McMillan
Shakespeare
Limited
Annual Report
2016
Collectively, the McMillan Shakespeare Group’s (MMS) business
divisions provide expertise in novated leasing, salary packaging,
associated Fringe Benefits Tax administration and management,
operating leases and asset management for ‘tool of trade’
vehicles and other business assets, retail finance, insurance
and warranty. No other provider offers this breadth of service
or industry experience.
Financial calendar
2016 A nnual R esults
A nnounce m ent of
24 A u g ust 2016
29 S e pte m b er 2016
2016 Final Dividend
Ex-D ate
30 S e pte m b er 2016
2016 Final Dividend
R ecord D ate
2016 Final Dividend
14 O cto b er 2016
Pay m ent D ate
25 O cto b er 2016
G eneral M eeting
2016 A nnual
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 25 October 2016 at 10am
at the State Library of Victoria, Ground Floor, 328 Swanston Street,
Melbourne, Victoria in the Theatrette.
www.mmsg.com.au
MMS
Annual Report 2016
1
Contents
Chairman’s Report
CEO’s Report
The journey to who we are today
Financial History
Non-financial Highlights
Directors’ Report
– Directors
– Directors meetings
– Principal activities
– Results
– Dividends
– Review of operations - Group
– Key highlights and activities
– Outlook
– Strategy and prospects
– State of affairs
– Events subsequent to balance date
– Likely developments
– Results of major segments of the Group
> Group Remuneration Services
> Asset Management – Aust/NZ
> Asset Management – UK
> Retail Financial Services
Indemnification and insurance
– Directors’ experience and responsibilities
– Company Secretary
– Remuneration Report
– Environmental regulations
–
– Non-audit services
– Auditor’s independence declaration
– Directors’ declaration
– Corporate governance practices
– Five year summary
Financial Report
Independent Audit Report
Auditors’ Independence Declaration
Shareholder Information
Corporate Directory
2
4
6
8
10
12
12
12
12
13
13
14
15
15
15
15
15
15
16
18
19
20
22
23
24
42
42
42
43
43
43
44
45
96
98
99
101
Financial calendar
24 A u g ust 2016
A nnounce m ent of
2016 A nnual R esults
29 S e pte m b er 2016
2016 Final Dividend
Ex-D ate
30 S e pte m b er 2016
2016 Final Dividend
R ecord D ate
14 O cto b er 2016
2016 Final Dividend
Pay m ent D ate
25 O cto b er 2016
2016 A nnual
G eneral M eeting
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 25 October 2016 at 10am
at the State Library of Victoria, Ground Floor, 328 Swanston Street,
Melbourne, Victoria in the Theatrette.
www.mmsg.com.au
MMS
Annual Report 2016
2
Chairman’s
Report
I am pleased to report that MMS
delivered another record profit for
the 2016 financial year (FY16),
assisted by the execution of our
diversification strategy.
Board composition
The last year marked the end of an era for your
Board. As previously announced, Ronald Pitcher
AM retired as Chairman and Director on
27 October 2015. Ron has a distinguished record
of service to your Company in the role of Chairman
since it listed on the ASX in March 2004, chairing
the Board through both favourable and challenging
market conditions. Since the company listed, Ron
has presided over MMS’ continued profit growth,
the evolution of our businesses, and expansion into
new markets both at home and offshore. Returns
to shareholders have remained strong and MMS’
market capitalisation has climbed from $33 million
to more than $1.1 billion today. We thank Ron for
11 years of outstanding service to MMS and wish
him the best for the future.
Following Ron’s retirement, I was proud to be
appointed as Chair of your Board, and thank Ron
for his wise counsel during what was a seamless
handover of duties.
In January we were delighted to appoint Sue Dahn
as an independent Director and Chair of your
Board’s Audit, Risk and Compliance Committee.
Sue brings to the Board her extensive experience
in senior roles within the Victorian Government,
and global and local accounting firms. As a partner
leading Investment Advisory Services at Pitcher
Partners, and Non-Executive Director of MTAA
Super, she is well placed to provide counsel to
MMS as it strives to serve diverse stakeholders
including long-standing clients in Not-for-Profit
(NFP) organisations and government agencies.
After regaining our traditional momentum last
year, in FY16 our entry into the consumer
vehicle financing market helped increase our
net profit after tax to $82.5 million, up 22%,
while simultaneously reducing the regulatory risk
associated with FBT legislation. Our performance
also reflected higher net profit contributions from
our three other operating divisions, stretching
our excellent track record of profit growth to
12 years since MMS listed on the Australian
Securities Exchange (ASX).
The final dividend of 34 cents per share brings the
total dividend for the year to 63 cents per share
fully franked, an increase of 21% over the prior
year. The dividend payout ratio is 60% which is
consistent with the prior year.
Diversification strategy
During the past two years we have had a focus
on diversifying our business into new markets
and geographies. FY16 has been another year
of achievement. In Australia, we completed the
acquisition of three United Financial Services
companies (collectively known as ‘UFS’) in July
2015 and progressed the integration of this
business along with Presidian under the Retail
Financial Services (RFS) segment. We also
continued to put our customers at the forefront
of everything we do by increasing our investment
in customer service, and improving their service
experience by leveraging the connectivity of digital
channels. Our Australasian fleet financing and
management unit returned to profit growth in FY16
notwithstanding the highly competitive market.
In the UK, the newly-acquired Anglo Scottish
Asset Finance business made a better than
expected maiden profit contribution and our UK
businesses increased assets under management
to more than 16,100 units.
Chairman’s Report
MMS
Annual Report 2016
3
$82.5m
63.0c
FY16 Net Profit
after Tax
FY16 Dividend
per Share
Outlook
Pursuing our diversification strategy has provided
MMS the opportunity to deepen relationships with
clients through an enhanced range of products
and services. In the year ahead our focus will be on
extracting more benefits from this strategy as the
integration of our acquired businesses progress.
Continued earnings growth in the medium term will
be underpinned by increased organic growth across
business segments, supported by increased cross-
selling opportunities, the launch of new products,
and investment in infrastructure and systems.
Against a backdrop of political uncertainty in
the UK, we anticipate clients and consumers
will prefer to purchase used vehicles over new
vehicles. We expect our acquisition of Anglo
Scottish to be bedded down, and generate a
greater contribution to earnings by year’s end. In
Australasia, our business will be strengthened by
new business wins for our GRS segment, and the
commencement of Principal and Agency (P&A)
agreements for our Asset Management segment.
Your Company’s regulatory risk exposure has
also been reduced from the pledge by both major
political parties in Australia to retain the current FBT
arrangement for novated leases. This, together
with our diversification strategy, means MMS is well
placed to deliver more value to our shareholders,
customers and the community. We thank you for
your loyalty as a shareholder and look forward to
your continued support in 2017.
Finally, on behalf of shareholders, I would like to
thank all of our people located around the world
for their tireless efforts in achieving another record
result for MMS. Our team is highly talented, deeply
committed to our customers, and very well led by
our Managing Director and Chief Executive Officer
Mike Salisbury. I thank Mike, and the rest of my
fellow Board members, for the invaluable skills and
expertise they bring to your Company.
Yours sincerely,
Tim Poole
Chairman
MMS
Annual Report 2016
4
Chief Executive
Officer’s Report
MMS has delivered another record
performance in 2016 through a
consistent focus on delivering our
diversification strategy by strengthening
our existing businesses, expanding
into new markets and driving growth
across all business segments.
Revenue grew by 30% as newly acquired
UFS and Anglo Scottish Asset Finance made
solid maiden contributions to the Group, and
our customer base expanded to include both
corporate partnerships and direct relationships
with consumers. MMS took a market leading
position in the independent used vehicle
financing market in Australia, and enjoyed
market share gains in the UK as we continued
to invest in our strategy and future growth. Our
traditional salary packaging and novated leasing
business proved again to be a reliable engine
of growth as new business wins, participation
growth and productivity improvements
supported overall profitability. Pleasingly, it was
also a year when this business’s exposure to
regulatory risk was reduced as both major
political parties recognised the value of our
industry to the wider community and confirmed
no change would be made to the FBT treatment
of novated leases.
Segment performance
In Australia our salary packaging and novated
leasing business enjoyed another record profit,
up 8%, due to the hard work of our talented
employees across the country. Customer
numbers rose again on the back of solid organic
growth, we delivered good cost containment,
and a raft of additional contract wins. Improving
our customers’ access to workplace benefits
has always been what makes our business tick,
and we estimate that Maxxia and RemServ now
deliver salary packaging services to 45% of
Australia’s public health employees.
Our clients’ confidence in our service was also
demonstrated by several renewals of large
contracts, including our exclusive contract
with the Tasmanian Government’s Department
of Health and Human Services, Peninsula
Health, and our sole provider contract with
the Government of South Australia. The latter
ensures we continue to provide education and
support to 104,000 government employees
in South Australia, and supports our deeper
investment in the state, including the creation
of 25 new jobs and the opening of Maxxia’s
third Customer Care Centre by the Premier
of South Australia, Jay Weatherill. Another
highlight was RemServ’s reappointment as a
salary packaging provider to the Queensland
Government for another five years until April
2021. This will extend our long-standing
partnership to 20 years and underlines the
success of RemServ’s focus on ‘Queenslanders
serving Queenslanders’.
New client wins have included coverage of two
large health organisations in NSW.
Chief Executive Officer’s Report
In recent years we have articulated our
diversification strategy to create value for our
shareholders and customers by becoming a
leader in adjacent and complementary sectors.
In 2015 this manifested in the acquisition of
Presidian and UFS and the creation of our
Retail Financial Services (RFS) segment. The
post-merger integration phase is unfolding
and is proceeding to expectations; and I am
delighted to report that profitability in RFS was
solid in FY16. Cross sales of products into our
GRS segment have also commenced with the
soft launch of our Maxxia Plus service.
Our Asset Management segment in Australasia
delivered a 19% increase in profitability despite
continued fleet inertia across the market. New
business wins, including the appointment of
Interleasing to the NSW Government’s panel of
vehicle leasing providers, was a highlight during
the year and will underpin growth in FY17.
Importantly, our pursuit of greater flexibility and
a more capital light funding model reached
a milestone with the development of our first
P&A funding arrangement that will lift your
Company’s return on equity in the years ahead.
In the UK, the integration of our newly-acquired
Anglo Scottish Asset Finance business
progressed ahead of plan and a maiden profit
contribution has exceeded expectations and
helped lift overall profitability for this segment.
Solid organic growth helped consolidate our
foothold in the UK, and was reinforced by
originations from repeat business and the
addition of new tied agents to the group. By
year end we had P&A funding arrangements
with six UK banks and finance companies
in place.
MMS
Annual Report 2016
5
Prepared for new challenges
As we embark on a new financial year, I am
proud that the actions of all of our people
around the world have made your Company
more vibrant, nimble, and resilient. This
achievement has, in part, been borne out of
our relentless commitment to improve our
customers’ experience at every touch point
with an MMS business, thereby giving them
greater value and enabling our businesses to
compete in any market conditions. It is why
during FY16 we offered a wider choice of digital
channels to customers, including the launch of
our Maxxia and RemServ Claims Apps which,
by 30 June, had driven more than 60% of all
claims being lodged via the online channel.
Finally, it is also why we continue our investment
in on-the-ground education events for our
clients’ employees – a personalised approach
to service for which we are renowned. In FY16
we received feedback from the market that
these events increase program participation
and help to set us apart from our competitors.
Conducted at worksites across Australia, they
include group information sessions and one-
on-one consultations in which our dedicated
Customer Education Managers ensure our
customers fully understand the financial benefits
of salary packaging and novated leases.
We put our people into worksites spanning
metropolitan, regional and remote locations
every day; and over the last year conducted
around 20,000 educational activities, including
5,552 consultations with individuals.
This level of dedication from our people reflects
our core values that our inaugural Chairman,
Ron Pitcher, helped embed, and I thank Ron
for his 11 years of leadership and service to
MMS. It also instils confidence in our clients
and customers, and will sustain our competitive
position and earnings growth in the years to
come. I thank our customers and our people for
their support.
I also thank you, our shareholders, for your trust
and investment in MMS as it moves into the
future from a position of strength.
Yours sincerely
Mike Salisbury
Managing Director &
Chief Executive Officer
MMS
Annual Report 2016
6
The journey to
who we are today
1980s – 2000
MMS’ origins date back to the 1980s with the
Australian federal government’s introduction of
the Fringe Benefits Tax (FBT) in 1986. In 1988
Melbourne economics teacher, Anthony Podesta,
joined a Geelong-based taxation and accounting
firm established by accountants Neil McMillan and
Edward Shakespeare. Following an ownership
change and his elevation to Managing Director
and Chief Executive Officer, Anthony revived the
business as McMillan Shakespeare and Associates
Ltd (MSA) and began offering remuneration advice
and administration services. During the 1990s
MSA grew as a range of organisations signed on
as clients, including many schools across Australia
who enjoyed the FBT concessions available at
the time and remain clients today. MSA began
growing a national footprint, and opened an office
in Perth in 1998. This initial success cemented the
position of MSA as the pioneer of Australia’s salary
packaging industry as customers learned how best
to ‘package’ their remuneration according to FBT
concessions amid a decade of changes to taxation
measures, including superannuation.
By 1998 a lack of investment capital led Anthony to
sell 80% of MSA to Zurich Australia for $20 million.
A reinvigorated MSA launched Australia’s first
novated lease product to the market that year –
a ground-breaking financial product that gave more
people access to new cars.
2000 –2016
MSA’s client numbers grew, with the profile of the
client base broadening in 2001 after the federal
government’s Inquiry into the Definition of Charities
and Related Institutions led to FBT concessions
being introduced for charities, Not-For-Profits
(NFP), hospitals and Public Benevolent Institutions.
Success with large NFP and public sector clients
stimulated MSA’s growth in scale, and by early
2004 Anthony, Ross Chessari and John Bennetts
seized the opportunity to buy the company back
from Zurich for $32.5 million. On 15 March 2004 it
was listed on the Australian Securities Exchange as
McMillan Shakespeare Limited (ASX: MMS).
Under Anthony’s leadership, MMS expanded into
Queensland by acquiring Brisbane-based salary
packager PKF Remuneration Services in October
2004. Greater expertise in vehicle leasing was
gained by the acquisition of Easifleet Management
in January 2006. Our national footprint continued
expanding with the opening of our Adelaide office.
In May 2008, Anthony stepped down as CEO
following the appointment of former AAMI CEO
Michael Kay to the role. Anthony was named
Ernst & Young Australian Entrepreneur of the Year
in 2012 and remained a MMS Board director until
his retirement in February 2014.
1980
1985
1990
1995
2000
2005
2010
1988
Anthony Podesta
joins Geelong-based
accounting firm
McMillan
Shakespeare
1989
Firm renamed as McMillan
Shakespeare and Associates
Ltd and begins offering
remuneration advice and
administration services
Origins Mid 80s
Traditional taxation and
accounting practice
Net Profit After Tax
(NPAT)
Number of Staff
1986
Fringe Benefits Tax introduced
1992
Superannuation
Guarantee introduced
1997
Purchase
Access Fleet
1998
MSA sold to Zurich
Australia
1998
MSA launches
Australia’s first
novated vehicle lease
1996
Perth office opens
2000
Goods and Services
Tax introduced
2001
FBT concessions introduced for NFPs, charities,
hospitals and Public Benevolent Institutions
2001
Federal Government Inquiry into the Definition
of Charities and Related Institutions
March 2004
Listing of McMillan
Shakespeare Limited on ASX
2009
Expansion to
New Zealand
Michael Kay appointed
May 2008
CEO
October 2004
Acquisition of Brisbane-based
PKF Remuneration Services
2004
Staff and management
buyout of MSA from
Zurich Australia
January 2006
Acquisition
of Easifleet
Management
2006
Adelaide
office opens
2010
February 2014
Acquisition of
Anthony Podesta
Interleasing
(Australia) Ltd
retires from
the Board
2012
Maxxia
UK
2013
Acquisition
of CLM Fleet
Management
2015
September 2014
Mike Salisbury appointed CEO
February 2015
Acquisition of Presidian
July 2015
Acquisition of UFS
November 2015
Acquisition of Anglo Scottish
MMS market capitalisation passes
$1 billion and total employees
(not FTE) passes 1,000
FY05
$5.2M
FY08
FY09
FY10
$17.4M
$20.5M
$27.9M
FY13
$62.2M
FY16
$82.5M
Net Profit After Tax
(NPAT)
197
390
435
532
993
Number of Staff
2011
Queensland floods
2016
Major Australian political
parties pledge no changes
to the method for valuing
FBT on vehicles
MMS
Annual Report 2016
7
At the start of the 2015 calendar year, MMS
embarked on a strategic journey to create value
for shareholders by diversifying our core business
and entering the consumer vehicle financing
market. MMS sought to apply our expertise as a
novated lease leader and asset manager to this
market to become a single source provider of all
types of consumer vehicle finance. The acquisitions
of privately-owned Presidian Holdings Pty Ltd and
United Financial Services Pty Ltd followed, and
18 months later the integration of these businesses
has significant momentum, with investors alert to
the benefits of our long-term diversification strategy.
The journey to who we are today
In September 2009 our trading company,
MSA, re-branded as Maxxia Pty Ltd and more
acquisitions followed. Interleasing (Australia)
Ltd was purchased from GMAC Australia LLC
in March 2010 which gave MMS two more
brands – Holden Leasing and Interleasing. This
consolidated the company’s position as Australia’s
leading single source provider of salary packaging,
novated leases, insurance, and fleet financing and
management services. In 2009 MMS established
a fleet management business in New Zealand. In
2012 MMS established our UK joint venture. In
2013 we acquired CLM Fleet Management plc and
commenced financing assets via Maxxia Finance
(UK). This was followed by the acquisition of Anglo
Scottish Asset Finance Ltd in November 2015.
Meanwhile, in our home market over the years,
developments in Australia’s taxation law have
presented challenges. The uncertainty about the
tax treatment of novated leasing during the election
period reduced sales and dented MMS’s 2014
financial result. The company rebounded in 2015
under the leadership of new CEO Mike Salisbury,
and by 4 May 2016 both major political parties in
Australia had recognised the value of our industry
to the wider community and pledged to retain the
current FBT arrangement for novated leases.
