ANNUAL REPORT 2020
iii
iv
vi
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22
23
27
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68
73
75
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
iii
Chairman’s letter
Dear Shareholder
The 2020 financial year has been
like no other in recent memory.
Your Company has emerged from
this turbulent period
in a very
sound position.
The tyre and wheel industry has been recognised in most
of our geographic markets as partly or wholly essential,
ameliorating the potential negative consequences of
Government imposed trading restrictions introduced to
deal with the COVID-19 pandemic.
The fact that the Company operates in many jurisdictions
is another important hedge against the risks of trading
restrictions coming and going in different places and to
varying degrees over the next 12 months.
Even before the acquisition of Tyres4U in August 2020,
the Company benefitted from operating a diverse range
of businesses. At the height of Australia’s pandemic
induced trading restrictions, our budget tyre and wheel
businesses operated at or above budget levels. In fact,
both Statewide Tyre Distributors and Dynamic Wheel Co
broke monthly revenue and profit records during the 4th
quarter of FY20.
The pandemic
interrupted the delivery of benefits
from a number of important strategic initiatives – new
products, near source procurement, sales process
improvements and brand building promotional activity.
The management team responded quickly and decisively
to the pandemic by reducing costs and scaling back
procurement, conserving cash in the process.
Fortunately, the pandemic interruptions were short lived,
and benefits began to flow in the 4th quarter, enabling
your Company to deliver a full year result that was close to
last year and generally exceeded expectations.
The Company worked collaboratively with suppliers and
customers to manage issues arising from the pandemic.
It was very pleasing to see all parties take a long-term
view of key relationships with sensible short-term
compromises and accommodations being made by
everyone to suit the difficult circumstances. Ultimately, all
involved met their commitments and we emerged with
stronger relationships with customers and suppliers.
Our priority during the pandemic has, of course, been
the health and safety of our employees. We are grateful
for the way employees rose to the challenges presented
by the pandemic – dealing with the stresses arising from
many uncertainties, changing the way people work
and having to work remotely while staying connected.
I have no doubt the Group will benefit from the tighter
bonds between our employees that arise from these
experiences.
Over the past two years earnings from TyreLife Solutions,
the 50% owned subsidiary in South Africa, have suffered
due to a subdued economy, the closure of a supplier’s
factory and the resulting need to replace a key product.
The pandemic has slowed the recovery of those earnings
to the extent that your Board considered it appropriate to
record an impairment expense against intangible assets
associated with that business.
The Company generated annual revenue of $158.9 million
in FY20 from its business base covering tyre and wheel
importing and original equipment supplying, with a
sectoral focus on 4WD, SUV and passenger cars. In the
2020 financial year, this activity was converted to an
Operating EBITDA of $11.8 million as shown on page viii.
The Company’s balance sheet is strong with net cash at
30 June 2020 of $13.6 million and a debt to equity ratio of
19%.
On 3 August 2020, the Company acquired the
Tyres4U businesses in Australia and New Zealand. This
transaction makes NTAW the largest independent tyre
and wheel wholesaler in both countries, with combined
revenue on the closing date of more than $450 million.
Commonwealth Bank of Australia provided new debt
facilities to fund the Tyres4U acquisition. Details of those
facilities and the “bring on balance sheet” of the Company
after the acquisition were published in August 2020.
The management team is committed to improving
the operating performance of the Tyres4U business
and
identifying business synergies to ensure this
transformational deal delivers diversity and scale to your
Company and positions it to grow earnings per share in
the 2nd half of FY21 and beyond.
iv
Chairman’s letter (cont)
Directors declared an interim dividend of 1.25c cents per
share (fully franked) which was paid to shareholders on 23
March 2020. No final dividend was declared as cash was
used to partly fund the Tyres4U acquisition. The increased
leverage in the Group will be relevant in any consideration
of dividends in FY21.
Your Board and management have worked diligently and
constructively during a difficult period and that effort is
appreciated.
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
“The Tyres4U acquisition makes
NTAW the largest independent
tyre wholesaler in both Australia
and New Zealand”
v
Managing Director’s report
Introduction
Operations - Overview
In 2020 the Company accelerated
various initiatives designed to provide
a more robust growth platform. These
included securing near
initiatives
source manufacture of some key
products, developing a new private
label 4WD product, expanding our
budget tyre business, new product releases (especially
wheels), more cross selling between business units
and continuing investment in technology to enhance
customer experiences.
Revenue adversely affected by price rises and sluggish
consumer demand in the 1st half was recovering before the
coronavirus pandemic disrupted all businesses to varying
degrees from late March. Gross profits fell in the 2nd half
as the Australian dollar devalued, some sell out price rises
were reversed and shipment of less expensive near sourced
products were delayed. The Company recovered well when
trading restrictions were lifted with robust consumer
demand and reduced costs driving up profits in the 4th
quarter.
On 3 August 2020, the Company acquired the Tyres4U
businesses in Australia and New Zealand. This transaction
transforms the Company into the largest independent tyre
and wheel wholesaler in both those countries, offering
products and solutions for almost every kind of vehicle
through almost all distribution channels. The additional
scale and diversity arising from this transaction will be
reflected in the 2021 financial year.
The Company carries on the business of importing and
wholesaling tyres and wheels in Australia, New Zealand and
South Africa, employing over 180 people and selling to over
2,000 customers (rising to over 600 and 4,000 respectively
following the Tyres4U acquisition).
Following the Tyres4U acquisition, the Company:
• imports and sells by wholesale and retail over 2,400,000
tyres, tubes and wheels annually. Products are used
on all types of vehicles – passenger cars, SUV’s, 4WD’s,
commercial vans, trucks & buses, agricultural, turf and off
the road equipment and industrial vehicles (e.g. forklifts);
• purchases from a diverse range of suppliers with no single
supplier accounting for more than 10% of cost of goods
sold; and
• sells to a diverse range of customers in numerous
distribution channels, with no single customer accounting
for more than 5% of revenue.
Tyres4U is a diverse wholesale, retail and service business.
Figure A (below) describes the Company’s distribution
footprint (after the Tyres4U acquisition).
The Tyres4U acquisition was funded by the Company’s cash
reserves and a new debt facility provided by Commonwealth
Bank of Australia. Details of the acquisition, the debt
facilities and the impact on the Company’s balance sheet
were published in July and August 2020. This information is
available on the Company’s website at www.ntaw.com.au.
Figure A.
NTAW Distribution Footprint
30 Distribution Centres
NTAW
3rd Party Logistics
vi
Managing Director’s report (cont)
A diversified brand building business
The following chart illustrates the business units within the group and the brands they sell:
Business Units
Exclusive Brands
Operations – 2020 Financial Year
• started up a new Statewide branch covering Queensland,
Prior to the pandemic, industry conditions proved to be
consistent with expectations. Import prices varied based
on country of manufacture, with US sourced products
becoming relatively more expensive. Price competition at
all levels of the value chain remained intense. Consumer
demand remained sluggish and business confidence
was low.
The Company’s response to these conditions included a
shift to less expensive tyres, a focus on growing the wheel
businesses (where all ticket prices are lower than tyres) and
the SUV segment, which continues to grow faster than
other vehicle categories. The closure of a supplier factory
forced Tyrelife Solutions (TLS) in South Africa to make
significant changes to its product range.
During the year, the Company introduced the following new
products: AUST: Blacklion (budget category) in Passenger,
SUV & 4WD, AUST/NZ: expanded range of Cooper branded
passenger tyres (lower priced/near sourced), AUST/NZ/
South Africa: near sourced Cooper 4WD product, South
Africa: Momo and Blacklion products and AUST/NZ an
array of new wheel styles and sizes.
As part of its shift to less expensive tyres, the Company:
• purchased the assets of Industrial Tyre Service in Western
Australia in March 2020 to become a branch of Statewide,
with revenue and profit from that branch growing over
time; and
New South Wales and Victoria.
Unit sales of premium 4WD products suffered in the 1st
half in response to a July price rise intended to cover higher
import prices. By November some price rises were reversed
to preserve market share with the resulting reduction
in gross margin not offset by the arrival of near sourced
products until June 2020.
Commercial and social responses to the pandemic had a
negative impact on sales in April 2020 with some regions
and businesses suffering more than others. Budget tyre
sales and wheel sales remained strong throughout the 2nd
half of the year. Original equipment business suffered from
customers closing down factories. Trading restrictions in
NZ and South Africa were more onerous than Australia.
Some businesses received government assistance (e.g.
Jobkeeper). After taking into account this assistance,
costs were reduced from March 2020 and product
purchases were scaled back. Apart from TLS in South
Africa where restrictions remained in place to the end of
the financial year, all businesses recovered quickly when
trading restrictions were lifted. Advertising expenditure
on SUV products was curtailed, impeding the execution
of that growth strategy. The quick sales recovery coupled
with the arrival of benefits from other initiatives and
lower costs resulted in higher than expected profits in
May and June.
vii
Managing Director’s report (cont)
FY20 Results
• Overall, the Company made solid progress in executing
various initiatives designed to bring about a return to profit
growth in FY21. This progress was temporarily interrupted
by the pandemic but has since regathered momentum.
The Tyres4U acquisition presents the Company with an
array of additional growth opportunities.
• Volumes and revenue from premium product sales were
both lower than FY19 due to price competition and the
impact of the pandemic.
• Volume and revenue from budget tyres (before and after
the acquisition of Industrial Tyre Service) grew strongly
throughout the year, with losses in April recovered in May
and June.
• Total revenue for FY20 was $158.9 million, a 5% reduction
on FY19.
• Despite some price increases holding, gross profit fell
with higher import prices (devalued Australian dollar,
particularly in the 2nd half), lower margin budget tyres
growing as a proportion of sales and falling premium unit
sales.
• Expenses in FY20 fell by $4.1 million (ignoring AASB16
adjustments and impairment costs), bringing the ratio
of operating expenses down from 21.1% in FY19 to 17.6% in
FY20.
• FY20 NPATA was $5.7 million ($6.9 million excluding the
impairment expense) compared to FY19 NPATA of $8.0
million.
• At 30 June 2020, the Group had:
– Net assets of $68.8 million
– Net tangible assets of $51.2 million
–
Cash of $25.9 million and net cash of $13.6 million
• The Company paid an interim dividend of $0.0125 on 23
March 2020 and did not declare a final dividend because
surplus cash was used to partially fund the purchase of
Tyres4U.
$’000
Sales revenue
Gross profit
Gross profit margin
Operating costs as % of total
revenue
Reported EBITDA
Reported EBITDA margin
Operating EBITDA
Operating EBITDA margin
NPATA attributable to NTAW
Outlook
FY20
158,857
41,263
26.00%
FY19
168,365
48,305
28.7%
16.90%
21.10%
12,184
7.70%
11,786
7.40%
5,665
12,824
7.60%
12,728
7.60%
7,968
• An
impairment expense was recorded against the
intangible assets of TLS (the Company’s 50% owned
subsidiary in South Africa). TLS earnings have suffered
over the past two years from a supplier ceasing to supply
a key product and a subdued South African economy.
The pandemic added further uncertainty about future
earnings, resulting in the impairment expense.
indicators
Macro-economic
including GDP contraction,
unemployment, consumer sentiment and health forecasts
(infection rates etc.) are all negative. Trading restrictions
imposed by governments subsist in some regions and are
likely to come and go throughout FY21. While the Group
has traded strongly during the pandemic, it is extremely
difficult to predict the outlook for operations.
• FY20 Operating EBITDA offers a meaningful comparison
to FY19. “Operating EBITDA” is:
$million
Reported EBITDA
Impact on Occupancy costs due to
adopting AASB 16
Impairment charges on intangible
assets related to South African
subsidiary
Unrealised foreign exchange losses
Operating EBITDA
FY20
FY19
12.2
(3.1)
2.2
0.5
11.8
12.8
(0.1)
12.7
in some regions will drive growth
Some conditions are expected to be favourable – drought
breaking rains
in
agricultural tyres, truck movements and the resulting
need for tyres will continue in lock downs, domestic travel
replacing overseas travel and public transport will increase
tyre wear and consumers have so far shown a propensity to
accessorise their vehicles (e.g. new wheel sales).
Benefits of near source manufacture of key products were
barely visible in FY20 but will have a positive impact in FY21.
The higher AUD to USD will assist GP or volume in the 1st
half of FY21. The Statewide Tyre Distribution expansion to
the Australian east coast only began in a meaningful way
in July 2020. The Group will launch a private label 4WD tyre
in FY21.
viii
Managing Director’s report (cont)
The Company reduced costs throughout FY20 in response
to falling demand in the 1st half and again in response to the
pandemic in the 2nd half. It is likely that at least half of these
cost reductions will prove to be structural, positioning the
Company (prior to Tyres4U) to maintain net profit margins
despite the fall in gross profit margins.
The Company expects Tyres4U will make a profitable
contribution to Group EBITDA in FY21 although some
restructuring costs are likely to be incurred. The Company
will focus on turning around the Tyres4U performance and
capturing growth opportunities arising from cross selling
and some cost synergies. Further integration benefits are
expected to accrue in FY22, delivering a more substantial
growth in earnings.
All things considered, the Group expects FY21 trading
conditions and outcomes to be like those experienced
in FY20, with additional contribution from Tyres4U and
potential upside
initiatives. The risks
associated with the pandemic remain unknown and our
expectations are subdued on the basis that the pandemic
will impede growth.
from strategic
Acknowledgements
Considering the disruption caused by the pandemic, the
Company’s performance in FY20 was very gratifying.
The resilience shown by the industry and the Company,
the arrival of benefits from various strategic initiatives
and the Tyres4U acquisition present an enticing mix of
opportunities.
In dealing with the pandemic, we have sought help
from, and provided help to, our suppliers and customers.
Important relationships have been tested and found to be
rock solid. Normal commercial imperatives were sometimes
suspended as parties rallied to support each other. The
memories of this behaviour will surely endure.
Life could hardly have been more difficult for our employees.
We will no doubt reflect on the pandemic as a watershed
moment when we substantially raised the level of care and
collegiality within the organisation. By doing so, we did not
have a positive Covid case amongst our employees, avoided
lay-offs and kept the businesses operating to deliver a solid
result. I’m honoured to be working with the NTAW cohort
and every employee should be extremely proud of what
they achieved in very difficult circumstances.
Yours faithfully
Peter Ludemann
Managing Director
ix
Diversifying products and distribution channels
x
FINANCIAL REPORT 2020
National Tyre & Wheel Limited and its controlled entities
Directors' report
30 June 2020
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', 'NTD' or 'parent entity') and the
entities it controlled at the end of, or during, the year ended 30 June 2020.
