NAME OF ENTITY
Super Cheap Auto Group
Limited
ABN OR EQUIVALENT
COMPANY REFERENCE
81 108 676 204
REGISTERED OFFICE
751 Gympie Road
Lawnton QLD 4501
Telephone (07) 3205 8511
Facsimile (07) 3205 8522
SHARE REGISTRY
Link Market Services
Level 12, 680 George Street
Sydney NSW 2000
BANKERS
Australia and New Zealand
Banking Group Limited
AUDITORS
PricewaterhouseCoopers
SOLICITORS
Redmond Van De Graaff
Mallesons Stephen Jaques
STOCK EXCHANGE LISTING
Super Cheap Auto Group Limited
shares are quoted on the
Australian Stock Exchange.
THE ANNUAL GENERAL MEETING
The Annual General Meeting of the
Shareholders of Super Cheap Auto
Group Limited will be held at the Pine
Rivers Memorial Bowls Club, Cnr.
Sparkes and Francis Roads, Bray Park,
Queensland on Thursday 26 October
2006 at 12.00 noon.
Formal notice of this meeting and proxy
form are enclosed with this report.
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SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
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CONTENTS
Chairman’s Report
Managing Director’s Report
Board of Directors
Senior Management Team
Corporate Governance Statement
Financial Statements
Directors’ Report
Annual Financial Report
Income Statements
Balance Sheets
Statements of Changes in Equity
Cash Flow Statements
Notes to the Financial Statements
Directors’ Declaration
Independent Audit Report
Shareholder Information
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WELCOME TO THE
2006 SUPER CHEAP
AUTO GROUP LIMITED
ANNUAL REPORT
2006 has been a year of change, growth and success
for the Group. This report showcases many of our
achievements including the opening of our Supercheap
Auto concept store at Chermside in Brisbane, the
successful establishment of BCF Boating Camping
Fishing in the outdoor and leisure market and our
sponsorship of the 2005 Supercheap Auto Bathurst 1000.
Once again, we recognise our team members, their
achievements and valuable contribution to the success
of our company.
We thank all our shareholders and customers for their
continued interest and support in our company.
We look forward to seeing you in the stores.
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
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HIGHLIGHTS
JUL 05 Announced the launch of BCF Boating Camping Fishing
– plans to rebrand the recently acquired CampMart business
to BCF along with plans to open further stores across Australia
and New Zealand.
OCT 05 Supercheap Auto Bathurst 1000 hugely successful with more
than 6 million viewers across Australia and New Zealand and
166,840 motorsports fans attending the great race.
BCF launched with 8 stores.
JAN 06 Launch of new look branding for Supercheap Auto.
BCF expands over the QLD/NSW border to open its fi rst NSW
store in Coffs Harbour - increasing its number of stores to 13.
MAY 06 Supercheap Auto unveils its new concept store at Chermside,
Queensland.
JUN 06 Group sales exceed $500 million.
BCF celebrates success at the National Retail
Association Awards.
JUL 06 First BCF store in Western Australia opens in Midland.
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SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
STORE NUMBERS
SALES $ MILLIONS
2
4
7
2
1
5
4
7
0
.
1
3
8
2
.
7
2
7
5
.
1
2
0
3
.
4
1
8
3
1
4
4
9
7
5
2
5
.
9
2002
2003
2004
2005
2006
2002
2003
2004
2005
2006
,
3
8
4
4
,
3
6
0
4
TEAM MEMBERS
,
2
9
6
4
,
2
4
0
8
1
,
5
6
3
3
0
4
*
.
2
8
9
.
EBIT
1
3
7
.
2
2
8
.
1
9
8
.
2002
2003
2004
2005
2006
2002
2003
2004
2005
2006
* Excludes benefi t of one-off inventory revaluation
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
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CHAIRMAN’S
REPORT
inventory and staffi ng costs, whilst lifting sales.
The consequential potential for smaller store
footprints has been proven by the work undertaken
at Chermside.
Meanwhile, Steve Doyle’s sole focus on the BCF
diversifi cation strategy is demonstrating that the
Company has the opportunity to take greater
benefi t from its existing infrastructure and skills.
BCF has successfully moved beyond being a small
reconnaissance effort into a substantive and fast
growing participant in the leisure goods market.
Expansion in WA and the NT, and additional
stores in NSW will strengthen BCF and reduce
the Group’s total dependence on the auto after-
market.
The Company’s commitment to growth will not be
diminished by a renewed focus on profi t margins.
The Board does not expect shareholders to
accept growth for the sake of growth. The early
response to increasing inventory levels, a decision
to establish a logistics facility in China and better
supplier arrangements are all examples of the
increasing importance being placed on maintaining
an enduring and sustainable cost structure.
Finally, it has been an important year for the
Group. Peter Birtles and his team have handled
the uncertainty created by top level management
changes and the pressure on sales from a tough
retail environment without compromising the BCF
roll-out and the need to redefi ne and re-invigorate
the initial Supercheap Auto business model. In
many respects, FY06 was a watershed year which
has positioned the Company for the longer term.
Dick Mcllwain
Chairman
Super Cheap Auto Group Limited
Fellow Shareholder
All segments of the business grew in the 2005/06
fi nancial year (FY06) with annual sales eclipsing
$500M for the fi rst time. Underlying operating
profi ts (EBITDA), which adjust for one-off inventory
revaluation in 2004/05 ($4.7M) and the impact of
the Group’s expansion of BCF ($4.8M), also grew
by 15%. On a similar underlying basis, net profi t
after tax (NPAT) has risen by 9%.
These are pleasing outcomes for a year which
has laid the foundation for the inevitable shift
away from total reliance on the formula that has
underpinned the Group’s impressive growth for
more than a decade. The changes in FY06 have
included the restructuring of the management
group, a realisation that the long period of
continuous growth through a single retailing model
is nearing its potential, and the diversifi cation
offered by the ongoing development of the BCF
boating fi shing and camping format.
The resignation of Bob Thorn precipitated an
overhaul of the group’s management structure.
Bob’s contribution to the development of the
Supercheap Auto business from 8 stores in 1993
to an Australia and New Zealand-wide leader in the
auto after-market, and his unique ability to create a
highly motivated team, distinguishes Supercheap
Auto from most other retailers.
Peter Birtles and the team have continued
the success of the Group. Peter and his chief
operating offi cers, David Ajala and Steve Doyle,
have helped to deliver another year of impressive
growth in a diffi cult retailing environment, whilst
simultaneously developing the strategies required
to re-condition the Supercheap Auto retail format,
and begin the CampMart conversion and BCF
roll-out.
The refi nement and reorientation of the
Supercheap Auto model under the leadership
of David Ajala recognises that the initial format
was not going to produce the economic benefi ts
needed to improve operating profi t margins or
move into smaller local markets. The re-formatted
Chermside store in Brisbane has reduced
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SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
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MANAGING
DIRECTOR’S
REPORT
2005/06 has been another signifi cant year in the
history of the Super Cheap Auto Group. Much has
been achieved with the highlights including:
■ Underlying Group EBIT increasing by 11% over
the prior year
SUPERCHEAP AUTO
Sales increased from $465 million to $482 million
during the period. This represents underlying
growth of 6% after adjusting for the extra week of
trading included in the prior year results.
■ Group sales passing through the half billion
dollar mark and recording an underlying
increase of 14% on the prior year
EBITDA at $42.5 million and EBIT at $32.4 million
were respectively 10% and 7% higher than the
prior comparative period on an underlying basis.
This is a good result in the challenging trading
conditions which prevailed during the year.
Higher fuel prices have had a negative infl uence
on consumer spending in the auto after-market,
resulting in a decline of over 2% in market wide
expenditure during the year. Supplier data has
confi rmed that Supercheap Auto has been
successful in growing market share in a number
of key categories such as lubricants, car care and
interior accessories.
The commitment to a consistent and planned
marketing and buying strategy has led to an
improvement in gross margins and in the business
achieving its targets for a 10% reduction in
inventory investment per store whilst improving
shelf availability in store. We have secured better
cost prices, improved trading terms, and reduced
logistics costs and shrinkage.
23 new stores were opened during the period
bringing the total number of Supercheap Auto
stores to 234 of which 196 were in Australia and 38
in New Zealand. We have opened a further 4 stores
so far in the current fi nancial year as at the date of
this report.
■ The successful launch of BCF with sales and
profi t exceeding launch expectations
■ Supercheap Auto gaining market share and at
the same time growing gross margins in diffi cult
trading conditions
■ The average inventory investment across
Supercheap Auto stores reducing by over 10%
whilst improving product availability on shelf.
These achievements highlight the strength of the
business model that has been built over the last
few years. In particular, we have begun to reap
the benefi ts of our investment in developing our
merchandising and supply chain management
systems.
In what have been generally acknowledged as
the most challenging trading conditions that
discretionary retail businesses have faced for a
number of years, we have been able to not only
grow sales and profi t in our primary business,
Supercheap Auto, but successfully launch a brand
new retail concept, BCF Boating Camping Fishing.
Our management of working capital has allowed
us to fully cover the $37 million invested in opening
23 new Supercheap Auto stores and 13 new BCF
stores through funds generated from operating
cash fl ow.
We have established the framework for future
growth in our existing formats and through
developing new format opportunities.
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SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
We now estimate that the current Supercheap
Auto format of a 700m2 standalone store has a
potential for around 270 stores across Australia
and New Zealand so we are getting closer to that
number. With that in mind, we have commenced
work on alternative formats for the Supercheap
Auto brand which, if successful, will provide the
Group with a fl exible footprint to suit local market
and demographic conditions. This will open up
opportunities for many more Supercheap Auto
stores across both countries. We will be trialling
these opportunities in the coming months.
We have also completed work on refreshing
our marketing strategy for the brand. We have
updated our brand logo, redesigned the layout
of our catalogues and our in-store signage and
more recently launched a new set of television
commercials. October 2005 was a proud moment
for the business with the fi rst running of the
Supercheap Auto Bathurst 1000, the most famous
and most viewed motor race in Australia.
We have recently refurbished our store at
Chermside in Brisbane as a Concept store to
trial new merchandising displays, new store
procedures and new products. The early trials have
proved very promising and we will commence a
programme of refurbishment of our higher trading
stores during the coming year, utilising the most
successful attributes of the Chermside concept
store.
More information on our involvement with the
Supercheap Auto Bathurst 1000 and on the
Chermside concept store is featured later in this
Annual Report.
The business has strengthened its position as
the leading retailer of automotive parts and
accessories across Australia and New Zealand
during the period and we are confi dent that the
strategies outlined above will further consolidate
this position over the coming years.
BCF – BOATING CAMPING FISHING
BCF was launched to the general public on 15
October 2005, with eight stores trading under
the BCF banner across South East Queensland
- three refurbished CampMart stores and fi ve
new BCF stores. Over the balance of the year, we
refurbished the remaining CampMart store, opened
three new BCF stores in Queensland and one in
Northern New South Wales. We have opened a
further two stores so far this fi nancial year, one
at Midland in Western Australia and one at West
Gosford in New South Wales.
At the time of the launch, we set targets for the
business of sales of $40 million and an EBIT (pre
set up costs) of $1.2 million. We are very pleased
to report that actual sales were $44 million and that
actual EBIT (pre set up costs) was $1.4 million.
This pleasing profi t result was achieved despite
the impact of un-forecasted non-cash provisions of
$0.7 million, arising from the impact of accounting
for property lease costs in accordance with AIFRS.
Gross margins have been ahead of original
expectations and gross inventory investment
has been held to an average of $1.3 million per
store compared to the initial target of $1.5 million
per store. We anticipate further improvements in
gross margins as we build scale and develop our
own brand products and leverage the Group’s
capabilities in sourcing product from Asia.
All components of the business have performed
well with the fi shing section being particularly
strong. Inventory investment in the boating section
has been rebalanced towards higher volume
and higher margin product for smaller boats and
away from hardware for larger boats and higher
value marine electronics to better refl ect trading
patterns.
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
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We have learnt that the complete Boating,
Camping and Fishing offer is most successful in
sites that are within 30 minutes of the ocean and
we will be concentrating on these type of locations
as we move to the next group of new stores. We
continue to see an opportunity for up to 60 full
BCF stores across Australia and New Zealand.
Our experience to date has indicated that there is
also the potential to operate successful stores in
additional locations using variants of the full offer.
SUPPLY CHAIN OPERATIONS
We have seen continued improvements in our
supply chain operations throughout the period. In
addition to the reduction in inventory holdings and
improvement in on shelf availability highlighted
earlier in my report, we have reduced logistics
costs as a % of sales.
During the year, the opening of a third party
distribution centre in Melbourne has reduced
freight costs as we distribute stock for our stores
in Victoria and South Australia from this facility
rather than from our Brisbane distribution centre.
In June, we moved our logistics operation in New
Zealand to larger premises in Auckland. This
new distribution centre will facilitate the direct
importing of product into New Zealand from Asia
rather than indirectly via our Brisbane site.
We have implemented a number of operational
improvements at our Brisbane facility which
have enhanced productivity and accuracy. We
have recently completed installation of additional
material handling equipment which will generate
further improvements in the coming year.
We are working on a number of initiatives to
improve our supply chain and sourcing operations
in China:
■ Firstly, we have entered into a logistics
partnership with Cargo Services Far East,
a Hong Kong based business which is
responsible for our logistics and freight
forwarding arrangements within China. As part
of this new relationship, we have implemented
new systems which allow us to track product
movements from the manufacturer in China
through to our distribution centres in Australia
and New Zealand. This will enable us to be
more fl exible with our promotional planning and
replenishment.
■ Secondly, we have renegotiated our shipping
arrangements which have generated signifi cant
cost savings.
■ Thirdly, we are in the process of establishing
our own direct sourcing operation based in
Hangzhou, China. We expect this new team
to be in place in October and they will have
a focus on reducing sourcing costs and lead
times, improving product packaging and quality
and generating supply chain effi ciencies.
REVIEW OF FINANCIAL CONDITION
We continue to fund our investment in growth
initiatives through our debt facilities. As highlighted
earlier in my report, we have been able to
minimise the drawdown of new debt through our
management of working capital.
We renegotiated our funding facilities during the
year, securing new arrangements which are a
mixture of term debt and working capital facilities.
These new facilities have been secured at a lower
cost and provide signifi cant capacity to fund
further growth initiatives over the coming years.
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SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
Net debt for the Group has increased from $75.2
million to $80.9 million. Under AIFRS a further
$1.8 million of net debt relating to a team member
share scheme special purpose vehicle has been
consolidated into the Group’s balance sheet.
Cash fl ow from operations was $26.8 million after
accounting for a $7.0 million increase in working
capital. This positive result was achieved even
though approximately $27 million was invested
in working capital to stock new stores opened
during the year. The working capital usage is a
$26 million improvement on the prior year.
Group Capital Expenditure was $21.0 million,
with $9.8 million in new store fi t-out, $7.8 million
in supply chain and IT projects and $3.4 million in
general maintenance and enhancement projects.
TEAM MEMBERS
I would like to thank all of my fellow team
members for their outstanding contribution
during the past year. As you can tell from the
above, we have a multitude of exciting initiatives
in progress across our Group. Each one of
these initiatives brings extra workload and new
challenges but our team members continue to
take these challenges head on.
We now have close to 4,000 team members
across the Group. Many of our team members
are worthy of individual recognition but we
can only feature a small number in our Annual
Report, as you will see later on in the Report.
Innovation, customer service, leadership and
executing with discipline are the key themes for
our Group as we execute our strategy. These
themes are all centred on our team members
so we are increasing our investment in their
development in these areas.
I would also like to take this opportunity to
acknowledge the immeasurable contribution
of my predecessor, Bob Thorn, to the current
success of Super Cheap Auto Group. When Bob
joined the business in 1993, he quickly identifi ed
the potential to grow Supercheap Auto from a
small chain of 8 stores based in
South East Queensland to the Trans Tasman
retailer it is today. Bob led from the front and
was highly passionate about creating a can-
do attitude which set the business apart from
its competitors. Setting ever more ambitious
targets, he galvanized team members into not
only achieving their goals but into exceeding
them. Bob created a unique team culture in
Supercheap Auto which has been central to
its success to date and will be pivotal as we
continue to grow the Group into the future. On
behalf of the Company and on a personal level,
thanks Bob.
LOOKING AHEAD
We anticipate that trading conditions will
continue to be quite challenging during the
coming year but we are confi dent that the
initiatives we have in place will enable our
businesses to continue to grow market share and
improve profi t margins.
We anticipate that Supercheap Auto will open
between 10 and 15 new stores in the coming
year of which some stores will be tests of the
new formats. BCF is also planning to open
between 10 and 15 new stores, extending its
network throughout Queensland, New South
Wales, Western Australia and the Northern
Territory.
I feel very privileged to have been given the
opportunity by the Board to lead the Company
through this exciting phase in its development
and I look forward to discussing our progress
with you over the coming years.
Peter Birtles
Managing Director
Super Cheap Auto Group Limited
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
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SUPERCHEAP
AUTO CHERMSIDE
Supercheap Auto is an exciting and enjoyable
place to shop. This environment and culture
has been created and supported by a team of
dedicated employees that live the core business
values and Team Framework Principles.
Throughout the past year, the Brand has
undergone a re-vitalisation with the development
of a new logo. This logo has been designed to
not only improve the quality perception of the
Brand, but also increase the focus on Auto,
ensuring that the business’ core offer to the
market is reinforced. Improvements were also
made to our catalogue format, in-store ticketing
and other marketing and media activities. The
team are also looking forward to a smart new
team uniform which will be introduced in the
early part of this new fi nancial year.
In May, we launched a newly refurbished store in
the Brisbane suburb of Chermside which has been
used as a test bed for a new-look store format.
This ‘Concept store’ has an increased focus on
the customer with some basic fi tment services,
easy to navigate store layout and signage, a
service counter and in-store informational touch
screens. The internal and external livery was also
updated to be more contemporary. The team has
enhanced their customer service skills and product
knowledge to provide an exceptional shopping
experience for all our customers.
The early results from Chermside have been very
pleasing and it is intended that we will use many
elements as we begin rolling out our new stores.
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
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SUPERCHEAP AUTO
BATHURST 1000
Over 6 Million Viewers
Tuned Into The Telecast
Crowd Attendance –
166,840 Spectators
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SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
Supercheap Auto has a long standing commitment
to motorsport and the natural extension of this
heritage is epitomised by our involvement with
the iconic Bathurst 1000.
The 2005 Supercheap Auto Bathurst 1000 had a
television audience in excess of 6 million people
and over 166,000 die hard race fans attending
the event.
A highlight of the 2005 Supercheap Auto Bathurst
1000 was the hugely successful ‘Track Store’
that not only showcased the Supercheap Auto
product offering but also provided fans with some
great entertainment and exclusive Bathurst offers.
At Bathurst it is the cars that the fans come to
see and with the Supercheap Auto Racing V8
Supercar, SCA1000 Special Edition HSV GTO
and Ben Bray’s drag car on display at the Track
Store, fans were certainly not disappointed.
Now a high profi le team in the V8 Supercar
series, the Supercheap Auto Racing Team has
earned a reputation as genuine contenders at
every race meeting. With many podium fi nishes
throughout the 2005 season and some promising
results in 2006, this committed team will strive
to have a strong fi nish to the 2006 season. With
plans already emerging for the 2007 season
and the introduction of the VE Commodore, the
Supercheap Auto Racing Team certainly has the
ammunition for a strong 2007 V8 Supercar series.
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
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BCF REPORT
What an incredible year it has been for the
company’s new brand – BCF Boating Camping
Fishing (“BCF”). The 300-strong team can be
extremely proud of not only the triumphant launch
and operation of the new brand, but also their
indispensable role in the successful introduction of
a new retailing concept to the Australian market.
The BCF brand is the fi rst to offer Australian
consumers an extensive boating, camping and
fi shing retail experience under one roof. Each store
follows a bulk-goods retailing format, stocking
a wide range of quality brands from trusted
manufacturers.
As a one-stop shop for all your boating, camping
and fi shing needs, the product range of BCF is
extensive including 12,000 lures, 600 reels, 1,000
rods, 20kms of rope, more tents than you can
poke a peg at and enough coolers and fridges
to keep 20,000 cans cool. Our customers
have quickly come to rely on the store for their
recreational needs.
Each store is staffed with up to 20 team members
who have all received training in boating, camping
and fi shing, enabling them to adequately address
customers’ enquiries.
15 October 2005, marked the offi cial launch of the
BCF stores, with eight stores opened throughout
Queensland, three of which were re-branded
CampMart stores. New South Wales welcomed
stores at Coffs Harbour and most recently West
Gosford with Western Australia also enjoying the
BCF experience at Midland - bringing the total
number of stores to 15 as at the date of this report.
Marketing, public relations and media campaigns
have been integrated to support the opening of
each of the stores, ensuring new markets are
introduced to the retailing concept of the brand’s
range, culture and price offering.
The coming year will see the growth strategy
continue with plans to open a further 10-15
new stores.
1414
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SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
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BOARD OF
DIRECTORS
2
4
1
3
5
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SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
Darryl McDonough, BBus (Acty),
LLB (Hons), SJD, FCPA, FAICD [1]
Independent Non-Executive Director
Darryl McDonough, aged 55, was appointed a
Director of the Company on 19 May 2004. Darryl
is a practicing solicitor with over 20 years of
corporate experience. He has served as a director
of a number of public companies in the past
including Cellnet Group Limited of which he was
chairman and Bank of Queensland Limited. Darryl
is a Past-President of the Australian Institute of
Company Directors, Queensland Division.
Robert Wright, BCom, FCPA, MAICD [5]
Independent Non-Executive Director
Mr Robert Wright, aged 57, was appointed a
Director of the Company on 19 May 2004. Robert
has 30 years’ fi nancial management experience,
having held a number of chief fi nancial offi cer
positions, including fi nance director of David
Jones Limited. He is currently the Chairman
of Dexion Limited and a director of Australian
Pipeline Limited, SAI Global Limited, both
Babcock & Brown Residential Land Partners
Limited and Babcock & Brown Residential Land
Partners Services Limited (jointly Babcock &
Brown Residential Land Partners Group) and the
reconstructed Harris Scarfe Australia Pty Limited.
Robert is the Chairman of the Audit and Risk
Management Committee.
Dick McIlwain, BA, FAICD [3]
Independent Non-Executive Chairman
Dick McIlwain, aged 59, was appointed a Director
of the Company on 19 May 2004. Dick has been
the Chief Executive of UNiTAB Limited since 1989
and the Managing Director and Chief Executive
since 1999. Dick is also the Non-Executive
Chairman of Wotif.com Limited. He is a Fellow of
the Australian Institute of Company Directors.
Peter Birtles, BSc, ACA [2]
Managing Director
Peter Birtles, aged 42, was appointed a Director
of the Company on 5 January 2006. Peter joined
Super Cheap Auto Pty Ltd in 2001 as Chief
Financial Offi cer and in 2006 was appointed
Managing Director.
Prior to joining Super Cheap Auto, Peter spent
12 years working with The Boots Company in the
United Kingdom and Australia in a variety of senior
fi nance, operations and information technology
roles where he ultimately held the position of Head
of Finance and Planning. Prior to joining The Boots
Company, Peter worked for Coopers & Lybrand.
Reg Rowe [4]
Non-Executive Director
Reg Rowe, aged 62, was appointed a Director
of the Company on 8 April 2004. Reg and Hazel
Rowe founded an automotive accessories mail
order business in 1972 which they ran from their
Queensland home. In 1974 they commenced
retail operations of the business which evolved
into Super Cheap Auto. Reg served as Managing
Director of Super Cheap Auto Pty Ltd until 1996
and then Chairman from 1996 to 2004.
Prior to this, Reg had 13 years experience in
various retail roles at Myer Department Stores.
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
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SENIOR
MANAGEMENT
TEAM
PETER BIRTLES [2]
Managing Director
DAVID KELLEY [4]
Company Secretary
David joined Super Cheap Auto Group in 2005. Prior
to this, David held various management and Internal
Audit positions at Adelaide Casino, Woolworths
Limited and General Motors – Asia/Pacifi c. David
has a Bachelors Degree in Economics from the
University of Adelaide and an M.B.A. from the
Australian Graduate School of Management.
