2019 Annual report
2019
101
st
Annual Report
BOARD OF DIRECTORS
J P (Jim) Gibbons, Chairman
Graeme D Gibbons
Denis M Wood
Matthew J Newman
Stuart B Gibbons
Ashley J Waugh
John W M Journee
GROUP CHIEF EXECUTIVE
COMPANY SECRETARY
FINANCE MANAGER
Graeme D Gibbons
Nicholas K Bartle
Paul Stephenson
AUDITOR
Grant Thornton New Zealand Audit Partnership
(Partner Michael Stewart)
BANKERS
ANZ Bank New Zealand Limited
Bank of New Zealand
Westpac New Zealand Limited
SHARE REGISTRY
Computershare Investor Services Limited
Level 2, 159 Hurstmere Road
Takapuna, North Shore
Private Bag 92119
Auckland 1142
Website: www.computershare.co.nz/investorcentre
REGISTERED OFFICE AND
ADDRESS FOR SERVICE
Level 6
57 Courtenay Place
PO Box 6159
Wellington 6141
New Zealand
Telephone (04) 384-9734
Facsimilie (04) 801-7279
E-mail address cmc@colmotor.co.nz
Website www.colmotor.co.nz
PROSPECTIVE DATES FOR 2020
Interim Half Year Report Late February
Interim Dividend 20 April
Preliminary Full Year Report Late August
Annual Report Late September
Final Dividend 19 October
Annual Meeting 6 November
Shareholder enquiries can be addressed to the Registered Office or directly to the Share Registry.
The Company is able to send shareholders e-mail notifications of the announcement of its preliminary half
year (in February) and full-year results (in August). To register for this service please send an e-mail to
cmc@colmotor.co.nz from the e-mail account you wish to receive the notifications with “Preliminary Results”
in the subject line.
Today the CMC Group’s core business is the operation of twelve Ford
dealerships each holding a franchise in its own right from the Ford
Motor Company of New Zealand Limited. Seven of these dealerships
also hold Mazda franchises. CMC, through Southpac Trucks, is the
NZ distributor and retailer of Kenworth and DAF heavy duty trucks and
in Southland/Otago, Agricentre South retails New Holland, Case IH
and Kubota tractors and equipment.
The Colonial Motor Company originated from William Black’s coach-
building factory which started operations in 1859 at 89 Courtenay
Place, Wellington. In 1881 it was taken over by Rouse & Hurrell, who
expanded the business with a new three storied premises calling it
Rouse & Hurrell’s Empire Steam and Carriage Works. This
partnership was formed into a limited liability company in 1902 with Mr
Edward Wade Petherick the first Secretary of the Company. The Ford
Motor Car Agency was taken up in 1908 and in August 1911 a new
name The Colonial Motor Company Limited was registered.
On Ford Canada’s recommendation a dominant shareholding and
control was acquired by Mr Charles Corden Larmour and the sale of
this majority holding and control to Mr Hope Gibbons and his family
interests was concluded in April 1918 after negotiations in 1916. At
that time there were 17 Authorised Ford Dealers in New Zealand of
which 10 were in the South Island. In 1919 the Company restructured
with a new memorandum and articles but the 1911 name was retained
and remains the same today.
The nine storied building at 89 Courtenay Place, designed by architect
J M Dawson to Ford plans, opened as the tallest Wellington
construction in 1922. It was the first motor vehicle assembly plant in
New Zealand - vehicles starting in boxes at the top and driving out
completed at the bottom. The Company later built assembly plants at
Fox Street, Parnell, Auckland and Sophia Street, Timaru. This was the
age of the Model T with Ford market share reaching a peak of 27% in
1926. The ‘CMC’ Building was sold in 2005.
In 1936, Ford Motor Company of New Zealand Limited established an
assembly plant at Seaview, Lower Hutt, and took over the distribution
of Ford products in New Zealand. CMC then concentrated on the retail
side of the business, operating the retail garages it then owned. The
1930's and 1940's were a time of survival with the depression, excess
stock of new product, and then no new vehicles available during the
war years and petrol rationing until 1950. Service became the key to
remaining in business.
Shortly after the end of the war the supply of new vehicles was
resumed and the 30 years up to 1980 saw the Group consolidate. The
Dealer organisation that developed proved to be one of the best retail
motor groups in New Zealand. Over this period nearly every
Dealership was either rebuilt, fully refurbished or relocated and new
Dealerships were opened in East, West and South Auckland to cater
for Auckland growth.
For the 50 years up to 1987, New Zealand had import licensing, local
assembly of vehicles and heavy additional sales taxes to control
overseas funds. The new vehicle industry under this regime peaked
in 1973 and again in 1974 at 123,000 units. The dismantling of
controls and the arrival of second hand imports from Japan saw the
industry fall to just 66,500 new vehicles in 1992. It wasn’t until 2014
30 years later, that the new vehicle industry again reached the level
seen in 1984. 2015, 2016 and now 2017 have all seen record industry
sales.
The late 1980’s and all through the 1990’s was a period of change and
adaptation. Over a decade most smaller Ford dealerships either
closed down or merged with their neighbours. This resulted in fewer,
but larger, Ford dealerships. CMC closed or sold its smaller
dealerships and acquired others to expand its city and provincial
locations. Nelson was acquired during this period. Compounding the
changes was the Ford NZ decision to first sell its NZ tractor distribution
to Norwoods and then later to close its distribution of heavy trucks in
New Zealand.
Most of the CMC company tractor departments were closed, with the
exception of Southland. This business has since grown to become
Agricentre South Limited, retailing New Holland & Kubota tractors in
Southland and Case IH tractors in Southland / Otago.
In 1994, CMC acquired a major interest in Southpac Trucks, the NZ
distributor for Kenworth and Foden (since retired) and more recently,
DAF, heavy duty trucks which are all part of the USA based PACCAR
organisation. Southpac Trucks has since grown into a major player in
the NZ heavy truck industry.
Guinness Peat Group plc (GPG) made a takeover offer for CMC in
October 1995. Among the sellers who enabled GPG to acquire 33.9%
were some original Gibbons Family shareholders. As part of a plan to
maximise value to shareholders, Directors resolved to rationalise the
Company's non-dealership property holdings, repay the surplus funds
to shareholders and focus the Company on its core motor trade
activities.
In June 1997, GPG sold its shares to the MBM Group of Malaysia.
Over the following years MBM sold down its holding in CMC, with
many of the shares acquired by members of the Gibbons family. MBM
sold its final block of 24.9% to a large number of individuals in 2003,
resulting in the addition of 300 shareholders to CMC.
In 1999, CMC's Auckland Dealerships joined with Ford Motor
Company and three other Ford dealerships to form Auckland Auto
Collection Limited (AACL). This move represented the biggest change
in the Ford franchise arrangements in New Zealand for over 60 years.
During 1999, this new business acquired the Mazda Dealerships in
Auckland and Mazda Motors joined CMC and Ford as a shareholder.
From 2002, the business operated as three Ford and Mazda
dealerships - North Harbour, John Andrew and South Auckland. CMC
sold its shareholding back to AACL in May 2005 and, in return,
acquired the South Auckland Dealership.
On 16 June 2003, Ford Motor Company celebrated its centennial and
the production of the original Model A Fordmobile with CMC and its
forebears having been actively involved with Ford for 95 of those 100
years. In celebration of this long relationship, a history of the
Company's operations and activities "Ford Ahead" was written and
published by Roger Gardner.
During the 2000’s CMC also acquired the Mazda franchises in
Invercargill, Dunedin, Timaru, Wellington, Lower Hutt and Masterton.
These were run as dual dealerships with the existing Ford dealerships.
The policy of adding Mazda to Ford dealerships ended when Ford
USA sold its interest in Mazda Japan in 2009.
It has been part of the Company's philosophy and success to own
property sites from which its retail subsidiary companies operate.
More recent additions to CMC include Case IH tractors in Southland
and Otago, Suzuki motorbikes in Christchurch and Masterton,
Hyundai cars and Isuzu light commercials in New Plymouth, Nissan
cars in Hastings and Kia cars in Nelson. In 2014, Jeff Gray BMW and
MINI with four dealerships in Christchurch, Wellington, Palmerston
North and Hastings were added but the businesses were sold in
November 2016. A new dealership was established in South
Auckland, selling Citroen, Peugeot and Isuzu light commercials.
The current major shareholdings in CMC are individual descendants
of Hopeful & Jessie Gibbons, who collectively hold over 60% of the
Company shares. There are also many descendants of the original
1902 subscribers to the Rouse & Hurrell Carriage Building Company
Limited who remain shareholders today.
Throughout the Company's history, change has always been with us
and our ability to adapt in good times and in bad has ensured ongoing
wellbeing and prosperity. As well, it has always been recognised that
dedicated, skilled and enthusiastic people have been, and will
continue to be, the key to the Company's future.
1
Notice of 101
st
Annual Meeting
Notice is hereby given that the 2019 annual meeting of shareholders of
The Colonial Motor Company Limited
will be held at
The Cable Room, Harbourside Function Centre,
4 Taranaki Street, Wellington
on Friday, 15 November 2019 starting at 12:00 midday
BUSINESS
1. Chairman’s introduction
2. Address from the Chairman
3. Shareholder discussion
4. Resolutions
To consider and, if thought fit, to pass the following resolutions
(see explanatory notes on the next page):
1. To re-elect James Picot Gibbons as a director of the company
2. To re-elect Matthew James Newman as a director of the company
3. To elect John Michael William Journee as a director of the company
4. To record the on-going appointment of Grant Thornton as auditor and to authorise the
directors to fix the auditor’s remuneration.
5. General business
A light lunch will be served following the meeting.
LOCATION
Cable Room
Harbourside
Function Centre
Museum of
New Zealand
Te Papa
Tongarewa
Circa
Michael
Fowler
Centre
Lagoon
2
Explanatory Notes – relating to the annual meeting
Voting
Following the introduction of new NZX Listing Rules, adopted by The Colonial Motor Company Limited on 1 February
2019, all voting at annual meetings must be conducted by poll rather than by show of hands. Procedures for voting, the
appointment of proxies and representatives, vote counting and the announcement of the results must now be applied in
greater detail.
Proxies and representatives
If you choose not to attend the meeting, a form is enclosed for you to complete to appoint a proxy or corporate
representative to vote on your behalf. Detailed guidance is provided on the form on how to complete it. Further copies
of the form may be obtained from the Company or downloaded from its website.
Resolutions
Each of the resolutions are to be considered as a separate ordinary resolution. To be passed, an ordinary resolution
requires a simple majority of votes of shareholders entitled to vote and voting. Each share in the Company carries one
vote.
The Board supports passing of all of the resolutions.
Re-election and election of directors
The Listing Rules require that a director must not hold office (without re-election) past the third annual meeting following
the director’s appointment or 3 years, whichever is longer.
A director appointed by the Board must not hold office (without re-election) past the next annual meeting following the
director’s appointment.
Resolution 1
James Picot Gibbons was last re-elected as a director at the 2016 annual meeting. He is eligible and offers himself for
re-election.
Jim first joined the board in 1992 and became Chairman at the start of 2011. His last executive position was as Dealer
Principal of Energy City Motors in New Plymouth, a role he had occupied for many years. Jim is a director of the Motor
Trade Association and MTA Group Investments Limited.
The Board has determined that Mr Gibbons will not be an independent director, if re-elected.
Resolution 2
Matthew James Newman was last re-elected as a director at the 2016 annual meeting. He is eligible and offers himself
for re-election.
Matthew initially became a director in 2013. He currently holds the position of chief executive of South Auckland Motors,
Southern Autos - Manukau and South Auckland Honda. Matthew has held various voluntary positions including as chair
of Counties Manukau Rugby Club.
If re-elected, the board has determined that Mr Newman will not be an independent director
.
Resolution 3
John Michael William Journee was appointed to the Board on 1 December 2018. As the 2019 annual meeting is the first
since his appointment, he is standing for election.
John has held various senior executive positions in the retail industry in New Zealand and Australia including with Noel
Leeming and The Warehouse. He is currently a director of The Warehouse Group Limited.
The Board has determined that Mr Journee will be an independent director if elected.
Resolution 4
Under section 200 of the Companies Act 1993, the Auditor is automatically re-appointed each year unless ineligible or
replaced.
The fee paid to the Auditor is disclosed in the annual report each year.
3
9.8%
10.5%
11.8%
11.2%
12.0%
9.3%
8.0%
9.0%
8.5%
8.7%
5.6%
16.5%
24.0%
25.4%
31.6%
10.6%
7.8%
21.0%
6.7%
10.0%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
2010201120122013201420152016201720182019
Percentage return on share price
at start of each year
Shareholder Returns
(Share price plus dividend)
Gross dividend yield
Movement in share price
Average gross return over
10
years20.5% p.a.
-
5
10
15
20
25
30
20152016201720182019
$ million
Trading Profit after Tax
-
200
400
600
800
1,000
20152016201720182019
$ million
Revenue
Facts at a glance
2015 2016 2017 2018 2019
Revenue ($000)
789,377
867,237 854,764 904,034 909,002
Trading profit after tax (excluding non-trading Items) ($000)
16,326
19,207 22,000 24,746 22,060
Profit after tax attributable to shareholders ($000)
17,597
21,479 22,232 24,985 21,901
Return on average shareholders’ funds
- trading profit after tax
11.2%
12.2% 12.8% 13.1% 10.9%
- profit attributable to shareholders
12.1%
13.7% 13.0% 13.2% 10.8%
Trading margin
2.1%
2.2% 2.6% 2.7% 2.4%
Earnings per share - trading profit after tax
49.9c
58.7c 67.3c 75.7c 67.5c
- profit attributable to shareholders
53.8c
65.7c 68.0c 76.4c 67.0c
Dividend per share
33.0c
40.0c 44.0c 50.0c 45.0c
Total dividends for the year ($000)
10,789
13,078 14,386 16,347 14,713
Shares on issue at reporting date
32.695m
32.695m 32.695m 32.695m 32.695m
Current ratio
1.4
1.5 1.6 1.4 1.4
Shareholders' equity as a percentage of total assets
45.9%
54.4% 57.1% 50.6% 53.9%
Net tangible asset backing per share
$4.33
$4.69 $5.19 $5.64 $6.07
(after final dividend is paid)
Facts at a glance
2015 2016 2017 2018 2019
Revenue ($000)
789,377
867,237 854,764 904,034 909,002
Trading profit after tax (excluding non-trading Items) ($000)
16,326
19,207 22,000 24,746 22,060
Profit after tax attributable to shareholders ($000)
17,597
21,479 22,232 24,985 21,901
Return on average shareholders’ funds
- trading profit after tax
11.2%
12.2% 12.8% 13.1% 10.9%
- profit attributable to shareholders
12.1%
13.7% 13.0% 13.2% 10.8%
Trading margin
2.1%
2.2% 2.6% 2.7% 2.4%
Earnings per share - trading profit after tax
49.9c
58.7c 67.3c 75.7c 67.5c
- profit attributable to shareholders
53.8c
65.7c 68.0c 76.4c 67.0c
Dividend per share
33.0c
40.0c 44.0c 50.0c 45.0c
Total dividends for the year ($000)
10,789
13,078 14,386 16,347 14,713
Shares on issue at reporting date
32.695m
32.695m 32.695m 32.695m 32.695m
Current ratio
1.4
1.5 1.6 1.4 1.4
Shareholders' equity as a percentage of total assets
45.9%
54.4% 57.1% 50.6% 53.9%
Net tangible asset backing per share
$4.33
$4.69 $5.19 $5.64 $6.07
(after final dividend is paid)
4
Directors’ report
Your Directors have pleasure in presenting the 101
st
annual report and audited consolidated financial statements of The
Colonial Motor Company Limited (CMC or Company) and its subsidiaries (Group) for the year ended 30 June 2019.
Revenue and profit
Revenue for the year was $909.0m. This is a 0.5% increase on the previous year’s $904.0m reflecting a general easing
of the motor vehicle market.
The trading profit after tax for the year was $22.1m, down 11% on last year’s $24.7m. Trading profit after tax is not
specified under Generally Accepted Accounting Practice but is a consistent measure of the underlying trading profitability
of the Group before valuation changes of assets and deferred tax. It is also the reference point used by the Board when
considering dividends. Profit for the year, which included a number of non-trading items such as asset revaluations and
related deferred tax, was down 13.0% on last year to $23.6m (2018: $27.1m).
Statement of financial position
Total assets dropped slightly to $387.7m at year end (2018: $389.4m). Driven primarily by a reduction in inventory, current
assets were down by $19.6m. This was offset by an increase in property, plant and equipment.
The annual independent revaluation of the Group’s property brought about an increase in the revaluation reserve of
$7.0m (2018: $5.4m). Capital expenditure, mainly incurred to acquire properties in Queenstown, Wanaka and Lower Hutt
contributed to the increase in property values. At reporting date shareholders’ equity was $209.2m (2018: $196.9m).
Dividends
Dividends paid in respect of this year will total 45.0 cents per share (2018: 50.0 cents per share). An interim dividend of
15.0 cents per share was paid on 15 April 2019 and a final dividend of 30.0 cents per share will be paid on 21 October
2019. Both dividends will carry the maximum level of imputation credits. The value of the distributions for this year will
be $14.7m (2018: $16.3m) representing 67% (2018: 66%) of the trading profit after tax.
Total shareholder returns over the past ten years are shown in the graph on page 3. The gross dividend yield has
remained within the range of 8.0% to 12.0% p.a. over the last 10 years.