1980
1985
1990
1995
2000
2005
2010
March 2004
Listing of McMillan
Shakespeare Limited on ASX
2009
Expansion to
New Zealand
May 2008
Michael Kay appointed
CEO
2012
Maxxia
UK
2013
Acquisition
of CLM Fleet
Management
2015
September 2014
Mike Salisbury appointed CEO
February 2015
Acquisition of Presidian
July 2015
Acquisition of UFS
October 2004
Acquisition of Brisbane-based
PKF Remuneration Services
2004
Staff and management
buyout of MSA from
Zurich Australia
FY05
$5.2M
January 2006
Acquisition
of Easifleet
Management
2010
Acquisition of
Interleasing
(Australia) Ltd
February 2014
Anthony Podesta
retires from
the Board
November 2015
Acquisition of Anglo Scottish
MMS market capitalisation passes
$1 billion and total employees
(not FTE) passes 1,000
2006
Adelaide
office opens
FY08
$17.4M
FY09
$20.5M
FY10
$27.9M
FY13
$62.2M
FY16
$82.5M
Net Profit After Tax
(NPAT)
197
390
435
532
993
Number of Staff
2011
Queensland floods
2016
Major Australian political
parties pledge no changes
to the method for valuing
FBT on vehicles
1988
Anthony Podesta
joins Geelong-based
accounting firm
McMillan
Shakespeare
1989
Firm renamed as McMillan
Shakespeare and Associates
Ltd and begins offering
remuneration advice and
administration services
1997
Purchase
Access Fleet
1998
MSA sold to Zurich
Australia
1998
MSA launches
Australia’s first
novated vehicle lease
1996
Perth office opens
Origins Mid 80s
Traditional taxation and
accounting practice
Net Profit After Tax
(NPAT)
Number of Staff
1986
Fringe Benefits Tax introduced
1992
Superannuation
Guarantee introduced
2000
Goods and Services
Tax introduced
FBT concessions introduced for NFPs, charities,
hospitals and Public Benevolent Institutions
2001
2001
Federal Government Inquiry into the Definition
of Charities and Related Institutions
Financial
History
MMS
Annual Report 2016
8
Segment revenue
performance
s
n
o
i
l
l
i
m
$
s
n
o
i
l
l
i
m
$
110.0
204.8
23.1
188.1
188.1
172.0
163.3
158.9
38.9
35.6
48.2
54.1
65.8
76.0
92.1
111.6
137.3
155.9
157.2
176.1
188.3
FY05
FY06
FY07
FY08
FY09
FY10
FY11 FY12
FY13 FY14
FY15
FY16
GRS
Asset Management
RFS
Normalised NPAT
last 11 years CAGR of 29%
17.1
5.2
11.3
13.2
17.4
20.5
27.9
43.5
54.3
62.2
55.0
67.5
82.5
FY05 FY06 FY07
FY08
FY09 FY10 FY11
FY12 FY13
FY14 FY15 FY16
NPAT continuing operations
Profit recognised on ILA business
combination (acquisition gain)
NPAT performance 1
100
80
60
40
20
0
UNPATA performance 2
11 years CAGR of 29.2%
s
n
o
i
l
l
i
m
$
5.2
11.3
13.2
17.4
20.5
27.9
43.5
54.3
62.2
55.9
69.6
87.2
FY05
FY06
FY07
FY08 FY09 FY10
FY11 FY12
FY13
FY14
FY15
FY16
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 Underlying NPATA (UNPATA) excludes one-off payments in relation to transaction costs incurred in acquisitions and the amortisation of acquisition intangibles
Financial History
s
t
n
e
c
120
100
80
s
t
n
e
c
60
40
20
0
s
t
n
e
c
Underlying earnings
per share EPS 3
Dividends
per share
MMS Share price:
March 2004 - June 2016
$20.00
$18.00
$16.00
$14.00
$12.00
$10.00
$8.00
$6.00
$4.00
$2.00
$0.00
MMS
Annual Report 2016
9
Underlying EPS 11-year CAGR - 26%
114.4
81.5
81.4
85.2
70.8
53.4
45.9
32.4
28.3
19.7
21.5
14.3
7.9
17.1
19.8
25.8
30.4
41.3
64.0
76.6
83.3
75.3
89.7
105.1
FY05
FY06
FY07
FY08 FY09
FY10 FY11
FY12 FY13
FY14
FY15
FY16
Underlying EPS
Cash EPS
Linear (Underlying EPS)
3.9
9.5
12.5
16.5
19.0
24.0
38.0
47.0
42.0
52.0
52.0
63.0
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
Dividends per share
Dividend 11 year CAGR 29%
Government proposal to change
FBT treatment of motor vehicles
4
0
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r
a
M
4
1
-
n
u
J
4
1
-
p
e
S
4
1
-
c
e
D
5
1
-
r
a
M
5
1
-
n
u
J
5
1
-
p
e
S
5
1
-
c
e
D
6
1
-
r
a
M
6
1
-
n
u
J
3 Underlying EPS excludes the profit recognised on acquisition of Interleasing (Australia) Limited, and the after tax acquisition costs and acquired intangibles amortisation.
Cash EPS includes CAPEX but excludes the investment in Fleet growth.
MMS
Annual Report 2016
10
Our customers
Non-financial
Highlights
11.5 million pa
Payments processed
888,556 pa
Number of phone calls
accepted
49
Industry leading Net Promoter Score (NPS)
(Average monthly score during FY16)
19,898
Number of onsite educational
activities delivered to clients located
around Australia
34%
Maxxia and RemServ website
visits originating from smartphones
and mobile devices
2.2 million
Maxxia and RemServ
website visits
61%
Claims lodged online via
private self-serve websites
(as a % of total claims lodged)
100%
Number of customer complaints
resolved by MMS and our Customer
Advocate without referral to an
external arbitrator
53,000
Claims App downloads
Non-financial Highlights
MMS
Annual Report 2016
11
Our people
Our environment
1,157
9%
(YOY reduction)
Employees across MMS Group
% reduction in greenhouse
emissions from car fleet
81%*
Carbon neutrality
(printed material)
Employee Engagement
High performance work environment ranking
* 2015 survey result (survey biennial)
Carbon neutrality
(net zero carbon footprint) achieved from the
offset of 100% of CO2 emissions caused by
the production of printed material
272 hrs
15%
(YOY reduction)
Company sponsored staff
volunteering hours
% reduction in greenhouse
emissions from electricity
MMS
Annual Report 2016
12
Directors’
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 2016 (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 Tim Poole
(Independent Non-Executive Director)
Mr John Bennetts (Non-Executive Director)
Mr Ross Chessari (Non-Executive Director)
Mr Ian Elliot
(Independent Non-Executive Director)
Mr Mike Salisbury (Managing Director and CEO)
Mr Ronald Pitcher AM retired as Independent
Chairman on 27 October 2015.
Mr Tim Poole was appointed to the position of
Independent Chairman effective 28 October 2015.
Ms Sue Dahn was appointed to the position of
Independent Non-Executive Director and Chair
of the Audit, Risk and Compliance Committee
effective 1 January 2016.
Mr Ian Elliot was appointed to the position of
Chairman of the Remuneration and Nomination
Committee on 26 April 2016.
Details of the qualifications, experience and special
responsibilities of the Directors at the date of this
Annual Report are set out on pages 22 and 23.
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 2016.
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 2016 were as
indicated in the table below.
Ms Sue Dahn attended one meeting by invitation
prior to her formal appointment.
Principal activities
The principal activities of the Company and its
controlled entities during the course of the financial
year ended 30 June 2016 was the provision of
salary packaging, vehicle leasing administration,
fleet management and retail financial 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 2016 that
are not otherwise disclosed in this Annual Report.
Director
Mr T. Poole (Chariman)
Mr M. Salisbury (Managing Director and CEO)
Mr J. Bennetts
Mr R. Chessari
Mr I. Elliot
Ms S. Dahn
Mr R. Pitcher, AM
Board
Meetings
Audit, Risk & Compliance
Committee Meetings 1
Remuneration & Nomination
Committee Meetings 1
Eligible
to Attend
Attended
Eligible
to Attend
Attended
Eligible
to Attend
Attended
16
16
16
16
16
6
4
16
16
14
15
15
6
4
4
-
4
-
-
3
1
4
-
4
-
-
3
1
5
-
3
5
5
2
3
5
-
3
4
5
2
3
1 The Audit, Risk & Compliance Committee and Remuneration & Nomination Committee were reconstituted in May 2016. There have been two meetings of the reconstituted
committees with the expanded responsibilities. See the Corporate Governance Statement for further details www.mmsg.com.au/about/governance
Directors’ Report
MMS
Annual Report 2016
13
Results
Details of the results for the financial year ended 30 June 2016 are as follows:
Results
2016
2015
Net profit after income tax (NPAT)
$82,469,341
$67,486,611
Basic earnings per share (EPS)
Earnings per share on a diluted basis (DPS)
99.4 cents
99.0 cents
87.0 cents
86.8 cents
Dividends
Details of dividends paid by the Company during the financial year ended 30 June 2016 are as follows:
Dividends
2016
2015
Final dividend for the financial year ended
30 June 2015 of 27.0 cents (2014: 31.0 cents)
per ordinary share paid on 16 October 2015 fully
franked at the tax rate of 30% (2015: 30%).
Interim dividend for the financial year ended
30 June 2016 of 29.0 cents (2015: 25.0 cents)
per ordinary share paid on 15 April 2016 fully
franked at the tax rate of 30% (2015: 30%).
$22,462,500
$23,632,463
$24,126,389
$20,279,628
Total
$46,588,889
$43,912,091
Subsequent to the financial year ended 30 June 2016, the Directors declared a final dividend of 34.0 cents
per ordinary share (fully franked at the tax rate of 30%) to be paid on 14 October 2016, bringing the total
dividend to be paid for the financial year ended 30 June 2016 to 63.0 cents per ordinary share.
MMS
Annual Report 2016
14
Directors’
Report
Review of operations – Group
This year marked another record profit for MMS
with our entry into the consumer vehicle financing
market contributing substantially to the result.
Consolidated Group NPAT for FY16 was
$82.5 million, up 22% on FY15. This increased
our NPAT compound annual growth rate (CAGR)
to 22% over the 10 years since MMS shares were
listed on the ASX in 2004.
After adjusting for one off costs associated with
the acquisition of UFS and Anglo Scottish Asset
Finance as well as non-operating amortisation,
underlying NPATA was 25% higher at $87.2 million.
Return on Equity for FY16 was 24%, however
using underlying NPATA Return on Equity was 27%,
a marginal decline on the previous year’s result.
The Group Remuneration Services (GRS) business
saw earnings before interest, tax, depreciation
and amortisation (EBITDA) increase to $88.9
million. New business in the health sector provide
a significant opportunity to improve program
participation rates for both the salary packaging
and novated leasing services.
Asset Management (AM) operations in the UK
enjoyed a second consecutive year of profitability,
which included a strong maiden contribution from
our newly-acquired Anglo Scottish. EBITDA more
than doubled to $5.5 million, up from $2.4 million
in FY15. The EBITDA of our Australian AM
operations increased to $21.7 million, up from
$18.1 million in FY15.
The integration of Presidian and UFS proceeded
under the newly-created Retail Financial Services
(RFS) segment, EBITDA reached $21.2 million
compared with $5.5 million a year earlier and
included a 12 and 11 month contribution from
Presidian and UFS, respectively.
Digital channels widen
customer’s choice
With an enlarged customer base brought about by
new business wins and recent acquisitions, MMS
stepped up our commitment to provide superb
customer experiences by offering a wider choice
of convenient online communication channels. In
FY16 we processed 11.5 million payments, a 5%
increase on the previous year. Our Customer Care
Centre remained the most used channel, followed
by our websites.
We also worked to ensure our existing online
channels delivered flexible, adaptable processes
that recognise the individuality of our customers
and improve their experience with what is
essentially intangible products focused on
transactions. The overwhelming popularity of
our Maxxia and RemServ online claims function
embedded in our private self-service sites was
evident in the swift adoption by our customers that
saw the proportion of claims lodged online reach
72% for Maxxia customers and 49% for RemServ
customers by 30 June 2016. The usage rate was
accelerated by the launch of our free Maxxia and
RemServ Claims Apps in August 2015. By year’s
end, Claims App downloads reached 53,000.
The rapid uptake of online claims by our
customers also reduced our average cost to
serve our growing customer base, producing both
streamlined processes and operational efficiencies.
As MMS continues to expand our retail platform
and achieve higher levels of cross sales, this and
other digital initiatives will help boost margins and
deliver earnings growth. One such digital initiative
is our refreshed RemServ private site launched in
June 2016. Accessible from any mobile device, the
site delivers full functionality and convenience to
our RemServ customers wherever they are.
Our people also benefited from MMS’ digital
expertise, with the redesign of our staff intranet site.
Improved navigability, streamlined information, and
better design provided for greater ease of working
for our expanding workforce. The inclusion of our
new internal cultural framework (unveiled in July
2015) on the intranet also helped embed MMS’
revised purpose and values across our expanded
number of businesses. In addition, a new App for
our employees became our first interactive channel
whereby our people from all businesses and
locations worldwide can connect.
Directors’ Report
MMS
Annual Report 2016
15
Key highlights and activities included:
– Consolidated Group FY16 NPAT of $82.5
million, up 22% on FY15.
– Free cash flow (pre increase in operating lease
assets) of $93.5 million provided a sound
footing for investing and financing activities.
Cash at 30 June 2016 was $95.6 million.
– Group vehicle assets under management
including Novated totalled 92,900 units as at
30 June 2016.
– Group funding facilities have been renegotiated
with extended maturity dates.
State of affairs
In FY16 the Group cemented its foothold in
the finance sector and with the Anglo Scottish
acquisition in November 2015 established a broker
aggregation platform in the UK. 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 2016 that
are not otherwise disclosed in this Annual Report.
Outlook
The Group was successful in winning a number of
new business contracts during the first weeks of
FY17.
Initiating principal and agency (P&A) agreements
with a number of funding providers to convert a
portion of the loan back to a capital lighter business
model. At 30 June 2016 a funding provider has
been secured with funding to commence in
August 2016.
Following the successful launch of Maxxia Plus the
company expects to grow its customer base with
employees of clients who do not novate or salary
package.
As planned, our largest novated leasing client is
currently evaluating tender proposals to provide
novated leasing services. If reappointed, MMS
expects UNPATA may reduce by approximately
$450,000 to $650,000 per month.
The overall commercial impact of ‘Brexit’ to our
UK operations is unclear. Despite the political
uncertainty and long-term economic changes that
are still to play out, we believe our UK businesses
remain well positioned. Whilst the pound sterling
has reduced in value the impact is negated by
having sterling denominated debt. We anticipate
some foreign-domiciled banks to scale back.
As a precautionary measure against potential
heightened credit risks, Maxxia Finance will move
to confine our funding panel to UK-based lenders.
On 10 August 2016 the HM Revenue &
Customs (HMRC) (UK) published a report titled
“Consultation on salary sacrifice for the provision
of benefits in kind”. Uncertainty that now
surrounds salary sacrifice schemes will mean
that potential adopters are likely to place the
introduction of a non-exempt scheme on hold
until the outcome of the consultation is known.
This could adversely impact our ability to further
develop the lifestyle lease product.
Reviews of the practices of credit insurance
providers by ASIC are in progress and has
identified areas for review across the industry,
including point-of-sale products, flex commissions
within asset origination pricing structures, and
commission payments to brokers. MMS has been
working with regulators and industry bodies to
ensure safeguards for consumers are embedded
across all our businesses, our sales practices
comply with all disclosure requirements and
all other regulatory standards and our pricing
structures remain viable for our broker network.
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 and customers. The rollout
of Maxxia Plus will provide our salary packaging
customers with an unrivalled product offering. We
will retain our market leading position in Australia’s
independent used vehicle financing market and
continue to develop our integrated range of asset
finance and management services in the UK.
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 in complementary and adjacent market
sectors, depending on market conditions and the
value proposition to MMS.
Events subsequent to balance date
Other than matters disclosed in the Annual Report,
there were no material events subsequent to reporting
date.
Likely developments
Other than information disclosed in this Annual
Report, there are no other material likely
developments affecting the operations of the
Group.
MMS
Annual Report 2016
16
Group Remuneration
Services
Group Remuneration Services
Profitability for GRS remained strong during FY16.
Solid organic growth, new business wins and firm
cost control generated a 8% increase in NPAT to
$58.7 million. Revenue rose 7% to $188.3 million
as our total salary packages under management
topped 293,000, and our novated lease volumes
climbed to reach 55,800 – a record level. Our
pipeline of new business contracts strengthened
throughout the year; and client participation
rates have improved. As well, the composition
of our client base by industry sector is richer
than it has even been. It extends beyond our
core government, health and NFP organisations,
to include global mining companies, major
entertainment companies, and national performing
arts organisations.
A major highlight of the year was the reappointment
of RemServ as salary packaging provider to the
Government of Queensland. This flagship contract
was extended for another three years to 2019, with
the potential for a further extension to 2021. This
will stretch our long-standing partnership to 20
years and underlines our commitment to this state.
Maxxia was also reappointed as the sole provider
of salary packaging and novated leasing services
to the Government of South Australia in February
2016 – a sole contract we first secured in 2012
after spending 13 years as a panel member.
This significant contract has been extended to
30 June 2023, a decision the Government of
South Australia made following an independent
biennial review of Maxxia’s performance by
PricewaterhouseCoopers. It covers approximately
104,000 employees and ensures we retain
access to this large customer base for our new
offerings such as Maxxia Plus. It also supports our
deepening investment in the state, which includes
the opening of our third Customer Care Centre in
August 2016.
Directors’ Report
Key highlights and activities included:
– GRS FY16 NPAT was 8% higher than the
–
previous corresponding period.
– Operational efficiencies and new digital
channels lowered our customer ‘cost to serve’
ratio, suppressing segment cost growth and
increased the EBITDA margin to 47%.
In turn, this drove the segment’s NPAT margin
higher to 31%.
– As at 30 June 2016 GRS increased its salary
packaging units to 293,000 and had a book of
55,800 novated leases.
