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Rent-A-Center About Eclipx Group
Eclipx Group is an established leader in fleet leasing
and management, diversified financial services and
online auction services in Australia and New Zealand.
Eclipx Group comprises FleetPartners, FleetPlus,
FleetChoice, AutoSelect, CarLoans.com.au, Georgie,
Right2Drive, GraysOnline, Are You Selling and Eclipx
Commercial.
For more information visit www.eclipx.com.
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Contents
Chairman’s Letter
Managing Director’s Letter
Our History
Business Overview
Year in Review
Financial Highlights
Corporate Responsibility and Sustainability
Board of Directors
Corporate Directory
Financial Report
Shareholder Information
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 Chairman’s
Letter
On behalf of the Eclipx Group Board
I am pleased to present the 2018
Eclipx Group Annual Report for the
year ended 30 September 2018.
While our core fleet and equipment financing
businesses both performed well, overall this Financial
Year was challenging. Our results fell below guidance
as a result of our recent acquisitions experiencing
some adverse business conditions, including:
\ A reduction in insolvency related auction
activity materially impacting revenue at
GraysOnline.
\ Our Right2Drive business being negatively
impacted by Australia’s prolonged drought,
reducing business originations as well as
competitive pressures from some insurers
offering replacement vehicles.
We are in the process of restructuring both of these
businesses so they are better equipped to meet the
expectations we had at the time of their acquisition,
and to take full advantage as conditions improve in
their respective markets.
2018 financial performance
Despite these issues, the Eclipx Group Board is
pleased to report a solid earnings performance for the
Group in FY18, with Net Operating Income increasing
27% to $325.3 million for the year and Group Net
Profit After Tax adjusted for Amortisation and One-off
Costs (NPATA) improving 14% to $78.1 million.
On 13 November 2018, the Board declared a fully
franked final dividend of 8.00 cents per share, taking
the full Financial Year dividend to 16.00 cents per
share, up 4.9% on last year. The record date for the
final dividend was 14 December 2018, with the final
dividend payable on 25 January 2019.
This Annual Report also contains the Directors’
Report and audited Financial Statements, providing
comprehensive details of the Group’s operations and
financial results across each of our business segments.
The markets in which we operate
Over the past 12 months to 30 September 2018,
the markets in Australia and New Zealand were
and will continue to be volatile, impacted by a
growing number of both local and global political
issues, especially in Australia with the Banking Royal
Commission’s negative impact upon financial markets
generally and the flow-on impact on housing prices,
resulting in negative consumer sentiment.
Whilst there is no doubt the Eclipx Group business
was challenging over the past 12 months, our core
portfolio of businesses that serve the commercial
sector is particularly resilient in these conditions.
Our core fleet businesses provide vehicle mobility
solutions that are essential in supporting the day-
to-day commercial transport needs of a range of
businesses in Australia and New Zealand, ranging
from SMEs to Government.
GraysOnline is Australia’s largest online vehicle
and equipment auction platform and its core
activities provide an essential service to businesses,
government and consumers disposing of or
acquiring vehicles and equipment in Australia.
Right2Drive achieved growing recognition and
acceptance of the convenience and value of its
product from a number of our insurance partners,
resulting in further growth of its business.
Also, Eclipx Group benefits from “best-in-class”
diversified funding platforms, including committed
facilities from all Major Trading Banks.
Our consumer business is the smallest part of our
portfolio. Recognising the changing conditions in
some aspects of this market, we are restructuring
our consumer operating rationale. This segment is
being repositioned as a new vehicle, trade-in and
novated leasing business for consumers. We are
pleased with the results so far, recognising there is
much more work to be done.
In a fast changing environment Eclipx Group
understands a key ingredient for success in our
business is investment in technology. This Financial
Year, Eclipx Group invested heavily in both its fleet
and car rental platforms, along with a number of
online portals, enabling our customers to better
manage their relationship with us and transact online.
We are now beginning to see the benefit of the IT
investment we have made over the last four years,
in terms of improvements in operating efficiency and
in the ease with which customers interact with us.
The future
These are both exciting and challenging times for
the Eclipx Group. Your Board and management are
focused on continuing to build a market leading
business that will ultimately benefit shareholders.
Our go-to market strategy is based on simplification
of our business to three fundamental elements:
\ Market leading corporate facing fleet and
novated leasing businesses in Australia and
New Zealand.
3-4
also confirmed, once again, that our managers are
strongly supportive and inclusive which is very
much valued by their teams.
I would like to thank all of the people who make
up the Eclipx Group comprising the Board, our
talented and committed management team, our
workforce of employees across all our businesses
and geographies. Their dedication, resilience and
drive equips the Eclipx Group to deliver exceptional
service and outcomes for our customers that will
ultimately benefit our shareholders.
Our management team’s remuneration is directly
impacted by the Eclipx Group performance. As we
missed profit guidance by more than 5% in FY18, no
short term incentive has been paid and long term
incentives have been materially impacted. Further
detail is contained in the Remuneration Report
(page 52).
Establishing a market leading salary packag-
ing and fleet company
Throughout the year just past, the Eclipx Board had
been in dialogue with McMillan Shakespeare Limited
(“MMS”ASX: MMS) about a proposed merger of
the two companies. The dialogue focused on the
industrial logic of the merger and identified the
benefits associated with the scale and combination
of complementary best-in breed business units.
Subsequently, on 8 November 2018 the Eclipx Group
announced it had signed a Scheme Implementation
Agreement with McMillan Shakespeare Limited.
The proposed merger, which is subject to Eclipx
shareholders approving the scheme in 2019, will be
implemented by MMS acquiring all shares in Eclipx.
Under the terms of the merger Eclipx shareholders
will receive 0.1414 MMS shares plus 46 cents cash
for each Eclipx share held on the date of settlement.
Using 8 November 2018 as an example, this would
imply a total value of $2.851 for each Eclipx share
(although the value of the consideration will fluctuate
with movements in the market value of MMS shares).
The Eclipx Board unanimously endorses the merger
and believes it represents a unique and compelling
value proposition for both companies, combining
the best of both organisations to create a leading
fleet management and salary packaging provider in
Australia and New Zealand.
Kerry Roxburgh
Chairman
\ Our GraysOnline auction business.
\ Our consumer business, including Right2Drive.
Environmental, societal and corporate
governance
Environmental, societal and corporate governance
(ESG) continues to be a high priority at Eclipx Group.
Our partnership with the Clean Energy Finance
Corporation (CEFC) has continued, with the aim
of increasing the uptake of low emissions vehicles
across Australia. We have now financed more than
$48 million worth of vehicles in our clean energy
funding facility since its establishment in 2015.
Our fleet businesses have also undertaken initiatives
to help reduce their environmental impact, with
FleetPlus achieving carbon neutral status during FY18.
In New Zealand we have recently introduced hybrid
cars to our fleet offering (pictured, centre, on page 17).
Contributing to the communities we work and live
in continues to be valued across the Eclipx Group.
During FY18 our volunteering program was launched
and employees collectively donated their talent
and time to multiple not-for-profits. On an annual
basis our employees are encouraged to give back
by taking a day of volunteering leave to support a
cause they are passionate about.
Our people are also committed fundraisers and have
contributed thousands of dollars to various causes
through individual and team fundraising initiatives,
including Steptember, Fiver for a Farmer, Movember
and other personal challenges. You can read about
some of these contributions on page 23.
Our people
The Eclipx Group Board Directors has a breadth of
relevant expertise and skills and I thank each of
them for their commitment and contributions this
year. In January 2018 we welcomed Linda Jenkinson
onto the Board and in March we farewelled Greg
Ruddock. On behalf of the Board and on your behalf,
I welcome Linda to the Board and I thank Greg for
his outstanding contribution at Eclipx Group, since
our ASX listing three years ago.
Our diverse employee group across Australia and
New Zealand is what drives and grows our company
and the Board join me in thanking each of our team
members for their dedication and commitment to
the Eclipx Group.
We have committed to annually surveying our
employees and our 2018 engagement survey
confirmed the importance of workplace health and
safety, cross-Group communication, and gender
diversity in our business. Our latest survey results
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 Managing
Director’s Letter
Before I review our business and
financial performance in 2018 I’d
like to recap on our key strategies
to drive profitable growth and
shareholder returns.
This is particularly important in a world of increasing
change and volatility which has the capacity to
affect all of our businesses.
How we prepare for and manage rapid change is an
increasingly important asset for our Group relative to
the competition in our sectors from both domestic
and international players. The consistent execution
of these strategies underpins our performance.
In 2018 we made progress on a number of fronts and
there is more to do in 2019 and beyond.
1. Eclipx is purposefully designed to be a
diversified asset services business operating
across both the asset and customer life cycle.
Our integrated model is a competitive strength
and enables us to provide compelling value
propositions to our customers while driving
multiple income streams.
2. Customer satisfaction is our continued focus.
We understand the links between a high
net promoter score, recurring revenues and
sustained asset growth. We are proud to have
more than doubled our NPS over the last two
years to industry leading levels with scope for
further gains.
3. Technology investments drive growth,
customer satisfaction and cost efficiencies.
Eclipx has invested in core systems and
software across our businesses with new
portals, online initiatives and system
implementations. In 2018 we began to see the
benefit of our investment in IT over the last
four years and we accelerated our investments
in IT development to increase the rate at
which we will generate the benefits we need
to obtain to keep us ahead of our competition.
4. We leverage our expertise in treasury, funding
and risk management to sustain returns and
maintain performance through the cycle.
Eclipx has deep expertise in building diversified
funding lines. We will continue to be financially
conservative with careful risk controls.
2018 snapshot
During the 2018 Financial Year Eclipx Group
delivered profitable growth across all its activities
with a strong performance in the core Australian
commercial and fleet business. We delivered this
growth while also ensuring the ongoing integration
of previously acquired businesses.
At the same time we were challenged by headwinds
in both our GraysOnline and Right2Drive businesses
which caused us to announce a revised NPATA
Guidance and Market Update for FY18 in the range
of $77 million to $80 million (+13% to 17% on FY17).
I am pleased to report that our NPATA for the year
ended 30 September 2018 was up 14% on last year
to $78.1 million and within our revised guidance
range.
This result includes a continued strong increase in
the market share of our fleet businesses - with new
wins and recommitments from existing customers
- whilst also engaging GraysOnline to sell our used
fleet vehicles, boosting our end of lease results.
In response to changing market dynamics and
the drive for improved profit growth, Eclipx has
repositioned its consumer business focusing on
novated leasing, new car buying and trade-in
services.
Right2Drive expanded its reach into the consumer
and corporate direct car rental markets in the
latter half of the year, recording an 8% growth in
hire income during the year. This strategic change
is expected to result in improved fleet utilisation,
lower costs and improved cash flow.
GraysOnline continued its integration with the Eclipx
Group and during the Financial Year the business
experienced strong sales growth in its auto division
(+23% on pro-forma FY17). We believe Grays remains
well placed to benefit when the insolvency markets
activity improves and asset turnover increases in the
industrial market segment.
The Commercial Equipment Finance team in New
Zealand was successfully established and launched
and will be targeting the SME sector which will
contribute to its ongoing success in the future.
I am pleased to also report on successful pricing
of the 4th Australian Assets Securitisation (ABS
Eclipx Turbo Series 2017 – 1 Trust), closing materially
oversubscribed and allocated to 20 investors,
reducing the cost of funding on $351.5 million of
leased receivables.
On 19 December 2017 Eclipx took up the opportunity
to expand our portfolio further by acquiring Are
You Selling - a leading used car buying service
providing fast payments, convenience and reliability
5-6
People are at the heart of the Eclipx Group; our
customers, our employees, our executive team and
our Board.
Leading Eclipx’s 1,200+ people is a privilege and I am
proud of Eclipx’s ability to attract and retain the best
talent within all our operations.
Each employee has contributed to our growth, with
their curious and innovative approach to the market
over the past Financial Year. I personally thank them,
along with our senior management team and the
Board, for their ongoing support and contributions.
They each contribute to the success of Eclipx
and the following pages of our Annual Report
acknowledge the achievements of our team, along
with some of the highlights that have contributed
towards making Eclipx what it is today.
Finally, my thanks go to you, our shareholders, for
your continuing investment in the Eclipx Group.
Doc Klotz
Chief Executive Officer and Managing Director
to consumers across Australia who are selling their
used car. Are You Selling is set to become a core
capability required to support our re-positioned
consumer proposition, where the discounted
purchase of a new vehicle is core to the provision of
vehicle trade-ins, novated leasing and consumer car
loans.
Throughout FY18, as part of our ongoing investment
in technology, we successfully developed and
launched a range of Group-wide digital platforms
and projects to provide enhanced data and
efficiencies for our customers, including Miles, a
new fleet system, and Nitro, a new and improved
customer portal for fleet customers in Australia and
New Zealand.
Finally, as testament to our consistent and
exceptional customer service I am pleased to report
our most recent overall NPS score of +69 across the
Group.
Looking ahead
In our ever-changing world the need to reposition
for growth and disruption is at the forefront of
Eclipx’s strategy.
Our key priorities are to:
1. Generate superior return on capital employed,
including growing earnings from our recent
acquisitions. We have repositioned Right2Drive
with growth in hire volumes beginning to
result in higher utilisation. We are investing in
Grays Auto to generate volume growth, cash
flow and profitability.
2. Simplify the business and reduce costs. By
consolidating platforms, merging brands and
continuing the process of integration of our
businesses we will provide greater value to our
customers, whilst reducing our cost to income
ratio. These initiatives have commenced in FY19.
3. Continue to deliver industry leading
performance in our core Australian
commercial and fleet operations.
4. Expand our finance capability to transition
from our historic commercial customer focus
to acquiring a presence in the SME and
consumer markets.
5. Continue to invest in technology and business
intelligence to enhance our customer offerings
and utilise our unique data insights in fleet, in
driver analytics, at auctions, into asset values
and in risk management.
6. Deliver profitable growth across all our
segments in 2019.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018
Our History
Over more than 30 years the Eclipx Group has developed into an established
leader in fleet leasing and management, consumer finance, commercial
equipment finance, online auction services and diversified financial services
across Australia and New Zealand.
7-8
Australian company founded
as a joint venture between
ANZ and JMJ Fleet
ANZ acquires 100% of AVIS
Fleet NZ
ANZ acquires PL Lease
Management
Nikko sells FleetPartners to
GIC and Ironbridge
Rebranded as Eclipx Group
and listed on the ASX
Acquisition of GraysOnline
and Are You Selling
1987
1995
2001
2008
2015
2017
1990
1996
2006
2014
2016
2018
ANZ and Linfox form a joint
venture to establish an NZ
fleet business
ANZ acquires 100% of the
Australian and NZ joint
ventures
ANZ sells FleetPartners to
Nikko Investments
Significant executive
reorganisation
Acquisition
of Right2Drive
Start up of the NZ SME
Division
Acquisitions of FleetPlus and
CarLoans
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 Business Overview
Eclipx Group is an established leader in vehicle leasing, diversified financial
services, equipment leasing and management, and online auction services in
Australia and New Zealand. We offer consumers and businesses of all sizes
access to a diverse suite of solutions, including:
Fleet leasing and
management
Commercial
equipment finance
Novated
leasing
Vehicle sales, trade-
ins and consumer
motor finance
Car hire and medium
term accident
replacement vehicles
An online auction
marketplace for
industrial and
commercial assets,
used vehicles, wine,
AV and IT
Eclipx’s ecosystem
We are an ASX-listed company operating in Australia and New Zealand, providing a multi-touch and multi-
customer journey through the vehicle and equipment asset lifecycle.
Operating across both Australia and New Zealand,
FleetPartners and FleetPlus are leading providers
of fleet management, leasing and salary packaging
solutions. Utilising leading technology and decades
of expertise, innovative and tailored solutions are
provided to a diverse range of customers, including
multi-nationals, corporates, small to medium sized
businesses and individuals. In addition to its core
fleet services and novated leasing they also provide
solutions across accident management, short term
rentals, driver education and telematics, including
driver behaviour data and car pool bookings.
FleetChoice provides novated leasing and salary
packaging administration services for small to
medium sized organisations and their employees
across Australia, making reporting easy via a
combination of direct contact and online reporting
tools to streamline tax and compliance.
In addition to its core fleet and finance services,
it also assists customers to access a nation-wide
supplier network offering fleet discounts, full vehicle
servicing, maintenance and repairs.
Georgie offers a new way to buy new cars. Georgie’s
team of car buying specialists help customers find a
car deal that fits their lifestyle with the bulk buying
power of Eclipx Group and its experienced team.
CarLoans.com.au is an online service that assists
individuals to secure the best car loan to suit their
needs. The business sources loans from a wide
range of Australian lenders and recommends loans
that meet the individual requirements of each
customer. CarLoans can assist with secured loans, as
well as operating and finance leases.
Are You Selling is Australia’s leading used car buying
service providing fast payments, convenience and
reliability to its thousands of customers around
Australia, without the inconvenience of having to
visit dealerships or sell their car online.
9-10
Leveraging our scale,
technology, experience
and independence
E
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Against a backdrop of significant growth in the
Eclipx Group’s fleet businesses over the past four
years, we are continuing to invest in new business
and technology initiatives to generate multiple
income streams across the asset and customer
life cycle.
Our new car buying service, Georgie, was launched
at the beginning of the Financial Year as part of
this focus - the business matches customer needs
with the most appropriate new car to ensure
buyers get the right vehicle, the first time.
The Georgie team arranges test drives, manages
trade-ins and coordinates the delivery of new cars
for customers.
Operating 24 hours a day, 7 days a week from
locations across Australia and New Zealand,
Right2Drive provides “not at fault” drivers with
like-for-like loan vehicles after an accident. It also
supplies rentals to the corporate and leisure sectors
and has served more than 100,000 customers during
its brief history, with a customer satisfaction rating
of NPS +86 (amongst the highest in the world).
With a fleet of over 3,000 vehicles, including
more than 100 different makes and models (from
economy, to luxury SUVs and a wide range of utes
and vans), Right2Drive has a large and broad fleet of
vehicles to suit every need.
AutoSelect is the remarketing channel of
FleetPartners New Zealand’s end of lease stock.
With three branches nationwide – Auckland,
Wellington, and Christchurch, AutoSelect offers a
huge selection of over 400 vehicles direct to the
New Zealand retail market.
Providing peace of mind vehicle purchasing for the
retail buyer, most vehicles come with a full service
history and all AutoSelect vehicles receive a VTNZ
100 point check and/or an independent appraisal
from the Automobile Association.
As a specialist business equipment finance
company, Eclipx Commercial arranges finance
solutions for businesses of all sizes across Australia
and New Zealand, to enable them to lease or
purchase IT, office and manufacturing equipment.
Their leasing, line of credit and equipment rental
products are designed to assist businesses to free
up their cash flow and provide alternate solutions to
financing their equipment needs.
GraysOnline is the largest industrial and commercial
online auction business in Australasia, offering a
huge range of industrial, consumer and commercial
goods, direct from manufacturers and distributors.
GraysOnline offers one of the widest ranges
of products online; from motor vehicles,
manufacturing, construction, equipment and
transport, to IT, consumer electronics and wine.
For vendors, GraysOnline helps with all aspects of
a sale program; from valuations to cataloguing,
project management, marketing, health and safety
compliance and detailed reporting.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018
11-12
Building Australia’s largest buy, sell and hire ecosystem
GraysOnline entered into a 10-year
partnership with iSeekplant.com.au -
Australia’s largest online hire marketplace for
machinery owners - during the FY18 year.
This new partnership will see GraysOnline
providing auction services to iSeekplants’
6,000+ customers who have over 82,000
working hire assets, becoming Australia’s
largest buy, sell and hire ecosystem.
Thousands of construction industry
professionals use the iSeekplant website
each week to look for equipment to hire for
projects spanning residential construction,
civil, agriculture, mining, roads and
infrastructure.
E
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Business Overview
CO NT INUE D
Our approach
Eclipx is relentlessly focused on delivering high growth and strong performance
to benefit both customers and investors, through:
A COMMITMENT
TO CUSTOMERS,
FIRST
CUT-THROUGH
PROPRIETARY
TECHNOLOGY
A HIGHLY TUNED,
DIVERSIFIED
FUNDING MODEL
Delivering an outstanding
customer experience through
our commitment to customer
service and value-adding end-
to-end technology.
Offering first-to-market
innovation via online
technology solutions that
provide customers with a high
level of service across a broad
suite of products and services.
Providing customers with
access to funding via a capital
efficient, securitised funding
model that is both cost-
effective and low-risk.
