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ANNUAL REPORT

2013

COMMUNITY DRIVEN
VISION
To actively contribute in meaningful and sustainable ways to communities, families in need and other worthy causes.

MISSION
To provide support and assistance to these community-focussed initiatives, by engaging the collaboration of A.P. Eagers and its automotive industry network, employees and other stakeholders.

OBJECTIVES
• • To encourage and support engagement by A.P. Eagers and its stakeholders in these initiatives. To secure voluntary assistance through financial support, sponsorship, skills transfer and in-kind donations to worthy and well-run organisations and other causes. To deliver 100 cents of every dollar donated to the intended recipients. To operate with the highest standards of integrity.

• •

From its earliest days, the company has been community driven. Reaching out to a local hospital for their ‘hospital tag day’ in November 1912, company founders Messrs. E.G. Eager and Son lent motor cars to nurses and children who collected over £70 in their fundraising initiative. (STATE LIBRARY OF QUEENSLAND 125907)

On behalf of A.P. Eagers, I would like to introduce you to the A.P. Eagers Foundation. For over a hundred years we have been proactive contributors to the communities in which we serve. Through our dealerships and other operations, we have led the way in supporting hundreds of worthwhile groups ranging from local charities, community service groups and schools to sporting clubs, health initiatives and national philanthropic organisations. The A.P. Eagers Foundation was formed in our centenary year to enhance the reach and significance of our support to the greater community, bringing the group’s growing scale to bear on issues that affect the communities in which we operate. Already the Foundation is providing significant support to two worthy national charities, the Leukaemia Foundation and Variety the Children’s Charity, and we plan to see this grow further. I commend the A.P. Eagers Foundation to all shareholders for your support and look forward to communicating further on its progress.

Martin Ward Managing Director & Chief Executive Officer

Year ended 31 December OPERATING RESULTS REVENUE EBITDA Depreciation and amortisation Impairment charge EBIT Finance Costs PROFIT BEFORE TAX Income tax expense Non-controlling interest in subsidiary ATTRIBUTABLE PROFIT AFTER TAX OPERATING STATISTICS Basic earnings per share - cents Dividends per share - cents Dividend franking - % As at 31 December FUNDS EMPLOYED Contributed equity Reserves Retained earnings Non-controlling interest in subsidiary Total equity Non-current liabilities Current liabilities Total liabilities TOTAL FUNDS EMPLOYED REPRESENTED BY Property plant and equipment Intangibles Available-for-sale investments Other non-current assets Property assets held for resale Other current assets TOTAL ASSETS OTHER STATISTICS Net tangible asset backing per share- $ Shares on issue - '000 Number of shareholders Total Debt (see note below) Net debt (total debt less bailment finance less cash) - $'000 Gearing ratio (debt/debt plus equity) - % Gearing ratio (net debt/net debt plus total equity) - %

2013 $'000

2012 $'000

2011 $'000

2010 $'000

2009 $'000

2,672,813 122,252 (12,354) 109,898 (23,188) 86,710 (22,748) (353) 63,609

2,642,535 114,819 (11,595) 323 103,547 (24,812) 78,735 (23,184) (181) 55,370

2,398,695 98,272 (11,161) (3,228) 83,883 (25,730) 58,153 (17,864) (95) 40,194

1,810,760 75,680 (9,254) 3 66,429 (21,131) 45,298 (13,661) (72) 31,565

1,663,015 80,821 (9,593) 2,393 73,621 (21,151) 52,470 (15,882) (13) 36,575

36.4 23.0 100 2013 $'000 231,205 108,612 198,369 939 539,125 246,082 431,658 677,740 1,216,865

34.0 20.0 100 2012 $'000 206,277 90,636 171,113 510 468,536 238,192 471,350 709,542 1,178,078

25.5 16.0 100 2011 $'000 162,047 74,329 143,795 444 380,615 186,949 364,196 551,145 931,760

21.1 12.8 100 2010 $'000 163,340 71,142 125,334 401 360,217 191,835 347,676 539,511 899,728

24.3 12.4 100 2009 $'000 145,502 75,208 109,884 45 330,639 150,704 255,352 406,056 736,695

344,956 125,259 195,195 5,764 21,612 524,079 1,216,865

350,862 117,521 162,590 3,926 23,963 519,216 1,178,078

336,544 118,011 2,345 4,245 20,622 449,993 931,760

335,611 115,900 7,803 20,250 420,164 899,728

305,645 67,507 37,684 17,458 308,401 736,695

2.34 176,548 4,636 514,889 199,001 48.8 27.0

2.06 170,687 4,300 513,332 200,674 52.3 30.0

1.67 156,805 3,941 416,497 150,847 52.2 28.3

1.55 157,290 4,073 409,920 169,412 53.2 32.0

1.76 149,325 3,797 286,115 96,279 46.4 22.6

Note: Leasebook liabilities are excluded from ‘Total debt’ and debt calculations as they are specifically matched against leasebook receivables (refer note 22 of 2013 financial statements). Bailment Finance Bailment finance is a form of financing peculiar to the motor industry, which is provided by financiers on a vehicle by vehicle basis. It is short-term in nature, is generally secured by the vehicle being financed and is principally represented on the borrower’s balance sheet as vehicle inventory with the liability reflected under current liabilities. Because of its short-term nature, it is excluded from net debt and the corresponding gearing ratio.

CONTENTS
Company Profile Board of Directors Executive Management Directors’ Report Auditor’s Declaration of Independence Corporate Governance Statement Financial Statements Notes to the Financial Statements Directors’ Declaration Independent Auditor’s Report Shareholder Information Corporate Directory 4 5 5 6 17 18 21 27 83 84 86 88

ANNUAL GENERAL MEETING
Our Annual General Meeting will be held at our registered office, 80 McLachlan Street, Fortitude Valley, Queensland, on Wednesday 21 May 2014 at 9.00 am.

FINANCIAL CALENDAR
Financial year end Full year results announced Record date for final dividend Payment date for final dividend Annual General Meeting 31 December 2013 26 February 2014 2 April 2014 16 April 2014 21 May 2014

A.P. Eagers Annual Report 2013

3

Company Profile

About Us A.P. Eagers Limited is a pure automotive retail group with our main operations in south-east Queensland, Adelaide, Darwin, Melbourne, Sydney and the Newcastle/Hunter Valley region of New South Wales. We represent a diversified portfolio of automotive brands, including all 12 of the top 12 selling car brands in Australia and 8 of the top 9 selling luxury car brands. In total, we represent 26 car brands and 10 truck and bus brands. Our core business consists of the ownership and operation of motor vehicle dealerships. We provide full facilities including the sale of new and used vehicles, service, parts and the facilitation of allied consumer finance. To complement our vehicle dealerships, we also operate a substantial motor vehicle auction business, Brisbane Motor Auctions. Our operations are generally provided through strategically clustered dealerships, 65% of which are situated on properties owned by us, with the balance leased. We own $334 million of prime real estate. This totals more than 70 acres positioned in high profile, main road locations in Brisbane, Sydney, Melbourne, Adelaide and Newcastle. With 3,100 employees and 4,600 shareholders, our sales revenue is running at $2.7 billion per annum. Dividends and EPS Growth We have paid a dividend to shareholders every year since listing in 1957, and a record dividend in 12 of the past 13 years. A.P. Eagers also has a track record of delivering Earnings Per Share (EPS) growth from acquisitions. Further information about our acquisition growth can be viewed on our website, www.apeagers.com.au.

Origins Our origins trace back to 1913 when Edward Eager and his son, Frederic, founded their family automotive business, E.G. Eager & Son Ltd, which continues today as a wholly-owned subsidiary of A.P. Eagers Limited. After establishing the first motor vehicle assembly plant in Queensland in 1922, the business secured the distributorship of General Motors’ products in Queensland and northern New South Wales in 1930 and listed as a public company in 1957 under the name Eagers Holdings Limited. A merger in 1992 with the listed A.P. Group Limited saw the addition of a number of new franchises and our name change to A.P. Eagers Limited. Further new franchises and geographic diversification have since followed. Growth Since 2000, our sales revenue has increased from $500 million to $2.7 billion, profit after tax has increased from $4.3 million to $64.0 million and the number of employees has increased from 600 to 3,100. Our operations expanded into the Northern Territory with the acquisition of Bridge Toyota in 2005. In 2007, we established ourselves on the Gold Coast with the acquisition of Surfers City Holden. The addition of Kloster Motor Group in the Newcastle/Hunter Valley region in 2007 heralded our advance into New South Wales. Our operations in that state have grown with the acquisition of Bill Buckle Auto Group in Sydney’s northern beaches region including Brookvale in 2008.

In 2010, we acquired the publicly listed Adtrans Group Limited, representing our direct entry into the South Australian and Victorian markets. Adtrans is South Australia’s premier car retailer and operates truck and bus dealerships in New South Wales, Victoria and South Australia. We also acquired Caloundra City Autos Group in Queensland’s growing Sunshine Coast region in 2010. Further expansion of our truck and bus operations occurred in late 2010 with the addition of six new franchises in New South Wales, Victoria and South Australia. In 2012, we established Carzoos to provide used car customers with a 48 hour money-back guarantee and other benefits. Daimler Trucks Adelaide and Eblen Motors were acquired in 2011 and Main North Nissan and Renault and Unley Nissan and Renault, Adelaide, were acquired in 2013, to complement our existing operations in South Australia. A strategic shareholding in listed Automotive Holdings Group Limited (AHG) was acquired in 2012, providing A.P. Eagers with exposure to the West Australian market. This investment represented 19.57% of AHG, valued at $192.8 million, at the end of 2013. A new business, Precision Automotive Technology, was established in late 2013 to source and distribute our own range of car care products (paint protection, interior protection, electronic rust protection and window tint products) under the brand names, Perfexion and 365+. Further Information Please visit www.apeagers.com.au for further information about A.P. Eagers Limited.

4

A.P. Eagers Annual Report 2013

Board of Directors

Executive Management
Timothy Boyd Crommelin BCom, FSIA, FSLE Chairman (appointed 8 May 2013), Member of Audit, Risk & Remuneration Committee Independent, non-executive Director since February 2011. Executive Chairman of Morgans Financial Ltd. Director of Senex Energy Ltd (appointed October 2010), Brisbane Lions Foundation, Australian Cancer Research Foundation and Abney Hotels Ltd. Chairman of the Advisory Board of the Australian National University Investment Committee. Member of the University of Queensland Senate. Former Deputy Chairman of Queensland Gas Company Ltd and CS Energy Ltd. Former Alternate Director of Ausenco Ltd (appointed February 2013, retired May 2013). Mr Crommelin has broad knowledge of corporate finance, risk management and acquisitions and over 40 years’ experience in the stockbroking and property industry. Martin Andrew Ward BSc (Hons), FAICD Managing Director, Chief Executive Officer Joined the Company in July 2005. Appointed Chief Executive Officer in January 2006. Appointed Managing Director in March 2006. Motor vehicle dealer. Director of Australian Automotive Dealer Association Limited (appointed January 2014). Mr Ward was formerly the Chief Executive Officer of Ford Motor Company’s Sydney Retail Joint Venture. Nicholas George Politis BCom Director Non-executive Director since May 2000. Motor vehicle dealer. Executive Chairman of WFM Motors Pty Ltd, A.P. Eagers Limited’s largest shareholder. Mr Politis is Director of a substantial number of other proprietary limited companies and has vast automotive retail industry experience. Peter William Henley FAIM, MAICD Director, Member of Audit, Risk & Remuneration Committee Independent, non–executive Director since December 2006. Director of Thorn Group Ltd (appointed May 2007). Deputy Chairman of MTQ Insurance Services Ltd and chair of MTQ Investment Committee. Formerly the Chairman and Chief Executive Officer of GE Money Motor Solutions. Mr Henley has over 30 years’ local and international experience in the financial services industry.
A.P. Eagers Annual Report 2013

Daniel Thomas Ryan BEc, MBus, FAICD Director Non-executive Director since January 2010. Director and Chief Executive Officer of WFM Motors Pty Ltd, A.P. Eagers Limited’s largest shareholder, and Director of a substantial number of other proprietary limited companies. Mr Ryan has significant management experience in automotive, transport, manufacturing and retail industries. David Arthur Cowper BCom, FCA Director, Chairman of Audit, Risk & Remuneration Committee Independent, non-executive Director since July 2012. Chartered accountant, with more than 35 years in the profession. Former partner of Horwath Chartered Accountants and Deloitte Touche Tohmatsu. Former Chairman of Horwath’s motor industry specialisation unit for six years. Mr Cowper’s area of professional specialisation while at Horwath and Deloitte was in providing audit, financial and taxation services to public and large private companies in the motor industry. Benjamin Wickham Macdonald AM, FAICD Chairman (retired 8 May 2013) Independent, non-executive Director from January 1992 until retirement on 8 May 2013. Chairman of Reef Corporate Services Ltd (appointed September 1995). Previously a Director of numerous public companies including FKP Ltd (Chairman), Macdonald Hamilton & Co Ltd (Managing Director), Perpetual Trustees Australia Ltd (Chairman), Bank of Queensland Ltd (Deputy Chairman), AMP Society (Australian Board), Queensland Cotton Holdings Ltd (Chairman), CSR Ltd, Placer Pacific Ltd, Allgas Energy Ltd and Casinos Austria International Ltd.

Keith Thomas Thornton BEc General Manager Queensland & Northern Territory Licensed motor dealer. Responsible for all operational issues in Queensland and Northern Territory since June 2007, having overseen the group’s new and used vehicle operations since December 2005 and held dealership General Manager roles since joining the group in 2002. Retail and wholesale operations experience in volume, niche and prestige industry sectors. Prior industry experience with various manufacturers. Michael Anthony Raywood BSc (Ec), CAHRI Group Human Resources Manager Commenced in November 2006. Responsible for the group’s human resource function. Extensive senior executive experience in human resources with large international and domestic corporates, including as Group Human Resources Manager of a Toyota business responsible for 7 countries in the South Pacific. Stephen Graham Best BBus, Grad Dip Mgt, FIPA, GAICD Chief Financial Officer Commenced in October 2007. Responsible for the group’s accounting, taxation, internal audit, treasury and information technology functions. Previous senior finance and commercial roles in the resources industry with MIM Holdings Limited, Xstrata PLC and Consolidated Rutile Limited. Denis Gerard Stark LLB, BEc General Counsel & Company Secretary Commenced in January 2008. Responsible for overseeing the company secretarial, legal, work health & safety, insurance and investor relations functions and property portfolio. Admitted as a solicitor in Queensland in 1994 and in Victoria in 1997. Affiliate of Chartered Secretaries Australia. Previous company secretarial and senior executive experience with public companies.

5

Directors’ Report

The Directors present their report together with the consolidated financial report of the group being A.P. Eagers Limited ABN 87 009 680 013 (“the Company”) and its controlled entities, for the year ended 31 December 2013 and the Auditor’s Report thereon. DIRECTORS The Directors of the Company at any time during or since the end of the year, and their qualifications, experience and special responsibilities, are detailed on page 5. DIRECTORS’ MEETINGS The number of Directors’ meetings (including meetings of committees of Directors) and number of meetings attended by each Director during the year were: Board Meetings Held T B Crommelin(1) N G Politis M A Ward P W Henley(1) D T Ryan D A Cowper
(1) (2)

Audit, Risk & Remuneration Committee Meetings Held 4 4 4 Attended 2 4 3 -

Attended 10 9 10 9 9 8 3

10 10 10 10 10 10 4

B W Macdonald

(1) Audit, Risk & Remuneration Committee members. (2) Retired from Board on 8 May 2013.

COMPANY SECRETARY The Company Secretary and his qualifications and experience are detailed on page 5. PRINCIPAL ACTIVITIES The group’s principal activities during the year consisted of the selling of new and used motor vehicles, distribution and sale of parts and accessories, repair and servicing of vehicles, provision of extended warranties and car care products, facilitation of finance and leasing in respect of motor vehicles, ownership of property and investments. The products and services supplied by the group were associated with, and integral to, the group’s motor vehicle dealership operations. There were no significant changes in the nature of the group’s activities during the year.

FINANCIAL & OPERATIONAL REVIEW The Directors are pleased to report a record 2013 statutory Net Profit Before Tax of $86.7 million. This compares to a Net Profit Before Tax of $78.7 million in 2012. Net Profit After Tax was $64.0 million in 2013 compared to $55.6 million in 2012. A strong operating performance from our SA Cars division, consistent results in QLD/NT, increased dividend income from the strategic investment in Automotive Holdings Group Ltd (AHG), and profits on the sale of businesses and property were the main contributors to profit growth on 2012.

6

A.P. Eagers Annual Report 2013

Directors’ Report Continued

Profit Comparison

Full Year to December 2013 $ million 36.4 64.0 86.7
(1)

Full Year to December 2012 $ million 34.0 55.6 78.7

% Change

Statutory EPS (basic) cents Statutory profit after tax Statutory profit before tax Impairment adjustments Freehold Property adjustments (reversal) Goodwill impairment Business acquisition costs(2) Underlying profit before tax Underlying profit after tax
(3) (2)

7.1% 15.1% 10.2%

0 0 0.6 87.3 64.4 36.6

(1.1) 0.8 78.4 55.6 34.0

n/a 11.4% 15.8% 7.6%

Underlying EPS (basic) cents
Notes

(1) It is highlighted that in addition to the property impairment net reversal of $1.1 million in 2012 there were specific property valuation net increases of $0.7 million which under Accounting Standards are not recognised in the Profit or Loss and instead are recognised in a revaluation reserve directly in the Statement of Financial Position. Accordingly overall increase in property fair values during the 2012 year was $1.8 million. (2) Business acquisition costs include taxes, legal and other costs associated with business acquisitions in 2013. (3) Underlying profit after tax includes the adjustments per Notes (1) above, and the related tax impact at 30% equating to $0.2 million in 2013 (2012: $0.3 million).

EXTERNAL ENVIRONMENT According to Federal Chamber of Automotive Industry statistics, Australia’s new motor vehicle sales increased by 2.2% in 2013 to 1,136,227, compared to 10.3% growth in the previous year. In response to a slowdown in the resources sector, new vehicle sales in Queensland, Northern Territory and Western Australia decreased on the previous year by 0.8%, 1.8%, and 1.9% respectively. All of the market growth was from Private buyers (+8.1%), whilst Business (-1.1%), Government (-20.2%) and Rental (-8.0%) buyer types recorded decreases on 2012. Nationally, the small SUV segment continued to show the greatest growth as a result of new product releases, and the previously high rates of growth in the SUV and Pick Up 4X4 segments slowed somewhat. In particular reduced demand in some mining related sectors and locations was evident in the second half of 2013. Vehicle affordability, supported by low interest rates, remains at historically high levels and to date the depreciation in the Australian dollar against key vehicle import currencies such as the Japanese Yen, Thai Baht, Korean Won and the Euro, has not translated into a trend to vehicle price increases. The growth in private buyer sales is being driven by affordability, continued new product release and substantial manufacturer marketing programs.

In May 2013 Ford announced that it would cease local manufacturing in Australia in October 2016, and in December 2013 General Motors said it would discontinue vehicle and engine manufacturing, and significantly reduce its engineering operations in Australia by the end of 2017. In February 2014 Toyota announced that it will stop building cars in Australia by the end of 2017. These manufacturers are transitioning to national sales and distribution structures, with the sales and service of their vehicles expected to continue unaffected through their extensive dealer networks. Australian sourced vehicles represented 10.4% of new cars sold in the national market in 2013, down from 12.6% in 2012. There were almost 17.2 million motor vehicles, including motor cycles, registered in Australia for the 2013 Motor Vehicle Census. This is 2.6% higher than the number of registrations for 2012 and an increase of 12.3% since 2008. The average annual growth rate over the five years to 2013 was 2.4%. (ABS) BUSINESS INITIATIVES The Company acquired the Main North and Unley Nissan and Renault businesses in Adelaide, South Australia, in September 2013, providing incremental growth for our strongly performing South Australian operations. Additional brand representation commenced in Brookvale, New South Wales, for Jaguar and Land Rover, and dealership refurbishments were completed at a number of sites in Adelaide for the Hyundai brand. A major refurbishment of the Eblen Subaru site in Glenelg, Adelaide commenced and a new dealership site in Cardiff, New South Wales, opened in February 2014 for Volkswagen, Honda and Hyundai replacing an inferior location five kilometres away.

A.P. Eagers Annual Report 2013

7

Directors’ Report Continued

The Hidden Valley Ford/Stuart Motor Group in Darwin was sold with operations in the Northern Territory focussed on the strongly performing Bridge Toyota dealership. An 11% equity interest in a Mazda dealership was also sold to the Dealer Principal to meet manufacturer requirements. The strategic 19.57% shareholding in AHG as at 31 December was valued at $192.8 million based on their closing share price of $3.78. Whilst not included in the Company’s profit after tax, a before tax unrealised gain of $22.8 million has been recognised in the Statement of Comprehensive Income for the 2013 year. The Company, in late 2013, established a new business, Precision Automotive Technology, to both source and distribute its own range of car care products (paint protection, interior protection, electronic rust protection and window tint products) under the exclusive brand names, Perfexion and 365+. FINANCIAL PERFORMANCE Revenue from operations increased by 0.9% to $2,652 million in 2013, reflecting lower overall new vehicle sales growth, and a decline in new vehicle sales in the Queensland market. Other revenue includes a full year of dividends from AHG of $10.0 million, compared to $4.8 million in 2012.

EBITDA increased by 6.5% to $122.3 million (2012: $114.8 million) and profit margins continued to trend upwards, with EBITDA/Revenue of 4.6% for 2013 compared to 4.3% in 2012 and NPBT/Sales improving to 3.2% for 2013 from 3.0% in 2012. However the improvement in margins was primarily due to the increased AHG dividend. A before tax profit on the sale of businesses and property of $2.0 million was realised in the financial year and the Company’s 20.7% interest in MTQ Insurance provided an equity accounted profit after tax and unrealised mark to market gain on investments of $2.0 million (2012: $1.7 million). Borrowing costs declined by 6.5% to $23.2 million (2012: $24.8 million), with higher average bailment and corporate debt being offset by lower interest rates. Business acquisition costs relating to the Main North and Unley Nissan acquisition of $0.6 million were expensed in the financial year. A lower than normal effective tax rate applied in 2013, due to the higher proportion of franked dividend income, the profits on sale of business and property incurring reduced tax expense, and a tax benefit related to a change in the deductibility of executive share plan costs recognised in the current and previous year. The Company’s net cash provided by operating activities was $76.1 million in 2013 (2012: $55.6 million), with the increase primarily due to higher dividend income and a favourable working capital movement.

