Annual Report
2018
For personal use only Contents
Chairman’s Letter
Managing Director’s report
Directors’ report
Auditor’s independence declaration
Financial statements
Notes to the financial statements
Directors’ declaration
Independent Auditor’s report
Shareholder information
Corporate Directory
Page
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For personal use only
For personal use only During the 2018 financial year, the Company generated annual
revenue on a pro forma basis of $153.4 million ($173.4 million
including Statewide) from its business base covering tyre and
wheel importing and original equipment supplying, with a
sectoral focus on 4WD, SUV and cars. In the 2018 financial year,
the Company converted this activity to a pro forma EBITDA of
$16.9 million, which exceeded the pro forma forecast set out in
its prospectus.
The Company’s balance sheet is strong with net cash at
30 June 2018 of $5.2 million and a debt to equity ratio of 22%.
Directors declared a final dividend of 2.3 cents per share (fully
franked) which was paid to shareholders on 8 October 2018,
bringing the full year dividend to 3.3 cents (fully franked). The
full year dividend represents a payout ratio of 58% of net profit
after tax but before amortisation (NPATA), which is consistent
with the Company’s policy of paying out 40% - 60% of NPATA.
The Company now employs more than 200 people in three
countries (Australia, New Zealand and South Africa), operates
11 distribution centres and utilises another seven third-party
distribution facilities. The business now sells more than
1,000,000 tyres and wheels annually to over 2,000 customers.
its operations
Your Company will continue
organically in its chosen market segments and will continue to
evaluate business acquisition opportunities.
to expand
The Company now employs more
than 200 people in three countries
(Australia, New Zealand and
South Africa).
Chairman’s Letter
Dear Shareholder
The 2018 financial year was a
transformational year
for your
Company as it undertook a $59
million initial public offering (IPO),
listed on the Australian Securities
Exchange and completed multiple
business acquisitions.
The Company achieved a pro forma
the
profit result
forecast published in the prospectus, issued as part of its IPO.
By any measure, it has been a busy and successful year for the
Company.
that exceeded
The acquisition transactions were the culmination of a plan
made four years ago to increase the scale and diversity of
the Company’s activities, while continuing to grow the original
Exclusive Tyre Distributors business, to reduce risk, create an
opportunity for founding shareholders to realise some of the
value they had built and facilitate other expansionary outcomes.
During the 2018 financial year, the Company acquired three
new businesses and the remaining shares in two others as
follows:
• Cotton Tyre Service;
• 50% of TyreLife Solutions (South Africa);
•
the remaining shares in MPC Mags & Wheels Pty Ltd and
Dynamic Wheel Co Pty Ltd; and
•
Statewide Tyre Distribution Pty Ltd (Statewide).
The Company has successfully executed organic growth
strategies focused on the importation and wholesale distribution
of wheels and tyres. These core activities are substantial and
service a wide array of consumers and businesses using an
extensive range of vehicles. The various operating entities
owned by the Company concentrate on being leaders in their
respective market segments.
Our prime objective is to assure employees, customers,
suppliers and shareholders that the Company is a stable,
secure and durable entity, determined to serve their interests
and dedicated to rewarding the differing investments each
of them makes. I am pleased to report that these goals were
achieved in the 2018 year.
iv
For personal use only During the year, I was appointed Chairman of the Board and
Mr Robert Kent joined as a non-executive director. The results
achieved by the Company in a year filled with executing
multiple transactional and organic growth strategies are
outstanding and a testament to the dedicated hard work and
commitment of all of our Directors, management and staff. I
thank them all for their contribution.
I would also like to thank our customers, suppliers and
shareholders for the support they have delivered over the past
year.
Yours faithfully
Murray Boyte
Chairman
For personal use only
Managing Director’s Report
Introduction
The Company welcomed over
2,000 new shareholders as part of
an initial public offering (IPO) and
listing on the Australian Securities
Exchange which were completed
on 15 December 2017. The IPO
to a
was completed according
prospectus dated 24 November
2017. The Company is a holding
Company for a number of operating subsidiaries (the “Group”).
At the same time as the ASX listing, the Group expanded via
the acquisition of:
•
•
•
•
the assets of Cotton Tyre Service;
50% of TyreLife Solutions, a South African tyre importer/
wholesaler;
45.6% of Dynamic Wheel Co that the Company did not
already own; and
50% of MPC Mags & Wheels that the Company did not
already own.
The Company acquired Statewide Tyre Distribution in May
2018 and the FY18 results include a brief period of trading
by that business.
Operations
The Company carries on the business of importing and
wholesaling tyres and wheels in Australia, New Zealand
and South Africa. We employ over 200 people and sell to
over 2,000 customers. Figure A below describes our
distribution footprint.
During the year, we combined the warehouse operations of
Dynamic Wheel Company and Cotton Tyre Service in Adelaide.
The Group is engaged in the following businesses:
•
•
•
•
premium 4WD, SUV and passenger tyre importing and
wholesaling (Exclusive Tyre Distributors in Australia and
New Zealand as well as TyreLife Solutions in South Africa);
wheel importing and wholesaling (Dynamic Wheel Co);
supplying tyres and wheels as original equipment to
caravan manufacturers (MPC); and
broad based
wholesaling (Statewide).
and budget
tyre
importing
and
The prospectus included 3 years of pro forma accounts for the
Group to provide a normalised basis of comparing financial
performance over that period. This Annual Report includes
references to those pro forma accounts.
Extensive Distribution Platform
Figure B (right) illustrates these entities, and some of the
brands they sell.
Senior Management team with
over 200 years combined tyre
and wheel industry experience
Over 200 employees in 3
countries
12 Distribution Centres operated
by NTAW
parties
7 Warehouse operated by 3rd
Figure A
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11
vii
For personal use only A diversified tyre and wheel wholesaler
Figure B
The Company focuses on addressing the needs of the
following segments within the broad tyre and wheel industry:
•
geographic expansion of wheel sales (NSW and New
Zealand); and
•
•
•
•
premium 4WD, SUV and passenger tyres;
steel and alloy wheels for 4WD vehicles;
original equipment wheels and tyres for caravans; and
lower priced tyres.
The Company is dedicated to being a value adding, trusted
supplier to its customers.
In FY18, the Company’s organic growth was underpinned by:
•
•
•
•
•
increased sales of new SUV and passenger products
introduced by ETD and ETD NZ in September 2016;
retail customers increasingly adopting a loyalty program
(the 360° Partner Program) introduced by ETD and ETD NZ
in 2016;
a program to differentiate key products by their technical
features and benefits (the TCC Program);
growing demand for steel wheels;
increased caravan manufacture;
•
new customers and a growing market share in South Africa.
Acquisition Strategy
The tyre and wheel markets can be segmented in various
ways – by vehicle type, vehicle use, geography and price/
quality position. The Company does not yet operate in certain
segments such as truck and bus tyres, agricultural tyres,
industrial tyres (e.g. fork trucks) and lower price tyres outside
South Australia. It is also underweight in other segments such
as passenger car tyres.
The Company aspires to acquire other tyre and wheel
wholesale businesses that operate in these segments to
expand its supplier and customer bases, build economies of
scale, capture revenue and cost synergies and diversify its
streams of revenue and earnings.
Like the acquisitions completed to date, there are other
wholesale businesses that meet these acquisition criteria.
vii
For personal use only Managing Director’s Report cont...
Results
In FY18 the Group delivered solid growth in units sold, revenue, gross profit, EBITDA and NPATA (all on a pro forma basis).
FY17
Actual
FY18
Prospectus
Forecast
FY18
Actual
Growth
%
720,566
783,550
776,123
7.7%
144,464
47,121
32.6%
15,599
10.8%
8,839
9,843
155,232
49,033
31.6%
16,381
10.6%
9,327
10,269
153,402
50,078
32.6%
16,940
11.0%
9,741
10,740
6.2%
6.3%
0.0%
8.6%
2.3%
10.2%
9.1%
Tyre Units
$’000
Revenue
Gross Profit
GP (%)
EBITDA
EBITDA Margin
NPAT
NPATA attributable to shareholders
Highlights included:
a 7.7% increase in tyre unit volume;
Over 1 million units were sold;
FY18 Pro Forma NPATA $10.7 million, ahead of FY18 full year prospectus forecast NPATA $10.3 million;
FY18 Pro Forma EBITDA $16.9 million (FY18 full year prospectus forecast $16.4 million);
FY18 Pro forma gross margin = 32.6% and EBITDA:Revenue = 11.0%
Net Cash at 30 June 2018 of $5.2 million;
Final dividend of 2.3c per share (fully franked) confirmed, taking the fully franked annual dividend to 3.3c per share;
Acquired businesses delivered on each investment case with no problematic integration issues;
Completion of the Statewide acquisition; and
FY18 Pro Forma NPAT of $9.7 million was also ahead of the prospectus forecast of $9.3 million.
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ix
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Outlook
The tyre market is expected to grow as the vehicle fleet
increases in Australia, New Zealand and South Africa, with
growth in target segments (especially SUV) growing faster
than others. Distances travelled and, consequently the rate
at which tyres are changed, may increase if the depreciating
domestic currencies in these markets (relative to the USD)
keeps travellers in the relevant country. Price competition has
been intense in each region for over three years and we don’t
expect any significant change to that market dynamic.
The devaluation of the domestic currencies against the US
dollar since January 2018 will increase import prices for the
vast majority of importers. Tyre prices in markets beyond the
Group’s territories have increased due to higher raw material
costs and we expect those increases will flow through to our
markets in due course. Typically, suppliers understand that
higher import prices have an impact on competitiveness,
regardless of how those increases are caused. As import price
changes of this kind eventually affect all industry participants,
competiors move more or less in unison and we don’t expect
import price changes to have any long term impact on our
performance.
The strategic direction of our operating entities will not change
substantially in FY19. We expect organic business growth
opportunities will be underpinned by
•
•
•
•
•
•
•
The launch of a new generation Cooper AT3 (an all-terrain
4WD tyre and our largest selling product) in Australia, New
Zealand and South Africa;
The launch of a new all-terrain tyre in Q3;
Continuing sales growth driven by the 360 loyalty program;
New wheel products (Dynamic and MPC);
Selling by some businesses into new geographic markets;
Cross selling between business units; and
Initiatives dealing with the changing nature of consumer
purchase pathways (e.g. accessing information online).
The Company has identified businesses that fit the acquisition
principles outlined earlier and we will be seeking to negotiate
transactions that meet our criteria.
FY18 Pro Forma NPATA of
$10.7 million was ahead of the
prospectus forecast of $10.3 million
ix
For personal use only Managing Director’s Report cont...
Acknowledgements
FY18 was obviously a watershed moment in the history of the
Company. To have completed a public share offer, ASX listing,
numerous acquisition transactions and grown all business
units in one year is an outstanding achievement.
These outcomes were made possible by the contributions of
our people, suppliers, customers and advisors, as well as the
support we received from new and departing shareholders.
Everyone involved will be rightly proud of what has been
achieved.
Peter Ludemann
Managing Director
These outcomes were made
possible by the contributions of our
people, suppliers, customers and
advisors, as well as the support we
received from new and departing
shareholders. Everyone involved
will be rightly proud of what has
been achieved.
For personal use only
Financial Report
2018
For personal use only Directors’ Report
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Directors' report
30 June 2018
The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as
the 'Group') consisting of National Tyre & Wheel Limited (referred to hereafter as the 'Company', 'NTAW' or 'parent entity')
and the entities it controlled at the end of, or during, the year ended 30 June 2018.
Directors
The following persons were directors of National Tyre & Wheel Limited during the whole of the financial year and up to the
date of this report, unless otherwise stated:
Murray Boyte (appointed 24 October 2017)
(John) Peter Ludemann
Terence (Terry) Smith
William (Bill) Cook
Robert Kent (appointed 27 September 2017)
Susanne Smith (resigned 26 October 2017)
Non-Executive Chairman
Chief Executive Officer and Managing Director
Executive Director
Non-Executive Director
Non-Executive Director
Former Executive Director
Principal activities
The principal activity of the Group during the financial year ended 30 June 2018 was the distribution and marketing of
motor vehicle tyres, wheels, tubes and related products in Australia, New Zealand and South Africa.
Dividends
Dividends paid during the financial year were as follows:
Final dividend for the year ended 30 June 2017 (declared and paid prior to the IPO)
Interim dividend for the year ended 30 June 2018 of 1.0 cents per ordinary share
Dividends to non-controlling interests
Consolidated
2018
$'000
2017
$'000
15,000
1,011
656
3,804
-
457
16,667
4,261
At the date of signing these financial statements, the Company has declared a fully franked final dividend of 2.3 cents per
share with a record date of 13 September 2018 and a payment date of 8 October 2018. The total dividend payable is
$2.35 million. 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.
Review of operations
NTAW (ASX:NTD) successfully listed on the Australian Stock Exchange on 15 December 2017 following an initial public
offer (“IPO”) of 24,922,767 new shares and the sale of 34,077,233 existing shares at a price of $1.00 per share, raising a
total of $59 million. NTAW published a Prospectus dated 24 November 2017 (“Prospectus”) in connection with that offer.
NTAW is the holding company for the following operating subsidiaries:
●
●
●
●
●
●
Exclusive Tyre Distributors Pty Ltd (“ETD”);
Exclusive Tyre Distributors (NZ) Limited (“ETDNZ”);
Dynamic Wheel Co Pty Ltd (“Dynamic”);
M.P.C. Mags & Wheels Pty Ltd (“MPC”);
Statewide Tyre Distribution Pty Ltd (“Statewide”); and
Top Draw Tyres Proprietary Limited (“Top Draw Tyres”)
The tyre and wheel industries are large with retail revenue in Australia estimated to exceed $5bn. NTAW segments the tyre
and wheel market by vehicle type and geography. The subsidiary entities seek to operate in segments with products and
business models that offer competitive advantages.
ETD and ETDNZ are the exclusive importers and wholesale distributors of Cooper, Mickey Thompson, Starfire and
Mastercraft branded 4WD, SUV and passenger tyres in Australia and New Zealand. They also import Federal branded
tyres in Australia (excluding Queensland) and New Zealand. Cooper and Mickey Thompson products are well known to
consumers for their reliability and performance and exclusive arrangements between ETD, ETDNZ and retail customers
underpin strong retail support for the promotion of products.
2
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Directors’ Report
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Directors' report
30 June 2018
Dynamic has a leading position in Australia for the importation and wholesale distribution of steel wheels, including the
proprietary Dynamic brand.
MPC specialises in supplying wheel and tyre packages for caravan and trailer manufacturers in Australia including the
proprietary MPC brand.
Statewide is a leading wholesaler of passenger, van and truck tyres based in South Australia. Statewide supplies less
expensive products than NTAW’s existing wholesale businesses and operates in the truck and bus tyre segment.
Top Draw Tyres is the exclusive importer and wholesale distributor for Cooper and Mickey Thompson branded 4WD, SUV
and passenger tyres in South Africa and neighbouring countries.
In addition to the results from the operation of these well established businesses, the Group is executing growth strategies
developed over the past two years which include:
●
ETD and ETDNZ introducing a wider range of Cooper branded products that are suitable for SUV and passenger
vehicles (these entities historically focussed on the 4WD segment) and, in the process, they are repositioning the
Cooper brand;
A loyalty program for ETD and ETDNZ customers launched in 2016;
Tapping into new consumer pathways arising from access consumers now have to information via the internet;
Dynamic is introducing new alloy wheel products and expanding into geographic markets including Western Australia,
New South Wales and New Zealand. It is also undertaking feasibility studies for sales into South Africa.
MPC is seeking new customers for tyre and wheel packages suitable for trailer manufacturers.
Statewide is focussing on improving business processes to enhance customer experiences.
Top Draw Tyres recently launched the Mickey Thompson range of products in South Africa and, having been in
business for less than 5 years, continues to grow by attracting new customers in its territory.
NTAW also plans to grow by acquiring other wholesale wheel and/or tyre businesses in Australia and New Zealand.
●
●
●
●
●
●
●
NTAW’s Board and management are pleased to report that the results for the financial year are in line with the pro forma
forecast set out in the Prospectus.
Result highlights
Statutory results
NTAW has reported total revenue of $147.5 million for the financial year, an increase of $27.0 million (22.4%) on the prior
year resulting from the increased sales across all business units and the acquisition of several entities during the
year. Details of the businesses acquired are contained on page 7.
NTAW’s statutory profit for the Group after providing for income tax and non-controlling interest amounted to $4.5 million
(30 June 2017: $5.5 million).
The profit for the previous financial year reflects a different capital structure and no public company costs. The current
financial year profit was impacted by the one-off costs associated with the IPO, pre-IPO acquisition expenses, recognition
of share based payment expenses relating to an existing option plan and other items as described in the results highlight
below. NTAW’s financial year result was also impacted by permanent tax differences including the non-deductibility of
share based payments expenses on the existing option plan exercised on IPO. Refer to Note 6 to the financial statements
for further details.
The combined effect of these differences and effects is $4.8 million (see Table 2, difference in FY2018 pro forma and
statutory actual, NPAT attributable to NTAW).
Pro forma results
In addition to the statutory results, pro forma financial information is presented below to enable the results for the financial
year to be compared to the financial information contained in NTAW’s Prospectus. The pro forma information is provided
on an unaudited basis and a reconciliation between the statutory and pro forma performance information is contained
within this report.
NTAW’s pro forma result for the financial year was a profit after providing for income tax and non-controlling interests and
excluding amortisation (NPATA) of $10.74 million compared with a Prospectus forecast pro forma NPATA for the year
ending 30 June 2018 of $10.27 million.
3
For personal use only
Directors’ Report
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Directors' report
30 June 2018
Pro forma adjustments have been made to reflect the inclusion of the acquired interests in Cotton and Top Draw Tyres with
effect from 1 July 2017, and to reflect the cost structure of the Group as a listed entity. Statewide’s results are included in
the statutory results from the date of acquisition, but have been excluded from the pro forma results in each of the following
tables as it was not included in the Prospectus forecast.
Key operating metrics of NTAW
Table 1 below shows some of the key operating metrics and ratios for NTAW for the financial year.
NTAW sold 776,123 tyre units in the financial year compared with 720,566 in the 2017 financial year and forecast sales of
783,550 tyre units. While the Group achieved year on year growth, 4WD tyre unit sales growth in Australia was below
expectations due to recent releases of new competing products. A new generation version of ETD’s biggest selling 4WD
product will be launched in September 2018. The Group has reported a pro forma full year gross profit margin of 32.6%
and a strong EBITDA margin of 11.0%, which are above the Prospectus forecast margins of 31.6% and 10.6%
respectively. The gross profit margin is derived from lower than expected USD imported prices and more favourable than
expected exchange rates between the AUD and USD. The Group’s operating costs as a percentage of sales was slightly
higher than forecast. This was the result of timing of costs associated with employment expenses and advertising and
promotion activities.
Table 1
Pro-forma Pro-forma Pro-forma Statutory
Forecast
Historical
FY2018
FY2017
Forecast
FY2018
Actual
FY2018
Statutory
Actual
FY2018
Number of tyres sold
Tyres sold growth %
Revenue growth %
Gross profit growth %
Gross profit margin
Operating costs as % of total revenue
EBITDA growth %
EBITDA margin
720,566
6.7%
5.2%
18.0%
32.6%
22.1%
45.3%
10.8%
783,550
8.7%
7.5%
4.1%
31.6%
21.2%
5.0%
10.6%
776,123
7.7%
6.2%
6.3%
32.6%
21.8%
8.6%
11.0%
-
-
-
31.8%
24.2%
-
7.7%
-
-
-
31.9%
24.8%
-
7.8%
Pro forma Historical Income Statements, Pro forma Forecast and Statutory Forecast Income Statements
Table 2 below sets out the unaudited pro forma Historical FY2017, Pro forma Forecast FY2018 and Pro forma Actual
FY2018.
NTAW has reported full year pro forma sales revenue of $153.4 million (FY2018 pro forma forecast $155.2 million) and
gross profit on sales of $50.1 million (FY2018 pro forma forecast $49.0 million). The Group has reported a full year pro
forma EBITDA of $16.9 million (FY2018 pro forma forecast $16.4 million).