We have established a vertically integrated finance business over the past
four years:
CUSTOMER ACQUISITION
FLEET LEASING & MANAGEMENT /
NOVATED LEASING
End to end outsourced solutions for companies
to manage and lease their fleet.
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 when 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.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018
G
N
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S
U
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Y
E
R
A
Capitalising on
Are You Selling’s
growth
Eclipx Group’s trade-in business, Are
You Selling, is Australia’s leading used
car buying service providing fast
payments, convenience and reliability
to its thousands of customers around
Australia. Established in 2012, Are You
Selling has experienced exceptional
growth, delivering an 80 per cent
increase in used car purchases year on
year and growing from one employee
to more than 30.
In late 2017 Eclipx acquired Are You
Selling and the team continue to use
innovative technology to enhance the
car selling experience for customers
in their own home, without the
inconvenience of having to meet with
potential buyers or visit dealerships to
sell their car.
Year in Review
For the year ending 30 September
2018 Eclipx managed or financed
117,060 vehicles with $2.4 billion in
assets under management, our Net
Operating Income (NOI) was $325.3
million (+27% on FY17) and Net Profit
After Tax and Amortisation (NPATA)
was $78.1 million (+14% on FY17).
The increase in NOI reflects strong growth in our
fleet and commercial businesses, underpinned
by continued solid end-of-lease (EOL) profit
performance and a full year contribution from
GraysOnline, offsetting some softness in the
Right2Drive and CarLoans businesses.
These results are in-line with the revised guidance
provided on 6 August 2018.
In FY18 Eclipx had $349 million in available
financing resources for growth having completed
a $65 million US private placement as part of its
corporate debt program. The placement was for a
seven year term with a fixed rate coupon, delivered
in AUD hedged with no exchange or interest rate
risk.
Acquisition of Are You Selling
On 19 December 2017, Eclipx Group acquired Car
Buyers Australia Pty Ltd, trading as AreYouSelling.
com.au which offers online ‘direct to consumer’
purchasing of used vehicles and the subsequent
on-sale of these vehicles.
This acquisition provides an additional vehicle
trade-in option for Eclipx customers and also
expands the GraysOnline vehicle sourcing footprint.
Car Buyers has recorded a profit before tax of
$1.1 million.
13-14
Customer service
accolades
FleetPlus received a prestigious Partner
for Growth Award in Customer Service
from Coca-Cola Amatil during the year,
in recognition of their partnership to
transform Amatil’s company-wide fleet.
As a result of this work Amatil reduced
their fleet costs, improved processes,
increased driver satisfaction and
safety, and reduced the frequency and
severity of accidents in their fleet.
Eclipx is improving business
performance through a focus on
enhancing and building customer
relationships, continuing to develop
technology, growing the consumer
segment and acquisitions.
S
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Our focus areas have included:
1. Growing the market share in the fleet business:
\ Relentless focus on excellence in customer
service and providing value added solutions.
2. Diversifying into adjacent markets:
\ Acquisitions of CarLoans, Right2Drive and
GraysOnline, providing opportunities for
Eclipx to increase parts of the fleet vehicle
value chain.
\ Diversifying earnings from a 100% traditional
fleet business to a business deriving income
from non-fleet activities of GraysOnline, Are
You Selling and Eclipx Commercial in Australia
and New Zealand.
3. Leveraging the Group’s funding expertise to
improve competitiveness:
\ Standalone warehouses to fund equipment
finance, consumers and state government
leases to optimise funding rates and capital
structures.
\ Diversifying funding sources to allow expansion.
\ Extending corporate debt and introducing
seven year funding into the corporate debt
structure of the Group.
4. Utilising efficiencies of scale and cross selling:
Eclipx is forecasting continued growth in FY19 by:
\ Introducing telematics devices to assist clients
in fleet management to reduce their operating
costs.
\ Growing the volume of new business writings
in fleet and capturing additional margin
through the vehicle life cycle.
\ Cross selling of equipment finance, operating
\ Expanding Eclipx Commercial in Australia and
leases and novated leases to clients.
New Zealand.
\ Leveraging the scale of the organisation to
realise supply chain improvements.
\ Consolidating the fleet businesses where this
will improve efficiencies and the customer
experience.
\ Continuing to invest in technology.
\ Growing the presence of Eclipx in the market.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018
Financial
Highlights
325.3 Million
NET OPERATING INCOME (NOI)
78.1 Million
NPATA (1)
2,432 Million
AUMOF (2) (CLOSING)
1,095 Million
NEW BUSINESS WRITINGS (NBW) (3)
24.7 Cents
CASH EPS (4)
16 Cents
DIVIDEND PER SHARE
117,060 Units
VUMOF
(1) NPATA is net profit after tax and tax adjusted add
back of amortisation of intangibles.
(2) AUMOF is assets under management or financed,
includes balance sheet and principal and agency
(P&A) funded assets.
(3) NBW excludes sale and leaseback agreements
totaling $23.9m in FY17 and $8.6m in FY18.
(4) Cash EPS is defined as each period’s NPATA
divided by the total weighted number of
ordinary shares on issue for that period.
27%
GROWTH PCP
14%
GROWTH PCP
9%
GROWTH PCP
11%
GROWTH PCP
-2%
GROWTH PCP
5%
GROWTH PCP
8%
GROWTH PCP
15-16
Performance and outlook
\ FY18 $78.1m NPATA is in line with revised guidance provided on
6 August 2018.
\ Profitable growth across all businesses, with strong performance
in core Australian commercial and fleet business.
\ Cash EPS down 2% reflecting underperformance in Grays and
Right2Drive, and increased number of shares on issue.
\ Efficiency gains underway with technology initiatives increasing
customer value proposition and reducing costs.
\ Fully franked final dividend of 8c per share payable 25 January 2019.
\ All segments expected to deliver revenue and NPATA growth in FY19.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018
Corporate Responsibility
and Sustainability
Corporate responsibility and sustainability is a high priority at Eclipx. Our 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
Corporate
governance
Developing
our people
Employee
engagement
Our
workforce
Diversity,
inclusion and
benefits
Community
support
Environment
Health and
safety
17-18
Values and integrity
Developing our people
The Board of Directors, as Eclipx’s highest
governance body, sets an expectation that Eclipx’s
values and ethical standards are reflected in our
operations.
Eclipx is committed to maintaining the highest
ethical standards in the conduct of its business
activities and has adopted a Code of Conduct that
applies to all Directors, employees, 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.
Corporate governance
The Eclipx Group Board is committed to
implementing the highest possible standards
of corporate governance and its underlying
commitment to excellence is enshrined in its
approach to governance.
The Board believes that sound governance is
fundamental to 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, 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, and the Risk Management Committee
identifies, assesses and reviews the key enterprise
risks and relevant mitigating control activities and
their effectiveness in accordance with our Risk
Management Framework.
The Workplace Health and Safety Committee
addresses workplace health and safety and
regulatory compliance, and the Project Steering
Committee governs the approval, scheduling and
execution of new project initiatives with 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’s Learning and Development team was
established in FY18 after the success of training
programs within Right2Drive and Georgie. The
positive results of these programs, along with
employee feedback from our 2017 engagement
survey, identified the need for a Group-wide
approach and support for increased employee
development initiatives.
Over our past Financial Year an analysis of
training needs has taken place along with the
implementation of a series of professional
development opportunities resulting in 3,500 hours
of face to face and online training for employees
on a variety of topics, including customer service,
resilience building, leadership coaching and strategy
development.
Eclipx employees are also offered compliance and
risk related training throughout the year on various
topics, including anti-money laundering, privacy,
fraud awareness, anti-bribery and corruption,
workplace health and safety, diversity and equality
and cyber security.
In FY18, Eclipx’s employees completed
approximately 5,000 hours of training on these
topics.
Employee engagement
Our commitment to employee engagement has
remained a top priority at Eclipx and we continue
to confidentially survey our employees annually
with the help of external consulting firm, Aon
Hewitt. Scores for our existing businesses continue
to improve on the whole and in FY18 employees
at GraysOnline and Car Buyers participated in the
survey for the first time.
The engagement survey is
an important measure of our
culture and inputs into our
priorities and initiatives.
Our people have confirmed that Eclipx’s managers
are supportive, we always make safety a priority
and diversity and inclusion is important to them.
Our focus areas, as a result of the survey, include
talent and staffing, effective communication, cross-
Group collaboration and agility.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 Our workforce
TURNOVER (%)
Voluntary (%)
Involuntary (%)
AGE DIVERSITY (%)
<20
20-29
30-39
40-49
50-59
60+
GENDER DIVERSITY
Group
Board (%)
Group Executive (%)
Management (%)
Individual (%)
Australia Only
Management (%)
Individual (%)
New Zealand Only
Management (%)
Individual (%)
* FY18 workforce figures include data from
GraysOnline and Car Buyers (AreYouSelling.com.au)
as new business acquisitions.
FY18
FY17
22
7
1%
24%
32%
23%
15%
5%
M
71
94
69
63
M
71
64
M
58
54
F
29
6
31
37
F
29
36
F
42
46
18
2
2%
28%
30%
22%
14%
4%
M
86
94
67
60
M
67
61
M
64
54
F
14
6
33
40
F
33
39
F
36
46
19-20
Building high
performing teams
Our Learning and Development team
introduced a new training program into the
business during the year to help leverage
and develop a number of high performing
teams within the Group.
Through structured workshop content and
real-life examples, participants created
clear and concise group objectives together
with a key set of actions to continue after
the workshops, with the aim of developing
each team and their outputs. The training
program will be rolled out across various
business units within Eclipx over the
coming year.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018
L
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M
M
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P
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21-22
Paving the way
for new talent
In our efforts to recruit and retain the best
talent, Eclipx Commercial Australia has
embarked on a formal traineeship program.
Their first trainee, Matthew Nicolopoulos,
commenced his one-year traineeship in
August 2018 while continuing his studies in
business management.
In his sales support role, Matthew is
supporting the Eclipx Commercial team
in data entry and settlements. It’s a
start in the business sector for the high
school graduate and a win-win for Eclipx
Commercial and Matthew: “This traineeship
has given me a big helping hand and
getting my foot in the door is a major
achievement.”
Diversity, inclusion and benefits
VOLUNTEER LEAVE
We encourage and support our employees to
engage with the communities they live and work
in, while also driving engagement and collaboration
amongst employees. One day of paid volunteering
leave is offered to all permanent and fixed term
employees (with a contract term of 12 months or
more) on an annual basis, so they can take time out
to support a cause they are passionate about as an
individual or as part of a team.
PARENTAL LEAVE
We offer 12 weeks of paid leave
for primary carers and one week
of paid leave for secondary
carers, along with flexible return
to work options.
We also offer an optional Keeping in Touch Plan
to employees on parental leave, including 10
optional Keeping in Touch working days. This
allows employees to transition more smoothly
back into their role and team, remain connected
to the business, become familiar with new or
updated processes, and able to maintain and
refresh their skills.
Eclipx also provides all employees with access to an
Employee Assistance Program.
Eclipx Group offers an inclusive work environment
for our diverse mix of employees regardless of their
gender, age, disability, ethnicity, marital or family
status, religious or cultural background, sexual
orientation or gender identity.
We also provide a supportive and rewarding
working environment that offers a range of
development opportunities and benefits:
INTERNAL MOBILITY
We aim to provide employees with meaningful work
and development opportunities across the Group’s
various brands. Internal mobility opportunities may
take the form of a secondment, permanent transfer
or relocation to a new office, state or country.
STUDY ASSISTANCE
We offer study assistance to employees as an
acknowledgement of our most important resource
- our employees and the knowledge, skills and
values they bring to work. The Group recognises
that the personal growth and development of our
employees improves individual and organisational
capability and is an integral part of the success of
our people and business.
FLEXIBLE WORK
We believe that fostering an environment in which
our employees can better integrate and balance
their work life and personal commitments will
ensure we can attract and retain a diverse and
talented workforce now and into the future. We
also recognise that this approach leads to greater
productivity, wellbeing and job satisfaction.
Empowering women
across Eclipx
Women in Eclipx (WINE) was officially launched
by a group of employees during FY18 to help
create development opportunities for the more
than 450 women working across Eclipx’s various
businesses.
The group’s vision is to inspire, develop and
empower Eclipx’s female employees by creating
networking, ideas sharing and mentoring
opportunities. A number of WINE events took
place over the year, including a presentation
and employee networking event with Eclipx
Board Director, and Order of Australia recipient,
Gail Pemberton.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018
Community support
Engagement with and support of the communities
we live and work in is a priority at Eclipx and we
continuously provide our people with opportunities
to participate in the environmental, social and
sustainability programs and causes they are
passionate about. Across our businesses employees
dedicate time, funds, skills and knowledge to help
various not-for-profits.
Eclipx employees participated in a number of
fundraising initiatives throughout FY18, including
‘Steptember’ for the second year running.
Steptember is an annual campaign to raise funds
and awareness for the Cerebral Palsy Alliance and
in 2018, more than 100 Eclipx teams across Australia
and New Zealand raised over $30,000 and took
more than 77 million steps.
As part of Eclipx’s commitment
to supporting our community
we launched paid volunteering
leave for employees in May 2018.
This benefit is open to all permanent and fixed term
employees (with a contract term of 12 months or
more), who are encouraged to take one day of paid
leave each year to volunteer with a community
organisation of their choice, as an individual or
within a team.
Since the program launched, until the end of
FY18, more than 460 hours were volunteered by
Eclipx employees across a range of activities; from
providing pro bono consulting services, to planting
trees, helping at food redistribution services,
supporting families with children in hospital,
volunteering at soup kitchens and local surf life
saving clubs, and organising clothing drives for
disadvantaged women.
Pictured below are employees from FleetPartners,
GraysOnline, Georgie, CarLoans and FleetChoice.
The team spent a day volunteering at Foodbank -
Australia’s largest hunger relief organisation which
provides 67 million meals a year to over 2,400
charities and 1,750 schools.
23-24
Supporting refugees
Right2Drive has continued to support
humanitarian refugees by providing casual
and permanent employment and support with
language programs, vocational interpreters
and agencies, to ensure successful skill
building and workplace integration.
One of these employees is Manhal Al Fadous
(pictured left), a Syrian refugee who arrived
in Australia in 2016 with his wife and three
children. A year later, Manhal was employed
by Right2Drive in Adelaide and has continued
his employment as a Client Services Executive:
“We fled Syria due to the war and spent a
couple of years in a refugee camp in Jordan,
where we were later accepted into the
Australian refugee program. Before the war I
owned a successful mobile phone company
and my wife was a university student. We look
forward to continuing our new and peaceful
beginning in Australia.”
Design-athon win to support children with autism
A team of six employees from across the
Eclipx Group participated in the Cerebral
Palsy Alliance’s ‘Enabled by Design-athon’ in
September 2018, in competition with several
other corporate teams. The hackathon-style
event challenges participants to create a
product prototype with the aim of helping
people with disability.
The Eclipx team - whose Design-athon team
name was ‘The Abled Explorers’ - were tasked
with creating a product to help motivate
children with autism to stay active. The team
chose to create an app called ‘Choose Your
Adventure’ which was focused on both
engaging children and parents in a fun way,
and creating a community of people affected
by autism.
In their pitch at the end of the two-day event
the team presented a live demonstration of
the app to a panel of judges and the event
audience. The team was successful in winning
the competition and have gone on to
progress the app in the hope it will become a
reality in the not too distant future.
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D
2
T
H
G
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P
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P
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ECLIPX GROUP LIMITED | ANNUAL REPORT 2018
25-26
Addressing our fleet businesses’
environmental impact
In FY18 Eclipx’s fleet businesses focused
on playing their part to reduce their
environmental impact.
FleetPlus achieved carbon neutral status
against the National Carbon Offset Standard,
by reducing its carbon emissions through the
introduction of efficiencies in electricity use,
air and road travel. The business then offset its
remaining emissions by investing in renewable
energy certificates and carbon credits.
FleetPartners also takes its commitment to
the environment seriously and in its first major
step to reduce its carbon footprint, it offset
the carbon emitted by its company car fleet
through partnering with a third party provider
to plant 860 native trees.
This initiative resulted in the establishment
of a bio-diverse forest which will offset 230
tonnes of CO2e, reduce soil degradation and
provide essential habitat for native wildlife
in the area. Employees from FleetPartners
(pictured below) also volunteered their time
to plant 3,000 native seedlings with a group of
other corporate volunteers during the year.
Environment
At Eclipx we have introduced a number of solutions
to help reduce our environmental impact and
climate risk.
Eclipx’s partnership with the Clean Energy Finance
Corporation (CEFC) has continued, with the aim
of increasing the uptake of low emissions vehicles
across Australia. We have now financed more than
$48 million worth of vehicles in our clean energy
funding facility, since its establishment in 2015.
Eclipx’s partnership with CEFC provides corporate,
government and not-for-profit fleet customers
with access to discounted interest rates when
choosing eligible low emissions passenger and light
commercial vehicles.
We also recycle at the majority of our business
locations through designated bins which separate
paper, organic and plastic waste for collection.
Empty toner cartridges and waste containers are
also recycled through a third party and e-waste is
either redirected or responsibly disposed of.
Eclipx has not received any fines during the
reporting period for non-compliance with
environmental laws and regulations.
Health and safety
Workplace health and safety is an important aspect
of Eclipx’s operations and we aim to create and
maintain safe environments for all stakeholders,
including employees, contractors, customers,
visitors and the communities in which we operate.
Eclipx employs a team of health and safety
professionals to implement our health and safety
systems and develop programs that guide our
compliance with applicable health and safety laws
and regulations. This supports the planned, orderly
and effective control of our health and safety
impact across the Eclipx Group.
We also ensure our people are proactively engaged,
contribute to and are accountable and responsible
for workplace health and safety performance
through ensuring they carry out hazard and risk
assessments, identify and control risks across our
sites and operations, and report all incidents and
near miss events.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 Board of Directors
Kerry Roxburgh
Doc Klotz
Garry McLennan
Gail Pemberton
27-28
Chairman and Independent Non-Executive
Director since 26 March 2015
Chief Executive Officer and Managing Director
since 27 March 2014
Deputy Chief Executive Officer,
Chief Financial Officer and Executive Director
since 27 March 2014
Independent Non-Executive Director
since 26 March 2015
Doc Klotz has over 25 years’ experience in senior
executive roles in financial services and travel in
Australia, New Zealand and the United States.
Prior to joining Eclipx in 2014 Doc was Head of
Operations at FlexiGroup, an ASX 200 company. Doc
has also had senior executive experience with Travel
Services International, Hotels.com and Expedia, Inc.
in the United States.
Garry McLennan has over 40 years’ corporate and
financial services experience, 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.
Kerry Roxburgh has more than 50 years’ experience
in the financial services industry. He is currently
Chairman of Tyro Payments Ltd and is the lead
Independent Non-Executive Director of Ramsay
Health Care Ltd. He is also a Non-Executive Director
of the Medical Indemnity Protection Society and
MIPS Insurance Ltd, and was previously a member
of the Advisory Board of AON Risk Solutions in
Australia.
Kerry was previously CEO of E*TRADE Australia and
was subsequently Non-Executive Chairman until it
was acquired by ANZ in 2007. 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, Kerry spent 20 years as a Chartered
Accountant with HLB Mann Judd and previously at
Arthur Andersen.
Kerry 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 company: Ramsay Health Care Ltd
(appointed July 1997).
Gail Pemberton’s executive roles have included
Chief Operating Officer UK at BNP Paribas Securities
Services and CEO and Managing Director, BNP
Paribas Securities Services, Australia and New
Zealand. Gail joined BNP Paribas after a highly
successful 20-year career at Macquarie Bank,
where she held the role of Group CIO for 12 years
and subsequently as COO of the Financial Services
Group in her last three years at Macquarie.
Gail’s current Board roles include Non-Executive
Director of Eclipx (ASX:ECX) and Prospa. She has
also worked with both the Federal and NSW
Government in the past as an independent adviser
on major transformation programs and talent and
capability enhancement. She previously served on
the Boards of Melbourne IT (ASX:MLB), OneVue
(ASX:OVH), SIRCA and RoZetta Technology and
Onthehouse (ASX:OTH) as independent Chair,
and as a Candidate Non-Executive Director of the
Colonial First State Group (being demerged from
Commonwealth Bank of Australia ASX:CBA) and
as Non-Executive Director for PayPal Australia,
QIC, UXC (ASX:UXC), Baycorp, Alleron Funds
Management, Air Services Australia, the Sydney
Opera House Trust and Harvey World Travel
(ASX:HWT).