Directors
The independent Directors at 30 June 2019 and the date of this report were Mr A J Waugh and Mr J W M Journee.
The revised listing rules issued by NZX this year specify that a director must not hold office (without re-election) past the
third annual meeting following the director’s appointment or three years, whichever is longer. The directors to retire this
year are Mr J P Gibbons and Mr M J Newman. Both are eligible and are seeking re-election at the forthcoming annual
meeting.
Also at that meeting Mr D M Wood will be retiring. Mr Wood joined the board in 2011 and was chair of the Audit &
Compliance Committee in 2019.
Mr J M W Journee was appointed to the Board on 1 December 2018 to fill the vacancy that arose from the retirement of
Falcon Clouston. As required by the Company’s constitution and the Listing Rules, Mr Journee is standing for election at
the 2019 annual meeting, the first since his appointment.
Director and company disclosures
Information required to be disclosed by the Directors and by the Company, to comply with the Companies Act 1993 and
the Listing Rules of the New Zealand Stock Exchange, is detailed on pages 44 to 48. A separate Governance Statement
is provided on pages 40 to 43 and a report on the CMC Group strategic direction on page 5.
For the Directors
19 September 2019
J P Gibbons D M Wood
Chairman of the Board Chairman of the Audit & Compliance Committee
Directors’ report
Your Directors have pleasure in presenting the 101
st
annual report and audited consolidated financial statements of The
Colonial Motor Company Limited (CMC or Company) and its subsidiaries (Group) for the year ended 30 June 2019.
Revenue and profit
Revenue for the year was $909.0m. This is a 0.5% increase on the previous year’s $904.0m reflecting a general easing
of the motor vehicle market.
The trading profit after tax for the year was $22.1m, down 11% on last year’s $24.7m. Trading profit after tax is not
specified under Generally Accepted Accounting Practice but is a consistent measure of the underlying trading profitability
of the Group before valuation changes of assets and deferred tax. It is also the reference point used by the Board when
considering dividends. Profit for the year, which included a number of non-trading items such as asset revaluations and
related deferred tax, was down 13.0% on last year to $23.6m (2018: $27.1m).
Statement of financial position
Total assets dropped slightly to $ 387.7m at year end (2018: $3 89.4m). Driven primarily by a reduction in inventory, current
assets were down by $19.6m. This was offset by an increase in property, plant and equipment.
The annual independent revaluation of the Group’s property brought about an increase in the revaluation reserve of
$7.0m (2018: $5.4m). Capital expenditure, mainly incurred to acquire properties in Queenstown, Wanaka and Lower Hutt
contributed to the increase in property values. At reporting date shareholders’ equity was $209.2m (2018: $196.9m).
Dividends
Dividends paid in respect of this year will total 45.0 cents per share (2018: 50.0 cents per share). An interim dividend of
15.0 cents per share was paid on 15 April 2019 and a final dividend of 30.0 cents per share will be paid on 21 October
2019. Both dividends will carry the maximum level of imputation credits. The value of the distributions for this year will
be $14.7m (2018: $1 6.3m) representing 67% (2018: 66%) of the trading profit after tax.
Total shareholder returns over the past ten years are shown in the graph on page 3. The gross dividend yield has
remained within the range of 8.0% to 12.0% p.a. over the last 10 years.
Directors
The independent D irectors at 30 June 2019 and the date of this report were Mr A J Waugh and Mr J W M Journee.
The revised listing rules issued by NZX this year specify that a director must not hold office (without re-election) past the
third annual meeting following the director’s appointment or three years, whichever is longer. The directors to retire this
year are Mr J P Gibbons and Mr M J Newman. Both are eligible and are seeking re-election at the forthcoming annual
meeting.
Also at that meeting Mr D M Wood will be retiring. Mr Wood joined the board in 2011 and was chair of the Audit &
Compliance Committee in 2019.
Mr J M W Journee was appointed to the Board on 1 December 2018 to fill the vacancy that arose from the retirement of
Falcon Clouston. As required by the Company’s constitution and the Listing Rules, Mr Journee is standing for election at
the 2019 annual meeting, the first since his appointment.
Director and company disclosures
Information required to be disclosed by the Directors and by the Company, to comply with the Companies Act 1993 and
the Listing Rules of the New Zealand Stock Exchange, is detailed on pages 44 to 48. A separate Governance Statement
is provided on pages 40 to 43 and a report on the CMC Group strategic direction on page 5.
For the Directors
19 September 2019
J P Gibbons D M Wood
Chairman of the Board Chairman of the Audit & Compliance Committee
5
CMC Group strategic direction
Management of capital resources
The Group has a strong balance sheet, with significant shareholder equity and very few long term financial commitments.
The major assets on the balance sheet are property and inventory, with property funded by retained earnings and
inventory funded by short term borrowing (bank borrowing, at call deposits and bailment). There is minimal goodwill.
The Group owns most of its key operational properties. The Group does not have investment properties as such, as all
of the properties are occupied or intended to be occupied by the operational business units of the Group. Ownership
brings greater flexibility when tailoring facilities to the Group’s particular requirements. It provides security of tenure whilst
conversely enabling the Group to sell and relocate as needs arise without the constraints of a long term lease.
The Group seeks to pay regular dividends calculated at 60 - 70% of trading profit. The dividends have the maximum
imputation credits available to New Zealand shareholders. The remaining profit is reinvested in the business, either as
controlled growth or maintaining and reinvesting in the quality of the existing assets.
This investment or reinvestment may be in the form of establishing or acquiring a dealership business or in developing a
new property for use by a dealership or refurbishing and upgrading an existing dealership facility.
By adopting an approach to capital management of;
- paying 60 - 70% of trading profit as dividend
- not overly gearing up the balance sheet by taking on significant long term debt
- not going to the shareholders for more capital
The Group is able to provide controlled growth for shareholders without shareholder dilution.
Operational Model
CMC is the parent company for a group of motor vehicle dealerships – the success of these dealerships is CMC’s
lifeblood.
The CEO’s (Dealer Principals) of our subsidiary companies operate within a financial and operational mandate but have
wide discretion and local autonomy. Their role involves balancing the often conflicting demands of the franchisor,
customers, employees and profitability.
We consider each dealership business individually and the need for reinvestment and growth opportunities available.
The Group balances the need to change and adapt with an awareness that it has specific areas of expertise. The
operational expertise revolves around the franchise business model, as a franchisee in a local market area or on a
national basis. In this model the franchisor supplies the product (including Electric Vehicles in the near future) and brand
positioning, with the franchisee concentrating on promoting the brand and selling the product and service to the customer.
The model brings its unique challenges and opportunities.
As a response to, and to enable success in a highly competitive and fragmented market place, particularly in metropolitan
areas, we have been moving to a ‘hub and spoke’ model. Here the main dealership facility, which encompasses all the
business’s array of activities – new and used vehicle sales, parts and service, is complemented by “service only” facilities
in customer convenient locations. This model is operational in South Auckland and is being introduced to greater
Wellington.
To be successful and grow a dealership or establish a new one we need to have management strength and depth and a
franchise opportunity that fits. Where we have existing property or can provide a property solution that enhances our
ability to take the actions. Ideally we will grow by representing a new franchise partner in a number of locations rather
than as a one off.
With Southpac Trucks we have expanded over time from a small base by increasing the market share of the Kenworth
and DAF brands in a growing heavy truck industry which brings growing parts and service opportunities for the business
and their network of independent parts and service dealers.
The location of our dealerships span all of New Zealand and range from small to large, from single to multiple brands.
The major brands with significant representation are; light vehicles - Ford and Mazda; heavy trucks - Kenworth and DAF;
tractors - New Holland and Case IH.
6
Chief Executive’s report
After nine years of continuous growth in the economy and the new vehicle industry, the tide has turned with the calendar year
industry now over 5% down year-over-year.
Our overall Group trading profit was lower than last year but still represents an outstanding result we are proud of.
The level of customer expectation in terms of product and service feels like it has never been higher. New technology is
changing, not just the product itself but also how we engage with our customers and how they choose to interact with us.
Product, as always, is a cornerstone of a dealership’s business and good old fashioned service is a key ingredient. The
electrification of motor vehicles is gaining pace and our future success will be linked to the desirability of the vehicles our
franchisors provide.
Dealerships
Southpac Trucks had another successful year and for the second consecutive time was awarded Kenworth Australia Dealer of
the Year. We have recently completed the expansion of the parts warehouse in its Manukau site. Kenworth has launched a
succession of models with new wide cabs and early next year DAF will introduce a new range featuring Euro6 compliant
drivetrains with reduced emissions and improved fuel efficiency.
Ford Ranger continues to be the number one selling new vehicle in New Zealand with Mazda’s CX range a strong player in the
growth segments of the passenger market. We expect both Ford and Mazda to launch the first of their electrified products in
the local market in 2020.
We continue to plan a range of facility projects including the upgrade of existing facilities and the construction of new ones all
of which have increasing timeframes to complete. These projects involve the latest brand presentation and, in most instances
the expansion of our service capacity. Increased service capability is needed to service the expanding customer base for the
brands we represent as well as to meet the unprecedented level of product recalls. Recalls are driven on a world-wide basis,
the most prominent of which has been for Takata airbags.
Tim Rabbitte was appointed Dealer Principal of Macaulay Motors in July 2018. Grant Price is now focusing on Agricentre South
and developments in Central Otago. The first was Southern Lakes Motors, a new dealership representing Mitsubishi and Nissan
at the former Macaulay’s site in Queenstown. The dealership was fully refurbished and repurposed for the new brands but the
build-up of the business has been held back by extreme difficulty in employing suitably skilled personnel.
Macaulay Motors opened its new facility in Queenstown in January 2019. Unfortunately, in May it suffered a serious setback
when a vehicle-related fire resulted in major damage to the workshop. The losses were fully insured and the workshop will be
restored to “as new”. Work is due for completion in November and, until then, the dealership will be maintaining its customer
service to the best of its ability using a restricted number of service bays at the previous site.
Other developments in Central Otago have involved purchases of land in Wanaka and Cromwell. The Wanaka site will become
a back-to-back ‘service-only’ facility for Macaulay Motors and Southern Lakes Motors. In Cromwell, the land is earmarked to
replace a facility leased by Agricentre South. Both development proposals are well through the planning and consenting
process. We expect to go to tender within the next month.
The new retail service centre for Capital City Ford and Mazda at 258 Taranaki Street, Wellington has been progressively
occupied over the last three months. The process to create a Wellington regional hub for Ford and Mazda on High Street in
Lower Hutt is increasing its momentum. We are purchasing further land adjacent to the Stevens Motors site and undertaking
detailed planning for brand and operational needs. We expect to start work on the Ford showroom in January 2020 and the
Mazda showroom in May. We will progressively move facilities until we finally exit the showroom building at 97 Taranaki Street
by 31 October 2020.
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
848688909294969800020406081012141618
Registrations
Calendar Year
Vehicle Registrations
New Vehicles
Used Imports
7
We have purchased property in Botany, Auckland which is currently leased to a third party. We have plans to expand and
refurbish the existing buildings in early 2020 to become a ‘Southern Autos – Botany’ location for Suzuki, Peugeot and Citroen.
We have also acquired a small dealership in Pukekohe, now renamed South Auckland Honda which introduces another brand
to the Group.
At Team Hutchinson Ford on Tuam Street in Christchurch we have let a contract to undertake work to enable the greenway to
be created and a major upgrade for the dealership to the latest brand standards. Work to get to this stage has been prolonged
and completion is now envisaged in the 3
rd
quarter of 2020.
Our plans for M.S. Motors in Nelson have changed over the last year. The current leased Haven Road property is now to be
refurbished for the Ford dealership and a second leased facility in Rutherford Street is in the process of being upgraded for
Nelson KIA.
Health & Safety
Under the guidance of Frank Whitworth, our Health & Safety Co-ordinator, our dealerships continue to build their critical expertise
in safer work practices.
The WorkSafe NZ case against Agricentre South relating to an accident in 2016 was finalised in April 2019. There were no
notifiable events in terms of the Health & Safety at Work Act in the June 2019 year. The dealership’s emergency procedures
were highly effective and no staff were seriously injured during the fire in Queenstown. The subsequent internal investigation
was exhaustive and challenging for our staff and has resulted in shared learning around the Group.
In recent months Frank has been on a countrywide road-show providing training on in-depth “incident investigations” to better
understand the root causes of “why” events happen. The outcome leading to improved dealership processes and practices.
Cleaner, Greener, Safer
In July the Ministry of Transport released a discussion paper titled “Moving the light vehicle fleet to low emissions”. This now
controversial paper was full of big assumptions, erroneous interpretations and factual errors. It has borrowed heavily from the
European plan but has missed vital ingredients, for example the differing treatment of light commercial vehicles.
There are two draft policies, the “clean car standard” and the “clean car discount”. Both are somewhat disingeuously labelled
as ‘clean’ given that neither addresses ‘cleaner exhaust emissions’. The first draft policy (the standard) has been almost
universally criticised. The second (the discount/feebate) is conditionally supported provided the detail of how it is put in place
is worked through. To the date of this report it would seem the Ministry was not interested in the view of or, in working with, the
new vehicle industry.
The “standard” seeks to impose financial penalties in arrears on the CO
2
emissions levels of importers’ average annual fleet
make-up. The target set for the level of CO
2,
while appearing to be “aspirational”, is not achievable in the timeframe. It would
come with a multitude of market distorting penalties and behaviours and a lack of a transparent understandable application. It
is nothing short of a new tax.
The “discount” (feebate) scheme has been well publicised and discussed. It simply aims to impose a fee on higher emitting
(CO
2
) vehicles and a discount (rebate) to low emitting vehicles i.e. EV’s. It is, in effect, a price transfer so not a tax. No doubt
the “devil will be in the detail”.
In last year’s report we commented that “if we (NZ) are serious about reducing our total emission level then fewer vehicles, with
the most up-to-date emission levels and latest safety features is part of the solution”. We talked of the political difficulty of taking
older, less safe, less economical higher emission vehicles off the road and of restricting the importation of older used vehicles.
The NZ vehicle fleet has grown 85% since 1990 (greenhouse gas benchmark year) while our population has grown 41%.
The average age of our light vehicle fleet is close to 15 years old with over 50% of used imports being over 10 years old on
arrival. In contrast, the European fleet average age is less than 8 years old, enabling a relatively fast flow through of new
technology benefits to making a cleaner, greener, safer fleet.
We had the opportunity to make a submission, in principle we agree with a policy that seeks to:
- significantly reduce the emissions from transport - Cleaner
- over time reduce the NZ fleets CO
2
footprint - Greener
- improve the quality of vehicles imported into NZ - Safer
We also strongly commented that for such a policy to be successful it must be transparent, simple and have “buy in” from the
consumer.
We reiterated that influencing consumer choice is the single best method of shifting demand and in doing so maintaining public
trust. The end target of 105gm/km is potentially attainable, just not in the way or the timeframe envisaged by the Ministry and
any approach needs to respect the set of circumstances that are present in NZ that require vehicle use - for example - low
population density, low level of public transport, topography (we have hills), our productive sector being provincially based and
a national fleet of older, lower priced (cheaper) cars.
Outlook
Indications are that the new vehicle industry will continue its year-over-year decline reflecting economic outlook and confidence.
Life at the coal face has been distinctly more challenging this winter however we, and our dealership teams, will as ever strive
for the best possible outcome.
G D Gibbons
Chief Executive
8
Group dealerships
Company Name
Chief Executive /
Dealer Principal (DP)
Franchises Location Web address
Southpac Trucks Ltd Maarten Durent Kenworth & DAF
Heavy Trucks
Manukau City,
Hamilton, Rotorua,
Palmerston North
& Christchurch
www.spt.co.nz
South Auckland Motors
Ltd
Matthew Newman
Michael Tappenden
(DP)
Ford & Mazda
Manukau City,
Auckland Airport,
Botany, Takanini &
Pukekohe
www.southaucklandmotors.co.nz
Southern Autos –
Manukau Ltd
Matthew Newman
Andrew Craw
(DP)
Suzuki, Peugeot,
Citroen & Isuzu
Manukau City www.southernautos.co.nz
South Auckland Honda
Ltd
Matthew Newman
Andy Kimber (Agency Mgr.)
Honda Pukekohe www.honda.co.nz
Energy City Motors Ltd Russell Dempster Ford New Plymouth &
Hawera
www.energyford.co.nz
Energy Motors Ltd Shaun Biesiek (DP) Hyundai & Isuzu New Plymouth www.energyhyundai.co.nz
www.energymotorsisuzu.co.nz
Ruahine Motors Ltd David Wills Ford Waipukurau www.ruahinemotors.co.nz
The Hawkes Bay Motor
Company Ltd
Paul Bond (
DP) Nissan &
Mahindra
Hastings www.hawkesbaynissan.co.nz
Fagan Motors Ltd Keith Allen Ford & Mazda
Suzuki & Kawasaki
Motorcycles
Masterton www.faganmotors.co.nz
www.fagansuzuki.co.nz
Stevens Motors Ltd Stuart Gibbons Ford & Mazda Lower Hutt www.stevensmotors.co.nz
Capital City Motors Ltd Matthew Carman Ford & Mazda Wellington,
Porirua & Kapiti
www.capitalcitymotors.co.nz
M.S. Motors (1998) Ltd Alan Kirby Ford Nelson www.nelsonford.co.nz
KIA Richmond www.nelsonkia.co.nz
Hutchinson Motors Ltd John Hutchinson Ford
Bridgestone Tyres
Christchurch www.thf.co.nz
Avon City Motors Ltd John Luxton Ford Christchurch &
Rangiora
www.acford.co.nz
Avon City Motorcycles
Ltd
John Luxton Suzuki & BMW
Motorcycles
Christchurch www.avoncitysuzuki.co.nz
Timaru Motors Ltd Wayne Pateman Ford & Mazda Timaru www.timarumotors.co.nz
Dunedin City Motors Ltd Robert Bain Ford & Mazda Dunedin, Oamaru
& Alexandra
www.dcmotors.co.nz
Macaulay Motors Ltd Grant Price
Tim Rabbitte (DP)
Ford & Mazda Invercargill &
Queenstown
www.macaulaymotors.co.nz
Southern Lakes Motors
Ltd
Grant Price
Suzanne van Pels
(Acting DP)
Mitsubishi &
Nissan
Queenstown www.southernlakesmotors.co.nz
Agricentre South Ltd
Grant Price Case IH Tractors
& Kuhn
Implements
Invercargill, Gore,
Milton, Cromwell &
Ranfurly
www.agricentre.co.nz
New Holland,
Kubota Tractors &
Norwood Ag
Equipment
Invercargill & Gore
Yamaha
Motorcycles
Gore
9
The consolidated financial statements should be read in conjunction with the accompanying notes.
