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2017
Eclipx Group Limited
ACN 131 557 901
Transforming into one of
Australia’s most exciting
diversified financial
services businesses
Eclipx Group is a diversifying market leader in
customer solutions that include fleet leasing and
management, consumer finance, commercial
equipment finance, online auction services and
diversified financial services across Australia and
New Zealand.
By leveraging our core capabilities and
consolidating our market position, we continue
to diversify into high-growth adjacencies, offering
unique products and exceptional value for
our customers.
Our focus is on providing excellent customer
service and value-add solutions for our
customers which translates into high growth for
our shareholders.
We’re committed to putting our customers first
through consistent delivery of customer service
excellence.
We utilise our market-leading proprietary
technology to generate technology solutions that
support our customers in our core fleet services,
as well as other online and digital services that
support our diversifying offer to the marketplace.
A well established, scalable and diverse funding
model which provides cost-effective, capital-
efficient and innovative funding solutions.
2
ECLIPX GROUP LIMITED ANNUAL REPORT 2017
CONTENTS
Our History
Chairman’s Letter
Managing Director’s Report
Eclipx Group Positioning
Financial Highlights
Business Overview
Corporate Sustainability
Board of Directors
Corporate Directory
Financial Report
04
06
08
10
12
14
20
26
29
30
3
OUR HISTORY
With 30 years of corporate history, Eclipx
Group has developed a strong platform
of capabilities.
In the last three years the business has
undergone an exciting transformation
led by a talented executive team.
1987
Australian
company
founded as a JV
between ANZ
and JMJ Fleet
1995
ANZ acquires
100% of AVIS
Fleet NZ
2001
ANZ acquires
PL Lease
Management
2008
Nikko sold
FleetPartners to
GIC and
Ironbridge
1990
ANZ and Linfox
form JV to
establish NZ
fleet business
1996
ANZ acquires
100% of the
Australian and
NZ JVs
2006
ANZ sold
FleetPartners
to Nikko
Investments
4
ECLIPX GROUP LIMITED ANNUAL REPORT 2017 2008
Nikko sold
GIC and
Ironbridge
FleetPartners to
Late
2014
Acquisitions of
FleetPlus and
CarLoans.com.au
Late
2015
Eclipx exceeds
FY15 NPATA
Prospectus
guidance
Late
2016
Eclipx
exceeds
FY16 NPATA
guidance
Early
2014
Significant
executive
reorganisation
Early
2015
Rebrand as Eclipx
Group and list on
the ASX
Early
2016
Acquisition of
Right2Drive
Late
2017
Acquisition of
GraysOnline
5
CHAIRMAN’S LETTER
These results are the outcome of our commitment
to delivering excellent service and outcomes to our
customers, to our people and for our shareholders.
The Board has declared a fully franked final dividend
of 7.75 cps taking the full financial year dividend to
15.25 cps, up 10.9% on last year. The record date for
the final dividend is 29 December 2017, payable on
19 January 2018.
Eclipx Transformation Continues
In a rapidly changing world, we continue to diversify
our business across financial services and other high
growth adjacencies, embracing technological change
and disruption that broadens both our product range
and customer reach.
In 2017 we pursued a number of acquisitions
and initiatives that complement our market
leading fleet, consumer motor finance, accident
replacement vehicle rental and equipment
financing businesses. Over the past 12 months,
Eclipx expanded its market leading suite of
complementary products, when in:
December 2016, Eclipx acquired Onyx car
rentals to provide addition scale for the
existing Eclipx Right2Drive business, adding a
strong presence in the Melbourne market.
June 2017, Eclipx launched “Georgie”, our
new car buying business targeting the
Australian consumer market, sourcing more
than $30 million of new vehicles purchases
resulting in significant savings to customers
in “Georgie’s” first six months of operation.;
August 2017, Eclipx acquired the ASX
listed GraysOnline, a market leading pioneer
in online auction of plant, of equipment
and of vehicles since the 1990’s. Grays
currently has a customer base of 750,000
active users submitting 4.3 million bids per
annum, with a strong growth trajectory in its
core business activities.
Our focus on People and Talent
This past year has also seen a substantial investment
in our people. Across our businesses, we initiated a
number of career development programs designed
to foster our people’s curiosity and innovative ability
whilst building their management and leadership skills.
On behalf of the Directors and our talented Eclipx
team across Australia and New Zealand, we are
pleased to present the Eclipx Group Annual Report
for 2017.
Eclipx continues its transformation into an exciting,
technology-driven financial services business whose
services are in strong demand in both Australia and
in New Zealand.
Over the past 12 months, we have experienced
strong growth across all our business segments,
resulting in:
$68.3 million cash Net Profit After Tax and
Amortisation of intangibles, an increase of
23% on the previous financial year;
cash Earnings Per Share up 13% to 25.1 cents;
New Business Writings amounted to $989
million, an increase of 8% over the previous
financial year;
$2.24 billion in Assets Under Management or
Financed at year end, an increase of 10% over
the previous financial year; and
at year end, Eclipx had 108,050 Vehicles
Under Management or Financed, an increase
of 9% on the previous financial year.
6
ECLIPX GROUP LIMITED ANNUAL REPORT 2017
As part of that process, we provide broad access to
online learning systems that develop technical and
business skills.
As was the case with our earlier acquisitions of both
CarLoans.com.au and of Right2Drive, our acquisition
of GraysOnline injects new talent and considerable
industry expertise into Eclipx. I am most pleased to say,
we have been successful in retaining this talent post
acquisition. Our objective is to continue to expand our
base of talented people capable of supporting further
business growth and innovation.
Our commitment to employee engagement has
remained a top priority at Eclipx and we are proud
to see a further improvement in our employee
engagement score in 2017. This is the fifth year of
surveying our people and we continue to analyse
their feedback to refocus our engagement initiatives,
to improve our communication with our people,
and to refine our change management processes
to strengthen our career development offer and
employee financial rewards.
I am also pleased to share with you, our investors,
that our people surveys confirm our success in
making diversity and inclusion a priority at Eclipx. We
remain committed to ensuring that we have a work
environment free of bias within an inclusive culture. Our
staff surveys confirm we have quality, caring managers
who always make the safety of our people their highest
priority. It is this culture that enables us to attract and
retain the very best people.
Workplace health and safety is a key priority at
Eclipx. We are committed to providing a risk free
environment for the welfare of our employees and
for all those associated with us.
Contributing to the communities we operate
in is highly valued within Eclipx and our people
are encouraged to partner with community
organisations, as volunteers.
Across each of our businesses, employees are
encouraged to dedicate their personal time,
skills and knowledge to a variety of not-for-
profit activities. Eclipx itself provides support
through the provision of vehicles at no cost to
charitable organisations and by matching financial
contributions to selected community partners. For
example, in September, Eclipx matched a $25,000
employee fundraising initiative for the Cerebral
Palsy Alliance.
Ensuring our sustainability
Environmental, societal and corporate governance
(ESG) issues continue to be a high priority activity
at Eclipx. As a group, we are committed to ESG and
have actively promoted fleet solutions that reduce
the environmental impact of our customers’ vehicles.
Eclipx is currently funding in excess of $29 million
in reduced emission vehicles at a lower cost to our
customers utilising our clean energy funding facility.
Our commitment to innovation
Technological knowledge is fundamental to Eclipx’s
success and the sustainability of our business. For
this reason, in June 2017, the Eclipx Board embarked
upon a study tour, meeting with key automotive
manufacturers, associations, researchers and
suppliers across Germany and Japan. With the
assistance of Austrade, this visit was designed to
obtain firsthand insights into prevailing automotive
trends in innovation and disruption. The tour
included visits to leading hubs for the development
of future technologies, including electric propulsion,
battery storage and vehicle automation.
The understanding gained on this study tour is now
feeding into the formulation of Eclipx strategies.
Governance
And finally, a fundamental component of our
strategy is the Board’s total commitment to
embracing the highest possible standards of
corporate governance and business ethics.
In closing, I take this opportunity to thank the
Eclipx Board, our management and our teams at
Eclipx across Australia and New Zealand for their
dedication, their commitment and for their passion
that combines to deliver the outstanding results that
we have reported this year.
Fellow shareholders, your Board is delighted to
present its 2017 Annual Report to you as a precursor
of exciting and changing times to come. I thank you
for your support and I look forward to the next year
of working for the benefit of you, our shareholders.
Kerry Roxburgh
Chairman
7
MANAGING DIRECTOR’S
REPORT
expand and diversify into high growth
adjacencies, including Right2Drive and
Onyx Car Rentals in 2016 and GraysOnline
more recently in 2017.
Eclipx has built a strong suite of complementary
businesses that will provide a multi-touch,
multi-customer journey through the vehicle and
equipment asset lifecycle.
This strategy is fundamental to developing a strong
diversified business capable of growing its market
share and taking advantage of the opportunities
presented in a period of rapid technological change.
Fleet and Commercial Equipment
Leasing
We are pleased to report continued strong asset
growth in our Australian and New Zealand fleet
businesses driven by continued innovation in
technology, excellence in customer service and
improvements in End of Lease outcomes.
This has resulted in 10% growth in its Net Profit
After Tax and Amortisation (“NPATA”) to $51.4
million, with improved operating margins and
cost efficiency.
Consumer - CarLoans.com.au,
Novated Leasing and Georgie
Our consumer motor financing business,
CarLoans.com.au together with our novated leasing
businesses, increased assets under management/
financed by 16% in FY17 and its NPATA by 11% to
$7.9 million.
In 2017, we launched our innovative on-line new
vehicle purchasing business, Georgie, which, in
its first 9 months of operation, has facilitated
the purchase of more than $25 million in new
It is with great pleasure that I present the Eclipx
Group Annual Report for 2017 and report that we
have delivered another year of strong growth in
our business in both assets under management and
earnings with a robust performance across our fleet
and consumer businesses.
Eclipx Strategy
Over the last three years we have established a
strategic focus to:
grow our fleet businesses by acquisition
(FleetPlus) as well as growing our
marketshare in both Australia and New Zealand
diversify into non-bank financial services
businesses by establishing equipment
financing and leasing capabilities and
acquiring our on-line consumer motor vehicle
financing business, CarLoans.com.au
8
ECLIPX GROUP LIMITED ANNUAL REPORT 2017
car purchases at discounted rates for more than
500 consumers.
reflected in our Net Promoter Score increasing to
+59 from +31 in the previous financial period.
Our relentless focus on delivering exceptional
customer service has ensured retention of existing
customers and driven new customer growth.
Our People
As a greatly diverse and welcoming organisation,
we continue to attract the best talent right across
our businesses. We are only as strong as our
dedicated and hard-working teams, and across
all of Eclipx’s businesses we see a passion, drive
and commitment to delivering customer service
excellence that is the envy of the market.
Across our businesses and geographies, it is this
Eclipx culture that sets us apart, with our clear
focus on delivering exceptional customer service at
the heart of our success.
We have the collective effort of our talented,
dedicated teams to congratulate and thank for this
year’s impressive results.
Doc Klotz
Chief Executive Officer and Managing Director
Right2Drive
Our Right2Drive business acquired in June 2016
increased its number of vehicle hires by 91% over
the previous financial year, to 33,780, through
increasing brand recognition and consumer
awareness as well as an expanding number of
points of representation across Australia and
New Zealand.
Its NPATA increased to $8 million, up significantly from
the $1.6 million partial year result reported in FY16.
Acquisition of GraysOnline
On 11 August 2017, we acquired GraysOnline, Australia’s
largest online auction equipment and vehicle
marketplace supporting 750,000 active customers.
The acquisition of GraysOnline represents an
exciting and significant opportunity for Eclipx to
provide a cross-sell of our finance and insurance
products, whilst providing another option to
increase the motor and equipment values for our
end-of-lease disposals.
GraysOnline contributed $2.5 million Earnings
Before Interest, Tax and Depreciation (“EBITDA”) and
$1.0 million NPATA in the two months of ownership
in FY17. The acquisition of GraysOnline is targeted
to achieve – post successful integration –$23-25
million EBITDA, with NPATA forecast to be $14.0-15.4
million for the financial year ending 30 September
2018, representing a highly accretive Earnings per
Share contribution of 29.7-32.7 cents per share.
Our Customers
Throughout 2017, we continued to strengthen
relationships with our customers which was
9
ECLIPX GROUP POSITIONING
ECLIPX HAS EVOLVED INTO A DIVERSIFIED
FINANCIAL SERVICES BUSINESS WITH HIGH
GROWTH CAPITAL EFFICIENT ADJACENCIES
FY2014
Traditional
Fleet
FY2016
Diversified
Financials
Leveraging organic
growth and technology
Accessing high growth
markets
Expanding the new
customer pipeline
Leveraging core
capabilities and services
FY2018
High Growth
Adjacencies
Disrupting markets
First mover advantage
Complementary
businesses
10
ECLIPX GROUP LIMITED ANNUAL REPORT 2017
ECLIPX HAS EVOLVED INTO A DIVERSIFIED
FINANCIAL SERVICES BUSINESS WITH HIGH
GROWTH CAPITAL EFFICIENT ADJACENCIES
Placing the customer first
Customer-centricity at the heart of
everything we do
Leveraging customer-centric technology to
deliver superior value
History of success in building and delivering
customer centric technology
Leveraging the expertise of our
people
Deep industry experience in banking and
financial services
Unique and unrivalled risk and funding
expertise
Developing innovative solutions for our customers
Diversifying the funding and risk
management platform
Non-fleet acquisitions increasing service income
and enhancing capital efficiency
Creating the most comprehensive funding
platform that delivers certainty, capital
efficiency and earnings predictability
Ensuring significant headroom for growth
Generating value throughout the
asset lifecycle
Expanding into disruptive high growth capital
light adjacencies
Repositioning as holistic and integrated asset
manager
Using adjacencies to drive customer and
shareholder value through the asset lifecycle
11
FINANCIAL HIGHLIGHTS
$63.8 Million
CASH NPAT1
23%
GROWTH PCP2
$989 Million
NEW BUSINESS WRITINGS3
8%
GROWTH PCP2
$2.24 Billion
ASSETS UNDER MANAGEMENT4
10%
GROWTH PCP2
15.25 Cents
DIVIDEND PER SHARE
11%
GROWTH PCP2
25.1 Cents
CASH EARNINGS PER SHARE5
13%
GROWTH PCP2
1. CASH NPAT – Cash net profit after tax reflects net profit after tax adjusted for the after tax effect of the amortisation of intangible
assets and material one-off items that do not reflect the ongoing operations of the business. Refer to page 70. 2. PCP – Prior Comparative
Period. 3. New Business Writings excludes sale and leaseback agreements totalling $19.0 million in FY16 and $23.9 million in FY17.
4. Assets Under Management – assets under management or financed and includes balance sheet and principal and agency funded
assets. 5. Cash Earnings Per Share is defined as each period’s Cash NPAT divided by the total weighted number of ordinary shares on issue
for that period. Weighted average shares on issue were 249.3 million in FY16 and 271.8 million in FY17. Eclipx issued 47.08 million shares as
part of the GraysOnline acquisition on 11 August 2017, bringing total shares on issue to 314.0 million as at 30 September 2017.
12
ECLIPX GROUP LIMITED ANNUAL REPORT 2017 Financial year 2017
$ MILLION
Net Operating Income (NOI)
Cash NPAT1
New Business Writings (NBW)2
AUMOF3 (closing)
VUMOF4 (units)
Cash EPS5 (cents)
Dividend per share1 (cents)
We have delivered
strong profit growth
for the third successive
year since listing.
FY16 ACTUAL
FY17 ACTUAL
GROWTH PCP
196.3
55.3
913
2,035
99,254
22.2
13.75
255.3
68.3
989
2,241
108,050
25.1
15.25
30%
23%
8%
10%
9%
13%
11%
FY17 NPATA of $68.3 million, +23% pcp with a $1.0 million
contribution from GraysOnline during stub period and exceeds
FY17 guidance of $65.5 million to $67.0 million
AUMOF increased $206 million (+10%) to $2.24 billion in FY17
whilst increasing NPATA margin by 29bps over FY16
NBW increased 8% to $989 million from strong volume growth
in Fleet
Right2Drive increased number of hires by 91% from 17,661 in FY16
(full year) to 33,780 in FY17 with 30 branches now in operation
across Australia and New Zealand
GraysOnline integration on track with previously announced cost
rationalisation program substantially completed
Cash EPS 25.1c, up 13% on FY16. Fully franked final dividend of
7.75 cps to be paid on 19 January 2018
Diversification of earnings continues with high growth adjacencies
contributing an increased share of earnings in FY18
FY18 guidance of 27-30% increase in NPATA representing EPS
growth of 10-12% over FY17
1. CASH NPAT – Cash net profit after tax reflects net profit after tax adjusted for the after tax effect of the amortisation of intangible assets and
material one-off items that do not reflect the ongoing operations of the business. Refer to page 70. 2. PCP – Prior Comparative Period. 3. New
Business Writings excludes sale and leaseback agreements totalling $19.0 million in FY16 and $23.9 million in FY17. 4. Assets Under Management –
assets under management or financed and includes balance sheet and principal and agency funded assets. 5. Cash Earnings Per Share is defined as
each period’s Cash NPAT divided by the total weighted number of ordinary shares on issue for that period. Weighted average shares on issue were
249.3 million in FY16 and 271.8 million in FY17. Eclipx issued 47.08 million shares as part of the GraysOnline acquisition on 11 August 2017, bringing total
shares on issue to 314.0 million as at 30 September 2017.
13
BUSINESS OVERVIEW
Review of Operations
Eclipx Group is an established leader in vehicle
and equipment financing and management and
online auction services across Australia and New
Zealand and offers consumers, businesses, and
governments access to solutions including fleet
leasing, fleet management, equipment finance,
novated leasing, vehicle sales, consumer motor
finance and medium term accident replacement
vehicles through our suite of brands and end-to-
end technology. We also have one of Australia’s
largest online auction marketplaces through
the GraysOnline suite of websites and provide
online auctioneering and associated services to
corporates and consumers in Australia and New
Zealand. We are listed on the Australian Securities
Exchange (ASX) and are included in the S&P/ASX
200 index.
Over the last three years we have established
the Eclipx ecosystem, consisting of vertically
integrated businesses that service multiple
customers through multiple touchpoints. This has
enabled us to continue adding shareholder value
by diversifying into high growth adjacencies. Our
most recent non-fleet acquisitions of Right2Drive
in 2016 and GraysOnline in 2017 have unique
and disruptive positions in high growth markets
and are complementary to our traditional fleet
leasing businesses.
Eclipx’s Ecosystem
Eclipx has built a strong suite of complementary
businesses that seek to extract value throughout
the motor vehicle lifecycle.
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Commercial
FLEET RE S E A R C
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14
ECLIPX GROUP LIMITED ANNUAL REPORT 2017
Review of Operations
We have established a vertically integrated finance business over the last three years:
Customer Acquisition
New & used car buying
Fleet discounting for consumers of new cars leveraging ECX
buying power and broad access to affordable used vehicles via
GraysOnline
Vehicle finance / insurance
Access to over 20 lenders for novated and consumer finance
solutions
Accident replacement
Market-leading accident replacement vehicles and consumer
service while customers are in need
Renewal / repurchase
Powered by marketing automation and large-scale data analysis,
customers are identified as they re-enter the car market
Used car disposal
Access to a large buying population to drive a better price than
with dealer trade-in and more control and safety than a private sale
We have $2.24 billion of assets under management or finance as at 30 September 2017. Growth of assets
under management or finance is a key driver of profitability as new receivables create management,
finance and services income streams that are recognised throughout the life of a lease. Profitability is also
driven by the provision of vehicle acquisition and financing services to consumers, accident replacement
vehicles to not at fault drivers and auction services to consumers and corporates.
Eclipx was structured in three segments for the year ended 30 September 2017:
Australian Commercial
(Fleet and Equipment) – this
segment comprises our Australian
fleet leasing and management
businesses (FleetPartners and
FleetPlus) and our equipment
financing business (Eclipx
Commercial). GraysOnline
contribution under Eclipx
ownership, from 11 August 2017 to
30 September 2017, was recorded
in this segment.
New Zealand Commercial –
this segment comprises our
New Zealand fleet leasing
and management businesses
(FleetPartners and FleetPlus)
and our used vehicle retail sales
outlet (AutoSelect).
Australian Consumer – this
segment comprises our novated
and online consumer loans
businesses (FleetPartners,
FleetPlus, CarLoans.com.au and
Fleet Choice), our medium term
car rental business (Right2Drive)
and our new vehicle purchasing
business (Georgie).
15
Australia Commercial –
continued strong growth in fleet
Our new business writings in the Australian
Commercial segment grew by 6% over the prior
year to $462 million. Total fleet and commercial
assets under management or financed in
Australia closed the year at $1,127 million, an
increase of 10% on FY2016.
New account wins
Growth throughout FY2017 has been attributed
to ongoing roll-on of new account wins,
resulting in an annual NPATA growth of 10%, or
$40.4 million.
End of lease
Throughout the 2017 financial year we have
witnessed ongoing improvements in end of lease
disposal proceeds, as a result of reduction in
transportation costs, a prudent RV setting, and
superior end of lease disposal strategies.
Outlook
We continue to leverage our core capabilities
in our fleet management services to drive
innovation, revenue and improvements in
technology. We are proactively engaging with
customers to move them from owned fleets to
fully funded and managed fleets, and looking
forward to FY2018, where we are expecting high
single digit AUMOF growth against stable margins.
New Zealand Commercial – solid
performance in a competitive
environment
New business writings for our New Zealand
operations delivered $192 million in the 2017
financial year. A NPATA growth rate of 10% was
driven by increased cost efficiencies (with NPATA
outpacing NOI growth of 2%) and a 7% increase
in the funded fleet (VUMOF).
Macroeconomic factors
The New Zealand election and decline of
the New Zealand dollar created uncertainty
throughout the year, resulting in a reduced
demand for replacement fleet vehicles. In
addition, the ongoing run down of a limited
number of FleetSmart customers initiated prior
to the Eclipx acquisition contributed to the lower
margin managed units in FY2017.
A positive outlook
New business is expected to continue to grow
strongly through targeted sales activity in
the construction, Government and not-for-
profit sectors, and, through the value driven
by the expansion of the AutoSelect retail car
distribution locations in New Zealand.
16
ECLIPX GROUP LIMITED ANNUAL REPORT 2017 Australia Consumer – Right2Drive
Ownership of Right2Drive for the full 2017
financial year achieved a $76.5 million in hire
income from an increase in promotional activity
and the ongoing expansion of the Right2Drive
network throughout Australia and New Zealand.
The success of this is driven by an increased
awareness in target segments via direct-
to-consumer advertising, online marketing
(enhancing the new lead generation), and
successful integration of the Onyx car rentals
into Right2Drive.
Outlook
Throughout FY2018, Right2Drive plans to
continue to expand its network in Australia and
New Zealand to 40 locations, co-locating with
GraysOnline at selected sites, and continue to
drive lead/nurture conversions through digital
intelligence and marketing activity.
17
Acquisition of GraysOnline
On 11 August 2017, we acquired GraysOnline, one
of Australia’s largest online auction marketplaces
through its flagship website, graysonline.com.
GraysOnline was listed on the ASX and is focused
on providing online auctioneering and associated
services to both the corporate and consumer
market segments.
GraysOnline earns revenues by capturing a
margin on sales through its platform and by
providing ancillary services such as valuation
and project management services. It facilitates
efficient transactions using its own auction
technology platform.
GraysOnline has a significant national presence
across 40 locations in Australia and New Zealand
with over 100,000 assets sold per month, making
GraysOnline the number one online auctioneer
in Australia.
GraysOnline is a significant cash flow business
that generates brokerage from buyers and sellers
when assets are sold. In the year to 30 June 2017,
GraysOnline earned $14.8 million in Earnings
before Interest, Depreciation and Amortisation.
$583 million
FY17 Sales
38.5 million
Visitors
4.3 million
Auction bids
750,000
Active users
Highlights
Significant national presence across 40
locations in Australia and New Zealand
•
•
•
•
•
Since being established in 1989, GraysOnline
has been the pioneer in the online auction
industry
#1 online auctioneer nationally, with over
100,000 assets sold per month
GraysOnline DNA is in industrial, plant and
equipment, wine and auto actioneering
GraysOnline is a significant cash flow
business that generates brokerage from
buyers and sellers when assets are sold
GraysOnline remains on track to deliver
$23-$25 million EBITDA (NPATA
$14.0-15.4 million) in FY18
GraysOnline comprises three divisions:
Darwin
Northam
Northam
Perth
Key sites
Regional yard
Cairns
Townsville
Gladstone
Toowoomba
Brisbane
Moree
Mildura
Dubbo
Wagga
Wagga
Newcastle
Sydney
Adelaide
Auckland
Shepparton
Melbourne
Christchurch
Plant and Equipment Auction – Australia’s largest online plant and equipment marketplace
Auto Auction – rapidly growing online auto auction marketplace targeting consumers
GraysWine – Online and telesales wine auction business
•
•
•
18
ECLIPX GROUP LIMITED ANNUAL REPORT 2017 The acquisition of GraysOnline represents
an opportunity to cross-sell our finance and
insurance products to GraysOnline auto and
commercial equipment purchasers as well
as creating increased optionality for our end
of lease disposals. It is also a strategic and
synergistic transaction for us.
There are a number of competitive advantages
offered to us through GraysOnline’s marketplaces
as detailed in the table below:
Marketplace
Overview
Competitive advantages
Commercial
Auto
Specialising in valuation and sale of
industrial and commercial assets, plant
and equipment and AV/IT
Servicing major corporations, small to
medium enterprises, Government, finance
and resource industries
Approximately 65% of sales is from repeat
and multi-vendor suppliers
A leading online marketplace for
auctioning used vehicles
Approximately 30,000 vehicles were
auctioned in the year ended 30 June 2017
87% clearance rate of vehicles in the year
ended 30 June 2017
2 million + unique visitors attracting
c.580,000 bids in the year ended
30 June 2017
National network of sites serviced by more
than 60 BDMs
Scalable online marketplace offering broad
industry coverage
Proven performance with clearance rates
exceeding 80%
Market leading distribution with access to
more than 2 million + customers
Strong partnerships and alliances with all
leading global OEMs in AV/IT
National distribution footprint
Rapidly growing and diverse vendor
network covering (dealerships, dealers and
private sellers)
Introduction of complementary value
added services
19
CORPORATE SUSTAINABILITY
20
ECLIPX GROUP LIMITED ANNUAL REPORT 2017 Sustainability Highlights
Corporate responsibility and sustainability is a high priority
at Eclipx. The primary focus is to ensure robust stewardship
of the business and to deliver sustainable long term
growth while operating in an ethical and transparent way.
Values and Integrity
Eclipx is committed to maintaining the highest ethical
standards in the conduct of its business activities. Eclipx has
adopted a Code of Conduct that applies to all Directors and
employees, and where relevant and to the extent possible,
consultants and contractors of Eclipx. The Code of Conduct
outlines how Eclipx expects its representatives to behave
and conduct business in the workplace on a range of issues.
The Board of Directors, as Eclipx’s highest governance
body, sets an expectation that Eclipx’s values and ethical
standards are reflected in Eclipx’s operations.
Environment
At Eclipx, we have introduced solutions to help tackle
environmental challenges, both by reducing the direct
environmental impact of our operations and by collaborating
with others to help minimise our indirect footprint.
By partnering with the Clean Energy Finance Corporation
(CEFC), we are increasing the uptake of reduced emissions
vehicles to accelerate Australia’s transformation to a more
competitive economy in a carbon constrained world. We now
finance over $25 million worth of vehicles in our clean energy
funding facility since its establishment in 2015.
We also recycle at all our business locations. Designated bins
separate paper, organic and plastic waste for collection and
recycling by a third party. Empty toner cartridges and waste
containers are recycled through Close the Loop Australia.
E-waste is also an important part of the recycling program by
responsibly disposing mobile phones, computers and monitors.
These actions help us play a small role in trying to limit
global warming to less than two degrees celsius above
pre-industrial levels.
Eclipx has not received any fines during the reporting period for
non-compliance with environmental laws and regulations.
21
Diversity and Inclusion
Eclipx strives to attract and retain the highest calibre
talent as well as to promote a safe and inclusive
work environment for all employees regardless of
their gender, age, disability, ethnicity, marital or
family status, religious or cultural background, sexual
orientation and gender identity.
Our commitment to ensuring we maintain this culture
is evidenced by the findings from our 2017 employee
engagement survey. This is the fifth year of surveying
our people and they have confirmed that Eclipx visibly
makes diversity and inclusion a priority, has quality,
caring managers; and always makes safety a priority. It
is this culture that enables Eclipx to attract and retain
the best talent in the industry.
Eclipx offers a rewarding and flexible work
environment that recognises the need to balance
work life with personal commitments. As such, Eclipx
provides an additional 12 weeks of paid leave for
primary carers and provides one week for secondary
careers with flexible work options. Eclipx also
provides employees with access to an Employee
Assistance Program.