Gail was awarded the Order of Australia (AO) in the
2018 Australia Day Honours list for distinguished
service to the finance and banking industry, to
business through a range of roles, as an advocate
for technology, and as a mentor to women.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 Board of Directors
CO NT INUE D
Trevor Allen
Russell Shields
Linda Jenkinson
Corporate Directory
29-30
Independent Non-Executive Director
since 26 March 2015
Independent Non-Executive Director
since 26 March 2015
Russell Shields has more than 35 years’ experience in
financial services, including six years as Chairman of
ANZ Bank, Queensland and Northern Territory.
Prior to joining ANZ, Russell held senior executive
roles with HSBC, including Managing Director Asia
Pacific – Transport, Construction and Infrastructure
and State Manager Queensland, HSBC Bank
Australia. He was previously Chairman of Onyx
Property Group Pty Ltd.
During the last three years Russell has also served as
a Director for the following listed companies: Aquis
Entertainment Ltd (appointed August 2015) and
Retail Food Group Ltd (resigned October 2018).
Trevor Allen has over 40 years’ 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 and
Freedom Foods Group Ltd and a Non-Executive
Alternate Director, Company Secretary and Public
Officer of Australian Fresh Milk Holdings Pty Ltd and
Fresh Dairy One Pty Ltd. He is also a Non-Executive
Director of Topco Investments Pty Ltd, the holding
company of Real Pet Food Company Limited.
Prior to undertaking non-executive roles in 2012,
Trevor held 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.
Trevor 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.
During the last three years Trevor has also served
as a Director for the following companies: Aon
Superannuation Pty Ltd (resigned August 2016),
Yowie Group Ltd (resigned January 2018) and
Brighte Capital Pty Ltd (resigned June 2018).
Eclipx Group Limited
ACN 131 557 901
Eclipx Group is listed on the Australian
Securities Exchange under the ASX code
of ECX.
Directors
Kerry Roxburgh – Chairman
Doc Klotz
Garry McLennan
Gail Pemberton
Trevor Allen
Russell Shields
Linda Jenkinson
Group General Counsel
and Company Secretary
Matthew W. Sinnamon
Registered Office and
Principal Administration Office
Level 32, 1 O’Connell Street
Sydney, NSW 2000
T: +61 2 8973 7272 | F: +61 2 8973 7171
Share Registry
Link Market Services Limited
Level 12, 680 George Street
Sydney, NSW 2000
T: +61 2 8280 7100 | F: +61 2 9287 0303
Auditor
KPMG
Tower 3, International Towers Sydney
300 Barangaroo Avenue
Sydney, NSW 2000
T: +61 2 9335 7000 | F: +61 2 9335 7001
Corporate Governance Statement
For a copy of Eclipx’s Corporate Governance
Statement visit:
investors.eclipxgroup.com/Investor-Centre
Independent Non-Executive Director
since 4 January 2018
Linda Jenkinson is a proven global entrepreneur
who has started three multi-national companies,
one of which listed on the NASDAQ.
Most recently she was the co-founder of John Paul,
a global concierge services and digital solutions
company that services some of the world’s leading
customer facing businesses.
Linda is currently a Director of Guild Group Holdings
and Air New Zealand (AIR) in New Zealand, a
Director of Harbour Asset Management and the
Director and Secretary of the Massey Foundation
in New Zealand and the United States. Previously
she was a partner at A.T. Kearney in their Global
Financial Services Practice and was a leader in A.T.
Kearney Global Sourcing Practice.
Linda holds a Master of Business Administration
from The Wharton School, University of
Pennsylvania and a Bachelor of Business Studies
from Massey University.
In 2016, Linda was named a World Class New
Zealander by Kea and as one of the most influential
women in the Bay Area for 2014 by the San
Francisco Business Times.
In 2014 Linda was a recipient of Massey University’s
Sir Geoffrey Peren Award, which recognises a
graduate who has reached the highest level of
achievement or who has been of significant service
to the university, community or nation.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 Financial
Report
for the year ended
30 September 2018
Directors’ Report
Lead Auditor’s Independence Declaration
32
50
Letter from Remuneration and Nomination Committee (unaudited) 51
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
Directors’ Declaration
Independent Auditor’s Report
52
69
70
71
72
73
77
77
80
81
83
84
86
89
89
91
92
93
93
96
96
97
103
103
104
106
108
108
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109
114
115
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116
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31-32
Directors’ Report
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 2018.
1. DIRECTORS
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
GAIL PEMBERTON
MA (UTS), FAICD, GCERT FIN
Chairman since 26 March 2015, Independent Non-
Executive Director 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.
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 Kerry also served as a Director for the
following listed company: Ramsay Health Care Ltd
(appointed July 1997).
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).
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 Directors’ Report
CONTINUED
TREVOR ALLEN
BCOM (HONS), CA, FF, FAICD
LINDA JENKINSON
BBS, MBA
RUSSELL SHIELDS
FAICD
IRWIN (‘DOC’) KLOTZ
33-34
Independent Non-Executive Director since 26 March
2015.
Independent Non-Executive Director since
4 January 2018.
Mr Trevor Allen has over 40 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 and
Freedom Foods 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. He is a Non-Executive
Director of Topco Investments Pty Ltd, the holding
company of Real Pet Food Company Limited.
Prior to undertaking non-executive roles in 2012,
he held 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.
During the last three years Trevor also served
as a Director for the following companies: Aon
Superannuation Pty Ltd (resigned August 2016),
Yowie Group Ltd (resigned January 2018) and
Brighte Capital Pty Ltd (resigned June 2018).
Ms Jenkinson is a proven global entrepreneur who
has started three multi-national companies, one
of which listed on the NASDAQ. Most recently she
was the co-founder of John Paul, a global concierge
services and digital solutions company that services
some of the world’s leading customer facing
businesses.
Ms Jenkinson is currently a director of Guild
Group Holdings and Air New Zealand (AIR) in New
Zealand, a director of Harbour Asset Management
and the director and secretary of the Massey
Foundation in New Zealand and the United States.
Previously Ms Jenkinson was a partner at A.T.
Kearney in their Global Financial Services Practice
and was a leader in A.T. Kearney Global Sourcing
Practice. Ms Jenkinson holds a Master of Business
Administration from The Wharton School, University
of Pennsylvania and a Bachelor of Business Studies
from Massey University.
In 2016, Ms Jenkinson was named a World Class
New Zealander by Kea and was named as one of
the most influential women in the Bay Area for 2014
by the San Francisco Business Times. In 2014 Ms
Jenkinson was a recipient of Massey University’s Sir
Geoffrey Peren Award, which recognises a graduate
who has reached the highest level of achievement
or who has been of significant service to the
university, community or nation.
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 40 years’ of corporate
and financial services experience 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.
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. 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
(resigned October 2018).
GREG RUDDOCK
BCOM (UWA)
Non-Executive Director resigned 31 March 2018.
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).
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 Directors’ Report
CONTINUED
2. COMPANY SECRETARY
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 2018 Financial Year and the number
of meetings attended by each Director. During the year a total of 17 Board meetings, five Audit and Risk
Committee meetings and five Remuneration and Nomination Committee meetings were held.
Board
Audit and Risk
Committee
Remuneration and
Nomination Committee
35-36
4. REVIEW OF OPERATIONS
Business acquisitions
On 19 December 2017, the Group acquired Car Buyers Australia Pty Ltd trading as areyouselling.com.au (“Car
Buyers”). The principal activity of the business acquired is the online direct to consumer purchasing of used
vehicles and the subsequent on sale of these vehicles. The Car Buyers acquisition provides an additional
vehicle trade-in option for Eclipx customers and also expands the Grays vehicle sourcing footprint. Car Buyers
recorded a profit before tax of $1.1m 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 2018 Eclipx managed or
financed in excess of 117,000 vehicles across Australia and New Zealand.
In Australia the Group operates under ten primary brands: FleetPartners, FleetPlus, FleetChoice, CarLoans.com.
au, Right2Drive, Eclipx Commercial, Onyx, GraysOnline.com, Georgie and areyouselling.com.au.
In New Zealand the Group operates under five primary brands: FleetPartners, FleetPlus, CarLoans.co.nz,
Right2Drive and AutoSelect.
Director
Held
Attended
Held
Attended
Held
Attended
Business model
Kerry Roxburgh
Gail Pemberton
Trevor Allen
Russell Shields
Gregory Ruddock
Linda Jenkinson
Garry McLennan
Doc Klotz
17
17
17
17
7
12
17
17
17
17
17
16
7
12
17
17
5
2
5
5
3
-
-
-
5
2
5
5
3
-
-
-
5
5
5
-
-
1
-
-
5
5
5
-
-
1
-
-
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 finder fees for introducing individuals to car dealerships, when they use the car buying
services of Georgie;
\ Eclipx earns revenue on the sale of ex-fleet vehicles and on the sale of vehicles it has purchased through
areyouselling.com.au;
\ Eclipx earns management and maintenance fees, ancillary revenue from related products and services
and end of lease income;
\ 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.
Whilst a non-IFRS disclosure, 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 online and word of mouth business-to-consumer. The Group drives profitability by
managing revenue, income generating assets, credit quality and operating expenses.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018
Directors’ Report
CONTINUED
4. REVIEW OF OPERATIONS (continued)
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 almost 100 years of 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 45m 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 a competitive advantage by upgrading and
consolidating IT platforms, infrastructure and apps.
Sales and distribution
Eclipx has created 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.
37-38
Group financial performance
The table below shows the key financial performance metrics for the 2018 Financial Year of the Group and its
segments:
Australia
Commercial
Australia
Consumer
Grays
New Zealand
Commercial
2018
$'m
129.8
2017
$'m
121.9
2018
2017
2018
2017
2018
2017
$'m
79.4
$'m
79.6
$'m
77.2
$'m
14.1
$'m
38.9
$'m
39.7
Total
2018
$'m
2017
$'m
325.3
255.3
Net operating income
Operating expenses
(66.4)
(61.0)
(52.3)
(55.3)
(60.4)
(11.2)
(25.7)
(22.7)
(204.8)
(150.2)
Holding company
debt interest
Expenses not reflecting
ongoing operations
(6.8)
(5.1)
(4.6)
(1.6)
(2.2)
(0.7)
(1.2)
(1.8)
(14.8)
(9.2)
(0.5)
-
(3.9)
(0.3)
(7.0)
(11.7)
-
-
(11.4)
(12.0)
Amortisation of intangibles
(4.1)
(4.2)
Tax
(12.6)
(14.3)
Statutory net profit after tax
39.4
37.3
(3.0)
(4.0)
11.6
3.0
(2.7)
(6.0)
13.7
0.2
(3.1)
(1.2)
3.3
4.8
(0.5)
2.6
(7.4)
8.2
(1.1)
(3.0)
7.9
-
(0.6)
(4.0)
10.6
-
0.7
0.7
1.1
0.2
0.4
0.4
(11.3)
(8.0)
(20.8)
(21.7)
62.2
54.2
8.1
4.1
8.4
3.4
0.3
1.9
-
2.1
41.6
39.4
15.3
14.6
9.2
1.0
8.3
11.0
74.4
66.0
1.0
0.8
1.2
1.3
1.2
0.2
0.3
-
3.7
2.3
Cash NPATA
42.6
40.2
16.5
15.9
10.4
1.2
8.6
11.0
78.1
68.3
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 adjustments for costs that do not reflect the ongoing operations of the
business. Consistent with prior periods the adjustments for 2018 and 2017 relates to costs associated with acquisitions and
significant business restructuring.
Net operating income
Net operating income is the sum of revenue less cost of revenue, lease finance costs and impairment losses.
The growth in net operating income of $70.0m is largely as a result of the Grays segment ($63.1m), which has
been part of the Group for the full year for 2018 compared to approximately 2 months in the comparative
period. The Australia Commercial segment experienced growth as the Group continued to grow the
contribution from Eclipx Commercial Finance and the fleet business in Australia.
Operating expenses
Operating expenditure has increased $54.6m compared to the prior period. The increase in operating
expenditure is predominantly as a result of the acquisition of Grays that occurred in August 2017, which
resulted in part year consolidation in 2017 and a full year consolidation in 2018. This provided $49.2m of the
total growth in operating expenses. The Group incurred additional expenditure as it expanded into the New
Zealand SME market with the launch of Eclipx Commercial Finance.
Holding company debt interest
The increase of $5.6m in holding company debt interest occurs as a result of the incremental borrowings under
the facility. The amounts drawn under the facility increased from $254.8m to $340.2m. The increase in holding
company debt interest of $5.6m relates to the portion of holding company debt that was not allocated to the
funding of leases through the warehouse funding structure.
Expenses not reflecting ongoing
operations (post tax)
Amortisation of acquired
intangibles (post tax)
Cash net profit after tax
including amortisation of
software
Software amortisation
(post tax)
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018
Directors’ Report
CONTINUED
4. REVIEW OF OPERATIONS (continued)
Expenses not reflecting ongoing operations
Expenses not reflecting ongoing operations relate to costs incurred in the Group that will not be ongoing
as they relate to an acquisition of a business or a restructure in the Group. This would include amounts paid
associated with redundancies, exit payments for contracts and premises and the recognition of any onerous
contracts associated with the restructure.
The table below reflects theses expenses:
Cost description
Transaction related costs Car Buyers
Transaction related costs Grays
Transaction related costs Onyx
Restructuring costs Right2Drive
Restructuring costs Fleet
Restructuring costs Grays
Total
2018
$’m
0.5
0.4
-
3.3
0.4
6.8
11.4
2017
$’m
-
8.3
0.3
-
-
3.4
12.0
Transaction costs related to Car Buyers relates to costs incurred associated with the successful acquisition of
Car Buyers, these costs include due diligence work and deal completion costs to conclude the acquisition of
the business where the costs are of a non-recurring basis.
Transaction costs related to Grays relates to costs incurred associated with the successful acquisition of
Grays: these costs include due diligence work, deal completion costs, advisor’s fees and costs to conclude
the acquisition the business. For 2018 additional costs were recognised which related to matters directly
associated with the Grays acquisition where the costs are of a non-recurring basis.
Transaction costs related to Onyx relates to costs incurred associated with the successful acquisition of Onyx,
these costs include due diligence work and deal completion costs to complete the acquisition where the costs
are of a non-recurring basis.
Restructuring costs Right2Drive relate to material costs the Group incurred associated with redundancies,
exit payments for contracts and licenses which the business incurred as a result of implementing a new car
rental system. The new car rental system replaces manual processes, enhances the customer experience and
provides a platform to expand product offering.
Restructuring cost Fleet relates to costs incurred across Australia and New Zealand associated with
redundancies.
Restructuring costs Grays relates to terminating suppliers and vendor contracts $1.8m, centralising operational
functions $3.7m and integrating Grays into the Group $1.3m. For 2017 costs incurred relate to the costs
associated with exiting unprofitable lines and the integration costs as Grays integrated operations in the
Group.
The costs incurred by the Group are in line with the acquisition strategy regarding Grays and these items have
been expensed in accordance with the accounting standards.
39-40
Amortisation of intangibles
Amortisation of intangibles includes costs associated with the amortisation of acquired intangibles related
to brand names and customer relationships and amortisation associated with software including acquired
software recognised at the time of acquiring a business and software which the Group has implemented.
Amortisation of intangibles has increased by $3.3m as a result of the amortisation of acquired intangibles
relating to the Grays and Car Buyers acquisitions $1.2m and amortisation of software $2.1m.
Tax
The Group had an effective tax rate of 25% (2017:28.6%). The Group is liable for tax in Australia and New
Zealand where the tax rates are 30% and 28% on taxable earnings. The major reason for the effective tax rate
being below the 30% tax rate is:
\ The Group receives profits from New Zealand businesses which are taxed in New Zealand at an effective
tax rate of 28% and
\ The Group recognised a deferred tax asset in relation to an assessable loss that previously was not
recognised as the ability to utilise the assessable loss was not certain.
Statutory net profit after tax
The statutory profit for 2018 has increased to $62.2m; this represents a growth of $8.0m against the prior
period. The Group has experienced growth in revenue as a result of the full year contribution from Grays
and growth in fleet and equipment finance. The growth in revenue has been partially offset by incremental
operating costs, corporate debt interest and amortisation of intangibles.
Expenses not reflecting ongoing operations (post tax)
The Group assesses its performance on a Cash NPATA basis. Cash NPATA is calculated by adding back the after
tax effect of expenses not reflecting ongoing operations.
Amortisation of acquired intangibles (post tax)
The Group adds back the after tax effect of the amortisation of acquired intangibles to calculate Cash NPATA.
Software amortisation (post tax)
The Group adds back the after tax effect of the amortisation of software to calculate Cash NPATA. Software
amortisation has increased as a result of the software recognised at the time of acquiring Grays $1.5m pre tax
($1.1m post tax) and amortisation of software implemented in 2018.
Cash NPATA
Cash NPATA has increased by $9.8m as a result of an increase in statutory earnings $8.0m, increase post tax
adjustments of amortisation of intangibles associated with the acquisition of Grays and software $2.3m and a
decrease in restructuring and acquisitions related costs of $0.5m post tax.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 Directors’ Report
CONTINUED
4. REVIEW OF OPERATIONS (continued)
Segment results
With the growth and diversification of the Group an additional segment has been disclosed. In the
accompanying financial report Eclipx has identified and disclosed the results of four operating segments:
Australia
Commercial
Australia
Consumer
Grays
New Zealand
Commercial
Description
\ Vehicle fleet
leasing and
management
business
\ Novated leasing
and the facilitation
of consumer
finance for cars
\ Commercial
\ Medium term
equipment finance
and leasing
rental to “not at
fault drivers”
\ Auctioneering and
valuation services
\ Vehicle fleet
leasing and
management
business
\ Commercial
equipment finance
and leasing
Brands
FleetPartners
FleetPlus
Eclipx Commercial
GraysOnline.com
FleetPartners
FleetPlus
AutoSelect
Eclipx Commercial
FleetPartners
FleetPlus
FleetChoice
CarLoans.com.au
Right2Drive
Onyx
Georgie
areyouselling.com.au
41-42
Australia Commercial
The Australia Commercial segment has reported a Cash NPATA of $42.6m (2017:$40.2m). The segment has
achieved growth in net operating income of $7.9m.
The segment has seen growth of 6% in new business writings. Fleet achieved a growth of 3% and equipment
finance achieved a growth of 29%. The growth in equipment finance has been underpinned by an investment
in a credit platform that has delivered faster credit approval times. The focus on the small medium enterprise
and mid-market customer base has allowed the segment to increase its new business yields. The segment has
leveraged the full Group capabilities by providing car buying, trade-in and auction services to the corporate
customers who own and manage their own fleets.
The segment has increased operating costs to support the growth in assets under management or finance and
will be gaining efficiencies with the investment in automation and improved processes.
Australia Consumer
This Australia Consumer segment has reported Cash NPATA of $16.5m (2017:$15.9m). The segment has achieved
growth with the launch of Georgie and the acquisition of Car Buyers and growth in new hires in the Right2Drive
business. The segment has been impacted by reduced accident rates due to reduced weather events, auto
insurers entering the credit hire market and the lowering of commissions being earned on the sale of finance
and insurance products. To address the impact in net operating income the segment has addressed the
operating costs. Right2Drive has undergone restructuring as a result of the implementation of a new rental
system which will allow for greater efficiency. The segment has invested in technology and has reviewed
processes to improve the customer experience and to lower costs. The segment will be activating a single-
agent sales model to offer a full suite of products including car-trade-ins, consumer finance, novated solutions
and insurance.
Net operating
Grays
$’m
40%
Income 40+
NPATA 55+
Contributions
to Cash
129.8
55%
24%
M 40+
M 55+
79.4
21%
24%
M 64+
M 76+
13%
77.2
12%
M 88+
M 89+
38.9
11%
$’m
42.6
16.5
10.4
8.6
The Grays segment has reported Cash NPATA of $10.4m, Grays was acquired on 11 August 2017 and the
numbers reported for the prior period relate to a partial period. Grays has successfully refocused the business
on profitable channels and asset categories. For example, Grays launched Grays Finance offering finance to
corporates and consumers and launched a proprietary e-tender B2B platform to sell high quality ex-fleet
vehicles and vehicles acquired through Car Buyers.
GraysOnline auction activity was affected both by a ten-year low in bank-initiated insolvencies in Australia and
the current buoyant construction sector where large plant and equipment is being deployed for longer periods
in infrastructure projects, resulting in reduced auctioned equipment disposals.
