Annual Report 2015 McMillan Shakespeare Limited
Financial calendar
Announcement of
2015 Annual Results
Annual Report
released
2015 Final Dividend
Record Date
2015 Annual
General Meeting
2016
August
25
September
29
October
1
October
16
October
27
February
23
2015
2015 Final Dividend
Ex-Date
2015 Final Dividend
Payment Date
Announcement of
H1 2016 Results
Annual General Meeting
The Annual General Meeting of the members of McMillan Shakespeare Limited A.B.N. 74 107 233 983
will be held on 27 October 2015 at 10:00 am at the State Library of Victoria, Ground Floor, 328 Swanston
Street, Melbourne, Victoria in the Theatrette.
Corporate directory
Directors
Registered Office
Share Registry
Ronald Pitcher, AM (Chairman)
Mike Salisbury (Managing Director)
John Bennetts
Ross Chessari
Tim Poole
Ian Elliot
Company Secretary
Mark Blackburn
Level 21, 360 Elizabeth Street
Melbourne Victoria 3000
Tel: +61 3 9097 3000
Fax: +61 3 9097 3060
Auditor
Grant Thornton Audit Pty Ltd
The Rialto, Level 30,
525 Collins Street
Melbourne Victoria 3000
Computershare Investor Services Pty
Limited
Yarra Falls, 452 Johnston Street
Abbotsford
Victoria 3067
Tel: +61 3 9415 4000
Website
www.mmsg.com.au
Financial Calendar
AGM Notice
Corporate Directory
Contents
Chair’s Report
CEO’s Report
10 year financial history
Non-Financial Highlights
Directors’ Report
• Directors
• Directors’ Meetings
• Principal Activities
• Results
• Dividends
• Review of Operations
• Outlook, Strategy and Prospects
• State of Affairs
• Events Subsequent to Balance Date
• Likely Developments
inside cover
inside cover
inside cover
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2
3
4–5
6
8
8
8
8
9
9
10
11
11
13
13
• Directors’ Experience & Special Responsibilities
14–15
• Remuneration Report
• Environmental Regulations
• Indemnification and Insurance
• Non Audit Services
• Directors Declaration
Five Year Summary
Financial Report
Directors’ Declaration
Independent Audit Report
Auditors Independence Declaration
Shareholder Information
16
38
38
38
39
40
41–84
85
86–87
88
89–90
Contents
MMSG Annual Report 2015 1
Chair’s report
I am delighted to present this review of MMS’ progress in
the 2015 financial year which produced a record result and
a return to the MMS tradition of delivering strong profitable
growth for shareholders.
It has been a strong year of growth for the Group following
the September 2013 withdrawal of proposed changes
to the FBT treatment of motor vehicles. We regained our
traditional momentum which accelerated as the year
progressed amid continued growth in revenue, profit and
customer numbers from our core businesses, and a better-
than-expected maiden profit contribution from our recently-
acquired Presidian business.
This demonstrated the value being created by the
execution of our strategy to diversify our core business
whilst also improving our customer service. Importantly,
MMS’ acquisitions of Presidian and three United Financial
Services companies (collectively known as ‘UFS’) in
February and July 2015 respectively have enlarged our
customer base, strengthened our business, and secured
a leadership position for the Group in the used vehicle
financing market, insurance and warranty market.
Our customers remain our highest priority. Throughout the
2015 financial year (FY15) our people continued to improve
how we interact with our customers both online and offline,
and increase the value we bring to them with our products
and services. Our relentless commitment to customer
service excellence and innovation was rewarded by higher
customer satisfaction levels and salary packaging program
participation rates.
Against this backdrop of strategic diversification and
operational excellence, we are delighted to have delivered
a 23% increase in net profit to a record $67.5 million for
FY15, and a 27 cent fully franked final dividend. This brings
the full year dividend to 52 cents per share, and slightly
increases this years’ payout ratio to 63%.
Board composition
The Board was pleased to appoint Mike Salisbury as Chief
Executive Officer following the retirement of Michael Kay in
September 2014. During his six-year term as CEO, Michael
developed an outstanding working culture at MMS and
executed acquisitions that together laid the foundation for
sustainable growth in the years to come.
Mike came to the role with seven years’ experience with the
Group and priceless corporate knowledge which facilitated
a seamless transition from old to new CEO. Since then, he
has led the execution of our corporate strategy with fresh
vigour, including the acquisitions of Presidian and UFS,
a range of customer experience improvements, and the
development of a new vision for the Group to better
guide our business activities in the future. Mike’s
leadership prowess and experience with the Group will
ensure progress continues apace toward building a
stronger business.
The board is grateful to Mike, his leadership team and all
employees for their significant contribution during the year.
Our people are outstanding and I would like to thank all
1,035 of them across Australia, New Zealand and the UK for
their dedication and flexibility as the MMS family grows.
Outlook
We have a clear strategy and our focus for the year ahead
will be on improving our service for our broadening
customer base, integrating Presidian and UFS, and
continuing to grow our asset financing activities in our
participating markets. Your board will consider making more
acquisitions depending on market conditions and the value
offered to shareholders.
In the 2016 financial year (FY16) MMS expects the strength
in new and second-hand vehicle sales to be sustained amid
historically low rates of finance. Earnings growth will be
strengthened by the contribution of Presidian and UFS
as new income streams and cross-selling opportunities
are realised. We also anticipate our continued investment in
IT infrastructure and systems to lift productivity across
the business.
We believe the environment, MMS’ strategy and the
strength of our expanding customer base mean the Group
is well positioned to deliver greater value to shareholders
over the medium term. We thank you for your loyalty as a
shareholder and look forward to your continued support
during this new growth phase for MMS.
Yours sincerely
Ronald Pitcher, AM
Chairman
2 MMSG Annual Report 2015
I am proud to be leading your company during this period
of growth for the Group and our pursuit of greater value for
you, our shareholders.
MMS’ performance in FY15 demonstrates the benefits of
broadening our focus to the used vehicle financing market
while still growing our leading share of the salary packaging
and novated leasing markets. The Group has now expanded
from a business relying on B2B partnerships to one that will
also have direct relationships with consumers (B2C). This
expansion has already impacted earnings. Presidian’s maiden
profit contribution to the Group exceeded our expectations.
Presidian is now part of the Group’s Retail Financial Services
segment. As this segment takes shape, its contribution to
Group earnings will increase.
Segment performance
During FY15 momentum returned to historic levels for our
salary packaging and novated leasing business, with a solid
rise in customer numbers fuelled, in part, by more than 50
additional contract wins. Profit for our Group Remuneration
Services segment increase by 29% on the FY14 level –
a very strong result that was helped by heavy investment
in new products and digital communication channels to
give our customers high quality service characterised by
unrivalled choice. The Group now has more than 2 million
visits to our website each year. Of these, one in five is made
using a smartphone or mobile device when our customers
are on the go. One in three salary packaging and novated
lease claims are lodged online – a proportion that is set to
surge this year after the recent launch of our free Maxxia
and RemServ Claims Apps.
For customers preferring the personal touch for which
the Group is renowned, we continued to invest in face-to-
face communication channels, and delivered more than
19,800 educational activities to our customers at worksites
across Australia. No matter what their service preferences,
customers continue to rate us highly. Our Net Promoter
Score averaged 50 during FY15.
Our Asset Management segment delivered a softer result
owing to a higher residual value provision, continuing fleet
inertia across the market and some credit losses that can
be attributed to the slowdown in the mining sector and
related services. This masked new business growth in
the UK asset management business which, as expected,
delivered its maiden profit in FY15. In addition, by June the
Joint Venture’s earnings had edged close to a break-even
position. We expect sales of finance leases to increase
in this market, supported by the upcoming launch of
our Lifestyle Lease product.
CEO’s report
Productivity
Productivity improvements from IT investment brought
greater efficiency across the business and better
experiences for our customers. The Group now processes
11 million payments each year. Our Melbourne and
Brisbane-based Customer Care Centres responded to
826,500 customer calls during FY15 with every call being
answered by a real person. These achievements, along with
more convenient online self-service for customers, and
greater standardisation of processes, will lift productivity in
the year ahead.
Our people
No review of the year would be complete without paying
tribute to our own people whose dedication enabled this
year’s record earnings result. They continue to demonstrate
their passion for our core values both at work and in the
community and I thank them for their outstanding effort.
For over two decades, the Group has been a trusted
workplace benefits services partner to many Not-for-Profit
(NFP) health, aged care and charity organisations. Our
people demonstrated their creativity and deep engagement
with the business during two internal campaigns (dubbed
‘Thought Bubble’) by contributing 124 ideas on ways to
better connect with our customers and grow our business.
Finally, as we welcome Presidian and UFS employees
into the MMS family, our people have rallied behind a
new, unifying vision for the Group which broadens our
purpose to capture the business activities of all subsidiaries
operating across Australia, New Zealand and the UK.
‘Driving what’s possible’ is our vision that will sit at the
heart of our business and support greater diversification,
enhanced customer service and earnings growth in the
years to come.
I thank you, our shareholders, customers and employees,
for your support and encourage you to stay with us on this
exciting journey ahead.
Yours sincerely
Mike Salisbury
Managing Director and Chief
Executive Officer
MMSG Annual Report 2015 3
10 year financial history
NPAT performance1
70
60
50
40
30
20
10
0
s
n
o
i
l
l
i
m
$
Profit recognised
on ILA business
combination
Normalised NPAT last
10 years CAGR of 29%
17.1
11.3
13.2
17.4
20.5
27.9
43.5
54.3
62.2
55.0
67.5
5.2
FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
NPAT from continuing operations
Acquisition gain
Revenue performance
23.1
158.9
163.3
172.0
188.1
188.1
38.9
35.6
48.2
54.1
65.8
76.0
92.1
111.6
137.3
155.9
157.2
67.5
176.1
s
n
o
i
l
l
i
m
$
400
380
360
340
320
300
280
260
240
220
200
180
160
140
120
100
80
60
40
20
0
FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Group Remuneration Services
Asset Management
Retail Financial Services
4 MMSG Annual Report 2015
10 year financial history
Normalised earnings per share (EPS)2
Earnings per share
10-year CAGR of 27%
s
t
n
e
c
100
90
80
70
60
50
40
30
20
10
0
FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Basic EPS
Cash EPS
Linear (Basic EPS)
Dividends per share
60
50
40
30
20
10
0
s
t
n
e
c
10-year CAGR of 30%
3.9
9.5
12.5
16.5
19.0
24.0
38.0
47.0
42.0
52.0
50.0
FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Dividends per share
MMS Share Price: March 2004 - August 2015
Government proposal to change
FBT treatment of motor vehicles
$20.00
$18.00
$16.00
$14.00
$12.00
$10.00
$8.00
$6.00
$4.00
$2.00
$0.00
4
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A
1. NPAT and EPS CAGR are normalised to exclude the profit recognised on acquisition of Interleasing (Australia) Limited in FY10 ($17m profit after tax).
2. Normalised EPS excludes the profit recognised on acquisition of Interleasing (Australia) Limited. Cash EPS includes CAPEX but excludes the
investment in fleet growth.
MMSG Annual Report 2015 5
Non-financial highlights
Our customers
Payments processed
Phone calls accepted
11 million p.a.
826,500 p.a.
Onsite employee educational
activities delivered to clients
located across Australia
19,880
Net Promoter Score (NPS)1
(Average monthly score during FY15)
50
Customer complaints resolved by MMS
and our Customer Advocate without
referral to an external arbitrator
99%
Visits to Maxxia and RemServ websites
2 million
Maxxia and RemServ website visits
originating from mobile devices
20%
Claims lodged online
(as a % of total claims lodged)
35%
Our people
Employees across MMS Group
1,035
Employee Engagement
High performance work
environment ranking
81%
Our environment
Reduction in greenhouse
emissions from car fleet travel
12%
(YOY reduction)
Carbon neutrality
(net zero carbon footprint) achieved from the
offset of 100% of CO2 emissions caused by
the production of printed material
Carbon neutrality
(printed material)
Reduction in greenhouse
emissions from electricity
12%
(YOY reduction)
6 MMSG Annual Report 2015
1 NPS of 50 or above is rated as excellent for financial services companies
Director’s report
The directors of McMillan Shakespeare Limited (Company
or MMS) present this report on the consolidated entity,
consisting of the Company and the entities that it controlled
at the end of, and during, the financial year ended 30 June
2015 (Group or MMSG).
Directors
The Directors during the whole of the financial year and up
to the date of this report (Directors) are as follows:
Mr Ronald Pitcher AM (Independent Chairman)
Mr John Bennetts (Non-Executive Director)
Mr Ross Chessari (Non-Executive Director)
Mr Tim Poole (Independent Non-Executive Director)
Mr Ian Elliot (Independent Non-Executive Director)
Mr Mike Salisbury was appointed to the position of Chief
Executive Officer on 1 October 2014 and subsequently as
Managing Director on 5 February 2015.
Mr Michael Kay retired as Managing Director and Chief
Executive Officer on 30 September 2014.
Details of the qualifications, experience and special
responsibilities of the Directors at the date of this Annual
Report are set out on pages 14 and 15.
The Directors that are noted above as independent
Directors, as determined in accordance with the Company’s
definition of independence, have been independent at all
times throughout the period that they held office during the
financial year ended 30 June 2015.
Directors’ meetings
The number of meetings held by the Board of Directors
(Board) (including meetings of committees of the Board)
and the number of meetings attended by each of the
Directors during the financial year ended 30 June 2015
were as indicated in the table below.
Mr Mike Salisbury attended five meetings in the capacity
of CEO from 1 October 2014. He also attended three
meetings by invitation from July 2014 until his formal
appointment as CEO.
Principal activities
The principal activities of the Company and its controlled
entities during the course of the financial year ended
30 June 2015 was the provision of salary packaging,
vehicle leasing administration, fleet management and
retail finance services.
In the opinion of the Directors, there were no significant
changes in the nature of the activities of the Company and
its controlled entities during the course of the financial year
ended 30 June 2015 that are not otherwise disclosed in this
Annual Report.
Director
Mr R. Pitcher, AM
(Chairman)
Mr M. Salisbury
(Managing Director and CEO)
Mr J. Bennetts
Mr R. Chessari
Mr T. Poole
Mr I. Elliot
Mr M. Kay
Board Meetings
Audit Committee Meetings
Remuneration
Committee Meetings
Eligible to
Attend
Attended
Eligible to
Attend
Attended
Eligible to
Attend
Attended
15
12
15
15
15
15
3
15
12
14
15
15
13
3
4
-
4
-
4
-
-
4
-
4
-
4
-
-
9
-
9
9
9
9
-
9
-
8
9
9
9
-
8 MMSG Annual Report 2015
Director’s report
Results
Details of the results for the financial year ended 30 June 2015 are as follows:
Results
2015
2014
Net profit after income tax (NPAT)
$67,486,611
$54,969,799
Basic earnings per share
87.0 cents
Earnings per share on a diluted basis
86.8 cents
73.8 cents
72.7 cents
Dividends
Details of dividends paid by the Company during the financial year ended 30 June 2015 are as follows:
Dividends
2015
2014
Final dividend for the financial year
ended 30 June 2014 of 31.0 cents
(2013: 18.0 cents) per ordinary share
paid on 15 October 2014 fully franked
at the tax rate of 30% (2013: 30%).
Interim dividend for the financial year
ended 30 June 2015 of 25 cents
(2014: 21.0 cents) per ordinary share
paid on 17 April 2015 fully franked at
the tax rate of 30% (2014: 30%).
$23,632,463
$13,414,314
$20,279,628
$15,650,033
Total
$43,912,091
$29,064,347
Subsequent to the financial year ended 30 June 2015, the Directors declared a final dividend of 27.0 cents per ordinary
share (fully franked at the tax rate of 30%) to be paid on 16 October 2015, bringing the total dividend to be paid for the
financial year ended 30 June 2015 to 52.0 cents per ordinary share.
MMSG Annual Report 2015 9
Director’s report
Review of operations
This year marked a record result for MMS as we returned
to our historically-strong profit growth following last
year’s withdrawal of proposed changes to the FBT
treatment of motor vehicles. The Group started harnessing
the benefits of our integration with Presidian Holdings Pty
Ltd (Presidian).
Our consolidated Group net profit after tax (NPAT) for
the year was $67.5 million, 23% higher than in the 2014
financial year (FY14). This pushed our NPAT Compound
Annual Growth Rate (CAGR) to 29% for the 11 years
since our listing on the ASX in 2004. Several one-off
items prevented an even stronger result, including $1.5
million (after tax) in acquisition costs associated with the
acquisition of Presidian in February 2015, and a $1.2 million
(after tax) onerous contract provision related to vacant
office space.
Adjusting for these one-off items, underlying NPAT (UNPAT)
was 26% higher at $70.2 million (FY14 UNPAT was $55.9m).
Return on Equity for the year was 25%.
Presidian’s earnings before interest, tax, depreciation and
amortisation (EBITDA) for the four months to 30 June 2015
was ahead of expectations at $5.5 million on revenue of
$23.1 million. The integration of Presidian’s businesses into
MMS gained momentum and is tracking ahead of target.
A significant number of Presidian employees relocated
to MMS’ head office in Melbourne’s CBD, and some
MMS managerial staff joined Presidian to share expertise
across the combined organisations, and identify cross-sell
opportunities. These developments were the initial steps
in streamlining functional areas and back-office operations
that will help create the capacity for greater scale, additional
revenue streams and the standardisation of processes
for greater efficiency across the business. In time this will
deliver a faster, easier and consistent customer experience.
The addition of Presidian to the MMS Group strengthens
our position in our home market, and leaves us uniquely
positioned to meet the needs of customers wanting vehicle
finance and associated products as well as the full range
of salary packaging benefits. We will leverage the scale in
our business to grow the Presidian retail platform and drive
higher returns.
As a fully-integrated business our UK operation was
profitable for the first time in FY15.
Enhanced customer experience
Productivity improvements from IT investment resulted in
greater efficiency across the business and more convenient
online self-service for our customers. The total number of
payments processed reached 11 million in the year. This
represents a 2.4% increase on the FY14 level.
The Company launched two mobile-optimised websites
with self-service platforms for our Maxxia and RemServ
brands early in FY15, giving our customers instant access
to their packaging account data wherever they are. Visits
to the Maxxia and RemServ websites topped 2 million,
with approximately 20% originating from smartphones and
mobile devices.
A live ‘click to chat’ function was embedded into our Maxxia
and RemServ websites, providing seamless assistance
to customers at their convenience while increasing both
customer engagement and our sales conversion rates.
Other initiatives included the embedding of an online claims
function into our private self-service sites, resulting in 35%
of claims being lodged online by year’s end. This initiative
was further enhanced with the development and launch of
our online Claims App for our Maxxia and RemServ brands
in August 2015.
In addition, two internal campaigns were implemented
to source ideas from our people on innovative ways to
better connect with our customers and grow our business.
Our employees’ creativity flourished, and more than 780
contributions were made via a web-based platform, with
124 ideas generated.
Key highlights and
activities included:
• Consolidated Group FY15 NPAT was 22.8% higher than
the previous corresponding period (25.6% ex interest
on the float1).
• Group Remuneration Services (GRS) FY15 NPAT was
29.3% higher than the previous corresponding period.
• Core operating contribution growth in GRS increased
25% on the previous corresponding period (core
operating contribution is defined as profit before
finance, tax and depreciation derived directly from salary
packages managed and novated leasing).
• Asset Management (AM) FY15 NPAT was $11.3 million,
representing the Australian, New Zealand and UK
businesses. The result was weaker than the FY14 result
($13.6 million) owing to an increase in the residual value
provision of $2.3 million (after tax) made for lease assets,
and credit losses totalling $0.3 million (after tax), both
due to exposure to the mining services sector. Fleet
‘inertia’ remained constant, with customers choosing to
extend leases rather than replace vehicles.
• As previously flagged to the market, the UK business
delivered its maiden profit in FY15. The business
originated £60 million of asset finance business. This
drove a significantly improved result for the Joint Venture
1 Ex interest on the float growth shows the business’s underlying growth after removing the impact of interest earned on non corporate funds which is
impacted by changes in interest rates.
10 MMSG Annual Report 2015
Director’s report
as it approached a break-even position toward the end of
the financial year. The expanded fleet book also provides
a larger income stream for the UK Finance business.
• A stronger second hand vehicle market with stable prices
drove vehicle disposal proceeds higher, resulting in
improved FY15 remarketing profits from the FY14 level.
• Free cash flow (pre increase in operating lease assets)
of $65.8 million provided a solid support for investing
and financing activities. Cash at 30 June 2015 was
$85.7 million.
• Assets under management grew by $92.0 million
during the year, or 21.6% on the FY14 total, amid greater
market consolidation.
• Across the Group, our pipeline of new business
opportunities strengthened during the year.
• Group funding facilities have been extended by a further
twelve months to March 2018 and on improved terms.
The UK facility was increased by £32 million. Term loan
facilities totalling $57.5 million were secured with two
club members and implemented to fund the Presidian
acquisition. This facility will be fully amortised over five
years to March 2020.
• By 30 June 2015 headcount across the Group increased
from 859 in the prior year to 1,035 following the
acquisition of Presidian.
• Total shares on issue increased by 4.3 million following
the acquisition of Presidian, 40% of which was funded
from the issue of MMS scrip to Presidian shareholders.
Outlook
MMS enjoyed a solid start to the 2016 financial year
(FY16), with trading activities meeting or exceeding targets.
Earnings will be strengthened further with the recent
acquisition of United Financial Services Pty Ltd, United
Financial Services Network Pty Ltd and United Financial
Services (Queensland) Pty Ltd in July 2015 (collectively
known as ‘UFS’).
Strategy and prospects
The Group’s medium term strategic direction is to continue
to look selectively to diversify, enhance and refine our
core business for the benefit of our shareholders, clients,
customers and the community. We will also enhance
our client and customer experiences through continued
investment in leading edge administration platforms and
customer facing technology. In addition, the Board will
consider making more value-adding acquisitions depending
on market conditions and the value proposition to MMS.
MMS’ acquisitions of Presidian and UFS in FY15 and FY16
respectively have strengthened the business by securing
a market leading position in the used vehicle financing
market. It has further diversified our business and reduced
our reliance on an intermediated relationship with clients to
reach, and make sales to, their employees (B2B) and fleet
managers, to a business that also has direct relationships
with consumers (B2C). The composition of our enlarged
consumer loan originations has also shifted significantly,
with 59% of the $1.5 billion (per year) combined loan
originations now being originated and brokered by
Presidian and UFS.
The acquisition of Presidian and UFS will assist the MMS
Group deliver earnings growth in FY16. Additional revenue
streams from both acquisitions are expected from the sale
of new products including warranties, insurances, vehicle
finance, and commercial finance loans. In addition, the
Group will tap the wide range of cross-selling opportunities
presented by having access to a broader customer base
and launching new products and services tailored to them.
State of affairs
In FY15 the Group established a strong foothold in the
consumer finance sector and with the UFS acquisition in
July 2015 has become a leading arranger of used vehicle
finance. There were no other significant changes in the
state of affairs of the Company and its controlled entities
that occurred during the financial year ended 30 June 2015
that are not otherwise disclosed in this Annual Report.
MMSG Annual Report 2015 11
12 MMSG Annual Report 2015
Review of operations
This acquisition strengthens the platform of our recently-
acquired Presidian business. The combined MMS and UFS
platform (including Presidian) will result in MMS’ consumer
loan originations increasing to $1.5 billion per annum and
our position in the used vehicle financing market being
elevated to a leading position. Revenue growth via finance
synergies and cross-selling in FY16 will be supported by
the combined Presidian and UFS network of 4,400 active
dealers and 600 finance brokers, as well as continued
growth in sales of commercial finance loans. Following the
integration of UFS, Group headcount across Australia, New
Zealand and the UK will surpass 1,150 people.
Likely developments
Following the acquisitions of Presidian and UFS, the
diversification of our core business and broadening of our
customer base will continue. Over the next 12 months we
foresee completing a review of our brand architecture that
contemplates a refreshed visual identity for the Group to
present a consistent face to our enlarged customer base
comprising MMS, Presidian and UFS customers.
Events subsequent to balance date
In July 2015 MMS unveiled a new vision for the Group to
our employees which broadens our purpose to capture the
business activities of our recently-acquired subsidiaries.
Our online presence was enhanced with the launch in
August 2015 of two Apps to support Maxxia and RemServ
customers wishing to lodge claims online.
On 23 July 2015 MMS announced the acquisition of
privately-owned companies United Financial Services Pty
Ltd, United Financial Services Network Pty Ltd and United
Financial Services (Queensland) Pty Ltd (collectively known
as ‘UFS’) for $42 million. Funding for the transaction
was debt-free and comprised cash (60%) from existing
cash reserves and MMS scrip (40%). The transaction was
completed on 31 July 2015, and is expected to be earnings
accretive from FY16.
UFS is an independent financial agency and automotive
brokerage services business providing consumer and
commercial finance and insurance products primarily to the
used motor vehicle sector. It has a national footprint with
28 office locations, 1,900 active dealers and 150 individual
finance brokers. In FY15 UFS originated approximately $370
million in auto and personal loans, and $14 million worth of
insurance premiums.
