BAPCOR LIMITED — Annual Report 2017

Aug 22, 2017

Bapcor Limited Appendix 4E Preliminary financial report

1. Company details

Name of entity: Bapcor Limited ABN: 80 153 199 912 Reporting period: For the year ended 30 June 2017 (‘FY17’) Previous period: For the year ended 30 June 2016 (‘FY16’)

2. Results for announcement to the market

			$’000	%		$’000
Revenue from continuing operations		Up	327,924	47.8	to	1,013,553
Earnings before interest, taxes, depreciation and	Statutory	Up	25,984	33.7	to	103,013
amortisation from continuing operations	Pro-forma	Up	40,375	52.4	to	117,404
	Statutory	Up	10,150	23.3	to	53,732
Net profit after tax from continuing operations
	Pro-forma	Up	22,185	50.9	to	65,767
	Statutory	Up	20,248	46.5	to	63,830
Net profit after tax
	Pro-forma	Up	27,965	64.2	to	71,547
	Statutory	Up	5.87 cps	32.8	to	23.76 cps
Earnings per share - basic (cents per share)
	Pro-forma	Up	8.65 cps	48.3	to	26.54 cps

Statutory revenue and net profit after tax for FY17 increased by 47.8% and 46.5% respectively compared to FY16.

After adjusting statutory net profit after tax for transaction costs relating to the takeover offer of Hellaby Holdings Limited (‘Hellaby’), the impact of the associated equity raising and once-off Hellaby integration costs including Hellaby head office redundancy costs, pro-forma net profit after tax from continuing operations increased by 50.9%. The increase in pro-forma net profit after tax reflects the impact of the acquisitions of Hellaby and other acquisitions made during FY17, the full year impact of Aftermarket Automotive Holdings Pty Ltd (‘ANA’) and other acquisitions made during FY16, as well as continued strong performance of Bapcor’s existing Trade business.

Earnings per share for FY2017 was 26.33 cents per share, up 48.3% compared to FY2016 (based on pro-forma NPAT including contribution from discontinued operations).

Net debt at 30 June 2017 was $381.9M representing a leverage ratio of less than 2.5X (Net Debt : FY17 EBITDA) on an annualised EBITDA basis allowing for a full twelve months of trading for acquisitions made during FY17 (the leverage ratio on a non-annualised EBITDA basis was 2.9X).

For a further explanation of the results above, refer to the Company’s ASX/Media Announcement for the year ended 30 June 2017 and the accompanying Directors’ Report.

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Bapcor Limited Appendix 4E Preliminary financial report

3. Dividends

3. Dividends
		Franked
	Amount per	amount per
	security	security
	Cents	Cents
2016 Interim dividend	5.0	5.0
2016 Final dividend	6.0	6.0
2017 Interim dividend	5.5	5.5
2017 Final dividend (declared after balance date but not yet paid)	7.5	7.5
Record date for determining entitlements to the dividend:	31 August 2017
Date dividend payable:	29 September 2017

4. Dividend reinvestment plans

Bapcor operates a Dividend Reinvestment Plan (‘DRP’), which provides shareholders with the opportunity to utilise all or part of their dividends to purchase shares in the Company. The DRP will be in operation for the 2017 final dividend.

Shareholders who elect to participate in the DRP for the 2017 final dividend will be issued shares at a DRP issue price which will be the average of the daily market price of Bapcor’s shares over the period of ten trading days between 8 September 2017 and 21 September 2017 (‘Pricing Period’), less a 1.5% discount.

The timetable in respect of the 2017 final dividend and DRP is as follows:

Event / Action	Date*
Record Date	31 August 2017
Election Date: Last date for shareholders to make an election to participate in the DRP	5.00 pm (Melbourne time) on 7 September 2017
PricingPeriod Commencement Date	8 September 2017
Last dayof PricingPeriod	21 September 2017
Announcement of DRP issueprice	22 September 2017
Dividend Payment Date / Issue of DRP shares	29 September 2017

*All dates are subject to change

Details of the DRP can be downloaded from http://www.bapcor.com.au/dividends. In order to participate in the DRP for the 2017 final dividend, shareholders should ensure that their DRP Election Form is received, or an online election is made, by no later than 5.00 pm (Melbourne time) on 7 September 2017. An online election can be made by visiting www.investorcentre.com.

5. Basis of preparation

This report is based on the consolidated financial statements which have been audited. The audit report, which was unqualified, is included within the Financial Report which accompanies this Appendix 4E.

6. Attachments

Other information requiring disclosure to comply with Listing Rule 4.2A is contained in the accompanying Financial Report of Bapcor Limited for the year ended 30 June 2017.

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Bapcor Limited

ABN 80 153 199 912

Financial Report - 30 June 2017

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Bapcor Limited Directors' report 30 June 2017

The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'consolidated entity') consisting of Bapcor Limited (referred to hereafter as the 'Company' or 'parent entity') and the entities it controlled at the end of, or during, the year ended 30 June 2017 (‘FY17’).

1. Directors

The following persons were directors of Bapcor Limited during the whole of the financial year and up to the date of this report, unless otherwise stated:

Robert McEniry Independent Non-Executive Chairman Darryl Abotomey Chief Executive Officer and Managing Director Andrew Harrison Independent, Non-Executive Director Therese Ryan Independent, Non-Executive Director Margaret Haseltine Independent, Non-Executive Director

2. Principal activities

During the year the principal activities of Bapcor were the sale and distribution of motor vehicle aftermarket parts and accessories, automotive equipment and services, and motor vehicle servicing.

Bapcor is one of the largest automotive aftermarket parts, accessories, equipment and services supplier in Australasia with a continuing operations store network covering over 850 sites.

3. Significant changes in the state of affairs

On 27 September 2016, Bapcor announced a cash takeover offer for 100% of the shares in Hellaby Holdings Limited (‘Hellaby’), a publicly listed entity on the New Zealand stock exchange (NZX: HBY). Bapcor was successful in its offer, assuming control over Hellaby on 13 January 2017. The transaction was finalised in March 2017 and Hellaby was delisted from the New Zealand stock exchange accordingly.

Hellaby comprises of three divisions – Automotive, Resource Services and Footwear. The divisions of Resource Services and Footwear are considered non-core and are being actively marketed and are at various stages through a potential divestment program.

The Hellaby Automotive division comprises respected, well established, market leading wholesale and distribution businesses with over 120 locations in both New Zealand and Australia. The business units include Brake and Transmission (‘BNT’), HCB Technologies (‘HCB’), Diesel Distributors, JAS Oceania, Federal Batteries and Premier Auto Trade (‘PAT’) and are complementary to Bapcor’s existing Trade distribution and auto-electrical Specialist Wholesale businesses.

The Footwear retail division comprises two retail chains; Hannahs and No.1 Shoes; across 117 stores in New Zealand. The Resource Services division provide highly specialised, essential maintenance solutions to industrial clients. These two divisions are considered non-core and it is Bapcor’s intention to divest them.

The Hellaby acquisition was fully funded by a combination of cash and debt facilities, being a new acquisition facility with the Australia and New Zealand Banking Group, and $181.3M capital raised in September 2016 via a placement of shares to institutional investors, and a share purchase plan offer to existing Bapcor shareholders.

During the financial year, Bapcor also completed a number of other acquisitions including Baxters Pty Ltd (‘Baxters’), MTQ Engine Systems Pty Ltd (‘MTQ’) and Roadsafe Automotive (‘Roadsafe’) expanding the depth and breadth of its Specialist Wholesale offering.

On 30 June 2017, Bapcor successfully refinanced its debt facilities establishing a new $500M debt facility with preexisting lenders ANZ and Westpac, as well as two new lenders being The Bank of Tokyo-Mitsubishi UFJ and The Hongkong and Shanghai Banking Corporation. Proceeds were used to repay the existing debt facilities including the acquisition facility for the acquisition of Hellaby.

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Bapcor Limited Directors' report 30 June 2017

4. Dividends

Fully franked dividends paid during the financial year were as follows:

30 September 2016 21 April 2017 *

14,781,000 (6.0 cents per share) 15,278,000 (5.5 cents per share)

• $4,558,000 of the interim dividend for the year ended 30 June 2017 was settled under the dividend reinvestment plan.

The Board has declared a final dividend in respect of the current financial year of 7.5 cents per share, fully franked. The final dividend will be paid on 29 September 2017 to shareholders registered on the record date of 31 August 2017. Bapcor’s Dividend Reinvestment Plan which was implemented on 16 February 2017 will be in operation for this final FY17 dividend.

The final dividend takes the total dividends declared in relation to the current financial year to 13.0 cents per share, fully franked, representing an increase of dividends paid of 18.2% compared to the prior financial year. Dividends paid and declared in relation to the current financial year represents 56.7% of statutory net profit after tax (‘NPAT’).

5. Review of operations

The key highlights of Bapcor’s financial results for FY17 were:

• Revenue from continuing operations increased by 47.8% compared to FY16, from $685.6M to $1,013.6M

• Statutory earnings before interest, taxes, depreciation and amortisation (‘EBITDA’) from continuing operations increased by 33.7% to $103M

• Pro-forma EBITDA from continuing operations increased by 52.4% to $117.4M

• Statutory net profit after tax (‘NPAT’) from continuing operations increased by 23.3% to $53.7M

• Pro-forma NPAT from continuing operations increased by 50.9% compared to FY16, from $43.6M to $65.8M

• Statutory NPAT including contribution from discontinued operations increased by 46.5% to $63.8M

• Pro-forma NPAT including contribution from discontinued operations increased by 64.2% compared to FY16, from $43.6M to $71.5M

• Pro-forma EPS based on NPAT from continuing operations increased by 36.4% compared to FY16 to 24.4 cents per share

• Pro-forma EPS based on NPAT including contribution from discontinued operations increased by 48.4% compared to FY16 to 26.5 cents per share

• Net debt at 30 June 2017 was $381.9M representing a leverage ratio of less than 2.5X (Net Debt : FY17 EBITDA) on an annualised pro-forma EBITDA including discontinued operations basis allowing for a full twelve months of trading for acquisitions made during FY17 (the leverage ratio on a non-annualised EBITDA basis was 2.9X).

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Bapcor Limited Directors' report 30 June 2017

The table below reconciles the pro-forma result to the statutory result for FY17 and FY16.

					Consolidated	Consolidated
			2017	2017
			Continuing	Discontinued	2017
	$’M	Notes	Operations	Operations	**Total **	2016
Statutory NPAT			53.7	10.1	63.8	43.6
Costs associated with the Hellaby acquisition		1	15.3	-	15.3	-
Interest adjustment		2	(0.7)	-	(0.7)	-
Depreciation and amortisation adjustment		3	-	(6.4)	(6.4)	-
Tax adjustment		4	(2.5)	2.0	(0.5)	-
Pro-forma NPAT			65.8	5.7	71.5	43.6

Notes on pro-forma adjustments:

1. Relates to one off costs incurred during the acquisition of Hellaby. These costs related to professional advisory fees, target defensive costs, finance costs relating to the bridging facility and refinancing, restructuring costs, one time elimination of intercompany profit in stock and other costs.

2. The interest adjustment reflects the additional interest expense that would have been incurred if the Hellaby related capital raising did not occur due to the reduction in borrowings between the time of the capital raising and the payment for Hellaby shares.

3. The depreciation and amortisation adjustment relates to the depreciation and amortisation that would have occurred in the Resource Services and Footwear divisions that was not recorded due to their held for sale status.

4. The tax adjustment reflects the tax effect of the Hellaby transaction costs and the finance, depreciation and amortisation adjustments based on local effective tax rates.

Note: The Directors’ Report includes references to pro-forma results to exclude the impact of Hellaby related acquisition costs as detailed above. The Directors believe the presentation of non-IFRS financial measures are useful for the users of this financial report as they provide additional and relevant information that reflect the underlying financial performance of the business. Non-IFRS financial measures contained within this report are not subject to audit or review.

Pro-forma revenue and EBITDA by segment is as follows:

	Revenue	EBITDA
	2017 $’M 2016 $’M Change %	2017 $’M 2016 $’M Change %
Trade Retail & Service Specialist Wholesale Hellaby Automotive Unallocated / Head Office1	465.1 419.1 11.0% 221.0 172.3 28.3% 212.7 103.4 105.7% 146.7 - (31.9) (9.2) (246.7%)	63.3 51.8 22.2% 28.2 21.6 30.3% 22.9 9.5 141.1% 15.1 - (12.1) (5.9) (107.1%)
Total continuing operations	1,013.6 685.6 47.8%	117.4 77.0 52.4%
Assets held for sale	196.6	16.9
Total	1,210.2 685.6 76.5%	134.3 77.0 74.3%

One of the largest contributors to Bapcor’s increase in revenue and profit was the acquisition of Hellaby. In addition, the results reflect the acquisitions of Baxters, MTQ and Roadsafe (all within the Specialist Wholesale segment) which were completed during the first half of FY17. FY17 also includes a full twelve months results of acquisitions made during FY16 including Aftermarket Network Australia Pty Ltd (previously Metcash Automotive Holdings Pty Ltd), Sprint Auto Parts and Bearing Wholesalers.

Further details of the operating and financial performance of each business segment follows below.

1 Includes intersegment sales eliminations

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Bapcor Limited Directors' report 30 June 2017

5.1 Operating and financial review – Trade

The Trade segment currently consists of the Burson Auto Parts and Precision Automotive Equipment business units. This segment is a distributor of:

• Automotive aftermarket parts and consumables to trade workshops for the service and repair of passenger and commercial vehicles

• Automotive workshop equipment such as vehicle hoists and scanning equipment, including servicing of the equipment

• Automotive accessories and maintenance products to do-it-yourself vehicle owners.

The Trade segment had another successful year recording revenue and EBITDA growth of 11.0% and 22.2% respectively.

The increase in revenue of 11.0% in FY17 included same store sales growth of 4.6% (compared to 4.6% in FY16) with every state recording positive growth. Same store sales growth in H2 FY17 was below H1 FY17 due to the comparative period in H2 FY16 including selling price increases above the rate recorded in H2 FY17. Whilst growing its revenue Trade was also successful in growing its gross margin percentage, which increased by 1.2 percentage points compared to FY16. The increase in gross margin percentage was a result of supplier negotiations as well as ongoing price management.

During FY17, Burson Auto Parts continued to expand its store network with the number of stores increasing from 145 at 30 June 2016 to 160 at 30 June 2017. The increase of 15 stores consisted of 3 individual store acquisitions and 12 greenfield store developments including a conversion of a company owned ABS store. The average cost per new store including inventory was $774,000.

The new stores are located as follows:

• Acquisitions – Colac in Victoria; Gladstone in Queensland; and Raymond Terrace in New South Wales.

• Greenfields – Oxenford and Warwick in Queensland; Grafton, Griffith, Hornsby, Morisset and Taree in New South Wales; Tuggeranong in the Australian Capital Territory; and Canningvale, Joondalup, Mandurah and Midvale in Western Australia.

The cost of doing business (‘CODB’) percentage decreased by 0.3 percentage points in FY17 mainly as a result of FY16 including costs associated with the bedding down of the new Trade Brisbane Distribution Centre and costs associated with the start-up stores in Western Australian.

As a result of the increased gross margin and lower CODB, EBITDA as a percentage of sales increased by 1.3%. In total EBITDA increased by $11.5M to $63.3M or by 22.2%.

The Trade businesses continue to see aggressive price competition. In particular, the Western Australian market continues to be very price competitive resulting in lower margins. Bapcor remains committed to its strategy to grow the store network across Western Australia.

A key focus for the Trade business is the development and training of employees. A total of 26 development training courses were conducted throughout FY17, with over 600 employees attending, as well as the continual provision of online training in areas such as safe driving.

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Bapcor Limited Directors' report 30 June 2017

5.2 Operating and financial review – Retail & Service

The Retail & Service segment consists of business units that are retail customer focused, and include the Autobarn, Autopro, Sprint Auto Parts and Car Parts retail store brands, and the Midas and ABS workshop service brands. The majority of this segment is franchised stores and workshops. There are also 54 company owned stores.

The Retail segment performed well during the year recording EBITDA of $28.2M compared to $21.6M in FY16, an increase of 30.3%. Revenue increased by 28.3% to $221.0M which includes the impact of a higher ratio of company owned stores versus franchise operations. As a result of the higher mix of company owned stores generating a higher level of sales relative to profit, EBITDA as a percentage of sales increased by 0.2 percentage points from 12.6% in FY16 to 12.8% in FY17.

Bapcor has previously stated its intention of growing the number of company owned Autobarn stores via both new Autobarn store locations as well as some select conversion of franchise stores to company owned stores. The total number of Autobarn stores at 30 June 2017 was a record high 122 stores, a net increase of 8 stores since 30 June 2016. The number of company owned stores increased from 15 to 31, with the 16 new stores consisting of 7 greenfield stores and the conversion of 9 franchise operations. The percentage of company owned Autobarn stores is now 25%, up from 14% at 30 June 2016. Autobarn achieved its largest single trading day in June 2017; catalogues delivered were up 7% and click and collect sales increased by 45%.

At 30 June 2017 the total number of company owned and franchise stores in the Retail segment was 385 consisting of Autobarn 122 stores, Autopro 86 stores, Sprint Auto Parts 38 stores and Midas and ABS 139 stores.

Bapcor has completed a strategic review of the Service businesses and based on the level of vertical integration as well as potential growth opportunities, it has been decided to retain and grow this business. In FY17 Midas achieved its highest average sales per store.

5.3 Operating and financial review – Specialist Wholesale

The Specialist Wholesale segment consists of the operations that specialise in automotive aftermarket wholesale and include AAD, Bearing Wholesalers and Opposite Lock, as well as Baxters, MTQ and Roadsafe that were acquired during FY17.

Baxters and Roadsafe were acquired by Bapcor in August 2016, while MTQ was acquired in November 2016. These entities form part of Australia’s largest automotive electrical, under car parts, and aftermarket diesel fuel injection and turbocharger distributorship. With a nationwide network, these entities service rural and metropolitan areas and multiple industries. The newly acquired businesses performed strongly in the months they formed part of the group, and have exceeded their investment business cases to date.

The original Specialist Wholesale business of AAD performed well growing both revenue and profit. AAD gross margin percentage was above FY16. Including the full year impact of FY16 acquisitions as well as the acquisitions completed during FY17, Specialist Wholesale revenue increased 105.7% and EBITDA by 141.1%.

Good progress was made during the financial year to increase the volume and product groups that the Specialist Wholesale segment sells into other Bapcor group businesses and this will continue in FY18 with growing the level of intercompany sales being a key business strategy.

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Bapcor Limited Directors' report 30 June 2017

5.4 Operating and financial review – Hellaby Automotive

The Hellaby Automotive business was acquired in January 2017 as part of the takeover of Hellaby. The Hellaby Automotive business consists of Trade and Specialist Wholesale businesses located in New Zealand and Australia and operates across more than 120 locations.

In New Zealand, Trade operates from 65 locations, of which BNT is the predominant business operating from 53 stores supplying automotive and truck parts and accessories to workshops. BNT is similar to Bapcor’s Burson Automotive business that operates in Australia. Also in New Zealand are the Specialist Wholesale businesses of JAS Oceania NZ - an auto electrical business, HCB – a battery business, Diesel Distributors – a distributor of diesel fuel components, and TRS – a tyre and wheel business predominantly supplying the agricultural market.

In Australia, Hellaby Automotive operates the auto electrical businesses of JAS Oceania, PAT and Federal Batteries, as well as Diesel Distributors.

Hellaby Automotive performed strongly and above the acquisition business case in H2 FY17 contributing EBITDA of $15.1M. EBITDA was up 20.7% compared to H1 FY17 and 28.5% higher than H2 FY16. BNT achieved same store sales growth of 8.0%. In the future, Hellaby Automotive will be reported as part of Bapcor’s Trade and Specialist Wholesale segments.

5.5 Operating and financial review – Unallocated / Head Office

The Unallocated / Head Office segment consists of all elimination and head office costs or adjustments that are not in the control of the other segments. Unallocated costs increased from $5.9M in FY16 to $12.1M in FY17 due largely to $3.1M of intercompany profit in stock eliminations, the inclusion of Hellaby head office costs of $2.0M and an increase on normal acquisition associated costs of $0.5M. Additional resources were also employed in head office due to the significant increase in size of the business. As of end of September 2017, Hellaby head office costs will be reduced to approximately $1.5M per annum.

5.6 Operating and financial review – Assets Held for Sale[1]

As part of the acquisition of Hellaby, Bapcor acquired the divisions of Resource Services and Footwear. These assets have been deemed non-core and a process to divest these assets is underway.

The Resource Services division comprises two businesses, Contract Resources and TBS. The Resource Services business operates in Australia, New Zealand, the Middle East and the Americas. These businesses provide highly specialised, essential maintenance solutions to industrial clients, particularly in the oil and gas industries. Resource Services’ EBITDA of $11.0 in H2 FY17 was 90.5% above H2 FY16 year largely due to the acquisition of TBS which was effective 1 July 2016.

The Footwear division comprises two retail networks in New Zealand, Hannahs and No.1 Shoes, across 117 stores. After experiencing challenging retail conditions in previous years, the Footwear business is now under the management of experienced retail specialists, and in H2 FY17 Footwear’s EBITDA of $5.9M was 28.5% above H2 FY16.

1 EBITDA metrics are presented for comparative purposes only and have been sourced from internal management reports

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Bapcor Limited Directors' report 30 June 2017

5.7 Financial Position - Capital Raising and Debt

The number of ordinary shares on issue in Bapcor increased in August 2016 by 500,000, due to the issue of shares by Bapcor to the vendors of Baxters Pty Ltd as part consideration for that acquisition.

In H1 FY17, Bapcor raised $181.3M of share capital to fund its acquisition of Hellaby through the issue of 28,205,129 shares under a placement to institutional investors, and the issue of 3,115,772 shares under a share purchase plan offer to existing shareholders.

In September 2016, Bapcor issued a further 138,519 shares to participating employees under the Bapcor Employee Salary Sacrifice Share Plan.

In April 2017, Bapcor issued 816,309 shares to participating shareholders under its Dividend Reinvestment Plan, in respect of the FY17 interim dividend.

As a result of the issues of shares described above, ordinary shares on issue increased from 245,857,351 as at 30 June 2016 to 278,633,080 as at 30 June 2017.

Bapcor’s external debt facility was refinanced and increased to $500M during the year allocated across four providers, to replace current existing debt and for future general corporate purposes, capital expenditure and acquisitions.

Net debt of $381.9M represented a leverage ratio of less than 2.5X on an annualised EBITDA basis allowing for a full twelve months of trading for acquisitions completed during FY17.

6. Strategy

Bapcor’s strategy is to be Australasia’s leading provider of motor vehicle aftermarket parts and accessories, automotive equipment and services, and motor vehicle servicing.

Trade

Trade consists of the businesses Burson Auto Parts, Precision Automotive Equipment and the recently acquired Tricor Engineering. The business units are trade-focussed “parts professionals” businesses supplying service workshops. Bapcor’s target is to grow Burson Auto Parts’ store numbers from 160 at the end of June 2017 to 200 stores by 2021 with 30% home brand product content.

Retail & Service

Autobarn – The premium retailer of automotive accessories, Autobarn had 91 franchise stores and 31 company owned stores at 30 June 2017 with a target to grow to 200 stores by 2023, with a majority of growth being company owned stores, and 35% home brand product content.

Independents – The independents group consists of the franchise stores of Autopro, Car Parts and Sprint Auto Parts. The strategy is to supply the independent parts stores via Bapcor’s extensive supply chain capabilities and brand support. There were 215 independent stores at 30 June 2017. The target is to maintain the number of independent stores at over 200 and convert these stores to Burson Auto Parts or Autobarn stores when commercially sensible opportunities arise.

Service – The service business consists of the brands Midas and ABS and aims to be experts at scheduled car servicing at affordable prices. There were 139 stores at 30 June 2017 of which 125 were franchised.

Specialist Wholesale

The Specialist Wholesale business strategy objective is to be the number one or number two industry category specialists in the parts programs in which it operates. The parts programs in which the specialist wholesale segment has historically operated are brake, bearings, electrical, suspension, 4WD, cooling, engine and gaskets.

The Specialist Wholesale businesses are focused on maximising internal sales, developing private label product ranges, and the evaluation of its distribution footprint including opportunities for shared facilities.

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Bapcor Limited Directors' report 30 June 2017

Hellaby optimisation

Following an internal review of the optimisation opportunities from the Hellaby acquisition, $8M to $11M in EBIT benefits have been identified in direct and indirect procurement, intercompany sourcing, freight, increased sales through expanded product ranges, developing shared services and optimising category expertise. These benefits are in addition to the forecast benefits of the Hellaby acquisition that were announced at the time of the acquisition and the reduction in Hellaby head office costs from an annual $6M to $7M, to approximately $1M.

Strategic divestments

Bapcor is continuing the process of divestment of non-core assets. Further announcements regarding the divestments will be made at the appropriate time.

