ANNUAL
REPORT
2017
S
G
F
l
e
e
t
G
r
o
u
p
L
i
m
i
t
e
d
A
n
n
u
a
l
R
e
p
o
r
t
2
0
1
7
SG FLEET GROUP LIMITED
ABN 40 167 554 574
In this Report
01 About SG Fleet Group
06 Chairman’s Report
07 Chief Executive Officer’s Report
11 Directors’ Report
24 Auditor’s Independence Declaration
25 Financial Report
74 Shareholder Information
76 Corporate Directory
A driving force in
introducing new
technology-based
services to the
marketplace.”
Our values
Trust
Innovation
Excellence
Collaboration
About SG Fleet Group
SG Fleet Group Limited is a leading specialist
provider of integrated mobility solutions,
including fleet management, vehicle leasing
and salary packaging services. SG Fleet
has a presence across Australia, as well as
in the United Kingdom and New Zealand.
The company employs approximately 700 staff
and has approximately 150,000 vehicles under
management. SG Fleet listed on the Australian
Securities Exchange in March 2014.
The SG Fleet Group incorporates four brands
across corporate and consumer business
segments: SG Fleet (operating in Australia,
New Zealand and the UK), nlc (Australia),
Fleet Hire (UK), and Motiva (UK).
The company has a unique position in the
marketplace, built on the experience, product
expertise and commitment of its team. SG Fleet
prides itself on the strength of its relationships with
blue chip corporate and government customers.
These relationships have been built around a
customer-centric approach to service delivery and
the development of bespoke but scalable solutions
to meet the needs of individual customers.
SG Fleet is a driving force in introducing new
technology-based services to the marketplace.
Continuous innovation provides its customers
with industry-leading proprietary technology
that enables highly advanced fleet management
capabilities and flexible mobility solutions.
Annual Report 2017 |
1
Integrated Mobility
SG Fleet’s customers are facing increasingly challenging
transport requirements. Demographic changes, traffic
intensity, technological advances and environmental
imperatives have fundamentally altered the way we move.
Our customers expect their demands to
be catered for holistically, across various
available transport modes, and delivered
as one integrated mobility solution.
End-to-end
SG Fleet’s integrated mobility solutions
provide customers with multiple options
and associated services in one bundle
to deliver a flexible, functional and cost
efficient end-to-end method to complete
their journey. We go beyond traditional
motor vehicle leasing to address evolving
customer needs with innovative,
market-leading solutions.
From closed to open systems
Mobility optimisation goes beyond closed
transport pools. SG Fleet offers additional
solutions, such as car share applications
and access to externally sourced assets,
all bundled into one centrally administered,
reported and billed package. By doing
so, we create additional efficiencies and
help optimise and extend our customers’
traditional pool structures.
SG Fleet leads the way
SG Fleet is at the forefront of a fundamental shift in the industry towards a more
complex service proposition. Thanks to our in-house innovation capability and
longstanding, specialist expertise, we are a recognised leader in this new paradigm.
Demand
evolves
Services
evolve
Providers
evolve
Increased
complexity of
transport demands
Integration and
mobility solutions
Innovation capability
Greater cost focus
Whole-of-life
benefit extraction
Specialist expertise
2
About SG Fleet Group| SG Fleet Group SG Fleet’s
in-house
innovation
approach gives
us the ability to
rapidly develop
flexible and
tailor-made
solutions that
add significant
and quantifiable
value for our
customers.”
Annual Report 2017 |
3
Consumer
In addition to its mobility solutions and fleet management
offering, the SG Fleet Group is a leading provider of novated
leasing, salary packaging and vehicle sourcing services for
consumers under the sgfleet and nlc brands in Australia.
We work with our
customers to find
the right car to
suit their needs.”
Our services
• Car information
• Car sourcing
• Novated leasing
• Consumer finance
•
Insurance
• Accessories
• Car management
• Car disposal
Novated leasing
Opting for a novated lease provides a range
of benefits to drivers. We offer monthly
plans with payments fixed for the term
of the arrangement to ensure hassle-free
budgeting and motoring for our customers.
Car purchasing
We work with our customers to find the
right car to suit their needs, and save them
time and stress by organising test drives,
negotiating on their behalf, arranging car
purchase, paperwork and delivery. As one
of Australia’s largest car buyers, we assess
thousands of quotes per month and give our
customers access to our fleet buying power.
We work independently, using our in-house
market knowledge on car pricing and re-sale
values to get our customers the best deal.
4
| SG Fleet Group
About SG Fleet Group United Kingdom
In the 2017 financial year, the SG Fleet Group significantly
bolstered its presence in the UK with the acquisition of
Fleet Hire Holdings and Motiva Group Limited.
The UK market
Structural trends support the growth of our
industry in the UK. While fleet management,
contract hire and short-term rental are
established segments, car salary sacrifice
and personal contract hire are only in
the early stages of development. In all of
these areas, our brands have successfully
positioned themselves as providers of
distinct, innovative products, supported
by sophisticated, tailored systems.
Current SG
Fleet/Fleet Hire
location
Current Motiva
location
Combining
the sgfleet,
Fleet Hire and
Motiva brands,
we are now a
Top 20 player
in this large
and attractive
market.”
Providing a full range of services
Our three brands provide a wide range
of corporate and consumer services to
customers in various industries.
• Fleet management
• Short and long-term contract hire
• Car salary sacrifice
• Short-term rental
• Telematics
• Personal contract hire
Sole supply
The ability to offer a one-stop shop for
our customers’ varied needs has been
the foundation of our strong relationships
in the marketplace. For many of our
customers, we are the sole suppliers of fleet
management and contract hire services. In
addition, we are able to introduce our salary
sacrifice products to them. We are trusted
partners, over many years.
Annual Report 2017 |
5
SG Fleet Group
Annual Report 2017
Chairman’s
Report
Your Company now
offers highly flexible,
multi-modal solutions
to its customers, for
example by adding car
sharing facilities to
traditional fleet structures.
We have become a
provider of integrated
mobility solutions.
We are a trusted
partner of the
Australian
Federal
Government
and a number
of state
governments,
and we count
some of the
most eminent
corporations
amongst our
private sector
customer list.”
6
Dear Shareholder
I have the pleasure of presenting you with
the SG Fleet Group Limited Annual Report
for the year ended 30 June 2017.
During this period, your Company has
expanded its presence internationally with
two acquisitions in the UK, which have
established a profitable growth platform
in that market. At the same time, SG Fleet
has strengthened its position in Australia
by further building its fleet management
and leasing offering and by continuing to
integrate the nlc novated business acquired
in the preceding financial year. Similarly,
in New Zealand, we have maintained our
momentum in terms of customer wins.
These positive operational developments
have allowed us to again generate strong
growth, both organically and inorganically,
in keeping with our stated strategy.
The progress we made as a result in
terms of net profits is reflected in a further
increase in the dividends paid to you, our
Shareholders. Your Board has declared a
fully franked final dividend of 9.265 cents
per share, bringing the total for the 2017
financial year to 16.801 cents per share,
an increase of over 30% on the previous
financial year.
Throughout the year, your Company was
successful in winning more than its fair
share of new business opportunities in
what have been fairly patchy economic
conditions domestically. At the start of the
period, we decided to enhance the sales
focus of our corporate and consumer
operations by creating distinct channels
within the Australian business. This has
allowed us to target customers with a
clearer value proposition, which addresses
the specific and distinct needs of companies
and government departments, as well as
individual drivers.
These needs continue to evolve rapidly
and customers are no longer satisfied with
basic fleet management services. Increasing
pressures to reduce the cost of operation
of large fleets are transforming the industry,
and we are exploring and offering all options
to better organise our customers’ transport
needs. SG Fleet continues to be a driving
force in introducing new technology-based
services to the marketplace.
Your Company now offers highly flexible,
multi-modal solutions to its customers, for
example by adding car sharing facilities to
traditional fleet structures. We have become
a provider of integrated mobility solutions.
The ability to add further value for our
customers by integrating multiple modes of
transport is greatly enhanced by a detailed
knowledge of the location and condition of
transport assets. Telematics devices provide
that information, but the true value-add
is created by combining and presenting
data in a way that allows fleet managers to
identify and address inefficiencies. SG Fleet
works closely with its customers to direct
and manage this optimisation process,
utilising its knowledge of the asset and its
unique expertise in developing remedial
solutions. Ultimately, it is your Company’s
ability to deliver on our customers’ efficiency
objectives that sets us apart in the industry.
The recognition we receive for this has
also allowed us to further strengthen
our relationships with corporate and
government clients. We are a trusted partner
of the Australian Federal Government
and a number of state governments,
and we count some of the most eminent
corporations amongst our private sector
customer list. SG Fleet has gained their
trust by helping them achieve their mobility
objectives and by enhancing, again and
again, the solutions that we provide. This
has put your Company in an excellent
position to achieve continued progress
and sustainable returns.
I would like to thank the Directors of the
Company’s Board for their contribution
during the year, as well as Super Group,
our majority shareholder, for continuing
to support our strategic direction. I also
take the opportunity to once again thank
you, our Shareholders, for your support
on our journey.
Andrew Reitzer
Chairman
14 August 2017
Sydney
| SG Fleet Group Chief Executive
Officer’s Report
The 2017 financial year has
seen the SG Fleet Group
maintain good momentum
across all of its businesses,
in what has been a very
competitive environment.
Dear Shareholder
I am pleased to report on SG Fleet Group
Limited’s financial performance for the year
ended 30 June 2017.
My review of this financial year will refer for
comparison to the financial figures for the
year ended 30 June 2016. The reported
figures include contributions of eleven and
seven months from Fleet Hire Holdings and
Motiva Group Limited respectively. These
businesses were acquired in the first half
of the financial year. Detailed financial data
can be found in the full annual report.
Strong contributions from
existing and acquired
businesses
The 2017 financial year has seen
the SG Fleet Group maintain good
momentum across all of its businesses,
in what has been a very competitive
environment. The continued integration of
the nlc business acquired in the previous
financial year and the addition of Fleet Hire
and Motiva in the UK at the start of the
period have ensured our inorganic growth
opportunities have contributed strongly
alongside the existing SG Fleet business.
Total revenue for the 2017 financial year
reached $293.2 million, up 38.3% on the
previous financial year. Total expenses,
excluding those related to acquisitions,
increased by 47.1% to $203.2 million.
Expenses increased disproportionately
due to the on-balance sheet funding
model used by the companies acquired
in the UK. The resulting underlying profit
before tax grew by 21.8% to $90.0 million.
At the first half results, we upwardly
revised the guidance we provided at our
2016 AGM for our underlying net profit
after tax excluding amortisation and
impairments, or NPATA. I am pleased to
report that the $68.7 million underlying
NPATA we achieved exceeds this
guidance. Reported net profit after tax,
which includes $3.3 million of acquisition-
related expenses, increased by a very
healthy 26.9% to $59.6 million. The results
equate to a reported earnings per share of
23.58 cents or underlying cash earnings
per share of 27.17 cents. That is up 24.8%
on the prior year.
The increase in total revenue was driven
by a combination of organic and acquisitive
growth. Management and maintenance
income grew by 32.5% to $92.5 million,
reflecting growth of 34% in fleet size,
to 146,000 vehicles. A full 12-month
contribution from nlc supported growth
in Additional products and services, with
that revenue line up 35% to $95.2 million.
Despite the impact of the competitive
environment on funding margins, Funding
commissions increased by 36.2% to
$56.1 million, helped by synergies from
the nlc acquisition.
On an overall basis, residual value disposal
results were stable for the year, with a
stronger performance in the passenger
vehicle segment offsetting lower disposals
income in respect of heavy commercial
vehicles. A greater proportion of profit share
arrangements was the primary reason for
a 15.1% decline in End of lease income,
to $10.7 million. That trend has now
stabilised. Rental income grew by 180.3%
to $34.2 million, largely due to the acquired
UK businesses’ funding of a significant
portion of their lease portfolio on-balance
sheet. Other income reduced by 21.1% to
$4.5 million as a result of lower interest and
ad-hoc income.
Enhanced focus within corporate
and consumer channels
During the year, the Australian economic
environment continued to lack direction,
and this was duly reflected in wavering
consumer sentiment. Within our industry,
the environment stabilised as the year
progressed, with some of the aggressive
tactics seen at the turn of the calendar
year less prevalent towards the end of the
reported period. Residual values remained
strong, with manageable fluctuations in
certain vehicle segments.
The mood within our corporate, fleet
management business improved
and we saw a significant number of
opportunities. In addition to multiple wins,
we also successfully retained a number
of large customers who extended their
arrangements with us. We continued to
extend the product range we provide to a
number of major customers, adding services
to these contracts.
7
Annual Report 2017 | Chief Executive
Officer’s Report Continued
The expansion of the range of products and services
we provide to our government customers mirrors
that in the private sector and is clear evidence of a
trend towards greater sophistication and value-add
in fleet management services.”
Good wins were registered to add to the
major accounts we retained successfully.
This helped both brands to finish the year
strongly. The Company was appointed to
the Queensland novated panel and started
writing its first deals in the first half. The
second half saw continued growth in leads
and deal volumes, with June 2017 setting
a record for the financial year.
Integration of the nlc business continues. We
now have a single management team across
the combined novated business, composed
of executives from both sales channels.
We have also combined the Corporate
Sales and Relationship Management
teams to provide a consistent and proven
business development methodology.
We successfully leveraged our greater scale
throughout the supply chain. A first step
in this process was the renegotiation of
funding terms. Since then, we also ensured
we are getting scale benefits in fuel, repair
and maintenance costs, and our highly
efficient vehicle procurement and disposal
model is now applied across the entire
novated business.
Over the reported period, we also made
significant progress identifying and executing
on revenue synergies, which represent the
greatest opportunity for us. We are getting
good cross-sell across a number of new
initiatives as we introduce products between
brands. Importantly, we are getting the best
of both worlds as the brand sales teams are
sharing their knowledge and specific focus
across the sales floors.
Profitable growth platform
established in the UK
In the UK, our acquisitions performed to
expectations, but the impact of the 2016
Autumn Statement was reflected in overall
financial performance. Nevertheless,
portfolio growth continued and our
combined UK business achieved a maiden
profit. We have now established critical
mass in the UK and a profitable platform
on which to build further.
The Autumn Statement effectively confirmed
the UK Government’s commitment to
the existing car salary sacrifice structure,
but during its consultation period, employers
and employees opted to postpone their
decisions, and this led to a slowdown in the
salary sacrifice segment of our business.
The subsequent recovery of activity started
somewhat later than anticipated and only
picked up momentum in the final months
of the reported period.
Generally, business activity in our target
segments continued unaffected by Brexit
and the UK political situation and we
saw a healthy pipeline of new business
opportunities coming through. Fleet Hire
and Motiva provided us with an expanded
offering. This enhanced scale helped
us win larger contracts. Significant wins
were achieved across all product areas.
In some cases, customers signed up
for multiple offerings or granted us sole
supply arrangements.
Integration of Fleet Hire and Motiva has
been running ahead of schedule alongside
ongoing business. The three businesses
have come together seamlessly. sgfleet and
Fleet Hire premises have been combined
and we now have a single management
team across all UK operations. The
restructure and integration of the sgfleet
and Fleet Hire sales and customer service
teams has been completed and we are
now integrating the Motiva teams. Bringing
together the various teams has had a very
positive impact on the cross-selling of
products to the wider customer book.
Vehicle purchasing negotiations were
concluded for the combined entity,
giving us better terms with each supplier.
These purchasing synergies will benefit
all three businesses. We also combined
our disposal operations to achieve better
disposal costs per unit and sales results.
And of course, our wholesale funding
terms have been renegotiated to reflect our
increased scale. As with nlc, the systems
integration is the final step. Work on the
Fleet Hire system integration has just begun
and is on track for completion in the current
half. Motiva will follow.
The split of our Australian presence into
distinct corporate and consumer channels,
first flagged at the 2016 financial year
results, delivered an enhanced focus
and optimised processes and this
positively influenced the performance
of these businesses.
Major developments during the year
included the on-boarding of the NSW
Government contract, which was won at the
end of the previous financial year. To ensure
a smooth process, we briefly paused certain
phases of our broader systems conversion
project and the nlc integration process.
Promisingly, we have seen the NSW
contract evolve from the initial product as
we sell additional value-add solutions to the
various agencies within the Government.
Similarly, our relationship with the Federal
Government continues to grow. We are
a strategic partner and we provide
ongoing advice regarding a number of the
Government’s fleet policies. The aim of our
work has been to improve fleet utilisation
and we have made good progress in that
regard. Further enhancements can be
achieved with the aid of telematics and our
car sharing product, and we are now seeing
increased take-up of these solutions. The
expansion of the range of products and
services we provide to our government
customers mirrors that in the private sector
and is clear evidence of a trend towards
greater sophistication and value-add in
fleet management services.
Our strength in adding value also guided
our approach to competitive opportunities.
Where price becomes the overriding factor,
we have shied away from compromising
profitability. One example of that has been the
heavy commercial segment, which has been
a challenge in the 2017 financial year in terms
of winning contracts at acceptable returns.
nlc integration on track and
yielding multiple benefits
The novated industry continued to grow
at a healthy rate during the reported
period, and our consumer business, which
incorporates the sgfleet and nlc brands,
was no exception in that regard. A healthy
pipeline of tenders arose in the market
and we continued to actively pursue
these opportunities.
8
| SG Fleet Group New Zealand progress
accelerates
The New Zealand business has continued
on well from the 2016 financial year,
doubling its profits in the reported period.
The local economy has continued to grow,
with business confidence on the rise
throughout the second half of the financial
year. Within our industry, we have seen
some changes in the competitive landscape
and we have ensured we are a beneficiary of
that shift. We received major referrals from
some of our marquee customers within the
tightly knit local business community and
that has helped us build a distinct position
as a high value-add, blue chip provider,
with a very strong technology offering.