– Our exclusive contract with Tasmania’s
Department of Health and Human Services was
extended for another five years.
– Major contract wins included Mid North Coast
Local Health District and South Western Sydney
Local Health District, which together allowed
Maxxia to access 13,000 new employees for
five years from 1 April 2016. New starters for
Mid North Coast Local Health District were able
to commence packaging from 1 March 2016.
– The soft launch of the Maxxia Plus service
in early 2016 which combines our Maxxia
Rewards retail discount program with the array
of competitive vehicle finance solutions offered
under our RFS brands. This enables more
cross-sell opportunities by allowing MMS to
better target the 29% of people who approach
Maxxia to discuss a novated lease, only to
change course and purchase a vehicle by other
means. It also enables us to reach out to all
employees and offer them a consumer finance
product. Initial feedback from customers has
been very favourable and steady sales growth is
expected in FY17.
MMS
Annual Report 2016
17
In FY16 RemServ moved to develop innovative
products to lift organic sales growth of salary
packaging benefits. RemServ laid the ground-
work for the release of a new exempt bus travel
benefit to a portion of South-East Queensland
commuters in the first quarter of FY17. The new
benefit will allow customers to package their
bus travel to and from work.
Capping of Meal Entertainment
and Venue Hire Benefits
The 2015 Federal Budget introduced an annual
cap limit of $5,000 applying to Meal Entertainment
and Venue Hire salary packaging benefits. The
change took effect from 1 April 2016 and applies
as a combined cap across both benefits each
FBT year. For our customers, the 10-month lag
between the Budget announcement and the date
the change took effect, meant in early 2016 a
bottleneck developed in their requests for package
amendments ahead of the end of the FBT year.
Maxxia and RemServ saw a year-end surge of
calls, claims and other forms of customer contact
that stretched our operational capacity both in our
Customer Care Centres and other teams. Our year-
end call volume tripled compared to previous years.
MMS
Annual Report 2016
18
Asset
Management
Key highlights and activities included:
– New business wins included Interleasing
(Australia) Ltd’s appointment to the Government
of NSW’s panel of vehicle leasing providers.
As one of six fleet funding providers on the
panel, Interleasing gained exposure to the NSW
Government’s owned fleet of 22,000 vehicles.
Funding of these vehicles under the new
arrangements commenced on 1 July 2016.
– The development of P&A funding arrangements
that will enable MMS to improve the Group’s
return on equity by funding the credit risk of
assets in Australia off balance sheet, and to
offer this facility to clients with appropriate
credit profiles.
– Good cost containment which reduced annual
employee and non-vehicle related costs by 5%
for the year and drove margin improvement.
– Assets under management totalled
approximately 21,000.
Asset Management – Aust/NZ
Diversified revenue streams enabled a significant
jump in profitability for this segment despite
relatively flat sales volumes amid competitive
market conditions as the business moves to a
capital lighter funding model. This model will drive
MMS’ Return on Equity higher in the years ahead
by funding a proportion of the credit risk of assets
in Australia off balance sheet.
Principal and interest income remained the
biggest contributor to revenue which reversed its
decline in the first half of FY16 to lift 2% to $179.5
million compared to a year earlier. The EBITDA
margin improved to reach 12% by year’s end and
maintained strong end of contract yields. NPAT
was $12.8 million, or 19% higher than the previous
year, and the NPAT margin improved by 100 basis
points to 7%.
Growth in our portfolio was flat during the year,
mainly as a result of above average levels of
fleet ‘inertia’ as customers veered away from
replacing assets in favour of lease extensions.
The downsizing of some industrial customers,
and the impact of market consolidation activity
on others, produced headwinds for our portfolio.
This was partially offset by new business wins;
and, pleasingly there were no material asset
impairments. These influences caused minimal
movement in the written down value of fixed
assets which totalled $307.0 million at year end.
Directors’ Report
MMS
Annual Report 2016
19
Asset Management – UK
After posting its maiden profit in FY15, additional
investment and solid momentum in our UK
businesses generated an increase in profit for this
segment as we continue to replicate the MMS
business model in this market. New business wins,
strong organic growth, and a better than expected
maiden profit contribution from our newly-acquired
Anglo Scottish unit pushed NPAT to $1.8 million
(£0.9 million) in the year to 30 June. The segment
enjoyed a strong jump in revenue to $25.3 million
(£12.6 million) on the back of $8.9 million derived
from brokerage commission income, a $6.4 million
increase in principal and interest income and a
$9.4 million lift in revenue from other vehicle
related services.
Together Maxxia Ltd and Anglo Scottish originated
$327.5 million of asset finance business, and
Maxxia grew the number of assets managed to
16,100. Demonstrating the continued maturity of
Maxxia in the UK, 30% of originations are now from
repeat customers.
Key highlights and activities included:
– Completion of the integration of Anglo Scottish
smoothly into our wider UK business. This
proceeded ahead of plan, and was pivotal in
elevating the unit’s maiden contribution to the
segment’s profitability during the year.
– An increase in the Group EBITDA margin to
22% (FY15: 19%) and NPAT margin to 7%
(FY15: 4%).
– Asset written down value grew by 13.8% to
finish the year at $128.9 million.
– $27.4 million of our UK fleet had been moved
off balance sheet by 30 June as part of our
P&A funding arrangements with six UK banks
and asset finance companies.
– Strong sales of our unique IT leasing product
targeting schools was launched in late FY15.
By the end of FY16 the number of schools
using this product totalled 39.
The Group will continue to execute its long-
term strategic plan in the UK, including pursuing
synergistic acquisitions if they present sound
value for shareholders and market conditions
are favourable.
MMS
Annual Report 2016
20
Retail Financial
Services
Retail Financial Services
Calendar year 2015 was a watershed year for
MMS, with our acquisitions of UFS (July 2015)
building on the acquisition of Presidian (February
2015) to secure a market leading position for our
company in the independent used vehicle financing
market and a large B2C customer base. With the
integration of the acquisitions well advanced, in
FY16 the spotlight fell on the need to reposition
these businesses and unify them as one RFS
division to ensure all identified revenue and cost
synergies are captured. Profitability within the
newly-formed RFS segment increased four-fold on
a year earlier with NPAT reaching $11.8 million as
a result of a full 12 months of trading for Presidian,
and 11 months for UFS. Organic growth and cross
sell of warranty products into our GRS segment
pushed revenue to $110.0 million.
Key highlights and activities included:
Increased net amount financed to $937m
–
an increase of 10%.
– 76,000 warranty products were written,
an increase of 7%.
– EBITDA grew by 22%.
Post-merger integration
The acquisitions of Presidian and UFS aimed to
enable MMS to expand into a new market and
channel, thereby diversifying our core business
while extracting new sources of revenue via
cross-selling and other paths to revenue growth.
Following the acquisitions, the post-merger
integration phase unfolded, with more than 200
Presidian and UFS employees being relocated
to MMS premises; and eight key integration
processes being structured around the key sources
of value to be extracted from the combined
entities. Finance terms were quickly renegotiated
so that new pricing arrangements for Presidian
products took effect from July 2015. Throughout
FY16 resources were allocated to priority
processes that would accelerate the integration of
information platforms and reporting systems. These
included the integration of the Presidian and UFS IT
development teams, and the broader consolidation
of all back office functions and property. By year’s
end these processes were nearing completion,
allowing more resources to be applied to the
remaining processes (see table opposite).
In addition, during FY16 the Group completed
a review of MMS’ brand portfolio to reposition
and simplify our house of brands architecture
following the acquisitions of Presidian and UFS.
The acquisitions resulted in MMS offering multiple
products (such as insurances and warranties)
under different customer-facing brands. In the
post-merger integration phase we will grow our
brand equity by harmonising existing brands with
our post-merger strategic direction to achieve a
consistent public face for our customers and other
stakeholders, as well as a source of sustainable
competitive advantage. To achieve this, in FY17 we
will reduce the number of customer-facing brands
and reposition those remaining to focus resources
and to concentrate marketing efforts. MMS’
corporate brand will remain unchanged.
Directors’ Report
MMS
Annual Report 2016
21
MMS
Annual Report 2016
22
Directors’ experience
and special responsibilities
Tim Poole CA, B Com
Appointed: 17 December 2013 (Non-Executive Director), 28 October 2015 (Chairman)
Positions:
Chairman of the Board
Member of the Audit, Risk and Compliance Committee
Member of the Remuneration and Nomination Committee
Mr Poole is currently Chairman of Aurizon Holdings Limited and Lifestyle Communities Limited and a
Non-Executive Director of Reece Limited. Previously, Mr Poole was an executive of Hastings Funds
Management (1995 to 2007), and he was appointed the Managing Director in 2005. He was formerly
the Chairman of Asciano Limited and a Non-Executive Director of Newcrest Mining Limited and Japara
Healthcare Limited. Mr Poole is considered an independent director under the Company’s definition of
independence.
Mike Salisbury MBA
Appointed: 1 October 2014 (as Chief Executive Officer), 5 February 2015 (as Managing Director)
Positions: 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 is a graduate of the Advanced Management Program at Harvard
Business School.
John Bennetts B Ec, LLB
Appointed: 1 December 2003
Positions:
Non-Executive Director
Member of the Audit, Risk and Compliance 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.
Ross Chessari LLB, M Tax
Appointed
1 December 2003
Positions:
Non-Executive Director
Member of the Remuneration and Nomination 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.
Directors’ Report
MMS
Annual Report 2016
23
Ian Elliot
Appointed: 27 May 2014
Positions:
Non-Executive Director
Chairman of the Remuneration and Nomination Committee
Mr Elliot is currently a Non-Executive Director of Salmat Limited and a Non-Executive Director of Hills
Industries Limited. 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.
Sue Dahn BCom, MBA, FCPA, FAICD
Appointed: 1 January 2016
Positions:
Non-Executive Director, Chair of the Audit, Risk and Compliance Committee
Ms Dahn is a partner in Investment Advisory Services at Pitcher Partners and Chair of the firm’s Investment
Committee. She is also a Non-Executive Director of MTAA Super and serves on the Victorian Council of
the Australian Institute of Company Directors. Prior to joining Pitcher Partners Ms Dahn spent 14 years in
senior positions within the Victorian Government including the Departments of Premier and Cabinet and
Treasury and Finance. Before this she was an accountant with big 4 chartered accounting firms.
Ms Dahn 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
Mark Blackburn, joined McMillan Shakespeare Group 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, Westpac, 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 IOOF Holdings Ltd
and iSelect Pty Ltd.
MMS
Annual Report 2016
24
Remuneration
Report
Executive Remuneration Guide
This short guide is intended to provide
shareholders with an overview of executive
remuneration outcomes for FY16 having regard
to the Company’s performance, as well as a brief
update on the actions the Board and Remuneration
and Nomination 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.
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.
Current performance is reviewed by the Board
through periodic reporting against approved
targets. This framework of strategic management
and the rollout of plans enable the Board to set
Long Term Incentive (LTI) plan targets and its
annual expectations that, together with operational
performance, determine any annual cash bonuses
for the executive management team.
The NPAT and EPS four year CAGR (FY12–FY16)
is 11% and 7% respectively as summarised in the
key metrics table below.
The Company has historically used Net Profit After
Tax (NPAT) and Earnings Per Share (EPS) as key
metrics for assessing LTI awarded to executive
management to align more closely with Company
performance. The Company has chosen to solely
apply an EPS hurdle to the FY15 LTI options
grant. 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).
Indices
FY16
FY15
FY14 1
FY13
FY12
4 year CAGR
Net profit attributable to
Company members
$82,469,341
$67,486,611
$54,969,799
$62,163,519
$54,305,163
NPAT growth
22.2%
22.8%
(11.6%)
14.5%
25.0%
Basic earnings per share
99.4 cents
87.0 cents
73.8 cents
83.4 cents
76.6 cents
Dividend per share
63.0 cents
52.0 cents
52.0 cents
42.0 cents
47.0 cents
11%
-
7%
-
1
Impacted by the former Government’s announcement on 16 July 2013 of proposed changes to the treatment of FBT on vehicles.
Directors’ Report
FY16 Remuneration outcomes
Company performance was reflected in executive
remuneration outcomes for FY16.
No options vested during the year. The current
tranche of options granted in FY15 and on
28 August 2015 will vest on 31 August 2017
subject to the achievement of performance
hurdles over the vesting period and continuity of
employment with the Company on 31 August 2017.
FY16 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, execution of selective acquisitions
and group strategy.
Annual bonuses are capped at 25% of fixed
remuneration. The achievement of individual
performance metrics for FY16 is discussed further
on page 29.
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 year of
15% for FY16 and a further 15% for FY17. The
performance hurdles are discussed in detail on
pages 32 and 33. The actual EPS performance
achieved 89% of the FY16 target and 69% of
the FY15 target. The actual EPS performance
achieved for FY16 and FY15 and target EPS for
the remaining year in the current programme is
shown in the chart below.
FY15 - FY17 LTI Programme Achievement
against performance hurdles
MMS
Annual Report 2016
25
Directors have assessed FY16 EPS for the
purpose of the LTI using underlying NPATA of
$87.2m which is based on reported NPAT of
$82.5m and adding back $1.9m for the after-
tax one-off acquisition costs for UFS and Anglo
Scottish and after-tax amortisation of intangibles
acquired through acquisitions of $2.8m.
On this basis and using the formula as disclosed
on page 32, the vesting entitlement for FY16 is
89% (FY15 is 69%). This results in cumulative
vesting of the first two tranches of 53%.
Details of Key Management Personnel (KMP)
remuneration for FY16 and FY15, prepared
in accordance with statutory obligations and
accounting standards, are contained in section
3 of this Report.
In addition to this Guide the report includes:
– more detailed disclosure of the Company’s
approach to annual bonuses;
– clearer disclosure in relation to LTI opportunities
and the terms and conditions that apply to the
current 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 that apply to
the current tranche of options implemented during
FY15 are set out below:
– earnings per share (EPS) performance hurdle is
used for long term incentive option grant;
– scaled reward system for LTI rather than a cliff
vesting structure that could apply using a NPAT
hurdle; and
– a twelve month holding lock applies to options
$
S
P
E
$1.267
$1.217
$1.167
$1.117
$1.067
$1.017
$0.967
$0.917
$0.867
$1.226
issued to the four KMPs.
Culmulative
actual EPS
52.6% vesting
$1.066
$1.051
$0.927
$0.890
FY15
FY16
FY17
Target EPS
Actual EPS achievment
Remuneration
Report
MMS
Annual Report 2016
26
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
Page
26
27
28
36
37
1. Who does this Report cover?
This Report sets out the remuneration arrange-
ments for the Group’s KMP (who are listed in
the table below) during FY16. 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 FY16
unless otherwise indicated.
Non-Executive Directors
Name
Position
Mr T. Poole
Non-Executive Chairman 2
Mr J. Bennetts
Non-Executive Director
Mr R. Chessari
Non-Executive Director
Mr I. Elliot
Ms S. Dahn
Non-Executive Director
Non-Executive Director 3
Mr R. Pitcher, AM
Non-Executive Chairman 1
Executive KMP 4
Name
Position
Mr M. Salisbury
CEO and Managing Director
Mr G. Kruyt
Chief Operating Officer
Mr M. Blackburn
Mr A. Tomas
Group CFO and
Company Secretary
Managing Director, Fleet
and Financial Products
1 Mr R Pitcher, MA retired as Non-Executive Chairman
effective 27 October 2015.
2 Mr T Poole was appointed Non-Executive Chairman
effective 28 October 2015.
3 Ms S Dahn was appointed Non-Executive Director
effective 1 January 2016.
4 There were no changes to Key Management Personnel
after the reporting date and before the Annual Report was
authorised for issue.
MMS
Annual Report 2016
27
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
and Nomination Committee
The Board has established a Remuneration and
Nomination 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 and
Nomination Committee, please refer to the
Corporate Governance Statement
www.mmsg.com.au/about/governance
Remuneration consultants
and other advisors
The Remuneration and Nomination Committee
obtains external independent advice when
required, and will use it to guide and inform their
decision-making. During FY16, no remuneration
recommendations (as defined in the Corporations
Act) were received.
Directors’ Report
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.
Fixed
Remuneration
LTI’s –
Performance
Options
Non-Executive
Directors
Executive KMP
x
LTI’s-Voluntary
Options
Annual
Cash Bonus
Non-Executive
Directors
Executive KMP
x
x
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.
MMS
Annual Report 2016
28
Remuneration
Report
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 and Nomination
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
Review
– Fixed remuneration is reviewed by the
Remuneration and Nomination 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
– 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 and Nomination Committee
has reviewed remuneration based on analysis
from multiple data sources and taken into
consideration factors such as annual revenue,
employee numbers, market capitalisation and
comparable companies. The Company generally
positions itself at the market median. In certain
circumstances, for exceptional candidates or high
responsibility positions, the Company may position
itself up to the seventy-fifth percentile of the
market. The Company has sourced additional data
through external remuneration consultancies to
inform Remuneration and Nomination Committee
decision making.
Directors’ Report
Annual Bonus Program
During the year, a total of $230,000 was awarded
to Executive KMP under the annual bonus program.
No Key Management Personnel has a contractual
right to a bonus.
However, the Remuneration and Nomination
Committee has the authority to award bonuses
based on contribution to operational, individual
and financial performance. The Remuneration and
Nomination 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
cash bonus program in FY16 is set out below.
Annual bonuses were paid to Executive KMPs
during the year for their contribution to key
strategic, operational and financial focus areas.
The following were outperformance above
expectations by Executive KMPs in FY16.
MMS
Annual Report 2016
29
Mr M. Salisbury (CEO and Managing Director)
– Stakeholder management, including
bipartisan political support for existing taxation
arrangements concerning salary packaging
and novated leasing
– Recontracting of major GRS clients
– Business development including new
products (bus travel benefit)
– Acquisitions (UFS and Anglo Scottish)
Mr M. Blackburn
(Group CFO and Company Secretary)
– Stakeholder management, including
investor relations
– Treasury and credit management
– Acquisitions (UFS and Anglo Scottish)
– Retail financial services integration
– Productivity improvements delivering financial
results and analysis for the MMS Group
Mr G. Kruyt (Chief Operating Officer)
– Business development including new
products (Maxxia Plus) and acquisitions
(UFS and Anglo Scottish)
– Retail Financial Services integration
– Supply chain management
– People development focus for senior and
future leaders
Mr A. Tomas
(Managing Director, Fleet and Financial Products)
– Business development including new products
(white label services)
– Acquisitions (Anglo Scottish)
– Development of principal and agency funding
capability
Sales
Growth
Cost to
Income
Ratio
Customer
Satisfaction
Productivity
Index
Staff
Engagement
Capital
Manage-
ment
Mergers /
Acquisitions
Group
Strategy
x
x
x
x
CEO and
Managing Director
CFO and
Company Secretary
Chief Operating
Officer
Managing Director,
Fleet and Financial
Products
MMS
Annual Report 2016
30
Remuneration
Report
What is the annual
bonus program?