New Zealand Commercial
The New Zealand Commercial segment has reported Cash NPATA of $8.6m (2017:$11.0m). The Cash NPATA for
2018 includes costs of $3.3m relating to the launch of Eclipx Commercial Finance in New Zealand. The focus of
Eclipx Commercial Finance will be on the small medium enterprises and mid-market customers and will provide
finance for fleet and non-fleet assets. The business commenced in November 2017.
The segment has achieved a 13% growth in new business writings as a result of the expansion in New Zealand
and the retention of key fleet customers on sole supply agreements. 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 wholesale disposal options and has expanded
its retail locations in Auckland, Wellington and Christchurch. The segment has successfully migrated its
fleet systems and has integrated the fleet and commercial equipment platform, which will allow for greater
efficiency.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018
60
+
24
+
36
+
24
+
12
+
12
+
M
45
+
21
+
24
+
13
+
11
+
11
+
M
Directors’ Report
CONTINUED
5. FINANCIAL POSITION
The Group financial position as at 30 September 2018 is summarised below:
Summary of financial position
Cash and cash equivalents
Restricted cash and cash equivalents
Receivables and other assets
Inventory
Leases
Intangibles
Other
Total assets
Borrowings
Trade and other liabilities
Provision
Other
Total liabilities
Net assets
Receivables and other assets
2018
$'m
62.1
146.2
208.9
38.6
1,597.6
829.6
16.5
2,899.5
1,814.3
118.2
13.7
53.3
1,999.5
900.0
2017
$'m
59.1
136.2
138.5
25.2
1,496.4
806.6
16.9
2,678.9
1,610.4
123.6
19.9
61.7
1,815.6
863.3
43-44
Prepayments includes amounts paid for legal services relating to the collection of credit hire receivables,
prepayments of Group insurances, inventory still to be received and prepayments associated with auction
proceeds.
Inventory
Inventory has increased by $13.4m as a result of an increase in fleet vehicles returning to the Group at the end
of the lease period and the acquisition and growth of Car Buyers.
Leases
Leases have increased against the prior period by $101.2m. This increase is attributable to the increased
business writings that have been experienced in Australia and New Zealand. 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 2018 is $3.8m (2017: $3.5m).
Borrowings
Borrowings for 2018 include an amount of $340.2m (2017: $254.8m) relating to corporate debt. The additional
borrowings received from the corporate debt were utilised to fund the acquisition of Car Buyers, fund the
growth of the lease portfolio either through additional capital into its warehouse or by funding some assets on
balance sheet, support the growth in trade receivables in the credit hire business and fund the investment in
technology. The remaining borrowings are associated with additional funding into the warehouse by external
parties.
Provisions
The decrease in provisions of $6.2m predominantly relates to the finalisation of the Gray’s acquisition
accounting. In the first half of the Financial Year the Group had a decrease in provisions of $6.5m. For the
second half of the Financial Year the Group recognised additional provisions associated with staff annual leave
and long service leave.
The growth in receivables and other assets of $70.4m is attributable to the following.
Cash flows
Receivable and other assets
Credit Hire receivables and billings in progress
Car Buyers (new business acquired)
Fleet receivables
Prepayments
Current tax receivable
Auction debtors
Other
Total
$'m
27.6
10.3
12.0
11.9
1.8
4.5
2.3
70.4
Fleet receivables has increased with the growth of the fleet and the amount outstanding at the end of the
year associated with the inventory sales that occurred in September.
Credit hire receivables and billings in progress has grown as the timing for settlement from insurers has
increased. The Group has experienced an improvement in the claims percentage to invoice but has noted an
increase in the period to settlement. The group is actively pursuing aged accounts and is also moving towards
long term arrangements covering utilisation, rates and collection periods with a number of general insurers.
Car Buyers was acquired in December 2017 and the growth in receivables is due to the growth in the business
coupled with the business acquisition.
For the Financial Year ended 30 September 2018, the Group increased the total cash holdings including
restricted cash by $13.0m (2017: $17.0m). The significant items impacting cash flow this year were:
\ The payments of dividends $31.2m;
\ Additional investment in software and property, plant and equipment $32.9m;
\ Acquisition and growth in Car Buyers $19.4m;
\ Growth in receivables excluding the growth in Car Buyers $60.1m; and
\ The inflow of $85.4m received from the corporate debt.
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 2018, Eclipx had undrawn debt facilities of
$286.8m (2017: $215.6m).
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).
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 Directors’ Report
CONTINUED
6. BUSINESS STRATEGIC OBJECTIVES
7. KEY RISKS
45-46
Eclipx is focused 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.
Diversify into adjacent markets
Leverage the Group’s funding expertise to improve
competitiveness
• Expanded into the state government and large corporate
markets.
• Acquisitions of CarLoans, Right2Drive and GraysOnline
which are businesses that are growth opportunities and are
complementary to the Eclipx fleet business.
• Diversified earnings from a 100% traditional fleet business
to a business deriving income from non-fleet activities of
Grays, areyouselling.com and Eclipx Commercial Finance in
Australia and New Zealand.
• Standalone warehouses to fund equipment finance,
consumers and state government leases to optimise
funding rates and capital structures.
• Diversified funding sources to allow expansion.
• The Group extended its Corporate debt and has introduced
a seven year funding into the Corporate debt structure of
the Group.
Utilisation of efficiencies of scale and cross selling
• Introduction of telematics devices to assist clients in fleet
management to reduce their 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.
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 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 may be exposed to increased funding costs due to
changes in market conditions
• 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
Eclipx may be affected by changes in fringe benefits tax
legislation in Australia
drawing 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.
• Eclipx has diversified the consumer segment to include
non-novated services so as to provide alternative product
offerings to consumers.
Eclipx may be unable to access funding on competitive
terms
• 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.
Grays is subject to earnings volatility in the banking,
insolvencies and financing division
• Grays has diversified earnings by introducing the sale of
insurance and finance solutions to customers.
The credit hire industry is a developing market in Australia
and New Zealand
• Grays has grown the auto division, which has less volatility
of earnings.
• Grays will continue to strengthen relationships in this
market.
• Right2Drive has educated the public regarding their legal
rights which are supported by legal precedent to having a
not at fault replacement vehicle.
• Right2Drive will provide vehicles at market rates and
has collection policies and procedures in place to collect
amounts outstanding.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 Directors’ Report
CONTINUED
8. OUTLOOK
For the Financial Year ended 30 September 2018 Eclipx has been able to grow the assets under management
or financed and grow the customer and client base. The Group has integrated and restructured Grays in
accordance with the business plan developed as part of the acquisition strategy.
For the 2019 Financial Year Eclipx is forecasting to continue to achieve growth, and this will be achieved by:
\ Growing the volume of new business writings in fleet, and to capture additional margin through the
vehicle life cycle;
\ Expand the business in Eclipx Commercial Finance in New Zealand and Australia;
\ Consolidate the fleet businesses where this will improve efficiencies and the customer experience;
\ Continue to invest in technology; and
\ Growing the presence of Eclipx in the market.
9. SUBSEQUENT EVENTS
On 8 November the Group signed a Scheme Implementation Agreement with McMillan Shakespeare Limited
(“MMS”ASX: MMS) to merge the companies to establish a leading salary packaging and fleet company. The
proposed merger, which is subject to Eclipx shareholders approving the scheme, will be implemented by MMS
acquiring all shares in Eclipx. Under the terms of the merger, Eclipx shareholders will receive 0.1414 MMS shares
plus 46 cents cash for each Eclipx share. Under the proposed timetable, a Scheme Booklet is expected to be
circulated to all Eclipx shareholders in December 2018 / early January 2019 and an Eclipx Scheme Meeting to
consider the Eclipx Scheme is likely to be scheduled for February 2019. Subject to conditions defined within the
Eclipx Scheme being satisfied, MMS and Eclipx anticipate the merger to complete in the first quarter of 2019.
On 13 November 2018 the Board declared a fully franked dividend of 8.00 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.
11. ENVIRONMENTAL FACTORS
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.
47-4 8
12. DIVIDENDS
Dividends paid during the Financial Year were as follows:
2018
$'000
2017
$'000
Fully franked final dividend for the year ended 30 September 2017 of 7.75 cents
per ordinary share paid on 19 January 2018 and
24,335
18,514
Fully franked interim dividend for the year ended 30 September 2018 of 8.00
cents per ordinary share paid on 2 July 2018.
25,319
49,654
19,897
38,411
On 13 November 2018, the Directors declared a fully franked final dividend for the year ended 30 September
2018 of 8.00 cents per ordinary share, to be paid on 25 January 2019 to eligible shareholders on the register
as at 14 December 2018. This equates to a total estimated dividend of $25,570,935 based on the number of
ordinary shares on issue as at 30 September 2018. The financial effect of dividends declared after the reporting
date are not reflected in the 30 September 2018 financial statements and will be recognised in subsequent
financial reports.
13. INDEMNIFICATION OF DIRECTORS AND OFFICERS
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
14. NON AUDIT SERVICES
KPMG, the external auditors of Eclipx provided non-audit services during the Financial Year end 30 September
2018. 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 Debt Advisory services assisted with the debt restructuring of Eclipx in Australia and New
Zealand to address the funding impacts of APS 120 Securitisation, and
\ KPMG Debt Advisory services assisted with the roll-over of the Corporate debt and the impact of
introducing an additional funder to the structure.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 Directors’ Report
CONTINUED
14. NON AUDIT SERVICES (CONTINUED)
Following review of the services provided by KPMG for the year ended 30 September 2018 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:
2018
$
2017
$
Audit and assurance services
Audit and review of financial statements
1,032,933
757,087
Non audit services
Transactional services including IPO
Debt restructuring
Total remuneration for non-audit services for KPMG
Total remuneration for KPMG
-
769,520
769,520
1,802,453
563,947
599,067
1,163,014
1,920,101
A copy of the auditor’s independence declaration is set out on page 48 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.
Kerry Roxburgh
Chairman
Sydney
13 November 2018
Doc Klotz
Chief Executive Officer
Sydney
13 November 2018
49-50
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 2018 there have been:
i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in
relation to the [audit/review]; and
ii. no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Dean Waters
Partner
Melbourne
13 November 2018
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.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018
Letter from Remuneration
and Nomination Committee (unaudited)
30 SEPTEMBER 2018
Dear Shareholders,
On behalf of the Board, I am pleased to present Eclipx Group Limited’s (Group) FY18 Remuneration Report.
Eclipx has achieved cash NPATA in FY18 of $78.1m, growth of +14% compared to FY17. Net Operating Income
was up 27% to $325.3m. For the first time, New Business Writings surpassed the $1 billion dollar milestone. Our
Fleet and Commercial Equipment Finance businesses performed very well in a challenging market. While these
results were solid, they nevertheless fell short of original market guidance. The profit shortfall was driven by
underperformance in the Right2Drive and Grays auction businesses.
Despite the shortfall, the business achieved a number of strategic milestones this year including the realisation
of $16m in pre tax acquisition synergies within the GraysOnline business, the implementation of the Miles
technology platform in New Zealand and the delivery of our market leading fleet customer portal, Nitro. In
December 2017, Eclipx made the highly strategic acquisition of Car Buyers Australia (AreYouSelling.com.au),
which brings to the group a high growth, online vehicle trade-in service capability. Also of significance in FY18,
was the successful creation and launch of the Commercial Equipment Finance team targeting the
SME sector in New Zealand.
In regards to Short Term Incentives (STI), the gateway of a minimum of 95% of the Group’s profitability target
was not achieved and consequently no STI awards will be paid to Executive KMP for the FY18 results. The FY18
Performance Outcomes table on page 55 shares the achievements against each KPI.
Total Shareholder Return (TSR) and Earnings Per Share growth (EPS) are critical metrics we consider when
evaluating the performance of the Group and are the two metrics that determine the vesting of Long Term
Incentive (LTI) grants to our Executives. The second tranche of the FY15 LTI was tested in April 2018 and met or
exceeded the EPS and TSR targets. The FY16 LTI grants were tested at the end of FY18 and failed to meet the
required performance hurdles for EPS and TSR.
Finally, over the course of FY18, the Remuneration and Nomination Committee conducted a thorough review
of key elements of the remuneration framework that was established at the time Eclipx listed in 2015, with
the assistance of Ernst & Young, our remuneration advisors. As a result, we plan to introduce the following
changes effective from the FY19 performance period and going forward:
\ Introduction of STI deferral commencing for awards made in respect of FY19 performance;
\ Removal of retesting for the tranche of LTI relating to TSR performance in respect of all new LTI grants;
and
\ Revising the definition of the change of control trigger as it applies to the LTI Plan from 30% to 50%.
I look forward to the opportunity to answer any questions regarding the Remuneration Report from
shareholders at the Group’s Annual General Meeting in February 2019.
Yours faithfully,
Gail Pemberton
Chair of the Remuneration and Nomination Committee
13 November 2018
51-52
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 2018 (FY18).
The Report has been audited as required by section 308(3C) of the Corporations Act 2001 and is presented in
the following sections:
1. Introduction
2. Remuneration governance
3. Link to strategy
4. Remuneration framework
5. Performance against key metrics
6. Non-Executive Director fees
7. Service agreements
8. Executive remuneration disclosures
9. Equity instruments
10. Loans
11. Other transactions
1. INTRODUCTION
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.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 Remuneration Report (audited)
CONTINUED
For the year ended 30 September 2018, the KMP were:
KMP
Position
Term as KMP
Non-Executive Directors
Kerry Roxburgh
Independent Chairman
Gregory Ruddock
Non-Executive Director
Gail Pemberton
Independent Non-Executive Director
Trevor Allen
Independent Non-Executive Director
Russell Shields
Independent Non-Executive Director
Full Year
Resigned 31 March 2018
Full Year
Full Year
Full Year
Linda Jenkinson
Independent Non-Executive Director
Appointed 4 January 2018
Executive Directors
Doc Klotz
Chief Executive Officer and Managing Director
Full Year
Garry McLennan
Deputy Chief Executive Officer and Chief Financial Officer
Full Year
Senior Executive
Jeff McLean
Chief Operating Officer
Full Year
The FY18 Remuneration outcomes are summarised as follows:
Fixed
Short Term
Long Term
Remuneration
Incentive (STI)
Incentive (LTI)
Doc Klotz received his
first increase in fixed
remuneration since his
commencement in
the role.
Jeff McLean received
his first increase in
fixed remuneration
since FY16.
The financial
performance
gateway was not
met and no KMP
received an STI
payment as
a result.
Performance for the second
tranche of the FY15 LTI was tested
in April 2018 with all targets met or
exceeded:
\ Eclipx’s TSR for the period
(73.51%) ranked the Group at
the 86th percentile
\ Eclipx’s EPS growth (13.28%)
exceeded the compound
annual growth target (10%)
Performance for the FY16 LTI was
tested at the end of FY18 and did not
meet the EPS or TSR targets.
53-54
2. REMUNERATION GOVERNANCE
The committee consists of four Independent Non-Executive Directors:
\ Ms Gail Pemberton (Committee Chair);
\ Mr Kerry Roxburgh;
\ Mr Trevor Allen; and
\ Ms Linda Jenkinson (effective 1 May 2018).
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
Management
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.
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.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018
Remuneration Report (audited)
CONTINUED
3. LINK TO STRATEGY
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
Over the past five years, Eclipx Group has rapidly repositioned its business, leveraging its core
competencies of customer centricity, treasury, credit, risk and unique data insights to:
\ Expand our distribution footprint in our chosen markets through acquisitions, start-ups and third
party relationships
\ Invest in customer centric technology to increase customer satisfaction whilst identifying new
revenue and margin opportunities
\ Invest in process digitisation to streamline our processes, enabling us to consolidate our
infrastructure whilst delivering superior value to customers
\ Attract and retain the best industry talent
\ Deliver superior long term value to shareholders.
Remuneration Strategy
The Eclipx Group 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 individual’s 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
55-56
4. REMUNERATION FRAMEWORK
Remuneration components and outcome
(i) Fixed remuneration
What is included in fixed remuneration?
How is fixed remuneration determined?
Fixed remuneration comprises base salary, non-monetary
benefits and superannuation.
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 FY18 STI Plan:
What is the purpose of the STI?
Who is eligible to participate in the STI plan?
How is performance evaluated?
Is there a minimum profit gateway?
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.
Eligibility to participate in the STI plan is determined by the
Board. All Executive KMP participated in the FY18 STI plan.
The Committee is responsible for making recommendations to
the Board regarding the performance and at risk remuneration
of Executive KMP.
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 FY18 KPIs?
The FY18 KPIs were set as follows:
KPI
Financial
People
Customer
Strategy
Individual
Doc
Klotz
60%
15%
5%
10%
10%
Garry
McLennan
Jeff
McLean
60%
15%
-
10%
15%
60%
10%
5%
5%
20%
All KPIs are set to be challenging and represent a significant
achievement. Please refer to the section FY18 Performance
Outcomes on page 57.
The combination of KPIs was chosen because the Board
believes that there needs to be a balance between financial
metrics and other metrics which support the Group’s strategic
initiatives which are linked to long term strategy and drive
future returns for shareholders.
Executive KMP may not currently receive more than their
target STI amount.
Awards are paid in cash following the finalisation of the
audited year-end financial statements.
Deferral of a portion of STI will be introduced from FY19.
Why were these KPIs chosen?
What is the maximum STI opportunity?
How is the award delivered?
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018
Remuneration Report (audited)
CONTINUED
(ii) Short term incentives (continued)
FY18 Performance Outcomes
No KMP received an STI award relating to FY18 performance as the minimum profit gateway (95% of Cash
NPATA) was not met.
The table below outlines the KPIs that applied to the Executive KMP in FY18, and the level of achievement
against each respective KPI.
KPI
Weighting (1)
Target
Level of achievement
Financial
60%
Achievement of Company Financial
Target (Cash NPATA)
Did not achieve target
$78.1m NPATA was achieved
People
10-15%
Drive employee engagement,
talent management and safety risk
management
Achieved or did not achieve target
Employee engagement did not improve
on FY17. A Graduate program has been
developed and launched and safety now has
a Group wide focus.
Customer
0-5%
Drive Net Promoter Score (NPS)
improvements
Achieved target
Significant NPS improvement across all
business units
Strategy
5-10%
Execute strategic M&A
opportunities
Achieved target
Acquisition targets identified and formal
alliances or partnerships developed
Individual
10-20%
KPIs related to new partnerships,
internal and external communication,
projects and cross-company
initiatives
Achieved or partially achieved or did not
achieve target
Various projects launched including some
strategic digital initiatives
(1) The weighting varies for each KMP, these are specified on page 56.
FY18 STI Outcomes
The following table outlines the STI awarded to each Executive KMP for FY18:
57-58
(iii) Long term incentives
The following table outlines the major features of the FY18 LTI Plan:
What is the purpose of
the LTI Plan?
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.
Who is eligible to
participate in the plan?
Eligibility to participate in the LTI Plan is determined by the Board. All Executive KMP
participated in the FY18 LTI Plan.
When was the grant
made?
The FY18 LTI grant was made to Senior Executives on 8 November 2017. The Executive Director
grants were approved by shareholders at the Annual General Meeting on 22 February 2018 and
granted on the same date.
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 FY18 LTI performance period commenced on 1 October 2017 and will conclude on 30
September 2020.
How is the LTI delivered?
The LTI is provided through a mix of Options and Rights (Award). The number of Options and
Rights granted in respect of each Award is determined by the Board.
The exercise price for the FY18 Options was set at $4.18 which represented the share price on
8 November 2017.
The Group uses the fair value methodology when calculating the number of Options and
Rights to grant each year. The mix of Rights to Options is determined by the Board on an
annual basis. For the FY18 LTI grant, the ratio of the number of Rights to Options granted to
each Executive KMP was approximately one Right to four Options.
To ensure consistency and simplicity, the Group continues to allocate the number of Options and
Rights using a fair value methodology. To increase transparency for our shareholders a comparison
of the fair value and face value of the Options and Rights for the CEO is set out below:
Vehicle
Doc Klotz
Options
Rights
Number
Granted
632,000
158,000
Fair Value
Face Value (^)
$259,120
$421,070
N/A
$600,400
^ Because Options have an exercise price, there is no simple approach to present the face
value of Options. On the date the Options were granted (22 February 2018), the Options
were “underwater”, as the exercise price of the Options was higher than the closing share
price of $3.80.