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
Peter Ludemann
Terry Smith
Bill Cook
Robert Kent
Non-Executive Chairman
Chief Executive Officer and Managing Director
Executive Director
Non-Executive Director
Non-Executive Director
Principal activities
The principal activity of the Group during the financial year ended 30 June 2020 was the distribution and marketing of motor vehicle
tyres, wheels, tubes and related products throughout Australia, New Zealand and South Africa.
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 Limited (“Dynamic”);
M.P.C. Mags and Tyres Pty Ltd (“MPC”);
Statewide Tyre Distribution Pty Ltd (“Statewide”); and
Top Draw Tyres Proprietary Limited t/a Tyrelife Solutions (“TLS”).
Subsequent to year end, two new wholly owned subsidiaries were incorporated, being Tyres4U Pty Ltd and Tyres4U (NZ) Limited.
Further disclosure related to these subsidiaries are made later in the Directors’ report.
There have been no significant changes in the nature of the Group’s activities during this period.
Dividends
Dividends paid during the financial year were as follows:
Final dividend
Special dividend
Interim dividend
Consolidated
2020
$'000
2019
$'000
2,573
1,080
1,286
2,353
-
1,283
4,939
3,636
A final dividend has not been declared for FY2020 due to the Tyres4U acquisition subsequent to balance date disclosed below and
further working capital investment.
2
2
Directors’ report 30 June 2020
National Tyre & Wheel Limited and its controlled entities
Directors' report
30 June 2020
Operating and financial review
Review of operations
The Group has reported a strong result, particularly in the context of extraordinary business interruptions and adverse trading
environments arising from the COVID-19 pandemic. The result is underpinned by the diversity of the Group’s businesses, which has
meant strength in some regions and segments has offset the impact of external difficulties encountered in others.
During the year, the Group achieved the following key strategic objectives:
expanded the Statewide business into Western Australia, via the acquisition of the net working capital assets of Industrial Tyre
Services Pty Limited;
continued rolling out the Blacklion range of budget tyres in Australia, including the establishment of a new Statewide branch
covering the Eastern states;
shifted the manufacture of some key products to Asia, reducing import prices to enhance the competitiveness of the relevant
products;
expanded the online e-commerce offering in South Africa including new agreements with tyre retailers to provide fulfilment
services;
introduced structural and tactical changes to sales teams and processes, rolling out new customer care initiatives and
consolidating sales management in fewer people; and
reduced overheads and increased efficiencies throughout the Group, saving $4.1m during the year (excluding the impact from the
adoption of AASB 16 Leases).
Prior to the COVID-19 pandemic, sales of wheels and budget tyres in Australia grew strongly, to some extent offsetting declining sales
of premium SUV and passenger products due to generally negative consumer sentiment, many regional economies operating in drought
and continued discounting by competitors. Key suppliers to the Group in the premium category remained unwilling to match offers
made by competitors.
Price rises within the Group in Australia in July 2019 had a negative impact on sales volume, leading to the reversal of some increases.
Volumes were recovering before the pandemic in some categories but at a lower gross margin. Sales of premium SUV and passenger
tyres did not recover as this category proved to be particularly difficult.
Performance in New Zealand before the pandemic was exceeding expectations with growth in passenger/SUV tyre sales, particularly in
Auckland. In South Africa, sales remained sluggish along with a generally poor economic outlook and the continuing effects of changes
to the product assortment sold there.
The pandemic caused lock downs in New Zealand and South Africa as well as substantial trading restrictions in Australia. Sales lost in
most businesses in April and May resulted in less activity as well as lower product purchases and reduced expenses. Uncertainties that
emerged then remain today with supply chains disrupted and consumer demand remaining unpredictable.
Financial assistance from Governments in NZ and Australia allowed Group businesses in those countries to retain people and maintain
service levels. But for that assistance, the relevant businesses would have reduced costs further than they did.
It is apparent that the tyre and wheel industry can recover quickly from trading restrictions, offering evidence that the industry is
essential and resilient. This resilience was more obvious in the budget product segments. The Group performed strongly in Australia
and New Zealand in May and June, with solid turnover producing high net profit margins due to lower overheads.
Results highlights
NTAW has reported total revenue of $158.9m (2019: $168.4m) for the financial year, a decrease of $9.5m (5.6%) on the prior year
resulting from the COVID-19 global pandemic and subsequent government imposed trading restrictions, continued price competition
and a tightening retail environment for premium products.
2
3
3
Directors’ report 30 June 2020
National Tyre & Wheel Limited and its controlled entities
Directors' report
30 June 2020
The Board has considered the appropriateness of the carrying value of assets attributed to the TyreLife Solutions (a 50% owned
subsidiary in South Africa) cash-generating unit. Those assets include intangible assets (goodwill, customer relationships and
importation rights) with a value of $2.2m. Given the uncertainties associated with future earnings from TLS in the prevailing
circumstances, and having regard to issues that had emerged prior to the pandemic, the Board considers the intangible assets to be
impaired and has recorded an impairment expense of $2.2m in FY2020 (2019: $Nil). This expense does not impact on the underlying
operating profit of the Group.
NTAW’s statutory profit for the Group after providing for impairment charges, income tax and non-controlling interest amounted to
$4.2m (2019: $6.4m).
NTAW has a strong balance sheet with net assets of $68.8m (2019: $70.7m). Total equity to total assets is 55.0% (2019: 59.8%) and net
cash increasing significantly to $13.6m from $6.5m in 2019 as a result of inventory management, lower product purchases and reduced
expenses during the second half of the year.
Key operating metrics
Gross profit margin
Operating costs as % of total revenue
Reported EBITDA1 margin
Operating EBITDA2 margin
1 EBITDA means earnings before interest, tax, depreciation and amortisation.
2 Refer to reconciliation between Reported EBITDA and Operating EBITDA below.
FY2020
26.0%
16.9%
7.7%
7.4%
FY2019
28.7%
21.1%
7.6%
7.6%
NTAW has reported a gross profit margin of 26.0% and an Operating EBITDA margin of 7.4%, with gross profit margin and Operating
EBITDA margin being less than that achieved in the prior year. In addition to the COVID-19 impact on our businesses, the decreased
gross profit margin in the year was derived from higher than expected USD imported prices and less favourable than expected exchange
rates between the AUD and USD, although this did start to improve at the end of the financial year. The Group’s operating costs as a
percentage of sales of 16.9% was significantly lower than prior year (21.1%) due to a reduction in employment expenses, more targeted
advertising and promotion activities (collectively $4.1m less than the prior period) and the impact on classification of expenditure due
to the adoption of AASB 16 Leases (amounting to a reduction in occupancy costs of $3.1m).
Key financial results
$'000
Sales revenue 1
Gross profit
Reported EBITDA
Operating EBITDA
NPATA attributable to NTAW 2
1
2
Revenue from sale of goods only, excluding interest income and other revenue.
NPATA excludes non-controlling interest and amortisation on a tax effected basis.
FY2020
FY2019
158,857
41,263
12,184
11,786
5,665
168,365
48,305
12,824
12,728
7,968.
Operating EBITDA
The Group has reported an EBITDA of $12.2m (2019: $12.8m). The result for FY2020 includes an impairment charge of $2.2m and
unrealised foreign exchange loss on foreign exchange contracts and foreign currency denominated suppliers of $0.5m (2019: loss of
$0.1m).
AASB 16 Leases was adopted for the first time in this reporting period, resulting in $3.1m of lease expenses (i.e. rent within occupancy
costs) being classified “below” EBITDA, largely as depreciation (of the right-of-use assets recognised on the Statement of financial
position). Therefore, EBITDA reported in the current period excludes costs which were included in the EBITDA of prior reporting periods
as these have not been restated to reflect the application of AASB 16.
4
4
Directors’ report 30 June 2020
National Tyre & Wheel Limited and its controlled entities
Directors' report
30 June 2020
After taking into account the above items, an Operating EBITDA of $11.8m was earned in FY2020 (FY2019: $12.7m) as shown in the
following table:
$'000
FY2020
FY2019
Net profit after tax
Depreciation and amortisation
Finance costs (net)
Income tax expense
Reported EBITDA
Impact on Occupancy costs due to adopting AASB 16
Impairment charges on intangible assets related to South African subsidiary
Unrealised foreign exchange losses
Operating EBITDA
Financial Position
4,228
5,121
828
2,007
12,184
(3,082)
2,210
474
11,786
6,677
2,628
544
2,975
12,824
-
-
(96)
12,728
Key financial information in relation to the Group’s financial position at year end is shown below:
Total assets ($’000)
Net assets ($’000)
Net cash/(debt) ($’000)
Shares on issue (‘000)
Dividends per security (cents)
30 June 2020
30 June 2019
123,431
68,845
13,636
102,891
1.25
118,204
70,743
6,494
102,891.
4.80
Significant balance movements during the financial year were as follows:
●
●
Net cash has increased $7.1m with cash and cash equivalents of $25.9m at 30 June 2020.
Right-of-use assets and lease liabilities have been recognised at 1 July 2019 resulting in a net impact on net assets of $0.7m at 30
June 2020.
A final dividend has not been declared for FY2020 due to the Tyres4U acquisition subsequent to balance date disclosed below and
further working capital investment. The prior year included a special dividend payment of 1.5 cents per share.
●
Outlook
On 4 August 2020, NTAW completed the purchase of the net working capital assets of Tyres4U (acquiring assets and assuming liabilities).
This transaction increased the scale and diversity of the Group’s operations with NTAW and Tyres4U combining for sales of more than
2.5m units and $450m of revenue in FY2020.
In particular, the transaction means the Group is more interested in the outlook for commercial products and services in the truck &
bus, agricultural, off the road and industrial segments as well as the consumer markets (passenger, SUV and 4WD) in which it has
traditionally operated. The Group’s outlook will also be affected by the extent to which various businesses are integrated and any
synergies are captured.
NTAW intends to continue operating Tyres4U as a separate business in the same way that other businesses in the Group operate
independently from each other. This approach has been successful because the preservation of business models and cultures in the
operating entities has appealed to all stakeholders.
The Tyres4U acquisition was based on acquiring net working capital assets for a price that corresponded to their book value. A review
of the Tyres4U business is being conducted to settle upon a strategy to utilise those assets more profitably. The outlook for future
Tyres4U earnings will be determined in September after that review has been completed.
4
5
5
Directors’ report 30 June 2020
National Tyre & Wheel Limited and its controlled entities
Directors' report
30 June 2020
The overall outlook for the Group remains difficult to predict. General macro indicators are negative with all relevant countries
experiencing economic contractions larger than any encountered since the Great Depression. Unemployment is expected to remain
historically high leading to weak consumer sentiment and demand. The pandemic remains out of control with global cases and deaths
continuing to rise. Most countries, including those particularly relevant to the Group, look set to regularly relax and reinstate trading
restrictions until a vaccine is found or some other solution emerges.
On the other hand, the Group stands to benefit from other forces at play. Many regional areas of Australia have received drought
breaking rains, increasing demand for truck and agricultural tyres. Truck movements have not been adversely affected by trading
restrictions and the movement of goods has generally been exempt from those restrictions, maintaining tyre demand in this segment.
Lower use of public transport and having to holiday in Australia might, subject to the impact of border closures, increase tyre wear
rates due to more domestic travel. Fewer options for discretionary spending (travel, accommodation, entertainment etc.) might
increase spending on necessities like tyres and wheels. More consumers may see the purchase of tyres and wheels as an accessory,
putting them in the frame to purchase premium products.
On balance, the Group expects existing operations (i.e. Group businesses excluding Tyres4U) in FY2021 to perform in line with FY2020
with the benefits of various strategic initiatives (near source manufacture, budget tyre expansion, wheel product growth and
operational efficiencies) being potentially offset by potential trading restrictions imposed by governments to manage the pandemic.
Expectations for Tyres4U will be determined in September after the completion of a strategic review of that business.
Significant changes in the state of affairs
There were no significant changes in the state of affairs of the Group during the financial year.
Matters subsequent to the end of the financial year
On 4 August 2020, the Group completed the transformative acquisition of the business assets and operations of Tyres4U in Australia
and New Zealand. Consideration totalled $48.7m which was paid in cash and NTD shares. To assist with the acquisition, NTD
renegotiated its debt facilities with Commonwealth Bank of Australia which has increased the total debt facility to $68.5m. A total of
11.3m shares were issued (bringing the total number of ordinary shares to 114.2m) using NTD’s available capacity under ASX Listing
Rule 7.1 and are subject to voluntary escrow of 18 months from the date of issue.
No other matter or circumstance has arisen since 30 June 2020 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 in the next financial year as it seeks to continue its recovery and adapt to the
changing market in light of the COVID-19 pandemic. Additionally the integration of the Tyres4U businesses into the Group and realising
revenue and cost synergies will be a key focus for the Group in the 2021 financial year and beyond.
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 party to a long-term formal distribution and licence agreement with Cooper Tires for the supply of
many premium 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 Tires to access the brand. The Group proactively engages in
maximising its key relationships to mitigate such risks. The Tyres4U acquisition introduces the Group to many new suppliers,
significantly reducing the risk of supplier dependency.
6
6
Directors’ report 30 June 2020
National Tyre & Wheel Limited and its controlled entities
Directors' report
30 June 2020
●
●
●
●
●
●
Foreign exchange risk – a significant proportion of the Group’s costs and expenses 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 and the behaviour of competitors). The Group 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 in recent years including the Tyres4U acquisition
after the balance date. 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. Although this risk has been further reduced as a consequence of the Tyres4U acquisition, the
Group proactively manages its customer relationships and has established value adding customer loyalty programs.
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.
COVID-19 pandemic – the Group is subject to the current and potential economic impacts due to the COVID-19 pandemic and
government imposed responses (e.g. mandatory trading shutdowns). Management is monitoring operating activities to ensure
that the appropriate level of working capital (including cash) is maintained to meet customer demands. The Group continues to
enforce the safe working practices implemented during the year to mitigate risks to employees and other stakeholders.
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:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Murray Boyte
Independent, Non-Executive Chairman
Mr Boyte 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, health services and property industries.
