ANNUAL
REPORT
2018
SG FLEET GROUP LIMITED
ABN 40 167 554 574
Our report
07
06
01
Chief Executive
Chairman’s
Our
Officer’s report
report
numbers
26
Auditor’s
independence
declaration
27
Financial
report
76
Shareholder
information
11
Directors’
report
78
Corporate
directory
Efficiency
About SG Fleet Group
SG Fleet Group Limited is a leading 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 over 140,000
vehicles under management. SG Fleet listed
on the Australian Securities Exchange in
March 2014.
The SG Fleet Group operates under two
brands across corporate and consumer
business segments: sgfleet (operating
in Australia, UK and New Zealand) and
nlc (Australia).
The company has a unique position in the
marketplace, built on the experience and product
expertise of its team. SG Fleet prides itself on
the strength of its relationships with blue chip
corporate and government customers.
These long-term 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
each customer.
An innovative mindset is core to everything
SG Fleet does. The company actively
contributes to the global discussion about
the future of transport and is shaping the
new mobility landscape in cooperation with
all levels of government, as well as leading
corporates. SG Fleet continuously evolves its
highly advanced fleet management capabilities
and flexible mobility solutions, consistently
exceeding its customers’ expectations.
Safety
We provide efficient,
safe and sustainable
mobility solutions to
our customers.
Sustainability
Our numbers
13
locations
Australia 9 – United Kingdom 2
– New Zealand 2
700
staff
32
years of experience
140,000+
vehicles under management
including 25,000 shared vehicles
180,000
resource management
system transactions
320,000
maintenance authorisations
$316.5m
revenue
$67.7m
profit
18.738cps
dividend
01
Annual Report 2018 |
Mobility Services: Entering a New Growth Phase
Corporate and consumer trends towards
Mobility-as-a-Service and the advent of
new technologies are creating growth
and value-add opportunities for SG Fleet.
The need for greater efficiency is driving
organisations to look beyond closed vehicle
pools and the same objective is strengthening
the appeal of leased transport assets to
consumers. In both cases, solutions are
increasingly being outsourced to specialist
providers such as SG Fleet.
Mobility-as-a-Service (MaaS)
integrates various forms of
transport into a mobility solution
that is consumed as a service.
Trends
Demands
Complexity of integrated mobility
management drives outsourcing
Early stage of new technology
adoption is fleet driven
Funding, sourcing, maintenance
and management of shared
(specialised) vehicle fleets
Public shared transport mirrors
closed corporate pool processes
Public multi-modal (open
pool) transport approach
adopted by corporates
Vehicle lease or mobility
contracts mirror utility
service access contracts
Shared transport assets
management expertise
Integrated transport
management expertise
Personal leasing and
mobility products
02
O
p
e
r
a
t
o
r
M
a
n
a
g
e
r
| SG Fleet Group Our Role Is Rapidly Evolving
SG Fleet is the natural owner of the Mobility Operator role and we are well positioned to assume
the Mobility Manager role in the future MaaS environment, bringing together multiple modes
of transport. Both roles are an extension of our core expertise in transport efficiency.
Required expertise
Shared fleet funding, sourcing & deployment
Mobility Fleet Operator
Deploys / manages / (owns) fleet of vehicles
Data management
Vehicle performance/usage optimisation
Efficiency improvement – fleet
Closed pools
Mobility Manager
Enables, administers and processes
cost-effective (multi-modal) transport
Efficiency improvement – mobility
Open pools
Booking and payment integration
Personal mobility products
Integrated vehicle management
Together with our
customers, we analyse
mobility requirements,
build solutions and
manage their operation.
03
Annual Report 2018 | A Comprehensive Product Range Built on SG Fleet’s
Operator and Manager Expertise…
Shared fleet
funding,
sourcing &
deployment
Leasing
Day-to-day fleet
management
Vehicle selection,
acquisition,
disposal (incl. EV)
Data
management
Vehicle
performance
and usage
optimisation
Vehicle
safety
Preventative
maintenance
solutions
Driver training
& safety
Telematics
Fleetintelligence
Multi-source data
collection hubs
Fleet efficiency
improvement
Closed single
mode
Integrated
strategies
Analysis-to-remedy
processes
Green/EV/AV
fleet strategies
Incubating the next generation
Continuous innovation is part of SG Fleet’s unique
culture. In order to further strengthen our position as
a visionary leader in our industry, we have created a
dedicated innovation hub to promote forward thinking
about the future of mobility amongst our staff and to
develop our next generation of products.
04
| SG Fleet Group …For Organisations and Consumers
Bringing our corporate
advantage to consumers
As a large fleet manager, we are able to utilise our corporate
scale advantage for the benefit of consumers. As new models
of car ownership and usage emerge, we source vehicles for
personal use, structure leases, and provide bundled vehicle
management services.
Whatever the transport requirement and ownership choices,
SG Fleet provides individual customers with attractive pricing,
convenience and peace of mind.
Mobility
efficiency
improvement
Open
multi-modal
Booking
& payment
integration
Integrated
mobility
management
Mobility chain
consulting
Bookingintelligence
(vehicle/seat)
Parking, tolls &
infringements
Mobility
payment
cards
Keyless
access
technology
Personal
mobility
products
Personal
operating &
finance leases
Short-term
rentals
Subscription
services
Car share &
ride hailing
partnerships
Integrated
single vehicle
management
Roadside &
accident
Fuel supply
solutions
Maintenance
05
Annual Report 2018 | Chairman’s report
Our strategic objective
is to maintain a stable
and sustainable
growth path for our
core corporate and
consumer businesses
and build additional
layers of growth
by progressively
rolling out the
next generation
of transport and
integrated mobility
solutions.
Andrew Reitzer
Chairman
13 August 2018
Sydney
06
Our focus on innovation and integrating
our various products has been a prominent
element of our culture for some time. The
beneficial impact of this was particularly
evident in our business this year, as a key
feature of our improved performance was
our ability to provide additional products
and services to existing customers
and use our wider offering to win new
contracts. Value-add is also increasingly
created through the consulting expertise
and insights we offer to customers,
particularly in the areas of electric vehicles,
including in the UK and New Zealand, and
integrated mobility. Not surprisingly, this
closer involvement with our customers,
both corporate and government, is
rapidly adding service touchpoints
to our relationships.
SG Fleet’s unique
offering gives us
the ability to create
the new industry
landscape.
This continuous evolution of fleet management
services towards the provision of mobility
solutions is reshaping our industry and we
are further building our leadership in this
new environment. Our evolving products
and services range embeds our customer
relationships and allows us to generate more
sustainable returns. In fact, SG Fleet’s unique
offering gives us the ability to create the new
industry landscape.
I would like to take this opportunity to thank
the Directors of the Company’s Board for
their contribution this year. My thanks also
go to our majority shareholder, Super Group,
for their active endorsement of our strategic
growth objectives. Finally and most
importantly, I thank you, our Shareholders,
for your continued support as we take
your Company into a promising future.
Dear Shareholder
I have the pleasure of presenting you with
the SG Fleet Group Limited Annual Report
for the year ended 30 June 2018.
During the 2018 financial year, your
Company has made continued progress
in all of its operational areas, while at the
same time implementing a significant
integration program for the businesses
acquired in the previous years. In Australia,
we actively addressed some headwinds in
the first half to produce a stronger second
period, helped by additional customer wins
and our growing products and services
range. The integration of the combined
UK business made an immediate and
positive impact on its competitive position
and as the economic climate in the UK
gradually improved, we were successful
in expanding our footprint, both in terms
of our offering and geographically. In
New Zealand, the good performance of
previous years continued, with our local
business further strengthening its already
enviable relationships with government and
blue chip corporates.
The resulting outcome for you, our
Shareholders, has been another year of
good profit growth and the ability to once
again increase our dividend payment to
you. Your Board has declared a fully franked
final dividend of 9.958 cents per share.
This brings the total dividend for the 2018
financial year to 18.738 cents per share,
a notable increment on the 16.801 cents
per share paid in the previous year. The
Company’s Dividend Reinvestment Plan will
be activated for the final dividend payment.
To ensure we can progress further,
we actively explore opportunities to
improve our internal processes as well
as how we deliver for our customers.
With the integration activity now nearing
its completion, we have embarked on
a group-wide efficiency drive, aimed
at optimising our operational rhythm.
Greater efficiency will put us in a stronger
position to bring an ever-expanding range
of products and services to market
and provide an even better customer
experience. Our strategic objective is to
maintain a stable and sustainable growth
path for our core corporate and consumer
businesses and build additional layers of
growth by progressively rolling out the
next generation of transport and integrated
mobility solutions.
| SG Fleet Group Chairman’s report
Chief Executive Officer’s report
The main theme of
the year has been
the continued growth
in the products and
services we provide
to our customers.
Robbie Blau
Chief Executive Officer
13 August 2018
Sydney
Dear Shareholder
I am pleased to report on SG Fleet Group
Limited’s financial performance for the year
ended 30 June 2018.
My review of this financial year will refer for
comparison to the financial figures for the
year ended 30 June 2017. Detailed financial
data can be found in the full annual report.
Successful addressing of
early headwinds results in
stronger full year performance
In the 2018 financial year, the SG Fleet
Group successfully addressed a number of
challenges encountered towards the end of
the first half to deliver a better performance
in the second period and continued
revenue and profit growth for the full year.
The overall business performed well, with
good contributions from the acquisitions
made in the UK in the previous year, as
well as from our New Zealand operations.
The main theme of the year has been the
continued growth in the products and
services we provide to our customers,
within a vehicle pool that has seen
limited progress.
Total revenue for the 2018 financial
year was $316.5 million, up 7.9% on
the previous corresponding period.
Total expenses increased by 8.4% to
$220.2 million. This was largely driven
by an increase in fleet management costs,
linked to the growth in accessory and
short-term rental income, as well as higher
depreciation and amortisation as a result
of further growth in average on-balance
sheet lease assets. Reported net profit after
tax increased by 13.6% to $67.7 million.
The Group’s profit result equates to a
reported earnings per share of 26.38 cents,
up 11.9% on the prior year.
As observed earlier, this performance
exceeded the growth in vehicle numbers,
to 147,703, thanks to the stronger
penetration of additional products and
services, which grew 9.5% in revenue
terms, to $104.2 million. A greater
contribution from the end of lease income
revenue line, up 65.4% to $17.7 million,
also contributed to this positive outcome.
Management and maintenance income
growth was modest, at 0.9%, and in
line with the growth in vehicle numbers.
Funding commissions declined slightly,
by 2.3% to $54.8 million, predominantly
reflecting a significant increase in inertia
and extensions, which impacted margins.
Rental income increased by 24.0%, again
reflecting the higher number of on-balance
sheet and inertia vehicles, as well as an
increase in short-term rental income, as
noted earlier. Finally, the smaller other
income revenue line declined by 11.1%
to $4.0 million, reflecting lesser interest
income as average cash balances during
the year were lower than in the previous
corresponding period.
Operating environment
improves
The Australian economic climate improved
towards the end of the first half, and
conditions remained above average for
the rest of the period. Reflecting a lag in
the retail industry overall, private car sales
were down when compared to the 2017
financial period, and this decline was more
pointed towards period end. Our larger
states of NSW and Victoria in particular
saw notable declines in private new car
sales. As SG Fleet’s novated business is
predominantly active in the private sector
employer segment, we are somewhat
sensitive to consumer purchasing
behaviour such as private car sales.