Sizeable wins, including some sale and
leaseback agreements, were achieved
throughout the period and the upsell of a
widening range of products within existing
relationships is accelerating. Telematics
applications in particular are in demand.
Strong interest in New Zealand for
alternative powertrains has also led us
to manage electric vehicles for a number
of blue chip companies there.
Increased use of technology
reshapes industry
Increasing demand for telematics and
other technology-based solutions has
been a common element across all the
geographies in which we operate. Both the
private sector and government are looking
at greater optimisation of their fleets and
our bookingintelligence, fleetintelligence
and telematics offering is receiving
strong endorsements.
Telematics penetration has accelerated
significantly in the reported period and that
trend continues unabated, helped by the
trials we conduct. Our ability to demonstrate
how telematics can help develop an actual,
implementable and bespoke solution for
our customers’ requirements is creating a
unique competitive position for us in what
undoubtedly is the future direction of fleet
management. The addition of a telematics
solution creates a clear uplift in profitability,
so we believe that this trend will provide us
with healthy additional growth over a long
time period.
Delivering on our objectives
During the 2017 financial year, we have
been able to deliver on our performance
objectives, despite a patchy economic
environment and at times aggressive tactics
within the industry in Australia. We have
now established critical mass in the UK and
both our overseas businesses contributed
to Group profits.
We have started the new financial year
in a promising position. The mood within
the fleet management business is positive
and we are seeing a strong pipeline across
the private sector and government. In our
consumer and novated business, the focus
is on winning additional customers and
increased penetration within the existing
eligible pools. Our strong focus on selling a
broader range of products will continue. The
bulk of the remaining nlc synergies will be
achieved in the current financial year and the
systems integration will start in this half. The
integration will also create improvements
in productivity, cost reductions, and better
performance from our sales channels.
In the UK, the recovery in salary sacrifice,
combined with the acquisition synergies
we expect going forward, means that we
are confident of strong progress for the
current full year. In New Zealand, we are
rapidly growing our reputation as well as
our profitability.
We are in good financial health and in
a strong position to fund new strategic
initiatives. If opportunities to build scale
arise, we will not hesitate to investigate
them, with the active support of our
majority shareholder, Super Group.
I would like to thank my Executive and all
my colleagues across the Group for their
efforts during the year. Looking into this
year and beyond, our aim continues to
be to deliver attractive growth rates and
sustainable returns for you, our Shareholders.
We have again demonstrated that is a very
achievable objective.
Robbie Blau
Chief Executive Officer
14 August 2017
Sydney
We are in good financial health and in a strong
position to fund new strategic initiatives. If
opportunities to build scale arise, we will not
hesitate to investigate them, with the active support
of our majority shareholder, Super Group.”
9
Annual Report 2017 | Contents
Directors’ report
Auditor’s independence declaration
Statement of profit or loss
Statement of other comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
Directors’ declaration
Independent auditor’s report to the members
of SG Fleet Group Limited
Shareholder information
Corporate directory
Page
11
24
25
26
27
28
29
30
67
68
74
76
10
| SG Fleet Group Directors’ report
The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the ‘Group’)
consisting of SG Fleet Group Limited (referred to hereafter as the ‘Company’ or ‘parent entity’) and the entities it controlled at the end of, or
during, the year ended 30 June 2017.
Directors
The following persons were Directors of the Company during the whole of the financial year and up to the date of this report, unless
otherwise stated:
Andrew Reitzer (Chairman)
Robert (Robbie) Blau
Cheryl Bart AO
Graham Maloney
Peter Mountford
Edwin Jankelowitz
Kevin Wundram
Colin Brown (alternate for Peter Mountford)
Details of the Directors are set out in the section ‘Information on Directors’ below.
Principal activities
During the financial year the principal continuing activities of the Group consisted of motor vehicle fleet management, vehicle leasing, short
term hire, consumer vehicle finance and salary packaging services.
Dividends
Dividends paid during the financial year were as follows:
Fully franked final dividend for the year ended 30 June 2016 of 7.63 cents per share paid on 20 October
2016 (2016: 6.117 cents)
Fully franked interim dividend for the year ended 30 June 2017 of 7.536 cents per share paid on 20 April
2017 (2016: 5.223 cents)
Consolidated
2017
$’000
2016
$’000
19,269
14,845
19,069
38,338
13,152
27,997
On 14 August 2017, the Directors declared a fully franked final dividend for the year ended 30 June 2017 of 9.265 cents per ordinary
share, to be paid on 17 October 2017 to eligible shareholders on the register as at 26 September 2017. This equates to a total estimated
distribution of $23,443,000, based on the number of ordinary shares on issue as at 30 June 2017. The financial effect of dividends
declared after the reporting date are not reflected in the 30 June 2017 financial statements and will be recognised in subsequent
financial reports.
Review of operations
The profit for the Group after providing for income tax amounted to $59,592,000 (30 June 2016: $46,977,000).
The fleet size of the Group as at 30 June 2017 was 146,357 (30 June 2016: 109,448).
Refer to Chairman’s report and Chief Executive Officer’s report for further commentary on the review of operations.
11
Annual Report 2017 | Significant changes in the state of affairs
On 4 August 2016, the Group acquired 100% of the ordinary
shares of UK based Fleet Hire Holdings Limited and its subsidiaries
for a total consideration of $34,413,000.
On 30 November 2016, the Group acquired 100% of the ordinary
shares of UK based Motiva Group Limited and its subsidiaries for
a total consideration of $23,910,000.
There were no other significant changes in the state of affairs of the
Group during the financial year.
Matters subsequent to the end
of the financial year
Apart from the dividend declared as discussed above, no other
matter or circumstance has arisen since 30 June 2017 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
Likely developments in the operations of the Group and the
expected results of those operations are contained in the
Chairman’s report and Chief Executive Officer’s report.
Environmental regulation
The Group is not subject to any significant environmental regulation
under Australian Commonwealth or State law.
Robert (Robbie) Blau
Executive Director and Chief Executive Officer (‘CEO’)
Qualifications:
Bachelor of Commerce (Accounting and Law), Bachelor of
Laws (Cum Laude) from the University of the Witwatersrand,
Higher Diploma in Tax Law from Johannesburg University
Experience and expertise:
Robbie was appointed CEO of SG Fleet in July 2006 and has
significant experience in the fleet management and leasing industry.
Robbie has overall responsibility for the strategic development of
the Group and manages its relationships with financial services
partners. Previously, Robbie was Managing Director of Nucleus
Corporate Finance in South Africa, which he founded in 1999.
During his time at Nucleus Corporate Finance, Robbie advised
South African listed entity Super Group Limited on corporate
advisory and strategic projects. He also spent a year working with
the Operations Director of South African Breweries Limited and
practised as a commercial attorney for five years at Werksmans
Attorneys in South Africa.
Other current directorships:
None
Former directorships (last 3 years):
None
Special responsibilities:
None
Interests in shares:
6,756,425 ordinary shares in the Company
Information on Directors
Andrew Reitzer
Independent Non-Executive Director and Chairman
Interests in options:
3,047,619 options over ordinary shares in the Company.
These options vested on 14 August 2017 and can be exercised
at any time up until the expiry date of 13 August 2018.
Qualifications:
Bachelor of Commerce and a Master of Business Leadership from
the University of South Africa
Cheryl Bart AO
Independent Non-Executive Director
Experience and expertise:
Andrew has over 35 years of global experience in both the retail
and wholesale industry. He has served as the Chief Executive
Officer (‘CEO’) of Metcash Limited between 1998 and 2013. Prior
to his appointment as CEO of Metcash, Andrew held various
management roles at Metro Cash & Carry Limited and was
appointed to lead the establishment of Metro’s operations in Israel
and Russia and served as the Group Operations Director.
Other current directorships:
Non-executive Chairman of Amaysim Australia Limited (ASX: AYS)
Former directorships (last 3 years):
None
Special responsibilities:
Chairman of the Nomination and Remuneration Committee
Interests in shares:
81,081 ordinary shares in the Company
Qualifications:
Bachelor of Commerce and Bachelor of Laws from the
University of New South Wales, Fellow of the Australian Institute
of Company Directors
Experience and expertise:
Cheryl is a qualified lawyer and company director with experience
across industries including financial services, utilities, energy,
television and film. Cheryl previously worked as a lawyer
specialising in Banking and Finance at Mallesons Stephen Jaques
(now King & Wood Mallesons). Cheryl is immediate past Chairman
of ANZ Trustees Ltd, the Environment Protection Authority of South
Australia, the South Australian Film Corporation, Adelaide Film
Festival and the Foundation for Alcohol Research and Education
(‘FARE’). She is the 31st person in the world to complete The
Explorer’s Grand Slam, and is a Patron of SportsConnect.
12
| SG Fleet GroupDirectors’ Report continued30 June 2017 Other current directorships:
Audio Pixels Holdings Limited (ASX: AKP), ME Bank, Football
Federation Australia (FFA), Invictus Games Sydney 2018,
Prince’s Trust and Powering Australian Renewables Fund (PARF).
Former directorships (last 3 years):
South Australian Power Networks, Australian Broadcasting
Corporation (‘ABC’), Spark Infrastructure Ltd, Local Organising
Committee 2015 Australia Asian Cup, EOS Ltd, Sydney Ports
Corporation, Chairman of Australian Sport Foundation and
Australian Himalayan Foundation.
Special responsibilities:
Member of the Audit, Risk and Compliance Committee and
member of the Nomination and Remuneration Committee
Interests in shares:
27,032 ordinary shares in the Company
Graham Maloney
Independent Non-Executive Director
Qualifications:
Bachelor of Arts from the University of Sydney, Associate of the
Institute of Actuaries of Australia, Fellow of the Australian Institute
of Company Directors
Experience and expertise:
Graham has over 40 years of experience in financial services,
including superannuation, life insurance, commercial banking,
investment banking and stock broking. He is the CEO of Stratagm,
which he established in 2009 to provide strategic and financial
advisory services to both businesses and individuals. Graham’s
experience includes roles as Division Director at Macquarie Capital
and as Group Treasurer at National Australia Bank.
Other current directorships:
Chair, Connective Group Australia and Non-Executive Director,
Circus Australia Ltd
Former directorships (last 3 years):
SFG Australia (ASX: SFW)
Special responsibilities:
Chairman of the Audit, Risk and Compliance Committee
Interests in shares:
27,027 ordinary shares in the Company
Peter Mountford
Non-Executive Director
Qualifications:
Bachelor of Commerce and Bachelor of Accountancy from
the University of the Witwatersrand, Chartered Accountant, Higher
Diploma in Taxation from the University of Witwatersrand and MBA
(With Distinction) from Warwick University
Experience and expertise:
Peter is the nominee for Super Group Limited, has over 20 years
of senior management experience and since 2009 has served as
the CEO of Super Group Limited. Prior to becoming the CEO of
Super Group Limited, he served as the Managing Director of Super
Group’s Logistics and Transport division and later its Supply Chain
division. Peter’s experience also includes six years as the CEO of
Imperial Holdings Limited’s Consumer Logistics division and as
Managing Director of South African Breweries Limited’s Diversified
Beverages. He is currently a Director of The Road Freight
Association in South Africa.
Other current directorships:
Super Group Limited (JSE: SPG) and Bluefin Investments
Limited (Mauritius)
Former directorships (last 3 years):
None
Special responsibilities:
Member of the Audit, Risk and Compliance Committee and
member of the Nomination and Remuneration Committee
Interests in shares:
540,540 ordinary shares in the Company
Edwin Jankelowitz
Non-Executive Director
Qualifications:
Chartered Accountant from South Africa
Experience and expertise:
Edwin has spent over 40 years in corporate offices and has been
Chairman of a number of listed companies. He was a member of
the Income Tax Special Court in South Africa for 20 years. Prior to
joining the Group, Edwin was Finance Director of Metcash Trading
Limited and Metcash Limited from May 1998 to January 2011, and
a Non-Executive Director of the company until August 2015. Edwin
held the positions of Finance Director, Managing Director and
then Chairman at Caxton Limited from 1983 to 1997. Edwin was
a consultant in business management and tax between 1980 and
1983. Edwin was with Adcock Ingram Ltd from 1967 to 1979 in
the Head Office and was promoted over time to Group Company
Secretary and then Finance Director.
Other current directorships:
None
Former directorships (last 3 years):
Metcash Limited (ASX: MTS) (resigned 27 August 2015)
Special responsibilities:
Member of the Audit, Risk and Compliance Committee
Interests in shares:
20,000 ordinary shares in the Company
13
Annual Report 2017 | Kevin Wundram
Executive Director and Chief Financial Officer (‘CFO’)
Colin Brown
Alternate Director for Peter Mountford
Qualifications:
Bachelor of Commerce from the University of the Witwatersrand,
Honours Bachelor of Accounting Science degree from the
University of South Africa, Chartered Accountant
Experience and expertise:
Kevin has been CFO of SG Fleet Group since July 2006 and
has significant experience in the fleet management and leasing
industry. He is responsible for the effective management of the
finance, treasury and corporate governance functions across
the Group. Prior to joining the Group, Kevin was responsible for
special projects at Super Group Limited, including the execution
of acquisitions, disposals and due diligence. Kevin was also a
member of the management committees of the Automotive Parts,
Commercial Dealerships and Supply Chain Divisions. Prior to
joining Super Group, Kevin worked in the audit and corporate
finance divisions of KPMG South Africa for six years.
Other current directorships:
None
Former directorships (last 3 years):
None
Special responsibilities:
None
Interests in shares:
1,025,112 ordinary shares in the Company
Interests in options:
1,250,000 options over ordinary shares in the Company. These
options vested on 14 August 2017 and can be exercised at any
time up until the expiry date of 13 August 2018
Qualifications:
Bachelor of Accounting Science degree from the University of
South Africa (‘UNISA’), Honours Bachelor of Accounting Science
degree from UNISA, Certificate in the Theory of Accounting from
UNISA, Chartered Accountant (South Africa), Master in Business
Leadership degree from the UNISA School of Business Leadership
Experience and expertise:
Colin provided support services to Super Group Limited’s treasury
activities in Johannesburg from June 2009 to February 2010, and
was appointed to the Super Group Limited’s board as CFO in
February 2010. Prior to that, Colin was CFO and a member of the
board of Celcom Group Limited, a business in the mobile phone
industry and previously listed on the Alternative Exchange (‘AltX’)
of the Johannesburg Stock Exchange (‘JSE’). Colin has also held
the Financial Director position at Electronic Data Systems (‘EDS’)
Africa Limited and Fujitsu Services South Africa, both multi-national
companies in the information technology services industry.
Other current directorships:
Super Group Limited (JSE: SPG), Bluefin Investments
Limited (Mauritius)
Former directorships (last 3 years):
None
Special responsibilities:
Alternative director and member of the Audit, Risk and Compliance
Committee for Peter Mountford
Interests in shares:
108,108 ordinary shares in the Company
‘Other current directorships’ set out 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 secretary
On 3 November 2016, Kevin Wundram has assumed the role of
Company Secretary in addition to his role as Chief Financial Officer.
Kevin’s experience is detailed in the ‘information of directors’
section above.
The previous company secretary was Sarah Anne Edwards
(appointed on 1 July 2015 and resigned on 3 November 2016).
14
| SG Fleet GroupDirectors’ Report continued30 June 2017 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 2017, and the number of meetings attended by each Director were:
Andrew Reitzer
Robbie Blau
Cheryl Bart AO
Graham Maloney
Peter Mountford
Edwin Jankelowitz
Kevin Wundram
Board of Directors
Audit, Risk and
Compliance Committee
Nomination and
Remuneration Committee
Attended
Held
Attended
Held
Attended
Held
9
9
8
9
9
8
9
9
9
9
9
9
9
9
–
–
4
4
4
4
–
–
–
4
4
4
4
–
4
–
4
–
4
–
–
4
–
4
–
4
–
–
Held: represents the number of meetings held during the time the Director held office or was a member of the relevant committee.
Colin Brown did not attend any meetings in his capacity as an Alternate Director during the financial year.
Remuneration report (audited)
The remuneration report, which has been audited, details the Key
Management Personnel (‘KMP’) remuneration arrangements for the
Group, in accordance with the requirements of the Corporations
Act 2001 and its Regulations.
KMP are those persons having authority and responsibility for
planning, directing and controlling the activities of the Group,
directly or indirectly, including all directors.
The remuneration report is set out under the following
main headings:
• Principles used to determine the nature and amount of
remuneration
• Details of remuneration
• Service agreements
• Share-based compensation
• Additional information
• Additional disclosures relating to key management personnel
Principles used to determine the nature and amount
of remuneration
The objective of the Group’s executive reward framework is to
ensure reward for performance is competitive and appropriate for
the results delivered. The framework aligns executive reward with
the achievement of strategic objectives and the creation of value
for shareholders, and conforms to market best practice for delivery
of reward. The Board ensures that executive reward satisfies the
following key criteria for good reward governance practices:
• competitiveness and reasonableness;
• acceptability to shareholders;
• performance linkage / alignment of executive compensation; and
• transparency.
The main role of the Nomination and Remuneration Committee
(‘NRC’) is to assist the Board in fulfilling its corporate governance
responsibilities and to review and make recommendations
in relation to the remuneration arrangements for its Directors
and executives. The NRC comprises two independent Non-
Executive Directors and one Non-Executive Director and meets
regularly throughout the financial year. The CEO and CFO attend
certain committee meetings by invitation, where management
input is required. The CEO and CFO are not present during any
discussions related to their own remuneration arrangements.
The performance of the Group depends on the quality of its
Directors and executives. The remuneration philosophy is to attract,
motivate and retain high performing, quality executives.
The remuneration framework has been structured to be market
competitive and complementary to the reward strategy of
the Group.
The reward framework is designed to align executive reward to
shareholders’ interests. The Board has considered 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.
In accordance with best practice corporate governance,
the structure of Non-Executive Directors and executive
remunerations are separate.
15
Annual Report 2017 | The combination of these comprise the executive’s
total remuneration.
