BAPCOR LIMITED - Annual Report 2023

Annual Report 2023

PERFORMING AND TRANSFORMING WITH PURPOSE

Acknowledgement of Country

Bapcor would like to acknowledge the Traditional Custodians of Country throughout Australia. We pay our respect to elders past and present.

We recognise the continued connection of all First Nations people with Country and in particular, on all the land where Bapcor operates.

Our Purpose and Values	02
Strategic Priorities	04
Better Than Before	07
Our Segments	08
Our Footprint	10
FY23 Year in Review	12
Chair’s Report	14
Managing Director and
Chief Executive Officer‘s Report	16
Board of Directors	18
Management Team	19
Our Approach to ESG	22
Directors’ Report	45
Financial Report	84
Shareholder Information	144
Corporate Directory	146

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ABOUT US
Bapcor Limited is Asia Pacific’s
leading provider of vehicle parts,
accessories, equipment, service
and solutions. From our origins
as Burson Auto Parts in 1971,
Bapcor has since grown into a
vertically integrated network
servicing customers through
specialist knowledge and
expertise in Trade, Specialist
Wholesale and Retail businesses.
Our reach extends across
c.1,000 locations and we employ
approximately 5,500 team
members across Australia,
New Zealand and Asia.
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BAPCOR ANNuAl REPORT 2023 01

OUR PURPOSE AND VALUES

Our Purpose is the reason Bapcor exists. That purpose – to be there for what matters most – is at the heart of everything we do. It’s our commitment to be there for our customers, team members, industry and the communities in which we operate.

BAPCOR PURPOSE

At Bapcor, we believe everyone deserves to be there for what matters most. But what does it mean to really be there? Yes, it’s a physical presence, a promise to show up when and where we need to be.

But it’s also a mindset, a shared responsibility to support the people around us and create stronger communities together, and a commitment to contribute to something greater than the sum of our parts.

So, we’ll continue to be there for our customers, our Industry, each other, and the communities we call home. As One Bapcor, we’ll continue to meet every moment head-on and be there for what matters most, now and into the future.

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Making it
easier
One
Bapcor
Better
than Deliver on
before commitments
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“Be there for what matters most”

Our Values

Our Purpose is enabled by our Values, which are embedded into our culture and processes and guide our day-to-day behaviours.

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We do the right thing...

We are open, honest and respectful. We do what we say and say what we do.

We are in it together...

We’re all part of the Bapcor family. We support each other, include everyone and have fun along the way.

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We give a damn...

We care about what we do and are proud of how we do it. We are passionate and

We get it done...

We use our unique talents to solutions and achieve common goals. We celebrate success and strive to win.

BAPCOR ANNuAl REPORT 2023

STRATEGIC PRIORITIES

1 Become One Bapcor

Becoming One Bapcor is about bringing our team together and uniting behind a common purpose, set of values and new ways of working to realise the full potential of Bapcor and unleash the power of our people.

The Better Than Before transformation is an important step on that journey, with the company making targeted investment in people, processes and technology in key areas of digital, category management and procurement.

2 Deliver capital efficient growth

Bapcor has created a vertically integrated ecosystem, combining hard-to-replicate national footprints with specialist go-to-market channels and brands. These foundations, supported by state-of-the-art supply chain capabilities, provide a unique customer proposition that Bapcor can leverage to deliver additional and sustainable capital efficient growth.
Embed an agile culture of transformation To truly unleash the power of our people, Bapcor is embedding a
3 culture where change, collaboration, continuous improvement, empowerment and customer-centricity are fully embraced as part of our DNA, to allow us to effectively respond to evolving market conditions and customer demands.

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4 Connect though digital and data

Bapcor is investing in technology that provides our customers with advanced digital channels to accelerate parts delivery and reduce their cost to serve. Our Accelerate Rewards program, in Retail, continues to build momentum with over 500,000 members and will enable us to bring more relevant and competitive offers to our growing digital customer base.

As a leading provider of automotive aftermarket parts in Australia and New Zealand, Bapcor is uniquely positioned to leverage industry-wide data for enhanced decision making and predictive analytics.

Extend and optimise our customer reach

Network and range expansion, both organic and through targeted acquisitions, will continue to be a priority for Bapcor in ensuring we have the right products, services and parts available and in close proximity to our customers, when they need them most.

Embed sustainability into our operations

ESG represents the foundation of our commitment to driving a long-term sustainable future, by embedding sustainability into our strategic decisions and everyday operations. In addition, we are positioning Bapcor to leverage the opportunities of a zero emissions environment, including through our aspiration to become a market leader in the supply of parts and technologies to zero emissions vehicles.

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BAPCOR ANNuAl REPORT 2023

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BETTER THAN BEFORE

“We are an organisation that is proud of what we do. Bapcor holds a leading position in an attractive and stable market, with strong results and sustained growth. Building on these foundations, we want to take Bapcor from being a really good business, to an even better business, where we make things easier, unleash the full potential of our people and ultimately create more value for our shareholders and customers.”

– Noel Meehan, Managing Director and CEO

In November 2022, we introduced Better than Before (BTB) with a dual focus on financial performance and organisational health. Our goal is to transform from a good business to an excellent business.

BTB is a multi-year, whole-of-business transformation with three key objectives:

unleash the power of our people and improve team member engagement Deliver at least $100M in discrete net EBIT benefit in FY25

Improve Bapcor’s average return on invested capital to more than 12% by FY25

A year into BTB and we are delivering on around 300 initiatives, driven by more than 150 team members as initiative owners. These initiatives are increasing efficiencies in processes and collaboration, driving change and minimising costs across the Group.

At the same time, we are starting to simplify our systems and policies, resulting in a working environment where it is easier to focus on the customer, with greater flexibility and more empowered team members.

BAPCOR ANNuAl REPORT 2023

OUR SEGMENTS

Bapcor operates in strong and resilient markets which offer good growth opportunities.