Competitive advantages

People – Bapcor has a strong and experienced management team and a proven record of attracting, retaining and growing key talent across the group. Training and development of team members are a priority for the group.

Supply Chain – strength of distribution network ensures fast delivery to trade customers who rely on quick access to parts to improve service time to their customers.

Diversification – extensive breadth and depth of product range and capability across the group provides multiple revenue streams and continues to drive intercompany sales and margin improvements opportunities, whilst spreading reliance on profitability.

7. Industry trends

The automotive aftermarket parts market in Australasia continues to experience growth based on:

• i. population growth;

• ii. increasing number of vehicles per person;

• iii. change in the age mix and complexity of vehicles (i.e. more vehicles in the four years or older range); and iv. an increase in the value of parts sold.

Demand for automotive parts, accessories and services is resilient as vehicle maintenance is critical to operating a vehicle. Vehicle servicing is driven by the number of kilometres travelled, with the number of kilometres travelled by passenger and light commercial vehicles not significantly impacted by economic conditions. Volatility in new vehicle sales does not directly impact demand as parts distributed by Bapcor are predominantly used to service vehicles that are aged four years or older.

Original equipment manufacturers are ceasing to manufacture cars in Australia. Ford ceased production in October 2016, and Toyota and Holden have announced production will cease in October 2017. Bapcor does not expect demand for parts to be affected by the decline in the Australian vehicle manufacturing industry, as Bapcor distributes parts for a wide range of vehicle makes and models irrespective of where the vehicle is manufactured, and demand for Bapcor’s services is driven by the total number of registered vehicles on the road in Australia and not the location of vehicle manufacture.

On-line channels to market is now a common medium for retail businesses albeit only a small percentage of automotive retail sales are on-line. Amazon has announced its intention to start trading in the Australian market at some point in the future it is expected this will present a market place for Automotive parts and accessories. Due to its fast delivery capabilities, wide product range and knowledgeable people being the key to Bapcor’s customer offering which on-line businesses cannot match, Bapcor does not believe the introduction of on-line competition will have a material impact to Bapcor’s business.

There is increased interest and production of electric vehicles. As Bapcor’s target market is vehicles greater than 3 to 4 years old, and due to the large size of the conventional vehicle car parc and how long it would take for electric vehicles to become a meaningful percentage of the total number of vehicles on the road, Bapcor considers that any impact to the Bapcor business within the foreseeable future is minimal.

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Bapcor Limited Directors' report 30 June 2017

8. Key business risks

There are a number of factors that could have an effect on the financial prospects of Bapcor. These include:

Competition risk - The Australian automotive aftermarket parts and accessories distribution industry is competitive and Bapcor may face increased competition from existing competitors (including through downward price pressure), new competitors that enter the industry, vehicle manufacturers, and new technologies or technical advances in vehicles or their parts. Increased competition could have an adverse effect on the financial performance, industry position and future prospects of Bapcor.

Increased bargaining power of customers - A significant majority of Bapcor’s sales are derived from repeat orders from customers. Bapcor may experience increased bargaining power from customers due to consolidation of existing workshops forming larger chains, greater participation of existing workshops in purchasing and buying groups, and closure of independent workshops resulting in greater market share of larger chains. An increase in bargaining power of customers may result in a decrease in prices or loss of customer accounts, which may in turn adversely affect Bapcor’s sales and profitability.

Supplier pressure or relationship damage - Bapcor’s business model depends on having access to a wide range of automotive parts, in particular parts with established brands that drive customer orders. An increase in pricing pressure from suppliers or a damaged relationship with a supplier may increase the prices at which Bapcor procures parts or limit Bapcor’s ability to procure parts from that supplier. If prices of parts increase, Bapcor will be required to pass on or absorb the price increases, which may result in a decreased demand for Bapcor’s products or a decrease in profitability. If Bapcor is no longer able to order parts from a key supplier, Bapcor may lose customer orders and accounts, resulting in lower sales. Any decline in demand, sales or profitability may have an adverse effect on Bapcor’s business and financial performance.

Exchange rate risk – A large proportion of Bapcor’s parts are sourced from overseas, either indirectly through local suppliers or directly by Bapcor. This exposes Bapcor to potential changes in the purchase price of products due to exchange rate movements. Historically Bapcor has been able to pass on the majority of the impact of foreign exchange movements through to the market. If the situation arises where Bapcor is not able to recoup foreign exchange driven cost increases, this may lead to a decrease in profitability. To mitigate this risk, Bapcor enters into forward exchange contracts based on expected purchases for the upcoming twelve months.

Managing growth and integration risk – The integration of acquired businesses and the continued strategy of growing the store network will require Bapcor to integrate these businesses and where appropriate upscale its operational and financial systems, procedures and controls and expand and retain, manage and train its employees. There is a risk of a material adverse impact on Bapcor if it is not able to manage its expansion and growth efficiently and effectively, or if the performance of new stores or acquisitions does not meet expectations. Bapcor senior management take an active role in the integration of acquired businesses.

Expansion - A key part of Bapcor’s growth strategy is to increase the size of its store network, which it intends to achieve through store acquisitions and greenfield developments. If suitable acquisition targets are not able to be identified; acquisitions are not able to be made on acceptable terms; or suitable greenfield sites are not available, this may limit Bapcor’s ability to execute its growth strategy within its expected timeframe. Further, new stores may not prove to be as successful as Bapcor anticipates including due to issues arising from integrating new businesses. This could negatively impact Bapcor’s financial performance and its capacity to pursue further acquisitions. Bapcor senior management take an active role in the rollout and progress of store expansion.

Divestments – As part of the acquisition of Hellaby, two non-core divisions were acquired, being Resource Services and Footwear. It is Bapcor’s intention to divest these businesses in an orderly manner. There is a risk these divestments could take longer or will be at lower value than expected.

Franchise regulations – Bapcor has a large franchise network within its Retail & Service segment. Changes in franchise law or regulations may have an impact on the responsibilities of the franchisor or the operations of these franchise businesses. Bapcor senior management seek ongoing professional advice to monitor any developments.

ACCC new car retailing industry market study – The Australian Competition and Consumer Commission (‘ACCC’) is currently conducting a review into the new car retailing industry that includes a review into consumer guarantees, access to technical information and fuel consumption and emissions. This study has the potential to influence Bapcor’s ability to access technical data from OEMs and also Bapcor’s workshop customers. Bapcor have provided a submission into this study and will continue to monitor the ACCC findings.

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9. Likely development and expected results of operations

Bapcor expects to continue to see growth in FY18 due to a number of factors as follows:

• A full 12 months of results will be included for the Hellaby acquisition (6 months in FY17) as well as other acquisitions made during FY17;

• Forecast intra business synergies as a result of the Hellaby acquisition; and

• Continued store network growth and solid performance in the underlying businesses.

Trading trends in July and for the month to date August have been consistent with expectations.

As a result of the above we are forecasting FY18 NPAT from continuing operations to be circa 30% above FY17 proforma NPAT from continuing operations.

10. Information on directors

Name:	Robert McEniry
Title:	Independent, Non-Executive Director and Chairman
Qualifications:	Master of Business Administration from the University of Melbourne
	Member of the Australian Institute of Company Directors
Experience and expertise:	Robert has extensive experience in the automotive industry both in Australia and
	overseas. Robert’s former roles include President and Chief Executive Officer (and
	Chairman) of Mitsubishi Motors Australia Ltd, Chief Executive Officer of Nucleus
	Network Ltd, Chief Executive Officer of South Pacific Tyres Ltd, and board member
	of the Executive Committee for the Federal Chamber of Automotive Industries
Other current directorships:	Robert is currently on the boards of Multiple Sclerosis Ltd, Australian Home Care
	Services Ltd (Chairman), Automotive Holdings Group Ltd and Stillwell Motor Group
	Ltd (Chairman).
Former directorships (last 3 years): None
Special responsibilities:	Chair of the Board
	Member of the Nomination and Remuneration Committee
	Member of the Audit and Risk Management Committee
Interests in shares:	43,163 ordinary shares
Name:	Darryl Abotomey
Title:	Chief Executive Officer and Managing Director
Qualifications:	Bachelor of Commerce majoring in accounting and economics from the University
	of Melbourne
	Member of the Australian Institute of Company Directors
Experience and expertise:	Darryl has more than ten years’ experience in the automotive aftermarket industry.
	Darryl has extensive experience in business acquisitions, strategy, finance,
	information technology and general management in distribution and other industrial
	businesses. Darryl was a former Director and Chief Financial Officer of Exego
	Group (Repco). He has also previously held directorships with The Signcraft Group,
	PaperlinX Limited, CPI Group Limited and Pinegro Products Pty Ltd.
Other current directorships:	None
Former directorships (last 3 years): None
Interests in shares:	1,860,246 ordinary shares
Interests in rights:	381,077 performance rights

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Bapcor Limited Directors' report 30 June 2017

Name:	Andrew Harrison
Title:	Independent, Non-Executive Director
Qualifications:	Bachelor of Economics from the University of Sydney
	Master of Business Administration from The Wharton School at the University of
	Pennsylvania
	Member of the Australian Institute of Company Directors
	Chartered Accountant.
Experience and expertise:	Andrew is an experienced company director and corporate advisor. Andrew has
	previously held executive and non-executive directorships with public, private and
	private equity owned companies; including as Chief Financial Officer of Seven
	Group Holdings, Group Finance Director of Landis and Gyr, and Chief Financial
	Officer and a director of Alesco Limited. Andrew was previously a Senior Manager
	at Gresham Partners Limited, an Associate at Chase Manhattan Bank (New York)
	and a Senior Manager at Ernst & Young (Sydney and London).
Other current directorships:	Andrew is currently on the boards of Estia Health Limited, WiseTech Global Limited,
	Xenith IP Limited, and IVE Group Limited.
Former directorships (last 3 years): None
Special responsibilities:	Chair of the Audit and Risk Management Committee
	Member of the Nomination and Remuneration Committee
Interests in shares:	56,869 ordinary shares
Name:	Therese Ryan
Title:	Independent, Non-Executive Director
Qualifications:	Bachelor of Laws from the University of Melbourne
	Graduate of the Australian Institute of Company Directors
Experience and expertise:	Therese is a professional non-executive director and has extensive experience as a
	senior business executive and commercial lawyer working in widely diversified
	businesses in Australia and internationally. Previously, she was Vice President and
	General Counsel of General Motors International Operations based in Shanghai,
	Assistant Secretary of General Motors Corporation and prior to that General
	Counsel and Company Secretary of GM Holden.
Other current directorships:	Therese is currently a board member of the Victorian Managed Insurance Authority,
	VicForests, Gippsland Water and WA Super.
Former directorships (last 3 years): None
Special responsibilities:	Chair of the Nomination and Remuneration Committee
	Member of the Audit and Risk Management Committee
Interests in shares:	32,976 ordinary shares
Name:	Margaret Haseltine
Title:	Independent, Non-Executive Director
Qualifications:	Bachelor of Arts Degree
	Diploma in Secondary Teaching from the Auckland University
	Fellow of the Australian Institute of Company Directors
Experience and expertise:	Margaret has more than 30 years’ business experience in a broad range of senior
	positions, and 10 years’ experience in board directorship. A proven executive
	leader, Margaret has significant experience in the areas of supply chain and
	logistics, customer interface in the FMCG sector, change management,
	governance, and management within a large corporate environment.
	Previously, she held various senior positions with Mars Food Australia, including
	CEO, spanning a 20-year career.
Other current directorships:	Margaret is currently a board member of Southern Hospitality Ltd, Bagtrans Pty.
	Ltd. (Chairman) and Stuart Alexander and Co Pty Ltd.
Former directorships (last 3 years): Fantastic Holdings Ltd.
Special responsibilities:	Member of the Nomination and Remuneration Committee
	Member of the Audit and Risk Management Committee
Interests in shares:	15,713 ordinary shares

'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and excludes directorships of all other types of entities.

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11. Company secretary and officers

Current Chief Financial Officer and Company Secretary:

Gregory Lennox Fox (2 March 2012 – present)

Greg has more than 25 years’ experience in the automotive, industrial and public accounting sectors. Greg joined Bapcor as Chief Financial Officer in 2012 with responsibility for finance, legal, company secretarial and plays a key role in strategic initiatives. Greg was previously Chief Financial Officer at Atlas Steels and at Plexicor, which was a major supplier to the automotive industry. Greg also held various senior financial positions with Amcor Ltd after commencing his career as a chartered accountant.

12. Meetings of directors

The number of meetings of the company's Board of Directors ('the Board') and of each Board committee held during the year ended 30 June 2017, and the number of meetings attended by each director were:

			Nomination and	Nomination and	Audit and Risk	Audit and Risk
	Full Board		Remuneration Committee		Committee
	Attended	Held	Attended	Held	Attended	Held
Robert McEniry	13 13		3 3		4 4
Darryl Abotomey1	13 13		- -		- -
Andrew Harrison	13 13		3 3		4 4
Therese Ryan	13 13		3 3		4 4
MargaretHaseltine	13 13		3 3		4 4

Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee.

• 1 The members of the Audit and Risk Management Committee are Andrew Harrison (Chair), Therese Ryan, Margaret Haseltine and Robert McEniry. By invitation from the Audit and Risk Management Committee, Darryl Abotomey attended all Audit and Risk Management Committee meetings.

The members of the Nomination and Remuneration Management Committee are Therese Ryan (Chair), Robert McEniry, Andrew Harrison and Margaret Haseltine. By invitation from the Nomination and Remuneration Committee, Darryl Abotomey attended all Nomination and Remuneration Committee meetings.

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13. Remuneration report – Introduction from Bapcor’s Independent Non-Executive Directors

The independent non-executive directors of Bapcor are pleased to present the 2017 Remuneration Report.

The format and presentation of the Remuneration Report has changed this year to reflect feedback we have had from shareholders and make it more extensive and to more clearly detail the link between Bapcor remuneration and the company’s performance.

13.1 Remuneration increases

Bapcor operates in a highly competitive market, and is focused on profitable growth. We have been so successful that executive pay and board fees have failed in successive years to keep pace with Bapcor’s size and complexity. This presents an unacceptable risk that we may not be able to attract and retain the expertise and experience required for an ever-demanding business. So again this year we have adjusted remuneration to reflect the changing nature and challenge of the tasks facing our directors and executives. The increase in remuneration is well below the growth of the company, whether measured in market capitalisation, revenue, earnings or share price.

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Realising the potential issue the increased executive and director remuneration could create for some investors, we engaged an external adviser to benchmark remuneration. The results confirmed our initial assessment that substantial remuneration increases were required. Hence, we acted by adjusting fixed remuneration for executives, and board fees for non-executive directors:

• an increase of 39% in fixed pay for the Managing Director and Chief Executive Officer (‘CEO’);

• an increase of broadly 28% in fixed pay for executive Key Management Personnel (‘KMP’) (excluding CEO); and

• an average increase of 39.9% in board director fees.

Notwithstanding these adjustments, fixed and total remuneration remain below the median for peer companies.

Executive short-term and long-term incentive pay opportunities remain the same percentage of fixed pay and are contingent on achieving growth objectives.

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13.2 FY17 performance and remuneration outcomes

FY17 was another very successful year for the company with outstanding efforts and outcomes from the executives and all employees. Significant outcomes for the year include:

• Increase in revenues of 76.5% to $1,210.2M, including revenue of $196.6M from non-core businesses

• Increase in net profit after tax (‘NPAT’) of 46.5% to $63.8M

• Increase in pro-forma NPAT of 64.2% to $71.5M

• Increase in pro-forma earnings per share (‘EPS’) of 48.4%

• Increase in dividends of 18.2% to 13.0 cents per share

• Integration of the Aftermarket Network Australia Pty Ltd (previously Metcash Automotive Holdings Pty Ltd) business successfully executed

• Acquisition of Hellaby and a number of Specialist Wholesale businesses

The incentive pay outcomes detailed in this report are a direct result of exceeding short-term incentive (‘STI’) targets primarily based on exceeding NPAT and earnings before interest and tax (‘EBIT’) budgets. At the time the budgets were set, they exceeded market expectations, including the benefits of acquisitions.

Non-financial targets of up to 30% also play a key role particularly as they contribute to the longer- term sustainability of the business.

As a result of achieving and exceeding the group’s objectives, on average 81% of the maximum FY17 STI was awarded to executive KMP. The Board is pleased with this outcome as it reflects the experience enjoyed by shareholders.

The long-term incentive (‘LTI’) measures of relative total shareholder return (‘TSR’) and EPS growth have been consistently applied since the initial public offering (‘IPO’). The Board is pleased that management exceeded maximum LTI requirements for both TSR and EPS, so that 100% of the relevant tranches of the FY14 and FY15 LTI’s vested.

13.3 FY17 & FY18 equity grant for the CEO

At our 2016 Annual General Meeting (‘AGM’) we asked our shareholders to approve a three year grant of LTI to our CEO. The resolution did not receive majority shareholder support, so the planned LTI opportunity was not granted to the CEO. Feedback indicated that annual tranches were preferred and that there was insufficient detail in respect of the proposed grants of equity for a majority of shareholders to approve the resolution. Therefore, the Notice of Meeting for this year's AGM will provide more specific detail of the annual LTI to be granted to the CEO and for which the Board will seek shareholder approval.

The Board will again seek approval for the LTI grant with performance measured from FY17. The basis of the grant will be detailed in the Notice of Meeting for the 2017 AGM and reflects the goals and objectives set by the board for the management team, including the CEO at that time. The Board believes it is essential the CEO is subject to exactly the same LTI performance requirements as his management team. The management team are operating on this assumption, and the Board considers it prudent these expectations be met.

We will also be seeking approval for the CEO LTI grant with performance measured from FY18. The performance requirements and grant basis will be consistent with that applying to other executives.

We trust that between the attached remuneration report and the details that will be contained in the Notice of Meeting for the 2017 AGM that we have provided sufficient details for the number of rights for both grants to receive shareholder support.

On behalf of the independent non-executive directors of the Board, we recommend the following remuneration report to you.

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Bapcor Limited Directors' report 30 June 2017

14. Remuneration report – Overview

Key Items	**Our Approach **
How is FY17 executive remuneration different from FY16?	Fixed remuneration for FY17 was adjusted to position it around 90% of the median of the comparator peer companies, based on the information obtained from the independent advisor retained by the Board, Godfrey Remuneration Group. The CEO was not granted an LTI in FY17 as the majority of shareholders did not approve the resolution put to the AGM.
Why has fixed remuneration of KMP been increased?	The Board obtained independent market data (from Godfrey Remuneration Group) to ensure that executive and non-executive KMP were fairly compensated for their position. The company has experienced significant growth in the size and complexity of the business, geographical scope, number of employees and revenues since the IPO in 2014. Consequently, increases to the fixed remuneration of executive KMP were considered by the Board to be fair and appropriate, necessary to ensure market equity, and to mitigate against the risk of losing key people, and of regretted executive turnover. It should be noted that, notwithstanding the increases in FY17, fixed and total remuneration of executive KMP remain below the median for peer companies. Also, since the FY17 review the company has acquired Hellaby Holdings Ltd in New Zealand and numerous other businesses. The independent market review of Board fees undertaken by Godfrey Remuneration Group indicated that Board fees were below market levels for comparable roles in peer companies. This was largely because of the company’s growth as outlined above. Accordingly the non-executive director (‘NED’) fees were adjusted to a level that remains below the median of the peer group based on the independent market data. Average NED fees increased by 39.9%, excluding Margaret Haseltine who commenced in May 2016.

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Bapcor Limited Directors' report 30 June 2017

Key Items	**Our Approach **
How much STI was earned by the executives for FY17 and what were the reasons for the level of payment?	STIs earned by executive KMP are based on targets set at the beginning of the financial year. The STIs at target level are 70% financial measures and 30% personal objectives. At maximum level, the STIs are weighted 83.5% and 80% to financial measures respectively for the CEO and other executives. The aggregate of STI paid to the executive KMP for FY17 performance was $2,121,000 (excluding Colin Daly who commenced with Bapcor as part of the Hellaby acquisition) which is 81% of the maximum that could have been paid to them. As the awards exceeded the target value, $607,000 will be deferred and paid to the executives in August 2018. These payments were made because of the company's financial performance exceeded target against a range of measures including:  Group pro-forma NPAT increase of 64.2% over FY16.  Group pro-forma EBITDA increase of 74.3% over FY16  Group revenue from continuing operations increase of 47.8% over FY16 For each executive KMP, specific personal objectives are agreed at the beginning of the year and these are measured against actual performance at the end of the year. The objectives include such areas as safety, progression and succession, employee development, employee engagement, strategic growth, same store sales growth, customer satisfaction, corporate compliance and governance and investor relations.
Why was the CEO’s equity grant for FY17 not approved by the shareholders at the AGM in October 2016?	The Board sought the approval of shareholders for flexibility in the grant of equity to the CEO over the following three years. Feedback indicated that there was insufficient detail in respect of the proposed grants of equity for a majority of shareholders to approve the resolution. The Notice of Meeting for this year's AGM will provide more specific detail of the LTI to be granted to the CEO and for which the Board will seek shareholder approval. The Board will seek approval for two tranches of LTI to be granted to the CEO, one for performance from FY17 and one for performance from FY18.
Why grant an LTI opportunity to the CEO encompassing FY17 performance?	The board wants to ensure that the CEO is aligned with other members of the executive team in his focus on Board priorities as well as aligned to growth in shareholder value. Therefore a grant was communicated to the CEO, subject to shareholder approval.

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Bapcor Limited Directors' report 30 June 2017

Key Items	**Our Approach **
What LTI grants have vested in FY17? What was the basis for the vesting of those grants?	One tranche of the LTI granted to 5 executives on 11 April 2014, being 65% of the total number granted, was independently tested by a third party against the company's FY17 TSR and EPS performance. The extent to which they vested is as follows: Relative TSR Rights: Bapcor's TSR performance ranked at the 100thpercentile of the comparator group. This resulted in 100% of the tranche vesting. Compound annual growth rate (‘CAGR’) of EPS: Bapcor's CAGR of EPS was 30.4%. This resulted in 100% of the tranche vesting. One tranche of the LTI granted to 11 executives on 24 December 2015, being 35% of the total number granted, was independently tested by a third party against the company's FY17 TSR and EPS performance. The extent to which they vested is as follows: Relative TSR Rights: Bapcor's TSR performance ranked at the 80thpercentile of the comparator group. This resulted in 100% of the tranche vesting. CAGR of EPS: Bapcor's CAGR of EPS was 36.5%. This resulted in 100% of the tranche vesting. Shares from vested Performance Rights remain under a restriction on sale for a further 12 months, reflecting further alignment of executive and shareholder interests.
What is the performance period for the LTIs?	The grants of LTI in the years up to and including FY17 were for performance periods of two years and three years, with both tranches having a further 12 month restriction on sale for vested LTI. The FY18 LTI opportunity will be subject to a minimum performance period of three years with a further 12 month restriction on sale for vested LTI.
Are you disclosing the executive KMP cash and realisable pay in FY17?	Yes. Recognising an increasing interest in it from some proxy advisers and investors, in addition to the required statutory format, the Board is disclosing cash paid and the value of vested deferred awards. Some payments are for performance in previous years (e.g. where there has been an STI deferral). Accordingly, cash and realisable pay is not an absolute indicator of pay for performance in this particular year. Section 15.5 of this report provides the detail.
Did the Board make any one-off payment to executive KMP in FY17?	There were no one-off payments to executive KMPs in FY17. A payment of $6,000 was made to Margaret Haseltine, a non-executive director in FY17 for the additional workload required of her in respect of her role on the Board of Hellaby Holdings Ltd during its acquisition and while it remained a listed entity in New Zealand. Refer to section 15.6.3.
Did the Board exercise discretion when determining the payments under the STI plan?	The personal objective component of the STI’s requires some degree of judgement as to the achievement of the objectives as these are not all based on numeric outcomes.

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Key Items	**Our Approach **
What were the FY17 STI performance measures for KMP’s?	Section 15.5.2 and 15.5.3 of this report provides more details of the performance measures for FY17. In summary, the CEO could earn:  38.5% of fixed remuneration for meeting the NPAT target (which was set significantly higher than FY16 actual NPAT), and  83.5% of his fixed remuneration if the NPAT target was exceeded by more than 10%, and  up to 16.5% of fixed remuneration for meeting personal objectives in respect of safety, progression and succession, people development, strategic growth (including acquisitions), organic growth, delivery of optimisation benefits, employee engagement and customer satisfaction, corporate governance and shareholder relations.
How did the Board determine the STI performance measures for FY17?	The Board determined that the focus of the executive team should be on growing NPAT for group management and EBIT for business segment managers. For this reason, 70% of the target STI award is tied to this financial measure. All above target STI is based on the financial measures. Achievement of the non-financial measures will underpin the future growth and sustainability of the company.
Is there provision for deferral of STI and what if any has been deferred?	The Board's current policy is to defer for 12 months the amount of STI awarded to executive KMP that is above target.
Has the company changed the method it uses to determine the number of LTI Performance Rights to grant?	For the period from listing in FY14 to FY17 there has been no change to the methodology used to calculate the number of LTI Performance Rights granted. Responding to investor feedback, for FY18 the company proposes to change from using a fair-value calculation methodology to the weighted average face value of shares in the interests of better transparency. The transition to this methodology will not disadvantage executives and will be fully detailed in the Notice of Meeting for the Annual General Meeting.
Has the company made any loans to the executives in FY17?	No. It is noted that there is no outstanding loan balance for the CEO.

