Super Retail Group Ltd Annual Report 2007

Plain-text annual report

SUPER CHEAP AUTO GROUP LIMITED ANNUAL REPORT 2007 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 Tel (07) 3205 8511 Fax (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 Kedron Wavell Services Club, Long Tan Room, 375 Hamilton Road, Chermside South, Queensland on Wednesday, 24 October 2007 at 11.00 am. Formal notice of this meeting and proxy form are enclosed with this report. CONTENTS 03 Chairman’s Report 04 Managing Director’s Report 09 11 14 18 Board of Directors Senior Management Team Corporate Governance Statement Financial Statements 19 Directors’ Report 31 32 33 34 Income Statements Balance Sheets Statement of Change in Equity Cash Flow Statement 35 Notes to the Financial Statements 75 Directors’ Declaration 76 78 Independent Audit Report Shareholder Information Supercheap Auto and BCF stores at the Noosa Civic Centre, Noosa, Queensland. HIGHLIGHTS JUL 06 First BCF store in Western Australia opens in Midland. Relocation of the New Zealand Distribution Centre to larger and more efﬁcient facilities. OCT 06 Supercheap Auto Bathurst 1000 hugely successful with more than 6 million viewers across Australia and New Zealand and an event record of 193,647 motorsport fans attending the great race. NOV 06 Opening of the Asia Sourcing Ofﬁce at Hangzhou, to the west of Shanghai, China MAR 07 BCF opens its 30th store in Mandurah, Western Australia JUN 07 Supercheap Auto celebrates success at the National Retail Association Awards. Winner of the Supreme Award for Best Retailer, Winner of the Innovation in Retail Award and received a Merit award for Specialty Retailer and was a national ﬁnalist in the Best Designed Store category. Supercheap Auto stores sell over 16,000 Monopoly games to help create over $1m in net proﬁt for children’s charities throughout Australia. STORE NUMBERS SALES $ MILLIONS 2 7 7 2 4 7 2 1 5 1 8 3 1 4 4 6 2 4 . 8 5 2 5 . 9 4 7 0 . 1 3 8 2 . 7 2 7 5 . 1 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 TEAM MEMBERS EBIT 4 , 0 0 4 3 , 8 4 4 3 , 6 0 4 2 , 9 6 4 2 , 4 0 8 2 2 . 8 1 9 . 8 3 8 . 1 3 0 . 4 * 2 8 . 9 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 *excludes beneﬁt of one-off inventory revaluation 2007 ANNUAL REPORT CHAIRMAN’S REPORT Super Cheap Auto has successfully moved into its fourth year as a listed company. The initial share offer 2004 was priced at $1.97 on the promise of earnings per share of 13.4 cents. Sales were forecast at $378.9 million from 176 stores offering a single retail format servicing the auto aftermarket. The results achieved in the 2007 ﬁnancial year capture the changes made to the business since 2004. These changes have delivered greater returns for investors who have been willing to be part of a fast growing company. Super Cheap Auto is now much much more than what it was when investors took up shares in the initial public offering. The results achieved in the 2007 ﬁnancial year have seen sales lift 19% to $625 million from 246 Supercheap Auto and 31 BCF stores. The earnings before interest tax depreciation and amortisation were up 30% to $51 million, and earnings per share grew 35% to 21.0 cents. These signiﬁcant improvements in the ﬁnancial outcomes have produced the earnings required to support the further development of the company and increase the dividends paid to shareholders. The parallel strategies of investment and proﬁt growth have combined to produce a number of signiﬁcant outcomes in FY 2007. The investment in new locations, new retail formats, and store refurbishments for Supercheap Auto, and the expansion of BCF to 31 stores spread across Queensland, NSW, NT and WA are the most obvious examples of the initiatives taken by the company during the past 12 months. Remarkably, BCF has generated almost $100 million in annual sales after only two years since the company entered the camping, boating and ﬁshing market with the acquisition of a small group of stores which were producing annual sales of $14 million. These initiatives have been supported with the ongoing development of the logistics capability of the company, including the establishment of the direct sourcing facility in China. Reﬁnancing and team member development activities add to the attention given to the many moving parts of Super Cheap Auto’s operations by Peter Birtles and his highly competent and professional management team. The many moving parts in a retail business offer different opportunities for a variety of people to contribute to the success of Super Cheap Auto. Team members occupying merchandise, warehouse, administrative, ﬁnance, property, IT, human resources and many other corporate roles provide the invisible support that sits behind those who service our customers. The Directors value the commitment, energy and creativity of the whole team. The company’s results in FY 2007 have been delivered through a clear focus on shareholder wealth. Building on the gains made over the last three years will remain an important part of the company’s business strategies. We recognise that shareholders’ patience should also be rewarded by more than an increased share price. Consequently, the Board has decided to increase the dividend payout ratio to between 45% and 55% of net earnings and declare a ﬁnal fully franked dividend of 6.5 cents. The full year dividend of 10.5 cents compares with 8.0 cents last ﬁnancial year. The record date for the ﬁnal dividend will be 18 September 2007. It will be paid on 10 October 2007. We look forward to continuing the company’s growth and delivering shareholder value. 3 SUPER CHEAP AUTO GROUP 2007 ANNUAL REPORT 2007 ANNUAL REPORT MANAGING DIRECTOR’S REPORT I am very pleased to report that all areas of the Group performed strongly during the 2006/07 year and as a result the Group has generated record sales and proﬁt. The highlights included: Earnings Per Share increasing by 35% over the prior year Both Supercheap Auto and BCF delivering strong growth in EBIT to contribute to an overall increase of 32% in Group EBIT compared to the prior year Group Sales increasing by 19% over the prior year as a result of stronger than expected like for like sales growth and a solid contribution from new stores Group Operating Cash Flow (before new store set up costs) increasing by $15 million compared to the prior year. As a result, the $45 million investment in new and refurbished stores was largely funded out of operating cash ﬂows. These results are a direct reﬂection of the passion and commitment demonstrated by our team members in successfully implementing initiatives under our 5 core strategic themes: expanding the Supercheap Auto network driving like for like sales growth in Supercheap Auto expanding the BCF network developing our procurement and supply chain capabilities developing our people. The improvement in Supercheap Auto’s performance has gained momentum during the year with 2nd half like for like sales growing at their highest rate for four years. BCF has continued to deliver sales and proﬁt results ahead of launch targets whilst controlling capital investment below expectations. Our Group Logistics and Shared Services functions have successfully supported the growth plans of the two Business Units whilst signiﬁcantly reducing the overall cost of doing business. SUPERCHEAP AUTO Sales at $525.7 million were 9.1% higher than the prior year with like for like sales growth of 4.1%. Like for like sales growth during the 2nd half of the year was 5.0% with a strong contribution from the 38 stores in New Zealand. The auto aftermarket remains relatively subdued so the business’ sales performance was primarily achieved from market share gains driven by a range of store format, merchandising and marketing initiatives implemented during the year. EBIT at $37.9 million was 14.7% higher than the prior year with the growth in sales supported by a 0.5% points reduction in operating costs as a % of sales primarily as a result of savings in marketing and support ofﬁce costs. Gross margins were 0.2% points lower than the prior year, with a reduction in retail margins arising from higher relative sales of lower gross margin categories being partly offset by a further saving of 0.2% points in logistics costs. Operating margins increased by 0.3% points to 7.2%. 14 new stores were opened during the year to take total store numbers to 246 at the end of June. In addition, four stores were relocated to stronger retail sites and two smaller under-performing stores were closed. Four of the new stores were developed in the new ‘400’ format, a 400m2 store with a reduced investment in space and inventory. This enables the business to open stores in smaller regional towns and higher rental cost metro locations and still achieve its return on capital target. One existing store was also converted to a ‘400’ format. The performance of these stores has continued to support conﬁdence in plans to grow a small network of ‘400’ format stores to supplement the larger network of ‘700’ format stores. In December, we opened a trial store under the sub brand of Supercheap Auto – Pitstop, a 200m2 store aimed at shopping centre locations. A second Pitstop store has commenced trading since the end of the ﬁnancial year and a decision will be taken on the potential of the Pitstop opportunity after the Christmas trading period. SUPER CHEAP AUTO GROUP 2007 ANNUAL REPORT 4 Towards the end of the year, products carrying the new mid market own brand ‘SCA’ began to appear in store. Customer reaction and sales response to these new products has been very positive. We are planning to introduce an extended range of products carrying the ‘SCA’ brand in the new ﬁnancial year which should beneﬁt both sales and gross margin. Total stock investment ended the year at $499,000 per store which represented a small decrease of $2,000 compared to the prior year. On a like for like basis, stock levels were $14,000 per store lower than the prior year as the business is now holding $3 million of battery stock that was previously held on consignment. David Ajala and the whole team at Supercheap Auto deserve enormous credit for the progress that has been made in re-invigorating the business over the past year. The team have worked tirelessly to successfully implement initiatives across a broad range of the company’s operations and it is very pleasing to see all the hard work rewarded with such a positive set of results. Many of the initiatives are still work in progress and we are conﬁdent that the business will continue to further enhance its position as the leading retailer of auto parts and accessories across Australia and New Zealand in the coming years. 2007 ANNUAL REPORT MANAGING DIRECTOR’S REPORT At the start of the year, the Retail Operations team commenced a program of refurbishing the higher trading stores utilising many of the enhancements successfully trialled at the Chermside concept store. 16 stores have now been refurbished whilst nine of the new stores and the four relocated stores have also been built using the updated store livery, layout and ﬁxtures. The refurbishment program has been a key factor behind the improvement in the like for like performance of the business. Promotional events continue to be important opportunities to drive sales in a subdued market and the Merchandising and Marketing teams have developed a sequence of successful themed promotional activities during the year. These events have been supported by the launch of a set of well received new TV commercials highlighting the broad range available in stores as well as the ‘fun and friendly’ culture of the business. The Bathurst 1000 event was particularly successful as the business leveraged its sponsorship of the event to drive sales as well as a brand building opportunity. Positive like for like growth was achieved in all merchandise categories across the year. Lubricants, batteries and car-care maintained the strong growth, reported at the half year, throughout the balance of the year, whilst the electrical and leisure and outdoor categories rebounded in the 2nd half. The increased investment in car audio, navigation and performance products continued to deliver strong growth. The higher sales growth of higher unit value and lower gross margin categories which feature national brands, such as lubricants and car audio and navigation, had a slightly negative impact on overall retail gross margins but this was partly offset by further reductions in stock loss and product returns. 5 SUPER CHEAP AUTO GROUP 2007 ANNUAL REPORT Gross margin was 40.6%, an increase of 4.9% points over the prior year. This signiﬁcant step up reﬂected the beneﬁt of a year’s experience, the larger scale of the business, the development of partnerships with key suppliers to deliver product exclusives and improvements to trading terms and a focus on enhancing inventory management processes. Operating costs (pre set up costs) at 33.9% of sales were 1.1% higher than the prior year partly as a result of higher rental costs and partly as a result of the timing of new store openings. Total inventory investment per store at $1.2 million is $0.1 million lower than the prior year reﬂecting the improvements made in inventory management processes and the three smaller stores. The performance of BCF has continued to exceed the targets that we set at the launch of the business in October 2005. Steve Doyle and the team have done an outstanding job in building such a sizeable business in such a short time period. We continue to reﬁne the business through experience and we remain conﬁdent in the opportunity to develop a national network of BCF stores that will generate a signiﬁcant contribution to Group Earnings in the coming years. BCF – BOATING CAMPING FISHING Sales at $99.1 million were 124% higher than the prior year with the growth driven by opening new stores and through the delivery of 13.5% like for like sales growth from existing stores. EBIT at $1.8 million was $5.3 million higher than the prior year whilst EBIT pre new store set up costs, at $6.6 million, was $5.3 million higher than the prior year. BCF opened 18 stores during the year to take total store numbers to 31, including 19 throughout Queensland, six in Western Australia, ﬁve in New South Wales and one in Darwin. During the year, we developed a second store format model of around 1,200m2 to supplement the existing 2,000m2 model. The smaller model has been designed to operate successfully in smaller regional towns and achieve target return on capital. Following a successful trial at Noosa, a further two new smaller format stores were opened in Bundaberg and Gladstone. It is anticipated that future stores will include a higher representation of the smaller format stores. BCF is a more seasonal business than Supercheap Auto with the Christmas/New Year holiday period being particularly important. The sales results were boosted by the efforts of the team in opening 10 new stores in the period from mid November to mid December with a number of these stores ahead of schedule. All three Categories have performed well during the year with sales ahead of target. The offer continues to be reﬁned in line with sales experience and there remain further opportunities to tailor the offer for local market demand. There are also opportunities for the business to extend its range offering into new products. SUPER CHEAP AUTO GROUP 2007 ANNUAL REPORT 6 2007 ANNUAL REPORT MANAGING DIRECTOR’S REPORT GROUP LOGISTICS AND SHARED SERVICES REVIEW OF FINANCIAL CONDITION The Group has continued to fund its investment through its debt facilities. Effective management of working capital has enabled the Group to minimise the drawdown of new debt and there remains signiﬁcant capacity in the Group’s debt facilities to fund further growth initiatives over the