Human Capital Development and
Retention
Promoting productivity and efficiency through
developing our people and maintaining good
employee relations is fundamental to maintaining
sustainable long-term operations. Eclipx has been
conducting a comprehensive employee engagement
survey for the past five years and has continued to
increase both its engagement score and employee
participation. These are important steps in Eclipx’s
journey to become an “Employer of Choice”. The
engagement survey is an important measure of our
culture and is a key input to the priorities and
initiatives in our People Strategy, including
investment in learning, effective communication,
rewards and recognition. In addition, we regularly
conduct employee “Pulse Surveys” to ensure that
Eclipx has a channel for obtaining real time feedback
and employee insights on various topics.
Approximately 86% of employees receive regular
performance and career reviews. The employees
that do not receive regular performance and career
reviews are casual employees or employees who had
less than three months of service at the end of the
business year.
Eclipx employees are offered compliance and risk-
related training throughout the year. Training courses
are provided on the following topics: anti-money
laundering, privacy, fraud awareness, anti-bribery
and corruption, work health and safety, diversity
and equality, cyber security and whistleblower
policies and procedures. In FY17, Eclipx’s employees
completed more than 5,000 hours of training on the
above-mentioned topics.
In addition, tailored leadership development
programs were run across the business during 2017. It
is Eclipx’s intention that these foundational units will
be built upon during 2018.
Eclipx has also engaged research and advisory
firm Corporate Executive Board (now Gartner) to
provide all managers with the “Manager Success
Workshop Series”. This allows Eclipx to accelerate
manager development by connecting managers
to action-oriented live training, tailored
development resources, and a global community
dedicated to their success. Eclipx launched an
online Manager Success Portal at the end of 2017
to ensure that managers have easy access to
valuable resources.
22
ECLIPX GROUP LIMITED ANNUAL REPORT 2017 Two of our business units also implemented
Lynda.com, which allows employees to learn
new business, creative and technology skills with
expert-led online video tutorials. Employees have
accessed over 650 hours of content since this
solution was launched.
Health & Safety
Occupational health and safety management is
another very important aspect of Eclipx’s operations.
Eclipx aims to create and maintain a safe working
environment for all employees, contractors,
customers and visitors.
In order to achieve this, Eclipx complies with
relevant health and safety laws and regulations
through a health and safety management system to
support planned, orderly and effective control over
health and safety issues.
We also ensure that our people are held accountable
and responsible for work health safety performance
and proactively manage health and safety risks
through identifying hazards, reporting near misses
and carrying out risk assessments to eliminate or
control those hazards.
Community Support
Contributing to the communities in which we operate
is also valued by our people. Across our businesses
employees dedicate time, skills and knowledge to
various not-for-profit activities. Eclipx also provides
support through the provision of vehicles at no
cost to select organisations or matched giving
to chosen community partners. An example of
this is September, an initiative of the Cerebal
Palsy Alliance, which saw Eclipx rank in the Top 10
Australian companies for our employee fundraising
of $25,000, which Eclipx matched.
We also give back to the community by donating
to charities throughout our businesses. FleetPlus
provides a vehicle to Sydney Story Factory, a not-for-
profit creative writing centre for marginalised young
people. FleetPartners New Zealand, in conjunction
with Mazda, has a longstanding partnership of 15
years with Duffy Books that aims to increase the
literacy levels of marginalised children. Right2Drive
organised a vintage car tour day for the Bandaged
Bear Appeal, which helps raise funds for the
patients of the Children’s Hospital at Westmead, in
association with Westmead Children’s Hospital.
Corporate Governance
At Eclipx, our Board is committed to implementing
the highest possible standards of corporate
governance. The Board’s underlying commitment to
excellence is enshrined in its approach to governance.
The Board believes that sound governance
is fundamental to the ongoing success and
growth and wherever possible, that its practices
are consistent with the Second Edition of
the Australian Securities Exchange (ASX)
Corporate Governance Council’s Principles and
Recommendations. To support these principles,
Eclipx has a two-level governance framework
which governs policies and procedures.
In addition, we have established distinct
management committees, each of which has a
dedicated charter which outlines the purpose,
responsibilities, composition, guidelines and
source of decision-making authority.
The Asset Risk Committee reviews and approves
the parameters in taking asset risk and residual
values. The Risk and Work Health and Safety
Committee identifies, assesses and reviews the
key enterprise risks and relevant mitigating control
activities and their effectiveness in accordance
with our Risk Management Framework, including
work health and safety and regulatory compliance.
The Project Steering Committee governs the
approval, scheduling and execution of new project
initiatives and has oversight of all discretionary
work undertaken.
The Board reviews the governance framework
periodically to ensure we continue to uphold the
highest governance standards.
As part of our commitment to corporate
responsibility and sustainability, Eclipx is also
adopting a scorecard to measure our performance
and track our progress to this end.
23
CORPORATE SUSTAINABILITY
CORPORATE SUSTAINABILITY
SCORECARD
CUSTOMERS
Net Promoter Score (Average monthly score)
FY17
37
FY16
31
STAKEHOLDERS
Donations and sponsorships ($ thousands)
Company-sponsored staff volunteering (hours)
ENVIRONMENT
CEFC eligible vehicles financed (number)
CEFC eligible vehicles financed ($ millions)
RESPONSIBLE CORPORATE GOVERNANCE
Employee engagement score (%)
Lost time injury frequency rate (AS1885.1-1990)
STAFF TURNOVER
Voluntary (%)
Involuntary (%)
24
88.6
481
1,123
29.0
70
2.0
18
2
39.7
106
544
14.5
64
1.7
24
4
ECLIPX GROUP LIMITED ANNUAL REPORT 2017 CUSTOMERS
Net Promoter Score (Average monthly score)
FY17
37
FY16
31
STAKEHOLDERS
Donations and sponsorships ($ thousands)
Company-sponsored staff volunteering (hours)
ENVIRONMENT
CEFC eligible vehicles financed (number)
CEFC eligible vehicles financed ($ millions)
RESPONSIBLE CORPORATE GOVERNANCE
Employee engagement score (%)
Lost time injury frequency rate (AS1885.1-1990)
STAFF TURNOVER
Voluntary (%)
Involuntary (%)
88.6
481
1,123
29.0
70
2.0
18
2
39.7
106
544
14.5
64
1.7
24
4
EMPLOYEE GENDER DIVERSITY
Group
Sustainability Scorecard
Board (%)
Group Executive (%)
CUSTOMERS
Management (%)
Net Promoter Score (Average monthly score)
Individual (%)
Customer compliments (%) (Ratio per customer)
Australia Only
Customer complaints (%) (Ratio per customer)
Management (%)
Customer complaints resolved by ECX (%) Environment
Individual (%)
STAKEHOLDERS
Donations and sponsorships ($ million)
New Zealand
Management (%)
Company-sponsored staff volunteering (hours)
Individual (%)
Taxes paid ($ million)
Salaries and related expenses ($ million)
NPATA ($ MILLION)
Dividends paid to shareholders ($ million)
EMPLOYEE AGE DIVERSITY (%)
FY17
FY16
M
86
F
14
M
86
F
14
94
FY17
6
100
FY16
0
67
60
M
67
61
M
64
54
33
40
F
33
39
F
36
46
68
56
M
68
58
M
67
48
32
44
F
32
42
F
33
52
Market capitalisation ($ million)
<20
20-29
30-39
40-49
50-59
ENVIRONMENT
2.19%
28.59%
30.01%
21.80%
13.69%
60+
3.72%
CEFC eligible vehicles financed (number)
CEFC eligible vehicles financed ($)
Paper recycling
RESPONSIBLE CORPORATE GOVERNANCE
*FY17 figures are as at 30 September 2017 and exclude GraysOnline
Employee engagement score (%)
Staff turnover (%)
Lost time injury frequency rate (AS1885.1-1990)
64
28
1.7
25
BOARD OF DIRECTORS
KERRY ROXBURGH, BCOM, MBA, MESAA
Chairman since 26 March 2015, Independent Non-Executive Director since
26 March 2015
Mr Kerry Roxburgh is a Stockbrokers And Financial Advisers Association of Australia -
Practitioner Member.
Kerry is Chairman of Eclipx Group Ltd and of Tyro Payments Ltd. He is the Lead Independent
Non-Executive Director of Ramsay Health Care, and a Non-Executive Director and Investment
Committee Chairman of the Medical Indemnity Protection Society and of MIPS Insurance Ltd.
After 10 years as Chairman of the Charter Hall Group, he retired from that Group at their AGM
in November 2014 and after 20 years as Chairman, on 31 December 2015 he retired from the
Board of Tasman Cargo Airlines.
In 2000, Kerry completed a 3-year term as CEO of the online stockbroker, E*TRADE Australia
(a business that he co-founded in 1997), becoming its Non-Executive Chairman until June
2007, when it was acquired by the ANZ Bank.
Prior to this appointment he was an Executive Director of HSBC Bank Australia where for 10
years from 1986, he held various positions including Head of Corporate Finance and Executive
Chairman of the group’s stockbroker, James Capel Australia.
GAIL PEMBERTON, MA, FAICD
Independent Non-Executive Director since 26 March 2015
Gail Pemberton was appointed to the Eclipx Board as a Non-Executive Director on 26 March 2015.
Gail has more than 35 years’ experience in banking and wealth management, and is a
specialist in technology and operations.
Gail is currently Chairman of Melbourne IT Ltd and a Non-Executive Director of PayPal
Australia Pty Ltd.
She was previously Chairman of OneVue and Onthehouse, and served on the Board of Alleron
Funds Management, Air Services Australia, the Sydney Opera House Trust, Harvey World
Travel and UXC Ltd.
26
ECLIPX GROUP LIMITED ANNUAL REPORT 2017 TREVOR ALLEN, BCOM (HONS), CA, FF, MAICD
Independent Non-Executive Director since 26 March 2015
Trevor Allen was appointed to the Eclipx Board as a Non-Executive Director on 26 March 2015.
Trevor has more than 40 years of corporate and commercial experience, primarily as a
corporate and financial adviser to Australian and international corporates. He is a Fellow of
the Australian Institute of Company Directors.
Trevor is currently a Non-Executive Director of Brighte Capital Pty Ltd (after retiring as
Chair in November 2017), Freedom Foods Group Ltd, Peet Limited, Peet Funds Management
Limited, Peet Flagstone Pty Ltd, Yowie Group Limited and Yowie Hong Kong Holdings
Limited. He is a Non-Executive Alternate Director, Company Secretary and Public Officer of
Australian Fresh Milk Holdings Pty Limited and Fresh Dairy One Pty Limited.
Trevor was previously a Non-Executive Director of the Juvenile Diabetes Research
Foundation, a member of FINSIA’s Corporate Finance Advisory Committee for 10 years, and a
board member of AON Superannuation Pty Ltd.
RUSSELL SHIELDS, FAICD, SA FIN
Independent Non-Executive Director since 26 March 2015
Russell Shields was appointed to the Eclipx Board as a Non-Executive Director on 26 March 2015.
Russell has more than 35 years’ experience in financial services, including six years as
Chairman Queensland and Northern Territory for ANZ Bank.
Russell is currently a Non-Executive Director of Aquis Entertainment Limited, Aquis Canberra
Limited, Casino Canberra Limited, Holsmere Pty Ltd and Retail Food Group Ltd.
Previously, Russell was the Chairman of Onyx Property Group Pty Ltd.
GREG RUDDOCK, BCOM
Non-Executive Director since 26 March 2015, Chairman to 26 March 2015
Greg Ruddock was appointed to the Eclipx Board as a Non-Executive Director on 26 March
2015, following his previous tenure as Chairman of Eclipx.
Greg has 14 years’ private equity experience with Gresham Private Equity and Ironbridge.
He is currently the Joint Chief Executive Officer of Ironbridge and co-leads investment and
portfolio management activities.
Greg is currently Chairman of Navigator Resources Limited and Non-Executive Director of
Carp Advisory B Pty Ltd, Ironmonger Holdings Pty Ltd, Mascot Marine Holdings Pty Ltd, Super
A-Mart Acquisitions Pty Ltd, Super A-Mart Finance Pty Ltd, Super A-Mart Holdco Pty Ltd, The
Galore Group (Australia) Pty Ltd, Prospa Advance Pty Ltd and IPMB Capital Partners Pty Ltd.
27
DOC KLOTZ
Chief Executive Officer and Managing Director since 27 March 2014
Doc Klotz was appointed Chief Executive Officer, Managing Director and Executive Director
of Eclipx on 27 March 2014.
Doc has over 25 years’ experience in senior executive roles in the financial services and travel
industries in Australia, New Zealand and the United States.
Prior to joining Eclipx, Doc was Head of Global Operations at FlexiGroup, an ASX 200
company. He also has senior executive experience with Travel Services International,
Hotels.com and Expedia, Inc. in the United States.
GARRY McLENNAN, BBUS, CPA, FAICD
Deputy Chief Executive Officer and Chief Financial Officer since 27 March 2014
Garry McLennan was appointed Deputy Chief Executive Officer, Chief Financial Officer and
Executive Director of Eclipx on 27 March 2014.
Garry has over 35 years of experience in financial services including five years as Chief Financial
Officer at FlexiGroup, an ASX 200 company.
Prior to his time at FlexiGroup, Garry spent 23 years at HSBC Bank Australia where he was Chief
Financial Officer and subsequently Chief Operating Officer. He has previously served on the
Board of HSBC Bank Australia and The Australian Banking Industry Ombudsman Ltd.
28
ECLIPX GROUP LIMITED ANNUAL REPORT 2017 CORPORATE DIRECTORY
Eclipx Group Limited
ACN 131 557 901
Eclipx Group is listed on the Australian Securities Exchange under the ASX code of ECX.
Share registry
Link Market Services Limited
Level 12, 608 George Street,
Sydney South, NSW 2000
Australia
Tel: +61 2 8280 7100
Fax: +61 2 9287 0303
Auditor
KPMG
Tower 3, International Towers Sydney
300 Barangaroo Avenue, NSW 2000
Australia
Tel: +61 2 9335 7000
Fax: +61 2 9335 7001
Directors
Kerry Roxburgh – Chairman
Trevor Allen
Doc Klotz
Garry McLennan
Gail Pemberton
Greg Ruddock
Russell Shields
Group General Counsel and
Company Secretary
Matthew W. Sinnamon
Registered office and principal
administration office
Level 32, 1 O’Connell Street
Sydney, NSW, 2000
Australia
Tel: +61 2 8973 7272
Fax: +61 2 8973 7171
Corporate Governance Statement
A copy of the Eclipx Corporate Governance Statement is available at:
http://investors.eclipxgroup.com/Investor-Centre/?page=Corporate-Governance
29
FINANCIAL REPORT
For the year ended 30 September 2017
CONTENTS
Director’s Report
Lead Auditor’s Independence Declaration
Letter from Remuneration and Nomination Committee (unaudited)
Remuneration Report (audited)
Financial Statements
Statement of Profit or Loss and Other Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
1.0 Introduction to the Report
2.0 Business Result for the Year
2.1 Segment information
2.2 Revenue
2.3 Expenses
2.4 Earnings per share
2.5 Business combinations
2.6 Taxation
3.0 Operating Assets and Liabilities
3.1 Property, plant and equipment
3.2 Finance leases
3.3 Trade receivables and other assets
3.4 Trade and other liabilities
3.5 Intangibles
4.0 Capital Management
4.1 Borrowings
4.2 Financial risk management
4.3 Cash and cash equivalents
4.4 Derivative financial instruments
4.5 Contributed equity
4.6 Commitments
4.7 Contingent liabilities
4.8 Dividends
5.0 Employee Remuneration and Benefits
5.1 Share based payments
5.2 Key management personnel disclosure
6.0 Other
6.1 Reserves
6.2 Parent entity information
6.3 Related party transactions
6.4 Remuneration of auditors
6.5 Deed of cross guarantee
6.6 Reconciliation of cash flow from operating activities
6.7 Events occurring after the reporting period
Director’s Declaration
Independent Auditor’s Report
Shareholder Information
30
31
45
46
47
62
63
64
65
66
70
71
74
75
76
78
81
83
83
84
85
88
89
93
94
95
96
98
99
100
105
106
107
108
110
111
113
113
114
115
122
The Directors present their report on the consolidated entity (referred to hereafter as Group or Eclipx) consisting
of Eclipx Group Limited (Company) and the entities it controlled at the end of, or during, the year ended 30
September 2017.
Directors
1.
The following persons were Directors of the Company during the financial year and up to the date of this report:
KERRY ROXBURGH
BCOM, MBA, MeSAFAA
Chairman since 26 March 2015, Independent Non-Executive Director since 26 March 2015.
Mr Kerry Roxburgh has more than 50 years’ experience in the financial services industry. He is Chairman of Tyro
Payments Ltd. He is the Lead Independent Non-Executive Director of Ramsay Health Care Ltd, a Non-Executive
Director of the Medical Indemnity Protection Society and of MIPS Insurance Ltd. Until 30 September 2016, he was
also a member of the Advisory Board of AON Risk Solutions in Australia.
He was previously CEO of E*TRADE Australia and was subsequently Non-Executive Chairman until June 2007,
when it was acquired by ANZ Bank. Prior to his time at E*TRADE, Kerry was an Executive Director of HSBC Bank
Australia where, for 10 years, he held various positions including Head of Corporate Finance and Executive
Chairman of HSBC James Capel Australia.
Prior to HSBC, he spent more than 20 years as a Chartered Accountant with HLB Mann Judd and previously at
Arthur Andersen.
He is a Practitioner Member of the Stockbrokers and Financial Advisers Association of Australia.
In addition to Eclipx Group Ltd, during the last three years Kerry also served as a Director for the following listed
companies: Ramsay Health Care Ltd (appointed July 1997) and Charter Hall Ltd (retired November 2014).
GAIL PEMBERTON
MA (UTS), FAICD, GCERT FIN
Independent Non-Executive Director since 26 March 2015
Ms Gail Pemberton has more than 35 years’ experience in banking and wealth management and is a specialist in
technology and operations.
Prior to taking up a Non-Executive Director career, Gail was Chief Operating Officer, UK at BNP Paribas Securities
Services and CEO and Managing Director, BNP Paribas Securities Services, Australia and New Zealand. She was
previously Group CIO, and subsequently Financial Services Group COO at Macquarie Bank.
Her current board roles include Chairman of OneVue Ltd and Melbourne IT Ltd. She is a Non-Executive Director of
PayPal Australia Pty Ltd.
She previously was Chairman of Onthehouse, and served on the board of Alleron Funds Management, Air
Services Australia, the Sydney Opera House Trust, Harvey World Travel, UXC Ltd and Queensland Investment
Corporation. She has also provided independent consulting services to the NSW Government Department of
Premier and Cabinet on their Corporate and Shared Services reform program.
In addition to Eclipx Group Ltd, during the last three years Gail also served as a Director for the following listed
companies: OneVue Ltd (appointed 2007) and Melbourne IT Ltd (appointed May 2016).
31
DIRECTORS’ REPORT TREVOR ALLEN
BCOM (HONS), CA, FF, MAICD
Independent Non-Executive Director since 26 March 2015
Mr Trevor Allen has 39 years’ of corporate and commercial experience, primarily as a corporate and financial
adviser to Australian and international corporates.
He is a Non-Executive Director of Peet Ltd, Freedom Foods Group Ltd and Yowie Group Ltd. He is a Non-
Executive Alternate Director, Company Secretary and Public Officer of Australian Fresh Milk Holdings Pty Ltd and
Fresh Dairy One Pty Ltd. Trevor is a director of Brighte Capital Pty Ltd. Until August 2016 he was a board member
of Aon Superannuation Pty Ltd, the trustee of the Aon Master Trust. He was a member of FINSIA’s Corporate
Finance Advisory Committee for 10 years up until December 2013.
Prior to undertaking non-executive roles, he had senior executive positions as an Executive Director - Corporate
Finance at SBC Warburg and its predecessors for eight years and as a Corporate Finance Partner at KPMG for
nearly 12 years. At the time of his retirement from KPMG in 2011, he was the Lead Partner in its National Mergers
and Acquisitions group.
He was Director - Business Development for Cellarmaster Wines from 1997 to 2000, having responsibility for the
acquisition, integration and performance of a number of acquisitions made outside Australia in that period.
In addition to Eclipx Group Ltd, during the last three years Trevor also served as a Director for the following listed
companies: Peet Ltd (appointed April 2012), Freedom Food Group Ltd (appointed July 2013) and Yowie Group Ltd
(appointed March 2015).
RUSSELL SHIELDS
FAICD, SA FIN
Independent Non-Executive Director since 26 March 2015
Mr Russell Shields has more than 35 years’ experience in financial services including six years as Chairman
Queensland and Northern Territory for ANZ Bank.
He is a Non-Executive Director of Aquis Entertainment Ltd and Retail Food Group Ltd. Previously Russell was the
Chairman of Onyx Property Group Pty Ltd.
Prior to joining ANZ, he held senior executive roles with HSBC including Managing Director Asia Pacific -
Transport, Construction and Infrastructure and State Manager Queensland, HSBC Bank Australia.
In addition to Eclipx Group Ltd, during the last three years Russell also served as a Director for the following listed
companies: Aquis Entertainment Ltd (appointed August 2015) and Retail Food Group Ltd (appointed December
2015).
GREG RUDDOCK
BCOM (UWA)
Non-Executive Director since 26 March 2015, Chairman to 26 March 2015
Mr Greg Ruddock is the Joint Chief Executive Officer of Ironbridge and co-leads investment and portfolio
management activities. He has 14 years’ of private equity experience with Gresham Private Equity and Ironbridge.
Prior to joining Ironbridge, he spent seven years with Wesfarmers in mergers and acquisitions, five years with
Kalamazoo Ltd in various senior roles, and four years as Director of Gresham Private Equity.
Greg has represented the Ironbridge Funds on the boards of Stardex, Super Amart, BBQs Galore, Easternwell,
ISGM and AOS.
In addition to Eclipx Group Ltd, during the last three years Greg also served as a Director for the following listed
company: Navigator Resources Ltd (appointed February 2016).
32
ECLIPX GROUP LIMITED ANNUAL REPORT 2017 1.
Directors (continued)
IRWIN (‘DOC’) KLOTZ
Chief Executive Officer and Managing Director since 27 March 2014
Mr Doc Klotz has over 25 years’ experience in senior executive roles in the financial services and travel industries
in Australia, New Zealand and the United States.
Prior to joining Eclipx in 2014, he was Head of Operations at FlexiGroup, an ASX 200 company (ASX: FXL).
He has senior executive experience with Travel Services International, Hotels.com and Expedia, Inc. in the United
States.
GARRY McLENNAN
BBUS (UTS), CPA, FAICD
Deputy Chief Executive Officer and Chief Financial Officer since 27 March 2014
Mr Garry McLennan has over 35 years’ of experience in financial services including five years as Chief Financial
Officer at FlexiGroup, an ASX 200 company (ASX: FXL).
Prior to his time at FlexiGroup, he spent 23 years at HSBC Bank Australia where he was Chief Financial Officer
and subsequently Chief Operating Officer. He has previously served on the board of HSBC Bank Australia and The
Australian Banking Industry Ombudsman Ltd.
Garry currently serves on the Board Audit Committee of Intersect, a full-service eResearch support agency.
Company Secretary
2.
Mr Matt Sinnamon was appointed Company Secretary and Group General Counsel on 27 October 2014. He is
admitted to the Supreme Court of New South Wales and the High Court of Australia. He is a member of the
Governance Institute of Australia, a Chartered Secretary and is entered on the Roll of Public Notaries.
The Company Secretary function is responsible for ensuring the Company complies with its statutory duties and
maintains proper documentation, registers and records. The role provides advice to the Directors and officers
about corporate governance and legal matters.
3. Directors’ Meetings
The table below sets out the numbers of meetings held during the 2017 financial year and the number of
meetings attended by each Director. During the year eight Board meetings, six Audit and Risk Committee
meetings and four Remuneration and Nomination Committee meetings were held.
Director
Kerry Roxburgh
Gail Pemberton
Trevor Allen
Russell Shields
Greg Ruddock
Garry McLennan
Doc Klotz
Board
Audit and Risk Committee
Remuneration and
Nomination Committee
Held
Attended
Held
Attended
Held
Attended
8
8
8
8
8
8
8
8
8
8
8
8
8
8
6
–
6
6
6
–
–
6
–
6
6
6
–
–
4
4
4
–
–
–
–
4
4
4
–
–
–
–
33
DIRECTORS’ REPORT 4.
Review of operations
Business acquisitions
On 18 November 2016 Eclipx acquired Anrace Pty Ltd trading as Onyx Car Rentals (Onyx). The principal activity of
the business acquired is the provision of rental replacement vehicles to “not at fault” drivers that have accident
damaged cars requiring repair. The business was acquired to accelerate the expansion in the Victorian medium
term vehicle rental market. Onyx recorded a profit before tax of $2.4m for the period under review.
On 11 August 2017 Eclipx acquired Grays eCommerce Group Ltd (Grays). The principal activity of the business
acquired is the provision of online auctioneering and valuation services in the industrial B2B sector together with
online auctioneering and other online retail services in the B2C sector. The business was acquired to diversify
earnings with an organisation that would integrate vertically and allow the Group to cross sell current and future
offerings. Grays recorded a profit before tax of $1.7m for the period under review.
Principal activities
Eclipx is a diversified financial services organisation that provides complete fleet management services, corporate
and consumer asset backed finance, medium term vehicle rentals and online auctioneering and associated
services to the Australian and New Zealand market. As at 30 September 2017 Eclipx managed or financed in
excess of 108,000 vehicles across Australia and New Zealand.
In Australia the Group operates under eight primary brands: FleetPartners, FleetPlus, FleetChoice, CarLoans.com.
au, Right2Drive, Eclipx Commercial, Onyx and GraysOnline.com.
In New Zealand the Group operates under five primary brands: FleetPartners, FleetPlus, CarLoans.co.nz,
Right2Drive and AutoSelect.
Business model
Eclipx generates revenue in different ways across its brands that can broadly be split as below:
Eclipx-funded model (used primarily by FleetPartners and Eclipx Commercial) is where Eclipx purchases
vehicles to lease to customers and earns a spread, or net interest income, being the difference between the
interest income it receives from customers and its cost of funds. Eclipx recognises net interest income over
the life of the lease;
Third-party-funded model (used primarily by FleetPlus, FleetChoice and CarLoans) is where Eclipx acts
as a broker or agent that arranges vehicle financing for the customer from third party banks and financial
institutions. Under this model, as compensation for originating new business, Eclipx earns part of its revenue
from upfront brokerage commissions paid by the third-party funders;
Eclipx earns management and maintenance fees, ancillary revenue from related products and services and
end of lease income; and
Vehicle rental (Right2Drive, Onyx) is where Eclipx rents motor vehicles to “not at fault” drivers that have
accident damaged vehicles; and
Auction proceeds (Grays) would include commissions earned on auctions, recovery of agreed costs
associated with the auction and revenue on the sale of goods where Grays acquired the goods for resale
purposes.
Eclipx believes Net Operating Income is a key measure of financial and operating performance for its businesses
as it takes into account the direct costs incurred in generating gross revenue.
The origination of new business is a key driver of profitability and the group targets growth through business-
to-business relationships and online and word of mouth business-to-consumer. The Group drives profitability by
managing revenue, income generating assets, credit quality and operating expenses.
34
ECLIPX GROUP LIMITED ANNUAL REPORT 2017 The core capabilities of Eclipx are:
Vehicle, fleet
and asset
management
Online
auctioneering
Credit risk
assessment and
management
Treasury and
access to
funding
Residual
value risk
management
Technology
Eclipx supports its core vehicle fleet leasing activities by offering customers a broad
range of vehicle management services, including initial vehicle procurement, ongoing
maintenance, supply management and contract amendments during and at the end of a
lease. Eclipx also enhances the value of its products and quality of service to customers
by leveraging economies of scale and relationships with third party suppliers.
Eclipx through the Grays acquisition has nearly 17 years of online auctioneering
experience, with Grays being the largest industrial and commercial online auction
business in the Asia-Pacific region. Grays has national coverage across Australia and an
international network which allows Grays to access networks of buyers and sellers in
Asia, the Middle East, Africa and Europe. The extensive coverage allows Grays to access a
wide client base and achieve in excess of 38.5m visitors to its site annually.
Eclipx draws on nearly 30 years of operating experience, a wealth of proprietary data
(including customer credit performance, arrears management, loss rates, and recovery
rates), and external credit reporting data from local credit bureaus, to assess the
credit risk of customers. The proprietary data and experience assists Eclipx in pricing
transactions and estimating the quantum of potential credit losses. Eclipx’s credit
risk assessment team operates independently from the sales teams with established
processes to ensure formal credit policies are followed. Technology and credit scorecards
are used to enable prompt credit decision making and control the consistency of
assessment.
Eclipx needs access to funding in order to purchase vehicles that it leases to its
customers. Eclipx utilises facilities called warehouse facilities (which in turn may be
refinanced through the issuance of asset backed securities), corporate debt and cash.