Consolidated statement of financial performance
for the year ended 30 June 2019
Notes
2019
$000
2018
$000
Revenue
Revenue 906,924 902,076
Other revenue 2,078 1,958
Total revenue 1 909,002 904,034
Trading expenses
Cost of products and services sold 757,262 755,544
Remuneration of staff 75,995 71,181
Depreciation and amortisation 4,371 3,741
Property occupation costs 6,723 6,571
Marketing, promotion and training 6,619 5,847
Other operating costs 19,347 18,744
Interest 3 4,992 4,565
Total trading expenses 2 875,309 866,193
Trading profit before tax 33,693 37,841
Taxation
Current tax 9,880 11,353
Deferred tax
80 (365)
Total tax on trading 4 9,960 10,988
Non-controlling interest 1,673 2,107
Trading profit after tax 22,060 24,746
Non-trading items
Fair value revaluation of property (243) (406)
Fair valuation of investments (57) 476
Total non-trading items before tax (300) 70
Taxation
Deferred tax
4 141 169
Non-trading items after tax (159) 239
Profit attributable to shareholders 21,901 24,985
Profit for the year
Profit attributable to: Shareholders
Trading profit after tax 22,060 24,746
Non-trading items after tax (159) 239
Total attributable to shareholders 21,901 24,985
Non-controlling interest 1,673 2,107
Profit for the year 6 23,574 27,092
Statistics per share
Basic and diluted earnings per share 7
Profit attributable to shareholders (cents) 67.0 76.4
Trading profit after tax (cents) 67.5 75.7
Dividends
Dividends (cents per share) 45.0 50.0
Total dividends ($’000) 14,713 16,347
Net tangible assets per share ($)
6.37 5.99
10
The consolidated financial statements should be read in conjunction with the accompanying notes.
Consolidated statement of comprehensive income
for the year ended 30 June 2019
Notes
2019
$000
2018
$000
Profit for the year 23,574 27,092
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Property revaluation reserve
Fair value movement 6,982 5,430
Deferred tax 4 53 108
Items that will be reclassified subsequently to profit or loss when
specific conditions are met
Cash flow hedge reserve
Movement in fair value of hedge derivatives (505) 862
Deferred tax 4 141 (241)
Total other comprehensive income for the year 6,671 6,159
Total comprehensive income for the year 30,245 33,251
Total comprehensive income for the year attributable to:
Shareholders 28,627 31,051
Non-controlling interest 1,618 2,200
Total comprehensive income for the year 30,245 33,251
Consolidated statement of changes in equity
for the year ended 30 June 2019
Notes
2019
$000
2018
$000
Total equity at beginning of the year 199,746 182,885
Comprehensive income
Profit for the year 23,574 27,092
Other comprehensive income 6,671 6,159
Total comprehensive income 30,245 33,251
Dividends paid to shareholders 22 (16,347) (15,040)
Dividends paid to non-controlling interest (1,350) (1,350)
Total equity at end of year 20 212,294 199,746
11
The consolidated financial statements should be read in conjunction with the accompanying notes.
Consolidated statement of financial position
at 30 June 2019
Notes
2019
$000
2018
$000
Shareholders’ equity
Share capital 21 15,968 15,968
Retained earnings 136,252 130,698
Property revaluation reserve 57,030 49,995
Foreign exchange cash flow hedge reserve (95) 214
Total shareholders’ equity 209,155 196,875
Non-controlling interest 3,139 2,871
Total equity 212,294 199,746
Current liabilities
Bank borrowings 25 35,856 41,550
At-call deposits 24 24,008 21,588
Trade & other payables 12 46,813 50,449
Vehicle floorplan finance 23 58,613 61,386
Financial liabilities – credit contracts 14 1,773 2,779
Tax payable 1,836 5,001
Financial derivatives – foreign exchange 29 155 -
Total current liabilities 169,054 182,753
Non-current liabilities
Financial derivatives – credit contracts 14 2,759 3,025
Deferred tax 4 3,589 3,844
Total non-current liabilities 6,348 6,869
Total equity and liabilities 387,696 389,368
Current assets
Cash & bank accounts 13 7,182 10,251
Trade & other receivables 11 55,493 57,991
Inventory 8 168,329 181,022
Financial assets – credit contracts 14 1,738 2,734
Financial derivatives – foreign exchange 29 - 349
Total current assets 232,742 252,347
Non-current assets
Financial assets – credit contracts 14 2,761 3,026
Intangible assets 16 1,028 1,028
Investments 18 2,440 2,497
Property, plant & equipment 9 148,725 130,470
Total non-current assets 154,954 137,021
Total assets 387,696 389,368
For the Directors
J P Gibbons
Chairman of the Board
D M Wood
Chairman of the Audit & Compliance Committee
Authorised for issue on 19 September 2019
The consolidated financial statements should be read in conjunction with the accompanying notes.
Consolidated statement of financial position
at 30 June 2019
Notes
2019
$000
2018
$000
Shareholders’ equity
Share capital 21 15,968 15,968
Retained earnings 136,252 130,698
Property revaluation reserve 57,030 49,995
Foreign exchange cash flow hedge reserve (95) 214
Total shareholders’ equity 209,155 196,875
Non-controlling interest 3,139 2,871
Total equity 212,294 199,746
Current liabilities
Bank borrowings 25 35,856 41,550
At-call deposits 24 24,008 21,588
Trade & other payables 12 46,813 50,449
Vehicle floorplan finance 23 58,613 61,386
Financial liabilities – credit contracts 14 1,773 2,779
Tax payable 1,836 5,001
Financial derivatives – foreign exchange 29 155 -
Total current liabilities 169,054 182,753
Non-current liabilities
Financial derivatives – credit contracts 14 2,759 3,025
Deferred tax 4 3,589 3,844
Total non-current liabilities 6,348 6,869
Total equity and liabilities 387,696 389,368
Current assets
Cash & bank accounts 13 7,182 10,251
Trade & other receivables 11 55,493 57,991
Inventory 8 168,329 181,022
Financial assets – credit contracts 14 1,738 2,734
Financial derivatives – foreign exchange 29 - 349
Total current assets 232,742 252,347
Non-current assets
Financial assets – credit contracts 14 2,761 3,026
Intangible assets 16 1,028 1,028
Investments 18 2,440 2,497
Property, plant & equipment 9 148,725 130,470
Total non-current assets 154,954 137,021
Total assets 387,696 389,368
For the Directors
J P Gibbons
Chairman of the Board
D M Wood
Chairman of the Audit & Compliance Committee
Authorised for issue on 19 September 2019
12
The consolidated financial statements should be read in conjunction with the accompanying notes.
Consolidated statement of cash flows
for the year ended 30 June 2019
Notes
2019
$000
2018
$000
Operating cash flows
Receipts from customers 911,345 880,336
Interest received 7 307
Dividends received 147 147
Payments to suppliers and employees (856,881) (878,114)
Interest paid (4,992) (4,565)
Income taxes paid (13,044) (9,465)
Net operating cash flows 6 36,582 (11,354)
Investing cash flows
Proceeds from sale of property, plant & equipment 414 833
Proceeds from sale of intangibles & investments - -
Purchase of property, plant & equipment (16,319) (14,895)
Net investing cash flows (15,905) (14,062)
Financing cash flows
(Decrease)/increase in bank borrowings (8,469) 40,427
Increase in deposits 2,420 3,570
Dividends paid to shareholders (17,697) (16,390)
Net financing cash flows (23,746) 27,607
Net change in cash held (3,069) 2,191
Cash at beginning of year 10,251 8,060
Cash at end of year 13 7,182 10,251
13
Notes to the consolidated financial statements
for the year ended 30 June 2019
Index to the notes
Note Page
Preparation of the consolidated financial statements
About the reporting entity 14
Statement of compliance 14
Basis of preparation 14
Critical accounting assumptions, estimates and judgements 14
Accounting policies
Impairment 15
Goods & services tax 15
Changes in accounting policies and accounting standards 15
Financial performance
The notes in this section explain the Group’s profit for the year and give more detail of items
that make up its revenue and expenses.
1 Revenue 16
2 Expenditure 17
3 Interest 17
4 Taxation 17
5 Segment report 18
6 Reconciliation of profit for the year with operating cash flows 19
7 Earnings per share 19
Financial position
This section describes the assets and liabilities the Group uses to generate profit including
its working capital.
8 Inventory 20
9 Property, plant and equipment 20
10 Christchurch greenway 22
11 Trade and other receivables 22
12 Trade and other payables 23
13 Cash and bank accounts 23
14 Credit contracts 24
15 Operating leases 25
16 Intangible assets 26
Investments
This section describes the corporate structure of the Group and how the results and balances
of the individual companies are combined into the consolidated financial statements.
17 Subsidiaries 27
18 Investments 27
Funding
This section describes the sources of funding the Group uses and how they are managed.
19 Capital management 28
20 Movements in equity 28
21 Share capital 29
22 Dividends 29
23 Vehicle floorplan finance 29
24 At call deposits 30
25 Bank borrowing 30
26 Financial instruments 30
27 Reconciliation of liabilities arising from financial activities 32
Managing risk
The notes in this section describe how the Group manages the financial risks that affect its
financial position and performance.
28 Financial risk management 33
29 Financial derivatives – foreign exchange 34
Other
30 Related party transactions 36
31 Contingencies 36
32 Events after the reporting date 36
14
Preparation of the consolidated financial statements
About the reporting entity
The financial statements presented are for The Colonial Motor Company Limited (the Company) and its
subsidiaries (the Group). The Company is an FMC Reporting Entity under the Financial Markets
Conduct Act 2013 (FMCA 2013). Where an FMC Reporting Entity prepares consolidated financial
statements, parent company disclosures are not required and have therefore not been included in these
financial statements.
The Group is a Tier 1 for profit reporting entity as set out in the External Reporting Board’s Accounting
Standards Framework. The Colonial Motor Company Limited is a New Zealand registered company
listed on the New Zealand Stock Exchange.
The Group’s principal activity is operating franchised motor vehicle dealerships. There is a list of the
dealerships and the franchises they represent on page 8.
Statement of compliance
These consolidated financial statements have been prepared in accordance with Generally Accepted
Accounting Practice in New Zealand (NZ GAAP). They comply with New Zealand Equivalents to
International Financial Reporting Standards (NZ IFRS)
issued by the New Zealand Accounting
Standards Board, Part 7 of the FMCA 2013 and the Companies Act 1993. They also comply with
International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards
Board.
The consolidated financial statements were authorised for issue by the Directors on 19 September 2019.
Basis of preparation
The consolidated financial statements have been prepared
• on an historical cost basis, modified by the revaluation of certain assets and liabilities to fair value
through profit or loss, and
• on the assumption that the Group is a going concern
The consolidated financial statements are presented in New Zealand Dollars, which is the Group’s
functional and presentation currency, rounded to the nearest thousand dollars.
Critical accounting assumptions, estimates and judgements
The Group makes assumptions, estimates and judgements concerning the future. They are based on
historical experience and other factors including expectations of future events that are believed to be
reasonable under the circumstances. Actual results may differ from these estimates.
Estimates, judgements and underlying assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the estimate is revised and in any future
periods affected.
Estimates and judgements that have a significant risk of causing a material adjustment to the carrying
amount of the assets and liabilities are detailed in the relevant notes of these consolidated financial
statements.
15
Accounting policies
The accounting policies set out in these notes have been applied consistently to all periods presented
in these consolidated financial statements.
The following general accounting policies relate to the overall consolidated financial statements.
Policies specific to particular transactions or balances are detailed within each relevant note and are
highlighted by a solid blue bar:
Specific accounting policy
General accounting policies
Impairment
The carrying amounts of the Group’s assets are reviewed at each reporting date to determine whether
there is any objective evidence of impairment. An impairment loss is recognised whenever the carrying
amount of an asset exceeds its estimated recoverable amount. Impairment losses directly reduce the
carrying amount of assets and are recognised as an expense in the consolidated statement of financial
performance.
The recoverable amount of an asset or cash generating unit is the greater of its value in use and its fair
value less costs to sell. In assessing fair value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate of the time value of money and risks specific to that
asset.
In respect of all assets (except goodwill and intangibles with indefinite useful lives) an impairment loss
is reversed if there has been a change in the estimate used to determine the recoverable amount.
Goods & Services Tax
The consolidated financial statements are prepared net of Goods & Services Tax (GST) with the
exception of receivables and payables which are stated including GST.
Changes in accounting policies and accounting standards
There have been no changes in accounting policies during the year.
Certain new accounting standards became effective for the Group from 1 July 2018. Further details on
the impact of these standards can be found in the following notes:
NZ IFRS 15 - Revenue from Contracts with Customers – note 1
NZ IFRS 9 - Financial Instruments – note 26
New standards, interpretations and amendments
At the date of authorisation of these consolidated financial statements, certain new standards and
interpretations to existing standards have been published but are not yet effective and have not been
adopted early by the Group.
All pronouncements will be adopted in the first accounting period beginning on or after the effective date
of the new standard. Information on new standards, amendments and interpretations that are expected
to be relevant to the consolidated financial statements are provided in the relevant notes as follows:
NZ IFRS 16 - Leases – note 15
Certain other new standards and interpretations issued but not yet effective and not expected to have
a material impact on the consolidated financial statements have not been disclosed.
16
Notes on financial performance
1 Revenue
Revenue from Contracts with Customers
The new accounting standard, NZ IFRS 15 – Revenue from Contracts with Customers, has been
adopted by the Group with effect from 1 July 2018. When deciding whether to recognise revenue the
Group undertakes the following:
1. Identifies the contract with the customer;
2. Identifies the performance obligations;
3. Determines the transaction price;
4. Allocates the transaction price to the performance obligations; and
5. Recognises revenue as the performance obligations are completed.
All of the revenue from contracts with customers arises from the sale of goods or services. The
transaction price is measured as the fair value of the consideration received or receivable and is net of
returns, trade allowances and rebates. All contracts are short term in nature.
For the supply of goods, the performance obligation is considered to be satisfied when control of the
goods has been passed to the buyer. This generally happens on delivery and revenue is recognised at
that time. Payment is usually required before the goods are delivered.
For the supply of services, performance obligations are considered satisfied when the service has been
completed. Revenue is recognised at that time. Payment is due on completion of the service.
The Group sells some products which have extended warranty or maintenance periods. These are part
of the price of the original goods or services and are not identified or treated separately. Any costs
incurred by the Group in respect of these services are recovered from the manufacturers providing the
extended warranties and maintenance agreements.
Given the short term nature of the contracts and that the performance obligations are generally met at
a single point, there has been no significant change in the Group’s accounting policies or procedures
post 1 July 2018. Consequently no contract assets or contract liabilities have been recognised by the
Group.
Prior to 1 July 2018, revenue was measured at the fair value of the consideration received or receivable.
It was recognised to the extent that it was probable that the economic benefits would flow to the Group
and the revenue could be reliably measured.
Amounts disclosed as revenue were net of returns, trade allowances and rebates. The following specific
recognition criteria would also be met before revenue was recognised:
Sale of products: Revenue from the sale of goods was recognised when the significant risks and rewards
of ownership had passed to the buyer and could be reliably measured. Risk and rewards were
considered to have passed to the buyer generally upon the delivery of goods to the customer.
Rendering of services: Revenue from the rendering of a service was recognised in the period in which
the service was provided.
Other Revenue
Rental revenue arising from premises rental is accounted for on a straight line basis over the lease term.
Interest comprises interest on funds invested and is recognised in profit or loss as it accrues using the
effective interest rate method.
2019
$000
2018
$000
Revenue from
Sale of products 842,024 839,621
Sale of services 64,900 62,455
Total revenue from contracts with customers 906,924 902,076
Interest 7 307
Rental revenue 2,071 1,651
Total other revenue 2,078 1,958
17
2 Expenditure
Expenditure in the consolidated statement of financial performance
includes:
2019
$000
2018
$000
Auditor’s remuneration
Audit fees – statutory audit 496 423
Other services - -
Total auditor’s remuneration 496 423
Operating lease expense 3,101 3,028
Directors’ fees 259 244
Bad debts written off 96 101
Donations 18 21
Contributions to retirement savings
CMC Workplace Savings Scheme 829 754
KiwiSaver 1,292 1,180
Increase/(decrease) in impairment allowance for:
Parts inventory obsolescence 153 (264)
Doubtful debts 8 (18)
Credit contracts (12) (32)
3 Interest
Interest expense comprises interest on deposits, vehicle floorplan finance, bank borrowings and bank
overdraft facilities.