coming years. Net external debt for the Group has increased from $80.5 million to $93.5 million. Under AIFRS a further $1.6 million (2006 - $2.1 million) of net debt relating to a team member share scheme special purpose vehicle has been consolidated into the Group’s balance sheet. Cash ﬂow from operations was $34.0 million, an increase of $7.2 million compared to the prior year. Overall investment in working capital was $12.5 million with $26.9 million invested in new stores opened during the year. Group Capital Expenditure was $30.6 million with $13.5 million in new store ﬁt-out, $4.6 million in the store refurbishment program, $8.1 million in supply chain and IT projects and $4.4 million in general maintenance and enhancement projects. The Group Logistics and Shared Services functions have not only supported the growth of the two retail businesses but also implemented important strategic initiatives at the same time as reducing the cost of doing business. Group Logistics costs reduced as a % of sales by 0.2% points for the 2nd successive year whilst Shared Services costs reduced by 0.5% points. These costs are recharged to the Business Units. The establishment of larger Distribution Centre facilities in Melbourne and Auckland has proved to be a major contributor to the improvement in Group Logistics operations through relieving pressure on the Brisbane Distribution Centre and facilitating a more efﬁcient distribution network. The Group intends to convert the outsourced operation in Melbourne to an in-house managed operation during the 2007/08 year and further increase the product volume processed through this facility. The Group established its Overseas Sourcing ofﬁce in Hangzhou to the west of Shanghai in October 2006. The Sourcing team have a focus not only on sourcing new and lower cost product but also on improving quality, packaging and supply chain operations. In June 2007, the Group completed a successful upgrade of its core IT system – SAP. This was a major project, led by the Information Services Team, delivered on time and under budget and which provides the Group with additional functionality to enhance merchandise and supply chain management operations. Group costs of $1.6 million represent the costs associated with operating as a public company, the cost of share options and costs incurred on corporate development opportunities. Costs increased by $1.0 million over the prior year primarily as a result of $0.4 million of non recurring advisory costs incurred on a corporate development opportunity, as well as the one-off positive impact in the prior year relating to the cancellation of share options. 7 SUPER CHEAP AUTO GROUP 2007 ANNUAL REPORT TEAM MEMBERS LOOKING AHEAD Our September 2006 Annual Management Conference was titled ‘Pride and Passion – It’s Our Business’ and I strongly believe that it is that sense of pride and passion shared by so many team members across our business that has been at the heart of all the Group has achieved over the last 12 months. We now have over 4,000 team members working in the business and I would like to thank and acknowledge them all for their contribution during the year. One of our major initiatives was the establishment of the Group’s Business Leadership Academy. This will provide a series of learning and development opportunities for team members at all levels of the business whether they are new inductees to the business, high potential store managers or team members who are aspiring to join the Group’s Leadership Team. We believe that investing in providing our team members with an opportunity for self development will be critical in an ever more competitive employment market. The Group will maintain its focus on its ﬁve key strategic initiatives during the upcoming year. Supercheap Auto will be targeting 10 new stores in the year and is planning to refurbish around 30 existing stores. The overall auto aftermarket is expected to remain relatively subdued during the year but we remain conﬁdent that Supercheap Auto will continue to grow market share and improve underlying proﬁt margins. BCF will be targeting 10 to 15 new stores with further stores in its existing markets and the potential of stores in the southern States of Australia. The increased scale and another year’s experience will lead to further improvements in proﬁt margins. The development of the Group Overseas sourcing operation and the domestic Logistics operations will lead to further underlying improvement in supply chain costs. The Group will be investing circa $5 million in establishing its Melbourne Distribution Centre, of which around $1 million of one-off costs will be expensed in the 2007/08 year. The 2007/08 year is shaping up to be another enjoyable and exciting year as the Group continues to grow and develop its operations and I look forward to reporting our progress to you during the year. SUPER CHEAP AUTO GROUP 2007 ANNUAL REPORT 8 2007 ANNUAL REPORT BOARD OF DIRECTORS Dick McIlwain, BA, FAICD Independent Non-Executive Chairman Dick McIlwain, aged 60, was appointed a Director of the Company on 19 May 2004. Dick is also the Managing Director and Chief Executive of Tattersall’s Limited, Non-Executive Chairman of Wotif.com Limited and a Fellow of the Australian Institute of Company Directors. Peter Birtles, BSc, ACA Managing Director Peter Birtles, aged 43, was appointed a Director of the Company on 5 January 2006. Peter joined Super Cheap Auto Pty Ltd in 2001 as Chief Financial Ofﬁcer and in 2006 was appointed Managing Director. 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 ﬁnance, operational 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 Non-Executive Director Reg Rowe, aged 63, 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. 9 SUPER CHEAP AUTO GROUP 2007 ANNUAL REPORT Darryl McDonough, BBus (Acty), LLB (Hons), SJD, FCPA, FAICD Independent Non-Executive Director Darryl McDonough, aged 56, 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 Independent Non-Executive Director Robert Wright, aged 58, was appointed a Director of the Company on 19 May 2004. Robert has 30 years’ ﬁnancial management experience, having held a number of chief ﬁnancial ofﬁcer positions, including ﬁnance director of David Jones Limited. He is currently the Chairman of Dexion Limited and a director of Australian Pipeline Limited, SAI Global Limited and both Babcock & Brown Residential Land Partners Limited and Babcock & Brown Residential Land Partners Services Limited (jointly Babcock & Brown Residential Land Partners Group). Robert is the Chairman of the Audit and Risk Committee. SUPER CHEAP AUTO GROUP 2007 ANNUAL REPORT 10 2007 ANNUAL REPORT SENIOR MANAGEMENT TEAM Peter Birtles Managing Director Peter joined Super Cheap Auto in 2001 as Chief Financial Ofﬁcer and was appointed Managing Director in January 2006. Steve Doyle Chief Operating Ofﬁcer - BCF Steve joined Super Cheap Auto in 2002 as Marketing Manager. He subsequently held the positions of General Manager – Retail and General Manager – Merchandising. 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 ﬁnance, 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. 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 Ofﬁcer – BCF in January 2006. He is responsible for the merchandising, marketing and retail operations of the BCF business. David Ajala Chief Operating Ofﬁcer – Supercheap Auto David joined the Super Cheap Auto Group in July 2005 as the General Manager of Merchandise before taking on his current role as COO in January 2006. David is responsible for Merchandise, Marketing and Retail Operations of the Supercheap Auto business. David has an extensive background in store operations and merchandise in the retail sector. Prior to joining the Super Cheap Auto Group, David held a number of senior management positions with Coles Myer across several states in a career spanning over 20 years. Roles included Regional Store Operations, National Category, National Promotions and National Business Manager. Gary Carroll Chief Financial Ofﬁcer Gary joined Super Cheap Auto Group in April 2006. He has over 15 years experience in accounting, treasury and banking areas across a number of industry sectors. He holds an honours degree 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 ﬁnance, information services, risk management and compliance functions for the Group. 11 SUPER CHEAP AUTO GROUP 2007 ANNUAL REPORT Robert Dawkins 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. He holds a degree qualiﬁcation in Accountancy from Queensland University of Technology. Robert’s key responsibilities include property and facilities management, property leasing and development, project and contract management and asset acquisition and disposal. Graham Chad 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 ﬁve years in retail general merchandise. He was Chief Logistics Ofﬁcer 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. Steve Tewkesbury General Manager – Overseas Sourcing Steve joined the Super Cheap Auto Group 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, then as a Supply Chain Consultant within the Australian FMCG sector. He holds a degree qualiﬁcation in E-Commerce from Monash University. Steve is responsible for our overseas sourcing operations based in Hangzhou and Shanghai, China, international shipping negotiations and co-ordinating our China logistics partner services at origin. Sonia La Penna Group Human Resources Manager Sonia joined Super Cheap Auto Group in December 2005 as the Group Human Resources Manager. Together with her tertiary qualiﬁcations, Sonia has over 10 years of Human Resources experience both in Australia and internationally. Prior to joining Super Cheap Auto Group, 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. SUPER CHEAP AUTO GROUP 2007 ANNUAL REPORT 12 Wayne McMahon Chief Information Ofﬁcer 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 Paciﬁc 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. 2007 ANNUAL REPORT SENIOR MANAGEMENT TEAM David Kelley 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/Paciﬁc. 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 leads the Group’s loss prevention, internal audit, stocktake, risk management and compliance functions. Pam Pugsley 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 qualiﬁcation through Deakin University in Melbourne. Pam has the responsibility for the day-to-day operations of our stores as well as the Store Improvements Department. 13 SUPER CHEAP AUTO GROUP 2007 ANNUAL REPORT 2007 ANNUAL REPORT 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 ﬁve 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. The Managing Director is responsible for implementing Group strategies and policies. The Board Charter speciﬁes 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, qualiﬁcations and independent status are proﬁled in the Directors’ Report on pages 19 to 28. Responsibilities The responsibilities of the Board include: approving the Company’s goals and strategic direction; monitoring ﬁnancial performance, including adopting annual budgets and approving the Group’s ﬁnancial 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 signiﬁcant business risks are identiﬁed and appropriately managed. Directors’ Independence As stated there are ﬁve 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 beneﬁt of a diverse range of experience, qualiﬁcations and professional skills. SUPER CHEAP AUTO GROUP 2007 ANNUAL REPORT 14 2007 ANNUAL REPORT CORPORATE GOVERNANCE STATEMENT The Board has adopted the independence deﬁnition suggested by the ASX Corporate Governance Council and as such three of the Company’s Directors (namely Mr Dick McIlwain, Dr Darryl McDonough and Mr Robert Wright) are considered to be independent by reference to that deﬁnition. 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 April 2007. FINANCIAL REPORTING The Board is provided with monthly reports from management on the ﬁnancial performance of the Company. The monthly reports include details of all key ﬁnancial measures reported against budgets approved by the Board. The Company’s ﬁnancial report preparation and approval process for each ﬁnancial year involves both the Managing Director and the Chief Financial Ofﬁcer making the following certiﬁcations to the Board that: the Company’s ﬁnancial reports and accompanying notes represent a true and fair view in all material respects of the Company’s ﬁnancial 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 efﬁciently 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 speciﬁc 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; 15 SUPER CHEAP AUTO GROUP 2007 ANNUAL REPORT 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; 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 speciﬁc 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 speciﬁc 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. Details of these Directors’ qualiﬁcations and attendance at Audit and Risk Committee meetings are set out in the Director’s Report on pages 19 to 28. 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 efﬁcient forum than the full Board for focusing on particular issues relevant to: verifying and safeguarding the integrity of the Company’s ﬁnancial reporting including the review, assessment and approval of the half-year ﬁnancial report, the annual report and all other ﬁnancial 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: ﬁnancial administration and reporting; audit control and independence; The Audit and Risk Committee consists of the following Independent Non-Executive Directors: legal compliance; R J Wright (Chairman) R D McIlwain D D McDonough accounting policies and standards; internal controls; and risk oversight and management. EXTERNAL AUDITORS All members of the Audit and Risk Committee are ﬁnancially literate and have the requisite ﬁnancial expertise. Some members have an in-depth understanding of the industry in which the Company operates. The Company’s Audit and Risk Committee’s policy is to appoint external auditors who demonstrate quality and independence. The Audit and Risk Committee: The Audit and Risk Committee operates in accordance with a charter which is available on the Company’s website. recommends to the Board the appointment of External Auditors and their fee; reviews the performance of the External Auditors; SUPER CHEAP AUTO GROUP 2007 ANNUAL REPORT 16 2007 ANNUAL REPORT CORPORATE GOVERNANCE STATEMENT establishes processes to ensure the 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; ensuring 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 29 to the ﬁnancial 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 reﬂects the highest standards of behaviour and professionalism and the practices necessary to maintain conﬁdence in the Company’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. DEALING IN SHARES The Company has a formal written policy for Directors and ofﬁcers 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 conﬁrm 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). 