Revenue EBITDA $ $ 763M 124M UP 11.3% UP 7.9%

Revenue by type

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10%
10%
80%
Non discretionary – Trade & Wholesale
Non discretionary – Retail
Discretionary – Retail
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Revenue EBITDA $ $ 766M 103M

UP 9.5% UP 0.9%

Revenue EBITDA $ $ 426M 68M UP 8.3% UP 1.7%

Revenue EBITDA

$ $ 176M 30M

UP 3.0% DOWN 8.9%

Australia’s leading distributor of vehicle parts and equipment solutions to Trade customers. It consists of the Burson Auto Parts, Precision Automotive Equipment and Blacktown Auto Spares in Australia as well as an emerging footprint in Thailand. This segment is a distributor of:

› Automotive aftermarket parts and consumables to trade workshops for the service and repair of passenger 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

One of Australia’s leading full-offer retailers and service centres providing best-in-class omni-channel customer experiences. It consists of business units that are retail customer focused, and includes the Autobarn, Autopro and Opposite

New Zealand’s leading integrated trade and wholesale group providing parts and equipment solutions. Brake & Transmission (‘BNT’) is the predominant business supplying automotive parts and accessories to workshops, as well as truck and trailer parts through

businesses of JAS Oceania and Baxters/MTQ; and the Wholesale business that is a specialised leader in automotive aftermarket wholesale operations through brands such as AAD, Bearing Wholesalers, Roadsafe, Premier Auto Trade, Federal Batteries, Diesel Distributors, and AADi.

lock brands as well as the Midas and ABS workshop service brands. This segment is comprised of mostly company-owned flagship stores in the Autobarn channel, with a mix of company-owned and franchised stores and workshops across the other brands.

the Truck and Trailer Parts brand. The Specialist Wholesale businesses include of HCB – batteries, Autolign – steering and suspension, JAS – auto electrical and Precision Equipment NZ – vehicle workshop equipment.

BAPCOR ANNuAl REPORT 2023

OUR FOOTPRINT

Our markets are located in Australia, New Zealand and Southeast Asia.

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Revenue by segment
8%
20% 36%
36%
Trade
Specialist Wholesale
Retail
NZ
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Our store footprint
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WA
76
17 18 41
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Revenue by geography
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8.3% 0.3%
91.4%
Australia
New Zealand
Thailand
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Trade
Specialist Wholesale
Retail
Other (Licensee)
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Thailand
NT 6
10
6
4 2 4
QLD
178
50 46 82
ACT
NSW
SA 8 181
77
3 2 3
58 44 79
17 11 49
VIC
NZ
195
216
63 44 88
76 13 127
TAS
18
8 1 9
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BAPCOR ANNuAl REPORT 2023

FY23 YEAR IN REVIEW

REVENUE

$ 2.0B Record revenue

PRO-FORMA NPAT $ 125.3M In line with guidance

DIVIDEND

Record

22.0 59.6% payout ratio

RETURN ON INVESTED CAPITAL

cents per 10.4% share, fully franked 10.6% in FY22 Improvement from 10.2% in 1H23

NETWORK EXPANSION

SAFETY

New locations

32% TRIFR improvement

Total recordable injury frequency rate reduced to 13.99

BETTER THAN BEFORE Target of at least

Net EBIT discrete contribution in FY25

$ 100M

Goal to improve average ROIC to >12% for FY23 – FY25 Improve team member engagement

INAUGURAL EMISSIONS REDUCTION ROADMAP

Scope 1 & 2 emissions reduction by FY30

40%

50% scope 1 & 2 emissions reduction by FY33

Perform

Resilient operational performance

Revenue growth in all segments demonstrated the resilience of Bapcor’s diversified business model
Operating margins lifted in all Trade and Wholesale segments in 2H23 versus 1H23, while Retail faced headwinds due to macro-economic factors
Temporary margin pressure due to input cost inflation, capability build and higher interest costs

Network and Supply Chain capability further enhanced

31 new locations comprised of 21 new stores, 3 acquisitions in the truck and commercial vehicle businesses and 7 retail franchise conversions
Improved distribution supply rates from the Victoria Distribution Centre
Construction of the Queensland Distribution Centre building achieved practical completion.

Ongoing focus on capital efficiency

Significant reduction in inventory levels by accelerating inventory turns
Improved cash generation with FY23 cash conversion of 107.4% versus 63.6% in FY22
Improved net debt position and strong balance sheet

Transform

Bapcor Purpose: “Be there for what matters most”

launched after extensive stakeholder engagement with team members, customers and shareholders
Becoming a purpose-led organisation creates more trust and loyalty with customers, a better place to work and sustainable success

Continued investment in capability and culture

Refresh of Group leadership team completed
unifying businesses and brands under “One Bapcor”
Investment in safety, transformation, procurement and ESG capability

Launch of Better than Before transformation program

launch of strategic, multi-year transformation with the program now in implementation and execution phase
Making it easier for our team members, unleashing Bapcor’s full potential and enabling additional growth

Targeted outcomes achieved on pilot initiatives in FY23 and initial financial benefits expected in FY24

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BAPCOR ANNuAl REPORT 2023

CHAIR’S REPORT

Dear shareholders, and all stakeholders of Bapcor,

On behalf of the Board I am pleased to report that FY23 has been another successful year for Bapcor. Bapcor delivered on its targets, with a dual focus on improving operational performance whilst undertaking the multi-year Better than Before strategic transformation.

The commitment of our team resulted in record revenues and solid underlying earnings. This robust operational and financial performance demonstrates the resilience of our business and the strong fundamentals of the automotive aftermarket industry, despite a more challenging macroeconomic environment of rising inflation and increasing interest rates.

In light of the successful FY23 performance, the Board has declared a final fully franked dividend of 11.5 cents per share, taking the full year dividend to a record level of 22.0 cents per share. This represents a 2.3% increase on the prior year and a dividend payout ratio of 59.6%.

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Board succession

During the year the Board appointed Bapcor’s Chief Executive Officer Noel Meehan as Managing Director, and welcomed two independent, Non-Executive Directors, Brad Soller and Kate Spargo to the Board. Brad is a highly experienced executive, having held various Chief Financial Officer positions with public companies in Australia and the united Kingdom. He has been appointed as Chair of the Audit and Risk Committee. Kate is an experienced public company director with broad business and legal expertise, and has become a member of Bapcor’s Nominations, Remuneration and ESG Committee. On 22 August 2023 we announced the appointment of Rebecca Dee-Bradbury as a Non-Executive Director. Rebecca has significant experience in leading organisational transformation and integration, marketing, digitisation and innovation. All new directors bring a wealth of expertise and experience to the Board to support Bapcor in its next phase of performance and growth.

Non-Executive Directors Therese Ryan and Jenny Macdonald retired during FY23 and I would like to thank them both for their significant contributions and commitment to the Board over their tenure.

Better than Before

During the year, Bapcor launched its multi-year transformation program called Better than Before. The program is an ambitious undertaking to transform our business from a good business into a much better business. I am delighted how the business has embraced this significant program of work, which is targeted to achieve a step change in Bapcor’s operational and financial performance with higher returns for shareholders and improved employee engagement. A company-wide Better than Before incentive plan has been implemented to align all team members to the delivery of the program which will benefit our team members, customers, and shareholders. Further details on the Better than Before incentive program can be found in the Remuneration Report commencing on page 58.

Safety and wellbeing

The safety and wellbeing of team members remains of paramount importance for Bapcor. During the year Bapcor continued to increase the investment into safety resources which enabled a focus on training and education, a more proactive engagement towards safety and improvements in the quality of data and reporting. Pleasingly, our safety performance has significantly improved with a 32% reduction in Bapcor’s Total Recordable Injury Frequency Rate to 13.99 and a 29% reduction in our lost Term Injury Frequency Rate to 5.13. Despite these improvements, we still have more work to do to keep our team members safe.