Abano Healthcare Group Limited (NZX); Eureka Group Holdings Limited (ASX: EGH); Hillgrove
Resources Limited (ASX: HGO)
Nil
Member of Audit and Risk Committee; Member of Remuneration and Nominations Committee
156,237 ordinary shares
Nil
6
7
7
Directors’ report 30 June 2020
National Tyre & Wheel Limited and its controlled entities
Directors' report
30 June 2020
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Name:
Title:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Name:
Title:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Peter Ludemann
Chief Executive Officer ('CEO') and Managing Director
Degrees in Law and Commerce (Marketing) from University of New South Wales ('UNSW')
Mr Ludemann 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, TLS and Tyres4U after
the balance date. Mr Ludemann 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
public company corporate structure, the IPO and listing of NTAW as well as generational
change within the Group.
Nil
Nil
Nil
2,759,928 ordinary shares
180,000 options
Terry Smith
Executive Director
Mr Smith 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
Nil
Member of Remuneration and Nominations Committee
27,255,297 ordinary shares
Nil
Bill Cook
Independent, Non-Executive Director
Mr Cook is an Independent Non-Executive Director of NTAW. Mr Cook 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, Mr Cook has served as non-executive director
for a number of companies, including NTAW since 2013.
Nil
Nil
Chair of Audit and Risk Committee; Member of Remuneration and Nominations Committee
403,132 ordinary shares
Nil
8
8
Directors’ report 30 June 2020
National Tyre & Wheel Limited and its controlled entities
Directors' report
30 June 2020
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (last 3 years):
Special responsibilities:
Interests in shares:
Interests in options:
Robert Kent
Independent, Non-Executive Director
Bachelor of Business degree (Marketing) from the Queensland University of Technology and is
a Graduate of the Australian Institute of Company Directors.
Mr Kent 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.
Nil
Nil
Chair of Remuneration and Nominations Committee; Member of Audit and Risk Committee
204,901 ordinary shares
Nil
'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
Mr Lamb is the Chief Financial Officer and joint Company Secretary. Mr Lamb has over 20 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. Mr Lamb 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. 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
Mrs Fanning is the joint Company Secretary. Mrs Fanning 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 2020, and the number of meetings attended by each director were:
Full Board
Remuneration and Nominations
Committee
Attended
Held
Attended
Held
Audit and Risk Committee
Attended
Held
Murray Boyte
John Peter Ludemann
Terence Smith
William Cook
Robert Kent
15
15
15
15
15
15
15
15
15
15
3
2*
3
3
3
3
2*
3
3
3
3
3*
2*
3
3
3
3*
3*
3
3
Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee.
*
Attended by invitation only
8
9
9
Directors’ report 30 June 2020
National Tyre & Wheel Limited and its controlled entities
Directors' report
30 June 2020
Remuneration Report (audited)
The remuneration report details the key management personnel remuneration arrangements for the Group, in accordance with the
requirements of the Corporations Act 2001 and Corporations Regulations 2001.
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)
(b)
(c)
(d)
(e)
(f)
(g)
Principles used to determine the nature and amount of remuneration
Details of remuneration
Relationship between remuneration and Company performance
Service agreements
Share-based compensation
Equity instruments held by key management personnel
Other transactions with 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 Nominations 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 Nominations 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.
10
10
Directors’ report 30 June 2020
National Tyre & Wheel Limited and its controlled entities
Directors' report
30 June 2020
Remuneration report (audited) (continued)
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 Nominations Committee. 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. The non-executive directors do not receive share options or other
incentives.
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 (i.e. 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. An additional fee of $10,000 per annum has been 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. Total annual
fees payable to non-executive directors for FY2020 is $250,000 (FY2019: $250,000).
Executive director remuneration
Fees and payments to executive directors reflect the demands and responsibilities of their role. Executive directors' fees and payments
are reviewed annually by the Remuneration and Nominations Committee. Details of executive director remuneration are contained in
section (d) Service Agreements of the Remuneration Report.
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 framework includes the following components:
●
●
●
Fixed remuneration – comprising base salary, superannuation contributions and other benefits, having regard to comparable
market benchmarks. 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;
Short-term incentive (“STI”) program – 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 include a financial gateway hurdle and non-financial key performance indicators (“KPIs”).
The percentage of fixed remuneration received is capped, but may vary, between individuals and depending on the level of
performance achieved; and
Long-term incentive (“LTI”) program – 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 combination of these comprises an executive's total remuneration. The Board believes this remuneration framework ensures that
remuneration outcomes link to Company performance and the long-term interests of Shareholders.
2020 STI Program
During FY2020, senior executives’ entitlement to an STI was based on achievement of agreed performance objectives including:
●
●
●
●
●
Financial performance;
Operational performance;
Strategy and innovative initiatives;
Workplace health and safety; and
Stakeholder satisfaction.
10
11
11
Directors’ report 30 June 2020
National Tyre & Wheel Limited and its controlled entities
Directors' report
30 June 2020
Remuneration report (audited) (continued)
Actual performance criteria varied between executives, having regard to their roles and responsibilities.
The Board applies the following general principles when determining and measuring performance targets and any STI
incentive:
STI Pool
The size of the STI pool is determined by the Board, upon advice from the Remuneration and Nominations
Committee, having regard to individual employment contracts. In consultation with the Remuneration and
Nominations Committee, the Board assesses the Group’s financial performance and the performance of key
management personnel against agreed performance objectives.
The STI available is split between the achievement of financial gateway hurdles (at a group and/or individual
operating entity level) and non-financial KPIs. The proportion of the STI between financial and non-financial varies
between key management personnel.
The financial gateway hurdles are based on Operating EBITDA which the Board believes is an acceptable proxy for
overall operating performance. Operating EBITDA is calculated by adjusting Reported EBITDA for the impact of the
adoption of AASB 16 Leases and non-operational related items, which included impairment charges and unrealised
foreign exchange gains/losses for FY2020.
The achievement of financial and non-financial KPIs vary between key management personnel. The Board retains
discretion in relation to the impact that non-recurring or unusual items may have on achievement of the STIs.
Structure
Achievement
The actual amount received by key management personnel, as a result of achieving the pre-determined financial hurdles and non-
financial KPIs, are listed in the remuneration tables below.
2020 LTI Program
Options may be granted under the Employee Share Option Plan (“ESOP”) which was adopted on 6 November 2017. 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 (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.
During FY2020, 1,845,000 options were granted to senior executives, including 960,000 issued to certain key management personnel,
pursuant to the ESOP on the specific key terms:
●
●
The Vesting Date of the options is 30 September 2022, subject to meeting the Performance Conditions.
The Performance Period for the Performance Conditions is the period from the Grant Date until the Vesting Date (inclusive of
each of those dates).
The performance conditions were as follows:
●
1) Earnings per share (“EPS”) condition – the Company’s EPS for the year ended 30 June 2021 was to be at least 10% higher than
its EPS for the year ended 30 June 2019.
Calculation of the EPS growth rate is based upon the EPS results reported in NTAW’s audited financial statements for the above
years. The Basic EPS reported may be adjusted for items which the Board, in its discretion, considers should be included in, or
excluded from, the result.
The Board determined that the FY2019 base EPS for the Options would be 7.74 cents per share. This was based upon the
Company’s 2019 NPATA attributable to NTAW shareholders. The target EPS for the 2021 financial year (based upon the Company’s
NPATA attributable to NTAW shareholders) is 8.51 cents per share.
2) Service condition – continuous employment of the employee with NTAW or one of its subsidiaries from the Grant Date until
the Vesting Date.
●
●
The Expiry Date of the options was 30 September 2024 which is two years after the Vesting Date, if not lapsed earlier.
If the Performance Conditions are not met before the end of the Performance Period, the options will lapse.
12
12
Directors’ report 30 June 2020
National Tyre & Wheel Limited and its controlled entities
Directors' report
30 June 2020
Remuneration report (audited) (continued)
It is the Board’s intention to grant options to senior executives for the FY2021 LTI. The specific terms of the grant are expected to be
finalised in September 2020, and, in the case of the Managing Director, will be subject to shareholder approval.
(b) Details of remuneration
The key management personnel of the Group in FY2020 consisted of the following directors of National Tyre & Wheel Limited:
●
●
●
●
●
Murray Boyte – Chairman
Peter Ludemann - Chief Executive Officer and Managing Director
Terry Smith - Executive Director
Bill Cook – Non-Executive Director
Robert Kent – Non-Executive Director
And the following persons:
●
●
●
●
●
●
Jason Lamb - Chief Financial Officer and Joint Company Secretary
Colin Skead - Chief Executive Officer, ETD
Chris Hummer - Managing Director, Dynamic
Georg Schramm - Managing Director, Top Draw Tyres (South Africa)
Trevor Wren - Managing Director, Statewide
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.
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-based
payments
2020
Cash salary
and fees1
$
Cash
Bonus
$
Non-
monetary
$
Super-
annuation
$
Long service
leave
$
Equity-
settled
$
Total
$
Non-Executive Directors:
M Boyte
W Cook
R Kent
82,192
73,093
56,350
-
-
-
Executive Directors:
T Smith
P Ludemann
86,227
507,181
-
126,415
-
-
-
-
-
7,808
6,944
23,650
-
-
-
-
-
-
90,000
80,037
80,000
8,192
25,000
-
15,283
-
5,603
94,419
679,482
Other Key Management Personnel:
277,710
J Lamb
C Skead2
275,631
186,126
C Hummer
326,887
G Schramm
T Wren3
215,420
174,880
R Chelvaratnam
2,261,697
86,426
8,213
63,694
-
53,438
3,960
342,146
-
-
-
-
11,575
-
11,575
25,000
24,982
21,830
-
22,094
16,461
181,961
5,367
1,402
4,446
-
47,000
3,317
76,815
4,980
4,825
4,825
-
4,825
4,825
29,883
399,483
315,053
280,921
326,887
354,352
203,443
2,904,077
1
2
3
Including movement in annual leave provisions.
Classified as key management personnel from 1 July 2019.
Cash bonus includes a discretionary bonus of $50,000 resulting from specific business unit achievements which were accrued in FY2020.
12
13
13
Directors’ report 30 June 2020
National Tyre & Wheel Limited and its controlled entities
Directors' report
30 June 2020
Remuneration report (audited) (continued)
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-based
payments
Cash salary
and fees3
$
Cash
bonus
FY20192
$
Cash
bonus
FY20181
$
2019
Non-
monetary
$
Super-
annuation
$
Long service
leave
$
Equity-
settled
$
Total
$
Non-Executive Directors:
M Boyte
W Cook
R Kent
82,192
73,060
55,000
Executive Directors:
T Smith
P Ludemann
83,014
464,215
Other Key Management Personnel:
278,627
J Lamb
151,502
C Hummer
364,054
G Schramm
165,312
T Wren
157,944
R Chelvaratnam
1,874,920
-
-
-
-
-
-
-
-
-
-
-
7,808
6,940
25,000
-
-
-
-
138,806
-
7,059
8,192
25,000
-
16,522
-
-
20,488
20,000
-
40,488
65,506
-
-
-
-
204,312
-
-
20,119
-
-
27,178
25,000
15,502
-
16,594
16,461
146,497
13,673
10,614
-
16,755
3,998
61,562
-
-
-
-
-
-
-
-
-
-
-
90,000
80,000
80,000
91,206
651,602
382,806
177,618
404,661
218,661
178,403
2,354,957
1
2
3
Bonuses accrued in FY2018 and paid in FY2019. The 2018 STIs were 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.
Discretionary cash bonus resulting from specific business unit achievements which were accrued in FY2019.
Including movement in annual leave provisions.
The relative proportion of the total remuneration opportunity of key management personnel of the Group is as follows:
Name
Non-Executive Directors:
M Boyte
W Cook
R Kent
Executive Directors:
T Smith
P Ludemann
Other Key Management Personnel:
J Lamb
C Skead
C Hummer
G Schramm
T Wren
R Chelvaratnam
Fixed remuneration
2019
2020
At risk - STI
At risk - LTI
2020
2019
2020
2019
-
-
-
-
30%
30%
29%
27%
-
26%
25%
-
-
-
-
23%
20%
-
20%
-
13%
18%
-
-
-
-
3%
5%
5%
7%
-
8%
8%
-
-
-
-
-
-
-
-
-
-
-
100%
100%
100%
100%
67%
65%
66%
66%
100%
66%
67%
100%
100%
100%
100%
77%
80%
-
80%
100%
87%
82%
14
14
Directors’ report 30 June 2020
National Tyre & Wheel Limited and its controlled entities
Directors' report
30 June 2020
Remuneration report (audited) (continued)
The proportion of the cash bonus paid/payable or forfeited is as follows:
Name
Executive Directors:
P Ludemann
Other Key Management Personnel:
J Lamb
C Skead
C Hummer
G Schramm
T Wren
R Chelvaratnam
Cash bonus paid/payable
2020
2019
Cash bonus forfeited1
2019
2020
56%
63%
6%
83%
-
78%
6%
-
44%
100%
-
-
-
100%
78%
-
37%
94%
17%
100%
22%
94%
100%
-
100%
-
22%
100%
1
Forfeited cash bonuses are not accrued in the relevant year’s result.
(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
Sales revenue ($’000)
Net profit after tax attributable to shareholders ($’000)1
Operating EBITDA ($’000)
Share price at end of year (cents)
Basic earnings per share (cents)
Dividends paid (cents per share)
Key management personnel remuneration ($)
FY2020
FY2019
FY2018
158,857
4,551
11,786
38
4.12
1.25
2,904,077
168,365
6,391
12,728
37.
6.22
4.80
2,354,957
153,402
9,314
12,016
123
5.25
3.30
3,650,352
1
FY2018 is the pro-forma net profit after tax attributable to shareholders as disclosed in the 2018 financial report.
(d) Service agreements
Remuneration and other terms of employment for key management personnel are formalised in service agreements with no fixed
tenure requirements. Details of these agreements for the FY2020 year are as follows:
Name:
Title:
Details:
Peter Ludemann
Chief Executive Officer and Managing Director
Mr Ludemann has an annual total fixed remuneration (TFR) of $503,700 consisting of base
salary, superannuation and other benefits. Under the terms of his employment contract, he is
eligible to receive short term incentives (STI) with a maximum opportunity of 45% of TFR per
annum (at maximum performance levels). The STI will be in the form of an annual cash bonus,
subject to the achievement of key performance indicators as determined by the Board.
Subject to shareholder approval, Mr Ludemann will also be awarded long term incentives (LTI)
under NTAW’s Employee Share Option Plan. He 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. Mr Ludemann’s employment contract does not contain any express redundancy
provisions. Mr Ludemann’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.