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For personal use only
Directors’ Report
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Directors' report
30 June 2018
Table 2
$'000
Sales revenue 1
Cost of sales
Gross profit
Other revenue 2
Employee benefits expense
Advertising & promotions
Occupancy expense
Other expenses
EBITDA
Depreciation
Amortisation of intangibles
EBIT
Share of net profit of associate
Interest (net)
Profit before tax
Income tax expense
NPAT
Non-controlling interests
NPAT attributable to NTAW
Amortisation [addback]
Pro-forma
Statutory
Historical
FY2017
Forecast
FY2018
Actual
FY2018
Forecast
FY2018
Actual
FY2018
144,464
(97,343)
155,232
(106,199)
153,402
(103,324)
145,801
(99,445)
146,184
(99,595)
47,121
377
(16,150)
(5,517)
(3,543)
(6,689)
15,599
(797)
(1,514)
13,288
-
(228)
13,060
(4,221)
8,839
(335)
8,504
1,339
49,033
180
(16,589)
(5,519)
(3,802)
(6,922)
16,381
(880)
(1,514)
13,987
-
(228)
13,759
(4,432)
9,327
(397)
8,930
1,339
50,078
227
(16,826)
(5,761)
(3,749)
(7,029)
16,940
(707)
(1,639)
14,594
-
(357)
14,237
(4,496)
9,741
(427)
9,314
1,426
46,356
146
(17,556)
(5,005)
(3,754)
(8,908)
11,279
(840)
(1,361)
9,078
78
(203)
8,953
(3,851)
5,102
(610)
4,492
1,232
46,589
1,029
(18,156)
(5,061)
(3,662)
(9,351)
11,388
(696)
(1,431)
9,261
133
(339)
9,055
(3,700)
5,355
(878)
4,477
1,280
NPATA attributable to NTAW
9,843
10,269
10,740
5,724
5,757
EBITDA attributable to NTAW
15,039
15,728
16,307
Notes to Table 2
1
2
Revenue from sale of goods only, excluding interest income and other revenue.
Other revenue includes a marketing contribution that has been included in Cost of sales in the pro forma numbers.
Table 3 below sets out the movement from the unaudited pro forma revenue in Table 2 to the statutory revenue as
reported in note 4 to the financial statements.
Table 3
$'000
Pro forma revenue
Revenue relating to acquired businesses:
- MPC
- Cotton
- Top Draw Tyres
- Statewide (not included in Prospectus Forecast)
Inter-company eliminations
Statutory revenue
Notes to Table 3
FY2017
Historical
Revenue
FY2018
Forecast
Revenue
FY2018
Actual
Revenue
Notes
144,464
155,232
153,402
(8,785)
(9,729)
(13,779)
-
7,226
-
(3,262)
(8,446)
-
2,227
-
(3,193)
(8,804)
1,968
2,812
119,397
145,751
146,184
1
1
Inter-company eliminations – reflects transactions by NTAW with the Acquired Business from 1 July 2016 to the dates on which they became controlled which is required to be
eliminated (to the extent such trading was not already included in the FY2017 statutory financials for NTAW, or the FY2018 statutory forecast)
5
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Directors’ Report
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Directors' report
30 June 2018
Table 4 sets out the movement from the unaudited Pro Forma NPAT in Table 2 statutory NPAT as reported on page 23 of
this report.
Table 4
$'000
Pro forma NPAT
NPAT relating to acquired businesses:
- MPC
- Cotton
- Top Draw Tyres
Equity accounting Top Draw Tyres
Unrealised FX Translation
Offer costs
Public company costs
Share based payments
Other pro forma adjustments
Net interest
Taxation adjustment
Statutory NPAT
Notes to Table 4:
FY2017
Historical
FY2018
Forecast
Notes
NPAT
NPAT
FY2018
Actual
NPAT
1
2
3
4
5
6
7
8
9
8,839
9,327
9,741
(1,059)
(530)
(670)
-
-
-
241
(444)
(97)
(78)
(195)
-
(127)
(415)
(78)
-
(1,531)
28
(2,052)
-
18
(68)
-
(140)
(414)
133
(628)
(1,455)
28
(2,057)
(44)
18
172
6,007
5,102
5,355
1
NPAT relating to acquired businesses - reflects the trading of the Group from 1 July 2016 to the dates on which they became controlled (to the extent such trading was not already
included in the FY2017 statutory financials for NTAW, or the FY2018 statutory forecast).
2
3
4
Equity accounting Top Draw Tyres - reflects the equity accounted share of Top Draw Tyres profit for the period from 1 November 2017 until the date of control 13 December 2017.
Unrealised FX translations – reflects the non-cash accounting for foreign exchange translations at 31 December 2017 in accordance with AASB 121.
Offer costs – reflects the amounts forecast to be expensed in FY2018 in relation to the Prospectus offer (fees payable to advisors, Lead Manager and tax, accounting and legal fees)
and the listing on the ASX. Note that $1.475 million of the offer costs (relating to the primary issue) are tax effected and netted off against issued capital.
5
Public company costs – reflects the increase in corporate costs expected as a consequence of the Company becoming ASX listed. The costs principally relate to Board and
governance (additional non-executive Directors, Audit and Remuneration Committee), additional professional, legal and company secretarial costs as well as an increase in
administrative resources and investor relations. The FY2018 adjustment reflects the incremental costs that have not been incurred prior to completion but are included in the pro
forma forecast.
6
Share based payments – reflects a share based payments remuneration expense based upon the LTI scheme operating prior to the IPO after ignoring the costs associated with a
new LTI scheme, incorporating “at risk” share based remuneration to key management personnel and to other employees under a proposed Employee Equity Plan to be
implemented from and including the 2019 financial year. The statutory forecast for the 2018 financial year included a share based expense of approximately $2.652 million which is
the expense for the option package for senior management of NTAW prior to the IPO. This package does not reflect the expense of the share based equity scheme post IPO. 50% of
the post IPO scheme has been represented in the pro forma adjustment. All options under the pre IPO plan have been exercised and held as ordinary shares and were either to be
sold through the offer or held in escrow.
Other pro forma adjustments – includes one-off costs that are considered to be non-recurring as well as Group elimination entries.
Interest (net) – Interest (net) reflects the expense on the corporate debt facility and finance leases at completion, offset by interest income on cash.
Taxation adjustment – Net taxation effect of other residual items between forecast pro forma taxation expense (including recurring non-deductible items) and taxation statutory
7
8
9
expense.
Significant changes in the state of affairs
Change of Company name and listing
On 19 October 2017, in readiness for the Company's listing on the Australian Securities Exchange ('ASX'), the Company
changed its name from National Tyre & Wheel Pty Limited to National Tyre & Wheel Limited and changed from a
proprietary company to an unlisted public company.
On 15 December 2017, the Company was admitted to the official list of the Australian Securities Exchange under ASX
code NTD and became a public listed company.
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30 June 2018
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30 June 2018
Business acquisitions
Several business acquisitions were completed during the financial year:
●
Top Draw Tyres - On 30 September 2017, NTAW acquired 34% of the ordinary shares in Top Draw Tyres, the
importer and distributor of tyres in South Africa. NTAW subsequently acquired a further 16% in Top Draw Tyres on 13
December 2017. Top Draw Tyre’s balance sheet was consolidated into the Group accounts on 31 December 2017.
S.N Tyre Wholesaler Pty Ltd ('Cotton') - On 31 October 2017, the Group acquired 100% of the business assets from
Cotton, a distributor of tyres in South Australia and Northern Territory.
MPC - On 14 December 2017, NTAW acquired the remaining 50% of the shares in MPC, a previously recognised
controlled entity.
Dynamic - On 14 December 2017, NTAW acquired the remaining 45.6% of the shares in Dynamic, a previously
recognised controlled entity.
Statewide - On 31 May 2018, the Group acquired 100% of the ordinary shares in Statewide, the importer and
distributor of tyres in South Australia, New South Wales and the Northern Territory.
●
●
●
●
Further details of these acquisitions are included in Note 33 to the financial statements.
Capital management – debt & equity
The Group’s debt facility was increased by $7.5 million to $14.38 million with an expiry date of 21 May 2021 during the
financial year, to assist with the acquisition of Statewide. Repayments during the financial year have reduced the facility
limit to $14.0 million at the end of the year. Further facility details are contained in note 20 to the financial statements.
The Group raised $59.0 million (prior to transaction costs) during the financial year as part of the IPO process, which
included the issue of 24.9 million shares. In addition, 15.75 million shares were issued as part consideration for business
acquisitions to the vendors of those businesses, and 7.58 million shares were issued to employees, prior to the IPO, upon
the exercise of previously issued options.
Other than the matters discussed in the Directors’ report, there were no other significant changes in the state of affairs of
the Group during the financial year.
Financial position
Key financial information in relation to the Group’s financial position at year end is shown below:
Total Assets ($’000)
Net Assets ($’000)
Cash and cash equivalents ($’000)
Debt ($’000)
Shares on issue (’000)
Dividends per security (cents) – post IPO only, including final dividend declared
30 Jun 2018 30 Jun 2017
121,592
66,663
19,608
14,021
102,321
3.3
84,139
43,373
14,765
7,780
68,002
-
Significant balance sheet movements during the financial year were as follows:
●
Total assets increased by $37.5 million, primarily due to the acquisition of businesses during the financial year and the
resulting recognition of intangible assets and associated business assets, including inventory.
Total liabilities increased by $14.2 million due to the net increase in borrowings ($6.2 million) for the Statewide
business acquisition and an increase in trade payables following business acquisitions.
Issued capital increased by $45.8 million which included the issue of new shares as noted above.
●
●
Matters subsequent to the end of the financial year
Apart from the dividend declared as discussed above, no other matter or circumstance has arisen since 30 June 2018 that
has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's
state of affairs in future financial years.
Likely developments and expected results of operations
The Group will continue to pursue growth in revenue and profit in the next financial year as it seeks to further diversify its
business and build the scale of its operations in the importation and wholesale distribution of tyres and wheels in Australia,
New Zealand and South Africa. Focus areas will include organic growth in the markets within which it operates, including
capitalising on the opportunities for revenue and cost synergies associated from the businesses already acquired, and
considering further acquisition growth over time.
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30 June 2018
Material business risks
The Board is committed to monitoring and mitigating business risks faced by the Group, including the following key risks
that have the potential to materially impact its financial prospects:
●
●
●
●
●
●
Supplier risk - the Group is reliant on long-term formal distribution and licence agreements with key suppliers,
including Cooper Tire and Mickey Thompson for the supply of many products it wholesales. The Group owns
customer relationships and controls the marketing of brands, but it relies on rights under formal long-term agreements
granted by Cooper Tire and other suppliers to access those brands. The Group proactively engages in maximising its
key relationships to mitigate such risks.
Foreign exchange risk - a significant proportion of the Group’s costs and expenses, and an increasing proportion of
revenues, are transacted in foreign currencies. Adverse movements between the Australian dollar, New Zealand
dollar and South African Rand against the US dollar may increase the price at which the Group acquires its trading
stock and result in volatility in profitability to the extent that the Group may or may not be able to pass on price
changes to its customers (after allowing for the impact inventory cycles have on the time it takes for exchange rate
movements to impact on cost of goods sold). The Company also seeks to use foreign exchange contracts to mitigate
its foreign exchange exposures. The effect of foreign currency translation on operating results from offshore
operations remains inherent in the Group’s business.
Business integration risk – the Group has acquired interests in several businesses during the financial year.
Successfully integrating and extracting synergies from acquisitions and managing growth is critical to the Group’s
continued performance and earnings from the acquisitions. The Group’s Board and management is experienced in
acquiring and integrating businesses, conducts comprehensive due diligence and ensures an integration plan is
followed.
Retention of key personnel - the Group’s future success is significantly dependent on the expertise and experience of
its key personnel and management. The loss of services of key members of management, and any delay in their
replacement, or the failure to attract additional key managers to new roles could have a material adverse effect on
NTAW’s financial performance and ability to deliver on its growth strategies.
Customer risk – the Group is dependent on its ability to retain its existing customers and attract new customers.
Although customer concentration is low, sales revenue would be adversely affected if all members of a chain or group
decided not to purchase products from the Group. The Group proactively manages its customer relationships, and
has established a value adding customer loyalty program.
Risk of competition - the tyre and wheel wholesale market is highly competitive. Competition is based on factors
including price, service, quality, performance standards, range and the ability to provide customers with an
appropriate range of quality products in a timely manner. A failure by the Group to effectively compete with its
competitors may adversely affect the Group’s future financial performance and position.
Environmental regulation
The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law.
Information on directors
Name:
Title:
Experience and expertise:
Murray Boyte
Independent, Non-Executive Chairman
Murray has over 35 years' experience in merchant banking and finance, undertaking
company reconstructions, mergers and acquisitions in Australia, New Zealand, North
America and Hong Kong. In addition, he has held executive positions and
Directorships in the transport, horticultural, financial services, investment , property
industries, and health service.
Abano Healthcare Group Limited (NZ); Eureka Group Holdings Limited (ASX: EGH)
Member of Audit and Risk Committee; Member of Remuneration and Nominations
Committee
112,500 ordinary shares
Nil
Other current directorships:
Former directorships (last 3 years): Unity Pacific Group (ASX: UPG)
Special responsibilities:
Interests in shares:
Interests in options:
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30 June 2018
Directors' report
30 June 2018
Experience and expertise:
Name:
Title:
Qualifications:
Peter Ludemann
Chief Executive Officer ('CEO') and Managing Director
Degrees in Law and Commerce (Marketing) from University of New South Wales
('UNSW')
Peter joined the Group as a director in 2012 and become full time CEO of NTAW in
July 2013. He has worked as a commercial lawyer, a director of numerous private
companies, the Managing Director of a Life Science Investment firm and as a Private
Equity Investment Manager at AMP Capital. He has been the driving force behind the
evolution of NTAW from a closely held family trust carrying on a niche 4WD tyre
wholesale business to a more widely held entity operating in the car, SUV and 4WD
tyre segments. He has managed the acquisition and integration of Dynamic, MPC,
National Tyre Wholesalers, Statewide and Top Draw. Peter has been responsible for
the execution of a succession plan for NTAW founders that has included the
distribution of retained earnings, the creation of a large private company corporate
structure and generational change within the Group.
Nil
Other current directorships:
Former directorships (last 3 years): Nil
Nil
Special responsibilities:
2,589,928 ordinary shares
Interests in shares:
Nil
Interests in options:
Name:
Title:
Experience and expertise:
Terence (Terry) Smith
Executive Director
Terry has over 40 years' experience in tyre importing, wholesaling and retailing.
Terry’s career is one of successful entrepreneurship, as he and wife Susanne, were
responsible for taking Exclusive Tyre Distributors ('ETD') from a start-up business to
one of the largest independent national tyre wholesalers in Australia.
Nil
Other current directorships:
Former directorships (last 3 years): Nil
Special responsibilities:
Interests in shares:
Interests in options:
Member of Remuneration and Nominations Committee
27,032,371 ordinary shares
Nil
Name:
Title:
Experience and expertise:
William (Bill) Cook
Independent, Non-Executive Director
Bill is an Independent Non-Executive Director of NTAW. Bill commenced his career at
Ford Motor Company in finance. He worked for Consolidated Press Holdings with the
late Kerry Packer from 1983 to 1996 as Head of M&A and worldwide reporting. After
two years as General Manager of Qantas Flight Catering’s Sydney business he
undertook Private Equity investment consulting roles, and subsequently joined AMP
Capital as an investment manager in the Private Equity team. Since leaving AMP, Bill
has served as non-executive director for a number of companies, including NTAW
since 2013.
Nil
Other current directorships:
Former directorships (last 3 years): Nil
Special responsibilities:
Chair of Audit and Risk Committee; Member of Remuneration and Nominations
Committee
203,132 ordinary shares
Nil
Interests in shares:
Interests in options:
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30 June 2018
Directors' report
30 June 2018
Experience and expertise:
Name:
Title:
Qualifications:
Robert (Rob) Kent
Independent, Non-Executive Director
Bachelor of Business degree (Marketing) from the Queensland University of
Technology and is a member of the Australian Institute of Company Directors.
Rob was the Managing Director of Publicis Mojo (Queensland), part of a global
advertising firm, from 2000 to 2017. He was also a member of the Publicis National
Board of Management. Rob is an experienced marketing executive who has
managed many campaigns involving sales, promotion and brand building. He was
also Managing Director of Personalised Plates Queensland from 2013 to 2017. Under
his management, sales grew by 34% over 4 years with internet traffic providing 75%
of revenue. Rob was a Director of ACT for Kids (a charity) from 2001 to 2013 and
member of the Board of South Bank Business Association in Brisbane from 2002 to
2009.
Nil
Other current directorships:
Former directorships (last 3 years): Nil
Special responsibilities:
Chair of Remuneration and Nominations Committee; Member of Audit and Risk
Committee
100,000 ordinary shares
Nil
Interests in shares:
Interests in options:
'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all
other types of entities, unless otherwise stated.
'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and
excludes directorships of all other types of entities, unless otherwise stated.
Company secretaries
Jason Lamb
Jason is the Chief Financial Officer and joint Company Secretary. Jason has 17 years’ accountancy experience. He is a
Certified Practicing Accountant with a Bachelor of Commerce (Accounting) and a Bachelor of Economics from the
University of Queensland. Jason was responsible for setting up the financial accounting systems for NTAW. He has also
been responsible for all financial due diligence work relating to business acquisitions and the establishment of financial
reporting systems for those operating entities. Jason is a member of the senior management committees at ETD
(Australia) and ETD (New Zealand) which oversees significant strategic decisions for those operating entities. He
participates in all Board meetings for NTAW and each operating entity as well as overseeing the production of financial
reports for all entities.
Laura Fanning
Laura is the joint Company Secretary and was appointed on 8 February 2018. Laura is a Chartered Accountant and
Chartered Secretary with more than 20 years’ financial, governance and commercial experience. She has held Company
Secretary and senior finance position positions in several listed and unlisted companies.
Meetings of directors
The number of meetings of the Company's Board of Directors ('the Board') and of each Board committee held during the
year ended 30 June 2018, and the number of meetings attended by each director were:
Full Board
Remuneration and
Nomination Committee
Audit and Risk Committee
Attended
Held
Attended
Held
Attended
Held
Murray Boyte
Peter Ludemann
Terence Smith
William Cook
Robert Kent
Susanne Smith
11
15
15
14
12
1
11
15
15
15
12
1
41
41
4
4
4
-
41
41
4
4
4
-
3
31
21
3
3
-
3
31
21
3
3
-
Held: represents the number of meetings held during the time the director held office or was a member of the relevant
committee.
1
Attended by invitation only
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30 June 2018
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30 June 2018
Remuneration report (audited)
The Board is pleased to present the Company’s first remuneration report.
The remuneration report details the key management personnel remuneration arrangements for the Group, in accordance
with the requirements of the Corporations Act 2001 and its Regulations.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly, including all directors.
The remuneration report is set out under the following main headings:
(a) Principles used to determine the nature and amount of remuneration
(b) Details of remuneration
(c) Relationship between remuneration and Company performance
(d) Service agreements
(e) Share-based compensation
(f)
(g) Other transactions with key management personnel
Equity instruments held by key management personnel
(a) Principles used to determine the nature and amount of remuneration
The objective of the Group's executive remuneration framework is to ensure reward for performance is competitive and
appropriate for the results delivered. The framework aligns executive remuneration with the achievement of strategic
objectives and the creation of value for shareholders, and it is considered to conform with accepted market practice for
remuneration and reward. The Board of Directors ('the Board') ensures that executive remuneration satisfies the following
key criteria for good remuneration governance practices:
●
●
●
●
competitiveness and reasonableness;
acceptability to shareholders;
performance linkage / alignment of executive compensation; and
transparency.
The Remuneration and Nomination Committee is responsible for reviewing remuneration arrangements for its directors and
executives and making recommendations to the Board for consideration and approval. The performance of the Group
depends on the quality of its directors and executives. The remuneration philosophy is to attract, motivate and retain high
performance and high quality personnel.
The Remuneration and Nomination Committee has structured an executive remuneration framework that is market
competitive and complementary to the reward strategy of the Group, as determined by the Board.
The reward framework is designed to align executive reward to shareholders' interests. The Board considers that it should
seek to enhance shareholders' interests by:
●
●
having economic profit as a core component of plan design;
focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering
constant or increasing return on assets as well as focusing the executive on key non-financial drivers of value; and
attracting and retaining high calibre executives.
●
Additionally, the reward framework should seek to enhance executives' interests by:
●
●
●
rewarding capability and experience;
reflecting competitive reward for contribution to growth in shareholder wealth; and
providing a clear structure for earning rewards.
Since the Group’s listing on the ASX, in accordance with best practice corporate governance, the structure of non-
executive director and executive director remuneration is separate.
Non-executive directors' remuneration
Fees and payments to non-executive directors reflect the demands and responsibilities of their role. Non-executive
directors' fees and payments are reviewed annually by the Remuneration and Nomination Committee. The Remuneration
and Nomination Committee may, from time to time, receive advice from independent remuneration consultants to ensure
non-executive directors' fees and payments are appropriate and in line with the market. The chairman's fees are
determined independently to the fees of other non-executive directors based on comparative roles in the external market.
The chairman is not present at any discussions relating to the determination of his own remuneration. Since the Group’s
IPO, non-executive directors do not receive share options or other incentives.
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30 June 2018
Under NTAW’s constitution, the directors decide the total amount paid to all directors as remuneration for their services.
However, under the ASX listing rules, the aggregate non-executive directors' remuneration (ie excluding the Managing
Director and executive directors, if any) for a financial year must not exceed the amount fixed by the Company in general
meeting. This amount has been fixed at $750,000 per annum. Any changes to the aggregate remuneration will be put to a
general meeting where the shareholders will be asked to approve a maximum annual aggregate remuneration.