Total Fixed Remuneration (‘TFR’) consisting of base salary,
annual leave, superannuation and non-monetary benefits, is
reviewed annually by the NRC, based on individual and business
unit performance, the overall performance of the Group and
comparable market remunerations.
Executives may receive their fixed remuneration in the form of cash
or other fringe benefits (for example motor vehicle benefits) where
it does not create any additional costs to the Group and provides
additional value to the executive.
The short-term incentives (‘STI’) program is designed to align
the targets of the business units with the performance hurdles
of executives. STI payments are granted to executives based on
specific annual targets and key performance indicators (KPI’s).
A performance modifier applies in relation to the award of the STI.
For an executive to receive payment under the STI program, their
performance has to be regarded as entirely satisfactory. Where an
executive is regarded as below competent, the award under the
STI program will be adjusted by the NRC.
Long-term incentives (‘LTI’) are set periodically for KMP
(‘Participants’) in order to align remuneration with the creation of
shareholder value over the long term. LTI include long service leave
and share-based payments.
LTI to Participants are made under the Equity Incentive Plan
(‘EIP’) and are currently delivered in the form of share options.
The number of options granted is based on a fixed percentage
of the relevant Participant’s TFR and is issued to the Participant
at no cost.
Options granted to KMP usually vest over three years (the
‘Performance Period’), subject to the satisfaction of performance
conditions. For the 2014 LTI offer, the Performance Period was
from the Group’s listing and concludes on 30 June 2017.
The performance conditions for the LTI options are based on the
compound annual growth rate (‘CAGR’) of the Group’s earnings per
share (‘EPS’). EPS was selected as the performance condition for
the LTI since it is a measure of economic profit and is a key driver
of the share price which is a key component in delivering sustained
growth in shareholder wealth. The Performance Period and
applicable performance conditions for any future LTI opportunities
will be determined by the Board and specified in the relevant
offer document.
Non-Executive Directors’ remuneration
Fees and payments to Non-Executive Directors reflect the
demands that are made on, and the responsibilities of, these
Directors. Non-Executive Directors’ fees and payments are
reviewed annually by the NRC. The NRC may, from time to time,
receive advice from independent remuneration consultants
to ensure Non-Executive Directors’ fees and payments are
appropriate and in line with the market. The Chairman’s fees are
determined independently to the fees of other Non-Executive
Directors based on comparative roles in the external market.
The Chairman is not present at any discussions relating
to determination of his own remuneration. Non-Executive
Directors do not receive retirement benefits, share options
or other cash incentives.
The remuneration of Non-Executive Directors consists of Directors’
fees and committee fees. The Chairman of the Board attends
all committee meetings but does not receive committee fees in
respect of his role as Chairman or member of any committee.
Non-Executive Director fees (Directors’ fees and committee fees)
(inclusive of superannuation) are summarised as follows:
Name – Position
Andrew Reitzer
– Independent Non-Executive Chairman
Cheryl Bart AO
– Independent Non-Executive Director
Graham Maloney
– Independent Non-Executive Director
Peter Mountford
– Non-Executive Director
Edwin Jankelowitz
– Independent Non-Executive Director
Fees per
annum
$200,000
$117,500
$120,000
$117,500
$110,000
ASX listing rules require the aggregate Non-Executive Directors
remuneration be determined periodically by a general meeting.
The most recent determination was at the Annual General Meeting
held on 12 February 2014, where the shareholders approved the
aggregate remuneration be fixed at a maximum of $1,000,000
per annum.
Executive remuneration
The Group aims to reward executives based on their position and
responsibility, with a level and mix of remuneration which has both
fixed and variable components.
The executive remuneration and reward framework has
four components:
• base salary and non-monetary benefits;
• short-term performance incentives;
• share-based payments; and
• other remuneration, such as superannuation and long
service leave.
16
| SG Fleet GroupDirectors’ Report continued30 June 2017 For the 2014 LTI offer the percentage of options that vest and become exercisable, if any, is determined by reference to the vesting
schedule, summarised as follows:
CAGR of EPS over the Performance Period
% of options that become exercisable
Less than 5%
5% (Threshold performance)
Between 5% and 15%
Nil
30%
Straight-line pro-rata vesting between 30% and 100%
15% or above (Stretch performance)
100%
Any options that remain unvested at the end of the Performance
Period will lapse immediately. The Participant must exercise any
vested options within 12 months of vesting. After 12 months, any
unexercised options will lapse. The Participant is entitled to receive
one share for each option that vests and is exercised. The Board
may make an equivalent cash payment in lieu of providing shares to
the participant. Any cash payment is at the Group’s discretion only.
The options do not carry dividends or voting rights prior to vesting
and exercise. Participants must not sell, transfer, encumber, hedge
or otherwise deal with the options.
The EIP provides the Board with broad ‘clawback’ powers if,
amongst other things, the Participant has: acted fraudulently
or dishonestly, engaged in gross misconduct or has acted in a
manner that has brought the Group into disrepute; or there is a
material financial misstatement; or the Group is required or entitled
under law or company policy to reclaim remuneration from the
Participant; or the Participant’s entitlements vest as a result of
fraud, dishonesty or breach of obligations of any other person
and the Board is of the opinion that the incentives would not have
otherwise vested.
If the Participant ceases employment for cause, the unvested
options automatically lapse unless the Board determines otherwise.
In other circumstances, the options will remain on issue with
a broad discretion for the Board to vest or lapse some or all of
the options. The Board will ordinarily lapse options in the case
of resignation.
Where there may be a change of control event, the Board has the
discretion to accelerate vesting of some or all of the options and the
Board will notify the Participant of the date on which any vested but
unexercised options will expire. Where only some of the options are
vested on a change of control event, the remainder of the options
will immediately lapse.
The EIP also provides flexibility for the Group to grant, subject
to the terms of individual offers, performance rights and
restricted shares.
The Board has approved the implementation of a new LTI,
‘The 2018 LTI Offer’ which will be tabled for approval at the Annual
General Meeting of the Company to be held on 24 October 2017.
Group performance and link to remuneration
The financial performance measure driving STI payment outcomes
for KMP for the year ended 30 June 2017 is determined on a
straight-line basis, based on the Group achieving EPS growth
of between 5.0% and 15.0% over the previous financial year. No
award is made if the Group’s EPS growth is less than 5.0% over
the previous financial year. The proportion of the maximum STI
awarded to the KMP is at the discretion of the Board.
The performance measure that drives LTI vesting is the CAGR
of the Group’s EPS over the relevant performance period.
The Group’s EPS for the year ended 30 June 2017 was 23.58 cents
per share.
Calculation of the CAGR of the EPS and achievement against the
performance condition for the purpose of the STI and the LTI is
determined by the Board in its absolute discretion, having regard
to any matters that it considers relevant. EPS is determined by
dividing the Company’s NPAT (‘net profit after tax’) by the weighted
average number of ordinary shares on issue during the financial
year. The Board has a discretion to adjust the NPAT used for this
purpose for the impact of non-recurring or significant transactions.
Voting and comments made at the Company’s 2016
Annual General Meeting (‘AGM’)
At the 2016 AGM, the shareholders voted to approve the adoption
of the remuneration report for the year ended 30 June 2016.
The Company did not receive any specific feedback at the AGM
regarding its remuneration practices.
Details of remuneration
Amounts of remuneration
Details of the remuneration of the KMP of the Group are set out in
the following tables.
The KMP of the Group consisted of the Directors of SG Fleet Group
Limited and the following persons:
• Andy Mulcaster – Managing Director, Australia (Corporate)
• David Fernandes – Managing Director, United Kingdom
• Geoff Tipene – Managing Director, New Zealand
• Matthew Reinehr – Managing Director, nlc (Retail)
17
Annual Report 2017 | Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-based
payments
Cash salary
and fees
$
Cash
bonus**
$
Non-
monetary
$
Super-
annuation
$
Leave
benefits
$
Equity-settled
options
$
2017
Non-Executive Directors:
Andrew Reitzer (Chairman)
Cheryl Bart AO
Graham Maloney
Peter Mountford
Edwin Jankelowitz
Executive Directors:
Robbie Blau (CEO)
Kevin Wundram (CFO)
182,650
107,310
120,000
117,500
100,460
–
–
–
–
–
984,155
482,232
630,000
258,000
Other Key Management Personnel:
Andy Mulcaster
David Fernandes*
Geoff Tipene*
Matthew Reinehr
366,905
253,035
223,815
262,741
194,848
136,520
126,250
111,367
–
–
–
–
–
–
–
–
9,984
23,213
–
17,350
10,190
–
–
9,540
19,616
19,616
30,136
24,038
10,502
19,520
Total
$
200,000
117,500
120,000
117,500
110,000
–
–
–
–
–
–
–
–
–
–
142,910
236,308
2,012,989
57,767
96,923
914,538
17,891
2,156
–
16,324
237,048
70,707
52,498
29,131
–
680,487
478,231
412,911
409,952
485,567
5,574,108
3,200,803
1,456,985
33,197
160,508
* Total remuneration in local currency paid to David Fernandes and Geoff Tipene was GBP 283,705 and NZD 436,603 respectively.
** Cash bonus represents amounts payable to KMPs consisting of 50% of 2016 STI and 50% of 2017 STI.
Colin Brown (Alternate Director) received no remuneration during the year ended 30 June 2017.
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-based
payments
Cash salary
and fees
$
Cash
bonus**
$
Non-
monetary
$
Super-
annuation
$
Leave
benefits
$
Equity-settled
options
$
2016
Non-Executive Directors:
Andrew Reitzer (Chairman)
Cheryl Bart AO
Graham Maloney
Peter Mountford
Edwin Jankelowitz*
Executive Directors:
Robbie Blau (CEO)
Kevin Wundram (CFO)
164,384
98,173
110,000
107,500
79,616
–
–
–
–
–
666,326
343,597
370,187
158,394
Other Key Management Personnel:
Andy Mulcaster
David Fernandes**
Geoff Tipene**
Matthew Reinehr*
357,819
298,044
190,951
154,198
137,004
116,650
70,977
41,029
–
–
–
–
–
–
–
–
15,478
22,182
–
15,616
9,327
–
–
7,564
19,308
19,308
29,003
28,314
5,861
11,856
Total
$
180,000
107,500
110,000
107,500
87,180
–
–
–
–
–
–
–
–
–
–
21,730
7,878
358,601
1,436,152
147,083
676,260
4,159
9,812
–
8,674
52,253
107,298
635,283
79,667
44,207
–
547,965
334,178
215,757
736,856
4,437,775
2,570,608
894,241
37,660
146,157
* Represents remuneration from date of appointment as KMP for Edwin Jankelowitz on 18 August 2015 and Matthew Reinehr on 1 December 2015.
** Total remuneration in local currency paid to David Fernandes and Geoff Tipene was GBP 271,705 and NZD 361,525 respectively.
*** Cash bonus represents amounts payable to KMPs consisting 25% of 2015 STI and 50% of 2016 STI.
Colin Brown (Alternate Director) received no remuneration during the year ended 30 June 2016.
18
| SG Fleet GroupDirectors’ Report continued30 June 2017 Non-Executive Directors’ salaries are 100% fixed. The fixed proportion and the proportion of remuneration linked to performance of
Executive Directors and KMP are as follows:
Name
Executive Directors:
Robbie Blau
Kevin Wundram
Other Key Management Personnel:
Andy Mulcaster
David Fernandes
Geoff Tipene
Matthew Reinehr
Fixed remuneration
At risk – STI
At risk – LTI
2017
2016
2017
2016
2017
2016
57%
61%
61%
60%
62%
73%
49%
55%
62%
64%
66%
81%
31%
28%
29%
29%
31%
27%
26%
23%
21%
21%
21%
19%
12%
11%
10%
11%
7%
–
25%
22%
17%
15%
13%
–
The proportion of the cash bonus paid/payable or forfeited is as follows:
Name
Executive Directors:
Robbie Blau
Kevin Wundram
Other Key Management Personnel:
Andy Mulcaster
Geoff Tipene
David Fernandes
Matthew Reinehr
Cash bonus paid/payable
Cash bonus forfeited
2017
2016
2017
2016
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
–
–
–
–
–
–
–
–
–
–
–
Service agreements
KMPs are employed under individual employment agreements. The agreements are continuous i.e. not of a fixed duration unless
otherwise stated. These agreements provide for a total compensation including a base salary, superannuation contribution and incentive
arrangements; variable notice and termination provisions; provisions for redundancy.
Details of these agreements are provided below:
Robbie Blau – CEO
• Total fixed remuneration (‘TFR’) of $1,000,000 per annum, which includes base salary, statutory superannuation contributions and any
salary sacrifice arrangements
• Participate in the STI with a maximum STI opportunity of 75% of TFR
Kevin Wundram – CFO
• TFR of $500,000 per annum, which includes base salary, statutory superannuation contributions and any salary sacrifice arrangements
• Participate in the STI with a maximum STI opportunity of 60% of TFR
19
Annual Report 2017 | Other Key Management Personnel
Other Key Management Personnel have employment agreements setting out the terms and conditions of their employment.
The agreements are not of a fixed duration. These agreements provide for:
• Total compensation inclusive of a base salary and statutory superannuation contributions and any salary sacrifice arrangements
• Eligibility to participate in the STI with a maximum STI Opportunity of 50% of TFR
Terms of STI payments: KMP are entitled to STI payment on a straight-line basis based on EPS growth of between 5% and 15% over the
previous financial year. The STI determined annually for each of the above KMP is subject to a 12 month payment deferral in respect to
50% the amount determined as payable.
Terms of termination: In general the contract is terminated by providing 4 weeks’ notice by the Company and 3 months’ notice by
the KMP. The KMP have no entitlement to termination payments in the event of removal for misconduct.
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
2017 (2016: Nil).
Options
The terms and conditions of each grant of options over ordinary shares affecting remuneration of Directors and other KMP in this financial
year or future reporting years are as follows:
Grant date
4 March 2014
Vesting date and
exercisable date
Expiry date
Exercise price
Fair value per option
at grant date
14 August 2017
13 August 2018
$1.85
$0.252
Options granted carry no dividend or voting rights and can be exercised only once the vesting conditions have been met until their
expiry date.
There were no options over ordinary shares granted to or vested in Directors and other KMP as part of compensation during the year
ended 30 June 2017.
Performance rights
There were no performance rights over ordinary shares issued to Directors and other key management personnel as part of compensation
that were outstanding as at 30 June 2017.
There were no performance rights over ordinary shares granted to or vested in Directors and other key management personnel as part of
compensation during the year ended 30 June 2017.
Additional information
The earnings of the Group for the four years to 30 June 2017 are summarised below:
Revenue
Profit after income tax
Dividends paid
2017
$’000
2016
$’000
2015
$’000
293,225
211,971
171,377
59,592
38,338
46,977
27,997
40,482
21,175
The factors that are considered to affect total shareholders return (‘TSR’) are summarised below:
Share price at financial year end ($)
Basic earnings per share (cents per share)
Share price at IPO was $1.85 per share.
2017
3.80
23.58
2016
3.64
18.94
2015
2.47
16.68
2014
$’000
64,083
15,620
–
2014
1.80
9.13
Additional disclosures relating to 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:
20
| SG Fleet GroupDirectors’ Report continued30 June 2017 Balance at
the start of
the year
Received
as part of
remuneration
Additions
Disposals/
other
Ordinary shares
Andrew Reitzer
Robbie Blau
Cheryl Bart AO
Graham Maloney
Peter Mountford
Edwin Jankelowitz
Kevin Wundram
Colin Brown
Andy Mulcaster
David Fernandes
Geoff Tipene
Matthew Reinehr
81,081
6,756,425
27,032
27,027
540,540
10,000
1,025,112
108,108
830,860
1,630,860
36,000
9,225,000
20,298,045
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
10,000
–
–
–
–
–
–
Balance at
the end of
the year
81,081
6,756,425
27,032
27,027
540,540
20,000
1,025,112
108,108
830,860
1,630,860
–
–
–
–
–
–
–
–
–
–
(10,000)
26,000
–
9,225,000
10,000
(10,000)
20,298,045
Option holding
The number of options over ordinary shares in the Company held during the financial year by each Director and other members of key
management personnel of the Group, including their personally related parties, is set out below:
Options over ordinary shares
Robbie Blau
Kevin Wundram
Andy Mulcaster
David Fernandes
Geoff Tipene
Balance at
the start of
the year
3,047,619
1,250,000
911,890
677,063
375,695
6,262,267
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,047,619
1,250,000
911,890
677,063
375,695
6,262,267
The options over ordinary shares listed in the table above vested on 14 August 2017. These options can be exercised at any time up until
the expiry date of 13 August 2018
Use of remuneration consultants
During the financial year ended 30 June 2017, the Group did not engage any remuneration consultants, but implemented certain of the
recommendations made by the remuneration consultants engaged during the year ended 30 June 2016.
This concludes the remuneration report, which has been audited.
21
Annual Report 2017 | Shares under option
Unissued ordinary shares of SG Fleet Group Limited under option at the date of this report are as follows:
Grant date
4 March 2014
Expiry date
Exercise price
Number
under option
13 August 2018
$1.85
8,086,046
These options vested on 14 August 2017 and can be exercised at any time up until the expiry date of 13 August 2018.
Shares under performance rights
Unissued ordinary shares of SG Fleet Group Limited under performance rights at the date of this report are as follows:
Grant date
20/03/2017
20/03/2017
No person entitled to exercise the performance rights had or has
any right by virtue of the performance right to participate in any
share issue of the Company or of any other body corporate.
Shares issued on the exercise of options
There were no ordinary shares of SG Fleet Group Limited issued on
the exercise of options during the year ended 30 June 2016 and up
to the date of this report.
Shares issued on the exercise
of performance rights
There were no ordinary shares of SG Fleet Group Limited issued
on the exercise of performance rights during the year ended
30 June 2017 and up to the date of this report.
Indemnity and insurance of officers
The Company has indemnified the Directors, executives and
employees of the Company for costs incurred, in their capacity
as a director, executive or employee, for which they may be held
personally liable, except where there is a lack of good faith.