MMSG Annual Report 2015 13
Directors’ experience & special responsibilities
Ronald Pitcher AM, FCA, FCPA
Appointed:
Positions:
4 February 2004
Chairman of the Board
Member of the Audit Committee
Chairman of the Remuneration Committee
Mr Pitcher is a Chartered Accountant with over 45 years experience in the
accounting profession and the provision of business advisory services. Mr Pitcher
has previously held a number of public company directorships and is currently a
director of Reece Australia Limited (since 2003). Under the Company’s definition of
independence, Mr Pitcher is considered to be independent.
Mike Salisbury MBA
Appointed:
Positions:
1 October 2014 (as Chief Executive Officer),
5 February 2015 (as Managing Director)
Managing Director and
Chief Executive Officer
Mr Salisbury joined MMS as Managing Director of RemServ in April 2008 and was
appointed to the position of Chief Executive Officer in October 2014. Before joining
the company in April 2008, Mr Salisbury was a member of the senior management
team at AAMI. Mr Salisbury held a variety of management positions within the
organisation, including a number of state management roles and the position of
Product Manager for Compulsory Third Party Insurance. Mr Salisbury is a member
of the Australian Institute of Company Directors, and is a Director of the National
Automotive Leasing & Salary Packaging Association. Mr Salisbury holds a Masters
of Business Administration from Southern Cross University and is a graduate of the
Advanced Management Program at Harvard Business School.
John Bennetts B Ec, LLB
Appointed:
Positions:
1 December 2003
Non-Executive Director
Member of the Audit Committee
Member of the Remuneration Committee
Mr Bennetts is an experienced investor and has been the founder and director of
many successful Australian companies with businesses in technology, finance and
manufacturing. He is a founder of Cellestis Limited and private equity investment
firm, Mooroolbark Investments Pty Limited (M-Group). He has also previously
provided advisory services to a range of companies in Australia and Asia. Prior to
the establishment of the M-Group, he was Group Legal Counsel and Company
Secretary of Datacraft Limited.
14 MMSG Annual Report 2015
Directors’ experience & special responsibilities
Ross Chessari LLB, M Tax
Appointed:
Positions:
1 December 2003
Non-Executive Director
Member of the Remuneration Committee
Mr Chessari is a founder and director of the investment manager, SciVentures
Investments Pty Limited (SciVentures). Prior to founding SciVentures, Mr Chessari
was the Managing Director of ANZ Asset Management and the General Manager
of ANZ Trustees.
Tim Poole CA, B Comm
Positions:
Appointed:
17 December
2013
Non-Executive Director
Chairman of the Audit Committee
Member of the Remuneration Committee
Mr Poole is currently a non-executive Director of Aurizon Holdings Limited (and will
become Chairman from 1 September). He is also the non-executive Chairman of
Lifestyle Communities Limited and a Director of Japara Healthcare Limited.
Mr Poole was formerly an executive of Hastings Funds Management (1995 to 2007)
including as the Managing Director (2005 to 2007). He was also formerly non-
executive Chairman of Asciano Limited and a non-executive Director of Newcrest
Mining Limited. Mr Poole is considered an independent director under the Company’s
definition of independence.
Ian Elliot
Appointed:
Positions:
27 May 2014
Non-Executive Director
Member of the Remuneration Committee
Mr Elliot is currently a non-executive Director of Salmat Limited, a non-executive
Director of Hills Industries Limited and a Commissioner of the Australian Rugby
League. Mr Elliot was formerly Chairman and CEO at Australia’s largest advertising
agency George Patterson Bates. He is a Fellow of the Australian Institute of
Company Directors and a graduate of the Advanced Management Program at
Harvard Business School. Mr Elliot is considered an independent director under
the Company’s definition of independence.
Mark Blackburn Dip Bus (Acct), CPA, GAICD
Positions:
Chief Financial Officer and Company Secretary
Mr Mark Blackburn joined MMS as Chief Financial Officer in October 2011.
Mr Blackburn commenced as Company Secretary on 26 October 2011.
Mr Blackburn has over 30 years experience in finance, working across a broad
range of industries for companies such as WMC, Ausdoc, Laminex Industries,
AAMI/Promina and Olex Cables. In particular, he has public company experience
in financial management and advice, management of financial risks, management
of key strategic projects, acquisitions and establishing joint ventures. Prior to his
employment with MMS, Mr Blackburn was Chief Financial Officer of AUSDOC Group
Ltd, IOOF Holdings Ltd and iSelect Pty Ltd.
MMSG Annual Report 2015 15
Remuneration Report (Audited)
Message from the Board
Dear Shareholders
We are pleased to present the 2015 Remuneration Report.
In response to feedback received on last year’s
Remuneration Report, and after receiving a ‘first strike’
at last year’s AGM, the Company has revisited the layout,
structure and content of this year’s Remuneration Report
with a view to meeting the needs and expectations of
shareholders and other stakeholders.
On behalf of the Committee, I recommend this year’s
Remuneration Report to you.
Ronald Pitcher, AM
Chairman
Executive remuneration guide
This short guide is intended to provide shareholders with an
overview of executive remuneration outcomes for FY15 having
regard to the Company’s performance, as well as a brief
update on the actions that the Board and Remuneration
Company performance
The Board undertakes an annual strategic review and
sets the strategy agenda for the Company. Three year
financial plans, annual budgets, forecasts and financial and
operational targets are prepared by executive management.
These are reviewed and approved by the Board. In the
approval process the Board considers Company financial
returns and targets, strategic issues such as markets and
competition for its products and businesses, regulatory and
operating risks, operating capability and importantly, how
these plans measure against stakeholder expectations.
Committee have taken to improve the structure and
reporting of the Company’s remuneration practices. This
guide is audited and is in addition to the audited information
set out in the formal Remuneration Report.
Current performance is reviewed by the Board through
periodic reporting against approved targets. This
strategic management framework enables the Board to
set Long Term Incentive (LTI) plan targets and its annual
expectations that, together with operational performance,
determine any annual bonuses for the executive
management team.
The NPAT and EPS CAGR for the last five years is 21%
and 19% respectively as summarised in the key metrics
table below.
Indices
FY15
FY142
FY13
FY12
FY11
Net profit attributable
to Company members
$67,486,611
$54,969,799
$62,163,519
$54,305,163
$43,460,470
NPAT growth 1
22.8%
(11.6%)
14.5%
25.0%
55.7%
Earnings per share
87.0 cents
73.8 cents
83.4 cents
76.6 cents
64.0 cents
The Company has historically used Net Profit After Tax (NPAT)
and Earnings Per Share (EPS) as key metrics for assessing
LTI awarded to executive key management personnel
(KMP) and executives to align more closely with Company
performance. The Company has chosen to solely
apply an EPS hurdle to the FY15 LTI options granted.
The EPS growth hurdle requires that the Company’s EPS
growth over the performance period is greater than the
target set by the Board (see page 25).
1 NPAT growth in 2011 has excluded the gain on business combination of $17,055,000 following the acquisition of Interleasing (Australia) Limited in April 2010.
2 Impacted by the former Government’s announcement on 16 July 2013 of proposed changes to the treatment of FBT on vehicles.
16 MMSG Annual Report 2015
MMSG Annual Report 2015 17
Remuneration Report
FY15 Remuneration outcomes
Company performance was reflected in executive
remuneration outcomes for FY15.
During the year 2,727,783 or 96% of awarded performance
options vested following the out-performance against pre-
determined cumulative compound NPAT targets over the
vesting period of three years. These were granted in respect
of the May 2010, August and October 2011 and March 2012
performance options. The May 2010 options were granted
to a KMP that included a vesting condition to complete
an 18 month fixed term contract and upon its successful
completion to be followed by a 36 month employment
contract, where the vesting conditions were dovetailed with
other options on-foot that were vesting on 31 August 2014.
The August 2011 issue was the primary grant of options to
existing executives under the three year programme with
the October 2011 issue to facilitate the newly appointed
CFO and the March 2012 issue followed from the extension
of the programme to an executive. The graph below sets
out the LTI achievement against performance hurdles.
FY12 - FY14 LTI Programme achievement
against performance hurdles
10.0%
9.6%
0.5%
62.2
64.3
54.3
56.9
49.4
’
m
$
T
A
P
N
90
80
70
60
50
40
30
20
10
-
15%
10%
5%
0%
55.0
-5%
-10%
-15%
-20%
-25%
-30%
-35%
FY12
FY13
FY14
NPAT target
NPAT Actual
The annual NPAT targets for FY12 and FY13 were out-
performed but FY14 under-performed mainly due to the
impact on the Group Remuneration Services (GRS)
business from the FBT proposals on novated leasing by
the previous Government and other one-time business
start-up costs. However, the cumulative NPAT performance
over the performance period exceeded the cumulative
target by 0.5%.
FY15 bonuses were determined taking into consideration
a number of company and individual performance metrics
that included sales growth, cost to income ratio, customer
satisfaction, productivity index, staff engagement, capital
management, mergers / acquisitions and group strategy.
Annual bonuses are capped at 25% of fixed remuneration.
The vesting of current performance options are measured
against target EPS. The target for FY15 was based on the
MMS budget with annual increases in EPS over the FY15
18 MMSG Annual Report 2015
year of 15% for FY16 and a further 15% for FY17.
The performance hurdles are discussed in detail on
page 25. The actual EPS performance achieved for FY15
and target EPS for the remaining two years is shown in the
chart below.
FY15 - FY17 LTI Programme
achievement against
performance hurdles
$1.226
FY15 actual
EPS represents
69% vesting
entitlement
$1.066
$0.927
$0.890
$
S
P
E
$1.267
$1.217
$1.167
$1.117
$1.067
$1.017
$0.967
$0.917
$0.867
FY15
FY16
FY17
Target EPS
Actual EPS
Directors have assessed FY15 EPS for the purpose of
the LTI using NPAT of $69.0m which is based on reported
NPAT of $67.5m and adding back $1.5m after-tax of one-off
Presidian acquisition costs.
On this basis and using the formula as disclosed on
page 25, the vesting entitlement for FY15 is 69% of the
entitlement for the year.
Details of KMP remuneration for FY15, prepared in
accordance with statutory obligations and accounting
standards, are contained in Section 3 of the Remuneration
Report: Details.
In addition to this Guide the report now includes:
• more detailed disclosure of the Company’s approach to
annual bonuses in line with improvement suggestions
from shareholders and other stakeholders;
• clearer disclosure in relation to LTI opportunities and
cycles and the terms and conditions that apply to the
FY15 grant;
• additional discussion of the Company’s remuneration
governance structures and the link between
the company’s performance and remuneration
outcomes; and
• more information about Non-Executive Directors’ fees.
Other relevant remuneration initiatives implemented during
FY15 are set out below:
• earnings per share (EPS) performance hurdle was
introduced for the FY15 long term incentive option grant;
• scaled reward system for LTI rather than the previous cliff
vesting structure; and
• a twelve month holding lock applies to options issued to
the four KMPs.
Remuneration Report
Contents
Key section
1. Who does this Report cover?
2. Remuneration policy and guiding principles
3. Executive remuneration in detail
4. Non-executive director remuneration in detail
5. Statutory remuneration disclosures
2. Remuneration policy and
guiding principles
Overview
The Group’s remuneration policies and practices are
designed to align the interests of staff and shareholders
while attracting and retaining staff members who are critical
to its growth and success.
The Group’s remuneration structure consists of cash and
non-cash components. The table below shows which KMP
are eligible for the various components.
Page
19
19
20
30
31
1. Who does this Report cover?
This Report sets out the remuneration arrangements for
the Group’s key management personnel (KMP) (who are
listed in the table below) during FY15. Throughout this
Remuneration Report, the KMP are referred to as either
Executive KMP or Non-Executive Directors.
All individuals held their positions for all of FY15 unless
otherwise indicated.
Non-Executive Directors
Name
Position
Mr R. Pitcher, AM
Non-Executive Chairman
Mr J. Bennetts
Non-Executive Director
Mr R. Chessari
Non-Executive Director
Mr T. Poole
Non-Executive Director
Mr I. Elliot
Non-Executive Director
Executive KMP
Name
Position
Mr M. Salisbury
CEO and Managing Director (1)
Mr G. Kruyt
Chief Operating Officer
Mr M. Blackburn
Mr A. Tomas
Group CFO and Company
Secretary
Managing Director, Fleet and
Financial Products
Mr M. Kay
CEO and Managing Director (3)
Mr P. Lang
Group Executive, Customers
and Corporate Affairs (2)
(1) Mr Salisbury held the role of Managing Director, Remuneration Services
until 30 September 2014 and assumed the role of CEO on 1 October
2014 and Managing Director on 5 February 2015. He was considered to
be a member of the KMP for all of FY15.
(2) Mr Lang resigned as Group Executive, Customers and Corporate Affairs
effective 5 December 2014.
(3) Mr Kay retired as CEO and Managing Director on 30 September 2014.
(4) There were no changes to KMP after the reporting date and before the
Annual Report was authorised for issue.
Fixed Remuneration
LTI’s – Performance
Options
(cid:51)
(cid:51)
x
(cid:51)
LTI’s-Voluntary Options
Annual Bonus
x
(cid:51)
x
(cid:51)
Non-Executive
Directors
Executive KMP
Non-Executive
Directors
Executive KMP
Non-Executive Director remuneration
The Board’s policy is to remunerate the Chairman and the
Non-Executive Directors at market rates for comparable
companies for the time and commitment involved in
meeting their obligations.
The Non-Executive Directors are remunerated for their
services from the maximum annual aggregate amount
approved by the shareholders of the Company on 29
October 2014 (currently $900,000 per annum).
The Board sets the fees for the Chairman and the
other Non-Executive Directors.
Neither the Chairman nor the other Non-Executive Directors
are entitled to any performance related remuneration.
There is no direct link between the remuneration of the
Chairman or any other Non-Executive Director and the
short term results of the Group because the primary
focus of the Board is on the long term strategic direction
and performance of the Group. There are no termination
payments payable to the Chairman or the other Non-
Executive Directors on their retirement from office other
than payments relating to the accrued superannuation
entitlements included in their remuneration.
See key Section 4. Non-Executive Director remuneration in
detail section for further information.
MMSG Annual Report 2015 19
Remuneration Report
Executive KMP remuneration
The components of remuneration for Executive KMP consist
of fixed remuneration (including superannuation and
benefits) and long-term incentives (in the form of options).
In addition Executive KMP may also receive an annual
bonus based on key performance indicators (KPIs).
The Board believes that this is an appropriate mix as it
ensures that executives are primarily focused on generating
value for shareholders over the long term (based on
targeted financial metrics), while also being modestly
rewarded in the short term for exceeding KPIs that
contribute to company performance. Executive KMP are not
incentivised to focus on short term goals at the expense of
long term goals and business priorities.
See key Section 3. Executive remuneration in detail section
for further information.
Remuneration governance
Role of the Remuneration Committee
The Board has an established Remuneration Committee
whose objectives are to oversee the formulation and
implementation of remuneration policy and make
recommendations to the Board on remuneration policies
and packages applicable to the Directors and Executives.
For further details of the composition and responsibilities
of the Remuneration Committee, please refer to the
Corporate Governance Statement
www.mmsg.com.au/about/governance
Remuneration consultants and
other advisors
The Remuneration Committee obtains external independent
advice when required, and will use it to guide and
inform their considered decision-making. During FY15,
no remuneration recommendations (as defined in the
Corporations Act) were received.
FY14 Annual General Meeting
(AGM) first strike
Post the Company’s FY14 AGM, and the receipt of a
‘first strike’ against the FY14 Remuneration Report, the
Board undertook to expand the details disclosed in future
Remuneration Reports.
The Board has taken a number of steps to improve the
Company’s reporting practices and enhance understanding.
In particular:
• The ‘Annual bonus program’ section of this Report
has been expanded to provide additional detail how
bonuses are determined, value range and other
relevant considerations (so that it is clear that there is a
structured process for the determination and award of
bonuses); and
• The ‘Long term incentive’ section of this Report provides
further clarity on the timing of LTI offers and the terms
and conditions that apply to the FY15 grant.
20 MMSG Annual Report 2015
3. Executive remuneration
in detail
As outlined above, the key components of Executive
KMP remuneration are fixed remuneration and long term
incentive grants. However, the Remuneration Committee
also has the authority to make, annual bonus awards.
Fixed Remuneration
Components
• Fixed remuneration comprises base
salary, superannuation and, in some
cases, non-cash benefits, such as
motor vehicle lease payments and car
parking benefits
• It is determined on an individual basis,
reflecting the duties, responsibilities
and performance levels of the relevant
executive, general market conditions
and comparable remuneration offered
in related industry sectors
• It does not vary over the course of a
year based on performance
• Neither the Chief Executive Officer
nor the Chief Financial Officer are
remunerated separately for acting as an
officer of the Company or any entities in
the Group
• Fixed remuneration is reviewed by the
Remuneration Committee annually
(or on promotion) to ensure fixed
remuneration remains competitive
in the market place and reflects
the individual’s skills, knowledge,
accountability and general performance
Review
• The Company conducts market
based reviews
• The Company generally positions itself
at the median
• There is no guarantee that fixed
remuneration will be increased as a
result of the annual review
The Remuneration Committee has reviewed remuneration
based on analysis from multiple data sources and taken
into consideration factors such as annual revenue,
employee numbers and market capitalisation. The
Company generally positions itself at the market median.
In certain circumstances, for exceptional candidates or
positions of high responsibility, the Company positions
itself at the seventy-fifth percentile of the market. The
Company has sourced additional data through external
remuneration consultants to inform Remuneration
Committee decision making.
Remuneration Report
Annual Bonus Program
During the year, a total of $205,000 was awarded to Executive KMP under the annual bonus program.
No Key Management Personnel have a contractual right to a bonus.
However, the Remuneration Committee has the authority to award bonuses based on contribution to operational, individual
and financial performance. The Remuneration Committee has opted for implementing bonuses rather than adopting the
standard STI concept to ensure that the Company/KMP can remain nimble and switch priorities to quickly adapt to dynamic
or evolving circumstances. One such instance occurred in FY14, to adapt to the disruption to the business caused by the
former Government’s announcement on 16 July 2013 of proposed changes to the treatment of FBT on motor vehicles.
The assessment criteria that applied to the annual bonus program in FY15 is set out in the table below
Sales
Growth
Cost to
Income
Ratio
Customer
Satisfaction
Productivity
Index
Staff
Engagement
Capital
Management
Mergers /
Acquisitions
Group
Strategy
CEO and
Managing
Director
CFO and
Company
Secretary
Chief
Operating
Officer
Managing
Director, Fleet
and Financial
Products
(cid:51)
x
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
x
x
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
(cid:51)
x
x
22 MMSG Annual Report 2015
Remuneration Report
What is the annual
bonus program?
A bonus may be awarded by the Remuneration Committee if in their opinion the employee’s
contribution to the company’s financial performance, operating capability and growth initiatives
together with the other metrics mentioned in the FY15 outcomes above, has exceeded expectations.
Who is eligible?
Executives
What is the performance period
1 July - 30 June
How and when are bonuses
determined?
Shortly after the end of the financial year, the CEO considers the issue of performance related annual
bonuses. Any award of performance related bonuses is based on an assessment of a number of
company and individual performance metrics including sales growth, cost to income ratio, customer
satisfaction, productivity index, staff engagement, capital management, corporate acquisitions and group
strategy. The CEO makes a recommendation about bonuses (excluding his own) to the Chairman of the
Remuneration Committee. The CEO’s bonus is determined by the Remuneration Committee.
Performance related annual bonuses are capped at 25% of fixed remuneration per employee and have
historically not exceeded 11% of total remuneration. In FY15 the highest bonus paid was 10% of that
Executive KMP’s total remuneration.
The Remuneration Committee makes the final determination about payment of all executive bonuses.
How is it delivered?
In cash.
The Executive must be employed at the time the bonus is paid.
Why does the Board consider the
bonus program appropriate?
Recognition of Executive contributions over and above role responsibility and the value created for
the business.
Company results must meet Board expectations.
Individuals must exceed performance KPIs and meet organisational behavioural standards.
Measures for Executives for FY14 included contribution to:
• Maintaining staff engagement levels during the disruption caused by the former Government’s
announcement on 16 July 2013 of proposed changes to the treatment of FBT on motor vehicles;
Is there a performance threshold
that must be met before bonuses
can be paid?
• Volume of novated lease sales;
• Maintaining sales staff retention levels; and
• Achievement of margin improvement from reduced costs.
Measures for Executives for FY15 included contribution to:
Were bonuses paid in FY15?
• Acquisition and integration of acquired companies while minimising disruption to business as usual;
• Record levels of novated lease sales;
• Successful contract tenders resulting in maintaining clients/new business/increased market share; and
• Record low cost to income ratio.
Executive KMP bonuses paid in FY15 totalled $205,000 and the highest bonus paid to an Executive
represented 10% of their total remuneration.
All FY14 bonuses were paid on 11 July 2014 except for the CEO who was paid on 8 August 2014.
Total bonuses paid to Executive KMP in relation to FY14 totalled $305,000.
Annual bonuses paid to Executive KMPs relative to total remuneration for the last six years have not
exceeded 8% per annum and is presented in the chart below.
Executive KMP Remuneration
7%
7%
7%
5%
8%
8%
Annual bonuses
included in remuneration
Total remuneration
% of annual bonuses
to total remuneration
43.5
s
n
o
i
l
l
i
m
$
5.0
4.0
3.0
2.0
1.0
-
FY10 FY11 FY12 FY13 FY14 FY15
NOTE
(1) Total remuneration is based on the amount as disclosed in the “total remuneration” column of the statutory table
on page 32.
(2) The annual bonuses paid in FY12 do not include $300,000 that was paid to Mr A Tomas under a contractual
arrangement as disclosed in the Remuneration Report for that financial year.
(3) The annual bonuses in respect of FY13 were declared and paid in FY14 and consequently, included in
the FY14 results but for the purpose of this graph, have been attributed to FY13 to show the relative proportion
to total remuneration.
MMSG Annual Report 2015 23
Remuneration Report
Long-term Incentives
The Board believes that the use of options is the most
appropriate form of long-term equity-based performance
incentive to reinforce alignment with shareholder interests.
The Company issues options to certain Executives and
employees under the McMillan Shakespeare Limited
Employee Option Plan (Plan) every three years.
Two types of options may be granted under this Plan:
1. Performance options
Options that will only vest subject to performance
hurdles and continuity of employment.
2. Voluntary option
Options that are not subject to performance hurdles,
but which:
• Executives must purchase;
• will only vest if the Executive continue in employment
(and thereby contribute to the performance of the
Company); and
• Executives will only realise value from if the Company’s
share price increases above a set ‘strike price’.
Voluntary options were granted in FY11 and again in
FY14 to provide Executives with an additional opportunity
to purchase up to a maximum of $50,000 worth of
options per executive. The terms and conditions relevant
to these Options were disclosed in prior year’s
Remuneration Reports.
No Executive can enter into a transaction that is designed
or intended to hedge the Executive’s exposure to any
unvested option. Executive are required to provide
declarations to the Board on their compliance with this
policy from time to time.
Further details are set out below.
Performance Options – FY15 LTI grant
During FY15, Performance Options were granted to
Executive KMP as their LTI.
The number of Performance Options awarded is
determined by multiplying the relevant Executive’s fixed
remuneration by a pre-determined percentage (which varies
depending on the position, duties and responsibilities of the
relevant executive between 10% and 40% (i.e. 40% for the
CEO and CFO).
This figure is then multiplied by three, recognising that
grants are made on a three yearly basis rather than annually.
The EPS performance hurdle is subject to the measurement
of the Company’s average annual growth in EPS for a three
year period. The performance hurdle was derived from
the EPS targets put in place in respect of the FY15 – FY17
Three Year Financial Plan. The Remuneration Committee
considers this to be a key indicator of the financial success
of the business. The EPS performance hurdle was designed
so that Executives are incentivised to ensure that the
Three Year Financial Plan is met or exceeded. The EPS
performance hurdle provides the KMP with a sole and
unambiguous target which they collectively need to achieve,
thereby encouraging a collaborative approach across the
business. The Remuneration Committee considers that
achieving the EPS target will have a positive impact on total
shareholder return.
All options issued have an exercise price (or strike price)
and only become valuable to the extent that the share price
rises above the exercise price. Given that options are issued
at or above the prevailing market price at the date that
the Board approved the grant, it is implied that increased
shareholder wealth is required before the senior executive
will receive any value from the options.
Details of the key terms and conditions of the FY15
Performance Options are as follows.
The vesting conditions for options that were granted prior to
FY15 (but that are still on-foot) are outlined in detail in prior
years Remuneration Reports.
24 MMSG Annual Report 2015
Remuneration Report
What are Performance
Options?
Do Executives pay for
Performance Options?
An option to acquire a fully paid ordinary share in the Company (subject to payment of
an exercise price), that will only vest and become exercisable if performance hurdles and
service conditions are satisfied.
Performance Options are granted as part of remuneration and therefore there is no
payment required for a grant. However, Executives are required to pay an exercise price to
exercise them and receive shares.
What is the
performance period?
Three years
An EPS hurdle applies to the FY15 grant.
An EPS hurdle has been chosen as it provides evidence of the Company’s growth in
earnings. The EPS growth hurdle requires that the Company’s EPS growth over the
performance period is greater than the target set by the Board.
What is the
performance hurdle
and why was it chosen?