17 SUPER CHEAP AUTO GROUP 2007 ANNUAL REPORT FINANCIAL STATEMENTS SUPER CHEAP AUTO GROUP LIMITED FOR THE PERIOD ENDED 30 JUNE 2007 SUPER CHEAP AUTO GROUP 2007 ANNUAL REPORT 18 Super Cheap Auto Group Limited Directors' report for the period ended 30 June 2007 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 30 June 2007. Directors The following persons were Directors of Super Cheap Auto Group Limited during the financial period and up to the date of this report. R D McIlwain R A Rowe D D McDonough R J Wright P A Birtles Information on qualifications and experience of Directors is included on pages 20 to 21. Principal activities During the period, the principal continuing activities of the consolidated entity consisted of the retailing of: (cid:120) (cid:120) auto parts and accessories, tools and equipment boating, camping and fishing equipment Dividends – Super Cheap Auto Group Limited The Directors recommended a fully franked dividend of 6.5 cents per share be paid on 10 October 2007 (total dividend, fully franked - $6,917,925). The following fully franked dividends of the parent entity have also been paid, declared or recommended since the end of the preceding financial year: Dividend Payment Date $ 2006 final fully franked dividend (5¢ per share) 2007 interim fully franked dividend (4¢ per share) 11 October 2006 4 April 2007 5,321,481 4,257,185 9,578,666 Review of operations Revenue from trading operations for the year was $625,187,000 (2006: $526,236,000). During the period, the consolidated entity opened 14 new Supercheap Auto stores of which 12 were in Australia and 2 in New Zealand. This resulted in Supercheap Auto trading with 246 stores at the end of the period. 18 new BCF stores were opened during the period taking total trading stores to 31. At the end of the financial year, the consolidated entity was trading from 277 stores. The net profit of the consolidated entity for the period ended 30 June 2007, after providing for income tax, amounted to $22,332,000 (2006: $16,510,000). A review of the operations for the 52 weeks to 30 June 2007 is set out in pages 4 to 8 of this report. Matters subsequent to the end of the financial period In the opinion of the Directors, there were no significant matters subsequent to the end of the financial period. 19 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT Super Cheap Auto Group Limited Directors' report for the period ended 30 June 2007 (continued) 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 notified to the consolidated entity during the period ended 30 June 2007. Directors and Directors’ interests The Directors of Super Cheap Auto Group Limited in office 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 60. Experience and expertise Independent non-executive Chairman for 3 years 3 months. Chief Executive Officer of UNiTAB for 10 years to 1999 and then Managing Director and Chief Executive Officer of UNiTAB Limited for 7 years. Currently Managing Director and Chief Executive Officer of Tattersall’s Limited. Fellow of the Australian Institute of Company Directors. Other current directorships Director of Tattersall’s Limited Non-Executive 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 43. Experience and expertise Managing Director for 1 year and 8 months. Previously Chief Financial Officer 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. 700,000 options over ordinary shares in Super Cheap Auto Group Limited. R A Rowe. Non-Executive Director. Age 63. Experience and expertise Founder of the business in 1972. Non-executive director for 3 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. SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT 20 Super Cheap Auto Group Limited Directors' report for the period ended 30 June 2007 D D McDonough, BBus (Acty), LLB (Hons), SJD, FCPA, FAICD. Independent Non-Executive Director. Age 56. Experience and expertise. Independent Non-Executive Director for 3 years 3 months. Partner of a major legal firm. 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). Special responsibilities Member of the Audit and Risk Committee. Member of the Nomination and Remuneration Committee. Interests in shares and options 60,000 ordinary shares in Super Cheap Auto Group Limited R J Wright, BCom, FCPA, MAICD. Independent Non-Executive Director. Age 58. Experience and expertise Independent Non-Executive Director for 3 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) and SAI Global Limited (director since 2003). Former directorships in the last 3 years None. 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 30 June 2007 is set out below: Full meetings directors A 13 13 11 13 13 B 13 13 13 13 13 Meetings of Committees Audit & Risk B A 3 n/a n/a 3 3 3 n/a n/a 3 3 Nomination & Remuneration A 2 2 1 2 2 B 2 2 2 2 2 R D McIlwain P A Birtles R A Rowe D D McDonough R J Wright A = Number of meetings attended B = Number of meetings held during the time the Director held office or was a member of the Committee during the year 21 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT Super Cheap Auto Group Limited Directors' report for the period ended 30 June 2007 (continued) Remuneration report The remuneration report is set out under the following main headings:- (cid:120) Principles used to determine the nature and amount of remuneration; (cid:120) Details of remuneration; (cid:120) Service agreements; (cid:120) Share-based compensation; and (cid:120) 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 financial report and have been audited. The disclosures on pages 26 and 27 are additional disclosures required by the Corporations Act 2001 and the Corporations Regulation 2001 which have not been audited. Principles used to determine the nature and amount of remuneration (audited) The broad remuneration policy is to ensure remuneration properly reflects 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 fixed components (salary and superannuation) which reflect 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 fixed 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 reflect 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: (cid:120) (cid:120) (cid:120) (cid:120) base pay and benefits 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-financial benefits at the executives’ discretion. Executives are offered a competitive base pay that comprises the fixed component of pay and rewards. External remuneration consultants provide analysis and advice to ensure base pay is set to reflect 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. Benefits Executives receive benefits including car allowances and salary continuance insurance. Short-term incentives Should the Company achieve a pre-determined profit 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 profit target ensures variable reward is only available when value has been created for shareholders and when profit is consistent with the business plan. The incentive pool is leveraged for performance above the threshold to provide an incentive for executive out-performance. SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT 22 Super Cheap Auto Group Limited Directors' report for the period ended 30 June 2007 Remuneration report (continued) Principles used to determine the nature and amount of remuneration (audited) (continued) 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 30 June 2007, 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 profit 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 profit 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. Key management personnel of the Group Amounts of remuneration Details of the remuneration of the directors and key management personnel (as defined in AASB 124 Related Party Disclosures) of Super Cheap Auto Group Limited are set out in the following tables. The key management personnel of the Group includes the directors and the following executive officers, (being those who have responsibility for directing strategy for the Group): (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) P A Birtles, Managing Director D F Ajala, Chief Operating Officer, Super Cheap Auto S J Doyle, Chief Operating officer, BCF G G Carroll, Chief Financial Officer G L Chad, General Manager, Group Logistics The highest paid executives for the period ended 30 June 2007 were as follows: (cid:120) (cid:120) (cid:120) (cid:120) (cid:120) P A Birtles D F Ajala S J Doyle G G Carroll G L Chad 23 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT Super Cheap Auto Group Limited Directors' report for the period ended 30 June 2007 (continued) Remuneration report (continued) Details of remuneration (audited) Key management personnel of the Group The following directors are key management personnel of the Group and Super Cheap Auto Group Limited. 2007 Short-term benefits Post-employment benefits Share-based payment Name 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 Other key management personnel D F Ajala S J Doyle G G Carroll G L Chad Totals Cash salary and fees $ Cash bonus $ Non- monetary benefits $ Super- annuation $ Retirement benefits $ Options $ Total $ 0 55,046 0 36,697 91,743 100,000 4,954 60,000 23,303 188,257 597,502 306,875 2,414 12,686 235,564 251,534 249,676 250,891 1,676,910 157,500 144,375 100,397 126,000 835,147 42,064 22,254 0 17,656 84,388 37,224 12,686 12,686 43,017 306,556 0 0 0 0 0 0 0 0 0 0 0 100,000 60,000 60,000 60,000 280,000 119,533 1,039,010 36,137 36,137 29,732 7,809 229,348 508,489 466,986 392,491 445,373 3,132,349 2006 Name Short-term benefits Post-employment benefits Share-based payment Cash salary and fees $ Cash bonus $ Non- monetary benefits $ Super- annuation $ Retirement benefits $ Options $ Total $ 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 25,000 55,046 20,000 55,046 155,092 216,698 617,073 171,939 217,454 234,075 47,572 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 0 110,000 0 0 16,590 14,380 0 7,019 13,869 12,139 3,034 179,979 1,839,882 0 110,000 22,138 70,691 32,615 211,905 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 100,000 60,000 60,000 60,000 280,000 43,626 265,445 (270,326) 377,530 0 15,346 15,346 6,110 178,958 263,259 385,940 56,716 0 (189,898) 234,732 2,042,580 (a) Mr P A Birtles was appointed a director on 5 January 2006. Before this appointment he was the company’s Chief Financial Officer and Company Secretary. Amounts shown above include all remuneration during the reporting period, whether as a director or as Chief Financial Officer and Company Secretary. (b) Mr R E Thorn resigned as an executive officer 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. SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT 24 Super Cheap Auto Group Limited Directors' report for the period ended 30 June 2007 Remuneration Report (continued) 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 benefits 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 30 June 2007 of $613,750 to be reviewed annually by the Nomination and Remuneration Committee. Payment of a termination benefit 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 Officer, Supercheap Auto Term of Agreement - 5 years commencing 27 January 2006 Base salary, inclusive of superannuation, for the period ended 30 June 2007 of $315,000 to be reviewed annually by the Nomination and Remuneration Committee. Payment of a termination benefit 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 Officer, BCF Term of Agreement - 5 years commencing 27 January 2006 Base salary, inclusive of superannuation, for the period ended 30 June 2007 of $288,750 to be reviewed annually by the Nomination and Remuneration Committee. Payment of a termination benefit 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 Officer Term of Agreement - 5 1/4 years commencing 17 April 2006 Base salary, inclusive of superannuation, for the period ended 30 June 2007 of $262,500 to be reviewed annually by the Nomination and Remuneration Committee. Payment of a termination benefit 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. 25 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT Super Cheap Auto Group Limited Directors' report for the period ended 30 June 2007 (continued) Remuneration Report (continued) 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 Exercise date Exercise Price Value per option at grant date Number under option 19 May 2004 27 January 2006 27 January 2006 27 January 2006 17 April 2006 17 April 2006 17 April 2006 1 July 2006 1 July 2006 1 July 2006 26 October 2006 26 October 2006 26 October 2006 1 July 2007 5 January 2009 5 January 2010 5 January 2011 17 April 2009 17 April 2010 17 April 2011 1 July 2009 1 July 2010 1 July 2011 1 February 2009 1 February 2010 1 February 2011 $1.97 $2.44 $2.44 $2.44 $2.25 $2.25 $2.25 $2.25 $2.25 $2.25 $2.44 $2.44 $2.44 $0.68 $0.29 $0.34 $0.38 $0.43 $0.47 $0.51 $0.19 $0.25 $0.30 $0.63 $0.72 $0.79 200,000 400,000 200,000 200,000 75,000 75,000 100,000 262,500 262,500 350,000 150,000 150,000 200,000 2,625,000 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 2007 2006 Number of options vested during the period 2007 2006 - - - - 500,000 - - - 125,000 - - - - - 400,000 400,000 250,000 - - - - - - - - - - - - - - - - - - - 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 Binomial 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. 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 profits have increased by 69% and dividends to shareholders have grown by approximately 62%. Revenue and store numbers have increased by 63% and 51% respectively. On a total basis, executive management remuneration has increased by 29% over the last 3 years, although notwithstanding certain managers have had their remuneration packages increased in line with performance and additional responsibilities. SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT 26 Super Cheap Auto Group Limited Directors' report for the period ended 30 June 2007 Remuneration Report (continued) Additional Information (unaudited) (continued) 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 Remuneration consisting of options B C D E Value at grant date $ Value at exercise date $ Value at lapse date $ Total of columns B-D $ 0% 0% 0% 0% 11.5% 7.1% 7.8% 7.6% 1.8% 0 0 0 0 360,550 0 0 0 31,813 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 360,550 0 0 0 31,813 A = The percentage of the value of remuneration consisting of options, based on the value at grant date set out in column B. 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 Name Paid % Forfeited % Year granted Vested % Forfeited % Options Financial years in which options may vest P A Birtles 100 D F Ajala 100 S J Doyle 100 G G Carroll 100 G L Chad 100 0 0 0 0 0 2004 2007 2006 2006 2006 2007 - - - - - - - - - - - - 2008 2009 2010 2011 2009 2010 2011 2009 2010 2011 2009 2010 2011 2010 2011 2012 Minimum total value of grant yet to vest Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Maximum total value of grant yet to vest ($) 135,400 94,950 108,000 157,600 58,200 34,100 38,100 58,200 34,100 38,100 32,175 35,475 50,800 7,275 9,488 15,050 Insurance of officers During the financial year, Super Cheap Auto Group Limited paid a premium of $27,000 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 officers in their capacity as officers of entities in the Group, and any other payments arising from liabilities incurred by the officers in connection with such proceedings, other than where such liabilities arise out of conduct involving a wilful breach of duty by the officers or the improper use by the officers 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. 27 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT Super Cheap Auto Group Limited Directors' report for the period ended 30 June 2007 (continued) 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. The Board of Directors has considered the position and, in accordance with the advice received from the Audit and Risk Committee is satisfied 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 satisfied 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: (cid:120) 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 (cid:120) none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, including 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 firms. Assurance Services PricewaterhouseCoopers Australian arm Remuneration for audit services Remuneration for other assurance services Total remuneration for assurance services Taxation Services Consolidated Entity 2006 2007 $’000 $’000 290 0 290 211 85 296 Total remuneration for taxation services 93 125 Advisory Services Total remuneration for advisory services 0 159 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 29. 