The annual base non-executive director fees paid by the Company are $90,000 per annum for the chairman and $70,000
per annum for other non-executive Directors. From 1 July 2018, an additional fee of $10,000 per annum will be paid to the
chairman of each Board committee. Directors may also be reimbursed for all travelling and other expenses incurred in
connection with their Company duties.
As disclosed in the Prospectus, one of the non-executive directors received options pursuant to NTAW’s former share
option plan, which vested and were exercised prior to completion of the IPO, resulting in shares being issued on 14
December 2017. Further details of the options granted are contained on page 18, and the shares issued are included in the
relevant disclosures on page 19.
Executive remuneration
The Group aims to reward executives based on their position and responsibilities, with a level and mix of remuneration
which has both fixed and variable components.
The executive remuneration and reward framework has four main components:
●
●
●
●
fixed remuneration, comprising base salary, superannuation and non-monetary benefits;
short-term performance incentives (STIs);
long-term performance incentives (LTIs), including share-based payments; and
other remuneration such as long service leave.
The combination of these comprises the executive's total remuneration.
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, is reviewed annually by the
Remuneration and Nomination Committee for the Managing Director and senior executives, based on individual and
business unit responsibilities and performance, the overall performance of the Group and comparable market
remuneration.
Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle
benefits) where it does not create any additional costs to the Group and provides additional value to the executive.
The STI program is designed to align the annual targets of the business units with the performance hurdles of executives.
STI payments are granted to executives based on financial and non-financial key performance indicators ('KPI's') being
achieved. KPI's may include profit contribution, customer satisfaction, leadership contribution and product management.
The LTI program includes share-based payments. The objective of the LTI program is to align the interests of key
management personnel to those of the company and its shareholders.
On listing, the Board adopted the executive remuneration framework and the executives’ service contracts as outlined in
the Prospectus and disclosed on pages 17 to 18 of this report.
STIs paid during the financial year were in the nature of cash bonuses, determined by the Board, having regard to the
Company’s strategy and ability to achieve the pro-forma net profit targets contained in the Prospectus.
In relation to LTIs, prior to the IPO, options that were issued by NTAW to management pursuant to NTAW’s former share
option plan, vested and were exercised, resulting in shares being issued to employees on 14 December 2017. Peter
Ludemann and Jason Lamb were two of the recipients of these options and shares. Further details of the options granted
are contained on page 18, and the shares issued are included in the relevant disclosures on page 19. The share based
payments expense included in the results for the financial year relates solely to this pre-IPO arrangement.
No further LTIs were issued for the financial year.
Remuneration review
During the financial year, the Remuneration and Nomination Committee undertook a review of the Group’s executive
remuneration framework (‘Remuneration Review’). The Group engaged Egan and Associates (remuneration consultants),
to review its existing STI and LTI policies and provide recommendations on how to improve these.
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Directors' report
30 June 2018
Fees paid to Egan and Associates during the financial year in relation to this work amounted to $15,750.
Following this review, the Board intends to adopt a new executive remuneration framework, including new STI and LTI
programs with effect from and including the financial year ending 30 June 2019. The new framework is expected to include
the following components:
●
●
●
Fixed remuneration – will continue to comprise base salary, superannuation contributions and other benefits, having
regard to comparable market benchmarks;
STI program – will be an ‘at risk’ component of remuneration where, if individual, business unit and Group
performance measures are met, senior executives will be awarded cash bonuses equal to a percentage of their fixed
remuneration. Performance measures will include a financial gateway hurdle and non-financial KPIs. The percentage
of fixed remuneration received as an STI will be capped, but may vary, depending on the level of performance
achieved.
LTI program – will be an ‘at risk’ component of remuneration where senior executives are awarded options which are
subject to an earnings per share (EPS) performance condition and a service condition. The number of options to be
awarded will be determined by the Board having regard to the overall amount of executive remuneration and the
annual profit impact of the options awarded.
The Board believes that this remuneration framework will ensure that remuneration outcomes link to Company
performance and the long-term interests of Shareholders.
Details of these plans are still being finalised, with completion expected in September 2018.
Employee Share Option Plan (ESOP)
Options may be granted under the existing ESOP which was adopted on 6 November 2017. The details of the ESOP are
summarised as follows:
●
●
●
●
●
Options may be granted under the ESOP to any person who is, or is proposed to be, a full-time or part-time
employee, a non-executive director, a contractor (40% full-time equivalent ('FTE')) or a casual employee (40% FTE) of
the Company or any of its associated bodies corporate, and whom the Board determines to be an eligible person for
the purposes of participation in the ESOP (referred to as an 'Eligible Person').
An option may not be granted under the ESOP if, immediately following its grant, the shares to be received on
exercise of the option, when aggregated with the number of shares which would be issued if each unvested option
granted under the ESOP or any other employee incentive scheme of the Company were to vest and be exercised and
the number of shares issued in the previous three years under the ESOP or any other employee incentive scheme of
the Company, exceeds 5% of the total number of issued shares at the time of grant (or any varied limit if permitted
under the Corporations Act 2001, ASX Listing Rules and ASIC instruments). Certain offers of options may be
excluded from the calculation as permitted under Class Order 14/1000, including excluded offers under section 708 of
the Corporations Act 2001 and offers under a disclosure document.
Each option entitles the participant to subscribe for one ordinary share in the Company.
The specific terms relevant to the grant of options are set out in an offer from the Company to the Eligible Person
which contains details of the application price (if any) (which must not be for more than nominal consideration), the
expiry date, the exercise price, the vesting date, any applicable performance conditions and other specific terms
relevant to those options.
Unless otherwise specified in the offer of an option, if a “Change of Control Event” occurs before the vesting date of
an option, that option immediately vests and ceases to be subject to any performance condition to which it was
subject. A Change of Control Event means the occurrence of one or more of the following events:
- a person who has offered to acquire all shares in the Company acquires Control (as defined in section 50AA of the
Corporations Act 2001) of the Company;
- any other event occurs which causes a change in Control of the Company;
- unless the Board determines otherwise, a takeover bid is recommended by the Board or a scheme of arrangement
which would have a similar effect to a full takeover bid is announced by the Company; and
- any other event which the Board reasonably considers should be regarded as a Change of Control Event.
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30 June 2018
Directors' report
30 June 2018
●
Options may only be transferred:
- to a legal personal representative on the death of the participant or to the participant’s trustee in bankruptcy on the
bankruptcy of the participant; or
- pursuant to an off-market takeover bid, in various compulsory acquisition scenarios under Chapter 6A of the
Corporations Act 2001, under a creditor’s scheme of arrangement under section 411 of the Corporations Act 2001
or if approved by the Board.
●
●
●
●
●
●
●
●
●
An option does not confer any rights to participate in a new issue of shares by the Company.
If the Company conducts a rights issue, the exercise price of options will be adjusted in accordance with the
adjustment formula for pro rata issues set out in the Listing Rules.
If the Company makes a bonus issue of securities to holders of shares, the rights of a holder in respect of an
unexercised option will be modified such that the participant will receive, upon exercise of an option, one share plus
such additional securities which the participant would have received had the participant exercised the option
immediately before the record date for that bonus issue and participated in the bonus issue as the holder of the share.
If the Company’s issued capital is reorganised (including consolidation, subdivision, reduction, or return), then the
number of options, the exercise price or both or any other terms will be reorganised in a manner determined by the
Board which complies with the listing rules.
Any shares issued under the ESOP rank equally in all respects with the shares of the same class on issue, subject to
the restrictions on the transfer of shares.
Shares issued on exercise of options are not transferable for the period (if any) specified in the offer from the
Company to the Eligible Person.
An unvested option lapses upon the first to occur of the following:
- its expiry date;
- any applicable performance condition not being satisfied prior to the end of any prescribed performance period;
- a transfer or purported transfer of the option in breach of the rules;
- 30 days following the day the participant ceases to be employed or engaged by the Company or an associated body
corporate by resigning voluntarily and not recommencing employment with the Company or an associated body
corporate before the expiration of that 30 days;
- 30 days following the day the participant ceases to be employed or engaged by the Company or an associated body
corporate by reason of his or her death, disability, bona fide redundancy, or any other reason with the approval of
the Board and the participant has not recommenced employment with the Company or an associated body
corporate before the expiration of those 30 days, however the Board has a discretion to deem all or any of the
options to have vested; or
- termination of the participant’s employment or engagement with the Company or an associated body corporate on
the basis the participant acted fraudulently, dishonestly, in breach of the participant’s obligations or otherwise for
cause.
A vested but unexercised option lapses upon the first to occur of the following:
- its expiry date;
- a transfer or purported transfer of the option in breach of the rules; or
- termination of the participant’s employment or engagement with the Company or an associated body corporate on
the basis the participant acted fraudulently, dishonestly, in breach of the participant’s obligations or otherwise for
cause.
Subject to the ASX Listing Rules and the law, the Board may at any time by resolution amend or add to the rules of
the ESOP. However, the consent of a participant is required for any change to the rules or option terms which
prejudicially affects the rights of the participant in relation to the option (except for certain changes, including changes
to benefit the administration of the Plan or to comply with laws, ASX Listing Rules or regulations).
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30 June 2018
Directors' report
30 June 2018
(b) Details of remuneration
The key management personnel of the Group consisted of the following directors of National Tyre & Wheel Limited:
●
●
●
●
●
●
Murray Boyte - Chairman (appointed 24 October 2017)
Peter Ludemann - Chief Executive Officer and Managing Director
Terence Smith - Executive Director
William Cook - Non Executive Director
Robert Kent - Non Executive Director (appointed 27 September 2017)
Susanne Smith - Former Executive Director (resigned 26 October 2017)
And the following persons:
●
●
●
●
Jason Lamb - Chief Financial Officer and Joint Company Secretary
Chris Hummer - Managing Director, Dynamic
Georg Schramm - Managing Director, Top Draw Tyres (Southern Africa)
Roshan Chelvaratnam - Managing Director, MPC
Amounts of remuneration
Details of the remuneration of key management personnel of the Group are set out in the following tables.
Prior to listing the Company on the ASX, National Tyre & Wheel Limited was not required to prepare a remuneration report
in accordance with the Corporations Act 2001. As such, remuneration information below is presented for the year ended 30
June 2018 only.
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
Cash salary
and fees
$
Cash
bonus
$
Non-
Super-
monetary annuation
$
$
Long
service
leave
$
Equity-
settled****
$
Total
$
55,953
68,650
48,191
-
-
-
-
-
-
5,316
6,522
2,910
-
-
-
-
98,000
-
61,269
173,172
51,101
125,965
366,613
50,068
-
227,858
-
15,417
12,329
-
11,764
25,000
4,659
235,490
174,268
199,449
181,147
1,505,794
104,678
-
-
50,790
383,326
12,830
-
-
-
40,576
32,283
14,897
179
22,894
126,424
(38,946)
114,200
7,612 1,331,839 1,971,251
55,640
913
-
-
7,929
3,276
-
4,411
572,708
192,441
199,628
259,242
(14,805) 1,609,337 3,650,652
179,498
-
-
-
2018
Non-Executive Directors:
M Boyte*
W Cook
R Kent*
Executive Directors:
T Smith
J Ludemann
S Smith**
Other Key Management
Personnel:
J Lamb
C Hummer
G Schramm***
R Chelvaratnam
Remuneration is from date of appointment to 30 June 2018
Remuneration is from 1 July 2017 to date of resignation
*
**
*** Remuneration is from 31 December 2017 (date of Top Draw Tyres consolidation) to 30 June 2018
**** Equity settled share based payments comprise the options that vested and were exercised prior to the IPO
15
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Directors’ Report
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Directors' report
30 June 2018
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Non-Executive Directors:
M Boyte
W Cook */**
R Kent
Executive Directors:
T Smith
J Ludemann *
S Smith
Other Key Management Personnel:
J Lamb *
C Hummer
G Schramm
R Chelvaratnam
Fixed
remuneration
2018
At risk - STI
2018
At risk - LTI
2018
100%
43%
100%
100%
21%
100%
51%
100%
100%
80%
-
-
-
-
11%
-
18%
-
-
20%
-
57%
-
-
68%
-
31%
-
-
-
*
**
2018 LTI comprises the options that vested and were exercised prior to the IPO, and does not reflect the future LTI
program to be adopted.
Fixed remuneration from the date of listing to 30 June 2018 comprised 100% of amounts received during that period.
The proportion of the cash bonus paid/payable or forfeited is as follows:
Name
Executive Directors:
P Ludemann
Other Key Management Personnel:
J Lamb
R Chelvaratnam
Cash bonus
paid/payable
2018
Cash bonus
forfeited
2018
100%
100%
100%
-
-
-
(c) Relationship between remuneration and Company performance
The table below summarises the Group’s performance and correlates it to the total key management personnel
remuneration for the financial year:
Metric
Statutory net profit after tax attributable to shareholders ($)
Pro forma sales revenue ($)
Pro forma net profit after tax attributable to shareholders ($) *
Change in share price **
Earnings per share (cents)
Total dividends paid ($)
Key management personnel remuneration ($) ***
2018
4,477,000
153,402,000
9,314,000
23%
5.25
1,011,121
3,650,652
*
**
Pro forma results are as presented on pages 3 to 6 of the Directors’ Report and enable the results for the financial
year to be compared to the financial information contained in NTAW’s Prospectus.
NTAW listed on the ASX on 15 December 2017 with a share price of $1.00. Closing price as at 29 June 2018 was
$1.23.
*** Including the cost of options granted and exercised prior to the IPO ($1,609,337).
16
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30 June 2018
Directors' report
30 June 2018
(d) Service agreements
Remuneration and other terms of employment for key management personnel are formalised in service agreements with
no fixed tenure requirements, unless otherwise disclosed below. Details of these agreements (prior to changes for the
proposed remuneration framework) are as follows:
Name:
Title:
Details:
Name:
Title:
Details:
Name:
Title:
Details:
Name:
Title:
Details:
Name:
Title:
Details:
Peter Ludemann
Chief Executive Officer and Managing Director
Peter's fixed remuneration package is a base salary of $406,793 including superannuation contributions.
Under the terms of his employment contract, he is eligible for short term incentives as determined by the
Board plus 9.5% superannuation on any incentive bonus amount, has statutory leave entitlements and is
entitled to 5 weeks annual leave per year. Either party may terminate the contract on 6 months’ notice. In
the case of termination by NTAW, NTAW may provide payment in lieu of notice. Peter’s employment
contract does not contain any express redundancy provisions. Peter’s contract contains a 5 year non-
compete restraint within Australia and New Zealand and a 12 month non-solicitation of employees,
contractors and clients who deal with NTAW.
Terry Smith
Executive Director
Terry’s fixed remuneration package is $70,000 inclusive of statutory superannuation contribution and a car
allowance of $22,300. He has statutory leave entitlements. Terry is employed on a part time basis. Either
party may terminate the contract on 6 months’ notice. In the case of termination by NTAW, NTAW may
provide payment in lieu of notice. Terry is entitled to redundancy pay in accordance with the NTAW’s legal
obligations. Terry’s contract contains a 6 month non-compete restraint within Australia and a 6 month non-
solicitation of employees, contacts and clients with whom he has contact with, or influence over.
Jason Lamb
Chief Financial Officer and joint Company Secretary
Jason’s fixed remuneration package is a base salary of $213,000 plus the minimum statutory
superannuation contributions and a car allowance of $22,300. He is eligible for short term incentives as
determined by the Board. Jason has statutory leave entitlements. Either party may terminate the contract
on 6 months’ notice. In the case of termination by NTAW, NTAW may provide payment in lieu of notice. He
is entitled to redundancy pay in accordance with NTAW’s legal obligations. Jason’s contract contains a 6
month non-compete restraint within Australia and a 6 month non-solicitation of employees, contacts and
clients with whom he has contact with, or influence over.
Chris Hummer
Managing Director, Dynamic
Chris’ fixed remuneration package is a base salary of $160,000 plus statutory superannuation
contributions. Under the terms of his employment contract, he is entitled to a bonus if Dynamic achieves
targets set by the Board. He has statutory leave entitlements. Either party may terminate the contract on 3
months’ notice. In the case of termination by Dynamic, Dynamic may provide payment in lieu of notice.
Chris is entitled to redundancy pay in accordance with the Company’s legal obligations. Mr Hummer’s
contract contains a 12 month non-compete restraint within as specified geographical area and a 12 month
non-solicitation of employees, contacts and clients with whom he has contact with, or influence over.
Georg Schramm
Managing Director, Top Draw (South Africa)
Georg’s employment contract is governed by South African law. His fixed remuneration package is
R278,000 per month and he is entitled to car and mobile phone allowances totalling R22,300 per month.
Either party may terminate the contract on 6 months’ notice. Where Georg is terminated due to operational
requirements, the termination will be governed by Top Draw (South Africa) policies or practices or, if no
policy or practice exists, in accordance with the law.
17
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Directors’ Report
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Directors' report
30 June 2018
Name:
Title:
Details:
fixed remuneration package
Roshan Chelvaratnam
Managing Director, MPC
is a base salary of $173,276 plus minimum statutory
Roshan’s
superannuation contributions. Under the terms of his employment contract, he is entitled to a bonus if
MPC achieves targets set by the Board. He has statutory leave entitlements. Either party may terminate
the contract on 6 months’ notice after the expiry of the initial term of 3 years (from 1 April 2017). In the
case of termination by MPC, MPC may provide payment in lieu of notice. He may not terminate within the
first 3 years of his employment. Roshan is entitled to redundancy pay in accordance with the Company’s
legal obligations. Roshan’s contract contains a 6 month non-compete restraint within Australia and a 12
month non-solicitation of employees, contacts and clients with whom he has contact with, or influence
over.
Key management personnel have no entitlement to termination payments in the event of removal for misconduct.
All key management personnel are required to keep information obtained during their employment confidential, both during
their employment and after their employment ends. Employment contracts contains an assignment of intellectual property
created during the course of their employment.
(e) Share-based compensation
Issue of shares
There were no shares issued to directors and other key management personnel as part of compensation during the year
ended 30 June 2018.
Options
The terms and conditions of each grant of options over ordinary shares affecting remuneration of directors and other key
management personnel in this financial year or future reporting years are as follows:
Name
Peter Ludemann
William Cook
Jason Lamb
Number of
options
granted
Grant date
Vesting date and
exercisable date
566,547
203,132
107,338
1 July 2017 - 21
November 2017
1 July 2017 - 21
November 2017
1 July 2017 - 21
November 2017
14 December
2017
14 December
2017
14 December
2017
Expiry date
1 July 2022
1 July 2022
1 July 2022
Exercise
price1
Fair value
per option
at grant date
$0.0278
$0.78
$0.5022
$0.49
$0.0073
$0.78
1
The exercise price is the weighted average of the exercise prices for the options granted on different dates
(f) Equity instruments held by key management personnel
Shareholding
The number of shares in the Company held during the financial year by each director and other members of key
management personnel of the Group, including their personally related parties, is set out below:
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Directors’ Report
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Directors' report
30 June 2018
Balance at
Share
the start of consolidation
the year
and split
Received
as part of
Remuneration
6
Disposals/
Balance at
the end of
Additions
other
the year
Ordinary shares
Murray Boyte7
Peter Ludemann1
Terence Smith1
William Cook1
Robert Kent7
Jason Lamb2
Chris Hummer3,5
Roshan Chelvaratnam4,5
-
-
68,000,002
-
-
-
-
-
-
-
(13,935,260)
-
-
-
-
-
-
4,316,547
-
203,132
-
476,003
-
-
112,500
-
-
-
100,000
94,000
4,261,714
7,858,500
-
(1,726,619)
112,500
2,589,928
(27,032,371) 27,032,371
203,132
100,000
358,602
4,261,714
3,929,250
-
-
(211,401)
-
(3,929,250)
68,000,002
(13,935,260)
4,995,682 12,426,714
(32,899,641) 38,587,497
1
Balance of shares escrowed until the earlier of the date 5 Business Days after the date that NTAW releases to the ASX its interim results for the 6 months ending 31 December 2018
and 22 April 2019 (‘CY18 Restriction Period’).
285,602 shares escrowed until the CY18 Restriction Period.
1,048,929 shares escrowed until the CY18 Restriction Period. 1,048,929 shares escrowed until the earlier of the date 5 Business Days after the date that NTAW releases to the ASX
its final results for the 12 months ending 30 June 2019 and 7 November 2019 (‘FY19 Restriction Period’).
1,964,625 shares escrowed until the CY18 Restriction Period. 1,964,625 shares escrowed until the FY19 Restriction Period.
Includes shares issued as consideration for business acquisition.
Shares received following the exercise of options.
Additions relate to shares purchased on IPO at the IPO Offer Price.
2
3
4
5
6
7
Option holding
The number of options over ordinary shares in the Company held during the financial year by each director and other
members of key management personnel of the Group, including their personally related parties, is set out below:
Options over ordinary shares
Peter Ludemann
William Cook
Jason Lamb
Balance at
the start of
the year
Granted
Exercised 1
Expired/
forfeited/
other
Balance at
the end of
the year
3,750,000
-
368,665
4,118,665
566,547
203,132
107,338
877,017
(4,316,547)
(203,132)
(476,003)
(4,995,682)
-
-
-
-
-
-
-
-
1
As all options were exercised just prior to the IPO, the value of each option on the exercise date is considered to be the share price at the time of listing, less the exercise price paid.