14
15
15
Directors’ report 30 June 2020
National Tyre & Wheel Limited and its controlled entities
Directors' report
30 June 2020
Remuneration report (audited) (continued)
Name:
Title:
Details:
Name:
Title:
Details:
Name:
Title:
Details:
Name:
Title:
Details:
Terry Smith
Executive Director
Mr Smith’s fixed remuneration package is $70,000 inclusive of statutory superannuation
contribution and a car allowance of $22,300. Mr Smith 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. Mr Smith is entitled to redundancy pay in
accordance with the NTAW’s legal obligations. Mr Smith’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
Mr Lamb has an annual total fixed remuneration (TFR) of $303,644 consisting of base salary,
superannuation and other benefits. Under the terms of his employment contract, he is eligible
to receive short term incentives (STI) with a maximum opportunity of 45% of TFR per annum
(at maximum performance levels). The STI will be in the form of an annual cash bonus, subject
to the achievement of key performance indicators as determined by the Board. Mr Lamb will
also be awarded long term incentives (LTI) under NTAW’s Employee Share Option Plan. He is
eligible for short term incentives as determined by the Board. Mr Lamb 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. Mr Lamb’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.
Colin Skead
Chief Executive Officer, ETD
Mr Skead has an annual total fixed remuneration (TFR) of $287,700 consisting of base salary,
superannuation and other benefits. Under the terms of his employment contract, he is eligible
to receive short term incentives (STI) with a maximum opportunity of 45% of TFR per annum
(at maximum performance levels). The STI will be in the form of an annual cash bonus, subject
to the achievement of key performance indicators as determined by the Board. Mr Skead will
also be awarded long term incentives (LTI) under NTAW’s Employee Share Option Plan. He has
statutory leave entitlements. Either party may terminate the contract on 3 months’ notice. In
the case of termination by ETD, ETD may provide payment in lieu of notice. Mr Skead is entitled
to redundancy pay in accordance with the Company’s legal obligations. Mr Skead’s contract
contains a 6 month non-compete restraint within as specified geographical area 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
Mr Hummer has an annual total fixed remuneration (TFR) of $192,720 consisting of base
salary, superannuation and other benefits. Under the terms of his employment contract, he is
eligible to receive short term incentives (STI) with a maximum opportunity of 40% of TFR per
annum (at maximum performance levels). The STI will be in the form of an annual cash bonus,
subject to the achievement of key performance indicators as determined by the Board. Mr
Hummer will also be awarded long term incentives (LTI) under NTAW’s Employee Share Option
Plan. 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. Mr Hummer 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.
16
16
Directors’ report 30 June 2020
National Tyre & Wheel Limited and its controlled entities
Directors' report
30 June 2020
Remuneration report (audited) (continued)
Name:
Title:
Details:
Name:
Title:
Details:
Name:
Title:
Details:
Georg Schramm
Managing Director, TLS (South Africa)
Mr Schramm’s employment contract is governed by South African law. His fixed remuneration
package is R3,094,000 per annum and he is entitled to car and mobile phone allowances
totalling R353,000 per annum. Either party may terminate the contract on 6 months’ notice.
Where Mr Schramm is terminated due to operational requirements, the termination will be
governed by TLS policies or practices or, if no policy or practice exists, in accordance with the
law.
Trevor Wren
Managing Director, Statewide
Mr Wren has an annual total fixed remuneration (TFR) of $171,915 consisting of base salary,
superannuation and other benefits. Under the terms of his employment contract, he is eligible
to receive short term incentives (STI) with a maximum opportunity of 40% of TFR per annum
(at maximum performance levels). The STI will be in the form of an annual cash bonus, subject
to the achievement of key performance indicators as determined by the Board. Mr Wren will
also be awarded long term incentives (LTI) under NTAW’s Employee Share Option Plan. He has
statutory leave entitlements. Either party may terminate the contract on 3 months’ notice. In
the case of termination by Statewide, Statewide may provide payment in lieu of notice. Mr
Wren is entitled to redundancy pay in accordance with the Company’s legal obligations. Mr
Wren’s contract contains a 6 month non-compete restraint within as specified geographical
area and a 6 month non-solicitation of employees, contacts and clients with whom he has
contact with, or influence over.
Roshan Chelvaratnam
Managing Director, MPC
Mr Chelvaratnam has an annual total fixed remuneration (TFR) of $196,005 consisting of base
salary, superannuation and other benefits. Under the terms of his employment contract, he is
eligible to receive short term incentives (STI) with a maximum opportunity of 35% of TFR per
annum (at maximum performance levels). The STI will be in the form of an annual cash bonus,
subject to the achievement of key performance indicators as determined by the Board. Mr
Chelvaratnam will also be awarded long term incentives (LTI) under NTAW’s Employee Share
Option Plan. He has statutory leave entitlements. Either party may terminate the contract on
6 months’ notice. 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. Mr Chelvaratnam is
entitled to redundancy pay in accordance with the Company’s legal obligations. Mr
Chelvaratnam’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
2020 (2019: Nil).
16
17
17
Directors’ report 30 June 2020
National Tyre & Wheel Limited and its controlled entities
Directors' report
30 June 2020
Remuneration report (audited) (continued)
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
J Ludemann
J Lamb
C Skead
C Hummer
R Chelvaratnam
T Wren
Number of
options
granted
180,000
160,000
155,000
155,000
155,000
155,000
Grant date
Vesting date and
exercise date
8 Nov 19
8 Nov 19
8 Nov 19
8 Nov 19
8 Nov 19
8 Nov 19
30 Sep 22
30 Sep 22
30 Sep 22
30 Sep 22
30 Sep 22
30 Sep 22
Expiry date
30 Sep 24
30 Sep 24
30 Sep 24
30 Sep 24
30 Sep 24
30 Sep 24
Exercise
price
Fair value
per option
at grant date
$0.37
$0.37
$0.37
$0.37
$0.37
$0.37
$0.14
$0.14
$0.14
$0.14
$0.14
$0.14
(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:
Ordinary shares
Murray Boyte
Peter Ludemann
Terry Smith
Bill Cook
Robert Kent
Jason Lamb
Colin Skead
Chris Hummer
Trevor Wren
Roshan Chelvaratnam
Received as
Balance at
the start of
the year
part of
remun-
eration
Additions
Disposals -
Off-market
Balance at
the end of
the year
156,237
2,759,928
27,255,297
303,132
204,901
363,722
3,500
4,652,522
655,737
3,929,250
40,284,226
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(196,463)
156,237
2,759,928
27,255,297
403,132
204,901
363,722
3,500
4,652,522
655,737
3,732,787
100,000
(196,463)
40,187,763
18
18
Directors’ report 30 June 2020
National Tyre & Wheel Limited and its controlled entities
Directors' report
30 June 2020
Remuneration report (audited) (continued)
Options
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
Murray Boyte
Peter Ludemann
Terry Smith
Bill Cook
Robert Kent
Jason Lamb
Colin Skead
Chris Hummer
Trevor Wren
Roshan Chelvaratnam
Balance at
the start of
the year
Granted
Exercised
Lapsed
Balance at
the end of
the year
-
180,000
-
-
-
160,000
-
140,000
100,000
110,000
-
180,000
-
-
-
160,000
155,000
155,000
155,000
155,000
690,000
960,000
-
-
-
-
-
-
-
-
-
-
-
-
(180,000)
-
-
-
(160,000)
-
(140,000)
(100,000)
(110,000)
-
180,000
-
-
-
160,000
155,000
155,000
155,000
155,000
(690,000)
960,000
(g) Other transactions with key management personnel
Related party leases
During the financial year, the Group leased business premises owned by closely related parties of key management personnel. One
lease expires on 30 May 2023 and has two 5 year renewal options and the other lease ending during the year. Rent payments for FY2020
totalled $214,845 (2019: $329,900), with $Nil outstanding at 30 June 2020 (2019: $Nil).
During the 2019 financial year, Terry and Susanne Smith (co-founders of Exclusive Tyre Distributors Australia Pty Ltd) and Chris and
Christine Hummer (co-founders of Dynamic Wheel Co Pty Ltd), transferred a total of 319,666 of their personally owned National Tyre
& Wheel Limited (NTD) shares to a number of employees of the Group. The gifts were made as a gesture of thanks and appreciation
for the employees’ efforts and support for the business prior to NTD’s listing on the ASX in December 2017. The transfers occurred
following the release of the shares from voluntary escrow during the year and were valued at 45 cents per share at that time.
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.
18
19
19
Directors’ report 30 June 2020
National Tyre & Wheel Limited and its controlled entities
Directors' report
30 June 2020
Shares under option
There were 1,845,000 unissued ordinary shares of National Tyre & Wheel Limited under option outstanding at the date of this report.
Shares issued on the exercise of options
There were no ordinary shares of National Tyre & Wheel Limited issued on the exercise of options during the year ended 30 June 2020
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 31 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 31 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 (including Independence Standards) 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.
●
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.
20
20
Directors’ report 30 June 2020
National Tyre & Wheel Limited and its controlled entities
Directors' report
30 June 2020
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.
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
25 August 2020
Brisbane
20
21
21
Directors’ report 30 June 2020
The Directors
National Tyre & Wheel Limited
30 Gow Street
MOOROOKA QLD 4105
Auditor’s Independence Declaration
In relation to the independent audit for the year ended 30 June 2020, to the best of my knowledge and belief
there have been:
(i)
(ii)
No contraventions of the auditor independence requirements of the Corporations Act 2001; and
No contraventions of APES 110 Code of Ethics for Professional Accountants (including
Independence Standards).
This declaration is in respect of National Tyre & Wheel Limited and the entities it controlled during the year.
PITCHER PARTNERS
WARWICK FACE
Partner
Brisbane, Queensland
25 August 2020
22
National Tyre & Wheel Limited and its controlled entities
National Tyre & Wheel Limited and its controlled entities
Statement of profit or loss and other comprehensive income
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2020
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2020
for the year ended 30 June 2020
Revenue from contracts with customers
Revenue from contracts with customers
Other income
Other income
Expenses
Expenses
Cost of goods sold
Cost of goods sold
Employee benefits and other related costs
Employee benefits and other related costs
Depreciation and amortisation
Depreciation and amortisation
Marketing
Marketing
Occupancy
Occupancy
Professional fees and insurance
Professional fees and insurance
Other
Other
Finance
Finance
Impairment loss
Impairment loss
Profit before income tax expense
Profit before income tax expense
Income tax expense
Income tax expense
Profit after income tax expense for the year
Profit after income tax expense for the year
Other comprehensive income
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
Foreign currency translation
Other comprehensive income for the year, net of tax
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Total comprehensive income for the year
Profit for the year is attributable to:
Non-controlling interest
Owners of National Tyre & Wheel Limited
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:
Total comprehensive income for the year is attributable to:
Non-controlling interest
Non-controlling interest
Owners of National Tyre & Wheel Limited
Owners of National Tyre & Wheel Limited
(98,595)
(98,595)
(18,357)
(18,357)
(3,699)
(5,609)
(3,699)
(5,609)
(459)
(459)
Note
Note
2020
2020
$'000
$'000
5
5
6
6
7
7
7
7
15
15
8
8
158,857
158,857
1,313
1,313
(117,594)
(117,594)
(17,106)
(17,106)
(5,121)
(5,121)
(3,691)
(3,691)
(1,692)
(1,692)
(1,478)
(1,478)
(4,046)
(4,046)
(997)
(997)
(2,210)
(2,210)
6,235
6,235
(2,007)
(2,007)
4,228
4,228
(1,096)
(1,096)
(1,096)
(1,096)
3,132
3,132
(323)
(323)
4,551.
4,551.
4,228.
4,228.
(323)
(323)
3,455.
3,455.
3,132.
3,132.
2019
2019
$'000
$'000
168,365
168,365
236
236
(120,060)
(120,060)
(18,081)
(18,081)
(2,628)
(2,628)
(5,899)
(5,899)
(5,195)
(5,195)
(1,669)
(1,669)
(4,752)
(4,752)
(665)
(665)
-
-
9,652
9,652
(2,975)
(2,975)
6,677
6,677
398
398
398
398
7,075
7,075
286
286
6,391
6,391
6,677
6,677
286
286
6,789
6,789
7,075
7,075
Basic earnings per share
Basic earnings per share
Diluted earnings per share
Diluted earnings per share
Cents
Cents
Cents
Cents
4.42
4.42
4.36
4.36
6.22
6.22
6.22
6.22
25
25
25
25
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes
The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes
23
23
23
National Tyre & Wheel Limited and its controlled entities
Statement of financial position
Statement of financial position
As at 30 June 2020
as at 30 June 2020
Note
2020
$'000
2019
$'000
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Prepayments
Income tax refund due
Total current assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Deferred tax
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Lease liabilities
Provisions
Derivative financial instruments
Current tax liability
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Provisions
Deferred tax
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Equity attributable to the owners of National Tyre & Wheel Limited
Non-controlling interest
Total equity
9
10
11
12
13
14
15
8
16
17
18
19
12
17
18
19
8
20
21
25,859
23,215
41,487
-
1,580
-
92,141
3,615
11,800
16,739
900
33,054
19,554
24,679
48,563
24
1,280
212
94,312
3,579
-
20,313
-
23,892
125,195
118,204
24,930
-
3,298
3,652
943
902
33,725
12,223
9,172
1,230
-
22,625
29,425
1,915
125
3,192
-
-
34,655
11,145
150
1,357
152
12,804
56,350
47,461
68,845
70,743
65,272
(859)
1,378
65,791
3,054
65,272
182.
1,912.