In addition to serving as Company Secretary, David
is responsible for the Group’s loss prevention,
internal audit, stocktake, risk management and
compliance functions.
GARY CARROLL [8]
Chief Financial Offi cer
Gary joined Super Cheap Auto Group in April 2006.
He has over 14 years’ experience in accounting,
treasury and banking areas across a number
of industry sectors. He holds honours degrees
in Commerce and Law from the University of
Queensland, and is a CPA.
After commencing his career with Ernst & Young,
Gary held senior management positions with
companies such as Citibank, Duke Energy and
Flight Centre.
Gary is responsible for the management of the
fi nance function for the Group.
GRAHAM CHAD [1]
General Manager – Group Logistics
Prior to joining Super Cheap Auto in 2005, Graham
spent 19 years with the Masterfoods (Mars) Group
in Australia and New Zealand in various senior
management roles followed by 5 years in retail
general merchandise. He was Chief Logistics Offi cer
for The Warehouse Group, Auckland and spent
several years at Woolworths in the Supply Chain
Operations Group for grocery distribution.
Graham is responsible for the logistics functions
that support the Group’s business units
incorporating the management of distribution
centres, freight and imports.
Peter joined Super Cheap Auto in 2001 as Chief
Financial Offi cer and was appointed Managing
Director in January 2006.
Peter is a chartered accountant with over 20 years
experience. Prior to joining Super Cheap Auto,
Peter spent 12 years working with The Boots
Company in the United Kingdom and Australia in a
variety of senior fi nance, operations and information
technology roles where he ultimately held the
position of Head of Finance and Planning. Prior
to joining The Boots Company, Peter worked for
Coopers & Lybrand.
DAVID AJALA [10]
Chief Operating Offi cer – Supercheap Auto
David has over 25 years’ retail experience in
Coles Myer. Prior to joining the Super Cheap Auto
Group in July 2005, David held a number of senior
management positions across several states
in Australia, including National Buyer, National
Promotions Manager, Area and Regional Operations
Manager and more recently as a National Business
Manager for CMF Food and Liquor division,
responsible for both the Coles brand and the Bi Lo
discount format.
David has completed Post Graduate studies with
Deakin University as part of his MBA.
David is responsible for the merchandising,
marketing and retail operations of the Supercheap
Auto business.
STEVE DOYLE [7]
Chief Operating Offi cer - BCF
Steve joined Super Cheap Auto in 2002 as
Marketing Manager. He subsequently held the
positions of General Manager – Retail and General
Manager – Merchandising.
In January 2005, following the acquisition of
CampMart, Steve was appointed General Manager
– CampMart. CampMart was relaunched as BCF
in July 2005. Steve was appointed Chief Operating
Offi cer – BCF in January 2006. He is responsible for
the merchandising, marketing and retail operations
of the BCF business.
1818
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
STEVE TEWKESBURY [6]
General Manager – Overseas Sourcing
Steve joined Super Cheap Auto in 2004 as Supply
Chain Manager and in 2006 was appointed as
General Manager – Overseas Sourcing.
He has in excess of 24 years’ experience in sales,
marketing and logistics. Prior to joining Super
Cheap Auto, Steve worked in Global Supply Chain
and E-Commerce Strategy for Reckitt & Colman.
He holds a degree qualifi cation in E-Commerce
from Monash University.
Steve is responsible for establishing the
Group’s overseas sourcing operations including
establishing our own direct sourcing operation
based in China, negotiating international shipping
and co-ordinating China logistics partner services.
SONIA LA PENNA [5]
Group Human Resources Manager
Sonia joined Super Cheap Auto in December 2005
as the Group Human Resources Manager. Together
with her tertiary qualifi cations, Sonia has over 10
years of Human Resources experience both in
Australia and internationally.
Prior to joining Super Cheap Auto, Sonia
commenced her HR career with Franklins Limited
and since then has held senior management
positions for companies including Brazin Limited,
Royal Caribbean Cruise Lines and Sunglass Hut
Australasia.
Sonia is responsible for Human Resources
Management across the Group.
PAM PUGSLEY [11]
General Manager Retail Operations
Pam joined Super Cheap Auto in November
2004. Pam has 23 years of retail experience in
Coles Myer Limited. Prior to joining Super Cheap
Auto, Pam was a Regional Manager for Coles
Supermarkets and Pick’n’Pay and previously held
positions in Merchandising, Store Development
and State Services Management in a variety of
locations across Australia.
In 2002, Pam completed a Post Graduate
qualifi cation through Deakin University in
Melbourne. Pam has the responsibility for the day-
to-day operations of our stores and for the set up
of new stores.
ROBERT DAWKINS [3]
Group Property Manager
Robert has 15 years’ experience in property
management. Prior to joining the Super Cheap
Auto Group in 2001, Robert was the Property
Manager for the Bank of Queensland Limited.
Robert’s key responsibilities include property
and facilities management, property leasing and
development, project and contract management
and asset acquisition and disposal.
WAYNE MCMAHON [9]
Chief Information Offi cer
Wayne joined Super Cheap Auto Group in 2006.
A graduate of Wollongong University, he has over
22 years’ experience in all areas of Information
Technology.
Wayne was previously based in Hong Kong as CIO
for Esquel Enterprises Limited and in Singapore
as Director Information Technology, Asia Pacifi c
for ModusLink. In total he has over 13 years’
experience living and working across Asia, with 11
of those years in the eCommerce enabled Supply
Chain industry.
Wayne is responsible for process development and
information technology across the Group.
3
2
1
4
5
9
10
8
6
7
11
1
3
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SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
2
4
2005 ANNUAL
AWARDS
This year we have much to celebrate with SCA team
member awards and BCF being presented with 4
awards by the National Retail Association.
SUPERCHEAP AUTO AWARDS
Each year Supercheap Auto (“SCA”) celebrates
the achievements of its team members at the
annual Managers’ Meeting. Throughout the year,
team members are nominated by their peers and
supervisors as having gone that extra mile, whilst
outstanding stores are nominated by their Area
Manager leading up to the awards announcement.
The 2005 award winners were:
Mathew Northway, Manager Of The Year (1)
Mathew joined SCA in October 2004 as Manager of
the Feilding store in New Zealand. Mathew’s award
as Manager of the Month in April 2005 came as a
result of his ambition for the store to succeed, his
integrity, his extensive knowledge of product and
willingness to share his skills and knowledge with
his peers.
Mathew has recently been seconded to the position
of Area Manager Central New Zealand.
Devonport Store – Store Of The Year (2)
In November 2002, Devonport opened as the 113th
SCA Store, the third store for Tasmania.
2005 was a great year for the Devonport store. It
traded well during the year, sales exceeded budget
by 16.9% with a massive 24% increase over the
previous year. The Devonport team is committed to
very high standards achieving no less than 8/10 store
standards at all times.
At the time of the awards, the store was managed
by Daniel Crabtree who has now taken on the role of
Area Manager for Vic and Tas. Assistant Manager at
the time, Greg Creely is now managing the store and
fellow team members include Ashton Rossington,
Kaella Burgess, Daniel Blahut, Ashley Perkins,
Jarrod Pearce, Scott Cannan, Lincoln Aherne.
Doug Love, Team Member Of The Year (3)
Doug Love is a career spare parts expert, having
25 years’ previous experience with Rocca Bros
when SCA purchased the Marlows business in 2003.
Initially Doug worked at the Thebarton store when the
store rebranded to SCA. In 2005, Doug moved to the
Salisbury store and shortly after won Team Member
of the Month.
Whilst Doug is well known for his impressive
knowledge of spare parts he is also respected for
his positive, professional and passionate approach
to his work.
Doug is currently working at Blair Athol, being a
member of the new team when it opened its doors
for the fi rst time in February 2006.
2006 NATIONAL RETAIL ASSOCIATION
AWARDS (4)
The Super Cheap Auto Group has always strived
for industry excellence and this year’s American
Express National Retail Association Awards was very
successful for the Group.
Congratulations to the BCF team on being successful
in 4 categories:
Winner Westfi eld Best New Retail Business/Store
Winner Bose Best Recreational Retailer
Highly Commended American Express Supreme
Reward for Best Retailer
Highly Commended American Express Young
Retailer of the Year
Grant Pearce won the individual award (Highly
Commended Young Retailer of the Year). Grant is
one of BCF’s retail trainers with responsibilities
extending to all BCF stores. Grant’s passion for
retail is one of the reasons for his success to date.
He thrives on dealing with customers and team
members which allows him to maintain his focus on
the foundations of retailing - customer service. The
NRA acknowledged Grant for his drive to succeed in
any environment and commended him for his efforts
in the year’s competition.
We congratulate Gareth Jones, Manager of the
SCA North Parramatta store, on his outstanding
performance and succeeding to the top 10 fi nalists
of the Young Retailer of the Year category.
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
21
21
CORPORATE
GOVERNANCE
STATEMENT
Super Cheap Auto Group Limited (“the Company”)
and the Board are committed to achieving and
demonstrating high standards of corporate
governance. The Directors of Super Cheap Auto
Group Limited are accountable to shareholders for
the proper management of the business and affairs
of the Company.
A description of the Company’s main corporate
governance practices is set out below. All these
practices unless otherwise stated were in place for
the reported period.
THE BOARD OF DIRECTORS
The Board of Directors, working with senior
management, is responsible to shareholders for the
overall management of the Company’s business
and affairs. The Directors’ overriding objective is to
increase shareholder value within an appropriate
framework which protects the rights and interests of
company shareholders and ensures the Company
and its controlled entities are properly managed.
The Board delegates responsibility for day-to-day
management of the Company to the Managing
Director.
Composition of the Board
The constitution of the Company provides that
the number of Directors is to be not less than
three nor more than eight. The Board is currently
comprised of fi ve Directors, four of whom (including
the Chairman) hold their positions in a non-
executive capacity.
The Board operates in accordance with the
broad principles set out in its charter which
is available from the Corporate Governance
information section of the Company website at
www.supercheapauto.com.
The Chairman is responsible for leading the Board,
ensuring Directors are properly briefed in all matters
relevant to their role and responsibilities, facilitating
board discussions and managing the Board’s
relationship with the Company’s senior executives.
2222
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
The Managing Director is responsible for
implementing Group strategies and policies. The
Board Charter specifi es that these are separate
roles to be undertaken by separate people.
The composition of the Board is reviewed annually
by the Board Nomination and Remuneration
Committee to ensure that it has available an
appropriate mix of skills and experience to ensure
the interests of shareholders are served.
Details of the members of the Board, their
experience, expertise, qualifi cations and
independent status are profi led in the Directors’
Report on pages 29 and 30.
Responsibilities
The responsibilities of the Board include:
■ approving the Company’s goals and strategic
direction;
■ monitoring fi nancial performance, including
adopting annual budgets and approving the
Group’s fi nancial statements;
■ ensuring that adequate systems of internal
control exist and are appropriately monitored for
compliance;
■ selecting the Managing Director and reviewing
the performance of senior management; and
■ ensuring signifi cant business risks are identifi ed
and appropriately managed.
Directors’ Independence
As stated there are fi ve Directors, three of whom
are Independent Non-Executive Directors (including
the Chairman). The predominance of Independent
Non-Executive Directors clearly separates the
Board from the Company’s executive management
and enshrines board independence. The structure
also provides the Company with the benefi t of a
diverse range of experience, qualifi cations and
professional skills.
The Board has adopted the independence defi nition
suggested by the ASX Corporate Governance
Council and as such three of Super Cheap Auto’s
Directors (namely Mr Dick McIlwain, Dr Darryl
McDonough and Mr Robert Wright) are considered
to be independent by reference to that defi nition.
INDEPENDENT PROFESSIONAL ADVICE
The Board (and each individual director) is
entitled to seek independent professional advice
consistent with Corporate Governance Practices
at the Company’s expense (subject to the
reasonableness of the costs and Board consent)
in the conduct of its duties for the Company.
PERFORMANCE ASSESSMENT
The Board undertakes an annual performance
evaluation of itself that compares the performance
of the Board with the requirements of the Board
Charter, sets the goals and objectives of the
Board for the upcoming year and effects any
improvements to the Board Charter that are
necessary or desirable.
This evaluation is conducted by the Board and
includes consideration of the annual assessment
of the effectiveness of the Board as conducted
by the Board Nomination and Remuneration
Committee.
This assessment was undertaken during
May 2006.
FINANCIAL REPORTING
The Board is provided with monthly reports from
management on the fi nancial performance of the
Company. The monthly reports include details
of all key fi nancial measures reported against
budgets approved by the Board. The Company’s
fi nancial report preparation and approval process
for each fi nancial year involves both the Managing
Director and the Chief Financial Offi cer making the
following certifi cations to the Board that:
■ the Company’s fi nancial reports and
accompanying notes represent a true and fair
view in all material respects of the Company’s
fi nancial condition and operational results and
are in accordance with relevant accounting
standards;
■ the above statement is founded on a sound
system of risk management and internal
compliance and control which implements the
policies adopted by the Board; and
■ the Company’s risk management and internal
compliance and control system is operating
effi ciently and effectively in all material
respects.
BOARD COMMITTEES
The Board has established two Committees to
assist it in carrying out its responsibilities, the
Board Nomination and Remuneration Committee
and the Audit and Risk Committee.
Each Committee has its own written charter
setting out its role and responsibilities,
composition, structure, membership requirements
and the manner in which the Committee
is to operate. All matters determined by
Committees are submitted to the full Board as
recommendations for Board decision.
Minutes of committee meetings are tabled
at the subsequent Board meeting. Additional
requirements for specifi c reporting by the
committees to the Board are addressed in the
charter of the individual committees.
BOARD NOMINATION AND
REMUNERATION COMMITTEE
The current composition of the Board Nomination
and Remuneration Committee is the full Board.
The Committee Chairman is the Chairman of the
Board. The Managing Director does not have
voting rights.
The Committee operates in accordance with
its charter which is available on the Company’s
website.
The Board has charged the Board Nomination and
Remuneration Committee with responsibility to:
■ assist the Board in ensuring that it is comprised
of Directors with the appropriate mix of skills,
experiences and competencies to discharge its
mandate effectively;
■ establish procedures for the selection and
recommendation of candidates suitable for
appointment to the Board;
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
23
23
■ ensure that the Company has in place
appropriate remuneration policies designed
to meet the needs of the Company and to
enhance corporate and individual performance;
Details of these Directors’ qualifi cations and
attendance at Audit and Risk Committee meetings
are set out in the Director’s Report on pages 29
and 30.
■ review the succession planning for the Board
and senior management and report to the
Board on such issues.
The Committee advises the Board on remuneration
and incentive policies and practices generally, and
makes specifi c recommendations on remuneration
packages and other terms of employment for
executive directors, other senior executives and
non executive directors.
Each member of the senior executive team signs
a formal employment contract at the time of their
appointment covering a range of matters including
their duties, rights, responsibilities and any
entitlements on termination. The standard contract
refers to a specifi c formal job description.
AUDIT AND RISK COMMITTEE
The existence of the Audit and Risk Committee is
considered by the Company to be a key element
of its corporate governance program and part of
the Company’s commitment to best practice in the
area of corporate governance.
The Audit and Risk Committee consists of the
following Independent Non-Executive Directors:
R J Wright (Chairman)
R D McIlwain
D D McDonough
All members of the Audit and Risk Committee
are fi nancially literate and have the requisite
fi nancial expertise. Some members have an in-
depth understanding of the industry in which the
Company operates.
The Audit and Risk Committee operates in
accordance with a charter which is available on
the Company’s website.
The Audit and Risk Committee supports the
full Board and essentially acts in a review and
advisory capacity. The Committee is considered
to be a more effi cient forum than the full Board for
focusing on particular issues relevant to:
■ verifying and safeguarding the integrity of the
Company’s fi nancial reporting including the
review, assessment and approval of the half-
year fi nancial report, the annual report and all
other fi nancial information published by the
Company or released to the market;
■ establishing a sound system of risk oversight
and management, and internal control;
■ establishing a sound system of compliance
with laws and regulations, internal compliance
guidelines, policies, procedures and control
systems and prescribed internal standards of
behaviour.
This committee provides ongoing assurance in
the areas of:
■ fi nancial administration and reporting;
■ audit control and independence;
■ legal compliance;
■ accounting policies and standards;
■ internal controls; and
■ risk oversight and management.
EXTERNAL AUDITORS
The Company’s Audit and Risk Committee’s policy
is to appoint external auditors who demonstrate
quality and independence.
The Audit and Risk Committee:
■ recommends to the Board the appointment of
External Auditors and their fee;
■ reviews the performance of the External
Auditors;
2424
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
■ establishes processes to ensure the
DEALING IN SHARES
independence and competence of the External
Auditors’ Audit Managers;
■ oversees and appraises the quality of audits
conducted by the External Auditors;
■ approves External Audit yearly audit plans for
the Company and its subsidiaries and oversees
the scope of audits to be conducted;
■ ensures that no management restrictions are
placed upon access to relevant information or
personnel by External Auditors.
The performance of the External Auditor is
reviewed annually.
An analysis of fees paid to the External Auditors,
including a break-down of fees for non-audit
services, is provided in Note 28 to the fi nancial
statements. It is the policy of the External
Auditors to provide an annual declaration of their
independence to the Audit and Risk Committee.
The External Auditor is requested to attend the
annual general meeting and be available to answer
shareholder questions about the conduct of the
audit and the preparation and content of the audit
report.
CODE OF CONDUCT
The Company has developed a statement of
values and a Code of Conduct (‘the Code’) which
has been fully endorsed by the Board and applies
to all Directors and team members. The Code is
reviewed and updated as necessary to ensure it
refl ects the highest standards of behaviour and
professionalism and the practices necessary to
maintain confi dence in the Group’s integrity.
In summary, the Code requires that at all times all
company personnel act with the utmost integrity,
objectivity and in compliance with the letter and
the spirit of the law and company policies.
A copy of the Code is available on the Company’s
website.
The Company has a formal written policy for
Directors and offi cers with respect to trading in the
Company’s securities (“Trading Policy”). Directors
and senior management (and their associates) are
prohibited from engaging in short-term trading of
Company securities.
The policy also restricts the selling of Company
securities to three “window” periods (between
24 hours and 30 working days following the
release of the annual results, the release of the
half-yearly results and the close of the annual
general meeting) and such other times as the
Board permits. In addition, Directors and senior
management must notify the Chairman before they
buy or sell Company securities and confi rm once
the transaction is complete.
In all instances buying or selling Super Cheap Auto
shares is not permitted at any time by any person
who possesses price sensitive information not
available to the market.
A copy of the Trading Policy is available on the
Company’s website.
CONTINUOUS DISCLOSURE AND
SHAREHOLDER COMMUNICATION
The Company has written policies and procedures
on information disclosure that focus on continuous
disclosure of any information concerning the
Company and its controlled entities that a
reasonable person would expect to have a
material effect on the price of the Company’s
securities. These policies and procedures
also include the arrangements the Company
has in place to promote communication with
shareholders and encourage effective participation
at general meetings. A summary of these policies
and procedures is available on the Company’s
website.
The Company Secretary is the person responsible
for communications with the Australian Stock
Exchange (ASX).
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
25
25
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SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
FINANCIAL
STATEMENTS
SUPER CHEAP AUTO GROUP LIMITED
FOR THE PERIOD ENDED:
1 JULY 2006
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
27
27
DIRECTORS’ REPORT
Super Cheap Auto Group Limited
For the period ended 1 July 2006
DIRECTORS’ REPORT
Your Directors present their report on the consolidated entity consisting of Super Cheap Auto Group Limited and the entities it
controlled at the end of, or during, the period ended 1 July 2006.
Directors
The following persons were Directors of Super Cheap Auto Group Limited during the fi nancial period and up to the date of this report.
R D McIlwain
R A Rowe
D D McDonough
R J Wright
P A Birtles was appointed a director on 5 January 2006 and became Managing Director on 27 January 2006 and continues in offi ce at
the date of this report.
R E Thorn was a director from the beginning of the fi nancial year until his resignation on 27 January 2006.
Information on qualifi cations and experience of Directors is included on pages 29 and 30.
PRINCIPAL ACTIVITIES
During the period, the principal continuing activities of the consolidated entity consisted of the retailing of:
• auto parts and accessories, tools and equipment
• boating, camping and fi shing equipment
DIVIDENDS – SUPER CHEAP AUTO GROUP LIMITED
The Directors recommended a fully franked dividend of 5 cents per share be paid on 11 October 2006 (total dividend, fully franked
- $5,321,481). The following fully franked dividends of the parent entity have also been paid, declared or recommended since the end
of the preceding fi nancial year:
Dividend
2005 fi nal fully franked dividend (4.5¢ per share)
2006 interim fully franked dividend (3¢ per share)
Payment Date
12 October 2005
5 April 2006
$
4,789,333
3,192,889
7,982,222
REVIEW OF OPERATIONS
Revenue from trading operations for the year was $525,949,000. During the period, the consolidated entity opened 23 new
Supercheap Auto stores of which 16 were in Australia and 7 in New Zealand. The consolidated entity also launched the BCF store
concept in Australia - rebadging the 4 existing CampMart stores and opening a further 9 new BCF stores. At the end of the fi nancial
year, the consolidated entity was trading from 247 stores.
The net profi t of the consolidated entity for the period ended 1 July 2006, after providing for income tax, amounted to $16,510,000.
A review of the operations for the 52 weeks to 1 July 2006 is set out in pages 6 to 9 of this report.
FINANCIAL POSITION
A review of the fi nancial position of the consolidated entity is set out on pages 6 to 9.
Matters subsequent to the end of the fi nancial period
In the opinion of the Directors, there were no signifi cant matters subsequent to the end of the fi nancial period.
Likely developments and expected results of operations
Likely developments in the operations of the consolidated entity in future fi nancial years are referred to in pages 6 to 9.
2828
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
DIRECTORS’ REPORT CONTINUED
Super Cheap Auto Group Limited
For the period ended 1 July 2006
ENVIRONMENTAL REGULATION
The consolidated entity’s environmental obligations are regulated under State, Territory and Federal Law. The consolidated entity
has a policy of at least complying with its environmental performance obligations. All environmental performance obligations are
monitored by the Board. No environmental breaches have been notifi ed to the consolidated entity during the period ended 1 July
2006.
DIRECTORS AND DIRECTORS’ INTERESTS
The Directors of Super Cheap Auto Group Limited in offi ce at the date of this report are listed below together with details of their
relevant interest in the securities of the Company at that date.
R D McIlwain, BA, FAICD.
Independent Chairman – non-executive. Age 59.
R A Rowe.
Non-Executive Director. Age 62.
Experience and expertise
Independent non-executive Chairman for 2 years 3 months.
Chief Executive Offi cer of UNiTAB for 10 years to 1999 and
then Managing Director and Chief Executive Offi cer of UNiTAB
Limited for 7 years. Fellow of the Australian Institute of Company
Directors.
Other current directorships
Managing Director of UNiTAB Limited since 1999.
Chairman of Wotif.com Limited since 2006
Former directorships in the last 3 years
None.
Special responsibilities
Chairman of the Board
Chairman of the Nomination and Remuneration Committee
Member of the Audit and Risk Committee.
Interests in shares and options
158,882 ordinary shares in Super Cheap Auto Group Limited.
P A Birtles. BSc, ACA
Managing Director. Age 42.
Experience and expertise
Managing Director for 8 months. Previously Chief Financial
Offi cer for 4 years 8 months and Company Secretary for 1 year
5 months.
Other current directorships
None.
Former directorships in the last 3 years
None.
Special responsibilities
Managing Director.
Member of the Nomination and Remuneration Committee.
Interests in shares and options
1,192,089 ordinary shares held on trust and 507 ordinary shares
in Super Cheap Auto Group Limited.
200,000 options over ordinary shares in Super Cheap Auto Group
Limited.
Experience and expertise
Founder of the business in 1972. Non-executive director for 2
years 4 months. Previously 8 years as Chairman and 24 years as
Managing Director.
Other current directorships
Director of a number of private family companies.