(g) Other transactions with key management personnel
Related party leases
During the financial year, a Group entity leased business premises owned by a closely related party of Chris Hummer on
commercial terms. The lease expired on 30 April 2017 and the parties are ‘holding over’ until new premises are
identified. Rent payments for the financial year totalled $123,598 (2017: $nil), with $nil outstanding at 30 June 2018 (2017:
$nil).
Loans to key management personnel
There were no loans to key management personnel and their related parties during the financial year.
This concludes the remuneration report, which has been audited.
Shares under option
There were no unissued ordinary shares of National Tyre & Wheel Limited under option outstanding at the date of this
report.
19
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Directors’ Report
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Directors' report
30 June 2018
Shares issued on the exercise of options
The following ordinary shares of National Tyre & Wheel Limited were issued during the year ended 30 June 2018 (prior to
the IPO) on the exercise of options granted:
Date options granted
01 July 2012
01 July 2014
01 July 2016
01 July 2016
01 July 2016
30 June 2017
1 July 2017
1 July 2017
21 November 2017
21 November 2017
Exercise
price
Number of
shares issued
$0.0000
$0.0000
$0.5022
$0.5022
$0.0000
$0.0000
$0.0000
$0.5022
$0.0000
$0.5022
1,487,945
77,305
220,000
2,150,000
1,324,339
1,000,000
1,006,470
200,000
76,663
40,242
7,582,964
No further shares were issued on the exercise of options granted during the year ended 30 June 2018 and up to the date
of this report.
Indemnity and insurance of officers
The Company has indemnified the directors and executives of the Company for costs incurred, in their capacity as a
director or executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the Company paid a premium in respect of a contract to insure the directors and executives of
the Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits
disclosure of the nature of the liability and the amount of the premium.
Indemnity and insurance of auditor
The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the
Company or any related entity against a liability incurred by the auditor.
During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the
Company or any related entity.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the Company, or to 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 part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor
are outlined in note 27 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another
person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by
the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 27 to the financial statements do not compromise the
external auditor's independence requirements of the Corporations Act 2001 for the following reasons:
●
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity
of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including
reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the Company,
acting as advocate for the Company or jointly sharing economic risks and rewards.
●
20
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Directors’ Report
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Directors' report
30 June 2018
Officers of the Company who are former partners of Pitcher Partners
There are no officers of the Company who are former partners of Pitcher Partners.
Rounding of amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that
Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out
immediately after this directors' report.
Auditor
Pitcher Partners continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act
2001.
On behalf of the directors
___________________________
Murray Boyte
Chairman
29 August 2018
Brisbane
21
For personal use only
The Directors
The Directors
National Tyre & Wheel Limited
National Tyre & Wheel Limited
30 Gow Street
30 Gow Street
MOOROOKA QLD 4105
MOOROOKA QLD 4105
Auditor’s Independence Declaration
Auditor’s Independence Declaration
As lead auditor for the audit of National Tyre & Wheel Limited for the year ended 30 June 2018, I
As lead auditor for the audit of National Tyre & Wheel Limited for the year ended 30 June 2018, I
declare that, to the best of my knowledge and belief, there have been:
declare that, to the best of my knowledge and belief, there have been:
(i) no contraventions of the auditor independence requirements as set out in the Corporations Act
(i) no contraventions of the auditor independence requirements as set out in the Corporations Act
2001 in relation to the audit; and
2001 in relation to the audit; and
(ii) no contraventions of APES 110 Code of Ethics for Professional Accountants.
(ii) no contraventions of APES 110 Code of Ethics for Professional Accountants.
This declaration is in respect of National Tyre & Wheel Limited and entities it controlled during the
This declaration is in respect of National Tyre & Wheel Limited and entities it controlled during the
year.
year.
PITCHER PARTNERS
PITCHER PARTNERS
N BATTERS
N BATTERS
Partner
Partner
Brisbane, Queensland
Brisbane, Queensland
29 August 2018
29 August 2018
22
22
For personal use only
Auditor’s Independence Declaration
As lead auditor for the audit of National Tyre & Wheel Limited for the year ended 30 June 2018, I
declare that, to the best of my knowledge and belief, 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 APES 110 Code of Ethics for Professional Accountants.
This declaration is in respect of National Tyre & Wheel Limited and entities it controlled during the
The Directors
National Tyre & Wheel Limited
30 Gow Street
MOOROOKA QLD 4105
year.
PITCHER PARTNERS
N BATTERS
Partner
Brisbane, Queensland
29 August 2018
Statement of profit or loss and other comprehensive income
National Tyre & Wheel Limited and its controlled entities
For the year ended 30 June 2018
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2018
Revenue
Expenses
Changes in inventories
Raw materials and consumables used
Employee benefits expense
Depreciation and amortisation expense
Legal and professional fees
Marketing expenses
Occupancy expenses
Insurance costs
Listing costs
Other expenses
Finance costs
Profit before income tax expense
Income tax expense
Profit after income tax expense for the year
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Profit for the year is attributable to:
Non-controlling interest
Owners of National Tyre & Wheel Limited
Total comprehensive income for the year is attributable to:
Non-controlling interest
Owners of National Tyre & Wheel Limited
Note
Consolidated
2018
$'000
2017
$'000
5
147,466
120,453
6
6
7
(3,572)
(96,023)
(18,156)
(2,127)
(768)
(5,061)
(3,662)
(536)
(2,078)
(5,969)
(459)
(1,458)
(79,922)
(13,841)
(1,651)
(237)
(4,919)
(3,292)
(335)
-
(4,827)
(470)
9,055
9,501
(3,700)
(3,297)
5,355
6,204
(446)
(446)
(2)
(2)
4,909
6,202
878
4,477
674
5,530
5,355
6,204
878
4,031
674
5,528
4,909
6,202
Basic earnings per share
Diluted earnings per share
Cents
Cents
38
38
5.25
5.05
8.13
7.52
22
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
23
For personal use only
Statement of financial position
National Tyre & Wheel Limited and its controlled entities
As at 30 June 2018
Statement of financial position
As at 30 June 2018
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Other
Total current assets
Non-current assets
Property, plant and equipment
Intangibles
Deferred tax
Other
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Income tax
Provisions
Other
Total current liabilities
Non-current liabilities
Payables
Borrowings
Deferred tax
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits/(accumulated losses)
Equity attributable to the owners of National Tyre & Wheel Limited
Non-controlling interest
Total equity
Note
Consolidated
2018
$'000
2017
$'000
8
9
10
11
12
13
14
7
15
16
17
18
19
20
7
21
22
23
19,608
25,900
47,754
463
1,779
95,504
3,917
22,167
4
-
26,088
14,765
19,840
31,348
-
269
66,222
3,245
14,591
-
81
17,917
121,592
84,139
35,018
1,615
-
1,069
3,107
-
40,809
-
12,820
-
1,300
14,120
25,361
1,355
399
733
1,976
48
29,872
2,151
6,812
636
1,295
10,894
54,929
40,766
66,663
43,373
64,761
(215)
(974)
63,572
3,091
18,942
1,967
16,025
36,934
6,439
66,663
43,373
The above statement of financial position should be read in conjunction with the accompanying notes
24
For personal use only
Statement of changes in equity
National Tyre & Wheel Limited and its controlled entities
For the year ended 30 June 2018
Statement of changes in equity
For the year ended 30 June 2018
Consolidated
Foreign
currency
translation
reserve
$'000
Share-
based
payments
reserve
$'000
Issued
capital
$'000
Other
Retained
reserves profits
$'000
$'000
Non-
controlling
interest
$'000
Total
equity
$'000
Balance at 1 July 2016
18,942
233
1,948
(356)
14,144
2,561
37,472
Profit after income tax expense
for the year
Other comprehensive income
for the year, net of tax
Total comprehensive income
for the year
Transactions with owners in
their capacity as owners:
Options issued
Options forfeited
Non-controlling interest on
acquisition of subsidiary
Transfers
Dividends paid (note 24)
-
-
-
-
-
-
-
-
-
(2)
(2)
-
-
-
-
-
-
-
-
1,044
(745)
-
(155)
-
-
-
-
-
-
-
-
-
5,530
674
6,204
-
-
(2)
5,530
674
6,202
-
-
-
-
1,044
(745)
-
155
(3,804)
3,661
-
(457)
3,661
-
(4,261)
Balance at 30 June 2017
18,942
231
2,092
(356)
16,025
6,439
43,373
Consolidated
Foreign
currency
translation
reserve
$'000
Share-
based
payments
reserve
$'000
Issued
capital
$'000
Other
reserves
$'000
Accumu-
lated
losses
$'000
Non-
controlling
interest
$'000
Total
equity
$'000
Balance at 1 July 2017
18,942
231
2,092
(356)
16,025
6,439
43,373
Profit after income tax expense
for the year
Other comprehensive income
for the year, net of tax
Total comprehensive income
for the year
Transactions with owners in
their capacity as owners:
Contributions of equity, net of
transaction costs (note 22)
Options issued
Options exercised
Reversal of option forfeiture
Non-controlling interest on
acquisition of subsidiary
Acquisition of non-controlling
interest of existing subsidiaries
Transfers
Dividends paid (note 24)
-
-
-
-
(446)
(446)
-
-
-
39,907
-
5,912
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,657
(4,601)
400
-
-
(548)
-
-
-
-
-
-
-
-
-
4,477
878
5,355
-
-
(446)
4,477
878
4,909
-
-
-
-
-
-
-
-
-
39,907
2,657
1,311
400
2,828
2,828
-
356
-
(5,657)
192
(16,011)
(6,398)
-
(656)
(12,055)
-
(16,667)
Balance at 30 June 2018
64,761
(215)
-
-
(974)
3,091
66,663
The above statement of changes in equity should be read in conjunction with the accompanying notes
25
For personal use only
Statement of cash flows
National Tyre & Wheel Limited and its controlled entities
For the year ended 30 June 2018
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 finance costs paid
Income taxes paid
Note
Consolidated
2018
$'000
2017
$'000
162,009
(148,475)
132,543
(122,853)
13,534
120
(291)
(4,461)
9,690
131
(327)
(2,977)
Net cash from operating activities
36
8,902
6,517
Cash flows from investing activities
Payment for purchase of business, net of cash acquired
Final payments for prior year business acquisition
Payments for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Transfers from term deposits
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Listing costs
Proceeds from borrowings
Repayment of borrowings
Dividends paid
Net cash from/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
33
24
(13,355)
(2,051)
(845)
228
-
(3,917)
-
(584)
223
307
(16,023)
(3,971)
26,234
(3,552)
7,471
(1,583)
(16,667)
-
-
4,000
(2,911)
(4,261)
11,903
(3,172)
4,782
14,765
61
(626)
15,381
10
Cash and cash equivalents at the end of the financial year
8
19,608
14,765
The above statement of cash flows should be read in conjunction with the accompanying notes
26
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 1. General information
Note 2. Significant accounting policies
Note 3. Critical accounting judgements, estimates and assumptions
Note 4. Operating segments
Note 5. Revenue
Note 6. Expenses
Note 7. Income tax
Note 8. Current assets - cash and cash equivalents
Note 9. Current assets - trade and other receivables
Note 10. Current assets - inventories
Note 11. Current assets - derivative financial instruments
Note 12. Current assets - other
Note 13. Non-current assets - property, plant and equipment
Note 14. Non-current assets - intangibles
Note 15. Current liabilities - trade and other payables
Note 16. Current liabilities - borrowings
Note 17. Current liabilities - derivative financial instruments
Note 18. Current liabilities - provisions
Note 19. Non-current liabilities - payables
Note 20. Non-current liabilities - borrowings
Note 21. Non-current liabilities - provisions
Note 22. Equity - issued capital
Note 23. Equity - reserves
Note 24. Equity - dividends
Note 25. Financial instruments
Note 26. Fair value measurement
Note 27. Remuneration of auditors
Note 28. Contingent liabilities
Note 29. Commitments
Note 30. Key management personnel disclosures
Note 31. Related party transactions
Note 32. Parent entity information
Note 33. Business combinations
Note 34. Interests in subsidiaries
Note 35. Deed of cross guarantee
Note 36. Reconciliation of profit after income tax to net cash from operating activities
Note 37. Non-cash investing and financing activities
Note 38. Earnings per share
Note 39. Share-based payments
Note 40. Events after the reporting period
28
28
38
39
39
40
41
42
42
43
44
44
44
45
47
47
47
48
48
48
49
50
51
51
52
55
56
56
57
57
57
58
59
62
62
65
65
66
66
69
27
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 1. General information
The financial statements cover National Tyre & Wheel Limited as a Group consisting of National Tyre & Wheel Limited
('Company' or 'parent entity') and the entities it controlled at the end of, or during, the year ('Group' or "NTAW'). The
financial statements are presented in Australian dollars, which is National Tyre & Wheel Limited's functional and
presentation currency.
National Tyre & Wheel Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its
registered office and principal place of business is:
30 Gow Street
Moorooka QLD 4105
A description of the nature of the Group's operations and its principal activities are included in the directors' report, which is
not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 29 August 2018. The
directors have the power to amend and reissue the financial statements.
Note 2. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board ('AASB') that are mandatory for the current reporting period. The adoption of these
Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of
the Group.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as
appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board ('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for, where applicable, the
revaluation of available-for-sale financial assets and derivative financial instruments.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial
statements, are disclosed in note 3.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the Group only.
Supplementary information about the parent entity is disclosed in note 32.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of National Tyre & Wheel
Limited as at 30 June 2018 and the results of all subsidiaries for the year then ended.
Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group 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 to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are de-consolidated from the date that control ceases.
28
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted
by the Group.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest,
without the loss of control, is accounted for as an equity transaction, where the difference between the consideration
transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity
attributable to the parent.
Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of profit or loss and
other comprehensive income, statement of financial position and statement of changes in equity of the Group. Losses
incurred by the Group are attributed to the non-controlling interest in full, even if that results in a deficit balance.
Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-
controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group
recognises the fair value of the consideration received and the fair value of any investment retained together with any gain
or loss in profit or loss.
Operating segments
Operating segments are presented using the 'management approach', where the information presented is on the same
basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the
allocation of resources to operating segments and assessing their performance.
Foreign currency translation
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are
recognised in profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the
reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average
exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange
differences are recognised in other comprehensive income through the foreign currency reserve in equity.
The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of.
Revenue recognition
Revenue is recognised when it is probable that the economic benefit will flow to the Group and the revenue can be reliably
measured. Revenue is measured at the fair value of the consideration received or receivable.
Sale of goods
Sale of goods revenue is recognised at the point of sale, which is where the customer has taken delivery of the goods, the
risks and rewards are transferred to the customer and there is a valid sales contract. Amounts disclosed as revenue are
net of sales returns and trade discounts.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest
rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset
to the net carrying amount of the financial asset.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
29
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
Income tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the
applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to
temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when
the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted,
except for:
●
When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting
nor taxable profits; or
When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and
the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the
foreseeable future.
●
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred
tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for
the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is
probable that there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets
against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable
authority on either the same taxable entity or different taxable entities which intend to settle simultaneously.
National Tyre & Wheel Limited (the 'head entity') and its wholly-owned Australian subsidiaries (Exclusive Tyre Distributors
Pty Ltd, MPC Mags & Tyres Pty Ltd, Dynamic Wheel Co Pty Limited and Statewide Tyre Distribution Pty Ltd), have formed
an income tax consolidated group under the tax consolidation regime. The head entity and subsidiary in the tax
consolidated group continue to account for their own current and deferred tax amounts. The tax consolidated group has
applied the 'separate taxpayer within group' approach in determining the appropriate amount of taxes to allocate to
members of the tax consolidated group.
In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets)
and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the tax
consolidated group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts
receivable from or payable to other entities in the tax consolidated group. The tax funding arrangement ensures that the
intercompany charge equals the current tax liability or benefit of each tax consolidated group member, resulting in neither a
contribution by the head entity to the subsidiaries nor a distribution by the subsidiaries to the head entity.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the
Group's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months
after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle
a liability for at least 12 months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the Group's normal operating cycle; it is held
primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no
unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities
are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
30
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value.
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method, less any provision for impairment. Trade receivables are generally due for settlement within 30 days.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written
off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is
objective evidence that the Group will not be able to collect all amounts due according to the original terms of the
receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial
reorganisation and default or delinquency in payments (more than 60 days overdue) are considered indicators that the
trade receivable may be impaired. The amount of the impairment allowance is the difference between the asset's carrying
amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows
relating to short-term receivables are not discounted if the effect of discounting is immaterial.
Other receivables are recognised at amortised cost, less any provision for impairment.
Inventories
Finished goods are stated at the lower of cost and net realisable value on a 'first in first out' basis. Cost comprises of
purchase and delivery costs, net of rebates and discounts received or receivable.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion
and the estimated costs necessary to make the sale.
Derivative financial instruments
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently
remeasured to their fair value at each reporting date. The accounting for subsequent changes in fair value depends on
whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
The Group has not satisfied the documentation, designation and effectiveness tests required by Australian Accounting
Standards, as such they do not qualify for hedge accounting and gains or losses arising from changes in fair value are
recognised immediately in profit or loss.
Derivatives are classified as current or non-current depending on the expected period of realisation.
Investments and other financial assets
Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the
initial measurement, except for financial assets at fair value through profit or loss. They are subsequently measured at
either amortised cost or fair value depending on their classification. Classification is determined based on the purpose of
the acquisition and subsequent reclassification to other categories is restricted.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have
been transferred and the Group has transferred substantially all the risks and rewards of ownership.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. They are carried at amortised cost using the effective interest rate method. Gains and losses are recognised
in profit or loss when the asset is derecognised or impaired.
Impairment of financial assets
The Group assesses at the end of each reporting period whether there is any objective evidence that a financial asset or
group of financial assets is impaired. Objective evidence includes significant financial difficulty of the issuer or obligor; a
breach of contract such as default or delinquency in payments; the lender granting to a borrower concessions due to
economic or legal reasons that the lender would not otherwise do; it becomes probable that the borrower will enter
bankruptcy or other financial reorganisation; the disappearance of an active market for the financial asset; or observable
data indicating that there is a measurable decrease in estimated future cash flows.
31
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
The amount of the impairment allowance for loans and receivables carried at amortised cost is the difference between the
asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest
rate. If there is a reversal of impairment, the reversal cannot exceed the amortised cost that would have been recognised
had the impairment not been made and is reversed to profit or loss.
Property, plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a diminishing value basis to write off the net cost of each item of property, plant and
equipment over their expected useful lives as follows:
Leasehold improvements
Plant and equipment
Motor vehicles
2.5% to 15%
5% to 60%
13.5% to 25%
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting
date.
Leasehold improvements are depreciated over the unexpired period of the lease or the estimated useful life of the assets,
whichever is shorter.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the
Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss.
Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and
requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets
and the arrangement conveys a right to use the asset.
A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the
risks and benefits incidental to the ownership of leased assets, and operating leases, under which the lessor effectively
retains substantially all such risks and benefits.
Finance leases are capitalised. A lease asset and liability are established at the fair value of the leased assets, or if lower,
the present value of minimum lease payments. Lease payments are allocated between the principal component of the
lease liability and the finance costs, so as to achieve a constant rate of interest on the remaining balance of the liability.
Leased assets acquired under a finance lease are depreciated over the asset's useful life or over the shorter of the asset's
useful life and the lease term if there is no reasonable certainty that the Group will obtain ownership at the end of the lease
term.
Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on a straight-line
basis over the term of the lease.
Intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value
at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible
assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are
subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss
arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the
carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually.
Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation
method or period.
32
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
Goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for
impairment, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at
cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not
subsequently reversed.
Brand name
Brand names are assessed as having an indefinite useful life on the basis of brand strength, ongoing expected profitability
and continuing support. Brand names are not amortised, but are instead tested for impairment annually, or more frequently
if events or changes in circumstances indicate that it might be impaired.
Customer relationships
Customer relationships acquired in a business combination are amortised on a straight-line basis over the period of their
expected benefit, being their finite useful life of 7 years.
Importation rights
Importation rights are amortised on a straight line basis over the term of the distribution agreement. Importation rights are
tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired.
Impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested
annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired.
Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the
present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or
cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to
form a cash-generating unit.
Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and
which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The
amounts are unsecured and are usually paid within 30 days of recognition.
Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They
are subsequently measured at amortised cost using the effective interest method.
Finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in
the period in which they are incurred.
Provisions
Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, it is
probable the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the
obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value
of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the
provision resulting from the passage of time is recognised as a finance cost.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be
settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities
are settled.