Performance conditions (EPS targets)
Weighting
Achievement of FY15 EPS* target of not less than $0.927
33.3%
Achievement of FY16 EPS* target of not less than $1.066
(15% growth from FY15 target
Achievement of FY17 EPS* target of not less than $1.226
(15% growth from FY16 target)
Maximum Entitlement
33.3%
33.3%
100%
How does the
EPS performance
hurdle work?
The EPS performance hurdle is subject to the measurement of the Company’s average
annual growth in EPS for a three year period. Basic EPS is determined by dividing the
Company’s NPAT before significant items by the weighted average number of ordinary
shares on issue during the financial year. Growth in EPS will be measured by comparing
the EPS at the start of the year of issue and the measurement year. The EPS hurdle is
a ‘line of sight’ hurdle, as the achievement of the hurdle directly correlates to improved
shareholder value. The Remuneration Committee considers it a key indicator of the financial
success of the business. Achieving the EPS target will have a positive impact on total
shareholder return.
The EPS target in FY15 is based on the Budgeted EPS for FY15: the Base Year. In the event
that the EPS target in any one year is not achieved, at the end of the three year period
ending 30 June 2017 the total EPS for the three year period will be calculated, and if the
total EPS for the three year period exceeds the sum of EPS targets for each of the three
years, the participant will be entitled to exercise all un-forfeited options.
The vesting scale is as follows:
Financial years
0% vesting
FY15
FY16
FY17
EPS less than
$0.867
EPS less than
$0.997
EPS less than
$1.146
50-100%
vesting
EPS between
$0.867 and
$0.927
EPS between
$0.997 and
$1.066
EPS between
$1.146 and
1.266
100% vesting
EPS at least
$0.927
EPS at least
$1.066
EPS at least
$1.226
Process for assessing
performance
conditions
To determine the extent to which the EPS performance hurdle is satisfied, the Remuneration
Committee relies on audited financial results and vesting is determined in accordance with
the Plan Rules.
The Remuneration Committee believes this method of assessment provides an appropriate
and objective assessment of performance.
The Remuneration Committee will take account of capital raisings and acquisitions where
necessary or appropriate to do so.
MMSG Annual Report 2015 25
Remuneration Report
What are the rights
attaching to the
Performance Options?
What is the exercise
price and how was it
determined?
When do the
Performance Options
expire?
What happens
on cessation of
employment?
What happens on a
change of control?
What Performance
Options were granted
in FY15?
No voting rights or entitlements to dividends are attached to Performance Options.
There are multiple prices depending on when the executive joined. The exercise price is
normally equal to or higher than the spot price at the date of grant and is based on 5 Day
Volume Weighted Average Price of Shares traded in the period immediately prior to grant
date of the options.
On 30 September 2018 for options without a “holding lock”. In relation to the Performance
Options granted to the four Executive KMPs a mandatory 12 month ‘holding lock’ will apply
to those Options such that any shares acquired by exercising vested Options cannot be sold
until 12 months after the Options vest (the Options vest on 31 August 2017, so the ‘holding
lock’ will apply until 31 August 2018 with the options expiring 30 September 2019).
If the employee leaves employment with the Group before 31 August 2017 regardless
of the circumstances, the options lapse without any payment to the employee.
On a change of control, the Board has discretion to bring forward the exercise date of
all performance options and to waive or vary the exercise conditions or performance
conditions attached to the performance options.
These are summarised on page 35.
26 MMSG Annual Report 2015
Remuneration Report
Voluntary Options – FY15 LTI grant
In FY15, Voluntary Options were offered to Executives.
Details of the key terms and conditions of the FY15 Voluntary Options are as follows.
The vesting conditions for options that were granted prior to FY15 (but that are still on-foot) are outlined in detail in the
Company’s previous Remuneration Reports.
What are Voluntary Options?
Do Executives pay for
Voluntary Options?
An option to acquire a fully paid ordinary share in the Company (subject to
payment of an exercise price) that may be purchased by Executives.
Voluntary Options provide Executives with an additional opportunity to invest in
the Company as a LTI. A Voluntary Option may be purchased by the Executive
when offered by the Company. The Voluntary Option will only vest if the Senior
Executive remains employed at vesting date.
Yes. The maximum amount that can be applied towards the purchase of
Voluntary Options is $50,000, and the number of options to be granted is
determined by dividing the amount invested by the fair value of the option at
grant date. The consideration payable per option is based on the fair value of
the option at grant date less a 25% discount.
In addition, an exercise price is payable when the options are exercised
for shares.
What is the vesting period?
Three years.
What is the performance hurdle and
why was it chosen?
No performance hurdles.
The Executive buys the option at grant date.
What are the rights attaching to the
Voluntary Options?
No voting rights or entitlements to dividends are attached to
Voluntary Options.
What is the exercise price and how
was it determined?
The exercise price is normally equal to or higher than the spot price at the
date of grant and is based on 5 Day Volume Weighted Average Price of shares
traded in the period immediately prior to grant date.
When do the Voluntary Options expire? 30 September 2018.
What happens on cessation of
employment?
What happens on a change of control?
If the Executive leaves employment with the Group before 31 August 2017, the
Executive will forfeit 25% (representing the discount) of their entitlement for
consideration, paid by the Company, in the amount of $1.
On a change of control, the Board has discretion to bring forward the exercise
date of all performance options and to waive or vary the exercise conditions or
performance conditions attached to the performance options.
What Voluntary Options were
granted in FY15?
These are summarised on page 35.
MMSG Annual Report 2015 27
Remuneration Report
Fixed vs performance based remuneration
The relevant proportions of fixed versus performance based remuneration received in FY15 are set out in the table below.
The proportion of performance based remuneration received increased from FY14 to FY15, and the Remuneration Committee
will keep the remuneration ‘mix’ under review to ensure that it remains appropriate in the Company’s circumstances.
Mr M. Salisbury1
Mr G. Kruyt1
Mr M. Blackburn1
Mr A. Tomas1
Mr M. Kay1
Mr P. Lang1
Fixed remuneration
At risk – Annual Bonus
At risk – LTI
FY15
FY14
74%
70%
72%
76%
77%
91%
73%
61%
63%
70%
56%
67%
FY15
5%
10%
5%
4%
-
-
FY14
FY15
FY14
22%
22%
9%
10%
10%
11%
21%
20%
23%
20%
23%
9%
5%
17%
28%
20%
34%
22%
1 The FY14 bonus includes the bonus in respect of FY13 which was declared after the release of the FY13 annual report.
Consequences of performance on shareholders’ wealth
The table below sets out the Company’s performance over the past five years in respect of key financial and non-financial
indicators. In addition to the links between remuneration and shareholder value discussed above, when reviewing the
Group’s performance and benefits for shareholder wealth, and the link to the remuneration policy, these indicators are
generally considered:
Indices
FY15
FY144
FY13
FY12
FY113
Net profit attributable to
Company members
NPAT growth1
Dividends paid
$67,486,611
$54,969,799
$62,163,519
$54,305,163
$43,460,470
22.8%
(11.6%)
14.5%
25.0%
55.7%
$43,912,091
$29,064,347
$36,516,743
$31,422,422
$20,388,246
Dividend payout ratio2
Share price as at 30 June
64.3%
$12.09
52.9%
$9.17
58.8%
$16.18
57.4%
$11.82
46.9%
$9.58
Basic earnings per share
87.0 cents
73.8 cents
83.4 cents
76.6 cents
64.0 cents
1 NPAT growth in FY11 excluded the gain on business combination following the acquisition of Interleasing (Australia) Limited in April 2010 of $17,055,000.
2 Dividend payout ratio is calculated based on dividends paid per share and EPS for the year.
3 Share price at the start of FY11 was $4.69.
4 Impacted by the former Government’s announcement on 16 July 2013 of proposed changes to the treatment of FBT on vehicles.
The overall level of executive compensation takes into account the performance of the Group over a number of years.
The Group’s profit from ordinary activities after tax and earnings per share has grown at a CAGR of 19.3% per annum over
the period from 1 July 2010 until 30 June 2015 (excluding the gain on business combination). Over the same period the
average return on equity (RoE) exceeded 33%.
MMSG Annual Report 2015 29
Remuneration Report
Key terms of Executive KMP service agreements
All Executive KMP are party to a written executive service agreement. The key terms are set out below.
Key terms of Executive Service Agreement for CEO
Duration
Ongoing
9 months
Periods of notice required to terminate
Termination payments
The agreement may, however, be terminated by the Company for cause
without notice or any payment.
The Company has discretion to make a payment in lieu of notice.
No contracted retirement benefits are in place with any of the Company's
executives.
Restraint of trade
The Company can elect to invoke a restraint period not exceeding 6 months.
Key terms of Executive Service Agreements for other Executive KMP
Duration
Ongoing
Periods of notice required to terminate
Termination payments
Generally, 6 months written notice, by the Company or the Executive KMP.
The agreement may, however, be terminated by the Company for cause
without notice or any payment.
The Company has discretion to make a payment in lieu of notice.
No contracted retirement benefits are in place with any of the Company's
Executive KMP.
Restraint of trade
The Company can elect to invoke a restraint period not exceeding 6 months.
4. Non-Executive Director remuneration in detail
The remuneration of Non-Executive Directors comprises Directors’ fees and superannuation contributions, and takes into
account the size and complexity of the Company’s operations, their responsibility for the stewardship of the Company and
their workloads.
As stated in the Executive Remuneration Guide section, total fees are not to exceed the annual limit of $900,000 approved
by shareholders in October 2014.
Details of the fees paid to the Non-Executive Directors are set out in the table below.
Directors Fees
Superannuation contributions
The annual Directors’ fees (including superannuation contributions) payable
to Non-Executive Directors for FY15 were as follows:
Position
Chairman
Fee ($)
203,014 (from 1 January 2015)
Audit Committee Chairman
127,364 (from 1 January 2015)
Director (base fee)
107,364 (from 1 January 2015)
No fees are payable in respect of membership of Board Committees.
Contributions required under legislation are made by the Company on
behalf of Non-Executive Directors.
Retirement benefits
There is no scheme for the payment of retirement benefits.
30 MMSG Annual Report 2015
Remuneration Report
5. Statutory remuneration disclosures
Non-Executive Director remuneration – statutory disclosures
The tables below set out the out the statutory disclosures required under the Corporations Act 2001 (Cth) and in
accordance with the Accounting Standards.
Short term benefits
Post
employment
benefits
Long term
benefits
Cash
Salary/Fees1
Other
Benefits
Superannuation
Long Service
Leave
Total
Remuneration
$
$
$
Non-Executive Directors
Mr R. Pitcher, AM
(Chairman)
Mr J. Bennetts
(Non-Executive Director)
Mr R. Chessari
(Non-Executive Director)
Mr T. Poole
(Non-Executive Director)
Mr I. Elliot
(Non-Executive Director)
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
182,907
179,200
85,322
72,107
85,322
72,107
107,182
57,196
98,050
16,342
-
-
-
-
-
-
-
-
-
-
1. The amounts shown for the Non-Executive Directors reflect directors’ fees only.
17,376
16,576
8,106
6,670
8,106
6,670
10,182
5,291
9,315
1,512
$
-
-
-
-
-
-
-
-
-
-
$
200,283
195,776
93,428
78,777
93,428
78,777
117,364
62,487
107,365
17,854
MMSG Annual Report 2015 31
Mr M. Salisbury
(CEO and Managing
Director) 3
Mr G. Kruyt (Chief
Operating Officer)
Mr M. Blackburn
(Group CFO and
Company Secretary)
Mr A. Tomas
(Managing Director,
Fleet and Financial
Products)
Former CEO
Mr M. Kay (CEO and
Managing Director,
resigned on 30
September 2014)5
Former Executive
KMP
Mr P. Lang
(Group Executive,
Customers and
Corporate Affairs
resigned on 5
December 2014)5
Remuneration Report
2. Executive KMP remuneration – statutory disclosures
The following table sets out the statutory disclosures required under the Corporations Act 2001 (Cth) and in accordance
with the Accounting Standards.
Short-term benefits
Post-
employment
benefits
Long-
term
benefits
Share-
based
payments
Cash
Salary/
Fees
Current
Year
Annual
Bonus
Fy13
Annual
Bonus4
Other
Benefits1
Superannuation
Long
Service
Leave
Options2
Total
Remuneration
Percentage Of
Remuneration
As Options
Executive KMP
$
$
2015
554,237
50,000
$
-
$
$
$
$
$
98,023
29,987
47,369
208,035
987,651
2014
278,268
50,000
50,000
30,774
20,886
10,590
22,645
463,163
2015
438,973
75,000
-
76,950
18,783
15,400
159,026
784,132
2014
354,728
75,000
75,000
17,162
17,775
12,504
110,005
662,174
2015
543,165
50,000
-
37,888
35,000
35,087
208,280
909,420
2014
541,406
40,000
40,000
(2,797)
25,000
232
255,108
898,949
2015
379,709
30,000
-
138,124
35,000
37,648
155,547
776,028
2014
386,682
40,000
40,000
113,117
25,000
3,748
149,484
758,031
2015
321,536
-
-
(60,107)
35,000
-
89,623
386,052
2014
1,039,756
75,000
100,000
8,131
25,000
(82,978)
595,440
1,760,349
%
21%
5%
20%
17%
23%
28%
20%
20%
23%
34%
2015
220,563
-
-
380
9,392
(81,298)
15,530
164,567
9%
2014
289,282
25,000
25,000
(1,257)
17,775
9,383
104,813
469,996
22%
In the case of redundancy, the company Redundancy Policy will apply to the extent that the payment is greater than the payment made to an Executive KMP on
termination.
1. Other benefits reflect annual leave entitlements, motor vehicle packaging payments, travel benefits and car parking benefits.
2. The equity value comprises the value of options issued. No shares were issued to any Non-Executive Director (and no options were granted to any Non-
Executive Director) during the financial years ended 30 June 2015 and 30 June 2014. The value of options issued to Executive KMP (as disclosed above)
are the assessed fair values (less any payments for the options) at the date that the options were granted to the executives, allocated equally over the
period from when the services are provided to vesting date. Fair values at grant date are determined using a binomial option pricing model that takes into
account the exercise price, the expected term of the option, the share price at grant date, the expected price volatility of the underlying share, the expected
dividend yield and the risk-free interest rate for the term of the option.
No options were granted during the year ended 30 June 2014.
3.
Mr Salisbury was appointed CEO from 1 October 2014 and Managing Director on 5 February 2015 and was formerly Managing Director,
Remuneration Services.
4. The bonus in respect of FY13 was deferred because of the former Government’s 16 July 2013 announcement of proposed changes to the treatment of FBT
on motor vehicles and paid in the FY14 financial year.
5. No payments were made to any Executive KMP in respect of termination of services in FY15.
32 MMSG Annual Report 2015
Remuneration Report
Option Details
No options were granted to, exercised by or lapsed with respect to Non-executive Directors during the financial year ended
30 June 2015 or 30 June 2014.
The terms and conditions of each grant of options to executives affecting their remuneration in the financial year ended 30
June 2015 and 2014 and each relevant future financial year are as follows:
Grant Date
Expiry Date
Share price at
valuation date
Exercise
Price
Value per option
at grant date1
Date Exercisable
28 May 2010
1 October 2015
$3.42
$3.42
16 August 2011
30 September 2015
$7.31
$7.31
16 August 20112
30 September 2015
$8.54
$7.31
25 October 2011
30 September 2015
$8.54
$8.54
14 March 2012
30 September 2015
$9.29
$9.29
24 July 2012
30 September 2015
$11.42
$11.42
19 August 2014
30 September 2018
$10.18
$10.18
19 August 20143
30 September 2019
$10.18
$10.18
23 September 2014
30 September 2018
$10.83
$10.83
28 October 2014
30 September 2018
$10.17
$10.17
24 March 2015
30 September 2018
$11.87
$11.87
26 May 2015
30 September 2018
$12.88
$12.88
$0.93
$1.76
$2.31
$1.87
$2.40
$2.56
$2.78
$3.01
$2.91
$2.68
$2.94
$3.18
100% after 1
October 2014
100% after 31
August 2014
100% after 31
August 2014
100% after 31
August 2014
100% after 31
August 2014
100% after 31
August 2014
100% after 31
August 2017
100% after 31
August 2017
100% after 31
August 2017
100% after 31
August 2017
100% after 31
August 2017
100% after 31
August 2017
1. Reflects the fair value at grant date for options granted as part of remuneration calculated in accordance with AASB 2: Share-based Payment.
2. These options were issued to the Managing Director on 16 August 2011 and valued on the day of approval by shareholders at the Annual General
Meeting on 25 October 2011.
3. This tranche of options is subject to a holding lock where any shares acquired by exercising these options cannot be sold until twelve months after
the options vest.
34 MMSG Annual Report 2015
Remuneration Report
Details of the options over ordinary shares in the Company provided as remuneration to each Executive KMP are set out
below. When exercised each option is convertible into one ordinary share of McMillan Shakespeare Limited.
Name
Date of
grant
Type of
option
Number
of options
granted
Value of
options
granted
during
the year
Number
of options
vested
during
year
Vested %
Number
of options
forfeited/
lapsed
during the
year1
Forfeited
or lapsed
%
Year in
which
options may
vest 2
Maximum
value of
options yet
to vest 2
-
-
FY 2018
709,860
Mr M. Salisbury
Mr G. Kruyt
Mr M. Blackburn
Mr A. Tomas
Mr M. Kay
Mr P. Lang
19 August
2014
24 July
2012
16 August
2011
19 August
2014
16 August
2011
16 August
2011
19 August
2014
25 October
2011
19 August
2014
28 May
2010
16 August
2011
16 August
2011
16 August
2011
19 August
2014
16 August
2011
16 August
2011
Performance
302,158
909,496
Performance
31,311
Performance
85,276
-
-
-
-
-
-
85,276
100%
Performance
215,827
649,639
-
-
Performance
159,637
Voluntary
37,901
-
-
159,637
100%
37,901
100%
Performance
256,248
771,306
-
-
Performance
352,942
-
352,942
100%
Performance
204,184
614,594
-
-
Performance
537,634
Voluntary
37,901
Performance
682,206
Voluntary
37,900
-
-
-
-
537,634
100%
37,901
100%
682,206
100%
37,900
100%
(31,311)
100%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Performance
105,438
293,118
-
-
(105,438)
100%
Performance
151,655
Voluntary
37,901
-
-
151,655
100%
37,901
100%
-
-
-
-
-
-
-
-
FY 2018
506,914
-
-
-
-
FY 2018
601,850
-
-
FY 2018
479,568
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1. Reflects the number at lapse date for options that were granted as part of remuneration and lapsed during the financial year ended 30 June 2015.
2. There is no minimum or maximum value attached to the options at the vesting date.
MMSG Annual Report 2015 35
Remuneration Report
Movement of options granted to Executive KMP
The table below reconciles the options held by each Executive KMP from the beginning to the end of FY15.
Executive KMP
Options
Balance at
the start of
the year1
Granted as
compensation
Vested
during
the year
Exercised
during
the year
Forfeited
Other
changes
during the
year
Vested and
exercisable
at the end of
the year
Unvested at the
end of the year
Mr M. Salisbury
Performance
116,587
302,158
85,276
(85,276)
(31,311)
Mr G. Kruyt
Performance
159,637
215,827
159,637
(159,637)
Mr G. Kruyt
Voluntary
37,901
-
37,901
(37,901)
Mr. M. Blackburn
Performance
352,942
256,248
352,942
(352,942)
Mr A. Tomas
Performance
537,634
204,184
537,634
(537,634)
Mr A. Tomas
Voluntary
37,901
Mr M. Kay
Performance
682,206
Mr M. Kay
Voluntary
37,901
-
-
-
37,901
(37,901)
682,206
37,901
-
-
-
-
-
-
-
-
-
Mr P. Lang
Performance
151,655
105,438
151,655
(151,655)
(105,438)
Mr P. Lang
Voluntary
37,901
-
37,901
(37,901)
-
1 There were no unvested options at the start of the year.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
682,206
37,901
-
-
302,158
215,827
-
256,248
204,184
-
-
-
-
-
Shares issued on exercise of performance options
Details of fully paid ordinary shares in the Company that were issued following the exercise of performance options by
KMPs during the year are set out below.
Name
Number of ordinary shares issued
Value of Option at exercise date $1
Mr M. Salisbury
Mr G Kruyt
Mr M. Blackburn
Mr A. Tomas
Mr M Kay
Mr P. Lang
85,276
159,637
352,942
537,634
-
151,655
310,501
580,956
868,452
4,639,781
-
544,441
1 Value at exercise date of options that were granted as part of remuneration and were exercised during the year has been determined as the intrinsic
value of options at that date
36 MMSG Annual Report 2015
Remuneration Report
Equity instrument details relating to Key Management Personnel
The tables below show the number of shares in the Company held during the financial year by each Director and each of
the Executive Key Management Personnel, including their personally related parties.
There were no shares granted during the year as compensation.
Share holdings
Balance at the start
of the year
Shares acquired
through option exercise
Other changes
during the year
Balance at the end
of the year
Non-Executive Directors
Mr R. Pitcher
Mr J. Bennetts
Mr R. Chessari
Mr T. Poole
Mr I. Elliot
Key Management Personnel
Mr M. Salisbury
Mr M. Kay1
Mr G. Kruyt
Mr M. Blackburn
Mr A. Tomas
Mr P. Lang1
25,100
3,993,025
6,050,941
8,000
-
-
811,904
73,044
1,250
17,050
-
1 Mr Kay and Mr Lang were no longer KMP at reporting date.
Unissued shares
-
-
-
-
-
85,276
-
197,538
352,942
575,535
189,556
-
(450,000)
-
-
-
(75,000)
-
(262,629)
(352,942)
(128,136)
(189,556)
25,100
3,543,025
6,050,941
8,000
-
10,276
-
7,953
1,250
464,449
-
At the date of this Annual Report, unissued ordinary shares of the Company under option are:
Option class
No. of unissued ordinary shares
Exercise price
Expiry date
Performance Options
Voluntary Options
Performance Options
Performance Options
Performance Options
Performance Options
Performance Options
Performance Options
Voluntary Options
682,206
50,801
978,417
543,695
107,877
109,142
294,336
85,692
23,981
$7.31
$7.31
$10.18
$10.18
$10.83
$10.17
$11.87
$12.88
$10.18
30 September 2015
30 September 2015
30 September 2019
30 September 2018
30 September 2018
30 September 2018
30 September 2018
30 September 2018
30 September 2018
No options were granted to the Directors or any of the five highest remunerated officers of the Company since the end of
the financial year.
MMSG Annual Report 2015 37
Remuneration Report
Directors’ interests
At the date of this Annual Report, the relevant interest of each Director in the securities issued by the Company and its
controlled entities, as notified by the Directors to the Australian Stock Exchange Limited (ASX) in accordance with section
205G(1) of the Corporations Act 2001 (Cth), is as follows:
Director
Mr R. Pitcher, AM (Chairman)
Mr M. Salisbury (Managing Director)
Mr J. Bennetts
Mr R. Chessari
Mr. T Poole
Mr I. Elliot
Options
-
302,158
-
-
-
-
Ordinary shares
25,100
10,276
3,543,025
6,050,941
8,000
-
No Director has, during the financial year ended 30 June 2015, became entitled to receive any benefit (other than a
benefit included in the aggregate amount of remuneration received or due and receivable by the Directors shown in the
Remuneration Report or the fixed salary of a full time employee of the Company) by reason of a contract made by the
Company or a controlled entity with the Director or an entity in which the Director has a substantial financial interest or a
firm in which the Director is a member.
End of Remuneration Report.
Environmental regulations
The Directors believe that the Company and its
controlled entities have adequate systems in place for
the management of relevant environmental requirements
and are not aware of any breach of those environmental
requirements as they apply to the Company and its
controlled entities.
Indemnification and insurance
Under the Company’s Constitution, the Company
indemnifies the Directors and officers of the Company and
its wholly-owned subsidiaries to the full extent permitted
by law against any liability and all legal costs in connection
with proceedings incurred by them in their respective
capacities.
The Company has also entered into a Deed of Access,
Indemnity and Insurance with each Director, each
Company Secretary, and each responsible manager under
the licenses which the Company holds (Deed), which
protects individuals acting as officeholders during their
term of office and after their resignation. Under the Deed,
the Company also indemnifies each officeholder to the full
extent permitted by law.
The Company has a Directors & Officers Liability Insurance
policy in place for all current and former officers of the
Company and its controlled entities. The policy affords
cover for loss in respect of liabilities incurred by Directors
and officers where the Company is unable to indemnify
them and covers the Company for indemnities provided to
38 MMSG Annual Report 2015
its Directors and officers. This does not include liabilities
that arise from conduct involving dishonesty. The
Directors have not included the details of the premium
paid with respect to this policy as this information is
confidential under the terms of the policy.
Non-audit services
Details of the amounts paid or payable to the auditor of
the Company, Grant Thornton Audit Pty Ltd and its related
practices, for non-audit services provided, during the
financial year ended 30 June 2015, are disclosed in Note 4
to the Financial Statements.
The Company’s policy is that the external auditor is not to
provide non-audit services unless the Audit Committee has
approved that work in advance, as appropriate.