RESULTS SUMMARY Consolidated results 2013 $’000 2,652,133 20,680 2,672,813 122,252 (12,354) 109,898 (23,188) 86,710 (22,748) 63,962 (353) 63,609 2012 $’000 2,628,160 14,375 2,642,535 114,819 (11,595) 323 103,547 (24,812) 78,735 (23,184) 55,551 (181) 55,370 34.0 cents

Year Ended 31 December Revenue from operations Other revenue Total revenue Earnings before interest, tax, depreciation and amortisation and impairment (EBITDA) Depreciation and Amortisation Impairment charge/net reversal Earnings before interest and tax (EBIT) Borrowing costs Profit before tax Income tax expense Profit after tax Non controlling interest in subsidiaries Attributable profit after tax Earnings per share - basic

Increase/(Decrease) 0.9% 43.9% 1.1% 6.5% 6.5% 6.1% (6.5)% 10.1% (1.9)% 15.1% (95.0)% 14.9% 7.1%

net income

36.4 cents

8

A.P. Eagers Annual Report 2013

Directors’ Report Continued

SEGMENTS Profits from the Company’s Car Retail segment were consistent with the previous year with a segment contribution of $57.3 million compared to $55.5 million in 2012. Reduced profitability in new cars and stable used car performance were offset by revenue and margin growth in parts and service, lower interest expense and the profit on sale of businesses. Strong results in South Australia and consistent results in Queensland/Northern Territory were offset by a weak performance in the Newcastle/Hunter Valley region. Lower interest expense resulted in the National Truck division (Truck Retail segment) recording an improved segment contribution of $8.4 million in 2013 compared to $8.0 million in 2012, with improved performance in the Victorian operations being largely offset by disappointing performances in South Australia and New South Wales. Heavy commercial sales nationally (according to VFACTS) were stagnant at 0.2% following a 9.9% increase in 2012. The value of the property portfolio decreased slightly to $334 million as at 31 December 2013, compared to $341 million in the previous year. Disposals of properties in Darwin, Brisbane and Newcastle were largely offset by development and refurbishment expenditure, and uplift in the value of a Fortitude Valley, Queensland, property. The Company continues to pursue the disposal of non-core properties. Returns from the portfolio were consistent with previous years. The Investment and All Other segment recorded a significant increase in contribution to $30.4 million, due to increased dividends and the unrealised gain on investment compared to a contribution of $25.2 million in 2012. FINANCIAL POSITION The Company’s financial position strengthened further during the year. EBITDA Interest Cover increased to 5.2 times as at 31 December 2013 compared to 4.6 times as at 31 December 2012, due to lower average interest rates and improved profit levels. Corporate debt net of cash on hand as at 31 December 2013 was slightly lower at $199.0 million (2012: $200.7 million) and total debt including vehicle bailment net of cash on hand was also slightly lower at $502.8 million as compared to $504.6 million at 31 December 2012. Improved profitability reduced gearing levels. Total gearing (Debt/Debt + Equity), including bailment inventory financing, was 48.8% as at 31 December 2013, as compared to 52.3% as at 31 December 2012. Bailment finance is cost effective shortterm finance secured against vehicle inventory on a vehicle by vehicle basis. Gearing excluding bailment and including cash on hand was 27.0% as at 31 December 2013 compared to 30.0% at the end of 2012. Despite plentiful new vehicle supply during the year, tight management resulted in total inventory levels closing the year at $409.7 million slightly below the end 2012 position of $410.5 million. Net tangible assets increased to $2.34 per share as at 31 December 2013, primarily as a result of the increase in value of the Company’s investments, compared to $2.06 per share as at 31 December 2012.

OUTLOOK AND STRATEGY UPDATE In 2014 we may see a more rational new vehicle market, with better balance between supply and demand, as manufacturers and distributors adjust to a lower-growth Australian economy. We may also see some new vehicle price inflation or a reduction in vehicle specification level as a lower Australian dollar takes effect, although this may take a year or so to flow through. Overall new vehicle sales are expected to remain stable on 2013 levels. Australian manufactured vehicles in 2013 represented 10% of the national new vehicle market. Due to the Company’s strategy of having a diversified exposure to the top 10 volume brands and top 5 luxury brands, a reduction in locally manufactured vehicles is not expected to have an impact on profitability. Strategically, the Company’s focus will be on continuing to improve business processes and management, with specific focus on used car and truck trading, optimisation of the parts distribution businesses, and organic growth opportunities through adding growing brands to established dealership clusters. Further acquisition opportunities which should have a positive impact on earnings per share are likely to arise during 2014. DIVIDENDS Dividends paid to members during the financial year were as follows: 2013 $’000 22,246 2012 $’000 16,335

Year ended 31 December Final ordinary dividend for the year ended 31 December 2012 of 13.0 cents (2011: 10.4 cents) per share paid on 16 April 2013 Interim ordinary dividend of 8.0 cents (2012: 7.0 cents) per share paid on 4 October 2013

14,124

11,717

36,370

28,052

A fully franked final dividend of 15 cents per share (2012: 13.0 cents) has been approved for payment on 16 April 2014 to shareholders who are registered on 2 April 2014 (Record Date). When combined with the interim dividend paid in October 2013, the total dividend based on 2013 earnings is 23 cents per share, fully franked (2012: 20 cents). The Company’s dividend reinvestment plan (DRP) will not operate in relation to the final dividend. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS In the Directors’ opinion there was no significant change in the state of affairs of the group during the financial year that is not disclosed in this report or the consolidated financial report.

A.P. Eagers Annual Report 2013

9

Directors’ Report Continued

MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR The Directors are not aware of any matter or circumstance not dealt with in this report or the consolidated financial report that has arisen since the end of the year under review and has significantly affected or may significantly affect the group’s operations, the results of those operations or the state of affairs of the group in future financial years. ENVIRONMENTAL REGULATION The group’s property development and service centre operations are subject to various environmental regulations. Environmental licences are held for particular underground petroleum storage tanks. Planning approvals are required for property developments undertaken by the group in relevant circumstances. Authorities are provided with appropriate details and to the Directors’ knowledge developments during the year were undertaken in compliance with planning requirements. Management works with regulatory authorities, where appropriate, to assist compliance with regulatory requirements. There were no material adverse environmental issues during the year to the Directors’ knowledge. REMUNERATION REPORT 1. Principles Used to Determine Remuneration The board as a whole is responsible for recommending and reviewing the remuneration arrangements of non-executive Directors, whilst the board (excluding the Chief Executive Officer) reviews the performance of the Chief Executive Officer on a continual basis and ensures the reward framework is appropriate. To assist the board, the Audit, Risk & Remuneration Committee reviews and makes recommendations regarding these remuneration arrangements. The Chief Executive Officer in consultation with the Chairman reviews the performance of the group’s senior executives on an ongoing basis and ensures the appropriateness of their reward framework. Remuneration packages are intended to properly reflect the individual’s duties and responsibilities, be competitive in attracting, retaining and motivating staff of the highest quality and be aligned to shareholder interests. The remuneration framework for executives has been developed to provide, where appropriate, a high proportion of “at risk” remuneration. This is designed to reflect competitive reward for contribution to growth in group profits and shareholder wealth.

In considering the impact of the group’s performance on shareholder wealth, the Directors have regard to various factors including the following metrics: 2013 NPAT ($’000) Earnings per share - basic (c) Dividends per share (c) Share Price at year end ($) 63,962 36.4 23.0 4.96 2012 55,551 34.0 20.0 4.38 2011 40,289 25.5 16.0 2.36 2010 31,637 21.1 12.8 2.50 2009 36,588 24.3 12.4 2.40

2. Non-executive Directors’ Remuneration Framework Non-executive Directors are remunerated for their services by way of fees (and where applicable, superannuation) from the maximum amount approved by shareholders in general meeting for that purpose, currently $500,000 per annum, which was fixed at the annual general meeting in 2007. Non-executive Director fees are $75,000 per annum plus superannuation benefits, and the Chairman’s fee is $95,000 per annum plus superannuation. The board, with the assistance of the Audit, Risk & Remuneration Committee, periodically reviews non-executive Director fees taking into account relevant market conditions. Non-executive Directors do not participate in schemes designed for the remuneration of executives, equity schemes or retirement allowance programmes, nor do they receive performance based bonuses.

3. Executives’ Remuneration Framework (a) Base Pay Each executive is offered a competitive base pay to reflect the market for a comparable role. Base pay is reviewed annually and on promotion to ensure it remains competitive with the market. It may be delivered as a combination of cash and superannuation that the executive elects to salary sacrifice. (b) Benefits Executives receive benefits including the provision of fully maintained motor vehicles, personal health and fitness programs and, in the case of the Chief Executive Officer, personal insurance. Retirement benefits are delivered under superannuation funds providing accumulation benefits. No lump sum defined benefits are provided.

10

A.P. Eagers Annual Report 2013

Directors’ Report Continued

(c) Short-term Performance Incentives (i) Incentive Pool / Bonus A short-term incentive pool is available for allocation by the Chief Executive Officer (in consultation with the Chairman) to non-commission based executives being the Company Secretary, Chief Financial Officer and Group Human Resources Manager. The allocations are determined on a discretionary basis during annual review after considering the achievements and performances of the individual executives and group. (ii) Commission Structure With the exception of the Chief Executive Officer and noncommission based executives, remuneration for senior executives is structured around measurable business performance factors linked to business strategies and designed to improve shareholder value. This commission structure is set at a percentage of net profit before tax of a business unit or business group. (d) Executive Incentive Plan (EIP) The EIP was approved by shareholders at the annual general meeting in 2010. It is intended as both a long-term and shortterm incentive, focussing on corporate performance and the creation of shareholder value over multi-year periods. Through the EIP, executives are driven to improve the Company’s performance and shareholder return. This is accomplished through the grant of performance rights and options which reward the achievement of pre-determined group performance hurdles and allow executives to share in the Company’s growth. A performance right is a right to be given a fully paid ordinary share in the Company at a nil exercise price upon the achievement of performance hurdles. An option is a right to be given a fully paid ordinary share in the Company upon payment of an exercise price and achievement of performance hurdles. In general, the exercise price is the market share price at or about the grant date or when the executive agreed in principle to participate in the plan. The performance rights and options are divided into separate tranches for each annual performance period. Each tranche of options may be further divided into sub-tranches. The tranches and sub-tranches are tested against the performance hurdles for the relevant performance period. (i) Performance Hurdles In order for performance rights and options to vest under the EIP, the pre-determined performance hurdles must be achieved for the relevant performance period, including: • • • the Company must meet the applicable Earnings Per Share (EPS) hurdle (as described below). the Company must meet any prescribed interest cover ratio. the executive must remain permanently employed by the group. (Where the executive has sacrificed payments into the EIP in return for rights or options, cessation of employment during the performance period may result in a prorated proportion of the rights or options remaining on issue to be tested at the end of the performance period but without the ability for any further re-testing).
A.P. Eagers Annual Report 2013

All performance hurdles for a performance period must be met for the relevant rights and options to vest. The board does, however, retain discretion to waive hurdles in exceptional circumstances where it is believed to be in the Company’s best interests to do so. (ii) EPS Hurdles A separate EPS performance hurdle applies for each tranche or sub-tranche of performance rights and options. These EPS hurdles were pre-determined using a base-line EPS when the participant agreed to join the plan. In general, the Company must achieve a minimum of 7% annual compound growth in diluted EPS above the base-line before any performance rights or options will vest for the performance period, with 10% annual compound growth required for all performance rights and options to vest for the period. As these “at risk” earnings are demonstrably linked to the creation of shareholder value, it is considered that if an EPS hurdle is not achieved during a 12 month performance period, re-testing would be appropriate to allow for market reaction to the Company’s longer term strategic initiatives. If the EPS hurdle is not achieved during the initial 12 month performance period, re-testing would take place 12 months later over a 24 month period. If the EPS hurdle is not achieved on the re-test, it may be re-tested a second time a further 12 months later over a 36 month period. On any re-test, the EPS hurdle for the re-test period would be the combined hurdle for each individual year in the re-test period. There cannot be more than two re-tests. Performance rights and options immediately lapse if they do not vest on the second re-test. (iii) CEO’s Participation in EIP At the Company’s annual general meeting in 2010, shareholders approved the Chief Executive Officer, Mr Ward, participating in the EIP. With 98.2% of proxy votes in favour or at the Chairman’s discretion, shareholders approved the following: • • Mr Ward’s performance hurdles are measured over the five year period 2010 to 2014. Before any of Mr Ward’s performance rights or options will vest for an individual year, the Company must achieve at least 7% annual compound growth in diluted EPS above the base-line EPS. The base-line was set when Mr Ward agreed to join the plan in mid-2009 at 16% above the average normalised basic EPS for the previous three years. For 100% of Mr Ward’s performance rights and options to vest for the five years, the Company must achieve at least 10% annual compound growth in diluted EPS above the base-line. The number of performance rights and options granted to Mr Ward was scaled back to reflect only 4.5 years’ value, even though his performance would be measured over a full five year period. This scaling back occurred because, at the time of the 2010 annual general meeting, his previous five year equity incentive plan was due to expire mid-year on 30 June 2010.
11





Directors’ Report Continued

The cost to the Company of Mr Ward’s participation in the EIP is calculated as follows: • If 100% of the performance rights and options were to vest over the five year period (requiring at least 10% annual compound growth in diluted EPS for five years), the recognised cost of the plan would average $850,000 per annum for 4.5 years, or $3.825 million in total over 4.5 years. However, accounting standards require that the cost be recognised, as shown in the remuneration table on page 14, based on the progressive recognition of each share option grant over its expected vesting period, which results in a higher overall cost of the EIP in the earlier years and a lower cost in later years. On the assumption that all performance hurdles are achieved over the five year EIP period, the total cost recognised in each year is shown in the following graphs. If no performance hurdles at all were to be achieved over the five year period, then no performance rights or options would vest and the plan would cost the Company zero dollars. By way of comparison, if only 50% of the performance rights and options by value were to vest each year over the five year period (requiring 9% annual compound growth in diluted EPS for five years), the cost of the plan would be on average $425,000 per annum for 4.5 years (or $1,912,500 in total over 4.5 years).
1600 1400 1200
$000’s

• •

1600 1400 1200 1000 800 600 400 200 0 0 2009 2010 937

1,431

800 423 186 600 400 200 0

$000’s

850

1000

850 425 0 2009 2010 2011

850

850

850

2011

2012

2013

2014

2012

2013

2014

Accounting accrual cost of CEO’s participation in EIP – progressive recognition based, assuming all performance hurdles are achieved.

Average annual cost of CEO’s participation in EIP, assuming all performance hurdles are achieved.

(iv) Grants to Key Management Personnel The following tables show details of current grants of performance rights and options over unissued shares, which were granted to key management personnel in or before the year under review. No rights or options were granted to key management personnel during the year under review except as shown in these tables. No rights or options were forfeited, and no options were exercised, by key management personnel during the year under review. Chief Executive Officer Fair value of each performance right $2.400 $2.286 $2.176 $2.072 $1.972

Tranche No. 1 2 3 4 5

Grant Date 28 May 2010 28 May 2010 28 May 2010 28 May 2010 28 May 2010

No. of performance rights granted 36,890 82,440 89,000 94,890 105,140

No. of options granted 416,665 815,215 810,810 815,215 797,870

End of 1st performance period 31 Dec 2010 31 Dec 2011 31 Dec 2012 31 Dec 2013 31 Dec 2014

Fair value of each option $0.808 $0.812 $0.810 $0.802 $0.806

Status Vested without re-testing Vested without re-testing Vested without re-testing Vested without re-testing Unvested

12

A.P. Eagers Annual Report 2013

Directors’ Report Continued

General Manager Queensland and Northern Territory No. of performance rights granted 22,590 48,015 50,950 54,115 57,515 No. of options granted 104,165 203,805 202,705 203,805 199,470 End of 1st performance period 31 Dec 2010 31 Dec 2011 31 Dec 2012 31 Dec 2013 31 Dec 2014 Fair value of each performance right $1.660 $1.562 $1.472 $1.386 $1.304 Fair value of each option $0.360 $0.368 $0.370 $0.368 $0.376

Tranche No. 1 2 3 4 5

Grant Date 28 August 2009 28 August 2009 28 August 2009 28 August 2009 28 August 2009

Status Vested without re-testing Vested without re-testing Vested without re-testing Vested without re-testing Unvested

Chief Financial Officer No. of performance rights granted 30,120 32,010 33,965 36,075 38,345 No. of options granted 138,890 135,870 135,135 135,870 132,980 End of 1st performance period 31 Dec 2010 31 Dec 2011 31 Dec 2012 31 Dec 2013 31 Dec 2014 Fair value of each performance right $1.660 $1.562 $1.472 $1.386 $1.304 Fair value of each option $0.360 $0.368 $0.370 $0.368 $0.376

Tranche No. 1 2 3 4 5

Grant Date 28 August 2009 28 August 2009 28 August 2009 28 August 2009 28 August 2009

Status Vested without re-testing Vested without re-testing Vested without re-testing Vested without re-testing Unvested

General Counsel & Company Secretary No. of performance rights granted No. of options granted 26,880 26,880 26,040 25,510 25,250 End of 1st performance period 31 Dec 2013 31 Dec 2014 31 Dec 2015 31 Dec 2016 31 Dec 2017 Fair value of each performance right -

Tranche No. 1 2 3 4 5

Grant Date 27 March 2013 27 March 2013 27 March 2013 27 March 2013 27 March 2013

Fair value of each option $0.93 $0.93 $0.96 $0.98 $0.99

Status Unvested(1) Unvested Unvested Unvested Unvested

(1) EPS performance hurdle was satisfied, but vesting remains subject to continued employment until 31 March 2015.

Further details of the performance rights and options granted under the EIP are specified in notes 34 and 35 to the consolidated financial report. 4. Hedging The board has adopted a policy which prohibits any Director or employee who participates in an equity plan from using derivatives, hedging or similar arrangements to reduce or eliminate the risk associated with the plan in relation to unvested securities or securities that are subject to trading restrictions, without the Chairman’s approval. Any breach will result in forfeiture or lapsing of the unvested securities or additional performance hurdles or trading restrictions being imposed, at the board’s discretion.

A.P. Eagers Annual Report 2013

13

Directors’ Report Continued

5. Executive Employment Agreements Executives who are key management personnel are employed under common employment agreements. The agreements do not have a finite term, can be terminated by either employer or employee giving notice within a range of four to twelve weeks and do not contain any termination payment arrangements. The board has discretion to extend the termination notice period that may be given to an executive and to make payments upon termination, as appropriate. The Chief Executive Officer’s employment agreement differs from that of other executives as follows: • The Company may terminate the Chief Executive Officer’s employment if he is unable to satisfactorily perform his duties due to illness, injury or accident for a period of six months or for cause. Termination for any other reason would entitle the Chief Executive Officer to a termination benefit equivalent to two times annual remuneration at the time of termination, subject to any limit imposed by law. The Chief Executive Officer may terminate his employment agreement on six months’ notice unless otherwise agreed with the Company.



6. Details of Remuneration Key management personnel include Directors and executives who have authority and responsibility for planning, directing and controlling the activities of the group. Remuneration details of key management personnel are set out in the following tables.
Short Term benefits Salary & fees Bonus & commissions Non monetary and other benefits (3) Post employment benefits Superannuation benefits Directors Retiring Allowance accrual (1) Share-based payments Performance Rights & Options (2) Performancerelated percentage

2013 Directors T B Crommelin (7) Chairman M A Ward Managing Director N G Politis Non-executive Director P W Henley Non-executive Director D T Ryan Non-executive Director D A Cowper Non-executive Director B W Macdonald (7) Chairman

Total

$

$

$

$

$

$

$

%

86,666 925,000 66,250 75,000 75,000 75,000 33,858 1,336,774

100,000 100,000

790 133,221 790 790 790 790 329 137,500

7,922 25,000 6,053 6,844 6,844 6,844 59,507

-

-

95,378

33 -

422,871 (5) 1,606,092 (5) 422,871 73,093 82,634 82,634 82,634 34,187 2,056,652

Executives K T Thornton General Manager Qld & NT S G Best Chief Financial Officer D G Stark General Counsel & Company Secretary

200,000 306,671

548,535 93,000

77,696 32,271

17,775 27,988

-

62,740 41,827

906,746 501,757

67 27

253,337 760,008

76,500 718,035

22,851 132,818

23,127 68,890

-

25,000 129,567

400,815 1,809,318

25

14

A.P. Eagers Annual Report 2013

Directors’ Report Continued

Short Term benefits Salary & fees Bonus & commissions Non monetary and other benefits (3)

Post employment benefits Superannuation benefits Directors Retiring Allowance accrual (1)

Share-based payments Performance Rights & Options (2) Performancerelated percentage

2012 Directors B W Macdonald Chairman M A Ward Managing Director N G Politis Non-executive Director P W Henley Non-executive Director D T Ryan Non-executive Director T B Crommelin Non-executive Director D A Cowper (4) Non-executive Director

Total

$

$

$

$

$

$

$

%

95,000 925,000 60,000 75,000 75,000 75,000 37,500 1,342,500

125,000 125,000

639 206,444 (6) 639 639 639 639 319 209,958

25,000 20,700 6,750 6,750 6,750 3,375 69,325

5,000 5,000

-

95,639

46 -

849,993 (5) 2,131,437 (5) 849,993 86,339 82,389 82,389 82,389 41,194 2,601,776

Executives K T Thornton General Manager Qld & NT S G Best Chief Financial Officer D G Stark General Counsel & Company Secretary

200,000 286,672

548,835 87,000

73,797 28,752

16,470 27,826

-

129,615 86,410

968,717 516,660

70 34

243,338 730,010

25,000 660,835

28,438 130,987

21,075 65,371

-

23,455 239,480

341,306 1,826,683

14

(1)

Accrued and paid on retirement.

(2) Performance rights and options granted under the EIP are valued using a binomial tree methodology. A pre-determined value of the portion of the rights and options attributable to the year under review has been expensed in the income statement in conformity with AASB 2 and reflected in each recipient’s remuneration. In each of 2013 and 2012, performance rights and options vested under the EIP for the previous year. Vesting is subject to the achievement of performance hurdles as previously detailed in this Remuneration Report. (3) Includes benefits such as the provision of motor vehicles, insurance policy costs and the movement in the provision for the individual’s employee entitlements. (4) Mr Cowper was appointed as a Director on 1 July 2012. (5) The share-based payment is based on progressive recognition of each award grant over its expected vesting period, which results in an increased cost in the earlier years of the EIP and a reduced cost in later years on the assumption that all performance hurdles will be achieved over the five year period. For further details, refer to commentary on pages 11 and 12 under the heading “CEO’s Participation in EIP”. (6) Includes $116,759 as a provision for long service leave based on Mr Ward’s initial seven years’ service to the Company. (7) Mr Crommelin was appointed Chairman on the retirement of Mr Macdonald on 8 May 2013.

A.P. Eagers Annual Report 2013

15

Directors’ Report Continued

DIRECTORS’ INTERESTS The relevant interest of each Director in the shares, rights and options issued by the Company as at the date of this report are as follows: Ordinary Shares (fully paid) T B Crommelin N G Politis M A Ward P W Henley D T Ryan D A Cowper 332,242 65,257,552 2,759,280 104,215 8,248 Share Options 3,655,775 (1)

Performance Rights 200,030 (1) -

(1) Share options and performance rights vest only if performance hurdles are met in accordance with the Executive Incentive Plan, as described in the Remuneration Report.

SHARES UNDER OPTION 5,144,000 options and 59,200 performance rights were granted by the Company over unissued shares during the year under review and none have been granted since the end of the year. 72,001 fully paid shares were issued as a result of the exercise of options and 439,268 fully paid shares were issued on the vesting of performance rights during or since the year under review. INDEMNIFICATION AND INSURANCE The Company’s constitution provides that, to the extent permitted by law, the Company must indemnify each person who is or has been a Director or Secretary against liability incurred in or arising out of the discharge of duties as an officer of the Company or out of the conduct of the business of the Company and specified legal costs. The indemnity is enforceable without the person having to incur any expense or make any payment, is a continuing obligation and is enforceable even though the person may have ceased to be an officer of the Company. At the start of the financial year under review and at the start of the following financial year, the Company paid insurance premiums in respect of Directors and Officers liability insurance contracts. The contracts insure each person who is or has been a Director or executive officer of the Company against certain liabilities arising in the course of their duties to the Company and its controlled entities. The Directors have not disclosed details of the nature of the liabilities covered or the amount of the premiums paid in respect of the insurance contracts as such disclosure is prohibited under the terms of the contracts. AUDITOR Deloitte Touche Tohmatsu continues in office as auditor of the group in accordance with section 327 of the Corporations Act 2001.

