MaxiPARTS Annual Report 2018

FY2018 Annual Report · MaxiPARTS

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ANNUAL REPORT 2018

MaxiTRANS Industries Limited
ACN 006 797 173

LEADING THE WAYOUR PURPOSE

LEAD OUR INDUSTRY TO BECOME
SAFER AND MORE EFFICIENT, SO OUR
CUSTOMERS CAN BETTER DELIVER
THE NEEDS OF A NATION.

Cover from left to right front row: Yunfeng Bao Graduate Product Engineer; Nor Nordin Business Graduate; Jackson Wright Graduate Engineer; Venkatesan Sethuraman Graduate Engineer;
Ankita Wadhani Business Graduate. Left to right back row Caleb Pearce Graduate Design Engineer; Aislinn Seery Graduate Design Engineer; Matthew Kebernik Graduate Product Designer

Image below from left to right: Jenny Chen Design Engineer; Daniel Grundell Design Engineer; Aislinn Seery Graduate Design Engineer

MaxiTRANS Industries | Annual Report 2018

Executive Leadership Team

Report of the Directors and
Financial Report

CONTENTS

2018 Highlights

MaxiPARTS

Chairman’s Letter

Australian Trailers

Managing Director’s Review

International

Our People, Our Community

Board of Directors

DELIVERING THE NEEDS OF A NATION02

MaxiTRANS Industries | Annual Report 2018

2018 HIGHLIGHTS

409

17.1

6.0

9.2

352

340 340

329

10.7

10.1

8.8*

6.3*

3.5

3.0

2.0

5.8

5.4

4.7*

3.4*

2014 2015 2016 2017 2018

Revenue
($m)

Net profit after tax
($m)

Ordinary dividends
declared per share (cents)

Earnings per share
(basic) (cents)

* Excluding significant items

Operating
cash flow

Women in
management roles

Australian trailer
unit sales

New Zealand
trailer unit sales

25%

17%

45%

345%

Medically treated
injury rate

$15K

20%

Donated to support
RUOK?

Coles

386 trailers
delivered

MaxiTRANS Industries | Annual Report 2018 03

CHAIRMAN’S REPORT

“MaxiTRANS builds even further upon
already strong foundations. Focusing
on operations to improve efficiencies as
well as setting safety of our people and
customers as a daily priority, is a clear
demonstration of how MaxiTRANS
continues to lead this industry to
become better every day”.

Dear Shareholder,

Last year I spoke to you about our change agenda at
MaxiTRANS and this year I can provide some further
colour to that agenda, how it is tracking and the future
the Board and Management have mapped out, but
firstly let me touch briefly on the year just completed.

Whilst our revenue objectives were met with an increase of 20% to
$409.3 million, poor operating margins meant we did not meet our
bottom line expectations with Net Profit After Tax of $10.1 million,
5.8% below last year. As a Board, we were disappointed at the
need to make a trading update in May of this year. This unexpected
downgrade was a direct result of manufacturing inefficiencies and
supply chain shortages which emerged as the business tried to
aggressively take advantage of a better than anticipated order book
following the completion of the Coles order in Q3. After an intense
period of recovery we have now regained control towards long run
levels of efficiency and have started to see the expected levels of
profitability return.

Whilst this was a setback, the Board is confident that the strategy
remains the right one for MaxiTRANS and we remain committed
to our five strategic pathways that have seen good progress over
the last year. This strategy will see the business double earnings
over the plan period through a combination of margin accretion
and revenue growth.

Operational Excellence
In building the foundation for the future, the business needs to
introduce more standardised and repeatable processes through a
consistent MaxiTRANS Production System supported by the new
ERP platform, a rigorous Health, Safety, Environment and Quality
platform and a collaborative whole-of-business supply chain network.

Growth in Existing Markets
Continuing with the successful growth of the product portfolio
in the MaxiPARTS business and further leveraging our national
customer relationships, we firmly believe we will – if we don’t
already – have a first class distribution asset.

Through a systemic review of our Sales, Service and Parts
footprint, innovative product enhancements/additions and the
flow-on effects of the Operational Excellence strategy, we will
continue to increase market share whilst protecting margins.

Growth in New Markets
With a key desire to move up the value chain in China through a
focus on the growing China and South East Asian markets and
better leveraging our existing New Zealand footprint, we aim
to have 25% of group earnings not exposed to the Australian
economy by 2022.

The success of these growth platforms can only happen by
ensuring the organisation is capable to deliver and we are
supporting this through our enabling strategies.

Organisation Development and Corporate Image
We are embedding a consistent set of values throughout our
entire team and creating a talent management and performance
framework that aligns the competencies of our people to meet
our business needs, underpinned by a pride in being Australia’s
largest and only listed player in our industry.

Finally, I am pleased to report that we have also made good
progress over the recent period in reviewing our capital allocation.
In addition to the recently announced decision to sell our Chinese
panel business, we have a number of other plans that will
continue to be developed and implemented over the next year.

So as I look forward, we – your Board of Directors – firmly believe
we have a sound strategy and a developing diverse organisational
capability to deliver that strategy.

Robert H. Wylie
Chairman

MaxiTRANS Industries | Annual Report 2018

MANAGING DIRECTOR’S REVIEW

“Operating cashflow of $19m
represented a 345% improvement
over the prior year, largely as a result
of improved working capital. This
strong operating cashflow funded the
continued investment in the group’s
core IT transformation program and
the Company’s dividend payments”.

MaxiTRANS’ performance for the year ended 30th
June 2018, reflects many encouraging signs for the
future of the Company, in particular a continued
rebalancing of the portfolio’s profitability as the
MaxiPARTS business continues to become a
substantive automotive distribution business in its
own right, continued strong order book and sales in
the Trailer segment. The year does however highlight
that we still have work to do to capitalise on the
opportunities that arise and, in particular, ensuring
these generate improving returns for shareholders.

Notwithstanding a significant improvement in employee
engagement and commitment to improve our safety performance,
our total injury rate improved only slightly. The continued
introduction of a systemic Health, Safety, Environment and
Quality program is now well underway and has started to drive
leading indicator performance improvement over the second
half of the year. This should continue in the coming year.
One of our core values is “To send all our people home safely”,
and the relentless pursuit of this desire remains a key focus
across the business.

From a financial perspective, all areas of our business, except
China, contributed to deliver overall revenue growth of 20%.
However, this strong top line growth did not translate to profit
growth in the Trailer business due to a number of significant
warranty issues in New Zealand as well as a disappointing
manufacturing performance in Australia in Q4 of FY18 that
resulted in the profit downgrade announced to the market
in May, 2018.

Operating cashflow of $19m represented a 345% improvement
over the prior year, largely as a result of improved working
capital. This strong operating cashflow funded the continued
investment in the group’s core IT transformation program and
the Company’s dividend payments. Net debt / equity at the
end of FY18 was 30%, a slight improvement on prior year.
The group’s financial position remains strong and we

continue to have significant headroom in our debt facilities,
enabling further investment in our strategic growth initiatives.

The extensive capital investment in the company’s IT systems and
processes in recent years will reduce in FY19 as the systems are
deployed progressively. We expect operating cashflow in future
years to consistently improve as the investment program reduces
and the benefits of this investment are realised.

As the strategy our Chairman articulated earlier has taken shape
through the year, the business has also been able to critically look
at our capital allocation and has taken a number of decisions that
will not only fund growth but also improve the Return on Invested
Capital. The first of these is to sell the MTC business in China as
a result of the changing panel manufacturing landscape globally.
The sale process is well underway and this will incorporate long-
term supply arrangements for continued sourcing of product.

MaxiPARTS Parts Business
The MaxiPARTS business experienced strong revenue and profit
growth from the launch of new products into the range including
tyres, European after-market truck parts and North American
after-market engine parts, as well as continued success of the
MaxiSTOCK customer inventory management system to drive
incremental sales.

A change in the group business model now has MaxiPARTS
operating as a key supplier to our manufacturing and service
facilities, thus ensuring parts and component procurement is
leveraging the company’s full scale, procurement and logistics
capability. This more integrated supply chain is already showing
early benefit in inventory levels and assisted in the improved
working capital performance for the year.

The strategic intent to drive sales volume increase through
our existing national wholesale and retail network of 20
locations, together with tight cost control, resulted in net margin
improvement over the prior year. This should continue as the
benefits of our national footprint start to become clearer to
key fleet customers.

MaxiTRANS Industries | Annual Report 2018 05

Australian Trailer Business
We continue to see an improvement in conditions for the
Australian trailer market with new trailer registrations in 2017
increasing 17% over the prior year, representing the second year
in a row of market growth, albeit somewhat affected by the scale
of the Coles trailers being registered . This appears to indicate
the start of the trailer equipment replacement cycle. Pleasingly,
MaxiTRANS has continued its long term trend of increasing
market share.

Assisted by the order to build 386 trailers for Coles
Supermarkets, the Australian trailer business increased its
unit sales 17% and revenue by 25%. The order, regarded as the
single largest order in the Australian trailer industry at the time,
was completed on budget and ahead of time. Confirming the
company’s credentials to deliver large scale orders. MaxiTRANS
has also secured a number of other high volume contracts, but
not of the same magnitude as the Coles contract.

The Coles order drove the strong sales growth of Maxi-CUBE
refrigerated vans and we also saw strong sales growth of our
Freighter branded general freight products. This is the result of
improved confidence in the general freight sector as well as the
better than expected launch of a standard model trailer that is
able to be delivered in a shorter lead time.

Whilst still above average historical levels, sales of our portfolio
of tipper products into the infrastructure construction, agriculture
and waste sectors declined from the abnormally high sales levels
of the prior year. We expect tipper sales to remain strong whilst
investment in infrastructure construction continues.

A solid pipeline of product development initiatives to deliver new
innovative solutions for our customers and cost reductions will
continue to deliver incremental sales into the future.

The current market conditions are requiring our manufacturing
facilities to increase production rates to high levels over a
sustained period. This challenge, compounded by the sudden
and dramatic shift in production mix, placed great strain on the
manufacturing facilities, with the impact experienced in the last
quarter of FY18. Pleasingly, our manufacturing management
team have restored operating efficiency back towards normal
levels as we enter the new financial year.

Looking forward, the single point reliance on a sole
manufacturing plant in Ballarat has resulted in an updated
manufacturing strategy that will see the next phase of capacity
growth likely to be in a new facility in Queensland. Not only does
this reduce long-term strain on the Ballarat facility but it enables
MaxiTRANS to better support the growing Northern NSW and
Queensland markets, whilst realising operating efficiency on
the present Queensland manufactured products.

International Business
New Zealand
As foreshadowed last year, the New Zealand trailer market
rebounded after the period of uncertainty surrounding the
transport regulation changes. This, combined with a number
of customer contract changes, drove a 45% increase in trailer
unit sales.

In addition, the business established its first permanent presence
in the South Island during the year by opening a new service
facility in Christchurch. This has been well received by our
customers as it provides national support for our products.

However, the business’ profit was significantly impacted by a
number of product warranty claims resulting from unacceptable
component design and manufacture in 2014. The issues have
now been identified and largely resolved.

China
Our China business has been challenged this past year due to
input cost increases combined with increased competition and
product commoditisation, resulting in the compression of trading
margins. An employee labour dispute in the second half also
contributed to the margin pressure. The dispute is now resolved.

Outlook
We continue to see improving conditions in the Australian
trailer market as operators upgrade their ageing fleets and
most key economic drivers remain positive. This will benefit
both our Australian trailer business as well as the MaxiPARTS
parts business.

In the short term, order intake remains strong, particularly
in both the general freight and the food and grocery sectors,
benefiting our Freighter and Maxi-CUBE products. Whilst our
tipper order intake is lower than the last financial year, it is still
somewhat dependent on the crop outlook and the timing of
commencement of new infrastructure projects.

With the New Zealand warranty issues now largely behind us
and the establishment of our Christchurch service facility, we can
look forward to this business returning to profitability in the next
financial year.

We look forward to completing the significant investment in our
new IT systems over the next financial year. This will be a key
enabler to driving operational efficiency through the business
resulting in strong operating cashflow in future years.

The Company continues to execute upon its corporate strategy
to not only improve the operational efficiency in our current
business but also to pursue growth opportunities in our existing
markets, looking to identify new market opportunities, all with
the aim of improving shareholder returns. Underlying this will
be a continued focus on improving our safety performance to
ensure we send our people home safely and also design our
products to send our customer’s people home safely.

Dean Jenkins
Managing Director and CEO

MaxiTRANS Industries | Annual Report 2018

OUR PEOPLE, OUR COMMUNITY

MaxiTRANS has ambitious plans for growth.
We realise that the Company cannot grow without
investing in our people. This is why we have made the
conscious effort to have organisational development
as one of our strategic pathways. The plans in this
space are equally ambitious although the principles
behind it are very simple – grow the people to grow
the business. We are building the foundations in
terms of policies and fundamental people processes,
to develop the culture and build the leadership to
drive growth. Investing in these programs will
equip our people with even more capabilities
to move the business forward.

A culture based on solid values
Having articulated our six values last year, the focus this
year shifted to defining what they mean in terms of aligned
behaviours. Defining the behaviours was a company-wide
initiative to enable people to connect with the values. These
values & behaviours are being progressively embedded in
everything, instilling the MaxiTRANS Way.

Our values and behaviours also form the basis of our recently
implemented performance and development process. While
this process will help us build focus on accountability and
collaboration, it will help drive a culture based on a balance
between results “the what” and behaviours “the how’.

Diversity and gender balance
MaxiTRANS recognises that diversity drives better results and
wants to lead the way in breaking the mould within a typically
male dominated industry. To this end, we have partnered with the
National Association of Women in Operations (NAWO) to develop
and drive strategies to build diversity and inclusion. These will
involve mentoring and professional development programs to
support the current workforce as well as internship programs
to start investing in the future prospective workforce.

We have set ourselves aspirational goals in terms of changing
the face of our workforce in the coming years. These include the
composition of our Senior Management Teams both in terms of
recruitment but also in terms of internal succession planning and
development. We also aim to bring diversity in our entry-level talent
through graduate, apprenticeship and mixed ability programs.

These efforts are already bearing fruit. We have experienced
a 25% increase in females in management roles from 2017
to 2018.

25%

increase in females in management roles
from 2017 to 2018.

GROW THE PEOPLE, TO GROW THE BUSINESSMaxiTRANS Industries | Annual Report 2018 07

Safety
Overall, our health and safety KPIs improved, with our Total Injury
Frequency Rate down 2% from last year. The biggest decline was
the medically treated injury rate, down 20% from FY17 and 46%
since FY15. Work groups have been established to examine tasks
most often associated with injuries, and implement practical
initiatives such as the modification of equipment.

Our focus on safety was broadened in FY18 to reflect our value
of sending all our people home safely. The more holistic view of
safety also saw an increased focus on mental health.

R U OK? Day
For the first time in September 2017, MaxiTRANS participated in
this national initiative, designed to draw attention and promote
effective responses to the risk of suicide. Linked to the effort
to raise awareness of mental health risks, MaxiTRANS staff
supported events promoting RU OK? Day at sites across the
business. MaxiTRANS donated $15,000 from all orders
received on R U OK? Day to the charity.

MaxiTRANS Industries | Annual Report 2018

MaxiPARTS

Operational highlights
MaxiPARTS has expanded its product offering from trailer parts,
consumables and tyres, to after-market North American engine
parts and Euro truck and bus parts, by successfully securing
new distribution arrangements with some of the world’s leading
after-market suppliers. The comprehensive product portfolio
has enabled MaxiPARTS to leverage its national network of 20
locations to strengthen its relationships with major corporate
fleet customers, meeting their needs to maintain large truck,
trailer and bus fleets.

Investment in developing our people is further improving product
quality and customer service. These competitive advantages will
provide MaxiPARTS with the opportunity to grow by targeting
new market segments and opportunities.

These initiatives resulted in MaxiPARTS increasing its external
revenue by 12%

MaxiPARTS has also benefited from being part of Australia’s
largest trailer supplier. A change in the Company business model
now sees MaxiPARTS fulfil the role of major component supplier
for the Group’s manufacturing facilities and service workshops.
This enables the group to benefit from its scale and MaxiPARTS
procurement and supply chain expertise.

Further consolidation in procurement and focus on process
improvement, enabled by the deployment of the new integrated
IT systems across the group, will further enhance our efficiency,
productivity and profitability over coming years.

Our strength is our people
Parts interpreters across our 20 branches dig deep into their
“parts DNA” every day in order to problem solve on behalf
of our customers. With such an extensive range of parts, it
is common for a customer to come into a MaxiPARTS store
and ask a member of the team to identify and source a part
merely by looking at it. The part can either be 20 years old
or new on the market; it could be an Original Equipment
Manufacturer part or an after-market part. In a simple case,
an order is placed with the proprietary supplier. However, it
isn’t unusual for a sought-after part to be reproduced from
an original drawing. Regardless of the nature of the request,
our people know exactly where to source it and deliver
quickly to meet the customer’s needs.

The commitment by our MaxiPARTS team to add value
to our customers by delivering what they need, when they
need it, is our biggest strength.

UNPARALLELED KNOWLEDGE BEARS FRUITMaxiTRANS Industries | Annual Report 2018 09

Empowering accountability with authority
Our drive to build passionate and experienced teams of experts
who deliver exceptional customer service based on unparalleled
levels of knowledge continues to bear fruit.

The growing team is now comprised of a much wider base
of expert know-how, with personnel, logistical, systems and
financial specialists all playing their role in building efficiency
and improving levels of customer service. We are also delighted
to report that 50% of new team members joining MaxiPARTS
last year were female.

Our exceptional team remains the business’s strongest
asset and assurance of our capacity to sustain further
substantial growth as Australia’s leading truck, trailer
and bus parts network.

50%

of new team members joining MaxiPARTS
last year were female

MaxiTRANS Industries | Annual Report 2018

AUSTRALIAN TRAILERS

Performance
Strong revenue growth in the Australian Trailer business
continued in FY2018, up 25% year on year. The growth comes
on the back of continued strong results through our company
owned and independent retail dealer network and the fulfilment
of the balance of the Coles contract. The Coles contract, believed
to be the largest of its kind in Australia, was delivered under
budget and ahead of the agreed delivery schedule and is further
testament to MaxiTRANS’ ability to deliver contracts of any size.

Guided by our commitment to leading our industry to become safer
and more efficient, allowing our customers to deliver the needs of a
nation, MaxiTRANS introduced a number of exciting new products
and enhanced service offerings to market throughout FY2018.

Innovation
A breakthrough innovation in safety was launched with the
introduction of the SafeADJUST™ Mezzanine Deck in January
2018. The new deck system helps to meet Distribution Centre
work health and safety requirements by removing the need for
operators to enter the safety exclusion zone.

SafeADJUST™, along with the suite of other product innovations
introduced over the preceding 18 months have helped to create a
compelling competitive advantage for our Freighter product line,
and is a contributor to the 27% year on year growth in demand
for this complex and highly customised product group.

In FY2018, MaxiTRANS introduced the latest evolution of its popular
Maxi-CUBE refrigerated trailer range. The revised trailer design went
through a rigorous test and prototype regime that involved accelerated
destruction testing, Finite Element Analysis (FEA) along with almost
1 million km of real world testing. The result: a 500kg tare weight
reduction, and greater than 5% improvement in thermal efficiency.

Efficiency
For the past decade the Performance Based Standards (PBS) scheme
has allowed heavy vehicle operators the potential to achieve greater
productivity (mass and/or overall length concessions) through
optimised vehicle designs that leverage the latest technology, which
in turn provides improved safety outcomes for all road users. In May
2018 the National Heavy Vehicle Regulator (NHVR), the government
body tasked with administering the scheme, released a report
summarising its success. In its findings it revealed MaxiTRANS as
the clear leader in providing these PBS-approved trailer combinations
for use on Australia’s road network.

As part of MaxiTRANS’ ongoing commitment to designing and
building trailers that perform their tasks as productively, safely and
sustainably as possible, MaxiTRANS increased its dedicated in-house
PBS engineering capability by over 50% in FY2018. This strategic
investment for the future is important to enable us to continue to
offer bespoke PBS solutions that are tailored to our customer’s
needs and unique operational requirements, as well as providing
a developmental pathway for our future engineering leaders.

TAILORING SOLUTIONS TO MEET CUSTOMER NEEDSMaxiTRANS Industries | Annual Report 2018 11

Customer Service
Over the course of FY2018, and in order to help better service and
support MaxiTRANS’ growing customer base, we extended our
trading hours at our Customer Service Centres in Melbourne and
Sydney. Additionally, we launched a remote servicing capability to
allow our technicians to service vehicles at our customers’ premises.

Throughout FY2018 continued investment was made in the growth
of MaxiTRANS’ Trailer Rental fleet. The fleet now comprises of 100+
trailers in a range of configurations that help to better support our
customers through their changing operational requirements.

Manufacturing
In January 2018, Trevor Negus took over as Group General Manager;
Manufacturing. Trevor joins MaxiTRANS off the back of a long and
distinguished career with Ford in various roles across their global
operations. Trevor’s immediate focus has been on enhancing
the manufacturing team’s strategic capabilities to complement
MaxiTRANS’ credentialed manufacturing operational strengths.

Standardisation of our engineering design approach and continued
refinement of our manufacturing methodologies through Project
TRANSForm have now delivered a base MRP system ready to be
rolled out across our manufacturing facilities in H1, FY2019.

Overall, MaxiTRANS continues as Australia’s largest and most
diverse heavy duty trailer manufacturer. Throughout FY2018,
we have invested for the future so that we are positioned and
structured to enable substantial, sustained growth in design and

delivery of ever safer and functionally superior trailers for the
Australian road transport industry.

25%

year on year revenue growth in the Australian
Trailer business

MaxiTRANS Industries | Annual Report 2018

INTERNATIONAL

Financial performance
International business performance was challenged with
margins being negatively impacted by a significant increase
in raw material costs in China, and by a range of historical
warranty issues in New Zealand.

A stronger sales performance in New Zealand was underpinned
by a very strong order book for refrigerated trailers. This was the
result of not only new introduced changes to vehicle dimension
and mass regulations by the Transport Authority but also
because of a number of larger transport contracts changing.

