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Report
2021
A
The McMillan Shakespeare Group is a trusted,
market-leading provider of salary packaging,
novated leasing, disability plan management and
support co-ordination, asset management and
related financial products and services.
Through its subsidiaries, it offers a breadth of services
and expertise, designed to responsibly deliver superior
long-term value to its customers. The Group employs a
highly committed team of c.1,300 people across Australia,
New Zealand and the United Kingdom and domestically
manages programs for some of the largest public sector,
corporate and charitable organisations.
Annual General Meeting
The Annual General Meeting of the members of McMillan Shakespeare Limited
A.B.N. 74 107 233 983 will be held at the State Library of Victoria, Village Roadshow
Theatrette, 328 Swanston Street, Melbourne (subject to COVID-19 restrictions)
and online via https://web.lumiagm.com/351991812 (Meeting ID 351-991-812)
on 22 October 2021 at 10.00am
mmsg.com.au
2
MMS ANNUAL REPORT 2021HeaderSUBHEADER Contents
Chair and Chief Executive Officer’s Joint Report
Our Vision, Purpose and Values
Key Metrics
Directors’ Report
2
5
6
8
8
Directors
9
Directors’ meetings
10
Principal activities
10
Results
10
Dividends
11
Review of operations
14
State of affairs
14
Risks
15
Outlook and likely developments
15
Events subsequent to balance date
Directors’ experience and special responsibilities 16
17
Company Secretary
18
Remuneration Report
37
Unissued shares
37
Directors’ interests
Environmental regulations
Indemnification and insurance
Non-audit services
Corporate governance practices
Auditor’s independence declaration
Directors’ declaration
Five year summary
Financial Report
Directors’ Declaration
Independent Audit Report
Auditor’s Independence Declaration
Shareholder Information
Corporate Directory
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Chair and Chief Executive Officer’s
Joint Report
The McMillan Shakespeare (MMS) Group delivered revenue
of $544.5 million and underlying net profit after tax and
amortisation (UNPATA) of $79.2 million in FY21. A fully franked
dividend of 61.3 cents per share was delivered for the year.
We are pleased to present the Group’s full year results for FY21.
Group Performance and Pandemic Impacts
An improved profit performance for the Group in FY21 was
achieved in a highly challenging operating environment, still
impacted by the ongoing COVID-19 pandemic.
Group UNPATA of $79.2 million represented growth of 14.8%
on FY20. Revenue of $544.5m represented growth of 10.2% on
FY20. Return on Capital Employed (ROCE) improved to 33.2%,
up from 19.8% and underlying earnings per share at 102.4c
was up 17.1%.
The result reflects the varied and on-going impacts of COVID-19
on our businesses such as the automotive supply dynamic, as
well as the benefits from execution of our key strategic priorities
such as the restructure of our United Kingdom (UK) business,
Plan Partners growth and improved customer engagement
through an ongoing shift toward digital distribution.
In response to the pandemic, we instituted a wage freeze
for FY21 and no bonuses relating to FY20 were paid. Additionally,
we extended senior debt maturities and non-essential spending
was restricted. The Australian Government JobKeeper funding
received ($7.3 million after-tax) in FY21 enabled the retention
of our employees despite the challenges of COVID-19 and the
negative impacts on our financial performance compared to
FY19. The business by period end had returned to around 90%
of its pre-pandemic performance, equating to approximately
80% in the absence of JobKeeper.
A fully franked dividend of 61.3 cents per share was delivered
for the year inclusive of the final dividend of 31.1 cents per share
payable on 24 September 2021. This represents 66% of UNPATA
excluding the contribution from the Jobkeeper program.
The ongoing impacts of the COVID-19 pandemic include the
way in which work is performed and constrained new vehicle
supply globally. Vehicle supply issues were, and continue to be,
the combined result of various COVID-19 related restrictions,
behaviour shift away from public transport and shared
mobility, and a shortage of vehicle semi-conductors impacting
manufacturers globally.
These factors combined to create an abnormal trading market,
punctuated by increased vehicle values, which presented a
range of both opportunities and challenges for the majority of
our operating segments.
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Operating Segment Performance
and Strategy Execution
Group Remuneration Services
Retail Financial Services
Our Group Remuneration Services (GRS) business achieved
segment UNPATA of $61.2 million representing an 0.4%
increase on FY20. Total salary packages under management
declined marginally (1.0%) on FY20, primarily as a result of
the loss of the salary packaging arrangements within the
New South Wales (NSW) public health network, despite the
addition of 109 new client wins. Novated leases increased
2.2% against a backdrop of the limited supply of new vehicles,
increased retail prices and net amount financed, with carry-over
of sales orders increasing to over five times historical levels.
Our ongoing commitment to improve customer engagement
and strengthen our digital distribution capability, was a key
driver of GRS performance, with traditional face-to-face
customer engagement severely constrained. Digital innovations
included our new online education hubs, the introduction of a
remote online sign-up for new salary package customers and a
new digital estimates function for novated leases.
We are also now interacting with customers more intuitively
and meeting their changing needs on a more individualised
basis, with more than 80,000 customer interactions recorded
through our digital live chat functions across the year.
Plan Partners, largely unaffected by COVID-19, achieved
strong customer organic growth, with funds under
administration in FY21 increasing by 76% and support co-
ordination hours increasing 43%. A significant milestone in
the growth strategy for the business was achieved through
the small acquisition of Plan Tracker, a well-established NSW
based national plan management provider, on 1 July 2021.
Plan Tracker has a footprint in NSW, Queensland, South
Australia and Western Australia and is highly aligned with
our culture and quality service. We warmly welcome the Plan
Tracker team and look forward to being better together to
make a positive impact on the disability sector.
Asset Management
Underlying net profit for our Asset Management business in
Australia and New Zealand was $15.6 million, an increase of
44.3% on FY20. The business was impacted by the vehicle
supply shortage, with a reduction in new business volumes,
offset by increased demand for used vehicles leading to the
generation of higher yields through our remarketing channels.
The business recorded 30 new client wins including a strong
number of returning customers.
In Asset Management in the UK, underlying profit after tax for
FY21 was $1.4 million, an increase of more than 100% on
FY20, whilst we successfully finalised the restructure of our
UK business during the period. This included the completion
of the acquisition of the remaining 50% equity interest in the
Maxxia Ltd joint venture and the internal re-organisation of
our Asset Finance businesses. The sale of European Vehicle
Contracts Limited (EVC) was also completed during the year
which was materially at our carrying value.
The UK business also continued to run down the existing
on-balance sheet lease portfolio with no new funding being
provided, a strategy commenced in FY20. The business
achieved stronger than expected off-balance sheet originations
with Net Amount Financed (NAF) increasing to $890 million,
in part benefited by the UK CBILS, albeit at lower yields.
Our Retail Financial Services (RFS) segment performed
resiliently across the period given in particular the impact
of COVID-19 lockdowns in the first half of the year, vehicle
supply constraints and ongoing regulatory uncertainty in
our retail business. The RFS segment delivered an uplift in
revenue to $59.2 million, however UNPATA was down 15.1%
to $2.6 million primarily as a result of an increase in the
claim experience pattern giving rise to an increased deferral
of revenue and associated acquisition costs, a $1.4 million
reduction to UNPATA.
While higher vehicle prices hampered the penetration of
warranty and insurance products for the Retail side of the
business, a strategic intent to diversify our distribution
channels, particularly into the new vehicle franchise market,
was a key driver of the improved performance.
The Aggregation side of the business performed well, recording
a 7% increase in Net Amount Financed, to over $1 billion worth
of originations for the year.
A strategic review of the RFS Retail business was completed
in FY21 including an assessment of the current regulatory
landscape and MMS business growth priorities.
Funding Warehouse
A securitisation and funding warehouse for the business
commenced development in the latter stages of FY20,
in order to create a more secure source of funding and
increasing funding options and price benefits for novated
lease customers. Equally, by transitioning to more annuity
style revenue over the life of a lease, we will recognise higher
overall value from each transaction.
This strategic initiative is particularly important given some
rationalisation of the automotive finance sector in FY21, with
Westpac planning to exit the automotive finance market.
Development of the warehouse progressed well in FY21
and remains on track, with the first volumes expected to be
delivered during FY22.
The Regulatory Environment
The regulatory environment in which we operate remains
subject to change, particularly following The Royal
Commission into Misconduct in the Banking, Superannuation
and Financial Services Industry.
Most notable is the introduction of a Deferred Sales Model
(DSM) in the second quarter of FY22, with respect to the sale
of Add-on Insurance and Warranty Products within our GRS
business. We are well placed to respond to and implement
the necessary changes.
Other potential reforms, including those being considered by
the Australian Securities and Investments Commission (ASIC),
continue to be monitored and assessed by the business.
We maintain an active and ongoing dialogue with relevant
policymakers and regulators alike, both directly and
in conjunction with key industry advocacy bodies.
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Clear Sustainability Commitment
During the year, the Board of MMS approved an inaugural
Sustainability strategy for the Group, which sets out our
focus and future direction on how we aim to create positive
environmental and social outcomes and value for our
stakeholders, including our shareholders, clients, customers,
our people and broader communities.
Board Committees were restructured effective
1 April 2021, with a People, Culture and Remuneration
Committee chaired by Mr Bruce Akhurst and a Nomination
Committee chaired by Helen Kurincic, replacing the former
Nomination and Remuneration Committee. All Committee
membership is now solely independent Directors.
This strategy responds to key environmental, social and
governance (ESG) risks and opportunities for the Group,
including taking action on climate change, supporting
greater accessibility and social inclusion, and our community
engagement activities. These are supported by a number of
targets for FY22 and beyond.
Reflecting the development of the MMS Sustainability
Strategy and our commitment to enhanced transparency, this
year, we produced our Sustainability Report in accordance
with the Global Reporting Initiative (GRI) Standard. This
framework will help us report on the most material issues and
impacts to our key stakeholders, and guide how we track and
improve our sustainability performance over time.
Some of our key sustainability highlights during the year
included offsetting 100% of the Group’s Scope 1 (company
car fleet) and Scope 2 (electricity use) carbon emissions,
transition of six of our offices to renewable energy contracts,
and investing over $733,000 in community causes and
organisations.
Investment in our people remained a priority for the Group
in FY21 and continued to adapt to new ways of working
as the pandemic persisted. Throughout the year, we also
delivered more than 81,000 hours of training and professional
development to our employees.
We were delighted to see our Sustainable Engagement Score
increase by 6% (since the previous employee engagement
biennial survey in 2019) to 85%, a figure above the
benchmark for financial services firms and in line with global
high performing organisations. This suggests that our people
feel more connected to the business, our values and culture
than at any time in the past.
Our risk culture was equally well appraised, with a score
of 86%, in line with leading global high performance
benchmarks. This indicates that employees feel well informed
and trained about risk and are safe to speak up, and see an
organisational culture of integrity and high ethical standard.
Governance Changes
Board renewal saw independent Non-Executive Director
Ian Elliot retiring on 1 April 2021 after more than six years
of committed service. Bruce Akhurst was appointed as
an independent Non-Executive Director on 1 April 2021,
a highly experienced former executive and ASX director
with a deep understanding of digital, technology, consumer
and regulated businesses. We are also grateful that
independent Non-Executive Director Tim Poole has agreed
to the Board’s request to offer himself for re-election this year.
If shareholders approve his re-election, Tim’s term would
conclude August 2022, allowing for a new NED recruitment
and transition to occur given Tim’s corporate knowledge and
contributions at an important time at MMS.
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Strategic Focus & Outlook
We expect the abnormal trading conditions that characterised
FY21 to continue throughout FY22, in particular given the
ongoing response of Governments to the global pandemic,
and motor vehicle supply constraints.
Our strategic focus in FY22 centres on growth and efficiency
across our businesses including the integration of the 1 July
2021 small acquisition of Plan Tracker into Plan Partners.
We will continue to invest in enhancing our digital capability
and reducing our cost to serve as we look to improve
our value proposition and ensure that all of our business
segments are well placed to continue to meet the changing
needs of customers, in both business as usual circumstances
and in the face of changing and disrupted market conditions.
We expect the warehouse to be operational in FY22 to
provide longer term strategic and financial benefits whilst
recognising the accounting impacts and changes (FY22
impact to UNPATA $(4m) to $(5m)).
As a result of the strategic review of the RFS Retail business,
on 23 August 2021, we agreed to the sale of the business
via a management buy-out as the most effective and efficient
option, resulting in on-going service and support to existing
customers and staff. We expect that this transaction will be
completed in 1HFY22.
We will also be developing a number of foundational programs
which will enable us to make meaningful and lasting impact in
the area of sustainability. These will include developing the first
MMS Reconciliation Action Plan (RAP) and an Accessibility
and Inclusion Plan (AIP), creating a pathway to achieve net
zero carbon emissions for our own operations and completing
a climate risk assessment in FY22.
Finally, we again sincerely thank our people for their amazing
efforts and commitment during such a challenging time. As
always, we thank our customers and our shareholders for
their ongoing engagement and support of the Group. Take
care and stay well.
Helen Kurincic
Chair
Mike Salisbury
Managing Director &
Chief Executive Officer
Our Vision,
Purpose and Values
MMS’ vision, our values and our WHY guide the Group’s
activities, in both a business sense and in our commitment to our
communities and stakeholders, providing a framework to guide
us in our day-to-day actions and long-term decision making.
They are a guarantee to our people, our customers and
our broader stakeholders that they are always at the center
of what we do and that there is a considered and deliberate
approach to delivering value through all our activities.
Vision
Values
To build a sustainable business that creates long term
value for our people, customers and shareholders.
For our people we create value through long term job
security; career opportunities and through being a values-
based business.
For our customers we create value through the quality
services and products we deliver.
For our shareholders we deliver value through the returns /
dividends and share value growth.
Purpose
To create new ways to make people’s lives easier.
Above and beyond – always going the extra mile.
Better together – always supporting and challenging one
another to learn, grow and develop – it’s OK to disagree.
Make it count – Big or small, we make the most of
each and every opportunity and always follow through
and do what we say we will.
Own it – always taking responsibility for our decisions,
actions and interactions.
Our ‘WHY’ – Driving What’s Possible
We do this by:
– Being a leader, not a follower
– Being a smart, creative driven business
–
Investing in/sharing the thrill of BIG ideas
– Seeing things differently
– Challenging ideas and conventions
– Shaping what’s to come
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Key Metrics
Our Customers
357,388
Salary packages1
Down (1.0%)
73,375
Novated leases
Up 2.2%
33,591
Assets pool – units
Down (15.2%)
$363m
Assets managed – WDV 2
Down (18.3%)
$2,770m
Net amount financed
Up 5.9% on pcp
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Net Promoter Score (NPS)3
Up 15.4% (FY21 avg. monthly score)
$1,179m
Plan Partners client funds
under administration
Up 76.2% on pcp
1 Salary Package reduction includes the loss of
NSW LHD (16,200 customers), underlying growth
excluding this loss was 3.5%.
2
Inclusive of on and off balance sheet funding.
WDV excludes off balance sheet Maxxia Ltd assets.
3 GRS salary packaging and novated leasing customer
satisfaction measured through Net Promoter Score.
Note: Movements compared to prior corresponding period.
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Our People and Environment
1,286
Employees (FTE)
MMS Group
Down (0.7%)
as at 30 June
85%
Employee Sustainable
Engagement Score
Up 6% (Aust. result of 86% is at Global
High Performing Companies Norm)
81,928
Developing our people
(training & development hours)
Up 44.4%
1 Australian Operations only.
2 Australian and New Zealand Operations only. Board, Executive Committee and General Managers, Senior Managers and Other Managers.
3
Includes Scope 1 (fuel), Scope 2 (purchased electricity) and Scope 3 emissions (employee commute and working from home,
business travel and third party services) from offices and facilities in Australia, NZ and the UK.
Note: Movements compared to prior corresponding period.
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2.7% Absenteeism rate1 Down from 4.0%34% Women in leadership2 Consistent with FY204,191 Greenhouse gas emissions (CO2e tonnes)3 100% of Scope 1 and 2 greenhouse gas emissions offset27% Total electricity sourced from renewable sources Up from 0%
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 2021 (Group or MMS).
Directors
The Directors during the whole of the financial year and
up to the date of this report (Directors) are as follows:
Ms Helen Kurincic (Independent Non-Executive Director)
Mr Tim Poole (Independent Non-Executive Director)
Mr Bruce Akhurst (appointed Independent
Non-Executive Director effective 1 April 2021)
Mr John Bennetts (Non-Executive Director)
Mr Ross Chessari (Non-Executive Director)
Mr Ian Elliot (retired as Independent
Non-Executive Director on 1 April 2021)
Ms Kathy Parsons (Independent Non-Executive Director)
Mr Mike Salisbury (Managing Director and CEO)
Details of the qualifications, experience and special
responsibilities of the Directors are set out on pages
16 and 17.
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 2021.
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Directors’ meetings
The number of meetings held and attended by the board of Directors (Board) (including meetings of committees of the Board)
during the financial year ended 30 June 2021 were as indicated in the table below.
Director
Ms H. Kurincic (Chair) 1
Mr T. Poole (Chair) 2
Mr M. Salisbury
(Managing Director and CEO)
Mr B. Akhurst 3
Mr J. Bennetts
Mr R. Chessari
Mr I. Elliot 4
Ms K. Parsons
Director
Ms H. Kurincic (Chair) 1
Mr T. Poole (Chair) 2
Mr M. Salisbury
(Managing Director and CEO)
Mr B. Akhurst 3
Mr J. Bennetts
Mr R. Chessari
Mr I. Elliot 4
Ms K. Parsons
Board Meetings
Audit, Risk & Compliance
Committee Meetings
Remuneration & Nomination
Committee Meetings 5
Eligible to
Attend
Attended
Eligible to
Attend
Attended
Eligible to
Attend
Attended
17
17
17
5
17
17
13
17
17
17
17
5
17
17
11
17
13
13
-
2
11
-
-
13
13
13
-
2
11
-
-
13
4
4
-
-
-
4
4
4
4
4
-
-
-
4
4
4
People, Culture and
Remuneration Committee 5
Nomination Committee 5
Eligible to
Attend
Attended
Eligible to
Attend
Attended
2
2
-
2
-
-
-
2
2
2
-
2
-
-
-
2
1
1
-
1
-
-
-
-
1
1
-
1
-
-
-
-
1 Ms H Kurincic was appointed as Chair effective 20 October 2020
2 Mr T Poole stepped down as Chair effective 20 October 2020
3 Mr B Akhurst was appointed effective 1 April 2021
4 Mr I Elliot retired effective 1 April 2021
5 The Remuneration and Nomination Committee was last held on 21 September 2020 and was replaced by the separate People, Culture and
Remuneration Committee and Nomination Committee
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Directors’ Report
Principal activities
The principal activities of the Company and its controlled entities was the provision of salary packaging, novated leasing,
disability plan management and support co-ordination, asset management and related financial products and 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 2021 that are not otherwise disclosed in this Annual Report.
Results
Results for the financial year ended 30 June 2021 are as follows:
Results
2021
2020
Net profit after income tax (NPAT)
attributable to owners of the Company
$61,065,330
$1,269,264
Underlying Net profit after income tax (UNPATA) 1
$79,212,985
$69,028,191
Basic earnings per share (EPS)
Underlying earnings per share
Basic earnings per share on a diluted basis (DPS)
78.9 cents
102.4 cents
78.4 cents
1.6 cents
87.4 cents
1.6 cents
1 UNPATA is calculated as net profit before-tax but before the after-tax impact of acquisition related items and non-business operational items (as outlined within
Note 2.1 of the Financial Report).
Dividends
Dividends paid by the Company during the financial year ended 30 June 2021 are as follows:
Dividends
No final dividend for the financial year ended 30 June 2020
was declared (2019: 40.0 cents) per ordinary share (2019:
fully franked at the tax rate of 30%)
Interim dividend for the financial year ended 30 June 2021 of
30.2 cents (2020: 34.0 cents) per ordinary share paid on 26
March 2021 fully franked at the tax rate of 30% (2020: 30%)
2021
Nil
2020
$33,281,888
$23,369,094
$26,309,576
Total
$23,369,094
$59,591,464
Subsequent to the financial year ended 30 June 2021, the Directors declared a final dividend of 31.1 cents per ordinary share
(fully franked at the tax rate of 30%) to be paid on 24 September 2021, bringing the total dividend to be paid for the financial
year ended 30 June 2021 to 61.3 cents per ordinary share.
Ex-dividend date
9 September 2021
Record date for determining entitlements to the dividend
10 September 2021
Dividend payment date
24 September 2021
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Review of operations – Group
Segment Review
Group Remuneration Services
In the GRS segment UNPATA was $61.2 million, a small
increase on the previous period.
The result reflects our ongoing commitment to improve
our value proposition through increased efficiency and
enhancing the customer experience, a strategy that has
proven particularly important with COVID-19 restrictions
necessitating a transition to digital-centric customer
engagement and distribution.
Salary Packaging and Novated Leasing
The global auto supply shortage negatively impacted
revenue growth for the period. Despite increased enquiry
levels from our customers, driven in part by COVID-19 and
the shift away from public transport and shared mobility, the
lack of available new car stock meant that customer orders
have been carried forward into future periods. As at the end
of the financial year, our carryover increased by over 500%
on pre COVID-19 levels. The impact to revenue has partially
been offset by the increase in average finance amounts driven
by higher retail prices being charged by dealerships.
We expect these challenging trading conditions to continue
through FY22, with longer-term normalisation expected as
global movement restrictions and supply challenges ease.
Whilst we recorded strong growth in new salary packages
during the period, this was offset by the transition out of the
remaining New South Wales Local Health Districts, resulting
in overall salary packages under management falling
marginally below that recorded in the previous period.
The business recorded 109 new client wins during the
period, across the not for profit, health, government and
private sectors. Significantly, Maxxia was appointed to the
Commonwealth Government salary packaging panel during
the period, with the new panel arrangement commencing
from 1 July 2021 for an initial three-year period.
Increased novated lease lead generation, new salary
packages, and the increase in our client base was a positive
endorsement of our strategy to improve the customer
experience and reduce the cost to serve through digital
enhancements, particularly in the context of the challenging
operating conditions that prevailed during the year.
The MMS Group delivered an improved profit performance
in FY21, achieved against the backdrop of a highly
challenging operating environment.
This result is encouraging, whilst also reflecting the varied
and on-going impacts of COVID-19, including the way in
which we engage with our customers, the way our people
perform their roles and the challenges of constrained new
vehicle supply globally.
We took steps to ensure the sustainability and financial
security of the Group in the face of the ongoing pandemic,
including reducing all non-essential operating and capital
expenditure, whilst also developing new ways to connect
and support our remote workforce, and maintaining high
levels of service to our customers through enhanced digital
capabilities.
In the year we also executed on a number of strategic
priorities, successfully completing the restructure of our
UK business, delivering strong organic customer growth in
Plan Partners, whilst delivering on our market consolidation
strategy by completing the acquisition of NSW national plan
management provider, Plan Tracker, on 1 July 2021.
This combination of factors has made for a very complex
and challenging year. The improved profit performance on
FY20 speaks to the organisation’s ability to anticipate, react
and respond to these conditions, which is testament to the
engagement and commitment of our people.
We acknowledge the support of the Australian Government
JobKeeper Program in the first quarter of the financial year
of approximately $7.3 million after tax, ensuring we were able
to retain all staff, many of whom had been either partially
or fully stood down as a result of COVID-19. Despite the
JobKeeper support, our operating performance remains
below pre-pandemic levels, recovering to approximately
eighty percent of FY19 levels.
Financial Performance Key Indicators
– Revenue of $544.5 million, up 10.2%
– Earnings before interest, tax, depreciation
and amortisation (EBITDA) of $130.7 million,
up 31.4% on FY20
– UNPATA of $79.2 million, up 14.8%
– Return on Equity (ROE) of 31.1%
– ROCE of 33.2% which is based on underlying earnings
before interest and tax (EBIT) as the numerator
– Statutory Net Profit After Tax (NPAT) $61.1 million
up significantly on FY20
– Final dividend declared of 31.1cps
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Directors’ Report
Digital Strategy for 2021
Plan Partners
The progression of our Digital Strategy, designed to lower
costs and improve execution and distribution, was central
to our performance. A focus on digital customer engagement
and distribution was particularly important during FY21 with
traditional face to face customer interaction significantly
reduced, as a result of COVID-19 restrictions.
Initiatives during FY21 included:
– Enhanced digital functionality, with online claim take-up
for both Maxxia and RemServ increasing by 6%;
– A range of new online education and engagement hubs
were established, with live streaming and video-on-
demand used to replicate the traditional on-site experience
of approximately 20,000 customer engagement sessions;
– A Novated Leasing Digital Estimates platform designed
to provide more flexibility and convenience for customers,
demonstrating positive early adoption among customers;
– An online sign-up function for salary packaging, driven
by an ongoing focus on enabling customers to self-service
at their own convenience and to offset face to
face distribution challenges; and
–
Introduction of enhanced digital live chat functionality
substantially increased novated lease leads, with more
than 80,000 customer interactions recorded, a 30%
increase on FY21.
These initiatives were central to increasing our average
monthly Net Promoter Score (NPS) to 60, well above the
sector benchmark and a pleasing 15.4% increase from
52 in FY20.
Plan Partners delivered another strong performance for the
period, with Funds under Administration growing by more
than 76% to $1.179 billion and support co-ordination hours
increasing 43% to 49,218 hours.
Over the year, the National Disability Insurance Agency
continued to execute on the roll-out of the Scheme, with
approximately 93% of eligible individuals now in receipt
of funding. The number of people with plan management
included in their National Disability Insurance Scheme (NDIS)
plans has also continued to increase and now represents
49% of all plans, up from 40% at the same time last year.
Our focus was on creating a more efficient customer
experience through further investment in technology,
including:
– Enhancements to our online Dashboards to improve
self-service functionality;
– A redesign of our website to improve accessibility
and deliver richer educational content to customers,
carers, and service providers; and
– The introduction of live chat functionality as an
additional communication tool recording more than
11,000 sessions in the year.
We ended the year well positioned to continue to progress
our growth strategy in FY22, with a focus on expanding our
investment in people and capability, through product and
service enhancements.
Immediately post the end of the period we successfully
completed the small acquisition of Plan Tracker, a NSW
based plan management provider that represents a strong
operational and cultural alignment with our business.
The acquisition demonstrates pleasing progression of our
growth and consolidation strategy. Merger and acquisition
opportunities, with the right cultural fit, will continue to be a
strategic priority.
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MMS ANNUAL REPORT 2021 The business reported stronger than expected off-balance
sheet originations with Net Amount Financed (NAF) increasing
by 2% to $890 million. NAF was benefited by the UK
Government Coronavirus Business Interruption Loan Scheme
(CBILS), albeit at lower yields. The Asset Finance business
also successfully completed an internal re-organisation
which has resulted in a new leadership structure under the
consolidated Anglo Scottish brand.
The business also continued to execute on the strategy to
run down the existing on balance sheet lease portfolio with
no new funding being provided.
Retail Financial Services
Segment UNPATA was $2.6 million, representing a 15.1%
decrease on FY20, with solid year on year improvement in
both businesses, offset by a $1.4m adjustment for deferred
warranty income reflecting the enhanced product terms
and recent claims experience.
Retail
The Retail Financial Services Retail segment overall
performance was impacted by challenging trading conditions,
primarily associated with the impact of COVID-19 on the
used vehicle market.
Despite the conditions, work done in previous periods to
reinforce the business value proposition through enhanced
products, distribution into new markets and strengthening
stakeholder relationships continued across FY21.