NON-AUDIT SERVICES A copy of the auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 is attached and forms part of this report. The Company may decide to employ its auditor on assignments additional to their statutory audit duties where the auditor’s expertise or experience with the group is important. Details of the amounts paid or payable to the auditor for audit and non-audit services provided to the group during the year are set out in note 32 to the consolidated financial report. In accordance with advice received from the Audit, Risk & Remuneration Committee, the Directors are satisfied that the provision of the non-audit services was compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 and did not compromise the auditor independence requirements of the Act because all non-audit services were reviewed by the Committee to ensure they did not impact the partiality and objectivity of the auditor. ROUNDING OF AMOUNTS TO NEAREST THOUSAND DOLLARS The Company is of a kind referred to in Class Order 98/0100 issued by the Australian Securities & Investments Commission, relating to the “rounding off” of amounts in the Directors’ report and financial report. Amounts in the Directors’ report and financial report have been rounded off to the nearest thousand dollars in accordance with that Class Order. This report is made in accordance with a resolution of the Directors.

Martin Ward Director Brisbane, 26 February 2014

16

A.P. Eagers Annual Report 2013

Auditor’s Declaration of Independence

A.P. Eagers Annual Report 2013

17

Corporate Governance Statement

This statement outlines our corporate governance practices against the recommendations of the ASX Corporate Governance Council. We have followed the Council’s recommendations throughout 2013 except as referred to below. Principle 1 Lay solid foundations for management and oversight We have a dynamic board which, over many years, has developed and implemented policies and practices designed to promote a culture of good corporate governance. The board’s key responsibilities are listed in our board charter, which is available on our website. The charter includes a delegation of powers to the Chief Executive Officer for day-to-day business. In recognition of the benefits of having a board that is able to act quickly, effectively and efficiently, specific delegated functions are not itemised in the charter (ASX recommendation 1.1). The process for evaluating performance of our senior executives is disclosed in the remuneration report. Evaluations have taken place during the reporting period in accordance with that process. Principle 2 Structure the board to add value Independence Our board consists of six Directors, including five non-executive Directors. The Managing Director, Mr Ward, is the only executive Director. Three Directors, rather than a majority of the board, are regarded as independent in terms of our board charter (ASX recommendation 2.1). In particular, Messrs Crommelin (Chairman), Henley and Cowper are considered to be independent of management and free of any business or other relationship that would materially interfere with their unfettered and independent judgement and ability to act in the best interests of the Company. Materiality thresholds are assessed on a case-by-case basis from the perspective of both the Company and each Director. In considering the question of independence, the board takes into account the ASX Corporate Governance Council’s guidelines and is not aware of any relationship that would affect the independence of the Directors whom it regards as independent.
18

As an executive of the Company’s adviser, Morgans, Mr Crommelin brings extensive knowledge and expertise to our board in areas such as corporate finance, risk management and acquisitions. The board considers that his role with Morgans does not interfere with his independence as a Director of the Company in any material respect. Mr Cowper brings a wealth of industry knowledge to the board, having specialised in providing audit, financial and taxation services to public and large private companies in the motor industry, been chairman of Horwath Chartered Accountants’ motor industry specialisation unit for six years and been the Company’s lead audit partner for seven years until 2008 while at Horwath and Deloitte Touche Tohmatsu. Given that more than five years have elapsed since he was lead audit partner and more than four years since he left Deloitte, the board considers that his former role does not interfere with his independence as a Director of the Company. In addition to the independent Directors, the board derives significant benefit from the expertise and experience of Messrs Politis and Ryan. Mr Politis has vast industry experience and is a Director and controlling shareholder of the Company’s largest shareholder, WFM Motors Pty Ltd. Mr Ryan has significant management experience in the automotive and other industries and is a Director and Chief Executive Officer of WFM Motors Pty Ltd. This combination of Directors has provided balance on the board. To assist in the proper discharge of their duties, Directors are entitled to obtain independent professional advice at the Company’s expense with the Chairman’s prior approval, not to be unreasonably withheld. Nomination Committee The board as a whole acts as a nomination committee and believes it is not necessary to establish a separate nomination committee or a formal policy for the nomination and appointment of Directors (ASX recommendations 2.4 and 2.6).

If a vacancy occurs the board identifies candidates with appropriate knowledge, experience, expertise and competencies having regard to various factors including our strategic and operational requirements and the attributes and diversity of incumbent Directors. Candidates require a disposition that would enable them to offer and resolve differing views and ask discerning questions. They are made aware of the time commitments needed of our Directors. Appointments are made on a non-discriminatory basis. Newly appointed Directors are provided with an induction program to allow them to participate fully, actively and effectively in board decision-making at the earliest opportunity. Non-executive Directors are required to retire periodically and may resubmit themselves for re-election by shareholders in accordance with the Corporations Act, the ASX listing rules and the Company’s constitution. Board Evaluation Under the board charter, the Chairman is responsible for ensuring that board meetings are conducted competently and ethically and that Directors individually and as a group have opportunities to air differences, explore ideas and generate the collective views and wisdom necessary for the proper operation of the board and Company. In this context, the Chairman undertakes a continuous review of the performance and contribution of individual Directors, whilst the board as a whole conducts an ongoing evaluation of its performance and that of its committee. Details of each Director’s term in office, qualifications, professional skills, experience, expertise and responsibilities are set out on page 5. Principle 3 Promote ethical and responsible decision-making We have established a range of procedures, practices and policies rather than a specific code of conduct (ASX recommendation 3.1), which promote and encourage: • • • ethical and responsible decision-making compliance with legal obligations the reporting of suspected violations of laws and unethical business practices

A P Eagers Annual Report 2013

Corporate Governance Statement Continued



the fair, impartial and prompt consideration at an appropriate level of any grievances raised by employees and other stakeholders

These help to foster a culture of compliance and maintain confidence in the Company’s integrity. They are incorporated into an “Employee Information and Policy Manual” which is provided to all new employees and Directors. Diversity We recognise the value and inherent benefits in having a diverse workforce and our diversity policy is available on our website. The board has set the following objectives for achieving gender diversity: • Establishment of a Female Employee Network to support the professional development of women and discuss how more women might be attracted into our workforce.

Our diversity policy and objectives are included within the content of the diversity training programme for managers and have been discussed with management teams during the year. In addition, they have been placed on our intranet site for all staff to view and also on our internet site. The automotive industry has traditionally been more attractive to male than female employees. This is exacerbated in vehicle servicing and parts supply operations which employed 47% of our total 3,084 employees at the end of 2013. In our servicing and parts operations, 5% of employees were women. Whilst in our other operations, 39% of employees were women. 18% of our total employees and 9% of our 64 General Managers were women, with no female members of the board. Principle 4 Safeguard integrity in financial reporting Our Audit, Risk & Remuneration Committee is comprised of three independent non-executive Directors Messrs Cowper (Committee Chairman), Henley and Crommelin. Committee members’ qualifications, experience and attendance at committee meetings are detailed on pages 5 and 6. The Committee Chairman may invite any member of management, the external or internal auditor or any other person to attend committee meetings. The committee may also meet with any person without management in attendance. As set out in the committee charter (which is available on our website), the committee reviews and makes recommendations to the board in relation to: • Accounting Practices and Tax annual and half yearly financial reports, significant accounting policy changes, the adequacy and effectiveness of reporting and accounting controls and practices and material taxation matters



External Audit - the external auditor’s appointment (including procedures for the selection and appointment of the auditor and for the rotation of the audit engagement partner), fees, audit plan, performance, independence, provision of non-audit services and management letters Internal Audit - the internal audit charter, plan, reports and independence, the provision of nonaudit services and any restrictions on the auditor Risk Management - the adequacy and effectiveness of risk management and internal control systems and the standard of corporate conduct in arms-length dealings and likely conflicts of interest Remuneration matters







This network has been established within the group. Meeting agendas are based on criteria established by the Workplace Gender Equality Agency. Recommendations from the network are for discussion with senior management and action as appropriate, and include initiatives such as: the use of employment advertisements that expressly encourage women to apply; paid maternity leave exceeding the government minimum; and an increased use of female interviewers for employment interviews. • Review of payroll system to determine whether there is equity in pay for men and women doing similar roles in similar circumstances.

Principle 5 Make timely and balanced disclosure We understand and respect that prompt disclosure of price-sensitive information is central to the efficient operation of the ASX’s securities market. Policies have been adopted requiring compliance with applicable regulatory requirements including ASX listing rules and noting both a legal and moral responsibility to conform with these obligations. ASX continuous disclosure obligations and any share transactions by Directors are considered at each scheduled board meeting as standing agenda items. Directors have also entered into agreements with the Company, which require them to provide all information necessary to enable the Company to comply with disclosure obligations. Our securities trading policy (which is available on the Company’s website) confirms the agreement by Directors to inform the Company of changes in their relevant interests as soon as reasonably possible and within three business days. The Company Secretary oversees disclosure of information to the ASX.

This annual review has concluded that equity in pay does exist in our group. The issue of equity in pay has also been considered by the Female Employee Network, with no issues of pay inequality identified. • Provision of diversity training for managers.

This diversity training for managers continues across the group. In addition to raising the awareness of our commitment to our diversity policy, the training assists managers to identify how they can positively influence workplace diversity within their businesses. • Demonstrate our commitment to the diversity policy by widely communicating its content and these objectives.

A P Eagers Annual Report 2013

19

Corporate Governance Statement Continued

Principle 6 Respect the rights of shareholders Effective communication with shareholders is important. We keep shareholders properly informed through the following means notwithstanding the absence of a specific communications policy (ASX recommendation 6.1): • • reports to the ASX and media releases half year and full year profit announcements and market updates, as appropriate annual reports Chairman and Chief Executive Officer addresses to our annual general meeting reports and announcements on our website

• •

ensuring material business risks are effectively managed monitoring and reporting on any material changes to our risk profile



the financial statements give a true and fair view of our financial position and performance

• •



Shareholders are encouraged to attend and participate in our annual general meeting by submitting questions and comments through the Chairman either before or during the meeting. The external auditor also attends our annual general meeting to answer questions about the audit and independent audit report. Principle 7 Recognise and manage risk Risk Management Framework We place a high priority on the identification of material risks and opportunities. By understanding and managing risk, greater certainty and confidence can be provided to shareholders, employees, customers, franchise partners and other stakeholders. Our risk management policy is available on our website. In accordance with the policy, we have established the following framework for the oversight and management of risk. The board is responsible for: • • overseeing our risk management function ensuring a sound system of risk oversight, management and internal control is in place

The Audit, Risk & Remuneration Committee assists the board by monitoring, assessing and reporting on the effectiveness of our risk management system and reviewing the internal audit function. The internal audit function operates independently of, but Principle 8 in consultation with, the external auditor. Remunerate fairly and responsibly In addition, the Chief Financial Officer The Audit, Risk & Remuneration is responsible for the establishment, implementation and maintenance of our Committee reviews and makes recommendations on remuneration risk management system. matters including arrangements for These controls are intended to assist non-executive Directors and the Chief in managing risk at acceptable levels Executive Officer. taking into account our objectives, The remuneration report details business model, industry, market remuneration arrangements of environment, ownership structure and Directors and senior executives. It appetite for risk. clearly distinguishes the structure of non-executive Directors’ remuneration Group Risk Register from that of the Chief Executive Officer Within the framework outlined and other senior executives. above, management has designed Consistent with the ASX Corporate and implemented a system of risk Governance Council’s guidelines, there management and internal control. The is no retirement benefits plan for nonsystem includes a group risk register executive Directors. methodology. Material business risks have been identified and prioritised so Our securities trading policy prohibits they may be managed appropriately. participants in any employee equity plan from using derivatives, hedging or similar The Audit, Risk & Remuneration Committee monitors, reviews and reports arrangements to reduce or eliminate risk in relation to securities that are unvested to the board on our risk management or subject to trading restrictions, without performance. Through the committee, the executive has reported to the board on the Chairman’s approval. the effectiveness of our management of material business risks and it is satisfied that the risk management process enables material risks to be appropriately identified, prioritised, monitored and managed. Strategic risks and opportunities are reported to the board on an ongoing basis. CEO & CFO declaration The Chief Executive Officer and Chief Financial Officer have declared that in their opinion: • our financial records have been properly maintained in accordance with section 286 of the Corporations Act the financial statements comply with accounting standards

The Chief Executive Officer and Chief Financial Officer have also confirmed that their declaration was founded on a sound system of risk management and internal control and that the system was operating effectively in all material respects in relation to financial reporting risks.



20

A.P. Eagers Annual Report 2013

FINANCIAL STATEMENTS

A.P. EAGERS LIMITED ABN 87 009 680 013
For the year ended 31 December 2013

Statement of Profit or Loss Statement of Profit or Loss and Other Comprehensive Income Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows Notes to and forming part of the Financial Statements Directors’ Declaration Independent Auditor’s Report

22 23 24 25 26 27 83 84

A.P. Eagers Annual Report 2013

21

Statement of Profit or Loss for the year ended 31 December 2013

CONSOLIDATED Note 2013 $'000 2,672,813 2,000 1,959 (749) (2,193,541) (224,649) 5(a) 5(a) 5(b) (23,188) (12,354) (135,581) 2012 $'000 2,642,535 (36) 1,133 1,673 71,997 (2,255,318) (213,433) (24,812) (11,595) (810) (132,599)

Revenue Other gains and losses excluding impairment reversal Reversal of impairment of non-current assets Share of net profits of associate Changes in inventories of finished goods and work in progress Raw materials and consumables used Employee benefits expense Finance costs

3 4 5(b) 40(d)

interest exp

Depreciation and amortisation expense Impairment of non-current assets Other expenses

Profit before tax Income tax expense Profit for the year 6

86,710 (22,748) 63,962

78,735 (23,184) 55,551

Attributable to: Owners of the parent Non-controlling interests

27(b)

63,609 353 63,962 Cents

55,370 181 55,551 Cents

Earnings per share: Basic earnings per share Diluted earnings per share 37 37 36.4 35.3 34.0 33.2

The above Statement of Profit or Loss is to be read in conjunction with the accompanying notes.

22

A.P. Eagers Annual Report 2013

Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2013

CONSOLIDATED CONSOLIDATED Note Note 2013 2012 2012 2011 $'000 $'000 $'000 $'000 63,962 55,551

Profit for the year Profit for the year Other Comprehensive Income Other Comprehensive Income Items that will not be reclassified subsequently to profit or loss: Gain onItems that will not be reclassified subsequently to profit or loss: revaluation of property Income tax relating to items that will not be reclassified subsequently Gain on revaluation of property Income tax relating to items that will not be reclassified subsequently Items that may be reclassified subsequently to profit or loss: Gain on revaluation of available for sale Investment Income tax expense Items that may be reclassified subsequently to profit or loss: Fair value gain/(loss) arising from cash flow hedges during the year Gain on revaluation of available-for-sale Investment Income tax (expense)/benefit Income tax expense 27(a) 27(a) 27(a) 27(a) 27(a) 27(a) 27(a) 27(a) 27(a) 27(a)

55,551

40,289

3,203 (961) 2,242 735 (222)

735 (222) 513 3,142 (942)

22,795 (6,839) 15,956

513

21,906 (6,572)

2,200

15,334

1,003 21,906 (202) 60 (300) (6,572) (142) 703 15,334 18,901 82,863 15,705

-

Total other comprehensive income for the year Cash flow hedges Total comprehensive income for the year Fair value loss arising during the year Total comprehensive income attributable to: Income tax credit Owners of the parent Non-controlling interests Total other comprehensive income for the year

27(a) 27(a)

71,256 (2,258) (202) 677 71,075 (1,581) (142) 181 71,256 15,705 619 60

82,510 353 82,863

The above Statement of Profit or Loss and Other Comprehensive Income is to be read in conjunction with the accompanying notes. Total comprehensive income for the year Total comprehensive income attributable to: Owners of the parent Non-controlling interests

71,256

40,908

71,075 181 71,256

40,813 95 40,908

The above Statement of Profit or Loss and Other Comprehensive Income is to be read in conjunction with the accompanying notes.

A.P. Eagers Annual Report 2013

23

Statement of Financial Position as at 31 December 2013

CONSOLIDATED Note Current Assets Cash and cash equivalents Trade and other receivables Leasebook receivables Loans receivables Inventories Other Property assets held for sale Total Current Assets Non-Current Assets Leasebook receivables Other loan receivable Available-for-sale investments Investment in associate Property, plant and equipment Intangible assets Total Non-Current Assets Total Assets Current Liabilities Trade and other payables Derivative financial instruments Borrowings - bailment and finance lease payable Borrowings - leasebook liabilities Current tax liabilities Provisions Total Current Liabilities Non-Current Liabilities Borrowings - leasebook liabilities Borrowings - others Derivative financial instruments Deferred tax liabilities Provisions Total Non-Current Liabilities Total Liabilities Net Assets Equity Contributed equity Reserves Retained earnings Equity attributable to equity holders of the parent Non-controlling Interest Total Equity 2013 $'000 12,106 94,919 11 409,742 7,301 524,079 21,612 545,691 2012 $'000 8,716 96,567 650 163 410,491 2,629 519,216 23,963 543,179

8 9(a) 9(b) 9(c) 10 11 11(a)

12(a) 12(b) 13 14 15 16

1,437 195,195 4,327 344,956 125,259 671,174 1,216,865

89 376 162,590 3,461 350,862 117,521 634,899 1,178,078

17 18 19(a) 19(b) 20 21

103,590 665 303,811 6,203 17,389 431,658

142,826 817 304,235 504 7,909 15,059 471,350

22(a) 22(b) 18 23 24

211,078 534 27,483 6,987 246,082 677,740 539,125

8 209,097 1,385 20,599 7,103 238,192 709,542 468,536

26(a) 27(a) 27(b)

231,205 108,612 198,369 538,186 939 539,125

206,277 90,636 171,113 468,026 510 468,536

The above Statement of Financial Position is to be read in conjunction with the accompanying notes.

24

A.P. Eagers Annual Report 2013

Statement of Changes in Equity for the year ended 31 December 2013

Issued capital CONSOLIDATED 2013 Balance at 1 January 2013 Profit for the year Other comprehensive income/(loss) Gain on revaluation of properties Gain on revaluation of available for sale investment Gain on cash flow hedge Income tax relating to components of other comprehensive income Total comprehensive income for the year Share based payments Transfer to retained earnings Issue of shares under DRP Issue of shares - others Issue of shares to staff Issue of shares to non- controlling entity Payment of dividend Balance 31 December 2013 2012 Balance at 1 January 2012 Profit for the year Other comprehensive income/(loss) Gain on revaluation of properties Gain on revaluation of available for sale investment Loss on cash flow hedge Income tax relating to components of other comprehensive income Total comprehensive income for the year Share based payments Issue of shares under DRP Issue of shares (Purchase of Shares in AHG) Issue of shares to staff Share buy-back scheme Payment of dividend Balance 31 December 2012 $'000

InvestAttributAsset Sharement able to Non revaluabased revaluaowners Contion Hedging payments tion Retained of the trolling reserve reserve reserve reserve earnings parent Interest $'000 $'000 (1,542) 1,003 (300) 703 (839) $'000 5,791 1,453 (2,361) 4,883 $’000 15,334 22,795 (6,839) 15,956 31,290 $'000 $'000 $'000 510 353 353 272 (196) 939

Total $’000 468,536 63,962 3,203 22,795 1,003 (8,100) 82,863 1,453 22,161 231 175 272 (36,566) 539,125

206,277 71,053 22,161 231 2,536 3,203 (961) 2,242 (17) -

171,113 468,026 63,609 63,609 17 63,609 3,203 22,795 1,003 (8,100) 82,510 1,453 22,161 231 175

(36,370) (36,370) 198,369 538,186

231,205 73,278

162,047 11,619 31,804 1,198 (391) 206,277

70,540 735 (222) 513 71,053

(1,400) (202) 60 (142) (1,542)

5,189 1,494 (892) 5,791

21,906 (6,572) 15,334 15,334

143,795 380,171 55,370 55,370 55,370 735 21,906 (202) (6,734) 71,075 1,494 11,619

444 181 181 (115) 510

380,615 55,551 735 21,906 (202) (6,734) 71,256 1,494 11,619 31,804 306 (391) (28,167) 468,536

31,804 306 (391) (28,052) (28,052) 171,113 468,026

The above Statement of Changes in Equity is to be read in conjunction with the accompanying notes.

A.P. Eagers Annual Report 2013

25

Statement of Cash Flows

for the year ended 31 December 2013

CONSOLIDATED Note Cash flows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Receipt from insurance claims Dividends received Interest received Interest and other costs of finance paid Income taxes paid Net cash provided by operating activities Cash flows from investing activities Payments for shares in other corporations Payment for acquisition of businesses Payment for acquisition of brand name Payments for property, plant and equipment Proceeds from sale of property, plant and equipment Proceeds from sale of businesses Net cash used in investing activities Cash flows from financing activities Receipt from issue of shares Proceeds from borrowings Repayment of borrowings Dividends paid to minority shareholders of a subsidiary Dividends paid to members of A.P. Eagers Limited Net cash provided by/(used in) financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of the financial year 8 2,684 32,078 (30,873) (196) (14,127) (10,434) 3,390 8,716 12,106 3,767 75,800 (33,552) (115) (20,284) 25,616 (4,563) 13,279 8,716 29(a) (56,777) (7,137) (207) (14,529) 15,411 900 (62,339) (59,569) (367) (28,843) 2,964 (85,815) 38 2,919,290 (2,808,033) 162 11,064 1,220 (22,943) (24,597) 76,163 2,890,402 (2,795,418) 456 5,454 716 (24,438) (21,536) 55,636 2013 $’000 2012 $’000

The above Statement of Cash Flows is to be read in conjunction with the accompanying notes.

26

A.P. Eagers Annual Report 2013

Notes to and forming part of the Financial Statements
31 December 2013

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) General Information and basis of preparation The financial report covers the Group (consolidated entity) of A.P. Eagers Limited and its subsidiaries (consolidated financial statements). A.P. Eagers Limited is a publicly listed company incorporated and domiciled in Australia. This general purpose financial report has been prepared in accordance with Australian equivalents to International Financial Reporting Standards (AIFRS), other authoritative pronouncements of the Australian Accounting Standards Board, Australian Accounting Interpretations and the Corporations Act 2001. For the purpose of preparing the financial statements, the company is a for profit entity. Compliance with IFRS The financial report complies with Australian Accounting Standards, which include AIFRS. Compliance with AIFRS ensures that the financial report, comprising the financial statements and notes thereto, complies with International Financial Reporting Standards (IFRS). Historical cost convention These financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets, derivatives and certain classes of property, plant and equipment to fair value. Functional and Presentation Currency The functional and presentation currency of the Group is the Australian Dollar. The financial statements were authorised for issue by the directors on the 26th February 2014. Accounting Policies The following is a summary of the material accounting policies adopted in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated.

(b) Basis of consolidation The consolidated financial statements incorporate the financial statements of A.P. Eagers Limited (The Company) and entities (including structured entities) controlled by the Company and its subsidiaries. Control is achieved when the Company: • • has power over the investee; is exposed, or has rights, to variable returns from its involvement with the investee; and has the ability to use its power to affect its returns.

Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the noncontrolling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the noncontrolling interests even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between memebers of the Group are eliminated in full on consolidation. (i) Changes in the Groups ownership interests in existing subsidiaries. Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company. When the Group loses control of a subsidiary, a gain or loss is recognised in profit or loss and is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. All amounts previously recognised in other comprehensive income in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable AASBs). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39, when applicable, the cost on initial recognition of an investment in an associate or a joint venture.



The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. When the company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the revelant activities of the investee unilaterally. The Company considers all revelant facts and circumstances in assessing whether or not the Company’s voting rights in an investee are sufficient to give it power, including: • the size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders; potential voting rights held by the Company, other vote holders or other parties; rights arising from other contractual arrangements; and any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the revelant activities at the time that decisions need to be made, including voting patterns at pervious shareholders’ meetings.



• •

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the company gains control until the date when the Company ceases to control the subsidiary.