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 23 August 2007 P A Birtles Director SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT 28 (cid:3) Auditor’s Independence Declaration Super Cheap Auto Group Limited for the period ended 30 June 2007 PricewaterhouseCoopers ABN 52 780 433 757 Riverside Centre 123 Eagle Street BRISBANE QLD 4000 GPO Box 150 BRISBANE QLD 4001 DX 77 Brisbane Australia www.pwc.com/au Telephone +61 7 3257 5000 Facsimile +61 7 3257 5999 As lead auditor for the audit of Super Cheap Auto Group Ltd for the period ended 30 June 2007 I declare that to the best of my knowledge and belief, there have been: a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Super Cheap Auto Group Limited and the entities it controlled during the period. B S Delaney Partner PricewaterhouseCoopers Brisbane 23 August 2007 Liability limited by a scheme approved under Professional Standards Legislation 29 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT Super Cheap Auto Group Limited Auditors’ Independence Declaration for the period ended 30 June 2007 Financial report Income statements Balance sheets Statements of changes in equity Cash flow statements Notes to the financial statements Directors' declaration Independent audit report to the members Page 31 32 33 34 36 75 76 This financial 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 financial 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 office 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 directors’ report on pages 4 to 8, which is not part of this financial report. The financial report was authorised for issue by the directors on 23 August 2007. The company has the power to amend and reissue the financial 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, financial reports and other information are available at our Shareholders’ Centre on our website: www.supercheapauto.com.au. SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT 30 INCOME STATEMENTS Super Cheap Auto Group Limited for the period ended 30 June 2007 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 Profit before income tax Consolidated Parent entity Notes 5 6 2007 $'000 2006 $'000 625,187 526,236 129 625,316 268 526,504 2006 $'000 17,013 2 17,015 (376,733) (316,860) 0 (70,633) (35,906) (44,979) (58,614) (7,191) (594,056) 31,260 (58,959) (32,586) (36,881) (52,017) (5,836) (503,139) 23,365 (6,855) 0 0 0 (1,602) (6,662) (8,264) 8,751 2,633 2006 $'000 13,008 0 13,008 0 0 0 0 (618) (4,245) (4,863) 8,145 1,456 Income tax (expense)/benefit 8 (8,928) Profit attributable to Members of Super Cheap Auto Group Limited 22,332 16,510 11,384 9,601 Earnings per share for profit attributable to the ordinary equity holders of the company: Basic earnings per share Diluted earnings per share Cents Cents 37 37 21.0 20.9 15.5 15.5 The above income statements should be read in conjunction with the accompanying notes. 31 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT BALANCE SHEETS Super Cheap Auto Group Limited as at 30 June 2007 ASSETS Current assets Cash and cash equivalents Trade and other receivables Inventories Total current assets Non-current assets Other financial 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 Trade and other payables Borrowings Deferred tax liabilities Provisions Total non-current liabilities Total liabilities Net assets EQUITY Contributed equity Reserves Retained profits Total equity Consolidated Parent entity Notes 2007 $'000 2006 $'000 2006 $'000 2006 $'000 9 10 11 12 13 14 15 16 17 18 19 20 21 23 24 6,271 14,591 159,880 180,742 0 67,262 7,991 58,613 133,866 6,372 14,137 135,021 155,530 0 49,797 5,355 58,794 113,946 17 116,290 0 116,307 84,234 0 32 0 84,266 132 96,064 0 96,196 84,234 0 0 0 84,234 314,608 269,476 200,573 180,430 62,243 31,410 5,611 5,800 105,064 8,194 70,000 0 6,824 85,018 49,443 19,020 1,725 4,941 75,129 5,482 70,000 45 5,890 81,417 1,601 29,729 5,611 0 36,941 0 70,000 0 0 70,000 213 16,956 1,725 0 18,894 0 70,000 45 0 70,045 190,082 156,546 106,941 88,939 124,526 112,930 93,632 91,491 25 26 26 84,233 (1,168) 41,461 84,233 (11) 28,708 84,233 496 8,903 84,233 160 7,098 124,526 112,930 93,632 91,491 The above balance sheets should be read in conjunction with the accompanying notes. SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT 32 STATEMENTS OF CHANGES IN EQUITY Super Cheap Auto Group Limited for the period ended 30 June 2007 Consolidated Parent entity Notes 2007 $'000 2006 $'000 2007 $'000 2006 $'000 Total equity at the beginning of the financial year 112,930 104,597 91,491 89,896 Changes in the fair value of cash flow hedges, net of tax Exchange differences on translation of foreign operations Net income recognised directly in equity 26 (1,613) 118 (1,495) 28 (129) (101) (2) 0 (2) Profit for the year Total recognised income and expense for the year 22,332 16,510 11,384 20,837 16,409 11,382 70 0 70 9,601 9,671 Transactions with equity holders in their capacity as equity holders: Dividends provided for or paid Employee share options 26 (9,579) 338 (9,241) (7,982) (94) (8,076) (9,579) 338 (9,241) (7,982) (94) (8,076) Total equity at the end of the financial year 124,526 112,930 93,632 91,491 Total recognised income and expense for the year is attributable to: Members of Super Cheap Auto Group Limited 20,837 16,409 11,382 9,671 The above statements of changes in equity should be read in conjunction with the accompanying notes. 33 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT CASH FLOW STATEMENTS Super Cheap Auto Group Limited for the period ended 30 June 2007 Consolidated Parent entity Notes 2007 $'000 2006 $'000 2007 $'000 2006 $'000 Cash flows 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 (outflow) inflow from operating activities Cash flows from investing activities Payments for property, plant and equipment Proceeds from sale of property, plant and equipment Proceeds from sale of service centres Net cash (outflow) inflow from investing activities Cash flows from financing activities Proceeds from borrowings Payments for borrowings Interest paid Dividends paid to company’s shareholders Repayment of loans re shares Advances to related parties Repayments of advances to related parties Net cash inflow (outflow) from financing activities 689,172 581,016 0 0 (602,820) (510,000) (5,888) (1,273) (36,597) (8,417) (7,346) (29,253) (8,103) (6,889) 0 0 (6,892) 0 0 (6,549) 36 33,992 26,771 (12,780) (7,822) (30,605) (20,994) 147 75 158 50 (30,383) (20,786) 0 0 0 0 0 0 0 0 26 255,950 (243,750) (6,284) (9,579) 0 0 0 264,266 (259,000) (3,927) (7,982) 0 0 55 252,500 (239,750) (6,626) (9,579) 0 (254,710) 270,830 259,638 (231,950) (3,604) (7,982) 0 (197,402) 189,209 (3,663) (6,588) 12,665 7,909 Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at end of year 9 (54) 6,372 (47) 6,271 (603) (115) 6,902 73 6,372 132 0 17 87 45 0 132 The above cash flow statements should be read in conjunction with the accompanying notes. SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT 34 NOTES TO THE FINANCIAL STATEMENTS SUPER CHEAP AUTO GROUP LIMITED FOR THE PERIOD ENDED 30 JUNE 2007 35 SUPER CHEAP AUTO GROUP 2007 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS Super Cheap Auto Group Limited for the period ended 30 June 2007 Contents of the notes to the financial statements 1 Summary of significant accounting policies 2 Financial risk management 3 Critical accounting estimates and judgements 4 Segment information Revenue 5 6 Other income Expenses 7 Income tax expense 8 9 Current assets - Cash and cash equivalents 10 Current assets - Trade and other receivables 11 Current assets - Inventories 12 Non-current assets - Other financial 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 – Trade and other payables 21 Non-current liabilities - Borrowings 22 Derivative Financial instruments 23 Non-current liabilities - Deferred tax liabilities 24 Non-current liabilities - Provisions 25 Contributed equity 26 Reserves and retained profits 27 Dividends 28 Key management personnel disclosures 29 Remuneration of auditors 30 Contingencies 31 Commitments 32 Related party transactions 33 34 Net tangible asset backing 35 Deed of cross guarantee 36 Reconciliation of profit after income tax to net cash inflow from operating activities 37 Earnings per share 38 Share-based payments Investments in controlled entity Page 37 44 45 46 48 48 49 50 51 51 51 52 52 53 54 55 55 56 56 56 56 57 61 61 62 62 63 64 67 67 68 68 69 70 70 72 72 73 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT 36 NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 1 Summary of significant accounting policies The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial report includes separate financial 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 financial 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 IFRS Australian Accounting Standards include AIFRSs. Compliance with AIFRSs ensures that the consolidated financial statements and notes of Super Cheap Auto Group Limited comply with International Financial Reporting Standards (IFRS). The parent entity financial statements and notes also comply with IFRS 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. Historical cost convention These financial statements have been prepared under the historical cost convention. (b) Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all entities controlled by Super Cheap Auto Group Limited (the “Company” or “parent entity”) as at 30 June 2007 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 financial 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 financial period its results are included in the consolidated statement of financial performance from the date on which control commences. Where control of an entity ceases during a financial 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 financial 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 profit or taxable profit or loss. 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. 37 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 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. The New Zealand tax rate changes to 30% with effect from 1 July 2008. All current deferred tax balances have been assessed for expected realisation timeframes for either the current rate of 33% or future rate of 30% to be applied. 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 financial 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 financial 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 flow hedges and qualifying net investment hedges. Translation differences on non-monetary items such as equities held at fair value through profit or loss, are reported as part of the fair value gain or loss. Translation differences on non-monetary items, such as equities classified as available-for-sale financial assets, are included in the fair value reserve in equity. (iii) Group companies The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: (cid:120) (cid:120) (cid:120) 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 fixed overhead expenditure. Costs are assigned to individual items of stock on the basis of SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT 38 NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 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 outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow 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 outflow 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 reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense. (j) Financial assets Classification The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and re- evaluates this designation at each reporting date. Financial assets at fair value through profit or loss (i) This category has two sub-categories: financial assets held for trading, and those designated at fair value through profit or loss on initial recognition. A financial asset is classified 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 classified as current assets if they are either held for trading or are expected to be realised within 12 months of the balance sheet date. Loans and receivables (ii) Loans and receivables are non derivative financial assets with fixed 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 classified as non-current assets. Loans and receivables are included in receivables in the balance sheet. Held-to-maturity investments (iii) Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group’s management has the positive intention and ability to hold to maturity. Available-for-sale financial assets (iv) Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified 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 flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit 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 ‘financial assets at fair value through profit 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 classified as available-for-sale are recognised in equity in the available for sale investments revaluation reserve. When securities classified 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 financial asset or group of financial assets is impaired. In the case of equity securities classified as available for sale, a significant 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 financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit 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. 39 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 (k) Derivatives 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 firm commitment (fair value hedge); or (2) hedges of highly probable forecast transactions (cash flow 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 flows of hedged items. Cash flow hedge (i) The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow 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 profit 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-financial asset (for example, inventory) or a non-financial 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. Derivatives that do not qualify for hedge accounting (ii) 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 financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The fair value of financial 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 flows. 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 financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial 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 benefits associated with the item will flow 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 financial 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 valuation methods provide a more reliable measure of fair value. Transaction costs arising on the issue of equity instruments are recognised directly in equity. Identifiable 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 identifiable net assets acquired is recorded as goodwill. If the cost of the acquisition is less SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT 40 NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 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 identification 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 financier under comparable terms and conditions. (o) Impairment of assets Assets that have an indefinite 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 identifiable cash flows (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 Capitalised leased plant and equipment Motor vehicles Computer systems Depreciation rate 10% - 37.5% 10% – 37.5% 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 classified as finance 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 finance charges, are included in other long term payables. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The interest element of the finance 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 finance leases is depreciated over the shorter of the asset’s useful life and the lease term. Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified 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 Goodwill (i) Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable 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. Other items of expenditure (ii) Significant items of expenditure, such as costs incurred in store set-ups, are expensed in the financial period in which these costs are incurred. 41 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 (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 financial 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 classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. 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 financial period but not distributed at balance date. (w) Employee benefits Wages and salaries, annual leave and sick leave (i) Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months of the reporting date are recognised 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. Long service leave (ii) The liability for long service leave is recognised in the provision for employee benefits 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 outflows. (iii) Retirement benefit 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 benefits 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 benefit 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 Binomial 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, profitability 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 benefit 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. SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT 42 NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 Profit-sharing and bonus plans (v) The Group recognises a liability and an expense for bonuses and profit-sharing based on a formula that takes into consideration the profit 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: - interest on bank overdrafts and short-term and long-term borrowings; - amortisation of discounts or premiums relating to borrowings; - amortisation of ancillary costs incurred in connection with the arrangement of borrowings; and - finance lease charges; (y) Cash and cash equivalents For the purposes of the cash flow statement, cash includes cash on hand, cash at bank and at call deposits with banks or financial institutions, other short term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, 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 Office. 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 flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to, the taxation authority, are presented as operating cash flow. (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) Earnings per share Basic earnings per share (i) Basic earnings per share is calculated by dividing the profit attributable to equity holders of the company, by the weighted average number of ordinary shares outstanding during the period. Diluted earnings per share (ii) Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. (ac) 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 financial report. Amounts in the financial report have been rounded off in accordance with that Class Order to the nearest thousand dollars. (ad) New accounting standard and UIG interpretations Certain new accounting standards and UIG interpretations have been published that are not mandatory for 30 June 2007 reporting periods. The Group’s assessment of the impact of these new standards and interpretations is set out below. UIG 9 Reassessment of Embedded Derivatives UIG 9 is effective for annual reporting periods beginning on or after 1 June 2006. It requires an entity to assess whether an embedded derivative is required to be separated from the host contract and accounted for as a derivative when the entity first becomes a party to the contract. Subsequent reassessment is prohibited unless there is a change in the terms of the contract that significantly modifies the cash flows that otherwise would be required under the contract, in which case reassessment is required. This is currently not relevant to the Group, but may transpire with future transactions. 43 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 AASB-I 10 Interim Financial Reporting and Impairment AASB-I 10 applies to annual reporting periods beginning on or after 1 November 2006. It prohibits impairment losses recognised in an interim period on goodwill, investments in equity instruments and investments in financial assets carried at cost to be reversed at a subsequent balance sheet date. The Group will apply AASB-I 10 from 1 July 2007 but it is not expected to have any impact on the Group's financial statements. 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. AASB 7 introduces new disclosures to improve the information about financial instruments. It requires the disclosure of qualitative and quantitative information about exposure to risks arising from financial instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk, including sensitivity analysis to market risk. It replaces AASB 130 Disclosures in the Financial Statements of Banks and Similar Financial Institutions and the disclosure requirements in IAS 32 Financial Instruments: Disclosure and Presentation. It is applicable to all reporting entities. The amendment to AASB 101 introduces disclosures about the level of an entity's capital and how it manages capital. The Group assessed the impact of AASB 7 and the amendment to AASB 101 and concluded that the main additional disclosures will be the sensitivity analysis to market risk and the capital disclosures required by the amendment of AASB 101. The Group will apply the standards from annual reporting periods beginning 1 July 2007. Revised AASB 101 Presentation of Financial Statements A revised AASB 101 was issued in October 2006 and is applicable to annual reporting periods beginning on or after 1 January 2007. The Group has not adopted the standard early. Application of the revised standard will not have any impact on the Group's financial statements. AASB-I 11 AASB 2 - Group and Treasury Share Transactions and AASB 2007-1 Amendments to Australian Accounting Standards arising from AASB Interpretation 11 AASB-I 11 and AASB 2007-1 are effective for annual reporting periods commencing on or after 1 March 2007. AASB-I 11 addresses whether certain types of share-based payment transactions should be accounted for as equity-settled or as cash settled transactions and specifies the accounting in a subsidiary’s financial statements for share-based payment arrangements involving equity instruments of the parent. The Group will apply AASB-I 11 from 1 July 2007, but it is not expected to have any impact on the Group's financial statements. AASB 8 Operating Segments and AASB 2007-3 Amendments to Australian Accounting Standards arising from AASB 8 AASB 8 and AASB 2007-3 are effective for annual reporting periods commencing on or after 1 January 2009. AASB 8 will result in a significant change in the approach to segment reporting, as it requires adoption of a "management approach" to reporting on the financial performance. The information being reported will be based on what the key decision-makers use internally for evaluating segment performance and deciding how to allocate resources to operating segments. The Group has not yet decided when to adopt AASB 8. Application of AASB 8 may result in different segments, segment results and different type of information being reported in the segment note of the financial report. However, it will not affect any of the amounts recognised in the financial statements. AASB 2007-4 Amendments to Australian Accounting Standards arising from ED 151 and Other Amendments and AASB 2007-7 Amendments to Australian Accounting Standards [AASB 1, AASB 2, AASB 4, AASB 5, AASB 107 & AASB 128] AASB 2007-4 and AASB 2007-7 are applicable to annual reporting periods beginning on or after 1 July 2007. The amendments introduce a number of options that existed under IFRS but had not been included in the original Australian equivalents to IFRS and remove many of the additional Australian disclosure requirements. Revised AASB 123 Borrowing Costs and AASB 2007-6 Amendments to Australian Accounting Standards arising from AASB 123 [AASB 1, AASB 101, AASB 107, AASB 111, AASB 116 & AASB 138 and Interpretations 1 & 12] The revised AASB 123 is applicable to annual reporting periods commencing on or after 1 January 2009. It has removed the option to expense all borrowing costs and - when adopted - will require the capitalisation of all borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset. 2 Financial risk management The Group's activities expose it to a variety of financial risks; market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses derivative financial instruments such as 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 identifies, evaluates and hedges financial 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 specific areas, such as mitigating foreign exchange, interest rate and credit risks, use of derivative financial instruments and investing excess liquidity. SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT 44 NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 (a) Market risk Foreign exchange risk (i) 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 at least the subsequent 4 months. Fair value interest rate risk (ii) Refer to (d) below. (b) Credit risk The Group has no significant 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 financial institutions. (c) Liquidity risk Prudent liquidity risk management implies maintaining sufficient 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 flexibility in funding by keeping committed credit lines available. (d) Cash flow and fair value interest rate risk As the Group has no significant interest-bearing assets, the Group’s income and operating cash flows 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 flow interest-rate risk. Borrowings issued at fixed rates expose the Group to fair value interest-rate risk. The Group manages its cash flow interest-rate risk by using floating-to-fixed interest rate swaps. Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates. Generally, the Group raises long-term borrowings at floating rates and swaps them into fixed rates that are lower than those available if the Group borrowed at fixed rates directly. Under the interest-rate swaps, the Group agrees with other parties to exchange, at specified intervals (mainly quarterly), the difference between fixed contract rates and floating-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 financial 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 definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. Estimated impairment of goodwill (i) 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. 45 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 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 fishing equipment. Primary reporting segment – business segment 2007 Supercheap Auto $’000 BCF $’000 Total continuing operations $’000 Inter-segment eliminations/ unallocated $’000 Consolidated $’000 Sales to external customers 525,745 99,070 624,815 Inter segment sales 0 0 0 Total sales revenue 525,745 99,070 624,815 Other revenue/income 119 8 127 525,864 99,078 624,942 37,851 1,827 39,678 Total revenue and other income Segment result (pre- borrowing costs) Borrowing costs Profit before income tax Income tax expense Profit for the period 0 0 0 374 374 (1,227) (7,191) 624,815 0 624,815 501 625,316 38,451 (7,191) 31,260 (8,928) 22,332 Segment assets 250,283 63,779 314,062 (1,054) 313,008 Unallocated assets Total assets 1,600 1,600 314,608 Segment liabilities (136,939) (62,021) (198,960) 110,147 (88,813) (101,269) (101,269) (190,082) Unallocated liabilities Total liabilities Acquisitions of property, plant and equipment and other non-current segment assets Depreciation and amortisation expense 19,633 10,701 30,334 11,870 1,390 13,260 0 0 30,334 13,260 299 Other non-cash expenses 0 0 0 299 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT 46 NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 4 Segment information (continued) 2006 Supercheap Auto $’000 BCF $’000 Total continuing operations $’000 Inter-segment eliminations/ unallocated $’000 Consolidated $’000 Sales to external customers 481,781 44,168 525,949 Inter segment sales 0 0 0 Total sales revenue 481,781 44,168 525,949 Other revenue/income 268 0 268 482,049 44,168 526,217 33,012 (3,472) 29,540 Total revenue and other income Segment result (pre- borrowing costs) Borrowing costs Profit before income tax Income tax expense Profit for the period Segment assets 235,322 32,292 267,614 Unallocated assets Total assets 0 0 0 287 287 (339) (5,836) (288) 2,150 525,949 0 525,949 555 526,504 29,201 (5,836) 23,365 (6,855) 16,510 267,326 2,150 269,476 Segment liabilities (126,936) (35,031) (161,967) 94,331 (67,636) Unallocated liabilities Total liabilities Acquisitions of property, plant and equipment and other non-current segment assets 13,806 6,341 20,147 Depreciation and amortisation expense 10,096 Other non-cash expenses 0 609 0 Geographical segments (88,910) (88,910) (156,546) 0 0 10,705 0 (134) 20,147 10,705 (134) 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 fishing. New Zealand Only Supercheap Auto operates in New Zealand. 47 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 Secondary Segment – Geographical Segments Segment Revenues from sales to external customers Segment Assets 2007 $’000 2006 $’000 2007 $’000 2006 $’000 Australia New Zealand 565,632 59,183 472,851 53,098 288,292 26,316 245,545 23,931 624,815 525,949 314,608 269,476 Acquisitions of property, plant and equipment, intangibles and other non-current segment assets 2007 $’000 29,225 1,109 30,334 2006 $’000 18,482 1,665 20,147 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 2007 $'000 2006 $'000 2007 $'000 2006 $'000 624,815 525,949 624,815 525,949 372 0 372 287 0 287 625,187 526,236 0 0 13 17,000 17,013 17,013 0 0 8 13,000 13,008 13,008 Consolidated Parent entity 2007 $'000 0 129 129 2006 $'000 84 184 268 2007 $'000 2006 $'000 0 2 2 0 0 0 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT 48 NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 7 Expenses Consolidated Parent entity 2007 $'000 2006 $'000 2007 $'000 2006 $'000 Profit before income tax includes the following specific gains and expenses: Expenses Net loss on disposal of property, plant and equipment 260 0 Depreciation Computer systems Plant and equipment Motor vehicles Total depreciation Amortisation Computer software Finance costs Interest and finance charges Amount capitalised Finance costs expensed Employee benefits expense Superannuation expense Salaries and wages Rental expense relating to operating leases Lease expenses Equipment hire Total rental expense relating to operating leases 4,014 6,283 311 10,608 3,434 4,814 317 8,565 2,652 2,140 7,191 0 7,191 6,094 98,417 104,511 43,405 1,274 44,679 5,933 (97) 5,836 5,416 85,419 90,835 35,590 991 36,581 Foreign exchange gains and losses Net foreign exchange (gains)/losses 509 745 0 0 0 0 0 0 6,662 0 6,662 6 283 289 0 0 0 0 0 0 0 0 0 0 4,320 (75) 4,245 12 280 292 0 0 0 9 49 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT 8 Income tax expense NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 Consolidated Parent entity 2007 $'000 2006 $'000 2007 $'000 2006 $'000 (a) Income tax expense Current tax Deferred tax Adjustments for current tax of prior period 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 23) (b) Numerical reconciliation of income tax expense to prima facie tax payable 11,037 (1,922) (187) 8,928 (2,217) 295 (1,922) 7,538 (666) (17) 6,855 (624) (42) (666) Profit from continuing operations before income tax expense 31,260 23,365 9,378 7,010 0 (342) 50 9,086 (6) 6 (173) 15 8,928 0 (177) 22 6,855 17 (17) 0 0 6,855 Tax at the Australian tax rate of 30% (2006 - 30%) 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 Adjustments for current tax of prior periods Research and development tax credits Restatement of New Zealand deferred tax balances to 30% Income tax expense Amounts recognised directly in equity Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss but directly debited or credited to equity Net deferred tax – debited/(credited) directly to equity (notes 14 and 23) (c) Tax consolidation legislation (2,468) (37) (128) (2,633) (37) 0 (37) 8,751 2,625 (5,100) 0 2 (2,473) 0 13 (173) 0 (2,633) (1,469) 13 0 (1,456) 13 0 13 8,145 2,444 (3,900) 0 0 (1,456) 0 0 0 0 (1,456) (731) (731) 28 28 (40) (40) 10 10 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’ financial statements. 