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15. Remuneration report (audited)

The Directors present the Remuneration Report setting out the principles, policy and practices adopted by the Bapcor board in respect of remuneration for the group's non-executive and executive KMP in accordance with the requirements of the Corporations Act 2001 and its Regulations.

The remuneration report is set out under the following main headings:

• 15.1 Principles used to determine the nature and amount of remuneration 15.2 Key management personnel

• 15.3 Remuneration governance

• 15.4 Executive remuneration

• 15.5 Cash and realisable remuneration 15.6 Statutory details of remuneration

The information provided in this Remuneration Report, which forms part of the Directors’ Report has been audited as required by section 308(3C) of the Corporations Act 2001 .

15.1 Principles used to determine the nature and amount of remuneration

The Board and Nomination and Remuneration Committee (‘NRC’) consider executive KMP remuneration should be structured in a way that provides fair, market competitive fixed remuneration with an at-risk remuneration opportunity that will focus executives on achieving company objectives and aligning their interests with shareholder outcomes.

At all times, the Board retains discretion to continually review and adjust the remuneration framework and structures in response to corporate changes, the commercial environment, shareholder feedback, good governance practices and market demands.

Fees and payments to NEDs reflect the demands and responsibilities of the directors. NED fees and payments are reviewed annually by the NRC.

The Board obtains external, independent specialist advice on remuneration and benchmarking to inform its decisions.

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15.2 Key management personnel

Bapcor's KMP, as defined by AASB 124 Related Party Disclosures , are those people with the authority and responsibility for planning, directing and controlling the activities of the consolidated entity, directly or indirectly, and includes non-executive and executive directors. The KMP as at 30 June 2017 and their position are those in the following table.

Name	**Position **
Non-executive Directors
Robert McEniry	Board Chair Member Audit and Risk Committee Member Nomination and Remuneration Committee
Andrew Harrison	Chair Audit and Risk Committee Member Nomination and Remuneration Committee
Therese Ryan	Chair Nomination and Remuneration Committee Member Audit and Risk Committee
Margaret Haseltine	Member Nomination and Remuneration Committee Member Audit and Risk Committee
**Executive Director **
Darryl Abotomey	Managing Director and Chief Executive Officer
Other KMP
Greg Fox	Chief Financial Officer and Company Secretary
Mathew Cooper	Executive General Manager, Strategic Development
Paul Dumbrell	Chief Operating Officer, Specialist Wholesale
Grant Jarrett	Executive General Manager, Operations
Craig Magill	Executive General Manager, Burson Trade
Peter Tilley	Executive General Manager, Retail & Service
Alison Laing1	Executive General Manager, Human Resources
Colin Daly2	Chief Executive Officer, Hellaby Automotive

1 Alison Laing commenced May 2017 2 Colin Daly joined on acquisition of Hellaby effective Jan 2017

15.3 Remuneration governance

The NRC is responsible for reviewing the remuneration framework to ensure it remains fit for purpose and, as appropriate, making recommendations to the Board on how it should be structured for the company at a particular time. The NRC's charter can be found at www.bapcor.com.au/about/governance.

Remuneration quantum and structure for executive and non-executive KMP are determined by the Board after considering recommendations made by the NRC.

The NRC meets regularly throughout the year to review and understand the effectiveness of the remuneration arrangements for the business, to assess executive KMP performance, to determine recommendations in respect of changes in fixed remuneration, STI awards and outcomes, and LTI awards and outcomes, among other matters.

The NRC and the Board have absolute discretion in determining the outcomes of incentive arrangements to ensure anomalous outcomes do not arise. This discretion can be exercised for both positive and negative adjustments to incentive outcomes to ensure the outcomes reflect the shareholders' experience.

The NRC seeks external advice and assistance as it considers appropriate. During FY17 and in respect of FY17, the NRC engaged Godfrey Remuneration Group to provide benchmarking reports in respect of executive KMP remuneration and NED fees and to assist with setting the comparator group for the relative TSR measure of the LTI. That work resulted in Godfrey Remuneration Group providing remuneration recommendations as defined in section 9B of the Corporations Act 2001 in respect of the quantum and mix of the executive KMP remuneration and in respect of the NED fees. Godfrey Remuneration Group was paid $30,000 excluding GST and disbursements for these services.

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The Board and the NRC have protocols in place to ensure the engagement of the remuneration advisers is and was independent of management and able to be carried out free of any undue influence. The Board is satisfied the recommendations were made free of any undue influence by KMP about whom the recommendations may relate.

During FY17, the NRC also engaged the services of Guerdon Associates to provide assistance in respect of market practices and trends, remuneration frameworks and structures, stakeholder engagement, and disclosures. Guerdon Associates did not provide any remuneration recommendations as defined in section 9B of the Corporations Act 2001 .

15.4 Executive remuneration

The following sections explain FY17 executive KMP remuneration:

• 15.4.1 Executive remuneration structure

• 15.4.2 Financial performance over the last three years

• 15.4.3 STI performance metrics and outcomes

• 15.4.4 STI payment, deferral and clawback

• 15.4.5 LTI plan

• 15.4.6 LTI outcomes

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Bapcor Limited Directors' report 30 June 2017

15.4.1 Executive remuneration structure

The Board has implemented a total remuneration structure for executive KMP remuneration comprising:

Component of total **remuneration **	**How is it delivered? **	Purpose	How does it link to company **performance? **
Fixed annual remuneration (‘FAR’)	Comprises base salary, superannuation and non- cash benefits such as motor vehicles.	To provide competitive, market based fixed remuneration for senior executives. The level of FAR is set with regard for the scope of the position, and the knowledge, skill and experience required of the individual to perform the role.	The complexity of the business requires highly skilled executives to achieve a company performance that meets shareholder expectations. Company and individual performance are considered during the annual remuneration review.
STI	Paid in cash after results released except for any amount above target. Any amount paid for above target performance is deferred for 12 months and paid in cash after release of the following year’s results, subject to claw back provisions.	To motivate executives to achieve specific financial and non-financial objectives and reward them in line with the actual achievements.	The key financial metric is NPAT for the group and EBIT for business segments with a threshold requirement of 95% of target. The target is set at a growth level to the prior year so that executives will be rewarded only if the company achieves growth. The non-financial measures include objectives for safety, people management, sustainability, compliance, and optimisation of acquisitions that are the foundation of a sustainable company performance.
LTI	Awards are made in the form of Performance Rights, which do not attract dividends or voting rights.	To motivate executives to take a long-term view of company performance, reward them in line with the company's performance over the longer term, and to link their reward with the investors' experience. The value of the Performance Rights will increase in line with an increasing shareholder return for investors and, as such, is effective in retaining executives.	Vesting of half of the Performance Rights is contingent on Bapcor's total shareholder return (‘TSR’) being better than fifty per cent of the companies in a comparable peer group. The other half of the Performance Rights will only vest if the company's compound annual growth rate of EPS is not less than 7.5%, with the maximum vesting at a compound annual growth rate of 15%. Performance is measured over 24 and 36 months with shares from the vested Performance Rights restricted from sale for a further 12 months.

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The specific details of the STI and LTI opportunities are explained in the sections below.

The pay mix of the executive KMP in FY17 is shown below:

Executive	**Fixed remuneration **	Maximum STI	Maximum LTI	**Total **
CEO	50%	50%	0%*	100%
CFO	48%	28%	24%	100%
Other KMP	50%	30%	20%	100%

• The CEO was not granted an LTI opportunity. The resolution for the grant of equity to the CEO, who is an executive director, was not approved by a majority of shareholders at the Annual General Meeting in October 2016.

15.4.2 Financial performance over the last three years

Bapcor's financial performance over the last three years will assist readers to understand the context of the remuneration framework, management's performance and how the company's performance impacts the remuneration outcomes for the executive KMP.

The table below shows measures of Bapcor’s financial performance over the three complete financial years since it listed on 23 April 2014.

	2015	2016	2017
Revenue from continuing operations $m	375.3	685.6	1,013.6
Increase/(decrease) in Sales	9.9%	82.7%	47.8%
Pro-forma NPAT $m	23.1	43.6	71.5
Increase/(decrease) in pro-forma NPAT	19.7%	88.7%	64.2%
Dividend declared (cents per share)	8.7	11.0	13.0
Increase/(decrease) in dividend declared	n/a	26.4%	18.2%
Share price 30 June $	3.40	5.52	5.49
Increase /(decrease) in share price	60.4%	62.4%	(0.05%)
Market capitalisation $m 30 June	746.9	1,357.1	1,529.7
Pro-forma EPS–TERP adjusted (cents)1	13.62	17.85	26.54
Increase/(decrease) in Pro-forma EPS–TERP adjusted	19.1%	31.0%	48.4%

• 1 2015 EPS has been adjusted to take into consideration the impact of the rights issue performed in 2016 and the impact on the number of shares as per AASB 133 Earnings Per Share

15.4.3 STI performance metrics and outcomes

Participants in the STI Plan have a target cash payment that is a percentage of their fixed annual remuneration. Actual STI payments may be below, at or above that target depending on the achievement of financial and non-financial objectives set each year by the Board. 70% of the target STI opportunity of the executive KMP is contingent on meeting annual NPAT objectives for group and EBIT objectives for business segments. 30% of target STI is subject to meeting other annual non-financial objectives.

No incentive payment for financial performance is payable if the threshold of 95% of financial target performance is not met.

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Bapcor Limited Directors' report 30 June 2017

Weighting of performance measure at target	Performance measure	FY17performance
70%	At the group level, NPAT is the primary financial metric and by business segment EBIT is the primary financial objective. They were selected by the Board to focus management on achieving a growth in profit that would deliver significant returns to shareholders. For executive KMP, the financial metric is the group NPAT for group executives, whereas the financial targets for business segment executives are split between EBIT of the business segment they manage and group EBIT. The group target was set significantly higher than the FY16 actual result and was set in the context of the business strategy and growth objectives. Percentage of FAR CEO CFO EGM Other KMP < Threshold Nil Nil Nil Nil Threshold 28.5% 20% 20% 20% Target 38.5% 28% 28% 28% Maximum 83.5% 48% 48% 48% Threshold level is 95% of target and requires significant improvement over FY16 actual result.	Reported pro-forma NPAT for FY17 was $71.5M, a 64.2% increase over FY16. The group NPAT performance was above target and above maximum. EBIT by business segment varied as detailed in the financial report.

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Bapcor Limited Directors' report 30 June 2017

	30%	Non-financial objectives were set for each of the executive KMP (as well as other managers) and have a common stream as well as specific targets by business segment. As the executives' roles differ and performance expectations vary accordingly, the weightings of the measures may vary for each executive. This is because each will have a particular focus on the business segment they manage. There is a range of metrics across the following criteria that are applicable to the executive KMP depending on their role and accountabilities:  Safety:requiring improved performance year on year.  Strategic acquisitions:with objectives requiring the identification of suitable businesses for acquisition, implementation of the business case and optimal integration.  Organic growth:for each business segment, organic growth targets and market share gains.  Systems and processes:with objectives focused on the long term sustainability of the company covering areas of information technology and warehousing and distribution.  Human resources:with objectives requiring people development, culture strategies, succession planning, training and development outcomes, and employee engagement.  Business unit:objectives involving store growth and customer engagement.  Compliance and governance:requiring processes and procedures to ensure achievement of compliance requirements.  Optimisation projects:for achieving optimisation from acquisitions and improved cost structures.	A detailed explanation of the group’s achievements in the non-financial areas are contained in section 5 of the Directors’ Report.

The following table shows the actual STI outcomes for each of the executive KMP for FY17:

KMP	Target STI as a % of FAR	Maximum STI as a % of FAR	Actual STI as a % of **maximum **	STI forfeited as a % of **maximum **	Actual STI awarded $
Darryl Abotomey	55%	100.0%	95.0%	5.0%	1,015,402
Greg Fox	40%	60.0%	92.9%	7.1%	320,340
Mathew Cooper	40%	60.0%	83.7%	16.3%	195,780
Paul Dumbrell	40%	60.0%	70.5%	29.5%	192,374
Grant Jarrett	40%	60.0%	42.6%	57.4%	93,294
Craig Magill	40%	60.0%	82.1%	17.9%	204,385
Peter Tilley	40%	60.0%	42.4%	57.6%	99,216
Colin Daly1	40%	60.0%	78.8%	21.2%	108,698
Alison Laing2	n/a	n/a	n/a	n/a	n/a

1 Colin Daly joined Bapcor as part of the Hellaby acquisition in January 2017. The Hellaby plan was continued until June 2017 2 Alison Laing joined Bapcor in May 2017 and is not eligible to participate in STI or LTI until 1 July 2017.

The STI performance measures are tested annually after the end of the relevant financial year.

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Bapcor Limited Directors' report 30 June 2017

15.4.4 STI payment, deferral and clawback

Where STI awards have been determined, payments under the STI Plan are made immediately after the release of full year financial results to the ASX except in relation to any portion of an award above the target up to the maximum award.

The amount of STI award above target is deferred for a period of 12 months. The deferred amount is payable to the executive immediately after the release of the year ending 30 June 2018 financial results.

All payments are in cash.

Awards are subject to claw back for any material financial misstatements that are subsequently determined in respect of Bapcor’s performance for the relevant period.

15.4.5 LTI plan

The LTI is contingent on company performance over a two and three year performance period. Payments are rights to acquire shares (‘Performance Rights’). Performance Rights are granted at the start of the performance period. Vesting of Performance Rights varies with the extent that performance requirements have been met. On vesting, the Performance Rights entitle the executive to receive fully paid shares in the company.

The key terms of the LTI under which grants were made in FY17 and prior years are as follows:

Administration	The LTI is administered by the Board.
Who participates?	In FY17 executive KMP, other than the CEO, and a number of other senior executives were invited to participate. The CEO did not participate in the FY17 LTI opportunity because majority shareholder approval was not received.
What is the LTI opportunity?	The LTI opportunity is the grant of Performance Rights that will vest on satisfaction of the applicable performance, service or other vesting conditions specified in the Offer at the time of the grant. The Board sets the terms and conditions on which it will offer Performance Rights under the LTI, including the vesting conditions, at the time of the offer.
Performance Rights	The LTI opportunity granted to participants in FY17 provides for the Performance Rights, upon satisfaction of the vesting conditions, to convert into a fully paid ordinary share for each vested right. The Performance Rights do not carry any voting rights or dividend entitlements.
How was the number of Performance Rights determined?	For the grants made in FY17, the number of Performance Rights was determined by dividing the executive's LTI value by the fair value of the Performance Rights at the time of grant. For grants of LTI in FY18 and beyond, the Board intends to determine the number of equity instruments to allocate by dividing the executive's LTI value by the face value of a Bapcor share for better transparency. The transition to the face value allocation methodology will be at no disadvantage to executive participants.
Performance period	Performance is assessed over a performance period specified at the time of the grant. The performance period for the LTI opportunities granted in FY17 are set out following this table. The Board intends the performance period for the grants of LTI to be made in FY18 will be for three years.

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Performance measures	Each executive is granted two tranches of Performance Rights. 50% of the total grant value of Performance Rights granted to the executive under each tranche are subject to the satisfaction of a TSR performance hurdle for the relevant performance period (‘TSR Rights’), and 50% are subject to satisfaction of an EPS performance hurdle for the relevant performance period (‘EPS Rights’). These are described in more detail in the section following this table.
Shares	Fully paid ordinary shares allocated on conversion of Performance Rights rank equally with the other issued ordinary shares and carry the same rights and entitlements, including dividend and voting rights. Shares may be issued by Bapcor or acquired on or off market by a nominee or trustee on behalf of Bapcor, then transferred to the participant.
Participation in new issues	Performance Rights granted in FY17 and earlier do not confer on a participant the right to participate in new issues of shares or other securities in Bapcor, including by way of bonus issues, rights issues or otherwise.
Limitations	The number of shares to be received by participants on the conversion of the Performance Rights must not exceed 5% of the total number of issued shares over a 5 year period.
Trustee	Bapcor may appoint a trustee for the purpose of administering the LTI, including to acquire and hold shares, or other securities of the company, on behalf of participants or otherwise for the purposes of the LTI.
Quotation	Performance Rights are not quoted on the ASX. Bapcor will apply for official quotation of any shares issued under the LTI, in accordance with the ASX Listing Rules and having regard for any disposal restrictions in place under the LTI.
Amendments	To the extent permitted by the ASX Listing Rules, the Board retains the discretion to vary the terms and conditions of the LTI. This includes varying the number of Performance Rights or the number of shares to which a participant is entitled upon a reorganisation of the capital of Bapcor. No discretion to vary LTI terms and conditions was made in FY17 or prior years.
Other terms	Shares acquired on the conversion of vested Performance Rights cannot be sold for a period of twelve months from vesting date. Performance Rights cannot be transferred, encumbered or hedged. The LTI contains other terms relating to the administration, variation, suspension and termination of the LTI.

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Bapcor Limited Directors' report 30 June 2017

In FY17 an offer to participate in the LTI was made to nine of Bapcor’s senior executives. Each executive's LTI opportunity comprised two tranches whereby:

• 34% of the allocated Performance Rights have a performance period that ends on 30 June 2018 at which time the performance hurdles for this tranche are tested; and

• 66% of the allocated Performance Rights have a performance period that ends on 30 June 2019 at which time the performance hurdles for this tranche are tested.

A summary of the terms for the Performance Rights granted in FY17 is set out in the following table.

	Tranche 1	Tranche 2
Grant date	20 December 2016	20 December 2016
Performance hurdle	Relative TSR EPS CAGR	Relative TSR EPS CAGR
Performance period	1/7/16 to 30/6/18 1/7/16 to 30/6/18	1/7/16 to 30/6/19 1/7/16 to 30/6/19
Test date	30 June 2018	30 June 2019
Expiry date	Once tested	Once tested
Quantity granted	77,891 46,395	145,742 91,647
Exercise price	Nil	Nil
Fair value at 1/7/16	$3.1696 $5.3213	$3.2883 $5.2293
Other conditions	Restriction on sale to 30/6/19	Restriction on sale to 30/6/20

Relative total shareholder return hurdle

Fifty per cent of the Performance Rights granted to a participant will vest subject to a TSR performance hurdle that assesses performance by measuring capital growth in the share price together with income returned to shareholders, measured over the performance period against a Comparator Group of companies. The Performance Rights will vest by reference to Bapcor's TSR performance ranking against this Comparator Group of companies, as follows:

Bapcor’s TSR relative to the Comparator Group over the performance period	Percentage of TSR Rights vesting
Less than 50th percentile	Nil
Equal to 50th percentile	50%
Greater than 50th percentile and less than 75th percentile	Pro-rata straight-line vesting
Equal to or greater than 75th percentile	100%

TSR for Bapcor and the companies in the Comparator Group will be calculated as follows:

• TSR will be measured between 30 June 2016 and 30 June 2018 or 2019 (the Performance Period);

• For the purpose of this measurement, dividends will be assumed to have been re-invested on the ex-dividend date;

• Tax and any franking credits (or equivalent) will be ignored; and

• For the purpose of this measurement, the share price of Bapcor and the Comparator Group companies will be averaged over the 10 trading days up to and including 30 June at the start and end date of the Performance Period.

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The Comparator Group for the FY17 LTI is set out below. The Board has the discretion to adjust the Comparator Group to take into account events including but not limited to takeovers, suspensions, mergers or demergers that might occur during the Performance Period.

ASX Code	Company Name
AAD	Ardent Leisure Group
AHG	Automotive Holdings Group
ARB	ARB Corporation Limited
BRG	Breville Group Limited
CTD	Corporate Travel Management Limited
DMP	Domino’s Pizza Enterprises Ltd
FLT	Flight Centre Travel Group
GEM	G8 Education Ltd
GUD	GUD Holdings Ltd
GXL	Greencross Limited
HVN	Harvey Norman Holdings Ltd
IVO	InvoCare Limited
JBH	JB Hi-Fi Limited
MTR	Mantra Group Ltd
MYR	Myer Holdings Limited
NVT	Navitas Limited
PMV	Premier Investments Limited
RFG	Retail Food Group Limited
SUL	Super Retail Group Limited
TME	Trade Me Group Ltd

Earnings per share growth

Fifty per cent of the Performance Rights granted to a participant will vest by reference to an EPS performance hurdle that measures the basic EPS on a normalised basis over the performance period. Each tranche of Performance Rights subject to an EPS hurdle will vest as follows:

• The Board has determined that the EPS hurdle will be based on a compound annual growth rate (‘CAGR’) of basic EPS of between 7.5% and 15%, respectively, over the Performance Period.

• The starting point for these EPS rights is the FY16 Actual EPS of 17.85 cents per share.

• Basic EPS is calculated in accordance with AASB 133 Earnings Per Share .

• The proportion of the EPS Rights that vest at the end of the Performance Period will be determined as follows:

Bapcor's compound annual EPS growth over the performance period	Percentage of EPS Rights Vesting
Less than 7.5%	Nil
7.5%	20%
Greater than 7.5% and less than 15%	Pro-rata straight-line vesting
Equal to or greater than 15%	100%

If vesting conditions are met, Performance Rights granted in FY17 will convert into fully paid ordinary shares of the company. Shares that are allocated in respect of each tranche will be subject to a restriction on sale for twelve months from vesting of the Performance Rights.

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Bapcor Limited Directors' report 30 June 2017

15.4.6 LTI outcomes

During FY17 the following Performance Rights were independently tested by a third party;

• One tranche of the LTI granted to 5 executives on 11 April 2014, being 65% of the total number granted, was tested against the company's FY17 TSR and EPS performance. The extent to which they vested is as follows.

• Relative TSR Rights: Bapcor's TSR performance ranked at the 100% percentile of the comparator. This resulted in 100% of the tranche vesting.

CAGR of EPS : Bapcor's CAGR of EPS was 30.4%. This resulted in 100% of the tranche vesting.

• One tranche of the LTI granted to 11 executives on 24 December 2015, being 35% of the total number granted, was tested against the company's FY17 TSR and EPS performance. The extent to which they vested is as follows.

• Relative TSR Rights : Bapcor's TSR performance ranked at the 80.9% percentile of the comparator. This resulted in 100% of the tranche vesting.

CAGR of EPS : Bapcor's CAGR of EPS was 36.5%. This resulted in 100% of the tranche vesting.

Shares from vested Performance Rights remain under a restriction on sale for a further 12 months, reflecting further alignment of executive and shareholder interests.

15.5 Cash and realisable remuneration

The following table shows the total cash remuneration received by executive KMP in respect of FY17. The total cash payments received are made up of fixed remuneration inclusive of superannuation and benefits and the amount of the FY17 STI award that is not deferred and is paid in August 2017.

The table also includes the value of previous years' deferred STI and LTI awards that vested during FY17 and became realisable. These values differ from the values in the table in section 15.6.1 that shows the accounting expense for both vested and unvested awards. The table does not show values for vested LTI that are not realisable because they remain under restriction from sale for 12 months after vesting.

Executive KMP	Fixed remuneration1 $	FY17 cash STI2 $	Total cash in respect of FY17 $	Previous year awards that vested during FY17	Previous year awards that vested during FY17	Total received and realisable during FY17 $
				Prior year deferred STI received3 $	Vested and unrestricted LTI4 $
Darryl Abotomey	1,068,300	587,565	1,655,865	129,178	-	1,785,043
Greg Fox	575,000	230,000	805,000	-	-	805,000
Mathew Cooper	390,000	156,000	546,000	-	-	546,000
Paul Dumbrell	400,810	182,000	582,810	-	-	582,810
Grant Jarrett	373,334	93,294	466,628	-	-	466,628
Craig Magill	415,000	166,000	581,000	-	-	581,000
Peter Tilley	390,004	99,216	489,220	-	-	489,220
Colin Daly5	229,806	108,698	338,504	-	-	338,504
Alison Laing6	44,999	-	44,999	-	-	44,999

• 1 Fixed remuneration is the aggregate of cash salary, superannuation and fringe benefits.

• 2 FY17 cash STI is the amount accrued and payable in respect of FY17 STI opportunity. It is the cash amount to be paid in August 2017 and does not include any deferred amount in respect of the FY17 STI award

• 3 Prior year deferred STI received is the STI amount awarded in August 2016 in respect of FY16 and deferred for 12 months. It is to be paid in August 2017.

• 4 Vested and unrestricted LTI is the value of the vested LTI on the day it is no longer under restriction from sale. The value is the closing share price on the date the LTI is no longer subject to restriction from sale. The FY14 LTI that vested during FY17 was restricted from sale until 1 Aug 2017.

