per share
The above Statement of Profit or Loss should be read in conjunction with the accompanying notes.
Notes
3
4
42(d)
5(a)
5(a)
5(b)
6
29(b)
31(c)
CONSOLIDATED
2016
$’000
2015
$’000
3,833,222
3,246,376
4,326
191
94,844
6,426
164
60,957
(3,230,501)
(2,700,387)
(311,423)
(278,922)
(24,378)
(13,993)
-
(21,293)
(13,216)
(7,610)
(210,883)
(171,537)
141,405
120,958
(35,879)
105,526
(33,943)
87,015
103,984
1,542
105,526
86,217
798
87,015
Cents
Cents
39(a)
39(b)
55.4
54.0
47.6
46.1
22
STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2016
Profit for the year
105,526
87,015
CONSOLIDATED
2016
$’000
2015
$’000
Notes
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Gain/(loss) on revaluation of property
Income tax (expense)/benefit relating to items that will not be reclassified subsequently
Items that may be reclassified subsequently to profit or loss
Gain/(loss) on revaluation of available for sale investment
Income tax (expense)/benefit
Reclassification adjustments relating to available-for-sale financial assets disposed
of in the year
Fair value gain arising from cash flow hedges during the year
Income tax (expense)/benefit
Total other comprehensive income/(loss) for the year
Total comprehensive income for the year
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interests
29(a)
29(a)
29(a)
29(a)
29(a)
29(a)
29(a)
10,842
(3,253)
7,589
(36,819)
11,046
(1,369)
(27,142)
405
(121)
284
2,187
(656)
1,531
49,689
(14,907)
(2,443)
32,339
300
(89)
211
(19,269)
34,081
86,257
121,096
84,715
1,542
86,257
120,298
798
121,096
The above Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.
23
ANNUAL REPORT 2016 STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER 2016
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax receivables
Prepayments and deposits
Assets classified as held for sale
Property sale receivable
Total current assets
Non-current assets
Property sale receivable
Other loans receivable
Available-for-sale financial assets
Investments in associates
Property, plant and equipment
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Derivative financial instruments
Borrowings - bailment and finance lease payable
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Derivative financial instruments
Deferred tax liabilities
Provisions
Other
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Non-controlling interests
Total equity
The above Statement of Financial Position should be read in conjunction with the accompanying notes.
24
Notes
8
9
10
11
12(a)
12(b)
12(c)
13(a)
13(b)
14
15
16
17
18
19
20(a)
21
22
23(a)
19
24
25
26
28
29(a)
29(b)
CONSOLIDATED
2016
$’000
2015
$’000
17,615
148,746
625,007
3,817
8,843
-
9,466
813,494
-
10,612
264,817
11,893
354,710
298,908
940,940
37,535
109,116
530,163
-
8,256
3,010
32,013
720,093
23,503
10,317
281,817
1,620
291,298
160,762
769,317
1,754,434
1,489,410
158,305
210
485,875
-
26,406
670,796
283,650
206
7,447
9,226
19,317
319,846
133,563
227
404,488
124
19,520
557,922
209,792
595
7,718
10,374
-
228,479
990,642
786,401
763,792
703,009
364,449
55,398
335,779
755,626
296,060
105,375
293,435
694,870
31(c)
8,166
8,139
763,792
703,009
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2016
Consolidated entity 2016
Balance at 1 January 2016
Profit for the year
Other comprehensive income
Total comprehensive income
for the year
Transactions with owners
in their capacity as owners:
Shares issued as
consideration for
business acquisitions
NCI arising on business
acquisition
Share based payment
expense
Dividends provided for or paid
Shares issued pursuant
to Staff share plan
Payments received
from employees for
exercised shares
Current tax on share plan
Income tax on items taken
to or transferred directly
from equity
Asset
revaluation
reserve
$’000
Issued
capital
$’000
Hedging
reserve
$’000
Share-
based
payments
reserve
$’000
Investment
revaluation
reserve
$’000
Attributable
to owners
of the
parent
$’000
Retained
earnings
$’000
296,060
45,192
(575)
(3,778)
64,536
293,435
694,870
Non-
controlling
interests
$’000
8,139
1,542
Total
$’000
703,009
105,526
-
-
-
-
7,589
7,589
-
284
284
32,450
-
-
-
35,939
-
-
-
68,389
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,966
-
(35,939)
6,948
(28)
(4,655)
(30,708)
-
103,984
103,984
(27,142)
-
(19,269)
-
(19,269)
(27,142)
103,984
84,715
1,542
86,257
-
-
-
-
-
-
-
-
-
-
-
-
32,450
-
32,450
-
(368)
(368)
2,966
-
2,966
(61,640)
(61,640)
(1,147)
(62,787)
-
-
-
-
-
6,948
(28)
(4,655)
-
-
-
-
-
6,948
(28)
(4,655)
(61,640)
(23,959)
(1,515)
(25,474)
Balance at 31 December 2016
364,449
52,781
(291)
(34,486)
37,394
335,779
755,626
8,166
763,792
Consolidated entity 2015
Balance at 1 January 2015
Profit for the year
Other comprehensive income
Total comprehensive
income for the year
Transactions with owners
in their capacity as owners:
Transfer to retained earnings
Share based payments
Payment of dividend
Shares issued pursuant
to Staff share plan
Payments received
from employees for
exercised shares
Current tax on share plan
Income tax on items taken
to or transferred directly
from equity
242,070
61,668
-
1,531
(786)
-
211
1,531
211
-
-
-
-
-
-
53,990
-
-
-
(18,007)
-
-
-
-
-
-
53,990
(18,007)
5,941
32,197
242,480
583,570
7,486
591,056
-
-
-
-
3,019
-
(53,990)
10,740
12,352
18,160
(9,719)
-
86,217
32,339
-
86,217
34,081
798
-
87,015
34,081
32,339
86,217
120,298
798
121,096
-
-
-
-
-
-
-
-
18,007
-
-
3,019
-
-
-
3,019
(54,328)
(54,328)
(145)
(54,473)
-
-
-
-
10,740
12,352
1,059
(35,262)
19,219
(8,998)
-
-
-
-
(145)
-
10,740
12,352
19,219
(9,143)
-
-
-
-
-
-
-
-
Balance at 31 December 2015
296,060
45,192
(575)
(3,778)
64,536
293,435
694,870
8,139
703,009
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
25
ANNUAL REPORT 2016 STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2016
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Receipts from insurance claims
Interest and other costs of finance paid
Income taxes paid
Dividends received
Interest received
Net cash provided by operating activities
Cash flows from investing activities
Payment for acquisition of businesses - net of cash acquired
Payments for property, plant and equipment
Payments for intangible assets
Proceeds from sale of businesses
Proceeds from sale of property, plant and equipment
Proceeds from sale of available-for-sale financial assets
Payments for shares in other corporations
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issues of shares and other equity securities
Proceeds from borrowings
Repayment of borrowings
Dividends paid to members of A.P. Eagers Limited
Dividends paid to minority shareholders of a subsidiary
Net cash provided by/(used in) financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
The above Statement of Cash Flows should be read in conjunction with the accompanying notes.
CONSOLIDATED
2016
$’000
2015
$’000
Notes
4,155,091
3,516,726
(4,012,246)
(3,393,453)
8,737
(24,151)
(34,028)
14,633
2,678
110,714
(118,333)
(52,707)
(500)
-
50,077
2,633
(29,469)
(148,299)
6,948
114,650
(41,146)
(61,640)
(1,147)
17,665
(19,920)
37,535
17,615
7,003
(21,365)
(39,870)
13,916
1,596
84,553
(669)
(18,854)
(2,510)
441
4,255
9,636
(7,345)
(15,046)
10,740
45,000
(57,098)
(54,328)
(63)
(55,749)
13,758
23,777
37,535
40
31(a)
16
29
7
8
26
NOTES TO AND FORMING PART OF
THE FINANCIAL STATEMENTS
31 DECEMBER 2016
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) General information and basis of preparation
The financial report covers the Group (consolidated entity) of
A.P. Eagers Limited and its subsidiaries (consolidated financial
statements). A.P. Eagers Limited is a publicly listed company
incorporated and domiciled in Australia.
Compliance with IFRS
These financial statements are general purpose financial
statements which have been prepared in accordance with the
Corporations Act 2001, Accounting Standards and Interpretations,
and comply with other requirements of the law.
The financial statements comprise the consolidated financial
statements of the Group. For the purposes of preparing the
consolidated financial statements, the Company is a for-profit
entity. Accounting Standards include Australian Accounting
Standards. Compliance with Australian Accounting Standards
ensures that the financial statements and notes of the company
and the Group comply with International Financial Reporting
Standards (IFRS).
Historical cost convention
These financial statements have been prepared under the
historical cost convention, as modified by the revaluation of
financial assets, derivatives and certain classes of property,
plant and equipment to fair value.
Fair Value is the price received to sell an asset or paid to
transfer a liability in an orderly transaction between market
participants at the measurement date, regardless of whether
that price is directly observable or estimated using another
valuation technique. In estimating the fair value of an asset
or a liability, the Group takes into account the characteristics
of the asset or liability if market participants would take
those characteristics into account when pricing the asset or
liability at the measurement date. Fair value for measurement
and/or disclosure purposes in these consolidated financial
statements is determined on such a basis, except for share-
based payment transactions that are within the scope of IFRS
2, leasing transactions that are within the scope of IAS 17, and
measurements that have some similarities to fair value but
are not fair value, such as net realisable value in IAS 2 or value
in use in IAS 36.
In addition, for financial reporting purposes, fair value
measurements are categorised into Level 1, 2 or 3 based on the
degree to which the inputs to the fair value measurements are
observable and the significance of the inputs to the fair value
measurements in its entirety, which are described as follows:
>
>
>
Level 1 inputs are quoted prices (unadjusted) in active
markets for identical assets or liabilities that the entity can
access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included
within Level 1, that are observable for the asset or liability,
either directly or indirectly; and
Level 3 inputs are unobservable inputs for the asset or liability.
Functional and presentation currency
The functional and presentation currency of the Group is the
Australian Dollar.
The financial statements were authorised for issue by the
directors on the 22nd of February 2017.
Accounting Policies
The following is a summary of the material accounting
policies adopted in the preparation of the financial report. The
accounting policies have been consistently applied, unless
otherwise stated.
(b) Basis of consolidation
The consolidated financial statements incorporate the financial
statements of A.P. Eagers Limited (the Company or Group) and
entities (including structured entities) controlled by the Company
and its subsidiaries. Control is achieved when the Company:
>
>
>
has power over the investee;
is exposed, or has rights, to variable returns from its
involvement with the investee; and
has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an investee
if facts and circumstances indicate that there are changes to one
or more of the three elements of control listed above.
When the company has less than a majority of the voting rights
of an investee, it has power over the investee when the voting
rights are sufficient to give it the practical ability to direct the
relevant activities of the investee unilaterally.
The Company considers all relevant facts and circumstances
in assessing whether or not the Company’s voting rights in an
investee are sufficient to give it power, including:
>
>
>
>
the size of the Company’s holding of voting rights relative to
the size and dispersion of holdings of the other vote holders;
potential voting rights held by the Company, other vote
holders or other parties;
rights arising from other contractual arrangements; and
any additional facts and circumstances that indicate that
the Company has, or does not have, the current ability
to direct the relevant activities at the time that decisions
need to be made, including voting patterns at previous
shareholders’ meetings.
27
ANNUAL REPORT 2016 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
Consolidation of a subsidiary begins when the Company obtains
control over the subsidiary and ceases when the Company loses
control of the subsidiary. Specifically, income and expenses
of a subsidiary acquired or disposed of during the year are
included in the consolidated statement of profit or loss and other
comprehensive income from the date the company gains control
until the date when the Company ceases to control the subsidiary.
Profit or loss and each component of other comprehensive
income are attributed to the owners of the Company and to
the non-controlling interests. Total comprehensive income
of subsidiaries is attributed to the owners of the Company
and to the non-controlling interests even if this results in
the non-controlling interests having a deficit balance. When
necessary, adjustments are made to the financial statements of
subsidiaries to bring their accounting policies into line with the
Group’s accounting policies.
All intragroup assets and liabilities, equity, income, expenses
and cash flows relating to transactions between members of the
Group are eliminated in full on consolidation.
(i)
Changes in the Group’s ownership interests in
existing subsidiaries
Changes in the Group’s ownership interests in subsidiaries that
do not result in the Group losing control over the subsidiaries
are accounted for as equity transactions. The carrying amounts
of the Group’s interests and the non-controlling interests are
adjusted to reflect the changes in their relative interests in the
subsidiaries. Any difference between the amount by which the
non-controlling interests are adjusted and the fair value of the
consideration paid or received is recognised directly in equity
and attributed to owners of the Company.
When the Group loses control of a subsidiary, a gain or loss is
recognised in profit or loss and is calculated as the difference
between (i) the aggregate of the fair value of the consideration
received and the fair value of any retained interest and (ii) the
previous carrying amount of the assets (including goodwill), and
liabilities of the subsidiary and any non-controlling interests. All
amounts previously recognised in other comprehensive income
in relation to that subsidiary are accounted for as if the Group
had directly disposed of the related assets or liabilities of the
subsidiary (i.e. reclassified to profit or loss or transferred to
another category of equity as specified/permitted by applicable
AASBs). The fair value of any investment retained in the former
subsidiary at the date when control is lost is regarded as the
fair value on initial recognition for subsequent accounting under
AASB 9, when applicable, the cost on initial recognition of an
investment in an associate or a joint venture.
(ii) Investments in associates
An associate is an entity over which the Group has significant
influence. Significant influence is the power to participate in
the financial and operating policy decisions of the investee but
is not control over those policies. If the Group holds, directly or
indirectly, 20% or more of the voting power of the investee, it is
presumed the Group has significant influence, unless it can be
clearly demonstrated that this is not the case.
The results and assets and liabilities of associates are
incorporated in these consolidated financial statements using
the equity method of accounting, except when the investment,
or a portion thereof, is classified as held for sale, in which case
it is accounted for in accordance with AASB 5. Under the equity
method, an investment in an associate is initially recognised
in the consolidated statement of financial position at cost and
adjusted thereafter to recognise the Group’s share of the profit
or loss and other comprehensive income of the associate.
When the Group’s share of losses of an associate exceeds the
Group’s interest in that associate (which includes any long-
term interests that, in substance, form part of the Group’s net
investment in the associate), the Group discontinues recognising
its share of further losses. Additional losses are recognised only
to the extent that the Group has incurred legal or constructive
obligations or made payments on behalf of the associate.
An investment in an associate is accounted for using the equity
method from the date on which the investee becomes an
associate. On acquisition of the investment in an associate, any
excess of the cost of the investment over the Group’s share of
the net fair value of the identifiable assets and liabilities of the
investee is recognised as goodwill, which is included within
the carrying amount of the investment. Any excess of the
Group’s share of the net fair value of the identifiable assets and
liabilities over the cost of the investment, after reassessment,
is recognised immediately in profit or loss in the period in which
the investment is acquired.
The requirements of AASB 139 are applied to determine whether
it is necessary to recognise any impairment loss with respect
to the Group’s investment in an associate. When necessary, the
entire carrying amount of the investment (including goodwill) is
tested for impairment of assets as a single asset by comparing
its recoverable amount (higher of value in use and fair value
less costs of disposal) with its carrying amount. Any impairment
loss recognised forms part of the carrying amount of the
investment. Any reversal of that impairment loss is recognised
in accordance with AASB 136 to the extent that the recoverable
amount of the investment subsequently increases.
The Group discontinues the use of the equity method from the
date when the investment ceases to be an associate, or when the
investment is classified as held for sale. When the Group retains
an interest in the former associate and the retained interest is a
financial asset, the Group measures the retained interest at fair
value at that date and the fair value is regarded as its fair value
on initial recognition in accordance with AASB 139.
28
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED31 DECEMBER 2016 The difference between the carrying amount of the associate at
the date the equity method was discontinued, and the fair value
of any retained interest and any proceeds from disposing of a
part interest in the associate is included in the determination
of the gain or loss on disposal of the associate. In addition, the
Group accounts for all amounts previously recognised in other
comprehensive income in relation to that associate on the same
basis as would be required if that associate had directly disposed
of the related assets or liabilities. Therefore, if a gain or loss
previously recognised in other comprehensive income by that
associate would be reclassified to profit or loss on the disposal
of the related assets or liabilities, the Group reclassifies the
gain or loss from equity to profit or loss (as a reclassification
adjustment) when the equity method is discontinued.
The Group continues to use the equity method when an
investment in an associate becomes an investment in a
joint venture or an investment in a joint venture becomes an
investment in an associate. There is no remeasurement to fair
value upon such changes in ownership interests.
When the Group reduces its ownership interest in an associate
but the Group continues to use the equity method, the Group
reclassifies to profit or loss the proportion of the gain or loss
that had previously been recognised in other comprehensive
income relating to that reduction in ownership interest if that
gain or loss would be classified to profit or loss on the disposal
of the related assets or liabilities.
When a Group entity transacts with an associate of the Group,
profits and losses resulting from the transactions with the
associate are recognised in the Group’s consolidated financial
statements only to the extent of interests in the associate that
are not related to the Group.
(c) Operating segments
Operating segments are identified based on internal reports that
are regularly reviewed by the entity’s chief operating decision
maker in order to allocate resources to the segment and assess
its performance.
The Group has four operating segments being (i) Car Retail
(ii) Truck Retail (iii) Property (iv) Investments. Currently the
segment of “Other” is not required.
(d) Revenue
(i) Sales revenue
Revenue from the sales of motor vehicles and parts is
recognised when the buyer has accepted the risks and rewards
of ownership, generally by taking delivery of the goods.
(ii) Service revenue
Service work on customers’ vehicles is carried out under
instruction from the customer. Service revenue is recognised
based upon when services are rendered. Revenue arising from
the sale of parts fitted to customers’ vehicles during service
is recognised upon delivery of the fitted parts to the customer
upon completion of the service.
(iii) Rental income
Rental income from operating leases is recognised in income on
a straightline basis over the lease term.
(iv) Interest revenue
Interest revenue is recognised on a time proportional basis,
taking into account the effective interest rates applicable to the
financial assets.
(v) Dividend revenue
Dividend revenue is recognised when the right to receive a
dividend has been established.
Dividends received from associates are accounted for in
accordance with the equity method of accounting in the
consolidated financial statements.
(vi) Goods and Services Tax (GST)
All revenue is stated net of the amount of Goods and Services
Tax (GST).
(e) Finance costs
Borrowing costs are recognised as expenses in the period in
which they are incurred. Borrowing costs include:
>
>
>
>
interest on bank overdrafts, short and long-term borrowings
interest on vehicle bailment arrangements
interest on finance lease liabilities
amortisation of ancillary costs incurred in connection with
the arrangement of borrowings
(f) Taxes
(i)
Income tax
The income tax expense or revenue for the period is the tax
payable on the current period’s taxable income based on the
notional income tax rate for each jurisdiction, adjusted by
changes in deferred tax assets and liabilities attributable to
temporary differences between the tax bases of assets and
liabilities and their carrying amounts in the financial statements,
and to unused tax losses.
Deferred tax assets and liabilities are recognised for temporary
differences at the tax rates expected to apply when the assets
are recovered or liabilities are settled, based on those tax rates
which are enacted or substantively enacted for each jurisdiction.
The relevant tax rates are applied to the cumulative amounts of
deductible and taxable temporary differences to measure the
deferred tax asset or liability. An exception is made for certain
temporary differences arising from the initial recognition of an
asset or a liability. No deferred tax asset or liability is recognised
in relation to these temporary differences if they arose in a
transaction, other than a business combination, that at the
time of the transaction did not affect either accounting profit or
taxable profit or loss.
29
ANNUAL REPORT 2016 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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.
Current and deferred tax balances attributable to amounts
recognised directly in equity are also recognised directly in equity.
(ii) Goods and services tax (“GST”)
Revenues, expenses, assets and liabilities are recognised net of
the amount of GST except:
> where the GST incurred on a purchase of goods and services
is not recoverable from the taxation authority, in which case
the GST is recognised as part of the cost of acquisition of the
asset or is part of the expense item as applicable; and
>
receivables and payables are stated with the amount of
GST included.
The net amount of GST recoverable from, or payable to, the
taxation authority is included as part of receivables or payables
in the statement of financial position.
Cash flows are included in the Statement of Cash Flows on a
gross basis and the GST component of cash flows arising from
investing and financing activities, which is recoverable from
or payable to the taxation authority, are classified as operating
cash flows.
Commitments and contingencies are disclosed net of the amount
of GST recoverable from, or payable to, the taxation authority.
(g) Leases
Leases in which a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases (net of any
incentives received from the lessor) are charged to profit or loss
on a straightline basis over the period of the lease.
(h) Business combinations
The purchase method of accounting is used for all business
combinations regardless of whether equity instruments or other
assets are acquired. Cost is measured as the fair value of the
assets given, shares issued or liabilities incurred or assumed at
the date of exchange. Acquisition related costs are recognised
in profit or loss as incurred. Where equity instruments are
issued in an acquisition, the value of the instruments is their
published market price as at the date of exchange unless, in rare
circumstances, it can be demonstrated that the published price
at the date of exchange is an unreliable indicator of fair value
and that other evidence and valuation methods provide a more
reliable measure of fair value. Transaction costs arising on the
issue of equity instruments are recognised directly in equity.
Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date, irrespective
of the extent of any non-controlling interest. The excess of the
cost of acquisition over the fair value of the Group’s share of the
identifiable net assets acquired is recorded as goodwill (refer
to Note 1(r)). If the cost of acquisition is less than the fair value
of the net assets of the subsidiary acquired, the difference is
recognised directly in profit or loss but only after assessment of
the identification and measurement of the net assets acquired.
Where settlement of any part of cash consideration is deferred,
the amounts payable in the future are discounted to their
present values as at the date of acquisition. The discount rate
used is the Australian government bond rate that matches the
future maturity period.
If the initial accounting for a business acquisition is incomplete
by the end of the reporting period in which the combination
occurs, the consolidated entity reports provisional amounts for
the items for which accounting is incomplete. The provisional
amounts are adjusted during the measurement period
(no longer than 12 months from the initial acquisition) on a
retrospective basis by restating the comparative information
presented in the financial statements.
(i) Impairment of long lived assets (excluding goodwill)
Assets that have an indefinite useful life are not subject to
amortisation and are tested annually for impairment. Assets
that are subject to amortisation 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. The recoverable amount is
the higher of an asset’s fair value less costs of disposal and its
value in use. For the purposes of assessing impairment, assets
are grouped at the lowest levels for which there are separately
identifiable cash flows (cash-generating units “CGU”) and
these cash flows are discounted using the estimated weighted
average cost of capital of the asset/CGU. An impairment loss
is recognised in profit or loss immediately, unless the relevant
asset is carried at fair value, in which case the impairment loss
is treated as a revaluation decrease (refer Note 1(p)). Where an
impairment loss subsequently reverses, the carrying amount
of the asset (CGU) is increased to the revised estimate of its
recoverable amount, but only to the extent that the increased
carrying amount does not exceed the carrying amount that
would have been determined had no impairment losses been
recognised for the asset (CGU) in prior years. A reversal of an
impairment loss is recognised in profit or loss immediately,
unless the relevant asset is carried at fair value,in which case,
the reversal of the impairment loss is treated as a revaluation
increase (refer Note1(p)).
(j) Cash and cash equivalents
Cash and cash equivalents include 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, and bank
overdrafts. Bank overdrafts are shown within borrowings in
current liabilities on the statement of financial position.
30
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED31 DECEMBER 2016 (i) Available-for-sale financial assets
Available-for-sale financial assets are initially measured at
cost at date of acquisition, which include transaction costs,
and subsequent to initial recognition, they are carried at fair
value. Unrealised gains and losses arising from changes in the
fair value of non-monetary securities classified as available-
for- sale are recognised in equity in the available-for-sale
investments revaluation reserve. When securities classified as
available-for-sale are sold or impaired, the accumulated fair
value adjustments are included in profit or loss as gains and
losses from the sale or impairment of investment securities.
The fair values of quoted investments are based on current
bid prices. If the market for a financial asset is not active (and
for unlisted securities), the Group establishes fair value by
using valuation techniques. These include reference to the fair
values of recent arm’s length transactions, involving the same
instruments or other instruments that are substantially the
same, discounted cash flow analysis, and pricing models to
reflect the issuer’s specific circumstances.
The Group assesses at each balance date whether there is
objective evidence that a financial asset or group of financial
assets is impaired. In the case of equity securities classified
as available-for-sale, a significant or prolonged decline in fair
value of a security below its cost is considered in determining
whether the security is impaired. If any such evidence exists
for available-for-sale financial assets, the cumulative loss
measured as the difference between the acquisition cost and
the current fair value, less any impairment loss on that financial
asset previously recognised in profit or loss is removed from
equity and recognised in profit or loss.
(ii) Loans and receivables
Loans and receivables are non derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They arise when the Group provides money, goods
or services directly to a debtor with no intention of selling the
receivable. They are included in current assets, except for
those with maturities greater than 12 months after the balance
date which are classified as non-current assets. Loans and
receivables are included in receivables in the statement of
financial position (Notes 9, 12 and 13).
Loans and receivables are measured at amortised cost using
the effective interest method less impairment. Interest is
recognised by applying the effective interest rate classification
of its investments at initial recognition and re-evaluates this
designation at each reporting date.
(k) Receivables
Trade receivables
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost, less provision for
doubtful debts. Trade receivables are due for settlement no
more than 60 days from the date of recognition.
In respect of trade and lease book receivables, collectability
is reviewed on an ongoing basis. Debts which are known to be
uncollectible are written off. A provision for doubtful debts is
raised where some doubt as to collectability exists. The amount
of the provision is the difference between the asset’s carrying
amount and the present value of estimated future cash flows,
discounted at the effective interest rate. The amount of the
provision is recognised in profit or loss.
(l) Inventories
New motor vehicles are stated at the lower of cost and net
realisable value. Demonstrator vehicles are stated at the lower
of cost and net realisable value. Costs are assigned on the basis
of specific identification.
Used motor vehicles are stated at the lower of cost and net
realisable value on a unit by unit basis. Net realisable value has
been determined by reference to the likely net realisable value
given the age of the vehicles at year end. This is effected through
the application of a specific provision percentage against cost
of vehicles based on age. Costs are assigned on the basis of
specific identification.
Spare parts and accessories are stated at the lower of cost and
net realisable value. Costs are assigned to individual items on
the basis of weighted average cost.
Work in progress is stated at cost. Cost includes labour incurred
to date and consumables utilised during the service. Costs
are assigned to individual customers on the basis of specific
identification.
(m) Investments and other financial assets
Investments are recognised and derecognised on settlement
date where the purchase or sale of an investment is under a
contract whose terms require delivery of the investment within
the time-frame established by the market concerned. They are
initially measured at fair value, net of transaction costs except
for those financial assets classified as at fair value through
profit or loss which are initially measured at fair value.
Subsequent to initial recognition, investments in associates
are accounted for under the equity method in the consolidated
financial statements.
The Group classifies its other financial assets in the following
categories: (i) available-for-sale financial assets and (ii) loans
and receivables. The classification depends on the purpose
for which the financial assets were acquired. Management
determines the classification of its investments at initial
recognition and re-evaluates this designation at each
reporting date.
31
ANNUAL REPORT 2016 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(n) Fair value estimation
The fair value of financial assets and financial liabilities must be
estimated for recognition and measurement or for disclosure
purposes.
The fair value of financial instruments traded in active markets
(such as publicly traded derivatives and available-for-sale
securities) is based on quoted market prices at the balance date.
The quoted market price used for financial assets held by the
Group is the current bid price.
The fair value of financial instruments that are not traded in an
active market is determined using valuation techniques. The
Group uses a variety of methods and makes assumptions that
are based on market conditions existing at each balance date.
Quoted market prices or dealer quotes for similar instruments
are used for long-term debt instruments held. Other techniques,
such as estimated discounted cash flows, are used to determine
fair value for the remaining financial instruments. The fair
value of interest rate swaps is determined based on market
expectations of future interest rates.
The nominal value less estimated credit adjustments of trade
receivables and payables are assumed to approximate their
fair values. The fair value of financial liabilities for disclosure
purposes is estimated by discounting the future contractual
cash flows at the current market interest rate that is available
to the Group for similar financial instruments.
(o) Derivatives
Derivatives are recognised at their fair value at each reporting
date. The method of recognising the resulting gain or loss
depends on whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being hedged. The
Group designates certain derivatives as hedges of exposure
to variability in cash flows, which includes hedges for highly
probable forecast transactions (cash flow hedges).
The Group documents at the inception of the transaction
the relationship between hedging instruments and hedged
items, as well as its risk management objective and strategy
for undertaking various hedge transactions. The Group also
documents its assessments, both at hedge inception and on
an ongoing basis, of whether the derivatives that are used in
hedging transactions have been and will continue to be highly
effective in offsetting changes in fair values or cash flows of
hedged items. Refer further details in Note 19.
(i) Cash flow hedges
The change in the fair value from remeasuring derivatives that
are designated and qualify as cash flow hedges is deferred
in equity as a hedging reserve, to the extent that the hedge is
effective. The ineffective portion is recognised in profit or loss
immediately.
Amounts deferred in the hedging reserve are recycled in profit
or loss in the periods when the hedged item is recognised in
profit or loss.
However, when the forecast transaction that is hedged results
in the recognition of a non-financial asset or non-financial
liability, the gains or losses previously deferred in the hedging
reserve are transferred from equity and included in the initial
measurement of the cost of the asset or liability.
Hedge accounting is discontinued when the Group revokes
the hedging relationship, the hedging instrument expires or is
sold, terminated or exercised, or no longer qualifies for hedge
accounting. Any cumulative gain or loss deferred in the hedging
reserve at that time remains in equity and is recognised when
the forecast transaction is ultimately recognised in profit or loss.
When a forecast transaction is no longer expected to occur, the
cumulative gain or loss that was deferred in equity is recognised
immediately in profit or loss.
(p) Property, plant and equipment
Land and buildings are shown at fair value, based on annual
assessment by the directors supported by periodic valuations
by external independent valuers, less subsequent depreciation
for buildings. Any accumulated depreciation at the date of
revaluation is eliminated against the gross carrying amount of
the asset and the net amount is restated to the revalued amount
of the asset. All other property, plant and equipment are stated
at historical cost less accumulated depreciation and impairment
losses. Historical cost includes expenditure that is directly
attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured
reliably. All other repairs and maintenance are charged to profit
or loss during the financial period in which they are incurred.
Increases in the carrying amounts arising on revaluation of land
and buildings are credited to property, plant and equipment
revaluation reserve in shareholders’ equity. To the extent that
the increase reverses a decrease previously recognised in
profit or loss, the increase is first recognised in profit or loss.
Decreases that reverse previous increases of the same asset
are first charged against revaluation reserves directly in equity
to the extent of the remaining reserve attributable to the asset,
all other decreases are charged to profit or loss.
32
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED31 DECEMBER 2016 (s) Trade and other payables
These amounts represent liabilities for goods and services
provided to the Group prior to the end of the financial year which
are unpaid. The amounts are unsecured and are usually paid
within 30 days of recognition. They are recognised initially at
the fair value of what is expected to be paid, and subsequently
at amortised cost, using the effective interest rate method.
(t) Borrowings
Borrowings are initially recognised at fair value net of
transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any difference between the
proceeds (net of transaction costs) and the redemption amount
is recognised in profit or loss over the period of the borrowings
using the effective interest rate method.
Borrowings are classified as current liabilities unless the Group
has an unconditional right to defer settlement of the liability for
at least 12 months after the balance date.
(u) New motor vehicle stock and related bailment
Motor vehicles secured under bailment plans are provided to
the Group under bailment agreements between the floor plan
loan providers and entities within the Group. The Group obtains
title to the vehicles immediately prior to sale. Motor vehicles
financed under bailment plans held by the Group are recognised
as trading stock with the corresponding liability shown as owing
to the finance provider.
(v) Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event,
it is probable that the Group 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 taking into account the risks and uncertainties
surrounding the obligation.
Provision for Warranties
Provision is made for the estimated claims in respect of
extended warranties provided on the majority of the Group’s
retail new and used vehicle sales. These claims are generally
expected to settle in the next financial year but some may be
extended into the following year if claims are made late in the
warranty period.
Land is not depreciated. Depreciation on other assets is
calculated using the straight line method to allocate their cost
or revalued amounts, net of their residual values, over their
estimated useful lives, as follows:
> Buildings
> Plant & equipment
>
Leasehold improvements
40 years
3 - 10 years
5 - 30 years
The asset’s residual values and useful lives are reviewed, and
adjusted if appropriate, at each balance date.
An asset’s carrying amount is written down immediately to its
recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount (Note 1(i)).
Gains and losses on disposals are determined by comparing
proceeds with carrying amounts. These are included in profit
or loss. When revalued assets are sold, it is Group policy to
transfer the amounts included in the asset revaluation reserve
in respect of those assets to retained earnings.
The cost of improvements to or on leasehold properties is
amortised over the unexpired period of the lease or the estimated
useful life of the improvement, whichever is the shorter.
The make good provision is capitalised as leasehold
improvements and amortised over the term of the lease.
(q) Trademarks / brand names
Trademarks / brand names are valued on acquisition where
management believe there is evidence of any of the following
factors: an established brand name with longevity, a reputation
that may positively influence a consumers decision to purchase
or service a vehicle, and strong customer awareness within a
particular geographic location. Trademarks are valued using a
discounted cash flow methodology. Trademarks are considered
to have an indefinite life as the Group expects to hold and
support such trademarks through marketing and promotional
support for an indefinite period. They are recorded at cost less
any impairment.
(r) Goodwill
Goodwill represents the excess of the cost of an acquisition
over the fair value of the Group’s share of the net identifiable
assets of the acquired subsidiary, associate or business at
the date of acquisition. Goodwill on acquisition of subsidiaries
and businesses is included in intangible assets. Goodwill on
acquisition of associates is included in investment in associates.
Goodwill acquired in business combinations is not amortised.
Instead, goodwill is tested for impairment annually, or more
frequently if events or changes in circumstances indicate that
it might be impaired, and is carried at cost less accumulated
impairment losses. An impairment loss for goodwill is
recognised immediately in profit or loss and is not reversed in a
subsequent period. Gains and losses on the disposal of an entity
include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose
of impairment testing (refer Note 17).
33
ANNUAL REPORT 2016 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(w) Employee benefits
A liability is recognised for benefits accruing to employees in
respect of wages and salaries, annual leave and long service
leave, when it is probable that settlement will be required and
they are capable of being measured reliably.
Liabilities recognised in respect of short-term employee
benefits, are measured at their nominal values using the
remuneration rate expected to apply at the time of settlement.
Liabilities recognised in respect of long-term employee benefits
are measured as the present value of the estimated future cash
outflows to be made by the Group in respect of services provided
by employees up to reporting date.
The fair value determined at the grant date of the equity-settled
share-based payments is expensed on a straight-line basis
over the vesting period, based on the Group’s estimate of equity
instruments that will eventually vest, with a corresponding
increase in equity. At the end of each reporting period, the Group
revises its estimate of the number of equity instruments expected
to vest. The impact of the revision of the original estimates, if any,
is recognised in profit or loss such that the cumulative expense
reflects the revised estimate, with a corresponding adjustment
to the share-based payments reserve.
Contributions are made by the Group to defined contribution
employee superannuation funds and are charged as expenses
when incurred.
(x) Dividends
Provision is made for the amount of any dividend declared on or
before the end of the year but not distributed at balance date.
(y) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated as net profit attributable to
members of the parent, adjusted to exclude any costs of servicing
equity (other than dividends), divided by the weighted average
number of ordinary shares, adjusted for any bonus element.
(ii) Diluted earnings per share
Diluted earnings per share is calculated as net profit attributable
to members of the parent, adjusted for:
> Costs of servicing equity (other than dividends)
>
The after tax effect of dividends and interest associated with
dilutive potential ordinary shares that have been recognised
as expenses
> Other non-discretionary changes in revenues or expenses
during the period that would result from the dilution of
potential ordinary shares, divided by the weighted average
number of ordinary shares and dilutive potential ordinary
shares, adjusted for any bonus element.
(z) Non-current assets held for sale
Non-current assets and disposal groups are classified as held
for sale if their carrying amount will be recovered principally
through a sale transaction rather than through continuing use.
This condition is regarded as met only when the sale is highly
probable and the asset (or disposal group) is available for
immediate sale in its present condition. Management must be
committed to the sale, which should be expected to qualify for
recognition as a completed sale within one year from the date
of classification.
Non-current assets (and disposal groups) classified as held
for sale are measured at the lower of their previous carrying
amount and fair value less costs to sell.
(aa) Rounding of amounts
The Company is of a kind referred to in Class Order 98/100,
issued by the Australian Securities and Investments
Commission, relating to the “rounding off” of amounts in the
financial report. Amounts in the financial report have been
rounded off in accordance with that Class Order to the nearest
thousand dollars, or in certain cases, to the nearest dollar.
(ab) New or revised standards and interpretations that are first
effective in the current reporting period
The group has applied the following standards and amendments
for the first time for their annual reporting period commencing
1 January 2016:
> AASB 2014-4 Amendments to Australian Accounting
Standards - Clarification of Acceptable Methods of
Depreciation and Amortisation
> AASB 2015-1 Amendments to Australian Accounting
Standards - Annual improvements to Australian Accounting
Standards 2012 - 2014 cycle, and
> AASB 2015-2 Amendments to Australian Accounting
Standards - Disclosure initiative: Amendments to AASB 101.
The application of these amendments has not had any material
impact on the disclosures or the amounts recognised in the
Group’s consolidated financial statements.
Certain new accounting standards and interpretations have
been published that are not mandatory for 31 December 2016
reporting periods and have not been early adopted by the Group.
The potential impact of the new or revised Standards and
Interpretations has not yet been determined.
List of Standards and Interpretations in issue not yet effective
At the date of authorisation of the financial statements, the
Standards and Interpretations listed below were in issue but
not yet effective.
34
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED31 DECEMBER 2016 Standard/Interpretation
Effective for annual
reporting periods
beginning on or after
Expected to be
initially applied in the
financial year ending
AASB 9 ‘Financial Instruments’, and the relevant amending standards
1 January 2018
31 December 2018
AASB 15 ‘Revenue from Contracts with Customers’, AASB 2014-5 ‘Amendments
to Australian Accounting Standards arising from AASB 15’, AASB 2015-8
‘Amendments to Australian Accounting Standards
– Effective date of AASB 15’
AASB 16 ‘Leases’
AASB 2016-1 ‘Amendments to Australian Accounting Standards
– Recognition of Deferred Tax Assets for Unrealised Losses
AASB 2016-2 ‘Amendments to Australian Accounting Standards
– Disclosure Initiative: Amendments to AASB 107’
AASB 2016-5 Amendments to Australian Accounting Standards
– Classification and Measurement of Share-based Payment Transactions
AASB 2016-6 Amendments to Australian Accounting Standards
– Applying AASB 9 Financial Instruments with AASB 4 Insurance Contracts
1 January 2018
31 December 2018
1 January 2019
31 December 2019
1 January 2017
31 December 2017
1 January 2017
31 December 2017
1 January 2018
31 December 2018
1 January 2018
31 December 2018
At the date of authorisation of the financial statements, the following IASB Standards and IFRIC interpretations (for which Australian
equivalent Standards and Interpretations have not yet been issued) were in issue but not yet effective:
Standard/Interpretation
Effective for annual
reporting periods
beginning on or after
Expected to be
initially applied in the
financial year ending
Annual Improvements to IFRS Standards 2014–2016 Cycle:
IFRS 12 Disclosure of Interests in Other Entities
Annual Improvements to IFRS Standards 2014–2016 Cycle:
IFRS 1 First-time Adoption of International Financial Reporting Standards,
and IAS 28 Investments in Associates and Joint Ventures
1 January 2017
31 December 2017
1 January 2018
31 December 2018
Transfers of Investment Property (Amendments to IAS 40)
1 January 2018
31 December 2018
35
ANNUAL REPORT 2016 2 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
(a) Critical accounting estimates, assumptions and judgements
Estimates, assumptions and judgements are continually
evaluated and are based on historical experience and other
factors, including expectations of future events that may have
a financial impact on the Group and that are believed to be
reasonable under the circumstances.
The Group makes estimates, assumptions and judgements
concerning the future. The resulting accounting estimates
will, by definition, seldom equal the related actual results. The
estimates, assumptions and judgements that have a significant
risk of causing a material adjustment to the carrying amounts of
assets and liabilities are discussed below:
(i)
Recoverability of goodwill and other intangibles with indefinite
useful lives
Goodwill and other intangibles with indefinite useful lives with a
carrying value of $298,908,000 (2015: $160,762,000) are tested
annually for impairment, based on estimates made by directors.
The recoverable amount of the intangibles is based on the
greater of ‘Value in use’ or ‘Fair value less costs to dispose’.
Value in use is assessed by the directors through a discounted
cash flow analysis which includes significant estimates and
assumptions related to growth rates, margins, working capital
requirements and cost of capital. Fair value less costs to dispose
is assessed by the directors based on their knowledge of the
industry and recent market transactions. Further information on
the intangibles impairment test can be found in Note 17.
(iv) Estimation of make good provisions
An amount of $1,970,000 (2015: $2,122,000) has been estimated
in respect of anticipated costs of future restoration of leased
properties. A bank guarantee has been given for the entire
balance, which has approximately 13 years to run at balance
date. In terms of the lease, this amount will be indexed and will
increase in the future, therefore it is the maximum estimate of
what would be payable. Further information on the estimate
of make good provisions can be found in Note 25.
(v) Demonstrator vehicle write down to net realisable value
In determining the amount of write-downs for demonstrator
vehicle inventory, management has made judgements based
on the expected net realisable value of inventory. Historic
experience and current knowledge of the products has been
used in determining any write-downs to net realisable value.
Refer to Note 10.
(vi) Used vehicle write down to net realisable value
In determining the amount of write-downs required for used
vehicle inventory, management has, in consultation with
published used vehicle valuations, made judgements based
on the expected net realisable value of that inventory. Historic
experience, current knowledge of the products and the
valuations from an independent used car publication has been
used in determining any write-downs to net realisable value.
Refer to Note 10.