In the broker funding model, Eclipx arranges funding for customers from third party
banks and other funders (under principal and agency arrangements or introducer
arrangements).
Eclipx typically sells a vehicle at the end of the lease and seeks to recover net proceeds
equal to or greater than the residual value. In order to manage residual value risk, Eclipx
seeks to estimate accurately future used car values with the assistance of a proprietary
algorithm, actively monitor car usage and maintenance to manage in-life lease
modifications and maximise end of lease sale proceeds.
Customer-focused technology solutions and innovation are critical components of
Eclipx’s business model. They assist Eclipx in providing a competitive and attractive
proposition to customers. Technology solutions are focused both on delivering value
or services to customers (e.g. through faster processing times), and on streamlining
internal operations to improve efficiency and risk management. Eclipx has commenced
and is intending to continue to drive efficiency improvements to make IT innovation a
competitive advantage by upgrading and consolidating IT platforms, infrastructure and
apps.
Sales and
distribution
Eclipx seeks to create a customer-centric, service-driven, culture, supported by aligned
commission and incentive structures for staff, and a multi-channel and multi-brand sales
and customer acquisition strategy.
35
DIRECTORS’ REPORT 4.
Review of operations (continued)
Group Financial Performance
The table below shows the key financial performance metrics for the 2016 financial year of the Group and
its segments:
Australia
Commercial
Australia
Consumer
Total
New Zealand
Commercial
Total
2017
$’m
2016
$’m
2017
$’m
2016
$’m
2017
$’m
2016
$’m
2017
$’m
2016
$’m
2017
$’m
2016
$’m
Net operating income
before operating expenses
after impairment charges
Depreciation and
amortisation of non financial
assets
135.9
112.4
79.6
45.1
215.5
157.5
39.7
38.8
255.2
196.3
(2.5)
(1.7)
(1.4)
(0.6)
(3.9)
(2.3)
(0.5)
(0.3)
(4.4)
(2.6)
Operating expenses
(69.6)
(54.9)
(53.9)
(30.9)
(123.5)
(85.8)
(22.2)
(22.3)
(145.7) (108.1)
Profit before tax,
non-recurring costs
and interest
Holding company debt
interest
Adjustments and
amortisation of
intangible assets
Tax
Statutory net profit
after tax
Material one-off
adjustments not reflecting
ongoing operations
(post tax)
Intangibles amortisation
(post tax)
Cash net profit after tax
63.8
55.8
24.3
13.6
88.1
69.4
17.0
16.2
105.1
85.6
(5.8)
(3.8)
(1.6)
(1.2)
(7.4)
(5.0)
(1.8)
(2.3)
(9.2)
(7.3)
(16.4)
(11.7)
(7.6)
(13.1)
(3.0)
(6.0)
(5.4)
(2.1)
(19.4)
(17.7)
(13.0)
(15.2)
(0.6)
(4.0)
(0.5)
(20.0)
(13.5)
(3.7)
(21.7)
(18.9)
29.9
31.3
13.7
4.9
43.6
36.2
10.6
9.7
54.2
45.9
8.2
2.7
0.2
3.3
41.4
2.6
36.6
2.0
15.9
2.5
1.3
8.7
8.4
5.2
0.0
0.1
8.4
5.3
5.3
57.3
3.9
45.3
0.4
11.0
0.2
10.0
5.7
4.1
68.3
55.3
Whilst a non-IFRS measure, cash net profit after tax (Cash NPATA) reflects net profit after tax adjusted for the after tax effect of the amortisation of
intangible assets and material one off adjustments or costs that do not reflect the ongoing operations of the business. The material one off adjustment
for 2017 is for costs associated with acquisitions and significant business restructuring. The adjustment for 2016 relates to costs associated with
acquisitions and significant debt and business restructuring.
Net operating income before operating expenses after impairment charges
Net operating income before operating expenses after impairment charges is $58.9m favourable to the prior
period. The favourable variance has been achieved by: an increase in the volume of new business writings; the
growth of Right2Drive and the contribution of Right2Drive for the full financial year; an increase in selling prices
of vehicles that have been returned at the end of the lease; and contribution from the Grays acquisition.
Operating expenses
Operating expenditure has increased $37.6m compared to the prior period. The increase in operating expenditure
is predominantly as a result of the acquisition of Right2Drive that occurred in May 2016 and resulted in part year
consolidation in 2016 and a full year consolidation in 2017, coupled with the growth in Right2Drive. The 2017
operating expenditure includes operating costs of Grays as from the date of acquisition.
36
ECLIPX GROUP LIMITED ANNUAL REPORT 2017 4.
Review of operations (continued)
Holding company debt interest
The increase of $1.9m to the prior period is as a result of the incremental borrowings under the facility. The
amounts drawn under the facility increased from $130.0m to $246.2m. The increase in holding company debt
interest of $1.9m would only relate to the portion of holding company debt that was not allocated to the funding
of leases through the warehouse funding structure.
Adjustments and amortisation of intangible assets
The Group incurred costs that are not reflective of the Group net profit relating to the ongoing operations of the
business. The adjustments for 2017 relate to costs incurred as a result of the business acquisitions of Grays and
Onyx and the restructuring of Grays. The table below shows the value of adjustments for 2017 and 2016:
Cost description
Transaction and restructuring costs
Replacement of holding company debt
Amortisation of intangibles
2017
$’m
12.0
–
8.0
20.0
2016
$’m
5.1
2.5
5.9
13.5
The transaction and restructuring costs for 2017 consists of $3.4m costs associated with the restructuring of Grays
as the business exits unprofitable lines and integrates into Eclipx. Eclipx incurred $8.3m of acquisition related
costs with the acquisition of Grays and $0.3m associated with the acquisition of Onyx.
The transaction and restructuring costs for 2016 relate to costs incurred as a result of the business acquisitions of
Right2Drive and FleetSmart and restructuring of the business. Replacement of holding company debt reflects the
costs associated with the early termination of the corporate debt originated in 2015.
Statutory net profit after tax
The statutory profit for 2017 has increased to $54.2m; this represents a growth of $8.3m against the prior period.
The predominant factors attributed to this growth are:
Full period contribution and growth of Right2Drive;
Expansion through acquisition of Grays;
Growth in the fleet and equipment finance; and
Incremental costs associated with the acquisition and restructure of Grays.
Cash net profit after tax
Eclipx has increased Cash NPATA by $13.0m or 23.5%. The growth in Cash NPATA is a result of growth in the
fleet and equipment finance, expansion through acquisition of Grays and full period contribution and growth of
Right2Drive. The growth in revenue was partially offset by growth in operating expenses and increased bad debts.
37
DIRECTORS’ REPORT 4.
Review of operations (continued)
Segment results
In the accompanying financial report and consistent with prior periods, Eclipx has identified and disclosed the
results of three operating segments:
Australia Commercial
Australia Consumer
New Zealand Commercial
Description
Brands
Vehicle fleet leasing
and management
business in Australia.
Commercial
equipment finance
and leasing.
Auctioneering and
valuation services.
FleetPartners
FleetPlus
Eclipx Commercial
GraysOnlline.com
Online broker
facilitating consumer
financing for vehicles
in Australia.
Consumer novated
leasing business
in Australia.
Medium term rental
to “not at fault
drivers”.
FleetPartners
FleetPlus
FleetChoice
CarLoans.com.au
Right2Drive
Onyx
Vehicle fleet leasing
and management
business in New
Zealand.
Used vehicle retail
sales.
Medium term rental
to “not at fault
drivers”.
FleetPartners
FleetPlus
AutoSelect
CarLoans.co.nz
Right2Drive
Net operating income
53.3%
53.3%
53.3%
53.3%
53.3%
53.3%
31.1%
31.1%
31.1%
31.1%
31.1%
31.1%
15.6%
15.6%
15.6%
15.6%
15.6%
15.6%
$ Million
$135.9m
$79.6m
$39.7m
Contribution to Cash
NPATA
60.6%
60.6%
60.6%
60.6%
60.6%
60.6%
23.3%
23.3%
23.3%
23.3%
23.3%
23.3%
16.1%
16.1%
16.1%
16.1%
16.1%
16.1%
$ Million
$41.4m
$15.9m
$11.0m
38
ECLIPX GROUP LIMITED ANNUAL REPORT 2017 4.
Review of operations (continued)
Australia Commercial
The Australia Commercial segment has contributed 60.6% (2016: 66.2%) to the Cash NPATA of the Group. The
segment has seen growth in new business writings of 6.0%. The segment has reported a net operating income of
$135.9m which is $23.5m favourable to the amount reported for 2016.
Continued focus on the customer, building on our customer relationships and competitive pricing has allowed
the business to experience growth in new business writings. The segment has been successful in increasing its
market share with large corporates.
The Group acquired Grays on 11 August 2017 and the financial performance of Grays has been included in the
Australia Commercial segment from this date. Grays contributed $14.0m to the growth in net operating income
before operating expenses after impairment charges and contributed $1.0m to Cash NPATA post allocation of
corporate overheads.
Operating expenses has increased predominantly as a result of the Grays acquisition, the operating costs of Grays
have been included in the segment from date of acquisition. Cash NPATA for the segment has grown by 13.1%
including Grays contribution or 10.4% excluding the contribution from Grays.
Eclipx Commercial has achieved a 4.8% growth in new business writings. Eclipx Commercial has allowed the
Group to expand the product offering on financing to include non-vehicle assets; this continues to provide
opportunities for cross selling finance and introducing new clients to the Group. On 25 September 2017 Eclipx
Commercial entered into a strategic partnership with the Medical Indemnity Protection Society to provide
financing solutions to its members.
Australia Consumer
This segment has contributed 23.3% (2016: 15.7%) to the Cash NPATA of the Group. The net operating income of
$79.6m (2016: $45.1m) which represents a growth of $34.5m against the prior period was predominantly as a result
of the full year contribution and growth in Right2Drive.
The investment in digital marketing has resulted in improved lead conversion and a lower acquisition cost. This
has contributed to an increase in new business writings of 17.1% across the consumer segment.
Right2Drive has grown the footprint in Australia and New Zealand to 30 branches and is the largest operator in
Australia and New Zealand. The business has grown the credit hire fleet to in excess of 2,000 vehicles.
New Zealand Commercial
The New Zealand Commercial segment has contributed 16.1% (2016: 18.1%) to the Cash NPATA of the Group. The
net operating income of $39.7m (2016:$38.8m) represents growth of 2.3% against the prior period. The growth in
net operating income is as a result of focusing on the profitability of new business writings and changes to the
funding structures. On 6 July 2017 Eclipx issued its first Asset Backed Securitisation in New Zealand which assisted
in lowering the cost of funds in New Zealand.
New Zealand continues to grow its strategic relationships so as to provide co-branded operating lease products
to new vehicle sales outlets. AutoSelect, the retail sales channel continues to outperform the wholesale disposal
options.
39
DIRECTORS’ REPORT Financial position
5.
The Group financial position as at 30 September 2017 is summarised below:
Summary of financial position
Cash and cash equivalents
Restricted cash and cash equivalents
Receivables and inventory
Leases
Intangibles
Other
Total assets
Borrowings
Trade and other liabilities
Other
Total liabilities
Net assets
Receivables and inventory
2017
$’m
59.1
136.2
163.7
1,496.4
806.6
16.9
2,678.9
1,610.4
123.6
81.6
1,815.6
863.3
2016
$’m
60.9
117.4
115.9
1,348.4
597.4
20.5
2,260.5
1,415.0
128.7
58.0
1,601.7
658.8
The growth in receivables and inventory is a result of the growth in Right2Drive and Onyx coupled with the
assets acquired with the acquisition of Onyx and Grays which equated to $14.6m.
Leases
Leases have increased against the prior period by $148.0m or 11.0%. This increase is attributable to the increased
business writings that have been experienced in Australia. The increased business writings and increased income
generating assets have created a base for profit in the coming years as the business derives annuity income on
these assets over the remaining contractual term. The provision for impairment held against operating leases for
2017 is $3.5m (2016: $5.1m).
Borrowings
Borrowings for 2017 include an amount of $246.2m (2016: $130.0m) relating to corporate debt. The additional
borrowings received from the corporate debt was utilised to fund the acquisition of Onyx, replace the lower
rated funding notes in the Eclipx warehouse funding structure in Australia and New Zealand, support the growth
in Right2Drive and fund the acquisition related costs associated with Grays.
The remaining borrowings balance of $1,364.2m (2016: $1,285.0m) relates to funding directly associated with
leases and inventory.
Cash flows
For the financial year ended 30 September 2017, the Group increased the total cash holdings including restricted
cash by $17.0m (2016: $13.7m).
The significant items impacting cash flow this year were:
An increase in finance and operating leases and inventory which were partially funded through cash;
The payment of dividends;
Additional investment in software, plant and equipment and fixture and fittings;
Expansion of Right2Drive; and
The acquisition of Grays and Onyx.
Funding
Eclipx looks to optimise the funding facilities that it has in place. Eclipx maintains committed funding facilities to
cater for the forecast business growth and as at 30 September 2017, Eclipx had undrawn debt facilities of $215.6m
(2016: $405.0m).
40
ECLIPX GROUP LIMITED ANNUAL REPORT 2017 For leasing finance facilities where Eclipx acts as the funder, funding will be provided by a combination of
warehouse and asset backed securitisation funding structures. Funders (major trading banks and institutional
investors) provide financing to a special purpose vehicle established by Eclipx which is used to fund the purchase
of assets that are to be leased to customers. These facilities are also known as revolving warehouse facilities
because they can be drawn and repaid on an ongoing basis up to an agreed limit subject to conditions. A group
of assets funded via a warehouse facility can be pooled together and refinanced by issuing securities (backed
by those assets) to investors in public wholesale capital markets (such as domestic and international banks and
institutional funds).
During the 2017 financial year Eclipx:
Rolled over warehouse facilities; and
Issued its first Asset Backed Securitisation in the New Zealand market.
Business strategic objectives
6.
Eclipx is focussed on improving business performance through a focus on enhancing and building on customer
relationships, enhancement and development of technology, growth in the consumer segment and acquisitions.
Strategic objective
Execution
To grow the market share in the
fleet business.
Continued annual growth in the fleet business.
Expanded into the state government and large corporate markets.
Diversify into adjacent markets.
Acquisitions of CarLoans, Right2Drive and GraysOnline which are
businesses that are growth opportunities and are complimentary to the
Eclipx fleet business.
Diversified earnings from a 100% traditional fleet business to a business
deriving approximately 16% from non-fleet activities while continuing
to grow the profit from the fleet activities.
Established the Eclipx Commercial business.
Standalone warehouses to fund equipment finance, consumers and
state government to optimise funding rates and capital structures.
Diversified funding sources to allow expansion.
The Group has issued its first asset backed securitization in the New
Zealand market.
Leverage the Group’s
funding expertise to improve
competitiveness.
Utilisation of efficiencies of scale
and cross selling.
Introduction of telematics devices to assist clients in fleet management
to reducetheir operating costs.
Cross selling of equipment finance, operating leases and novated leases
to clients.
The Group has leveraged the scale of the organisation to realise supply
chain improvements.
41
DIRECTORS’ REPORT Key risks
7.
The key risks facing Eclipx are those risks that will have an impact on the financial performance and the execution
of the strategy.
Key risk
Mitigating Factors
Eclipx may inaccurately set and
forecast vehicle residual values
and there may be unexpected
falls in used vehicle prices.
Eclipx may be exposed to
increased funding costs due
to changes in market conditions.
Eclipx performs a monthly portfolio revaluation using market
information on all assets where Eclipx is at risk on the residual value
and any impairment identified is immediately recognised.
Eclipx has diversified wholesale and retail disposal channels for vehicles
returning at the end of the lease, allowing them to minimise any losses
on vehicles where the residual value is above the market value.
Residual values are reviewed regularly by the pricing and risk team and
adjusted based on market and actual performance.
Eclipx has a diversified funding structure which includes multiple
funding parties.
Funding margins are negotiated and agreed on an annual basis.
Eclipx will have the ability to charge any margin increase onto new
business that is written in the year.
Eclipx is exposed to credit risk.
Eclipx has a dedicated credit team that assesses risk drawing on
Eclipx may be affected by
changes in fringe benefits tax
legislation in Australia.
Eclipx may be unable to access
funding on competitive terms.
nearly 30 years of operating experience, a wealth of proprietary data
(including customer credit performance, arrears management, loss
rates, and recovery rates), and external credit reporting data from local
credit bureaus.
Eclipx has diversified the consumer segment to include non-novated
services so as to provide alternative product offerings to consumers.
Eclipx has a diversified funding structure which includes multiple
funding parties.
Funding facilities are negotiated and agreed on an annual basis.
Eclipx mitigates the interest rate risk by hedging the portfolio and
funding is provided based on the contractual maturity of the lease.
8. Outlook
For the financial year ended 30 September 2017 Eclipx has been able to exceed the targets set in terms of its
financial performance, growth of assets under management or financed and growth in the customer and client
base.
For the 2018 financial year Eclipx is forecasting to achieve growth in Cash NPATA and this will be achieved by:
Growing the volume of new business writings in all segments;
Managing the competitive price pressures experienced in the market;
Consolidation of platforms and processes;
Realising efficiencies across the Group including the integration of Grays;
Investing in technology; and
Growing the presence of Eclipx in the market.
42
ECLIPX GROUP LIMITED ANNUAL REPORT 2017 Subsequent events
9.
On 7 November 2017 the Board declared a fully franked dividend of 7.75 cents per share.
Except for the matters disclosed above, no other matter or circumstance has occurred since the end of the
reporting period that may materially affect the Group’s operations, the results of those operations or the Group’s
state of affairs in future financial years.
10. Changes in state of affairs
During the financial year, there was no significant change in the state of affairs of the Group other than that
referred to in the financial statements or notes thereto.
Environmental factors
11.
Eclipx is not subject to any significant environmental regulation under Australian Commonwealth or State Law.
Eclipx recognises its obligations to its stakeholders (customers, shareholders, employees and the community) to
operate in a way that lowers the impact it and its customers has on the environment. During the course of the
year Eclipx has worked with funders and customers to support initiatives on improving their carbon footprint.
12. Dividends
Dividends paid during the financial year were as follows:
Fully franked final dividend for the year ended 30 September 2016 of 7.00 cents per
ordinary share paid on 20 January 2017.
Fully franked interim dividend for the year ended 30 September 2017 of 7.50 cents per
ordinary share paid on 7 July 2017.
2017
$’000
2016
$’000
18,514
15,613
19,897
38,411
16,287
31,900
On 7 November 2017, the Directors declared a fully franked final dividend for the year ended 30 September 2017
of 7.75 cents per ordinary share, to be paid on 19 January 2018 to eligible shareholders on the register as at 29
December 2017. This equates to a total estimated dividend of $24,334,526 based on the number of ordinary
shares on issue as at 30 September 2017. The financial effect of dividends declared after the reporting date are
not reflected in the 30 September 2016 financial statements and will be recognised in subsequent financial
reports. The Group will offer a Dividend Reinvestment Plan at a 1.5% discount with no participation limits.
Indemnification of Directors and Officers
13.
The Directors and Officers of Eclipx are indemnified against liabilities pursuant to agreements with Eclipx. Eclipx
has entered into insurance contracts with third party insurance providers, in accordance with normal commercial
practices. Under the terms of the insurance contracts, the nature of the liabilities insured against and the
amount of premiums paid are confidential.
43
DIRECTORS’ REPORT DIRECTORS’ REPORT
14. Non audit services
KPMG, the external auditors of Eclipx provided non-audit services during the financial year end 30 September
2017. The role of the external auditor is to provide an independent opinion that the financial reports are true
and fair and that they comply with applicable regulations. The Audit and Risk Committee have implemented
processes and procedures to review the independence of the external auditors and to ensure that they may
only provide services that are consistent with their role of external auditor.
Eclipx acquired non-audit services from KPMG where the utilisation of KPMG would be beneficial to Eclipx due
to the specific skills and knowledge the non-audit service team would have regarding the transaction and the
impact this could have on the Group. The following non-audit services were acquired from KPMG:
KPMG Transaction services assisted with the due diligence relating to Grays, Onyx and unsuccessful
acquisitions that did not proceed past due diligence;
KPMG Transaction services provided the Investigating Accountant’s report for inclusion in the Grays
Ecommerce Group Scheme Booklet; and
KPMG Debt Advisory services assisted with the debt restructuring of Eclipx in Australia and New Zealand to
address the funding impacts of APS 120 Securitisation.
Following review of the services provided by KPMG for the year ended 30 September 2017 the Directors are
satisfied that the provision of non-audit services is compatible with the general standard of independence for
auditors imposed by the Corporations Act 2001 in view of the nature and amount of the services provided, and
that all non-audit services were subject to the corporate governance procedures adopted by the Company.
The fees paid or payable to KPMG were as follows
Audit and assurance services
Audit and review of financial statements
Non-audit services
Transactional services including IPO
Debt restructuring
Total remuneration for non-audit services for KPMG
Total remuneration for KPMG
2017
$
2016
$
757,087
746,254
563,947
599,067
1,163,014
1,920,101
179,134
540,000
719,134
1,465,388
A copy of the auditor’s independence declaration is set out on page 45 on this financial report, and forms part
of the Directors Report.
15. Rounding of amounts
The company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191, issued by the Australian Securities and Investments Commission, relating to the “rounding off” of
amounts in the Directors’ Report and the Financial Report. Amounts, unless otherwise stated, have been rounded
off to the nearest whole number of thousands of dollars.
This Directors’ Report is signed on behalf of the Directors in accordance with the resolution of Directors made
pursuant to section 298(2) of the Corporations Act 2001.
Doc Klotz
Chief Executive Officer
Kerry Roxburgh
Chairman
Sydney
7 November 2017
44
ECLIPX GROUP LIMITED ANNUAL REPORT 2017 Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To the Directors of Eclipx Group Limited
I declare that, to the best of my knowledge and belief, in relation to the audit of Eclipx Group Limited
for the financial year ended 30 September 2017 there have been:
i.
ii.
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
KPM_INI_01
Dean Waters
Partner
Melbourne
7 November 2017
PAR_SIG_01
PAR_NAM_01
PAR_POS_01
PAR_DAT_01
PAR_CIT_01
KPMG, an Australian partnership and a member
firm of the KPMG network of independent member
firms affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity.
Liability limited by a scheme
approved under Professional
Standards Legislation.
45
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
LEAD AUDITOR’S INDEPENDENCE DECLARATION 30 September 2017
Dear Shareholders
On behalf of the Board, I am pleased to present Eclipx Group Limited’s (Group) FY2017 Remuneration Report.
Eclipx has achieved a growth of 18.2% in net profit after tax (NPAT) and 23.4% in Cash NPATA compared to
FY2016. The Group continues to deliver on its strategy to diversify into adjacent markets with the acquisition of
Grays eCommerce Group and Onyx. Right2Drive, acquired in 2016, has been successfully integrated into Eclipx
and has grown to 30 branches across Australia and New Zealand. The fleet and consumer businesses have seen
growth in new business writings over the last 12 months.
Total Shareholder Return (TSR) and Earnings Per Share growth (EPS) are critical metrics to consider when
evaluating the performance of the Group and our people. We are proud to have achieved a 95th percentile TSR
ranking and EPS compound growth of 13.39% in relation to the first tranche of the LTI awards granted in April
2015. This strong performance is reflected in the LTI Outcomes located on page 54.
Executive Key Management Personnel (Executive KMP) achieved or exceeded all key performance indicator
(KPI) targets, which is reflected in their short-term incentive awards. The FY2017 Performance Outcomes table
on page 51 outlines the achievements against each KPI. We have been particularly pleased to see significant
improvements in customer satisfaction and employee engagement during FY2017 and look forward to continuing
our focus on people following the appointment of Michelle Seddon as Human Resources Director for the Group.
I look forward to the opportunity to discuss the Remuneration Report with you at the Group’s Annual General
Meeting in February 2018.
Yours faithfully
Gail Pemberton
Chair of the Remuneration and Nomination Committee
7 November 2017
46
ECLIPX GROUP LIMITED ANNUAL REPORT 2017LETTER FROM REMUNERATION AND NOMINATION COMMITTEE (UNAUDITED) REMUNERATION REPORT (AUDITED)
The Remuneration and Nomination Committee (Committee) of the Board presents the Eclipx Group Limited
Remuneration Report (Report) for the year ended 30 September 2017 (FY2017).
The Report has been audited as required by section 308(3C) of the Corporations Act 2001 and is presented in the
following sections:
Introduction
1.
2. Remuneration governance
3. Link to strategy
4. Remuneration framework
5. Performance against key metrics
6. Non-executive directors fees
7. Service agreements
8. Executive remuneration disclosures
9. Equity instruments
10. Loans
11. Other transactions
Introduction
1.
The Report outlines the Group’s approach to remuneration, its link to the Group’s business strategy, and
how performance has been reflected in the remuneration outcomes for Key Management Personnel (KMP).
This report covers the KMP of the Group, who are the people responsible for determining and executing the
strategy. This Group is comprised of both Executive KMP (CEO/ MD, Deputy CEO/CFO and COO), and Non-
Executive Directors.
For the year ended 30 September 2017, the KMP were:
KMP
Position
Term as KMP
Non-Executive Directors
Kerry Roxburgh
Greg Ruddock
Gail Pemberton
Trevor Allen
Russell Shields
Executive Directors
Doc Klotz
Garry McLennan
Senior Executive
Jeff McLean
Independent Chairman
Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Full Year
Full Year
Full Year
Full Year
Full Year
Chief Executive Officer and Managing Director
Deputy Chief Executive Officer and Chief Financial Officer
Full Year
Full Year
Chief Operating Officer
Full Year
The FY2017 Remuneration Outcomes are summarised as follows:
Element
FY2017
Outcome
FIXED
REMUNERATION
SHORT TERM
INCENTIVES (STI)
There was no change to
Fixed Remuneration.
All KPIs were achieved or
exceeded. These results, combined
with the successful execution
of the GraysOnline acquisition,
generated a significant uplift in
NPATA, EPS and shareholder value,
resulting in 100% achievement of
the on-target STI awards.
LONG TERM
INCENTIVES (LTI)
Performance for the first tranche of the
FY2015 LTI was tested, with all targets
achieved or exceeded:
Eclipx’s TSR for the period (79.88%)
ranked the Group at the 95th percentile
Eclipx’s EPS growth (13.39%) exceeded
the compound annual growth target
(10%)
This resulted in 100% vesting of the first
tranche of the FY2015 LTI grant.
47
Remuneration governance
2.
The committee consists of three Independent Non-Executive Directors:
Ms Gail Pemberton (Committee Chair);
Mr Kerry Roxburgh; and
Mr Trevor Allen.
The following diagram demonstrates how the Board, Committee, Remuneration Advisors and Management
interact to set the remuneration structure and determine remuneration outcomes for the Group:
Board
The Board oversees the Group’s Remuneration Policy
Remuneration and Nomination Committee
The Committee is responsible for making recommendations to the Board in relation to the Remuneration
Policy. This may include recommendations in relation to:
Remuneration strategy;
The appointment, performance and remuneration of Non-Executive Directors, Executive Directors
and Senior Executives; and
The design and positioning of remuneration elements, including fixed and “at risk” pay, equity-based
incentive plans and other employee benefits programs.
Remuneration Advisors
The Committee has appointed Ernst & Young
(EY) as the external remuneration advisor to
the Group. EY provides independent advice in
relation to:
Market remuneration practices and trends;
Regulatory frameworks; and
The design, valuation and vesting of equity
awards.
No remuneration recommendations (as
defined by the Corporations Act 2001) were
requested or provided from EY or any other
advisors.
Management
The Chief Executive Officer and Managing
Director is responsible for making
recommendations to the Remuneration
and Nomination Committee in relation to
the remuneration of the Deputy CEO and
CFO and Senior Executives.
48
ECLIPX GROUP LIMITED ANNUAL REPORT 2017REMUNERATION REPORT (AUDITED) REMUNERATION REPORT (AUDITED)
Link to strategy
3.
The Group’s remuneration strategy supports rewarding performance in areas critical to the achievement of
Group strategy. This is achieved by attracting and retaining talented people who are motivated to achieve
challenging performance targets aligned with both the business strategy and the long-term interests of
shareholders. The following diagram illustrates the link between business strategy and remuneration outcomes:
Strategy
The Eclipx Strategy is to transform our business into a diversified financial services business that:
Consolidates our market leading position in our core fleet businesses;
Continues to diversify into finance adjacencies such as consumer finance and commercial
equipment finance;
Leverages our core capabilities to expand into market leading high growth adjacencies (such as
the medium term car rental and online auction businesses); and
Utilises our unique products, services and technology to deliver exceptional value to our
customers throughout the asset lifecycle.
This results in delivering exceptional value to shareholders.
Remuneration Strategy
The Eclipx Remuneration Strategy seeks to:
1. Deliver sustainable shareholder value by:
– Ensuring there is a significant ‘at-risk’ component of total remuneration;
– Assessing performance and the short term incentive (STI) plan outcomes against financial and
non-financial KPIs linked to the Eclipx Strategy; and
– Aligning long term incentive (LTI) plan performance hurdles with targeted shareholder returns.