• 5 C Daly is Chief Executive – Hellaby Automotive and has been included from when Bapcor took effective control of Hellaby in January 2017

• 6 A Laing commenced as Executive General Manager - Human Resources in May 2017

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Bapcor Limited Directors' report 30 June 2017

15.6 Statutory details of remuneration

The statutory remuneration disclosures for the year ended 30 June 2017 are detailed below under the following headings and are prepared in accordance with Australian Accounting Standards (AASBs).

• 15.6.1 Remuneration of KMP

• 15.6.2 Service agreements

• 15.6.3 NED remuneration

• 15.6.4 Share-based compensation

• 15.6.5 Equity instrument disclosures relating to KMP

• 15.6.6 Total shares under option or right to KMP

• 15.6.7 Loans to KMP

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Bapcor Limited Directors' report 30 June 2017

15.6.1 Remuneration of KMP

	Short termbenefits Post employment benefits Long term benefits Share based payments Percentage of remuneration fixed and **at risk **
	Cash salary and fees5 Bonus4 Non- monetary Superannuation Long service leave Equity settled Total Fixed At risk -STI At risk - LTI
2017	$ $ $ $ $ $ $ % % %
NED R McEniry	260,384 - - 19,616 - - 280,000 100% - -
A Harrison	126,700 - - 13,300 - - 140,000 100% - -
T Ryan	126,700 - - 13,300 - - 140,000 100% - -
M Haseltine	123,080 - - 12,920 - - 136,000 100% - -
**Executive Director **
D Abotomey	1,043,300 1,005,402 - 25,000 16,555 334,616 2,424,873 45% 41% 14%
Other KMP
GFox	551,112 305,340 - 19,616 9,256 263,113 1,148,437 51% 26% 23%
CMagill	395,384 203,185 - 19,616 6,590 152,397 777,172 54% 26% 20%
P Dumbrell1	372,179 192,374 21,250 6,894 166,372 759,069 53% 25% 22%
MCooper	370,384 190,780 - 19,616 6,173 111,639 698,592 57% 27% 16%
P Tilley	360,175 99,216 - 21,250 5,310 109,405 595,356 65% 17% 18%
G Jarrett	352,083 93,294 - 21,250 5,469 111,185 583,281 65% 16% 19%
CDaly2	222,912 108,698 - 6,894 - - 338,504 68% 32% -
A. Laing3	40,724 - - 4,275 4,173 - 49,172 100% - -
**Total **	4,345,117 2,198,289 - 217,903 60,420 1,248,727 8,070,456
2016	$ $ $ $ $ $ $ % % %
NED
R McEniry	170,000 - - 16,150 - - 186,150 100% - -
A Harrison	97,800 - - 9,291 - - 107,091 100% - -
T Ryan	97,800 - - 9,291 - - 107,091 100% - -
M Haseltine	6,780 - - 644 - - 7,424 100% - -
**Executive Director **
D Abotomey	745,000 562,678 - 25,000 11,917 355,697 1,700,292 46% 33% 21%
Other KMP
GFox	430,693 232,400 - 19,207 7,178 160,518 849,996 54% 27% 19%
CMagill	301,902 165,474 - 19,547 5,178 93,000 585,101 56% 28% 16%
P Dumbrell	368,716 159,775 - 17,743 5,852 77,194 629,280 62% 26% 12%
MCooper	292,656 140,070 - 17,442 5,011 50,728 505,907 62% 28% 10%
P Tilley	282,304 124,350 - 17,743 4,179 47,925 476,501 64% 26% 10%
G Jarrett	316,360 136,069 - 17,817 5,303 53,521 529,070 64% 26% 10%
**Total **	3,110,011 1,520,816 - 169,875 44,618 838,583 5,683,903

1 P Dumbrell took 6.8 weeks leave without pay during FY17 2 C Daly is Chief Executive – Hellaby Automotive and has been included from when Bapcor took effective control of Hellaby in January 2017 3 A Laing commenced as Executive General Manager - Human Resources in May 2017

• 4 As per the prior year financial report, bonuses in relation to the sale of ANA in FY16 have been excluded from the above table.

• 5 Cash salary and fees includes accrued annual leave

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Bapcor Limited Directors' report 30 June 2017

15.6.2 Service agreements

Remuneration and other terms of employment for KMP are formalised in service agreements. Details of these agreements are as follows.

Name: Darryl Abotomey Title: Chief Executive Officer and Managing Director Agreement commenced: 21 April 2014 Term of agreement: 5 years (to 30 April 2019) Details:

Fixed annual remuneration was increased to $1,068,300 (inclusive of superannuation). This is adjusted annually. Fixed remuneration and incentives are based on independent advice from Godfrey Remuneration Group.

Bapcor or Darryl may terminate his employment contract by giving the other 12 months’ written notice before the proposed date of termination, or in Bapcor’s case, payment in lieu of notice. Bapcor may terminate Darryl’s employment immediately and without payment in lieu of notice in certain circumstances including for any serious misconduct. Darryl’s employment contract also includes a restraint of trade period of 12 months.

Other KMP

Each of Bapcor's executive KMP is employed under an individual employment agreement. The provisions of the employment agreements include:

Contract terms	The commencement dates vary and all contracts are open ended.
Fixed annual remuneration	Each executive's contract specifies the FAR inclusive of superannuation, motor vehicle, non-cash benefits and FBT thereon. The amount for each executive is as set out earlier in this report.
Review of FAR	The executives' FAR is subject to annual review with no obligation on the company to make changes.
Variable pay	Each executive is eligible to participate in the company's incentive arrangements that can vary from time to time. The maximum STI opportunity is 60% of the executive's FAR and the maximum LTI opportunity is between 40% and 50% of the executive's FAR.
Notice period	The executive KMP are subject to a three to six month notice period both by the company and by the executive.
Confidentiality	Each contract includes provisions requiring the executive to maintain the confidentiality of company information.
Leave	Each contract provides for leave entitlements, as a minimum, as per the National Employment Standard.
Restraint of trade	Each contract includes restraint of trade provisions for a period after termination of employment.

As Alison Laing commenced employment in May 2017, she has not participated in STI or LTI opportunities for FY17, but will do so in future years. Colin Daly has participated for part of the FY17 year in the former Hellaby STI plan and will participate in the Bapcor LTI.

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Bapcor Limited Directors' report 30 June 2017

15.6.3 NED remuneration

Fees and payments to NEDs reflect the demands and the responsibilities of the directors. NED fees and payments are reviewed annually by the NRC. The NRC seeks to set fees at a level that will attract and retain high calibre NEDs who have a diverse range of experience, skills and qualifications to enable effective oversight of management and the company. The NRC may, from time to time, receive advice from independent remuneration consultants to ensure NED fees and payments are competitive, appropriate and in line with the market.

The maximum aggregate fee pool of $1,000,000 was approved by shareholders at the AGM on 21 October 2016.

A review of NED remuneration was undertaken by the NRC in August 2016. The NRC engaged Godfrey Remuneration Group to undertake an independent benchmarking of NED fees. The review determined that the base board fees and committee fees were significantly below market levels for the workload commitments particularly given the company's growth and complexity.

The following fee policy for the Board and Committees took effect from 1 July 2016.

NEDtype	Board $	Nomination & Remuneration Committee $	Audit & Risk Management Committee $
Chairman	280,000	20,000	20,000
Member	110,000	10,000	10,000

All fee amounts are inclusive of compulsory superannuation obligations.

Fees paid to NEDs in FY17 are set out in the following table. Fees are paid in cash and NEDs were not granted options or share rights in FY17. NEDs are not entitled to any payment on retirement or resignation from the Board. Directors may also be reimbursed for expenses properly incurred by the Director in connection with the affairs of Bapcor including travel and other expenses whilst attending to company affairs.

An additional amount of $6,000 was paid to Margaret Haseltine for the additional workload required of her in respect of her role on the Board of the Hellaby Holdings Ltd during its acquisition and while it remained a listed entity in New Zealand.

NED	**Financial year **	Board fees $	Committee fees $	Superannuation $	Total $
Robert McEniry	2017	258,646	-	18,949	277,595
	2016	162,600	7,400	16,150	186,150
Andrew Harrison	2017	100,002	27,273	12,091	139,367
	2016	85,000	12,800	9,291	107,091
Therese Ryan	2017	100,002	27,273	12,091	139,367
	2016	85,000	12,800	9,291	107,091
Margaret Haseltine	2017	105,948	18,267	11,800	136,016
	2016	5,997	783	644	7,424

Shares held by NEDs

The Board has a policy of encouraging directors to increase their holding of shares in the company so that over time it reaches a minimum level of one times the base board fees. The current shareholding interests of the NEDs is set out in section 15.6.5.

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Bapcor Limited Directors' report 30 June 2017

15.6.4 Share-based compensation

The following table outlines the details of the LTI grants outstanding for each executive KMP participant and other movements in options and performance rights in the year. As options will not vest if the performance conditions are not satisfied, the minimum value of the option yet to vest is nil. Fair value is calculated in accordance with Bapcor’s accounting policy as discussed in note 1 of the financial statements. There were no amounts paid and there were no amounts outstanding or due from KMP in relation to the grant of options during the year.

KMP	Grant date	Quantity granted	Vest date	Exercise price $	Value at grant date $1	Vested%	Quantity vested	Quantity remaining	Forfeited/ lapsed %	Value expensed this year $2
D Abotomey	24/04/2014 24/12/2015	70,071 220,089 55,198 105,790	30/06/2016 30/06/2017 30/6/2017 30/6/2018	- -	382,342 574,449	24% 0%	70,071 -	- 220,089 55,198 105,790	0% 0%	112,063 222,553
G Fox	24/04/2014 24/12/2015	31,778 99,814 24,814 47,558	30/06/2016 30/06/2017 30/06/2017 30/06/2018	- -	173,398 258,243	24% 0%	31,778 -	- 99,814 24,814 47,558	0% 0%	60,987 100,048
	20/12/2016	24,605 46,995	30/06/2018 30/06/2019	-	307,393	0%	-	24,605 46,995	0%	102,078
C Magill	24/04/2014 24/12/2015	18,114 56,894 14,558 27,901	30/06/2016 30/06/2017 30/06/2017 30/06/2018	- -	93,634 151,505	24% 0%	18,114 -	- 56,894 14,558 27,901	0% 0%	34,763 58,696
	20/12/2016	14,206 27,135	30/06/2018 30/06/2019	-	177,485	0%	-	14,206 27,135	0%	58,938
P Dumbrell	24/12/2015	21,230 40,688	30/06/2017 300/6/2018	-	220,940	0%	-	21,230 40,688	0%	85,597
	20/12/2016	19,470 37,188	30/06/2018 30/06/2019	-	243,244	0%	-	19,470 37,188	0%	80,775
M Cooper	24/12/2015	13,951 26,738	30/06/2017 30/06/2018	-	145,189	0%	-	13,951 26,738	0%	56,249
	20/12/2016	13,351 25,501	30/06/2018 30/06/2019	-	166,799	0%	-	13,351 25,501	0%	55,390
P Tilley	24/12/2015	13,180 25,261	30/06/2017 30/06/2018	-	137,168	0%	-	13,180 25,261	0%	54,015
	20/12/2016	13,351 25,501	30/06/2018 30/06/2019	-	166,799	0%	-	13,351 25,501	0%	55,390
G Jarrett	24/12/2015	14,719 28,211	30/06/2017 300/6/2018	-	153,186	0%	-	14,719 28,211	0%	59,347
	20/12/2016	12,495 23,865	30/06/2018 30/06/2019	-	156,102	0%	-	12,495 23,865	0%	51,838
**Total **		1,240,220			3,507,876		119,963	**1,120,257 **		1,248,727

1 Value at grant date has been determined as the fair value of performance rights at grant

2 Value expensed this year is the current years expense calculated by allocating the fair value (determined at grant), of the performance rights, over the relevant vesting period as required by the Accounting Standards.

35

Bapcor Limited Directors' report 30 June 2017

15.6.5 Equity instrument disclosures relating to KMP

The numbers of ordinary voting shares in the company held during the financial year by each director and other KMP, including their personally related parties, are set out below.

		Balance at start of the **year **	Received during the **year **	Retail Share **Offer **	Purchase of shares	Sale of shares	Balance at the end of **the year **
	2017
	Directors
	R McEniry	40,294	-	2,869	-	-	43,163
	A Harrison	44,000	-	2,869	10,000	-	56,869
	T Ryan	32,976	-	-	-	-	32,976
	M Haseltine	-	-	153	15,560	-	15,713
	D Abotomey	1,787,306	70,071	2,869	-	-	1,860,246
	Other KMP
	G Fox	762,417	31,778	-	-	(200,000)	594,195
	CMagill	809,246	18,114	-	-	-	827,360
	P Dumbrell	2,817,313	-	-	-	-	2,817,313
	M Cooper	-	-	-	8,500	-	8,500
	P Tilley	-	-	-	-	-	-
	G Jarett	-	-	-	-	-	-
	Total	6,293,552	119,963	8,760	34,060	(200,000)	6,256,335
	2016
	Directors
	R McEniry	27,473	-	12,821	-	-	40,294
	A Harrison	30,000	-	14,000	-	-	44,000
	T Ryan	22,483	-	10,493	-	-	32,976
	M Haseltine	-	-	-	-	-	-
	D Abotomey	1,559,526	-	727,780	-	(500,000)	1,787,306
	Other KMP
	G Fox	656,193	-	306,223	-	(199,999)	762,417
	CMagill	1,078,714	-	503,400	-	(772,868)	809,246
	P Dumbrell1	-	-	-	4,695,525	(1,878,210)	2,817,313
	M Cooper	-	-	-	-	-	-
	P Tilley	-	-	-	-	-	-
	G Jarett	-	-	-	-	-	-
	Total	3,374,389	-	1,574,717	4,695,523	(3,351,077)	6,293,552

1 The issue of shares to P Dumbrell (via his related entities) in FY16 occurred as part of the ANA acquisition settlement.

15.6.6 Total shares under option or right to KMP

Date granted	Vest date	Expiry date	Exercise price of rights	Quantity
Performance rights plans
24/04/2014	30/6/2017	n/a	$0.00	376,797
24/12/2015	30/6/2017	n/a	$0.00	157,650
24/12/2015	30/6/2018	n/a	$0.00	302,147
20/12/2016	30/06/2018	n/a	$0.00	97,478
20/12/2016	30/06/2019	n/a	$0.00	186,185
Total shares under option of right				**1,120,257 **

36

Bapcor Limited Directors' report 30 June 2017

15.6.7 Loans to executive KMP

During FY16, loans were made to executive KMP (D Abotomey, G Fox and C Magill) and some other executives to assist in the purchase of shares under the retail component of the Entitlements Offer in that year. These loans are secured by the underlying shares. The loans are interest bearing and are repayable on the earlier of sale of the underlying shares, termination of employment or 5 years from the date of the loan. Any remuneration in relation to over achievement of target STIs is to be applied to repay the outstanding loan balance. The total amount of loans made during FY16 to executive KMP was $3,050,000. Subsequent to the loans being made, there have been repayments of $1,696,000 and as at 30 June 2017, the outstanding balance on these loans to executive KMP is $1,354,000. There are no outstanding loans to the CEO.

37

Bapcor Limited Directors' report 30 June 2017

16. Matters subsequent to the end of the financial year

On 3 July 2017, Bapcor purchased Tricor Engineering ("Tricor") for a total of $2.4M of which $1.0M is deferred over the next two years. Tricor specialises in the supply and installation of lubrication equipment in the car dealership and heavy vehicle workshop market. The business will operate within the Precision Automotive Equipment business within the Trade segment.

Apart from the dividend declared as discussed above, no other matter or circumstance has arisen since 30 June 2017 that has significantly affected, or may significantly affect the consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial years.

17. Environmental regulation

The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or State law.

18. Indemnity and insurance of officers

During the financial year, the company paid a premium of $190,250 in respect of a contract to insure the directors and executives of the company against a liability for costs that may be incurred in defending civil or criminal proceedings that may be brought against the directors, in their capacity as a director, except where there is a lack of good faith.

19. Proceedings on behalf of the company

No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company, or to intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or part of those proceedings.

20. Auditor

PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001.

21. Remuneration of auditors

Details of the amounts paid or payable to the auditor for audit and non-audit services provided during the financial year by the auditor are outlined in note 29 to the financial statements.

The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.

The directors are of the opinion that the services as disclosed in note 29 to the financial statements do not compromise the external auditor's independence requirements of the Corporations Act 2001 for the following reasons:

• all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and

• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risks and rewards.

38

Bapcor Limited Directors' report 30 June 2017

22. Auditor's independence declaration

A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 40 of the Directors' Report.

23. Rounding of amounts

The company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.

This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001.

On behalf of the directors,

==> picture [97 x 61] intentionally omitted <==

==> picture [169 x 48] intentionally omitted <==

Robert McEniry Chairman

Darryl Abotomey Chief Executive Officer and Managing Director

23 August 2017 Melbourne

39

==> picture [77 x 59] intentionally omitted <==

Bapcor Limited Directors' report (continued) 30 June 2017

Auditor’s Independence Declaration

As lead auditor for the audit of Bapcor Limited for the year ended 30 June 2017, I declare that to the best of my knowledge and belief, there have been:

• (a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

• (b) no contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Bapcor Limited and the entities it controlled during the period.

==> picture [170 x 107] intentionally omitted <==

Daniel Rosenberg Partner PricewaterhouseCoopers

Melbourne 23 August 2017

PricewaterhouseCoopers, ABN 52 780 433 757 40 2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001 T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation.

Bapcor Limited Contents 30 June 2017

Consolidated statement of comprehensive income	42
Consolidated statement of financial position	44
Consolidated statement of changes in equity	45
Consolidated statement of cash flows	46
Notes to the consolidated financial statements	47
Directors' declaration	99
Independent auditor's report to the members of Bapcor Limited	100
Corporate directory	106

General information

The financial statements cover Bapcor Limited as a consolidated entity consisting of Bapcor Limited and the entities it controlled at the end of, or during, the year. The financial statements are presented in Australian dollars, which is Bapcor Limited's functional and presentation currency.

Bapcor Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is:

61 Gower Street, Preston VIC 3072 AUSTRALIA

A description of the nature of the consolidated entity's operations and its principal activities are included in the Directors' Report, which is not part of the financial statements.

The financial statements were authorised for issue, in accordance with a resolution of directors, on 23 August 2017. The directors have the power to amend and reissue the financial statements.

41

Bapcor Limited Consolidated statement of comprehensive income For the year ended 30 June 2017

Note Revenue from continuing operations Expenses Cost of sales Employee benefits expense Freight Advertising Administration Motor vehicles IT & communications Occupancy Acquisition costs 5 Depreciation and amortisation expense 5 Finance costs 5 Profit before income tax expense from continuing operations Income tax expense 6 Profit after income tax expense from continuing operations Profit after income tax expense from discontinued operations 7 Profit after income tax expense for the year Other comprehensive income Items that may be reclassified to profit or loss Foreign currency translation Changes in the fair value of cash flow hedges Other comprehensive income for the year, net of tax Total comprehensive income for the year Profit for the year is attributable to: Non-controlling interest Owners of Bapcor Limited 23 Total comprehensive income for the year is attributable to: Non-controlling interest: Continuing operations Discontinued operations Total non-controlling interest Owners of Bapcor Limited: Continuing operations Discontinued operations Total owners of Bapcor Limited	Consolidated 2017 2016 $'000 $'000 1,013,553 685,629 (552,683) (382,679) (209,013) (132,714) (17,982) (11,470) (23,773) (17,324) (42,026) (25,956) (9,113) (6,499) (10,441) (6,912) (37,027) (23,897) (8,482) (1,149) (13,527) (10,055) (9,766) (4,858) 79,720 62,116 (25,988) (18,534) 53,732 43,582 10,098 - 63,830 43,582 (891) - (1,967) (1,256) (2,858) (1,256) 60,972 42,326 (214) - 64,044 43,582 63,830 43,582 - - (244) - (244) - 52,524 42,326 8,692 - 61,216 42,326 60,972 42,326
	79,720 (25,988)
	53,732 10,098
	63,830 (891) (1,967)
	(2,858)
	60,972
	(214) 64,044
	63,830
	- (244)
	(244)
	52,524 8,692
	61,216
	60,972

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes

42

Bapcor Limited Consolidated statement of comprehensive income For the year ended 30 June 2017

		Consolidated	Consolidated
	Note	2017	2016
		$'000	$'000
		Cents	Cents
Earnings per share for profit from continuing operations attributable to the
owners of Bapcor Limited
Basic earnings per share	40	19.93	17.89
Diluted earnings per share	40	19.83	17.82
Earnings per share for profit from discontinued operations attributable to the
owners of Bapcor Limited
Basic earnings per share	40	3.75	-
Diluted earnings per share	40	3.73	-
Earnings per share for profit attributable to the owners of Bapcor Limited
Basic earnings per share	40	23.76	17.89
Diluted earnings per share	40	23.64	17.82

The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes

43

Bapcor Limited Consolidated statement of financial position As at 30 June 2017

Note Assets Current assets Cash and cash equivalents 8 Trade and other receivables 9 Inventories 10 Derivative financial instruments 27 Assets held for sale 11 Total current assets Non-current assets Trade and other receivables 12 Property, plant and equipment 13 Intangibles 14 Deferred tax asset 6 Other 15 Total non-current assets Total assets Liabilities Current liabilities Trade and other payables 16 Derivative financial instruments 27 Income tax Provisions 17 Liabilities relating to assets held for sale 18 Total current liabilities Non-current liabilities Borrowings 19 Derivative financial instruments 27 Provisions 20 Total non-current liabilities Total liabilities Net assets Equity Issued capital 21 Reserves 22 Accumulated losses 23 Equity attributable to the owners of Bapcor Limited Non-controlling interest 24 Total equity	Consolidated 2017 2016 $'000 $'000 39,755 22,392 135,784 87,304 261,627 163,020 40 - 178,860 - 616,066 272,716 296 573 49,781 36,213 647,831 362,207 18,664 7,247 4,061 4,466 720,633 410,706 1,336,699 683,422 174,768 121,507 1,780 420 3,455 6,236 32,131 26,607 70,842 - 282,976 154,770 429,747 148,184 637 1,374 33,372 12,874 463,756 162,432 746,732 317,202 589,967 366,220 600,675 416,427 (202) 845 (17,067) (51,052) 583,406 366,220 6,561 - 589,967 366,220
	616,066
	296 49,781 647,831 18,664 4,061
	720,633
	1,336,699
	174,768 1,780 3,455 32,131 70,842
	282,976
	429,747 637 33,372
	463,756
	746,732
	589,967
	600,675 (202) (17,067)
	583,406 6,561
	589,967

The above consolidated statement of financial position should be read in conjunction with the accompanying notes

44

Bapcor Limited Consolidated statement of changes in equity For the year ended 30 June 2017

Consolidated Balance at 1 July 2015 Profit after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 21) Share-based payments (note 21) Dividends paid (note 25) Balance at 30 June 2016 Contributed equity Other Consolidated $'000 $'000 Balance at 1 July 2016 416,427 - Profit/(loss) after income tax expense for the year - - Other comprehensive income for the year, net of tax - - Total comprehensive income for the year - - Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 21) 186,144 - Non-controlling interests on acquisition (note 34) - - Share-based payments (note 21) - - Treasury shares (note 20) - (1,896) Dividends paid (note 25) - - Balance at 30 June 2017 602,571 (1,896)	Consolidated Balance at 1 July 2015 Profit after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 21) Share-based payments (note 21) Dividends paid (note 25) Balance at 30 June 2016 Contributed equity Other Consolidated $'000 $'000 Balance at 1 July 2016 416,427 - Profit/(loss) after income tax expense for the year - - Other comprehensive income for the year, net of tax - - Total comprehensive income for the year - - Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 21) 186,144 - Non-controlling interests on acquisition (note 34) - - Share-based payments (note 21) - - Treasury shares (note 20) - (1,896) Dividends paid (note 25) - - Balance at 30 June 2017 602,571 (1,896)	Consolidated Balance at 1 July 2015 Profit after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 21) Share-based payments (note 21) Dividends paid (note 25) Balance at 30 June 2016 Contributed equity Other Consolidated $'000 $'000 Balance at 1 July 2016 416,427 - Profit/(loss) after income tax expense for the year - - Other comprehensive income for the year, net of tax - - Total comprehensive income for the year - - Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 21) 186,144 - Non-controlling interests on acquisition (note 34) - - Share-based payments (note 21) - - Treasury shares (note 20) - (1,896) Dividends paid (note 25) - - Balance at 30 June 2017 602,571 (1,896)	Contributed equity $'000 337,390 - -	Reserves $'000 441 - (1,256)	Accumulated losses $'000 (70,906) 43,582 -	Total equity $'000 266,925 43,582 (1,256) 42,326 79,037 1,660 (23,728) 366,220 Total equity $'000 366,220 63,830 (2,858) 60,972 186,144 6,804 1,782 (1,896) (30,059) 589,967
			- 79,037 - -	(1,256) - 1,660 -	43,582 - - (23,728)
			416,427	845	(51,052)
			Reserves $'000 845 - (2,828)	Accumulated losses $'000 (51,052) 64,044 -	Non- controlling Interests $'000 - (214) (30)
	- 186,144 - - - -	- - - - (1,896) -	(2,828) - - 1,782 - -	64,044 - - - - (30,059)	(244) - 6,804 - - -
	602,571	(1,896)	(201)	(17,067)	6,560

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes

45

Bapcor Limited Consolidated statement of cash flows For the year ended 30 June 2017

Note Cash flows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Payments for new store initial inventory purchases Borrowing costs Transaction costs relating to acquisition of business Income taxes paid Net cash from operating activities 39 Cash flows from investing activities Payment for purchase of business, net of cash and cash equivalents 35 Payment for deferred settlements Payments for property, plant and equipment 13 Payments for intangibles 14 Proceeds from disposal of property, plant and equipment Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares 21 Share issue transaction costs 21 Purchase of treasury shares 21 Repayment of acquired loans via acquisition 35 Net proceeds from borrowings 19 Dividends paid 25 Borrowing transaction costs Net cash from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the financial year 8	Consolidated 2017 2016 $'000 $'000 1,114,521 771,029 (994,123) (702,626) 120,398 68,403 (11,532) (6,150) (9,288) (3,957) (8,482) (1,029) (30,002) (18,004) 61,094 39,263 (373,238) (289,012) (6,511) - (15,096) (12,020) (1,120) (2,149) 974 471 (394,991) (302,710) 182,022 54,306 (4,596) (1,068) (1,896) - (79,487) - 283,429 148,800 (25,501) (23,728) (2,618) (367) 351,353 177,943 17,456 (85,504) 22,392 107,896 (93) - 39,755 22,392
	120,398 (11,532) (9,288) (8,482) (30,002)
	61,094
	(373,238) (6,511) (15,096) (1,120) 974
	(394,991)
	182,022 (4,596) (1,896) (79,487) 283,429 (25,501) (2,618)
	351,353
	17,456 22,392 (93)
	39,755

Note; the consolidated statement of cash flows represents the statement of cash flows of the continuing operations only. Discontinued operational cash flow has been excluded as cash flow disclosures are not required for disposal groups that are classified as held for sale on acquisition in accordance with AASB 5 Non-current Assets Held for Sale and Discontinued Operations .

