Eagers Automotive Limited Annual Report 2022

Plain-text annual report

Eagers Automotive LimitedABN 87 009 680 013Annual Report2022Eagers Automotive LimitedAnnual Report 2022Eagers Automotive Limited | ABN 87 009 680 013 5 Year Financial Summary For the year ended 31 December 2022 Year ended 31 December OPERATING RESULTS From continuing operations Revenue EBITDAI Depreciation and amortisation Impairment and property revaluations through profit and loss EBIT Finance costs Finance income Profit before tax Income tax expense Profit from continuing operations Group trading results Loss from discontinued operations 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 Financial assets at fair value through OCI Other non-current assets Property assets held for resale Other current assets Total assets Other statistics Shares on issue – ‘000 Number of shareholders Total Debt1 Net debt (total debt less bailment finance less cash) – $’000 2022 $’000 2021 $’000 2020 $’000 RESTATED 2019 $’000 2018 $’000 8,541,502 652,410 (116,603) (16,727) 519,080 (88,245) 11,387 442,222 (117,882) 324,340 8,663,462 651,642 (120,428) (5,156) 526,058 (79,619) 10,368 456,807 (118,070) 338,737 8,749,675 625,447 (166,257) (90,700) 368,490 (88,384) – 280,106 (88,575) 191,531 5,816,979 342,407 (95,217) (244,925) 2,265 (65,569) – (63,304) (17,176) (80,480) 4,112,802 215,283 (46,137) – 169,146 (40,744) – 128,402 (30,906) 97,496 – (16,173) 308,167 (8,000) (12,913) 317,824 (35,320) (8,921) 147,290 (59,113) (2,787) (142,380) – (1,619) 95,877 121.3 71.0 100 2022 $’000 1,154,572 (606,122) 655,796 37,384 1,241,630 1,261,740 1,616,867 2,878,607 4,120,237 698,393 855,022 12,118 979,385 – 1,575,319 4,120,237 255,398 11,439 1,316,234 253,452 125.2 70.9 100 2021 $’000 1,173,069 (617,978) 510,725 21,635 1,087,451 1,300,548 1,342,946 2,643,494 3,730,945 514,374 775,295 577 1,067,324 18,670 1,354,705 3,730,945 256,933 10,767 1,056,611 128,409 57.6 25.0 100 (67.4) 25.3 100 2020 $’000 RESTATED 2019 $’000 1,173,069 (580,200) 317,848 13,860 924,577 1,443,313 1,665,761 3,109,074 4,033,651 494,266 785,574 2,366 1,188,502 – 1,562,943 4,033,651 256,933 11,159 1,233,079 129,263 1,173,069 (560,126) 199,463 9,423 821,829 1,490,490 2,545,827 4,036,317 4,858,146 456,058 773,174 2,366 1,245,734 – 2,380,814 4,858,146 256,933 9,955 1,744,826 314,867 50.1 36.5 100 2018 $’000 371,405 (124,306) 380,558 8,002 635,659 544,994 818,696 1,363,690 1,999,349 388,407 313,325 149,774 269,905 – 877,938 1,999,349 191,309 5,038 899,405 310,264 58.6 32.8 Gearing ratio (debt/debt plus equity) – % Gearing ratio (net debt/net debt plus total equity) – % 51.2 16.8 49.3 10.6 57.1 12.3 68.0 27.7 1 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 2022 Highlights Chairman’s Letter Chief Executive Officer’s Message Company Profile Where We Operate Next100 Strategy Sustainability Report Board of Directors Executive Management Directors’ Report Auditor’s Declaration of Independence Financial Report 2 3 4 6 7 8 10 30 31 32 52 53 138 Controlled Entities 142 144 Corporate Directory Shareholder Information Annual General Meeting Eagers Automotive Limited Annual General Meeting will be held at 9am (QLD time) on Wednesday, 24 May 2023. It will be held as a “hybrid” meeting, giving shareholders an opportunity to attend either online or in person at Morgans Stockbroking, Level 29, 123 Eagle Street, Brisbane, Queensland. Financial Calendar 2022 Financial Year End Full Year Results Announcement Final Dividend Announcement Final Dividend Record Date Final Dividend Payment Date Annual General Meeting Half Year End Half Year Results Announcement* Interim Dividend Announcement* Interim Dividend Record Date* Interim Dividend Payment Date* 2023 Financial Year End 31 December 2022 23 February 2023 23 February 2023 16 March 2023 31 March 2023 24 May 2023 30 June 2023 August 2023 August 2023 September 2023 October 2023 31 December 2023 * Estimate only, subject to any changes notified to the ASX. 1 Eagers Automotive Limited | ANNUAL REPORT 2022 2022 Highlights Statutory Profit Before Tax Record Underlying Operating Profit Before Tax1 Record Underlying Return on Sales $442.2m $405.2m 4.7% Strong Available Liquidity2 Owned Property Portfolio Record Total Ordinary Dividend $631.1m $607.6m 71.0cps 1. Underlying operating results refers to continuing operations outlined and reconciled to statutory results on slides 32 (FY22) and 33 (comparative financial information) of the Investor Presentation released to the ASX on 23 February 2023. Underlying operating figures are non-financial measures and have not been subject to audit by the Company’s external auditors. 2. Defined as Cash and Undrawn Lines of Credit. 2 Chairman’s Letter “ Your Company delivered a record underlying financial performance driven by a strong return on sales which has ultimately enabled the Board to declare a record dividend for our shareholders.” Dear Shareholders 2022 was a year of impressive financial and operational performance and continued strategic execution for Eagers Automotive. Your Company delivered a record underlying financial performance driven by a strong return on sales which has ultimately enabled the Board to declare a record dividend for our shareholders. Statutory profit before tax was $442.2 million for the year compared to $456.8 million in 2021. Underlying profit before tax was a record $405.2 million, an increase from $401.8 million in 2021. We remain in an excellent financial position, underpinned by a substantial property portfolio and asset base, with available liquidity of $631.1 million at 31 December 2022 providing the capability and flexibility to invest in organic growth initiatives and acquisition opportunities while being active in capital management programs. This will allow us to build on our industry leading market position and continue to create value for our shareholders. Once again, we are pleased to be able to reward shareholders, with a record fully franked final dividend for 2022 of 49.0 cents per share, which was paid on 31 March 2023. The final dividend combined with our ordinary interim dividend takes total dividends for the full year to a record 71.0 cents per share, versus 62.5 cents per share in 2021 (excluding special dividends). This record final and full year dividend underlines the confidence your Board has in our business and its outlook for 2023 and beyond. The record performance and shareholder returns are testament to the leadership of our Chief Executive Officer Keith Thornton and the rest of the management team. Two years since his appointment, and having navigated some formidable challenges including a global pandemic, we are delighted with Keith’s leadership of the Company and our progress following the succession plan implemented in 2021. Looking forward, we remain committed to delivering earnings growth and executing on key strategic and operational initiatives. We expect to continue to deliver top line revenue growth associated with the investments and new strategic partnerships established in 2022, while exploring accretive new opportunities for growth, including the New Energy Vehicle market. Pleasingly, we continue to advance Environmental, Social and Governance (ESG) initiatives and I encourage you to read our second annual Sustainability Report. We will continue to focus on the three core pillars of our sustainability strategy – People, the Planet and our Performance and implementation of ESG initiatives that support our overarching corporate strategy and take into account the environmental, social and governance issues of most importance and relevance to our company. On behalf of the Board, I would like to extend my thanks to Keith and the management team for their leadership and guidance. A further thank you to all our team members – these record results are not possible without your passion, diligent execution, focus and commitment. I would also like to acknowledge my fellow Directors for their counsel and valuable input to the Board throughout the year. In conclusion, I would like to thank our shareholders for their continued support. I am confident that with our strong foundation we are well positioned to capitalise on growth opportunities consistent with our strategy, and Eagers will continue to be a leader in the industry and deliver strong returns for our shareholders for many years to come. Thank you Tim Crommelin Chairman 3 Chief Executive Officer’s Message “ 2022 was a rewarding year for Eagers Automotive. Our balance sheet and financial position remain very strong, with significant available liquidity, providing the capacity and flexibility to support disciplined reinvestment.” Dear Shareholders I am delighted to report on a year of strong financial performance and strategic progress at Eagers Automotive, which culminated in the team delivering a record underlying profit and a record dividend for the financial year ended 31 December 2022. Operating Environment Consistent with the broader economy, the business was largely able to move on from the disruption experienced across the retail sector in 2020 and 2021 during the height of the global pandemic. While there were some residual challenges from the pandemic, most specifically related to supply and logistics and labour absenteeism in the first half of 2022, the market dynamics for our industry remained favourable allowing the company to leverage the strength of the operating platform built in recent years. Financial Performance Eagers Automotive delivered another very successful financial performance in 2022 with records achieved across a number of key metrics. Overall demand for new and pre-owned vehicles strengthened on 2021 levels, despite interest rate rises and ongoing supply chain delays. New car orders continued to outstrip deliveries in 2022 leading to a record order bank at the year’s end, with an increase of 74.4% since December 2021. While consolidated revenue from continuing operations was marginally down to $8.5 billion, largely reflecting the divestment of Bill Buckle Auto Group in September 2022, we delivered a record underlying operating profit before tax of $405.2 million, up from $401.8 million in the prior year. On a statutory basis, our profit before tax was $442.2 million, which equated to a statutory profit after tax of $324.3 million. Strong cost management despite the high inflationary environment, aided by a reset cost base and strong focus on efficiency improvements, underpinned our sustainable strong return on sales margin during 2022. We continued to grow our property portfolio in 2022 ending the year with $607.6 million of land and buildings. This continued investment in strategic assets combined with $631.1 million of available liquidity as at 31 December 2022 underpins the strength of the company’s financial position. In reflecting the strength of our balance sheet and the confidence in our outlook the Board approved a record, fully franked, ordinary dividend of 71.0 cents per share in 2022, up 13.6% on 2021. 4 Eagers Automotive Limited | ANNUAL REPORT 2022Strategic Progress Our financial performance in 2022 was underpinned by our relentless focus on executing our Next100 strategy which will support our growth ambitions for 2023 and beyond. We expanded our national footprint through the acquisition of multi-franchised dealership groups in the ACT and South Australia. The ACT business includes a diverse portfolio of strong performing brands which account for approximately 30% of all new vehicles sold in the region. The acquisition in Adelaide added further scale and complementary brands to our existing South Australian operations. Both transactions included the acquisition of associated property holdings, consistent with our long-term property strategy. During 2022 we delivered a key component of our Automall strategy, leading the transformation of automotive retail with the launch of our innovative new retail format Automall West at Indooroopilly Shopping Centre in Brisbane. In addition, we made significant progress in growing Australia’s largest national fixed price pre-owned automotive business, easyauto123. This business delivered revenue and volume growth in 2022 of 25% and 20.3% respectively, whilst also delivering a profitable return in a highly competitive market. The strategic partnerships that we established with existing OEMs, as well as new market entrants, ensures Eagers Automotive is uniquely placed to deliver top line revenue growth and play a leading role in the industry transition to new energy and low emission vehicles in the immediate future. Outlook We have commenced 2023 with a robust foundation for the year ahead. We continue to closely monitor the macroeconomic environment, however we have a record order book with a significant run-off period and demand remains strong relative to historical levels. When combined with our balance sheet strength we are extremely well positioned for the year ahead. We continue to manage costs closely, driving productivity improvements across the business through our proprietary technology initiatives and leveraging our scale advantages to drive sustainable, strong return on sales. Strategic acquisitions, new partnerships and greenfield opportunities established in 2022 will provide the platform for material top line revenue growth in 2023 and beyond. The generational shift towards a lower emission future creates a unique opportunity for Eagers Automotive to play a leading role in the transition to new energy and low emission vehicles by leveraging our scale and expertise and partnering with existing OEMs and new market entrants. Acknowledgments I would like to thank our customers for their ongoing support. Our 2022 results reinforce the enormous trust our customers have in us. We understand that all customers make conscious decisions on where to direct their business and we continue to work hard to win and retain our customers. It is our great privilege to be able to provide products and services to each and every customer we serve. I would also like to recognise and thank all of our great team members across Australia and New Zealand who have worked tirelessly to deliver this record result for 2022. Our team continues to focus on our customers and key stakeholders to ensure we meet and exceed their expectations. To each of our OEM partners, we are proud to represent your brand. Our position as your retail partner is a privilege and responsibility we take very seriously. We will continue to focus on being a preferred partner for your business. To our other suppliers and partners including financiers, landlords and suppliers, your ongoing support and partnership are fundamental to our continued success. Thank you. Finally, thank you to each of our shareholders, large and small, for your ongoing support and commitment to Eagers Automotive. We are very excited for what the future holds. Yours faithfully Keith Thornton Chief Executive Officer 5 Company Profile About us Eagers Automotive Limited is the leading automotive retail group in Australia and New Zealand, with a long and proud history of 110 years. Our name was changed to Eagers Automotive Limited from A.P. Eagers Limited in 2020 following our acquisition of the listed Automotive Holdings Group Limited (AHG). This new name better reflects our position in the automotive industry and recent growth, whilst also maintaining a connection to our foundation. We are a pure automotive retail group representing a diversified portfolio of automotive brands across Australia and New Zealand. 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. Our operations are typically provided through strategically clustered dealerships, many of which are situated on properties owned by us in high profile, main road locations, with the balance leased by us. Our main operations are located in Brisbane, regional Queensland, Adelaide, Darwin, Melbourne, Perth, Sydney, the Newcastle/Hunter Valley region of New South Wales, ACT, Tasmania and Auckland. Dividends and EPS Growth We have paid a dividend to our shareholders every year since we listed on the Australian Securities Exchange in 1957. We have a track record of delivering Earnings Per Share (EPS) growth from acquisitions. 6 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 one of our wholly-owned subsidiaries. After establishing the first motor vehicle assembly plant in Queensland in 1922, we 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 followed. Our acquisition of AHG in 2019 cemented our position as the leading automotive retail group in Australia and New Zealand. Growth Our sales revenue from continuing operations, which excludes operations during the period either divested or held for sale, has increased from $500 million in 2000 to $8.54 billion in 2022. Our operations expanded into the Northern Territory with the acquisition of Bridge Toyota in 2005. In 2010, we acquired the publicly listed Adtrans Group Limited, being South Australia’s premier car retailer. This was our direct entry into South Australia. Eblen Motors was acquired in 2011, Main North and Unley Nissan and Renault were added in 2013, and Reynella Subaru was acquired in 2014, complementing our existing operations in South Australia. A new business, Precision Automotive Technology, was established in 2013 to source and distribute our own range of car care products. In 2014, our Queensland operations continued to expand through the acquisition of Ian Boettcher Motors in Ipswich and the Craig Black Group in south-west and central Queensland. 2016 saw further growth with the acquisition of Motors Group Tasmania and the Victorian businesses Silver Star Motors, Mercedes–Benz Ringwood and Waverley Toyota. Our presence in regional Queensland grew substantially in 2016 with the acquisition of the Crampton Automotive and Tony Ireland Groups, taking us into new geographic territories in Toowoomba and Townsville. In 2018 we completed the acquisition of Toowoomba Motor Group (Mitsubishi and Kia), Metro Nissan (Brisbane) and Southern Vales Nissan (Adelaide). We acquired a strategic holding in AHG in 2012 which provided indirect exposure to the West Australian market. This investment grew to full ownership of AHG in 2019, bringing significant operations in Perth, Sydney, Newcastle/ Hunter Valley, Brisbane, Melbourne and Auckland. 2021 saw strategic acquisitions of Toowoomba Ford and multi-franchised dealerships in Cardiff and Maitland. 2022 In September 2022 Eagers Automotive acquired a portfolio of dealerships and properties located in the Canberra regions of Belconnen, Fyshwick, Phillip, and Gungahlin. The dealership group includes the Toyota, Ford, Volkswagen, Jeep, Lexus, Subaru, Mitsubishi, Volvo and GMSV brands and operates across 10 owned properties and three commercially leased sites. Following this acquisition Eagers Automotive now has operations in every state and territory of Australia. At the end of September 2022, Eagers Automotive acquired a multi-franchised dealership in Adelaide known as NewSpot. The new car dealership brand portfolio obtained through the acquisition includes RAM, MG, Kia, LDV, SsangYong, Suzuki, Fiat and Jeep. The dealerships operate across one owned property that was purchased as part of the acquisition, and six leased sites. Eagers Automotive Limited | ANNUAL REPORT 2022Where We Operate Eagers Automotive dealerships can be found in all States and Territories in Australia as well as in New Zealand. Eagers Automotive Dealerships Inclusive of new and used cars, trucks, parts and service 45 4 39 87 70 16 17 26 24 Automotive Industry Overview – New Vehicles Australian Automotive Market share by type Top 10 Brands Australia New Zealand New Vehicle Sales in Australia Toyota Mazda Kia Mitsubishi Hyundai Ford MG Subaru Isuzu Ute Mercedes-Benz Top 10 21.4% 8.9% 7.2% 7.1% 6.8% 6.2% 4.6% 3.3% 3.3% 2.9% 71.6% Toyota Mitsubishi Ford Kia Suzuki Hyundai Tesla Mazda MG Nissan Top 10 17.4% 14.5% 9.2% 6.8% 5.1% 5.0% 4.2% 3.7% 3.2% 2.7% 71.8% 53% SUV sales 3% EV sales 7 Passenger 203,056 (19%) SUV 574,632 (53%) Light Commercial 256,382 (24%) Heavy Commercial 47,359 (4%) Sources: VFACTS, Motor Industry Association of New Zealand. NEXT100 Strategy Providing integrated mobility solutions for the next 100 years OPTIMISE DEVELOP GROW Engage our customers, everywhere Redefine our workforce Deliver optimised vehicle finance solutions Support innovation Reinvest with discipline Online. At the airport. In shopping malls. In multi-brand service hubs. At home. At work. Our workforce: re-defined and re-imagined, based on our customers’ journey. Our flexible owned and leased property portfolio allows us to continue to evolve to fit our customers’ lifestyles, circumstances, wants and needs. This transformation is aimed at delivering an all new and vastly superior customer experience on a more sustainable and productive cost base. Capitalise on the unique position our industry occupies in the distribution of motor vehicles, with the aim of becoming the preferred provider of automotive and mobility finance solutions. Deliver ultra-competitive, highly tailored finance solutions sourced from our extensive funding relationships. Support our partners to introduce ACE (autonomous, connected and electric) and other emerging product innovations. Our partners cover circa 95% of the total market for new vehicles in Australia and are at the forefront of design, performance and innovation. Disciplined use of shareholder funds combined with rigorous review of existing and new operations to support an unrelenting focus on long-term wealth creation. Utilise balance sheet strength to capitalise on evolving and emerging market trends. Exceed Stakeholder Expectations Customer. Employees. Partners. Shareholders. Community 8 Eagers Automotive Limited | ANNUAL REPORT 2022Our Guiding Principles This is what we stand for and the reason why we exist. They guide our people and create a culture where everyone understands what is important for achieving success. W H E RE WE ARE G OIN G N - VIS I O P O S E - WHY WE D O IT R U P Where To be the most admired automotive group How To provide optimisation for all stakeholders, not maximisation for one Why To keep our community moving and give them the freedom to enjoy their lives MISSION - HOW W E D O I T Our Values Integrity Inclusiveness Owner’s Mindset Agility Doing what you say you’ll do Being open and recognising the contribution of all individuals Taking pride and ownership in your work Being flexible and open to change 9 Eagers Automotive Limited | SUSTAINABILITY REPORT 2022 Sustainability Report Contents 1. Introduction 2. About Us 3. People 4. Planet – Climate Change and the Environment 5. Performance – Sustainable Growth Appendix A: SASB Reference Table 11 12 14 22 27 29 We are pleased to present our sustainability report for 2022. At Eagers Automotive, our vision is to be the most admired automotive group, and we know this cannot be realised without a strong people focus, considered environmental footprint and a business resilient to internal and external pressures. This is why our sustainability strategy has People, the Planet and our Performance at its core. 10 1. Introduction Our report for 2021 established the Sustainability Accounting Standards Board (SASB) as the globally recognised reporting standard against which we will align for its guidance for companies in the multiline and speciality retailers and distributors sector (SASB Standard). Sustainability is a journey of continuous improvement and accountability and over the past year we have focused on developing a Group-wide sustainability strategy that supports our overarching corporate strategy and takes into account the environmental, social and governance issues of most importance and relevance to the Group. We have also considered the Task Force on Climate- related Financial Disclosures (TCFD) reporting framework, and have identified the following five United Nations Sustainable Development Goals (UN SDGs) which our strategy best supports and aligns: These five UN SDGs reflect the areas we believe Eagers Automotive Group is best placed to contribute given our prominent role in the automotive retail industry. 11 Eagers Automotive Limited | SUSTAINABILITY REPORT 2022 2. About Us Eagers Automotive is the largest automotive retail group in Australia, with a long and proud history over 110 years, more recently expanding operations to New Zealand. We employed 7,738 people and represented 43 automotive brands during the reporting period, with locations in every Australian capital city as well as regional Queensland, the Newcastle/ Hunter Valley region of New South Wales, broader Tasmania and Auckland, New Zealand. As well as the sale of new and used motor vehicles, our principal activities consist of the distribution and sale of parts, accessories and car care products, repair and servicing of vehicles, provision of extended warranties, facilitation of motor vehicle finance, property ownership and investments. Strong company growth in recent years has seen a shift towards greater centralised operational and regulatory oversight. We continue to mature our Group-wide approach and data collection and reporting capabilities, and it is within this context that our sustainability journey is evolving. Key Facts/Highlights ✔ Sustainability vision, mission and goals developed ✔ 5 UN SDGs of focus ✔ 7,738 employees, 7,323 in Australia and 415 in New Zealand ✔ 43 automotive brands represented ✔ Dealerships in every Australian capital city AutoMall West – Indooroopilly Shopping Centre, West Brisbane. This new automotive retail and service format provides a tailored, flexible and convenient experience for our customers while leveraging a more economically sustainable retail footprint for the longer term. 12 AutoMall West Indooroopilly Shopping Centre, West Brisbane. 13 Eagers Automotive Limited | SUSTAINABILITY REPORT 2022 3. People As an automotive retail sales and service provider, people are at the core of our business and our most important asset. To be competitive and provide a superior customer experience, we need to attract and retain the best employees, and to be the most admired automotive group, our aim is for people throughout our value chain to feel valued and respected. Key Facts/Highlights ✔ Recommenced our Employee Engagement Survey ✔ Uplift in female gender representation: ✔ 7% increase in management positions ✔ >13% increase in non-management positions ✔ Our people: ✔ represent > 40 places of origin ✔ speak > 30 different languages ✔ Commitment made to remunerate all employees above the minimum wage by end of 2023 ✔ 377 new apprentices employed ✔ 127 apprentices completed their training (a) Employee Engagement We recognise there is a strong link between employee engagement and business performance – a highly engaged workforce will ensure we achieve sustainable high-performance outcomes. Our 2022 Employee Engagement Survey provided the opportunity to hear directly from our employees as to how they feel about working for Eagers Automotive Group, the recent growth in our business and how the COVID-19 pandemic had impacted them. This survey was conducted by an independent third-party provider, giving employees comfort that the survey was both anonymous and confidential, and enabling feedback to be benchmarked against a portfolio of other automotive, transportation and logistics employers. Of our 7,316 employees (at that time), 3,964 responded to the survey, representing approximately 54% of our workforce. The survey results highlighted the areas across our business that are most important to our employees, and provided insights about their views on company culture, how we go about our work, where we are headed as a company and where there are opportunities for growth. (b) Diversity and Inclusion We recognise the inherent benefits in having a diverse workforce, one that reflects the diversity of the communities within which we operate, and we value the different perspectives and contributions these differences in thoughts and approach can make to our business. 14 3. People (CONTINUED) Naidoc Week celebrations in Western Australia. (i) Equal Opportunity and Treatment To attract and retain the most talented and engaged people and achieve optimum diversity in our workforce, we are committed to fostering a work environment that provides for and respects equal employment opportunities and experiences. We work on the principle that all employment decisions must be based on merit and be non-discriminatory. All employees are valued according to how they perform their duties and their ability and enthusiasm for maintaining company expectations and standards. Our managers are responsible for ensuring employees are treated fairly and with respect and dignity regardless of race, gender identity, sexual orientation, marital status, age, sex, disability, pregnancy, breast feeding, intersex status or other background or personal characteristics, in accordance with our Diversity Policy, Code of Conduct and other governance documents. (ii) Diversity Policy In accordance with our Diversity Policy, the Group’s governing Board has set the following objectives for achieving diversity in the composition of our Board, senior executives and workforce generally: A. Board Composition As against our diversity target to increase female representation on the Board to 30% by 2025, women now make up 25% of the Board. Gender Board Female Male February 2023 February 2022 February 2021 25.0% 75.0% 22.2% 77.8% 20.0% 80.0% B. Diversity and Inclusion Training ‘Inclusiveness’ is one of our four company values and to help embed this value across the Group, our objective is to deliver diversity and inclusion training to all managers over a four-year period, focusing on increasing awareness of unconscious biases and understanding how differences can contribute to the development of a high-performance culture. Diversity-related management training and coaching provided in 2022 included in the areas of: —Leadership —Unconscious Bias —Duty of Care —Workplace Harassment & Bullying —Discrimination —Probation —Mental Health Awareness C. Workforce Gender Composition We are committed to improving the gender balance of our workforce. Our objective is to recognise and better understand relevant gender issues in our workforce so that we can ensure a supportive environment for all and minimise any barriers to gender equality. The following table shows the gender representation across the Group, and the increase in female representation across our management and non-management roles from our 2021 results. Gender 2022 Rate* 2021 Rate* Management Female Male Non-Management Female Male Non-Specific Apprentices and Trades People Graduates Female Male 15.2% 84.8% 39.3% 60.7% 0.1% 4.3% 95.7% 8.2% 91.8% 25.6% 74.4% – 5.1% 94.9% * Rates are calculated to the nearest one decimal place. 15 Eagers Automotive Limited | SUSTAINABILITY REPORT 2022 3. People (CONTINUED) A formidable force – Fearless Female+ Forum group photo 2022. R U OK Day morning tea event at corporate head office, Brisbane to encourage our people to start meaningful conversations with someone they feel may be struggling with the pressures of life. As we continue to recover from the impacts of the COVID-19 pandemic, priority during the year was given to regional initiatives to support and promote a gender diverse workplace including these targeted programs: • Fearless Female+ Forum Established in April 2021, the Fearless Female+ Forum is a networking forum to inspire, motivate and connect aspiring female and non-binary leaders across our Western Australian businesses and work toward bridging the gender gap in the automotive industry. During 2022 the Forum held sessions focusing on mindset, recognising potential, psychological safety, personal brand, realising purpose and achieving work life balance. • GROW Program The GROW Program operates across our South Australian dealership network and is a 12-month in-house development program aimed at our female employees to help develop self-confidence and personal leadership skills to further their careers. Consisting of three modules run over three separate days throughout the year, it is also supported by other initiatives including guest speaking groups, charity events and a celebration dinner at the end of the year. Other diversity and inclusion activities are guided centrally and practised at the dealership level. For example, we support various charity and community awareness activities which are outlined in our annual Health & Wellbeing Calendar and published on our company intranet. In 2022, these events included R U OK Day, Mental Health Awareness Week, International Women’s Day, International Men’s Health Week, National Sorry Day, NAIDOC Week, Darkness to Daylight and Safe Work Month. 16 GROW Ladies Day 2022 raised over $15,000 for local charities in South Australia. D. Cultural Diversity Recognition Similarly, we are also working to better understand the cultural heritage and diversity of our workforce. According to our 2022 Employee Engagement Survey, while Australia, New Zealand, United Kingdom and Asia are the prominent countries or places of origin of our employees, more than 40 other places of origin are also represented, and our employees speak more than 30 different languages. 3. People (CONTINUED) Long Service Dinner – Western Australia’s longest serving employee, Maureen Rice, who has 48 years of tenure with our business. Western Australia’s 30 Year Club - Recognising and celebrating our employees who have served our businesses for 30+ years. (c) Reward and Recognition Appropriate and adequate rewards and recognition are an important driver of employee engagement and we are proud that many of our employees have chosen to have long careers with us. To celebrate our long tenured employees, we recognise annual service anniversaries that begin after 10 years with us, and every subsequent five-year anniversary. This acknowledgement includes CEO recognition, a gift of appreciation and celebratory events. Throughout 2022 all our employees were remunerated in accordance with the relevant industrial awards and enterprise agreements. The broad variety of roles within the Group that are captured by the SASB reporting standards means the reporting of averaged labour rates1 may not reflect accurately and is therefore of limited extrinsic value. This does not detract, however, from its importance to entities with less diverse business operations and in international markets that do not have the extensive industrial relations regime applying in Australia. We are committed to exceeding all legal and employee payment obligations, which is reflected in the reduction in the number of our employees paid the minimum wage, and subsequently, an increase in the number of our employees paid above the minimum wage. By the end of 2023, our aim is that all Group employees will be remunerated above the minimum wage. Minimum Wage Employee Rate 2022 Rate* 2021 Rate* Whole of Group 0.9% 1.4% * Rate is calculated to the nearest one decimal place. 1 For example, the average hourly wage of retail and distribution employees, as required by CG-MR-310a.1. Precision Automotive Technology (PAT) Diamond Awards Night 2022 for our QNT region. These awards are held annually in our regions and recognise the exceptional work performance of our PAT sales teams. 17 Eagers Automotive Limited | SUSTAINABILITY REPORT 2022 3. People (CONTINUED) (d) Career Development and Training (e) Labour Practices As Australia’s leading automotive retailer, we are committed to the future of the automotive industry and actively look to encourage people to pursue and maintain careers in our sector. (i) Learning and Development We value continuous learning that supports role performance, customer service improvements and achievement of professional goals. In that regard, we provide training in many areas including: —Sales and Service Development —Car Care —Finance and Insurance —Leadership —Workplace, Health and Safety —Managing Award Based Workforces —Manufacturer and product-specific training —Systems training Company-sponsored training and educational opportunities are also available on a case-by-case basis, in areas such as executive education, future leadership and sponsored higher education. (ii) Apprenticeships We have various apprenticeship and traineeship opportunities available in Automotive Trades and Services, as well as Administration. We employ 769 apprentices across the Eagers Automotive Group. In 2022, 377 new apprentices were employed, and 127 apprentices completed their training to become qualified Automotive Technicians, Automotive Electricians and Parts Interpreters. We provide many benefits to support our apprentices during their training, including payment of technical fees, interest-free loans to purchase toolkits, the opportunity to salary sacrifice some expenses, and discounts on vehicles, parts and servicing. We recognise the importance of monitoring certain aspects of labour practices to ensure that we are providing our employees with a great place to work and that any issues that may arise can be appropriately and promptly addressed. The below sets out the Group’s employment turnover breakdowns and addresses, as applicable, employment violations for the reporting period, in satisfaction of the SASB reporting requirements. (i) Turnover The table below shows our employee turnover across our Group in 2022 and the Group is working on implementing employee retention strategies that focus on recruitment and employee engagement in an effort to reduce turnover rates across the business going forward. Voluntary turnover includes resignations and retirements, while involuntary turnover includes dismissal, redundancy and non-renewal of contracts. Group-wide Turnover 2022 Rate* 2021 Rate* Voluntary Involuntary 33.0% 3.2% 30.2% 3.0% * Rates are calculated to the nearest one decimal place. (ii) Labour Law and Other Violations We did not incur any monetary loss in 2022 as a result of legal proceedings associated with labour law violations. We also did not incur any monetary loss in 2022 as a result of legal proceedings associated with employment discrimination. 18 3. People (CONTINUED) (f) Balancing Work Goals with Life Goals To be truly aligned with our “Inclusive” corporate value and to attract and retain the best employees, we know that we need to meet our people at whatever stage they are in their life, whether that be raising children, caring for elderly parents, pursuing further education or achieving personal life goals - because high performing people don’t just perform highly in their work life. (i) Parental Leave Policy It is important to us that our employees maintain a balance between their work and family commitments. During the reporting period we developed a new harmonised Parental Leave Policy, incorporating our Maternity Support Program, which is intended to subsidise any payments made under the relevant Government Scheme to assist eligible employees to maintain their usual average pay for a period of up to 12 weeks during their parental leave. (ii) Employee Assistance Program We continue to provide employees and immediate family members with access to ‘Best You’ by Benestar - an independent, free and confidential counselling and support program in areas such as mental health, relationships, exercise, sleep and financial counselling, and the online platform BeneHub which contains a library of health and wellbeing resources. (g) Health, Safety and Wellbeing We are dedicated to ensuring the health, safety and wellbeing of our people at work, through the ongoing identification and management of workplace health and safety risks in accordance with our Workplace Health, Safety and Environment (WHSE) Policy, Risk Management Procedure, integrated WHSE software platform and other supporting documents and systems. Our health and wellbeing activities during 2022 included: —Review, reduction and simplification of our Safe Work Instructions to aid usability and compliance. —Launch of a new online WHSE Risk Profile Register for greater ease of reporting, monitoring, task assignment and control measure alignment. —Roll out of a suite of short training videos to support our WHSE Policy and related policies, procedures and practices. —Development of an Electric Vehicle Safety Guide to respond to the identification of electric vehicle safety as an emerging risk. —Safe Work Month safety campaign and competition to recognise and reward employees for their promotion and ownership of a safety culture. (h) Modern Slavery As a reporting entity under the Modern Slavery Act 2018 (Cth), the Eagers Automotive Group continued to mature its approach to the identification and understanding of modern slavery risks in its operations and supply chain, and to strengthen its controls to mitigate these risks. This year we reviewed and revised our supplier questionnaire process with the aim of uplifting supplier engagement and enabling more efficient risk assessments in line with a risk-based approach. We also strengthened our modern slavery governance through the development of a Modern Slavery Policy, reaffirmed our commitment to protecting against modern slavery practices in our revised Code of Conduct, and are in the process of developing modern slavery training and awareness for roll out to employees in 2023. 19 Eagers Automotive Limited | SUSTAINABILITY REPORT 2022 (i) Supporting our Community – Eagers Automotive Foundation Established in 2013, the Eagers Automotive Foundation provides meaningful and sustainable support to our communities, and as all administration expenses of the Foundation are paid for by Eagers Automotive Limited, we ensure that 100% of donations are delivered to intended recipients. The Foundation’s vision is to create a lasting spirit of giving within the Eagers Automotive network for those in need. Employees have the option to donate a portion of their salary to the Foundation through our Workplace Giving Program and are encouraged to propose charities and causes close to their heart for the Foundation to support, through a formal grant process. Our dealerships also have a longstanding history of giving and together with the Foundation, our support exceeded $1,480,000 in monetary and in-kind contributions during 2022. Tim Franklin is undertaking an incredible feat to run the world – known as ‘Tim Runs The World.’ The 26,232 kilometre (16,300 mile) journey will take Tim from his home city of Brisbane with the objective to be arriving back within 433 days to break the current world record. Tim is fundraising for his journey with a percentage of all donations going to his three chosen charities – Inspiring Brighter Futures, Lung Foundation Australia and Wings for Life. easyauto123 supported Tim’s world record attempt by providing a drive car for his support team during the New Zealand leg of his journey. Tree planting day – our employees planted over 650 native trees at Bannister Creek Reserve, Western Australia. Supporting Cancer Council ACT through the provision of a vehicle. Supporting National Breast Cancer Foundation (NBCF) – Our WA parts distribution centre, AMCAP, donated $13,500 to the NBCF in 2022, via NBCF CEO Cleola Anderiesz. AMCAP not only raise valuable funds to support the NBCF’s mission towards zero deaths from breast cancer by 2030, but create breast cancer awareness through its pink NBCF branded cabinets and containers. Supporting Variety – The Children’s Charity of Queensland, through the funding of two $20,000 bikes for the Championing Cycling for Kids with Disability Program. This program provided the children at Nursery Road State Special School, Brisbane with adaptive bikes that are engineered to give all children the opportunity to share in the joy of riding a bike. 20 Eagers Automotive Foundation 2022 Initiatives Organisations, causes and events benefiting from Group initiatives during 2022 include: Queensland —Ginger Cloud Foundation —St Vincent de Paul Society – Christmas Appeal and Flood Appeal —Darkness to Daylight —Hope in a Suitcase Australia —National Breast Cancer Foundation —Waalitj Foundation —CPL Giving Day —Jack Reed Foundation —Mangrove Housing —Variety Bash —Peak 2 Park —Loads of Love —Xavier Foundation —Variety – The Children’s Charity —The Humpty Dumpty Foundation —Wheely Fun Kids Cycling Program —Tour De Pif —Tour De Brisbane —Rural Aid Australia —Ecumenical Coffee Brigade —Cystic Fibrosis Australia —Baby Give Back —Mater’s International Women’s Day South Australia —Minda —Backpacks 4 SA Kids —Kickstart for Kids —Living Without Limits —The Royal Society for the Blind —Youth Opportunities —GROW Ladies Day —Big Night Out Western Australia —Dress for Success —The Salvation Army Australia —Lifeline Australia —Immune Deficiency Foundation Australia —Cancer Council - Australia’s Biggest Morning Tea —Camp Quality —Waalitj Foundation —Western Australian Association for Mental Health (WAAMH) - Mixed Mental Health Charity Game —National Breast Cancer Foundation —Harry Perkins Institute of Medical Research —Oz Harvest —Activ Foundation —North Perth Christmas Lunch-for homeless and in need —Special Children’s Christmas Parties (Perth) —Wheels for Hope —Perth Children’s Hospital Foundation —Headspace —BulldustNBack 2022 – Children’s cancer and mental health charities —Cystic Fibrosis —Lionheart Camp for Kids —Muscular Dystrophy Association of WA —National Tree Day —Pink Ribbon Breakfast —Hearts for the Homeless —Movember Northern Territory —Fight Cancer Foundation —Camp Quality —Cancer Council NT —PAWS —Special Children’s Christmas Party New South Wales —Immune Deficiencies Foundation Australia —Mark Hughes Foundation —Elouera Surf Lifesaving Club —Penrith Men’s Walk and Talk —Better Foundation – Blacktown and Mount Druitt Hospitals —Kids Rehab at The Children’s Hospital at Westmead —Society 389 Children’s Charity Club Australian Capital Territory —Canberra Pet Rescue —Roundabout Canberra —Walk with me —Percy Begg Pantry —Soldier On —Community First Program —Beryl Women Inc —Ronald McDonald House Charities —Carers ACT —Cancer Council —St Vincent De Paul —Marymead Victoria, Tasmania and New Zealand —Variety the Children’s Charity - Bikes4Kids and Motor Mouth Camp —Camp Quality —Pathways Tasmania —Cancer Council —Tasmanian Institute of Sport —St Giles Society —Sally’s Ride —Tim Runs the World —Breast Cancer Foundation For every new or demonstrator vehicle sold and delivered in December 2022, two of our Melbourne dealerships donated a bike, helmet & lock valued at $218 to Variety Bikes4Kids program to show children the joy, fun with friends and fitness that owning a bike can bring. 92 bikes were donated in 2022, with a total value over $20,000. The Push-up Challenge 2022 – 24 Days, 26,182 push ups. 25 of our Western Australian employees participated in The Push Up Challenge raising over $2,800 for Lifeline WA. 21 Eagers Automotive Limited | SUSTAINABILITY REPORT 2022 4. Planet – Climate Change and the Environment The increasing occurrence of serious weather events affecting our service territories is a continuing reminder of the risks that natural disasters pose to our property, assets and operations, and the importance of appropriately incorporating business resilience activities into our strategic planning. Key Facts/Highlights ✔ 14 underground petroleum storage systems (UPSS) decommissioned, handed back or divested ✔ 15 solar photovoltaic systems installed (a) Environment Our business activities can be both impacted by, and have an impact on, the environment in which we operate. Our efforts have and will continue to focus on mitigation activities that optimise our physical environment, deliver greater business resilience, and improve customer and employee experience and satisfaction. (i) Hazardous Chemicals A. Chemical Risk Management Our operations involve the handling, storage and sale of many hazardous chemicals such as paints, solvents, fuel, degreasers, aerosols and oil. Our WHSE Risk Management approach aligns with our overarching risk management approach. Our centralised safety management system and use of Chemwatch, an externally run online platform, enables the application of specific control measures for each site, including the development and maintenance of chemicals registers, Safety Data Sheets, chemical composition awareness to aid decision making, signage and employee training in the safe handling and use of chemicals. Group, State and site safety partners and advisors, as well as Operations Management are supported in their ownership of chemical risk management by a suite of governance documents and processes including our WHSE Policy, Environmental Register, WHSE Risk Management Procedure, and site and business-based risk profile registers which are tested through an internal audit program using audit criteria aligned to our safety management system. 22 4. Planet – Climate Change and the Environment (CONTINUED) Underground Petroleum Storage System (UPSS) - One of the 37 UPSSs decommissioned, handed back or divested under our program of works to mitigate safety and environmental risks associated with UPSS. B. Hazardous Chemical Handling and Elimination Within dealership and service operations, chemical use and management is primarily guided by vehicle manufacturer requirements and those of the third-party products we on-sell. Programs have also commenced to help mitigate environmental and safety implications of certain hazardous chemicals used within our operations. For example, a chemical control and substitution program is being piloted to eliminate the use of harmful chemicals in products (such as detailing products) provided by a supply partner, and a review of our spray-painting activities was completed to ensure their continued safe operation. At the beginning of 2021 there were 56 underground petroleum storage systems (UPSSs) across our network of dealerships and service centres with the potential to present safety and environmental risks if they were to deteriorate over time. As such, we commenced a program of works that will ultimately see all UPSSs decommissioned, handed back (if within a leased site), or divested (if subject to a property sale). To date 37 UPSSs have been decommissioned, handed back or divested, 14 of these during the reporting period. (ii) Waste Management The Group’s waste management initiatives address specific site and operational impacts and requirements and are focused on reducing, reusing or recycling waste materials: —Reduce and reuse – The Group is in the process of rolling out electronic contracts for customers and document management systems to not only improve customer and employee experience, but reduce paper usage, increase information security, and reduce physical storage expenses. At our parts distribution and service centres goods may be unpackaged and repackaged for distribution to customers and other Group locations. Packaging initiatives have focused on reducing use of single-use plastic, substituting plastic products with paper equivalents (i.e. plastic bags and tape) and reusing cardboard boxes for repackaging goods where appropriate (dependant on size, shape and weight considerations). At Precision Automotive Technology (PAT), the Group’s wholly-owned provider of premium aftermarket car care products, cardboard product boxes are made in Australia by a company that is a signatory to the Australian Packaging Covenant and plastic product bottles are also made in Australia by a carbon neutral plastics factory. —Recycle – Paper and comingled recycling initiatives are deployed throughout our sites and other recycling initiatives include the recycling of plastics (such as pallet wrapping, bumpers and mouldings), timber pallets, cardboard boxes, metal (predominantly manufacturer’s transport frames, damaged panels, and doors), lead acid batteries and tyres. 23 Eagers Automotive Limited | SUSTAINABILITY REPORT 2022 4. Planet – Climate Change and the Environment (CONTINUED) (b) Climate Change As a business operating across Australia and New Zealand we recognise the impact of climate change on our environment and the impact severe weather events can have on buildings and assets, as well as business operations and people. In this section we provide an overview of the Group’s greenhouse gas (GHG) emissions and mitigation activities to reduce the impact of our operations on the environment. (i) Climate Change Governance – Risks and Opportunities We acknowledge that as a retailer of new and used vehicles, regulatory and consumer demands are a driving force behind our original equipment manufacturers (OEMs) transitioning to significantly reduced carbon emissions and this, as well as any increase in extreme weather events, will continue to impact our business, presenting both climate change risks and opportunities. The Group underwent a climate change risk identification process during the reporting period. The climate related physical and transition risks recognised as having the potential to impact our business are not unusual or dissimilar to other retail entities operating within the automotive industry and across our operational territory and include: —Increases in extreme weather events impacting property and other physical assets, as well as causing supply chain disruption. —Changes in operational requirements resulting from increased OEM requirements to meet climate related regulatory changes. —A shift in market demand (internal combustion engine (ICE) to low emission vehicles (i.e. electric, hybrid, hydrogen and emerging)) and resulting operational impacts. —Utility, transportation and insurance cost pressures (for example water, power, fuel and waste). —Changing workplace health, safety and environment hazards. 24 Building asset resilience - Constructions works underway at our corporate head office in Newstead, Brisbane, after the site was impacted by the February, 2022 Brisbane flood event. Resilience activities include the construction of a flood mitigation wall around the perimeter of the property and the installation of backflow prevention valves on plumbing infrastructure. Many of these climate change risks present opportunities for our business, including cost savings through energy, recycling and asset resilience initiatives, as well as retail sales product mix with the demand for and supply of lower emissions products and services. Our diversified vehicle brand approach places us in a strong competitive position to adapt to shifting consumer preferences, while our diversified business approach enables us to leverage new opportunities. Our broad geographic operations base also ensures we are well placed to mitigate the impacts of extreme weather events, all together increasing business resilience and ensuring financial stability. See section 5(a) of this report for more information about the Group’s approach to climate change risk management. 4. Planet – Climate Change and the Environment (CONTINUED) (ii) Greenhouse Gas (GHG) Emissions Although our business, as a retailer, generates a relatively modest level of GHG emissions, we are committed to playing our part in the broader emission reduction response. An annual review of the emissions and energy consumption of the Group’s Australian operations is undertaken as part of our compliance with Australia’s national greenhouse and energy reporting requirements (NGERS). Our main sources of Scope 1 emissions include emissions from transport fuel (i.e. Diesel, petrol and LPG). Our NGERS reporting for the 2021-2022 highlights reductions across all three fuel uses. Our main source of Scope 2 emissions derives from purchased electricity. Our NGERS reporting for the 2021-2022 also showed a decrease in electricity usage across the Group, down 11% from the 2020-2021 reporting period. These decreases may be attributed in part to energy efficiency and renewable initiatives as well as site consolidations. Our total Scope 1 (direct) and Scope 2 (indirect) emissions for the NGERS reporting year 2021–2022, in comparison to the previous year were: T CO2-e Scope 1 Scope 2 TOTAL 2021-2022 2020-2021 29,067 26,104 55,171 33,009 29,561 62,570 Our emissions data collection and reporting processes are maturing, and we are currently investigating the most appropriate metric by which to report our emissions trends that also takes into account our company’s growth strategy. A. Reducing CO2 Emissions – Eagers Automotive Group initiatives The majority of our operational GHG emissions come from electricity used to power our sites and offices. Heating, ventilation and air conditioning (HVAC) are the largest users of electricity in our business, at approximately 60% of total usage. Although HVACs are the most significant consumers of electricity, it is important that we continue to provide our employees and customers with a comfortable and safe place in which to work and visit. Solar system installed on one of our Toowoomba dealerships in South-East Queensland. We have continued to roll out our solar replacement and installation program with an additional 15 Solar Photovoltaic systems installed in 2022, each providing between 30Kw and 100Kw of electricity. The Group also continued its installation of more energy efficient lighting and air conditioning systems and use of sensor and timing devices, all together contributing in part to a reduction in energy consumption from the last reporting period despite overall business growth and aiding in the management of rising electricity prices. B. Reducing CO2 Emissions - Partner initiatives Our OEM partners have set ambitious targets for reducing CO2 emissions and increasing the sale of electric vehicles, and we are committed to supporting and facilitating their journey to a lower emissions economy by bringing these vehicles to market. The table on the following page provides a summary of the targets from 13 of the top 15 brands sold in Australia and represented by the Group, which accounted for 76% of all new vehicle sales in 2022. 25 Eagers Automotive Limited | SUSTAINABILITY REPORT 2022 4. Planet – Climate Change and the Environment (CONTINUED) OEM Target Reduce global average CO2 emissions from new vehicles by 90%, compared to 2010 levels Global Battery Electric Vehicle sales target of 3.5 million each year Achieve carbon neutrality across Australian operations Achieve carbon neutrality across global manufacturing facilities Reduce ‘well-to-wheel’ CO2 emissions and achieve a 50% reduction, compared to 2010 levels All vehicles will be electrified, and pure-electric vehicles will account for 25 to 40% of those sales All vehicles, production facilities and suppliers will be carbon neutral All electricity at production facilities to be replaced by 100% renewable energy Phase out production of all combustion engine vehicles in key markets (exc. Australia) Global sales target for electric vehicles of 1.4 million each year Achieve target of net-zero in terms of emissions across the value chain CO2 emissions from new vehicles to be 40% below 2010 levels, and electric vehicles to be 50% of all vehicles sold CO2 emissions from business activities to be 40% below 2014 levels Eliminate or offset GHGs generated at all stages of the value chain, including purchase, procurement, production, sales, use and disposal All electricity at production facilities to be replaced by 100% renewable energy Achieve 100% electrification of new vehicles worldwide Global sales target for electric vehicles of 1.87 million each year All vehicles, production facilities and suppliers will be carbon neutral Source 100% carbon-free electricity for global operations 50% of global sales will be battery/electric powered Global sales target for electric vehicles of 2 million each year Pursue goal of reducing the average CO2 emissions from new passenger cars by at least 90%, compared to 2010 levels All commercial cars will be equipped with electric powertrain technology Increase the ratio of electric vehicles (EV) and hybrid cars to 40% of the gross number of vehicles sold, globally Achieve target of net-zero across the entire life cycle of new vehicles Achieve target of net-zero arising directly from business and manufacturing operations 1 2 3 4 5 6 7 8 26 Target Year 2050 2030 2025 2035 2030 2030 2045 2040 2040 2030 2050 2030 2030 2045 2045 2040 2030 2050 2035 2030 2026 2050 Early 2030s 2030 2050 2050 OEM Target 9 Reduce CO2 emissions from business activities by 50%, on 2013 levels Offer a complete fleet of carbon neutral vehicles Achieve target of net-zero in terms of emissions across the value chain Reduce vehicles’ CO2 emissions in production and use phase by 30%, compared to 2018 levels Increase the proportion of the fleet that is electric to at least 50% Reduce the production-related environmental impact with respect to energy, water, waste by 45% per vehicle 10 All new vehicles to be CO2 neutral along all stages of the value chain Reduce CO2 emissions of new vehicles by 40%, on 2018 levels Plug in hybrids or all-electric vehicles to account for more than 50% of car and van sales Customers to be offered the choice of at least one all-electric vehicle in every vehicle segment Manufacturing operations at all production plants to be CO2 neutral Target Year 2030 2030 2050 2030 2030 2025 2039 2030 2030 2025 Achieved 11 Achieve target of net-zero in terms of emissions 2050 across the value chain Every all-new vehicle offering in key markets will be electrified Aim to have an electrification mix of more than 50% globally Introduce 20 new EV and e-POWER equipped models in key markets Early 2030s 2030 2026 12 Achieve target of net-zero in terms of emissions 2050 across the value chain Reduce CO2 emissions per vehicle and kilometre driven by 40% throughout the entire lifecycle – supply chain, production and use phase - from 2019 levels 50% of sales volumes to come from fully electric vehicles 10 million fully electric vehicles to be on global roads 13 Zero CO2 emissions from production Start full scale inclusion of electrification technologies in vehicles Reduce ‘well-to-wheel’ CO2 emissions by 40%, compared to 2010 levels Reduce CO2 from business activities by 45% in base unit per sales unit, compared to 2016 levels Launch the first EV for international markets 2030 2030 2030 2050 2030 2030 2030 2025 5. Performance – Sustainable Growth Robust risk management processes and practices integrated into our work culture are important for the resilience and long-term sustainability of our business. Key Facts/Highlights ✔ Independent review of our cybersecurity practices ✔ Establishment of a standing Privacy Management Working Group ✔ Commenced review of key employee and governance policies (a) Risk Management Framework Our risk management framework provides the tools to identify and report on key business risks, including climate change risks. The Group risk register is prepared by management and includes specific risk groups across seven (7) risk categories. Of these risk categories, climate related risks are included under the ‘strategic’, ‘operational’, ‘people’, ‘legal’ and ‘social’ categories. When identifying risks, changes in external and internal context and indicators of emerging risks are considered. The risk analysis examines consequences and likelihood to determine a risk rating that supports the priority of actions for managing risks. The risk matrix provides parameters for risk analysis to ensure a consistent approach. Following assessment, risk management plans and controls for individual risks are developed and implemented by management. Risks are assessed on a bi-annual basis by each functional area and provided to the Executive Leadership Team for review, after which the risk ratings are submitted to the Audit & Risk Committee. The Audit & Risk Committee monitors, assesses, and reports to the Board on the effectiveness of the risk management system and the group risk register. Risks are communicated through the business as agenda items at key management meetings (including Executive, Board and Audit & Risk Committee meetings). The Eager Automotive Board oversees the Group’s risk management approach and is responsible for ensuring a sound system of risk oversight, management and internal control is in place. The Board sets the risk appetite within which management is expected to operate. Climate and sustainability related issues are considered by the Board as relevant, for example, when reviewing and guiding strategy, setting performance objectives, and overseeing major capital expenditure. (b) Data and Information Security We take a proactive approach to protecting our commercial, customer and employee information, with multiple strategies deployed to reduce the risk of cyber security breaches, including: —Next-Generation Antivirus protection across all endpoints in the business —Strong mail-filter settings —Modern firewall and internet gateways —Secure remote access mechanisms —Online cyber-security training to all employees —Internal simulated phishing exercises —Company IT, cyber security and privacy related policies, guidelines, and incident response documents. 27 Eagers Automotive Limited | SUSTAINABILITY REPORT 2022 5. Performance – Sustainable Growth (CONTINUED) Results of vulnerability scanning, and cyber incident and breach trends are reported regularly to management and the Board. During the reporting period there were no known successful cyber security breaches of our customer and employee data. There were also no reportable data breaches that involved the theft of personal information. In light of increasing cyber security risks globally and in line with our continuous improvement approach, 2022 saw the development of a Cyber Incident Response Plan and an external and independent review of our cybersecurity practices. Further, our Internal Audit team conducted 55 physical audits of information security at dealership locations covering physical security of IT servers, password security awareness and physical security of hardcopy documents. For 2023 we will be increasing our commitment to Cyber Security with the appointment of a Chief Information Security Officer. We also commenced a review of our privacy and information management practices and established a standing Privacy Management Working Group tasked with identifying and promoting privacy and information management process improvements. (c) Ethics and Integrity Policies Our commitment to a culture of honesty and ethical behaviour is reflected in our adoption of “Integrity” as one of our four corporate values. Ethical behaviours are promoted through a suite of Group-wide policies and procedures, including our Code of Conduct, Employee Manual, Whistleblower Policy and Bribery and Corruption Policy, all of which are currently under review as part of our continuous improvement approach. We encourage and support our employees, customers and stakeholders to speak up about unethical behaviour and have implemented an integrity reporting framework to provide eligible whistleblowers with a safe avenue to raise concerns confidentially and anonymously via an external and independently operated complaints avenue. Employees can also choose to report issues directly to their managers or other senior personnel in accordance with our Grievance and Complaints Management Policy. 28 Appendix A: SASB Reference Table Topic Accounting Metric Energy Management in Retail and Distribution Data Security Total energy consumed Description of approach to identifying and addressing data security risks 1. Number of data breaches 2. Percentage involving personally identifiable information (PII) 3. Number of customers affected Labour Practices 1. Average hourly wage 2. Percentage of in-store employees earning minimum wage, by region 1. Voluntary 2. Involuntary turnover rate for in-store employees Total amount of monetary losses as a result of legal proceedings associated with labour law violations Workplace Diversity and Inclusion Percentage of gender representations for 1. Management 2. All other employees Product Sourcing, Packaging and Marketing Discussion of processes to assess and manage risks and/or hazards associated with chemicals in products Discussion of strategies to reduce the environmental impact of packaging Page 25 27, 28 28 17 18 18 15 22, 23 23 Disclaimer and Disclosures This report contains forward-looking statements in relation to Eagers Automotive Limited and its controlled entities (collectively the Eagers Automotive Group or Group), including statements setting out the Group’s intent, goals, objectives, initiatives, commitments and current expectations in relation to the Group’s business and operations, external conditions and risk management practices. This report also includes forward-looking statements regarding climate change and other environmental and social consideration. While these statements are based on the Group’s good faith assumptions as to the risks and opportunities likely to affect the Group’s business and operations in the future, the Group does not give any assurance that any assumptions will eventuate or prove correct or accurate, as there are many intervening factors which are outside the control of the Group. As such, no undue reliance should be placed on these statements. The Eagers Automotive Group also recognises and acknowledges that due to its decentralised business structure and sustainability reporting being in its infancy, data and information gathered and reported may be incomplete or inaccurate, despite the Group’s best efforts. The continued development and implementation of appropriate data gathering tools and systems is a key focus for the Group to ensure streamlined sustainability reporting and a continuous improvement approach to data accuracy, relevance and reliance. 29 Eagers Automotive Limited | FINANCIAL REPORT 2022 Board of Directors Timothy Boyd Crommelin BCom, FSIA, FSLE Chairman of Board Independent Director Member of Remuneration & Nomination Committee Non-executive Director since February 2011. Chairman of Morgans Holdings (Australia) Limited. Director of University of Queensland Endowment Foundation (UQEF). Trustee of Australian Cancer Research Foundation. Former Director of Senex Energy Ltd (2010 to April 2022). Former Deputy Chairman of Queensland Gas Company Ltd (2006 to 2009). Broad knowledge of corporate finance, risk management and acquisitions and over 40 years’ experience in the stockbroking and property industry. Nicholas George Politis AM, BCom Director Non-executive Director since May 2000. Motor vehicle dealer. Executive Chairman of WFM Motors Pty Ltd, Eagers Automotive 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 Member of Remuneration & Nomination Committee Non-executive Director since January 2010. Director and Chief Executive Officer of WFM Motors Pty Ltd, Eagers Automotive Limited’s largest shareholder. Director of a substantial number of proprietary limited companies. Significant management experience in automotive, transport, manufacturing and retail industries. Marcus John Birrell Independent Director Member of Audit & Risk Committee Non-executive Director since July 2016. Former Director of Australian Automotive Dealer Association Limited (2014 to 2017). 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 Joined the Company as Chief Financial Officer in August 2015. Appointed as an executive Director in March 2017. Executive responsibility for accounting, taxation, internal audit, payroll and treasury functions. Previous senior finance roles with PricewaterhouseCoopers and Flight Centre Travel Group Limited. Admitted as a chartered accountant in 1997. Gregory James Duncan OAM, BEc, FCA Independent Director Chairman of Remuneration & Nomination Committee Member of Audit & Risk Committee Non-executive Director since December 2019. Director of advisory and investment firm JWT Bespoke Pty Ltd (2013 to present). Former owner and Executive Chairman of Trivett Automotive Group, Australia’s largest prestige automotive business. Former Director of Automotive Holdings Group Ltd (2015 to 2019). Mr Duncan was also Chairman of Cox Automotive Australia Board of Management from 2016, retiring on 31 March 2021. David Scott Blackhall BCom, MBA, FAICD Independent Director Chairman of Audit & Risk Committee since 29 March 2022, having joined the Committee on 23 February 2022 Non-executive Director since December 2019. Over half a century of automotive industry experience with manufacturers, including at Managing Director level, as dealer principal and owner of various automotive franchises. Chairman (since November 2021) and Chief Executive (2016 to 2019) of Australian Automotive Dealer Association. Managing Director of corporate advisory firm Raglan Ridge Advisors. Former Director of Automotive Holdings Group Ltd (2019). Michelle Victoria Prater BBus, CPA, ACIS, AICD Director Non-executive Director since February 2020. Executive Chairman of APPL Group (2004 to present), a property development and investment group with an extensive automotive property portfolio including significant properties leased to Eagers Automotive dealerships. Former executive roles at corporate and operational levels with Automotive Holdings Group Ltd (1993 to 2004) including as an executive Director (2002 to 2004). David Arthur Cowper BCom, FCA Independent Director (until his retirement from the Board on 18 May 2022) Chairman of Audit & Risk Committee (until 29 March 2022) Non-executive Director since July 2012 until his retirement on 18 May 2022. 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. Executive Management Keith Thomas Thornton BEc Chief Executive Officer Commenced with the Company in July 2002. Prior to his appointment as Chief Executive Officer in February 2021, Keith had been responsible for the group’s automotive operations since June 2007, most recently as Chief Operating Officer from January 2017 until February 2021. Keith is a licensed motor dealer with substantial automotive retail and wholesale experience in volume, niche and prestige industry sectors. Keith also brought significant industry experience to the Company, having previously worked for various automotive manufacturers. Keith is an Alternate Director of Australian Automotive Dealer Association Limited (2014 to present). Edward Geschke BA, MBA Chief Operating Officer, Automotive (since 1 May 2022) Responsible for the Company’s Franchised Automotive and Independent Used operations across Australia and New Zealand. Since commencing in the automotive industry as a trainee sales consultant with the Company in 2004, Edward has risen to hold many operational management positions with the Company across Australia. Most recently, he was Executive General Manager of the Company’s operations in Western Australia from 2019 to 2022, leading integration of AHG’s largest State operation into the merged Eagers Automotive. Edward is also a graduate of the Harvard Business School’s General Management Program. Denis Gerard Stark LLB, BEc Company Secretary Commenced with the Company in January 2008. Responsible for overseeing the company secretarial, legal, investor relations and property administration functions. Previous company secretarial, senior executive and legal experience with public companies. Admitted as a solicitor in Queensland in 1994 and Victoria in 1997. 30 31 Eagers Automotive Limited | FINANCIAL REPORT 2022 Board of Directors Timothy Boyd Crommelin BCom, FSIA, FSLE Gregory James Duncan OAM, BEc, FCA Chairman of Board Independent Director Independent Director Chairman of Remuneration & Nomination Committee Member of Remuneration & Nomination Committee Member of Audit & Risk Committee Non-executive Director since February 2011. Chairman of Non-executive Director since December 2019. Director of Morgans Holdings (Australia) Limited. Director of University advisory and investment firm JWT Bespoke Pty Ltd (2013 to of Queensland Endowment Foundation (UQEF). Trustee of present). Former owner and Executive Chairman of Trivett Australian Cancer Research Foundation. Former Director Automotive Group, Australia’s largest prestige automotive of Senex Energy Ltd (2010 to April 2022). Former Deputy business. Former Director of Automotive Holdings Group Chairman of Queensland Gas Company Ltd (2006 to 2009). Ltd (2015 to 2019). Mr Duncan was also Chairman of Cox Broad knowledge of corporate finance, risk management Automotive Australia Board of Management from 2016, and acquisitions and over 40 years’ experience in the retiring on 31 March 2021. stockbroking and property industry. Nicholas George Politis AM, BCom Director Non-executive Director since May 2000. Motor vehicle dealer. Executive Chairman of WFM Motors Pty Ltd, Eagers Automotive 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 Member of Remuneration & Nomination Committee Non-executive Director since January 2010. Director and Chief Executive Officer of WFM Motors Pty Ltd, Eagers Automotive Limited’s largest shareholder. Director of a substantial number of proprietary limited companies. Significant management experience in automotive, transport, manufacturing and retail industries. Marcus John Birrell Independent Director Member of Audit & Risk Committee Non-executive Director since July 2016. Former Director of Australian Automotive Dealer Association Limited (2014 to 2017). 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 Joined the Company as Chief Financial Officer in August 2015. Appointed as an executive Director in March 2017. Executive responsibility for accounting, taxation, internal audit, payroll and treasury functions. Previous senior finance roles with PricewaterhouseCoopers and Flight Centre Travel Group Limited. Admitted as a chartered accountant in 1997. David Scott Blackhall BCom, MBA, FAICD Independent Director Chairman of Audit & Risk Committee since 29 March 2022, having joined the Committee on 23 February 2022 Non-executive Director since December 2019. Over half a century of automotive industry experience with manufacturers, including at Managing Director level, as dealer principal and owner of various automotive franchises. Chairman (since November 2021) and Chief Executive (2016 to 2019) of Australian Automotive Dealer Association. Managing Director of corporate advisory firm Raglan Ridge Advisors. Former Director of Automotive Holdings Group Ltd (2019). Michelle Victoria Prater BBus, CPA, ACIS, AICD Director Non-executive Director since February 2020. Executive Chairman of APPL Group (2004 to present), a property development and investment group with an extensive automotive property portfolio including significant properties leased to Eagers Automotive dealerships. Former executive roles at corporate and operational levels with Automotive Holdings Group Ltd (1993 to 2004) including as an executive Director (2002 to 2004). David Arthur Cowper BCom, FCA Independent Director (until his retirement from the Board on 18 May 2022) Chairman of Audit & Risk Committee (until 29 March 2022) Non-executive Director since July 2012 until his retirement on 18 May 2022. 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. Executive Management Keith Thomas Thornton BEc Chief Executive Officer Commenced with the Company in July 2002. Prior to his appointment as Chief Executive Officer in February 2021, Keith had been responsible for the group’s automotive operations since June 2007, most recently as Chief Operating Officer from January 2017 until February 2021. Keith is a licensed motor dealer with substantial automotive retail and wholesale experience in volume, niche and prestige industry sectors. Keith also brought significant industry experience to the Company, having previously worked for various automotive manufacturers. Keith is an Alternate Director of Australian Automotive Dealer Association Limited (2014 to present). Edward Geschke BA, MBA Chief Operating Officer, Automotive (since 1 May 2022) Responsible for the Company’s Franchised Automotive and Independent Used operations across Australia and New Zealand. Since commencing in the automotive industry as a trainee sales consultant with the Company in 2004, Edward has risen to hold many operational management positions with the Company across Australia. Most recently, he was Executive General Manager of the Company’s operations in Western Australia from 2019 to 2022, leading integration of AHG’s largest State operation into the merged Eagers Automotive. Edward is also a graduate of the Harvard Business School’s General Management Program. Denis Gerard Stark LLB, BEc Company Secretary Commenced with the Company in January 2008. Responsible for overseeing the company secretarial, legal, investor relations and property administration functions. Previous company secretarial, senior executive and legal experience with public companies. Admitted as a solicitor in Queensland in 1994 and Victoria in 1997. 30 31 Eagers Automotive Limited | FINANCIAL REPORT 2022 Directors’ Report Directors’ Report (CONTINUED) The Directors of Eagers Automotive Limited ABN 87 009 680 013 (the Company or Eagers) present their report together with the consolidated financial report of the Company and its controlled entities (the Group) for the year ended 31 December 2022 and the auditor’s report thereon. Eagers Automotive Limited (ASX: APE) (Eagers Automotive or the Company), Australia’s leading automotive retail group, announced on 23 February 2023, its results for the twelve months ended 31 December 2022 (FY22). The Company delivered record Underlying Operating Profit Before Tax1 of $405.2 million, compared to $401.8 million in the prior corresponding period (pcp). Directors Principal Activities Key financial highlights 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 30. Company Secretary The Company Secretary and his qualifications and experience are detailed on page 31. Directors’ Meetings The number of Board meetings (including meetings of Board committees) held during the year under review and the number of meetings attended by each Director were: 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. Board Meetings Attended Held Audit & Risk Committee Meetings Held Attended Remuneration & Nomination Committee Meetings Held Attended 16 113 133 8 15 16 15 15 14 16 16 16 8 16 16 16 16 16 – – – 1 5 – 5 4 – – – – 1 5 – 5 4 – 5 – 5 – – – 5 – – 5 – 5 – – – 5 – – T B Crommelin2 N G Politis D T Ryan2 D A Cowper1, 4 M J Birrell1 S A Moore G J Duncan1, 2 D S Blackhall1 M V Prater 1 Audit & Risk Committee members. 2 Remuneration & Nomination Committee members. 3 Mr Politis and Mr Ryan did not attend meetings which considered proposals for the Company to acquire businesses associated with them. 4 Retired from the Board on 18 May 2022. 32 Statutory Results Revenue EBITDAI2, 3 Statutory Profit Before Tax Statutory Profit After Tax Total Ordinary Dividend per Share (cents) Special Interim Dividend per Share (cents) Underlying Operating Results1 Underlying Revenue1 Underlying EBITDAI2, 3 Underlying Profit Before Tax1 Underlying Profit After Tax1 2 3 Dividend headwinds. 1 Underlying operating results refers to continuing operations, adjusted for significant items outlined and reconciled to statutory results on slides 32 (FY22) and 33 (comparative financial information) of the Investor Presentation. Underlying operating figures are non-financial measures and have not been subject to review by the Company’s external auditors. EBITDAI means earnings before interest, tax, depreciation, amortisation and impairment. Interest income associated with the impact of AASB16 Leases has been deducted in the comparative EBITDAI calculation, aligning with current year presentation. The Board has approved a record ordinary final dividend of 49.0 cps fully franked for FY22, up 15.3% on FY21 (42.5 cps). The ordinary dividend has been approved for payment on 31 March 2023 to shareholders who are registered on 16 March 2023 (Record Date). When combined with the ordinary interim dividend paid in September 2022, the total ordinary dividend based on FY22 earnings is 71.0 cps (FY21 ordinary dividend: 62.5 cps and special dividend 8.4 cps) fully franked. The record payout reflects the Company’s strong financial performance which has been underpinned by a relentless focus on execution and the continued confidence of the Board and management team in the outlook for both the Company and the broader industry. Eagers Automotive is in an extremely strong financial position, well placed to navigate the impacts of any cyclical market or economic The Company’s dividend reinvestment plan (DRP) will not operate in relation to the ordinary 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 2021 of 42.5 cents (2020: 25.0 cents) per share paid on 20 April 2022 Interim ordinary dividend for 2022 of 22.0 cents (2021: 20.0 cents) per share paid on 23 September 2022 Special dividend of nil cents (2021: 8.4 cents) per share Full year to December 2022 $’000 Full year to December 2021 $’000 8,541.5 8,663.5 652.4 442.2 324.3 71.0 – 471.1 405.2 283.1 651.6 456.8 330.7 62.5 8.4 455.9 401.8 288.9 8,541.5 8,663.5 2022 $’000 2021 $’000 109,197 64,233 56,487 165,684 – 165,684 51,387 115,620 21,582 137,202 33 Eagers Automotive Limited | FINANCIAL REPORT 2022 Directors’ Report Directors’ Report (CONTINUED) The Directors of Eagers Automotive Limited ABN 87 009 680 013 (the Company or Eagers) present their report together with the consolidated financial report of the Company and its controlled entities (the Group) for the year ended 31 December 2022 and the auditor’s report thereon. Eagers Automotive Limited (ASX: APE) (Eagers Automotive or the Company), Australia’s leading automotive retail group, announced on 23 February 2023, its results for the twelve months ended 31 December 2022 (FY22). The Company delivered record Underlying Operating Profit Before Tax1 of $405.2 million, compared to $401.8 million in the prior corresponding period (pcp). Directors Principal Activities Key financial highlights The Directors of the Company at any time during or since The Group’s principal activities during the year the end of the year, and their qualifications, experience and special responsibilities, are detailed on page 30. Statutory Results Revenue EBITDAI2, 3 Statutory Profit Before Tax Statutory Profit After Tax Total Ordinary Dividend per Share (cents) Special Interim Dividend per Share (cents) Underlying Operating Results1 Underlying Revenue1 Underlying EBITDAI2, 3 Underlying Profit Before Tax1 Underlying Profit After Tax1 Full year to December 2022 $’000 Full year to December 2021 $’000 8,541.5 652.4 442.2 324.3 71.0 – 8,541.5 471.1 405.2 283.1 8,663.5 651.6 456.8 330.7 62.5 8.4 8,663.5 455.9 401.8 288.9 1 Underlying operating results refers to continuing operations, adjusted for significant items outlined and reconciled to statutory results on slides 32 (FY22) and 33 (comparative financial information) of the Investor Presentation. Underlying operating figures are non-financial measures and have not been subject to review by the Company’s external auditors. EBITDAI means earnings before interest, tax, depreciation, amortisation and impairment. Interest income associated with the impact of AASB16 Leases has been deducted in the comparative EBITDAI calculation, aligning with current year presentation. 