67,366
3,377
68,845
70,743
The above statement of financial position should be read in conjunction with the accompanying notes
24
24
National Tyre & Wheel Limited and its controlled entities
Statement of changes in equity
For the year ended 30 June 2020
Foreign
currency
Share-based
translation
payments
reserve
$'000
reserve
$'000
Issued
capital
$'000
Retained
earnings
$'000
Non-
controlling
interest
Total equity
$'000
$'000
Balance at 1 July 2018
National Tyre & Wheel Limited and its controlled entities
Statement of changes in equity
Statement of changes in equity
Profit after income tax expense for the year
For the year ended 30 June 2020
Other comprehensive income for the year, net
of tax
-
-
64,761
(216)
-
(974)
3,091
66,662
-
for the year ended 30 June 2020
6,391
286
-
6,677
398
398
-
Foreign
currency
translation
reserve
$'000
-
Share-based
payments
reserve
$'000
Issued
capital
$'000
Total comprehensive income for the year
Balance at 1 July 2018
Transactions with owners in their capacity as
owners:
Share-based payments (note 24)
Transfers
Dividends reinvested
Dividends paid (note 22)
Profit after income tax expense for the year
Other comprehensive income for the year, net
of tax
Balance at 30 June 2019
Total comprehensive income for the year
Balance at 1 July 2019
Initial adoption of AASB 16 (refer to note 2
and note 18)
Transactions with owners in their capacity as
owners:
Share-based payments (note 24)
Transfers
Dividends reinvested
Dividends paid (note 22)
Balance at 1 July 2019 - restated
Balance at 30 June 2019
Profit after income tax expense for the year
Other comprehensive income for the year, net
of tax
64,761
-
-
511
-
-
-
65,272
-
65,272
-
-
-
511
65,272
-
-
65,272
(216)
-
-
-
-
-
398
182
398
182
-
-
-
-
182
-
-
182
-
(1,096)
Balance at 1 July 2019
Total comprehensive income for the year
65,272
-
182
(1,096)
Initial adoption of AASB 16 (refer to note 2
Transactions with owners in their capacity as
and note 18)
owners:
Share-based payments (note 24)
Balance at 1 July 2019 - restated
Dividends paid (note 22)
Balance at 30 June 2020
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:
Share-based payments (note 24)
Dividends paid (note 22)
-
65,272
-
-
-
65,272
-
-
-
-
-
-
-
182
-
(914)
(1,096)
(1,096)
-
-
Balance at 30 June 2020
65,272
(914)
-
-
-
398
6,391
Retained
earnings
$'000
(974)
-
132
-
6,391
(3,637)
Non-
controlling
interest
$'000
286
7,075
Total equity
$'000
3,091
286
-
-
-
-
66,662
132
-
511
6,677
(3,637)
-
1,912
-
3,377
398
70,743
6,391
286
7,075
1,912
3,377
70,743
132
-
(132)
-
-
-
-
-
-
-
132
-
(132)
-
-
-
-
(146)
132
-
1,766
(3,637)
-
-
-
-
3,377
-
132
(146)
-
511
70,597
(3,637)
-
-
-
-
-
-
55
-
-
-
55
-
-
4,551
1,912
(323)
3,377
4,228
70,743
-
-
(1,096)
1,912
4,551
3,377
(323)
70,743
3,132
(146)
-
1,766
(4,939)
-
(146)
3,377
-
-
55
(4,939)
70,597
4,551
1,378
(323)
3,054
4,228
68,845
-
-
(1,096)
4,551
(323)
3,132
55
-
55
-
(4,939)
-
-
55
(4,939)
1,378
3,054
68,845
The above statement of changes in equity should be read in conjunction with the accompanying notes
25
The above statement of changes in equity should be read in conjunction with the accompanying notes
25
24
25
Share-based
payments
reserve
$'000
Non-
for the year ended 30 June 2020
controlling
interest
Total equity
$'000
$'000
2019
$'000
Retained
earnings
$'000
Note
2020
$'000
66,662
3,091
(974)
-
6,391
286
173,453
-
(155,221)
-
6,677
186,025
398
(177,306)
6,391
286
18,232
169
(997)
(1,881)
15,523
-
-
-
-
3,377
(1,265)
229
-
3,377
(1,036)
7,075
8,719
123
(665)
(4,100)
132
-
4,077
511
(3,637)
70,743
(721)
329
600
70,743
208
132
(132)
-
-
23
-
132
-
(3,637)
1,912
National Tyre & Wheel Limited and its controlled entities
Statement of changes in equity
For the year ended 30 June 2020
National Tyre & Wheel Limited and its controlled entities
Statement of cash flows
Statement of cash flows
For the year ended 30 June 2020
Foreign
currency
translation
reserve
$'000
Issued
capital
$'000
Balance at 1 July 2018
64,761
(216)
Profit after income tax expense for the year
Cash flows from operating activities
Other comprehensive income for the year, net
Receipts from customers
of tax
Payments to suppliers and employees
Total comprehensive income for the year
Interest received
Transactions with owners in their capacity as
Interest and other finance costs paid
owners:
Income taxes paid
Share-based payments (note 24)
Transfers
Dividends reinvested
Dividends paid (note 22)
Net cash from operating activities
-
-
-
-
-
511
-
-
398
398
-
-
-
-
Balance at 1 July 2019
Net cash (used in)/from investing activities
Initial adoption of AASB 16 (refer to note 2
and note 18)
Cash flows from financing activities
Dividends paid
Balance at 1 July 2019 - restated
Repayment of lease liabilities
Repayment of borrowings
Profit after income tax expense for the year
Other comprehensive income for the year, net
of tax
Net cash used in financing activities
Total comprehensive income for the year
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
Transactions with owners in their capacity as
owners:
Share-based payments (note 24)
Dividends paid (note 22)
Cash and cash equivalents at the end of the financial year
-
-
Balance at 30 June 2020
65,272
(914)
65,272
182
-
-
65,272
182
-
-
-
-
(1,096)
(1,096)
-
-
-
-
-
-
-
-
-
-
-
55
-
55
Balance at 30 June 2019
Cash flows from investing activities
Payments for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Transfers from term deposits
65,272
182
-
1,912
(146)
-
(146)
22
1,766
4,551
(4,939)
3,377
(2,558)
(360)
(323)
(3,127)
70,597
-
(1,577)
4,228
-
(7,857)
-
(4,704)
(1,096)
4,551
-
9
(4,939)
(323)
6,630
19,077
152
25,859
-
-
3,132
(419)
19,608
(112)
55
19,077
(4,939)
1,378
3,054
68,845
14,765
61
19,608
The above statement of changes in equity should be read in conjunction with the accompanying notes
25
The above statement of cash flows should be read in conjunction with the accompanying notes
26
26
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 1. General information
Note 2. Significant accounting policies
Note 3. Critical accounting judgements, estimates and assumptions
Note 4. Operating segments
Note 5. Revenue from contracts with customers
Note 6. Other income
Note 7. Expenses
Note 8. Income tax
Note 9. Cash and cash equivalents
Note 10. Trade and other receivables
Note 11. Inventories
Note 12. Derivative financial instruments
Note 13. Property, plant and equipment
Note 14. Right-of-use assets
Note 15. Intangible assets
Note 16. Trade and other payables
Note 17. Borrowings
Note 18. Lease liabilities
Note 19. Provisions
Note 20. Issued capital
Note 21. Reserves
Note 22. Dividends
Note 23. Cash flow information
Note 24. Share-based payments
Note 25. Earnings per share
Note 26. Key management personnel disclosures
Note 27. Related party transactions
Note 28. Financial instruments
Note 29. Fair value measurement
Note 30. Commitments
Note 31. Remuneration of auditors
Note 32. Contingent liabilities
Note 33. Interests in subsidiaries
Note 34. Parent entity information
Note 35. Deed of cross guarantee
Note 36. Events after the reporting period
30 June 2020
28
28
37
39
39
39
40
41
42
42
42
43
43
44
45
47
47
48
49
50
51
51
52
52
55
56
56
56
60
61
62
62
62
63
64
66
26
27
27
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 1. General information
30 June 2020
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 (‘AUD’), 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 25 August 2020. 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.
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
financial assets and liabilities at fair value through profit or loss 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.
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 following Accounting Standards and Interpretations are most relevant to the Group:
AASB16 Leases
The Group has early adopted AASB 16 from 1 July 2019. The standard replaces AASB 117 Leases and for lessees eliminates the
classifications of operating leases and finance leases. Except for short-term leases and leases of low-value assets, right-of-use assets
and corresponding lease liabilities are recognised in the statement of financial position. Straight-line operating lease expense
recognition is replaced with a depreciation charge for the right-of-use assets (included in operating costs) and an interest expense on
the recognised lease liabilities (included in finance costs). In the earlier periods of the lease, the expenses associated with the lease
under AASB 16 will be higher when compared to lease expenses under AASB 117. However, EBITDA (“Earnings before interest, tax,
depreciation and amortisation”) results improve as the operating expense is now replaced by interest expense and depreciation in
profit or loss. For classification within the statement of cash flows, the interest portion is disclosed in operating activities and the
principal portion of the lease payments are separately disclosed in financing activities. For lessor accounting, the standard does not
substantially change how a lessor accounts for leases.
28
28
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
30 June 2020
Impact of adoption
AASB 16 was adopted using the modified retrospective approach and as such comparatives have not been restated. The impact of
adoption on opening retained earnings as at 1 July 2019 was as follows:
Operating lease commitments disclosed at 30 June 2019
Discounted using the lessee's incremental borrowing rate of at the date of initial application
Add: finance lease liabilities recognised at 30 June 2019
Less: short-term leases not recognised as a lease liability
Lease liability recognised as at 1 July 2019
1 July 2019
$'000
5,154
4,687
275
(521)
4,441
The associated right-of-use assets for property leases were measured on a retrospective basis as if the new rules had always been
applied. Other right-of-use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or
accrued lease payments relating to that lease recognised in the balance sheet as at 30 June 2019. There were no onerous lease contracts
that required an adjustment to the right-of-use assets at the date of initial application.
The recognised right-of-use assets relate to the following types of assets:
30 June 2020 1 July 2019
$'000
$'000
11,486
115
199
11,800
3,982
109
111
4,202
Land and buildings
Equipment
Motor vehicles
Total right-of-use assets
The change in accounting policy affected the following items in the balance sheet on 1 July 2019:
●
●
●
●
●
property, plant and equipment - decrease by $247,000
right-of-use assets - increase by $4,202,000
deferred tax assets - increase by $65,000
borrowings - decrease $275,000
lease liabilities - increase by $4,441,000
The net impact on retained earnings on 1 July 2019 was a decrease of $146,000.
The weighted average incremental borrowing rate applied at transition was 4.3%.
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 34.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of National Tyre & Wheel Limited as at 30
June 2020 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
29
29
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
30 June 2020
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 translation reserve in equity.
The foreign currency translation reserve is recognised in profit or loss when the foreign operation or net investment is disposed of.
Revenue recognition
The Group recognises revenue as follows:
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the Group is expected to be entitled in exchange for
transferring goods or services to a customer. For each contract with a customer, the Group: identifies the contract with a customer;
identifies the performance obligations in the contract; determines the transaction price which takes into account estimates of variable
consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the
relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance
obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised.
Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts, rebates and
refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates are determined using
either the 'expected value' or 'most likely amount' method. The measurement of variable consideration is subject to a constraining
principle whereby revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of
cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable
consideration is subsequently resolved. Amounts received that are subject to the constraining principle are recognised as a refund
liability.
30
30
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
30 June 2020
Sale of goods
Revenue from the sale of goods is recognised at the point in time when the customer obtains control of the goods, which is generally
at the time of delivery.
Other income
Interest income
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 income
Other income is recognised when it is received or when the right to receive payment is established.
Government grants
Government grants are recognised when conditions attached to the grants have been complied with and the right to receive the
grant has been established. Government grants received during the financial year were limited to funds received from the Australian
Government under the JobKeeper Payment scheme. These have been classified as other income.
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,
M.P.C 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.
30
31
31
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
30 June 2020
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.
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. For the statement of cash flows presentation purposes, cash and cash equivalents
also includes bank overdrafts, which are shown within borrowings in current liabilities on the statement of financial position.
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 allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days.
The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To
measure the expected credit losses, trade receivables have been grouped based on days overdue.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
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.
Stock in transit is stated at the lower of cost and net realisable value. 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.
32
32
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
30 June 2020
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
Capital work in progress
2.5% to 15%
5% to 60%
13.5% to 30%
0% until in use
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.
Leasehold improvements are depreciated over the shorter of the unexpired period of the lease or the estimated useful life of the assets.
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.
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises
the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net
of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of
costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset.
Right-of-use assets are amortised on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset,
whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the lease term, the
amortisation is over its estimated useful life. Right-of-use assets are subject to impairment or adjusted for any remeasurement of lease
liabilities.
The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12
months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred.
Lease liabilities
As explained earlier in this note, the Group has adopted AASB 16 Leases from 1 July 2019. As of this date, a lease liability is recognised
at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made
over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the
Group's incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease
payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase
option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease
payments that do not depend on an index or a rate are expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a
change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty
of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-
of-use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down.
The Group has applied the following practical expedients permitted by AASB 16:
applying a single discount rate to a portfolio of leases with reasonably similar characteristics;
not to recognise a lease liability for short term leases (leases with an expected term of 12 months or less) or for leases of low
value assets. Payments made under such leases are expensed on a straight-line basis;
using hindsight in determining the lease term where the contract contains options to extend or terminate the lease; and
not to assess all rent concessions received during the year as a direct consequence of the COVID-19 pandemic as lease
modifications and recorded any concessions to the profit or loss as received.
32
33
33
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
30 June 2020
Prior to 1 July 2019, leases of property, plant and equipment where the group, as lessee, had substantially all the risks and rewards of
ownership were classified as finance leases. Finance leases were capitalised at the lease’s inception at the fair value of the leased
property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges,
were included in current and non-current borrowings. Each lease payment was allocated between the liability and finance cost. The
finance cost was charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining
balance of the liability for each period. The property, plant and equipment acquired under finance leases was depreciated over the
shorter of the asset’s useful life and the lease term if there was no reasonable certainty that the group will obtain ownership at the end
of the lease term.
Leases in which a significant portion of the risks and rewards of ownership were not transferred to the group as lessee were classified
as operating leases. Payments made under operating leases (net of any incentives received from the lessor) were charged to profit or
loss on a straight-line basis over the period 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.
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 to 10 years.
Importation rights
Importation rights are amortised on a straight line basis over the term of the distribution agreement, being between 7 to 10 years.
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 (“CGU”)
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.
34
34
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
30 June 2020
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.
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, which 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.
34
35
35
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
30 June 2020
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.
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.
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.
36
36
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 2. Significant accounting policies (continued)
30 June 2020
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.
Comparative information
Comparatives have been reclassified, where applicable, to align with current year presentation. There was no impact on the results or
financial position of the Group.
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
Other than those discussed previously, no other 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 2020.
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.
New Conceptual Framework for Financial Reporting
A revised Conceptual Framework for Financial Reporting has been issued by the AASB and is applicable for annual reporting periods
beginning on or after 1 January 2020. The application of new definition and recognition criteria as well as new guidance on
measurement will result in amendments to several accounting standards. The issue of AASB 2020-1 Amendments to Australian
Accounting Standards – References to the Conceptual Framework, also applicable from 1 January 2020, includes such amendments.