The Audit Committee has reviewed a summary of non-
audit services provided during the financial year ended 30
June 2015 by Grant Thornton Audit Pty Ltd. Given that the
only non-audit services related to client contract audits,
review of banking covenant and trust account compliance,
the Audit Committee has confirmed that the provision of
non-audit services is compatible with the general standard
of independence for auditors imposed by the Corporations
Act 2001 (Cth). This has been formally advised to the
Board. Consequently, the Directors are satisfied that the
provision of non-audit services during the year by the
auditor and its related practices did not compromise the
auditor independence requirements of the Corporations
Act 2001 (Cth).
Auditor’s independence declaration
A copy of the auditor’s independence declaration, as
required under section 307C of the Corporations Act 2001
(Cth), is set out on page 88 of this Annual Report.
Directors’ declaration
The Directors have received and considered written
representations from the Chief Executive Officer and
the Chief Financial Officer in accordance with the ASX
Principles. The written representations confirmed that:
•
•
the financial reports are complete and present a true
and fair view, in all material respects, of the financial
condition and operating results of the Company and its
controlled entities and are in accordance with all relevant
accounting standards; and
the above statement is founded on a sound system of
risk management and internal compliance and control
that implements the policies adopted by the Board and
that compliance and control is operating efficiently and
effectively in all material respects.
Corporate governance practices
Our full corporate governance statement is available on our
website at www.mmsg.com.au/about/governance
Signed in accordance with a resolution of the Directors.
Ronald Pitcher, AM
Chairman
Mike Salisbury
Managing Director
25 August 2015
Melbourne,
Australia
MMSG Annual Report 2015 39
Five year summary
Five-year summary FY11 – FY15
2015
2014
2013
2012
2011
Financial performance
Group
Revenue ($m)
NPAT ($m)
UNPAT ($m)1
Group Remuneration Services segment
Segment revenue ($m)
Segment NPAT ($m)
Asset Management segment
Segment revenue ($m)
Segment NPAT ($m)
Retail Financial Services segment
Segment revenue ($m)
Segment NPAT ($m)
Shareholder value
Total return on equity (%)2
Dividends per share (cps)
Dividend payout ratio (%)
Basic earnings per share (cps)
Return on equity (%)
Other
Employees
Employee engagement score (%)
389.6
67.5
70.2
176.1
54.3
188.1
11.3
23.1
3.0
24.9
52.0
62.5
87.0
25
1,035
81
347.5
55.0
55.9
157.2
42.0
188.1
13.6
-
-
26.2
52.0
52.9
73.8
26
873
No survey
330.1
62.2
62.2
155.9
46.8
172.0
14.6
-
-
34.2
42.0
58.7
83.4
34
700
84
302.0
54.3
54.3
137.3
40.3
163.3
14.3
-
-
38.4
47.0
57.9
76.6
38
730
No survey
271.3
43.5
43.5
111.6
31.7
158.9
13.5
-
-
46.5
38.0
46.9
64.0
43
608
80
1 Underlying NPAT (UNPAT) is reported NPAT normalised for items considered to be capital in nature or not directly relating to operational performance. UNPAT
is likely to better reflect maintainable earnings and presents a better comparable measure of performance year on year. UNPAT items included in FY15 are
the after-tax adjustments for acquisition expenses relating Presidian of $1.5m after tax and the onerous provision for contracted rental for vacant property
$1.25m after tax. The UNPAT adjustment in FY14 was acquisition expenses relating to CLM of $0.9m after tax.
2 Total return to equity is calculated as NPAT over the average of the current and proceeding year’s equity.
40 MMSG Annual Report 2015
Financial Report
Statements of Profi t or Loss and
Other Comprehensive Income
For the year ended 30 June 2015
Consolidated Group
Parent Entity
Revenue and other income
Employee benefi ts expense
Depreciation and amortisation expenses and impairment
Leasing and vehicle management expenses
Brokerage commissions and incentives
Net claims incurred
Consulting expenses
Marketing expenses
Property and corporate expenses
Technology and communication expenses
Other expenses
Finance costs
Share of equity accounted joint venture loss
Acquisition expenses
Profi t before income tax
Income tax (expense) / benefi t
Profi t attributable to members of the parent entity
Other comprehensive income
Items that may be re-classifi ed subsequently to profi t or loss:
Changes in fair value of cash fl ow hedges
Exchange differences on translating foreign operations
Income tax on other comprehensive income
Total other comprehensive income for the year
Total comprehensive income for the year
Basic earnings per share (cents)
Diluted earnings per share (cents)
Note
3
4(a)
12
4(a)
5(a)
6
6
2015
$’000
2014
$’000
389,590
347,457
2015
$’000
68,363
(677)
2014
$’000
29,124
(646)
-
-
-
-
(213)
-
(358)
-
-
(507)
-
-
-
-
-
-
(358)
-
(438)
-
(11)
-
-
-
66,608
517
67,125
27,671
418
28,089
-
-
-
-
-
-
-
-
(81,038)
(89,116)
(52,692)
-
-
(3,446)
(2,739)
(6,869)
(8,141)
(11,038)
(10,872)
(1,120)
(1,177)
79,209
(24,239)
54,970
418
489
(142)
765
55,735
67,125
28,089
73.8
72.7
(96,856)
(92,825)
(50,717)
(5,535)
(2,160)
(2,119)
(3,477)
(10,059)
(8,673)
(9,350)
(10,865)
(816)
(2,196)
93,942
(26,455)
67,487
(107)
2,338
28
2,259
69,746
87.0
86.8
The above statements of profi t or loss and other comprehensive income should be read in conjunction with the accompanying notes.
MMSG Annual Report 2015
41
Financial Report
Statements of Financial Position
As at 30 June 2015
Current assets
Cash and cash equivalents
Trade and other receivables
Finance lease receivables
Inventory
Prepayments
Deferred acquisition costs
Total current assets
Non-current assets
Property, plant and equipment
Finance lease receivables
Intangible assets
Other fi nancial assets
Deferred tax assets
Deferred acquisition costs
Total non-current assets
TOTAL ASSETS
Current liabilities
Trade and other payables
Unearned premium liability
Other liabilities
Provisions
Current tax liability
Borrowings
Derivative fi nancial instruments
Total current liabilities
Non-current liabilities
Borrowings
Unearned premium liability
Provisions
Deferred tax liabilities
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Retained earnings
TOTAL EQUITY
Note
8
9
10
13
10
15
11
14
16
17
18
19
19
18
14
Consolidated Group
Parent Entity
2015
$’000
2014
$’000
85,729
46,941
35,253
7,165
6,361
2,137
183,586
305,128
89,911
194,671
1,871
1,183
973
593,737
71,197
29,185
7,969
5,379
6,568
-
120,298
313,205
16,937
66,659
1,726
5,832
-
404,359
2015
$’000
2,598
2,413
-
-
18
-
5,029
-
-
-
261,646
105
-
261,751
2014
$’000
1,005
473
-
-
20
-
1,498
-
-
-
123,206
13
-
123,219
777,323
524,657
266,780
124,717
63,862
6,105
16,187
10,591
3,789
5,658
699
106,891
346,046
2,781
2,228
934
351,989
49,359
-
18,068
6,137
10,634
452
639
85,289
213,995
-
767
759
215,521
47,908
-
-
-
2,182
4,016
-
54,106
53,002
-
-
-
53,002
458,880
300,810
107,108
318,443
223,847
159,672
20(a)
121,617
10,677
186,149
56,456
4,817
162,574
121,617
8,449
29,606
318,443
223,847
159,672
46,737
-
-
-
10,283
-
-
57,020
-
-
-
-
-
57,020
67,697
56,456
4,848
6,393
67,697
The above statements of fi nancial position should be read in conjunction with the accompanying notes.
42 MMSG Annual Report 2015
Statements of Changes in Equity
For the Year Ended 30 June 2015
2015
Equity as at beginning of year
Profi t attributable to members of the parent entity
Other comprehensive income after tax
Total comprehensive income for the period
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs
Employee share schemes - value of employee services
Income tax associated with share based payments
recognised in equity
Dividends paid
Note
20
20(b)
27
7
Issued
capital
$’000
56,456
-
-
-
65,161
-
Retained
Earnings
$’000
162,574
67,487
-
67,487
-
-
-
-
-
(43,912)
Equity as at 30 June 2015
121,617
186,149
2014
Equity as at beginning of year
Profi t attributable to members of the parent entity
Other comprehensive income after tax
Total comprehensive income for the period
Transactions with owners in their capacity as owners:
Employee share schemes - value of employee services
Dividends paid
56,456
-
-
-
136,668
54,970
-
54,970
27
7
-
-
-
(29,064)
Equity as at 30 June 2014
56,456
162,574
2015
Equity as at beginning of year
Profi t attributable to members of the parent entity
Other comprehensive income after tax
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs
Employee share schemes - value of employee services
Income tax associated with share based payments
recognised in equity
Dividends paid
Note
20(b)
27
7
Financial Report
Consolidated Group
Cash fl ow
Hedge
Reserve
$’000
(447)
-
(79)
(79)
Foreign
Currency
Translation
Reserve
$’000
416
-
2,338
2,338
-
-
-
-
-
-
-
-
Total
$’000
223,847
67,487
2,259
69,746
65,161
1,326
2,275
(43,912)
(526)
2,754
318,443
(740)
-
293
293
-
-
(56)
-
472
472
195,435
54,970
765
55,735
-
-
1,741
(29,064)
(447)
416
223,847
Option
Reserve
$’000
4,848
-
-
-
-
1,326
2,275
-
8,449
3,107
-
-
-
1,741
-
4,848
Parent Entity
Issued
capital
$’000
56,456
-
-
-
65,161
-
Retained
Earnings
$’000
6,393
67,125
-
67,125
-
-
-
-
-
(43,912)
Option
Reserve
$’000
4,848
-
-
-
-
1,326
2275
-
Total
$’000
67,697
67,125
-
67,125
65,161
1,326
2275
(43,912)
Equity as at 30 June 2015
121,617
29,606
8,449
159,672
2014
Equity as at beginning of year
Profi t attributable to members of the parent entity
Other comprehensive income after tax
Total comprehensive income for the period
Transactions with owners in their capacity as owners:
Employee share schemes - value of employee services
Dividends paid
27
7
Equity as at 30 June 2014
56,456
-
-
-
7,368
28,089
-
28,089
-
-
-
(29,064)
56,456
6,393
3,107
-
-
-
1,741
-
4,848
66,931
28,089
-
28,089
1,741
(29,064)
67,697
The above statements of changes in equity should be read in conjunction with the accompanying notes.
MMSG Annual Report 2015
43
Financial Report
Statements of Cash Flows
For the Year Ended 30 June 2015
Cash fl ows from operating activities
Receipts from customers
Payments to suppliers and employees
Proceeds from sale of assets under lease
Payments for assets under lease
Interest received
Interest paid
Dividends received
Income taxes paid
Net cash (used in) / from operating activities
Cash fl ows from investing activities
Payments for capitalised software
Payments for plant and equipment
Proceeds from sale of plant and equipment
Payments for contract rights
Subsidiaries’ acquisition expenses
Payments for joint venture subordinated loans
Net cash used in investing activities
Cash fl ows from fi nancing activities
Proceeds from borrowings
Proceeds from share issues
Repayment of borrowings
Payment of borrowing costs
Dividends paid by parent entity
(Repayments to) / proceeds from controlled entities
Net cash provided by / (used in) fi nancing activities
Effect of exchange changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Payments for subsidiary investments (net of cash acquired)
28
Consolidated Group
Parent Entity
Note
2015
$’000
2014
$’000
2015
$’000
2014
$’000
372,471
341,286
-
-
(153,766)
(155,944)
(1,485)
(1,453)
47,688
36,742
(243,441)
(150,375)
2,158
(10,957)
-
-
39
-
-
-
60
-
22
15(b)
2,681
(9,832)
-
(29,042)
(13,241)
(4,777)
(7,698)
1,921
(512)
(63,620)
(2,416)
(961)
-
68,324
29,064
(26,055)
36,855
-
-
66,878
27,671
(5,488)
(3,184)
-
-
(12,418)
(1,177)
(2,419)
-
-
-
-
-
-
-
-
(64,450)
(2,416)
-
(14,478)
-
-
(78,063)
(24,686)
(66,866)
(14,478)
7
146,298
15,112
(11,872)
(542)
(43,912)
-
105,084
752
14,532
71,197
33,552
-
(1,723)
(993)
(29,064)
-
1,772
17
13,958
57,239
57,500
15,112
(359)
(130)
(43,912)
(26,630)
1,581
-
1,593
1,005
2,598
-
-
-
-
(29,064)
16,348
(12,716)
-
477
528
1,005
Cash and cash equivalents at end of year
8
85,729
71,197
The above statements of fi nancial position should be read in conjunction with the accompanying notes.
44 MMSG Annual Report 2015
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) General information
The fi nancial report of McMillan Shakespeare Limited and its subsidiaries for the year ended 30 June 2015 was authorised for issue in accordance
with a resolution of the directors on 25 August 2015 and covers McMillan Shakespeare Limited (‘the Company” or the “parent entity”) as an
individual entity as well as “the Group”, consisting of McMillan Shakespeare Limited and its subsidiaries (‘the Group” or “Consolidated Group”)
as required by the Corporations Act 2001.
The fi nancial report is presented in Australian dollars, which is the Group’s functional and presentation currency.
McMillan Shakespeare Limited is a company limited by shares and domiciled in Australia, whose shares are publicly traded on the Australian
Stock Exchange.
(b) Basis of preparation
The fi nancial report is a general purpose fi nancial report which has been prepared in accordance with Australian Accounting Standards and
Interpretations of the Australian Accounting Standards Board (AASB), and Corporations Act 2001. McMillan Shakespeare Limited is a for-profi t
entity for the purpose of preparing the fi nancial statements. Material accounting policies adopted in the preparation of these fi nancial statements
are presented below and have been applied consistently unless stated otherwise.
Except for cash fl ow information, the fi nancial statements have been prepared on an accruals basis and are based on historical costs, modifi ed,
where applicable, by the measurement at fair value of selected non-current assets, fi nancial assets and fi nancial liabilities.
Compliance with IFRS
Australian Accounting Standards incorporate International Financial Reporting Standards (IFRSs) as issued by the International Accounting
Standards Board. Compliance with Australian Accounting Standards ensures that the fi nancial statements and notes also comply with IFRSs.
(c) Principles of consolidation
(i) Subsidiaries
The consolidated fi nancial statements comprise the fi nancial statements of the Company and its subsidiaries which are all entities (including
structured entities) controlled by the Company as at 30 June each year. Control is achieved when the Group is exposed to, or has rights to,
variable returns from its involvement in the entity and has the ability to affect those returns through its power to direct the activities of the
entity. In assessing control, the Group considers all relevant facts and circumstances to determine if the Group’s voting rights in an investee
are suffi cient to give it power, including the following:
•
•
•
•
the size of the Group’s voting rights holding relative to the size and dispersion of holdings of the other vote holders;
potential voting rights held by the Group and other holders;
rights arising from other contractual arrangements; and
facts and circumstances that indicate whether the Group has the ability to direct relevant activities at the time decision need to be made.
The Group reassesses whether it has control over an entity when facts and circumstances indicate changes that may affect any of these elements.
Subsidiaries are consolidated from the date control is transferred to the Group and deconsolidated from the Group from the date that control ceases.
The fi nancial statements of subsidiaries are prepared for the same reporting period as the parent entity, using consistent accounting policies.
All inter-company balances and transactions, including unrealised profi ts arising from intra-group transactions are eliminated. Unrealised
losses are also eliminated unless costs cannot be recovered. Investments in subsidiaries are accounted for at cost in the individual fi nancial
statements of the parent entity, including the value of options issued by the Company on behalf of its subsidiaries in relation to employee
remuneration.
(ii) Joint ventures
The Group has an interest in a joint venture, where by contractual agreement, the joint venture partners jointly control the economic activities
and key decisions of the joint venture entity. The arrangement requires unanimous consent of the parties for key strategic, fi nancial and
operating policies that govern the joint venture. The Group’s interest in the joint venture entity is accounted for using the equity method after
initially recognising the investment at cost.
Under the equity method, the post-acquisition share of profi ts and losses of the joint venture entity is recognised in profi t and loss, and the
share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income. When the Group’s share
of losses exceeds its interest in the joint venture entity, the carrying amount of that interest, including any long-term interests that form part
thereof, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has
made payments on behalf of the joint venture entity. The Group’s share of intra-group balances, transactions and unrealised gains or losses
on such transactions between the Group and the joint venture are eliminated.
MMSG Annual Report 2015
45
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
(d) Business combinations
The acquisition method of accounting is used to account for all business combinations. Cost is measured as the fair value of the assets given, shares
issued or liabilities incurred or assumed at the date of exchange. Acquisition related costs are expensed as incurred. Where equity instruments
are issued, the value of the equity instruments is their published market price on the date of completion and when control is achieved unless, in
rare circumstances, it can be demonstrated that the published price on that day is an unreliable indicator of fair value and that other evidence and
valuation methods provide a more reliable measure of fair value. Transaction costs arising on the issue of equity instruments are recognised directly
in equity.
Identifi able assets acquired and liabilities and contingent liabilities assumed in business combinations are initially measured at their fair values
at acquisition date. The excess of the cost of acquisition over the fair value of the Group’s share of the identifi able net assets acquired is recorded
as goodwill (refer Note 1(j)(i)). If the cost of acquisition is less than the Group’s share of the fair value of the net assets acquired, the gain is
recognised in profi t or loss. If the initial accounting for a business combination is incomplete by the time of reporting the period in which the
business combination occurred, provisional estimates are used for items for which accounting is incomplete. These provisional estimates are
adjusted in a measurement period that is not to exceed one year from the date of acquisition to refl ect the information it was seeking about facts and
circumstances that existed at the date of acquisition that had they been known would have affected the amounts recognised at that date.
Where settlement of any part of the cash consideration is deferred, the amounts payable in the future are discounted to the present value at the date
of the exchange using the entity’s incremental borrowing rate as the discount rate.
(e) Employee Share Trust
During the year, the Company established the McMillan Shakespeare Limited Employee Share Plan Trust (EST) to facilitate the distribution of
McMillan Shakespeare Limited shares under the Group’s executive option plan. The EST is controlled by McMillan Shakespeare Limited and forms
part of the Group. Shares held by the EST are disclosed as treasury shares and are deducted from issued shares.
(f) Current versus non-current classifi cation
The Group presents assets and liabilities in the statements of fi nancial position based on current / non-current classifi cation. An asset is current
when it is:
•
Expected to be realised or intended to be sold or consumed in the Group’s normal operating cycle,
• Held primarily for the purpose of trading,
•
Expected to be realised within twelve months after reporting date, or
• Cash or a cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after reporting date.
The Group classifi es all other assets as non-current.
A liability is current when:
•
•
•
•
It is expected to be settled in the Group’s normal operating cycle,
It is held primarily for the purpose of trading,
It is due to be settled within twelve months after reporting date, or
There is an unconditional right to defer the settlement of the liability for at least twelve months after reporting date.
The Group classifi es all other liabilities as non-current.
(g) Income tax
(i)
Income tax
The income tax expense for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for
each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in
the countries where the entities in the Group operate and generate taxable income.
(ii) Deferred tax
Deferred tax assets and liabilities are recognised for all temporary differences between the carrying amounts of assets and liabilities for
fi nancial reporting purposes and their respective tax bases, at the tax rates expected to apply when the assets are recovered or liabilities
settled, based on those rates which are enacted or substantially enacted. Deferred tax is not recognised if they arise from the initial recognition
of goodwill. Deferred tax assets are only recognised for deductible temporary differences and unused tax losses if it is probable that future
taxable amounts will be available to utilise those temporary differences and losses. Deferred tax assets and liabilities are not recognised for
temporary differences between the carrying amounts and tax bases of investments in subsidiaries 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.
46
MMSG Annual Report 2015
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
Current and deferred tax on items that are accounted for in other comprehensive income or equity are recognised in other comprehensive
income and equity respectively. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
and liabilities and the deferred taxes relate to the same taxable entity and the same taxing authority.
(iii) Tax consolidation
The Company and its wholly-owned Australian resident entities are members of a tax consolidated group under Australian taxation law. The
Company is the head entity in the tax consolidated group. Entities within the tax consolidated group have entered into a tax funding agreement
and a tax-sharing agreement with the head entity. Under the terms of the tax funding arrangement, the Company and each of the entities in
the tax consolidated group have agreed to pay a tax equivalent payment to or from the head entity, based on the current tax liability or current
tax asset of the head entity.
(iv) Investment allowances
Companies within the Group may be entitled to claim special tax deductions for investments in qualifying assets (investment allowances) or
a tax credit under the Incentive regime in Australia in relation to eligible Research & Development expenditure. The Group accounts for such
allowances as a reduction in income tax payable and current tax expense. A deferred tax asset is recognised for unclaimed tax credits.
(h) Non-current assets held for sale and discontinued operations
Non-current assets are classifi ed as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through
continuing use. Non-current assets held for sale are measured at the lower of their carrying amount and fair value less costs to sell. The criteria
for classifi cation as held for sale is satisfi ed when the sale is highly probable, the asset is available for immediate sale in its present condition and
management is committed to the sale, is expected to successfully complete the sale within one year from the date of classifi cation.
A discontinued operation represents a major line of business or geographical area of operations that has been disposed of or is classifi ed as held
for sale, or is part of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively
with a view to resale.
(i) Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly
attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
Depreciation on assets is calculated on a straight-line basis over the estimated useful life of the asset as follows:
Class of Fixed Asset
Plant and equipment
Motor vehicles under operating lease
Depreciation Rate
20% – 40%
20% – 33%
The assets’ residual values and useful lives are reviewed and adjusted, if appropriate, at the end of the reporting period.
Motor vehicles no longer held under an operating lease are classifi ed as inventory.
(j)
Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost.
Intangible assets acquired in a business combination are recognised at their fair value at the date of acquisition. Following initial recognition,
intangible assets are carried at their initial vale less any accumulated amortisation and accumulated impairment losses. Specifi c criteria for various
classes of intangible assets are stated below.
(i) Goodwill
Goodwill represents the excess of the cost of the business combination over the Group’s share of the net fair value of the identifi able assets,
liabilities and contingent liabilities. Goodwill is not amortised but is measured at cost less any accumulated impairment losses. Goodwill is
reviewed for impairment annually, or more frequently if events or changes in circumstances indicate that the carrying value may be impaired
(refer Note 15(c)). Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Any
impairment is recognised immediately in profi t or loss and cannot be subsequently reversed.
MMSG Annual Report 2015
47
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
(ii) Capitalised software development costs
Software development costs are capitalised when it is probable that future economic benefi ts attributable to the software will fl ow to the entity
through revenue generation and / or cost reduction. Development costs include external direct costs for services, materials and licences and
internal labour related costs directly involved in the development of the software. Capitalised software development costs are amortised from
the date of commissioning on a straight line basis over three to fi ve years, during which the benefi ts are expected to be realised.
(iii) Contract rights
Contract rights acquired and amounts paid for contract rights are recognised at the value of consideration paid plus any expenditure directly
attributable to the transactions. Contracts are amortised over the life of the contract, and reviewed annually for indicators of impairment in line
with the Group’s impairment policy (refer Note 1(k)).
(iv) Identifi able intangible assets acquired on business combination
Amortisation of identifi able intangible assets is calculated on a straight-line basis over the estimated useful lives as follows:
Intangible Asset
Dealer relationships and networks
Customer contracts
Useful Life
10 to 13 years
13 years
Brand names have indefi nite useful lives and consequently, are not amortised but are subject to annual impairment assessments.
(k)
Impairment of assets
At each reporting date, the Group reviews the carrying amount of its tangible (including operating lease assets) and intangible assets to determine
whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of
the affected assets are evaluated. An impairment loss is recognised in profi t or loss for the amount that the asset’s carrying value exceeds the
recoverable amount. The recoverable amount of an asset is determined as the higher of the asset’s fair value less costs to sell and its value in use.
For the purpose of assessing fair value, assets are grouped at the lowest levels for which there are separately identifi able cash infl ows which are
largely independent of cash infl ows from other assets (cash-generating units). Where the asset does not generate cash fl ows that are independent
from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
For assets other than goodwill where impairment losses previously recognised no longer exist or have decreased, the amount is reversed to the
extent that the asset’s carrying amount does not exceed the recoverable amount, nor the carrying amount that would have been determined had no
impairment loss been recognised for the asset in prior years.
Goodwill is tested for impairment annually and whenever there is indication that the asset may be impaired. An impairment of goodwill is not
subsequently reversed. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated
future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of
money and the risks specifi c to the asset for which the estimates of future cash fl ows have not been adjusted.
Operating lease assets are reviewed for impairment on an ongoing basis and at reporting date using both internal and external sources of information.
(l) Financial instruments
Recognition and de-recognition
Regular purchases and sales of fi nancial assets and liabilities are recognised on trade date, the date on which the Group commits to the fi nancial
assets or liabilities. Financial assets are derecognised when the rights to receive cash fl ows from the fi nancial assets have expired or have been
transferred and the Group has transferred substantially all the risks and rewards of ownership. The Group classifi es fi nancial assets into the following
categories depending on the purpose for which the asset was acquired.