A.P. Eagers Annual Report 2013

27

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (ii) Investments in associates An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control over those policies. The results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting, except when the investment, or a portion thereof, is classified as held for sale, in which case it is accounted for in accordance with AASB 5. Under the equity method, an investment in an associate is initially recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group’s share of the profit and loss and other comprehensive income of the associate. When the Group’s share of losses of an associate exceeds the Group’s interest in that associate (which includes any longterm interests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the assoociate. An investment in an associate is accounted for using the equity method from the date on which the investee becomes an associate. On acquisition of the investment in an associate, any excess of the cost of the investment over the Group’s share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets and liablilties over the cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the investment is acquired.

The requirements of IAS 39 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group’s investment in an associate. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognised forms part of the carryng amount of the investment. Any reversal of that impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases. The Group discontinues the use of the equity method from the date when the investment ceases to be an associate, or when the investment is classified as held for sale. When the Group retains an interest in the former associate and the retained interest is a financial asset, the Group measures the retained interest at fair value at that date and the fair value is regarded as its fair value on initial recognition in accordance with IAS 39. The difference between the carrying amount of the associate at the date the equity method was discontinued, and the fair value of any retained interest and any proceeds from disposing of a part interest in the associate is included in the determination of the gain or loss on disposal of the associate. In addition, the Group accounts for all amounts previously recognised in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by that associate would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when the equity method is discontinued. The Group continues to use the equity method when an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate. There is no remeasurement to fair value upon such changes in ownership interests.

When the Group reduces its ownership interest in an associate but the Group continues to use the equity method, the Group reclassifies to profit or loss the proportion of the gain or loss that had previously been recognised in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be classified to profit or loss on the disposal of the related assets or liabilities. When a Group entity transacts with an associate of the Group, profits and losses resulting from the transactions with the associate are recognised in the Group’s consolidated financial statements only to the extent of interests in the associate that are not related to the Group. (c) Operating Segments Operating segments are identified based on internal reports that are regularly reviewed by the entity’s chief operating decision maker in order to allocate resources to the segment and assess its performance. The Group has four operating segments being (i) Car Retail (ii) Truck Retail (iii) Property (iv) Investment and all other. (d) Revenue (i) Sales revenue Revenue from the sales of motor vehicles and parts is recognised when the buyer has accepted the risks and rewards of ownership, generally by taking delivery of the goods. (ii) Service revenue Service work on customers’ motor vehicles is carried out under instructions from the customer. Service revenue is recognised based upon the percentage completion of the work requested. The percentage completion is measured by reference to labour hours incurred to date as a percentage of estimated total labour hours for the service to be performed. Revenue arising from the sale of parts fitted to customers’ vehicles during service is recognised upon delivery of the fitted parts to the customer upon completion of the service.

28

A.P. Eagers Annual Report 2013

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (iii) Rental income Rental income from operating leases is recognised in income on a straight-line basis over the lease term. (iv) Interest revenue Interest revenue is recognised on a time proportional basis, taking into account the effective interest rates applicable to the financial assets. (v) Dividend revenue Dividend revenue is recognised when the right to receive a dividend has been established. Dividends received from associates are accounted for in accordance with the equity method of accounting in the consolidated financial statements. (vi) Goods and Services Tax (GST) All revenue is stated net of the amount of Goods and Services Tax (GST). (e) Finance costs Borrowing costs are recognised as expenses in the period in which they are incurred. Borrowing costs include: • • • • interest on bank overdrafts, short and long-term borrowings interest on vehicle bailment arrangements interest on leasebook and finance lease liabilities amortisation of ancillary costs incurred in connection with the arrangement of borrowings

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. (ii) Goods and services tax (“GST”) Revenues, expenses and assets are recognised net of the amount of GST except: • where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and receivables and payables are stated with the amount of GST included.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. (g) Leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease. (h) Business Combinations The purchase method of accounting is used for all business combinations regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the date of exchange. Acquisition related costs are recognised in profit or loss as incurred. Where equity instruments are issued in an acquisition, the value of the instruments is their published market price as at the date of exchange unless, in rare circumstances, it can be demonstrated that the published price at the date of exchange is an unreliable indicator of fair value and that other evidence and valuation methods provide a more reliable measure of fair value. Transaction costs arising on the issue of equity instruments are recognised directly in equity. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill (refer to Note 1(s)). If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in profit or loss but only after a reassessment of the identification and measurement of the net assets acquired.



(f) Taxes (i) Income tax The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the notional income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position. Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from or payable to the taxation authority, are classified as operating cash flows.

A.P. Eagers Annual Report 2013

29

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present values as at the date of acquisition. The discount rate used is the incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. If the initial accounting for a business acquisition is incomplete by the end of the reporting period in which the combination occurs, the consolidated entity reports provisional amounts for the items for which accounting is incomplete. The provisional amounts are adjusted during the measurement period (no longer than 12 months from the initial acquisition) on a retrospective basis by restating the comparative information presented in the financial statements. (i) Impairment of long lived assets (excluding Goodwill) Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units “CGU”) and these cash flows are discounted using the estimated weighted average cost of capital of the asset/CGU. An impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease (refer Note 1(p)). Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does

not exceed the carrying amount that would have been determined had no impairment losses been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised in profit or loss immediately, unless the relevant asset is carried at fair value, in which case, the reversal of the impairment loss is treated as a revaluation increase (refer Note 1 (p)). (j) Cash and cash equivalents Cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other shortterm, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position. (k) Receivables Leasebook receivables A receivable is recognised for this class of debtor when the loan documentation is signed. The carrying amount of the debt is net of unearned income. Income from lease and mortgage loan contracts is brought to account in accordance with a method that ensures that income earned over the term of the contract bears a constant relationship to the funds employed. Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for doubtful debts. Trade receivables are due for settlement no more than 60 days from the date of recognition. In respect of trade and leasebook receivables, collectability is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for doubtful debts is raised where some doubt as to collectability exists. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in profit or loss.

(l) Inventories New motor vehicles are stated at the lower of cost and net realisable value. Demonstrator vehicles are stated at the lower of cost and net realisable value. Costs are assigned on the basis of specific identification. Used motor vehicles are stated at the lower of cost and net realisable value on a unit by unit basis. Net realisable value has been determined by reference to the likely net realisable value given the age of the vehicles at year end. Costs are assigned on the basis of specific identification. Spare parts and accessories are stated at the lower of cost and net realisable value. Costs are assigned to individual items on the basis of weighted average cost. Work in progress is stated at cost. Cost includes labour incurred to date and consumables utilised during the service. Costs are assigned to individual customers on the basis of specific identification. (m) Investments and other financial assets Investments are recognised and derecognised on settlement date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs except for those financial assets classified as at fair value through profit or loss which are initially measured at fair value. Subsequent to initial recognition, investments in associates are accounted for under the equity method in the consolidated financial statements. The group classifies its other financial assets in the following categories: (i) available-for-sale financial assets and (ii) loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its investments at initial recognition and re-evaluates this designation at each reporting date.

30

A.P. Eagers Annual Report 2013

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (i) Available-for-sale financial assets Available-for-sale financial assets are initially measured at cost at date of acquisition, which include transaction costs, and subsequent to initial recognition, they are carried at fair value. Unrealised gains and losses arising from changes in the fair value of non-monetary securities classified as available-for-sale are recognised in equity in the available-for-sale investments revaluation reserve. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments are included in profit or loss as gains and losses from the sale or impairment of investment securities. The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. These include reference to the fair values of recent arm’s length transactions, involving the same instruments or other instruments that are substantially the same, discounted cash flow analysis, and pricing models to reflect the issuer’s specific circumstances. The Group assesses at each balance date whether there is objective evidence that a financial asset or group of financial assets is impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in fair value of a security below its cost is considered in determining whether the security is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss - is removed from equity and recognised in profit or loss.

(ii) Loans and receivables Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after the balance date which are classified as non-current assets. Loans and receivables are included in receivables in the statement of financial position (Notes 9 and 12). Loans and receivables are measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest rate classification of its investments at initial recognition and re-evaluates this designation at each reporting date. (n) Fair value estimation The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The fair value of financial instruments traded in active markets (such as publicly traded derivatives and available-for-sale securities) is based on quoted market prices at the balance date. The quoted market price used for financial assets held by the Group is the current bid price. The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date. Quoted market prices or dealer quotes for similar instruments are used for long-term debt instruments held. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value of interest rate swaps is determined based on market expectations of future interest rates.

The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. (o) Derivatives Derivatives are recognised at their fair value at each reporting date. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as hedges of exposure to variability in cash flows, which includes hedges for highly probable forecast transactions (cash flow hedges). The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessments, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items. Refer further details in Note 18.

A.P. Eagers Annual Report 2013

31

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (i) Cash flow hedges The change in the fair value from remeasuring derivatives that are designated and qualify as cash flow hedges is deferred in equity as a hedging reserve, to the extent that the hedge is effective. The ineffective portion is recognised in profit or loss immediately. Amounts deferred in the hedging reserve are recycled in profit or loss in the periods when the hedged item is recognised in profit or loss. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or non-financial liability, the gains or losses previously deferred in the hedging reserve are transferred from equity and included in the initial cost and measurement of the cost of the asset or liability. Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. Any cumulative gain or loss deferred in the hedging reserve at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was deferred in equity is recognised immediately in profit or loss. (p) Property, plant and equipment Land and buildings are shown at fair value, based on annual assessment by the directors supported by periodic valuations by external independent valuers, less subsequent depreciation for buildings. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. All other property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred. Increases in the carrying amounts arising on revaluation of land and buildings are credited to property, plant and equipment revaluation reserve in shareholders’ equity. To the extent that the increase reverses a decrease previously recognised in profit or loss, the increase is first recognised in profit or loss. Decreases that reverse previous increases of the same asset are first charged against revaluation reserves directly in equity to the extent of the remaining reserve attributable to the asset; all other decreases are charged to profit or loss. Land is not depreciated. Depreciation on other assets is calculated using the straight line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives, as follows: - Buildings - Plant & equipment - Leasehold improvements 40 years 3 - 10 years 5 - 30 years

The cost of improvements to or on leasehold properties is amortised over the unexpired period of the lease or the estimated useful life of the improvement, whichever is the shorter. The make good provision is capitalised as leasehold improvements and amortised over the term of the lease. (q) Franchise Rights Franchise rights are those rights conferred to the Group under its agreements with vehicle manufacturers and distributors. Such rights primarily include the right to sell and service the franchisor’s product within specified geographical boundaries. Franchise rights are valued on acquisition using a discounted cash flow methodology. The Group generally expects its franchise agreements to survive for the foreseeable future and anticipates routine renewals of the agreements without substantial cost. The contractual terms of the Group’s franchise agreements provide for various durations. It is generally difficult for the manufacturer or distributor to terminate or not renew a franchise unless good cause exists. The Group’s experience has been that such franchise agreements are rarely involuntarily terminated or not renewed. Accordingly the Group believes that its franchise agreements will contribute to cash flows for the foreseeable future and have indefinite lives. They are recorded at cost less any impairment. (r) Trademarks / Brand Names Trademarks / brand names are valued on acquisition where management believe there is evidence of any of the following factors; an established brand name with longevity, a reputation that may positively influence a consumers decision to purchase or service a vehicle, and strong customer awareness within a particular geographic location. Trademarks are valued using a discounted cash flow methodology. Trademarks are considered to have an indefinite life as the Group expects to hold and support such trademarks through marketing and promotional support for an indefinite period. They are recorded at cost less any impairment.

The asset’s residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (Note 1(i)). Gains and losses on disposals are determined by comparing proceeds with carrying amounts. These are included in profit or loss. When revalued assets are sold, it is Group policy to transfer the amounts included in the asset revaluation reserve in respect of those assets to retained earnings.

32

A.P. Eagers Annual Report 2013

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (s) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary, associate or business at the date of acquisition. Goodwill on acquisition of subsidiaries and businesses is included in intangible assets. Goodwill on acquisition of associates is included in investment in associates. Goodwill acquired in business combinations is not amortised. Instead, goodwill is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. An impairment loss for goodwill is recognised immediately in profit or loss and is not reversed in a subsequent period. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cashgenerating units for the purpose of impairment testing (refer Note 16(a)). (t) Trade and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. They are recognised initially at the fair value of what is expected to be paid, and subsequently at amortised cost, using the effective interest rate method. (u) Borrowings Borrowings are initially recognised at fair value net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest rate method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance date.

(v) New motor vehicle stock and related bailment Motor vehicles secured under bailment plans are provided to the Group under bailment agreements between the floor plan loan providers and entities within the Group. The Group obtains title to the vehicles immediately prior to sale. Motor vehicles financed under bailment plans held by the Group are recognised as trading stock with the corresponding liability shown as owing to the finance provider. (w) Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate taking into account the risks and uncertainties surrounding the obligation. Provision for Warranties Provision is made for the estimated claims in respect of extended warranties provided on the majority of the Group’s retail new and used vehicle sales. These claims are generally expected to settle in the next financial year but some may be extended into the following year if claims are made late in the warranty period. (x) Employee benefits A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave, when it is probable that setttlement will be required and they are capable of being measured reliably. Liabilities recognised in respect of short-term employee benefits, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement. Liabilities recognised in respect of long-term employee benefits are measured as the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to reporting date.

The Group recognises a liability and an expense for the long-term incentive plan for selected exceutives based on a formula that takes into consideration the ranking of total shareholder return measured against a comparator group of companies. Contributions are made by the Group to defined contribution employee superannuation funds and are charged as expenses when incurred. (y) Dividends Provision is made for the amount of any dividend declared on or before the end of the year but not distributed at balance date. (z) Earnings per share (i) Basic earnings per share Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element. (ii) Diluted earnings per share Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for: • • Costs of servicing equity (other than dividends) The after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses Other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares, divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element



A.P. Eagers Annual Report 2013

33

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (aa) Non-Current assets held for sale Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification. Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell. (ab) Rounding of Amounts The company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the “rounding off” of amounts in the financial report. Amounts in the financial report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. (ac) New or revised Standards and Interpretations that are first effective in the current reporting period The group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to their operations and effective for the current reporting period. The adoption of all the new and revised Standards and Interpretations has resulted in changes to the Group’s accounting policies and has effect on the amounts reported for the current and prior periods. The new and revised Standards and Interpretations has not had a material impact on profit or loss and other comprehensive income but has resulted in changes to the Group’s presentation of, or disclosure in, its financial statements.

AASB 13 Fair Value Measurement The Group has applied AASB 13 for the first time in the current year. AASB 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. The scope of AASB 13 is broad, the fair value measurement requirements of AASB 13 apply to both financial instrument items and nonfinancial instrument items for which other AASBs require or permit fair value measurements and disclosures about fair value measurements, except for share-based payment transactions that are within the scope of AASB 2 Share-based Payment, leasing transactions that are within the scope of IAS 17 Leases, and measurements that have some similarities to fair value but are not fair value (e.g. net realisable value for the purposes of measuring inventories or value in use for impairment assessment purposes). AASB 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions. Fair value under AASB 13 is an exit price regardless of whether that price is directly observable or estimated using another valuation technique. Also, AASB 13 includes extensive disclosure requirements. AASB 13 requires prospective application from 1 January 2013. In addition, specific transitional provisions were given to entities such that they need not apply the disclosure requirements set out in the Standard in comparative information provided for periods before the initial application of the Standard. In accordance with these transitional provisions, the Group has not made any new disclosures required by AASB 13 for the 2012 comparative period (please see Notes 13,15,17 and 18 for the 2013 disclosures). Other than the additional disclosures, the application of AASB 13 has not had any material impact on the amounts recognised in the consolidated financial statements.

AASB 10 Consolidated and Separate Financial Statements AASB 10 replaces the parts of AASB 127 ‘Consolidated and Separate Financial Statements’ that deal with consolidated financial statements and Interpretation 112 ‘Consolidation – Special Purpose Entities’. AASB 10 changes the definition of control such that an investor controls an investee when a) it has power over an investee; b) it is exposed, or has rights, to variable returns from its involvement with the investee, and c) has the ability to use its power to affect its returns. All three of these criteria must be met for an investor to have control over an investee. Previously, control was defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Additional guidance has been included in AASB 10 to explain when an investor has control over an investee. Some guidance included in AASB 10 that deals with whether or not an investor that owns less than 50 per cent of the voting rights in an investee has control over the investee is relevant to the Group. The directors of the Company made an assessment at the date of the initial application of AASB 10 as to whether or not the Group has control of its investments in accordance with the new definition of control and the related guidance set out in AASB 10. The directors concluded that, consistent with the accounting treatment in the comparative year no changes to the investment categories were noted. AASB 12 Disclosure of Interest in Other Entities AASB 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the application of AASB 12 has resulted in more disclosures in the consolidated financial statements. However this did not result in any changes to the financial statements.

34

A.P. Eagers Annual Report 2013

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) (ad) Standards and Interpretations in issue not yet adopted At the date of authorisation of the financial instruments, the following Standards and Interpretations relevant to the Group wre in issue but not yet yet effective. The potential impact of the new or revised Standards and Intepretations has not yet been determined. Standard/Interpretation Effective for annual reporting periods beginning on or after 1-Jan-15 Expected to be initially applied in the financial year ending 31-Dec-15

AASB 9 ‘Financial Instruments’ , and the relevant amending standards * AASB 2011-4 'Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements’ AASB 2012-3 'Amendments to Australian Accounting Standards Disclosures - Offsetting Financial Assets and Financial Liabilities’ AASB 2013-3 'Amendments to AASB 136 - Recoverable Amount Disclosures for Non-Financial Assets’ AASB 2013-7 'Amendments to AASB 1038 arising from AASB 10 in relation to consolidation and interests of policyholders’ AASB 9 Financial Instruments

1-Jul-13

31-Dec-14

1-Jan-14

31-Dec-14

1-Jan-14

31-Dec-14

1-Jan-14

31-Dec-14

AASB 9 issued in November 2009, introduced new requirements for the classification and measurement of financial assets. AASB 9 was amended in October 2010 to include requirements for the classification and measurement of financial liabilities and for derecognition. Key Requirements of AASB 9 • all recognised financial assets that are within the scope of IAS 139 Financial Instruments: Recognition and Measurement are required to be subsequently measured at amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair value at the end of subsequent accounting periods. In addition, under AASB 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss. with regard to the measurement of financial liabilities designated as at fair value through profit or loss, AASB 9 requires that the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Under IAS 39, the entire amount of the change in the fair value of the financial liability designated as fair value through profit or loss was presented in profit or loss.



The directors of the Company anticipate that the application of AASB 9 in the future may have a significant impact on amounts reported in respect of the Group’s financial assets and financial liabilities (e.g. the Group’s investments are currently classified as available-for-sale investments will have to be measured at fair value at end of subsequent reporting periods, with changes in the fair value being recognised in profit or loss). However, it is not practicable to provide a reasonable estimate of the effect of AASB 9 until a detailed review has been completed.

A.P. Eagers Annual Report 2013

35

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

2. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (a) Critical accounting estimates, assumptions and judgements Estimates and the judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Group and that are believed to be reasonable under the circumstances. The group makes estimates, assumptions and judgements concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates, assumptions and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are discussed below: (i) Estimated impairment of goodwill and other intangibles with indefinite useful lives Goodwill and other intangibles with indefinite useful lives with a carrying value of $125,259,000 (2012: $117,521,000) are tested annually for impairment, based on estimates made by directors. The recoverable amount of the intangibles is based on the greater of ‘Value in use’ or ‘Fair value less costs to sell’. Value in use is assessed by the directors through a discounted cash flow analysis which includes significant estimates and assumptions related to growth rates, margins, working capital requirements and cost of capital. Fair value less costs to sell is assessed by the directors based on their knowledge of the industry and recent market transactions. Further information on the intangibles impairment test can be found in Note 16(a).

(ii) Fair value estimation of land and buildings (including assets held for sale) Land and buildings with a carrying value of $334,272,000 (2012: $341,204,000) are carried at fair value. This fair value is determined by the directors and is supported by formal independent valuations conducted periodically but at least every three years. (iii) Available-for-sale Investment The Group continued to acquire shares in the Automotive Holdings Group Limited (AHG) during 2013. At year end the carrying value of the shares were at a fair value of $192,850,000 (2012: $160,245,000). This fair value is determined by the market value of the shares on the last trading day of the reporting period. (iv) Provisions for warranties A provision for warranties of $3,350,000 (2012: $3,313,000) has been recognised for extended warranties provided for the Group’s retail new and used vehicle sales. This provision has been estimated based on past experience and confirmation of future costs by the administrators of the warranty programmes. (v) Estimation of make good provisions An amount of $1,767,000 (2012: $1,767,000) has been estimated in respect of a leased property for any expenditure required to be incurred to restore the property back to its original state. The lease has approximately 15 years to run at balance date, with a bank guarantee being given for the $1,767,000 recognised. In terms of the lease, this amount will be indexed and will increase in the future, therefore it is the maximum estimate of what would be payable today.

36

A.P. Eagers Annual Report 2013

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

3. REVENUE CONSOLIDATED 2013 $’000 Sales revenue New vehicles Used vehicles Parts Service Other 1,624,187 531,505 335,713 160,660 68 1,612,195 542,502 319,893 153,418 152 2,628,160 2012 $’000

Other revenue Dividend received Rents Interest Proceeds of insurance claims Commissions Other

roa=sale s/assts

2,652,133

9,970 107 1,214 162 7,140 2,087 20,680

4,798 457 714 456 6,537 1,413 14,375 2,642,535

Total revenue 4. OTHER GAINS AND LOSSES Gain/(Loss) on disposal of other assets

2,672,813

2,000

(36)

A.P. Eagers Annual Report 2013

37

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

5. EXPENSES CONSOLIDATED 2013 $’000 (a) Profit before income tax includes the following specific expenses: Depreciation Buildings Plant and equipment Total depreciation Amortisation Leasehold improvements Brand names Total depreciation and amortisation (Note 15 & 16) Finance costs New vehicle bailment Other Total finance expense Rental expense relating to operating leases Minimum lease payments 17,587 16,738 10,224 12,964 23,188 11,653 13,159 24,812 2,049 105 12,354 1,768 47 11,595 3,915 6,285 10,200 3,641 6,139 9,780 2012 $’000

Contributions to superannuation funds Provision expenses Inventory Warranties Bad debts

18,865

17,714

(314) 5,421 439 5,546

1,138 4,462 451 6,051 1,494 -

Share-based payments Business acquisition costs (b) Impairment of non-current assets Impairment of intangibles (Note 16) Impairment (Reversal) of land & buildings (Note 15)

1,453 594

-

810 (1,133) (323)

38

A.P. Eagers Annual Report 2013

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

6. INCOME TAX CONSOLIDATED 2013 $’000 (a) Income tax expense (benefit) Current income tax expense Deferred income tax benefit (Note 23) 23,667 (919) 22,748 Deferred income tax expense/(benefit) included in income tax expense comprises: Decrease in deferred tax liabilities (919) (1,352) 24,536 (1,352) 23,184 2012 $’000

(b) Numerical reconciliation of income tax expense to prima facie tax payable Profit before income tax expense 86,710 78,735

Income tax calculated at 30% (2012 - 30%) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Depreciation and amortisation Non-taxable dividends Non allowable expenses Non allowable impairment expense Sundry items Income tax expense

26,013

23,621

364 (3,319) 953 (1,263) 22,748

181 (1,637) 687 243 89 23,184

(c) Amounts recognised directly in equity Aggregate deferred tax arising in the reporting period and not recognised in net profit or loss but directly credited (debited) to equity (Note 23) 8,100 6,732

The tax rate used in the above reconciliations is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under Australian tax law. There has been no change in the corporate tax rate when compared with the previous reporting period.