Where the Group has relied on the conceptual framework in determining its accounting policies for transactions, events or conditions
that are not otherwise dealt with under Australian Accounting Standards, the Group 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.
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.
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 acquisition date present value of expected future cash flows associated with the brand and the recurring
current customers covering a period of 5 to 12 years. These cash flows have been calculated using annual growth rates of between
2.0%-4.0% (2019: 3.8%-6.9%), a terminal growth rate of 2.0% (2019: 1.50%-2.0%) and a pre-tax discount rate of between 14.3%-15.5%
(2019: 16.3%-18.6%).
36
37
37
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 3. Critical accounting judgements, estimates and assumptions (continued)
30 June 2020
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 (refer to note 15).
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 value-in-use calculations, which incorporate a number of key
estimates and assumptions, with the future impact of the COVID-19 pandemic considered when making estimates and assumptions. In
the 2020 financial year, the Group recognised an impairment loss on goodwill, customer relationships and importation rights (refer to
note 15) belonging to a particular CGU (refer to note 15).
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 0.9% (2019: 2.0%), volatility of share price of 58.9% (2019: 65.0%) and
assumed vesting period from grant date (refer to note 24).
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 (refer to note 19).
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 (refer to note 8).
38
38
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 4. Operating segments
30 June 2020
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.
Non-current assets
As at 30 June 2020, $29,299,000 (2019: $20,628,000) of the Group's non-current assets (excluding deferred taxes) were held in
Australia, with $2,603,000 held in New Zealand ($565,000) and $252,000 ($2,698,000) held in South Africa, respectively.
Major customers
During the year ended 30 June 2020, none of the Group's external revenue was derived from sales of greater than 10% to any customer
(2019: none).
Note 5. Revenue from contracts with customers
Sale of goods
Disaggregation of revenue
The disaggregation of revenue from contracts with customers by geographic region is as follows:
Australia
New Zealand
South Africa
2020
$'000
2019
$'000
158,857
168,365
158,857
168,365
130,642
16,193
12,022
136,711
16,421
15,233
158,857
168,365
During the 2020 and 2019 financial years, all revenue from sale of goods was recognised as the goods were transferred at a point in
time.
Note 6. Other income
Government grants
Interest income
Other income
2020
$'000
2019
$'000
1,072
169
72
1,313
-
123
113
236
38
39
39
30 June 2020
2020
$'000
2019
$'000
35
391
341
2,990
3,757
558
806
-
4
377
393
-
774
644
1,204
6
1,364
1,854
5,121
2,628
427
570
997
42
623
665
235
51
466
12
-
478
-
-
4,196
4,196
1,081
1,126
55
67
132
160
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 7. Expenses
Profit before income tax includes the following specific expenses:
Depreciation
Leasehold improvements
Plant and equipment
Motor vehicles
Right-of-use assets
Total depreciation
Amortisation
Customer relationships
Importation rights
Other intangibles
Total amortisation
Total depreciation and amortisation
Finance costs
Interest and finance charges paid/payable for lease liabilities
Interest and finance charges paid/payable for financial liabilities
Finance costs expensed
Net foreign exchange loss
Net foreign exchange loss
Expense relating to leases
Expense relating to short-term leases
Expense relating to leases of low value assets
Expense relating to operating leases
Superannuation expense
Defined contribution superannuation expense
Share-based payments expense
Share-based payments expense
Bad debts
Bad debts expense
40
40
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 8. Income tax
Income tax expense
Current tax
Deferred tax
Under/(over) provision in prior years
Income tax expense
Deferred tax included in income tax expense comprises:
Decrease/(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:
Sundry items
Adjustment recognised for prior periods
Difference in overseas tax rates
Income tax expense
Deferred tax
Net deferred tax comprises temporary differences attributable to:
Capital raising costs
Provisions
Property, plant and equipment
Intangibles
Right-of-use assets
Other
Lease liabilities
Foreign currency exchange
Deferred tax (liability)/asset
Movements:
Opening balance
Adoption of AASB 16 Leases
Credited/(charged) to profit or loss
Foreign exchange differences
Closing balance
30 June 2020
2020
$'000
2019
$'000
3,059
(1,002)
(50)
3,066
156.
(247)
2,007
2,975
(1,002)
156
6,235
9,651
1,871
2,895
204
360
2,075
3,255
(50)
(18)
(247)
(33)
2,007
2,975
441
1,528
(48)
(1,608)
(3,461)
159.
3,668
221.
690
1,355
(116)
(2,118)
-..
5
63
(31)
900
(152)
(152)
65
1,002
(15)
4..
-.
(156)
-.
900
(152)
40
41
41
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 9. Cash and cash equivalents
Cash at bank
Reconciliation to cash and cash equivalents at the end of the financial year
The above figures are reconciled to cash and cash equivalents at the end of the financial year as
shown in the statement of cash flows as follows:
Balances as above
Bank overdraft (refer to note 17)
Balance as per statement of cash flows
Note 10. Trade and other receivables
Trade receivables
Less: Allowance for expected credit losses
30 June 2020
2020
$'000
2019
$'000
25,859
19,554
25,859
19,554
25,859
-
19,554
(477)
25,859
19,077
23,259
(44)
24,714
(35)
23,215
24,679
Allowance for expected credit losses
The Group has recognised a net loss of $67,000 (2019: $160,000) in 'other' expenses for the current year for specific debtors for which
such evidence exists. Trade receivables past due but not impaired amount to $2,952,000 (2019: $4,535,000).
At 30 June 2020 an ageing analysis of those trade receivables are as follows:
Not overdue
1 to 30 days overdue
31 to 60 days overdue
61 plus days overdue
Refer to note 28 for further information on financial instruments.
Note 11. Inventories
Finished goods - at cost
Less: Provision for impairment
Stock in transit - at cost
42
42
20,263
2,528
149
275
20,144
4,038
315
182
23,215
24,679
30,594
(13)
30,581
37,252
(22)
37,230
32,652
(150)
32,502
10,906
11,333
15,248
41,487
48,563
47,750
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 12. Derivative financial instruments
Forward foreign exchange contracts
Refer to note 29 for further information on fair value measurement.
Note 13. 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
Capital works in progress - at cost
30 June 2020
2020
$'000
2019
$'000
(943)
24
425
(66)
359
5,060
(3,334)
1,726
2,764
(1,234)
1,530
321
(266)
55
4,826
(3,067)
1,759
3,104
(1,395)
1,709
-
56
3,615
3,579
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Balance at 1 July 2018
Additions
Disposals
Exchange differences
Depreciation expense
Balance at 30 June 2019
Additions
Disposals
Transfers
Transfers to right-of-use assets
Depreciation expense
Exchange differences
Balance at 30 June 2020
Leasehold
improvements
$'000
Plant and
equipment
$'000
Motor
vehicles
$'000
Capital works
in progress
$'000
Total
$'000
59
-
-
-
(4)
55
283
-
56
-
(35)
-
359
1,864
268
(8)
12
(377)
1,759
431
(14)
-
(50)
(391)
(9)
1,994
397
(303)
14
(393)
1,709
552
(174)
-
(197)
(341)
(19)
-
56
-
-
-
56
-
-
(56)
-
-
-
3,917
721
(311)
26
(774)
3,579
1,266
(188)
-
(247)
(767)
(28)
1,726
1,530
-
3,615
Property, plant and equipment secured under finance leases
As of 1 July 2019, property, plant and equipment secured under finance leases are classified as right-of-use assets, refer to note 14.
42
43
43
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 14. Right-of-use assets
Land and buildings - right-of-use
Less: Accumulated depreciation
Plant and equipment - right-of-use
Less: Accumulated depreciation
Motor vehicles - right-of-use
Less: Accumulated depreciation
30 June 2020
2020
$'000
2019
$'000
17,061
(5,575)
11,486
185
(70)
115
405
(206)
199
11,800
-
-
-
-
-
-
-
-
-
-
Reconciliations
Reconciliations of the written down values at the beginning and end of the current year are set out below:
Recognition of assets on adoption of AASB 16 on 1 July 2019
Transfers from property, plant and equipment
Additions
Lease modifications
Disposals
Depreciation expense
Foreign exchange differences
Balance at 30 June 2020
Land and
buildings
$'000
Plant and
equipment
$'000
Motor vehicles
$'000
Total
$'000
3,982
-
10,326
76
-
(2,862)
(36)
11,486
109
50
10
-
-
(40)
(14)
115
111
197
-
44
(44)
(88)
(21)
199
4,202
247
10,336
120
(44)
(2,990)
(71)
11,800
44
44
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 15. Intangible assets
Goodwill - at cost
Less: Accumulated impairment loss
Brand name - at cost
Customer relationships - at cost
Less: Accumulated amortisation and impairment loss
Importation rights - at cost
Less: Accumulated amortisation and impairment loss
Other intangibles - at cost
Less: Accumulated amortisation
30 June 2020
2020
$'000
2019
$'000
8,878
(1,311)
7,567
8,878
-
8,878
2,393
2,393
4,798
(1,831)
2,967
12,106
(8,294)
3,812
14
(14)
-
4,798
(1,062)
3,736
12,106
(6,800)
5,306
14
(14)
-
16,739
20,313
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 2018
Amortisation expense
Balance at 30 June 2019
Amortisation expense
Impairment loss
Goodwill
$'000
Brand
name
$'000
Customer
relation-
ships
$'000
Importation
rights
$'000
Other
intangibles
$'000
Total
$'000
8,878
-
8,878
-
(1,311)
2,393
-
2,393
-
-
4,380
(644)
3,736
(558)
(211)
6,510
(1,204)
5,306
(806)
(688)
6
(6)
-
-
-
-
22,167
(1,854)
20,313
(1,364)
(2,210)
16,739
Balance at 30 June 2020
7,567
2,393
2,967
3,812
Impairment of intangible assets
An impairment loss of $2,210,000 (2019: $Nil) was recognised in relation to the Top Draw Tyres Pty Ltd cash-generating unit. This CGU
included goodwill, customer relationships and importation rights intangible assets, all of which have been impaired to $Nil. The pre and
post COVID-19 pandemic performance of the CGU as well as continuing uncertainty of its future prospects, has resulted in the
impairment being recognised this financial year.
44
45
45
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 15. Intangibles assets (continued)
30 June 2020
Impairment testing
For the purpose of impairment testing, goodwill and brand names are allocated to the respective cash-generating units:
Goodwill
CGU:
- Tyres and wheels
- M.P.C Mags and Tyres Pty Ltd (“MPC”)
- Top Draw Tyres Pty Ltd
Brand names
CGU:
- M.P.C Mags and Tyres Pty Ltd (“MPC”)
2020
$'000
2019
$'000
5,228
2,339
-
5,228
2,339
1,311
7,567
8,878
2,393
2,393
The Group tests whether goodwill and brand names have suffered any impairment on an annual basis. The recoverable amount of the
CGUs was determined based on value-in-use calculations which require the use of assumptions. The calculations are conducted using
a discount cash flow methodology based on financial budgets approved by the Board of Directors for the 2021 financial year which
have been reduced on those in prior periods. The 2021 cashflow budgets have then been extrapolated using estimated annual growth
rates, together with terminal growth rates. These growth rates are considered reasonable in light of the reduced 2021 base cashflows,
and are consistent with forecasts included in industry reports specific to the industry in which each CGU operates.
The following table sets out the key assumptions for those CGUs that have significant goodwill and brand names allocated to them,
which have not been impaired during the year:
2020
Tyres and wheels
%
MPC
%
2019
Tyres and wheels
%
MPC
%
Average annual growth rate (%)
Terminal growth rate (%)
Pre-tax discount rate (%)
3.0%
2.0%
14.7%
3.0%
2.0%
15.8%
3.8%
1.5%
16.3%
1.9%
1.5%
16.8%
Management has determined the value assigned to each of the above key assumptions as follows:
Assumption
Approach used to determine values
Annual growth rate
Terminal growth rate
Discount rate
Average annual growth rate over the five-year forecast period beyond the 2021 financial year is based on the
reduced cashflow budgets, past performance and management’s expectations of market development.
Terminal growth rate was based on the reduced 2021 forecast cashflows and management’s expectations of
long-term growth.
A post-tax estimate based on NTD’s weighted average cost of capital.
Significant estimate: Impact of possible changes in key assumptions
A sensitivity analysis was performed on key assumptions, as follows:
Average annual growth rates – reduction by 1% No impairment in either the Tyres & Wheels CGU or MPC CGU
Terminal growth rate – reduction by 1%
No impairment in either the Tyres & Wheels CGU or MPC CGU
Discount rate – increase by 1.0%
No impairment in Tyres & Wheels CGU, but for the MPC CGU, the Group would
have had to recognise an impairment against the carrying value of goodwill of
$700,000.
In the prior year, there were no reasonably possible changes in any of the key assumptions that would have resulted in an
impairment in any CGU.
46
46
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 16. Trade and other payables
Trade payables
GST payable
Other payables and accruals
Refer to note 28 for further information on financial instruments.
Note 17. Borrowings
Current
Bank overdraft
Bank loans
Non-current
Bank loans
Total secured liabilities
The total secured liabilities are as follows:
Bank overdraft
Bank loans
The bank loan facility has an expiry date of 31 May 2023.
Refer to note 28 for further information on financial instruments.
30 June 2020
2020
$'000
2019
$'000
21,581
432
2,917
27,383
197
1,845
24,930
29,425
2020
$'000
2019
$'000
-
-
-
477
1,438
1,915
12,223
11,145
12,223
11,145
-
12,223
477
12,583
12,223
13,060
Assets pledged as security
The bank loans are secured over the assets of National Tyre & Wheel Limited and the following subsidiaries - Exclusive Tyre Distributors
Pty Ltd, Exclusive Tyre Distributors (NZ) Ltd, Dynamic Wheel Co Pty Limited, M.P.C Mags & Tyres Pty Ltd and Statewide Tyre Distribution
Pty Ltd.