Our own industry environment has
remained competitive, although we did not
see specific competitors adopt particularly
aggressive tactics. Overall, the industry
continued to benefit from a steady stream
of new opportunities, as longstanding
trends towards outsourcing showed no
sign of slowing down. While a number of
regulatory reviews impacted pricing in some
product areas in the first half, no significant
developments regarding our immediate
regulatory environment occurred later in the
year. Nevertheless, we continue to monitor
the situation and ensure we are in a position
to respond to any changes.
The industry
continued to benefit
from a steady stream
of new opportunities,
as longstanding trends
towards outsourcing
showed no sign of
slowing down.
07
Annual Report 2018 | Chief Executive Officer’s report continued
Strengthening relationships
and product penetration in
the Corporate business
Helped by the more positive mood in
corporate Australia, our tool-of-trade
business continued to see a constant
stream of new opportunities. We generated
increased traction for our technology-based
solutions and other add-ons with both
corporate and government customers,
in particular for car share services, driver
safety programs, telematics, and our
Bookingintelligence resource management
solution. Late in the reported period, we
also had a very promising response to our
new Chain of Responsibility management
product, Inspect365, which we have now
begun to commercialise.
Customers generally increased their
overall spend on our services to access
the cost savings we generate on their
behalf. This has allowed us to grow overall
profit independently of vehicle numbers
growth, as noted earlier. Some of the
growth in extensions that held back vehicle
growth was attributable to the end of local
vehicle manufacturing, which led some
customers with ‘buy local’ fleet policies
to delay replacements while they decided
what imported vehicles are fit for purpose.
We expect to see this backlog clear
progressively. The strengthening of our
relationship with key customers has been
a feature throughout the year and for a
number of them, we were able to formally
extend existing agreements. While in May,
we reported the loss of the WA Government
contract, overall we were successful in
further extending our market share in
the Corporate business. The contract in
question only represented about half a
percent of our revenue.
As was the case in the 2017 financial year,
the heavy commercial segment again
proved challenging in terms of winning
contracts at reasonable returns, particularly
late in the first period, and its profit
contribution declined from the previous
corresponding period. However, this
behaviour abated somewhat, benefiting the
business’ performance in the second half.
Accessories sales support
Consumer business
performance
The Australian Consumer business
had good success in signing up new
employers, across both the sgfleet and
nlc brands, in the process growing the
total pool of employees eligible for novated
leases. Conversion of eligible employees
into novated drivers continued to be
challenging, with subdued consumer
sentiment a factor in lease take-up, as
noted above. Encouragingly, the sale of
accessories to novated drivers remained
buoyant, helped by the improved
management of our product mix. The
full range of vehicle accessories is now
available through the nlc channel and
we have seen very strong conversion of
accessory sale opportunities across both
brands. The business also rolled out car
buying and disposal services to both
individual drivers and the wider employee
base of our customers. We continue to
explore lead-generation opportunities to
feed into this wider consumer offering.
The lowering of commissions on extended
warranty products, in line with regulatory
reviews, impacted performance in the
novated segment. This particular product
accounts for a small percentage of our
revenue. We monitored these reviews
and took on board the concerns of the
regulator. Margins are now at a new,
sustainable baseline.
The full range of
vehicle accessories
is now available
through the nlc
channel and we
have seen very
strong conversion
of accessory sale
opportunities across
both brands.
Integration of the nlc business neared its
completion during the year and it is now
functioning on a fully integrated basis.
The adoption of common corporate sales,
relationship management and marketing
team methodologies across both channels
is yielding a consistent and improved
customer experience as well as greater
productivity. We have continued to share
best practice processes across brands
and this is driving greater sales volumes
and value. Only a portion of the IT system
migration remains and we will complete the
remaining two phases within the current
financial year.
Promising outlook for key
growth areas in UK
The economic climate in the UK saw some
improvement during the year and that was
reflected in an uptick in interest in both tool-
of-trade, particularly light commercials, and
salary packaging services. Another area
that has seen increased interest is personal
contract hire. We actively targeted these
areas throughout the period. In the light
commercial contract hire space, we actively
deployed Motiva’s longstanding expertise
across the combined customer book, with
good success. In addition to promoting
personal leasing products to individual
consumers, we also launched van-based
schemes into the owner/driver segment via
franchise and trade association affiliations.
Similar schemes have been launched into
other specialised segments.
In the salary packaging segment, activity
continued to recover following the Autumn
2016 statement. This recovery was
initially slower than expected due to the
UK Government’s delay in clarifying its
stance on schemes. Clear and definitive
guidance has since been given on the
matter, providing absolute certainty that
cars continue to be a cost effective benefit
of employment in the UK.
As in previous periods, we continued to
build out our customer book, breaking
into a number of new industry sectors
and locations with some sole supply wins,
both in tool-of-trade and salary packaging.
The SME segment, which accounts for a
very significant part of the UK economy,
in particular holds great promise for
further growth.
08
| SG Fleet Group Low emission vehicles continued to be
a hot topic in the UK, and we shared our
expertise in this area with local businesses
and government departments. We are
currently working with a major national
utility company to raise awareness and
promote electric vehicles, providing us
with a good opportunity to benefit from
their strong brand presence and get our
own brand in front of a wider audience.
Integration of the Fleet Hire and Motiva
businesses progressed rapidly throughout
the year. The operational and support
teams were integrated, as were all
operational processes. On the marketing
front, we have successfully rolled out the
sgfleet branding across the Fleet Hire and
Motiva businesses. The Motiva system
migration is on track for completion in the
current half year period. Restructuring and
integration costs were almost fully borne in
the first half of 2018.
The SME segment,
which accounts for
a very significant part
of the UK economy,
holds great promise
for future growth.
Strong New Zealand
reputation spreads
The New Zealand economy has seen a
relatively lengthy period of strong growth.
In our industry, this positive mood was
reflected in healthy tender activity, providing
continued opportunities. As is the case in
Australia, we saw a trend towards higher
value-add solutions in this market. Given
our positioning as a specialised provider to
blue chip companies, this is a development
that suits us well. Demand for management
services for electric fleets, as well as for
telematics and driver safety applications
is growing steadily. We have been able
to position ourselves as a leader in these
areas and intend to build on that.
The business had wins in multiple sectors
and further developed its reach within
government on the back of our previous
achievements in that segment, including
amongst key entities such as the Transport
Ministry, the Defence Force, and KiwiRail.
We continue to be recognised for the quality
of our products and services and our strong
competitive position was reflected in our
activity in panel accounts, where we won
more than our fair share of orders.
Improved operating rhythm
through greater efficiency
During the year, we embarked on
a group-wide efficiency drive to further
simplify, automate and digitise our
processes. The nearing completion of our
integration activities allows us to upgrade
these processes across the entire Group.
We have also been able to extract best
practice learnings from each of our
businesses and apply these elsewhere.
Many of our operational processes
constitute a significant workload and cost
for the business at the back end, and they
often shape the quality of the customer
experience. Offering our customers an
enhanced experience is a major factor
in customer retention.
Our efficiency program is a major, ground-
breaking effort across the business,
which will look at key components of our
operations at a fundamental level. It is an
opportunity for SG Fleet to improve its
operating rhythm, make progress across
multiple efficiency measures and optimise
how we deliver for our customers.
Entering a new growth phase
The 2018 financial year was a period of
many achievements. We successfully
integrated a number of businesses while
maintaining focus on the performance
of our ongoing operations. We acted
decisively to address some challenges in
the first half and, in addition to achieving
our objectives for the second half, we were
able to partially offset the impact of these
early headwinds.
The 2018 financial
year was a period of
many achievements.
Our Australian Corporate business has
further strengthened key relationships
going into the 2019 financial year, while
the Consumer business continued to
grow its customer target pool, which
bodes well for the future. In the UK,
we are seeing a promising outlook in a
number of product areas and this will be
conducive to continued expansion. Finally,
in New Zealand, progress is continuing at
a healthy rate.
Growth in the current financial year will
come primarily from ongoing activities,
supplemented by further product and
services expansion, which we expect to
accelerate in future years as we bring our
mobility services solutions to market. Both
add growth layers to our existing activities,
as will any acquisitions.
SG Fleet is only at the very beginning of
these additional growth phases. Many
of the products we have already brought
to market are only in the early stages
of adoption, although that adoption is
accelerating. Effectively, there is a very
extensive range of solutions we can and
will roll out over the next few years and, as
we have demonstrated this year, adding
revenue generators and continued greater
customer penetration are powerful drivers
of profitability. Innovation remains a key
driver in this process and to enhance that
focus, we have established a dedicated
innovation hub within the Group. This is
very much a natural progression of our
current model.
Our financial health remains strong and
we can readily fund new strategic initiatives,
both organically and inorganically. We
have the strong support of our majority
shareholder, Super Group, and when
corporate activity re-emerges, we intend
to be an active participant in it.
Innovation remains
a key driver and to
enhance that focus,
we have established a
dedicated innovation
hub within the Group.
My sincere thanks go to my Executive
and all my colleagues across the Group.
Their tireless efforts during the year have
further strengthened the Company. We
are entering an exciting growth phase and
with the support of you, our Shareholders,
we will continue to build our leadership
position, create growth and generate
healthy, sustainable returns.
09
Annual Report 2018 | 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
26
27
28
29
30
31
32
69
70
76
78
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 2018.
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:
Final dividend for the year ended 30 June 2017 of 9.265 cents per ordinary share paid
on 17 October 2017 (2017: 7.63 cents)
Interim dividend for the year ended 30 June 2018 of 8.78 cents per share paid
on 19 April 2018 (2017: 7.536 cents)
Consolidated
2018
$’000
2017
$’000
23,844
19,269
22,596
46,440
19,069
38,338
On 13 August 2018, the Directors declared a fully franked final dividend for the year ended 30 June 2018 of 9.958 cents per ordinary
shares, to be paid on 16 October 2018 to eligible shareholders on the register as at 25 September 2018. This equates to a total
estimated distribution of $25,628,000, based on the number of ordinary shares on issue as at 30 June 2018. The financial effect
of dividends declared after the reporting date are not reflected in the 30 June 2018 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 $67,675,000 (30 June 2017: $59,592,000).
The fleet size of the Group as at 30 June 2018 was 147,703 (30 June 2017: 146,357).
Refer to Chairman’s report and Chief Executive Officer’s report for further commentary on the review of operations.
11
Annual Report 2018 | Significant changes in the state of affairs
There were no significant changes in the state of affairs of the
Group during the financial year.
Matters subsequent to the end
of the financial year
Apart from the dividend declared as discussed above, no other
matter or circumstance has arisen since 30 June 2018 that has
significantly affected, or may significantly affect the Group’s
operations, the results of those operations, or the Group’s state
of affairs in future financial years.
Likely developments and expected results
of operations
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.
Information on Directors
Andrew Reitzer
Independent Non-Executive Director and Chairman
Qualifications:
Bachelor of Commerce and a Master of Business Leadership
from the University of South Africa
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)
and Non-executive Chairman of ARQ Group Limited (ASX: ARQ).