See note 28 (b) for interest rate disclosures.
Interest costs are recognised using the effective interest rate method and expensed in the period they
are incurred.
4 Taxation
4(a) Tax expense
Income tax expense comprises current and deferred tax. Current tax is the tax payable on taxable profit
for the period using the existing tax rates.
Tax expense is recognised in the consolidated statement of financial performance except when it relates
to items recognised directly in the consolidated statement of comprehensive income.
2019
$000
2018
$000
Profit before tax for the year 33,393 37,911
Expected tax charge at the tax rate of 28% 9,350 10,615
Tax adjustments for:
Non-deductible expenses 498 598
Tax exempt income - (147)
Changes in unrecognised temporary differences 38 308
Prior year adjustment (6) (21)
Actual current tax charge 9,880 11,353
Movement in deferred tax (61) (534)
Total tax expense 9,819 10,819
18
4(b) Deferred tax
The calculation of deferred tax uses the liability approach that recognises deferred tax assets and
liabilities based on differences between the accounting and tax values of specific items in the
consolidated statement of financial position.
Deferred tax assets and liabilities are carried
• at the tax rates expected to apply when the assets are recovered or liabilities settled
• on the basis that the Group expects future profits to exceed any reversal of existing temporary
differences
Deferred tax liability
2019
$000
2018
$000
At the beginning of the year (3,844) (4,245)
Movement through the consolidated statement of
financial performance
On trading profit (80) 365
On non-trading property depreciation 141 169
Movement through property revaluation reserve 53 108
Movement through foreign currency cash flow hedge
reserve
141 (241)
At the end of the year (3,589) (3,844)
Deferred tax assets and liabilities are attributable to the following:
Trade and other payables 612 809
Trade and other receivables 21 19
Employee benefits 1,050 1,001
Inventories 667 628
Financial derivatives 43 (98)
Impairment allowance for finance bad debts 10 13
Property, plant and equipment (1,641) (1,724)
Building depreciation rule change (4,351) (4,492)
Deferred tax liability at the end of the year (3,589) (3,844)
Deferred tax on unused tax losses to be utilised against
future taxable profits
- -
4(c) Imputation credit account
2019
$000
2018
$000
Imputation credits available for use in subsequent
reporting periods
29,199 23,687
The New Zealand imputation regime enables tax credits to be attached to dividends paid to
shareholders as a method of avoiding double-taxation of company profits.
5 Segment report
The Group is structured so that each motor vehicle dealership is managed locally under the control of a
dealer principal who reports monthly to the Group Chief Executive. The Group Chief Executive is
considered to be the Chief Operating Decision Maker in terms of NZ IFRS 8 - Operating Segments. The
key measures used to assess dealership performance are revenue, trading profit before tax, trade
receivables and inventory.
Each of the trading subsidiaries enters into agreements in their own right with the New Zealand distributor
to sell and service specific brands of motor vehicle in a defined primary marketing area. As national
distributor of two brands of heavy trucks, Southpac Trucks Limited has equivalent agreements with the
international suppliers covering the whole country. Most of these agreements (called either dealer or
franchise agreements) do not have a specific duration. All of the dealer or franchise agreements contain
the right for the distributor/franchisor or the dealer to terminate the arrangements at short notice. Some
of these agreements have finite terms from one to three years, usually without automatic rights of
renewal. If a dealership or franchise agreement is terminated or not renewed there could be a detrimental
effect on the future financial performance of the Group.
19
The dealerships have similar economic characteristics, financial performance (as measured by their
gross profitability), products, services, processes, customers, methods of distribution and all operate in
the same regulatory environment. On that basis, all of the Group’s operating segments have been
aggregated into a single reporting segment to most appropriately reflect the nature and financial effects
of the business activities in which the Group engages and the economic environment in which it operates.
2019 2018
Operating
segment Corporate
Total
Group
Operating
segment Corporate
Total
Group
$000 $000 $000 $000 $000 $000
Revenue from customers 908,218 777 908,995 903,727 - 903,727
Depreciation & amortisation 2,642 1,729 4,371 2,168 1,573 3,741
Interest income 7 - 7 301 6 307
Interest expense 3,018 1,974 4,992 2,871 1,694 4,565
Trading profit before tax 29,623 4,070 33,693 34,582 3,259 37,841
Total assets 241,650 146,046 387,696 261,998 127,370 389,368
6 Reconciliation of profit for the year with operating cash flows
2019
$000
2018
$000
Profit for the year 23,574 27,092
Adjustments for non-cash items
Depreciation 4,371 3,741
Revaluation of property and investments 300 (70)
Movement in
Impairment of credit contracts (12) (4)
Deferred tax (61) (534)
Movement in working capital
Trade & other payables (3,615) 13,030
Tax payable (3,165) 1,888
Trade & other receivables 2,497 (23,243)
Inventory 12,693 (33,254)
Net cash flow from operations 36,582 (11,354)
7 Earnings per share
2019
$000
2018
$000
Trading profit after tax 22,060 24,746
Profit after tax for the year attributable to shareholders 21,901 24,985
Weighted average number of shares on issue – see note 21
Basic and diluted earnings per share on
Cents per
share
Cents per
share
Trading profit after tax 67.5 75.7
Profit after tax attributable to shareholders 67.0 76.4
Basic and diluted earnings per share are calculated by dividing the profit after tax attributable to
shareholders by the weighted average number of shares outstanding during the year.
There were no potentially dilutive ordinary shares outstanding at the reporting date (2018: none).
20
Notes on financial position
8 Inventory
New and used vehicles are valued at the lower of cost or net realisable value. Parts, accessories,
workshop stocks, fuels and gases are recognised at cost, using where applicable, the first in first out
method. Cost includes expenditure incurred in acquiring the inventory and bringing it to the existing
location and condition. Due allowance has been made for obsolete and slow moving stock.
Inventory, particularly of vehicles, is reviewed, on a transaction by transaction basis, as part of normal
commercial trading. Estimates and judgement are required to ensure that carrying values do not exceed
net realisable values at the reporting date.
Parts inventory is reviewed regularly for slow-moving or obsolete stock. At each reporting date an
impairment allowance is recognised based on the age of stock and historical evidence of inventory held
for a similar timeframe. The movement in the parts obsolescence allowance is as a result of a
combination of the realisation and scrapping of aged stock during the reporting period.
2019
$000
2018
$000
Vehicles 146,925 160,989
Parts, accessories, workshop fuels and gases 24,162 22,795
Impairment allowance (2,758) (2,762)
Total inventory 168,329 181,022
Total inventory write-down including parts, parts obsolescence and vehicles 432 660
9 Property, plant & equipment
Land & buildings
Land and buildings owned by the Group are categorised as property, plant & equipment because they
are owned specifically for use in the revenue generating operations of its subsidiaries.
All land and buildings, other than properties held for sale (if any), were independently valued at reporting
date by QV Asset & Advisory to comply with Property Institute New Zealand Professional Practice
Standards and International Valuation Standards. The principal valuer was Angela Scott, a MPINZ
Registered Valuer.
All property has been classified as level 2 in the fair value hierarchy specified in NZ IFRS 13 – Fair Value
Measurement because, although there is an active and open market for commercial properties, each
property is unique in its location, size, age and condition.
All property was valued at its highest and best use by applying a direct sales comparison approach,
which derives fair values by comparing the property to similar assets that have recently sold on the open
market.
Any revaluation surplus is credited to the property revaluation reserve unless it reverses a revaluation
decrease for the same asset previously recognised in profit or loss. In that case, the surplus is credited
to profit or loss to the extent of the decrease previously charged. Any revaluation deficit is recognised
through profit or loss unless it directly offsets a previous surplus in the same asset in the property
revaluation reserve.
In May 2019, there was a fire at the Macaulay Motors facility in Queenstown. It is a new dealership
property that was officially opened in January 2019. The fire was contained in the workshop and the
dealership has continued to trade, with service work being completed at its previous location. The cost
of repairing the building and replacing damaged plant & equipment is expected to be $2.1m and is fully
covered by the Group’s insurance. Given the short time frame to repair the damaged property and that
the insurer has confirmed that all the re-instatement costs will be fully reimbursed, no adjustment to the
carrying value of this property has been reflected in the consolidated financial statements at 30 June
2019. Repairs are currently being undertaken.
Other property, plant & equipment
Property, plant & equipment other than land and buildings are carried at cost less accumulated
depreciation and impairment losses. Cost includes all expenditure that is directly attributable to the
acquisition of the asset. Software that is integral to the functionality of the related equipment is
capitalised as part of the asset.
21
Depreciation
Land is not depreciated. The economic life of buildings has been assessed at between 33 and 100
years and buildings are depreciated accordingly. Any accumulated depreciation on buildings at
revaluation date is eliminated against the gross carrying amount of the asset and the net amount is
restated to the revalued amount of the asset.
Other plant and equipment has been depreciated over its estimated useful life on an accounting basis
that the Group considers best reflects the decline in the economic service potential of each class of
assets. The general rate bands are shown below:
Service vehicles 18 – 36% of Diminishing Value
Furniture, fittings and equipment 7.5 – 60% of Diminishing Value
Carrying values and depreciation rates are reviewed at each reporting date to ensure depreciation rates
are appropriate.
Land &
buildings
Furniture,
fittings &
equipment
Service
vehicles
Total
$000 $000 $000 $000
Cost or fair value at 30 June 2017 62,565 21,476 5,314 89,355
Accumulated depreciation - (14,978) (2,570) (17,548)
Revaluation 43,317 - - 43,317
Net book value at 30 June 2017 105,882 6,498 2,744 115,124
Additions 11,589 1,966 1,265 14,820
Disposals (6) (26) (685) (717)
Depreciation (1,548) (1,445) (789) (3,782)
Movement in revaluation 5,025 - - 5,025
Net book value at 30 June 2018 120,942 6,993 2,535 130,470
Cost or fair value at 30 June 2018 72,598 22,696 5,313 100,607
Accumulated depreciation - (15,703) (2,778) (18,481)
Revaluation 48,344 - - 48,344
Net book value at 30 June 2018 120,942 6,993 2,535 130,470
Additions 12,566 2,868 1,474 16,908
Disposals (614) (111) (352) (1,077)
Depreciation (1,775) (1,695) (845) (4,315)
Movement in revaluation 6,739 - - 6,739
Net book value at 30 June 2019 137,858 8,055 2,812 148,725
Comprised of:
Cost or fair value at 30 June 2019 82,775 24,482 5,769 113,026
Accumulated depreciation - (16,427) (2,957) (19,384)
Revaluation 55,083 - - 55,083
Net book value at 30 June 2019 137,858 8,055 2,812 148,725
2019
$000
2018
$000
Revaluation deficit recognised as non-trading items through profit or loss (243) (406)
Capital work in progress included in value of land & buildings at reporting
date. Capital work in progress is not subject to depreciation until completed
and brought into use 2,535 2,624
Capital commitments
Commitments to the future acquisition of new dealership facilities and
development projects to existing facilities 3,948 4,027
22
10 Christchurch greenway
The dealership property occupied by Team Hutchinson Ford on Tuam Street in Christchurch is owned
by the Group and is in the city’s Southern Frame designated area. An east-west greenway is being
constructed through the centre of the dealership. In April 2018 agreement was reached with Crown
authorities for the Group to grant an easement in perpetuity across the site for the construction of the
greenway. The agreement involved:
1. a cash settlement to meet the cost of demolishing part of the workshop and remodelling the
remaining buildings to accommodate the business over a split site, and;
2. acquisition of an adjacent area of land to replace part of the land taken by the greenway.
Initial recognition of the agreement was to create an asset for the full value of the settlement receivable
from the Crown ($7.555m) based on the reasonable expectation that the agreement was legally binding
and all conditions imposed on the parties would be met. At the same time a liability for the same amount
was established in recognition of the Group’s future performance obligations to clear the land and make
changes to existing buildings in order to continue its business.
At the reporting date, the outstanding receivable included in Other Receivables represents further
payments due to be received from the Crown on particular events defined in the agreement and the
value of the land to be acquired. The balance of the performance obligations, included in Other
Payables, reflects the remainder of the settlement that has yet to be allocated to particular elements of
the work to be completed including compensation for the loss in capital value of the land as a result of
granting the easement that will divide, what is currently a single contiguous area of land, into two
separate titles.
The lump sum settlement made in 2018 includes an unspecified amount of compensation for “injurious
affection”, a legal term given to the disruption and additional operational costs that are likely to be
incurred during the creation of the greenway. The amount of the compensation for injurious affection
will only be measurable upon completion of the capital works. Provision has been made within deferred
tax for the anticipated tax effects associated with putting the greenway in place.
2019 2018
$000 $000
Other Receivables
Balance at 1 July 3,555 -
Consideration for granting easement and making land available
Cash - 7,000
Value of land to be acquired - 555
Payments received (1,000) (4,000)
Balance at 30 June – note 11 2,555 3,555
Performance obligation
Balance at 1 July 7,031 -
Liability for future obligations - 7,555
Expenditure incurred (671) (524)
Balance at 30 June – note 12 6,360 7,031
11 Trade and other receivables
2019
$000
2018
$000
Trade receivables 52,408 52,069
Impairment allowance for expected credit losses (75) (67)
52,333 52,002
Other receivables – greenway agreement note 10 2,555 3,555
Other receivables 447 1,853
Prepayments 158 581
Carrying value of trade and other receivables 55,493 57,991
Bad debts written off in year 96 101
The net carrying value of trade receivables and prepayments is considered to be their fair value.
23
With effect from 1 July 2018, the Group has adopted the simplified model of recognising lifetime
expected credit losses as detailed in NZ IFRS 9 – F inancial Instruments, as none of the trade or other
receivables contain a significant financing component.
In measuring expected credit losses, the trade receivables have been assessed on a collective basis
as they share similar credit risks. Expected loss rates are based on historic trading patterns over the
last 5 years adjusted for anticipated changes in the 12 months following reporting date. Adoption of
the new standard has not impacted the method of calculating impairment on prior period results.
The items included in other receivables do not share the same credit risks as trade receivables and no
credit loss is expected to arise.
Trade receivables are written off as bad debts when there is no expectation of recovery.
On the above basis the expected credit loss of trade receivables is as follows:
2019
$000
2018
$000
Expected credit loss rate 0.14% 0.13%
Gross carrying amount 52,408 52,069
Expected credit loss 75 67
Movements in the loss allowance are as follows:
Balance at 1 July 67 94
Allowance recognised in profit or loss 31 -
Allowance reversed (23) (27)
Balance at 30 June 75 67
12 Trade and other payables
Trade and other payables are stated at amortised cost.
Employee benefits
The Group provides for benefits accruing to employees for:
• salaries and wages earned but not yet paid
• annual leave accrued but not yet taken
• short-term incentives arising from contractual obligations or when it is probable that the incentives
will be paid and they can be reliably measured
Trade and other payables are all due within one year.
2019
$000
2018
$000
Trade payables 25,473 28,457
Employee benefits 8,364 8,175
Other payables – performance obligation note 10 6,360 7,031
Other payables 6,616 6,786
Total trade and other payables 46,813 50,449
13 Cash and bank accounts
2019
$000
2018
$000
Bank accounts in funds 7,384 10,573
Bank accounts in overdraft (202) (322)
Net cash and bank accounts 7,182 10,251
These balances include all cash and cash equivalents.
Bank overdrafts are payable at call.
The Company guarantees the amounts owing by its subsidiaries under overdraft facilities and the
subsidiaries guarantee the indebtedness of the Company.
Aggregate limit on bank overdrafts 7,035 7,035
24
14 Credit contracts
Dealerships arrange finance for customers to buy vehicles with a number of finance companies. Before
the customers enter into the finance agreements, information is gathered and provided to the finance
companies to check that customers meet their creditworthiness, affordability and
other criteria.
Dealerships make the initial loans to the customer but instantaneously assign them to the finance
company.
Credit contracts with Motor Trade Finance Limited (MTF) differ from the other finance companies. MTF
retains the right of recourse to the dealership if a particular customer defaults on their payments.
Accounting for the MTF credit contracts results in creating a receivable from the customer (which is
collected by MTF due to the assignment) and an equal and opposite liability for the amount that may
become payable to MTF if the customer defaults. In the normal course of business, the receivable and
liability for each finance deal reduce in parallel as customers make routine repayments.
The financial liabilities under credit contracts a t reporting date consist of the outstanding balances on
customers’ accounts. The movement in the liability is detailed in note 27.
Financial receivables – credit contracts
There is a risk if customers fail to make the necessary repayments that the receivable will not be
recoverable and the liability will remain payable to MTF. Factors that mitigate
this risk include:
• credit checks that are carried out when the finance is arranged
• timely credit control practices
• the number of outstanding loans means there is no concentration of credit risk on a restricted
number of debtors
• security over the vehicles that are financed so that, if other measures fail, the vehicles can be
repossessed and sold to offset bad debts
Bad debts
If customers default and the sale proceeds of the vehicle do not cover the outstanding balance, the
deficit is recognised as an expense in profit or loss.
Impairment
The balances are routinely reviewed for impairment and an allowance is made for amounts that are
unlikely to be recovered. The impairment allowance is calculated as a percentage of net amounts
outstanding under the credit contracts based on historic trading patterns.