(ii) Fair value estimation of land and buildings
(vii) Fair value of assets and liabilities acquired in a
Land and buildings with a carrying value of $298,507,000
(2015: $249,246,000) are carried at fair value. This fair value
is determined by the directors and is supported by formal
independent valuations conducted periodically but at least every
three years. Further information on the fair value estimation of
land and buildings can be found in Note 16.
(iii) Provisions for warranties
A provision for warranties of $4,870,000 (2015: $4,183,000)
has been recognised for extended warranties provided for the
Group’s retail new and used vehicle sales. This provision has
been estimated based on past experience and confirmation of
future costs by the administrators of the warranty programmes.
Further information on the provision for warranties can be found
in Note 22.
business combination
The acquisitions made by the Group have required a number
of judgements and estimates to be made. The directors have
judged that no significant intangible assets have been acquired
in the business combinations other than Goodwill (see also (i)
above). Additionally as part of the acquisition and negotiation
process, judgements have been made as to the fair value of
vehicle and parts inventory, warranties and other assets and
liabilities acquired. Further judgements and estimates have been
made in relation to the probability of achieving future milestones
of certain acquired businesses as disclosed in Note 31(a).
36
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED31 DECEMBER 2016 3 REVENUE
Sales revenue
New vehicles
Used vehicles
Parts
Service
Other
Other revenue
Dividend received
Rents
Interest
Proceeds of insurance claims
Commissions
Other
Total revenue
4 OTHER GAINS
Gains on disposal of other assets
Fair value gains/(losses) on financial assets at fair value through profit or loss
Net gain/(loss) on sale of available-for-sale financial assets
CONSOLIDATED
2016
$’000
2015
$’000
2,393,429
1,976,916
728,236
433,475
224,360
238
652,080
384,789
186,047
1,923
3,779,738
3,201,755
14,442
13,752
440
6,103
6,104
16,961
9,434
53,484
96
3,182
7,003
14,833
5,755
44,621
3,833,222
3,246,376
1,136
1,235
1,955
4,326
2,936
-
3,490
6,426
37
ANNUAL REPORT 2016 5 EXPENSES
(a) Profit before income tax includes the following specific expenses:
CONSOLIDATED
2016
$’000
2015
$’000
Notes
Depreciation
Buildings
Plant and equipment
Leased motor vehicles
Total depreciation
Amortisation
Leasehold improvements
Brand names
Total amortisation
Total Depreciation and Amortisation
Finance costs
Vehicle bailment & related hedge
Other
Total finance expense
Rental expense relating to operating leases
Minimum lease payments
Superannuation
Provision expenses
Inventory
Warranties
Bad debts
Share-based payments
Business acquisition costs
(b) Impairment of non-current assets
Revaluation loss of land and buildings
Impairment of intangibles
38
16
16
3,637
8,399
-
3,195
6,854
1,149
12,036
11,198
1,863
94
1,957
1,891
127
2,018
13,993
13,216
12,537
11,841
24,378
10,493
10,800
21,293
37,221
27,414
27,942
24,119
6,275
6,879
580
13,734
3,174
5,390
307
8,871
2,966
3,019
1,758
201
-
-
-
2,083
5,527
7,610
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED31 DECEMBER 2016
6
INCOME TAX
(a) Income tax expense
Current income tax expense
Deferred income tax expense/(benefit)
Deferred income tax expense/(benefit) included in income tax expense comprises:
In respect of the current year
Deferred tax reclassified from equity to profit or loss
Closing balance
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Profit before income tax expense
Tax at the Australian tax rate of 30.0% (2015 - 30.0%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Goodwill impairment
Non deductible capital expenditure
Non-taxable dividends
Non allowable expenses
Property (revaluation) / impairment
Tax offsets
Sundry items
Income tax expense
(c) Tax expense (income) relating to items of other comprehensive income
Aggregate deferred tax arising in the reporting period and directly debited to other
comprehensive income
CONSOLIDATED
2016
$’000
26,885
8,994
35,879
8,407
587
8,994
2015
$’000
38,972
(5,029)
33,943
(6,076)
1,047
(5,029)
141,405
120,958
42,422
36,287
-
304
(4,390)
355
(371)
(306)
(2,135)
35,879
1,658
220
(4,175)
377
625
-
(1,049)
33,943
7,671
(15,652)
39
ANNUAL REPORT 2016
7 DIVIDENDS
(a) Ordinary dividends fully franked based on tax paid @ 30%
Final dividend for the year ended 31 December 2015 of 20.0 cents per share (2014 - 18.0 cents)
paid on 15 April 2016
Interim dividend of 13.0 cents (2015 - 12.0 cents) per share paid on 7 October 2016
Total dividends paid
CONSOLIDATED
2016
$’000
2015
$’000
37,015
24,625
61,640
32,239
22,089
54,328
Dividends paid in cash or satisfied by the issue of shares under the dividend reinvestment plan during
the years ended 31 December 2016 and 2015 were as follows:
Paid in cash
61,640
54,328
(b) Dividends not recognised at year end
In addition to the above dividends, since year end the directors have recommended the payment of
a final dividend of 22 cents per share, fully franked based on tax paid at 30%. The aggregate amount
of the proposed dividend expected to be paid on 18 April 2017 out of the retained profits at
31 December 2016, but not recognised as a liability at year-end is:
41,923
36,940
(c) Franked dividends
The final dividend recommended after 31 December 2016 will be franked out of existing franking credits
or out of franking credits arising from the payment of income tax in the year ending 31 December 2016.
Franking credits available for subsequent reporting periods based on a tax rate of 30.0% (2015 - 30.0%)
169,770
159,089
The above amounts represent the balances of the franking account as at the end of the financial year,
adjusted for:
(a) franking credits that will arise from the payment of the current tax liability
(b) franking debits that will arise from the payment of dividends recognised as a liability at the
reporting date, and
(c) franking credits that will arise from the receipt of dividends recognised as receivables at the
reporting date.
Impact on franking credits of dividends not recognised
(17,967)
(15,831)
8 CURRENT ASSETS – CASH AND CASH EQUIVALENTS
Current assets
Cash at bank and on hand
Short term deposits
12,615
5,000
17,615
The above figures are reconciled to cash at the end of the financial year as shown in the statement of cash flows as follows:
Balances as above
Less: Bank overdrafts
Balances per Statement of Cash Flows
17,615
-
17,615
3,535
34,000
37,535
37,535
-
37,535
40
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED31 DECEMBER 2016 9 CURRENT ASSETS – TRADE AND OTHER RECEIVABLES
Trade and other receivables
Provision for doubtful receivables
CONSOLIDATED
2016
$’000
2015
$’000
151,933
111,887
(3,187)
(2,771)
148,746
109,116
(i) The ageing of lease, property and trade receivables at 31 December 2016 is detailed below:
CONSOLIDATED
2016
2015
Not past due
Past due 0-30 days
Past due 31 days plus
Total
Gross
$’000
142,265
5,325
4,343
Provision
$’000
Gross
$’000
Provision
$’000
2,504
106,082
108
575
3,511
2,294
2,006
80
685
2,771
151,933
3,187
111,887
The maximum credit period on trade sales is 60 days. No interest is charged on the trade receivables from the date of invoice or when
past due. The Group has provided fully for all receivables identified by management as being specifically doubtful, and in addition has
provided 10% for all receivables over 90 days and 2.5% of total trade receivables excluding motor vehicle debtors. The Group’s provision
policy is based on an assessment of changes in credit quality and historical experience.
Included in the Group’s trade receivables balance are debtors with a net carrying amount of $8,985,000 (2015: $5,039,000) which are
past due at the reporting date. The Group has not provided for these balances as there have not been any specifically identified factors
that would indicate a deterioration of credit quality. The Group therefore still considers the amounts recoverable. The Group does not
hold any collateral over these balances. The average age of these receivables is 62 days (2015: 61 days).
(ii) Movement in provision for doubtful receivables
Opening balance
Additional provisions
Amounts written off during the year
Closing balance
CONSOLIDATED
2016
$’000
2,771
580
(164)
3,187
2015
$’000
2,622
307
(158)
2,771
In determining the recoverability of a trade receivable the Group considers any deterioration in the credit quality of the trade receivable
from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer
base being large, diverse and unrelated. Accordingly, the Directors believe that there is no further provision required in excess of the
provision for doubtful debts.
41
ANNUAL REPORT 2016 10 CURRENT ASSETS – INVENTORIES
New and demonstrator motor vehicles & trucks - bailment stock - at cost
Less: Write-down to net realisable value
Used vehicles & trucks - at cost
Less: Write-down to net realisable value
Parts and other consumables - at cost
Less: Write-down to net realisable value
CONSOLIDATED
2016
$’000
2015
$’000
473,127
400,900
(8,900)
(6,258)
464,227
394,642
103,594
(5,664)
97,930
64,678
(1,828)
62,850
87,369
(5,358)
82,011
55,344
(1,834)
53,510
Total inventories
625,007
530,163
11 CURRENT ASSETS - CURRENT TAX RECEIVABLES
Current tax receivables
3,817
-
12 CURRENT ASSETS – OTHER CURRENT ASSETS
(a) Prepayments and deposits
Prepayments and deposits
(b) Assets classified as held for sale
Intangible asset held for sale
8,843
8,256
-
3,010
In 2016, AP Eagers transferred its shares in Auto Trader Australia Pty Ltd (Auto Trader) to DealerMotive under a scheme of
arrangement, in return for an equal dollar value of shares in DealerMotive. The investment in DealerMotive is equity accounted.
Refer to Note 42(a).
(c) Property sale receivables
Property sale receivables
9,466
32,013
Sale of property where proceeds are expected to be received within 12 months of balance date.
42
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED31 DECEMBER 2016
13 NON-CURRENT ASSETS – RECEIVABLES
(a) Property sale receivable
Property sale receivable
(b) Other loans receivable
Other loans receivable
14 NON-CURRENT ASSETS – AVAILABLE-FOR-SALE INVESTMENTS CARRIED AT FAIR VALUE
Shares in a listed company - Automotive Holdings Group Limited (1)
Shares in a listed company - Smartgroup Corporation Ltd (1)
Shares in an unlisted company - One Way Traffic Pty Ltd (Carsguide) (2)
CONSOLIDATED
2016
$’000
2015
$’000
-
23,503
10,612
10,317
261,989
2,828
-
275,288
4,184
2,345
264,817
281,817
(1) The Directors have assessed the fair value of the investment as at 31 December 2016 based on the market price of the shares on the last trading day of the
reporting period. This is a level 1 fair value measurement asset being derived from inputs based on quoted prices that are observable.
(2) In 2016, AP Eagers transferred its shares in One Way Traffic Pty Ltd (Carsguide) to DealerMotive under a scheme of arrangement, in return for an equal dollar
value of shares in DealerMotive. The investment in DealerMotive is equity accounted. Refer to Note 42(a).
Valuation of Available for sale investments
Details of the Group’s available for sale investments and information about the fair value hierarchy as at 31 December 2016 are as follows:
Class of Financial Assets
and Liabilities
Level 1 Available for sale
investments - listed entities
Level 3 Available for sale
investments - unlisted entities
Unobservable inputs used in determination of fair values
Carrying
Amount
31/12/16
$’000
264,817
Carrying
Amount
31/12/15
$’000
279,472
Valuation Technique
Key Input
Quoted bid prices in an
active market.
Quoted bid prices in an
active market.
-
2,345 Net asset assessment
and available bid prices
from equity participants.
Pre tax operating margin taking into
account managements’ experience
and knowledge of market conditions
and financial position.
Market information based on
available bid prices.
There were no transfers between levels in the year.
43
ANNUAL REPORT 2016
15 NON-CURRENT ASSETS – INVESTMENTS IN ASSOCIATES
Shares in associate - Norna Limited
Shares in associate - DealerMotive Ltd
Shares in associate - Carzapp Pty Ltd
CONSOLIDATED
2016
$’000
1,620
9,973
300
2015
$’000
1,620
-
-
11,893
1,620
Investment in associates is accounted for in the consolidated financial statements using the equity method of accounting (refer Note 42).
Reconciliation of the carrying amount of investment in associate is set out in Note 42(b).
16 NON-CURRENT ASSETS - PROPERTY, PLANT AND EQUIPMENT
Freehold land and buildings - at fair value
Directors’ valuation
Land
Buildings
Construction in progress
Total land and buildings
Leasehold improvements
At cost
Accumulated depreciation
Total leasehold improvements
Plant and equipment
At cost
Accumulated depreciation
Total plant and equipment
Motor vehicles under lease
At cost
Accumulated depreciation
Total motor vehicles under lease
188,108
106,693
3,706
298,507
32,469
(14,328)
18,141
78,032
(39,970)
38,062
-
-
-
149,592
99,377
277
249,246
27,098
(12,589)
14,509
60,025
(33,622)
26,403
1,733
(593)
1,140
Total property, plant and equipment
354,710
291,298
Valuation of land and buildings
The basis of the Directors’ valuation of land and buildings is the assessed fair value, being the amounts for which the assets could
be exchanged between willing parties in an arm’s length transaction at balance date, based on current prices in an active market for
similar properties in the same location and condition. The assessed fair value is supported by periodic, but at least triennial valuations,
by external third party valuers. The 2016 valuations were made by the Directors based on their assessment of prevailing market
conditions and supported by fair value information received from independent expert property valuers on certain properties and the
Group’s own market activities and market knowledge.
44
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED31 DECEMBER 2016 Details of the Group’s freehold land and buildings and information about the fair value hierarchy as at 31 December 2016 are as follows:
Carrying
Amount
31/12/16
$’000
Carrying
Amount
31/12/15
$’000
49,747
42,911
Class of
Financial
Assets &
Liabilities
Level 3
Car – HBU
Alternate
Use
Level 3 Car
Dealership
205,157
170,294
Unobservable inputs used in determination of fair values
Valuation
Technique
Key Input
Input
Average /
Range
2016
Average /
Range
2015
Direct
comparison
External
valuations
Price
/sqm land
Average
$1,563/sqm
Average
$1,440/sqm
Other
Key
Information
Land size
Range
$1,262 -
$3,584/sqm
Range
$1,278 -
$2,622/sqm
Range
(weighted
average)
2016
Range
(weighted
average)
2015
Average
7,952 sqm
Average
7,199 sqm
Range
779 -
24,160 sqm
Range
779 -
24,160 sqm
External
valuations
industry
benchmarks
Summation
method,
income
capitalisa-
tion
and direct
comparison
Capitalisa-
tion rate
Average
7.3%
Average
8.0%
Net rent /
sqm land
Average
$102/sqm
Average
$94/sqm
Range
3.1% - 9.9%
Range
2.5% -
9.7%
Range
$25 -
$297/sqm
Range
$14 -
$297/sqm
Net rent /
sqm GBA
Average
$212/sqm
Average
$194/sqm
Range
$73 -
$806/sqm
Range
$62 -
$747/sqm
Level 3
Development
- Car
Dealership
Level 3
Truck
Dealership
9,328
9,350
Direct
comparison
External
valuations
Price
/sqm land
Average
$458/sqm
18,319
18,436
Direct
comparison
External
valuations
Range
$330 -
$817/sqm
Average
$328/sqm
Range
$203 -
$434/sqm
Price
/sqm land
Price/
sqm GBA
Average
$459/sqm
Range
$330 -
$821/sqm
Average
$330/sqm
Range
$206 -
$440 /sqm
Land size
Average
18,641 sqm
Average
18,641 sqm
Range
7,218 -
25,700 sqm
Range
7,218 to
25,700 sqm
Net rent/
sqm land
Average
$30/sqm
Range
$17 -
$43/sqm
Capitalisa-
tion rate
Average
9.2%
Average
$30/sqm
Range
$17 to
$43/sqm
Average
9.2%
Range
7.9% - 9.8%
Range
8.2% to 9.7%
Level 3
Other
Logisitics
12,250
7,978
Income
capitalisa-
tion method
supported
by market
comparison
Sub Total
294,801
248,969
Construction
in Progress
3,706
277
Total
298,507
249,246
External
valuations
Capitalisa-
tion Rate
Average
7.8%
Average
8.2%
Net rent /
sqm GBA
Average
$109/sqm
Average
$90/sqm
Range
6.9% -
8.4%
Range
8.1% to
8.3%
Range
$79 -
$179/sqm
Range
$79 -
$143/sqm
45
ANNUAL REPORT 2016 16 NON-CURRENTS ASSETS - PROPERTY, PLANT & EQUIPMENT CONTINUED
There were no transfers between levels in the year.
Explanation of asset classes: Car - Higher and Best Use (HBU). Alternate Use refers to properties currently operated as car dealerships
which have a higher and best use HBU greater than that of a car dealership; Car Dealership refers to properties operating as car
dealership with a consistent HBU; Development Car Dealership refers to properties which are in progress of, or being held for future
development as a car dealership; Truck Dealership refers to properties being operated as a truck dealership with a HBU consistent with
that use; Other Logistics are industrial properties used for parts warehousing and vehicle logistics.
Carrying amounts that would have been recognised if land and buildings were stated at cost
If freehold land was carried at historical cost, its current carrying value would be $130,861,000 (2015: $98,791,000). If freehold buildings
(including construction in progress) were carried at historical cost, its current carrying value (after depreciation) would be $106,693,000
(2015: $99,654,000).
Non-current assets pledged as security
Refer to Note 23 for information on non-current assets pledged as security by the Group.
Reconciliations
Reconciliation of the carrying amounts of each class of property, plant and equipment at the beginning and end of the year is set out below:
Freehold
land
$’000
Freehold
buildings
$’000
Construction
in progress
$’000
Leasehold
improve-
ments
$’000
Motor
vehicles
under lease
$’000
Plant and
equipment
$’000
149,592
26,461
(22)
10,842
1,235
99,377
10,999
(46)
-
-
-
(3,637)
277
3,429
-
-
-
-
14,509
5,121
374
-
-
(1,863)
188,108
106,693
3,706
18,141
152,879
-
(3,391)
2,187
(2,083)
97,251
5,208
113
-
-
-
(3,195)
187
237
(147)
-
-
-
14,446
1,954
-
-
-
1,140
-
(1,140)
26,403
22,583
(2,525)
Total
$’000
291,298
68,593
(3,359)
10,842
1,235
-
-
(8,399)
(13,899)
38,062
354,710
21,802
11,455
-
-
-
292,485
18,854
(7,056)
2,187
(2,083)
-
-
-
-
5,920
-
(3,631)
-
-
149,592
99,377
277
14,509
1,140
26,403
291,298
(1,891)
(1,149)
(6,854)
(13,089)
Consolidated 2016
Carrying amount at the
start of the year
Additions
Disposals/transfers
Revaluation gain credited
to asset revaluation
reserve
Revaluation charged to
profit and loss
Depreciation/
amortisation expense
Carrying amount
at end of year
Consolidated 2015
Carrying amount at the
start of the year
Additions
Disposals/transfers
Revaluation gain credited
to asset revaluation
reserve
Revaluation charged to
profit and loss
Depreciation/
amortisation expense
Carrying amount
at end of year
46
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED31 DECEMBER 2016 17 NON-CURRENT ASSETS – INTANGIBLES
Goodwill
Trade marks/brand names
Movement - Goodwill
Balance at the beginning of the financial year
Additional amounts recognised:
- from business combinations during the year (Note 31(a))
Less: Impairment during the year
Less: Disposal of businesses
Balance at the end of the financial year
Movement - Trade marks/brand names
Balance at the beginning of the financial year
Less: Amortisation of brand names
Balance at the end of the financial year
CONSOLIDATED
2016
$’000
292,233
6,675
298,908
2015
$’000
153,993
6,769
160,762
153,993
158,837
138,240
-
-
1,033
(5,527)
(350)
292,233
153,993
6,769
(94)
6,675
6,896
(127)
6,769
(a) Impairment tests for goodwill
For the purpose of impairment testing, goodwill is allocated to each of the consolidated entity’s cash generating units (CGU), or groups
of CGUs, that are expected to benefit from the synergies of the combinations. Each unit or groups of units to which goodwill is allocated
represents the lowest level at which assets are monitored for internal management purposes. Previously, the Group had determined
that each dealership network represented a CGU for the purposes of testing assets for impairment. As a result of changes in the
business operating model and realignment of internal reporting, the Group has reassessed the number of CGUs to five, with four CGUs
in the Car Automotive segment grouped by state(s) (QLD & NT, NSW, VIC & TAS, SA) and one national CGU for the Truck segment.
A segment-level summary of the goodwill allocation is presented as follows:
Automotive dealership operations:
Goodwill
Trade marks/brand names
Truck dealership operations:
Goodwill
Trade marks/brand names
CONSOLIDATED
2016
$’000
2015
$’000
284,283
5,625
289,908
7,950
1,050
9,000
146,043
5,719
151,762
7,950
1,050
9,000
The recoverable amount of a CGU or group of CGU’s to which goodwill and other indefinite life intangible assets is allocated is
determined based on the greater of its value in use and its fair value less costs of disposal. Fair value is determined as being the amount
obtainable from the sale of a CGU in an arms length transaction between knowledgeable and willing parties at balance date. This fair
value assessment less costs of disposal is conducted by the Directors based on their extensive knowledge of the automotive and truck
retailing industry including the current market conditions prevailing in the industry. The value in use assessment is conducted using
a discounted cash flow (DCF) methodology requiring the Directors to estimate the future cash flows expected to arise from the cash
generating units and then applying a discount rate to calculate the present value.