Former directorships in the last 3 years
None.
Special responsibilities
Member of the Nomination and Remuneration Committee.
Interests in shares and options
52,402,159 ordinary shares in Super Cheap Auto Group Limited.
D D McDonough, BBus (Acty), LLB (Hons), SJD,
FCPA, FAICD.
Independent Non-Executive Director. Age 55.
Experience and expertise.
Independent Non-Executive Director for 2 years 3 months.
Partner of a major legal fi rm. Past President of the Australian
Institute of Company Directors (Queensland Division).
Other current directorships
None
Former directorships in the last 3 years
Chairman and non-executive director of Queensland Competition
Authority (director 1998-2005).
Chairman and non-executive director of Cellnet Group Limited
(director 2002-2005).
Non-executive director of Bond University Limited from
1998-2003.
Special responsibilities
Member of the Audit and Risk Committee.
Member of the Nomination and Remuneration Committee.
Interests in shares and options
50,000 ordinary shares in Super Cheap Auto Group Limited.
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
29
29
DIRECTORS’ REPORT CONTINUED
Super Cheap Auto Group Limited
For the period ended 1 July 2006
R J Wright, BCom, FCPA, MAICD.
Independent Non-Executive Director. Age 57.
Former directorships in the last 3 years
None.
Experience and expertise
Independent Non-Executive Director for 2 years 3 months.
Director of a number of major Retail companies over the last 20
years.
Other current directorships
Non-executive director of both Babcock & Brown Residential
Land Partners Limited and Babcock & Brown Residential Land
Partners Services Limited (jointly Babcock & Brown Residential
Land Partners Group) (director since 2006). Chairman and
non-executive director of Dexion Limited (director since 2005).
Non-executive director of Australian Pipeline Limited (director
since 2000), SAI Global Limited (director since 2003) and the
reconstructed Harris Scarfe Australia Limited (director since
2001).
Special responsibilities
Chairman of the Audit and Risk Committee.
Member of the Nomination and Remuneration Committee.
Interest in shares and options
40,609 ordinary shares in Super Cheap Auto Group Limited.
Company Secretary
The Company Secretary is Mr D J Kelley, B.Ec., MBA, MIIA. Mr
Kelley commenced with Super Cheap Auto Group Limited as the
Business Audit & Compliance Manager in February 2005 and was
appointed Company Secretary in January 2006.
Meetings of directors
The number of meetings of the Company’s Board of Directors and each Board Committee held during the period ended 1 July 2006 is
set out below:
R D McIlwain
R E Thorn
P A Birtles
R A Rowe
D D McDonough
R J Wright
Full meetings directors
Audit & Risk
Nomination & Remuneration
Meetings of Committees
A
14
8
5
12
13
14
B
14
9
5
14
14
14
A
3
n/a
n/a
n/a
3
3
B
3
n/a
n/a
n/a
3
3
A
4
1
4
4
4
4
B
4
2
4
4
4
4
A = Number of meetings attended
B = Number of meetings held during the time the Director held offi ce or was a member of the Committee during the year
REMUNERATION REPORT
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; and
• Additional information.
The information provided includes remuneration disclosures that are required under Accounting Standard AASB 124 Related Party
Disclosures. These disclosures have been transferred from the fi nancial report and have been audited.
3030
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
DIRECTORS’ REPORT CONTINUED
Super Cheap Auto Group Limited
For the period ended 1 July 2006
PRINCIPLES USED TO DETERMINE THE NATURE AND
AMOUNT OF REMUNERATION (AUDITED)
The broad remuneration policy is to ensure remuneration
properly refl ects the relevant person’s duties and responsibilities
and that the Group’s remuneration is competitive in attracting,
retaining and motivating people of the highest quality.
The Board believes that the best way to achieve this objective
is to provide Senior Executives with a remuneration package
consisting of fi xed components (salary and superannuation)
which refl ect the individual’s responsibilities, duties and personal
performance and a blend of short and long term incentives
which reward both individual and company performance each
year. The framework provides a mix of fi xed and variable pay. As
executives gain seniority within the group, the balance of this
mix shifts to a higher proportion of “at risk” rewards.
Non-Executive Directors
Fees and payments to Non-Executive Directors refl ect the
demands which are made on, and the responsibilities of, the
Directors. Non-Executive Directors’ fees and payments are
reviewed annually by the Board. The Chairman’s fees are
determined independently to the fees of 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 share
options. Non-Executive Directors may opt each year to receive
a percentage of their remuneration in Super Cheap Auto Group
Limited shares, which would be acquired on-market.
Directors’ fees
The current base remuneration was established on 19 May 2004.
The Directors’ fees are inclusive of Committee fees.
Non-Executive Directors’ fees are determined within an
aggregate Directors’ fee pool limit approved by shareholders.
Executive pay
The executive pay and reward framework has four components:
• base pay and benefi ts
• short-term performance incentives
• long-term incentives through participation in the Super Cheap
Auto Executive Option Plan, and
• other remuneration such as superannuation.
The combination of these comprises the executive’s total
remuneration.
Base pay
Structured as a total employment cost package which may be
delivered as a combination of cash and prescribed non-fi nancial
benefi ts at the executives’ discretion.
Executives are offered a competitive base pay that comprises
the fi xed component of pay and rewards. External remuneration
consultants provide analysis and advice to ensure base pay is
set to refl ect the market for a comparable role. Base pay for
senior executives is reviewed annually to ensure the executive’s
pay is competitive with the market. An executive’s pay is also
reviewed on promotion.
There are no guaranteed base pay increases included in any
senior executives’ contracts.
Benefi ts
Executives receive benefi ts including car allowances and salary
continuance insurance.
Short-term incentives
Should the Company achieve a pre-determined profi t target set
by the Nomination and Remuneration Committee then a short-
term incentive (STI) pool is available for allocation to executives
during the annual review. Cash incentives (bonuses) are payable
in September each year. Using a profi t target ensures variable
reward is only available when value has been created for
shareholders and when profi t is consistent with the business
plan. The incentive pool is leveraged for performance above the
threshold to provide an incentive for executive out-performance.
Each executive has a target STI opportunity depending on
the accountabilities of the role and impact on organisation
of business unit performance. The maximum target bonus
opportunity is between 40% and 50% of total base salary
dependent on the seniority of the executive.
Each year, the Nomination and Remuneration Committee
considers the appropriate targets and key performance
indicators (KPIs) to link the STI plan and the level of payout if
targets are met. This includes setting any maximum payout
under the STI plan, and minimum levels of performance to trigger
payment of STI.
For the period ended 1 July 2006, the KPIs linked to short term
incentive plans were based on group, individual business and
personal objectives. Depending on the responsibilities of the
executive, these KPIs required performance in sales growth,
gross profi t improvement, reduction of operating costs and
improvement in operating procedures. The targets are set to
ensure that reward is only available when value has been created
for shareholders and when profi t is consistent with the business
plan.
The Nomination and Remuneration Committee is responsible
for assessing whether the KPIs are met. To help make this
assessment, the Committee receives reports on performance
from management.
The STI target annual payment is reviewed annually.
DETAILS OF REMUNERATION (AUDITED)
Key management personnel of the Group
Amounts of remuneration
Details of the remuneration of the directors and key management
personnel (as defi ned in AASB 124 Related Party Disclosures)
of Super Cheap Auto Group Limited are set out in the following
tables.
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
31
31
DIRECTORS’ REPORT CONTINUED
Super Cheap Auto Group Limited
For the period ended 1 July 2006
The key management personnel of the Group includes the directors and the following executive offi cers, (being those who have
responsibility for directing strategy for the Group):
• P A Birtles, Managing Director
• D F Ajala, Chief Operating Offi cer, Super Cheap Auto
• S J Doyle, Chief Operating offi cer, BCF
• G G Carroll, Chief Financial Offi cer
• G L Chad, General Manager, Group Logistics
The highest paid executives for the period ended 1 July 2006 were as follows:
• P A Birtles
• R E Thorn (until 27 January 2006)
• D F Ajala
• S J Doyle
• G L Chad
2006
Name
Short-term benefi ts
Cash salary
and fees
Cash
bonus
Non-
monetary
benefi ts
Post-employment
benefi ts
Share-based
payment
Super-
annuation
Retirement
benefi ts
Options
$
25,000
55,046
20,000
55,046
155,092
216,698
617,073
171,939
217,454
234,075
Non-executive directors
R D McIlwain Chairman
R A Rowe
D D McDonough
R J Wright
Sub-total non-executive
directors
Executive directors
P A Birtles (a)
R E Thorn (From 3 July 2005
– 27 January 2006) (b)
Other key management personnel
P A Birtles (a)
D F Ajala (appointed
18 July 2005)
S J Doyle
G G Carroll (appointed
17 April 2006)
G L Chad (appointed
5 September 2005)
Totals
$
0
0
0
0
0
0
0
0
$
0
0
0
0
0
0
$
75,000
4,954
40,000
4,954
124,908
5,121
17,583
13,200
0
7,019
0
110,000
16,590
14,380
13,869
12,139
47,572
0
0
3,034
179,979
1,839,882
0
110,000
22,138
70,691
32,615
211,905
Total
$
100,000
60,000
60,000
60,000
280,000
$
0
0
0
0
0
43,626
265,445
(270,326)
377,530
0
178,958
15,346
15,346
263,259
385,940
6,110
56,716
0
(189,898)
234,732
2,042,580
$
0
0
0
0
0
0
0
0
0
0
0
0
0
(a) Mr P A Birtles was appointed a director on 5 January 2006. Before this appointment he was the company’s Chief Financial Offi cer
and Company Secretary. Amounts shown above include all remuneration during the reporting period, whether as a director or as
Chief Financial Offi cer and Company Secretary.
(b) Mr R E Thorn resigned as an executive offi cer of the Company on 27 January 2006. Upon resignation he was paid unused leave
entitlements of $259,140. This is included in the table above in cash salary and fees. All allocated options lapsed upon resignation.
3232
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
DIRECTORS’ REPORT CONTINUED
Super Cheap Auto Group Limited
For the period ended 1 July 2006
Cash
salary and
fees
$
100,000
188,745
54,600
54,600
397,945
2005
Name
Non-executive directors
R D McIlwain Chairman
R A Rowe (a)
D D McDonough
R J Wright
Sub-total non-executive
directors
Executive directors
R E Thorn
Other key management personnel
P A Birtles
S J Doyle
Totals
Short-term employee benefi ts
Post-employment
benefi ts
Share-based
payment
Cash
bonus
Non
monetary
benefi ts
Super-
annuation
Retirement
benefi ts
Options
$
0
0
0
0
0
$
0
0
0
0
0
$
0
5,400
5,400
5,400
16,200
Total
$
100,000
194,145
60,000
60,000
414,145
$
0
0
0
0
0
548,076
275,000
9,342
31,520
291,150
225,038
1,462,209
135,000
75,000
485,000
3,396
20,221
32,959
11,585
11,585
70,890
270,326
1,134,264
63,502
0
333,828
504,633
331,844
2,384,886
$
0
0
0
0
0
0
0
0
0
(a) Mr R A Rowe resigned as an Executive Offi cer of the Company on 5 July 2004. Upon resignation he was paid unused leave
entitlements of $134,145. This is included in the table above in cash salary and fees.
SERVICE AGREEMENTS (AUDITED)
Remuneration and other terms of employment for key
management personnel are formalised in service agreements.
Each of these agreements provide for the provision of
performance related cash bonuses, other benefi ts and when
eligible, participation in the Executive Option Plan.
All contracts with executives may be terminated early by either
party with three months notice, subject to termination payments
as detailed below:-
P A Birtles, Managing Director
Term of Agreement - 5 years commencing 27 January 2006
Base salary, inclusive of superannuation, for the period ended 1
July 2006 of $550,000 to be reviewed annually by the Nomination
and Remuneration Committee.
Payment of a termination benefi t on early termination by the
Company, other than for cause, equal to 12 months base salary
if the termination is effective more than 12 months before the
expiry date or 9 months base salary if the termination is effective
within 12 months before the expiry date.
D F Ajala, Chief Operating Offi cer, Supercheap Auto
Term of Agreement - 5 years commencing 27 January 2006
Base salary, inclusive of superannuation, for the period ended 1
July 2006 of $300,000 to be reviewed annually by the Nomination
and Remuneration Committee.
Payment of a termination benefi t on early termination by the
Company, other than for cause, equal to 6 months base salary
if the termination is effective more than 12 months before the
expiry date or 3 months base salary if the termination is effective
within 12 months before the expiry date.
S J Doyle, Chief Operating Offi cer, BCF
Term of Agreement - 5 years commencing 27 January 2006
Base salary, inclusive of superannuation, for the period ended 1
July 2006 of $275,000 to be reviewed annually by the Nomination
and Remuneration Committee.
Payment of a termination benefi t on early termination by the
Company, other than for cause, equal to 6 months base salary
if the termination is effective more than 12 months before the
expiry date or 3 months base salary if the termination is effective
within 12 months before the expiry date.
G G Carroll, Chief Financial Offi cer
Term of Agreement - 5 1/4 years commencing 17 April 2006
Base salary, inclusive of superannuation, for the period ended 1
July 2006 of $250,000 to be reviewed annually by the Nomination
and Remuneration Committee.
Payment of a termination benefi t on early termination by the
Company, other than for cause, equal to 6 months base salary
if the termination is effective more than 12 months before the
expiry date or 3 months base salary if the termination is effective
within 12 months before the expiry date.
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
33
33
DIRECTORS’ REPORT CONTINUED
Super Cheap Auto Group Limited
For the period ended 1 July 2006
SHARE BASED COMPENSATION (AUDITED)
Shares under option
Unissued ordinary shares of Super Cheap Auto Group Limited under option at the date of this report are as follows:
Grant date
19 May 2004
27 January 2006
27 January 2006
27 January 2006
17 April 2006
17 April 2006
17 April 2006
Exercise date
1 July 2007
5 January 2009
5 January 2010
5 January 2011
17 April 2009
17 April 2010
17 April 2011
Exercise Price
Value per option
at grant date
Number under option
$1.97
$2.44
$2.44
$2.44
$2.25
$2.25
$2.25
$0.68
$0.29
$0.34
$0.38
$0.43
$0.47
$0.51
200,000
400,000
200,000
200,000
75,000
75,000
100,000
1,250,000
The exercise of the options is subject to the satisfaction of a qualifying hurdle. The qualifying hurdle requires cumulative annual
growth of 10% in Earnings Per Share (pre amortisation) from the IPO Prospectus forecast Earnings Per Share (pre amortisation) for
the year ending 30 June 2005 (being 17.2 cents) through to each of the years prior to the options being exercised. The options do not
have an expiry date.
No option holder has any right under the options to participate in any other share issue of the Company or of any other entity.
Details of options over ordinary shares in the Company provided as remuneration to each Director of Super Cheap Auto Group Limited
and each of the key management personnel of the Group are set out below.
Name
Directors of Super Cheap Auto Group
R D McIlwain
R A Rowe
D D McDonough
R J Wright
P A Birtles
Other Key Management Personnel
D F Ajala
S J Doyle
G G Carroll
G L Chad
Number of options granted
during the period
Number of options vested
during the period
2006
2005
2006
2005
0
0
0
0
0
400,000
400,000
250,000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
The amounts disclosed for emoluments relating to options above is the assessed fair value at grant date of options granted to
executive directors and other executives, allocated equally over the period from grant date to vesting date. Fair values at grant date
are independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the
option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, 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.
3434
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
DIRECTORS’ REPORT CONTINUED
Super Cheap Auto Group Limited
For the period ended 1 July 2006
ADDITIONAL INFORMATION (UNAUDITED)
The level of executive rewards takes into account the performance of the Group with greater emphasis given to the current and future
years. Since listing in July 2004, dividends to shareholders have grown by approximately 23%, with revenue and store numbers
increasing by 45% and 35% respectively. On a total basis, executive management remuneration has decreased by 16% over the
last 2 years, although certain managers have had their remuneration packages increased in line with performance and additional
responsibilities.
Share-based compensation: Options
Further details relating to options are set out below.
Name
R D McIlwain
R A Rowe
D D McDonough
R J Wright
P A Birtles
D F Ajala
S J Doyle
G G Carroll
G L Chad
A
B
C
D
E
Remuneration
consisting of
options
Value at grant
date
Value at exercise
date
Value at lapse
date
Total of columns
B-D
0%
0%
0%
0%
9.8%
6%
4%
10.7%
0%
$
0
0
0
0
135,400
130,400
130,400
118,450
0
$
0
0
0
0
0
0
0
0
0
$
0
0
0
0
0
0
0
0
0
$
0
0
0
0
135,400
130,400
130,400
118,450
0
A = The percentage of the value of remuneration consisting of options, based on the value at grant date set out in column B, and the
associated share-based payment expense for the period ended 1 July 2006.
B = The value at grant date calculated in accordance with AASB 2 Share-based Payment of options granted during the year as part of
remuneration.
C = The value at exercise date of options that were granted as part of remuneration and were exercised during the year.
D = The value at lapse date of options that were granted as part of remuneration and that lapsed during the year.
Details of remuneration: cash bonuses and options
Cash bonuses are dependent on the satisfaction of performance conditions as set out in the section headed “short term incentives”
above. For each cash bonus included in the above tables, the percentage of the available bonus that was paid and the percentage
that was forfeited because the person did not meet the performance criteria are set out below. No part of the bonuses are payable in
future years.
Cash Bonus
Options
Paid
%
Forfeited
%
Year
granted
Vested
%
Forfeited
%
Financial years
in which options
may vest
Minimum total
value of grant
yet to vest
Maximum total
value of grant
yet to vest ($)
Name
P A Birtles
D F Ajala
0
0
100
100
2004
2006
S J Doyle
84
16
2006
G G Carroll
G L Chad
0
0
100
2006
100
-
-
-
-
-
-
-
-
-
-
-
2008
2009
2010
2011
2009
2010
2011
2009
2010
2011
-
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
135,400
58,200
34,100
38,100
58,200
34,100
38,100
32,175
35,475
50,800
-
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
35
35
DIRECTORS’ REPORT CONTINUED
Super Cheap Auto Group Limited
For the period ended 1 July 2006
INSURANCE OF OFFICERS
During the fi nancial year, Super Cheap Auto Group Limited paid a premium of $70,236 to insure the directors and secretaries of the
Company and its controlled entities, and the general managers of each of the divisions of the Group.
The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the
offi cers in their capacity as offi cers of entities in the Group, and any other payments arising from liabilities incurred by the offi cers
in connection with such proceedings, other than where such liabilities arise out of conduct involving a wilful breach of duty by the
offi cers or the improper use by the offi cers of their position or of information to gain advantage for themselves or someone else or to
cause detriment to the Company. It is not possible to apportion the premium between amounts relating to the insurance against legal
costs and those relating to other liabilities.
NON-AUDIT SERVICES
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise
and experience with the Company and/or the Group are important.
Details of the amounts paid or payable to the auditor (PricewaterhouseCoopers) for audit and non-audit services provided during the
year are set out below. During the 2005 year, audit services were provided by a fi rm other than PricewaterhouseCoopers.
The Board of Directors has considered the position and, in accordance with the advice received from the Audit and Risk Committee is
satisfi ed that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by
the Corporations Act 2001. The Directors are satisfi ed that the provision of non-audit services by the auditor, as set out below, did not
compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:
• all non-audit services have been reviewed by the Audit and Risk Committee to ensure they do not impact the impartiality and
objectivity of the auditor
• none of the services undermine the general principles relating to auditor independence as set out in Professional Statement F1,
including reviewing or auditing the auditor’s own work, acting in a management or a decision-making capacity for the Company,
acting as advocate for the Company or jointly sharing economic risk and rewards.
During the period the following fees were paid or payable for services provided by the auditor
of the parent entity, its related practices and non-related audit fi rms. During the 2005 period,
audit services were provided by Grant Thornton:
Assurance Services
Remuneration for audit services
Remuneration for other assurance services
Total remuneration for assurance services
Taxation Services
Total remuneration for taxation services
Advisory Services
Total remuneration for advisory services
Consolidated Entity
2006
$’000
2005
$’000
211
85
296
125
159
175
-
175
4
0
3636
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
DIRECTORS’ REPORT CONTINUED
Super Cheap Auto Group Limited
For the period ended 1 July 2006
AUDITORS INDEPENDENCE DECLARATION
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 38.
ROUNDING OF AMOUNTS
The Company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investments Commission, relating
to the “rounding off” of amounts in the Directors’ Report. Amounts in the Directors’ Report have been rounded off in accordance with
that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.
This report is made in accordance with a resolution of the Directors.
R D McIlwain
Chairman
Brisbane, 24 August 2006
P A Birtles
Director
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
37
37
AUDITORS’ INDEPENDENCE DECLARATION
Super Cheap Auto Group Limited
For the period ended 1 July 2006
3838
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
ANNUAL
FINANCIAL REPORT
SUPER CHEAP AUTO GROUP LIMITED
FOR THE PERIOD ENDED:
1 JULY 2006
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
39
39
ANNUAL FINANCIAL REPORT
Super Cheap Auto Group Limited ABN 81 108 676 204
For the period ended 1 July 2006
Income statements
Balance sheets
Statements of changes in equity
Cash fl ow statements
Notes to the fi nancial statements
Directors’ declaration
Independent audit report to the members
Page
41
42
43
44
45
90
91
This fi nancial report covers both Super Cheap Auto Group Limited as an individual entity and the consolidated entity consisting of
Super Cheap Auto Group Limited and its subsidiaries. The fi nancial report is presented in the Australian currency.
Super Cheap Auto Group Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered offi ce and
principal place of business is:
751 Gympie Road, Lawnton, Queensland, 4501
A description of the nature of the consolidated entity’s operations and its principal activities is included in the review of operations and
activities on pages 6 to 9 and in the directors’ report on pages 28 and 29, both of which are not part of this fi nancial report.
The fi nancial report was authorised for issue by the directors on 24 August 2006. The company has the power to amend and reissue
the fi nancial report.
Through the use of the internet, we have ensured that our corporate reporting is timely, complete, and available globally at minimum
cost to the company. All press releases, fi nancial reports and other information are available at our Shareholders’ Centre on our
website: www.supercheapauto.com.au.
4040
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
INCOME STATEMENTS
Super Cheap Auto Group Limited
For the period 3 July 2005 to 1 July 2006
Revenue from continuing operations
Other income
Total revenues and other income
Cost of sales of goods
Other expenses from ordinary activities
- selling and distribution
- marketing
- occupancy
- administration
Borrowing costs expense
Total expenses
Profi t before income tax
Income tax expense
Consolidated
Parent entity
Notes
5
6
2006
$’000
526,236
268
526,504
2005
$’000
470,363
214
470,577
(316,860)
(281,185)
(58,959)
(32,586)
(36,881)
(52,017)
(5,836)
(52,091)
(25,965)
(31,083)
(44,938)
(4,399)
(503,139)
(439,661)
8
23,365
(6,855)
30,916
(9,192)
2006
$’000
13,000
0
13,000
0
0
0
0
(618)
(4,237)
(4,855)
8,145
1,456
2005
$’000
9,509
0
9,509
0
0
0
0
(1,024)
(1,180)
(2,204)
7,305
327
Profi t attributable to Members of Super Cheap Auto
Group Limited
16,510
21,724
9,601
7,632
Earnings per share for profi t attributable to the
ordinary equity holders of the company:
Basic earnings per share
Diluted earnings per share
36
36
15.5
15.5
20.4
20.4
The above income statements should be read in conjunction with the accompanying notes.