2 3 Dividend The Board has approved a record ordinary final dividend of 49.0 cps fully franked for FY22, up 15.3% on FY21 (42.5 cps). The ordinary dividend has been approved for payment on 31 March 2023 to shareholders who are registered on 16 March 2023 (Record Date). When combined with the ordinary interim dividend paid in September 2022, the total ordinary dividend based on FY22 earnings is 71.0 cps (FY21 ordinary dividend: 62.5 cps and special dividend 8.4 cps) fully franked. The record payout reflects the Company’s strong financial performance which has been underpinned by a relentless focus on execution and the continued confidence of the Board and management team in the outlook for both the Company and the broader industry. Eagers Automotive is in an extremely strong financial position, well placed to navigate the impacts of any cyclical market or economic headwinds. The Company’s dividend reinvestment plan (DRP) will not operate in relation to the ordinary 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 2021 of 42.5 cents (2020: 25.0 cents) per share paid on 20 April 2022 Interim ordinary dividend for 2022 of 22.0 cents (2021: 20.0 cents) per share paid on 23 September 2022 Special dividend of nil cents (2021: 8.4 cents) per share 2022 $’000 2021 $’000 109,197 64,233 56,487 165,684 – 165,684 51,387 115,620 21,582 137,202 33 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. Board Meetings Committee Meetings Committee Meetings Attended Held Attended Held Attended Held Audit & Risk Remuneration & Nomination 16 113 133 8 15 16 15 15 14 16 16 16 8 16 16 16 16 16 – – – 1 5 – 5 4 – – – – 1 5 – 5 4 – 5 – 5 – – – 5 – – 5 – 5 – – – 5 – – Company Secretary The Company Secretary and his qualifications and experience are detailed on page 31. Directors’ Meetings The number of Board meetings (including meetings of Board committees) held during the year under review and the number of meetings attended by each Director were: 1 Audit & Risk Committee members. 2 Remuneration & Nomination Committee members. 3 Mr Politis and Mr Ryan did not attend meetings which considered proposals for the Company to acquire businesses associated with them. 4 Retired from the Board on 18 May 2022. T B Crommelin2 N G Politis D T Ryan2 D A Cowper1, 4 M J Birrell1 S A Moore G J Duncan1, 2 D S Blackhall1 M V Prater 32 Eagers Automotive Limited | FINANCIAL REPORT 2022 Directors’ Report (CONTINUED) Directors’ Report (CONTINUED) Financial performance Segment performance Financial position Outlook On a statutory basis, the Company achieved a Statutory Net Profit Before Tax of $442.2 million for FY22, compared to $456.8 million in the pcp. The FY22 statutory result included significant items totalling $37.0 million net income before tax, predominately relating to the gain on sale of Bill Buckle Auto Group and associated property totalling $47.7 million, partially offset by a $15.0 million provision recognised in relation to a non-core business that was divested in a prior period. Statutory Net Profit After Tax including discontinued operations for FY22 was $324.3 million, compared to $330.7 million in FY21. Statutory and Underlying1 revenue declined by 1.4% to $8,541.5 million, with FY22 revenue impacted by a combination of the Bill Buckle Auto Group divestment in June 2022 along with continued supply constraints impacting new vehicle deliveries, partially offset by the acquisition of the ACT and South Australian businesses in the second half of 2022. On a like-for-like basis, Statutory and Underlying1 revenue decreased by 1.3% to $8,078.4 million. Underlying1 Operating NPBT2/Sales ratio increased marginally to 4.7% in FY22 (FY21: 4.6%). The margin uplift in the context of a higher inflationary environment reflects continued favourable margin dynamics and the benefit from ongoing productivity and cost-out programs. While overall revenue has been impacted by supply constraints, momentum in the underlying business has continued with a record order bank at December 2022, reflecting an increase of 74.4% since December 2021. The Car Retailing segment delivered an Underlying1 Operating Profit Before Tax of $397.4 million, compared to $388.4 million in 2021. The increase in profit was achieved despite ongoing supply constraints and inflationary pressures, reflecting strong margins, the successful integration of recent business acquisitions and the organic and greenfield growth delivered through strategic automotive retail partnerships. The Car Retailing segment recorded a Statutory Profit Before Tax of $432.3 million compared to a profit of $403.0 million in 2021. The result benefited from the gain on sale of businesses of $35.2 million, predominately relating to the strategic divestment of Bill Buckle Auto Group. The Company continued to focus on the growth of its national, independent pre-owned business, headlined by easyauto123 and supported by its national auction business Carlins. The easyauto123 business delivered volume and revenue growth due to a combination of the roll out of new sites across Australia and New Zealand along with investment in organic growth at established locations. Car Retailing Statutory and Underlying1 revenue increased by 1.2% to $8,540.6 million (2021: $8,438.3 million). The value of the property portfolio increased to $607.6 million at 31 December 2022, compared with $448.3 million at 31 December 2021 (excluding assets held for sale). This material increase primarily reflects the acquisition of property associated with the ACT and South Australian businesses in 2022, partially offset by divestment of properties associated with Bill Buckle Auto Group. The Property segment recorded an Underlying1 Operating Profit Before Tax of $13.5 million (excluding impairment and gains on sale), compared to $12.6 million in 2021. This increase in underlying profit was driven by income associated with recent property purchases, offset by the interest costs associated with debt drawn. The Property segment recorded a Statutory Profit Before Tax of $30.5 million for 2022 compared to $18.4 million in the pcp. The movement was driven by gains on sale of property associated with Bill Buckle Auto Group and a non-core parcel of land in Queensland. Eagers Automotive is in a very strong financial position holding We have commenced FY23 with a very strong foundation a substantial property portfolio and asset base, together for the year ahead. Demand continues to outstrip supply with $631.1 million of available liquidity at 31 December 2022. supporting a structural change to a new normal in order bank This liquidity position includes available cash and undrawn levels across the industry. Our record order bank provides commitments under corporate debt facilities. Corporate debt (Term and Capital loan facilities) net of cash on hand increased to $253.4 million as at 31 December significant earnings resilience through the cycle, as we deliver higher productivity and a sustainable, higher return on sales margin when compared to the pre-COVID trading environment. 2022, up from $128.4 million at 31 December 2021, and the In addition to these market dynamics, the strategic acquisitions Company’s leverage metrics are in a strong position, with and partnerships developed during 2022 provide the foundation the gearing ratio at 0.54 times as at 31 December 2022 for top line revenue growth and position Eagers Automotive to (FY21: 0.28 times). The increase in corporate debt during the lead the generational shift to lower emission and new energy period was driven by the prudent and disciplined allocation vehicles, which is expected to gain considerable momentum in of capital to invest in the strategic property and businesses 2023 and underpin demand through the next decade. acquisitions in the ACT and South Australia and the on-market share buy-back. We continue to closely monitor the external macroeconomic environment and will ensure we continue to operate the Total inventory levels increased to $1,059.3 million as at business with discipline, focusing on active cost management, 31 December 2022, up from $874.0 million at 31 December targeted investment in growth and accelerating our 2021, driven by the acquisition of the ACT and South technology-enabled productivity initiatives across the Australian businesses in the second half of 2022. Eagers business, particularly around people and property. The Company continues to focus on cash management, provides the Company with the capacity and flexibility to Automotive continues to maintain significant equity ownership in used vehicle inventory. retaining a strong cash position of $190.4 million as at 31 December 2022. Strong operating cash flows of $407.5 million, supplemented by proceeds from the sale of Bill Buckle Auto Group and associated property, enabled the acquisition of strategic property and businesses, the continued investment in the delivery of new automotive retail formats and payment of dividends. In June 2022, Eagers Automotive announced its intention to conduct an on-market share buy-back of up to 10% of issued share capital. To date the Company has bought back 1.5 million shares, which represents 0.6% of shares on issue at the time of the buy-back announcement. The buy-back reflects the Board’s prudent focus on active capital management and is testament to the Company’s strong balance sheet and available liquidity. The strength of our balance sheet, evidenced by our liquidity position, low gearing and high value property portfolio, pursue accretive growth opportunities while insulating the business in the event of any material headwinds. In 2023 and beyond, Eagers Automotive is focused on continuing to create value for shareholders by: — Delivering material top line revenue growth associated with acquisitions, new strategic partnerships and greenfield opportunities established during FY22; — Maintaining our sustainably higher return on sales margin by leveraging new and existing margin levers, combined with cost base discipline and deliberate productivity improvements; — Continued evolution of our Independent Used Car Strategy with definitive inventory streams to drive performance in our traditional Franchise dealership used vehicle segment, and growing easyauto123 in a sustainable and profitable manner; — Leveraging our leading position in New Energy Vehicle retail as market adoption of low and zero emission vehicles accelerates rapidly via organic changes in consumer preference, supported by incentives and mandates stimulating incremental demand; — Implementing our proprietary technology initiatives to realise further productivity improvements; and — Disciplined review of accretive acquisition opportunities consistent with our Next100 Strategy, while executing on greenfield opportunities with both existing and new partners with a view to creating a distinct market advantage. 1 Underlying operating results refers to continuing operations, adjusted for significant items outlined and reconciled to statutory results on slides 32 (FY22) and 33 (comparative financial information) of the Investor Presentation. Underlying operating figures are non-financial measures and have not been subject to review by the Company’s external auditors. 2 NPBT means Net Profit Before Tax. 34 35 Eagers Automotive Limited | FINANCIAL REPORT 2022 Directors’ Report (CONTINUED) Directors’ Report (CONTINUED) Financial performance Segment performance Financial position Outlook On a statutory basis, the Company achieved a Statutory The Car Retailing segment delivered an Underlying1 Operating Net Profit Before Tax of $442.2 million for FY22, compared to Profit Before Tax of $397.4 million, compared to $388.4 million $456.8 million in the pcp. The FY22 statutory result included in 2021. The increase in profit was achieved despite ongoing significant items totalling $37.0 million net income before tax, supply constraints and inflationary pressures, reflecting predominately relating to the gain on sale of Bill Buckle Auto strong margins, the successful integration of recent business Group and associated property totalling $47.7 million, partially acquisitions and the organic and greenfield growth delivered offset by a $15.0 million provision recognised in relation to a through strategic automotive retail partnerships. non-core business that was divested in a prior period. Statutory Net Profit After Tax including discontinued operations for FY22 was $324.3 million, compared to $330.7 million in FY21. Statutory and Underlying1 revenue declined by 1.4% to The Car Retailing segment recorded a Statutory Profit Before Tax of $432.3 million compared to a profit of $403.0 million in 2021. The result benefited from the gain on sale of businesses of $35.2 million, predominately relating to the $8,541.5 million, with FY22 revenue impacted by a combination strategic divestment of Bill Buckle Auto Group. Underlying1 Operating NPBT2/Sales ratio increased marginally investment in organic growth at established locations. of the Bill Buckle Auto Group divestment in June 2022 along with continued supply constraints impacting new vehicle deliveries, partially offset by the acquisition of the ACT and South Australian businesses in the second half of 2022. On a like-for-like basis, Statutory and Underlying1 revenue decreased by 1.3% to $8,078.4 million. to 4.7% in FY22 (FY21: 4.6%). The margin uplift in the context of a higher inflationary environment reflects continued favourable margin dynamics and the benefit from ongoing productivity and cost-out programs. While overall revenue has been impacted by supply constraints, momentum in the underlying business has continued with a record order bank at December 2022, reflecting an increase of 74.4% since December 2021. The Company continued to focus on the growth of its national, independent pre-owned business, headlined by easyauto123 and supported by its national auction business Carlins. The easyauto123 business delivered volume and revenue growth due to a combination of the roll out of new sites across Australia and New Zealand along with Car Retailing Statutory and Underlying1 revenue increased by 1.2% to $8,540.6 million (2021: $8,438.3 million). The value of the property portfolio increased to $607.6 million at 31 December 2022, compared with $448.3 million at 31 December 2021 (excluding assets held for sale). This material increase primarily reflects the acquisition of property associated with the ACT and South Australian businesses in 2022, partially offset by divestment of properties associated with Bill Buckle Auto Group. The Property segment recorded an Underlying1 Operating Profit Before Tax of $13.5 million (excluding impairment and gains on sale), compared to $12.6 million in 2021. This increase in underlying profit was driven by income associated with recent property purchases, offset by the interest costs associated with debt drawn. The Property segment recorded a Statutory Profit Before Tax of $30.5 million for 2022 compared to $18.4 million in the pcp. The movement was driven by gains on sale of property associated with Bill Buckle Auto Group and a non-core parcel of land in Queensland. Eagers Automotive is in a very strong financial position holding a substantial property portfolio and asset base, together with $631.1 million of available liquidity at 31 December 2022. This liquidity position includes available cash and undrawn commitments under corporate debt facilities. Corporate debt (Term and Capital loan facilities) net of cash on hand increased to $253.4 million as at 31 December 2022, up from $128.4 million at 31 December 2021, and the Company’s leverage metrics are in a strong position, with the gearing ratio at 0.54 times as at 31 December 2022 (FY21: 0.28 times). The increase in corporate debt during the period was driven by the prudent and disciplined allocation of capital to invest in the strategic property and businesses acquisitions in the ACT and South Australia and the on-market share buy-back. Total inventory levels increased to $1,059.3 million as at 31 December 2022, up from $874.0 million at 31 December 2021, driven by the acquisition of the ACT and South Australian businesses in the second half of 2022. Eagers Automotive continues to maintain significant equity ownership in used vehicle inventory. The Company continues to focus on cash management, retaining a strong cash position of $190.4 million as at 31 December 2022. Strong operating cash flows of $407.5 million, supplemented by proceeds from the sale of Bill Buckle Auto Group and associated property, enabled the acquisition of strategic property and businesses, the continued investment in the delivery of new automotive retail formats and payment of dividends. In June 2022, Eagers Automotive announced its intention to conduct an on-market share buy-back of up to 10% of issued share capital. To date the Company has bought back 1.5 million shares, which represents 0.6% of shares on issue at the time of the buy-back announcement. The buy-back reflects the Board’s prudent focus on active capital management and is testament to the Company’s strong balance sheet and available liquidity. We have commenced FY23 with a very strong foundation for the year ahead. Demand continues to outstrip supply supporting a structural change to a new normal in order bank levels across the industry. Our record order bank provides significant earnings resilience through the cycle, as we deliver higher productivity and a sustainable, higher return on sales margin when compared to the pre-COVID trading environment. In addition to these market dynamics, the strategic acquisitions and partnerships developed during 2022 provide the foundation for top line revenue growth and position Eagers Automotive to lead the generational shift to lower emission and new energy vehicles, which is expected to gain considerable momentum in 2023 and underpin demand through the next decade. We continue to closely monitor the external macroeconomic environment and will ensure we continue to operate the business with discipline, focusing on active cost management, targeted investment in growth and accelerating our technology-enabled productivity initiatives across the business, particularly around people and property. The strength of our balance sheet, evidenced by our liquidity position, low gearing and high value property portfolio, provides the Company with the capacity and flexibility to pursue accretive growth opportunities while insulating the business in the event of any material headwinds. In 2023 and beyond, Eagers Automotive is focused on continuing to create value for shareholders by: — Delivering material top line revenue growth associated with acquisitions, new strategic partnerships and greenfield opportunities established during FY22; — Maintaining our sustainably higher return on sales margin by leveraging new and existing margin levers, combined with cost base discipline and deliberate productivity improvements; — Continued evolution of our Independent Used Car Strategy with definitive inventory streams to drive performance in our traditional Franchise dealership used vehicle segment, and growing easyauto123 in a sustainable and profitable manner; — Leveraging our leading position in New Energy Vehicle retail as market adoption of low and zero emission vehicles accelerates rapidly via organic changes in consumer preference, supported by incentives and mandates stimulating incremental demand; — Implementing our proprietary technology initiatives to realise further productivity improvements; and — Disciplined review of accretive acquisition opportunities consistent with our Next100 Strategy, while executing on greenfield opportunities with both existing and new partners with a view to creating a distinct market advantage. 1 Underlying operating results refers to continuing operations, adjusted for significant items outlined and reconciled to statutory results on slides 32 (FY22) and 33 (comparative financial information) of the Investor Presentation. Underlying operating figures are non-financial measures and have not been subject to review by the Company’s external auditors. 2 NPBT means Net Profit Before Tax. 34 35 Eagers Automotive Limited | FINANCIAL REPORT 2022 Directors’ Report (CONTINUED) Significant Changes in the State of Affairs 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. Remuneration Report 1. Introduction and key management personnel (KMP) Contents of Remuneration Report 1. Introduction and Key Management Personnel (KMP) 2. Remuneration strategy and principles 3. Remuneration governance 4. FY22 business performance 5. Executive remuneration framework for FY22 6. Remuneration structure and outcomes for FY22 7. Remuneration framework changes for FY22 8. Executive contractual arrangements 9. Non-executive Director remuneration 10. Statutory disclosures 37 37 38 38 39 41 44 45 45 56 Directors’ Report (CONTINUED) Position Chair Director Director Director Director Director Director Director The KMP for FY22 were: Non-executive Directors (NEDs) Name Tim Crommelin Nick Politis David Cowper Daniel Ryan Marcus Birrell Greg Duncan David Blackhall Michelle Prater Executive Directors Sophie Moore (CFO) Other Executive KMP Keith Thornton (CEO) Edward Geschke (COO) This report outlines the remuneration arrangements for the Company’s KMP, which include Directors and executives who have authority and responsibility for planning, directing and controlling the activities of the Group. The information provided in this report has been prepared in accordance with the requirements under the Corporations Act 2001 and relevant Accounting Standards. This report forms part of the Directors’ Report and unless otherwise indicated the following sections have been audited in accordance with section 308 (3c) of the Corporations Act 2001. Part year (from 1 January to his retirement from the Board on 18 May 2022) Term as KMP in FY22 Full year Full year Full year Full year Full year Full year Full year Full year Executive Director, Chief Financial Officer Chief Executive Officer Full year Chief Operating Office – Part year (from his appointment as COO Automotive on 1 May to 31 December 2022) Denis Stark (CS) Company Secretary Full year There have been no changes to KMP since the reporting date. 2. Remuneration strategy and principles The Company’s remuneration strategy and principles, which guide our remuneration framework, are outlined below. Our Remuneration Principles the Next100 Strategy equity ownership achievement of long-term financial and non-financial long-term value creation for shareholders Drive Linked to Aligned to Linked to the objectives Simplicity Flexibility Easily explained to and understood by Enables the Board to apply appropriate judgement where internal and external in the interests of the Company stakeholders to do so, with the rationale to be disclosed transparently where discretion is used Our Remuneration Strategy Remuneration packages are intended to reflect the individual’s duties and responsibilities, be competitive in attracting and retaining quality talent and be aligned to shareholder interests. 36 37 Eagers Automotive Limited | FINANCIAL REPORT 2022 Directors’ Report (CONTINUED) 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. Contents of Remuneration Report 1. Introduction and Key Management Personnel (KMP) 2. Remuneration strategy and principles 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 8. Executive contractual arrangements 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. 9. Non-executive Director remuneration 10. Statutory disclosures 3. Remuneration governance 4. FY22 business performance 5. Executive remuneration framework for FY22 6. Remuneration structure and outcomes for FY22 7. Remuneration framework changes for FY22 37 37 38 38 39 41 44 45 45 56 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. Introduction and key management personnel (KMP) This report outlines the remuneration arrangements for the Company’s KMP, which include Directors and executives who have authority and responsibility for planning, directing and controlling the activities of the Group. The information provided in this report has been prepared in accordance with the requirements under the Corporations Act 2001 and relevant Accounting Standards. This report forms part of the Directors’ Report and unless otherwise indicated the following sections have been audited in accordance with section 308 (3c) of the Corporations Act 2001. The KMP for FY22 were: Name Non-executive Directors (NEDs) Tim Crommelin Nick Politis David Cowper Daniel Ryan Marcus Birrell Greg Duncan David Blackhall Michelle Prater Executive Directors Sophie Moore (CFO) Other Executive KMP Keith Thornton (CEO) Edward Geschke (COO) Denis Stark (CS) Position Chair Director Director Director Director Director Director Director Term as KMP in FY22 Full year Full year Part year (from 1 January to his retirement from the Board on 18 May 2022) Full year Full year Full year Full year Full year Executive Director, Chief Financial Officer Full year Chief Executive Officer Chief Operating Office – Automotive Company Secretary Full year Part year (from his appointment as COO on 1 May to 31 December 2022) Full year There have been no changes to KMP since the reporting date. 2. Remuneration strategy and principles The Company’s remuneration strategy and principles, which guide our remuneration framework, are outlined below. Our Remuneration Principles Aligned to the Next100 Strategy Linked to the achievement of long-term financial and non-financial objectives Drive equity ownership Linked to long-term value creation for shareholders Simplicity Flexibility Easily explained to and understood by internal and external stakeholders Enables the Board to apply appropriate judgement where in the interests of the Company to do so, with the rationale to be disclosed transparently where discretion is used Our Remuneration Strategy Remuneration packages are intended to reflect the individual’s duties and responsibilities, be competitive in attracting and retaining quality talent and be aligned to shareholder interests. 36 37 5. Executive remuneration framework for FY22 5. Executive remuneration framework for FY22 (CONTINUED) Eagers Automotive Limited | FINANCIAL REPORT 2022 Directors’ Report (CONTINUED) Remuneration Report (CONTINUED) 3. Remuneration governance The Company’s remuneration governance structure provides oversight of the Company’s remuneration practices and policies. The following diagram illustrates the remuneration governance framework. Board The Board is responsible for approving and reviewing the remuneration arrangements for NEDs and the CEO, based on recommendations of the Remuneration & Nomination Committee. The Board also reviews the CEO’s performance on a continual basis. Remuneration & Nomination Committee The Remuneration & Nomination Committee reviews and makes recommendations to the Board regarding NED and CEO remuneration arrangements and KMP equity plans. These reviews take place at least annually, taking into account relevant factors including market conditions. Management The CEO, in consultation with the Chair of the Remuneration & Nomination Committee, sets and reviews the remuneration arrangements of other executive KMPs ensuring the appropriateness of their reward framework and reviews their performance at least annually. Remuneration advisors External advisors may be engaged directly by the Board or through the Remuneration & Nomination Committee to provide advice or information relating to KMP that is free from the influence of management. Although no such external advisors were engaged during FY22, as reported last year KPMG was engaged in FY20 and early FY21 to assist with a remuneration review, changes to the executive remuneration framework and benchmarking. KPMG’s engagement did not involve providing any remuneration recommendations as defined by the Corporations Act 2001. 4. FY22 business performance During FY22, despite an unusual and challenging external environment, the Company achieved strong growth in respect of key financial and non-financial metrics, which has been reflected in our strong financial results for the year. The table below details Eagers’ performance against key financial and operational metrics for the five-year period ended 31 December 2022. Name Statutory net profit after tax (NPAT) ($ million) Statutory earnings per share (EPS) – basic (cents) Dividend per share (cents) Share price at year end ($) 2022 324.3 121.3 71.0 10.85 2021 330.7 125.2 70.9 13.44 2020 156.2 57.6 25.0 13.29 2019 (139.6) (67.4) 25.3 10.24 2018 97.5 50.1 36.5 6.00 Directors’ Report (CONTINUED) Remuneration Report (CONTINUED) Total Fixed Remuneration Short-Term Incentives (TFR) (STI) Long-Term Incentives (LTI) — Each executive KMP — There were no changes in FY22 to receives a competitive base the STI plan described in last year’s pay (plus superannuation) remuneration report. to reflect the market for a — The focus of the STI plan is on creation comparable role. of shareholder value by rewarding the — There were no changes in FY22 to the LTI plan described in last year’s remuneration report. — The focus of the LTI plan is on creation of shareholder value by rewarding the achievement of financial performance hurdles over a four-year performance period (FY21 to — Base pay is reviewed annually and on promotion to ensure it remains competitive with the market. — Benefits may include use of motor vehicles, insurance and health and fitness programs. achievement of both financial and non-financial performance hurdles. — Performance is measured annually. and performance rights. FY24). to FY24). — The STI plan is delivered in a mix of cash at the end of the four-year period (FY21 — Performance is measured only once, being — Performance rights for a four-year period — The LTI plan is delivered in share options. (FY21 to FY24) were allocated on the initial grant date in February FY21, with the number of rights determined using ‘fair value’ methodology. — Two financial performance hurdles must be achieved for any rights to vest. The exercise price is $12.32 per option, being the share price on the initial grant date in February 2021. — Options for the four-year period were allocated on the initial grant date, with the number of options determined using ‘fair — If rights vest, they convert to ordinary value’ methodology. — Financial hurdles - Two financial performance hurdles must be achieved for any options to vest: Baseline: • Interest cover ratio of at least 2.5 times; and • Compound annual growth in EPS above the » 50% of options vest at 9.0% EPS growth over the four-year period. » 100% of options vest at 10% EPS growth over the four-year period. — If options vest and are exercised, they will convert to ordinary shares at the end of the four-year period, without a holding lock. — If employment ceases, all unvested options will lapse, unless the Board determines otherwise. CEO annum over the four-year period, subject to achievement of the two financial hurdles. — Non-financial hurdles – up to one-third — Maximum award – 50% of base pay per shares subject to holding lock until February 2025 or cessation of employment. — If employment ceases, there is no STI payment or vesting of rights for the year in which employment ceases unless the Board determines otherwise. CEO of base pay, by cash payment, subject to strategic and sustainability hurdles (split evenly between strategic and sustainability). — Financial hurdles – up to two-thirds of base pay, by a mix of cash payment and rights, subject to two financial hurdles: • Interest cover ratio of at least 2.5 times; and • Compound annual growth in underlying EPS above baseline of 52.0 cents per share for FY20 (Baseline): » At 7.0% EPS growth, $200,000 in cash and $200,000 of rights will vest. » At 7.5% EPS growth, a further $200,000 of rights will vest. » At 8.0% EPS growth, a further $200,000 of rights will vest. 38 39 Eagers Automotive Limited | FINANCIAL REPORT 2022 Directors’ Report (CONTINUED) Remuneration Report (CONTINUED) 3. Remuneration governance The Company’s remuneration governance structure provides oversight of the Company’s remuneration practices and policies. The following diagram illustrates the remuneration governance framework. Total Fixed Remuneration (TFR) Short-Term Incentives (STI) Long-Term Incentives (LTI) 5. Executive remuneration framework for FY22 5. Executive remuneration framework for FY22 (CONTINUED) Directors’ Report (CONTINUED) Remuneration Report (CONTINUED) — Each executive KMP — There were no changes in FY22 to receives a competitive base pay (plus superannuation) to reflect the market for a comparable role. — Base pay is reviewed annually and on promotion to ensure it remains competitive with the market. — Benefits may include use of motor vehicles, insurance and health and fitness programs. Board The Board is responsible for approving and reviewing the remuneration arrangements for NEDs and the CEO, based on recommendations of the Remuneration & Nomination Committee. The Board also reviews the CEO’s performance on a continual basis. Remuneration & Nomination Committee The Remuneration & Nomination Committee reviews and makes recommendations to the Board regarding NED and CEO remuneration arrangements and KMP equity plans. These reviews take place at least annually, taking into account relevant factors including market conditions. Management The CEO, in consultation with the Chair of the Remuneration & Nomination Committee, sets and reviews the remuneration arrangements of other executive KMPs ensuring the appropriateness of their reward framework and reviews their performance at least annually. Remuneration advisors External advisors may be engaged directly by the Board or through the Remuneration & Nomination Committee to provide advice or information relating to KMP that is free from the influence of management. Although no such external advisors were engaged during FY22, as reported last year KPMG was engaged in FY20 and early FY21 to assist with a remuneration review, changes to the executive remuneration framework and benchmarking. KPMG’s engagement did not involve providing any remuneration recommendations as defined by the Corporations Act 2001. 4. FY22 business performance During FY22, despite an unusual and challenging external environment, the Company achieved strong growth in respect of key financial and non-financial metrics, which has been reflected in our strong financial results for the year. The table below details Eagers’ performance against key financial and operational metrics for the five-year period ended 31 December 2022. Name Statutory net profit after tax (NPAT) ($ million) Statutory earnings per share (EPS) – basic (cents) Dividend per share (cents) Share price at year end ($) 2022 324.3 121.3 71.0 10.85 2021 330.7 125.2 70.9 13.44 2020 156.2 57.6 25.0 13.29 2019 (139.6) (67.4) 25.3 10.24 2018 97.5 50.1 36.5 6.00 the STI plan described in last year’s remuneration report. — The focus of the STI plan is on creation of shareholder value by rewarding the achievement of both financial and non-financial performance hurdles. — Performance is measured annually. — The STI plan is delivered in a mix of cash and performance rights. — There were no changes in FY22 to the LTI plan described in last year’s remuneration report. — The focus of the LTI plan is on creation of shareholder value by rewarding the achievement of financial performance hurdles over a four-year performance period (FY21 to FY24). — Performance is measured only once, being at the end of the four-year period (FY21 to FY24). — Performance rights for a four-year period — The LTI plan is delivered in share options. The exercise price is $12.32 per option, being the share price on the initial grant date in February 2021. — Options for the four-year period were allocated on the initial grant date, with the number of options determined using ‘fair value’ methodology. — Financial hurdles - Two financial performance hurdles must be achieved for any options to vest: • Interest cover ratio of at least 2.5 times; and • Compound annual growth in EPS above the Baseline: » 50% of options vest at 9.0% EPS growth over the four-year period. » 100% of options vest at 10% EPS growth over the four-year period. — If options vest and are exercised, they will convert to ordinary shares at the end of the four-year period, without a holding lock. — If employment ceases, all unvested options will lapse, unless the Board determines otherwise. CEO — Maximum award – 50% of base pay per annum over the four-year period, subject to achievement of the two financial hurdles. (FY21 to FY24) were allocated on the initial grant date in February FY21, with the number of rights determined using ‘fair value’ methodology. — Two financial performance hurdles must be achieved for any rights to vest. — If rights vest, they convert to ordinary shares subject to holding lock until February 2025 or cessation of employment. — If employment ceases, there is no STI payment or vesting of rights for the year in which employment ceases unless the Board determines otherwise. CEO — Non-financial hurdles – up to one-third of base pay, by cash payment, subject to strategic and sustainability hurdles (split evenly between strategic and sustainability). — Financial hurdles – up to two-thirds of base pay, by a mix of cash payment and rights, subject to two financial hurdles: • Interest cover ratio of at least 2.5 times; and • Compound annual growth in underlying EPS above baseline of 52.0 cents per share for FY20 (Baseline): » At 7.0% EPS growth, $200,000 in cash and $200,000 of rights will vest. » At 7.5% EPS growth, a further $200,000 of rights will vest. » At 8.0% EPS growth, a further $200,000 of rights will vest. 38 39 Eagers Automotive Limited | FINANCIAL REPORT 2022 Directors’ Report (CONTINUED) Remuneration Report (CONTINUED) Remuneration Report (CONTINUED) 5. Executive remuneration framework for FY22 (CONTINUED) 6. Remuneration structure and outcomes for FY22 Total Fixed Remuneration (TFR) Short-Term Incentives (STI) Long-Term Incentives (LTI) CFO — Performance rights - up to one-third of CFO — Maximum award – 17% of base pay per base pay, subject to two financial hurdles: • Interest cover ratio of at least 2.5 times; annum over the four-year period, subject to the achievement of the two financial hurdles. As reported above in this Directors‘ Report, the Company delivered strong results against key financial and non-financial metrics for FY22. The following are details of the FY22 remuneration structures and outcomes awarded to executive KMP based on both Company and • Compound annual growth in underlying EPS above the Baseline: » At 7.5% EPS growth, 50% of rights vest. » At 8.0% EPS growth, 100% of rights vest. — Up to 42% of base pay, by cash payment, subject to: • Non-financial hurdles - 60% of payment subject to strategic and sustainability hurdles (split evenly between strategic and sustainability). • Financial hurdles – 40% of payment subject to financial hurdle of 7% compound annual growth in underlying EPS above the Baseline. COO — No performance rights. — Up to $200,000, by cash payment, subject to business units achieving specified non-financial hurdles (split between strategic and sustainability hurdles). — COO is also entitled to a commission plan consisting of a cash payment equal to a percentage of net profit before tax of relevant business units. — The commission plan is subject to a cap and applies only to the COO. It has a direct link to the Company’s financial performance and is commonly used for senior management in the automotive industry, where fixed remuneration is set relatively low and variable remuneration forms a larger proportion of the remuneration mix. COO — Maximum award – 50% of base pay per annum over the four-year period, subject to the achievement of the two financial hurdles. CS — Performance rights of up to 12% of base pay, subject to two financial hurdles: • Interest cover ratio of at least 2.5 times; CS — Maximum award – 6% of base pay per annum over the four-year period, subject to the achievement of the two financial hurdles. and • Compound annual growth in underlying EPS above the Baseline: » At 7.5% EPS growth, 50% of rights vest. » At 8.0% EPS growth, 100% of rights vest. — Up to 29% of base pay, by cash payment, subject to: • Non-financial hurdles - 80% of payment subject to strategic and sustainability hurdles (split evenly between strategic and sustainability). • Financial hurdles – 20% of payment subject to financial hurdle of 7% compound annual growth in underlying EPS above the Baseline. 40 Directors’ Report (CONTINUED) and individual performance. (a) STI Plan - performance outcomes for FY22 Further detail Executive KMP. Design feature Eligibility Instrument Performance period Maximum opportunity Performance Hurdle Rationale A mix of cash and performance rights, as described in section 5 of this remuneration report. Performance is measured annually. As described in section 5 of this remuneration report. Financial hurdles are quantitative measures that align executive KMP members with each other, and also with the interests of shareholders. These common objectives are easily shared and communicated. They reward executives only when the Company, as a whole, performs to achieve the financial hurdles. ESG measures. Sustainability hurdles incentivise executive KMP members to play a productive role in developing sustainable business practices across operational, safety, risk, culture, governance and other Strategic hurdles are a blend of hurdles which measure progress against the Company’s Next100 Strategic Plan and nominated strategic projects. Each executive KMP member has a combination of group-wide and individual hurdles applicable to their role and the function they lead across the Company. Incorporating this blend of both group and individual performance hurdles assists in creating one team working towards common objectives whilst also rewarding and recognising individual performance. This blend of performance hurdles drives executive focus in both short-term performance and appropriate investments and initiatives for the protection and growth of the Company in the medium and longer term, thereby aligning executive and shareholder interests. Performance Review The Board, following review by the Remuneration & Nomination Committee, approved the achievement of the financial performance hurdles by the CEO and all executive KMP, the achievement of the CEO’s non-financial performance hurdles and the payment of the CEO’s STI award. The CEO, in consultation with the Remuneration & Nomination Committee, approved the achievement of the non-financial performance hurdles of the other executive KMP. Achievement of Financial Achievement of the financial performance hurdles by the CEO and all other executive KMP was Performance Hurdles determined with reference to the Company’s annual growth in underlying EPS and interest cover ratio performance hurdles, as described in section 5 of this remuneration report, having regard to the group’s audited financial statements. 