The face value of Rights is calculated using a share price of $3.80, being the closing share price
on the date the Rights were granted (22 February 2018). The face value of the Rights does not
take into account the performance hurdles that must be met before the Rights may vest.
STI opportunity as % of fixed
remuneration
STI earned as
% of target
STI forfeited as
% of target
Are dividends paid during
the performance period?
No.
Target STI
opportunity for FY18
Minimum
Target
Name
Executive Directors
Doc Klotz
Garry McLennan
Senior Executive
$900,000
$700,000
0%
0%
0%
100%
100%
67%
0%
0%
0%
100%
100%
100%
Jeff McLean
$318,250
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018
Remuneration Report (audited)
CONTINUED
What performance
hurdles need to be met?
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).
The TSR and EPS performance hurdles are applied independently such that the portion of an
Award subject to one hurdle can vest regardless of whether the other hurdle is met.
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:
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 FY18 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. FY17 will be the base year for
Awards granted under the FY18 LTI Offer. Accordingly, to determine the growth in Cash EPS,
the Cash EPS achieved in FY20 will be compared to Cash EPS achieved in FY17, and the level of
compound annual growth (stated as a percentage) will determine the proportion of the Cash
EPS hurdled Awards that vest.
59-60
What performance
hurdles need to be met?
(continued)
The Group’s annual compound Cash EPS
growth rate
% of Cash EPS hurdled Awards that vest
Below 7% compound annual growth
At 7% compound annual growth
Nil
50%
Between 7% and 10% compound annual
growth
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 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 FY18 grant due to the ongoing volatility of the share price
and the market. If a retest was determined appropriate for the FY18 LTI grant this would only
occur over a single extended performance period which would commence on 1 October 2017
and end on 30 September 2021. Retesting for grants from FY19 onwards has been removed to
better align with market practice.
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.
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.
What happens if there is a
change of control?
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 change of control for the purpose of the LTI Plan.
The change of control trigger for FY19 LTI grants onwards will be revised from 30% to 50%.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 Remuneration Report (audited)
CONTINUED
LTI Outcomes
The following table provides information on FY18 performance against key metrics:
61-62
The table below summarises the performance and outcomes for the IPO FY15 grant that vested during FY18.
KMP
Doc
Klotz
Plan
Award
Type (1)
FY15 LTI
Loan Shares
FY15 LTI
Loan Shares
Garry
McLennan
FY15 LTI
Loan Shares
FY15 LTI
Loan Shares
Performance
Condition
Relative TSR
Component
Absolute EPS
Component
Relative TSR
Component
Absolute EPS
Component
Number
of awards
granted
Performance
outcomes
% LTI
tranche
that vested
% LTI
tranche
forfeited
400,000
86th percentile
100%
400,000
13.28% compound
annual growth
100%
400,000
86th percentile
100%
400,000
100%
13.28%
compound annual
growth
0%
0%
0%
0%
(1) Loan shares were only used for the IPO FY15 grant and have not been offered for LTI grants from FY16 onwards.
The FY16 LTI was tested at the end of FY18 and failed to meet the required performance hurdle for EPS growth
and thus the corresponding portion of those grants (50%) have lapsed. The TSR target set for 50% of the FY16
grant was also not met and as a result that portion will be eligible for a one-time retest in FY19.
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 FY18 is set out below. This incorporates the FY18 STI
Maximum Opportunity and the actual FY18 LTI grant value.
Executive KMP Remuneration Opportunity Mix
Doc Klotz
Garry McLennan
Jeff McLean
36%
33%
37%
36%
33%
25%
28%
34%
38%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Fixed Remuneration
STI Maximum Opportunity
FY18 LTI Grant (Fair Value)
5. PERFORMANCE AGAINST KEY METRICS
Cash NPATA ($'000)
Cash EPS (cents)
IPO
-
-
Share Price at the end of the year
$2.30
Dividend paid (cents)
2016
interim
6.75
6. NON-EXECUTIVE DIRECTOR FEES
2015
48,585
20.23
$3.01
2016
final
7.00
2016
55,330
22.19
$4.07
2017
interim
7.50
2017
68,275
25.11
$4.05
2017
final
7.75
2018
78,108
24.69
$2.57
2018
interim
8.00
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.
The Board approved an increase to Chairman and Member fees for the Remuneration and Nomination
Committee effective 1 May 2018. Following are the Non-Executive Director fees for FY18 and Committee
membership as at 30 September 2018:
Chairman fee (C)
Member fee (M)
Kerry Roxburgh
Trevor Allen
Linda Jenkinson
Gail Pemberton
Russell Shields
Board
$250,000
$125,000
C
M
M
M
M
2018 Fee p.a. $
Audit & Risk
Committee
Remuneration & Nomination
Committee
$25,000
$12,500
M
C
-
M
M
$25,000
$12,500
M
M
M
C
-
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 FY18, Mr Kerry Roxburgh and Ms Gail Pemberton 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 which subsequently converted to Ordinary Shares in Eclipx Group Limited on 9
November 2017.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018
Remuneration Report (audited)
CONTINUED
Non-Executive Directors (Cash and Share based payments)
The following table shows details of fees received by the Non-Executive Directors:
Salary and Fees
Short term
benefits
Post-employment
benefits
Share based
payments
Cash $
Value of share
rights $ (1)
Non-monetary
$ (4)
Superannuation
$ (1)
Equity settled $
Total $
Kerry Roxburgh (Chairman)
FY18
FY17
Russell Shields
FY18
FY17
Trevor Allen
FY18
FY17
Gail Pemberton
FY18
FY17
135,750
135,709
125,571
125,571
118,781
118,169
83,935
132,420
Greg Ruddock (2)
FY18
FY17
70,253
82,144
Linda Jenkinson (3)
FY18
89,641
125,000
125,000
-
-
31,250
31,250
62,500
-
-
-
-
-
-
-
-
-
-
-
-
24,962
-
-
14,250
11,791
11,929
11,929
12,469
10,581
8,773
12,580
6,674
7,804
8,516
-
-
-
-
-
-
-
-
-
-
-
275,000
272,500
137,500
137,500
162,500
160,000
155,208
145,000
101,889
89,948
98,157
(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 in 2017 were paid to Ironbridge Capital Management Pty Ltd and not to
Mr Ruddock directly until 4 February 2017. Mr Greg Ruddock resigned as Non-Executive Director on 31 March 2018.
(3) Non-Executive Director fees for Ms Linda Jenkinson commenced 4 January 2018.
(4) Non-monetary benefit relates to farewell gift and fringe benefit tax.
63-64
7. SERVICE AGREEMENTS
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
Chief Executive
Officer and
Managing Director
Deputy Chief
Executive Officer
and Chief Financial
Officer
Fleet Holdings
(Australia)
Pty Ltd
Six months
by either
party
Immediate
termination
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 FY17 and FY18:
Short term benefits
Long term benefits
Salary
and
fees $
Non-
monetary
$ (1)
Movement
in annual
leave
provision
$ (2)
Cash
bonus
payable
in respect
of current
year $
Non-
monetary
$ (3)
Superannuation
$
Total $
Share based
payments
equity
settled $ (4)
Executive Directors
Doc Klotz
FY18
FY17
867,139
161,531
28,425
-
18,101
830,261
142,940
51,798
850,000
7,134
Garry McLennan
FY18
FY17
679,553
5,297
(10,501)
-
13,393
680,261
5,856
26,753
700,000
5,845
Senior Executive
Jeff McLean
FY18
FY17
441,667
10,146
(4,528)
-
8,975
405,261
9,358
(3,281)
212,500
3,199
20,196
19,735
20,196
19,735
20,196
19,735
1,394
1,096,786
796,468
2,698,336
9,091
717,029
796,468
2,234,918
26,704
503,160
287,837
934,609
(1) Amount represents car parking, medical insurance, flights home, visa application fees, sponsorship fees and fringe benefits
tax. Current year non-monetary benefit for Mr Klotz includes one-off fees paid for prior years tax service which is not
expected to incur in FY19.
(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.
(4) Decrease in share based payments is a result of lower probability factor of meeting performance target.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018
Remuneration Report (audited)
CONTINUED
8. EXECUTIVE REMUNERATION DISCLOSURES (CONTINUED)
Details of Outstanding Awards
65-66
Actual Remuneration Received
The following table shows details of the actual remuneration received by Executive KMP in FY18:
Salary
and fees $ (1)
Cash bonus
paid in current
year $ (2)
Superannuation
$
Equity that
vested $ (3)
Total $
Executive Directors
Doc Klotz
FY18
FY17
Garry McLennan
FY18
FY17
Senior Executive
Jeff McLean
FY18
FY17
864,139
850,000
20,196
1,204,514
2,938,849
830,261
799,000
19,735
1,288,000
2,936,996
697,748
700,000
20,196
1,204,514
2,622,458
680,261
665,000
19,735
1,312,000
2,676,996
435,888
212,500
405,261
199,750
20,196
19,735
-
-
668,584
624,746
(1) Salary and superannuation are paid fortnightly and may vary depending on the number of pay cycles within any given year.
(2) Amount represents bonus in respective to the performance of FY17, paid in FY18.
(3) 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.
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 the vesting period.
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
KMP
Plan
l
z
t
o
K
c
o
D
n
a
n
n
e
L
c
M
y
r
r
a
G
n
a
e
L
c
M
ff
e
J
I
T
L
8
1
Y
F
I
T
L
7
1
Y
F
I
T
L
6
1
Y
F
I
T
L
8
1
Y
F
I
T
L
7
1
Y
F
I
T
L
6
1
Y
F
I
T
L
8
1
Y
F
I
T
L
7
1
Y
F
I
T
L
6
1
Y
F
Award
type
Performance
condition
Rights
TSR tranche
EPS tranche
79,000
79,000
Options
TSR tranche
316,000
EPS tranche
316,000
Rights
TSR tranche
EPS tranche
71,500
71,500
Options
TSR tranche
440,000
EPS tranche
440,000
Rights
TSR tranche
92,500
EPS tranche
92,500
Options
TSR tranche
400,000
EPS tranche
400,000
Rights
TSR tranche
EPS tranche
79,000
79,000
Options
TSR tranche
316,000
EPS tranche
316,000
Rights
TSR tranche
EPS tranche
71,500
71,500
Options
TSR tranche
440,000
EPS tranche
440,000
Rights
TSR tranche
92,500
EPS tranche
92,500
Options
TSR tranche
400,000
EPS tranche
400,000
Rights
TSR tranche
42,500
EPS tranche
42,500
Options
TSR tranche
170,000
EPS tranche
170,000
Rights
TSR tranche
39,000
EPS tranche
39,000
Options
TSR tranche
237,500
EPS tranche
237,500
Rights
TSR tranche
70,000
EPS tranche
70,000
Options
TSR tranche
350,000
EPS tranche
350,000
-
-
$4.18
$4.18
-
-
$3.60
$3.60
-
-
$3.06
$3.06
-
-
$4.18
$4.18
-
-
$3.60
$3.60
-
-
$3.06
$3.06
-
-
$4.18
$4.18
-
-
$3.60
$3.60
-
-
$3.06
$3.06
1.99
3.34
0.41
0.41
2.28
3.46
0.68
0.72
1.34
2.38
0.35
0.36
1.99
3.34
0.45
0.48
2.28
3.46
0.68
0.72
1.34
2.38
0.35
0.36
2.47
3.70
0.65
0.68
2.18
3.13
0.53
0.55
1.86
2.75
0.58
0.60
157,210
263,860
129,560
129,560
163,020
247,390
299,200
316,800
123,950
220,150
140,000
144,000
157,210
263,860
142,200
151,680
163,020
247,390
299,200
316,800
123,950
220,150
140,000
144,000
104,975
157,250
110,500
115,600
85,020
122,070
125,875
130,625
130,200
192,500
203,000
210,000
r
e
b
m
e
v
o
N
8
r
e
b
m
e
v
o
N
4
r
e
b
m
e
v
o
N
0
1
r
e
b
m
e
v
o
N
8
r
e
b
m
e
v
o
N
4
r
e
b
m
e
v
o
N
0
1
r
e
b
m
e
v
o
N
8
r
e
b
m
e
v
o
N
4
r
e
b
m
e
v
o
N
0
1
0
2
0
2
9
1
0
2
8
1
0
2
0
2
0
2
9
1
0
2
8
1
0
2
0
2
0
2
9
1
0
2
8
1
0
2
r
e
b
m
e
v
o
N
8
r
e
b
m
e
v
o
N
4
r
e
b
m
e
v
o
N
0
1
r
e
b
m
e
v
o
N
8
r
e
b
m
e
v
o
N
4
r
e
b
m
e
v
o
N
0
1
r
e
b
m
e
v
o
N
8
r
e
b
m
e
v
o
N
4
r
e
b
m
e
v
o
N
0
1
2
2
0
2
1
2
0
2
0
2
0
2
2
2
0
2
1
2
0
2
0
2
0
2
2
2
0
2
1
2
0
2
0
2
0
2
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018
Remuneration Report (audited)
CONTINUED
9. EQUITY INSTRUMENTS
This table shows details of share and option holdings of KMP:
Held at 1 October 2017
Net Change
Held as at 30 September 2018
Shares
Rights Options (2) Shares
Rights
Options
Shares
Rights
Options
Non-Executive Directors
Kerry Roxburgh
(Chairman)
135,000
Russell Shields
228,777
Trevor Allen
96,331
Gail Pemberton
96,641
Greg Ruddock (3)
600,000
Linda Jenkinson
-
Executive Directors
-
-
-
-
-
-
200,000
104,611
100,000
56,870
200,000
83,515
200,000
331,904
200,000
(600,000)
-
3,258
-
-
-
-
-
-
-
239,611
(50,000)
285,647
(15,000)
179,846
(150,000)
428,545
(200,000)
-
-
3,258
-
-
-
-
-
-
200,000
50,000
185,000
50,000
-
-
Doc Klotz
3,841,361
328,000
1,680,000
37,593
158,000
632,000
3,878,954
486,000
2,312,000
Garry McLennan
3,871,432 (1) 328,000
1,680,000
100,000
158,000
632,000 3,971,432 (1) 486,000
2,312,000
Senior Executive
Jeff McLean
1,533,200
218,000
1,175,000
(622,391)
85,000
340,000
910,809
303,000
1,515,000
(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.
(3) Mr Greg Ruddock resigned as Non-Executive Director on 31 March 2018. The net change represents his holdings at the
time of resignation.
67-68
10. LOANS
Loan shares issued under the Group’s LTI Plans prior to FY16 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
Opening loan
balance $
Closing loan
balance $
Number of
vested loan
shares
Loan value per
vested loan
share
Doc Klotz
5,854,967
Garry McLennan
5,854,967
5,854,967
5,854,967
Jeff McLean
2,077,403 (1)
1,186,666
3,539,118
3,539,118
866,985
$1.65
$1.65
$1.37
Loan expiry date
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 FY15 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:
KMP
Grant date
Opening
loan
balance $
Closing loan
balance $ (1)
Doc Klotz
22 April 2015
3,411,840
3,253,080
Garry
McLennan
22 April 2015
3,353,300
3,162,550
Number of
unvested
loan shares
relating to
loan
Number
of vested
loan shares
relating to
loan
Loan value
per vested
loan share
-
-
1,600,000
1,600,000
$2.03
$1.98
Loan expiry
date
April 2020
April 2020
(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.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018
Statement of Profit or Loss
and Other Comprehensive Income
FOR THE YEAR ENDED 30 SEPTEMBER 2018
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 (loss)/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
Consolidated
2018
$’000
2017
$’000
Note
2.2
2.2
2.3
2.3
2.3
2.3
2.3
758,526
604,517
(359,784)
(276,973)
(71,187)
327,555
(67,993)
259,551
(2,237)
(4,295)
(130,856)
(96,883)
(14,997)
(81,682)
(227,535)
(12,372)
(60,935)
(170,190)
(14,824)
82,959
(9,192)
75,874
2.6 (i)
(20,760)
(21,664)
62,199
54,210
171
(2,055)
(1,884)
7,225
(5,089)
2,136
60,315
56,346
62,199
54,210
60,315
56,346
Cents
Cents
Earnings per share
Basic earnings per share
Diluted earnings per share
2.4
2.4
19.80
19.37
20.31
19.79
The above Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the
accompanying notes.
Statement of Financial Position
AS AT 30 SEPTEMBER 2018
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
Borrowings
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained earnings
Total equity
69-70
Note
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
4.5
6.1
Consolidated
2018
$’000
2017
$’000
62,078
146,180
208,870
38,565
545,486
1,052,114
2,771
13,845
59,078
136,157
138,533
25,171
444,544
1,051,848
2,671
14,304
829,631
806,609
2,899,540
2,678,915
118,246
13,713
9,037
3,538
40,670
123,591
19,879
9,715
2,784
49,276
1,814,320
1,610,407
1,999,524
1,815,652
900,016
863,263
654,765
635,246
17,046
228,205
900,016
12,357
215,660
863,263
The above Statement of Financial Position should be read in conjunction with the accompanying notes.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018
Statement of Changes in Equity
FOR THE YEAR ENDED 30 SEPTEMBER 2018
Consolidated
Note
$’000
$’000
$’000
$’000
Attributable to owners of Eclipx Group Limited
Contributed
equity
Reserves
Retained
earnings
Total equity
Statement of Cash Flows
FOR THE YEAR ENDED 30 SEPTEMBER 2018
71-72
Consolidated
2018
$’000
2017
$’000
Note
Balance at 1 October 2016
Profit for the year
Cash flow hedges
Foreign currency translation
Total comprehensive income for the year
455,484
3,470
-
-
-
-
-
7,225
(5,089)
2,136
199,861
54,210
-
-
54,210
Issue of new shares for acquisition of Grays
2.5
170,906
-
Transactions with owners in their capacity as
owners:
Employee share schemes
Movement in treasury reserve
5.1
Issue of shares under the Dividend Reinvestment Plan 4.5
Issue of shares on exercise of Options
Dividends paid
4.8
-
-
8,591
265
-
4,462
2,289
-
-
-
Balance at 30 September 2017
635,246
12,357
215,660
863,263
(38,411)
(38,411)
635,246
12,357
215,660
Balance at 1 October 2017
Profit for the year
Cash flow hedges
Foreign currency translation
Total comprehensive income for the year
Issue of rights for acquisition of CarBuyers
2.5
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
-
-
-
-
-
-
-
18,421
1,098
-
-
171
(2,055)
(1,884)
1,581
454
4,538
-
-
-
Balance at 30 September 2018
654,765
17,046
228,205
900,016
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
(49,654)
(49,654)
658,815
54,210
7,225
(5,089)
56,346
170,906
4,462
2,289
8,591
265
863,263
62,199
171
(2,055)
60,315
1,581
454
4,538
18,421
1,098
-
-
-
-
-
62,199
-
-
62,199
-
-
-
-
-
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
6.6
1,018,588
872,124
(609,682)
(418,230)
408,906
453,894
(23,743)
2,553
(67,369)
320,347
(8,861)
2,199
(65,099)
382,133
Cash flows from investing activities
Purchase of items reported under operating leases
3.1
(391,936)
(444,329)
Purchase of items reported under finance leases
Purchase of property, plant and equipment and intangibles
Payment for acquisitions (net of cash acquired)
Proceeds from sales of items reported under operating leases
Net cash outflow from investing activities
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
The above Statement of Cash Flows should be read in conjunction with the accompanying notes.
(251,689)
(226,350)
(32,896)
(7,298)
202,596
(17,436)
(13,857)
172,136
(481,223)
(529,836)
915,965
858,222
(713,975)
(664,443)
(31,233)
(29,820)
2,961
173,718
12,842
195,235
181
208,258
2,194
166,153
18,450
178,298
(1,513)
195,235
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2018
1.0 Introduction to the Report
Statement of compliance
(i) Principles of consolidation
Foreign operations
Classification and measurement
73-74
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 13 November 2018.
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.
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.
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.
The consolidated financial statements incorporate
the assets and liabilities of all controlled entities
of Eclipx Group Limited as at 30 September 2018
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.
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.
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.
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 2018 and are set out below.
AASB 9 Financial instruments
AASB 9 Financial instruments replaces the current
accounting standard AASB 139 Financial Instrument:
Recognition and Measurement. AASB 9 will result
in changes to financial assets and liabilities and will
cover classification, measurement, impairment and
hedge accounting. The Group will first apply AASB 9
in the Financial Year beginning 1 October 2018 and
the standard will be applied retrospectively and as
an adjustment to the opening statement of financial
position.