47
ANNUAL REPORT 2016 17 NON-CURRENT ASSETS – INTANGIBLES CONTINUED
The DCF model adopted by Directors was based on the 2017 financial budgets approved by the Board, a 3% (2015: 3%) perpetual growth
rate and a pre-tax discount rate of 11% (2015: 11%). This growth rate does not exceed the long term average growth rate for the industry.
For the automotive dealership operations, the Directors believe that any reasonable change in the key assumptions on which the
recoverable amount is based is not expected to cause the carrying amount to exceed the recoverable amount of the CGUs, however see
Note 31(a) for considerations surrounding contingent consideration.
For the truck dealership operations, the Directors believe that any reasonable change in the key assumptions on which the recoverable
amount is based is not expected to cause the carrying amount to exceed the recoverable amount of the CGUs.
(b) Impairment charge
The Directors’ assessment in 2016 determined that goodwill and other intangible assets with indefinite useful lives were not impaired
in 2016 (2015: $5,527,000 impairment recorded). In 2015 the impairment related to the Truck Dealership Division and was the result of
challenging new and used heavy truck trading conditions consistent with a weak market environment.
18 CURRENT LIABILITIES – TRADE AND OTHER PAYABLES
Trade and other payables
Trade payables (1)
Other payables
Annual Leave
(1) The average credit period on purchases of goods is 30 days.
No interest is charged on trade payables from the date of invoice.
The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe.
19 CURRENT LIABILITIES - DERIVATIVE FINANCIAL INSTRUMENTS
Current liabilities
Interest rate swap contracts - cash flow hedges
Total current derivative financial instrument liabilities
Non-current liabilities
Interest rate swap contracts - cash flow hedges
Total non-current derivative financial instrument liabilities
CONSOLIDATED
2016
$’000
2015
$’000
81,924
51,676
24,705
68,249
45,475
19,839
158,305
133,563
210
210
206
206
227
227
595
595
The Group is party to derivative financial instruments in the normal course of business in order to hedge exposure to fluctuations in
interest rates in accordance with the Group’s financial risk management policies (refer to Note 30).
Bailment finance of the Group currently bears an average variable interest rate at 31 December 2016 of 4.12% (2015: 4.25%). As per
Group policy, bailment finance is not hedged.
The interest rate swaps currently in place are providing a fixed rate of interest on the variable cash advances drawn down under the
term facility. The swap contracts in place cover approximately 34% (2015: 67%) of the term facility outstanding at the year end. The
contracts require settlement of net interest receivable or payable each 30 days.
The gain or loss from remeasuring the hedging instruments at fair value is deferred in equity in the hedging reserve to the extent that
the hedge is effective and re-classified into profit or loss when the hedged interest expense is recognised. The ineffective portion is
recognised in profit or loss immediately.
At balance date, a gain from remeasuring the hedging instruments at fair value of $416,000 (2015: $822,000) has been recognised in
equity in the hedging reserve (Note 29(a)). No portion was ineffective.
48
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED31 DECEMBER 2016
Valuation of Derivative financial instruments
Details of the Group’s derivative financial instruments and information about the fair value hierarchy as at 31 December 2016 are as follows:
Class of Financial
Assets and Liabilities
Level 2
Cash flow hedges – Interest
rate swaps
Unobservable inputs used in determination of fair values
Carrying
Amount
31/12/16
$’000
Carrying
Amount
31/12/15
$’000
Valuation Technique
Key Input
416
822
Discounted cash flow
Future cash flows are estimated
based on forward interest rates
(from observable yield curves at
the end of the reporting period) and
contract interest rates, discounted
at a rate that reflects the credit risk
of various counterparties.
There were no transfers between levels in the year.
20 CURRENT LIABILITIES - BORROWINGS - BAILMENT AND FINANCE LEASE PAYABLE
(a) Bailment and finance lease payable
Bailment finance
Finance lease payable
(i) Bailment finance
CONSOLIDATED
2016
$’000
2015
$’000
485,875
404,134
-
354
485,875
404,488
Bailment finance is provided on a vehicle by vehicle basis by various finance providers at an average interest rate of 4.12% p.a.
applicable at 31 December 2016 (2015: 4.25%). Bailment finance is repayable within a short period after the vehicle is sold to a third
party, generally within 48 hours.
(ii) Interest rate risk exposures
Details of the Group’s exposure to interest rate changes on interest bearing liabilities is set out in Note 30.
(iii) Fair value disclosures
Details of the Group’s fair value of interest bearing liabilities is set out in Note 30.
(iv) Security
Details of the security relating to each of the secured liabilities and further information on bank loans is set out in Note 23.
21 CURRENT LIABILITIES – CURRENT TAX LIABILITIES
Income tax
-
124
22 CURRENT LIABILITIES – PROVISIONS
Employee benefits
Warranties
21,536
4,870
26,406
15,337
4,183
19,520
49
ANNUAL REPORT 2016
22 CURRENT LIABILITIES – PROVISIONS CONTINUED
(a) Movements in provisions
Movements in each class of provision during the financial year, other than employee benefits, are set out below:
CONSOLIDATED
2016
$’000
2015
$’000
Warranties
Carrying amount at the start of the year
Additional provisions recognised
Payments charged against provisions
Acquired through business combination
4,183
6,879
(6,789)
597
4,870
3,863
5,390
(5,070)
-
4,183
(b) Warranty Provision
An estimate is made based on past experience, and confirmation of future costs by the administrator of the warranty program, of the
expected expenditure on new and used motor vehicles in terms of warranties on these vehicles.
23 NON-CURRENT LIABILITIES – BORROWINGS (SECURED)
(a) Borrowings – others
Term facility
Capital loan
Finance lease payables
SECURED LIABILITIES
Total secured liabilities (current and non-current) are:
Term facility (i)
Capital loan (ii)
Finance lease payable (iii)
Bailment finance (iv)
204,500
79,150
-
154,000
55,000
792
283,650
209,792
204,500
79,150
-
485,875
769,525
154,000
55,000
1,146
404,134
614,280
(i)
The term facility is secured by a general security agreement which includes registered first mortgages held by a security trustee over specific freehold land
and buildings and a general charge over assets. This excludes new and used inventory and related receivables, letter of set off given by and on account of the
parent entity and its subsidiaries, and a Corporate Guarantee and Indemnity unlimited as to amount given by the parent entity and its subsidiaries.
(ii) The capital loan is secured by registered first mortgages given by subsidiaries over specific freehold land and buildings, letter of set off given by and on account
of the parent entity and its subsidiaries, and a Corporate Guarantee and Indemnity unlimited as to amount given by the parent entity and its subsidiaries.
(iii) The finance lease liability is secured against associated leased assets.
(iv) Vehicle bailment finance reflects a liability payable to the consolidated entity’s bailment financiers. This liability is represented by and secured over debtors
included in current assets receivables in respect of recent vehicle deliveries to customers, and by new vehicles, demonstrator vehicles and some used vehicles
all included in inventories (bailment stock). Refer to Note 10.
50
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED31 DECEMBER 2016
ASSETS PLEDGED AS SECURITY
The carrying amounts of assets pledged as security are:
Non-current assets pledged as security
Freehold land and buildings - first mortgage
Other non-current assets
Current assets pledged as security
Inventories
Other current assets
Total assets pledged as security
FINANCING ARRANGEMENTS
The consolidated entity has access to the following lines of credit at balance date:
Total facilities
Term facility (i)
Working capital facility (includes bank overdraft) (ii)
Capital loan (iii)
Bailment finance (iv)
Bank guarantees
Finance lease payables (v)
Used at balance date
Term facility
Capital loan
Bailment finance
Bank guarantees
Finance lease payables
Unused at balance date
Term facility
Working capital facility (includes bank overdraft)
Bailment finance
Bank guarantees
Finance lease payables
CONSOLIDATED
2016
$’000
2015
$’000
297,083
651,999
247,791
520,070
485,875
177,304
404,134
207,023
1,612,261
1,379,018
260,000
260,000
25,000
79,150
671,534
22,000
-
25,000
55,000
567,734
22,000
3,000
1,057,684
932,734
204,500
79,150
485,875
19,879
-
154,000
55,000
404,134
17,010
1,146
789,404
631,290
55,500
25,000
185,659
2,121
-
106,000
25,000
163,600
4,990
1,854
268,280
301,444
(i) Term facility at balance date was provided on a non-amortisable (interest only) basis subject to compliance with specific covenants for a fixed term.
(ii) Working capital facility at balance date was provided on a non-amortisable (interest only) basis subject to compliance with specific covenants and an annual review.
(iii) Capital loan facility at balance date was provided on a non-amortisable (interest only) basis for a fixed term.
(iv) Bailment facilities are used to finance the acquisition of new vehicle and some used vehicle trading stock. These facilities include a combination of fixed term
and open ended arrangements and are subject to review periods ranging from quarterly to annual. These facilities generally include short term termination
notice periods and are disclosed as current liabilities in the statement of financial position.
(v) The finance lease liability provides direct and specific funding to a portfolio of finance leases associated with rental vehicles.
51
ANNUAL REPORT 2016 24 NON-CURRENT LIABILITIES – DEFERRED TAX LIABILITIES
Deferred tax liabilities
The balance comprises temporary differences attributable to:
Amounts recognised in profit or loss
Book versus tax carrying value of plant and equipment
Inventory valuation
Prepayments
Provisions
Doubtful debts
Employee benefits
Warranties
Property receivable
Sundry items
CONSOLIDATED
2016
$’000
7,447
2015
$’000
7,718
(1,488)
4,225
661
(956)
(13,310)
(5,339)
(66)
(937)
1,900
1,731
942
(831)
(12,262)
(1,157)
(2,091)
(259)
Total amounts recognised in profit or loss
(17,210)
(12,027)
Amounts recognised directly in equity
Revaluation of available-for-sale investment
Revaluation of property, plant and equipment
Hedge liability
Share options trust
Total amounts recognised directly in equity
Net deferred tax liabilities
15,964
16,094
(125)
(7,276)
24,657
27,659
11,551
(246)
(19,219)
19,745
7,447
7,718
52
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED31 DECEMBER 2016 Notes
6(a)
29(a)
29(a)
29(a)
29(a)
The deferred tax expense included in income tax expense in respect of the above temporary
differences resulted from the following movements :
Opening balance at 1 January 2016
Deferred tax assets relating to business combinations
Deferred tax expense/(benefit)
Current year adjustments related to prior year deferred tax
Deferred tax recognised directly in equity
Revaluation of available-for-sale investment
Revaluation of property plant and equipment
Movement in fair value of cash flow hedge
Share options trust
Arising on income and expenses reclassified from equity to profit & loss - relating to
available-for-sale financial assets
Closing balance at 31 December 2016
25 NON-CURRENT LIABILITIES - PROVISIONS
Employee benefits - long service leave
Make good provision (a)
CONSOLIDATED
2016
$’000
2015
$’000
7,718
(2,343)
8,994
(3,318)
17,350
(22)
(5,029)
32
(11,046)
14,907
3,253
121
4,655
(587)
7,447
7,256
1,970
9,226
656
90
(19,219)
(1,047)
7,718
8,252
2,122
10,374
(a) A provision for make good of leasehold improvements on a long term leased property has been recognised in the financial
statements for the expected cost of restoring the premises to its original condition at the end of the lease. The lessor of the property
has been provided with a bank guarantee of $1,970,000 in respect of the estimated make good cost and rental costs.
(b) Movement in the make good provision:
Balance at start of year
Recognition of additional provision during the year
Payments against provision
Carrying amount at end of year
26 NON-CURRENT LIABILITIES - OTHER
Other (contingent consideration)
2,122
-
(152)
1,970
1,787
353
(18)
2,122
19,317
-
Other liabilities represent the estimated fair value of the contingent consideration relating to the acquisitions of Birrell Motors Group
and Tony Ireland Group (see Note 31(a)). There has been no change in the fair value of the contingent consideration since the acquisition
date except for unwinding of the discounting.
53
ANNUAL REPORT 2016 (e) Other
Currently the segment “Other” is not required.
The accounting policies of the reportable segments are the same
as the Group’s accounting policies as described in Note 1 with the
exception of all changes in fair value of property and investments
being recognised as profit or loss adjustments for segment
reporting purposes. This compares to the Group policy of crediting
increments to a property plant and equipment and investment
reserve in equity (refer Note 1(p)).
Segment profit represents the profit earned by each segment
without allocation of unrecouped corporate / head office costs
and income tax. External bailment is allocated to the Car
Retailing and Truck Retailing segments. Bills payable funding
costs are allocated to the Car Retailing, Truck Retailing,
Property, and Investment segments based on notional market
based covenant levels.
This is the measure reported to the chief operating decision
maker for the purposes of resource allocation and assessment
of segment performance. For the purpose of monitoring
segment performance and allocating resources between
segments, the chief operating decision maker monitors the
tangible, intangible, and financial assets attributable to each
segment. All assets are allocated to reportable segments.
Geographic Information
The Group operates in one principal geographic location,
being Australia.
27 SEGMENT INFORMATION
Segments are identified on the basis of internal reports about
components of the consolidated entity that are regularly
reviewed by the chief operating decision maker, being the board
of directors, in order to allocate resources to the segment and to
assess its performance.
The consolidated entity operates in four operating and reporting
segments being (a) Car Retailing (b) Truck Retailing (c) Property
and (d) Investments, these being identified on the basis of being
the components of the consolidated entity that are regularly
reviewed by the chief decision maker for the purpose of
resource allocation and assessment of segment performance.
Information regarding the consolidated entity’s reporting
segments is presented below.
(a) Car Retailing
Within the Car Retail segment, the consolidated entity offers a
diversified range of automotive products and services, including
new vehicles, used vehicles, vehicle maintenance and repair
services, vehicle parts, extended service contracts, vehicle
brokerage, vehicle protection products and other aftermarket
products. They also facilitate financing for vehicle purchases
through third-party sources. New vehicles, vehicle parts, and
maintenance services are predominantly supplied in accordance
with franchise agreements with manufacturers.
This segment also includes a motor auction and car rental business.
(b) Truck Retailing
Within the Truck Retail segment, the consolidated entity offers a
diversified range of products and services, including new trucks,
used trucks, truck maintenance and repair services, truck
parts, extended service contracts, truck protection products and
other aftermarket products. They also facilitate financing for
truck purchases through third-party sources. New trucks, truck
parts, and maintenance services are predominantly supplied in
accordance with franchise agreements with manufacturers.
(c) Property
Within the Property segment, the consolidated entity acquires
commercial properties principally for use as facility premises
for its motor dealership operations. The Property segment
charges the Car Retailing segment commercial rentals for
owned properties occupied by that segment. The Property
segment reports property assets at fair value, based on annual
assessments by the directors supported by periodic, but at least
triennial valuations by external independent valuers. Revaluation
increments arising from fair value adjustments are reported
internally and assessed by the chief operating decision maker as
profit adjustments in assessing the overall returns generated by
this segment to the consolidated entity.
(d) Investments
This segment includes the investments in DealerMotive
Ltd, Automotive Holdings Group Limited, and Smartgroup
Corporation Limited.
54
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED31 DECEMBER 2016 (f) Segment results
Segment reporting 2016
Car Retailing
$’000
Truck
Retailing
$’000
Sales to external customers
3,449,738
363,802
Inter-segment sales
Total sales revenue
TOTAL REVENUE
-
3,449,738
3,449,738
-
363,802
363,802
Property
$’000
Investments
$’000
Eliminations
$’000
Consolidated
$’000
5,240
25,071
30,311
30,311
14,442
-
3,833,222
-
(25,071)
-
14,442
14,442
(25,071)
3,833,222
(25,071)
3,833,222
SEGMENT RESULT
Operating profit before interest
External interest expense allocation
OPERATING CONTRIBUTION
Share of net profit of equity accounted
investments
Business acquisition costs
GST refunds
Investment revaluation
Property revaluation
Profit on sale of property/businesses
114,777
(13,005)
101,772
191
(1,758)
4,418
-
-
-
SEGMENT PROFIT
104,623
6,264
Unallocated corporate expenses
PROFIT BEFORE TAX
Income tax expense
NET PROFIT
8,090
(1,826)
6,264
23,013
(7,994)
15,019
14,392
(1,553)
12,839
-
-
-
-
-
-
160,272
(24,378)
135,894
191
(1,758)
4,418
-
1,235
3,091
-
-
-
-
-
-
-
-
-
-
-
-
-
12,077
1,136
28,232
(38,774)
-
1,955
38,774
(10,842)
-
(23,980)
27,932
143,071
Depreciation and amortisation
(9,192)
(980)
(3,821)
Non cash expenses (reversal of
expenses) other than depreciation and
amortisation
Impairment of trade receivables
Write down (back) of inventories to net
realisable value
(3,293)
(448)
(1,676)
358
44
194
152
-
-
-
-
-
-
ASSETS
Segment assets
LIABILITIES
Segment liabilities
NET ASSETS
1,067,473
91,488
320,813
274,660
661,164
406,309
69,100
22,388
197,173
123,640
63,205
211,455
Acquisitions of non-current assets
155,135
104
52,852
35,039
(1,666)
141,405
(35,879)
105,526
(13,993)
(2,783)
(404)
(1,482)
1,754,434
990,642
763,792
243,130
-
-
-
-
-
-
-
-
55
ANNUAL REPORT 2016 27 SEGMENT INFORMATION CONTINUED
Segment reporting 2015
Car Retailing
$’000
Truck
Retailing
$’000
Property
$’000
Investments
$’000
Eliminations
$’000
Consolidated
$’000
Sales to external customers
2,884,657
345,075
Inter-segment sales
Total sales revenue
TOTAL REVENUE
-
2,884,657
2,884,657
-
345,075
345,075
SEGMENT RESULT
Operating profit before interest
External interest expense allocation
OPERATING CONTRIBUTION
Share of net profit of equity accounted
investments
Business acquisition costs
GST refunds
Investment revaluation
Property revaluation
Profit on sale of property/businesses
Goodwill impairment
106,040
(10,373)
95,667
164
(201)
2,326
-
-
-
-
4,638
(2,367)
2,271
-
-
-
-
-
-
(5,527)
2,892
25,013
27,905
27,905
19,503
(6,283)
13,220
-
-
-
-
104
3,010
-
13,752
-
3,246,376
-
(25,013)
-
13,752
13,752
(25,013)
3,246,376
(25,013)
3,246,376
13,666
(2,270)
11,396
-
-
-
46,199
-
3,490
-
-
-
-
-
-
-
(46,199)
(2,187)
-
-
143,847
(21,293)
122,554
164
(201)
2,326
-
(2,083)
6,500
(5,527)
SEGMENT PROFIT
97,956
(3,256)
16,334
61,085
(48,386)
123,733
Unallocated corporate expenses
PROFIT BEFORE TAX
Income tax expense
NET PROFIT
Depreciation and amortisation
8,226
1,186
3,804
Non cash expenses (reversal of
expenses) other than depreciation and
amortisation
Impairment of trade receivables
Write down (back) of inventories to net
realisable value
2,826
40
47
110
(2,006)
(1,664)
335
-
-
-
-
-
-
ASSETS
Segment assets
LIABILITIES
Segment liabilities
NET ASSETS
732,798
128,132
343,653
284,827
476,023
256,775
99,578
28,554
154,819
188,834
55,981
228,846
Acquisitions of non-current assets
13,974
468
5,445
10,355
(2,775)
120,958
(33,943)
87,015
13,216
3,208
150
(3,670)
1,489,410
786,401
703,009
30,242
-
-
-
-
-
-
-
-
56
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED31 DECEMBER 2016 28 CONTRIBUTED EQUITY
(a) Paid up capital
Ordinary shares - fully paid
CONSOLIDATED
2016
$’000
2015
$’000
364,449
296,060
Ordinary shares confer on their holders the right to participate in dividends declared by the Board and to vote at general meetings of
the Company.