2. Attract, retain and motivate talent by:
– Ensuring the remuneration strategy is simple, transparent and consistently applied;
– Offering a competitive total remuneration opportunity and ensuring remuneration is
differentiated based on capability and performance; and
– Incentivising key talent to deliver business performance that accelerates shareholder value
creation.
Link to Performance
Remuneration outcomes are linked to performance through:
– Setting fixed remuneration to reflect the individuals experience, capability and the
value they bring to the Group
– Requiring a significant portion of executive remuneration to be “at risk”;
– Applying a profitability gateway that must be achieved before any STI payment is
made to Executive KMP;
– Ensuring that KPIs focus on strategic business objectives designed to deliver
shareholder value;
– Applying challenging financial and non-financial metrics to measure short and long
term performance;
– Ensuring that LTI will only vest as a result of achieving earnings per share growth
and total shareholder return targets.
Fixed STI LTI
49
4.
Remuneration framework
Remuneration components and outcome
(i)
Fixed remuneration
What is included in
fixed remuneration?
Fixed remuneration comprises base salary, non-monetary benefits and
superannuation.
How is fixed
remuneration
determined?
Fixed remuneration, along with the other elements of Total Remuneration, for the
Executive KMP group is determined with reference to comparable roles in companies
which have a similar market capitalisation and similar growth aspirations to Eclipx.
Fixed remuneration for each individual is set based on their experience, capability and
the value they bring to the Group.
(ii)
Short term incentives
The following table outlines the major features of the FY2017 STI plan
What is the purpose
of the STI?
To motivate and reward participants for achieving specific measurable financial and
non-financial results which link pay to performance and hence contribute to the
achievement of the Eclipx strategy.
Who is eligible
to participate in the
STI plan?
Eligibility to participate in the STI plan is determined by the Board. All Executive KMP
participated in the FY2017 STI plan.
How is performance
evaluated?
The Committee is responsible for making recommendations to the Board regarding
the performance and ‘at risk’ remuneration of Executive KMP.
Is there a minimum
profit gateway?
At least 95% of the Group’s profitability target must be achieved before any STI
award will be payable to Executive KMP. Once this gateway is achieved the
percentage achievement of KPIs will determine individual STI outcomes.
What are the
FY2016 KPIs?
The FY2017 KPIs were set as follows:
60% weighting to the Group Financial KPI
25% weighting to People, Customer and Strategy KPIs
15% to individual KPIs designed to enhance the sustainability of the business and
drive results.
All KPIs are set to be challenging and represent a significant achievement.
Why were these
KPIs chosen?
The combination of KPIs was chosen because the Board believes that there needs
to be a balance between financial measures and those metrics which support the
Group’s long term strategy and determines future returns for shareholders.
What is the
maximum STI
opportunity?
Executive KMP may not currently receive more than their target STI amount.
How is the award
delivered?
Awards are paid in cash following the finalisation of the audited year-end financial
statements.
50
ECLIPX GROUP LIMITED ANNUAL REPORT 2017REMUNERATION REPORT (AUDITED) 4.
Remuneration framework (continued)
Remuneration components and outcome (continued)
(ii)
Short term incentives (continued)
FY2017 Performance Outcomes
The minimum profit gateway (95% of Cash NPATA) was achieved for FY2017, allowing for an individual’s STI award
to be calculated based on their achievement of certain KPIs.
The table below outlines the KPIs that applied to the Executive KMP in FY2016, and the level of achievement
against each respective KPI. 85% of KPIs are shared (i.e., Financial, People, Consumer and Strategy), with the
remaining 15% based on individual KPIs.
KPI
Weighting
Target
Level of achievement
Financial
60%
People
Customer
Strategy
Individual
10%
5%
10%
15%
Achievement of
Company Financial
Target (Cash NPATA)
Drive employee
engagement,
performance and
development
Drive Net Promoter
Score (NPS)
improvements
Execute strategic
M&A opportunities
KPIs related to
new partnerships,
acquisitions, service
optimisation, cross-
company initiatives
and talent deliverables
Exceeded target
$68.3 m NPATA was achieved
Exceeded target
Employee engagement improved by
6 points. All employees set SMART,
development and career goals.
Leadership Development Programs
have been introduced.
Exceeded target
+6 point improvement in the Group
NPS Score
Exceeded target
Successful acquisition and
integration of GraysOnline.
Achieved or Exceeded
Launch of various digital and
product initiatives.
Ongoing growth of Consumer
businesses and implementation of
operating efficiencies.
Exceeded
Achieved
Partially achieved
Did not achieve
FY2017 STI Outcomes
The following table outlines the STI awarded to each Executive KMP for FY2017:
Name
Executive Directors
Doc Klotz
Garry McLennan
Senior Executive
Jeff McLean
Target STI
opportunity
for FY2017
STI opportunity as %
of fixed remuneration
Minimum
Target
STI earned
as % of target
STI forfeited
as % of target
$850,000
$700,000
$212,500
0%
0%
0%
100%
100%
50%
100%
100%
100%
0%
0%
0%
51
4.
Remuneration framework (continued)
Remuneration components and outcome (continued)
(iii)
Long term incentives
The following table outlines the major features of the FY2017 LTI plan
What is the purpose
of the LTI plan?
Who is eligible to
participate in the
plan?
When was the grant
made?
The Group established an LTI plan to assist in the motivation, retention and reward of
key employees. The LTI plan is designed to align participants’ efforts with the interests
of shareholders by providing participants with exposure to Eclipx Group Limited
shares.
Eligibility to participate in the LTI plan is determined by the Board. All Executive KMP
participated in the FY2017 LTI plan.
The FY2017 LTI grant was made to Senior Executives on 4 November 2016. The
Executive Director grants were approved at the Annual General Meeting and granted
on 17 February 2017.
What performance
period applies?
Awards made under the LTI Plan are subject to a three year performance period
commencing on the first day of the applicable financial year (Performance Period).
The FY2017 LTI performance period commenced on 1 October 2016 and will conclude
on 30 September 2019.
How is the LTI
delivered?
The LTI is provided through a mix of Rights and Options (Award). The number of
Rights and Options granted in respect of each Award is determined by the Board.
The exercise price for the FY2017 Options was set at $3.60 which represented the
share price on 4 November 2016.
The Group currently uses the fair value methodology when calculating the number
of rights and options to grant each year. The mix of Rights and Options is
determined by the Board on an annual basis. For the FY2017 LTI grant, the ratio of
the number of Rights to Options granted to each Executive KMP was
approximately one Right to four Options.
Dividends are not payable on the Award.
The Award is subject to the following equally weighted performance hurdles:
a) Relative Total Shareholder Return (TSR) versus Comparator Group (50% of total
grant); and
b) Absolute Earnings per Share (EPS) Growth (50% of total grant).
Relative TSR component
Relative TSR was selected as a performance measure to directly align executive
remuneration with returns delivered to shareholders, relative to other ASX-listed
companies. TSR is a method of calculating the return shareholders would earn
if they held a notional number of shares over a period of time. TSR measures
the percentage growth in the company’s share price plus the value of dividends
received during the period, assuming that all of those dividends are re-invested into
new shares.
The Group’s relative TSR is measured against constituents of the ASX 200 (excluding
GICS Industry “Metals & Mining” companies) over the vesting period for each grant. The
comparator group was selected to ensure a robust and meaningful comparator group
size, given the small number of listed direct competitors in the Australian market.
Miraqle Metrics, a division of Orient Capital provides the Group with a periodic TSR
Calculation and Ranking Reports which ranks the TSR performance of the Group against
the constituents of the comparator group. The percentage of Awards comprising the
relative TSR component that vests, if any, will be based on the following:
Are dividends
paid during the
performance period?
What performance
hurdles need
to be met?
52
ECLIPX GROUP LIMITED ANNUAL REPORT 2017REMUNERATION REPORT (AUDITED) 4.
Remuneration framework (continued)
Remuneration components and outcome (continued)
(iii)
Long term incentives (continued)
What performance
hurdles need
to be met?
(continued)
Relative TSR percentile ranking
% of relative TSR hurdled Awards that
vest
Below the 51st percentile
At the 51st percentile
Nil
50%
Between the 51st and 75th percentile
Straight line pro rata vesting between
50% and 100%
At or above the 75th percentile
100%
Absolute EPS component
Absolute EPS was selected as a performance measure as EPS growth is a key strategic
objective for the Group. The EPS targets are set annually with consideration to
earnings and EPS forecasts, based on the following process.
• Prior to each grant Management will prepare three-year earnings forecasts and
calculate the three-year growth rate.
• Forecasts are then converted into a three-year Compound Annual Growth Rate
(CAGR) which will represent the growth required to achieve the EPS target by the
end of the performance period. The CAGR is referred to in setting the top of the
vesting range.
• These forecasts are provided to the Committee who will review the
appropriateness of the proposed targets and recommend the final targets to the
Board for approval.
For the FY2017 Award, the percentage of Awards subject to the Cash EPS hurdle that
vest, if any, will be determined based on the Group’s compound annual growth in Cash
EPS over the Performance Period by reference to the “base year” Cash EPS. FY16 will be
the base year for Awards granted under the FY17 LTI Offer. Accordingly, to determine
the growth in Cash EPS, the Cash EPS achieved in FY19 will be compared to Cash EPS
achieved in FY16, and the level of compound annual growth (stated as a percentage)
will determine the proportion of the Cash EPS hurdled Awards that vest.
The Group’s annual compound Cash
EPS growth rate
Below 7% compound annual growth
At 7% compound annual growth
Between 7% and 10% compound
annual growth
% of Cash EPS hurdled Awards that vest
Nil
50%
Straight line pro rata vesting between
50% and 100%
At or above 10% compound annual growth
100%
How are the
performance
awards valued?
The TSR hurdled Awards are valued via the Monte-Carlo simulation method.
The Cash EPS hurdle is valued via the Binominal tree method and has been chosen
as it provides evidence of the Group’s growth in earnings and is directly linked to
shareholder returns and the Group’s overall strategic objectives.
Is retesting
available for any
of the performance
hurdles?
If, as a result of exceptional circumstances, Awards subject to the 50% TSR
component only do not vest in full during the first Performance Period, they have
the opportunity for a single retest over an extended performance period ending 12
months after the completion of the first Performance Period.
Retesting was introduced upon listing in 2015 due to the volatility of the share price
and the market. The Board reviews the LTI Plan design annually. The Board
determined that retesting continued to be appropriate for the FY2017 grant due to
the ongoing volatility of the share market. If a retest was determined appropriate
for the FY2017 LTI this would only occur over a single extended performance period
which would commence on 1 October 2016 and end on 30 September 2020.
53
4.
Remuneration framework (continued)
Remuneration components and outcome (continued)
(iii)
Long term incentives (continued)
What happens if
an Executive KMP
ceases employment?
Where an Executive KMP ceases employment defined by the Group as resignation or
termination for cause, any unvested LTI Awards (or vested and unexercised Awards)
are forfeited, unless otherwise determined by the Board.
What happens if
there is a change
of control?
Where an Executive KMP ceases employment for any other reason, unvested Awards
will continue “on-foot” and will be tested at the end of the original vesting period.
Note that the Plan Rules provide the Board with discretion to determine that a
different treatment should apply at the time of cessation, if applicable.
A change of control occurs where, as a result of any event or transaction, a new
person or entity becomes entitled to a significant percentage of shares in the Group.
In the event of a change of control of the Group the following treatment will apply:
Upon a 50% change of control, all unvested Awards will vest in full;
Upon a 30% change of control, all unvested Awards will vest in full, unless, prior to
the 30% change of control occurring, the Board determines that the transaction
should not be treated as a charge of control for the purposes of the LTI plan.
LTI Outcomes
The table below summarises the performance and outcomes for the IPO FY2015 grant that vested during FY2017.
KMP
Plan
Award Type
Doc Klotz
FY2015
LTI
FY2015
LTI
Loan shares
Loan shares
Performance
Condition
Relative TSR
Component
Absolute EPS
Component
Number
of awards
granted
Performance
outcome
% LTI tranche
that vested
% LTI
tranche
forfeited
400,000
95th percentile
100%
400,000
13.39% compound
annual growth
100%
0%
0%
0%
0%
Garry
McLennan
FY2015
LTI
Loan shares
Relative TSR
Component
400,000
95th percentile
100%
FY2015
LTI
Loan Shares
Absolute EPS
Component
400,000
13.39% compound
annual growth
100%
Loan shares were last used for the IPO FY2015 grant and have not been offered from 2016 onwards.
54
ECLIPX GROUP LIMITED ANNUAL REPORT 2017REMUNERATION REPORT (AUDITED) 4.
Remuneration framework (continued)
Remuneration components and outcome (continued)
(iii)
Long term incentives (continued)
Executive KMP Remuneration Opportunity Mix
Each Executive KMP has a remuneration opportunity mix that consists of fixed and ‘at-risk’ remuneration. The ‘at-
risk’ remuneration opportunity comprises a STI opportunity and LTI grant.
The relative mix of the three remuneration components is determined by the Board on the recommendation of
the Committee.
The components are reviewed on an annual basis and quantum set to recognise the responsibilities of each
role. The remuneration opportunity mix that applied for FY2017 is set out below. This incorporates the FY2017 STI
Maximum Opportunity and the actual FY2017 LTI grant value.
Executive KMP Remuneration Opportunity Mix
Doc Klotz
31%
31%
38%
Garry McLennan
29%
29%
42%
Jeff McLean
39%
19%
42%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Fixed Remuneration
STI Maximum
LTI Grant Value
Performance against key metrics
5.
The following table provides information on FY2017 and historical performance against key metrics:
5
8
5
8
4
,
0
3
3
,
5
5
5
7
2
8
6
,
.
3
2
0
2
9
1
.
2
2
1
1
.
5
2
2015 2016 2017
Cash NPATA ($’000)
2015 2016 2017
Cash EPS (cents)
0
3
2
$
.
.
1
0
3
$
.
7
0
4
$
.
5
0
4
$
IPO
2015 2016 2017
Share price at the end
of the year
5
7
6
.
0
0
7
.
0
5
7
.
2016
2016
2017
Interim
Final
Interim
Dividend paid (cents)
55
6.
Non-executive director fees (continued)
Non-executive director fees
6.
Fees paid to Non-Executive Directors reflect the demands and responsibilities of each position. Fees are
benchmarked against an appropriate group of comparator companies and determined within the approved
aggregate Directors’ fee pool limit of $1.4 million per annum. Non-Executive Directors do not receive variable
remuneration and base fees are inclusive of mandatory superannuation contributions.
There were no changes to Non-Executive Director fees during FY2017 and the following fee structure was
applicable for the full year:
Base fees (per annum)
Chairman (K Roxburgh)
Other Non-Executive Directors
Additional fees (per annum)
Audit and Risk Committee – Chair (T Allen)
Audit and Risk Committee – Member (K Roxburgh, R Shields, G Ruddock)
Remuneration and Nomination Committee – Chair (G Pemberton)
Remuneration and Nomination Committee – Member (K Roxburgh, T Allen)
$250,000
$125,000
$25,000
$12,500
$20,000
$10,000
As required by Mr Ruddock’s conditions of employment with Ironbridge Capital Management Pty Ltd
(“Ironbridge”), Non-Executive Director fees for Mr Greg Ruddock were paid to Ironbridge from 1 October 2016 to 3
February 2017. On 3 February 2017 Ironbridge ceased to be a shareholder in the Group and as such from 4 February
2017 to 30 September 2017 Non-Executive Director Fees for Mr Ruddock were paid directly to Mr Ruddock.
Share Rights Contribution Plan
The Share Rights Contribution Plan was established to facilitate Non-Executive Director shareholdings in the
Company and improve the alignment of Non-Executive Director interests with those of shareholders.
Under the plan, Non-Executive Directors may elect to sacrifice, on a pre-tax basis, up to 50% of base Director
fees (excluding Committee fees) to acquire share rights. The share rights will not be subject to performance
conditions. However, if a participant ceases to hold office before their share rights convert to shares, all share
rights will lapse and the fee amount sacrificed under the Share Rights Contribution Plan will be returned to the
participant.
During FY2016, all Non-Executive Directors elected to sacrifice the maximum of 50% of base Director fees to
acquire share rights. Subject to the Company’s Securities Trading Policy, the salary sacrifice contributions were
converted into Share Rights on 20 December 2016 and subsequently converted to Ordinary Shares in Eclipx
Group Limited on 21 December 2016.
During FY2017, Mr Kerry Roxburgh elected to sacrifice the maximum of 50% of base Director fees to acquire share
rights and Mr Trevor Allen elected to sacrifice 25% of base Director fees to acquire share rights. Subject to the
Company’s Securities Trading Policy, the salary sacrifice contributions were converted into Share Rights on 28
December 2016 and subsequently converted to Ordinary Shares in Eclipx Group Limited on 17 February 2017.
56
ECLIPX GROUP LIMITED ANNUAL REPORT 2017REMUNERATION REPORT (AUDITED) Non-Executive Directors (Cash and Share based payments)
The following table shows details of fees received by the Non-Executive Directors:
Short term benefits
Salary and
fees – value
of share
rights
$ 1
Salary and
fees – cash
$
135,709
135,787
125,000
125,000
125,571
68,493
118,169
89,470
132,420
75,342
-
62,500
31,250
62,500
-
62,500
Post-
employment
benefits
Share based
payments
Non-
monetary
$
Super-
annuation
$ 1
Equity
settled
$ 4
Total
$
-
-
-
-
-
11,791
11,713
11,929
6,507
10,581
8,030
12,580
7,158
-
-
-
-
-
-
-
-
-
272,500
272,500
137,500
137,500
160,000
160,000
145,000
145,000
89,948
Kerry Roxburgh (Chairman)
FY2017
FY2016
Russell Shields
FY2017
FY2016
Trevor Allen
FY2017
FY2016
Gail Pemberton
FY2017
FY2016
Greg Ruddock2
FY2017
82,144
-
--
7,804
1 Salary sacrifice contributions made in respect of the Share Rights Contributions Plan are included as salary and fees. Superannuation contributions
do not apply to the salary sacrifice component.
2 Non-Executive Director fees for Mr Greg Ruddock were paid to Ironbridge Capital Management Pty Ltd and not to Mr Ruddock directly until 4
February 2017.
57
6.
Non-Executive driector fees (continued)
Service agreements
7.
The Group’s Executives are employed under ongoing common law contracts. The table below outlines the
employment and termination terms for each Executive.
Service
agreement
Employing
Entity
Notice
period
Serious
misconduct
Termination
entitlement
Restraint of
Trade
Fleet Holdings
(Australia)
Pty Ltd
Six months
by either
party
Immediate
termination
Chief Executive
Officer and
Managing
Director
Deputy Chief
Executive
Officer and Chief
Financial Officer
Chief Operating
Officer
FleetPartners
Pty Ltd
8.
Executive remuneration disclosures
Statutory Remuneration for Executive KMP
When termination
is initiated by the
Company, up to
six month’s fixed
remuneration may
be paid in lieu of
notice. Payments are
capped at 12 months’
remuneration per
relevant legislative
requirements
12 months
following expiry
of notice period
Six months
following expiry
of notice period
The following table shows details of the remuneration received by Executives during FY2016 and FY2017:
Short term benefits
Long term benefits
Cash
bonus
payable
in respect
of current
year
$
Movement
in annual
leave
provision
$ 2
Non-
monetary
$ 3
Super-
annuation
$
Share
based
payments
equity
settled
$
Total
$
Salary
and fees
$
Non-
monetary
$ 1
Executive Directors
Doc Klotz
FY2017
FY2016
Garry McLennan
FY2017
FY2016
Senior Executive
Jeff McLean
FY2017
FY2016
830,261
142,940
830,236
137,036
51,798
14,400
850,000
799,000
680,261
680,236
5,856
5,628
26,753
700,000
(36,631)
665,000
7,134
2,301
5,845
1,872
19,735
19,764
796,468
2,698,336
517,546
2,320,283
19,735
19,764
796,468
2,234,918
517,546
1,853,415
405,261
405,236
9,358
8,463
(3,281)
22,612
212,500
199,750
3,199
1,136
19,735
19,764
287,837
934,609
121,059
778,020
1 Amount represents car parking, medical insurance, flights home, visa application fees, sponsorship fees and fringe benefits tax.
2 Amount represents annual leave provisions. Negative movement indicates leave taken during the year exceeded leave accrued during the current
year. This is to be read in conjunction with Salary and Fees column.
3 Amount represents long service leave provisions.
58
ECLIPX GROUP LIMITED ANNUAL REPORT 2017REMUNERATION REPORT (AUDITED) 8.
Executive remuneration disclosures (continued)
Actual Remuneration Received
The following table shows details of the actual remuneration received by Executive KMP in FY2017:
Short term
benefits
Long term
benefits
Salary and fees
$ 1
Cash bonus paid
in current year
$
Superannuation
$
Equity that
vested during
20172
Total
$
Executive Directors
Doc Klotz
FY2017
FY2016
Garry McLennan
FY2017
FY2016
Senior Executive
Jeff McLean
FY2017
FY2016
830,261
862,930
680,261
707,161
799,000
850,000
665,000
700,000
405,261
418,750
199,750
200,000
19,735
19,765
19,735
19,765
19,735
19,765
1,288,000
-
1,312,000
-
-
-
2,936,996
1,732,695
2,676,996
1,426,926
624,746
638,515
1 Salary and superannuation are paid fortnightly and may vary depending on the number of pay cycles within any given year. In 2016, there was one
additional fortnightly pay.
2 Represents the value of loan shares granted in previous years that vested during the year, calculated as the number of loan shares that vested
multiplied by the closing market price of Eclipx shares on the vesting date, less the loan amount outstanding.
Details of outstanding awards
The maximum value of loan shares that may vest in future years that will be recognised as share-based payments
in future years is set out in the table below. The amount reported is the value of share-based payments
calculated in accordance with AASB2 Share-based payment over vesting period.
KMP
Plan
Award type
Performance
condition
Number
of awards
granted
Exercise
price
Doc Klotz
FY2015 LTI
Loan shares
TSR tranche 2
400,000
$2.30
Garry
McLennan
FY2015 LTI
Loan shares
TSR tranche 2
400,000
$2.30
EPS tranche 2
400,000
$2.30
EPS tranche 2
400,000
$2.30
Fair value
per award
(at grant
date)
$
Fair value
of award (at
grant date)
$
exercise date
0.63
0.63
0.63
0.63
252,000
252,000
252,000
252,000
Vesting
date/first
Expiry
date
21 April
2018
21 April
2020
21 April
2018
21 April
2020
21 April
2018
21 April
2020
21 April
2018
21 April
2020
59
8.
Executive remuneration disclosures (continued)
The minimum value of the outstanding Awards is nil if no performance hurdles are met. The maximum value of Awards
that may vest in future years that will be recognised as share-based payments in future years is set out in the table
below. The amount reported is the value of share-based payments calculated in accordance with AASB2 Share-based
payment over vesting period:
KMP
Plan
Award type
Performance
condition
Number
of awards
granted
Exercise
price
Fair value
per award
(at grant
date)
$
Fair value
of award
(at grant
date)
$
Vesting
date/first
exercise
date Expiry date
Doc Klotz
FY2017 LTI
Rights
TSR tranche
EPS tranche
71,500
71,500
Garry
McLennan
Options
TSR tranche
440,000
EPS tranche
440,000
FY2016 LTI
Rights
TSR tranche
EPS tranche
92,500
92,500
Options
TSR tranche
400,000
EPS tranche
400,000
FY2017 LTI
Rights
TSR tranche
EPS tranche
71,500
71,500
Options
TSR tranche
440,000
EPS tranche
440,000
FY2016 LTI
Rights
TSR tranche
EPS tranche
92,000
92,000
Options
TSR tranche
400,000
EPS tranche
400,000
Jeff
McLean
FY2017 LTI
Rights
TSR tranche
EPS tranche
Options
TSR tranche
EPS tranche
FY2016 LTI
Rights
TSR tranche
EPS tranche
39,000
39,000
237,500
237,500
70,000
70,000
Options
TSR tranche
350,000
EPS tranche
350,000
-
-
$3.60
$3.60
-
-
$3.06
$3.06
-
-
$3.60
$3.60
-
-
$3.06
$3.06
-
-
$3.60
$3.60
-
-
$3.06
$3.06
2.28
3.46
0.68
0.72
1.34
2.38
0.35
0.36
2.28
3.46
0.68
0.72
1.34
2.38
0.35
0.36
2.18
3.13
0.53
0.55
1.86
2.75
0.58
0.60
163,020 10 November
10 November
2019
2021
247,390
299,200
316,800
123,950 10 November
10 November
2018
2020
220,150
140,000
144,000
163,020 10 November
10 November
2019
2021
247,390
299,200
316,800
123,950 10 November
10 November
2018
2020
220,150
140,000
144,000
85,020 10 November
10 November
2019
2021
122,070
125,875
130,625
130,200 10 November
10 November
2018
2020
192,500
203,000
210,000
60
ECLIPX GROUP LIMITED ANNUAL REPORT 2017REMUNERATION REPORT (AUDITED) Equity instruments
9.
This table shows details of share and option holdings of KMP:
Held at 1 October 2016
Net Change
Held as at 30 September 2017
Shares
Rights Options2
Shares
Rights
Options
Shares
Rights
Options
Non-Executive Directors
Kerry Roxburgh
(Chairman)
Russell Shields
Trevor Allen
Gail Pemberton
133,695
69,347
69,347
79,347
Greg Ruddock
600,000
Executive Directors
Doc Klotz
Garry McLennan
3,802,954
3,821,4321
Senior Executive
–
–
–
–
–
200,000
1,305
–
-
135,000
200,000
157,430
– (100,000)
228,777
200,000
26,984
200,000
200,000
17,294
-
–
–
–
-
-
-
96,331
96,641
600,000
–
–
–
–
–
200,000
100,000
200,000
200,000
200,000
185,000
800,000
38,407
143,000
880,000
3,841,361
328,000 1,680,000
185,000
800,000
50,000
143,000
880,000 3,871,432
328,000 1,680,000
Jeff McLean
1,678,200
140,000
700,000 (145,000)
78,000
475,000 1,533,200
218,000
1,175,000
1. 43,478 of these shares are held by a close family member of the Executive KMP.
2. Options for Non-Executive Directors were purchased at IPO at an issue price of $0.24 per option. Each option is exercisable over one share with an
exercise price of 264.50 cents, immediately vested and exercisable, and with an expiry date of 21 April 2020.
Loans
10.
Loan shares issued under the Group’s LTI plans prior to FY2016 were funded by the Group. Recourse under the
loans is limited to the shares and proceeds of any sale of the shares. The loan is interest free and must be repaid
by the expiry date.
Mr Klotz, Mr McLennan and Mr McLean were offered loan shares under the share ownership plan prior to the IPO
that are not subject to vesting conditions. Details of these loans are as follows:
KMP
Doc Klotz
Garry McLennan
Jeff McLean
Opening loan
balance
$
Closing loan
balance
$
Number of vested
loan shares not
yet exercised
5,854,967
5,854,967
2,234,770
5,854,967
5,854,967
2,077,4031
3,539,118
3,539,118
1,416,931
Exercise
price
Loan expiry
date
$1.65
$1.65
$1.47
September 2021
September 2021
September 2019
1 Loan repayments apply to Mr McLean only and equate to dividends paid less tax applicable on dividends.
Mr Klotz and Mr McLennan were granted loan shares under the FY2015 LTI plan for which loans are still
outstanding and subject to vesting conditions or yet to be exercised. Details of these loans are as follows:
Opening loan
balance
$
Closing loan
balance
$ 1
Number
of unvested
loan shares
relating to
loan
Number
of vested
loan
shares
relating
to loan
Exercise
price
Loan expiry
date
3,551,960
3,525,670
3,411,840
800,000
800,000
3,353,300
800,000
800,000
$2.30
$2.30
April 2020
April 2020
KMP
Doc Klotz
Grant date
22 April 2015
Garry McLennan
22 April 2015
1. Loan repayments relate to dividends paid on the relevant shares less tax applicable on dividends. A higher tax rate applies to Mr Klotz as a result
of his United States citizenship and resulting tax obligations.
11. Other transactions
Transactions with other related parties are made on normal commercial terms and conditions. Refer to Note 6.3
related party for more information.
61
Consolidated
Revenue from continuing operations
Cost of revenue
Lease finance costs
Net operating income before operating expenses and impairment charges
Impairment losses on loans and receivables
Employee benefit expense
Depreciation, amortisation and impairment expense
Operating overheads
Total overheads
Operating finance costs
Profit before income tax
Income tax expense
Profit for the year
Other comprehensive income
Item that may be reclassified to profit or loss
Changes in the fair value of cash flow hedges
Exchange differences on translation of foreign operations
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Profit attributable to:
Owners of Eclipx Group Limited
Total comprehensive income for the year attributable to:
Owners of Eclipx Group Limited
Note
2.2
2.2
2.3
2.3
2.3
2.3
2.6(i)
2017
$’000
604,517
(276,973)
(67,993)
259,551
2016
$’000
504,837
(241,537)
(65,097)
198,203
(4,295)
(1,989)
(96,883)
(12,372)
(60,935)
(170,190)
(9,192)
75,874
(21,664)
54,210
(71,835)
(8,526)
(41,259)
(121,620)
(9,828)
64,766
(18,898)
45,868
7,225
(5,089)
2,136
(643)
5,290
4,647
56,346
50,515
54,210
45,868
56,346
50,515
Cents
Cents
Earnings per share
Basic earnings per share
Diluted earnings per share
2.4
2.4
20.31
19.79
18.88
18.55
The above Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the
accompanying notes.