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 financial 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 32). SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT 50 NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 9 Current assets - Cash and cash equivalents Consolidated Parent entity 2007 $'000 2006 $'000 2007 $'000 2006 $'000 Cash at bank and in hand 6,271 6,372 17 132 10 Current assets - Trade and other receivables Trade receivables Provision for impairment of receivables (a) Loans to related parties (b) Other receivables Tax receivable Prepayments Consolidated Parent entity 2007 $'000 5,639 (74) 5,565 0 2,753 1,176 5,097 14,591 2006 $'000 6,653 (26) 6,627 0 2,188 564 4,758 14,137 2007 $'000 2006 $'000 0 0 0 116,194 96 0 0 116,290 0 0 0 95,554 102 0 408 96,064 Further information relating to loans to key management personnel is set out in note 28. (a) Impaired trade receivables The Group has recognised a loss of $52,000 (2006: $27,000) in respect of bad and doubtful trade receivables during the period ended 30 June 2007. 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. 11 Current assets – Inventories Consolidated Parent entity 2007 $'000 2006 $'000 2007 $'000 2006 $'000 Finished goods - at lower of cost or net realisable value 159,880 135,021 0 0 51 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 12 Non-current assets – Other financial assets Consolidated Parent entity 2007 $'000 2006 $'000 2007 $'000 2006 $'000 Shares in subsidiaries at cost Name of entity Super Cheap Auto Pty Ltd BCF Australia Pty Ltd Super Retail Group Services Pty Ltd Total non-current assets – shares in controlled entities (refer Note 33) 0 0 0 0 0 0 0 0 84,233 1 0 84,233 1 0 84,234 84,234 13 Non-current assets – Property, plant and equipment Consolidated Parent entity 2007 $'000 2006 $'000 2007 $'000 2006 $'000 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 77,346 (22,258) 55,088 1,423 (792) 631 26,104 (14,561) 11,543 55,498 (16,363) 39,135 1,342 (645) 697 20,468 (10,503) 9,965 Total net property, plant and equipment 67,262 49,797 Assets pledged as security are detailed in Note 21 0 0 0 0 0 0 0 0 0 0 Reconciliations - consolidated entity Carrying amounts at 2 July 2006 Additions Disposals Depreciation and amortisation Foreign currency exchange differences Carrying amounts at 30 June 2007 Reconciliations - consolidated entity Carrying amounts at 3 July 2005 Additions Disposals Depreciation and amortisation Foreign currency exchange differences Carrying amounts at 1 July 2006 Plant and equipment $’000 Motor vehicles $’000 Computer systems $’000 39,135 22,039 (346) (6,283) 543 55,088 697 298 (61) (311) 8 631 9,965 5,527 0 (4,014) 65 11,543 Plant and equipment $’000 Motor vehicles $’000 Computer systems $’000 31,500 13,024 (17) (4,814) (558) 39,135 652 412 (40) (317) (10) 697 9,359 4,127 (15) (3,434) (72) 9,965 0 0 0 0 0 0 0 0 0 0 Total $’000 49,797 27,864 (407) (10,608) 616 67,262 Total $’000 41,511 17,563 (72) (8,565) (640) 49,797 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT 52 NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 14 Non-current assets - Deferred tax assets The balance comprises temporary differences attributable to: Amounts recognised in profit or loss Doubtful debts Employee benefits Accruals Inventories Deferred borrowing/consulting costs Deferred make good provision Straight line lease adjustment Deferred income Depreciation Provision for warranties and legal costs Amounts recognised directly in equity Cash flow hedges Set off with deferred tax liabilities (note 22) Net deferred tax assets Movements: Opening balance Credited/(charged) to the income statement Credited/(charged) to equity Foreign exchange on translation of NZ subsidiary Closing balance Deferred tax assets to be recovered after more than 12 months Deferred tax assets to be recovered within 12 months Consolidated Parent entity 2007 $'000 2006 $'000 2007 $'000 2006 $'000 129 2,191 774 1,146 0 686 2,458 90 386 30 7,890 680 8,570 (579) 7,991 5,633 2,217 662 58 8,570 1,368 7,202 8,570 214 1,785 419 889 2 550 1,658 78 0 20 5,615 18 5,633 (278) 5,355 5,086 624 18 (95) 5,633 2,560 3,073 5,633 0 2 59 0 0 0 0 0 0 0 61 (29) 32 0 32 24 37 (29) 0 32 0 32 32 0 0 24 0 0 0 0 0 0 0 24 0 24 (24) 0 37 (13) 0 0 24 0 24 24 53 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 15 Non-current assets – Intangible assets Consolidated Parent entity 2007 $’000 2006 $’000 Goodwill at cost Less impairment charge Net goodwill Trademarks, at cost Less accumulated depreciation Net trademarks Computer software Less accumulated amortisation 2007 $’000 52,112 0 52,112 14 0 14 15,203 (8,716) 6,487 2006 $’000 52,112 0 52,112 14 0 14 12,732 (6,064) 6,668 Total net intangibles 58,613 58,794 0 0 0 0 0 0 0 0 0 0 Reconciliations – consolidated entity - 2007 Carrying amounts at 2 July 2006 Additions Impairment/amortisation charge Foreign currency exchange differences Carrying amounts at 30 June 2007 Reconciliations – consolidated entity - 2006 Carrying amounts at 3 July 2005 Additions Impairment/amortisation charge Carrying amounts at 1 July 2006 (a) Impairment tests for goodwill Goodwill $’000 Trademarks $’000 52,112 0 0 0 52,112 14 0 0 0 14 Goodwill $’000 Trademarks $’000 Computer Software $’000 6,668 2,470 (2,652) 1 6,487 Computer Software $’000 52,112 0 0 52,112 14 0 0 14 6,224 2,584 (2,140) 6,668 0 0 0 0 0 0 0 0 0 0 Totals $’000 58,794 2,470 (2,652) 1 58,613 Totals $’000 58,350 2,584 (2,140) 58,794 Goodwill is allocated to the Group’s cash-generating units (CGUs) identified 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 flow projections based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-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. SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT 54 NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 15 (b) Non-current assets – Intangible assets (continued) Key assumptions used for value-in-use calculations No impairment loss was recognised in the 2007 financial 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 2007 % 3 5 2006 % 3 5 2007 % 15 15 2006 % 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 Other payables 17 Current liabilities – Borrowings Secured Commercial bill Less borrowing costs capitalised, net Total current liabilities – secured interest bearing liabilities Unsecured Related parties Unsecured bank financing Total current liabilities – unsecured interest bearing liabilities Consolidated Parent entity 2007 $'000 43,138 19,105 62,243 2006 $'000 36,412 13,031 49,443 2007 $'000 25 1,576 1,601 2006 $'000 8 205 213 Consolidated Parent entity 2007 $'000 2006 $'000 2007 $'000 2006 $'000 31,540 (271) 19,379 (469) 29,940 (211) 17,229 (273) 31,269 18,910 29,729 16,956 2 139 141 1 109 110 0 0 0 0 0 0 Total current liabilities – interest bearing liabilities 31,410 19,020 29,729 16,956 (a) Bills payable Bills have been drawn as a source of short-term financing 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 22. (c) Fair value disclosures Details of the fair value of borrowings for the Group are set out in note 22. (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 21. 55 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 18 Current liabilities – Current tax liabilities Consolidated Parent entity 2007 $'000 2006 $'000 2007 $'000 2006 $'000 Income tax payable 5,611 1,725 5,611 1,725 19 Current liabilities – Provisions Make good provision Employee benefits Consolidated Parent entity 2007 $'000 284 5,516 5,800 2006 $'000 260 4,681 4,941 2007 $'000 0 0 0 2006 $'000 0 0 0 20 Non-current liabilities – Trade and Other Payables Straight line lease adjustment 21 Non-current liabilities – Borrowings Secured Cash advance Consolidated Parent entity 2007 $'000 8,194 2006 $'000 5,482 2007 $'000 0 2006 $'000 0 Consolidated Parent entity 2007 $'000 70,000 70,000 2006 $'000 2007 $'000 70,000 70,000 70,000 70,000 2006 $'000 70,000 70,000 The facilities are secured by first registered floating 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, Super Retail Group Services 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, Super Retail Group Services Pty Ltd 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 fixed charges coverage. SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT 56 NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 21 Non-current liabilities – Borrowings (continued) The carrying amount of assets pledged as security are equal to those shown in the consolidated balance sheet. 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 Consolidated Parent entity 2007 $’000 2006 $’000 2007 $’000 2006 $’000 128,720 1,342 130,062 128,720 1,338 130,058 125,000 1,342 126,342 125,000 1,338 126,338 101,600 1,251 102,851 27,120 91 27,211 89,400 1,287 90,687 39,320 51 39,371 100,000 0 100,000 25,000 1,342 26,342 87,250 0 87,250 37,750 1,338 39,088 In addition, the Company has access to a $112 million (2006: $37.5 million) transactional facility for clean credit and foreign currency dealings. Super Cheap Auto Pty Ltd has commercial bills of $Nil (2006: $17.25 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 $1.6 million (2006: $2.15 million) at 30 June 2007. The current interest rates on the financing arrangements are: - Multi Option Facility (including commercial bills, overdraft and cash advance) 7.50%-7.59% (2006: 6.93%-7.13%) 22 Derivative Financial instruments Derivative financial instruments The parent entity and its controlled entity are parties to derivative financial 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. 57 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 22 Derivative Financial instruments (continued) At balance date the following amounts were committed on foreign currency forward exchange contracts: Consolidated entity Parent entity 2007 $000 2006 $000 2007 $000 2006 $000 Buy United States dollars and sell Australian dollars with maturity - 0 to 6 months - 7 to 12 months 18,500 15,000 3,000 0 0 0 0 0 Weighted average rate of contracts 82 cents 70 cents 0 cents 0 cents Buy Australian dollars and sell New Zealand dollars with maturity - 0 to 6 months 9,000 0 0 0 Weighted average rate of contracts 115 cents 0 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 flows 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) (b) Included in other payables under note 16 Included in other receivables under note 10 0 2,362 2,362 (97) (97) 2,265 0 60 60 0 (101) (101) (41) 0 0 0 (97) (97) (97) 0 0 0 0 (101) (101) (101) Interest rate swap contracts Bank loans of the economic entity currently bear an average variable interest rate of 7.5% (2006: 6.97%). 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 fixed 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 15% (2006: 17%) of the loan principal outstanding. The average fixed interest rate is 5.66% (2006: 5.66%). SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT 58 NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 22 Derivative Financial instruments (continued) 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: Notes 9 10 16, 18 17 17 17, 21 19, 24 Notes 9 10 16, 18 17 17 17, 21 19, 24 2007 Financial assets Cash and deposits Receivables Total financial assets Weighted average rate of interest Financial liabilities Trade and other payables Related parties Unsecured financing Commercial bill/cash advance Employee entitlements Total financial liabilities Weighted average rate of interest Net financial assets/ (liabilities) 2006 Financial assets Cash and deposits Receivables Total financial assets Weighted average rate of interest Financial liabilities Trade and other payables Related parties Unsecured financing Commercial bill/cash advance Employee entitlements Total financial liabilities Weighted average rate of interest Net financial assets/ (liabilities) Fixed interest maturing in 1 year or less $’000 Over 1 to 5 years $’000 More than 5 years $000 Non- interest bearing $’000 Total $’000 Floating interest rate $’000 5,237 5,237 6.2% 0 0 0 86,269 0 86,269 0 0 0 0 139 15,000 0 15,139 7.5% 6.56% (81,032) (15,139) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1,034 14,591 15,625 6,271 14,591 20,862 67,854 2 0 0 6,782 74,638 67,854 2 139 101,269 6,782 176,046 (59,013) (155,184) Fixed interest maturing in 1 year or less $’000 Over 1 to 5 years $’000 More than 5 years $000 Non- interest bearing $’000 Total $’000 Floating interest rate $’000 5,438 0 5,438 5.00% 0 0 0 73,910 0 73,910 6.97% 0 0 0 0 0 109 0 0 109 0 0 0 0 0 0 15,000 0 15,000 6.56% (68,472) (109) (15,000) 0 0 0 0 0 0 0 0 0 0 934 14,137 15,071 6,372 14,137 20,509 51,168 1 0 0 5,902 57,071 51,168 1 109 88,910 5,902 146,090 (42,000) (125,581) 59 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 22 Derivative Financial instruments (continued) Net fair value of financial assets and liabilities On-balance sheet items The net fair values of cash and cash equivalents and non-interest bearing monetary financial assets and financial liabilities of the consolidated entity approximate the carrying amounts. The net fair values of other monetary financial assets and financial liabilities of the consolidated entity are based upon market prices where a market exists or by discounting the expected future cash flows by the current interest rates for assets and liabilities with similar risk profiles. Derivative financial 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 profiles. Carrying amounts and net fair values of financial assets and financial liabilities at balance sheet date: On-balance sheet financial instruments Financial assets Cash and deposits Receivables Non-traded financial assets Financial liabilities Trade and other payables Commercial bill and other financing Non-traded financial liabilities Off-balance sheet financial instruments Financial assets Forward exchange contracts * Financial liabilities Forward exchange contracts * Consolidated entity Carrying amount Net fair value 2007 $’000 2006 $’000 2007 $’000 2006 $’000 6,271 14,591 20,862 6,372 14,137 20,509 6,271 14,591 20,862 6,372 14,137 20,509 (67,854) (101,410) (169,264) (51,168) (89,020) (140,188) (67,854) (101,410) (169,264) (51,168) (89,020) (140,188) 2,362 (97) 60 (101) 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 financial assets and liabilities. None of the financial 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 financial assets is the carrying amount, net of any provisions for doubtful debts of those assets, as disclosed in the statement of financial position, and notes to the financial statements. Credit risk for derivative financial 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. SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT 60 NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 23 Non-current liabilities - Deferred tax liabilities Consolidated Parent entity 2007 $'000 2006 $'000 2007 $'000 2006 $'000 The balance comprises temporary differences attributable to: Amounts recognised in profit or loss Prepayments Unrealised foreign exchange on inter company balances Depreciation Amounts recognised directly in equity Share based payments Cash flow hedges 10 224 345 579 0 0 579 6 0 248 254 39 30 323 Set-off of deferred tax liabilities of parent entity pursuant to set-off provisions Net deferred tax liabilities (579) 0 (278) 45 Movements: Opening balance 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 24 Non-current liabilities – Provisions 323 295 (69) 30 579 569 10 579 420 (42) (10) (45) 323 317 6 323 0 0 0 0 0 0 0 0 0 69 0 (69) 0 0 0 0 0 0 0 0 0 39 30 69 (24) 45 79 0 (10) 0 69 69 0 69 Make good provision Employee benefits Consolidated Parent entity 2007 $'000 5,558 1,266 6,824 2006 $'000 4,669 1,221 5,890 2007 $'000 2006 $'000 0 0 0 0 0 0 (a) Provision is made for costs arising from contractual obligations in lease agreements at the inception of the agreement. Make good provision A provision has been recognised for the present value of the estimated expenditure required to remove any leasehold improvements. These costs have been capitalised as part of the cost of the leasehold improvements and are amortised over the shorter of the term of the lease or the useful life of the assets. (b) Movements in provisions (consolidated entity) (notes 19 & 24) Opening balance as at 2 July 2006 Additional provisions recognised Indexing of provisions Provision released Closing balance as at 30 June 2007 61 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT Make good $'000 4,929 923 376 (387) 5,841 25 Contributed equity NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 Consolidated Parent entity 2007 $'000 2006 $'000 2007 $'000 2006 $'000 Ordinary shares fully paid 84,233 84,233 84,233 84,233 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 30 June 2007 Number of Shares 1 49,697,150 56,732,471 106,429,622 Issue Price $’000 1.00 1.69 - 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 1,375,000 ordinary shares were issued during the period, with no options being exercised during the period. Information relating to options outstanding at the end of the financial period are set out in Note 38. 