A.P. Eagers Annual Report 2013

39

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

7. DIVIDENDS CONSOLIDATED 2013 $’000 Ordinary dividends fully franked based on tax paid @ 30% Final dividend for the year ended 31 December 2012 of 13.0 cents per share (2011 - 10.4 cents) paid on 16 April 2013 Interim dividend of 8.0 cents (2012 - 7.0 cents) per share paid on 4 October 2013 Total dividends paid Dividends paid in cash or satisfied by the issue of shares under the dividend reinvestment plan during the years ended 31 December 2013 and 31 December 2012 were as follows: Paid in cash Satisfied by issue of shares under Dividend Reinvestment Plan Dividends not recognised at year end In addition to the above dividends, since year end the directors have recommended the payment of a final dividend of 15.0 cents per share, fully franked based on tax paid at 30%. The aggregate amount of the proposed dividend expected to be paid on 16 April 2014 out of the retained profits at 31 December 2013, but not recognised as a liability at year end, is: Franked dividends The final dividend recommended after 31 December 2013 will be franked out of existing franking credits or out of franking credits arising from the payment of income tax in the year ending 31 December 2014. Franking credits available for subsequent financial years based on a tax rate of 30% (2012 - 30%) The above amounts represent the balances of the franking account as at the end of the financial year, adjusted for: (a) franking credits that will arise from the payment of the current tax liability; (b) franking debits that will arise from the payment of the dividends recognised as a liability at the reporting date; and (c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date. Impact on franking credits of dividends not recognised (11,364) (9,510) 14,127 22,243 36,370 16,335 11,717 28,052 22,246 14,124 36,370 16,335 11,717 28,052 2012 $’000

26,515

22,189

120,300

108,700

40

A.P. Eagers Annual Report 2013

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

8. CURRENT ASSETS - Cash and cash equivalents CONSOLIDATED 2013 $’000 Cash at bank and on hand Short Term Deposits 3,106 9,000 12,106 The above figures are reconciled to cash at the end of the financial year as shown in the statement of cash flows as follows: Balances as above Less: Bank overdrafts Balance per statement of cash flows 9. CURRENT ASSETS - Receivables (a) Trade and other receivables (i) Less: Provision for doubtful receivables (ii) 97,313 2,394 94,919 (b) Leasebook receivables Less: Provision for doubtful receivables (ii) 27 16 11 (c) Loans receivables (i)The ageing of lease, property and trade receivables at 31 December 2013 is detailed below: CONSOLIDATED 2013 Gross $000 Not past due Past due 0 -30 days Past due 31 plus days Total 89,950 3,603 3,787 97,340 Provision $000 1,552 77 781 2,410 2012 Gross $000 91,457 4,387 4,040 99,884 Provision $000 1,511 88 905 2,504 98,948 2,381 96,567 773 123 650 163 12,106 12,106 8,716 8,716 2012 $’000 2,716 6,000 8,716

The maximum credit period on trade sales is 60 days. No interest is charged on the trade receivables from the date of invoice or when past due. The group has provided fully for all receivables identified by management as being specifically doubtful, and in addition has provided 10% for all receivables over 90 days and 2.5% of total trade receivables excluding motor vehicle debtors. The Group’s provision policy is based on an assessment of changes in credit quality and historical experience. Included in the Group’s trade receivables balance are debtors with a carrying amount of $6,532,000 (2012: $7,434,000) which are past due at the reporting date. The Group have not provided for these balances as there has not been any specifically identified factors that would indicate a deterioration of credit quality. The Group therefore still considers the amounts recoverable. The Group does not hold any collateral over these balances. The average age of these receivables is 62 days (2012: 62 days).

A.P. Eagers Annual Report 2013

41

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

9. CURRENT ASSETS - Receivables (continued) (ii) Movement in provision for doubtful receivables CONSOLIDATED 2013 $’000 Opening Balance Additional provisions Addition due to acquisitions Amounts written off during the year Closing Balance 2,504 439 (533) 2,410 2012 $’000 2,567 451 (514) 2,504

In determining the recoverability of a trade receivable the Group considers any deterioration in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large, diverse and unrelated. Accordingly, the directors believe that there is no further provision required in excess of the provision for doubtful debts. 10. CURRENT ASSETS - Inventories New motor vehicles & trucks - Bailment stock - at cost Less: Write-down to net realisable value 290,343 4,152 286,191 Used vehicles & trucks - at cost Less: Write-down to net realisable value 77,915 3,783 74,132 Parts and other consumables - at cost Less: Write-down to net realisable value 51,178 1,759 49,419 Total Inventories 11. CURRENT ASSETS - Other current assets Prepayments and deposits 11(a) Property assets held for sale Land & buildings held for sale 21,612 23,963 7,301 2,629 409,742 289,662 4,449 285,213 79,782 3,623 76,159 51,056 1,937 49,119 410,491

Property assets surplus to ongoing business requirements expected to be sold within 12 months of balance date.

42

A.P. Eagers Annual Report 2013

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

12. NON-CURRENT ASSETS - Receivables CONSOLIDATED 2013 $’000 (a) Leasebook receivables (b) Loans receivables 13. NON-CURRENT ASSETS - Available-for-sale investments carried at fair value Shares in an unlisted company - One Way Traffic Pty Ltd (Carsguide) 1 Shares in a listed company - Automotive Holdings Group Limited
2

2012 $’000 89 376

1,437

2,345 192,850 195,195

2,345 160,245 162,590

(1) The Directors have assessed the fair value of the investment as at 31 December 2013 is materially consistent with its cost of acquisition. This is a level 3 fair value measurement asset being derived from inputs other than quoted prices that are unobservable from the asset either directly or indirectly. (2) The Directors have assessed the fair value of the investment as at 31 December 2013 based on the market price of the shares on the last trading day of the reporting period. This is a level 1 fair value measurement asset being derived from inputs based on quoted prices that are observable. Valuation of Available for sale investments Details of the group’s available for sale investments and information about the fair value hierarchy as at 31 December 2013 are as follows: Unobservable Inputs used in determination of fair values
Class of Financial Assets and Liabilities Level 1 Available for sale investments listed entities Level 3 Available for sale investments unlisted entities Carrying Carrying Amount Amount 31/12/13 31/12/12 $000’s $000’s 192,850 160,245 Valuation Technique Quoted bid prices in an active market. Other Range Range Average/ Average/ key (weight- (weightRange Range Infored avg) ed avg) 2013 2012 mation 2013 2012 N/A N/A N/A N/A N/A

Key Input Quoted bid prices in an active market.

Input N/A

2,345

2,345

Net asset Pre tax operating assessment margin taking into and available account managements bid prices experience and from equity knowledge of market participants conditions and financial position Market information based on available bid prices

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

There were no transfers between Levels in the year.

A.P. Eagers Annual Report 2013

43

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

14. NON-CURRENT ASSETS - Investment in associate CONSOLIDATED 2013 $’000 Shares in an associate - M T Q Insurance Limited 4,327 4,327 Investment in associates is accounted for in the consolidated financial statements using the equity method of accounting (refer Note 40). Reconciliation of the carrying amount of investment in associate is set out in Note 40(b). 15. NON-CURRENT ASSETS - Property, plant and equipment Freehold land and buildings - at fair value Directors’ valuation as at Land Buildings Construction in progress Total land and buildings Leasehold improvements At cost Less: Accumulated amortisation Total leasehold improvements Plant and equipment At cost Less: Accumulated depreciation Total plant and equipment Total property, plant and equipment Valuation of land and buildings The basis of the directors’ valuation of land and buildings is the assessed fair value, being the amounts for which the assets could be exchanged between willing parties in an arm’s length transaction at balance date, based on current prices in an active market for similar properties in the same location and condition. The assessed fair value is supported by periodic, but at least triennial valuations, by external third party valuers. The 2013 valuations were made by the directors based on their assessment of prevailing market conditions and supported by fair value information received from independent expert property valuers on certain properties, and the group’s own market activities and market knowledge. Details of the group’s freehold land and buildings and information about the fair value hierarchy as at 31 December 2013 are as follows: Explanation of asset classes; Car - HBU Alternate Use refers to properties currently operated as car dealerships which have a higher and best use (HBU) greater than that of a car dealership; Car Dealership refers to properties operating as car dealership with a consistent HBU; Development Car Dealership refers to properties which are in progress of, or being held for future development as a car dealership; Truck Dealership refers to properties being operated as a truck dealership with a HBU consistent with that use; Other Logistics are industrial properties used for parts warehousing and vehicle logistics. 50,106 32,343 17,763 344,956 48,402 29,368 19,034 350,862 26,405 11,872 14,533 24,998 10,411 14,587 193,500 112,357 6,803 312,660 198,515 118,320 406 317,241 2012 $’000 3,461 3,461

44

A.P. Eagers Annual Report 2013

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

15. NON-CURRENT ASSETS - Property, plant and equipment (continued) Unobservable Inputs used in determination of fair values
Class of Financial Assets and Liabilities Level 3 Car - HBU Alternate Use Level 3 Car Dealership Carrying Carrying Amount Amount 31/12/13 31/12/12 $000’s $000’s 102,574 Valuation Technique Average/ Range 2013 Average $1,881/sqm Average/ Range 2012 Average $1,921/sqm Other key Information Range (weighted avg) 2013 Average 5,988 sqm Range 779 - 24,160 sqm Net Rent/ Sqm Land Average $90 sqm Range $22 to $297 sqm Range (weighted avg) 2012 Average 4,914 sqm Range 779 - 24,160 sqm Average $89 sqm Range $22 to $297 sqm

Key Input

Input

107,201 Direct comparison

External valuations Specific incomplete transactions

Price / sqm Land

Land size

Range Range $821 - $5036 $821 - $5297 /sqm /sqm Net Rent/ Gross Income 8% - 12% (Nonluxury) 10% 14% (Luxury) Capitalisation Rate Average 8.0% Average 8.3% Net Rent/ Sqm GBA Average 9.6% Average 10.3%

184,719

192,643 Summation method, income capitalisation and direct comparison

External valuations Industry benchmarks

Range Range 3.0% - 19.2% 2.9% - 27.1%

Average $192 sqm

Average $196 sqm

Range Range 5.2% - 10.7% 5.4% - 10.6% Level 3 Development - Car Dealership Level 3 Truck Dealership 11,075 11,540 Direct comparison External valuations Price /sqm Land Average $375/sqm Average $399/sqm

Range Range $100 to $584 $109 to $649 sqm sqm

Range Range $212 - $531/ $168 - $539/ sqm sqm 20,968 21,200 Direct comparison External valuations Price /sqm Average $375/sqm Land Price / sqm GBA Range $212-$531 /sqm Average $379/sqm Range $215-$537 /sqm Net Rent/ Land Sqm Land Size Average 18,641 sqm Range 7,218 25,700 sqm Average $30 sqm Range $17 to $43 sqm Capitalisation Rate Average 8.1% Average 18,641 sqm Range 7,218- 25,700 sqm Average $30 sqm Range $17 to $43 sqm Average 7.9%

Range Range 8.0% to 8.2% 7.4% to 7.9% Level 3 Other Logistics 8,132 8,216 Income capitalisation method supported by market comparison 340,800 406 341,206 External valuations Capitalisation Rate Average 7.4% Average 7.1% Net Rent/ sqm GBA Average $83 sqm Range $63-$153 sqm Average $80 sqm Range $63-$153 sqm

Range Range 6.2% 6.8% to 8.2% to 8.2%

Sub Total Construction in Progress Total

327,468 6,803 334,271

There were no transfers between Levels in the year.

A.P. Eagers Annual Report 2013

45

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

15. NON-CURRENT ASSETS - Property, plant and equipment (continued) Carrying amounts that would have been recognised if land and buildings were stated at cost If freehold land was carried at historical cost, its current carrying value would be $119,372,000 (2012 : $127,777,000). If freehold buildings (including construction in progress) were carried at historical cost, its current carrying value (after depreciation) would be $120,423,000 (2012 : $123,278,000). Non-current assets pledged as security Refer to Note 22 for information on non-current assets pledged as security by the group. Reconciliations Reconciliation of the carrying amounts of each class of property, plant and equipment at the beginning and end of the year is set out below: Freehold land $'000 Consolidated 2013 Carrying amount at start of year Additions Disposals/transfers Revaluation gain credited to asset revaluation reserve Revaluation gain credited to profit and loss Depreciation/amortisation expense (Note 5) Transfer (to)/from Property assets held for sale Carrying amount at end of year 198,515 (7,281) 3,203 (937) 193,500 118,320 2,525 (7,861) (3,915) 3,288 112,357 406 6,459 (62) 6,803 14,587 1,995 (2,049) 14,533 19,034 5,014 (6,285) 17,763 350,862 15,993 (15,204) 3,203 (12,249) 2,351 344,956 Freehold buildings $'000 Construction in progress $'000 Leasehold improvements $'000 Plant and equipment $'000

Total $'000

Consolidated 2012 Carrying amount at start of year Additions Disposals/transfers Revaluation gain credited to asset revaluation reserve Revaluation gain credited to profit and loss Depreciation/amortisation expense (Note 5) Transfer to Property assets held for sale Carrying amount at end of year 186,952 12,249 (1,753) 1,535 1,133 (1,601) 198,515 111,877 10,845 1,779 (800) (3,641) (1,740) 118,320 3,136 395 (3,125) 406 15,186 1,169 (1,768) 14,587 19,393 5,780 (6,139) 19,034 336,544 30,438 (3,099) 735 1,133 (11,548) (3,341) 350,862

46

A.P. Eagers Annual Report 2013

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

16. NON-CURRENT ASSETS - Intangibles CONSOLIDATED 2013 $’000 Goodwill Franchise rights Trade marks/brand names 62,580 56,962 5,717 125,259 Movement - Goodwill Balance at the beginning of the financial year Additional amounts recognised: - from business combinations during the year (Note 29(a)) Less: Impairment during the year (Note 16(b)) Less: Reclassification Less: Disposal of businesses Balance at the end of the financial year Movement - Franchise rights Balance at the beginning of the financial year Purchase of Franchise Rights during the year Less: Disposal of businesses Balance at the end of the financial year Movement - Trade marks/Brand names Balance at the beginning of the financial year Purchase of brand name during the year Less: Amortisation of Brand names Less: Disposal of businesses Balance at the end of the financial year 5,734 88 (105) 5,717 5,414 367 (47) 5,734 51,829 5,133 56,962 51,829 51,829 3,329 (707) 62,580 (810) 59,958 59,958 60,768 2012 $’000 59,958 51,829 5,734 117,521

A.P. Eagers Annual Report 2013

47

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

16. NON-CURRENT ASSETS - Intangibles (continued) (a) Impairment tests for goodwill, franchise rights and trade marks / brand names For the purpose of impairment testing, goodwill and other intangible assets with indefinite useful lives (being franchise rights and trade marks/brand names) are al=located to each of the consolidated entity’s cash generating units (CGU), or groups of CGU’s, that are expected to benefit from the synergies of the combinations. Each unit or groups of units to which goodwill and other indefinite life intangible assets is allocated represents the lowest level at which assets are monitored for internal management purposes and is not larger than an identified operating segment. The CGU or groups of CGU’s to which goodwill and other indefinite life intangible assets is allocated are as follows: CONSOLIDATED 2013 $’000 Automotive Dealership Operations: Goodwill Franchise rights Trade marks / brand names Truck Dealership Operations: Goodwill Franchise rights Trade marks / brand names 8,701 4,500 1,050 14,251 8,977 4,500 1,050 14,527 53,879 52,462 4,667 111,008 50,981 47,329 4,684 102,994 2012 $’000

The recoverable amount of a CGU or group of CGU’s to which goodwill and other indefinite life intangible assets is allocated is determined based on the greater of its value in use and its fair value less costs to sell. Fair value is determined as being the amount obtainable from the sale of a CGU in an arms length transaction between knowledgeable and willing parties at balance date. This fair value assessment less costs to sell is conducted by the directors based on their extensive knowledge of the automotive and truck retailing industry including the current market conditions prevailing in the industry. The value in use assessment is conducted using a discounted cash flow (DCF) methodology requiring the directors to estimate the future cash flows expected to arise from the cash generating units and then applying a discount rate to calculate the present value. The DCF model adopted by directors was based on the 2014 financial budgets approved by the Board, a 3% (2013:3%) perpetual growth rate and a pre-tax discount rate of 11% (2013:11%). This growth rate does not exceed the long term average growth rate for the industry. (b) Impairment charge The Directors’ assessment in 2013 determined that goodwill and other intangible assets with indefinite useful lives was impaired to the extent of $Nil (2012 - $810,000) which has been recognised in respect of the above classes of intangible assets.

48

A.P. Eagers Annual Report 2013

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

17. CURRENT LIABILITIES - Payables CONSOLIDATED 2013 $’000 Trade and other payables Trade payables (i) Deferred Consideration - Share sale agreement (ii) Other payables 65,320 38,270 103,590 58,339 46,967 37,520 142,826 2012 $’000

(i) The average credit period on purchases of goods is 30 days. No interest is charged on trade payables from the date of invoice. The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe. (ii) A.P.Eagers Limited purchased 42,573,215 ordinary shares in Automotive Holdings Group Limited from PFV Pty Ltd and Jove Management Pty Ltd (Wheatley Family) on the 9th July 2012. Consideration for the purchase included a deferred payment of $46,967,099 which was paid 4 July 2013. Valuation of Deferred Consideration Details of the group’s Deferred Consideration and information about the fair value hierarchy as at 31 December 2013 are as follows: Unobservable Inputs used in determination of fair values
Class of Financial Assets and Liabilities Level 3 Contingent consideration in a business combination Carrying Carrying Amount Amount 31/12/13 31/12/12 $000’s $000’s 46,967 Valuation Technique Discounted cash flow Average/ Range 2013 N/A Average/ Range 2012 N/A Other key Range Range Infor(weighted (weighted mation avg) avg) 2013 2012 N/A N/A N/A

Key Input Discounted cash flow

Input Discounted rate of 0% as less than 12 months

There were no transfers between Levels in the year.

A.P. Eagers Annual Report 2013

49

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

18. Derivative financial instruments CONSOLIDATED 2013 $’000 Interest rate swap contracts - cash flow hedges Classified as: Current liabilities Non-current liabilities 665 534 1,199 The group is party to derivative financial instruments in the normal course of business in order to hedge exposure to fluctuations in interest rates in accordance with the Group’s financial risk management policies (refer to Note 28). Bailment finance of the Group currently bears an average variable interest rate of 4.67% (2012: 5.11%). The policy to protect part of this finance exposure against increasing interest rates was amended in 2013, such that in future this exposure will not be hedged. Existing swap contracts will be allowed to expire. The swaps contracts in place cover approximately 26% (2012: 41%) of the bailment finance outstanding at the year end. The fixed interest rates ranged from 2.91% to 4.44% and average 3.87% (2012: 4.13%) and the variable rates were between 2.56% and 3.10% (2012: 3.09% and 4.45%). The contracts require settlement of net interest receivable or payable each 30 days. The gain or loss from remeasuring the hedging instruments at fair value is deferred in equity in the hedging reserve to the extent that the hedge is effective and re-classified into profit or loss when the hedged interest expense is recognised. The ineffective portion is recognised in profit or loss immediately. At balance date, a loss from remeasuring the hedging instruments at fair value of $1,199,000 (2012: loss $2,202 000) has been recognised in equity in the hedging reserve (Note 27(a)). No portion was ineffective. Valuation of Derivative financial instruments Details of the group’s Derivative financial instruments and information about the fair value hierarchy as at 31 December 2013 are as follows: Unobservable Inputs used in determination of fair values
Class of Financial Assets and Liabilities Level 2 Cash flow hedges Interest rate swaps Carrying Amount 31/12/13 $000’s 1,199 Carrying Amount 31/12/12 $000’s 2,202 Valuation Technique Discounted cash flow. Other Range Range Average/ Average/ key (weight- (weightRange Range Infored avg) ed avg) 2013 2012 mation 2013 2012 N/A N/A N/A N/A N/A

2012 $’000

817 1,385 2,202

Key Input Future cash flows are estimated based on forward interest rates (from observable yield curves at the end of the reporting period) and contract interest rates, discounted at a rate that reflects the credit risk of various counterparties.

Input N/A

There were no transfers between Levels in the year.

50

A.P. Eagers Annual Report 2013

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

19. CURRENT LIABILITIES - Borrowings (secured) CONSOLIDATED 2013 $’000 (a) Bailment and finance lease payable Bailment finance Finance lease payable 303,782 29 303,811 (b) Leasebook liabilities (i) Bailment finance Bailment finance is provided on a vehicle by vehicle basis by various finance providers at an average interest rate of 4.67% p.a. applicable at 31 December 2013 (2012: 5.11%). Bailment finance is repayable within a short period after the vehicle is sold to a third party, generally within 48 hours. (ii) Interest rate risk exposures Details of the Group’s exposure to interest rate changes on interest bearing liabilities is set out in Note 28. (iii) Fair value disclosures Details of the Group’s fair value of interest bearing liabilities is set out in Note 28. (iv) Security Details of the security relating to each of the secured liabilities and further information on bank loans is set out in Note 22. (v) The leasebook liabilities are with Toyota Finance Corporation and are secured over the associated leased assets. The loans are under “back to back” lease arrangements with a weighted average interest rate of Nil% (2012: 8.32%). 20. CURRENT LIABILITIES - Current tax liabilities Income tax 21. CURRENT LIABILITIES - Provisions Employee benefits Warranties 14,039 3,350 17,389 Movement in provisions Movements in each class of provisions during the financial year, other than employee benefits, are set out below: Warranties $’000 3,313 38 5,421 (5,422) 3,350 11,746 3,313 15,059 6,203 7,909 303,942 293 304,235 504 2012 $’000

Consolidated - 2013 Carrying amount at start of year Provisions acquired Additional provisions recognised Payments charged against provisions Carrying amount at end of year Warranty Provision

An estimate is made based on past experience, and confirmation of future costs by the administrator of the warranty program, of the expected expenditure on new and used motor vehicles in terms of warranties on these vehicles.

A.P. Eagers Annual Report 2013

51

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

22. NON-CURRENT LIABILITIES - Borrowings (secured) CONSOLIDATED 2013 $’000 (a) Leasebook liabilities (Note 19(v)) (b) Borrowings - others Term facility Capital Loan Finance lease payables 139,000 72,078 211,078 SECURED LIABILITIES Total secured liabilities (current and non-current) are: Term facility (i) Capital Loan
(ii) (ii)

2012 $’000 8

-

139,000 70,000 97 209,097

139,000 72,078 (iv) (iii)

139,000 70,000 512 390 303,942 513,844

Working Capital Facility (Includes Bank overdraft) Leasebook liabilities Bailment finance
(v)

Finance lease payables

29 303,782 514,889

Total secured liabilities

(i) The Term Facility is secured by a general security agreement which includes registered first mortgages held by a security trustee over specific freehold land and buildings and a general charge over assets excluding new and used inventory and related receivables; letter of set off given by and on account of the parent entity and its subsidiaries, and a Corporate Guarantee and Indemnity unlimited as to amount given by the parent entity and its subsidiaries. (ii) The Working Capital facility and Capital loan are secured by registered first mortgages given by subsidiaries over specific freehold land and buildings; letter of set off given by and on account of the parent entity and its subsidiaries, and a Corporate Guarantee and Indemnity unlimited as to amount given by the parent entity and its subsidiaries. (iii) Leasebook liabilities are secured against associated leasebook receivables, and a charge over the assets of a specific subsidiary. (iv) The finance lease liability is secured against associated leased assets. (v) Vehicle bailment finance reflects a liability payable to the consolidated entity’s bailment financiers. This liability is represented by and secured over debtors included in current assets receivables in respect of recent vehicle deliveries to customers, and by new vehicles and demonstrator vehicles included in inventories (bailment stock). Refer Note 10.