8% Compound Annual Growth in 60.7 cents per share 104.8 cents per share Underlying EPS Interest cover ratio At least 2.5 times 14.8 times FY22 Financial Performance Hurdle FY22 Actual Achieved Yes Yes 41 Eagers Automotive Limited | FINANCIAL REPORT 2022 Directors’ Report (CONTINUED) Directors’ Report (CONTINUED) Remuneration Report (CONTINUED) Remuneration Report (CONTINUED) 5. Executive remuneration framework for FY22 (CONTINUED) 6. Remuneration structure and outcomes for FY22 Total Fixed Remuneration Short-Term Incentives Long-Term Incentives (TFR) (LTI) CFO As reported above in this Directors‘ Report, the Company delivered strong results against key financial and non-financial metrics for FY22. The following are details of the FY22 remuneration structures and outcomes awarded to executive KMP based on both Company and individual performance. — Performance rights - up to one-third of — Maximum award – 17% of base pay per base pay, subject to two financial hurdles: • Interest cover ratio of at least 2.5 times; annum over the four-year period, subject to the achievement of the two financial hurdles. (a) STI Plan - performance outcomes for FY22 Design feature Further detail Eligibility Instrument Performance period Maximum opportunity Performance Hurdle Rationale Performance Review Achievement of Financial Performance Hurdles Executive KMP. A mix of cash and performance rights, as described in section 5 of this remuneration report. Performance is measured annually. As described in section 5 of this remuneration report. Financial hurdles are quantitative measures that align executive KMP members with each other, and also with the interests of shareholders. These common objectives are easily shared and communicated. They reward executives only when the Company, as a whole, performs to achieve the financial hurdles. Sustainability hurdles incentivise executive KMP members to play a productive role in developing sustainable business practices across operational, safety, risk, culture, governance and other ESG measures. Strategic hurdles are a blend of hurdles which measure progress against the Company’s Next100 Strategic Plan and nominated strategic projects. Each executive KMP member has a combination of group-wide and individual hurdles applicable to their role and the function they lead across the Company. Incorporating this blend of both group and individual performance hurdles assists in creating one team working towards common objectives whilst also rewarding and recognising individual performance. This blend of performance hurdles drives executive focus in both short-term performance and appropriate investments and initiatives for the protection and growth of the Company in the medium and longer term, thereby aligning executive and shareholder interests. The Board, following review by the Remuneration & Nomination Committee, approved the achievement of the financial performance hurdles by the CEO and all executive KMP, the achievement of the CEO’s non-financial performance hurdles and the payment of the CEO’s STI award. The CEO, in consultation with the Remuneration & Nomination Committee, approved the achievement of the non-financial performance hurdles of the other executive KMP. Achievement of the financial performance hurdles by the CEO and all other executive KMP was determined with reference to the Company’s annual growth in underlying EPS and interest cover ratio performance hurdles, as described in section 5 of this remuneration report, having regard to the group’s audited financial statements. 8% Compound Annual Growth in Underlying EPS Interest cover ratio 60.7 cents per share 104.8 cents per share At least 2.5 times 14.8 times Yes Yes FY22 Financial Performance Hurdle FY22 Actual Achieved (STI) CFO and • Compound annual growth in underlying EPS above the Baseline: » At 7.5% EPS growth, 50% of rights vest. » At 8.0% EPS growth, 100% of rights vest. — Up to 42% of base pay, by cash payment, subject to: • Non-financial hurdles - 60% of payment subject to strategic and sustainability hurdles (split evenly between strategic and sustainability). • Financial hurdles – 40% of payment subject to financial hurdle of 7% compound annual growth in underlying EPS above the Baseline. non-financial hurdles (split between strategic and sustainability hurdles). — COO is also entitled to a commission plan consisting of a cash payment equal to a percentage of net profit before tax of relevant business units. — The commission plan is subject to a cap and applies only to the COO. It has a direct link to the Company’s financial performance and is commonly used for senior management in the automotive industry, where fixed remuneration is set relatively low and variable remuneration forms a larger proportion of the remuneration mix. • Compound annual growth in underlying EPS above the Baseline: » At 7.5% EPS growth, 50% of rights vest. » At 8.0% EPS growth, 100% of rights vest. — Up to 29% of base pay, by cash payment, subject to: • Non-financial hurdles - 80% of payment subject to strategic and sustainability hurdles (split evenly between strategic and sustainability). • Financial hurdles – 20% of payment subject to financial hurdle of 7% compound annual growth in underlying EPS above the Baseline. COO COO — No performance rights. — Maximum award – 50% of base pay per — Up to $200,000, by cash payment, subject annum over the four-year period, subject to to business units achieving specified the achievement of the two financial hurdles. — Performance rights of up to 12% of base — Maximum award – 6% of base pay per pay, subject to two financial hurdles: annum over the four-year period, subject to • Interest cover ratio of at least 2.5 times; the achievement of the two financial hurdles. CS CS and 40 41 Eagers Automotive Limited | FINANCIAL REPORT 2022 Directors’ Report (CONTINUED) Directors’ Report (CONTINUED) Remuneration Report (CONTINUED) Remuneration Report (CONTINUED) 6. Remuneration structure and outcomes for FY22 (CONTINUED) 6. Remuneration structure and outcomes for FY22 (CONTINUED) (a) STI Plan - performance outcomes for FY22 (CONTINUED) (a) STI Plan - performance outcomes for FY22 (CONTINUED) Design feature Further detail Design feature Further detail Achievement of Strategic Performance Hurdles Achievement of the Strategic performance hurdles was determined with reference to achievement of both group and individual performance and engagement against strategic initiatives, including in these areas: Achievement of Sustainability Achievement of the Sustainability performance hurdles was determined with reference to Performance Hurdles achievement of both group and individual performance and engagement against sustainability Group-wide Strategic Achievements Achievements against the Next100 Strategic Plan in FY22 included: — Acquisitions of significant dealership businesses in the ACT and South Australia. — Divestments of specific businesses that did not suit the Company’s portfolio in NSW and Western Australia. — Organic franchised automotive growth through new representation of automotive brands and in new locations in Queensland, Western Australia and Victoria. — Execution of AutoMall strategy in Queensland and Western Australia. — Organic growth in independent used automotive business through the rollout of new sites in NSW and Tasmania for sustainable scaling of used business through disciplined investment. — Organic growth with new representation of non-traditional brands such as BYD. — Organic growth through the Company’s property strategy, with 13 properties acquired and 4 divested, resulting in an increase in the freehold property portfolio value from $467 million to $608 million. — Significant property redevelopments in Queensland and Victoria. — Organic growth through the Company’s proprietary technology driving growth in productivity and incremental revenue opportunities in all regions. Individual Strategic Achievements — For the CEO, achievement through leading specific progress against the Next100 Strategic Plan as described above, including maximising franchised automotive outcomes via organic and acquisitive growth opportunities, and maximising used automotive business growth opportunities. — For the CFO, achievement through contributions towards specific progress against the Next100 Strategic Plan as described above, managing key financial measures for anticipated requirements while positioning the Company for Next100 execution, and leading key projects for acquisition, divestment and growth, balancing the desired outcomes with appropriate commerciality. — For the COO, achievement through contributions towards specific progress against the Next100 Strategic Plan as described above, including development and rollout of nominated strategic projects across relevant business units such as growing representation of both traditional and new brands, the AutoMall strategy, used automotive business initiatives, implementation of proprietary technology, while balancing desired outcomes with appropriate commerciality. — For the CS, achievement through contributions towards specific progress against the Next100 Strategic Plan as described above, key acquisitions, divestments and growth initiatives, balancing desired outcomes with appropriate commerciality, and establishing and maintaining legal/corporate framework for growth ambitions and Next100 Strategy. 42 and performance initiatives, including in these areas: Group-wide Sustainability Achievements Achievements in FY22 included: — Development of the Company’s sustainability and ESG roadmap in support of the Next100 Strategic Plan and aligned with our corporate values. — The ESG roadmap focuses on developing our people (people), optimising our environment (planet) and sustainable growth (performance), adopting a practical and pragmatic approach. — Driving stakeholder engagement levels across the group, including annual employee engagement survey through an independent external operator. — Multiple safety initiatives implemented, including improved reporting and risk management, and safety leadership program. — Environmental initiatives, including continued program for decommissioning of underground petroleum storage systems and installation of solar photovoltaic systems across multiple sites. — Group-wide adherence to relevant regulatory and contractual requirements. — Ongoing cost-out program and optimisation of businesses and property portfolio to provide for a more sustainable business and greater flexibility for implementation of omni-channel approach. Individual Sustainability Achievements — For the CEO, achievement through leading specific progress against the group-wide sustainability initiatives as described above, including driving group-wide stakeholder engagement, group-wide adherence to relevant regulatory and contractual requirements, and roadmap for key sustainability initiatives including ESG and diversity, while balancing desired outcomes with appropriate commerciality. — For the CFO, achievement through contributions towards specific group-wide sustainability initiatives as described above, organisational compliance with accounting and taxation obligations, adherence to relevant regulatory and contractual requirements, contributions towards nominated non-strategic projects, while balancing desired outcomes with appropriate commerciality. — For the COO, achievement through contributions towards specific group-wide sustainability initiatives as described above, including the rollout of operational projects across used automotive and other business units, driving employee engagement levels, safety initiatives and the cost-out program, while balancing desired outcomes with appropriate commerciality. — For the CS, achievement through contributions towards specific group-wide sustainability initiatives as described above, advisory to Board and management in respect of sustainability/ESG initiatives, governance, corporate values and operations, adherence to relevant regulatory and contractual requirements, in an environment of high transparency, ethics and integrity, and while balancing desired outcomes with appropriate commerciality. Having regard to the group and individual achievements outlined above, all executive KMPs received 100% of their STI plan awards for FY22 following assessment by the Board, Remuneration & Nomination Committee and CEO, as described in section 5 of this remuneration report. It was considered that no reduction to maximum entitlements was warranted based on review of the individual’s performance during the year against these measures. In these circumstances, payment of the full STI awards was determined to be appropriate, particularly in light of the Company’s record 2022 operational and financial performance. CEO CFO COO CS % Awarded FY22 under STI Plan % 100% 100% 100% 100% STI Paid $ 600,000 250,000 200,000 125,000 No. of Rights Vested 52,265 17,422 - 4,355 43 Eagers Automotive Limited | FINANCIAL REPORT 2022 Directors’ Report (CONTINUED) Directors’ Report (CONTINUED) Remuneration Report (CONTINUED) Remuneration Report (CONTINUED) 6. Remuneration structure and outcomes for FY22 (CONTINUED) 6. Remuneration structure and outcomes for FY22 (CONTINUED) (a) STI Plan - performance outcomes for FY22 (CONTINUED) (a) STI Plan - performance outcomes for FY22 (CONTINUED) Design feature Further detail Design feature Further detail Achievement of Strategic Achievement of the Strategic performance hurdles was determined with reference to Performance Hurdles achievement of both group and individual performance and engagement against strategic Achievement of Sustainability Performance Hurdles Achievement of the Sustainability performance hurdles was determined with reference to achievement of both group and individual performance and engagement against sustainability and performance initiatives, including in these areas: Group-wide Sustainability Achievements Achievements in FY22 included: — Development of the Company’s sustainability and ESG roadmap in support of the Next100 Strategic Plan and aligned with our corporate values. — The ESG roadmap focuses on developing our people (people), optimising our environment (planet) and sustainable growth (performance), adopting a practical and pragmatic approach. — Driving stakeholder engagement levels across the group, including annual employee engagement survey through an independent external operator. — Multiple safety initiatives implemented, including improved reporting and risk management, and safety leadership program. — Environmental initiatives, including continued program for decommissioning of underground petroleum storage systems and installation of solar photovoltaic systems across multiple sites. — Group-wide adherence to relevant regulatory and contractual requirements. — Ongoing cost-out program and optimisation of businesses and property portfolio to provide for a more sustainable business and greater flexibility for implementation of omni-channel approach. Individual Sustainability Achievements — For the CEO, achievement through leading specific progress against the group-wide sustainability initiatives as described above, including driving group-wide stakeholder engagement, group-wide adherence to relevant regulatory and contractual requirements, and roadmap for key sustainability initiatives including ESG and diversity, while balancing desired outcomes with appropriate commerciality. — For the CFO, achievement through contributions towards specific group-wide sustainability initiatives as described above, organisational compliance with accounting and taxation obligations, adherence to relevant regulatory and contractual requirements, contributions towards nominated non-strategic projects, while balancing desired outcomes with appropriate commerciality. — For the COO, achievement through contributions towards specific group-wide sustainability initiatives as described above, including the rollout of operational projects across used automotive and other business units, driving employee engagement levels, safety initiatives and the cost-out program, while balancing desired outcomes with appropriate commerciality. — For the CS, achievement through contributions towards specific group-wide sustainability initiatives as described above, advisory to Board and management in respect of sustainability/ESG initiatives, governance, corporate values and operations, adherence to relevant regulatory and contractual requirements, in an environment of high transparency, ethics and integrity, and while balancing desired outcomes with appropriate commerciality. Having regard to the group and individual achievements outlined above, all executive KMPs received 100% of their STI plan awards for FY22 following assessment by the Board, Remuneration & Nomination Committee and CEO, as described in section 5 of this remuneration report. It was considered that no reduction to maximum entitlements was warranted based on review of the individual’s performance during the year against these measures. In these circumstances, payment of the full STI awards was determined to be appropriate, particularly in light of the Company’s record 2022 operational and financial performance. CEO CFO COO CS % Awarded FY22 under STI Plan % 100% 100% 100% 100% STI Paid $ 600,000 250,000 200,000 125,000 No. of Rights Vested 52,265 17,422 - 4,355 43 initiatives, including in these areas: Group-wide Strategic Achievements Achievements against the Next100 Strategic Plan in FY22 included: — Acquisitions of significant dealership businesses in the ACT and South Australia. — Divestments of specific businesses that did not suit the Company’s portfolio in NSW and Western Australia. — Organic franchised automotive growth through new representation of automotive brands and in new locations in Queensland, Western Australia and Victoria. — Execution of AutoMall strategy in Queensland and Western Australia. — Organic growth in independent used automotive business through the rollout of new sites in NSW and Tasmania for sustainable scaling of used business through disciplined investment. — Organic growth with new representation of non-traditional brands such as BYD. — Organic growth through the Company’s property strategy, with 13 properties acquired and 4 divested, resulting in an increase in the freehold property portfolio value from $467 million to $608 million. — Significant property redevelopments in Queensland and Victoria. — Organic growth through the Company’s proprietary technology driving growth in productivity and incremental revenue opportunities in all regions. Individual Strategic Achievements — For the CEO, achievement through leading specific progress against the Next100 Strategic Plan as described above, including maximising franchised automotive outcomes via organic and acquisitive growth opportunities, and maximising used automotive business growth opportunities. commerciality. — For the CFO, achievement through contributions towards specific progress against the Next100 Strategic Plan as described above, managing key financial measures for anticipated requirements while positioning the Company for Next100 execution, and leading key projects for acquisition, divestment and growth, balancing the desired outcomes with appropriate — For the COO, achievement through contributions towards specific progress against the Next100 Strategic Plan as described above, including development and rollout of nominated strategic projects across relevant business units such as growing representation of both traditional and new brands, the AutoMall strategy, used automotive business initiatives, implementation of proprietary technology, while balancing desired outcomes with appropriate commerciality. — For the CS, achievement through contributions towards specific progress against the Next100 Strategic Plan as described above, key acquisitions, divestments and growth initiatives, balancing desired outcomes with appropriate commerciality, and establishing and maintaining legal/corporate framework for growth ambitions and Next100 Strategy. 42 Eagers Automotive Limited | FINANCIAL REPORT 2022 Directors’ Report (CONTINUED) Directors’ Report (CONTINUED) Remuneration Report (CONTINUED) 6. Remuneration structure and outcomes for FY22 (CONTINUED) (b) Accounting Treatment of STI Plan The cost of the CEO’s STI plan will average a maximum of $600,000 per annum over the four-year period FY21 to FY24, and will only reach the maximum cost if 100% of the performance rights under the plan are to vest over the four year period (which would require at least 8% compound annual growth in underlying EPS for the four years, as described above). This is based on the fair value methodology on the initial grant date. However, accounting standards require that the remuneration table on page 48 must include the cost of the STI plan each year based on progressive recognition of the performance rights in the period from the grant date to their vesting date, rather than their average annual cost. This has resulted in the remuneration table showing a decrease in the CEO’s share-based pay for FY22 as compared to FY21. Despite this accounting treatment, the number of performance rights which vested for the CEO has actually risen from 50,463 rights in FY21 to 52,265 rights in FY22. (c) LTI Plan for FY22 The LTI Plan was introduced in FY21, as detailed in section 5 of this remuneration report, for better alignment with ASX200 market practice. There were no changes to the LTI Plan in FY22. Performance will be measured at the end of FY24. 9. Non-executive director remuneration 7. Remuneration framework changes for FY22 There have been no material changes to the executive remuneration framework for FY22. The appointment of the COO on 1 May 2022 resulted in his addition as an executive KMP member for FY22. As reported in last year’s remuneration report, a comprehensive review of the executive remuneration framework was undertaken in FY20 in response to the ‘first strike’ received at our 2020 Annual General Meeting. This included the Board engaging with shareholders, proxy advisors and other stakeholders to better understand their concerns and the Board also obtained independent external advice in FY20 in relation to our remuneration framework. As a result, many changes were made to the remuneration framework for FY21 and these are reflected in the current STI and LTI Plans, as described in section 5 of this remuneration report. These changes better align our remuneration framework with ASX200 market practice, while maintaining a strong pay-for-performance culture. Key Changes to Remuneration Framework following ‘First Strike’ in FY20 — Improved disclosure on STI framework and performance measures. — Clear STI performance hurdles, assessed against both financial and non-financial performance hurdles, improving the alignment of executive KMP remuneration with shareholder interests. — STI plan is a mix of cash and equity (performance rights). — No re-testing of STI performance hurdles. — Improved disclosure on LTI framework and performance measures. — LTI plan has a four-year performance period for financial hurdles for alignment of executive KMP remuneration with shareholder interests. — LTI plan is awarded wholly in equity (share options) for alignment with shareholders, with the option exercise price set at $12.32 per option (which was the share price on the initial grant date in February 2021). — Clear LTI performance hurdles for the four-year performance period, assessed wholly against financial measures with graduated vesting. — No re-testing of LTI performance hurdles. — Current remuneration framework was introduced for FY21. — Improved transparency and disclosure of the remuneration framework and structures. — Appropriate change-in-control and claw-back provisions in line with market practice. — No equity retention grants. — The Board has not used its discretion to award one-off bonuses. STI LTI Other 44 Remuneration Report (CONTINUED) 8. Executive contractual arrangements the limits set by the Corporations Act 2001. The following table details key contractual terms. Executive KMP are employed under common employment agreements. Any termination benefits would be subject to compliance with Name CEO CFO COO CS Duration of service agreement Notice period by employee Notice period by company Payments upon termination Ongoing 12 months 12 months At the Board’s discretion Ongoing Ongoing Ongoing 3 months 3 months At the Board’s discretion 6 months 6 months At the Board’s discretion 3 months 3 months At the Board’s discretion The objectives of the Company’s policy regarding Non-executive Director (NED) fees are: — to preserve the independence of NEDs by not providing them with any performance-related remuneration. NEDs do not participate in schemes designed for the remuneration of executives, equity schemes, incentive programmes or retirement allowance programmes, nor do they receive performance-based bonuses. — to be market competitive with regard to NED fees, which are reviewed annually. NED fees are limited to a maximum aggregate amount approved by shareholders, with the current limit of $1,000,000 per annum having been approved at the 2020 Annual General Meeting. Each NED receives a single fee based on their position, without any extra fee payable for being a member of a Committee. NED fees for FY22 are as reflected in the following table (exclusive of superannuation). Role Chair of the Board Chair of the Audit & Risk Committee Chair of the Remuneration & Nomination Committee Other NEDs Fees $125,000 per annum $115,000 per annum $115,000 per annum $100,000 per annum 45 Eagers Automotive Limited | FINANCIAL REPORT 2022 Directors’ Report (CONTINUED) Directors’ Report (CONTINUED) Remuneration Report (CONTINUED) 8. Executive contractual arrangements Executive KMP are employed under common employment agreements. Any termination benefits would be subject to compliance with the limits set by the Corporations Act 2001. The following table details key contractual terms. Name CEO CFO COO CS Duration of service agreement Ongoing Ongoing Ongoing Ongoing Notice period by employee 12 months 3 months 6 months 3 months Notice period by company 12 months 3 months 6 months 3 months Payments upon termination At the Board’s discretion At the Board’s discretion At the Board’s discretion At the Board’s discretion The LTI Plan was introduced in FY21, as detailed in section 5 of this remuneration report, for better alignment with ASX200 market practice. There were no changes to the LTI Plan in FY22. Performance will be measured at the end of FY24. 9. Non-executive director remuneration The objectives of the Company’s policy regarding Non-executive Director (NED) fees are: — to preserve the independence of NEDs by not providing them with any performance-related remuneration. NEDs do not participate in schemes designed for the remuneration of executives, equity schemes, incentive programmes or retirement allowance programmes, nor do they receive performance-based bonuses. — to be market competitive with regard to NED fees, which are reviewed annually. NED fees are limited to a maximum aggregate amount approved by shareholders, with the current limit of $1,000,000 per annum having been approved at the 2020 Annual General Meeting. Each NED receives a single fee based on their position, without any extra fee payable for being a member of a Committee. NED fees for FY22 are as reflected in the following table (exclusive of superannuation). Role Chair of the Board Chair of the Audit & Risk Committee Chair of the Remuneration & Nomination Committee Other NEDs Fees $125,000 per annum $115,000 per annum $115,000 per annum $100,000 per annum 45 Remuneration Report (CONTINUED) 6. Remuneration structure and outcomes for FY22 (CONTINUED) (b) Accounting Treatment of STI Plan The cost of the CEO’s STI plan will average a maximum of $600,000 per annum over the four-year period FY21 to FY24, and will only reach the maximum cost if 100% of the performance rights under the plan are to vest over the four year period (which would require at least 8% compound annual growth in underlying EPS for the four years, as described above). This is based on the fair value methodology on the initial grant date. However, accounting standards require that the remuneration table on page 48 must include the cost of the STI plan each year based on progressive recognition of the performance rights in the period from the grant date to their vesting date, rather than their average annual cost. This has resulted in the remuneration table showing a decrease in the CEO’s share-based pay for FY22 as compared to FY21. Despite this accounting treatment, the number of performance rights which vested for the CEO has actually risen from 50,463 rights in FY21 to 52,265 rights in FY22. (c) LTI Plan for FY22 7. Remuneration framework changes for FY22 There have been no material changes to the executive remuneration framework for FY22. The appointment of the COO on 1 May 2022 resulted in his addition as an executive KMP member for FY22. As reported in last year’s remuneration report, a comprehensive review of the executive remuneration framework was undertaken in FY20 in response to the ‘first strike’ received at our 2020 Annual General Meeting. This included the Board engaging with shareholders, proxy advisors and other stakeholders to better understand their concerns and the Board also obtained independent external advice in FY20 in relation to our remuneration framework. As a result, many changes were made to the remuneration framework for FY21 and these are reflected in the current STI and LTI Plans, as described in section 5 of this remuneration report. These changes better align our remuneration framework with ASX200 market practice, while maintaining a strong pay-for-performance culture. Key Changes to Remuneration Framework following ‘First Strike’ in FY20 — Improved disclosure on STI framework and performance measures. — Clear STI performance hurdles, assessed against both financial and non-financial performance hurdles, improving the alignment of executive KMP remuneration with shareholder interests. — STI plan is a mix of cash and equity (performance rights). — No re-testing of STI performance hurdles. — Improved disclosure on LTI framework and performance measures. — LTI plan has a four-year performance period for financial hurdles for alignment of executive KMP remuneration with shareholder interests. — LTI plan is awarded wholly in equity (share options) for alignment with shareholders, with the option exercise price set at $12.32 per option (which was the share price on the initial grant date — Clear LTI performance hurdles for the four-year performance period, assessed wholly against in February 2021). financial measures with graduated vesting. — No re-testing of LTI performance hurdles. Other — Current remuneration framework was introduced for FY21. — Improved transparency and disclosure of the remuneration framework and structures. — Appropriate change-in-control and claw-back provisions in line with market practice. — No equity retention grants. — The Board has not used its discretion to award one-off bonuses. STI LTI 44 Eagers Automotive Limited | FINANCIAL REPORT 2022 Directors’ Report (CONTINUED) Remuneration Report (CONTINUED) 10. Statutory disclosures Statutory remuneration disclosures are prepared in accordance with the Corporations Act 2001 and Australian Accounting Standards and include share-based payments expensed during the financial year, calculated in accordance with AASB 2 Share-based payments. (a) Executive KMP in FY21 and FY22 Table 1 – Statutory Table of executive KMP remuneration Short-term benefits Salary and fees $ Bonus and commission $ 1,200,000 1,050,000 133,333 – 600,000 591,667 425,000 412,500 – 200,000 600,000 835,918 1,151,4875 – 250,000 200,000 125,000 125,000 – – 2,358,334 2,254,167 2,126,487 1,160,918 Non- monetary and other benefits $1 223,798 233,638 103,056 – 133,692 23,334 68,725 40,031 – (9,628) 529,272 287,375 Post employment benefits Share-based payments Super- annuation $ Other post- employment benefits $ Performance rights and options $2 Performance- related percentage % Total $ 25,000 25,000 18,333 – 27,500 22,631 27,500 22,631 – 4,167 98,333 74,429 – – – – - - - - – – – – 1,250,0003 3,298,798 3,994,561 1,850,005 66,666 – 316,667 450,216 79,167 129,165 – – 1,472,876 – 1,327,860 1,287,848 725,393 729,327 – 194,539 1,712,501 2,429,386 6,824,927 6,206,275 56 67 83 – 43 50 28 35 – – Executive KMP Year Keith Thornton Edward Geschke4 Sophie Moore Denis Stark Martin Ward6 Total 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 1 2 3 Includes benefits such as the provision of motor vehicles, insurance policy costs, health and fitness programme costs and the movement in the provision for employee entitlements. If a negative amount is shown, leave taken for the year exceeded the sum of leave accrued for the year and other benefits. This does not represent an amount paid or owed by the KMP to the Company. Performance rights and options 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 the recipient’s remuneration. Vesting is subject to the achievement of performance hurdles as detailed in this Remuneration Report. Includes the cost of performance rights vested for FY22 under the STI plan. In accordance with accounting standards, the amount for vested rights each year is based on progressive recognition of the rights over the period from the grant date to their vesting date. This results in a higher cost in the earlier years of the STI plan and a lower cost in later years on the assumption that all performance hurdles will be achieved over the four-year period (FY21 to FY24). Despite this accounting treatment, the number of performance rights which vested for the CEO increased from 50,463 rights in FY21 to 52,265 rights in FY22. For further details, refer to the section “Accounting Treatment of STI Plan” on page 44. 4 Mr Geschke commenced as a KMP on 1 May 2022. 5 6 Mr Ward ceased as a KMP on 1 March 2021. Includes $200,000 STI payment, with the balance being the COO’s commission plan. Directors’ Report (CONTINUED) Remuneration Report (CONTINUED) 10. Statutory disclosures (CONTINUED) (b) NEDs in FY21 and FY22 Table 2 – Statutory Table of NED remuneration Short-term benefits Salary and fees Bonus and commission Non- monetary and other benefits $1 Post employment benefits Share-based payments Other post- Performance Super- employment annuation benefits rights and options Performance- related Total percentage $ % NED KMP Tim Crommelin Nick Politis Dan Ryan David Cowper2 Marcus Birrell Greg Duncan David Blackhall3 Michelle Prater Total Year 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 $ 125,000 100,000 100,000 85,000 100,000 85,000 43,192 100,000 100,000 85,000 115,000 85,000 110,846 85,000 100,000 85,000 794,038 710,000 $ – – – – – – – – – – – – – – – – – – 606 514 606 514 606 514 202 514 606 514 606 514 606 514 606 514 4,446 4,112 $ 12,813 9,750 10,250 8,288 10,250 8,288 4,319 9,750 10,250 8,288 11,788 8,288 11,372 8,288 10,250 8,288 81,291 69,228 $ – – – – – – – – – – – – – – – – – – $ – – – – – – – – – – – – – – – – – – 138,419 110,264 110,856 93,802 110,856 93,802 47,714 110,264 110,856 93,802 127,394 93,802 122,824 93,802 110,856 93,802 879,776 783,340 1 Includes insurance policy costs. 2 Mr Cowper ceased as a KMP on 18 May 2022. 3 Mr Blackhall was appointed Chairman of Audit & Risk Committee on 29 March 2022. 46 – – – – – – – – – – – – – – – – 47 Eagers Automotive Limited | FINANCIAL REPORT 2022 Directors’ Report (CONTINUED) Remuneration Report (CONTINUED) 10. Statutory disclosures Statutory remuneration disclosures are prepared in accordance with the Corporations Act 2001 and Australian Accounting Standards and include share-based payments expensed during the financial year, calculated in accordance with AASB 2 Share-based payments. Executive KMP Year Other post- Performance Super- employment annuation benefits rights and options Performance- related Total percentage Post employment benefits Share-based payments (a) Executive KMP in FY21 and FY22 Table 1 – Statutory Table of executive KMP remuneration Short-term benefits Salary and fees Bonus and commission $ $ 1,200,000 1,050,000 600,000 835,918 133,333 1,151,4875 – 600,000 591,667 425,000 412,500 – 200,000 250,000 200,000 125,000 125,000 – – – 2,358,334 2,126,487 2,254,167 1,160,918 Non- monetary and other benefits $1 223,798 233,638 103,056 133,692 23,334 68,725 40,031 – – (9,628) 529,272 287,375 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 $ 25,000 25,000 18,333 27,500 22,631 27,500 22,631 – – 4,167 98,333 74,429 Keith Thornton Edward Geschke4 Sophie Moore Denis Stark Martin Ward6 Total $ – – – – - - - - – – – – $ – – $2 – – – 1,250,0003 3,298,798 1,850,005 3,994,561 66,666 1,472,876 316,667 1,327,860 450,216 1,287,848 79,167 129,165 725,393 729,327 194,539 1,712,501 6,824,927 2,429,386 6,206,275 % 56 67 83 – 43 50 28 35 – – 1 Includes benefits such as the provision of motor vehicles, insurance policy costs, health and fitness programme costs and the movement in the provision for employee entitlements. If a negative amount is shown, leave taken for the year exceeded the sum of leave accrued for the year and other benefits. This does not represent an amount paid or owed by the KMP to the Company. 2 Performance rights and options 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 the recipient’s remuneration. Vesting is subject to the achievement of performance hurdles as detailed in this Remuneration Report. 3 Includes the cost of performance rights vested for FY22 under the STI plan. In accordance with accounting standards, the amount for vested rights each year is based on progressive recognition of the rights over the period from the grant date to their vesting date. This results in a higher cost in the earlier years of the STI plan and a lower cost in later years on the assumption that all performance hurdles will be achieved over the four-year period (FY21 to FY24). Despite this accounting treatment, the number of performance rights which vested for the CEO increased from 50,463 rights in FY21 to 52,265 rights in FY22. For further details, refer to the section “Accounting Treatment of STI Plan” on page 44. 4 Mr Geschke commenced as a KMP on 1 May 2022. 5 Includes $200,000 STI payment, with the balance being the COO’s commission plan. 6 Mr Ward ceased as a KMP on 1 March 2021. 46 Directors’ Report (CONTINUED) Remuneration Report (CONTINUED) 10. Statutory disclosures (CONTINUED) (b) NEDs in FY21 and FY22 Table 2 – Statutory Table of NED remuneration Short-term benefits Salary and fees $ Bonus and commission $ Non- monetary and other benefits $1 Post employment benefits Share-based payments Super- annuation $ Other post- employment benefits $ Performance rights and options $ Performance- related percentage % Total $ NED KMP Tim Crommelin Nick Politis Dan Ryan David Cowper2 Marcus Birrell Greg Duncan David Blackhall3 Michelle Prater Total Year 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 125,000 100,000 100,000 85,000 100,000 85,000 43,192 100,000 100,000 85,000 115,000 85,000 110,846 85,000 100,000 85,000 794,038 710,000 – – – – – – – – – – – – – – – – – – 606 514 606 514 606 514 202 514 606 514 606 514 606 514 606 514 4,446 4,112 12,813 9,750 10,250 8,288 10,250 8,288 4,319 9,750 10,250 8,288 11,788 8,288 11,372 8,288 10,250 8,288 81,291 69,228 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 138,419 110,264 110,856 93,802 110,856 93,802 47,714 110,264 110,856 93,802 127,394 93,802 122,824 93,802 110,856 93,802 879,776 783,340 Includes insurance policy costs. 1 2 Mr Cowper ceased as a KMP on 18 May 2022. 3 Mr Blackhall was appointed Chairman of Audit & Risk Committee on 29 March 2022. – – – – – – – – – – – – – – – – 47 Eagers Automotive Limited | FINANCIAL REPORT 2022 Directors’ Report (CONTINUED) Remuneration Report (CONTINUED) 10. Statutory disclosures (CONTINUED) (c) Performance Rights and Options of KMP The following are details of all current performance rights and options which were granted to KMP over unissued ordinary shares in the Company in or before the year under review. A performance right is a right to acquire a share at a nil exercise price upon the achievement of performance hurdles. An option is a right to acquire a share upon payment of an exercise price and achievement of performance hurdles. No rights or options were granted to, lapsed or were exercised by KMP during or after the year under review, except as detailed below. (i) Movement in Performance Rights of KMP Table 3 – Grants and vesting of Performance Rights in FY22 Name CEO CFO COO2 CS Opening balance 162,390 54,130 nil 13,533 Performance Rights granted Performance Rights vested1 Performance Rights lapsed nil nil nil nil 52,265 17,422 nil 4,355 nil nil nil nil Closing balance 110,125 36,708 nil 9,178 17,422 18,034 18,674 nil nil nil 17,4221 $11.48 nil nil $11.09 $10.71 1 These rights vested and converted to ordinary shares on 23 February 2023 and remain subject to a trading restriction as described in section 5 of this Remuneration Report. 2 COO was appointed on 1 May 2022. (ii) Movement in Options of KMP Table 4 – Grants and exercise of Options in FY22 Name CEO CFO COO2 CS Opening balance 869,564 262,497 144,927 36,232 Options granted Options exercised nil nil nil nil nil 96,2161 nil nil Options lapsed nil 21,354 nil nil Closing balance 869,564 144,927 144,927 36,232 1 These options were granted in 2015, had an exercise price of $9.25 per option and vested by the end of 2019. 45,900 of these options were exercised on 10 June 2022 and were valued at $0.18 per option on the day of exercise, whilst the balance were exercised on 1 September 2022 and were valued at $3.71 per option on the day of exercise. 2 COO was appointed on 1 May 2022. Grant Date No. granted No. No. lapsed exercised Fair value No. granted No. No. lapsed exercised Fair value Performance Rights Options (iii) Performance Rights and Options granted to KMP Table 5 – Details of share-based payments (Performance Rights and Options) CEO Grant Date No. granted No. lapsed No. exercised Fair value No. granted No. lapsed No. exercised Fair value Performance Rights Options 24 February 2021 50,463 nil 50,463 $11.89 52,265 54,103 56,022 nil nil nil 52,2651 $11.48 nil nil $11.09 $10.71 869,564 nil nil $2.76 End of performance period 31 December 2021 31 December 2022 31 December 2023 31 December 2024 31 December 2024 Status Vested 24 February 2022 Vested 23 February 2023 Unvested Unvested Unvested 1 Performance rights are automatically exercised upon vesting. 52,265 rights granted for 2022 were exercised on 23 February 2023, valued at the closing price of the underlying shares on the day of exercise. 