Cents
Cents
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
41
41
BALANCE SHEETS
Super Cheap Auto Group Limited
As at 1 July 2006
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Total current assets
Non-current assets
Other fi nancial assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Deferred tax liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained profi ts
Total equity
Consolidated
Parent entity
Notes
2006
$’000
2005
$’000
2006
$’000
2005
$’000
9
10
11
12
13
14
15
16
17
18
19
20
22
23
24
25
25
6,372
14,158
135,021
155,551
0
49,797
5,355
58,794
6,902
14,156
123,183
144,241
0
41,511
4,708
58,350
113,946
104,569
132
96,085
0
96,217
84,234
0
0
0
84,234
45
65,909
0
65,954
84,234
0
0
0
84,234
269,497
248,810
180,451
150,188
54,925
19,041
1,725
4,681
80,372
70,000
45
6,150
76,195
50,036
84,528
696
4,032
139,292
0
42
4,879
4,921
156,567
112,930
144,213
104,597
213
16,977
1,725
0
18,915
70,000
45
0
70,045
88,960
91,491
200
59,583
467
0
60,250
0
42
0
42
60,292
89,896
84,233
(11)
28,708
84,233
184
20,180
84,233
84,233
160
7,098
184
5,479
112,930
104,597
91,491
89,896
The above balance sheets should be read in conjunction with the accompanying notes.
4242
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
STATEMENTS OF CHANGES IN EQUITY
Super Cheap Auto Group Limited
For the period ended 1 July 2006
Total equity at the beginning of the fi nancial year
Adjustment on adoption of AASB 132 and AASB 139,
net of tax, to:
Retained profi ts
Reserves
Restated total equity at the beginning of the
fi nancial year
Consolidated
Parent entity
Notes
25
25
2006
$’000
104,597
0
0
2005
$’000
84,835
0
0
2006
$’000
2005
$’000
89,896
84,226
0
0
0
0
104,597
84,835
89,896
84,226
Changes in the fair value of cash fl ow hedges, net of tax
25
Exchange differences on translation of foreign
operations
Net income recognised directly in equity
Profi t for the year
Total recognised income and expense for the year
Transactions with equity holders in their capacity as
equity holders:
Dividends provided for or paid
Employee share options
26
28
(129)
(101)
16,510
16,409
(7,982)
(94)
(8,076)
0
0
0
70
0
70
0
0
0
21,724
21,724
9,601
9,671
7,632
7,632
(2,129)
167
(1,962)
(7,982)
(2,129)
(94)
167
(8,076)
(1,962)
Total equity at the end of the fi nancial year
112,930
104,597
91,491
89,896
Total recognised income and expense for the year is
attributable to:
Members of Super Cheap Auto Group Limited
16,409
21,724
9,671
7,632
The above statements of changes in equity should be read in conjunction with the accompanying notes.
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
43
43
CASH FLOW STATEMENTS
Super Cheap Auto Group Limited
For the year ended 1 July 2006
Consolidated
Parent entity
Notes
2006
$’000
2005
$’000
2006
$’000
2005
$’000
581,016
517,279
0
0
(510,000)
(470,187)
(1,273)
(588)
Cash fl ows from operating activities
Receipts from customers (inclusive of goods and
services tax)
Payments to suppliers and employees (inclusive of
goods and services tax)
Rental payments
- external
- related parties
Income taxes paid
Net cash (outfl ow) infl ow from operating activities
35
Cash fl ows from investing activities
Payment for purchase of subsidiary, net of cash
acquired
38
Payments for property, plant and equipment
Proceeds from sale of property, plant and equipment
Proceeds from sale of service centres
(29,253)
(29,024)
(8,103)
(6,889)
26,771
0
(20,994)
158
50
(8,002)
(6,018)
4,048
(8,019)
(17,812)
45
1,084
Net cash (outfl ow) infl ow from investing activities
(20,786)
(24,702)
Cash fl ows from fi nancing activities
Proceeds from borrowings
Payments for borrowings
Interest paid
Dividends paid to company’s shareholders
26
Repayment of loans re shares
Advances to related parties
Repayments of advances to related parties
264,266
(259,000)
(3,927)
(7,982)
0
0
55
207,724
(176,598)
(3,751)
(7,129)
(7,183)
0
856
Net cash infl ow (outfl ow) from fi nancing activities
(6,588)
13,919
0
0
(6,549)
(7,822)
0
0
354
(234)
0
0
0
0
0
259,638
(231,950)
(3,604)
(7,982)
0
(6,699)
0
0
0
(6,699)
134,825
(75,250)
(2,021)
(2,129)
0
(197,402)
(48,447)
189,209
7,909
0
6,978
Net increase (decrease) in cash and cash
equivalents
Cash and cash equivalents at the beginning of the
fi nancial year
Effects of exchange rate changes on cash and cash
equivalents
Cash and cash equivalents at end of year
9
(603)
(6,735)
6,902
13,640
73
6,372
(3)
6,902
87
45
0
132
45
0
0
45
The above cash fl ow statements should be read in conjunction with the accompanying notes.
4444
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
NOTES TO THE
FINANCIAL STATEMENTS
SUPER CHEAP AUTO GROUP LIMITED
FOR THE PERIOD ENDED:
1 JULY 2006
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
45
45
NOTES TO THE FINANCIAL STATEMENTS
Super Cheap Auto Group Limited
For the period ended 1 July 2006
CONTENTS OF THE NOTES TO THE FINANCIAL STATEMENTS
1 Summary of signifi cant accounting policies
2 Financial risk management
3 Critical accounting estimates and judgements
4 Segment information
5 Revenue
6 Other income
7 Expenses
8
Income tax expense
9 Current assets - Cash and cash equivalents
10 Current assets - Trade and other receivables
11 Current assets - Inventories
12 Non-current assets - Other fi nancial assets
13 Non-current assets - Property, plant and equipment
14 Non-current assets - Deferred tax assets
15 Non-current assets - Intangible assets
16 Current liabilities - Trade and other payables
17 Current liabilities - Borrowings
18 Current liabilities – Current tax liabilities
19 Current liabilities - Provisions
20 Non-current liabilities - Borrowings
21 Financial instruments
22 Non-current liabilities - Deferred tax liabilities
23 Non-current liabilities - Provisions
24 Contributed equity
25 Reserves and retained profi ts
26 Dividends
27 Key management personnel disclosures
28 Remuneration of auditors
29 Contingencies
30 Commitments
31 Related party transactions
32 Investments in controlled entities
33 Net tangible asset backing
34 Deed of cross guarantee
35 Reconciliation of profi t from ordinary activities after income tax to net cash infl ow from operating activities
36 Earnings per share
37 Share-based payments
38 Business combinations
39 Explanation of transition to Australian equivalents to International Financial Reporting Standards (‘IFRS’)
4646
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
Page
47
54
54
55
57
57
58
59
60
60
61
61
61
63
64
65
65
66
66
66
67
71
72
72
73
74
74
78
78
79
79
80
81
81
81
82
82
84
85
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation
of the fi nancial report are set out below. These policies have
been consistently applied to all the years presented, unless
otherwise stated. The fi nancial report includes separate fi nancial
statements for Super Cheap Auto Group Limited as an individual
entity and the consolidated entity consisting of Super Cheap
Auto Group Limited and its subsidiaries.
(a) Basis of preparation
This general purpose fi nancial report has been prepared
in accordance with Australian equivalents to International
Financial Reporting Standards (AIFRSs), other authoritative
pronouncements of the Australian Accounting Standards Board,
Urgent Issues Group Interpretations and the Corporations Act
2001.
Compliance with IFRSs
Australian Accounting Standards include AIFRSs. Compliance
with AIFRSs ensures that the consolidated fi nancial statements
and notes of Super Cheap Auto Group Limited comply with
International Financial Reporting Standards (IFRSs). The parent
entity fi nancial statements and notes also comply with IFRSs
except that it has elected to apply the relief provided to parent
entities in respect of certain disclosure requirements contained
in AASB 132 Financial Instruments: Presentation and Disclosure.
Application of AASB1 First-time Adoption of Australian
Equivalents to International Financial Reporting
Standards
These fi nancial statements are the fi rst Super Cheap Auto Group
Limited fi nancial statements to be prepared in accordance with
AIFRSs. AASB1 First Time Adoption of Australian Equivalents to
International Financial Reporting Standards has been applied in
preparing these fi nancial statements.
Financial statements of Super Cheap Auto Group Limited until
2 July 2005 had been prepared in accordance with previous
Australian Generally Accepted Accounting Policies (AGAAP).
AGAAP differs in certain respects from AIFRS. When preparing
the interim fi nancial report for the half year ended 31 December
2005, management amended certain accounting and valuation
methods applied in the previous AGAAP fi nancial statements to
comply with AIFRS. With the exception of fi nancial instruments,
the comparative fi gures were restated to refl ect these
adjustments. The Group has taken the exemption available
under AASB1 to only apply AASB132 Financial Instruments:
Disclosure and Presentation and AASB139 Financial Instruments:
Recognition and Measurement from 3 July 2005.
Reconciliations and descriptions of the effect of transition from
previous AGAAP to AIFRS on the Group’s equity and its net
income are given in Note 39.
Historical cost convention
These fi nancial statements have been prepared under the
historical cost convention.
(b) Principles of consolidation
The consolidated fi nancial statements incorporate the assets
and liabilities of all entities controlled by Super Cheap Auto
Group Limited (the “Company” or “parent entity”) as at 1 July
2006 and the results of its controlled entities for the period then
ended. Super Cheap Auto Group Limited and its controlled
entities comprise the “consolidated entity”. The effects of all
transactions between entities in the consolidated entity are fully
eliminated.
Subsidiaries are all those entities (including special purpose
entities) over which the Group has the power to govern the
fi nancial and operating policies, generally accompanying a
shareholding of more than one-half of the voting rights. The
existence and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing
whether the Group controls another entity.
Where control of an entity is acquired during a fi nancial period
its results are included in the consolidated statement of fi nancial
performance from the date on which control commences. Where
control of an entity ceases during a fi nancial year its results are
included for that part of the period during which control existed.
(c) Segment reporting
A business segment is a group of assets and operations
engaged in providing products or services that are subject to
risks and returns that are different to those of other business
segments. A geographical segment is engaged in providing
products or services within a particular economic environment
and is subject to risks and returns that are different from those of
segments operating in other economic environments.
(d) Income tax
The income tax expense or revenue for the period is the tax
payable on the current period’s taxable income based on
the national income tax rate for each jurisdiction adjusted by
changes in deferred tax assets and liabilities attributable to
temporary differences between the tax bases of assets and
liabilities and their carrying amounts in the fi nancial statements,
and to unused tax losses.
Deferred tax assets and liabilities are recognised for temporary
differences at the tax rates expected to apply when the assets
are recovered or liabilities are settled, based on those tax rates
which are enacted or substantively enacted for each jurisdiction.
The relevant tax rates are applied to the cumulative amounts of
deductible and taxable temporary differences to measure the
deferred tax asset or liability. An exception is made for certain
temporary differences arising from the initial recognition of an
asset or a liability. No deferred tax asset or liability is recognised
in relation to these temporary differences if they arise in a
transaction, other than a business combination, that at the
time of the transaction did not affect either accounting profi t or
taxable profi t or loss.
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
47
47
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
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.
Deferred tax liabilities and assets are not recognised for
temporary differences between the carrying amount and tax
bases of investments in controlled entities where the parent
entity is able to control the timing of the reversal of the
temporary differences and it is probable that the differences
will not reverse in the foreseeable future.
Current and deferred tax balances attributable to amounts
recognised directly in equity are also recognised directly
in equity.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets and liabilities
and when the deferred tax balances relate to the same taxation
authority. Current tax assets and tax liabilities are offset where
the entity has a legally enforceable right to offset and intends
either to settle on a net basis, or to realise the asset and settle
the liability simultaneously.
Tax Consolidation Legislation
Super Cheap Auto Group Limited and its wholly-owned
Australian controlled entities have implemented the tax
consolidation legislation as of 1 July 2003.
The head entity, Super Cheap Auto Group Limited and the
controlled entities in the tax consolidated group continue
to account for their own current and deferred tax amounts.
These tax amounts are measured as if each entity in the tax
consolidated group continues to be a stand alone taxpayer in its
own right.
(e) Foreign currency translation
(i) Functional and presentation currency
Items included in the fi nancial statements of each of the
Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (‘the
functional currency’). The consolidated fi nancial statements
are presented in Australian dollars, which is Super Cheap Auto
Group Limited’s functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional
currency 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 year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the income
statement, except when deferred in equity as qualifying cash
fl ow hedges and qualifying net investment hedges.
Translation differences on non-monetary items such as equities
held at fair value through profi t or loss, are reported as part
of the fair value gain or loss. Translation differences on non-
monetary items, such as equities classifi ed as available-for-sale
fi nancial assets, are included in the fair value reserve in equity.
4848
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
(iii) Group companies
The results and fi nancial position of all the Group entities (none
of which has the currency of a hyperinfl ationary economy)
that have a functional currency different from the presentation
currency are translated into the presentation currency as follows:
• assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of that balance sheet;
• income and expenses for each income statement are
translated at average exchange rates (unless this is not a
reasonable approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case income and
expenses are translated at the dates of the transactions); and
• all resulting exchange differences are recognised as a separate
component of equity.
(f) Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable.
Amounts disclosed as revenue are net of returns, trade
allowances, duties and taxes paid. Revenue from the sale of
goods is recognised upon the delivery of goods to customers
pursuant to sales orders and when the associated risks and
rewards have passed to the carrier or customer. Revenue from
rendering a service is recognised upon the delivery of the service
to the customer.
(g) Trade receivables
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost, less provision for
doubtful debts. Trade receivables are due for settlement 30
days from the end of the month after sale. Collectibility of trade
receivables is reviewed on an ongoing basis. Debts which are
known to be uncollectible are written off. A provision for doubtful
receivables is established when there is objective evidence that
the Group will not be able to collect all amounts due.
(h) Inventories
Inventories are measured at the lower of cost and net realisable
value. Costs comprise direct purchase costs and an appropriate
proportion of supply chain variable and fi xed overhead
expenditure. Costs are assigned to individual items of stock
on the basis of weighted average costs. Net realisable value is
the estimated selling price in the ordinary course of business
less the estimated cost of completion and the estimated costs
necessary to make the sale.
(i) Provisions
Provisions for legal claims and service warranties are recognised
when: the Group has a present legal or constructive obligation as
a result of past events; it is probable that an outfl ow of resources
will be required to settle the obligation; and the amount has
been reliably estimated. Provisions are not recognised for future
operating losses.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
Where there are a number of similar obligations, the likelihood
that an outfl ow will be required in settlement is determined by
considering the class of obligations as a whole. A provision is
recognised even if the likelihood of an outfl ow with respect to
any one item included in the same class of obligations may
be small.
Provisions are measured at the present value of management’s
best estimate of the expenditure required to settle the present
obligation at the balance sheet date. The discount rate used to
determine the present value refl ects current market assessments
of the time value of money and the risks specifi c to the liability.
The increase in the provision due to the passage of time is
recognised as interest expense.
(j) Financial assets
From 26 June 2004 to 2 July 2005
The Group has taken the exemption available under AASB1
to apply AASB132 and AASB139 only from 3 July 2005. The
Group has applied previous AGAAP to the comparative
information on fi nancial instruments within the scope of
AASB132 and AASB 139.
Adjustments on transition date: 3 July 2005
The nature of the main adjustments to make this information
comply with AASB132 and AASB139 are that, with the exception
of held-to-maturity investments and loans and receivables which
are measured at amortised cost (refer below), fair value is the
measurement basis. Fair value is exclusive of transaction costs.
Changes in fair value are either taken to the income statement
or an equity reserve (refer below). At the date of transition (3
July 2005) changes to carrying amounts are taken to retained
earnings or reserves.
From 3 July 2005
The Group classifi es its investments in the following categories:
fi nancial assets at fair value through profi t or loss, loans and
receivables, held-to-maturity investments, and available-for-sale
fi nancial assets. The classifi cation depends on the purpose for
which the investments were acquired. Management determines
the classifi cation of its investments at initial recognition and re-
evaluates this designation at each reporting date.
(i) Financial assets at fair value through profi t or loss
This category has two sub-categories: fi nancial assets held
for trading, and those designated at fair value through profi t or
loss on initial recognition. A fi nancial asset is classifi ed in this
category if acquired principally for the purpose of selling in the
short term or if so designated by management. Derivatives are
also categorised as held for trading unless they are designated
as hedges. Assets in this category are classifi ed as current
assets if they are either held for trading or are expected to be
realised within 12 months of the balance sheet date.
(ii) Loans and receivables
Loans and receivables are non derivative fi nancial assets with
fi xed or determinable payments that are not quoted in an active
market. They arise when the Group provides money, goods
or services directly to a debtor with no intention of selling the
receivable. They are included in current assets, except for those
with maturities greater than 12 months after the balance sheet
date which are classifi ed as non-current assets. Loans and
receivables are included in receivables in the balance sheet.
(iii) Held-to-maturity investments
Held-to-maturity investments are non-derivative fi nancial assets
with fi xed or determinable payments and fi xed maturities that
the Group’s management has the positive intention and ability to
hold to maturity.
(iv) Available-for-sale fi nancial assets
Available-for-sale fi nancial assets are non-derivatives that are
either designated in this category or not classifi ed in any of the
other categories. They are included in non-current assets unless
management intends to dispose of the investment within 12
months of the balance sheet date.
Financial assets are derecognised when the rights to receive
cash fl ows from the fi nancial assets have expired or have been
transferred and the Group has transferred substantially all the
risks and rewards of ownership.
Available-for-sale fi nancial assets and fi nancial assets at fair
value through profi t and loss are subsequently carried at fair
value. Loans and receivables and held-to-maturity investments
are carried at amortised cost using the effective interest method.
Realised and unrealised gains and losses arising from changes in
the fair value of the ‘fi nancial assets at fair value through profi t or
loss’ category are included in the income statement in the period
in which they arise. Unrealised gains and losses arising from
changes in the fair value of non monetary securities classifi ed
as available-for-sale are recognised in equity in the available for
sale investments revaluation reserve. When securities classifi ed
as available for sale are sold or impaired, the accumulated fair
value adjustments are included in the income statement as gains
and losses from investment securities.
The Group assesses at each balance date whether there is
objective evidence that a fi nancial asset or group of fi nancial
assets is impaired. In the case of equity securities classifi ed as
available for sale, a signifi cant or prolonged decline in the fair
value of a security below its cost is considered in determining
whether the security is impaired. If any such evidence exists
for available-for-sale fi nancial assets, the cumulative loss
– measured as the difference between the acquisition cost and
the current fair value, less any impairment loss on that fi nancial
asset previously recognised in profi t and loss – is removed from
equity and recognised in the income statement. Impairment
losses recognised in the income statement on equity instruments
are not reversed through the income statement.
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
49
49
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
(k) Derivatives
From 26 June 2004 to 2 July 2005
The Group has taken the exemption available under AASB1
to apply AASB132 and AASB139 from 3 July 2005. The Group
has applied previous AGAAP in the comparative information
on fi nancial instruments within the scope of AASB132 and
AASB139. Under previous AGAAP derivatives were valued on
a mark to market basis and any valuation adjustments were
recognised in the Income Statement.
Adjustments on transition date: 3 July 2005
The nature of the main adjustments to make this information
comply with AASB132 and AASB139 are that derivatives are
measured on a fair value basis. Changes in fair value are either
taken to the income statement or an equity reserve (refer
below). At the date of transition (3 July 2005) changes in the
carrying amounts of derivatives are taken to retained earnings
or reserves, depending on whether the criteria for hedge
accounting are satisfi ed at the transition date.
From 3 July 2005
Derivatives are initially recognised at fair value on the date
a derivative contract is entered into and are subsequently
remeasured to their fair value. The method of recognising the
resulting gain or loss depends on whether the derivative is
designated as a hedging instrument, and if so, the nature of the
item being hedged. The Group designates certain derivatives
as either; (1) hedges of the fair value of recognised assets or
liabilities or a fi rm commitment (fair value hedge); or (2) hedges
of highly probable forecast transactions (cash fl ow hedges).
The Group documents at the inception of the transaction
the relationship between hedging instruments and hedged
items as well as its risk management objective and strategy
for undertaking various hedge transactions. The Group also
documents its assessment, both at hedge inception and on
an ongoing basis, of whether the derivatives that are used in
hedging transactions have been and will continue to be highly
effective in offsetting changes in cash fl ows of hedged items.
(i) Cash fl ow hedge
The effective portion of changes in the fair value of derivatives
that are designated and qualify as cash fl ow hedges is
recognised in equity in the hedging reserve. The gain or loss
relating to the ineffective portion is recognised immediately in the
income statement.
Amounts accumulated in equity are recycled in the income
statement in the income periods when the hedged item will
affect profi t or loss (for instance when the forecast sale that is
hedged takes place). However, when the forecast transaction
that is hedged results in the recognition of a non-fi nancial asset
(for example, inventory) or a non-fi nancial liability, the gains and
losses previously deferred in equity are transferred from equity
and included in the measurement of the initial cost or carrying
amount of the asset or liability.
When a hedging instrument expires or is sold or terminated, or
when a hedge no longer meets the criteria for hedge accounting,
any cumulative gain or loss existing in equity at the time remains
in equity and is recognised when the forecast transaction is
ultimately recognised in the income statement. When a forecast
transaction is no longer expected to occur, the cumulative gain
or loss that was reported in equity is immediately transferred to
the income statement.
(ii) Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge
accounting. Changes in the fair value of any derivative
instrument that does not qualify for hedge accounting are
recognised immediately in the income statement.
(l) Fair value estimation
The fair value of fi nancial assets and fi nancial liabilities must be
estimated for recognition and measurement or for disclosure
purposes.
The fair value of fi nancial instruments that are not traded in
an active market (for example, over-the-counter derivatives) is
determined using valuation techniques. The fair value of interest
rate swaps is calculated as the present value of the estimated
future cash fl ows. The fair value of forward exchange contracts is
determined using forward exchange market rates at the balance
sheet date.
The nominal value less estimated credit adjustments of trade
receivables and payables are assumed to approximate their
fair values. The fair value of fi nancial liabilities for disclosure
purposes is estimated by discounting the future contractual cash
fl ows at the current market interest rate that is available to the
Group for similar fi nancial instruments.
(m) Property, plant & equipment
Each class of property, plant and equipment is carried
at historical cost, less any accumulated depreciation or
amortisation.
Subsequent costs are included in the asset’s carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefi ts associated with the item
will fl ow to the Group and the cost of the item can be measured
reliably. All other repairs and maintenance are charged to the
income statement during the fi nancial period in which they are
incurred.
(n) Business combinations
The purchase method of accounting is used to account for
all acquisitions of assets (including business combinations)
regardless of whether equity instruments or other assets are
acquired. Cost is measured as the fair value of the assets given,
shares issued or liabilities incurred or assumed at the date of
exchange plus costs directly attributable to the acquisition.
Where equity instruments are issued in an acquisition, the
value of the instruments is their published market price as at
the date of exchange unless, in rare circumstances, it can be
demonstrated that the published price at the date of exchange is
an unreliable indicator of fair value and that other evidence and
5050
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
valuation methods provide a more reliable measure of fair value.
Transaction costs arising on the issue of equity instruments are
recognised directly in equity.
Identifi able assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date, irrespective
of the extent of any minority interest. The excess of the cost
of acquisition over the fair value of the Group’s share of the
identifi able net assets acquired is recorded as goodwill. If the
cost of the acquisition is less than the fair value of the net assets
of the subsidiary acquired, the difference is recognised directly
in the income statement, but only after a reassessment of the
identifi cation or measurement of the net assets acquired.
Where settlement of any part of cash consideration is deferred,
the amounts payable in the future are discounted to their present
value as at the date of exchange. The discount rate used is
the entity’s incremental borrowing rate, being the rate at which
a similar borrowing could be obtained from an independent
fi nancier under comparable terms and conditions.
(o) Impairment of assets
Assets that have an indefi nite useful life are not subject to
amortisation and are tested annually for impairment. Assets
that are subject to amortisation 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. The recoverable amount is the
higher of an asset’s fair value less costs to sell and value in use.
For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifi able cash
fl ows (cash generating units).
(p) Depreciation and amortisation of property, plant
and equipment
Depreciation and amortisation are calculated on a straight line
or diminishing value basis to allocate the cost of an item of
property, plant and equipment net of residual values over the
expected useful life of each asset to the consolidated entity.