(b) Movements in ordinary share capital
Date
Details
01 Jan 2016
Opening balance
09 Feb 2016
Issue of options to staff under share incentive schemes
29 Feb 2016
Issue of options to staff under share incentive schemes
17 Mar 2016
Issue of options to staff under share incentive schemes
31 Mar 2016
Issue of shares as partial consideration for acquisition of
Birrell Motors Group
01 Jul 2016
Issue of shares for Crampton acquisition
19 Jul 2016
Issue of options to staff under share incentive schemes
17 Aug 2016
Issue of options to staff under share incentive schemes
05 Oct 2016
Issue of options to staff under share incentive schemes
07 Nov 2016
Issue of options to staff under share incentive schemes
31 Dec 2016
Closing balance
01 Jan 2015
Opening balance
01 Apr 2015
Issue of options to staff under share incentive schemes
30 Jun 2015
Issue of options to staff under share incentive schemes
06 Jul 2015
Issue of options to staff under share incentive schemes
31 Jul 2015
Issue of options to staff under share incentive schemes
21 Aug 2015
Issue of options to staff under share incentive schemes
01 Sep 2015
Issue of options to staff under share incentive schemes
31 Dec 2015
Closing balance
Number
of shares
184,073,803
220,430
164,031
615,175
2,200,000
937,742
1,164,695
50,000
1,008,375
58,555
190,492,806
178,519,473
586,825
272,650
268,555
3,330,775
334,305
761,220
184,073,803
Issue
price
$11.30
$10.90
$10.48
$9.75
$11.73
$11.80
$12.25
$10.20
$9.87
$7.46
$9.38
$9.55
$10.06
$10.36
$9.89
$’000
296,060
2,491
1,788
6,447
21,450
11,000
13,742
612
10,281
578
364,449
242,070
4,376
2,557
2,564
33,502
3,462
7,529
296,060
57
ANNUAL REPORT 2016 29 RESERVES AND RETAINED EARNINGS
(a) Reserves:
Property, plant and equipment revaluation reserve
Hedging reserve - cash flow hedge
Share-based payments reserve
Investment revaluation reserve
Movements:
Property, plant and equipment revaluation reserve:
Balance at beginning of the financial year
Revaluation surplus/(deficit) during the year - gross
Transfer to retained earnings relating to properties sold
Deferred tax
Balance at the end of the financial year
Hedging reserve - cash flow hedge:
Balance at beginning of the financial year
Movement during the year
Deferred tax
Balance at the end of the financial year
Share-based payments reserve:
Balance at beginning of the financial year
Deferred tax
Payments received from employees for exercised options
Employee share schemes - value of employee services
Transfer to share capital (shares issued)
Current tax on share plans
Balance at the end of the financial year
Investment revaluation reserve:
Balance at beginning of the financial year
Gain/(loss) on revaluation of available-for-sale investment
Deferred tax
Cumulative gain reclassed to profit or loss on disposal of available for sale financial
assets
Balance at the end of the financial year
CONSOLIDATED
2016
$’000
2015
$’000
Note
52,781
(291)
(34,486)
37,394
55,398
45,192
10,842
-
(3,253)
52,781
(575)
405
(121)
(291)
(3,778)
(4,655)
6,948
2,966
(35,939)
(28)
(34,486)
64,536
(36,819)
11,046
(1,369)
37,394
45,192
(575)
(3,778)
64,536
105,375
61,668
2,187
(18,007)
(656)
45,192
(786)
300
(89)
(575)
5,941
18,160
10,740
3,019
(53,990)
12,352
(3,778)
32,197
49,689
(14,907)
(2,443)
64,536
16
29(b)
24
24
24
24
58
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED31 DECEMBER 2016 (b) Retained earnings
Retained profits at the beginning of the financial year
Net profit for the year
Transfer from asset revaluation reserve re properties sold
Transfer from share based payment reserve
Dividends provided for or paid
Retained profits at the end of the financial year
(c) Nature and purpose of other reserves
(i) Property, plant and equipment revaluation reserve
Note
7
CONSOLIDATED
2016
$’000
2015
$’000
293,435
103,984
-
-
(61,640)
335,779
242,480
86,217
18,007
1,059
(54,328)
293,435
The property, plant and equipment revaluation reserve is used to record increments and decrements on the revaluation of non-current
assets as described in Note 1(p).
(ii) Hedging reserve
The hedging reserve contains the effective portion of interest rate hedge arrangements incurred as at the reporting date.
(iii) Share-based payments reserve
The share-based payment reserve is used to recognise the fair value of performance rights expected to vest and the fair value of equity
expected to be issued under various share incentive schemes referred to in Notes 36 and 37.
(iv) Investment revaluation reserve
The investments revaluation reserve represents the cumulative gains and losses arising on the revaluation of available-for-sale
financial assets that have been recognised in other comprehensive income, net of amounts reclassified to profit or loss when those
assets have been disposed of or are determined to be impaired.
59
ANNUAL REPORT 2016 CREDIT RISK
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in a financial loss to
the Group. The Group has adopted a policy of only dealing with
creditworthy counterparties and obtaining sufficient collateral
where appropriate, as a means of mitigating the risk of financial
loss from defaults. Further, it is the Group’s policy that all
customers who wish to trade on credit terms are subject to
credit verification procedures.
Trade receivables consist of a large number of customers,
spread across geographical areas. Ongoing credit evaluation
is performed on the financial condition of debtors and other
receivable balances are monitored on an ongoing basis, with the
result that the Group’s exposure to bad debts is not significant.
The consolidated entity establishes an allowance for doubtful
debts that represents its estimate of incurred losses in respect
of trade and other receivables and investments.
With respect to credit risk arising from financial assets of the
Group comprised of cash, cash equivalents and receivables, the
Group’s maximum exposure to credit risk, excluding the value of
any collateral or other security, at balance date is in the carrying
amount as disclosed in the statement of financial position and
notes to the financial statements.
The Group’s credit risk on liquid funds is limited as the counter
parties are major Australian banks with favourable credit
ratings assigned by international credit rating agencies.
LIQUIDITY RISK
Liquidity risk is the risk that the consolidated entity will not
be able to meet its financial obligations as they fall due. The
consolidated entity’s approach to managing liquidity is to
ensure, as far as possible, that it will always have sufficient
liquidity to meet its liabilities when due, under both normal and
stressed conditions.
The Group’s overall objective is to maintain a balance between
continuity of funding and flexibility through the use of bank
overdrafts and bank loans.
The Group also manages liquidity risk by maintaining adequate
reserves, banking facilities and reserve borrowing facilities by
continuously monitoring forecast and actual cash flows and
matching the maturity profiles of financial assets and liabilities.
Information on available facilities can be found in Note 23.
30 FINANCIAL INSTRUMENTS
Overview
The consolidated entity has exposure to the following key risks
from its use of financial instruments:
> Credit risk
>
Liquidity risk
> Market risk (interest rate risk)
This note presents information about the consolidated entity’s
exposure to each of the above risks, the consolidated entity’s
objectives, policies and processes for measuring and managing
risk, and the consolidated entity’s management of capital.
Further quantitative disclosures are included throughout these
consolidated financial statements.
The Directors have overall responsibility for the
establishment and oversight of the consolidated entity’s risk
management framework.
The Directors have established an Audit, Risk and Remuneration
Committee which is responsible for monitoring, assessing and
reporting on the consolidated entity’s risk management system.
The committee will provide regular reports to the Board of
Directors on its activities.
The consolidated entity’s risk management policies are
established to identify and analyse the risks faced by the
consolidated entity, to set appropriate risk limits and controls,
and to monitor risks and adherence to limits. Risk management
policies and systems are reviewed regularly to reflect changes
in market conditions and the consolidated entity’s activities.
The Audit, Risk and Remuneration Committee oversees how
management monitors compliance with the risk management
policies and procedures and reviews the adequacy of the
risk management framework in relation to the risks. The
Committee is assisted in its oversight by Internal Audit. Internal
Audit undertakes both regular and ad hoc reviews of risk
management controls and procedures, the results of which are
reported to the Committee.
The Group’s principal financial instruments comprise bank
loans, bailment finance, cash, short-term deposits and interest
rate swap contracts. The main purpose of these financial
instruments is to raise finance for and fund the Group’s
operations and to hedge the Group’s exposures to interest rate
volatility. The Group has various other financial instruments
such as trade debtors and trade creditors which arise directly
from its operations. It is, and has been throughout the period
under review, the Group’s policy that no speculative trading in
financial instruments shall be undertaken.
The main risk arising from the Group’s financial instruments
are interest rate risk, credit risk and liquidity risk. The Board
reviews and agrees policies for managing each of these risks
and they are summarised below.
60
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED31 DECEMBER 2016 MARKET RISK
Market risk is the risk that changes in market prices, such as
interest rates, will affect the consolidated entity’s income or the
value of its holdings of financial instruments. The objective of
market risk management is to manage and monitor market risk
exposures within acceptable parameters, whilst optimising the
return on risk.
(i)
Interest rate risk
The Group is exposed to interest rate risk as a consequence
of its financing facilities as set out in Notes 20 & 23. Funds are
borrowed by the Group at both fixed and floating interest rates.
The Group’s policy is to manage its interest cost using a mix of
fixed and variable rate debt.
The Group’s policy is to keep between 0% and 50% of its
borrowings at fixed rates of interest. As at 31 December 2016,
approximately 42% (2015: 62%) of the Group’s borrowings were at
a fixed rate of interest. The Group hedges part of the interest rate
risk (see Note 19) by swapping floating for fixed interest rates.
The consolidated entity classifies interest rate swaps as cash
flow hedges.
The net fair value of the swaps at 31 December 2016 was
$416,000 liability (2015: $822,000 liability), with the movement
being recognised in equity for the consolidated entity.
(ii) Interest rate sensitivity
The sensitivity analyses below have been determined based
on the exposure to interest rates for both derivative and non-
derivative instruments at reporting date and the stipulated
change taking place at the beginning of the financial year and
held constant throughout the reporting period. A 50 basis point
increase or decrease is used when reporting interest rate risk
internally to key management and represents management’s
assessment of the possible change in interest rates.
At reporting date, if interest rates had been 50 basis points
higher or lower and all other variable were held constant,
the Group’s net profit after tax would increase/decrease by
$3,699,214 (2015: $1,593,000) per annum. This is mainly due
to the Group’s exposures to interest rates on its variable rate
borrowings.
(iii) Interest rate swap contracts
Under interest rate swap contracts, the Group agrees to
exchange the difference between fixed and floating rate interest
amounts calculated on agreed notional principal amounts. Such
contracts enable the Group to mitigate the cash flow exposures
on the issued variable rate debt held. The fair value of interest
rate swaps at the reporting date is determined by discounting
future cash flows using the curves at reporting date and the
credit risk inherent in the contract, and are disclosed below. The
average interest rate is based on the outstanding balances at
the start of the financial period.
The following tables detail the notional principal amounts and remaining terms of interest rate swap contracts outstanding as at
reporting date:
Outstanding floating for fixed contracts
Less than 1 year
Between 1 - 2 years
Between 2 - 3 years
Between 3 - 4 years
Average contracted
fixed interest rate
Notional principal amount
Fair value
2016
%
2.59%
2.34%
2.38%
-
2.44%
2015
%
3.31%
2.72%
2.26%
2.38%
2.67%
2016
$’000
46,200
8,000
15,000
-
2015
$’000
33,500
46,200
8,000
15,000
69,200
102,700
2016
$’000
2015
$’000
(210)
(54)
(152)
-
(416)
(227)
(458)
(36)
(101)
(822)
The interest rate swaps settle on a monthly basis. The floating rate on the interest rate swaps is the Australian BBSW. The Group will
settle the difference between the fixed and floating interest rate on a net basis.
All interest rate swap contracts exchanging floating rate interest amounts for fixed rate interest amounts are designated as cash flow
hedges in order to reduce the Group’s cash flow exposure resulting from variable interest rates on borrowings. The interest rate swaps
and the interest payments on the loan occur simultaneously and the amount deferred in equity is recognised in profit or loss over the
loan period.
61
ANNUAL REPORT 2016 30 FINANCIAL INSTRUMENTS CONTINUED
CAPITAL MANAGEMENT
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future
development of the business.
The Board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the
advantages and security afforded by a sound capital position.
There were no changes in the consolidated entity’s approach to capital management during the period.
CREDIT RISK
(i) Exposure to Credit Risk
The carrying amount of financial assets (as per Notes 9, 12 and 13) represents the maximum credit exposure. The maximum exposure
to credit risk at the reporting date was:
Trade and other receivables
Less: Provision for doubtful receivables
(ii) Impairment Losses
The aging of trade receivables at reporting date is detailed in Note 9.
(iii) Fair values & Exposures to Credit & Liquidity Risk
CONSOLIDATED
2016
$’000
-
2015
$’000
-
172,011
177,720
(3,187)
(2,771)
168,824
174,949
Detailed in the following table, the Directors consider that the carrying amounts of financial assets and financial liabilities recorded in
the financial statements approximate their fair value.
Financial assets
Trade and other receivables net of doubtful debts
Cash and cash equivalents
Financial liabilities
Bills payable and fully drawn advances
Capital loan
Vehicle bailment
Finance lease payables
Trade and other payables
Derivative financial instruments
168,824
17,615
186,439
204,500
79,150
485,875
-
158,305
416
174,949
37,535
212,484
154,000
55,000
404,134
1,146
133,563
822
928,246
748,665
The fair value of financial assets and financial liabilities are determined as follows:
The fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are
determined with reference to quoted market prices (includes listed redeemable notes, bills of exchange, debentures and perpetual
notes).
The fair values of derivative instruments are calculated using quoted prices. Where such prices are not available, discounted cash
flow analysis is performed using the applicable yield curve for the duration of the instruments for non-optional derivatives and
option pricing models for optional derivatives. Interest rate swaps are measured at the present value of future cash flows estimated
and discounted based on the applicable yield curves derived from quoted interest rates.
>
>
62
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED31 DECEMBER 2016 Maturity profile
The below table provides a maturity profile for the Group’s financial instruments that are exposed to interest rate risk at balance
date. The amounts disclosed in the table are gross contractual undiscounted cash flows (principal and interest) required to settle the
respective liabilities. The interest rate is based on the rate applicable as at the end of the financial period.
Contractual maturities of financial liabilities
Less than
1 year
$’000
1 - 2 years
$’000
2 - 3 years
$’000
3 - 4 years
$’000
4 - 5 years
$’000
5+ years
$’000
Total
$’000
At 31 December 2016
INTEREST BEARING
Floating rate
Financial assets
Cash and cash equivalents
17,615
Average interest rate
2.39%
Financial liabilities
Vehicle bailment (current)
506,322
-
-
-
Fully drawn advances
Fully drawn advances (1)
Capital loan (Non-current)
8,596
1,145
1,036
112,197
52,145
1,036
517,099
165,378
-
-
-
3,677
181
1,036
4,894
-
-
-
3,677
-
1,036
4,713
-
-
-
-
-
-
3,677
99,951
-
1,036
4,713
-
41,138
17,615
506,322
231,775
53,471
46,318
141,089
837,886
Average interest rate
4.10%
3.35%
3.79%
3.51%
3.51%
3.51%
Fixed rate
Financial liabilities
Capital loan (Non-current)
2,669
51,305
Average interest rate
5.20%
5.20%
NON INTEREST BEARING
Financial assets
Property sale receivables
Trade debtors
9,466
159,358
168,824
-
-
-
Financial liabilities
Trade and other payables
158,305
19,317
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
53,974
9,466
159,358
168,824
177,622
(1) The amount included in fully drawn advances relate to variable rates that are hedged with interest rate swaps to fixed rates.
63
ANNUAL REPORT 2016 30 FINANCIAL INSTRUMENTS CONTINUED
Less than
1 year
$’000
1 - 2 years
$’000
2 - 3 years
$’000
3 - 4 years
$’000
4 - 5 years
$’000
5+ years
$’000
Total
$’000
At 31 December 2015
INTEREST BEARING
Floating rate
Financial assets
Cash and cash equivalents
37,535
Average interest rate
2.43%
Financial liabilities
Vehicle bailment (current)
Fully drawn advances
Fully drawn advances (1)
Capital loan (Non-current)
404,134
3,197
36,701
208
444,240
-
-
-
-
-
-
3,197
47,697
208
51,102
45,058
-
208
45,266
-
-
-
1,442
-
208
1,650
-
-
-
33,082
-
208
33,290
-
-
-
-
-
5,225
5,225
Average interest rate
4.39%
4.50%
4.16%
4.16%
4.16%
4.16%
Fixed rate
Financial liabilities
Capital loan (Non-current)
Finance lease payables
2,600
417
3,017
2,600
807
3,407
51,300
-
51,300
Average interest rate
5.18%
5.20%
5.20%
-
-
-
-
NON INTEREST BEARING
Financial assets
Property sale receivables
Trade debtors
Financial liabilities
32,013
109,116
141,129
16,707
-
16,707
6,884
-
6,884
6,884
-
6,884
Trade and other payables
133,563
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
37,535
404,134
85,976
84,398
6,265
580,773
56,500
1,224
57,724
62,488
109,116
171,604
133,563
(1) The amount included in fully drawn advances relate to variable rates that are hedged with interest rate swaps to fixed rates.
Estimation of Fair Value
The following summarises the major methods and assumptions used in estimating the fair value of financial instruments:
Loans and Borrowings
Fair value is calculated based on discounted expected future principal and interest cash flows.
Trade and Other Receivables/Payables
For receivables/payables with a remaining life of less than one year, the notional amount is deemed to reflect the fair value. All other
receivables/payables are discounted to determine the fair value.
Interest Rate Swaps
The fair value of interest rate swaps is calculated based on the present value of the estimated future cash flows of these instruments.
64
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED31 DECEMBER 2016 31 INVESTMENTS IN SUBSIDIARIES
Name of Entity
Eagers Retail Pty Ltd
Eagers MD Pty Ltd
Eagers Finance Pty Ltd
Nundah Motors Pty Ltd
Eagers Nominees Pty Ltd
Austral Pty Ltd
E G Eager & Son Pty Ltd
A.P. Group Ltd
A.P. Ford Pty Ltd
A.P. Motors Pty Ltd
A.P. Motors (No.1) Pty Ltd
A.P. Motors (No.2) Pty Ltd
A.P. Motors (No.3) Pty Ltd
Associated Finance Pty Limited
Leaseline & General Finance Pty Ltd
City Automotive Group Pty Ltd
PPT Investments Pty Ltd
PPT Holdings No 1 Pty Ltd
PPT Holdings No 2 Pty Ltd
PPT Holdings No 3 Pty Ltd
Bill Buckle Holdings Pty Ltd
Bill Buckle Autos Pty Ltd
Bill Buckle Leasing Pty Ltd
Adtrans Group Limited
Adtrans Corporate Pty Ltd
Adtrans Automotive Group Pty Ltd
Stillwell Trucks Pty Ltd
Adtrans Trucks Pty Ltd
Graham Cornes Motors Pty Ltd
Whitehorse Trucks Pty Ltd
Adtrans Used Pty Ltd
Adtrans Hino Pty Ltd
Adtrans Australia Pty Ltd
Melbourne Truck and Bus Centre Pty Ltd
Adtrans Truck Centre Pty Ltd
Adtrans Trucks Adelaide Pty Ltd
Precision Automotive Technology Pty Ltd
IB Motors Pty Ltd
IB MD Pty Ltd
AP Townsville Pty Ltd
South West Queensland Motors Pty Ltd
BASW Pty Ltd
Western Equipment Rentals Pty Ltd
Boonarga Welding Pty Ltd
Black Auto CQ Pty Ltd
CH Auto Pty Ltd
Auto Ad Pty Ltd
Motors TAS Pty Ltd
WS Motors Pty Ltd
MB VIC Pty Ltd
Carzoos Pty Ltd
Crampton Automotive Pty Ltd
Motors Group (Glen Waverley) Pty Ltd
Port City Autos Pty Ltd
Adverpro Pty Ltd
AP Queensland (No. 1) Pty Ltd
EQUITY HOLDING
2016
%
100
80
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
90
100
100
100
100
100
100
100
100
100
80
100
80
80
80
80
100
100
100
100
100
100
100
100
80
100
100
100
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*
2015
%
100
80
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
90
100
100
100
100
100
100
100
100
100
80
100
80
80
80
80
100
100
100
100
100
100
100
-
-
-
-
-
65
ANNUAL REPORT 2016 31 INVESTMENTS IN SUBSIDIARIES CONTINUED
All subsidiaries are either directly controlled by A.P. Eagers Limited, or are wholly owned within the Group, have ordinary class of
shares and are incorporated in Australia.
Information relating to A.P. Eagers Limited (‘the parent entity’)
Financial position
Assets
Current assets
Non-current assets
Liabilities
Current liabilities
Non-current liabilities
Equity
Issued capital
Retained earnings
Reserves
Asset revaluation reserve
Investment revaluation reserve
Share based payments reserve
Financial performance
Profit for the year
Other comprehensive income
2016
$’000
2015
$’000
-
510,553
510,553
5,836
16,005
21,841
364,449
115,459
1,683
37,394
(30,274)
488,711
60,221
38,774
13,120
488,298
501,418
-
28,380
28,380
296,060
113,631
1,683
64,536
(2,872)
473,038
61,490
46,199
All subsidiaries were parties to a deed of cross guarantee with A.P. Eagers Limited pursuant to ASIC Class Order 98/1418 which has
been lodged with and approved by Australian Securities and Investments Commission as at 31 December 2016. Under the deed of
cross guarantee each of these companies guarantee the debts of the other named companies. The aggregate assets and liabilities of
these companies at 31 December 2016 and their aggregate net profit after tax for the year ended 31 December 2016 match the reported
balances within the Statement of Financial Position and the Statement of Profit or Loss respectively.
As a party to the deed of cross guarantee, each of the wholly-owned subsidiaries (marked *) is relieved from the requirement to prepare
and lodge an audited financial report.
Also refer Notes 32(a) and 32(b) in respect of guarantees entered into by the parent entity in relation to debts of its subsidiaries.
(a) Acquisition of businesses
The Group acquired the following business during the 2016 year as detailed below:
Year
2016
2016
2016
2016
Name of business
Birrell Motors Group
Jeep/Kia Ipswich
Crampton Automotive Group
Tony Ireland Motors
Date of acquisition
Principal activity
1-Apr-16
15-Apr-16
1-July-16
1-Oct-16
Motor Dealership
Motor Dealership
Motor Dealership
Motor Dealership
Proportion
acquired
100% (1)
100%
100%
100%
(1) As part of the Birrell Motors Group acquisition 80% shares of Motors Group (Glen Waverley) Pty Ltd were acquired. The remaining 20% interest is accounted
for as a non controlling interest.