A bonus may be awarded by the Remuneration and Nomination Committee if the employee’s
contribution to the Company’s financial performance, operating capability and growth initiatives
together with the other metrics mentioned in the FY16 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 and Nomination Committee. The CEO’s bonus is determined by the Remuneration and
Nomination Committee.
Performance related annual cash bonuses are capped at 25% of fixed remuneration per employee
and have historically not exceeded 8% of total remuneration. In FY16 the highest bonus paid was
9% of that Executive’s total remuneration.
The Remuneration and Nomination 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?
Is there a performance
threshold that must be
met before bonuses
can be paid?
Were bonuses paid
in FY16?
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 FY16 included contribution to:
– Acquisitions and the integration of acquired companies while minimising disruption to business
as usual;
– Record levels of novated lease sales;
– Successful contract tenders and extensions resulting in maintaining clients/new business/increased
market share; and
– Record low cost to income ratio.
Executive KMP bonuses paid in FY16 totalled
$230,000 and the highest bonus paid to an
Executive represented 9% of their total remuneration.
All FY16 bonuses were paid in August 2016.
Total bonuses paid to Executive KMP in relation
to FY15 totalled $205,000.
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 at right.
s
n
o
i
l
l
i
m
$
6
5
4
3
2
1
0
7%
7%
7%
6%
5%
8%
8%
FY10 FY11 FY12 FY13 FY14 FY15 FY16
Annual cash bonuses included in remuneration
Total remuneration
%
% of annual cash bonuses to total remuneration
NOTE
1 Total remuneration is based on the amount as disclosed in the “total remuneration” column of the statutory table on page 38.
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.
Directors’ Report
Long-term Incentives
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; and
2. Voluntary options
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 FY15 to provide Executives with an additional
opportunity to purchase up to a maximum of
$50,000 per executive. The terms and conditions
relevant to these Options were disclosed in prior
years Remuneration Reports.
No Executive can enter into a transaction that is
designed or intended to hedge the Executive’s
exposure to any unvested option. Executives are
required to provide declarations to the Board on
compliance with this policy from time to time.
Further details are set out below.
MMS
Annual Report 2016
31
Performance Options
No Performance Options were granted during the
year to Executives as their LTI.
The value of options included in the remuneration
of Executive KMP were granted in FY15.
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%).
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
Company’s FY15 – FY17 Three Year Financial Plan.
The Remuneration and Nomination 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
and Nomination 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
current Performance Options are outlined on
pages 32 and 33.
MMS
Annual Report 2016
32
Remuneration
Report
What are 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.
Do Executives pay for
Performance Options?
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
What is the
performance hurdle and
why was it chosen?
An earnings per share (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.
How does the EPS
performance hurdle
work?
Performance conditions (EPS targets)
Achievement of FY15 EPS target of not less than $0.927
Weighting
33.3%
Achievement of FY16 EPS target of not less than $1.066 (15% growth from FY15 target)
33.3%
Achievement of FY17 EPS target of not less than $1.226 (15% growth from FY16 target)
33.3%
Maximum Entitlement
100%
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 and acquisition related 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 and
Nomination 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
50-100% vesting
100% vesting
FY15
FY16
FY17
EPS less than $0.867
EPS between $0.867 & $0.927
EPS at least $0.927
EPS less than $0.997
EPS between $0.997 & $1.066
EPS at least $1.066
EPS less than $1.146
EPS between $1.146 & $1.266
EPS at least $1.226
Process for assessing
performance conditions
To determine the extent to which the EPS performance hurdle is satisfied, the Remuneration and
Nomination Committee relies on audited financial results and vesting is determined in accordance
with the Plan Rules.
The Remuneration and Nomination Committee believes this method of assessment provides an
appropriate and objective assessment of performance.
The Remuneration and Nomination Committee will take account of capital raisings and acquisitions
where necessary or appropriate to do so.
Directors’ Report
MMS
Annual Report 2016
33
What are the rights
attaching to the
Performance Options?
No voting rights or entitlements to dividends are attached to Performance Options.
What is the exercise
price and how was it
determined?
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.
When do the
Performance Options
expire?
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).
What happens
on cessation of
employment?
What happens on a
change of control?
What Performance
Options were granted
in FY16?
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.
No Performance Options were granted to Executive KMPs in FY16.
MMS
Annual Report 2016
34
Remuneration
Report
Voluntary Options – FY15 LTI grant
No Voluntary Options were offered to Executives in FY16.
Details of the key terms and conditions of the FY15 Voluntary Options granted in FY15 are as follows.
What are
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.
Do Executives pay for
Voluntary Options?
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?
What is the exercise
price and how was it
determined?
No voting rights or entitlements to dividends are attached to Voluntary Options.
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?
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.
What happens on a
change of control?
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 FY16?
None.
Directors’ Report
MMS
Annual Report 2016
35
Fixed vs performance based remuneration
The relevant proportions of fixed versus performance based remuneration received in FY16 are set out in
the table below.
The proportion of performance based remuneration received increased from FY15 to FY16, and the
Remuneration and Nomination Committee will keep the remuneration ‘mix’ under review to ensure that it
remains appropriate in the Company’s circumstances.
Mr M. Salisbury
Mr G. Kruyt
Mr M. Blackburn
Mr A. Tomas
Fixed remuneration
At risk – Annual Bonus
At risk – LTI
FY16
71%
68%
68%
73%
FY15
74%
70%
72%
76%
FY16
6%
9%
6%
4%
FY15
5%
10%
5%
4%
FY16
23%
23%
26%
23%
FY15
21%
20%
23%
20%
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
Net profit attributable to
Company members
NPAT growth
Dividends paid
Dividend payout ratio 1
Share price as at
30 June 2
Earnings per share
FY16
FY15
FY14 3
FY13
FY12
$82,469,341
$67,486,611
$54,969,799
$62,163,519
$54,305,163
22%
23%
(12%)
15%
25%
$46,588,889
$43,912,091
$29,064,347
$36,516,743
$31,422,422
60%
$13.68
61%
$12.09
70%
$9.17
50%
$16.18
65%
$11.82
99.4 cents
87.0 cents
73.8 cents
83.4 cents
76.6 cents
1 Dividend payout ratio is calculated as total dividend for the financial year divided by UNPATA for the financial year.
2 Share price at the start of FY12 was $9.58.
3
Impacted by an announcement on 16 July 2013 of possible changes to the treatment of FBT on vehicles.
MMS
Annual Report 2016
36
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.
Periods of notice
required to terminate
9 months written notice by the Company or CEO.
The agreement may, however, be terminated by the Company for cause without notice or any payment.
Termination payments
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
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.
Termination payments
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
$900,000 approved by shareholders in October 2014.
Details of the fees paid to the Non-Executive Directors are set out in the table below.
Directors’ Fees
The annual Directors’ fees (including superannuation contributions) payable to Non-executive
Directors for FY16 were as follows:
Position
Chairman
Fee ($)
205,000 (from 1 January 2016)
Audit, Risk and Compliance Committee Chair
130,000 (from 1 January 2016)
Remuneration and Nomination Committee Chairman
130,000 (from 1 January 2016)
Director (base fee)
115,000 (from 1 January 2016)
No fees are payable in respect of membership of Board Committees.
Superannuation
contributions
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.
Directors’ Report
MMS
Annual Report 2016
37
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
Cash
salary/fees 1
Other
Benefits 2
Superannuation
Total
Remuneration
Non-Executive Directors
Mr T. Poole
(Non-Executive Chairman)
Mr J. Bennetts
(Non-Executive Director)
Mr R. Chessari
(Non-Executive Director)
Mr I. Elliot
(Non-Executive Director)
Ms S. Dahn
(Non-Executive Director
Mr R. Pitcher, AM
(Non-Executive Chairman)
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
$
164,852
107,182
101,536
85,322
93,278
85,322
104,037
98,050
39,574
-
61,800
182,907
$
-
-
-
-
8,259
-
-
-
19,787
-
-
-
$
14,799
10,182
9,646
8,106
9,646
8,106
9,884
9,315
5,639
-
5,871
17,376
$
179,651
117,364
111,182
93,428
111,183
93,428
113,921
107,365
65,000
-
67,671
200,283
1 The amounts shown for the Non-Executive Directors reflect directors’ fees only.
2 Other benefits comprise salary packaging.
MMS
Annual Report 2016
38
Remuneration
Report
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 Cash
Bonus
Other
Benefits 1
Super-
annuation
Long
Service
Leave
Options 2
Total
remuneration
Percentage of
remuneration
as options
Total value of
remuneration
received 4
Non-Executive Directors
$
$
$
$
$
$
$
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)
2016
714,022
75,000
77,150
37,635
28,226
270,760
1,202,793
2015
554,237
50,000
98,023
29,987
47,369
208,035
987,651
2016
497,292
75,000
23,467
19,308
20,886
193,400
829,353
2015
438,973
75,000
76,950
18,783
15,400
159,026
784,132
2016
557,231
50,000
(11,717)
38,642
10,686
229,621
874,463
2015
543,165
50,000
37,888
35,000
35,087
208,280
909,420
2016
379,622
30,000
158,287
35,628
9,117
182,967
795,621
2015
379,709
30,000
138,124
35,000
37,648
155,547
776,028
23%
21%
23%
20%
26%
23%
23%
20%
$
874,039
964,393
624,615
1,155,618
657,889
1,502,047
574,966
5,220,340
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.
No payments were made to any Executive KMP in respect of termination of services in FY16.
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 2016 and 30 June 2015. 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 to Executive KMPs during the year ended 30 June 2016.
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 Value of remuneration received comprises salary, benefits and superannuation salary packaged, annual and long service leave used and
bonuses paid in the year. Cash remuneration paid in FY15 includes the intrinsic value of options that vested in the year as disclosed on
page 36 of the 2015 Annual Report.
Directors’ Report
MMS
Annual Report 2016
39
Option Details
No options were granted to, exercised by or lapsed with respect to Non-Executive Directors during
FY16 or FY15.
The terms and conditions of each grant of options to executives affecting their remuneration in FY16 or
FY15 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 date 1
Date Exercisable
19 August 2014
30 September 2018
$10.18
$10.18
$2.78
100% after 31 August 2017
19 August 2014 2
30 September 2019
$10.18
$10.18
$3.01
100% after 31 August 2017
23 September 2014
30 September 2018
$10.83
$10.83
$2.91
100% after 31 August 2017
28 October 2014
30 September 2018
$10.17
$10.17
$2.68
100% after 31 August 2017
24 March 2015
30 September 2018
$11.87
$11.87
$2.94
100% after 31 August 2017
26 May 2015
30 September 2018
$12.88
$12.88
$3.18
100% after 31 August 2017
25 August 2015
30 September 2018
$13.82
$13.82
$3.23
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 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.
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 year
Forfeited
or lapsed
%
Year in
which
options
may
vest
Maximum
value of
options yet
to vest 1
Mr M. Salisbury
Mr G. Kruyt
Mr M. Blackburn
Mr A. Tomas
19 August
2014
19 August
2014
19 August
2014
19 August
2014
Performance
302,158
Performance
215,827
Performance
256,248
Performance
204,184
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
FY 2018
$709,860
FY 2018
$506,914
FY 2018
$601,850
FY 2018
$479,568
1 There is no minimum or maximum value attached to the options at the vesting date.
MMS
Annual Report 2016
40
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 FY16.
Name
Options
Balance at
start of year
Granted as
compen-
sation
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
302,158
Mr G. Kruyt
Performance
215,827
Mr M. Blackburn
Performance
256,248
Mr A. Tomas
Performance
204,184
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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.
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.
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 T. Poole
Mr J. Bennetts
Mr R. Chessari
Mr I. Elliot
Ms S Dahn
Key Management Personnel
Mr M. Salisbury
Mr G. Kruyt
Mr M. Blackburn
Mr A. Tomas
8,000
3,543,025
6,050,941
-
-
10,276
7,953
1,250
464,449
-
-
-
-
-
-
-
-
-
11,000
-
-
-
-
-
-
8,750
-
19,000
3,543,025
6,050,941
-
-
10,276
7,953
10,000
464,449
End of the audited Remuneration Report
Directors’ Report
Directors’
Report
MMS
Annual Report 2016
41
Unissued shares
At the date of this Annual Report, unissued ordinary shares of the Company under option are:
Option class
Performance Options
Performance Options
Performance Options
Performance Options
Performance Options
Performance Options
No. of unissued
ordinary shares
Exercise price
Expiry date
978,417
469,081
107,877
150,831
85,692
33,436
$10.18
$10.18
$10.83
$11.87
$12.88
$13.82
30 September 2019
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.
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. T Poole (Chairman)
Mr M. Salisbury
(Managing Director)
Mr J. Bennetts
Mr R. Chessari
Mr I Elliot
Ms S Dahn
Options
-
302,158
-
-
-
-
Ordinary shares
19,000
10,276
3,543,025
6,050,941
-
-
No Director, during FY16, 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.
MMS
Annual Report 2016
42
Directors’
Report
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 FY16, 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,
Risk and Compliance Committee has approved
that work in advance, as appropriate.
The Audit, Risk and Compliance Committee has
reviewed a summary of non-audit services provided
during the financial year ended 30 June 2016 by
Grant Thornton Audit Pty Ltd. Given that the only
non-audit services related to client contract audits
and review of banking covenant and trust account
compliance, the Audit, Risk and Compliance
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).
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 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.
Directors’ Report
MMS
Annual Report 2016
43
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 98 of this
Annual Report.
Corporate governance practices
Our full corporate governance statement
is available on our website at
www.mmsg.com.au/about/governance
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.
Signed in accordance with a resolution of
the Directors.
Tim Poole
Chairman
24 August 2016
Melbourne, Australia
Michael Salisbury
Managing Director
MMS
Annual Report 2016
44
Five year summary
2012–2016
FINANCIAL PERFORMANCE
Group
Revenue ($m)
NPAT ($m)
UNPATA ($m)
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
Dividends per share (cps)
Dividend payout ratio (%) 2
Basic earnings per share (cps)
Return on Equity (%) 3
OTHER
Employees
Employee engagement score (%) 4
2016
2015
2014
2013
2012
504.7
82.5
87.2
188.3
58.7
204.8
14.6
110.0
11.8
63.0
60
99.4
24
389.6
67.5
69.6
176.1
54.3
188.1
11.3
23.1
3.0
52.0
61
87.0
25
1,157
No survey
1,035
81
347.5
55.0
56.1
157.2
42.0
188.1
13.6
-
-
52.0
70
73.8
26
873
No survey
330.1
62.2
62.2
155.9
46.8
172.0
14.6
-
-
42.0
50
83.4
34
700
84
302.0
54.3
54.3
137.3
40.3
163.3
14.3
-
-
47.0
65
76.6
38
730
No survey
1 Underlying NPATA (UNPATA) is reported NPAT normalised for items considered to be capital in nature or not directly relating to operational performance. UNPATA is likely
to better reflect maintainable earnings and presents a better comparable measure of performance year on year. UNPATA items included in FY16 comprise after-tax
adjustments for acquisition expenses from business combination relating to UFS and Anglo Scottish of $1.9m in FY16 (Presidian of $1.5m in FY15, CLM of $0.8m in FY14),
and after-tax amortisation of intangibles acquired from business combination of $2.8m in FY16 (FY15: $0.6m).
2 Dividend payout ratio is calculated as total dividend for the financial year divided by UNPATA for the financial year.
3 Return on equity has been adjusted to reflect 12 months trading for acquisitions made in each financial year.
4 Employee engagement survey conducted biennially.
Financial
Report 2016
MMS
Financial Report 2016
Statements of Profit or Loss and
Other Comprehensive Income
For the year ended 30 June 2016
Consolidated Group
Parent Entity
MMS
Financial Report 2016
47
2015
$’000
68,363
(677)
-
-
-
-
(213)
-
(358)
-
-
2016
$’000
46,715
(726)
-
-
-
-
(356)
-
(400)
-
-
(1,973)
(507)
-
-
43,260
734
43,994
-
-
-
-
-
-
66,608
517
67,125
-
-
-
-
69,746
43,994
67,125
87.0
86.8
Revenue and other income
Employee benefits 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
Profit before income tax
Income tax (expense) / benefit
Profit attributable to members of the parent entity
Other comprehensive income
Items that may be re-classified subsequently to profit or loss:
Changes in fair value of cash flow hedges
Exchange differences on translating foreign operations
Income tax on other comprehensive income
Total other comprehensive (loss) / income for the year
Total comprehensive income for the year
Basic earnings per share (cents)
Diluted earnings per share (cents)
Note
3
4(a)
11(b)
5(a)
6
6
2016
$’000
504,666
(120,206)
(91,380)
(60,063)
(46,960)
(7,823)
(3,003)
(3,380)
(11,230)
(11,206)
(13,327)
(12,841)
(1,495)
(2,289)
119,463
(36,994)
82,469
(73)
(8,145)
(16)
(8,234)
74,235
99.4
99.0
2015
$’000
389,590
(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
The above statements of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
MMS
Financial Report 2016
48
Statements of
Financial Position
As at 30 June 2016
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 financial 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 financial instruments
Total current liabilities
Non current liabilities
Borrowings
Unearned premium liability
Other financial liabilities
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
20
18
14
21(a)
Consolidated Group
Parent Entity
2016
$’000
2015
$’000
2016
$’000
2015
$’000
95,583
37,396
46,280
7,282
7,827
2,084
196,452
302,132
89,279
254,632
1,732
194
964
648,933
845,385
70,561
5,966
16,384
13,023
10,116
12,944
819
129,813
332,626
2,755
6,740
1,705
1,251
345,077
474,890
370,495
144,380
4,086
222,029
370,495
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
777,323
63,862
6,105
16,187
10,591
3,789
5,658
699
106,891
346,046
2,781
-
2,228
934
351,989
458,880
318,443
121,617
10,677
186,149
318,443
5,716
6,477
-
-
14
-
12,207
-
-
-
2,598
2,413
-
-
18
-
5,029
-
-
-
337,900
261,646
-
-
337,900
350,107
105,617
-
-
-
9,439
11,500
-
126,556
41,528
-
-
-
540
42,068
168,624
181,483
144,380
10,092
27,011
181,483
105
-
261,751
266,780
47,908
-
-
-
2,182
4,016
-
54,106
53,002
-
-
-
-
53,002
107,108
159,672
121,617
8,449
29,606
159,672
The above statements of financial position should be read in conjunction with the accompanying notes.