The Company’s subsidiary, SG Fleet Australia Pty Limited on behalf
of the Company paid a premium in respect of a contract to insure
the Directors and executives of the Company and of any related
bodies corporates defined in the insurance policy, against a liability
to the extent permitted by the Corporations Act 2001.
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. The
Company has not paid a premium in respect of a contract to insure
the auditor of the Company or any related entity.
Vesting date
Exercise price
30/06/2018
30/06/2019
$0.00
$0.00
Number
under rights
142,967
285,993
428,960
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 28 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 28 to the financial statements do not compromise the external
auditor’s independence requirements of the Corporations Act 2001
for the following reasons:
• all non-audit services have been reviewed and approved to
ensure that they do not impact the integrity and objectivity of the
auditor; and
• none of the services undermine the general principles relating to
auditor independence as set out in APES 110 Code of Ethics for
Professional Accountants issued by the Accounting Professional
and Ethical Standards Board, including reviewing or auditing the
auditor’s own work, acting in a management or decision-making
capacity for the Company, acting as advocate for the Company
or jointly sharing economic risks and rewards.
22
| SG Fleet GroupDirectors’ Report continued30 June 2017 Officers of the Company who are former
partners of KPMG
There are no officers of the Company who are former partners
of KPMG.
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 immediately follows this
Directors’ report.
Auditor
KPMG continues in office in accordance with section 327 of the
Corporations Act 2001.
This report is made in accordance with a resolution of Directors,
pursuant to section 298(2)(a) of the Corporations Act 2001.
On behalf of the Directors
Andrew Reitzer
Chairman
Robbie Blau
Chief Executive Officer
14 August 2017
Sydney
23
Annual Report 2017 | Auditor’s independence declaration
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To the Directors of SG Fleet Group Limited
I declare that, to the best of my knowledge and belief, in relation to the audit of SG Fleet Group Limited
for the financial year ended 30 June 2017 there have been:
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
no contravention of the auditor independence requirements as set out in the Corporations
Act 2001 in relation to the audit; and
i.
ii.
no contravention of any applicable code of professional conduct in relation to the audit.
To the Directors of SG Fleet Group Limited
I declare that, to the best of my knowledge and belief, in relation to the audit of SG Fleet Group Limited
for the financial year ended 30 June 2017 there have been:
i.
no contravention of the auditor independence requirements as set out in the Corporations
Act 2001 in relation to the audit; and
KPMG
ii.
Michael O Connell
no contravention of any applicable code of professional conduct in relation to the audit.
Partner
Sydney
14 August 2017
KPMG
Michael O Connell
Partner
Sydney
14 August 2017
21
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
24
21
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
| SG Fleet GroupDirectors’ Report continued30 June 2017
Statement of profit or loss
For the year ended 30 June 2017
Revenue
Expenses
Fleet management costs
Employee benefits expense
Occupancy costs
Depreciation and amortisation
Technology costs
Other expenses
Finance costs
Profit before income tax expense
Income tax expense
Profit after income tax expense for the year attributable to the owners of
SG Fleet Group Limited
Basic earnings per share
Diluted earnings per share
The above statement of profit or loss should be read in conjunction with the accompanying notes
Consolidated
Note
2017
$’000
2016
$’000
5
293,225
211,971
(77,540)
(73,589)
(5,976)
(22,563)
(4,633)
(12,685)
(9,767)
86,472
(51,647)
(53,837)
(4,958)
(10,707)
(3,093)
(10,778)
(8,589)
68,362
(26,880)
(21,385)
59,592
46,977
Cents
23.58
23.20
Cents
18.94
18.69
6
6
7
38
38
Annual Report 2017 | 25
Statement of other comprehensive income
For the year ended 30 June 2017
Consolidated
2017
$’000
2016
$’000
Profit after income tax expense for the year attributable to the owners of SG Fleet Group Limited
59,592
46,977
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Foreign currency translation difference for foreign operations
Effective portion of changes in fair value of cash flow hedges, net of tax
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to the owners of SG Fleet Group Limited
The above statement of other comprehensive income should be read in conjunction with the accompanying notes
(1,743)
610
(1,133)
58,459
(1,514)
(1,157)
(2,671)
44,306
26 | SG Fleet Group
Statement of financial position
As at 30 June 2017
Assets
Cash and cash equivalents
Finance, trade and other receivables
Inventories
Income tax refund due
Leased motor vehicle assets
Property, plant and equipment
Intangibles
Total assets
Liabilities
Trade and other payables
Derivative financial instruments
Income tax
Deferred tax
Employee benefits
Residual risk provision
Lease portfolio borrowings
Borrowings
Vehicle maintenance funds
Deferred income
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits
Total equity
Consolidated
Note
2017
$’000
2016
$’000
8
9
10
7
11
12
13
14
15
7
7
16
17
18
19
20
21
22
23
83,923
80,756
11,272
–
64,818
4,231
420,492
665,492
103,099
2,464
5,698
2,836
8,018
11,595
55,328
81,693
48,777
5,226
160
16,130
2,828
364,155
518,969
63,460
3,889
–
1,256
7,114
10,213
11,855
158,119
134,750
54,524
37,024
438,705
226,787
58,687
26,522
317,746
201,223
272,008
267,348
(120,382)
(120,032)
75,161
53,907
226,787
201,223
The above statement of financial position should be read in conjunction with the accompanying notes
Annual Report 2017 | 27
Statement of changes in equity
For the year ended 30 June 2017
Consolidated
Balance at 1 July 2015
Profit after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs (note 22)
Share-based payments (note 39)
Dividends paid (note 24)
Balance at 30 June 2016
Consolidated
Balance at 1 July 2016
Profit after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs (note 22)
Share-based payments (note 39)
Dividends paid (note 24)
Balance at 30 June 2017
Issued
capital
$’000
Reserves
$’000
232,768
(118,313)
–
–
–
34,580
–
–
–
(2,671)
(2,671)
–
952
–
267,348
(120,032)
Issued
capital
$’000
Reserves
$’000
267,348
(120,032)
–
–
–
4,660
–
–
–
(1,133)
(1,133)
–
783
–
272,008
(120,382)
Retained
profits
$’000
34,927
46,977
–
46,977
–
–
(27,997)
53,907
Retained
profits
$’000
53,907
59,592
–
59,592
–
–
(38,338)
75,161
Total
equity
$’000
149,382
46,977
(2,671)
44,306
34,580
952
(27,997)
201,223
Total
equity
$’000
201,223
59,592
(1,133)
58,459
4,660
783
(38,338)
226,787
The above statement of changes in equity should be read in conjunction with the accompanying notes
28 | SG Fleet Group
Statement of cash flows
For the year ended 30 June 2017
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Interest and other finance costs paid
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Payment for purchase of subsidiary, net of cash acquired
Proceeds from disposal of lease portfolio assets
Acquisition of lease portfolio assets
Payments for property, plant and equipment
Payments for intangibles
Proceeds from disposal of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Dividends paid
Net cash (used in)/from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the financial year
The above statement of cash flows should be read in conjunction with the accompanying notes
Consolidated
Note
2017
$’000
2016
$’000
304,537
228,141
(186,787)
(137,383)
1,423
(10,337)
(22,186)
86,650
1,963
(6,320)
(30,049)
56,352
(46,662)
(127,796)
19,146
(27,394)
(2,260)
(3,148)
115
19,175
(23,711)
(1,882)
(2,999)
60
(60,203)
(137,153)
78,967
(64,010)
(38,338)
(23,381)
3,066
81,693
(836)
83,923
157,442
(54,373)
(27,997)
75,072
(5,729)
89,143
(1,721)
81,693
37
34
11
11
12
13
24
8
Annual Report 2017 | 29
Notes to the financial statements
30 June 2017
Note 1. General information
The financial statements cover SG Fleet Group Limited as a Group
consisting of SG Fleet Group Limited (the ‘Company’ or ‘parent
entity’) and the subsidiaries it controlled at the end of, or during,
the year (the ‘Group’). The financial statements are presented in
Australian Dollars, which is SG Fleet Group Limited’s functional and
presentation currency.
SG Fleet Group Limited is a listed public company limited by
shares, incorporated and domiciled in Australia. Its registered office
and principal place of business is:
Level 2, Building 3
20 Bridge Street
Pymble NSW 2073
During the financial year the principal continuing activities of the
Group consisted of motor vehicle fleet management, vehicle
leasing, short term hire, consumer vehicle finance and salary
packaging services.
The financial statements were authorised for issue, in accordance
with a resolution of Directors, on 14 August 2017. 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 periods presented, unless
otherwise stated.
New or amended Accounting Standards and
Interpretations adopted
The Group has adopted all of the new or amended Accounting
Standards and Interpretations issued by the Australian Accounting
Standards Board (‘AASB’) that are mandatory for the current
reporting period. The adoption of these Accounting Standards and
Interpretations did not have any significant impact on the financial
performance or position of the Group during the financial year.
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’). Where
necessary, comparatives have been restated to conform to
changes in presentation in the current year.
Historical cost convention
The financial statements have been prepared under the
historical cost convention, except for derivative financial
instruments at fair value.
Critical accounting estimates
The preparation of the financial statements requires the use of
certain critical accounting estimates. It also requires management
to exercise its judgement in the process of applying the Group’s
accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and
estimates are significant to the financial statements, are disclosed
in note 3.
Parent entity information
In accordance with the Corporations Act 2001, these financial
statements present the results of the Group only. Supplementary
information about the parent entity is disclosed in note 33.
Principles of consolidation
The consolidated financial statements incorporate the assets and
liabilities of all subsidiaries of SG Fleet Group Limited as at 30 June
2017 and the results of all subsidiaries for the year then ended.
Subsidiaries are all those entities over which the Group has control
at the end of, or during the year. 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 deconsolidated from the date
that control ceases.
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.
The acquisition of common control subsidiaries is accounted
for using the common control method. The acquisition of other
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.
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.
30 | SG Fleet Group
Foreign currency translation
The financial statements are presented in Australian Dollars, which
is SG Fleet Group Limited’s functional and presentation currency.
Rental income
Rental income from operating leases is recognised in profit or loss
on a straight line basis over the lease term.
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 period-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 rate at the date of the transaction, for the period.
All resulting foreign exchange differences are recognised in
other comprehensive income through the foreign currency reserve
in equity.
The foreign currency reserve is recognised in profit or loss when
the foreign operation or net investment is disposed of.
Revenue recognition
Revenue is recognised when it is probable that the economic
benefit will flow to the Group and the revenue can be reliably
measured. Revenue is measured at the fair value of the
consideration received or receivable.
Management and maintenance income
Fleet management income and management fees are brought to
account on a straight line basis over the term of the lease.
Maintenance income is recognised on a stage of completion basis
in order that profit is recognised when the services are provided.
Maintenance costs are expensed as and when incurred.
Additional products and services
Revenue from the sale of additional products and services is
recognised when it is received or when the right to receive payment
is established.
Funding commissions
Introductory commissions earned are recognised in profit or
loss in full in the month in which the finance is introduced to the
relevant financier. Trailing commissions earned from financiers are
recognised over the life of the lease.
End of lease income
Income earned after the expiry of the lease is recognised when
it is received or when the right to receive payment is established.
Other income
Other income is recognised when it is received or when the right
to receive payment is established.
Interest
Interest revenue is recognised as interest accrues using the
effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest
income over the relevant period using the effective interest rate,
which is the rate that exactly discounts estimated future cash
receipts through the expected life of the financial asset to the
net carrying amount of the financial asset.
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.
Annual Report 2017 | 31
Cash flow hedges
Cash flow hedges are used to cover the Group’s exposure to
variability in cash flows that is attributable to particular risks
associated with a recognised asset or liability or a firm commitment
which could affect profit or loss. The effective portion of the
gain or loss on the hedging instrument is recognised in other
comprehensive income through the hedging reserve in equity,
whilst the ineffective portion is recognised in profit or loss. Amounts
taken to equity are transferred out of equity and included in
the measurement of the hedged transaction when the forecast
transaction occurs.
Cash flow hedges are tested for effectiveness on a regular basis
both retrospectively and prospectively to ensure that each hedge
is highly effective and continues to be designated as a cash flow
hedge. If the forecast transaction is no longer expected to occur,
the amounts recognised in equity are transferred to profit or loss.
If the hedging instrument is sold, terminated, expires, exercised
without replacement or rollover, or if the hedge becomes
ineffective and is no longer a designated hedge, amounts
previously recognised in equity remain in equity until the forecast
transaction occurs.
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 straight-line basis to write off the
net cost of each item of property, plant and equipment over their
expected useful lives as follows:
Leasehold improvements
Office equipment and furniture
Motor vehicles
five years
three to eight years
four years
The residual values, useful lives and depreciation methods are
reviewed, and adjusted if appropriate, at each reporting date.
Leasehold improvements are depreciated over the unexpired
period of the lease or the estimated useful life of the assets,
whichever is shorter.
An item of property, plant and equipment is derecognised upon
disposal or when there is no future economic benefit to the Group.
Gains and losses between the carrying amount and the disposal
proceeds are taken to profit or loss.
For leased motor vehicles see ‘Leases – Group as lessor – leased
motor vehicles assets’ accounting policy.
Note 2. Significant accounting policies
continued
Income tax continued
SG Fleet Group Limited (the ‘head entity’) and its wholly-owned
Australian subsidiaries have formed an income tax consolidated
group under the tax consolidation regime. The head entity
and each subsidiary in the tax consolidated group continue to
account for their own current and deferred tax amounts. The tax
consolidated group has applied the ‘separate taxpayer within
group’ approach in determining the appropriate amount of taxes
to allocate to members of the tax consolidated group.
In addition to its own current and deferred tax amounts, the
head entity also recognises the current tax liabilities (or assets)
and the deferred tax assets arising from unused tax losses and
unused tax credits assumed from each subsidiary in the tax
consolidated group.
Assets or liabilities arising under tax funding agreements with the
tax consolidated entities are recognised as amounts receivable
from or payable to other entities in the tax consolidated group. The
tax funding arrangement ensures that the intercompany charge
equals the current tax liability or benefit of each tax consolidated
group member, resulting in neither a contribution by the head entity
to the subsidiaries nor a distribution by the subsidiaries to the
head entity.
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.
Finance, trade and other receivables
Trade receivables are initially recognised at fair value and
subsequently measured at amortised cost using the effective
interest method, less any provision for impairment.
For finance lease and contract purchase agreements see
‘Leases – Group as lessor’ accounting policy.
Other receivables are recognised at amortised cost, less any
provision for impairment.
Inventories
End-of-term operating lease assets are stated at the lower of cost
and net realisable value. Cost comprises purchase and delivery
costs, net of rebates and discounts received or receivable.
Net realisable value is the lower of (i) estimated selling price in the
ordinary course of business less the estimated costs of completion
and the estimated costs necessary to make the sale and (ii) cost
less residual value provision.
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.
32 | SG Fleet Group
Notes to the financial statements continued30 June 2017
Leases
Group as lessee
The determination of whether an arrangement is or contains a
lease is based on the substance of the arrangement and requires
an assessment of whether the fulfilment of the arrangement
is dependent on the use of a specific asset or assets and the
arrangement conveys a right to use the asset.
A distinction is made between finance leases, which effectively
transfer from the lessor to the lessee substantially all the risks and
benefits incidental to ownership of leased assets, and operating
leases, under which the lessor effectively retains substantially all
such risks and benefits.
Finance leases are capitalised. A lease asset and liability are
established at the fair value of the leased assets, or if lower, the
present value of minimum lease payments. Lease payments are
allocated between the principal component of the lease liability and
the finance costs, so as to achieve a constant rate of interest on the
remaining balance of the liability.
Leased assets acquired under a finance lease are depreciated over
the asset’s useful life or over the shorter of the asset’s useful life
and the lease term if there is no reasonable certainty that the Group
will obtain ownership at the end of the lease term.
Operating lease payments, net of any incentives received from the
lessor, are charged to profit or loss on a straight-line basis over the
term of the lease.
Group as lessor
Amounts due from customers under finance leases and contract
purchase agreements are recorded as receivables. Finance
and contract purchase receivables are initially recognised at an
amount equal to the present value of the minimum instalment
payments receivable plus the present value of any unguaranteed
residual value expected to accrue at the end of the contract term.
Interest income is allocated to accounting periods so as to reflect
a constant periodic rate of return on the Group’s net investment
outstanding in respect of the contracts.
Group as lessor – leased motor vehicle assets
Lease motor vehicle assets represents full maintenance lease
assets which are stated at historical cost less accumulated
depreciation. The cost of leased motor vehicle assets includes
the purchase price, non-refundable purchase taxes, and other
expenditure that is directly attributable to the acquisition, including
costs incurred to bring the asset to a working condition such that it
is available for intended use.
The depreciable amount of the asset is depreciated over its
estimated useful life of seven years on a straight-line basis.
Lease rentals receivable and payable on operating leases are
recognised in profit or loss in periodic amounts over the effective
lease term on a straight line basis.
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 of amortisation and the 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
Where an entity or operation is acquired in a business combination,
that is not a common control transaction, the identifiable net assets
acquired are measured at fair value. The excess of the fair value
of the cost of the acquisition over the fair value of the identifiable
net assets acquired is brought to account as goodwill. 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.
Customer contracts
The customer contracts acquired in a business combination are
amortised on a straight-line basis over the period of their expected
benefit, being their finite useful lives of 10 years.
Software
Significant costs associated with software are deferred and
amortised on a straight-line basis over the period of their
expected benefit, being their finite useful lives of between
two and eight years.
Brand name
The brand name acquired in a business combination is amortised
on a straight-line basis over the period of its expected benefit, being
a finite useful life of 10 years.
Impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite
useful life are not subject to amortisation and are tested annually
for impairment, or more frequently if events or changes in
circumstances indicate that they might be impaired. Other non-
financial assets are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is recognised for
the amount by which the asset’s carrying amount exceeds its
recoverable amount.