48 49 Directors’ Report (CONTINUED) Remuneration Report (CONTINUED) 10. Statutory disclosures (CONTINUED) (c) Performance Rights and Options of KMP (CONTINUED) (iii) Performance Rights and Options granted to KMP (CONTINUED) Table 5 – Details of share-based payments (Performance Rights and Options) (CONTINUED). Grant Date No. granted No. No. lapsed exercised Fair value No. granted No. No. lapsed exercised Fair value Performance Rights Options CFO 24 February 2021 COO Grant Date 24 February 2021 CS performance End of period Status Vested 31 December 23 February 2022 2023 31 December 31 December 31 December 2023 Unvested 2024 Unvested performance End of period Status Vested 2022 Vested 31 December 24 February 2021 31 December 23 February 2022 2023 31 December 31 December 31 December 2023 Unvested 2024 Unvested 1 Performance rights are automatically exercised upon vesting. 17,422 rights granted for 2022 were exercised on 23 February 2023, valued at the closing price of the underlying shares on the day of exercise. 144,927 nil nil $2.76 2024 Unvested Performance Rights Options No. granted No. No. lapsed exercised Fair value No. granted No. No. lapsed exercised Fair value Status performance End of period 31 December 144,927 nil nil $2.76 2024 Unvested 24 February 2021 4,205 nil 4,205 $11.89 4,355 4,509 4,669 nil nil nil 4,3551 $11.48 nil nil $11.09 $10.71 1 Performance rights are automatically exercised upon vesting. 4,355 rights granted for 2022 were exercised on 23 February 2023, valued at the closing price of the underlying shares on the day of exercise. 36,232 nil nil $2.76 2024 Unvested Further details of the performance rights and options granted to KMP are specified in Notes 42 and 43 to the consolidated financial report. Eagers Automotive Limited | FINANCIAL REPORT 2022 Directors’ Report (CONTINUED) Remuneration Report (CONTINUED) 10. Statutory disclosures (CONTINUED) (c) Performance Rights and Options of KMP Remuneration Report. 2 COO was appointed on 1 May 2022. (ii) Movement in Options of KMP Table 4 – Grants and exercise of Options in FY22 Name CEO CFO COO2 CS Name CEO CFO COO2 CS CEO 48 The following are details of all current performance rights and options which were granted to KMP over unissued ordinary shares in the Company in or before the year under review. A performance right is a right to acquire a share at a nil exercise price upon the achievement of performance hurdles. An option is a right to acquire a share upon payment of an exercise price and achievement of performance hurdles. No rights or options were granted to, lapsed or were exercised by KMP during or after the year under review, except as detailed below. (i) Movement in Performance Rights of KMP Table 3 – Grants and vesting of Performance Rights in FY22 Directors’ Report (CONTINUED) Remuneration Report (CONTINUED) 10. Statutory disclosures (CONTINUED) (c) Performance Rights and Options of KMP (CONTINUED) (iii) Performance Rights and Options granted to KMP (CONTINUED) Table 5 – Details of share-based payments (Performance Rights and Options) (CONTINUED). CFO Grant Date No. granted No. lapsed No. exercised Fair value No. granted No. lapsed No. exercised Fair value Performance Rights Options 1 These rights vested and converted to ordinary shares on 23 February 2023 and remain subject to a trading restriction as described in section 5 of this 144,927 nil nil $2.76 Opening balance 162,390 54,130 nil 13,533 Performance Performance Performance Rights granted Rights vested1 52,265 17,422 nil 4,355 Rights lapsed nil nil nil nil Closing balance 110,125 36,708 nil 9,178 24 February 2021 17,422 18,034 18,674 nil nil nil 17,4221 $11.48 nil nil $11.09 $10.71 End of performance period 31 December 2022 31 December 2023 31 December 2024 31 December 2024 Status Vested 23 February 2023 Unvested Unvested Unvested 1 Performance rights are automatically exercised upon vesting. 17,422 rights granted for 2022 were exercised on 23 February 2023, valued at the closing price of the underlying shares on the day of exercise. Opening balance 869,564 262,497 144,927 36,232 Options granted Options exercised Options lapsed 96,2161 21,354 nil nil nil Closing balance 869,564 144,927 144,927 36,232 nil nil nil COO Grant Date 24 February 2021 CS Performance Rights Options No. granted No. lapsed No. exercised Fair value No. granted No. lapsed No. exercised Fair value 144,927 nil nil $2.76 1 These options were granted in 2015, had an exercise price of $9.25 per option and vested by the end of 2019. 45,900 of these options were exercised on 10 June 2022 and were valued at $0.18 per option on the day of exercise, whilst the balance were exercised on 1 September 2022 and were valued at $3.71 per option on the day of exercise. 2 COO was appointed on 1 May 2022. Grant Date No. granted No. lapsed No. exercised Fair value No. granted No. lapsed No. exercised Fair value Performance Rights Options 24 February 2021 4,205 nil 4,205 $11.89 4,355 4,509 4,669 nil nil nil 4,3551 $11.48 nil nil $11.09 $10.71 36,232 nil nil $2.76 End of performance period 31 December 2024 Status Unvested End of performance period 31 December 2021 31 December 2022 31 December 2023 31 December 2024 31 December 2024 Status Vested 24 February 2022 Vested 23 February 2023 Unvested Unvested Unvested 1 Performance rights are automatically exercised upon vesting. 4,355 rights granted for 2022 were exercised on 23 February 2023, valued at the closing price of the underlying shares on the day of exercise. Further details of the performance rights and options granted to KMP are specified in Notes 42 and 43 to the consolidated financial report. 49 (iii) Performance Rights and Options granted to KMP Table 5 – Details of share-based payments (Performance Rights and Options) Grant Date No. granted No. No. lapsed exercised Fair value No. granted No. No. lapsed exercised Fair value Performance Rights Options 24 February 2021 50,463 nil 50,463 $11.89 52,265 54,103 56,022 nil nil nil 52,2651 $11.48 nil nil $11.09 $10.71 performance End of period Status Vested 2022 Vested 31 December 24 February 2021 31 December 23 February 2022 2023 31 December 31 December 31 December 2023 Unvested 2024 Unvested 1 Performance rights are automatically exercised upon vesting. 52,265 rights granted for 2022 were exercised on 23 February 2023, valued at the closing price of the underlying shares on the day of exercise. 869,564 nil nil $2.76 2024 Unvested nil nil nil nil nil nil nil nil Eagers Automotive Limited | FINANCIAL REPORT 2022 Directors’ Report (CONTINUED) Remuneration Report (CONTINUED) 10. Statutory disclosures (CONTINUED) (d) Relevant Interest in the Company’s Shares Held by KMP Table 6 – Shareholdings of KMP NEDs Name Tim Crommelin Nick Politis Daniel Ryan David Cowper1 Marcus Birrell Greg Duncan David Blackhall Michelle Prater 1 Ceased as a Director on 18 May 2022. Executive KMP Name CEO CFO COO1 CS Opening balance as at 1 January Received from Employee Share Plan Purchases Sales 438,286 438,286 70,005,321 69,905,321 1,200 1,200 15,053 15,053 2,000,000 2,000,000 350,000 300,000 28,056 28,056 2,540,096 2,540,096 nil nil nil nil nil nil nil nil nil nil nil nil nil nil nil nil 10,000 nil 580,000 100,000 nil nil nil nil nil nil nil 50,000 11,944 nil nil nil nil nil nil nil nil nil nil nil nil nil nil nil nil nil nil nil Closing balance as at 31 December 448,286 438,286 70,585,321 70,005,321 1,200 1,200 15,053 15,053 2,000,000 2,000,000 350,000 350,000 40,000 28,056 2,540,096 2,540,096 Opening balance as at 1 January Received from Employee Share Plan Purchases 319,406 266,162 121,789 121,789 15,000 - 176,339 151,519 50,463 518,583 96,216 nil nil - 4,205 64,820 nil nil nil nil nil - nil nil Closing balance as at 31 December 369,869 319,406 182,005 121,789 15,000 - 157,922 176,339 Sales nil 465,339 36,000 nil nil - 22,622 40,000 Year 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 Year 2022 2021 2022 2021 2022 2021 2022 2021 1 COO was appointed on 1 May 2022. (e) Hedging of shares of unvested equity awards 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 equity award or shares that are subject to trading restrictions, without the Chair’s approval. Any breach will result in the forfeiture or lapsing of the unvested equity awards or additional performance hurdles or trading restrictions being imposed, at the Board’s discretion. (f) KMP transactions Mr Politis has a controlling interest in WFM Motors Pty Ltd (WFM Motors), which has a relevant interest in approximately 27% of the share capital of Eagers Automotive. WFM Motors divested a portfolio of dealerships and properties within the ACT to the Company during FY22. An independent expert opined on the transaction which was completed at fair value. Further detail is included in Note 44 of the consolidated financial report. There were no other related party transactions with KMP during the reporting period requiring disclosure in this Remuneration Report. Directors’ Report (CONTINUED) Tim Crommelin Nick Politis Dan Ryan Marcus Birrell Sophie Moore Greg Duncan David Blackhall Michelle Prater Directors’ Interests The relevant interest of each Director in shares, rights and options issued by the Company as at the date of this report are as follows: Ordinary Shares 448,286 70,585,321 1,200 2,000,000 182,005 350,000 40,000 2,786,602 Share Options Performance Rights 144,927 36,708 – – – – – – – – – – – – Shares Under Option Non-Audit Services No options or performance rights were granted by the A copy of the auditor’s Independence Declaration as Company over unissued fully paid ordinary shares during the required under section 307C of the Corporations Act 2001 year under review. No options or rights have been granted is attached and forms part of this report. since the end of the year under review. The Company may decide to employ its auditor on No shares were issued as a result of the exercise of options assignments additional to their statutory audit duties or performance rights during or since the year under review. where the auditor’s expertise or experience with the Group At the date of this report, there are 2,211,840 unissued shares under option and 156,011 unvested performance rights. is important. 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. Auditor Deloitte Touche Tohmatsu continues in office as auditor of the Group in accordance with section 327 of the Corporations Act 2001. 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 40 to the consolidated financial report. In accordance with advice received from the Audit & Risk 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. Tim Crommelin Director Brisbane, 23 February 2023 50 51 Eagers Automotive Limited | FINANCIAL REPORT 2022 Directors’ Report (CONTINUED) Remuneration Report (CONTINUED) 10. Statutory disclosures (CONTINUED) (d) Relevant Interest in the Company’s Shares Held by KMP Table 6 – Shareholdings of KMP NEDs Name Tim Crommelin Nick Politis Daniel Ryan David Cowper1 Marcus Birrell Greg Duncan David Blackhall Michelle Prater Executive KMP Name CEO CFO COO1 CS 1 Ceased as a Director on 18 May 2022. Opening Received from balance as at 1 January Employee Share Plan Purchases Sales Year 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 Year 2022 2021 2022 2021 2022 2021 2022 2021 438,286 438,286 70,005,321 69,905,321 1,200 1,200 15,053 15,053 2,000,000 2,000,000 350,000 300,000 28,056 28,056 2,540,096 2,540,096 nil nil nil nil nil nil nil nil nil nil nil nil nil nil nil nil 319,406 266,162 121,789 121,789 15,000 - 176,339 151,519 50,463 518,583 96,216 nil nil - 4,205 64,820 10,000 nil 580,000 100,000 50,000 11,944 nil nil nil nil nil nil nil nil nil nil nil nil nil nil nil - nil nil Closing balance as at 31 December 448,286 438,286 70,585,321 70,005,321 1,200 1,200 15,053 15,053 2,000,000 2,000,000 350,000 350,000 40,000 28,056 2,540,096 2,540,096 nil nil nil nil nil nil nil nil nil nil nil nil nil nil nil nil Sales nil 465,339 36,000 nil nil - 22,622 40,000 369,869 319,406 182,005 121,789 15,000 - 157,922 176,339 Opening Received from balance as at 1 January Employee Share Plan Purchases Closing balance as at 31 December 1 COO was appointed on 1 May 2022. (e) Hedging of shares of unvested equity awards 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 equity award or shares that are subject to trading restrictions, without the Chair’s approval. Any breach will result in the forfeiture or lapsing of the unvested equity awards or additional performance hurdles or trading restrictions being imposed, at the Board’s discretion. Mr Politis has a controlling interest in WFM Motors Pty Ltd (WFM Motors), which has a relevant interest in approximately 27% of the share capital of Eagers Automotive. WFM Motors divested a portfolio of dealerships and properties within the ACT to the Company during FY22. An independent expert opined on the transaction which was completed at fair value. Further detail is included in Note 44 of the consolidated financial report. There were no other related party transactions with KMP during the reporting period requiring disclosure (f) KMP transactions in this Remuneration Report. 50 Directors’ Report (CONTINUED) Directors’ Interests The relevant interest of each Director in shares, rights and options issued by the Company as at the date of this report are as follows: Tim Crommelin Nick Politis Dan Ryan Marcus Birrell Sophie Moore Greg Duncan David Blackhall Michelle Prater Shares Under Option No options or performance rights were granted by the Company over unissued fully paid ordinary shares during the year under review. No options or rights have been granted since the end of the year under review. No shares were issued as a result of the exercise of options or performance rights during or since the year under review. At the date of this report, there are 2,211,840 unissued shares under option and 156,011 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. Auditor Deloitte Touche Tohmatsu continues in office as auditor of the Group in accordance with section 327 of the Corporations Act 2001. Ordinary Shares Share Options Performance Rights 448,286 70,585,321 1,200 2,000,000 182,005 350,000 40,000 2,786,602 – – – – 144,927 – – – – – – 36,708 – – Non-Audit Services 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 40 to the consolidated financial report. In accordance with advice received from the Audit & Risk 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. Tim Crommelin Director Brisbane, 23 February 2023 51 Deloitte Touche Tohmatsu ABN 74 490 121 060 Level 23, Riverside Centre 123 Eagle Street Brisbane, QLD, 4000 Australia Phone: +61 7 3308 7000 www.deloitte.com.au Eagers Automotive Limited | FINANCIAL REPORT 2022 The Board of Directors Eagers Automotive Limited 5 Edmund Street Newstead, QLD 4006 23 February 2023 Dear Board Members Auditor’s Independence Declaration to Eagers Automotive 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 Eagers Automotive Limited. As lead audit partner for the audit of the financial report of Eagers Automotive Limited for the year ended 31 December 2022, 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 faithfully DELOITTE TOUCHE TOHMATSU David Rodgers Partner Chartered Accountants Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities (collectively, the “Deloitte organisation”). DTTL (also referred to as “Deloitte Global”) and each of its member firms and related entities are legally separate and independent entities, which cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm and related entity is liable only for its own acts and omissions, and not those of each other. DTTL does not provide services to clients. Please see www.deloitte.com/about to learn more. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte organisation. 52 26 Deloitte Touche Tohmatsu ABN 74 490 121 060 Level 23, Riverside Centre 123 Eagle Street Brisbane, QLD, 4000 Australia Phone: +61 7 3308 7000 www.deloitte.com.au Eagers Automotive Limited ABN 87 009 680 013 Financial Report For the year ended 31 December 2022 Contents Consolidated Statement of Profit or Loss Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to and forming part of the Consolidated Financial Statements 54 55 56 57 59 60 132 Directors’ Declaration 133 Independent Auditor’s Report Eagers Automotive Limited | FINANCIAL REPORT 2022 The Board of Directors Eagers Automotive Limited 5 Edmund Street Newstead, QLD 4006 23 February 2023 Dear Board Members Yours faithfully DELOITTE TOUCHE TOHMATSU David Rodgers Partner Chartered Accountants Auditor’s Independence Declaration to Eagers Automotive 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 Eagers Automotive Limited. As lead audit partner for the audit of the financial report of Eagers Automotive Limited for the year ended 31 December 2022, 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. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities (collectively, the “Deloitte organisation”). DTTL (also referred to as “Deloitte Global”) and each of its member firms and related entities are legally separate and independent entities, which cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm and related entity is liable only for its own acts and omissions, and not those of each other. DTTL does not provide services to clients. Please see www.deloitte.com/about to learn more. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte organisation. 52 26 53 Eagers Automotive Limited | FINANCIAL REPORT 2022 Consolidated Statement of Profit or Loss For the year ended 31 December 2022 Revenue Finance income Other gains Share of net profits of associates Raw materials and consumables purchased Employee benefits expense Finance costs Depreciation and amortisation expense Impairment of non-current assets Other expenses Profit before tax Income tax expense Profit from continuing operations Loss from discontinued operations Profit for the year Attributable to: Owners of Eagers Automotive Limited Non-controlling interests Earnings/(loss) per share for profit attributable to the ordinary equity holders of the Company: Basic earnings/(loss) per share From continuing operations From discontinued operations Diluted earnings/(loss) per share From continuing operations From discontinued operations Notes 3 4 5 48(b) 6(a) 6(a) 6(a) 6(b) 7 37 34(c) 45(a) 45(b) Consolidated 2022 $’000 2021 $’000 8,541,502 11,387 55,182 1,067 (6,900,716) (678,452) (88,245) (116,603) (16,727) (366,173) 442,222 (117,882) 324,340 – 324,340 8,663,462 10,368 58,234 1,130 (7,043,492) (672,077) (79,619) (120,428) (5,156) (355,615) 456,807 (118,070) 338,737 (8,000) 330,737 308,167 16,173 324,340 317,824 12,913 330,737 Cents Cents 121.3 121.3 – 121.1 121.1 – 125.2 128.4 (3.2) 124.7 127.9 (3.2) The above Consolidated Statement of Profit or Loss should be read in conjunction with the accompanying notes. 54 Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 31 December 2022 Profit for the year Other comprehensive income Items that may be reclassified subsequently to profit or loss Exchange differences on translation of foreign operations Items that will not be reclassified subsequently to profit or loss Gain on revaluation of property Deferred tax expense Changes in the fair value of financial assets at fair value through other comprehensive income Total other comprehensive income for the year Total comprehensive profit for the year Total comprehensive profit attributable to: Owners of Eagers Automotive Limited Non-controlling interests Notes Consolidated 2022 $’000 2021 $’000 324,340 330,737 32(a) 19, 32(a) 32(a) 32(a) (3,127) (3,127) 21,446 (6,434) 189 15,201 12,074 336,414 320,241 16,173 336,414 9 9 4,999 (1,500) – 3,499 3,508 334,245 321,332 12,913 334,245 The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. 55 Eagers Automotive Limited | FINANCIAL REPORT 2022 Consolidated Statement of Financial Position As at 31 December 2022 Current assets Cash and cash equivalents Trade and other receivables Inventories Current tax receivables Other current assets Finance lease receivables Assets classified as held for sale Total current assets Non-current assets Loans receivable Financial assets at fair value through other comprehensive income Investments in associates Other non-current receivables Property, plant and equipment Intangible assets Deferred tax assets Other non-current assets Right-of-use assets Finance lease receivables Total non-current assets Total assets Current liabilities Trade and other payables Borrowings - bailment and other current loans Current tax liabilities Provisions Deferred revenue Lease liabilities Total current liabilities Non-current liabilities Borrowings Deferred revenue Provisions Lease liabilities Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Retained earnings Non-controlling interests Total equity Notes 9 10 11 24 12 18 13 14 15 16, 48 14 19 20 21 17(a)(i) 18 22 23 24 25 26 17(a)(i) 27 29 28 17(a)(i) Consolidated 2022 $’000 2021 $’000 190,434 275,300 1,059,301 – 21,680 39,104 – 1,585,819 32,468 12,118 2,331 19,048 698,393 855,022 142,116 10,575 564,109 198,238 2,534,418 4,120,237 375,672 939,324 16,331 104,527 12,924 168,089 1,616,867 376,910 15,922 14,227 854,681 1,261,740 2,878,607 1,241,630 197,620 228,960 874,049 574 18,787 34,715 18,670 1,373,375 23,910 577 2,074 11,801 514,374 775,295 152,000 10,508 631,099 235,932 2,357,570 3,730,945 364,263 696,292 – 101,770 13,442 167,179 1,342,946 311,062 16,462 14,058 958,966 1,300,548 2,643,494 1,087,451 31 32(a) 32(b) 34(c) 1,154,572 (606,122) 655,796 1,204,246 37,384 1,241,630 1,173,069 (617,978) 510,725 1,065,816 21,635 1,087,451 The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. 56 Consolidated Statement of Changes in Equity For the year ended 31 December 2022 Consolidated entity Notes Issued capital $’000 Asset revaluation reserve $’000 Share- based payments reserve $’000 Foreign currency translation reserve $’000 Business combination reserve $’000 Investment revaluation reserve $’000 Retained earnings $’000 Attributable to owners of the parent $’000 Non- controlling interests $’000 Total equity $’000 32(a) 32(a) Balance at 1 January 2022 Profit for the year Other comprehensive income Total comprehensive income for the year Transfer to retained earnings Transactions with owners in their capacity as owners: Share-based payments expense Dividends provided for or paid Shares acquired by Employee Share Trust Shares issued pursuant to staff share plan Share buy-back Purchase of shares from non-controlling interests Recognition of non- controlling interests on acquisition Income tax on items taken to or transferred directly from equity 32(a) 31(b) 32(b) 32(a) 1,173,069 – 24,078 – (91,541) – 1,213 (479,042) – – (72,686) 510,725 1,065,816 308,167 – 308,167 21,635 1,087,451 16,173 324,340 – – – – – – – (18,497) – – – (18,497) 15,012 15,012 (2,588) – – – – – – – – – – – – 2,396 – (681) 1,295 – – – (3,127) (3,127) – – – – – – – – (640) 2,370 – – – – – – – – – – – – – – 189 – 12,074 – 12,074 189 308,167 320,241 16,173 336,414 – 2,588 – – – 2,396 – – – 2,396 – (165,684) (165,684) (9,612) (175,296) – – – – – – – – – – (681) 1,295 (18,497) – – – (681) 1,295 (18,497) – – (1,300) (1,300) 10,488 10,488 – – – (165,684) (640) (181,811) – (640) (424) (182,235) Balance at 31 December 2022 1,154,572 36,502 (89,171) (1,914) (479,042) (72,497) 655,796 1,204,246 37,384 1,241,630 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. 57 Eagers Automotive Limited | FINANCIAL REPORT 2022 Consolidated Statement of Changes in Equity For the year ended 31 December 2022 Consolidated entity Notes Issued capital $’000 Asset revaluation reserve $’000 Share- based payments reserve $’000 Foreign currency translation reserve $’000 Business combination reserve $’000 Investment revaluation reserve $’000 Retained earnings $’000 Attributable to owners of the parent $’000 Non- controlling interests $’000 Total equity $’000 32(a) Balance at 1 January 2021 Profit for the year Other comprehensive income Total comprehensive income for the year Transfer to retained earnings Transactions with owners in their capacity as owners: Share-based payments expense Dividends provided for or paid Shares acquired by Employee Share Trust Shares issued pursuant to staff share plan Income tax on items taken to or transferred directly from equity Sale of shares to non-controlling interests Issues of shares to NCI 32(b) 32(a) 32(a) 1,173,069 – 32,834 – (62,510) – 1,204 – (479,042) – (72,686) 317,848 – 317,824 910,717 317,824 13,860 12,913 924,577 330,737 – – – – – – – – – – – 3,499 3,499 (12,255) – – – – – 3,204 – – (51,019) – 19,037 – – (253) – – – – (29,031) 9 9 – – – – – – – – – – – – – – – – – – – – – – 3,508 – 3,508 – 317,824 321,332 12,913 334,245 – 12,255 – – – 3,204 – – – 3,204 – (137,202) (137,202) (3,985) (141,187) – – – – – – – – (51,019) 19,037 (253) – – – (51,019) 19,037 (253) – (2,548) (2,548) – – – (137,202) – (166,233) 1,395 (5,138) 1,395 (171,371) Balance at 31 December 2021 1,173,069 24,078 (91,541) 1,213 (479,042) (72,686) 510,725 1,065,816 21,635 1,087,451 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. 58 Consolidated Statement of Cash Flows For the year ended 31 December 2022 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 Payments for acquisition of businesses - net of cash acquired Payments for property, plant and equipment Payments for intangible assets Payments for shares in other corporations Proceeds from sale of businesses - net of cash disposed Proceeds from sale of property, plant and equipment Receipts from subleases Net cash provided by/(used in) investing activities Cash flows from financing activities Proceeds from issues of shares and other equity securities Payments for shares acquired by the Employee Share Trust Proceeds from borrowings Purchase of shares under share buy-back arrangement Repayment of borrowings Transactions with non-controlling interests Dividends paid to members of Eagers Automotive Limited Dividends paid to minority shareholders of a subsidiary Repayment of lease liabilities Net cash used in financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the financial year Notes Consolidated 2022 $’000 2021 $’000 9,334,840 (8,764,033) 7,100 (88,245) (96,355) 811 13,425 407,543 9,529,429 (9,032,831) 4,776 (79,619) (131,176) 1,695 10,431 302,705 (104,553) (197,917) (11,019) (11,754) 49,256 68,856 21,282 (185,849) 1,295 (681) 104,560 (18,497) (16,571) (305) (165,684) (9,612) (122,880) (228,375) (6,681) 197,620 (505) 190,434 (14,403) (67,807) – 1,524 111,774 85,265 21,138 137,491 19,037 (51,019) – – (150,522) (1,666) (137,202) (9,102) (121,194) (451,668) (11,472) 209,092 – 197,620 46 35(a) 36 32(a) 32(a) 31 8 9 The December 2021 Consolidated Statement of Cash Flows has been prepared to include cash flows from continuing and discontinued operations in accordance with AASB 107 Statement of Cash Flows. Refer to Note 37. The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. 59 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 1 Summary of significant accounting policies Functional and presentation currency The functional and presentation currency of the Group is the Australian Dollar. The consolidated financial statements were authorised for issue by the Directors on the 23rd of February 2023. 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. Going concern The consolidated financial statements have been prepared on the basis that the Group is a going concern, able to realise assets in the ordinary course of business and settle liabilities as and when they fall due. The Group has net current liabilities of ($31.0 million) at 31 December 2022 which is primarily due to a fixed rate, fixed term capital loan becoming due and payable within the next twelve months. Management has commenced discussions with the financier and expects to refinance the loan in the first half of 2023. The Group has maintained a robust balance sheet with total available liquidity of $631.1 million (cash in bank of $190.4 million and undrawn facilities of $440.7 million) at 31 December 2022 and a substantial asset base and property portfolio valued at $607.6 million (including construction in progress). The Group has generated positive net cash flows from operating activities of $407.5 million and profit from operations of $324.3 million for the year ended 31 December 2022. Based on the strength of the Group’s balance sheet and its cash flow modelling, the Directors are of the view that the Group will be able to settle all obligations as they fall due for a period of 12 months following this report. The Directors are therefore of the opinion that the preparation of the consolidated financial statements as a going concern is appropriate. The Directors of the Company have assessed the ongoing impact of the Coronavirus disease (COVID-19) on continuing operations and consider any future impacts will not have a material impact on the overall Group and its available liquidity. (a) General information and basis of preparation The financial report covers the Group (consolidated entity) of Eagers Automotive Limited (“the Company” and “the Group”) and its subsidiaries (consolidated financial statements). Eagers Automotive Limited is a publicly listed company incorporated and domiciled in Australia. The financial report has been prepared on a going concern basis, in line with AASB 101 Presentation of Financial Statements. Compliance with IFRS These consolidated 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 report 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 consolidated financial statements and notes of the Company and the Group comply with International Financial Reporting Standards (IFRS). Historical cost convention These consolidated 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 AASB 2 Share-based Payment and measurements that have some similarities to fair value but are not fair value, such as net realisable value in AASB 102 Inventories or value-in-use in AASB 136 Impairment of Assets. 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. 60 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 1 Summary of significant accounting policies (CONTINUED) (b) Basis of consolidation The consolidated financial statements incorporate the financial statements of Eagers Automotive Limited 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. In the current year, the Group invested in EV Dealer Group Pty Ltd (EV Dealer Group) which operates as the exclusive Australian retailer for Build Your Dreams (BYD). The Group has determined that it has accounting control over EV Dealer Group given that contractual rights give it the ability to direct the activities that significantly affect the investee’s returns. 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 consolidated financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-group 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: — the aggregate of the fair value of the consideration received and the fair value of any retained interest; and — 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 accounting standards). 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 Financial Instruments (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 Non-current Assets Held for Sale and Discontinued Operations. 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. 61 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 1 Summary of significant accounting policies (CONTINUED) When the Group increases its ownership interest such that an existing associate becomes a subsidiary, the Group remeasures its previously held interest at its acquisition date fair value and recognises the resulting gain or loss in profit or loss. The acquisition of the investment in the subsidiary is recognised in accordance with Note 35(c)(i). 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) Rounding of amounts The Company is of a kind referred to in the Australian Securities and Investments Commission (ASIC) Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, issued by ASIC, relating to the “rounding off” of amounts in the financial report. Amounts in the financial report have been rounded off in accordance with that instrument to the nearest thousand dollars, or in certain cases, to the nearest dollar. (d) Goods and services tax Revenues, expenses, assets and liabilities are recognised net of the amount of goods and services tax (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 Consolidated Statement of Financial Position. Cash flows are included in the Consolidated 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. (e) Other accounting policies Significant other account policies that summarise the recognition, treatment and measurement basis used, and are relevant to understanding the consolidated financial statements, are included throughout the relevant notes to the consolidated financial statements. (b) Basis of consolidation (CONTINUED) (ii) Investments in associates (CONTINUED) 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 128 Investments in Associates and Joint Ventures 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 9. 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 portion 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. 62 Summary of significant accounting policies (CONTINUED) 2 Critical accounting estimates and judgements Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 1 (f) New or revised standards and interpretations that are first effective in the current reporting period New and revised standards and amendments thereof and interpretations effective for the current year that are relevant to the Group, but have not had a material impact, are: — AASB 2021-3 Amendments to Australian Accounting Standards – Covid-19-Related Rent Concessions beyond 30 June 2021; — AASB 2020-3 Amendments to Australian Accounting Standards – Annual Improvements 2018-2020 and Other Amendments; — AASB 2021-7 Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB 10 and AASB 128 and Editorial Corrections; and — AASB 2022-2 Amendments to Australian Accounting Standards – Extending Transition Relief under AASB 1. The standards in issue but not yet effective, and do not have a material impact on the Group, are as follows: — AASB 17 Insurance Contracts; — AASB 2021-5 Amendments to Australian Accounting Standards – Deferred Tax related to Assets and Liabilities arising from a Single Transaction; — AASB 2021-2 Amendments to Australian Accounting Standards – Disclosure of Accounting Policies and Definition of Accounting Estimates; — AASB 2014-10 Amendments to Australian Accounting Standards – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture; — AASB 2015-10 Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB 10 and AASB 128; — AASB 2017-5 Amendments to Australian Accounting Standards – Effective Date of Amendments to AASB 10 and AASB 128 and Editorial Corrections; — AASB 2020-1 Amendments to Australian Accounting Standards – Classification of Liabilities as Current or Non-Current; — AASB 2020-6 Amendments to Australian Accounting Standards – Classification of Liabilities as Current or Non-current – Deferral of Effective Date; and — AASB 2022-1 Amendments to Australian Accounting Standards – Initial Application of AASB 17 and AASB 9 – Comparative Information. 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 included in the following notes: Note Note 11 Note 17 Note 17 Note 18 Note 19 Note 20 Note 21 Note 35 Key judgements and estimates Vehicle inventory write-down to net realisable value Significant judgement in determining the lease term of contracts with renewal options Recoverability of right-of-use assets and other non-current assets Calculation of loss allowance Fair value estimation of land and buildings Recoverability of goodwill and other intangibles with indefinite useful lives Recoverability of deferred tax asset The fair value of assets and liabilities acquired in business combinations 63 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 3 Revenue Set out below is the disaggregation of the Group’s revenue from contracts with customers: Consolidated revenue for the year ended 31 December 2022 from continuing operations Type of goods or service New vehicles Used vehicles Parts Service Other Total revenue from external customers Timing of revenue recognition At a point in time Over time Total revenue from external customers Geographical markets Australia New Zealand Total revenue from external customers Consolidated revenue for the year ended 31 December 2021 from continuing operations Type of goods or service New vehicles Used vehicles Parts Service Other Total revenue from external customers Timing of revenue recognition At a point in time Over time Total revenue from external customers Geographical markets Australia New Zealand Total revenue from external customers 64 Retailing $’000 Property $’000 Total $’000 5,301,413 1,795,998 904,259 489,246 49,658 8,540,574 8,046,055 494,519 8,540,574 8,068,711 471,863 8,540,574 – – – – 928 928 928 – 928 928 – 928 5,301,413 1,795,998 904,259 489,246 50,586 8,541,502 8,046,983 494,519 8,541,502 8,069,639 471,863 8,541,502 Retailing $’000 Property $’000 Total $’000 5,182,209 1,970,178 937,638 524,567 47,517 8,662,109 8,128,223 533,886 8,662,109 8,143,758 518,351 8,662,109 – – – – 1,353 1,353 1,353 – 1,353 1,353 – 1,353 5,182,209 1,970,178 937,638 524,567 48,870 8,663,462 8,129,576 533,886 8,663,462 8,145,111 518,351 8,663,462 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 3 Revenue (CONTINUED) Recognition and measurement (i) Revenue Sales revenue Revenue from the sale of motor vehicles and parts is recognised when the performance obligation has been satisfied. The performance obligation is considered to be satisfied at a point in time when the vehicles or parts are invoiced and physically dispatched or collected. Revenue is measured at the fair value of consideration receivable, net of any discounts, rebates and incentives. Agency commission represent fees from third parties where the Group acts as an agent by arranging a third party to provide goods and services to a customer. In such cases, the Group is not primarily responsible for providing the underlying good or service to the customer. Agency commission is recognised on an accruals basis on completion of the referral. Agency commissions are reported as sales revenue. Service revenue Service work on customers’ vehicles is carried out under instruction from the customer. Service revenue is recognised over time based on when the performance obligation is satisfied, which is when services are rendered. Revenue arising from the sale of parts fitted to customers’ vehicles during service is recognised at a point in time upon satisfaction of the performance obligation, which is considered by the Group to be upon delivery of the fitted parts to the customer upon completion of the service. (ii) Other Revenue items Warranties revenue The Group sells extended warranties beyond those provided by the manufacturer, which further protects the customer for repairs and defects in the vehicle over a specified period. Under AASB 15 Revenue from Contracts with Customers, warranties are considered to be a distinct service as they are both regularly supplied by the Group to customers on a stand-alone basis and are available to customers from other providers in the market. As a result, where vehicles are being sold with an extended warranty included, a portion of the vehicle sale price is required to be allocated to the warranty based on the stand-alone selling price of those services. Revenue relating to the warranties is recognised over time, while the transaction price allocated to these services is recognised as a contract liability (referred to as deferred revenue, refer to Notes 26 and 29) at the time of the initial sales transaction and is released on a straight-line basis over the period of the service. 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. Rental income Rental income from operating leases is recognised on a straight-line basis over the lease term. Finance and insurance commissions The Group acts as an agent in the sale of vehicle finance and insurance products. The revenue (i.e., commission from the sale of these products) is recognised at a point in time when the performance obligation is satisfied, which is upon delivery of the vehicle and the transfer of control to the customer. Interest revenue Interest revenue is recognised on a time proportional basis, taking into account the effective interest rates applicable to the financial assets. 65 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 4 Finance income Finance income Consolidated 2022 $’000 11,387 2021 $’000 10,368 Finance income relates to income earned on sublease arrangements on finance leases, in accordance with AASB 16 Leases. 5 Other gains Gain on disposal of non-financial assets Gain on disposal of properties Gain on disposal of businesses Brand restructure compensation Recognition and measurement Notes 36 Consolidated 2022 $’000 2,813 17,121 35,248 – 55,182 2021 $’000 15,168 10,957 31,894 215 58,234 Property, plant and equipment 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. 66 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 6 Expenses (a) Profit before income tax includes the following specific expenses: Depreciation Buildings Plant and equipment Leasehold improvements Right-of-use assets Total depreciation Amortisation Customer relationships Other intangible assets Total amortisation Total depreciation and amortisation Finance costs Vehicle bailment Interest on lease liabilities Other Total finance costs Superannuation Provision expenses Allowance for expected credit losses Employee benefits expense Employee benefits expense – gross Employee benefits expense recognised in raw materials and consumables purchased Total employee benefits expense Share-based payments Business acquisition and divestment costs Business restructuring and integration costs (b) Impairment of non-current assets Impairment of right-of-use assets Revaluation decrement of land and buildings Allowance for expected credit losses (c) Recognition and measurement Notes 19 19 19 17(a)(ii) 20 20 17(a)(ii) Consolidated 2022 $’000 9,097 15,670 4,289 85,624 114,680 1,462 461 1,923 116,603 25,504 45,837 16,904 88,245 59,164 2021 $’000 4,754 19,165 5,383 89,664 118,966 1,462 – 1,462 120,428 17,022 48,715 13,882 79,619 55,499 10(b) 726 765 678,452 102,196 780,648 2,396 3,034 1,850 672,077 107,530 779,607 3,204 1,803 – Notes 17(a)(i) 18 Consolidated 2022 $’000 1,727 – 15,000 16,727 2021 $’000 – 5,156 – 5,156 (i) Property, plant and equipment 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 and equipment — Leasehold improvements 30–40 years 3–10 years The shorter of the lease term and the useful life of the asset (5-30 years) (ii) 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; and — amortisation of ancillary costs incurred in connection with the arrangement of borrowings. 