During 2016 the acquired businesses contributed revenue of $418,718,346 and profit before tax of $10,054,210 to the consolidated result.
If the acquisition had occurred on 1 January 2016, the consolidated revenue and the consolidated profit before tax of the Group would
have been $4,069 million and $146 million respectively.
66
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED31 DECEMBER 2016
Allocation of purchase consideration
The purchase price of the businesses acquired has been allocated as follows:
Cash consideration
Issue of ordinary shares
Contingent consideration (i)
Crampton
Automotive
Group
$’000
Tony Ireland
Group
$’000
24,896
11,000
-
9,603
-
500
Jeep/Kia
Ipswich
$’000
1,222
-
-
Birrell
Motors
Group
$’000
85,976
21,450
18,590
2016
Total
Consolidated
$’000
121,697
32,450
19,090
Total purchase consideration
35,896
10,103
1,222
126,016
173,237
Consolidated fair value at acquisition date
Net assets acquired
Cash
Receivables, prepayments
Other investments
Inventory
Property, plant and equipment
Deferred tax assets
Creditors, borrowings and provisions
Deferred tax liabilities
Net assets acquired
Acquisition cost
Non-Controlling Interest
Goodwill on acquisition (ii)
2016
$’000
3,364
6,276
250
62,547
12,550
2,375
(52,700)
(32)
34,630
173,237
(367)
138,240
(i)
The purchase consideration for the acquisition of Birrell Motors Group includes a contingent consideration amount payable up to a maximum value of
$19,800,000 (discounted value of $18,590,000 at date of acquisition), contingent on Birrell Motors Group achieving future earnings performance targets for
2018 and 2019. The directors have judged that the full contingent consideration will be payable in 2019 based on the track record of the acquired businesses,
upside in the business and outlook for luxury vehicles in particular. This necessarily requires an element of estimation. Should the businesses not achieve the
expected future milestones, the associated goodwill balance will be reviewed for impairment within the VIC & TAS CGU.
The purchase consideration for the acquisition of the Tony Ireland Group includes an earn out payable up to a maximum value of $500,000. The earn out is
contingent on the Tony Ireland Group achieving future earnings performance targets.
(ii) Goodwill arose in the business combinations because as at the date of acquisition the consideration paid for the combination included amounts in relation to
the benefit of expected synergies and future revenue and profit growth from the businesses acquired. These benefits were not recognised separately from
goodwill as the future economic benefits arising from them could not be reliably measured in time for inclusion in these financial statements. Therefore, the
amount allocated to goodwill on acquisition has been provisionally determined at the end of the reporting period.
67
ANNUAL REPORT 2016
31 INVESTMENTS IN SUBSIDIARIES CONTINUED
Cash consideration on acquisition
Cash acquired on acquisition
Net cash flow on acquisition of business
2016
$’000
121,697
(3,364)
118,333
The Group acquired the following business during the 2015 year as detailed below:
Year
2015
Name of business
Auto Advantage
Date of acquisition
Principal activity
Proportion acquired
01-Aug-15
Motor Vehicle Broker
100%
During 2015 the acquired business contributed revenues of $1,225,000 and profit before tax of $36,000. If the acquisition had occurred on
1 January 2015, the consolidated revenue and the consolidated profit before tax would have been $2,938,000 and $86,000 respectively.
Allocation of purchase consideration
The purchase price of business acquired has been allocated as follows:
Cash consideration
Contingent consideration (i)
Total purchase consideration
Fair value of net identifiable assets
Goodwill
Consolidated fair value at acquisition date
Net assets acquired
Receivables, prepayments
Property, plant and equipment
Deferred tax assets
Creditors, borrowings and provisions
Net assets acquired
Acquisition cost
Goodwill on acquisition (ii)
2015
Auto
Advantage
$’000
669
326
995
(40)
1,033
993
2015
$’000
5
8
22
(75)
(40)
993
1,033
(i)
Under the initial contingent consideration arrangement an additional $326,400 was required to be paid if Auto Advantage’s volume exceeded 765 units
and 1530 units ending 365 and 730 days respectively. At the end of 365 days the volume exceeded 765 units and the first payment of $163,200 was made.
Management consider that it is probable that the second payment of $163,200 will be required.
(ii) Goodwill arose in the business combinations because as at the date of acquisition the consideration paid for the combination included amounts in relation to
the benefit of expected synergies and future revenue and profit growth from the businesses acquired. In the prior year, the amount allocated to goodwill on
acquisition was provisionally determined, and no changes made in the current period.
Cash consideration on acquisition
669
68
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED31 DECEMBER 2016 (b) Disposal of businesses
There were no businesses sold by the Group during 2016.
The Group sold the following business during the 2015 year as detailed below:
Year
2015
Name of business
Western Equipment Rentals
Date of sale
30-Nov-15
Principal activity
Retail Franchise
Proportion disposed
100%
Net assets disposed of
Property, plant and equipment
Creditors, borrowings and provisions
Intangible assets
Net assets disposed
Total consideration received (100% Cash)
Gain on sale
CONSOLIDATED
2015
$’000
45
(4)
350
391
441
50
(c) Details of non-wholly owned subsidiaries
The table below shows details of non-wholly owned subsidiaries of the Group. The Group have reviewed its subsidiaries that have non-
controlling interests and note that they are not material to the reporting entity.
Profit allocated to
non-controlling interests
Accumulated
non-controlling interests
2016
$’000
2015
$’000
2016
$’000
2015
$’000
Individually immaterial subsidiaries with non-controlling interest
1,542
798
8,166
8,139
Movement - Non Controlling Interest
Balance at the beginning of the financial year
Profit for the year
Payment of shares
Payment of dividend
Balance as at the end of the financial year
CONSOLIDATED
2016
$’000
8,139
1,542
(368)
(1,147)
8,166
2015
$’000
7,486
798
-
(145)
8,139
32 CONTINGENT LIABILITIES
(a) Parent entity
Unsecured guarantees, indemnities and undertakings have been given by the parent entity in the normal course of business in respect
of financial and trade arrangements entered into by its subsidiaries. It is not anticipated that the parent entity will become liable for any
amount in respect thereof. At 31 December 2016 no subsidiary was in default in respect of any arrangement guaranteed by the parent
entity and all amounts owed have been brought to account as liabilities in the financial statements.
(b) Deed of cross guarantee
A.P. Eagers Limited and all of its subsidiaries were parties to a deed of cross guarantee lodged with the Australian Securities and
Investments Commission as at 31 December 2016. Under the deed of cross guarantee each company within the closed Group
guarantees the debts of the other companies. The maximum exposure of the parent entity in relation to the cross guarantees is
$968,800,000 (2015: $776,992,000).
(c) Buy back agreements
As at 31 December 2016, entities within the Group had entered into sale and buy back agreements for new vehicles. The financial
exposure to the Group is immaterial.
69
ANNUAL REPORT 2016 33 COMMITMENTS FOR EXPENDITURE
(a) Capital Commitments
Capital expenditure for land, buildings, plant and equipment contracted for at the end of the reporting period but not recognised as
liabilities is as follows:
Within one year
(b) Finance Lease Liabilities
Commitments for minimum lease payments in relation to finance lease liabilities are payable as follows:
Within one year
Later than 1 year but not later than 5 years
Less future finance charges
Present value of minimum lease payments
CONSOLIDATED
2016
$’000
2015
$’000
2,949
23,292
-
-
-
-
-
417
806
1,223
(78)
1,145
(c) Operating Lease Commitments
Commitments for minimum lease payments in relation to non-cancellable operating leases for premises are payable as follows:
Within one year
Later than 1 year but not later than 5 years
Later than 5 years
38,758
103,067
83,450
225,275
25,118
66,442
41,990
133,550
The consolidated entity leases property under non-cancellable operating leases with expiry dates between 31 January 2017 and 1 July 2035.
Leases generally provide for a right of renewal at which time the lease is renegotiated. Lease rental payments comprise a base amount
plus an incremental contingent rental based on movements in the consumer price index or a fixed percentage increase.
34 REMUNERATION OF AUDITOR
Amounts received or due and receivable by Deloitte Touche Tomatsu (“Deloitte”) for:
Audit or review of the financial report of the parent entity and any other entity in the consolidated entity
Amounts received or due and receivable by related entities of Deloitte for:
Other services in relation to the parent entity and any other entity in the consolidated entity
762
438
1,200
600
250
850
35 SUBSEQUENT EVENTS
Commencing 4 January 2017, the Group acquired a further 9.3 million shares in Automotive Holdings Group Limited (‘AHG’) at a total
cost of $36.4 million through a series of on-market share purchases. As a result, the Group’s shareholding in AHG increased from
19.99% as at 31 December 2016 to 22.82%.
70
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED31 DECEMBER 2016 36 KEY MANAGEMENT PERSONNEL
The remuneration report included in the Directors’ Report sets out the remuneration policies of the consolidated entity and the
relationship between these policies and the consolidated entity’s performance.
The following have been identified as key management personnel (KMP) with authority and responsibility for planning, directing and
controlling the activities of the Group, directly or indirectly during the financial year.
The specified Executives of A.P. Eagers Limited during the financial year were:
(a) Details of key management personnel
(i) Directors
T B Crommelin
Chairman (non-executive)
M A Ward
D A Cowper
P W Henley
N G Politis
D T Ryan
M J Birrell
(ii) Executives
S A Moore
D G Stark
K T Thornton
Managing Director and Chief Executive Officer
Director (non-executive)
Director (non-executive)
Director (non-executive)
Director (non-executive)
Director (non-executive), appointed 27 July 2016
Chief Financial Officer
General Counsel & Company Secretary
General Manager – Queensland and Northern Territory
(b) Compensation of key management personnel
The aggregate compensation made to key management personnel of the Company and the Group is set out below.
Short term
Post employment benefits
Share based payments
(c) Option holdings of key management personnel
Details of options held by key management personnel can be found in Note 36(f).
(d) Loans to key management personnel
There are no loans to key management personnel.
(e) Other transactions with key management personnel
Other transactions with key management personnel are detailed in Note 38.
CONSOLIDATED
2016
$’000
2015
$’000
3,709,156
3,999,836
149,941
146,493
1,328,022
1,634,339
5,187,119
5,780,668
71
ANNUAL REPORT 2016 36 KEY MANAGEMENT PERSONNEL CONTINUED
(f) Share Based Payments
Plan A: EPS Performance Rights and Options - Key Executives
The Group commenced an Earnings Per Share (EPS) based performance rights and option compensation scheme for specific executive
officers in 2009. The fair value of these performance rights and options is calculated on grant date and recognised over the period to
vesting. The vesting of the performance rights and options granted is based on the achievement of specified earnings per share growth
targets and interest cover thresholds. The fair value has been calculated using a binomial option pricing model based on numerous
variables including the following:
Performance Rights
Award date 29 October 2009
Vesting date
Expiry date
Share price at grant date
Expected life
Volatility
Risk free interest rate
Dividend yield
Performance Options
Award date 29 October 2009
Vesting date
Expiry date
Share price at grant date
Exercise price
Expected life
Volatility
Risk free interest rate
Dividend yield
27-Mar-11
28-Aug-16
$ 1.82
1.6 years
30%
4.37%
6.0%
27-Mar-12
28-Aug-16
$ 1.82
2.6 years
30%
4.89%
6.0%
27-Mar-13
28-Aug-16
$ 1.82
3.6 years
30%
5.18%
6.0%
27-Mar-14
28-Aug-16
$ 1.82
4.6 years
30%
5.31%
6.0%
27-Mar-15
30-Sep-17
$ 1.82
5.6 years
30%
5.33%
6.0%
27-Mar-11
28-Aug-16
$ 1.82
$ 1.82
4.3 years
30%
5.29%
6.0%
27-Mar-12
28-Aug-16
$ 1.82
$ 1.82
4.8 years
30%
5.32%
6.0%
27-Mar-13
28-Aug-16
$ 1.82
$ 1.82
5.3 years
30%
5.33%
6.0%
27-Mar-14
28-Aug-16
$ 1.82
$ 1.82
5.8 years
30%
5.33%
6.0%
30-Mar-15
30-Sep-17
$ 1.82
$ 1.82
6.8 years
30%
5.33%
6.0%
The General Manager, Queensland and Northern Territory, the previous General Manager of Kloster Motor Group and the previous
Chief Financial Officer have been granted rights and options under the EPS share incentive plan (Plan A). The modified grant date
method (AASB 2) is applied to this incentive plan whereby the cost of the plan is determined by the value of the rights and options at
grant date and the probability of the EPS and interest cover targets being achieved and vesting occurring. The number of performance
rights and options granted under the plan is as follows:
Performance Rights
Number
82,830
112,035
118,880
126,265
134,205
Performance Options
Number
381,945
475,545
472,975
475,545
465,430
Grant Date
29-Oct-09
29-Oct-09
29-Oct-09
29-Oct-09
29-Oct-09
Grant Date
29-Oct-09
29-Oct-09
29-Oct-09
29-Oct-09
29-Oct-09
End Performance
Period
31-Dec-10
31-Dec-11
31-Dec-12
31-Dec-13
31-Dec-14
End Performance
Period
31-Dec-10
31-Dec-11
31-Dec-12
31-Dec-13
31-Dec-14
Expiry Date
28-Aug-16
28-Aug-16
28-Aug-16
28-Aug-16
30-Sep-17
Expiry Date
28-Aug-16
28-Aug-16
28-Aug-16
28-Aug-16
30-Sep-17
Fair Value
at Grant Date
$ 1.66
$ 1.56
$ 1.47
$ 1.39
$ 1.30
Fair Value
at Grant Date
$ 0.36
$ 0.36
$ 0.37
$ 0.37
$ 0.38
No rights or options were forfeited during the year. All rights had been issued in prior periods and EPS and interest cover targets had
been achieved in prior periods resulting in vesting occurring. 1,372,695 of the remaining options were exercised during the year. There
are no rights or options remaining under this plan.
No costs of the share plan were expensed during 2016 (2015: $nil). The share plan was fully expensed by the end of 2014.
72
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED31 DECEMBER 2016 Plan C: EPS Performance Rights and Options – Key Executives 2014
The Group commenced an Earnings Per Share (EPS) based performance rights and option compensation scheme for specific executive
officers in 2014. The fair value of these performance rights and options is calculated on grant date and recognised over the period to
vesting. The vesting of the performance rights and options granted is based on the achievement of specified earnings per share growth
targets and interest cover thresholds. The fair value has been calculated using a binomial option pricing model based on numerous
variables including the following:
Performance Rights
Award date 4 July 2014
Vesting date
Expiry date
Share price at grant date
Expected life
Volatility
Risk free interest rate
Dividend yield
Performance Options
Award date 4 July 2014
Vesting date
Expiry date
Share price at grant date
Exercise price
Expected life
Volatility
Risk free interest rate
Dividend yield
31-Mar-16
04-Jul-21
$ 5.47
1.7 years
25%
2.51%
4.2%
31-Mar-17
04-Jul-21
$ 5.47
2.7 years
25%
2.63%
4.2%
31-Mar-18
04-Jul-21
$ 5.47
3.7 years
25%
2.79%
4.2%
31-Mar-19
30-Sep-22
$ 5.47
4.7 years
25%
2.96%
4.2%
31-Mar-20
30-Sep-22
$ 5.47
5.7 years
25%
3.13%
4.2%
31-Mar-16
04-Jul-21
$ 5.47
$ 5.47
4.4 years
25%
2.90%
4.2%
31-Mar-17
04-Jul-21
$ 5.47
$ 5.47
4.9 years
25%
2.98%
4.2%
31-Mar-18
04-Jul-21
$ 5.47
$ 5.47
5.4 years
25%
3.06%
4.2%
31-Mar-19
30-Sep-22
$ 5.47
$ 5.47
5.9 years
25%
3.24%
4.2%
31-Mar-20
30-Sep-22
$ 5.47
$ 5.47
7.0 years
25%
3.31%
4.2%
The Managing Director, General Manager Queensland and Northern Territory, previous Chief Financial Officer, General Counsel and
Company Secretary and four other senior executives have been granted rights and options under the EPS share incentive plan (Plan
C). The modified grant date method (AASB 2) is applied to this incentive plan whereby the cost of the plan is determined by the value of
the rights and options at grant date and the probability of the EPS and interest cover targets being achieved and vesting occurring. The
number of performance rights and options granted under the plan is as follows:
Performance Rights
Number
137,791
137,571
143,464
149,551
156,173
Performance Options
Number
769,228
712,760
705,258
663,363
656,857
Grant Date
04-Jul-14
04-Jul-14
04-Jul-14
04-Jul-14
04-Jul-14
Grant Date
04-Jul-14
04-Jul-14
04-Jul-14
04-Jul-14
04-Jul-14
End Performance
Period
31-Dec-15
31-Dec-16
31-Dec-17
31-Dec-18
31-Dec-19
End Performance
Period
31-Dec-15
31-Dec-16
31-Dec-17
31-Dec-18
31-Dec-19
Expiry Date
04-Jul-21
04-Jul-21
04-Jul-21
30-Sep-22
30-Sep-22
Expiry Date
04-Jul-21
04-Jul-21
04-Jul-21
30-Sep-22
30-Sep-22
Fair Value
at Grant Date
$ 5.08
$ 4.87
$ 4.67
$ 4.48
$ 4.29
Fair Value
at Grant Date
$ 0.91
$ 0.94
$ 0.95
$ 1.01
$ 1.02
No rights or options were forfeited or expired during the year. As a result of the EPS target being achieved the performance rights and
options relating to the 31 December 2016 performance period have vested.
A total of 137,791 rights were issued and 50,000 options exercised during the year. As a result of the EPS and interest cover targets
being achieved the performance rights and options for each performance period have vested.
The value of the performance rights and options expensed during the year was $1,495,012, with a cumulative expense being recognised
at 31 December 2016 of $3,696,614 (2015: $2,201,602).
73
ANNUAL REPORT 2016 37 OTHER SHARE BASED PAYMENTS
Recognised share-based payments expenses
Refer Note 29 for movements on share based payments reserve.
Plan D: EPS Performance Rights and Options – Senior Management (A)
The Group commenced an Earnings Per Share (EPS) based performance rights and option compensation scheme for nineteen specific
management personnel in 2010. The fair value of these performance rights and options is calculated on grant date and recognised over
the period to vesting. The vesting of the performance rights and options granted is based on the achievement of specified earnings per
share growth targets and interest cover thresholds. The fair value has been calculated using a binomial option pricing model based on
numerous variables including the following:
Performance Rights
Award date 27 January 2010
Vesting date
Expiry date
Share price at grant date
Expected life
Volatility
Risk free interest rate
Dividend yield
Performance Options
Award date 27 January 2010
Vesting date
Expiry date
Share price at grant date
Exercise price
Expected life
Volatility
Risk free interest rate
Dividend yield
27-Mar-11
27-Jan-17
$ 2.42
1.2 years
30%
5.06%
5.10%
27-Mar-12
27-Jan-17
$ 2.42
2.2 years
30%
5.11%
5.10%
27-Mar-13
27-Jan-17
$ 2.42
3.2 years
30%
5.17%
5.10%
27-Mar-11
27-Jan-17
$ 2.42
$ 2.42
4.1 years
30%
5.06%
5.10%
27-Mar-12
27-Jan-17
$ 2.42
$ 2.42
4.6 years
30%
5.11%
5.10%
27-Mar-13
27-Jan-17
$ 2.42
$ 2.42
5.1 years
30%
5.17%
5.10%
Specific executives have been granted rights and options under the EPS share incentive plan (Plan D). This includes the General
Counsel & Company Secretary. The modified grant date method (AASB 2) is applied to this incentive plan whereby the cost of the plan is
determined by the value of the rights and options at grant date and the probability of the EPS and interest cover targets being achieved
and vesting occurring. The number of performance rights and options granted under the plan is as follows:
Performance Rights
Number
162,310
219,265
230,750
Performance Options
Number
547,705
731,250
714,690
Grant Date
27-Jan-10
27-Jan-10
27-Jan-10
Grant Date
27-Jan-10
27-Jan-10
27-Jan-10
End Performance
Period
31-Dec-10
31-Dec-11
31-Dec-12
End Performance
Period
31-Dec-10
31-Dec-11
31-Dec-12
Expiry Date
27-Jan-17
27-Jan-17
27-Jan-17
Expiry Date
27-Jan-17
27-Jan-17
27-Jan-17
Fair Value
at Grant Date
$ 2.28
$ 2.17
$ 2.06
Fair Value
at Grant Date
$ 0.50
$ 0.52
$ 0.53
No rights or options were forfeited or expired during the year. As a result of the EPS and interest cover targets being achieved the
performance rights and options for each performance period have vested. A total of 1,536,710 options were exercised during the year.
No costs of the share plan were expensed during 2016 (2015: $nil). The share plan was fully expensed by the end of 2012.