33
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled wholly within 12 months of the reporting date
are measured at the present value of expected future payments to be made in respect of services provided by employees
up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee
departures and periods of service. Expected future payments are discounted using market yields at the reporting date on
high-quality corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future
cash outflows.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
Share-based payments
Equity-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for
the rendering of services.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined
using either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the
option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the
expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do
not determine whether the Group receives the services that entitle the employees to receive payment. No account is taken
of any other vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the
vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the
best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount
recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already
recognised in previous periods.
Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions
are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are
satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made.
An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair
value of the share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is treated as a
cancellation. If the condition is not within the control of the Group or employee and is not satisfied during the vesting
period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining
expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and
new award is treated as if they were a modification.
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the
fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date; and assumes that the transaction will take place either: in the
principal market; or in the absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability,
assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its
highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are
available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.
34
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and
transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair
value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either
not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge
and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an
analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison,
where applicable, with external sources of data.
Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
Dividends
Dividends are recognised when declared during the financial year and no longer at the discretion of the Company.
Business combinations
The acquisition method of accounting is used to account for business combinations regardless of whether equity
instruments or other assets are acquired.
The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments
issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest
in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value
or at the proportionate share of the acquiree's identifiable net assets. All acquisition costs are expensed as incurred to
profit or loss.
On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic conditions, the Group's operating or
accounting policies and other pertinent conditions in existence at the acquisition-date.
Where the business combination is achieved in stages, the Group remeasures its previously held equity interest in the
acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is
recognised in profit or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent
changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss.
Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within
equity.
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling
interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment
in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair
value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a
gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and
measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred
and the acquirer's previously held equity interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the
provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based
on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement
period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the
information possible to determine fair value.
35
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of National Tyre & Wheel Limited,
excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares
outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the
weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part
of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of
financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
Rounding of amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that
Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
mandatory, have not been early adopted by the Group for the annual reporting period ended 30 June 2018. The Group's
assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the Group,
are set out below.
Accounting Standard
Nature of change
Impact on the financial statements
AASB 9 'Financial
Instruments' (effective
for the accounting
period starting 1 July
2018)
AASB 9 introduces various new concepts
including:
• Amended rules for hedge accounting;
• Changes to the categorisation and
measurement of financial assets particularly
affecting those measured as available for sale
('AFS') or held to maturity ('HTM');
• New methods of calculating impairment losses
of financial assets; and
• A change to the rules surrounding the
modification of financial liabilities measured at
amortised cost.
These changes are not expected to have a
material impact since the Group:
• Does not hedge account;
• Has no financial assets measured as AFS or
HTM;
• Does not have significant financial assets to
impair and only have insignificant provisions for
doubtful debts; and
• Does not intend to modify existing financial
liabilities.
36
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 2. Significant accounting policies (continued)
Accounting Standard
Nature of change
Impact on the financial statements
AASB 15 'Revenue
from Contracts with
Customers' (effective
for the accounting
period starting 1 July
2018)
AASB 15 is based on the principle that revenue
is recognised when control of a good or service
transfers to a customer. This new standard
requires a five step analysis of transactions to
determine whether, how much and the point at
which revenue is recognised. It applies to all
contracts with customers except leases,
financial instruments and insurance contracts.
AASB 15 is not expected to have a material
impact on the Group since revenue principally
comprises sale of goods revenue which will
continue to be recognised at point of sale of the
goods.
AASB 16 'Leases'
(effective for the
accounting period
starting 1 July 2019)
AASB 16 requires recognition of a right-of-use
asset along with the associated lease liability
where the entity is a lessee. An interest expense
will be recognised in the profit or loss using the
effective interest rate method, and the right-of
use asset will be depreciated. Lessor accounting
will largely remain unchanged.
AASB 16 is not expected to have a material
impact since the Group are not lessees. The
Group are significant lessors, however, there is
little change to lessor accounting under AASB
16.
If AASB 16 were adopted from 1 July 2019
based on the leases in effect at 30 June 2018,
this would have a material impact on the
transactions and balances recognised in the
financial statements, specifically:
• Right-of-use assets and lease liabilities on the
balance sheet would increase on 1 July 2018 by
approximately $7.6m and $8.2m, respectively;
• Retained earnings would be reduced on 1 July
2018 by approximately $0.6m because the
carrying value of the assets reduce more quickly
than the carrying amount of the lease liabilities;
and
• Total expenses for FY19 would be
approximately $0.1 million less, as amortisation
and interest expense would increase by
approximately $2.5m but rent expense would
decrease by approximately $2.6m.
We do not intend to adopt AASB 16 before its
effective date.
AASB 9, AASB 15 and AASB 16 will each introduce expanded disclosure requirements and changes in presentation.
These are expected to change the nature and extent of the Group’s disclosure about its financial instruments, revenue and
leases respectively, particularly in the year the new standard is adopted.
IASB revised Conceptual Framework for Financial Reporting
The revised Conceptual Framework has been issued by the International Accounting Standards Board ('IASB'), but the
Australian equivalent has yet to be published. The revised framework is applicable for annual reporting periods beginning
on or after 1 January 2020 and the application of the new definition and recognition criteria may result in future
amendments to several accounting standards. Furthermore, entities who rely on the conceptual framework in determining
their accounting policies for transactions, events or conditions that are not otherwise dealt with under Australian Accounting
Standards may need to revisit such policies. The Group will apply the revised conceptual framework from 1 July 2020 and
is yet to assess its impact.
37
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 3. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in
relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates
and assumptions on historical experience and on other various factors, including expectations of future events,
management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will
seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next
financial year are discussed below.
Business combinations
As discussed in note 2, business combinations are initially accounted for on a provisional basis. The fair value of assets
acquired, liabilities and contingent liabilities assumed are initially estimated by the Group taking into consideration all
available information at the reporting date. Fair value adjustments on the finalisation of the business combination
accounting is retrospective, where applicable, to the period the combination occurred and may have an impact on the
assets and liabilities, depreciation and amortisation reported.
Recognition of identifiable intangible assets on acquisition
Brand names, importation rights and customer relationships have been recognised on the acquisition of subsidiaries. The
valuation of these assets is based on the present value of expected future cash flows associated with the brand and the
recurring current customers covering a period of 5-10 years. These cashflows have been calculated using an average
growth rates of between 3-6.3% and a discount rate of between 17-20%.
Goodwill and other indefinite life intangible assets
The Group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill
and other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in
note 2. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations.
These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital
and growth rates of the estimated future cash flows.
Impairment of non-financial assets other than goodwill and other indefinite life intangible assets
The Group assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets at
each reporting date by evaluating conditions specific to the Group and to the particular asset that may lead to impairment.
If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of
disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions.
Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value is determined by using the Binomial model taking into
account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions
relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities
within the next annual reporting period but may impact profit or loss and equity.
Share-based payments expense under the employee share option plan has been recognised over the expected vesting
period of the options. The share-based payment expense incurred is equal to the value of the options and management
have assessed the fair value of the options using a Binominal model with the following key criteria: pre-determined
exercise price, share price at grant date based on estimated enterprise value of the company, risk-free rate of 1.5%,
volatility of share price of 60% and assumed vesting period from grant date.
Income tax
The Group is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in
determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary
course of business for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax
audit issues based on the Group's current understanding of the tax law. Where the final tax outcome of these matters is
different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in
which such determination is made.
38
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 3. Critical accounting judgements, estimates and assumptions (continued)
Warranty provision
In determining the level of provision required for warranties the Group has made judgements in respect of the expected
performance of the products, the number of customers who will actually claim under the warranty and how often, and the
costs of fulfilling the conditions of the warranty. The provision is based on estimates made from historical warranty data
associated with similar products.
Note 4. Operating segments
Identification of reportable operating segments
The Group's operating segments are based on the internal reports that are reviewed and used by the Board of Directors
(who are identified as the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the
allocation of resources.
The Directors are of the opinion that there is one reportable segment in the Group as the CODM reviews results, assesses
performance and allocates resources at a Group level.
As the information reported to the CODM is the consolidated results of the Group, the segment results are shown
throughout these financial statements and are not duplicated here.
Major customers
During the year ended 30 June 2018, none of the Group's external revenue was derived from sales of greater than 10% to
any customer.
Geographical information
Australia
New Zealand
South Africa
Sales to external customers
Geographical non-current
assets
2018
$'000
2017
$'000
2018
$'000
2017
$'000
123,219
14,704
8,261
106,935
12,464
-
25,410
597
77
17,392
525
-
146,184
119,399
26,084
17,917
The geographical non-current assets above are exclusive of, where applicable, financial instruments, deferred tax assets,
post-employment benefits assets and rights under insurance contracts.
Note 5. Revenue
Sales revenue
Sale of goods
Other revenue
Interest
Other revenue
Revenue
Consolidated
2018
$'000
2017
$'000
146,184
119,399
120
1,162
1,282
132
922
1,054
147,466
120,453
39
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 6. Expenses
Profit before income tax includes the following specific expenses:
Cost of sales
Cost of sales
Depreciation
Leasehold improvements
Plant and equipment
Motor vehicles
Total depreciation
Amortisation
Customer relationships
Importation rights
Other intangibles
Total amortisation
Total depreciation and amortisation
Finance costs
Interest and finance charges paid/payable
Amortisation of borrowing costs
Finance lease charges
Finance costs expensed
Net foreign exchange loss
Net foreign exchange loss
Net loss/(gain) on disposal
Net loss/(gain) on disposal of property, plant and equipment
Rental expense relating to operating leases
Minimum lease payments
Superannuation expense
Defined contribution superannuation expense
Share-based payments expense
Share-based payments expense
40
Consolidated
2018
$'000
2017
$'000
99,595
81,380
6
361
329
696
361
1,067
3
1,431
42
330
289
661
57
930
3
990
2,127
1,651
437
-
22
459
299
143
28
470
657
160
2
(36)
3,398
3,241
1,026
1,047
2,657
699
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 7. Income tax
Income tax expense
Current tax
Deferred tax - origination and reversal of temporary differences
Adjustment recognised for prior periods
Aggregate income tax expense
Deferred tax included in income tax expense comprises:
Increase in deferred tax assets
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense
Tax at the statutory tax rate of 30%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Amortisation of intangibles
Sundry items
Adjustment recognised for prior periods
Current year temporary differences not recognised
Difference in overseas tax rates
Income tax expense
Amounts credited directly to equity
Deferred tax assets
Consolidated
2018
$'000
2017
$'000
4,623
(903)
(20)
3,361
(64)
-
3,700
3,297
(903)
(64)
9,055
9,501
2,717
2,850
-
1,035
3,752
(20)
-
(32)
297
217
3,364
-
(40)
(27)
3,700
3,297
Consolidated
2018
$'000
2017
$'000
(442)
-
41
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 7. Income tax (continued)
Deferred tax
Net deferred tax comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Capital raising costs
Employee benefits
Property, plant and equipment
Intangibles
Accruals and provisions
Other
Finance lease liability
Foreign currency exchange
Deferred tax asset/(liability)
Movements:
Opening balance
Credited to profit or loss
Credited to equity
Additions through business combinations (note 33)
Closing balance
Note 8. Current assets - cash and cash equivalents
Cash on hand
Cash at bank
Note 9. Current assets - trade and other receivables
Trade receivables
Less: Provision for impairment of receivables
Receivable from employees
Consolidated
2018
$'000
2017
$'000
837
789
(115)
(2,321)
567
60
67
120
-
470
(84)
(1,603)
536
32
43
(30)
4
(636)
(636)
903
442
(705)
903
64
-
(1,603)
4
(636)
Consolidated
2018
$'000
2017
$'000
2
19,606
2
14,763
19,608
14,765
Consolidated
2018
$'000
2017
$'000
26,026
(127)
25,899
19,740
-
19,740
1
100
25,900
19,840
Impairment of receivables
The Group has recognised a loss of $42,000 (2017: $64,000) in profit or loss in respect of impairment of receivables.
42
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 9. Current assets - trade and other receivables (continued)
The ageing of the impaired receivables provided for above are as follows:
3 to 6 months overdue
Over 6 months overdue
Movements in the provision for impairment of receivables are as follows:
Additional provisions recognised
Additions through business combinations
Receivables written off during the year as uncollectable
Closing balance
Consolidated
2018
$'000
2017
$'000
66
61
127
-
-
-
Consolidated
2018
$'000
2017
$'000
42
127
(42)
127
-
64
(64)
-
Past due but not impaired
Customers with balances past due but without provision for impairment of receivables amount to $6,483,000 as at 30 June
2018 ($3,838,000 as at 30 June 2017).
The Group did not consider a credit risk on the aggregate balances after reviewing the credit terms of customers based on
recent collection practices.
The ageing of the past due but not impaired receivables are as follows:
Consolidated
2018
$'000
2017
$'000
5,096
813
574
3,287
226
325
6,483
3,838
Consolidated
2018
$'000
2017
$'000
47,904
(150)
31,348
-
47,754
31,348
Less than 30 days overdue
31 to 60 days overdue
Over 61 days overdue
Note 10. Current assets - inventories
Finished goods - at cost
Less: Provision for impairment
43
For personal use only
Consolidated
2018
$'000
2017
$'000
463
-
Consolidated
2018
$'000
2017
$'000
1,135
600
44
1,779
142
-
127
269
Consolidated
2018
$'000
2017
$'000
321
(262)
59
4,625
(2,761)
1,864
3,308
(1,314)
1,994
321
(256)
65
3,881
(2,164)
1,717
2,536
(1,073)
1,463
3,917
3,245
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 11. Current assets - derivative financial instruments
Forward foreign exchange contracts
Refer to note 26 for further information on fair value measurement.
Note 12. Current assets - other
Prepayments
Other deposits
Other current assets
Note 13. Non-current assets - property, plant and equipment
Leasehold improvements - at cost
Less: Accumulated depreciation
Plant and equipment - at cost
Less: Accumulated depreciation
Motor vehicles - at cost
Less: Accumulated depreciation
44
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 13. Non-current assets - property, plant and equipment (continued)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2016
Additions
Additions through business combinations (note 33)
Disposals
Depreciation expense
Balance at 30 June 2017
Additions
Additions through business combinations (note 33)
Disposals
Exchange differences
Depreciation expense
Balance at 30 June 2018
Leasehold
Plant and
improvements equipment
$'000
$'000
Motor
vehicles
$'000
Total
$'000
107
-
-
-
(42)
65
-
-
-
-
(6)
59
1,607
207
238
(5)
(330)
1,717
315
221
(16)
(12)
(361)
1,437
450
48
(183)
(289)
1,463
738
344
(210)
(12)
(329)
3,151
657
286
(188)
(661)
3,245
1,053
565
(226)
(24)
(696)
1,864
1,994
3,917
Property, plant and equipment secured under finance leases
Refer to note 29 for further information on property, plant and equipment secured under finance leases.
Note 14. Non-current assets - intangibles
Consolidated
2018
$'000
2017
$'000
8,878
3,094
2,393
2,393
4,798
(418)
4,380
12,106
(5,596)
6,510
14
(8)
6
2,951
(57)
2,894
10,730
(4,529)
6,201
14
(5)
9
22,167
14,591
Goodwill - at cost
Brand name - at cost
Customer relationships - at cost
Less: Accumulated amortisation
Importation rights - at cost
Less: Accumulated amortisation
Other intangibles - at cost
Less: Accumulated amortisation
45
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 14. Non-current assets - intangibles (continued)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2016
Additions
Additions through business
combinations (note 33)
Amortisation expense
Balance at 30 June 2017
Additions through business
combinations (note 33)
Amortisation expense
Goodwill
$'000
Brand
name
$'000
Customer
relation-
ships
$'000
Importation
rights
$'000
Other
intangibles
$'000
Total
$'000
755
-
2,339
-
-
-
-
-
2,393
-
2,951
(57)
7,131
-
-
(930)
3,094
2,393
2,894
6,201
5,784
-
-
-
1,847
(361)
1,376
(1,067)
-
12
-
(3)
9
-
(3)
6
7,886
12
7,683
(990)
14,591
9,007
(1,431)
22,167
Balance at 30 June 2018
8,878
2,393
4,380
6,510
Impairment testing
For the purpose of impairment testing, goodwill and brand names are allocated to the respective operating entity’s cash
generating ('CGU'):
Goodwill and intangibles with indefinite useful lives are allocated to the following cash generating units (CGU):
Goodwill
CGU:
- Exclusive Tyres Distributors Pty Ltd
- M.P.C Mags and Tyres Pty Ltd
- Dynamic Wheel Co Pty Ltd
- Top Draw Tyres Pty Ltd
- Statewide Tyre Distribution Pty Ltd
Brand names
CGU:
- M.P.C Mags and Tyres Pty Ltd
Consolidated
2018
$'000
2017
$'000
2,735
2,339
755
1,311
1,738
-
2,339
755
-
-
8,878
3,094
Consolidated
2018
$'000
2017
$'000
2,393
2,393
The recoverable amount of assets including goodwill and brand name assets is determined based on value in use
calculations at the individual CGU level at 30 June 2018. The value in use assessment is conducted using a discount cash
flow (DCF) methodology derived from managements forecast for FY19. This has been based on management and
Directors past experience, current performance and market conditions to estimate the future cashflows that are expected to
arise at the CGU level.
46
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 14. Non-current assets - intangibles (continued)
The DCF model adopted by the directors was based on the FY19 approved budget. The key assumptions used in the
testing for impairment are:
●
●
●
Post tax discount rate 14%;
Terminal value of 6 times multiple; and
Budgeted EBITDA growth rate of 4% per annum.
No reasonable change in any if the key assumptions would result in an impairment.
The Directors’ assessment of 2018 goodwill and brand names were that they are not impaired.
Note 15. Current liabilities - trade and other payables
Trade payables
GST payable
Deferred consideration
Other payables and accruals
Consolidated
2018
$'000
2017
$'000
31,096
133
-
3,789
23,325
104
300
1,632
35,018
25,361
Refer to note 25 for further information on financial instruments.
Deferred consideration at 30 June 2017 related to the amount owing as part of the acquisition of the Group’s 50%
shareholding in M.P.C Mags and Tyres Pty Ltd in the 2017 financial year. This consideration was paid in full during the
2018 financial year.
Note 16. Current liabilities - borrowings
Bank loans
Lease liability
Consolidated
2018
$'000
2017
$'000
1,436
179
1,200
155
1,615
1,355
Refer to note 20 for further information on assets pledged as security and financing arrangements.
Refer to note 25 for further information on financial instruments.
Note 17. Current liabilities - derivative financial instruments
Consolidated
2018
$'000
2017
$'000
-
399
Forward foreign exchange contracts
Refer to note 25 for further information on financial instruments.
Refer to note 26 for further information on fair value measurement.
47
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 18. Current liabilities - provisions
Employee benefits
Warranties
Consolidated
2018
$'000
2017
$'000
2,343
764
1,294
682
3,107
1,976
Warranties
The provision represents the estimated warranty claims in respect of products sold which are still under warranty at the
reporting date. The provision is estimated based on historical warranty claim information, sales levels and any recent
trends that may suggest future claims could differ from historical amounts.
Consolidated - 2018
Carrying amount at the start of the year
Additional provisions recognised
Carrying amount at the end of the year
Warranties
$'000
682
82
764
Amounts not expected to be settled within the next 12 months
The current provision for employee benefits includes all unconditional entitlements where employees have completed the
required period of service and also those where employees are entitled to pro-rata payments in certain circumstances. The
entire amount is presented as current, since the Group does not have an unconditional right to defer settlement. Based on
past experience, the Group expects all employees to take the full amount of accrued leave or require payment within the
next 12 months.
Note 19. Non-current liabilities - payables
Deferred consideration
Other payables
Consolidated
2018
$'000
2017
$'000
-
-
-
1,750
401
2,151
Refer to note 25 for further information on financial instruments.
Deferred consideration at 30 June 2017 related to the amount owing as part of the acquisition of the Group’s 50%
shareholding in M.P.C Mags and Tyres Pty Ltd in the 2017 financial year. This consideration was paid in full during the
2018 financial year.
Note 20. Non-current liabilities - borrowings
Bank loans
Lease liability
Refer to note 25 for further information on financial instruments.
48
Consolidated
2018
$'000
2017
$'000
12,585
235
6,580
232
12,820
6,812
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 20. Non-current liabilities - borrowings (continued)
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Bank loans
Lease liability
Consolidated
2018
$'000
2017
$'000
14,021
414
7,780
387
14,435
8,167
The bank loan facility has an expiry date of 21 May 2021.
Assets pledged as security
The bank loan is secured over the assets of National Tyre & Wheel Limited and the following subsidiaries - Exclusive Tyre
Distributors Pty Ltd, MPC Mags & Tyres Pty Ltd and Dynamic Wheel Co Pty Limited. The bank requires security over the
assets of Exclusive Tyre Distributors (NZ) Ltd and Statewide Tyre Distribution Pty Ltd to be provided within 30 days of
NTAW’s 2018 AGM.
The lease liabilities are effectively secured as the rights to the leased assets, recognised in the statement of financial
position, revert to the lessor in the event of default.