Also in New Zealand, improvements to labour efficiencies arising
from operational excellence initiatives began to flow through in
the second half of the year. These improvements are expected
to make a significant contribution to higher profitability for the
New Zealand manufacturing business in coming years.

Operational highlights

Expanding our after-sales service offer in NZ
A significant step in our strategy to provide superior after-
sales support to New Zealand customers was realised
with the opening of our new service centre in Christchurch
in December 2017. Complementing the established service
facility in Auckland, this expanded national service offering
begins to develop a strong competitive advantage in New
Zealand’s road transport sector. It is expected to boost
financial performance in coming years both through
increased service revenues and by contributing a more
competitive point of leverage for new trailer sales.

A range of initiatives were explored and/or implemented
throughout the year in pursuit of new avenues for sustained,
profitable growth outside of Australia.

Apart from the launch of an expanded after-sales service
offering in New Zealand, we will also be launching a trailer
rental business this financial year. It will enable our customers
to respond rapidly to changing levels of demand and minimise

PURSUING SUSTAINABLE, PROFITABLE GROWTHMaxiTRANS Industries | Annual Report 2018 13

down-time associated with the need for repairs or upgrades to
existing trailer equipment. We will initially trial and refine the offer
with a limited number of units before expanding the rental fleet
in line with demand over coming years.

The New Zealand business will also introduce a number of new
product developments on the back of the overall group program,
including the Maxi-CUBE Classic refrigerated van which will
provide operators with both improved thermal performance
and also have a tare weight saving.

Throughout the year significant effort and time was also invested
to better understand growth opportunities in various Asian
markets. This is now translating into the prioritisation of and
planning for new growth initiatives that will be assessed and
implemented in coming years.

45%

increase in trailer unit sales – the New Zealand trailer
market rebounded after a period of uncertainty

MaxiTRANS Industries | Annual Report 2018

BOARD OF DIRECTORS

Robert Wylie (A) – Chairman, Non-Executive Director
James Curtis (B) – Deputy Chairman, Non-Executive Director
Dean Jenkins (C) – Managing Director and CEO
Samantha Hogg (D) – Non-Executive Director
Joseph Rizzo (E) – Non-Executive Director

MaxiTRANS Industries | Annual Report 2018 15

EXECUTIVE LEADERSHIP TEAM

Campbell Richards (A) – Chief Financial Officer
Andrew McKenzie (B) – Group GM, Sales and Marketing
Trevor Negus (C) – Group GM Manufacturing
Angelique Zammit (D) – Group Human Resources Manager
Peter Loimaranta (E) – Group GM, International
Justin O’Brien (F) – General Manager, MaxiPARTS
Scott Harkin (G) – Group Supply Manager
Dean Jenkins – Managing Director and CEO (pictured on page 14)

MaxiTRANS Industries | Annual Report 2018

REPORT OF THE DIRECTORS
AND FINANCIAL REPORT

CONTENTS

Financial Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

Consolidated Statement of Cash Flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41

Report of the Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . .42

Directors’ Declaration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36

Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .81

Consolidated Statement of Profit or Loss and
Consolidated Statement of Comprehensive Income . . . . . . . . . . . . . . . . . . . .37

Consolidated Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . .38

Consolidated Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . .39

Australian Stock Exchange Additional Information . . . . . . . . . . . . . . . . . . . . . .87

MaxiTRANS Industries Limited
ACN 006 797 173
and Controlled Entities

MaxiTRANS Industries | Annual Report 2018

REPORT OF THE DIRECTORS AND FINANCIAL REPORT

FOR THE YEAR ENDED 30 JUNE 2018

Financial Summary

Revenue

EBITDA (excluding significant items)(3)

EBIT (excluding significant items)(3)

NPBT (excluding significant items)(3)

NPAT (excluding significant items)(3)(4)

Significant Items (net of tax)

NPAT – attributable to equity holders

Basic EPS(6)

Ordinary dividends/share declared

Depreciation

Amortisation – leased assets

Amortisation – intangibles

Capex additions

Operating cash flow

NTA

Net assets

Interest bearing liabilities(5)

Finance costs

Total bank debt(5)

Net debt/equity(5)

Interest cover (excluding significant items)

F2014

F2015

F2016

F2017

F2018

351,968

329,165

340,179

340,072

409,312

30,594

25,185

23,172

17,075

16,247

10,604

8,079

6,303

19,219

14,199

11,840

8,752

–

(1,806)(1)

(3,517)(2)

21,439

16,836

14,520

10,695

–

20,931

16,133

13,659

10,077

–

17,075

9.26

6.00

3,600

690

1,119

13,239

16,612

75,876

4,497

2.43

2.00

3,967

550

1,126

10,893

12,138

78,380

5,235

2.83

3.00

3,583

662

775

9,530

21,196

86,278

10,695

10,077

5.78

3.50

3,541

562

500

8,354

4,445

91,210

5.44

3.50

3,713

586

499

14,486

19,767

98,801

121,813

120,612

123,337

128,727

135,819

42,580

2,013

39,713

31%

12.51

47,302

2,525

45,196

36%

4.20

43,152

2,359

41,465

26%

5.75

47,697

2,316

46,214

32%

7.27

50,661

2,474

49,500

30%

8.62

$’000

cents

$’000

times

(1) Relates to impairment loss on AZMEB intangible assets of $2.58m pre-tax (disclosed above net of tax).

(2) Relates to the impairment loss on Lusty EMS and Hamelex White intangible assets of $4.398m pre-tax and the closure cost of the Bundaberg

facility of $0.626m pre-tax (disclosed above net of tax).

(3) EBIT, EBITDA, NPBT and NPAT excluding significant items are non-IFRS financial measures, which have not been subject to review or
audit by the Group’s external auditors. These measures are presented to enable understanding of the underlying performance of the
Group by users.

(4) Also referred to as underlying net profit after tax attributable to MaxiTRANS equity holders.

(5) F2018 excludes liabilities held for sale amounts.

(6) Includes both earnings from continued and discontinued operations.

18 MaxiTRANS Industries | Annual Report 2018

Your directors submit their report together with the
consolidated financial report of MaxiTRANS Industries
Limited ACN 006 797 173 (“the Company”) and its
subsidiaries (together referred to as the "Group"), and
the Group's interest in associates for the year ended
30 June 2018 and the auditor’s report thereon.

Directors

The names of directors in office at any time during or since
the end of the financial year are:

Mr Robert H. Wylie

(Chairman since 30 June 2016)

Mr James R. Curtis

(Director since 1987 – Deputy
Chairman since October 1994)

Mr Joseph Rizzo

(Director since June 2014)

Ms Samantha Hogg

(Director since April 2016)

Mr Dean Jenkins

(Appointed Managing Director
on 1 March 2017)

Principal Activities

The principal activities of the Group during the year
consisted of the design, manufacture, sale, service and
repair of transport equipment and related components
and spare parts. There were no changes in the nature of
the Group’s principal activities during the financial year.

Dividends

Dividends paid or declared for payment are as follows:

Ordinary shares

A fully franked interim dividend of 2.00 cents per share
was paid on 13 April 2018 totalling $3,701,513.

A fully franked final dividend of 1.50 cents per share has
been proposed by the directors after reporting date for
payment on 12 October 2018. The financial effect of this
dividend has not been brought to account in the financial
statements for the year ended 30 June 2018 and will be
recognised in subsequent financial reports.

State of Affairs

There were no significant changes in the state of affairs
of the Group which occurred during the financial year.

Events Subsequent to Balance Date

There were no material events subsequent to balance date
impacting on the financial statements.

Corporate Governance Statement

The Corporate Governance Statement of the Directors
and the accompanying Appendix 4G is separately
lodged with the ASX and forms part of this Directors’ Report.
It may also be found on the Company’s website
at www.maxitrans.com.

Environmental Regulation

The Group’s environmental obligations are regulated
under Local, State and Federal Law. All environmental
performance obligations are internally monitored and
subjected to regular government agency audit and site
inspections. The Group has a policy of complying with its
environmental performance obligations. No breach of any
environmental regulation or law has been notified to the
Group during or since the year ended 30 June 2018.

Operating & Financial Review

REVIEW OF OPERATIONS

The Group operates two types of businesses: the Trailer
businesses comprising the design, manufacture, sale and
servicing of trailers in Australia and New Zealand; and the
Parts business, MaxiPARTS, a trailer and truck parts
business in Australia.

As a result of a review of capital returns across the
MaxiTRANS’ businesses, the Company has decided to
divest its interest in Maxi-CUBE Tong Composites Co Ltd
(“MTC”), a business that manufactures panels in China for
refrigerated and dry freight trailers for both its domestic and
export markets. With increasing product commoditisation in
China and rising input costs, it is unlikely the business will
generate acceptable returns on the capital invested. MTC
has been classified as a Discontinued Operation in the
Consolidated Statement of Profit or Loss and classified as
Assets Held For Sale and Liabilities Held For Sale in the
Statement of Financial Position.

Trailer Business

The Trailer business has a diverse portfolio of trailers with
market leading brands and a reputation for high quality with
customers. Sales of products through our dealer network,
comprising both owned dealerships and licensed
dealerships provides a full solution including after
sales service and parts to those customers.

REPORT OF THE DIRECTORS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018MaxiTRANS Industries | Annual Report 2018

Australia

The Australian trailer market continued to show
improvement with new trailer registrations increasing 17%
in 2017, the second year in a row of market growth. The
Company’s diverse product portfolio assisted in maintaining
its strong market leading position and achieving a 17%
increase in unit sales. This strong sales result was assisted
by the completion of the order for 386 units for Coles
Supermarkets, widely regarded as the largest single trailer
order in the Australian trailer industry. The order was
completed on budget and ahead of schedule, confirming
the Company’s ability to deliver on large-scale projects.
This order also contributed to the strong market growth
referred to above.

Whilst the Coles order drove the sales growth of Maxi-CUBE
refrigerated vans, pleasingly we also experienced strong
sales growth of our Freighter branded trailers highlighting
improved confidence in the general freight sector.

Sales of our tipper products into the infrastructure,
construction, agriculture and waste sectors declined from
last years’ abnormally high levels, however, we expect sales
to remain strong as the investment in infrastructure
construction continues.

Unfortunately, the strong revenue growth did not fully
translate into improved profitability. Our strong sales order
performance is requiring our manufacturing facilities to
increase production rates to high levels over a sustained
period. These high build rates, combined with a dramatic
shift of production mix significantly adversely impacted our
operating efficiency in the last quarter of FY18, resulting in
the trading update in May, 2018. Pleasingly, efficiencies are
returning to normal levels as we enter the new financial year.

New Zealand

As foreshadowed last year, the New Zealand trailer market
rebounded after a period of uncertainty surrounding the
transport regulation changes. This, combined with a
number of customer contract changes drove a 45% increase
in trailer unit sales.

In addition, the business established its first permanent
presence in the South Island during the year by opening a
new service facility in Christchurch. This has been well
received by our customers as it provides national support
for our products.

The business’ profit, however, was significantly impacted
by a number of product warranty claims resulting from
unacceptable component design and manufacture in 2014.
The issues have now been identified and largely resolved.

Parts Business

The Parts business sells trailer and truck parts at both
a wholesale and retail level in Australia.

The retail business sells parts to road transport operators
as well as truck and trailer service and repair providers
mainly along the eastern seaboard of Australia under
the MaxiPARTS brand.

The wholesale business operates in Victoria, Queensland,
New South Wales and Western Australia. Wholesale
customers are typically truck dealers and trailer
manufacturers. At the end of FY18, MaxiPARTS operated
20 wholesale sites and retail stores.

The MaxiPARTS business experienced strong revenue and
profit growth from the launch of new products into its range
including tyres, European aftermarket truck parts and North
American aftermarket engine parts. The MaxiSTOCK
customer inventory management system continued to drive
incremental sales.

A change in the group business model now has MaxiPARTS
operating as a key supplier to our manufacturing and
service facilities, thus ensuring parts and component
procurement is leveraging the company’s full scale,
procurement and logistics capability. This is also reflected in
improved inventory levels as inventory holding duplication
across the business is reduced.

Discontinued Operation – China

Our China panel business has been challenged in this past
year due to input cost increases combined with increased
competition and product commoditisation, resulting in the
compression of trading margins. A labour dispute in the
second half of the year, which has now been resolved, also
impacted trading margins.

As outlined above, the Company has decided to divest this
business due to its inability to produce adequate capital
returns. In line with the Company’s strategy to generate
growth in new markets, the Company continues to
investigate other strategic opportunities in China and more
broadly across South East Asia.

REPORT OF THE DIRECTORS (CONT.)FOR THE YEAR ENDED 30 JUNE 201820 MaxiTRANS Industries | Annual Report 2018

FINANCIAL REVIEW

Sales

Total revenue increased by 20% for the year to $409.3 million.

With the exception of our China business, all businesses
delivered revenue growth. The Trailer business increased
external revenue by 26% to $291 million and the Parts
business (the MaxiPARTS business) recorded a 12% external
revenue increase to finish FY18 with revenue of $102 million.

The investment associated with Project TRANSform, our
substantial program to replace our ageing and end-of-life
IT systems continued during the year. We are on track to
deploy the systems during FY19. Once implemented, we
expect our cashflow to significantly improve as a result of
the reduced capital investment in later years and the
realisation of the operating efficiencies to be obtained
from the new systems and processes.

Net debt for FY18 reduced to 30% of equity, down from
32% in FY17.

Profit

External Financing Facilities

Notwithstanding the strong revenue growth, net profit after
tax attributable to MXI equity holders was $10.1 million in
FY18, a decrease of 5.7%.

Trading margins were lower in FY18 across all business
units.

Overheads were higher during the year due to:

••

Increased warranty expenses, particularly in the
New Zealand trailer business;

•• Higher selling costs associated with increased sales

volumes and trailer depreciation on rental trailers; and

••

Increased corporate costs to deliver the business growth
(Health & Safety, HR, Finance & Administration and IT).

Cash Generation & Capital Management

Operating cash flow of $19.7 million was generated during
FY18 which was 345% higher than FY17.

Notwithstanding the sustained high build rates during the
year, working capital reduced predominantly due to a
reduction in inventory and an increase in deferred revenue
(i.e. customer deposits received in advance). It is expected
that working capital will remain at these levels whilst the
current trailer build rates are maintained.

During FY17, MaxiTRANS entered into debt facilities
totalling $70 million through a syndicated facility with the
Commonwealth Bank of Australia and HSBC Bank. The
facility is used to fund ongoing business requirements and
facilitate the funding of future growth opportunities. The
facility has both three years and five year maturities, has a
number of covenant requirements and is secured against
property owned by the Group.

These facilities are sufficient to support the business in
its current form. In addition, MTC has a three year RMB
20 million facility with ANZ Banking Group in China and has
an additional uncommitted facility of RMB 5 million. It is
expected this facility will be repaid as a part of a sale of
the business.

Dividends

The total dividend to shareholders relating to the financial
year ending 30 June 2018 will be 3.5 cents per share and
will be fully franked. The total ordinary dividend of 3.5 cents
per share is consistent with the prior year and represents a
64% payout ratio of FY18 net profit after tax attributable to
MXI shareholders.

RISK

The MaxiTRANS Audit & Risk Management Committee, a
sub-committee of the Board, governs the framework and
process for the identification and mitigation of material
business risks. A business risk is the threat that an event or
action will pose to MaxiTRANS’ ability to meet its business
objectives or capture an opportunity.

REPORT OF THE DIRECTORS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018MaxiTRANS Industries | Annual Report 2018

Operational Risks

Foreign Exchange & Commodities Risk

The Group has identified the following operational risks as
“very high”:

•• The Trailer business, which contributed 71% of Group

revenue and 69% of business segment net profit before
tax, is engaged in the manufacture and sale of high value
discretionary capital goods. The success of this business
is largely dependent on the prosperity of the economy
driving freight movement. There is a risk that any decline
in the domestic economy will reduce freight movement
and therefore the demand for new trailers and expanding
customer fleets.

The Group has sought to mitigate this risk by:

•• ensuring that its products are of consistently high

quality;

•• expanding into other adjacent markets;

The Group has exposure to movements in the Australian
dollar against the United States dollar, the Euro and the
Chinese Yuan.

The Trailer business has exposures to these currencies
arising from the purchase of raw materials and components
consumed in the manufacture of trailers. The Trailer
business also has significant exposure to commodity
price fluctuations for steel and aluminium used in the
manufacturing process. Similarly, the Parts business also
has exposure to these currencies as a result of importing
parts for sale.

The Group has a policy of only hedging foreign currency
cash flow risk utilising forward contracts to protect against
movements in short term committed expenditure.

The Group does not hedge against currency risk arising
from the translation of foreign operations.

•• expanding the Parts business to provide more stable,

Depreciation of the Australian dollar may:

recurring income; and

•• expanding into international markets.

•• The risk of greater competition from offshore

competitors selling imported trailers in the Australian
market resulting in a potential loss of market share.

The Group has sought to mitigate this risk by:

•• ensuring that product quality remains high thereby

protecting its brands;

•• product innovation to provide better solutions to

customers;

••

investigating low cost country sourcing opportunities to
maintain margins;

••

reducing the manufacturing cost base through
efficiencies to maintain margins;

•• minimising lead times to delivery; and

•• expand the service footprint to provide after-sales support.

•• adversely affect the operating cost base and therefore
margins. The Group currently hedges short term
committed foreign currency purchases. Some or all of
this risk may be further mitigated by price management
and efficiency improvement, however;

•• may also benefit the Group insofar as it also acts as a
potential barrier to entry for imports that may be
uncompetitive in price against locally produced products.

Conversely, an appreciating Australian dollar against
major currencies increases the risk of import competition.
The specialised and customised nature of the trailer
industry, together with demand for short delivery times,
reduces this risk.

HEALTH & SAFETY

The Company is actively engaged in a major program to step
change the safety culture of the organisation and provide a
high level of care for all employees. This program, known as
“MaxiSAFE” will equip and empower management to drive
improvements in health and safety through the deployment
of a comprehensive Health, Safety, Environment and
Quality System.

Since FY15, the program has yielded a 46% improvement
in safety performance.

The Board currently monitors, and will continue to
monitor, the Group’s health and safety performance
on a monthly basis.

REPORT OF THE DIRECTORS (CONT.)FOR THE YEAR ENDED 30 JUNE 201822 MaxiTRANS Industries | Annual Report 2018

STRATEGY

OUTLOOK

MaxiTRANS has undertaken a refresh of its corporate
strategy. The strategy focuses on the following pathways
that will drive superior shareholder returns:

•• Operational excellence that will ensure the Company’s

systems and processes deliver high quality, cost effective
products and services;

•• Leveraging its market leading position to optimise

growth opportunities in the markets in which it operates;

•• Leveraging its expertise to diversify into new markets;

•• Develop a comprehensive organisation development

model to continue to recruit, develop and retain the best
people; and

•• Ensure our corporate image accurately reflects its

market-leading position.

Business Transformation Program

The Company has committed to a significant investment in a
business transformation program known as “Project
TRANSform”.

The program will replace a number of outdated legacy IT
systems with a single enterprise resource planning (“ERP”)
system and other integrated systems across the business.
This will allow the Company to streamline many business
processes, thus creating operational efficiencies and
mitigating business risk.

During FY18, the new ERP system continued to be developed
and will be deployed across the business during FY19.

It is expected market conditions in the Australian trailer
market will continue to improve as operators upgrade their
ageing fleets and most key economic drivers remain
positive. This will benefit both the Australian trailer
business as well as the MaxiPARTS parts business.

In the short term, order intake remains strong, particularly
in both the general freight and the food and grocery sectors,
benefitting our Freighter and Maxi-CUBE products. Whilst
the tipper order intake is lower than the last financial year,
it is still somewhat dependent on the crop outlook and the
timing of commencement of new infrastructure projects.

With the New Zealand warranty issues now largely dealt
with and the further establishment of the Christchurch
service facility, it is expected this business will return to
profitability in the next financial year.

The significant investment in the new IT systems is expected
to be completed over the next financial year. This will be
a key enabler to driving operational efficiency through
the business resulting in strong operating cashflow in
future years.

The Company continues to execute upon its corporate
strategy to not only improve the operational efficiency in our
current business but also to pursue growth opportunities in
our existing markets, looking to identify new market
opportunities, all with the aim of improving shareholder
returns. Underlying this will be a continued focus on
improving our safety performance to not only ensure we
send our people home safely but that MaxiTRANS’ products
design also send our customer’s people home safely.

REPORT OF THE DIRECTORS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018MaxiTRANS Industries | Annual Report 2018

Information of Directors

Mr. Robert H. Wylie

Chairman, Independent Non-Executive, (appointed 30 June 2016), Age 68

Qualifications & Experience:

Fellow of the Institute of Chartered Accountants in Australia, a member of the Institute
of Chartered Accountants of Scotland and a Fellow of the Australian Institute of Company
Directors. Appointed Director in September 2008.

Currently a Director of The Walter + Eliza Hall Institute of Medical Research, Mr. Wylie
has wide ranging experience in professional service in a variety of management roles with
Deloitte. He has previously held senior positions with Deloitte Touche USA LLP. Prior to this,
he was Deputy Managing Partner Asia Pacific. This followed a long career with Deloitte
Australia, including eight years as National Chairman. Mr. Wylie also served on the Global
Board of Directors and the Governance Committee of Deloitte Touche Tohmatsu and
the Global Board of Directors of Deloitte Consulting. Mr Wylie is also a former National
President of the Institute of Chartered Accountants in Australia. Formerly a Director of
Elders Limited from November 2009 to August 2012 and Director of both Centro Properties
Limited and CPT Manager Limited from October 2008 to December 2011.

Special Responsibilities:

Chairman of the Nomination Committee. Member of the Audit & Risk Management
Committee and Remuneration & Human Resources Committee.

Interest in Shares:

121,904 ordinary shares beneficially held.

Options over Ordinary Shares:

Nil

Mr. Dean S Jenkins

Managing Director, Executive, Age 46

Qualifications & Experience:

Appointed Managing Director on 1 March 2017.