(i) Cash and cash equivalents
For statement of cash fl ow purposes, cash and cash equivalents includes cash on hand, deposits held at call with fi nancial institutions, other
short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash
which are subject to an insignifi cant risk of changes in value.
(ii) Loans and receivables
Trade and other receivables
All receivables are classifi ed as ‘loans and receivables’ under the requirements of AASB 139 Financial Instruments: Recognition and
Measurement and are recognised initially at fair value, and subsequently at amortised cost, less provision for impairment. All trade and other
receivables are classifi ed as current as they are due for settlement within the agreed credit terms of settlement which are usually no more than
30 days from the date of recognition. Cash fl ows relating to short-term receivables are not discounted if the effect of discounting is immaterial.
48
MMSG Annual Report 2015
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
Loan receivables
Loan receivables are non-derivative fi nancial assets with fi xed or determinable payments that are not quoted on an active market. They are
included in current assets, where their maturities are less than 12 months from reporting date and in non-current assets if longer.
Loan receivables that have the ability to convert to a specifi ed amount of equity shares of the borrower in restitution for defaulting loan
repayments are designated as available-for-sale fi nancial assets. These assets are measured at fair value at inception and subsequently,
marked to market at reporting date with the movement taken to reserves. In measuring fair value at reporting date, the net present value of the
loan is calculated using market interest rates at reporting date, or if it is probable that the loan receivable will be converted to shares of the
borrower, the market value of the underlying shares attributable to the loan receivable is used.
(iii) Separate Financial Statements
Investments in subsidiaries are carried at cost and adjusted for any share based payments in the separate fi nancial statements of the Company,
under AASB 127: Separate Financial Statements.
(iv) Available-for-sale fi nancial assets
Available-for-sale fi nancial assets are non-derivative assets that are designated as available-for-sale or are not classifi ed in any other category
of fi nancial assets. They include investments and debt instruments such as subordinated loans that may be convertible to equity. Gains and
losses arising from changes in fair value are recognised in other comprehensive income and accumulated in the investments and subordinated
loan reserve, with the exception of impairment losses which is recognised in profi t or loss. Available-for-sale fi nancial assets are included in
non-current assets unless the investment matures or is intended to be disposed of within twelve months of the end of the reporting period.
(v) Other fi nancial liabilities
Trade and other payables
Trade and other payables, including accruals, and borrowings are recorded initially at fair value, and subsequently at amortised cost using the
effective interest rate method, with interest expense recognised on an effective yield basis.
The effective interest rate method is a method of calculating the amortised cost of a fi nancial liability and that allocates interest expense over
the relevant period. The effective interest rate is the rate that exactly discounts estimated future payments through the expected life of the
fi nancial liability to the net carrying amount on initial recognition.
Trade and other payables are non-interest bearing.
Financial liabilities are derecognised when the Group’s obligations are discharged, cancelled or expire pursuant to its commitments.
The difference between its carrying amount of the fi nancial liability derecognised and the consideration paid and payable is recognised in
profi t or loss.
(vi) Impairment of fi nancial assets
Financial assets are assessed for indicators of impairment at the end of each reporting period. Impairment conditions are objective evidence
of one or more events occurring after the initial recognition of the fi nancial asset that affects estimated future cash fl ows of the investment.
(vii) Impairment of trade and other receivables
The collectability of receivables is reviewed on an ongoing basis and debts that are determined as not collectible are written off and expensed.
An allowance for impairment is provided for 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. The provision consists of allowances for specifi c doubtful amounts.
The allowance account for receivables is used to record impairment losses unless the Group is satisfi ed that there is no possible recovery
of the amount, at which point it is written off directly against the amount owing. The impairment loss and any subsequent reversal thereof, is
recognised in the profi t or loss within other expenses. There have been no amounts recorded for impairment for the parent entity.
(viii) Impairment of available for sale equity securities
In respect of available for sale equity securities, impairment losses previously recognised in profi t or loss are not reversed through profi t
or loss. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income and accumulated in
investment revaluation reserve within equity. In respect of available for sale debt securities, impairment losses are subsequently reversed
through profi t or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of
the impairment loss.
MMSG Annual Report 2015
49
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
(m) Employee benefi ts
(i) Salaries and wages, annual leave and long service leave
Short term liabilities for employee benefits arising from services rendered by employees to reporting date which are expected to be settled
within twelve months after the end of the reporting date have been recognised and are measured at the amounts expected to be paid when the
liabilities are settled.
Long service leave and annual leave liabilities and other employee benefits that are not expected to be settled wholly within one year have been
measured at the present value of the estimated future cash outfl ows to be made for those benefits. Consideration is given to expected future
wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using interest
rates attaching to high quality corporate bonds with terms to maturity that match, as closely as possible, the estimated future cash outfl ows.
Employee leave liabilities and other obligations are presented as current liabilities in the statement of fi nancial position if the Group does not
have an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when the actual settlement is
expected to occur.
Annual leave and long service leave liabilities are included in provisions and other employee liabilities are included in other payables.
(ii) Superannuation
The amount charged to the profi t or loss in respect of superannuation represents the contributions made by the Group to superannuation funds.
(iii) Bonuses
A liability for employee benefits in the form of bonuses is recognised in employee benefits. This liability is based upon pre-determined
plans tailored for each participating employee and is measured on an ongoing basis during the fi nancial period. The amount of bonuses is
dependent on the outcomes for each participating employee. As has been past practice, an additional amount is included where the Board has
decided to pay discretionary bonuses for exceptional performance and a provision recognised for this constructive obligation.
(n) Revenue
Revenue is recognised at the fair value of consideration received or receivable to the extent that it is probable that the economic benefi ts will fl ow
to the Group and can be reliably measured. Amounts disclosed as revenue are shown net of returns, trade allowances and duties, amortisation of
pre-paid fee discounts included in deferred contract establishment costs and taxes paid. The Group has concluded that it acts as agent in some
of its revenue arrangements and principal in other arrangements. The following are specific criteria that are applied for the recognition of revenue:
(i) Rendering of services
Revenue from services provided is recognised by reference to the stage of completion of the services provided to the customer. This includes
revenue derived from services that the Group has performed mainly as agent and consequently, does not possess any signifi cant credit, carry
or residual risks of ownership of the underlying fi nancial arrangement with the customer. Revenue is recognised when the customer accepts
delivery or on completion of the contract for the underlying fi nancial arrangement with the fi nancier or insurer,
(ii)
Interest
Revenue from interest is recognised as interest accrues using the effective interest rate method. The effective interest rate method uses the
rate that exactly discounts the estimated future cash flows over the expected life of the fi nancial asset.
(iii) Dividends
Revenue from dividends is recognised when the Group’s right to receive payment is established.
(iv) Lease revenue (property, plant and equipment)
Operating lease rental revenue is made up of operating lease interest and the principal that forms the net investment in the leased asset.
Interest included in operating lease instalments is calculated on a straight-line basis for each customer contract based on the effective rate
method using the interest rate in the lease contract, the net investment value of the leased asset and the residual value. The principal portion
upon receipt reduces the net investment in the leased asset.
(v) Sale of leased assets
Revenue includes the proceeds from the routine sale of motor vehicles previously leased and included within property, plant and equipment
following the cessation of the rental of these assets by a customer.
50
MMSG Annual Report 2015
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
(vi) Vehicle maintenance services
Revenues from maintenance service contracts are recognised for services rendered when it is probable that economic benefi ts from the
transaction will fl ow to the Group. When the amounts are uncollectible or recovery is not considered probable, an expense is recognised
immediately. Revenue is recognised for each reporting period by reference to the stage of completion when the outcome of the service
contracts can be estimated reliably. The stage of completion of service contracts is based on the proportion that costs incurred to date bear
to total estimated costs. When the outcome cannot be measured reliably, revenue is deferred and recognised 60 days after the contract
terminates.
(vii) Warranty revenue
Warranty revenue comprises product income from direct business, charged to product holders, but excluding stamp duties, GST and other
amounts collected on behalf of third parties.
Warranty revenue, including that on unclosed business, is recognised when it has been earned, calculated from attachment date over the
period of the contract for direct business. Where time does not approximate the pattern of risk, previous claims experience is used to derive
the incidence of risk.
The proportion of revenue received or receivable not earned in the profi t and loss at reporting date is recognised in the consolidated statement
of fi nancial position as an unearned liability.
Income on unclosed business is brought to account using estimates based on the previous year’s actual unclosed business with due allowance
made for any changes in the pattern of new business and renewals.
(o) Goods and services tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not
recoverable from the Australian Taxation Offi ce (ATO). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or
as part of an item of expense. Receivables and payables in the Statement of Financial Position are shown inclusive of GST. The net amount of GST
recoverable from, or payable to, the ATO is included as a current asset or liability in the Statement of Financial Position.
(p) Leasing
Leases are classified as fi nance leases whenever the terms of the contract transfers substantially all the risk and rewards of ownership to the lessee.
All other contracts are classified as operating leases.
(i) Finance lease receivable portfolio
Lease contracts with customers are recognised as fi nance lease receivables at the Group’s net investment in the lease which equals the net
present value of the future minimum lease payments. Finance lease income is recognised as income in the period to refl ect a constant periodic
rate of return on the Group’s remaining net investment in respect of the lease.
(ii) Operating lease portfolio – the Group as lessor
Lease contracts with customers other than fi nance leases are recognised as operating leases. The Group’s initial investment in the lease is
added as a cost to the carrying value of the leased assets and recognised as lease income on a straight line basis over the term of the lease.
Operating lease assets are amortised as an expense on a straight line over the term of the lease based on the cost less residual value of
the lease.
(iii) Operating leases – the Group as lessee
Operating lease payments are recognised as an expense on a straight-line basis over the lease term except where another systematic basis is
more representative of the time pattern in which economic benefi ts from the lease asset are consumed. Where incentives are received to enter
into operating leases, such incentives are recognised as a liability. The aggregate benefi t of incentives is recognised as a reduction of lease
expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefi ts
from the lease asset are consumed.
(q) Share-based payments
The fair values of options granted are recognised as an employee benefit expense with a corresponding increase in equity (share option reserve).
The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options.
Fair value is determined using a binomial option pricing model. In determining fair value, no account is taken of any performance conditions other
than those related to the share price of the Company (“market conditions”). The cumulative expense recognised between grant date and vesting
date is adjusted to refl ect the Directors’ best estimate of the number of options that will ultimately vest because of internal conditions attached to
the options, such as the employees having to remain with the Group until vesting date, or such that employees are required to meet internal targets.
No expense is recognised for options that do not ultimately vest because internal conditions were not met. An expense is still recognised for options
that do not ultimately vest because a market condition was not met.
MMSG Annual Report 2015
51
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
(r)
Issued capital
Ordinary shares and premium received on issue of options are classifi ed as issued capital within equity.
Costs directly attributable to the issue of new shares or options are shown as a deduction from the equity proceeds, net of any income tax benefi t.
Costs directly attributable to the issue of new shares or options associated with the acquisition of a business are included as part of the business
combination.
(s) Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the Group, on or before
the end of the fi nancial year but not distributed at reporting date.
(t) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to members of the Company by the weighted average number of
ordinary shares outstanding during the fi nancial year, adjusted for bonus elements in ordinary shares during the year.
(ii) Diluted earnings per share
Earnings and the weighted average number of shares used in calculating basic earnings per share is adjusted for the following to calculate
diluted earnings per share:
•
•
the after-tax effect of interest and any other fi nancing costs associated with dilutive potential ordinary shares; and
the weighted average number of additional shares that would have been outstanding assuming the conversion of all dilutive potential
ordinary shares.
(u) Segment reporting
Operating segments are reported in a manner consistent with internal reporting provided to the chief operating decision maker. The chief operating
decision maker, who is responsible for allocating resources and assessing the performance of the operating segments, has been identifi ed as the
Chief Executive Offi cer.
(v) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event and where it is probable that
the Group is required to settle the obligation, and the obligation can be reliably estimated.
Provisions are measured at the present value of expenditure expected at settlement. The discount rate used to determine the present value refl ects
the current pre-tax market rate of the time value of money and the risks specifi c to the liability. The increase in the provision due to the passage of
time is recognised as interest expense.
Provision for rebate and cancellation
Specifi c provisions are provided for cancellation of contracts and the consequential clawback of commissions received at the time revenue is
recognised. The provision refl ects an obligation to refund commissions received from the fi nancier or insurer for early termination of a loan or policy.
Rebate provisions relate to the clawback of commission from fi nanciers, based on the various fi nancier clawback policies.
Restructurings
A restructuring provision is recognised when the Group has developed a plan for the restructuring and has communicated with those affected that
it will carry out the plan. The provision is measured based on the direct cost arising from and necessary to undertake the restructuring plan and not
with the ongoing activities of the Group.
Onerous provision
Contractual and unavoidable costs of meeting obligations that exceed the economic benefi ts expected to be received under it are recognised as an
onerous provision. The provision is measured on the net cash outfl ow and present valued using the pre-tax rate that refl ects current market rates and
the time value of money and any specifi c risks to the liability.
(w) Deferred acquisition costs (DAC)
Acquisition costs incurred in deriving warranty income are deferred and recognised as assets where they can be reliably measured and where it is
probable that they will give rise to warranty revenue in subsequent reporting periods.
Deferred acquisition costs are amortised systematically in accordance with the expected pattern of the incidence risk under the warranty contracts
to which they relate. The pattern of amortisation corresponds to the earning pattern of warranty revenue.
52
MMSG Annual Report 2015
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
(x) Unearned premium liability
The Group assesses the risk attached to unexpired warranty contracts based on risk and earning pattern analysis, to ascertain whether the unearned
warranty liability is suffi cient to cover all expected future claims against current warranty contracts. This assessment is performed quarterly, to
ensure that there have been no signifi cant changes to the risk and earning pattern and to ensure the liability recorded is adequate.
(y) Outstanding claims liability
The liability represents claims authorised, prior to reporting date, and paid in the subsequent reporting period.
(z)
Inventories
The inventory of motor vehicles is stated at the lower of cost and net realisable value. Following termination of the lease or rental contract the
relevant assets are transferred from Assets under Operating Lease to Inventories at their carrying amount. Net realisable value is the estimated
selling price in the ordinary course of business, less estimated costs to make the sale.
(aa) Operating cash fl ow
All cash fl ows other than investing or fi nancing cash fl ows are classified as operating cash fl ows. As the Asset Management segment provides
operating and fi nance leases for motor vehicles and equipment, the cash outfl ows to acquire the lease assets are classified as operating cash
outfl ows. Similarly, interest received and interest paid in respect of the asset management segment are classified as operating cash fl ows.
(ab) Borrowings
Borrowings are initially recorded at fair value, net of transaction costs and subsequently measured at amortised cost using the effective interest rate
method. The effective interest rate method exactly discounts the estimated cash flows through the expected life of the borrowing. Transaction costs
comprise fees paid for the establishment of loan facilities and are amortised over the term of the borrowing facilities.
(ac) Derivative fi nancial instruments
The Group uses derivative fi nancial instruments to manage its interest rate exposure to interest rate volatility and its impact on leasing product
margins. The process to mitigate against the exposure seeks to have more control in balancing the spread between interest rates charged to lease
contracts and interest rates and the level of borrowings assumed in its fi nancing as required.
In accordance with the Group’s treasury policy, derivative interest rate products that can be entered into include interest rate swaps, forward rate
agreements and options as cash fl ow hedges to mitigate both current and future interest rate volatility that may arise from changes in the fair value
of its borrowings.
Derivative fi nancial instruments are recognised at fair value at the date of inception and subsequently re-measured at fair value at reporting date.
The resulting gain or loss is recognised in profi t or loss unless the derivative or amount thereof is designated and effective as a hedging instrument,
in which case the gain or loss is taken to other comprehensive income in the cash fl ow hedging reserve that forms part of equity. Amounts
recognised in other comprehensive income are transferred to profi t or loss and subsequently recognised in profi t or loss to match the timing and
relationship with the amount that the derivative instrument was intended to hedge.
(i) Hedge accounting
At the inception of the hedging instrument, the Group documents the relationship between the instrument and the item it is designated to
hedge. The Group also documents its assessment at the inception of the hedging instrument and on an ongoing basis, whether the hedging
instruments that are used have been and will continue to be highly effective in offsetting changes in the cash fl ows of the hedged items.
(ii) Embedded derivatives
Derivatives embedded in non-derivative host contracts are treated as separate derivatives when they meet the defi nition of a derivative, their
risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at fair value through
profi t or loss.
(iii) Non-trading derivatives
Non-trading derivative fi nancial instruments include the Group’s irrevocable option to purchase all of the shares owned by the partner in
the joint venture entity. The fi nancial instruments are measured at fair value initially and in future reporting dates. Fair value changes are
recognised in profi t or loss.
(ad) Foreign currency translation
The consolidated fi nancial statements of the Group are presented in Australian dollars which is the functional and presentation currency.
The fi nancial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity
operates (“functional currency”).
MMSG Annual Report 2015
53
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
(i) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.
Differences resulting at settlement of such transactions and from the translation of monetary assets and liabilities at reporting date are
recognised in profi t or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of
the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date
when the fair value is determined. Translation differences are recognised as part of the fair value change of the non-monetary item.
(ii) Group companies
On consolidation of the fi nancial results and affairs of foreign operations, assets and liabilities are translated at prevailing exchange rates
at reporting date and income and expenses for the year at average exchange rates. The resulting exchange differences from consolidation
are recognised in other comprehensive income and accumulated in equity. On disposal of a foreign operation, the component of other
comprehensive income relating to that particular foreign operation is recognised in profi t or loss.
(ae) Critical judgements and signifi cant accounting estimates
The preparation of fi nancial statements requires the Board to make judgements, estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate
is revised and in any future periods affected.
All signifi cant judgements, estimates and assumptions made during the year have been considered for signifi cance. Key assumptions used for
value-in-use calculations to determine the recoverable amount of assets in impairment tests are discussed in Note 15(d).
Estimates of signifi cance are used in determining the residual values of operating lease and rental assets at the end of the contract date and
income from maintenance services, which is recognised on a percentage stage of completion. In determining residual values, critical judgements
include the future value of the asset lease portfolio at the time of sale, economic and vehicle market conditions and dynamics. For income from
maintenance contracts, judgement is made in relation to expected realisable margins. The estimates and underlying assumptions are reviewed on
an ongoing basis.
In recognising premium revenue for the direct business is the consequential recognition of unearned premium liability at reporting date.
The measurement is based upon the expected future pattern of incidence of risk in relation to warranty contracts. In determining the estimated
pattern of incidence of risk, the Group uses a variety of estimation techniques generally based on statistical analysis of the Group and industry
experience that assumes that the development pattern of current claims will be consistent with past experience as appropriate.
No other judgements, estimates or assumptions are considered signifi cant.
(af) New accounting standards and interpretations
The Group has applied the following standards and amendments that are mandatory for the fi rst time for the fi nancial year beginning 1 July 2014.
None of these standards and amendments materially affected any of the amounts recognised in the current period or any prior period.
(i) AASB 2013-3 ‘Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial Assets’ – removes the requirement to disclose
the recoverable amount of a cash-generating unit (CGU) to which goodwill or other intangible assets with indefi nite useful lives had been
allocated when there has been no impairment or reversal of impairment of the related CGU. Furthermore, the amendments introduce additional
disclosure requirements applicable to when the recoverable amount of an asset or a CGU is measured at fair value less costs of disposal.
These new disclosures include the fair value hierarchy, key assumptions and valuation techniques used which are in line with the disclosures
required by AASB 13 ‘Fair Value Measurements’. The application of these arrangements does not have any material impact on the disclosures
in the Group’s consolidated fi nancial statements.
(ii) AASB 2014-1 ‘Part A: Annual Improvements 2010-2012 and 2011-2013 Cycle AASB 13 ‘Fair Value Measurement’ and AASB 2011-8’
– includes a number of amendments to various AASBs as follows;
•
•
•
Amendment to AASB 2 changes the defi nitions of ‘vesting condition’ and ‘service condition’ that apply to share-based transactions
granted after 1 July 2014.
Amendment to AASB 8 requires disclosure of the judgements made by management in applying aggregation criteria to operating
segments and clarifi es that a reconciliation of the total of the reportable segments’ assets to the Group’s total assets should only be
provided if the segment assets are regularly provided to the chief operating decision-maker.
Amendment to AASB 124 clarifi es that the defi nition of a ‘related party’ includes a management entity that provides key management
personnel services to the Group.
(iii) Interpretation 21 ‘Levies’ – which has been applied by the Group for the fi rst time in this period, addresses the issue as to when to recognize a
liability to pay a levy imposed by a government. The interpretation defi nes a levy, and specifi es that the obligating event that gives rise to the
liability is the activity that triggers the payment of the levy, as identifi ed by legislation.
54
MMSG Annual Report 2015
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
The adoption of all the new and revised Standards and Interpretations has not resulted in any changes to the Company’s accounting policies and
has no material impact on the disclosures or on the amounts recognised in the consolidated fi nancial statements.
The following new accounting standards, amendments to standards and interpretations (Standards) have been issued and are effective for annual
reporting periods beginning after 30 June 2015, but have not been applied in preparing this fi nancial report. None of these are expected to have a
signifi cant effect on the fi nancial report of the Consolidated Group unless otherwise noted in the Standards below. The Group has not or does not
plan to adopt these Standards early and the extent of their impact has not been fully determined unless otherwise noted below.
(i) AASB 9 Financial Instruments (effective for annual reporting periods on or after 1 January 2018)
AASB 9 introduces new requirements for the classifi cation and measurement and de-recognition of fi nancial assets and fi nancial liabilities. It
aims to replace AASB 139 Financial Instruments: Recognition and Measurement in its entirety. The new standard also sets out new rules for
hedge accounting and introduces expanded disclosure requirements and changes in presentation.
The Group has not yet assessed how its own hedging arrangements would be affected by the new rules. The other changes in AASB 9 are not
expected to materially affect the Group’s accounting for fi nancial assets and fi nancial liabilities, as none have been designated at fair value
through profi t or loss where the changes might have had an impact.
The Group will adopt the new standard at the operative date and accordingly, its fi rst application will be in the fi nancial statements for the
annual reporting period ending 30 June 2019.
(ii)
IFRS 15 Revenue from Contracts with Customers (effective for annual reporting periods on or after 1 January 2017)
The revenue-related interpretations in IFRS 15 will include the establishing of a new control-based revenue recognition model, changing the
basis for deciding whether revenue is to be recognised over time or at a point in time, the provision of new and more detailed guidance on
specifi c topics (eg multiple element arrangements, variable pricing, rights of return, warranties, licensing). The new standard will also expand
and improve disclosures about revenue. The Australian Accounting Standards Board (AASB) is expected to issue the equivalent Australian
Standard (AASB 15 Revenue from Contracts with Customers)
The Group has not yet assessed the full impact of this standard.
There are no other standards that are not yet effective and that are expected to have a material impact on the entity in the current or future reporting
periods and on foreseeable future transactions.
(ag) Changes in accounting policies
In the current year, the Group has adopted all of the new and revised Standards and Interpretations issues by the Australian Accounting Standards
Board that are relevant to its operations and effective for the current annual reporting period.
There have been no signifi cant effects on current, prior or future periods arising from the first time application of the standards in respect of
presentation, recognition and measurement in the current year fi nancial statements.
(ah) Parent entity accounts
In accordance with Class order CO10/654 the Group will continue to include parent entity financial statements in the fi nancial report.
(ai) Rounding of amounts
The Company is of a kind referred to in Class order CO98/100, issued by the Australian Securities and Investments Commission, relating to the
“rounding off” of amounts in the fi nancial report. Amounts in the fi nancial report have been rounded off in accordance with that Class Order to the
nearest thousand dollars, or in certain cases, the nearest dollar.
2 FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of fi nancial risks: market risk (including currency risk and interest rate risk), credit risk and liquidity risk.
The Group’s overall risk management approach is to identify the risk exposures and implement safeguards which seek to manage these exposures
and minimise potential adverse effects on the fi nancial performance of the Group. The Board is responsible for monitoring and managing the
fi nancial risks of the Group. The Board monitors these risks through monthly board meetings, via regular reports from the Risk and Compliance
Committee and ad hoc discussions with senior management, should the need arise. A top 20 risk report is presented to the Board monthly and the
full risk register at least quarterly. The Credit and Treasury reports are provided to the Credit Committee and Interest Committee respectively, by the
Group Treasurer and Head of Credit, including sensitivity analysis in the case of interest rate risk and aging / exposure reports for credit risk. These
committee reports are discussed at Board meetings monthly, along with management accounts. All exposures to risk and management strategies
are consistent with prior year, other than as noted below.
MMSG Annual Report 2015
55
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
(a) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its fi nancial obligations as they fall due.
Liquidity management strategy
The Asset Management business and the resultant borrowings exposes the Group to potential mismatches between the refi nancing of its assets and
liabilities. The Group’s objective is to maintain continuity and fl exibility of funding through the use of committed revolving bank club facilities based
on common terms, asset subordination and surplus cash as appropriate to match asset and liability requirements.
The Group’s policy is to ensure that there is suffi cient liquidity through access to committed available funds to meet at least twelve months of
average net asset funding requirements. This level is expected to cover any short term fi nancial market constraint for funds.