Statements of
Changes in Equity
For the year ended 30 June 2016
MMS
Financial Report 2016
49
2016
Consolidated Group
Issued
capital
$’000
Retained
Earnings
$’000
Option
Reserve
$’000
Note
Cash flow
Hedge
Reserve
$’000
Foreign
Currency
Translation
Reserve
$’000
Total
$’000
Equity as at beginning of year
21, 22
121,617
186,149
8,449
(526)
2,754
318,443
Profit 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
21(b)
22,763
82,469
-
82,469
-
-
(46,589)
-
-
-
-
1,643
-
-
(89)
(89)
-
-
-
-
(8,145)
(8,145)
82,469
(8,234)
74,235
-
-
-
22,763
1,643
(46,589)
28
7
-
-
Employee share schemes - value of employee services
Dividends paid
Equity as at 30 June 2016
2015
144,380
222,029
10,092
(615)
(5,391)
370,495
Consolidated Group
Issued
capital
$’000
Retained
Earnings
$’000
Option
Reserve
$’000
Note
Cash flow
Hedge
Reserve
$’000
Foreign
Currency
Translation
Reserve
$’000
Total
$’000
Equity as at beginning of year
21
56,456
162,574
4,848
(447)
416
223,847
Profit 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
Equity as at 30 June 2015
-
-
-
67,487
-
67,487
21(b)
28
7
65,161
-
-
-
-
-
-
(43,912)
-
-
-
-
1,326
2,275
-
-
(79)
(79)
-
-
-
-
-
2,338
2,338
-
-
-
-
67,487
2,259
69,746
65,161
1,326
2,275
(43,912)
121,617
186,149
8,449
(526)
2,754
318,443
The above statements of changes in equity should be read in conjunction with the accompanying notes.
MMS
Financial Report 2016
50
2016
Statements of
Changes in Equity
For the year ended 30 June 2016
Issued capital
$’000
121,617
Note
21
-
-
-
Equity as at beginning of year
Profit 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
21(b)
22,763
Employee share schemes - value of employee services
Dividends paid
Equity as at 30 June 2016
28
7
-
-
144,380
2015
Equity as at beginning of year
Profit 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
Equity as at 30 June 2015
Issued capital
$’000
56,456
Note
21
-
-
-
65,161
-
-
-
121,617
21(b)
28
7
The above statements of changes in equity should be read in conjunction with the accompanying notes.
Parent Entity
Retained
Earnings
$’000
29,606
43,994
-
43,994
-
-
(46,589)
27,011
Parent Entity
Retained
Earnings
$’000
6,393
67,125
-
67,125
-
-
-
(43,912)
29,606
Option
Reserve
$’000
8,449
-
-
-
-
1,643
-
10,092
Option
Reserve
$’000
4,848
-
-
-
1,326
2,275
-
8,449
Total
$’000
159,672
43,994
-
43,994
22,763
1,643
(46,589)
181,483
Total
$’000
67,697
67,125
-
67,125
65,161
1,326
2,275
(43,912)
159,672
Statements of
Cash Flows
For the year ended 30 June 2016
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Proceeds from sale of assets under lease
Proceeds from sale of lease portfolio
Payments for assets under lease
Interest received
Interest paid
Dividends received
Income taxes paid
Subsidiaries acquisition expense
MMS
Financial Report 2016
Consolidated Group
Parent Entity
Note
2016
$’000
2015
$’000
23(b)
516,531
(226,279)
52,188
32,805
372,471
(153,766)
47,688
-
(234,601)
(243,441)
1,855
(11,329)
-
(33,586)
(2,612)
2,681
(9,832)
-
(29,042)
(2,416)
2016
$’000
-
(1,834)
-
-
-
123
(1,947)
46,592
-
-
51
2015
$’000
-
(1,485)
-
-
-
39
-
68,324
-
-
Net cash from / (used in) operating activities
23(a)
94,972
(15,657)
42,934
66,878
Cash flows from investing activities
Payments for capitalised software
Payments for plant and equipment
Proceeds from sale of plant and equipment
Payments for contract rights
15(b)
(3,396)
(4,468)
-
-
(4,777)
(7,698)
1,921
(512)
-
-
-
-
-
-
-
-
Payments for subsidiary investments (net of cash acquired)
29(c)
(39,000)
(63,620)
Subsidiaries’ acquisition expenses
Payments for joint venture subordinated loans
-
(1,356)
-
(961)
(55,982)
(1,225)
-
(64,450)
(2,416)
-
Net cash used in investing activities
(48,220)
(75,647)
(57,207)
(66,866)
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Proceeds from share issues
Payment of borrowing costs
Dividends paid by parent entity
Proceeds from / (repayments to) controlled entities
23(c)
23(c)
116,360
(111,343)
5,358
(184)
7
(46,589)
-
146,298
(11,872)
15,112
(542)
(43,912)
-
-
(4,016)
5,358
-
(46,589)
62,638
Net cash (used in) / provided by financing activities
(36,398)
105,084
17,391
Effect of exchange changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
8
(500)
9,854
85,729
95,583
752
14,532
71,197
85,729
-
3,118
2,598
5,716
57,500
(359)
15,112
(130)
(43,912)
(26,630)
1,581
-
1,593
1,005
2,598
The above statements of cash flows should be read in conjunction with the accompanying notes.
52
1 Summary of Significant
Accounting Policies
(a) General information
The financial report of McMillan Shakespeare Limited
and its subsidiaries for the year ended 30 June 2016
was authorised for issue in accordance with a resolution
of the directors on 24 August 2016 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”) as required by the
Corporations Act 2001.
The financial 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 financial report is a general purpose financial
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-profit entity for the purpose of preparing
the financial statements. Material accounting policies
adopted in the preparation of these financial statements
are presented below and have been applied consistently
unless stated otherwise.
Except for cash flow information, the financial
statements have been prepared on an accruals basis
and are based on historical costs, modified, where
applicable, by the measurement at fair value of selected
non-current assets, financial assets and financial
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 financial statements and notes also
comply with IFRSs.
(c) Principles of consolidation
(i) Subsidiaries
The consolidated financial statements comprise the
financial 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 sufficient 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 reassess whether the Group 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 financial 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 profits 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
financial 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,
financial 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 profits and losses of the joint venture entity is
recognised in profit 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.
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
53
(d) Business combinations
(e) Employee Share Trust
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 over the
period representative of the achievement of control the
transfer of the benefits from the achievement of control
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.
Identifiable 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
Consolidated Group’s share of the identifiable net assets
acquired is recorded as goodwill (refer Note 1(j)(i)). If the
cost of acquisition is less than the Consolidated Group’s
share of the fair value of the net assets acquired,
the gain is recognised in profit 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 reflect 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.
Any contingent consideration to be transferred by the
Group will be recognised at fair value at acquisition
date. Contingent consideration that includes an asset
or liability is classified as an asset or liability and is re-
measured for fair value changes. Subsequent changes
to the fair value of contingent consideration that qualify
as measurement period adjustments are retrospectively
adjusted against goodwill. For changes to the fair value
of contingent consideration that occur beyond the
measurement period are recognised in profit or loss.
Contingent consideration that is classified as an equity
is not remeasured at subsequent reporting dates and its
subsequent settlement is accounted for within equity.
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.
The Group maintains 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 Consolidated Group. Shares held by the EST
are disclosed as treasury shares and are deducted from
issued shares.
(f) Current versus non-current classification
The Group presents assets and liabilities in the
statements of financial position based on current/ non-
current classification. 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 classifies 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 classifies all other liabilities as non-current.
(g) Income tax
Income tax
(i)
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 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 financial 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
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
54
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.
Deferred tax assets and liabilities are not recognised for
temporary differences between the carrying amount and
tax bases of investments in foreign operations where
the company 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.
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 Consolidated
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 classified 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 classification as held for sale is
satisfied 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 classification.
A discontinued operation represents a major line of
business or geographical area of operations that has
been disposed of or is classified 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, at the end of the reporting period.
Motor vehicles no longer held under an operating lease
are classified 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 value less any accumulated amortisation
and accumulated impairment losses. Specific 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 identifiable 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 the statement of profit or loss and cannot be
subsequently reversed.
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
55
inflows which are largely independent of cash inflows
from other assets (cash-generating units). Where the
asset does not generate cash flows 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 flows are discounted to
their present value using a pre-tax discount rate that
reflects current market assessments of the time value of
money and the risks specific to the asset for which the
estimates of future cash flows 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 financial assets and
liabilities are recognised on trade date, the date on
which the Group commits to the financial assets or
liabilities. Financial assets are derecognised when the
rights to receive cash flows from the financial assets
have expired or have been transferred and the Group
has transferred substantially all the risks and rewards of
ownership. The Group classifies financial assets into the
following categories depending on the purpose for which
the asset was acquired.
(i) Cash and cash equivalents
For statement of cash flow purposes, cash and cash
equivalents includes cash on hand, deposits held at call
with financial institutions, other short-term, highly liquid
investments with original maturities of three months
or less that are readily convertible to known amounts
of cash which are subject to an insignificant risk of
changes in value.
(ii) Capitalised software development costs
Software development costs are capitalised when it
is probable that future economic benefits attributable
to the software will flow 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
five years, during which the benefits 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 Consolidated Group’s
impairment policy (refer Note 1(k)).
(iv) Identifiable intangible assets acquired on business
combination
Identifiable intangible assets with finite lives are
amortised over their useful lives and assessed for
impairment. Amortisation of identifiable intangible assets
is calculated on a straight-line basis over the estimated
useful lives as follows:
Intangible asset
Dealer relationships
and networks
Customer contracts
Brand names
Useful life
10 to 13 years
13 years
6 years to indefinite
Brand names that have indefinite useful lives will
consequently, not be amortised but are subject to
annual impairment assessments. Brand names that are
restructured or consolidated with other brands and which
consequently, are considered to have a finite life are
amortised over a useful life that represents the expected
run-off of economic benefits expected from them.
(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 profit 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 identifiable cash
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
56
(ii) Loans and receivables
(v) Other financial liabilities
Trade and other receivables
All receivables are classified 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 classified 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 flows relating to
short-term receivables are not discounted if the effect of
discounting is immaterial.
Loan receivables
Loan receivables are non-derivative financial assets with
fixed 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
specified amount of equity shares of the borrower in
restitution for defaulting loan repayments are designated
as available-for-sale financial 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
financial statements of the Company, under AASB 127:
Separate Financial Statements.
(iv) Available-for-sale financial assets
Available-for-sale financial assets are non-derivative
assets that are designated as available-for-sale or are
not classified in any other category of financial 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 profit or loss. Available-for-sale financial
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.
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 financial 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 financial 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 financial liability derecognised and the
consideration paid and payable is recognised in profit
or loss.
(vi) Impairment of financial 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
financial asset that affects estimated future cash flows
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
collectable 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
specific doubtful amounts.
The allowance account for receivables is used to record
impairment losses unless the Group is satisfied 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 Statement of Profit 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 profit
or loss are not reversed through profit 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,
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
impairment losses are subsequently reversed through
profit 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.
(m) Employee benefits
(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 outflows 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 outflows.
Employee leave liabilities and other obligations are
presented as current liabilities in the statement of
financial 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 profit 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 financial 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.
57
(n) Revenue
Revenue is recognised at the fair value of consideration
received or receivable to the extent that it is probable
that the economic benefits will flow 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
significant credit, carry or residual risks of ownership
of the underlying financial arrangement with the
customer. Revenue is recognised when the customer
accepts delivery or on completion of the contract for the
underlying financial arrangement with the financier or
insurer,
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 financial asset.
(ii)
(iii) Dividends
Revenue from dividends is recognised when the Group’s
right to receive payment is established.
(iv) Lease revenue (property, plant & 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.
(vi) Vehicle maintenance services
Revenues from maintenance service contracts are
recognised for services rendered when it is probable that
economic benefits from the transaction will flow to the
Group. When the amounts are uncollectable or recovery
is not considered probable, an expense is recognised
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
58
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 profit and loss at reporting date is
recognised in the consolidated statement of financial
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 Office (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 finance 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
finance 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 reflect
a constant periodic rate of return on the Consolidated
Group’s remaining net investment in respect of the
lease.
(ii) Operating lease portfolio – the Group as lessor
Lease contracts with customers other than finance
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 benefits from
the lease asset are consumed. Where incentives are
received to enter into operating leases, such incentives
are recognised as a liability. The aggregate benefit 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 benefits 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 reflect 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 Consolidated 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.
(r)
Issued capital
Ordinary shares and premium received on issue of
options are classified 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 benefit. 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.
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
59
(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 financial year but not distributed at balance 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 financial 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 financing
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
identified as the Chief Executive Officer.
(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 reflects the current
pre-tax market rate of the time value of money and the
risks specific to the liability. The increase in the provision
due to the passage of time is recognised as interest
expense.
Provision for cancellations and clawbacks
Specific provisions are provided for cancellation
of contracts and the consequential clawback of
commissions received at the time revenue is recognised.
This provision reflects an obligation to refund
commissions received from the financier or insurer for
early termination of a loan or policy.
Rebate provisions relate to the clawback of commission
from financiers, based on the various financier 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 benefits expected
to be received under it are recognised as an onerous
provision. The provision is measured on the net cash
outflow and present valued using the pre-tax rate that
reflects current market rates to reflect the time value of
money and any specific 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.
(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 sufficient to cover all expected future claims
against current warranty contracts. This assessment is
performed quarterly, to ensure that there have been no
significant 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.
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
60
(aa) Operating cash flow
(ii) Embedded derivatives
All cash flows other than investing or financing cash
flows are classified as operating cash flows. As the
asset management segment provides operating and
finance leases for motor vehicles and equipment, the
cash outflows to acquire the lease assets are classified
as operating cash outflows. Similarly, interest received
and interest paid in respect of the asset management
segment are classified as operating cash flows.
(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 financial instruments
The Group uses derivative financial 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 financing 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 flow hedges to mitigate both current and
future interest rate volatility that may arise from changes
in the fair value of its borrowings.
Derivative financial 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 profit 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 flow hedging reserve that forms part of equity.
Amounts recognised in other comprehensive income are
transferred to profit or loss and subsequently recognised
in profit 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 flows of the hedged items.
Derivatives embedded in non-derivative host contracts
are treated as separate derivatives when they meet the
definition 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 profit or loss.
(iii) Non-trading derivatives
Non-trading derivative financial instruments include the
Group’s irrevocable option to purchase all of the shares
owned by the partner in the joint venture entity. The
financial instruments are measured at fair value initially
and in future reporting dates. Fair value changes are
recognised in profit or loss.
(ad) Foreign currency translation
The consolidated financial statements of the Group are
presented in Australian dollars which is the functional
and presentation currency. The financial statements
of each entity in the Group are measured using the
currency of the primary economic environment in which
the entity operates (“functional currency”).
(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 profit 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 financial 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 profit or loss.
(ae) Critical judgements and significant accounting
estimates
The preparation of financial 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.
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
61
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 significant judgements, estimates and assumptions
made during the year have been considered for
significance. 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 significance 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 significant.
(af) New accounting standards and interpretations
Several new accounting standards or amendments to
accounting standards were issued during the year. None
of these standards and amendments materially affected
any of the amounts recognised in the current period or
any prior period.
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 2016, but have not been
applied in preparing this financial report. None of these
are expected to have a significant effect on the financial
report of the Consolidated Group unless otherwise noted
in the Standards below. The Consolidated 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
classification and measurement and de-recognition
of financial assets and financial liabilities. The new
standard replaces 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. In relation to the impairment
of financial assets, the new requirement is for the use
of an expected credit loss model, to replace the current
incurred credit loss model.
The Group has not yet assessed in detail the impact
of AASB 9. However, based on the Group’s preliminary
assessment, the Standard is not expected to have
a material impact on the transactions and balances
recognised in the financial statements when it is first
adopted for the year ending 30 June 2019.
(ii) AASB 15 Revenue from Contracts with Customers
(effective for annual reporting periods on or after
1 January 2018)
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 specific topics (eg multiple
element arrangements, variable pricing, rights of return,
warranties, licensing). The new standard will also expand
and improve disclosures about revenue.
The Group has not yet assessed in detail the full
impact of this standard. However, from a preliminary
assessment of the Group’s products sold, contractual
terms with customers and current revenue recognition
accounting policies, the Standard is not expected to
have a material impact on the transactions and balances
recognised in the financial statements when it is first
adopted for the year ending 30 June 2019.
(iii) AASB 16 Leases (effective from annual reporting
periods on or after 1 January 2019)
AASB 16 replaces AASB 117 Leases that introduces
the accounting model that requires lessees to recognise
all leases on balance sheet, except for short-term
leases and leases of low value assets. The Group has
not completed a detailed assessment of the impact of
AASB 16 and it has not been practicable to provide
a reasonable estimate until this has been completed.
However, based on the preliminary assessment, the
likely impact on the first time adoption of the Standard
for the year ending 30 June 2020 includes the following.
– It is not expected there is any significant impact on
the Group’s accounting model and the disclosure of
the transactions and balances as lessor.
– The Group’s currently transacted operating leases for
property will be brought on to the balance sheet. The
outstanding commitments will be recognised as a
liability with a corresponding asset for the right to use
the asset.
– It is probable that equity will be affected from the
timing of the use of the asset which is likely to be
quicker compared to the discharge of the liability.