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Bank loans
Bank guarantee
Used at the reporting date
Bank loans
Bank guarantee
Unused at the reporting date
Bank loans
Bank guarantee
Note 21. Non-current liabilities - provisions
Employee benefits
Warranties
49
Consolidated
2018
$'000
2017
$'000
14,021
4,157
18,178
14,021
2,466
16,487
-
1,691
1,691
7,780
-
7,780
7,780
-
7,780
-
-
-
Consolidated
2018
$'000
2017
$'000
291
1,009
276
1,019
1,300
1,295
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 21. Non-current liabilities - provisions (continued)
Warranties
The provision represents the estimated warranty claims in respect of products sold which are still under warranty at the
reporting date. The provision is estimated based on historical warranty claim information, sales levels and any recent
trends that may suggest future claims could differ from historical amounts.
Movements in provisions
Movements in each class of provision during the current financial year, other than employee benefits, are set out below:
Consolidated - 2018
Carrying amount at the start of the year
Amounts used
Carrying amount at the end of the year
Note 22. Equity - issued capital
Warranties
$'000
1,019
(10)
1,009
Ordinary shares - fully paid
102,321,143 68,000,002
64,761
18,942
Consolidated
2018
Shares
2017
Shares
2018
$'000
2017
$'000
Movements in ordinary share capital
Details
Balance
Balance
Consolidation of existing shares (pre-IPO)
Split of existing shares (pre-IPO)
Issue of shares on IPO capital raising
Issue of shares on acquisition of business
Issue of shares per Employee Option Plan
Issue of shares for acquisition of Statewide Tyre
Distribution Pty Ltd
Issue of shares for acquisition of Statewide Tyre
Distribution Pty Ltd
Share issue transaction costs, net of tax
Date
Shares
Issue price
$'000
1 July 2016
68,000,002
30 June 2017
21 November 2017
21 November 2017
14 December 2017
14 December 2017
14 December 2017
68,000,002
(14,768,755)
833,495
24,922,767
14,541,654
7,582,964
18,942
18,942
-
-
24,923
14,542
5,912
$1.00
$1.00
$0.78
31 May 2018
553,279
$1.22
675
18 June 2018
655,737
$1.22
800
(1,033)
64,761
Balance
30 June 2018
102,321,143
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in
proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the
Company does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
Share buy-back
There is no current on-market share buy-back.
50
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 22. Equity - issued capital (continued)
Capital risk management
The Group's objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can
provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce
the cost of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated
as total borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares or sell assets to reduce debt.
The Group would look to raise capital when an opportunity to invest in a business or company was seen as value adding
relative to the current Company's share price at the time of the investment. The Group is actively pursuing additional
investments in the short term as it continues to integrate and grow its existing businesses in order to maximise synergies.
Note 23. Equity - reserves
Foreign currency reserve
Share-based payments reserve
Other reserves
Consolidated
2018
$'000
2017
$'000
(215)
-
-
(215)
231
2,092
(356)
1,967
Foreign currency reserve
The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign
operations to Australian dollars. It is also used to recognise gains and losses on hedges of the net investments in foreign
operations.
Share-based payments reserve
The share-based payments reserve is used to recognise the value of equity benefits provided to employees and directors
as part of their remuneration. Share-based payment reserves have been transferred to share capital upon exercising.
Other reserves
The other reserve is used to record transactions with owners in their capacity as owners and transfers to the non-
controlling interest. These have been transferred to retained earnings following the 100% acquisition of Dynamic Wheel
Co. Pty Ltd during the year.
Note 24. Equity - dividends
Dividends
Dividends paid during the financial year were as follows:
Final dividend for the year ended 30 June 2017 (declared and paid prior to the IPO)
Interim dividend for the year ended 30 June 2018 of 1.0 cents per ordinary share
Dividends to non-controlling interests
Consolidated
2018
$'000
2017
$'000
15,000
1,011
656
3,804
-
457
16,667
4,261
51
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 24. Equity - dividends (continued)
At the date of signing these financial statements, the Company has declared a fully franked final dividend of 2.3 cents per
share with a record date of 13 September 2018 and a payment date of 8 October 2018. The total dividend payable is $2.35
million. 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.
Franking credits
Consolidated
2018
$'000
2017
$'000
Franking credits available for subsequent financial years based on a tax rate of 30%
6,049
9,453
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for franking
credits that will arise from the payment of the amount of the provision for income tax at the reporting date.
Note 25. Financial instruments
Financial risk management objectives
The Group's activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and
interest rate risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the
unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the
Group. The Group uses derivative financial instruments such as forward foreign exchange contracts to hedge certain risk
exposures. Derivatives are exclusively used for hedging purposes, i.e. not as trading or other speculative instruments. The
Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity
analysis in the case of interest rate, foreign exchange and other price risks and ageing analysis for credit risk.
Risk management is carried out by senior finance executives ('finance') under policies approved by the Board of Directors
('the Board'). These policies include identification and analysis of the risk exposure of the Group and appropriate
procedures, controls and risk limits. Finance identifies, evaluates and hedges financial risks within the Group's operating
units. Finance reports to the Board on a monthly basis.
Market risk
Foreign currency risk
The Group undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk
through foreign exchange rate fluctuations.
Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities
denominated in a currency that is not the entity's functional currency. The risk is measured using sensitivity analysis and
cash flow forecasting.
In order to protect against exchange rate movements, the Group has entered into forward foreign exchange contracts.
These contracts are hedging highly probable forecasted cash flows for the ensuing financial year. Most of the Group’s
transactions are carried out in $AUD. Exposures to currency exchange rates arise from the Group’s overseas purchases,
which are primarily denominated in $US-Dollars ($USD). To mitigate the Group’s exposure to foreign currency risk, non-
$AUD cash flows are monitored, and forward exchange contracts are entered into in accordance with the Group’s risk
management policies. The usual length of forward contracts entered into are short term and cover known $USD
exposures. Where the amounts to be paid and received in a specific currency are expected to largely offset one another,
no further hedging activity is undertaken.
At 30 June 2018, the Group had forward foreign exchange contracts to acquire $15,355,000 of USD (2017: $16,725,000).
These are due to mature within 3 months of balance date. The fixed exchange rates on these contracts ranged from
0.7335 to 0.8046 (2017: 0.7190 to 0.7664).
The Group’s exposure to foreign currency risk at the end of the reporting period, expressed in AUD, was as follows:
52
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 25. Financial instruments (continued)
Cash
Trade payables
Buy foreign currency (held for trading)
Consolidated
2018
$'000
2017
$'000
1
(29,984)
463
218
(22,797)
(399)
(29,520)
(22,978)
Based on this exposure, had the Australian dollar weakened or strengthened against these foreign currencies with all other
variables held constant, the Group's profit before tax for the year would have been affected as follows:
Consolidated - 2018
% change
profit before
tax
Effect on
equity
% change
profit before
tax
Effect on
equity
AUD strengthened
Effect on
AUD weakened
Effect on
USD
10%
2,681
1,877
(10%)
(3,277)
(2,294)
Consolidated - 2017
% change
profit before
tax
Effect on
equity
% change
profit before
tax
Effect on
equity
AUD strengthened
Effect on
AUD weakened
Effect on
USD
10%
2,105
1,474
(10%)
(2,573)
(1,801)
The percentage change is the expected overall volatility of the significant currencies, which is based on management's
assessment of reasonable possible fluctuations. The actual foreign exchange loss for the year ended 30 June 2018 was
$657,000 (2017: loss of $160,000).
Price risk
The Group is not exposed to any significant price risk.
Interest rate risk
The Group's main interest rate risk arises from long-term borrowings. Borrowings obtained at variable rates expose the
Group to interest rate risk. Borrowings obtained at fixed rates expose the Group to fair value interest rate risk.
As at the reporting date, the Group had the following variable rate borrowings outstanding:
Consolidated
Borrowings
Net exposure to cash flow interest rate risk
2018
2017
Balance
Balance
$'000
$'000
14,021
7,180
14,021
7,180
An analysis by remaining contractual maturities in shown in 'liquidity and interest rate risk management' below.
For the Group the bank loans outstanding, totalling $14,021,000 (2017: $7,180,000), are principal and interest payment
loans. An official increase/decrease in interest rates of 50 (2017: 50) basis points would have an adverse/favourable effect
on profit before tax of $70,000 (2017: $39,000) per annum. The percentage change is based on the expected volatility of
interest rates using market data and analysts forecasts. In addition, minimum principal repayments of $1,436,000
(2017:$1,200,000) are due during the subsequent 12 month period.
53
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 25. Financial instruments (continued)
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
Group. The Group has a strict code of credit, including obtaining agency credit information, confirming references and
setting appropriate credit limits. The Group obtains guarantees where appropriate to mitigate credit risk. The maximum
exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for
impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. The
Group does not hold any collateral.
Liquidity risk
Vigilant liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash
equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable.
The Group manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously
monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities.
Financing arrangements
Unused borrowing facilities at the reporting date:
Bank guarantee
Consolidated
2018
$'000
2017
$'000
1,691
-
Remaining contractual maturities
The following tables detail the Group's remaining contractual maturity for its financial instrument liabilities. The tables have
been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the
financial liabilities are required to be paid. The tables include both principal cash flows disclosed as remaining contractual
maturities.
Consolidated - 2018
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing - variable
Bank loans
Interest-bearing - fixed rate
Lease liability
Total non-derivatives
1 year or less
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years
$'000
Over 5 years
$'000
Remaining
contractual
maturities
$'000
31,096
1,299
-
-
-
-
1,436
1,436
11,149
179
34,010
235
1,671
-
11,149
-
-
-
-
-
31,096
1,299
14,021
414
46,830
54
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 25. Financial instruments (continued)
Consolidated - 2017
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Deferred consideration
Interest-bearing - variable
Bank loans
Interest-bearing - fixed rate
Lease liability
Total non-derivatives
1 year or less
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years
$'000
Over 5 years
$'000
Remaining
contractual
maturities
$'000
23,325
244
300
-
401
1,750
-
-
-
1,200
1,200
5,380
168
25,237
243
3,594
-
5,380
-
-
-
-
-
-
-
-
23,325
645
2,050
7,780
411
34,211
399
399
Derivatives
Forward foreign exchange contracts net settled
Total derivatives
-
-
399
399
-
-
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed
above.
Note 26. Fair value measurement
Fair value hierarchy
The following tables detail the Group's assets and liabilities, measured or disclosed at fair value, using a three level
hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
or indirectly
Level 3: Unobservable inputs for the asset or liability
Consolidated - 2018
Assets
Forward foreign exchange contracts - derivatives
Total assets
Consolidated - 2017
Liabilities
Forward foreign exchange contracts - derivatives
Total liabilities
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
Level 1
$'000
-
-
-
-
463
463
Level 2
$'000
Level 3
$'000
399
399
-
-
-
-
463
463
Total
$'000
399
399
There were no transfers between levels during the financial year.
The carrying amounts of trade and other receivables and trade and other payables are assumed to approximate their fair
values due to their short-term nature.
The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the current market
interest rate that is available for similar financial liabilities.
55
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 26. Fair value measurement (continued)
Valuation techniques for fair value measurements categorised within level 2 and level 3
Derivative financial instruments have been valued using quoted market rates, adjusted as appropriate. This valuation
technique maximises the use of observable market data where it is available and relies as little as possible on entity
specific estimates.
Note 27. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by Pitcher Partners, the auditor of
the Company:
Audit services - Pitcher Partners
Audit or review of the Group’s annual financial statements
Audit or review of the Exclusive Tyre Distributors (NZ) Ltd’s annual financial statements
Other services - Pitcher Partners
Investigating Accountant’s Report
Transaction services
Tax compliance services
Note 28. Contingent liabilities
Consolidated
2018
$
2017
$
185,000
15,000
71,426
15,000
200,000
86,426
276,236
248,486
113,000
-
25,481
20,040
637,722
45,521
837,722
131,947
The Group has given bank guarantees as at 30 June 2018 of $2,466,000 (2017: $2,366,000) to various landlords.
56
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 29. Commitments
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
Lease commitments - finance
Committed at the reporting date and recognised as liabilities, payable:
Within one year
One to five years
Total commitment
Less: Future finance charges
Net commitment recognised as liabilities
Representing:
Lease liability - current (note 16)
Lease liability - non-current (note 20)
Consolidated
2018
$'000
2017
$'000
3,178
4,196
2,650
4,584
7,374
7,234
194
253
447
(33)
414
179
235
414
168
243
411
(24)
387
155
232
387
Operating lease commitments includes contracted amounts for various warehouses and offices under non-cancellable
operating leases expiring within four years (2017: five years) with, in some cases, options to extend. The leases have
various escalation clauses. On renewal, the terms of the leases are renegotiated.
Finance lease commitments includes contracted amounts for various motor vehicles with a written down value of $617,000
(2017: $612,000) under finance leases expiring within one to three years (2017: one to four years). Under the terms of the
leases, the Group has the option to acquire the leased assets for predetermined residual values on the expiry of the
leases.
Note 30. Key management personnel disclosures
Compensation
The aggregate compensation made to directors and other members of key management personnel of the Group is set out
below:
Consolidated
2018
$
2017
$
1,929,696
126,424
(14,805)
1,609,337
1,339,871
-
-
-
3,650,652
1,339,871
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
Note 31. Related party transactions
Parent entity
National Tyre & Wheel Limited is the parent entity.
57
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 31. Related party transactions (continued)
Subsidiaries
Interests in subsidiaries are set out in note 34.
Key management personnel
Disclosures relating to key management personnel are set out in note 30 and the remuneration report included in the
directors' report.
Transactions with related parties
During the financial year, a Group entity leased business premises owned by a closely related party of Chris Hummer on
commercial terms. The lease expired on 30 April 2017 and the parties are ‘holding over’ until new premises are
identified. Rent payments for the financial year totalled $123,598 (2017: $nil), with $nil outstanding at 30 June 2018 (2017:
$nil).
Receivable from and payable to related parties
There were no trade receivables from or trade payables to related parties at the current and previous reporting date.
Loans to/from related parties
There were no loans to or from related parties at the current and previous reporting date.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
Note 32. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Loss after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Share-based payments reserve
Accumulated losses
Total equity
58
Parent
2018
$'000
2017
$'000
(2,203)
(1,175)
(2,203)
(1,175)
Parent
2018
$'000
2017
$'000
3,141
1,788
62,814
31,713
6,960
7,934
19,567
14,528
64,761
-
(21,514)
18,942
2,092
(3,849)
43,247
17,185
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 32. Parent entity information (continued)
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity had a deed of cross guarantee in place in relation to certain subsidiaries at 30 June 2018 and 30 June
2017 (refer to note 35).
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2018 and 30 June 2017.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2018 and 30 June 2017.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2, except for the
following:
●
●
●
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Investments in associates are accounted for at cost, less any impairment, in the parent entity.
Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an
indicator of an impairment of the investment.
Note 33. Business combinations
2018
Top Draw Tyres Proprietary Limited ('Top Draw Tyres')
On 30 September 2017, the Group acquired 34% of the ordinary shares in Top Draw Tyres, the importer and distributor of
tyres in South Africa. The Group subsequently acquired a further 16% on 13 December 2017. The Group now owns 50%
of Top Draw Tyres and the remaining shares are held by the Top Draw Tyres vendors. Total consideration for the
acquisition was $4,006,000 in cash. The acquired business has contributed revenue of $8,260,000 and profit before tax of
$735,000 to the Group from the date of acquisition to 30 June 2018. If the acquisition occurred on 1 July 2017, the full year
contributions would have been revenues of $17,060,000 and profit before tax of $1,190,000. NTAW recognised $133,000
as previously equity accounted profits for the period up until control was obtained.
S.N Tyre Wholesaler Pty Ltd ('Cotton')
On 31 October 2017, the Group acquired 100% of the business assets from Cotton, a distributor of tyres in South Australia
and Northern Territory. Total consideration for the acquisition was $6,220,000, including $3,732,000 in cash consideration
and $2,488,000 in Company shares, issued on 14 December 2017. The acquired business assets have been incorporated
in Exclusive Tyre Distributors. The acquired business assets have contributed revenue of $5,780,000 and profit before tax
of $920,000 to the Group from the date of acquisition to 30 June 2018. If the acquisition occurred on 1 July 2017, the full
year contributions would have been revenues of $8,980,000 and profit before tax of $1,170,000.
Statewide Tyre Distribution Pty Ltd ('Statewide')
On 31 May 2018, the Group acquired 100% of the ordinary shares in Statewide, the importer and distributor of tyres in
South Australia, New South Wales and the Northern Territory. Total consideration for the acquisition was $8,542,000,
including $7,067,000 in cash consideration and $1,475,000 in Company shares, issued on 31 May 2018 and 18 June
2018. The acquired business has contributed revenue of $1,970,000 and profit before tax of $170,000 to the Group from
the date of acquisition to 30 June 2018. Due to Statewide not maintaining accounting records in accordance with Australian
Accounting Standards prior to the acquisition, it is impracticable to disclose the impact to revenue and profit and loss of the
Group for the 2018 financial year if the acquisition had been at 1 July 2017.
The goodwill on the above acquisitions comprise the value of the workforce, future revenues from those customers which
are not current and expected and future synergies to be realised as part of the Group.
The assets acquired and liabilities assumed in the above business combinations have been accounted for on a provisional
basis as at year end.
59
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 33. Business combinations (continued)
Details of the acquisitions are as follows:
Cash and cash equivalents
Trade and other receivables
Inventories
Plant and equipment
Motor vehicles
Customer relationships
Importation rights
Deferred tax asset
Trade payables
Deferred tax liability
Provisions
Other liabilities
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration
transferred
Representing:
Cash paid or payable to vendor
National Tyre & Wheel Limited shares issued to vendor
Non-controlling interest
Share of previous equity accounted profit
Pre-IPO
Top Draw
Pre-IPO
Post-IPO
Tyres
Cotton
Fair value
Fair value
Statewide
Fair value
Total
Fair value
$'000
$'000
$'000
$'000
1,246
1,812
6,266
35
44
327
1,376
55
(3,669)
(511)
(1,109)
(216)
5,656
1,311
-
1,415
2,181
106
102
1,109
-
-
(945)
(333)
(150)
-
3,485
2,735
204
2,819
4,300
80
198
411
-
206
(485)
(123)
(688)
(118)
6,804
1,738
1,450
6,046
12,747
221
344
1,847
1,376
261
(5,099)
(967)
(1,947)
(334)
15,945
5,784
6,967
6,220
8,542
21,729
4,006
-
2,828
133
3,732
2,488
-
-
7,067
1,475
-
-
14,805
3,963
2,828
133
6,967
6,220
8,542
21,729
Cash used to acquire business, net of cash acquired:
Acquisition-date fair value of the total consideration
transferred
Less: cash and cash equivalents
Less: share of equity accounted profit from previous periods
Less: shares issued by Company as part of consideration
Less: non-controlling interest
6,967
(1,246)
(133)
-
(2,828)
6,220
-
-
(2,488)
-
8,542
(204)
-
(1,475)
-
21,729
(1,450)
(133)
(3,963)
(2,828)
Net cash used
2,760
3,732
6,863
13,355
Other
On 14 December 2017, the Group acquired the remaining 45.6% of the shares in Dynamic Wheel Co Pty Ltd, a previously
recognised controlled entity. Total consideration for the acquisition was $4,196,000 in Company shares.
On 14 December 2017, the Group acquired the remaining 50% of the shares in M.P.C Mags and Tyres Pty Ltd, a
previously recognised controlled entity. Total consideration for the acquisition of the remaining shares was $7,858,000 in
Company shares.
60
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 33. Business combinations (continued)
2017
M.P.C Mags and Tyres Pty Ltd
On 31 March 2017, the Group acquired 50% of the assets and liabilities of M.P.C Mags and Tyres Pty Ltd. This was
subsequently increased to 100% with the remaining 50% acquired on 14 December 2017.
The goodwill on acquisition comprises the value of the workforce, future revenues from those customers which are not
current and expected and future synergies to be realised as part of the Group. If the acquisition occurred on 1 July 2016,
the full year contributions would have been revenues of $12,001,000 and profit before tax of $2,204,000. The purchase
price allocation for M.P.C Mags and Tyres Pty Ltd has been finalised resulting in a decrease of goodwill of $86,000.
Goodwill is not deductible for tax purposes.