Using the 2023 baseline, Bapcor has adopted targets to reduce our emissions by 40% by 2030 and by 50% by 2033.

Environment, Social and Governance (ESG)

ESG represents the foundation of our commitment to driving a long-term sustainable future, which encompasses environmental stewardship, social responsibility, and effective governance. Bapcor has made significant progress across all areas of our ESG strategy and delivered on the objectives and initiatives outlined in the 2022 report. A highlight was the comprehensive assessment of the carbon footprint across all our locations in Australia, New Zealand and Thailand. using the 2023 baseline footprint, Bapcor has adopted targets to reduce our emissions by 40% by 2030 and by 50% by 2033, driven by a renewable energy procurement strategy across our property portfolio and the decarbonisation of our fleet. Significant progress was also made across all areas of Bapcor’s ESG Strategy, including human rights and modern slavery, ethical procurement, waste management, sustainable packaging, diversity and inclusion, and community engagement.

The 2023 ESG report can be found on page 22.

Thanks

On behalf of my fellow Board members, I would like to thank the entire Bapcor team for their commitment and dedication to continue to deliver strong results and transform the business. I would also like to thank our shareholders, customers, suppliers and franchisees for your ongoing support.

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Margaret Haseltine Chair

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BAPCOR ANNuAl REPORT 2023

MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER‘S REPORT

Dear shareholders, and all stakeholders,

As Margie has commented, FY23 has been another successful year for Bapcor. Bapcor’s ability to perform and transform is a testament to the strength, collaboration and perseverance of our talented team members. Our team – supported by our suppliers, franchisees and customers – are critical to our success and I want to thank them for their contribution to Bapcor in FY2023.

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Group leadership team

Bapcor continued to strengthen its Group leadership team this year with the appointment of Merryl Dooley as Chief People and Culture Officer. Merryl is an experienced strategic executive who has held Chief People Officer (CPO) roles at Decjuba and Tabcorp Holdings limited.

We also welcomed Kristoff Keele as Chief Strategy and Transformation Officer, an experienced commercial leader who brings to Bapcor deep experience leading strategy development and execution of large-scale transformation projects. Kristoff was the Head of the Melbourne Office for ANZ’s Corporate Advisory practice and prior to that, EGM Transformation, Strategy and M&A at Toll Group.

Further, Tracey Wright joined the team as Executive General Manager – Specialist Networks. Previously, Tracey was the CEO of Club Assist, an organisation owned by a consortium of the Motoring Clubs of Australia that specialises in providing batteries for emergency roadside assistance, retail and wholesale channels.

deliver even more for our customers and drive additional value for shareholders.

BTB currently comprises of around 300 initiatives with a targeted goal of contributing at least $100M in Net EBIT in FY25 and enhancing Bapcor’s average Return on Invested Capital to greater than 12% by FY25, as well as improving our team member engagement.

Our Purpose

As we exited FY23, Bapcor introduced its Purpose – “Be there for what matters most”.

The purpose was launched following engagement with over 1,200 stakeholders, including team members, investors and customers. Bapcor’s purpose will further unify our team members, and drive performance and additional, sustainable growth and lead us to being a purpose-led organisation.

Looking forward

Operational performance

Bapcor achieved record revenues in FY23, with top-line growth and own brand sales improvements across every business segment, with highlights of the FY23 performance being:

› Over $2.0 billion in revenue, up 9.7% with growth in all segments.
› Significant reduction in our inventory, on a like for like basis by around $50 million.
› Delivered $125.3 million Pro Forma NPAT, in line with guidance.
› Improved the strength of our balance sheet, with positive cash generation and debt reduction.

Bapcor’s priority is to continue to perform operationally, as well as executing on the Better than Before transformation program. For FY24, Bapcor expects a solid underlying performance, subject to market conditions, and for the Better than Before program to deliver its, previously disclosed targeted FY24 goals. This outlook is based on solid demand in the Trade and NZ segments, albeit with a return to more normalised longer-term growth rates, as well as growth and consolidation opportunities in the Specialist Wholesale segment, particularly in the Truck market. The Retail segment is expected to face ongoing challenging market conditions and a more uncertain trading environment. Across Bapcor macroeconomic headwinds are expected due to ongoing temporary margin pressures from cost inflation and other external factors such as increasing payroll taxes, the investment in capability, depreciation and amortisation costs and higher interest.

› An improved safety performance, delivering a 32% decrease of the injury frequency rate.

These results were supported with two new stores in Trade, 11 new stores in Specialist Wholesale, 16 additional company owned stores in Retail and two additional stores in New Zealand. We also continued to improve our distribution supply rates from the Distribution Centre in Victoria (DCV) and achieved practical completion of the construction of the new Distribution Centre in Queensland.

Bapcor’s transformation

Bapcor announced its strategic transformation, Better Than Before (BTB) in November 2022, with the intent of transforming a good business into an excellent business. BTB is a multi-phase transformation to further optimise Bapcor’s potential and unleash the power of our people,

Thanks

Our team members continue to be the heart and soul of Bapcor. On behalf of Bapcor’s Board and the Group leadership team, I would like to sincerely thank all of them and their families for their ongoing commitment and support as we continue to perform and transform in FY24.

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Noel Meehan Managing Director and Chief Executive Officer

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BAPCOR ANNuAl REPORT 2023

BOARD OF DIRECTORS

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Margaret Haseltine Independent Non-executive Chair

BA, GradDipTchg(Sec), FAICD

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Mark Powell

Independent Non-executive Director

BSc (Hons), MSc, MBA, BApp. Theol, MA (Hons), GAICD, CMInstD (NZ)

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Noel Meehan Managing Director & Chief Executive Officer

BSc Hons, MAICD, FCPA, AMP (HBS)

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Brad Soller Independent Non-executive Director B.Com, B.Acc, M.Com, CA (SA)

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James Todd Independent Non-executive Director

BCom, llB, MAICD, F FIN

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Mark Bernhard Independent Non-executive Director

BBus (Acc), GAICD, MBA

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Kathryn Spargo Independent Non-executive Director llB (Hons), BA, FAICD

Refer to page 54 for biography details

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MANAGEMENT TEAM

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Noel Meehan

Managing Director & Chief Executive Officer

BSc Hons, MAICD, FCPA, AMP (HBS)

Stefan Camphausen

Chief Financial Officer

MBA, BA

Steve Drummy

Executive General Manager – Bapcor Trade BBus(Acc), MBA, FCPA, GAICD

Craig Magill Executive General Manager – Bapcor Specialist Wholesale

MC-ENT, GradDip Mgmt

Noel joined Bapcor in June 2020 as Chief Financial Officer, was appointed as Chief Executive Officer on 8 February 2022, and Managing Director and Chief Executive Officer on 1 September 2022.