Estimates of remaining useful lives and residual values are
reviewed and adjusted, if appropriate, at each balance sheet
date. The depreciation rates used for each class of assets are:
Plant and equipment
Depreciation rate
10% - 37.5%
Capitalised leased plant and equipment
10% – 37.5%
Motor vehicles
Computer systems
15%
25% – 37.5%
An asset’s carrying amount is written down immediately to its
recoverable amount if the asset’s carrying amount is greater than
its estimated recoverable amount.
Gains and losses on disposals are determined by comparing
proceeds with carrying amount. These are included in the income
statement. When revalued assets are sold, it is Group policy to
transfer the amounts included in other reserves in respect of
those assets to retained earnings.
(q) Leases
Leases of property, plant and equipment where the Group
has substantially all the risks and rewards of ownership are
classifi ed as fi nance leases. Finance leases are capitalised at
the lease’s inception at the lower of the fair value of the leased
property and the present value of the minimum lease payments.
The corresponding rental obligations, net of fi nance charges,
are included in other long term payables. Each lease payment
is allocated between the liability and fi nance charges so as to
achieve a constant rate on the fi nance balance outstanding. The
interest element of the fi nance cost is charged to the income
statement over the lease period so as to produce a constant
periodic rate of interest on the remaining balance of the liability
for each period. The property, plant and equipment acquired
under fi nance leases is depreciated over the shorter of the
asset’s useful life and the lease term.
Leases in which a signifi cant portion of the risks and rewards of
ownership are retained by the lessor are classifi ed as operating
leases. Payments made under operating leases (net of any
incentives received from the lessor) are charged to the income
statement on a straight-line basis over the period of the lease
term.
(r) Intangible assets
(i) Goodwill
Goodwill represents the excess of the cost of an acquisition
over the fair value of the Group’s share of the net identifi able
assets of the acquired subsidiary or business at the date of
the acquisition. Goodwill on acquisitions of subsidiaries is
included in intangible assets. Goodwill acquired in business
combinations is not amortised. Instead, goodwill is tested for
impairment annually, or more frequently if events or changes in
circumstances indicated that it might be impaired, and is carried
at cost less accumulated impairment losses. Gains and losses on
the disposal of an entity include the carrying amount of goodwill
relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose
of impairment testing. Each of those cash-generating units
represents the Group’s investment in each country of operation
by each primary reporting segment.
(ii) Other items of expenditure
Signifi cant items of expenditure, such as costs incurred in store
set-ups, are expensed in the fi nancial period in which these
costs are incurred.
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
51
51
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
(s) Trade and other payables
Trade and other creditors are payables for goods and services
provided to the consolidated entity prior to the end of the
fi nancial period and which are unpaid at that date. The amounts
are unsecured and are normally paid within sixty days of
recognition.
(t) Borrowings
Borrowings are initially recognised at fair value, net of transaction
costs incurred. Borrowings are subsequently measured at
amortised cost. Any difference between the proceeds (net of
transaction costs) and the redemption amount is recognised in
the income statement over the period of the borrowings using
the effective interest method.
(u) Contributed equity
Ordinary shares are classifi ed 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. Incremental costs directly attributable to the issue
of new shares or options, or for the acquisition of a business, are
included in the cost of the acquisition as part of the purchase
consideration.
(v) Dividends
Provision is made for the amount of any dividend declared,
being appropriately authorised and no longer at the discretion
of the entity, on or before the end of the fi nancial period but not
distributed at balance date.
(w) Employee benefi ts
(i) Wages and salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary
benefi ts and annual leave expected to be settled within 12
months of the reporting date are recognised in other payables
and are measured at the amounts expected to be paid when the
liabilities are settled. Liabilities for non-accumulating sick leave
are recognised when the leave is taken and measured at the
rates paid or payable.
(ii) Long service leave
The liability for long service leave is recognised in the provision
for employee benefi ts and 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 on
national government bonds with terms to maturity and currency
that match, as closely as possible, the estimated future cash
outfl ows.
(iii) Retirement benefi t obligations
Contributions are made by the economic entity to an employee
superannuation fund and are charged as expenses when
incurred.
(iv) Share-based payments
Share-based compensation benefi ts are provided to certain
employees via the Super Cheap Auto Executive Option Plan.
Shares options granted before 7 November 2002 and/or
vested before 1 January 2005
No options were granted before 7 November 2002 nor were any
vested before 1 January 2005.
Shares options granted after 7 November 2002 and
vested after 1 January 2005
The fair value of options granted under the Super Cheap Auto
Group Limited Executive Option Plan is recognised as an
employee benefi t expense with a corresponding increase in
equity. The fair value is measured at grant date and recognised
over the period during which the employees become
unconditionally entitled to the options.
The fair value at grant date is determined using a Black-Scholes
option pricing model that takes into account the exercise price,
the term of the option, the vesting and performance criteria,
the impact of dilution, the non-tradeable nature of the option,
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.
The fair value of the options granted excludes the impact of
any non-market vesting conditions (for example, profi tability
and sales growth targets). Non-market vesting conditions are
included in assumptions about the number of options that are
expected to become exercisable. At each balance sheet date,
the entity revises its estimate of the number of options that are
expected to become exercisable. The employee benefi t expense
recognised each period takes into account the most recent
estimate.
Upon exercise of the options, the balance of the share-based
payments reserve relating to those options is transferred to share
capital.
(v) Profi t-sharing and bonus plans
The Group recognises a liability and an expense for bonuses and
profi t-sharing based on a formula that takes into consideration
the profi t attributable to the company’s shareholders after
certain adjustments. The Group recognises a provision where
contractually obliged or where there is a past practice that has
created a constructive obligation.
(x) Borrowing costs
Borrowing costs are recognised in the period in which these
are incurred and are expensed in the period to which the costs
relate. Generally costs such as discounts and premiums incurred
in raising borrowings are amortised on an effective yield basis
over the period of the borrowing. Borrowing costs include:
5252
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
• interest on bank overdrafts and short-term and long-term
(ac) Earnings per share
borrowings;
• amortisation of discounts or premiums relating to borrowings;
• amortisation of ancillary costs incurred in connection with the
arrangement of borrowings; and
• fi nance lease charges;
(y) Cash and cash equivalents
For the purposes of the cash fl ow statement, cash includes
cash on hand, cash at bank and at call deposits with banks or
fi nancial 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 insignifi cant risk of changes in value, and bank overdrafts.
(z) Goods and Services Tax
Revenues, expenses and assets are recognised net of the
amount of goods and services tax, except where the amount
of goods and services tax incurred is not recoverable from the
Australian Tax Offi ce. In these circumstances the goods and
services tax is recognised as part of the cost of acquisition of
the asset or as part of the item of expense. Receivables and
payables in the consolidated balance sheet are shown inclusive
of goods and services tax.
Cash fl ows are presented on a gross basis. The GST
components of cash fl ows arising from investing or fi nancing
activities which are recoverable from, or payable to, the taxation
authority, are presented as operating cash fl ow.
(aa) Make good requirements in relation to leased
premises.
Make good costs arising from contractual obligations in lease
agreements are recognised as provisions at the inception of
the agreement. A corresponding asset is taken up in property,
plant and equipment at that time. Expected future payments are
discounted using appropriate market yields at reporting date.
(ab) Fair value estimation
The fair value of fi nancial assets and fi nancial liabilities must be
estimated for recognition and measurement or for disclosure
purposes.
The fair value of fi nancial instruments traded in active
markets (such as publicly traded derivatives, and trading and
available-for-sale securities) is based on quoted market prices
at the balance sheet date. The quoted market price used for
fi nancial assets held by the Group is the current bid price; the
appropriate quoted market price for fi nancial liabilities is the
current ask price.
The nominal value less estimated credit adjustments of trade
receivables and payables are assumed to approximate their
fair values. The fair value of fi nancial liabilities for disclosure
purposes is estimated by discounting the future contractual cash
fl ows at the current market interest rate that is available to the
Group for similar fi nancial instruments.
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the profi t
attributable to equity holders of the company, by the weighted
average number of ordinary shares outstanding during the
period.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the fi gures used in the
determination of basic earnings per share to take into account
the after income tax effect of interest and other fi nancing 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.
(ad) Rounding of amounts
The economic entity is of a kind referred to in Class Order
98/0100, issued by the Australian Securities and Investments
Commission, relating to the “rounding off” of amounts in the
fi nancial report. Amounts in the fi nancial report have been
rounded off in accordance with that Class Order to the nearest
thousand dollars.
(ae) New accounting standard and UIG interpretations
Certain new accounting standards and UIG interpretations
have been published that are not mandatory for 30 June 2006
reporting periods. The Group’s assessment of the impact of
these new standards and interpretations is set out below.
(i) UIG 4 Determining whether an Asset Contains a Lease
UIG 4 is applicable to annual periods beginning on or after 1
January 2006. The Group has not elected to adopt UIG 4 early.
It will apply UIG 4 in its 2007 fi nancial statements and the UIG
4 transition provisions. The Group will therefore apply UIG 4 on
the basis of facts and circumstances that existed as of 1 July
2006. Implementation of UIG 4 is not expected to change the
accounting for any of the Group’s current arrangements.
(ii) AASB 2005-9 Amendments to Australian Accounting
Standards [AASB 4, AASB 1023, AASB 139 & AASB 132]
AASB 2005-9 is applicable to annual reporting periods beginning
on or after 1 January 2006. The amendments relate to the
accounting for fi nancial guarantee contracts. The Group has not
elected to adopt the amendments early. It will apply the revised
standards in its 30 June 2007 fi nancial statements. The new
rules will be implemented retrospectively with a restatement of
the comparatives as required by AASB 108 Accounting Policies,
Changes in Accounting Estimates and Errors.
(iii) AASB 7 Financial Instruments: Disclosures and
AASB 2005-10 Amendments to Australian Accounting
Standards [AASB 132, AASB 101, AASB 114, AASB 117,
AASB 133, AASB 139, AASB 1, AASB 4, AASB 1023 &
AASB 1038]
AASB 7 and AASB 2005-10 are applicable to annual reporting
periods beginning on or after 1 January 2007. The Group has not
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
53
53
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
adopted the standards early. Application of the standards will not
affect any of the amounts recognised in the fi nancial statements,
but will impact the type of information disclosed in relation to the
Group’s fi nancial instruments.
2 FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of fi nancial risks;
market risk (including currency risk, fair value interest rate risk
and price risk), credit risk, liquidity risk and cash fl ow interest
rate risk. The Group’s overall risk management program focuses
on the unpredictability of fi nancial markets and seeks to
minimise potential adverse effects on the fi nancial performance
of the Group. The Group uses derivative fi nancial instruments
such as foreign exchange contracts and interest rate swaps to
hedge certain risk exposures.
Risk management is carried out by a central treasury department
(Group Treasury) under policies approved by the Board of
Directors. Group Treasury identifi es, evaluates and hedges
fi nancial risks in close co operation with the Group’s operating
units. The Board provides written principles for overall risk
management, as well as written policies covering specifi c areas,
such as mitigating foreign exchange, interest rate and credit
risks, use of derivative fi nancial instruments and investing excess
liquidity.
(a) Market risk
(i) Foreign exchange risk
Foreign exchange risk arises when future commercial
transactions and recognised assets and liabilities are
denominated in a currency that is not the entity’s functional
currency.
The Group operates internationally and is exposed to foreign
exchange risk arising from currency exposures to the United
States dollar and New Zealand dollar.
Forward contracts and currency options are used to manage
foreign exchange risk.
The Group’s risk management policy is to hedge up to 75%
of anticipated transactions (purchases) in US dollars for the
subsequent 4 months.
(ii) Fair value interest rate risk
Refer to (d) below.
(b) Credit risk
The Group has no signifi cant concentrations of credit risk. The
Group has policies in place to ensure that sales of products
and services are made to customers with an appropriate credit
history. Derivative counterparties and cash transactions are
limited to high credit quality fi nancial institutions.
(c) Liquidity risk
Prudent liquidity risk management implies maintaining suffi cient
cash and marketable securities, the availability of funding
through an adequate amount of committed credit facilities and
the ability to close out market positions. Due to the dynamic
nature of the underlying businesses, the Group aims at
maintaining fl exibility in funding by keeping committed credit
lines available.
(d) Cash fl ow and fair value interest rate risk
As the Group has no signifi cant interest bearing assets, the
Group’s income and operating cash fl ows are not materially
exposed to changes in market interest rates.
The Group’s interest rate risk arises from long term borrowings.
Borrowings issued at variable rates expose the Group to cash
fl ow interest rate risk. Borrowings issued at fi xed rates expose
the Group to fair value interest rate risk.
The Group manages its cash fl ow interest rate risk by using
fl oating to fi xed interest rate swaps. Such interest rate swaps
have the economic effect of converting borrowings from fl oating
rates to fi xed rates. Generally, the Group raises long term
borrowings at fl oating rates and swaps them into fi xed rates
that are lower than those available if the Group borrowed at
fi xed rates directly. Under the interest rate swaps, the Group
agrees with other parties to exchange, at specifi ed intervals
(mainly quarterly), the difference between fi xed contract rates
and fl oating rate interest amounts calculated by reference to the
agreed notional principal amounts.
3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated and are
based on historical experience and other factors, including
expectations of future events that may have a fi nancial impact
on the entity and that are believed to be reasonable under the
circumstances.
(a) Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the
future. The resulting accounting estimates will, by defi nition,
seldom equal the related actual results. The estimates and
assumptions that have a signifi cant risk of causing a material
adjustment to the carrying amounts of assets and liabilities
within the next fi nancial year are discussed below.
(i) Estimated impairment of goodwill
The Group tests annually whether goodwill has suffered any
impairment, in accordance with the accounting policy stated
in note 1(o). The recoverable amounts of cash generating units
have been determined based on value in use calculations. These
calculations require the use of assumptions. Refer to note 15
for details of these assumptions and the potential impact of
changes to the assumptions.
5454
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
4 SEGMENT INFORMATION
The consolidated entity is organised on a global basis into the following business segments:
Supercheap Auto: Retail and distribution of motor vehicle spare parts and accessories, tools and equipment.
BCF Boating, Camping and Fishing: Retail and distribution of boating, camping and fi shing equipment.
Primary reporting segment – business segment
Total
continuing
operations
Inter-segment
eliminations/
unallocated
Consolidated
2006
Sales to external customers
Inter segment sales
Total sales revenue
Other revenue/income
Total revenue and other income
Segment result (pre-borrowing costs)
Net borrowing costs
Profi t before income tax
Income tax expense
Profi t for the period
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
Acquisitions of property, plant and
equipment and other non-current
segment assets
Depreciation and amortisation expense
Other non-cash expenses
Supercheap
Auto
$’000
481,781
0
481,781
519
482,300
32,637
BCF
$’000
44,168
0
44,168
36
44,204
(3,436)
$’000
525,949
0
525,949
555
526,504
29,201
263,465
32,292
295,757
(61,015)
(35,031)
(96,046)
13,806
6,341
20,147
10,096
(134)
609
0
10,705
(134)
$’000
0
0
0
0
0
0
(5,836)
(28,410)
2,150
28,410
(88,931)
0
0
0
$’000
525,949
0
525,949
555
526,504
29,201
(5,836)
23,365
(6,855)
16,510
267,347
2,150
269,497
(67,636)
(88,931)
(156,567)
20,147
10,705
(134)
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
55
55
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
4 SEGMENT INFORMATION (CONTINUED)
Total
continuing
operations
Inter-segment
eliminations/
unallocated
Consolidated
2005
Sales to external customers
Inter segment sales
Total sales revenue
Other revenue/income
Total revenue and other income
Segment result (pre-borrowing costs)
Net borrowing costs
Profi t before income tax
Income tax expense
Profi t for the period
Segment assets
Unallocated assets
Segment liabilities
Unallocated liabilities
Total liabilities
Acquisitions of property, plant and
equipment and other non-current
segment assets
Depreciation and amortisation expense
Other non-cash expenses
Supercheap
Auto
$’000
465,048
0
465,048
432
465,480
35,758
BCF
$’000
5,097
0
5,097
0
5,097
(443)
$’000
470,145
0
470,145
432
470,577
35,315
243,943
10,942
254,885
(58,172)
(11,261)
(69,433)
17,098
7,529
24,627
8,317
239
27
0
8,344
239
$’000
0
0
0
0
0
0
(4,399)
(9,375)
3,300
9,375
(84,155)
0
0
0
$’000
470,145
0
470,145
432
470,577
35,315
(4,399)
30,916
(9,192)
21,724
245,510
3,300
(60,058)
(84,155)
(144,213)
24,627
8,344
239
Geographical segments
The consolidated entity’s divisions are operated in two main geographical areas.
Australia
The home country of the parent entity. The areas of operation are automotive as well as boating, camping and fi shing.
New Zealand
Only Supercheap Auto operates in New Zealand.
Secondary Segment – Geographical Segments
Segment Revenues from
sales to external customers
Segment Assets
Acquisitions of property,
plant and equipment,
intangibles and other
non-current segment assets
2006
$’000
472,851
53,098
525,949
2005
$’000
422,799
47,346
470,145
2006
$’000
245,566
23,931
269,497
2005
$’000
221,598
27,212
248,810
2006
$’000
18,482
1,665
20,147
2005
$’000
21,773
2,854
24,627
Australia
New Zealand
5656
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
5 REVENUE
From continuing operations
Sales revenue
Sale of goods
Other revenue
Interest
Dividends – related party
6 OTHER INCOME
Net gain on disposal of property, plant and equipment
Other income
Consolidated
Parent entity
2006
$’000
2005
$’000
2006
$’000
525,949
525,949
470,145
470,145
287
0
287
218
0
218
526,236
470,363
0
0
0
13,000
13,000
13,000
2005
$’000
0
0
9
9,500
9,509
9,509
Consolidated
Parent entity
2006
$’000
84
184
268
2005
$’000
0
214
214
2006
$’000
0
0
0
2005
$’000
0
0
0
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
57
57
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
7 EXPENSES
Profi t before income tax includes the following
specifi c gains and expenses:
Gains
Change in methodology of inventory valuation to
incorporate attributable supply chain costs
Expenses
Net loss on disposal of property, plant and equipment
Depreciation
Computer systems
Plant and equipment
Leasehold improvements
Motor vehicles
Total depreciation
Amortisation
Computer software
Borrowing costs
Interest and fi nance charges
Amount capitalised
Borrowing costs expensed
Employee benefi ts expense
Superannuation expense
Salaries and wages
Rental expense relating to operating leases
Lease expenses
Equipment hire
Total rental expense relating to operating leases
Foreign exchange gains and losses
Net foreign exchange (gains)/losses
Consolidated
Parent entity
2006
$’000
2005
$’000
2006
$’000
2005
$’000
0
0
3,434
4,814
0
317
8,565
4,718
147
2,623
3,832
81
268
6,804
2,140
1,540
5,933
(97)
5,836
5,416
85,419
90,835
35,590
991
36,581
4,634
(235)
4,399
4,753
73,459
78,212
31,665
1,035
32,700
745
(356)
0
0
0
0
0
0
0
0
4,312
(75)
4,237
12
280
292
0
0
0
9
0
0
0
0
0
0
0
0
1,415
(235)
1,180
15
296
311
0
0
0
0
5858
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
8
INCOME TAX EXPENSE
(a) Income tax expense
Current tax
Deferred tax
Under (over) provided in prior years
Deferred income tax (revenue) expense included in
income tax expense comprises:
Decrease (increase) in deferred tax assets (note 14)
(Decrease) increase in deferred tax liabilities (note 22)
(b) Numerical reconciliation of income tax expense
to prima facie tax payable
Profi t from continuing operations before income tax
expense
Tax effect of amounts which are not deductible (taxable) in
calculating taxable income:
Non-taxable dividends
Tax consolidation adjustments re NZ branch
Sundry items
Difference in overseas tax rates
Under (over) provision in prior years
Income tax expense
(c) Amounts recognised directly in equity
Aggregate current and deferred tax arising in the reporting
period and not recognised in net profi t or loss but directly
debited or credited to equity
Net deferred tax - debited (credited) directly to equity
(notes 14 and 22)
Consolidated
Parent entity
2006
$’000
7,538
(666)
(17)
6,855
(624)
(42)
(666)
2005
$’000
8,149
846
197
9,192
869
(23)
846
23,365
30,916
0
(177)
22
6,855
17
(17)
6,855
0
(415)
88
8,948
47
197
9,192
2006
$’000
(1,469)
13
0
(1,456)
13
0
13
8,145
2,444
(3,900)
0
0
(1,456)
0
0
(1,456)
2005
$’000
(550)
(37)
260
(327)
(37)
0
(37)
7,305
2,192
(2,850)
0
71
(587)
0
260
(327)
Tax at the Australian tax rate of 30% (2005 - 30%)
7,010
9,275
28
28
(72)
(72)
10
10
(72)
(72)
(d) Tax consolidation legislation
Super Cheap Auto Group Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation
legislation as of 1 July 2003. The accounting policy in relation to this legislation is set out in note 1(d).
On adoption of the tax consolidation legislation, the entities in the tax consolidated group entered into a tax sharing agreement which,
in the opinion of the directors, limits the joint and several liability of the wholly-owned entities in the case of a default by the head
entity, Super Cheap Auto Group Limited.
The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate Super Cheap
Auto Group Limited for any current tax payable assumed and are compensated by Super Cheap Auto Group Limited for any current
tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Super Cheap Auto
Group Limited under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in
the wholly-owned entities’ fi nancial statements.
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
59
59
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity,
which is issued as soon as practicable after the end of each fi nancial year. The head entity may also require payment of interim
funding amounts to assist with its obligations to pay tax instalments. The funding amounts are recognised as current intercompany
receivables or payables (see note 31).
9 CURRENT ASSETS – CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Deposits at call
Consolidated
Parent entity
2006
$’000
6,372
0
6,372
2005
$’000
6,850
52
6,902
2006
$’000
132
0
132
2005
$’000
45
0
45
The prior year deposits at call bore interest at variable rates of between 5.2% and 5.6%
10 CURRENT ASSETS – TRADE AND OTHER RECEIVABLES
Trade receivables
Provision for doubtful receivables (a)
Loans to related parties (b)
Loans to key management personnel
Other receivables
Tax receivable
Prepayments
Consolidated
Parent entity
2006
$’000
6,653
(26)
6,627
0
0
2,188
564
4,779
14,158
2005
$’000
5,988
0
5,988
0
44
3,399
0
4,725
14,156
2006
$’000
0
0
0
2005
$’000
0
0
0
95,554
65,046
0
102
0
429
96,085
0
0
0
863
65,909
Further information relating to loans to key management personnel is set out in note 27.
(a) Bad and doubtful trade receivables
The Group has recognised a loss of $27,000 (2005: $88,000) in respect of bad and doubtful trade receivables during the period ended
1 July 2006. The loss has been included in ‘other expenses’ in the income statement.
(b) Loan’s to related parties
Super Cheap Auto Group Limited provides funding to its wholly owned subsidiaries in the form of cash loans. These are repaid by the
subsidiaries as the funds become available.