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
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:
6,892,245 ordinary shares in the Company
Interests in options:
781,756 options over ordinary shares in the Company
Interests in rights:
67,980 performance rights over ordinary shares in the Company
Cheryl Bart AO
Independent Non-Executive Director
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
Directors’ report| SG Fleet Group Other current directorships:
Audio Pixels Holdings Limited (ASX: AKP), ME Bank, Football
Federation Australia (FFA), Invictus Games Sydney 2018, The
Prince’s Trust Australia 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.
He is also the Chair of Connective Group, a leading mortgage
aggregation business, and of Spitfire, a start-up technology
group providing asset management and investment trading
platforms. 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), Bluefin Investments Limited
(Mauritius – Unlisted)
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 2018 | 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:
687,347 ordinary shares in the Company
Interests in options:
279,199 options over ordinary shares in the Company
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 – Unlisted)
Former directorships (last 3 years):
None
Special responsibilities:
Alternative director and member of the Audit, Risk
and Compliance Committee for Peter Mountford
Interests in rights:
24,279 performance rights over ordinary shares in the Company
Interests in shares:
108,108 ordinary shares in the Company.
‘Other current directorships’ set out above are current
directorships for listed entities only and exclude 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 exclude directorships of all other types of entities, unless
otherwise stated.
Company secretary
Edelvine Rigato (B.A., Grad Dip ACG, FGIA, FCIS, MAICD)
was appointed company secretary on 11 September 2017.
Edelvine has over 10 years’ experience in company secretarial
practice with publicly listed and private companies. Prior to
joining SG Fleet Group, Edelvine was the company secretary
of Melbourne IT Group (now ARQ Group Limited) and assistant
company secretary at Ardent Leisure Group.
The previous company secretary was Kevin Wundram (appointed
on 3 November 2016 and resigned on 11 September 2017).
14
Directors’ report| SG Fleet Group Meetings of Directors
The number of meetings of the Company’s Board of Directors (‘the Board’) and of each Board committee held during the year ended
30 June 2018, and the number of meetings attended by each Director were:
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
6
6
6
6
6
5
6
6
6
6
6
6
6
6
–
–
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 2018 | 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
$200,004
$117,502
$120,000
$117,502
$110,002
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.
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.
An individual performance gateway applies in relation to the
award of the STI. For an executive to receive payment under
the STI program, their performance must be assessed as being
fully satisfactory. This includes their individual contribution
to the Group’s organisational culture and demonstrating and
upholding the shared values that underpin the Group purpose
and ambition.
STI payments are granted to executives based on specific
financial targets and an appraisal of the executive’s performance
and key performance indicators (KPI’s). At the beginning of
each year the NRC sets the growth target for the business
units and for the Group as a whole for the purpose of the STI.
A minimum profit growth gateway of 60% of the target growth
rate applies in order for an executive to be entitled to the
financial component of the STI.
The growth achieved for the year, and the achievement against
the performance conditions for the purpose of the STI is
determined by the Board in its absolute discretion, having regard
to any matters that it considers relevant and the Board has a
discretion to adjust the earnings measures used for this purpose
for the impact of non-recurring or significant transactions.
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
and performance rights (‘LTI Instruments’). The number of LTI
Instruments granted is based on a fixed percentage of the relevant
Participant’s TFR and is issued to the Participant at no cost.
LTI Instruments granted to KMP vest over two and three year
periods (the ‘Performance Period’), subject to the satisfaction
of performance conditions.
The executive remuneration and reward framework has
four components:
The LTI Instruments issued for the FY2018 LTI offer have been
split into two Tranches:
• base salary and non-monetary benefits;
• short-term performance incentives;
• share-based payments; and
• other remuneration, such as superannuation and
long service leave.
The combination of these comprise the executive’s total
remuneration.
• 1/3 of the Rights have been allocated to Tranche 1 which
will be assessed over the two year Performance Period of
1 July 2017 to 30 June 2019. If the performance condition
is met, vesting occurs in August 2019; and
• 2/3 of the Rights have been allocated to Tranche 2 which
will be assessed over the three year Performance Period of
1 July 2017 to 30 June 2020. If the performance condition
is met, vesting occurs in August 2020.
16
Directors’ report| SG Fleet Group The performance conditions for the LTI Instruments 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.
For the FY2018 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 6%
6% (Threshold performance)
Between 6% and 14%
Nil
60%
Straight-line pro-rata vesting between 60% and 100%
14% or above (Stretch performance)
100%
Any LTI Instruments that remain unvested at the end of the
Performance Period will lapse immediately. The Participant
is entitled to receive one share for each right that vests. The
Participant is entitled to receive one share for each option that
vests and is exercised. The Participant must exercise any vested
options within 3 years of vesting. After 3 years, any unexercised
options will lapse. 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 Board may
determine to implement a cashless exercise arrangement under
which, in lieu of paying cash, the Board may permit a participant
to pay the exercise price by forfeiting some of the vested options
or forgoing some of the shares that would otherwise be allocated
to the participant on exercise.
The LTI Instruments 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
LTI Instruments automatically lapse unless the Board determines
otherwise. In other circumstances, the LTI Instruments will
remain on issue with a broad discretion for the Board to vest or
lapse some or all of the LTI Instruments. The Board will ordinarily
lapse LTI Instruments 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 LTI
Instruments and the Board will notify the Participant of the
date on which any vested but unexercised options will expire.
Where only some of the LTI Instruments are vested on a change
of control event, the remainder of the LTI Instruments will
immediately lapse.
The EIP also provides flexibility for the Group to grant, subject
to the terms of individual offers, restricted shares.
Group performance and link to remuneration
The financial performance measure driving the financial component
of the STI payment outcomes for Executive Directors for the year
ended 30 June 2018 is determined on a straight-line basis, based
on the Group achieving EPS growth of between 7.8% and 12.9%
over the previous financial year. In terms of the minimum profit
growth gateway, no award of the financial component of the STI is
made if the Group’s EPS growth is less than 7.8% over the previous
financial year. STI payments granted to other KMP’s are based on
a combination of the Group EPS Targets as set out above, and
specific divisional growth targets. 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 2018 was 26.38 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
2017 Annual General Meeting (‘AGM’)
At the 2017 AGM, the shareholders voted to approve the
adoption of the remuneration report for the year ended
30 June 2017. 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
• Geoff Tipene – Managing Director, New Zealand
• Graham Hale – Managing Director, United Kingdom
(appointed as KMP on 1 November 2017)
• David Fernandes – Managing Director, United Kingdom
(ceased as KMP on 31 October 2017)
• Matthew Reinehr – Managing Director, nlc (Retail)
(resigned on 30 November 2017)
17
Annual Report 2018 | 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
$
2018
Non-Executive Directors:
Andrew Reitzer (Chairman)
Cheryl Bart AO
Graham Maloney
Peter Mountford
Edwin Jankelowitz
Executive Directors:
Robbie Blau (CEO)
Kevin Wundram (CFO)
182,652
107,308
120,000
117,502
100,458
–
–
–
–
–
999,951
489,951
581,250
262,500
Other Key Management Personnel:
Andy Mulcaster
Geoff Tipene*
Graham Hale * **
David Fernandes*
Matthew Reinehr***
383,381
231,342
162,607
61,589
91,515
200,191
132,063
81,461
–
–
–
–
–
–
–
–
–
–
24,945
13,357
–
–
17,352
10,194
–
–
9,544
20,049
20,049
19,785
6,940
13,009
8,772
9,986
Total
$
200,004
117,502
120,000
117,502
110,002
–
–
–
–
–
–
–
–
–
–
18,854
9,286
263,879
1,883,983
94,242
876,028
10,141
–
–
8,411
–
59,640
34,674
59,201
–
–
673,138
429,964
329,635
78,772
101,501
3,048,256
1,257,465
38,302
135,680
46,692
511,636
5,038,031
* Total remuneration in local currency paid to Geoff Tipene amounts to NZ$464,976. Total remuneration in local currency paid to Graham Hale amounts to £189,205.
Total remuneration in local currency paid to David Fernandes was £45,214 for the period 1 July 2017 until 31 October 2017 when he ceased to be a KMP
** Represents remuneration from date of appointment as KMP for Graham Hale on 1 November 2017
*** Represents remuneration until the date the executive ceased to be a KMP on 30 November 2017
Colin Brown (Alternate Director) received no remuneration during the year ended 30 June 2018.
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
Geoff Tipene*
David Fernandes*
Matthew Reinehr
366,905
223,815
253,035
262,741
194,848
126,250
136,520
111,367
–
–
–
–
–
–
–
–
23,213
9,984
–
17,350
10,190
–
–
9,540
19,616
19,616
30,136
10,502
24,038
19,520
Total
$
200,000
117,500
120,000
117,500
110,000
–
–
–
–
–
–
–
–
–
–
142,910
57,767
236,308
2,012,989
96,923
914,538
17,891
–
2,156
16,324
70,707
29,131
52,498
–
680,487
412,911
478,231
409,952
3,200,803
1,456,985
33,197
160,508
237,048
485,567
5,574,108
* Total remuneration in local currency paid to David Fernandes and Geoff Tipene was £283,705 and NZ$436,603 respectively
Colin Brown (Alternate Director) received no remuneration during the year ended 30 June 2017.
18
Directors’ report| SG Fleet Group 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
Geoff Tipene
Graham Hale
David Fernandes
Matthew Reinehr
Fixed remuneration
At risk – STI
At risk – LTI
2018
2017
2018
2017
2018
2017
55%
59%
61%
61%
57%
100%
100%
57%
61%
61%
62%
–
60%
73%
31%
30%
30%
31%
25%
–
–
31%
28%
29%
31%
–
29%
27%
14%
11%
9%
8%
18%
–
–
12%
11%
10%
7%
–
11%
–
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
Graham Hale
David Fernandes
Matthew Reinehr
Cash bonus paid/payable
Cash bonus forfeited
2018
2017
2018
2017
52%
63%
75%
82%
68%
80%
–
100%
100%
100%
100%
–
100%
100%
48%
37%
25%
18%
32%
20%
–
–
–
–
–
–
–
–
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 $1,020,000 per annum, which includes base salary, statutory superannuation contributions
and any salary sacrifice arrangements
• Participate in the STI with a maximum STI opportunity of 98% of TFR
Kevin Wundram – CFO
• TFR of $510,000 per annum, which includes base salary, statutory superannuation contributions and any salary sacrifice arrangements
• Participate in the STI with a maximum STI opportunity of 70% of TFR
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
• 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 56% of TFR
19
Annual Report 2018 | Terms of STI payments:
STI payments are granted to Executive Directors based on specific financial targets and an appraisal of the executive’s performance
and key performance indicators (KPI’s). The financial performance measure driving the financial component of the STI payment
outcomes for Executive Directors for the year ended 30 June 2018 is determined on a straight-line basis, based on the Group
achieving EPS growth of between 7.8% and 12.9% over the previous financial year. STI payments granted to other KMP are based
on a combination of the Group EPS growth targets as set out above, and specific divisional growth targets.
The growth achieved for the year, and the achievement against the performance conditions for the purpose of the STI is determined
by the Board in its absolute discretion, having regard to any matters that it considers relevant and the Board has a discretion to adjust
the earnings measures used for this purpose for the impact of non-recurring or significant transactions.