26 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 financial period Net exchange difference on translation of foreign controlled Entity Balance at the end of the financial period Share based payments reserve Balance at beginning of the financial period Options lapsed Option expense Balance at the end of the financial period Hedging reserve Balance of beginning of the financial period Revaluation – gross Deferred tax Balance at the end of the financial period Retained earnings Balance at the beginning of the financial period Net profit/(loss) for the financial period attributable to shareholders of Super Cheap Auto Group Limited Dividends provided for or paid Retained profits/(losses) at the end of the financial period Consolidated Parent entity 2007 $'000 2006 $'000 2007 $'000 2006 $'000 (11) 428 (1,585) (1,168) (129) 118 (11) 90 0 338 428 28 (2,304) 691 (1,585) 28,708 22,332 (9,579) (129) 90 28 (11) 0 (129) (129) 184 (270) 176 90 0 40 (12) 28 0 428 68 496 0 0 0 90 0 338 428 70 (3) 1 68 20,180 16,510 (7,982) 7,098 11,384 (9,579) 41,461 28,708 8,903 0 90 70 160 0 0 0 184 (270) 176 90 0 100 (30) 70 5,479 9,601 (7,982) 7,098 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT 62 NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 26 (c) Reserves and retained profits (continued) Nature and purpose of reserves (i) Hedging reserve - cash flow hedges The hedging reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are recognised directly in equity, as described in note 1(k). Amounts are recognised in profit and loss when the associated hedged transaction affects profit 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 profit and loss when the net investment is disposed of. 27 Dividends Ordinary shares Dividends paid by Super Cheap Auto Group Limited during the reporting period were as follows: Interim dividend for the period ended 30 June 2007 of 4 cents (2006: 3 cents per share) paid on 4 April 2007. Fully franked based on tax paid @ 30% Final dividend for the period ended 1 July 2006 of 5 cents per share (2005: 4.5 cents per share) paid on 11 October 2006. 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 final dividend of 6.5 cents per ordinary share (2006: 5 cents per ordinary share), fully franked based on tax paid at 30%. Parent Entity 2007 $’000 2006 $’000 4,257 5,322 9,579 3,193 4,789 7,982 The aggregate amount of the dividend expected to be paid on 10 October 2007, out of retained profits at 30 June 2007, but not recognised as a liability at year end, is 6,918 5,322 Franking credits The franked portions of dividends paid after 30 June 2007 will be franked out of existing franking credits and out of franking credits arising from the payments of income tax in the years ending after 30 June 2007. Franking credits remaining at balance date available for dividends declared after the current balance date based on a tax rate of 30% 25,781 22,805 The above amounts represent the balance of the franking account as at the end of the financial 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 $2,964,825 (2006: $2,280,635). 63 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 28 Key management personnel disclosures (a) Directors The following persons were directors of Super Cheap Auto Group Limited during the financial year: (i) Chairman - non-executive Richard Douglas McIlwain (ii) Executive directors Peter Alan Birtles, Managing Director (iii) Non-executive directors Reginald Rowe Robert Wright Darryl McDonough (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 financial year: Name David Ajala Steven Doyle Gary Carroll Graham Chad Position Chief Operating Officer – Super Cheap Auto Chief Operating Officer – BCF Chief Financial Officer General Manager – Group Logistics Employer Super Cheap Auto Group Limited Super Cheap Auto Group Limited Super Cheap Auto Group Limited Super Cheap Auto Group Limited (c) Key management personnel compensation Consolidated Parent entity 2007 $ 2006 $ 2007 $ 2006 $ Short-term employee benefits Post-employment benefits Share-based payments 2,596,445 306,556 229,348 3,132,349 2,020,573 211,905 (189,898) 2,042,580 91,743 188,257 215,519 495,519 155,092 124,908 (189,898) 90,102 The key management personnel remuneration in some instances has been paid by a subsidiary. The company has taken advantage of the relief provided by Corporations Regulation 2M.6.04 and has transferred the detailed remuneration disclosures to the directors’ report. The relevant information can be found in the remuneration report on pages 22 to 27. SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT 64 NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 28 Key management personnel disclosures (continued) (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 22 to 27. (ii) Option holdings The numbers of options over ordinary shares in the company held during the financial 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. 2007 Balance at the start of the year Name Directors of Super Cheap Auto Group Limited R D McIlwain R A Rowe D D McDonough R J Wright P A Birtles Other key management personnel of the Group D F Ajala S J Doyle G G Carroll G L Chad 0 0 0 0 200,000 400,000 400,000 250,000 0 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 0 0 0 0 500,000 0 0 0 125,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 700,000 400,000 400,000 250,000 125,000 0 0 0 0 0 0 0 0 0 No options are vested and unexercisable at the end of the year. 2006 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 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 Name 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 Other key management personnel of the Group D F Ajala S J Doyle G G Carroll G L Chad 0 0 0 1,000,000 0 200,000 0 0 0 0 0 0 0 0 0 0 400,000 400,000 250,000 0 No options are vested and unexercisable at the end of the year. 65 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 28 Key management personnel disclosures (continued) (iii) Share holdings The numbers of shares in the company held during the financial 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. 2007 Name Directors of Super Cheap Auto Group Limited Ordinary shares R D McIlwain R A Rowe D D McDonough R J Wright P A Birtles Other key management personnel of the Group Ordinary shares D F Ajala S J Doyle G G Carroll G L Chad 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 1,192,596 0 493,411 0 0 0 0 0 0 0 0 0 0 0 0 0 10,000 0 0 158,882 52,402,159 60,000 40,609 1,192,596 281 (350,000) 0 0 281 143,411 0 0 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) 0 158,882 52,402,159 50,000 40,609 4,063,958 1,192,596 0 (43,537) 0 0 0 493,411 0 0 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 2007 $000 2006 $000 4,877 4,382 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT 66 NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 29 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 firms. Consolidated Parent entity 2007 $ 2006 $ 2007 $ 2006 $ (a) Assurance services Audit services PricewaterhouseCoopers Australian firm Audit and review of financial reports and other audit work under the Corporations Act 2001 Total remuneration for audit services 289,700 289,700 211,437 211,437 171,700 171,700 211,437 211,437 Other assurance services PricewaterhouseCoopers Australian firm IFRS accounting services Total remuneration for other assurance services 0 0 85,230 85,230 0 0 85,230 85,230 Total remuneration for assurance services 289,700 296,667 171,700 296,667 (b) Taxation services PricewaterhouseCoopers Australian firm Tax compliance services, including review of company income tax returns Total remuneration for taxation services 92,864 92,864 125,012 125,012 (c) Advisory services PricewaterhouseCoopers Australian firm Due diligence Total remuneration for advisory services 0 0 159,000 159,000 0 0 0 0 125,012 125,012 159,000 159,000 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. 30 Contingencies Consolidated Parent entity 2007 $000 2006 $000 2007 $000 2006 $000 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: 1,251 1,287 0 0 67 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 31 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 five years Later than five 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 five years Later than five years Less lease straight lining adjustment (note 20) 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 five years Later than five years Consolidated Parent entity 2007 $000 2006 $000 2007 $000 2006 $000 1,736 0 0 1,736 895 0 0 895 42,157 131,691 53,928 (8,194) 219,582 35,222 108,548 44,136 (5,482) 182,424 2,976 3,641 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1,480 4,440 0 5,920 1,375 5,500 0 6,875 1,480 4,440 0 5,920 1,375 5,500 0 6,875 Amounts disclosed as remuneration commitments include commitments arising from the service contracts of key management personnel referred to in the remuneration report on pages 22 to 27 that are not recognised as liabilities and are not included in the key management personnel compensation. 32 Related party transactions Transactions with related parties are at arm’s length unless otherwise stated. (a) The parent entity within the Group is Super Cheap Auto Group Limited, which is the ultimate Australian parent. Parent entities (b) Interests in subsidiaries are set out in note 33. Subsidiaries (c) Disclosures relating to key management personnel are set out in note 28. Key Management Personnel Directors (d) The names of the persons who were Directors of Super Cheap Auto Group Limited during the financial period are R D McIlwain, R A Rowe, R J Wright, D D McDonough and P A Birtles. SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT 68 NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 32 Related party transactions (continued) (e) Amounts due from Directors of the consolidated entity and their director-related entities are as follows: Amounts due from related parties Director related entities of R A Rowe – store lease costs to be reimbursed by landlord (see below) Transactions with related parties (f) Aggregate amounts included in the determination of profit from ordinary activities before income tax that resulted from transactions with related parties: 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 Loans to/from Related Parties (g) Loans to Subsidiaries - beginning of the period - loans advanced - loan repayments received End of year 33 Investments in controlled entities Consolidated Parent entity 2007 $’000 2006 $’000 2007 $’000 2006 $’000 0 0 0 0 7,393 0 0 0 0 0 0 0 7,324 883 0 0 0 0 0 0 0 0 0 0 0 0 0 883 17,000 13,000 13,420 8,558 95,555 291,469 (270,830) 116,194 62,116 235,834 (202,395) 95,555 Name of Entity Super Cheap Auto Pty Ltd(a) Super Cheap Auto (New Zealand) Pty Ltd(b) Super Retail Group Services Pty Ltd(a),(c) BCF Australia Pty Ltd(a) SCA Equity Plan Pty Ltd(b) Country of Incorporation Class of Shares 2007 % 2006 % Equity Holding Australia New Zealand Australia Australia Australia Ordinary Ordinary Ordinary Ordinary Ordinary 100 100 100 100 100 100 100 100 100 100 (a) These controlled entities have been granted relief from the necessity to prepare financial 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 Super Cheap Auto Group Limited acquired the share capital from Super Cheap Auto Pty Ltd. 69 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 Consolidated Entity 2007 Cents 60¢ 2006 Cents 51¢ 34 Net tangible asset backing Net tangible asset per ordinary share 35 Deed of cross guarantee Super Cheap Auto Group Limited, Super Cheap Auto Pty Ltd, BCF Australia Pty Ltd, Super Retail Group Services 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 financial 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. (a) Consolidated Income Statement and a summary of movements in consolidated retained profits 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’. Set out below is a consolidated income statement and a summary of movements in consolidated retained profits for the period ended 30 June 2007 of the Closed Group consisting of Super Cheap Auto Group Limited, Super Cheap Auto Pty Ltd, BCF Australia Pty Ltd, Super Retail Group Services Pty Ltd and SCA Equity Plan Pty Ltd. 