6060
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
11 CURRENT ASSETS – INVENTORIES
Finished goods - at cost
12 NON-CURRENT ASSETS – OTHER FINANCIAL ASSETS
Shares in subsidiaries at cost
Name of entity
Super Cheap Auto Pty Ltd
BCF Australia Pty Ltd
Total non-current assets – shares in controlled entities
(refer Note 32)
Consolidated
Parent entity
2006
$’000
2005
$’000
135,021
123,183
2006
$’000
0
2005
$’000
0
Consolidated
Parent entity
2006
$’000
2005
$’000
2006
$’000
0
0
0
0
0
0
84,233
1
84,234
2005
$’000
84,233
1
84,234
13 NON-CURRENT ASSETS – PROPERTY, PLANT AND EQUIPMENT
Plant and equipment, at cost
Less accumulated depreciation
Net plant and equipment
Motor vehicles, at cost
Less accumulated depreciation
Net motor vehicles
Computer systems, at cost
Less accumulated depreciation
Net computer equipment
Total net property, plant and equipment
Assets pledged as security are detailed in Note 20
Consolidated
Parent entity
2006
$’000
55,498
(16,363)
39,135
1,342
(645)
697
20,468
(10,503)
9,965
49,797
2005
$’000
43,274
(11,774)
31,500
1,139
(487)
652
16,467
(7,108)
9,359
41,511
2006
$’000
2005
$’000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
61
61
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
Reconciliations – consolidated entity – 2006
Carrying amounts at 3 July 2005
Additions
Disposals
Depreciation and amortisation
Foreign currency exchange differences
Carrying amounts at 1 July 2006
Plant and
equipment
Capitalised
leased plant
and equipment
Motor
vehicles
Computer
systems
$’000
$’000
$’000
$’000
31,500
13,024
(17)
(4,814)
(558)
39,135
0
0
0
0
0
0
652
412
(40)
(317)
(10)
697
9,359
4,127
(15)
(3,434)
(72)
9,965
Plant and
equipment
Capitalised
leased plant
and equipment
Motor
vehicles
Computer
systems
$’000
$’000
$’000
$’000
Reconciliations – consolidated entity – 2005
Carrying amounts at 27 June 2004
Additions
Disposals
Additions through acquisition
Depreciation and amortisation
Foreign currency exchange differences
Carrying amounts at 2 July 2005
26,569
8,712
(130)
175
(3,832)
6
31,500
81
0
0
0
(81)
0
0
600
353
(58)
25
(268)
0
652
6262
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
Total
$’000
41,511
17,563
(72)
(8,565)
(640)
49,797
Total
$’000
34,337
13,958
(189)
203
7,087
4,893
(1)
3
(2,623)
(6,804)
0
6
9,359
41,511
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
14 NON-CURRENT ASSETS – DEFERRED TAX ASSETS
Consolidated
Parent entity
The balance comprises temporary differences attributable to:
Amounts recognised in profi t or loss
Doubtful debts
Employee benefi ts
Accruals
Inventories
Deferred borrowing/consulting costs
Deferred make good provision
Straight line lease adjustment
Deferred income
Provision for warranties and legal costs
Amounts recognised directly in equity
Cash fl ow hedges
Set off with deferred tax liabilities (note 22)
Net deferred tax assets
Movements:
Opening balance
Change on adoption of AASB 132 and AASB 139
Credited/(charged) to the income statement
Foreign exchange on translation of NZ subsidiary
Credited/(charged) to equity
Closing balance
Deferred tax assets to be recovered after more than 12 months
Deferred tax assets to be recovered within 12 months
2006
$’000
214
1,785
419
889
2
550
1,658
78
20
5,615
18
5,633
(278)
5,355
5,086
0
624
(95)
18
5,633
2,560
3,073
5,633
2005
$’000
139
1,545
721
1,081
4
353
1,145
78
20
5,086
0
5,086
(378)
4,708
5,955
0
(869)
0
0
5,086
1,498
3,588
5,086
2006
$’000
2005
$’000
0
0
24
0
0
0
0
0
0
24
0
24
(24)
0
37
0
(13)
0
0
24
0
24
24
0
0
37
0
0
0
0
0
0
37
0
37
(37)
0
0
0
37
0
0
37
0
37
37
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
63
63
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
15 NON-CURRENT ASSETS – INTANGIBLE ASSETS
Consolidated
Parent entity
2006
$’000
2005
$’000
Goodwill at cost
Less impairment charge
Net goodwill
Trademarks, at cost
Less accumulated depreciation
Net trademarks
Computer software
Less accumulated amortisation
Total net intangibles
Reconciliations – consolidated entity - 2006
Carrying amounts at 3 July 2005
Additions
Impairment/amortisation charge
Carrying amounts at 1 July 2006
Reconciliations – consolidated entity - 2005
Carrying amounts at 27 June 2004
Additions
Impairment/amortisation charge
Carrying amounts at 2 July 2005
2006
$’000
52,112
0
52,112
14
0
14
12,732
(6,064)
6,668
58,794
2005
$’000
52,112
0
52,112
14
0
14
10,143
(3,919)
6,224
58,350
0
0
0
0
0
0
0
0
0
0
Goodwill
Trademarks
Computer
Software
$’000
$’000
$’000
52,112
0
0
52,112
14
0
0
14
6,224
2,584
(2,140)
6,668
Goodwill
Trademarks
Computer
Software
$’000
$’000
$’000
45,335
6,777
0
52,112
14
0
0
14
3,873
3,892
(1,541)
6,224
0
0
0
0
0
0
0
0
0
0
Totals
$’000
58,350
2,584
(2,140)
58,794
Totals
$’000
49,222
10,669
(1,541)
58,350
(a) Impairment tests for goodwill
Goodwill is allocated to the Group’s cash generating units (CGUs) identifi ed according to business segment and country of operation.
The recoverable amount of a CGU is determined based on value in use calculations. These calculations use cash fl ow projections
based on fi nancial budgets approved by management covering a fi ve year period. Cash fl ows beyond the fi ve year period are
extrapolated using the estimated growth rates stated below. The growth rate does not exceed the long term average growth rate for
the business in which the CGU operates.
6464
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
(b) Key assumptions used for value in use calculations
No impairment loss was recognised in the 2006 fi nancial year.
The following assumptions have been used for the analysis of each CGU within the business segment. Management determined
budgeted gross margin based on past performance and its expectations for the future. The weighted average growth rates used
are consistent with forecasts included in industry reports. The discount rates used are pre tax. The factors used by each business
segment is shown below.
Supercheap Auto
BCF
Growth rate
Discount rate
2006
2005
2006
2005
%
3
5
%
3
5
%
15
15
%
15
15
In the initial two year’s of a store operating growth rate is assumed to be 10%.
16 CURRENT LIABILITIES – TRADE AND OTHER PAYABLES
Trade payables
Straight line lease adjustment
Other payables
17 CURRENT LIABILITIES – BORROWINGS
Consolidated
Parent entity
2006
$’000
36,412
5,482
13,031
54,925
2005
$’000
33,001
3,733
13,302
50,036
2006
$’000
8
0
205
213
2005
$’000
31
0
169
200
Secured
Commercial bill
Less borrowing costs capitalised, net
Total current liabilities – secured interest bearing liabilities
Unsecured
Related parties
Unsecured bank fi nancing
Total current liabilities – unsecured interest bearing liabilities
Consolidated
Parent entity
2006
$’000
19,400
(469)
18,931
1
109
110
2005
$’000
84,550
(395)
84,155
1
372
373
2006
$’000
17,250
(273)
16,977
0
0
0
2005
$’000
59,650
(67)
59,583
0
0
0
Total current liabilities – interest bearing liabilities
19,041
84,528
16,977
59,583
(a) Bills payable
Bills have been drawn as a source of short term fi nancing on a needs basis.
(b) Interest rate risk exposures
Details of the Group’s exposure to interest rate changes on borrowings are set out in note 21.
(c) Fair value disclosures
Details of the fair value of borrowings for the Group are set out in note 21.
(d) Security
Details of the security relating to each of the secured liabilities and further information on the bank overdrafts and
bank loans are set out in note 20.
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
65
65
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
18 CURRENT LIABILITIES – CURRENT TAX LIABILITIES
Income tax payable
19 CURRENT LIABILITIES – PROVISIONS
Employee benefi ts - long service leave
20 NON-CURRENT LIABILITIES – BORROWINGS
Secured
Cash advance
Consolidated
Parent entity
2006
$’000
1,725
2005
$’000
696
2006
$’000
1,725
2005
$’000
467
Consolidated
Parent entity
2006
$’000
4,681
2005
$’000
4,032
2006
$’000
0
2005
$’000
0
Consolidated
Parent entity
2006
$’000
70,000
70,000
2005
$’000
0
0
2006
$’000
70,000
70,000
2005
$’000
0
0
The facilities are secured by fi rst registered company charges over all the assets and undertakings of Super Cheap Auto Group
Limited, Super Cheap Auto Pty Ltd, Super Cheap Auto (New Zealand) Pty Ltd and BCF Australia Pty Ltd in favour of ANZ Banking
Group Limited and by cross guarantees and indemnities between Super Cheap Auto Pty Ltd and Super Cheap Auto (New Zealand) Pty
Ltd and between Super Cheap Auto Group Limited, Super Cheap Auto Pty Ltd, SCA Equity Plan and BCF Australia Pty Ltd in favour of
ANZ Banking Group Limited. Financial covenants are provided by Super Cheap Auto Group Limited with respect to leverage, gearing
and fi xed charges coverage.
The carrying amount of assets pledged as security are equal to those shown in the consolidated balance sheet.
Consolidated
Parent entity
2006
$’000
2005
$’000
2006
$’000
2005
$’000
Financing arrangements
Unrestricted access was available at balance date to the
following lines of credit:
Total facilities
- Multi-Option Facility (including commercial bill, overdraft
and cash advance)
- Indemnity/Guarantee Facility
Totals
Facilities used at balance date
- Multi-Option Facility (including commercial bill, overdraft
and cash advance)
- Indemnity/Guarantee Facility
Totals
Unused balance of facilities at balance date
- Multi-Option Facility (including commercial bill, overdraft
and cash advance)
- Indemnity/Guarantee Facility
Totals
6666
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
128,720
1,338
130,058
89,400
1,287
90,687
39,320
51
39,371
93,720
1,338
95,058
84,550
1,287
85,837
9,170
51
9,221
125,000
1,338
126,338
87,250
0
87,250
37,750
1,338
39,088
90,000
1,338
91,338
59,650
0
59,650
30,350
1,338
31,688
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
20 NON-CURRENT LIABILITIES – BORROWINGS (CONTINUED)
In addition, the Company has access to a $37.5 million (2005: $35.3 million) transactional facility for clean credit and foreign
currency dealings.
Super Cheap Auto Pty Ltd has commercial bills of $17.25 million (2005: $21.6 million) outstanding at year end which are drawn as part
of the group facility. The bank facilities may be drawn at any time.
Included in the facility above is an amount of $3.72 million for SCA Equity Plan Pty Ltd. This amount was drawn to $2.15 million
(2005: $3.3 million) at 1 July 2006.
The current interest rates on the fi nancing arrangements are:
– Multi Option Facility (including commercial bills, overdraft and cash advance)
6.93%–7.13% (2005: 5.99%–7.23%)
21 FINANCIAL INSTRUMENTS
Transition to AASB 132 and AASB 139
The Group has taken the exemption available under AASB 1 First-time Adoption of Australian Equivalents to International Financial
Reporting Standards to apply AASB 132 Financial Instruments: Disclosure and Presentation and AASB 139 Financial Instruments:
Recognition and Measurement from 1 July 2005.
Derivative fi nancial instruments
The parent entity and its controlled entity are parties to derivative fi nancial instruments in the normal course of business in order to
hedge exposures to foreign exchange and interest rate changes.
Foreign exchange contracts
The economic entity retails products including some that have been imported from South East Asia. In order to protect against
exchange rate movements, the economic entity has entered into forward exchange rate contracts to purchase United States Dollars.
The contracts are timed to mature in line with forecasted payments for imports and cover forecast purchases for the coming four
months on a rolling basis.
At balance date the following amounts were committed on foreign currency forward exchange contracts:
Buy United States Dollars and sell
Australian Dollars with maturity
- 0 to 6 months
- 7 to 12 months
Consolidated
Parent entity
2006
$’000
3,000
0
2005
$’000
4,000
0
2006
$’000
0
0
2005
$’000
0
0
Weighted average rate of contracts
70 cents
75 cents
0 cents
0 cents
The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised directly in equity.
When the cash fl ows occur, the Group adjusts the initial measurement of the component recognised in the balance sheet by the
related amount deferred in equity.
Gains and losses arising from hedging contracts terminated prior to maturity are also carried forward until the designated hedged
transaction occurs.
The following gains, losses and costs have been deferred as
at the balance date:
- realised gains
- unrealised gains
- total gains (a)
- realised losses and costs
- unrealised losses and costs
- total losses and costs (b)
Net gains/(losses and costs)
(a) Included in other payables under note 16
(b) Included in other receivables under note 10
0
60
60
0
(101)
(101)
(41)
0
0
0
0
(7)
(7)
(7)
0
0
0
0
(101)
(101)
(101)
0
0
0
0
0
0
0
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
67
67
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
21 FINANCIAL INSTRUMENTS (CONTINUED)
Interest rate swap contracts
Bank loans of the economic entity currently bear an average variable interest rate of 6.97% (2005: 7.09%). It is policy to protect part
of the loans from exposure to increasing interest rates. Accordingly, the economic entity has entered into interest rate swap contracts,
under which it is obliged to receive interest at variable rates and to pay interest at fi xed rates. The contracts are settled on a net basis
and the net amount receivable or payable at the reporting date is included in other debtors or other creditors.
The Group has entered an interest rate swap for nominal value of $15,000,000 which expires on 18 January 2008.
The contracts require settlement of net interest receivable or payable each 90 days. The settlement dates coincide with the dates on
which interest is payable on the underlying debt. Swaps currently in place cover approximately 17% (2005: 45%) of the loan principal
outstanding. The average fi xed interest rate is 6.56% (2005: 6.24%).
Interest rate risk exposures
The economic entity’s exposure to interest rate risk and the effective weighted average interest rate by maturity periods is set out in
the following table:
2006
Financial assets
Cash and deposits
Receivables
Total fi nancial assets
Notes
9
10
Weighted average rate of interest
Financial liabilities
Trade and other payables
16, 18
Related parties
Unsecured fi nancing
Commercial bill
Employee entitlements
Total fi nancial liabilities
Weighted average rate of interest
Net fi nancial assets/ (liabilities)
17
17
17, 20
19, 23
Fixed interest maturing in
Floating
interest
rate
$’000
1 year or
less
Over 1 to 5
years
More than
5 years
Non-
interest
bearing
$’000
$’000
$’000
$’000
Total
$’000
5,438
0
5,438
5.00%
0
0
0
73,931
0
73,931
6.97%
(68,493)
0
0
0
0
0
109
0
0
109
0
0
0
0
0
0
15,000
0
15,000
6.56%
(109)
(15,000)
0
0
0
0
0
0
0
0
0
0
934
14,158
15,092
6,372
14,158
20,530
51,168
51,168
1
0
0
5,902
57,071
1
109
88,931
5,902
146,111
(41,979)
(125,581)
6868
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
21 FINANCIAL INSTRUMENTS (CONTINUED)
2005
Financial assets
Cash and deposits
Receivables
Total fi nancial assets
Notes
9
10
Weighted average rate of interest
Financial liabilities
Trade and other payables
16, 18
Related parties
Unsecured fi nancing
Commercial bill
Employee entitlements
Total fi nancial liabilities
Weighted average rate of interest
17
17
17, 20
19, 23
Fixed interest maturing in
Floating
interest
rate
$’000
1 year or
less
Over 1 to 5
years
More than
5 years
Non-
interest
bearing
$’000
$’000
$’000
$’000
Total
$’000
5,855
0
5,855
5.11%
0
0
0
58,883
0
58,883
7.09%
0
0
0
0
0
372
25,272
0
25,644
6.24%
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1,047
14,156
15,203
6,902
14,156
21,058
46,999
46,999
1
0
0
5,016
52,016
1
372
84,155
5,016
136,543
(36,813)
(115,485)
Net fi nancial assets/(liabilities)
(53,028)
(25,644)
Net fair value of fi nancial assets and liabilities
On-balance sheet items
The net fair values of cash and cash equivalents and non-interest bearing monetary fi nancial assets and fi nancial liabilities of the
consolidated entity approximate the carrying amounts.
The net fair values of other monetary fi nancial assets and fi nancial liabilities of the consolidated entity are based upon market prices
where a market exists or by discounting the expected future cash fl ows by the current interest rates for assets and liabilities with
similar risk profi les.
Derivative fi nancial instruments
The net fair values of forward exchange contracts is taken as the unrealised gain or loss at balance date calculated by reference to the
current forward rates for contracts with similar maturity profi les.
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
69
69
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
21 FINANCIAL INSTRUMENTS (CONTINUED)
Carrying amounts and net fair values of fi nancial assets and
fi nancial liabilities at balance sheet date:
On-balance sheet fi nancial instruments
Financial assets
Cash and deposits
Receivables
Non-traded fi nancial assets
Financial liabilities
Trade and other payables
Commercial bill and other fi nancing
Non-traded fi nancial liabilities
Off-balance sheet fi nancial instruments
Financial assets
Forward exchange contracts *
Financial liabilities
Forward exchange contracts *
Consolidated entity
Carrying amount
Net fair value
2006
$’000
2005
$’000
2006
$’000
2005
$’000
6,372
14,158
20,530
6,902
14,156
21,058
6,372
14,158
20,530
(51,168)
(89,041)
(46,999)
(84,528)
(51,168)
(89,041)
6,902
14,156
21,058
(46,999)
(84,528)
(140,209)
(131,527)
(140,209)
(131,527)
60
(101)
0
(7)
0
0
0
0
*These amounts are unrealised gains and losses which have been included in the net carrying amount and net fair value of the on-
balance sheet fi nancial assets and liabilities.
None of the fi nancial assets and liabilities are readily traded on organised markets in the standardised form.
Where assets are carried at amounts above the net fair value these amounts have not been written down as it is intended to hold
these assets to maturity.
Net fair value is exclusive of costs that would be incurred on realisation of an asset and inclusive of costs that would be incurred on
settlement of a liability.
Credit risk
The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised fi nancial
assets is the carrying amount, net of any provisions for doubtful debts of those assets, as disclosed in the statement of fi nancial
position, and notes to the fi nancial statements.
Credit risk for derivative fi nancial instruments arises from the potential failure by counterparties to the contract to meet their
obligations. The credit risk exposure to forward exchange contracts and interest rate swaps is the net fair value of these contracts.
7070
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
22 NON-CURRENT LIABILITIES – DEFERRED TAX LIABILITIES
The balance comprises temporary differences attributable
to:
Amounts recognised in profi t or loss
Prepayments
Depreciation
Amounts recognised directly in equity
Share based payments
Cash fl ow hedges
Set-off of deferred tax liabilities of parent entity pursuant to
set-off provisions
Net deferred tax liabilities
Movements:
Opening balance
Change on adoption of AASB 132 and AASB 139
Charged/(credited) to the income statement
Charged/(credited) to equity
Foreign exchange on translation of NZ subsidiary
Closing balance
Deferred tax liabilities to be settled after more than 12 months
Deferred tax liabilities to be settled within 12 months
Consolidated
Parent entity
2006
$’000
2005
$’000
2006
$’000
2005
$’000
6
248
254
39
30
323
(278)
45
420
0
(42)
(10)
(45)
323
317
6
323
0
341
341
79
0
420
(378)
42
371
0
(23)
72
0
420
420
0
420
0
0
0
39
30
69
(24)
45
79
0
0
(10)
0
69
69
0
69
0
0
0
79
0
79
(37)
42
7
0
0
72
0
79
79
0
79
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
71
71
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
23 NON-CURRENT LIABILITIES – PROVISIONS
Make good provision
Employee benefi ts - long service leave
Consolidated
Parent entity
2006
$’000
4,929
1,221
6,150
2005
$’000
3,895
984
4,879
2006
$’000
0
0
0
2005
$’000
0
0
0
(a) Make good provision
Provision is made for costs arising from contractual obligations in lease agreements at the inception of the agreement.
(b) Movements in provisions (consolidated entity)
Opening balance as at 3 July 2005
Additional provisions recognised
Indexing of provisions
Provision released
Closing balance as at 1 July 2006
24 CONTRIBUTED EQUITY
Ordinary shares fully paid
Movement in ordinary share capital
Issue of shares on incorporation (8 April 2004)
Issue of shares on 23 April 2004
Share split on 19 May 2004
Closing balance 1 July 2006
Make good
$’000
3,895
808
287
(61)
4,929
Consolidated
Parent entity
2006
$’000
84,233
2005
$’000
84,233
2006
$’000
84,233
Number of Shares
Issue Price
1
49,697,150
56,732,471
106,429,622
1.00
1.69
-
2005
$’000
84,233
$’000
0
84,233
0
84,233
The ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the parent entity in proportion to
the number of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present, in person or by proxy, at a meeting of shareholders of the parent entity is
entitled to one vote and, upon a poll, each share is entitled to one vote.
Options over 1,050,000 ordinary shares were issued during the period, with no options being exercised during the period. Options over
1,000,000 shares lapsed during the period. Information relating to options outstanding at the end of the fi nancial period are set out in
Note 27.
7272
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
25 RESERVES AND RETAINED PROFITS
Reserves
Foreign currency translation reserve
Share based payments reserve
Hedging reserve
Movements
Foreign currency translation reserve
Balance at the beginning of the fi nancial period
Net exchange difference on translation of foreign controlled Entity
Balance at the end of the fi nancial period
Share based payments reserve
Balance at beginning of the fi nancial period
Options lapsed
Option expense
Balance at the end of the fi nancial period
Hedging reserve
Balance of beginning of the fi nancial period
Movement in reserve
Balance at the end of the fi nancial period
Retained earnings
Consolidated
Parent entity
2006
$’000
(129)
90
28
(11)
0
(129)
(129)
184
(270)
176
90
0
28
28
2005
$’000
0
184
0
184
0
0
0
17
0
167
184
0
0
0
2006
$’000
0
90
70
160
0
0
0
184
(270)
176
90
0
70
70
2005
$’000
0
184
0
184
0
0
0
17
0
167
184
0
0
0
Balance at the beginning of the fi nancial period
20,180
585
5,479
(24)
Net profi t/(loss) for the fi nancial period attributable
to shareholders of Super Cheap Auto Group Limited
Dividends provided for or paid
Retained profi ts/(losses) at the end of the fi nancial
period
Nature and purpose of reserves
16,510
(7,982)
21,724
(2,129)
9,601
(7,982)
7,632
(2,129)
28,708
20,180
7,098
5,479
(i) Hedging reserve cash fl ow hedges
The hedging reserve is used to record gains or losses on a hedging instrument in a cash fl ow hedge that are recognised directly in
equity, as described in note 1(k). Amounts are recognised in profi t and loss when the associated hedged transaction affects profi t and
loss.
(ii) Share based payments reserve
The share based payments reserve is used to recognise the fair value of options issued but not exercised.
(iii) Foreign currency translation reserve
Exchange differences arising on translation of the foreign controlled entity are taken to the foreign currency translation reserve, as
described in note 1(e). The reserve is recognised in profi t and loss when the net investment is disposed of.
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
73
73
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
26 DIVIDENDS
Ordinary shares
Dividends paid by Super Cheap Auto Group Limited during the reporting period were as
follows:
Interim dividend for the period ended 31 December 2005 of 3 cents (2005: 2 cents per
share) paid on 5 April 2006. Fully franked based on tax paid @ 30%
Final dividend for the period ended 2 July 2005 of 4.5 cents per share paid on
12 October 2005. Fully franked based on tax paid @ 30%
Total dividends provided and paid
Dividends not recognised at year end
Subsequent to year end, the Directors have recommended the payment of a fi nal
dividend of 5 cents per ordinary share (2005: 4.5 cents per ordinary share), fully franked
based on tax paid at 30%.
The aggregate amount of the dividend expected to be paid on 11 October 2006, out of
retained profi ts at 1 July 2006, but not recognised as a liability at year end, is
Franking credits
The franked portions of dividends paid after 1 July 2006 will be franked out of existing
franking credits and out of franking credits arising from the payments of income tax in
the periods ending after 1 July 2006.
Franking credits remaining at balance date available for dividends declared after the
current balance date based on a tax rate of 30%
Parent Entity
2006
$’000
3,193
4,789
7,982
2005
$’000
2,129
0
2,129
5,321
4,789
22,805
20,397
The above amounts represent the balance of the franking account as at the end of the fi nancial period, adjusted for:
• franking credits that will arise from the payment of the current tax liability; and,
• franking debits that will arise from the payment of the dividend as a liability at the reporting date.
The amount recorded above as the franking credit amount is based on the amount of Australian income tax paid or to be paid in
respect of the liability for income tax at the balance date.
The impact on the franking account of the dividend recommended by the directors since year end, but not recognised as a liability at
year end, will be a reduction in the franking account of $2,280,635 (2005: $2,053,573).