The STI determined annually for each of the above KMP is subject to a 12 month payment deferral in equity in respect of 25% of 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
3,427,250 shares were issued to Directors and other key management personnel during the year ended 30 June 2018 (2017: Nil)
as a result of the exercise of options as part of compensation.
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
25 October 2017
25 October 2017
Vesting date and
exercisable date
Expiry date
Exercise price
Fair value per option
at grant date
14 August 2017
13 August 2018
20 August 2019
19 August 2022
18 August 2020
17 August 2023
$1.85
$3.66
$3.66
$0.252
$1.050
$1.080
Options granted carry no dividend or voting rights and can be exercised only once the vesting conditions have been met until their
expiry date.
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.
The number of options over ordinary shares granted to and vested in Directors and other KMP as part of compensation during the
financial year ended 30 June 2018 is set out below:
Number of
options granted
during the year
2018
Number of
options granted
during the year
2017
Number of
options vested
during the year
2018
Number of
options vested
during the year
2017
781,756
279,199
176,686
102,724
123,725
–
–
–
–
–
3,047,619
1,250,000
911,890
375,695
677,063
–
–
–
–
–
Name
Robbie Blau
Kevin Wundram
Andy Mulcaster
Geoff Tipene
David Fernandes
20
Directors’ report| SG Fleet Group Performance rights
The terms and conditions of each grant of performance rights over ordinary shares affecting remuneration of Directors and other key
management personnel in this financial year or future reporting years are as follows:
Grant date
25 October 2017
25 October 2017
Vesting date
Fair value
per right at
grant date
20 August 2019
18 August 2020
$3.880
$3.700
Performance rights granted carry no dividend or voting rights and will vest when the performance conditions have been met.
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.
The number of performance rights over ordinary shares granted to and vested in Directors and other key management personnel as
part of compensation during the year ended 30 June 2018 are set out below:
Name
Robbie Blau
Kevin Wundram
Andy Mulcaster
Geoff Tipene
David Fernandes
Number
of rights
granted
during the
year
2018
Number
of rights
granted
during the
year
2017
Number
of rights
vested
during the
year
2018
Number
of rights
vested
during the
year
2017
67,980
24,279
15,364
8,933
10,759
–
–
–
–
–
–
–
–
–
–
Additional information
The earnings of the Group for the five years to 30 June 2018 are summarised below:
Revenue
Profit after income tax
Dividends paid
2018
$’000
2017
$’000
2016
$’000
2015
$’000
316,466
293,225
211,971
171,377
67,675
46,440
59,592
38,338
46,977
27,997
40,482
21,175
The factors that are considered to affect total shareholders return (‘TSR’) are summarised below:
Share price at financial year end ($)
Basic earnings per share (cents per share)
2018
3.70
26.38
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
21
Annual Report 2018 | 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:
Balance at
the start of
the year
Received
as part of
remuneration*
Additions
Disposals/
other
Balance at
the end of
the year
Ordinary shares
Andrew Reitzer
Cheryl Bart AO
Graham Maloney
Peter Mountford
Edwin Jankelowitz
Colin Brown
Robbie Blau
Kevin Wundram
Andy Mulcaster
Geoff Tipene
Graham Hale
David Fernandes**
Matthew Reinehr**
81,081
27,032
27,027
540,540
20,000
108,108
–
–
–
–
–
–
6,756,425
1,675,820
1,025,112
830,860
687,347
501,429
26,000
190,352
219,097
–
1,630,860
372,302
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
81,081
27,032
27,027
540,540
20,000
108,108
(1,540,000)
6,892,245
(1,025,112)
687,347
(806,255)
526,034
(190,352)
–
(2,003,162)
26,000
219,097
–
–
9,225,000
–
4,180
(9,229,180)
20,517,142
3,427,250
4,180
(14,794,061)
9,154,511
* Represents shares issued on exercise of options as disclosed below
** Disposal/others represents shares held when the executive ceased to be a KMP
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:
Balance at
the start of
the year
Granted
Exercised*
Expired/
forfeited/
other
Balance at
the end of
the year
Options over ordinary shares
Robbie Blau
Kevin Wundram
Andy Mulcaster
Geoff Tipene
David Fernandes**
3,047,619
781,756
(3,047,619)
1,250,000
279,199
(1,250,000)
911,890
375,695
677,063
176,686
(911,890)
102,724
(375,695)
123,725
(677,063)
(123,725)
–
–
–
–
781,756
279,199
176,686
102,724
–
* 3,427,250 shares were issued in relation to the exercise of the 6,262,267 options referred to above
** Disposal/others represents options held when the executive ceased to be a KMP
6,262,267
1,464,090
(6,262,267)
(123,725)
1,340,365
22
Directors’ report| SG Fleet Group Performance rights holding
The number of performance rights 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:
Performance rights over ordinary shares
Robbie Blau
Kevin Wundram
Andy Mulcaster
Geoff Tipene
Graham Hale
David Fernandes*
Balance at
the start of
the year
–
–
–
–
43,002
–
43,002
Granted
Vested
Expired/
forfeited/
other
Balance at
the end of
the year
67,980
24,279
15,364
8,933
–
10,759
127,315
–
–
–
–
–
–
–
–
–
–
–
–
(10,759)
(10,759)
67,980
24,279
15,364
8,933
43,002
–
159,558
* Disposal/others represents performance rights held when the executive ceased to be a KMP
Use of remuneration consultants
During the financial year ended 30 June 2018, the Group did not engage any remuneration consultants.
This concludes the remuneration report, which has been audited.
Shares under option
Unissued ordinary shares of SG Fleet Group Limited under option at the date of this report are as follows:
Grant date
04/03/2014
25/10/2017
25/10/2017
Expiry date
13/08/2018
19/08/2022
17/08/2023
Exercise
price
Number
under option
$1.85
$3.66
$3.66
187,005
638,913
1,219,077
2,044,995
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
25/10/2017
25/10/2017
Vesting date
14/08/2018
20/08/2019
20/08/2019
18/08/2020
Number
under rights
142,967
285,993
52,453
109,115
590,528
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.
23
Annual Report 2018 | Shares issued on the exercise of options
The following ordinary shares of SG Fleet Group Limited were issued during the year ended 30 June 2018 and up to the date of this
report on the exercise of options granted:
Date options granted
4 March 2014
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 2018 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.
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.
Exercise
price
Number of
shares issued
$0.00
4,327,277
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 29 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 29 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.
Officers of the Company who are former
partners of KPMG
There are no officers of the Company who are former partners
of KPMG.
24
Directors’ report| SG Fleet Group Rounding of amounts
The Company is of a kind referred to in Corporations Instrument
2016/191, issued by the Australian Securities and Investments
Commission, relating to ‘rounding-off’. Amounts in this report
have been rounded off in accordance with that Corporations
Instrument to the nearest thousand dollars, or in certain cases,
the nearest dollar.
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
13 August 2018
Sydney
25
Annual Report 2018 | 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 2018 there have been:
i.
ii.
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG Michael O Connell
Partner
Sydney
13 August 2018
PAR_SIG_01
PAR_NAM_01
PAR_POS_01
PAR_DAT_01
PAR_CIT_01
23
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.
26
| SG Fleet Group
Statement of profit or loss
For the year ended 30 June 2018
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
2018
$’000
2017
$’000
5
316,466
293,225
(84,112)
(75,724)
(6,129)
(28,631)
(5,633)
(10,420)
(9,537)
96,280
(77,540)
(73,589)
(5,976)
(22,563)
(4,633)
(12,685)
(9,767)
86,472
(28,605)
(26,880)
67,675
59,592
Cents
26.38
26.34
Cents
23.58
23.20
6
6
7
39
39
27
Annual Report 2018 | Statement of other comprehensive income
For the year ended 30 June 2018
Profit after income tax expense for the year attributable to the owners
of SG Fleet Group Limited
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
Consolidated
2018
$’000
2017
$’000
67,675
59,592
1,563
476
2,039
69,714
(1,743)
610
(1,133)
58,459
The above statement of other comprehensive income should be read in conjunction with the accompanying notes
28
| SG Fleet Group Statement of financial position
As at 30 June 2018
Assets
Cash and cash equivalents
Finance, trade and other receivables
Inventories
Prepayments
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
2018
$’000
2017
$’000
8
9
10
11
12
13
14
15
16
7
7
17
18
19
20
21
22
23
24
103,275
76,675
9,413
12,098
63,861
3,970
420,816
690,108
83,923
67,594
11,272
13,162
64,818
4,231
420,492
665,492
139,155
103,099
1,419
2,674
5,158
8,058
10,510
55,289
2,464
5,698
2,836
8,018
11,595
55,328
134,329
158,119
44,716
37,530
438,838
251,270
54,524
37,024
438,705
226,787
273,999
272,008
(119,125)
(120,382)
96,396
75,161
251,270
226,787
The above statement of financial position should be read in conjunction with the accompanying notes
29
Annual Report 2018 | Statement of changes in equity
For the year ended 30 June 2018
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 23)
Share-based payments (note 40)
Dividends paid (note 25)
Balance at 30 June 2017
Consolidated
Balance at 1 July 2017
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 23)
Share-based payments (note 40)
Dividends paid (note 25)
Balance at 30 June 2018
Issued
capital
$’000
Reserves
$’000
267,348
(120,032)
–
–
–
4,660
–
–
–
(1,133)
(1,133)
–
783
–
272,008
(120,382)
Retained
profits
$’000
53,907
59,592
–
59,592
–
–
(38,338)
75,161
Total equity
$’000
201,223
59,592
(1,133)
58,459
4,660
783
(38,338)
226,787
Issued
capital
$’000
Reserves
$’000
Retained
profits
$’000
Total equity
$’000
272,008
(120,382)
–
–
–
1,991
–
–
–
2,039
2,039
(1,991)
1,209
–
273,999
(119,125)
75,161
67,675
–
67,675
–
–
(46,440)
96,396
226,787
67,675
2,039
69,714
–
1,209
(46,440)
251,270
The above statement of changes in equity should be read in conjunction with the accompanying notes
30
| SG Fleet Group Statement of cash flows
For the year ended 30 June 2018
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 financing activities
Net increase 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
8
103,275
The above statement of cash flows should be read in conjunction with the accompanying notes
Consolidated
Note
2018
$’000
2017
$’000
344,619
304,537
(191,390)
(186,787)
1,309
(9,896)
(29,679)
114,963
–
21,278
(35,798)
(1,445)
(6,190)
51
1,423
(10,337)
(22,186)
86,650
(46,662)
19,146
(27,394)
(2,260)
(3,148)
115
(22,104)
(60,203)
62,862
(90,141)
(46,440)
(73,719)
19,140
83,923
212
38
12
12
13
14
25
78,967
(64,010)
(38,338)
(23,381)
3,066
81,693
(836)
83,923
31
Annual Report 2018 | Parent entity information
In accordance with the Corporations Act 2001, these financial
statements present the results of the Group only. Supplementary
information about the parent entity is disclosed in note 34.
Principles of consolidation
The consolidated financial statements incorporate the assets
and liabilities of all subsidiaries of SG Fleet Group Limited as
at 30 June 2018 and the results of all subsidiaries for the year
then ended.
Subsidiaries are all those entities over which the Group has
control 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.
Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by
the Group.
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.