52

A.P. Eagers Annual Report 2013

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

22. NON-CURRENT LIABILITIES - Borrowings (continued) ASSETS PLEDGED AS SECURITY The carrying amounts of assets pledged as security are: CONSOLIDATED 2013 $’000 Non-current assets pledged as security Freehold land and buildings -first mortgage Other non-current assets Current assets pledged as security Inventories Other current assets Total assets pledged as security FINANCING ARRANGEMENTS The consolidated entity has access to the following lines of credit at balance date: Total facilities Term facility (i) Working Capital facility(includes bank overdraft) Capital Loan (ii) Bailment finance Bank guarantees Leasebook liabilities (v) Finance lease payables
(iv) (iii)

2012 $’000

333,097 336,902 303,782 148,823 1,122,604

340,014 317,659 303,942 110,261 1,071,876

179,000 25,000 72,078 428,065 13,089 29 717,261

139,000 25,000 70,000 381,515 13,089 512 390 629,506 139,000 70,000 303,942 11,487 512 390 525,331

Used at balance date Term facility Working Capital facility(includes bank overdraft) Capital Loan Bailment finance Bank guarantees Leasebook liabilities Finance lease payables 139,000 72,078 303,782 12,858 29 527,747

A.P. Eagers Annual Report 2013

53

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

22. NON-CURRENT LIABILITIES - Borrowings (continued) ASSETS PLEDGED AS SECURITY (continued) CONSOLIDATED 2013 $’000 Unused at balance date Term facility Working Capital facility (includes bank overdraft) Capital Loan Bailment finance Bank guarantees Leasebook liabilities Finance lease payables 40,000 25,000 124,283 231 189,514 25,000 77,573 1,602 104,175 2012 $’000

(i) Term facility at balance date was provided on a non-amortisable (interest only) basis subject to compliance with specific covenants for a fixed term. (ii) Capital Loan facility at balance date was provided on a non-amortisable (interest only) basis for a fixed term. (iii) Working Capital Facility at balance date was provided on a non-amortisable (interest only) basis subject to compliance with specific covenants and an annual review. (iv) Bailment facilities are used to finance the acquisition of new vehicle and some used vehicle trading stock. These facilities include a combination of fixed term and open ended arrangements and are subject to review periods ranging from quarterly to annual. These facilities generally include short term termination notice periods and are disclosed as current liabilities in the statement of financial position. (v) The lease book liability provides direct and specific funding to a portfolio of leases associated with the Bill Buckle Auto Group acquisition. New business is not being written under this facility and the leasebook liability is now finalised.

54

A.P. Eagers Annual Report 2013

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

23. NON-CURRENT LIABILITIES - Deferred tax liabilities CONSOLIDATED 2013 $’000 Deferred tax liabilities The balance comprises temporary differences attributable to: Amounts recognised in profit or loss Book versus tax carrying value of plant and equipment Finance lease book Inventory valuation Prepayments Provisions -Doubtful Debts - Employee benefits - Warranties - Inventory write downs Investment in associate Sundry items 1,912 5 1,713 308 (969) (10,375) (1,009) (587) 808 (904) (9,098) Amounts recognised directly in equity Revaluation of available-for-sale investment Revaluation of property, plant and equipment Hedge liability 13,410 23,531 (360) 36,581 Net deferred tax liabilities The deferred tax expense included in income tax expense in respect of the above temporary differences resulted from the following movements: Opening balance at 1 January Deferred tax assets relating to business combinations Charged/(credited) to profit and loss (Note 6) Deferred tax recognised directly in equity - Revaluation of available-for-sale investment(Note 27(a)) - Revaluation of property plant and equipment (Note 27(a)) - Movement in fair value of cash flow hedge (Note 27(a)) Closing balance at 31 December 6,839 961 300 27,483 6,572 220 (60) 20,599 20,599 (297) (919) 15,219 (1,352) 27,483 6,572 22,942 (661) 28,853 20,599 2,002 92 1,851 439 (827) (9,516) (1,001) (659) 549 (1,184) (8,254) 27,483 2012 $’000 20,599

A.P. Eagers Annual Report 2013

55

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

24. NON-CURRENT LIABILITIES - Provisions CONSOLIDATED 2013 $’000 Employee benefits Make good provision on leasehold premises - refer (a) and (b) below 5,220 1,767 6,987 (a) A make good clause under a long term property lease has been recognised in the financial statements. The lessor of the property has been provided with a bank guarantee of $1,900,000 in respect of the estimated make good cost and rental costs. (b) Movement in the provision: Balance at start of year Recognition of additional provision during the year Carrying amount at end of year Make good provision on leasehold improvements A provision has been made for the expected cost of restoring the premises to its original condition at the end of the lease. 25. SEGMENT INFORMATION Segments are identified on the basis of internal reports about components of the consolidated entity that are regularly reviewed by the chief operating decision maker, being the board of directors, in order to allocate resources to the segment and to assess its performance. The consolidated entity operates in four operating and reporting segments being (i) Car Retailing (ii) Truck Retailing (iii) Property and (iv) Investment and all other, these being identified on the basis of being the components of the consolidated entity that are regularly reviewed by the chief decision maker for the purpose of resource allocation and assessment of segment performance. Information regarding the consolidated entity’s reporting segments is presented below. (i) Car Retailing Within the Car Retail segment, the consolidated entity offers a diversified range of automotive products and services, including new vehicles, used vehicles, vehicle maintenance and repair services, vehicle parts, extended service contracts, vehicle protection products and other aftermarket products. They also facilitate financing for vehicle purchases through third-party sources. New vehicles, vehicle parts, and maintenance services are predominantly supplied in accordance with franchise agreements with manufacturers. (ii) Truck Retailing Within the Truck Retail segment, the consolidated entity offers a diversified range of products and services, including new trucks, used trucks, truck maintenance and repair services, truck parts, extended service contracts, truck protection products and other aftermarket products. They also facilitate financing for truck purchases through third-party sources. New trucks, truck parts, and maintenance services are predominantly supplied in accordance with franchise agreements with manufacturers. (iii) Property Within the Property segment, the consolidated entity acquires commercial properties principally for use as facility premises for its motor dealership operations. The Property segment charges the Car Retailing segment commercial rentals for owned properties occupied by that segment. The Property segment reports property assets at fair value, based on annual assessments by the directors supported by periodic, but at least triennial valuations by external independent valuers. Revaluation increments arising from fair value adjustments are reported internally and assessed by the chief operating decision maker as profit adjustments in assessing the overall returns generated by this segment to the consolidated entity. (iv) Investment and all other This segment includes a motor vehicle auction business and the investment in One Way Traffic Pty Ltd, trading as Carsguide, and the investment in Automotive Holdings Group Limited.
56 A.P. Eagers Annual Report 2013

2012 $’000 5,336 1,767 7,103

1,767 1,767

1,767 1,767

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

25. SEGMENT INFORMATION (continued) Segment reporting 2013 Car Retailing $’000 2,198,918 2,198,918 9,029 2,207,947 Truck Retailing $’000 409,981 409,981 779 410,760 Investment and all other Eliminations $’000 $’000 43,234 43,234 9,970 53,204 (28,035) (28,035) (28,035)

Property $’000 107 28,035 28,142 795 28,937

Consolidated $’000 2,652,240 2,652,240 20,573 2,672,813

Sales to external customers Inter-segment sales Total sales revenue Other revenue TOTAL REVENUE SEGMENT RESULT Operating profit before interest External interest expense allocation OPERATING CONTRIBUTION Share of net profit of equity accounted investments Business Acquisition costs Investment revaluation Property revaluation Profit on sale of property/businesses SEGMENT PROFIT Unallocated corporate expenses PROFIT BEFORE TAX Income tax expense NET PROFIT Depreciation and amortisation Non cash expenses (reversal of expenses) other than depreciation and amortisation Impairment of trade receivables Write down (back) of inventories to net realisable value ASSETS Segment assets LIABILITIES Segment liabilities NET ASSETS Acquisitions of non-current assets, including assets of businesses acquired

65,679 (11,502) 54,177 1,959 (594) 1,793 57,335

10,359 (1,941) 8,418 8,418

19,401 (7,293) 12,108 3,203 207 15,518

10,018 (2,452) 7,566 22,795 30,361

(22,795) (3,203) (25,998)

105,457 (23,188) 82,269 1,959 (594) 2,000 85,634 1,076 86,710 (22,748) 63,962 12,354 2,335 (93) (381)

6,223 1,750 (218) (284)

1,462 508 123 (89)

4,455 -

214 77 2 (8)

-

537,602

138,229

343,028

198,006

-

1,216,865

348,925 188,677 14,282

95,114 43,115 798

166,558 176,470 9,003

67,143 130,863 10,270

-

677,740 539,125 34,353

The accounting policies of the reportable segments are the same as the Group’s accounting policies as described in Note 1 with the exception of all changes in fair value of property and investments being recognised as profit or loss adjustments for segment reporting purposes. This compares to the Group policy of crediting increments to a property plant and equipment and investment reserve in equity (refer Note 1(p)). Segment profit represents the profit earned by each segment without allocation of unrecouped corporate / head office costs and income tax. External bailment is allocated to the Car Retailing and Truck Retailing segments. Bills payable/ Term Facility funding costs are allocated to the Car Retailing,Truck Retailing and Property segments based on notional market based covenant levels. This is the measure reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance. For the purpose of monitoring segment performance and allocating resources between segments, the chief operating decision maker monitors the tangible, intangible, and financial assets attributable to each segment. All assets are allocated to reportable segments.
A.P. Eagers Annual Report 2013 57

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

25. SEGMENT INFORMATION (continued) Segment reporting 2012 Car Retailing $’000 2,189,059 2,189,059 8,310 2,197,369 Truck Retailing $’000 400,395 400,395 312 400,707 Investment and all other Eliminations $’000 $’000 38,706 38,706 4,798 43,504 (28,166) (28,166) (28,166)

Property $’000 457 28,166 28,623 498 29,121

Consolidated $’000 2,628,617 2,628,617 13,918 2,642,535

Sales to external customers Inter-segment sales Total sales revenue Other revenue TOTAL REVENUE SEGMENT RESULT Operating profit before interest External interest expense allocation OPERATING CONTRIBUTION Share of net profit of equity accounted investments Goodwill Impairment Investment revaluation Property revaluation Profit on sale of property/businesses SEGMENT PROFIT Unallocated corporate expenses PROFIT BEFORE TAX Income tax expense NET PROFIT Depreciation and amortisation Non cash expenses (reversal of expenses) other than depreciation and amortisation Impairment of trade receivables Write down (back) of inventories to net realisable value ASSETS Segment assets LIABILITIES Segment liabilities NET ASSETS Acquisitions of non-current assets, including assets of businesses acquired

67,747 (13,990) 53,757 1,673 99 55,529

10,527 (2,564) 7,963 7,963

19,381 (7,436) 11,945 1,868 (134) 13,679

4,939 (822) 4,117 (810) 21,906 25,213

(21,906) (735) (22,641)

102,594 (24,812) 77,782 1,673 (810) 1,133 (35) 79,743 (1,008) 78,735 (23,184) 55,551

5,947 2,710 (104) 1,444

1,326 696 38 (153)

4,149 -

173 (449) 3 (122)

-

11,595 2,957 (63) 1,169

523,908

141,371

347,182

165,617

-

1,178,078

339,385 184,523 4,985

98,802 42,569 1,868

163,938 183,244 23,543

107,417 58,200 138,748

-

709,542 468,536 169,144

The accounting policies of the reportable segments are the same as the Group’s accounting policies as described in Note 1 with the exception of all changes in fair value of property and investments being recognised as profit or loss adjustments for segment reporting purposes. This compares to the Group policy of crediting increments to a property plant and equipment and investment reserve in equity (refer Note 1(p)). Segment profit represents the profit earned by each segment without allocation of unrecouped corporate / head office costs and income tax. External bailment is allocated to the Car Retailing and Truck Retailing segments. Bills payable funding costs are allocated to the Car Retailing,Truck Retailing and Property segments based on notional market based covenant levels . This is the measure reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance. For the purpose of monitoring segment performance and allocating resources between segments, the chief operating decision maker monitors the tangible, intangible, and financial assets attributable to each segment. All assets are allocated to reportable segments. Geographic Information The Group operates in one principal geographic location, being Australia.
58 A.P. Eagers Annual Report 2013

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

26. CONTRIBUTED EQUITY CONSOLIDATED 2013 $’000 (a) Paid up capital Ordinary shares fully paid 231,205 2012 $’000 206,277

Ordinary shares confer on their holders the right to participate in dividends declared by the Board and to vote at general meetings of the company. (b) Movements in ordinary share capital: Date 01-Jan-12 1-Jan-12 to 15-Feb-12 28-Feb-12 Details Balance Cancellation of shares under the buy-back scheme (see Note (d) below) Issue of shares to staff under share incentive schemes Number of shares 31,360,584 (31,569) $12.38
(average price)

Issue price

$’000 162,047 (391)

84,420 31,413,435

$10.56

892

24-May-12 09-Jul-12

Share split effected - 5 for 1 Issue of shares to Wheatley Family as part consideration for purchase of shares in Automotive Holdings Group Limited

157,067,175 10,193,381 126,635 1,111,839 2,187,528 170,686,558 439,268 3,754,815 1,540,676 55,000 72,001 176,548,318 $5.38 $4.20 $4.20 $4.20 $2.42 $3.12 $2.42 $3.55 $3.55

31,804 306 3,949 (98) 7,768 206,277 2,362 15,771 6,472 (82) 231 174 231,205

31-Aug 12 to 17-Sep-12 Issue of shares to staff under share incentive schemes 27-Sep-12 05-Oct-12 01-Jan-13 18-Mar-13 16-Apr-13 Dividend reinvestment Plan shortfall underwritten by broker Underwriting commission paid to broker Issue of shares under Dividend Reinvestment Plan Balance Issue of shares to staff under share incentive schemes Issue of shares under Dividend Reinvestment Plan Dividend reinvestment Plan shortfall underwritten by broker Underwriting commission paid to broker New Shares issued Issue of shares to staff under share incentive schemes Balance

18-Jul 13 to 22-Jul-13 31-Dec-13

(c) The company has a dividend reinvestment plan under which holders of ordinary shares may elect to have all or part of their dividend entitlements satisfied by the issue of new ordinary shares rather than being paid in cash. Shares in 2012 have been issued under the plan at a 7.5% discount to the market price. In 2013 the shares were issued at a special 10% discount in recognition of the company’s 100 year anniversary. The plan was fully underwritten by the broker, RBS Morgan. (d) On 25 October 2011 the company announced to the Australian Securities Exchange that it intends to buy-back up to a maximum of 10% of its issued capital within one year, subject to market conditions. The final share buy back notice was issued 9th November 2012. The buy-backs reflect the company’s focus on maintaining an efficient statement of financial position through active capital management.

A.P. Eagers Annual Report 2013

59

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

27. RESERVES AND RETAINED PROFITS CONSOLIDATED 2013 $’000 (a) Reserves: Property, plant and equipment revaluation reserve Hedging reserve - cash flow hedge Share-based payments reserve Investment revaluation reserve Movements: Property, plant and equipment revaluation reserve: Balance at beginning of the financial year Revaluation surplus during the year - gross (Note 15) Transfer to retained earnings relating to properties sold Deferred tax (Note 23) Balance at the end of the financial year Hedging reserve - cash flow hedge: Balance at beginning of the financial year Transfer to profit or loss Transfer to derivative financial instruments (gross) Deferred tax (Note 23) Balance at the end of the financial year Share-based payments reserve: Balance at beginning of the financial year Share based payments Transfer to share capital (shares issued) Balance at the end of the financial year Investment revaluation reserve: Balance at beginning of the financial year Gain on revaluation of available-for-sale investment Deferred tax (Note 23) Balance at the end of the financial year 15,334 22,795 (6,839) 31,290 21,906 (6,572) 15,334 5,791 1,453 (2,361) 4,883 5,189 1,494 (892) 5,791 (1,542) 2,202 (1,199) (300) (839) (1,400) 2,000 (2,202) 60 (1,542) 71,053 3,203 (17) (961) 73,278 70,540 735 (222) 71,053 73,278 (839) 4,883 31,290 108,612 71,053 (1,542) 5,791 15,334 90,636 2012 $’000

60

A.P. Eagers Annual Report 2013

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

27. RESERVES AND RETAINED PROFITS (continued) CONSOLIDATED 2013 $’000 (b) Retained earnings Retained profits at the beginning of the financial year Net profit for the year Transfer from asset revalaution reserve re properties sold Dividends provided for or paid (Note 7) Retained profits at the end of the financial year (c) Nature and purpose of reserves. (1) Property, plant and equipment revaluation reserve The property, plant and equipment revaluation reserve is used to record increments and decrements on the revaluation of noncurrent assets as described in Note 1(p). (2) Hedging reserve The hedging reserve contains the effective portion of interest rate hedge arrangements incurred as at the reporting date. (3) Share-based payments reserve The share-based payment reserve is used to recognise the fair value of performance rights expected to vest and the fair value of equity expected to be issued under various share incentive schemes referred to in Notes 34 and 35. (4) Investment revaluation reserve The investments revaluation reserve represents the cumulatve gains and losses arising on the revaluation of available-for-sale financial assets that have been recognised in other comprehensive income, net of amounts reclassified to profit or loss when those assets have been disposed of or are determined to be impaired. 28. FINANCIAL INSTRUMENTS Overview The consolidated entity has exposure to the following key risks from its use of financial instruments: Credit risk Liquidity risk Market risk (interest rate risk) This note presents information about the consolidated entity’s exposure to each of the above risks, the consolidated entity’s objectives, policies and processes for measuring and managing risk, and the consolidated entity’s management of capital. Further quantitative disclosures are included throughout these consolidated financial statements. The Board of Directors has overall responsibility for the establishment and oversight of the consolidated entity’s risk management framework. The Board has established an Audit, Risk and Remuneration Committee which is responsible for monitoring, assessing and reporting on the consolidated entity’s risk management system. The committee will provide regular reports to the Board of Directors on its activities. The consolidated entity’s risk management policies are established to identify and analyse the risks faced by the consolidated entity, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the consolidated entity’s activities. The Audit, Risk and Remuneration Committee oversees how management monitors compliance with the risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks. The Committee is assisted in its oversight by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Committee. The Group’s principal financial instruments comprise bank loans, bailment finance, cash, short-term deposits and interest rate swap contracts. The main purpose of these financial instruments is to raise finance for and fund the Group’s operations and to hedge the Group’s exposures to interest rate volatility. The Group has various other financial instruments such as trade debtors and trade creditors which arise directly from its operations. It is, and has been throughout the period under review, the Group’s policy that no speculative trading in financial instruments shall be undertaken. The main risk arising from the Group’s financial instruments are interest rate risk, credit risk and liquidity risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below. 171,113 63,609 17 (36,370) 198,369 143,795 55,370 (28,052) 171,113 2012 $’000

A.P. Eagers Annual Report 2013

61

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

28. FINANCIAL INSTRUMENTS (continued) CREDIT RISK Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. Further, it is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. Trade receivables consist of a large number of customers, spread across geographical areas. Ongoing credit evaluation is performed on the financial condition of debtors and other receivable balances are monitored on an ongoing basis, with the result that the Group’s exposure to bad debts is not significant. The consolidated entity establishes an allowance for doubtful debts that represents its estimate of incurred losses in respect of trade and other receivables and investments. With respect to credit risk arising from financial assets of the Group comprised of cash, cash equivalents and receivables, the Group’s maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date is in the carrying amount as disclosed in the statement of financial position and notes to the financial statements. The Group’s credit risk on liquid funds is limited as the counter parties are major Australian banks with favourable credit ratings assigned by international credit rating agencies. LIQUIDITY RISK Liquidity risk is the risk that the consolidated entity will not be able to meet its financial obligations as they fall due. The consolidated entity’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions. The Group’s overall objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts and bank loans. The Group also manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Information on available facilities can be found in Note 22.

MARKET RISK Market risk is the risk that changes in market prices, such as interest rates, will affect the consolidated entity’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and monitor market risk exposures within acceptable parameters, whilst optimising the return on risk. Interest rate risk The Group is exposed to interest rate risk as a consequence of its financing facilities as set out in Notes 19 & 22. Funds are borrowed by the Group at both fixed and floating interest rates. The Group’s policy is to manage its interest cost using a mix of fixed and variable rate debt. The Group’s policy is to keep between 50% and 80% of its borrowings at fixed rates of interest. As at 31 December 2013, approximately 67% (2012: 53%) of the Group’s borrowings were at a fixed rate of interest. The Group hedges part of the interest rate risk (see Note 18) by swapping floating for fixed interest rates. In 2013 the Group amended its policy such that exposure to the changes in interest rates on its variable rate borrowings relating to inventories are unhedged. Existing hedges will not be replaced once they expire. Four interest rate swaps denominated in Australian dollars were in place as at 31 December 2013. These swaps mature between March 2014 and November 2014 and have a fixed rate between 2.91% and 4.44% . At 31 December 2013 the notional average contract amount of these four swaps was $20 million. The consolidated entity classifies interest rate swaps as cash flow hedges. The net fair value of the swap at 31 December 2013 was $1,199,000 liability (2012: $2,202,000 liability) and has been recognised in equity for the consolidated entity. Interest rate sensitivity The sensitivity analyses below have been determined based on the exposure to interest rates for both derivative and non-derivative instruments at reporting date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management and represents management’s assessment of the possible change in interest rates. At reporting date, if interest rates had been 50 basis points higher or lower and all other variable were held constant, the Group’s net profit after tax would increase/ decrease by $968,000 (2012: $889,000) per annum. This is mainly due to the Group’s exposures to interest rates on its variable rate borrowings.

62

A.P. Eagers Annual Report 2013

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

28. FINANCIAL INSTRUMENTS (continued) Interest rate swap contracts Under interest rate swap contracts, the Group agrees to exchange the difference between fixed and floating rate interest amounts calculated on agreed notional principal amounts. Such contracts enable the Group to mitigate the cash flow exposures on the issued variable rate debt held. The fair value of interest rate swaps at the reporting date is determined by discounting future cash flows using the curves at reporting date and the credit risk inherent in the contract, and are disclosed below. The average interest rate is based on the outstanding balances at the start of the financial period. The following tables detail the notional principal amounts and remaining terms of interest rate swap contracts outstanding as at reporting date: Average contracted fixed interest rate Outstanding floating for fixed contracts Less than 1 year Between 1 - 2 years Between 2 - 3 years 2013 % 3.74% 3.49% 3.46% 3.66% 2012 % 4.74% 3.74% 4.13% Notional principal amount 2013 $’000 103,700 22,500 25,500 151,700 2012 $’000 67,500 103,700 171,200 Fair value 2013 $’000 (666) (280) (253) (1,199) 2012 $’000 (817) (1,385) (2,202)

The interest rate swaps settle on a monthly basis. The floating rate on the interest rate swaps is the Australian BBSW. The Group will settle the difference between the fixed and floating interest rate on a net basis. All interest rate swap contracts exchanging floating rate interest amounts for fixed rate interest amounts are designated as cash flow hedges in order to reduce the Group’s cash flow exposure resulting from variable interest rates on borrowings. The interest rate swaps and the interest payments on the loan occur simultaneously and the amount deferred in equity is recognised in profit or loss over the loan period. CAPITAL MANAGEMENT The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position. There were no changes in the consolidated entity’s approach to capital management during the period. CREDIT RISK Exposure to Credit Risk The carrying amount of financial assets (as per Note 9) represents the maximum credit exposure. The maximum exposure to credit risk as the reporting date was: CONSOLIDATED 2013 $’000 Trade and other receivables Less: Provision for doubtful receivable 98,777 2,410 96,367 Impairment Losses The aging of trade receivables at reporting date is detailed in Note 9. 2012 $’000 100,349 2,504 97,845

A.P. Eagers Annual Report 2013

63

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

28. FINANCIAL INSTRUMENTS (continued) Fair values & Exposures to Credit & Liquidity Risk Detailed in the following table, the directors consider that the carrying amounts of financial assets and financial liabilities recorded in the financial statements approximate their fair value (2012: fair value). CARRYING AMOUNT 2013 $’000 Financial assets Trade and other receivables net of doubtful debts Derivative financial instrument Cash and cash equivalents 96,366 12,106 108,472 Financial liabilities Bills payable and fully drawn advances Capital Loan Vehicle bailment Bank overdraft Deferred Consideration Sale Share agreement Leasebook liability Finance lease payables Trade and other payables Derivative financial instrument 139,000 72,078 303,782 29 103,590 1,199 619,678 139,000 70,000 303,942 46,967 512 390 95,859 2,202 658,872 139,000 72,078 303,782 29 103,590 1,199 619,678 139,000 70,000 303,942 46,967 512 390 95,859 2,202 658,872 97,845 8,716 106,561 96,366 12,106 108,472 97,845 8,716 106,561 2012 $’000 FAIR VALUE 2013 $’000 2012 $’000

The fair value and net fair value of financial assets and financial liabilities are determined as follows: • The fair value of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices (includes listed redeemable notes, bills of exchange, debentures and perpetual notes). The fair values of derivative instruments are calculated using quoted prices. Where such prices are not available, discounted cash flow analysis is performed using the applicable yield curve for the duration of the instruments for nonoptional derivatives and option pricing models for optional derivatives. Foreign currency forward contracts are measured using quotes forward exchange rates and yield curves derived from quoted interest rates matching maturities of the contracts. Interest rate swaps are measured at the present value of future cash flows estimated and discounted based on the applicable yield curves derived from quoted interest rates.