Most recently Chief Operating Officer & Executive Director of the Weir Group PLC, one of
the world’s leading engineering businesses. Prior to the Weir Group, Mr Jenkins was
CEO of UGL Rail from 2008 to 2010, Australia’s largest supplier and maintainer of rolling
stock. He also spent 11 years in senior leadership roles with QANTAS, culminating in
the role of Group General Manager – Engineering, Material and Logistics.

Interest in Shares:

202,000 ordinary shares beneficially held.

Options over Ordinary Shares:

Nil

REPORT OF THE DIRECTORS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

24 MaxiTRANS Industries | Annual Report 2018

Mr. James R. Curtis

Deputy Chairman, Non-Executive, Age 83

Qualifications & Experience:

Appointed Deputy Chairman in 1994.

Mr. Curtis was one of the founders of the Group in 1972. He has over 50 years' experience
in the transport equipment industry and is a pioneer of fibreglass road transport
equipment in Australia.

Special Responsibilities:

Member of Audit & Risk Management Committee, Remuneration & Human Resources
Committee and Nomination Committee.

Interest in Shares:

24,943,030 ordinary shares beneficially held.

Options over Ordinary Shares:

Nil

Mr. Joseph Rizzo

Independent Non-Executive Director, Age 62

Qualifications & Experience:

Bachelor of Economics (Monash University), Executive Program (University of Michigan),
Graduate of the Australian Institute of Company Directors (GAICD). Appointed
Non-Executive Director 2014.

Formerly Managing Director of PACCAR Australia Pty Ltd with 35 years’ experience in
the road transport equipment manufacturing industry. Mr. Rizzo has a wide knowledge of
the industry generally along with strong manufacturing, sales and marketing experience
in a directly related field. Former Vice President of the Truck Industry Council.

Special Responsibilities:

Chairman of the Remuneration & Human Resources Committee and Member of the
Audit & Risk Management Committee and Nomination Committee.

Interest in Shares:

50,000 ordinary shares beneficially held.

Options over Ordinary Shares:

Nil

Ms. Samantha Hogg

Independent Non-Executive Director, Age 51

Qualifications & Experience:

Currently the Chairperson of Tasmanian Irrigation and TasRail and a director of Hydro
Tasmania and Australian Renewable Energy agency and has previously held senior
executive finance roles at the Transurban Group, Vale Inco and WMC Resources.

Special Responsibilities:

Chairperson of the Audit and Risk Management Committee and Member of the
Remuneration & Human Resources Committee and Nomination Committee.

Interest in Shares:

Nil ordinary shares beneficially held.

Options over Ordinary Shares:

Nil

REPORT OF THE DIRECTORS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

MaxiTRANS Industries | Annual Report 2018

Company Secretaries

Alison Groves

LLB.(Hons), BEc, FGIA, FCIS
Appointed to the position of Company Secretary on 20 July 2018.

Mr. Campbell R. Richards

B. Bus. (Acc), CA
Appointed to the position of Company Secretary in June 2013. Resigned on 20 July 2018.

Mr. Albert Retief

B. Bus. (Acc), CA
Appointed to the position of Assistant Company Secretary in May 2016.

Details of attendances by directors at Board and committee meetings during the year are as follows:

Directors’
Meetings

Audit & Risk
Management
Committee

Remuneration &
Human Resources
Committee

Nomination
Committee

Number Number
eligible
attended
to attend

Robert Wylie

James Curtis

Joseph Rizzo

Samantha Hogg

Dean Jenkins

–

REPORT OF THE DIRECTORS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

26 MaxiTRANS Industries | Annual Report 2018

Remuneration Report

Information contained in the Remuneration Report is audited.

Remuneration levels for directors, secretaries and
executives of the Company, and relevant group executives
of the Group (“the directors and senior executives”) are
competitively set to attract and retain appropriately qualified
and experienced directors and senior executives. The
Remuneration Committee obtains independent advice on
the appropriateness of remuneration of non-executive
directors and the Managing Director having regard to trends
in comparative companies and the objectives of the Group’s
remuneration strategy.

The remuneration structures explained below are
designed to attract suitably qualified candidates, reward the
achievement of strategic objectives, and achieve the broader
outcome of creation of value for shareholders.

The remuneration structures take into account:

•• The capability and experience of the directors and senior

executives;

•• The directors’ and senior executives’ ability to control the

relevant segment/s’ performance;

•• The Group’s performance including the Group’s Return

on Invested Capital; and

percentage of total remuneration) between STI and
LTI components to average 20% and 20% respectively.
In the case of the Managing Director, the mix of
performance linked remuneration (as a percentage of
total remuneration) between STI and LTI components
is 15% and 25% respectively.

The Directors are of the view that the remuneration
structure supports alignment between the Group and
shareholders.

Each of the components of total remuneration for executive
directors and senior management are described in more
detail below.

Fixed remuneration

Fixed remuneration consists of base remuneration,
including any FBT charges related to employee benefits
which have been salary sacrificed, as well as employer
contributions to superannuation funds.

Remuneration levels are reviewed annually by both the
Remuneration Committee and the Managing Director
through a process that considers individual, segment
and overall performance of the Group. In addition and as
required, external consultants may be engaged to provide
analysis and advice to ensure the directors’ and senior
executives’ remuneration is competitive in the market place.
A senior executive’s remuneration is also reviewed on
promotion.

•• The amount of incentives within each director’s and

senior executive’s remuneration.

Performance-linked remuneration

The Directors continue to be focussed on ensuring that
MaxiTRANS provides a remuneration structure which
genuinely attracts, motivates and retains executive talent
and aligns the interests of management and shareholders.

The following is a summary of the key elements of the
structure of remuneration for executive directors and
senior management:

••

the structure of executive director and senior
management remuneration includes a mix
of fixed and performance-linked components;

••

the mix of total remuneration between fixed and
performance-linked components to average 60%
and 40% respectively;

••

the performance-linked component of total
remuneration comprises a Short Term Incentive (‘STI’)
scheme and a Long Term Incentive (‘LTI’) scheme; and

••

the mix of performance-linked remuneration (as a

Performance linked remuneration includes both STIs
and LTIs and is designed to reward executive directors
and senior executives for meeting or exceeding specified
objectives. The STI includes an “at risk” incentive provided in
the form of cash.

The LTI is provided in the form of Performance Rights.

The MaxiTRANS Performance Rights Plan (‘PRP’) was
approved by the shareholders at the Annual General
Meeting held on 15 October 2010.

STI

Each year KPIs (key performance indicators) are set for
senior executives and executive directors. The KPIs generally
include measures relating to the Group, the relevant
segment and the individual, and include financial, people,
customer, strategy and risk measures. The measures are
chosen as they directly align the individual’s reward to the
KPIs of the Group and to its strategy and performance.

REPORT OF THE DIRECTORS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018MaxiTRANS Industries | Annual Report 2018

Other benefits

Non-executive directors are not entitled to receive additional
benefits as a non-cash benefit. Non-executive directors may
receive a component of their directors’ fees as
superannuation.

Senior executives can receive additional benefits as
non-cash benefits, as part of the terms and conditions
of their appointment. Other benefits typically include
payment of superannuation, motor vehicles, telephone
expenses and allowances, and where applicable, the
Group pays fringe benefits tax on these benefits.

Consequences of performance on shareholder wealth

In considering the Group’s performance and benefits for
shareholder wealth, the remuneration committee has
regard to the indices highlighted in the table on page 31.
Net profit after tax and net profit before tax are considered as
two of the financial performance targets in setting the STI.

Service agreements

It is the Group’s policy that service contracts for executive
directors and senior executives be unlimited in term but
capable of termination on up to six months notice and
that the Group retains the right to terminate the contract
immediately, by making payment of up to twelve months’
pay in lieu of notice.

The Group has entered into service contracts with each
executive director and senior executive that entitle those
executives to receive, on termination of employment, their
statutory entitlements of accrued annual and long service
leave, together with any superannuation benefits.

The service contract outlines the components of
remuneration paid to the executive directors and senior
executives but does not prescribe how remuneration
levels are modified year to year. Remuneration levels are
reviewed each year to take into account cost-of-living
changes, any change in the scope of the role performed
by the senior executive and any changes required to meet
the principles of the remuneration policy including
performance related objectives if applicable.

Except in the case of the Managing Director and Chief
Financial Officer where the key financial performance
objectives are “net profit after tax,” the key financial
performance objective for other executives is “net
profit before tax” compared to budgeted amounts.
All executives also have other financial performance
objectives relating to working capital improvement.
The non-financial objectives vary with position and
responsibility and include measures such as achieving
strategic outcomes, safety and environmental performance,
customer satisfaction and staff development.

At the end of the financial year the actual performance
of the Group, the relevant segment and individual is
measured against the KPIs set at the beginning of the
financial year.

The method of assessment was chosen as it provides
an objective assessment of the individual’s performance.

In line with the Group’s philosophy of rewarding employees
for performance, STIs based on the achievement of KPIs
are available to staff other than executive directors and
senior management.

LTI

The LTI scheme available to executive directors and to
senior management is based on the annual grant of a
specified number of Performance Rights which can be
converted by executive directors and senior management
into a specified number of ordinary shares in the Company.

Performance Rights will vest and will be able to be
exercised upon the achievement of specified long term
performance targets in a period not less than three years
after the date upon which the Performance Rights are
granted to executive directors and senior management
provided they remain in the employment of the Group
throughout that period.

The Board has set a long term incentive target for
management to achieve an increase in the Group’s
Return on Invested Capital (‘ROIC’).

If the minimum ROIC target is reached, 50% of the
Performance Rights will vest. The percentage of
Performance Rights that vest increases on a sliding
scale once the minimum target is reached. 100% of the
Performance Rights will vest where the target is fully
achieved or exceeded. No director or senior executive
has entered a hedging arrangement with respect to the
value of unvested Performance Rights.

REPORT OF THE DIRECTORS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018Services of remuneration consultant

In keeping with the above policies, the Remuneration
Committee engaged Mercer as remuneration consultant
to review the amount of senior executive remuneration
during the year. Mercer was paid $31,000 for the
remuneration recommendations.

Remuneration recommendations regarding senior executives
were provided directly to the Remuneration Committee.
A declaration was received from Mercer as part of its report
that advice provided was made free from undue influence
of senior executives.

28 MaxiTRANS Industries | Annual Report 2018

Mr Dean Jenkins, Managing Director, has a contract
of employment with the Company dated 1 March 2017.
The contract specifies the duties and obligations to be
fulfilled by the Managing Director and provides that the
Board and Managing Director will early in each financial
year, consult and agree objectives for achievement during
that year. The service contract can be terminated either
by the Company or Mr Jenkins providing six months’ notice.
The Company may make a payment in lieu of notice of six
months, equal to base salary, motor vehicle allowance
and superannuation. This payment represented market
practice at the time the terms were agreed. The Managing
Director has no entitlement to a termination payment
in the event of removal for misconduct or breach of any
material terms of his contract of employment.

Mr Campbell Richards, Chief Financial Officer, has
a contract of employment with the Company dated
3 May 2013.

The contract can be terminated either by the Company or
Mr Richards providing three months’ notice. The Company
may make a payment in lieu of notice of three months, equal
to base salary and superannuation.

Non-executive directors

Total remuneration for all non-executive directors, last
voted upon by shareholders at the 2012 AGM, is not to
exceed $600,000 per annum and directors’ fees are set
based on advice from external advisors with reference to
fees paid to other non-executive directors of comparable
companies. Directors’ base fees (inclusive of superannuation)
for the year were $75,000 per annum. The Chairperson
received $140,000 per annum. Non-executive directors
do not receive performance related remuneration and are
not entitled to either an STI or LTI. Directors’ fees cover all
main board activities and membership or chairing of all
committees. Non-executive directors are not entitled
to any retirement benefits.

REPORT OF THE DIRECTORS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018MaxiTRANS Industries | Annual Report 2018

Directors’ and executive officers’ remuneration

Details of the nature and amount of each major element of remuneration of each director of the Company and other key
management personnel of the Group:

Primary

Post

Equity

Other (iv)

Total

Super

PRs
(iii)

25,000

35,000

6,507

–

2,001

17,007

27,697

6,507

–

Proportion of
remuneration
performance
related

Value of
PRs as
proportion of
remuneration

140,000

75,000

–

23,065

75,000

–

Salary
& fees (i)

Year

STI
(ii)

DIRECTORS

Non-executive

Mr R Wylie
Chairman

Mr J Curtis

2018

115,000

2017

105,000

2018

68,493

2017

68,493

Mr G Lord (v)

2018

–

Non-cash
benefits

–

150

–

726

–

2017

21,064

2018

57,393

2017

47,303

2018

68,493

2017

68,493

2018

697,380

2017

248,003

Mr J Rizzo

Ms S Hogg

Executive

Mr D Jenkins (vi)
Managing Director

Mr M Brockhoff (vii)
Former Managing
Director

EXECUTIVES

Mr C Richards
Chief Financial Officer
and Company Secretary

Mr A Wibberley (viii)
Former Group General
Manager – Manufacturing

Mr P Buttler (ix)
Former General Manager
– Ballarat MaxiTRANS
Australia Pty Ltd

Mr A McKenzie
Group General Manager
– Sales and Marketing

2018

–

85,251

75,132

36,460

100,274

909,396

4.0%

23,135

23,199

–

13,333

284,471

–

71,781

180,957

47.1%

–

2017

655,497

–

29,652

68,094

(112,152)

61,199

702,290

(16.0%)

2018

346,433

41,447

2017

332,924

2018

–

2017

84,323

2018

–

2017

1,550

–

44,297

1,138

113,393

546,709

363,330

7.8%

(0.3%)

0.2%

(0.3%)

–

31,500

(1,094)

–

1,963

18,615

(54,230)

96,210

146,880

(36.9%)

–

6,042

(43,336)

62,596

26,851

(161.4%)

2018

305,711

19,178

2017

295,408

–

5,201

3,278

32,187

(27)

22,000

384,250

30,365

35,346

22,000

386,398

5.0%

9.1%

–

9.1%

REPORT OF THE DIRECTORS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018Mr P Loimaranta
Group General
Manager –
International

Mr C Wallace (x)
Former General
Manager – Vic Branch
MaxiTRANS Australia
Pty Ltd

Mr A Roder (xi)
Former Group
General Manager
– Manufacturing

Mr T Negus (xii)
Group General
Manager –
Manufacturing

Mr J O’Brien (xiii)
General Manager –
MaxiParts Pty Ltd

30 MaxiTRANS Industries | Annual Report 2018

Primary

Post

Equity

Other (iv)

Total

Salary
& fees (i)

Year

STI
(ii)

EXECUTIVES (continued)

Super

PRs
(iii)

Proportion of
remuneration
performance
related

Value of
PRs as
proportion of
remuneration

2018

286,906

26,942

2017

280,430

2018

–

2017

162,289

–

31,649

1,016

31,359

377,872

28,439

(1,070)

34,446

342,245

7.4%

(0.3%)

0.3%

(0.3%)

–

19,412

22,190

(32,434)

171,141

342,598

(9.5%)

Non-cash
benefits

–

2018

152,593

11,687

5,201

16,521

(15,169)

2,547

173,379

293,532

(2.0%)

5.2%

(8.7%)

5.2%

2017

255,055

2018

190,064

2017

–

2018

248,771

28,484

2017

–

23,316

15,160

17,396

–

207,461

–

27,939

6,660

37,017

348,872

10.1%

–

1.9%

–

(i)
(ii)

Notes in relation to table of directors’ and executive officers' remuneration
Includes the accrual of short-term statutory entitlements.
STI entitlement is 15% of total remuneration for each of the individuals listed above. The short-term cash incentives disclosed
above are for performance for the 30 June 2018 financial year using the criteria set out in the Remuneration Report. The
amounts were determined after performance reviews were completed.

(iii) The fair value of performance rights (PRs) is calculated at the date of grant using the Monte Carlo simulation model and allocated
to each reporting period evenly over the period from grant date to vesting date, adjusted for any changes in the probability of
performance and service targets being achieved. The value disclosed is the portion of the fair value recognised in this reporting
period. In valuing the PRs, market conditions have been taken into account. Further details in respect of PRs are contained on the
following page of the Remuneration Report. Details of PRs vested during the period are contained in Note 15 – Share Based
Payments. During the period it was determined that the performance and service conditions of the 2014 PR scheme will not be
met. As a result, the total amount recognised for services received over the life of the 2014 PR scheme was reversed.
Includes the accrual of long-term statutory entitlements.

(iv)
(v) Mr G Lord retired effective 21 October 2016.
(vi) Mr D Jenkins was appointed on 1 March 2017.
(vii) Mr M Brockhoff retired effective 31 July 2017. All PRs held by Mr Brockhoff at that time were cancelled.
(viii) Mr A Wibberley resigned effective 28 October 2016. All PRs held by Mr Wibberley at that time were cancelled.
(ix) Mr P Buttler resigned effective 1 July 2016. All PRs held by Mr Buttler at that time were cancelled.
(x) Mr C Wallace was made redundant on 19 April 2017. All PRs held by Mr Wallace at that time were cancelled.
(xi) Mr A Roder resigned on 12 January 2018. All PR’s held by Mr Roder at that time were cancelled.
(xii) Mr T Negus was appointed on 1 January 2018.
(xiii) Mr J O’Brien was appointed to the role of General Manager – MaxiParts on 1 November 2017.

From 1 July 2017 to the date of Mr O’Brien’s appointment, he was Acting General Manager – MaxiParts.

REPORT OF THE DIRECTORS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018MaxiTRANS Industries | Annual Report 2018

Analysis of share-based payments granted as remuneration

Details of the vesting profile of the PRs granted as remuneration to each of the Company directors and other key management
personnel of the Group during the reporting period are detailed below.

Directors

Mr D Jenkins

Company executives

Mr C Richards

Consolidated entity executives

Mr A Roder(1)

Mr P Loimaranta

Mr A McKenzie

Mr J O’Brien

PRs granted
(no.)

Grant date

Fair value at
grant date ($)

Vesting date

Expiry date

462,193

31 Aug. 2017

0.5879

31 Aug. 2020

31 Aug. 2024

229,344

31 Aug. 2017

0.5879

31 Aug. 2020

31 Aug. 2024

203,287

206,628

215,691

172,551

31 Aug. 2017

0.5879

31 Aug. 2020

31 Aug. 2024

31 Aug. 2020

31 Aug. 2024

31 Aug. 2020

31 Aug. 2024

31 Aug. 2020

31 Aug. 2024

(1) On 12 January 2018, the date when Mr Roder resigned, Mr Roder’s PRs were cancelled.

Subject to the terms of the Performance Rights Plan, all PRs expire on the earlier of their expiry date or termination of the
individual's employment. In order for PRs to vest, holders must continue to be in the employment of the Group until vesting
date. The PRs vest three years after the date they were issued, subject to the satisfaction of performance hurdles. PRs may
only be exercised during a four year period after they have vested. Details of the performance criteria are included in the
discussion on LTIs.

The estimated maximum value of PRs on issue for future years is the current share price. This is subject to future movements
in the share price. The estimated minimum value is $nil.

Unissued shares under rights

At the date of this report there are no unissued ordinary shares of the Company relating to vested PRs.

CONSOLIDATED RESULTS AND SHAREHOLDER RETURNS

Net profit/(loss) attributable to
equity holders of the parent

2018

2017

2016

2015

2014

$10,076,812

$10,694,940

$5,235,234

$4,496,951

$17,074,194

Basic EPS(1)

5.44¢

5.78¢

2.83¢

2.43¢

9.26¢

Dividends declared

$6,477,648

$5,552,270

$3,701,513

$11,104,542

Dividends declared per share

Share price

3.50¢

51.0¢

3.50¢

67.0¢

3.00¢

45.0¢

2.00¢

39.5¢

6.00¢

97.0¢

(1) Includes both continued and discontinued earnings.

REPORT OF THE DIRECTORS (CONT.)FOR THE YEAR ENDED 30 JUNE 201832 MaxiTRANS Industries | Annual Report 2018

Directors’ and executives’ holdings of shares

For key management personnel, the movements in shares held directly, indirectly or beneficially at the reporting date in the
Company are set out below:

2018 Shares

MaxiTRANS Industries Limited

Directors:

Mr D Jenkins

Mr J Curtis

Mr R Wylie

Mr J Rizzo

Executives:

Mr P Loimaranta

Held at
1 July 2017

Purchases

Sales

Held at
30 June 2018

–

202,000

24,943,030

21,364

50,000

260,716

–

100,540

–

202,000

24,943,030

121,904

50,000

(2,163)

258,553

Ms Hogg, Mr Negus, Mr Richards, Mr McKenzie and Mr O’Brien do not hold any shares as at 30 June 2018.

2017 Shares

MaxiTRANS Industries Limited

Directors:

Mr M Brockhoff (retired 1 March 2017)

Mr J Curtis

Mr G Lord (retired 21 October 2016)

Mr R Wylie

Mr J Rizzo

Executives:

Mr P Loimaranta

Mr A Wibberley (resigned 28 October 2016)

Held at
1 July 2016

3,090,172

24,943,030

1,049,604

21,364

50,000

260,716

176,507

Purchases

Sales

Held at
30 June 2017

–

(3,090,172)(1)

–

24,943,030

(1,049,604)(1)

–

(176,507(1))

–

21,364

50,000

260,716

–

Ms Hogg, Mr Jenkins, Mr Richards, Mr McKenzie and Mr Roder do not hold any shares as at 30 June 2017.

(1) Represent shareholding on the date of retirement/resignation.

End of Remuneration Report

REPORT OF THE DIRECTORS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018MaxiTRANS Industries | Annual Report 2018

Audit and Risk Management Committee

As at the date of this report, the Company had an Audit and Risk Management Committee of the Board of Directors that met five
times during the year. The details of the functions and memberships of the committees of the Board are presented in the
Corporate Governance Statement.