Foreign currency translation
The financial statements are presented in Australian
Dollars, which is SG Fleet Group Limited’s functional and
presentation currency.
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 13 August 2018. The Directors
have the power to amend and reissue the financial statements.
Note 2. Significant accounting policies
The principal accounting policies adopted in the preparation of
the financial statements are set out below. These policies have
been consistently applied to all the 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’).
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.
32
| SG Fleet GroupNotes to the financial statements30 June 2018 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.
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.
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.
Rental income
Rental income from operating leases is recognised in profit
or loss on a straight line basis over the lease term.
Other income
Other income is recognised when it is received or when the
right to receive payment is established.
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.
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.
33
Annual Report 2018 | Note 2. Significant accounting policies
continued
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. Trade
receivables are generally due for settlement within 30 days.
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.
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.
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
five years
Office equipment and furniture
three to eight years
Motor vehicles
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.
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.
34
| SG Fleet GroupNotes to the financial statements30 June 2018 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.
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.
35
Annual Report 2018 | Note 2. Significant accounting policies
continued
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.
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.
36
| SG Fleet GroupNotes to the financial statements30 June 2018 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 at 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.
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.
37
Annual Report 2018 | Note 2. Significant accounting policies
continued
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.
Comparative figures
Comparatives in the statement of financial position have been
realigned to the current period presentation. There has been
no effect on the profit for the year. In the previous year, the
Group presented prepayments within ‘finance, trade and other
receivables’. For clearer presentation, the Group has changed
the disclosure to present prepayments as a separate line item
in its statement of financial position.
Rounding of amounts
The Company is of a kind referred to in Corporations Instrument
2016/191, issued by the Australian Securities and Investments
Commission, relating to ‘rounding-off’. Amounts in this report
have been rounded off in accordance with that Corporations
Instrument to the nearest thousand dollars, or in certain cases,
the nearest dollar.
New Accounting Standards and Interpretations
not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that
have recently been issued or amended but are not yet
mandatory, have not been early adopted by the Group for the
annual reporting period ended 30 June 2018. The Group’s
assessment of the impact of these new or amended Accounting
Standards and Interpretations, most relevant to the Group,
are set out below.
AASB 9 Financial Instruments
This standard is applicable to annual reporting periods
beginning on or after 1 January 2018, with the Group adopting
this standard from 1 July 2018. The standard replaces all
previous versions of AASB 9 and completes the project to
replace AASB 139/IAS 39 ‘Financial Instruments: Recognition
and Measurement’.
AASB 9 introduces new classification and measurement
models for financial assets. A financial asset shall be measured
at amortised cost, if it is held within a business model whose
objective is to hold assets in order to collect contractual cash
flows, which arise on specified dates and solely principal and
interest. All other financial instrument assets are to be classified
and measured at fair value through profit or loss unless the
Group makes an irrevocable election on initial recognition to
present gains and losses on equity instruments (that are not
held-for-trading) in other comprehensive income (‘OCI’). The
standard eliminates the existing AASB 139 categories held to
maturity, loans and receivables and available-for-sale financial
assets. For financial liabilities, the standard requires the portion
of the change in fair value that relates to the entity’s own
credit risk to be presented in OCI (unless it would create an
accounting mismatch).
Based on management’s assessment, the new classification
requirements will not have a material impact on its accounting
of trade receivables, loans, investments in debt securities
measured at amortised cost and investments in equity securities
that are measured on a fair value basis. Also, there will be no
material impact regarding the classification of financial liabilities.
New impairment requirements will use a forward looking
‘expected credit loss’ (‘ECL’) model to recognise an allowance,
replacing the ‘incurred loss’ model of AASB 139. Impairment
will be measured under a 12-month ECL method unless the
credit risk on a financial instrument has increased significantly
since initial recognition in which case the lifetime ECL method
is adopted. Management has estimated the ECL using a
methodology based on actual credit loss experience over the
past five years, segmented based on geographic region and
then adjusted by factors to reflect the Group’s view of economic
conditions over the expected lives of receivables. Based on
this methodology, management has estimated the impact as at
1 July 2018 will result in additional impairment of $246,000 with
a corresponding decrease in deferred tax liability of $49,000
and a decrease in retained earnings of $197,000.
The Group will take advantage of the exemption allowing it not to
restate comparative information for prior periods with respect to
classification and measurement (including impairment) changes.
New simpler hedge accounting requirements are intended
to more closely align the accounting treatment with the risk
management activities of the Group. When initially applying the
standard, the Group may choose as its accounting policy to
continue to apply the hedge accounting requirements of AASB
139 instead of the requirements in AASB 9. The Group has
elected to adopt AASB 9 for hedge accounting prospectively,
therefore there will be no financial impact with the adoption of
AASB 9 on hedge accounting.
The standard requires extensive new disclosures in particular
about hedge accounting, credit risk and ECLs. Management’s
assessment included an analysis to identify data gaps
against current processes and is currently in the process
of implementing changes that it believes will be necessary
to capture the required data.
AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods
beginning on or after 1 January 2018, with the Group adopting
this standard from 1 July 2018. The standard provides a
single standard for revenue recognition. The core principle of
the standard is that an entity will recognise revenue to depict
the transfer of promised goods or services to customers in
an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services.
The standard will require: contracts (either written, verbal or
implied) to be identified, together with the separate performance
obligations within the contract; determine the transaction price,
adjusted for the time value of money excluding credit risk;
allocation of the transaction price to the separate performance
obligations on a basis of relative stand-alone selling price of each
distinct good or service, or estimation approach if no distinct
observable prices exist; and recognition of revenue when each
performance obligation is satisfied. Credit risk will be presented
separately as an expense rather than adjusted to revenue.
38
| SG Fleet GroupNotes to the financial statements30 June 2018 For goods, the performance obligation would be satisfied
when the customer obtains control of the goods. For services,
the performance obligation is satisfied when the service has
been provided, typically for promises to transfer services to
customers. For performance obligations satisfied over time,
an entity would select an appropriate measure of progress
to determine how much revenue should be recognised
as the performance obligation is satisfied. Contracts with
customers will be presented in an entity’s statement of
financial position as a contract liability, a contract asset, or
a receivable, depending on the relationship between the
entity’s performance and the customer’s payment. Sufficient
quantitative and qualitative disclosure is required to enable
users to understand the contracts with customers; the significant
judgments made in applying the guidance to those contracts;
and any assets recognised from the costs to obtain or fulfil a
contract with a customer.
Management’s assessment of the new standard on the various
revenue streams are as follows:
• Management and maintenance income: No significant impact;
• Additional products and services: There is no significant
impact on the majority of this revenue stream. However:
(i) upfront establishment fees previously recognised as
revenue when lease contracts were executed, will be required
to be recognised over the performance obligation being
over the term of the contract; and (ii) revenue related to the
waiver of the lessee’s wear and tear obligations previously
recognised over the term of the contract, will be required to
be recognised over the performance obligation, being at the
end of the lease term. The estimated impact as at 1 July 2018
would be the recognition of contract liabilities of (i) $916,000
and (ii) $228,000, with a decrease in deferred tax liability of
$343,000 and a corresponding decrease in retained earnings
of $801,000;
• Funding commissions: No significant impact;
• End of lease income: The Group will be required to gross
up the end of lease income as revenue and show the
corresponding expense for the related fleet management
costs. There will be no overall impact on profit or loss nor
retained earnings; however, had the Group applied the
standard for the year ended 30 June 2018, revenue would
have increased by $198,300,000 with a corresponding
increase in expense;
• Rental income: No significant impact; and
• Other income: No significant impact.
The Group plans to use the cumulative effect method on the
date of initial application (1 July 2018) which will not require the
standard to be applied to the comparative period presented.
AASB 16 Leases
This standard is applicable to annual reporting periods
beginning on or after 1 January 2019, with the Group electing
to early adopt this standard from 1 July 2018. The standard
replaces AASB 117 ‘Leases’ and for lessees will eliminate the
classifications of operating leases and finance leases. Subject
to certain exceptions, a ‘right-of-use’ asset will be capitalised
in the statement of financial position, measured at the present
value of the unavoidable future lease payments to be made
over the lease term.
The exceptions relate to short-term leases of 12 months or less
and leases of low-value assets (such as personal computers
and small office furniture) where an accounting policy choice
exists whereby either a ‘right-of-use’ asset is recognised or lease
payments are expensed to profit or loss as incurred. A liability
corresponding to the capitalised lease will also be recognised,
adjusted for lease prepayments, lease incentives received, initial
direct costs incurred and an estimate of any future restoration,
removal or dismantling costs. Straight-line operating lease
expense recognition will be replaced with a depreciation
charge for the leased asset (included in operating costs) and
an interest expense on the recognised lease liability (included in
finance costs). In the earlier periods of the lease, the expenses
associated with the lease under AASB 16 will be higher when
compared to lease expenses under AASB 117. For classification
within the statement of cash flows, the lease payments will be
separated into both a principal (financing activities) and interest
(either operating or financing activities) component. For lessor
accounting, the standard does not substantially change how
a lessor accounts for leases.
Management have completed an initial assessment of the
potential impact on the Group’s financial statements. The actual
impact will depend on future economic conditions, including:
(i) the Group’s borrowing rate at date of initial adoption;
(ii) whether the Group will apply the full retrospective approach
or the modified retrospective approach with the available
optional practical expedients at date of initial application;
(iii) the composition of the Groups lease portfolio; and (iv) the
Group’s latest assessment of whether it will exercise any lease
renewal option.
The impact of adoption of this standard as at 1 July 2018,
using the modified retrospective approach, applying a single
discount rate to portfolio of leases with reasonable similar
characteristics and the use of hindsight in determining the
lease term that contain options will result in the recognition
of a right-of-use asset of $11,135,000 with a corresponding
increase in lease liability, in respect of the Group’s operating
leases over premises, equipment and fleet vehicles based on the
Group’s non-cancellable operating lease held at 30 June 2018,
refer to note 32. Management does not expect the changes to
significantly affect the overall cashflow nor expenses and net
profit. The estimated impact in year of adoption is an increase
in expenses of $452,000; however, the costs will be recognised
in different classifications (interest, depreciation and liability
reduction). No significant impact is expected for the Groups
finance leases.
Estimated impact on retained earnings due to the
adoption of AASB 9, AASB 15 and AASB 16:
Retained
earnings
$’000
Reported retained earnings as at 30 June 2018
96,396
Estimated adjustment on adoption of AASB 9
Estimated adjustment on adoption of AASB 15
Adjusted retained earnings opening balance as at
1 July 2018
(197)
(801)
95,398
39
Annual Report 2018 | Note 2. Significant accounting policies
continued
IASB revised Conceptual Framework for
Financial Reporting
The revised Conceptual Framework has been issued by the
IASB, but the Australian equivalent is yet to be published.
The revised framework is applicable for annual reporting periods
beginning on or after 1 January 2020 and the application of
the new definition and recognition criteria may result in future
amendments to several accounting standards. Furthermore,
where the Group has relied on the conceptual framework in
determining its accounting policies for transactions, events or
conditions that are not otherwise dealt with under Australian
Accounting Standards, the Group may need to revisit such
policies. The Group will apply the revised conceptual framework
from 1 July 2020 and is yet to assess its impact.