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
62
– Performance measures such as EBIT will be higher as
the implicit interest in lease payments for former off
balance sheet leases will be represented as part of
finance costs rather than being included in operating
expenses.
– Operating cash flow in the statement of cash flows
will be higher as principal repayments on all lease
liabilities will now be included in financing activities
rather than operating activities. Cash flow from
financing activities will now be correspondingly, lower.
(iv) AASB 2015-2 Amendments to Australian Accounting
Standards – Disclosure initiative: Amendments to
AASB 101 (effective for annual reporting periods on or
after 1 January 2016)
The amendments to AASB 101 Presentation of Financial
Statements are as follows.
– Clarify the materiality requirements to include and
emphasis on the potentially detrimental effect
of obscuring useful information with immaterial
information.
– Clarify that AASB 101’s specified line items in the
statement of profit or loss and other comprehensive
income and the statement of financial position can be
disaggregated.
– Add requirements for how the Group should present
subtotals in the statements of profit or loss and
statements of financial position.
– Clarify that entities have flexibility as to the order
that notes are presented but also emphasise that
understandability and comparability should be
considered by an entity when deciding that order .
When these amendments are first adopted for the year
ending 30 June 2017, there will be no material impact
on the financial statements.
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 significant 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 financial statements.
(ah) Parent entity accounts
In accordance with ASIC Corporations (Rounding in
Financials/Directors’ Reports) Instrument 2016/191 the
Group will continue to include parent entity financial
statements in the financial report.
(ai) Rounding of amounts
The Company is of a kind referred to in ASIC
Corporations (Rounding in Financials/Directors’
Reports) Instrument 2016/191, issued by the Australian
Securities and Investments Commission, relating to
the “rounding off” of amounts in the financial report.
Amounts in the financial report have been rounded
off in accordance with that Class Order to the nearest
thousand dollars, or in certain cases, the nearest dollar.
2 Financial Risk Management
The Group’s activities expose it to a variety of financial
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 financial performance of the Group. The
Board is responsible for monitoring and managing the
financial 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 risk report is presented to the Audit,
Risk and Compliance Committee at least four times per
year. 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.
(a) Liquidity risk
Liquidity risk is the risk that the Group will not
be able to meet its financial obligations as they fall due.
Liquidity management strategy
The Asset Management business and the resultant
borrowings exposes the Group to potential mismatches
between the refinancing of its assets and liabilities. The
Group’s objective is to maintain continuity and flexibility
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 sufficient
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 financial market constraint for funds.
The Group monitors daily positive operating cash flows
and forecasts cash flows for twelve month period.
Significant cash deposits have been maintained which
enable the Group to settle obligations as they fall due
without the need for short term financing facilities. The
Chief Financial Officer and the Group Treasurer monitor
the cash position of the Group daily.
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
63
Financing arrangements
During the year, the Group increased its committed borrowing facilities for the Asset Management segment to finance its fleet management portfolio
as follows.
2016
2015
Secured bank borrowings
Maturity dates
Facility
Used
Unused
Facility
Used
Unused
AUD’000
NZD’000
NZD’000
AUD’000
GBP’000
GBP’000
31/03/2018
165,000
132,000
31/03/2018 1
31/03/2019 1
31/03/2019
03/04/2018
31/03/2019
10,000
10,000
75,000
42,000
35,000
8,500
2,000
46,200
37,900
15,500
33,000
1,500
8,000
28,800
4,100
19,500
250,000
20,000
186,000
8,662
-
-
-
-
64,000
11,338
-
-
57,000
43,500
13,500
-
-
-
Total borrowings (AUD)
398,148
284,654
113,494
386,995
283,947
103,048
1 Part of AUD facilities to be drawn in NZD20m
The facilities have been provided by a financing club of three major Australian banks operating under common terms and conditions. During the year,
the mix of facilities and amounts drawn from changed between Club members. The Group believes that this initiative has improved liquidity, provides
funding diversification 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 one of these facilities has been extended to 31 March 2019.
In addition to the borrowing facilities to finance Asset Management’s lease portfolio, the Group has a GBP4.75 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 has a facility
of AUD53.1 million which was fully drawn on 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 financial liabilities
The table below analyses the Group’s and the parent entity’s financial 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 flows. Balances due within 12 months equal their carrying value as the
impact of discounting is not significant.
Consolidated Group – at 30 June 2016: Contractual maturities of financial liabilities
Trade payables
Other creditors and liabilities
Borrowings
Less than 6
months
$’000
20,792
64,706
9,733
95,231
6–12
months
$’000
-
176
12,517
1–2 years
$’000
2–5 years
$’000
-
1,481
295,853
-
7,164
129,396
12,693
297,334
136,560
Consolidated Group – at 30 June 2015: Contractual maturities of financial liabilities
Trade payables
Other creditors and liabilities
Borrowings
Less than 6
months
$’000
19,399
57,282
8,502
85,183
6–12
months
$’000
-
-
11,603
11,603
1–2 years
$’000
2–5 years
$’000
-
-
-
-
27,415
346,136
27,415
346,136
Over 5
years
$’000
-
-
-
-
Over 5
years
$’000
-
-
-
-
Total
contractual
cash flows
$’000
20,792
73,527
Carrying
Amount /
liabilities
$’000
20,792
74,618
447,499
345,570
541,818
440,980
Total
contractual
cash flows
$’000
19,399
57,282
Carrying
Amount /
liabilities
$’000
19,399
57,282
393,656
351,704
470,337
428,385
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
64
Parent – at 30 June 2016: Contractual maturities of financial liabilities
Less than 6
months
$’000
6–12
months
$’000
1–2 years
$’000
2–5 years
$’000
Amounts payable to
wholly owned entities
and other payables
Borrowings
Financial guarantee contracts
105,617
6,561
3,173
-
6,469
6,048
-
-
12,664
283,189
31,287
98,109
115,351
12,517
295,853
129,396
Parent – at 30 June 2015: Contractual maturities of financial liabilities
Less than 6
months
$’000
6–12
months
$’000
1–2 years
$’000
2–5 years
$’000
Over 5
years
$’000
Total
contractual
cash flows
$’000
Carrying
Amount
(assets)/
liabilities
$’000
-
-
-
-
105,617
105,617
56,981
390,519
53,028
-
553,117
158,645
Over 5
years
$’000
Total
contractual
cash flows
$’000
Carrying
Amount
(assets)/
liabilities
$’000
Amounts payable to
wholly owned entities
and other payables
Borrowings
Financial guarantee contracts
(b) Credit risk
47,908
2,836
5,666
-
3,817
7,786
-
-
13,770
13,645
44,718
301,418
56,410
11,603
27,415
346,136
-
-
-
-
47,908
47,908
65,141
328,515
57,018
-
441,564
104,926
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 financial 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
2016
$’000
37,396
95,583
135,559
292,825
561,363
2015
$’000
46,941
85,729
125,164
293,125
550,959
2016
$’000
-
5,716
-
-
2015
$’000
-
2,598
-
-
5,716
2,598
Lease assets of the Asset Management business represents future lease rentals that have yet to be invoiced. Such assets are secured against
underlying assets.
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
65
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. 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 official 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 financial 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 flow 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
significant 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 facilities attributable to the Asset Management business and other loan facilities drawn on.
AUD’000
GBP’000
Total AUD’000
2016
2015
Borrowings
’000
Weighted average
interest rate %
Borrowings
’000
Weighted average
interest rate %
241,365
58,150
345,570
2.94
1.40
2.64
251,803
49,250
351,704
3.00
1.36
2.73
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 flow 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 specified periods, the difference between fixed 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 profile of the lease portfolio in order to preserve the contracted net interest
margin. At 30 June 2016, the Group’s borrowings for the Asset Management business of $229,554,000 (2015: $295,750,000) were covered by
interest rate swaps at a fixed rate of interest of 3.38% (2015: 3.58%).
The Group’s interest rate risk also arises from cash at bank and deposits, which are at floating interest rates.
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
66
At reporting date, the Group had the following variable rate financial 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 flow interest rate risk
2016
Balance
$’000
95,583
(293,230)
229,554
(53,125)
2015
Balance
$’000
85,729
(295,750)
275,554
(57,141)
(21,218)
8,392
1 Excluding capitalised borrowing costs of $785,000 (2015: $1,064,000) for Asset Management and $97,000 (2015: $123,000) for the bank loan for Presidian.
Sensitivity analysis – floating interest rates:
At 30 June 2016, the Group’s and parent entity’s cash and cash equivalents give rise to credit and interest rate risk. Cash and cash equivalent funds
held by the Group and the parent entity include funds at bank and in deposit net of bank borrowings that are not hedged. The Group also holds cash
and cash equivalent funds in trust to which the Group has contractual beneficial entitlement to the interest. If the Australian interest rate weakened or
strengthened by 25 basis points, being the Group’s view of possible fluctuation, and all other variables were held constant, the Group’s post-tax profit
for the year would have been $649,000 (2015: $577,000) higher or lower and the parent entity $83,000 (2015: $95,000) 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 financial 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 financial and non-financial 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 Consolidated 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 $292,825,000 (2015: $293,125,000) included a residual value provision of
$4,381,000 (2015: $5,237,000).
(e) Fair value measurements
The fair value of financial assets and financial liabilities is estimated for recognition and measurement for disclosure purposes.
The following table is an analysis of financial 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).
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
67
Financial asset/
(financial liability)
Interest rate swaps –
cash flow hedge
Fair value at
2016
$’000
2015
$’000
Fair value
hierarchy
(819)
(699)
2
Valuation technique and key input
Discounted cash flow using estimated future cash flows
based on forward interest rates (from observable yield curves
at the end of the reporting period) and contract interest rates,
discounted to reflect the credit risk of various counterparties
Except as detailed in the following table, the carrying amounts of financial assets and financial liabilities recognised in the consolidated financial
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.
Carrying
amount
2016
$’000
Consolidated Group
Fair
value
2016
$’000
Carrying
amount
2015
$’000
Fair
value
2015
$’000
Finance lease receivables – non-current
89,279
86,496
89,911
89,589
Current finance lease receivables are short term and their carrying amount is considered to equal their fair value. The fair value of non-current
finance lease receivables were calculated based on cash flows discounted using an average of current lending rates appropriate for the geographical
markets the leases operate of 3.83% (2015: 3.96%). They are classified as level 3 fair values in the fair values hierarchy due to the inclusion of
unobservable inputs.
3 Revenue
Revenue from continuing operations
Remuneration services 1
Lease rental services
Brokerage commissions and financial services
Proceeds from sale of leased assets
Dividends received
Interest – other persons
Other
Total revenue
Consolidated Group
Parent Entity
2016
$’000
2015
$’000
2016
$’000
2015
$’000
188,483
148,184
118,295
47,361
-
1,855
488
176,096
144,436
23,106
43,270
-
2,682
-
-
-
-
-
-
-
-
-
46,592
68,324
123
-
39
-
504,666
389,590
46,715
68,363
1 Included in remuneration services revenue is interest income derived
from the holding of trust funds
9,587
10,108
Underwriting premium from direct business
included in Retail Financial Services Revenue
Gross written premium
Movement in deferred income
Premium revenue
31,700
(165)
31,535
13,483
(971)
12,512
-
-
-
-
-
-
-
-
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
68
4 Expenses
(a) Profit before income tax includes the
following specific 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
Consolidated Group
Parent Entity
2016
$’000
2015
$’000
2016
$’000
2015
$’000
5,395
590
78,172
2,998
385
3,840
91,380
4,743
1,061
79,785
3,292
3,219
725
92,825
9,123
6,886
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Defined contribution superannuation expense
8,259
6,677
(b) Other individually significant items
Contracted property rental payments for vacant space included in
property and corporate expense in the profit or loss
Credit losses included in other expenses in the profit or loss
(c) Auditor’s remuneration
Remuneration of the auditor (Grant Thornton Audit Pty Ltd)
of the parent entity for:
Audit or review of the financial statements
Other compliance
Agreed upon procedures:
– review of borrowing covenant
Remuneration of a network firm of the parent entity auditor:
Audit or review of the financial statements (UK)
Other compliance
Consolidated Group
Parent Entity
2016
$’000
-
-
2015
$’000
1,725
448
2016
$’000
2015
$’000
-
-
-
-
Consolidated Group
Parent Entity
2016
$
2015
$
2016
$
2015
$
278,000
46,400
277,000
46,400
1,900
1,900
139,656
100,265
4,062
-
-
-
-
-
-
-
-
-
-
-
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
69
2015
$’000
(425)
-
(92)
(517)
2015
$’000
66,608
19,982
-
-
-
-
-
-
5 Income Tax Expense / (Benefit)
Consolidated Group
Parent Entity
(a) Components of tax expense / (benefit)
Current tax expense/(benefit)
Adjustments for current tax of prior years
Deferred tax
Income tax expense / (benefit)
2016
$’000
39,066
668
(2,740)
36,994
2015
$’000
22,054
(311)
4,712
26,455
2016
$’000
(1,494)
115
645
(734)
Consolidated Group
Parent Entity
(b) The prima facie tax payable on profit before income tax is
reconciled to the income tax expense / (benefit) as follows:
Profit before income tax
2016
$’000
119,463
Prima facie tax payable on profit before income tax at 30% (2015: 30%)
35,839
Add tax effect of:
– non-deductible costs
– overseas tax rate differential of subsidiaries
– over-provision of tax from prior year
– share based payments
– research & development
– deductible expenses not previously recognisable
Less tax effect of:
– dividends received
Income tax expense/(benefit)
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
recognisable as there was no basis for a tax deduction
Unrecognised temporary differences
Foreign currency translation of investments in subsidiaries
for which no deferred tax (assets)/liabilities have been recognised
2015
$’000
93,942
28,182
409
(154)
(311)
121
(354)
(1,438)
26,455
2016
$’000
43,260
12,978
150
-
116
-
-
-
828
(341)
668
-
-
-
36,994
13,244
19,982
-
-
(13,978)
(20,499)
36,994
26,455
(734)
(517)
-
-
-
67
2,275
2,342
(5,391)
2,754
-
-
-
-
67
2,275
2,342
-
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
70
6 Earnings per Share
Basic earnings per share
Basic EPS – cents per share
Net profit 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
Consolidated Group
2016
000
99.4
$82,469
82,927
2015
000
87.0
$67,487
77,537
99.0
86.8
$82,469
$67,487
82,927
77,537
335
211
Weighted average number of ordinary shares outstanding during the year used in the calculation of diluted EPS
83,262
77,748
7 Dividends
Final fully franked ordinary dividend for the year ended 30 June 2015
of $0.27 (2014: $0.31) per share franked at the tax rate of 30%
(2014: 30%)
Interim fully franked ordinary dividend for the year ended 30 June 2016
of $0.29 (2015: $0.25) per share franked at the tax rate of 30%
(2015: 30%)
Consolidated Group
Parent Entity
2016
$’000
2015
$’000
2016
$’000
2015
$’000
22,463
23,632
22,463
23,632
24,126
20,280
24,126
20,280
46,589
43,912
46,589
43,912
Franking credits available for subsequent financial years
based on a tax rate of 30% (2015 – 30%)
90,370
78,806
90,370
78,806
The above amounts represent the balance of the franking account at the end of the financial 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 profits of
subsidiaries were paid as dividends.
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
8 Cash and Cash Equivalents
Consolidated Group
Parent Entity
Cash on hand
Bank balances
Short term deposits
2016
$’000
3
14,992
80,588
95,583
2015
$’000
4
47,437
38,288
85,729
2016
$’000
-
86
5,630
5,716
71
2015
$’000
-
173
2,425
2,598
Cash and cash equivalents are subject to interest rate risk as they earn interest at floating rates. Cash at bank is invested at floating rates.
In 2016, the floating interest rates for the Group and parent entity were between 1.43% and 2.06% (2015: 1.53% and 3.46%). The short term
deposits are also subject to floating rates, which in 2016 were between 2.04% and 3.04% (2015: 2.42% and 3.39%). These deposits have an
average maturity of 90 days (2015: 90 days) and are highly liquid.
9 Trade and Other Receivables
Current
Trade receivables
Other receivables
Amounts receivable from wholly owned entities
2016
$’000
2015
$’000
13,998
23,398
-
37,396
16,246
30,695
-
46,941
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
2016
Amount
impaired
$’000
Amount not
impaired
$’000
(451)
(145)
(119)
(65)
(496)
10,792
2,463
327
136
280
Total
$’000
11,243
2,608
446
201
776
Total
$’000
13,766
1,747
497
213
944
15,274
(1,276)
13,998
17,167
2015
$’000
-
130
2,283
2,413
2016
$’000
-
70
6,407
6,477
2015
Amount
impaired
$’000
Amount not
impaired
$’000
-
(59)
(128)
(105)
(629)
(921)
13,766
1,688
369
108
315
16,246
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.
(d) Doubtful debts policy
Refer Note 1(k).
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
72
10 Finance Lease Receivables
Consolidated Group
Parent Entity
Current finance lease receivables
Non-current finance lease receivables
Amounts receivable under finance lease receivables
Within one year
Later than one but not more than five years
Later than five years
2016
$’000
46,280
89,279
2015
$’000
35,253
89,911
135,559
125,164
2016
$’000
2015
$’000
-
-
-
-
-
-
Consolidated Group
Minimum
lease
payments
2016
$’000
Present value
of lease
payments
2016
$’000
Minimum
lease
payments
2015
$’000
Present value
of lease
payments
2015
$’000
51,411
94,795
66
44,653
90,841
65
39,842
95,551
186
35,253
89,727
184
146,272
135,559
135,579
125,164
Less: unearned finance income
(10,713)
-
(10,415)
-
Present value of minimum lease payments
135,559
135,559
125,164
125,164
There were no unguaranteed residual values of assets leased under finance leases at reporting date (2015: nil)
11 Other Financial Assets
(a) Investment in subsidiaries
Shares in subsidiaries at cost
Consolidated Group
Parent Entity
2016
$’000
-
2015
$’000
2016
$’000
2015
$’000
-
337,900
261,646
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting
policy described in Note 1(c).