Financial assets
AASB 9 has three classification categories
for financial assets; amortised cost, fair value
through other comprehensive income (FVTOCI)
and fair value through profit or loss (FVTPL). The
classification is based on the business model under
which the financial instrument is managed and its
contractual cash flows.
The Group will apply the following policies for
the newly adopted classification categories under
AASB 9:
Amortised cost - A financial asset will be measured
at amortised cost if both of the following conditions
are met;
\ the financial asset is held within a business
model whose objective is to hold financial
assets in order to collect contractual cash
flows
\ the contractual terms of the financial asset
give rise on specified dates to cash flows that
are solely payments of principal and interest
on the principal outstanding.
FVTOCI - A financial asset will be measured at FVTOCI if
both of the following conditions are met:
\ the financial asset is held within a business
model whose objective is achieved by both
collecting contractual cash flows and selling
financial assets
\ the contractual terms of the financial asset
give rise on specified dates to cash flows that
are solely payments of principal and interest
on the principal outstanding.
FVTPL - All financial assets that are not measured
at amortised cost or FVTOCI will be measured
at FVTPL. All financial assets that are equity
instruments will be measured at FVTPL unless the
Group irrevocably elects to present subsequent
changes in the fair value in other comprehensive
income. The Group does not expect to make this
election.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 NOTES TO THE FINANCIAL STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2018
Introduction to the Report
CONTINUED
75-76
Impairment
Hedge accounting
AASB 15 program governance and status
\ The Group provides motor vehicles to
AASB 9 replaces the incurred loss model of AASB
139 with an expected loss model, resulting in
an acceleration of impairment recognition. The
impairment requirements apply to the Group’s
net investment in finance lease receivables,
loan receivables, trade receivables and contract
receivables measured at amortised cost.
AASB 9 program governance and status
The AASB 9 program was initiated at the start of the
2018 calendar year and the working group consisted
of experts from finance, risk, treasury, operations
and external advisors. The Audit Committee was
updated regarding the implementation program for
the introduction of AASB 9.
The Group engaged external advisors to assist with:
\ building and validating the new expected
credit loss models;
\ developing and implementing processes for
staging and using forward looking economic
guidance in the Expected Credit Losses
models;
\ documenting the policies, governance and
control framework for impairment calculations
under AASB9; and
\ implementing the system changes.
Measurement
To measure the expected credit loss (ECL) the
Group applies probability of default (PD) x exposure
at default (EAD) x loss given default (LGD). The
Group will be applying the simplified approach
which measures the ECL equal to the discounted
lifetime expected credit loss.
Macroeconomic scenarios
The assessment of credit risk, and the estimation of
ECL, will be unbiased and probability weighted, and
will incorporate all relevant available information
relevant to the assessment, including information
about past events, current conditions and
reasonable and supportable information about
future events and economic conditions at the
report date. The Group has established a process
whereby forward-looking macroeconomic scenarios
and probability weightings are developed for ECL
calculation purposes. The final probability-weighted
ECL will be calculated from a baseline, an up-
scenario and a down-scenario.
Hedge accounting under AASB 9 introduces greater
flexibility to the type of transactions that can be
hedged and the type of risk components in non-
financial items that qualify as hedging instruments.
The effectiveness test in AASB139 has been
replaced and now includes a qualitative approach
to the assessment or the in-principle economic
relationship between the hedging instrument and
the hedged item.
The Group uses interest rate swaps to manage
its exposure to the volatility in interest rates. The
effective portion of the hedge will qualify under the
new standard for hedge accounting.
Transition
The Group will record a transition adjustment to the
opening statement of financial position, retained
earnings and other comprehensive income at 1
October 2018. The transition adjustment is expected
to reduce opening retained earnings by $9,050,000
($12,900,000 pre tax). The outcome is largely as a
result of the requirement to recognise lifetime ECL,
where previously losses were recognised once
incurred. The Group has implemented the reporting
required under AASB 9 and will continue to refine
the technology to support this during the Financial
Year ending 30 September 2019.
AASB 15 revenue from contracts with customers
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. The standard will be
applied retrospectively as an adjustment to the
opening statement of financial position.
The AASB 15 programme was initiated at the start
of the 2018 calendar year and the working group
consisted of experts from finance, operations
and external advisors. The Audit Committee was
updated regarding the implementation program for
the introduction of AASB 15.
Measurement and recognition
Management applied the five step framework
under AASB 15 across various revenue streams and
have assessed the requirements of AASB 15. On the
adoption of this standard the following impacts will
be noted:
\ The Group currently recognises income for
the significant work performed at the time
of entering into a lease. AASB 15 requires
this revenue to be recognised over the lease
contract period. Had the Group applied AASB
15 for the year ended 30 September 2018,
profit before tax would have decreased by
$4,316,000.
\ The Group currently recognises maintenance
income based on the percentage of
completion at a portfolio level. With the
implementation of AASB 15, the Group will
be required to apply the percentage of
completion against individual leases. Had the
group applied AASB 15 for the year ended 30
September 2018, the profit before tax would
not have materially changed. The Group will
recognise deferred revenue of $11,603,000
associated with this implementation.
\ The Group will disclose the disposal of
operating leased asset reported as property,
plant and equipment and the disposal
of operating leased assets financed by a
third party on a gross basis. There will be
no overall impact to profit before tax. Had
the Group applied AASB 15 for the year
ended 30 September 2018, revenue would
have increased by $139,218,000 with a
corresponding increase in cost of revenue.
not-at-fault individuals and the expenses
are recovered from the at fault individuals.
The Group has accounted for any discounts
or credit as a cost of revenue expense.
Following the adoption of AASB 15, the
discounts or credits will be applied against
revenue and not against cost of revenue.
Had the Group applied AASB 15 for the
year ended 30 September 2018, revenue
would have decreased by $10,214,000 with a
corresponding decrease in cost of revenue.
There will be no overall impact to profit
before tax.
Transition
The Group will record a transition adjustment
to the opening statement of financial position,
retained earnings and other comprehensive income
at 1 October 2018. The transition adjustment will
reduce opening retained earnings by $21,494,784
($30,706,000 pre tax). The adjustment is a result
of the timing of revenue recognition where the
revenue is now being recognised over the life of
the lease coupled with the recognition of deferred
maintenance income.
AASB 16 - Leases
The Group will be adopting the new accounting
standard AASB 16 Leases for the Financial Year
commencing 1 October 2019. 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. The adoption of AASB 16 by the
Group will result in the Group recognizing assets
and liabilities for its operating leases over premises
and equipment as well as recognition of interest and
depreciation replacing operating lease expense. The
financial impact to the Group of adopting AASB 16
will be quantified by the Group for the year ending
30 September 2019.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 NOTES TO THE FINANCIAL STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2018
2.0 Business Result for the Year
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 Makers (Chief Executive Officer and Deputy Chief Executive Officer) in assessing performance and in
determining the allocation of resources.
As a result of the acquisition of Grays eCommerce Group Limited (“Grays”), the Group’s Chief Operating
Decision Makers have assessed Grays as a new segment.
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 expenses 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.
77-78
2018
Australia
Commercial
$’000
Australia
Consumer
$’000
Grays
$’000
New
Zealand
Commercial
$’000
Total
$’000
Net operating income before operating expenses
and impairment charges
130,600
80,185
77,203
39,567
327,555
Depreciation and amortisation of non-financial assets
(2,083)
(1,176)
(265)
(291)
(3,815)
Bad and doubtful debts
(829)
(758)
-
(650)
(2,237)
Operating expenses
(64,332)
(51,129)
(60,131)
(25,440)
(201,032)
Profit before tax, non-recurring costs and interest
63,356
27,122
16,807
13,186
120,471
Holding company debt interest
(6,821)
(4,588)
(2,219)
(1,196)
(14,824)
Adjustments*
Tax
(4,548)
(6,919)
(10,159)
(1,062)
(22,688)
(12,564)
(4,002)
(1,134)
(3,060)
(20,760)
Statutory net profit after tax
39,423
11,613
3,295
7,868
62,199
Material one-off adjustments not reflecting ongoing
operations (post tax)
232
3,039
4,789
-
8,060
Acquired intangible amortisation (post tax)
1,944
615
1,130
374
4,063
Cash net profit after tax including amortisation
of software
41,599
15,267
9,214
8,242
74,322
Software amortisation (post tax)
1,007
1,194
1,195
390
3,786
Cash net profit after tax
42,606
16,461
10,409
8,632
78,108
* Adjustments relate to acquisition related costs, amortisation of intangibles and restructuring costs.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 NOTES TO THE FINANCIAL STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2018
2.0 Business Result for the Year
CONTINUED
2.1 SEGMENT INFORMATION (CONTINUED)
2017
Australia
Commercial
$’000
Australia
Consumer
$’000
Grays ^
$’000
New
Zealand
Commercial
$’000
Total
$’000
Net operating income before operating expenses
and impairment charges
124,964
80,276
14,089
40,222
259,551
79-80
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.
Depreciation and amortisation of non-financial assets
(2,178)
(1,415)
(326)
(449)
(4,368)
Finance income
Bad and doubtful debts
(3,095)
(705)
-
(495)
(4,295)
Operating expenses
(58,772)
(53,931)
(10,844)
(22,244)
(145,791)
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.
Profit before tax, non-recurring costs and interest
60,919
24,225
2,919
17,034
105,097
Operating lease rentals
Holding company debt interest
(5,152)
(1,563)
(639)
(1,838)
(9,192)
Adjustments*
Tax
(4,242)
(2,973)
(12,216)
(600)
(20,031)
(14,251)
(5,932)
2,544
(4,025)
(21,664)
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.
Statutory net profit after tax
37,274
13,757
(7,392)
10,571
54,210
Sale of goods
Material one-off adjustments not reflecting ongoing
operations (post tax)
-
215
8,209
-
8,424
Acquired intangible amortisation (post tax)
2,084
667
225
381
3,357
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.
Cash net profit after tax including amortisation
of software
39,358
14,639
1,042
10,952
65,991
Recovery of expenses
Software amortisation (post tax)
855
1,231
148
51
2,285
Cash net profit after tax
40,213
15,870
1,190
11,003
68,276
* Adjustments relate to acquisition related costs, amortisation of intangibles and restructuring costs.
^ Grays was acquired 11 August 2017 and the result reflect the trading performance of the segment from this date.
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.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2018
2.0 Business Result for the Year
CONTINUED
2.2 REVENUE (CONTINUED)
Cost of revenue
Cost of revenue comprises the cost associated with providing the service components of the lease
instalments, auction commission 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. Cost of goods sold relates to cost associated to the sale of goods.
Consolidated
2018
$’000
111,149
102,958
73,622
15,800
68,846
33,566
205,405
20,785
7,481
36,676
82,238
758,526
39,932
6,927
17,423
61,984
402
203,868
29,248
359,784
2017
$’000
104,880
102,501
3,938
2,952
13,127
33,387
204,196
18,051
8,916
36,093
76,476
604,517
39,430
5,234
3,293
2,603
309
204,190
21,914
276,973
Revenue 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
Total revenue from continuing operations
Cost of revenue:
Maintenance and management expense
Related products and services expense
Recoverable expenses
Cost of goods sold
Impairment on operating leased assets
Depreciation on operating leased assets
Rental hire expense
Total cost of revenue
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.
81-82
Interest expense
Interest expense is recognised in the statement of profit or loss and other 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
ten years for core system software costs.
Consolidated
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)
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
2018
$’000
3,815
5,920
5,262
14,997
71,545
(358)
71,187
14,824
14,824
20,312
10,285
10,498
1,010
39,577
81,682
2017
$’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
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 NOTES TO THE FINANCIAL STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2018
2.0 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.
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.
Total basic earnings per share 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 Basic and Diluted earnings per share
Profit attributable to the ordinary equity holders of the company used in calculating basic
earnings per share and diluted earnings per share:
From continuing operations
Weighted average number of shares used as the denominator
Consolidated
2018
Cents
19.80
19.37
2017
Cents
20.31
19.79
Consolidated
2018
$’000
62,199
2017
$’000
54,210
62,199
54,210
Consolidated
2018
2017
Number
Number
Weighted average number of ordinary shares used as the denominator in calculating basic
314,209,530
266,879,322
earnings per share
Weighted average number of ordinary shares used as the denominator in calculating
321,085,520
273,993,890
diluted earnings per share
83-84
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 - Car Buyers Australia
On 19 December 2017, the Group acquired Car Buyers Australia Pty Ltd trading as areyouselling.com.au (“Car
Buyers”). The principal activity of the business acquired is the online direct to consumer purchasing of used
vehicles and the subsequent on sale of these vehicles. The Car Buyers acquisition provides an additional
vehicle trade-in option for Eclipx customers and also expands the Grays vehicle sourcing footprint.
Goodwill of $8,237,000 is primarily related to growth expectations, expected future profitability and the
expertise of the Car Buyers workforce. The goodwill that arose from this business combination is not expected
to be deductible for tax purposes.
The purchase price allocation is final. Car Buyers recorded revenue of $45,795,200 and a profit before tax of
$1,094,400 for the period from 19 December 2017 to 30 September 2018. If Car Buyers had been acquired on 1
October 2017, revenue of the Group for the year would have increased by $8,124,893 and profit before tax for
the year would have decreased by $59,261.
Comparative year acquisition
In the prior year, the Group acquired 100% interest in Grays eCommerce Group Limited (Grays) and Anrace Pty
Ltd trading as Onyx Car Rentals (Onyx).
During the 2018 Financial Year, the Group has completed the acquisition accounting process for Grays and Onyx.
Finalisation of provisional accounting did not impact the comparative year statement of financial position,
statement of profit or loss and other comprehensive income or opening retained earnings.
The following tables summarise current year and prior year consideration paid, the fair values of assets
acquired and liabilities assumed at the acquisition date.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 NOTES TO THE FINANCIAL STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2018
85-86
2.0 Business Result for the Year
CONTINUED
2.5 BUSINESS COMBINATIONS (CONTINUED)
Purchase consideration
Cash paid
Deferred consideration
Issue of shares in Eclipx Group Limited
Issue of rights 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 total expenses recognised 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
Goodwill on acquisition
Purchase consideration
Purchase consideration - cash (outflow)
Cash consideration
Deferred consideration**
Less: Balances acquired
(Outflow) of cash - Investing activities
Car Buyers
2018
$’000
7,000
460
-
1,581
9,041
Grays
2017
$’000
-
-
170,906
-
Onyx
2017
$’000
9,000
515
-
-
170,906
9,515
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.
488
8,807
345
However, deferred tax assets and liabilities are not recognised for:
Car Buyers
Final
Fair Value
Grays
Final
Fair Value
Onyx
Final
Fair Value
$’000
$’000
$’000
162
1,334
1,678
-
1,018
-
-
(2,885)
-
(465)
(38)
804
8,237
9,041
Car Buyers
$’000
(7,000)
(460)
162
(7,298)
(4,770)
9,754
1,871
831
18,931
11,630
2,865
(16,763)
(3,568)
(8,487)
(1,834)
10,460
160,446
170,906
Grays
$’000
-
-
(4,770)
(4,770)
427
1,216
-
4,012
1,167
-
-
(1,092)
(5,316)
(611)
(350)
(547)
10,062
9,515
Onyx
$’000
(9,000)
(515)
427
(9,088)
\ 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.
* Amounts provisionally disclosed in provisions relating to debtor and inventory have been reclassed to trade and other
receivables and inventory. Included in provisions recognised on acquisition of Grays was contingent consideration relating
to the acquisition of DMS-Davlan by Grays. The release of the excess provision was released against goodwill.
** Deferred consideration on the Onyx acquisition represents amounts paid on acquisition being held in escrow which was
released to the vendor within 12 months of acquisition date.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 NOTES TO THE FINANCIAL STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2018
2.0 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% (2017 - 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
Tax losses utilised
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
2018
$’000
82,959
24,888
(247)
101
(476)
(582)
(2,963)
39
20,760
24,400
(3,640)
20,760
2017
$’000
75,874
22,762
(294)
331
(674)
(610)
-
149
21,664
8,600
13,064
21,664
25.0%
28.6%
Opening
balance
$’000
Charged to
profit
or loss
$’000
Charged to
other com-
prehensive
income
and equity
$’000
Reclassi-
fication
between
current tax
payable
$’000
Acquired
through
business
combina-
tion
$’000
Closing
Balance
$’000
Deferred
tax asset
$’000
Deferred
tax liability
$’000
891
596
3,014
(88)
-
-
150
(433)
2,758
(180)
53
-
-
-
-
4,055
4,055
75
75
2,631
2,631
-
-
-
6,499
131
(39,465)
(498)
2,737
(789)
(20,621)
(46,605)
2,050
3,640
-
-
-
-
53
(3,558)
(38)
3,034
9,169
(6,135)
6,822
2,213
(143)
5,051
-
-
-
(38)
(33,141)
-
(33,141)
4,161
4,161
-
(18,714)
(37,899)
-
20,091
(18,714)
(57,990)
(17,320)
17,320
(37,899)
2,771
(40,670)
2018
Doubtful debt
provision
Deferred
revenue
Hedging
assets and
liabilities
Accruals,
employee
provisions and
other
Leasing
adjustments
Acquisition
cost
Intangible
assets
Set off DTL
against DTA
Net tax assets/
(liabilities)
2017
Doubtful debt
provision
Deferred
revenue
Hedging
assets and
liabilities
Accruals,
employee
provisions and
other
Leasing
adjustments
Acquisition
cost
Intangible
assets
Set off DTL
against DTA
Net tax assets/
(liabilities)
87-88
Opening
balance
$’000
Charged to
profit
or loss
$’000
Charged to
other com-
prehensive
income
and equity
$’000
Reclassi-
fication
between
current tax
payable
$’000
Acquired
through
business
combina-
tion
$’000
Closing
Balance
$’000
Deferred
tax asset
$’000
Deferred
tax liability
$’000
2,157
(1,407)
179
(16)
-
-
5,929
(930)
(2,241)
-
-
-
141
433
891
596
891
596
-
2,758
2,758
-
-
-
14,973
(8,066)
(30,122)
(9,343)
612
-
(12,466)
(18,738)
6,698
(13,064)
-
-
-
-
(2,241)
(5,506)
5,098
6,499
50,336
(43,837)
-
-
-
(39,465)
-
(39,465)
2,125
2,737
2,737
-
(4,871)
(10,377)
(9,982)
(2,185)
(20,621)
(46,605)
-
(20,621)
57,318
(103,923)
(54,647)
54,647
(46,605)
2,671
(49,276)
Consolidated
2018
$’000
11
11
2017
$’000
(1,797)
(1,797)
(iii) Franking credits
Franked dividends (Australia)
Franking credits available for subsequent Financial Years based on a tax rate of 30%
The negative balance 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.
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 based
on estimates. 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.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2018
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 other 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.
89-90
Total
$’000
1,010,301
5,371
446,602
(176,560)
(309)
(208,558)
(10,695)
1,066,152
1,771,829
(705,677)
1,066,152
Plant and
equipment
$’000
Fixture and
fittings
$’000
Motor vehicles
and equipment
$’000
4,997
4,684
1,326
-
-
(2,819)
(4)
8,184
19,011
(10,827)
8,184
6,053
687
947
-
-
(1,549)
(18)
6,120
11,747
(5,627)
6,120
999,251
-
444,329
(176,560)
(309)
(204,190)
(10,673)
1,051,848
1,741,071
(689,223)
1,051,848
Plant and
equipment
$’000
Fixture and
fittings
$’000
Motor vehicles
and equipment
$’000
Total
$’000
8,184
(528)
(3,098)
4,102
-
-
(2,434)
1
6,227
19,475
(13,248)
6,227
6,120
1,051,848
1,066,152
-
-
2,882
-
-
(1,381)
(3)
7,618
14,618
(7,000)
7,618
-
-
391,936
(185,334)
(402)
(203,868)
(2,066)
1,052,114
1,944,831
(892,717)
1,052,114
(528)
(3,098)
398,920
(185,334)
(402)
(207,683)
(2,068)
1,065,959
1,978,924
(912,965)
1,065,959
Consolidated
2017
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
2017
Cost
Accumulated depreciation and impairment
Net book amount
Consolidated
2018
Opening net book amount
Finalisation as part of business combination
Disposals
Additions
Transfers to inventory
Impairment charge
Depreciation charge
Foreign exchange variation
Closing net book amount
2018
Cost
Accumulated depreciation and impairment
Net book amount
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 NOTES TO THE FINANCIAL STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2018
3.0 Operating Assets and Liabilities
CONTINUED
3.1 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
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
Consolidated
2018
$’000
2017
$’000
262,731
789,383
1,052,114
6,227
7,618
13,845
246,408
805,440
1,051,848
8,184
6,120
14,304
Total property, plant and equipment
1,065,959
1,066,152
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.