Note 3. Critical accounting judgements,
estimates and assumptions
The preparation of the financial statements requires management
to make judgements, estimates and assumptions that affect
the reported amounts in the financial statements. Management
continually evaluates its judgements and estimates in relation to
assets, liabilities, contingent liabilities, revenue and expenses.
Management bases its judgements, estimates and assumptions
on historical experience and on other various factors, including
expectations of future events, management believes to be
reasonable under the circumstances. The resulting accounting
judgements and estimates will seldom equal the related actual
results. The judgements, estimates and assumptions that have
a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities (refer to the respective notes)
within the next financial year are discussed below.
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.
Income tax
The Group is subject to income taxes in the jurisdictions in which
it operates. Significant judgement is required in determining
the provision for income tax. There are many transactions and
calculations undertaken during the ordinary course of business
for which the ultimate tax determination is uncertain. The Group
recognises liabilities for anticipated tax audit issues based on
the Group’s current understanding of the tax law. Where the
final tax outcome of these matters is different from the carrying
amounts, such differences will impact the current and deferred
tax provisions in the period in which such determination is made.
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.
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.
40
| SG Fleet GroupNotes to the financial statements30 June 2018 Operating segment information
Consolidated – 2018
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 – 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
Australia
$’000
New
Zealand
$’000
United
Kingdom
$’000
Corporate
$’000
Total
$’000
247,312
1,294
248,606
110,024
(10,776)
(6,590)
92,658
7,258
60,587
5
7,263
3,787
10
60,597
21,761
(2,625)
(15,230)
(404)
758
(2,543)
3,988
536,012
19,782
134,314
324,803
15,949
98,086
–
–
–
315,157
1,309
316,466
(1,124)
134,448
–
–
(1,124)
–
–
(28,631)
(9,537)
96,280
(28,605)
67,675
690,108
690,108
438,838
438,838
New
Zealand
$’000
United
Kingdom
$’000
Corporate
$’000
Total
$’000
Australia
$’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
41
Annual Report 2018 | 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
42
Consolidated
2018
$’000
2017
$’000
93,340
104,216
54,805
17,690
42,436
2,670
92,526
95,209
56,134
10,733
34,167
3,033
315,157
291,802
1,309
1,423
316,466
293,225
Consolidated
2018
$’000
2017
$’000
44
1,504
108
17,895
19,551
780
5,746
2,554
9,080
55
1,196
98
12,995
14,344
780
5,458
1,981
8,219
28,631
22,563
7,372
2,536
(16)
(355)
9,537
7,865
2,483
(11)
(570)
9,767
6,342
5,896
5,082
4,979
| SG Fleet GroupNotes to the financial statements30 June 2018 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 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
2018
$’000
2017
$’000
26,610
1,995
28,605
28,163
(1,283)
26,880
1,995
(1,283)
96,280
28,884
86,472
25,942
102
384
138
832
29,370
26,912
–
(453)
(312)
162
(209)
15
28,605
26,880
Consolidated
2018
$’000
2017
$’000
210
245
14,161
2,691
17,262
3,520
The above potential tax benefit for tax losses and temporary differences, relating to United Kingdom (2017: United Kingdom and
New Zealand), has not been recognised in the statement of financial position.
43
Annual Report 2018 | Note 7. Income tax continued
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
Assessed loss
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 to equity
Additions through business combinations
Exchange differences
Closing balance
Provision for income tax
Provision for income tax
Amount expected to be settled within 12 months
44
Consolidated
2018
$’000
2017
$’000
1,852
2,067
13,470
(2,415)
(1,785)
(2,996)
(51)
(3,602)
(393)
(402)
(587)
5,158
–
5,158
5,158
2,836
1,995
210
–
117
5,158
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
Consolidated
2018
$’000
2017
$’000
2,674
2,674
5,698
5,698
| SG Fleet GroupNotes to the financial statements30 June 2018
Note 8. Cash and cash equivalents
Cash at bank
Secured deposits
Amount expected to be recovered within 12 months
Consolidated
2018
$’000
72,475
30,800
103,275
103,275
2017
$’000
52,669
31,254
83,923
83,923
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
Trade receivables
Less: Provision for impairment of receivables
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
Exchange difference in foreign subsidiary
Receivables written off during the year as uncollectable
Closing balance
Impairment of receivables are charged (or credited) to other expenses in profit or loss.
Consolidated
2018
$’000
76,856
(244)
76,612
63
76,675
76,675
2017
$’000
67,807
(213)
67,594
–
67,594
67,594
Consolidated
2018
$’000
2017
$’000
213
73
–
3
(45)
244
68
111
258
–
(224)
213
45
Annual Report 2018 | Note 9. Finance, trade and other receivables continued
Past due but not impaired
Customers with balances past due but without provision for impairment of receivables amount to $2,236,000 as at 30 June 2018
($1,978,000 as at 30 June 2017).
The ageing of the past due but not impaired receivables are as follows:
Consolidated
2018
$’000
2017
$’000
2,236
1,978
Consolidated
2018
$’000
9,413
9,413
2017
$’000
11,272
11,272
Consolidated
2018
$’000
12,098
12,098
2017
$’000
13,162
13,162
Consolidated
2018
$’000
94,559
(30,134)
(564)
63,861
4,779
59,082
63,861
2017
$’000
93,617
(27,926)
(873)
64,818
3,580
61,238
64,818
Within one year overdue
Note 10. Inventories
End-of-term operating lease assets held for disposal
Amount expected to be recovered within 12 months
Note 11. Prepayments
Prepayments
Amount expected to be recovered within 12 months
Note 12. 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
46
| SG Fleet GroupNotes to the financial statements30 June 2018 Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2016
Additions
Additions through business combinations
Disposals
Revaluation increments
Exchange differences
Depreciation expense
Balance at 30 June 2017
Additions
Disposals
Revaluation increments
Exchange differences
Depreciation expense
Balance at 30 June 2018
Note 13. 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
Leased
assets
$’000
16,130
27,394
53,919
(19,146)
248
(732)
(12,995)
64,818
35,798
(21,278)
344
2,074
(17,895)
63,861
Consolidated
2018
$’000
621
(578)
43
7,831
(4,194)
3,637
523
(233)
290
3,970
3,970
2017
$’000
649
(565)
84
7,746
(3,987)
3,759
537
(149)
388
4,231
4,231
47
Annual Report 2018 | Note 13. Property, plant and equipment continued
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2016
Additions
Additions through business combinations
Disposal
Exchange differences
Depreciation expense
Balance at 30 June 2017
Additions
Disposals
Exchange differences
Depreciation expense
Balance at 30 June 2018
Note 14. Intangibles
Goodwill – at cost
Brand name – at cost
Less: Accumulated amortisation
Customer contracts – at cost
Less: Accumulated amortisation
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
10
–
134
–
(5)
(55)
84
–
–
3
(44)
43
2,677
2,042
240
–
(4)
(1,196)
3,759
1,401
(29)
10
(1,504)
3,637
141
218
192
(59)
(6)
(98)
388
44
(35)
1
(108)
290
Total
$’000
2,828
2,260
566
(59)
(15)
(1,349)
4,231
1,445
(64)
14
(1,656)
3,970
Consolidated
2018
$’000
2017
$’000
356,096
353,528
7,800
(2,015)
5,785
59,509
(14,919)
44,590
21,517
(7,172)
14,345
420,816
420,816
7,800
(1,235)
6,565
58,785
(9,085)
49,700
15,308
(4,609)
10,699
420,492
420,492
48
| SG Fleet GroupNotes to the financial statements30 June 2018 Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2016
Additions
Additions through business combinations
Exchange differences
Amortisation expense
Balance at 30 June 2017
Additions
Exchange differences
Amortisation expense
Balance at 30 June 2018
Goodwill
$’000
Brand
name
$’000
Customer
contracts
$’000
Software
$’000
305,771
7,345
41,706
–
48,779
(1,022)
–
353,528
–
2,568
–
356,096
–
–
–
(780)
6,565
–
–
(780)
5,785
–
13,712
(260)
(5,458)
49,700
–
636
(5,746)
44,590
9,333
3,148
199
–
(1,981)
10,699
6,190
10
(2,554)
14,345
Total
$’000
364,155
3,148
62,690
(1,282)
(8,219)
420,492
6,190
3,214
(9,080)
420,816
Goodwill acquired through business combinations have been allocated to the following cash-generating units (‘CGUs’):
Australian CGU
United Kingdom CGU
Total
Consolidated
2018
$’000
2017
$’000
305,771
305,771
50,325
47,757
356,096
353,528
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% (2017: 0%) for both CGUs;
• Revenue growth was projected at 5.4% (2017: 6.4%) per annum for the Australian CGU and 4.8% (2017: 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 9.93% (2017: 10.44%) was used for the Australian CGU and 6.83% (2017: 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.
49
Annual Report 2018 | Note 15. Trade and other payables
Trade payables
Accrued expenses
Amount expected to be settled within 12 months
Refer to note 26 for further information on financial instruments.
Consolidated
2018
$’000
129,079
10,076
139,155
139,155
2017
$’000
91,981
11,118
103,099
103,099
Trade payables include residual values payable to financiers, which are secured by the underlying operating lease asset, cash lock-up
of $25,317,000 (2017: $25,218,000) and bank guarantees.
Note 16. Derivative financial instruments
Interest rate swap contracts
Amount expected to be settled after more than 12 months
Refer to note 26 for further information on financial instruments.
Refer to note 27 for further information on fair value measurement.
Note 17. 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
Note 18. Residual risk provision
Residual risk
Amount expected to be settled within 12 months
Amount expected to be settled after more than 12 months
50
Consolidated
2018
$’000
1,419
1,419
2017
$’000
2,464
2,464
Consolidated
2018
$’000
3,698
4,360
8,058
7,286
772
8,058
2017
$’000
3,523
4,495
8,018
7,053
965
8,018
Consolidated
2018
$’000
10,510
5,156
5,354
10,510
2017
$’000
11,595
7,083
4,512
11,595
| SG Fleet GroupNotes to the financial statements30 June 2018 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 – 2018
Carrying amount at the start of the year
Provision utilised
Exchange differences
Unused amounts reversed
Carrying amount at the end of the year
Note 19. Lease portfolio borrowings
Lease portfolio borrowings
Amount expected to be settled within 12 months
Amount expected to be settled after more than 12 months
Residual
risk
$’000
11,595
(117)
35
(1,003)
10,510
Consolidated
2018
$’000
55,289
28,914
26,375
55,289
2017
$’000
55,328
26,898
28,430
55,328
Refer to note 26 for further information on financial instruments.
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.
Note 20. Borrowings
Bank loans
Amount expected to be settled within 12 months
Amount expected to be settled after more than 12 months
Refer to note 26 for further information on financial instruments.
Consolidated
2018
$’000
134,329
26,992
2017
$’000
158,119
25,179
107,337
132,940
134,329
158,119
51
Annual Report 2018 | Note 20. Borrowings continued
Total secured liabilities
The total secured liabilities are as follows:
Bank loans
Lease portfolio borrowings (note 19)
Assets pledged as security
Assets pledged as security for borrowings are:
Consolidated
2018
$’000
134,329
55,289
2017
$’000
158,119
55,328
189,618
213,447
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 per quarter for the
next five quarters and a bullet payment of $79,564,000 on maturity being 17 November 2019.