We were also pleased to see the Federal Court approval
of the Davantage class action settlement.
On 23 August 2021 MMS entered into an agreement to sell
its RFS Retail business to the current management team.
This will include the sale of Davantage Group Pty Ltd (trading
as Presidian, National Warranty Company and National
Roadservice Australia) and Presidian Management Services
Pty Ltd.
The transaction is expected to close during 1HFY22.
The sale is the result of a strategic review of the RFS Retail
business including an assessment of the current regulatory
landscape and the strategic priorities of MMS. Sale to the
existing management team was the preferred and most
effective and efficient alternative arising from the review,
resulting in the ongoing service and support to the Retail
business’ existing customers and staff.
Asset Management - Australia and New Zealand
The AM ANZ segment achieved UNPATA of $15.6 million,
an increase of 44.3% on FY20, and continued to operate in
a market both buoyed and impacted by COVID-19.
A fall in new vehicle supply hampered new business volumes
and presented challenges in replacing assets that had
reached end-of-contract periods. However most customers
were retained and continued to utilise existing assets.
This was offset by strong increased demand for used
vehicles, which resulted in higher yields through the
wholesale and retail remarketing channels.
The rise in contract extensions and reductions to overall
fleet sizes led to a reduction in overall written down value
of assets under management by 11.2% to $311.2 million.
The market remains highly competitive and this is expected
to continue in FY22 and beyond.
The business recorded 30 new client wins during the
period and renewed several large contracts, including with
the NSW Government, the largest outsourced funded fleet
in the Australian market.
These wins reflect a focus in recent periods of improving
our value proposition and reinforcing our core capability
- centred around strengthening customer relationships
and improving our service provision through technology
enhancements.
Such initiatives included the introduction of a new customer
portal, Interleasing Connect, to improve the customer self-
service experience through enhanced navigation to core
fleet management and other value-add services.
Off-balance sheet funding of assets remained above 30%
concentration levels, reflecting the focus of recent periods
on increasing principal and agency funding.
Asset Management - UK
In the UK, UNPATA for FY21 was $1.4 million, an
increase of more than 100% on FY20. The result was
pleasing given economic conditions remained challenging,
with the UK heavily impacted by COVID-19 restrictions
throughout the year.
Used vehicle disposal profitability was impacted by
widespread lockdowns, as sales channels were limited
to online click-and-collect distribution during the period.
CLM reported an impairment of $2.0 million against the
carrying value of goodwill with lockdowns having a greater
than anticipated impact on maintenance management and
outsourced fleet management services.
A restructure of the UK business was completed during the
year with a new senior leadership team being established.
The restructure resulted in a cash cost of $1.8 million and
non-cash costs of $12.8 million, primarily attributable to
the acquisition of the remaining 50% equity interest in the
Maxxia Ltd joint venture. The disposal of the underperforming
EVC business was completed which approximated our
carrying value.
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MMS ANNUAL REPORT 2021 Directors’ Report
Aggregation
Despite challenging market conditions in the Broker Asset
Finance Aggregation market, the Aggregation business
performed soundly, with NAF increasing 7% compared
to FY20. The result was driven by a strong recovery in
consumer and small business confidence during the period,
and particularly the demand for vehicles and leisure goods.
Acquisition of new broker accounts combined with organic
growth by a number of large existing brokers resulted in NAF
exceeding the $1 billion threshold for only the second time in
the business’s history.
The Aggregation team focussed on maintaining relationships
with brokers and lenders throughout the COVID-19 pandemic,
which included holding virtual events and enhancing the use
of video calling, social media channels and websites to offer
improved connectivity and convenience.
This focus on relationships, a core component of our value
proposition, helped the business grow the lender panel to
32 funders during the period, providing brokers and their
customers – consumers and businesses – with even greater
choice and range of products and lending solutions and was
a key contributor to the business performance and result.
State of affairs
There were no other significant changes in the state of affairs
of the Company and its controlled entities during the financial
year ended 30 June 2021 that are not otherwise disclosed
in this Annual Report.
Risks
In order to achieve our business objectives and build a
more resilient business, the Board and Management at
MMS have a responsibility to effectively govern and manage
the financial, operational, compliance, environmental and
social risks to which it is exposed. MMS’ approach to risk
management, underpinned by the Group’s risk management
policy, framework and risk appetite, overseen by the Audit,
Risk and Compliance Committee, is embedded in our
culture and reflected in our decision making. Our approach
is to proactively manage the risks facing the business,
including the early identification and assessment of risks,
the implementation of controls and the active monitoring
and reporting of risks.
MMS bases its risk management procedures on the
Risk Management Standard AS ISO 31000:2018. As part
of normal business activities, the Senior Executives formally
identify and/or review key risks. The results of these reviews
are recorded in the MMS risks register, which is used by the
Management Risk and Compliance Committee and the
Board Audit, Risk and Compliance Committee to actively
monitor risks and mitigation strategies.
Key risks include:
– The COVID-19 pandemic and its potential ongoing
adverse impact on consumer movement and confidence,
business investment, the health and safety of our people,
asset values, vehicle/asset supply, and access to client
and MMS premises;
– Deteriorating economic conditions and related conditions
in the markets we operate in and their influence on
business and consumer sentiment, including post
Brexit impact on the UK economy, and cross border
flow of assets;
– Movements in the health of the new and used vehicle
sales markets, including the ongoing available supply
of vehicles and fluctuations in used vehicle values and
potential residual value risks;
–
Impact of recommendations arising out of the
Royal Commission into Misconduct in the Banking,
Superannuation and Financial Services Industry – including
the sector requirement to introduce a deferred sales
model across add-on financial products sold in connection
with a motor vehicle in FY22; ASIC’s consideration of the
imposition of a cap on the amount of commission that
may be paid to vehicle dealers in relation to the sale of
add-on insurance products; and forthcoming product
Design and Distribution obligations;
– Adverse change in the regulatory conditions relating
to consumer lending products and similar change to
the policy settings relating to products and services
administrated or offered by the Group;
– Adverse regulatory policy changes impacting the
business including for example Fringe Benefits Tax
legislation or NDIS legislation;
– Capital market constraints impacting the security
and ongoing commitment of funding in the automotive
segment;
– The loss or non-renewal of a material client or clients
to the business;
– Competitive intensity due to new entrants, mergers
between existing competitors and/or due to the failure
to respond to changes in market conditions, customer
demands or technology changes;
– Climate change risks, including those associated with
the transport sector’s transition to a low carbon future;
– The threat of a cybersecurity attack, including during a
period where many MMS employees are working remotely;
– The non-performance or failure of key technology and
operating systems;
– The occurrence of a significant breach of MMS’s privacy
obligations;
– The non-performance or failure of MMS key suppliers; and
– The inherent credit risk that exists within the asset
financing businesses.
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Outlook and likely developments
Events subsequent to balance date
We expect COVID-19 to continue to challenge the
environments within which we operate, with the unpredictable
imposition of restrictions expected to remain, impacting our
operations and remaining a material risk during FY22.
The constrained auto supply conditions that impacted the
market in FY21, are also expected to continue throughout
FY22 and potentially beyond.
In response, the focus for the GRS segment will be to
continue to work to enhance our digital distribution channels
and increase choice and convenience for customers. Further
customer insights research will also be pursued in order to
tailor our offering to meet customers specific needs to ensure
our point of competitive difference remains compelling.
Other than the matters disclosed at Note 8.9 of the Financial
Report and below, there were no material events subsequent
to reporting date.
On 1 July 2021, the Group successfully completed the small
acquisition of Plan Tracker, a NSW based plan management
provider.
On 23 August 2021 the Group executed an agreement with
a Management Buy-Out consortium to dispose of the RFS
Retail business. Completion is expected to occur in 1HFY22.
The Divestment is expected to result in an estimated loss of
($1.8m). Further details on the financial impact to the Group
are included in the Events Subsequent to the Reporting Date
section in the Notes to the Financial Statements (Note 8.9).
We expect the warehouse to be operational in FY22 to
provide longer term strategic and financial benefits whilst
recognising the accounting impacts and changes (FY22
impact to UNPATA $(4m) to $(5m)).
In the Plan Partners business, we will continue to invest
in technologies that support our customer’s experience.
Continued focus on both customer acquisition and retention
is expected to further expand our customer base, in addition
to the successful integration of Plan Tracker into the group.
A targeted approach to further market consolidation will
continue to be a strategic priority.
In the AM ANZ business, we will continue to focus on
leveraging the abnormal conditions in the used vehicle
market, whilst reinforcing our value proposition through
further technology enhancements and introducing new driver
products and services.
As COVID-19 lockdowns ease in the UK, more favourable
trading conditions are expected. Following the successful
management restructure, a key concentration for the business
will be the growth of the broker business and the profitable
realisation of Maxxia Limited end of lease vehicles.
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Directors’ experience
and special responsibilities
Helen Kurincic MBA, FAICD, FGIA
Appointed: 15 September 2018 (Non-Executive Director), 20 October 2020 (Chair)
Positions: Chair of the Board, Member of the Audit, Risk and Compliance Committee,
Member of the People, Culture and Remuneration Committee,
Chair of the Nomination Committee
Ms Kurincic is Non-Executive Chair of Integral Diagnostics Limited, Non-Executive Director
of Estia Health Limited, HBF Health Limited and the Victorian Clinical Genetics Service.
Formerly, Ms Kurincic was the Chief Operating Officer and Director of Genesis Care from
its earliest inception, creating and developing the first and largest radiation oncology and
cardiology business across Australia. She has also formerly held Board roles across the
publicly listed, private, not-for-profit and government sectors as well as being the former
CEO of Benetas and Heart Care Victoria. Ms Kurincic is a Fellow of the Australian Institute
of Company Directors and Governance Institute of Australia. Ms Kurincic is considered an
independent director under the Company’s definition of independence.
Tim Poole B Comm
Appointed: 17 December 2013 (Non-Executive Director),
28 October 2015 – 20 October 2020 (Chair)
Positions: Non-Executive Director, Member of the Audit, Risk and Compliance Committee,
Member of the People, Culture and Remuneration Committee,
Member of the Nomination Committee
Mr Poole is currently Chair of Aurizon Holdings Limited and a Non-Executive Director
of Reece Limited. Mr Poole was previously an executive of the unlisted infrastructure
and private equity manager, Hastings Funds Management (1995 to 2007), including
being the Managing Director from 2005. He was formerly the Non-Executive Chair of
Lifestyle Communities 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.
Bruce Akhurst B Ec (Hons), LLB, FAICD
Appointed: 1 April 2021
Positions: Non-Executive Director, Chair of the People, Culture and Remuneration
Committee, Member of the Audit, Risk and Compliance Committee,
Member of the Nomination Committee
Mr Akhurst is currently Non-Executive Director, Chair of the Risk and Compliance
Committee and a member of the People and Remuneration Committee and Technology
Committee at Tabcorp Holdings Limited. Mr Akhurst is also Chair of the Peter McCallum
Cancer Foundation and Council Member of RMIT University chairing the Technology
and Infrastructure Committee. Mr Akhurst was previously Non-Executive Director and a
member of the People, Culture and Remuneration Committee of Vocus Group Limited,
CEO of Sensis, Group MD and General Counsel of Telstra and a Partner of Mallesons
Stephen Jaques.
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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 a
number of successful Australian companies. He owns businesses in varied industries
including technology and finance. Mr Bennetts is a Non-Executive Director of Sacred
Heart Mission. He was a founder of Cellestis Limited and private equity investment firm,
Mooroolbark Investments Pty Limited (M-Group). He has also provided corporate advisory
services to a range of companies in Australia and Asia. Prior to the establishment of
M-Group, he was a senior executive of pioneering Australian multinational IT company,
Datacraft Limited and also practised as a commercial lawyer.
Ross Chessari LLB, M Tax
Appointed: 1 December 2003
Positions: Non-Executive Director
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.
Kathy Parsons B Comm
Appointed: 22 May 2020
Positions: Non-Executive Director, Chair of the Audit, Risk and Compliance Committee,
Member of the Remuneration and Nomination Committee,
Member of the People, Culture and Remuneration Committee
Ms Parsons is a former audit partner at Ernst & Young where she spent time as a partner
in the firm’s US, UK and Australian practices. In addition to her audit client responsibilities
she was part of the firm’s Oceania Assurance Leadership team as the Professional
Practice Director with responsibility for assurance quality and risk management in the
region. Ms Parsons is considered an independent Director under the Company’s
definition of independence.
Ashley Conn B Comm, CA, MBA
Appointed: 5 October 2020
Positions: Chief Financial Officer and Company Secretary
Mr Conn joined MMS in October 2020 as CFO and has over 20 years of financial services
experience. Previously Mr. Conn was the CFO of CSG Ltd and prior to that had been an
investment banker working in Australia and New York predominantly for Goldman Sachs
and Morgan Stanley.
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Remuneration Report (audited)
Letter from the Chair of the People,
Culture and Remuneration Committee
Dear Shareholders,
On behalf of the People, Culture and Remuneration
Committee (PCRC) and Board of McMillan Shakespeare
Limited (the Company), I am pleased to present the Financial
Year 2021 (FY21) Remuneration Report (Report).
During the year, the Remuneration and Nomination
Committee was replaced by the People, Culture and
Remuneration Committee and the Nomination Committee.
The role of the PCRC is to review and have oversight
of people, culture and remuneration matters and make
recommendations to the Board.
At MMS, we are committed to achieving long-term,
sustainable returns for our shareholders by leveraging
scale, introducing new technology and pursuing value
accretive, strategic growth opportunities in a rapidly changing
landscape. In achieving this, we don’t provide short-term
incentives to Executives but instead operate a Long-Term
Incentive Plan (LTIP) which includes performance hurdles
comprising both financial and strategic targets.
Overview of Company performance
In FY21 an improved profit performance for the Group was
achieved in a highly challenging operating environment,
still impacted by the ongoing COVID-19 pandemic. Group
UNPATA grew by 14.8% to $79.2 million, with revenue up
10.2% to $544.5m. A fully franked dividend of 61.3 cents
per share was delivered for the year.
The result reflected the on-going impacts of COVID-19
on the businesses such as the global automotive supply
constraints, as well as the benefits from execution of key
strategic priorities including restructure of the United Kingdom
business, Plan Partners growth and improved customer
engagement through an ongoing shift toward
digital distribution. Development of a securitisation and
funding warehouse for the business progressed well in
FY21 and remains on track, with the first volumes expected
to be delivered during FY22.
FY21 remuneration outcomes
While Group earnings out-performed against plan and PCP,
the Earnings per Share and Return on Capital Employed
targets for the FY19 and FY20 LTIP grants relating to FY21
performance hurdles were not achieved and thus did not vest.
However, the FY20 LTIP ROCE performance hurdle relating
to FY22 and the FY21 LTIP grant are estimated to have a
possibility of vesting.
Strategic targets accounted for 30% of FY21 LTIP, 20%
of the plan has qualified for vesting. Further details are
provided in Section 5(b).
Impact to remuneration as a result of COVID-19
The Board and management are focused on the sustainability
and financial health of the Company for the longer term.
As a result of COVID-19, measures were put in place to
protect its long-term future and to put affected business units
in a position to stand back up as quickly as possible when
circumstances permit, by retaining our talented workforce.
As announced previously in FY20, effective from 13 April 2020
to 6 July 2020, the Company moved into a partial or full stand
down of the workforce in most parts of the business where
there had been a material change in workload. We matched
our workforce to the activity in each of our business units
and to support our customers.
The Company received JobKeeper for the period from April
to September 2020 and this subsidy enabled the retention
of all staff. JobKeeper has been included in the setting and
calculation of the achievement of the financial performance
hurdles under the LTIP.
There were no increases in fixed remuneration in FY21.
Remuneration framework changes in FY21 and FY22
To maintain the alignment to the long-term strategy of
MMS, changes to the LTI scheme were implemented in FY21
which were disclosed within the FY20 remuneration report.
These changes are further detailed in section 4(c).
From FY22, strategic targets are to account for 40% of
the LTIP with the remaining 60% to continue to represent
financial targets.
Changes in KMP / MMSG leadership
Mark Blackburn, CFO and Company Secretary, stepped
down from his position on 1 December 2020 after nine years
in the role and with the Company. Mr Ashley Conn assumed
the role of Chief Financial Officer and Company Secretary on
5 October 2020.
Geoffrey Kruyt, Chief Operating Officer, resigned on 10 June
2021 with an effective termination date of 10 December 2021.
No rights or options under the LTI vested during the year
and all unvested rights will be forfeited when his employment
formally terminates on 10 December 2021.
Ian Elliot resigned as an independent Non-Executive Director
of the Company and the Chair of the Remuneration and
Nomination Committee effective 1 April 2021. I was announced
as an independent Non-Executive Director of the Company
and assumed the role of Chair of the People, Culture and
Remuneration Committee effective from 1 April 2021.
We thank you for your support and welcome your feedback.
Bruce Akhurst
Non-Executive Chair of the People,
Culture and Remuneration Committee
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1. Contents
Section
Key Management Personnel
FY21 Remuneration Snapshot
Executive Remuneration Framework
and Policy – Overview
FY21 Outcomes and the Link to
Performance
Remuneration Governance
Executive Remuneration Tables
Non-Executive Director Remuneration
Reference
Section 2
Page 19
Section 3
Page 20
Section 4
Page 21
Section 5
Page 27
Section 6
Page 29
Section 7
Page 31
Section 8
Page 35
2. Key Management Personnel
This Report has been prepared in accordance with
Section 300A of the Corporations Act 2001 and outlines
the remuneration arrangements in place for the Key
Management Personnel (KMP) of the Company. This
comprises all Non-Executive Directors and those senior
employees who have authority and responsibility for planning,
directing and controlling the activities of the Company.
The table below sets out the Company’s Executive KMP
and Non-Executive Directors during the 2021 Financial Year.
Executive KMP
Name
Position
Mr M Salisbury
Chief Executive Officer (CEO)
and Managing Director
Mr M Blackburn
Group Chief Financial
Officer (CFO) and
Company Secretary
Term as
KMP in
2021
Full year
Part year 1
Mr A Conn
Group Chief Financial Officer
(CFO) and Company Secretary
Part year 2
Mr G Kruyt
Chief Operating Officer (COO)
Full year 3
Non-Executive Directors
Name
Position
Term as
NED in
2021
Ms H. Kurincic
Non-Executive Chair 4
Full year
Mr T. Poole
Non-Executive Director 4
Full year
Mr B Akhurst
Non-Executive Director
Part year 5
Mr J. Bennetts
Non-Executive Director
Full year
Mr R. Chessari
Non-Executive Director
Full year
Mr I. Elliot
Non-Executive Director
Part year 6
Ms K. Parsons
Non-Executive Director
Full year
1 Resigned 1 December 2020
2 Appointed 5 October 2020
3 Resigned on 10 June 2021 with an effective termination date of
10 December 2021
4 Ms H. Kurincic was appointed Chair on 20 October 2020 at the
conclusion of the Annual General Meeting replacing Mr T. Poole
5 Appointed 1 April 2021
6 Resigned 1 April 2021
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MMS ANNUAL REPORT 2021
Remuneration Report (audited)
3. FY21 Remuneration Snapshot
Company Performance
The Company continued to be impacted by COVID-19 during FY21. The GRS and Asset Management ANZ businesses
experienced a faster than anticipated recovery in novated lease sales and strong returns in remarketing values on used vehicles.
Plan Partners continued to grow its market share and customer base while ongoing investment in technology continues to
deliver productivity and efficiency gains.
In the UK, CLM continued to be negatively impacted by the lockdowns with reduced activity within the fleet control and
rental businesses. However, the UK asset finance businesses were able to increase net amounts financed (NAF) through the
origination of the UK Government CBILS (Coronavirus Business Interruption Loan Scheme) loans.
The Board set strategic goals as part of the FY21 LTIP. The completion of the capital light strategy in the UK, delivery of core
business growth through enhanced digital capability, novated leasing conversion rate improvement and the acceleration of
customer growth in Plan Partners were all achieved.
KMP Remuneration
Fixed pay
Long-term incentive
Fixed pay adjustments are made to reflect general market
conditions and remuneration offered to comparable roles
within related industries.
The Company does not pay short-term incentives to its KMP
and instead operate a LTIP based on financial and strategic
performance hurdles.
As outlined in the 2020 report, with COVID-19 and the
current economic environment, the Managing Director
and Group Executives reduced their remuneration by
approximately 24% from the 13 April 2020 to 6 July 2020.
Reflecting the link between organisation performance and
executive reward, MMS performance hurdles have not been
satisfied and no performance options or rights will vest in
respect of the FY19 three year or FY20 two year LTIP.
No fixed remuneration increases were applied in respect
of FY21.
Furthermore, the earnings per share performance hurdles
for the FY22 and FY23 performance periods are unlikely
to be achieved. However, the return on capital employed
performance hurdles in respect of the FY22 and FY23
performance periods are considered likely to be achieved.
In relation to the strategic targets in the FY21 LTIP, 20% of
the plan has qualified for vesting.
As announced in the 2020 report, several changes have
been made for the LTIP for FY21 to further align the
Company with market practice and stakeholder expectations
(refer Note 4(c)).
Non-Executive Director Fees
Non-Executive Director fees were not increased during FY21.
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MMS ANNUAL REPORT 2021 4. Executive Remuneration Framework and Policy – Overview
(a) FY21 Strategic Pillars and Design Principles
Our Strategic Pillars
Winning in the Core
Brave New World
One Business
Telling Our Story
– New business wins
and retention
– Industry leading product
and service delivery
– Improved productivity
– Acquisitions
– New markets
– New customer
segments
– Group-wide business
collaboration
– Business synergies
– Integration of
new business
– Aligned strategies
– Internal staff
communications
strategy
– Branding and marketing
– B2B client
development events
Customer
Centricity
Our People
Technology
Platforms
Our Executive Remuneration
Strategy and Policy
Design
Principles
MMS’ executive remuneration strategy and policies support our
strategic pillars. Our executive remuneration policy is designed to
align the interests of executives and shareholders while attracting
and retaining key executive talent who are critical to the growth
and success of the Company.
– Attraction and retention of key talent through fair and
market competitive fixed remuneration for the role.
– Aligning reward with the creation of sustainable, long-term
value for the Company’s shareholders. Our executives do
not receive short-term incentives (only LTIPs) and a minimum
shareholding requirement has been introduced.
– Incentivise high performance through stretch LTIP
performance measures aligned with the Company’s strategy.
– Retention of key talent. Vesting of our long-term incentives
are subject to executives’ continued employment with
the Company.
21
MMS ANNUAL REPORT 2021
Remuneration Report (audited)
(b) Remuneration framework cycle
In relation to the FY21 framework, fixed remuneration was provided in addition to a long-term incentive granted
100% as Performance Rights, based on 70% financial measures and 30% as strategic objectives.
Our Executive Remuneration
Framework (Snapshot)
35% EPS & ROCE
35% EPS & ROCE
Performance qualified rights
but not settled for 1 year
30% Strategic Measures
Performance qualified rights
but not settled for 2 years
Fixed remuneration
(Cash salary +
Superannuation)
n
o
i
t
r
o
p
d
r
a
w
a
d
n
a
t
n
e
m
e
E
l
e
v
i
t
n
e
c
n
i
m
r
e
t
-
g
n
o
L
y
r
a
a
S
l
Years
1
2
3
22
MMS ANNUAL REPORT 2021
(c) Executive remuneration framework
The PCRC and Board of the Company are committed to ensuring our executive remuneration framework remains
fit-for-purpose going forward.
The below table describes each element of pay within the framework and the strategic link.
Our Executive Remuneration Framework
Element
Strategic Link
Fixed remuneration
Fixed remuneration comprises base salary and superannuation
(and, in some cases, non-cash benefits such as motor vehicle
lease payments and car parking benefits)
Fixed remuneration of the Executive KMP is set to attract and retain
the calibre of talent required to drive outcomes for the Company’s
shareholders and deliver on the Company’s strategy.
The PCRC reviews fixed remuneration annually (or on promotion) to
ensure fixed remuneration levels remain fair, appropriate and market
competitive.
Long-term incentive
Incentives are delivered through indeterminate rights in a LTIP,
with Performance Rights measured over a 3 year period and
subject to performance measures.
By delivering variable reward wholly as a long-term incentive,
our framework encourages sustainable decision making and a
focus on the long-term health of the business (including the
interests of customers), to drive long term value for shareholders.
Vesting of the LTIP is subject to the achievement of performance
hurdles to drive a high-performance culture amongst our
Executive Team.
The ROCE and EPS hurdles are aligned with our strategic pillars
and our focus on both earnings and capital optimisation.
Non-financial measures align to shorter term business objectives,
measured through a combination of better capital management,
increased productivity and growth.
Short-term incentive
MMS does not offer short term incentives and only provides fixed
remuneration and long-term incentives.
Each element of remuneration is outlined in more detail below:
Fixed annual remuneration in FY21
Fixed remuneration of the Executive KMP is reviewed by the PCRC annually (or on promotion) to determine whether
changes are appropriate in order to maintain market competitiveness and attract and retain the talent required to drive
outcomes for the Company’s shareholders. Fixed remuneration is determined on an individual basis having regard to:
– The individual’s role, duties and responsibilities and performance levels;
– General market conditions; and
– Remuneration offered to comparable roles within related industries.
In considering fixed remuneration changes, the PCRC has regard to external benchmarking and generally positions
the fixed remuneration at the market median of comparable roles within comparator companies (taking into account
revenue, employee numbers and market capitalisation).
Due to the economic environment and impact of COVID-19, no fixed annual remuneration increases were made to
the Executive KMP in respect of FY21.
23
MMS ANNUAL REPORT 2021
Remuneration Report (audited)
LTIP awarded in FY21
In FY21, the Executive KMP were granted Performance Rights in four equal parts of 17.5% each aggregating to 70.0%
where each part was measured against financial targets and the remaining 30.0% measured against strategic targets.
Rolling annual grants will be made under the Company’s LTIP going forward (as against larger amounts which vest every
three years) to align with market practice.
LTIP changes in FY21
As part of the review of the LTIP program and as announced in the 2020 report, we have made the following changes
in the LTIP effective in FY21:
LTIP FY21 changes
Transition from fair value to face
value allocation methodology
To align with market practice among other ASX listed organisations, the Board
has decided to issue Rights under the LTIP on a face value (market value of a
share) basis from FY21.
The move from a fair value methodology to a face value methodology also aligns
with shareholders and advisors’ preference for LTIP awards to be calculated using
the face value of the underlying shares, rather than the fair value of the Right.
The move from a fair value to face value methodology required a one-off
conversion of the stated ‘Target’ LTIP opportunity. It is noted that there is
no change to the overall remuneration package.
Move to an indeterminate right
as the LTI instrument
The shift to indeterminate rights provides the Company with flexibility to settle
LTIP grants in either shares or cash payment depending on the Company’s
circumstance and preference at the time of exercise/escrow lifting. Rights are
however generally expected to be settled in shares.
Awards to generally remain on-
foot for ‘good’ leavers
Good Leavers are generally able to retain their awards on a pro rata basis
whilst Bad Leavers forfeit all unvested awards at the time they cease employment.
The Board retains discretion to determine a different treatment taking into
consideration the circumstances of the departure, which may include an
appropriate deferral period.
Specific details on the Performance Rights granted to Executive KMP during FY21 are provided in section 7(b) of the report,
and the table below outlines the terms of the grants:
24
MMS ANNUAL REPORT 2021
Detailed summary – FY21 LTIP grant
Element
Description
Opportunity levels
(% of fixed remuneration)
The opportunity levels offered to the Executive KMP in FY21 were:
− 98% of fixed remuneration for the CEO;
− 98% of fixed remuneration for the CFO; and
− 98% of fixed remuneration for the COO.