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes

46

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 1. Significant accounting policies

The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

New or amended Accounting Standards and Interpretations adopted

The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period.

Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.

Basis of preparation

These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board ('IASB').

Historical cost convention

The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of available-for-sale financial assets, financial assets and liabilities at fair value through profit or loss, investment properties, certain classes of property, plant and equipment and derivative financial instruments.

Critical accounting estimates

The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the consolidated entity's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 2.

Parent entity information

In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only. Supplementary information about the parent entity is disclosed in note 34.

Principles of consolidation

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Bapcor Limited ('company' or 'parent entity') as at 30 June 2017 and the results of all subsidiaries for the year then ended. Bapcor Limited and its subsidiaries together are referred to in these financial statements as the 'consolidated entity'.

Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control ceases.

Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the consolidated entity.

The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent.

Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of comprehensive income, statement of financial position and statement of changes in equity of the consolidated entity. Losses incurred by the consolidated entity are attributed to the non-controlling interest in full, even if that results in a deficit balance.

Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss.

Operating segments

Operating segments are presented using the 'management approach', where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the allocation of resources to operating segments and assessing their performance.

47

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 1. Significant accounting policies (continued)

Foreign currency translation

The financial statements are presented in Australian dollars, which is Bapcor Limited's functional and presentation currency.

Transactions and balances

Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.

Foreign operations

The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity.

The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties.

Revenue is recognised when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the consolidated entity and specific criteria have been met for each of the revenue activities as described below. Where estimates are used, they are based on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

Sale of goods

A sale is recorded when goods have been delivered to the customer, the customer has accepted the goods and collectability of the related receivables is probable.

Rendering of services - franchise and service fees Revenue from the provision of franchise and advertising services is recognised on an accruals basis.

Revenue from the provision of accounting and information technology support services is recognised on a periodical as-delivered basis.

Other revenue

Other revenue is recognised when it is received or when the right to receive payment is established.

Income tax

The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:

• When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or

• When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset.

Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously.

48

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 1. Significant accounting policies (continued)

Discontinued operations

A discontinued operation is a component of the consolidated entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately on the face of the statement of comprehensive income.

Discontinued operations adhere to the accounting policies of the consolidated entity except for the following specific recognition and measurement policies only relating to the discontinued operations:

Revenue recognition and measurement:

Sale of services and unbilled revenue (specific to the Resource Services discontinued operation):

Where services are charged on the basis of actual time and materials incurred, revenue is recognised as costs are incurred. Revenue is generally calculated based on contractual billing rates for the services performed. To the extent that services rendered have not been invoiced at balance date but are billable under agreed contractual terms, an amount is recorded as unbilled revenue in the balance sheet as part of assets held for sale.

An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the consolidated entity's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current.

A liability is classified as current when: it is either expected to be settled in the consolidated entity's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current.

Deferred tax assets and liabilities are always classified as non-current.

Cash and cash equivalents

Cash and cash equivalents includes 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.

Where services are under a fixed price arrangement then the percentage-of-completion method of contract accounting is applied. When the outcome of fixed price contracts can be measured reliably, revenue is recognised based on the proportion of work performed to date relative to the estimated total contract costs. When the outcome of fixed price contracts cannot be measured reliably, revenue is recognised only to the extent of the expenses incurred under the contract that are expected to be recoverable. If these services have not been invoiced at balance date but are billable, an amount is recorded as unbilled revenue in the balance sheet as part of assets held for sale.

Current and non-current classification

Assets and liabilities are presented in the statement of financial position based on current and non-current classification.

Trade and other receivables

Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. Trade receivables are generally due for settlement within 30 to 60 days.

Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is objective evidence that the consolidated entity will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and default or delinquency in payments (more than 60 days overdue) are considered indicators that the trade receivable may be impaired. The amount of the impairment allowance is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial.

49

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 1. Significant accounting policies (continued)

Other receivables are recognised at amortised cost, less any provision for impairment.

Inventories

Stock in transit is stated at the lower of cost and net realisable value. Cost comprises of purchase and delivery costs, net of rebates and discounts received or receivable.

Stock on hand is stated at the lower of cost and net realisable value. Cost comprises of purchase and delivery costs, net of rebates and discounts received or receivable.

Hedges of a net investment

Hedges of a net investment in a foreign operation include monetary items that are considered part of the net investment. Gains or losses on the hedging instrument relating to the effective portion of the hedge are recognised directly in equity whilst gains or losses relating to the ineffective portion are recognised in profit or loss. On disposal of the foreign operation, the cumulative value of any such gains or losses recognised directly in equity is transferred to profit or loss.

Plant and equipment

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Derivative financial instruments

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.

Derivatives are classified as current or non-current depending on the expected period of realisation.

Cash flow hedges

Cash flow hedges are used to cover the consolidated entity's exposure to variability in cash flows that is attributable to particular risks associated with a recognised asset or liability or a firm commitment which could affect profit or loss. The effective portion of the gain or loss on the hedging instrument is recognised in other comprehensive income through the cash flow hedges reserve in equity, whilst the ineffective portion is recognised in profit or loss. Amounts taken to equity are transferred out of equity and included in the measurement of the hedged transaction when the forecast transaction occurs.

Cash flow hedges are tested for effectiveness on a regular basis both retrospectively and prospectively to ensure that each hedge is highly effective and continues to be designated as a cash flow hedge. If the forecast transaction is no longer expected to occur, the amounts recognised in equity are transferred to profit or loss.

If the hedging instrument is sold, terminated, expires, exercised without replacement or rollover, or if the hedge becomes ineffective and is no longer a designated hedge, the amounts previously recognised in equity remain in equity until the forecast transaction occurs.

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 consolidated entity and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.

Depreciation is calculated on a straight-line basis to write off the net cost of each item of plant and equipment over their expected useful lives as follows:

Plant and equipment	2-15 years
Motor vehicles	3-7 years

The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.

An item of plant and equipment is derecognised upon disposal or when there is no future economic benefit to the consolidated entity. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. Any revaluation surplus reserve relating to the item disposed of is transferred directly to retained profits.

Leases

The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

50

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 1. Significant accounting policies (continued)

A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the risks and benefits incidental to the ownership of leased assets, and operating leases, under which the lessor effectively retains substantially all such risks and benefits.

Finance leases are capitalised. A lease asset and liability are established at the fair value of the leased assets, or if lower, the present value of minimum lease payments. Lease payments are allocated between the principal component of the lease liability and the finance costs, so as to achieve a constant rate of interest on the remaining balance of the liability.

Brands and trademarks

Brands and trademarks are recognised as intangible assets where a registered trademark is acquired with attributable value. They are valued using a relief from royalty method and are considered indefinite life intangibles and are not amortised unless there is an intention to discontinue their use in which it is amortised over the estimated remaining useful life.

Customer contracts

Customer contracts acquired in a business combination are amortised on a straight-line basis over the period of their expected benefit, being their finite life which is currently between 10 and 20 years.

Leased assets acquired under a finance lease are depreciated over the asset's useful life or over the shorter of the asset's useful life and the lease term if there is no reasonable certainty that the consolidated entity will obtain ownership at the end of the lease term.

Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on a straightline basis over the term of the lease.

Intangible assets

Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period.

Goodwill

Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed.

Software

Costs incurred in acquiring, developing, and implementing new software are recognised as intangible assets only when it is probable that future economic benefits associated with the item will flow to the consolidated entity and the cost of the item can be measured reliably. The expenditure capitalised comprises all directly attributable costs, including costs of materials, services, licenses and direct labour. Software is amortised on a straight-line basis over the period of their expected benefit, being their finite life which is currently between 2 and 4 years.

Impairment of assets

Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount.

Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit.

Trade and other payables

These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid. Due to their shortterm nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 to 90 days of recognition.

51

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 1. Significant accounting policies (continued)

Borrowings

Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method.

Where there is an unconditional right to defer settlement of the liability for at least 12 months after the reporting date, the loans or borrowings are classified as noncurrent.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is amortised on a straight-line basis over the term of the facility.

Provisions

Provisions are recognised when the consolidated entity has a present (legal or constructive) obligation as a result of a past event, it is probable the consolidated entity will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognised as a finance cost.

Employee benefits

Short-term employee benefits

Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled.

Long-term employee benefits

The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are measured at the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

Share-based payments

Share-based compensation benefits are provided to employees via the Long-Term Incentive (LTI) plan. The fair value of performance rights granted under the LTI is recognised as an employee benefit expense over the period during which the employees become unconditionally entitled to the rights and options with a corresponding increase in equity.

The total amount to be expensed is determined by reference to the fair value of the rights and options granted, which includes any market performance conditions and the impact of any non-vesting conditions but excludes the impact of any service and non-market performance vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to vest which are revised at the end of each reporting period. The impact of the revision to original estimates, if any, is recognised in profit or loss, with a corresponding adjustment to equity.

The fair value is measured at grant date and the expense recognised over the life of the plan. The fair value is independently determined using a Black-Scholes or similar option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.

Fair value measurement

When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market.

Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

52

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 1. Significant accounting policies (continued)

Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair value measurement.

For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data.

Issued capital

Ordinary shares are classified as equity.

Business combinations

The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued. The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary.

Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition-date. On an acquisition-by-acquisition basis, any non-controlling interest in the acquiree is recognised either at fair value or at the non-controlling interest's proportionate share of the acquiree's net identifiable assets.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Dividends

Dividends are recognised when declared during the financial year and no longer at the discretion of the company.

The excess of the consideration transferred and the amount of any non-controlling interest in the acquiree over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity's incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.

Earnings per share

Basic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to the owners of Bapcor Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year and excluding treasury shares.

53

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 1. Significant accounting policies (continued)

Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

Goods and Services Tax ('GST') and other similar taxes

Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.

Rounding of amounts

The company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.

AASB 9 Financial Instruments

This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard replaces all previous versions of AASB 9 and completes the project to replace IAS 39 'Financial Instruments: Recognition and Measurement'. AASB 9 introduces new classification and measurement models for financial assets. A financial asset shall be measured at amortised cost, if it is held within a business model whose objective is to hold assets in order to collect contractual cash flows, which arise on specified dates and are solely repayable of principal and interest. All other financial instrument assets are to be classified and measured at fair value through profit or loss unless the entity makes an irrevocable election on initial recognition to present gains and losses on equity instruments (that are not held-for-trading) in other comprehensive income ('OCI'). For financial liabilities, the standard requires the portion of the change in fair value that relates to the entity's own credit risk to be presented in OCI (unless it would create an accounting mismatch). New simpler hedge accounting requirements are intended to more closely align the accounting treatment with the risk management activities of the entity. New impairment requirements will use an 'expected credit loss' ('ECL') model to recognise an allowance. Impairment will be measured under a 12-month ECL method unless the credit risk on a financial instrument has increased significantly since initial recognition in which case the lifetime ECL method is adopted. The standard introduces additional new disclosures. The consolidated entity will adopt this standard from 1 January 2018. The consolidated entity is still assessing the impact of its adoption but do not expect it to be material.

New Accounting Standards and Interpretations not yet mandatory or early adopted

Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2017. The consolidated entity's assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the consolidated entity, are set out below.

54

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 1. Significant accounting policies (continued)

AASB 15 Revenue from Contracts with Customers

This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard provides a single standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard will require: contracts (either written, verbal or implied) to be identified, together with the separate performance obligations within the contract; determine the transaction price, adjusted for the time value of money; allocation of the transaction price to the separate performance obligations on a basis of relative stand-alone selling price of each distinct good or service and recognition of revenue when each performance obligation is satisfied. Credit risk will be presented separately as an expense rather than adjusted to revenue. For goods, the performance obligation would be satisfied when the customer obtains control of the goods. For services, the performance obligation is satisfied when the service has been provided. For performance obligations satisfied over time, an entity would select an appropriate measure of progress to determine how much revenue should be recognised as the performance obligation is satisfied. Contracts with customers will be presented in an entity's statement of financial position as a contract liability, a contract asset, or a receivable, depending on the relationship between the entity's performance and the customer's payment. Sufficient quantitative and qualitative disclosure is required to enable users to understand the contracts with customers; the significant judgements made in applying the guidance to those contracts; and any assets recognised from the costs to obtain or fulfil a contract with a customer.

The consolidated entity will adopt this standard from 1 January 2018 and has commenced obtaining and tracking information in relation to the quantification of this change on its different revenue streams but the impact of its adoption is yet to be completed by the consolidated entity.

AASB 16 Leases

This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard replaces AASB 117 'Leases' and for lessees will eliminate the classifications of operating leases and finance leases. Subject to exceptions, a 'right-of-use' asset will be capitalised in the statement of financial position, measured at the present value of the unavoidable future lease payments to be made over the lease term. The exceptions relate to short-term leases of 12 months or less and leases of low-value assets (such as personal computers and small office furniture) where an accounting policy choice exists whereby either a 'right-of-use' asset is recognised or lease payments are expensed to profit or loss as incurred. A liability corresponding to the capitalised lease will also be recognised, adjusted for lease prepayments, lease incentives received, initial direct costs incurred and an estimate of any future restoration, removal or dismantling costs. Straight-line operating lease expense recognition will be replaced with a depreciation charge for the leased asset (included in operating costs) and an interest expense on the recognised lease liability (included in finance costs). In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when compared to lease expenses under AASB 117. However EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results will be improved as the operating expense is replaced by interest expense and depreciation in profit or loss under AASB 16. For classification within the statement of cash flows, the lease payments will be separated into both a principal (financing activities) and interest (either operating or financing activities) component. For lessor accounting, the standard does not substantially change how a lessor accounts for leases.

The consolidated entity will adopt this standard from 1 July 2019 and has commenced obtaining and tracking information in relation to the quantification of this change. Given the number of operating leases in relation to warehouse and stores that the consolidated entity has in place, it is expected that this change will have a material impact of the balance sheet in particular via the recognition of the respective right-of-use asset and corresponding liability. The consolidated entity will continue to assess the quantification of this change and the impact of its adoption.

55

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 2. Critical accounting judgements, estimates and assumptions

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below.

Share-based payment transactions

The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using either the Binomial or Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity. Refer to note 41.

Provision for impairment of receivables

The provision for impairment of receivables assessment requires a degree of estimation and judgement. The level of provision is assessed by taking into account the ageing of receivables, historical collection rates and specific knowledge of the individual debtor's financial position. Refer to notes 9 and 12.

Provision for impairment of inventories

The provision for impairment of inventories assessment requires a degree of estimation and judgement. The level of the provision is assessed by taking into account the recent sales experience, the ageing of inventories and other factors that affect inventory obsolescence. Refer to note 10.

Estimation of useful lives of assets

The consolidated entity determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down. Refer to notes 13 and 14.

Goodwill and other indefinite life intangible assets

The consolidated entity tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill and other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in note 1. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital and growth rates of the estimated future cash flows. Refer to note 14.

Deferred consideration

The deferred consideration liability is the difference between the total purchase consideration, usually on an acquisition of a business combination, and the amounts paid or settled up to the reporting date, discounted to net present value. The consolidated entity applies provisional accounting for any business combination. Any reassessment of the liability during the provisional period is adjusted for retrospectively as part of the fair value of consideration. Thereafter, at each reporting date, the deferred consideration liability is reassessed against revised estimates and any increase or decrease in the net present value of the liability will result in a corresponding gain or loss to profit or loss. The increase in the liability resulting from the passage of time is recognised as a finance cost. Refer to note 17 and 20.

Business combinations

As discussed in note 1, business combinations are initially accounted for on a provisional basis. The fair value of assets acquired, liabilities and contingent liabilities assumed are initially estimated by the consolidated entity taking into consideration all available information at the reporting date. Fair value adjustments on the finalisation of the business combination accounting is retrospective, where applicable, to the period the combination occurred and may have an impact on the assets and liabilities, depreciation and amortisation reported. Refer to note 35.

56

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 3. Restatement of comparatives

Change in accounting policy

In November 2016, the IFRS Interpretations Committee (IFRIC) provided clarification on the recognition of deferred tax liabilities on intangible assets with an indefinite useful lives. The guidance determined that indefinite does not mean unlimited or infinite, but is only used because the amortisation period is arbitrary due to the fact that the end of the life is not known. The IFRIC noted that non-amortisation did not necessarily mean that the entity will recover the carrying amount of that asset only through sale and not through use. Based on this clarification, the company has elected to change its accounting policy and recognise deferred tax liabilities on its intangible assets with indefinite useful lives on the basis that recovery is through use. The adjustment has been made retrospectively.

The impact of this change to the prior year statement of financial position was an increase to both deferred tax liability and goodwill of $13,367,000.

Reclassifications

The financial statements contain reclassifications of prior year disclosures to ensure comparability with the current year presentation.

Note 4. Operating segments

Description of segments

The consolidated entity has identified four operating segments based on the internal reports that are reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation of resources including capital allocations.

The operating results of the consolidated entity are currently reviewed by the CODM and decisions are based on four operating segments which also represent the four reporting segments, as follows:

Trade	Represents the trade focused automotive aftermarket parts distribution to independent
	and chain mechanic workshops. Includes the operations of Burson Auto Parts and
	Precision Automotive Equipment.
Retail & Service	Represents the retail focused accessory stores that are positioned as the first choice
	destination for both the everyday consumer and automotive enthusiast as well as the
	service areas of Bapcor. Includes the operations of Autobarn, Autopro, Sprint Auto Parts,
	Midas and ABS.
Specialist Wholesale	Includes the specialised wholesale distribution areas of the organisation that focus on a
	specific automotive area. Includes the operations of Australian Automotive Distribution,
	Baxters, Bearing Wholesalers, MTQ Engine Systems and Roadsafe.
Hellaby Automotive	Represents the recently acquired Hellaby business including the operations of Brake &
	Transmission, Autolign, Diesel Distributors, Federal Batteries, HCB Technologies, JAS
	Oceania, Premier Auto Trade, and TRS Tyre & Wheel.

There is likely to be changes in reportable segments in the near future as the Hellaby businesses become integrated into the consolidated entity.

Segment revenue

Intersegment transactions are carried out at arm's length and eliminated on consolidation. The revenue from external parties reported to the CODM is measured in a manner consistent with that in the statement of comprehensive income.

Segment EBITDA

Segment performance is assessed on the basis of segment EBITDA. Segment EBITDA comprises expenses which are incurred in the normal trading activity of the segments and excludes the impact of depreciation, amortisation, interest, share-based payments and other items which are determined to be outside of the control of the respective segments.

57

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 4. Operating segments (continued)

Operating segment information

Consolidated - 2017 Revenue Sales Total segment revenue Intersegment sales Discontinued operations (note 7) Total revenue EBITDA Intersegment EBITDA Depreciation and amortisation Finance costs Acquisition costs Discontinued operations (note 7) Profit before income tax expense Income tax expense Profit after income tax expense Assets Segment assets Held for sale assets (note 11) Total assets Liabilities Segment liabilities Held for sale liabilities (note 18) Total liabilities	Trade $'000 465,102	Retail & Service $'000 220,996	Specialist Wholesale $'000 212,715	Hellaby Automotive $'000 146,670	Unallocated / Head Office $'000 -	Total $'000 1,045,483
	465,102 63,296	220,996 28,190	212,715 22,948	146,670 15,057	- (12,397)	1,045,483 (31,930) 196,603
						1,210,156
						117,094
	280,947	274,241	196,610	358,191	47,850	(5,599) (13,527) (9,766) (8,482) 15,135
						94,855 (31,025)
						63,830
						1,157,839
	91,273	37,549	30,493	44,794	471,781	178,860
						1,336,699
						675,890
						70,842
						746,732

58

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 4. Operating segments (continued)

Consolidated - 2016 Revenue Sales Total segment revenue Intersegment sales Total revenue EBITDA Intersegment EBITDA Depreciation and amortisation Finance costs Acquisition costs Profit before income tax expense Income tax expense Profit after income tax expense Assets Segment assets Total assets Liabilities Segment liabilities Total liabilities	Trade $'000 419,139	Retail & Service $'000 172,264	Specialist Wholesale $'000 103,423	Unallocated / Head Office $'000* -	Total $'000 694,826
	419,139 51,794	172,264 20,915	103,423 9,517	- (2,711)	694,826 (9,197)
					685,629
					79,515
	274,887	263,943	123,482	21,110	(1,337) (10,055) (4,858) (1,149)
					62,116 (18,534)
					43,582
					683,422
	88,760	36,786	12,337	179,319	683,422
					317,202
					317,202

• There has been reclassification of inter-segment transactions from the Unallocated / Head Office segment to the segment they relate to, to ensure comparability between years.

Geographical information

Australia New Zealand	Sales to external customers 2017 2016 $'000 $'000 926,638 685,629 86,915 -	Sales to external customers 2017 2016 $'000 $'000 926,638 685,629 86,915 -	Geographical non-current assets 2017 2016 $'000 $'000 531,719 403,459 170,250 - 701,969 403,459	Geographical non-current assets 2017 2016 $'000 $'000 531,719 403,459 170,250 - 701,969 403,459
	1,013,553	685,629	701,969	403,459

The geographical non-current assets above are exclusive of, where applicable, financial instruments, deferred tax assets and balances such as intercompany and investments that are eliminated on consolidation. It only pertains to the continuing operations of the consolidated entity.

Revenue is allocated to geographical segments on the basis of where the sale is recorded.