67 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 7 Income tax (a) Income tax expense Current income tax expense Deferred income tax expense Deferred income tax expense included in income tax expense comprises: In respect of the current year Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. (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% (2021: 30%) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Non-deductible capital expenditure Non-taxable dividends Non-allowable expenses Property impairment Application of capital losses against current year capital gains Sundry items Income tax expense (c) Tax expense relating to items of other comprehensive income Consolidated 2022 $’000 113,558 4,324 117,882 2021 $’000 108,736 9,334 118,070 4,324 9,334 Notes 21 21 Consolidated 2022 $’000 442,222 2021 $’000 456,807 132,667 137,042 910 – 783 – (16,267) (211) 117,882 541 (325) 608 1,547 (17,488) (3,855) 118,070 Consolidated 2022 $’000 (5,382) 2021 $’000 (1,500) Aggregate deferred tax arising in the reporting period and recognised in other comprehensive income (d) Recognition and measurement Taxes Eagers Automotive Limited and its wholly-owned Australian entities are part of a tax consolidated group in accordance with Part 3-90 of the Income Tax Assessment Act 1997. The existence of a tax consolidated group allows for wholly-owned corporate groups to operate as a single entity for income tax purposes. The head entity, Eagers Automotive Limited, and the wholly-owned entities in the tax consolidated group continue to account for their own income tax expense, current and deferred tax amounts in accordance with the Eagers Automotive Tax Funding Agreement. These tax amounts are measured by adopting a notional tax approach which requires each member to calculate their separate tax amounts as if each entity in the tax consolidated group continues to be a standalone taxpayer. Assets or liabilities arising for wholly-owned subsidiaries under the Tax Funding Arrangement are recognised as accounts receivable from or payable to other entities in the Group. In addition to its own income tax expense, current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and tax credits assumed from controlled entities in the tax consolidated group. 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 consolidated financial statements, and to unused tax losses. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. 68 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 8 Dividends (a) Ordinary dividends fully franked based on tax paid @ 30% Final dividend for the year ended 31 December 2021 of 42.5 cents (2020: 25.0 cents) per share paid on 20 April 2022 Interim dividend for the year ended 31 December 2022 of 22.0 cents (2021: 28.4 cents – ordinary dividend of 20.0 cents and a special dividend of 8.4 cents) per share paid on 23 September 2022 Total dividends paid Dividends paid in cash during the years ended 31 December 2022 and 2021 were as follows: Paid in cash (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 49.0 cents per share, fully franked based on tax paid at 30%. The aggregate amount of the proposed dividend expected to be paid on 31 March 2023 out of the retained profits at 31 December 2022 but not recognised as a liability at year end is: (c) Franked dividends The final dividend recommended after 31 December 2022 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 2022. Franking credits available for subsequent reporting periods based on a tax rate of 30% (2021: 30%) Consolidated 2022 $’000 2021 $’000 109,197 64,233 56,487 165,684 72,969 137,202 165,684 137,202 125,145 109,197 529,115 487,161 The above amounts represent the balances of the franking account as at the end of the financial year, adjusted for: (i) franking credits that will arise from the payment of the current tax liability; (ii) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and (iii) 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 (53,634) (46,799) 9 Current assets – Cash and cash equivalents Cash at bank and on hand Consolidated 2022 $’000 2021 $’000 190,434 197,620 The above figures are reconciled to cash at the end of the financial year as shown in the Consolidated Statement of Cash Flows. Recognition and measurement 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 Consolidated Statement of Financial Position. 69 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 10 Current assets – Trade and other receivables Trade and other receivables Allowance for expected credit losses (a) Ageing of trade receivables The ageing of trade receivables at 31 December 2022 is detailed below: Not past due Past due 0-30 days Past due 31 days plus Total Consolidated 2022 $’000 279,961 (4,661) 275,300 2021 $’000 233,024 (4,064) 228,960 Consolidated 2022 Gross $’000 266,328 9,061 4,572 279,961 2022 Provision $’000 3,703 227 731 4,661 2021 Gross $’000 223,166 6,604 3,254 233,024 2021 Provision $’000 3,573 165 326 4,064 Included in the Group’s trade receivables balance are debtors with a net carrying amount of $12,675,000 (2021: $9,367,000) which are past due at the reporting date. The Group has applied the expected credit losses methodology to these trade receivables, in line with AASB 9. The average age of these receivables is 62 days (2021: 61 days). (b) Movement in expected credit losses Opening balance Additional loss allowance Amounts written off during the year Disposal due to divestment Closing balance Consolidated 2022 $’000 4,064 726 (35) (94) 4,661 2021 $’000 5,639 765 (676) (1,664) 4,064 The Group applies the simplified approach permitted by AASB 9, which requires expected lifetime losses to be recognised from initial recognition of the receivable. The expected credit losses on these financial assets are estimated using a provision matrix based on the Group’s historical credit losses experience. In line with this, the Group has provided 10% for all receivables over 90 days and 2.5% of total trade receivables excluding motor vehicle debtors. (c) Recognition and measurement Receivables Trade receivables are recognised initially at the transaction price, less the expected lifetime credit losses to be recognised from initial recognition of the receivables. 70 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 11 Current assets – Inventories New and demonstrator motor vehicles and trucks – at cost Less: Write-down to net realisable value Used vehicles and trucks – at cost Less: Write-down to net realisable value Parts and other consumables – at cost Less: Write-down to net realisable value Total inventories (a) Recognition and measurement Consolidated 2022 $’000 675,629 (15,585) 660,044 256,929 (15,290) 241,639 168,426 (10,808) 157,618 1,059,301 2021 $’000 528,027 (15,013) 513,014 247,445 (14,347) 233,098 136,374 (8,437) 127,937 874,049 Inventories New motor vehicles and 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. (b) Critical accounting estimates and judgements (i) New and demonstrator motor vehicles and trucks write-down to net realisable value In determining the amount of write-downs for new and demonstrator vehicle inventory, management has made judgements based on the expected net realisable value of inventory. Historic experience and current knowledge of the products have been used in determining any write-downs to net realisable value. (ii) Used vehicles and trucks 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. 71 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 12 Current assets – Other current assets Prepayments and deposits 13 Current assets – Assets classified as held for sale Assets classified as held for sale There are no assets currently held for sale in the current reporting period. Consolidated 2022 $’000 21,680 2021 $’000 18,787 Consolidated 2022 $’000 – 2021 $’000 18,670 Assets classified as held for sale at 31 December 2021 represented a vacant property sale that was unconditional at reporting date, and settled in February 2022. The asset was presented within total assets of the Property segment in Note 30(b). Recognition and measurement Assets held for sale 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. 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. Where assets are sold above the lower of their previous carrying amounts and fair value less costs to sell, this gain is recognised in profit or loss when the sale is recognised. 14 Non-current assets – Receivables Loans receivables Other non-current receivables Consolidated 2022 $’000 32,468 19,048 51,516 2021 $’000 23,910 11,801 35,711 72 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 15 Non-current assets – Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income Shares in a listed company1 Shares in an unlisted company2 Consolidated 2022 $’000 11,943 175 12,118 2021 $’000 – 577 577 1 2 The Directors have assessed the fair value of the investment as at 31 December 2022 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. The Directors have assessed the fair value of the investment as at 31 December 2022 is materially consistent with its cost of acquisition. This is a level 3 fair value measurement asset being derived from inputs other than quoted prices that are unobservable from the asset either directly or indirectly. (a) Valuation of financial assets at fair value through other comprehensive income Details of the Group’s assets held at fair value through other comprehensive income and information about the fair value hierarchy as at 31 December 2022 are as follows: Class of financial assets and liabilities Level 1 Financial assets at fair value through other comprehensive income – listed Level 3 Financial assets at fair value through other comprehensive income – unlisted Unobservable inputs used in determination of fair values Carrying amount 31/12/22 $’000 11,943 Carrying amount 31/12/21 Valuation technique Key input $’000 – Quoted bid prices in an active market. Quoted bid prices in an active market. 175 577 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. (b) Recognition and measurement 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 timeframe established by the market concerned. They are initially measured at fair value, net of transaction costs, except for those financial assets classified as fair value through profit or loss (FVPL), 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 remaining financial assets in the following measurement categories: — those to be measured subsequently at fair value (either through other comprehensive income (OCI) or through profit or loss); and — those to be measured at amortised cost. The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses will either be recorded in profit or loss or OCI. For investments in equity instruments that are not held for trading, the classification will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI). 73 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 15 Non-current assets – Financial assets at fair value through other comprehensive income (CONTINUED) (b) Recognition and measurement (CONTINUED) Measurement At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at FVPL, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss. Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest. Equity instruments The Group subsequently measures all equity investments at fair value. 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. Where the Group’s management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognised in profit or loss as other income when the Group’s right to receive payments is established. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value. The Group recognises the payment of dividends in the profit and loss for those equity instruments measured at FVOCI. Impairment The Group assesses at each balance date whether there is objective evidence that a financial asset or group of financial assets is impaired. For trade receivables and other receivables, finance lease receivables and other loans receivable, the Group applies the simplified approach permitted by AASB 9, which requires expected lifetime losses to be recognised from initial recognition of these financial assets. The expected credit losses on these financial assets are estimated using a provision matrix based on the Group’s historical credit loss experience. 16 Non-current assets – Investments in associates Shares in associate – Vehicle Parts (WA) Pty Ltd Shares in associate – Mazda Parts Consolidated 2022 $’000 1,846 485 2,331 2021 $’000 1,555 519 2,074 Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting (refer Note 48). Reconciliation of the carrying amount of investments in associates is set out in Note 48(b). 74 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 17 Right-of-use assets and lease liabilities (a) Leases (i) Amounts recognised in the Consolidated Statement of Financial Position The Consolidated Statement of Financial Position shows the following amounts relating to leases: Right-of-use assets Property Equipment Consolidated entity Year ended 31 December 2022 Opening net book amount Exchange differences Additions Disposals Depreciation charge Impairment loss Rent reviews Adjustments to lease terms Closing net book amount Consolidated 2022 $’000 564,109 – 564,109 Notes Property $’000 Equipment $’000 629,853 (2,525) 21,598 (17,440) (84,378) (1,727) 15,155 3,573 564,109 1,246 – – – (1,246) – – – – 6(b) 2021 $’000 629,853 1,246 631,099 Total $’000 631,099 (2,525) 21,598 (17,440) (85,624) (1,727) 15,155 3,573 564,109 Disposal of property right-of-use assets reported above are primarily driven by the sale of Bill Buckle Auto Group ($1.4 million) and the purchase of properties previously leased ($11.9 million). The remainder of the movement relates to miscellaneous lease exits. Consolidated entity Year ended 31 December 2021 Opening net book amount Exchange differences Additions Disposals Depreciation charge Rent reviews Adjustments to lease terms Closing net book amount Lease liabilities Current Non-current Property $’000 Equipment $’000 Total $’000 801,129 (3,070) 49,471 (132,743) (89,415) 5,002 (521) 629,853 – – 1,495 – (249) – – 1,246 801,129 (3,070) 50,966 (132,743) (89,664) 5,002 (521) 631,099 Consolidated 2022 $’000 2021 $’000 168,089 854,681 1,022,770 167,179 958,966 1,126,145 75 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 17 Right-of-use assets and lease liabilities (CONTINUED) (a) Leases (CONTINUED) (ii) Amounts recognised in the Consolidated Statement of Profit or Loss The Consolidated Statement of Profit or Loss shows the following amounts relating to leases: Depreciation charge of right-of-use assets Buildings Equipment Interest expense Expense relating to short-term leases (iii) Maturity analysis of contracted undiscounted cashflows Maturity analysis Not later than one year Later than 1 year and not later than 5 years Later than 5 years Total undiscounted lease payments Less: Present value adjustment Present value of lease payments Notes 6(a) Consolidated 2022 $’000 84,378 1,246 85,624 45,837 5,196 2021 $’000 89,415 249 89,664 48,715 3,645 Consolidated 2022 $’000 2021 $’000 168,089 537,006 577,351 1,282,446 (259,676) 1,022,770 167,179 585,321 665,649 1,418,149 (292,004) 1,126,145 In addition to the above lease payments is a minimum lease payment of $44.7 million expected to occur to within 2-5 years, under a non-cancellable lease that has not yet commenced. The lease relates to vacant land for future development and is expected to commence in 2023. The lease agreement contains an option to prepay the lease at the end of the first 12 months after commencement instead of regular monthly lease payments. The Directors have not yet made a decision over the rent payment options as outlined in the contract. (b) Recognition and measurement Leases The Group as a lessee The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets. For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed. Lease liabilities At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as an expense in the period in which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. The incremental borrowing rate is defined as the rate of interest that the lessee would have to pay to borrow over a similar term and with a similar security over the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The lease liability is presented as a separate line in the Consolidated Statement of Financial Position. 76 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 17 Right-of-use assets and lease liabilities (CONTINUED) (b) Recognition and measurement (CONTINUED) Leases (CONTINUED) Lease liabilities (CONTINUED) After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured whenever: — the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the lease liabilities are remeasured by discounting the revised lease payments using a revised discount rate; — the lease payments change due to changes in an index or rate or a change in expected payment under guaranteed residual value, in which case the lease liability is remeasured by discounting the revised lease payments using the initial discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used); and — a lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate. Right-of-use assets The Group recognises right-of-use assets at cost at the commencement date of the lease (i.e., the date the underlying asset is available for use). The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are subsequently measured at cost, less any accumulated depreciation and impairment losses, and are adjusted for any remeasurement of lease liabilities. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under AASB 137 Provisions, Contingent Liabilities and Contingent Assets. The costs are included in the related right-of-use asset, unless those costs are incurred to produce inventories. The right-of-use assets are presented as a separate line in the Consolidated Statement of Financial Position. Right-of-use assets are subject to impairment in accordance with AASB 136. Any identified impairment loss is accounted for in line with our accounting policy for ‘Property, plant and equipment’ Short-term leases and leases of low-value assets The Group applies the short-term lease recognition exemption to its short-term leases of property, machinery/equipment and motor vehicles (i.e., those leases that have a lease of 12 months or less from the commencement date and do not contain a purchase option). It also applies the low-value assets recognition exemption to leases that are considered of low-value. Lease payments on short-term leases and leases of low-value assets are recognised as an expense on a straight-line basis over the lease term. Sale and leaseback transactions Where the Group enters into a sale and leaseback transaction, the Group firstly applies the requirements of AASB 15 Revenue from Contracts with Customers to determine whether control has passed, and whether the transfer is accounted for as a sale. Further, when the Group enters into a sale and leaseback transaction and the fair value of the consideration for the sale of the property does not equal the fair value of the asset, or the payments for the lease are not at market rates, the following adjustments are made to measure the sale proceeds at fair value: (i) any below market terms are accounted for as a prepayment of lease payments; and (ii) any above market terms are accounted for as additional financing provided by the buyer-lessor to the Group. Incremental borrowing rate The Group has determined its incremental borrowing rate by considering the interest rate on their financing facility and applying, where considered necessary, adjustments to align this with an asset specific rate. The adjustments consider the term of the agreement, security of asset and the funds necessary to obtain the asset of a similar value in a similar economic environment. Significant judgement is required to assess and apply these adjustments. The application of the incremental borrowing rate impacts the initial valuation of the lease liability and associated interest expense. (c) Critical accounting estimates and judgements Recoverability of right-of-use assets and other non-current assets The Group assessed the recoverability of the right-of-use assets and other non-current assets associated with Holden sites and restructuring activities related to its leased property portfolio. In applying the standard, the Directors have made certain assumptions and judgements in relation to the determination of the recoverable amount for these assets. Further information on impairments recognised in respect to right-of-use assets and other non-current assets can be found in Notes 17(a)(i) and 19(a) respectively. Significant judgement in determining the lease term of contracts with renewal options The Group determines the lease term as the non-cancellable term of the lease, together with periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Group has the option, under some of its property leases to lease the asset for additional terms. The Group applies judgement in evaluating whether it is reasonably certain to exercise the option to renew. That is, it considers all relevant factors that create an economic incentive for it to exercise the renewal. After the commencement date, the Group reassess the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew (e.g., a change in business strategy). 77 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 18 Finance lease receivables In determining the expected credit losses for these assets, the directors of the Group have taken into account the understanding of the credit risk rating of counterparties, as well as the historical default experience and the future prospects of the industries in which the lessees operate, together with the value of collateral held over these finance lease receivables. (a) Amounts receivable under finance leases Year 1 Year 2 Year 3 Year 4 Year 5 Onwards Total undiscounted lease payments Less: Unearned finance income Allowance for expected credit losses Present value of lease payments receivable Current Non-current Total finance lease receivables Consolidated 2022 $’000 39,104 37,548 28,945 27,903 22,918 169,941 326,359 (74,017) (15,000) 237,342 39,104 198,238 237,342 2021 $’000 34,715 34,430 33,223 28,525 27,428 192,135 350,456 (79,809) – 270,647 34,715 235,932 270,647 All subleases are back-to-back arrangements, and as such there is no residual value risk. The Group is not exposed to foreign currency risk as a result of the lease arrangement, as all leases are denominated in Australian Dollars. The back-to-back subleases have terms between 1 and 13 years. Leases include a clause to enable upward revision of the rental charge on an annual basis according to prevailing market conditions. (b) Movement in expected credit losses Opening balance Additional loss allowance Closing balance Consolidated 2022 $’000 – 15,000 15,000 2021 $’000 – – – 78 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) Measurement and recognition of expected credit losses The measurement of expected credit losses is a function of the probability of default, loss given default (i.e., the magnitude of the loss if there is a default) and the exposure at default. The assessment of the probability of default and loss given default is based on historical data adjusted by forward-looking information as described above. As for the exposure at default, for financial assets, this is represented by the assets’ gross carrying amount at the reporting date. (d) Critical accounting estimates and judgements Calculation of loss allowance When measuring ECL the Group uses reasonable and supportable forward-looking information, which is based on assumptions for the future movement of different economic drivers and how these drivers will affect each other. Loss given default is an estimate of the loss arising on default. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, taking into account cash flows from collateral and integral credit enhancements. Probability of default constitutes a key input in measuring ECL. Probability of default is an estimate of the likelihood of default over a given time horizon, the calculation of which includes credit rating, assumptions and expectations of future conditions. 18 Finance lease receivables (CONTINUED) (c) Recognition and measurement Leases The Group as a lessee Sublease arrangements When the Group is an intermediate lessor, it accounts for the head lease and the sublease as two separate contracts. The sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease. As a result of the subleasing arrangements entered into as a result of business divestments, the Group has recognised a current finance lease receivable of $39.1 million, and a non current finance lease receivable of $198.2 million. Amounts due from lessees under finance leases are recognised as receivables at the amount of the Group’s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return of the Group’s net investment outstanding in respect of the leases. Impairment of financial assets The Group recognises a loss allowance for expected credit losses on investments in debt instruments that are measured at amortised cost or at FVOCI, lease receivables, trade receivables and contract assets. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument. The Group always recognises lifetime expected credit losses (ECL) for trade receivables, contract assets and lease receivables. The Group have taken into account the understanding of the credit risk rating of counterparties, as well as the historical default experience and the future prospects of the industries in which the lessees operate, together with the value of collateral held over these finance lease receivables. Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. Definition of default The Group considers the following as constituting an event of default for internal credit risk management purposes as historical experience indicates that financial assets that meet either of the following criteria are generally not recoverable: — when there is a breach of financial covenants by the debtor; or — information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors, including the Group, in full (without taking into account any collateral held by the Group). 79 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 19 Non-current assets – Property, plant and equipment Freehold land and buildings – at fair value Directors' valuation1 Land Buildings Total land and buildings Construction in progress – at cost Construction in progress Leasehold improvements At cost Accumulated depreciation Total leasehold improvements Plant and equipment At cost Accumulated depreciation Total plant and equipment Total property, plant and equipment 1 Valuation of land and buildings. Consolidated 2022 $’000 2021 $’000 285,292 291,763 577,055 249,962 182,490 432,452 30,510 15,825 42,357 (5,670) 36,687 68,415 (14,274) 54,141 698,393 27,809 (3,415) 24,394 48,516 (6,813) 41,703 514,374 Valuation of land and buildings The Group considers the valuation of land & buildings every reporting date and the Group’s policy requires land & buildings to be externally valued every three years. At reporting dates where an asset is not externally valued, the Group considers whether market conditions or asset specific factors support the position that the carrying value of the asset is materially in line with fair value. This includes consideration of changes in market variables such as capitalisation rates and terminal growth observable through comparable independent valuations obtained and also considers comparable market transactions. The Group also considers whether the usage of a property has changed that may alter the valuation of the property. In the current year, the Group commissioned additional valuations of additional properties above the usual cyclical valuations in response to uncertainty driven by market conditions. 80 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 19 Non-current assets – Property, plant and equipment (CONTINUED) Valuation of land and buildings (CONTINUED) Details of the Group’s freehold land and buildings and information about the fair value hierarchy as at 31 December 2022 are as follows: Unobservable inputs used in determination of fair values Class of assets and liabilities Level 3 Car – HBU Alternate Use Carrying amount 2021 2022 $’000 $’000 41,881 40,541 535,174 380,956 Level 3 Franchised Automotive Dealership Level 3 Truck Dealership – 9,888 Level 3 Other Logistics – 1,067 Total 577,055 432,452 Inputs used to measure fair value Adopted capitalisation rate Net market rental (per sqm) Price per sqm land Adopted capitalisation rate Net market rental (per sqm) Net rent per sqm GBA Adopted capitalisation rate Net market rental (per sqm) Price per sqm land Adopted capitalisation rate Net market rental (per sqm) Range of unobservable inputs 2022 6.2% - 8.1% 2021 N/A $120 - $298 N/A $1,473 - $4,826 $1,489 - $4,002 4.9% - 10.1% 0.0% - 9.0% $4 - $270 $0 - $300 $54 - $1,029 N/A $0 - $980 4.7% - 4.7% N/A N/A N/A N/A $0 - $20 $430 - $430 8.0% - 8.0% $71 - $71 Valuation technique Key input Direct comparison External valuations Summation method, income capitalisation and direct comparison External valuations, industry benchmarks Direct comparison External valuations Income capitalisation method supported by market comparison External valuations Truck Dealership and Other Logistics have been reclassified to Franchised Automotive Dealership in the current year. 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 HBU greater than that of a car dealership; Franchised Automotive Dealership refers to properties operating as car dealerships with a HBU consistent with that use; Truck Dealership refers to properties being operated as truck dealerships 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 $250,357,000 (2021: $235,675,000). If freehold buildings were carried at historical cost, its current carrying value (after depreciation) would be $269,643,000 (2021: $182,490,000). Non-current assets pledged as security Refer to Note 27 for information on non-current assets pledged as security by the Group. 81 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 19 Non-current assets – Property, plant and equipment (CONTINUED) 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: Consolidated 2022 Opening net book amount Exchange differences Transfers Additions Revaluation gain recognised in asset revaluation reserve Disposals Depreciation charge Carrying amount at end of year Freehold land $’000 249,962 – (20,872) 52,326 21,446 (17,570) – 285,292 Buildings $’000 182,490 – 34,710 95,950 – (12,290) (9,097) 291,763 Construction in progress $’000 15,825 – (22,645) 37,394 Leasehold improvements $’000 24,394 – 7,293 10,349 – (64) – 30,510 – (1,060) (4,289) 36,687 Plant and equipment $’000 41,703 (892) 1,514 30,943 – (3,457) (15,670) 54,141 Total $’000 514,374 (892) – 226,962 21,446 (34,441) (29,056) 698,393 During the period, the Group acquired land and buildings of which $30 million was directly funded through capital loan facilities obtained by the Group. Refer to Note 27 for further information on movement in borrowings. Consolidated 2021 Opening net book amount Exchange differences Transfers Additions Revaluation gain recognised in asset revaluation reserve Revaluation recognised in profit and loss Disposals Transfer to property assets held for sale Depreciation charge Carrying amount at end of year Freehold land $’000 202,384 – – 112,376 4,999 (5,156) (45,971) (18,670) – 249,962 Buildings $’000 154,079 – 1,521 56,336 – – (24,692) – (4,754) 182,490 Construction in progress $’000 7,405 – (1,972) 10,392 Leasehold improvements $’000 39,474 – (1,888) 5,488 – – – – – 15,825 – – (13,297) – (5,383) 24,394 Plant and equipment $’000 90,924 (438) 2,339 15,187 – – (47,144) – (19,165) 41,703 Total $’000 494,266 (438) – 199,779 4,999 (5,156) (131,104) (18,670) (29,302) 514,374 82 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 19 Non-current assets – Property, plant and equipment (CONTINUED) (a) Recognition and measurement (b) Critical accounting estimates and judgements Fair value estimation of land and buildings Land and buildings with a carrying value of $577.1 million (2021: $432.5 million) are carried at fair value. Fair value inherently involves estimates and judgements to be made. The Directors determine the fair value of land and buildings at least annually and if required in contemplation of sale. The Directors’ assessment is supported by formal independent valuations conducted periodically but at least every three years. 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. Revaluations are made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting period or immediately prior to the initial classification of assets held for sale. 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. 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 20(b)(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. 83 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 20 Non-current assets – Intangibles Goodwill Trade marks/brand names Customer relationships Other intangible assets Movement – Goodwill Balance at the beginning of the financial year Additional amounts recognised: Acquired through business combinations 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: Disposal of businesses Balance at the end of the financial year Movement – Customer relationships Balance at the beginning of the financial year Amortisation charge Balance at the end of the financial year Movement - Other intangible assets Balance at the beginning of the financial year Recognition of other intangible assets Amortisation charge Balance at the end of the financial year Notes Consolidated 2022 $’000 834,619 5,915 3,930 10,558 855,022 2021 $’000 763,988 5,915 5,392 – 775,295 763,988 771,755 35(a) 36(a) 81,664 (11,033) 834,619 10,749 (18,516) 763,988 5,915 – 5,915 5,392 (1,462) 3,930 – 11,019 (461) 10,558 6,965 (1,050) 5,915 6,854 (1,462) 5,392 – – – – 84 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 20 Non-current assets – Intangibles (CONTINUED) Impairment tests for goodwill (a) For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (CGU), or groups of CGUs, that are expected to benefit from the synergies of the combinations. Each unit or group of units to which goodwill is allocated represents the lowest level at which goodwill is monitored for internal management purposes. The Group has nine groups of CGUs in the Car retailing segment, grouped by the operating regions (QLD & NT, NSW, ACT, VIC & TAS, SA, WA, NZ), national retailing rights (BYD), and a National Used CGU, with the lowest level for which there are independent cash flows determined to be on an operating region or State basis. The recoverable amount of a CGU or group of CGUs 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 arm’s length transaction between knowledgeable and willing parties at the balance date. If relevant, this fair value assessment less costs of disposal is conducted by the Directors based on their extensive knowledge of the car 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 CGU’s and then applying a discount rate to calculate the present value. The DCF model adopted by the Directors utilises cash flow forecasts derived from the 2023 financial budgets approved by the Board to help determine year one cash flows. The budgets consider all available sources of information (both external and internal). The key assumptions determined by the Directors as being the assumptions to which the CGUs recoverable amount is most sensitive are: Cash flow growth rates The DCF value-in-use models include a range of cash flow growth rates applied in a second forecast year to year four that does not exceed 2.3% (2021: 2.0%) in both our Australian and New Zealand operations. Terminal growth rates A terminal growth rate of 2.5% is applied from year four and into the terminal period (2021: 2.0%). The terminal growth rate is not deemed to exceed the long-term average growth rate for the industry and generally accepted future consumer price index (CPI) rate. Discount rate A post-tax discount rate of 8.5% (2021: 8.0%) was applied to the cash flows for Australian operations and a post-tax discount rate of 8.75% (2021: 8.0%) for New Zealand, incorporating the impact of AASB 16 (IFRS 16 Leases in New Zealand) on the Group’s cost of debt. Management engaged a third party specialist to provide the discount rate utilised in the DFC value-in-use models. Whilst supply chain dynamics persist, the Group’s fundamentals reflect the strength of our ongoing business, with continued growth of our new car order bank and realised benefits from our ongoing productivity and cost-out programs. The forecast growth rates and terminal growth rate have been based on consideration of historical performance and the expected future operating conditions. Consideration of COVID-19 and the associated impacts on the automotive retail industry and the wider economy The Group believes that the assumptions underpinning the DCF calculations used to evaluate the recoverability of goodwill and intangible assets have been adjusted to reflect reasonable estimates of the impact of COVID-19 and the risks associated with estimated cash flows. Whilst there is no impairment of the CGUs at 31 December 2022, the Directors acknowledge the continuing heightened level of uncertainty around key assumptions in the current environment. Management have considered the market context and performance with reference to the VFACTS National Report New Vehicle Sales results for December 2022. Market new vehicle sales increased 3.0% year-to-date December 2022, compared to year-to-date December 2021. New vehicle sales is a leading indicator for Used Vehicle, Parts and Service department performance. Consideration of climate change In estimating recoverable amount the Group has considered the potential impacts of climate change both on the Group’s business model and corporate strategy. The most significant change for vehicle retailers will be the increasing rate of demand for electric vehicles (including hydrogen fuel cell electric vehicles) in preference to internal combustion engine vehicles. This change, in isolation is not expected to significantly impact the Group’s business model as the Group is pivoting to supplying a greater percentage of electric vehicles to meet consumer demand. Other impacts such as the Group’s desire to meet net zero emissions over time are being considered and will be reflected in the recoverable amount as the strategy progresses. There is significant headroom in all CGUs. Sensitivity analysis performed The Group has performed sensitivity analysis of the reasonably possible changes in the key assumptions used in the model, including reducing cash flow growth rates from a maximum of 2.3% to a fixed growth rate of 0% applied from the second forecast year through to year five, whilst holding terminal growth rate at 2.5%. Further, the Group has sensitised the discount rate from 8.5% to 9.0% in Australian operations, and from 8.75% to 9.25% in New Zealand operations. Under each of these independent scenarios, no impairment was identified. The CGU most sensitive to possible impairment is New Zealand. However, the directors have determined that a reasonably possible change to the key assumptions, including the Board approved Year 1 forecast, would not result in impairment. 85 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 20 Non-current assets – Intangibles (CONTINUED) (b) Recognition and measurement (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 independent cash inflows (CGUs) 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 19(a)). 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 Note 19(a)). (ii) Customer relationships Customer relationships acquired in a business combination where management believes there are contracted relationships in place that generate repeat transactions which creates future economic benefits and are amortised on a straight-line basis over the period of their expected benefit, being their finite useful life of five years. Customer relationships are made up of fleet customer arrangements in place for the new vehicle and servicing business. (iii) 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 consumer’s decision to purchase or service a vehicle, and/or strong customer awareness within a particular geographic location. The trademarks are valued using a discounted cash flow methodology. The majority of the Group’s 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. (iv) Other intangible assets Other intangible assets include costs associated with franchise licences which provide a benefit for more than one reporting period are amortised over the remaining term of the franchise licence. Capitalised costs associated with renewal options for franchise licences are deferred and amortised over the renewal option period. The unamortised balance is reviewed each balance date and charged to the Consolidated Income Statement to the extent that future benefits are no longer probable. (v) 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 acquired and liabilities assumed 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. (c) Critical accounting estimates and judgements Recoverability of goodwill and other intangibles with indefinite useful lives Goodwill and other intangibles with indefinite useful lives of $840.5 million (2021: $769.9 million) 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 discount rates based on the current cost of capital. Fair value less costs of disposal is assessed by the Directors based on their knowledge of the industry and any recent market transactions. The above figures therefore reflect the estimates of the recoverable amounts post any impairment recognised during the year. Further information on the impairment test in respect of goodwill and other assets can be found in Notes 19(a) and 20(a). 86 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 21 Non-current assets – Deferred tax assets Deferred tax assets The balance comprises temporary differences attributable to: Amounts recognised in profit or loss Book versus tax carrying value of plant and equipment Leases Deferred income Inventory valuation Prepayments Trade receivables Provisions Employee benefits Other Sundry items Total amounts recognised in profit or loss Amounts recognised directly in equity Revaluation of available-for-sale investment Revaluation of property, plant and equipment Share options trust Total amounts recognised directly in equity 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 2022 Deferred tax (expense) Adjustments recognised in the current year in relation to deferred tax in prior years prior years Deferred tax recognised directly in equity Revaluation of property, plant and equipment Disposal of property with prior period revaluation Revaluation of financial assets Share options trust Deferred tax recognised through a business combination Deferred tax assets relating to business combinations Closing balance at 31 December 2022 Notes Consolidated 2022 $’000 2021 $’000 142,116 152,000 27,857 66,396 4,516 2,565 (1,707) 1,399 35,237 6,319 16,668 159,250 (57) (18,020) 943 (17,134) 152,000 (4,324) (1,702) (6,434) 1,109 (57) (640) 25,548 67,047 4,944 (2,157) (766) 1,215 33,115 6,475 24,422 159,843 – (8,948) 1,105 (7,843) 162,005 (9,334) – (1,500) – – 253 2,164 142,116 576 152,000 7(a) 32(a) 32(a) 32(a) Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes: Deferred tax liabilities Deferred tax assets Net deferred tax asset Consolidated 2022 $’000 (19,784) 161,900 142,116 2021 $’000 (11,871) 163,871 152,000 At the reporting date, the Group has no unused revenue tax losses (2021: nil) available for offset against future profits. No deferred tax asset has been recognised in respect of capital losses of $57.5 million (2021: $116.9 million, revised to $109.4 million following finalisation of the Group income tax return) as it is not considered probable that there will be future capital gains available to utilise the capital losses. The capital losses may be carried forward indefinitely. 