Opportunity levels increased in FY21 from 75% to 98% to recognise the change from a fair
value to face value methodology.
Allocation methodology
Performance Rights: Rights are allocated on a face value basis from FY21.
Performance period
Two and three years in respect of meeting financial targets. One year in relation to strategic targets.
The vesting of any LTIP is subject to continued employment with the Company on the date that
the Company’s financial report is lodged with the ASX for the year ending 30 June 2023.
Performance hurdles
Subject to the Executive remaining employed for the performance period, vesting of the
Performance Rights is subject to the achievement of two performance hurdles:
a) Financial targets
− The Company’s CAGR in underlying EPS which applies to 35.0% of the Performance
Rights; and
− Absolute average ROCE over the performance period which applies to 35.0%
of the Performance Rights.
The following vesting schedules apply to Performance Rights (with vesting on a straight-line
basis between each level of performance).
Underlying EPS CAGR
Performance
Period
Level of
performance (%)
Percentage of
awards vesting
Allocation of
total grant
FY21 and FY22
FY21, FY22
and FY23
<11.5%
-
11.5% –15.5%
50%–100%
<9.5%
-
9.5% –13.5%
50%–100%
-
17.5%
-
17.5%
Average ROCE
Performance
Period
Level of
performance (%)
Percentage of
awards vesting
Allocation of
total grant
FY21 and FY22
FY21, FY22
and FY23
<29.5%
-
29.5% – 32.5%
50%–100%
<31.5%
-
31.5% – 34.5%
50%–100%
-
17.5%
-
17.5%
Calculation of Underlying EPS (CAGR) shall be based on comparing the underlying EPS
results in the final year of the performance period to the Underlying EPS results for FY20 as
the base year (excluding any impairment losses recognised in the base year).
The ROCE performance condition is based on the Company’s average ROCE over the
performance period.
25
MMS ANNUAL REPORT 2021 Remuneration Report (audited)
Element
Description
Performance hurdles
(continued)
Process for assessing
performance conditions
b) Strategic objectives
Strategic objectives are set by the Board across key strategic areas in FY21 as follows:
− Capital management (including, amongst other things, a focus on the delivery and
operation of the Company’s warehouse funding initiative during FY21 and the rate at
which the Company can move to capital light funding in the UK);
− Productivity (including, amongst other things, delivery of productivity benefits and core
business growth through the Company’s enhanced digital capability); and
− Growth (including, amongst other things, a focus on acceleration of growth initiatives
with an emphasis on accelerating customer growth in Plan Partners and the delivery
of organic extensions).
To determine the full extent to which the performance hurdles are satisfied, the PCRC relies
on the audited financial results and vesting is determined in accordance with the LTIP Rules.
The PCRC believes this method of assessment provides an appropriate and objective
assessment of performance. The PCRC adjusts for impairments recognised in year while the
impact and timing of any capital raisings and acquisitions are adjusted for to ensure metrics
are correctly adjusted to take into account these changes.
In the event that the Executive takes approved unpaid leave for a period exceeding three
months during FY21, FY22 or FY23, the vesting criteria outlined above with respect to the
performance hurdles and the executive’s continued employment will be deemed on a pro-rata
basis to reflect the period of continuous service during the relevant financial year, unless the
Board determines otherwise.
Voting and dividend entitlements
No voting rights or dividend entitlements attach to the Performance Rights.
Malus (i.e. forfeiture of awards)
If the Board determines that an act of fraud, defalcation or gross misconduct has occurred in
relation to the affairs of the Group, the Participant will forfeit any right or interest in the Shares,
Rights or Options or other entitlements under the Plan.
Treatment upon cessation
of employment
If the Executive leaves employment with the Company prior to the date specified in the Invitation
Letter, the Rights will lapse without any payment to the employee (subject to the discretion of the
Board).
Change of control
On a change of control, the Board has discretion to waive the performance conditions attached to
the Performance Rights.
Hedging
No Executive can enter a transaction that is designed or intended to hedge the Executive’s
exposure to any unvested option or right. Executives are required to provide declarations to the
Board on their compliance with this policy from time to time.
M
M
S
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
1
26
(d) Pay mix
Reward Mix
We set out below the mix between fixed remuneration and LTIP at maximum for current Executive KMP.
The Board believes this is an appropriate mix to ensure that Executives are focused on generating value for
shareholders over the long term (based on targeted financial metrics).
Fixed remuneration
Long-term incentive
Chief Executive Officer
Chief Financial Officer
Chief Operating Officer
50.5%
49.5%
50.5%
49.5%
50.5%
49.5%
5. FY21 Outcomes and the Link to Performance
(a) MMS financial performance FY19 to FY21
The table below sets out the Company’s performance over the past three years in respect of key financial and
non-financial indicators.
Indices
FY21
FY20
FY19
Net profit attributable to Company members
$61,065,330
$1,269,264
$63,672,478
Underlying net profit after income tax (UNPATA)1
$79,212,985
$69,028,191
$88,696,719
NPAT growth
UNPATA growth
Dividends paid
Dividend payout ratio2
Share price as at 30 June
Market capitalisation (A$m)
Earnings per share (cents)
Underlying earnings per share (cents)3
ROCE4
>100%
14.8%
(98.0%)
(22.2%)
26.6%
(5.1%)
$23,369,094
$59,591,464
$61,173,277
66.0%
$12.95
$1,002.1
78.9
102.4
33%
42.4%
$9.08
$702.6
1.6
87.4
20%
69.0%
$12.21
$1,016.0
77.0
107.3
21%
1 UNPATA is calculated as net profit after-tax but before the after-tax impact of acquisition related items and non-business operational items
(as outlined within Note 2.1 of the Financial Report).
2 Dividend payout ratio is calculated as total dividends declared for the financial year divided by UNPATA for the financial year. FY21 payout ratio is calculated
on UNPATA excluding JobKeeper of $7.3m (net of tax) (FY20: $7.0m net of tax).
3 Underlying earnings per share is based on UNPATA.
4 Return on capital employed (ROCE) is adjusted to reflect twelve months’ trading for acquisitions made in the financial year based on underlying
earnings before interest and tax (EBIT). Underlying EBIT is before the pre-tax impact of acquisition related and non-business operational items
(as outlined within Note 2.1 of the Financial Report). Capital employed (excluding lease liabilities) used in the calculations includes the add back of
impairment of acquired intangible asset charges incurred in the respective financial period.
M
M
S
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
1
27
Remuneration Report (audited)
(b) Company performance outcomes linked to the LTIP
The following table outlines the performance against the LTIP financial performance measures that have been
used across the KMP in FY21.
Alignment between Performance and Remuneration
FY19 Grants – 3 Year
Performance LTIP Metric
FY181
FY19
FY202
FY21
Metric
Achieved
ROCE 2,3
N/A
17.7%
10.4%
29.5%
19.2%
Underlying EPS growth (cps)2
113.2
80.8
24.8
81.0
(10.5%)
Vesting
Target
Range
22.25% -
24.25%
6.0% -
14%
Vesting
Target Met
No
No
FY20 Grant – 2 & 3 Year
Performance LTIP Metrics
FY191
FY202
FY21
Metric
Achieved
Period
Vesting Target
Range
Vesting
Target Met
ROCE 2,3
N/A
10.4% 29.5%
20.0%
Underlying EPS growth (cps)2
107.3
24.8
81.0
(13.1%)
2 year
21.5% - 23.0%
No
3 year
21.5% - 24.0%
Expected
2 year
6.0% - 10.5%
No
3 year
6.0% - 10.5% Not expected
FY21 Grant – 2 & 3 Year
Performance LTIP Metrics
FY201,2
FY21
Metric
Achieved
Period
Vesting Target
Range
Vesting
Target Met
ROCE 2,3
N/A
29.5%
29.5%
Underlying EPS growth (cps)2
87.4
81.0
(7.3%)
FY21 Grant –
Tranches for strategic targets
Successful development and implementation of funding warehouse
Execute capital light strategy in the UK
Delivery of core business growth through the Group’s
enhanced digital capability
Novated leasing conversion rate improvement
Accelerating customer growth in Plan Partners
Delivery of organic extensions in GRS or Plan Partners
Total
1 Base year for underlying EPS.
2 year
29.5% - 32.5%
Expected
3 year
31.5% - 34.5%
Expected
2 year
11.5% - 15.5% Not expected
3 year
9.5% - 13.5% Not expected
Allocation
of Grant
Vesting
Target Met
Vesting
Allocation
5%
5%
5%
5%
5%
5%
30%
-
Yes
Yes
Yes
Yes
-
-
-
5%
5%
5%
5%
-
20%
2 ROCE and EPS metrics include impairment charges and UK restructuring costs as well as one-off UK contract loss in the UK in FY19.
3 ROCE is based on the average in the performance period.
The Rights that have qualified and are subject to meeting the relevant employment conditions in the table above will
result in 45,571 ordinary MMS shares being provided to Mr M. Salisbury, Mr G. Kruyt and Mr A. Conn and will be issued by
the MMS Employee Share Trust.
M
M
S
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
1
28
6. Remuneration Governance
(a) Responsibility for setting remuneration
Responsibility for setting a remuneration policy and determining Executive and Non-Executive Director remuneration
rests with the Board.
The Board has established the PCRC and its objectives are to oversee the formulation and implementation of the
remuneration policy and make recommendations to the Board on remuneration policies and packages applicable
to the Directors and Executive KMP. For further details on the composition and responsibilities of the PCRC,
please refer to the Corporate Governance Statement on our website www.mmsg.com.au/overview/#governance.
The following chart outlines key stakeholders in the governance of remuneration at MMS.
Remuneration
Consultants
Board
Provide independent advice
information and recommendations
relevant to remuneration decisions.
Responsibility for setting
a remuneration policy and
determining Executive and Non-
Executive Director remuneration
rests with the Board.
Shareholder
and Advisory Bodies
Includes consultation, investor and
proxy meetings and engagement
at the Annual General Meeting.
People, Culture
and Remuneration
Committee and
Nomination Committee
Assist the Board to achieve
its objective by making
recommendations to the Board
in relation to its composition and
recruitment, retention, remuneration
and succession planning for
Directors and Senior Executives.
Audit, Risk and
Compliance Committee
Support the People, Culture and
Remuneration Committee by
providing relevant information as
required for incentive awards.
(b) Use of independent remuneration consultant
The PCRC obtains external independent advice from remuneration consultants when required, and will use it to guide
and inform their decision-making. During FY21, no remuneration recommendations (as defined in the Corporations
Act 2001 (Cth)) were received.
(c) Board discretion
The Board has adopted a set of guiding principles when it considers adjustments to performance outcomes under the LTIP.
The process for adjustments and principles applied are:
1. Transparency: for any adjustments made, MMS will provide clear disclosure and rationale. Where possible, disclosures
will be made in advance that may result in necessary adjustments ensuring early communication to shareholders.
2. Timing of adjustments: adjustments will be made only to reward outcomes at the time of vesting, applying to both
positive and negative adjustments.
3. Shareholders and management alignment: adjustments will be made in the interests of balancing the
shareholder and management alignment ensuring consistency in Company objectives.
M
M
S
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
1
29
Remuneration Report (audited)
(d) Details of executive service agreements
The table below sets out key information in respect of the service agreements of the CEO and other Executive KMP.
Element
Duration
Notice period 1
Description
Ongoing
− CEO: 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.
− Executive KMP: 6 month’s 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 in respect of the
above notice periods.
No contracted retirement benefits are in place with any of the Company’s Executives.
Restraint of trade
A restraint period not exceeding 6 months.
1
It is noted that Mr G. Kruyt, COO, announced his resignation on 10 June 2021 with an effective termination date of 10 December 2021.
(e) Minimum shareholding requirements
The Company has minimum shareholding requirements for its Executive KMP and Non-Executive Directors to
facilitate share ownership and encourage an ‘ownership’ mindset. Refer section 7(f) for further details on current
senior executive KMP and director share ownership.
The table below sets out key information in respect of this Policy. Please refer to the ‘Share Ownership and
Retention Policy’ on the Company’s website for further detail www.mmsg.com.au/overview/#governance.
Directors and officers
Description
Requirement
Executive KMP
50% of one year’s
fixed remuneration
The later of:
− 5 years from September 2017; or
− 5 years from date of commencement as Executive KMP
Non-Executive Directors1
100% of one
year’s base
director fees
The later of:
− 5 years from September 2017; or
− 5 years from date of commencement as Non-Executive Director
1 Share Ownership and Retention Policy reviewed and updated 26 June 2020.
30
MMS ANNUAL REPORT 2021 7 Executive Remuneration Tables
(a) Executive remuneration
The following table sets out the executive remuneration for FY21 in accordance with the requirements
of the Accounting Standards and Corporations Act 2001 (Cth).
Cash
salary/
fees 9
$
Annual
Leave
Entitle-
ments
Other
Benefits 1
Super-
annuation
Long
Service
Leave
Options
and
Rights 2,3
Total
remuneration
Percentage of
remuneration
as options
and rights
Value of
remuneration
received 3,4
Value of
options
exercised
and sold 8
$
$
$
$
$
$
%
$
FY21
876,309
21,175
30,892
25,000
15,282
300,294
1,268,952
24%
932,201
FY20
844,502
(14,395)
33,530
25,479
19,456
(81,110)
827,462
FY21
658,732
15,248
-
21,694
11,056
(33,751)
672,979
FY20
647,743
(10,688)
311,130
47,705
36,802
(74,202)
958,490
n/a
n/a
n/a
903,511
930,331
680,426
-
1,006,577
664,522
FY21
562,897
(144,675)
-
10,013
(96,863)
80,215
411,587
19%
572,910
-
FY20
633,220
28,552
6,382
22,747
13,203
25,937
730,041
4%
662,349
788,973
FY21
407,218
12,514
FY20
-
-
-
-
15,853
6,996
60,222
502,803
12%
423,071
-
-
-
-
n/a
-
FY21 2,505,156
(95,738)
30,892
72,560
(63,529)
406,980
2,856,321
14%
2,608,608
-
-
-
FY20 2,125,465
3,469
351,042
95,931
69,461
(129,375) 2,515,993
-
2,572,437
2,383,826
$
-
Executive KMP
Mr M. Salisbury
(CEO and
Managing Director)
Mr G. Kruyt 7
(COO)
Mr M. Blackburn 5,6
(Group CFO and
Company Secretary)
Mr A. Conn 5
(Group CFO and
Company Secretary)
Total
Remuneration
1 Other benefits reflect motor vehicle packaging payments, travel benefits, housing allowance and car parking benefits.
2 The equity value comprises the value of Performance Options and Rights issued. No shares were issued to any Non-Executive Director (and no Performance
Options or Rights were granted to any Non-Executive Director) during the financial years ended 30 June 2020 and 30 June 2021. The value of Performance
Options and Rights issued to Executive KMP (as disclosed above) are the assessed fair values (less any payments for the options) at the date that the
Performance Options and Rights 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 pricing model that takes into account the exercise price, the expected term of the option or right,
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 or right.
3 The expense in FY21 comprises the fair value expense of Performance Rights granted in FY20 and FY21 based on the number of Rights estimated to vest based
on the Company’s performance against the EPS and ROCE performance targets (subject to continuing employment) with vesting periods in FY22 and FY23.
4 Value of remuneration received comprises salary, benefits and superannuation salary packaged, annual and long service leave used and bonuses paid in the year
(excludes the value of Options or Rights).
5 Mr M. Blackburn resigned and ended service on 1 December 2020 while Mr A. Conn was appointed and commenced service on 5 October 2020.
6 The value of Options and Rights of Mr M. Blackburn in FY20 is based on vesting entitlement of Rights granted in FY20 that is measured against strategic targets
less the reversal of Performance Options and Rights granted in FY18 and FY19.
7 Mr G. Kruyt resigned on 10 June 2021 with an effective termination date of 10 December 2021 with the Options and Rights expense representing the reversal of
Performance Rights granted in FY20.
8 The value of options in 2020 relates to Performance Options granted in FY15 and were exercised and sold in FY20. These options were subject to a 12 month
holding lock from vesting date in August 2017 that was effectively extended to April 2019 when the Company terminated its proposed merger with Eclipx Ltd.
The value is based on the amount realised on disposal less the exercise price (excludes value of remuneration received).
9 Cash salary/fees are lower in FY20 due to KMP taking pay reductions during the period 13 April 2020 to 6 July 2020.
31
MMS ANNUAL REPORT 2021
Remuneration Report (audited)
(b) Detail of LTIP securities
The terms and conditions of each grant of Performance Options and Performance Rights to Executive KMP
affecting their remuneration in FY21 and each relevant future financial year are set out below.
Grant Date
Type of LTI securities
Expiry Date
Share price at
valuation date
Exercise
Price
Value per option
at grant date 1
Date Exercisable
02/07/18
3 Year Performance
Options
12 months following the
3 Year Lodgement Date
$16.14
$16.64
$2.54
3 Year Lodgement Date
(expected to be September 2021)
02/07/18
3 Year Performance
Rights
Date that the
FY21 financial statements
are lodged
$16.14
-
$14.12
3 Year Lodgement Date
(expected to be September 2021)
23/10/182
3 Year Performance
Options
12 months following the
3 Year Lodgement Date
$15.90
$16.64
$2.25
3 Year Lodgement Date
(expected to be September 2021)
23/10/182
3 Year Performance
Rights
01/07/19
3 Year Performance
Rights
22/10/193
3 Year Performance
Rights
Date that the
FY21 financial statements
are lodged
Date that the
FY22 financial statements
are lodged
Date that the
FY22 financial statements
are lodged
$15.90
$12.37
$14.85
18/12/19
1 Year Performance
Rights
31 October 2020
$12.90
20/10/204
3 Year Performance
Rights
30/10/20
3 Year Performance
Rights
Date that the
FY23 financial statements
are lodged
Date that the
FY23 financial statements
are lodged
$9.46
$9.34
-
-
-
-
-
-
$13.95
3 Year Lodgement Date
(expected to be September 2021)
$10.18
3 Year Lodgement Date
(expected to be September 2022)
$12.83
3 Year Lodgement Date
(expected to be September 2022)
$12.27
31 October 2020
$8.51
3 Year Lodgement Date
(expected to be September 2023)
$8.40
3 Year Lodgement Date
(expected to be September 2023)
1 Reflects the fair value at grant date for options or rights granted as part of remuneration, calculated in accordance with AASB2 Share-based Payment.
2 The issue to Mr Mike Salisbury occurred on 23 October 2018, after shareholder approval at the Company’s AGM.
3 The issue to Mr Mike Salisbury occurred on 22 October 2019, after shareholder approval at the Company’s AGM.
4 The issue to Mr Mike Salisbury occurred on 20 October 2020, after shareholder approval at the Company’s AGM.
32
MMS ANNUAL REPORT 2021 Details of the LTIP securities over ordinary shares in the Company provided as remuneration to each
Executive KMP are set out below.
Name
Date of
grant
Type of LTIP securities
Value of
securities
granted
during the
year $
Number of
securities
vested
during year
Number of
securities
granted
Vested %
Number of
securities
forfeited/
lapsed
during the
year
Year in
which
securities
may vest
Maximum
value of
securities
yet to vest 1
$
Forfeited or
lapsed %
23/10/18
3 Year Performance Options
105,272
23/10/18
3 Year Performance Rights
18,937
22/10/19
3 Year Performance Rights
69,178
-
-
-
20/10/20
3 Year Performance Rights
103,763
$8.51
02/07/18
3 Year Performance Options
78,201
02/07/18
3 Year Performance Rights
14,067
01/07/19
3 Year Performance Rights
50,491
-
-
-
30/10/20
3 Year Performance Rights
75,733
$8.40
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(105,272)
100%
FY22
(18,937)
100%
FY22
-
-
(31,131)
45%
FY23
290,766
(10,376)
10%
FY24
663,909
(78,201)
100%
FY22
(14,067)
100%
FY22
-
-
(22,721)
45%
FY23
282,783
(7,573)
10%
FY24
572,610
18/12/19
1 Year Performance Rights
16,899
-
(16,899)
100%
-
-
FY21
-
30/10/20
3 Year Performance Rights
48,362
$8.40
-
-
(4,836)
10%
FY24
305,438
M
r
M
.
S
a
l
i
s
b
u
r
y
M
r
G
.
K
r
u
y
t
2
M
r
M
.
l
B
a
c
k
b
u
r
n
M
r
A
C
o
n
n
1 There is no minimum value attached to the securities at the vesting date. Maximum value is defined as the fair value at grant less amount expensed.
2 All rights granted to Mr G. Kruyt will be forfeited on his effective termination date of 10 December 2021.
(c) Movement of LTIP securities granted
The table below reconciles the Performance Options and Performance Rights held by each Executive KMP
from the beginning to the end of FY21.
Name
LTI Securities
Balance at
the start of
the year
Number
Granted
during
year 1
Vested
during the
year
Exercised
during the
year
Forfeited
during
year
Other
changes
during
the year
Vested and
exercisable
at the end
of the year
Unvested
at the end
of the year
Mr M. Salisbury
Mr G. Kruyt2
Performance Options
105,272
-
Performance Rights
88,115
103,763
Performance Options
78,201
-
Performance Rights
64,558
75,733
-
-
-
-
-
-
-
-
(105,272)
(60,444)
(78,201)
(44,361)
Mr M. Blackburn
Performance Rights
16,899
-
(16,899)
(16,899)
-
Mr A. Conn
Performance Rights
-
48,362
-
-
(4,836)
-
-
-
-
-
-
-
-
-
-
-
-
-
131,434
-
95,930
-
43,526
1 Granted pursuant the Company’s LTIP
2 All rights granted to Mr G. Kruyt will be forfeited on his effective termination date of 10 December 2021.
33
MMS ANNUAL REPORT 2021
Remuneration Report (audited)
(d) Shares issued on Performance Options
No ordinary shares in the Company were issued following the exercise of Performance Options by Executive KMP during
FY21. Any shares issued on exercise of options were acquired on market under the terms of the Company’s Share Trust Plan.
(e) Other transactions and balances with KMP
There were no loans made during the year, or remaining unsettled at 30 June 2021, between the Company and its KMP
and/or their related parties.
(f) Executive KMP and director share ownership
The following table sets out the number of shares held directly, indirectly or beneficially by Directors and
Executive KMP (including their related parties).
Balance
at the start
of the year
Shares
acquired
through
option
exercise
Other
changes
during
the year
Balance
at the end
of the year
Value of
Shares1
$
Minimum
Shareholding
Requirement2
$
Non-Executive Directors
Ms H. Kurincic
Mr T. Poole
Mr B. Akhurst
20,000
30,000
-
Mr J. Bennetts
3,343,025
Mr R. Chessari
6,050,941
Mr I. Elliot
Ms K. Parsons
Executive KMP
1,254
1,400
Mr M. Salisbury
16,526
Mr G. Kruyt
Mr M. Blackburn
Mr A. Conn
7,000
3,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
25,000
20,000
30,000
25,000
259,000
210,125
388,500
137,500
323,750
147,500
(275,000)
3,068,025
39,730,924
127,500
-
-
6,600
-
-
-
-
6,050,941
78,359,686
125,000
1,254
8,000
16,239
N/A3
103,600
150,000
16,526
214,012
469,629
7,000
3,000
-
90,650
38,850
N/A4
N/A5
-
297,000
1 Calculated as the number of shares multiplied by the share price as at 30 June 2021 of $12.95.
2 Minimum shareholding required as outlined under section 6(e).
3 Mr I. Elliot resigned as a Non-Executive Director of the Company with effect from 1 April 2021.
4 Mr G. Kruyt resigned on 10 June 2021 with an effective termination date of 10 December 2021.
5 Mr M. Blackburn resigned and ended service on 1 December 2020.
34
MMS ANNUAL REPORT 2021
8. Non-Executive Director remuneration
(a) Remuneration policy and arrangements
The Board sets the fees for the Chair and the other Non-Executive Directors. The Board’s policy is to remunerate the
Chair and Non-Executive Directors:
− at market competitive rates, having regard to the fees paid for comparable companies, the need to attract
Directors of the requisite calibre and expertise and their workloads (taking into account the size and complexity of the
Company’s operations and their responsibility for the stewardship of the Company); and
− in a matter which preserves and safeguards their independence. Neither the Chair nor the other Non-Executive
Directors are entitled to any performance-related pay. The primary focus of the Board is on the long-term strategic
direction of the Company.
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).
(b) Fees and other benefits
The table below sets out the annual fees payable (inclusive of superannuation) to the directors of MMS. The fee schedule
has been determined having regard to fees paid to comparable roles within MMS’ peers.
Fees are inclusive of superannuation, contributions required under legislation are made by the Company on behalf of
Non-Executive Directors. There is no scheme for the payment of retirement benefits or termination payments (other than
payments relating to accrued superannuation entitlements).
Role
Chair
Non-executive Directors
Audit, Risk and Compliance
Committee
People, Culture and Remuneration
Committee
Nomination Committee
Chair
Membership
Chair
Membership
Chair
Membership
FY21 Fee
$210,125
$115,000
$25,000
$12,500
$20,000
$10,000
$Nil
$Nil
35
MMS ANNUAL REPORT 2021 Remuneration Report (audited)
(c) Non-Executive Director remuneration – statutory disclosure
The fees paid or payable to the directors of the Company in respect of the 2021 financial year are set out below.
Cash
salary/fees 1
Other
Benefits 2
Superannuation
Total value of
remuneration
received
Total
remuneration
Non-Executive Directors
Ms H. Kurincic
(Non-Executive Chair)
Mr T. Poole
(Non-Executive Director)
Mr B. Akhurst3
(Non-Executive Director)
Mr J. Bennetts
(Non-Executive Director)
Mr R. Chessari
(Non-Executive Director)
Mr I. Elliot4
(Non-Executive Director)
Ms K. Parsons5
(Non-Executive Director)
Total Remuneration
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
FY21
FY20
$
171,797
119,292
145,669
143,921
33,676
-
116,438
87,329
114,155
84,471
92,466
117,123
133,630
10,763
807,831
562,899
$
-
-
-
-
-
-
-
-
-
1,146
-
-
1,454
-
1,454
1,146
$
16,321
11,333
13,839
13,673
3,199
-
11,062
8,296
10,845
8,134
8,784
11,127
12,833
1,023
76,883
53,586
$
188,118
130,625
159,508
157,594
36,875
-
127,500
95,625
125,000
93,751
101,250
128,250
147,917
11,786
886,168
617,631
$
188,118
130,625
159,508
157,594
36,875
-
127,500
95,625
125,000
93,751
101,250
128,250
147,917
11,786
886,168
617,631
1 Cash salary/fees are lower in FY20 due to Directors taking pay reductions during the period 13 April 2020 to 6 July 2020.
2 Other benefits comprise salary packaging.
3 Mr B. Akhurst was appointed as a Non-Executive Director of the Company with effect from 1 April 2021.
4 Mr I. Elliot resigned as a Non-Executive Director of the Company with effect from 1 April 2021.
5 Ms K. Parsons was appointed as a Non-Executive Director of the Company with effect from 22 May 2020.
Signed in accordance with a resolution of the Directors made pursuant to s.298(2) of the Corporations Act 2001.
On behalf of the Directors.