Recoverable amount is the higher of an asset’s fair value less costs
of disposal and value-in-use. The value-in-use is the present value
of the estimated future cash flows relating to the asset using a
pre-tax discount rate specific to the asset or cash-generating unit
to which the asset belongs. Assets that do not have independent
cash flows are grouped together to form a cash-generating unit.
Annual Report 2017 | 33
Note 2. Significant accounting policies
continued
Trade and other payables
These amounts represent liabilities for goods and services
provided to the Group prior to the end of the financial year and
which are unpaid. Due to their short-term nature they are measured
at amortised cost and are not discounted. The amounts are
unsecured and are usually paid within 30 days of recognition.
Borrowings
Loans and borrowings are initially recognised at the fair value of
the consideration received, net of transaction costs. They are
subsequently measured at amortised cost using the effective
interest method.
Maintenance deferred income liability
Maintenance income is measured by reference to the stage of
completion based on the proportion that the maintenance costs
incurred to date bear to the total estimated costs of completion
of the contract.
Deferred income is recognised based on the differences in
maintenance fee derived in accordance with the contract billing
cycle and income determined based on stage of completion at the
reporting date. Refer to revenue recognition policy for maintenance
income above.
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.
Residual values
The Group has entered into various agreements with its financiers
that govern the transfer of the residual value risk inherent in
operating lease assets from the financier to the Group at the end
of the underlying lease agreement. These agreements include
put/call options, sale direction deeds and guaranteed buyback
arrangements. The residual value provision is created on an
onerous pool basis to cover future shortfalls on the disposal of
these vehicles. Assets are grouped into homogenous groups which
are then analysed further into maturity pools. A provision is raised
for a maturity pool if the forecast loss on disposal of the assets in
the pool exceeds the future fee income that the pool will generate
between the reporting date and the maturity date. Maturity pools
in a net profit position are not offset against maturity pools in a net
loss position.
Employee benefits
Short-term employee benefits
Employee benefits expected to be settled 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 employee benefits not expected to be settled within
12 months of the reporting date is measured as the present value
of expected future payments to be made in respect of services
provided by employees up to the reporting date using the projected
unit credit method. 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 based on high quality corporate bonds
with terms to maturity and currency that match, as closely as
possible, the estimated future cash outflows.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are
expensed in the period in which they are incurred.
Share-based payments
Equity-settled share-based compensation benefits are provided
to employees.
Equity-settled transactions are awards of shares, or options
over shares, that are provided to employees in exchange for the
rendering of services.
The cost of equity-settled transactions is 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 is 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 | SG Fleet Group
Notes to the financial statements continued30 June 2017 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 are 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 interest. 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 each reporting date and transfers between levels are
determined based on a reassessment of the lowest level 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.
Vehicle maintenance funds
Vehicle maintenance funds represents amounts collected from
customers for vehicles under management, with such amounts
subsequently used for payments for ongoing vehicle maintenance
expenses such as fuel, service cost, registration and other charges.
Any unused amounts at the end of the lease period are refunded to
the customers.
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 are no longer at the discretion of the Company.
Business combinations
The acquisition method of accounting is used to account for
business combinations regardless of whether equity instruments
or other assets are acquired.
The consideration transferred is the sum of the acquisition-date
fair values of the assets transferred, equity instruments issued or
liabilities incurred by the acquirer to former owners of the acquiree
and the amount of any non-controlling interest in the acquiree.
For each business combination, the non-controlling interest in the
acquiree is measured at either fair value or at the proportionate
share of the acquiree’s identifiable net assets. All acquisition costs
are expensed as incurred to profit or loss.
On the acquisition of a business, the Group assesses the
financial assets acquired and liabilities assumed for appropriate
classification and designation in accordance with the contractual
terms, economic conditions, the Group’s operating or accounting
policies and other pertinent conditions in existence at the
acquisition-date.
Where the business combination is achieved in stages, the Group
remeasures its previously held equity interest in the acquiree at the
acquisition-date fair value and the difference between the fair value
and the previous carrying amount is recognised in profit or loss.
Contingent consideration to be transferred by the acquirer is
recognised at the acquisition-date fair value. Subsequent changes
in the fair value of the contingent consideration classified as
an asset or liability is recognised in profit or loss. Contingent
consideration classified as equity is not remeasured and its
subsequent settlement is accounted for within equity.
The difference between the acquisition-date fair value of assets
acquired, liabilities assumed and any non-controlling interest in the
acquiree and the fair value of the consideration transferred and the
fair value of any pre-existing investment in the acquiree is recognised
as goodwill. If the consideration transferred and the pre-existing
fair value is less than the fair value of the identifiable net assets
acquired, being a bargain purchase to the acquirer, the difference is
recognised as a gain directly in profit or loss by the acquirer on the
acquisition-date, but only after a reassessment of the identification
and measurement of the net assets acquired, the non-controlling
interest in the acquiree, if any, the consideration transferred and the
acquirer’s previously held equity interest in the acquirer.
Business combinations are initially accounted for on a provisional
basis. The acquirer retrospectively adjusts the provisional amounts
recognised and also recognises additional assets or liabilities
during the measurement period, based on new information
obtained about the facts and circumstances that existed at the
acquisition-date. The measurement period ends on either the
earlier of (i) 12 months from the date of the acquisition or (ii) when
the acquirer receives all the information possible to determine
fair value.
Annual Report 2017 | 35
AASB 15 Revenue from Contracts with Customers
AASB 15 Revenue from Contracts with Customers was issued
in December 2014 and provides a single comprehensive model
for revenue recognition based on the satisfaction of performance
obligations and additional disclosures about revenue. It replaces
AASB 118 Revenue and related interpretations. This standard
will become mandatory for the Group’s 30 June 2019 financial
statements. The Group is currently assessing the implications of
AASB 15. It is expected that the adoption of AASB 15 by the Group
will result in a change in the recognition of certain revenue streams
from upfront to over time. The Group is in the process of estimating
the impact of these revenue streams on its financial statements.
The new standard also introduces expanded disclosure
requirements and changes in presentation. These are expected to
change the nature and extent of the Group’s disclosures about its
revenue from contracts with the customer and associated assets
and, particularly in the year of the adoption of the new standard.
AASB 16 Leases
AASB 16 Leases was issued in February 2016 and introduced
changes to lessee accounting, in particular, the requirement
to recognise leases currently classified as operating leases on
balance sheet. The standard requires a lessee to recognise a
right-of-use asset representing its rights to use the underlying lease
asset and a lease liability representing its obligations to make lease
payments, with certain exceptions for short-term leases or leases
of low-value assets, on the statement of financial position. This
will replace the operating/finance lease distinction and accounting
requirements currently prescribed in AASB 117 Leases. This
standard will become mandatory for the Group’s 30 June 2020
financial statements. The Group has started an initial assessment
of the potential impact on its consolidated financial statements.
So far, the most significant impact identified is that the Group
will recognise new assets and liabilities for its operating leases,
primarily, leases over premises and equipment. The Group has
not yet quantified the impact on its reported assets and liabilities
of adoption of AASB 16. No significant impact is expected for the
Group’s finance leases.
Note 2. Significant accounting policies
continued
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to the owners of SG Fleet Group 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.
Rounding of amounts
The Company is of a kind referred to in Corporations Instrument
2016/191, issued by the Australian Securities and Investments
Commission, relating to ‘rounding-off’. Amounts in this report
have been rounded off in accordance with that Corporations
Instrument to the nearest thousand dollars, or in certain cases,
the nearest dollar.
New Accounting Standards and Interpretations not
yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have
recently been issued or amended but are not yet mandatory, have
not been early adopted by the Group for the annual reporting
period ended 30 June 2017. 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.
AASB 9 Financial Instruments
AASB 9 Financial Instruments was issued in December 2014
and addresses recognition and measurement requirements for
financial assets and financial liabilities, impairment requirements
that introduce an expected credit loss impairment model and
general hedge accounting requirements which more closely align
with risk management activities undertaken when hedging financial
and non-financial risks. This standard becomes mandatory for the
Group’s 30 June 2019 financial statements. The Group is in the
process of assessing the impact of AASB 9 and is not yet able to
reasonably estimate the impact on its financial statements.
36 | SG Fleet Group
Notes to the financial statements continued30 June 2017 Note 4. Operating segments
Identification of reportable operating segments
The Group is organised into geographic operating segments:
Australia, New Zealand, United Kingdom and Corporate.
These 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. There
is no aggregation of operating segments.
The CODM reviews EBITDA (earnings before interest, tax,
depreciation and amortisation). The accounting policies adopted for
internal reporting to the CODM are consistent with those adopted
in the financial statements.
Prior year balances have been reclassified to reflect how the
balances are monitored by the CODM.
Intersegment receivables, payables and loans
Intersegment loans are initially recognised at the consideration
received. Intersegment loans receivable and loans payable that
earn or incur non-market interest are not adjusted to fair value
based on market interest rates. Intersegment loans are eliminated
on consolidation.
Major customers
There are no major customers that contributed more than 10%
of revenue to the Group.
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.
Revenue from maintenance income
As discussed in note 2, the Group estimates the maintenance
income on a stage of completion approach. These calculations
require the use of assumptions, including an estimation of the stage
of completion and the profit margin to be achieved over the life of
the contract.
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, to which these
assets belong, 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.
Residual values
As discussed in note 2, the Group has entered into various
agreements with its financiers relating to residual value risk inherent
in operating lease assets being transferred to the Group at the
end of the underlying lease agreement. A provision is raised where
the forecast loss on disposal of the assets in the pool exceeds
the expected future fee income that the pool will generate. The
expected future income is estimated based on past experience and
likely market conditions at the time of disposal of the assets.
Annual Report 2017 | 37
Australia
$’000
New
Zealand
$’000
United
Kingdom
$’000
Corporate
$’000
Total
$’000
239,991
1,396
241,387
105,378
(9,536)
(7,213)
88,629
6,082
45,729
6
6,088
2,931
(2,076)
(359)
496
21
45,750
15,055
(10,951)
(2,195)
1,909
510,961
16,510
138,021
321,990
12,615
104,100
–
–
–
(4,562)
–
–
(4,562)
–
–
291,802
1,423
293,225
118,802
(22,563)
(9,767)
86,472
(26,880)
59,592
665,492
665,492
438,705
438,705
New
Zealand
$’000
United
Kingdom
$’000
Corporate
$’000
Total
$’000
Australia
$’000
200,509
1,938
202,447
89,195
(7,552)
(8,071)
73,572
4,314
15
4,329
1,734
(1,252)
(253)
229
5,185
10
5,195
711
(1,903)
(265)
(1,457)
466,071
12,402
40,496
302,411
9,029
6,306
–
–
–
(3,982)
–
–
(3,982)
–
–
210,008
1,963
211,971
87,658
(10,707)
(8,589)
68,362
(21,385)
46,977
518,969
518,969
317,746
317,746
Operating segment information
Consolidated – 2017
Revenue
Operating revenue from external customers
Interest
Total revenue
EBITDA
Depreciation and amortisation
Finance costs
Profit/(loss) before income tax expense
Income tax expense
Profit after income tax expense
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
Consolidated – 2016
Revenue
Operating revenue from external customers
Interest
Total revenue
EBITDA
Depreciation and amortisation
Finance costs
Profit/(loss) before income tax expense
Income tax expense
Profit after income tax expense
Assets
Segment assets
Total assets
Liabilities
Segment liabilities
Total liabilities
38 | SG Fleet Group
Notes to the financial statements continued30 June 2017 Note 5. Revenue
Operating revenue
Management and maintenance income
Additional products and services
Funding commissions
End of lease income
Rental income
Other income
Other revenue
Interest
Revenue
Note 6. Expenses
Profit before income tax includes the following specific expenses:
Depreciation
Leasehold improvements
Office equipment and furniture
Motor vehicles
Leased motor vehicle assets
Total depreciation
Amortisation
Brand name
Customer contracts
Software
Total amortisation
Total depreciation and amortisation
Finance costs
External borrowing costs for corporate debt
External borrowing costs for lease portfolio
Net foreign exchange losses (gains)
Net movement in fair value of derivatives
Total finance costs
Rental expense relating to operating leases
Minimum lease payments
Superannuation expense
Defined contribution superannuation expense
Consolidated
2017
$’000
2016
$’000
92,526
95,209
56,134
10,733
34,167
3,033
69,844
70,436
41,214
12,596
12,157
3,761
291,802
210,008
1,423
1,963
293,225
211,971
Consolidated
2017
$’000
2016
$’000
55
1,196
98
12,995
14,344
780
5,458
1,981
8,219
9
641
65
5,970
6,685
455
2,543
1,024
4,022
22,563
10,707
7,865
2,483
(11)
(570)
9,767
5,290
1,039
(5)
2,265
8,589
5,896
5,717
4,979
3,951
Annual Report 2017 | 39
Note 7. Income tax
Income tax expense
Current tax
Deferred tax – origination and reversal of temporary differences
Aggregate income tax expense
Deferred tax included in income tax expense comprises:
Increase/(decrease) in deferred tax liabilities
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:
Entertainment expenses
Non-deductible expenses
Current year tax losses not recognised
Difference in overseas tax rates
Adjustment recognised for prior periods
Income tax expense
Amounts charged/(credited) directly to equity
Deferred tax liabilities
Tax losses not recognised
Unused tax losses for which no deferred tax asset has been recognised
Potential tax benefit at statutory tax rates
Consolidated
2017
$’000
2016
$’000
28,163
(1,283)
26,880
20,131
1,254
21,385
(1,283)
1,254
86,472
25,942
68,362
20,509
138
832
79
380
26,912
20,968
162
(209)
15
224
140
53
26,880
21,385
245
(456)
17,262
3,520
11,730
3,519
The above potential tax benefit for tax losses and temporary differences, relating to United Kingdom and New Zealand, has not been
recognised in the statement of financial position.
40 | SG Fleet Group
Notes to the financial statements continued30 June 2017 Deferred tax liability
Deferred tax liability comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Property, plant and equipment
Prepayments
Intangibles
Employee benefits
Accrued expenses
Provisions
Doubtful debts
Deferred income
Deferred expenses
Derivative financial instruments
Amounts recognised in equity:
Derivative financial instruments
Deferred tax liability
Amount expected to be settled after more than 12 months
Movements:
Opening balance
Charged/(credited) to profit or loss
Charged/(credited) to equity
Additions through business combinations (note 34)
Exchange differences
Closing balance
Income tax refund due
Income tax refund due
Amount expected to be recovered within 12 months
Provision for income tax
Provision for income tax
Amount expected to be settled within 12 months
Consolidated
2017
$’000
2016
$’000
589
2,152
15,164
(2,359)
(4,446)
(3,378)
(50)
(3,036)
(1,080)
–
3,556
(720)
2,836
2,836
1,256
(1,283)
245
2,659
(41)
2,836
–
–
5,698
5,698
471
1,837
14,520
(2,094)
(3,341)
(3,107)
(21)
(4,302)
(1,571)
(680)
1,712
(456)
1,256
1,256
(14,483)
1,254
(456)
14,941
–
1,256
160
160
–
–
Annual Report 2017 | 41
Note 8. Cash and cash equivalents
Cash at bank
Secured deposits
Amount expected to be recovered within 12 months
Consolidated
2017
$’000
52,669
31,254
83,923
83,923
2016
$’000
64,089
17,604
81,693
81,693
Secured deposits represent cash held by the Group as required under certain funding and insurance arrangements between the Group,
the financiers under its lease portfolio facilities and its insurance providers. The secured deposits are not available as free cash for the
purpose of operations of the Group.
Note 9. Finance, trade and other receivables
Consolidated
2017
$’000
67,807
(213)
67,594
13,162
–
80,756
80,756
2016
$’000
40,711
(68)
40,643
8,130
4
48,777
48,777
Consolidated
2017
$’000
2016
$’000
68
111
258
(224)
–
213
40
28
5
–
(5)
68
Trade receivables
Less: Provision for impairment of receivables
Prepayments
Finance lease receivables
Amount expected to be recovered within 12 months
Impairment of receivables
The ageing of the impaired receivables provided for above are within one year overdue.
Movements in the provision for impairment of receivables are as follows:
Opening balance
Additional provisions recognised
Additions through business combinations
Receivables written off during the year as uncollectable
Unused amounts reversed
Closing balance
Impairment of receivables are charged (or credited) to other expenses in profit or loss.
42 | SG Fleet Group
Notes to the financial statements continued30 June 2017 Past due but not impaired
Customers with balances past due but without provision for impairment of receivables amount to $1,978,000 as at 30 June 2017
($917,000 as at 30 June 2016).