87 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 21 Non-current assets – Deferred tax assets (CONTINUED) (a) Recognition and measurement (b) Critical accounting estimates and judgements Deferred tax asset Recognition and measurement of deferred tax assets require certain judgements and assumptions to be made, including but not necessarily limited to the expected realisation of certain assets and liabilities and the likelihood and timing of sufficient profits available in the future. Deferred taxes 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, where at the time of the transaction the temporary differences did not affect either accounting profit or taxable profit or loss. 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. 88 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 22 Current liabilities – Trade and other payables Trade and other payables Trade payables1 Other payables Consolidated 2022 $’000 142,505 233,167 375,672 2021 $’000 116,668 247,595 364,263 Other payables comprises of customer deposits held of $95.1 million (2021: $71.4 million), taxes payable of $10.2 million (2021: $15.4 million), accruals of $96.6 million (2021: $118.8 million), with the remaining balance relating to miscellaneous payables. 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. Recognition and measurement 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. 23 Current liabilities – Borrowings – bailment and other current loans (a) Bailment finance and other current loans Bailment finance Capital loan Consolidated 2022 $’000 872,348 66,976 939,324 2021 $’000 681,325 14,967 696,292 (i) Bailment finance Bailment finance is provided on a vehicle-by-vehicle basis by various finance providers at an average interest rate of 3.67% p.a. applicable at 31 December 2022 (2021: 2.21%). 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 33. (iii) Fair value disclosures Details of the Group’s fair value of interest bearing liabilities is set out in Note 33. (iv) Security Details of the security relating to each of the secured liabilities and further information on bank loans is set out in Note 27. b) Recognition and measurement (i) 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. (ii) 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. 89 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 24 Current liabilities – Net current tax liabilities Current income tax receivable Current income tax payable Net current income tax payable/(receivable) Recognition and measurement Please refer to Note 7(d) for recognition and measurement of tax balances. 25 Current liabilities – Provisions Annual leave Long service leave Recognition and measurement Consolidated 2022 $’000 – 16,331 16,331 2021 $’000 (574) – (574) Consolidated 2022 $’000 55,534 48,993 104,527 2021 $’000 57,429 44,341 101,770 (i) 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. (ii) 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. Contributions are made by the Group to defined contribution employee superannuation funds and are charged as expenses when incurred. 26 Current liabilities – Other current liabilities Deferred revenue Consolidated 2022 $’000 12,924 2021 $’000 13,442 Deferred revenue relates to recognition of revenue in accordance with the performance obligations in certain warranty contracts. 90 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 27 Non-current liabilities – Borrowings (secured) Term facility Capital loan Secured liabilities Total secured liabilities (current and non-current) are: Term facility1 Capital loan2 Bailment finance3 Consolidated 2022 $’000 104,560 272,350 376,910 2021 $’000 – 311,062 311,062 104,560 339,326 872,348 1,316,234 – 326,029 681,325 1,007,354 2 1 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. 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. 3 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 11. Refer to Note 33 for maturities. 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 Consolidated 2022 $’000 2021 $’000 577,055 1,052,900 872,348 353,639 2,855,942 432,452 905,967 681,325 346,057 2,365,801 91 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 27 Non-current liabilities – Borrowings (secured) (CONTINUED) Financing arrangements The consolidated entity has access to the following lines of credit at the balance date: Total facilities Term facility1 Working capital facility (includes bank overdraft)2 Capital loan3 Bailment finance4 Bank guarantees Drawn at balance date Term facility Capital loan Bailment finance Bank guarantees Undrawn at balance date Term facility Working capital facility (includes bank overdraft) Capital loan Bailment finance Bank guarantees Consolidated 2022 $’000 2021 $’000 382,000 30,000 472,545 1,624,700 66,100 2,575,345 104,560 339,326 872,348 53,408 1,369,642 277,440 30,000 133,219 752,352 12,692 1,205,703 382,000 30,000 449,527 1,597,030 58,000 2,516,557 – 326,029 681,325 49,257 1,056,611 382,000 30,000 123,498 915,705 8,743 1,459,946 Term facility at balance date was provided on a non-amortisable (interest only) basis subject to compliance with specific covenants for a fixed term. 1 2 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. 3 Capital loan facility at the balance date was provided on a non-amortisable (interest only) basis for a fixed term. 4 Dealerships utilise bailment finance to fund both new and used vehicle inventory. New vehicles are purchased from the original equipment manufacturer (OEM) using financing provided by a bailment finance provider, who retains title in the vehicle until it is subsequently sold by the dealership to the customer. Vehicle financed under bailment plans are recognised as inventory with the corresponding bailment liability owing to the finance providers. These facilities include a combination of fixed term and open-ended arrangements and are subject to review periods ranging from quarterly to annual. The facilities are available for drawdown by specified dealerships on a vehicle-by-vehicle basis, with repayment as it relates to an individual vehicle required immediately after the vehicle is sold. The Group also utilises the bailment finance facility to finance some of its used vehicle inventory. 92 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 28 Non-current liabilities – Provisions Long service leave Other provisions Consolidated 2022 $’000 8,537 5,690 14,227 2021 $’000 8,613 5,445 14,058 The other provisions balance held at reporting date relates to provisions held for make good of leased property. This is for the expected cost of restoring the premises to its original condition at the end of the lease. Recognition and measurement (i) 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. (ii) 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 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. 29 Non-current liabilities – Deferred revenue Deferred revenue Consolidated 2022 $’000 15,922 2021 $’000 16,462 Deferred revenue relates to recognition of revenue in accordance with the performance obligations in certain warranty contracts. 93 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) (ii) Truck Retailing For the comparative period, this segment includes only Daimler Truck dealerships which were divested in the prior period, as detailed above. Within the Truck Retailing segment, the Group offered a diversified range of products and services, including new trucks, used trucks, truck maintenance and repair services, truck parts, service contracts, truck protection products and other aftermarket products. They also facilitated financing for truck purchases through third-party sources. New trucks, truck parts and maintenance services were predominantly supplied in accordance with franchise agreements with manufacturers. (iii) Property Within the Property segment, the Group acquires commercial properties principally for use as facility premises for its motor dealership operations. The Property segment charges both the Car Retailing segment, and the formerly known Truck Retailing segment, commercial rent 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 Group. (a) Geographic information The Group operates in two principal geographic locations, being Australia and New Zealand. 30 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 Group has historically operated in three operating and reporting segments being (i) Car Retailing, (ii) Truck Retailing and (iii) Property. These are identified on the basis of being the components of the Group that are regularly reviewed by the chief operating decision maker for the purpose of resource allocation and assessment of segment performance. Information regarding the Group’s reporting segments is presented below. As a result of the divestment of the Daimler Trucks business in the comparative period, the Group changed the structure of its internal organisation. This resulted in a change in the composition of its reportable segments in the prior period, resulting in the Group now operating in two segments. The Truck Retailing reporting segment for the comparative period represents only Daimler Truck dealerships for the year ended 31 December 2021. All remaining non-Daimler Truck dealerships are reported in the Car Retailing segment. The accounting policies of the reportable segments are the same as the Group’s accounting policies as described in Note 1. 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. Funding costs in relation to bills payable are allocated to the Car Retailing, Truck Retailing and Property 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. (i) Car Retailing Within the Car Retailing segment, the Group offers a diversified range of automotive products and services, including new vehicles, used vehicles, vehicle maintenance and repair services, vehicle parts, 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 includes a motor auction business and forklift rental business. Following the divestment of Daimler Trucks in the comparative period, the Group adjusted the composition of its reportable segments, resulting in all remaining non-Daimler Truck dealerships being reallocated to the Car Retailing segment for both the comparative and current period. 94 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 30 Segment information (CONTINUED) (b) Segment results Segment reporting 2022 Sales to external customers Inter-segment sales Total sales revenue Segment result Operating profit before interest External interest expense allocation Operating contribution Business acquisition and divestment costs Other expenses Profit on termination of leases Profit on sale of businesses Profit on sale of properties Impairment of non-current assets Segment profit Unallocated corporate expenses Profit before tax Income tax expense Net profit Depreciation and amortisation Assets Segment assets Liabilities Segment liabilities Net assets Car Retailing Truck Retailing $’000 – – – $’000 8,540,574 – 8,540,574 479,835 (76,742) 403,093 (3,034) (3,926) 2,672 35,248 – (1,727) 432,326 (107,506) 3,522,360 2,509,721 1,012,639 – – – – – – – – – – – – – – Property $’000 928 34,665 35,593 24,973 (11,503) 13,470 – – – – 17,121 – 30,591 (9,097) 597,877 368,886 228,991 Eliminations $’000 – (34,665) (34,665) Consolidated $’000 8,541,502 – 8,541,502 – – – – – – – – – – – – – – 504,808 (88,245) 416,563 (3,034) (3,926) 2,672 35,248 17,121 (1,727) 462,917 (20,695) 442,222 (117,882) 324,340 (116,603) 4,120,237 2,878,607 1,241,630 95 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 30 Segment information (CONTINUED) (b) Segment results (CONTINUED) Segment reporting 2021 Sales to external customers Inter-segment sales Total sales revenue Segment result Operating profit before interest External interest expense allocation Operating contribution Share of net profit of equity accounted investments Business acquisition and divestment costs Property revaluation Profit on termination of leases Profit on sale of businesses Profit on sale of property Manufacturer compensation income Miscellaneous Segment profit Unallocated corporate expenses Profit before tax Income tax expense Net profit Depreciation and amortisation Assets Segment assets Liabilities Segment liabilities Net assets Car Retailing Truck Retailing $’000 223,826 – 223,826 $’000 8,438,283 – 8,438,283 Property $’000 1,353 30,699 32,052 Eliminations $’000 – (30,699) (30,699) Consolidated $’000 8,663,462 – 8,663,462 459,990 (68,147) 391,843 1,078 (1,412) – 8,833 1,708 – 215 735 403,000 6,333 (2,314) 4,019 – (391) – 5,364 30,186 – – – 39,178 21,748 (9,158) 12,590 – – (5,156) – – 10,957 – – 18,391 (106,441) (7,819) (6,168) 3,271,999 2,317,465 954,534 – – – 458,946 326,029 132,917 – – – – – – – – – – – – – – – – 488,071 (79,619) 408,452 1,078 (1,803) (5,156) 14,197 31,894 10,957 215 735 460,569 (3,762) 456,807 (118,070) 338,737 (120,428) 3,730,945 2,643,494 1,087,451 (c) Recognition and measurement Operating segments Operating segments are identified based on internal reports that are regularly reviewed by the Group’s Board of Directors in order to allocate resources to the segment and assess its performance. The Group has historically operated in three operating and reporting segments being (i) Car Retailing, (ii) Truck Retailing and (iii) Property. The Truck Retailing segment is only applicable to the comparative period due to the divestment of the Daimler Trucks business in 2021. Currently the segment of “Other” is not required. 96 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 31 Contributed equity (a) Paid up capital Ordinary shares – fully paid Consolidated 2022 Shares 2021 Shares 2022 $’000 2021 $’000 255,398,099 256,933,106 1,154,572 1,173,069 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. At the reporting date, the Employee Share Trust held 2,509,566 outstanding shares, which are reported in share capital (2021: 2,597,771). (b) Movements in ordinary share capital Date 01-Jan-2022 26-Aug-2022 30-Aug-2022 15-Sep-2022 16-Sep-2022 19-Sep-2022 20-Sep-2022 23-Sep-2022 26-Sep-2022 27-Sep-2022 28-Sep-2022 29-Sep-2022 30-Sep-2022 04-Oct-2022 19-Oct-2022 20-Oct-2022 21-Oct-2022 10-Nov-2022 16-Nov-2022 17-Nov-2022 22-Nov-2022 07-Dec-2022 07-Dec-2022 08-Dec-2022 12-Dec-2022 20-Dec-2022 21-Dec-2022 22-Dec-2022 23-Dec-2022 28-Dec-2022 29-Dec-2022 30-Dec-2022 31-Dec-2022 01-Jan-2021 31-Dec-2021 Details Opening balance Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back Share buy-back Closing balance Opening balance No equity movement during the year Closing balance Number of shares 256,933,106 (152,289) (19,880) (7,995) (120,569) (80,408) (145,690) (127,322) (161,629) (93,967) (39,011) (65,920) (99,997) (24,992) (12,359) (60,000) (18,001) (31,886) (35,000) (8,865) (5,000) (35,000) (2,016) (10,496) (25,504) (30,000) (20,000) (27,856) (44,925) (14,261) (14,000) (169) 255,398,099 256,933,106 – 256,933,106 Buy-back price – $13.13 $12.57 $12.74 $12.73 $12.77 $12.75 $12.68 $12.16 $11.55 $11.63 $11.39 $11.17 $10.91 $11.56 $11.10 $10.97 $11.77 $11.99 $11.90 $11.98 $11.64 $11.60 $11.57 $11.50 $11.09 $11.10 $11.08 $10.80 $10.75 $10.68 $10.73 – – – – $’000 1,173,069 (2,000) (250) (102) (1,535) (1,026) (1,857) (1,615) (1,966) (1,086) (454) (751) (1,117) (273) (143) (666) (197) (375) (420) (106) (60) (407) (23) (121) (293) (333) (222) (309) (485) (153) (150) (2) 1,154,572 1,173,069 – 1,173,069 97 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 32 Reserves and retained earnings (a) Reserves Asset revaluation reserve Share-based payments reserve Foreign currency translation reserve Business combination reserve Investment revaluation reserve Movements: Asset revaluation reserve: Balance at beginning of the financial year Revaluation surplus during the year Deferred tax - revaluation surplus during the year Transfer to retained earnings relating to properties sold Deferred tax - transfer to retained earnings relating to properties sold 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 Shares acquired by the Employee Share Trust Employee share schemes - value of employee services Balance at the end of the financial year Foreign currency translation reserve: Balance at beginning of the financial year Other comprehensive income Balance at the end of the financial year Business combination reserve: Balance at beginning of the financial year Balance at the end of the financial year Investment revaluation reserve: Balance at beginning of the financial year Gain on revaluation of financial assets held at fair value through other comprehensive income Balance at the end of the financial year (b) Retained earnings Retained profits at the beginning of the financial year Net profit for the year Less: NCI Share Transfer to retained earnings Dividends provided for or paid Retained profits at the end of the financial year Notes 19 21 32(b) 21, 32(b) 21 Consolidated 2022 $’000 36,502 (89,171) (1,914) (479,042) (72,497) (606,122) 24,078 21,446 (6,434) (3,697) 1,109 36,502 (91,541) (640) 1,295 (681) 2,396 (89,171) 1,213 (3,127) (1,914) 2021 $’000 24,078 (91,541) 1,213 (479,042) (72,686) (617,978) 32,834 4,999 (1,500) (12,255) – 24,078 (62,510) (253) 19,037 (51,019) 3,204 (91,541) 1,204 9 1,213 (479,042) (479,042) (479,042) (479,042) (72,686) 189 (72,497) (72,686) – (72,686) Consolidated 2022 $’000 510,725 324,340 (16,173) 2,588 (165,684) 655,796 2021 $’000 317,848 330,737 (12,913) 12,255 (137,202) 510,725 98 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 32 Reserves and retained earnings (CONTINUED) (c) Nature and purpose of other reserves (i) Property, plant and equipment revaluation reserve 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 19(a). (ii) Investment revaluation reserve The investment revaluation reserve represents the cumulative gains and losses arising on assets held at FVOCI that have been recognised in other comprehensive income. (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 42 and 43. (iv) Business combination reserve The business combination reserve is used to recognise difference between the value of consideration paid to acquire the non-controlling interest, the carrying value of the non- controlling interest and the value of shares acquired. 33 Financial instruments (a) 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 and Risk Committee (“the 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 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. The main purpose of these financial instruments is to raise finance for and fund the Group’s operations. 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 risks 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: 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. The Group applies the simplified approach permitted by AASB 9, which requires expected lifetime credit losses to be recognised from initial recognition of the receivable. The expected credit losses on these financial assets are estimated using a provision matrix based on the Group’s historical credit loss experience. With respect to credit risk arising from financial assets of the Group (comprised of cash, cash equivalents, receivables, finance lease receivables and other loans receivable), the Group’s maximum exposure to credit risk at balance date, excluding the value of any collateral or other security, is the carrying amount as disclosed in the Consolidated Statement of Financial Position and notes to the consolidated 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. 99 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) (ii) Interest rate sensitivity The sensitivity analysis below has 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 $6.8 million (2021: $5.0 million) per annum. This is mainly due to the Group’s exposures to interest rates on its variable rate borrowings. 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. 33 Financial instruments (CONTINUED) (a) Overview (CONTINUED) 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’s ability to manage liquidity risk is not affected by the net current liability position at 31 December 2022, which is impacted by the recognition of a current liability equivalent to the present value of the lease payments under the remaining term of each lease in accordance with AASB 16. The cash commitments in relation to each lease remain unchanged. Management are of the view that the Group will continue to generate sufficient operating cash flows to meet its financial obligations as they fall due. 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. 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. Interest rate risk (i) The Group’s policy is to keep between 0% and 50% of its borrowings at fixed rates of interest. As at 31 December 2022, 23% (2021: 30%) of the Group’s borrowings were at a fixed rate of interest. 100 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 33 Financial instruments (CONTINUED) (b) Credit risk (i) Exposure to credit risk The carrying amount of financial assets (as per Note 10) represents the maximum credit exposure. The maximum exposure to credit risk as the reporting date was: Trade and other receivables Less: Allowance for expected credit losses (ii) Impairment losses The aging of trade receivables at reporting date is detailed in Note 10. Consolidated 2022 $’000 279,961 (4,661) 275,300 2021 $’000 233,024 (4,064) 228,960 (iii) Fair values and exposures to credit and liquidity risk Detailed in the following table, the Directors consider that the carrying amounts of financial assets and financial liabilities recorded in the consolidated financial statements approximate their fair value. Financial assets Trade and other receivables net of expected credit losses Cash and cash equivalents Other non-current receivables Financial liabilities Bills payable and fully drawn advances Capital loan Vehicle bailment Trade and other payables Notes 10 9 14 27 27 27 22 Consolidated 2022 $’000 275,300 190,434 51,516 517,250 104,560 339,326 872,348 375,672 1,691,906 2021 $’000 228,960 197,620 35,711 462,291 – 326,029 681,325 364,263 1,371,617 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). 101 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 33 Financial instruments (CONTINUED) (b) Credit risk (CONTINUED) (iii) Fair values and Exposures to Credit and Liquidity Risk (CONTINUED) 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 assets and liabilities At 31 December 2022 Interest bearing Floating rate Financial assets Cash and cash equivalents Average interest rate Financial liabilities Vehicle bailment (current) Fully drawn advances Capital loan (non-current) Average interest rate Fixed rate Financial liabilities Capital loan (non-current) Average interest rate Non-interest bearing Financial assets Trade debtors and other receivables Financial liabilities Trade and other payables 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 $’000 190,434 1.31% 872,348 7,437 2,358 882,143 4.08% – – – 7,437 2,358 9,795 1.66% – – – 271,409 2,358 273,767 1.65% – – – 213,168 2,358 215,526 1.05% – – – – 2,358 2,358 5.24% – – – – 19,422 19,422 5.24% 190,434 872,348 499,451 31,212 1,403,011 75,396 3.33% 24,363 3.18% 43,563 3.18% 60,783 3.17% 26,877 3.19% 149,599 3.18% 380,581 294,348 375,672 – – – – – – – – 32,468 326,816 – 375,672 Please refer to note 17(a)(i) and 18 for ageing of lease liabilities and finance lease receivables, respectively. 102 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 33 Financial instruments (CONTINUED) (b) Credit risk (CONTINUED) (iii) Fair values and Exposures to Credit and Liquidity Risk (CONTINUED) Maturity profile (CONTINUED) At 31 December 2021 Interest bearing Floating rate Financial assets Cash and cash equivalents Average interest rate Financial liabilities Vehicle bailment (current) Fully drawn advances Capital loan Average interest rate Fixed rate Financial liabilities Capital loan Average interest rate Non-interest bearing Financial assets Trade debtors Financial liabilities Trade and other payables 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 $’000 197,620 0.10% 681,325 3,295 1,764 686,384 1.95% – – – 3,295 1,764 5,059 1.72% – – – 3,295 1,764 5,059 1.52% – – – 268,707 1,764 270,471 1.49% – – – 207,034 1,764 208,798 1.91% – – – – 16,313 16,313 3.09% 197,620 681,325 485,626 25,133 1,192,084 24,005 3.34% 72,925 3.35% 21,892 3.19% 41,086 3.18% 58,270 3.17% 154,735 3.20% 372,913 240,761 364,264 – – – – – – – – 23,910 264,671 – 364,264 (iv) 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. 103 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 34 Investments in subsidiaries (a) Deed of cross guarantee Name of entity Eagers Automotive Limited A.P. Ford Pty Ltd A.P. Group Ltd A.P. Motors (No.1) Pty Ltd A.P. Motors (No.2) Pty Ltd A.P. Motors (No.3) Pty Ltd A.P. Motors Pty Ltd ACM Autos Holdings Pty Ltd ACM Autos Pty Ltd ACM Liverpool Pty Ltd ACN 132 712 111 Pty Ltd Adtrans Australia Pty Ltd Adtrans Automotive Group Pty Ltd Adtrans Corporate Pty Ltd Adtrans Group Pty Ltd Adtrans Hino Pty Ltd Adtrans Truck Centre Pty Ltd Adtrans Trucks Pty Ltd Adtrans Used Pty Ltd Adverpro Pty Ltd AHG 1 Pty Ltd AHG Automotive Mining and Industrial Solutions Pty Ltd AHG Coatings Pty Ltd AHG Finance 2005 Pty Ltd AHG Finance Pty Ltd AHG Franchised Automotive Pty Ltd AHG International Pty Ltd AHG Management Company Pty Ltd AHG Newcastle Pty Ltd AHG Property Pty Ltd AHG Services (NSW) Pty Ltd AHG Services (QLD) Pty Ltd AHG Services (VIC) Pty Ltd AHG Services (WA) Pty Ltd AHG Trade Parts Pty Ltd AHG Training Pty Ltd AHG WA (2015) Pty Ltd AHGCL 2016 Pty Ltd AHGSW 2018 Pty Ltd AP Townsville Pty Ltd APE Cars Mgmt Pty Ltd Associated Finance Pty Ltd Auckland Auto Collection Limited Austral Pty Ltd AUT 6. Pty Ltd Auto Ad Pty Ltd Automotive Holdings Group (Queensland) Pty Ltd Automotive Holdings Group (Victoria) Pty Ltd Automotive Holdings Group Pty Ltd C – Member of the Closed Group EC – Member of the Extended Closed Group 104 Equity holding Member of DOCG Membership group Opt In/Out 2022 % 100 100 100 100 100 100 100 80 80 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 78 100 100 100 100 100 100 100 100 100 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * 2021 % 100 100 100 100 100 100 100 80 80 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 78 100 100 100 100 100 100 100 100 100 2022 2021 2022 2021 2022 2021 Y Y Y N Y Y Y Y Y Y Y Y Y Y Y Y Y N Y N Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y N N Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y C C C N/A C C C EC EC C C C C C C C C N/A C N/A C C C C C C C C C C C C C C C C C C C EC C C C C C C C C C C C C C C C C N/A N/A C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C EC C C C C C C C C C Opt Out Opt In Opt Out Opt In Opt Out Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 34 Investments in subsidiaries (CONTINUED) (a) Deed of cross guarantee (CONTINUED) Name of entity BASW Pty Ltd Big Rock 2005 Pty Ltd Big Rock Pty Ltd Bill Buckle Autos Pty Ltd Bill Buckle Holdings Pty Ltd Bill Buckle Leasing Pty Ltd Black Auto CQ Pty Ltd Boonarga Welding Pty Ltd Bradstreet Motors Holdings Pty Ltd Bradstreet Motors Pty Limited Cardiff Car City Holdings Pty Ltd Cardiff Car City Pty Limited Carlin Auction Services (NSW) Pty Ltd Carlins Automotive Auctioneers (QLD) Pty Ltd Carlins Automotive Auctioneers (S.A) Pty Ltd Carlins Automotive Auctioneers (WA) Pty Ltd Carlins Automotive Auctioneers Pty Ltd Carlins Group Holdings Pty Ltd Carsplus Australia Pty Ltd Carzoos Pty Ltd Castle Hill Autos No. 1 Pty Ltd Castlegate Enterprises Pty Ltd CFD (2012) Pty Ltd CH Auto Pty Ltd Cheap Cars QLD Pty Ltd Chellingworth Pty Ltd City Auto (2016) Holdings Pty Ltd City Auto (2016) Pty Ltd City Automotive Group Pty Ltd City Motors (1981) Pty Ltd Crampton Automotive Pty Ltd Drive A While Pty Ltd Dual Autos Pty Ltd Duncan Autos 2005 Pty Ltd Duncan Autos Pty Ltd E.G. Eager & Son Pty Ltd EACAB Pty Ltd Eagers ACT Pty Ltd Eagers ACT Rentals Pty Ltd Eagers ACT Cars MGMT Pty Ltd Eagers Finance Pty Ltd Eagers MD Pty Ltd Eagers Nominees Pty Ltd Eagers Retail Pty Ltd Eagers TACT Pty Ltd EASST Pty Ltd Easy Auto 123 Pty Ltd Essendon Auto (2017) Pty Ltd Eurocars (SA) Pty Ltd EV Dealer Group Pty Ltd C – Member of the Closed Group EC – Member of the Extended Closed Group Equity holding 2021 2022 % % 80 80 80 80 100 100 100 - 100 100 100 100 100 100 80 80 80 80 80 80 80 80 80 80 53 53 53 53 53 53 53 53 53 53 53 53 100 100 100 100 100 100 100 100 100 100 100 100 78 78 100 100 80 80 80 80 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 78 78 - 100 - 100 - 100 100 100 80 80 100 100 100 100 - 80 100 85 100 100 100 100 100 100 - 49 * * * * * * * * * * * * * * * * * * * * * * * * Member of DOCG Membership group Opt In/Out 2022 2021 2022 2021 2022 2021 Y Y Y N/A Y N Y Y Y Y Y Y N N N N N N Y N Y Y Y Y Y Y Y Y Y Y Y Y Y N N Y Y Y Y Y Y Y Y Y Y Y Y Y Y N Y N Y Y Y Y Y Y N N N N N N N N N N Y Y Y Y Y Y Y Y N N Y Y Y Y Y Y Y Y Y N/A N/A N/A Y Y Y Y N/A Y Y Y Y N/A EC EC C N/A C N/A C EC EC EC EC EC N/A N/A N/A N/A N/A N/A C N/A C C C C EC C EC EC C C C C C N/A N/A C EC C C C C EC C C EC EC C C C N/A EC N/A C C C C C EC N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A C C C C C C EC C N/A N/A C C C C C C C C EC N/A N/A N/A C EC C C N/A C C C C N/A Opt Out Opt In Opt Out Opt In Opt Out 105 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 34 Investments in subsidiaries (CONTINUED) (a) Deed of cross guarantee (CONTINUED) Equity holding 2021 2022 % % 100 100 100 100 100 100 100 100 100 100 100 100 90 90 80 80 80 80 100 100 100 100 100 100 80 80 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 80 80 80 80 100 100 100 100 100 100 80 80 100 100 100 100 100 100 100 100 100 100 100 100 87.5 87.5 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 80 80 80 80 100 100 100 100 100 100 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Member of DOCG Membership group Opt In/Out 2022 2021 2022 2021 2022 2021 Y N N Y Y Y Y Y Y Y N N Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y N Y Y Y Y Y Y Y Y Y Y Y Y Y Y N Y Y Y Y Y Y N N Y Y Y Y N N Y N N Y Y Y Y Y Y Y Y Y N N Y Y Y N Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y N N Y Y Y C N/A N/A C C C EC EC EC C N/A N/A EC C C C C C C C C EC EC C C C EC C C N/A C C C EC C C C C C C C C C C N/A EC EC C C C Opt In Opt In Opt Out Opt In Opt Out Opt In Opt Out Opt Out Opt In Opt In C N/A N/A C C C EC N/A N/A C N/A N/A EC C C C C C C C C N/A N/A C C C N/A C C C C C C EC C C C C C C C C C C C N/A N/A C C C Name of entity Falconet Pty Ltd Ferntree Gully Autos Holdings Pty Ltd Ferntree Gully Autos Pty Ltd Finmo Pty Ltd Giant Autos (1997) Pty Ltd Giant Autos Pty Ltd Graham Cornes Motors Pty Ltd Grand Autos 2005 Pty Ltd Highland Autos Pty Ltd Highland Kackell Pty Ltd HM (2015) Holdings Pty Ltd HM (2015) Pty Ltd IB MD Pty Ltd IB Motors Pty Ltd Janasen Pty Ltd Janetto Holdings Pty Ltd Kingspoint Pty Ltd Leaseline & General Finance Pty Ltd Lionteam Pty Ltd LWC International Limited LWC Limited Maitland City Motor Group Holdings Pty Ltd Maitland City Motor Group Pty Ltd Matchacar Pty Ltd MB VIC Pty Ltd MBSA Motors Pty Ltd MCM Autos Pty Ltd MCM Sutherland Pty Ltd Melbourne City Autos (2012) Pty Ltd Melbourne Truck and Bus Centre Pty Ltd Melville Autos 2005 Pty Ltd Melville Autos Pty Ltd Mornington Auto Group (2012) Pty Ltd Motors Group (Glen Waverley) Pty Ltd Motors TAS Pty Ltd Newcastle Commercial Vehicles Pty Ltd North City (1981) Pty Ltd North City 2005 Pty Ltd Northside Autos 2005 Pty Ltd Northside Nissan (1986) Pty Ltd Northwest (WA) Pty Ltd Novated Direct Pty Ltd NSW Vehicle Wholesale Pty Ltd Nuford Ford Pty Ltd Nundah Motors Pty Ltd OPM (2012) Holdings Pty Ltd OPM (2012) Pty Ltd Osborne Park Autos Pty Ltd Penrith Auto (2016) Pty Ltd Perth Auto Alliance Pty Ltd C – Member of the Closed Group EC – Member of the Extended Closed Group 106 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 34 Investments in subsidiaries (CONTINUED) (a) Deed of cross guarantee (CONTINUED) Name of entity Precision Automotive Technology Pty Ltd PT (2013) Pty Ltd Rent Two Buy Pty Ltd RL Sublessor Pty Ltd Sabalan Holdings Pty Ltd Sabalan Pty Ltd Shemapel 2005 Pty Ltd South West Queensland Motors Pty Ltd Southeast Automotive Group Pty Ltd Southern Automotive Group Pty Ltd Southside Autos (1981) Pty Ltd Southside Autos 2005 Pty Ltd Southwest Automotive Group Pty Ltd Submo Pty Ltd SWGT Pty Ltd Total Autos (1990) Pty Ltd Total Autos 2005 Pty Ltd Vehicle Storage & Engineering Pty Ltd VMS Pty Ltd WA Trucks Pty Ltd Webster Trucks Mgmt Pty Ltd Western Equipment Rentals Pty Ltd Widevalley Pty Ltd WS Motors Pty Ltd Zupp Holdings Pty Ltd Zupps Aspley Pty Ltd Zupps Gold Coast Pty Ltd Zupps Mt Gravatt Pty Ltd Zupps Parts Pty Ltd C – Member of the Closed Group EC – Member of the Extended Closed Group Equity holding 2021 2022 % % 100 100 100 92.5 100 100 100 100 80 80 80 80 100 100 80 80 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 78 78 100 100 100 100 100 100 100 100 100 100 * * * * * * * * * * * * * * * * * * * * * * Member of DOCG Membership group Opt In/Out 2022 2021 2022 2021 2022 2021 Opt In Opt Out Opt In Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y N Y Y N Y Y Y Y Y Y Y Y N Y Y N N Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y C EC C C EC EC C EC C C C C C C C C C C N/A C C N/A C EC C C C C C C N/A C C N/A N/A C EC C C C C C C C C C C C C C C C EC C C C C C All entities noted as members of the Deed of Cross Guarantee (DOCG) above, were parties to a Deed of Cross Guarantee with Eagers Automotive Limited pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 which has been lodged with and approved by Australian Securities and Investments Commission as at 31 December 2022. Under the DOCG each of these companies guarantee the debts of the other named companies. All subsidiaries that are either directly controlled by Eagers Automotive Limited, or are wholly owned within the Group, have ordinary class of shares and are incorporated in Australia or New Zealand. 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. 107 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 34 Investments in subsidiaries (CONTINUED) (a) Deed of cross guarantee (CONTINUED) The following entities obtained relief under ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 in 2021, but were ineligible for relief in 2022: Entity name A.P. Motors (No.1) Pty Ltd Adtrans Trucks Pty Ltd Adverpro Pty Ltd Bill Buckle Autos Pty Ltd Bill Buckle Leasing Pty Ltd Carzoos Pty Ltd Duncan Autos 2005 Pty Ltd Duncan Autos Pty Ltd EASST Pty Ltd Melbourne Truck and Bus Centre Pty Ltd Nundah Motors Pty Ltd VMS Pty Ltd Western Equipment Rentals Pty Ltd Ineligibility date 15 December 2022 15 December 2022 15 December 2022 30 June 2022 15 December 2022 15 December 2022 15 December 2022 15 December 2022 01 February 2022 15 December 2022 15 December 2022 15 December 2022 15 December 2022 108 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 34 Investments in subsidiaries (CONTINUED) (a) Deed of cross guarantee (CONTINUED) The following entities joined the DOCG in 2022 by assumption deed: Entity name ACM Autos Holdings Pty Ltd ACM Autos Pty Ltd Big Rock 2005 Pty Ltd Bradstreet Motors Holdings Pty Ltd Bradstreet Motors Pty Ltd Cardiff Car City Holdings Pty Ltd Cardiff Car City Pty Limited City Auto (2016) Holdings Pty Ltd City Auto (2016) Pty Ltd Eagers ACT Cars MGMT Pty Ltd Eagers ACT Pty Ltd Eagers ACT Rentals Pty Ltd Eagers TACT Pty Ltd Grand Autos 2005 Pty Ltd Highland Autos Pty Ltd Maitland City Motor Group Holdings Pty Ltd Maitland City Motor Group Pty Ltd MCM Autos Pty Ltd OPM (2012) Holdings Pty Ltd OPM (2012) Pty Ltd PT (2013) Pty Ltd Sabalan Holdings Pty Ltd Sabalan Pty Ltd The following entities were removed from the DOCG in 2022 via revocation deed: Entity name A.P. Motors (No.1) Pty Ltd Adtrans Trucks Pty Ltd Adverpro Pty Ltd Bill Buckle Leasing Pty Ltd Carzoos Pty Ltd Duncan Autos 2005 Pty Ltd Duncan Autos Pty Ltd Melbourne Truck and Bus Centre Pty Ltd Nundah Motors Pty Ltd VMS Pty Ltd Western Equipment Rentals Pty Ltd The following entities were subject to a notice of disposal in 2022: Entity name Bill Buckle Autos Pty Ltd Assumption date 09 June 2022 09 June 2022 09 June 2022 09 June 2022 09 June 2022 09 June 2022 09 June 2022 09 June 2022 09 June 2022 02 August 2022 25 May 2022 25 May 2022 25 May 2022 09 June 2022 09 June 2022 09 June 2022 09 June 2022 09 June 2022 09 June 2022 09 June 2022 09 June 2022 09 June 2022 09 June 2022 Revocation date 15 December 2022 15 December 2022 15 December 2022 15 December 2022 15 December 2022 15 December 2022 15 December 2022 15 December 2022 15 December 2022 15 December 2022 15 December 2022 Notice of disposal date 30 June 2022 109 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 34 Investments in subsidiaries (CONTINUED) (a) Deed of cross guarantee (CONTINUED) (i) Members of the closed group A Consolidated Statement of Profit or Loss and Consolidated Statement of Financial Position, comprising the Company and entities which are members of the Closed Group, after eliminating all transactions between parties to the Deed of Cross Guarantee, at 31 December 2022 is set out below: 2022 $’000 2021 $’000 293,091 (1,005) 292,086 (87,203) 204,883 – 204,883 350,166 (2,733) 347,433 (84,315) 263,118 (8,000) 255,118 171,515 224,849 844,733 – 15,129 39,104 - 1,295,330 32,474 12,119 1,845 19,048 677,897 685,695 127,568 10,575 509,197 198,238 2,274,656 3,569,986 189,637 195,455 720,778 10,270 16,055 34,715 18,670 1,185,580 22,659 577 1,555 11,801 502,015 679,996 139,439 10,508 563,243 235,932 2,167,725 3,353,305 Deed of Cross Guarantee Consolidated Statement of Profit or Loss Profit before tax from continuing operations Addback: AASB16 closed group adjustment Profit before tax from continuing operations Income tax expense from continuing operations Profit for the period from continuing operations Loss for the period from discontinued operations Profit for the year Consolidated Statement of Financial Position Current assets Cash and cash equivalents Trade and other receivables Inventories Current tax receivable Other current assets Finance lease receivables Assets classified as held for sale Total current assets Non-current assets Loans receivable Financial assets at fair value through other comprehensive income Investments in associates Other non-current receivables Property, plant and equipment Intangible assets Deferred tax assets Other non-current assets Right-of-use assets Finance lease receivables Total non-current assets Total assets 110 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 34 Investments in subsidiaries (CONTINUED) (a) Deed of cross guarantee (CONTINUED) (i) Members of the closed group (CONTINUED) Deed of Cross Guarantee Current liabilities Trade and other payables Borrowings - bailment and other current loans Current tax liabilities Provisions Deferred revenue Lease liabilities Total current liabilities Non-current liabilities Borrowings Deferred revenue Provisions Lease liabilities Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Retained earnings Non-controlling interests Total equity 2022 $’000 2021 $’000 160,356 737,517 3,085 85,286 7,321 156,515 1,150,080 376,910 15,922 11,939 796,369 1,201,140 2,351,220 258,081 557,415 – 85,145 7,917 150,975 1,059,533 311,062 16,462 11,857 883,559 1,222,940 2,282,473 1,218,766 1,070,832 1,154,572 (625,353) 689,547 1,218,766 – 1,218,766 1,173,069 (637,209) 534,972 1,070,832 – 1,070,832 111 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 34 Investments in subsidiaries (CONTINUED) (a) Deed of cross guarantee (CONTINUED) (ii) Members of the extended closed group Entities that are parties to the Deed of Cross Guarantee and controlled by Eagers Automotive Limited. A Consolidated Statement of Profit or Loss and Consolidated Statement of Financial Position, comprising the entities that are parties to the Deed of Cross Guarantee, after eliminating all transactions between parties to the Deed of Cross Guarantee, at 31 December 2022 is set out below: 2022 $’000 2021 $’000 427,544 (532) 427,012 (112,642) 314,370 – 314,370 380,566 (2,343) 378,223 (91,784) 286,439 (8,000) 278,439 173,573 271,578 1,043,490 – 20,244 39,104 – 1,547,989 33,506 12,119 2,331 19,048 696,958 841,183 140,000 10,575 564,109 198,238 2,518,067 4,066,056 190,115 213,264 788,357 6,643 16,604 34,715 18,670 1,268,368 22,659 577 1,555 11,801 508,009 725,089 142,297 10,508 590,088 235,932 2,248,515 3,516,883 Deed of Cross Guarantee Consolidated Statement of Profit or Loss Profit before tax from continuing operations Addback: AASB16 extended closed group adjustment Profit before tax from continuing operations Income tax expense from continuing operations Profit for the period from continuing operations Loss for the period from discontinued operations Profit for the year Consolidated Statement of Financial Position Current assets Cash and cash equivalents Trade and other receivables Inventories Current tax receivable Other current assets Finance lease receivables Assets classified as held for sale Total current assets Non-current assets Loans receivable Financial assets at fair value through other comprehensive income Investments in associates Other non-current receivables Property, plant and equipment Intangible assets Deferred tax assets Other non-current assets Right-of-use assets Finance lease receivables Total non-current assets Total assets 112 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 34 Investments in subsidiaries (CONTINUED) (a) Deed of cross guarantee (CONTINUED) (ii) Members of the extended closed group (CONTINUED) Deed of Cross Guarantee Current liabilities Trade and other payables Borrowings - bailment and other current loans Current tax liabilities Provisions Deferred revenue Lease liabilities Total current liabilities Non-current liabilities Borrowings Deferred revenue Provisions Lease liabilities Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Retained earnings Non-controlling interests Total equity 2022 $’000 2021 $’000 270,919 932,482 14,403 105,091 12,433 164,846 1,500,174 376,910 15,922 12,904 853,308 1,259,044 2,759,218 257,600 614,087 - 93,178 8,910 157,804 1,131,579 311,062 16,462 11,857 911,644 1,251,025 2,382,604 1,306,838 1,134,279 1,154,572 (606,123) 723,996 1,272,445 34,393 1,306,838 1,173,069 (617,978) 562,539 1,117,630 16,649 1,134,279 113 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 34 Investments in subsidiaries (CONTINUED) (b) Information relating to Eagers Automotive Limited (‘the parent entity’) Financial performance Profit for the year Financial position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Net assets Equity Issued capital Retained earnings Reserves Asset revaluation reserve Business combination reserve Investment revaluation reserve Share-based payments reserve 2022 $’000 2021 $’000 203,025 192,927 17,943 673,872 691,815 11,226 – 11,226 680,589 40,811 612,945 653,756 – – – 653,756 1,154,572 140,634 1,173,069 97,863 1,683 (479,042) (48,087) (89,171) 680,589 1,683 (479,042) (48,276) (91,541) 653,756 Refer Notes 38(a) and 38(b) in respect of guarantees entered into by the parent entity in relation to debts of its subsidiaries. (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. Individually immaterial subsidiaries with non-controlling interest Profit allocated to non-controlling interests Accumulated non-controlling interests 2022 $’000 16,173 2021 $’000 12,913 2022 $’000 37,384 2021 $’000 21,635 Consolidated 2022 $’000 21,635 16,173 10,488 (1,300) (9,612) – 37,384 2021 $’000 13,860 12,913 1,395 – (3,985) (2,548) 21,635 Movement – non-controlling interest Balance at the beginning of the financial year Profit for the year Acquisition of non-controlling interest Purchase of shares from non-controlling interests Payment of dividend Disposal of non-controlling interest Balance as at the end of the financial year 114 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 35 Business acquisitions (a) Acquisition of other businesses The Group acquired the following businesses during the 2022 year as detailed below: Year 2022 2022 Name of business Canberra Group Newspot Group Date of acquisition 1 September 2022 30 September 2022 Principal activity Motor Vehicle Dealer Motor Vehicle Dealer Proportion acquired 100% 100% The acquired businesses did not contribute materially to the consolidated profit before tax or consolidated revenue for the period. Allocation of purchase consideration The purchase price of the businesses acquired has been allocated as follows: Cash used to acquire business, net of cash acquired Cash used to acquire property Total purchase consideration Consolidated fair value at acquisition date Net assets acquired Receivables, prepayments Inventory Property Right-of-use assets Lease liabilities Plant and equipment Deferred tax assets Creditors, borrowings and provisions Net assets acquired Acquisition cost Goodwill on acquisition1 Canberra Group $’000 95,624 110,130 205,754 Newspot Group $’000 8,929 5,046 13,975 2022 Total consolidated $’000 104,553 115,176 219,729 Canberra Group $’000 Newspot Group $’000 2022 Total consolidated $’000 2,777 50,130 110,130 1,599 (1,599) 10,038 2,013 (44,351) 130,737 205,754 75,017 68 2,300 5,046 3,047 (3,047) 1,147 151 (1,384) 7,328 13,975 6,647 2,845 52,430 115,176 4,646 (4,646) 11,185 2,164 (45,735) 138,065 219,729 81,664 1 Goodwill arose on 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 consolidated financial statements. Therefore, the amount allocated to goodwill on acquisition has been provisionally determined at the end of the reporting period, with final settlement expected to occur in the first half of 2023. The acquired Canberra Group business contributed revenues of $144.0 million and net profit of $2.7 million to the group for the period from 1 September 2022 to 31 December 2022. The acquired Newspot Group business contributed revenues of $28.2 million and net profit of $1.1 million to the group for the period from 30 September 2022 to 31 December 2022. If the Canberra Group acquisition had occurred on 1 January 2022, consolidated pro-forma revenue and profit for the year ended 31 December 2022 would have been $458 million and $15 million respectively. If the Newspot Group acquisition had occurred on 1 January 2022, consolidated pro-forma revenue and profit for the year ended 31 December 2022 would have been $100 million and $4 million respectively. 