Amounts owed by customers are recoverable over a number of years. To determine the percentage
used for the impairment allowance, estimates are based on historical data for contracts in default.
Financing agreements outstanding at reporting date that have been assigned to MTF with recourse
have the following repayment schedule:
2019
$000
2018
$000
Up to 1 year 1,773 2,779
1 to 2 years 1,463 1,652
2 to 3 years 818 945
3 to 4 years 377 342
4 to 5 years 101 86
Total 4,532 5,804
Impairment allowance (32) (44)
Carrying value of receivables 4,500 5,760
Number of credit contracts 289 410
Value of impaired accounts written off in the year ($000) - -
Actual arrears/amounts past due at 30 June ($000) 24 37
Arrears as percentage of total 0.54% 0.63%
Total value of accounts in arrears at 30 June ($000) 392 471
Accounts in arrears as % of total 8.65% 8.11%
25
The amounts payable by customers under the financial assets – credit contracts, including future
interest, have the following repayment profile, which is the maximum amount the Group may be required
to pay if subject to recourse under its contractual obligations.
2019
$000
2018
$000
Less than 1 year 2,134 3,256
1 to 2 years 1,679 1,895
More than 2 years 1,426 1,504
Total 5,239 6,655
15 Operating leases
The Group owns most of the property from which it operates. Some dealerships operate from sites not
owned by the Group that are leased from third parties. The leases are negotiated under normal
commercial arrangements with varying terms, escalation clauses and renewal conditions. There are no
undue restrictions imposed on these leases and no contingent rents due. The financial commitments
created by the leases are primarily for the regular payment of rent with payments due over the periods
up to the earliest date each lease may be terminated as summarised in the table below.
The Group does not carry any material finance leases.
Operating lease commitments 2019
$000
2018
$000
Within one year 2,887 2,484
Between one and two years 1,682 1,250
Between two and five years 3,095 2,080
Over five years 713 138
Total operating lease commitments 8,377 5,952
The Group owns some properties that are not completely occupied by Group companies and the space
is leased to third parties. The leases are also negotiated under normal commercial arrangements with
varying terms, escalation clauses and renewal conditions and without undue restrictions. The rent is
receivable during the non-cancellable periods of these leases according to the following schedule.
Operating lease receivables
Within one year 439 572
Between one and two years 301 345
Between two and five years 230 459
Over five years - 53
Total operating lease receivables 970 1,429
Change in financial reporting standard
Under current financial reporting standards, the commitments and receivables under operating leases
are not included in the financial statements of the lessors and lessees (landlords and tenants) but need
only be disclosed as above.
A new standard, NZ IFRS 16 – Leases, is coming into effect and will be compulsory for the first time in
the Group’s consolidated financial statements for the year ending 30 June 2020. The Group does not
intend to adopt the standard before that date.
The new standard does not impose material changes for lessors but completely changes the financial
reporting by lessees. It will require them to recognise the present value of the rental commitments over
the most likely term of the lease (a potentially longer period than the non-cancellable period used to
determine the commitments above) as a liability in their statement of financial position. The liability will
be offset by an asset representing the right to use the properties. The liability and asset will be equal
and opposite only at the start of each lease and the reductions in their value over the terms of the leases
will be recognised on different bases. The right of use asset will be depreciated on a straight line basis.
Rather than recognise the rental payments as expenses through profit or loss they will be split between
partial settlement of the liability and a notional interest expense component.
The standard provides a lease-by-lease option either to:
• restate the accounting from inception of each lease or
• transition from the implementation date of the standard
It is the Group’s current intention to apply full re-statement of all its leases.
26
The Group estimates, based on its current portfolio of leases, that at 30 June 2020 the lease liability will
be valued in the range of $14 – $16 million and that, in the year ending 30 June 2020, the replacement
of the rental expense by amortisation of the right of use asset and interest will:
• increase earnings before interest, tax depreciation and amortisation (EBITDA) by $2.2 – $ 2.6m
• increase interest by $0.6 - $0.7m
• increase amortisation by $1.7 - $2.0m
• decrease trading profit before tax by approximately $0.1m
The Group intends to take advantage of the concessions and has not included leases on low value
assets or those leases that expire within 12 months of the date of the initial application of the standard.
The payments associated with these leases will be recognised as an expense on a straight line basis
over the life of the lease.
16 Intangible assets
Intangible assets consist of goodwill and other intangibles.
Goodwill is recognised on acquisitions of subsidiaries or purchases of business assets and represents
the excess of the acquisition costs over the fair value of the individually identified acquired assets and
liabilities at acquisition date.
Goodwill relates to the acquisition of business assets which have no foreseeable limit to the period over
which they are expected to generate cash inflows for the Group. As such they are considered to have
an indefinite useful life.
The value of intangibles is compared with the “value in use” of the affected dealerships, which have
been identified as the cash generating units associated with the intangibles. Impairment of the intangible
assets is recognised if there is considered to be a permanent reduction of the “value in use”.
Impairment testing calculations require the use of estimates and assumptions. The calculations of “value
in use” are based on the actual results for the past five reporting periods together with the projected
results for the next five reporting periods. It was assumed that there would be no real growth during the
period of the forecasts.
Key assumptions relate to the general economic outlook, the level of the new and used vehicle industries
and the performance of the Group’s business units in this environment.
The discount rate used in completing the cash flow forecast to assess value in use was 9.1%
(2018: 8.9%).
Management considers that any reasonable change in a key assumption used in the determination of
the value in use would not cause the carrying amount of intangible assets to exceed their recoverable
amount.
The value of intangible assets was reviewed at 30 June 2019. There was no indication of impairment
below their carrying amount (2018: $Nil).
2019 2018
Goodwill $000 $000
Balance at 1 July 1,028 1,028
Impairment loss during the year - -
Balance at 30 June 1,028 1,028
Cost 1,028 1,028
Accumulated amortisation and impairment - -
Balance at 30 June 1,028 1,028
27
Notes on investments
17 Subsidiaries
Subsidiaries are entities controlled by the Company. Control requires the investor to have exposure or
rights to variable returns and the ability to affect those returns through power over the investee. The
financial statements of subsidiaries are included in the consolidated financial statements from the date
that control commences until the date that control ceases. Intra-group balances, and any revenue and
expenses from intra-
group transactions, are eliminated in preparing the consolidated financial
statements.
Non-controlling interests in the results and equity of subsidiaries are shown separately in each of the
consolidated financial statements. They represent the portion of the profit or loss, other comprehensive
income and net assets of subsidiaries that is not held by the Group based on their respective ownership
interests.
All subsidiaries are 100% owned (2018: 100%), with the exception of Southpac Trucks Limited which is
85% owned (2018: 85%). All subsidiaries have a reporting date of 30 June. All Group companies are
registered in New Zealand. Subsidiary companies operate as motor vehicle dealerships and related or
incidental activities. The Company provides administrative and financial services to the subsidiaries as
well as leasing them, at market rates, many of the properties they occupy.
Trading subsidiaries
Agricentre South Ltd, Avon City Motorcycles Ltd, Avon City Motors Ltd, Capital City Motors Ltd,
Dunedin City Motors Ltd, Energy City Motors Ltd, Energy Motors Ltd, Fagan Motors Ltd, Hutchinson
Motors Ltd, M.S. Motors (1998) Ltd, Macaulay Motors Ltd, Ruahine Motors Ltd, South Auckland
Honda Ltd, South Auckland Motors Ltd, Southern Autos – Manukau Ltd, Southern Lakes Motors Ltd,
Southpac Trucks Ltd, Stevens Motors Ltd, The Hawkes Bay Motor Company Ltd and Timaru Motors
Ltd.
Non-trading subsidiaries
Advance Agricentre Ltd, Avery Motors Ltd, Capital City Paint & Panel Ltd, Central Lakes Automotive
Ltd, East City Ford Ltd, Jeff Gray Ltd, Metro Motors (Porirua) Ltd, Metro Training Services Ltd,
Panmure Motors Ltd, Papakura Ford Ltd, Pukekohe Motors Ltd, Queenstown Motors Ltd,
South Auckland Ford Ltd, Southland Tractors Ltd, Tower Motors (2012) Ltd and
Trucks South Ltd.
Non-controlling interest
Southpac Trucks Ltd operates branches and service agencies throughout New Zealand and its principal
place of business is Auckland. The summarised financial position and cash flows at the reporting date
were as follows:
2019
$000
2018
$000
Shareholders’ equity 20,928 19,136
Current liabilities 71,797 86,368
Total equity and liabilities 92,725 105,504
Total assets 92,725 105,504
Net cash flows from:
Operating activities 19,970 (16,267)
Investing activities (1,561) (653)
Financing activities (19,831) 17,063
Net movement in cash held (1,422) 143
Opening cash balance 2,613 2,470
Closing cash balance 1,191 2,613
18 Investments
2019
$000
2018
$000
Shares in Motor Trade Finance Limited (MTF) 2,437 2,494
Other 3 3
Total investments 2,440 2,497
MTF shares are traded in a quoted but restricted market and are categorised as level two in the fair
value hierarchy set out in NZ IFRS 13 – Fair Value Measurement.
Shares are carried at fair value with changes in value recognised through profit or loss.
28
Notes on funding
19 Capital management
The Group’s capital includes share capital, retained earnings and property revaluation reserves.
The Group’s policy is to maintain a strong capital base to ensure that it continues as a going concern,
to maintain investor, supplier and market confidence and to sustain future development of the business.
The Board regularly monitors future capital requirements and costs to maintain an appropriate balance
of shareholders’ equity and debt. The Group generally maintains the capital structure by setting a
sustainable level of dividends.
The Group issues call debt securities and maintains relationships with a number of financial institutions
to ensure that adequate debt facilities are available to meet short to medium term strategic cash flow
requirements and as a buffer for unexpected events. The Group complied with all of the financial
covenants incorporated in the bank borrowing facilities – note 25 – and the at call deposit trust deed
– note 24 – at the reporting date and at 30 June 2018. There are no other externally imposed capital
requirements.
There has been no change in the Group’s management of capital during the years ended 30 June 2019
or 30 June 2018.
20 Movements in equity
Share
capital
(Note 21)
Property
revaluation
reserve
Foreign
exchange
cash flow
hedge
reserve
Retained
earnings
Total
attributable
to share-
holders
Non-
controlling
interest
Total
equity
$000 $000 $000 $000 $000 $000 $000
Balance at 30 June 2017
15,968 44,457 (314) 120,753 180,864 2,021 182,885
Dividends paid - note 22 - - - (15,040) (15,040) (1,350) (16,390)
Total transactions with
shareholders
- - - (15,040) (15,040) (1,350) (16,390)
Profit for the year - - - 24,985 24,985 2,107 27,092
Other comprehensive income
Property revaluation reserve
Fair value movement - 5,430 - - 5,430 - 5,430
Deferred tax - 108 - - 108 - 108
Foreign exchange cash flow
hedge reserve
Fair value movement - - 733 - 733 129 862
Deferred tax - - (205) - (205) (36) (241)
Total comprehensive income - 5,538 528 24,985 31,051 2,200 33,251
Balance at 30 June 2018 15,968 49,995 214 130,698 196,875 2,871 199,746
Dividends paid - note 22 - - - (16,347) (16,347) (1,350) (17,697)
Total transactions with
shareholders
- - - (16,347) (16,347) (1,350) (17,697)
Profit for the year - - - 21,901 21,901 1,673 23,574
Other comprehensive income
Property revaluation reserve
Fair value movement - 6,982 - - 6,982 - 6,982
Deferred tax - 53 - - 53 - 53
Foreign exchange cash flow
hedge reserve
Fair value movement - - (429) - (429) (76) (505)
Deferred tax - - 120 - 120 21 141
Total comprehensive income - 7,035 (309) 21,901 28,627 1,618 30,245
Balance at 30 June 2019 15,968 57,030 (95) 136,252 209,155 3,139 212,294
29
Reserves
The property revaluation reserve arises on the revaluation of land and buildings. Where revalued land
or buildings are sold, the portion of the revaluation reserve that relates to the asset and is effectively
realised, is transferred directly to retained earnings.
The foreign exchange cash flow hedge reserve comprises the cumulative balance of adjustments to
uncompleted transactions that qualify as effectively hedged under NZ IFRS 9 – Financial Instruments.
21 Share capital
All shares on issue are fully paid-up and have no par value.
All ordinary shares:
• have equal voting rights
• share equally in dividends
• would share equally in any surplus on winding up
2019
$000
2018
$000
Share capital 15,968 15,968
Thousands
of shares
Thousands
of shares
Number of ordinary shares on issue 32,695 32,695
Weighted average number of ordinary shares on issue 32,695 32,695
22 Dividends
2019
$000
2018
$000
Date paid Cents per share
Final for the previous year 15 October 2018 35.0 11,443 10,136
Interim for the current year 15 April 2019 15.0 4,904 4,904
Dividends paid during the year 16,347 15,040
For details of the final dividend for the current year, see note 32.
23 Vehicle floorplan finance
When not purchased outright, new vehicles are funded by bailment arrangements, which represent a
financial liability, accounted for at amortised cost. The vehicles are initially included in inventory at the
same value.
Most of the subsidiaries have bailment facilities with finance companies to provide funding for new
vehicles. The main finance company is UDC Finance Limited. Under these facilities the finance
companies own the vehicles that are placed in the control of the subsidiaries as bailees and are available
to display for sale to the public in the dealerships. The subsidiaries pay bailment fees (similar to interest)
for the use of the vehicles. The bailment agreements are subject to financial limits. The vehicles are
purchased from the finance companies when they are sold to customers.
If the subsidiaries breach the bailment agreements, the finance companies retain the right to repossess
and sell the vehicles and the subsidiaries must meet any shortfall of the sale proceeds from the purchase
price of the vehicles.
2019
$000
2018
$000
Total vehicle floorplan finance 58,613 61,386
30
24 At call deposits
The Company offers for subscription unsecured call debt securities (Deposits) that are repayable on
demand. Acceptance of Deposits is restricted to shareholders, employees and their associates.
At reporting date the Deposits were constituted by, issued under and are described in a trust deed dated
13 September 2016 between the Company, its Guaranteeing Subsidiaries (as therein defined) and
Public Trust as supervisor for the holders of Deposits (the Depositors). Under the terms of the trust deed
the Guaranteeing Subsidiaries unconditionally guarantee, jointly and severally, the repayment of the
deposits together with interest thereon by the Company and by each of the other Guaranteeing
Subsidiaries. The governance documents, including a product disclosure statement, are available on
the Disclose Register.
Interest is payable on Deposits at rates that vary from time to time as disclosed to the Depositors on the
application form or as subsequently notified to Depositors in writing. The interest rate applicable at 30
June 2019 was 3.25% (2018: 3.25%).
2019
$000
2018
$000
Deposits 24,008 21,588
Maximum amount of deposits on offer 30,000 30,000
25 Bank borrowing
The Group has wholesale facilities with BNZ, ANZ and Westpac, three highly-respected international
registered trading banks. The bank facilities are reviewed annually by the banks and have terms that
extend up to three years from the date of each review.
Wholesale borrowing is transacted only by the Company. Its indebtedness is guaranteed by its trading
subsidiaries to the full extent of the facilities. All borrowing at the reporting date was repayable at call.
The agreements with each of the banks are very similar and require the Group to meet financial criteria
based on ratios derived from its financial statements. The Group also pledges to the banks not to grant
security over any of its assets i.e. a “negative pledge”.
2019
$000
2018
$000
Bank borrowing 35,856 41,550
Combined facility limits 60,000 56,500
26 Financial instruments
Financial instruments primarily comprise cash at bank, receivables, payables, credit contracts, forward
exchange contracts, shares in companies, borrowings and loans.
The Group has adopted the new standard, NZ IFRS 9 – Financial Instruments, with effect from 1 July
2018. The new standard makes changes to the classification and measurement of financial assets and
liabilities and introduces an expected credit loss model for the impairment of financial assets. NZ IFRS
9 also contains new requirements for the application of hedge accounting. These are explained in note
29. Adoption of the new standard has not impacted the classification and measurement of financial
assets or liabilities.
Accounting policy applied after 1 July 2018
Financial assets and liabilities are recognised when the Group becomes a party to the contractual
provisions of the financial instrument.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset
expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial
liability is derecognised when it is extinguished, discharged, cancelled or expires.
Except for trade receivables that do not contain a financing component and are measured at transaction
price, all financial assets are initially measured at fair value adjusted for transaction costs (where
applicable).
31
Financial assets, other than those designated and effective as hedging instruments, are classified into
the following categories:
• amortised cost
• fair value through profit or loss
• fair value through other comprehensive income
The classification is determined by both:
• the entity’s business model for managing the financial asset
• the contractual cash flow characteristics of the financial asset
Measurement of financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the following conditions (and are not
designated as fair value through profit or loss):
• the assets are held to collect contractual cash flows
• the contractual terms of the assets give rise to cash flows that are only payments of principal and
interest
After initial recognition, the assets are measured at amortised cost using the effective interest rate
method. Discounting is ignored where the effect of discounting is not material.
Financial assets at fair value through profit or loss
Financial assets that are held under a different model than ‘held to collect’ or ‘held to collect and sell’
and assets whose cash flows are not solely payments of principal and interest are accounted for as fair
value through profit or loss. All derivative financial instruments fall into this category, except for those
designated and effective as hedge instruments. This category also contains any equity investments.
Assets in this category are all measured at fair value with gains or losses recognised in profit or loss.
The fair values of the assets in this category are determined by reference to an active market or using
an alternative valuation technique where no market exists.