The Group monitors daily positive operating cash fl ows and forecasts cash fl ows for twelve month period. Signifi cant cash deposits have been
maintained which enable the Group to settle obligations as they fall due without the need for short term fi nancing facilities. The Chief Financial
Offi cer and the Group Treasurer monitor the cash position of the Group daily.
Financing arrangements
During the year the Group increased its committed borrowing facilities for the Asset Management segment to fi nance its fl eet management portfolio
as follows.
Secured bank borrowings
Maturity dates
AUD’000
AUD’000
GBP’000
31/03/2018
03/04/2018(1)
03/04/2018
Total borrowings (AUD)
(1)
Includes facility to be drawn in NZD20m
Facility
250,000
20,000
57,000
386,995
2015
Used
186,000
8,662
43,500
283,947
Unused
64,000
11,338
13,500
103,048
Facility
285,000
15,000
25,000
345,167
2014
Used
193,420
-
12,250
215,100
Unused
91,580
15,000
12,750
130,067
The facilities have been provided by a fi nancing club of three major Australian banks operating common terms and conditions. The Group believes
that this initiative has improved liquidity, provides funding diversifi cation and has achieved a lower cost. The bank loans are sourced in local
currency of the principal geographical markets to minimise foreign currency exposure. The maturity date for these facilities have been extended
with a new maturity date to 31 March 2018
In addition to the borrowing facilities to fi nance Asset Management’s lease portfolio, the Group has a GBP5.75 million facility that was fully drawn
down for the acquisition of CLM Fleet Management plc. This borrowing is an amortising facility that matures on 31 August 2018. The Group also
secured a new facility of AUD57.5 million which was fully drawn down to fund the acquisition of the Presidian Group. This is an amortising facility
that matures on 31 March 2020.
The level and type of funding will be reviewed on an on-going basis to ensure they meet the Group’s on-going requirements in the principal
geographical market operated in.
Maturities of fi nancial liabilities
The table below analyses the Group’s and the parent entity’s fi nancial liabilities into relevant maturity groupings based on their contractual maturities
and based on the remaining period to the expected settlement date.
The amounts disclosed in the table are the contractual undiscounted cash fl ows. Balances due within 12 months equal their carrying value as the
impact of discounting is not signifi cant.
Consolidated Group – at 30 June 2015: Contractual maturities of fi nancial liabilities
Less than 6 mths
$’000
6-12 mths
$’000
1-2 years
$’000
2-5 years
$’000
Over 5 years
$’000
Trade payables
Other creditors
and liabilities
Borrowings
19,399
57,282
8,502
85,183
-
-
11,603
11,603
-
-
-
-
27,415
27,415
346,136
346,136
-
-
-
-
Total contractual
cash fl ows
$’000
Carrying Amount
/liabilities
$’000
19,399
19,399
57,282
393,656
470,337
57,282
351,704
428,385
56
MMSG Annual Report 2015
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
Consolidated Group – at 30 June 2014: Contractual maturities of fi nancial liabilities
Less than 6 mths
$’000
6-12 mths
$’000
1-2 years
$’000
2-5 years
$’000
Over 5 years
$’000
Trade payables
Other creditors
and liabilities
Borrowings
16,222
39,712
4,477
60,411
-
-
4,848
4,848
-
-
-
-
10,121
10,121
220,820
220,820
-
-
-
-
Total contractual
cash fl ows
$’000
Carrying Amount
(assets)/liabilities
$’000
16,222
16,222
39,712
240,266
296,200
39,712
214,447
270,381
Parent – at 30 June 2015: Contractual maturities of fi nancial liabilities
Less than 6 mths
$’000
6-12 mths
$’000
1-2 years
$’000
2-5 years
$’000
Over 5 years
$’000
Total contractual
cash fl ows
$’000
Carrying Amount
(assets)/liabilities
$’000
Amounts payable
to wholly owned
entities and other
payables
Borrowings
Financial
guarantee
contracts
47,908
2,836
5,666
56,410
-
3,817
7,786
11,603
-
-
13,770
44,718
13,645
27,415
301,418
346,136
-
-
-
-
47,908
65,141
47,908
57,018
328,515
441,564
-
104,926
Parent – at 30 June 2014: Contractual maturities of fi nancial liabilities
Less than 6 mths
$’000
6-12 mths
$’000
1-2 years
$’000
2-5 years
$’000
Over 5 years
$’000
Total contractual
cash fl ows
$’000
Carrying Amount
(assets)/liabilities
$’000
Amounts payable
to wholly owned
entities
Financial
guarantee
contracts
(b) Credit risk
46,540
-
-
-
4,477
51,017
4,848
4,848
10,121
10,121
220,820
220,820
-
-
-
46,540
46,540
240,266
286,806
-
46,540
Credit risk is the risk of financial loss to the Group if a customer or counter-party to a financial instrument fails to meet its contractual obligations.
The Company and Group have exposure to credit risk through the receivables’ balances, customer leasing commitments and deposits with banks.
The following carrying amount of fi nancial assets represents the maximum credit exposure at reporting date.
Trade and other receivables
Deposits with banks
Finance lease & CHP receivables
Operating lease assets
Consolidated Group
Parent Entity
2015
$’000
46,941
85,729
125,164
293,125
550,959
2014
$’000
29,185
71,197
24,906
303,408
428,696
2015
$’000
-
2,598
-
2,598
2014
$’000
-
1,005
-
-
1,005
Lease assets of the Asset Management business represents future lease rentals that have yet to be invoiced. Such assets are secured against
underlying assets.
MMSG Annual Report 2015
57
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
Credit risk management strategy
Credit risk arises from cash and cash equivalents and deposits with banks as well as exposure from outstanding receivables and unbilled future
rentals for leased vehicles and counterparty risks associated with interest and currency swaps . For deposits with banks, only independently rated
institutions with upper investment-grade ratings are used, in accordance with the Board approved Investment Policy.
Credit risk relating to the leasing of assets is managed pursuant to the Board approved Credit Policy by the Group CFO and the Group Treasurer
and Head of Credit. The policy is reviewed annually and prescribes minimum criteria in the credit assessment process that includes credit risk
rating of the customer, concentration risk parameters, type and intended use of the asset under lease and the value of the exposure. A two tiered
Credit Committee structure is in place to stratify credit applications for assessment; a Local Credit Committee and an Executive Credit Committee
reviewing applications based on volume, nature and value of the application. All minutes of the Credit Committee meetings are reported to the
Board. The Board receives a monthly report from the Credit Committee and periodically reviews concentration limits that effectively spread the
risks as widely as possible across asset classes, client base, industries, regions and asset manufacturer. There is a broad spread of credit risk
concentration through the Group’s exposure to individual customers, industry sectors, asset types, asset manufacturers or regions.
Where customers are independently rated, these ratings are taken into account. If there is no independent offi cial rating, management assesses the
credit quality of the customer using the Group’s internal risk rating tool, taking into account information from an independent national credit bureau,
its financial position, business segment, past experience and other factors using an application scorecard or other risk-assessment tools. Collateral
is also obtained where appropriate, as a means of mitigating risk of fi nancial loss from defaults. The overall debtor aging position is reviewed
monthly by the Board, as is the provision for any impairment in the trade receivables balance.
(c) Market risk
(i)
Interest rate risk
The Group’s strong cash fl ow from operations and borrowings exposes the Group to movements in interest rates where movements could
directly affect the margins from existing contracts and the pricing of new contracts for assets leased and income earned from surplus cash.
Exposure to interest rate volatility is managed via the Group’s Treasury and pricing policies. The policies aim to minimise mismatches
between the amortised value of lease contracts and the sources of financing to mitigate repricing and basis risk. Mismatch and funding graphs
including sensitivity analysis, are reported monthly to the Board along with the minutes of the monthly Interest Committee meetings.
Interest rate risk arises where movements in interest rates affect the net margins on existing contracts for assets leased. As the Group carries
signifi cant cash and borrowings, movements in interest rates can affect net income to the Group, particularly for the Group Remuneration
Services segment.
Borrowings issued at variable rates expose the Group to repricing interest rate risk. As at the end of the reporting period, the Group had the
following variable rate borrowings under long-term revolving and amortising facilities.
AUD’000
GBP’000
Total (AUD)
2015
2014
Borrowings
‘000
Weighted average
interest rate
%
Borrowings
‘000
Weighted average
interest rate
%
251,803
49,250
351,704
3.00
1.36
2.73
193,420
12,250
215,100
3.51
1.95
3.35
The weighted average interest rate of each borrowing is used as an input to asset repricing decisions for the geographical markets operated
in. An analysis of maturities is provided in note 2(a).
To mitigate the cash fl ow volatility arising from interest rate movements, the Group has entered into interest rate swaps with counterparties
rated as AA- by Standard & Poors, to exchange, at specifi ed periods, the difference between fi xed and variable rate interest amounts calculated
on contracted notional principal amounts. The contracts require settlement of net interest receivable or payable on a quarterly basis. These
swaps are designated to hedge underlying borrowing obligations and match the interest-repricing profi le of the lease portfolio in order to
preserve the contracted net interest margin. At 30 June 2015, the Group’s borrowings for the Asset Management business of $295,750,000
(2014: $215,100,000) were covered by interest rate swaps at a fi xed rate of interest of 3.58% (2014: 4.29%).
The Group’s interest rate risk also arises from cash at bank and deposits, which are at floating interest rates.
58
MMSG Annual Report 2015
Notes to the Financial Statements
For the Year Ended 30 June 2015
At reporting date, the Group had the following variable rate fi nancial assets and liabilities outstanding:
Cash and deposits
Bank loans (Asset Management segment)(1)
Interest rate swaps (notional amounts)
Bank loans (Presidian Group acquisition)(1)
Net exposure to cash fl ow interest rate risk
Financial Report
2015
Balance
$’000
85,729
2014
Balance
$’000
71,197
(295,750)
(215,100)
275,554
(57,141)
8,392
211,679
-
67,776
(1)
Excluding capitalised borrowing costs of $1,064,000 for Asset Management and $123,000 for the bank loan for Presidian.
Sensitivity analysis – floating interest rates:
At 30 June 2015, the Group’s and parent entity’s cash and cash equivalents give rise to credit and interest rate risk. If the Australian
interest rate weakened or strengthened by 100 basis points, being the Group’s view of possible fl uctuation, and all other variables were held
constant, the Group’s post-tax profit for the year would have been $31,000 (2014: $451,000) higher or lower and the parent entity $544,000
(2014: $471,000) higher or lower, depending on which way the interest rates moved based on the cash and cash equivalents and borrowings
balances at reporting date.
(ii) Foreign currency risk
The Group’s exposure to foreign currency risk arises when fi nancial instruments that are denominated in a currency other than the functional
currency in which they are measured. This includes the Group’s inter-company receivables and payables which do not form part of the net
investment in the UK and New Zealand entities. The Group’s exposure to translation related risks from fi nancial and non-fi nancial items of the
UK and New Zealand entities do not form part of the Group’s risk exposure given that these entities are part of longer term investments and
consequently, their sensitivity to foreign currency movements are not measured.
The Group’s transactions are pre-dominantly denominated Australian dollars which is the functional and presentation currency.
(iii) Other market price risk
The Group does not engage in any transactions that give rise to any other market risks.
(d) Asset risk
The Group’s exposure to asset risk is mainly from the residual value of assets under lease and the maintenance and tyre obligations to meet claims
for these services sold to customers. Residual value is an estimate of the value of an asset at the end of the lease. This estimate, which is formed at
the inception of the lease and any subsequent impairment, exposes the Group to potential loss from resale if the market price is lower than the value
as recorded in the books. The risk relating to maintenance and tyre services arises where the costs to meet customer claims over the contracted
period exceed estimates made at inception.
The Group continuously reviews the portfolio’s residual values via a Residual Value Committee comprising experienced senior staff with a balance
of disciplines and responsibilities, who measure and report all matters of risk that could potentially affect residual values and maintenance costs and
matters that can mitigate the Group from these exposures. The asset risk policy sets out a framework to measure and factor into their assessment
such critical variables as used car market dynamics, economic conditions, government policies, the credit market and the condition of assets
under lease.
At reporting date, the portfolio of motor vehicles under operating lease of $293,125,000 (2014: $303,408,000) included a residual value provision
of $5,237,000 (2014: $2,018,000).
(e) Fair value measurements
The fair value of fi nancial assets and fi nancial liabilities is estimated for recognition and measurement for disclosure purposes.
The following table is an analysis of fi nancial instruments that are measured at fair value on a recurring basis subsequent to initial recognition,
grouped into three levels based on the degree to which the fair value is observable.
•
•
Level 1: derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: derived from inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
•
Level 3: derived from inputs for the asset or liability that are not based on observable market data (unobservable inputs).
MMSG Annual Report 2015
59
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
Financial asset / (fi nancial liability)
Interest rate swaps – cash fl ow hedge
Fair value at
2015
$000
(699)
2014
$000
(639)
Fair value
hierarchy
Valuation technique
and key input
2 Discounted cash fl ow using estimated future
cash fl ows based on forward interest rates (from
observable yield curves at the end of the reporting
period) and contract interest rates, discounted to
refl ect the credit risk of various counterparties.
Except as detailed in the following table, the carrying amounts of fi nancial assets and fi nancial liabilities recognised in the consolidated fi nancial
statements approximate their fair values. The fair value of borrowings is not materially different to their carrying amounts since the interest payable
is close to market rates. The carrying amount of cash, trade and other receivables, trade and other payables are assumed to be the same as their
fair values, due to their short term nature.
Finance lease receivables – non-current
Consolidated Group
2015
Carrying
amount
$000
89,911
Fair value
$000
89,589
2014
Carrying
amount
$000
16,937
Fair value
$000
18,110
Current fi nance lease receivables are short term and their carrying amount is considered to equal their fair value. The fair value of non-current
fi nance lease receivables were calculated based on cash fl ows discounted using an average of current lending rates appropriate for the geographical
markets the leases operate of 3.96% (2014: 5.50%). They are classifi ed as level 3 fair values in the fair values hierarchy due to the inclusion of
unobservable inputs.
Consolidated Group
Parent Entity
2015
$’000
2014
$’000
2015
$’000
2014
$’000
3 REVENUE
Revenue from continuing operations
Remuneration services1
Lease rental services
Retail fi nancial services
Proceeds from sale of leased assets
Dividends received
Interest – other persons
Total revenue
176,096
144,436
23,106
43,270
-
2,682
389,590
157,247
154,732
-
33,320
-
2,158
347,457
1 Included in remuneration services revenue is interest income derived from the
holding of trust funds
10,108
9,844
Underwriting premium from direct business included in
Retail fi nancial services revenue
Gross written premium
Movement in deferred income
Premium revenue
13,483
(971)
12,512
-
-
-
-
-
-
-
68,324
39
68,363
-
-
-
-
-
-
-
-
29,064
60
29,124
-
-
-
-
60
MMSG Annual Report 2015
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
Consolidated Group
Parent Entity
2015
$’000
2014
$’000
2015
$’000
2014
$’000
4 EXPENSES
(a) Profi t before income tax includes the following specifi c
expenses
Depreciation and amortisation expenses and impairment
Amortisation of software development
Amortisation of contract rights acquired
Depreciation of assets under operating lease
Depreciation of plant and equipment
Residual value impairment loss
Amortisation of intangibles
Rental expense on operating leases
Minimum lease payments
Superannuation
4,743
1,061
79,785
3,292
3,219
725
3,501
976
81,475
2,913
-
251
92,825
89,116
6,886
5,784
Defi ned contribution superannuation expense
6,677
5,260
(b) Other individually signifi cant items
Contracted property rental payments for vacant space included in
property and corporate expense in the profi t or loss
Credit losses included in other expenses in the profi t or loss
1,725
448
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(c) Auditor’s remuneration
Remuneration of the auditor (Grant Thornton Audit Pty Ltd)
of the parent entity for:
Audit or review of the fi nancial statements
Other compliance
Agreed upon procedures:
- review of borrowing covenant
Remuneration of a network fi rm of the parent entity auditor:
Audit or review of the fi nancial statements (UK)
Other compliance
Consolidated Group
Parent Entity
2015
$
2014
$
2015
$
2014
$
277,000
46,400
179,000
53,400
1,900
2,000
100,265
-
86,420
17,646
-
-
-
-
-
-
-
-
-
-
MMSG Annual Report 2015
61
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
Consolidated Group
Parent Entity
2015
$’000
2014
$’000
2015
$’000
2014
$’000
5
INCOME TAX EXPENSE / (BENEFIT)
(a) Components of tax expense / (benefi t)
Current tax expense / (benefi t)
Adjustments for current tax of prior years
Deferred tax
Income tax expense / (benefi t)
(b) The prima facie tax payable on profi t before income tax is
reconciled to the income tax expense / (benefi t) as follows:
Profi t before income tax
Prima facie tax payable on profi t before income tax at 30% (2014: 30%)
Add tax effect of:
- share based payments
- non-deductible costs
- research & development
- overseas tax rate differential of subsidiaries
- current year losses not brought to account
- over-provision for tax from prior year
- deductible expenses not previously recognisable
Less tax effect of:
- dividends received
Income tax expense / (benefi t)
Amounts recognised directly in equity
Expense relating to the setting up of Employee Share Trust for the distribution
of employee share-based payments
Deductible share-based payments that were not previously recognizable as
there was no basis for a tax deduction
22,054
(311)
4,712
26,455
93,942
28,182
121
409
(354)
(154)
-
(311)
(1,438)
26,455
-
26,455
67
2,275
2,342
30,342
(323)
(5,780)
24,239
(425)
-
(92)
(517)
(418)
-
-
(418)
79,209
23,763
66,608
19,982
27,671
8,301
522
540
(346)
12
71
(323)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
24,239
19,982
8,301
-
24,239
(20,499)
(517)
(8,719)
(418)
-
-
-
67
2,275
2,342
-
-
-
-
Unrecognised temporary differences
Foreign currency translation of investments in subsidiaries for which no
deferred tax liabilities have been recognised
2,754
416
-
62
MMSG Annual Report 2015
Notes to the Financial Statements
For the Year Ended 30 June 2015
6 EARNINGS PER SHARE
Basic earnings per share
Basic EPS – cents per share
Net profi t after tax
Weighted average number of ordinary shares outstanding during the year used in the calculation of basic EPS
Diluted earnings per share
Diluted EPS – cents per share
Earnings used to calculate basic earnings per share (EPS)
Weighted average number of ordinary shares outstanding during the year used in the calculation of basic EPS
Weighted average number of options on issue outstanding
Weighted average number of ordinary shares outstanding during the year used in the calculation of diluted EPS
Financial Report
Consolidated Group
2015
’000
2014
’000
87.0
$67,487
77,537
86.8
$67,487
77,537
211
77,748
73.8
$54,970
74,524
72.7
$54,970
74,524
1,136
75,660
7 DIVIDENDS
Final fully franked ordinary dividend for the year ended 30 June 2014
of $0.31 (2013: $0.18) per share franked at the tax rate of 30%
(2013: 30%)
Interim fully franked ordinary dividend for the year ended 30 June 2015
of $0.25 (2014: $0.21) per share franked at the tax rate of 30%
(2014: 30%)
Consolidated Group
Parent Entity
2015
$’000
2014
$’000
2015
$’000
2014
$’000
23,632
13,414
23,632
13,414
20,280
43,912
15,650
29,064
20,280
43,912
15,650
29,064
Franking credits available for subsequent fi nancial years based on a
tax rate of 30% (2014 – 30%)
78,806
61,992
78,806
61,992
The above amounts represent the balance of the franking account at the end of the fi nancial year end adjusted for:
(a)
franking credits that will arise from the payment of the amount of the provision for income tax;
(b)
franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and
(c)
franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
The consolidated amounts include franking credits that would be available to the parent entity if distributable profi ts of subsidiaries were paid
as dividends.
MMSG Annual Report 2015
63
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
8 CASH AND CASH EQUIVALENTS
Cash on hand
Bank balances
Short term deposits
Consolidated Group
Parent Entity
2015
$’000
2014
$’000
2015
$’000
2014
$’000
4
47,437
38,288
85,729
1
18,361
52,835
71,197
-
173
2,425
2,598
-
964
41
1,005
Cash and cash equivalents are subject to interest rate risk as they earn interest at fl oating rates. Cash at bank is invested at fl oating rates. In 2015,
the fl oating interest rates for the Group and parent entity were between 1.53% and 3.46% (2014: 0.6% and 3.53%). The short term deposits are
also subject to fl oating rates, which in 2015 were between 2.42% and 3.39% (2013: 2.50% and 3.64%). These deposits have an average maturity
of 90 days (2014: 90 days) and are highly liquid.
9
TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Other receivables
Amounts receivable from wholly owned entities
Consolidated Group
Parent Entity
2015
$’000
2014
$’000
2015
$’000
2014
$’000
16,246
30,695
-
46,941
14,836
14,349
-
29,185
-
130
2,283
2,413
-
-
473
473
The carrying amount of all current receivables are equal to their fair value as they are short term and fully recoverable.
(a) Ageing and impairment losses
The ageing of trade receivables for the Group at reporting date was:
Consolidated Group
Not past due
Past due 30 days
Past due 31-60 days
Past due 61-90 days
Past due >90 days
Total
(b) Concentration of risk
2015
Amount
impaired
$’000
-
(59)
(128)
(105)
(629)
(921)
Total
$’000
13,766
1,747
496
213
944
17,167
Amount not
impaired
$’000
13,766
1,688
369
108
315
Total
$’000
10,981
2,368
799
626
553
16,246
15,327
2014
Amount
impaired
$’000
-
(11)
(41)
(12)
(427)
(491)
Amount not
impaired
$’000
10,981
2,357
758
614
126
14,836
The Group’s maximum exposure to credit risk at reporting date by geographic region is predominantly in Australia based on the location of
originating transactions and economic activity.
(c) Other receivables
These amounts generally arise from transactions outside the usual operating activities of the Group. None of the other current receivables are
impaired or past due.
64
MMSG Annual Report 2015
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
(d) Doubtful debts policy
Refer Note 1(l).
10 FINANCE LEASE RECEIVABLES
Current fi nance lease receivables
Non-current fi nance lease receivables
Amounts receivable under fi nance lease receivables.
Amounts receivable under fi nance lease receivables
Within one year
Later than one but not more than fi ve years
Later than fi ve years
Less: unearned fi nance income
Present value of minimum lease payments
Consolidated Group
Parent Entity
2015
$’000
2014
$’000
2015
$’000
2014
$’000
35,253
89,911
125,164
7,969
16,937
24,906
-
-
-
-
-
-
Consolidated Group
Minimum lease
payments
2015
$’000
Present value of
lease payments
2015
$’000
Minimum lease
payments
2014
$’000
Present value of
lease payments
2014
$’000
39,842
95,551
186
135,579
(10,415)
125,164
35,253
89,727
184
125,164
-
125,164
9,187
19,741
-
28,928
(4,022)
24,906
7,969
16,937
-
24,906
-
24,906
There were no unguaranteed residual values of assets leased under fi nance leases at reporting date (2014: nil)
MMSG Annual Report 2015
65
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
11 OTHER FINANCIAL ASSETS
(a)
Investment in subsidiaries
Consolidated Group
Parent Entity
2015
$’000
2014
$’000
2015
$’000
2014
$’000
Shares in subsidiaries at cost
123,206
The consolidated fi nancial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting
policy described in Note 1(c).
261,646
-
-
Interest in material subsidiaries:
Name
Parent entity
McMillan Shakespeare Limited
Subsidiaries in Group
Maxxia Pty Limited 1
Remuneration Services (Qld) Pty Limited 1
Interleasing (Australia) Ltd 1
TVPR Pty Ltd 1
Maxxia Limited (NZ)
Maxxia Fleet Limited
Maxxia (UK) Limited
Maxxia Finance Limited
CLM Fleet Management plc
Presidian Holdings Pty Ltd 1
Davantage Group Pty Ltd 1
Money Now Pty Ltd 1
National Finance Choice Pty Ltd 1
Franklin Finance Group Pty Ltd 1
Australian Dealer Insurance Pty Ltd 1
National Finance Solutions Pty Ltd 1
National Insurance Choice Pty Ltd 1
Country of Incorporation
Percentage
Owned
2015
Percentage
Owned
2014
Principal activities
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
United Kingdom
United Kingdom
United Kingdom
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100% Remuneration services provider
100% Remuneration services provider
100% Asset management and services
100% Asset management and services
100% Dormant
100% Asset management and services
100% Investment holding
100% Asset management and services
100% Fleet management services
- Retail fi nancial services
- Retail fi nancial services
- Retail fi nancial services
- Retail fi nancial services
- Retail fi nancial services
- Retail fi nancial services
- Retail fi nancial services
- Retail fi nancial services
1
These subsidiaries have been granted relief from the necessity to prepare fi nancial reports in accordance with Class Order 98/1418 issued by the Australian Securities and Investments
Commission. For further information refer to Note 29.
(b) Loan receivable
Loan receivable
Other expense receivable
Share of losses of equity accounted joint venture
FX
Carrying value at end of the fi nancial year
66
MMSG Annual Report 2015
Consolidated Group
Parent Entity
2015
$’000
2014
$’000
2015
$’000
2014
$’000
3,211
996
(2,009)
(327)
1,871
2,126
861
(1,193)
(68)
1,726
-
-
-
-
-
-
-
-
-
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
The loan and other expense receivable is made up of advances to the joint venture entity as part of the working capital facility provided pursuant
to the Group’s investment arrangement and forms part of the net investment in the joint venture. Its carrying value includes the share of the joint
venture’s loss of $816,000 (2014: $1,120,000) recognised under the equity method that is in excess of the Company’s fully written down carrying
value of its investment (2014: $nil - refer note 12).