27 KEY MANAGEMENT PERSONNEL DISCLOSURES
(a) Directors
The following persons were directors of Super Cheap Auto Group Limited during the fi nancial year:
(i) Chairman (non executive)
Richard McIlwain
(ii) Executive directors
Peter Birtles, Managing Director (director from 5 January 2006)
Robert Thorn, Managing Director (from 3 July 2005 – 27 January 2006)
(iii) Non executive directors
Reginald Rowe
Robert Wright
Darryl McDonough
7474
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
27 KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED)
(b) Other key management personnel
The following persons also had authority and responsibility for planning, directing and controlling the activities of the Group, directly
or indirectly, during the fi nancial year:
Name
David Ajala
Steven Doyle
Gary Carroll
Graham Chad
Position
Employer
Chief Operating Offi cer – Supercheap Auto
Super Cheap Auto Group Limited
Chief Operating Offi cer – BCF
Chief Financial Offi cer
Super Cheap Auto Group Limited
Super Cheap Auto Group Limited
General Manager – Group Logistics
Super Cheap Auto Pty Limited
(c) Key management personnel compensation
Short-term employee benefi ts
Post-employment benefi ts
Share-based payments
Consolidated
Parent entity
2006
$
1,982,635
208,636
(189,898)
2,001,373
2005
$
1,980,168
70,890
333,828
2,384,886
2006
$
155,092
124,908
0
2005
$
397,945
16,200
0
280,000
414,145
The key management personnel remuneration in some instances has been paid by a subsidiary.
The company has taken advantage of the relief provided by ASIC Class Order 06/50 and has transferred the detailed remuneration
disclosures to the directors’ report. The relevant information can be found in the remuneration report on pages 31 to 35.
(d) Equity instrument disclosures relating to key management personnel
(i) Options provided as remuneration and shares issued on exercise of such options
Details of options provided as remuneration and shares issued on the exercise of such options, together with terms and conditions of
the options, can be found in the remuneration report on pages 31 to 35.
(ii) Option holdings
The numbers of options over ordinary shares in the company held during the fi nancial year by each director of Super Cheap Auto
Group Limited and other key management personnel of the Group, including their personally related parties, are set out below.
2006
Name
Balance at
the start
of the year
Granted
during the
year as
compensation
Exercised
during the
year
Other
changes
during the
year
Balance at
the end of
the year
Vested and
exercisable
at the end of
the year
Directors of Super Cheap Auto Group Limited
R D McIlwain
R A Rowe
D D McDonough
R E Thorn
R J Wright
P A Birtles
0
0
0
1,000,000
0
200,000
0
0
0
0
0
0
Other key management personnel of the Group
D F Ajala
S J Doyle
G G Carroll
G L Chad
0
0
0
0
400,000
400,000
250,000
0
No options are vested and unexercisable at the end of the year.
0
0
0
0
0
0
0
0
0
0
0
0
0
(1,000,000)
0
0
0
0
0
0
0
0
0
0
0
200,000
400,000
400,000
250,000
0
0
0
0
0
0
0
0
0
0
0
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
75
75
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
27 KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED)
2005
Name
Balance
at the
start of
the year
Granted
during the
year as
compensation
Exercised
during the
year
Other
changes
during the
year
Balance at
the end of
the year
Vested and
exercisable
at the end of
the year
Directors of Super Cheap Auto Group Limited
R D McIlwain
R A Rowe
R E Thorn
D D McDonough
R J Wright
0
0
1,000,000
0
0
Other key management personnel of the Group
P A Birtles
S J Doyle
200,000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1,000,000
0
0
200,000
0
0
0
0
0
0
0
0
(iii) Share holdings
The numbers of shares in the company held during the fi nancial year by each director of Super Cheap Auto Group Limited and other
key management personnel of the Group, including their personally related parties, are set out below. There were no shares granted
during the reporting period as compensation.
2006
Name
Directors of Super Cheap Auto Group Limited
Ordinary shares
R D McIlwain
R A Rowe
D D McDonough
R J Wright
R E Thorn (resigned 27 January 2006)
P A Birtles
Other key management personnel of the Group
Ordinary shares
D F Ajala
S J Doyle
G G Carroll
G L Chad
Balance at the
start of the
year
Received
during the year
on the exercise
of options
Other changes
during the year
Balance at the
end of the year
158,882
52,402,159
50,000
40,609
4,899,078
1,192,596
0
536,948
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(835,120)
0
0
(43,537)
0
0
158,882
52,402,159
50,000
40,609
4,063,958
1,192,596
0
493,411
0
0
7676
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
27 KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED)
2005
Name
Directors of Super Cheap Auto Group Limited
Ordinary shares
R D McIlwain
R A Rowe
D D McDonough
R J Wright
R E Thorn
Other key management personnel of the Group
Ordinary shares
P A Birtles
S J Doyle
Balance at
the start of
the year
Received
during the year
on the exercise
of options
Other
changes
during the
year
Balance at
the end of
the year
0
93,909,727
0
0
4,835,120
1,192,089
536,441
0
0
0
0
0
0
0
158,882
158,882
(41,507,568)
52,402,159
50,000
40,609
63,958
50,000
40,609
4,899,078
507
507
1,192,596
536,948
Aggregate amounts of each of the above types of other transactions with key management personnel of Super Cheap Auto Group
Limited:
Amounts paid to key management personnel as shareholders
Dividends
2006
$000
4,382
2005
$000
1,175
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
77
77
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
28 REMUNERATION OF AUDITORS
During the period the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices
and non-related audit fi rms. During the 2005 period, audit services were provided by Grant Thornton.
(a) Assurance Services
Audit Services
Audit and review of fi nancial reports and other audit work under the
Corporations Act 2001
Related practices of PricewaterhouseCoopers Australian fi rm
Non-PricewaterhouseCoopers audit fi rms for the audit or review of
fi nancial reports of any entity in the Group
Total remuneration for audit services
Other assurance services
PricewaterhouseCoopers Australian fi rm
IFRS accounting services
Total remuneration for other assurance services
Total remuneration for assurance services
(b) Taxation services
PricewaterhouseCoopers Australian fi rm
Consolidated
Parent entity
2006
$
2005
$
2006
$
2005
$
211,437
175,468
211,437
143,208
0
0
0
0
211,437
175,468
211,437
143,208
85,230
85,230
0
0
85,230
85,230
0
0
296,667
175,468
296,667
143,208
Tax compliance services, including review of company income tax
returns
Total remuneration for taxation services
(c) Advisory services
PricewaterhouseCoopers Australian fi rm
Due diligence
Total remuneration for advisory services
125,012
125,012
3,500
3,500
125,012
125,012
159,000
159,000
0
0
159,000
159,000
0
0
0
0
It is the Group’s policy to employ PricewaterhouseCoopers on assignments additional to their statutory audit duties where
PricewaterhouseCoopers’ expertise and experience with the Group are important. These assignments are principally tax advice and
due diligence reporting on acquisitions, or where PricewaterhouseCoopers is awarded assignments on a competitive basis. It is the
Group’s policy to seek competitive tenders for all major consulting projects.
29 CONTINGENCIES
Guarantees
Guarantees issued by the bankers of Super Cheap Auto Pty Ltd in support of
various rental arrangements for certain retail outlets.
The maximum future rental payments guaranteed amount to:
1,287
1,287
0
0
Consolidated
Parent entity
2006
$000
2005
$000
2006
$000
2005
$000
7878
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
30 COMMITMENTS
Capital commitments
Commitments for the acquisition of plant and equipment contracted for at the
reporting date but not recognised as liabilities payable:
Within one year
Later than one year but not later than fi ve years
Later than fi ve years
Total capital commitments
Lease commitments
Commitments in relation to operating lease payments under non-cancellable
operating leases are payable as follows:
Within one year
Later than one year but not later than fi ve years
Later than fi ve years
Less lease straight lining adjustment (note 16)
Total lease commitments
Future minimum lease payments expected to be received in relation to non-
cancellable sub-leases of operating leases
Remuneration commitments
Commitments for the payment of salaries and other remuneration under long-term
employment contracts in existence at the reporting date but not recognised as
liabilities, payable:
Within one year
Later than one year and not later than fi ve years
Later than fi ve years
Consolidated
Parent entity
2006
$000
2005
$000
2006
$000
2005
$000
895
0
0
895
1,694
0
0
1,694
35,222
108,548
44,136
(5,482)
28,694
87,217
45,140
(3,733)
182,424
157,318
3,641
3,889
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1,375
5,500
0
6,875
850
1,950
0
2,800
1,375
5,500
0
6,875
850
1,950
0
2,800
Amounts disclosed as remuneration commitments include commitments arising from the service contracts of key management
personnel referred to in the remuneration report on pages 31 to 35 that are not recognised as liabilities and are not included in the key
management personnel compensation.
31 RELATED PARTY TRANSACTIONS
Transactions with related parties are at arm’s length unless otherwise stated.
(a) Parent entities
The parent entity within the Group is Super Cheap Auto Group Limited, which is the ultimate Australian parent.
(b) Subsidiaries
Interests in subsidiaries are set out in note 32.
(c) Key Manaement Personnel
Disclosures relating to key management personnel are set out in note 27.
(d) Directors
The names of the persons who were Directors of Super Cheap Auto Group Limited during the fi nancial period are R D McIlwain,
R E Thorn (from 3 July 2005 to 27 January 2006), R A Rowe, R J Wright, D D McDonough and P A Birtles (appointed 5 January 2006).
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
79
79
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
31 RELATED PARTY TRANSACTIONS (CONTINUED)
(e) Amounts due from related parties
Amounts due from Directors of the consolidated entity and their director-related entities are as follows:
Consolidated
Parent entity
Amount due from:
Director – R E Thorn
– expenses to be reimbursed
Director related entities of R A Rowe
– store lease costs to be reimbursed by landlord
2006
$000
0
0
0
2005
$000
18
26
44
(f) Transactions with related parties
Aggregate amounts included in the determination of profi t from ordinary activities before income tax that resulted from transactions
with related parties:
2006
$000
2005
$000
0
0
0
0
883
13,000
0
0
0
0
1,548
9,500
8,558
6,469
62,116
235,834
(202,395)
95,555
(6,199)
151,754
(83,439)
62,116
7,324
883
6,960
1,548
0
0
0
0
0
0
0
0
0
0
0
0
Country of
Incorporation Class of Shares
Australia
New Zealand
Australia
Australia
Australia
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Equity Holding
2006
%
100
100
100
100
100
2005
%
100
100
100
100
100
Other Transactions
- store lease payments – R A Rowe related property entities
- remuneration paid to directors of the ultimate Australian
parent entity
Dividend Revenue
- dividends from subsidiaries
Tax Consolidation Legislation
- current tax payable assumed from wholly owned tax
consolidated entities
(g) Loans to/from Related Parties
Loans to Subsidiaries
- beginning of the period
- loans advanced
- loan repayments received
End of year
32 INVESTMENTS IN CONTROLLED ENTITIES
Name of Entity
Super Cheap Auto Pty Ltd(a)
Super Cheap Auto (New Zealand) Pty Ltd(b)
Super Retail Group Services Pty Ltd (previously SCA
Purchasing Pty Ltd)(b) (c)
BCF Australia Pty Ltd(a)
SCA Equity Plan Pty Ltd(b)
(a) These controlled entities have been granted relief from the necessity to prepare fi nancial reports in accordance with Class Order
98/1418 issued by the Australian Securities and Investments Commission.
(b) Investment is held directly by Super Cheap Auto Pty Ltd.
(c) During the period SCA Purchasing Pty Ltd changed its name to Super Retail Group Services Pty Ltd.
8080
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
33 NET TANGIBLE ASSET BACKING
Net tangible asset per ordinary share
Consolidated Entity
2006
Cents
51¢
2005
Cents
43¢
34 DEED OF CROSS GUARANTEE
Super Cheap Auto Group Limited, Super Cheap Auto Pty Ltd, BCF Australia Pty Ltd and SCA Equity Plan Pty Ltd are parties to a
Deed of Cross Guarantee under which each company guarantees the debts of the others. By entering into the Deed, the wholly
owned entities have been relieved from the requirement to prepare a fi nancial report and directors’ report under Class Order 98/1418
(as amended by Class Orders 98/2017, 00/0321, 01/1087, 02/0248 and 02/1017) issued by the Australian Securities and Investments
Commission.
The above companies represent a ‘Closed Group’ for the purposes of the Class Order, and as there are no other parties to the Deed of
Cross Guarantee that are controlled by Super Cheap Auto Group Limited, they also represent the ‘Extended Closed Group’.
As the consolidated fi nancial statements cover all parties to the Deed of Cross Guarantee and the members of the Extended Closed
Group are the same as the Closed Group, no separate disclosure of consolidated information for the Closed Group has been shown.
35 RECONCILIATION OF PROFIT FROM ORDINARY ACTIVITIES AFTER INCOME TAX TO NET CASH INFLOW FROM
OPERATING ACTIVITIES
Consolidated
Parent entity
Profi t from ordinary activities after related income tax
Depreciation and amortisation
Net (gain)/loss on sale of non-current assets
Non-cash employee benefi ts expense/share based
payments
Net Interest Expense
Change in operating assets and liabilities, net of effects
from the purchase of controlled entities
- (increase)/decrease in receivables
- (increase)/decrease in inventories
- increase/(decrease) in payables
- increase/(decrease) in provisions
- increase/(decrease) in deferred tax
Net cash infl ow from operating activities
2006
$000
16,510
10,705
(84)
(134)
2005
$000
21,724
8,344
147
239
5,549
4,181
2006
$000
9,601
0
0
(134)
4,237
52
(11,838)
4,735
1,920
(644)
26,771
431
(28,669)
130
(3,397)
918
4,048
(22,800)
0
1,271
0
3
(7,822)
2005
$000
7,632
0
0
239
1,180
(8,308)
0
(1,011)
0
34
(234)
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
81
81
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
36 EARNINGS PER SHARE
Basic earnings per share
Diluted earnings per share
Weighted average number of shares used as the denominator
Weighted average number of shares used as the denominator in calculating
basic earnings per share
Adjustments for calculation of diluted earnings per share options
Weighted average potential ordinary shares used as the denominator in calculating
diluted earnings per share
Reconciliations of earnings used in calculating earnings per share
Basic earnings per share
- earnings used in calculating basic earnings per share – net profi t after tax
Diluted earnings per share
- earnings used in calculating diluted earnings per share – net profi t after tax
(a) Information concerning the classifi cation of securities
Consolidated Entity
2006
Cents
15.5
15.5
2005
Cents
20.4
20.4
Consolidated Entity
2006
Number
2005
Number
106,429,622
106,429,622
49,188
0
106,478,810
106,429,622
2006
$000
2005
$000
16,510
21,724
16,510
21,724
(i) Options
Options granted are considered to be potential ordinary shares and have been included in the determination of diluted earnings per
share to the extent to which they are dilutive.
37 SHARE-BASED PAYMENTS
(a) Executive Option Plan
The Company has established the Super Cheap Auto Executive Share Option Plan (“Option Plan”) to assist in the retention and
motivation of executives of Super Cheap Auto (“Participants”). It is intended that the Option Plan will enable the Company to retain
and attract skilled and experienced executives and provide them with the motivation to enhance the success of the Company.
Under the Option Plan, options may be offered to Participants selected by the Board. Unless otherwise determined by the Board, no
payment is required for the grant of options under the Option Plan.
Subject to any adjustment in the event of a bonus issue, each option is an option to subscribe for one Share. Upon the exercise of an
option by a Participant, each Share issued will rank equally with other Shares of the Company.
Options issued under the Option Plan may not be transferred unless the Board determines otherwise. The Company has no obligation
to apply for quotation of the options on ASX. However, the Company must apply to ASX for offi cial quotation of Shares issued on the
exercise of the options.
At any one time, the total number of options on issue under the Option Plan that have neither been exercised nor lapsed will not
exceed 5.0% of the total number of shares in the capital of the Company on issue.
8282
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
37 SHARE-BASED PAYMENTS (CONTINUED)
Set out below are summaries of options granted under the plan:
Grant Date
Expiry date
Exercise
price
Balance at
start of the
year
Granted
during
the year
Exercised
during
the year
Expired
during the
year
Balance at
end of the
year
Exercisable
at end of
the year
Number
Number
Number
Number
Number
Number
Consolidated and parent entity - 2006
19 May 2004
19 May 2004
19 May 2004
27 Jan 2006
27 Jan 2006
27 Jan 2006
17 April 2006
17 April 2006
17 April 2006
Total
1 July 2007
1 July 2008
1 July 2009
5 Jan 2009
5 Jan 2010
5 Jan 2011
17 April 2009
17 April 2010
17 April 2011
$1.97
$1.97
$1.97
$2.44
$2.44
$2.44
$2.25
$2.25
$2.25
Weighted average exercise price
Consolidated and parent entity - 2005
19 May 2004
19 May 2004
19 May 2004
Total
1 July 2007
1 July 2008
1 July 2009
$1.97
$1.97
$1.97
Weighted average exercise price
700,000
250,000
250,000
0
0
0
0
0
0
0
0
0
400,000
200,000
200,000
75,000
75,000
100,000
1,200,000
1,050,000
$1.97
$2.39
700,000
250,000
250,000
1,200,000
$1.97
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
500,000
250,000
250,000
0
0
0
0
0
0
200,000
0
0
400,000
200,000
200,000
75,000
75,000
100,000
200,000
0
0
400,000
200,000
200,000
75,000
75,000
100,000
1,000,000
1,250,000
1,250,000
$1.97
$2.25
$2.25
0
0
0
0
0
700,000
250,000
250,000
700,000
250,000
250,000
1,200,000
1,200,000
$1.97
$1.97
There were no options exercised during the period.
The weighted average remaining contractual life of share options outstanding at the end of the period was 3.01 years.
Fair value of options granted
The assessed fair value at grant date of options granted during the period ended 1 July 2006 was 29 to 68 cents per option. The fair
value at grant date is independently determined using a 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.
The model inputs for options granted during the period ended 1 July 2006 included:
(a) options are granted for no consideration
(b) exercise price: $2.25, $2.44 (2005: nil)
(c) grant date: 27 January 2006 and 17 April 2006 (2005: nil)
(d) expiry date: 5 January 2009, 17 April 2009, 5 January 2010, 17 April 2010, 5 January 2011, 17 April 2011 (2005: nil)
(e) share price at grant date: $2.41, $2.32 (2005: nil)
(f) expected price volatility of the company’s shares: 20% (2005: nil)
(g) expected dividend yield: 3.5% (2005: nil)
(h) risk free interest rate: 5.6% (2005: nil).
The expected price volatility is based on the historic volatility (based on the remaining life of the options), adjusted for any expected
changes to future volatility due to publicly available information.
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
83
83
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
38 BUSINESS COMBINATIONS
Acquisition by controlled entity
On 17 January 2005, BCF Australia Pty Ltd acquired certain assets and assumed certain liabilities of the CampMart business from an
entity external to the Group.
Details of the acquisition are as follows:
Fair value of identifi able net assets acquired:
Inventory
Plant and equipment
Trade creditors
Employee entitlements
Goodwill
Cash consideration (a)
(a) Cash consideration of $6,699,000 was paid by the parent, with the remaining $1,320,000 paid by a subsidiary.
Goodwill on acquisition relates to the retail footprint and associated customer catchment area of the acquired business.
2005
$’000
2,000
203
(914)
(46)
1,243
6,776
8,019
8484
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
39 EXPLANATION OF TRANSITION TO AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING
STANDARDS (“IFRS”)
a. Reconciliation of equity reported under previous Australian Generally Accepted Accounting Principles (AGAAP) to
equity under Australian equivalents to IFRS (AIFRS).
(i) At the date of transition to AIFRS : 27 June 2004
Consolidated
Effect of
Transition to
AIFRS
Previous
AGAAP
Notes
$’000
$’000
(xi)
(xi)
(ii)(vii)
(vi)(vii)
(x)
13,640
5,394
92,513
1,633
1,206
114,386
36,257
45,349
0
5,006
0
86,612
28
5,270
0
0
0
5,298
(1,920)
3,873
0
585
0
2,538
Parent entity
Effect of
Transition
to AIFRS
Previous
AGAAP
$’000
$’000
0
0
0
1,678
0
1,678
0
0
84,233
4,876
0
89,109
0
0
0
0
0
0
0
0
0
(4,876)
0
(4,876)
AIFRS
$’000
13,668
10,664
92,513
1,633
1,206
119,684
34,337
49,222
0
5,591
0
89,150
AIFRS
$’000
0
0
0
1,678
0
1,678
0
0
84,233
0
0
84,233
Current assets
Cash assets
Receivables
Inventories
Tax Assets
Other
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Investments
Deferred tax assets
Other non-current assets
Total non-current assets
Total assets
200,998
7,836
208,834
90,787
(4,876)
85,911
Current liabilities
Payables
Interest bearing liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Deferred tax liabilities
Interest bearing liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained profi ts
Total Equity
(x)(iii)(iv)
(viii)(xi)
(ii)
(x)
(ii)
(x)(i)(v)
(xii)
46,857
35,744
0
8,643
91,244
355
21,600
797
22,752
113,996
87,002
84,233
2
2,767
87,002
2,231
5,298
0
0
7,529
(348)
0
2,822
2,474
49,088
41,042
0
8,643
98,773
7
21,600
3,619
25,226
6,199
0
0
0
6,199
355
0
0
355
(4,521)
0
0
0
(4,521)
(348)
0
0
(348)
1,678
0
0
0
1,678
7
0
0
7
10,003
123,999
6,554
(4,869)
1,685
(2,167)
84,835
84,233
(7)
84,226
0
15
(2,182)
(2,167)
84,233
17
585
84,835
84,233
0
0
84,233
0
17
(24)
(7)
84,233
17
(24)
84,226
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
85
85
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
39 EXPLANATION OF TRANSITION TO AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING
STANDARDS (“IFRS”) (CONTINUED)
(ii) At the end of last reporting period under previous AGAAP : 2 July 2005
Consolidated
Effect of
Transition to
AIFRS
Previous
AGAAP
Notes
$’000
$’000
(xi)
(x)(xi)
6,426
6,607
123,183
0
4,725
140,941
476
2,824
0
0
0
3,300
AIFRS
$’000
6,902
9,431
123,183
0
4,725
144,241
Parent entity
Previous
AGAAP
$’000
45
62,979
0
0
0
63,024
Effect of
Transition to
AIFRS
$’000
0
2,930
0
0
0
2,930
AIFRS
$’000
45
65,909
0
0
0
65,954
(ii)(vii)
45,016
(3,505)
41,511
0
0
0
(vi)(vii)
(x)
49,294
0
3,509
0
97,819
9,056
0
1,199
0
6,750
58,350
0
4,708
0
104,569
0
84,234
3,142
0
87,376
0
0
(3,142)
0
(3,142)
0
84,234
0
0
84,234
Current assets
Cash assets
Receivables
Inventories
Tax Assets
Other
Total current assets
Non-current assets
Property, plant and
equipment
Intangible assets
Investments
Deferred tax assets
Other non-current assets
Total non-current assets
Total assets
238,760
10,050
248,810
150,400
(212)
150,188
Current liabilities
Payables
Interest bearing liabilities
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Deferred tax liabilities
Interest bearing liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained profi ts
Total Equity
(iii)(iv)
(viii)(xi)
(ii)
(x)
(ii)
(x)(i)(v)
(xii)
46,045
81,228
696
4,032
132,001
341
0
984
1,325
133,326
105,434
84,233
2
21,199
105,434
3,991
3,300
0
0
7,291
(299)
0
3,895
3,596
50,036
84,528
696
4,032
139,292
42
0
4,879
4,921
10,887
144,213
(837)
104,597
0
182
(1,019)
84,233
184
20,180
(837)
104,597
200
59,583
467
0
60,250
175
0
0
175
60,425
89,975
84,233
0
5,742
89,975
0
0
0
0
0
(133)
0
0
(133)
(133)
200
59,583
467
0
60,250
42
0
0
42
60,292
(79)
89,896
0
184
(263)
84,233
184
5,479
(79)
89,896
8686
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
39 EXPLANATION OF TRANSITION TO AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING
STANDARDS (“IFRS”) (CONTINUED)
b. Reconciliation of profi t under previous AGAAP to profi t under Australian equivalents to IFRS (AIFRS)
(i) Reconciliation of profi t for the 53 weeks ended 2 July 2005
Consolidated
Parent entity
Previous
AGAAP
Effect of
Transition
to AIFRS
AIFRS
Previous
AGAAP
Effect of
Transition
to AIFRS
AIFRS
Notes
$’000
$’000
$’000
$’000
$’000
$’000
(iv)
470,279
214
470,493
84
0
84
470,363
214
470,577
0
9,509
9,509
(iv)
281,135
50
281,185
0
(ii)(iii)
(v)(vi)
(ii)
52,091
25,965
29,139
47,530
4,239
440,099
0
0
1,944
(2,592)
160
(438)
52,091
25,965
31,083
44,938
4,399
439,661
0
0
0
785
1,180
1,965
0
0
0
0
0
0
0
239
0
239
0
9,509
9,509
0
0
0
0
1,024
1,180
2,204
30,394
522
30,916
7,544
(239)
7,305
(x)
(9,831)
639
(9,192)
327
0
327
20,563
1,161
21,724
7,871
(239)
7,632
Revenue from ordinary activities
Sale of goods
Other income
Total revenues
Expenses from ordinary activities
Cost of sales of goods
Other expenses from ordinary activities
- selling and distribution
- marketing
- occupancy
- administration
Borrowing costs expense
Total expenses
Profi t from continuing operations before
income tax
Income tax expense relating to ordinary
activities
Profi t attributable to members of Super
Cheap Auto Group Limited
c. Reconciliation of cash fl ow statement for the 53 weeks
ended 2 July 2005.