Financial assets at fair value through other comprehensive income
The Group had no financial assets in this category at 30 June 2019.
Impairment of financial assets
The standard’s new impairment requirements use forward looking information to recognise expected
credit losses. The scope of this new requirement covers loans and other debt type financial assets, trade
receivables and loan commitments.
Recognition of credit losses is not dependent on identifying a credit loss event but instead considers a
broader range of information when assessing credit risk including past events, current conditions and
reasonable forecasts that could affect the expected collectability of future cash flows. In applying this
approach, distinction is made between:
• financial instruments that have not deteriorated significantly in credit quality since initial
recognition, or that have a low credit risk (Stage 1)
• financial instruments that have deteriorated in credit quality since initial recognition and whose
credit risk is not low (Stage 2)
• financial instruments that have objective evidence of impairment at the reporting date
12 month expected credit losses are recognised for Stage 1 instruments while lifetime expected credit
losses are recognised for Stage 2 instruments. Measurement of expected credit losses is determined
by a probability weighted assessment of the credit losses over the life of the instrument.
The Group makes use of a simplified approach in accounting for trade receivables. See note 11 for more
information.
Measurement of financial liabilities
Financial liabilities are initially measured at fair value and, where applicable, adjusted for transaction
costs. Subsequently, financial liabilities are measured at amortised cost using the effective interest
method except for derivative financial instruments that are designated and effective as hedging
instruments (see note 29).
32
Accounting policy applied prior to 1 July 2018
Measurement of financial instruments
All financial instruments were recognised in the consolidated financial statements initially at fair value
plus any directly attributable transaction costs. Cash, trade receivables and credit contracts were
subsequently measured at amortised cost with investments measured at fair value. Financial liabilities
were measured at amortised cost. Financial derivatives associated with foreign exchange contracts
were measured at fair value.
Impairment of financial assets
All financial assets were reviewed for impairment and an allowance provided where there was objective
evidence that the asset may not be recovered.
Financial instruments by category
2019 2019 2018 2018
$000 $000 $000 $000
Fair value
through
profit or loss
Amortised
cost
Fair value
through
profit or loss
Amortised
cost
Assets
Cash and bank accounts - 7,182 - 10,251
Trade and other receivables - 55,335 - 57,410
Credit contracts - 4,499 - 5,760
Shares in companies 2,440 - 2,497 -
Financial derivatives – foreign exchange - - 349 -
Financial
liabilities at
amortised
cost
Financial
derivatives
at fair value
Financial
liabilities at
amortised
cost
Financial
derivatives
at fair
value
Liabilities
Bank borrowings 35,856 - 41,550 -
At-call deposits 24,008 - 21,588 -
Trade and other payables 33,837 - 36,632 -
Vehicle floorplan finance 58,613 - 61,386 -
Credit contracts 4,532 - 5,804 -
Financial derivatives – foreign exchange - 155 - -
27 Reconciliation of liabilities arising from financing activities
At the
beginning of
the year Cash flows
Non-cash
changes
At the end
of the year
$000 $000 $000 $000
Bank borrowing – note 25 41,550 (5,694) - 35,856
At call deposits – note 24 21,588 2,420 - 24,008
Vehicle floorplan finance – note 23 61,386 (2,773) - 58,613
Total short term borrowings 124,524 (6,047) - 118,477
Credit contracts – note 14
Short term 2,779 - (1,006) 1,773
Long term 3,025 - (266) 2,759
Total liabilities arising from financing
activities 130,328 (6,047) (1,272) 123,009
33
Notes on managing risk
28 Financial risk management
28 (a) Credit risk
Financial instruments which potentially subject the Group to concentrations of credit risk consist
principally of bank balances, deposits, receivables and credit contracts.
The carrying amounts of financial assets represent the Group’s maximum credit exposure.
The Group places its cash and short term investments with high credit quality financial institutions (as
determined by independent credit rating agencies) and limits the amount of credit exposure to any one
financial institution.
The Group performs credit evaluations on all customers requiring credit and generally does not require
collateral or other security to support financial instruments with credit risk.
Concentrations of credit risk with respect to accounts receivable are limited due to the large number of
customers included in the Group’s customer base.
The rate of impairment of amounts receivable under credit contracts – note 14 – is low. If the incidence
of recourse requiring balances to be written off were to increase by 0.1% it would increase the annual
amount written off through profit or loss by $0.01m (2018: $0.01m).
28 (b) Interest rate risk
The Group is not exposed to any specific interest rate risk other than normal interest rate movements
on a daily basis in the New Zealand market. The specific rates that the Group was exposed to during
the year were:
2019 2018
Bank overdrafts 5.23% - 10.50% 5.45% - 11.00%
At call deposits 3.25% 3.25%
Bank borrowing facilities 2.78% - 3.15% 2.87% - 3.00%
Bank borrowings are unsecured and fall within the agreed committed facility requirements in place with
the Group’s bankers. These facilities have maturity dates ranging from March 2020 to December 2020
and are expected to be renewed in the normal course of business. The facilities can be drawn on or
repaid at any time and interest rates are variable. The carrying value of these loans is considered to be
the fair value.
Interest rate sensitivity
The effect of a movement of 1% in interest rates would be to change finance costs in profit or loss and
equity by $0.598m per annum (2018: $0.631m).
28 (c) Liquidity risk
Liquidity risk represents the Group’s ability to meet its contractual payment obligations. The Group
monitors its cash on an ongoing basis to ensure it has sufficient credit facilities to meet its obligations.
The Group obtains funding for its operations from several sources. In addition to its shareholders’ funds
(made up of share capital and reserves), funding is also provided by depositors through the at call
deposit scheme and from banks and other financial institutions.
Financial liabilities in the form of at call deposits and bank borrowings are repayable at call. Trade and
other payables fall due within one year. The potential repayment profile of amounts due under financial
liabilities – credit contracts is provided in note 14.
There is a risk that the banks may reduce or withdraw the facilities or will be unable to provide the level
of funding required. The Group would then be required to obtain alternative funding which could cost
more. If no alternative funding was available, the consequences would disrupt cash flows and potentially
the Group may not be able to continue to pay suppliers and staff or repay depositors.
If the finance companies were to withdraw the bailment facilities described in note 23 or were unable to
fund as many vehicles as required, the Group would have to seek alternative methods of funding the
vehicles. This could involve bailment agreements with other providers or additional bank funding to
purchase the vehicles outright. The consequences could include increased costs and disruption to the
supply of new vehicles for sale.
34
28 (c) Liquidity risk (continued)
The Group mitigates its funding risk by adopting prudent financial management practices (such as
closely monitoring its cash flows, regularly checking compliance with the financial ratios) and by
maintaining open and honest relationships with the banks and finance companies.
The extent of the bank facilities is disclosed in note 25 and bailment facilities in note 23.
28 (d) Foreign currency risk
The Group enters into fixed rate foreign exchange contracts to create cash flow hedges for the purchase
of trucks on a contract-by-contract basis with firm customer orders and for units ordered for stock. Other
short term transactions are covered by forward exchange contracts and accounted for at that rate.
The principal values (stated in New Zealand Dollars) of forward exchange contracts entered into and
outstanding at each reporting date were denominated in the following currencies. All forward exchange
contracts have value dates of less than 12 months.
Currency
2019
$000
2018
$000
Australian Dollars (AUD 23.3m) 24,501 25,915
Euros (EUR 6.4m) 10,938 35,229
Total 35,439 61,144
Due to the close association between foreign currency commitments for imported goods, their selling
price and the underlying forward exchange contracts, it is estimated that any change in the New Zealand
Dollar exchange rates against the above currencies would have had minimal impact on the result and
equity for the year ended 30 June 2019 or 30 June 2018.
29 Financial derivatives – foreign exchange
Foreign exchange asset / (liability)
2019
$000
2018
$000
Balance at 1 July 349 (513)
Movement during the year through
Other comprehensive income (504) 862
Profit or loss - -
Balance at 30 June (155) 349
The Group has adopted the new accounting standard NZ IFRS 9 – Financial Instruments, with effect
from 1 July 2018. The standard deals with the classification of financial assets, financial liabilities and
hedge accounting. This has required changes to disclosures but prior period results have not been
restated.
The Group uses forward currency contracts to hedge its foreign currency risks. Such derivative financial
instruments are initially recognised at fair value on the date on which a derivative contract is entered
into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the
fair value is positive and as financial liabilities when the fair value is negative.
For the purpose of hedge accounting, hedges are classified as cash flow hedges when hedging the
exposure to variability in cash flows that is either attributable to a particular risk associated with a
recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an
unrecognised firm commitment.
At the inception of a hedge relationship, the Group formally designates and documents the hedge
relationship to which it wishes to apply hedge accounting and the risk management objective and
strategy for undertaking the hedge.
Before 1 July 2018, the documentation included identification of the hedging instrument, the hedged
item or transaction, the nature of the risk being hedged and how the Group assessed the effectiveness
of changes in the hedging instrument’s fair value in offsetting the exposure to changes in the hedged
item’s fair value or cash flows attributable to the hedged risk. Such hedges were expected to be highly
effective in offsetting changes in fair value or cash flows and were assessed on an ongoing basis to
determine that they actually have been highly effective throughout the financial reporting periods for
which they were designated.
35
Beginning 1 July 2018, the documentation includes identification of the hedging instrument, the hedged
item, the nature of the risk being hedged and how the Group assesses whether the hedging relationship
meets the hedge effectiveness requirements (including the analysis of sources of hedge ineffectiveness
and how the hedge ratio is determined). A hedging relationship qualifies for hedge accounting if it meets
all of the following effectiveness requirements:
• there is ‘an economic relationship’ between the hedged item and the hedging instrument
• the effect of credit risk does not ‘dominate the value changes’ that result from that economic
relationship
• the hedge ratio of the hedging relationship is the same as that resulting from the quantity of the
hedged item that the Group actually hedges and the quantity of the hedging instrument that the
Group actually uses to hedge that quantity of hedged item
Hedges that meet all the qualifying criteria for hedge accounting all fall into one category of hedge and
are accounted for as described below:
Cash flow hedges
The effective portion of the gain or loss on the hedging instrument is recognised in Other Comprehensive
Income in the cash flow hedge reserve, while any ineffective portion is recognised immediately in profit
or loss. The cash flow hedge reserve is adjusted to the lower of the cumulative gain or loss on the
hedging instrument and the cumulative change in fair value of the hedged item. The Group continues
to designate all of the forward contracts as hedging instruments.
The amounts accumulated in Other Comprehensive Income are accounted for depending on the nature
of the underlying hedged transaction. If the hedged transaction subsequently results in the recognition
of a non-financial item such as inventory, the amount accumulated in equity is removed from the
separate component of equity and included in the initial cost or other carrying amount of inventory.
36
Other notes
30 Related party transactions
The Group has related party transactions with key management personnel and the CMC Group
Workplace Savings Scheme.
Management personnel
Transactions with key management personnel were:
2019
$000
2018
$000
Short term benefits (including salary, incentives, profit share, use of motor
vehicles and other benefits) 6,982 7,504
Post-employment benefits (including contributions to retirement savings
schemes) 238 238
Share related benefits - -
Total remuneration benefits 7,220 7,742
Key management personnel includes current Directors (executive and non-executive), key management
at the group office and chief executives of all trading subsidiaries.
Some key management personnel have funds on deposit with the Company by way of its unsecured
call debt securities – note 24 – on the same terms and conditions as all other depositors.
Mr J P Gibbons is a director of the Motor Trade Association. Group operating subsidiaries are members
on normal commercial terms and conditions.
Also see remuneration of Directors on page 44 and remuneration of employees on page 45.
The CMC Group Workplace Savings Scheme
The Company is the sponsoring employer of the CMC Group Workplace Savings Scheme (the Scheme)
which is a defined contribution scheme. It is categorised as an employer-related restricted workplace
savings scheme registered under the FMCA 2013.
The Company ceased to be the trustee of the Scheme when a new trust deed was registered on
18 November 2016 but continues to provide administrative services to the Scheme and received fees
of $0.069m during the year (2018: $0.062m).
The Scheme holds 162,196 (2018: 162,196) ordinary shares in the Company representing 4.6% (2018:
4.7%) of its total assets. The Company is a related party to the Scheme and FMCA limits investments
in related parties to 5% of total assets.
All transactions between key management personnel, the Scheme and Group companies were in the
normal course of business and provided on arm’s length commercial terms.
31 Contingencies
2019
$000
2018
$000
Contingent assets
Contingent liabilities
-
-
-
-
Legal action initiated in March 2017 by WorkSafe NZ against Agricentre South Limited (Agricentre), a
wholly owned subsidiary, has now been resolved. The case related to an accident in April 2016 at the
workplace of a customer involving a tractor owned by Agricentre. The final costs of the penalties, which
were largely provided for at June 2018, are included in the consolidated financial statements.
The Group has provided guarantees to PACCAR Australia Pty Limited in respect of obligations owed to
that company. The guarantee is in proportion to the shareholding in Southpac Trucks Limited and the
maximum exposure for the Group is $1.3m.
32 Events after the reporting date
On 14 August 2019 a dividend was declared of 30.0 cents per share to be paid fully imputed on
21 October 2019, representing a total payment of $9.8 million.
37
1
Independent auditor’s report
To the Shareholders of The Colonial Motor Company Limited
Report on the audit of the consolidated financial statements
Opinion
We have audited the consolidated financial statements of The Colonial Motor Company Limited (the “Company”)
and its subsidiaries (the “Group”) on pages 9 to 36 which comprise the consolidated statement of financial
position as at 30 June 2019, and the consolidated statement of financial performance, consolidated statement of
comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for
the year then ended, and notes to the consolidated financial statements, including a summary of significant
accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the
financial position of the group as at 30 June 2019 and its financial performance and cash flows for the year then
ended in accordance with New Zealand Equivalents to International Financial Reporting Standards (“NZ IFRS”)
issued by the New Zealand Accounting Standards Board.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (“ISAs (NZ)”)
issued by the New Zealand Audit and Assurance Standards Board. Our responsibilities under those standards are
further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of
our report. We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised)
Code of Ethics for Assurance Practitioners issued by the New Zealand Auditing and Assurance Standards Board,
and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the consolidated financial statements of the current period. These matters were addressed in the context of our
audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Why the matter is significant How our audit addressed the key audit matter
Inventory valuation and existence
As at 30 June 2019, inventory of $168m is held across
multiple locations. There are a number of risks that can
have a material impact on the inventory balance in the
consolidated financial statements, principally:
• T he assessment of net realisable value of inventory,
which for used vehicles in particular can fluctuate as
a result of general economic conditions, new vehicle
sales and incentives, price paid on trade in and the
age, condition and configuration of vehicles;
• Provision requirements for slow moving inventory as
a result of the factors noted above; and
• That inventory may not exist at year end due to either
fraud or error.
The inventory accounting policy and note is disclosed
on page 20.
In obtaining sufficient appropriate audit evidence
we:
• Assessed the risk around net realisable value of
inventory by comparing the carrying value of a
sample of vehicles held at balance date to post year-
end sales, or if not sold, to used car prices of similar
products currently available for sale in the market
place;
• Performed substantive and analytical procedures on
the Group’s vehicle and parts inventory reports, to
identify any issues in respect of valuation and slow-
moving inventory;
• Confirmed the inventory balances funded by
bailment arrangements with finance companies; and
• Attended year end stock takes at all dealerships and
verified the existence of new, used and demonstrator
vehicles, including those financed through floor plan.
3
Restriction on use of our report
This report is made solely to the Group’s shareholders, as a body. Our audit work has been undertaken so that
we might state to the Group’s shareholders, as a body, those matters which we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Group and its shareholders, as a body, for our audit work, for this report or
for the opinion we have formed.
Grant Thornton New Zealand Audit Partnership
Michael Stewart
Partner, Audit
Grant Thornton New Zealand Audit Partnership
20 September 2018
Level 3, Grant Thornton House
134 Oxford Terrace
PO Box 2099
Christchurch 8140
New Zealand
T +64 (0)3 964 6824
F +64 (0)4 474 8509
38
2
Why the matter is significant How our audit addressed the key audit matter
Accuracy of revenue
• The Group has revenue of $909m. There are a
number of factors that could affect this reported
amount, including:
• Revenue recognition policies are appropriate and
consistently applied over all revenue transactions;
and
• Payment and delivery of the sold motor vehicles may
not have occurred before year end which would
result in revenue being overstated.
• The revenue recognition accounting policy was
updated to reflect NZ IFRS 15 that came into effect
from 1 July 2018.
In obtaining sufficient appropriate audit evidence
we:
• Evaluated the Group’s recognition of revenue by
assessing the procedures and key controls that
Group management has in place to ensure that
appropriate revenue recognition policies have been
consistently applied in accordance with NZ IFRS 15;
and
• Performed in relation to sales cut off, detailed
substantive testing on sales recognised either side of
year end to substantiate that the appropriate terms of
the relevant contracts had been satisfied and that the
risks and rewards associated with the contract had
passed to the customer. This testing included
obtaining evidence of post year end receipts which
provided evidence as to the validity of accounts
receivable at the year end.
Other information
The Directors are responsible for all the other information. The other information comprises the Facts at a Glance,
Directors’ report, Chief Executive’s Report, Group Dealerships, Governance Statement, Disclosures as required
by the Companies Act 1993 and Disclosures as at 30 June as required by the New Zealand Stock Exchange
Listing Rules, but does not include the consolidated financial statements and our auditor’s report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we do not express
any form of audit opinion or assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the
consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Directors’ responsibilities for the consolidated financial statements
The Directors are responsible on behalf of the Group for the preparation and fair presentation of the consolidated
financial statements in accordance with NZ IFRS issued by the New Zealand Accounting Standards Board, and
for such internal control as those charged with governance determine is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Directors are responsible on behalf of the Group for
assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group
or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the Audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with ISAs (NZ) will always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these consolidated financial statements.