Bruce Akhurst
Non-Executive Chair of the PCRC
Helen Kurincic
Non-Executive Chair of the Board
End of the audited Remuneration Report
36
MMS ANNUAL REPORT 2021
Directors’ Report
Unissued shares
At the date of this Annual Report, unissued ordinary shares of the Company under option are:
Option class
No. of unissued ordinary shares
Exercise price
Expiry date
Voluntary Options
12,500
$13.45
30 September 2021
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 Securities Exchange Limited (ASX) in accordance with section
205G(1) of the Corporations Act 2001 (Cth), is as follows:
Director
Ms H. Kurincic (Chair)
Mr. T. Poole
Mr M. Salisbury
(Managing Director)
Mr B. Akhurst
Mr J. Bennetts
Mr R. Chessari
Ms K. Parsons
Rights
Options
Ordinary shares
-
-
131,434
-
-
-
-
-
-
-
-
-
-
-
20,000
30,000
16,526
25,000
3,068,025
6,050,941
8,000
No Director during FY21, 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 other than
for payment of $27,468 for the provision of IT services on arms’ length terms by Mailguard Pty Ltd, of which John Bennetts
has an economic interest.
M
M
S
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
1
37
Directors’ Report
Environmental regulations
The Directors believe that the Company and its controlled entities have adequate systems in place for the management
of relevant environmental requirements and are not aware of any breach of those environmental requirements as they apply
to the Company and its controlled entities.
Indemnification and insurance
Under the Company’s Constitution, the Company indemnifies the Directors and officers of the Company and its wholly-owned
subsidiaries to the 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 entered into a Deed of Access, Indemnity and Insurance (Deed) with each Director and each Company
Secretary, 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.
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 FY21, are disclosed in Note 8.6 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 (ARCC) has approved that work in advance, as appropriate.
The ARCC has reviewed the services other than the statutory audit provided by Grant Thornton Audit Pty Ltd during the
financial year ended 30 June 2021. The other services related to non-statutory audit services and other assurance services
which are 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).
Corporate governance practices
Our full corporate governance statement is available on our website at www.mmsg.com.au/overview/#governance
M
M
S
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
1
38
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 103 of this Annual Report.
Directors’ declaration
The Directors have received and considered written representations from the Chief Executive Officer and the
Chief Financial Officer in accordance with the ASX Principles. The written representations confirmed that:
– the financial reports are complete and present a true and fair view, in all material respects, of the financial condition
and operating results of the Company and its controlled entities and are in accordance with all relevant accounting
standards; and
– the above statement is founded on a sound system of risk management and internal compliance and control that
implements the policies adopted by the Board and that compliance and control is operating efficiently and effectively
in all material respects.
Signed in accordance with a resolution of the Directors.
Helen Kurincic
Chair
24 August 2021
Melbourne, Australia
Mike Salisbury
Managing Director &
Chief Executive Officer
M
M
S
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
1
39
Directors’ Report
Five year summary
Five-Year Summary 2017 – 2021
20219
20209
2019
2018
2017
Financial Performance
Group
Revenue ($m)
NPAT ($m)
UNPATA ($m) 1
Group Remuneration Services segment
Segment revenue ($m)
Segment NPAT ($m)
Segment UNPATA ($m) 3
Asset Management segment
Segment revenue ($m) 2
Segment NPAT ($m)
Segment UNPATA ($m) 3
Retail Financial Services segment
Segment revenue ($m)
Segment NPAT ($m)
Segment UNPATA ($m) 3
Shareholder Value
Dividends per share (cps)
Dividend payout ratio (%) 4
Basic earnings per share (cps)
Return on Equity (%)5
Underlying earnings per share (cps) 6
Return on capital employed (%) 5
Other
Employees (FTE) 7
Employee engagement score (%) 8
544.5
61.1
79.2
228.8
61.2
61.2
256.3
(0.6)
17.0
59.2
2.0
2.6
61.3
66
78.9
31
102.4
33
1286
85
494.0
1.3
69.0
214.8
60.9
60.9
229.3
(9.9)
6.0
49.5
(47.3)
3.0
34.0
42
1.6
21
87.4
20
1295
868
549.7
63.7
88.7
221.9
66.1
66.1
245.8
12.4
17.2
80.7
(14.0)
6.4
74.0
69
77.0
23
107.3
21
545.4
50.3
93.5
207.7
64.1
64.1
243.7
25.5
21.6
92.5
(38.5)
8.6
73.0
65
60.9
4
113.2
20
1334
79
1,283
No survey
523.4
67.9
87.2
189.7
58.3
58.3
226.1
16.6
17.5
106.0
(5.0)
12.4
66.0
63
81.6
24
104.8
20
1,195
76
1 FY21 UNPATA excludes UK restructuring costs of $14.6m and impairment of CLM goodwill for $2.0m. FY20 UNPATA excludes one-off adjustments for Deferred
Income and DAC of $9.8m (post tax), class action settlement and legal costs of $5.1m (post tax) and share buyback costs $0.4m (post tax).
2 Revenue in 2017 has been re-stated to recognise the proceeds from the sale of motor vehicles as revenue to replace profit from the sale of motor vehicles.
3 Segment UNPATA does not include unallocated public company costs and interest from Group treasury funds.
4 FY21 payout ratio is calculated on UNPATA excluding JobKeeper of $7.3m (net of tax) (FY20: $7.0m net of tax).
5 Prior period comparatives have been restated to measure ROE and ROCE, which are based on UNPATA and underlying EBIT respectively to exclude the after-tax
impact of acquisition related items and non-business operational items. Equity and capital employed used in the calculations includes the add-back of impairment
of acquired intangible asset charges incurred in the respective financial period.
6 Underlying earnings per share is based on UNPATA.
7 As at 30 June.
8 Employee engagement survey conducted biennially with Pulse Survey’s conducted in intervening periods. The 2020 result represents the May 2020 Pulse
Survey Sustainability Engagement score.
9
Includes JobKeeper benefit of $7.3m (net of tax) for FY21 (FY20: $7.0m net of tax) which has been recognised as an offset against employee benefit expenses.
M
M
S
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
1
40
Financial
Report
FOR THE YEAR ENDED 30 JUNE 2021
41
Statements of Profit or Loss and
Other Comprehensive Income
FOR THE YEAR ENDED 30 JUNE 2021
Consolidated Group
Parent Entity
Note
2021
$’000
2020
$’000
2021
$’000
2020
$’000
Revenue
Revenue from contracts with customers
2.2
544,222
493,116
Interest income
Dividends received
Revenue from continuing operations
Fair value on previously held equity interest
Expenses
Employee benefit expenses
Leasing and vehicle management expenses
Brokerage commissions and incentives
Depreciation and amortisation expenses
Net claims incurred
Other operating expenses
Finance costs
2.3
6.1
2.4
2.4
229
-
846
-
544,451
493,962
1,805
-
(130,690)
(141,189)
(27,489)
(67,113)
(12,264)
(46,473)
(8,386)
(128,879)
(103,312)
(30,892)
(83,290)
(13,591)
(47,794)
(8,786)
Operational expenses excluding impairment & other non-operational items
(433,604)
(416,544)
(13,541)
(2,270)
305
-
-
(15,506)
(50,139)
(3,822)
-
-
1,459
(52,502)
(449,110)
(469,046)
24,916
(22,585)
Impairment of intangible assets
Impairment of financial assets
Gain on loss of control of subsidiary
Related party loan forgiveness
Contingent consideration fair valuation
Impairment & other non-operational items
Total expenses
Profit / (loss) before income tax
Income tax (expense) / benefit
Net profit / (loss) for the year
Net profit / (loss) attributable to:
Owners of the Company
Non-controlling interest
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
Reclassification of exchange differences on disposal of foreign operation
Income tax on other comprehensive income
Other comprehensive income / (loss) for the year
Total comprehensive income / (loss) for the year
Total comprehensive income / (loss) for the year is attributable to:
Owners of the Company
Non-controlling interest
Total comprehensive income / (loss) for the year
Basic earnings per share (cents)
Diluted earnings per share (cents)
2.4
2.4
2.5
2.6
2.6
97,146
(36,081)
61,065
61,065
-
61,065
1,514
652
34
(454)
1,746
62,811
62,811
-
62,811
78.9
78.4
-
106
128,109
128,215
-
-
154
59,591
59,745
-
(1,006)
(905)
-
-
-
-
(1,196)
(161)
(2,363)
-
-
-
-
-
(2,048)
(512)
(3,465)
-
(5,541)
(77,969)
-
52,640
-
47,099
44,736
172,951
687
-
-
-
(77,969)
(81,434)
(21,689)
643
2,331
173,638
(21,046)
1,269
1,062
2,331
(524)
542
-
114
132
173,638
(21,046)
-
-
173,638
(21,046)
-
-
-
-
-
(89)
-
-
27
(62)
2,463
173,638
(21,108)
173,638
(21,108)
-
-
173,638
(21,108)
1,401
1,062
2,463
1.6
1.6
42
The above Statements of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.
MMS ANNUAL REPORT 2021
Statements of Financial Position
AS AT 30 JUNE 2021
Current assets
Cash and cash equivalents
Trade and other receivables
Finance lease receivables
Assets under operating lease
Inventories
Prepayments
Deferred acquisition costs
Total current assets
Non-current assets
Finance lease receivables
Assets under operating lease
Right-of-use assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Deferred acquisition costs
Other financial assets
Total non-current assets
TOTAL ASSETS
Current liabilities
Trade and other payables
Contract liabilities
Other liabilities
Provisions
Unearned premium liability
Current tax liability
Borrowings
Lease liabilities
Derivative financial instruments
Total current liabilities
Non-current liabilities
Unearned premium liability
Provisions
Borrowings
Lease liabilities
Deferred tax liabilities
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
Equity
Issued capital
Reserves
Retained earnings
TOTAL EQUITY
Consolidated Group
Parent Entity
Note
2021
$’000
2020
$’000
2021
$’000
2020
$’000
4.1
3.2
3.3
3.4
3.6
3.7
3.3
3.4
3.5
3.1
2.5
3.7
6.2
3.8
3.9
3.9
3.10
3.7
4.2
3.5
3.7
3.10
4.2
3.5
2.5
4.5
157,997
40,975
21,478
62,877
15,312
4,660
5,218
308,517
29,770
147,441
40,511
4,174
134,852
13,753
6,912
-
377,413
685,930
102,085
7,181
8,090
13,722
19,142
4,148
23,886
1,602
213
180,069
22,748
1,484
152,444
47,273
12,717
236,666
416,735
269,195
76,257
(9,510)
202,448
269,195
91,408
70,502
43,936
62,272
7,715
3,299
5,206
284,338
69,150
153,670
15,953
5,269
140,413
10,122
6,641
-
401,218
685,556
94,859
8,098
2,341
14,521
18,083
5,274
11,706
6,523
1,678
163,083
20,483
1,608
251,914
17,913
1,669
293,587
456,670
228,886
76,419
(12,078)
164,545
228,886
74
481
-
-
-
19
-
574
-
-
-
-
-
-
-
253,303
253,303
253,877
12,372
-
-
-
-
2,824
5,761
-
-
20,957
-
-
3,991
-
942
4,933
25,890
227,987
76,257
1,254
150,476
227,987
220
12,863
-
-
-
20
-
13,103
-
-
-
-
-
-
-
211,123
211,123
224,226
128,324
-
-
-
-
3,433
5,761
-
-
137,518
-
-
9,115
-
814
9,929
147,447
76,779
76,419
360
-
76,779
The above Statements of Financial Position should be read in conjunction with the accompanying notes.
43
MMS ANNUAL REPORT 2021
Statements of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2021
2021
Equity as at beginning of year
Net profit for the year
Other comprehensive income
for the year
Total comprehensive income
for the year
Transactions with owners in
their capacity as owners:
Share-based expense
Treasury shares
Reclassification of share-based
payment reserve
Adjustment to acquisition reserve
Dividends paid
Note
4.5
5.1
4.5
4.6
Consolidated Group
Issued
capital
$’000
Retained
earnings
$’000
Share-based
payment
reserve
$’000
Cash
flow hedge
reserve
$’000
Foreign
currency
translation
reserve
$’000
Acquisition
reserve
$’000
Total
$’000
76,419
164,545
360
(1,288)
(4,018)
(7,132)
228,886
-
-
-
-
(162)
-
-
-
61,065
-
61,065
-
-
207
-
(23,369)
-
-
-
-
1,060
1,060
1,101
-
(207)
-
-
1,254
-
-
-
-
-
-
686
686
-
-
-
-
-
-
-
-
-
-
-
(72)
-
61,065
1,746
62,811
1,101
(162)
-
(72)
(23,369)
Equity as at 30 June 2021
76,257
202,448
(228)
(3,332)
(7,204)
269,195
2020
Issued
capital
$’000
Retained
earnings
$’000
Note
Consolidated Group
Share-
based
payment
reserve
$’000
Cash flow
hedge
reserve
$’000
Foreign
currency
translation
reserve
$’000
Equity as at beginning of year
4.5
135,868
237,956
872
(878)
(4,560)
Net profit for the year
Other comprehensive income /
(loss) for the year
Total comprehensive income /
(loss) for the year
Transactions with owners in
their capacity as owners:
Share buyback
Share-based expense
Dividends paid
Exercise of employee options
Acquisition of Outside
Equity Interest
Capital reduction
-
-
-
1,269
-
1,269
-
-
-
-
(410)
(410)
-
542
542
4.5
5.1
4.6
4.5
(10,366)
(69,650)
-
-
-
(59,591)
5,478
-
8.1(d)
4.5
-
(54,561)
-
54,561
-
(512)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Outside
equity
interest
$’000
(194)
1,062
-
1,062
-
-
-
-
Acquisition
reserve
$’000
-
-
-
-
-
-
-
-
Total
$’000
369,064
2,331
132
2,463
(80,016)
(512)
(59,591)
5,478
(868)
-
(7,132)
-
(8,000)
-
Equity as at 30 June 2020
76,419
164,545
360
(1,288)
(4,018)
-
(7,132)
228,886
44
The above Statements of Changes in Equity should be read in conjunction with the accompanying notes.
MMS ANNUAL REPORT 2021
Statements of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2021
Issued
capital
$’000
76,419
-
-
-
-
(162)
-
-
76,257
Issued
capital
$’000
135,868
-
-
-
2021
Equity as at beginning of year
Profit attributable to owners
of the Company
Other comprehensive income
for the year
Total comprehensive income
for the year
Transactions with owners in
their capacity as owners:
Share-based expense
Treasury shares
Reclassification of share-based
payment reserve
Dividends paid
Equity as at 30 June 2021
2020
Equity as at beginning of year
Loss attributable to owners
of the Company
Other comprehensive loss
for the year
Total comprehensive loss
for the year
Transactions with owners in
their capacity as owners:
Share buyback
Share-based expense
Dividends paid
Exercise of employee options
Capital reduction
Equity as at 30 June 2020
Note
4.5
5.1
4.6
Note
4.5
4.5
5.1
4.6
4.5
4.5
Parent
Retained
earnings
$’000
Share-based
payment reserve
$’000
Cash flow
hedge reserve
$’000
-
360
173,638
-
173,638
-
-
207
(23,369)
150,476
Retained
earnings
$’000
95,726
(21,046)
-
(21,046)
-
-
-
1,101
-
(207)
-
1,254
-
-
-
-
-
-
-
-
-
Parent
Share-based
payment reserve
$’000
Cash flow
hedge reserve
$’000
872
-
-
-
-
(512)
-
-
-
360
62
-
(62)
(62)
-
-
-
-
-
-
Total
$’000
76,779
173,638
-
173,638
1,101
(162)
-
(23,369)
227,987
Total
$’000
232,528
(21,046)
(62)
(21,108)
(80,016)
(512)
(59,591)
5,478
-
76,779
(10,366)
(69,650)
-
-
5,478
(54,561)
76,419
-
(59,591)
-
54,561
-
The above Statements of Changes in Equity should be read in conjunction with the accompanying notes.
45
MMS ANNUAL REPORT 2021
Statements of Cash Flows
FOR THE YEAR ENDED 30 JUNE 2021
Consolidated Group
Parent Entity
Note
2021
$’000
2020
$’000
2021
$’000
2020
$’000
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Proceeds from sale of assets previously under lease
Proceeds from sale of lease portfolio
Payments for assets under lease
Government subsidies
Interest received
Interest paid
Dividends received
Income taxes paid
551,400
(371,002)
81,758
34,909
(76,942)
14,809
229
(9,938)
-
(30,258)
554,699
(293,697)
67,878
111,474
(232,357)
7,696
846
(9,168)
-
(18,911)
Net cash from operating activities
4.1
194,965
188,460
Cash flows from investing activities
Payments for capitalised software
Payments for plant and equipment
Payment to acquire Outside Equity Interest
Payments for joint venture subordinated loans
Cash lost from disposal of subsidiary,
net of cash consideration received
Cash acquired from business combination,
net of cash consideration paid
Net cash used in investing activities
Cash flows from financing activities
Dividends paid by parent entity
Proceeds from borrowings
Repayments of borrowings
Payments for lease liabilities
Payments for borrowing costs
Payments for share buyback
Payments for share expenses
Proceeds from exercise of employee options
Payment for treasury shares
Proceeds from loans from controlled entities
3.1
8.1(d)
6.2
6.1
4.6
4.1
4.1
4.5
4.5
4.5
(7,572)
(2,367)
-
(3,520)
(565)
5,963
(8,061)
(23,369)
124,792
(215,070)
(6,726)
-
-
-
-
(162)
-
(13,494)
(1,212)
(8,000)
(4,596)
-
-
(27,302)
(59,591)
107,949
(171,086)
(7,923)
(1,828)
(80,016)
(548)
5,478
-
-
-
(514)
-
-
-
-
106
(161)
23,369
-
22,800
-
-
-
-
-
-
-
(23,369)
-
(5,124)
-
-
-
-
-
(162)
5,709
-
(4,556)
-
-
-
-
154
(501)
59,591
-
54,688
-
-
-
-
-
-
-
(59,591)
-
(4,481)
-
-
(80,016)
(548)
5,478
-
75,646
Net cash used in financing activities
(120,535)
(207,565)
(22,946)
(63,512)
Effect of exchange changes on cash and cash equivalents
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
220
66,589
91,408
53
(46,354)
137,762
Cash and cash equivalents at end of year
4.1
157,997
91,408
-
-
(146)
(8,824)
220
74
9,044
220
46
The above Statements of Cash Flows should be read in conjunction with the accompanying notes.
MMS ANNUAL REPORT 2021
1 Introduction to the Report
The financial report of McMillan Shakespeare Limited
(Company or parent entity) in respect of the Company and the
entities it controlled at the reporting date or during the year ended
30 June 2021 (Group or Consolidated Group) was authorised in
accordance with a resolution of the Directors on 24 August 2021.
Reporting entity
The Company is a for-profit company limited by shares which is
incorporated and domiciled in Australia and listed on the Australian
Securities Exchange (ASX).
Basis of preparation and accounting policies
The financial report is a general purpose financial report which
has been prepared in accordance with the Australian Accounting
Standards and Interpretations issued by the Australian Accounting
Standards Board (AASB) and the Corporations Act 2001 (Cth).
The financial report also complies with the International Financial
Reporting Standards (IFRS) as issued by the International
Accounting Standards Board.
Except for cash flow information, the financial statements have
been prepared on an accrual and historical cost basis except for
certain financial instruments measured at fair value as explained
in the notes to the financial statements (the Notes).
The accounting policies adopted are consistent with those of
the previous financial year unless stated otherwise. The financial
report presents reclassified comparative information where
required for consistency with current year’s presentation.
Key judgements, estimates and assumptions
The preparation of the financial statements requires judgement
and the use of estimates and assumptions in applying the Group’s
accounting policies, which affects amounts reported for assets,
liabilities, income and expenses.
Judgements, estimates and assumptions are continuously
evaluated and are based on:
> historical experience
> current market conditions
> reasonable expectations of future events
Actual results may differ and uncertainty about these judgements,
estimates and assumptions could result in a material adjustment
to the carrying amount of assets or liabilities in future periods.
Significant judgement was required to derive reasonable estimates
of the significant uncertainties including COVID-19 on future
business plans, operating capability and cash flow projections.
The key areas involving judgement or significant estimates and
assumptions are set out below:
Note
Item
3.1
Intangible assets
Judgements, Estimates
and Assumptions
Assessment of
recoverable amount
3.4
3.7
Assets under operating
lease
Lease assets
residual value
Unearned premium
liability and deferred
acquisition costs
Pattern of incidence
of risk
4.3(b)
Trade and other
receivables and finance
lease receivables
Impairment of
financial assets
Detailed information about each of these judgements,
estimates and assumptions are included in the Notes together
with information about the basis of calculation for each affected
line item in the financial statements.
47
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021 The Notes
The Notes include information which is required to understand the
financial statements and is material and relevant to the operations,
financial performance and position of the Group. Information is
considered material and relevant where:
> the amount in question is significant because of its size
or nature;
> it is important for understanding the results of the Group; or
> it helps explain the impact of significant changes in the
Group’s business.
The Notes are organised into the following sections:
2. Performance
Information on the performance of the Group, including segment
results, earnings per share (EPS) and income tax.
3. Assets and Liabilities
Details the assets used in the Group’s operations and the
liabilities incurred as a result.
4. Capital Management
Information relating to the Group’s capital structure and financing
as well as the Group’s exposure to various financial risks.
5. Employee Remuneration and Benefits
Information relating to remuneration and benefits provided to
employees and key management personnel.
6. Group Structure
Information relating to subsidiaries and other material investments
of the Group.
7. Unrecognised Items
Information about items that are not recognised in the financial
statements but could potentially have a significant impact on
the Group’s financial performance or position in the future.
8. Other Disclosures
Other disclosures required by Australian Accounting Standards
that are considered relevant to understanding the Group’s
financial performance or position.
Basis of consolidation
Subsidiaries are consolidated from the date the Group gains
control until the date on which control ceases. 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.
The Group’s share of results of its equity accounted investments
is included in the consolidated financial statements from the date
that significant influence or joint control commences until the
date that significant influence or joint control ceases. The Group’s
share of all intercompany balances, transactions and unrealised
profits are eliminated.
The financial statements of subsidiaries are prepared for the same
reporting period as the parent entity, using consistent accounting
policies.
Foreign currency
The consolidated financial statements of the Group are presented
in Australian dollars which is the 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”).
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 the profit or loss.
Non-monetary items are not retranslated at reporting date and are
measured at historical cost (being the exchange rates at the dates
of the initial transaction), except for non-monetary items measured
at fair value which are translated using the exchange rates at the
date when fair value was determined.
Group companies
On consolidation of the financial results and affairs of foreign
operations, assets and liabilities are translated to the presentation
currency at prevailing exchange rates at reporting date and
income and expenses for the year at average exchange rates. The
resulting exchange differences on consolidation are recognised in
other comprehensive income (OCI) and accumulated in equity. On
disposal of a foreign operation, the component of OCI relating to
that particular foreign operation is recognised in profit or loss.
Accounting policies
Accounting policies that summarise the classification, recognition
and measurement basis of financial statement line items and that
are relevant to the understanding of the consolidated financial
statements are provided throughout the notes.
Current versus non-current classification
Assets and liabilities are presented 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 no 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.
Rounding of amounts
The amounts contained in the financial report have been rounded
to the nearest thousand dollars (unless specifically stated to be
otherwise) under the option available to the Company under ASIC
Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191.
48
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
2 Performance
2.1 SEGMENT REPORTING
Description of segments
The Group has identified its operating segments based on the internal reports reviewed and used by the Group’s Chief Operating 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, type of customer and distribution methods.
The Group’s reportable segments are set out below:
Reportable Segment
Services provided
Group Remuneration Services (GRS)
Administrative services in respect of salary packaging and facilitates the settlement
of motor vehicle novated leases for customers but does not provide financing
Ancillary services associated with motor vehicle novated lease products
Plan management and support coordination services to participants in the
National Disability Insurance Scheme (NDIS)
Asset Management (AM)
Financing and ancillary management services associated with motor vehicles, commercial
vehicles and equipment
Retail Financial Services (RFS)
Retail brokerage services, aggregation of finance originations and extended warranty cover,
but does not provide financing
Underlying net profit after-tax and amortisation (UNPATA), being net profit after-tax but before the after-tax impact of acquisition related and
non-business operational items (as outlined in the following tables), is the key measure by which management monitors the performance of
the Segments. Segment revenue and expenses are reported as attributable to the shareholders of the Company and excludes outside equity
interests share.
49
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021 2.1 SEGMENT REPORTING (CONTINUED)
2021
GRS
$’000
AM
$’000
RFS
$’000
Unallocated1
$’000
Consolidated
$’000
Revenue from contracts with customers
228,780
256,240
59,202
Interest revenue
Segment revenue
Timing of revenue recognition:
– At a point in time
– Over time
Segment revenue from contracts with customers
UNPATA
Reconciliation to statutory net profit after-tax
attributable to members of the parent entity
Amortisation of intangible assets acquired on
business combination
United Kingdom (UK) restructuring expenses – cash
UK restructuring expenses – non-cash
Impairment of CLM goodwill
Acquisition costs
Income tax
UNPATA adjustments after-tax
Statutory net profit / (loss) after-tax
attributable to members of the parent entity
Assets and liabilities
Segment assets
Segment liabilities
Additions to segment non-current assets
Segment depreciation and amortisation2
-
79
-
228,780
256,319
59,202
128,476
100,304
228,780
61,161
-
-
-
-
-
-
-
161,442
94,798
256,240
16,992
(1,299)
(1,805)
(12,755)
(1,962)
-
246
(17,575)
35,703
23,499
59,202
2,551
(750)
-
-
-
-
225
(525)
-
150
150
-
-
-
(1,491)
-
-
-
-
(69)
21
(48)
544,222
229
544,451
325,621
218,601
544,222
79,213
(2,049)
(1,805)
(12,755)
(1,962)
(69)
492
(18,148)
61,161
(583)
2,026
(1,539)
61,065
138,165
106,207
40,415
14,798
384,474
248,916
76,445
64,558
56,202
48,904
20
1,298
107,089
12,708
-
-
685,930
416,735
116,880
80,654
1 Unallocated assets include cash and bank balances of segments other than AM, maintained as part of the centralised treasury and funding function of the Group.
2 Depreciation and amortisation includes impairment of goodwill and other intangibles of $13.5 million (2020: $50.1 million).
50
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
2.1 SEGMENT REPORTING (CONTINUED)
2020
GRS
$’000
AM
$’000
RFS
$’000
Unallocated1
$’000
Consolidated
$’000
Revenue from contracts with customers
214,822
228,755
49,539
Interest revenue
Segment revenue
Timing of revenue recognition:
– At a point in time
– Over time
Segment revenue from contracts with customers
UNPATA
Reconciliation to statutory net profit after-tax
attributable to members of the parent entity
Amortisation of intangible assets acquired
on business combination
Impairment of goodwill and other intangible assets
Other, including class action legal costs
and settlement provision (refer to Note 7.2)
Deferred revenue and acquisition costs valuation
Share buyback expenses
Other, including due diligence and
restructuring expenses
Fair valuation of deferred consideration
and finance charge
Income tax
UNPATA adjustments after-tax
Statutory net profit / (loss) after-tax
attributable to members of the parent entity
Assets and liabilities
Segment assets
Segment liabilities
Additions to segment non-current assets
Segment depreciation and amortisation2
-
533
-
214,822
229,288
49,539
121,589
93,233
214,822
60,946
-
-
-
-
-
-
-
-
-
130,815
97,940
228,755
6,038
(1,753)
(16,174)
-
-
-
(123)
1,459
673
41,238
8,301
49,539
3,005
(2,141)
(33,965)
(7,255)
(13,930)
-
-
-
6,998
-
313
313
-
-
-
(961)
-
-
-
-
(548)
493,116
846
493,962
293,642
199,474
493,116
69,028
(3,894)
(50,139)
(7,255)
(13,930)
(548)
(1,165)
(1,288)
-
165
1,459
7,836
(15,918)
(50,293)
(1,548)
(67,759)
60,946
(9,880)
(47,288)
(2,509)
1,269
199,491
79,978
13,217
15,872
466,168
308,419
69,164
80,183
77,537
49,015
5
37,374
(57,640)
19,258
-
-
685,556
456,670
82,386
133,429
1 Unallocated assets include cash and bank balances of segments other than AM, maintained as part of the centralised treasury and funding function of the Group.