62
ECLIPX GROUP LIMITED ANNUAL REPORT 2017STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Consolidated
ASSETS
Cash and cash equivalents
Restricted cash and cash equivalents
Trade receivables and other assets
Inventory
Finance leases
Operating leases reported as property, plant and equipment
Deferred tax assets
Property, plant and equipment
Intangibles
Total assets
LIABILITIES
Trade and other liabilities
Provisions
Derivative financial instruments
Other
Deferred tax liabilities Other
Borrowings
Total liabilities
Net Assets
EQUITY
Contributed equity
Reserves
Retained earnings
Total equity
Note
2017
$’000
2016
$’000
4.3
4.3
3.3
3.2
3.1
2.6(ii)
3.1
3.5
3.4
4.4
2.6(ii)
4.1
59,078
136,157
138,533
25,171
444,544
1,051,848
2,671
14,304
806,609
60,922
117,376
95,321
20,532
349,139
999,251
9,519
11,050
597,369
2,678,915
2,260,479
123,591
19,879
9,715
2,784
49,276
128,719
7,205
20,700
1,744
28,257
1,610,407
1,815,652
1,415,039
1,601,664
863,263
658,815
4.5
6.1
635,246
12,357
215,660
863,263
455,484
3,470
199,861
658,815
*The presentation format of the Consolidated Statement of Financial Position has been changed from a current/non-current basis to order of liquidity.
See Note 1 for additional disclosures.
The above Statement of Financial Position should be read in conjunction with the accompanying notes.
63
STATEMENT OF FINANCIAL POSITIONas at 30 September 2017 Attributable to owners of Eclipx Group Limited
Consolidated
Balance at 1 October 2015
Profit for the year
Cash flow hedges
Foreign currency translation
Total comprehensive income for the year
Issue of new shares and rights for acquisition of
Right2Drive Pty Ltd
Transactions with owners in their capacity
as owners:
Employee share schemes
Movement in treasury reserve
Issue of shares under the Dividend Reinvestment
Plan*
Dividends paid
Note
Contributed
equity
$’000
375,005
–
–
–
–
Reserves
$’000
(8,776)
–
(643)
5,290
4,647
73,819
3,708
5.1
4.5
4.8
-
-
6,660
-
2,860
1,031
-
–
Balance at 30 September 2016
455,484
3,470
Balance at 1 October 2016
Profit for the year
Cash flow hedges
Foreign currency translation
Total comprehensive income for the year
Issue of new shares and rights for acquisition
of Grays eCommerce Group Ltd
Transactions with owners in their capacity
as owners:
Employee share schemes
Movement in treasury reserve
Issue of shares under the Dividend
Reinvestment Plan**
Issue of shares on exercise of options
Dividends paid
455,484
-
-
-
–
3,470
-
7,225
(5,089)
2,136
2.5
170,906
-
5.1
4.5
4.5
4.8
–
–
8,591
265
–
4,462
2,289
–
–
–
Retained
earnings
$’000
185,893
45,868
–
–
45,868
–
-
-
-
(31,900)
199,861
199,861
54,210
-
-
54,210
–
–
–
–
–
Total
equity
$’000
552,122
45,868
(643)
5,290
50,515
77,527
2,860
1,031
6,660
(31,900)
658,815
658,815
54,210
7,225
(5,089)
56,346
170,906
4,462
2,289
8,591
265
(38,411)
(38,411)
Balance at 30 September 2017
635,246
12,357
215,660
863,263
* The issuance of shares under the Dividend Reinvestment Plan included the issuing of 1,084,412 shares on 29 January 2016 and 958,099 ordinary
shares on 30 June 2016.
** The issuance of shares under the Dividend Reinvestment Plan included the issuing of 816,908 shares on 20 January 2017 and 1,511,759 ordinary shares
on 7 July 2017.
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
64
ECLIPX GROUP LIMITED ANNUAL REPORT 2017STATEMENT OF CHANGES IN EQUITYfor the year ended 30 September 2017 Consolidated
Cash flows from operations
Receipts from customers
Payments to suppliers and employees
Income tax paid
Interest received
Interest paid
Net cash inflow from operating activities
Cash flows from investing activities
Purchase of items reported under operating leases
Purchase of items reported under finance leases
Purchase of property, plant and equipment and intangibles
Payment for acquisitions (net of cash acquired) (Note 2.5)
Proceeds from sales of items reported under operating leases
Note
2017
$’000
2016
$’000
872,124
744,193
(418,230)
(303,479)
453,894
440,714
(8,861)
2,199
(65,099)
382,133
(444,329)
(226,350)
(17,436)
(13,857)
172,136
(8,125)
2,561
(64,633)
370,517
(431,452)
(221,435)
(10,174)
(388)
159,487
6.6
3.1
Net cash outflow from investing activities
(529,836)
(503,962)
Cash flows from financing activities
Proceeds from borrowings
Repayments of borrowings
Dividends paid
Proceeds from settlement of long term incentive plans
Net cash inflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year,
net of overdraft
Exchange rate variations on New Zealand cash and cash equivalent
balances
Cash and cash equivalents at end of the year, net of overdraft
4.3
858,222
(664,443)
(29,820)
2,194
166,153
811,156
(640,721)
(25,240)
-
145,195
18,450
11,750
178,298
164,565
(1,513)
195,235
1,983
178,298
The above Statement of Cash Flows should be read in conjunction with the accompanying notes.
65
STATEMENT OF CASH FLOWSfor the year ended 30 September 2017 Statement of compliance
These general purpose Financial Statements of the consolidated results of Eclipx Group Limited (ACN 131 557 901)
have been prepared in accordance with the Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board and the Corporations Act 2001. The consolidated financial statements comply with
International Financial Reporting Standards (IFRS) adopted by the International Accounting Standards Board
(IASB).
The financial report was authorised for issue by the Board of Directors on 7 November 2017.
Basis of preparation
These Financial Statements have been prepared under the historical cost convention, except for the financial
assets and liabilities (including derivative instruments) at fair value through profit or loss and certain classes of
property, plant and equipment.
Rounding of amounts
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191, issued by the Australian Securities and Investments Commission, relating to the ‘rounding off’ of
amounts in the Financial Statements. Amounts in the Financial Statements have been rounded off in accordance
with that Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
Critical accounting estimates and assumptions
The preparation of Financial Statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group’s accounting policies.
Accounting estimates and judgements
Impairment of goodwill
Income taxes
Leased property
Note
Page
3.5
2.6
3.1
87
80
82
Significant accounting policies
The significant accounting policies adopted in the preparation of the financial report are set out below. Other
significant accounting policies are contained in the notes to the financial report to which they relate. The financial
statements are for the Group consisting of Eclipx Group Limited (Company) and its controlled entities.
(i)
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all controlled entities of Eclipx
Group Limited as at 30 September 2017 and the results of all controlled entities for the year ended. Eclipx
Group Limited and its controlled entities together are referred to in this financial report as the Group or the
consolidated entity.
The Company controls an entity if it is exposed, or has rights, to variable returns from its involvement with the
controlled entity and has the ability to affect those returns through its power over the controlled entity. All
controlled entities have a reporting date of 30 September.
Profit or loss and other comprehensive income of controlled entities acquired or disposed of during the year
are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable. In
preparing the financial report, all intercompany balances, transactions and unrealised profits arising within the
consolidated entity are eliminated in full.
(ii)
Foreign currency translation
Functional and presentation currency
The consolidated financial statements are presented in Australian dollars (AUD), which is also the functional
currency of the Company.
66
ECLIPX GROUP LIMITED ANNUAL REPORT 2017NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20171.0 Introduction to the report (ii) Foreign currency translation (continued)
Foreign currency transactions and balances
Foreign currency transactions are translated into the functional currency of the respective Group entity, using
the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and
losses resulting from the settlement of such transactions and from remeasurement of monetary items at year end
exchange rates are recognised in profit or loss.
Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using the
exchange rates at the date of transaction), except for non-monetary items measured at fair value which are
translated using the exchange rates at the date when fair value was determined.
Foreign operations
In the Group’s financial statements, all assets, liabilities and transactions of Group entities with a functional
currency other than AUD are translated into AUD upon consolidation. The functional currency of the entities in
the Group has remained unchanged during the reporting period.
On consolidation, assets and liabilities have been translated into AUD at the closing rate at the reporting date.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity have been treated as assets
and liabilities of the foreign entity and translated into AUD at the closing rate. Income and expenses have been
translated into AUD at the average rate over the reporting period. Exchange differences are charged or credited
to other comprehensive income and recognised in the currency translation reserve in equity. On disposal of a
foreign operation, the cumulative translation differences recognised in equity are reclassified to profit or loss and
recognised as part of the gain or loss on disposal.
Changes in accounting policies
Except for the changes below, the Group has consistently applied the accounting policies set out in the notes to
the financial statements to all periods presented in these consolidated financial statements.
(i) AASB 101 Presentation of Financial Statements
During 2017, management have elected to disclose the Statement of Financial Position in order of Liquidity
in accordance with paragraph 60 of Accounting Standards AASB 101 Presentation of Financial Statements.
Previously, the Statement of Financial Position was prepared on a current/non-current basis.
The Directors believe the presentation of the Statement of Financial Position in order of liquidity provides
information that is more reliable and is consistent with the manner in which the broader financial services
industry reports. As a consequence, the comparative period (2016) has been represented to be consistent with
the current year order of liquidity.
New and revised standards and interpretations adopted by the Group
The Group has adopted, for the first time, certain standards that made changes to a number of existing Australian
Accounting Standards and they have not had any material effect on the Group’s financial position or performance.
These standards have been set out below.
AASB 2015-2: Amendments to Australian Accounting Standards - Disclosure Initiative: Amendments to AASB 101
AASB 2014-4: Amendments to Australian Accounting Standards - Clarification of Acceptable Methods of
Depreciation and Amortisation
AASB 2015-1: Amendments to Australian Accounting Standards - Annual improvements to Australian Accounting
Standards 2012-2014 Cycle
67
NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20171.0 Introduction to the report (continued) New and revised standards and interpretations not yet adopted by the Group
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
mandatory, have not been early adopted by the Group for the annual reporting period ended 30 September 2017
and are set out below.
Application of
Standard
Application by
Group
1 January 2017
1 October 2017
1 January 2017
1 October 2017
1 January 2018
1 October 2018
Reference
Description
AASB 2016-1
AASB 2016-2
AASB 9
Financial
Instruments
Amendments to Australian Accounting Standards –
Recognition of Deferred Tax Assets for Unrealised Losses.
Amends AASB 112 Income Taxes to clarify when deductible
temporary differences arise, estimation of probable
future taxable profits and where an entity would assess a
deferred tax asset in combination with other deferred tax
assets of the same type.
Amendments to Australian Accounting Standards –
Disclosure
Initiative: Amendments to AASB 107 Statement of Cash
Flows to require entities preparing financial statements in
accordance with Tier 1 reporting requirements to provide
disclosures that enable users of financial statements
to evaluate changes in liabilities arising from financing
activities, including both changes arising from cash flows
and non-cash changes.
AASB 9 Financial Instruments will replace AASB 139
Financial Instruments: Recognition and Measurement.
The new standard results in changes to accounting
policies for financial assets and financial liabilities covering
classification and measurement, impairment and hedge
accounting. For impairments AASB 9 replaces the incurred
loss model of AASB 139 with an expected loss model,
resulting in an acceleration of impairment recognition.
Hedge accounting under AASB 9 is more closely aligned
with financial risk management, and may be applied to a
greater variety of hedging instruments and risks. AASB 9 is
effective for the Group for the annual periods beginning 1
October 2018. The Group is expected to apply the standard
retrospectively, recognising the cumulative effect of
initially applying the standard as an adjustment to the
opening balance of retained earnings. The implementation
of the new standard will result in an increase in the
impairments held against trade receivables. The Group is
in the process of assessing the impact on impairments as a
result of AASB 9 and is not yet able to quantify the impact
on its financial statements.
68
ECLIPX GROUP LIMITED ANNUAL REPORT 2017NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20171.0 Introduction to the report (continued) New and revised standards and interpretations not yet adopted by the Group
(continued)
Application of
Standard
Application by
Group
1 January 2018
1 October 2018
1 January 2019
1 October 2019
Reference
Description
AASB 15
Revenue
from
Contracts
with
Customers
Instruments
AASB 16
Leases
AASB 15 Revenue from Contracts with Customers
replaces all current guidance on revenue recognition
from contracts with customers. It requires identification
of performance obligations within a transaction and
an associated transaction price allocation to these
obligations. Revenue is recognised upon satisfaction
of these performance obligations, which occur when
control of the goods or services are transferred to the
customer. Revenue received for a contract that includes
a variable amount is subject to revised conditions for
recognition, whereby it must be highly probable that
no significant reversal of the variable component may
occur when the uncertainties around its measurement
are removed. The Group will first apply AASB 15 in the
financial year beginning 1 October 2018 and is expected
to apply the standard retrospectively, recognising the
cumulative effect of initially applying the standard as an
adjustment to the opening balance of retained earnings.
The adoption of AASB 15 by the Group will result in a
change in the recognition of certain revenue streams
from upfront to over time. The Group is in the process of
estimating the impact of these revenue streams on its
financial statements.
AASB 16 Leases replaces the current AASB 117 Leases
standard and sets out a comprehensive model for
identifying lease arrangements and the subsequent
measurement. A contract contains a lease if it conveys
the right to control the use of an identified asset for a
period of time. The majority of leases from the lessee
perspective within the scope of AASB 16 will require
the recognition of a ‘right-of-use’ asset and a related
lease liability, being the present value of future lease
payments. This will result in an increase in the recognised
assets and liabilities in the statement of financial position
as well as a change in expense recognition, with interest
and depreciation replacing operating lease expense.
Accounting for leases from the Group’s perspective as
lessor remains unchanged under AASB 16. AASB 16 is
effective for the Group for the annual periods beginning
1 October 2019 with the option to early adopt in the
financial year beginning 1 October 2018. The Group
is expected to apply the standard retrospectively,
recognising the cumulative effect of initially applying the
standard as an adjustment to the opening balance of
retained earnings. The adoption of AASB 16 by the Group
will result in the Group recognising assets and liabilities
for its operating leases over premises and equipment as
well as recognition of interest and depreciation replacing
operating lease expense.
69
NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20171.0 Introduction to the report (continued) This section provides the information that is most relevant to understanding the financial performance of the
Group during the financial year and, where relevant, the accounting policies applied and the critical judgements
and estimates made.
2.1 Segment information
2.2 Revenue
2.3 Expenses
2.4 Earnings per share
2.5 Business combinations
2.6 Taxation
2.1 Segment information
Identification of reportable segments
An operating segment is a component of an entity that engages in business activities from which it may earn
revenue and incur expenses, whose operating results are reviewed regularly by the Group’s Chief Operating
Decision Maker in order to effectively allocate Group resources and assess performance.
The Group has identified its operating segments based on the internal reports that are reviewed and used by the
Chief Operating Decision Makers to make strategic decisions. The Chief Operating Decision Makers are the Chief
Executive Officer and the Deputy Chief Executive Officer.
Three reportable segments have been identified: Australia Commercial, Australia Consumer and New Zealand
Commercial. The segments are based on the class of customer to which services are provided. Included in all
segments are services related to the provision of lease finance and fleet management to customers. Australia
Commercial includes auctioneering services and Australia Consumer includes the credit hire business.
In addition to statutory profit after tax, the business is assessed on a Cash Net Profit After Tax (Cash NPATA)
basis. Whilst a non-IFRS measure, Cash NPATA is defined as statutory profit after tax, adjusted for the after tax
effect of material one-off items that do not reflect the ongoing operations of the Group and amortisation of
intangible assets. Each of these operating segments is managed separately as each of these service lines requires
different resources as well as marketing approaches.
2017
Net operating income before operating
expenses and impairment charges
Depreciation and amortisation of
non-financial assets
Bad and doubtful debts
Operating expenses
Profit before tax, non-recurring costs
and interest
Holding company debt interest
Adjustments 1
Tax
Statutory net profit after tax
Intangibles amortisation including tax
impact
One-off costs including tax impact
Cash net profit after tax
Australia
Commercial
$’000
Australia
Consumer
$’000
Australia
Total
$’000
New Zealand
Commercial
$’000
Total
$’000
139,053
80,276
219,329
40,222
259,551
(2,504)
(3,095)
(69,616)
63,838
(5,791)
(16,458)
(11,707)
29,882
3,312
8,209
41,403
(1,415)
(705)
(53,931)
24,225
(1,563)
(2,973)
(5,932)
13,757
1,898
215
15,870
(3,919)
(3,800)
(449)
(495)
(123,547)
(22,244)
88,063
17,034
(4,368)
(4,295)
(145,791)
105,097
(9,192)
(20,031)
(21,664)
54,210
(1,838)
(600)
(4,025)
10,571
432
-
5,642
8,424
11,003
68,276
(7,354)
(19,431)
(17,639)
43,639
5,210
8,424
57,273
1 *Adjustments relate to acquisition related costs ($8,632,000), amortisation of intangible assets ($8,004,000) and restructuring costs ($3,395,000).
70
ECLIPX GROUP LIMITED ANNUAL REPORT 2017NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20172.0 Business result for the year 2.2 Segment information (continued)
2016
Net operating income before operating
expenses and impairment charges
Depreciation and amortisation of
non-financial assets
Bad and doubtful debts
Operating expenses
Profit before tax, non-recurring costs
and interest
Australia
Commercial
$’000
Australia
Consumer
$’000
Australia
Total
$’000
New Zealand
Commercial
$’000
Total
$’000
113,885
45,052
158,937
39,266
198,203
(1,663)
(1,531)
(568)
-
(2,231)
(1,531)
(336)
(458)
(2,567)
(1,989)
(54,870)
(30,874)
(85,744)
(22,289)
(108,033)
55,821
13,610
69,431
16,183
85,614
Holding company debt interest
Adjustment 1
Tax
Statutory net profit after tax
(3,828)
(7,606)
(13,099)
31,288
(1,216)
(5,450)
(2,083)
4,861
(5,044)
(13,056)
(15,182)
36,149
Intangibles amortisation including tax
impact
Restructure and acquisition costs including
tax impact
Cash net profit after tax
2,651
1,313
3,964
2,669
36,608
2,502
8,676
5,171
45,284
(2,295)
(453)
(3,716)
9,719
214
113
10,046
(7,339)
(13,509)
(18,898)
45,868
4,178
5,284
55,330
1 Adjustments relate to acquisition related costs, corporate debt restructuring costs, amortisation of intangibles and other restructuring costs.
2.2 Revenue
Recognition and measurement
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future
economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities
as described below. The Group bases its estimates on historical results, taking into consideration the type of
customer, the type of transaction and the specifics of each arrangement.
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue
are net of returns, trade allowances, rebates and amounts collected on behalf of third parties.
Finance income
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of
calculating the amortised cost of a financial asset and allocating the interest income over the relevant period
using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through
the expected life of the financial asset to the net carrying amount of the financial asset.
Operating lease rentals
Rental revenue arising from operating lease contracts is brought to account in the period it is earned. The
operating lease rentals are recognised on a straight line basis over the lease term. The instalments are classified
and presented in finance income and operating lease rentals.
Maintenance and management income
Maintenance income is recognised over the life of the contract with reference to the stage of completion.
Management income and management fees are recognised on a straight line basis over the term of the contract.
71
NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20172.0 Business result for the year (continued) 2.2 Revenue (continued)
Sale of goods
Sale of goods revenue is recognised when there is persuasive evidence that the goods have passed to the
consumer. Evidence is usually in the form of a delivery docket issued at the time of the delivery of goods to
the customer. The delivery of goods docket indicates that there has been a transfer of the risk and rewards of
ownership. Amounts disclosed as revenue are net of sales returns and trade discounts.
Auction commission
Commissions including handling, buyers’ premiums and valuation fees are recognised once the auction or
valuation has been completed.
Recovery of expenses
Recovery of expenses are recognised, to the extent that they are recoverable once the auction or valuation has
been completed.
Brokerage, commissions and advice services income
Income is recognised when the relevant services have been provided and a reliable estimate of the income can
be made.
End of lease income
End of lease income includes profits on the sale of vehicles from terminated lease contracts and other revenue
generated at the end of a lease.
Rental hire income
Rental hire income is brought to account in the period it is earned.
Cost of revenue
Cost of revenue comprises the cost associated with providing the service components of the lease instalments
and rental hire income. Cost of revenue is recognised for each reporting period by reference to the stage of
completion when the outcome of the services contracts can be estimated reliably. The stage of completion of
services contracts is based on the proportion that costs incurred to date bear to total estimated costs. Rental hire
expense includes amounts paid to third parties for vehicles under operating leases.
From continuing operations:
Finance income
Maintenance and management income
Sale of goods
Recovery of expenses
Auction commissions
Related products and services income
Operating lease rentals
Brokerage income
Sundry income
End of lease income
Rental hire income
Consolidated
2017
$’000
2016
$’000
104,880
102,501
3,938
2,952
13,127
33,387
204,196
18,051
8,916
36,093
76,476
101,642
97,484
-
-
-
30,011
200,461
16,695
7,672
31,876
18,996
Total revenue from continuing operations
604,517
504,837
72
ECLIPX GROUP LIMITED ANNUAL REPORT 2017NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20172.0 Business result for the year (continued) 2.2 Revenue (continued)
Cost of revenue:
Maintenance and management expense
Related products and services expense
Recoverable expenses
Changes in inventories of finished goods and work
Impairment on operating leased assets
Depreciation on operating leased assets
Rental hire expense
Total cost of revenue
Consolidated
2017
$’000
39,430
5,234
3,293
2,603
309
204,190
21,914
276,973
2016
$’000
41,629
4,797
-
-
(118)
189,413
5,816
241,537
73
NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20172.0 Business result for the year (continued) 2.3 Expenses
Recognition and measurement
Depreciation
Depreciation on assets is calculated using the straight line method to allocate their cost, net of their residual
values, over their estimated useful lives, as follows:
Motor vehicles 2-10 years;
Furniture and fittings 3-10 years; and
Plant and equipment 3-10 years.
Interest expense
Interest expense is recognised in the statement of comprehensive income using the effective interest method.
Amortisation
Costs incurred in developing products or systems and costs incurred in acquiring software and licenses that will
contribute to future period financial benefits through revenue generation and/or cost reduction are capitalised
to software and systems. Costs capitalised include external direct costs of materials and service and direct payroll
and payroll related costs of employees’ time spent on the project. Amortisation is calculated on a straight line
basis over periods generally ranging from three to five years for non-core costs, and seven to 10 years for core
system software costs.
Profit before income tax includes the following specific expenses:
Depreciation and amortisation
Plant and equipment - fixture and fittings
Amortisation - Intangible assets
Software
Total depreciation and amortisation expense
Lease finance costs
Interest and finance charges - Third parties
Hedge (gain)/loss
Total lease finance costs
Operating finance costs
Facility finance costs
Total operating finance costs
Operating overheads
Rental of premises
Technology costs
Restructuring costs
Acquisition related costs
Other overheads
Total operating overheads
74
Consolidated
2017
$’000
2016
$’000
4,368
4,830
3,174
12,372
68,424
(431)
67,993
9,192
9,192
10,199
9,956
3,395
5,517
31,868
60,935
2,567
3,711
2,248
8,526
64,633
464
65,097
9,828
9,828
6,668
7,301
1,760
3,301
22,229
41,259
ECLIPX GROUP LIMITED ANNUAL REPORT 2017NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20172.0 Business result for the year (continued) 2.4 Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company,
excluding any costs of servicing equity other than ordinary shares, by the weighted average number of fully paid
ordinary shares outstanding during the financial year and excluding treasury shares.
From continuing operations attributable to the ordinary equity holders of the company
Total basic earnings per share attributable to the ordinary equity holders of the company
Consolidated
2017
Cents
20.31
20.31
2016
Cents
18.88
18.88
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take
into account the after income tax effect of interest and other financing costs associated with dilutive potential
ordinary shares and the weighted average number of additional ordinary shares that would have been
outstanding assuming the conversion of all dilutive potential ordinary shares.
From continuing operations attributable to the ordinary equity holders of the company
Total diluted earnings per share attributable to the ordinary equity holders of the company
Reconciliation of earnings used in calculating earnings per share
Basic earnings per share
Profit attributable to the ordinary equity holders of the company used in calculating
basic earnings per share:
From continuing operations
Diluted earnings per share
Profit attributable to the ordinary equity holders of the company used in calculating
diluted earnings per share
From continuing operations
Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in calculating
basic earnings per share
Weighted average number of ordinary shares used as the denominator in calculating
diluted earnings per share
Consolidated
2017
Cents
19.79
19.79
2016
Cents
18.55
18.55
Consolidated
2017
$’000
2016
$’000
54,210
54,210
45,868
45,868
54,210
54,210
45,868
45,868
Consolidated
2017
Number
2016
Number
266,879,322
242,954,968
273,993,890
247,295,831
75
NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20172.0 Business result for the year (continued) 2.5 Business combinations
Recognition and measurement
The acquisition method of accounting is used to account for all business combinations, regardless of whether
equity instruments or other assets are acquired. The consideration transferred for the acquisition of a controlled
entity comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued
by the Group. The consideration transferred also includes the fair value of any asset or liability resulting from a
contingent consideration arrangement and the fair value of any pre-existing equity interest in the controlled
entity. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at
their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-
controlling interests in the acquiree either at fair value or at the non-controlling interests’ proportionate share of
the acquiree’s net identifiable assets.
The excess of the consideration transferred and the amount of any non-controlling interests in the acquiree over
the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the
fair value of the net identifiable assets of the controlled entity acquired and the measurement of all amounts has
been reviewed, the difference is recognised directly in profit or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are
discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental
borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier
under comparable terms and conditions.
Contingent and deferred consideration is classified either as equity or a financial liability. Amounts classified as a
financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.
Summary of acquisition – Grays eCommerce Group Limited
On 11 August 2017, the Group completed the 100% acquisition of Grays eCommerce Group Limited (Grays) that
consisted of the following entities: GEG No 1 Pty Ltd, Grays (Aust) holdings Pty Ltd, GEG No 3 Pty Ltd, GEG No
2 Pty Ltd, Grays (NSW) Pty Ltd, Graysonline (SA) Pty Ltd, Grays (VIC) Pty Ltd, GLC Fine Wines & Liquor, Grays
Auctions Ltd (NZ), Grays Eisdell Timms (WA) Pty Ltd, Grays Eisdell Timms (QLD) Pty Ltd, CM Pty Ltd and GEM
Trust. Grays’ principal activity is the provision of online auctioneering and valuation services in the B2B sector
together with online auctioneering and other online retail services in the B2C sector. Grays was acquired to
diversify earnings from an organisation that would integrate vertically and allow the Group to cross sell current
and future offerings.
The Group acquired all the share capital of Grays for an initial consideration of $170,906,000 settled by the issue
of 47,081,636 Eclipx ordinary shares to the existing shareholders of Grays.
Provisional goodwill of $161,561,000 is primarily related to growth expectations, monetisation of certain consumer
segments and a significant reduction in corporate overheads by leveraging Eclipx infrastructure. The goodwill that
arose from this business combination is not expected to be deductible for tax purposes.
The purchase price allocation is provisional and may be revised within 12 months of acquisition date.
Grays recorded revenue of $20,161,000 and a profit before tax of $1,724,000 for the period from 11 August 2017 to
30 September 2017. If Grays had been acquired on 1 October 2016, revenue of the Group for the year would have
increased by $117,046,000, and profit before tax for the year would have increased by $1,814,000.
Summary of acquisition – Onyx
On 18 November 2016, the Group acquired 100% of Anrace Pty Ltd trading as Onyx Car Rentals (Onyx). Onyx’s
principal activity is the provision of accident replacement vehicles and was acquired to accelerate the expansion
of our accident replacement business in the Victorian medium term vehicle rental market.
The Group acquired all the share capital of Onyx for consideration of $9,515,000 which was settled with available
cash (inclusive of a deferred amount of $515,000 held in escrow).
Provisional goodwill of $9,241,000 is primarily related to growth expectations, expected future profitability and
the expertise of Onyx’s workforce. The goodwill that arose from this business combination is not expected to be
deductible for tax purposes.
The purchase price allocation is provisional and may be revised within 12 months of acquisition date.