UK corporate borrowings
UK corporate borrowings comprise facilities totalling £15,275,000. The facilities are repayable in instalments of £625,000 per quarter
followed by a bullet payment of £12,150,000 on maturity being 17 November 2019.
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Consolidated
2018
$’000
2017
$’000
181,582
120,960
190,192
113,450
302,542
303,642
151,867
168,495
55,289
55,328
207,156
223,823
29,715
65,671
95,386
21,697
58,122
79,819
Total facilities
Corporate borrowings
Lease portfolio borrowings (note 19)
Used at the reporting date
Corporate borrowings
Lease portfolio borrowings (note 19)
Unused at the reporting date
Corporate borrowings
Lease portfolio borrowings (note 19)
52
| SG Fleet GroupNotes to the financial statements30 June 2018 Note 21. 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 22. Deferred income
Deferred income
Amount expected to be settled within 12 months
Amount expected to be settled after more than 12 months
Note 23. Issued capital
Consolidated
2018
$’000
44,716
14,909
29,807
44,716
2017
$’000
54,524
21,946
32,578
54,524
Consolidated
2018
$’000
37,530
21,859
15,671
37,530
2017
$’000
37,024
20,018
17,006
37,024
Ordinary shares – fully paid
257,358,146 253,030,869
273,999
272,008
Consolidated
2018
Shares
2017
Shares
2018
$’000
2017
$’000
Movements in ordinary share capital
Details
Balance
Date
Shares
Issue price
$’000
1 July 2016
251,791,826
Shares issued on acquisition of Fleet Hire Holdings Limited, UK
4 August 2016
Shares issued on acquisition of Motiva Group Limited, UK
30 November 2016
756,142
482,901
Balance
Shares issued on exercise of options
Shares issued on exercise of options
30 June 2017 253,030,869
22 August 2017
190,352
11 September 2017
4,136,925
Transfer from share based payment reserve on exercise of options
–
Balance
30 June 2018
257,358,146
$4.10
$3.23
$0.00
$0.00
$0.00
267,348
3,100
1,560
272,008
–
–
1,991
273,999
53
Annual Report 2018 | Note 23. Issued capital continued
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 2017 Annual Report.
Note 24. Reserves
Foreign currency reserve
Hedging reserve – cash flow hedges
Share-based payments reserve
Capital reserve
Consolidated
2018
$’000
(1,301)
(78)
1,412
2017
$’000
(2,864)
(554)
2,194
(119,158)
(119,158)
(119,125)
(120,382)
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.
54
| SG Fleet GroupNotes to the financial statements30 June 2018 Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2016
Foreign currency translation
Movement in hedges – gross
Deferred tax
Share-based payments
Balance at 30 June 2017
Foreign currency translation
Share-based payments
Movement in hedges – gross
Deferred tax
Transfer to share capital
Balance at 30 June 2018
Foreign
currency
$’000
Cash flow
hedge
$’000
Share-based
payments
$’000
Capital
$’000
Total
$’000
(1,121)
(1,743)
–
–
–
(2,864)
1,563
–
–
–
–
(1,301)
(1,164)
1,411
(119,158)
(120,032)
–
855
(245)
–
(554)
–
–
686
(210)
–
(78)
–
–
–
783
2,194
–
1,209
–
–
(1,991)
1,412
–
–
–
–
(1,743)
855
(245)
783
(119,158)
(120,382)
–
–
–
–
–
1,563
1,209
686
(210)
(1,991)
(119,158)
(119,125)
Note 25. Dividends
Dividends
Dividends paid during the financial year were as follows:
Final dividend for the year ended 30 June 2017 of 9.265 cents per ordinary share paid
on 17 October 2017 (2017: 7.63 cents)
Interim dividend for the year ended 30 June 2018 of 8.78 cents per share paid
on 19 April 2018 (2017: 7.536 cents)
Consolidated
2018
$’000
2017
$’000
23,844
19,269
22,596
46,440
19,069
38,338
On 13 August 2018, the Directors declared a fully franked final dividend for the year ended 30 June 2018 of 9.958 cents per ordinary
shares, to be paid on 16 October 2018 to eligible shareholders on the register as at 25 September 2018. This equates to a total
estimated distribution of $25,628,000, based on the number of ordinary shares on issue as at 30 June 2018. The financial effect
of dividends declared after the reporting date are not reflected in the 30 June 2018 financial statements and will be recognised in
subsequent financial reports.
55
Annual Report 2018 |
Note 25. Dividends continued
Franking credits
Consolidated
2018
$’000
2017
$’000
Franking credits available for subsequent financial years based on a tax rate of 30%
45,599
38,181
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 26. 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.
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.
56
| SG Fleet GroupNotes to the financial statements30 June 2018 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
2018
Balance
$’000
2017
Balance
$’000
(55,767)
(68,307)
(5,705)
72,475
30,800
41,803
(81)
52,669
31,254
15,535
An official increase/decrease in interest rates of 50 (2017: 50) basis points would have a favourable/adverse effect on profit before tax
and equity of $209,000 (2017: $78,000) 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 2018 of $88,407,000 (2017:
$98,349,000). The interest rate swap contract hedges the Group’s risk against an increase in variable interest rate. However, hedge
accounting is not applied. The contracts mature in 2019-2020 financial year. Weighted average fixed rate is 3.19% (2017: 3.13%).
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 borrowings (note 19)
Consolidated
2018
$’000
29,715
65,671
95,386
2017
$’000
21,697
58,122
79,819
57
Annual Report 2018 | Note 26. Financial instruments continued
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 – 2018
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 inflow
Total derivatives
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
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
129,079
–
17,324
5,827
15,220
24,508
40,673
–
69,164
18,454
191,958
128,291
–
–
1,419
1,419
–
–
–
–
9,110
9,110
–
–
–
–
–
–
–
–
–
–
129,079
57,997
5,827
84,384
52,072
329,359
1,419
1,419
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
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above.
58
| SG Fleet GroupNotes to the financial statements30 June 2018 Note 27. Fair value measurement
Fair value hierarchy
The following tables detail the Group’s assets and liabilities, measured or disclosed at fair value, using a three level hierarchy, based
on the lowest level of input that is significant to the entire fair value measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3: Unobservable inputs for the asset or liability.
Consolidated – 2018
Liabilities
Derivative financial instruments – Interest rate swap contracts
Total liabilities
Consolidated – 2017
Liabilities
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
–
–
1,419
1,419
–
–
Level 1
$’000
Level 2
$’000
Level 3
$’000
1,419
1,419
Total
$’000
2,464
2,464
Derivative financial instruments – Interest rate swap contracts
Total liabilities
–
–
2,464
2,464
–
–
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 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 28. 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:
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
Consolidated
2018
$
2017
$
4,344,023
4,690,985
135,680
46,692
160,508
237,048
511,636
485,567
5,038,031
5,574,108
59
Annual Report 2018 | Note 29. 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 30. Commitments – operating lease receivable
Committed at the reporting date, receivable:
Within one year
One to five years
Consolidated
2018
$
2017
$
499,408
543,373
118,419
29,064
147,483
89,524
752,679
842,203
646,891
1,385,576
Consolidated
2018
$’000
2017
$’000
20,931
18,840
39,771
15,372
14,822
30,194
Future minimum rentals receivable includes contracted amounts for motor vehicles under non-cancellable operating leases between
one and five years.
Note 31. 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 $10,510,000 (2017: $11,595,000) has been recognised as a residual value provision and an amount of $564,000
(2017: $873,000) 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.
60
| SG Fleet GroupNotes to the financial statements30 June 2018 Note 32. 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
2018
$’000
2017
$’000
4,576
6,622
841
3,473
5,599
–
12,039
9,072
–
632
Operating lease commitments includes contracted amounts for office accommodation and office equipment under non-cancellable
operating leases expiring within one to ten 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 33. 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 36.
Key management personnel
Disclosures relating to key management personnel are set out in note 28 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.
61
Annual Report 2018 | Note 34. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
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
2018
$’000
(787)
(787)
2017
$’000
(3,996)
(3,996)
Consolidated
2018
$’000
2017
$’000
–
–
506,334
467,577
1,441
165,127
5,126
81,134
484,387
482,396
(143,180)
(95,953)
341,207
386,443
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 37 for further details.
The parent entity has also provided guarantees and indemnities for bank facilities. Refer to note 20 for further details.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2018 and 30 June 2017.
Capital commitments – Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2018 and 30 June 2017.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2, except for the following:
•
investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity; and
• dividends received from subsidiaries are recognised as other income by the parent entity.
Note 35. Business combinations
Comparative period business combinations:
In the previous year, the Group acquired a 100% interest in UK based entities Fleet Hire Holdings Limited and Motiva Group Limited
for the total consideration of $58,323,000.
The purchase price accounting for the business combination has now been finalised. This did not impact the comparative year
statement of financial position, statement of profit or loss and other comprehensive income or opening retained profits.
62
| SG Fleet GroupNotes to the financial statements30 June 2018
Details of the acquisition are as follows:
Representing:
Cash paid or payable to vendor
SG Fleet Group Limited shares issued to vendor
Fleet Hire
Fair value
$’000
Motiva
Fair value
$’000
Total
Fair value
$’000
31,313
3,100
34,413
22,350
1,560
23,910
53,663
4,660
58,323
Note 36. 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
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
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
2018
%
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%
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%
63
Annual Report 2018 | Note 37. 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)
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
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’.
The statement of profit or loss, statement of other comprehensive income and statement of financial position for the Closed Group
are the same as the Group and therefore have not been separately disclosed.
64
| SG Fleet GroupNotes to the financial statements30 June 2018 Note 38. Cash flow information
Reconciliation of profit after income tax to net cash from operating activities
Profit after income tax expense for the year
Adjustments for:
Depreciation and amortisation
Net loss/(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
Decrease/(increase) in inventories
Decrease in income tax refund due
Decrease/(increase) in prepayments
Increase in trade and other payables
Increase/(decrease) in provision for income tax
Increase/(decrease) in deferred tax liabilities
Increase in employee benefits
Increase/(decrease) in other provisions
Decrease in deferred income
Net cash from operating activities
Non-cash investing and financing activities
Shares issued under employee share plan
Shares issued in relation to business combinations
Consolidated
2018
$’000
2017
$’000
67,675
59,592
28,631
22,563
13
1,209
(344)
(359)
(9,081)
1,859
–
1,064
25,747
(3,024)
2,112
40
(1,085)
506
114,963
(56)
783
(248)
(570)
(17,529)
(4,458)
160
(963)
24,886
5,821
(1,283)
904
812
(3,764)
86,650
Consolidated
2018
$’000
1,991
–
1,991
2017
$’000
–
4,660
4,660
65
Annual Report 2018 |
Note 38. Cash flow information continued
Changes in liabilities arising from financing activities
Consolidated
Balance at 1 July 2016
Net cash (used in)/from financing activities
Changes through business combination
Exchange differences
Balance at 30 June 2017
Net cash used in financing activities
Exchange differences
Balance at 30 June 2018
Note 39. Earnings per share
Lease portfolio
borrowings
$’000
Bank
loans
$’000
Total
$’000
11,855
(8,306)
52,505
(726)
55,328
(1,974)
1,935
134,750
146,605
23,263
–
106
158,119
(25,305)
1,515
14,957
52,505
(620)
213,447
(27,279)
3,450
55,289
134,329
189,618
Consolidated
2018
$’000
2017
$’000
Profit after income tax attributable to the owners of SG Fleet Group Limited
67,675
59,592
Weighted average number of ordinary shares used in calculating basic earnings per share
256,514,976 252,759,335
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares
Performance rights over ordinary shares
97,235
3,969,069
285,756
113,610
Weighted average number of ordinary shares used in calculating diluted earnings per share
256,897,967 256,842,014
Number
Number
Basic earnings per share
Diluted earnings per share
Cents
26.38
26.34
Cents
23.58
23.20
66
| SG Fleet GroupNotes to the financial statements30 June 2018 Note 40. 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 $1,209,000 (2017: $783,000).