A further description of the auditor’s responsibilities for the audit of the consolidated financial statements is
located on the External Reporting Board’s website at: https://www.xrb.govt.nz/standards-for-assurance-
practitioners/auditors- responsibilities/audit-report-1/
3
Restriction on use of our report
This report is made solely to the Group’s shareholders, as a body. Our audit work has been undertaken so that
we might state to the Group’s shareholders, as a body, those matters which we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Group and its shareholders, as a body, for our audit work, for this report or
for the opinion we have formed.
Grant Thornton New Zealand Audit Partnership
Michael Stewart
Partner, Audit
Grant Thornton New Zealand Audit Partnership
20 September 2018
Level 3, Grant Thornton House
134 Oxford Terrace
PO Box 2099
Christchurch 8140
New Zealand
T +64 (0)3 964 6824
F +64 (0)4 474 8509
39
3
Restriction on use of our report
This report is made solely to the Company’s shareholders, as a body. Our audit work has been undertaken so
that we might state to the Company’s shareholders, as a body, those matters which we are required to state to
them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company and its shareholders, as a body, for our audit work, for
this report or for the opinion we have formed.
Grant Thornton New Zealand Audit Partnership
Michael Stewart
Partner, Audit
Grant Thornton New Zealand Audit Partnership
19 September 2019
Level 3, Grant Thornton House
134 Oxford Terrace
PO Box 2099
Christchurch 8140
New Zealand
T +64 (0)3 964 6824
3
Restriction on use of our report
This report is made solely to the Group’s shareholders, as a body. Our audit work has been undertaken so that
we might state to the Group’s shareholders, as a body, those matters which we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Group and its shareholders, as a body, for our audit work, for this report or
for the opinion we have formed.
Grant Thornton New Zealand Audit Partnership
Michael Stewart
Partner, Audit
Grant Thornton New Zealand Audit Partnership
20 September 2018
Level 3, Grant Thornton House
134 Oxford Terrace
PO Box 2099
Christchurch 8140
New Zealand
T +64 (0)3 964 6824
F +64 (0)4 474 8509
3
Restriction on use of our report
This report is made solely to the Group’s shareholders, as a body. Our audit work has been undertaken so that
we might state to the Group’s shareholders, as a body, those matters which we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Group and its shareholders, as a body, for our audit work, for this report or
for the opinion we have formed.
Grant Thornton New Zealand Audit Partnership
Michael Stewart
Partner, Audit
Grant Thornton New Zealand Audit Partnership
20 September 2018
Level 3, Grant Thornton House
134 Oxford Terrace
PO Box 2099
Christchurch 8140
New Zealand
T +64 (0)3 964 6824
F +64 (0)4 474 8509
40
Governance statement
The Colonial Motor Company Limited (CMC) is a public company with its shares listed on the New
Zealand Stock Exchange (NZX) operated by NZX Limited.
The Board of Directors is committed to maintaining high standards of governance by implementing a
framework of structures, practices and processes that it considers appropriate and effective. CMC’s
corporate governance policies and procedures and its board and committee charters, which document
the framework have been approved by the Board. Components of the system of governance are
reviewed from time to time.
This statement sets out how these measures meet the recommendations made in the NZX Corporate
Governance Code 2017 and the requirements of the NZX Main Board Listing Rules.
The Board’s view
is that the
corporate governance structures, practices and processes have followed these
recommendations and requirements in the year to 30 June 2019.
The Group is organised so that each motor vehicle dealership is incorporated as a subsidiary company
that is managed locally. The CEO of each Group company reports to the Group Chief Executive. Each
dealership also has a direct relationship with the franchisor(s) that it represents.
1. Code of ethical behaviour
Directors should set high standards of ethical behaviour, model this behaviour and hold management
accountable for these standards being followed throughout the organisation.
The Board ensures that, consistent with its history and industry standing, CMC conducts its dealings
with all stakeholders with integrity and respect. It maintains a directors’ manual including a code of
ethics that extends to all staff and sets out definitive standards of behaviour. In particular, Directors
take care to comply with rules requiring disclosure of positions and occupations they have outside of
CMC that may involve a conflict of interest.
The Directors have established a securities trading policy to comply with prevailing legislation that
requires full disclosure by directors and senior executives both before and after buying and selling
shares in CMC. All share trades by directors are reported to the market and subsequently in annual
reports.
2. Board composition and performance
To ensure an effective board, there should be a balance of independence, skills, knowledge,
experience and perspectives.
The constitution specifies that there should be between five and seven directors. The Board contains a
mix of independent, executive and non-executive directors.
As vacancies arise, new directors are identified by the nomination committee of the Board and may
then be appointed by the Board. Directors may also be nominated by shareholders. Directors who
have been appointed by the Board during the year must stand for election by the shareholders at the
next general meeting as must anyone nominated as a director.
The constitution specifies that directors cannot serve (without re-election) past the third annual meeting
following their appointment or three years whichever is longer. Directors reaching that anniversary are
required to retire. Those who remain eligible, may stand for re-election.
A director appointed by the Board must not hold office (without re-election) past the next annual meeting
following the director’s appointment.
3. Board committees
The board should use committees where this will enhance its effectiveness in key areas, while still
retaining board responsibility.
Where additional detailed supervision or consideration is required, the Board establishes committees
that operate by making recommendations to the full board for final resolution. There are three standing
committees with specific written terms of reference.
41
Audit and Compliance Committee Members of the committee have relevant financial qualifications
and/or commercial experience. The Audit and Compliance Committee met five times during the
reporting year.
Comprising Mr D M Wood (Chairman), Mr A J Waugh and Mr J W M Journee, the committee meets
regularly with management, the internal auditor and the external auditor to:
• review the adequacy of controls to identify and manage areas of potential risk and to safeguard
the assets of the Group
• maintain the independence of the external auditor and review the external audit functions
generally
• evaluate the processes to ensure that financial records and accounting policies are properly
maintained in accordance with statutory requirements and financial information provided to
shareholders and the Board is accurate and reliable
Management is delegated the responsibility for developing, maintaining and enforcing the system of
internal controls. The same basic set of controls is applied across the Group. Monthly reports from each
dealership form a key element of the financial control mechanism. An internal auditor works in
conjunction with the external statutory auditor to complete a review of all dealerships every year for
maintenance of the standard of accounting practices and for compliance with the internal policies and
procedures. The internal auditor regularly reports to the Audit and Compliance Committee.
Remuneration Committee Mr J P Gibbons, (Chairman) and Mr A J Waugh make up the remuneration
committee the purpose of which is to ensure that the Directors and senior executives are fairly and
reasonably rewarded for their individual contributions. The Remuneration Committee met once during
the reporting year. CMC’s policy is to review remuneration levels for directors and senior staff every
two years. Directors’ fees were reviewed in 2018.
Management and director remuneration is disclosed in the annual report. CMC has no equity-based
remuneration plan and does not require its directors to purchase or hold CMC shares.
Nominations Committee This committee has the task of identifying potential directors with skills that
are complementary to the needs of the Company and the Board. All Directors serve on the nominations
committee. During the year, the Nominations Committee undertook a search process that culminated
in the appointment of a new director.
4. Reporting and disclosure
The board should demand integrity in financial and non-financial reporting and in the timeliness and
balance of corporate disclosures.
The Board schedules at least eight meetings each year to monitor the progress of management on
achieving the targets and objectives that the Board has set. The Board usually meets in Wellington but
at least once a year it holds a meeting at a dealership in order to meet front-line staff and experience
operations at first hand. Additional ad hoc meetings are held when necessary, sometimes by telephone
conference. During the year, the Board held ten meetings, eight in person and two by telephone
conference.
The Board of Directors issues three reports annually - a half year report, a preliminary result and a full
year report - to provide shareholders with the information they need to monitor their investment in the
Company. The CMC reports are designed to deliver that information in a clear, concise manner. The
reports are mailed to all shareholders and are available for download from CMC’s website
www.colmotor.co.nz. Shareholders may register to receive the interim and preliminary reports
electronically.
A condition of listing is that CMC complies with the listing rules issued by the NZX. NZX issued new
listing rules in 2019. CMC chose to exercise the option and elected to transition to the new rules on
1 February 2019. The rules became compulsory for all issuers on 1 July 2019. The rules include the
requirement to continuously disclose market sensitive information. The market acts in the position of
all current and potential shareholders and disclosure via the NZX is generally considered adequate
notice. However, CMC has a policy of also communicating directly with its shareholders whenever
practical.
42
5. Remuneration
The remuneration of directors and executives should be transparent, fair and reasonable.
As stated above, remuneration of directors and senior executives is considered by the Remuneration
Committee of the Board. During its assessments, the Committee generally refers to independent
survey reports to provide suitable market-related benchmarks.
The actual amounts paid to directors are disclosed in CMC’s annual reports including full details of
executive directors. Remuneration of other staff is also disclosed in the $10,000 bands specified in
company legislation.
The packages of senior staff are made up of fixed and variable components. The variable portions
include only short-term incentives. There are no long-term incentives or share schemes in place. The
variable elements are based on dealership profit and comprise higher proportions of the total than are
seen in the general market. Participation in the financial performance provides a strong incentive for
success. The Group has a proud record of staff retention, particularly at senior levels.
6. Risk management
Directors should have a sound understanding of the material risks faced by the issuer and how to
manage them. The board should regularly verify that the issuer has appropriate processes that identify
and manage potential and material risks.
The range of tools used to mitigate risk includes elements of corporate governance outlined in this
report, the system of internal controls and management reporting and accountability. The Board reviews
the Group insurance programme and assesses which risks to insure with the assistance of an external
insurance broker. The Audit and Compliance Committee has particular responsibility for internal audit
on which it receives regular reports. Management provides the committee with an annual internal
management and regulatory compliance summary report.
Health & safety CMC is committed to providing healthy and safe environments for all its customers,
workers, contractors and other visitors to its facilities. A group-wide workplace safety management
programme is operated with a Health and Safety Committee active at each subsidiary. The Group
Health and Safety Co-ordinator maintains and is continually improving CMC’s workplace health and
safety systems that are based on a comprehensive policy and procedures manual and are subject to
independent external audits.
The Board receives reports, considers health and safety issues at each of its meetings and experiences
first-hand the practicalities during its regular dealership visits.
7. Auditors
The board should ensure the quality and independence of the external audit process.
The role of the external auditor is to report to shareholders on the truth and fairness of the financial
statements prepared by management, authorised by the Board and included in the annual report.
The audit partner and the chairman of the Audit and Compliance Committee meet twice a year and the
auditor attends Committee meetings at least three times a year. The scope of discussions is not limited
but includes issues identified during audits, audit planning and staffing and the extent of non-audit work
by the audit firm. The primary audit partner is changed periodically to provide a fresh perspective and
to ensure greater independence. Fees paid for audit and any non-audit work (such as taxation advice)
are disclosed in the annual report.
43
8. Shareholder rights and relations
The board should respect the rights of shareholders and foster relationships with shareholders that
encourage them to engage with the issuer.
The Board of Directors acts in a stewardship role on behalf of all shareholders. It approves the strategic
direction of the Group, oversees the management of its capital resources, monitors its performance and
compliance, ensures its assets are safeguarded and its workplaces are safe.
Shareholders meet in person at annual meetings to:
• consider the Company’s financial performance and financial position
• elect or re-elect directors
• record the appointment of an external statutory auditor
• set the maximum level of director remuneration following reviews in alternate years. The actual
amount paid to each director is disclosed in annual reports
The shareholders adopted the current constitution in 2004 that specifies the administration of the
Company and the relationship with shareholders. Copies of the constitution are available from the
Company or can be downloaded from the New Zealand Companies Office website.
The requirements of the NZX Listing Rules are incorporated by reference into the constitution. NZX
released revised listing rules on 1 January 2019. CMC elected to adopt all the new rules with effect
from 1 February 2019.
Computershare Investor Services Limited maintains the register of shareholders.
44
Disclosures as required by the Companies Act 1993
(a) Directors’ interests
In relation to sections 140 and 211(1)(e) of the Act, no director has declared any interest in a related party
transaction with the Company during the year. The Company has received the following general
disclosures of interest pursuant to section 140(2) of the Act that remain in place at the date of this report:
J P Gibbons Director of Motor Trade Association and MTA Group Investments Limited.
D M Wood Chairman of Mercy Healthcare Auckland Limited.
A J Waugh Director of Seeka Limited.
J W M Journee Director of The Warehouse Group Limited, The Warehouse Group Investments
Limited and Farmlands Co-operative Society Limited and member of the Quantiful
Limited Advisory Board.
(b) Remuneration of directors
Remuneration and all other benefits received by the directors who held office during the year ended 30
June 2019 are disclosed pursuant to section 211(1)(f) of the Act as follows:
Directors’ fees
2019
$
Total remuneration
2019
$
Total remuneration
2018
$
J P Gibbons (Chairman) 89,500 114,134 109,134
F R S Clouston (retired Nov 2018) 24,979 24,979 56,650
G D Gibbons - 1,073,359 1,148,454
S B Gibbons - 219,605 287,060
M J Newman - 643,788 883,053
D M Wood 57,679 57,679 51,500
A J Waugh 54,500 54,500 51,500
J W M Journee (appointed Dec 2018) 31,792 31,792 -
Remuneration for the Chairman, additional to directors’ fees, includes the provision of a motor vehicle.
Mr F R S Clouston was elected Chairman of the Audit and Compliance Committee in November 2013
and received additional directors’ fees commensurate with the position from that date until his retirement
in November 2018. Mr D M Wood was elected Chairman of the Audit and Compliance Committee in
December 2018 and has received the additional fees from that date.
Executive Directors do not receive directors’ fees for acting as a director of the Company or of any
subsidiary. Executive Directors acting in their capacity as employees of the Company or of a subsidiary
received total remuneration including salary, incentives, superannuation contributions, use of a motor
vehicle and other benefits in the year ended 30 June 2019 as disclosed above. No other employee of the
Company, or of any Group subsidiary, retains or receives any remuneration or other benefits as a director.
The remuneration package of the Group Chief Executive, Mr G D Gibbons, (who is also a director) has in
the year to 30 June 2019 a fixed component (including salary, motor vehicle and superannuation
contributions) of $415,134 (2018: $415,134) and an annual short term incentive component based on the
current year’s trading profit performance of $658,225 (2018: $733,320). There are no long term incentives
or share schemes in place.
Dealer Principals/Chief Executive Officers
of subsidiary companies receive a profit performance
component of their remuneration based on their dealership profit. The remuneration received by Mr M J
Newman as an executive is shown for the twelve months to 30 June 2019 and includes a short-term profit
performance component of $377,657 (2018: $618,422). Similarly, the remuneration of Mr S B Gibbons
as an executive is shown for the twelve months to 30 June 2019 and includes a short-term profit
component of $39,274 (2018: $108,229).
In accordance with clause 28.4 of its constitution, the Company may provide for directors’ retirement
benefits. The total provided at 30 June 2019 was $268,500 (2018: $253,500). Directors appointed after
1 May 2004 are not eligible to receive a retirement allowance unless authorised by shareholder
resolution.
As permitted in clause 29.4 of the Company’s constitution, an insurance policy is in place in relation to
directors and officers liability. The policy ensures that generally directors will incur no monetary loss as
a result of actions they undertake as directors. Certain actions are specifically excluded, such as incurring
penalties and fines that may be imposed in respect of breaches of the law.
45
(c) Use of company information by directors
During the year the Board did not receive any requests from directors to use Company information
provided to them in their capacity as an officer or employee that would not otherwise have been available
to them.
(d) Share dealings by directors
Directors have disclosed under Section 148(2) of the Act the following acquisition of a relevant interest in
shares in the Company between 1 July 2018 and 31 August 2019.
Director
Number of shares
acquired/ (disposed)
Date of transaction
Price per
share
Type of interest
M J Newman 500 20 March 2019 $8.15 Beneficial
M J Newman 5,000 7 November 2018 $8.20 Beneficial
S B Gibbons 20,000 21 September 2018 $8.18 Beneficial
J W M Journee declared an initial beneficial interest in 2,613 shares on his appointment as a director on
1 December 2018.
Directors disclosed no other transactions in the shares of the Company during the period.
(e) Composition of the Board
All 7 of the Directors and the 13 officers (direct reports to the Group Chief Executive) at the reporting date
were male (2018: 7 Directors - male, 13 officers - male).