59

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 5. Expenses

Note 5. Expenses
Profit before income tax from continuing operations includes the following specific expenses: Depreciation and amortisation expense Plant and equipment Motor vehicles Amortisation Make good provision Acquisition costs Professional consultant costs Transaction success fees paid to advisors Other transaction costs Finance costs Interest and finance charges paid/payable Borrowing cost write offs due to refinancing process Rental expense relating to operating leases Minimum lease payments Superannuation expense Defined contribution superannuation expense	Consolidated 2017 2016 $'000 $'000 5,519 4,593 4,012 2,604 3,667 2,476 329 382 13,527 10,055 2,369 652 3,793 - 2,320 497 8,482 1,149 9,185 4,858 581 - 9,766 4,858 31,902 26,122 13,740 8,596
	13,527
	2,369 3,793 2,320
	8,482
	9,185 581
	9,766
	31,902
	13,740

60

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 6. Income tax

Income tax expense Current tax on profits for the year Deferred tax expense Adjustment recognised for prior periods Relating to discontinued operations Total income tax expense Income tax expense is attributable to: Profit from continuing operations Profit from discontinued operations Total income tax expense Deferred tax included in income tax expense comprises: Increase in deferred tax assets Decrease in deferred tax liabilities Total deferred tax expense Numerical reconciliation of income tax expense and tax at the statutory rate Profit before income tax expense from continuing operations Profit before income tax expense from discontinued operations Tax at the statutory tax rate of 30% Tax effect amounts which are not deductible/(taxable) in calculating taxable income: Acquisition costs Other Adjustment recognised for prior periods Difference in overseas tax rates Total income tax expense Amounts charged/(credited) directly to equity Deferred tax assets Amounts charged/(credited) directly to other comprehensive income Deferred tax assets Deferred tax liabilities	Consolidated 2017 2016 $'000 $'000 26,907 19,319 (610) (638) (309) (147) 5,037 - 31,025 18,534 25,988 18,534 5,037 - 31,025 18,534 (561) (638) (49) - (610) (638) 79,720 62,116 15,135 - 94,855 62,116 28,457 18,635 2,134 7 321 39 (309) (147) 422 - 31,025 18,534 (1,359) (321) (1,359) (321) (1,329) (1,263) 228 - (1,101) (1,263)
	31,025
	25,988 5,037
	31,025
	(561) (49)
	(610)
	79,720 15,135
	94,855
	28,457 2,134 321
	(309) 422
	31,025
	(1,359)
	(1,359)
	(1,329) 228
	(1,101)

61

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 6. Income tax (continued)

Note 6. Income tax (continued)
Deferred tax asset Deferred tax asset comprises temporary differences attributable to: Amounts recognised in profit or loss: Property, plant and equipment Employee benefits Trade and other receivables Inventory Other Amounts recognised in equity: Transaction costs on share issue Amounts recognised in other comprehensive income: Cash flow hedge Share-based payment Total deferred tax asset Set off deferred tax liabilities pursuant to set-off provisions Net deferred tax asset Movements in deferred tax asset: Opening balance Credited to profit or loss Charged to equity Charged to other comprehensive income Additions through business combinations (note 35) Adjustment recognised for prior periods Foreign currency translation Closing balance	Consolidated 2017 2016 $'000 $'000 2,259 1,671 11,737 8,417 2,663 2,269 15,810 7,368 8,520 6,419 40,989 26,144 1,359 321 447 538 882 725 1,329 1,263 43,677 27,728 (25,013) (20,481) 18,664 7,247 27,728 11,925 561 638 1,038 321 66 1,263 13,778 13,628 53 (47) 453 - 43,677 27,728
	40,989
	1,359
	447 882
	1,329 43,677
	(25,013)
	18,664
	27,728 561 1,038 66 13,778 53 453
	43,677

62

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 6. Income tax (continued)

Note 6. Income tax (continued)
Deferred tax liability Deferred tax liability comprises temporary differences attributable to: Amounts recognised in profit or loss: Customer contracts Trademarks Other Amounts recognised in other comprehensive income: Cash flow hedge Total deferred tax liability Set off deferred tax liabilities pursuant to set-off provisions Net deferred tax liability Movements in deferred tax liability: Opening balance Credited to profit or loss Charged to other comprehensive income Additions through business combinations (note 35) Adjustment recognised for prior periods Closing balance	Consolidated 2017 2016 $'000 $'000 6,688 7,053 17,721 13,367 376 61 24,785 20,481 228 - 25,013 20,481 (25,013) (20,481) - - 20,481 78 (49) - 228 - 4,353 20,420 - (17) 25,013 20,481
	24,785
	228
	25,013
	(25,013)
	-
	20,481 (49) 228 4,353 -
	25,013

63

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 7. Discontinued operations

Description

The discontinued operations relate to the business units of Footwear and Resource Services that were acquired as part of the Hellaby Holdings Limited acquisition and deemed assets held for sale on acquisition. Refer to notes 11 and 18 for further information.

Financial performance information

Revenues Footwear Resource Services Expenses Footwear Resource Services Profit before income tax expense Income tax expense Profit after income tax expense from discontinued operations	Consolidated 2017 2016 $'000 $'000 64,697 - 131,906 - 196,603 - (59,498) - (121,970) - (181,468) - 15,135 - (5,037) - 10,098 -
	196,603
	(59,498) (121,970)
	(181,468)
	15,135 (5,037)
	10,098

Cash flow disclosures are not required for disposal groups that are classified as held for sale on acquisition in accordance with AASB 5 Non-current Assets Held for Sale and Discontinued Operations .

Note 8. Current assets - cash and cash equivalents

Note 8. Current assets - cash and cash equivalents
Australian dollars New Zealand dollars United States dollars Other currencies	Consolidated 2017 2016 $'000 $'000 29,772 19,210 6,965 - 3,017 3,107 1 75 39,755 22,392
	39,755

64

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 9. Current assets - trade and other receivables

Note 9. Current assets - trade and other receivables
Trade receivables Less: Provision for impairment of receivables Customer loans Less: Provision for impairment of receivables Other receivables Prepayments	Consolidated 2017 2016 $'000 $'000 126,524 80,489 (8,296) (6,963) 118,228 73,526 1,366 2,040 (851) (840) 515 1,200 12,118 9,086 4,923 3,492 17,041 12,578 135,784 87,304
	118,228
	1,366 (851)
	515
	12,118 4,923
	17,041
	135,784

Trade receivables are non-interest bearing and repayment terms vary by business unit. The amount of provision for impairment of trade receivables has been measured as the difference between the carrying amount of the trade receivables and the estimated future cash flows expected to be received from the relevant debtors.

Customer loans relate to loans with franchisees. Loans with repayment terms of less than 12 months are classified as current. Non-current customer loans are discounted to their present value. Of the total customer loans balance including the non-current portion disclosed in note 12, $265,000 (2016: $678,000) are non-interest bearing. $1,704,000 (2016: $2,427,000) of loans have a weighted average annual interest rate of 9.9% (2016: 9.1%).

Other receivables are non-interest bearing. Receivables with repayment terms of less than 12 months are classified as current. These receivables are all neither past due nor impaired.

The ageing of the net trade receivables and loans above (including the non-current portion from note 12) are as follows:

Current and not due 31 - 60 days 61 - 90 days 91 - 120 days	Consolidated 2017 2016 $'000 $'000 84,431 47,245 28,424 22,405 6,184 5,519 - 130 119,039 75,299
	119,039

As at 30 June the amount of the provision for receivables and loans was $9,454,000 (2016: $8,295,000) represented by; • Provision for trade doubtful debts $7,130,000 (2016: $6,576,000)

• Provision for credit notes $1,166,000 (2016: $387,000)

• Provision for customer loans $1,158,000 (2016: $1,332,000)

Bapcor recognised a loss of $254,000 (2016: $447,000) in respect of impaired receivables during the financial year.

65

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 9. Current assets - trade and other receivables (continued)

Movements in the provision for impairment of receivables and loans are as follows:

Opening balance Additional provisions recognised Additions through business combinations Amounts used Foreign currency translation Change in provision from re-measurement Closing balance	Consolidated 2017 2016 $'000 $'000 8,295 532 254 447 2,846 7,949 (1,356) (633) (9) - (576) - 9,454 8,295
	9,454

Note 10. Current assets - inventories

Stock in transit - at cost Stock on hand - at cost Less: Provision for slow moving inventory	Consolidated 2017 2016 $'000 $'000 13,325 6,496 302,287 181,213 (53,985) (24,689) 248,302 156,524 261,627 163,020
	302,287 (53,985)
	248,302
	261,627

The current year increase in provision for impairment is due to the Hellaby and other acquisition fair value adjustments consistent with the Bapcor provision policy. Refer to note 35.

66

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 11. Current assets - assets held for sale

Note 11. Current assets - assets held for sale
Footwear Resource Services	Consolidated 2017 2016 $'000 $'000 27,391 - 151,469 - 178,860 -
	178,860

As part of the Hellaby Holdings Limited acquisition, the two acquired business segments of Footwear and Resource Services were immediately deemed assets held for sale at the time of acquisition. The consolidated entity has been actively marketing the sale of the Hellaby Resource Services Limited, Number 1 Shoes Limited and R Hannah & Co Limited subsidiaries, with completion expected during H1 FY18. The assets and liabilities of these business segments are classified as held for sale as at 30 June 2017 and the results from acquisition to the year ended 30 June 2017 have been reported as discontinued operations (refer note 7).

AASB 5 Non-current Assets Held for Sale and Discontinued Operations requires that when the disposal group is acquired as part of a business combination, it is measured at fair value less costs to sell. The fair value less costs to sell have been determined to be NZD $84.1M and NZD $15.5M, for Resource Services and Footwear respectively. The assets held for sale component has been grossed up by the current book value of the associated liabilities which are reported in note 18, as well as the net cash on hand as at 30 June 2017 as these disposals are intended to be net of debt and cash balances. Net cash as at 30 June 2017 for these business segments was NZD $9.0M and NZD $4.7M for Resource Services and Footwear respectively.

Refer to note 29 for information relating to the determination of the fair value of the assets held for sale.

Note 12. Non-current assets - trade and other receivables

Note 12. Non-current assets - trade and other receivables
Customer loans Less: Provision for impairment of receivables	Consolidated 2017 2016 $'000 $'000 603 1,065 (307) (492) 296 573
	296

Customer loans relate to loans with franchisees. Refer to note 9 for further information on these customer loans.

67

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 13. Non-current assets - property, plant and equipment

Note 13. Non-current assets - property, plant and equipment
Plant and equipment - at cost Less: Accumulated depreciation Motor vehicles - at cost Less: Accumulated depreciation	Consolidated 2017 2016 $'000 $'000 55,016 40,997 (22,409) (17,174) 32,607 23,823 27,396 19,654 (10,222) (7,264) 17,174 12,390 49,781 36,213
	32,607
	27,396 (10,222)
	17,174
	49,781

Reconciliations

Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:

Consolidated Balance at 1 July 2015 Additions Additions through business combinations (note 35) Disposals Depreciation expense Balance at 30 June 2016 Additions Additions through business combinations (note 35) Disposals Foreign currency translation Transfers in/(out) Depreciation expense Balance at 30 June 2017	Plant and equipment $'000 14,046 7,334 7,122 (86) (4,593)	Motor vehicles $'000 9,011 4,686 1,712 (415) (2,604)	Total $'000 23,057 12,020 8,834 (501) (7,197) 36,213 15,096 8,904 (895) (6) - (9,531) 49,781
	23,823 9,399 4,722 (210) (1) 393 (5,519)	12,390 5,697 4,182 (685) (5) (393) (4,012)
	32,607	17,174

68

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 14. Non-current assets - intangibles

Note 14. Non-current assets - intangibles
Goodwill Trademarks Customer contracts Less: Accumulated amortisation Software Less: Accumulated amortisation	Consolidated 2017 2016 $'000 $'000 561,843 289,231 59,443 44,581 25,543 25,543 (3,251) (1,519) 22,292 24,024 8,959 7,306 (4,706) (2,935) 4,253 4,371 647,831 362,207
	59,443
	25,543 (3,251)
	22,292
	8,959 (4,706)
	4,253
	647,831

Reconciliations

Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:

Consolidated Balance at 1 July 2015 Additions Additions through business combinations (note 35) Disposals Amortisation expense Balance at 30 June 2016 Additions Additions through business combinations (note 35) Foreign currency translation Amortisation expense Balance at 30 June 2017	Computer software $'000 1,537 2,069 1,724 (2) (957)	Customer contracts $'000 - 56 25,487 - (1,519)	Trade names $'000 - 24 44,557 - -	Goodwill $'000 98,317 - 190,914 - -	Total $'000 99,854 2,149 262,682 (2) (2,476) 362,207 1,120 289,204 (1,033) (3,667) 647,831
	4,371 1,101 716 - (1,935)	24,024 - - - (1,732)	44,581 19 14,889 (47) -	289,231 - 273,599 (986) -
	4,253	22,292	59,442	561,844

Impairment testing

Impairment testing of assets including goodwill and other intangible assets occurs each year on 31 March balances or when impairment indicators arise. The recoverable amount of assets including goodwill and other indefinite useful life intangible assets is determined based on value-in-use calculations at an individual or a combination of cash-generating units (CGU) up to the operating segment level, with the exception outlined below in relation to the Hellaby acquired goodwill. These calculations require the use of key assumptions on which management has based its cash flow projections, as well as pre-tax discount rates.

Cash flow projections were derived from management forecasts based on the five year strategic plan. This has been compiled based on past experience, current performance and market position as well as structural changes and economic factors which have been derived based on external data and internal analysis.

69

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

The following key assumptions were used in testing for impairment:

• Pre-tax discount rate: 11.96% (2016: 10.42%)

• Terminal value growth rate beyond 5 years (set at current CPI): 1.30% (2016: 1.70%)

• Forecast year on year revenue and EBITDA margin growth ranges as follows:

CGU	**Revenue growth **	EBITDAgrowth
Trade	3.0%-4.8%	0–0.3 percentage points
Retail & Service	3.1%-6.8%	0–0.6 percentage points
SpecialistWholesale	3.0%-3.6%	0–0.2percentage points

A reasonable possible change in assumptions would not cause the carrying value of the CGUs to exceed its recoverable amount.

Hellaby acquired goodwill

In relation to the recent Hellaby acquisition, goodwill of $241,000,000 was acquired. Management have performed impairment testing using fair value less cost to sell with reference to the fair value being the purchase price paid at acquisition with no impairment indicators being noted since acquisition.

There have been no further indicators of impairment after the impairment testing date of 31 March 2017 up until the date of this report.

The balances of goodwill and other intangible assets excluding computer software allocated to each current segment as at 30 June were:

Goodwill: Trade Retail & Service Specialist Wholesale Hellaby Automotive Other intangible assets: Retail & Service Specialist Wholesale Hellaby Automotive	Consolidated 2017 2016 $'000 $'000 106,529 105,261 126,738 125,116 88,420 58,854 240,156 - 561,843 289,231 54,815 56,456 16,298 12,149 10,622 - 81,735 68,605
	561,843
	54,815 16,298 10,622
	81,735

70

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 15. Non-current assets - other

Note 15. Non-current assets - other
Make good asset Employee loans	Consolidated 2017 2016 $'000 $'000 1,085 941 2,976 3,525 4,061 4,466
	4,061

Employee loans were made to key management personnel and other personnel to assist in the purchase of shares. These loans are secured by the underlying shares acquired. The loans are interest bearing and are repayable on the earlier of sale of the underlying shares, termination of employment or five years from the date of the loan in cash, and cannot be settled by the employees returning the shares to the company.

Note 16. Current liabilities - trade and other payables

Note 16. Current liabilities - trade and other payables
Trade payables Accrued expenses	Consolidated 2017 2016 $'000 $'000 133,966 95,871 40,802 25,636 174,768 121,507
	174,768

Refer to note 28 for further information on financial risk management.

Note 17. Current liabilities - provisions

Note 17. Current liabilities - provisions
Employee benefits Deferred settlements Onerous lease provision	Consolidated 2017 2016 $'000 $'000 27,191 20,124 4,267 5,570 673 913 32,131 26,607
	32,131

Deferred settlements

This provision represents the obligation to pay consideration following the acquisition of a business. Some of these are only due to the vendor if certain future targets are met. It is measured at the present value of the estimated liability.

As at period end, the following deferred settlements are provided for (across both current and non-current deferred settlement provisions; refer to note 20 for details on non-current portion):

• Sprint Auto Parts; currently provided at $3,298,000

• Precision Automotive; currently provided at $1,594,000

• Baxters Pty Ltd; currently provided at $20,288,000

71

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 17. Current liabilities - provisions (continued)

Onerous lease provision

This provision represents the present value of the estimated costs, net of any sub-lease revenue that will be incurred until the end of the lease terms where the obligation is expected to exceed the economic benefit to be received.

Amounts not expected to be settled within the next 12 months

The current provision for employee benefits includes all unconditional entitlements where employees have completed the required period of service and also those where employees are entitled to pro-rata payments in certain circumstances. The entire amount is presented as current, since the consolidated entity does not have an unconditional right to defer settlement. However, based on past experience, the consolidated entity does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months.

The following amounts reflect leave that is not expected to be taken within the next 12 months:

Employee benefits obligation expected to be settled after 12 months	Consolidated 2017 2016 $'000 $'000 4,742 4,345

Note 18. Current liabilities - liabilities relating to assets held for sale

Footwear Resource Services Eliminations	Consolidated 2017 2016 $'000 $'000 8,184 - 63,000 - (342) - 70,842 -
	70,842

The liabilities relating to assets held for sale relate to the Footwear and Resource Services business segments which were deemed to be held for sale on business combination of Hellaby Holdings Limited. Refer to note 11 for further information.

The liabilities relating to Resource Services includes a contingent consideration payable of $6,800,000.

On 2 April 2013 Hellaby Holdings Limited entered into a deed with the non-controlling shareholders Contract Services Investments Limited which included a put and call option. The liability is currently measured at fair value based on the fair value being attributed to the held for sale Resource Services business segment and the respective non-controlling shareholders interest held.

All other liabilities have been measured in accordance with the accounting policies of the consolidated entity.

72

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 19. Non-current liabilities - borrowings

Note 19. Non-current liabilities - borrowings
Secured bank loans Less: unamortised transaction costs capitalised	Consolidated 2017 2016 $'000 $'000 432,229 148,800 (2,482) (616) 429,747 148,184
	429,747

Refer to note 28 for further information on financial risk management.

Refinancing

On 30 June 2017, the consolidated entity successfully refinanced its debt facilities establishing a new $500M debt facility with the pre-existing lenders ANZ and Westpac, as well as two new lenders being The Bank of Tokyo-Mitsubishi UFJ (BTMU) and The Hongkong and Shanghai Banking Corporation (HSBC). Proceeds were used to repay the existing debt facilities including the bridging loan for the acquisition of Hellaby Holdings Limited. The $500M debt facility comprises funding in 3 and 5 year tranches as follows:

• $200M 3 year tranche, available for general corporate purposes;

• $250M 5 year tranche, available for general corporate purposes;

• $50M 3 year tranche, available for working capital requirements.

The facility is secured by way of a fixed and floating charge over Bapcor's assets. There were no changes to the debt covenants with the net leverage ratio being >3.0X and the fixed cover charge ratio being >1.75X. Refer to note 28 for further information.

As part of the refinancing process, the unamortised transactions costs that related to the pre-existing debt facilities of $581,000 was expensed in the statement of comprehensive income and accounted for as part of finance costs.

Costs of $2,482,000 were incurred in establishing the new facility, and are being amortised over the life of the facility and will be expensed to finance costs as effective interest expense in the statement of comprehensive income. As at 30 June 2017 total borrowing costs of $2,482,000 (2016: $616,000) have not yet been amortised through the statement of comprehensive income.

Financing arrangements

Unrestricted access was available at the reporting date to the following lines of credit:

Total facilities Bank loans including overdraft Used at the reporting date Bank loans including overdraft Unused at the reporting date Bank loans including overdraft *	Consolidated 2017 2016 $'000 $'000 497,500 184,850 432,229 148,800 65,271 36,050
	432,229
	65,271

• Total facility available at 30 June 2017 was $500M (30 June 2016: $200M). The amount used in the above table excludes $2.5M (30 June 2016: $15.2M) of facility which relates to bank guarantees under the working capital tranche.

73

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 20. Non-current liabilities - provisions

Note 20. Non-current liabilities - provisions
Employee benefits Deferred settlements Make good provision Onerous lease provision	Consolidated 2017 2016 $'000 $'000 2,644 1,821 20,913 7,178 8,169 2,512 1,646 1,363 33,372 12,874
	33,372

Deferred settlements and onerous lease provision Refer to note 17.

Make good provision

This provision represents the present value of the estimated costs to make good the premises leased by the consolidated entity at the end of the respective lease terms. The current year increase in make good provision is due to the Hellaby and other acquisition (refer note 35) fair value adjustments consistent with the Bapcor make good provision policy.

Movements in provisions

Movements in each class of provision during the current financial year, other than employee benefits, are set out below:

Consolidated - 2017 Carrying amount at the start of the year Additional provisions recognised Additions through business combinations (note 35) Amounts used Foreign currency translation Movement between current and non-current classification Unwinding of discount Carrying amount at the end of the year	Deferred consideration $'000 7,178 - 28,622 (17,086) - 1,302 897	Make good $'000 2,512 386 5,322 (34) (17) - -	Onerous lease $'000 1,363 - 1,058 (428) - (347) -
	20,913	8,169	1,646

74

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 21. Equity - issued capital

Consolidated 2017 2016 2017 Shares Shares $'000 Ordinary shares 278,633,080 245,857,351 602,571 Treasury shares (200,000) - (1,896) 278,433,080 245,857,351 600,675 Movements in ordinary share capital Details Date Shares Opening balance 1 July 2016 245,857,351 Issue for Baxters Pty Ltd acquisition 3 August 2016 500,000 Exempt Employee Share Scheme offer 9 September 2016 138,519 Issue for Hellaby Holdings Ltd acquisition - Institutional placement (net of costs) 30 September 2016 28,205,129 Issue for Hellaby Holdings Ltd acquisition - Retail placement (net of costs) 4 November 2016 3,115,772 Issue for Dividend Reinvestment Plan 21 April 2017 816,309 Transactions costs arising on share issue - Deferred tax credit recognised directly in equity - Closing balance 30 June 2017 278,633,080 Movements in treasury shares Details Date Shares Opening balance 1 July 2016 - Treasury shares purchased 16 December 2016 (351,344) Allocation as part of the FY14 LTI 16 December 2016 151,344 Closing balance 30 June 2017 (200,000)	2017 Shares 278,633,080 (200,000)	Consolidated 2016 2017 Shares $'000 245,857,351 602,571 - (1,896)	Consolidated 2016 2017 Shares $'000 245,857,351 602,571 - (1,896)	2016 $'000 416,427 - 416,427 $'000 416,427 2,780 734 161,051 16,288 4,558 (648) 1,381 602,571 $'000 - (1,896) - (1,896)
	278,433,080	245,857,351	600,675
			Shares 245,857,351 500,000 138,519 28,205,129 3,115,772 816,309 - -
			278,633,080
			Shares - (351,344) 151,344
			(200,000)

Ordinary shares

Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the company does not have a limited amount of authorised capital.

On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote.

Treasury shares

The average purchase price of treasury shares during the period was $5.40 per share.

75

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 22. Equity - reserves

Note 22. Equity - reserves
Foreign currency reserve Cash flow hedge reserve Share-based payments reserve Net investment hedge reserve	Consolidated 2017 2016 $'000 $'000 (918) - (2,519) (1,256) 3,883 2,101 (648) - (202) 845
	(202)

Foreign currency reserve

This reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign operations to Australian dollars. It is also used to recognise gains and losses on hedges of the net investments in foreign operations.

Cash flow hedge reserve

This reserve is used to recognise the effective portion of the gain or loss of cash flow hedge instruments that is determined to be an effective hedge.

Share-based payments reserve

This reserve is used to recognise the value of equity benefits provided to employees and directors as part of their remuneration, and other parties as part of their compensation for services.

Net investment hedge reserve

This reserve is used to recognise the effective portion of the gain or loss of net investment hedge instruments that is determined to be an effective hedge.

Movements in reserves

Movements in each class of reserve during the current and previous financial year are set out below:

Consolidated Balance at 1 July 2015 Revaluation Share-based payment expense Deferred tax Balance at 30 June 2016 Revaluation Share-based payment expense Deferred tax Foreign currency translation Balance at 30 June 2017	Foreign currency reserve $'000 - - - -	Cash flow hedge reserve $'000 - (1,794) - 538	Share-based payments reserve $'000 441 - 1,081 579	Net investment hedge reserve $'000 - - - -	Total $'000 441 (1,794) 1,081 1,117 845 (2,491) 1,625 681 (862) (202)
	- - - - (918)	(1,256) (1,860) - 541 56	2,101 - 1,625 157 -	- (631) - (17) -
	(918)	(2,519)	3,883	(648)

76

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 23. Equity - accumulated losses

Note 23. Equity - accumulated losses
Accumulated losses at the beginning of the financial year Profit after income tax expense for the year Dividends paid (note 25) Accumulated losses at the end of the financial year	Consolidated 2017 2016 $'000 $'000 (51,052) (70,906) 64,044 43,582 (30,059) (23,728) (17,067) (51,052)
	(17,067)

Note 24. Equity - non-controlling interest

Note 24. Equity - non-controlling interest
Resource Services – Asset Held for Sale acquired Resource Services – Liability Held for Sale acquired Resource Services – Net Assets Held for Sale acquired Non-controlling interest acquired Non-controlling interest loss for the period Foreign currency revaluation	Consolidated 2017 2016 $'000 $'000 129,780 - (46,851) - 82,929 - 6,805 - (214) - (30) - 6,561 -
	82,929
	6,805 (214) (30)
	6,561

As part of the current year acquisition of Hellaby Holdings Limited, the acquired Resource Services held for sale asset has a non-controlling interest that is material to the group. Refer to note 35. The amounts relating to this non-controlling interest and subsequent transactions are as represented above.

Note 25. Equity - dividends

Dividends

Dividends paid during the financial year were as follows:

Final dividend for the year ended 30 June 2016 (2016: 30 June 2015) of 6.0 cents (2016: 4.7 cents) per ordinary share Interim dividend for the year ended 30 June 2017 (2016: 30 June 2016) of 5.5 cents (2016: 5.0 cents) per ordinary share *	Consolidated 2017 2016 $'000 $'000 14,781 11,497 15,278 12,231 30,059 23,728
	30,059

• In the current year, $4,558,000 of the interim dividend for the year ended 30 June 2017 was settled under the dividend reinvestment plan.