2 Depreciation and amortisation includes impairment of goodwill and other intangibles of $13.5 million (2020: $50.1 million).
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 including Director’s fees and finance
costs relating to borrowings not specifically sourced for segment operations, costs directly incurred in relation to acquisitions and divestments
or interest revenue not directly attributable to a segment.
Included in Segment revenue for GRS are revenues of $64,200,316 (2020: $57,026,000) from the Group’s largest contract. This is the only
customer representing greater than 10% of total segment revenue.
51
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
Other segment information
Assets are allocated based on the operations of the segment. The parent entity’s borrowings are not considered to be segment liabilities.
Geographical segment information
Revenue from continuing operations by location of operations and assets are detailed below.
Australia
United Kingdom
New Zealand
Revenue from
external customers
Non-current assets1
2021
$’000
425,169
102,776
16,356
544,301
2020
$’000
2021
$’000
2020
$’000
425,343
280,415
259,669
55,861
12,445
56,303
26,942
92,638
38,789
493,649
363,660
391,096
1 Non-current assets do not include deferred tax assets.
2.2 REVENUE FROM CONTRACTS WITH CUSTOMERS
Consolidated Group
Parent Entity
Remuneration services
Lease rental services
Sale of leased and other assets
Brokerage commissions and financial services
Other
2021
$’000
228,781
102,131
123,394
89,518
398
2020
$’000
214,765
111,226
86,234
80,612
279
Total revenue from contracts with customers
544,222
493,116
2021
$’000
2020
$’000
-
-
-
-
-
-
-
-
-
-
-
-
52
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
Revenue
Description
Remuneration services
Lease rental services
Sale of leased and
other assets
Brokerage commissions
and financial services
Administration fees for the provision of salary packaging and ancillary services including
novated leasing and finance procurement, motor vehicle administration and other services,
but not the provision of financing. Fees are recognised at the point in time that the services are
rendered, net of any rebates payable to the employer organisation. Fee rates are contractually
agreed with each client employer and the provision of administration services are considered
to have been satisfied for each period completed.
Interest is received for managing funds held in trust for clients pursuant to the contractual
agreement and is recognised when received (refer Note 4.1).
Fees derived from the origination of financing and insurance products are recognised at a
point in time when the customer has executed the lease finance or activated the insurance
cover and the Group has no outstanding obligations. The Group acts as an agent and does not
include the premium on policies as revenue.
Volume based rebates from providers are estimated and recognised based on the period of
entitlement.
Fees for the provision of support coordination services are recognised at the point in time of
providing the service. Fees for the provision of plan management services are recognised over
time based on individual plans.
Rental income received for operating lease assets is recognised on a straight line basis over
the term of the lease.
Interest from finance leases is recognised over the term of the lease for a constant periodic
return on the amount invested in the lease asset.
Fees for tyre and maintenance services are recognised to the extent that services are
completed based on the percentage of costs incurred relative to total expected costs.
Fleet administration fees are recognised in the period that services are provided.
The Group assumes control of motor vehicles at the termination of lease contracts and
disposes of the asset as principal. The net proceeds are recognised when settlement
is completed and ownership of the motor vehicle passes to the purchaser.
Fees from the sale of wholesale warranty discretionary products are recognised over time
based on the risk and earning pattern analysis measured using the historical profile of claims
to estimate probable future performance obligations net of premium clawbacks. Underwriting
premium revenue is subject to clawback for policy terminations and is estimated based on a
historical profile of termination rates.
Volume based incentives (VBI) are received based on the volume of financial products
introduced by the network of dealers and brokers with financiers using contracted rates. VBI’s
are recognised in the period the financier activates the finance originations net of rebates
provided to dealers and brokers in the network.
Commission income is received from brokerage services for the procurement of lease finance
to motor vehicle fleet operators and other customers as agent under a principal and agency
arrangement (P&A) with financiers. Income is recognised when the financing arrangements
are funded free from any service deliverables net of estimated clawback of commissions from
future terminations. Under a P&A arrangement the Group acts as agent for the procurement
of lease asset financing and does not possess credit risk or carry on risks of ownership of the
underlying finance or asset with the customer.
53
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021 2.3 DIVIDENDS RECEIVED
Dividends are recognised when the Company’s right to receive payment is established.
2.4 PROFIT AND LOSS INFORMATION
(a) Impairment of intangible assets
Impairment of goodwill
Impairment of other intangible assets
Consolidated Group
Parent Entity
2021
$’000
12,537
1,004
13,541
2020
$’000
48,475
1,664
50,139
2021
$’000
2020
$’000
-
-
-
-
-
-
Impairment of goodwill and other intangible assets in financial year 2021 includes the impairment of CLM Fleet Management plc (CLM) and
Maxxia Limited (ML) goodwill which was recognised in the half-year ended 31 December 2020 as outlined within Note 3.1.
The Group’s impairment of goodwill and other intangible assets in 2020 relate to the RFS Aggregation segment and the business in the UK.
The UK operations projected lower future cash flows affected by a weaker economic environment including the effects of COVID-19 affecting
the products and markets that the businesses trade in. RFS Aggregation in the comparative period experienced increasing competitive
pressures during the year affecting finance originations and yields in addition to the impact of COVID-19.
Refer Note 3.1 for the assumptions used in the assessments.
(b) Impairment of financial assets
Impairment of subordinated loan
Trade debtors specific and expected credit loss allowance / (gain)
Finance receivables specific loss allowance gain
Finance lease receivable expected credit loss allowance gain
Impairment of investment in subsidiaries
Related entities loan impairment
Consolidated Group
Parent Entity
2021
$’000
3,520
(833)
(80)
(337)
-
-
2020
$’000
4,596
1,248
(1,844)
(178)
-
-
2,270
3,822
2021
$’000
2020
$’000
-
-
-
-
5,541
-
5,541
-
-
-
-
74,348
3,621
77,969
Group
The subordinated loan loss allowance of $3,520,000 (2020: $4,596,000) relates to the net investment in ML in the UK to which the
Group had a joint venture arrangement prior to obtaining control on 31 December 2020 (refer to Note 6.1 for further details).
Finance lease receivables Expected Credit Loss (ECL) allowance gain of $337,000 is affected largely by the reduction of the carrying value
of Finance Lease receivables of $61,838,000 from $113,086,000 in 2020. The Group uses the assessment criteria from its credit
management system and adds forward looking indicators to reflect macro-economic factors to estimate ECL including the downgrade of
the credit rating of some clients due to their industry COVID-19 risk.
Finance receivables specific loss allowance gain of $80,000 relates to the discharge of a provision for lease assets recovered from
distressed clients.
Parent entity
The carrying value of investments in controlled entities were assessed for recoverable value that resulted in an impairment of
$5,541,000 (2020: $74,348,000) (refer Note 6.2).
54
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021 (c) Other operating expenses
Consulting1
Marketing
Property and other corporate costs
Technology and communication
Other
Consolidated Group
Parent Entity
2021
$’000
7,161
8,601
8,637
16,692
5,382
46,473
2020
$’000
11,678
7,735
7,703
13,197
7,481
47,794
2021
$’000
245
-
431
-
520
2020
$’000
1,616
-
432
-
-
1,196
2,048
1 Consulting expenses in 2020 include legal expenses of $6.5m mostly related to the class action proceedings and $2m for the provision of the class action
settlement (refer Note 7.2).
(d) Other expense items
Consolidated Group
Parent Entity
2021
$’000
2020
$’000
2021
$’000
2020
$’000
Depreciation and amortisation expenses
Depreciation of assets under operating lease
Amortisation of software development
Depreciation of plant and equipment
Amortisation of intangible assets
Depreciation of right-of-use (ROU) assets
Superannuation
47,445
8,181
2,843
2,050
6,594
58,980
11,700
3,191
3,893
5,526
67,113
83,290
Superannuation contribution expense
9,010
8,863
(e) Government subsidies
JobKeeper Payment
Coronavirus Job Retention Scheme
10,450
700
11,150
10,029
1,237
11,266
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The Group received the Federal Government economic response subsidy, JobKeeper Payment, for the period from April to September 2020.
The UK entities received the Coronavirus Job Retention Scheme, a temporary relief to provide financial support to assist in the retention of
employees who may otherwise be laid off during the COVID-19 pandemic. The JobKeeper Payment subsidy assisted the Group to retain its
employees and reduce stand downs. In the UK, the subsidy was a pass through for those employees that were furloughed.
The subsidies have been accounted for as a reduction to employee benefit expenses in the Consolidated Statement of Profit or Loss.
55
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
(f)
Impact of change in estimates
The unearned portion of revenue from warranty contract premiums is deferred based on projected future claim obligations. Direct acquisition
costs associated with the unexpired portion of contracts are also deferred. During the 2020 financial year, the estimated value of future claims
obligations was independently assessed using the methodology consistent with prior years and applying current risk factors and a refreshed
claims profile. The claims profile reflected a slower earning pattern and the extension of validity of claims both as a consequence of changes
to products and operations. The resulting effect was to defer a larger portion to meet future claims.
The impact of the transition to the new estimates in 2020 decreased revenue from contracts with customers by $20,704,000 and decreased
brokerage commissions and incentives by $6,774,000 in the Consolidated Statement of Profit or Loss.
2.5
INCOME TAX
Components of tax expense / (benefit)
Current tax expense / (benefit)
Adjustments for current tax of prior years
Deferred tax expense / (benefit)
Income tax expense / (benefit)
Consolidated Group
Parent Entity
2021
$’000
29,305
(38)
6,814
36,081
2020
$’000
28,839
(1,369)
(4,885)
22,585
2021
$’000
(781)
(34)
128
(687)
2020
$’000
(537)
-
(106)
(643)
The tax expense included in the Statements of Profit or Loss consist of current and deferred income tax.
Current income tax is:
Deferred income tax is:
> the expected tax payable on the current period’s taxable income
> recognised using the liability method
> calculated using tax rates for each jurisdiction enacted or
substantively enacted at the end of the reporting period in the
countries where the entities in the Group operate and generate
> based on temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and their
respective tax bases
taxable income
> inclusive of any adjustment to income tax payable or recoverable
of prior years
> calculated using the tax rates that are expected to apply when
the assets are recovered or liabilities settled, based on those
rates which are enacted or substantially enacted
> not recognised if they arise from the initial recognition
of goodwill
Current and deferred income tax is recognised in the Statements of Profit or Loss. However, when it relates to items charged directly to the
Statements of Other Comprehensive Income or Statements of Changes in Equity, the tax is recognised in OCI or equity respectively.
56
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
The prima facie tax payable on profit / (loss) before income tax is reconciled to the income tax expense / (benefit) as follows:
Consolidated Group
Parent Entity
2021
$’000
2020
$’000
2021
$’000
2020
$’000
Profit / (loss) before income tax
97,146
24,916
172,951
(21,689)
Prima facie tax payable on profit before income tax at 30%
(2020: 30%)
Add tax effect of:
29,144
7,475
51,885
(6,507)
12,946
1,662
23,391
– Non-deductible impairment expense
– Non-deductible subordinated loan
– Non-deductible costs
– Contingent consideration fair valuation
– Share-based payments
– Overseas tax rate differential of subsidiaries
– Other
– Impairment of deferred tax asset
– Over-provision of tax from prior year
Less tax effect of:
– Dividends received
– Non-assessable fair value on previously held equity interest
– Non-assessable loan forgiveness
Income tax expense / (benefit)
2,382
669
604
-
-
1,477
25
2,161
(38)
36,424
-
(343)
-
836
774
(277)
(154)
2,354
-
-
(1,369)
22,585
-
-
-
36,081
22,585
-
25
-
-
-
-
-
(34)
53,538
-
350
-
-
-
-
-
-
17,234
(38,433)
(17,877)
-
(15,792)
(687)
-
-
(643)
57
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
Deferred tax asset / (liability)
The balance comprises temporary differences attributed for:
Amounts recognised in profit or loss
Doubtful debts
Provisions
Property, plant and equipment
Accrued expenses
Finance and other receivables / prepayments
Other
Losses
Deferred acquisition expenses
Intangible assets
Unearned income
Amounts recognised in equity
Derivatives recognised directly in equity
Share-based payments reserve
Closing balance at 30 June
Recognised as:
Deferred tax asset (DTA)
Deferred tax liability (DTL)
Movements in deferred tax asset / (liability)
Opening balance at 1 July
Charged to profit or loss
Charged to other comprehensive income
Adjustment to acquisition of Outside Equity Interest
Foreign exchange translation
Closing balance at 30 June
Consolidated Group
Parent Entity
2021
$’000
2020
$’000
2021
$’000
2020
$’000
487
6,760
(13,783)
5,756
3,245
131
646
271
(4,386)
1,583
710
(46)
372
1,036
13,753
(12,717)
1,036
8,453
(6,814)
(454)
(72)
(77)
1,036
717
7,043
(6,269)
7,582
2,992
131
123
285
(5,814)
1,379
8,169
284
-
8,453
10,122
(1,669)
8,453
3,331
4,885
111
-
126
-
-
-
64
-
-
-
79
(1,051)
45
(1,051)
131
-
-
-
-
-
-
-
-
(942)
(841)
-
-
(942)
-
(942)
(942)
(814)
(128)
-
-
-
27
-
(814)
-
(814)
(814)
(947)
106
27
-
-
8,453
(942)
(814)
The carrying value of DTA’s are reduced to the extent that it is probable future taxable profits will be available to utilise these temporary
differences. DTA’s and DTL’s are offset only if certain criteria are met with respect to legal enforceability and within the same tax jurisdiction.
DTA’s and DTL’s 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 reversal and it is probable that the differences will not reverse in the foreseeable future.
58
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021 Unrecognised temporary differences
Temporary differences that have not been tax effected:
Unused tax losses and deferred tax assets
Foreign currency translation reserve for investment in subsidiaries
Consolidated Group
Parent Entity
2021
$’000
31,406
3,332
34,738
2020
$’000
1,251
4,018
5,269
2021
$’000
2020
$’000
-
-
-
-
-
-
Unused tax losses relate to subsidiaries that are dormant and/or are unlikely to generate sufficient taxable income to use these losses.
Foreign exchange translation differences in overseas investments will only be realised when the investments are disposed of in the
foreseeable future.
Tax consolidation
The Company and its wholly-owned Australian resident entities are members of a tax consolidated group under Australian taxation law.
The Company is the head entity in the tax consolidated group. Entities within the tax consolidated group have entered into a tax funding
agreement and a tax-sharing agreement with the head entity. Under the terms of the tax funding arrangement, the Company and each of
the entities in the tax consolidated group have agreed to pay a tax equivalent payment to or from the head entity, based on the current tax
liability or current tax asset of the head entity.
2.6 EARNINGS PER SHARE
Basic EPS – cents per share
Diluted EPS – cents per share
Earnings used to calculate basic and diluted EPS ($’000)
Net profit after-tax ($’000)
Weighted average number of ordinary shares used in the calculation of basic EPS (‘000)
Weighted average number of options and rights on issue outstanding (’000)
Weighted average number of ordinary shares used in the calculation of diluted EPS (‘000)
Consolidated Group
2021
$’000
78.9
78.4
2020
$’000
1.6
1.6
$61,065
$1,269
77,381
555
77,936
78,945
869
79,814
Basic EPS 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.
Diluted EPS is calculated from earnings and the weighted average number of shares used in calculating basic EPS adjusted for the dilutive
effect of all potential ordinary shares from the employee incentive plan.
59
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
3 Assets and Liabilities
3.1
INTANGIBLE ASSETS
The Group’s intangible assets comprise brands, dealer relationships, customer lists and relationships, software development costs,
contract rights and goodwill.
2021
Useful life (range)
Goodwill
$’000
Not
applicable
Consolidated Group
Brands –
indefinite
life
$’000
Indefinite
Brands –
finite life
$’000
Dealer
relationships
$’000
Customer
lists and
relationships
$’000
Software
development
costs
$’000
Contract
rights
$’000
Total
$’000
6 years
6-13 years
5-13 years
3-5 years Contract life
Cost
208,164
22,443
Accumulated depreciation
-
-
6,598
(6,598)
26,183
(13,087)
6,874
(5,909)
71,355
13,139
(40,708)
(13,139)
354,756
(79,441)
Accumulated impairment loss
(120,302)
(13,171)
-
(6,990)
-
-
-
(140,463)
Net carrying value
87,862
9,272
Reconciliation
of written down values
Balance beginning of year
89,326
9,272
Additions
Additions from business
combinations (refer Note 6.1)
Disposal of subsidiary
Impairment
-
10,575
-
(12,537)
-
-
-
-
-
-
-
-
-
-
6,106
965
30,647
32,894
7,572
-
(682)
(958)
7,348
1,573
-
-
-
-
-
-
-
-
(666)
58
965
Amortisation
Changes in foreign currency
-
498
-
-
-
-
(1,384)
142
Closing balance
87,862
9,272
-
6,106
(8,181)
2
-
-
30,647
-
134,852
2020
Useful life (range)
Cost
Accumulated depreciation
Goodwill
$’000
Not
applicable
198,122
-
Consolidated Group
Brands –
indefinite
life
$’000
Indefinite
Brands –
finite life
$’000
Dealer
relationships
$’000
Customer
lists and
relationships
$’000
Software
development
costs
$’000
Contract
rights
$’000
Total
$’000
6 years
6-13 years
5-13 years
3-5 years Contract life
22,443
-
6,598
(6,598)
28,637
(14,299)
(6,990)
6,679
(5,106)
-
65,842
13,269
(32,948)
(13,269)
-
7,348
1,573
32,894
Accumulated impairment loss
(108,796)
(13,171)
Net carrying value
89,326
9,272
Reconciliation
of written down values
Balance beginning of year
137,427
9,272
Additions
Impairment
Amortisation
Other
Changes in foreign currency
-
(48,475)
-
-
374
-
-
-
-
-
Closing balance
89,326
9,272
-
-
878
-
(878)
-
-
-
60
11,088
2,276
-
(1,664)
(2,270)
-
194
30,387
13,494
-
-
-
(745)
(11,700)
-
42
713
-
7,348
1,573
32,894
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
134,852
140,413
7,572
10,575
(682)
(13,495)
(10,231)
700
341,590
(72,220)
(128,957)
140,413
191,328
13,494
(50,139)
(15,593)
713
610
140,413
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
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 of
the acquired entity. Goodwill is measured at cost less any
accumulated impairment losses and is reviewed for impairment
annually, or more frequently if events or changes in circumstances
indicate that the carrying value may be impaired. 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.
Identifiable intangible assets acquired from
business combination
Brands, dealer relationships and customer lists and relationships
acquired in a business combination are recognised at their fair
value at the date of acquisition. Following initial recognition, these
assets are carried at their initial value less any accumulated
amortisation and accumulated impairment.
Identifiable intangible assets with finite lives are amortised over
their estimated useful lives on a straight-line basis and assessed
for impairment annually. Brand names that have indefinite useful
lives are not amortised but are subject to annual impairment
assessments. Brands are assessed for impairment as part of the
relevant CGU.
Brand names that have an indefinite life are pursuant to the
Group’s plan for its continued use into the foreseeable future are
expected to continue to generate cash flows indefinitely. The useful
life assessment is reviewed annually.
Capitalised software development costs
Software development costs which are not acquired from a business
combination are initially measured at cost and subsequently re-
measured at cost less amortisation and impairment.
Costs are capitalised when it is probable that future economic
benefits will flow to the entity through revenue generation and/
or cost reduction. Costs include external direct costs for services,
materials and internal labour related costs directly involved in the
development of the software and 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.
Contract rights
Contract costs not acquired from a business combination
are initially measured at cost being the amounts paid plus
any expenditure directly attributable to the transactions and
subsequently measured at cost less amortisation and impairment.
Contracts are amortised over the life of the contract and reviewed
annually for indicators of impairment.
Impairment test of goodwill
An impairment loss is recognised in profit or loss for the amount
that the asset’s carrying value exceeds the recoverable amount.
Recoverable amount is determined as the higher of the asset’s fair
value less costs to sell and value-in-use (VIU). For the purpose
of assessing fair value, assets are grouped at the lowest levels
for which there are separately identifiable cash inflows which are
largely independent of cash inflows from other assets (cash-
generating units). Where the asset does not generate independent
cash flows, the Group estimates the recoverable amount of the
cash-generating unit to which the asset belongs.
The carrying amount of goodwill is allocated to the Group’s cash-
generating units (CGUs) below based on the organisation and
management of its businesses.
Key judgement: Assessment of recoverable amount
Recoverable amounts of cash generating units have been determined using the value-in-use methodology. The variables used require
the use of assumptions that affect earnings projections and the estimation of a discount rate that uses a cost of capital and risk premium
specific to the cash generating unit amongst other factors.
Cash projections used in the financial models to assess the recoverable amount of goodwill and indefinite life intangible assets required
significant estimates in uncertain economic and business environments. These are discussed in more detail below.
61
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
Maxxia Pty Limited (Maxxia)
Remuneration Services (Qld)
Pty Limited (RemServ)
CLM Fleet Management plc (CLM)
Anglo Scottish Asset Finance Limited (ASF)
Retail Financial Services Segment
Aggregation Business (RFS Aggregation)
Capex Asset Finance Limited (CAPEX)
Other
Goodwill
Intangibles
2021
$’000
2021
$’000
24,190
25,211
9,102
5,959
16,717
31,894
-
-
87,862
4,047
-
4,693
11,956
-
1,083
46,990
Consolidated Group
Total
2021
$’000
49,401
13,149
5,959
21,410
43,850
-
1,083
Goodwill
Intangibles
2020
$’000
2020
$’000
24,190
23,820
9,102
7,799
13,139
31,894
3,202
-
6,288
311
2,710
12,828
2,791
2,339
Total
2020
$’000
48,010
15,390
8,110
15,849
44,722
5,993
2,339
134,852
89,326
51,087
140,413
Key assumptions used for VIU calculations
Cash flow projections
Cash flow projections are based on the financial year 2022
(FY2022) budgets. Growth assumptions used for subsequent
years reflect strategic business plans and forecast growth rates.
Financial projections take into account any risk exposures in
changes to the trading, market and regulatory environments.
COVID-19 has resulted in significant uncertainty in the economic
environment affecting the Group’s businesses in particular the CLM
CGU. The scale of the restrictions, changing economic and social
environment and pace of recovery has created inherent uncertainty
to the projection of cash flows assumed in the financial models.
The VIU assessment models have adopted a probability weighted
outcome of various scenarios in the cash flow projections.
The after-tax discounted cash flow (DCF) models were based on
after-tax cash flows discounted by an after-tax discount rate.
Cash flows beyond five years are extrapolated using conservative
growth rates of 2.0% (in-line with long term CPI) as well as using 1.0%
in forming the probability weighted assessment for the CLM CGU.
GRS CGUs
The Maxxia and RemServ CGUs that form the GRS segment
operate largely in the same business environment and are exposed
to similar risks. The equivalent pre-tax discount rate of 16% (2020:
15%) was applied in the VIU calculation.
Cash flow projections for GRS in FY2022 are substantially higher
than the carrying value of goodwill and any reasonable changes
to the key assumptions would not cause an impairment. A key
assumption in the GRS segment is that there is no significant
change to Australian tax legislation that could affect the salary
packaging and novated lease businesses. RemServ generates a
substantial portion of its salary packaging and novated leasing
business from the provision of services to employees of the
Queensland Government pursuant to contractual arrangements to
November 2021 and March 2022 respectively.
AM CGUs
Impairment assessment model for AM CGUs
The base case scenario used the business plans that formed the
FY2022 budget and the growth assumptions for the subsequent
years as disclosed for each CGU below. The at-risk scenarios
assumed the base case plus the impact of a further COVID-19
wave imposing a lockdown (where applicable) as well as a
projection risk for the possibility of under-performing the future
budget and forecast results.
CAPEX and ASF
During the year, the UK business re-organised its operations
within the CAPEX and ASF business groups. CAPEX and ASF
operate largely in the same business sector and are exposed
to relatively similar types of risks. Following the internal re-
organisation of the UK asset finance businesses under a common
leadership structure with sharing of resources, the business of
CAPEX was transferred to ASF creating one new combined ASF
CGU replacing the CAPEX and ASF CGUs identified in prior periods.
Goodwill and other intangible assets of CAPEX were re-allocated
to the ASF CGU accordingly.
ASF experienced a recovery during FY2021 from the initial fall in
volumes during the initial period of lockdowns due to COVID-19
that occurred in April and May 2020.
Probability weighting assumptions were applied to each year in the
scenarios between 25% and 50%. If the probability weightings were
changed by 10% the impact to the assessed VIU of ASF is $0.7m.
A 0.25% increase to the discount rate indicated a reduction in VIU
of $1.4m and a 5% decrease to revenue indicated a reduction
in VIU of $6.4m.
The equivalent pre-tax discount rate of 13.2% (2020: 12.2%) was
applied in the VIU calculation.
62
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
Revenue growth
rate assumptions
ASF
FY2022
FY2023
FY2024
FY2025
–FY2026
Base scenario
11%
7%
14%
2%
Business activity is expected to continue to improve as a
result of improving economic conditions as lockdowns are
eased and the roll-out of the vaccine program creates more
favourable trading conditions for businesses.
At-risk scenario #1
At-risk scenario #2
5%
0%
7%
7%
14%
14%
2%
2%
Discount applied to future cash flows as a projection risk for
under-performing against planned targets and any adverse
impacts due to COVID-19.
CLM
Impairment recognised for the period ended 31 December 2020
On 24 February 2021, the Group announced an impairment of CLM goodwill.
CLM’s business is driven by transactional activities related to the delivery, service, maintenance, repair and disposal of motor vehicles,
the COVID-19 lockdown periods had a greater than anticipated impact on these sectors causing a substantial loss to CLM’s maintenance
management and outsourced fleet management services. A recovery is anticipated on the back of pent-up demand for required services
but inherent uncertainty remained affecting the level and pace of recovery. As a result, the CGU was assessed for impairment as at
31 December 2020.
An impairment of $1,962,000 was determined from the weighted probability of the cash flow scenarios modelled for CLM.
Impairment testing for the year ended 30 June 2021
No further impairment has been recognised based on the VIU assessment conducted as at 30 June 2021.
Cash flows beyond the five year period are extrapolated using terminal growth rates of 2.0% (in-line with long term CPI) as well as using
1.0% in forming the probability weighted assessment.
Probability weighting assumptions were applied with an equal probability applied to each of the scenarios. If the probability weightings
for the at-risk scenarios were increased by 20% (collectively), the reduction to the assessed VIU of CLM is $0.1m.
From other sensitivity tests applied, a 0.25% increase to the discount rate indicated a reduction in VIU of $0.1m and a 5% decrease to
revenue indicated a reduction in VIU of $0.5m.
The equivalent pre-tax discount rate of 13.2% (2020: 12.2%) was applied in the VIU calculation.
Revenue growth
rate assumptions
CLM
FY2022
FY2023
FY2024
FY2025
–FY2026
Base scenario
13.0%
3.9%
2.7%
2.0%
At-risk scenario #1
(38.8%)
55.5%
At-risk scenario #2
(38.8%)
45.7%
2.7%
2.7%
2.0%
2.0%
The easing of lockdown restrictions allows a gradual recovery
in CLM’s business activities during FY2022 to FY2024 as
withheld required services are re-instated. Beyond FY2024,
growth is in-line with estimated CPI.