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Bank overdraft
Bank loans
Bank guarantee
-
12,223
4,157
16,380
477
12,583
4,157
17,281
46
47
47
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 17. Borrowings (continued)
Used at the reporting date
Bank overdraft
Bank loans
Bank guarantee
Unused at the reporting date
Bank overdraft
Bank loans
Bank guarantee
Note 18. Lease liabilities
Current
Property leases
Equipment leases
Motor vehicle leases
Non-current
Property leases
Equipment leases
Motor vehicle leases
30 June 2020
2020
$’000
2019
$’000
-
12,223
1,945
14,168
-
-
2,212
2,212
3,162
51
85
3,298
9,016
58
98
9,172
477
12,583
2,892
16,016
-
-
1,265
1,265
-
17
108
125
-
47
103
150
764
3,107
The Group has leases for warehouse and office facilities, warehouse equipment and motor vehicles. Leases are either non-cancellable
or may only be cancelled by incurring a substantive termination fee. All variable payments are linked to an index. The lease liabilities
are secured by the related underlying asset.
Leasing activities
The table below describes the nature of the Group’s leasing activities by type of right-of-use asset.
Right-of-use asset
No. of
leases
Range of
remaining
term (yrs)
Average
remaining
term (yrs)
No. of leases
with extension
options
No. of leases
with purchase
options
No. of leases with
variable payments
linked to an index
No. of leases with
termination
options
Land and buildings
Plant and equipment
Motor vehicles
11
5
12
0.2 - 6.3
1.9 - 3.9
0.1 - 2.3
3.0
2.3
0.9
10
-
-
-
1
12
5
-
-
-
-
-
Future minimum lease payments at 30 June 2020 were as follows:
$’000
Within 1 year
1-2 years
2-3 years
3-4 years
4-5 years
After 5 years
Total
Gross lease payments
Finance charges
3,731
(433)
3,409
(294)
2,392
(184)
1,874
(108)
1,270
(49)
Net present value
3,298
3,115
2,208
1,766
1,221
881
(19)
862
13,558
(1,088)
12,470
48
48
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 18. Lease liabilities (continued)
The total cash outflow for leases in the 2020 financial year was $2,988,000.
30 June 2020
The gains recognised in the Statement of profit or loss and other comprehensive income in the 2020 financial year reflecting changes in
lease payments that arose from rent concessions received as direct consequence of the COVID-19 pandemic was $130,000.
In the 2019 financial year, the Group only recognised lease liabilities in relation to leases that were classified as ‘finance leases’ under
AASB 117 Leases. The corresponding assets were presented in property, plant & equipment and liabilities as part of borrowings. Refer
to note 2 for details on adjustments recognised on adoption of AASB 16 Leases on 1 July 2019.
Note 19. Provisions
Current
Employee benefits
Warranties
Non-current
Employee benefits
Warranties
2020
$’000
2019
$’000
2,748
904
2,305
887
3,652
3,192
2,343
764
3,107
230
1,000
272
1,085
1,230
1,357
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.
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 (current and non-current) during the current financial year, other than employee benefits, are
set out below:
Warranties
Carrying amount at the start of the year
Additional provisions recognised
Amounts used
Carrying amount at the end of the year
2020
$'000
1,972
489
(556)
1,904
48
49
49
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
30 June 2020
Notes to the financial statements
Note 20. Issued capital
30 June 2020
2020
Shares
2019
Shares
2020
$'000
2019
$'000
Ordinary shares - fully paid
102,891,313
102,891,313
65,272
65,272
Movements in ordinary share capital
Details
Date
Shares
Issue price
$'000
Balance
Issue of shares per Dividend Reinvestment Plan
Issue of shares per Dividend Reinvestment Plan
1 July 2018
8 October 2018
4 April 2019
102,321,143
332,809
237,361
$1.1700
$0.5100
Balance
Balance
30 June 2019
102,891,313
30 June 2020
102,891,313
64,761
390
121
65,272
65,272
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.
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.
The capital risk management policy remains unchanged from the 30 June 2019 Annual Report.
50
50
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 21. Reserves
Foreign currency translation reserve
Share-based payments reserve
30 June 2020
2020
$'000
2019
$'000
(914)
55
859
182
-
182
Foreign currency translation 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 as part of their
remuneration. Share-based payments reserve is transferred to share capital upon exercising of options, and is transferred to retained
earnings upon lapsing or forfeiture of options.
Note 22. Dividends
Dividends paid during the financial year were as follows:
Final dividend
Special dividend
Interim dividend
2,573
1,080
1,286
2,353
-
1,284
4,939
3,637
Refer to note 20 for details of shares issued pursuant to the Company's Dividend Reinvestment Plan during the 2019 financial year.
Franking credits
Franking credits available for subsequent financial years based on a tax rate of 30%
15,811
15,350
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for franking credits or
debits that will arise from the payment or refund of the amount of the provision for income tax or income tax refundable at the
reporting date.
50
51
51
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 23. Cash flow information
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
Impairment of intangible assets
Net loss/(gain) on disposal of property, plant and equipment
Share-based payments
Impairment of receivables
Foreign exchange differences
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Decrease/(increase) in inventories
Decrease/(increase) in other assets
Increase/(decrease) in trade and other payables
Increase/(decrease) in other provisions
Increase/(decrease) in provision for income tax
Decrease/(increase) in deferred tax assets
30 June 2020
2020
$'000
2019
$'000
4,228
6,676
5,121
2,210
(14)
55
67
(288)
1,434
7,075.
(300)
(4,519)
328.
1,114.
(988)
2,628
-
(44)
132
156
951
1,062
(813)
(102)
(5,586)
142
(1,281)
156
Net cash from operating activities
15,523
4,077
Note 24. Share-based payments
Employee Share Option Plan (“ESOP”)
The Company adopted an 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.
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.
52
52
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 24. Share-based payments (continued)
30 June 2020
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.
●
●
52
53
53
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 24. Share-based payments (continued)
30 June 2020
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:
2020
Grant date
Expiry date
Exercise price
Balance at
start of year
Granted
Lapsed
Exercised
08/11/2019
07/12/2018
07/11/2024
30/09/2023
$0.3735
$1.1724
-
1,630,000
1,845,000
-
-
(1,630,000)
1,630,000
1,845,000
(1,630,000)
Balance at end
of year
-
-
-
1,845,000
-
1,845,000
2019
Grant date
Expiry date
Exercise price
Balance at
start of year
Granted
Lapsed
Exercised
Balance at end
of year
07/12/2018
30/09/2023
$1.1724
-
1,630,000
-
-
1,630,000
The weighted average remaining contractual life of options outstanding at the end of the financial year was 4.25 years (2019: Nil years).
Options lapsed during the 2020 financial year as the performance conditions were not met.
The performance conditions were as follows:
1)
Earnings per share condition – the Company’s EPS for the year ended 30 June 2021 was to be at least 10% higher than its EPS
for the year ended 30 June 2019.
Calculation of the EPS growth rate is based upon the EPS results reported in NTAW’s audited financial statements for the above
years. The Basic EPS reported may be adjusted for items which the Board, in its discretion, considers should be included in, or
excluded from, the result.
The Board determined that the FY2019 base EPS for the Options would be 7.74 cents per share. This was based upon the
Company’s 2019 NPATA attributable to NTAW shareholders. The target EPS for the 2021 financial year (based upon the
Company’s NPATA attributable to NTAW shareholders) is 8.51 cents per share.
2)
Service condition – continuous employment of the employee with NTAW or one of its subsidiaries from the Grant Date until
the Vesting Date.
54
54
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 24. Share-based payments (continued)
30 June 2020
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
at grant date
Exercise
price
Expected
volatility
Dividend
yield
Risk-free
Fair value
interest rate at grant date
08/11/2019
07/12/2018
07/11/2024
30/09/2023
$0.4200
$0.4900
$0.3735
$1.1724
58.90%
65.00%
7.40%
8.70%
0.88%
2.00%
$0.1400
$0.0810
Employee Gifted Shares
During the 2019 financial year, Terry and Susanne Smith (co-founders of Exclusive Tyre Distributors Australia Pty Ltd) and Chris and
Christine Hummer (co-founders of Dynamic Wheel Co Pty Ltd), transferred a total of 319,666 of their personally owned National Tyre
& Wheel Limited shares to a number of employees of the Group. The gifts were made as a gesture of thanks and appreciation for the
employees’ efforts and support for the business, prior to NTD’s listing on the ASX in December 2017. The transfers occurred following
the release of the shares from voluntary escrow during the year and were valued at 45 cents per share at that time.
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 Employee Share Option Plan
Employee gifted shares
Total expense recognised from share-based payment transactions in employee benefits expense
Note 25. Earnings per share
Profit after income tax
Non-controlling interest
2020
$'000
2019
$'000
55
-
55
-
132
132
2020
$'000
2019
$'000
4,228
323
6,677
(286)
Profit after income tax attributable to the owners of National Tyre & Wheel Limited
4,551
6,391
Weighted average number of ordinary shares used in calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares
Number
Number
102,891,313
102,676,530
1,439,071
-
Weighted average number of ordinary shares used in calculating diluted earnings per share
104,330,384
102,676,530
Basic earnings per share
Diluted earnings per share
Cents
Cents
4.42
4.36
6.22
6.22
54
55
55
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 26. Key management personnel disclosures
30 June 2020
The aggregate compensation made to directors and other members of key management personnel of the Group is set out below:
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
Note 27. Related party transactions
Parent entity
National Tyre & Wheel Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 33.
2020
$'000
2019
$'000
2,639,068
158,311
76,815
29,883
2,146,898
146,497
61,562
-
2,904,077
2,354,957
Key management personnel
Disclosures relating to key management personnel are set out in note 26 and the remuneration report included in the directors' report.
Transactions with related parties
During the financial year, the Group leased business premises owned by closely related parties of key management personnel. One
lease expires on 30 May 2023 and has two 5 year renewal options and the other lease ending during the year. Rent payments for the
financial year totalled $214,845 (2019: $329,900), with $Nil outstanding at 30 June 2020 (2019: $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 28. 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.
56
56
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 28. Financial instruments (continued)
30 June 2020
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 2020, the Group had forward foreign exchange contracts to acquire USD $10,700,000 (2019: USD $15,900,000). These are
due to mature within 5 months of balance date. The fixed exchange rates on these contracts ranged from 0.5970 to 0.6972 (2019:
0.6675 to 0.7154).
The Group's exposure to foreign currency risk at the end of the reporting period, expressed in AUD, was as follows:
Cash
Trade payables
Buy foreign currency (held for trading)
2020
$'000
2019
$'000
235
(12,405)
(943)
-
(20,094)
24
(13,113)
(20,070)
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:
2020
USD
2019
USD
AUD strengthened
Effect on profit
before tax
Effect on equity
AUD weakened
Effect on profit
before tax
% change
% change
Effect on equity
10%
1,192
834
10%
(1,457)
(1,020)
AUD strengthened
Effect on profit
before tax
Effect on equity
AUD weakened
Effect on profit
before tax
% change
% change
Effect on equity
10%
1,825
1,277
10%
(2,230)
(1,561)
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 2020 was $235,000 (2019: loss of
$51,000).
Price risk
The Group is not exposed to any significant price risk.
56
57
57
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 28. Financial instruments (continued)
30 June 2020
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:
Bank overdraft
Borrowings
Net exposure to cash flow interest rate risk
2020
$'000
2019
$'000
-
12,223
477
12,583
12,223
13,060
An analysis by remaining contractual maturities in shown in 'liquidity and interest rate risk management' below.
The weighted average interest rate on borrowings during the year ended 30 June 2020 was 0.91% (2019: 1.30%).
For the Group the bank loans outstanding, totalling $12,223,000 are interest only payment loans (2019: $12,583,000 principal and
interest payment loans). An official increase/decrease in interest rates of 50 (2019: 50) basis points would have an adverse/favourable
effect on profit before tax of $61,000 (2019: $63,000) per annum. The percentage change is based on the expected volatility of interest
rates using market data and analysts forecasts. No minimum principal repayments (2019: $1,438,000) are due during the subsequent
12 month period.
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.
The Group has adopted a lifetime expected loss allowance in estimating expected credit losses to trade receivables through the use of
a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered representative across all customers of
the Group based on recent sales experience, historical collection rates and forward-looking information that is available.
Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include the failure
of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual payments for a period
greater than 1 year.
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
2020
$'000
2019
$'000
2,212
1,265
58
58
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 28. Financial instruments (continued)
30 June 2020
The bank guarantee facilities may be drawn at any time and have a weighted average maturity of 2.24 years (2019: 2.21 years).
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.
2020
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing - variable
Bank overdraft
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
21,581
1,372
-
-
-
-
-
-
-
-
-
12,233
-
-
-
-
21,581
1,372
-
12,233
3,298
26,251
3,115
3,115
5,195
17,428
860
860
12,468
47,654
Derivatives
Forward foreign exchange contracts net settled
Total derivatives
(943)
(943)
-
-
-
-
-
-
(943)
(943)
2019
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
27,383
608
-
-
-
-
477
1,460
-
1,460
-
9,727
108
78
25
-
-
-
-
-
-
-
27,383
608
477
12,647
211
24
24
Derivatives
Forward foreign exchange contracts net settled
Total derivatives
24
24
-
-
-
-
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above.
58
59
59
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 29. Fair value measurement
30 June 2020
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
2020
Forward foreign exchange contracts - derivatives
Total liabilities
2019
Forward foreign exchange contracts - derivatives
Total assets
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
Level 1
$'000
-
-
-
-
(943)
(943)
Level 2
$'000
Level 3
$'000
24
24
-
-
-
-
(943)
(943)
Total
$'000
24
24
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.
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.
60
60
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 30. Commitments
30 June 2020
Capital commitments
Committed at the reporting date but not recognised as liabilities, payable:
Property, plant and equipment
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
Lease liability - non-current
2019
$'000
283
2,279
2,874
5,153
2019
$'000
116
109
225
(14)
211
108
103
211
From 1 July 2019, the group has recognised right-of-use assets for these leases, except for short-term and low-value leases. Refer to
further information in note 2 and note 18.
60
61
61
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 31. Remuneration of auditors
30 June 2020
During the financial year the following fees were paid or payable for services provided by Pitcher Partners, the auditor of the Company,
and its network firms:
Audit services - Pitcher Partners
Audit or review of the financial statements
Other services - Pitcher Partners
Transaction services
Tax compliance services
IT consulting services
Audit services - network firms
Audit or review of the financial statements
Other services - network firms
Other assurance services
Note 32. Contingent liabilities
2020
$
2019
$
200,998
200,000
115,000
118,620
4,800
145,451
128,612
-
238,420
274,063
439,418
474,063
27,222
18,882
12,923
592
40,145
19,474
The Group has given bank guarantees as at 30 June 2020 of $1,945,000 (2019: $2,892,000) to various landlords and suppliers for standby
letters of credit.