Risk exposure
The maximum facility under the arrangement is GBP1.8 million together with other expenses agreed between the JV parties to accelerate growth are
fully repayable no later than 31 January 2017. Under certain conditions of default on the repayments, the Group has an option to convert a portion
of the amount outstanding to increase the Group’s interest in the joint venture from 50% to 60%. The loan accrues interest at commercial rates and
the balance at reporting date approximates to fair value. At reporting date, the fair value of the option was not material.
12 INVESTMENT IN JOINT VENTURE
Acquired
Share of losses after income tax
Carrying value at end of the fi nancial year
Consolidated Group
Parent Entity
2015
$’000
2014
$’000
2015
$’000
2014
$’000
337
(337)
-
337
(337)
-
-
-
-
-
-
-
A subsidiary has a 50% interest in Maxxia Limited (UK), a company resident in the UK and the principal activity of which is provider of fi nancing
solutions and associated management services on motor vehicles. By contractual agreement, the Group together with the joint venture partner
jointly control the economic activities and key decisions of the joint venture entity. The arrangement requires unanimous consent of the parties for
key strategic, fi nancial and operating policies that govern the joint venture. By agreement, the Group assumes responsibility for key decisions of
the joint venture entity when its interest is greater than 75%. The Group has an option to acquire the residual interest in the joint venture entity from
the joint venture partner after fi ve years from acquisition and the joint venture partner has an option to sell its interest to the Group during the same
period. At reporting date, the fair value of the option is not materially different to the carrying value.
The interest in Maxxia Limited is equity accounted in the fi nancial statements. Information relating to the joint venture investment is set out below.
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net liabilities
The net liabilities of Maxxia Limited (UK) is reconciled to the carrying amount of the Group’s interest is as follows.
Net liabilities of JV
Group ownership interest (50%)
Carrying amount
Cumulative losses of JV equity accounted
The Group’s share of the JV losses is limited to its carrying value.
Consolidated Group
2015
$’000
1,649
6,951
8,600
2,397
11,168
13,565
(4,965)
(4,965)
(2,483)
-
2014
$’000
2,205
727
2,932
2,003
3,715
5,718
(2,786)
(2,786)
(1,393)
-
(2,346)
(1,530)
MMSG Annual Report 2015
67
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
Joint venture fi nancial results
Revenues
Expenses
Loss before income tax
Income tax
Loss after income tax
Share of joint venture capital commitments
13 PROPERTY, PLANT AND EQUIPMENT
(a) Plant and equipment
At cost
Less accumulated depreciation
Assets under operating lease
At cost
Less accumulated depreciation
Total plant and equipment
(b) Movements in cost and accumulated depreciation
Year ended 30 June 2015
Balance at the beginning of year
Additions
Acquisitions through business combination
Transfer to software
Disposals / transfers to assets held for sale
Depreciation expense
Impairment loss
FX
Balance at 30 June
Year ended 30 June 2014
Balance at the beginning of year
Additions
Acquisitions through business combination
Disposals / transfers to assets held for sale
Depreciation expense
FX
Balance at 30 June
(1)
Accumulated provision for impairment loss at reporting date is $5,237,000 (2014: $2,018,000).
68
MMSG Annual Report 2015
Consolidated Group
2015
$’000
2,644
(4,684)
(2,040)
408
(1,632)
-
2014
$’000
1,001
(3,801)
(2,800)
560
(2,240)
-
Consolidated Group
Parent Entity
2015
$’000
2014
$’000
2015
$’000
2014
$’000
31,393
(19,390)
12,003
25,990
(16,193)
9,797
457,684
458,969
(164,559)
(155,561)
293,125
305,128
303,408
313,205
-
-
-
-
-
-
-
Consolidated Group
Plant and
equipment
Assets under
operating lease(1)
$’000
$’000
9,797
7,248
1,075
(1,246)
(1,863)
(3,292)
-
284
12,003
9,002
2,548
746
348
(2,913)
66
9,797
303,408
122,124
-
-
(49,136)
(79,785)
(3,219)
(267)
293,125
287,749
131,967
1,897
(36,985)
(81,475)
255
303,408
-
-
-
-
-
-
-
Total
$’000
313,205
129,372
1,075
(1,246)
(50,999)
(83,077)
(3,219)
17
305,128
296,751
134,515
2,643
(36,637)
(84,388)
321
313,205
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
(c) Security
The above assets form part of the security supporting the fi xed and fl oating charge pledged to the Group’s fi nanciers.
(d) Property, plant and equipment held for sale
Property, plant and equipment no longer held under operating leases are classifi ed as inventory.
14 DEFERRED TAX ASSETS / (LIABILITIES)
(a) Asset / (Liability)
The balance comprises temporary differences and tax losses attributed for:
Amounts recognised in profi t or loss
Doubtful debts
Provisions
Property, plant and equipment
Accrued expenses
Other receivables/prepayments
Other
Losses
Deferred acquisition expenses
Intangible assets
Unearned income
Employee share rights
Amounts recognised in equity
Derivatives recognised directly in equity
Closing balance at 30 June
Recognised as:
Deferred tax asset
Deferred tax liability
(b) Movement
Opening balance at 1 July
Charged to profi t or loss
Charged to other comprehensive income
Acquired at acquisition
FX
Closing balance at 30 June
Consolidated Group
Parent Entity
2015
$’000
2014
$’000
2015
$’000
2014
$’000
185
4,070
(10,021)
6,954
-
389
467
1,356
(3,799)
150
278
29
220
249
1,183
(934)
249
5,073
(3,673)
28
(1,130)
(49)
249
147
4,208
(1,584)
2,311
(764)
922
405
-
(764)
-
4,881
192
5,073
5,832
(759)
5,073
367
5,780
(142)
(932)
-
5,073
-
-
-
88
-
17
-
-
-
-
105
-
105
105
-
105
13
92
-
-
-
105
-
-
-
6
-
7
-
-
-
-
13
-
13
13
-
13
176
(163)
-
-
-
13
MMSG Annual Report 2015
69
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
Consolidated Group
Parent Entity
2015
$’000
2014
$’000
2015
$’000
2014
$’000
15 INTANGIBLE ASSETS
(a) Carrying values
Goodwill
Cost
Impairment loss
Net carrying value
Brands
Cost
Net carrying value
Dealer relationships
Cost
Accumulated amortisation
Net carrying value
Software development costs
Cost(i)
Accumulated amortisation
Net carrying value
Contract rights
Cost
Accumulated amortisation
Net carrying value
Customer list and relationships
Cost
Accumulated amortisation
Net carrying value
Total Intangibles
(i)
Software includes capitalised internal costs
(b) Reconciliation of net book amount
2015
Net book amount
Balance beginning of year
Additions
Goodwill
$’000
46,387
-
134,877
(36)
134,841
22,443
22,443
12,033
(309)
11,724
35,631
(15,988)
19,643
13,070
(10,616)
2,454
4,302
(736)
3,566
194,671
46,423
(36)
46,387
-
-
-
-
25,900
(11,245)
14,655
12,605
(9,555)
3,050
2,818
(251)
2,567
66,659
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Consolidated Group
Brands
$’000
Dealer
relationships
$’000
Software
development
costs
$’000
Contract
rights
$’000
Customer
list and
relationships
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$’000
66,659
4,777
Acquisition through business combination
86,672
22,443
12,033
-
-
-
-
14,655
4,312
4,173
1,246
3,050
465
-
-
-
(309)
(4,743)
(1,061)
-
-
-
2,567
-
1,100
126,421
-
(416)
315
1,246
(6,529)
2,097
-
-
1,782
-
-
-
134,841
22,443
11,724
19,643
2,454
3,566
194,671
Transfer from property, plant & equipment
Amortisation
FX
Closing balance
70
MMSG Annual Report 2015
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
2014
Net book amount
Balance beginning of year
Additions
Goodwill
$’000
33,292
-
Acquisition through business combination
12,254
Amortisation
FX
Closing balance
-
841
46,387
(c) Impairment test for goodwill
Consolidated Group
Brands
$’000
Dealer
relationships
$’000
Software
development
costs
$’000
Contract
rights
$’000
Customer
list and
relationships
$’000
-
-
-
-
-
-
-
-
-
-
-
-
12,668
5,488
-
4,272
-
-
(3,501)
(1,222)
-
14,655
-
3,050
-
-
2,637
(251)
181
2,567
Goodwill is allocated to the Group’s cash-generating units (CGUs) identifi ed arising from the acquisitions of subsidiaries.
The carrying amount of goodwill allocated to each CGU:
Maxxia Pty Limited
Remuneration Services (Qld) Pty Limited
CLM Fleet Management plc
Presidian Holdings Pty Ltd and controlled entities
Consolidated Group
2015
$’000
24,190
9,102
14,877
86,672
134,841
Total
$’000
50,232
5,488
14,891
(4,974)
1,022
66,659
2014
$’000
24,190
9,102
13,095
-
46,387
The recoverable amount of each CGU above is determined based on value-in-use calculations. These calculations use the present value of cash
fl ow projections based on fi nancial budgets approved by management covering a fi ve-year period.
(d) Key assumptions used for value-in-use calculations
Maxxia Pty Limited
Remuneration Services (Qld) Pty Limited
CLM Fleet Management plc
Discount rate
2015
%
15.06
15.06
12.08
2014
%
15.88
15.88
-
The budgets use historical average growth rates to project revenue. Costs are determined taking into account historical margins and estimated cost
increases. The average growth rates used in the fi ve year projection is between 5%. Cash fl ows beyond the fi ve-year period are extrapolated using a
zero growth rate for conservatism. The growth rate does not exceed the long-term average growth rate for the business in which the CGU operates.
In performing the value-in-use calculations for each CGU, the Group has applied pre-tax discount rates to discount the forecast future attributable
pre-tax cash fl ows. The pre-tax discount rates are disclosed above. The discount rates used refl ect specifi c risks relating to the relevant business
each subsidiary is operating in.
These assumptions have been used for the analysis of each CGU within each subsidiary.
The recoverable amounts of the CGUs exceed the carrying amounts by substantial margins. Consequently, a sensitivity analysis of possible
changes in key assumptions is not considered necessary.
Goodwill acquired with Presidian Holdings Pty Ltd during the year was determined from fair value variables. There were no impairment indicators
since acquisition to reporting date.
MMSG Annual Report 2015
71
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
16 TRADE AND OTHER PAYABLES
Unsecured liabilities
Trade payables
GST payable
Sundry creditors and accruals
Amounts payable to wholly owned entities
Consolidated Group
Parent Entity
2015
$’000
2014
$’000
2015
$’000
2014
$’000
19,399
2,046
42,417
-
16,222
1,594
31,543
-
63,862
49,359
-
-
599
47,309
47,908
-
-
197
46,540
46,737
Trade and other payables are non-interest bearing. These are short-term liabilities and the carrying value is representative of the fair value.
17 OTHER LIABILITIES
Maintenance instalments received in advance
Receivables in advance
Unearned property incentives
Unearned other income
18 PROVISIONS
Current
Employee benefi ts
Provision for rebate and cancellations
Provision for onerous contracts
Other
Non current
Employee benefi ts
Provision for onerous contracts
19 BORROWINGS
Current
Bank loans – at amortised cost
Non-current
Bank loans – at amortised cost
72
MMSG Annual Report 2015
6,622
4,379
5,186
-
7,529
3,598
6,816
125
16,187
18,068
7,586
2,174
650
181
6,137
-
-
-
10,591
6,137
1,139
1,089
2,228
767
-
767
-
-
-
-
-
-
-
-
-
-
-
-
-
5,658
452
4,016
346,046
213,995
53,002
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
(a) Security
The parent entity guarantees all bank loans of subsidiaries in the Group, totalling $351,704,000 (2014: $215,100,000).
Fixed and fl oating charges are provided by the Group in respect to fi nancing facilities provided to it by its club of fi nanciers.
The Group’s loans are also secured by the following fi nancial undertakings from all the entities in the Group.
(i) Group bank loans excluding cash assets, is not to exceed 80% of the sum of the Group’s aggregate of the written down value of net operating
lease assets, fi nance lease receivables and commercial hire purchase receivables.
(ii) Group shareholder’s funds of is not less than $200,000,000 at all times.
(iii) Group ratio of consolidated earnings before interest and tax to consolidated interest expense is not less than 3:1.
(iv) Group debt to EBITDA ratio excluding the Asset Management segment does not exceed 2.5:1.0.
The following are other undertakings that have been provided by entities in the Group receiving the loans.
(i) Negative pledge that imposes certain covenants including a restriction to provide other security over its assets, a cap on its maximum fi nance
debt, do not acquire assets which are non-core business to the Group, disposal of a substantial part of its business and reduction of its capital.
(ii) Maintenance of certain fi nancial thresholds for shareholders’ equity, gearing ratio, interest cover and fl eet asset portfolio performance.
(iii) The business exposures of the Interleasing Group and CLM Fleet Management plc satisfy various business parameters.
At all times throughout the year, the Group operated with signifi cant headroom against all of its borrowing covenants.
(b) Fair value disclosures
The fair value of fi nancial liabilities for disclosure purposes is estimated by discounting the future contractual cash fl ows at the current market
interest rate that is available to the Group for similar fi nancial instruments. The fair value of current borrowings approximates the carrying amount,
as the impact of discounting is not signifi cant.
(c) Risk exposures
Details of the Group’s exposure to risks arising from current and non-current borrowings are set out in Note 2.
Consolidated Group
Parent Entity
2015
$’000
2014
$’000
2015
$’000
2014
$’000
20 ISSUED CAPITAL
(a) Share capital
81,810,993 (2014: 74,523,965) fully paid ordinary shares
121,617
56,456
121,617
56,456
MMSG Annual Report 2015
73
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
(b) Movements in issued capital
Balance at 1 July 2014
Shares issued for the acquisition of Presidian Holdings Pty Ltd
Shares purchased by the McMillan Shakespeare Limited Share Plan Trust (“EST”)
Shares purchased by the EST and distributed to employees
Fully paid shares issued pursuant to the exercise of employee options
Proceeds from issue of new options
Share issue expenses
Less: tax effect of expenses
Shares issued during the year
Total issued capital at 30 June 2015
Treasury shares
Shares held by public at 30 June 2015
Balance at 1 July 2013
No shares were issued nor options exercised during the year
Balance at 30 June 2014
Issue price
$11.66
-
$6.53
$7.31
Number of
shares
74,523,965
4,285,192
692,482
2,035,301
274,053
-
7,287,028
81,810,993
(692,482)
81,118,511
74,523,965
74,523,965
Ordinary
shares
$’000
56,456
49,982
-
13,283
2,003
50
(224)
67
65,161
121,617
56,456
56,456
Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of members’ shares held.
At members’ meetings, each fully paid ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a
show of hands.
During the year, the Company established the McMillan Shakespeare Limited Employee Share Plan Trust (EST) to facilitate the distribution of MMS
shares under the Group’s executive option plan.
(c) Treasury shares
Treasury shares are shares in McMillan Shakespeare Limited that are held by the EST for the purpose of issuing shares under the EST. Details of the
treasury shares during the period are as follows.
Acquisition of new shares by the EST from the Company at market value
Shares distributed from the exercise of options
Balance of treasury shares at 30 June 2015
(d) Options
Number of shares
2,727,783
(2,035,301)
692,482
At 30 June 2015, there were 2,876,147 (2014: 3,163,692) unissued ordinary shares for which options were outstanding. Details relating to options
issued, exercised and lapsed during the year and options outstanding at the end of the reporting period is set out in Note 27 on page 80.
(e) Capital management strategy
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can continue to provide returns
for shareholders and benefi ts for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. 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.
The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as
long and short term borrowings (excluding derivatives and fi nancial guarantees) less cash and cash equivalents. Total capital is calculated as equity
as shown in the statement of fi nancial position plus net debt.
The Groups’ gearing ratio was 46% (2014: 39%) calculated as net debt of $267,162,000 (2014: $143,250,000) divided by total debt and equity
of $585,605,000 (2014: $367,097,000).
The Group’s Risk and Compliance Committee reviews the capital structure of the Group on an on-going basis. As part of this review the committee
considers the cost of capital and the risks associated with each class of capital.
74
MMSG Annual Report 2015
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
21 RESERVES
(a) Option reserve
Movements in the reserve are detailed in the Statements of Changes in Equity. The reserve records amounts for the fair value of options granted and
recognised as an employee benefi ts expense but not exercised.
(b) Cash fl ow hedge reserve
Consolidated Group
Parent Entity
Revaluation - gross
Deferred tax
Balance at the end of the fi nancial year
2015
$’000
(746)
220
(526)
2014
$’000
(639)
192
(447)
2015
$’000
-
-
-
2014
$’000
-
-
-
The hedging reserve is used to record gains and losses on interest rate swaps that are designed and qualify as cash fl ow hedges and that are
recognised in other comprehensive income.
(c) Foreign currency translation reserve
Consolidated Group
Parent Entity
Balance at the end of the fi nancial year
2015
$’000
2,754
2014
$’000
416
2015
$’000
-
2014
$’000
-
The foreign translation reserve account accumulates exchange differences arising on translation of foreign controlled entities which are recognised
in other comprehensive income. The carrying amount is reclassifi ed to profi t or loss when the net investment is disposed of.
22 CASH FLOW INFORMATION
Reconciliation of cash fl ow from operations with profi t from operating
activities after income tax
Profi t for the year
Non cash fl ows in profi t from operating activities
Amortisation
Impairment loss
Depreciation
Option expense
Share of equity accounted joint venture loss
Purchase of assets under lease
Written down value of assets sold
Acquisition expenses
Changes in assets and liabilities, net of the effects of purchase of
subsidiaries
Consolidated Group
Parent Entity
2015
$’000
2014
$’000
2015
$’000
2014
$’000
67,487
54,970
67,125
28,089
6,529
3,219
83,077
1,326
816
4,728
-
84,388
1,741
1,120
(243,441)
(150,375)
34,816
2,196
26,002
1,177
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(Increase) / decrease in trade receivables and other assets
(11,722)
(12,549)
Increase / (decrease) in trade payables and accruals
Increase / (decrease) in income taxes payable
(Decrease) / increase in deferred taxes
Increase in other liabilities
(Decrease) in unearned revenue
Net cash from operating activities
48,021
(5,816)
1,282
(113)
(918)
25,635
3,872
(4,386)
532
-
(130)
8,076
(8,101)
(92)
-
-
(90)
(4,287)
3,796
163
-
-
(13,241)
36,855
66,878
27,671
MMSG Annual Report 2015
75
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
23 COMMITMENTS
(a) Operating lease commitments
Non-cancellable operating leases contracted for but not capitalised in the
fi nancial statements:
Payable minimum lease payments
- Not later than 12 months
- Between 12 months and 5 years
- Greater than 5 years
Consolidated Group
Parent Entity
2015
$’000
2014
$’000
2015
$’000
2014
$’000
8,568
30,738
19,444
58,750
5,584
21,339
8,852
35,775
-
-
-
-
-
-
-
-
The property leases are non-cancellable leases with varying terms, with rent payable monthly in advance. Individual rental agreements specify each
rental adjustment. The equipment leases are non-cancellable leases with varying terms, with rent payable quarterly in arrears.
24 SEGMENT REPORTING
Reportable segments
(a) Description of Segments
The Group has identifi ed its operating segments based on the internal reports reviewed and used by the Group’s Chief Decision Maker (the CEO)
to determine business performance and resource allocation. Operating segments have been identifi ed after considering the nature of the products
and services, nature of the production processes, type of customer and distribution methods.
Three reportable segments have been identifi ed, in accordance with AASB 8 “Operating Segments” based on aggregating operating segments
taking into account the nature of the business services and products sold and the associated business and fi nancial risks and how they affect the
pricing and rates of return.
Group Remuneration Services - This segment provides administrative services in respect of salary packaging and facilitates the settlement of motor
vehicle novated leases for customers, but does not provide fi nancing. The segment also provides ancillary services associated with motor vehicle
novated lease products.
Asset Management - This segment provides fi nancing and ancillary management services associated with motor vehicles, commercial vehicles
and equipment.
Retail Financial Services - This segment provides retail brokerage services, aggregation of fi nance originations and extended warranty cover, but
does not provide fi nancing.
(b) Segment information provided to the Chief Decision Maker
The following is an analysis of the Group’s revenue and results from operations by reportable segment.
Segment revenue
Segment profi t after tax
Group Remuneration Services
Asset Management
Retail Financial Services(1)
Segment operations
Corporate administration and directors' fees
Acquisition expenses
Net interest income
Tax on unallocated items
Profi t after tax from continuing operations for the year
(1)
Retail Financial Services has reported from 27 February 2015 to 30 June 2015.
76
MMSG Annual Report 2015
2015
$’000
176,096
188,061
23,106
387,263
2014
$’000
157,247
188,069
-
345,316
2015
$’000
54,306
11,281
3,027
68,614
(1,250)
(2,196)
1,836
483
67,487
2014
$’000
41,988
13,557
-
55,545
(1,436)
(1,177)
1,978
60
54,970
Notes to the Financial Statements
For the Year Ended 30 June 2015
(c) Other segment information
(i) Segment revenue
Segment revenue is reconciled to the profi t of loss as follows:
Total segment revenue
Interest revenue
Total revenue per profi t or loss
Financial Report
2015
$’000
387,263
2,327
389,590
2014
$’000
345,316
2,141
347,457
Segment revenue above represents sales to external customers and excludes inter-segment sales, consistent with the basis by which the fi nancial
information is presented to the Chief Decision Maker.
The accounting policies of the reportable segments are the same as the Group’s policies. Segment profi t includes the segment’s share of centralised
general management and operational support services which are shared across segments based on the lowest unit of measurement available to
allocate shared costs that reasonably measure each segment’s service level requirements and consumption. Segment profi t does not include
corporate costs of the parent entity, including listing and company fees, director’s fees and fi nance costs relating to borrowings not specifi cally
sourced for segment operations, costs directly incurred in relation to the acquisition of specifi c acquisition and strategic investment targets or
interest revenue not directly attributable to a segment.
Included in the revenue for the Group Remuneration Services segment are revenues of $61,898,000 (2014: $58,583,000) from the Group’s largest
customer.
(ii) Segment result
Segment depreciation and amortisation
Group Remuneration Services
Asset Management
Retail Financial Services
Share of loss from joint venture
Group Remuneration Services
Asset Management
Retail Financial Services
2015
$’000
5,587
86,323
915
92,825
-
816
-
816
2014
$’000
4,655
84,461
-
89,116
-
1,120
-
1,120
MMSG Annual Report 2015
77
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
(iii) Segment assets and liabilities
The segment information with respect to total assets is measured in a consistent manner with that of the fi nancial statements. These assets
are allocated based on the operations of the segment and the physical location of the asset.
The parent entity’s borrowings are not considered to be segment liabilities.
The reportable segments’ assets and liabilities are reconciled to total assets as follows:
Segment assets
Group Remuneration Services
Asset Management
Retail Financial Services
Segment assets
Non-segment assets
Unallocated assets(1)
Consolidated assets per statement of fi nancial position
Segment liabilities
Group Remuneration Services
Asset Management
Retail Financial Services
Consolidated liabilities per statement of fi nancial position
Non-segment liabilities
Unallocated liabilities(1)
Consolidated liabilities per statement of fi nancial position
2015
$’000
2014
$’000
77,080
483,898
141,280
702,258
75,065
777,323
44,149
335,617
27,878
407,644
51,236
458,880
66,417
393,737
-
460,154
64,503
524,657
32,332
268,478
-
300,810
-
300,810
(1)
Unallocated assets comprise cash and bank balances of segments other than Asset Management, maintained as part of the centralised treasury and funding function of the
Group. Unallocated liabilities comprise borrowings for the acquisition of the Retail Financial Services segment, utilising the Group’s borrowing capacity and equity to fund the
initial acquisition and ongoing loan maintenance utilises centralised treasury controlled funds.
Additions to non-current assets
Group Remuneration Services
Asset Management
Retail Financial Services
2015
$’000
2014
$’000
5,634
128,189
127,822
261,645
2,172
155,365
-
157,537
(d) Geographical segment information
The Group’s revenue from continuing operations from external customers by location of operations and information about its non-current assets by
location of assets are detailed below.
Australia
United Kingdom
New Zealand
(1) Non-current assets do not include deferred tax asset and subordinated loans.
78
MMSG Annual Report 2015
Revenue from external customers
Non-current assets(1)
2015
$’000
374,520
12,628
2,442
389,590
2014
$’000
336,420
9,962
1,075
347,457
2015
$’000
477,521
101,257
11,905
590,683
2014
$’000
376,296
14,251
6,257
396,804
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
25 CONTINGENT LIABILITIES
Estimates of the potential fi nancial effect of contingent liabilities that may become payable:
Guarantee provided for the performance of a contractual obligation not
supported by term deposit.
Guarantees provided in respect of property leases.