74
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED31 DECEMBER 2016 Plan E: EPS Performance Rights and Options – Senior Management (B)
The Group commenced an Earnings Per Share (EPS) based performance rights and option compensation scheme for three specific
executive officers in 2010. The fair value of these performance rights and options is calculated on grant date and recognised over the
period to vesting. The vesting of the performance rights and options granted is based on the achievement of specified earnings per
share growth targets and interest cover thresholds. The fair value has been calculated using a binomial option pricing model based on
numerous variables including the following:
Performance Rights
Award date 18 November 2010
Vesting date
Expiry date
Share price at grant date
Expected life
Volatility
Risk free interest rate
Dividend yield
Performance Options
Award date 18 November 2010
Vesting date
Expiry date
Share price at grant date
Exercise price
Expected life
Volatility
Risk free interest rate
Dividend yield
27-Mar-11
27-Jan-17
$ 2.52
0.4 years
30%
4.91%
5.00%
27-Mar-12
27-Jan-17
$ 2.52
1.4 years
30%
4.93%
5.00%
27-Mar-13
27-Jan-17
$ 2.52
2.4 years
30%
4.95%
5.00%
27-Mar-11
27-Jan-17
$ 2.52
$ 2.52
3.3 years
30%
4.91%
5.00%
27-Mar-12
27-Jan-17
$ 2.52
$ 2.52
3.8 years
30%
4.93%
5.00%
27-Mar-13
27-Jan-17
$ 2.52
$ 2.52
4.3 years
30%
4.95%
5.00%
Specific executives have been granted rights and options under the EPS share incentive plan (Plan E). The modified grant date method
(AASB 2) is applied to this incentive plan whereby the cost of the plan is determined by the value of the rights and options at grant date
and the probability of the EPS and interest cover targets being achieved and vesting occurring. The number of performance rights and
options granted under the plan is as follows:
Performance Rights
Number
7,785
40,650
42,735
Performance Options
Number
39,925
189,785
181,365
Grant Date
18-Nov-10
18-Nov-10
18-Nov-10
Grant Date
18-Nov-10
18-Nov-10
18-Nov-10
End Performance
Period
31-Dec-10
31-Dec-11
31-Dec-12
End Performance
Period
31-Dec-10
31-Dec-11
31-Dec-12
Expiry Date
27-Jan-17
27-Jan-17
27-Jan-17
Expiry Date
27-Jan-17
27-Jan-17
27-Jan-17
Fair Value at
Grant Date
$ 2.47
$ 2.35
$ 2.23
Fair Value at
Grant Date
$ 0.48
$ 0.51
$ 0.53
As a result of the EPS and interest cover targets being achieved the performance rights and options for each performance period have
vested. No options were forfeited during the year. A total of 136,325 options were exercised during the year.
No costs of the share plan were expensed during 2016 (2015: $nil). The share plan was fully expensed by the end of 2012.
75
ANNUAL REPORT 2016 37 OTHER SHARE BASED PAYMENTS CONTINUED
Plan F: EPS Performance Options – Senior Management 2013
The Group commenced an Earnings Per Share (EPS) based share option compensation scheme for 57 specific senior staff, including
the Company Secretary/General Counsel. The fair value of these performance options is calculated on grant date and recognised
over the period to vesting. The vesting of the performance options granted is based on the achievement of specified earnings per
share growth targets. The fair value has been calculated using a binomial option pricing model based on numerous variables
including the following:
Performance Options
Award date 27 March 2013
Vesting date
Expiry date
Share price at grant date
Exercise price
Expected life
Volatility
Risk free interest rate
Dividend yield
31-Mar-15
31-Mar-16
31-Mar-17
31-Mar-18
31-Mar-19
31-Mar-20
31-Mar-20
31-Mar-20
31-Mar-20
31-Mar-20
$ 4.84
$ 5.04
$ 4.84
$ 5.04
$ 4.84
$ 5.04
$ 4.84
$ 5.04
$ 4.84
$ 5.04
4.5 years
4.5 years
5.0 years
5.5 years
6.0 years
30%
3.08%
4.20%
30%
3.08%
4.20%
30%
3.13%
4.20%
30%
3.17%
4.20%
30%
3.22%
4.20%
Specific executives have been granted options under the EPS share incentive plan (Plan F). The modified grant date method (AASB 2)
is applied to this incentive plan whereby the cost of the plan is determined by the value of the options at grant date and the probability
of the EPS targets being achieved and vesting occurring. The number of options granted under the plan is as follows:
Performance Options
Number
951,950
951,950
911,510
892,840
883,750
Grant Date
27-Mar-13
27-Mar-13
27-Mar-13
27-Mar-13
27-Mar-13
End Performance
Period
31-Dec-14
31-Dec-15
31-Dec-16
31-Dec-17
31-Dec-18
Expiry Date
31-Mar-20
31-Mar-20
31-Mar-20
31-Mar-20
31-Mar-20
Fair Value
at Grant Date
$ 0.93
$ 0.93
$ 0.96
$ 0.98
$ 0.99
A total of 30,720 options in 2016 were forfeited or expired during the year. A total of 21,500 options were exercised during the year. As a
result of the EPS target being achieved the performance options relating to the 31 December 2016 performance period have vested.
The value of the performance options expensed during the year was $786,979, with a cumulative expense being recognised at 31
December 2016 of $3,475,680 (2015: $2,705,492).
76
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED31 DECEMBER 2016 Plan H: EPS Performance Rights and Options – Key Executives
The Group commenced a new Earnings Per Share (EPS) based performance rights and option compensation scheme for two specific
executive officers in 2015. The fair value of these performance rights and options is calculated on grant date and recognised over the period
to vesting. The fair value has been calculated using a binomial option pricing model based on numerous variables including the following:
Performance Rights
Award date 21 January 2015
Vesting date
Expiry date
Share price at grant date
Expected life
Volatility
Risk free interest rate
Dividend yield
Performance Options
Award date 21 January 2015
Vesting date
Expiry date
Share price at grant date
Exercise Price
Expected life
Volatility
Risk free interest rate
Dividend yield
31-Mar-16
21-Jan-22
$ 5.85
1.2 years
22%
2.20%
4.4%
31-Mar-17
21-Jan-22
$ 5.85
2.2 years
22%
2.12%
4.4%
31-Mar-18
21-Jan-22
$ 5.85
3.2 years
22%
2.11%
4.4%
31-Mar-19
30-Sep-22
$ 5.85
4.2 years
22%
2.15%
4.4%
31-Mar-20
30-Sep-22
$ 5.85
5.2 years
22%
2.22%
4.4%
31-Mar-16
21-Jan-22
$ 5.85
$ 5.65
4.1 years
22%
2.15%
4.4%
31-Mar-17
21-Jan-22
$ 5.85
$ 5.65
4.6 years
22%
2.18%
4.4%
31-Mar-18
21-Jan-22
$ 5.85
$ 5.65
5.1 years
22%
2.21%
4.4%
31-Mar-19
30-Sep-22
$ 5.85
$ 5.65
5.9 years
22%
2.28%
4.4%
31-Mar-20
30-Sep-22
$ 5.85
$ 5.65
6.4 years
22%
2.33%
4.4%
Two specific executives have been granted options under the EPS share incentive plan (Plan H). The modified grant date method
(AASB 2) is applied to this incentive plan whereby the cost of the plan is determined by the value of the options at grant date and the
probability of the EPS targets being achieved and vesting occurring. The number of options granted under the plan is as follows:
Performance Rights
Number
14,412
15,065
15,746
16,459
17,202
Performance Options
Number
95,235
93,020
93,020
91,953
93,020
Grant Date
21-Jan-15
21-Jan-15
21-Jan-15
21-Jan-15
21-Jan-15
Grant Date
21-Jan-15
21-Jan-15
21-Jan-15
21-Jan-15
21-Jan-15
End Performance
Period
31-Dec-15
31-Dec-16
31-Dec-17
31-Dec-18
31-Dec-19
End Performance
Period
31-Dec-15
31-Dec-16
31-Dec-17
31-Dec-18
31-Dec-19
Expiry Date
21-Jan-22
12-Feb-22
12-Feb-22
12-Feb-22
30-Sep-22
Expiry Date
21-Jan-22
12-Feb-22
12-Feb-22
12-Feb-22
30-Sep-22
Fair Value
at Grant Date
$ 5.55
$ 5.31
$ 5.08
$ 4.86
$ 4.65
Fair Value
at Grant Date
$ 0.84
$ 0.86
$ 0.86
$ 0.87
$ 0.86
No performance rights or options were forfeited or expired during the year. As a result of the specific targets being achieved the
performance rights and options relating to the 31 December 2016 performance period have vested.
The value of the performance rights and options expensed during the year was $188,655, with a cumulative expense being recognised
as at 31 December 2016 of $422,635 (2015: $233,980).
77
ANNUAL REPORT 2016 37 OTHER SHARE BASED PAYMENTS CONTINUED
Plan I: EPS Performance Rights and Options – Key Executives
The Group commenced in 2015 a new performance rights and option compensation scheme for a specific senior staff member, based
on achieving certain defined operating targets for a specific business entity. The fair value of these performance rights and options is
calculated on grant date and recognised over the period to vesting. The fair value has been calculated using a binomial option pricing
model based on numerous variables including the following:
Performance Rights
Award date 12 February 2015
Vesting date
Expiry date
Share price at grant date
Expected life
Volatility
Risk free interest rate
Dividend yield
Performance Options
Award date 12 February 2015
Vesting date
Expiry date
Share price at grant date
Exercise price
Expected life
Volatility
Risk free interest rate
Dividend yield
31-Mar-16
31-Mar-17
31-Mar-18
31-Mar-19
31-Mar-20
12-Feb-22
12-Feb-22
12-Feb-22
30-Sep-22
30-Sep-22
$ 6.26
$ 6.26
$ 6.26
$ 6.26
$ 6.26
1.1 years
2.1 years
3.1 years
4.1 years
5.1 years
22%
1.91%
4.2%
22%
1.85%
4.2%
22%
1.87%
4.2%
22%
1.95%
4.2%
22%
2.05%
4.2%
31-Mar-16
31-Mar-17
31-Mar-18
31-Mar-19
31-Mar-20
12-Feb-22
12-Feb-22
12-Feb-22
30-Sep-22
30-Sep-22
$ 6.26
$ 6.26
$ 6.26
$ 6.26
$ 6.26
$ 6.26
$ 6.26
$ 6.26
$ 6.26
$ 6.26
4.1 years
4.6 years
5.1 years
5.9 years
6.4 years
22%
1.94%
4.2%
22%
1.99%
4.2%
22%
2.04%
4.2%
22%
2.14%
4.2%
22%
2.20%
4.2%
A specific senior staff member has been granted performance rights and options under the Specific Target share plan (Plan I). The
modified grant date method (AASB 2) is applied to this incentive plan whereby the cost of the plan is determined by the value of the
rights and options at grant date and the probability of specific targets being achieved and vesting occurring. The number of options
granted under the plan is as follows:
Performance Rights
Number
9,045
9,440
9,836
11,406
11,881
Performance Options
Number
97,590
95,294
94,186
102,272
102,272
Grant Date
12-Feb-15
12-Feb-15
12-Feb-15
12-Feb-15
12-Feb-15
Grant Date
12-Feb-15
12-Feb-15
12-Feb-15
12-Feb-15
12-Feb-15
End Performance
Period
31-Dec-15
31-Dec-16
31-Dec-17
31-Dec-18
31-Dec-19
End Performance
Period
31-Dec-15
31-Dec-16
31-Dec-17
31-Dec-18
31-Dec-19
Expiry Date
12-Feb-22
12-Feb-22
12-Feb-22
30-Sep-22
30-Sep-22
Expiry Date
12-Feb-22
12-Feb-22
12-Feb-22
30-Sep-22
30-Sep-22
Fair Value
at Grant Date
$ 5.97
$ 5.72
$ 5.49
$ 5.26
$ 5.05
Fair Value
at Grant Date
$ 0.83
$ 0.85
$ 0.86
$ 0.88
$ 0.88
No performance rights or options were forfeited or expired during the year. As a result of the specific targets being achieved the
performance rights and options relating to the 31 December 2016 performance period have vested since balance date.
The value of the performance rights and options expensed during the year was $170,998, with a cumulative expense being recognised
as at 31 December 2016 of $350,995 (2015: $179,997).
78
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED31 DECEMBER 2016 Plan J: EPS Performance Rights and Options – Key Executives
The Group commenced a new Earnings Per Share (EPS) based performance rights and option compensation scheme for two specific
executive officers in 2015. The fair value of these performance rights and options is calculated on grant date and recognised over the
period to vesting. The vesting of the performance rights and options granted is based on the achievement of specified earnings per
share growth targets and interest cover thresholds. The fair value has been calculated using a binomial option pricing model based on
numerous variables including the following:
Performance Rights
Award date 12 June 2015
Vesting date
Expiry date
Share price at grant date
Expected life
Volatility
Risk free interest rate
Dividend yield
Performance Options
Award date 12 June 2015
Vesting date
Expiry date
Share price at grant date
Exercise price
Expected life
Volatility
Risk free interest rate
Dividend yield
31-Mar-16
12-Jun-22
$ 9.25
0.8 years
24%
1.98%
3.7%
31-Mar-17
12-Jun-22
$ 9.25
1.8 years
24%
1.99%
3.7%
31-Mar-18
12-Jun-22
$ 9.25
2.8 years
24%
2.06%
3.7%
31-Mar-19
30-Sep-22
$ 9.25
3.8 years
24%
2.18%
3.7%
31-Mar-20
30-Sep-22
$ 9.25
4.8 years
24%
2.33%
3.7%
31-Mar-16
12-Jun-22
$ 9.25
$ 9.25
3.9 years
24%
2.19%
3.7%
31-Mar-17
12-Jun-22
$ 9.25
$ 9.25
4.4 years
24%
2.27%
3.7%
31-Mar-18
12-Jun-22
$ 9.25
$ 9.25
4.9 years
24%
2.35%
3.7%
31-Mar-19
30-Sep-22
$ 9.25
$ 9.25
5.5 years
24%
2.46%
3.7%
31-Mar-20
30-Sep-22
$ 9.25
$ 9.25
6.1 years
24%
2.54%
3.7%
Two specific executives have been granted options under the EPS share incentive plan (Plan J). The modified grant date method (AASB
2) is applied to this incentive plan whereby the cost of the plan is determined by the value of the options at grant date and the probability
of the EPS targets being achieved and vesting occurring. The number of options granted under the plan is as follows:
Performance Rights
Number
2,783
5,780
5,995
6,218
6,458
Performance Options
Number
17,605
33,783
32,678
31,645
31,250
Grant Date
12-Jun-15
12-Jun-15
12-Jun-15
12-Jun-15
12-Jun-15
Grant Date
12-Jun-15
12-Jun-15
12-Jun-15
12-Jun-15
12-Jun-15
End
Performance Period
31-Dec-15
31-Dec-16
31-Dec-17
31-Dec-18
31-Dec-19
End
Performance Period
31-Dec-15
31-Dec-16
31-Dec-17
31-Dec-18
31-Dec-19
Expiry Date
12-Jun-22
12-Jun-22
12-Jun-22
30-Sep-22
30-Sep-22
Expiry Date
12-Jun-22
12-Jun-22
12-Jun-22
30-Sep-22
30-Sep-22
Fair Value
at Grant Date
$ 8.98
$ 8.65
$ 8.34
$ 8.04
$ 7.74
Fair Value
at Grant Date
$ 1.42
$ 1.48
$ 1.53
$ 1.58
$ 1.60
No performance rights or options were forfeited or expired during the year. As a result of the specific targets being achieved the
performance rights and options relating to the 31 December 2016 performance period have vested.
The value of the performance rights and options expensed during the year was $126,662, with a cumulative expense being recognised
as at 31 December 2016 of $209,984 (2015: $83,322).
79
ANNUAL REPORT 2016 37 OTHER SHARE BASED PAYMENTS CONTINUED
Plan K: EPS Performance Rights and Options – Key Executives
The Group commenced a new Earnings Per Share (EPS) based performance rights and option compensation scheme for one specific
executive officer in 2016. The fair value of these performance rights and options is calculated on grant date and recognised over the
period to vesting. The vesting of the performance rights and options granted is based on the achievement of specified earnings per
share growth targets and interest cover thresholds. The fair value has been calculated using a binomial option pricing model based on
numerous variables including the following:
Performance Rights
Award date 31 March 2016
Vesting date
Expiry date
Share price at grant date
Expected life
Volatility
Risk free interest rate
Dividend yield
Performance Options
Award date 31 March 2016
Vesting date
Expiry date
Share price at grant date
Exercise price
Expected life
Volatility
Risk free interest rate
Dividend yield
31-Mar-17
31-Mar-24
$ 9.75
1.0 year
27%
1.95%
3.8%
31-Mar-18
31-Mar-24
$ 9.75
2.0 years
27%
1.88%
3.8%
31-Mar-19
31-Mar-24
$ 9.75
3.0 years
27%
1.90%
3.8%
31-Mar-20
31-Mar-24
$ 9.75
4.0 years
27%
1.98%
3.8%
31-Mar-17
31-Mar-24
$ 9.75
$ 10.34
4.5 years
27%
2.03%
3.8%
31-Mar-18
31-Mar-24
$ 9.75
$ 10.34
5.0 years
27%
2.08%
3.8%
31-Mar-19
31-Mar-24
$ 9.75
$ 10.34
5.5 years
27%
2.13%
3.8%
31-Mar-20
31-Mar-24
$ 9.75
$ 10.34
6.0 years
27%
2.18%
3.8%
One specific executive has been granted options under the EPS share incentive plan (Plan K). The modified grant date method (AASB 2)
is applied to this incentive plan whereby the cost of the plan is determined by the value of the options at grant date and the probability of
the EPS targets being achieved and vesting occurring. The number of options granted under the plan is as follows:
Performance Rights
Number
7,987
8,296
8,620
8,960
Performance Options
Number
48,076
46,012
44,910
43,859
Grant Date
31-Mar-16
31-Mar-16
31-Mar-16
31-Mar-16
Grant Date
31-Mar-16
31-Mar-16
31-Mar-16
31-Mar-16
End
Performance Period
31-Dec-16
31-Dec-17
31-Dec-18
31-Dec-19
End
Performance Period
31-Dec-16
31-Dec-17
31-Dec-18
31-Dec-19
Expiry Date
31-Mar-24
31-Mar-24
31-Mar-24
31-Mar-24
Expiry Date
31-Mar-24
31-Mar-24
31-Mar-24
31-Mar-24
Fair Value
at Grant Date
$ 9.39
$ 9.04
$ 8.70
$ 8.37
Fair Value
at Grant Date
$ 1.56
$ 1.63
$ 1.67
$ 1.71
No performance rights or options were forfeited or expired during the year. As a result of the specific targets being achieved the
performance rights and options relating to the 31 December 2016 performance period have vested.
The value of the performance rights and options expensed during the year was $214,448, with a cumulative expense being recognised as
at 31 December 2016 of $214,448 (2015: $Nil).
80
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED31 DECEMBER 2016 38 RELATED PARTIES
Key management personnel
Other information on key management personnel has been disclosed in the Directors’ Report.
Remuneration and retirement benefits
Information on the remuneration of key individual management personnel has been disclosed in the Remuneration Report included in
the Directors’ Report.
Other transactions of directors and director related entities
The aggregate amount of “Other transactions” with key management personnel are as follows:
(i)
Mr N G Politis is a director and shareholder of a number of companies involved in the motor industry with whom the consolidated
entity transacts business. These transactions, sales of $462,274 (2015: $466,281) and purchases of $520,476 (2015: $341,762)
during the last 12 months, are primarily the sale and purchase of spare parts and accessories and are carried out under terms and
conditions no more favourable than those which it is reasonable to expect would have applied if the transactions were at arm’s length.
(ii) Mr M Birrell is a director and owner of a number of properties leased by subsidaries of A. P. Eagers. The lease transactions of
$1,956,301 during the last 6 months since his appointment to the board are carried out under terms and conditions no more
favourable than those which it is reasonable to expect would have applied if the transactions were at arm’s length.
Mr M Birrell also has a consultancy arrangement with AP Eagers whereby he is paid a consultancy fee in consideration for provision
of professional services provided for AP Eagers’ Victorian and Tasmanian businesses. There were nil transactions during the last 6
months since his appointment to the board.
Finally, Mr M Birrell was a party to the Birrell Motors Group business acquisition which is subject to a contingent consideration
arrangement whereby an additional amount is payable at 31 December 2019 if a specified performance target is met. The
contingent consideration has been recognised as a financial liability as at 31 December 2016, refer to Note 26.
(iii) Controlled entities may, from time to time, sell motor vehicles, parts and servicing of motor vehicles for domestic use to directors
of entities in the consolidated entity or their director-related entities within a normal employee relationship on terms and conditions
no more favourable than those which it is reasonable to expect would have been adopted if dealing with the directors or their
director-related entities at arm’s length in the same circumstances.
Wholly-owned group
The parent entity of the wholly-owned group is A.P. Eagers Limited. Information relating to the wholly-owned group is set out in Note 31.
81
ANNUAL REPORT 2016
39 EARNINGS PER SHARE
(a) Basic earnings per share
CONSOLIDATED
2016
Cents
2015
Cents
Earnings attributable to the ordinary equity holders of the Company
55.4
47.6
(b) Diluted earnings per share
Earnings attributable to the ordinary equity holders of the Company
54.0
46.1
(c) Reconciliation of earnings used in calculating earnings per share
Basic earnings per share
Profit attributable to the ordinary equity holders of the Company used in calculating basic earnings per share:
Profit for the year
Less: attributable to non-controlling interest
Profit attributable to the ordinary equity holders of the Company used in calculating basic earnings per share
CONSOLIDATED
2016
$’000
2015
$’000
105,526
(1,542)
103,984
87,015
(798)
86,217
Diluted earnings per share
Profit for the year less attributable to non-controlling interest
Profit attributable to the ordinary equity holders of the Company used in calculating diluted earnings per share
103,984
103,984
86,217
86,217
Weighted average number of ordinary shares outstanding during the year
Shares deemed to be issued for no consideration in respect of employee options (1)
Weighted average number of ordinary shares outstanding during the year used in the calculation of
diluted earnings per share
187,811,094
4,747,506
180,997,843
6,214,054
192,558,600
187,211,897
(1) 134,781 performance options representing potential ordinary shares are anti-dilutive and are therefore excluded from the weighted average number of
ordinary shares for the purposes of diluted earnings per share.