The ageing of the past due but not impaired receivables are as follows:
Within one year overdue
Finance lessor commitments
Committed at the reporting date and recognised as assets, receivable:
Within one year
Note 10. Inventories
End-of-term operating lease assets held for disposal
Amount expected to be recovered within 12 months
Note 11. Leased motor vehicle assets
Lease motor vehicle assets – at cost
Less: Accumulated depreciation
Less: Impairment
Amount expected to be recovered within 12 months
Amount expected to be recovered after more than 12 months
Consolidated
2017
$’000
1,978
2016
$’000
917
Consolidated
2017
$’000
2016
$’000
–
4
Consolidated
2017
$’000
11,272
11,272
2016
$’000
5,226
5,226
Consolidated
2017
$’000
93,617
(27,926)
(873)
64,818
3,580
61,238
64,818
2016
$’000
23,589
(7,125)
(334)
16,130
2,993
13,137
16,130
Annual Report 2017 | 43
Note 11. Leased motor vehicle assets continued
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Leased
assets
$’000
17,664
23,711
(19,175)
74
(174)
(5,970)
16,130
27,394
53,919
(19,146)
248
(732)
(12,995)
64,818
Consolidated
2017
$’000
649
(565)
84
7,746
(3,987)
3,759
537
(149)
388
4,231
4,231
2016
$’000
679
(669)
10
6,363
(3,686)
2,677
260
(119)
141
2,828
2,828
Consolidated
Balance at 1 July 2015
Additions
Disposals
Revaluation increments
Exchange differences
Depreciation expense
Balance at 30 June 2016
Additions
Additions through business combinations (note 34)
Disposals
Revaluation increments
Exchange differences
Depreciation expense
Balance at 30 June 2017
Note 12. Property, plant and equipment
Leasehold improvements – at cost
Less: Accumulated depreciation
Office equipment and furniture – at cost
Less: Accumulated depreciation
Motor vehicles – at cost
Less: Accumulated depreciation
Amount expected to be recovered after more than 12 months
44 | SG Fleet Group
Notes to the financial statements continued30 June 2017 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 2015
Additions
Additions through business combinations
Disposals
Exchange differences
Depreciation expense
Balance at 30 June 2016
Additions
Additions through business combinations (note 34)
Disposals
Exchange differences
Depreciation expense
Balance at 30 June 2017
Note 13. Intangibles
Goodwill – at cost
Brand name – at cost
Less: Accumulated amortisation
Customer contracts – at cost
Less: Accumulated amortisation
Less: Impairment
Software – at cost
Less: Accumulated amortisation
Amount expected to be recovered after more than 12 months
Leasehold
improvements
$’000
Office
equipment
and furniture
$’000
Motor
vehicles
$’000
19
–
–
–
–
(9)
10
–
134
–
(5)
(55)
84
891
1,763
666
–
(2)
(641)
2,677
2,042
240
–
(4)
(1,196)
3,759
93
119
–
(16)
10
(65)
141
218
192
(59)
(6)
(98)
388
Total
$’000
1,003
1,882
666
(16)
8
(715)
2,828
2,260
566
(59)
(15)
(1,349)
4,231
Consolidated
2017
$’000
2016
$’000
353,528
305,771
7,800
(1,235)
6,565
58,785
(9,085)
–
49,700
15,308
(4,609)
10,699
7,800
(455)
7,345
45,328
(2,543)
(1,079)
41,706
12,015
(2,682)
9,333
420,492
420,492
364,155
364,155
Annual Report 2017 | 45
Note 13. Intangibles continued
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2015
Additions
Additions through business combinations
Amortisation expense
Balance at 30 June 2016
Additions
Additions through business combinations (note 34)
Exchange differences
Amortisation expense
Balance at 30 June 2017
Goodwill
$’000
136,460
–
169,311
–
305,771
–
48,779
(1,022)
–
353,528
Brand
name
$’000
–
–
7,800
(455)
7,345
–
–
–
(780)
6,565
Customer
contracts
$’000
Software
$’000
649
–
43,600
(2,543)
41,706
–
13,712
(260)
(5,458)
49,700
5,583
2,999
1,775
(1,024)
9,333
3,148
199
–
(1,981)
10,699
Total
$’000
142,692
2,999
222,486
(4,022)
364,155
3,148
62,690
(1,282)
(8,219)
420,492
Goodwill acquired through business combinations have been allocated to the following cash-generating units (‘CGUs’):
Australian CGU
United Kingdom CGU
Total
Consolidated
2017
$’000
2016
$’000
305,771
305,771
47,757
–
353,528
305,771
Impairment testing for goodwill
The impairment test was based on a value-in-use approach. The recoverable amount was determined to be higher than the carrying
amount and therefore no impairment loss was recognised. Value-in-use was determined by discounting the future cash flows based on
the following key assumptions:
• Cash flows were projected based on actual operating results and the four-year business plan. Cash flow beyond Year 5 was projected at
a growth rate of 0% (2016: 0%) for both CGUs;
• Revenue growth was projected at 6.4% (2016: 6.7%) per annum for the Australian CGU and 5.2% per annum for the United Kingdom CGU;
• Direct costs were forecast based on the margins historically achieved by the business;
• Overheads were forecast based on current levels adjusted for inflationary increases; and
• The Company’s pre-tax weighted average cost of capital was applied in determining the recoverable amount.
• The discount rate of 10.44% (2016: 11.03%) was used for the Australian CGU and 7.53% for the United Kingdom CGU.
The values assigned to the key assumptions represent management’s assessment of future trends in the industry and are based on both
external and internal data sources.
Sensitivity analysis
Management estimates that any reasonable changes in the key assumptions would not have a significant impact on the value-in-use of
intangible assets and goodwill that would require the assets to be impaired.
46 | SG Fleet Group
Notes to the financial statements continued30 June 2017 Note 14. Trade and other payables
Trade payables
Accrued expenses
Amount expected to be settled within 12 months
Refer to note 25 for further information on financial instruments.
Consolidated
2017
$’000
91,981
11,118
103,099
103,099
2016
$’000
56,486
6,974
63,460
63,460
Trade payables include residual values payable to financiers, which are secured by the underlying operating lease asset, cash lock-up of
$25,218,000 (2016: $11,265,000) and bank guarantees.
Note 15. Derivative financial instruments
Interest rate swap contracts – cash flow hedges
Amount expected to be settled after more than 12 months
Refer to note 25 for further information on financial instruments.
Refer to note 26 for further information on fair value measurement.
Note 16. Employee benefits
Annual leave
Long service leave
Amount expected to be settled within 12 months
Amount expected to be settled after more than 12 months
Consolidated
2017
$’000
2,464
2,464
2016
$’000
3,889
3,889
Consolidated
2017
$’000
3,523
4,495
8,018
7,053
965
8,018
2016
$’000
3,160
3,954
7,114
6,053
1,061
7,114
Annual Report 2017 | 47
Note 17. Residual risk provision
Residual risk
Amount expected to be settled within 12 months
Amount expected to be settled after more than 12 months
Residual risk provision
The provision is to recognise the future liability relating to residual value exposures as described in notes 2 and 3.
Movements in provisions
Movements in the provision during the current financial period is set out below:
Consolidated – 2017
Carrying amount at the start of the year
Additional provisions recognised
Additions through business combinations (note 34)
Exchange differences
Carrying amount at the end of the year
Note 18. Lease portfolio borrowings
Lease portfolio borrowings
Amount expected to be settled within 12 months
Amount expected to be settled after more than 12 months
Consolidated
2017
$’000
11,595
7,083
4,512
11,595
2016
$’000
10,213
4,097
6,116
10,213
Residual
risk
$’000
10,213
821
570
(9)
11,595
Consolidated
2017
$’000
55,328
26,898
28,430
55,328
2016
$’000
11,855
4,626
7,229
11,855
Lease portfolio borrowings
The lease portfolio borrowings are secured by the underlying funded assets and lease agreements, together with an irrevocable letter of
credit, cash lock-ups and guarantees. These facilities are interest bearing and are repaid monthly in accordance with the amortisation
schedule of the underlying assets.
48 | SG Fleet Group
Notes to the financial statements continued30 June 2017 Note 19. Borrowings
Bank loans
Amount expected to be settled within 12 months
Amount expected to be settled after more than 12 months
Refer to note 25 for further information on financial instruments.
Total secured liabilities
The total secured liabilities are as follows:
Bank loans
Lease portfolio borrowings (note 18)
Assets pledged as security
Assets pledged as security for borrowings are:
Consolidated
2017
$’000
2016
$’000
158,119
134,750
25,179
132,940
158,119
15,000
119,750
134,750
Consolidated
2017
$’000
158,119
55,328
2016
$’000
134,750
11,855
213,447
146,605
Australian corporate borrowings
The corporate borrowings comprise bank loans which are secured by guarantees and indemnities as well as fixed and floating charges or
composite guarantees issued by the Group. The facilities are repayable in instalments of $5,000,000 for the next nine quarters and a bullet
payment of $82,100,000 on maturity being 17 November 2019.
UK corporate borrowings
UK corporate borrowings comprise facilities totalling GBP 17,775,000. The facilities are repayable in instalments of GBP 625,000 per
quarter followed by a bullet payment of GBP 12,150,000 on maturity being 17 November 2019.
Annual Report 2017 | 49
Note 19. Borrowings continued
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Corporate borrowings
Lease portfolio facilities
Used at the reporting date
Corporate borrowings
Lease portfolio facilities
Unused at the reporting date
Corporate borrowings
Lease portfolio facilities
Note 20. Vehicle maintenance funds
Vehicle maintenance funds
Amount expected to be settled within 12 months
Amount expected to be settled after more than 12 months
Note 21. Deferred income
Deferred income
Amount expected to be recognised within 12 months
Amount expected to be recognised after more than 12 months
50 | SG Fleet Group
Consolidated
2017
$’000
2016
$’000
190,192
113,450
160,344
40,484
303,642
200,828
168,495
55,328
152,147
11,855
223,823
164,002
21,697
58,122
79,819
8,197
28,629
36,826
Consolidated
2017
$’000
54,524
21,946
32,578
54,524
2016
$’000
58,687
29,032
29,655
58,687
Consolidated
2017
$’000
37,024
20,018
17,006
37,024
2016
$’000
26,522
12,399
14,123
26,522
Notes to the financial statements continued30 June 2017 Note 22. Issued capital
Ordinary shares – fully paid
253,030,869
251,791,826
272,008
267,348
Consolidated
2017
Shares
2016
Shares
2017
$’000
2016
$’000
Movements in ordinary share capital
Details
Balance
Date
Shares
Issue price
$’000
1 July 2015
242,691,826
Shares issued on acquisition of nlc Pty Ltd
30 November 2015
9,100,000
$3.80
Balance
30 June 2016
251,791,826
Shares issued on acquisition of Fleet Hire Holdings Limited, UK
(note 34)
4 August 2016
Shares issued on acquisition of Motiva Group Limited, UK (note 34)
30 November 2016
756,142
482,901
$4.10
$3.23
Balance
30 June 2017 253,030,869
232,768
34,580
267,348
3,100
1,560
272,008
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 are 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. The Group
monitors capital on the basis of its gearing ratio. 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 debts.
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.
The Group is subject to certain financing arrangements covenants and meeting these are given priority in all capital risk management
decisions. There have been no events of default on the financing arrangements during the financial year.
The capital risk management policy remains unchanged from the 30 June 2016 Annual Report.
Annual Report 2017 | 51
Note 23. Reserves
Foreign currency reserve
Hedging reserve – cash flow hedges
Share-based payments reserve
Capital reserve
Consolidated
2017
$’000
(2,864)
(554)
2,194
2016
$’000
(1,121)
(1,164)
1,411
(119,158)
(119,158)
(120,382)
(120,032)
Foreign currency reserve
The reserve is used to recognise exchange differences arising from translation of the financial statements of foreign operations to
Australian Dollars.
Hedging reserve – cash flow hedges
The reserve is used to recognise the effective portion of the gain or loss of cash flow hedge instruments that is determined to be an
effective hedge.
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and Directors as part of their remuneration, and other
parties as part of their compensation for services.
Capital reserve
The reserve is used to recognise contributions from or to SG Fleet Group Limited and its controlled subsidiaries by shareholders.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Foreign
currency
$’000
Cash flow
hedge
$’000
Share-based
payments
$’000
Capital
$’000
Total
$’000
393
(1,514)
–
–
–
(1,121)
(1,743)
–
–
–
(2,864)
(7)
–
(1,613)
456
–
(1,164)
–
855
(245)
–
(554)
459
(119,158)
(118,313)
–
–
–
952
1,411
–
–
–
783
2,194
–
–
–
–
(1,514)
(1,613)
456
952
(119,158)
(120,032)
–
–
–
–
(1,743)
855
(245)
783
(119,158)
(120,382)
Consolidated
Balance at 1 July 2015
Foreign currency translation
Movement in hedges – gross
Deferred tax
Share-based payments
Balance at 30 June 2016
Foreign currency translation
Movement in hedges – gross
Deferred tax
Share-based payments
Balance at 30 June 2017
52 | SG Fleet Group
Notes to the financial statements continued30 June 2017 Note 24. Dividends
Dividends
Dividends paid during the financial year were as follows:
Fully franked final dividend for the year ended 30 June 2016 of 7.63 cents per share paid
on 20 October 2016 (2016: 6.117 cents)
Fully franked interim dividend for the year ended 30 June 2017 of 7.536 cents per share paid
on 20 April 2017 (2016: 5.223 cents)
Consolidated
2017
$’000
2016
$’000
19,269
14,845
19,069
38,338
13,152
27,997
On 14 August 2017, the Directors declared a fully franked final dividend for the year ended 30 June 2017 of 9.265 cents per ordinary
share, to be paid on 17 October 2017 to eligible shareholders on the register as at 26 September 2017. This equates to a total estimated
distribution of $23,443,000, based on the number of ordinary shares on issue as at 30 June 2017. The financial effect of dividends
declared after the reporting date are not reflected in the 30 June 2017 financial statements and will be recognised in subsequent
financial reports.
Franking credits
Franking credits available for subsequent financial years based on a tax rate of 30%
Consolidated
2017
$’000
2016
$’000
38,181
30,415
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
•
•
•
franking credits that will arise from the payment of the amount of the provision for income tax at the reporting date
franking debits that will arise from the payment of dividends recognised as a liability at the reporting date
franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date
The franking credits above excludes exempting credits.
Note 25. Financial instruments
Financial risk management objectives
The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency risk 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 Board has overall responsibility for the establishment and oversight of the risk management framework. The Audit, Risk and
Compliance Committee, a sub-committee of the Board, has responsibility for managing risk. The Committee reports to the Board on
its activities.
Risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls,
and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market
conditions and the Group’s activities. The Group through its training and management standards and procedures, aims to develop a
disciplined and constructive control environment in which all employees understand their roles and obligations.
Market risk
Foreign currency risk
The Group is not exposed to any significant foreign currency risk, except for translation of financial assets and liabilities of foreign
subsidiaries into presentation currency.
Annual Report 2017 | 53
Note 25. Financial instruments continued
Price risk
The Group is not exposed to any significant price risk.
Interest rate risk
The Group’s main interest rate risk arises from its borrowings and cash at bank. Borrowings and cash at bank issued at variable rates
expose the Group to interest rate risk. Borrowings issued at fixed rates expose the Group to fair value risk. The policy is to ensure that at
least 60% of its exposure to changes in interest rates on general borrowings, unless approved by the Board, other than lease portfolio
borrowings, is on a fixed rate basis. Lease portfolio borrowings are entered into on a fixed interest rate basis, except for lease portfolio
borrowings utilised to fund lease portfolio assets in inertia which are entered into on a variable rate basis.
As at the reporting date, the Group had the following variable rate bank accounts and other facilities after impact of hedging instruments:
Consolidated
Bank loans
Lease portfolio facilities
Cash at bank
Secured deposits
Net exposure to cash flow interest rate risk
2017
Balance
$’000
2016
Balance
$’000
(68,307)
(33,688)
(81)
52,669
31,254
15,535
(1,071)
64,089
17,604
46,934
An official increase/decrease in interest rates of 50 (2015: 50) basis points would have a favourable/adverse effect on profit before tax and
equity of $78,000 (2016: $235,000) per annum. The percentage change is based on the expected volatility of interest rates using market
data and analyst’s forecasts.
Derivatives interest rate swap
The Group has entered into interest rate swap contracts with notional/principal value as at 30 June 2017 of $98,349,000 (2016:
$107,355,000). The interest rate swap contract hedges the Group’s risk against an increase in variable interest rate. The contracts mature
in 2019-2020 financial year. Weighted average fixed rate is 3.13% (2016: 3.09%).
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
maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for
impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. The Group does not
hold any collateral.
Liquidity risk
Vigilant liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash equivalents) and available
borrowing facilities to be able to pay debts as and when they become due and payable. Typically the Group ensures that it has sufficient
cash or facilities on demand to meet expected operational expenses for a period of 90 days, including the servicing of financial obligations.
This excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.
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:
Corporate borrowings
Lease portfolio facilities
54 | SG Fleet Group
Consolidated
2017
$’000
21,697
58,122
79,819
2016
$’000
8,197
28,629
36,826
Notes to the financial statements continued30 June 2017 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 interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals
may differ from their carrying amount in the statement of financial position.
Consolidated – 2017
Non-derivatives
Non-interest bearing
Trade payables
Interest-bearing – variable
Bank loans
Lease portfolio liabilities
Interest-bearing – fixed rate
Bank loans
Lease portfolio facilities
Total non-derivatives
Derivatives
Interest rate swaps net settled
Total derivatives
Consolidated – 2016
Non-derivatives
Non-interest bearing
Trade payables
Interest-bearing – variable
Bank loans
Lease portfolio liabilities
Interest-bearing – fixed rate
Bank loans
Lease portfolio facilities
Total non-derivatives
Derivatives
Interest rate swaps net settled
Total 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
91,981
–
–
15,839
14,440
42,021
82
–
–
15,752
28,661
152,315
15,220
17,022
46,682
69,164
12,510
123,695
–
–
–
–
2,464
2,464
–
–
–
–
182
182
–
–
91,981
72,300
82
100,136
58,375
322,874
2,464
2,464
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
56,486
–
–
4,975
1,088
16,092
3,981
82,622
–
–
4,830
27,556
–
–
15,583
2,942
23,355
84,170
4,742
116,468
–
–
3,889
3,889
–
–
–
–
–
–
–
–
56,486
37,361
1,088
115,845
11,665
222,445
3,889
3,889
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above.
Annual Report 2017 | 55
Note 26. Fair value measurement
Fair value hierarchy
The following tables detail the Group’s assets and liabilities, measured or disclosed at fair value, using a three level hierarchy, based on the
lowest level of input that is significant to the entire fair value measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: Unobservable inputs for the asset or liability.
Consolidated – 2017
Liabilities
Derivative financial instruments – Interest rate swap contracts
Total liabilities
Consolidated – 2016
Liabilities
Level 1
$’000
Level 2
$’000
Level 3
$’000
–
–
2,464
2,464
–
–
Level 1
$’000
Level 2
$’000
Level 3
$’000
Derivative financial instruments – Interest rate swap contracts
Total liabilities
–
–
3,889
3,889
–
–
Total
$’000
2,464
2,464
Total
$’000
3,889
3,889
There were no transfers between levels during the financial year.