77

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 25. Equity - dividends (continued)

The Board has declared a final dividend in respect of the current financial year of 7.5 cents per share, fully franked. The final dividend will be paid on 29 September 2017 to shareholders registered on 31 August 2017.

The final dividend takes the total dividends declared in relation to the current financial year to 13.0 cents per share, fully franked, representing an increase of dividends paid of 18.2% compared to the prior financial year. Dividends paid and declared in relation to the current financial year represents 56.7% of net profit after tax.

Franking credits

Franking credits available for subsequent financial years based on a tax rate of 30%	Consolidated 2017 2016 $'000 $'000 38,252 28,480

The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:

• franking credits that will arise from the payment of the amount of the provision for income tax at the reporting date

• franking debits that will arise from the payment of dividends recognised as a liability at the reporting date

• franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date

Note 26. Net tangible assets

A large proportion of the consolidated group's assets are intangible in nature, consisting of goodwill, customer contracts and trademarks acquired on business combination as well as software. These assets as well as any deferred taxes are excluded from the calculation of net tangible assets per security.

Net tangible assets per share at 30 June 2017 was (16.0) (30 June 2016: 1.6) cents per share.

Net assets per share at 30 June 2017 was $2.12 (30 June 2016: $1.49) per share.

Note 27. Derivative financial instruments

Current assets Forward foreign exchange contracts - cash flow hedges Current liabilities Forward foreign exchange contracts - cash flow hedges Non-current liabilities Interest rate swap contracts - cash flow hedges	Consolidated 2017 2016 $'000 $'000 40 - (1,780) (420) (637) (1,374) (2,377) (1,794)
	(2,377)

Refer to note 28 for further information on financial risk management.

Refer to note 29 for further information on fair value measurement.

78

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 28. Financial risk management

Financial risk management objectives

The consolidated entity's activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and interest rate risk), credit risk and liquidity risk. The consolidated entity's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the consolidated entity. The consolidated entity uses derivative financial instruments such as forward foreign exchange contracts to hedge certain risk exposures. Derivatives are exclusively used for hedging purposes, i.e. not as trading or other speculative instruments. The consolidated entity uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks, ageing analysis for credit risk and beta analysis in respect of investment portfolios to determine market risk.

Risk management is carried out by senior finance executives ('finance') under policies approved by the Board of Directors ('the Board'). These policies include identification and analysis of the risk exposure of the consolidated entity and appropriate procedures, controls and risk limits. Finance identifies, evaluates and manages financial risks within the consolidated entity's operating units. Finance reports to the Board on a monthly basis.

The consolidated entity holds the following financial instruments:

Financial assets Cash and cash equivalents Trade and other receivables Derivative financial instruments Financial liabilities* Trade and other payables Derivative financial instruments Deferred consideration Borrowings **	Consolidated 2017 2016 $'000 $'000 39,755 22,392 131,157 84,385 40 - 170,952 106,777 174,768 121,507 2,417 1,794 25,180 12,748 432,229 148,800 634,594 284,849
	170,952
	174,768 2,417 25,180 432,229
	634,594

• Trade and other receivables in the table excludes prepayments which are not classified as financial instruments ** Borrowings excludes any unamortised transaction costs capitalised

Market risk

Foreign currency risk

The consolidated entity undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange rate fluctuations, primarily with respect to the United States dollar and the New Zealand dollar.

Foreign exchange risk arises from future commercial transactions, primarily the purchase of inventory for sales, recognised financial assets and financial liabilities and net investments in foreign operations.

In order to protect against exchange rate movements, the consolidated entity has entered into forward foreign exchange contracts. These contracts are hedging highly probable forecasted cash flows for the ensuing financial year. Management has a risk management policy to hedge between 25% and 100% of anticipated foreign currency transactions for the subsequent 12 months. As well as this the consolidated entity also has foreign currency loans to offset foreign investments which create a natural hedge against foreign currency fluctuations.

79

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 28. Financial risk management (continued)

The following table demonstrates the sensitivity to a change in the Australian dollar against other currencies, with all other variables held constant. The impact on profit before tax is due to changes in the fair value of monetary assets and liabilities. The pre-tax impact on equity is due to changes in the fair value of forward exchange contracts designated as cash flow hedges as well as foreign currency loans designated as net investment hedges.

AUD strengthened AUD weakened Consolidated - 2017 % change Effect on profit before tax $’000 Effect on equity $’000 % change Effect on profit before tax $’000 Effect on equity $’000 Derivative financial instruments 1% - 589 (1%) - (601) Other financial assets 1% (287) - (1%) 293 - Other financial liabilities 1% 259 943 (1%) (264) (962) (28) 1,532 29 (1,563) AUD strengthened AUD weakened Consolidated - 2016 % change Effect on profit before tax $’000 Effect on equity $’000 % change Effect on profit before tax $’000 Effect on equity $’000 Derivative financial instruments 1% - 204 (1%) - (209) Other financial assets 1% (31) - (1%) 31 - (31) 204 31 (209)	AUD strengthened AUD weakened Consolidated - 2017 % change Effect on profit before tax $’000 Effect on equity $’000 % change Effect on profit before tax $’000 Effect on equity $’000 Derivative financial instruments 1% - 589 (1%) - (601) Other financial assets 1% (287) - (1%) 293 - Other financial liabilities 1% 259 943 (1%) (264) (962) (28) 1,532 29 (1,563) AUD strengthened AUD weakened Consolidated - 2016 % change Effect on profit before tax $’000 Effect on equity $’000 % change Effect on profit before tax $’000 Effect on equity $’000 Derivative financial instruments 1% - 204 (1%) - (209) Other financial assets 1% (31) - (1%) 31 - (31) 204 31 (209)	AUD strengthened AUD weakened Consolidated - 2017 % change Effect on profit before tax $’000 Effect on equity $’000 % change Effect on profit before tax $’000 Effect on equity $’000 Derivative financial instruments 1% - 589 (1%) - (601) Other financial assets 1% (287) - (1%) 293 - Other financial liabilities 1% 259 943 (1%) (264) (962) (28) 1,532 29 (1,563) AUD strengthened AUD weakened Consolidated - 2016 % change Effect on profit before tax $’000 Effect on equity $’000 % change Effect on profit before tax $’000 Effect on equity $’000 Derivative financial instruments 1% - 204 (1%) - (209) Other financial assets 1% (31) - (1%) 31 - (31) 204 31 (209)
	31	(209)

Price risk

The consolidated entity is not exposed to any significant price risk.

Interest rate risk

The consolidated entity's main interest rate risk arises from long-term borrowings. The interest rate and term for bank borrowings is determined at the date of each drawdown.

Borrowings obtained at variable rates expose the consolidated entity to cash flow interest rate risk. The consolidated entity, from time to time, enters into interest rate swap contracts under which it receives interest at variable rates and pays interest at fixed rates to manage the risk of adverse fluctuations in the floating interest rate on its borrowings.

As at the reporting date, the consolidated entity had the following variable rate borrowings and interest rate swap contracts outstanding:

	2017		2016
	Weighted		Weighted
	average		average
	interest rate	Balance	interest rate	Balance
Consolidated	%	$'000	%	$'000
Borrowings (principal)	3.30%	432,229	3.35%	148,800
Less: amounts covered by interest rate swaps	2.39%	(60,000)	2.39%	(60,000)
Net exposure to cash flow interest rate risk		372,229		88,800

80

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 28. Financial risk management (continued)

As at 30 June 2017, if the weighted average interest rate of the bank borrowings had changed by a factor of + / - 10%, interest expense would increase / decrease by $1,427,000 (2016: $499,000).

The amount recognised in other comprehensive income net of tax in relation to interest rate swaps was $516,000 (2016: ($637,000)).

Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the consolidated entity. Credit risk is managed in the following ways:

• The consolidated entity has a strict code of credit for all customers, including obtaining agency credit information, confirming references and setting appropriate credit limits.

• Derivative counterparties and cash transactions are limited to high quality independently rated financial institutions with a minimum rating of 'A'.

• Concentrations of credit risk are minimised by undertaking transactions with a large number of customers.

• In some instances the consolidated entity holds collateral over its trade receivables and loans in the form of personal guarantees and charges under the Personal Property Securities Register.

The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes 9 and 12.

Liquidity risk

Vigilant liquidity risk management requires the consolidated entity to maintain sufficient liquid assets (mainly cash and cash equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable.

The consolidated entity manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities.

Financing arrangements

Unused borrowing facilities at the reporting date:

Bank loans including overdraft *	Consolidated 2017 2016 $'000 $'000 65,271 36,050

• The unused facility value excludes any facility that relates to bank guarantees. Refer to note 19 for further information.

81

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 28. Financial risk management (continued)

Remaining contractual maturities

The following tables detail the consolidated entity's remaining contractual maturity for its financial instrument liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position.

Consolidated - 2017 Non-derivatives Trade payables Borrowings Deferred consideration Derivatives Interest rate swaps Forward foreign exchange contracts Consolidated - 2016 Non-derivatives Trade payables Borrowings Deferred consideration Derivatives Interest rate swaps Forward foreign exchange contracts	1 year or less $'000 174,768 16,633 4,369	Between 1 and 2 years $'000 - 16,633 22,069	Between 2 and 5 years $'000 - 466,062 -	Over 5 years $'000 - - -	Remaining contractual maturities $'000 174,768 499,328 26,438 700,534 637 1,780 2,417 Remaining contractual maturities $'000 121,507 158,452 13,214 293,173 1,374 420 1,794
	195,770	38,702	466,062	-
	- 1,780	116 -	521 -	- -
	1,780	116	521	-
	1 year or less $'000 121,507 4,633 8,195	Between 1 and 2 years $'000 - 4,633 5,019	Between 2 and 5 years $'000 - 149,186 -	Over 5 years $'000 - - -
	134,335	9,652	149,186	-
	- 420	- -	1,374 -	- -
	420	-	1,374	-

• Borrowings’ contractual cash flows includes an interest component based on the drawn/undrawn ratio and interest rate applicable as at reporting date until maturity of the loan facility.

Fair value of financial instruments

The fair value of financial assets and liabilities disclosed in the statement of financial position do not differ materially from their carrying values.

Capital risk management

The consolidated entity's policy is to maintain a capital structure for the business which ensures sufficient liquidity and support for business operations, maintains shareholder and market confidence, provides strong stakeholder returns, and positions the business for future growth. In assessing capital management both equity and debt instruments are taken into consideration. The ongoing maintenance of this policy is characterised by:

• ongoing cash flow forecast analysis and detailed budgeting processes which, combined with continual development of banking relationships, is directed at providing a sound financial positioning for the consolidated entity's operations and financial management activities; and

82

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 28. Financial risk management (continued)

• a capital structure that provides adequate funding for potential acquisition and investment strategies, building future growth in shareholder value. The syndicated loan facility can be partly used to fund significant investments as part of this growth strategy.

The consolidated entity is not subject to externally imposed capital requirements, other than contractual banking covenants and obligations. All bank lending requirements have been complied with during the year and at the date of this report, which include the following covenants:

• Net leverage ratio not exceeding 3.00:1 (Net Debt : EBITDA);

• Fixed charge cover ratio not exceeding 1.75:1 (EBITDA plus Rent : Net Total Cash Interest plus Rent)

Note 29. Fair value measurement

Fair value hierarchy

The following tables detail the consolidated entity's financial instruments, measured or disclosed at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being:

• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date

• Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

Level 3: Unobservable inputs for the asset or liability

Consolidated - 2017 Assets Derivative financial instruments Assets held for sale Liabilities Derivative financial instruments Liabilities held for sale Deferred consideration Consolidated - 2016 Liabilities Derivative financial liabilities Deferred consideration	Level 1 $'000 - -	Level 2 $'000 40 -	Level 3 $'000 - 178,860	Total $'000 40 178,860 178,900 2,417 70,842 25,180 98,439 Total $'000 1,794 12,748 14,542
	-	40	178,860
	- - -	2,417 - -	- 70,842 25,180
	-	2,417	96,022
	Level 1 $'000 - -	Level 2 $'000 1,794 -	Level 3 $'000 - 12,748
	-	1,794	12,748

There were no transfers between levels during the financial year.

Derivative financial instruments carried at fair value are forward foreign exchange contracts and floating interest rate to fixed interest rate swaps. These are considered to be Level 2 financial instruments because their measurement is derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Deferred consideration is considered to be a Level 3 financial instrument because inputs in valuing this instrument are not based on observable market data. The fair value of this instrument is determined based on an estimated discounted cash flow analysis.

83

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 29. Fair value measurement (continued)

Assets and liabilities held for sale are considered to be a Level 3 financial instrument because inputs in valuing these assets are not based on observable market data. The fair value of this instrument is determined based on information obtained by management during the sale process (e.g. indicative bids, adviser estimates) as well as estimates derived on earning multiples.

Note 30. Remuneration of auditors

During the financial year the following fees were paid or payable for services provided by PricewaterhouseCoopers, the auditor of the company, and its network firms:

Audit services - PricewaterhouseCoopers Audit or review of the financial statements Other services - PricewaterhouseCoopers Tax compliance services Consulting services Audit services - network firms Audit or review of the financial statements Other services - network firms Tax compliance services Consulting services Total auditor remuneration	Consolidated 2017 2016 $ $ 510,000 310,000 60,602 54,315 106,000 11,302 166,602 65,617 676,602 375,617 333,010 - 88,102 - 12,000 - 100,102 - 433,112 - 1,109,713 375,617
	60,602 106,000
	166,602
	676,602
	333,010
	88,102 12,000
	100,102
	433,112
	1,109,713

84

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 31. Commitments and contingent liabilities

Commitments Committed at the reporting date but not recognised as liabilities, payable: Guarantees in relation to leases Letters of credit in relation to the purchase of inventory Guarantees in relation to performance of contracts Other commitments in relation to facility construction and consumable purchases Operating lease payables - continuing operations Committed at the reporting date but not recognised as liabilities, payable: Within one year One to five years More than five years Operating lease receivables - continuing operations Committed at the reporting date and recognised as assets, receivable: Within one year One to five years More than five years	Consolidated 2017 2016 $'000 $'000 2,982 3,455 343 - 483 - 1,571 - 5,379 3,455 40,650 28,397 72,802 54,642 6,257 11,823 119,709 94,862 4,298 7,047 7,110 11,774 291 1,202 11,699 20,023
	5,379
	40,650 72,802 6,257
	119,709
	4,298 7,110 291
	11,699

• The commitments in relation to performance of contracts and facility construction and consumable purchases relate to the discontinued operations of Resource Services

Operating lease commitments includes contracted amounts for various retail outlets, warehouses, offices and plant and equipment under non-cancellable operating leases with, in some cases, options to extend. The leases have various escalation clauses. On renewal, the terms of the leases are renegotiated.

Contingent liabilities

Other than the put and call option disclosed in note 18, there are no other unrecorded contingent liabilities (2016: Nil).

Note 32. Related party transactions

Parent entity

Bapcor Limited is the parent entity.

Subsidiaries

Interests in subsidiaries are set out in note 36.

Key management personnel

Disclosures relating to key management personnel are set out in note 33 and the remuneration report included in the Directors' Report.

85

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 33. Related party transactions - key management personnel disclosures

Compensation Short-term employee benefits Post-employment benefits Long-term benefits Share-based payments Loans Opening balance Amounts repaid Closing balance	Consolidated 2017 2016 $’000 $’000 6,543 4,631 218 170 60 45 1,249 839 8,070 5,685 1,780 3,050 (426) (1,270) 1,354 1,780
	8,070
	1,780 (426)
	1,354

Refer to the audited remuneration report within the Directors’ Report for further details on key management personnel compensation, as well as note 15 for details on the loans made to key management personnel.

Note 34. Parent entity information

Set out below is supplementary information about the parent entity.

Statement of comprehensive income Loss after income tax Internal dividend income Total comprehensive income	Parent 2017 2016 $'000 $'000 (18,276) (5,161) 108,000 - 89,724 (5,161)
	89,724

86

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 34. Parent entity information (continued)

Statement of financial position Total current assets Total assets Total current liabilities Total liabilities Equity Issued capital Other reserves Current year profits/(losses) Dividends paid Prior years retained earnings Total equity	Parent 2017 2016 $'000 $'000 - - 672,422 426,596 - - - - 600,675 416,427 4,014 2,101 89,724 (5,161) (30,059) (23,728) 8,068 36,957 672,422 426,596
	672,422
	-
	-
	600,675 4,014 89,724 (30,059) 8,068
	672,422

Note 35. Business combinations

Current financial year acquisitions

The consolidated entity acquired the net assets of the following businesses:

• Roadsafe Automotive Products ('Roadsafe')

• Autopro Raymond Terrace

• Autopro Gladstone

• Autopro Colac

• Autopro Gawler

• Autobarn Burleigh Heads

• Autobarn Beenleigh

• Autobarn Nambour

• Autobarn Orange

• Autobarn Virginia

The consolidated entity also acquired 100% of the following companies:

• Baxters Pty Ltd ('Baxters') in July 2016

• MTQ Engine Systems (Aust) Pty Ltd ('MTQ') in November 2016

• Hellaby Holdings Limited ('Hellaby') in January 2017

These acquisitions were made to strengthen the Bapcor offering as well as to enter the New Zealand market via the Hellaby acquisition.

87

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 35. Business combinations (continued)

The assets and liabilities recognised as a result of these acquisitions are set out below. Non-material business combinations have been aggregated. Acquisitions still within the acquisition period of twelve months from acquisition date are provisional at the time of this report.

Cash and cash equivalents Trade and other receivables Inventories Assets held for sale Plant and equipment Intangible assets Deferred tax asset Deferred tax liabilities Trade and other payables Liabilities held for sale Provisions Bank overdraft Bank loans Net assets attributable to non-controlling interests Net assets acquired Goodwill Acquisition-date fair value of the total consideration transferred Representing: Cash paid Shares issued Deferred and contingent consideration Debt forgiven Cash used to acquire business, net of cash acquired: Cash consideration Add: bank overdraft Less: cash and cash equivalents Net cash used	Hellaby Fair value $'000 - 36,280 65,581 163,334 5,328 11,384 9,952 (3,087) (34,984) (64,423) (8,323) (1,065) (79,487) (6,805)	Roadsafe Fair value $'000 2 1,163 1,300 - 200 1,886 410 (566) (506) - (446) - - -	Baxters Fair value $'000 - 4,875 8,294 - 1,177 1,772 1,428 (532) (3,937) - (1,134) (316) - -	MTQ Fair value $'000 1,112 4,512 8,686 - 2,132 562 1,610 (169) (3,740) - (2,637) - - -	Other Fair value $'000 11 219 2,296 - 56 - 378 - (380) - (834) - - - 1,746 3,045 4,791 4,117 - - 674 4,791 4,116 - (11) 4,105
	93,685 241,000	3,443 7,824	11,627 13,008	12,068 8,722
	334,685	11,267	24,635	20,790
	334,685 - - -	11,267 - - -	2,124 2,780 19,731 -	20,790 - - -
	334,685	11,267	24,635	20,790
	334,685 1,065 -	11,267 - (2)	2,124 316 -	20,790 - (1,112)
	335,750	11,265	2,440	19,678

Goodwill in relation to these acquisitions relates to the anticipated future probability of their contribution to the consolidated entity's total business.

88

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 35. Business combinations (continued)

The Hellaby business acquisition took place on 13 January 2017 when control was deemed to have been in place. Refer to the segment disclosures for details of continuing operations contribution since acquisition at note 4. The discontinued operations contribution are disclosed in note 7. The contribution of the continuing operations of the Hellaby acquisition if the acquisition had taken place on 1 July 2016 (excluding any acquisition accounting adjustments) would have been an incremental revenue of $142.3M and EBITDA of $10.6M to the consolidated entity.

Each of the other business acquisitions took place on different dates and are heavily integrated into the consolidated entity's operations and as such it is impractical to disclose the amount of profit since acquisition date. The amount of revenue contributed by these acquisitions for FY17 are as follows:

Business	Acquired	Revenue in FY17
Roadsafe	Aug-16	$10.3M
Baxters	Aug-16	$37.2M
MTQ	Nov-16	$28.8M

Refer to note 5 for details on acquisition related costs incurred.

Deferred and contingent consideration

A contingent consideration has been estimated and provided for on the Baxters acquisition and is currently accrued at $20,288,000 which is based on expected future earnings. This payment is due to the vendor if certain future targets are met.

Net assets attributable to non-controlling interests

As part of the Hellaby business acquisition, within the Resource Services division there existed a minority interest in relation to a number of the Contract Services subsidiaries. The fair value attributable to this minority interest has been determined by reference to the fair value of that part of the business at the percentage held by the minority interest.

Prior financial year acquisitions

In the previous financial year the consolidated entity made the following acquisitions:

• Aftermarket Network Australia Pty Ltd (‘ANA’) (formerly Metcash Automotive Holdings Pty Ltd)

• Bearing Wholesalers

• DB’s Auto One

• Precision Equipment

• Illawarra Auto Spares

• Revvin’s Auto Parts

• QAH North Geelong

• Sprint Auto Parts

• Manning River Autoparts

Due to an accounting policy change as outlined in note 3, a retrospective adjustment was made during the current year to recognise deferred tax liabilities on the indefinite life trademarks acquired as part of the above acquisitions. The impact of this adjustment to deferred tax liability and goodwill in the prior year was $13,367,000. No other material change to the business combination of these occurred during the current year.

89

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 36. Interests in subsidiaries

The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policies of the consolidated entity:

		Ownership	interest
	Principal place of business /	2017	2016
Name	Country of incorporation	%	%
Bapcor Finance Pty Ltd (formerly Burson Finance Pty
Ltd)	Australia	100.0%	100.0%
Burson Automotive Pty Ltd	Australia	100.0%	100.0%
Car Bitz & Accessories Pty Ltd	Australia	100.0%	100.0%
Aftermarket Network Australia Pty Ltd (formerly
Metcash Automotive Holdings Pty Ltd)	Australia	100.0%	100.0%
Specialist Wholesalers Pty Ltd (formerly Australian
Automotive Distribution Pty Ltd)	Australia	100.0%	100.0%
Automotive Brands Group Pty Ltd	Australia	100.0%	100.0%
Midas Australia Pty Ltd	Australia	100.0%	100.0%
ACN 610 722 168	Australia	100.0%	100.0%
MTQ Engine Systems (Aust) Pty Ltd	Australia	100.0%	-
Baxters Pty Ltd	Australia	100.0%	-
Hellaby Holdings Limited	New Zealand	100.0%	-
Hellaby Automotive Limited	New Zealand	100.0%	-
Brake & Transmission NZ Limited	New Zealand	100.0%	-
Dasko Limited	New Zealand	100.0%	-
HCB Technologies Limited	New Zealand	100.0%	-
Diesel Distributors Limited	New Zealand	100.0%	-
TRS Tyre & Wheel Limited	New Zealand	100.0%	-
Truck & Trailer Parts Limited ***	New Zealand	100.0%	-
Hellaby Automotive Australia Pty Limited	Australia	100.0%	-
Ryde Batteries Pty Limited	Australia	100.0%	-
Ryde Batteries (Wholesale) Pty Limited	Australia	100.0%	-
Federal Batteries Qld Pty Limited	Australia	100.0%	-
Diesel Distributors Australia Pty Limited	Australia	100.0%	-
TRS Tyre & Wheel Pty Limited ***	Australia	100.0%	-
Hellaby Auto Electrical Pty Limited	Australia	100.0%	-
JAS Oceania Pty Limited	Australia	100.0%	-
Australian Automotive Electrical Wholesale Pty Ltd	Australia	100.0%	-
Low Voltage Pty Limited	Australia	100.0%	-
Premier Auto Trade Pty Limited	Australia	100.0%	-
Hellaby Auto Fuel Pty Limited ***	Australia	100.0%	-
Hellaby Australia Pty Limited	Australia	100.0%	-
Renouf Corporation International	United States	100.0%	-
Benequity Properties, LLC	United States	100.0%	-
Hellaby Investment No 13 Limited ***	New Zealand	100.0%	-
Hellaby Investment No 14 Limited ***	New Zealand	100.0%	-
Discount Shoe Warehouse Limited ***	New Zealand	100.0%	-
Generator Fund Limited ***	New Zealand	100.0%	-
Hellaby Brands Limited ***	New Zealand	100.0%	-
Number 1 Shoes Limited *	New Zealand	100.0%	-
R Hannah & Co Limited *	New Zealand	100.0%	-
Hellaby Resource Services Limited **	New Zealand	100.0%	-
TBS Group Limited **	New Zealand	100.0%	-
TBS Farnsworth Limited **	New Zealand	100.0%	-
Total Bridge Services JV **	New Zealand	50.0%	-
T.B.S. Coatings Limited **	New Zealand	100.0%	-
TBS Remcon Limited **	New Zealand	100.0%	-

90

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 36. Interests in subsidiaries (continued)

		Ownership	interest
	Principal place of business /	2017	2016
Name	Country of incorporation	%	%
Crow Refractory Limited **	New Zealand	100.0%		-
Hellaby Investment No 8 Limited **	New Zealand	100.0%		-
Hellaby Investments Number 10 Limited **	New Zealand	100.0%		-
Contract Resources Investments Limited **	New Zealand	85.0%		-
Contract Resources South America Limited **	New Zealand	85.0%		-
Nexxo Contract Resources Do Brasil Manuseio De
Catalisadores Ltda JV **	United States	42.5%		-
Contract Resources (New Zealand) Limited **	New Zealand	85.0%		-
Contract Resources Holdings Pty Limited **	Australia	85.0%		-
Contract Resources Finance Pty Limited **	Australia	85.0%		-
Contract Resources Australia Pty Limited **	Australia	85.0%		-
Contract Resources Equipment Pty Limited **	Australia	85.0%		-
DDT International Pty Limited **	Australia	85.0%		-
Contract Resources Pty Limited **	Australia	85.0%		-
CR Travel Pty Limited **	Australia	85.0%		-
Contract Resources (Karratha) Pty Limited **	Australia	85.0%		-
Contract Resources USA Inc **	United States	85.0%		-
Contract Resources Limited LLC **	United States	85.0%		-
Catalyst Handling Resources Holdings LLC **	United States	68.0%		-
Catalyst Handling Resources Ltd **	Trinidad & Tobago	68.0%		-
Catalyst Handling Resources LLC **	United States	68.0%		-
JACR (JV) **	The Kingdom of Saudi Arabia	41.7%		-
Contract Resources Technical and Industrial Services
LLC **	Oman	85.0%		-
Contract Resources Oilfield Services LLC **	United Arab Emirates	85.0%		-
Contract Resources Oilfield Services WLL **	Qatar	85.0%		-

• These subsidiaries relate to the Footwear business unit of the Hellaby Holdings Limited acquisition performed in the current period and are held for sale.