As CLM’s business is heavily impacted by COVID-19, FY2022
includes the risk of additional lockdowns that will potentially
have a negative impact to its business in FY2022. An upturn
in business is assumed in the subsequent period for the
pent-up demand for required motor vehicle services.
A projection risk for under-performing planned targets based
on prior year experience is also factored in.
63
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2021
Maxxia Limited
The ML joint venture was acquired on 31 December 2020 as
outlined within Note 6.1 as a result of a contractual arrangement
to acquire the remaining 50% equity interest. The acquisition
cost of $1,805,000 for the remaining JV interest was based on
an historic incentive arrangement to retain prior management.
ML has reported historical accumulated losses and the estimated
recoverable amount based on future earnings did not support the
carrying amount of the goodwill recognised of $10,575,000 and
therefore this was impaired to zero.
RFS Aggregation CGU
The motor vehicle market was stronger than anticipated in
FY2021 with origination volumes recovering from the initial decline
experienced toward the end of FY2020 due to COVID-19. However,
uncertainty remains over future cash flows due to reduced yields
due to increased competition and the lender mix.
Given that significant uncertainty remains with the economic
environment and impact of COVID-19, the sustainability and level
of recovery from COVID-19 and as RFS Aggregation seeks to hold
and recover its market position, the impairment assessment has
been modelled on the weighted probability of three outcomes.
The base scenario uses the plan for FY2022, a second scenario
factors a projection risk for COVID-19 and other factors and a
third scenario as a growth model that seeks to recover market
share and yields (“Growth”). An equivalent pre-tax discount rate of
16.0% (2020: 15.0%) has been used for the pre-tax value-in-use
calculations.
Scenarios have been applied using probability weighting
assumptions of 60%, 30% and 10% for the base, at-risk and
growth scenarios respectively. If the probability weighting of the
at-risk scenario was increased by 10% and the probability
weighting of the growth scenario was reduced by 10% with
no change to the base scenario, the reduction to the assessed
carrying value is $2.4m.
From other sensitivity tests applied, a 0.25% increase to the
discount rate indicated a reduction in carrying value of $0.2m
and a 5% decrease to revenue indicated a reduction in carrying
value of $4.5m.
No impairment has been brought to account based on the
weighted probability of the three outcomes.
Revenue
growth rates
RFS Aggregation
Base scenario
FY2022
FY2023
FY2024
–FY2026
11%
0%
2%
At-risk scenario
Growth scenario
(1%)
9%
2%
6%
2%
2%
The volume of finance originations is assumed to increase in
FY2022 however lower net yields are expected to continue
to remain as the business faces increased competition and a
change in financier mix.
Discount applied to future cash flows as a projection risk
for under-performing against planned targets.
The growth model assumes recovery to pre-COVID-19
net yields as the business changes its financier mix and
recovers market share.
64
MMS ANNUAL REPORT 2021
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2021
3.2 TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Other receivables
Amounts receivable from wholly owned entities
Consolidated Group
Parent Entity
2021
$’000
34,016
6,959
-
2020
$’000
32,356
38,146
-
40,975
70,502
2021
$’000
-
-
481
481
2020
$’000
-
-
12,863
12,863
Trade receivables
Trade receivables are amounts due from customers for services performed in the ordinary course of business and held with the objective
of collecting cash flows. They are generally settled within 30 days and the carrying amount includes a loss allowance of $924,000
(FY20: $967,000) and specific doubtful debts allowance of $284,000 (2020: $1,074,000). The carrying amount is generally considered
to equal their fair value.
Other receivables
Other receivables include transactions accruing and customer related funds that are to be recovered.
The 2020 balance includes $25,560,000 from the sale of a portfolio of operating leases at written down.
None of the other receivables are impaired or past due.
3.3 FINANCE LEASE RECEIVABLES
Current finance lease receivables
Non-current finance lease receivables
Consolidated Group
Parent Entity
2021
$’000
21,478
29,770
51,248
2020
$’000
43,936
69,150
113,086
2021
$’000
2020
$’000
-
-
-
-
-
-
AM finance lease contracts entered into are recognised as finance lease receivables and classified as financial assets measured at amortised
cost as the contract transfers substantially all the risks and rewards of ownership of an underlying asset. The net investment in the lease
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.
Amounts receivable under finance lease receivables
Within one year
Later than one but not more than five years
Later than five years
Less: unearned finance income
Present value of minimum lease payments
Fair value of finance lease receivables
Consolidated Group
Minimum
lease
payments
2021
$’000
Present value
of lease
payments
2021
$’000
Minimum
lease
payments
2020
$’000
Present value
of lease
payments
2020
$’000
23,608
32,287
234
56,129
(4,881)
51,248
21,478
29,551
219
51,248
-
51,248
50,657
47,296
72,233
1,138
120,667
(7,581)
113,086
43,936
68,062
1,088
113,086
-
113,086
113,496
The fair value of finance lease receivables due within one year are considered to approximate their carrying amount. Fair values were calculated
based on cash flows discounted using an average of current lending rates appropriate for the geographical markets the leases operate of
4.03% (2020: 3.62%). They are classified as level 3 fair values in the fair values hierarchy due to the inclusion of unobservable inputs.
65
MMS ANNUAL REPORT 2021
3.4 ASSETS UNDER OPERATING LEASE
Assets under operating lease terminating
within the next 12 months – current
Assets under operating lease terminating
after more than 12 months – non current
Assets under operating lease – total
Depreciation rate (range)
At cost
Accumulated depreciation
Movements during the year
Balance at the beginning of year
Additions
Reclassification from finance lease receivables1
Disposals / transfers to assets held for sale
Depreciation expense
Addition from business combinations (refer Note 6.1)
Residual value adjustment
Change in foreign currency
Balance at 30 June
Consolidated Group
Parent Entity
2021
$’000
2020
$’000
2021
$’000
2020
$’000
62,877
62,272
147,441
153,670
210,318
215,942
-
-
-
-
-
-
Consolidated Group
2021
$’000
2020
$’000
20% – 33%
20% – 33%
339,842
(129,524)
360,876
(144,934)
210,318
215,942
215,942
64,949
13,601
(36,457)
(47,445)
(2,178)
1,840
66
280,705
67,679
-
(72,496)
(58,980)
-
(551)
(415)
210,318
215,942
1 Reclassification resulting from the acquisition of Maxxia Ltd (refer Note 6.1) where leases previously recognised as finance leases were reclassified as
substantially all the risk and rewards of ownership now remain with the Group.
Accumulated provision for impairment loss at reporting date is $5,071,000 (2020: $4,733,000).
Assets held under operating leases are for contracts with customers other than finance leases. The 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 depreciated as an expense on a straight line basis over the term of the lease based on the cost less residual value of the lease.
Provision for residual value
The provision estimates the probable diminution in value of operating lease and rental assets at the end of lease contract dates. The estimate
is based on the deficit in estimated recoverable value from contracted cash flows.
A residual value provision is also recognised for the estimated loss in recoverable value of lease assets which are transferred to the Group
at the end of the lease term pursuant to some P&A arrangements with financiers and other residual value guarantees. The asset from the
financier is acquired at its residual value on termination of the lease which creates an exposure of the carrying value to the expected market
price for which the potential impact is assessed at reporting and the shortfall provided for.
66
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
Key judgement: Lease assets residual value
Operating leases carry an inherent risk for the residual value of the asset. Estimates of significance are used in determining the residual
values of operating lease and rental assets at the end of the contract date. The assessment includes forecasts of the future value of the
asset lease portfolio at the time of sale and considers the potential impact of economic and vehicle market conditions and dynamics.
Under the P&A financing arrangement with external financiers, the Group acquires the lease assets on the termination of the lease contract
and is thereby exposed to the residual value of the underlying asset. A provision is recognised and this assessment similarly includes an
assessment of the future value of these P&A funded assets.
If the estimated residual values reduced by 5%, this would result in an increase in the provision by $3.4m.
3.5 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES
This note discloses the Group as lessee for operating lease arrangements for the use of property and equipment.
Right-of-use assets (ROU assets)
At cost
Accumulated depreciation
Balance at beginning of year
New assets leased in the period
Depreciation included in profit or loss
Impairment included in profit or loss
Disposal of subsidiary
Change in foreign currency
Balance at 30 June
Lease liabilities
Balance at beginning of year
New assets leased in the period
Finance charge included in profit or loss
Disposal of subsidiary
Lease payments
Change in foreign currency
Balance at 30 June
Carrying value of lease liabilities
Current
Non-current
Consolidated Group
Parent Entity
2021
$’000
2020
$’000
2021
$’000
2020
$’000
78,770
47,481
(38,259)
(31,528)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
15,953
20,990
489
(5,526)
-
-
-
-
-
40,511
15,953
31,418
(6,594)
(89)
(243)
66
40,511
15,953
-
-
Consolidated Group
Parent Entity
2021
$’000
24,436
31,418
2,357
(324)
(9,083)
2020
$’000
31,868
489
1,031
-
(8,952)
71
-
48,875
24,436
1,602
47,273
48,875
6,523
17,913
24,436
2021
$’000
2020
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
67
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
During the financial year the Group brought to account a non-cancellable property lease under AASB 16 Leases for a lease variation to extend
the existing lease arrangement as well as a new lease agreement for the same property (that is expected to commence in December 2022).
The lease variation and new lease agreements have been treated as a lease modification at the effective date of the lease variation. The lease
liability has been remeasured for the entire modified agreement based on the modified lease’s consideration and term.
Recognition and measurement of lease assets and liabilities
ROU assets and the lease liability are initially measured on a present value basis. Leases brought to account are for the value of the property
and exclude non-lease components.
Lease liabilities include the net present value of fixed rental payments less any lease incentives receivable plus any rental adjustments where the
extensions available under the lease will probably be exercised. Lease payments are discounted using the Group’s incremental borrowing rate.
ROU asset is measured at cost comprising the amount of the initial measurement of the lease liability, any initial direct costs and any provision
for make-good or restoration. ROU asset is depreciated over the shorter of the asset’s useful life and lease term on a straight line basis.
Short-term leases of less than 12 months and low-value leases are expensed on a straight line basis to the profit or loss. The principal portion
of payments is included in financing activities in the Statements of Cash Flows and the finance charges is included in operating activities.
3.6
INVENTORIES
Motor vehicles are stated at the lower of cost and net realisable value. Following termination of a 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.
3.7 UNEARNED PREMIUM LIABILITY, DEFERRED ACQUISITION COSTS (DAC) AND
OUTSTANDING CLAIMS LIABILITY
Unearned premium liability
The Group assesses the risk attached to unexpired wholesale warranty discretionary products based on the risk and earning pattern analysis
to ascertain whether the unearned premium liability (contract liability) is sufficient to cover all expected future claims against current warranty
contracts. Underwriting premium revenue that is not recognised in the period is deferred as an unearned premium liability.
Deferred acquisition costs
Acquisition costs incurred in deriving warranty income are deferred and recognised as contract assets where they can be reliably measured
and where it is probable that the associated warranty contract will give rise to warranty revenue in subsequent reporting periods.
DAC 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.
Outstanding claims liability
A liability is recognised for claims authorised but unpaid and claims reported which are not authorised for payment but are assessed for a
probability of payment at reporting date. Claims incurred is the expense recognised in the settlement of extended warranty claims net of
amounts recovered from third parties.
Key judgement: Pattern of incidence of risk
Underwriting premium revenue is measured based upon the expected future pattern of incidence of risk in relation to warranty contracts.
The pattern of incidence of risk is estimated using a variety of techniques 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.
During the year, external actuarial services were engaged to assess the deferred income and acquisition costs of active contracts that
may give rise to future claims. Whilst the underlying methodology had not changed, the critical variable in the claims profile were refreshed
to assume the pattern and timing of claims affected by more recent history of claims as well as the impact of recent regulatory changes
and product changes.
68
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
3.8 TRADE AND OTHER PAYABLES
Unsecured liabilities
Trade payables
GST payable
Accrued expenses
Sundry creditors
Amounts payable to wholly owned entities
Consolidated Group
Parent Entity
2021
$’000
2020
$’000
2021
$’000
2020
$’000
30,458
5,003
45,134
21,490
-
24,577
4,594
50,573
15,115
-
102,085
94,859
-
-
-
481
11,891
12,372
-
-
-
103
128,221
128,324
Trade and other payables from normal business activities are non-interest bearing and are short term in nature. They are recognised initially
at fair value and subsequently at amortised cost.
3.9. CUSTOMER RECEIPTS IN ADVANCE
Other liabilities
Other liabilities relate to customer receipts in advance which represent payments for future vehicle sales not yet delivered.
Contract liabilities
Maintenance fees received in advance
Rebates and cancellations
Consolidated Group
Parent Entity
2021
$’000
5,146
2,035
7,181
2020
$’000
4,051
4,047
8,098
2021
$’000
2020
$’000
-
-
-
-
-
-
Maintenance fees received in advance
Maintenance fees received in advance is income from maintenance service contracts that are unearned based on the historical profile of costs
incurred to date over the expected total cost. Profit attributed over the life of the contract and losses that are provided in full in the period that
the loss-making contract is first determined, is adjusted in the amount of revenue recognised.
Rebates and cancellations
Brokerage commissions from the provision of financial services allow that rebates paid to its dealer/broker network and commissions received
from the origination business may be clawed back by the financial service providers. The potential for rebates and clawback are calculated
based on the historical profile of rebates and commissions.
69
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021 3.10 PROVISIONS
Current
Employee benefit liabilities
Provision for class action
Other provisions
Non-current
Employee benefit liabilities
Balance at start of the year
Employee benefits earned
and accrued in the year
Payments in the year
Provision made in the year
Consolidated Group
Parent Entity
2021
$’000
2020
$’000
2021
$’000
2020
$’000
13,281
-
441
13,722
1,484
1,484
11,800
2,000
721
14,521
1,608
1,608
-
-
-
-
-
-
-
-
-
-
Employee benefit liabilities
Other provisions
Provision for class action
2021
$’000
13,408
8,034
(6,677)
-
2020
$’000
2021
$’000
11,704
721
8,901
(7,197)
-
(436)
-
156
2020
$’000
519
-
(100)
302
721
2021
$’000
2,000
-
(2,000)
-
-
2020
$’000
-
-
-
2,000
2,000
Balance at the end of the year
14,765
13,408
441
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.
Employee benefits
Employee entitlements to annual and long service leave have been provided for based on amounts expected to be paid when the leave
entitlements are used.
Annual leave and long service leave that are not expected to be settled wholly within twelve months have been measured at the present value
of the estimated future cash outflows. 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 liabilities other than annual leave and long service leave are included in other payables.
Provision for class action
The provision for class action of $2,000,000 in 2020 was based on the possible settlement of the class action dispute which was settled
during financial year 2021 (refer Note 7.2).
70
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021 4 Capital Management
This section provides information relating to the Group’s capital structure and its exposure to financial risks, how they affect the Group’s
financial position and performance, and how the risks are managed.
The Group’s capital management strategy aims 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 dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group monitors
capital on the basis of the gearing ratio and key banking covenants.
The capital structure of the Group is reviewed on an ongoing basis and considers the allocation and type of capital and the associated risks
and returns.
4.1 CASH AND CASH EQUIVALENTS
Cash on hand
Bank balances
Short-term deposits
Consolidated Group
Parent Entity
2021
$’000
5
157,750
242
157,997
2020
$’000
5
90,178
1,225
91,408
2021
$’000
-
74
-
74
2020
$’000
-
220
-
220
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 subject to an insignificant risk of changes in value. Cash and cash
equivalents is controlled by the Group and the contractual rights transfer to the Company substantially all of the benefits and risks of ownership.
Cash at bank and short term deposits earn interest at floating rates with the floating interest rates for the year for cash at bank between
0.01% and 0.55% (2020: 0.59% and 1.22%). Short-term deposits have an average maturity of 90 days (2020: 90 days) and are highly liquid.
Cash and cash equivalents held in trust and not recognised in the Statement of Financial Position
Pursuant to contractual arrangements with clients, GRS administers cash flows on behalf of clients as part of the remuneration benefits
administration service. Cash held in trust for clients are therefore not available for use in the Group’s operations. For some clients,
cash is held in bank accounts specified in their name and other client monies are held in bank accounts specially designated as monies in
trust for clients. All client monies are segregated from the Group’s own cash and not included in the Consolidated Statement of Financial
Position. At reporting date, the balance of monies held in bank accounts in trust for clients representing all client contributions to operate
their accounts were as follows:
Client monies in trust, interest accruing to the Group
Client monies in trust, interest accruing to clients
Consolidated Group
Consolidated Group
2021
Average
interest rate %
0.51%
0.49%
$’000
435,376
23,828
459,204
2020
Average
interest rate %
1.46%
1.29%
$’000
408,676
23,092
431,768
The parent entity does not hold any client monies.
Pursuant to contractual agreement with clients, the Group received the following interest for managing client monies and as part of the
administration service fees at an average interest rate of 0.51% (2020: 1.46%). Interest received is recognised within Remuneration Services
revenue from contracts with customers.
Interest received on client monies in trust
Consolidated Group
2021
$’000
2,283
2020
$’000
5,976
71
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
Cash Flow Information
Reconciliation of cash flow from operations with
profit / (loss) from operating activities after-tax
Profit / (loss) for the year
Non cash flows in profit / (loss) from operating activities
Amortisation
ROU assets depreciation
Impairment
Gain on previously held equity interest
Gain on disposal of subsidiary
Depreciation
Loss allowance / (gain)
Share-based expense
Fair valuation of contingent consideration
Share buyback expenses
Other
Changes in assets and liabilities,
net of the effects of purchase of subsidiaries
Decrease / (increase) in trade receivables and other assets
Decrease in finance lease receivables principle repayments and disposals
Increase in assets under lease
Decrease in written down value of assets sold
(Decrease) / increase in trade payables and accruals
(Decrease) / increase in income taxes payable
Decrease / (increase) in deferred taxes
Increase in unearned revenue
Decrease in provisions
Consolidated Group
Parent Entity
2021
$’000
61,065
10,231
6,594
16,790
(1,805)
(305)
50,289
(417)
1,101
-
-
(833)
2020
$’000
2,331
15,593
5,526
54,735
-
-
62,171
583
(512)
(1,462)
548
1,390
22,165
25,668
(16,549)
172,141
(76,942)
(232,459)
70,419
(3,658)
(1,428)
7,332
9,639
(940)
76,573
26,391
8,810
(5,214)
21,119
(3,255)
2021
$’000
2020
$’000
173,638
(21,046)
-
-
-
-
5,541
77,969
-
-
-
-
-
-
-
-
1,101
(512)
-
-
(52,640)
(104,736)
-
-
-
377
(609)
128
-
-
-
-
-
(4)
-
-
-
(270)
(1,316)
(133)
-
-
Net cash from operating activities
194,965
188,460
22,800
54,688
Cash from operating activities
Cash flows other than investing or financing are classified as cash from operating activities. As the AM segment provides operating and
finance leases for motor vehicles and equipment, the cash outflows to acquire the lease assets as well as interest received and interest paid
are classified as operating cash outflows.
Net debt reconciliation
A summary of the movement in borrowings (excluding capitalised borrowing costs) affecting financing cash flows during the year is
provided below:
Financing cash flow from liabilities
Borrowings (excluding capitalised borrowing costs)
Payable due to wholly owned entities
Consolidated Group
Parent Entity
2021
$’000
2020
$’000
176,808
265,381
-
-
2021
$’000
9,752
11,410
2020
$’000
14,876
115,358
Financing liabilities
176,808
265,381
21,162
130,234
72
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
Financing cash flow from liabilities (continued)
Movements during the year
Liabilities at the start of the period
Cash flows relating to borrowings
Cash flows relating to payables due to wholly owned entities
Non-cash settlement of payables due to wholly owned entities
Related party loan forgiveness
Foreign exchange adjustments
Consolidated Group
Parent Entity
2021
$’000
2020
$’000
2021
$’000
2020
$’000
265,381
(90,278)
328,430
(63,137)
-
-
-
1,705
-
-
-
88
130,234
(5,124)
7,022
(58,330)
(52,640)
-
55,421
(4,481)
79,294
-
-
-
Liabilities at the end of the period
176,808
265,381
21,162
130,234
4.2 BORROWINGS
Current
Bank loans – at amortised cost
Non-current
Bank loans – at amortised cost
Total bank loans
Consolidated Group
Parent Entity
2021
$’000
2020
$’000
2021
$’000
2020
$’000
23,886
11,706
5,761
5,761
152,444
251,914
176,330
263,620
3,991
9,752
9,115
14,876
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.
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.
Security and financial covenants
The parent entity guarantees all bank loans of subsidiaries in the Group, totalling $167,056,000 (2020: $250,498,000).
Fixed and floating charges are provided by the Group in respect to financing facilities provided by its syndicate of financiers. The assets
identified in Note 3.4 form part of the security.
Loans are also secured by the
following financial undertakings
from all entities in the Group:
> Negative pledge that imposes certain covenants including a restriction to provide
other security over its assets, cap on its maximum finance debt, acquire assets which
are non-core business to the Group, not to dispose of a substantial part of its business
and reduction of its capital;
> Maintenance of certain financial thresholds for shareholders’ equity, gearing ratio and
fleet asset portfolio performance; and
> Various business parameters of the Interleasing Group and Maxxia Finance Ltd.
The Group operated with significant headroom against all of its borrowing covenants at all times.
The Groups’ gearing ratio was 20% (2020: 46%) calculated as net debt of $67,208,000 (2020: $196,648,000) divided by total debt
and equity of $336,403,000 (2020: $425,534,000).
73
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
4.3 FINANCIAL RISK MANAGEMENT
We proactively manage the risks facing the business, this includes the early identification and assessment of risks, the implementation of controls
and the active monitoring and reporting of risks. Our approach to risk management, underpinned by the Group’s risk management policy and
framework, and overseen by the Audit, Risk and Compliance Committee, is embedded in our culture and reflected in our decision making.
Senior Executives identify and/or review key risks as part of our normal business activities, and formally at least quarterly. The results of these
reviews are recorded in the MMS risks register, which is used by the Management Risk and Compliance Committee and key risks within the
risk register are reported to the Board Audit, Risk and Compliance Committee (ARCC) for monitoring.
Financial risks of the
Group are monitored
by the Board through:
> ARCC obtains management confirmation of adherence with the Risk Management Policy and Framework;
> regular reporting of compliance with, and/or breaches of, the Risk Appetite Statement;
> monthly board meetings which include financial and operational reports from senior management;
> regular reports from the ARCC; and
> discussions with senior management.
Other monitoring
occurs through:
> dedicated Group Risk Manager responsible for overall monitoring and reporting of financial risks;
> a risk report is presented to the ARCC at least four times per year; and
> Credit and Interest Committees which oversee Group credit risk, liquidity risk and interest rate
risk with reporting provided to the Board.
In the normal course of business, the Group is exposed to various risks as set out below:
Risk
Exposure
Response
Liquidity
risk
Credit risk
Risk that the Group will not
be able to meet its financial
obligations as they fall due.
The AM businesses borrowings
exposes the Group to potential
mismatches between the
refinancing of its assets and
liabilities.
Maintain continuity and flexibility of funding through the use of committed revolving bank
club facilities based on common terms, asset subordination and surplus cash to match
asset and liability requirements.
Ensure there is sufficient liquidity through access to committed available funds to meet
at least twelve months of average net asset funding requirements augmented with
uncommitted P&A facilities. This level is expected to cover any short-term financial market
constraint for funds.
The Group monitors daily operating cash flows and forecast cash flows for a 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.
Risk of financial loss if a
customer or counter-party to
a financial instrument fails to
meet its contractual obligations.
Exposure to credit risk is
through the receivables’
balances, customer leasing
commitments, deposits with
banks 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.
Leasing credit risk is managed pursuant to the Board approved Credit Policy. The policy
is reviewed annually and prescribes minimum criteria in the credit assessment process
that includes the credit risk rating of the customer, concentration risk parameters, type
and intended use of the asset 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 manufacturers.
Credit risk concentration is spread through 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, the credit quality is assessed 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 obtained where appropriate, to mitigate the risk of financial loss from defaults.
Debtor ageing and the provision for impairment is reviewed monthly by the Board.
74
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
Risk
Exposure
Strategy
Market risk
Interest
rate risk
Foreign
currency
risk
Asset risk
Movements in interest rates could
directly affect the margins from existing
contracts and the pricing of new contracts
for assets leased and income earned
from surplus cash.
Borrowings issued at variable rates expose
the Group to repricing interest rate risk.
Foreign currency risk arises from holding
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.
Asset risk is mainly from the residual value
of assets under lease and the tyre and
maintenance 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. The estimate 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 recognised.
Risk relating to tyre and maintenance
services arises where the costs to meet
customer claims over the contracted period
exceed estimates made at inception.
Treasury and pricing 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.
The Group has entered into interest rate swaps with counterparties
rated as AA- by Standard & Poor’s to exchange, at specified periods, the
difference between fixed and variable rate interest amounts calculated on
contracted notional principal amounts. 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.
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 these entities are part of longer term investments and consequently,
their sensitivity to foreign currency movements are not measured.
The Group’s transactions are predominantly denominated in Australian
dollars which is the predominant functional currency and the presentation
currency of the Group.
Continuous review of 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.
(a) Liquidity risk
Financing arrangements
Committed borrowing facilities for the AM segment to finance its fleet management portfolio and other borrowing requirements not used to
finance the fleet management portfolio are as follows:
Borrowing facilities in local
currency (AUD ‘000)
2021
2020
Facility
Used
Unused
Facility
Used
Unused
AM borrowing facilities
251,834
160,761
91,073
322,115
240,648
81,467
Other borrowing facilities
16,047
16,047
-
24,726
24,726
-
Total Borrowings 1
267,881
176,808
91,073
346,841
265,374
81,467
1 Borrowings do not include capitalised borrowing costs of $478,000 (2020: $1,761,000).
75
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021 Details of the fleet management portfolio facilities in local currency are as follows:
AM secured bank borrowings
(excluding borrowing costs)
Maturity
dates
2021
2020
Facility
Used
Unused
Facility
Used
Unused
AUD’0001
AUD’0001
AUD’0001
AUD’0001
AUD’0001
AUD’0001
NZD’0001
NZD’0001
NZD’0001
NZD’0001
GBP’0001
GBP’0002
GBP’0001
1 Revolving facility
2 Amortising facility
31/03/2023
31/03/2024
31/03/2025
31/03/2022
31/03/2023
31/03/2024
31/03/2023
31/03/2024
31/03/2022
31/03/2023
31/03/2023
31/03/2023
31/10/2021
75,000
58,000
20,000
-
-
-
45,800
48,000
5,300
-
-
-
29,200
10,000
14,700
-
-
-
-
-
-
-
-
-
130,670
112,800
45,000
20,000
25,000
4,000
11,000
29,000
6,600
23,100
-
-
15,000
18,500
-
-
-
-
18,500
-
4,400
5,900
-
-
15,000
-
-
-
-
-
-
30,000
15,000
27,200
7,100
-
-
-
-
-
-
-
17,870
20,000
16,000
-
-
2,800
7,900
-
-
47,000
37,200
9,800
Revolving facilities above have been provided by a financing club of three major Australian banks operating under common terms and
conditions. Borrowings are denominated in the local currency of the principal geographical markets to remove associated foreign currency
cash flow exposure.