Indemnity

With the exception of the matters noted below, the Company has not, during or since the end of the financial year, in respect
of any person who is or has been an officer or auditor of the Company or a related body corporate:

(i)

(ii)

Indemnified or made any relevant agreement for indemnifying against a liability incurred as an officer, including costs
and expenses in successfully defending legal proceedings; or

Paid or agreed to pay a premium in respect of a contract insuring against a liability incurred as an officer for the costs
or expenses to defend legal proceedings.

The Group has entered into a contract of insurance in relation to the indemnity of the Group’s directors and officers.
The insurance policy relates to claims for damages, judgements, settlements or costs in respect of wrongful acts
committed by directors or officers in their capacity as directors or officers but excluding wilful, dishonest, fraudulent,
criminal or malicious acts or omissions by any director or officer. The directors indemnified are those existing at the
date of this report. The officers indemnified include each full time executive officer and secretary.

During the financial year, the Group paid premiums of $58,852 (2017: $41,852) in respect of directors’ and officers’ liability
insurance contracts.

Clause 101 of the Company’s constitution contains indemnities for officers of the Company.

The Company has entered into a deed of protection with each of the directors to:

(i)

Indemnify the director to ensure that the director will have the benefit of the indemnities after the director ceases being
a director of any group company;

(ii)

Insure the director against certain liabilities after the director ceases to be a director of any group company; and

(iii)

Provide the director with access to the books of group companies.

Share Options

Share options granted to directors and highly remunerated officers

No options were granted to any of the directors or the seven most highly remunerated executives of the Company or Group
as part of their remuneration during or since the end of the financial year.

Shares Issued on the Exercise of Options

No options were exercised during the financial year.

Further details on the Group's Performance Rights Plan are detailed in Note 15 to the consolidated financial statements
and in the Remuneration Report.

REPORT OF THE DIRECTORS (CONT.)FOR THE YEAR ENDED 30 JUNE 201834 MaxiTRANS Industries | Annual Report 2018

Non-Audit Services

During the year, KPMG, the Company’s auditor, performed certain other services in addition to their statutory duties.

The Board has considered the non-audit services provided during the year by the auditor and in accordance with written advice
provided by resolution of the Audit and Risk Management Committee, is satisfied that the provision of those non-audit services
during the year by the auditor is compatible with, and did not compromise, the auditor independence requirements
of the Corporations Act 2001 for the following reasons:

••

All non-audit services were subject to the corporate governance procedures adopted by the Group and have been reviewed by
the Audit and Risk Management Committee to ensure they do not impact the integrity and objectivity of the auditor; and

••

The non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES
110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting
in a management or decision making capacity for the Group, acting as an advocate for the Group or jointly sharing risks and
rewards.

A copy of the auditor’s independence declaration as required under Section 307C of the Corporations Act is included in,
and forms part of this Report of the Directors on page 35.

Details of the amounts paid to the auditor of the Company, KPMG, for audit and non-audit services provided during the year are
set out below.

Remuneration of auditor

Remuneration of the auditor of the Group for:

KPMG Australia:

– auditing and reviewing the financial statements
– other services (taxation and advisory)

Overseas KPMG Firms:

– auditing and reviewing financial statements
– other services (taxation, advisory and due diligence)

Total

Proceedings on Behalf of Company

Consolidated

2018
$

2017
$

292,830
188,254

306,967
166,219

481,084

473,186

86,849
9,554

96,403

82,219
12,605

94,824

577,487

568,010

No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which
the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings.
The Company was not a party to any such proceedings during the year.

REPORT OF THE DIRECTORS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

MaxiTRANS Industries | Annual Report 2018

Rounding of Accounts

The parent entity has applied the relief available to it in ASIC Corporations (Rounding in Financial/Directors Reports) Instruments
2016/191 and, accordingly, amounts in the financial statements and Report of the Directors have been rounded
to the nearest thousand dollars unless specifically stated to be otherwise.

This report has been made in accordance with a resolution of the Board of Directors.

Mr. Robert H Wylie, Director

Mr. Dean Stuart Jenkins, Director

Dated this 24th day of August 2018

Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001

To the Directors of MaxiTRANS Industries Limited

I declare that, to the best of my knowledge and belief, in relation to the audit of MaxiTRANS Industries Limited for the financial
year ended 30 June 2018 there have been:

(i)

no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation
to the audit; and

(ii)

no contraventions of any applicable code of professional conduct in relation to the audit.

KPMG
Melbourne
24 August 2018

Suzanne Bell
Partner

KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.

Liability limited by a scheme approved under Professional Standards
Legislation.

REPORT OF THE DIRECTORS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

36 MaxiTRANS Industries | Annual Report 2018

DIRECTORS’ DECLARATION

FOR THE YEAR ENDED 30 JUNE 2018

In the opinion of the directors of MaxiTRANS Industries Limited (“the Company”):

(a)

the consolidated financial statements and notes as set out on pages 37 to 80, are in accordance with the
Corporations Act 2001, including:

(i)

giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its performance for the financial
year ended on that date; and

(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.

(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due

and payable.

There are reasonable grounds to believe that the Company and the Group entities identified in Note 18 will be able to meet
any obligations or liabilities to which they are or may become subject to by virtue of the Deed of Cross Guarantee between
the Company and those Group entities pursuant to ASIC Class Order (2016/785).

The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive
Officer and Chief Financial Officer for the financial year ended 30 June 2018.

The directors draw attention to Note 1 to the consolidated financial statements, which includes a statement of compliance with
International Financial Reporting Standards.

This declaration is made in accordance with a resolution of the Board of Directors.

Mr. Robert H Wylie, Director

Mr. Dean Stuart Jenkins, Director

Dated this 24th day of August 2018

MaxiTRANS Industries | Annual Report 2018

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2018

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Continued Operations
Sale of goods
Rendering of services
Changes in inventories of finished goods and work in progress
Raw materials and consumables used
Interest income
Other income – sale of assets
Employee and contract labour expenses
Warranty expenses
Depreciation and amortisation expenses
Finance costs
Other expenses
Share of net profits of associates accounted for using the equity method

Profit before income tax
Income tax expense

Profit from continued operations

Discontinued Operation

Consolidated

Note

2018
$’000

375,087
14,907
2,578
(241,132)
58
72
(100,976)
(3,770)
(4,073)
(2,328)
(27,750)
1,404

14,077
(3,734)

10,343

3(a)

Restated
2017^
$’000

305,523
14,767
5,581
(194,419)
86
161
(85,316)
(1,796)
(3,895)
(2,127)
(25,863)
884

13,586
(3,227)

10,359

Profit/(loss) from discontinued operation, net of tax

(332)

686

Profit for the year

Profit attributable to:
Equity holders of the Company
Non-controlling interests

Earnings per share for profit attributable to the ordinary equity holders of the company:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)

Earnings per share from continued operations:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Profit for the year

Other comprehensive income
Items that may subsequently be re-classified to profit or loss:
Net exchange difference on translation of financial statements of foreign operations
Other sundry movements
Items that will never be re-classified to profit or loss:
Revaluation of land and buildings
Related tax

12
12

Other comprehensive income for the year, net of tax

Total comprehensive income for the year

Total comprehensive income attributable to:
Equity holders of the Company
Non-controlling interests

10,011

11,045

10,077
(66)

10,695
350

5.44
5.44

5.58
5.58

5.78
5.78

5.60
5.60

10,011

11,045

850
(35)

3,901
(1,136)

3,580

13,591

13,573
18

(1,609)
114

3,557
(1,041)

1,021

12,066

11,782
284

^ In accordance with AASB 5 Non-current Assets Held for sale and Discontinued Operations prior year comparatives have been restated

to be consistent with disclosures for 30 June 2018. Refer to Note 27 Disposal Group held for sale.

The consolidated statement of profit or loss and consolidated statement of comprehensive income is to be read in conjunction
with the accompanying notes to the consolidated financial statements.

38 MaxiTRANS Industries | Annual Report 2018

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

FOR THE YEAR ENDED 30 JUNE 2018

Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax assets
Assets held for sale
Other

Total Current Assets

Non-Current Assets
Investment in associate
Property, plant and equipment
Intangible assets
Deferred tax assets
Other

Total Non-Current Assets

Total Assets

Current Liabilities
Trade and other payables
Deferred Revenue
Interest bearing loans and borrowings
Current tax liability
Provisions
Liabilities held for sale

Total Current Liabilities

Non-Current Liabilities
Interest bearing loans and borrowings
Deferred tax liabilities
Provisions
Other

Total Non-Current Liabilities

Total Liabilities

Net Assets

Equity
Issued capital
Reserves
Retained earnings

Equity attributable to equity holders of the Company

Non-controlling interest

Total Equity

Consolidated

Note

4
5
3(c)
27

6
7
3(b)

9
3(c)
10
27

9
3(b)
10

2018
$’000

9,692
39,120
57,700
2,237
19,813
1,584

2017
$’000

6,140
45,208
60,368
1,209
–
1,562

130,146

114,487

4,826
93,733
34,265
–
1,249

4,442
88,526
37,517
472
1,135

134,073

132,092

264,219

246,579

47,327
4,090
752
–
13,126
9,550

74,845

49,908
2,409
1,141
97

53,555

52,600
3,086
2,563
118
12,421
–

70,788

45,134
752
1,144
34

47,064

128,400

117,852

135,819

128,727

56,386
20,998
57,097

56,386
17,481
53,539

134,481

127,406

1,338

1,321

135,819

128,727

The consolidated statement of financial position is to be read in conjunction with the notes to the consolidated financial statements.

MaxiTRANS Industries | Annual Report 2018

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2018

Issued
capital
$’000

Asset
revaluation
reserve1
$’000

Retained
earnings
$’000

Non-
controlling
interest
$’000

Other
reserves2
$’000

Total
$’000

Note

Balance at 1 July 2017

56,386

15,121

53,539

1,321

2,360

128,727

Comprehensive income for the year

Profit for the year

Other comprehensive income

Net exchange differences on translation of
financial statements of foreign operations

Revaluation of land and buildings

Other sundry movements

Total comprehensive income for the year

Transactions with owners recorded
directly in equity

Dividends to equity holders

Final dividend to previous
minority shareholder

Final payment for 20% minority
share purchased on 30 June 2017

Share-based payment transactions

Other sundry movements

Total transactions with owners

–

10,077

(66)

–

10,011

–

2,765

–

2,765

10,077

–

(6,478)

(12)

(31)

–

(6,519)

–

(2)

765

–

(35)

850

2,765

(35)

730

13,591

–

(6,478)

(12)

(31)

–

(6,499)

Balance at 30 June 2018

56,386

17,886

57,097

1,338

3,112

135,819

1. Asset revaluation reserve
The asset revaluation reserve includes the net revaluation increments arising from the revaluation of land and buildings.

2. Other reserves
Other reserves comprises the foreign currency translation reserve, share based payment reserve and hedging reserve.

The consolidated statement of changes in equity is to be read in conjunction with the notes to the consolidated financial statements.

40 MaxiTRANS Industries | Annual Report 2018

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONT.)

FOR THE YEAR ENDED 30 JUNE 2018

Issued
capital
$’000

Asset
revaluation
reserve1
$’000

Retained
earnings
$’000

Non-
controlling
interest
$’000

Other
reserves2
$’000

Total
$’000

Note

Balance at 1 July 2016

56,386

12,605

48,337

1,971

4,038

123,337

Comprehensive income for the year

Profit for the year

Other comprehensive income

Net exchange differences on translation of
financial statements of foreign operations

Revaluation of land and buildings

Other sundry movements

Total comprehensive income for the year

Transactions with owners recorded
directly in equity

Dividends to equity holders

Purchase of 20% minority share

Share-based payment transactions

Other sundry movements

Total transactions with owners

–

10,695

350

–

11,045

–

2,516

–

(66)

(1,543)

(1,609)

–

114

2,516

114

2,516

10,695

284

(1,429)

12,066

–

(5,553)

–

(336)

(596)

–

(2)

–

(249)

–

(5,889)

(536)

(249)

(2)

(5,493)

(934)

(249)

(6,676)

Balance at 30 June 2017

56,386

15,121

53,539

1,321

2,360

128,727

1. Asset revaluation reserve
The asset revaluation reserve includes the net revaluation increments arising from the revaluation of land and buildings.

2. Other reserves
Other reserves comprises the foreign currency translation reserve, share based payment reserve and hedging reserve.

The consolidated statement of changes in equity is to be read in conjunction with the notes to the consolidated financial statements.

MaxiTRANS Industries | Annual Report 2018

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2018

Cash flows from operating activities

Receipts from customers
Payments to suppliers and employees
Interest received
Interest and other costs of finance paid
Income tax paid

Consolidated

Note

2018
$’000

2017
$’000

450,322
(422,870)
58
(2,474)
(5,269)

381,950
(374,000)
86
(2,316)
(1,275)

Net cash provided by operating activities

19,767

4,445

Cash flows from investing activities

Payments for property, plant and equipment
Acquisition of non-controlling interest
Dividends received
Proceeds from sale of property, plant and equipment

Net cash used in investing activities

Cash flows from financing activities

Repayment of borrowings
Proceeds from borrowings
Payment of finance lease liabilities
Dividends paid

Net cash used in financing activities

Net increase/(decrease) in cash

Cash and cash equivalents at beginning of year
*Less: cash held for sale

Cash and cash equivalents at end of year

(14,485)
(31)
1,020
130

(13,366)

(8,194)
(536)
629
309

(7,792)

(3,349)
9,610
(230)
(6,490)

(36,000)
40,749
(204)
(5,889)

(459)

(1,344)

5,942

6,140
(2,390)

9,692

(4,691)

10,831
–

6,140

* In accordance with AASB 5 Non-current Assets held for sale and Discontinued Operations prior year comparatives have not been restated

for the impact of the Disposal Group held for sale. Refer to Note 27 Disposal Group held for sale.

The consolidated statement of cash flows is to be read in conjunction with the notes to the consolidated financial statements.

42 MaxiTRANS Industries | Annual Report 2018

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

MaxiTRANS Industries Limited (the ‘Company’) is a
company domiciled in Australia and its registered office is
346 Boundary Road, Derrimut, Victoria. The consolidated
financial statements of MaxiTRANS Industries Limited as at
and for the year ended 30 June 2018 comprise the
Company and its subsidiaries (together referred to as the
‘Group’) and the Group’s interest in joint ventures and
jointly controlled entities. The Group is a for-profit entity.

Basis of preparation

The financial report is a general purpose financial report
which has been prepared in accordance with Australian
Accounting Standards (‘AASBs’) adopted by the Australian
Accounting Standards Board (‘AASB’) and the Corporations
Act 2001. The financial report also complies with
International Financial Reporting Standards ('IFRSs')
adopted by the International Accounting Standards
Board ('IASB').

The financial report has been prepared on an accruals
basis and is based on historical costs and does not take
into account changing money values or, except where
stated, current valuations of non-current assets. Cost
is based on the fair values of the consideration given in
exchange for assets. These accounting policies have been
consistently applied to all periods presented in the
consolidated financial report by each entity in the Group
and are consistent with those of the previous year. The
financial report contains comparative information that has
been adjusted to align with the presentation of the current
period, where necessary.

These consolidated financial statements are presented
in Australian dollars, which is the Company's functional
currency.

The Group has applied the relief available to it in ASIC
Corporations (Rounding in Financial/Directors Reports)
Instruments 2016/191 and, accordingly, amounts in the
financial statements and Report of the Directors have been
rounded to the nearest thousand dollars unless specifically
stated to be otherwise.

The financial report was approved by the board of directors
on 24 August 2018.

The relevant Australian Accounting Standards and
Interpretations that became effective and that were early
adopted by the Group since 30 June 2017 were:

•• AASB 2016-1 Amendments to Australian Accounting
Standards – Recognition of Deferred Tax Assets for
Unrealised losses (mandatory for years beginning
on or after 1 January 2017)

•• AASB 2016-2 Amendments to Australian Accounting
Standards – Disclosure initiative: Amendments to
AASB 107 (mandatory for years beginning on or after
1 January 2017)

•• AASB 2016-5 Amendments to Australian Accounting
Standards – Classification and Measurement of
Share-based Payment Transactions.

•• AASB 2017-2 Amendments to Australian Accounting

Standards – Further Annual Improvements 2014-2016
Cycle (mandatory for years beginning on or after
1 January 2017)

Accounting policies

The following is a summary of the material accounting
policies adopted by the Group in the preparation of the
financial report.

(a) Principles of consolidation

The consolidated financial report comprises the
financial statements of MaxiTRANS Industries
Limited and all of its subsidiaries. A subsidiary
is any entity controlled by MaxiTRANS Industries
Limited or any of its subsidiaries. Control exists
where MaxiTRANS Industries Limited is exposed
to, or has rights to, variable returns from its
involvement with the entity and has the ability to
affect those returns through its power over the
entity. A list of subsidiaries is contained in Note 18
to the financial statements.

All inter-company balances and transactions
between entities in the Group, including any
unrealised profits or losses, have been eliminated
on consolidation.

Business combinations are accounted for using the
acquisition method as at the acquisition date, which is
the date on which control is transferred to the Group.

Costs related to the acquisition, other than those
associated with the issue of debt or equity
securities, that the Group incurs in connection with
a business combination are expensed as incurred.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018
MaxiTRANS Industries | Annual Report 2018

foreign exchange rate ruling at that date. Foreign
exchange differences arising on translation are
recognised in the consolidated statement of profit
or loss. Non-monetary assets and liabilities that are
measured in terms of historical cost in a foreign
currency are translated using the exchange rate at
the date of the transaction. Non-monetary assets
and liabilities denominated in foreign currencies
that are stated at fair value are translated into
Australian dollars at foreign exchange rates ruling
at the dates the fair value was determined.

(ii) Financial statements of foreign operations

The assets and liabilities of foreign operations,
including goodwill and fair value adjustments
arising on consolidation, are translated into
Australian dollars at foreign exchange rates ruling
at the reporting date. The revenues and expenses
of foreign operations are translated into Australian
dollars at rates approximating the foreign exchange
rates ruling at the dates of the transactions. Foreign
exchange differences arising on translation are
recognised directly in a separate component of equity.

Inventories are valued at the lower of cost and net
realisable value. Costs are assigned on a weighted
average basis and include direct materials, direct
labour and an appropriate proportion of variable
and fixed factory overheads, based on the normal
operating capacity of the production facilities.

Net realisable value is determined on the basis
of each inventory line’s normal selling price.

(d) Property, plant and equipment

(i) Owned assets

Land and buildings

Property whose fair value can be measured reliably
is carried at a revalued amount, being its fair value
at the date of the revaluation less any subsequent
accumulated depreciation and subsequent
accumulated impairment losses. Fair value of land
and buildings is assessed at each reporting period.

Independent valuations were obtained during the
financial year ending 30 June 2018 in relation to all
land and buildings.

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
(continued)

Any contingent consideration payable is recognised
at fair value at the acquisition date. If the contingent
consideration is classified as equity, it is not
remeasured and settlement is accounted for within
equity. Otherwise, subsequent changes to the fair
value of the contingent consideration are recognised
in profit or loss.

Where subsidiaries have entered or left the Group
during the year, their operating results have been
included from the date control was obtained or until
the date control ceased. The accounting policies of
subsidiaries have been changed when necessary to
align them with the policies adopted by the Group.

NCI are measured at their proportionate share
of the acquiree’s identifiable net assets at the date
of acquisition. Changes in the Group’s interest
in a subsidiary that do not result in a loss of control
are accounted for as equity transactions.

The Group’s interests in equity-accounted investees
comprise interests in associates. Associates are
those entities in which the Group has significant
influence, but not control or joint control, over the
financial and operating policies.

Interests in associates are accounted for using the
equity method. They are initially recognised at cost,
which includes transaction costs. Subsequent
to initial recognition, the consolidated financial
statements include the Group’s share of profit or
loss and OCI of equity-accounted investees, until
the date on which significant influence ceases.

When the Group’s share of losses exceeds its
interest in an associate, the Group’s carrying
amount is reduced to nil and recognition of further
losses is discontinued except to the extent that the
Group has incurred legal or constructive obligations
or made payments on behalf of an associate.

Unrealised gains arising from transactions with
associates are eliminated to the extent of the
Group’s interest in the associate.

(b) Foreign currency

(i) Foreign currency transactions

Transactions in foreign currencies are translated
at the foreign exchange rate ruling at the date of
the transaction. Monetary assets and liabilities
denominated in foreign currencies at the reporting
date are translated into Australian dollars at the

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

44 MaxiTRANS Industries | Annual Report 2018

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
(continued)

present value of the minimum lease payments at
inception of the lease, less accumulated depreciation.

These were considered by the directors in
establishing revaluation amounts.

Lease payments are accounted for as described
in accounting policy (v).

If an asset’s carrying amount is increased as a
result of a revaluation, the increase is credited
directly to equity under the heading of Asset
Revaluation Reserve. However, the increase is
recognised in profit or loss to the extent that it
reverses a revaluation decrease of the same asset
previously recognised in profit or loss. If an asset’s
carrying amount is decreased as a result of a
revaluation, the decrease is recognised in profit
or loss. However, the decrease is debited directly
to equity under the heading of Asset Revaluation
Reserve to the extent of any credit balance existing
in the revaluation reserve in respect of that asset.
Changes to an asset’s carrying amount are brought
to account together with the tax effects applicable
to the revaluation amount. On realisation of any
amounts contained in the Asset Realisation Reserve,
the balance is transferred to retained earnings.

Plant and equipment

Items of plant and equipment are stated at cost or
deemed cost less accumulated depreciation and
impairment losses (see accounting policy (i)). The
cost of self-constructed assets includes the cost
of materials, direct labour, and an appropriate
proportion of production overheads. The cost
of self-constructed assets and acquired assets
includes (i) the initial estimate, at the time of
installation and during the period of use, when
relevant, of the costs of dismantling and removing
the items and restoring the site on which they are
located, and (ii) changes in the measurement of
existing liabilities recognised for these costs
resulting from changes in the timing or outflow
of resources required to settle the obligation or
from changes in the discount rate.

Where parts of an item of property, plant and
equipment have different useful lives, they are
accounted for as separate items of property, plant
and equipment.