The adoption of AIFRS has not resulted in any material
adjustments to the cash fl ow statement.
d. Notes to the reconciliations
(i) Foreign currency translation reserve –
consolidated only
The Group has elected to apply the exemption in AASB1 First
Time Adoption of Australian Equivalents to International Financial
Reporting Standards. The cumulative translation differences
for all foreign operations are deemed to be zero at the date of
transition to AIFRS. The effect is:
(a) At 27 June 2004
For the Group, the balance of the $2,000 credit in the foreign
currency translation reserve is reduced to nil. Retained earnings
is increased by $2,000.
(b) At 2 July 2005
For the Group, the balance of the $2,000 credit in the foreign
currency translation reserve is reduced to nil. Retained earnings
is increased by $2,000.
(ii) Provision for ‘make-good’ requirements in relation
to leased premises – consolidated only
Under previous AGAAP, the group accounted for make good
costs in relation to leased premises as they were incurred. Under
AASB137 Provisions, Contingent Liabilities and Contingent
Assets, estimates of the costs of make-good provisions that are
contractually required as part of lease agreements should be
appropriately estimated and provided for. The effect is:
(a) At 27 June 2004
For the Group there has been an increase in property, plant and
equipment of $1,953,000, an increase in liabilities of $2,822,000
and a decrease in retained earnings of $869,000.
(b) At 2 July 2005
For the Group there has been an increase in property, plant
and equipment of $2,719,000 and an increase in liabilities of
$3,895,000 and a decrease in retained earnings of $869,000,
an increase in occupancy costs of $147,000 and an increase in
borrowing costs of $160,000.
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
87
87
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
39 EXPLANATION OF TRANSITION TO AUSTRALIAN
EQUIVALENTS TO INTERNATIONAL FINANCIAL
REPORTING STANDARDS (“IFRS”) (CONTINUED)
(iii) Leases – consolidated only
Under AASB117 Leases, there is a requirement to account for
fi xed rate increases in operating leases on a straight line basis.
The effect is:
(a) At 27 June 2004
For the Group there has been an increase in straight line lease
adjustment of $1,939,000 and a decrease in retained earnings of
$1,939,000.
(b) At 2 July 2005
For the Group there has been an increase in straight line lease
adjustment of $3,733,000 and a decrease in retained earnings of
$1,949,000, and an increase in occupancy costs of $1,794,000.
(iv) Deferred revenue – consolidated only
Under AASB118 Revenue, revenue from the sale of goods shall
be recognised if an entity retains only an insignifi cant risk of
ownership. Under AIFRS, it is appropriate to recognise a liability
for future returns based on previous experience and other
relevant factors. The effect is:
(a) At 27 June 2004
For the Group there has been an increase in deferred revenue
liability of $292,000 and a decrease in retained earnings of
$292,000.
(vii) Intangible assets – software capitalised –
consolidated only
Under AASB138 Intangible Assets, software costs are to be
shown as intangibles. The effect is:
(a) At 27 June 2004
For the Group there has been an increase in intangibles of
$3,873,000 and a decrease in property, plant and equipment of
$3,873,000.
(b) At 2 July 2005
For the Group there has been an increase in intangibles of
$6,224,000 and a decrease in property, plant and equipment of
$6,224,000.
(viii) Interest bearing liabilities – borrowings –
consolidated and parent
The Group has elected to apply the exemption from restatement
of comparatives for AASB 132 Financial Instruments: Disclosure
and Presentation and AASB 139 Financial Instruments:
Recognition and Measurement. It has therefore continued to
apply the previous AGAAP rules to derivatives, fi nancial assets
and fi nancial liabilities and also to hedge relationships for
the period ended 2 July 2005. The adjustments required for
differences between previous AGAAP and AASB 132 and AASB
139 have been determined and recognised at 2 July 2005.
In accordance with AASB139 Financial Instruments, prepaid
interest expense and capitalised transaction costs have been
netted against gross borrowings. The effect is:
(b) At 2 July 2005
For the Group there has been an increase in deferred revenue
liability of $258,000 and a decrease in retained earnings of
$92,000, a decrease in sales of $84,000 and a decrease in cost of
sales of goods of $50,000.
(a) At 27 June 2004
No impact.
(b) At 2 July 2005
No impact.
(v) Share-based payments – consolidated and parent
Under AASB2 Share-based Payment, from 1 July 2004 the Group
is required to recognise an expense for those options that were
issued to employees under the Share Option Plan. The effect is:
(a) At 27 June 2004
For the Group and parent there has been an increase in reserves
of $24,000 and a decrease in retained earnings of $24,000.
(b) At 2 July 2005
For the Group and parent there has been an increase in reserves
of $263,000 and a decrease in retained earnings of $24,000, and
an increase in administration costs of $239,000.
(vi) Intangible assets – goodwill impairment –
consolidated only
Under AASB3 Business Combinations, amortisation of goodwill
is prohibited and is replaced by annual impairment testing
focussing on the cash fl ows of the related cash generating unit.
The effect is:
(a) At 27 June 2004
No impact.
(b) At 2 July 2005
For the Group there has been an increase in intangibles of
$2,832,000 and a decrease in administration costs of $2,832,000.
8888
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
(c) At 3 July 2005
For the Group there has been decrease in borrowings of
$1,450,000 and a decrease in prepayments of $1,450,000.
(ix) Business combinations
In accordance with AASB3 Business Combinations, the group
has elected not to restate business combinations occurring prior
to the transition date.
(x) Deferred tax assets and deferred tax liabilities
– consolidated and parent
Under AASB112 Income Taxes, deferred tax balances are
determined using the balance sheet method which calculates
temporary differences based on the carrying amounts of an
entity’s assets and liabilities in the balance sheet and their
associated tax basis. The effect is:
(a) At 27 June 2004
For the Group there has been an increase in deferred tax assets
of $1,542,000, an increase in deferred tax liabilities of $609,000,
an increase in retained earnings of $940,000 and an increase in
reserves of $7,000.
For the parent there has been an increase in deferred tax
liabilities of $7,000 and a decrease in reserves of $7,000.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
(b) At 2 July 2005
For the Group there has been an increase in deferred tax assets
of $2,422,000, an increase in deferred tax liabilities of $924,000,
an increase in retained earnings of $940,000 and decrease in
reserves of $79,000, and a decrease in tax expense of $639,000.
(b) At 2 July 2005
There is no effect on the Group. For the parent entity, deferred
tax liabilities decreased by $1,750,000, deferred tax assets
decreased by $3,105,000 and inter company receivables
increased by $2,930,000.
For the parent there has been an increase in deferred tax
liabilities of $79,000 and a decrease in reserves of $79,000.
Under AIFRS, deferred tax assets and liabilities are offset for
matching tax jurisdictions. The effect of this is as follows:
Super Cheap Auto Group Limited and its wholly-owned
Australian controlled entities implemented the tax consolidation
legislation as of 1 July 2003. Under previous AGAAP, the parent
entity recognised current and deferred tax amounts relating
to transactions, events and balances of the tax consolidated
entities as if those transactions, events and balances were its
own.
Under AIFRS, the parent entity only recognises the current tax
payable and deferred tax assets arising from unused tax losses
and unused tax credits assumed from controlled entities in the
tax consolidated group. The effect is:
(a) At 27 June 2004
There is no effect on the Group. For the parent entity, deferred
tax liabilities decreased by $355,000, deferred tax assets
decreased by $4,876,000 and inter company payables decreased
by $4,521,000.
(a) At 27 June 2004
For the Group, deferred tax liabilities decreased by $957,000 and
deferred tax assets decreased by $957,000.
For the parent, there was no effect.
(b) At 2 July 2005
For the Group, deferred tax liabilities decreased by $378,000 and
deferred tax assets decreased by $378,000.
For the parent, deferred tax liabilities decreased by $37,000 and
deferred tax assets decreased by $37,000.
(xi) SCA Equity Plan Pty Ltd – consolidated only
Under UIG112, SCA Equity Plan Pty Ltd is required to be
included in the Group consolidation. The effect is:
(a) At 27 June 2004
Increase in cash of $28,000, increase in receivables of
$5,270,000, and an increase in interest bearing liabilities of
$5,298,000.
(b) At 2 July 2005
Increase in cash of $476,000, increase in receivables of
$2,824,000 and an increase in interest bearing liabilities of
$3,300,000.
(xii) Retained earnings.
The effect on retained earnings of the charges set out above are as follows:
Foreign currency translation reserve
Straight line lease provision
Lease make-good provisions
Share-based payments
Deferred tax balances
Deferred revenue
Goodwill
Total adjustment
Group
Parent
26 June
2004
$’000
2
(1,939)
(869)
(17)
933
(292)
0
Notes
(i)
(iii)
(ii)
(v)(x)
(x)
(iv)
(vi)
2 July
2005
$’000
2
(3,733)
(1,176)
(184)
1,498
(258)
2,832
(2,182)
(1,019)
26 June
2004
$’000
0
0
0
(17)
(7)
0
0
(24)
2 July
2005
$’000
0
0
0
(184)
(79)
0
0
(263)
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
89
89
DIRECTOR’S DECLARATION
Super Cheap Auto Group Limited
For the period ended 1 July 2006
In the directors’ opinion:
(a) the fi nancial statements and notes set out on pages 39 to 89 are in accordance with the Corporations Act 2001, including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
(ii) giving a true and fair view of the company’s and consolidated entity’s fi nancial position as at 1 July 2006 and of its performance,
as represented by the results of their operations, changes in equity and their cash fl ows, for the fi nancial period ended on that
date; and
(b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable;
and
(c) the audited remuneration disclosures set out on pages 31 to 35 of the directors’ report comply with Accounting Standards AASB
124 Related Party Disclosures and the Corporations Regulations 2001; and
(d) at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group identifi ed
in note 34 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 34.
The directors have been given the declarations by the managing director and chief fi nancial offi cer required by section 295A of the
Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
RD McIlwain
Director
Brisbane, 24 August 2006
P A Birtles
Director
9090
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
AUDIT REPORT
Super Cheap Auto Group Limited
For the period ended 1 July 2006
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
91
91
AUDIT REPORT (CONTINUED)
Super Cheap Auto Group Limited
For the period ended 1 July 2006
9292
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SHAREHOLDER INFORMATION
Super Cheap Auto Group Limited
For the period ended 1 July 2006
The shareholder information set out below was applicable as at 24 August 2006.
A. Distribution of equity securities
Analysis of numbers of equity security holders by size of holding:
1 – 1000
1,001 – 5,000
5, 001 – 10,000
10, 001 – 100,000
100, 001 and over
Ordinary Shareholders
Optionholders
983
1,336
314
269
49
2,951
3
3
There were 81 holders of less than a marketable parcel of ordinary shares.
B. Equity security holders
The names of the twenty largest holders of quoted equity securities are listed below:
Name
SCA FT Pty Ltd
Westpac Custodian Nominees Limited
ANZ Nominees Limited (Cash Income A/C)
J P Morgan Nominees Australia Limited
National Nominees Limited
Suncorp Custodian Services Pty Limited (AET)
SCA Equity Plan Pty Ltd
Robert Edward Thorn
Citicorp Nominees Pty Ltd (CFS Developing Companies A/C)
UBS Wealth Management Australia Nominees Pty Ltd
Geomar Superannuation Pty Ltd
Cogent Nominees Pty Limited (SMP Accounts)
HSBC Custody Nominees (Australia) Limited
Victorian Workcover Authority
Mr Rakesh Tulshyan & Mrs Seema Tulshyan (BTML A/C)
Ankit Pty Ltd (Tulshyan Family Account)
Bond Street Custodians Limited (SJM - 143800 A/C)
Bond Street Custodians Limited (SJM - 143796 A/C)
Bond Street Custodians Limited (SJM - 143825 A/C)
Bond Street Custodians Limited (SJM - 143812 A/C)
Ordinary shares
Number held
52,402,159
Percentage of
issued shares
49.24%
4,125,523
3,889,803
3,440,353
3,387,796
3,311,930
2,719,628
2,499,493
1,703,720
1,620,000
1,470,000
1,329,569
970,220
712,800
709,637
703,918
535,391
535,391
535,391
535,391
3.88%
3.65%
3.23%
3.18%
3.11%
2.56%
2.35%
1.60%
1.52%
1.38%
1.25%
0.91%
0.67%
0.67%
0.66%
0.50%
0.50%
0.50%
0.50%
87,138,113
81.87%
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
93
93
9494
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
Cairns (Earlville) (07) 4033 0600
VICTORIA
SUPERCHEAP AUTO
AUSTRALIAN
CAPITAL TERRITORY
Belconnen (02) 6253 5660
Fyshwick (02) 6239 2333
Tuggeranong (02) 6293 2233
NEW SOUTH WALES
Albury (02) 6041 1866
Auburn (02) 9648 5722
Bankstown (02) 9709 6500
Bathurst (02) 6331 7122
Blacktown (02) 9676 1444
Bondi Junction (02) 9389 3968
Brookvale (02) 9905 5666
Campbelltown (02) 4625 9000
Coffs Harbour (02) 6651 8550
Dapto (02) 4260 9120
Dubbo (02) 6882 0611
Erina (02) 4367 4850
Fairy Meadow (02) 4225 2366
Glendale (02) 4954 6066
Goulburn (02) 4822 9190
Grafton (02) 6642 7222
Griffi th (02) 6962 9566
Inverell (02) 6722 5466
Kotara (02) 4965 5488
Lake Haven (02) 4392 7077
Lake Road (02) 6581 5778
Lakemba (02) 9740 9999
Lismore (02) 6622 7797
Liverpool (02) 9600 7100
Maitland (02) 4933 5133
McGraths Hill (02) 4577 8822
Menai (02) 9543 3577
Moree (02) 6752 4755
Mt Druitt (02) 9677 1400
Mudgee (02) 6372 7055
Narellan (02) 4647 4533
Newcastle (02) 4968 9833
North Parramatta (02) 9683 4188
Nowra (02) 4422 9700
Orange (02) 6369 1066
Penrith (02) 4733 3322
Port Macquarie (02) 6583 2099
Queanbeyan (02) 6299 4099
Rockdale (02) 9567 0966
Shellharbour (02) 4297 6899
Singleton (02) 6571 5955
Tamworth (02) 6762 4433
Taree (02) 6551 6211
Tweed Heads (07) 5524 8911
Ulladulla (02) 4455 3488
Villawood (02) 9632 0877
Wagga Wagga (02) 6921 6922
Warwick Farm (02) 9822 7299
Wentworthville (02) 9896 0166
West Gosford (02) 4323 2044
Wetherill Park (02) 9604 9622
NORTHERN TERRITORY
Alice Springs (08) 8952 7455
Berrimah (08) 8932 9866
Darwin (08) 8985 4898
QUEENSLAND
Acacia Ridge (07) 3274 6311
Airlie Beach (07) 4948 3644
Ashmore (07) 5539 2033
Ayr (07) 4783 7377
Beenleigh (07) 3287 2777
Biloela (07) 4992 5299
Booval (07) 3282 6356
Browns Plains (07) 3806 8177
Bundaberg (07) 4151 1111
Burleigh (07) 5576 6000
Burpengary (07) 3888 9366
Caboolture (07) 5499 0488
Cannon Hill (07) 3395 8622
Capalaba (07) 3823 1677
Carseldine (07) 3261 4777
Chermside (07) 3359 4930
Cleveland (07) 3286 5777
Currimundi (07) 5437 7400
Dalby (07) 4662 2933
Deception Bay (07) 3204 8100
Enoggera (07) 3855 3188
Gladstone (07) 4976 9133
Goodna (07) 3818 0722
Gympie (07) 5482 7566
Hermit Park (07) 4721 6488
Hervey Bay (Pialba) (07) 4124 1211
Innisfail (07) 4061 4788
Ipswich (07) 3812 2366
Kallangur (07) 3204 4922
Kawana Waters (07) 5478 3555
Keperra (07) 3851 3611
Kingaroy (07) 4162 5733
Labrador (07) 5537 7977
Lawnton (07) 3881 2800
Loganholme (07) 3209 9322
Loganlea (07) 3805 2688
MacGregor (07) 3849 6822
Mackay (07) 4942 2344
Mackay City (07) 4951 0944
Manunda (07) 4053 6912
Maroochydore (07) 5479 4844
Maryborough (07) 4121 3332
Mermaid Beach (07) 5554 6233
Moorooka (07) 3892 2565
Mt Isa (07) 4749 3785
Nerang (07) 5527 3988
Noosa (07) 5455 5444
Nundah (07) 3256 7600
Oxenford (07) 5573 4422
Redcliffe (07) 3284 2055
Rockhampton (07) 4922 5433
Smithfi eld (Cairns) (07) 4038 1588
Southport (07) 5527 0666
Stones Corner (07) 3394 4844
Taigum (07) 3265 7211
Taringa (07) 3871 3808
Thuringowa (07) 4773 9000
Toowoomba City (07) 4632 0799
Toowoomba South (07) 4635 7577
Townsville (Garbutt) (07) 4725 6866
Underwood (07) 3841 3400
Victoria Point (07) 3207 9262
Warwick (07) 4661 7633
Windsor (07) 3857 0677
Yamanto (07) 3294 1033
SOUTH AUSTRALIA
Blair Athol (08) 8269 7122
Darlington (08) 8358 3566
Elizabeth (08) 8287 6533
Kilkenny (08) 8347 2214
Marion (08) 8296 2210
Munno Para (08) 8254 7999
Noarlunga (08) 8384 2833
Para Hills (08) 8258 2760
Port Adelaide (08) 8447 6088
Salisbury (08) 8258 4811
Thebarton (08) 8354 0666
Whyalla (08) 8645 5159
TASMANIA
NEW ZEALAND
Burnie (03) 6432 4855
Devonport (03) 6424 3244
Glenorchy (03) 6272 9200
Albany 0011 64 9 448 2461
Alicetown 0011 64 4 569 1576
Blenheim 0011 64 3 579 3480
Launceston (03) 6333 0511
Botany 0011 64 9 273 8160
Bairnsdale (03) 5153 2799
Ballarat (03) 5339 9455
Bendigo (03) 5442 7877
Cambridge 0011 64 7 823 7618
Dunedin 0011 64 3 477 2590
Feilding 0011 64 6 323 2074
Gisborne 0011 64 6 868 3760
Hamilton 0011 64 7 834 3586
Broadmeadows (03) 9309 2799
Hastings 0011 64 6 870 4521
Carrum Downs (03) 9782 8305
Hawera 0011 64 6 278 3641
Cranbourne (03) 5995 7299
Dandenong (03) 9706 7788
Echuca (03) 5480 6788
Epping (03) 9408 4288
Essendon (03) 9379 3600
Frankston (03) 9781 2288
Highland Park 0011 64 9 533 3201
Invercargill 0011 64 3 214 4385
Kelston 0011 64 9 813 2091
Levin 0011 64 6 368 3195
Lyall Bay 0011 64 4 387 1092
Manukau 0011 64 9 250 4392
Hoppers Crossing (03) 9748 7277
Masterton 0011 64 6 370 3308
Horsham (03) 5382 5000
Kangaroo Flat (03) 5447 9144
Keysborough (03) 9798 8466
Knox City (03) 9800 4722
Mt Maunganui 0011 64 7 574 1593
Mt Wellington 0011 64 9 574 6435
Napier 0011 64 6 842 1461
New Plymouth 0011 64 6 758 3882
Maribyrnong (03) 9318 8444
Palmerston North 0011 64 6 354 1743
Mentone (03) 9585 0399
Mildura (03) 5022 2588
Moe (03) 5126 1755
Papanui 0011 64 3 354 8123
Paraparaumu 0011 64 4 298 1523
Porirua 0011 64 4 238 2641
Narre Warren (03) 9705 9199
Pukekohe 0011 64 9 239 2073
North Geelong (03) 5272 3277
Riccarton 0011 64 3 341 5087
Preston (03) 9484 6006
Ringwood (03) 9847 0055
Rowville (03) 9764 1677
Rotorua 0011 64 7 348 5275
Stoke 0011 64 3 547 8394
Takanini 0011 64 9 299 8615
Roxburgh Park (03) 8339 0765
Tauranga 0011 64 7 579 5436
Sale (03) 5144 3466
Shepparton (03) 5831 3944
Sunbury (03) 9746 3610
Sunshine (03) 9310 2488
Thomastown (03) 9466 3699
Traralgon (03) 5174 9755
Wangaratta (03) 5722 3244
Warragul (03) 5623 5699
Warrnambool (03) 5561 7660
Watergardens (03) 9390 9699
Waurn Ponds (03) 5241 8947
Werribee (03) 9748 0055
Yarraville (03) 9318 9928
WESTERN AUSTRALIA
Balcatta (08) 9240 1566
Belmont (08) 9477 5699
Bunbury (08) 9721 9977
Canning Vale (08) 9455 3411
Cannington (08) 9258 7294
Fremantle (08) 9335 8633
Geraldton (08) 9921 8244
Gosnells (08) 9398 4822
Joondalup (08) 9300 0744
Kalgoorlie (08) 9021 7145
Mandurah (08) 9581 8588
Midland (08) 9274 5422
Mirrabooka (08) 9344 8478
Morley (08) 9375 6933
Myaree (08) 9317 7699
O’Connor (08) 9314 3822
Tory Street 0011 64 4 801 6072
Upper Hutt 0011 64 4 528 0278
Wairau Park 0011 64 9 442 1905
Wanganui 0011 64 6 348 9407
Whakatane 0011 64 7 308 9072
Whangarei 0011 64 9 459 6440
Woolston 0011 64 3 389 1249
BCF
NEW SOUTH WALES
Coffs Harbour (02) 6651 6500
West Gosford (02) 4322 5833
QUEENSLAND
Browns Plains (07) 3800 1733
Cairns (07) 4051 8155
Capalaba (07) 3245 2220
Cannon Hill (07) 3890 2744
Keperra (07) 3851 4625
Labrador (07) 5500 5700
Lawnton (07) 3889 2911
Mackay (07) 4942 3499
Maroochydore (07) 5479 2390
Springwood (07) 3808 2405
Toowoomba (07) 4638 7511
Townsville (07) 4775 6300
WESTERN AUSTRALIA
Osborne Park (08) 9443 3711
Midland (08) 9250 2166
Rockingham (08) 9592 7999
Spearwood (08) 9494 2144
Victoria Park (08) 9361 8422
Whitford (08) 9403 0444
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
SUPER CHEAP AUTO GROUP LIMITED 2006 ANNUAL REPORT
95
95
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