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. The carrying amounts of trade
receivables and trade payables are assumed to approximate their fair values due to their short-term nature. The fair value of financial
liabilities is estimated by discounting the remaining contractual maturities at the current market interest rate that is available for similar
financial instruments.
Valuation techniques for fair value measurements categorised within level 2 and level 3
Derivative financial instruments have been valued using observable market rates. This valuation technique maximises the use of
observable market data where it is available and relies as little as possible on entity specific estimates.
Note 27. Key management personnel disclosures
Compensation
The aggregate compensation made to Directors and other members of key management personnel of the Group is set out below:
Consolidated
2017
$
2016
$
4,690,985
3,502,509
160,508
237,048
485,567
146,157
52,253
736,856
5,574,108
4,437,775
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
56 | SG Fleet Group
Notes to the financial statements continued30 June 2017 Note 28. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by KPMG, the auditor of the Company:
Audit services – KPMG
Audit or review of the financial statements
Other services – KPMG
Tax services
Corporate advisory
Note 29. Commitments – operating lease receivable
Committed at the reporting date, receivable:
Within one year
One to five years
Consolidated
2017
$
2016
$
543,373
436,673
89,524
752,679
842,203
97,281
497,297
594,578
1,385,576
1,031,251
Consolidated
2017
$’000
15,372
14,822
30,194
2016
$’000
4,264
5,052
9,316
Future minimum rentals receivable includes contracted amounts for motor vehicles under non-cancellable operating leases between one
and five years.
Note 30. Contingent liabilities
The Group has entered into agreements with its lease portfolio financiers under which the residual value risk inherent in operating leases
is transferred from the financier of the asset to the Group at the end of the lease. Under these agreements, at the end of the contractual
lease term for each vehicle, the Group is obliged to pay the guaranteed residual value amount to the financier. The company then sells
the vehicles and realises a profit or loss on sale. Bank guarantees and letters of credit have been issued to lease portfolio financiers as
security for these obligations.
An amount of $11,595,000 (2016: $10,213,000) has been recognised as a residual value provision and an amount of $873,000 (2016:
$334,000) has been recognised as an impairment provision respectively, calculated on an onerous pool basis, to cover potential shortfalls
on the disposal of these vehicles.
The Group has executed certain guarantees and indemnities, as well as fixed and floating charges over the assets of the Group in favour
of funders as security for banking and lease portfolio facilities provided to the Group.
Annual Report 2017 | 57
Note 31. Commitments for expenditure
Lease commitments – operating
Committed at the reporting date but not recognised as liabilities:
Within one year
One to five years
More than five years
Capital commitments
Committed at the reporting date but not recognised as liabilities:
Intangible assets
Consolidated
2017
$’000
2016
$’000
3,473
5,599
–
3,249
7,318
376
9,072
10,943
632
1,309
Operating lease commitments includes contracted amounts for office accommodation and office equipment under non-cancellable
operating leases expiring within one to five years with, in some cases, options to extend. The leases do not have escalation clauses.
On renewal, the terms of the leases are renegotiated.
Capital commitments includes contracted amounts for the acquisition and development of Enterprise Resource Planning (‘ERP’) systems.
Note 32. Related party transactions
Parent entities
SG Fleet Group Limited is the parent entity. The ultimate parent entity is Super Group Limited, incorporated in South Africa and listed on
the Johannesburg Stock Exchange.
Subsidiaries
Interests in subsidiaries are set out in note 35.
Key management personnel
Disclosures relating to key management personnel are set out in note 27 and the remuneration report included in the Directors’ report.
Transactions with related parties
There were no transactions with related parties during the current and previous financial year.
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.
58 | SG Fleet Group
Notes to the financial statements continued30 June 2017 Note 33. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Loss after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Accumulated losses
Total equity
Parent
2017
$’000
(3,996)
(3,996)
2016
$’000
(3,221)
(3,221)
Parent
2017
$’000
2016
$’000
–
155
467,577
484,367
5,126
81,134
–
60,250
482,396
(95,953)
386,443
477,736
(53,619)
424,117
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity and its subsidiaries are party to a deed of cross guarantee under which each company guarantees the debts of the
others. No deficiencies of assets exist in any of these subsidiaries. Refer to note 36 for further details.
The parent entity has also provided guarantees and indemnities for bank facilities. Refer to note 19 for further details.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2017 and 30 June 2016.
Capital commitments – Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2017 and 30 June 2016.
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; and
• dividends received from subsidiaries are recognised as other income by the parent entity.
Annual Report 2017 | 59
Note 34. Business combinations
Fleet Hire Holdings Limited
On 4 August 2016, the Group acquired 100% of the ordinary shares of UK based Fleet Hire Holdings Limited and its subsidiaries
(‘Fleet Hire’) for a total consideration of $34,413,000. Fleet Hire is a business that offers contract hire, salary sacrifice, short-term rental
and fleet management services. The goodwill of $31,416,000 is attributable to the expected synergies and cross-selling opportunities
that will arise from the acquisition, the future growth prospects of new products and initiatives together with the skills base and operating
processes within the acquired entity.
The values identified in relation to the acquisition are provisional as at 30 June 2017.
The fair value of 756,142 ordinary shares issued to settle part of the consideration was based on the listed share price of the Company
on 4 August 2016 of $4.10 per share.
Motiva Group Limited (‘Motiva’)
On 30 November 2016, the Group acquired 100% of the ordinary shares of UK-based Motiva Group Limited and its subsidiaries
(‘Motiva’) for a total consideration of $23,910,000. Motiva is a business that offers contract hire, short-term rental and fleet management
services. The goodwill of $17,363,000 is attributable to the expected synergies and cross-selling opportunities that will arise from the
acquisition, the future growth prospects of new products and initiatives together with the skills base and operating processes within the
acquired entity.
In the seven months to 30 June 2017, Motiva contributed revenue of $16,523,000 and profit before tax of $1,473,000 to the Group
results, before acquisition-related expenses. Had the acquisition occurred on 1 July 2016, management estimates that Motiva would
have contributed revenue of $28,533,000 and profit before tax of $1,919,000 to the Group results, before acquisition related expenses. In
determining these amounts, management has assumed that the fair value adjustments that arose on the date of acquisition would have been
the same if the acquisition occurred on 1 July 2016. The values identified in relation to the acquisition are provisional as at 30 June 2017.
The fair value of 482,901 ordinary shares issued to settle part of the consideration was based on the listed share price of the Company
on 30 November 2016 of $3.23 per share.
Acquisition-related expenses
The Group incurred acquisition related costs of $2,497,000 on transaction advisory, legal fees and due diligence costs relating to the Fleet
Hire and Motiva acquisitions. In addition, the Group incurred acquisition related costs of $1,038,000 on transaction advisory, legal fees and
due diligence costs on an unsuccessful acquisition. These costs have been included in other expenses in the Group’s statement of profit
or loss.
60 | SG Fleet Group
Notes to the financial statements continued30 June 2017 Details of the acquisition are as follows:
Cash and cash equivalents
Finance, trade and other receivables
Income tax refund due
Inventories
Prepayments
Lease motor vehicle assets
Property, plant and equipment
Intangible assets
Trade and other payables
Deferred tax liability
Residual risk provision
Lease portfolio borrowings
Deferred income
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Cash paid or payable to vendor
SG Fleet Group Limited shares issued to vendor (note 22)
Cash used to acquire business, net of cash acquired:
Cash paid to vendor
Less: cash and cash equivalents
Net cash used
Fleet Hire
Fair value
$’000
Motiva
Fair value
$’000
Total
Fair value
$’000
1,822
6,814
29
906
612
11,663
454
7,752
(7,235)
(1,198)
(280)
5,179
2,604
94
682
3,457
42,256
112
6,159
(3,816)
(1,461)
(290)
(11,630)
(40,875)
(6,712)
2,997
31,416
34,413
31,313
3,100
34,413
31,313
(1,822)
29,491
(7,554)
6,547
17,363
23,910
22,350
1,560
23,910
22,350
(5,179)
17,171
7,001
9,418
123
1,588
4,069
53,919
566
13,911
(11,051)
(2,659)
(570)
(52,505)
(14,266)
9,544
48,779
58,323
53,663
4,660
58,323
53,663
(7,001)
46,662
None of the goodwill recognised is expected to be deductible for income tax purpose. All trade receivables are expected to be collectable
at the acquisition date.
Comparative period business combinations
On 30 November 2015, the Group acquired 100% of the ordinary shares of nlc Pty Limited and its subsidiaries (‘nlc’) for the total
consideration transferred of $211,335,000. nlc is a specialist manager and provider of novated lease, consumer vehicle finance and vehicle
sourcing services.
Details of the acquisition are as follows:
Representing:
Cash paid or payable to vendor
SG Fleet Group Limited shares issued to vendor
Fair value
$’000
176,755
34,580
211,335
The fair value of 9,100,000 ordinary shares issued to settle part of the consideration was based on the listed share price of the Company
at 30 November 2015 of $3.80 per share.
At 30 June 2016 the acquisition accounting balances were finalised.
Annual Report 2017 | 61
Note 35. 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:
Ownership interest
Principal place of business/
Country of incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
2017
%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
2016
%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
–
–
–
–
–
–
–
–
Name
SG Fleet Solutions Pty Limited
SG Fleet Holdings Pty Limited
SG Fleet Finance Pty Limited
SG Fleet Investments Pty Ltd
SG Fleet Management Pty Limited
SG Fleet Australia Pty Limited
Fleet Care Services Pty Limited
SG Fleet Salary Packaging Pty Limited
Beta Dimensions Pty Limited
SMB Car Sales Pty Limited
NLC Pty Limited
NLC Finance Pty Ltd
NLC Insurance Pty Ltd
Vehicle Insurance Underwriters Pty Ltd
NLC Administration Pty Limited
Kerr Reinehr Group Pty Limited
NLC Services Pty Limited
SG Fleet NZ Limited
SG Fleet UK Limited
SG Fleet UK Holdings Limited
Fleet Hire Holdings Limited
Fleet Hire Limited
Pure Fleet Management Limited
Car Salary Exchange Limited
Motiva Group Limited
Motiva Vehicle Contracts Limited
Mway Vehicle Rentals Limited
Motiva Direct Limited
Motrak Limited
62 | SG Fleet Group
Notes to the financial statements continued30 June 2017 Note 36. Deed of cross guarantee
The following entities are party to a deed of cross guarantee under which each company guarantees the debts of the others:
SG Fleet Group Limited (holding entity)
SMB Car Sales Pty Limited *
SG Fleet Solutions Pty Limited *
SG Fleet Holdings Pty Limited *
SG Fleet Finance Pty Limited *
SG Fleet Investments Pty Ltd *
SG Fleet Management Pty Limited *
SG Fleet Australia Pty Limited *
Fleet Care Services Pty Limited *
SG Fleet Salary Packaging Pty Limited *
Beta Dimensions Pty Limited *
NLC Pty Limited*
NLC Finance Pty Ltd
NLC Insurance Pty Ltd
Vehicle Insurance Underwriters Pty Ltd
NLC Administration Pty Limited*
Kerr Reinehr Group Pty Limited*
NLC Services Pty Limited*
SG Fleet NZ Limited
SG Fleet UK Limited
By entering into the deed, the entities (denoted above by an asterisk (*)) have opted to obtain relief from the requirement to prepare
financial statements and Directors’ report under Corporations Instrument 2016/785 issued by the Australian Securities and Investments
Commission (‘ASIC’).
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 SG Fleet Group 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’.
Statement of profit or loss and other comprehensive income
Revenue
Fleet management costs
Employee benefits expense
Occupancy costs
Depreciation and amortisation
Technology costs
Other expenses
Finance costs
Profit before income tax expense
Income tax expense
Profit after income tax expense
Other comprehensive income
Foreign currency translation difference for foreign operations
Effective portion of changes in fair value of cash flow hedges, net of tax
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
2017
$’000
259,189
(58,838)
(67,812)
(5,406)
(13,126)
(4,213)
(11,551)
(7,754)
90,489
(26,173)
64,316
743
610
1,353
65,669
2016
$’000
211,971
(51,647)
(53,837)
(4,958)
(10,707)
(3,093)
(10,778)
(8,589)
68,362
(21,385)
46,977
(1,514)
(1,157)
(2,671)
44,306
Annual Report 2017 | 63
Note 36. Deed of cross guarantee continued
Equity – retained profits
Retained profits at the beginning of the financial year
Profit after income tax expense
Dividends paid
Retained profits at the end of the financial year
Statement of financial position
Assets
Cash and cash equivalents
Finance, trade and other receivables
Inventories
Income tax refund due
Leased motor vehicle assets
Property, plant and equipment
Intangibles
Total assets
Liabilities
Trade and other payables
Derivative financial instruments
Income tax
Deferred tax
Employee benefits
Residual risk provision
Lease portfolio borrowings
Borrowings
Intercompany borrowings
Vehicle maintenance funds
Deferred income
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits
Total equity
64 | SG Fleet Group
2017
$’000
53,907
64,316
(38,338)
79,885
2016
$’000
34,927
46,977
(27,997)
53,907
2017
$’000
2016
$’000
78,617
68,466
8,056
–
19,555
3,724
397,970
576,388
93,561
2,464
5,123
711
8,018
11,069
12,953
81,693
48,777
5,226
160
16,130
2,828
364,155
518,969
63,460
3,889
–
1,256
7,114
10,213
11,855
128,050
134,750
2,442
54,524
23,475
342,390
233,998
–
58,687
26,522
317,746
201,223
272,008
267,348
(117,895)
(120,032)
79,885
53,907
233,998
201,223
Notes to the financial statements continued30 June 2017 Note 37. Reconciliation of profit after income tax to net cash from operating activities
Profit after income tax expense for the year
Adjustments for:
Depreciation and amortisation
Net gain on sale of non-current assets
Share-based payments
Leased motor vehicles – fair value increments
Net movement in fair value of derivatives
Change in operating assets and liabilities:
Increase in finance, trade and other receivables
Increase in inventories
Decrease/(increase) in income tax refund due
Decrease in deferred tax assets
Increase in prepayments
Increase in trade and other payables
Increase/(decrease) in provision for income tax
Decrease in deferred tax liabilities
Increase in employee benefits
Increase/(decrease) in other provisions
Decrease in deferred income
Net cash from operating activities
Note 38. Earnings per share
Profit after income tax attributable to the owners of SG Fleet Group Limited
Consolidated
2017
$’000
2016
$’000
59,592
46,977
22,563
10,707
(56)
783
(248)
(570)
(17,529)
(4,458)
160
–
(963)
24,886
5,821
(1,283)
904
812
(3,764)
86,650
(44)
952
(74)
2,265
(3,215)
(126)
(160)
14,483
(730)
10,075
(9,758)
(13,229)
804
(2,155)
(420)
56,352
Consolidated
2017
$’000
2016
$’000
59,592
46,977
Number
Number
Weighted average number of ordinary shares used in calculating basic earnings per share
252,759,335 248,012,591
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares
Performance rights over ordinary shares
3,969,069
3,381,165
113,610
–
Weighted average number of ordinary shares used in calculating diluted earnings per share
256,842,014 251,393,756
Basic earnings per share
Diluted earnings per share
Cents
23.58
23.20
Cents
18.94
18.69
Annual Report 2017 | 65
Note 39. Share-based payments
The Group has a share option plan and performance rights to incentivise certain employees and Key Management Personnel.
The share-based payment expense for the year was $783,000 (2016: $952,000).
Share option plan
The share option plan is subject to a service condition and a performance condition. The performance condition is based on the
compound annual growth rate (‘CAGR’) of the Group’s earnings per share.
Set out below are summaries of options granted under the plan:
2017
Grant date
Expiry date
Exercise
price
Balance at
the start of
the year
04/03/2014
13/08/2018
$1.85
8,086,046
8,086,046
Granted
Exercised
–
–
–
–
Expired/
forfeited/
other
–
–
Balance at
the end of
the year
8,086,046
8,086,046
Outstanding options vested and exercisable as at 30 June 2017 Nil (30 June 2016: Nil). The weighted average remaining contractual
life of options outstanding at the end of the financial period was nil year (2016: one years).
Performance rights
The performance rights are subject to a service condition and a performance condition. The performance condition is based on the
compound annual growth rate of the Group’s earnings per share. Rights do not carry a right to receive any dividends. If rights vest and
are exercised to receive shares, these shares will be eligible to receive any dividends.
Set out below are summaries of performance rights granted under the plan:
2017
Grant date
Vesting date
20/03/2017
20/03/2017
30/06/2018
30/06/2019
Exercise
price
$0.00
$0.00
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
–
–
–
142,967
285,993
428,960
–
–
–
–
–
–
142,967
285,993
428,960
None of the performance rights outstanding as at 30 June 2017 are vested and exercisable. The weighted average remaining contractual
life of performance rights outstanding at the end of the financial year was 20 months.
For the performance rights 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
20/03/2017
20/03/2017
Vesting date
30/06/2018
30/06/2019
Share price
at grant date
Exercise
price
Dividend
yield
Fair value
at grant date
$3.29
$3.29
$0.00
$0.00
4.10%
4.10%
$3.120
$3.000
Note 40. Events after the reporting period
Apart from the dividend declared as disclosed in note 24, no other matter or circumstance has arisen since 30 June 2017 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 | SG Fleet Group
Notes to the financial statements continued30 June 2017 Directors’ declaration
In the Directors’ opinion:
• the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations
Regulations 2001 and other mandatory professional reporting requirements;
• the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board as described in note 2 to the financial statements;
• the attached financial statements and notes give a true and fair view of the Group’s financial position as at 30 June 2017 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 36
to the financial statements.
The Directors have been given the declarations required by section 295A of the Corporations Act 2001 from the Chief Executive Officer
and Chief Financial Officer.