(ii) Leased assets

Leases for which the Group assumes substantially
all of the risks and rewards of ownership are
classified as finance leases. The plant and equipment
acquired by way of a finance lease is stated at an
amount equal to the lower of its fair value and the

(iii) Depreciation

Depreciation is charged to the consolidated profit
and loss on a straight-line basis over the estimated
useful lives of each part of an item of property,
plant and equipment when it’s ready for use. Land
is not depreciated. The estimated useful lives are
reflected in the following rates in the current and
comparative periods:

Buildings

Plant and
equipment

Leased plant
and equipment

2018

2017

25-40 years

2-20 years

3.33-10 years

The residual value, the useful life and the
depreciation method applied to an asset are
reassessed at least annually.

(e) Intangibles

(i) Goodwill

All business combinations are accounted for by
applying the acquisition method. Goodwill represents
the difference between the consideration transferred
for the acquisition and the net recognised amount
(generally fair value of the identifiable assets
acquired and liabilities assumed), all measured
as of acquisition date.

Goodwill is stated at cost less any accumulated
impairment losses. Goodwill is allocated to cash-
generating units and is tested annually for impairment
(see accounting policy (i)). In respect of joint ventures,
the carrying amount of goodwill is included in the
carrying amount of the investment in the joint venture.

Negative goodwill arising on an acquisition
is recognised directly in profit or loss.

(ii) Research and development

Expenditure on research activities, undertaken with
the prospect of gaining new scientific or technical
knowledge and understanding, is recognised in the
profit and loss as an expense as incurred.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

MaxiTRANS Industries | Annual Report 2018

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
(continued)

Expenditure on development activities, whereby
research findings are applied to a plan or design for the
production of new or substantially improved products
and processes, is capitalised if the product or process is
technically and commercially feasible and the Group
has sufficient resources to complete the development.

The expenditure capitalised includes the cost of
materials, direct labour and an appropriate proportion
of overheads. Other development expenditure is
recognised in the profit and loss as an expense as
incurred. Capitalised development expenditure is stated
at cost less accumulated amortisation (see below)
and impairment losses (see accounting policy (i)).

(iii) Brand names

Brand names acquired by the Group have indefinite
useful lives and are measured at cost less
accumulated impairment. They are tested annually
for impairment, or more frequently if events or
circumstances indicate that they might be impaired.

Intellectual
property

Software

2018

2017

0-20 years

10 years

Amortisation methods, useful lives and residual
values are reviewed at each financial year end and
adjusted if appropriate.

(f) Non-current assets held for sale

Non-current assets that are highly probable to be
recovered primarily through sale or distribution
rather than through continuing use, are classified
as held for sale. Immediately before classification,
the assets are remeasured in accordance with the
Group's accounting policies. Thereafter, generally the
assets are measured at the lower of their carrying
amount and fair value less costs to sell. Impairment
losses on initial classification as held for sale and
subsequent gains or losses on remeasurement are
recognised in profit or loss. Gains are not recognised
in excess of any cumulative impairment loss.

(iv) Intellectual Property

(g) Trade and other receivables

Intellectual property acquired by the Group with
definite useful lives are measured at cost less
accumulated impairment. They are tested annually
for impairment, or more frequently if events or
circumstances indicate that they might be impaired.

(v) Other intangible assets

Other intangible assets that are acquired by
the Group are stated at cost less accumulated
amortisation and impairment losses.

(vi) Amortisation

Amortisation of intangibles other than goodwill is
charged to the profit and loss on a straight-line
basis over the estimated useful lives of intangible
assets unless such lives are indefinite. Goodwill
and intangible assets with an indefinite useful life
are tested for impairment at least at each annual
reporting date. Other intangible assets are amortised
from the date that they are available for use.
The estimated useful lives are reflected in the following
rates in the current and comparative periods:

Trade and other receivables are stated at their
amortised cost less impairment losses (see
accounting policy (i)).

(h) Cash and cash equivalents

Cash and cash equivalents comprise cash balances
and call deposits with an original maturity of three
months or less. Bank overdrafts that are repayable
on demand and form an integral part of the Group’s
cash management are included as a component
of cash and cash equivalents for the purpose of the
statement of cash flows.

(i)

Impairment

The carrying amounts of the Group’s assets, other than
inventories (see accounting policy (c)) and deferred tax
assets (see accounting policy (p)), are reviewed at each
reporting date to determine whether there is any
indication of impairment. If any such indication exists,
the asset’s recoverable amount is estimated.

For goodwill, assets that have an indefinite useful
life and intangible assets that are not yet available
for use, the recoverable amount is estimated at
least annually.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

46 MaxiTRANS Industries | Annual Report 2018

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
(continued)

An impairment loss is recognised whenever the
carrying amount of an asset or its cash generating
unit exceeds its recoverable amount. Impairment
losses are recognised in the profit and loss unless
the asset has previously been revalued, in which
case the impairment loss is recognised as a reversal
to the extent of that previous revaluation with any
excess recognised through the profit and loss.

Impairment losses recognised in respect of
cash-generating units are allocated first to reduce
the carrying amount of any goodwill allocated to
the cash-generating unit (group of units) and then,
to reduce the carrying amount of the other assets
in the unit (group of units) on a pro rata basis.

In respect of other assets, an impairment loss is
reversed if there has been a change in the estimates
used to determine the recoverable amount.

An impairment loss is reversed only to the extent
that the asset’s carrying amount does not exceed
the carrying amount that would have been
determined, net of depreciation or amortisation,
if no impairment loss had been recognised.

(l)

Interest-bearing borrowings

Interest-bearing borrowings are recognised initially
at fair value less attributable transaction costs.
Subsequent to initial recognition, interest-bearing
borrowings are stated at amortised cost with any
difference between cost and redemption value being
recognised in the profit or loss over the period of the
borrowings on an effective interest basis.

(j) Calculation of recoverable amount

(m) Employee benefits

The recoverable amount of the Group’s receivables
carried at amortised cost is calculated as the present
value of estimated future cash flows, discounted at
the original effective interest rate (i.e. the effective
interest rate computed at initial recognition of these
financial assets). Receivables with a short duration
(less than 12 months) are not discounted.

The recoverable amount of other assets is the greater
of their fair value less costs to sell and value in use.
In assessing value in use, the estimated future cash
flows are discounted to their present value using a
post-tax nominal discount rate that reflects current
market assessments of the time value of money
and the risks specific to the asset. For an asset
that does not generate largely independent cash
inflows, the recoverable amount is determined for
the cash-generating unit to which the asset belongs.

(k) Reversals of impairment

An impairment loss in respect of receivables carried
at amortised cost is reversed if the subsequent
increase in recoverable amount can be related
objectively to an event occurring after the impairment
loss was recognised.

An impairment loss in respect of goodwill
is not reversed.

(i) Defined contribution superannuation funds

Obligations for contributions to defined contribution
superannuation funds are recognised as an expense
in the profit or loss as incurred. During the year
superannuation contributions of $6,437,490
(2017: $5,166,573) were expensed.

(ii) Long-term service benefits

The Group’s net obligation in respect of long-term
service benefits, other than pension plans, is the
amount of future benefit that employees have earned
in return for their service in the current and prior
periods. The obligation is calculated using expected
future increases in wage and salary rates including
related on-costs and expected settlement dates, and
is discounted using the rates attached to corporate
bonds at the reporting date which have maturity dates
approximating the terms of the Group’s obligations.

(iii) Share based payments transactions

MaxiTRANS Industries Limited grants performance
rights from time to time to certain employees under
the Performance Rights Plan.

The fair value of performance rights granted
is recognised as an employee expense with a
corresponding increase in equity recorded over
the vesting period.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

MaxiTRANS Industries | Annual Report 2018

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
(continued)

(p) Income tax

The fair value of the performance rights is
calculated at the date of grant using a Monte Carlo
simulation model and allocated to each reporting
period over the period from grant date to vesting
date. The value disclosed is the portion of the fair
value of the performance rights allocated to this
reporting period.

(iv) Wages, salaries, annual leave, sick leave and

non-monetary benefits

Liabilities for employee benefits for wages,
salaries, annual leave and sick leave represent
present obligations resulting from employees’
services provided to reporting date, calculated
at undiscounted amounts based on remuneration
wage and salary rates that the Group expects to
pay as at reporting date including related on-costs,
such as workers compensation insurance and
payroll tax. Non-accumulating non-monetary
benefits, such as medical care, housing, cars
and free or subsidised goods and services, are
expensed based on the net marginal cost to the
Group as the benefits are taken by the employees.

(n) Provisions

A provision is recognised in the consolidated
statement of financial position when the Group has
a present legal or constructive obligation as a result
of a past event, and it is probable that an outflow
of economic benefits will be required to settle the
obligation. If the effect is material, provisions are
determined by discounting the expected future cash
flows at a pre-tax rate that reflects current market
assessments of the time value of money and, when
appropriate, the risks specific to the liability.

(o) Warranties

A provision for warranties is recognised when the
underlying products or services are sold. The
provision is based on historical warranty
data and known warranty claims.

Income tax expense comprises current and deferred
tax. Income tax is recognised in the profit or loss except
to the extent that it relates to items recognised directly
in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable
income for the year, using tax rates enacted or
substantially enacted at the reporting date, and any
adjustment to tax payable in respect of previous years.

In determining the amount of current and deferred tax,
the Group takes into account the impact of uncertain
tax positions. The Group believes that its accruals
for tax liabilities are adequate for all open tax years.
This assessment relies on estimates and assumptions
and may involve judgements about future events.

Deferred tax is provided using the balance sheet
liability method, providing for temporary differences
between the carrying amounts of assets and
liabilities for financial reporting purposes and the
amounts used for taxation purposes. The following
temporary differences are not provided for: goodwill,
the initial recognition of assets or liabilities that
affect neither accounting nor taxable profit, and
differences relating to investments in subsidiaries
to the extent that they will probably not reverse in
the foreseeable future. The amount of deferred tax
provided is based on the expected manner of
realisation or settlement of the carrying amount
of assets and liabilities, using tax rates enacted
or substantially enacted at the reporting date.

A deferred tax asset is recognised only to the extent
that it is probable that future taxable profits will be
available against which the asset can be utilised.

Deferred tax assets are reduced to the extent that
it is no longer probable that the related tax benefit
will be realised.

Additional income taxes that arise from the distribution
of dividends are recognised at the same time as the
liability to pay the related dividend.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

48 MaxiTRANS Industries | Annual Report 2018

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
(continued)

(s) Revenue

(q) Tax consolidation

The Company and its wholly-owned Australian
resident entities have formed a tax-consolidated
group with effect from 1 July 2003 and are therefore
taxed as a single entity from that date. The head
entity within the tax consolidated group is MaxiTRANS
Industries Limited.

Due to the existence of a tax contribution agreement
between the entities in the tax consolidated group,
the parent entity recognises the tax effects of its
own transactions and the current tax liabilities
and the deferred tax assets arising from unused
tax losses and unused tax credits assumed from
the subsidiary entities.

Current tax income/expense, deferred tax liabilities
and deferred tax assets arising from temporary
differences of the members of the tax-consolidated
group are recognised in the separate financial
statements of the members of the tax consolidated
group using the ‘separate taxpayer within group’
approach by reference to the carrying amounts
of assets and liabilities in the separate financial
statements of each entity and the tax values
applying under tax consolidation.

In accordance with the tax contribution agreement,
the subsidiary entities are compensated/charged
for the assets and liabilities assumed by the parent
entity as intercompany receivables and payables
and for amounts which equal the amounts initially
recognised by the subsidiary entities.

(r) Earnings per share

Basic earnings per share (“EPS”) is calculated
by dividing the net profit attributable to members
of the parent entity for the reporting period, by the
weighted average number of ordinary shares
of the Company.

Diluted EPS is calculated by dividing the basic
earnings, adjusted by the after tax effect of financing
costs associated with dilutive potential ordinary shares
and the effect on revenues and expenses of conversion
to ordinary shares associated with dilutive potential
ordinary shares, by the weighted average number of
ordinary shares and dilutive potential ordinary shares.

(i) Revenue from the sale of goods

Revenue from the sale of goods is recognised upon
the constructive delivery of goods to customers in
accordance with contracted terms, at which point
the significant risks and rewards of ownership
are transferred.

(ii) Revenue from the rendering of services

Revenue from the rendering of services is
recognised as the services are completed.

(iii) Other income

Interest income is recognised in the profit and loss
as it accrues, using the effective interest method.

(iv) Dividend income

Dividend revenue is recognised when the right
to receive a dividend has been established.

(t) 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 Tax 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 the expense.

Receivables and payables are stated with the amount
of GST included.

The net amount of GST recoverable from, or payable
to, the ATO is included as a current asset or liability
in the consolidated balance sheet.

Cash flows are included in the statements of cash
flows on a gross basis. The GST components of cash
flows arising from investing and financing activities
which are recoverable from, or payable to, the ATO
are classified as operating cash flows.

(u) Trade and other payables

Liabilities are recognised for amounts to be paid
in the future for goods or services received. Trade
accounts payable are normally settled within 60 days.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

MaxiTRANS Industries | Annual Report 2018

When a derivative is designated as a cash flow
hedging instrument, the effective portion of changes
in the fair value of the derivative is recognised in
OCI and accumulated in the hedging reserve.
Any ineffective portion of changes in the fair value
of the derivative is recognised in the profit or loss.

The amount accumulated in equity is retained in OCI
and reclassified to profit or loss in the same period
or periods during which the hedged item affects
profit or loss.

If the hedging instrument no longer meets the
criteria for hedge accounting, expires or is sold,
terminated or exercised, or the designation is
revoked, then hedge accounting is discontinued
prospectively. If the forecast transaction is no longer
expected to occur, then the amount accumulated
in equity is reclassified to profit or loss.

(x) Accounting estimates and judgements

Management discussed with the Board Audit and
Risk Management Committee the development,
selection and disclosure of the Group’s critical
accounting policies and estimates and the application
of these policies and estimates. The estimates and
judgements that have a significant risk of causing
a material adjustment to the carrying amounts of
assets and liabilities within the next financial year
are discussed below.

(i) Impairment of goodwill and intangibles

The Group assesses whether goodwill and
intangibles with indefinite useful lives are impaired
at least annually in accordance with accounting
policy (i).

These calculations involve an estimation of the
recoverable amount of the cash-generating units
to which the goodwill and intangibles with indefinite
useful lives are allocated.

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
(continued)

(v) Expenses

(i) Operating lease payments

Payments made under operating leases are
recognised in the profit or loss on a straight-line
basis over the term of the lease. Lease incentives
received are recognised in the profit or loss as an
integral part of the total lease expense and spread
over the lease term.

(ii) Finance lease payments

Minimum lease payments are apportioned between
the finance charge and the reduction of the
outstanding liability. The finance charge is allocated
to each period during the lease term so as to produce
a constant periodic rate of interest on the remaining
balance of the liability.

(iii) Finance costs

Finance costs comprise interest payable on
borrowings calculated using the effective interest
method, foreign exchange losses, and losses on
hedging instruments that are recognised in the
profit and loss. Borrowing costs that are directly
attributable to the acquisition, construction or
production of a qualifying asset are capitalised
as part of the cost of the asset. All other borrowing
costs are recognised in the profit and loss using
the effective interest method.

(w) Derivative financial instruments

The Group from time to time uses derivative financial
instruments to hedge its exposure to foreign exchange
and interest rate risks arising from operational,
financing and investment activities. The Group does
not hold or issue derivative financial instruments for
trading purposes. However, derivatives that do not
qualify for hedge accounting are accounted for as
trading instruments.

Derivative financial instruments are recognised
initially at fair value. Subsequent to initial recognition,
derivative financial instruments are stated at fair
value. The gain or loss on remeasurement to fair
value is recognised immediately in profit or loss.
However, where derivatives qualify for hedge
accounting, recognition of any resultant gain or loss
depends on the nature of the item being hedged.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

50 MaxiTRANS Industries | Annual Report 2018

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
(continued)

(ii) Capital management

(ii) Provisions

The calculation of the provisions for warranty
claims and impairment provisions for inventory
and receivables involves estimation and judgement
surrounding future claims and potential losses and
exposures based primarily on past experience, the
likelihood of claims or losses and exposures arising
in the future as well as management knowledge and
experience together with a detailed examination of
financial and non financial information and trends.
Refer accounting policy (n) for details of the
recognition and measurement criteria applied.

(y) Financial risk management

(i) Overview

The Group has exposure to credit, market and liquidity
risks associated with the use of financial instruments.

The Board has delegated to the Audit and Risk
Management Committee responsibility for the
establishment of policies on risk oversight and
management.

Risk management policies are established to
identify and analyse the risks faced by the Group,
to set appropriate risk controls, and to monitor
risks and adherence to limits.

The Group does not enter into or trade financial
instruments, including derivative financial
instruments, for speculative purposes.

The Group’s activities expose it primarily to the
financial risks associated with changes in foreign
currency exchange rates and interest rates. The
carrying value of financial assets and financial
liabilities recognised in the accounts approximate
their fair value with the exception of borrowings
which are recorded at amortised cost.

There have not been any changes to the objectives,
policies and procedures for managing risk during
the current year or in the prior year.

The Board’s policy is to maintain a strong capital
base so as to maintain investor, creditor and market
confidence and to sustain future development of the
business.

The Board monitors the earnings per share and the
levels of dividends to ordinary shareholders together
with the net debt/equity ratio, which at 30 June 2018
was 31% (2017: 32%). The Dividend Reinvestment Plan
was suspended on 21 June 2011. The Board seeks to
maintain a balance between higher returns that might
be possible with higher levels of borrowings and the
advantages afforded by a sound capital position.

(z) Segment reporting

Operating segments are identified and segment
information disclosed on the basis of internal reports
that are regularly provided to, or reviewed by the
Group's chief operating decision maker which, for the
Group, is the Managing Director. In this regard, such
information is provided using different measures to
those used in preparing the consolidated statement
of profit or loss and consolidated balance sheet.
Reconciliations of such management information
to the statutory information contained in the financial
report have been included.

(aa) Determination of fair values

A number of the Group’s accounting policies and
disclosures require the determination of fair value, for
both financial and non-financial assets and liabilities.
Fair values have been determined for measurement
and/or disclosure purposes based on the following
methods. When applicable, further information about
the assumptions made in determining fair values is
disclosed in the notes specific to that asset or liability.

(i) Land and buildings

The fair value of property is based on market values.
The market value of property is the estimated
amount for which a property could be exchanged
on the date of valuation between a willing and
knowledgeable buyer and seller in an arm’s length
transaction after proper marketing.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

MaxiTRANS Industries | Annual Report 2018

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
(continued)

(ii) Derivatives

The fair value of forward exchange contracts
is based on their listed market price, if available.
If a listed market price is not available, then fair
value is estimated by discounting the difference
between the contractual forward price and the
current forward price for the residual maturity
of the contract.

The fair value of interest rate swaps is based
on independent valuations.

Fair values reflect the credit risk of the instrument and
include adjustments to take account of the credit risk
of the Group entity and counterparty when appropriate.

(iii) Trade and other receivables

The fair value of trade and other receivables is
estimated as the present value of future cash flows,
discounted at the market rate of interest at the
reporting date. This fair value is determined for
disclosure purposes.

(iv) Non-derivative financial liabilities

Fair value, which is determined for disclosure
purposes, is calculated based on the present value
of future principal and interest cash flows, discounted
at the market rate of interest at the reporting date.
For finance leases the market rate of interest is
determined by reference to similar lease agreements.

(ab) Government grants

From time to time the Group becomes eligible for
government grants. These grants are accounted
for in accordance with AASB 120 Accounting for
Government Grants and Disclosure of Government
Assistance. The grants relate to assets, and have
been presented in the statement of financial position
deducting the grant value from the cost of the asset
in arriving at the asset carrying amount.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

52 MaxiTRANS Industries | Annual Report 2018

2. PROFIT FROM ORDINARY ACTIVITIES

Employee and contract labour expenses:
– employee expenses
– contract labour expenses

Total employee and contract labour expenses

Net (income)/expenses from movements in provision for:
– employee entitlements
– warranty
– other

Net (income)/expense resulting from movements in provisions

Rental expense on operating leases

Research and development expenditure
expensed as incurred

Crediting as income:

Net gain on disposal of:
– property, plant and equipment

3. TAXATION

(a) Income tax

Reconciliation of tax expense

Prima facie tax payable on profit before tax for continued
and discontinued operations at 30% (2017: 30%)

Add/(deduct) tax effect of:
Research and development allowance
Non-assessable expenditure/(income)
Associate equity accounted income
Under/(over) provision in prior year
Impact of tax rates in foreign jurisdictions

Add/(deduct) Income tax attributable to discontinued operations

Consolidated

2018
$’000

Restated
2017
$’000

87,614
13,362

100,976

75,544
9,772

85,316

458
960
(1,037)

381

(178)
120
244

186

6,282

6,455

684

682

161

4,097

4,356

(268)
73
(421)
140
27

(449)

(295)
(28)
(265)
(245)
(48)

(881)

(248)

Income tax expense in consolidated statement of profit or loss

3,734

3,227

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

MaxiTRANS Industries | Annual Report 2018

3. TAXATION (continued)

Income tax expense attributable to profit from continuing operations is made up of:

Current tax expense
Prior year under/(over) provision

Deferred tax expense
– origination and reversal of temporary difference
– prior year under/(over) – deferred differences
Exclude discontinued operation current tax benefit/(expense)

Consolidated

2018
$’000

2,530
229

962
(72)
85

Restated
2017
$’000

2,947
(206)

773
(39)
(248)

Income tax expense in consolidated statement of profit or loss

3,734

3,227

(b) Deferred tax assets/(deferred tax liabilities)

The deferred tax assets/(deferred tax liabilities) are made
up of the following estimated tax benefits/(cost):
– Provisions and accrued employee benefits
– Property, plant and equipment
– Leases
– Intangible assets
– Inventory
– Other

Net deferred tax asset/(liability)

Balance at beginning of year
Recognised in profit or loss
Recognised in equity
Transfer to assets held for sale

Net deferred tax asset/(liability)

4,857
(7,025)

(1,488)
1,134
113

(2,409)

(280)
(712)
(1,121)
(296)

(2,409)

5,414
(5,596)
–
(972)
968
(94)

(280)

1,334
(734)
(880)
–

(280)

The Group’s current tax asset of $2,237,282 (2017: $1,209,051) and current tax liability of nil (2016: $118,499) represents the
amount of income taxes receivable/(payable) in respect of current and prior financial periods.