Noel brings over 30 years’ of executive leadership experience, both in Australia and internationally, across the logistics and transport, mining services and winemaking industries. Prior to joining Bapcor, Noel has held the office of Chief Financial Officer at Toll Group, Treasury Wine Estates limited and Orica limited.

Noel is a non-executive director of Tye Soon limited (SGX:BFu), a listed Singapore company in which Bapcor owns 25%.

Stefan joined Bapcor in July 2022 as Chief Financial Officer.

Stefan has more than 20 years’ experience in Executive Finance roles across Asia Pacific, Europe and the Americas. Prior to joining Bapcor, Stefan held various other Chief Financial Officer positions, including at ASX-listed CIMIC Group and leading Asian-Pacific contracting service providers CPB Contractors and Thiess.

Steve joined Bapcor in February 2019 as Executive General Manager – SWG Engine Management (now part of the Specialist Wholesale segment) and was appointed Executive General Manager – Bapcor Trade in March 2021.

Steve has over 25 years’ experience in the manufacturing, pharmaceutical, industrial, wholesale, retail and health sectors. Prior to joining Bapcor, Steve held EGM and CFO roles in businesses including Australian unity, Sonepar, Hagemeyer, Blackwood’s and News limited.

Craig joined Bapcor in February 2012 as a General Manger in Burson Auto Parts, transitioning to lead Burson in 2014 and has held several senior/executive roles at Bapcor. Craig was appointed Executive General Manager – Bapcor Specialist Wholesale in April 2021.

Craig has had an extensive career in the automotive aftermarket industry spanning more than 25 years. Starting as a management cadet and working through most of the key operational and sales positions in aftermarket parts distributors. Prior to joining Bapcor, Craig was the General Manager of RAC’S (WA) automotive workshops, which was preceded by many years at Repco.

BAPCOR ANNuAl REPORT 2023

MANAGEMENT TEAM CONTINUED

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Tracey Wright Executive General Manager – Bapcor Specialist Networks BB (Marketing & HRM)

Tim Cockayne Executive General Manager – Bapcor Retail MBA, GAICD

Martin Storey Executive General Manager – Bapcor New Zealand

Abdul Jaafar

Executive General Manager – Supply Chain BCS, BSE, MBA

Tracey joined Bapcor in April 2023 in the new role of Executive General Manger – Specialist Networks.

Tracey has more than 20 years’ executive experience growing and transforming businesses and leading cultural change, both nationally and internationally. Prior to joining Bapcor, Tracey was the CEO of Club Assist, an organisation owned by a consortium of the Motoring Clubs of Australia that specialises in providing batteries to the automotive aftermarket for emergency roadside assistance, retail and wholesale channels. Tracey has worked in the renewable energy, FMCG, financial services and marketing/ advertising sectors.

Tim joined Bapcor in April 2019 as Executive General Manager – Bapcor Retail.

Tim has over 30 years of retail experience working across various sectors within specialty and big box retail. Tim has held senior roles for a number of national retail businesses including the Prouds Jewellery Group and Total Tools Pty ltd. Prior to joining Bapcor, Tim was CEO of the Total Tools franchise business where he undertook a massive growth program.

Martin joined BNT in September 2016 as BNT Group General Manager, and was promoted to Executive General Manager – Bapcor New Zealand in September 2018 to lead our New Zealand businesses.

Martin has over 30 years experience in sales and management roles in distribution and building industries both in New Zealand and internationally. Prior to joining Bapcor, Martin spent over 15 years at Fletcher Building, holding several senior sales and general management positions.

Abdul joined Bapcor in March 2022 as Executive General Manager – Supply Chain.

Abdul has over 20 years’ experience driving operational excellence and innovation within supply chains in Europe and Asia-Pacific, fostering strategic partnerships and leading high-performing teams. Prior to joining Bapcor, Abdul held roles at organisations including Fantastic Furniture, Greenlit Brands, Steinhoff International and Allied Express.

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Merryl Dooley Chief People and Culture Officer BA, MBA

Kristoff Keele

Chief Strategy and Transformation Officer BBusSys

Morris Lieberman

Chief Technology Officer BBus (Acc), CPA, GAICD, MACS

Merryl joined Bapcor in October 2022 as Chief People and Culture Officer.

Merryl is an experienced executive who has held Chief People Officer (CPO) roles for over 10 years across entertainment, retail and fashion. Prior to joining Bapcor, Merryl was Chief People and Sustainability Officer at Decjuba and prior to that was the CPO at Tabcorp Holdings limited for over 10 years where she had accountability for People, Culture, Safety and Communications.

Kristoff joined Bapcor in February 2023 as Chief Strategy and Transformation Officer.

Kristoff has 20 years of experience as a commercial leader and brings to Bapcor deep experience leading strategy development and execution of large-scale transformation projects. Through various roles internationally in private equity, advisory and corporate development, Kristoff also has extensive experience in M&A and global capital markets. Prior to joining Bapcor, Kristoff was the Head of the Melbourne Office for ANZ’s Corporate Advisory practice and prior to that was the EGM Transformation, Strategy and M&A at Toll Group where he led the execution of Toll Group’s strategy and transformation program.

Morris joined Bapcor in April 2022 as Chief Technology Officer and is responsible for Information Technology, Digital and Cybersecurity across the Bapcor Group.

Prior to joining Bapcor, Morris had a successful career in Australia, Germany and Singapore as Transformation Director and Global CIO at Nufarm, Direct to Consumer Director & CIO at Treasury Wine Estates as well as executive roles in Shell, Cadbury Schweppes and Fosters.

BAPCOR ANNuAl REPORT 2023

BAPCOR PURPOSE

BE THERE FOR WHAT MATTERS MOST

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We do the right thing... We are in it together... We give a damn... We get it done...
Ethical Supply Chain Environmental Good Governance Positively Impacting
& Procurement Sustainability & Supporting And Our Communities
Developing Team Members
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› Human Rights and › Net-Zero Emissions Modern Slavery › Waste Management
› Ethical Supply Chain › Packaging and › Ethical Procurement Circularity
› Health, Safety and Wellbeing
› Community Engagement
› Culture and › Fair Tax Development Contributions
› Diversity and Inclusion
› Privacy Protection

Area of Focus: Ethical Supply Chain & Procurement 24 Area of Focus: Environmental Sustainability 27 Area of Focus: Good Governance & Supporting and Developing Team Members 37 Area of Focus: Positively Impacting our Communities 42

BAPCOR ANNuAl REPORT 2023 23

AREA OF FOCUS:
ETHICAL SUPPLY CHAIN
& PROCUREMENT
For Bapcor, maintaining ethical and efficient practices across
the value chain reflects how our core values are embedded
within our organisation, rather than a matter of mere
compliance. By upholding ethical practices, Bapcor ensures
the integrity of our products, builds trust with stakeholders,
and contributes to a more responsible automotive
Key Topic Objective/Initiative FY22 FY23 Target Publish Modern Slavery Ongoing aftermarket industry.	SDG Alignment GRI Alignment 414-1
Statement
Human Rights and Modern Slavery An active Modern Slavery Working Group Ongoing
Participate in uN Global Compact Ongoing
Ethical Supply Chain and Procurement Develop and implement ESG-risk based procurement process AAAA modern slavery portal launched 126 suppliers commenced onboarding, of which 70 completed Actively increase # of suppliers onboarded
24

AREA OF FOCUS: ETHICAL SUPPLY CHAIN & PROCUREMENT

Human Rights and Modern Slavery

WHAT does this mean to us?