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
73
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
Anglo Scottish Asset Finance Limited plc
Presidian Holdings Pty Ltd
Davantage Group Pty Ltd
Money Now Pty Ltd
National Finance Choice Pty Ltd
Franklin Finance Group Pty Ltd
Australian Dealer Insurance Pty Ltd
National Finance Solutions Pty Ltd
National Insurance Choice Pty Ltd
United Financial Services Pty Ltd
United Financial Services Network Pty Ltd
United Financial Services (Queensland) Pty Ltd
Country of Incorporation
Percentage
Owned
2016
Percentage
Owned
2015
Principal activities
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Australia
Australia
Australia
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%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
100%
100%
100%
100%
100%
100%
100%
100%
-
-
-
Remuneration services provider
Remuneration services provider
Asset management and services
Asset management and services
Dormant
Asset management and services
Investment holding
Asset management
Fleet management services
Fleet management services
Retail financial services
Retail financial services
Retail financial services
Retail financial services
Retail financial services
Retail financial services
Retail financial services
Retail financial services
Retail financial services
Retail financial services
Retail financial services
1 These subsidiaries have been granted relief from the necessity to prepare financial reports in accordance with Class Order 98/1418 issued by the Australian Securities
and Investments Commission. For further information refer to Note 30.
(b) Loan receivable
Loan receivable
Other expense receivable
Share of losses of equity accounted joint venture
Change in foreign currency
Carrying value at end of the financial year
Consolidated Group
Parent Entity
2016
$’000
3,827
1,297
(3,504)
112
1,732
2015
$’000
3,211
996
(2,009)
(327)
1,871
2016
$’000
2015
$’000
-
-
-
-
-
-
-
-
-
-
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 $1,495,000 (2015: $816,000) recognised under the equity method that is in excess of the Company’s fully written down carrying
value of its investment (2015: $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.
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
74
12 Investment in Joint Venture
Consolidated Group
Parent Entity
Acquired
Share of losses after income tax
Carrying value at end of the financial year
2016
$’000
337
(337)
-
2015
$’000
337
(337)
-
2016
$’000
2015
$’000
-
-
-
-
-
-
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 financing
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, financial 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 five 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 financial statements. Information relating to the joint venture investment is set out below.
Consolidated Group
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
Joint venture financial results
Revenues
Expenses
Loss before income tax
Income tax
Loss after income tax
Share of joint venture capital commitments
2016
$’000
3,632
-
3,632
5,557
5,124
10,681
(7,049)
(7,049)
(3,524)
-
2015
$’000
1,649
853
2,502
2,397
5,070
7,467
(4,965)
(4,965)
(2,483)
-
(3,841)
(2,346)
Consolidated Group
2016
$’000
2,906
(5,896)
(2,990)
-
(2,990)
-
2015
$’000
2,644
(4,684)
(2,040)
408
(1,632)
-
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
13 Property, Plant and Equipment
Consolidated Group
Parent Entity
75
(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 2016
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
Change in foreign currency
Balance at 30 June
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
Change in foreign currency
Balance at 30 June
2016
$’000
28,667
(19,360)
9,307
2015
$’000
31,393
(19,390)
12,003
457,722
(164,897)
457,684
(164,559)
292,825
293,125
302,132
305,128
2016
$’000
2015
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Consolidated Group
Plant and
equipment
$’000
Assets under
operating lease 1
$’000
12,003
4,626
283
(2,800)
(1,623)
(2,998)
-
(184)
293,125
126,520
-
2,800
(51,953)
(78,172)
(385)
890
Total
$’000
305,128
131,146
283
-
(53,576)
(81,170)
(385)
706
9,307
292,825
302,132
9,797
7,248
1,075
(1,246)
(1,863)
(3,292)
-
284
303,408
122,124
-
-
(49,136)
(79,785)
(3,219)
(267)
313,205
129,372
1,075
(1,246)
(50,999)
(83,077)
(3,219)
17
12,003
293,125
305,128
1 Accumulated provision for impairment loss at reporting date is $4,381,000 (2015: 5,237,000).
(c) Security
The above assets form part of the security supporting the fixed and floating charge pledged to the Group’s financiers.
(d) Property, plant and equipment held for sale
Property, plant and equipment no longer held under operating leases are classified as inventory.
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
76
14 Deferred Tax Assets / (Liabilities)
Consolidated Group
Parent Entity
(a) Asset / (Liability)
2016
$’000
2015
$’000
2016
$’000
2015
$’000
The balance comprises temporary differences and tax losses attributed for:
Amounts recognised in profit 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 profit or loss
Charged to other comprehensive income
Acquired at acquisition
Change in foreign currency
Closing balance at 30 June
137
4,290
(8,435)
7,061
467
(9)
511
1,708
(8,093)
217
885
(1,261)
204
(1,057)
194
(1,251)
(1,057)
249
3,193
(16)
(4,620)
137
(1,057)
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
-
-
-
-
-
(540)
-
-
(540)
-
(540)
-
(540)
(540)
105
(645)
-
-
-
-
-
-
88
-
17
-
-
-
-
105
-
105
105
-
105
13
92
-
-
-
(540)
105
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
77
Consolidated Group
Parent Entity
2016
$’000
2015
$’000
2016
$’000
2015
$’000
182,665
134,877
(36)
(36)
182,629
134,841
22,443
6,598
(1,532)
27,509
21,795
(1,881)
19,914
38,930
(21,286)
17,644
13,070
(11,541)
1,529
6,713
(1,306)
5,407
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
254,632
194,671
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15 Intangible Assets
(a) Carrying values
Goodwill
Cost
Impairment loss
Net carrying value
Brands
Brands at cost - indefinite life
Brands at cost - finite life
Accumulated amortisation
Net carrying value
Dealer relationships
Cost
Accumulated amortisation
Net carrying value
Software development costs
Cost 1
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
1 Software includes capitalised internal costs.
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
78
(b) Reconciliation of net book amount
Goodwill
$’000
Brands
$’000
Dealer
relationships
$’000
Customer
lists and
relationships
$’000
Software
development
costs
$’000
Contract
rights
$’000
Total
$’000
2016
Net book amount
Balance beginning of year
134,841
Additions
Acquisition through
business combination
(note 29(d))
Amortisation1
-
52,186
22,443
-
6,598
-
(1,532)
Change in foreign currency
(4,398)
-
Closing balance
182,629
27,509
11,724
-
10,115
(1,585)
(340)
19,914
3,566
-
3,235
(723)
(671)
5,407
19,643
3,396
-
(5,395)
-
17,644
2,454
194,671
-
-
3,396
72,134
(925)
-
(10,160)
(5,409)
1,529
254,632
2015
Net book amount
Balance beginning of year
Additions
Acquisition through
business combination
Transfer from property,
plant & equipment
Amortisation1
Change in foreign currency
Goodwill
$’000
Brands
$’000
Dealer
relationships
$’000
Customer
lists and
relationships
$’000
Software
development
costs
$’000
Contract
rights
$’000
46,387
-
86,672
-
-
1,782
-
-
22,443
-
-
-
-
-
12,033
-
(309)
-
14,655
4,312
4,173
1,246
3,050
465
-
-
(4,743)
(1,061)
-
-
2,567
-
1,100
-
(416)
315
3,566
Total
$’000
66,659
4,777
126,421
1,246
(6,529)
2,097
Closing balance
134,841
22,443
11,724
19,643
2,454
194,671
1 Amortisation of contract rights is recognised in expenses of $590,000 (2015: $1,061,000) and as a discount to revenue of $335,000 (2015: Nil)
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
79
(c) Impairment test for goodwill
Goodwill is allocated to the Group’s cash-generating units (CGUs) identified 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
Anglo Scottish Finance Limited
Retail Financial Services segment risk business
Retail Financial Services segment retail finance business
Consolidated Group
2016
$’000
24,190
9,102
13,086
16,882
51,608
67,761
2015
$’000
24,190
9,102
14,877
86,672
-
182,629
134,841
The recoverable amount of each CGU above is determined based on value-in-use calculations. These calculations use the present value of cash
flow projections based on financial budgets approved by the Board for next year and financial projections by management for four years hence
covering a five-year period in total.
(d) Key assumptions used for value-in-use calculation
Discount rate
Maxxia Pty Limited
Remuneration Services (Qld) Pty Limited
CLM Fleet Management plc
Anglo Scottish Finance Limited
Retail Financial Services segment risk business
Retail Financial Services segment retail finance business
2016
%
10.46
10.46
14.01
14.01
10.46
10.46
2015
%
15.06
15.06
12.08
-
15.06
15.06
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 five year projection is between 1% and 10% based on business plans and initiated strategies.
Cash flows beyond the five-year period are extrapolated using conservative growth rates between 0% and 3%. 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 flows. The pre-tax discount rates are disclosed above. The discount rates used reflect specific risks relating to the relevant business
each subsidiary is operating in.
These assumptions have been used for the analysis of each CGU within each business.
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.
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
80
16 Trade and Other Payables
Consolidated Group
Parent Entity
Unsecured liabilities
Trade payables
GST payable
Sundry creditors and accruals
Amounts payable to wholly owned entities
2016
$’000
2015
$’000
2016
$’000
2015
$’000
20,792
1,677
48,092
-
70,561
19,399
2,046
42,417
-
-
-
181
105,436
63,862
105,617
-
-
599
47,309
47,908
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
18 Provisions
Current
Employee benefit liabilities
Provision for rebate and cancellations
Provision for onerous contracts
Other
Non current
Provision for long service leave
Provision for onerous contracts
2016
$’000
5,815
5,300
5,269
2015
$’000
6,622
4,379
5,186
16,384
16,187
2016
$’000
9,333
3,337
353
-
2015
$’000
7,586
2,174
650
181
13,023
10,591
717
988
1,705
1,139
1,089
2,228
2016
$’000
2015
$’000
-
-
-
-
-
-
-
-
2016
$’000
2015
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
81
Consolidated Group
Parent Entity
2016
$’000
2015
$’000
2016
$’000
2015
$’000
12,944
5,658
11,500
4,016
332,626
346,046
41,528
53,002
19 Borrowings
Current
Bank loans – at amortised cost
Non current
Bank loans – at amortised cost
(a) Security
The parent entity guarantees all bank loans of subsidiaries in the Group, totalling $345,570,000 (2015: $351,704,000).
Fixed and floating charges are provided by the Group in respect to financing facilities provided to it by its syndicate of financiers.
The Group’s loans are also secured by the following financial undertakings from all the entities in the Group.
(i) Group Asset Management 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, finance lease receivables and commercial hire purchase receivables.
(ii) Group shareholder’s funds 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.
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 finance
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 financial thresholds for shareholders’ equity, gearing ratio and fleet 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 significant headroom against all of its borrowing covenants.
(b) Fair value disclosures
The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market
interest rate that is available to the Group for similar financial instruments. The fair value of current borrowings approximates the carrying amount,
as the impact of discounting is not significant.
(c) Risk exposures
Details of the Group’s exposure to risks arising from current and non-current borrowings are set out in Note 2.
20 Other Financial Liabilities
Consolidated Group
Parent Entity
Contingent consideration
2016
$’000
6,740
2015
$’000
-
2016
$’000
-
2015
$’000
-
Contingent consideration represents the estimated fair value of future consideration payable upon the achievement of certain performance targets in
relation to the acquisition of Anglo Scottish Asset Finance Limited. There has been no change to fair value since acquisition date.
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
82
21 Issued Capital
(a) Share capital
Consolidated Group
Parent Entity
2016
$’000
2015
$’000
2016
$’000
2015
$’000
83,204,720 (2015: 81,810,993) fully paid ordinary shares
144,380
121,617
144,380
121,617
(b) Movements in issued capital
Number of
shares
Issue
price
Balance at 1 July 2015
Shares issued for the acquisition of the United Financial Services companies
Fully paid shares issued pursuant to the exercise of employee options
Shares distributed from the employee share trust to employees on exercise of options
Total issued capital at 30 June 2016
Treasury shares
Shares held by public at 30 June 2016
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 employee share trust 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
Total issued capital at 30 June 2015
Treasury shares
Shares held by public at 30 June 2015
$12.96
$7.31
-
81,810,993
1,342,926
733,007
(682,206)
1,393,727
83,204,720
(10,276)
83,194,444
Number of
shares
Issue
price
$11.66
-
$6.53
$7.31
74,523,965
4,285,192
692,482
2,035,301
274,053
-
7,287,028
81,810,993
(692,482)
81,118,511
Ordinary
shares
$’000
121,617
17,405
5,358
-
22,763
144,380
Ordinary
shares
$’000
56,456
49,982
-
13,283
2,003
50
(224)
67
65,161
121,617
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.
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
Notes to the
Financial Statements
For the year ended 30 June 2016
(c) Treasury shares
Balance of shares at the beginning of the year
Shares distributed from the exercise of options
Balance of treasury shares at 30 June 2016
(d) Options
83
Number of shares
692,482
(682,206)
10,276
At 30 June 2016, there were 1,825,334 (2015: 2,876,147) 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 28 on page 88.
(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 benefits for other stakeholders. In order to maintain or adjust the capital structure, the Group may adjust the amount of divi-
dends 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 financial guarantees) less cash and cash equivalents. Total capital is calculated as equity as
shown in the statement of financial position plus net debt.
The Groups’ gearing ratio was 40% (2015: 46%) calculated as net debt of $249,987,000 (2015: $267,162,000) divided by total debt and equity of
$620,482,000 (2015: $585,605,000).
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 and allocation of capital and the risks associated with each class of capital.
22 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 benefits expense but not exercised.
(b) Cash flow hedge reserve
Revaluation - gross
Deferred tax
Balance at the end of the financial year
Consolidated Group
Parent Entity
2016
$’000
(819)
204
(615)
2015
$’000
(746)
220
(526)
2016
$’000
2015
$’000
-
-
-
-
-
-
The hedging reserve is used to record gains and losses on interest rate swaps that are designed and qualify as cash flow hedges and that are
recognised in other comprehensive income.
(c) Foreign currency translation reserve
Balance at the end of the financial year
Consolidated Group
Parent Entity
2016
$’000
(5,391)
2015
$’000
2,754
2016
$’000
-
2015
$’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 reclassified to profit or loss when the net investment is disposed of.
The decline in the foreign currency reserve was a direct result of GBP weakening sharply against the Australian dollar several days before reporting
date following the referendum in the United Kingdom to leave the European Union. The Group does not have plans to realise its investments in the
UK in the foreseeable future.
MMS Financial Report 2016
MMS
Financial Report 2016
84
Notes to the
Financial Statements
For the year ended 30 June 2016
23 Cash Flow Information
Consolidated Group
Parent Entity
(a) Reconciliation of cash flow from operations with
profit from operating activities after tax
2016
$’000
2015
$’000
2016
$’000
2015
$’000
Profit for the year
Non cash flows in profit 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
Finance lease receivables principle repayments
Changes in assets and liabilities, net of the effects
of purchase of subsidiaries
Decrease / (increase) in trade receivables and other assets
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
Increase / (decrease) in provisions
Net cash from operating activities
82,469
67,487
43,994
67,125
9,825
385
81,170
1,643
1,495
(234,601)
94,101
33,202
11,898
9,738
5,677
(3,278)
-
(49)
1,297
94,972
6,529
3,219
83,077
1,326
816
(243,441)
34,816
11,727
(11,722)
34,155
(5,816)
1,282
(113)
(918)
1,919
(15,657)
-
-
1,643
-
-
-
64
(10,669)
7,257
645
-
-
-
42,934
-
-
-
1,326
-
-
-
(1,456)
8,076
(8,101)
(92)
-
-
-
66,878
(b) Proceeds from sale of lease portfolio
Proceeds from a portion of the UK fleet that was moved off balance sheet as part of principal and agency arrangements with a number of funding
providers.
(c) Proceeds and repayments of borrowings
Proceeds from and repayments of borrowings were predominantly to change the mix of funding between syndicate banks together with the repayment
of amortising loans.
24 Commitments
(a) Operating lease commitments
Non cancellable operating leases contracted for but not
capitalised in the financial statements:
Payable minimum lease payments
– Not later than 12 months
– Between 12 months and 5 years
– Greater than 5 years
Consolidated Group
Parent Entity
2016
$’000
2015
$’000
2016
$’000
2015
$’000
8,891
30,071
14,447
53,409
8,568
30,738
19,444
58,750
-
-
-
-
-
-
-
-
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.
Notes to the
Financial Statements
For the year ended 30 June 2016
25 Segment Reporting
Reportable segments
(a) Description of Segments
MMS
Financial Report 2016
85
The Group has identified 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 identified 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 identified, 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 financial 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 financing. The segment also provides ancillary services associated with motor
vehicle novated lease products.
Asset Management - This segment provides financing and ancillary management services associated with motor vehicles, commercial vehicles
and equipment.
Retail Financial services - This segment provides retail brokerage services, aggregation of finance originations and extended warranty cover,
but does not provide financing. The United Financial Services group of companies were added to this segment from 31 July 2015.
(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 profit 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
Profit after tax from continuing operations for the year
2016
$’000
188,310
204,812
110,037
2015
$’000
176,096
188,061
23,106
503,159
387,263
2016
$’000
58,662
14,634
11,827
85,123
(1,398)
(2,289)
(438)
1,471
82,469
2015
$’000
54,306
11,281
3,027
68,614
(1,250)
(2,196)
1,836
483
67,487
1 Retail Financial Services comprising the Presidian Group is reported from 27 February 2015 to 30 June 2015. The UFS entities joined this segment from 31 July 2015 to
30 June 2016.
86
(c) Other segment information
(i) Segment revenue
Segment revenue is reconciled to the Statement of Profit of Loss as follows:
Total segment revenue
Interest revenue
Total revenue per Consolidated Statement of Profit or Loss
2016
$’000
503,159
1,507
2015
$’000
387,263
2,327
504,666
389,590
Segment revenue above represents sales to external customers and excludes inter-segment sales, consistent with the basis by which the financial
information is presented to the Chief Decision Maker.
The accounting policies of the reportable segments are the same as the Group’s policies. Segment profit 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 profit does not
include corporate costs of the parent entity, consisting of listing and company fees, director’s fees and finance costs relating to borrowings not
specifically sourced for segment operations, costs directly incurred in relation to the acquisition of specific 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 $63,714,000 (2015: $61,898,000) in respect of the
Group’s largest contract.
(ii) Segment result
The following items are included in the segment results.