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 Profit before income tax Income tax (expense)/benefit Consolidated 2007 $'000 582,105 129 582,234 (351,484) (63,886) (34,618) (39,733) (54,773) (7,253) (551,747) 30,487 (8,810) 2006 $'000 490,689 268 490,957 (298,502) (52,563) (31,352) (32,346) (47,354) (5,781) (467,898) 23,059 (6,692) Profit for the period 21,677 16,367 Summary of movements in consolidated retained profits Retained profits at the beginning of the financial year Profit for the period Dividends provided for or paid Retained profits at the end of the financial year 28,063 21,677 (9,579) 40,161 19,678 16,367 (7,982) 28,063 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT 70 NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 35 Deed of cross guarantee (continued) (b) Balance Sheet Set out below is a consolidated balance sheet as at 30 June 2007 of the Closed Group consisting of Super Cheap Auto Group Limited, Super Cheap Auto Pty Ltd, BCF Australia Pty Ltd, Super Retail Group Services Pty Ltd and SCA Equity Plan Pty Ltd. Consolidated 2007 $'000 2006 $'000 5,780 33,758 142,677 182,215 1 60,777 7,837 58,605 127,220 309,435 58,367 31,410 6,786 4,617 101,180 8,194 70,000 0 6,824 85,018 186,198 123,237 84,233 (1,157) 40,161 5,888 32,153 119,639 157,680 1 44,015 5,018 58,790 107,824 265,504 46,739 19,020 2,289 3,625 71,673 5,482 70,000 45 5,890 81,417 153,090 112,414 84,233 118 28,063 123,237 112,414 ASSETS Current assets Cash and cash equivalents Trade and other receivables Inventories Total current assets Non-current assets Other financial 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 Trade and other payables Borrowings Deferred tax liabilities Provisions Total non-current liabilities Total liabilities Net assets EQUITY Contributed equity Reserves Retained profits Total equity 71 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 Reconciliation of profit from ordinary activities after income tax to net cash inflow from 36 operating activities Consolidated Parent entity Profit from ordinary activities after related income tax Depreciation and amortisation Net (gain)/loss on sale of non-current assets Non-cash employee benefits expense/share based payments Net Interest Expense Change in operating assets and liabilities, net of effects from the purchase of controlled entities and the sale of the service entity - (increase)/decrease in receivables - (increase) in inventories - increase in payables - increase/ in provisions - (decrease)/increase in deferred tax Net cash inflow from operating activities 37 Earnings per share 2007 $000 22,332 13,260 260 299 6,819 (441) (24,859) 16,243 1,792 (1,713) 33,992 2006 $000 2007 $000 2006 $000 16,510 10,705 (84) (134) 5,549 52 (11,838) 4,735 1,920 (644) 26,771 11,384 0 0 299 6,649 9,601 0 0 (134) 4,237 (36,350) 0 5,275 0 (37) (12,780) (22,800) 0 1,271 0 3 (7,822) 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 profit after tax Diluted earnings per share - earnings used in calculating diluted earnings per share – net profit after tax (a) Information concerning the classification of securities Consolidated Entity 2007 Cents 21.0 20.9 2006 Cents 15.5 15.5 Consolidated Entity 2007 Number 2006 Number 106,429,622 641,363 106,429,622 49,188 107,070,985 106,478,810 2007 $000 2006 $000 22,332 16,510 22,332 16,510 Options (i) 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. SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT 72 NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 38 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 official 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. Set out below are summaries of options granted under the plan: Grant Date Exercise date Exercise price Balance at start of the year Number Granted during the year Exercised during the year Number Number Number Expired during the year Balance at end of the year Number Exercisable at end of the year Number Consolidated and parent entity - 2007 19 May 2004 27 Jan 2006 27 Jan 2006 27 Jan 2006 17 April 2006 17 April 2006 17 April 2006 1 July 2006 1 July 2006 1 July 2006 26 Oct 2006 26 Oct 2006 26 Oct 2006 1 July 2007 5 Jan 2009 5 Jan 2010 5 Jan 2011 17 April 2009 17 April 2010 17 April 2011 1 July 2009 1 July 2010 1 July 2011 1 Feb 2009 1 Feb 2010 1 Feb 2011 $1.97 $2.44 $2.44 $2.44 $2.25 $2.25 $2.25 $2.25 $2.25 $2.25 $2.44 $2.44 $2.44 Total 200,000 400,000 200,000 200,000 75,000 75,000 100,000 0 0 0 0 0 0 1,250,000 0 0 0 0 0 0 0 262,500 262,500 350,000 150,000 150,000 200,000 1,375,000 Weighted average exercise price $2.25 $2.32 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 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 Total 700,000 250,000 250,000 0 0 0 0 0 0 1,200,000 0 0 0 400,000 200,000 200,000 75,000 75,000 100,000 1,050,000 Weighted average exercise price $1.97 $2.39 There were no options exercised during the period. 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 0 200,000 400,000 200,000 200,000 75,000 75,000 100,000 262,500 262,500 350,000 150,000 150,000 200,000 200,000 0 400,000 0 200,000 0 200,000 0 75,000 0 75,000 0 100,000 0 262,500 0 262,500 0 350,000 0 150,000 0 150,000 0 0 200,000 0 2,625,000 2,625,000 0 $2.32 $2.32 500,000 250,000 250,000 0 0 0 0 0 0 200,000 200,000 0 0 0 0 400,000 400,000 200,000 200,000 200,000 200,000 75,000 75,000 75,000 75,000 100,000 100,000 1,000,000 1,250,000 1,250,000 $1.97 $2.25 $2.25 The weighted average remaining contractual life of share options outstanding at the end of the period was 2.52 years. 73 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS (continued) Super Cheap Auto Group Limited for the period ended 30 June 2007 38 Share-based payments (continued) Fair value of options granted The assessed fair value at grant date of options granted during the period ended 30 June 2007 was 38 to 57 cents per option. The fair value at grant date is independently determined using a Binomial 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 30 June 2007 included: (a) (b) (c) (d) (e) (f) (g) (h) options are granted for no consideration exercise price: $2.25, $2.44 (2006: $2.25, $2.44) grant date: 1 July 2006 and 26 October 2006 (2006: 27 January 2006 and 17 April 2006) expiry date: 1 February 2009, 1 July 2009, 1 February 2010, 1 July 2010, 1 February 2011 and 1 July 2011 (2006: 5 January 2009, 17 April 2009, 5 January 2010, 17 April 2010, 5 January 2011, 17 April 2011) share price at grant date: $1.59, $2.65 (2006: $2.41, $2.32) expected price volatility of the company’s shares: 33% (2006: 20%) expected dividend yield: 3.5% (2006: 3.5%) risk-free interest rate: 6.0% (2006: 5.6%). 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 2007 ANNUAL REPORT 74 DIRECTORS’ DECLARATION Super Cheap Auto Group Limited For the period ended 30 June 2007 ` In the directors’ opinion: (a) (b) (c) (d) the financial statements and notes set out on pages 30 to 74 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 giving a true and fair view of the company’s and consolidated entity's financial position as at 30 June 2007 and of its performance, as represented by the results of their operations, changes in equity and their cash flows, for the financial period ended on that date; and (ii) 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 the audited remuneration disclosures set out on pages 22 to 27 of the directors’ report comply with Accounting Standards AASB 124 Related Party Disclosures and the Corporations Regulations 2001; and at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group identified in note 35 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in note 35. The directors have been given the declarations by the managing director and chief financial officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the directors. R D McIlwain Director P A Birtles Director Brisbane 23 August 2007 75 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT (cid:3) (cid:3) Independent auditor’s report to the members of Super Cheap Auto Group Limited Report on the financial report and the AASB 124 Remuneration disclosures contained in the directors’ report AUDIT REPORT Super Cheap Auto Group Limited for the period ended 30 June 2007 PricewaterhouseCoopers ABN 52 780 433 757 Riverside Centre 123 Eagle Street BRISBANE QLD 4000 GPO Box 150 BRISBANE QLD 4001 DX 77 Brisbane Australia www.pwc.com/au Telephone +61 7 3257 5000 Facsimile +61 7 3257 5999 We have audited the accompanying financial report of Super Cheap Auto Group Limited (the company), which comprises the balance sheet as at 30 June 2007, and the income statement, statement of changes in equity and cash flow statement for the period ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration for both Super Cheap Auto Group Limited and the Super Cheap Auto Group (the consolidated entity). The consolidated entity comprises the company and the entities it controlled at the period’s end or from time to time during the financial period. We have also audited the remuneration disclosures contained in the directors’ report. As permitted by the Corporations Regulations 2001, the company has disclosed information about the remuneration of directors and executives (“remuneration disclosures”), required by Accounting Standard AASB 124 Related Party Disclosures, under the heading “remuneration report” in pages 22 to 27 of the directors’ report and not in the financial report. Directors’ responsibility for the financial report and the AASB 124 Remunerations disclosures contained in the directors' report The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1 the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards. The directors of the company are also responsible for the remuneration disclosures contained in the directors’ report. Auditor’s responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. Our responsibility is to also express an opinion on the remuneration disclosures contained in the directors’ report based on our audit. Liability limited by a scheme approved under Professional Standards Legislation SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT 76 AUDIT REPORT Super Cheap Auto Group Limited for the period 30 June 2007 (continued) An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report and the remuneration disclosures contained in the directors’ report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report and the remuneration disclosures contained in the directors’ report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report and the remuneration disclosures contained in the directors’ report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report and the remuneration disclosures contained in the directors’ report. Our procedures include reading the other information in the Annual Report to determine whether it contains any material inconsistencies with the financial report. For further explanation of an audit, visit our website http://www.pwc.com/au/financialstatementaudit. Our audit did not involve an analysis of the prudence of business decisions made by directors or management. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Auditor’s opinion on the financial report In our opinion: (a) the financial report of Super Cheap Auto Group Limited is in accordance with the Corporation Act 2001, including: (i) (ii) giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2007 and of their performance for the period ended on that date; and complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and (b) the consolidated financial statements and notes also complies with International Financial Reporting Standards as disclosed in Note 1. Auditor’s opinion on the AASB 124 Remuneration disclosures contained in the directors’ report In our opinion, the remuneration disclosures that are contained in pages 22 to 27 of the directors’ report comply with Accounting Standard AASB 124. PricewaterhouseCoopers B S Delaney Partner Brisbane 23 August 2007 77 SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT SHAREHOLDER INFORMATION Super Cheap Auto Group Limited for the period ended 30 June 2007 The shareholder information set out below was applicable as at 23 August 2007. 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 10,001-1000,000 100,001 and over Ordinary Shareholders Optionholders 955 1,128 231 210 40 11 There were 24 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 J P Morgan Nominees Australia Limited ANZ Nominees Limited National Nominees Limited Cogent Nominees Pty Limited Cogent Nominees Pty Limited UBS Wealth Management Australian Nominees Pty Ltd SCA Equity Plan Pty Ltd Citicorp Nominees Pty Limited HSBC Custody Nominees (Australia) Limited Geomar Superannuation Pty Ltd Citicorp Nominees Pty Limited AMP Life Limited Citicorp Nominees Pty Limited Equitas Nominees Pty Limited Equitas Nominees Pty Limited Equitas Nominees Pty Limited Equitas Nominees Pty Limited Suncorp General Insurance Limited Ordinary shares Number held Percentage of issued shares 52,402,159 9,196,214 3,768,979 3,056,133 2,986,695 2,972,501 2,817,222 2,522,000 1,964,774 1,829,408 1,481,491 1,470,000 1,374,009 828,283 740,553 535,391 535,391 535,391 535,391 516,401 49.24% 8.64% 3.54% 2.87% 2.81% 2.79% 2.65% 2.37% 1.85% 1.72% 1.39% 1.38% 1.29% 0.78% 0.70% 0.50% 0.50% 0.50% 0.50% 0.49% 92,068,386 86.51% SUPER CHEAP AUTO GROUP LIMITED 2007 ANNUAL REPORT 78 SUPERCHEAP AUTO AUSTRALIAN CAPITAL TERRITORY Belconnen (02) 6253 5660 Fyshwick (02) 6239 2333 Tuggeranong (02) 6293 2233 NEW SOUTH WALES Albury (02) 6041 1866 Armidale (02) 6771 1955 Auburn (02) 9648 5722 Ballina (02) 6681 4755 Bankstown (02) 9709 6500 Bathurst (02) 6331 7122 Bella Vista (02) 8814 6335 Bennetts Green (02) 4947 4088 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 Grifﬁth (02) 6962 9566 Hurstville (02) 9580 1722 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 Cairns (Earlville) (07) 4033 0600 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 Robina (07) 5578 8477 Rockhampton (07) 4922 5433 Smithﬁeld (Cairns) (07) 4038 1588 Southport (07) 5527 0666 Stones Corner (07) 3394 4844 Taigum (07) 3265 7211 TarInga (07) 3871 3808 The Pines (07) 5534 5633 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 Wynnum (07) 3348 2044 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 Burnie (03) 6432 4855 Devonport (03) 6424 3244 Glenorchy (03) 6272 9200 Launceston (03) 6333 0511 BCF NEW SOUTH WALES Auburn (02) 9648 4366 Bennetts Green (02) 4947 4088 Coffs Harbour (02) 6651 6500 Port Macquarie (02) 6583 2455 West Gosford (02) 4322 5833 NORTHERN TERRITORY Darwin (08) 8948 0099 QUEENSLAND Browns Plains (07) 3800 1733 Bundaberg (07) 4151 6566 Burleigh (07) 5593 8600 Cairns (07) 4051 8155 Capalaba (07) 3245 2220 Cannon Hill (07) 3890 2744 Gladstone (07) 4978 0611 Hervey Bay (07) 4194 1366 Ipswich (07) 3202 4455 Keperra (07) 3851 4625 Labrador (07) 5500 5700 Lawnton (07) 3889 2911 Mackay (07) 4942 3499 Maroochydore (07) 5479 2390 Noosa (07) 5440 5866 Rockhampton (07) 4926 5055 Springwood (07) 3808 2405 Toowoomba (07) 4638 7511 Townsville (07) 4775 6300 Virginia (07) 3216 5077 WESTERN AUSTRALIA Balcatta (08) 9240 1700 Cannington (08) 9350 5888 Mandurah (08) 9581 6399 Midland (08) 9250 2166 Myaree (08) 9317 6011 Rockingham (08) 9527 9005 VICTORIA Bairnsdale (03) 5153 2799 Ballarat (03) 5339 9455 Bendigo (03) 5442 7877 Brimbank (03) 8390 2611 Broadmeadows (03) 9309 2799 Carrum Downs (03) 9782 8305 Cranbourne (03) 5995 7299 Dandenong (03) 9706 7788 Echuca (03) 5480 6788 Epping (03) 9408 4288 Essendon (03) 9379 3600 Frankston (03) 9781 2288 Hoppers Crossing (03) 9748 7277 Horsham (03) 5382 5000 Kangaroo Flat (03) 5447 9144 Keysborough (03) 9798 8466 Knox City (03) 9800 4722 Maribyrnong (03) 9318 8444 Mentone (03) 9585 0399 Mildura (03) 5022 2588 Moe (03) 5126 1755 Narre Warren (03) 9705 9199 North Geelong (03) 5272 3277 Preston (03) 9484 6006 Ringwood (03) 9847 0055 Rowville (03) 9764 1677 Roxburgh Park (03) 8339 0765 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 Albany (08) 9841 3700 Balcatta (08) 9240 1566 Belmont (08) 9477 5699 Bunbury (08) 9721 9977 Canning Vale (08) 9455 3411 Cannington Hometown (08) 9258 7294 Clarkson (08) 9407 9533 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 3255 Morley (08) 9375 6933 Myaree (08) 9317 7699 O’Connor (08) 9314 3822 Osborne Park (08) 9443 3711 Rockingham (08) 9592 7999 Spearwood (08) 9494 2144 Victoria Park (08) 9361 8422 Whitford (08) 9403 0444 NEW ZEALAND Albany 0011 64 9 448 2461 Alicetown 0011 64 4 569 1576 Blenheim 0011 64 3 579 3480 Botany 0011 64 9 273 8160 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 Hastings 0011 64 6 870 4521 Hawera 0011 64 6 278 3641 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 Masterton 0011 64 6 370 3308 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 Palmerston North 0011 64 6 354 1743 Papanui 0011 64 3 354 8123 Paraparaumu 0011 64 4 298 1523 Porirua 0011 64 4 238 2641 Pukekohe 0011 64 9 239 2073 Riccarton 0011 64 3 341 5087 Rotorua 0011 64 7 348 5275 Stoke 0011 64 3 547 8394 Takanini 0011 64 9 299 8615 Taupo 0011 64 7 376 5023 Tauranga 0011 64 7 579 5436 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 WWW.SUPERCHEAPAUTO.COM.AU WWW.BCF.COM.AU WWW.SUPERCHEAPAUTO.COM.AU WWW.BCF.COM.AU

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