Bapcor recognises the importance of upholding human rights and actively opposes modern slavery in all its forms. To this end, we are committed to building improvements into our processes and sourcing practices that better identify and mitigate modern slavery risks. We expect the same of all team members, contractors, and suppliers of products and/or services to Bapcor.

HOW are we managing it?

Bapcor has a Human Rights Policy which sets out clear expectations and guidelines to uphold human rights in both our business operations and across our supply chain. Bapcor publishes an annual Modern Slavery Statement prepared in accordance with the Modern Slavery Act 2018 (Cth) and is an active participant in the uN Global Compact.

Bapcor is a founding member of the Australian Automotive Aftermarket Association (AAAA) Modern Slavery Consortium. This forum has established an industry-led approach for the development of a comprehensive and fit-for-purpose supplier Self-Assessment Questionnaire (SAQ) platform – encouraging transparency and accountability. In FY23, we focused on onboarding key strategic suppliers onto the platform, which resulted in 126 suppliers commencing the onboarding process, of which 70 suppliers completed the SAQ. Key strategic suppliers that completed self-assessments in FY23 are estimated to represent approximately 20% of average annualised total supplier volumes, and the SAQs will aid in better understanding our suppliers, identifying risk, and aligning them with our ethical requirements.

Ethical Supply Chain and Procurement

WHAT does this mean to us?

For Bapcor, ethical supply chain and procurement means ensuring the efficient and responsible distribution and delivery of our products. Bapcor focuses on building strong relationships with suppliers, promoting ethical practices, and maintaining a robust and reliable supply chain network. By effectively managing the supply chain, Bapcor can provide high-quality products to our customers while minimising risks and maintaining a competitive advantage.

HOW are we managing it?

To ensure that Bapcor and our supply partners are committed to conducting domestic and international business to our standard of integrity, Bapcor has in place an Ethical Supply Chain & Procurement (ESC/P) Policy which sets Bapcor’s expectations on suppliers’ compliance with laws, environmental sustainability, health and safety, and labour practices. In FY23, we updated our supplier service agreements and tender requirements to embed our commitment to sustainability including ESG-related prequalification measures on emissions, sustainable packaging, human rights and SAQ completion.

In FY23, education and training has been another key focus. Bapcor hosted modern slavery training sessions for our top 100 leaders to increase the knowledge base around modern slavery and ensure a mutual understanding of how Bapcor is approaching the topic of human rights due diligence. We also introduced a modern slavery online training module more broadly across the organisation to better equip Bapcor team members with the knowledge and tools required for identifying modern slavery risks.

BAPCOR ANNuAl REPORT 2023

CASE STUDY

DISTRIBUTION CENTRE QUEENSLAND

In line with Bapcor’s supply chain strategy, in March this year a new state-of-the-art distribution centre was officially opened in Redbank, Queensland, reflecting our commitment to continually enhance supply chain efficiencies and operational excellence. By centralising Bapcor’s storage and supply of goods, we are poised to achieve significant advantages in terms of streamlined operations, improved inventory management, and optimised logistics. This centralisation will lead to reduced lead times, better coordination between our brands, and enhanced customer service levels; ultimately

generating cost efficiencies, sustainability wins and bolstering our competitive edge. The investment in this new distribution centre reaffirms Bapcor’s dedication to continuously elevate our supply chain capabilities, further solidifying our position as a leader in the automotive aftermarket industry. In line with our ESG commitments, our new facility specifically focused on including environmentally friendly features such as a 1.8-megawatt solar panel system, 6 charging units for 12 electric vehicles and rainwater harvesting storage capabilities.

AREA OF FOCUS: ENVIRONMENTAL SUSTAINABILITY

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Environmental sustainability is a fundamental priority for Bapcor. We recognise that climate change and sustainability are a challenge for society as a whole, and we support the transition to a low-carbon economy.

We strive to minimise our environmental footprint by implementing sustainable practices throughout our operations, and as a key step in this pursuit. In FY23 Bapcor has established our current baseline GHG emissions, which has allowed us to set greenhouse gas (GHG) emissions reduction targets, in-line with our existing net-zero carbon ambition.

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SDG GRI
Key Topic Objective/Initiative FY22 FY23 Target Alignment Alignment
Reduce Scope 1 and Net Zero Roadmap 40% Reduction 305-1
Scope 2 emissions Emission with specific by FY30
305-2
in-line with targets ambition targets
50% Reduction
established established 305-3
Net-Zero by FY33
Emissions
Perform annual FY22 not 28,061 tn Ongoing
emissions assessment measured
for Scope 1 and 2 like-for-like
Increase renewable – Preliminary Finalise
electricity utilisation assessment renewable
completed energy
strategy
Assess and improve FY22 not 5,861 tn waste Mid-term 306-3
waste management measured generated improvements
306-4
processes and increase like-for-like (~80% of Au
levels of waste diverted and NZ sites)
Waste from landfill
47.2% diverted
Management
from landfill
(Au only)
–
Review and report on Inaugural Ongoing
packaging in-line with APCO Report
Australian Packaging and Action
Covenant Organisation Plan filed
Packaging (APCO)
and
Circularity
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BAPCOR ANNuAl REPORT 2023

AREA OF FOCUS: ENVIRONMENTAL SUSTAINABILITY CONTINUED

Net-Zero Emissions

across our operations in Australia, New Zealand and Thailand, encompassing our business segments of Trade, Specialist Wholesale, Retail and New Zealand. Several improvements have been integrated into this year’s foot printing methodology, including improved capture of Bapcor’s operating sites and fleet data, as well as greater alignment with best practice emissions accounting methodologies, such as the GHG Protocol[1] and Science-Based Targets initiative (SBTi)[2] . These improvements reflect our commitment to accuracy and transparency in measuring our environmental impact, and while we also show the estimates from our FY22 reports in the below table, this is therefore not an appropriate like-for-like comparator.

WHAT this means to Bapcor?