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
2016
$’000
2015
$’000
4,782
82,203
4,395
91,380
-
1,495
-
1,495
5,587
86,323
915
92,825
-
816
-
816
(iii) Segment assets and liabilities
The segment information with respect to total assets is measured in a consistent manner with that of the financial 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
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
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 financial position
Segment liabilities
Group Remuneration Services
Asset Management
Retail Financial Services
Segment liabilities
Non-segment liabilities
Unallocated liabilities 1
Consolidated liabilities per statement of financial position
87
2016
$’000
2015
$’000
59,067
520,785
184,573
764,425
77,080
483,898
141,280
702,258
80,960
75,065
845,385
777,323
53,680
337,537
38,437
429,654
44,149
335,617
27,878
407,644
45,236
51,236
474,890
458,880
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 utilising centralised treasury controlled funds.
Additions to non-currrent assets
Group Remuneration Services
Asset Management
Retail Financial Services
2016
$’000
2015
$’000
5,302
154,210
47,328
5,634
128,189
127,822
206,840
261,645
(d) Geographical 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.
Revenue from external customers
Non-current assets 1
2016
$’000
475,507
25,277
3,902
504,666
2015
$’000
374,520
12,628
2,442
389,590
2016
$’000
576,704
60,532
9,771
647,007
2015
$’000
477,521
101,257
11,905
590,683
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
88
26 Contingent Liabilities
Consolidated Group
Parent Entity
Estimates of the potential financial 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.
27 Related Party Transactions
(a) Wholly owned group
2016
$’000
11,050
5,967
17,017
2015
$’000
10,050
5,970
16,020
2016
$’000
2015
$’000
50
-
50
50
-
50
Transactions between the Company and other entities within the wholly owned group during the years ended 30 June 2016 and 2015 consisted of:
(a) loans advanced to the Company; and
(b) the payment of dividends to the Company.
Aggregate amounts included in the determination of profit from ordinary activities before income tax that resulted from transactions with entities in
the wholly owned group:
Consolidated Group
Parent Entity
Dividend revenue
Aggregate amounts payable to entities within the wholly
owned group at balance date:
Current payables
(b) Key management personnel compensation
Compensation
Short-term employment benefits
Post-employment benefits
Long-term employment benefits
Share-based payments
28 Share-based Payments
2016
$
2015
$
2016
$
2015
$
-
-
-
-
46,592,000
68,324,463
105,436,102
47,309,114
3,218,477
3,513,224
2,054,809
2,153,525
186,698
68,915
876,748
216,247
54,206
836,041
131,763
38,912
500,381
153,072
82,456
505,938
4,350,838
4,619,718
2,725,865
2,894,991
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 and Nomination Committee recommends to the Board the number of performance options to be granted on the basis of the posi-
tion, duties and responsibilities of the relevant executive.
Set out below are summaries of options granted under the plans:
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
Consolidated Group and parent entity - 2016
Grant date
Expiry date
16 August 2011
30 September 2015
16 August 2011
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
25 August 2015
30 September 2018
89
Exercise
price
Balance at
start of the
year
Granted
during the
year
Exercised or
sold during
the year
Forfeited
during the
year 1
Balance at
end of the
year
Exercisable
at end
of the year
$7.31
$7.31
$10.18
$10.18
$10.83
$10.17
$11.87
$12.88
$13.82
682,206
50,801
978,417
567,676
107,877
109,142
294,336
85,692
-
-
-
-
-
-
-
-
-
33,436
(682,206)
(50,801)
-
-
-
-
-
-
-
-
-
-
(98,595)
-
(109,142)
(143,505)
-
-
-
-
978,417
469,081
107,877
-
150,831
85,692
33,436
2,876,147
33,436
(733,007)
(351,242)
1,825,334
-
-
-
-
-
-
-
-
-
-
-
Weighted average exercise price
$9.73
$13.82
$7.31
$10.87
$10.55
Consolidated Group and parent entity - 2015
Grant date
Expiry date
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
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
Balance at
start of the
year
Granted
during the
year
Exercised or
sold during
the year
Forfeited
during the
year 1
Balance at
end of the
year
Exercisable
at end
of the year
$3.42
$7.31
$7.31
$8.54
$9.29
$11.42
$10.18
$10.18
$10.83
$10.17
$11.87
$12.88
537,634
1,805,957
314,578
352,942
31,250
121,331
-
-
-
-
-
-
-
-
-
-
-
-
978,417
832,719
107,877
109,142
294,336
85,692
(537,634)
(1,123,751)
(263,777)
(352,942)
(31,250)
-
-
-
-
-
-
-
-
-
-
-
-
(121,331)
-
(265,043)
-
-
-
-
-
-
682,206
682,206
50,801
50,801
-
-
-
978,417
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
-
$10.57
$9.73
$7.31
The weighted average remaining contractual life of options outstanding at the end of the year was 1.9 years (2015: 2.17 years).
1 None of the forfeited options represented expired options (2015: Nil).
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
90
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.
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.
Model input
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
August 2015
Nil
$13.82
25 August 2015
2.1 years
$13.82
47%
3.5%
1.7%
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 benefits expense were
as follows:
Consolidated Group
Parent Entity
Options expense recognised under the Employee Option Plan
1,643,091
1,326,493
2016
$
2015
$
2016
$
-
2015
$
-
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
91
29 Business Combination
(a) Businesses acquired
The Group completed its acquisition of 100% of United Financial Services Pty Ltd, United Financial Services Network Pty Ltd and United Financial
Services (Queensland) Pty Ltd (collectively known as “UFS”) on 31 July 2015. The UFS companies are incorporated in Australia and specialise in
the delivery of consumer and commercial finance and insurance products in the Australian sector. The acquisition consolidates MMS’ position in the
auto financing sector and builds on the investment in Presidian that was completed in February 2015. The addition of UFS will enhance the Retail
Financial Services business segment and brings cross selling opportunities across the businesses in MMS and the realisation of corporate and
operational synergies.
In addition to the acquisition of the UFS companies to complement the RFS segment, an ancillary UFS business was acquired for $250,000 to
provide coverage of a certain geographical area.
On 4 November 2015, the Group completed the acquisition of 100% of Anglo Scottish Asset Finance (“Anglo Scottish”). Anglo Scottish is incorporated
in the UK and provides integrated asset finance and asset management services in the UK sector. Anglo Scottish brings a comprehensive network of
funder relationships and will complement the existing CLM business in the UK. The addition of Anglo Scottish to the Asset Management segment is
anticipated to facilitate the cross-sharing of service capabilities to enhance operational efficiencies and a broader range of asset finance solutions. Its
addition to existing UK operations also strengthens business capability and reach through wider geographic access across the UK.
(b) Consideration transferred
Consideration for the UFS acquisition was $44.2m, funded by $26.8m of cash and 1,342,926 of fully paid ordinary shares that were fair valued at
$17.4m on completion. Cash assumed from UFS was $2.1m. Fair value was determined using the Company’s share price. The shares issued are
free from encumbrances but will be held in escrow for various periods up to a maximum of 24 months.
Anglo Scottish was acquired for consideration of $26.6m (£12.8m) that comprised upfront cash payments of $18.9 (£9.0m) and a contingent
consideration that has been fair valued at $7.7m (£3.8m). Cash assumed from Anglo Scottish was $4.5m (£2.2m). Under the arrangement, the
contingent consideration payable is £4m, £5m or up to £7m, depending on the achievement of EBITDA against EBITDA targets over the three year
period from 1 January 2016 to 31 December 2018.
At reporting date, it has been estimated that a potential undiscounted earn-out consideration of £4.0m ($8.4m) is payable under the sale agreement.
The fair value is based on a probability weighted assessment of projected EBITDA under the existing business plan and present valued using the
segment’s incremental borrowing rate of 2.8%.
Consideration for the acquisitions is summarised as follows.
Cash
Shares
Contingent consideration
Total
UFS
$’000
Anglo Scottish
$’000
26,755
17,405
-
44,160
18,857
-
7,690
26,547
Total
$’000
45,612
17,405
7,690
70,707
The assets and liabilities acquired have been fair valued in accordance with AASB 3 “Business Combinations” and, translated at acquisition date
foreign exchange rates, has resulted in goodwill of $52.2m. Acquisition-related expenses of $2.3m were incurred and expensed on consolidation
and included in the Statement of Consolidated Profit or Loss and Other Comprehensive Income for the period.
(c) Reconciliation of consideration to cash flow
Cash consideration
Cash acquired
Net cash outflow
UFS
$’000
Anglo Scottish
$’000
26,755
(2,147)
24,608
18,857
(4,465)
14,392
Total
$’000
45,612
(6,612)
39,000
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
92
(d) Assets acquired and liabilities assumed at the date of acquisition
Fair Value at acquisition date (provisional)
Cash
Brands
Dealer relationships
Customer contracts and JV agreement
Property, plant & equipment and software
Trade, other receivables and prepayments
Assets acquired
Trade payables and accrued expenses
Income tax provision
Deferred tax liabilities
Liabilities assumed
Identifiable net assets acquired
Goodwill
Consideration
The following trade receivables of UFS and Anglo Scottish 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.
UFS
Anglo Scottish
Total fair value of Trade Receivables
(e) Impact of acquisition on the results of the Group
The profit result for the period includes sales revenue and net profit after
tax of the new acquisitions as follows.
UFS (period 31 July 2015 to 30 June 2016)
Anglo Scottish (period 4 November 2015 to 30 June 2016)
Total
UFS
$’000
2,148
6,598
7,513
-
245
2,242
Anglo
Scottish
$’000
4,465
-
2,602
3,235
37
1,518
18,746
11,857
3,932
-
3,311
7,243
11,503
32,657
44,160
2,880
650
1,309
4,839
7,018
19,529
26,547
Total
$’000
6,613
6,598
10,115
3,235
282
3,760
30,603
6,812
650
4,620
12,082
18,521
52,186
70,707
FV of Trade Receivables
$’000
2,198
1,418
3,616
Revenue
$’000
Net profit after tax
$’000
38,377
9,271
47,648
2,337
1,414
3,751
Had the acquisitions occurred effective 1 July 2015, the respective “pro-forma” revenue and net profit after tax adjusted for differences in the
accounting policies between the Group and the acquired entities including the recognition of the amortisation of Dealer networks and customer
contracts and JV agreement at their fair value is summarised below.
UFS
Anglo Scottish
Total
Revenue
$’000
Net profit after tax
$’000
42,251
13,538
55,789
2,445
2,122
4,567
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
93
30 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 and Interleasing (Australia) Ltd, CARILA Pty Ltd and TVPR Pty Ltd (Interleasing Group) entered into deeds of cross
guarantee in the year ended 30 June 2010. Under the deeds, each company guarantees the debts of the others and is relieved from the requirement
to prepare a financial report and directors’ report under Class Order 98/1418 (as amended) issued by the Australian Securities and Investments
Commission. This closed group and the Presidian group of entities no longer holds deeds of cross guarantee.
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 financial position and a summary of movements in consolidated retained profits
for the year ended 30 June 2016 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.
(a) Consolidated Statement of Comprehensive Income and summary
of movements in consolidated retained profits
2016
$’000
2015
$’000
Statement of Comprehensive Income
Revenue and other income
Employee and director benefits 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
Profit before income tax
Income tax expense
Profit attributable to members of the parent entity
Other comprehensive income
Other comprehensive income for the year after tax
Total comprehensive income for the year
Movements in consolidated retained earnings
Retained earnings at the beginning of the financial year
De-consolidation of Presidian group no longer supported by deeds of cross guarantee
Profits for the year
Dividends paid
Retained earnings at the end of the financial year
370,321
(87,714)
(83,169)
(54,822)
-
-
(2,100)
(2,286)
(7,893)
(7,918)
(9,942)
(7,451)
(1,387)
105,639
(31,732)
73,907
374,442
(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
1,643
3,559
75,550
70,809
189,094
(3,027)
73,907
(46,589)
165,756
-
67,250
(43,912)
213,385
189,094
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
94
(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 financial 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
2016
$’000
2015
$’000
76,395
26,810
3,337
-
7,218
80,606
47,869
3,752
973
7,021
113,760
140,221
285,294
48,985
3,970
3,625
226,045
-
291,177
177,306
1,120
7,882
38,404
2,137
567,919
518,026
681,679
658,247
63,675
9,672
-
8,381
11,500
93,228
1,597
-
219,257
220,854
71,984
3,552
6,105
10,588
2,451
94,680
2,227
2,781
239,888
244,896
314,082
339,576
367,597
318,671
144,380
9,832
213,385
121,617
7,960
189,094
367,597
318,671
MMS Financial Report 2016Notes to the Financial Statements For the year ended 30 June 2016
Directors’
Declaration
The Directors are of the opinion that:
1.
the financial statements and notes on pages 47 to 94
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
financial position as at 30 June 2016 and financial
performance for the financial year ended on that date;
and
2. there are reasonable grounds to believe that the
Company will be able to pay its debts as and when
they become due and payable.
3. at the date of this declaration, there are reasonable
grounds to believe that the members of the extended
closed group identified in Note 30 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 30.
MMS
Financial Report 2016
95
Note 1(b) confirms that the financial 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 Officer and Chief Financial Officer required by
section 295A of the Corporations Act 2001 (Cth).
This declaration is made in accordance with a resolution of
the Directors.
Tim Poole
Chairman
Michael Salisbury
Managing Director
24 August 2016
Melbourne, Australia
MMS
Financial Report 2016
96
Independent
Audit Report
As at 30 June 2016
Independent
Audit Report
As at 30 June 2016
MMS
Financial Report 2016
97
MMS
Financial Report 2016
98
Auditor’s Independence
Declaration
As at 30 June 2016
Shareholder
Information
MMS
Financial Report 2016
99
Additional information required by the ASX Listing Rules and not disclosed elsewhere in this Annual Report is set out below:
SUBSTANTIAL SHAREHOLDINGS
As at 8 August 2016, the number of shares held by substantial shareholders and their associates is as follows:
Shareholder
Number of Ordinary Shares
Percentage of Ordinary Shares 1
HSBC Custody Nominees (Aust) Ltd
JP Morgan Nominees Australia Limited
Chessari Holdings Pty Limited 2
26,508,197
11,842,740
6,050,941
31.86
14.23
7.27
1 As at 8 August 2016, 83,204,720 fully paid ordinary shares have been issued by the Company.
2 Chessari Holdings Pty Limited is a company associated with Mr Ross Chessari, a Non-Executive Director.
NUMBER OF SHARE & OPTION HOLDERS
As at 8 August 2016, 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 $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 $11.87 and expiring on 30 September 2018
Options exercisable at $12.88 and expiring on 30 September 2018
Options exercisable at $13.82 and expiring on 30 September 2018
Number of Holders
5,944
4
13
1
2
2
2
VOTING RIGHTS
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 8 August 2016, 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+
3,376
2,012
312
208
35
As at 8 August 2016 there were 201 shareholders who held less than a marketable parcel of 37 fully paid ordinary shares in
the Company.
ON-MARKET BUY BACK
The Company does not have a current on-market buy-back.
MMS
Financial Report 2016
100
Shareholder
Information
TOP 20 SHAREHOLDERS
As at 8 August 2016, the details of the top 20 shareholders in the Company are as follows:
No.
Name
Number of
Ordinary Shares
Percentage of
Ordinary Shares 1
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
Chessari Holdings Pty Limited 2
Citicorp Nominees Pty Limited
Asia Pac Technology Pty Limited 3
BNP Paribas Noms Pty Ltd < DRP>
National Nominees Limited
NWC Group Pty Ltd
Ann Leslie Ryan
RBC Investor Services Australia Nominees Pty Ltd
BNP Paribas Nominees Pty Ltd
RBC Investor Services Australia Nominees Pty Ltd
Magic Bay Nominees Pty Ltd (Findus Property A/C)
Milton Corporation Limited
AFICO Pty Ltd
I-Capital Australia Pty Ltd (Hewtom Family Disc A/C)
AMP Life Limited
MOHL Invest Pty Ltd (MOHL Super Fund A/C)
HSBC Custody Nominees (Australia) Limited – A/C 2
Citicorp Nominees Pty Limited
Totals: Top 20 holders of issued Capital
Total Remaining Holders Balance
26,508,197
11,842,740
6,050,941
3,563,393
3,543,025
3,536,157
3,167,827
1,178,427
1,008,418
975,831
769,968
725,240
607,829
532,488
512,776
462,399
414,297
365,000
318,308
310,605
66,393,866
16,810,854
1 As at 8 August 2016, 83,204,720 fully paid ordinary shares have been issued by the Company.
2 Chessari Holdings Pty Limited is a company associated with Mr Ross Chessari, a Non-Executive Director.
3 Asia Pac Technology Pty Limited is a company associated with Mr John Bennetts, a Non-Executive Director.
RESTRICTED SECURITIES
As at the date of this Annual Report, the following securities in the Company were subject to voluntary escrow.
31.86
14.23
7.27
4.28
4.26
4.25
3.81
1.42
1.21
1.17
0.93
0.87
0.73
0.64
0.62
0.56
0.50
0.44
0.38
0.37
79.80
20.20
Number of ordinary shares
1,863,122
671,464
279,470
UNQUOTED SECURITIES
Date of escrow expiry
27 February 2017
31 July 2017
26 February 2019
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 $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 $11.87 and expiring on 30 September 2018
Options exercisable at $12.88 and expiring on 30 September 2018
Options exercisable at $13.82 and expiring on 30 September 2018
Options do not carry a right to vote
978,417
469,081
107,877
150,831
85,692
33,436
4
13
1
2
2
2
Corporate Directory
Registered Office
Level 21, 360 Elizabeth Street
Melbourne Victoria 3000
Tel: +61 3 9097 3000
Fax: +61 3 9097 3060
Company Auditor
Grant Thornton Audit Pty Ltd
The Rialto, Level 30, 525 Collins Street
Melbourne Victoria 3000
Share Registry
Computershare Investor Services Pty Limited
Yarra Falls, 452 Johnston Street
Abbotsford Victoria 3067
Tel: +61 3 9415 4000
www.mmsg.com.au
McMillan Shakespeare Limited
ABN 74 107 233 983
AFSL No. 299054
Level 21, 360 Elizabeth Street
Melbourne Victoria 3000
www.mmsg.com.au