The borrowing facilities are further augmented by P&A facilities of $194 million ($100 million utilised) and residual value facilities totalling
$123 million ($69 million utilised). The Group carries a residual value exposure in relation to some P&A facilities that revert the lease asset to
the Group at the termination of the lease. The residual value was assessed at the lower of book value and estimated disposal value resulting in
a provision for loss in value of $2.0 million for assets identified to be possibly below book value.
The Group believes that the balanced arrangement of internal funded fleet assets and the use of P&A facilities improves liquidity, provides
funding diversification and helps to optimise capital management.
Loan maturities were extended for most facilities with the Club of financiers during the year. Revolving facilities for Australian operations of
$196 million due to mature on 31 March 2022 were reduced to $153 million and extended for another 1 to 3 years at significantly improved
margins. Committed bank facilities for UK operations reduced by GBP13.5 million in aggregate as the mix of internal funding and the
employment of P&A in the provision of lease financing continue to evolve. Facilities were extended, at improved margins, to match the maturity
profile of the underlying lease receivables. Unused facilities will provide funding to meet immediate requirements together with the headroom
from the uncommitted P&A facilities and residual value facility. This, together with contractual lease receivable cash flows, will provide the
necessary funding requirements for the next twelve months of forecast new lease additions.
The other facilities are borrowed in local currency as follows:
Secured bank borrowings
(excluding borrowing costs)
Maturity
dates
2021
2020
Facility
Used
Unused
Facility
Used
Unused
AUD’000
AUD’000
GBP’000
GBP’000
GBP’000
31/12/2022
29/09/2022
31/01/2021
30/06/2023
31/03/2022
5,739
4,013
-
3,422
-
5,739
4,013
-
3,422
-
-
-
-
-
-
7,650
7,224
1,540
-
3,950
7,650
7,224
1,540
-
3,950
-
-
-
-
-
76
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021 Maturities of financial liabilities
The table below summarises the maturity profile of the Group and the parent entity’s financial liabilities based on undiscounted contractual
payments at the expected settlement dates. Contracted payments are based on amounts brought to account on the Statement of Financial
Position and property lease commitments not brought to account.
Consolidated Group –
at 30 June 2021:
Contractual maturities
of financial liabilities
Trade payables
Other creditors and liabilities
Lease liabilities
Borrowings
Consolidated Group –
at 30 June 2020:
Contractual maturities
of financial liabilities
Trade payables
Other creditors and liabilities
Lease liabilities
Borrowings
Less than
6 months
$’000
30,458
78,709
4,488
14,002
127,657
Less than
6 months
$’000
24,577
78,903
4,341
8,197
6–12
months
$’000
-
6,640
4,185
14,231
25,056
6–12
months
$’000
-
5,900
3,344
8,923
116,018
18,167
1–2 years
$’000
2–5 years
$’000
-
-
7,881
77,666
85,547
-
-
19,989
75,596
95,585
1–2 years
$’000
2–5 years
$’000
-
-
4,315
219,242
223,557
-
-
20,842
34,118
54,960
Parent – at 30 June 2021:
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
12,372
2,939
11,063
26,374
-
-
2,919
11,312
14,231
4,009
73,657
77,666
-
-
Over 5
years
$’000
-
-
32,389
-
32,389
Over 5
years
$’000
-
-
52,573
-
52,573
Total
contractual
cash flows
$’000
Carrying
amount of
liabilities
$’000
30,458
85,349
68,932
181,495
366,234
30,458
86,833
48,875
176,808
342,974
Total
contractual
cash flows
$’000
Carrying
amount of
liabilities
$’000
24,577
84,803
85,415
270,480
465,275
24,577
86,411
24,436
265,374
400,798
Over 5
years
$’000
Total
contractual
cash flows
$’000
Carrying
amount of
liabilities
$’000
-
12,372
12,372
-
9,867
75,596
-
171,628
9,752
-
75,596
-
193,867
22,124
Parent – at 30 June 2020:
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 of
liabilities
$’000
Amounts payable to
wholly owned entities
and other payables
Borrowings
Financial guarantee contracts
128,324
-
-
-
4,267
3,930
136,521
2,955
5,968
8,923
5,837
213,405
219,242
2,086
32,032
34,118
-
-
-
-
128,324
128,324
15,145
255,335
14,876
-
398,804
143,200
77
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
(b) Credit risk
The following carrying amount of financial assets represent the maximum credit exposure at reporting date.
Trade and other receivables
Deposits with banks
Finance lease receivables
Operating lease assets
Consolidated Group
Parent Entity
2021
$’000
40,975
157,997
51,248
210,318
460,538
2020
$’000
70,502
91,408
113,086
215,942
490,938
2021
$’000
2020
$’000
481
74
-
-
555
-
220
-
-
220
Operating lease assets represent future lease rentals not yet invoiced which are secured against underlying assets.
Impairment of trade receivables and finance lease receivables
Key judgement: Impairment of financial assets
Finance lease, trade and other receivables are assessed for impairment at the end of each reporting period on an expected credit loss
(ECL) basis. The Group applies the AASB 9 simplified model of recognising lifetime expected credit losses for all receivables as these
items do not have a significant financing component. In measuring the expected credit losses, the trade receivables and finance lease
receivables have been grouped based on substantially shared credit risk characteristics.
ECL for finance lease receivables includes the inherent risk attached to the credit assessment of each customer, estimate of customer
default risk, environment and inventory risk and other factors affecting recoverability. COVID-19 affected the credit quality of many
customers at varying levels. The continuing impact of COVID-19 on the future credit quality of finance lease customers has resulted
in the ECL being adjusted to include a downgrade to the credit rating of all customers where their industry is more exposed to the effects
of COVID-19.
Recoverability of trade receivables is reviewed on an ongoing basis. The expected loss rate for trade receivables is based on the credit
loss history on sales over the previous 36 months and adjusted for forward looking factors.
Impairment of financial assets is most sensitive to the failure of a significant customer.
Trade receivables
The loss allowance for trade receivables have been estimated as follows:
Consolidated Group
Parent Entity
2021
$’000
2.62%
35,224
924
284
1,208
2020
$’000
2.81%
34,397
967
1,074
2,041
2021
$’000
2020
$’000
-
-
-
-
-
-
-
-
-
-
Expected loss rate
Gross carrying amount
Loss allowance
Specific loss allowance
Total loss allowance
78
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
Ageing and expected
credit loss of trade receivables
Not past due
Past due 30 days
Past due 31-60 days
Past due 61-90 days
Past due >90 days
2021
Loss
allowance
$’000
(803)
(48)
(33)
(15)
(309)
(1,208)
Total
$’000
29,060
2,806
1,324
403
1,631
35,224
Amount not
impaired
$’000
28,257
2,758
1,291
388
1,322
2020
Loss
allowance
$’000
(821)
(55)
(221)
(341)
(603)
Amount not
impaired
$’000
27,281
2,387
1,153
333
1,202
Total
$’000
28,102
2,442
1,374
674
1,805
34,016
34,397
(2,041)
32,356
The Group’s maximum exposure to credit risk at reporting date by geographic region is predominantly in Australia, New Zealand and the
UK based on the location of originating transactions and economic activity.
Finance lease receivables
The finance lease receivables loss provision and movements during the year is set out below:
Consolidated Group
Parent Entity
Balance at start of year
Specific loss allowance
Expected loss allowance
Loss allowance discharged
Changes in foreign currency
Balance at end of year
Expected credit loss provision
Specific provision
2021
$’000
1,139
-
(337)
(80)
25
747
629
118
747
2020
$’000
3,149
177
(178)
(2,021)
12
1,139
950
189
1,139
2021
$’000
2020
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The expected credit loss rate is calculated using the credit management system’s default rate assigned for each customer adjusted
by the expected recoverable rate plus deflators for duration and other economic or business environmental factors.
Expected credit loss rate
Gross carrying amount
Loss allowance
Consolidated Group
Parent Entity
2021
$’000
1.18%
53,323
629
2020
$’000
0.86%
110,782
950
2021
$’000
2020
$’000
-
-
-
-
-
-
79
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
(c) Market risk
Interest rate risk
At reporting date, the Group had the following variable rate borrowings under long-term facilities attributable to the AM business and
other loan facilities drawn on.
AUD’000
NZD’000
GBP’000
Total AUD ‘000
2021
2020
Weighted
average
interest rate
%
1.20%
1.57%
1.46%
1.31%
Borrowings
$’000
108,852
29,700
21,922
176,808
Weighted
average
interest rate
%
1.60%
1.79%
1.87%
1.68%
Borrowings
$’000
156,676
34,300
42,693
265,374
The weighted average interest rate on borrowings is used as an input to asset repricing decisions for geographical markets operated in.
Analysis of maturities is provided in Note 4.3(a).
Borrowings for the AM business of $125,668,000 (2020: $168,479,000) were covered by interest rate swaps at a fixed rate of interest
of 1.72% (2020: 2.72%).
Interest rate risk also arises from cash at bank and deposits, which are at floating interest rates.
At reporting date, the Group had the following variable rate financial assets and liabilities outstanding:
Cash and deposits
Bank loans 1
Interest rate swaps (notional amounts)
Net exposure to cash flow interest rate risk
2021
$’000
157,997
(176,808)
125,668
106,857
2020
$’000
91,408
(265,374)
168,479
(5,487)
1 Excluding capitalised borrowing costs of $478,000 (2020: $1,761,000) for AM.
Sensitivity analysis – floating interest rates:
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 $947,000 (2020: $721,000) higher or lower and
the parent entity $17,000 (2020: $26,000) higher or lower, depending on which way the interest rates moved based on the balances
at reporting date.
(d) Asset risk
The portfolio of motor vehicles under operating lease and the residual value of assets under P&A and other facilities of 327,180,000
(2020: $290,675,000) included a residual value provision of $5,071,000 (2020: $4,733,000). Refer to Note 3.4 for further details.
80
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
4.4 FINANCIAL INSTRUMENTS
Fair value measurement
The fair value of financial assets and financial liabilities is estimated for recognition and measurement for disclosure purposes.
The below table is an analysis of financial instruments that are measured at fair value on a recurring basis subsequent to initial recognition,
grouped into the following three levels based on the degree to which the fair value is observable.
Level 1
Level 2
Derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.
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).
Financial asset/
(financial liability)
Fair value at
2021
$’000
2020
$’000
Fair value
hierarchy
Valuation technique and key input
Interest rate swaps
(213)
(1,678)
2
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 above and in Note 3.3, the carrying amounts of financial assets and financial liabilities recognised 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.
Derivative financial instruments
In accordance with the Group’s treasury policy, derivative interest rate products 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.
Hedge accounting
Where the Group undertakes a hedge transaction it documents at inception of the transaction the type of hedge, the relationship between the
hedging instruments and hedged items and its risk management objective and strategy. The documentation also demonstrates, both at hedge
inception and on an ongoing basis that the hedge has been, and is expected to continue to be, highly effective.
The Group uses derivative financial instruments for cash flow hedging purposes and designates them as such.
Cash flow hedge
Derivatives or other financial instruments that hedge the exposure to variability in cash flows from
external borrowings that are priced using variable interest rates.
Cash flows hedges are used to manage interest rate exposure to interest rate volatility and its impact
on leasing product margins. This process seeks to have more control in balancing the spread between
interest rates charged on lease contracts and interest rates and the level of borrowings assumed in its
financing as required.
Recognition date
Measurement
Changes in fair value
Inception
Fair value
Any gains or losses arising from changes in the fair value of the hedge contracts are taken to other
comprehensive income (OCI) to the extent of the effective portion of the cash flow hedge and the
ineffective portion recognised in the Statement of Profit or Loss. These gains or losses in OCI are
accumulated in a component in equity and are re-classified to the Statement of Profit or Loss to match
the timing and relationship with the amount that the derivative instruments was intended to hedge.
81
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
4.5
ISSUED CAPITAL
Share capital
The following relates to the Group and Parent entity:
Number
of shares
Issue
price
Shares issued at 1 July 2020
Treasury shares acquired on-market
Shares held by external shareholders at the beginning of the year
Treasury shares distributed in the year on the exercise of employee rights
Shares held by external shareholders at 30 June 2021
77,381,107
(16,899)
77,364,208
16,899
77,381,107
Shares issued at 1 July 2019
Treasury shares acquired on-market
Shares held by external shareholders at the beginning of the year
Share buyback
Treasury shares distributed in the year on the exercise of employee options
Capital reduction
Shares held by external shareholders at 30 June 2020
Number
of shares
Issue
price
83,204,720
(538,129)
82,666,591
(5,823,613)
538,129
-
77,381,107
$1.78
$10.18
Ordinary
shares
$’000
76,419
(162)
76,257
-
76,257
Ordinary
shares
$’000
135,868
-
135,868
(10,366)
5,478
(54,561)
76,419
Ordinary shares and premiums received on issue of options are classified as issued capital.
Costs attributable to the issue of new shares or options are deducted from the equity proceeds, net of any income tax benefit, except with
the acquisition of a business which are included as part of the business combination.
Shares purchased by the Company or any entity in the Group are classified as treasury shares and the incremental cost of acquiring those
shares are deducted from share capital.
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.
Capital reduction
The net assets of the parent were affected by the loss in value of its investments in and receivable balances from its subsidiaries amounting
to $77,969,000 resulting in a deficit in retained earnings of $54,561,000 at 30 June 2020. In order to avoid the limitation on the Company’s
capacity to pay a dividend, the deficit in retained earnings was applied as a reduction against share capital for the value that is no longer
represented in assets in accordance with S.258F of the Corporations Act. The loss in value of assets in 2020 is summarised as follows:
Investment in subsidiaries
Loan receivables from subsidiaries
Loss in value of assets
82
2021
$’000
-
-
-
2020
$’000
74,348
3,621
77,969
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021 The loss in value of the investment in subsidiaries resulted from the impairment of intangibles assets of the RFS Aggregation and the
AM subsidiaries in the UK (refer Note 3.1) and the recoverable value of another subsidiary investment in 2020. The parent entity’s
assessment of the recoverability of loans receivable from its subsidiaries resulted in an impairment of $3,621,000.
The capital reduction is non-cash and the impairment of the parent’s investment in its subsidiaries and loan receivables did not impact
the consolidated financial statements and did not affect net assets of the parent or the Group.
Share buyback
In October 2019, the Company completed an off-market share buyback of 5,823,613 fully paid ordinary shares at $13.74 per share
that was funded from cash of $80,016,443. The share buyback comprised a capital component of $1.78 which reduced share capital by
$10,366,031 and a fully franked dividend per share of $11.96 that was paid out of retained earnings of $69,650,412.
Treasury shares
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 Long Term Incentive Plan (LTIP). The EST is controlled by McMillan Shakespeare Limited
and forms part of the Group.
Treasury shares are shares in McMillan Shakespeare Limited that are held by the EST for the purpose of issuing shares under the
McMillan Shakespeare Limited LTIP. Treasury shares are deducted from issued shares to show the number of issued shares held by
external shareholders.
Options
At 30 June 2021, there were 12,500 (2020: 8,979) unissued ordinary shares for which options were outstanding and exercisable at an
average price of $13.45 (2020: $13.45). Details relating to options issued, exercised and lapsed during the year and options outstanding at
the end of the year is set out in Note 5.1.
4.6 DIVIDENDS
Final fully franked ordinary dividend for the year
ended 30 June 2020 of $Nil (2019: $0.40) per share
franked at the tax rate of Nil (2019: 30%)
Interim fully franked ordinary dividend for the year ended
30 June 2021 of $0.302 (2020: $0.34) per share franked
at the tax rate of 30% (2020: 30%)
Franking credits available for subsequent financial
years based on a tax rate of 30% (2020 – 30%)
Consolidated Group
Parent Entity
2021
$’000
2020
$’000
2021
$’000
2020
$’000
-
33,281
-
33,281
23,369
23,369
26,310
59,591
23,369
23,369
26,310
59,591
112,284
91,455
112,284
91,455
Dividends are brought to account when declared and appropriately authorised before the end of the financial year but not distributed at
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.
83
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
Performance Rights
A Performance Right is an entitlement to acquire a fully paid
ordinary share in the Company for Nil consideration at grant for
conversion to a share, subject to the achievement of performance
hurdles and service conditions being satisfied. Performance Rights
carry no dividend or voting rights.
Performance hurdles and vesting entitlements
Refer page 23 for details of the terms and conditions for
Performance Rights issued in the year.
Recognition and measurement
The Performance Options and Rights are accounted for as equity-
settled share-based payments and recognised at the fair value at
grant date as an employee benefit expense over the period from
issue date to vesting date with a corresponding increase in equity
(share-based payment reserve). Fair value is determined using a
binomial option pricing model and incorporates market conditions
and does not include any option conditions that are not market
based. The cumulative expense recognised is adjusted to reflect
the Directors’ best estimate of the number of options or rights that
will ultimately vest based on the vesting conditions attached to the
options and rights, such as the employees having to remain with
the Group until vesting date, or such that employees are required
to meet financial targets. No expense is recognised for options or
rights that do not ultimately vest.
5 Employee Remuneration and Benefits
5.1 SHARE-BASED PAYMENTS
The Company operates a LTIP for certain executives and
employees under the McMillan Shakespeare Limited Employee
Share Plan. The Company issues Performance Rights annually
with a three year vesting period. The issuance to the Managing
Director was granted on 20 October 2020 following shareholder
approval on that day.
No executive can enter into a transaction that is designed or
intended to hedge the exposure. Executives are required to
provide declarations to the Board on their compliance with this
policy regularly.
Performance Options
Performance Options are granted for Nil consideration with
no dividend or voting rights. The performance options may be
exercised into ordinary shares subject to the satisfaction of
specified performance hurdles and continuity of employment.
On exercise, each participant will pay the exercise price and
receive one fully paid ordinary share in the Company.
The People, Culture and Remuneration Committee recommends
to the Board the number of performance options to be granted
on the basis of the position, duties and responsibilities of the
relevant executive.
Voluntary Options
Voluntary options allow the participant to acquire a fully paid
ordinary share in the Company by the payment of the exercise
price at the exercise date. Entitlement to exercise is not contingent
upon continued employment with the Company nor are there
performance hurdles. Voluntary Options are offered to certain
executives for an additional opportunity to invest in the Company,
who can acquire for a consideration up to a maximum of $20,000.
Consideration was set at a 25% discount to the face value of
the option at the date of grant. However, if the participant leaves
employment before vesting date, the participant will forfeit 25%
of their entitlement for $1 (the amount forfeited being equal to
the 25% discount to the face value that applied to the
consideration price of the option at the date of the conditional
offer and acceptance).
84
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021 Options
Set out below are summaries of options granted under the plans:
Performance Options
Consolidated Group and parent entity – 2021
Grant date
Expiry date
Exercise
price
Balance at
start of the
year
Granted
during the
year
Exercised or
sold during
the year
Forfeited
during the
year
Balance at
end of the
year
Exercisable
at end
of the year
3 July 2018
30 September 2022
23 October 2018
30 September 2022
$16.64
$16.64
Weighted average exercise price
466,905
105,272
572,177
$16.64
-
-
-
-
-
-
-
-
(466,905)
(105,272)
(572,177)
$16.64
-
-
-
-
-
-
-
-
Performance Options
Consolidated Group and parent entity – 2020
Grant date
Expiry date
Exercise
price
Balance at
start of the
year
Granted
during the
year
Exercised or
sold during
the year
Forfeited
during the
year
Balance at
end of the
year
Exercisable
at end
of the year
19 August 2014
30 September 2019
$10.18
3 July 2017
30 September 2020
$13.45
26 September 2017 30 September 2020
$14.97
24 October 2017
30 September 2020
$13.45
538,129
332,381
17,340
71,140
3 July 2017
30 September 2021
$13.45
308,488
26 September 2017 30 September 2021
$14.97
24 October 2017
30 September 2021
$13.45
3 July 2018
30 September 2022
$16.64
23 October 2018
30 September 2022
$16.64
Weighted average exercise price
15,920
66,027
576,253
105,272
2,030,950
$13.68
-
-
-
-
-
-
-
-
-
-
-
(538,129)
-
-
-
-
-
-
-
-
-
(332,381)
(17,340)
(71,140)
(308,488)
(15,920)
(66,027)
(109,348)
-
-
-
-
-
-
-
-
466,905
105,272
(538,129)
(920,644)
572,177
$10.18
$13.88
$16.64
-
-
-
-
-
-
-
-
-
-
-
Voluntary Options
Consolidated Group and parent entity – 2021
Grant date
Expiry date
Exercise
price
Balance
at start of
the year
Granted
during the
year
Exercised or
sold during
the year
Forfeited
during the
year
Balance
at end of
the year
Exercisable
at end of
the year
3 July 2017
3 July 2017
30 September 2020
$13.45
30 September 2021
$13.45
Weighted average exercise price
8,979
12,500
21,479
$13.45
-
-
-
-
-
-
-
-
(8,979)
-
(8,979)
$13.45
-
12,500
12,500
$13.45
-
12,500
12,500
$13.45
Voluntary Options
Consolidated Group and parent entity – 2020
Grant date
Expiry date
Exercise
price
Balance
at start of
the year
Granted
during the
year
Exercised or
sold during
the year
Forfeited
during the
year
Balance
at end of
the year
Exercisable
at end of
the year
3 July 2017
3 July 2017
30 September 2020
$13.45
30 September 2021
$13.45
Weighted average exercise price
8,979
12,500
21,479
$13.45
-
-
-
-
-
-
-
-
-
-
-
-
8,979
12,500
21,479
$13.45
8,979
-
8,979
$13.45
85
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
Rights
Set out below is a summary of Performance Rights granted under the Plan:
2021
Grant date
Exercise date1
3 July 2018
30 September 2021
23 October 2018
30 September 2021
1 July 2019
30 September 2022
22 October 2019
30 September 2022
18 December 2019
31 October 2020
20 October 2020
30 September 2023
30 October 2020
30 September 2023
2020
Grant date
Exercise date1
3 July 2017
30 September 2019
26 September 2017
30 September 2019
24 October 2017
30 September 2019
3 July 2017
30 September 2020
26 September 2017
30 September 2020
24 October 2017
30 September 2020
3 July 2018
30 September 2021
23 October 2018
30 September 2021
1 July 2019
30 September 2022
22 October 2019
30 September 2022
18 December 2019
31 October 2020
Balance at
the start of
the year
Granted
during the
year
Distributed
during the
year
Forfeited
during
the year1
Balance
at end of
the year
Exercisable
at end of
the year
83,978
18,937
277,513
69,178
16,899
-
-
-
-
-
-
-
103,763
429,633
-
-
-
-
(16,899)
-
-
(83,978)
(18,937)
(142,313)
(31,131)
-
(10,376)
(42,963)
-
-
135,200
38,047
-
93,387
386,670
466,505
533,396
(16,899)
(329,698)
653,304
-
-
-
-
-
-
-
-
Balance at
the start of
the year
Granted
during the
year
Distributed
during the
year
Forfeited
during
the year1
Balance
at end of
the year
Exercisable
at end of
the year
83,429
4,365
17,860
87,883
4,598
18,814
103,648
18,937
-
-
-
-
-
-
-
-
-
-
-
334,336
69,178
16,899
339,534
420,413
-
-
-
-
-
-
-
-
-
-
-
-
(83,429)
(4,365)
(17,860)
(87,883)
(4,598)
(18,814)
(19,670)
-
-
-
-
-
-
-
83,978
18,937
(56,823)
277,513
-
-
69,178
16,899
(293,442)
466,505
-
-
-
-
-
-
-
-
-
-
-
-
1 The first available exercise date is the date that the Company’s financial statements for the respective years are lodged with ASX. For the purpose of this
summary it is assumed to be 30 September of that year.
Fair value of Performance Rights granted
The fair value at grant date was estimated by discounting the Company’s share price at this date by the dividend yield of the Company
as follows:
Grant
20 October 2020
30 October 2020
Share price
at grant date
Expected
life (years)
Expected
dividend yield
$9.46
$9.34
2.9
2.9
3.6%
3.6%
Fair
value
$8.51
$8.40
86
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
Expenses arising from share-based payment transactions
Performance Options issued under the LTIP
Voluntary Options issued under the LTIP
Performance Rights issued under the LTIP
Consolidated Group
Parent Entity
2021
$
2020
$
2021
$
2020
$
-
(432,342)
1,607
1,099,680
3,552
(83,400)
1,101,287
(512,190)
-
-
-
-
-
-
-
-
5.2 KEY MANAGEMENT PERSONNEL COMPENSATION
Short-term employment benefits
Post-employment benefits
Long-term employment benefits
Share-based payments
Consolidated Group
Parent Entity
2021
$
2020
$
2021
$
2020
$
3,249,595
3,044,020
2,155,883
2,095,836
149,443
(63,529)
406,980
149,517
69,461
(129,375)
111,896
(81,581)
380,509
101,812
32,659
(55,173)
3,742,489
3,133,623
2,566,707
2,175,134
5.3 OTHER EMPLOYEE BENEFITS
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 measured on an ongoing basis and is dependent on the outcomes for each participating employee.
87
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
6 Group Structure
6.1 BUSINESS COMBINATIONS
Business combinations are accounted for on the date on which control is transferred to the Group. Cost is measured as the fair value of the
assets given, shares issued or liabilities incurred or assumed at the date of exchange. Transaction costs, other than those associated with the
issue of debt or equity instruments that the Group incurs in connection with a business combination, are expensed as incurred.
Upon the loss of control, the Group de-recognises the assets and liabilities of the subsidiary, non-controlling interests and the other
components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in the profit or loss.
Non-controlling interests are measured at their proportionate share of the subsidiaries’ net assets.
Acquisition of ML
The Group acquired the remaining 50% equity interest of ML on 31 December 2020, a company incorporated in the UK providing asset
funding solutions, vehicle fleet leasing and asset management. These products and services are delivered through a variety of channels, both
direct to market through a diverse customer base containing a number of publicly quoted and private companies, government bodies including
those in the education sector and public authorities. The acquisition cost of $1,805,000 for the remaining JV interest was based on an historic
incentive arrangement to retain prior management. ML was previously a joint venture of the Group through the Group’s 50% equity interest
and the acquisition represents the acquisition of the remaining equity in ML (refer to Note 6.3).
Consideration transferred
Consideration transferred for the acquisition is summarised as follows:
Cash
Total consideration transferred
Reconciliation of consideration to cash flow
Purchase consideration – cash inflow for ML acquisition
Cash consideration
Cash acquired
Net cash inflow in period
Consolidated Group
2021
$’000
1,805
1,805
Consolidated Group
2021
$’000
1,805
(7,768)
(5,963)
88
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
Assets acquired and liabilities assumed at the date of acquisition
Consolidated Group
Fair Value at acquisition date
Cash and cash equivalents
Trade and other receivables, and prepayments
Inventory
Property, plant and equipment
Assets acquired
Trade payables and accrued expenses
Income tax provision
Other liabilities
Provisions
Related party payables
Liabilities assumed
Identifiable net liabilities acquired
Goodwill
Fair value on previously held equity interest
Consideration transferred
2021
$’000
7,768
1,836
10,278
47
19,929
15,778
337
530
2,178
8,071
26,894
(6,965)
10,575
(1,805)
1,805
Goodwill arose as the acquisition cost of $1,805,000, which was based on a historical incentive arrangement to retain prior management,
exceeded the net assets at acquisition following historical accumulated losses. None of the goodwill is expected to be tax deductible.
Refer to Note 3.1 regarding the carrying value of the goodwill recognised.
Acquisition-related expenses of $100,000 have been incurred and expensed on consolidation and included in the Consolidated Statement
of Profit or Loss and Other Comprehensive Income for the period within ‘Other operating expenses’.
Trade receivables of ML at acquisition resulted from trade sales with customers and have been fair valued at $1,000,000.