Bapcor recognises the importance of reducing GHG emissions and takes responsibility for its contribution to the collective efforts required to combat the impacts of climate change. We are committed to monitoring and managing emissions across our operations, with a primary focus on scope 1 and 2 emissions in the short-term. We appreciate the relevance of continuing to implement energy efficiency solutions, supported by instruments such as renewable energy certificates as appropriate, and practices across the business through energy saving technologies and behaviour change and we are committed to increasing the share of renewables in our energy mix.

In-line with our environmental commitments, we are also committed to measuring and reducing our scope 3 emissions in pursuit of a net-zero future. While Bapcor recognises the complexity of our value chain and the resulting challenges in capturing accurate scope 3 emissions data, we are striving to improve our data capture and quality to align with best practice methodology. Over time, this ongoing effort will ensure we have robust data around our scope 3 emissions sources, enabling us to develop a comprehensive and informed approach towards scope 3 emissions reductions.

HOW are we managing it?

To manage and reduce our GHG emissions in line with best practice and science-based targets, Bapcor has developed a robust GHG emissions baseline to ensure transparency of relevant emissions sources.

After capturing an initial estimate of Bapcor’s Australian scope 1 and 2 emissions footprint in FY22, this work was expanded in FY23 to now measure Bapcor’s scope 1 and scope 2 emissions globally. Our global operations comprise approximately 600 company managed locations

GHG emissions – FY22 and FY23 comparison

Emissions	FY2022 FY2023 Key Reporting
Scope3	(tco2e)4 (tco2e) Improvements
Scope 14	9,394 14,250 › Primarily fuel emissions related to operating our fleet of c. 2,000 vehicles. › Inclusion of New Zealand and Thailand. › Inclusion of fugitive emissions. › Improved collection of mobile fuel data from vehicle fleet.
Scope 2	– 13,811 › Primarily electricity emissions related to operating
(Market-based)	c. 600 company-managed locations. › Calculation of market-based scope 2 emissions in FY23, in-line with best practice.
Scope 2	12,671 14,071 › Primarily electricity emissions related to operating
(Location-based)	c. 600 company-managed locations. › Inclusion of New Zealand and Thailand. › Improved site list and collection of primary electricity data. › use of New Zealand specific emission factors.

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(1) https://ghgprotocol.org/standards.

(2) https://sciencebasedtargets.org/resources/files/SBTi-criteria.pdf.

(3) location-based method: calculates GHG emissions based on the average emissions intensity of grids on which energy consumption occurs. Market-based method: reflects GHG emissions from electricity that companies have purposefully chosen (or their lack of choice). (4) Initial estimate; Au only.

CASE STUDY FLEET MANAGEMENT AND CARBON OFFSETTING

leveraging technology, enhancing safety, and promoting sustainability.

Bapcor is actively pursuing various initiatives to optimise its vehicle fleet operations. The installation of telematics in Bapcor’s vehicles will continue in FY24 and will enable comprehensive operational monitoring and facilitate the rollout of a Driver Safety program. Moreover, a fleet procurement analysis will allow us to identify opportunities to replace aging vehicles with safer and newer models, prioritising the acquisition of more sustainable vehicles, evidencing Bapcor’s commitment to

Bapcor has also continued its engagement with Greenfleet, purchasing 6,981 credits to offset 50% of our fleet emissions (compared to 13,963 gross tCO2e). Since 2019, through this partnership Bapcor has offset a total of 39,778 tonnes of carbon emissions to fund biodiverse native forest restoration projects in Australia.

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|||
|---|---|
|Fleet Emissions|
|FY22|FY23|
|(tCO2e):|
|9,013*|13,963|

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FY22 numbers do not include New Zealand or Thailand, which accounted for 1664tCO2e and 130tCO2e in FY23 respectively.

Scope 1 & 2 emissions – FY22 and FY23 comparison

In our FY23 emissions calculations, we have calculated both market-based and location-based scope 2 emissions as per the GHG Protocol’s guidelines. Our market-based scope 2 emissions highlight the positive impact of the renewable electricity we purchased in the first half of 2023 for our new Distribution Centre Queensland. As we continue to increase procuring renewable electricity for our sites, these market-based scope 2 emissions will further decrease, contributing to our overall emissions reduction efforts.

using this FY23 GHG Protocol-aligned data as a baseline, we have prepared our inaugural carbon roadmap for scope 1 and 2 emissions, resulting in the following science-based GHG reduction targets:

› Bapcor commits to reduce scope 1 & 2 emissions by 40% by FY30, from an FY23 baseline; and
› Bapcor commits to reduce scope 1 & 2 emissions by 50% by FY33, from an FY23 baseline.

Please refer to the ‘Our Decarbonisation Roadmap’ deep dive on page 30 for additional information.

BAPCOR ANNuAl REPORT 2023

AREA OF FOCUS: ENVIRONMENTAL SUSTAINABILITY CONTINUED

Our Decarbonisation Roadmap

Building on the foundations that we established in FY22, our focus for FY23 was to improve the accuracy of our data and methodologies and extend the assessment of our GHG emissions to include the operations in New Zealand and Thailand. Based on this global assessment, Bapcor also sought to set decarbonisation targets, aligned with the SBTi guidelines, and supported by a roadmap of actions.

In line with our commitment to complete an emissions reduction roadmap in FY23, the following sections offer a deep dive into Bapcor’s decarbonisation journey and key milestones.

GHG emissions

By reviewing our FY22 GHG footprint, Bapcor gained valuable insight to guide our approach for FY23. In the process of extending our coverage to include all our operations in Australia, New Zealand, and Thailand, we have made relevant improvements for data completeness with a primary focus on our scope 1 and 2 emissions. These enhancements included improving the alignment with established frameworks such as the GHG Protocol and streamlining our data collection procedures, reducing redundancy and our reliance on estimations, which have improved our data quality and allow for more actionable insights from the data gathered.

The Decarbonisation Roadmap

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1 2
GHG Setting of
Footprint Decarbonisation
Targets
GHG footprint Preliminary
calculation target
and profiling modelling
5 4 3
Develop reduction Identify
scenarios to assess emissions Develop “BAU”
target feasibility reduction levers (business as usual)
6
Finalise
decarbonisation
targets
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Bapcor Scope 1 & 2 emissions by scope

Key emissions insights

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16,000
14,250 13,811 14,071
14,000 12,671
12,000
10,000 9,394
8,000
6,000
4,000
2,000
0
Scope 1 Scope 2 Scope 2
(Market-based) (Location-based)
FY22 (indicative only, as not measured FY23
like-for-like)
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Given that the majority of Bapcor’s operations are based in Australia, most emissions also originate from our Australian activities, followed by New Zealand and lastly our operations in Thailand. Scope 1 emissions include Bapcor’s fleet fuel consumption, stationary fuel consumption as well as a small amount of refrigerant emissions from air conditioning units, so-called fugitive emissions. Amongst this, Bapcor’s fleet fuel consumption emerged as the most substantial contributor, accounting for 49.8% of the total scope 1 and 2 emissions, with the majority originating from Bapcor’s largest segment, Trade. Scope 2 emissions from property electricity consumption was the second largest emissions contributor, accounting for 49.2% of the combined scope 1 and 2 emissions. The scope 1 and 2 emissions data collated was then used to develop the science-based reduction targets for Bapcor.