4. TRADE AND OTHER RECEIVABLES

Trade debtors
Not past due
Past due 0 – 30 days
Past due 31 – 60 days
Past due over 61 days

Trade receivables

Other receivables

Total trade and other receivables

Consolidated 2018

Consolidated 2017

Gross
$’000

Impairment
$’000

Total
$’000

Gross
$’000

Impairment
$’000

Total
$’000

25,586
8,856
1,981
3,305

39,728

(142)
(49)
(33)
(192)

25,444
8,807
1,948
3,113

29,526
9,139
2,316
3,620

(166)
(69)
(23)
(49)

29,360
9,070
2,293
3,571

(416)

39,312

44,601

(307)

44,294

(192)

39,120

914

45,208

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

54 MaxiTRANS Industries | Annual Report 2018

INVENTORIES

Second–hand units – at net realisable value
Finished goods – at cost
Work in progress – at cost
Raw materials – at cost
Less: provision for decrease to net realisable value

Total inventories

6. PROPERTY, PLANT AND EQUIPMENT

Land and buildings at fair value
Accumulated depreciation

Total land and buildings

Plant and Equipment

Plant and equipment at cost
Accumulated depreciation

Office equipment at cost
Accumulated depreciation

Leased property, plant and equipment
Accumulated depreciation

Capital work in progress

Total plant and equipment

Total property, plant and equipment

Consolidated

2018
$’000

2017
$’000

1,162
38,016
4,661
15,863
(2,002)

57,700

3,044
35,242
6,913
18,358
(3,189)

60,368

46,205
–

46,205

43,526
(201)

43,325

39,212
(28,191)

41,828
(28,046)

11,021

13,782

10,025
(8,367)

1,658

1,501
(575)

926

33,923

47,528

93,733

9,522
(8,075)

1,447

7,990
(1,692)

6,298

23,674

45,201

88,526

Independent valuations/market assessments were obtained during 30 June 2018 in relation to all land and buildings held at that
time, for use by the directors in assessing land and buildings at fair value.

Refer to Note 26(e) for details of security over land and buildings.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

MaxiTRANS Industries | Annual Report 2018

6. PROPERTY, PLANT AND EQUIPMENT (continued)

Reconciliations
Reconciliations of the carrying amounts for each class of property, plant and equipment are set out below:

Consolidated

Land and buildings
Carrying amount at the beginning of the financial year
Additions
Fair value revaluation
Disposals
Depreciation
Other sundry movements

Carrying amount at the end of the financial year

Plant and equipment
Carrying amount at the beginning of the financial year
Additions
Transfer from inventories
Transfers from/(to) leased plant and equipment
Transfers from capital works in progress
Transfer to Assets held for sale
Disposals
Depreciation
Other sundry movements

Carrying amount at the end of the financial year

Office equipment
Carrying amount at the beginning of the financial year
Additions
Transfers from capital works in progress
Transfer from plant & equipment
Transfer to Assets held for sale
Transfer from leased plant and equipment
Disposals
Depreciation
Other sundry movements

Carrying amount at the end of the financial year

Leased property, plant and equipment
Carrying amount at the beginning of the financial year
Additions
Transfers to plant and equipment
Transfer to Assets held for sale
Disposals
Other sundry movements
Amortisation

Carrying amount at the end of the financial year

Capital works in progress
Carrying amount at the beginning of the financial year
Additions
Transfer to Assets held for sale
Transfers to software
Transfers to property, plant and equipment

Carrying amount at the end of the financial year

2018
$’000

43,325
10
3,901
–
(539)
(492)

46,205

13,782
1,757
–
(7)
1,071
(1,717)
(1,279)
(2,660)
74

11,021

1,447
903
–
7
(191)
–
(2)
(518)
12

1,658

6,298
495
–
(5,562)
–
281
(586)

926

23,674
11,324
(4)
–
(1,071)

33,923

2017
$’000

40,284
–
3,557
–
(524)
8

43,325

10,768
1,496
3,784
15
91
–
(135)
(2,133)
(104)

13,782

1,984
362
8
–
–
2
(13)
(884)
(12)

1,447

7,176
116
(17)
_
–
(415)
(562)

6,298

18,351
6,380
–
(958)
(99)

23,674

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

56 MaxiTRANS Industries | Annual Report 2018

INTANGIBLE ASSETS

Software at cost
Accumulated depreciation

Goodwill at cost

Brand names at cost
Accumulated amortisation

Intellectual property at cost
Accumulated amortisation

Patents and trademarks at cost
Accumulated amortisation

Total intangibles

Reconciliations
Reconciliations of the carrying amounts for each class of intangible assets are set out below:

Software

Carrying amount at the beginning of the financial year
Transfers from capital work in progress
Depreciation

Carrying amount at the end of the financial year

Goodwill

Carrying amount at the beginning of the financial year
Impairment losses
Less goodwill classified as held for sale

Carrying amount at the end of the financial year

Brand names
Carrying amount at the beginning of the financial year

Carrying amount at the end of the financial year

Intellectual property

Carrying amount at the beginning of the financial year
Amortisation
Impairment Losses

Carrying amount at the end of the financial year

Consolidated

2018
$’000

2017
$’000

958
(192)

766

958
(96)

862

21,892

24,645

6,930
(691)

6,239

6,930
(691)

6,239

22,665
(17,297)

22,665
(16,894)

5,368

5,771

891
(891)

–

891
(891)

–

34,265

37,517

862
–
(96)

766

24,645
–
(2,753)

21,892

6,239

5,771
(403)
–

5,368

–
958
(96)

862

24,645
–
–

24,645

6,239

6,175
(404)
–

5,771

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

MaxiTRANS Industries | Annual Report 2018

CGU

Australian Trailers
MaxiPARTS
Yangzhou Maxi–CUBE Tong Composites (China)
MaxiTRANS New Zealand

Consolidated

Other Intangibles
Allocation

Goodwill
Allocation

2018
$’000

12,373
–
–
–

12,373

2017
$’000

12,872
–
–
–

12,872

2018
$’000

5,193
16,699
–
–

21,892

2017
$’000

5,193
16,699
2,753
–

24,645

Impairment tests for Goodwill and Other Intangibles

The recoverable amount of the CGU’s to which goodwill and other intangible assets with indefinite useful lives are allocated is
determined based on value–in–use calculations. These calculations use cash flow projections based on most recent budgeted
projections by key operational management and are subsequently reviewed by the Board. Budgeted EBITDA was based on
expectations of future outcomes taking into account past experience, adjusted for anticipated revenue growth. Revenue growth
was projected taking into account current market conditions, order intake and expectations with regards to market share.
Projections are extrapolated using estimated growth rates for a five year period with a terminal growth rate of 2% – 2.5%.
The growth rate used for years 2-5 is 2.5% – 2.7% which is based on recent Australian Government GDP forecasts and the
after-tax nominal discount rates used were 10.6% – 11.6% (2017: 8.8% – 9.8%).

The recoverable amount of the Australian Trailers and MaxiParts CGU’s were found to be in excess of their respective carrying
values. As the China CGU was classified as held for sale at 30 June 2018, its allocated goodwill was tested for impairment by
comparing the estimated amount to be received from the sale to the current carrying value of net assets.

The MaxiTrans New Zealand non-current assets were also not tested for impairment as there was no indicator for impairment
during the period.

8. TRADE AND OTHER PAYABLES

Trade payables
Other payables and accruals

Total trade and other payables

Consolidated

2018
$’000

2017
$’000

34,853
12,474

47,327

39,776
12,824

52,600

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

58 MaxiTRANS Industries | Annual Report 2018

INTEREST BEARING LOANS AND BORROWINGS

Current
Bank loans – secured
Lease liability

Total current interest bearing liabilities

Non-current
Bank loans – secured
Lease liability

Total non–current interest bearing liabilities

Consolidated

2018
$’000

–
752

752

49,500
408

49,908

2017
$’000

1,729
834

2,563

44,485
649

45,134

Bank loans are subject to a floating interest rate. Interest rate swaps have been executed in respect of $28.5m
(2017: $20.0m) of this debt in order to mitigate interest rate risk. Refer to note 26(b) for further details.

Finance costs:
– Interest on bank loans
– Finance lease charges

Total finance costs

10. PROVISIONS

Current
Employee entitlements
Warranty

Total current provisions

Non-current
Employee entitlements
Other

Total non-current provisions

2,236
92

2,328

2,029
98

2,127

9,166
3,960

9,420
3,001

13,126

12,421

1,066
75

1,141

1,092
52

1,144

Aggregate employee entitlements liability

10,232

10,512

Warranty and other provisions at 30 June 2018 is analysed as follows:

Carrying amount at 1 July 2017
Provisions made during the year
Provisions written back during the year
Payments made during the year
Foreign Currency Exchange differences

Carrying amount at 30 June 2018

Warranty
$’000
3,001
3,370
(61)
(2,316)
(34)

3,960

Other
$’000
52
23
–
–
–

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

MaxiTRANS Industries | Annual Report 2018

Number of
Ordinary Shares

Share Capital
$’000

185,075,653

56,386

11. ISSUED CAPITAL

Balance at 30 June 2017

Balance at 30 June 2018

Ordinary shares

Subject to the Constitution of the Company, holders of ordinary shares are entitled to vote as follows:

•• Every shareholder may vote;

•• On a show of hands every shareholder has one vote;

•• On a poll every shareholder has one vote for each fully paid share.

The company does not have authorised capital or par value in respect of its issued shares.

Subject to the Constitution of the Company, ordinary shares attract the right in a winding up to participate equally in the
distribution of the assets of the Company (both capital and surplus), subject only to any amounts unpaid on shares.

12. EARNINGS PER SHARE

Basic earnings per share

Earnings reconciliation
Net profit attributable to equity holders of the Company

Basic earnings
From continuing operations
From discontinued operations

Diluted Earnings
From continuing operations
From discontinued operations

Consolidated

2018 – $’000

2017 – $’000

10,077

10,077
10,343
(266)

10,077

10,077
10,343
(266)

10,077

10,695

10,695
10,359
336

10,695

10,695
10,359
336

10,695

2018 – Number

2017 – Number

Weighted average number of shares

Number of ordinary shares for basic Earnings Per Share
Effect of shares issued during the year

Number of Ordinary Shares for Diluted earnings per share

185,075,653
–

185,075,653

185,075,653
–

185,075,653

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

60 MaxiTRANS Industries | Annual Report 2018

13. DIVIDENDS

Dividends paid

2018
Interim – ordinary

Total dividends paid

2017
Interim – ordinary
Final – ordinary

Total dividends paid

Dividends proposed

Cents Per
Share

Total Amount
$’000

Date of
Payment

Tax Rate for
Franking Credit

Percent
Franked

2.00

2.00
1.50

3.50

3,702

3,702
2,776

6,478

13 April 2018

30%

100%

3 April 2017
3 October 2017

30%
30%

100%
100%

Final – ordinary

1.50

2,776

12 October 2018

30%

100%

The above dividend was determined after the end of the financial year and will be paid on 12 October 2018. The financial
effect of this dividend has not been brought to account in the financial statements for the year ended 30 June 2018 and
will be recognised in subsequent financial statements.

Dividend franking account

Franking credits available to shareholders of
MaxiTRANS Industries Limited for subsequent financial years

The Company

2018
$’000

2017
$’000

24,574

22,657

The ability to utilise the franking credits is dependent upon the ability to declare dividends.

The impact on the dividend franking account of dividends proposed after the reporting date but not recognised as a liability
is to reduce it by $1,189,772 (2017: $1,189,772).

14. SEGMENT INFORMATION

It is the Group’s policy that inter–segment pricing is determined on an arm’s length basis. Segment results, assets and
liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
Unallocated items mainly comprise interest–bearing loans, borrowings and corporate assets and expenses. Total finance
costs of the Group are included in unallocated corporate costs.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

MaxiTRANS Industries | Annual Report 2018

14. SEGMENT INFORMATION (continued)

Year ended 30 June 2018

Business Segments

Trailer
Solutions

Parts &

Discontinued Eliminations Consolidated

Components Operations

$’000

Revenue
External segment revenue
Inter–segment revenue

290,948
7,553

101,945
25,477

16,419
2,899

–
(35,929)

409,312
–

Total segment revenue

298,501

127,422

19,318

(35,929)

409,312

Unallocated sundry revenue

Total revenue

–

409,312

Segment net profit before tax

18,846

8,827

(419)

–

27,254

Share of net profit of equity
accounted investments
Unallocated corporate expenses

Profit before related income
tax expense
Income tax expense

Net profit

Depreciation and amortisation
Unallocated depreciation
and amortisation

Total depreciation and amortisation

Assets
Segment assets
Unallocated corporate assets

Consolidated total assets

Liabilities
Segment liabilities
Unallocated corporate liabilities

Consolidated total liabilities

Capital expenditure(i)
Unallocated capital expenditure

Consolidated capital expenditure

3,018

854

725

142,883

67,090

19,813

60,088

16,840

9,550

3,088

358

325

1,404
(14,999)

13,659
(3,648)

10,011

4,597

201

4,798

229,786
34,815

264,601

86,478
42,304

128,782

3,771
10,715

14,486

–

(i) Capital expenditure includes the acquisition of leased assets

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

62 MaxiTRANS Industries | Annual Report 2018

14. SEGMENT INFORMATION (continued)

Year ended 30 June 2017

Business Segments

Revenue
External segment revenue
Inter–segment revenue

Total segment revenue

Unallocated sundry revenue

Total revenue

Trailer
Solutions

Parts &

Discontinued Eliminations Consolidated

Components Operations

$’000

230,905
880

91,136
11,900

231,785

103,036

17,674
2,108

19,782

–
(14,888)

340,072
–

–

340,072

–

340,072

Segment net profit before tax

16,848

5,958

935

–

23,740

Share of net profit of equity
accounted investments
Unallocated corporate expenses

Profit before related income
tax expense
Income tax expense

Net profit

Depreciation and amortisation
Unallocated depreciation
and amortisation

Total depreciation and amortisation

Assets
Segment assets
Unallocated corporate assets

Consolidated total assets

Liabilities
Segment liabilities
Unallocated corporate liabilities

Consolidated total liabilities

Capital expenditure(i)
Unallocated capital expenditure

Consolidated capital expenditure

884
(10,104)

14,520
(3,475)

11,045

2,632

1,033

708

–

4,373

147,998

57,023

18,628

53,865

17,854

9,434

1,691

540

168

230

4,603

223,649
19,845

243,493

81,153
33,613

114,766

2,399
5,955

8,354

–

(i) Capital expenditure includes the acquisition of leased assets

Geographical segments
The Group’s external revenues are predominantly derived from customers located within Australia.
The customer base is sufficiently diverse to ensure the Group is not reliant on any particular customer.
The Group’s assets and capital expenditure activities are predominantly located within Australia.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

MaxiTRANS Industries | Annual Report 2018

15. SHARE BASED PAYMENTS

On 15 October 2010, the Group established the MaxiTRANS Performance Rights Plan (‘PRP’) that entitles executive directors
and senior management to receive a specified number of Performance Rights (‘PRs’) which upon vesting can be converted
into a specified number of ordinary shares in the Company.

The terms and conditions relating to PRs currently on issue are as follows:

Period

Grant date

Total PRs issued

Total PRs forfeited

Total PRs remaining on issue

Vesting conditions

1,819,520

–

1,819,520

ROIC – 100%

1 July 2017 – 30 June 2020

1 July 2016– 30 June 2019

30 September 2017

30 September 2016

3,591,081

1,977,014

1,614,067

ROIC – 50%
EPS – 50%

6.17% (year ended
30 June 2016)

Base Return on Invested Capital (ROIC)

3 year average rate of 6%

Target increase in ROIC

Average of 0.65% per annum
(7.95% over 3 years)

Average of 1.75% per annum
(5.25% over 3 years)

Percentage increase in base ROIC required

32.5%

85%

Minimum % of ROIC target that must be
achieved for Performance Rights to vest

66.67% (i.e. average of 0.43%
per annum)

70% (i.e. average of 1.22%
per annum)

Target EPS

Basic EPS – 9.82¢
Growth over 2014 EPS at 9.26c given
that 2015 &2016 EPS was impacted
by non-recurring costs

Minimum service requirement

3 years from grant date

Details of PRs exercised:

2015/18 Plan

2016/19 Plan

Total PRs issued

Total PRs forfeited

Total PRs exercised

Measurement of fair value

4,985,370

–

3,591,081

1,977,014

–

2017/20 Plan

1,819,520

–

The fair value of PRs is calculated at the date of grant by an independent external valuer, Grant Thornton, using the
Monte Carlo simulation model and allocated to each reporting period evenly over the period from grant date to vesting date.
Expected volatility is estimated by considering historic average share price volatility.

PRs are granted under a service condition and, for grants to key management personnel, non–market performance
conditions. Non–market performance conditions are not taken into account in the grant date fair value measurement
of the services received.

The inputs used in the measurement of the fair values at grant date of the PRs on issue are as follows:

Fair value at grant date
Share price at grant date
Expected volatility
Expected dividend yield
Risk–free rate of return
Liquidity discount

2018

58.79¢
67.00¢
50.00%
6.5%
2.00%
15.00%

2017

45.99¢
61.00¢
50.00%
6 – 7%
2.30%
15.00%

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

64 MaxiTRANS Industries | Annual Report 2018

15. SHARE BASED PAYMENTS (continued)

Expense/(income) recognised in profit and loss

Consolidated

Share based payments expense recognised
Share based payments reversed

Total share based payment expense/(income) recognised as employee costs

2018
$’000

352
(330)

2017
$’000

503
(752)

(249)

During the period it was determined that the performance and service conditions of the 2015 PR scheme will not be met.
As a result, the total amount recognised for goods and services received over the life of the 2015 scheme was reversed.
In addition where an employee has left the business their PR expense was reversed. The reversal amount is comprised of:

2015 PR scheme
2016 PR scheme
2017 PR scheme

$’000
276
48
6

16. RELATED PARTY DISCLOSURES

(a) Director and other key management personnel disclosures

Key management personnel have authority and responsibility for planning, directing and controlling the activities
of the Group. Key management personnel comprise the directors of the Company and executives for the Group.

The following were key management personnel of the Group at any time during the reporting period and unless
otherwise indicated were key management personnel for the entire period:

Non-executive directors
– Mr J Curtis (Deputy Chairman)

– Mr R Wylie (Chairman)

– Mr J Rizzo

– Ms S Hogg

Executive directors
– Mr M Brockhoff (Former Managing Director

– retired on 1 July 2017)

– Mr D Jenkins (Managing Director)

Executives
– Mr C Richards (CFO)

–

Mr A Roder (Group General Manager – Manufacturing)
– resigned 12 January 2018

–

Mr P Loimaranta (Group General Manager – International)

– Mr A McKenzie (Group General Manager – Sales and
Marketing)

–

Mr T Negus (Group General Manager – Manufacturing)
– appointed 1 January 2018

Mr J O’Brien (General Manager – MaxiParts)
– appointed 1 November 2017

(b) Directors’ transactions in shares

Directors and their related entities acquired 302,540 (2017: Nil) existing ordinary shares in MaxiTRANS Industries Limited
during the year.

Apart from the details disclosed in this note, no key management personnel have entered into a material contract
with the Company or the Group since the end of the previous financial year and there were no material contracts
involving directors’ interests existing at year end.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

MaxiTRANS Industries | Annual Report 2018

(d) Transactions with associate

During the year the Group derived revenue from the associate of $40,488,567 (2017: $26,708,172) for the sale
of new units, parts and the provisions of services. Amounts receivable from the associate at year end total
$3,925,567 (2017: $1,479,408).

During the year the Group paid for services and parts from the associate totalling $1,659,565 (2017: $1,260,496).
Amounts owing at year end total $120,977 (2017: $45,511).

All dealings were in the ordinary course of business and on normal commercial terms and conditions.

(e) Key management personnel remuneration

The key management personnel remuneration (see Remuneration Report) is as follows:

Short–term employee benefits
Post–employment benefits
Share based payment benefits/(expense)

Consolidated

2018

2017

3,176,337
323,940
(6,382)

3,147,072
329,407
(193,811)

3,493,895

3,282,668

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

66 MaxiTRANS Industries | Annual Report 2018

17. PARENT ENTITY

As at 30 June 2018 and throughout the financial year ending on that date, the parent company of the Group was MaxiTRANS
Industries Limited.

Results of the parent company
Profit/(loss) for the year
Other comprehensive income

Total comprehensive income

Financial position of the parent company
Current assets
Total assets

Current liabilities
Total liabilities

Net assets

Total equity of the parent company comprising of:
Issued capital
Reserves
Retained earnings

Total equity

Parent company investment in subsidiaries and joint ventures

Company

2018
$’000

2017
$’000

(3,427)
–

(3,427)

52,047
114,440

2,393
51,892

(785)
–

(785)

64,832
116,263

1,076
43,833

62,548

72,430

56,386
609
5,553

62,548

56,386
586
15,458

72,430

Investments in subsidiaries and joint ventures are carried at historical cost in the parent company less, where applicable,
any impairment charge.

Parent company contingencies

At any given point in time, the parent company may be engaged in defending legal actions brought against it. The directors
are not aware of any such actions that would give rise to a material contingent liability to the parent company.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

MaxiTRANS Industries | Annual Report 2018

18. CONTROLLED ENTITIES

Particulars in relation to controlled entities

Country of
Incorp.