(f) Remuneration of employees
During the year to 30 June 2019 the number of employees in the Group, not being directors of The
Colonial Motor Company Limited, who received remuneration (including salary, incentives,
superannuation contributions, use of a motor vehicle and other benefits) which exceeded $100,000 were
as follows:
Remuneration Number of employees Remuneration Number of employees
$ 2019 2018 $ 2019 2018
100,000 - 110,000 50 45 310,001 - 320,000 3 2
110,001 - 120,000 27 26 340,001 - 350,000 1 -
120,001 - 130,000 21 15 360,001 - 370,000 3 1
130,001 - 140,000 13 10 370,001 - 380,000 - -
140,001 - 150,000 14 13 380,001 - 390,000 1 -
150,001 - 160,000 14 9 420,001 - 430,000 - 1
160,001 - 170,000 8 8 460,001 - 470,000 1 -
170,001 - 180,000 1 7 470,001 - 480,000 1 2
180,001 - 190,000 4 4 490,001 - 500,000 - 1
190,001 - 200,000 6 5 500,001 - 510,000 - 1
200,001 - 210,000 6 5 510,001 - 520,000 1 -
210,001 - 220,000 4 4 520,001 - 530,000 - 1
220,001 - 230,000 3 1 530,001 - 540,000 1 -
230,001 - 240,000 2 2 570,001 - 580,000 - 1
240,001 - 250,000 1 2 590,001 - 600,000 1 -
260,001 - 270,000 - 2 720,001 - 730,000 1 -
280,001 - 290,000 2 1 1,430,001 - 1,440,000 1 -
290,001 - 300,000 - 1 1,740,001 - 1,750,000 - 1
Total 191 171
Total full time equivalent employees 997 961
46
Disclosures as at 30 June 2019 as required by the New Zealand Stock Exchange
Listing Rules
(a) Director independence
The following directors were Independent Directors at reporting date:
A J Waugh
J W M Journee
The following directors were not Independent Directors at reporting date:
J P Gibbons
G D Gibbons
D M Wood
M J Newman
S B Gibbons
(b) Directors’ relevant interests at 30 June 2019
Shares in which the
director has a beneficial
interest solely or jointly
Shares in which the
director has a non-
beneficial interest
Shares held by
associated person of the
director
2019 2018 2019 2018 2019 2018
G D Gibbons 1,737,849 1,737,849 1,300,825 1,300,825 - 104,250
J P Gibbons 1,421,081 1,421,081 1,035,849 1,035,849 513,270 513,270
S B Gibbons 1,930,578 1,910,578 176,087 176,087 6,151 6,151
M J Newman 25,500 20,000 - - - -
D M Wood 20,000 20,000 168,426 168,426 578,120 578,120
A J Waugh 4,450 4,450 - - 376 376
J W M Journee 2,613 - - - - -
(c) Substantial security holders
As required by section 26 the Securities Markets Act 1988, the substantial security holders as at 31
August 2019 (from whom a notice under the Act had been received and the date of each such notice)
were as follows:
Date Shares %
P C Gibbons 27 March 2017 2,232,341 6.83
J P Gibbons 4 October 2013 2,646,084 8.09
S B Gibbons 16 September 2010 2,031,263 6.21
G D Gibbons 27 March 2017 1,865,032 5.70
Issued and fully paid capital as at 30 June 2019 was made up of 32,694,632 ordinary shares. The
above disclosures include voting securities arising by reason of joint holdings, powers of attorney and
directorships as specifically required by the Securities Markets Act 1988 (sections 4 & 5). No shares
have been counted more than once in the determination of Substantial Security Holders.
A number of shares identified under Mr J P Gibbons are also jointly held or have trustees in common
with N L Gibbons, B R Gibbons and P L Bennett.
A number of shares identified under Mr S B Gibbons are also jointly held or have trustees in common
with A D Gibbons and L B Rogerson.
A number of shares identified under Mr G D Gibbons are also jointly held or have trustees in common
with A K Gibbons, S D & D M Wood, R D Gibbons, A D & G V Beaumont, D D & B W Harrison and
G D & I W Watson.
47
(d) Distribution of shareholders and shareholdings
This distribution information reflects the position as at 31 August 2019.
Number of shareholders Number of shares
Number % Number %
1 - 999 279 17.4 133,756 0.4
1,000 - 9,999 989 61.9 3,245,536 9.9
10,000 - 99,999 270 16.9 6,653,731 20.3
100,000 - 999,999 56 3.5 17,444,724 53.4
1,000,000 + 4 0.3 5,216,885 16.0
Total 1,598 100.0 32,694,632 100.0
(e) Five year summary of shareholder return on investment - 30 June year ended
Year
Share
price Dividends paid - cps
Gross
dividend
Change
in share
Total
gross
Gross
shareholder
at 30
June
Date Net Gross yield
%
price
cps
return
cps
return
%
2019 $8.80 15/04/19 35.0 69.4 8.7 81.0 150.4 18.8
15/10/18 15.0
2018 $8.00 16/04/18 15.0 63.9 8.5 50.0 113.9 15.2
17/10/17 31.0
2017 $7.50 18/04/17 13.0 55.6 9.0 130.0 185.6 29.9
17/10/16 27.0
2016 $6.20 18/04/16 13.0 45.8 8.0 45.0 90.8 15.8
19/10/15 20.0
2015 $5.75 20/04/15 13.0 48.7 9.3 55.0 103.6 19.9
20/10/14 22.0
Note: Yields are calculated on the share price at the beginning of each year. The share price at 30 June
2014 was $5.20.
48
Fifty largest shareholdings as at 31 August 2019
Shares %
AD & SB Gibbons & LB Rogerson 1,697,507 5.1
Florence Theodosia Gibbons 1,287,037 3.9
Peter Craig Gibbons (Trust) 1,173,642 3.6
Peter Craig Gibbons 1,058,699 3.2
JP & BR Gibbons & PL Bennett 683,550 2.1
NL, BR & JP Gibbons & PL Bennett (Estate RC Gibbons Deceased) 664,006 2.0
RJ Field & AJ Palmer 600,000 1.8
Graeme Durrad Gibbons 564,207 1.7
MI & C Louisson & RM Carruthers 563,777 1.7
PL & LC Bennett & JP Gibbons 543,794 1.7
BR & CM Gibbons & PL Bennett 528,971 1.6
Diana Durrad Harrison 523,628 1.6
Gillian Durrad Watson 507,619 1.6
Robert Durrad Gibbons 507,480 1.6
Sara Durrad Wood 506,919 1.6
Alison Durrad Beaumont 497,004 1.5
JP & DM Gibbons & PL Bennett 492,055 1.5
MA Gibbons, AK Cook & PJ Clark 474,348 1.5
JG, J & CG Harrison 458,317 1.4
Citibank Nominees (New Zealand) Limited 387,133 1.2
Nancy Lucy Gibbons 375,710 1.1
May Alice Gibbons 355,196 1.1
RD Gibbons, SD Wood & GD Gibbons 354,810 1.1
Hart Capital Partners Limited 339,778 1.1
CG, AE & JG Harrison 335,244 1.0
AE Romans 325,482 1.0
JG, KS, SKE & J Bale 324,244 1.0
RB & JG Tait & IJ Craig 310,006 1.0
Rebecca Hope Wilson 300,478 0.9
Leanne Barnes Rogerson 281,410 0.9
SH Majors, RH & SJ Wilson 268,556 0.8
AD & GV Beaumont & GD Gibbons 259,203 0.8
David Grindell 252,000 0.8
K Enright & C Louisson 251,366 0.8
CM Louisson & N Tarsa 241,804 0.7
Stuart Barnes Gibbons 233,071 0.7
GD & AK Gibbons & SD Wood 209,203 0.6
Maldon Hector Whitwell 200,000 0.6
T A Pegler 188,306 0.6
CG & AJ Harrison & JA Flygenring & P&M Trustees No 2 Limited 188,118 0.6
JH Smith, AF Peake & SB Gibbons 176,087 0.5
CMC Workplace Savings Scheme Trustee Limited 162,196 0.5
DD & BW Harrison & GD Gibbons 159,203 0.5
GD & IW Watson & GD Gibbons 159,203 0.5
SD & DM Wood & GD Gibbons 159,203 0.5
Judith Gibbons Bale 147,929 0.5
HA Louisson, CJ Warren & JA Piper 140,870 0.4
MC Durrentijdt, J T van Gaal & KD Trustees Limited 140,000 0.4
I F Michie 135,730 0.4
Anita Forbes Peake 132,480 0.4
Total of fifty largest shareholdings 20,826,579 63.7
Total shares on issue 32,694,632 100.0
A number of the registered shareholders may hold shares as nominee(s) on behalf of other parties.
Today the CMC Group’s core business is the operation of Ford
dealerships each holding a franchise in its own right from the Ford
Motor Company of NZ Ltd. Seven of these dealerships also hold
Mazda franchises. CMC, through Southpac Trucks, is the NZ
distributor and retailer of Kenworth and DAF heavy duty trucks and in
Southland/Otago, Agricentre South retails New Holland, Case IH and
Kubota tractors and equipment.
The Colonial Motor Company originated from William Black’s coach-
building factory which started operations in 1859 at 89 Courtenay
Place, Wellington. In 1881 it was taken over by Rouse & Hurrell, who
expanded the business with new three storied premises calling it
Rouse & Hurrell’s Empire Steam and Carriage Works. This
partnership was formed into a limited liability company in 1902 with Mr
Edward Wade Petherick the first Secretary of the Company. The Ford
Motor Car Agency was taken up in 1908 and in August 1911 a new
name “The Colonial Motor Company Limited” was registered.
On Ford Canada’s recommendation a dominant shareholding and
control was acquired by Mr Charles Corden Larmour and the sale of
this majority holding and control to Mr Hope Gibbons and his family
interests was concluded in April 1918 after negotiations in 1916. At
that time there were 17 Authorised Ford Dealers in New Zealand of
which 10 were in the South Island. In 1919 the Company restructured
with a new memorandum and articles but the 1911 name was retained
and remains the same today. 2018 marked the company’s 100
th
Annual Report.
The nine storied building at 89 Courtenay Place, designed by architect
J M Dawson to Ford plans, opened as the tallest Wellington
construction in 1922. It was the first motor vehicle assembly plant in
New Zealand - vehicles starting in boxes at the top and driving out
completed at the bottom. The Company later built assembly plants at
Fox Street, Parnell, Auckland and Sophia Street, Timaru. This was the
age of the Model T with Ford market share reaching a peak of 27% in
1926. The ‘CMC’ Building was sold in 2005.
In 1936, Ford Motor Company of New Zealand Limited established an
assembly plant at Seaview, Lower Hutt, and took over the distribution
of Ford products in New Zealand. CMC then concentrated on the retail
side of the business, operating the retail garages it then owned. The
1930's and 1940's were a time of survival with the depression, excess
stock of new product, and then no new vehicles available during the
war years and petrol rationing until 1950. Service became the key to
remaining in business.
Shortly after the end of the war the supply of new vehicles was
resumed and the 30 years up to 1980 saw the Group consolidate. The
Dealer organisation that developed proved to be one of the best retail
motor groups in New Zealand. Over this period nearly every
Dealership was either rebuilt, fully refurbished or relocated and new
Dealerships were opened in East, West and South Auckland to cater
for Auckland growth.
CMC was listed on the NZ Stock Exchange in 1962.
For the 50 years up to 1987, New Zealand had import licensing, local
assembly of vehicles and heavy additional sales taxes to control
overseas funds. The new vehicle industry under this regime peaked
in 1973 and again in 1974 at 123,000 units. The dismantling of
controls and the arrival of second hand imports from Japan saw the
industry fall to just 66,500 new vehicles in 1992. It wasn’t until 2014
30 years later, that the new vehicle industry again reached the level
seen in 1984. 2015, 2016 and now 2017 have all seen record industry
sales.
The late 1980’s and all through the 1990’s was a period of change and
adaptation. Over a decade most smaller Ford dealerships either
closed down or merged with their neighbours. This resulted in fewer,
but larger, Ford dealerships. CMC closed or sold its smaller
dealerships and acquired others to expand its city and provincial
locations. Nelson was acquired during this period. Compounding the
changes was the Ford NZ decision to first sell its NZ tractor distribution
to Norwoods and then later to close its distribution of heavy trucks in
New Zealand.
Most of the CMC company tractor departments were closed, with the
exception of Southland. This business has since grown to become
Agricentre South Ltd, retailing New Holland & Kubota tractors in
Southland and Case IH tractors in Southland / Otago with locations in
Invercargill, Gore, Milton, Cromwell and Ranfurly.
In 1994 CMC acquired a major interest in Southpac Trucks, the NZ
distributor for Kenworth and Foden (since retired) and more recently,
DAF, heavy duty trucks which are all part of the USA based PACCAR
organisation. Southpac Trucks has since grown into a major player in
the NZ heavy truck industry with locations in Manukau City, Hamilton,
Rotorua, Palmerston North and Christchurch together with a
nationwide network of independent parts & service dealers.
Guinness Peat Group plc (GPG) made a takeover offer for CMC in
October 1995. Among the sellers who enabled GPG to acquire 33.9%
were some original Gibbons Family shareholders. As part of a plan to
maximise value to shareholders, Directors resolved to rationalise the
Company's non-dealership property holdings, repay the surplus funds
to shareholders and focus the Company on its core motor trade
activities.
In June 1997, GPG sold its shares to the MBM Group of Malaysia.
Over the following years MBM sold down its holding in CMC, with
many of the shares acquired by members of the Gibbons family. MBM
sold its final block of 24.9% to a large number of individuals in 2003,
resulting in the addition of 300 shareholders to CMC.
In 1999, CMC's Auckland Dealerships joined with Ford Motor
Company and three other Ford dealerships to form Auckland Auto
Collection Limited (AACL). This move represented the biggest change
in the Ford franchise arrangements in New Zealand for over 60 years.
During 1999, this new business acquired the Mazda Dealerships in
Auckland and Mazda Motors joined CMC and Ford as a shareholder.
From 2002, the business operated as three Ford and Mazda
dealerships - North Harbour, John Andrew and South Auckland. CMC
sold its shareholding back to AACL in May 2005 and, in return,
acquired the South Auckland Dealership.
On 16 June 2003, Ford Motor Company celebrated its centennial and
the production of the original Model A Fordmobile with CMC and its
forebears having been actively involved with Ford for 95 of those 100
years. In celebration of this long relationship, a history of the
Company's operations and activities "Ford Ahead" was written and
published by Roger Gardner.
During the 2000’s CMC also acquired the Mazda franchises in
Invercargill, Dunedin, Timaru, Wellington, Lower Hutt and Masterton.
These were run as dual dealerships with the existing Ford dealerships.
The policy of adding Mazda to Ford dealerships ended when Ford
USA sold its interest in Mazda Japan in 2009.
It has been part of the Company's philosophy and success to own
property sites from which its retail subsidiary companies operate.
In 2014 CMC acquired Jeff Gray BMW & MINI with locations in
Wellington, Christchurch, Palmerston North and Hastings. The
business was subsequently sold in November 2016.
In recent years CMC has increased its franchise representation in a
number of locations as separate dealerships or aligned with existing
businesses and now includes: Suzuki, Nissan, Kia, Honda cars,
Hyundai, Isuzu Utes, Peugeot, Citroen, Mahindra; Suzuki, Kawasaki,
Yamaha & BMW motorcycles.
Details of the Group’s current dealerships, locations and franchises
represented are detailed on page 8 in the report.
The current major shareholdings in CMC are with individual
descendants of Hopeful & Jessie Gibbons, who collectively hold over
60% of the Company shares. There are also many descendants of
the original 1902 subscribers to the Rouse & Hurrell Carriage Building
Company Limited who remain shareholders today.
Throughout the Company's history, change has always been with us
and our ability to adapt in good times and in bad has ensured ongoing
wellbeing and prosperity. As well, it has always been recognised that
dedicated, skilled and enthusiastic people have been, and will
continue to be, the key to the Company's future.
---
PO Box 6159
Wellington
New Zealand 6141
DX SP21009
Level 6
57 Courtenay Place
Wellington 6011
Telephone 04 384-9734
Facsimile 04 801-7279
Email cmc@colmotor.co.nz
Website www.colmotor.co.nz
101
ST
ANNUAL REPORT 2019
The Directors of The Colonial Motor Company Limited present its
101
st
annual report covering the year to 30 June 2019.
The report is being mailed to all shareholders. Additional copies are
available on request from the Company at PO Box 6159 Wellington
6141, telephone +64 4 384 9734 or e-mail cmc@colmotor.co.nz.
The report will also be available for download from the Company’s
website www.colmotor.co.nz
Data sourced from publicly available filings. Our datasets may not be complete. Automated analysis can produce errors. If you believe any data on this page is incorrect, please contact us at hello@nzxplorer.co.nz. For informational purposes only. Not investment advice.
Other issuers discussed similar conditions around this time
Matched by meaning across NZX announcement text, not keywords — based on our semantic index of announcement bodies.
- CCC — Cooks Coffee Company Limited: 2019 Annual Report2019-08-07
“1 COOKS GLOBAL FOODS LIMITED ANNUAL REPORT 31 MARCH 2019 COOKS GLOBAL FOODS LIMITED 2 Contents to Consolidated Financial Statements Contents 2 Executive Chairman’s Report 3 Directors’ Report 8 Indepe…”
- AFC — AFC Group Holdings Limited: AFC releases Annual Report for the year ended 31 March 20192019-06-28
“AFC GROUP HOLDINGS LIMITED ANNUAL REPORT 2019 FOR THE YEAR ENDED 31 MARCH 2019 AFC GROUP HOLDINGS LIMITED ANNUAL REPORT CONTENTS FOR THE YEAR ENDED 31 MARCH 2019 Page Directors' Profiles 2 Directors' Report 3 Corporate Governance Statement4 - 5 AFC Longview Limited6 AFC Int…”
- ALF — Allied Farmers Limited: Allied Farmers Reports Solid Result2019-08-27
“Annual Report 2019 Working with Farmers for Farmers Annual Report 2019 Working with Farmers for Farmers Annual Report 2019 Working with Farmers for Farmers Annual Report 2019 Working with Farmers for Farmers Annual Report 2019 Annual Report 2019 Working with Farmers for Far…”