76
ECLIPX GROUP LIMITED ANNUAL REPORT 2017NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20172.0 Business result for the year (continued) 2.5 Summary of acquisition - Onyx (continued)
Onyx recorded revenue of $9,487,000 and a profit before tax of $2,376,000 for the period from 18 November 2016
to 30 September 2017. If Onyx had been acquired on 1 October 2016, revenue of the Group for the year would
have increased by $886,000 and profit before tax for the year would have increased by $392,000.
The following tables summarise the consideration paid, the fair values of assets acquired and liabilities assumed
at the acquisition date.
Purchase consideration
Cash paid
Deferred consideration
Issue of shares in Eclipx Group Limited
Total
Acquisition-related costs are not included as part of consideration transferred and
have been recognised as an expense in the consolidated statement of profit or loss
and other comprehensive income, as part of other expenses. The expense recognised
during the period is:
Fair values of assets acquired and liabilities assumed:
Cash and cash equivalents
Trade and other receivables
Inventory
Property, plant and equipment
Intangible asset - Brand name
Intangible asset - Software
Intangible asset - Customer relationships
Trade and other liabilities
Borrowings
Provisions
Deferred tax liabilities
Total identifiable net assets
Provisional goodwill on acquisition
Purchase consideration
Purchase consideration - cash (outflow)/inflow
Cash consideration
Deferred consideration1
Less: Balances acquired
(Outflow)/inflow of cash – Investing activities
Grays 2017
$’000
Onyx 2017
$’000
-
-
170,906
170,906
9,000
515
–
9,515
8,287
345
Grays
Provisional
Fair value
$’000
Onyx
Provisional
Fair value
$’000
(4,770)
11,242
2,107
831
18,931
11,630
2,865
(16,574)
(3,568)
(11,514)
(1,835)
9,345
161,561
170,906
428
1,216
-
4,540
1,167
-
-
(1,093)
(5,316)
(318)
(350)
274
9,241
9,515
Grays $’000
Onyx $’000
-
-
(4,770)
(4,770)
(9,000)
(515)
428
(9,087)
1 Deferred consideration on the Onyx acquisition represents amounts paid on acquisition being held in escrow which is expected to be released to
the vendor within the next 12 months.
77
NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20172.0 Business result for the year (continued) 2.6 Taxation
Recognition and measurement
Current tax
Current tax assets and liabilities are measured at the amount of income taxes payable or recoverable in respect
of the taxable profit or tax loss for the period. It is calculated using tax rates and tax laws that have been enacted
or substantively enacted by the reporting date.
Deferred tax
Deferred tax is accounted for in respect of temporary differences arising from differences between the carrying
amount of assets and liabilities and the corresponding tax base.
Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised
for all deductible temporary differences, unused tax losses and tax offsets, to the extent that it is probable that
sufficient future taxable profits will be available to utilise them.
However, deferred tax assets and liabilities are not recognised for:
taxable temporary differences that arise from initial recognition of an asset or liability in a transaction other
than a business combination that at the time of the transaction affects neither accounting nor taxable profit
or loss;
temporary differences between the carrying amount and tax bases of investments in controlled entities
where the parent entity is able to control the timing of the reversal of the temporary differences and
it is probable that the differences will not reverse in the foreseeable future; and
taxable temporary differences arising from goodwill.
Deferred tax assets and liabilities are measured at the tax rates and tax laws that are expected to apply the
year when the asset is utilised or liability is settled, based on tax rates and tax laws that have been enacted
or substantively enacted at the reporting date.
Income taxes relating to items recognised directly in equity are recognised directly in equity and not in the
statement of profit or loss and other comprehensive income.
Offsetting deferred tax balances
Deferred tax assets and liabilities are offset 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.
Tax consolidation legislation
Eclipx Group Limited and its wholly owned Australian controlled entities are part of a tax-consolidated group
under Australian taxation law. Eclipx Group Limited is the head entity in the tax-consolidated group. Entities
within the tax-consolidated group have entered into a tax funding arrangement and a tax sharing agreement
with the head entity. Under the terms of the tax funding arrangement, Eclipx Group Limited and each of the
entities in the tax-consolidated group have agreed to pay (or receive) a tax equivalent payment to (or from)
the head entity, based on the current tax liability or current tax asset of the entity.
78
ECLIPX GROUP LIMITED ANNUAL REPORT 2017NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20172.0 Business result for the year (continued) 2.6 Taxation (continued)
(i) Reconciliation of income tax expense
Profit from continuing operations before income tax expense
Prima facie tax rate of 30.0% (2015 - 30.0%)
New Zealand tax rate differentials
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
Share based payments not deductible
Contingent consideration
Finance income on convertible notes
Other
Income tax expense
Income tax expense comprises of:
Current tax
Deferred tax
Income tax expense
Effective tax rate
(ii) Movement of deferred tax
Consolidated
2.5 Business combinations (continued)
2017
$’000
75,874
22,762
(294)
331
(674)
(610)
149
2016
$’000
64,766
19,430
(327)
434
(210)
(489)
60
21,664
18,898
8,600
13,064
21,664
15,391
3,507
18,898
28.6%
29.2%
Opening
balance
$’000
2,157
179
Charged
to profit
or loss
$’000
(1,407)
(16)
Charged to
other com-
prehensive
income and
equity
$’000
Reclassi-
fication
between
current tax
payable
$’000
Acquired
through
business
combi-
nation
$’000
Closing
balance
$’000
Deferred
tax asset
$’000
Deferred
tax
liability
$’000
-
-
-
-
-
141
433
891
596
891
596
-
2,758
2,758
-
-
-
5,929
(930)
(2,241)
2017
Doubtful debt provision
Deferred revenue
Hedging assets and
liabilities
Accruals, employee
provisions and other
14,973
(8,066)
Leasing adjustments
(30,122)
(9,343)
Acquisition cost
Intangible assets
612
-
(12,466)
6,698
-
-
-
-
(5,506)
5,098
6,499
50,336
(43,837)
-
-
-
(39,465)
-
(39,465)
2,125
2,737
2,737
-
(4,871)
(9,982)
(20,621)
-
(20,621)
(18,738)
(13,064)
(2,241)
(10,377)
(2,185)
(46,605)
57,318
(103,923)
Set off DTL against DTA
Net tax assets/(liabilities)
(54,647)
54,647
(46,605)
2,671
(49,276)
79
NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20172.0 Business result for the year (continued) 2.6 Taxation (continued)
2016
Doubtful debt provision
Deferred revenue
Hedging assets and
liabilities
Accruals, employee
provisions and other
Opening
balance
$’000
Charged
to profit
or loss
$’000
Charged to
other com-
prehensive
income and
equity
$’000
Reclassifi-
cation
between
current
tax payable
$’000
Acquired
through
business
combi-
nation
$’000
775
139
746
40
–
–
5,547
114
268
–
–
–
636
–
–
Closing
balance
$’000
Deferred
tax asset
$’000
2,157
179
2,157
179
5,929
5,929
Deferred
tax
liability
$’000
–
–
–
29,241
(4,262)
Leasing adjustments
(37,703)
(2,862)
Acquisition cost
Intangible assets
–
(8,734)
612
2,105
–
–
–
–
(10,735)
(3,507)
268
Set off DTL against DTA
Net tax assets/(liabilities)
(iii) Franking credits
(10,443)
10,443
–
–
-
437
14,973
41,722
(26,749)
–
–
(30,122)
612
(5,837)
(12,466)
–
612
–
(30,122)
–
(12,466)
(4,764)
(18,738)
50,599
(69,337)
(41,080)
41,080
(18,738)
9,519
(28,257)
Franked dividends (Australia)
Franking credits available for subsequent financial years based on a tax rate of 30%
Consolidated
2017
$’000
(1,797)
(1,797)
2016
$’000
9,144
9,144
The decrease in franking credits in 2017 resulted from the utilisation of $16,462,000 franking credits for the
payment of dividends to shareholders, which was greater than Australian tax amounts paid during the year. Eclipx
paid a franking deficit tax of $1,800,000 on 31 October 2017 resulting in the franking credit balance no longer
being in deficit at that date. The franking deficit tax paid will be utilised against future required tax payments for
the Australian tax consolidated group.
Key estimate and judgement: Taxation
The Group is subject to income taxes in Australia and New Zealand. Significant judgement is required in
determining the provision for income taxes. There are many transactions and calculations undertaken during
the ordinary course of business for which the ultimate tax determination is uncertain. The Group recognises
liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where
the final tax outcome of these matters is different from the amounts that were initially recorded, such
differences will impact the current and deferred tax provisions in the period in which such determination is
made.
80
ECLIPX GROUP LIMITED ANNUAL REPORT 2017NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20172.0 Business result for the year (continued) 3.0 Operating assets and liabilities
This section provides information relating to the operating assets and liabilities of the Group.
3.1
Property, plant and equipment
Recognition and measurement
Property, plant and equipment
Property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure
that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any
gains/losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.
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. The carrying amount of the replaced part is derecognised. All other
repairs and maintenance are charged to the statement of profit or loss and comprehensive income during the
reporting period in which they are incurred.
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.
Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are
included in the statement of profit or loss and other comprehensive income.
Leased property
Leased property is stated at cost less accumulated depreciation and impairment. Cost includes initial direct costs
incurred in negotiating and arranging the operating lease contract. In the event that the settlement of all or part
of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future
to their present value at the date of acquisition.
Depreciation is brought to account on leased property. Depreciation is calculated on a straight line basis so as
to write off the net cost of each asset over its expected useful life (being the term of the related lease contract)
to its estimated residual value. The assets’ residual values and useful lives are revised, and adjusted if appropriate,
at the end of each reporting period.
Residual values are assessed for impairment and in the event of a shortfall, an impairment charge is recognised
in the current period.
Consolidated
2016
Opening net book amount
Acquired as part of business combinations
Additions
Transfers to inventory
Impairment charge
Depreciation charge
Foreign exchange variation
Closing net book amount
2016
Cost
Accumulated depreciation and impairment
Net book amount
Plant and
equipment
$’000
Fixture and
fittings
$’000
Motor
vehicles and
equipment
$’000
Total
$’000
4,328
512
1,717
-
-
(1,574)
14
4,997
13,093
(8,096)
4,997
5,637
139
1,240
-
-
(993)
30
6,053
919,811
929,776
-
431,452
(175,282)
118
651
434,409
(175,282)
118
(189,413)
(191,980)
12,565
999,251
12,609
1,010,301
10,188
(4,135)
6,053
1,487,900
1,511,181
(488,649)
(500,880)
999,251
1,010,301
81
NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20173.0 Operating assets and liabilities 3.0 Operating assets and liabilities (continued)
3.1
Property, plant and equipment (continued)
Consolidated
2017
Opening net book amount
Acquired as part of business combinations (note 2.5)
Additions
Transfers to inventory
Impairment charge
Depreciation charge
Foreign exchange variation
Closing net book amount
2017
Cost
Accumulated depreciation and impairment
Net book amount
Plant and
equipment
$’000
Fixture and
fittings
$’000
Motor
vehicles and
equipment
$’000
Total
$’000
4,997
4,684
1,326
-
-
(2,819)
(4)
8,184
6,053
999,251
1,010,301
687
947
-
-
-
5,371
444,329
446,602
(176,560)
(176,560)
(309)
(309)
(1,549)
(204,190)
(208,558)
(18)
(10,673)
(10,695)
6,120
1,051,848
1,066,152
19,011
(10,827)
8,184
11,747
(5,627)
1,741,071
1,771,829
(689,223)
(705,677)
6,120
1,051,848
1,066,152
Motor vehicle and equipment operating leases reported as property, plant
and equipment
Operating leases terminating within 12 months
Operating leases terminating after more than 12 months
Net book amount of property, plant and equipment
Plant and equipment
Fixture and fittings
Total property, plant and equipment
Consolidated
2017
$’000
2016
$’000
246,408
805,440
1,051,848
212,268
786,983
999,251
8,184
6,120
14,304
4,997
6,053
11,050
1,066,152
1,010,301
Key estimate and judgement: Leased property
The Group reviews the value of leased property at regular intervals. Determining the residual value and any
fair value adjustment on leased motor vehicles requires the use of assumptions, including the future value
of motor vehicles, economic and vehicle market conditions and dynamics.
82
ECLIPX GROUP LIMITED ANNUAL REPORT 2017 3.2 Finance leases
Recognition and measurement
Amounts due from lessees under finance leases are recorded as receivables. Finance lease receivables are initially
recognised at amounts equal to the present value of the minimum lease payments receivable plus the present
value of any guaranteed residual value expected to accrue at the end of the lease term. Finance lease payments
are allocated between interest revenue and reduction of the lease receivable over the term of the lease in order
to reflect a constant periodic rate of return on the net investment outstanding in respect of the lease.
Assets leased under finance leases are classified and presented as lease receivables.
Gross investment
Unearned income
Amount expected to be recovered within 12 months
Amount expected to be recovered after more than 12 months
Consolidated
2017
$’000
503,662
(59,118)
444,544
139,291
305,253
444,544
2016
$’000
399,406
(50,267)
349,139
104,645
244,494
349,139
The future minimum lease payments under non-cancellable leases are disclosed in note 4.6(c).
3.3 Trade receivables and other assets
Recognition and measurement
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method, less provision for impairment. Trade receivables are generally due for settlement within 30 days.
The amount of the impairment loss is recognised in profit or loss within impairment losses on loans and receivables.
When a trade receivable for which an impairment allowance had been recognised becomes uncollectable in
a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously
written off are credited against impairment losses on loans and receivables in profit or loss.
Collectability of trade receivables is disclosed as part of credit risk. Refer to note 4.2.
Net trade receivables
Trade receivables
Provision for doubtful debts
Sundry debtors
Prepayments
Other assets
Current tax receivable
Total trade receivables and other assets
Consolidated
2017
$’000
2016
$’000
98,708
(9,025)
89,683
24,635
21,329
34
2,852
138,533
57,335
(5,242)
52,093
17,005
17,720
34
8,469
95,321
A significant portion of the above amounts are expected to be recovered within 12 months. The net carrying
value of trade receivables is considered a reasonable approximation of fair value.
83
NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20173.0 Operating assets and liabilities (continued) NOTES TO THE FINANCIAL STATEMENT
for the year ended 30 September 2017
3.0 Operating assets and liabilities (continued)
3.3 Trade receivables and other assets (continued)
All of the Group’s trade receivables and other assets have been reviewed for indicators of impairment. Certain
trade receivables were found to be impaired and an allowance for credit losses of $9,025,357 (2016: $5,242,195)
has been recorded accordingly.
Movements in the provision for impairment of receivables are as follows:
At 1 October
Acquired as part of business combinations
Provision for doubtful debts recognised/(released) during the year
At 30 September
Consolidated
2017
$’000
5,242
1,693
2,090
9,025
2016
$’000
3,332
2,121
(211)
5,242
The creation and release of the provision for impaired receivables has been included in the statement of profit
or loss and other comprehensive income. Amounts charged to the allowance account are generally written off
when there is no expectation of recovering additional cash.
3.4 Trade and other liabilities
Recognition and measurement
These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year
which are unpaid.
Trade payables
Lease liability
Accrued expenses
Current tax liabilities
Maintenance income received in advance
Contingent and deferred considerationa
Other payables
Total trade and other liabilities
Amount expected to be settled within 12 months
Amount expected to be settled after more than 12 months
Total trade and other liabilities
Consolidated
2017
$’000
46,871
6,854
16,480
-
11,452
3,821
38,113
123,591
2016
$’000
40,010
7,927
17,102
16,834
11,793
6,145
28,908
128,719
Consolidated
2017
$’000
120,362
3,229
123,591
2016
$’000
123,509
5,210
128,719
a Under the terms of the sale agreement on the acquisition of FleetSmart during the year ended 30 September 2016, a further cash component
of consideration may be payable over a period of eight years of up to $5,233,000, based on achievement of certain performance conditions.
The contingent consideration was an estimate of the probable consideration that was to be paid as at the end of the reporting period. As at
30 September 2017, $2,512,000 of this balance remains as contingent. Deferred consideration of $793,000 (2016: $912,000) is recognised at 30
September 2017, payable over a remaining period of four years. The remaining balance of $515,500 relates to deferred consideration of the
acquisition of Onyx (refer to note 2.5) which is expected to be released to the vendor within the next 12 months.
84
ECLIPX GROUP LIMITED ANNUAL REPORT 2017 3.5 Intangibles
Recognition and measurement
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the net identifiable assets
of the acquired controlled entities at the date of acquisition. Goodwill on acquisitions of controlled entities
are included in intangible assets. Goodwill 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. Gains and losses on the disposal of an entity include the carrying amount
of goodwill relating to the entity sold.
Goodwill is allocated to a cash-generating unit (CGU) for the purpose of impairment testing. The allocation is
made to those CGU’s that are expected to benefit from the business combination in which the goodwill arose.
Customer relationships and brand names
Other intangible assets include customer relationships and brand names acquired as part of business
combinations and recognised separately from goodwill. Customer relationships are amortised over 10 years
on a straight line basis. Brand names are amortised over 20 years on a straight line basis.
Software
Software costs include only those costs directly attributable to the development phase and are only recognised
following completion of technical feasibility and where the Group has an intention and ability to use the asset.
Brand names
$’000
Customer
relationships
$’000
Software
$’000
Goodwill
$’000
Total
$’000
2016
Opening net book amount
4,132
25,848
8,792
466,012
504,784
Acquired as part of business combination
(note 2.5)
Additions
Amortisation charge
Foreign exchange variation
Closing net book amount
2016
Cost
Accumulated amortisation and impairment
Net book amount
14,373
34
(457)
3
18,085
18,751
(666)
18,085
5,083
-
(3,254)
256
27,933
34,681
(6,748)
27,933
-
62,828
11,487
(2,248)
46
18,077
28,377
(10,300)
18,077
-
-
4,434
533,274
533,274
-
533,274
82,284
11,521
(5,959)
4,739
597,369
615,083
(17,714)
597,369
85
NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20173.0 Operating assets and liabilities (continued) 3.5 Intangibles (continued)
Brand Names
$’000
Customer
relationships
$’000
Software
$’000
Goodwill
$’000
Total
$’000
2017
Opening net book amount
18,085
27,933
18,077
533,274
597,369
Acquired as part of business combination
(note 2.5)
Additions
Amortisation charge
Foreign exchange variation
Closing net book amount
2017
Cost
Accumulated amortisation and impairment
Net book amount
20,098
-
(1,172)
(2)
37,009
38,847
(1,838)
37,009
2,865
-
(3,658)
(19)
27,121
11,630
15,164
(3,174)
(220)
41,477
170,802
205,395
-
-
(3,074)
15,164
(8,004)
(3,315)
701,002
806,609
37,520
(10,399)
27,121
54,847
(13,370)
41,477
701,002
-
832,222
(25,613)
701,002
806,609
Impairment of assets
(i)
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested
annually for impairment, or more frequently if events or changes in circumstances indicate that they might be
impaired. Other assets are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the
asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair
value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash
inflows from other assets or groups of assets (CGUs). Non-financial assets other than goodwill that suffered
impairment are reviewed for possible reversal of the impairment at the end of each reporting period.
For the purpose of annual impairment testing, goodwill is allocated to the following CGUs, which are the units
expected to benefit from the synergies of the business combinations in which the goodwill arises.
Consolidated
2017
$’000
280,780
145,871
112,790
161,561
701,002
2016
$’000
280,780
136,567
115,927
-
533,274
Australia Commercial
Australia Consumer
New Zealand Commercial
Unallocated
Goodwill allocation at 30 September
86
ECLIPX GROUP LIMITED ANNUAL REPORT 2017 3.5 Intangibles (continued)
(i) Impairment of assets (continued)
Unallocated goodwill relates to goodwill on the acquisition of Grays which has not been allocated to a CGU at 30
September 2017 as the final assessment of the benefits to the relevant CGU’s was yet to be finalised.
Goodwill is reviewed on an annual basis or more frequently if events or changes in circumstances indicate a
potential impairment. There is no impairment recognised in 2017 (2016: $nil). The impairment test is applied
consistently for all CGUs that have goodwill allocated and is based on value in use. The value in use was
determined by discounting future cash flows generated from the businesses. Cash flows were projected based on
a three-year forecast prepared by management for the applicable CGU, with an extrapolation of expected cash
flows for the units’ remaining useful lives using the growth rates determined by management.
Long term growth rate: Australia 2.00% (2016: 2.50%)
Long term growth rate: New Zealand 2.00% (2016: 3.00%)
Discount rates (post tax) 11.00% (2016: 11.00%)
Growth rates are reviewed on an annual basis and adjusted based on forecasted expectations of the industry
performance, historical data and risks to these expectations. Long term growth rates are based on forecast
economic data from the Reserve Bank Australia and the Reserve Bank New Zealand.
The discount rate takes into consideration the capital and financing structure of the business going forward and
adjusted to factor in the changes to the cash flow model which considers the net cash flows and the distribution
of these cash flows to equity investors.
Key estimate and judgement: Impairment of assets
The Group tests annually whether goodwill has suffered any impairment. The recoverable amounts of
cash-generating units have been determined based on value-in-use calculations. These calculations require
the use of assumptions.
87
NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20173.0 Operating assets and liabilities (continued) This section provides information relating to the Group’s capital structure and its exposure to financial risk, how
they affect the Group’s financial position and performance, and how the risks are managed. The capital structure
of the Group consists of debt and equity.
4.1 Borrowings
Recognition and measurement
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 the statement of profit or loss and other comprehensive income over the period of the
borrowings using the effective interest method. Fair value approximates carrying value in relation to borrowings.
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 end of the reporting period.
The secured borrowings may be drawn at any time and is subject to annual review. Subject to the continuance of
satisfactory credit ratings, the borrowing facilities may be drawn at any time and have an average maturity of 16
months (2016: 12 months).
Bank loans
Notes payable
Borrowing costs
Chattel mortgages
Total secured borrowings
Amount expected to be settled within 12 months
Amount expected to be settled after more than 12 months
Total secured borrowings
Bank loans
Consolidated
2017
$’000
2016
$’000
254,768
130,000
1,359,442
1,290,242
(7,704)
3,901
(5,203)
-
1,610,407
1,415,039
337,410
1,272,997
1,610,407
303,713
1,111,326
1,415,039
Bank loans are secured by fixed and floating charge over the assets of the Company and all wholly owned
subsidiaries. The carrying amount of assets pledged as security was $237,085,000 (2016: $187,825,000).
Notes payable
Notes payable are secured by fixed and floating charge over the motor vehicles and equipment that are leased to
customers. The carrying amount of assets pledged as security was $1,632,549,000 (2016: $1,465,766,000).
Financing arrangements
The Group had access to the following undrawn borrowing facilities at the end of the reporting period:
Loan facilities used at reporting date
Loan facilities unused at reporting date
Total loan facilities available
Financial covenants
Consolidated
2017
$’000
1,618,111
215,621
2016
$’000
1,420,242
404,961
1,833,732
1,825,203
The Group has complied with financial covenants of its borrowing facilities during the 2017 and 2016 reporting
periods.
88
ECLIPX GROUP LIMITED ANNUAL REPORT 2017NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20174.0 Capital management 4.2 Financial risk management
This note explains the Group’s exposure to financial risks and how these risks could affect the Group’s future
financial performance. Current year profit or loss information has been included where relevant to add
further context.
Risk management
The Group’s capital management objectives are to:
ensure the Group’s ability to continue as a going concern; and
provide an adequate return to shareholders, by pricing products and services commensurately with the
level of risk.
The Group monitors capital on the basis of the carrying amount of equity plus its subordinated loan, less cash and
cash equivalents as presented on the face of the statement of financial position and cash flow hedges recognised
in other comprehensive income.
Management assesses the Group’s capital requirements in order to maintain an efficient overall financing
structure whilst avoiding excessive leverage. This takes into account the subordination levels of the Group’s
various classes of debt. The Group manages the capital structure and makes adjustments to it in the light
of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain
or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital
to shareholders, issue new shares, or sell assets to reduce debt.
Net debt
Total equity
Capital-to-overall financing ratio
Market risk
(i)
Foreign exchange risk
Consolidated
2017
$’000
1,415,172
863,263
61%
2016
$’000
1,236,741
658,815
53%
The Group operates internationally and is exposed to foreign exchange risk arising from various currency
exposures, primarily with respect to the New Zealand dollar.
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities
denominated in a currency that is not the entity’s functional currency and net investments in foreign operations.
The Group manages its exposures to the New Zealand dollar by ensuring that its assets and liabilities in New
Zealand are predominantly in New Zealand dollars.
For sensitivity measurement purposes, a +/- 10% (2016:10%) sensitivity in foreign exchange rates to the Australian
dollar has been selected as this is considered realistic given the current levels of exchange rates, the recent levels
of volatility and market expectations for future movements in exchange rates. Based on the financial instruments
held at 30 September 2017, had the Australian dollar weakened/strengthened by 10% (2016:10%) against the New
Zealand dollar compared to year-end rates, with other variables held constant, the consolidated entity’s after-tax
profits for the year and equity would have been $889,824 (2016: $1,159,074) higher/lower, as a result of exposure
to exchange rate fluctuations of foreign currency operations. All foreign exchange risk is due to the translation of
the New Zealand entities on consolidation.
89
NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20174.0 Capital management (continued) 4.2 Financial risk management (continued)
(ii)
Interest rate risk
2017
2016
Weighted
average
interest rate
%
3.838%
2.665%
Weighted
average
interest rate
%
4.011%
2.900%
Balance
$’000
1,610,407
(1,514,210)
96,197
Balance
$’000
1,415,039
(1,263,911)
151,128
Borrowings
Interest rate swaps (notional principal amount)
Unhedged variable debt
Interest rate sensitivity analysis
The sensitivity analysis below has been determined based on the exposure to interest rates at the reporting
date and assuming that the rate change occurs at the beginning of the financial year and is then held constant
throughout the reporting period.
The selected basis points (bps) increase or decrease represents the Group’s assessment of the possible change
in interest rates. A positive number indicates a before-tax increase in profit and equity and a negative number
indicates a before-tax decrease in profit and equity.
Sensitivities have been based on an increase in interest rates by 100 bps (2016: 100 bps) and a decrease by 100 bps
(2016: 100 bps) across the yield curve.
Interest rate risk
Carrying
amount
$’000
–100 bps
Profit/equity
$’000
+100 bps
Profit/equity
$’000
195,235
(1,952)
1,952
444,544
639,779
-
(1,952)
-
1,952
1,610,407
16,104
(16,104)
123,591
9,715
1,743,713
-
(15,142)
962
-
15,142
(962)
2017
Financial assets
Cash and cash equivalents
Finance leases
– Fixed interest rate
Total (decrease)/increase
Financial liabilities
Borrowings
– Floating rate
Trade and other liabilities
Derivatives used for hedging
Total increase/(decrease)
90
ECLIPX GROUP LIMITED ANNUAL REPORT 2017NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20174.0 Capital management (continued) 4.2 Financial risk management (continued)
2016
Financial assets
Cash and cash equivalents
Finance leases
– Fixed interest rate
Total (decrease)/increase
Financial liabilities
Borrowings
– Floating rate
Trade and other liabilities
Derivatives used for hedging
Total increase/(decrease)
Credit risk
Interest rate risk
Carrying
amount
$’000
–100 bps
Profit/equity
$’000
+100 bps
Profit/equity
$’000
178,298
(1,783)
1,783
349,139
527,437
–
(1,783)
–
1,783
1,415,039
14,150
(14,150)
128,719
20,700
1,564,458
-
(12,639)
1,511
-
12,639
(1,511)
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible
are written off by reducing the carrying amount directly. An allowance account (provision for impairment of
trade receivables) is used when there is objective evidence that the Group will not be able to collect all amounts
due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability
that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are
considered indicators that the trade receivable is impaired. For amounts due under leases, delinquency would
be for amounts more than 30 days overdue. Receivables due under credit hire have different indicators for
impairment due to the nature of the product. The amount of the impairment allowance is the difference between
the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original
effective interest rate.
The credit quality of financial assets is managed by the Group using internal indicators based on their current
probability of default. These indicators are compared to market benchmarks to enable wider comparisons.
Finance leases are secured against individual assets. The carrying values of the assets held as security
approximate the written down value of the finance leases.
Unimpaired past due loans and receivables
Past due under 30 days
Unimpaired past due loans and receivables
Past due 30 days to under 60 days
Past due 60 days to under 90 days
Past due 90 days and over
Total unimpaired past due loans and receivables
Total unimpaired loans and receivables
Unimpaired past due as a percentage of total unimpaired loans and receivables
Unimpaired past due 30 days and over as a percentage of total unimpaired loans
and receivables
Consolidated
2017
$’000
2016
$’000
10,137
7,887
5,593
4,715
23,696
44,141
89,683
49%
4,418
2,852
8,479
23,636
52,093
45%
38%
30%
91
NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20174.0 Capital management (continued) 4.2 Financial risk management (continued)
Trade receivables includes amounts associated with the credit hire business, Right2Drive and Onyx. The credit
hire business looks to recover costs from the party at fault or their insurance company. The ageing of credit hire
receivables would, by its nature, be materially higher than non-credit hire receivables. The period of ageing is not
the main characteristic that defines an impairment for credit hire.