Details of the acquisition are as follows:
Fair value
$'000
33
992
3,272
238
48
2,393
2,951
(578)
(291)
(1,603)
(133)
7,322
2,339
9,661
3,950
2,050
3,661
9,661
9,661
(33)
(2,050)
(3,661)
3,917
Cash and cash equivalents
Trade receivables
Inventories
Plant and equipment
Motor vehicles
Brand name
Customer relationships
Trade payables
Other payables
Deferred tax liability
Provisions
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Cash paid or payable to vendor
Deferred consideration
Non-controlling interest
Cash used to acquire business, net of cash acquired:
Acquisition-date fair value of the total consideration transferred
Less: cash and cash equivalents
Less: deferred consideration
Less: non-controlling interest
Net cash used
61
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 34. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in note 2:
Name
Exclusive Tyres Distributors Pty Ltd
Exclusive Tyres Distributors (NZ) Ltd
Dynamic Wheel Co Pty Ltd
M.P.C Mags and Tyres Pty Ltd
Top Draw Tyres Proprietary Limited
Statewide Tyre Distribution Pty Ltd
Note 35. Deed of cross guarantee
Principal place of business /
Country of incorporation
Australia
New Zealand
Australia
Australia
South Africa
Australia
Ownership interest
2017
2018
%
%
100.00%
100.00%
100.00%
100.00%
50.00%
100.00%
100.00%
100.00%
54.40%
50.00%
-
-
The following entities are party to a deed of cross guarantee under which each company guarantees the debts of the
others:
National Tyre & Wheel Limited
Exclusive Tyres Distributors Pty Ltd
Exclusive Tyres Distributors (NZ) Ltd
By entering into the deed, the Australian wholly-owned entities have been relieved from the requirement to prepare
financial statements and directors' report under Corporations Instrument 2016/785 issued by the Australian Securities and
Investments Commission.
The above companies represent a 'Closed Group' for the purposes of the Corporations Instrument, and as there are no
other parties to the deed of cross guarantee that are controlled by National Tyre & Wheel Limited, they also represent the
'Extended Closed Group'.
62
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 35. Deed of cross guarantee (continued)
Set out below is a consolidated statement of profit or loss and other comprehensive income and statement of financial
position of the 'Closed Group'.
Statement of profit or loss and other comprehensive income
Revenue
Raw materials and consumables used
Employee benefits expense
Depreciation and amortisation expense
Legal and professional fees
Marketing expenses
Occupancy expenses
Insurance costs
Listing costs
Other expenses
Finance costs
Profit before income tax expense
Income tax expense
Profit after income tax expense
Other comprehensive income
Foreign currency translation
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Equity - retained profits
Retained profits at the beginning of the financial year
Profit after income tax expense
Dividends paid
Transfer from share-based payments reserve
Transfer from other reserves
Retained profits at the end of the financial year
2018
$'000
2017
$'000
113,466
(73,151)
(14,079)
(1,588)
(719)
(4,719)
(3,121)
(392)
(2,078)
(8,372)
(485)
106,003
(71,802)
(11,791)
(1,508)
(235)
(4,795)
(3,073)
(328)
-
(3,827)
(461)
4,762
(1,516)
8,183
(2,743)
3,246
5,440
(133)
(133)
(2)
(2)
3,113
5,438
2018
$'000
2017
$'000
14,947
3,246
(16,011)
548
(356)
13,156
5,440
(3,804)
155
-
2,374
14,947
63
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 35. Deed of cross guarantee (continued)
Statement of financial position
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Other
Non-current assets
Receivables
Other financial assets
Property, plant and equipment
Intangibles
Deferred tax
Total assets
Current liabilities
Trade and other payables
Borrowings
Income tax
Provisions
Other financial liabilities
Other
Non-current liabilities
Payables
Borrowings
Provisions
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits
Total equity
64
2018
$'000
2017
$'000
15,896
20,691
26,710
557
420
64,274
-
33,567
2,897
9,010
1,764
47,238
12,571
17,682
24,900
-
269
55,422
80
8,832
2,549
6,202
858
18,521
111,512
73,943
25,755
1,529
1,289
1,990
-
-
30,563
-
12,716
1,230
13,946
24,297
1,277
385
1,678
388
48
28,073
2,151
6,646
1,217
10,014
44,509
38,087
67,003
35,856
64,761
(132)
2,374
18,942
1,967
14,947
67,003
35,856
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 36. Reconciliation of profit after income tax to net cash from operating activities
Profit after income tax expense for the year
Adjustments for:
Depreciation and amortisation
Net loss/(gain) on disposal of property, plant and equipment
Share-based payments
Listing costs recognised in profit after income tax
Profit recognised for equity accounted investments
Amortisation of capitalised borrowing costs
Bad debts
Foreign exchange differences
Change in operating assets and liabilities:
Increase in trade and other receivables
Increase in inventories
Increase in deferred tax assets
Increase in other operating assets
Increase/(decrease) in trade and other payables
Increase in provision for income tax
Increase/(decrease) in other provisions
Decrease in other operating liabilities
Consolidated
2018
$'000
2017
$'000
5,355
6,204
2,129
2
2,657
2,078
(132)
167
42
(2,166)
(546)
(3,572)
(902)
(884)
5,473
141
(892)
(48)
1,651
(36)
699
-
-
143
64
264
(446)
(1,458)
(64)
(106)
(883)
385
316
(216)
Net cash from operating activities
8,902
6,517
Note 37. Non-cash investing and financing activities
Acquisition of plant and equipment by means of finance leases
211
73
Consolidated
2018
$'000
2017
$'000
65
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 38. Earnings per share
Profit after income tax
Non-controlling interest
Consolidated
2018
$'000
2017
$'000
5,355
(878)
6,204
(674)
Profit after income tax attributable to the owners of National Tyre & Wheel Limited
4,477
5,530
Weighted average number of ordinary shares used in calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
85,245,148 68,000,002
Options over ordinary shares
3,402,889
5,573,529
Weighted average number of ordinary shares used in calculating diluted earnings per share 88,648,037 73,573,531
Number
Number
Basic earnings per share
Diluted earnings per share
Note 39. Share-based payments
Cents
Cents
5.25
5.05
8.13
7.52
Two employee option plans were in existence during the financial year.
NTAW Senior Executive Option Plan ('SEOP')
The SEOP was used prior to the Company’s listing on the ASX to recognise senior executives contribution to the Group
and to allow them to share in the growth in value of the Group.
Under the terms of the SEOP, participants are granted options over ordinary shares of the Company which vest only if
certain events occur.
This plan has been discontinued following the IPO.
Employee Share Option Plan ('ESOP')
The Company has adopted a new employee share option plan on 6 November 2017. The details of the ESOP are
summarised as follows:
Options may be granted under the ESOP to any person who is, or is proposed to be, a full-time or part-time employee, a
non-executive director, a contractor (40% full-time equivalent ('FTE')) or a casual employee (40% FTE) of the Company or
any of its associated bodies corporate, and whom the Board determines to be an eligible person for the purposes of
participation in the ESOP (referred to as an 'Eligible Person').
An option may not be granted under the ESOP if, immediately following its grant, the shares to be received on exercise of
the option, when aggregated with the number of shares which would be issued if each unvested option granted under the
ESOP or any other employee incentive scheme of the Company were to vest and be exercised and the number of shares
issued in the previous 3 years under the ESOP or any other employee incentive scheme of the Company, exceeds 5% of
the total number of issued shares at the time of grant (or any varied limit if permitted under the Corporations Act 2001, ASX
Listing Rules and ASIC instruments). Certain offers of options may be excluded from calculation as permitted under Class
Order 14/1000, including excluded offers under section 708 of the Corporations Act 2001 and offers under a disclosure
document.
Each option entitles the participant to subscribe for one ordinary share in the Company.
66
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 39. Share-based payments (continued)
The specific terms relevant to the grant of options are set out in an offer from the Company to the Eligible Person which
contains details of the application price (if any) (which must not be for more than nominal consideration), the expiry date,
the exercise price, the vesting date, any applicable performance conditions and other specific terms relevant to those
options.
Unless otherwise specified in the offer of an option, if a “Change of Control Event” occurs before the vesting date of an
option, that option immediately vests and ceases to be subject to any performance condition to which it was subject. A
Change of Control Event means the occurrence of one or more of the following events:
●
a person who has offered to acquire all shares in the Company acquires Control (as defined in section 50AA of the
Corporations Act 2001) of the Company;
any other event occurs which causes a change in Control of the Company;
unless the Board determines otherwise, a takeover bid is recommended by the Board or a scheme of arrangement
which would have a similar effect to a full takeover bid is announced by the Company; and
any other event which the Board reasonably considers should be regarded as a Change of Control Event.
●
●
●
Options may only be transferred:
●
●
to a legal personal representative on the death of the participant or to the participant’s trustee in bankruptcy on the
bankruptcy of the participant; or
pursuant to an off-market takeover bid, in various compulsory acquisition scenarios under Chapter 6A of the
Corporations Act 2001, under a creditor’s scheme of arrangement under section 411 of the Corporations Act 2001 or
if approved by the Board.
An option does not confer any rights to participate in a new issue of shares by the Company.
If the Company conducts a rights issue, the exercise price of options will be adjusted in accordance with the adjustment
formula for pro rata issues set out in the Listing Rules.
If the Company makes a bonus issue of securities to holders of shares, the rights of a holder in respect of an unexercised
option will be modified such that the participant will receive, upon exercise of an option, one Share plus such additional
securities which the participant would have received had the participant exercised the option immediately before the record
date for that bonus issue and participated in the bonus issue as the holder of the share.
If the Company’s issued capital is reorganised (including consolidation, subdivision, reduction, or return), then the number
of options, the exercise price or both or any other terms will be reorganised in a manner determined by the Board which
complies with the Listing Rules.
Any shares issued under the ESOP rank equally in all respects with the Shares of the same class on issue, subject to the
restrictions on the transfer of shares.
Shares issued on exercise of options are not transferable for the period (if any) specified in the offer from the Company to
the Eligible Person.
An unvested option lapses upon the first to occur of the following:
●
●
●
●
its expiry date;
any applicable performance condition not being satisfied prior to the end of any prescribed performance period;
a transfer or purported transfer of the option in breach of the rules;
30 days following the day the participant ceases to be employed or engaged by the Company or an associated body
corporate by resigning voluntarily and not recommencing employment with the Company or an associated body
corporate before the expiration of that 30 days;
30 days following the day the participant ceases to be employed or engaged by the Company or an associated body
corporate by reason of his or her death, disability, bona fide redundancy, or any other reason with the approval of the
Board and the participant has not recommenced employment with the Company or an associated body corporate
before the expiration of those 30 days, however the Board has a discretion to deem all or any of the options to have
vested; or
termination of the participant’s employment or engagement with the Company or an associated body corporate on the
basis the participant acted fraudulently, dishonestly, in breach of the participant’s obligations or otherwise for cause.
●
●
67
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 39. Share-based payments (continued)
A vested but unexercised option lapses upon the first to occur of the following:
●
●
●
its expiry date;
a transfer or purported transfer of the option in breach of the rules; or
termination of the participant’s employment or engagement with the Company or an associated body corporate on the
basis the participant acted fraudulently, dishonestly, in breach of the participant’s obligations or otherwise for cause.
Subject to the ASX Listing Rules and the law, the Board may at any time by resolution amend or add to the rules of the
ESOP. However, the consent of a participant is required for any change to the rules or option terms which prejudicially
affects the rights of the participant in relation to the option (except for certain changes, including changes to benefit the
administration of the Plan or to comply with laws, ASX Listing Rules or regulations).
Set out below are summaries of options granted under the plans:
2018
Grant
date
Expiry
date
Exercise
price
Balance at
start of year
Granted
Option split
Forfeited
Exercised
Balance at
end of year
01/07/2012
01/04/2014
01/07/2016
01/07/2016
01/07/2016
30/06/2017
01/07/2017
01/07/2017
01/07/2022 $0.0000
01/07/2022 $0.0000
01/07/2022 $0.50221
01/07/2022 $0.50221
01/07/2022 $0.0000
01/07/2022 $0.0000
01/07/2022 $0.0000
01/07/2022 $0.50221
1,487,945
77,305
220,000
2,150,000
1,324,339
1,000,000
-
-
-
-
-
-
-
-
1,006,470
200,000
23,298
1,210
3,445
33,665
20,737
15,658
15,760
3,132
6,259,589
1,206,470
116,905
-
-
-
-
-
-
-
-
-
(1,511,243)
(78,515)
(223,445)
(2,183,665)
(1,345,076)
(1,015,658)
(1,022,230)
(203,132)
(7,582,964)
-
-
-
-
-
-
-
-
-
1
The Exercise price was adjusted during the financial year as a result of the share consolidation and share split that occurred prior to the IPO.
2017
Grant
date
Expiry
date
Exercise
price
Balance at
start of year
Granted
Option split
Forfeited
Exercised
01/07/2012
01/07/2013
01/07/2014
01/07/2014
01/07/2015
01/07/2016
01/07/2016
01/07/2016
30/06/2017
01/07/2022 $0.0000
01/07/2022 $1.0000
01/07/2022 $0.7600
01/07/2022 $0.0000
01/07/2022 $0.6200
01/07/2022 $0.5100
01/07/2022 $0.5100
01/07/2022 $0.0000
01/07/2022 $0.0000
1,800,000
1,000,000
2,060,000
77,305
90,000
-
-
-
-
-
-
-
-
-
220,000
2,150,000
1,324,339
1,000,000
5,027,305
4,694,339
-
-
-
-
-
-
-
-
-
-
(312,055)
(1,000,000)
(2,060,000)
-
(90,000)
-
-
-
-
(3,462,055)
Balance at
end of year
-
-
-
-
-
-
-
-
-
-
1,487,945
-
-
77,305
-
220,000
2,150,000
1,324,339
1,000,000
6,259,589
68
For personal use only
Notes to the financial statements
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Notes to the financial statements
30 June 2018
Note 39. Share-based payments (continued)
Set out below are the options exercisable at the end of the financial year:
Grant date
Expiry date
01/07/2012
01/07/2014
01/07/2016
01/07/2016
01/07/2016
30/06/2017
01/07/2022
01/07/2022
01/07/2022
01/07/2022
01/07/2022
01/07/2022
2018
2017
Number
Number
-
-
-
-
-
-
-
1,487,945
77,305
220,000
2,150,000
1,324,339
1,000,000
6,259,589
All options were exercised just prior to the Group listing on the ASX. The weighted average share price on the exercise
date is therefore considered to be $1.00.
The weighted average remaining contractual life of options outstanding at the end of the financial year was nil years (2017:
5 years).
Valuation model inputs
For the options granted during the current financial year, the valuation model inputs used to determine the fair value at the
grant date, are as follows:
Grant date
Expiry date
Share price Exercise
at grant date
price
Expected
volatility
Dividend
Risk-free
Fair value
yield
interest rate at grant date
01/07/2017
01/07/2017
01/07/2022
01/07/2022
$0.78
$0.78
$0.00
$0.51
60.00%
60.00%
-
-
1.94%
1.94%
$0.78
$0.49
Expenses recognised from share-based payment transactions
The expense recognised in relation to the share-based payment transactions was recognised within employee benefit
expense within the statement of profit or loss as follows:
Options issued under the NTAW Senior Executive Option plan
Options forfeited during the year
Cash payments made / accrued on forfeiture of options
Consolidated
2018
$'000
2017
$'000
2,657
-
-
1,044
(745)
400
Total expense recognised from share-based payment transactions in employee benefits
expense
2,657
699
Note 40. Events after the reporting period
Apart from the dividend declared as disclosed in note 24, no other matter or circumstance has arisen since 30 June 2018
that has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the
Group's state of affairs in future financial years.
69
For personal use only
Directors’ Declaration
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Directors' declaration
30 June 2018
In the directors' opinion:
●
●
●
●
●
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the
Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 2 to the financial statements;
the attached financial statements and notes give 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;
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable; and
at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed
Group will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed
of cross guarantee described in note 35 to the financial statements.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
___________________________
Murray Boyte
Chairman
29 August 2018
Brisbane
Independent Auditor’s Report
To the Shareholders of National Tyre & Wheel Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of National Tyre & Wheel Limited and controlled entities (“the Group”),
which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement
of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of
cash flows for the year then ended, and notes to the financial statements, including a summary of significant
accounting policies, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
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 then ended; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of
our report. We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards
Board’s APES 110 Code of Ethics for Professional Accountants “the Code” that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to
the directors of the Group, would be in the same terms if given to the directors as at the time of this auditor’s
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
including:
(a)
(b)
Basis for Opinion
report.
opinion.
Key Audit Matters
these matters.
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the financial report of the current period. These matters were addressed in the context of our audit of the
financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
70
71
For personal use only
Independent Auditor’s Report
To the Shareholders of National Tyre & Wheel Limited
Independent Auditor’s Report
To the Shareholders of National Tyre & Wheel Limited
Report on the Audit of the Financial Report
Report on the Audit of the Financial Report
Opinion
Opinion
We have audited the financial report of National Tyre & Wheel Limited and controlled entities (“the Group”),
which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement
We have audited the financial report of National Tyre & Wheel Limited and controlled entities (“the Group”),
of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of
which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement
cash flows for the year then ended, and notes to the financial statements, including a summary of significant
of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of
accounting policies, and the directors’ declaration.
cash flows for the year then ended, and notes to the financial statements, including a summary of significant
accounting policies, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
(a)
giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its financial
performance for the year then ended; and
giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its financial
complying with Australian Accounting Standards and the Corporations Regulations 2001.
performance for the year then ended; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
(a)
(b)
(b)
Basis for Opinion
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
our report. We are independent of the Group in accordance with the auditor independence requirements of the
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards
our report. We are independent of the Group in accordance with the auditor independence requirements of the
Board’s APES 110 Code of Ethics for Professional Accountants “the Code” that are relevant to our audit of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
Board’s APES 110 Code of Ethics for Professional Accountants “the Code” that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to
the directors of the Group, would be in the same terms if given to the directors as at the time of this auditor’s
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to
report.
the directors of the Group, would be in the same terms if given to the directors as at the time of this auditor’s
report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matters
Key Audit Matters
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
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
of the financial report of the current period. These matters were addressed in the context of our audit of the
these matters.
financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
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Key audit matter
Key audit matter
Acquisition of businesses
Refer to Note 36: Business Combinations
Acquisition of businesses
How our audit addressed the matter
How our audit addressed the matter
Key audit matter
How our audit addressed the matter
Impairment of goodwill and separately identifiable intangible assets
Key audit matter
How our audit addressed the matter
Refer to Note 14: Intangibles
Impairment of goodwill and separately identifiable intangible assets
Refer to Note 36: Business Combinations
During the year, National Tyre & Wheel Limited
completed the following acquisitions:
During the year, National Tyre & Wheel Limited
completed the following acquisitions:
acquired 100% of the business assets and
liabilities of Cotton Tyre Services;
acquired 100% of the business assets and
acquired a 50% interest in Top Draw Tyres
liabilities of Cotton Tyre Services;
Proprietary Limited; and
acquired a 50% interest in Top Draw Tyres
acquired a 100% interest in Statewide Tyre
Proprietary Limited; and
Distribution Pty Ltd.
acquired a 100% interest in Statewide Tyre
Distribution Pty Ltd.
Accounting for these transactions is a complex and
judgemental exercise, requiring management’s use
Accounting for these transactions is a complex and
in determining the fair value of
of estimates
judgemental exercise, requiring management’s use
consideration transferred, the fair value of assets and
in determining the fair value of
of estimates
liabilities acquired, and in particular determining the
consideration transferred, the fair value of assets and
allocation of purchase consideration to the fair value
liabilities acquired, and in particular determining the
of identifiable intangible assets and goodwill.
allocation of purchase consideration to the fair value
of identifiable intangible assets and goodwill.
It is due to the size of the acquisitions and the
estimation process involved in accounting for the
It is due to the size of the acquisitions and the
purchase price allocation that this is a key area of
estimation process involved in accounting for the
audit focus.
purchase price allocation that this is a key area of
audit focus.
Our audit procedures included:
As part of business combinations completed during
Refer to Note 14: Intangibles
Our audit procedures included:
the year, the Group has recognised goodwill and
As part of business combinations completed during
other intangible assets valued at $8,878,000 and
the year, the Group has recognised goodwill and
$13,283,000, respectively.
other intangible assets valued at $8,878,000 and
$13,283,000, respectively.
These intangible assets relate to the acquisition of
various subsidiaries of National Tyre & Wheel Ltd,
These intangible assets relate to the acquisition of
with these subsidiaries being the basis of
various subsidiaries of National Tyre & Wheel Ltd,
management’s determination of Cash-Generating
with these subsidiaries being the basis of
Units (“CGU”) in the Group.
management’s determination of Cash-Generating
Units (“CGU”) in the Group.
The carrying amount of Goodwill and the intangible
assets is supported by value-in-use calculations
The carrying amount of Goodwill and the intangible
prepared by management which are based on
assets is supported by value-in-use calculations
budgeted future cash flows and key estimates such
prepared by management which are based on
as growth and discount rates.
budgeted future cash flows and key estimates such
as growth and discount rates.
This is a key area of audit focus as the value of the
intangible assets is material and the evaluation of
This is a key area of audit focus as the value of the
the recoverable amount of these assets requires
intangible assets is material and the evaluation of
significant judgement in determining the key
the recoverable amount of these assets requires
estimates supporting the expected future cash flows
significant judgement in determining the key
of the CGUs and the utilisation of the relevant
estimates supporting the expected future cash flows
of the CGUs and the utilisation of the relevant
assets.
assets.