Note 33. 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) Limited
Dynamic Wheel Co Pty Limited
M.P.C Mags and Tyres Pty Ltd
Top Draw Tyres Proprietary Limited
Statewide Tyre Distribution Pty Ltd
Principal place of business /
Country of incorporation
Australia
New Zealand
Australia
Australia
South Africa
Australia
Ownership interest
2019
2020
%
%
100.00%
100.00%
100.00%
100.00%
50.00%
100.00%
100.00%
100.00%
100.00%
100.00%
50.00%
100.00%
62
62
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 34. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit/(loss) after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Reserves
Accumulated losses
Total equity
30 June 2020
Parent Entity
2020
$'000
2019
$'000
1,539
1,539
(524)
(524)
2,538
1,230
57,340
56,136
8,690
5,197
20,957
16,408
65,272
55
(28,944)
65,272
-
(25,544)
36,383
39,728
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 2020 and 30 June 2019. Refer to
note 35.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2020 and 30 June 2019.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2020 and 30 June 2019.
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.
62
63
63
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 35. Deed of cross guarantee
30 June 2020
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; and
Exclusive Tyres Distributors (NZ) Limited.
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'.
Set out below is a consolidated statement of profit or loss and other comprehensive income and statement of financial position of the
'Closed Group'.
Closed Group
2020
$'000
2019
$'000
98,927
3,020
(73,184)
(10,686)
(3,800)
(1,101)
(3,322)
(435)
(2,826)
(804)
5,789
(1,845)
110,442
107
(78,409)
(11,647)
(1,625)
(1,210)
(5,176)
(3,335)
(3,465)
(641)
5,041
(2,576)
3,944
2,465
(89)
(89)
132
132
3,855
2,597
1,201
3,944
(4,939)
(129)
2,373
2,465
(3,637)
-
78
1,201
Statement of profit or loss and other comprehensive income
Revenue
Other income
Cost of goods sold
Employee benefits and other related costs
Depreciation and amortisation
Professional fees and insurance
Marketing
Occupancy
Other
Finance
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 earnings
Retained earnings at the beginning of the financial year
Profit after income tax expense
Dividends paid
Transfer from share-based payments reserve
Retained earnings at the end of the financial year
64
64
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
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
Prepayments
Income tax refund due
Non-current assets
Other financial assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Deferred tax
Total assets
Current liabilities
Trade and other payables
Borrowings
Provisions
Derivative financial instruments
Lease liabilities
Current tax liability
Non-current liabilities
Borrowings
Lease liabilities
Provisions
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
30 June 2020
Closed Group
2020
$'000
2019
$'000
18,803
14,728
19,068
-
538
-
53,137
33,567
2,667
10,694
7,233
1,870
56,031
14,747
16,883
26,299
19
543
225
58,716
33,567
2,575
-
7,922
1,363
45,427
109,168
104,143
15,253
-
2,290
740
2,894
894
22,071
12,223
8,451
1,159
21,833
21,631
1,458
2,077
-
-
-
25,166
11,213
-
1,291
12,504
43,904
37,670
65,264
66,473
65,272
(86)
78
65,272
-
1,201
65,264
66,473
64
65
65
National Tyre & Wheel Limited and its controlled entities
Notes to the financial statements
Notes to the financial statements
30 June 2020
Note 36. Events after the reporting period
30 June 2020
On 4 August 2020, the Group completed the transformative acquisition of the business assets and operations of Tyres4U in Australia
and New Zealand. Consideration totalled $48.7m which was paid in cash and NTD shares. To assist with the acquisition, NTD
renegotiated its debt facilities with Commonwealth Bank of Australia which has increased the total debt facility to $68.5m. A total of
11.3m shares were issued (bringing the total number of ordinary shares to 114.2m) using NTD’s available capacity under ASX Listing
Rule 7.1 and are subject to voluntary escrow of 18 months from the date of issue.
No other matter or circumstance has arisen since 30 June 2020 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.
66
66
National Tyre & Wheel Limited and its controlled entities
Directors' declaration
Directors’ declaration
30 June 2020
In the directors' opinion:
30 June 2020
●
●
●
●
●
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 2020 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
25 August 2020
Brisbane
66
67
67
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 its controlled entities (“the
Group”), which comprises the consolidated statement of financial position as at 30 June 2020, 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, 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:
(a)
(b)
giving a true and fair view of the Group’s financial position as at 30 June 2020 and of its
financial performance for the year then ended; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) “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 Company, 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.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current period. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
68
Key Audit Matter
How our audit addressed the key audit matter
Impairment of goodwill and separately identifiable intangible assets
Refer to Note 15: Intangibles
As part of business combinations completed
during prior years, the Group recognised
goodwill and 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, with these subsidiaries being the
basis of 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 prepared by management which
are based on budgeted future cash flows, key
estimates and significant judgements such as
growth rate, discount rate and terminal value.
This is a key area of audit focus as the value of
the intangible assets is material and the
evaluation of the recoverable amount of these
assets requires significant judgement in
determining the key estimates supporting the
expected future cash flows of the CGUs and
the utilisation of the relevant assets.
Our audit procedures included:
Understanding and evaluating management’s
processes and controls;
Assessing management’s determination of
the Group’s CGUs based on our
understanding of the nature of the Group’s
business and the identifiable groups of cash
generating assets;
Comparing the cash flow forecasts used in
the value-in-use calculations to Board
approved budgets for the 2021 financial year
and the Group’s historic actual performance;
Assessing the significant judgements and key
estimates used for the impairment
assessment, in particular, those judgements
relating to the discount rate, terminal value
and cash flow forecasts;
Checking the mathematical accuracy of the
impairment testing model and agreed relevant
data to the latest budgets;
Performing sensitivity analysis by varying
significant judgements and key estimates,
including the discount rate and growth rate
inputs, for the CGUs to which goodwill
relates; and
Assessing the adequacy of the Group’s
disclosures in respect of impairment testing of
goodwill and indefinite useful life intangible
assets.
Pitcher Partners is an association of independent firms.
An Independent Queensland Partnership ABN 84 797 724 539. Liability limited by a scheme approved under Professional Standards Legislation.
Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities.
69
Adoption of Australian Accounting Standard AASB 16 Leases
Refer to Note 14: Right-of-use assets & Note 18 Lease Liabilities
Adoption of Australian Accounting Standard AASB 16 Leases
Refer to Note 14: Right-of-use assets & Note 18 Lease Liabilities
The 30 June 2020 financial year was the first
year of adoption for Australian Accounting
Standard AASB 16 Leases. The Group has
entered into a significant volume of leases by
number and value, over properties, motor
vehicles and equipment as a lessee.
The 30 June 2020 financial year was the first
The Group elected to apply the modified
year of adoption for Australian Accounting
retrospective approach. Effective on the date
Standard AASB 16 Leases. The Group has
of transition, a $4,441,000 Lease Liability and
entered into a significant volume of leases by
$4,202,000 of Right of Use Assets were
number and value, over properties, motor
recognised, with an after-tax adjustment of
vehicles and equipment as a lessee.
$146,000 impacting retained earnings.
The Group elected to apply the modified
retrospective approach. Effective on the date
Given the financial significance to the Group of
of transition, a $4,441,000 Lease Liability and
its leasing arrangements, the complexity and
$4,202,000 of Right of Use Assets were
management’s judgements involved in the
recognised, with an after-tax adjustment of
application of AASB 16, such as, the
$146,000 impacting retained earnings.
Incremental Borrowing Rate, inputs within lease
calculations and the transition requirements of
Given the financial significance to the Group of
the standard, this was assessed as a key audit
its leasing arrangements, the complexity and
matter.
management’s judgements involved in the
application of AASB 16, such as, the
Incremental Borrowing Rate, inputs within lease
calculations and the transition requirements of
the standard, this was assessed as a key audit
matter.
Our procedures included, amongst others:
Understanding and evaluating
management’s processes and controls
related to the identification, recognition and
measurement of lease liabilities and right of
use assets;
Our procedures included, amongst others:
Assessing the integrity of the management’s
Understanding and evaluating
AASB 16 lease calculation model, including
management’s processes and controls
the accuracy of formulas;
related to the identification, recognition and
Agreeing management’s inputs into the
measurement of lease liabilities and right of
AASB 16 lease calculation model, using
use assets;
audit sampling to agree the lease term, fixed
Assessing the integrity of the management’s
and variable rent payments, renewal options
AASB 16 lease calculation model, including
and lease incentives back to underlying
the accuracy of formulas;
executed lease agreements;
Agreeing management’s inputs into the
Assessing the reasonableness of
AASB 16 lease calculation model, using
management’s assumptions in relation to the
audit sampling to agree the lease term, fixed
accounting treatment of lease renewal
and variable rent payments, renewal options
options under AASB 16;
and lease incentives back to underlying
Assessing the reasonableness of the
executed lease agreements;
Incremental Borrowing Rate used to discount
Assessing the reasonableness of
future lease payments to present value; and
management’s assumptions in relation to the
Reviewing whether the Group’s new
accounting treatment of lease renewal
accounting policy satisfied the requirements
options under AASB 16;
of AASB 16 including the adoption of
Assessing the reasonableness of the
practical expedients applied by management
Incremental Borrowing Rate used to discount
for the transitional accounting.
future lease payments to present value; and
Reviewing whether the Group’s new
Other Information
accounting policy satisfied the requirements
of AASB 16 including the adoption of
practical expedients applied by management
for the transitional accounting.
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 2020, but does not
include the financial report and our auditor’s report thereon.
Other Information
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
The directors are responsible for the other information. The other information comprises the
information included in the Group’s annual report for the year ended 30 June 2020, but does not
include the financial report and our auditor’s report 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
Our opinion on the financial report does not cover the other information and accordingly we do not
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
express any form of assurance conclusion thereon.
If, based on the work we have performed, we conclude that there is a material misstatement of this
In connection with our audit of the financial report, our responsibility is to read the other information
other information, we are required to report that fact. We have nothing to report in this regard.
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Pitcher Partners is an association of independent firms.
An Independent Queensland Partnership ABN 84 797 724 539. Liability limited by a scheme approved under Professional Standards Legislation.
Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities.
Pitcher Partners is an association of independent firms.
An Independent Queensland Partnership ABN 84 797 724 539. Liability limited by a scheme approved under Professional Standards Legislation.
Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities.
70
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
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 and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override
of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based 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 conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Group to
cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
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 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 audit.
Pitcher Partners is an association of independent firms.
An Independent Queensland Partnership ABN 84 797 724 539. Liability limited by a scheme approved under Professional Standards Legislation.
Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities.
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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 reasonably be thought to bear on our independence, and where applicable, actions
taken to eliminate threats or safeguards applied.
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 these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report 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
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 9 to 20 of the directors’ report for the
year ended 30 June 2020. In our opinion, the Remuneration Report of National Tyre & Wheel for the
year ended 30 June 2020, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
PITCHER PARTNERS
WARWICK FACE
Partner
Brisbane, Queensland
25 August 2020
Pitcher Partners is an association of independent firms.
An Independent Queensland Partnership ABN 84 797 724 539. Liability limited by a scheme approved under Professional Standards Legislation.
Pitcher Partners is a member of the global network of Baker Tilly International Limited, the members of which are separate and independent legal entities.
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National Tyre & Wheel Limited and its controlled entities
Shareholder information
Shareholder information
30 June 2020
The shareholder information set out below was applicable as at 18 August 2020.
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:
ST Corso Pty Ltd
J P Morgan Nominees Australia Pty Limited
EM Australia 2021 Pty Ltd (previously Tyres4U Pty Ltd)
Sandhurst Trustees Ltd (Collins St Value Fund A/C)
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
Roshan Charles Chelvaratnam
BNP Paribas Nominees Pty Ltd (IB AU Noms Retailclient DRP)
Mr John Peter Ludemann
S.N. Tyre Wholesalers Pty Ltd
Mr Christian James Haustead
Mrs Christine Lorraine Hummer
Mrs Christine Lorraine Hummer
Mr Christopher John Hummer
Mr Christopher John Hummer
Altor Capital Management Pty Ltd (Altor Alpha Fund A/C)
Tyre & Tube Australia (Services) Pty Ltd
Citicorp Nominees Pty Limited
Trevor John Wren
Mrs Tracey Lee Cunningham (The Avebury Family A/C)
30 June 2020
Number
of holders
of ordinary
shares
70
339
233
451
76
1,169
62
Ordinary shares
% of total
Number held
shares
issued
26,750,297
13,429,417
10,617,107
4,794,267
4,108,139
4,095,737
3,732,787
3,292,643
2,589,928
2,487,440
1,110,000
1,048,929
1,048,928
1,048,928
1,011,337
1,000,000
698,796
695,048
655,737
600,000
84,815,465
23.42
11.76
9.30
4.20
3.60
3.59
3.27
2.88
2.27
2.18
0.97
0.92
0.92
0.92
0.89
0.88
0.61
0.61
0.57
0.53
74.29
Unquoted equity securities
There are 1,845,000 unquoted unissued ordinary shares of National Tyre & Wheel Limited under option at the date of this report.
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National Tyre & Wheel Limited and its controlled entities
Shareholder information
Shareholder information
30 June 2020
Substantial holders
Substantial holders in the Company are set out below:
30 June 2020
Ordinary shares
% of total
Number held
shares
issued
ST Corso Pty Ltd atf the Smith Trading Trust, Terence Smith & Susanne Smith (together Smith Group)
National Tyre & Wheel Limited
EM Australia 2021 Pty Ltd (previously Tyres4U Pty Ltd)
Forager Funds Management Pty Ltd
38,789,779
11,534,482
10,617,107
6,637,661
33.96
10.10
9.30
5.81
Voting rights
The voting rights attached to ordinary shares are set out below:
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 on issue at the date of this report.
Securities subject to voluntary escrow
Class
Ordinary shares
Ordinary shares
Expiry date
31 May 2021
4 February 2022
Number
of shares
218,579
11,315,903
11,534,482
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National Tyre & Wheel Limited and its controlled entities
Corporate directory
Corporate directory
30 June 2020
30 June 2020
Directors
Murray Boyte - Chairman
Peter Ludemann - Chief Executive Officer and Managing Director
Terry Smith
Bill Cook
Robert Kent
Company secretaries
Jason Lamb
Laura Fanning
Registered office and principal place of
business
30 Gow Street
Moorooka QLD 4105
Telephone: (07) 3212 0950
Facsimile: (07) 3212 0951
Share register
Auditor
Solicitors
Bankers
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
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/
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