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
2018
$’000
633,670
(88,184)
545,486
178,060
367,426
545,486
2017
$’000
503,662
(59,118)
444,544
139,291
305,253
444,544
The future minimum lease payments under non-cancellable leases are disclosed in note 4.6(c).
91-92
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
Credit hire receivables
Provision for doubtful debts
Sundry debtors
Prepayments
Other assets
Current tax receivable
Total trade receivables and other assets
Consolidated
2018
$’000
72,808
73,421
(13,832)
132,397
38,538
33,215
67
4,653
208,870
2017
$’000
51,689
47,019
(9,025)
89,683
24,635
21,329
34
2,852
138,533
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.
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 $13,831,515 (2017: $9,025,357)
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 during the year
At 30 September
Consolidated
2018
$’000
9,025
-
4,807
13,832
2017
$’000
5,242
1,693
2,090
9,025
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.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2018
3.0 Operating Assets and Liabilities
CONTINUED
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 consideration (a)
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
2018
$’000
44,004
4,824
15,678
7,677
8,970
814
36,279
118,246
2017
$’000
46,871
6,854
16,480
-
11,452
3,821
38,113
123,591
Consolidated
2018
$’000
117,854
392
118,246
2017
$’000
120,362
3,229
123,591
(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 2018, $253,442 (2017: $2,512,000)
of this balance remains as contingent. Deferred consideration of $560,000 (2017: $793,000) is recognised at 30 September
2018, payable over a remaining period of three years.
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.
93-94
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
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
2,865
-
(3,658)
(19)
27,121
11,630
15,164
(3,174)
(220)
41,477
170,802
205,395
-
-
(3,074)
701,002
15,164
(8,004)
(3,315)
806,609
38,847
37,520
54,847
701,002
832,222
(1,838)
37,009
(10,399)
27,121
(13,370)
41,477
-
701,002
(25,613)
806,609
Brand names
$’000
Customer
relationships
$’000
Software
$’000
Goodwill
$’000
Total
$’000
2018
Opening net book amount
37,009
27,121
41,477
701,002
806,609
Acquired as part of business
combination (note 2.5)
Additions
Amortisation charge
Foreign exchange variation
Finalisation as part of business
combination (note 2.5)
1,018
-
(1,976)
(1)
-
Closing net book amount
36,050
-
-
(3,944)
(25)
-
23,152
-
25,912
(5,262)
(43)
-
62,084
8,237
-
-
(600)
(294)
708,345
9,255
25,912
(11,182)
(669)
(294)
829,631
2018
Cost
Accumulated amortisation and
impairment
Net book amount
39,864
37,492
80,697
708,345
866,398
(3,814)
36,050
(14,340)
23,152
(18,613)
62,084
-
708,345
(36,767)
829,631
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 NOTES TO THE FINANCIAL STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2018
3.0 Operating Assets and Liabilities
CONTINUED
3.5 INTANGIBLES (CONTINUED)
(i) Impairment of assets
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.
Australia Commercial
Australia Consumer
New Zealand Commercial
Grays
Unallocated
Goodwill allocation at 30 September
Consolidated
2018
$’000
330,707
154,896
110,511
112,231
-
708,345
2017
$’000
280,780
145,871
112,790
-
161,561
701,002
Unallocated goodwill relates to goodwill on the acquisition of Grays which had not been allocated to a CGU at
30 September 2017. The final assessment of the benefits to the relevant CGU’s was finalised in 2018.
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 2018 (2017: $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 into perpetually using the growth rates determined by management.
\ Long term growth rate: Australia Commercial 2.60% (2017: 2.00%)
\ Long term growth rate: Australia Consumer 2.60% (2017: 2.00%)
\ Long term growth rate: Grays 2.60%
\ Long term growth rate: New Zealand Commercial 2.60% (2017: 2.00%)
\ Discount rates (post tax): All CGUs 11.00% (2017: 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 International Monetary Fund. 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.
4.0 Capital Management
95-96
KEY ESTIMATE AND JUDGEMENT: IMPAIRMENT OF GOODWILL
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.
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 19 months (2017: 16 months).
Bank loans
Notes payable
Borrowing costs
Chattel mortgages
Consolidated
2018
$’000
340,200
1,484,115
(9,995)
-
2017
$’000
254,768
1,359,442
(7,704)
3,901
Total secured borrowings
1,814,320
1,610,407
Amount expected to be settled within 12 months
Amount expected to be settled after more than 12 months
Total secured borrowings
Bank loans
345,878
1,468,442
1,814,320
337,410
1,272,997
1,610,407
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 $323,358,000 (2017: $237,085,000).
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 $1,743,779,000 (2017: $1,632,549,000).
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 Consolidated
2018
$’000
1,824,315
286,790
2,111,105
2017
$’000
1,618,111
215,621
1,833,732
Net debt
Total equity
Capital-to-overall financing ratio
Market risk
(i) Foreign exchange risk
97-98
Consolidated
2018
$’000
1,606,062
900,016
56%
2017
$’000
1,415,172
863,263
61%
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% (2017:10%) 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 2018, had the Australian dollar weakened/strengthened by 10%
(2017:10%) 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 $850,039 (2017: $889,824)
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.
(ii) Interest rate risk
2018
2017
Weighted
average
interest rate
%
6.350%
4.000%
2.417%
Balance
$’000
65,000
1,749,320
(1,636,120)
113,200
Weighted
average
interest rate
%
-
3.838%
2.665%
Balance
$’000
-
1,610,407
(1,514,210)
96,197
Borrowings
- Fixed interest rate
- Floating interest rate
Interest rate swaps (notional principal amount)
Unhedged variable debt
NOTES TO THE FINANCIAL STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2018
4.0 Capital Management
CONTINUED
4.1 BORROWINGS (CONTINUED)
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
The Group has complied with financial covenants of its borrowing facilities during the 2018 and 2017 reporting
periods.
Reconciliation of movements of liabilities to cash flows arising from financing activities
Liabilities arising from financing activity
Borrowing balance 30 Sep 2017
Proceeds from borrowings
Repayments of borrowings
Non cash changes
Foreign exchange
Amortisation of capital borrowing cost
Borrowing balance 30 Sep 2018
Consolidated
Borrowing
$’000
Total Cash Flow
$’000
915,965
(713,975)
1,610,407
915,965
(713,975)
(2,251)
4,174
1,814,320
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.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 99-100
Credit risk
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
Consolidated
2018
$’000
2017
$’000
12,659
10,137
8,992
6,901
48,347
76,899
132,397
58%
5,593
4,715
23,696
44,141
89,683
49%
Unimpaired past due 30 days and over as a percentage of total unimpaired loans
and receivables
49%
38%
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.
NOTES TO THE FINANCIAL STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2018
4.0 Capital Management
CONTINUED
4.2 FINANCIAL RISK MANAGEMENT (CONTINUED)
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 (2017: 100 bps) and a decrease by 100
bps (2017: 100 bps) across the yield curve.
2018
Financial assets
Cash and cash equivalents
Finance leases
- Fixed interest rate
Total (decrease)/increase
Financial liabilities
Borrowings
- Fixed interest rate
- Floating rate
Trade and other liabilities
Derivatives used for hedging
Total increase/(decrease)
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)
Interest rate risk
Carrying amount
$’000
-100 bps
Profit/equity
$’000
+100 bps
Profit/equity
$’000
208,258
(2,083)
2,083
545,486
753,744
-
(2,083)
-
2,083
65,000
1,749,320
118,246
9,037
1,941,603
-
17,493
-
(16,361)
1,132
-
(17,493)
-
16,361
(1,132)
Interest rate risk
Carrying amount
$’000
-100 bps
Profit/equity
$’000
+100 bps
Profit/equity
$’000
195,235
(1,952)
444,544
639,779
-
(1,952)
1,610,407
123,591
9,715
1,743,713
16,104
-
(15,142)
962
1,952
-
1,952
(16,104)
-
15,142
(962)
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018
101-102
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.
2018
Financial liabilities
Derivatives used for hedging
Total financial liabilities
2017
Financial liabilities
Derivatives used for hedging
Total financial liabilities
Level 1
$’000
-
-
Level 2
$’000
9,037
9,037
Level 3
$’000
Level 4
$’000
-
-
9,037
9,037
Level 1
$’000
Level 2
$’000
Level 3
$’000
Level 4
$’000
-
-
9,715
9,715
-
-
9,715
9,715
There were no transfers between levels for recurring fair value measurements during the year. Fair value of
financial liabilities and financial assets approximates the carrying value.
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.
NOTES TO THE FINANCIAL STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2018
4.0 Capital Management
CONTINUED
4.2 FINANCIAL RISK MANAGEMENT (CONTINUED)
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
2018
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
(117,854)
(268)
(124)
-
(118,246)
(118,246)
Borrowings
Provisions
(391,478)
(392,650)
(1,085,937)
(64,666)
(1,934,731)
(1,814,320)
(9,711)
(4,002)
-
-
(13,713)
(13,713)
Total non-derivatives
(519,043)
(396,920)
(1,086,061)
(64,666)
(2,066,690)
(1,946,279)
Derivatives
Interest rate swaps
Total derivatives
Contractual maturities
of financial liabilities
2017
Non-derivatives
(7,273)
(7,273)
(2,305)
(2,305)
(117)
(117)
436
436
(9,259)
(9,259)
(9,037)
(9,037)
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
(8,765)
(8,765)
(1,798)
(1,798)
557
557
212
212
(9,794)
(9,794)
(9,715)
(9,715)
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 NOTES TO THE FINANCIAL STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2018
4.0 Capital Management
CONTINUED
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.
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
2018
$’000
62,078
62,078
82,776
32,920
30,484
146,180
208,258
2017
$’000
59,078
59,078
77,009
30,648
28,500
136,157
195,235
The weighted average interest rate received on cash and cash equivalents for the year was 1.32% (2017: 0.76%).
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.
103-104
(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.
(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
2018
$’000
9,037
9,037
7,353
1,684
9,037
2017
$’000
9,715
9,715
8,843
872
9,715
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.
2018
Share capital
Fully paid ordinary shares
Other equity securities
Treasury shares
Total issued equity
2018
Shares
2017
Shares
2018
$’000
2017
$’000
319,111,693
310,518,887
654,765
635,246
525,000
3,475,000
-
-
319,636,693
313,993,887
654,765
635,246
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 NOTES TO THE FINANCIAL STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2018
4.0 Capital Management
CONTINUED
4.5 CONTRIBUTED EQUITY (CONTINUED)
Movements in ordinary share capital
Date Details
1 October 2016 Opening balance
Number
of shares
$’000
258,058,584
455,484
Issue of shares under the Dividend Reinvestment Plan - 2016
816,908
3,129
20 January 2017
final dividend
22 April 2017
Loan shares vested
2,950,000
-
105-106
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
2018
$’000
2017
$’000
7 July 2017
Issue of shares under the Dividend Reinvestment Plan - 2017
Telecommunication commitments
1,782
2,673
interim dividend
1,511,759
11 August 2017
Issue of new shares for acquisition of Grays eCommerce Group
47,081,636
1 September 2017
Issue of shares on exercise of Options
100,000
5,462
170,906
265
30 September 2017 Closing balance
310,518,887
635,246
19 January 2018 Issue of shares under the Dividend Reinvestment Plan - 2017
final dividend
22 April 2018 Loan shares vested
28 May 2018 Issue of shares on exercise of Options
2 July 2018 Issue of shares under the Dividend Reinvestment Plan - 2018
interim dividend
Closing balance
2,080,270
2,950,000
415,000
3,147,536
319,111,693
8,121
-
1,098
10,300
654,765
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.
Opening balance
Loan shares vested
Closing balance
Number of
shares 2018
Number of
shares 2017
3,475,000
6,425,000
(2,950,000)
(2,950,000)
525,000
3,475,000
(b) Lease commitments: Group as lessee
(i) 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
2018
$’000
16,309
27,524
23,525
67,358
2017
$’000
17,548
23,493
8,109
49,150
(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
Later than one year but not later than five years
Consolidated
2018
$’000
1,046
2,492
3,538
2017
$’000
920
1,864
2,784
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2018
4.0 Capital Management
CONTINUED
4.6 COMMITMENTS (CONTINUED)
c. Lease commitments: Group as lessor
i. Finance leases
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
ii. Operating leases
Minimum lease payments receivable on leases of motor vehicles are as follows:
Minimum lease payments under non-cancellable operating leases of motor vehicles
not recognised 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
2018
$’000
210,530
421,711
1,429
633,670
2017
$’000
162,525
340,364
773
503,662
Consolidated
2018
$’000
2017
$’000
309,259
366,859
19,285
695,403
299,323
354,554
22,826
676,703
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
$50,740,320 (2017: $50,739,551). These commitments are not recognised as liabilities as the relevant assets have
not yet been received.
107-108
4.7 CONTINGENT LIABILITIES
On the acquisition of Grays eCommerce Group Limited, the Group acquired a bank guarantee facility.
As at 30 September 2018, $1,867,000 (2017: $3,188,000) of the bank guarantee facility has been utilised.
Bank guarantees
Consolidated
2018
$’000
2017
$’000
1,867
3,188
In addition to the bank guarantee above, 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 maximum exposure
is $471,000 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.
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:
Final dividends paid
2017 final dividend paid on 19 January 2018; 7.75 cents per ordinary share
franked to 100% (2017: 7.00 cents)
Interim dividends paid
2018 interim dividend paid on 02 July 2018; 8.00 cents per ordinary share
franked to 100% (2017: 7.50 cents)
Total dividends paid
Final dividends proposed but not recognised at year end
Consolidated
2018
$’000
2017
$’000
24,335
18,514
25,319
49,654
19,897
38,411
2018 : 8.00 cents (2017: 7.75 cents) per ordinary share franked to 100%
25,571
24,335
On 13 November 2018, the Directors declared a fully franked final dividend for the year ended 30 September
2018 of 8.00 cents per ordinary share, to be paid on 25 January 2019 to eligible shareholders on the register
as at 14 December 2018. This equates to a total estimated dividend of $25,570,935 based on the number of
ordinary shares on issue as at 30 September 2018. The financial effect of dividends declared after the reporting
date are not reflected in the 30 September 2018 financial statements and will be recognised in subsequent
financial reports.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2018
5.0 Employee Remuneration and Benefits
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.
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.
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
109-110
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 2018, 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.
Set out below are summaries of options granted under each plan:
Loan shares
Grant date Expected
vesting
date
Exercise
price
Weighted
average
exercise
price
Balance
at start of
the year
Granted
during
the year
Forfeited
during
the year
Vested
and
exercised
during
the year
Unvested
balance
at end of
the year
Vested
balance
not
exercised
Number
Number Number
Number
Number
Number
2018
25 Sep 08
08 May 13
25 Sep 14
10 Mar 15
22 Apr 15
2017
25 Sep 08
08 May 13
25 Sep 14
10 Mar 15
22 Apr 15
-
-
-
-
-
-
-
-
-
-
22 Apr 15
21 Apr 18
$2.30
$0.90
$2.03
$0.90
$2.03
787,500
129,744
$1.47-$1.65 $2.30
10,474,328
$2.30
$2.30
$0.90
$2.03
$2.30
$2.30
$0.90
$2.03
420,000
5,850,000
787,500
129,744
$1.47-$1.65 $2.30
11,190,775
$2.30
$2.30
$2.30
$2.30
$2.30
450,000
2,950,000
2,950,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(753,855)
-
(1,167,017)
(90,000)
(650,000)
-
-
(577,803)
(168,644)
(50,000)
-
-
-
-
-
-
-
-
-
-
33,645
129,744
9,307,311
330,000
5,200,000
787,500
129,744
10,612,972
281,356
2,900,000
-
2,950,000
-
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 NOTES TO THE FINANCIAL STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2018
5.0 Employee Remuneration and Benefits
CONTINUED
5.1 SHARE BASED PAYMENTS (CONTINUED)
Options
Grant date
Expected
vesting
date
Exercise
price
Weighted
average
exercise
price
Balance
at start
of the
year
Granted
during
the year
Forfeited
during
the year
Vested
and
exercised
during
the year
Unvested
balance
at end of
the year
Vested
balance
not
exercised
111-1 12
Rights
Grant date
2018
Expected vesting
date
Balance at
start of the year
Granted during
the year
Forfeited during
the year
Unvested balance
at end of the year
Number
Number
Number
Number
Number
Number Number
Number
Number
Number
10-Nov-15
30-Sep-18
865,000
2018
22-Apr-15
22-Apr-15
-
-
$2.30
$2.30
450,000
$2.30
$2.30
725,000
10-Nov-15
30-Sep-18
$3.06
$3.06
3,730,000
19-Feb-16
30-Sep-18
$3.06
$3.06
1,625,000
5-Sep-16
30-Sep-19
$3.80
$3.80
1,000,000
-
-
-
-
-
4-Nov-16
30-Sep-19
$3.60
$3.60
4,605,000 -
(395,000)
17-Feb-17
30-Sep-19
$3.60
$3.60
1,760,000
-
08-Nov-17
30-Sep-20 $4.18
22-Feb-18
30-Sep-20 $4.18
24-Aug-18
30-Sep-20 $4.18
$4.18
$4.18
$4.18
-
-
-
3,750,000 (110,000)
1,264,000 -
300,000
2017
22-Apr-15
21-Apr-17
$2.30
$2.30
725,000
22-Apr-15
21-Apr-18
$2.30
$2.30
725,000
10-Nov-15
30-Sep-18
$3.06
$3.06
3,875,000
19-Feb-16
30-Sep-18
$3.06
$3.06
1,625,000
5-Sep-16
30-Sep-19
$3.80
$3.80
1,000,000
-
-
-
-
-
4-Nov-16
30-Sep-19
$3.60
$3.60
17-Feb-17
30-Sep-19
$3.60
$3.60
-
-
4,745,000 (140,000)
1,760,000 -
-
-
(225,000)
(175,000)
-
-
225,000
550,000
(275,000)
-
-
-
-
-
(145,000)
-
-
-
-
-
-
-
-
-
-
3,455,000
1,625,000
1,000,000
4,210,000
1,760,000
3,640,000
1,264,000
300,000
-
-
-
-
-
-
-
-
(275,000)
-
450,000
-
-
-
-
-
-
725,000
3,730,000
1,625,000
1,000,000
-
-
-
-
4,605,000 -
1,760,000
-
19-Feb-16
30-Sep-18
400,000
4-Nov-16
30-Sep-19
489,000
17-Feb-17
30-Sep-19
286,000
-
-
-
-
(30,000)
835,000
(30,000)
370,000
(10,000)
479,000
-
286,000
08-Nov-17
30-Sep-20
22-Feb-18
30-Sep-20
24-Aug-18 (1)
17-Aug-21
-
-
-
1,090,000
(40,000)
1,050,000
316,000
200,000
-
-
316,000
200,000
(1) Rights granted on the 23 August 2018 are service rights with Fair value of $2.26. Holders of service rights must be
continuously employed by the Company from Grant date to Vesting Date.