Class of
Shares

Interest Held

2018 %

2017 %

The Company:
MaxiTRANS Industries Limited

Controlled entities of
MaxiTRANS Industries Limited:
MaxiTRANS Australia Pty Ltd
– Transport Connection Pty Ltd (ii)
Transtech Research Pty Ltd
Trail Truck Parts Pty Ltd (i)
MaxiTRANS Industries (N.Z.) Pty Ltd
Peki Pty Ltd (i)
Ultraparts Pty Ltd (i)
MaxiTRANS Services Pty Ltd
MaxiTRANS Finance Pty Ltd (i)
Lusty EMS Pty Ltd
Hamelex White Pty Ltd (i)
MaxiPARTS Pty Ltd (formerly Colrain Pty Ltd)
– Colrain Queensland Pty Ltd
– Colrain (Albury) Pty Ltd
– Queensland Diesel Spares Pty Ltd (formerly Colrain

(Ballarat) Pty Ltd) (i)

– Colrain Pty Ltd (formerly Colrain (Geelong) Pty Ltd) (i)
– MaxiPARTS (Qld) Pty Ltd (formerly Queensland Diesel

Aust.
Aust.
Aust.
Aust.
Aust.
Aust.
Aust.
Aust.
Aust.
Aust.
Aust.
Aust.
Aust.
Aust.

Aust.
Aust.

Spares Pty Ltd)

MaxiTRANS Employee Share Plan Pty Ltd
MaxiTRANS (China) Limited (i)
Yangzhou Maxi–CUBE Tong Composites Co Ltd

Aust.
Aust.
Hong Kong
China

Ord.
Ord.
Ord.
Ord.
Ord.
Ord.
Ord.
Ord.
Ord.
Ord.
Ord.
Ord.
Ord.
Ord.

Ord.
Ord.

Ord.
Ord.
Ord.
Ord.

100
100
100
100
100
100
100
100
100
100
100
100
100
100

100
100

100
100
100
80

100
100
100
100
100
100
100
100
100
100
100
100
100
100

100
100

100
100
100
80

(i) Dormant entity
(ii) As at 30 June 2017 MaxiTRANS Australia Pty Ltd purchased the remaining 20% minority shareholding

19. ACQUISITION OF NCI

In June 2017, the Group acquired the additional 20% interest in Transport Connection Pty Ltd for $536,405 in cash, increasing its
ownership from 80% to 100%. A final payment of $31,201 was paid in 2018 following the finalisation of the 30 June 2017 financial
report of Transport Connection Pty Ltd. The carrying amount of Transport Connection Pty Ltd net assets in the Group’s
consolidated financial statements on the date of the acquisition was $2,982,252.

The Group recognised a decrease in NCI of $596,450 and an increase in retained earnings attributable to the owners of the
Company of $60,045.

Carrying amount of NCI acquired ($2,982,252 x 20%)
Consideration paid to NCI

Increase in equity attributable to owners of the Company

2018
$’000

–
31

2017
$’000

596
536

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

68 MaxiTRANS Industries | Annual Report 2018

20. DEED OF CROSS GUARANTEE

The Company, together with its subsidiaries, MaxiTRANS Australia Pty Ltd, Transtech Research Pty Ltd, Lusty EMS Pty Ltd,
Peki Pty Ltd, MaxiTRANS Industries (N.Z.) Pty Ltd, MaxiPARTS Pty Ltd (effective 1 September 2008, previously ineligible) and
Queensland Diesel Spares Pty Ltd (effective 22 June 2012, previously ineligible) each of which are incorporated in Australia,
entered into a “Deed of Cross Guarantee” so as to seek the benefit of the accounting and audit relief available under Class Order
(2016/785) made by the Australian Securities & Investments Commission which was granted on 30 June 2006.

A consolidated statement of comprehensive income and consolidated balance sheet, comprising the Company and controlled
entities which are party to the Deed, after eliminating all transactions between parties to the Deed of Cross Guarantee,
for the year ended 30 June 2018 is set out as follows:

Consolidated statement of comprehensive income

Total revenue

Changes in inventories of finished goods and work in progress

Raw materials and consumables used

Other income

Employee expenses

Warranty expenses

Depreciation and amortisation expenses

Finance costs

Other expenses

Share of net profits of joint ventures accounted
for using the equity method

Profit before income tax

Income tax expense

Profit for the year

Other comprehensive income
Items that may subsequently be re-classified to profit or loss:

Net exchange difference on translation of financial
statements of foreign operations
Other sundry movements
Items that will never be reclassified to profit or loss:

Revaluation of land and buildings
Related tax

Other comprehensive income/(loss) for the year, net of tax

Total comprehensive income for the year

Profit attributable to:
Equity holders of the company

Total comprehensive income attributable to:
Equity holders of the company

Consolidated

2018
$’000

2017
$’000

362,979

285,214

2,433

3,847

(217,833)

(162,586)

161

(98,724)

(82,695)

(3,770)

(4,055)

(2,328)

(1,796)

(3,875)

(2,127)

(26,938)

(24,963)

1,404

13,240

(3,484)

9,756

429
(35)

3,901
(1,136)

3,159

12,915

884

12,064

(2,770)

9,294

(1,275)
114

3,557
(1,041)

1,355

10,649

9,756

9,294

12,915

10,649

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

MaxiTRANS Industries | Annual Report 2018

Consolidated

2018
$’000

9,691
35,539
55,470
2,237
1,567

104,504

4,826
7,193
93,617
32,686
265
1,249

2017
$’000

4,695
31,889
56,610
1,209
1,310

95,713

4,442
7,162
77,988
33,183
215
1,133

139,836

124,123

244,340

219,836

47,855
753
–
12,857

61,465

49,908
2,741
1,141
97

53,887

42,512
834
–
11,438

54,784

43,406
701
1,144
35

45,286

115,352

100,070

128,988

119,766

56,386
19,175
53,427

56,386
15,215
47,302

128,988

119,766

20. DEED OF CROSS GUARANTEE (continued)

Consolidated statement of financial position

Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax assets
Other

Total Current Assets

Non-Current Assets
Investment in joint venture
Investments in controlled entities
Property, plant and equipment
Intangible assets
Deferred tax assets
Other

Total Non-Current Assets

Total Assets

Current Liabilities
Trade and other payables
Interest bearing loans and borrowings
Current tax liability
Provisions

Total Current Liabilities

Non-Current Liabilities
Interest bearing loans and borrowings
Deferred tax liabilities
Provisions
Other

Total Non-Current Liabilities

Total Liabilities

Net Assets

Equity
Issued capital
Reserves
Retained profits

Total Equity

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

70 MaxiTRANS Industries | Annual Report 2018

21. INVESTMENT IN ASSOCIATE

Name of Entity

Principal Activity

Trailer Sales Pty Ltd

Trailer retailer. Repairs and service provider.
Sale of spare parts within Australia,
which is the country of incorporation.

Ownership

2018
%
36.67

2017
%
36.67

$’000

2018
2017

Revenues
(100%)

70,740
56,210

Net
Profit
after Tax
(100%)

3,829
2,411

Share of
Associate
Profit
Recognised

Total
Assets

Total
Liabilities

Net Assets as
Reported by
Associate

1,404
884

20,489
18,041

8,453
7,052

12,035
10,988

Commitments
The share of the associate’s capital commitments contracted but not provided for or payable within one year was $nil
at 30 June 2018 (2017: $nil).

22. NOTE TO THE CONSOLIDATED STATEMENT OF CASH FLOWS

Reconciliation of cash flows from operating activities with operating profit/(loss) after tax

Profit for the year

Non cash items in operating profit
Depreciation/amortisation of assets
Profit on sale of fixed assets
Share of associates profit
Share based payments expense

Change in assets and liabilities
(Increase)/decrease in receivables
(Increase)/decrease in other assets
(Increase)/decrease in inventories
Increase/(decrease) in trade payables
and other liabilities
Increase/(decrease) in income tax payable
Increase/(decrease) in deferred taxes
Increase/(decrease) in provisions

Net cash flows from operating activities

Consolidated

2018
$’000

2017
$’000

10,011

11,045

4,798
73
(1,404)
22

(569)
61
2,739

3,161
(1,237)
741
1,371

19,767

4,603
(161)
(884)
(249)

(4,735)
35
(11,426)

4,331
1,633
517
(264)

4,445

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

MaxiTRANS Industries | Annual Report 2018

23. CAPITAL AND LEASING COMMITMENTS

(a) Operating lease commitments

Future operating lease rentals not provided for in the financial statements and payable:
– not later than 1 year
– later than 1 year but not later than 5 years
– later than 5 years

Consolidated

2018
$’000

4,244
8,011
1,671

2017
$’000

4,426
9,890
1,636

Total operating lease commitments

13,926

15,952

The Group leases property under operating leases expiring from one to ten years. Leases generally provide the Group with
a right of renewal at which time all terms are renegotiated.

(b) Capital expenditure commitments

Payable
– not later than 1 year
– later than 1 year but not later than 5 years

Total capital expenditure commitments

24. CONTINGENT LIABILITIES

7,144
867

8,011

13,180
3,580

16,760

At any given point in time the Group may be engaged in defending legal actions brought against it. In the opinion of the
directors such actions are not expected to have a material effect on the Group’s financial position.

25. REMUNERATION OF AUDITOR

Remuneration of the auditor of the Company for:

KPMG Australia:
– auditing and reviewing the financial statements
– other services (taxation and advisory)

Overseas KPMG Firms:
– auditing and reviewing financial statements
– other services (taxation, advisory and due diligence)

Total auditor remuneration

292,830
188,254

306,967
166,219

481,084

473,186

86,849
9,554

96,403

82,219
12,605

94,824

577,487

568,010

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

72 MaxiTRANS Industries | Annual Report 2018

26. FINANCIAL INSTRUMENTS

(a) Risk management framework/policies

The Group’s key activities include the design, manufacture, sale, service and repair of transport equipment and related
component and spare parts. These activities expose the Group to a variety of financial risks, including liquidity risk, credit risk
and market risk such as currency and interest rate risk.

The Group’s financial risk management program seeks to minimise the potential adverse effects of the unpredictability
of financial markets on the financial performance of the Group by utilising derivative financial instruments for purchase
of supplies and raw materials. The Group measures risk exposure through sensitivity analysis in the case of currency risk,
cash flow forecasting and ageing analysis for credit risk.

(b) Interest rate risk

The Group is exposed to interest rate risk as it borrows at both fixed and floating interest rates. The risk is managed by the
use of fixed interest rate contracts. Hedging activities are evaluated regularly to align with interest rate views and defined risk
appetite, ensuring optimal hedging strategies are applied, by either positioning the statement of financial performance or
protecting interest rate expense through different interest rate cycles.

As at reporting date the interest rate profile of the Group’s interest bearing financial instruments were:

Borrowings – fixed rate
Borrowings – floating rate

Consolidated

2018
$’000

15,161
35,500

50,661

2017
$’000

21,483
26,214

47,697

As at reporting date, if interest rates on borrowings had moved as illustrated in the table below, with all other variables held
constant, post tax profit for the year would have been affected as follows:

100bp increase
100bp decrease

(218)
218

(140)
140

The Group is exposed to foreign currency risk on purchases that are denominated in foreign currency, primarily United States
Dollars. Derivative financial instruments (forward exchange contracts) are used by the Group to economically hedge exposure
to exchange rate risk associated with foreign currency transactions.

Forward exchange contracts

The following table summarises the US Dollar forward exchange contracts outstanding as at the reporting date:

Average Exchange Rate

Foreign Currency

Contract Value

Fair Value

2018
$’000

2017
$’000

2018
$’000

2017
$’000

2018
$’000

2017
$’000

2018
$’000

2017
$’000

Buy USD Dollar

0.7498

0.7505

7,028

5,132

9,373

6,839

134

(149)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

MaxiTRANS Industries | Annual Report 2018

26. FINANCIAL INSTRUMENTS (continued)

As at reporting date, if the Australian Dollar had moved against the US Dollar currency as illustrated in the table below,
with all other variables held constant, post tax profit for the year would have been affected as follows:

USD 10.0 cents increase

(d) Credit risk

Consolidated

2018
$’000

2017
$’000

(699)

(652)

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss
to the Group. The Group is exposed to credit risk from its operating activities, primarily from trade and other receivables
and financing activities, including deposits with financial institutions. The carrying amount of these financial assets
at year-end represented the Group’s maximum exposure to credit risk. The Group has a policy of only dealing with
credit worthy counterparties and obtaining sufficient security where appropriate, as a means of mitigating the risk
of financial losses from defaults. The Group does not have any significant credit risk exposure to any single counter
party. The majority of accounts receivable are due from entities within the transport industry.

Guarantees

Performance guarantees of $723,768 (2017: $1,296,594) are held by Australia and New Zealand Banking Group Limited and
Westpac Banking Corporation on behalf of MaxiTRANS Australia Pty Ltd and MaxiPARTS Pty Ltd. MaxiTRANS Industries
Limited guarantees the loan facility MTC (China) has with HSBC Bank. Refer to (e) below for details of the MTC (China)
loan facility.

(e) Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group manages
liquidity risk by maintaining adequate cash reserves, committed banking facilities and reserve borrowing facilities and by
continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

The Group’s liquidity management policies include Board approval of all changes to debt facilities including the terms of
fixed rate debt. The liquidity management policies ensure that the Group has a well diversified portfolio of debt, in terms
of maturity and source, which significantly reduces reliance on any one source of debt in any one particular year. Liquidity
risk is managed by the Group based on net inflows and outflows from financial assets and financial liabilities.

The following table summarises the maturities of the Group’s financial liabilities based on the remaining earliest
contractual maturities, excluding net interest payable on borrowings.

30 June 2018 – Consolidated

Carrying
Amount
$’000

6 months
or Less
$’000

6–12
Months
$’000

1–2
Years
$’000

2–5
Years
$’000

Trade and other payables and accruals
Borrowings

(47,327)
(50,660)

(47,327)
(630)

–
(122)

–
(22,245)

–
(27,663)

Effect of derivative instruments
Forward exchange contracts
– inflow
– outflow

9,880
(9,746)

–
–

(97,853)

(47,823)

(122)

(22,245)

(27,663)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

74 MaxiTRANS Industries | Annual Report 2018

26. FINANCIAL INSTRUMENTS (continued)

30 June 2017 – Consolidated

Carrying
Amount
$’000

6 months
or Less
$’000

6–12
Months
$’000

1–2
Years
$’000

2–5
Years
$’000

Trade and other payables and accruals
Borrowings

(52,600)
(47,697)

(52,600)
(1,099)

–
(1,464)

–
(1,970)

–
(43,164)

Effect of derivative instruments
Forward exchange contracts
– inflow
– outflow

Finance facilities

6,774
(6,923)

–
–

(100,446)

(53,848)

(1,464)

(1,970)

(43,164)

At year end, the Group had the following financing facilities in place with its bankers:

Consolidated

Facility Amount

Utilised

Available

2018
$’000

2017
$’000

2018
$’000

2017
$’000

2018
$’000

2017
$’000

Loan facility
Overdraft facility
Multi-option facility
Less borrowings included in liabilities

64,655
1,000
9,000
(4,655)

64,801
1,000
9,000
–

52,568
–
1,395
(3,068)

46,214
–
4,273
–

12,087
1,000
7,605
(1,587)

18,587
1,000
4,727
–

70,000

74,801

50,895

50,487

19,105

24,314

On 29 June 2017, the Group refinanced its financing facilities. Commonwealth Bank of Australia and HSBC Bank are the
Group’s new banking partners.

The loan, overdraft and other facilities are fully secured by a registered mortgage over certain land and buildings of the
controlled entities with a fair value of $46,205,051 as at 30 June 2018.

Core Australian and New Zealand loan facilities of $70.0m mature as follows, subject to continuing compliance with the terms
of the facilities:
– $40.0m in June 2020
– $30.0m in June 2022

The net cash used in financing activities excluding dividends paid (totalling $6.031m) as disclosed in the Statement of Cash
Flows, consist of the movement in Interest bearing loans and borrowings as per note 9 ($2.963m) plus the borrowings held for
sale per note 27 ($3.068m).

Interest rates are a combination of fixed and variable.

The MTC (China) core loan facility is a 3 year facility of RMB 15.0m and is with HSBC Bank in China.

The terms and conditions of the bank facilities contain covenants in relation to gearing ratio, interest cover and EBITDA ratio.
These covenants have been satisfied during the 2018 and 2017 financial years.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

MaxiTRANS Industries | Annual Report 2018

26. FINANCIAL INSTRUMENTS (CONTINUED)

(f) Fair value

Determination of fair value

Net fair value has been determined in respect of financial assets and financial liabilities, with reference to the carrying
amount of such assets and liabilities in the consolidated balance sheet, determined in accordance with the accounting
policies disclosed in Note 1 to the financial statements.

The carrying amount approximates estimated net fair value for the Group’s financial assets and liabilities.

Classification of fair value

Fair Value Measurement requires that financial and non-financial assets and liabilities measured at fair value (being forward
exchange contracts, interest rate swaps and land and buildings) be disclosed according to their position in the fair value
hierarchy. There were no transfers between levels within the fair value hierarchy at 30 June 2018.

•• Level 1 is based on quoted prices in active markets for identical items;

•• Level 2 is based on quoted prices or other observable market data not included in level 1;

•• Level 3 valuations are based on inputs other than observable market data.

Forward exchange contracts and interest rate swaps are classified as Level 2 and their fair value is determined by reference
to observable inputs from active markets or prices from markets not considered active. They are priced with reference to an
active yield or rate, but with an adjustment applied to reflect the timing of maturity dates.

The fair value of forward exchange contracts and interest rate swaps at balance date is as follows:

Derivative assets
Derivative liabilities

Consolidated

2018
$’000

41
–

2017
$’000

–
193

Land and buildings are classified as Level 3 and their fair value reflects the use of directly unobservable market inputs in their
valuation, including assumptions about rents, yields and discount rates obtained from analysed transactions.

Valuations and assessments against current market prices have been performed at 30 June 2018 by external, independent
property valuers, having appropriate recognised professional qualifications and recent experience in the location and category
of the property being valued. The valuation technique is based on the highest and best use to market participants.

The following table present changes in the fair value of land and buildings during 2017/18, including changes to the
unobservable inputs.

Opening balance as at 1 July 2017

Fair value revaluation

Additions

Depreciation recognised in the statement of profit and loss

Exchange rate variance

Closing balance as at 30 June 2018

Consolidated

Land and Buildings
$’000

43,325

3,901

(539)

(492)

46,205

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

76 MaxiTRANS Industries | Annual Report 2018

27. DISPOSAL GROUP HELD FOR SALE

In June 2018, management committed to a plan to sell MaxiTRANS Industries Limited’s 80% share of Yangzhou Maxi-CUBE Tong
Composites Co Ltd (MTC) which forms part of the Parts & Components segment. Accordingly, MTC is presented as a disposal
group held for sale at 30 June 2018. Efforts to sell the disposal group have started and a sale is highly probable in FY19.

(a) Impairment losses relating to the disposal group

The estimated amount to be received from the sale is expected to be higher than the current carrying value of MTC’s net assets
and as such no write-downs of the disposal group has been recognised.

(b) Assets and liabilities of disposal group held for sale

At 30 June 2018, the disposal group was stated at fair value less costs to sell and comprised the following assets and liabilities.

Property, plant and equipment
Inventories
Trade and other receivables
Cash at bank
Deferred tax asset
Goodwill
Other assets

Assets held for sale

Trade and other payables
Bank Loans
Provisions
Other liabilities

Liabilities held for sale

There are no cumulative income or expenses included in OCI relating to the disposal group.

$’000

7,470
1,513
4,417
2,390
296
2,753
974

19,813

5,213
3,068
739
530

9,550

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

MaxiTRANS Industries | Annual Report 2018

28. DISCONTINUED OPERATION

In June 2018, management committed to a plan to sell MaxiTRANS Industries Limited’s 80% share of Yangzhou Maxi-CUBE
Tong Composites Co Ltd (MTC) which forms part of the Parts & Components segment.

MTC was not previously classified as held-for-sale or as a discontinued operation. The comparative consolidated statement
of profit or loss and OCI has been restated to show the discontinued operation separately from continuing operations.

(a) Results of Discontinued Operation

Sale of goods
Changes in inventories of finished goods and work in progress
Raw materials and consumables used
Employee and contract labour expenses
Depreciation and amortisation expenses
Finance costs
Other expenses

Profit/(loss) from discontinued operation before tax
Income tax expense

Profit/(loss) from discontinued operation
Less: Non Controlling Interest

Profit/(loss) attributable to equity holders

Basic earnings (loss) per share (cents per share)
Diluted earnings (loss) per share

2018
$’000

19,317
178
(15,862)
(852)
(725)
(146)
(2,329)

(419)
87

(332)
66

(266)

(0.14)
(0.14)

2017
$’000

19,782
178
(14,927)
(792)
(708)
(189)
(2,410)

934
(248)

686
(137)

549

0.30
0.30

The loss from the discontinued operation of $332 thousand (2017: profit of $686 thousand) is 80% attributable to the owners
of the Company.

(b) Cash flows from (used in) Discontinued Operation

Net cash used in operating activities
Net cash from investing activities
Net cash used in financing activities

Net cash flows for the year

2018
$’000

1,652
(318)
(389)

945

2017
$’000

–
–
–

–

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

78 MaxiTRANS Industries | Annual Report 2018

29. STANDARDS ISSUED BUT NOT YET EFFECTIVE

A number of new standards are effective for annual reporting periods beginning after 1 January 2018 and earlier application
is permitted; however, the Group has not early adopted the new or amended standards in preparing these consolidated
financial statements.

The following standards are expected to have an impact on the Group’s financial statements in the period of initial application.

(a) Estimated impact of the adoption of AASB 9 and AASB 15

The Group is required to adopt AASB 9 Financial Instruments and AASB 15 Revenue from Contracts with Customers from reporting
periods commencing after 1 January 2018. The Group has assessed the estimated impact that the initial application of AASB 9
and AASB 15 will have on its consolidated financial statements. The estimated impact of the adoption of these standards on
the Group’s equity as at 1 July 2018 is based on assessments undertaken to date and is summarised below.

Estimated

Estimated
adjustments adjustments
due
to adoption
of AASB 15

due
to adoption
of AASB 9

As reported at
30 June 2018

Estimated
adjusted
opening
balance
1 July 2018

Retained earnings

57,172

(33)

57,216

The total estimated adjustment (net of tax) to the opening
balance of the Group’s equity at 1 July 2018 is $44 thousand.
The principal components of the estimated adjustment are
as follows:

•• An increase of $77 thousand in retained earnings due to
the write back of impairment losses on financial assets.