Maturity profile The below table provides a maturity profile for the Group’s financial instruments that are exposed to interest rate risk at balance date. The amounts disclosed in the table are gross contractual undiscounted cash flows (principal and interest) required to settle the respective liabilities. The interest rate is based on the rate applicable as at the end of the financial period.

64

A.P. Eagers Annual Report 2013

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

28. FINANCIAL INSTRUMENTS (continued) At 31 December 2013 INTEREST BEARING Floating rate Financial assets Cash and cash equivalents Loan receivable Leasebook receivables 12,106 81 27 12,214 Average interest rate Financial liabilities Vehicle bailment (current) Fully Drawn Advances Fully Drawn Advances (1) Capital Loan (Non-Current) 307,321 2,264 26,561 904 337,050 Average interest rate Fixed rate Financial liabilities Bills payable Capital loan (Non-Current) Finance lease payables 8,726 4,678 30 13,434 Average Interest Rate NON INTEREST BEARING Financial assets Trade debtors Financial liabilities Trade and other payables Derivative financial instrument 103,590 1,199 104,789 103,590 1,199 104,789 94,902 94,902 5.01% 546 2,600 3,146 5.03% 10,773 2,600 13,373 5.20% 2,600 2,600 5.20% 51,300 51,300 5.20% 20,045 63,778 30 83,853 4.74% 43,607 33,938 904 78,449 4.86% 7,675 15,398 904 23,977 4.82% 904 904 4.52% 904 904 4.52% 22,793 22,793 4.52% 307,321 53,546 75,897 27,313 464,077 3.17% 1,518 1,518 5.63% 12,106 1,599 27 13,732 Less than 1 year $'000 1 - 2 years $'000 2 - 3 years $'000 3 - 4 years $'000 4 - 5 years $'000 5+ years $'000 Total $'000

(1) The amount included in fully drawn advances relate to variable rates that are hedged with interest rate swaps to fixed rates.

A.P. Eagers Annual Report 2013

65

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

28. FINANCIAL INSTRUMENTS (continued) At 31 December 2012 INTEREST BEARING Floating rate Financial assets Cash and cash equivalents Loan receivable Leasebook receivables Less than 1 year $'000 1 - 2 years $'000 2 - 3 years $'000 3 - 4 years $'000 4 - 5 years $'000 5+ years $'000 Total $'000

8,716 186 870 9,772 4.06%

399 94 493 7.10%

-

-

-

-

8,716 585 964 10,265 -

Average interest rate Financial liabilities Vehicle bailment (current) Fully Drawn Advances Fully Drawn Advances (1) Capital Loan (Non-Current)

307,825 1,463 3,856 3,633 316,777

21,633 24,188 3,633 49,454 5.21%

7,702 3,633 11,335 5.21%

3,633 3,633 5.19%

3,633 3,633 5.19%

84,859 84,859 5.19%

307,825 30,798 28,044 103,024 469,691 -

Average interest rate Fixed rate Financial liabilities Bills payable Leasebook liabilities Finance lease payables

5.14%

70,906 526 323 71,755

8,823 8 100 8,931 5.26%

9,756 9,756 5.38%

-

-

-

89,485 534 423 90,442 -

Average Interest Rate NON INTEREST BEARING Financial assets Trade debtors Financial liabilities Trade and other payables Deferred Consideration Share Sale Agreement Derivative financial instrument

6.15%

96,444

-

-

-

-

-

96,444

95,859 46,967 2,202 145,028

-

-

-

-

-

95,859 46,967 2,202 145,028

(1) The amount included in fully drawn advances relate to variable rates that are hedged with interest rate swaps to fixed rates. Estimation of Fair Value The following summarises the major methods and assumptions used in estimating the fair value of financial instruments: Loans and Borrowings Fair value is calculated based on discounted expected future principal and interest cash flows. Trade and other Receivables/Payables For receivables/payables with a remaining life of less than one year, the notional amount is deemed to reflect the fair value. All other receivables/payables are discounted to determine the fair value. Interest rate swaps The fair value of interest rate swaps is calculated based on the present value of the estimated future cash flows of these instruments.
66 A.P. Eagers Annual Report 2013

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

29. INVESTMENTS IN SUBSIDIARIES Name of entity Equity holding 2013 % Eagers Retail Pty Ltd Eagers MD Pty Ltd Eagers Finance Pty Ltd Nundah Motors Pty Ltd Eagers Nominees Pty Ltd Austral Pty Ltd E G Eager & Son Pty Ltd A.P. Group Ltd A.P. Ford Pty Ltd A.P. Motors Pty Ltd A.P. Motors (No.1) Pty Ltd A.P. Motors (No.2) Pty Ltd A.P. Motors (No.3) Pty Ltd Associated Finance Pty Limited Leaseline & General Finance Pty Ltd City Automotive Group Pty Ltd PPT Investments Pty Ltd PPT Holdings No 1 Pty Ltd PPT Holdings No 2 Pty Ltd PPT Holdings No 3 Pty Ltd Bill Buckle Holdings Pty Ltd Bill Buckle Autos Pty Ltd Bill Buckle Leasing Pty Ltd Adtrans Group Limited Adtrans Corporate Pty Ltd Adtrans Automotive Group Pty Ltd Stillwell Trucks Pty Ltd Adtrans Trucks Pty Ltd Graham Cornes Motors Pty Ltd Whitehorse Trucks Pty Ltd Adtrans Used Pty Ltd Adtrans Hino Pty Ltd Adtrans Australia Pty Ltd Melbourne Truck and Bus Centre Pty Ltd Adtrans Truck Centre Pty Ltd Adtrans Trucks Adelaide Pty Ltd Precision Automotive Technology Pty Ltd * * * * * * * * * * * * * * * * 100 80 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 90 100 100 100 100 100 100 100 100 2012 % 100 91 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 90 100 100 100 100 100 100 100 -

All subsidiaries are either directly controlled by A.P. Eagers Limited, or are wholly owned within the group, have ordinary class of shares and are incorporated in Australia.

A.P. Eagers Annual Report 2013

67

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

29. INVESTMENTS IN SUBSIDIARIES (continued) Information relating to A.P. Eagers Limited (‘the parent entity’) 2013 $’000 Financial position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Equity Issued capital Retained earnings Reserves - Asset revaluation reserve - Investment revaluation reserve - Share based payments reserve Financial performance Profit for the year Other comprehensive income 50,219 15,956 45,963 15,334 231,205 92,229 1,684 31,290 4,884 361,292 206,277 77,826 1,684 15,334 5,791 306,912 6,056 13,261 19,317 7,753 6,568 14,321 27,641 352,968 380,609 870 320,363 321,233 2012 $’000

All subsidiaries were parties to a deed of cross guarantee with A.P. Eagers Limited pursuant to ASIC Class Order 98/1418 which has been lodged with and approved by Australian Securities and Investments Commission as at 31 December 2013. Under the deed of cross guarantee each of these companies guarantee the debts of the other named companies. The aggregate assets and liabilities of these companies at 31 December 2013 and their aggregate net profit after tax for the year ended 31 December 2013 match the reported balances within the Statement of Financial Position and the Statement of Profit or Loss respectively. As a party to the deed of cross guarantee, each of the wholly-owned subsidiaries (marked *) is relieved from the requirement to prepare and lodge an audited financial report. Also refer Notes 30(a) and 30(b) in respect of guarantees entered into by the parent entity in relation to debts of its subsidiaries.

68

A.P. Eagers Annual Report 2013

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

29. INVESTMENTS IN SUBSIDIARIES (continued) (a) Acquisition of businesses The Group acquired the following business during the 2013 year as detailed below: Year 2013 Name of business Main North Nissan & Unley Nissan Date of acquisition 02-Sep-13 Principal activity Motor Dealership Proportion acquired 100%

During 2013 the acquired businesses contributed revenues of $29,712,000 and profit before tax of $532,000 . If the acquisition had occurred on 1 January 2013, the consolidated revenue and the consolidated profit before tax would have been $2,737 million and $87.8 million respectively. Allocation of purchase consideration The purchase price of business acquired has been allocated as follows: Total consolidated Cash consideration Total purchase consideration Fair Value of net identifiable assets Goodwill 2013 $’000 7,137 7,137 3,808 3,329 7,137 Consolidated fair value at acquisition date Net assets acquired Inventory Property, plant and equipment Deferred tax assets Creditors, borrowings and provisions Identifiable intangible assets Net assets acquired Acquisition cost Goodwill on acquisition
(i)

2013 $’000 58 782 385 (2,431) 5,014 3,808 7,137 3,329

(i) Goodwill arose in the business combinations because as at the date of acquisition the consideration paid for the combination included amounts in relation to the benefit of expected synergies and future revenue and profit growth from the businesses acquired. These benefits were not recognised seperately from goodwill as the future economic benefits arising from them could not be reliably measured in time for inclusion in this finnacial statements. Therefore, the amount allocated to goodwill on acquistion has been provisionally determined at the end of the reporting period. The Group did not acquire any significant new business during the previous year. (b) Disposal of businesses During 2013 the Group disposed of its Hidden Valley Ford business in the Northern Territory for $1,430,000 resulting in a net gain of $900,000. There were no significant businesses disposed during the 2012 year.

A.P. Eagers Annual Report 2013

69

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

30. CONTINGENT LIABILITIES (a) Parent entity Unsecured guarantees, indemnities and undertakings have been given by the parent entity in the normal course of business in respect of financial and trade arrangements entered into by its subsidiaries. It is not anticipated that the parent entity will become liable for any amount in respect thereof. At 31 December 2013 no subsidiary was in default in respect of any arrangement guaranteed by the parent entity and all amounts owed have been brought to account as liabilities in the financial statements. (b) Deed of cross guarantee A.P. Eagers Limited and all of its subsidiaries were parties to a deed of cross guarantee lodged with the Australian Securities and Investments Commission as at 31 December 2013. Under the deed of cross guarantee each company guarantees the debts of the other companies. The maximum exposure of the parent entity in relation to the cross guarantees is $658,939,000 (2012: $695,221,000). (c) As at 31 December 2013, entities within the Group had entered into sale and buy back agreements for new vehicles. The financial exposure to the Group is immaterial. 31. COMMITMENTS FOR EXPENDITURE CONSOLIDATED 2013 $’000 Capital Commitments Commitments for the construction of buildings and acquisition of plant and equipment contracted for at the reporting date but not recognised as liabilities, payable: Within one year Finance Lease Liabilities Commitments for minimum lease payments in relation to leasebook & finance lease liabilities are payable as follows: Within 1 year Later than 1 year but not later than 5 years Later than 5 years 30 30 Less future finance charges Present value of minimum lease payments Operating Lease Commitments Commitments for minimum lease payments in relation to non-cancellable operating leases for premises are payable as follows: Within 1 year Later than 1 year but not later than 5 years Later than 5 years 16,588 38,869 13,866 69,323 14,798 31,621 15,523 61,942 (1) 29 849 108 957 (55) 902 4,413 1,923 2012 $’000

The consolidated entity leases property under non-cancellable operating leases with expiry dates between 31 January 2014 and 1 July 2035. Leases generally provide for a right of renewal at which time the lease is renegotiated. Lease rental payments comprise a base amount plus an incremental contingent rental based on movements in the consumer price index or a fixed percentage increase.

70

A.P. Eagers Annual Report 2013

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

32. REMUNERATION OF AUDITOR CONSOLIDATED 2013 $’000 Amounts received or due and receivable by Deloitte Touche Tomatsu (“Deloitte”) for: - audit or review of the financial report of the parent entity and any other entity in the consolidated entity Amounts received or due and receivable by related entities of Deloitte for: - other services in relation to the parent entity and any other entity in the consolidated entity 64,474 569,349 33. SUBSEQUENT EVENTS Nil. 34. KEY MANAGEMENT PERSONNEL The remuneration report included in the directors’ report sets out the remuneration policies of the consolidated entity and the relationship between these policies and the consolidated entity’s performance. The following have been identified as key management personnel with authority and responsibility for planning, directing and controlling the activities of the group, directly or indirectly during the financial year: (a) Details of key management personnel (i) Directors T B Crommelin (1) M A Ward P W Henley N G Politis D T Ryan D A Cowper B W Macdonald (ii) Executives S G Best K T Thornton D G Stark
(1)

2012 $’000

504,875

511,125

72,818 583,943

Chairman (non-executive) Managing Director and Chief Executive Officer Director (non-executive) Director (non-executive) Director (non-executive) Director (non-executive) Chairman (non-executive) Chief Financial Officer General Manager - Queensland and Northern Territory General Counsel & Company Secretary

(1) Mr Crommelin was appointed chairman on the retirement of Mr Macdonald on 8 May 2013. (b) Compensation of key management personnel The aggregate compensation made to key management personnel of the Company and the Group is set out below. CONSOLIDATED 2013 $’000 Short term Post employment Share based payment 3,185,135 128,397 552,438 3,865,970 2012 $’000 3,199,290 139,696 1,089,473 4,428,459

A.P. Eagers Annual Report 2013

71

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

34. KEY MANAGEMENT PERSONNEL (continued) (c) Option holdings of key management personnel Details of options held by key management personnel can be found in Note 34(g). (d) Relevant Interest in shares held by key management personnel 2013 At 01-Jan-13 Dividend Reinvestment Plan Executive Incentive Plan At 31-Dec-13

Purchases

Sales

Directors B W Macdonald (1) M A Ward N G Politis P W Henley D T Ryan T B Crommelin D A Cowper Executives K T Thornton S G Best D G Stark 285,555 104,745 53,450 66,902,612
(1) Mr Macdonald retired as a Director on 8 May 2013

421,875 2,788,280 62,817,353 101,085 322,269 8,000

1,948,310 3,130 9,973 248

89,000 -

373,889 -

(118,000) -

421,875 2,759,280 65,139,552 104,215 332,242 8,248

2,139 1,963,800

50,950 33,965 15,655 189,570

373,889

-

336,505 138,710 71,244 69,311,871

2012

At 01-Jan-12

Dividend Reinvestment Plan

Executive Incentive Plan

Purchases

Sales

At 31-Dec-12

Directors B W Macdonald M A Ward N G Politis P W Henley D T Ryan T B Crommelin D A Cowper Executives K T Thornton S G Best D G Stark 237,540 72,735 38,575 63,411,600 (e) Loans to key management personnel There are no loans to key management personnel (f) Other transactions with key management personnel Other transactions with key management personnel are detailed in Note 36: Related parties. 1,213,841 48,015 32,010 14,875 177,340 2,099,831 285,555 104,745 53,450 66,902,612 421,875 2,704,840 59,580,340 83,315 272,380 1,207,612 6,229 82,440 1,000 2,029,401 17,770 43,660 8,000 421,875 2,788,280 62,817,353 101,085 322,269 8,000

72

A.P. Eagers Annual Report 2013

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

34. KEY MANAGEMENT PERSONNEL (continued) (g) Share Based Payments Plan A: EPS Performance Rights and Options - Key Executives The Group commenced a new Earnings Per Share (EPS) based performance rights and option compensation scheme for specific executive officers in 2009. The fair value of these performance rights and options is calculated on grant date, and recognised over the period to vesting. The vesting of the performance rights and options granted is based on the achievement of specified earnings per share growth targets and interest cover thresholds. The fair value has been calculated using a binomial option pricing model based on numerous variables including the following: Performance Rights Award date 28 August 2009 Vesting date Expiry date Share price at grant date Expected life Volatility Risk free interest rate Dividend yield Performance Options Award date 28 August 2009 Vesting date Expiry date Share price at grant date Exercise price Expected life Volatility Risk free interest rate Dividend yield 27-Mar-11 28-Aug-16 $ 1.82 $ 1.82 4.3 years 30% 5.29% 6.0% 27-Mar-12 28-Aug-16 $ 1.82 $ 1.82 4.8 years 30% 5.32% 6.0% 27-Mar-13 28-Aug-16 $ 1.82 $ 1.82 5.3 years 30% 5.33% 6.0% 27-Mar-14 28-Aug-16 $ 1.82 $ 1.82 5.8 years 30% 5.33% 6.0% 27-Mar-15 27-Sep-17 $ 1.82 $ 1.82 6.8 years 30% 5.33% 6.0% 27-Mar-11 28-Aug-16 $ 1.82 1.6 years 30% 4.37% 6.0% 27-Mar-12 28-Aug-16 $ 1.82 2.6 years 30% 4.89% 6.0% 27-Mar-13 28-Aug-16 $ 1.82 3.6 years 30% 5.18% 6.0% 27-Mar-14 28-Aug-16 $ 1.82 4.6 years 30% 5.31% 6.0% 27-Mar-15 27-Sep-17 $ 1.82 5.6 years 30% 5.33% 6.0%

The General Manager, Queensland and Northern Territory, General Manager Kloster Motor Group and Chief Financial Officer have been granted rights and options under the EPS share incentive plan (Plan A). The modified grant date method (AASB 2) is applied to this incentive plan whereby the cost of the plan is determined by the value of the rights and options at grant date and the probability of the EPS and interest cover targets being achieved and vesting occurring. The number of performance rights and options granted under the plan is as follows: Performance Rights Number 82,830 112,035 118,880 126,265 134,205 Grant Date 28-Aug-09 28-Aug-09 28-Aug-09 28-Aug-09 28-Aug-09 End Performance Period 31-Dec-10 31-Dec-11 31-Dec-12 31-Dec-13 31-Dec-14 Expiry Date 28-Aug-16 28-Aug-16 28-Aug-16 28-Aug-16 28-Sep-17 Fair Value at Grant Date $ 1.66 $ 1.56 $ 1.47 $ 1.39 $ 1.30

A.P. Eagers Annual Report 2013

73

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

34. KEY MANAGEMENT PERSONNEL (continued) (g) Share Based Payments (continued) Performance Options Number 381,945 475,545 472,975 475,545 465,430 Grant Date 28-Aug-09 28-Aug-09 28-Aug-09 28-Aug-09 28-Aug-09 End Performance Period 31-Dec-10 31-Dec-11 31-Dec-12 31-Dec-13 31-Dec-14 Expiry Date 28-Aug-16 28-Aug-16 28-Aug-16 28-Aug-16 27-Sep-17 Fair Value at Grant Date $ 0.36 $ 0.36 $ 0.37 $ 0.37 $ 0.38

No rights or options were forfeited or expired during the year. As a result of the EPS and interest cover targets being achieved the Performance Rights and Performance Options relating to the 31 December 2013 Performance Period as set out above have vested since balance date. The fair value of the performance rights and options was estimated as $1,675,000 (2012: $1,675,000) in total, with a cumulative expense being recognised at 31 December 2013 of $1,609,375 (2012: $1,462,981). Plan B: EPS Performance Rights and Options - Managing Director The Group commenced a new Earnings Per Share (EPS) based performance rights and option compensation scheme for the Managing Director in 2010. The fair value of these performance rights and options is calculated on grant date, and recognised over the period to vesting. The vesting of the performance rights and options granted is based on the achievement of specified earnings per share growth targets and interest cover thresholds. The fair value has been calculated using a binomial option pricing model based on numerous variables including the following: Performance Rights Award date 28 May 2010 Vesting date Expiry date Share price at grant date Expected life Volatility Risk free interest rate Dividend yield Performance Options Award date 28 May 2010 Vesting date Expiry date Share price at grant date Exercise price Expected life Volatility Risk free interest rate Dividend yield 27-Mar-11 28-Aug-16 $ 2.50 $ 1.82 3.5 years 30% 4.87% 4.90% 27-Mar-12 28-Aug-16 $ 2.50 $ 1.82 4.0 years 30% 4.97% 4.90% 27-Mar-13 28-Aug-16 $ 2.50 $ 1.82 4.5 years 30% 5.02% 4.90% 27-Mar-14 28-Aug-16 $ 2.50 $ 1.82 5.0 years 30% 5.08% 4.90% 27-Mar-15 27-Sep-17 $ 2.50 $ 1.82 6.1 years 30% 5.19% 4.90% 27-Mar-11 28-Aug-16 $ 2.50 0.8 years 30% 4.87% 4.90% 27-Mar-12 28-Aug-16 $ 2.50 1.8 years 30% 4.97% 4.90% 27-Mar-13 28-Aug-16 $ 2.50 2.8 years 30% 5.02% 4.90% 27-Mar-14 28-Aug-16 $ 2.50 3.8 years 30% 5.08% 4.90% 27-Mar-15 27-Sep-17 $ 2.50 4.8 years 30% 5.19% 4.90%

74

A.P. Eagers Annual Report 2013

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

34. KEY MANAGEMENT PERSONNEL (continued) (g) Share Based Payments (continued) The Managing Director has been granted rights and options under the EPS share incentive plan (Plan B). The modified grant date method (AASB 2) is applied to this incentive plan whereby the cost of the plan is determined by the value of the rights and options at grant date and the probability of the EPS and interest cover targets being achieved and vesting occurring. The number of performance rights and options granted under the plan is as follows: Performance Rights Number 36,890 82,440 89,000 94,890 105,140 Performance Options Number 416,665 815,215 810,810 815,215 797,870 Grant Date 28-May-10 28-May-10 28-May-10 28-May-10 28-May-10 End Performance Period 31-Dec-10 31-Dec-11 31-Dec-12 31-Dec-13 31-Dec-14 Expiry Date 28-Aug-16 28-Aug-16 28-Aug-16 28-Aug-16 27-Sep-17 Fair Value at Grant Date $ 0.81 $ 0.81 $ 0.81 $ 0.80 $ 0.81 Grant Date 28-May-10 28-May-10 28-May-10 28-May-10 28-May-10 End Performance Period 31-Dec-10 31-Dec-11 31-Dec-12 31-Dec-13 31-Dec-14 Expiry Date 28-Aug-16 28-Aug-16 28-Aug-16 28-Aug-16 28-Sep-17 Fair Value at Grant Date $ 2.40 $ 2.29 $ 2.18 $ 2.07 $ 1.97