26 RELATED PARTY TRANSACTIONS
(a) Wholly owned group
Consolidated Group
Parent Entity
2015
$’000
10,050
5,970
16,020
2014
$’000
10,351
4,840
15,191
2015
$’000
50
-
50
2014
$’000
50
-
50
Transactions between the Company and other entities within the wholly owned group during the years ended 30 June 2015 and 2014 consisted of:
(a)
(b)
loans advanced to the Company; and
the payment of dividends to the Company.
Aggregate amounts included in the determination of profi t from ordinary activities before income tax that resulted from transactions with entities in
the wholly owned group:
Consolidated Group
Parent Entity
2015
$
2014
$
2015
$
2014
$
Dividend revenue
Aggregate amounts payable to entities within the wholly owned group
at balance date:
Current payables
-
-
-
-
68,324,463
29,064,347
47,309,114
46,540,031
(b) Key management personnel compensation
Compensation
Short-term employment benefi ts
Post-employment benefi ts
Long-term employment benefi ts
Share-based payments
27 SHARE-BASED PAYMENTS
3,513,224
4,139,212
2,153,525
2,290,456
216,247
54,206
836,041
4,619,718
212,400
(46,521)
1,237,496
5,542,587
153,072
82,456
505,938
130,964
(82,746)
850,548
2,894,991
3,189,222
The Company issued options to certain executives and employees under the McMillan Shakespeare Limited Employee Option Plan. Two types of
options have been granted under this plan, performance options and voluntary options.
No executive can enter into a transaction that is designed or intended to hedge the executive’s exposure to any unvested option. Executives will be
required to provide declarations to the Board on their compliance with this policy from time to time.
Performance Options
Performance options over unissued ordinary shares in the Company are granted for no consideration and are, other than as disclosed in this Annual
Report, granted at or above market prices prevailing when the Board approved the issue. Performance options carry no dividend or voting rights.
Once exercised, each option is converted into one fully paid ordinary share in the Company.
The Remuneration Committee recommends to the Board the number of performance options to be granted on the basis of the position, duties and
responsibilities of the relevant executive.
MMSG Annual Report 2015
79
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
Voluntary Options
Voluntary options were fi rst granted during the 2012 fi nancial year when 314,578 options were issued at $1.32 each and expire on 30 September 2015
(the consideration was set at a 25% discount to the fair value of the options on grant date) up to an investment limit of $50,000 per executive. The
maximum discount to any one executive is therefore, limited to $16,666.
The entitlement to exercise the voluntary options is not contingent upon continued employment with the Company nor are there performance
hurdles. However, if the executive leaves employment before 31 August 2014, the executive will forfeit 25% of their entitlement for $1 (the amount
forfeited being equal to the 25% discount to the fair market value that applied to the acquisition price of the option at the date of the conditional offer
and acceptance). The vesting date of these options is 31 August 2014. No performance hurdles are attached to these options given that these are
purchased options; the executive has paid $50,000 for the purchase of these options (representing 75% of the fair value of the options on grant date).
Set out below are summaries of options granted under the plans:
Consolidated Group and parent entity - 2015
Grant date
Expiry date
28 May 2010
1 October 2015
16 August 2011(1)
30 September 2015
16 August 2011(2)
30 September 2015
25 October 2011
30 September 2015
14 March 2012
30 September 2015
24 July 2012
30 September 2015
19 August 2014
30 September 2019
19 August 2014
30 September 2018
23 September 2014 30 September 2018
28 October 2014
30 September 2018
24 March 2015
30 September 2018
26 May 2015
30 September 2018
Exercise
price
$3.42
$7.31
$7.31
$8.54
$9.29
$11.42
$10.18
$10.18
$10.83
$10.17
$11.87
$12.88
Balance at
start of the
year
537,634
1,805,957
314,578
352,942
31,250
121,331
Granted
during
the year
Exercised or
sold during
the year
Forfeited
during
the year
Balance at
end of
the year
Exercisable
at end of
the year
-
-
-
-
-
-
(537,634)
(1,123,751)
(263,777)
(352,942)
(31,250)
-
-
-
-
-
-
-
-
-
-
-
-
-
978,417
832,719
107,877
109,142
294,336
85,692
-
-
-
-
-
(121,331)
-
-
682,206
682,206
50,801
50,801
-
-
-
-
978,417
(265,043)
567,676
-
-
-
-
107,877
109,142
294,336
85,692
-
-
-
-
-
-
-
-
-
3,163,692
2,408,183
(2,309,354)
(386,374)
2,876,147
733,007
Weighted average exercise price
$6.96
$10.51
Consolidated Group and parent entity - 2014
28 May 2010
1 October 2015
16 August 2011
30 September 2015
16 August 2011
30 September 2015
25 October 2011
30 September 2015
14 March 2012
30 September 2015
$3.42
$7.31
$7.31
$8.54
$9.29
537,634
1,831,540
314,578
352,942
31,250
24 July 2013
30 September 2015
$11.42
121,331
Weighted average exercise price
3,189,275
$6.97
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$10.57
$9.73
$7.31
-
537,634
(25,583)
1,805,957
-
-
-
-
314,578
352,942
31,250
121,331
(25,583)
3,163,692
$7.31
$6.96
-
-
-
-
-
-
-
-
(1) None of the forfeited options represented expired options (2014: Nil).
(2)
The weighted average remaining contractual life of options outstanding at the end of the year was 2.17 years (2014: 0.25 years).
80
MMSG Annual Report 2015
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
Fair value of options granted
The assessed fair value at grant date of options granted during the year is disclosed in the table below. The fair value at grant date is determined using
a binomial option pricing model that takes into account the exercise price, the term of the option, the share price at the grant date, the expected price
volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.
Model input
August 2014
September 2014
October 2014
March 2015
May 2015
Consideration payable upon grant
Exercise price
Grant date
Expected life
Share price at grant date
Expected price volatility
Expected dividend yield
Risk-free interest rate
Nil
$10.18
Nil
$10.83
Nil
$10.17
Nil
$11.87
Nil
$12.88
19 August 2014 23 September 2014
28 October 2014
24 March 2015
26 May 2015
3.5 years
$10.18
49%
4.5%
2.2%
3.0 years
$10.83
48%
4.5%
2.9%
2.9 years
$10.17
48%
4.5%
2.6%
2.4 years
$11.87
47%
3.5%
1.8%
2.3 years
$12.88
47%
3.5%
2.0%
The expected price volatility is based on historic volatility (based on the remaining life of the options), adjusted for any expected changes to future
volatility due to publicly available information.
Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the year as part of employee and Director benefi ts expense were
as follows:
Options expense recognised under the Employee Option Plan
1,326,493
1,741,480
2015
$
2014
$
2015
$
-
2014
$
-
Consolidated Group
Parent Entity
28 BUSINESS COMBINATION
(a) Subsidiaries acquired
The Group acquired 100% of Presidian Holdings Pty Ltd and its subsidiaries on 27 February 2015, a group of companies incorporated in Australia
that is a provider of fi nance, warranty and insurance products to the automotive industry. The acquisition was a complementary extension of
the Group’s existing Australian network and auto value chain competencies in the new car market, and brings with it numerous cross selling
opportunities across both organisations
There were no other acquisitions during the year. The Company acquired United Financial Services Pty Ltd together with two other associated
companies subsequent to reporting date, on 31 July 2015. Refer note 30 for further details.
(b) Consideration transferred
Consideration for the acquisition was $114,432,000, less cash assumed of $830,000, funded wholly by $64,450,000 of cash and borrowings and
4,285,192 of fully paid ordinary shares that were fair valued at $49,982,000 on completion. Fair value has been determined as the volume weighted
average of the closing price of MMS’ shares for the 5 days prior to completion date. The shares issued are free from encumbrances but will be held
in escrow for various periods up to 48 months.
The assets and liabilities acquired have been fair valued in accordance with AASB 3 “Business Combinations”, and has resulted in goodwill
of $86,672,000. Acquisition-related expenses of $2,196,000 were incurred and expensed on consolidation and included in the Statement of
Consolidated Profi t or Loss and Other Comprehensive Income for the year.
Purchase consideration – cash outfl ow
Cash paid for shares
Cash acquired
Net cash outfl ow for consideration transferred
$’000
64,450
(830)
63,620
MMSG Annual Report 2015
81
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
(c) Assets acquired and liabilities assumed at the date of acquisition
Assets acquired and liabilities assumed at the date of acquisition
Cash
Brands
Dealer relationships
Customer contracts
Property, plant & equipment and software
Trade, other receivables and prepayments
Deferred acquisition costs
Assets acquired
Trade payables and accrued expenses
Unearned revenue
Income tax provision
Deferred tax liabilities
Liabilities assumed
Identifi able net assets acquired
Goodwill
Consideration
Fair Value at
acquisition date
(Provisional)
$’000
830
22,443
12,033
1,100
5,248
5,547
3,387
50,588
10,710
9,675
1,313
1,130
22,828
27,760
86,672
114,432
Trade receivables of $1,915,000 acquired with Presidian have resulted from trade sales with customers and are considered fair value and their
collection and conversion to cash are expected in full pursuant to customer terms.
Goodwill arising on acquisition is attributable to the profi tability, quality client base, operating software and competent skill base of the acquired
Presidian business and the growth potential when combined with MMSG’s other business for a unique offering of a fully integrated asset management
business and employee benefi ts service. None of the goodwill is expected to be tax deductible.
Further review is being undertaken on the fair valuation and refi nement of warranty unearned premium income and deferred acquisition costs and
other items and this work is contemplated for completion for the next interim fi nancial report.
(d) Impact of acquisition on the results of the Group
The Consolidated Statement of Comprehensive Income for the year includes sales revenue of $23.1m and net profi t after tax of $3.0m as a result
of the acquisition of Presidian. Had the acquisition occurred effective 1 July 2014, the respective “pro-forma” revenue and profi t for the year of
$69.3m and $7.5m would have been included in the Statement of Comprehensive Income. In determining the proforma revenue and profi t of
Presidian, adjustments have been made for differences in the accounting policies between the Group and Presidian and the recognition of the
amortisation of Dealer networks and customer contracts on the assumption that these assets were acquired at 1 July 2014 at their fair value.
82
MMSG Annual Report 2015
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
29 DEED OF CROSS GUARANTEE
McMillan Shakespeare Limited, Maxxia Pty Ltd and Remuneration Services (Qld) Pty Ltd are parties to a deed of cross guarantee entered into
during the year ended 30 June 2009 followed by the joining of Interleasing (Australia) Ltd, CARILA Pty Ltd and TVPR Pty Ltd (Interleasing Group)
entering into deeds of cross guarantee in the year ended 30 June 2010. Presidian Holdings Pty Ltd and its subsidiaries joined the closed group
with deeds of cross guarantees entered into during the year. Under the deeds, each company guarantees the debts of the others and is relieved from
the requirement to prepare a fi nancial 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 McMillan Shakespeare Limited, they also represent the ‘Extended Closed Group’.
Set out below is a statement of comprehensive income, statement of fi nancial position and a summary of movements in consolidated retained
profi ts for the year ended 30 June 2015 of the Closed group consisting of McMillan Shakespeare Limited, Maxxia Pty Ltd and Remuneration
Services (Qld) Pty Ltd, Interleasing (Australia) Ltd, CARILA Pty Ltd and TVPR Pty Ltd and Presidian Holdings Pty Ltd and its subsidiaries.
(a) Consolidated Statement of Comprehensive Income and summary of movements in consolidated retained profi ts
Statement of Comprehensive Income
Revenue and other income
Employee and director benefi ts expenses
Depreciation and amortisation expenses and impairment
Leasing and vehicle management expenses
Brokerage commissions and incentives
Net claims incurred
Consulting cost expenses
Marketing expenses
Property and corporate expenses
Technology and communication expenses
Finance costs
Other expenses
Acquisition expenses
Profi t before income tax
Income tax expense
Profi t attributable to members of the parent entity
Other comprehensive income
Other comprehensive income/(loss) for the year after tax
Total comprehensive income for the year
Movements in consolidated retained earnings
Retained earnings at the beginning of the fi nancial year
Profi ts for the year
Dividends paid
Retained earnings at the end of the fi nancial year
2015
$’000
2014
$’000
374,442
336,422
(91,718)
(90,611)
(49,438)
(5,535)
(2,160)
(1,580)
(2,738)
(9,375)
(7,964)
(9,429)
(8,206)
(2,196)
93,492
(26,242)
67,250
(79,826)
(88,042)
(47,160)
-
-
(3,420)
(2,584)
(6,724)
(7,692)
(10,370)
(9,602)
-
81,002
(24,242)
56,760
3,559
70,809
(2,076)
54,684
165,756
67,250
(43,912)
189,094
138,060
56,760
(29,064)
165,756
MMSG Annual Report 2015
83
Financial Report
Notes to the Financial Statements
For the Year Ended 30 June 2015
(b) Consolidated Statement of Financial Position
Current assets
Cash and cash equivalents
Trade and other receivables
Finance lease receivables
Deferred acquisition costs
Inventory
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax asset
Finance lease receivables
Other fi nancial assets
Deferred acquisition costs
Total non-current assets
TOTAL ASSETS
Current liabilities
Trade and other payables
Current tax liability
Unearned premium liability
Provisions
Borrowings
Total current liabilities
Non-current liabilities
Provisions
Unearned premium liability
Borrowings
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Retained earnings
TOTAL EQUITY
2015
$’000
2014
$’000
80,606
47,869
3,752
973
7,021
141,385
291,177
177,306
1,120
7,882
38,404
2,137
516,862
658,247
71,984
3,552
6,105
10,588
2,451
94,680
2,227
2,781
239,888
244,896
339,576
318,671
121,617
7,960
189,094
318,671
65,034
32,830
4,630
-
5,294
107,788
303,427
50,997
5,766
8,458
17,715
-
386,363
494,151
59,560
10,527
-
6,135
-
76,222
767
-
190,549
191,316
267,538
226,613
56,456
4,401
165,756
226,613
30 SUBSEQUENT EVENTS
On 31 July 2015, the Company completed the acquisition of United Financial Services Pty Ltd, United Financial Services Network Pty Ltd and
United Financial Services (Queensland) Pty Ltd (collectively known as “UFS”) for a consideration of $42 million, funded 60% cash from existing
Company cash reserves and 40% MMS shares, to which 1,342,926 fully paid ordinary shares were issued. UFS is a fi nancial services provider
specialising in the delivery of consumer and commercial fi nance and insurance products. It will complement the Presidian business acquired in
February 2015, presenting numerous cross selling opportunities across both organisations and the realisation of revenue synergies.
Given that the acquisition was completed on 31 July 2015 and fi nal adjustment on settlement is still being processed, acquisition accounting for
UFS is incomplete for meaningful reporting at the date of this report.
84
MMSG Annual Report 2015
Financial Report
Directors’ Declaration
The Directors are of the opinion that:
1.
the fi nancial statements and notes on pages 41 to 84 are in accordance with the Corporations Act 2001(Cth), including:
(a) compliance with Accounting Standards, the Corporations Regulations 2001 (Cth) and other mandatory professional reporting requirements;
and
(b) giving a true and fair view of the consolidated entity’s fi nancial position as at 30 June 2015 and fi nancial performance for the fi nancial year
ended on that date; and
2.
3.
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed group identifi ed in Note 29 will be
able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in Note 29.
Note 1(b) confi rms that the fi nancial statements also comply with International Financial Reporting Standards as disclosed as issued by the International
Accounting Standards Board.
The Directors have been given the declarations by the Chief Executive Offi cer and Chief Financial Offi cer required by section 295A of the Corporations
Act 2001 (Cth).
This declaration is made in accordance with a resolution of the Directors.
Ronald Pitcher, AM
Chairman
25 August 2015
Melbourne, Australia
Michael Salisbury
Managing Director
MMSG Annual Report 2015
85
Financial Report
Independent Audit Report
As at 30 June 2015
The Rialto, Level 30
525 Collins St
Melbourne Victoria 3000
Correspondence to:
GPO Box 4736
Melbourne Victoria 3001
T +61 3 8320 2222
F +61 3 8320 2200
E info.vic@au.gt.com
W www.grantthornton.com.au
Independent Auditor’s Report
To the Members of McMillan Shakespeare Limited
Report on the financial report
We have audited the accompanying financial report of McMillan Shakespeare Limited (the
“Company”), which comprises the consolidated statement of financial position as at 30 June
2015, the consolidated statement of profit or loss and other comprehensive income,
consolidated statement of changes in equity and consolidated statement of cash flows for
the year then ended, notes comprising a summary of significant accounting policies and
other explanatory information and the directors’ declaration of the consolidated entity
comprising the Company and the entities it controlled at the year’s end or from time to time
during the financial year.
Directors’ responsibility for the financial report
The Directors of the Company are responsible for the preparation of the financial report
that gives a true and fair view in accordance with Australian Accounting Standards and the
Corporations Act 2001. The Directors’ responsibility also includes such internal control as
the Directors determine is necessary to enable the preparation of the financial report that
gives a true and fair view and is free from material misstatement, whether due to fraud or
error. The Directors also state, in the notes to the financial report, in accordance with
Accounting Standard AASB 101 Presentation of Financial Statements, the financial
statements comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We
conducted our audit in accordance with Australian Auditing Standards. Those standards
require us to comply with relevant ethical requirements relating to audit engagements and
plan and perform the audit to obtain reasonable assurance whether the financial report is
free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial report. The procedures selected depend on the auditor’s
judgement, including the assessment of the risks of material misstatement of the financial
report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the
Company’s preparation of the financial report that gives a true and fair view in order to
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the
context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm
is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and
are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its
Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current
scheme applies.
86 MMSG Annual Report 2015
Independent Audit Report
As at 30 June 2015
Financial Report
design audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Company’s internal control. An audit
also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the Directors, as well as evaluating the
overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the
Corporations Act 2001.
Auditor’s opinion
In our opinion:
a
the financial report of McMillan Shakespeare Limited is in accordance with the
Corporations Act 2001, including:
i
ii
giving a true and fair view of the consolidated entity’s financial position as at 30
June 2015 and of its performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations
Regulations 2001; and
b
the financial report also complies with International Financial Reporting Standards as
disclosed in the notes to the financial statements.
Report on the remuneration report
We have audited the remuneration report included in pages 16 to 38 of the directors’ report
for the year ended 30 June 2015. The Directors of the Company are responsible for the
preparation and presentation of the remuneration report in accordance with section 300A of
the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration
report, based on our audit conducted in accordance with Australian Auditing Standards.
Auditor’s opinion on the remuneration report
In our opinion, the remuneration report of McMillan Shakespeare Limited for the year
ended 30 June 2015, complies with section 300A of the Corporations Act 2001.
GRANT THORNTON AUDIT PTY LTD
Chartered Accountants
B.A. Mackenzie
Partner - Audit & Assurance
Melbourne, 25 August 2015
MMSG Annual Report 2015
87
Financial Report
Auditor’s Independence Declaration
As at 30 June 2015
The Rialto, Level 30
525 Collins St
Melbourne Victoria 3000
Correspondence to:
GPO Box 4736
Melbourne Victoria 3001
T +61 3 8320 2222
F +61 3 8320 2200
E info.vic@au.gt.com
W www.grantthornton.com.au
Auditor’s Independence Declaration
To the Directors of McMillan Shakespeare Limited
In accordance with the requirements of section 307C of the Corporations Act 2001, as lead
auditor for the audit of McMillan Shakespeare Limited for the year ended 30 June 2015, I
declare that, to the best of my knowledge and belief, there have been:
a
b
No contraventions of the auditor independence requirements of the Corporations Act
2001 in relation to the audit; and
No contraventions of any applicable code of professional conduct in relation to the
audit.
GRANT THORNTON AUDIT PTY LTD
Chartered Accountants
B.A. Mackenzie
Partner - Audit & Assurance
Melbourne, 25 August 2015
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the
context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm
is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and
are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its
Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current
scheme applies.
88 MMSG Annual Report 2015
Financial Report
Shareholder Information
Additional information required by the ASX Listing Rules and not disclosed elsewhere in this Annual Report is set out below:
SUBSTANTIAL SHAREHOLDINGS
As at 6 August 2015, the number of shares held by substantial shareholders and their associates is as follows:
Shareholder
Chessari Holdings Pty Limited(2)
Number of Ordinary Shares
Percentage of Ordinary Shares1
6,050,941
7.28
(1)
(2)
As at 6 August 2015, 83,153,919 fully paid ordinary shares have been issued by the Company.
Chessari Holdings Pty Limited is a company associated with Mr Ross Chessari, a Non-Executive Director.
NUMBER OF SHARE & OPTION HOLDERS
As at 6 August 2015, the number of holders of ordinary shares and options in the Company was as follows:
Class of Security
Fully paid ordinary shares
Options exercisable at $7.31 and expiring on 30 September 2015
Options exercisable at $10.18 and expiring on 30 September 2019
Options exercisable at $10.18 and expiring on 30 September 2018
Options exercisable at $10.83 and expiring on 30 September 2018
Options exercisable at $10.17 and expiring on 30 September 2018
Options exercisable at $11.87 and expiring on 30 September 2018
Options exercisable at $12.88 and expiring on 30 September 2018
VOTING RIGHTS
Number of Holders
6,940
2
4
15
1
1
3
2
In accordance with the Constitution of the Company and the Corporations Act 2001 (Cth), every member present in person or by proxy at a general
meeting of the members of the Company has:
•
•
on a vote taken by a show of hands, one vote; and
on a vote taken by a poll, one vote for every fully paid ordinary share held in the Company.
A poll may be demanded at a general meeting of the members of the Company in the manner permitted by the Corporations Act 2001 (Cth).
DISTRIBUTION OF SHARE & OPTION HOLDERS
As at 6 August 2015, the distribution of share and option holders in the Company was as follows:
Distribution of Shares & Options
Number of Holders of Ordinary Shares
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,000+
3,585
2,422
384
249
26
As at 6 August 2015 there were 154 shareholders who held less than a marketable parcel of 36 fully paid ordinary shares in the Company.
MMSG Annual Report 2015
89
Financial Report
Shareholder Information
TOP 20 SHAREHOLDERS
As at 6 August 2015, the details of the top 20 shareholders in the Company are as follows:
No.
Name
Number of Ordinary Shares
Percentage of Ordinary Shares1
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
HSBC Custody Nominees (Aust) Ltd
J P Morgan Nominees Australia Limited
National Nominees Limited
Chessari Holdings Pty Limited(2)
Citicorp Nominees Pty Limited
Asia Pac Technology Pty Limited(3)
NWC Group Pty Ltd
BNP Paribas Noms Pty Ltd
RBC Investor Services Australia Nominees Pty Ltd
Ann Leslie Ryan
RBC Investor Services Australia Nominees Pty Ltd
Magic Bay Nominees Pty Ltd (Findus Property A/C)
CPU Share Plans Pty Ltd (MMS Options Unallocated A/C)
AFICO Pty Ltd
I-Capital Australia Pty Ltd (Hewtom Family Disc A/C)
UBS Nominees Pty Ltd
MOHL Invest Pty Ltd (MOHL Family A/C)
Citicorp Nominees Pty Ltd (Colonial First State Inv A/C)
MAP Capital Pty Ltd (Richmond TCE CAP ARF A/C)
MOD Enterprises Pty Ltd
Totals: Top 20 holders of issued Capital
Total Remaining Holders Balance
1
2
3
As at 6 August 2015, 83,153,919 fully paid ordinary shares have been issued by the Company.
Chessari Holdings Pty Limited is a company associated with Mr Ross Chessari, a Non-Executive Director.
Asia Pac Technology Pty Limited is a company associated with Mr John Bennetts, a Non-Executive Director.
RESTRICTED SECURITIES
16,660,158
12,794,828
9,925,416
6,050,941
3,878,565
3,543,025
2,356,855
1,204,000
1,131,000
1,008,418
907,363
897,105
692,482
683,701
462,399
323,683
310,000
283,768
275,000
259,237
63,647,944
19,505,975
20.04
15,.39
11.94
7.28
4.66
4.26
2.83
1.45
1.36
1.21
1.09
1.08
0.83
0.82
0.56
0.39
0.37
0.34
0.33
0.31
76.54
23.46
As at the date of this Annual Report, there are no securities in the Company subject to voluntary escrow or any other restrictions.
UNQUOTED SECURITIES
As at the date of this Annual Report, the details of unquoted securities in the Company are as follows:
Class
Number of Securities
Number of Holders
Options exercisable at $7.31 and expiring on 30 September 2015
Options exercisable at $10.18 and expiring on 30 September 2019
Options exercisable at $10.18 and expiring on 30 September 2018
Options exercisable at $10.83 and expiring on 30 September 2018
Options exercisable at $10.17 and expiring on 30 September 2018
Options exercisable at $11.87 and expiring on 30 September 2018
Options exercisable at $12.88 and expiring on 30 September 2018
Options do not carry a right to vote
ON-MARKET BUY BACK
The Company does not have a current on-market buy-back.
90 MMSG Annual Report 2015
733,007
978,417
567,676
107,877
109,142
294,336
85,692
2,876,147
2
4
15
1
1
3
2
MMSG Annual Report 2015
91
92 MMSG Annual Report 2015
McMillan Shakespeare Limited
A.B.N. 74 107 233 983
A.F.S.L. No. 299054
Level 21, 360 Elizabeth Street
Melbourne, Victoria 3000
www.mmsg.com.au