Emissions reduction pathway modelling

as well as current challenges and plans moving forward. Consolidated, this information served as important inputs for the development of the potential scenario pathways to achieve our science-based targets.

With the solid foundations and improvements in FY23 documenting our GHG emissions and considering the science-based reduction targets, Bapcor proceeded towards a high-level assessment of potential reduction levers. These reduction levers focused on the largest emissions sources: fleet emissions and property electricity consumption. Key internal stakeholders were engaged to gain insights regarding the status of renewables utilisation at Bapcor sites and the adoption of low emissions vehicles,

Various potential reduction scenarios were formulated against a “business-as-usual” baseline, each leveraging on reducing fleet emissions and property energy consumption to varying degrees, with the aim of establishing possible approaches to finalising targets:

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Key Modelling
No. Scenario Features Assumptions
1 Business-as-usual Inclusion of › Projections assume 5% annual growth in Bapcor’s activities.
(BAu) grid-greening › Grid emissions factors decarbonise in line with the World
No other Economic Outlook (WEO) stated policy scenario projections [5] .
changes › Emission factors for consumption of refrigerants and combusting
fuel emissions will not change to 2033.
2 Science-based Movement of › Projections assume 5% annual growth in Bapcor’s activities.
Target sites to renewable › Grid emissions factors decarbonise in line with the World
Achievement energy + pursuit Economic Outlook (WEO) stated policy scenario projections.
of fleet
decarbonisation › Emission factors for refrigerants and combusting fuel emissions
will not change to 2033.
› No change to renewable electricity portion for the first two years.
Afterwards, gradually transition electricity to renewable sources
at an average rate of 12% per year.
› No change to the fleet for the first five years, then transition of cars
and vans to grid powered electric vehicles at a rate of 20% per year.
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(5) https://www.iea.org/reports/world-energy-outlook-2022.

BAPCOR ANNuAl REPORT 2023

AREA OF FOCUS: ENVIRONMENTAL SUSTAINABILITY CONTINUED

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Scenario 1: Business as usual
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40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33
Scope 1 fleet Scope 1 remainder Scope 2 Targets
under the business-as-usual (BAu) scenario, emissions emissions is necessary to achieve science aligned targets.
increase significantly between FY23 and FY33 due to the This prompted an analysis of the most effective approach
growth assumption applied. It is evident that, beyond the to lower Bapcor’s emissions.
impacts of grid decarbonisation, a reduction in GHG
SBT Achievement Scenario – 40% reduction by FY30 and 50% reduction by FY33
30,000
25,000
20,000
15,000
10,000
5,000
0
FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33
Scope 1 fleet Scope 1 remainder Scope 2 Scope 2 EVs Targets
e)GHG Emissions (tCO2
e)GHG Emissions (tCO2
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under the business-as-usual (BAu) scenario, emissions increase significantly between FY23 and FY33 due to the growth assumption applied. It is evident that, beyond the impacts of grid decarbonisation, a reduction in GHG

SBT Achievement Scenario – 40% reduction by FY30 and 50% reduction by FY33

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The two levers involving movement of sites to renewable energy and fleet decarbonisation were assessed individually and in combination, alongside the insights gained through consultation with key internal stakeholders. The “Science-based Target Achievement” scenario revealed that both levers would be essential, as neither would likely independently meet Bapcor’s reduction targets. This scenario includes the gradual implementation of renewable energy at Bapcor sites, aiming for all sites to be powered by renewable energy, including onsite generation and procured renewables as guided by our renewable energy strategy, and supported by instruments such as renewable energy certificates as appropriate.

Additionally, there will be a shift to a lower emissions fleet. The scenario depicts an initial growth in emissions due to the business growth assumption and implementation time required.

The development of these scenarios and the assessment of reduction levers have enabled us to identify high-level pathways that will guide us on our emissions reduction journey. This approach is instrumental in framing the next steps to effect meaningful change, including the implementation of renewable energy solutions at our sites and the gradual transition of our fleet where appropriate technology is available and feasible.

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Target setting

Based on the solid foundations and improvements in FY23 documenting our GHG emissions and the emissions reduction pathway modelling, overall reduction targets have been set. These targets include Bapcor’s scope 1 and 2 emissions and have been established following the SBTi requirements, with FY23 as the baseline year:

Bapcor commits to reduce scope 1 & 2 emissions by 40% by FY30, from an FY23 baseline; and

Transitioning to a net zero future will require close attention to, and monitoring of, our emissions and their impact across our value chain. As part of this commitment, we will focus on improving our total emissions through enhanced data collection systems, working with our supply partners, and embracing innovative low carbon technologies.

Our inaugural decarbonisation roadmap provides Bapcor with a solid foundation to progress our ESG commitments. Moving forward, we will continue to explore and implement solutions that can accelerate our emissions reduction strategy and align with our net zero ambition.

Bapcor commits to reduce scope 1 & 2 emissions by 50% by FY33, from an FY23 baseline.

BAPCOR ANNuAl REPORT 2023

AREA OF FOCUS: ENVIRONMENTAL SUSTAINABILITY CONTINUED

Waste Management

WHAT does this mean to us?

Bapcor aims to minimise waste generation and promote waste management practices that prioritise recycling, reuse, and responsible disposal. By adopting waste reduction strategies and collaborating with suppliers and customers, Bapcor strives to minimise the environmental impact associated with waste related to our products and operations.

HOW are we managing it?

During FY23, Bapcor engaged more closely with our preferred waste management provider. We took action to commence consolidating management of waste services by expanding our provider’s mandate to encompass all Bapcor sites, which will continue in FY24. This included completing a series of site-specific waste audits, which further supported developing segment – and site-specific waste management plans.

In FY23, we also established our first Bapcor-wide baseline to measure how much of our waste is diverted from landfill. We remain dedicated to continuous improvement and will explore innovative waste management solutions to contribute to a greener future for our organization and beyond.