82
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED31 DECEMBER 2016 40 RECONCILIATION OF NET PROFIT AFTER TAX TO THE NET CASH INFLOWS FROM OPERATIONS
CONSOLIDATED
Net profit after tax
Depreciation and amortisation
Impairment of goodwill
Net (gain)/loss on sale of available-for-sale financial assets
Share of profits of associate
Dividends from investments
Gain / (Loss) on sale of property,plant & equipment
Employee share scheme expense
Non controlling interest adjustments
Profit on sale of business
Property receivable and deposits
(Gain) / Impairment to property revaluation (through P&L)
(Increase)/decrease in assets -
Receivables
Inventories
Prepayments
Increase/(decrease) in liabilities -
Creditors (including bailment finance)
Provisions
Taxes payable
Notes
5
14
2016
$’000
105,526
13,993
-
(1,955)
(191)
191
(1,136)
2,966
(535)
-
22,547
(1,235)
(39,630)
(94,844)
(587)
104,079
5,738
(4,213)
2015
$’000
87,015
13,216
5,527
(3,490)
(164)
164
(2,886)
3,018
(1,406)
(50)
28,403
2,083
(30,412)
(57,327)
(5,883)
48,263
4,997
(6,515)
Net cash inflow from operating activities
110,714
84,553
41 NON-CASH TRANSACTIONS
In 2015, the Group entered into unconditional contracts for the sale of 80 McLachlan Street, Fortitude Valley and a parcel of land in
Newstead. As a result a combined profit of $3.010 million was recognised in that year and was included within the amount disclosed
in Note 4. Consideration for the sales totalling $32.013 million was realised in full in 2016.
42 INVESTMENTS IN ASSOCIATES
(a) Carrying amounts
Investments in associate are accounted for in the consolidated financial statements using the equity method of accounting. Information
relating to the associate is set out below:
Name of company
Unlisted securities
Norna Limited (formerly MTQ Insurance Services Limited)
DealerMotive Ltd
Carzapp Pty Ltd
OWNERSHIP INTEREST
CONSOLIDATED
2016
%
20.65
25.76
10.00
56.41
2015
%
20.65
-
-
2016
$’000
1,620
9,973
300
2015
$’000
1,620
-
-
20.65
11,893
1,620
83
ANNUAL REPORT 2016 42 INVESTMENTS IN ASSOCIATES CONTINUED
Norna Limited (formerly MTQ Insurance Servers Limited)
In 2014 MTQ Insurance Services Limited changed its name to Norna Limited. On 29 August 2014 MTA Insurance Limited (a wholly
owned subsidiary of Norna Limited) was sold to AAI Limited with settlement to take place in instalments, the final of which is expected
to be realised in 2017. Once the sale is completed Norna Limited will be liquidated.
AP Eagers Limited will remain a shareholder in Norna Limited with a 20.65% interest (2015: 20.65%) and will continue to equity account
the investment in the associate which has been equity accounted from 1 January 2006 (refer Note 15), until the final distributions are
received and Norna Limited is liquidated.
Norna Limited is incorporated in Australia. Its principal activities for the period up to the sale remained the sale of consumer credit
and insurance products, as well as undertaking investment activities. Since the sale, the entity has ceased operations with the only
transactions being related to holding costs and interest until the final terms of the sale agreement are met and the entity is liquidated.
Dealermotive Limited
In 2016, AP Eagers transferred its shares in One Way Traffic Pty Ltd (Carsguide) and Auto Trader Australia Pty Ltd (Auto Trader) to
DealerMotive Limited (DealerMotive) under a scheme of arrangement, in return for an equal dollar value of shares in DealerMotive. AP
Eagers also subscribed to shares in DealerMotive during the year as part of a capital raising. AP Eagers holds a 25.8% shareholding in
DealerMotive as at 31 December 2016.
DealerMotive Limited is incorporated in Australia. Its principal activities for the period is holding a 30% investment in Cox Automotive
Australia, a subsidiary of Cox Automotive. Cox Automotive Australia controls and operates Manheim Australia, Dealer Solutions and
One Way Traffic (Carsguide) businesses and owns the Auto Traders brand.
(b) Movement in the carrying amounts of investment in associate
Carrying amount at the beginning of the financial year
Equity share of profit from ordinary activities after income tax
Dividends received during the year
Equity accounted investments acquired
Carrying amount at the end of the financial year
(c) Summarised financial information of associates
The aggregate profits, assets and liabilities of associate are:
Revenue
Profits from ordinary activities after income tax expense
Assets
Liabilities
(d) Share of associate profit
CONSOLIDATED
2016
$’000
1,620
191
(191)
10,273
11,893
112
925
50,537
57
2015
$’000
1,620
164
(164)
-
1,620
188
712
8,107
128
Based on the last published results for the 12 months to 30 June 2016 plus unaudited results up to
31 December 2016.
Profit from ordinary activities after income tax
191
164
(e) Dividends received from associates
Dividends received from associates
(f) Reporting date of associates
The associates reporting dates are 30 June annually.
84
191
164
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS CONTINUED31 DECEMBER 2016 DIRECTORS’ DECLARATION
The Directors declare that :
(a) in the directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable;
(b) in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001,
including compliance with accounting standards and giving a true and fair view of the financial position and performance of the
consolidated entity; and
(c) in the director’s opinion, the attached financial statements are in compliance with International Financial Reporting Standards as
stated in Note 1(a) to the financial statements; and
(d) the directors have been given the declarations required by s.295A of the Corporations Act 2001
At the date of this declaration, the company is within the class of companies affected by ASIC Class Order 98/1418. The nature of the
deed of cross guarantee is such that each company which is party to the deed guarantees to each creditor payment in full of any debt in
accordance with the deed of cross guarantee.
In the directors’ opinion, there are reasonable grounds to believe that the company and the companies to which the ASIC Class Order
applies, as detailed in Note 31 to the financial statements will, as a group, be able to meet any obligations or liabilities to which they are,
or may become, subject by virtue of the deed of cross guarantee.
Signed in accordance with a resolution of the Directors made pursuant to s.295(5) of the Corporations Act 2001.
On behalf of the Directors
M A Ward
Director
Brisbane,
22 February 2017
85
ANNUAL REPORT 2016 INDEPENDENT AUDIT REPORT
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Level 25 and 26, Riverside Centre
123 Eagle Street
Brisbane, QLD, 4000
Australia
Phone: +61 7 3308 7000
www.deloitte.com.au
Independent Auditor’s Report
to the Members of A.P. Eagers Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of A.P. Eagers Limited (the Company) and its subsidiaries (the Group),
which comprises the consolidated statement of financial position as at 31 December 2016, the consolidated
statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity
and the consolidated statement of cash flows for the year then ended, and notes to the financial statements,
including a summary of significant accounting policies, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act
2001, including:
(i)
giving a true and fair view of the Group’s financial position as at 31 December 2016 and of its financial
performance for the year then ended; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
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 are independent of the Group in accordance with the auditor independence requirements of
the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards
Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the
Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given
to the directors of the Company, would be in the same terms if given to the directors as at the time of this
auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
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 of the current period. These 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.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
86
Key Audit Matter
Business Acquisitions
During the financial year ended 31 December
2016 the Group made a number of acquisitions
as disclosed in note 31. The most significant
acquisition during the period was the Birrell
Motor Group.
Accounting for acquisitions is complex and
involves a number of significant judgements and
estimates as disclosed in note 2a (vii). The key
areas of significant judgement and estimation in
relation to the Birrell transaction were the:
determination of the fair value of the
contingent consideration, and
accordingly the total consideration, for
the transaction; and
identification and measurement of the
fair value of assets and liabilities
acquired.
Recoverability of goodwill
As detailed in note 17, the Group has
recognised goodwill of $292.2 million at 31
December 2016 as a result of historic
acquisitions over a number of years.
As set out in note 2a (i), the director’s
assessment of the recoverability of goodwill
requires the exercise of significant judgement,
in particular in estimating future growth rates,
discount rates and the expected cash flows of
businesses (cash generating units (CGUs)) to
which the goodwill has been allocated.
Estimating the cash flows requires the exercise
of judgement as to the likely impact of:
competitive pressures in specific
markets; and
potential changes resulting from the
regulatory review of finance and
insurance practices across the
automotive industry.
We have focused on CGUs that are most
sensitive to these factors relative to the carrying
value of goodwill.
How the scope of our audit responded to the Key
Audit Matter
Our procedures included, but were not limited to the
following:
Reading the purchase and sale agreements to
understand the terms and conditions of the
acquisitions and evaluating management’s
application of the relevant accounting
standards;
Assessing the estimation of the contingent
consideration by challenging the key
assumptions including discount rate and
probability of achievement of future profit
targets. This included comparing the actual
performance since acquisition against the
forecast performance;
Challenging the methodology and assumptions
utilised to identify and determine the fair
value of the assets and liabilities acquired;
and
Assessing the adequacy of the Group’s
disclosures of the acquisitions.
Our procedures, performed in conjunction with our
valuation specialists included, but were not limited to
the following:
Critically evaluating the Group’s categorisation
of CGUs and the allocation of goodwill to the
carrying value of CGUs based on our
understanding of the Group’s business. This
evaluation included performing an analysis of
the Group’s internal reporting and consultation
with our accounting technical specialists;
Evaluating management’s ability to accurately
forecast cash flows by assessing the precision
of the prior year forecasts again actual
outcomes;
With the assistance of Deloitte valuation
specialists, challenging the following:
o
o
o
o
Comparing the discount rate utilised
by management to an independently
calculated discount rate;
Comparing growth rates with 3rd party
data for the motor industry
Comparing the Group’s forecast cash
flows to the board approved budget;
and
Performing sensitivity analysis on the
growth and discount rates.
Evaluating the adequacy of the related
disclosures in the financial report.
87
ANNUAL REPORT 2016 INDEPENDENT AUDIT REPORT CONTINUED
Key Audit Matter
Recoverable amount of used and
demonstrator vehicles inventory
As disclosed in note 10 the Group has
recognised provisions against the cost of its new
and used motor vehicle and truck inventory of
$14.6 million.
As disclosed in note 2a (v) and (vi) the
estimation of net realisable value requires the
Directors to make certain judgements and
estimates based on the age, condition, brand of
the vehicle and historic sales outcomes.
How the scope of our audit responded to the Key
Audit Matter
Our procedures included, but were not limited to:
Developing an understanding of
management’s processes and judgements
applied in estimating the net realisable value
of demonstrator and used vehicles and trucks;
Validating the aging and cost, on a sample
basis, of used, demonstrator vehicle and truck
inventory at year-end as key inputs into
management’s calculation of the write down
provisions;
Evaluating management’s judgements in
estimating net realisable value by:
comparing the carrying value of
vehicles and trucks to post year-end
sales; and/or
comparing the carrying value of
vehicle and truck inventory to
external third party valuation data;
and/or
comparison to historical sales data.
o
o
o
Evaluating the adequacy of the related
disclosures in the financial report.
Other Information
The Directors are responsible for the other information. The other information comprises the Directors’ Report
which we obtained prior to the date of this auditor’s report, the other information also includes the following
documents which will be included in the annual report (but does not include the financial report and our
auditor’s report thereon) the company profile and A.P. Eagers foundation report, which is expected to be made
available to us after that date.
Our opinion on the financial report does not cover the other information and accordingly we do not and will
not express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information identified
above and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are required
to report that fact. We have nothing to report in this regard.
When we read the company profile and A.P. Eagers foundation report 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.
Directors’ Responsibilities 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.
88
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 has 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 this
financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement
and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report
to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the Group to cease to continue as a going
concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events in a
manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial report. We are responsible
for the direction, supervision and performance of the Group audit. We remain solely responsible for
our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most significance
in the audit of the financial report of the current period and are therefore the key audit matters. We describe
these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or
89
ANNUAL REPORT 2016 INDEPENDENT AUDIT REPORT CONTINUED
when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 11 to 18 of the directors’ report for the year ended
31 December 2016.
In our opinion, the Remuneration Report of A.P. Eagers Limited, for the year ended 31 December 2016
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.
DELOITTE TOUCHE TOHMATSU
Stephen Tarling
Partner
Chartered Accountants
Brisbane 22 February 2017
90
SHAREHOLDER INFORMATION
AS AT 15 MARCH 2017
EQUITY SECURITIES
The company’s quoted securities consist of 190,719,109 ordinary fully paid shares (ASX: APE).
TOP 20 HOLDERS OF ORDINARY SHARES
WFM Motors Pty Ltd
Patterson Cheney Investments Pty Ltd
Jove Pty Ltd
Alan Piper Investments (No 1) Pty Ltd
HSBC Custody Nominees (Australia) Limited
Milton Corporation Limited
Argo Investments Limited
Martin Andrew Ward
Citicorp Nominees Pty Ltd
Berne No 132 Nominees Pty Ltd <315738 A/C>
Birrell Investments Pty Ltd
RBC Investor Services Australia Nominees Pty Limited
Diane Colman
UBS Nominees Pty Ltd
National Nominees Limited
J P Morgan Nominees Australia Limited
Hegford Pty Ltd
ANZ Trustees Limited
Peter Gary Robinson
Trevor Reading
No. of Shares
% of Issued Shares
68,540,285
12,591,761
10,560,000
6,406,250
6,324,637
5,833,107
4,432,620
4,286,014
2,473,106
2,444,101
2,000,000
1,909,357
1,881,710
1,844,478
1,570,567
1,261,670
1,246,063
1,181,920
1,116,455
1,107,550
35.94
6.60
5.54
3.36
3.32
3.06
2.32
2.25
1.30
1.28
1.05
1.00
0.99
0.97
0.82
0.66
0.65
0.62
0.59
0.58
91
ANNUAL REPORT 2016 SHAREHOLDER INFORMATION
AS AT 15 MARCH 2017 CONTINUED
Distribution of Shareholders
Range
1
1,001
5,001
10,001
-
-
-
-
1,000
5,000
10,000
100,000
100,001 and over
No. of Shareholders
1,980
1,780
564
808
103
5,235
126 shareholders hold less than a marketable parcel of 55 shares at $9.21 per share.
Substantial Shareholders*
Notice Date
No. of Shares
WFM Motors Pty Ltd
17 October 2012
62,817,353
Patterson Cheney Investments Pty Ltd
2 May 2016
12,591,761
Jove Pty Ltd
11 July 2012
10,193,381
* As disclosed in substantial holding notices received by the company.
Performance Rights and Options
576,265 unvested performance rights, 3,559,755 unvested options and 4,945,461 vested options are on issue to fifty-five holders
pursuant to the Executive Incentive Plan. Vesting is subject to the achievement of pre-determined performance hurdles, as described in
the Directors’ Report. The rights and options do not have any dividend or voting rights.
On-market Buy-back
The company does not have a current on-market share buy-back.
Voting Rights
The following voting rights attach to ordinary shares, subject to the company’s constitution:
> A shareholder entitled to attend and vote at a meeting may do so in person or by proxy, attorney or corporate representative.
> On a show of hands, each shareholder entitled to vote has one vote.
> On a poll, each shareholder entitled to vote has one vote for each fully paid share and a fraction for each partly paid share.
>
If a share is held jointly with two or more holders in attendance, only the holder whose name appears first in the register may vote.
Corporate Governance Statement
The company’s Corporate Governance Statement is located on the company’s website at
http://www.apeagers.com.au/shareholders/corporate-governance/.
92
CORPORATE DIRECTORY
A.P. EAGERS LIMITED
ABN 87 009 680 013
INCORPORATION
Incorporated in Queensland on 17 April 1957
REGISTERED OFFICE
5 Edmund Street
Newstead Qld 4006
POSTAL ADDRESS
PO Box 199
Fortitude Valley Qld 4006
TELEPHONE
(07) 3608 7100
FACSIMILE
(07) 3608 7111
WEBSITE
www.apeagers.com.au
AUDITOR
Deloitte Touché Tohmatsu
Grosvenor Place
225 George Street
Sydney NSW 2000
SHARE REGISTRY
Computershare Investor Services Pty Limited
117 Victoria Street
West End Qld 4101
Enquiries within Australia: 1300 552 270
Enquiries outside Australia: +61 3 9415 4000
BOARD OF DIRECTORS
Tim Crommelin, Chairman, Non-executive Director
Martin Ward, Managing Director & Chief Executive Officer
Nick Politis, Non-executive Director
Dan Ryan, Non-executive Director
David Cowper, Non-executive Director
Marcus Birrell, Non-executive Director
Sophie Moore, Director & Chief Financial Officer
COMPANY SECRETARY
Denis Stark, General Counsel & Company Secretary
CONTROLLED ENTITIES
ABN 47 008 278 171
Adtrans Australia Pty Ltd
ABN 83 007 866 917
Adtrans Automotive Group Pty Ltd
ABN 85 056 340 928
Adtrans Corporate Pty Ltd
ABN 28 008 129 477
Adtrans Group Ltd
ABN 51 127 369 260
Adtrans Hino Pty Ltd
ABN 17 106 764 327
Adtrans Truck Centre Pty Ltd
ABN 45 151 699 651
Adtrans Trucks Adelaide Pty Ltd
ABN 71 008 264 935
Adtrans Trucks Pty Ltd
ABN 11 074 561 514
Adtrans Used Pty Ltd
ABN 72 612 630 618
Adverpro Pty Ltd
ACN
612 890 883
AP Eagers Foundation Ltd
ABN 43 010 602 383
A.P. Ford Pty Ltd
ABN 53 010 030 994
A.P. Group Ltd
ABN 76 010 579 996
A.P. Motors Pty Ltd
ABN 95 010 585 234
A.P. Motors (No.1) Pty Ltd
ABN 97 010 585 243
A.P. Motors (No.2) Pty Ltd
ABN 99 010 585 252
A.P. Motors (No.3) Pty Ltd
ABN 30 616 472 729
AP Queensland (No.1) Pty Ltd
ABN 12 600 279 927
AP Townsville Pty Ltd
ABN 76 009 677 678
Associated Finance Pty Ltd
ABN 89 009 662 202
Austral Pty Ltd
ABN 23 605 815 021
Auto Ad Pty Ltd
ABN 63 601 452 199
BASW Pty Ltd
ABN 75 000 388 054
Bill Buckle Autos Pty Ltd
ABN 44 062 951 106
Bill Buckle Holdings Pty Ltd
ABN 52 000 871 910
Bill Buckle Leasing Pty Ltd
ABN 50 135 015 191
Black Auto CQ Pty Ltd
ABN 31 099 480 903
Boonarga Welding Pty Ltd
ABN 35 608 791 911
Carzoos Pty Ltd
ABN 20 600 297 783
CH Auto Pty Ltd
ABN 14 067 985 602
City Automotive Group Pty Ltd
ABN 64 057 283 253
Crampton Automotive Pty Ltd
ABN 20 009 658 306
E.G. Eager & Son Pty Ltd
ABN 65 009 721 288
Eagers Finance Pty Ltd
ABN 58 009 727 753
Eagers MD Pty Ltd
ABN 98 009 723 488
Eagers Nominees Pty Ltd
ABN 91 009 662 211
Eagers Retail Pty Ltd
ABN 73 008 123 993
Graham Cornes Motors Pty Ltd
ABN 50 169 210 173
IB MD Pty Ltd
ABN 90 169 209 607
IB Motors Pty Ltd
ABN 51 010 131 361
Leaseline & General Finance Pty Ltd
MB Vic Pty Ltd
ABN 12 608 791 877
Melbourne Truck and Bus Centre Pty Ltd ABN 42 143 202 699
ABN 85 164 997 228
Motors Group (Glen Waverley) Pty Ltd
ABN 69 608 791 680
Motors Tas Pty Ltd
ABN 52 009 681 556
Nundah Motors Pty Ltd
ABN 43 160 315 579
Port City Autos Pty Ltd
ABN 13 078 207 333
PPT Holdings No 1 Pty Ltd
ABN 13 078 207 397
PPT Holdings No 2 Pty Ltd
ABN 30 078 207 468
PPT Holdings No 3 Pty Ltd
PPT Investments Pty Ltd
ABN 80 000 868 860
Precision Automotive Technology Pty Ltd ABN 59 163 233 207
ABN 21 600 279 589
South West Queensland Motors Pty Ltd
ABN 19 008 014 720
Stillwell Trucks Pty Ltd
ABN 91 131 269 184
Western Equipment Rentals Pty Ltd
ABN 13 116 437 702
Whitehorse Trucks Pty Ltd
ABN 99 608 791 804
WS Motors Pty Ltd
93
ANNUAL REPORT 2016 2
2
0
0
1
1
6
6
A
A
N
N
N
N
U
U
A
A
L
L
R
R
E
E
P
P
O
O
R
R
T
T