Our audit procedures included:
Assessing management’s determination of the
Group’s CGUs based on our understanding of the
Assessing management’s determination of the
nature of the Group’s business and the
Group’s CGUs based on our understanding of the
identifiable groups of cash generating assets;
nature of the Group’s business and the
Comparing the cash flow forecasts used in the
identifiable groups of cash generating assets;
process;
value-in-use calculations to Board approved
Comparing the cash flow forecasts used in the
budgets for the 2019 financial year. We
value-in-use calculations to Board approved
compared the current year’s forecasts to actual
budgets for the 2019 financial year. We
results to assess the accuracy of the forecasting
compared the current year’s forecasts to actual
results to assess the accuracy of the forecasting
Assessing the significant judgements and key
process;
estimates used for the impairment assessment,
Assessing the significant judgements and key
in particular, those judgements relating to the
estimates used for the impairment assessment,
discount rate and cash flow forecasts;
in particular, those judgements relating to the
Checking the mathematical accuracy of the
discount rate and cash flow forecasts;
impairment testing model and agreed relevant
Checking the mathematical accuracy of the
data to the latest budgets;
impairment testing model and agreed relevant
Performing sensitivity analysis by varying key
data to the latest budgets;
estimates, including the discount rate and
Performing sensitivity analysis by varying key
growth rate inputs, for the CGUs to which
estimates, including the discount rate and
goodwill relates; and
growth rate inputs, for the CGUs to which
Assessing the adequacy of the Group’s
goodwill relates; and
disclosures in respect of impairment testing of
Assessing the adequacy of the Group’s
goodwill and indefinite useful life intangible
disclosures in respect of impairment testing of
goodwill and indefinite useful life intangible
assets.
assets.
Our audit procedures included:
Obtaining an understanding of the relevant
controls associated with identifying and
Obtaining an understanding of the relevant
accounting for business acquisitions within the
controls associated with identifying and
financial statements;
accounting for business acquisitions within the
Reading the sale and purchase agreements to
financial statements;
understand key terms and conditions;
Reading the sale and purchase agreements to
Recalculating the purchase consideration for
understand key terms and conditions;
each transaction;
Recalculating the purchase consideration for
Assessing the fair value of tangible assets
each transaction;
acquired and liabilities assumed;
Assessing the fair value of tangible assets
acquired and liabilities assumed;
Evaluating the estimates and methodology in
management’s calculation of the fair value of
Evaluating the estimates and methodology in
the intangible assets acquired, including
management’s calculation of the fair value of
forecast revenues, EBITDA margin, discount
the intangible assets acquired, including
rates and other judgemental inputs;
forecast revenues, EBITDA margin, discount
rates and other judgemental inputs;
Comparing the valuation estimates with
external benchmarks (e.g. discount rates,
Comparing the valuation estimates with
royalty rates); and
external benchmarks (e.g. discount rates,
royalty rates); and
disclosures in respect of business combinations.
Assessing the adequacy of the Group’s
Assessing the adequacy of the Group’s
disclosures in respect of business combinations.
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Key audit matter
Key audit matter
Acquisition of businesses
Refer to Note 36: Business Combinations
Acquisition of businesses
How our audit addressed the matter
How our audit addressed the matter
Refer to Note 36: Business Combinations
During the year, National Tyre & Wheel Limited
Our audit procedures included:
completed the following acquisitions:
During the year, National Tyre & Wheel Limited
completed the following acquisitions:
acquired 100% of the business assets and
liabilities of Cotton Tyre Services;
acquired 100% of the business assets and
acquired a 50% interest in Top Draw Tyres
liabilities of Cotton Tyre Services;
Proprietary Limited; and
acquired a 50% interest in Top Draw Tyres
acquired a 100% interest in Statewide Tyre
Proprietary Limited; and
Distribution Pty Ltd.
acquired a 100% interest in Statewide Tyre
Distribution Pty Ltd.
Accounting for these transactions is a complex and
of estimates
judgemental exercise, requiring management’s use
Accounting for these transactions is a complex and
in determining the fair value of
of estimates
judgemental exercise, requiring management’s use
consideration transferred, the fair value of assets and
in determining the fair value of
liabilities acquired, and in particular determining the
consideration transferred, the fair value of assets and
allocation of purchase consideration to the fair value
liabilities acquired, and in particular determining the
of identifiable intangible assets and goodwill.
allocation of purchase consideration to the fair value
of identifiable intangible assets and goodwill.
It is due to the size of the acquisitions and the
estimation process involved in accounting for the
It is due to the size of the acquisitions and the
purchase price allocation that this is a key area of
estimation process involved in accounting for the
purchase price allocation that this is a key area of
audit focus.
audit focus.
Our audit procedures included:
Obtaining an understanding of the relevant
controls associated with identifying and
Obtaining an understanding of the relevant
accounting for business acquisitions within the
controls associated with identifying and
financial statements;
accounting for business acquisitions within the
Reading the sale and purchase agreements to
financial statements;
understand key terms and conditions;
Reading the sale and purchase agreements to
Recalculating the purchase consideration for
understand key terms and conditions;
each transaction;
Recalculating the purchase consideration for
Assessing the fair value of tangible assets
each transaction;
acquired and liabilities assumed;
Assessing the fair value of tangible assets
acquired and liabilities assumed;
Evaluating the estimates and methodology in
management’s calculation of the fair value of
Evaluating the estimates and methodology in
the intangible assets acquired, including
management’s calculation of the fair value of
forecast revenues, EBITDA margin, discount
the intangible assets acquired, including
rates and other judgemental inputs;
forecast revenues, EBITDA margin, discount
rates and other judgemental inputs;
Comparing the valuation estimates with
external benchmarks (e.g. discount rates,
Comparing the valuation estimates with
royalty rates); and
external benchmarks (e.g. discount rates,
Assessing the adequacy of the Group’s
royalty rates); and
disclosures in respect of business combinations.
Assessing the adequacy of the Group’s
disclosures in respect of business combinations.
Key audit matter
How our audit addressed the matter
Impairment of goodwill and separately identifiable intangible assets
Key audit matter
How our audit addressed the matter
Refer to Note 14: Intangibles
Impairment of goodwill and separately identifiable intangible assets
As part of business combinations completed during
Refer to Note 14: Intangibles
the year, the Group has recognised goodwill and
As part of business combinations completed during
other intangible assets valued at $8,878,000 and
the year, the Group has recognised goodwill and
$13,283,000, respectively.
other intangible assets valued at $8,878,000 and
$13,283,000, respectively.
These intangible assets relate to the acquisition of
various subsidiaries of National Tyre & Wheel Ltd,
These intangible assets relate to the acquisition of
with these subsidiaries being the basis of
various subsidiaries of National Tyre & Wheel Ltd,
management’s determination of Cash-Generating
with these subsidiaries being the basis of
Units (“CGU”) in the Group.
management’s determination of Cash-Generating
Units (“CGU”) in the Group.
The carrying amount of Goodwill and the intangible
assets is supported by value-in-use calculations
The carrying amount of Goodwill and the intangible
prepared by management which are based on
assets is supported by value-in-use calculations
budgeted future cash flows and key estimates such
prepared by management which are based on
as growth and discount rates.
budgeted future cash flows and key estimates such
as growth and discount rates.
This is a key area of audit focus as the value of the
intangible assets is material and the evaluation of
This is a key area of audit focus as the value of the
the recoverable amount of these assets requires
intangible assets is material and the evaluation of
significant judgement in determining the key
the recoverable amount of these assets requires
estimates supporting the expected future cash flows
significant judgement in determining the key
of the CGUs and the utilisation of the relevant
estimates supporting the expected future cash flows
assets.
of the CGUs and the utilisation of the relevant
assets.
Our audit procedures included:
Our audit procedures included:
Assessing management’s determination of the
Assessing the significant judgements and key
Assessing management’s determination of the
Group’s CGUs based on our understanding of the
nature of the Group’s business and the
Group’s CGUs based on our understanding of the
identifiable groups of cash generating assets;
nature of the Group’s business and the
Comparing the cash flow forecasts used in the
identifiable groups of cash generating assets;
value-in-use calculations to Board approved
Comparing the cash flow forecasts used in the
budgets for the 2019 financial year. We
value-in-use calculations to Board approved
compared the current year’s forecasts to actual
budgets for the 2019 financial year. We
results to assess the accuracy of the forecasting
compared the current year’s forecasts to actual
process;
results to assess the accuracy of the forecasting
process;
estimates used for the impairment assessment,
Assessing the significant judgements and key
in particular, those judgements relating to the
estimates used for the impairment assessment,
discount rate and cash flow forecasts;
in particular, those judgements relating to the
Checking the mathematical accuracy of the
discount rate and cash flow forecasts;
impairment testing model and agreed relevant
data to the latest budgets;
impairment testing model and agreed relevant
Performing sensitivity analysis by varying key
data to the latest budgets;
estimates, including the discount rate and
Performing sensitivity analysis by varying key
growth rate inputs, for the CGUs to which
estimates, including the discount rate and
goodwill relates; and
growth rate inputs, for the CGUs to which
goodwill relates; and
disclosures in respect of impairment testing of
goodwill and indefinite useful life intangible
disclosures in respect of impairment testing of
assets.
goodwill and indefinite useful life intangible
assets.
Checking the mathematical accuracy of the
Assessing the adequacy of the Group’s
Assessing the adequacy of the Group’s
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Other Information
Other Information
The directors are responsible for the other information. The other information comprises the information
included in the Group’s annual report for the year ended 30 June 2018, but does not include the financial report
The directors are responsible for the other information. The other information comprises the information
and our auditor’s report thereon.
included in the Group’s annual report for the year ended 30 June 2018, but does not include the financial report
and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any
form of assurance conclusion thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial report or our
In connection with our audit of the financial report, our responsibility is to read the other information and, in
knowledge obtained in the audit or otherwise appears to be materially misstated.
doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
Responsibilities of the Directors for the Financial Report
The directors of the Group are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
The directors of the Group are responsible for the preparation of the financial report that gives a true and fair
control as the directors determine is necessary to enable the preparation of the financial report that gives a true
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
and fair view and is free from material misstatement, whether due to fraud or error.
control as the directors determine is necessary to enable the preparation of the financial report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue
of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
alternative but to do so.
of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic
alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
can arise from fraud or error and are considered material if, individually or in the aggregate, they could
with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements
reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.
can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement
and maintain professional scepticism throughout the audit. We also:
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement
and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error,
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
intentional omissions, misrepresentations, or the override of internal control.
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
intentional omissions, misrepresentations, or the override of internal control.
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
of the Group’s internal control.
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
of the Group’s internal control.
and related disclosures made by the directors.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based
and related disclosures made by the directors.
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based
may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our
material uncertainty exists, we are required to draw attention in our auditor’s report to the related
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However,
disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our
future events or conditions may cause the Group to cease to continue as a going concern.
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However,
Evaluate the overall presentation, structure and content of the financial report, including the disclosures,
future events or conditions may cause the Group to cease to continue as a going concern.
and whether the financial report represents the underlying transactions and events in a manner that
Evaluate the overall presentation, structure and content of the financial report, including the disclosures,
achieves fair presentation.
achieves fair presentation.
and whether the financial report represents the underlying transactions and events in a manner that
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the financial report. We are responsible for the
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
direction, supervision and performance of the Group audit. We remain solely responsible for our audit
activities within the Group to express an opinion on the financial report. We are responsible for the
direction, supervision and performance of the Group audit. We remain solely responsible for our audit
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
We also provide the directors with a statement that we have complied with relevant ethical requirements
reasonably be thought to bear on our independence, and where applicable, related safeguards.
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most significance
in the audit of the financial report of the current period and are therefore the key audit matters. We describe
From the matters communicated with the directors, we determine those matters that were of most significance
these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or
in the audit of the financial report of the current period and are therefore the key audit matters. We describe
when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
benefits of such communication.
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
opinion.
opinion.
audit.
audit.
benefits of such communication.
Report on the Remuneration Report
Report on the Remuneration Report
Opinion on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 11 to 19 of the directors’ report for the year ended
30 June 2018. In our opinion, the Remuneration Report of National Tyre & Wheel Limited, for the year ended 30
We have audited the Remuneration Report included in pages 11 to 19 of the directors’ report for the year ended
June 2018, complies with section 300A of the Corporations Act 2001.
30 June 2018. In our opinion, the Remuneration Report of National Tyre & Wheel Limited, for the year ended 30
June 2018, complies with section 300A of the Corporations Act 2001.
The directors of the Group are responsible for the preparation and presentation of the Remuneration Report in
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
The directors of the Group are responsible for the preparation and presentation of the Remuneration Report in
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
Responsibilities
Responsibilities
PITCHER PARTNERS
PITCHER PARTNERS
NIGEL BATTERS
Partner
NIGEL BATTERS
Brisbane, Queensland
Partner
29 August 2018
Brisbane, Queensland
29 August 2018
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Other Information
Other Information
The directors are responsible for the other information. The other information comprises the information
included in the Group’s annual report for the year ended 30 June 2018, but does not include the financial report
The directors are responsible for the other information. The other information comprises the information
and our auditor’s report thereon.
included in the Group’s annual report for the year ended 30 June 2018, but does not include the financial report
and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any
form of assurance conclusion thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial report or our
In connection with our audit of the financial report, our responsibility is to read the other information and, in
knowledge obtained in the audit or otherwise appears to be materially misstated.
doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
Responsibilities of the Directors for the Financial Report
The directors of the Group are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
The directors of the Group are responsible for the preparation of the financial report that gives a true and fair
control as the directors determine is necessary to enable the preparation of the financial report that gives a true
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
and fair view and is free from material misstatement, whether due to fraud or error.
control as the directors determine is necessary to enable the preparation of the financial report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue
of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic
alternative but to do so.
alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
can arise from fraud or error and are considered material if, individually or in the aggregate, they could
with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements
reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.
can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement
and maintain professional scepticism throughout the audit. We also:
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement
and maintain professional scepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error,
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
intentional omissions, misrepresentations, or the override of internal control.
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
intentional omissions, misrepresentations, or the override of internal control.
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
of the Group’s internal control.
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
of the Group’s internal control.
and related disclosures made by the directors.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based
and related disclosures made by the directors.
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based
may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that
may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a
material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our
material uncertainty exists, we are required to draw attention in our auditor’s report to the related
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However,
disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our
future events or conditions may cause the Group to cease to continue as a going concern.
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However,
Evaluate the overall presentation, structure and content of the financial report, including the disclosures,
future events or conditions may cause the Group to cease to continue as a going concern.
and whether the financial report represents the underlying transactions and events in a manner that
Evaluate the overall presentation, structure and content of the financial report, including the disclosures,
achieves fair presentation.
and whether the financial report represents the underlying transactions and events in a manner that
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
achieves fair presentation.
activities within the Group to express an opinion on the financial report. We are responsible for the
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
direction, supervision and performance of the Group audit. We remain solely responsible for our audit
activities within the Group to express an opinion on the financial report. We are responsible for the
opinion.
direction, supervision and performance of the Group audit. We remain solely responsible for our audit
opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit
audit.
and significant audit findings, including any significant deficiencies in internal control that we identify during our
audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
We also provide the directors with a statement that we have complied with relevant ethical requirements
reasonably be thought to bear on our independence, and where applicable, related safeguards.
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most significance
in the audit of the financial report of the current period and are therefore the key audit matters. We describe
From the matters communicated with the directors, we determine those matters that were of most significance
these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or
in the audit of the financial report of the current period and are therefore the key audit matters. We describe
when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
benefits of such communication.
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
Report on the Remuneration Report
Report on the Remuneration Report
Opinion on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 11 to 19 of the directors’ report for the year ended
30 June 2018. In our opinion, the Remuneration Report of National Tyre & Wheel Limited, for the year ended 30
We have audited the Remuneration Report included in pages 11 to 19 of the directors’ report for the year ended
June 2018, complies with section 300A of the Corporations Act 2001.
30 June 2018. In our opinion, the Remuneration Report of National Tyre & Wheel Limited, for the year ended 30
June 2018, complies with section 300A of the Corporations Act 2001.
Responsibilities
Responsibilities
The directors of the Group are responsible for the preparation and presentation of the Remuneration Report in
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
The directors of the Group are responsible for the preparation and presentation of the Remuneration Report in
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
PITCHER PARTNERS
PITCHER PARTNERS
NIGEL BATTERS
Partner
NIGEL BATTERS
Brisbane, Queensland
Partner
29 August 2018
Brisbane, Queensland
29 August 2018
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Shareholder information
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Shareholder information
30 June 2018
The shareholder information set out below was applicable as at 17 August 2018.
Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Number
of holders
of ordinary
shares
31
345
415
454
36
1,281
13
Ordinary shares
% of total
shares
issued
Number held
27,032,371
14,514,583
8,347,570
6,122,816
5,873,439
3,929,250
3,353,324
2,589,928
2,487,440
2,097,857
1,374,368
1,048,929
1,048,928
655,737
553,279
477,192
387,484
334,432
330,345
323,204
26.42
14.19
8.16
5.98
5.74
3.84
3.28
2.53
2.43
2.05
1.34
1.03
1.03
0.64
0.54
0.47
0.38
0.33
0.32
0.32
82,882,476
81.02
ST Corso Pty Ltd
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
National Nominees Limited
Citicorp Nominees Pty Limited
Roshan Charles Chelvaratnam
BNP Paribas Noms Pty Ltd (DRP)
Mr John Peter Ludemann
S.N. Tyre Wholesalers Pty Ltd
Mrs Christine Lorraine Hummer
BNP Paribas Noms (NZ) Ltd (DRP)
Mr Christopher John Hummer
Mr Christopher John Hummer
Trevor John Wren
John William Weeks
CS Fourth Nominees Pty Limited (HSBC Cust Nom AU Ltd 11 A/C)
Mr Bradley Joseph Smith
Dr David John Ritchie + Dr Gillian Joan Ritchie (D J Ritchie Super Fund A/C)
Mrs Tracey Lee Cunningham (The Avebury Family A/C)
BNP Paribas Nominees Pty Ltd (Agency Lending DRP A/C)
Unquoted equity securities
There are no unquoted equity securities.
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Shareholder information
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Shareholder information
30 June 2018
Substantial holders
Substantial holders in the Company are set out below:
National Tyre & Wheel Limited and its subsidiaries
ST Corso Pty Ltd atf the Smith Trading Trust, Terence Smith & Susanne Smith (together
Smith Group)
Perpetual Limited and its related bodies corporate
Voting rights
The voting rights attached to ordinary shares are set out below:
Ordinary shares
% of total
shares
issued
Number held
40,609,068
39.69
40,609,068
5,636,909
39.69
5.51
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
There are no other classes of equity securities.
Securities subject to voluntary escrow
Class
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Expiry date
Earlier of five business days after the Company
releases to the ASX its interim results for the half-
year ended 31 December 2018 and 22 April 2019
31 May 2019
Earlier of five business days after the Company
releases to the ASX its final results for the year
ended 30 June 2019 and 7 November 2019
31 May 2020
31 May 2021
Number
of shares
35,696,057
218,579
4,257,274
218,579
218,579
40,609,068
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Corporate directory
National Tyre & Wheel Limited and its controlled entities
30 June 2018
Corporate directory
30 June 2018
Directors
Murray Boyte - Chairman
John Peter Ludemann - Chief Executive Officer and Managing Director
Terence Smith
William Cook
Robert Kent
Company secretaries
Jason Lamb
Laura Fanning
Registered office and principal
place of business
Share register
Auditor
Solicitors
Bankers
30 Gow Street
Moorooka QLD 4105
Telephone: (07) 3255 6595
Computershare Investor Services Pty Limited
Level 4
60 Carrington Street
Sydney NSW 2000
Telephone: 1300 787 272
Pitcher Partners
Level 38
345 Queen Street
Brisbane QLD 4000
Dentons
77 Castlereagh Street
Sydney NSW 2000
Commonwealth Bank of Australia
Ground Floor
Tower 1
201 Sussex Street
Sydney NSW 2000
Stock exchange listing
National Tyre & Wheel Limited shares are listed on the Australian Securities
Exchange (ASX code: NTD)
Website
www.ntaw.com.au
Business objectives
National Tyre & Wheel Limited has used cash and cash equivalents held at the time
of listing, in a way consistent with its stated business objectives.
Corporate Governance Statement
The Company’s directors and management are committed to conducting the Group’s
business in an ethical manner and in accordance with the highest standards of
corporate governance. The Company has adopted and substantially complies with
the ASX Corporate Governance Principles and Recommendations (3rd Edition)
(‘Recommendations’) to the extent appropriate to the size and nature of the Group’s
operations.
The Company has prepared a Corporate Governance Statement which sets out the
corporate governance practices that were in operation since listing, identifies any
Recommendations that have not been followed, and provides reasons for not
following such Recommendations.
The Company’s Corporate Governance Statement and policies, which is approved at
the same time as the Annual Report, can be found on its website:
http://www.ntaw.com.au/Corporate-Governance/Corporate-Governance-
Statement.pdf
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