Their collection and conversion to cash are expected in full pursuant to customer terms.
Impact of acquisition on the results of the Group
The Consolidated Statement of Profit or Loss for the period includes revenue of $34,292,000 and net loss after-tax of $1,200,000
attributed to ML. Had the acquisition occurred effective 1 July 2020, revenue of ML to the Group would have been $57,057,000 and
net loss after-tax adjusted for differences in the accounting policies between the Group and ML would have been $2,504,000.
6.2 OTHER FINANCIAL ASSETS
Investment in subsidiaries
Shares in subsidiaries at cost
Consolidated Group
Parent Entity
2021
$’000
-
2020
$’000
2021
$’000
2020
$’000
-
253,303
211,123
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the
accounting policy described in the relevant notes above.
89
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
Name
Parent entity
McMillan Shakespeare Limited
Subsidiaries in Group
Maxxia Pty Limited 1
Remuneration Services (Qld) Pty Limited 1
Easilease Pty Ltd
Onboard Finance Pty Ltd
MaxxiMe Pty Ltd 2
Interleasing (Australia) Ltd 1
TVPR Pty Ltd 1
Carila Pty Ltd 1
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
National Dealer Services Pty Ltd
Motorsure Pty Ltd
Presidian Management Services Pty Ltd
ADU Investments Pty Ltd
United Financial Services Pty Ltd
United Financial Services Network Pty Ltd
United Financial Services (QLD) Pty Ltd
Plan Management Partners Pty Ltd
Maxxia (UK) Limited
Maxxia Finance Limited
CLM Fleet Management plc
Anglo Scottish Asset Finance Limited
European Vehicle Contracts Limited 3
Capex Asset Finance Limited
Maxxia Ltd 4
The Car House Milton Keynes Limited
Corporate Vehicle Rentals Limited
Total Vehicle Mgt Limited
Maxxia Limited
Maxxia Fleet Limited
Wuxi McMillan Software Co. Ltd
Country
of Incorporation
% Owned
2021
% Owned
2020
Principal activities
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
New Zealand
New Zealand
Peoples Republic
of China
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%
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%
50%
100%
100%
100%
100%
100%
100%
Remuneration services provider
Remuneration services provider
Remuneration services provider
Remuneration services provider
Remuneration services provider
Asset management and services
Asset management and services
Asset management and 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
Retail financial services
Retail financial services
Retail financial services
Retail financial services
Plan management services
Investment holding
Asset management
Fleet management services
Asset management
Asset management
Asset management
Asset management
Fleet management services
Fleet management services
Fleet management services
Dormant
Asset management and services
Software development
1 These subsidiaries have been granted relief from the necessity to prepare financial reports in accordance with ASIC Corporations (Wholly-owned Companies)
Instrument 2016/785 issued by the Australian Securities and Investments Commission. For further information refer to Note 6.4.
2 Formerly Just Honk Pty Ltd.
90
3 On 11 March 2021, the Group disposed of 100% of the share capital of European Vehicle Contracts Limited.
4 On 31 December 2020, the Group acquired the remaining 50% of the share capital of Maxxia Ltd (refer to Note 6.1 for details).
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
Investments in subsidiaries are accounted for at cost less impairment 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.
In 2021, the parent entity recognised impairments for its investments in United Financial Services Pty Ltd, United Financial Services
Network Pty Ltd, United Financial Services (QLD) Pty Ltd and Presidian Holdings Pty Ltd of $5,541,000 (2020: $51,457,000) and in
Maxxia (UK) Limited of $Nil (2020: $22,891,000) based on the assessment of their recoverable value.
Subordinated loan receivable
Consolidated Group
Parent Entity
Carrying value at start of the financial year
New loans during year
Specific credit loss allowance
Carrying value at end of the financial year
2021
$’000
-
3,520
(3,520)
-
2020
$’000
-
4,596
(4,596)
-
2021
$’000
2020
$’000
-
-
-
-
-
-
-
-
The loan receivable is made up of advances to the joint venture with ML (“JV”, refer Note 6.3) as part of the working capital facility
provided pursuant to the Group’s investment arrangement and formed part of the net investment in the JV. The loan was classified as a
financial asset at amortised cost prior to the Group obtaining control on 31 December 2020 (refer to Note 6.1).
During the period, the subordinated loan was assessed to be impaired and $3,520,000 (2020: $4,596,000) was expensed in the
Statement of Profit and Loss.
6.3
INVESTMENT IN JOINT VENTURE
Acquired
Share of losses after income tax
Carrying value at end of the financial year
Consolidated Group
Parent Entity
2021
$’000
337
(337)
-
2020
$’000
337
(337)
-
2021
$’000
2020
$’000
-
-
-
-
-
-
Until 31 December 2020, a subsidiary had a 50% interest in ML (JV), a company resident in the UK and the principal activity of which is
provider of financing solutions and associated management services on motor vehicles. Under the contractual agreement, the Group
together with the joint venture partner jointly controlled the economic activities and key decisions of the JV. The arrangement required
unanimous consent for key strategic, financial and operating policies that affected the Group’s returns. The Group had 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
had an option to sell its interest to the Group during the same period.
The interest in the JV was equity accounted in the financial statements. The Group’s share of losses exceeds its investment cost in the
JV and accordingly, the excess is applied to the extent of the loan receivable from the JV that forms part of the net investment until it is
reduced to zero, and thereafter 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 obtained control of the JV on 31 December 2020 (refer to Note 6.1).
91
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
Information relating to the joint venture investment is set out below:
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net liabilities
The net liabilities of ML is reconciled to the carrying amount of the Group’s interest is as follows:
Net liabilities of JV
Group ownership interest (50%)
Carrying amount
Cumulative losses of JV equity accounted
The following are the JV’s financial results prior to obtaining control on 31 December 2020:
Joint venture financial results
Revenues
Expenses
Loss before income tax
Income tax
Loss after income tax
Group’s share of loss after income tax
Share of joint venture capital commitments
Consolidated Group
2021
$’000
-
-
-
-
-
-
-
2020
$’000
16,155
121
16,276
23,013
11,665
34,678
(18,402)
Consolidated Group
2021
$’000
-
-
-
-
2020
$’000
(18,402)
(9,201)
-
-
Consolidated Group
2021
$’000
22,765
(24,069)
(1,304)
-
2020
$’000
5,186
(8,202)
(3,016)
-
(1,304)
(3,016)
-
-
-
-
92
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
6.4 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) 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 ASIC Corporations (Wholly-owned Companies) Instrument 2016/785.
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 the financial information of the Closed Group:
Consolidated Statement of Comprehensive Income and summary of movements in consolidated retained earnings
Statement of Comprehensive Income
Revenue and other income
Employee and director benefits expenses
Depreciation and amortisation expenses and impairment
Leasing and vehicle management expenses
Consulting cost expenses
Marketing expenses
Property and corporate expenses
Technology and communication expenses
Finance costs
Other expenses
Impairment
Profit before income tax
Income tax expense
Profit / (losses) attributable to members of the parent entity
Other comprehensive income
Other comprehensive (loss) / income for the year after-tax
Total comprehensive (loss) / income for the year
Movements in consolidated retained earnings
Retained earnings at the beginning of the financial year
Profit / (loss) for the year
Dividends paid
Share buyback
Capital reduction
Lease transition
Consolidated Group
2021
$’000
317,695
(94,532)
(54,256)
(36,986)
(5,190)
(7,056)
(2,095)
2020
$’000
331,702
(93,827)
(69,138)
(43,261)
(3,065)
(6,781)
(2,405)
(13,182)
(10,205)
(5,623)
(715)
(9,695)
88,365
(29,471)
58,894
(5,005)
(3,868)
(74,348)
19,799
(26,504)
(6,705)
438
59,332
(62)
(6,767)
148,468
58,894
(23,369)
-
-
-
232,072
(6,705)
(59,591)
(69,650)
54,561
(2,219)
Retained earnings at the end of the financial year
183,993
148,468
93
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021 Consolidated Statement of Financial Position
Current assets
Cash and cash equivalents
Trade and other receivables
Finance lease receivables
Assets under operating lease
Inventory
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax asset
Finance lease receivables
Other financial assets
Total non-current assets
TOTAL ASSETS
Current liabilities
Trade and other payables
Current tax liability
Provisions
Borrowings
Lease liabilities
Total current liabilities
Non-current liabilities
Provisions
Borrowings
Lease liabilities
Deferred tax liability
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
Equity
Issued capital
Reserves
Retained earnings
TOTAL EQUITY
94
2021
$’000
83,457
35,567
1,534
49,761
7,767
2020
$’000
44,750
48,231
10,358
62,272
5,149
178,086
170,760
156,589
55,514
10,918
6,426
102,284
331,731
130,734
56,740
6,515
9,007
107,558
310,554
509,817
481,314
73,632
2,534
13,676
5,761
538
96,141
1,479
102,747
45,516
9,469
159,211
69,147
3,634
12,509
7,037
4,749
97,076
1,603
149,153
15,356
-
166,112
255,352
263,188
254,465
218,126
76,420
(5,948)
183,993
254,465
76,420
(6,762)
148,468
218,126
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
7 Unrecognised Items
7.1 COMMITMENTS
Operating lease commitments
The commitment in the 2020 period related to a non-cancellable property lease that was expected to commence in January 2023.
During the 2021 period this lease was brought to account in the Statement of Financial Position as outlined within Note 3.5.
Payable minimum lease payments
– Not later than 12 months
– Between 1 and 5 years
– Greater than 5 years
Current payables
7.2 CONTINGENT LIABILITIES
Financial guarantees
Guarantee provided for the performance of a contractual
obligation not supported by term deposit
Guarantees provided for obligations under P&A facilities
Guarantee provided in respect of a working capital facility
Guarantees provided in respect of property leases
Cross company guarantees
Consolidated Group
Parent Entity
2021
$’000
2020
$’000
2021
$’000
2020
$’000
-
-
-
-
-
14,770
39,604
54,374
-
-
-
-
-
-
-
-
Consolidated Group
Parent Entity
2021
$’000
2020
$’000
2021
$’000
2020
$’000
11,550
14,862
11,359
4,256
473
42,500
11,550
14,088
10,768
5,603
448
42,457
-
14,255
11,036
-
-
-
13,908
10,768
-
-
25,291
24,676
Class Action
On 14 August 2018, a class action proceeding was commenced in the Federal Court against Davantage Group Pty Ltd (trading as “National
Warranty Company”), a subsidiary of the Company, in relation to certain warranty products. Davantage Group Pty Ltd was acquired by the
Company in February 2015 and the claim relates to certain warranties entered into between 1 July 2013 and 28 May 2015. A significant
portion of the relevant period to which the claim relates is in respect of a time when the “National Warranty Company” was not owned by
the MMS Group.
The parties reached agreement to settle the matter with funds of $2 million paid by the Group which was fully provided for as at 30 June 2020.
The settlement is without any admission of liability and was approved by the Federal Court of Australia on 5 February 2021.
95
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2021
8 Other Disclosures
8.1 RESERVES
(a) Share-based payment reserve
The reserve records amounts for the fair value of share-based payments granted and recognised as an employee benefits expense but not exercised.
The balance in reserves representing share-based equity rights and options are transferred to retained earnings upon vesting.
(b) Cash flow hedge reserve
Revaluation - gross
Deferred tax
Balance at the end of the financial year
Consolidated Group
Parent Entity
2021
$’000
(213)
(15)
(228)
2020
$’000
(1,678)
390
(1,288)
2021
$’000
2020
$’000
-
-
-
-
-
-
The hedging reserve is used to record gains and losses on interest rate swaps that are designated and qualify as cash flow hedges.
(c) Foreign currency translation reserve
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.
(d) Acquisition reserve
At 30 June 2020, the Company acquired Outside Equity Interest’s (OEI) remaining interest in Plan Management Partners Pty Ltd for $8,000,000.
Given the Group already controlled Plan Management Partners Pty Ltd prior to acquiring the remaining equity interest, the remaining balance
was accounted for as an equity transaction. The difference of $7,132,000 between the purchase price of $8,000,000 and the OEI prior to the
transaction of $868,000 was recognised as an acquisition reserve.
8.2 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.
INTEREST
8.3
Interest income is brought to account on an accrual basis.
8.4 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost less accumulated depreciation and impairment loss provision. Cost includes expenditure directly
attributable to bringing the asset to the location and condition necessary for it to be capable of operating as intended.
Depreciation is calculated on a straight-line basis over the estimated useful life of the asset. The useful lives and residual value of assets
are reviewed and adjusted for impairment, if appropriate, at the end of the reporting period.
8.5 RELATED PARTY TRANSACTIONS
Transactions between the Company and other entities within the wholly owned group during the years ended 30 June 2021 and 2020 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:
Dividend revenue
Aggregate amounts payable to entities within the wholly owned
group at balance date:
Current receivables
Current payables
96
Consolidated Group
Parent Entity
2021
$
2020
$
2021
$
2020
$
-
-
-
-
-
-
128,109,000
59,591,464
481,314
12,863,000
11,891,036
128,221,000
MMS ANNUAL REPORT 2021
8.6 AUDITOR’S REMUNERATION
Remuneration of the auditor (Grant Thornton Audit Pty Ltd)
of the parent entity for:
Audit or review of the financial report of the entity and any
other entity in the Consolidated Group
Assurance related
Remuneration of a network firm of the parent entity auditor:
Audit or review of the financial statements (UK)
Assurance related for non-statutory audit services
No non-assurance related services were provided.
Consolidated Group
Parent Entity
2021
$
2020
$
2021
$
2020
$
306,000
301,200
264,400
157,970
183,018
8,565
179,813
10,009
-
-
-
-
-
-
-
-
8.7 NEW ACCOUNTING STANDARDS AND INTERPRETATIONS ADOPTED DURING THE YEAR
The amended accounting standards and interpretations issued by the Australian Accounting Standards Board during the year that were
mandatory were adopted except as outlined below. None of these amendments or interpretations adopted materially affected any of the
amounts recognised or disclosures in the current or prior year. The following IFRS Interpretations Committee (IFRIC) and IFRS Interpretations
Committee agenda decisions were not yet adopted during the year.
IFRIC agenda decision on Software-as-a-Service (SaaS) arrangements
The IFRIC has issued two final agenda decisions which impact SaaS arrangements:
> Customer’s right to receive access to the supplier’s software hosted on the cloud (March 2019) – this decision considers whether
a customer receives a software asset at the contract commencement date or a service over the contract term.
> Configuration or customisation costs in a cloud computing arrangement (April 2021) – this decision discusses whether configuration
or customisation expenditure relating to SaaS arrangements can be recognised as an intangible asset and if not, over what time
period the expenditure is expensed.
As at 30 June 2021, the Group has not yet completed its assessment of the impact of the IFRIC agenda decision. The Group expects to adopt
this IFRIC agenda decision in its half-year financial statements ending on 31 December 2021.
IFRS Interpretations Committee agenda decision on Costs necessary to sell Inventories (issued June 2021)
AASB 102 Inventories does not define costs necessary to sell inventories when determining net realisable value. The agenda decision
confirmed that an entity cannot limit the costs it includes to those that are only incremental in determining which of its costs are necessary
to sell its inventories.
As at 30 June 2021, the Group has not yet completed its assessment of the impact of the IFRS agenda decision however expects to adopt
in its half-year financial statements ending on 31 December 2021.
8.8 ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE
A new accounting standard AASB 17 Insurance Contracts has been issued but not mandatory for adoption in the year ended 30 June 2021.
This Standard is first applicable to the Group for financial periods beginning 1 July 2023. AASB 17 requires all insurance contracts to be
accounted for in a consistent manner and requires insurance obligations to be accounted for using current values.
The Group is yet to undertake a detailed assessment of the impact of AASB 17 Insurance Contracts. However, based on the entity’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 2024 except for the classification of deferred acquisition costs which are likely
to be reclassified against the unearned premium liability in the Statement of Financial Position.
There are no other standards or interpretations that are not yet effective that are expected to have a material impact on the Group or Company.
97
MMS ANNUAL REPORT 2021Notes to the Financial StatementsFOR THE YEAR ENDED 30 JUNE 2021
Notes to the Financial Statements
FOR THE YEAR ENDED 30 JUNE 2021
8.9 EVENTS SUBSEQUENT TO THE REPORTING DATE
Other than the below and the matters disclosed in this report, there were no material events subsequent to the reporting date.
General
At the date of this report, significant uncertainties remain in the economic environment and the impact of COVID-19 on the business sectors
affecting the Group’s businesses. COVID-19 restrictions remain to various degrees across Australia, and in particular more stringently
across some of our most populous cities, while they have eased across the UK, as at the date of this report. Accordingly, there is significant
uncertainty to the condition of markets that the Group operates in that may affect the recoverable value of assets, adequacy of provisions and
the financial cash flow assumptions used to assess the carrying value of non-current assets.
Plan Tracker Acquisition
On 1 July 2021, a wholly owned subsidiary within the Group acquired 100% of the issued capital of Plan Tracker Pty Ltd. Plan Tracker Pty Ltd
provides plan management services under the National Disability Insurance Scheme (NDIS).
RFS Retail Business Divestment
Subsequent to 30 June 2021 on 23 August 2021, an agreement to sell Davantage Group Pty Ltd and Presidian Management Services Pty Ltd
(the “Warranty business”) was entered into. The sale is expected to result in a loss on disposal of approximately $1.8m with $0.35m
in estimated transaction costs. The sale will be recognised upon completion which is expected to occur in 1HFY2022.
The following provides a summary of the assets and associated liabilities of the warranty business that is subject to the sale as at 30 June 2021:
Current assets
Cash and cash equivalents
Trade and other receivables
Promissory note receivable1
Prepayments
Deferred acquisition costs
Total current assets
Non-current assets
Property, plant and equipment
Right-of-use asset
Intangible assets
Deferred acquisition costs
Deferred tax asset
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Provisions
Unearned premium liability
Lease liabilities
Total current liabilities
Non-current liabilities
Provisions
Unearned premium liability
Total non-current liabilities
Total liabilities
Net assets
1 Promissory note receivable from the Group.
98
Consolidated Group
Note
2021
$’000
3.7
3.7
3.7
3.7
20,513
2,474
10,553
48
5,218
38,806
17
68
186
6,912
268
7,451
46,257
1,594
841
19,142
77
21,654
60
22,748
22,808
44,462
1,795
MMS ANNUAL REPORT 2021
Directors’ Declaration
The Directors are of the opinion that:
1.
the financial statements and notes on pages 42 to 98 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 Company and Group’s financial
Note 1 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).
position as at 30 June 2021 and financial performance for the
financial year ended on that date; and
This declaration is made in accordance with a resolution of the
Directors of McMillan Shakespeare Limited.
2.
there are reasonable grounds to believe that the Company and
Group 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 6.4 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 6.4.
Helen Kurincic
Chair
Mike Salisbury
Managing Director &
Chief Executive Officer
24 August 2021
Melbourne, Australia
99
MMS ANNUAL REPORT 2021 Independent Audit Report
AS AT 30 JUNE 2021
Collins Square, Tower 5
727 Collins Street
Melbourne Victoria 3008
Correspondence to:
GPO Box 4736
Melbourne Victoria 3001
T +61 3 8320 2222
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E info.vic@au.gt.com
W www.grantthornton.com.au
Independent Auditor’s Report
To the Members of McMillan Shakespeare Limited
Report on the audit of the financial report
Opinion
We have audited the financial report of McMillan Shakespeare Limited (the Company) and its subsidiaries (the Group),
which comprises the consolidated statements of financial position as at 30 June 2021, the consolidated statements of
profit or loss and other comprehensive income, consolidated statements of changes in equity and consolidated statements
of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of
significant accounting policies, and the Directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including:
a giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its performance for the year
ended on that date; and
b complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are
further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are
independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and
the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled
our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
#5940900v3
100
MMS ANNUAL REPORT 2021
Independent Audit Report
AS AT 30 JUNE 2021
2
Key audit matter
How our audit addressed the key audit matter
Impairment of goodwill and intangible asset balance (Note 3.1)
At 30 June 2021, the Group has $87,862,000 of goodwill
and $16,343,000 in other intangible assets (excluding
software development costs) contained within separate
cash generating units (CGUs).
During the year the Group recognised an impairment
against goodwill for the following GCU’s:
CLM Fleet Management of $1,962;000; and
Maxxia Limited of $10,575,000 (Maxxia Limited’s
future earnings did not support the carrying
amount of the goodwill recognised of
$10,575,000 and therefore this was impaired to
zero).
AASB 136 Impairment of Assets requires management to
perform an impairment test on goodwill and other
indefinite life intangibles at least annually, as well as on
intangible assets with finite useful lives if indicators of
impairment are identified.
We consider this a key audit matter due to the nature of
the balances and the judgments required in preparing the
value-in-use (VIU) models and due to the judgement in
determining CGUs, impairment indicators and triggers.
This involves consideration of the future results of the
business, growth and the discount rates applied.
Our procedures included, amongst others
assessing management’s determination of CGUs based on our
understanding of how management monitors the entity’s operations
and makes decisions about groups of assets that generate
independent cash flows;
evaluating management’s process for the preparation and review of
the impairment assessment VIU models, taking into consideration
the impacts of sector specific issues;
reviewing the impairment assessment VIU models for compliance
with AASB 136;
reviewing the completeness and accuracy of the underlying data
used in the impairment assessment VIU models;
utilising internal valuation specialists to assess the appropriateness
of the valuation methodology;
evaluating the mathematical accuracy of the VIU model calculations;
assessing the key growth rate assumptions by comparing them to
historical results, economic or industry forecasts and the discount
rate by reference to the cost of capital for the relevant components
and the Group by comparing to historical results, and considering
the Group’s historical ability to forecast accurately;
performing sensitivity analyses in relation to the cash flow
projections, discount and growth rate assumptions on CGU’s with a
higher risk of impairment. The impairment analysis considered the
individual and collective impacts; and
assessing the adequacy of the Group’s disclosures within the
financial statements.
Warranty revenue and unearned premium liability (Note 3.7)
The warranty area of the business derives revenues
through the gross wholesale premiums obtained from
dealers entering into the sale of warranty products to
used vehicle consumers.
Revenue is recognised over the term of the warranty in
line with the profile of expected future claims. This gives
rise to the unearned premium liability. At year-end this
balance was a liability of $41,890,000.
We consider this a key audit matter due to the inherent
subjectivity over the nature of the estimations used in
determining the unearned premium liability.
Our procedures included, amongst others:
verifying the mathematical accuracy of the unearned premium
liability and warranty revenue calculations to ensure the revenue
profile assumptions have been correctly applied;
reviewing the completeness and accuracy of the underlying data
used in the calculation;
assessing the reasonableness of management’s key assumptions in
relation to the revenue profile, which is based on the profile of future
claim costs by;
o analytically reviewing the claims patterns during the year to
determine the appropriateness of the percentages in the
unearned premium model; and
o selecting a sample of claims in the current year and agreeing
their details to supporting documentation and payments;
testing the accuracy of the gross premiums used in the unearned
premium calculation by selecting a sample of gross premiums and
agreeing amounts and key terms to supporting contracts; and
assessing the adequacy of the Group’s disclosures within the
financial statements.
Information other than the financial report and auditor’s report thereon
The Directors are responsible for the other information. The other information comprises the information included in the
Group’s annual report for the year ended 30 June 2021, but does not include the financial report and our auditor’s report
thereon.
101
MMS ANNUAL REPORT 2021
Independent Audit Report
AS AT 30 JUNE 2021
3
Our opinion on the financial report does not cover the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or
otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the financial report
The Directors of the Group are responsible for the preparation of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors
determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material
misstatement, whether due to fraud or error.
In preparing the financial report, the Directors are responsible for assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing
Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance
Standards Board website at: https://www.auasb.gov.au/auditors_responsibilites/ar1_2020.pdf. This description forms part of
our auditor’s report.
Report on the remuneration report
Opinion on the remuneration report
We have audited the Remuneration Report included in pages 18 to 36 of the Directors’ report for the year ended 30 June
2021.
In our opinion, the Remuneration Report of McMillan Shakespeare Limited, for the year ended 30 June 2021 complies
with section 300A of the Corporations Act 2001.
Responsibilities
The Directors of the Group are responsible for the preparation and presentation of the Remuneration Report in accordance
with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report,
based on our audit conducted in accordance with Australian Auditing Standards.
Grant Thornton Audit Pty Ltd
Chartered Accountants
Darren Scammell
Partner – Audit & Assurance
Melbourne, 24 August 2021
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Auditor’s Independence Declaration
AS AT 30 JUNE 2021
Collins Square, Tower 5
727 Collins Street
Melbourne VIC 3008
Correspondence to:
GPO Box 4736
Melbourne VIC 3001
T +61 3 8320 2222
F +61 3 8320 2200
E info.vic@au.gt.com
W www.grantthornton.com.au
Auditor’s Independence Declaration
To the Directors of McMillan Shakespeare Limited
In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of McMillan
Shakespeare Limited (the Company) and its subsidiaries (the Group) for the year ended 30 June 2021, I declare that, to the
best of my knowledge and belief, there have been:
a
b
no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
Grant Thornton Audit Pty Ltd
Chartered Accountants
Darren Scammell
Partner – Audit & Assurance
Melbourne, 24 August 2021
Grant Thornton Audit Pty Ltd ACN 130 913 594
a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389
www.grantthornton.com.au
‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients
and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International
Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are
delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one
another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to
Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to
Grant Thornton Australia Limited.
Liability limited by a scheme approved under Professional Standards Legislation.
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Shareholder Information
Additional information required by the ASX Listing Rules and not disclosed elsewhere in this Annual Report is set out below:
SUBSTANTIAL SHAREHOLDINGS
As at 30 July 2021 the number of shares held by substantial shareholders and their associates is as follows:
Shareholder
HSBC Custody Nominees (Aust) Ltd
JP Morgan Nominees Australia Limited
Citicorp Nominees Limited
Chessari Holdings Pty Limited2
Asia Pac Technology Pty Ltd3
Number of Ordinary Shares
Percentage of Ordinary Shares 1
28,227,083
9,859,180
7,633,731
6,050,941
3,068,025
36.48
12.74
9.87
7.82
3.96
1 As at 30 July 2021, 77,381,107 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.
NUMBER OF SHARE & OPTION HOLDERS
As at 30 July 2021, 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 $13.45 and expiring on 30 September 2021
VOTING RIGHTS
Number of Holders
4,933
2
In accordance with the Constitution of the Company and the Corporations Act 2001 (Cth), every member present in person or by proxy
at a general meeting of the members of the Company has:
> on a vote taken by a show of hands, one vote; and
> on a vote taken by a poll, one vote for every fully paid ordinary share held in the Company.
A poll may be demanded at a general meeting of the members of the Company in the manner permitted by the Corporations Act 2001 (Cth).
DISTRIBUTION OF SHARE & OPTION HOLDERS
As at 30 July 2021, the distribution of share and option holders in the Company was as follows:
Distribution of Shares & Options
Number of Holders of Ordinary Shares & Options
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,000+
3,124
1,413
225
151
22
As at 30 July 2021 there were 265 shareholders who held less than a marketable parcel of 40 fully paid ordinary shares in the Company.
ON-MARKET BUYBACK
The Company does not have a current on-market buy-back.
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MMS ANNUAL REPORT 2021
Shareholder Information
TOP 20 SHAREHOLDERS
As at 30 July 2021, the details of the top 20 shareholders in the Company are as follows:
No.
Name
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
JP Morgan Nominees Australia Limited
Citicorp Nominees Limited
Chessari Holdings Pty Limited2
Asia Pac Technology Pty Ltd3
CS Third Nominees Pty Limited
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