** These subsidiaries relate to the Resource Services business unit of the Hellaby Holdings Limited acquisition performed in the current period and are held for sale. Minority shareholding is held in the intermediate group holding company, Contract Resources Investments Limited, except for the United States entities where there is an additional minority interest of 20%.

*** These subsidiaries are non-trading.

91

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 37. Deed of cross guarantee

The following entities are party to a deed of cross guarantee under which each company guarantees the debts of the others. The companies below represent a 'Closed Group' for the purposes of the class order outlined below.

• Bapcor Limited

• Bapcor Finance Pty Limited (formerly Burson Finance Pty Limited)

• Burson Automotive Pty Limited

• Aftermarket Network Australia Pty Ltd

• Specialist Wholesalers Pty Ltd (formerly Australian Automotive Distribution Pty Ltd)

• Automotive Brands Group Pty Ltd

• Midas Australia Pty Ltd

• MTQ Engine Systems (Aust) Pty Ltd

• Baxters Pty Ltd

• Car Bitz & Accessories Pty Ltd

• ACN 610 722 168

• Australian Automotive Electrical Wholesale Pty Limited

• Diesel Distributors Australia Pty Limited

• Federal Batteries Qld Pty Limited

• Hellaby Australia Pty Limited

• Hellaby Automotive Australia Pty Limited

• Hellaby Auto Electrical Pty Limited

• Hellaby Auto Fuel Pty Limited

• JAS Oceania Pty Limited

• Low Voltage Pty Limited

• Premier Auto Trade Pty Limited

• Ryde Batteries Pty Limited

• Ryde Batteries (Wholesale) Pty Limited

• TRS Tyre & Wheel Pty Limited

By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare financial statements and Directors' Report under Class Order 98/1418 issued by the Australian Securities and Investments Commission.

Set out below is a consolidated statement of comprehensive income and statement of financial position of the Closed Group.

Statement of comprehensive income Revenue Expenses Profit before income tax expense Income tax expense Profit after income tax expense Other comprehensive income Changes in the fair value of cash flow hedges Other comprehensive income for the year, net of tax Total comprehensive income for the year	2017 $'000 922,348 (844,420)	2016 $'000 685,629 (623,513) 62,116 (18,534) 43,582 (1,256) (1,256) 42,326
	77,928 (25,001)
	52,927 2,191
	2,191
	55,118

92

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 37. Deed of cross guarantee (continued)

Equity - retained profits Accumulated losses at the beginning of the financial year Profit after income tax expense Dividends paid Accumulated losses at the end of the financial year Statement of financial position Current assets Cash and cash equivalents Trade and other receivables Inventories Derivative financial instruments Income tax refund due Non-current assets Trade and other receivables Property, plant and equipment Intangibles Deferred tax Other Intercompany Investments Total assets Current liabilities Trade and other payables Derivative financial instruments Income tax Provisions Non-current liabilities Borrowings Derivative financial instruments Provisions Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity	2017 $'000 (51,052) 52,927 (30,059)	2016 $'000 (70,906) 43,582 (23,728) (51,052) 2016 $'000 22,392 87,304 163,020 - - 272,716 573 36,213 362,207 7,247 4,466 - - 410,706 683,422 121,507 420 6,236 26,607 154,770 148,184 1,374 12,874 162432 317,202 366,220 416,427 845 (51,052) 366,220
	(28,184)
	2017 $'000 30,905 114,618 221,179 27 1,045
	367,774
	296 46,679 426,157 10,356 4,061 30,879 334,685
	853,113
	1,220,887
	150,446 934 4,998 30,195
	186,573
	429,747 637 28,402
	458,786
	645,359
	575,528
	600,676 3,036 (28,184)
	575,528

93

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 38. Events after the reporting period

On 3 July 2017, Bapcor purchased Tricor Engineering ("Tricor") for a total of $2.4M of which $1.0M is deferred over the next two years. Tricor specialises in the supply and installation of lubrication equipment in the car dealership and heavy vehicle workshop market. The business will operate within the Precision Automotive Equipment business within the Trade segment.

Apart from the dividend declared as disclosed in note 25, no other matter or circumstance has arisen since 30 June 2017 that has significantly affected, or may significantly affect the consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial years.

Note 39. Reconciliation of profit after income tax to net cash from operating activities

Profit after income tax expense for the year Adjustments for: Depreciation and amortisation Net gain on disposal of property, plant and equipment Amortisation of capitalised borrowing costs Amortisation of share-based payment Component relating to discontinued operations Change in operating assets and liabilities: Decrease/(increase) in trade and other receivables Increase in inventories Decrease/(increase) in other operating assets Increase/(decrease) in trade and other payables Increase/(decrease) in provision for income tax Decrease in other operating liabilities Net cash from operating activities

Consolidated 2017 2016 $'000 $'000 63,830 43,582 13,527 9,673 (80) (32) 752 459 1,625 1,081 (10,098) - (396) 631 (12,450) (20,382) (1,027) 13,859 10,737 (11,230) (3,623) 1,676 (1,703) (54) 61,094 39,263

61,094

94

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 40. Earnings per share

Earnings per share for profit from continuing operations Profit after income tax attributable to the owners of Bapcor Limited Basic earnings per share Diluted earnings per share Earnings per share for profit from discontinued operations Profit after income tax attributable to the owners of Bapcor Limited Basic earnings per share Diluted earnings per share Earnings per share for profit Profit after income tax Non-controlling interest Profit after income tax attributable to the owners of Bapcor Limited Basic earnings per share Diluted earnings per share Weighted average number of ordinary shares Weighted average number of ordinary shares used in calculating basic earnings per share Adjustments for calculation of diluted earnings per share: Options over ordinary shares Weighted average number of ordinary shares used in calculating diluted earnings per share	Consolidated 2017 2016 $'000 $'000 53,732 43,582 Cents Cents 19.93 17.89 19.83 17.82 Consolidated 2017 2016 $'000 $'000 10,098 - Cents Cents 3.75 - 3.73 - Consolidated 2017 2016 $'000 $'000 63,830 43,582 214 - 64,044 43,582 Cents Cents 23.76 17.89 23.64 17.82 Number Number 269,599,050 243,646,174 1,337,272 935,184 270,936,322 244,581,358
	64,044
	Cents 23.76 23.64 Number 269,599,050 1,337,272
	270,936,322

The weighted average number of ordinary shares for 2016 has been restated for the effect of the rights issues performed in accordance with AASB 133 Earnings per share .

95

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 41. Share-based payments

Long Term Incentive plan

The Long Term Incentive (LTI) plan is intended to assist in the motivation, retention and reward of certain senior executives. The LTI is a payment contingent on two and three year performance and the payments are rights to acquire shares (Performance Rights). Refer to the audited remuneration report within the Directors' Report for further information on the LTI.

In FY17 an offer to participate in the LTI was made to nine of Bapcor’s senior executives. Each executive's LTI opportunity comprised two tranches whereby:

• 34% of the allocated Performance Rights have a performance period that ends on 30 June 2018 at which time the performance hurdles for this tranche are tested; and

• 66% of the allocated Performance Rights have a performance period that ends on 30 June 2019 at which time the performance hurdles for this tranche are tested.

A summary of the terms for the Performance Rights granted in FY17 and FY16 are set out in the following tables:

FY17	Tranche 1	Tranche 2
Grant date	20 December 2016	20 December 2016
Performance hurdle	Relative TSR EPS	Relative TSR EPS
Performance period	1/7/16 to 30/6/18 1/7/16 to 30/6/18	1/7/16 to 30/6/19 1/7/16 to 30/6/19
Test date	30 June 2018	30 June 2019
Expiry date	Once tested	Once tested
Quantity granted	77,891 46,395	145,742 91,647
Exercise price	Nil	Nil
Fair value at 20/12/16	$2.696 $5.265	$2.897 $5.160
Other conditions	Restriction on sale to 30/6/19	Restriction on sale to 30/6/20

FY16	Tranche 1	Tranche 2
Grant date	24 December 2015	24 December 2015
Performance hurdle	Relative TSR EPS	Relative TSR EPS
Performance period	1/7/16 & 1/8/16 to 30/6/17 1/7/16 & 1/8/16 to 30/6/17	1/7/16 & 1/8/16 to 30/6/18 1/7/16 & 1/8/16 to 30/6/18
Test date	30 June 2017	30 June 2018
Expiry date	Once tested	Once tested
Quantity granted	102,673 102,673	196,780 196,780
Exercise price	Nil	Nil
Fair value at 24/12/15	$3.368 $3.958	$3.196 $3.842
Other conditions	Restriction on sale to 30/6/18	Restriction on sale to 30/6/19

Relative total shareholder return ('TSR') hurdle

Fifty per cent of the Performance Rights granted to a participant will vest subject to a TSR performance hurdle that assesses performance by measuring capital growth in the share price together with income returned to shareholders, measured over the performance period against a Comparator Group of companies. The Performance Rights will vest by reference to Bapcor's TSR performance ranking against this Comparator Group of companies, as follows:

Bapcor’s TSR relative to the Comparator Group over the performance period	Percentage of TSR Rights vesting
Less than 50th percentile	Nil
Equal to 50th percentile	50%
Greater than 50th percentile and less than 75th percentile	Pro-rata straight-line vesting
Equal to or greater than 75th percentile	100%

96

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 41. Share-based payments (continued)

Earnings per share ('EPS') growth

Fifty per cent of the Performance Rights granted to a participant will vest by reference to an EPS performance hurdle that measures the basic EPS on a normalised basis over the performance period. Each tranche of Performance Rights subject to an EPS hurdle will vest as follows:

Bapcor's compound annual EPS growth over the performance period	Percentage of EPS Rights Vesting
Less than 7.5%	Nil
7.5%	20%
Greater than 7.5% and less than 15%	Pro-rata straight-line vesting
Equal to or greater than 15%	100%

There is no expiry date. The Performance Rights are exercised as soon as the vesting conditions are met. If vesting conditions are met, Performance Rights will automatically convert into fully paid ordinary shares of the Company. Shares that are allocated in respect of each tranche will be subject to a restriction on sale for twelve months from vesting of the Performance Rights.

Set out below are summaries of Performance Rights granted under the LTI:

2017

Exercise Grant date Vesting date price 24/04/2014 30/06/2016 $0.00 24/04/2014 30/06/2017 $0.00 01/07/2015 30/06/2017 $0.00 01/07/2015 30/06/2018 $0.00 01/08/2015 30/06/2017 $0.00 01/08/2015 30/06/2018 $0.00 01/07/2016 30/06/2018 $0.00 01/07/2016 30/06/2019 $0.00	Balance at the start of the year 151,344 475,362 128,868 246,986 76,478 146,574 - -	Granted - - - - - - 124,286 237,389	Exercised (151,344) - - - - - - -	Expired/ forfeited/ other - - - - - - - -	Balance at the end of the year - 475,362 128,868 246,986 76,478 146,574 124,286 237,389 1,435,943
	1,225,612	361,675	(151,344)	-

2016 Exercise Grant date Vesting date price 24/04/2014 30/06/2016 $0.00 24/04/2014 30/06/2017 $0.00 01/07/2015 30/06/2017 $0.00 01/07/2015 30/06/2018 $0.00 01/08/2015 30/06/2017 $0.00 01/08/2015 30/06/2018 $0.00	Balance at the start of the year 151,344 475,362 - - - -	Granted - - 128,868 246,986 76,478 146,574	Exercised - - - - - -	Expired/ forfeited/ other - - - - - -	Balance at the end of the year 151,344 475,362 128,868 246,986 76,478 146,574 1,225,612
	626,706	598,906	-	-

97

Bapcor Limited Notes to the consolidated financial statements 30 June 2017

Note 41. Share-based payments (continued)

The weighted average exercise price for the Performance Rights exercised in FY17 was $5.3958 (2016: N/a).

The weighted average contractual lives are 1.48 years (2016: 1.54 years).

The expense arising from share-based payment transactions relating to the LTI during the year as part of employee benefits expense was $1,625,000 (30 June 2016: $1,081,000).

Refer to note 1 for details on the fair value determination of the share-based payments.

Employee Salary Sacrifice Share plan

During the financial year, Bapcor issued shares to employees via an Employee Salary Sacrifice Share plan ('ESSS'). The ESSS allowed eligible employees to acquire up to $1,000 of shares from their pre-tax wages. The value of this share-based payment transaction is deemed immaterial to the financial statements.

98

Bapcor Limited Directors' declaration 30 June 2017

In the directors' opinion:

• the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements;

• the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 1 to the financial statements;

• the attached financial statements and notes give a true and fair view of the consolidated entity's financial position as at 30 June 2017 and of its performance for the financial year ended on that date;

• there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and

• at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in note 37 to the financial statements.

The directors have been given the declarations required by section 295A of the Corporations Act 2001.

Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.

On behalf of the directors,

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Robert McEniry Chairman

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Darryl Abotomey Chief Executive Officer and Managing Director

23 August 2017 Melbourne

99

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Independent auditor’s report

To the shareholders of Bapcor Limited

Report on the audit of the financial report

Our opinion

In our opinion:

The accompanying financial report of Bapcor Limited (the Company) and its controlled entities (together the Group) is in accordance with the Corporations Act 2001 , including:

• a) giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its financial performance for the year then ended

• b) complying with Australian Accounting Standards and the Corporations Regulations 2001 .

What we have audited

The Group financial report comprises:

• the Consolidated statement of financial position as at 30 June 2017

• the Consolidated statement of comprehensive income for the year then ended

• the Consolidated statement of changes in equity for the year then ended

• the Consolidated statement of cash flows for the year then ended

• the Notes to the consolidated financial statements, which include a summary of Significant accounting policies

• the directors’ declaration

Basis for opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial report section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.

Our audit approach

An audit is designed to provide reasonable assurance about whether the financial report is free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report.

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial report as a whole, taking into account the geographic and management structure of the Group, its accounting processes and controls and the industry in which it operates.

100

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Materiality

• For the purpose of our audit we used overall group materiality of $4.1 million, which represents approximately 5% of the Group’s adjusted profit before tax.

• We applied this threshold, together with qualitative considerations, to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial report as a whole.

• We chose Group profit before tax because, in our view, it is the metric against which the performance of the Group is most commonly measured. Adjustments have been made for business combination transactions costs as they are considered to be unusual or infrequently occurring items impacting profit and loss.

• We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonly acceptable thresholds.

Audit scope

• Our audit focused on areas where the Group made subjective judgements; for example, significant accounting estimates involving assumptions and inherently uncertain future events.

• Audit procedures were performed on the Australian and New Zealand operations assisted by local component auditors in New Zealand under the instruction and supervision of the group engagement team.

• Our team included specialists in taxation and experts in valuations to assist in the audit procedures over the fair value of intangible assets identified in the Hellaby Holdings Limited acquisition and goodwill impairment.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report for the current period. The key audit matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Further, any commentary on the outcomes of a particular audit procedure is made in that context.

Key audit matter	How our audit addressed the key audit matter
Accounting for acquisition of Hellaby Holdings Limited	Our audit procedures included the following, amongst others:
Refer to note 35 of the financial report The Group made a number of acquisitions during the financial year ended 30 June 2017. The most significant completed was the acquisition of Hellaby Holdings Limited (Hellaby) in January 2017 for $334.6 million.	 Considering whether the relevant evidence, including share registers and ASX announcements by the Group, was consistent with the Group’s determination of the acquisition date of Hellaby based on the requirements of Australian
As per note 35 of the financial statements the	Accounting Standards.

As per note 35 of the financial statements, the Group has recognised the fair value of assets

101

• Key audit matter How our audit addressed the key audit matter and liabilities for each acquired business,  Agreeing the fair value of consideration which included identifiable intangible assets paid to third party records, including totalling $11.4 million and goodwill of $241 agreeing a sample of payments to bank million. The fair value of assets held for sale at records, and ASX take over acquisition amounted to $163.3 million, announcements. representing the Resource Services Group and Footwear business acquired as part of the  Assessing the Group’s identification of Hellaby acquisition. intangible assets, including consideration

• The fair value of assets held for sale has been of whether the intangibles identified were determined based on indicative bids, adviser complete. These procedures were estimates and estimates derived from earnings performed with the support of PwC valuation experts.

The fair value of assets held for sale has been determined based on indicative bids, adviser estimates and estimates derived from earnings multiples (as described in note 29 of the financial statements).

• Assessing valuations of identified intangibles by testing the mathematical accuracy of valuation calculations, agreement of a sample of key valuation inputs to source documents and consideration of the appropriateness of a sample of other key valuation inputs, including the discount rate used. Agreeing inputs used in the calculation to those assessed in the Group’s expert report. These procedures were performed with the support of PwC valuation experts.

We focused on this matter because of the significant judgement involved in the Group estimating the fair values of net assets acquired and the material impact on the financial report of the acquisition.

• Consideration of the competence, qualifications, experience and objectivity of the Group’s valuation experts who assisted with the Group’s valuations adopted for the Hellaby acquisition.

• Assessment of identification of business units held for sale in the acquisition in accordance with accounting standards.

• Consideration of the adequacy of the disclosures made in note 35, including with regard to the requirements of Australian Accounting Standards.

Carrying value of goodwill and intangible assets with indefinite lives Refer to note 14 of the financial report

At 30 June 2017, the Group recognised $561.8m of goodwill and $59.4m of intangible assets with indefinite lives (trademarks).

At least annually, an impairment test is performed by the Group to assess whether the carrying value of the goodwill and intangible assets with indefinite lives, in each of the Group’s cash generating units (CGUs) are

Goodwill and intangible assets with indefinite lives

In assessing the models, our audit procedures included, amongst others:

 Assessing whether the grouping of CGUs (which was up to the Group’s operating segments) used to test impairment was appropriate in light of how synergies were shared across the Group’s business based on our consideration of internal Group reporting, discussions and our understanding of

102

Key audit matter

recoverable based on a ‘value in use’, using a discounted cashflow model, or ‘fair value less costs of disposal’ model (the models). Where a shortfall in value is identified, an impairment charge is recognised in the Consolidate statement of comprehensive income.

Significant judgement is required by the Group to estimate the key assumptions in the models to determine the recoverable amount of the goodwill and the amount of any impairment. The most significant areas of judgment relate to:

• cash flow forecasts, including the terminal value forecast;

• short-term and future growth rates in revenue and EBITDA margin; and

• the discount rate adopted in the models.

Given the level of judgement applied by the Group and the magnitude of the goodwill and intangible assets with indefinite lives recognised on the Group’s Consolidated statement of financial position we determined that this was a key audit matter.

How our audit addressed the key audit matter

the operation of the Group’s business.

 Assessing whether the grouping of CGUs appropriately included the assets, liabilities and cash flows directly attributable and a reasonable allocation of corporate overheads.

 Testing that forecast cash flows used in the models were consistent with the Group’s most upto-date budgets and business plans formally approved by the Board and assessing whether the key assumptions used in the models were reasonable based on supporting evidence.

 Assessing the Group’s forecasting ability by comparing budgets with reported actuals.

 As part of our sensitivity analysis on key assumptions in the models, considering changes in the Group’s assumptions used in the models.

 With the assistance of PwC valuation experts, evaluating the appropriateness of the discount rates by assessing the reasonableness of the relevant inputs to the calculation against industry and market factors.

 Testing the mathematical accuracy of the models’ calculations.

 Considered the adequacy and accuracy of disclosures in note 14, including those regarding the key assumptions, in accordance with the requirements of Australian Accounting Standards.

Carrying value of Inventory

Refer to note 10 of the financial report

At 30 June 2017 the Group recognised inventory of $261.6 million.

The Group’s inventory is held at the lower of cost or net realisable value. Cost includes the purchase price of inventory, landing costs, such as freight and are reduced for related supplier rebates.

The Group has recorded a provision for aged and slow moving inventory of $54 million. The provision is estimated based on the application of judgemental provisioning rates to aged and slow moving inventory categories. Specific provisioning for items where the known net realisable value is lower than cost are also recorded.

Our audit procedures included the following, amongst others:

• Considering if all inventory balances were included in the provision calculation.

• An evaluation of whether the methodology applied to calculate the provision was consistent with that applied in the prior year.

• Assessing the Group’s historical ability to make estimates by testing a sample of products included in the prior year inventory provision, including comparing the estimated recoverable amount to the actual gross margin earned on those products sold in the financial year and the

103

Key audit matter	How	our audit addressed the key audit matter
		clearance rate achieved.
We consider this to be a key audit matter
because of the significant judgement and		Testing of the mathematical accuracy of
estimation involved by the Group in		the provision calculation.
determining the net realisable value of
inventory and the potentially material impact		Evaluating whether the provision for
on the financial report.		inventory was adequate by assessing:
		the gross margins recognised by the
		Group; and
		the inventory turnover ratio and ageing,
		including a comparison to the prior year.

Other information

The directors are responsible for the other information. The other information included in the Group’s annual report for the year ended 30 June 2017 comprises the Director’s Report and Corporate Directory (but does not include the financial report and our auditor’s report thereon), which we obtained prior to the date of this auditor’s report. We also expect other information to be made available to us after the date of this auditor's report, including the Chairman’s Report, CEO’s Report, Corporate Governance Statement, Segment overview, Community & Sustainability and Shareholder Information.

Our opinion on the financial report does not cover the other information and we do not and will not express any opinion or form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

When we read the other information not yet received as identified above, if we conclude that there is a material misstatement therein, we are required to communicate the matter to the directors and use our professional judgement to determine the appropriate action to take.

Responsibilities of the directors for the financial report

The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have has no realistic alternative but to do so.

104

Auditor’s responsibilities for the audit of the financial report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report.

A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our auditor’s report.

Report on the remuneration report

Our opinion on the remuneration report

We have audited the remuneration report included in pages 20 to 38 of the directors’ report for the year ended 30 June 2017.

In our opinion, the remuneration report of Bapcor Limited for the year ended 30 June 2017 complies with section 300A of the Corporations Act 2001.

Responsibilities

The directors of Bapcor Limited are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards.

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PricewaterhouseCoopers

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Daniel Rosenberg Partner

Melbourne 23 August 2017

105

Bapcor Limited Corporate directory 30 June 2017

Directors

Directors	Robert McEniry (Independent, Non-Executive Director and Chairman)
	Darryl Abotomey (Chief Executive Officer and Managing Director)
	Andrew Harrison (Independent, Non-Executive Director)
	Therese Ryan (Independent, Non-Executive Director)
	Margaret Haseltine (Independent, Non-Executive Director)
Company secretary	Gregory Fox
Notice of annual general meeting	The details of the annual general meeting of Bapcor Limited are:
	Date: 27 October 2017
	Time: 2.00pm (Melbourne time)
	Address: Level 37, 101 Collins Street, Melbourne VIC 3000f
Registered office	61 Gower Street
	Preston VIC 3072
	Australia
Share register	Computershare Investor Services Pty Ltd
	452 Johnston Street
	Abbotsford VIC 3067
	Australia
	Ph: +61 3 9415 4000
Auditor	PricewaterhouseCoopers
	2 Riverside Quay
	Southbank VIC 3006
	Australia
Stock exchange listing	Bapcor Limited shares are listed on the Australian Securities Exchange
	(ASX code: BAP)
Website	www.bapcor.com.au

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