•• An decrease of $33 thousand due to deferred recognition
of revenue from sales contracts with extended warranty.

(b) AASB 9 Financial Instruments

AASB 9 Financial Instruments sets out requirements for
recognising and measuring financial assets, financial
liabilities and some contracts to buy or sell non-financial
items. This standard replaces AASB 139 Financial
Instruments: Recognition and Measurement.

(i) Classification – Financial assets

AASB 9 contains a new classification and measurement
approach for financial assets that reflects the business
model in which assets are managed and their cash flow
characteristics.

AASB 9 contains three principal classification categories
for financial assets: measured at amortised cost, FVOCI
and FVTPL. The standard eliminates the existing AASB 139
categories of held to maturity, loans and receivables and
available for sale.

Based on its assessment, the Group does not believe that
the new classification requirements will have a material
impact on its accounting for trade receivables and loans
that are managed on a fair value basis.

(ii) Impairment – Financial assets

AASB 9 replaces the ‘incurred loss’ model in AASB 139
with a forward-looking ‘expected credit loss’ (ECL) model.
This will require considerable judgement about how
changes in economic factors affect ECLs, which will
be determined on a probability-weighted basis.

The new impairment model will apply to financial assets
measured at amortised cost or FVOCI, except for
investments in equity instruments, and to contract assets.

Under AASB 9, loss allowances will be measured on either
of the following bases:

••

12-month ECLs: these are ECLs that result from
possible default events within the 12 months after
the reporting date; and

••

lifetime ECLs: these are ECLs that result from
all possible default events over the expected life
of a financial instrument.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

MaxiTRANS Industries | Annual Report 2018

29. STANDARDS ISSUED BUT NOT YET EFFECTIVE (continued)

Lifetime ECL measurement applies if the credit risk
of a financial asset at the reporting date has increased
significantly since initial recognition and 12-month ECL
measurement applies if it has not. An entity may determine
that a financial asset’s credit risk has not increased
significantly if the asset has low credit risk at the reporting
date. However, lifetime ECL measurement always applies
for trade receivables and contract assets without a significant
financing component; the Group has chosen to apply this
policy also for trade receivables and contract assets with
a significant financing component.

Based on AASB 9’s impairment methodology, the Group has
estimated that application of AASB 9 impairment requirements
at 1 July 2018 does not result in a significant impact.

(iii) Classification – Financial liabilities

AASB 9 largely retains the existing requirements in AASB
139 for the classification of financial liabilities.

However, under AASB 139 all fair value changes of liabilities
designated as at FVTPL are recognised in profit or loss,
whereas under AASB 9 these fair value changes are
generally presented as follows:

••

the amount of change in the fair value that is attributable
to changes in the credit risk of the liability is presented
in OCI; and

••

the remaining amount of change in the fair value
is presented in profit or loss.

The Group has not designated any financial liabilities at
FVTPL and it has no current intention to do so. The Group’s
assessment did not indicate any material impact regarding
the classification of financial liabilities at 1 July 2018.

(iv) Hedge accounting

When initially applying AASB 9, the Group may choose
as its accounting policy to continue to apply the hedge
accounting requirements of AASB 139 instead of the
requirements in AASB 9. The Group has chosen to apply
the new requirements of AASB 9.

AASB 9 requires the Group to ensure that hedge accounting
relationships are aligned with the Group’s risk management
objectives and strategy and to apply a more qualitative and
forward-looking approach to assessing hedge effectiveness.
AASB 9 also introduces new requirements on rebalancing
hedge relationships and prohibiting voluntary discontinuation
of hedge accounting. Under the new model, it is possible
that more risk management strategies, particularly those
involving hedging a risk component (other than foreign

currency risk) of a non-financial item, will be likely to
qualify for hedge accounting. The Group does not currently
undertake hedges of such risk components.

Under AASB 139, for all cash flow hedges, the amounts
accumulated in the cash flow hedge reserve are reclassified
to profit or loss as a reclassification adjustment in the same
period as the hedged expected cash flows affect profit or
loss. However, under AASB 9, for cash flow hedges of
foreign currency risk associated with forecast non-financial
asset purchases, the amounts accumulated in the cash flow
hedge reserve and the cost of hedging reserve will instead
be included directly in the initial cost of the non-financial
asset when it is recognised. The Group does not currently
have cash flow hedges of foreign currency risk.

The types of hedge accounting relationships that the
Group currently designates meet the requirements of
AASB 9 and are aligned with the entity’s risk management
strategy and objective.

(v) Transition

Changes in accounting policies resulting from the adoption
of AASB 9 will generally be applied retrospectively, except
as described below.

•• The Group will take advantage of the exemption allowing

it not to restate comparative information for prior
periods with respect to classification and measurement
(including impairment) changes. Differences in the
carrying amounts of financial assets and financial
liabilities resulting from the adoption of AASB 9 will
generally be recognised in retained earnings and
reserves as at 1 July 2018.

•• The new hedge accounting requirements should

generally be applied prospectively.

AASB 15 establishes a comprehensive framework for
determining whether, how much and when revenue
is recognised. It replaces existing revenue recognition
guidance, including AASB 118 Revenue, AASB 111
Construction Contracts and AASB Interpretation
13 Customer Loyalty Programmes.

(i) Sales of goods

For the sale of goods and services, revenue is currently
recognised when the goods are delivered to the customers’
premises or collected at the Company premises, which is
taken to be the point in time at which the customer accepts
the goods and the related risks and rewards of ownership

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018

80 MaxiTRANS Industries | Annual Report 2018

transfer. Revenue is recognised at this point provided
that the revenue and costs can be measured reliably,
the recovery of the consideration is probable and there
is no continuing management involvement with the goods.

Therefore, the cumulative effect of adopting AASB 16 will
be recognised as an adjustment to the opening balance
of retained earnings at 1 July 2019, with no restatement
of comparative information.

When applying the modified retrospective approach to leases
previously classified as operating leases under AASB 117,
the lessee can elect, on a lease-by-lease basis, whether
to apply a number of practical expedients on transition.
The Group is assessing the potential impact of using these
practical expedients.

The Group is not required to make any adjustments for
leases in which it is a lessor except where it is an intermediate
lessor in a sub-lease.

30. EVENTS SUBSEQUENT TO BALANCE DATE

There have been no events subsequent to the reporting date
which would have a material effect on the Group’s financial
statements for the year ended 30 June 2018.

This will result in revenue, and some associated costs, for
these contracts being recognised earlier than at present
– i.e. before the goods are delivered to the customers’
premises or collected at the Company’s premises.

(ii) Transition

The Group plans to adopt AASB 15 using the cumulative effect
method, with the effect of initially applying this standard
recognised at the date of initial application (i.e. 1 July 2018).
As a result, the Group will not apply the requirements
of AASB 15 to the comparative period presented.

(d) AASB 16 Leases

AASB 16 removes the lease classification test for lessees
and requires all the leases (including operating leases) to
be brought onto the balance sheet. The definition of a lease
is also amended and is now the new on/off balance sheet
test for lessees.

AASB 16 is effective for annual reporting periods beginning
on or after 1 January 2019, with early adoption permitted
where AASB 15 Revenue from Contracts with Customers
is adopted at the same time. The Group is assessing the
potential impact on its financial statements resulting from
the application of AASB 16.

(i) Transition

As a lessee, the Group can either apply the standard using a:

• retrospective approach; or

•

modified retrospective approach with optional
practical expedients.

The lessee applies the election consistently to all of its leases.

The Group plans to apply AASB 16 initially on 1 July 2019,
using the modified retrospective approach.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)FOR THE YEAR ENDED 30 JUNE 2018MaxiTRANS Industries | Annual Report 2018

INDEPENDENT AUDITOR’S REPORT

FOR THE YEAR ENDED 30 JUNE 2018

Independent Auditor’s Report

To the shareholders of MaxiTRANS Industries Limited

Report on the audit of the Financial Report

Opinion

We have audited the Financial Report of
MaxiTRANS Industries Limited (the
Company).

In our opinion, the accompanying
Financial Report of the Company is in
accordance with the Corporations Act
2001, including:

• giving a true and fair view of the
Group's financial position as at 30 June
2018 and of its financial performance for
the year ended on that date; and

The Financial Report comprises:

• Consolidated statement of financial position as at 30 June
2018

• Consolidated statement of profit or loss, Consolidated
statement of comprehensive income, Consolidated
statement of changes in equity, and Consolidated
statement of cash flows for the year then ended

• Notes including a summary of significant accounting
policies

• Directors' Declaration.

• complying with Australian Accounting
Standards and the Corporations
Regulations 2001.

The Group consists of the Company and the entities it
controlled at the year end or from time to time during the
financial year.

Basis for opinion

We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Our responsibilities under those standards are further described in the Auditor’s responsibilities for the
audit of the Financial Report section of our report.

We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the Financial Report in Australia. We
have fulfilled our other ethical responsibilities in accordance with the Code.

KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.

Liability limited by a scheme approved under
Professional Standards Legislation.

82 MaxiTRANS Industries | Annual Report 2018

INDEPENDENT AUDITOR’S REPORT (CONT.)

FOR THE YEAR ENDED 30 JUNE 2018

Key Audit Matters

The Key Audit Matters we identified
are:

• Recoverability of goodwill and other
intangible assets

• Warranty provision

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.

Recoverability of goodwill and other intangible assets (AUD $34.3m)

Refer to Note 7 Intangible assets

The key audit matter

How the matter was addressed in our audit

A key audit matter for us was the
Group’s annual testing of goodwill and
other intangible assets for impairment,
given the size of the balance and market
capitalisation being below the carrying
amount of the net assets at year-end,
increasing the possibility of goodwill and
intangible assets being impaired. This
further increased our audit effort in this
area. We focused on the significant
forward-looking assumptions the Group
applied in their value in use models,
including:

•

forecast cash flows, growth rates
and terminal growth rates – the
Group has forecasted significant
growth in the business, therefore
increasing the risk of inaccurate
forecasts.

• discount rate - these are complicated
in nature and vary according to the
conditions and environment the
specific Cash Generating Unit (CGU)
is subject to from time to time, and
the model’s approach to
incorporating risks into the cash
flows or discount rates.

We involved valuation specialists to
supplement our senior audit team

Our procedures included:

• We considered the appropriateness of the value in use
method applied by the Group to perform the annual test
of goodwill and other intangible assets for impairment
against the requirements of the accounting standards.

• We assessed the integrity of the value in use models

used, including the accuracy of the underlying
calculation formulas.

• We compared the forecast cash flows contained in the
value in use models to Board approved forecasts.

• We assessed the accuracy of previous Group forecasts
to inform our evaluation of forecasts incorporated in the
models.

• We compared historical actual growth in sales,

expenses, gross profit, and EBITDA to financial year
2019 budgeted cash flows to assess reasonableness of
those cash flows.

• Where applicable, we inspected post year-end

management reporting accounts to compare actual
performance to date against budget for financial year
2019.

• We considered the sensitivity of the models by varying
key assumptions, such as financial year 2019 forecast
cash flows, growth rates, terminal growth rates and
discount rates, within a reasonably possible range, to
identify those CGUs at higher risk of impairment and to
focus our further procedures.

MaxiTRANS Industries | Annual Report 2018

INDEPENDENT AUDITOR’S REPORT (CONT.)

FOR THE YEAR ENDED 30 JUNE 2018

members in assessing this key audit
matter.

• We compared forecast growth rates to published

studies of industry trends and expectations. We used
our knowledge of the Group, their past performance,
business and customers, and our industry experience.

• Working with our valuation specialists we

independently developed a discount rate range
considered comparable using publicly available market
data for comparable entities, adjusted by risk factors
specific to the Group and the industry it operates in.

• We compared the trading multiples from comparable
companies to the multiples from the Group’s value-in-
use models.

• We assessed the disclosures in the financial report

against the requirements of the accounting standards.

Warranty provision (AUD $4.0m)

Refer to Note 10 Provisions

The key audit matter

How the matter was addressed in our audit

The warranty provision was considered a
key audit matter due to the estimation
uncertainty inherent in the Group’s key
assumptions applied, specifically relating
to:

• The product portfolio, where each
product has different design and
quality attributes;

• The different products having

different warrantable periods and
different expected rectification costs;

• The inherent unpredictability of future
failures resulting in claims under
warranty; and

• The increased warranty claims in the
current year that were not anticipated
by one of the subsidiaries of the
Group, increasing the risk of
inaccurate forecasting of claims.

The key assumptions used in the
determination of the warranty provision
are:

Our procedures included:

• Through inquiries with senior management, we

obtained an understanding of the product portfolio,
each product’s warrantable period and history of failure
rates, and the key assumptions used in the
determination of the warranty provision;

• Assessing the accuracy of the Group’s previous

provision for warranty claims by comparing the prior
year provision against actual claims settled during the
current period to inform our evaluation of the current
period estimate;

• Checking the mathematical accuracy of the general

warranty provision model;

• Testing the warranty period used in the determination

of the provision by inspecting the warranty terms as set
out on the company website;

• To test the accuracy of the historical cost to repair

products, which is data used in the Group’s provision
determination, we selected a sample of warranty
claims from the Group’s claim reports and compared
the product type, repair cost, and build year to source
documentation;

• To test the accuracy of the number of units repaired,
which is also data used in the Group’s provision

84 MaxiTRANS Industries | Annual Report 2018

INDEPENDENT AUDITOR’S REPORT (CONT.)

FOR THE YEAR ENDED 30 JUNE 2018

• The historical claim rate being the
indicator of future claim rate;

• Each product’s historical repair cost
being the indicator of future repair
cost.

determination, we compared the number of units
repaired to the number of units repaired per the
Group’s claim reports;

• Performing a comparison of the Group’s actual claim

rate for the years ended 30 June 2017 and 30 June
2018 to the forecasted claim rate for those respective
years to assess the accuracy of the Group’s forecasting
of the future claim rate and the reasonableness of using
history as the indicator of future claim rates;

• Performing a comparison of the Group’s actual

warranty costs to repair trailers for the years ended 30
June 2017 and 30 June 2018 to the forecasted repair
cost for those respective years to assess the accuracy
of the Group’s forecasting of the estimated cost to
repair future units and the reasonableness of using
history as the indicator of future repair cost;

• Assessing the warranty provision methodology against

the requirements of the accounting standards;

•

In relation to increased warranty claims in the current
year for one of the subsidiaries of the Group, inquiring
with management to understand the specific warranty
issues stemming from trailers built over a specific
period that were sold to certain customers.

Inspecting external transportation authority reports
identifying the number of units registered by those
customers referred to above, and assessing the
completeness of the Group’s provision by comparing
the number of units provided for to the number of units
as per the external report.

• To test the reasonableness of the specific provision for
the affected subsidiary, we selected a sample of
warranty claims in the current year, compared the
repair cost to source documentation, and compared to
the Group’s forecasted cost included in the provision.

MaxiTRANS Industries | Annual Report 2018

INDEPENDENT AUDITOR’S REPORT (CONT.)

FOR THE YEAR ENDED 30 JUNE 2018

Other Information

Other Information is financial and non-financial information in MaxiTRANS Industries Limited’s annual
reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are
responsible for the Other Information.

Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.

In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In
doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or
our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We are required to report if we conclude that there is a material misstatement of this Other Information,
and based on the work we have performed on the Other Information that we obtained prior to the date of
this Auditor’s Report we have nothing to report.

Responsibilities of the Directors for the Financial Report

The Directors are responsible for:

• preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting
Standards and the Corporations Act 2001

• implementing necessary internal control to enable the preparation of a Financial Report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error

• assessing the Group and Company's ability to continue as a going concern and whether the use of the
going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless they either intend to liquidate the
Group and Company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the Financial Report

Our objective is:

• to obtain reasonable assurance about whether the Financial Report as a whole is free from material
misstatement, whether due to fraud or error; and

• to issue an Auditor’s Report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of the Financial Report.

A further description of our responsibilities for the audit of the Financial Report is located at the Auditing
and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf.
This description forms part of our Auditor’s Report.

86 MaxiTRANS Industries | Annual Report 2018

INDEPENDENT AUDITOR’S REPORT (CONT.)

FOR THE YEAR ENDED 30 JUNE 2018

Report on the Remuneration Report

Opinion

Directors’ responsibilities

In our opinion, the Remuneration
Report of MaxiTRANS Industries
Limited for the year ended 30 June
2018, complies with Section 300A of
the Corporations Act 2001.

The Directors of the Company are responsible for the
preparation and presentation of the Remuneration Report in
accordance with Section 300A of the Corporations Act 2001.

Our responsibilities

We have audited the Remuneration Report included in pages
26 to 32 of the Directors’ report for the year ended 30 June
2018.

Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.

KPMG

Suzanne Bell

Partner

Melbourne

24 August 2018

MaxiTRANS Industries | Annual Report 2018

AUSTRALIAN STOCK EXCHANGE
ADDITIONAL INFORMATION

FOR THE YEAR ENDED 30 JUNE 2018

Additional information required by the Australian Stock
Exchange Limited Listing Rules and not disclosed elsewhere
in this report.

Distribution of shareholders
As at 31 July 2018

Category – No of Shares

No of Shareholders

1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over

431
926
656
1,403
220

3,636

Shareholders with less than a marketable parcel
As at 31 July 2018, there were 308 shareholders holding
less than a marketable parcel of 885 ordinary shares
($0.565 on 31 July 2018) in the Company totalling
109,241 ordinary shares.

On market buy-back
There is no current on-market buy-back.

SHAREHOLDINGS

Substantial shareholders

The names of the substantial shareholders as at
31 July 2018 are:

Ordinary Shares

Transcap Pty Ltd and related parties

HGT Investments Pty Ltd

Pinnacle Investment Management Group
Limited and its susidiaries

Greg & Harrison

Voting rights

24,943,030

20,250,000

9,551,557

9,356,501

As at 31 July 2018, there were 3,636 holders of ordinary
shares of the Company.

Subject to the Constitution of the Company, holders
of ordinary shares are entitled to vote as follows:

(a) every shareholder may vote;

(b) on a show of hands every shareholder

has one vote;

(i) one vote for each fully paid share; and

(ii) for each partly paid share held by the

shareholder, a fraction of a vote equivalent
to the proportion which the amount paid
(not credited) is of the total amounts paid
and payable (excluding amounts credited)
on the share.

As at 31 July 2018, there were no unquoted options over
unissued ordinary shares.

88 MaxiTRANS Industries | Annual Report 2018

AUSTRALIAN STOCK EXCHANGE
ADDITIONAL INFORMATION (CONT.)

FOR THE YEAR ENDED 30 JUNE 2018

TWENTY LARGEST SHAREHOLDERS – ORDINARY SHARES AS AT 31 JULY 2018

Name

1. HGT INVESTMENTS PTY LTD

2. TRANSCAP PTY LTD

3. CITICORP NOMINEES PTY LIMITED

4. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED

5. J P MORGAN NOMINEES AUSTRALIA LIMITED

6. TOROA PTY LTD

7. TRANSCAP PTT LTD

8. HORRIE PTY LTD

9. DE BRUIN SECURITIES PTY LTD

10. JOHN E GILL TRADING PTY LIMITED

11. MR ERIC DEAN ROSS

12. JOHN E GILL OPERATIONS PTY LTD

13. JAMES R CURTIS

14. HILLMORTON CUSTODIANS PTY LTD

15. BNP PARIBAS NOMINEES PTY LTD

16. MAHATA PTY LTD

17. TANERKA PTY LTD

18. BNP PARIBAS NOMS PTY LTD

19. DEBUSCEY PTY LTD

20. BELGRAVIA STRATEGIC EQUITIES PTY LTD

Total ordinary fully paid shares – top 20 holders

Total remaining holders balance

Units

% of Units

20,250,000

14,940,739

9,579,308

9,364,187

6,817,484

4,286,241

2,994,810

2,165,000

2,129,773

1,571,933

1,406,540

1,391,657

1,328,439

1,311,000

1,273,930

1,222,392

1,102,620

921,453

897,056

855,000

10.94

8.07

5.18

5.06

3.68

2.32

1.62

1.17

1.15

0.85

0.76

0.75

0.72

0.71

0.69

0.66

0.60

0.50

0.48

0.46

82,701,875

102,373,778

44.69

55.31

MaxiTRANS Industries | Annual Report 2018

CORPORATE DIRECTORY

Company Secretary
Alison Groves

Registered Office
346 Boundary Road
Derrimut VIC 3030

Principal Place
of Business
346 Boundary Road
Derrimut VIC 3030

Contact numbers
Tel +61 3 8368 1100
Fax +61 3 8368 1178

Share Registry
Computershare Investor Services
Yarra Falls, 452 Johnston Street
Abbotsford VIC 3067

Tel 1300 850 505 (within Australia)
Tel +61 3 9415 4000 (outside Australia)

Auditor
KPMG
Tower Two
Collins Square
727 Collins St
Melbourne VIC 3000

Stock Exchange
The Company is listed on the
Australian Securities Exchange.

Other Information
MaxiTRANS Industries Limited
ACN 006 797 173

maxitrans.com

VALUES

According to what we each have learned from life experiences, we develop personal values that
act as guiding principles to help us live and work together.

At MaxiTRANS this is no different, which is why we have created our own set of values that guide us in everything
that we do. These values help our MaxiTRANS team align thinking & behaviour to create a culture that performs.
We call this the MaxiTRANS Way.

Those values are:

SEND ALL OUR
PEOPLE HOME
SAFELY

A BALANCED FOCUS
ON CUSTOMERS
AND RESULTS

ENABLE AND
EMPOWER PEOPLE
TO ACHIEVE
RESULTS

ENCOURAGE
COLLABORATION
AND DEEP SEATED
ACCOUNTABILITY

BE HONEST,
FORTHRIGHT
AND ETHICAL
IN OUR DEALINGS

BECOME BETTER
EVERY DAY IN ALL
THAT WE DO

maxitrans.com

OUR