115 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 35 Business acquisitions (CONTINUED) (b) Acquisition of businesses in prior year The Group acquired the following businesses during the 2021 year as detailed below: Year 2021 2021 2021 Name of business Westpoint Volkswagen Armstrong Ford Kelly Trotter and Heritage Motor Group Date of acquisition 31 March 2021 1 September 2021 1 December 2021 Principal activity Motor Vehicle Dealer Motor Vehicle Dealer Motor Vehicle Dealer Proportion acquired 100% 100% 100% The acquired businesses did not contribute materially to the consolidated profit before tax or consolidated revenue for the period. Allocation of purchase consideration The purchase price of the businesses acquired has been allocated as follows: Cash consideration Total purchase consideration Consolidated fair value at acquisition date Net assets acquired Receivables, prepayments Inventory Property, plant and equipment Creditors, borrowings and provisions Net assets acquired Acquisition cost Goodwill on acquisition1 Westpoint Volkswagen $’000 785 785 Armstrong Ford $’000 890 890 Kelly Trotter and Heritage Motor Group $’000 12,728 12,728 2021 Total consolidated $’000 14,403 14,403 2021 $’000 79 8,025 604 (5,054) 3,654 14,403 10,749 1 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. Subsequent to year end, the acquisitions were finalised with no adjustment. 116 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 35 Business acquisitions (CONTINUED) (c) Recognition and measurement (d) Critical accounting estimates and judgements The fair value of assets and liabilities acquired in business combinations Acquisitions made by the Group have required some 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. 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. Business combinations The acquisition 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 acquisition unless, in rare circumstances, it can be demonstrated that the published price at the date of acquisition 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. Where the business combination is achieved in stages, the Group remeasures its previously held equity interest in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is recognised in the profit or loss. 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 20(b)(v)). 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 acquisition 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 consolidated financial statements. 117 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 36 Business divestments (a) Business disposal and discontinued operations The Group sold the following businesses during the 2022 year as detailed below: Year 2022 2022 Name of business Bill Buckle Auto Group Osborne Park Hyundai Date of sale 30 June 2022 31 July 2022 Principal activity Automotive Business Automotive Business Net assets disposed of Receivables, prepayments Inventory Property Right-of-use assets Lease liabilities Plant and equipment Goodwill Creditors, borrowings and provisions Deferred tax asset Net assets disposed Total consideration received (100% cash) Liabilities paid on our behalf Sale consideration for businesses Sale consideration for properties Total sale consideration Gain on sale of businesses Gain on sale of properties Gain on disposal of non-financial assets Total gain on sale Proportion disposed 100% 100% Consolidated 2022 $’000 7,862 15,803 29,383 1,341 (1,648) 1,316 11,033 (22,584) 578 43,084 92,755 – 49,256 43,499 92,755 35,248 13,923 307 49,478 The Directors have considered these disposals during the twelve month period to December 2022 in the context of AASB 5 and they have determined that the disclosure requirements of discontinued operations do not apply. This judgement has been made based on all of the available facts and circumstances surrounding the sale and the impact of the related segments and remaining businesses, noting, this is not a separate major line of business. 118 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 36 Business divestments (CONTINUED) (b) Disposal of businesses in prior year The Group sold the following business during the 2021 year as detailed below: Year 2021 2021 2021 2021 2021 2021 2021 Name of business 360 Finance Daimler Truck Operations Carlins Automotive Auctioneers (WA) Pty Ltd Coffs Harbour Iveco and Hino Doncaster Jaguar Land Rover Skipper Transport Parts Port City Autos Date of sale 31 March 2021 30 April 2021 31 May 2021 18 June 2021 1 July 2021 13 August 2021 1 September 2021 Principal activity Finance Company Trucks Business Automotive Business Trucks Business Automotive Business Parts Business Automotive Business Net assets disposed of Receivables, prepayments Inventory Property, plant and equipment Goodwill Intangible assets Creditors, borrowings and provisions Deferred tax asset Net assets disposed Total consideration received (100% cash) Liabilities paid on our behalf Total sale consideration Legal fees Gain on sale 37 Discontinued operations Proportion disposed 100% 100% 47% 100% 100% 100% 100% Consolidated 2021 $’000 42,656 163,530 15,937 18,516 1,050 (166,565) 5,072 80,196 111,774 308 112,082 (8) 31,894 The loss from discontinued operations in the year ended 31 December 2021 relates to a provision recorded for a claim submitted prior to the end of the financial year from Anchorage Capital Partners in relation to the Refrigerated Logistics Share Sale Agreement. There is no profit or loss from discontinued operations in the current year ended 31 December 2022. 38 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 2022 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 consolidated financial statements. (b) Deed of cross guarantee Eagers Automotive Limited and all of its 100% owned subsidiaries were parties to a deed of cross guarantee lodged with the Australian Securities and Investments Commission as at 31 December 2022. 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 $2.75 billion (2021: $2.38 billion). 119 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 39 Commitments for expenditure 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 40 Remuneration of auditor Deloitte and related network firms1 Audit or review of financial reports Group Subsidiaries and joint operations Statutory assurance services required by legislation to be provided by the auditor Other assurance and agreed-upon procedures under other legislation or contractual arrangements Other services: Tax consulting services Consulting services Other Total remuneration for other services 1 The auditor of Eagers Automotive Limited is Deloitte Touche Tohmatsu. 41 Subsequent events Consolidated 2022 $’000 11,343 2021 $’000 8,801 2022 $’000 1,011 283 1,294 – 16 453 47 6 506 1,816 2021 $’000 1,083 237 1,320 103 – 485 95 – 580 2,003 No matter or circumstance has occurred subsequent to year end that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group or economic entity in subsequent financial years. 120 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 42 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 Eagers Automotive Limited during the financial year were: (a) Details of key management personnel (i) Directors — T B Crommelin — S A Moore — D A Cowper — N G Politis — D T Ryan — M J Birrell — G J Duncan — D S Blackhall — M V Prater (ii) Executives — D G Stark — K T Thornton — E Geschke Chairman (non-executive) Director and Chief Financial Officer Director (non-executive), resigned 18th May 2022 Director (non-executive) Director (non-executive) Director (non-executive) Director (non-executive) Director (non-executive) Director (non-executive) Company Secretary Chief Executive Officer Chief Operating Officer – Automotive, appointed 1st May 2022 (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 42(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 44. Consolidated 2022 $’000 5,813 180 1,713 7,706 2021 $’000 4,417 144 2,429 6,990 121 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 42 Key management personnel (CONTINUED) (f) Share-based payments Plan J: EPS Performance Rights and Options – Key Executive The Group commenced a new Earnings Per Share (EPS) based performance rights and options 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 performance rights and 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 rights and options at grant date and the probability of the EPS targets being achieved and vesting occurring. The number of rights and 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 21,354 options were forfeited during the year. No rights were issued, and 125,607 options were exercised during the year. The share plan was fully expensed by the end of 2019, with a cumulative expense being recognised of $449,959. 122 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 42 Key management personnel (CONTINUED) (f) Share-based payments (CONTINUED) Plan L: Executive incentive plan – Grant of performance rights – Key Executive The Group commenced a new performance rights compensation scheme for a specific executive officer in 2020. The fair value of these performance rights is calculated on grant date and recognised over the period to vesting. The performance rights are automatically exercised and converted to vested restricted shares on the Conversion Date, being the date that is one week after release of the Company’s full-year financial results. The vesting of the performance rights granted is based on continued employment at the relevant vesting dates. The fair value was estimated by taking the market price of the Company’s shares on the grant date less the present value of expected dividends that will not be received during the period. Performance rights Award date 17 February 2020 Vesting date Share price at grant date Expected life Risk free interest rate Dividend yield The number of performance rights granted under the plan is as follows: Performance rights Number 30,000 35,000 35,000 31-Dec-19 $9.00 0.0 years 0.81% 4.056% 31-Dec-20 $9.00 0.87 years 0.81% 4.056% 31-Dec-21 $9.00 1.87 years 0.75% 4.056% Grant date 17-Feb-20 17-Feb-20 17-Feb-20 End performance period 31-Dec-19 31-Dec-20 31-Dec-21 Fair value at grant date $9.00 $9.00 $9.00 No performance rights were forfeited or expired during the year. A total of 35,000 rights were issued during the year in respect of the 2021 performance year. No costs of the share plan were expensed during 2022 (2021: $133,548). The share plan was fully expenses by the end of 2021, with a cumulative expense being recognised of $846,531. 123 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 42 Key management personnel (CONTINUED) (f) Share-based payments (CONTINUED) Plan M: EPS Performance Rights and Options – Key Executives The Group commenced a new Earnings Per Share (EPS) based performance rights and option compensation scheme for specific executive officers in 2021. 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 24 February 2021 Vesting date Expiry date Share price at grant date Expected life Volatility Risk free interest rate Dividend yield Performance options Award date 24 February 2021 Vesting date Expiry date Share price at grant date Exercise price Expected life Volatility Risk free interest rate Dividend yield Performance rights Number 54,668 74,042 76,646 79,365 Performance options Number 2,173,910 28-Feb-22 28-Feb-22 $12.32 1.0 years 38% 0.06% 3.5% 28-Feb-23 28-Feb-23 $12.32 2.0 years 38% 0.08% 3.5% 28-Feb-24 28-Feb-24 $12.32 3.0 years 38% 0.21% 3.5% 28-Feb-25 28-Feb-25 $12.32 4.0 years 38% 0.42% 3.5% 28-Feb-25 30-Apr-25 $12.32 $12.32 4.1 years 38% 0.44% 3.5% Fair value at grant date $11.89 $11.48 $11.09 $10.71 Expiry date 28-Feb-22 28-Feb-23 28-Feb-24 28-Feb-25 Expiry date Fair value at grant date Grant date 24-Feb-21 24-Feb-21 24-Feb-21 24-Feb-21 Grant date End performance period 31-Dec-21 31-Dec-22 31-Dec-23 31-Dec-24 End performance period 24-Feb-21 31-Dec-24 30-Apr-25 $2.76 No performance rights or options were forfeited or expired during the year. 54,668 Plan M rights were issued during the year. No options were granted during the year. The value of the performance rights expensed during the year was $920,836, with a cumulative expense being recognised at 31 December 2022 of $2,491,674 (2021: $1,570,838). The value of the performance options expensed during the year was $1,474,998, with a cumulative expense being recognised at 31 December 2022 of $2,974,996 (2021: $1,499,998). 124 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 43 Other share-based payments Recognised share-based payments expenses Refer Note 32(a) for movements in share-based payments reserve. Plan H: EPS Performance Rights and Options – Key Executives The Group commenced a new Earnings Per Share (EPS) based performance rights and options compensation scheme for four 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 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% 31-Mar-17 21-Jan-22 $5.85 2.2 years 22% 2.12% 31-Mar-18 21-Jan-22 $5.85 3.2 years 22% 2.11% 31-Mar-19 30-Sep-22 $5.85 4.2 years 22% 2.15% 31-Mar-20 30-Sep-22 $5.85 5.2 years 22% 2.22% 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% Four specific executives have been granted rights and 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 rights and options at grant date and the probability of the EPS targets being achieved and vesting occurring. The number of rights and 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. No rights were issued during the year. A total of 407,969 options were exercised during the year. No costs of the share plan were expensed during 2021 (2020: nil). The share plan was fully expensed by the end of 2019, with a cumulative expense being recognised of $749,281. 125 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 43 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 options 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 rights and 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 rights and options at grant date and the probability of the EPS targets being achieved and vesting occurring. The number of rights and 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. No rights were issued during the year. No costs of the share plan were expensed during 2022 (2021: nil). The share plan was fully expensed by the end of 2019, with a cumulative expense being recognised of $599,980. 126 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) (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 Eagers Automotive Limited. Information relating to the wholly-owned group is set out in Note 34. 44 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 $1,074,893 (2021: $352,415) and purchases of $1,005,027 (2021: $710,876) 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. Mr N G Politis has a controlling interest in WFM Motors Pty Ltd (WFM Motors) which approximately owns 27% of Eagers Automotive. WFM Motors divested of a portfolio of dealerships and properties within ACT during the financial year. The collection of dealerships and properties were sold for $205,754,029. An independent expert was appointed and the transaction was completed at fair value. (ii) Mr M Birrell is a Director and owner of a number of properties leased by subsidiaries of Eagers Automotive Limited. The lease transactions of $1,412,805 (2021: $2,076,941) have been 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. During the period $109,956 (2021: $105,775) was received in relation to short-term sublease arrangements. Furthermore, during the twelve months ended 31 December 2022, Mr M Birrell purchased stock with a value of $8,212 (2021: $5,986) from one of the subsidiaries, with the transactions being carried out under terms and conditions no more favourable than those which is reasonable to expect to have been applied if the transactions were at arms length. Mr M Birrell is a Director and owner of a company involved in the provision of finance to the motor vehicle industry with whom the consolidated entity transacts business. These transactions, totalling $89,900 (2021: $170,753), are commissions paid to the consolidated entity 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. 127 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 45 Earnings per share (a) Basic earnings per share Attributable to the ordinary equity holders of the company From continuing operations From discontinued operations (b) Diluted earnings per share Attributable to the ordinary equity holders of the company From continuing operations From discontinued operations (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 and 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 basic earnings per share Diluted earnings per share Profit for the year attributable to the owners of Eagers Automotive Limited Profit attributable to the ordinary equity holders of the Company used in calculating diluted earnings per share Weighted average number of ordinary shares outstanding during the year Shares deemed to be issued for no consideration in respect of employee options Weighted average number of ordinary shares outstanding during the year used in the calculation of diluted earnings per share Consolidated 2022 Cents 121.3 121.3 – 2021 Cents 125.2 128.4 (3.2) Consolidated 2022 Cents 121.1 121.1 – 2021 Cents 124.7 127.9 (3.2) Consolidated 2022 $’000 2021 $’000 324,340 (16,173) 330,737 (12,913) 308,167 317,824 308,167 317,824 308,167 317,824 2022 Number 254,010,439 553,128 2021 Number 253,801,325 1,105,408 254,563,567 254,906,733 128 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 45 Earnings per share (CONTINUED) (d) Recognition and measurement 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. (i) Basic earnings per share Basic earnings per share is calculated by dividing: — the profit attributable to owners of the Company, excluding any costs of servicing equity other than ordinary shares — by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year and excluding treasury shares. (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; and — 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. 46 Reconciliation of net profit after tax to the net cash inflows from operations Net profit after tax Depreciation and amortisation Impairment of non-current assets Share of profits of associates Gain on disposal of non-financial assets Gain on sale of property, plant and equipment Employee share scheme expense Gain on sale of businesses (Increase)/decrease in assets - Receivables Inventories Prepayments Contract assets Deferred tax assets Increase/(decrease) in liabilities - Creditors (including bailment finance) Provisions Deferred revenue Taxes payable Net cash inflow from operating activities Notes 6(a) 6(b) 5 5 Consolidated 2022 $’000 324,340 116,603 16,727 (1,067) (2,813) (17,121) 2,396 (35,248) (46,340) (185,252) (2,893) – 9,884 209,552 2,927 (1,057) 16,905 407,543 2021 $’000 330,737 120,428 5,156 (1,130) (15,168) (10,957) 3,204 (31,894) 39,903 151,732 13,111 39,594 (8,950) (260,245) (42,041) (14,968) (15,807) 302,705 129 Eagers Automotive Limited | FINANCIAL REPORT 2022 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 47 Changes in liabilities arising from financing activities The below table represents the cash and non-cash movements in financing activities for 2022: 1 January 2022 $’000 Financing cash flows $’000 Termination of leases $’000 Fair value adjustments/ rent reviews $’000 Property acquisitions $’000 New leases $’000 Other changes1 $’000 31 December 2022 $’000 Term facility Capital loan Lease liabilities Total – 326,029 1,126,145 1,452,174 104,560 (16,571) (122,880) (34,891) – – (20,150) (20,150) – – 17,225 17,225 – 29,868 – 29,868 – – 22,430 22,430 – – – – 104,560 339,326 1,022,770 1,466,656 The below table represents the cash and non-cash movements in financing activities for 2021: 1 January 2021 $’000 Financing cash flows $’000 Termination of leases $’000 Fair value adjustments/ rent reviews $’000 Property acquisitions $’000 New leases $’000 Other changes1 $’000 31 December 2021 $’000 Term facility Capital loan Lease liabilities Total 137,500 200,855 1,270,919 1,609,274 (137,500) (13,022) (121,194) (271,716) – – (104,053) (104,053) – – 5,674 5,674 – 138,196 – 138,196 – – 78,050 78,050 – – (3,251) (3,251) – 326,029 1,126,145 1,452,174 1 Other changes includes interest charged and foreign currency translation in relation to financing activities. 130 Notes to and forming part of the Consolidated Financial Statements 31 December 2022 (CONTINUED) 48 Investments in associates (a) Carrying amounts Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting. Information relating to the associates is set out below: Name of company Unlisted securities Vehicle Parts (WA) Pty Ltd Mazda Parts Ownership interest Consolidated 2022 % 50.00 16.67 2021 % 50.00 16.67 2022 $’000 1,846 485 2,331 2021 $’000 1,555 519 2,074 Vehicle Parts (WA) Pty Ltd Vehicle Parts (WA) Pty Ltd provides warehousing and distribution of automotive parts and accessories for Subaru in Western Australia. Mazda Parts Mazda Parts provides warehousing and distribution of automotive parts and accessories for Mazda in Western Australia. (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 Carrying amount at the end of the financial year Consolidated 2022 $’000 2,074 1,067 (810) 2,331 2021 $’000 1,561 1,130 (617) 2,074 (c) Share of associate profit Based on the last published results for the 12 months to 30 June 2022 plus unaudited results up to 31 December 2022. Profit from ordinary activities after income tax (d) Reporting date of associates The associates’ reporting dates are 30 June annually. Consolidated 2022 $’000 1,067 2021 $’000 1,130 131 Eagers Automotive Limited | FINANCIAL REPORT 2022 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 consolidated financial statements and notes set out on pages 54 to 131 are in accordance with the Corporations Act 2001, including: (i) Complying with Accounting Standards and the Corporate Regulations 2001, and (ii) giving a true and fair view of the financial position and performance of the Company and the consolidated entity; (c) in the Director’s opinion, the consolidated financial statements and notes are in accordance with International Financial Reporting Standards, and a statement of compliance with these standards is included in Note 1(a); (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 Corporations (Wholly owned Companies) Instrument 2016/785. The nature of the deed of cross guarantee referred to in the ASIC Corporation Instrument 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 Corporation Instrument applies, as detailed in Note 34 to the consolidated 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 Tim Crommelin Director Brisbane, 23 February 2023 132 Deloitte Touche Tohmatsu ABN 74 490 121 060 Level 23, 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 Eagers Automotive Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of Eagers Automotive Limited (the “Company”) and its subsidiaries (the “Group”) which comprises the consolidated statement of financial position as at 31 December 2022, the consolidated statement of profit or loss, 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 other explanatory information, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: • • Giving a true and fair view of the Group’s financial position as at 31 December 2022 and of its financial performance for the year then ended; and 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 & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the “Code”) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. 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. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte organization. 133 Eagers Automotive Limited | FINANCIAL REPORT 2022 Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current year. 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. Key Audit Matter How the scope of our audit responded to the Key Audit Matter The recoverability of non-current assets including goodwill and other intangible assets In conjunction with our internal valuation specialists, our procedures included, but were not limited to: its Understanding management's process of calculating the recoverable amount of the CGUs and approval by the directors. Testing the design and implementation of the relevant key manual controls. Evaluating the Group’s identification of CGUs and allocation of goodwill to the carrying value of the Group’s identified CGUs. the of an understanding Obtaining methodology applied by management in developing impairment assessment, including the underlying key assumptions. Challenging and assessing assumptions determine including: the future revenue and terminal growth rates against relevant external data and historical actuals; the discount rate applied by comparing the rate to our independently calculated range; and the profit before tax forecast against historical actuals and recent market trends. Assessing the adequacy of the financial report disclosures. and estimates used recoverable the Group’s to amount, the As outlined in Note 20, the Group recognised goodwill of $834.6 million at 31 December 2022. Determining the recoverable amount of the Cash Generating Units (“CGUs”) to which goodwill is allocated requires management to exercise significant judgement, particularly in the current economic environment. We performed a risk assessment over each of the identified CGU and where risk was determined to be present, we performed further audit procedures. We identified three key estimates in management’s value in use models that they utilise to determine the recoverability of the CGUs being: 1. 2. 3. forecast cash flows, including future growth rates; terminal growth rates; and discount rates. 1. 2. 3. 4. 5. i. ii. iii. 6. 134 Key Audit Matter Acquisition of the Canberra Group How the scope of our audit responded to the Key Audit Matter Our audit procedures included, but were not limited to: As disclosed in Notes 35 and 44, the Group acquired a portfolio of dealerships and associated property located in Canberra (referred to as the “Canberra Group”) from WFM Motors Pty Ltd and its associated entities that are a related party for a total purchase price of $205.8 million. The acquisition completed on 1 September 2022 with goodwill of $75.0 million arising from the transaction. The purchase price The acquisition has been accounted for as a business combination in accordance with AASB 3 Business allocation Combinations. performed to exercise intangible assets and judgement determining the fair value of the identified assets and liabilities acquired. requires management in identifying 1. 2. i. ii. iii. Additionally, as the acquisition was from a related party, the transaction was subject to shareholder approval at an Extraordinary General Meeting and an Independent Expert’s Report (“IER”) to determine if the transaction was fair and reasonable for the non- associated shareholders. 3. The transaction has been provisionally accounted for at 31 December 2022. in Understanding the director’s process determining that the transaction was at fair value. In conjunction with our valuation specialists, evaluated acquisition managements accounting. This included: obtaining the relevant purchase agreements to verify the purchase price and date of acquisition; challenging management’s purchase price allocation methodology and identification of intangible assets; and challenging and assessing management’s determination of the fair value of the assets and liabilities acquired, including obtaining the work of management’s experts and evaluating their competence. Assessing the adequacy of the financial report disclosures. 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, and also includes the following information which will be included in the annual report (but does not include the financial report and our auditor’s report thereon): the Company Profile, the 5 Year Financial Summary, the Chairman's Letter, the Message from the CEO and the Eagers Automotive Sustainability Report, which are expected to be made available to us after that date. Our opinion on the financial report does not cover the other information and 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, the 5 Year Financial Summary, the Chairman's Letter, the Message from the CEO and the Eagers Automotive Sustainability Report, which are expected to be made available to us after that date 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. 135 Eagers Automotive Limited | FINANCIAL REPORT 2022 Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of 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’s 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. 136 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, actions taken to eliminate threats or safeguards applied. 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 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 36 to 51 of the Directors’ Report for the year ended 31 December 2022. In our opinion, the Remuneration Report of Eagers Automotive Limited, for the year ended 31 December 2022, 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 DELOITTE TOUCHE TOHMATSU David Rodgers Partner Chartered Accountants Brisbane, 23 February 2023 Nathan Furness Partner Chartered Accountants Brisbane, 23 February 2023 137 Controlled Entities As at 31 December 2022 Entity ACN Entity A.C.N. 132 712 111 PTY LTD 132 712 111 AHG PROPERTY PTY LTD A.P. FORD PTY. LTD. A.P. GROUP PTY LTD 010 602 383 AHG SERVICES (NSW) PTY LTD 010 030 994 AHG SERVICES (QLD) PTY LTD A.P. MOTORS (NO 1) PTY. LTD. 010 585 234 AHG SERVICES (VIC) PTY LTD A.P. MOTORS (NO 2) PTY. LTD. 010 585 243 AHG SERVICES (WA) PTY LTD A.P. MOTORS (NO.3) PTY. LTD. 010 585 252 AHG TRADE PARTS PTY LTD A.P. MOTORS PTY. LTD. 010 579 996 AHG TRAINING PTY LTD ACM AUTOS HOLDINGS PTY LTD 621 081 552 AHG WA (2015) PTY LTD ACM AUTOS PTY LTD 121 604 082 AHGCL 2016 PTY LTD ACM LIVERPOOL PTY LTD 121 604 055 AHGSW 2018 PTY LTD ADTRANS AUSTRALIA PTY. LTD. 008 278 171 AP TOWNSVILLE PTY LTD ADTRANS AUTOMOTIVE GROUP PTY LTD 007 866 917 APE CARS MGMT PTY LTD ADTRANS CORPORATE PTY LTD 056 340 928 ASSOCIATED FINANCE PTY. LIMITED ACN 131 182 968 132 055 728 132 055 737 145 856 328 132 055 700 609 816 257 159 538 226 603 598 750 615 618 678 626 195 668 600 279 927 632 136 906 009 677 678 ADTRANS GROUP PTY LTD 008 129 477 AUCKLAND AUTO COLLECTION LIMITED NZBN 939375 ADTRANS SYDNEY PTY LTD 127 369 260 AUSTRAL PTY LTD ADTRANS TRUCK CENTRE PTY LTD 106 764 327 AUT 6. PTY LTD ADTRANS TRUCKS PTY. LTD. 008 264 935 AUTO AD PTY LTD ADTRANS USED PTY. LTD. ADVERPRO PTY LTD AHG 1 PTY LTD AHG AUTOMOTIVE MINING AND INDUSTRIAL SOLUTIONS PTY LTD AHG COATINGS PTY LTD AHG FINANCE 2005 PTY LTD AHG FINANCE PTY LTD AHG FRANCHISED AUTOMOTIVE PTY LTD AHG INTERNATIONAL PTY LTD AHG MANAGEMENT COMPANY PTY LTD AHG NEWCASTLE PTY LTD 074 561 514 612 630 618 116 779 198 162 034 111 609 750 558 112 854 387 064 015 676 128 362 185 147 802 211 147 802 337 600 832 755 AUTOMOTIVE HOLDINGS GROUP (QUEENSLAND) PTY LTD AUTOMOTIVE HOLDINGS GROUP (VICTORIA) PTY LTD AUTOMOTIVE HOLDINGS GROUP PTY LTD BASW PTY LTD BIG ROCK 2005 PTY LTD BIG ROCK PTY LTD BILL BUCKLE HOLDINGS PTY LIMITED BILL BUCKLE LEASING PTY LIMITED BLACK AUTO CQ PTY LTD BOONARGA WELDING PTY LTD 009 662 202 008 985 886 605 815 021 127 499 683 158 935 249 111 470 038 601 452 199 112 854 403 008 968 867 062 951 106 000 871 910 135 015 191 099 480 903 138 Eagers Automotive Limited | ANNUAL REPORT 2022Controlled Entities As at 31 December 2022 (CONTINUED) Entity ACN Entity BRADSTREET MOTORS HOLDINGS PTY LTD 602 181 386 E. G. EAGER & SON PTY. LTD. BRADSTREET MOTORS PTY LIMITED 061 172 183 EACAB PTY LTD CARDIFF CAR CITY HOLDINGS PTY LTD 602 181 751 EAGERS ACT CARS MGMT PTY LTD CARDIFF CAR CITY PTY LIMITED 062 072 299 EAGERS ACT PTY LTD CARLIN AUCTION SERVICES (NSW) PTY LTD 069 462 148 EAGERS ACT RENTALS PTY LTD CARLINS AUTOMOTIVE AUCTIONEERS (QLD) PTY LTD 648 699 325 EAGERS FINANCE PTY. LTD. CARLINS AUTOMOTIVE AUCTIONEERS (S.A) PTY LTD 639 409 537 EAGERS MD PTY LTD EAGERS NOMINEES PTY. LTD. CARLINS AUTOMOTIVE AUCTIONEERS (WA) PTY LTD 121 606 826 EAGERS RETAIL PTY. LTD. CARLINS AUTOMOTIVE AUCTIONEERS PTY LTD 069 430 182 CARLINS GROUP HOLDINGS PTY LTD CARSPLUS AUSTRALIA PTY LTD CARZOOS PTY LTD CASTLE HILL AUTOS NO. 1 PTY. LTD. CASTLEGATE ENTERPRISES PTY LTD CFD (2012) PTY LTD CH AUTO PTY LTD CHEAP CARS QLD PTY LTD CHELLINGWORTH PTY LTD CITY AUTO (2016) HOLDINGS PTY LTD CITY AUTO (2016) PTY LTD CITY AUTOMOTIVE GROUP PTY LIMITED CITY MOTORS (1981) PTY LTD CRAMPTON AUTOMOTIVE PTY LTD DRIVE A WHILE PTY LTD DUAL AUTOS PTY LTD DUNCAN AUTOS 2005 PTY LTD DUNCAN AUTOS PTY LTD 619 469 966 082 428 279 608 791 911 148 096 244 088 414 715 158 508 233 600 297 783 616 472 729 112 854 467 611 922 993 611 928 968 067 985 602 008 973 402 057 283 253 168 250 128 113 068 830 112 854 485 093 664 192 ACN 009 658 306 652 679 000 659 468 934 658 497 753 658 934 224 009 721 288 009 727 753 009 723 488 009 662 211 658 497 299 651 942 264 148 136 314 616 989 596 114 124 346 657 632 758 008 936 409 EAGERS TACT PTY LTD EASST PTY LTD EASY AUTO 123 PTY LTD ESSENDON AUTO (2017) PTY LTD EUROCARS (SA) PTY LTD EVDEALER GROUP PTY LTD FALCONET PTY. LTD. FERNTREE GULLY AUTOS HOLDINGS PTY LTD 613 081 208 FERNTREE GULLY AUTOS PTY LTD FINMO PTY LTD GIANT AUTOS (1997) PTY LTD GIANT AUTOS PTY LTD GRAHAM CORNES MOTORS PTY. LTD. GRAND AUTOS 2005 PTY LTD HIGHLAND AUTOS PTY LTD HIGHLAND KACKELL PTY LTD HM (2015) HOLDINGS PTY LTD HM (2015) PTY LTD IB MD PTY LTD 145 562 401 621 801 054 078 830 770 112 854 832 008 123 993 112 854 878 121 604 297 121 805 785 605 790 065 605 791 142 169 210 173 139 Controlled Entities As at 31 December 2022 (CONTINUED) Entity IB MOTORS PTY LTD JANASEN PTY LTD ACN Entity 169 209 607 NORTHWEST (WA) PTY LTD 009 388 621 NOVATED DIRECT PTY LTD ACN 158 935 294 164 980 705 JANETTO HOLDINGS PTY LTD 104 649 505 NSW VEHICLE WHOLESALE PTY LIMITED 140 971 259 KINGSPOINT PTY LTD 104 766 565 NUFORD FORD PTY LTD LEASELINE & GENERAL FINANCE PTY. LTD. 010 131 361 NUNDAH MOTORS PTY. LTD. LIONTEAM PTY LTD 112 854 458 OPM (2012) HOLDINGS PTY LTD LWC INTERNATIONAL LIMITED NZBN 3361910 OPM (2012) PTY LTD LWC LIMITED NZBN 1861124 OSBORNE PARK AUTOS PTY LTD MAITLAND CITY MOTOR GROUP HOLDINGS PTY LTD MAITLAND CITY MOTOR GROUP PTY LTD MATCHACAR PTY LTD MB VIC PTY LTD MBSA MOTORS PTY LTD MCM AUTOS PTY LTD MCM SUTHERLAND PTY LTD MELBOURNE CITY AUTOS (2012) PTY LTD 602 179 000 PENRITH AUTO (2016) PTY LTD PERTH AUTO ALLIANCE PTY LTD 112 526 431 609 773 873 608 791 877 132 711 892 121 606 862 121 606 808 150 616 747 PRECISION AUTOMOTIVE TECHNOLOGY PTY LTD 163 233 207 PT (2013) PTY LTD RENT TWO BUY PTY LTD RL SUBLESSOR PTY LTD SABALAN HOLDINGS PTY LTD SABALAN PTY LTD SHEMAPEL 2005 PTY LTD 162 030 015 165 880 562 639 689 320 602 181 117 002 698 188 112 854 412 SOUTH WEST QUEENSLAND MOTORS PTY LTD 600 279 589 MELBOURNE TRUCK AND BUS CENTRE PTY LTD 143 202 699 MELVILLE AUTOS 2005 PTY LTD MELVILLE AUTOS PTY LTD MORNINGTON AUTO GROUP (2012) PTY LTD 112 854 421 107 617 774 150 616 890 MOTORS GROUP (GLEN WAVERLEY) PTY LTD 164 997 228 MOTORS TAS PTY LTD 608 791 680 NEWCASTLE COMMERCIAL VEHICLES PTY LTD 157 829 626 SOUTHEAST AUTOMOTIVE GROUP PTY LTD SOUTHERN AUTOMOTIVE GROUP PTY LTD SOUTHSIDE AUTOS (1981) PTY LTD SOUTHSIDE AUTOS 2005 PTY LTD SOUTHWEST AUTOMOTIVE GROUP PTY LTD 112 854 449 009 681 556 623 139 177 158 377 452 112 854 476 611 323 150 089 353 346 103 071 290 103 181 237 008 968 821 112 854 369 096 279 480 637 015 457 098 706 051 009 162 387 112 854 896 NORTH CITY (1981) PTY LTD NORTH CITY 2005 PTY LTD NORTHSIDE AUTOS 2005 PTY LTD NORTHSIDE NISSAN (1986) PTY LTD 008 974 061 113 532 077 112 854 805 008 974 070 SUBMO PTY LTD SWGT PTY LTD TOTAL AUTOS (1990) PTY LTD TOTAL AUTOS 2005 PTY LTD 140 Eagers Automotive Limited | ANNUAL REPORT 2022Controlled Entities As at 31 December 2022 (CONTINUED) Entity ACN VEHICLE STORAGE & ENGINEERING PTY LTD 121 604 242 VMS PTY. LTD. WA TRUCKS PTY LTD WEBSTER TRUCKS MGMT PTY LTD WESTERN EQUIPMENT RENTALS PTY LTD WIDEVALLEY PTY LTD WS MOTORS PTY LTD ZUPP HOLDINGS PTY. LTD. ZUPPS ASPLEY PTY. LTD. ZUPPS GOLD COAST PTY. LTD. ZUPPS MT GRAVATT PTY LTD ZUPPS PARTS PTY. LTD. 121 604 037 112 854 341 632 136 899 131 269 184 065 389 120 608 791 804 009 824 462 009 900 298 009 681 261 009 695 694 009 842 648 141 Shareholder Information As at 27 March 2023 Distribution of Equity Securities Range 1-1,000 1,001-5000 5,001-10,000 10,001-100,000 100,001 and over Total The Company’s quoted securities consist of 255,398,099 ordinary fully paid shares (ASX:APE). 485 shareholders hold less than a marketplace parcel of 38 shares at $13.30 per share. Equity Security Holders Twenty largest quoted equity security holders ARGO INVESTMENTS LIMITED MUTUAL TRUST PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED CITICORP NOMINEES PTY LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED JOVE PTY LTD NATIONAL NOMINEES LIMITED 1 WFM MOTORS PTY LTD 2 3 4 5 6 7 WASHINGTON H SOUL PATTINSON AND COMPANY LIMITED 8 9 10 ALAN PIPER INVESTMENTS (NO1) PTY LTD 11 BNP PARIBAS NOMS PTY LTD 12 BERNE NO 132 NOMINEES PTY LTD 13 CPU SHARE PLANS PTY LIMITED 14 FOUR LEAF FAMILY PTY LTD 15 BIRRELL INVESTMENTS PTY LTD 16 D COLMAN 17 18 19 HEGFORD PTY LTD 20 BNP PARIBAS NOMINEES PTY LTD PULO RD PTY LTD LG MCGRATH INVESTMENTS PTY LTD Total Substantial Shareholders Substantial holders1 in the Company are set out below: WFM MOTORS PTY LTD VERNON CHARLES WHEATLEY 1. As disclosed in substantial holding notices received by the Company 142 Ordinary Shareholders 5,571 3,827 838 832 108 11,176 Percentage of Units 0.92% 3.55% 2.41% 8.33% 84.79% 100.00% Ordinary Shares Number of Shares Held 70,453,037 23,764,811 19,508,994 16,622,383 12,396,588 8,286,382 6,795,986 6,083,588 5,348,239 4,936,250 2,976,231 2,444,101 2,252,648 2,150,000 2,000,000 1,881,710 1,746,935 1,428,632 1,381,652 1,154,000 193,612,167 Percentage of Shares Issued 27.59% 9.31% 7.64% 6.51% 4.85% 3.24% 2.66% 2.38% 2.09% 1.93% 1.17% 0.96% 0.88% 0.84% 0.78% 0.74% 0.68% 0.56% 0.54% 0.45% 75.81% Notice Date 23 September 2019 18 November 2019 No of Shares1 69,536,516 15,356,763 Eagers Automotive Limited | ANNUAL REPORT 2022Shareholder Information As at 27 March 2023 (CONTINUED) Performance Rights and Options 156,011 unvested performance rights and 2,028,983 unvested options are on issue to 13 holders pursuant to the Company’s equity incentive plans. Vesting is subject to achievement or waiver of pre-determined performance hurdles. Performance rights and options do not have any dividend or voting rights. Employee Incentive Scheme 115,601 shares were purchased on-market during the reporting period for the purposes of our employee incentive scheme at an average price of $11.53 per share. On-market Buy-back The Company does 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 https://www.eagersautomotive.com.au/shareholders/ corporate-governance/ 143 144 Eagers Automotive LimitedABN 87 009 680 013IncorporationIncorporated in Queensland on 17 April 1957Registered Office56 Edmondstone Road Bowen Hills QLD 4006 AustraliaPostal AddressPO Box 199 Fortitude Valley QLD 4006 AustraliaTelephone(07) 3608 7100Facsimile(07) 3608 7111Websitewww.eagersautomotive.com.au AuditorDeloitte Touché Tohmatsu Riverside Centre 123 Eagle Street Brisbane QLD 4001 Share RegistryComputershare Investor Services Pty Limited Level 1 200 Mary Street Brisbane QLD 4000 Enquiries within Australia: 1300 552 270 Enquiries outside Australia: +61 3 9415 4000Board of DirectorsTim Crommelin, Chairman, Non-executive DirectorNick Politis, Non-executive DirectorDan Ryan, Non-executive DirectorMarcus Birrell, Non-executive DirectorSophie Moore, Executive Director and Chief Financial Officer Greg Duncan, Non-executive DirectorDavid Blackhall, Non-executive DirectorMichelle Prater, Non-executive DirectorChief Executive OfficerKeith ThorntonCompany SecretaryDenis StarkCorporate DirectoryEagers Automotive Limited | ANNUAL REPORT 2022eagersautomotive.com.au

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