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the
availability of funding through an adequate amount of committed credit facilities to meet obligations when
due and to close out market positions. To mitigate against liquidity risk, the Group maintains cash reserves and
committed undrawn credit facilities to meet anticipated funding requirements for new business. In addition, the
Group can redraw against its committed credit limits if the principal outstanding is reduced by the contractual
amortisation payments. Details of unused available loan facilities are set out in note 4.1.
Management monitors rolling forecasts of the Group’s liquidity reserve (comprising the undrawn borrowing
facilities) and cash and cash equivalents on the basis of expected cash flows. In addition, the Group’s liquidity
management policy involves projecting cash flows and considering the level of liquid assets necessary to meet
these, monitoring balance sheet liquidity ratios against internal and external regulatory requirements and
maintaining debt financing plans.
Amounts due to funders are repaid directly by rental and repayments received from the Group’s customers.
The table below analyses the Group’s contractual financial liabilities into relevant maturity groupings. The amounts
disclosed below are the contractual undiscounted cash flow. Balances due within 12 months equal their carrying
balances as the impact of discounting is not significant. For interest rate swaps, the cash flows have been
estimated using forward interest rates applicable at the end of the reporting period.
Contractual maturities
of financial liabilities
2017
Non-derivatives
Less than
1 year
$’000
Between
1 and 2 years
$’000
Between
2 and 5 years
$’000
Over
5 years
$’000
Total
contractual
cash flows
$’000
Carrying
amount
$’000
Trade and other liabilities
(120,362)
(940)
(1,951)
(338)
(123,591)
(123,591)
Borrowings
Provisions
(380,030)
(362,596)
(915,377)
(60,836)
(1,718,839)
(1,610,407)
(16,404)
(3,475)
-
-
(19,879)
(19,879)
Total non-derivatives
(516,796)
(367,011)
(917,328)
(61,174)
(1,862,309)
(1,753,877)
Derivatives
Interest rate swaps
Total derivatives
Contractual maturities
of financial liabilities
2016
Non-derivatives
Trade and other liabilities
Borrowings
Provisions
(8,765)
(8,765)
(1,798)
(1,798)
557
557
212
212
(9,794)
(9,794)
(9,715)
(9,715)
Less than
1 year
$’000
Between
1 and 2 years
$’000
Between
2 and 5 years
$’000
Over
5 years
$’000
Total
contractual
cash flows
$’000
Carrying
amount
$’000
(123,509)
(351,084)
(5,712)
(1,890)
(2,851)
(469)
(128,719)
(128,719)
(345,897)
(779,918)
(62,782)
(1,539,681)
(1,415,039)
(1,493)
-
-
(7,205)
(7,205)
Total non-derivatives
(480,305)
(349,280)
(782,769)
(63,251)
(1,675,605)
(1,550,963)
Derivatives
Interest rate swaps
Total derivatives
92
(10,123)
(10,123)
(6,563)
(6,563)
(4,512)
(4,512)
(255)
(255)
(21,453)
(21,453)
(20,700)
(20,700)
ECLIPX GROUP LIMITED ANNUAL REPORT 2017NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20174.0 Capital management (continued) 4.2 Financial risk management (continued)
Fair value risk
This section explains the judgements and estimates made in determining the fair values of the assets and
liabilities that are recognised and measured at fair value in the financial statements. To provide an indication
about the reliability of the inputs used in determining fair value, the Group has classified its assets and liabilities
into the three levels prescribed under the accounting standards. An explanation of each level follows underneath
the table.
2017
Financial liabilities
Derivatives used for hedging
Total financial liabilities
2016
Financial liabilities
Derivatives used for hedging
Total financial liabilities
Level 1
$’000
Level 2
$’000
Level 3
$’000
-
-
9,715
9,715
-
-
Total
$’000
9,715
9,715
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
-
-
20,700
20,700
-
-
20,700
20,700
There were no transfers between levels for recurring fair value measurements during the year.
A description of the level in the hierarchy is as follows:
Level 2: The fair value of assets and liabilities that are not traded in an active market (for example, over-the-counter
derivatives) is determined using valuation techniques which maximise the use of observable market data and rely
as little as possible on entity-specific estimates. If all significant inputs required to fair value an asset or liability
are observable, these are included in level 2.
Valuation techniques used to determine fair values
The fair values of interest rate swaps is calculated as the present value of the estimated future cash flows based
on observable yield curves. The fair value of interest rates swaps are included in level 2. No other assets or liabilities
held by the Group are measured at fair value.
4.3 Cash and cash equivalents
Recognition and measurement
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash
on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original
maturities of three months or less that are readily convertible to known amounts of cash and which are subject
to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings
in current liabilities in the statement of financial position. Restricted cash, that represents cash held by the entity
as required by funding arrangements, is disclosed separately on the statement of financial position and combined
for the purpose of presentation in the statement of cash flows.
93
NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20174.0 Capital management (continued) 4.3
Cash and cash equivalents (continued)
Unrestricted
Operating accounts
Restricted
Collections accounts
Liquidity reserve accounts
Vehicle servicing and maintenance reserve accounts
Cash at bank and on hand
Total as disclosed in the statement of cash flows
Consolidated
2017
$’000
2016
$’000
59,078
59,078
60,922
60,922
77,009
30,648
28,500
136,157
195,235
31,933
42,707
42,736
117,376
178,298
The weighted average interest rate received on cash and cash equivalents for the year was 0.76% (2016: 1.10%).
Liquidity reserve, maintenance reserve, vehicle servicing, collateral and customer collection accounts represent
cash held by the entity as required under the funding arrangements and are not available as free cash for the
purposes of operations of the Group until such time as the obligations of each trust are settled. Term deposit
accounts are also not available as free cash for the period of the deposit.
4.4 Derivative financial instruments
Recognition and measurement
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are
subsequently remeasured to their fair value. The method of recognising the resulting gain or loss depends
on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
The Group designates certain derivatives as hedges of highly probable forecast transactions (cash flow hedges).
The Group documents at the inception of the hedging transaction the relationship between hedging instruments
and hedged items, as well as its risk management objective and strategy for undertaking various hedge
transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis,
of whether the derivatives that are used in hedging transactions have been and will continue to be highly
effective in offsetting changes in fair values or cash flows of hedged items.
(i)
Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow
hedges is recognised in other comprehensive income and accumulated in reserves in equity. The gain or loss
relating to the ineffective portion is recognised immediately in profit or loss within other income or other expense.
Amounts accumulated in equity are recycled in the statement of profit or loss and other comprehensive income
in the periods when the hedged item will affect profit or loss (for instance, when the forecast sale that is hedged
takes place). However, when the forecast transaction that is hedged results in the recognition of a non-financial
asset (for example, inventory) or a non-financial liability, the gains and losses previously deferred in equity are
transferred from equity and included in the measurement of the initial cost or carrying amount of the asset
or liability.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for
hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised
when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer
expected to occur, the cumulative gain or loss that was reported in equity is immediately reclassified to profit
or loss.
94
ECLIPX GROUP LIMITED ANNUAL REPORT 2017NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20174.0 Capital management (continued) 4.4 Derivative financial instruments (continued)
(ii)
Derivatives that do not qualify for hedge accounting
Where a derivative instrument does not qualify for hedge accounting or hedge accounting has not been
adopted, changes in the fair value of these derivative instruments are recognised immediately in the statement
of profit or loss and other comprehensive income.
(iii)
Derivatives
Derivatives are only used for economic hedging purposes (to hedge interest rate risk) and not as trading
or speculative instruments. The Group has the following derivative financial instruments:
Interest rate swaps - cash flow hedges
Total derivative financial instrument liabilities
Amount expected to be settled within 12 months
Amount expected to be settled after more than 12 months
Total derivative financial instrument liabilities
4.5 Contributed equity
Recognition and measurement
Consolidated
2017
$’000
9,715
9,715
8,843
872
9,715
2016
$’000
20,700
20,700
10,643
10,057
20,700
Ordinary fully paid shares are classified as equity. Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net of tax, from the proceeds.
Share capital
Fully paid ordinary shares
Other equity securities
Treasury shares
Total issued equity
2017
Shares
2016
Shares
2017
$’000
2016
$’000
310,518,887
258,058,584
635,246
455,484
3,475,000
6,425,000
–
–
313,993,887
264,483,584
635,246
455,484
95
NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20174.0 Capital management (continued) 4.5 Contributed equity (continued)
Movements in ordinary share capital
Date
1 October 2015
29 January 2016
19 May 2016
30 June 2016
Details
Opening balance
Issue of shares under the Dividend Reinvestment Plan - 2015
final dividend
Issue of new shares for acquisition of Right2Drive Pty Ltd
Issue of shares under the Dividend Reinvestment Plan - 2016
interim dividend
30 September 2016
Closing balance
20 January 2017
22 April 2017
7 July 2017
11 August 2017
Issue of shares under the Dividend Reinvestment Plan
– 2016 final dividend
Loan shares vested
Issue of shares under the Dividend Reinvestment Plan
– 2017 interim dividend
Issue of new shares for acquisition of Grays eCommerce
Group
1 September 2017
Issue of shares on exercise of options
30 September 2017
Closing balance
Number of
shares
$’000
233,781,298
375,005
1,084,412
22,234,775
3,381
73,819
958,099
3,279
258,058,584
455,484
816,908
2,950,000
3,129
-
1,511,759
5,462
47,081,636
170,906
100,000
265
310,518,887
635,246
Treasury shares
Treasury shares are shares in Eclipx Group Limited that are held by Eclipx Group Limited Employee Share Trust
or by staff under loans. These shares are issued under the Eclipx Group Limited Employee Share scheme and the
executive LTI plan. The shares that have not been settled in cash are funded with a loan and are in substance an
option and are reflected with zero value until such time that they are settled in cash so as to exercise the option.
Details
Opening balance
Loan shares vested
Closing balance
Number of
shares 2017
Number of
shares 2016
6,425,000
6,425,000
(2,950,000)
-
3,475,000
6,425,000
4.6 Commitments
a.
Telecommunication commitments
Telecommunication commitments contracted for at the end of the reporting period but not recognised
as liabilities, are as follows:
Consolidated
2017
$’000
2,673
2016
$’000
5,686
Telecommunication commitments
96
ECLIPX GROUP LIMITED ANNUAL REPORT 2017NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20174.0 Capital management (continued) 4.6 Commitments (continued)
b.
i.
Lease commitments: Group as lessee
Operating leases
The Group leases motor vehicles and commercial premises under non-cancellable operating leases expiring
within the next five years. The leases have varying terms, escalation clauses and renewal rights. On renewal,
the terms of the leases are renegotiated.
Commitments in relation to leases contracted for at the end of each reporting period but not recognised
as liabilities, are as follows:
Within one year
Later than one year but not later than five years
Later than five years
Consolidated
2017
$’000
17,548
23,493
8,109
49,150
2016
$’000
12,000
20,167
-
32,167
ii.
Finance leases
The Group leases fixed assets which lease expires within the next five years.
Commitments in relation to leases contracted for at the end of each reporting period and recognised as liabilities,
are as follows:
Within one year
Later than one year but not later than five years
c.
i.
Lease commitments: Group as lessor
Finance leases
Consolidated
2017
$’000
920
1,864
2,784
2016
$’000
607
1,137
1,744
Future minimum lease payments due to the Group under non-cancellable leases, are as follows:
Commitments in relation to finance leases are receivable as follows:
Within one year
Later than one year but not later than five years
Later than five years
Consolidated
2017
$’000
2016
$’000
162,525
340,364
773
123,624
275,660
122
503,662
399,406
97
NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20174.0 Capital management (continued) 4.6 Commitments (continued)
Lease commitments: Group as lessor (continued)
Operating leases
c.
ii.
Minimum lease payments receivable on leases of motor vehicles are as follows:
Minimum lease payments under non-cancellable operating leases of motor vehicles
notrecognised in financial statements are receivable as follows:
Within one year
Later than one year but not later than five years
Later than five years
Consolidated
2017
$’000
2016
$’000
299,323
354,554
22,826
676,703
314,676
360,229
25,080
699,985
d.
Contractual commitments for the acquisition of property, plant or equipment
The Group had contractual commitments for the acquisition of property, plant or equipment totalling $50,739,551
(2016: $62,535,510). These commitments are not recognised as liabilities as the relevant assets have not yet been
received.
4.7 Contingent liabilities
On the acquisition of Grays eCommerce Group Limited, the Group acquired a bank guarantee facility. As at
30 September 2017, $3,188,000 of the bank guarantee facility has been utilised with $1,812,000 of this facility
remaining unused.
Bank guarantees
Consolidated
2017
$’000
3,188
2016
$’000
–
During the course of its business, Grays Group may issue to its customers guarantees relating to the future
financial outcomes of auction sales events. Internal controls are in place to ensure that there are no potential
future losses arising from these guarantees. At the end of the financial year, the maximium exposure is
$5,000,000 of guarantee commitments of this nature on issue, all of which are expected to be settled within 12
months from balance date. The Group does not expect that any of these guarantees will result in losses.
98
ECLIPX GROUP LIMITED ANNUAL REPORT 2017NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20174.0 Capital management (continued) 4.8 Dividends
Recognition and measurement
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the
discretion of the entity, before or at the end of the financial year but not distributed at balance date.
Details of dividends paid and proposed during the financial year are as follows:
Consolidated
2017
$’000
2016
$’000
Final dividends paid
2016 final dividend paid on January 2017: 7.00 cents per ordinary share franked to 100%
(2016: 6.50 cents)
18,514
15,613
Interim dividends paid
2017 interim dividends paid on 7 July 2017: 7.50 cents per ordinary share franked to 100%
(2016: 6.75 cents)
Total dividends paid
19,897
38,411
16,287
31,900
Final dividends proposed but not recognised at year end
2017: 7.75 cents (2016: 7.00 cents) per ordinary share franked to 100%
24,335
18,514
On 07 November 2017, the Directors declared a fully franked final dividend for the year ended 30 September 2017
of 7.75 cents per ordinary shares, to be paid on 19 January 2018 to eligible shareholders on the register as at 29
December 2017. This equates to a total estimated distribution of $24,334,526 based on the number of ordinary
shares on issues as at 30 September 2017. The final 2017 dividend has not been declared at the reporting date and
therefore is not reflected in the financial statements.
99
NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20174.0 Capital management (continued) Recognition and measurement
Long service leave
The liability for long service leave is recognised in the provision for employee benefits and measured as the
present value of expected future payments to be made in respect of services provided by employees up to the
end of the reporting period using the projected unit credit method. Consideration is given to expected future
wage and salary levels, experience of employee departures and periods of service. Expected future payments
are discounted using market yields at the end of the reporting period on national government bonds with terms
to maturity and currency that match, as closely as possible, the estimated future cash outflows.
Retirement benefit obligations
The Group makes payments to employees’ superannuation funds in line with the relevant superannuation
legislation. Contributions made are recognised as expenses when they arise.
Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or when
an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination
benefits when it is demonstrably committed to either terminating the employment of current employees
according to a detailed formal plan without possibility of withdrawal or to providing termination benefits
as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after
the end of the reporting period are discounted to present value.
Bonus plans
The Group recognises a liability and an expense for bonuses on a formula that takes into consideration the profit
attributable to the Company’s shareholders after certain adjustments. The Group recognises a provision where
contractually obliged or where there is a past practice that has created a constructive obligation.
5.1 Share based payments
Share based payments
Share based compensation benefits are provided to employees via the Eclipx Group LTI plan.
The fair value of options granted under the Eclipx Group LTI plan is recognised as an expense by the employing
entity that receives the employee’s services. with a corresponding increase in equity. The fair value is measured
at grant date and recognised over the period during, which the employees become unconditionally entitled
to the options (vesting period).
The fair value at grant date is independently determined using a Binomial tree option pricing model and
Monte-Carlo simulation pricing model that takes into account the exercise price, the term of the option, the
impact of dilution, the share price at grant date and expected price volatility of the underlying share, the
expected dividend yield and the risk free interest rate for the term of the option. The fair value of the options
granted is then adjusted to reflect market vesting conditions, but excludes the impact of any non-market vesting
conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in the
assumptions about the number of options that are expected to become exercisable. At the end of each reporting
period, the Group revises its estimate of the number of options that are expected to become exercisable.
The employee benefit expense recognised each period takes into account the most recent estimate. The impact
of the revision to original estimates, if any, is recognised in the statement of profit or loss and other
comprehensive income, with a corresponding adjustment to equity.
In the event a share scheme is cancelled, the remaining unexpensed fair value of the original grant for those
options still vesting at the date of cancellation is taken as a charge to the statement of profit or loss and other
comprehensive income.
100
ECLIPX GROUP LIMITED ANNUAL REPORT 2017NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20175.0 Employee remuneration and benefits NOTES TO THE FINANCIAL STATEMENT
for the year ended 30 September 2017
5.0 Employee remuneration and benefits (continued)
5.1 Share based payments (continued)
Loan shares
Eclipx Group Limited issued shares to senior management employees of the Group with consideration satisfied
by loans to the employees granted by Eclipx Group Limited. These arrangements are considered to be “in
substance options” and treated as share-based payments. Whilst the above awards have been made by Eclipx
Group Limited, the employees provide services to other entities within the Group, and therefore the associated
expenses are borne by those entities that receive the relevant employees’ services.
Options
Eclipx Group Limited issued options to key employees of the Group. Whilst the above awards have been made
by Eclipx Group Limited, the employees provide services to other entities within the Group, and therefore the
associated expenses are borne by those entities that receive the relevant employees’ services. Options do not
carry a right to receive any dividends. If options vest and are exercised to receive shares, these shares will be
eligible to receive any dividends.
Rights
Eclipx Group Limited issued rights to key employees of the Group. Whilst the above awards have been made
by Eclipx Group Limited, the employees provide services to other entities within the Group, and therefore the
associated expenses are borne by those entities that receive the relevant employees’ services. Rights do not carry
a right to receive any dividends. If rights vest and are exercised to receive shares, these shares will be eligible
to receive any dividends.
The loan shares, options and rights are subject to the same performance hurdles. Refer to remuneration report for
details of these performance hurdles.
(i)
Long Term Incentive Plan
For the year ended 30 September 2017, the following awards were provided under the following employee share
ownership plans:
Options and rights
Each award is subject to testing against certain total shareholder return (TSR) and earnings per share (EPS)
conditions on the third year anniversary of the grant.
101
5.1 Share based payments (continued)
Set out below are summaries of options granted under each plan:
Loan shares
Expected
vesting
date
Exercise
price
Weighted
average
exercise
price
Balance
at start of
the year
Number
Granted
during
the year
Number
Forfeited
during
the year
Number
Vested
and
exercised
during
the year
Number
Unvested
balance
at end of
the year
Number
Vested
option not
exercised
Number
–
–
(577,803)
(168,644)
(50,000)
–
–
787,500
129,744
– 10,612,972
–
281,356
– 2,900,000
– 2,950,000
–
–
–
–
–
–
–
–
–
787,500
129,744
11,190,775
450,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– (150,000)
– (150,000)
– 2,950,000
– 2,950,000
–
–
$0.90
$2.03
$1.47-$1.65
$2.30
$2.30
$2.30
$0.90
$2.03
$1.47-$1.65
$2.30
$2.30
$2.30
$0.90
$2.03
$1.60
$2.30
$2.30
$2.30
$0.90
$2.03
$1.60
$2.30
$2.30
$2.30
787,500
129,744
11,190,775
450,000
2,950,000
2,950,000
787,500
129,744
11,190,775
450,000
3,100,000
3,100,000
Grant date
2017
25-Sep-08
08-May-13
25-Sep-14
10-Mar-15
22-Apr-15
22-Apr-15
21–Apr–18
2016
25-Sep-08
08-May-13
25-Sep-14
10-Mar-15
22-Apr-15
21–Apr–17
22-Apr-15
21–Apr–18
102
ECLIPX GROUP LIMITED ANNUAL REPORT 2017NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20175.0 Employee remuneration and benefits (continued) 5.1 Share based payments (continued)
Options
Expected
vesting date
Exercise
price
Grant date
2017
22-Apr-15 21-Apr-17
22-Apr-15 21-Apr-18
10-Nov-15 30-Sep-18
19-Feb-16
30-Sep-18
5-Sep-16
30-Sep-19
4-Nov-16
30-Sep-19
4-Nov-16
30-Sep-19
2016
22-Apr-15 21-Apr-17
22-Apr-15 21-Apr-18
10-Nov-15 30-Sep-18
19-Feb-16
30-Sep-18
5-Sep-16
30-Sep-19
$2.30
$2.30
$3.06
$3.06
$3.80
$3.60
$3.60
$2.30
$2.30
$3.06
$3.06
$3.80
Rights
Grant date
2017
10-Nov-15
19-Feb-16
4-Nov-16
17-Feb-17
2016
10-Nov-15
19-Feb-16
Expected
vesting date
30–Sep–18
30–Sep–18
30–Sep–19
30–Sep–19
30–Sep–18
30–Sep–18
Weighted
average
exercise
price
Balance
at start
of the year
Number
Granted
during the
year
Number
Forfeited
during the
year
Number
Vested
and
exercised
during
the year
Number
Unvested
balance
at the
end of
the year
Number
Vested
option
not
exercised
Number
– (275,000)
–
450,000
$2.30
$2.30
$3.06
$3.06
$3.80
$3.60
$3.60
725,000
725,000
3,875,000
1,625,000
1,000,000
–
–
–
–
–
–
(145,000)
–
–
–
–
4,745,000
(140,000)
1,760,000
–
$2.30
800,000
$2.30
800,000
–
–
(75,000)
(75,000)
$3.06
$3.06
$3.80
–
–
–
4,025,000
(150,000)
1,625,000
1,000,000
–
–
–
725,000
– 3,730,000
– 1,625,000
– 1,000,000
– 4,605,000
– 1,760,000
–
–
725,000
725,000
– 3,875,000
– 1,625,000
– 1,000,000
–
–
–
–
–
–
–
–
–
–
–
Balance at
start of the
year
Number
Granted
during the
year
Number
Forfeited
during the
year
Number
Balance at
end of the
year
Number
935,000
400,000
–
–
–
–
–
–
489,000
286,000
(70,000)
–
–
–
865,000
400,000
489,000
286,000
970,000
400,000
(35,000)
–
935,000
400,000
103
5.1 Share based payments (continued)
(i)
Fair value of options granted
The fair value for awards granted under Relative TSR vesting conditions is independently determined using
the Monte-Carlo simulation pricing model, whilst the fair value for awards granted under EPS Hurdle vesting
conditions is independently determined using the Binomial tree pricing model. The models take into account
the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected
price volatility of the underlying share, the expected dividend yield and risk free interest rate for the term of the
option.
The model inputs for options granted are as follows:
Grant date
Award type
First test date
Retest date
First vesting date
Loan repayment date/expiry date
Share price at the grant date
Loan/exercise price
Expected life
Volatility
Risk free interest rate
Dividend yield (p.a)
Average assessed
fair value per instrument
17 February
2017
17 February
2017
4 November
2016
4 November
2016
5 September
2016
Options
Rights
Options
Rights
Options
30 September
2019
30 September
2019
30 September
2019
30 September
2019
30 September
2019
30 September
2020
30 September
2020
30 September
2020
30 September
2020
30 September
2020
4 November
2019
4 November
2019
17 February
2022
17 February
2022
4 November
2019
4 November
2021
4 November
2019
4 November
2021
4 November
2019
4 November
2021
$3.90
$3.60
$3.90
Nil
$3.60
$3.60
$3.60
Nil
$3.80
$3.80
3.9 years
2.8 years
4.0 years
3.1 years
4.1 years
28.5%
2.12%
4.42%
$0.70
28.5%
1.96%
4.42%
$2.87
28.5%
1.78%
4.67%
$0.54
28.5%
1.70%
4.67%
$2.66
29%
1.53%
4.15%
$0.60
Grant date
Award type
First test date
Retest date
First vesting date
Loan repayment date/expiry date
Share price at the grant date
Loan/exercise price
Expected life
Volatility
Risk free interest rate
Dividend yield (p.a)
Average assessed
fair value per instrument
104
19 February
2016
19 February
2016
10 November
2015
10 September
2015
Options
Rights
Rights
Options
30 September
2018
30 September
2018
30 September
2018
30 September
2018
30 September
2019
30 September
2019
30 September
2019
30 September
2019
10 November
2018
10 November
2018
10 November
2018
10 November
2018
10 November
2020
10 November
2020
10 November
2020
10 November
2020
$2.62
$3.06
$2.62
Nil
$3.06
$3.06
$3.06
Nil
3.8 years
3.0 years
4.0 years
3.0 years
30%
1.85%
3.50%
$0.36
30%
1.78%
3.50%
$1.86
30%
2.06%
3.50%
$0.59
30%
1.93%
3.50%
$2.31
ECLIPX GROUP LIMITED ANNUAL REPORT 2017NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20175.0 Employee remuneration and benefits (continued) 5.1
Share based payments (continued)
(i)
Fair value of options granted (continued)
The expected price volatility is representative of the level of uncertainty expected in the movements of the
Company’s share price over the life of the award. The price volatility was determined considering:
the tendency of newly listed entities to show decreasing volatility early in their life;
volatility of comparable listed companies; and
the mean reversion tendency of volatilities.
(ii)
Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period as part of employee
benefit expense were as follows:
Awards issued to employees of controlled entities during the year
Consolidated
2017
$’000
4,462
2016
$’000
2,860
(iii)
Terms and conditions of Share Schemes
The share based payments issued since the IPO are subject to vesting conditions. Refer to the remuneration
report for details of these vesting conditions.
5.2 Key management personnel disclosure
Short-term employee benefits
Post-employment benefits
Long-term employee benefits
Share-based payments
Consolidated
2017
$’000
4,662
114
16
1,881
6,673
2016
$’000
4,505
93
5
1,156
5,759
105
6.1 Reserves
Recognition and measurement
Share-based payment reserve
The share based payment reserve is used to recognise:
the fair value of options issued to Directors and employees but not exercised;
the fair value of shares issued to Directors and employees; and
other share-based payment transactions.
Cash flow hedge reserve
The hedging reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are
recognised in other comprehensive income. Amounts are reclassified to profit or loss when the associated hedge
transaction affects profit or loss.
Treasury reserve
Treasury shares are unpaid loan shares in Eclipx Group Limited that have been issued as part of the Eclipx Group
Share scheme and the executive LTI plan. See note 5.1 for further information.
Foreign currency translation reserve
The foreign currency translation reserve is used to recognise exchange differences arising from translation of the
financial statements of foreign operations to Australian Dollars.
Consolidated
2017
$’000
2016
$’000
(6,110)
991
(124)
17,600
12,357
(13,335)
10,204
(2,979)
(6,110)
13,138
–
4,462
17,600
(13,335)
(1,298)
4,965
13,138
3,470
(12,692)
(911)
268
(13,335)
6,570
3,708
2,860
13,138
Reconciliation of reserves
Hedging reserve - cash flow hedges
Treasury reserve
Foreign currency translation reserve
Share based payments reserve
Total reserves
Movements in reserves
Hedging reserve - cash flow hedges
Balance 1 October
Revaluation
Deferred tax
Balance 30 September
Share based payments reserve
Balance 1 October
Rights issued as part of the Right2Drive Pty Ltd acquisition
Awards issued to employees of controlled entities during the year
Balance at 30 September
106
ECLIPX GROUP LIMITED ANNUAL REPORT 2017NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20176.0 Other 6.2 Parent entity information
(i)
Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
Statement of financial position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Shareholders equity
Issued share capital
Reserves
Retained earnings
Profit for the year
Consolidated
2017
$’000
2016
$’000
8,566
1,027,961
1,036,527
(6,338)
(244,256)
(250,594)
635,246
10,412
140,275
785,275
(92)
1,232
778,612
779,844
(12,829)
(127,609)
(140,438)
455,484
5,144
178,778
639,406
1,285
(ii) Guarantees entered into by the parent entity
There are cross guarantees given by Eclipx Group Limited, Pacific Leasing Solutions (Australia) Pty Limited,
Leasing Finance (Australia) Pty Limited, Fleet Holding (Australia) Pty Limited, PLS Notes (Australia) Pty Limited,
Fleet Partners Pty Limited, Fleet Aust Subco Pty Limited, Fleet Partners Franchising Pty Limited, CLFC Pty
Limited, Car Insurance Pty Limited, FleetPlus Holdings Pty Limited, CarLoans.com.au Pty Ltd, Fleet Choice Pty
Ltd, CLFC Media Holdings Pty Limited, FleetPlus Pty Limited, Eclipx Commercial Pty Ltd, FleetPlus Novated Pty
Limited, PackagePlus Australia Pty Limited, Eclipx Insurance Pty Ltd, CarInsurance.com.au Pty Ltd, Right2Drive Pty
Ltd, Anrace Pty Ltd, Eclipx MMF Finance Pty Ltd, Grays eCommerce Group Limited, GEG No 1 Pty Ltd, Grays (Aust)
Holdings Pty Ltd, GEG Capital Pty Ltd, GEG International Pty Ltd, Grays (NSW) Pty Ltd, Graysonline (SA) Pty Ltd,
Grays (VIC) Pty Ltd, GLC Fine Wines Liquor Pty Limited, Grays Eisdell Timms (WA) Pty Limited, Grays Eisdell Timms
(QLD) Pty Limited and C M Pty Limited.