No rights or options were forfeited or expired during the year. As a result of the EPS and interest cover targets being achieved the Performance Rights and Performance Options relating to the 31 December 2013 Performance Period as set out above have vested since balance date. The fair value of the performance rights and options was estimated as $3,826,828 (2012: $3,826,828) in total, with a cumulative expense being recognised at 31 December 2013 of $3,641,322 (2012: $3,459,213). 35. OTHER SHARE BASED PAYMENTS Recognised share-based payments expenses Refer Note 27 for movements on share based payments reserve. Plan C: EPS Performance Rights and Options - Senior Management (A) The Group commenced a new Earnings Per Share (EPS) based performance rights and option compensation scheme for nineteen specific management personnel in 2010. The fair value of these performance rights and options is calculated on grant date, and recognised over the period to vesting. The vesting of the performance rights and options granted is based on the achievement of specified earnings per share growth targets and interest cover thresholds. The fair value has been calculated using a binomial option pricing model based on numerous variables including the following: Performance Rights Award date 27 January 2010 Vesting date Expiry date Share price at grant date Expected life Volatility Risk free interest rate Dividend yield 27-Mar-11 27-Jan-17 $ 2.42 1.2 years 30% 5.06% 5.10% 27-Mar-12 27-Jan-17 $ 2.42 2.2 years 30% 5.11% 5.10% 27-Mar-13 27-Jan-17 $ 2.42 3.2 years 30% 5.17% 5.10%

A.P. Eagers Annual Report 2013

75

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

35. OTHER SHARE BASED PAYMENTS (continued) Performance Options Award date 27 January 2010 Vesting date Expiry date Share price at grant date Exercise price Expected life Volatility Risk free interest rate Dividend yield 27-Mar-11 27-Jan-17 $ 2.42 $ 2.42 4.1 years 30% 5.06% 5.10% 27-Mar-12 27-Jan-17 $ 2.42 $ 2.42 4.6 years 30% 5.11% 5.10% 27-Mar-13 27-Jan-17 $ 2.42 $ 2.42 5.1 years 30% 5.17% 5.10%

Specific executives have been granted rights and options under the EPS share incentive plan (Plan C). This includes the General Counsel & Company Secretary. The modified grant date method (AASB 2) is applied to this incentive plan whereby the cost of the plan is determined by the value of the rights and options at grant date and the probability of the EPS and interest cover targets being achieved and vesting occurring. The number of performance rights and options granted under the plan is as follows: Performance Rights Number 139,285 186,975 196,770 Grant Date 27-Jan-10 27-Jan-10 27-Jan-10 End Performance Period 31-Dec-10 31-Dec-11 31-Dec-12 Expiry Date 27-Jan-17 27-Jan-17 27-Jan-17 Fair Value at Grant Date $ 2.28 $ 2.17 $ 2.06

Performance Options Number 597,705 731,250 714,690 Grant Date 27-Jan-10 27-Jan-10 27-Jan-10 End Performance Period 31-Dec-10 31-Dec-11 31-Dec-12 Expiry Date 27-Jan-17 27-Jan-17 27-Jan-17 Fair Value at Grant Date $ 0.50 $ 0.52 $ 0.53

As a result of the EPS and interest cover targets being achieved the performance rights and options for each Performance Period have vested. The fair value of the performance rights and options for 2012 was $2,151,641 ,with a cumulative expense being recognised as 31 December 2012 of $2,151,641. (The cumulative expense recognised in respect of Key Management Personnel included in this plan recognised at 31 December 2012 was $193,500.) Plan D: EPS Performance Rights and Options - Senior Management (B) The Group commenced a new Earnings Per Share (EPS) based performance rights and option compensation scheme for three specific executive officers in 2010. The fair value of these performance rights and options is calculated on grant date, and recognised over the period to vesting. The vesting of the performance rights and options granted is based on the achievement of specified earnings per share growth targets and interest cover thresholds. The fair value has been calculated using a binomial option pricing model based on numerous variables including the following:

76

A.P. Eagers Annual Report 2013

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

35. OTHER SHARE BASED PAYMENTS (continued) Performance Rights Award date 22 October 2010 Vesting date Expiry date Share price at grant date Expected life Volatility Risk free interest rate Dividend yield Performance Options Award date 22 October 2010 Vesting date Expiry date Share price at grant date Exercise price Expected life Volatility Risk free interest rate Dividend yield 27-Mar-11 27-Jan-17 $ 2.52 $ 2.52 3.3 years 30% 4.91% 5.00% 27-Mar-12 27-Jan-17 $ 2.52 $ 2.52 3.8 years 30% 4.93% 5.00% 27-Mar-13 27-Jan-17 $ 2.52 $ 2.52 4.3 years 30% 4.95% 5.00% 27-Mar-11 27-Jan-17 $ 2.52 0.4 years 30% 4.91% 5.00% 27-Mar-12 27-Jan-17 $ 2.52 1.4 years 30% 4.93% 5.00% 27-Mar-13 27-Jan-17 $ 2.52 2.4 years 30% 4.95% 5.00%

Specific executives have been granted rights and options under the EPS share incentive plan (Plan D). The modified grant date method (AASB 2) is applied to this incentive plan whereby the cost of the plan is determined by the value of the rights and options at grant date and the probability of the EPS and interest cover targets being achieved and vesting occurring. The number of performance rights and options granted under the plan is as follows: Performance Rights Number 7,785 40,650 42,735 Grant Date 22-Oct-10 22-Oct-10 22-Oct-10 End Performance Period 31-Dec-10 31-Dec-11 31-Dec-12 Expiry Date 27-Jan-17 27-Jan-17 27-Jan-17 Fair Value at Grant Date $ 2.47 $ 2.35 $ 2.23

Performance Options Number 39,825 187,785 181,365 Grant Date 22-Oct-10 22-Oct-10 22-Oct-10 End Performance Period 31-Dec-10 31-Dec-11 31-Dec-12 Expiry Date 27-Jan-17 27-Jan-17 27-Jan-17 Fair Value at Grant Date $ 0.48 $ 0.51 $ 0.53

As a result of the EPS and interest cover targets being achieved the performance rights and options for each Performance Period have vested. The fair value of the performance rights and options for 2012 was $419,936, with a cumulative expense being recognised at 31 December 2012 of $419,936.

A.P. Eagers Annual Report 2013

77

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

35. OTHER SHARE BASED PAYMENTS (continued) Plan E: EPS Performance Options - Senior Management 2013 The Group commenced a new Earnings Per Share (EPS) based share option compensation scheme for 57 specific senior staff, including the Company Secretary/General Counsel and the Group Human Resources Manager. The fair value of these performance options is calculated on grant date and recognised over the period to vesting. The vesting of the performance options granted is based on the achievement of specified earnings per share growth targets. The fair value has been calculated using a binomial option pricing model based on numerous variables including the following. Performance Options Award date 27 March 2013 Vesting date Expiry date Share price at grant date Exercise price Expected life Volatility Risk free interest rate Dividend yield 31-Mar-15 31-Mar-20 $ 4.84 $ 5.04 4.5 years 30% 3.08% 4.20% 31-Mar-16 31-Mar-20 $ 4.84 $ 5.04 4.5 years 30% 3.08% 4.20% 31-Mar-17 31-Mar-20 $ 4.84 $ 5.04 5.0 years 30% 3.13% 4.20% 31-Mar-18 31-Mar-20 $ 4.84 $ 5.04 5.5 years 30% 3.17% 4.20% 31-Mar-19 31-Mar-20 $ 4.84 $ 5.04 6.0 years 30% 3.22% 4.20%

Specific executives have been granted options under the EPS share incentive plan (Plan E). The modified grant date method (AASB 2) is applied to this incentive plan whereby the cost of the plan is determined by the value of the options at grant date and the probability of the EPS targets being achieved and vesting occurring. The number of options granted under the plan is as follows: Performance Options Number 951,450 951,450 921,930 903,040 893,850 Grant Date 27-Mar-13 27-Mar-13 27-Mar-13 27-Mar-13 27-Mar-13 End Performance Period 31-Dec-14 31-Dec-15 31-Dec-16 31-Dec-17 31-Dec-18 Expiry Date Fair Value at Grant Date 31-Mar-20 31-Mar-20 31-Mar-20 31-Mar-20 31-Mar-20 $ 0.93 $ 0.93 $ 0.96 $ 0.98 $ 0.99

No options were forfeited or expired during the year. As a result of the EPS target being achieved the performance options relating to the 31 December 2013 Performance Period have vested since balance date. The fair value of the performance rights and options for 2013 was $885,000, with a cumulative expense being recognised at 31 December 2013 of $885,000.

78

A.P. Eagers Annual Report 2013

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

35. OTHER SHARE BASED PAYMENTS (continued) Plan F: Specifc Target Performance Rights and Options The Group commenced a new performance rights and option compensation scheme for a specific senior staff member, based on achieving certain defined operating targets for a specifc business entity. The fair value of these performance rights and options is calculated on grant date and recognised over the period to vesting. The fair value has been calculated using a binomial option pricing model based on numerous variables including the following. Performance Rights Award date 27 March 2013 Vesting date Share price at grant date Expected life Volatility Risk free interest rate Dividend yield Performance Options Award date 27 March 2013 Vesting date Expiry date Share price at grant date Expected life Volatility Risk free interest rate Dividend yield 31-Mar-15 31-Mar-20 $ 4.84 4.5 years 30% 3.08% 4.20% 31-Mar-16 31-Mar-20 $ 4.84 4.5 years 30% 3.08% 4.20% 31-Mar-17 31-Mar-20 $ 4.84 5.0 years 30% 3.13% 4.20% 31-Mar-18 31-Mar-20 $ 4.84 5.5 years 30% 3.17% 4.20% 31-Mar-19 31-Mar-20 $ 4.84 6.0 years 30% 3.22% 4.20% 31-Mar-15 $ 4.84 2.0 years 30% 2.88% 4.20% 31-Mar-16 $ 4.84 2.0 years 30% 2.88% 4.20% 31-Mar-17 $ 4.84 3.0 years 30% 2.95% 4.20% 31-Mar-18 $ 4.84 4.0 years 30% 3.04% 4.20% 31-Mar-19 $ 4.84 5.0 years 30% 3.13% 4.20%

A specific executive have been granted performance rights and options under the Specific Target share plan (Plan F). The modified grant date method (AASB 2) is applied to this incentive plan whereby the cost of the plan is determined by the value of the rights and options at grant date and the probability of specifc targets being achieved and vesting occurring. The number of options granted under the plan is as follows: Performance Rights Number 11,240 11,240 11,740 12,220 12,760 Performance Options Number 107,530 107,530 104,170 102,040 101,010 Grant Date 27-Mar-13 27-Mar-13 27-Mar-13 27-Mar-13 27-Mar-13 End Performance Period 31-Dec-14 31-Dec-15 31-Dec-16 31-Dec-17 31-Dec-18 Expiry Date 31-Mar-20 31-Mar-20 31-Mar-20 31-Mar-20 31-Mar-20 Fair Value at Grant Date $ 0.93 $ 0.93 $ 0.96 $ 0.98 $ 0.99 Grant Date 27-Mar-13 27-Mar-13 27-Mar-13 27-Mar-13 27-Mar-13 End Performance Period 31-Dec-14 31-Dec-15 31-Dec-16 31-Dec-17 31-Dec-18 Expiry Date 31-Mar-20 31-Mar-20 31-Mar-20 31-Mar-20 31-Mar-20 Fair Value at Grant Date $ 4.45 $ 4.45 $ 4.26 $ 4.09 $ 3.92

No performance rights or options were forfeited or expired during the year. As a result of the specific targets not being achieved the performance rights and options relating to the 31 December 2013 Performance Period have not vested since balance date. The fair value of the performance rights and options for 2013 was $150,000. No expense was recognised at 31 December 2013 as the performance hurdle was not met.
A.P. Eagers Annual Report 2013 79

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

36. RELATED PARTIES Key Management Personnel Other information on key management personnel has been disclosed in the Directors report. Remuneration and retirement benefits Information on the remuneration of key individual management personnel has been disclosed in the Remuneration Report included in the Directors’ Report. Other transactions of directors and director related entities The aggregate amount of “Other transactions” with key management personnel are as follows: (i) Mr N G Politis is a director and shareholder of a number of companies involved in the motor industry with whom the consolidated entity transacts business. These transactions, sales of $593,886 (2012 :$603,322) and purchases of $313,122 (2012: $344,029) during the last 12 months, are primarily the sale and purchase of spare parts and accessories and are carried out under terms and conditions no more favourable than those which it is reasonable to expect would have applied if the transactions were at arm’s length. (ii) Controlled entities may, from time to time, sell motor vehicles, parts and servicing of motor vehicles for domestic use to directors of entities in the consolidated entity or their director-related entities within a normal employee relationship on terms and conditions no more favourable than those which it is reasonable to expect would have been adopted if dealing with the directors or their director-related entities at arm’s length in the same circumstances. Wholly-owned group The parent entity in the wholly-owned group is A.P. Eagers Limited. Information relating to the wholly-owned group is set out in Note 29. 37. EARNINGS PER SHARE CONSOLIDATED 2013 2012 Cents Cents (a) Basic earnings per share Earnings attributable to the ordinary equity holders of the company (b) Diluted earnings per share Earnings attributable to the ordinary equity holders of the company

36.4

34.0

35.3

33.2

(c) Reconciliations of earnings used in calculating earnings per share Basic Earnings per Share Profit for the year Less: attributable to non-controlling interest Profit attributable to the ordinary equity holders of the company used in calculating basic earnings per share Diluted Earnings per Share Profit for the year Profit attributable to the ordinary equity holders of the company used in calculating diluted earnings per share Weighted average number of ordinary shares outstanding during the year Adjustments for calculation of diluted earnings per share - Performance rights and options Weighted average number of ordinary shares outstanding during the year used in the calculation of diluted earnings per share

CONSOLIDATED 2013 2012 $’000 $’000 63,962 (353) 63,609 55,551 (181) 55,370

63,962 63,609 174,862,288 5,174,058

55,551 55,370 162,736,656 4,025,937

180,036,346

166,762,593

80

A.P. Eagers Annual Report 2013

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

38. RECONCILIATION OF NET PROFIT AFTER TAX TO THE NET CASH INFLOWS FROM OPERATIONS CONSOLIDATED 2013 2012 $’000 $’000 Net profit after tax Depreciation and amortisation (Profit)/loss on sale of property, plant and equipment Share of profits of associate Dividends from investments Employee share scheme expense Employee share payment to trust Non cash impairment adjustments Eagers MD sale of businesses Profit on sale of business (Increase)/decrease in assets Receivables Inventories Prepayments Increase/(decrease) in liabilities Creditors (including bailment finance) Provisions Taxes payable Net cash inflow from operating activities 39. NON-CASH TRANSACTIONS Payment of dividends totalling $22,242,785 (2012: $11,717,103) under the Dividend Reinvestment Plan were settled by the issue of 5,295,491 ordinary shares (2012: 3,299,367 shares). 40. INVESTMENTS IN ASSOCIATE (a) Carrying amounts Investments in associate are accounted for in the consolidated financial statements using the equity method of accounting. Information relating to the associate is set out below. OWNERSHIP INTEREST Name of Company Unlisted Securities M T Q Insurance Services Limited 20.68 20.68 4,327 3,461 The investment in M T Q Insurance Services Limited was equity accounted from 1 January 2006 (refer Note 14). M T Q Insurance Services Limited is incorporated in Australia. Its principal activities are the sale of consumer credit and insurance products, as well as undertaking investment activities. 2013 % 2012 % CONSOLIDATED 2013 $’000 2012 $’000 6,836 456 (2,539) 76,163 59,003 1,939 1,632 55,636 2,737 125 (4,705) (363) (73,593) (417) 63,962 12,354 (207) (1,959) 1,094 1,455 (2,361) 708 (893) (900) 55,551 11,595 135 (1,673) 656 1,494 (323) -

A.P. Eagers Annual Report 2013

81

Notes to and forming part of the Financial Statements
31 December 2013 (continued)

40. INVESTMENTS IN ASSOCIATE (continued) CONSOLIDATED 2013 $’000 (b) Movement in the carrying amounts of investment in associate Carrying amount at the beginning of the financial year Equity share of profit from ordinary activities after income tax Dividends received during current year Carrying amount at the end of the financial year (c) Summarised financial information of associate The aggregate profits, assets and liabilities of associate are: Revenue Profits from ordinary activities after income tax expense Assets Liabilities (d) Share of associate profit (based on the last published results for the 12 month's to 30 June 2013 plus unaudited results for the 6 months to 31 December 2013) Profit from ordinary activities before income tax Income tax expense Profit from ordinary activities after income tax (e) Share of associate expenditure commitments Lease commitments (f) Dividends received from associate (g) Reporting date of associate The associate reporting dates are 30 June annually. 151 1,094 191 657 2,799 (840) 1,959 2,390 (717) 1,673 43,128 9,842 89,201 65,668 33,607 5,239 74,732 55,570 3,461 1,959 (1,094) 4,326 2,445 1,673 (657) 3,461 2012 $’000

82

A.P. Eagers Annual Report 2013

Directors’ Declaration

The directors declare that : (a) in the directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; (b) in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the consolidated entity; and (c) in the director’s opinion, the attached financial statements are in compliance with International Financial Reporting Standards as stated in Note 1(a) to the financial statements; and (d the directors have been given the declarations required by s.295A of the Corporations Act 2001 At the date of this declaration, the company is within the class of companies affected by ASIC Class Order 98/1418. The nature of the deed of cross guarantee is such that each company which is party to the deed guarantees to each creditor payment in full of any debt in accordance with the deed of cross guarantee. In the directors’ opinion, there are reasonable grounds to believe that the company and the companies to which the ASIC Class Order applies, as detailed in Note 29 to the financial statements will, as a group, be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee. Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001. On behalf of the Directors

Martin Ward Director 26 February 2014

A.P. Eagers Annual Report 2013

83

Independent Auditor’s Report

84

A.P. Eagers Annual Report 2013

Independent Auditor’s Report Continued

A.P. Eagers Annual Report 2013

85

Shareholder Information as at 28 March 2014

Equity Securities The company’s quoted securities consist of 176,769,473 ordinary fully paid shares (ASX: APE). Top 20 Holders of Ordinary Shares No. of Shares WFM Motors Pty Ltd Patterson Cheney Investments Pty Ltd Jove Pty Ltd Alan Piper Investments (No 1) Pty Ltd Milton Corporation Limited Argo Investments Limited Navigator Australia Ltd Martin Ward National Nominees Limited Berne No 132 Nominees Pty Ltd Citicorp Nominees Pty Ltd Diane Colman AMP Life Limited Hegford Pty Ltd ANZ Trustees Limited Peter Gary Robinson Trevor Reading Eagers Nominees Pty Ltd Bryce McKerrell Niblick Pty Limited 65,251,638 12,591,761 10,715,916 6,406,250 5,833,107 4,312,620 3,250,472 2,804,170 2,509,765 2,444,101 1,943,082 1,881,710 1,321,735 1,203,063 1,181,920 1,116,455 1,099,380 1,075,355 869,637 863,324 % of Issued Shares 36.91 7.12 6.06 3.62 3.30 2.44 1.84 1.59 1.42 1.38 1.10 1.06 0.75 0.68 0.67 0.63 0.62 0.61 0.49 0.49

86

A.P. Eagers Annual Report 2013

Shareholder Information as at 28 March 2014 (continued)

Distribution of Shareholders Range 1 1,001 5,001 10,001 1,000 5,000 10,000 100,000 No. of Shareholders 1,690 1,485 547 822 102 4,646 80 shareholders hold less than a marketable parcel. Performance Rights and Options

Substantial Shareholders No. of Shares Held WFM Motors Pty Ltd Patterson Cheney Investments Pty Ltd Jove Pty Ltd 62,817,353 11,977,755 10,193,381

100,001 and over

298,545 unvested performance rights, 6,355,080 unvested options and 6,944,215 vested options are on issue to sixty-four holders pursuant to the Executive Incentive Plan. Vesting is subject to the achievement of pre-determined performance hurdles, as described in the Directors’ Report. The rights and options do not have any dividend or voting rights. On-market Buy-back The company does not have a current on-market share buy-back. Voting Rights The following voting rights attach to ordinary shares, subject to the company’s constitution: • • • • A shareholder entitled to attend and vote at a meeting may do so in person or by proxy, attorney or corporate representative. On a show of hands, each shareholder entitled to vote has one vote. On a poll, each shareholder entitled to vote has one vote for each fully paid share and a fraction for each partly paid share. If a share is held jointly with two or more holders in attendance, only the holder whose name appears first in the register may vote.

A.P. Eagers Annual Report 2013

87

Corporate Directory

A.P. Eagers Limited ABN 87 009 680 013 Incorporation Incorporated in Queensland on 17 April 1957 Registered Office 80 McLachlan Street Fortitude Valley Qld 4006 Postal Address PO Box 199 Fortitude Valley Qld 4006 Telephone (07) 3248 9455 Facsimile (07) 3248 9459 Website www.apeagers.com.au Auditor Deloitte Touché Tohmatsu Grosvenor Place 225 George Street Sydney NSW 2000 Share Registry Computershare Investor Services Pty Ltd 117 Victoria Street West End Qld 4101 Enquiries within Australia: 1300 552 270 Enquiries outside Australia: +61 3 9415 4000

Board of Directors Timothy Crommelin, Chairman Martin Ward, Managing Director & Chief Executive Officer Nicholas Politis, Non-executive Director Peter Henley, Non-executive Director Daniel Ryan, Non-executive Director David Cowper, Non-executive Director Company Secretary Denis Stark, General Counsel & Company Secretary Controlled Entities Adtrans Australia Pty Ltd ABN 47 008 278 171 Adtrans Automotive Group Pty Ltd ABN 83 007 866 917 Adtrans Corporate Pty Ltd ABN 85 056 340 928 Adtrans Group Ltd ABN 28 008 129 477 Adtrans Hino Pty Ltd ABN 51 127 369 260 Adtrans Truck Centre Pty Ltd ABN 17 106 764 327 Adtrans Trucks Adelaide Pty Ltd ABN 45 151 699 651 Adtrans Trucks Pty Ltd ABN 71 008 264 935 Adtrans Used Pty Ltd ABN 11 074 561 514 A.P. Ford Pty Ltd ABN 43 010 602 383 A.P. Group Ltd ABN 53 010 030 994 A.P. Motors Pty Ltd ABN 76 010 579 996 A.P. Motors (No.1) Pty Ltd ABN 95 010 585 234 A.P. Motors (No.2) Pty Ltd ABN 97 010 585 243 A.P. Motors (No.3) Pty Ltd ABN 99 010 585 252 Associated Finance Pty Ltd ABN 76 009 677 678 Austral Pty Ltd ABN 89 009 662 202 Bill Buckle Autos Pty Ltd ABN 75 000 388 054 Bill Buckle Holdings Pty Ltd ABN 44 062 951 106 Bill Buckle Leasing Pty Ltd ABN 52 000 871 910 City Automotive Group Pty Ltd ABN 14 067 985 602 E.G. Eager & Son Pty Ltd ABN 20 009 658 306 Eagers Finance Pty Ltd ABN 65 009 721 288 Eagers MD Pty Ltd ABN 58 009 727 753 Eagers Nominees Pty Ltd ABN 98 009 723 488 Eagers Retail Pty Ltd ABN 91 009 662 211 Graham Cornes Motors Pty Ltd ABN 73 008 123 993 Leaseline & General Finance Pty Ltd ABN 51 010 131 361 Melbourne Truck and Bus Centre Pty Ltd ABN 42 143 202 699 Nundah Motors Pty Ltd ABN 52 009 681 556 PPT Holdings No 1 Pty Ltd ABN 13 078 207 333 PPT Holdings No 2 Pty Ltd ABN 13 078 207 397 PPT Holdings No 3 Pty Ltd ABN 30 078 207 468 PPT Investments Pty Ltd ABN 80 000 868 860 Precision Automotive Technology Pty Ltd ABN 59 163 233 207 Stillwell Trucks Pty Ltd ABN 19 008 014 720 Whitehorse Trucks Pty Ltd ABN 13 116 437 702

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A.P. Eagers Annual Report 2013

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