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:
2018
Grant date
04/03/2014
25/10/2017
25/10/2017
2017
Grant date
04/03/2014
Expiry date
13/08/2018
19/08/2022
17/08/2023
Exercise
price
Balance at
the start of
the year
Granted
Exercised
$1.85
8,086,046
–
(7,899,041)
$3.66
$3.66
–
–
638,913
1,219,077
–
–
8,086,046
1,857,990
(7,899,041)
Expired/
forfeited/
other
–
–
–
–
Balance at
the end of
the year
187,005
638,913
1,219,077
2,044,995
Expired/
forfeited/
other
Balance at
the end of
the year
Expiry date
Exercise
price
Balance at
the start of
the year
13/08/2018
$1.85
8,086,046
8,086,046
Granted
Exercised
–
–
–
–
–
–
8,086,046
8,086,046
Outstanding options exercisable as at 30 June 2018 was 187,005 (30 June 2017: Nil). The weighted average remaining contractual life
of options outstanding at the end of the financial period was 2.25 years (2017: nil 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 dividends.
Set out below are summaries of performance rights granted under the plan:
2018
Grant date
20/03/2017
20/03/2017
25/10/2017
25/10/2017
2017
Grant date
20/03/2017
20/03/2017
Vesting date
14/08/2018
20/08/2019
20/08/2019
18/08/2020
Vesting date
14/08/2018
20/08/2019
Balance at
the start of
the year
142,967
285,993
–
–
–
–
52,453
109,115
428,960
161,568
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
–
–
–
–
–
–
–
–
–
–
142,967
285,993
52,453
109,115
590,528
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
67
Annual Report 2018 | Note 40. Share-based payments continued
Performance rights exercisable as at 30 June 2018 Nil (30 June 2017: Nil). The weighted average remaining contractual life of
performance rights outstanding at the end of the financial period was 15 months (2017: 20 months).
For the options granted during the current financial period, the Black-Scholes valuation model inputs used to determine the fair value
at the grant date, are as follows:
Grant date
25/10/2017
25/10/2017
Vesting date
20/08/2019
18/08/2020
Share price
at grant date
Exercise
price
Estimated
volatility
Dividend
yield
Risk-free
interest rate
Fair value
at grant date
$4.19
$4.19
$3.66
$3.66
36.00%
36.00%
4.60%
4.60%
1.88%
2.03%
$1.050
$1.080
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
25/10/2017
25/10/2017
Vesting date
20/08/2019
18/08/2020
Share price
at grant date
Exercise
price
Dividend
yield
Fair value
at grant date
$4.19
$4.19
$0.00
$0.00
4.60%
4.60%
$3.880
$3.700
Note 41. Events after the reporting period
Apart from the dividend declared as disclosed in note 25, no other matter or circumstance has arisen since 30 June 2018 that has
significantly affected, or may significantly affect the Group’s operations, the results of those operations, or the Group’s state of affairs
in future financial years.
68
| SG Fleet GroupNotes to the financial statements30 June 2018 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 2018 and of its
performance for the financial year ended on that date;
• there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable; and
• at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group will be
able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee
described in note 37 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
13 August 2018
Sydney
69
Annual Report 2018 | Independent auditor’s report
to the members of SG Fleet Limited
Independent Auditor’s Report
To the shareholders of SG Fleet Group Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of
SG Fleet Group Limited (the Company).
In our opinion, the accompanying
Financial Report of the Company is in
accordance with the Corporations Act
2001, including:
giving a true and fair view of the
Group’s financial position as at 30
June 2018 and of its financial
performance for the year ended on
that date; and
complying with Australian Accounting
Standards and the Corporations
Regulations 2001.
Basis for opinion
The Financial Report comprises:
consolidated statement of financial position as
at 30 June 2018
consolidated statement of profit or loss,
consolidated statement of other comprehensive
income, consolidated statement of changes in
equity, and consolidated statement of cash
flows for the year then ended;
notes including a summary of significant
accounting policies; and
Directors’ Declaration.
The Group consists of the Company and the
entities it controlled at the year-end or from time to
time during the financial year.
We conducted our audit in accordance with Australian Auditing Standards. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities
for the audit of the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of
Ethics for Professional Accountants (the Code) that are relevant to our audit of the Financial
Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the
Code.
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
70
| SG Fleet Group
Key Audit Matters
The Key Audit Matters we identified are:
valuation of goodwill;
recognition of residual risk provision;
and
measurement and recognition of
deferred maintenance income.
Key Audit Matters are those matters that, in our
professional judgement, were of most significance
in our audit of the Financial Report of the current
period.
These matters were addressed in the context of
our audit of the Financial Report as a whole, and in
forming our opinion thereon, and we do not provide
a separate opinion on these matters.
Valuation of goodwill (AUD $356.1m)
Refer to Note 14 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 52% 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.
assessing the approach to the valuation
methodology adopted and the application of
the adopted methodology in calculating the
value in use within the goodwill impairment
model;
assessing the integrity of the value in use
model, 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. We
analysed how independent cash inflows of
the Group were generated against the
requirements of the accounting standards;
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 this data. We adjusted
this range by risk factors specific to the
Group and the and the industry it operates
in;
challenging the Group’s cash flow forecast
and growth assumptions, including those
related to fleet size and growth assumptions
across different geographies, using our
knowledge of the Group and its industry.
71
71
Annual Report 2018 |
Independent auditor’s report
to the members of SG Fleet Limited
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 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
possible range. This allows us 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 $10.5m)
Refer to Note 18 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. This
is owing to the significant audit effort
required and the high degree of judgment
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 determine 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 leases 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
shortfalls on the disposal of these assets
once ownership is transferred to the Group.
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.
This is performed by comparing the
72
72
| SG Fleet Group
It also takes into account 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 judgment 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 transfer of ownership.
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.
Measurement and recognition of deferred maintenance income (AUD $37.5m)
Refer to Note 22 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 measured using the stage
of completion method.
The measurement and recognition of
deferred maintenance income is a Key Audit
Matter. This is 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. This is performed 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.
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.
73
73
Annual Report 2018 |
Independent auditor’s report
to the members of SG Fleet Limited
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we
do not express an audit opinion or any form of assurance conclusion thereon, with the exception
of the Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other
Information. In doing so, we consider whether the Other Information is materially inconsistent
with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be
materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other
Information, and based on the work we have performed on the Other Information that we
obtained prior to the date of this Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
preparing the Financial Report that gives a true and fair view in accordance with
Australian Accounting Standards and the Corporations Act 2001;
implementing necessary internal control to enable the preparation of a Financial Report
that gives a true and fair view and is free from material misstatement, whether due to
fraud or error; and
assessing the Group’s ability to continue as a going concern and whether the use of the
going concern basis of accounting is appropriate. This includes disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless
they either intend to liquidate the Group or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objective is:
to obtain reasonable assurance about whether the Financial Report as a whole is free
from material misstatement, whether due to fraud or error; and
to issue an Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with Australian Auditing Standards will always detect a material
misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of 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_responsibilities/ar1.pdf. This description forms part of our
Auditor’s Report.
74
74
| SG Fleet Group
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 2018, complies with
Section 300A of the Corporations Act
2001.
The Directors of the Company are responsible for
the preparation and presentation of the
Remuneration Report in accordance with Section
300A of the Corporations Act 2001.
Our responsibilities
We have audited the Remuneration Report
included in pages 11 to 20 of the Directors’ report
for the year ended 30 June 2018.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit
conducted in accordance with Australian Auditing
Standards.
KPMG
Michael O Connell
Partner
Sydney
13 August 2018
75
75
Annual Report 2018 |
Shareholder information
The shareholder information set out below was applicable as at 31/07/2018.
Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
Number of holders
of ordinary shares
Number of holders
of options over
ordinary shares
Number of holders of
performance rights
over ordinary shares
323
526
308
358
49
1,564
91
–
–
–
–
9
9
–
–
26
13
20
–
59
–
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Ordinary shares
Number held
146,693,331
27,508,205
18,739,643
14,135,709
8,786,227
5,216,425
5,213,787
3,820,985
1,675,820
1,173,162
857,422
743,603
687,347
540,540
500,000
465,960
444,892
405,405
400,000
344,336
% of total
shares issued
57.00
10.69
7.28
5.49
3.41
2.03
2.03
1.48
0.65
0.46
0.33
0.29
0.27
0.21
0.19
0.18
0.17
0.16
0.16
0.13
238,352,799
92.61
Bluefin Investments Limited
HSBC Custody Nominees (Australia) Limited
BNP Paribas Noms Pty Ltd (DRP)
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
Robert Pinkas Blau
National Nominees Limited
Netwealth Investments Limited (Wrap Services A/C)
Misamada Nominees Pty Limited (Misamada A/C)
Mr David John Fernandes
BNP Paribas Noms Pty Ltd (Agency Lending DRP A/C)
Australian Executor Trustees Limited (No 1 Account)
Shevin Pty Limited (The Shevin A/C)
Peter Mountford
Mulcaster Super Fund Pty Ltd (Mulcaster Super Fund A/C)
Macdonald Gilbert Bell
Aus Executor Trustees Ltd (GFFD)
Enerview Pty Ltd
Insync Investments Pty Ltd (Weekley Super Fund No 1 A/C)
Mrs Annie Margossian Kenny + Mr Scott Andrew Kenny (KASM Superfund A/C)
76
| SG Fleet Group 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
Voting rights
The voting rights attached to ordinary shares are set out below:
Number
on issue
Number
of holders
2,044,995
590,528
9
59
Ordinary shares
Number held
% of total
shares issued
146,693,331
57.00
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
Expiry date
Number of shares
August 2018
February 2019
378,070
241,450
619,520
77
Annual Report 2018 | 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
Stock exchange listing
SG Fleet Group Limited shares are listed on the Australian
Securities Exchange (ASX code: SGF)
Website
www.sgfleet.com
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
Enquiries
investorenquiries@sgfleet.com
Company secretary
Edelvine Rigato
Notice of annual general meeting
The details of the annual general meeting of
SG Fleet Group Limited are:
Hobart Room, Lobby Level
The Sofitel Sydney Wentworth
61-101 Phillip Street
Sydney NSW 2000
3:00 PM on Tuesday 23 October 2018
Registered office and Principal
place of business
Level 2, Building 3
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
Boardroom Pty Ltd
Level 12, 225 George Street, Sydney, NSW 2000
Telephone: 1300 737 760
E-mail: enquiries@boardroomlimited.com.au
Website: www.boardroomlimited.com.au
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