No liability was recognised by the parent entity or the consolidated entity in relation to the above guarantee as
the fair value of the guarantee is immaterial.
(iii) Contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30 September 2017 or 2016. For information about
guarantees given by the parent entity, see above.
107
NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20176.0 Other (continued) 6.3 Related party transactions
(i)
Transactions within the wholly owned Group
The following transactions occurred with related parties:
The related party payables among Australian entities are interest free and are not due for payment within the
next 12 months.
(ii)
Controlling entity
The parent entity of the Group is Eclipx Group Limited.
(iii)
Interest in other entities
The controlled entities of the Group listed below were wholly owned during the current and prior year, unless
otherwise stated:
Australia
Fleet Aust Subco Pty Ltd
FP Turbo Trust 2007-1 (Australia)
Pacific Leasing Solutions (Australia) Pty Ltd
FP Turbo Series 2014-1 Trust
Leasing Finance (Australia) Pty Ltd
FP Turbo Warehouse Trust 2014-1 (Australia)
PLS Notes (Australia) Pty Ltd
Fleet Partners Franchising Pty Ltd
Fleet Holding (Australia) Pty Ltd
Eclipx Insurance Pty Ltd
Fleet Partners Pty Ltd
CarInsurance.com.au Pty Ltd
FleetPlus Holdings Pty Limited
Car Insurance Pty Ltd
FleetPlus Pty Ltd
FleetPlus Novated Pty Ltd
PackagePlus Australia Pty Ltd
CLFC Media Holdings Pty Ltd
Eclipx Commercial Pty Ltd
Right2Drive Pty Ltd b
Grays eCommerce Group Ltd a
Grays (Aust) Holdings Pty Ltda
GEG International Pty Ltda
Grays (NSW) Pty Ltda
Grays (VIC) Pty Ltda
Gray Eisdell Timms (WA) Pty Ltda
CM Pty Ltda
Anrace Pty Ltdd
CLFC Pty Ltd
CarLoans.com.au Pty Ltd
Fleet Choice Pty Ltd
FP Turbo Series 2015-1 Equipment Trust
FleetPlus Asset Securisation Pty Ltd c
FP Turbo Government Lease Trust 2016-1
GEG No. 1 Pty Ltda
GEG Capital Pty Ltda
Grays (NSW) Pty Ltda
GraysOnline (SA) Pty Ltda
GLC Fine Wines & Liquor Pty Ltda
Gray Eisdell Timms (QLD) Pty Ltda
GEM Trusta
Eclipx MMF Finance Pty Ltde
(a) On 11 August 2017, the Group concluded the 100% acquisition of Grays eCommerce Group Limited.
(b) On 19 May 2016, the Group concluded the 100% acquisition of the Right2Drive Group.
(c) The Group does not have control of FleetPlus Asset Securisation Pty Ltd.
(d) On 18 November 2016, the Group concluded the 100% acquisition of Anrace Pty Ltd.
(e) On 22 November 2016, the Group established Eclipx MMF Finance Pty Ltd.
(f) On 15 August 2017, Fleet Holding (NZ) Limited changed its name to Eclipx Fleet Holding (NZ) Limited.
(g) On 15 August 2017, Pacific Leasing Solutions (NZ) Limited changed its name to Eclipx Pacific Leasing Solutions (NZ) Limited.
(h) On 15 August 2017, Leasing Finance (NZ) Limited changed its name to Eclipx Leasing Finance (NZ) Limited.
(i) On 28 September 2017, the Group established Eclipx NZ Limited.
108
ECLIPX GROUP LIMITED ANNUAL REPORT 2017NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20176.0 Other (continued) 6.3 Related party transactions (continued)
(iii) Interest in other entities (continued)
New Zealand
FleetPlus Ltd (NZ)
CarLoans.co.nz Ltd
Fleet NZ Limited
Eclipx Pacific Leasing Solutions (NZ) Limitedg
Eclipx Leasing Finance (NZ) Limitedh
PLS Notes (NZ) Ltd
Right2Drive (New Zealand) Ltdb
Grays Auctions Ltd (NZ)a
Eclipx NZ Ltdi
Eclipx Fleet Holding (NZ) Ltdf
Fleetpartners NZ Trustee Ltd
Truck Leasing Ltd
FP Ignition Trust 2011-1 New Zealand
FleetPartners NZ Trust
FPNZ Warehouse Trust 2015-1
FP Ignition 2017 Warehouse Trust
FP Ignition 2017 B Trust
(a) On 11 August 2017, the Group concluded the 100% acquisition of Grays eCommerce Group Limited.
(b) On 19 May 2016, the Group concluded the 100% acquisition of the Right2Drive Group.
(c) The Group does not have control of FleetPlus Asset Securisation Pty Ltd.
(d) On 18 November 2016, the Group concluded the 100% acquisition of Anrace Pty Ltd.
(e) On 22 November 2016, the Group established Eclipx MMF Finance Pty Ltd.
(f) On 15 August 2017, Fleet Holding (NZ) Limited changed its name to Eclipx Fleet Holding (NZ) Limited.
(g) On 15 August 2017, Pacific Leasing Solutions (NZ) Limited changed its name to Eclipx Pacific Leasing Solutions (NZ) Limited.
(h) On 15 August 2017, Leasing Finance (NZ) Limited changed its name to Eclipx Leasing Finance (NZ) Limited.
(i) On 28 September 2017, the Group established Eclipx NZ Limited.
109
NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20176.0 Other (continued) 6.3 Related party transactions (continued)
(iv) Transactions with other related parties
(a)
Relationship with Ironbridge
During the year, Eclipx Group Limited has incurred $51,900 in fees (2016: $137,500) from Ironbridge Capital
Management PLC in relation to Director Fees for G Ruddock. Refer to the remuneration report for further
information.
(b)
Logbook Me Pty Limited
Eclipx Group Limited is party to a contract with Logbook Me Pty Limited (LogbookMe) which supplies a software
product that utilises GPS tracking devices which Eclipx on sells to its customers. This product allows Eclipx fleet
customers to manage their fringe benefits and fuel tax costs on their fleet as well as fulfilling key driver safety
monitoring obligations under workplace health and safety legislation. LogbookMe has agreed not to distribute
its product to other fleet management and vehicle finance providers for the term of the contract, subject to
minimum subscriber volumes. The term of the contract is 10 years from 15 October 2014. The device, freight and
subscription fees paid to LogbookMe amounted in 2017 to $536,388 (2016: $219,571); the increase resulting from
incremental product sales to Eclipx customers.
The LogbookMe tool provided to Eclipx has been instrumental in securing corporate and government tenders.
The Chief Executive Officer and Deputy Chief Executive Officer have a direct equity interest in LogbookMe.
The contract with LogbookMe has been negotiated on an arms length basis with Board oversight.
6.4 Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor of the Group.
(a) Audit and assurance services
Audit Services
KPMG Australian firm:
Audit and review of financial statements
757,087
746,254
Consolidated
2017
$
2016
$
(b) Non-audit services
KPMG Australian firm:
Debt restructuring
Transactional services
Total remuneration for non-audit services for KPMG
Total remuneration for KPMG
599,067
563,947
1,163,014
1,920,101
540,000
179,134
719,134
1,465,388
110
ECLIPX GROUP LIMITED ANNUAL REPORT 2017NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20176.0 Other (continued) 6.5 Deed of cross guarantee
Eclipx Group Limited, Pacific Leasing Solutions (Australia) Pty Limited, Leasing Finance (Australia) Pty Limited,
Fleet Holding (Australia) Pty Limited, PLS Notes (Australia) Pty Limited, Fleet Partners Pty Limited, Fleet Aust
Subco Pty Limited, Fleet Partners Franchising Pty Limited, CLFC Pty Limited, Car Insurance Pty Limited, FleetPlus
Holdings Pty Limited, CarLoans.com.au Pty Ltd, Fleet Choice Pty Ltd, CLFC Media Holdings Pty Limited, FleetPlus
Pty Limited, Eclipx Commercial Pty Ltd, FleetPlus Novated Pty Limited, PackagePlus Australia Pty Limited, Eclipx
Insurance Pty Ltd, CarInsurance.com.au Pty Ltd, Right2Drive Pty Ltd, Anrace Pty Ltd, Eclipx MMF Finance Pty Ltd,
Grays eCommerce Group Limited, GEG No 1 Pty Ltd, Grays (Aust) Holdings Pty Ltd, GEG Capital Pty Ltd, GEG
International Pty Ltd, Grays (NSW) Pty Ltd, Graysonline (SA) Pty Ltd, Grays (VIC) Pty Ltd, GLC Fine Wines & Liquor
Pty Limited, Grays Eisdell Timms (WA) Pty Limited, Grays Eisdell Timms (QLD) Pty Limited and C M Pty Limited are
parties to a deed of cross guarantee under which each company guarantees the debts of the others. By entering
into the deed, the wholly owned entities have been relieved from the requirement to prepare a financial report
and directors’ report under Class Order 98/1418 (as amended) issued by the Australian Securities and Investments
Commission.
The above companies represent a ‘Closed Group’ for the purposes of the Class Order, and as there are no other
parties to the deed of cross guarantee that are controlled by Eclipx Group Limited, they also represent the
‘Extended Closed Group’.
Set out below is a statement of profit or loss and other comprehensive income for the year of the Closed Group.
Statement of profit or loss and other comprehensive income
Revenue from continuing operations
Cost of revenue
Lease finance costs
Net operating income before operating expenses and impairment charges
Impairment losses on loans and receivables
Net operating income before operating expenses
Employee benefit expense
Depreciation and amortisation expense
Operating overheads
Total overheads
Operating finance costs
Profit before income tax
Income tax expense
Profit for the year
Other comprehensive income/(loss), net of tax
Total comprehensive income for the year
Consolidated
2017
$’000
2016
$’000
461,870
(191,479)
(44,018)
226,373
(3,800)
222,573
(79,955)
(11,240)
(57,463)
(148,658)
(5,903)
68,012
(17,552)
50,460
2,136
52,596
412,201
(166,171)
(41,861)
204,169
(1,530)
202,639
(58,073)
(7,894)
(32,062)
(98,029)
(6,515)
98,095
(13,812)
84,283
4,647
88,930
111
NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20176.0 Other (continued) 6.5 Deed of cross guarantee (continued)
Set out below is a consolidated statement of financial position as at reporting date of the Closed Group.
ASSETS
Cash and cash equivalents
Restricted cash and cash equivalents
Trade and other receivables
Inventory
Finance leases
Operating leases reported as property, plant and equipment
Property, plant and equipment
Receivables - advances to related parties
Deferred tax assets
Intangibles
Total assets
LIABILITIES
Trade and other liabilities
Provisions
Derivative financial instruments
Other
Borrowings
Payables - Advances from related parties
Deferred tax liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained earnings
Total equity
Consolidated
2017
$’000
2016
$’000
35,374
90,490
118,814
11,369
424,568
655,780
12,761
99,731
29,657
681,127
49,326
72,371
73,768
10,673
331,899
621,406
9,938
55,764
3,737
471,182
2,159,671
1,700,064
30,594
18,427
5,992
2,784
29,020
6,410
14,162
1,744
1,214,069
1,017,663
715
49,276
4,250
-
1,321,857
1,073,249
837,814
626,815
635,246
15,771
186,797
837,814
455,484
(1,282)
172,613
626,815
* The presentation format of the Consolidated Statement of Financial Position has been changed from a current/non-current basis to order of
liquidity. See Note 1 for additional disclosures.
112
ECLIPX GROUP LIMITED ANNUAL REPORT 2017NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20176.0 Other (continued) 6.6 Reconciliation of cash flow from operating activities
Consolidated
Profit after tax for the year
Depreciation and amortisation
Doubtful debts
Share based payments expense
Fleet and stock impairment
Corporate debt restructuring costs
Unwind on contingent consideration
Net (gain)/loss on sale of non-current assets
Hedging gain
Exchange rate variations on New Zealand cash and cash equivalents
Net cash inflow from operating activities before change in assets and liabilities
Change in operating assets and liabilities:
Increase in trade and other receivables
Increase in finance leases
Decrease/(increase) in deferred tax assets/liabilities
Increase in trade and other liabilities
Decrease in current provisions
Increase in other current liabilities
Net cash inflow from operating activities
2017
$’000
54,210
216,562
4,295
4,467
309
-
(2,840)
(24,972)
(431)
1,513
253,113
(39,886)
130,945
29,375
(5,128)
12,674
1,040
2016
$’000
45,868
197,939
1,989
2,860
(118)
1,615
(778)
(16,234)
464
(1,983)
231,622
7,975
106,370
2,437
23,186
(2,010)
937
382,133
370,517
6.7 Events occurring after the reporting period
Except for the matters disclosed above, no other matter or circumstance has occurred since the end of the
reporting period that may materially affect the Group’s operations, the results of those operations or the Group’s
state of affairs in future financial years.
113
NOTES TO THE FINANCIAL STATEMENTfor the year ended 30 September 20176.0 Other (continued) In the opinion of the Directors of Eclipx Group Limited (Group):
(a) The consolidated Financial Statements and notes of the Group that are set out on pages 62 to 113 are
in accordance with the Corporations Act 2001, including:
(i) Giving a true and fair view of the Group’s financial position as at 30 September 2017 and of its
performance for the financial year ended on that date; and
(ii) Complying with Australian Accounting Standards (including the Australian Accounting Interpretations)
and the Corporations Regulations 2001; and
(b) There are reasonable grounds to believe that the Group will be able to pay its debts as and when they
become due and payable.
(c) There are reasonable grounds to believe that the Group and the group entities identified in Note 6.5 will be
able to meet any obligations or liabilities to which they are or may become subject to by virtue of the Deed
of Cross Guarantee between the Company and those group entities pursuant to ASIC Class Order 98/1418.
(d) The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from
the Chief Executive Officer and Chief Financial Officer for the financial year ended 30 September 2017.
(e) The Directors draw attention to note 1 of the consolidated financial statements which includes a statement
of compliance with International Financial Reporting Standards.
Signed in accordance with a resolution of the Directors:
Kerry Roxburgh
Chairman
Sydney
7 November 2017
Doc Klotz
Chief Executive Officer
114
ECLIPX GROUP LIMITED ANNUAL REPORT 2017DIRECTORS’ DECLARATION Independent Auditor’s Report
To the shareholders of Eclipx Group Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report
of Eclipx Group Limited (the Company).
In our opinion, the accompanying
Financial Report of the Company is in
accordance with the Corporations Act
2001, including:
•
•
giving a true and fair view of the
Group’s financial position as at 30
September 2017 and of its financial
performance for the year ended on
that date; and
complying with Australian
Accounting Standards and the
Corporations Regulations 2001.
The Financial Report comprises the:
• Consolidated statement of financial position as at 30
September 2017
• Consolidated statement of profit or loss and other
comprehensive income, consolidated statement of
changes in equity, and consolidated statement of cash
flows for the year then ended
• Notes including a summary of significant accounting
policies
• Directors’ Declaration.
The Group consists of the Company and the entities it
controlled at the year-end or from time to time during the
financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
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 Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics
for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in
Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.
Key Audit Matters
The Key Audit Matters we identified are:
• Valuation of goodwill;
• Determination of vehicle residual values;
• Revenue recognition; and
• Acquisition of Grays eCommerce Group Liited
(GEG).
Key Audit Matters are those matters that, in our
professional judgement, were of most
significance in our audit of the Financial Report of
the current period.
These matters were addressed in the context of
our audit of the Financial Report as a whole, and
in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
KPMG, an Australian partnership and a member firm
of the KPMG network of independent member firms
affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity.
Liability limited by a scheme
approved under Professional
Standards Legislation.
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
115
INDEPENDENT AUDITOR’S REPORT
Valuation of goodwill – ($701.0m)
Refer to Note 3.5 in the Financial Report.
The key audit matter
How the matter was addressed in our audit
Valuation of the Group’s goodwill is a
Key Audit Matter due to:
•
the size of the balance (being 25%
of total assets); and
•
the high level of judgment involved
by us in assessing the inputs into
the model supporting the Group’s
annual assessment for impairment.
We focused on the significant forward-
looking assumptions the Group applied
in its value in use model, including:
•
forecast growth rates for the
Group’s underlying cash flows,
which can vary based on a number
of factors such as the number and
fleet size of new customer wins,
industry growth projections and
inflation expectations. The Group
operates across different
geographies with varying market
pressures, which increases the risk
of inaccurate forecasts; and
•
the discount rates, which are
complex in nature and may vary
according to the conditions and
environment the specific cash
generating units (CGUs) are subject
to from time to time.
The Group also made a significant
acquisition during the year, resulting in
$161.6m of provisional goodwill arising
from the acquisition of Grays
eCommerce Group Limited.
We involved valuation specialists to
supplement our senior auditors in
assessing this Key Audit Matter.
Working with our valuation specialists, our procedures
included:
• evaluating the approach to the value in use valuation
methodology adopted against the AASB 136 Impairment
of Assets accounting standard,
•
•
•
•
•
•
•
•
assessing the integrity of the value in use model used,
including the accuracy of the underlying calculation
formulas;
assessing the Group’s determination of their CGUs
based on our understanding of the operations of the
Group’s business and the impact of acquisitions during
the year. We analysed how independent cash inflows of
the Group were generated against the requirements of
the relevant accounting standards;
analysing the significant acquisition of Grays
eCommerce Group Limited during the year and the
Group’s internal reporting to assess the Group’s
monitoring and management of activities and the
consistency of the allocation of goodwill to CGUs;
assessing the Group’s discount rates against publicly
available data for a group of comparable entities and
independently developing discount rate ranges
considered comparable using publicly available market
data for comparable entities, adjusted by risk factors
specific to the CGU and the industry and geography they
operate in;
challenging the Group’s cash flow forecast and growth
assumptions, including those relating to the fleet size of
new customer wins using our knowledge of the Group,
its industry and the Group’s past performance, and
industry growth projections and inflation expectations
across different geographies. We also compared the
Group’s long-term growth and inflation assumptions to
published studies of industry trends and expectations
across different geographies, and considered differences
experienced across the Group’s operations;
assessing the Group’s historical forecasting accuracy by
checking prior actuals to prior forecasts to inform our
assessment of forecasts incorporated in the model;
considering the sensitivity of the model by varying key
assumptions such as discount rates and forecast growth
rates, within a reasonably possible range, to identify
those assumptions at higher risk and to assess the
presence of indicators of impairment; and
assessing the disclosures in the Financial Report using
our understanding of the Group obtained from our
testing and against the requirements of the relevant
accounting standards.
116
ECLIPX GROUP LIMITED ANNUAL REPORT 2017INDEPENDENT AUDITOR’S REPORT
Determination of vehicle residual values
Refer to Critical Accounting Estimates and Assumptions and disclosures over residual values in the
context of property, plant and equipment in Notes 1.0 and 3.1 in the Financial Report.
The key audit matter
How the matter was addressed in our audit
Understanding the process for, and
robustness of, residual value setting is
considered a Key Audit Matter due to
the significant audit effort required and
the high degree of judgement applied by
us in assessing the Group’s valuation of
the residual value of their fleet and the
impact residual value setting has on a
number of key accounts. We focused on
vehicle impairment and vehicle trading
profit as an indicator of the Group’s
ability to set accurate residual values.
We considered the Group’s following
significant judgements:
− expected forecast residual value at
the end of the lease term;
− periodical future lease-related fee
cash flow assumptions; and
Our procedures included:
• Understanding the process by which residual
values are calculated;
•
Testing the key controls for the Group’s residual
valuation process such as the bi-annual review and
approval of residual value changes by senior
management to assess residual value settings on
existing vehicles;
• Assessing the Group’s judgement on future lease-
related fee cash flows and end of lease cash flow
assumptions based on timing and future condition
of returned vehicles used in the vehicle impairment
model by comparing to historical cash flow
experience for a sample of previous leases;
• Assessing the Group’s ability to forecast vehicle
residual values by selecting a statistical sample of
vehicles disposed of during the year and comparing
the sale price to sales invoices and written down
values; and
− assumptions on the timing and future
condition of vehicles returned at the
end of the lease, and associated cash
flows.
• Comparing a sample of the current residual values
of vehicles against the current market value of
those vehicles sourced from an independent
external database of used vehicle valuations.
Residual value setting has the following
impacts within the Financial Report:
• Vehicle depreciation ($204.2m) over
the lease term is calculated with
reference to the residual value as the
terminating value; and
• Vehicle impairment ($0.3m)
recognised where residual values
exceed estimated future sales
prices.
The timing of revenue recognition across
the term of a lease may be affected by
aggressive or conservative residual value
setting as it impacts the level of revenue
recognised during the term of the lease
compared to at the end of the lease.
117
INDEPENDENT AUDITOR’S REPORT
Revenue recognition ($604.5m)
Refer to Note 2.2 in the Financial Report.
The key audit matter
How the matter was addressed in our audit
Our procedures included:
• Assessing the Group’s revenue recognition policies in
accordance with relevant accounting standards;
•
Testing key controls in the sales system, in particular
the matching control of invoices, lease receipt
allocation and cash receipts;
• Recalculating and assessing the reasonableness of
the Group’s estimates of the stage of completion of
the contracted maintenance of leased assets by
checking the mathematical accuracy of the stage of
completion model and checking the average age,
term and distance assumptions for consistency with
internal system generated lease portfolio statistics.
These are tested on a sample basis;
• Challenging the Group’s judgement in determining
the key assumptions by comparing the average cost
of maintenance activities performed to publicly
available market rates and costs;
• Assessing the Group’s judgement on principal or
agent maintenance revenue recognition in
accordance with AASB 118 Revenue;
• With assistance from IT specialists, testing key
automated controls within the leasing database; and
• Challenging the Group’s judgement on the rental hire
revenue recorded based on the historical and
expected recoverability of rental hire receivables, we
test a statistical sample of rental hire receivables to
subsequent receipts of cash and evaluate trends in
recoverability of rental hire revenue.
The Group’s operations include a
number of unique revenue streams,
including but not limited to: finance
and operating lease related revenue,
rental hire income, maintenance and
other service revenue, auction sales
revenue and commission revenue.
Some of these revenue streams
include a high level of estimation or
accounting complexity, resulting in the
measurement and recognition of those
revenue streams being considered a
Key Audit Matter due to the audit
effort arising from:
• The estimation of maintenance
revenue using a stage of
completion method and key
assumptions of the average age,
term and useage of the vehicle
fleet as well as cost of
maintenance performed;
• The de-recognition of certain
maintenance cash flows due to
principal or agent considerations;
• The dependence of the Group on
the automation of lease invoicing
and, thus its revenue recognition,
necessitates the involvement of
our information technology (IT)
specialists; and
• The significant judgement required
by the Group in assessing the
recoverability of rental hire
receivables, and therefore the
additional audit effort required to
assess the quantum of the
revenue associated with those
receivables.
118
ECLIPX GROUP LIMITED ANNUAL REPORT 2017INDEPENDENT AUDITOR’S REPORT
Acquisition of Grays eCommerce Group Limited (GEG) ($170.9m)
Refer to Note 2.5 in the Financial Report.
The key audit matter
How the matter was addressed in our audit
The acquisition of Grays eCommerce
Group Limited (GEG) for $170.9m is
considered a Key Audit Matter due to the
size of the acquisition and the audit
complexity arising from the Group’s
estimation process in the purchase price
allocation (PPA).
The process involved in accounting for the
acquisition is complex, requiring us to
assess the Group’s judgement in
determining the fair value of acquired
assets and liabilities, in particular the
valuation of goodwill and separately
identifiable intangible assets, such as
brand names and customer relationships.
The valuation of intangible assets
(including brand names and customer
relationships) requires us to assess the
Group’s judgement in selecting
appropriate valuation models and the key
assumptions such as growth rates,
projected cash flows, discount rates and
royalty rates underpinning this. The Group
engaged an independent expert to assist
with this.
We involved our valuation specialists to
supplement our senior auditors in
assessing this Key Audit Matter.
Our procedures included:
• Assessing the acquisition against the criteria of a
business combination in the relevant accounting
standards by reading the key transaction
documents to understand key terms and
conditions;
• Working with our valuation specialists to assess
and challenge the key assumptions used in the
PPA to identify and value intangible assets. This
involved:
o Assessing the competence, objectivity and
scope of the Group’s independent expert;
o Challenged the key inputs used by the
Group’s independent valuation expert to
determine the value of intangible assets,
including growth rates, projected cash flows,
discount rates and royalty rates, we did this
by comparing the key inputs against
approved business forecasts, published
studies of economic growth and inflation
expectations and an external, independent
database of comparable royalty rates; and
o Challenged the Group’s judgmental
assumptions such as the identification of
separable identifiable intangible assets and
the Group’s independent valuation expert’s
approach and methodology of valuing these
assets by comparing to accepted industry
practice and accounting standards
requirements.
• Assessing the fair value of other significant assets
and liabilities recorded in the purchase price
allocation, by performing procedures including
independently confirming cash balances acquired,
performing subsequent receipts and settlement
testing on trade receivables and payables; and
• Assessing the Group’s disclosures in respect of
the acquisition in accordance with relevant
accounting standards.
119
INDEPENDENT AUDITOR’S REPORT
Other Information
Other Information is financial and non-financial information in Eclipx Group Limited’s annual reporting,
which is provided in addition to the Financial Report and the Auditor's Report. The Directors are
responsible for the Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information.
In doing so, we 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.
We are required to report if we conclude that there is a material misstatement of this Other
Information, and based on the work we have performed on the Other Information that we obtained
prior to the date of this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
•
•
•
preparing the Financial Report that gives a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act 2001
implementing necessary internal control to enable the preparation of a Financial Report that gives
a true and fair view and is free from material misstatement, whether due to fraud or error
assessing the Group’s ability to continue as a going concern. This includes disclosing, as
applicable, matters related to going concern and using the going concern basis of accounting
unless they 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 objective is:
•
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 Australian Auditing Standards will always detect a material misstatement when it
exists.
Misstatements can arise from fraud or error. They 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.
A further description of our responsibilities for the Audit of the Financial Report is located at the
Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_files/ar2.pdf.
This description forms part of our Auditor’s Report.
120
ECLIPX GROUP LIMITED ANNUAL REPORT 2017INDEPENDENT AUDITOR’S REPORT
Report on the Remuneration Report
Opinion
Director’s responsibilities
In our opinion, the Remuneration
Report of Eclipx Group Limited for
the year ended 30 September
2017, complies with Section 300A
of the Corporations Act 2001.
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 responsibilities
We have audited the Remuneration Report contained within the
Director’s report for the year ended 30 September 2017.
Our responsibility is to express an opinion on the Remuneration
Report, based on our Audit conducted in accordance with
Australian Auditing Standards.
KPMG
Dean Waters
Partner
Melbourne
7 November 2017
121
INDEPENDENT AUDITOR’S REPORT
Investor information
Additional information required by the ASX and not shown elsewhere in this report is as follows, and is current as
at 19 December 2017.
Distribution of holders of quoted equity securities
Fully paid ordinary shares
Range of holdings
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
Number of
share holders
% of
share holders
2,386
1,256
430
430
73
4,575
52.15
27.45
9.40
9.40
1.60
100.00
Shares
held
317,072
3,526,974
3,244,092
10,807,335
296,098,414
313,993,887
% of
shares
0.10
1.12
1.03
3.44
94.30
100.00
Distribution of holders of unquoted equity securities
Non-executive Director Options
Number of
option holders
% of
option holders
Options
held
% of
options
-
-
-
1
4
5
-
-
-
20
80
100
Number of
option holders
% of
option holders
-
-
13
55
35
103
-
-
12.6
53.4
34
100
Number of
rights holders
% of
rights holders
-
5
21
38
7
71
-
7
29.6
53.5
9.9
100
-
-
-
100,000
800,000
900,000
Options
held
-
-
130,000
2,500,000
14,895,000
17,525,000
Rights
held
-
25,000
210,000
1,418,000
1,467,000
3,120,000
-
-
-
11.1
88.9
100
% of
options
-
-
0.7
14.3
85
100
% of
rights
-
0.8
6.7
45.5
47
100
Range of holdings
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
LTI Options
Range of holdings
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
LTI Rights
Range of holdings
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
122
ECLIPX GROUP LIMITED ANNUAL REPORT 2017SHAREHOLDER INFORMATION Substantial Shareholder Notices (as disclosed to the ASX)
Shareholders
Ordinary shares held
% of issued shares
Date of notice
Vinva Investment Management
Bennelong Funds Management Group Pty Ltd
16,062,430
21,986,089
5.12%
7.2507%
25/08/2017
11/12/2017
Twenty largest shareholders
Shareholders
1
2
3
4
5
6
7
8
9
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD
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