2017
10-Nov-15
30-Sep-18
935,000
19-Feb-16
30-Sep-18
400,000
4-Nov-16
30-Sep-19
17-Feb-17
30-Sep-19
-
-
(i) Fair value of options granted
-
-
489,000
286,000
(70,000)
865,000
-
-
-
400,000
489,000
286,000
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.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 NOTES TO THE FINANCIAL STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2018
5.0 Employee Remuneration and Benefits
CONTINUED
5.1 SHARE BASED PAYMENTS (CONTINUED)
The model inputs for options and rights granted during current and previous years are as follows:
Grant date
23 Aug
2018
22 Feb
2018
22 Feb
2018
08 Nov
2017
08 Nov
2017
17 Feb
2017
17 Feb
2017
4 Nov
2016
4 Nov
2016
Award type
Options Options
Rights
Rights
Options Options
Rights
Options
Rights
First test date
Retest date
First vesting date
Expiry date
Share price at the
grant date
Loan/exercise
price
30 Sep
2020
N/A
4 Nov
2020
23 Aug
2023
30 Sep
2020
30 Sep
2021
4 Nov
2020
23 Feb
2023
30 Sep
2020
30 Sep
2021
4 Nov
2020
23 Feb
2023
30 Sep
2020
30 Sep
2021
4 Nov
2020
30 Sep
2020
30 Sep
2021
4 Nov
2020
08 Nov
2022
08 Nov
2022
30 Sep
2019
30 Sep
2020
4 Nov
2019
17 Feb
2022
30 Sep
2019
30 Sep
2020
4 Nov
2019
17 Feb
2022
30 Sep
2019
30 Sep
2020
4 Nov
2019
4 Nov
2021
30 Sep
2019
30 Sep
2020
4 Nov
2019
4 Nov
2021
$2.69
$3.78
$3.78
$4.18
$4.18
$3.90
$3.90
$3.60
$3.60
$2.05
$4.18
Nil
Nil
$4.18
$3.60
Nil
$3.60
Nil
Expected life
3.6 years
3.8 years
2.8 years
4.1 years
4.5 years
3.9 years
2.8 years
4.0 years
3.1 years
Volatility
26.0%
28.0%
28.0%
28.0%
28.0%
28.5%
28.5%
28.5%
28.5%
Risk free interest
rate
2.09%
2.23%
2.09%
2.06%
2.11%
2.12%
1.96%
1.78%
1.70%
Dividend yield (p.a)
6.01%
4.59%
4.59%
4.06%
4.06%
4.42%
4.42%
4.67%
4.67%
Average assessed
fair value per
instrument
N/A: Not Applicable
$0.42
$0.44
$2.67
$2.99
$0.67
$0.70
$2.87
$0.54
$2.66
113-114
(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
2018
$’000
454
2017
$’000
4,462
(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
2018
$’000
3,047
123
40
37
3,247
2017
$’000
4,662
114
16
1,881
6,673
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2018
115-116
6.0 Other
6.1 RESERVES
Recognition and measurement
Share based payment reserve
The share based payment reserve is used to recognise:
\ the fair value of options and rights 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
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 Car buyers acquisition
Awards issued to employees of controlled entities during the year
Balance at 30 September
2018
$’000
(5,939)
5,529
(2,179)
19,635
17,046
(6,110)
244
(73)
(5,939)
17,600
1,581
454
19,635
2017
$’000
(6,110)
991
(124)
17,600
12,357
(13,335)
10,204
(2,979)
(6,110)
13,138
-
4,462
17,600
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/(loss) for the year
Consolidated
2018
$’000
239
1,140,140
1,140,379
(38,415)
(336,984)
(375,399)
654,765
13,766
96,449
764,980
(67)
2017
$’000
8,566
1,027,961
1,036,527
(6,338)
(244,256)
(250,594)
635,246
10,412
140,275
785,933
(92)
(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, C M Pty Limited, GraysFinance Pty Ltd, Accident Services Pty Ltd and Car
Buyers Australia Pty Ltd.
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 2018 or 2017. For information about
guarantees given by the parent entity, see above.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 NOTES TO THE FINANCIAL STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2018
6.0 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
PLS Notes (Australia) Pty Ltd
Fleet Holding (Australia) Pty Ltd
Fleet Partners Pty Ltd
FleetPlus Holdings Pty Limited
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 Ltd (a)
GEG International Pty Ltd (a)
GraysOnline (SA) Pty Ltd (a)
Grays (VIC) Pty Ltd (a)
FP Turbo Warehouse Trust 2014-1 (Australia)
Fleet Partners Franchising Pty Ltd
Eclipx Insurance Pty Ltd
CarInsurance.com.au Pty Ltd
Car Insurance Pty Ltd
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 Ltd (a)
GEG Capital Pty Ltd (a)
Grays (NSW) Pty Ltd (a)
GLC Fine Wines & Liquor Pty Ltd (a)
Gray Eisdell Timms (QLD) Pty Ltd (a)
Gray Eisdell Timms (WA) Pty Ltd (a)
GEM Trust (a)
C M Pty Ltd (a)
Anrace Pty Ltd (d)
ECX Turbo 2017-1
Eclipx - MIPS Member Finance Trust
FP Turbo Series 2016-1 Trust
New Zealand
FleetPlus Ltd (NZ)
CarLoans.co.nz Ltd
Fleet NZ Limited
Eclipx MMF Finance Pty Ltd (e)
GraysFinance Pty Ltd (b)
Accident Services Pty Ltd (j)
Car Buyers Australia Pty Ltd (k)
Eclipx Fleet Holding (NZ) Ltd (f)
Fleetpartners NZ Trustee Ltd
Truck Leasing Ltd
Eclipx Pacific Leasing Solutions (NZ) Limited (g)
FP Ignition Trust 2011-1 New Zealand
Eclipx Leasing Finance (NZ) Limited (h)
FleetPartners NZ Trust
PLS Notes (NZ) Ltd
Right2Drive (New Zealand) Ltd (b)
Grays Auctions Ltd (NZ) (a)
Eclipx NZ Ltd (i)
Cayman
Grays Mid East Cayman Inc (a)
FPNZ Warehouse Trust 2015-1
FP Ignition 2017 Warehouse Trust
FP Ignition 2017 B Trust
117-118
The Group does not have control of FleetPlus Asset Securisation Pty Ltd.
a) On 11 August 2017, the Group concluded the 100% acquisition of Grays eCommerce Group Limited.
b) On 31 October 2017, the Group extablished GraysFinance Pty Ltd.
c)
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.
On 15 August 2017, Pacific Leasing Solutions (NZ) Limited changed its name to Eclipx Pacific Leasing
g)
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.
j) On 30 May 2018, the Group established Accident Services Pty Ltd.
k) On 19 December 2017, the Group concluded the 100% acquisition of Car Buyers Australia Pty Ltd as
areyouselling.com.au (“Car Buyers”).
l) On 6 December 2016, the Group established FP Turbo Series 2016-1 Trust.
m) On 25 September 2017, the Group established Eclipx - MIPS Member Finance Trust.
n) On 1 November 2017, the Group established Eclipx Turbo Series 2017-1 Trust.
(iv) Transactions with other related parties
(a) Relationship with Ironbridge
During the year, Eclipx Group Limited has incurred Nil in fees (2017: $51,900) 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, which have been achieved. The term of the contract is 10
years from 15 October 2014. The device, freight and subscription fees paid to LogbookMe amounted in 2018 to
$668,049 (2017: $536,388); 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 acquired shares in LogbookMe in 2013, prior
to becoming employed by Fleet Holdings (Australia) Pty Ltd. They have not received any distributions from
LogbookMe since acquiring this shareholding.
The contract with LogbookMe has been negotiated on an arms length basis with Board oversight.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 NOTES TO THE FINANCIAL STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2018
6.0 Other
CONTINUED
6.4 REMUNERATION OF AUDITORS
During the year the following fees were paid or payable for services provided by the auditor of the Group.
Consolidated
2018
$
2017
$
(a) Audit and assurance services
Audit Services
KPMG Australian firm:
119-120
Set out below is a statement of profit or loss and other comprehensive income for the year of the Closed
Group.
Consolidated
Statement of profit or loss and other comprehensive income
Revenue from continuing operations
Cost of revenue
Lease finance costs
Audit and review of financial statements
1,032,933
757,087
Net operating income before operating expenses and impairment charges
(b) Non-audit services
KPMG Australian firm:
Debt restructuring
Transactional services
Total remuneration for non-audit services for KPMG
Total remuneration for KPMG
6.5 DEED OF CROSS GUARANTEE
769,520
-
769,520
1,802,453
599,067
563,947
1,163,014
1,920,101
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, C M Pty Limited Grays Finance Pty Ltd, Accident Services Pty Ltd and Car Buyers Australia
Pty Ltd 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’.
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
2018
$’000
599,164
(270,852)
(46,305)
282,007
(1,588)
280,419
(111,652)
(13,644)
(74,114)
(199,410)
(10,913)
70,096
(17,762)
52,334
(1,884)
50,450
2017
$’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
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 NOTES TO THE FINANCIAL STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2018
6.0 Other
CONTINUED
121-12 2
6.5 DEED OF CROSS GUARANTEE (CONTINUED)
6.6 RECONCILIATION OF CASH FLOW FROM OPERATING ACTIVITIES
Set out below is a consolidated statement of financial position as at reporting date of the Closed Group.
Consolidated
Consolidated
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
2018
$’000
54,271
96,567
171,279
22,145
513,168
644,727
12,160
117,478
30,388
691,683
2017
$’000
35,374
90,490
118,814
11,369
424,568
655,780
12,761
99,731
29,657
681,127
2,353,866
2,159,671
23,023
12,819
5,049
3,538
30,594
18,427
5,992
2,784
1,393,030
1,214,069
13,978
40,670
1,492,107
715
49,276
1,321,857
861,759
837,814
656,569
15,712
189,478
635,246
15,771
186,797
861,759
837,814
* 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.
Profit after tax for the year
Depreciation and amortisation
Doubtful debts
Share based payments expense
Fleet and stock impairment
Unwind on contingent consideration
Net gain on sale of non-current assets
Hedging gain
Exchange rate variations on New Zealand cash and cash equivalents
2018
$’000
62,199
218,865
2,237
454
402
(3,007)
(26,702)
(358)
(182)
Net cash inflow from operating activities before change in assets and liabilities
253,908
Change in operating assets and liabilities:
Increase in trade and other receivables
Principal settlement of finance leases
(Increase)/decrease in deferred tax assets/liabilities
Increase/(decrease) in trade and other liabilities
(Decrease)/increase in provisions
(Decrease)/Increase in other current liabilities
Net cash inflow from operating activities
(66,913)
150,748
(8,715)
429
(6,626)
(2,484)
320,347
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
382,133
6.7 EVENTS OCCURRING AFTER THE REPORTING PERIOD
On 8 November the Group signed a Scheme Implementation Agreement with McMillan Shakespeare Limited
(“MMS”ASX: MMS) to merge the companies together to establish a leading salary packaging and fleet
company. The proposed merger, which is subject to conditions, will be implemented by MMS acquiring all
shares in Eclipx. Under the terms of the merger, Eclipx shareholders will receive 0.1414 MMS shares plus 46
cents cash for each Eclipx share. Under the proposed timetable, a Scheme Booklet is expected to be circulated
to all Eclipx shareholders in December 2018 / early January 2019 and an Eclipx Scheme Meeting to consider
the Eclipx Scheme is likely to be scheduled for February 2019. Subject to conditions defined within the Eclipx
Scheme being satisfied, MMS and Eclipx anticipate the merger to complete in the first quarter of 2019.
On 13 November 2018 the Board declared a fully franked dividend of 8.00 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.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 Directors’
Declaration
In the opinion of the Directors of Eclipx Group Limited (Group):
123-124
Independent Auditor’s Report
To the shareholders of Eclipx Group Limited
(a) The consolidated Financial Statements and notes of the Group that are set out on pages 67 to 120 are in
Report on the audit of the Financial Report
accordance with the Corporations Act 2001, including:
(i) Giving a true and fair view of the Group’s financial position as at 30 September 2018 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 2018.
(e) The Directors draw attention to note 1 of the consolidated financial statements which includes a statement
of compliance with International Financial Reporting Standards.
Kerry Roxburgh
Chairman
Sydney
13 November 2018
Doc Klotz
Chief Executive Officer
Sydney
13 November 2018
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 2018 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:
• Statement of Financial Position as at 30
September 2018
• Statement of Profit or Loss and Other
Comprehensive Income, Statement of Changes in
Equity, and 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 of 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 and intangible assets
• Setting of vehicle residual values
• Revenue recognition
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.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018
Valuation of goodwill and intangible assets – ($829.6m)
Refer to Note 3.5 in the Financial Report.
Valuation of goodwill and intangible assets – ($829.6m)
Refer to Note 3.5 in the Financial Report.
The key audit matter
How the matter was addressed in our audit
The key audit matter
How the matter was addressed in our audit
125-126
Valuation of the Group’s goodwill and intangible
assets is a Key Audit Matter due to:
•
•
the size of the balance (being 29% of total
assets); and
the high level of judgement involved by us in
assessing the inputs into the models underlying
the Group’s annual assessment for impairment
of goodwill and intangible assets.
We focused on the significant forward-looking
assumptions the Group applied in its value in use
models, including:
•
•
forecast growth rates for the Group’s
underlying cash flows, which can vary based
on a range of factors such as the number and
fleet size of new customer wins, volume of
auction sales, industry growth projections and
inflation expectations. The Group operates
across different geographies with varying
market dynamics, which increases the risk of
inaccurate forecasts; and
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 made the significant acquisition of
Grays eCommerce Group Limited in the prior
year. This necessitated our consideration of the
Group’s allocation of goodwill in the current year
to the CGUs to which they belong based on the
management and monitoring of the business.
In addition to the above, the carrying amount of
the net assets of the Group exceeded the Group’s
market capitalisation at year end, increasing the
possibility of goodwill being impaired. This further
increased our audit effort in this key audit area.
In addition to goodwill intangible assets, our
audit effort was increased in relation to software
intangible assets due to the Group’s continued
investment in technology, increase in the capitalised
software balance and the judgement involved in the
Group’s assessment of impairment indicators.
We involved valuation specialists to supplement
our senior audit team members in assessing this Key
Audit Matter.
Working with our valuation specialists, our
procedures relating more specifically to goodwill
included:
•
•
•
•
•
•
Evaluating the value in use valuation
methodology adopted by the Group with
reference to the requirements of AASB 136
Impairment of Assets accounting standard.
Assessing the integrity of the value in use
models used, including the accuracy of the
underlying calculation formulas.
Analysing the significant acquisition of Grays
eCommerce Group Limited 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. We also independently
developed 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.
Comparing the forecast cash flows contained
in the value in use models to Board approved
forecasts.
Challenging the Group’s cash flow forecast and
growth assumptions, including those relating
to the fleet size of new customer wins and
volume of auction sales using our knowledge
of the Group. We also used our knowledge of
the Group’s industry and past performance,
industry growth projections and inflation
expectations across different geographies to
assess the cash flow forecast. We 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 accuracy of previous Group
forecasts to inform our evaluation of forecasts
incorporated in the models.
•
•
•
Considering the sensitivity of the models 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.
Assessing the Group’s reconciliation of
differences between the year-end market
capitalisation and the carrying amount of
the net assets. This included comparing the
carrying amount of net assets at year-end to
the implicit market capitalisation based on
the offer price made by McMillan Shakespeare
Limited on 8 November 2018 to acquire all of
the Group’s shares.
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.
Our procedures relating more specifically to
capitalised software included:
•
•
•
Testing a sample of key controls relating to the
review and approval by senior management of
software costs capitalised and monitoring of
capitalised software projects.
Assessing a sample of software costs
capitalised for the relevant nature against
the requirements of the relevant accounting
standards.
Challenging the Group’s assessment regarding
impairment indicators in relation to capitalised
software. This included comparing the status
and cost of software projects in progress to
initial approved business cases.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 Setting 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 Note 3.1 in the Financial Report.
The key audit matter
How the matter was addressed in our audit
Residual value setting relating to fleet vehicles is 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 residual
values;
the flow on impact residual value setting has
on a number of key accounts in the Group’s
Financial Report, including vehicle depreciation
and impairment; and
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.
We focused on vehicle impairment and vehicle
trading profit as well as the robustness of the
process as indicators of the Group’s ability to set
accurate residual values.
We considered the Group’s following significant
judgements used in the vehicle impairment model:
•
•
•
expected forecast residual value at the end of
the lease term;
periodical future lease-related fee cash flow
assumptions; and
assumptions on the timing and future
condition of vehicles returned at the end of the
lease, and associated cash flows.
Our procedures included:
•
•
•
•
•
Understanding the process residual values are
set by the Group.
Testing a sample of 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
setting on fleet vehicles.
Assessing the Group’s judgement on future
lease-related fee cash flows and end of lease
cash flow assumptions. This is based on the
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. We
compared the sale price to sales invoices and
written down values to assess the ability of the
Group to accurately value assets at the end of
the lease term.
Comparing a sample of the current residual
values of vehicles against the current market
value of those vehicles sourced from an
independent database of used vehicle
valuations.
127-128
Revenue recognition ($758.5m)
Refer to Note 2.2 in the Financial Report.
The key audit matter
How the matter was addressed in our audit
Some of the Group’s revenue streams include a
high level of estimation or accounting complexity.
Measurement and recognition of these revenue
streams is a Key Audit Matter due to the audit effort
arising from:
•
•
•
•
The estimation of maintenance revenue using
a stage of completion method. We focussed
on the key assumptions of the average age,
term and usage of the vehicle fleet as well as
the proportion of maintenance costs incurred
compared to expected for the vehicle type;
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 the
allocation of revenue to different revenue
streams;
The significant judgement required by the
Group in assessing the net revenue recorded
in relation to rental hire income. The historical
collectability rates of receivables related to this
income increases our audit effort in this area.
Our procedures included:
•
•
•
•
Assessing the Group’s revenue recognition
policies against relevant accounting standards.
Recalculating and assessing 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. We checked the
average age, term and usage assumptions for
consistency with internal system generated
lease portfolio statistics. We also tested
these, on a sample basis, to key criteria in the
underlying lease agreements.
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 by evaluating
the Group’s contractual obligations against the
recognition criteria in AASB 118 Revenue.
• With the assistance of our IT specialists, testing
key automated controls within the leasing
database, including the automated system
allocation of revenue to different revenue
streams.
•
Challenging the Group’s judgement on the
net rental hire revenue recorded based on
the historical and expected recoverability of
rental hire receivables. We assess historical
collectability rates, test a statistical sample of
rental hire receivables to subsequent receipts
of cash and evaluate trends in recoverability of
rental hire revenue.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 Other Information
Report on the Remuneration Report
129-130
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report of Eclipx
Group Limited for the year ended 30 September
2018, 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 included
in the Directors’ report for the year ended 30
September 2018.
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
13 November 2018
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.
The Other Information we obtained prior to the date of this Auditor’s Report was the Directors’ Report and the
Remuneration Report. The Chairman’s Letter, Managing Director’s Report, Our History, Eclipx Group Positioning.
Financial Highlights, Business Overview, Corporate Sustainability, Board of Directors, Corporate Directory and
Shareholder Information sections of the Annual Report are expected to be made available to us after the date
of the Auditor’s Report.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not and
will 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 and Company’s ability to continue as a going concern and whether the use of the
going concern basis of accounting is appropriate. 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 and Company 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 the
Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the Auditing
and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This
description forms part of our Auditor’s Report.
ECLIPX GROUP LIMITED | ANNUAL REPORT 2018 Shareholder Information
INVESTOR INFORMATION
Substantial Shareholder Notices (as disclosed to the ASX)
131-132
Additional information required by the ASX and not shown elsewhere in this report is as follows, and is current
as at 5 December 2018.
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
shareholders
% of
shareholders
2,583
1,596
729
612
71
5,591
46.20%
28.55%
13.04%
10.95%
1.27%
100%
Ordinary
shares held
449,603
4,537,623
5,519,211
16,043,945
293,086,311
319,636,693
% of
ordinary shares
0.14%
1.42%
1.73%
5.02%
91.69%
100%
Distribution of holders of unquoted equity securities
Non-Executive Director 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 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
Number of
option holders
% of
option holders
Options
held
% of
options
-
-
-
2
2
4
-
-
-
50
50
100
Number of
option holders
% of
option holders
-
-
11
101
31
143
-
-
7.7
70.6
21.7
100
Number of
rights holders
% of rights
holders
-
19
31
46
7
103
-
18.4
30.1
44.7
6.8
100
-
-
-
100,000
385,000
485,000
Options
held
-
-
110,000
4,160,000
9,849,000
14,119,000
Rights
held
-
95,000
310,000
1,611,500
1,429,500
3,446,000
-
-
-
20.6
79.4
100
% of
options
-
-
1
29
70
100
% of
rights
-
0.8
6.7
45.5
47
100
Ordinary
shares held
22,458,526
28,804,698
% of
issued shares
7.03%
9.01%
Date of notice
03/12/2018
08/10/2018
Shareholders
Pendal Group Limited
Yarra Funds Management Limited;
Yarra Capital Management Holdings Pty Ltd
Yarra Management Nominees Pty Ltd;
AA Australia Finco Pty Ltd;
TA SP Australia Pty Ltd;
TA Universal Investment Holdings Ltd
Vinva Investment Management
Renaissance Smaller Companies Pty Ltd
16,081,777
23,361,659
5.03%
7.31%
20/08/2018
09/08/2018
Twenty largest shareholders
Rank Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
14
15
16
17
18
19
20
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD
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