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
Andrew Reitzer
Chairman
Robbie Blau
Chief Executive Officer
14 August 2017
Sydney
Annual Report 2017 | 67
Independent auditor’s report
to the members of SG Fleet Group Limited
Independent Auditor’s Report
Independent Auditor’s Report
To the shareholders of SG Fleet Group Limited
To the shareholders of SG Fleet Group Limited
Report on the audit of the Financial Report
Report on the audit of the Financial Report
Opinion
Opinion
We have audited the Financial Report of
SG Fleet Group Limited (the Company).
We have audited the Financial Report of
In our opinion, the accompanying Financial
SG Fleet Group Limited (the Company).
Report of the Company is in accordance
In our opinion, the accompanying Financial
with the Corporations Act 2001, including:
Report of the Company is in accordance
• giving a true and fair view of the
with the Corporations Act 2001, including:
Group’s financial position as at 30
• giving a true and fair view of the
June 2017 and of its financial
Group’s financial position as at 30
performance for the year ended on
June 2017 and of its financial
that date; and
performance for the year ended on
complying with Australian Accounting
that date; and
Standards and the Corporations
complying with Australian Accounting
Regulations 2001.
Standards and the Corporations
Regulations 2001.
•
•
Basis for opinion
The Financial Report comprises:
• consolidated statement of financial position as at 30
The Financial Report comprises:
June 2017;
• consolidated statement of financial position as at 30
• consolidated statement of profit or loss,
• consolidated statement of profit or loss,
June 2017;
consolidated statement of other comprehensive
income, consolidated statement of changes in
consolidated statement of other comprehensive
equity, and consolidated statement of cash flows for
income, consolidated statement of changes in
the year then ended;
equity, and consolidated statement of cash flows for
• notes including a summary of significant accounting
the year then ended;
policies; and
• notes including a summary of significant accounting
• Directors’ Declaration.
policies; and
The Group consists of the Company and the entities it
• Directors’ Declaration.
controlled at the year-end or from time to time during
The Group consists of the Company and the entities it
the financial year.
controlled at the year-end or from time to time during
the financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
Our responsibilities under those standards are further described in the Auditor’s responsibilities for
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
the audit of the Financial Report section of our report.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
the audit of the Financial Report section of our report.
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics
Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.
for Professional Accountants (the Code) that are relevant to our audit of the Financial Report in
Australia. We have fulfilled our other ethical responsibilities in accordance with the Code.
Key Audit Matters
Key Audit Matters
The Key Audit Matters we identified are:
• valuation of goodwill;
The Key Audit Matters we identified are:
•
• valuation of goodwill;
recognition of residual risk provision;
• measurement and recognition of deferred
recognition of residual risk provision;
•
maintenance income; and
• measurement and recognition of deferred
• measurement and recognition of business
maintenance income; and
combinations.
• measurement and recognition of business
combinations.
Key Audit Matters are those matters that, in our
professional judgment, were of most
Key Audit Matters are those matters that, in our
significance in our audit of the Financial Report of
professional judgment, were of most
the current period.
significance in our audit of the Financial Report of
These matters were addressed in the context of
the current period.
our audit of the Financial Report as a whole, and
These matters were addressed in the context of
in forming our opinion thereon, and we do not
our audit of the Financial Report as a whole, and
provide a separate opinion on these matters.
in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
68
68 | SG Fleet Group
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
68
Liability limited by a scheme approved under
Professional Standards Legislation.
Liability limited by a scheme approved under
Professional Standards Legislation.
Valuation of goodwill (AUD $353.5m)
Refer to Note 13 to the Financial Report
The Key Audit Matter
How the matter was addressed in our audit
Valuation of goodwill is a Key Audit Matter due
to:
Working with our corporate finance specialists,
our procedures included:
•
•
the size of the balance (being 53% of total
assets); and
the high level of judgement involved by us in
assessing the inputs into the model
supporting the Group’s annual assessment
for impairment.
We focused on the significant forward-looking
assumptions the Group applied in its value in use
model, including:
•
•
forecast growth rates for the Group’s
underlying cash flows, which can vary based
on a number of factors such as the number
and fleet size of new customer wins, industry
growth projections and inflation expectations.
The Group operates across different
geographies with varying market pressures,
which increases the risk of inaccurate
forecasts; and
the discount rate, which is complicated in
nature and may vary according to the
conditions and environment the specific cash
generating units (CGUs) are subject to from
time to time.
The Group also made significant acquisitions
during the year, including $48.8m of goodwill as
part of those acquisitions. In addition, the Group
continued the process of integrating the nlc
acquisition from November 2015 into the
Australian business. This required the
reconsideration of the Group’s determination of
the Group’s CGUs to which they relate based on
the independence of each asset’s cash inflows
and the impact to management’s monitoring of
the business.
• assessing the approach to the valuation
methodology adopted and the application of
the adopted methodology in calculating value
in use within the goodwill impairment model;
• assessing the integrity of the value in use
model used, including the accuracy of the
underlying calculation formulas;
• assessing the Group’s determination of their
CGUs based on our understanding of the
operations of the Group’s business and the
impacts of the acquisitions during the year
and the integration of the nlc acquisition. We
analysed how independent cash inflows of
the Group were generated against the
requirements of the accounting standards;
• analysing the significant acquisitions during
the year and the Group’s internal reporting to
assess the Group’s monitoring and
management of activities and the
consistency of the allocation of goodwill to
CGUs;
• assessing the Group’s discount rate against
publicly available data for a group of
comparable entities and independently
developing a discount rate range considered
comparable using publicly available market
data for comparable entities, adjusted by risk
factors specific to the Group and the industry
it operates in;
• challenging the Group’s cash flow forecast
and growth assumptions, including those
relating to fleet size and growth assumptions
across different geographies, using our
knowledge of the Group and its industry.
This included comparing the Group’s growth
assumptions to external data, such as
industry growth projections and inflation
expectations across different geographies;
• assessing the accuracy of previous Group
forecasts to inform our evaluation of
forecasts incorporated in the model and how
69
Annual Report 2017 | 69
Independent auditor’s report continued
30 June 2017
they impacted the business, for use in
further testing;
• considering the sensitivity of the model by
varying key assumptions such as discount
rates and forecast growth rates, within a
reasonably possible range, to identify those
assumptions at higher risk and to assess the
presence of indicators of impairment; and
• assessing the disclosures in the Financial
Report using our understanding of the Group
obtained from our testing and against the
requirements of the accounting standards.
Recognition of residual risk provision (AUD $11.6m)
Refer to Note 17 to the Financial Report
The Key Audit Matter
How the matter was addressed in our audit
The recognition of the residual risk provision is
considered to be a Key Audit Matter owing to the
significant audit effort required and the high
degree of judgement applied by us in assessing
the Group’s valuation of the residual value of
their fleet. We focused on gathering evidence on
the completeness of the residual value model
used by the Group to calculate the residual risk
provision.
The Group has entered into agreements with
financiers which requires the transfer of the
asset ownership and the associated residual risk
inherent in operating lease assets from the
financier to the Group at the end of the operating
leases. The determination of the probable
residual risk provision is based on the Group’s
judgement in determining the future shortfalls on
the disposal of these assets once ownership is
transferred to the Group and of market demand
and economic factors, such as inherent volatility
of the asset’s disposal value due to changes in
market conditions between the balance date and
future date at which the assets will be disposed.
A provision is recognised if the forecast sale
proceeds of the asset is less than the residual
value payable to the financiers. This requires us
to use our judgement when considering the
Group’s assessment, as the recoverability of the
assets are subject to a number of factors,
including the condition of the asset at the
Our procedures included:
•
•
•
•
•
testing the key control for the Group’s
residual valuation process which is the
quarterly approval of the residual value
model by senior management and testing
the completeness of inputs in the model;
assessing the accounting treatment of the
Group’s residual risk provision methodology
to the relevant accounting standards;
comparing the market conditions,
environmental factors and macroeconomic
factors underpinning the Group’s
determination of the residual risk provision
against our understanding of the business,
industry and economy;
assessing the Group’s ability to accurately
value assets at the end of the lease term by
comparing the historical residual valuation of
a sample of vehicles to the actual sale
proceeds received from previous disposals
from comparable vehicle classes; and
comparing a sample of the current residual
valuation of the assets against the current
market value of these assets using recent
external auction prices achieved for
comparable assets.
70 | SG Fleet Group
70
transfer of ownership.
Measurement and recognition of deferred maintenance income (AUD $37.0m)
Refer to Note 21 to the Financial Report
The Key Audit Matter
How the matter was addressed in our audit
The periodic payments received from customers
by the Group for maintenance services are
deferred and recognised as revenue when the
associated maintenance costs for the leased
assets have been incurred or can be reasonably
measured using the stage of completion method.
The measurement and recognition of deferred
maintenance income is a Key Audit Matter due to
the audit effort involved in assessing the Group’s
estimation of lifecycle maintenance costs using a
stage of completion method, and the significance
of this to the related timing of recognition and
deferral of revenue.
Our procedures included:
•
•
•
assessing the Group’s revenue recognition
policy in accordance with relevant
accounting standards;
assessing the historical accuracy of the
Group’s estimates of the stage of
completion of the maintenance of the
leased assets by comparing historical
estimates of the stage of completion ratio
of the maintenance of the leased asset
against the actual ratio used in the current
year; and
checking the Group’s calculation of deferred
maintenance income using the estimate of
the stage of completion ratio of
maintenance costs for the prior six months
assessed above.
Measurement and recognition of business combinations (AUD $58.3m)
Refer to Note 34 to the Financial Report
The Key Audit Matter
How the matter was addressed in our audit
The acquisitions of Fleet Hire Holdings Limited
for a consideration of $34.4m and Motiva Group
Limited for a consideration of $23.9m are
considered a Key Audit Matter due to the size of
the acquisitions and the audit complexity arising
from the Group’s estimation process in the
purchase price allocation.
The process involved in accounting for these
acquisitions was complex, requiring the Group to
apply judgement to determine the fair value of
acquired assets and liabilities, in particular
determining the allocation of the purchase
consideration to goodwill and separately
identifiable intangible assets, such as brand
names and customer contracts.
Our procedures included:
• assessing the acquisition against the criteria
of a business combination in the accounting
standards, and establishing the date of
acquisition by reading the key transaction
documents to understand key terms and
conditions;
• working with our corporate finance
specialists, we used our knowledge of the
acquired businesses, and their industry, to
assess their cash flow forecasts used to
determine the value of intangible assets. We
also assessed key assumptions used to
determine the value of intangible assets,
including those relating to growth rates and
71
Annual Report 2017 | 71
Independent auditor’s report continued
30 June 2017
We focused on the following key assumptions in
the Group’s value in use models used to
determine the fair value of intangible assets,
including brand names and customer contracts:
•
forecast revenues including renewal rate and
operating costs;
• growth rate; and
• discount rate.
Our assessment of these assumptions was
complex as the fleet size and types of leases of
the acquired businesses required knowledge and
understanding of the fleet management industry.
We involved corporate finance specialists to
supplement our senior auditors in assessing this
Key Audit Matter.
discount rates. This included comparing the
key assumptions against publicly available
data of a group of comparable entities and
external data such as economic growth
projections and inflation expectations;
• assessing the fair value of other assets and
liabilities recorded in the purchase price
allocation, including leased motor vehicle
assets, by performing procedures including
independently confirming cash balances
acquired and checking lease receivables to
the acquiree’s leasing system reports, on the
closing balance sheets as at respective
acquisition dates; and
• assessing the Group’s disclosures in respect
of business acquisitions with reference to
the accounting standard requirements.
Other Information
Other Information is financial and non-financial information in SG Fleet Group Limited’s annual
reporting which is provided in addition to the Financial Report and the Auditor's Report. The Directors
are responsible for the Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other
Information. In doing so, we consider whether the Other Information is materially inconsistent with
the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
We are required to report if we conclude that there is a material misstatement of this Other
Information, and based on the work we have performed on the Other Information that we obtained
prior to the date of this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
• preparing the Financial Report that gives a true and fair view in accordance with Australian
Accounting Standards, the Corporations Act 2001;
•
implementing necessary internal control to enable the preparation of a Financial Report that gives
a true and fair view and is free from material misstatement, whether due to fraud or error; and
• assessing the Group’s ability to continue as a going concern. This includes disclosing, as
applicable, matters related to going concern and using the going concern basis of accounting
unless they either intend to liquidate the Group or to cease operations, or have no realistic
alternative but to do so.
72 | SG Fleet Group
72
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
•
•
to obtain reasonable assurance about whether the Financial Report as a whole is free from
material misstatement, whether due to fraud or error; and
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it
exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of this Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the
Auditing and Assurance Standards Board website at http://www.auasb.gov.au/auditors_files/ar2.pdf.
This description forms part of our Auditor’s Report.
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration Report of
SG Fleet Group Limited for the year ended
30 June 2017, complies with Section 300A
of the Corporations Act 2001.
The Directors of the Company are responsible for the
preparation and presentation of the Remuneration
Report in accordance with Section 300A of the
Corporations Act 2001.
Our responsibilities
We have audited the Remuneration Report included in
pages 10 to 18 of the Directors’ report for the year
ended 30 June 2017.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
KPMG
Michael O Connell
Partner
Sydney
14 August 2017
73
Annual Report 2017 | 73
Shareholder information
The shareholder information set out below was applicable as at 31 July 2017.
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
Number of holders
of ordinary shares
Number of holders
of options over
ordinary shares
Number of holders of
performance rights
over ordinary shares
317
555
311
415
63
1,661
65
–
–
–
–
9
9
–
–
26
12
13
–
51
–
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Bluefin Investments Limited
J P Morgan Nominees Australia Limited
BNP Paribas Noms Pty Ltd (DRP)
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
Citicorp Nominees Pty Limited
Robert Pinkas Blau
Mutual Trust Pty Ltd
Lanlow Pty Ltd (Matt & Sally Reinehr Fam A/C)
UBS Nominees Pty Ltd
Mr David John Fernandes
Aust Executor Trustees Ltd (DS Capital Growth Fund)
Mr Kevin Victor Wundram
Australian Executor Trustees Limited (No 1 Account)
Invia Custodian Pty Limited (Best Superannuation P/L A/C)
Mulcaster Super Fund Pty Ltd (Mulcaster Super Fund A/C)
RBC Investor Services Australia Nominees Pty Ltd (VFA A/C)
Pacific Custodians Pty Limited (SGF Plans Ctrl A/C)
Annie Margossian-Kenny + Scott Andrew Kenny (KASM Superfund A/C)
Cobragemsuper Pty Ltd (Cobragem Superfund A/C)
74 | SG Fleet Group
Ordinary shares
Number held
132,506,417
17,830,327
16,380,706
13,181,881
10,433,380
9,834,339
6,756,425
4,675,000
4,550,000
1,861,389
1,630,860
1,277,995
1,025,112
1,000,678
895,234
806,225
768,497
669,281
575,005
550,000
% of total
shares issued
52.37
7.05
6.47
5.21
4.12
3.89
2.67
1.85
1.80
0.74
0.64
0.51
0.41
0.40
0.35
0.32
0.30
0.26
0.23
0.22
227,208,751
89.81
Unquoted equity securities
Options over ordinary shares
Performance rights over ordinary shares
Substantial holders
Substantial holders in the Company are set out below:
Bluefin Investments Limited
Pengana Capital Group Limited
Voting rights
The voting rights attached to ordinary shares are set out below:
Number on issue
Number of holders
8,086,046
428,960
9
51
Ordinary shares
Number held
132,506,417
12,842,762
% of total
shares issued
52.37
5.08
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy, attorney or corporate representative shall have one vote
and upon a poll each share shall have one vote.
There are no other classes of equity securities.
Restricted securities
Class
Fully Paid Ordinary Shares
Fully Paid Ordinary Shares
Fully Paid Ordinary Shares
Fully Paid Ordinary Shares
Expiry date
August 2017
February 2018
August 2018
February 2019
Number
of shares
4,928,071
241,450
378,071
241,451
5,789,043
Annual Report 2017 | 75
Corporate directory
Directors
Andrew Reitzer – Independent Non-Executive Chairman
Auditor
KPMG
Robbie Blau – Chief Executive Officer
International Tower 3
Cheryl Bart AO – Independent Non-Executive Director
300 Barangaroo Avenue
Graham Maloney – Independent Non-Executive Director
Sydney NSW 2000
Peter Mountford – Non-Executive Director
Kevin Wundram – Chief Financial Officer
Edwin Jankelowitz – Independent Non-Executive Director
Colin Brown – Alternate Director for Peter Mountford
Company secretary
Kevin Wundram
Stock exchange listing
SG Fleet Group Limited shares are listed on the Australian
Securities Exchange (ASX code: SGF)
Website
www.sgfleet.com
Notice of annual general meeting
The details of the annual general meeting of SG Fleet Group
Limited are:
Corporate Governance Statement
Corporate Governance Statement which is approved at the same
time as the Annual Report can be found at http://investors.sgfleet.
com/Investors/?page=Corporate-Governance-Statement
Albert Room, 2nd Floor
Intercontinental Hotel
117 Macquarie Street
Sydney NSW 2000
3:00 PM on Tuesday 24 October 2017
Registered office and Principal place of business
Level 2, Building 3
Enquiries
investorenquiries@sgfleet.com
20 Bridge Street
Pymble NSW 2073
Telephone: +61 2 9494 1000
Facsimile: +61 2 9391 5656
E-mail: globalenquiries@sgfleet.com
Share register
The Registrar
Computershare Investor Services Pty Ltd
Level 4, 60 Carrington Street, Sydney, NSW 2000
Telephone: 1300 787 272
E-mail: web.queries@computershare.com.au
Website: www.investorcentre.com
76 | SG Fleet Group
S
G
F
l
e
e
t
G
r
o
u
p
L
i
m
i
t
e
d
A
n
n
u
a
l
R
e
p
o
r
t
2
0
1
7
www.sgfleet.com