CASE STUDY DISTRIBUTION CENTRE VICTORIA (DCV)

In FY23, Bapcor demonstrated its commitment to enhancing waste management practices with a particular focus on the Distribution Centre in Victoria (DCV). These efforts included the introduction of a new cardboard compactor, improved waste station set-ups with detailed signage, and improvements to our induction and weekly training content. We continue to work on streamlining the number and timing of collections and have increased efforts with our segregation of soft plastics. Other important sustainability measures include exchanging plastic ‘airfil’

pillows to a paper void fill method and replacing all unrecyclable black pallet wrapping to a natural wrapping. A pallet repair station was also set up this year, and for pallets that cannot be repaired these are now stacked into a semi-trailer and collected by a specialist provider to be turned into recycled timber packaging or landscaping mulch. Valuable insights gained from the DCV’s waste management initiatives have proven instrumental in establishing our practices at the Distribution Centre Queensland.

Packaging and Circularity

WHAT does this mean to us?

Bapcor acknowledges the importance of sustainable packaging and circularity in reducing waste and conserving resources. We are exploring updated packaging solutions that are recyclable, reusable, or made from sustainable materials. Bapcor also encourages the adoption of circular economy principles, aiming to extend product lifecycles, promote repair and remanufacturing, and reduce overall resource consumption.

HOW are we managing it?

In FY23, Bapcor established a Sustainable Packaging Working Group (SPWG). Through this forum, we have developed an overarching Sustainable Packaging Strategy that includes goals and targets which align with APCO’s Sustainable Packaging Guidelines.

The SPWG is also tasked with overseeing the design and development of a master product list, developing packaging compliance documentation for use with our packaging suppliers and developing a Packaging Recyclability Evaluation Portal (PREP) training program and PREP usage guidelines.

Bapcor has initiated its plans to phase out problematic and unnecessary single-use plastic items, i.e. lightweight plastic shopping bags and rigid polyvinyl chloride (PVC) packaging, with non-woven reusable shopping bags becoming the only choice available.

CASE STUDY RACEWORKS PILOT PROGRAM

Bapcor has partnered with an external packaging design agency to support the development and implementation of sustainable packaging processes across the business. A project requiring new retail packaging solutions for our Raceworks brand was used as a pilot to test the new process and tools in a live environment. Following an audit of current packaging formats across the Raceworks portfolio, we identified sample products for the new development process. These products were taken through ideation and concept development stages whereby a range of packaging concepts were designed using less material, mono-layer components and new print strategies to achieve sustainability compliance, optimise the supply chain and improve retail performance. The final concepts were prototyped, and indicative specifications shared with our packaging suppliers. The new Raceworks packaging will wear Australian Recycling labels (ARls).

During FY23 we also released our inaugural Australian Packaging Covenant Organisation (APCO) Annual Report and Action Plan for the FY22 reporting period demonstrating our commitment to a circular economy for packaging.

BAPCOR ANNuAl REPORT 2023

CASE STUDY

BATTERIES

In FY23 Bapcor achieved a significant milestone by selling over 500,000 batteries across all business units. Notably, over 90% of these batteries were purchased to replace failed ones. Since failed automotive batteries are fully recyclable and in-line with our commitment to sustainability, Bapcor has established the industry-leading used lead Acid Battery (ulAB) recycling and collection program, which has received accreditation for its nation-wide

solution. This program ensures the responsible collection and recycling of lead acid batteries. Remarkably, 97% of each battery will be recycled into valuable resources such as lead ingots, polypropylene pallets, and sodium sulphate crystals. By actively engaging in battery recycling through this partnership, Bapcor aims to drive a positive environmental impact through programs it can actively control.

AREA OF FOCUS:

GOOD GOVERNANCE & SUPPORTING AND DEVELOPING TEAM MEMBERS

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Supporting and developing our team members is a priority at Bapcor. We are dedicated to living our values and creating a safe, engaging, and inclusive work environment where team members can thrive personally and professionally. We invest in their growth through training, mentoring, and providing opportunities for advancement.

By nurturing our team members, we foster a culture of collaboration, engagement, and continuous learning, which drives our collective success.

Our team member engagement is embedded in a commitment to strong corporate governance practices to ensure transparency, accountability, and ethical conduct. The company adheres to relevant laws, regulations, and industry standards and regularly reviews its governance framework. Bapcor values integrity, honesty, and responsible decision-making in all aspects of its operations, fostering trust among our stakeholders.

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SDG GRI
Key Topic Objective/Initiative FY22 FY23 Target Alignment Alignment
Continue to invest in 20.58 TRIFR 13.99 TRIFR Further 403-9
and develop safety 7.18 lTIFR 5.13 lTIFR Improvement
processes, systems, in FY24
and education to
Health, reduce TRIFR
Safety and
Wellbeing
Achieve a positive and 3 [rd] quartile 4 [th] quartile 2 [nd] Quartile
open culture and a 2 [nd] by FY25
quartile employee
engagement score
Culture and (utilising the
Development Organisational Health
Index, or OHI, tool)
Reduce total turnover 39.3% 39.0% Further
across the Group Improvement
in FY24
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BAPCOR ANNuAl REPORT 2023

AREA OF FOCUS: GOOD GOVERNANCE & SUPPORTING AND DEVELOPING TEAM MEMBERS CONTINUED

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SDG GRI
Key Topic Objective/Initiative FY22 FY23 Target Alignment Alignment
Maintain an active Ongoing 405-1
Diversity and Inclusion
Working Group
Diversity and
Inclusion Maintain a women’s Ongoing
mentoring program
launch inclusive – – FY24
leadership training
for senior leaders
and managers
Implement initiatives 26% Female 28% Female 35% FY26
to improve gender, age, Team Team
ethnicity, and ability Members Members
diversity across the
29% New 32% New 50% FY26
Bapcor Group
Female Female
Hires Hires
24% Female 27% Female 35% FY26
Internal Internal
Promotions Promotions
15% Female 16% Female 35% FY26
People People
leaders leaders
17% GlT and 30% GlT and 35% FY26
Direct reports Direct reports
Ensure privacy for 0 Recorded 0 Recorded Ongoing
personal information Data Breaches Data Breaches
Privacy
Protection
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Health, Safety and Wellbeing

WHAT does this mean to us?

The Health, Safety and Wellbeing (HSW) of our team members continues to be of paramount importance for Bapcor. To ensure it remains front of mind for all team members, we continue to invest in resourcing, systems, and training.

Culture and Development

WHAT does this mean to us

Bapcor is committed to fostering a vibrant, purpose-led culture. With a large and distributed front-line workforce, the attraction, growth, and retention of quality talent is a key priority. As we ramped up our focus on creating a ‘One Bapcor’ culture, in FY23 we have invested in the development and alignment of our senior leaders to lead ‘the Bapcor way’.

HOW are we managing it?

Bapcor prioritises the holistic integration of occupational health and safety into its operations. This is achieved through the implementation of consistent and simplified systems and processes, fostering a culture of accountability. Following an external audit in FY22, Bapcor’s commitment to HSW was recognised with increased dedicated safety resources to support a team dedicated to HSW.

In FY23, Bapcor made significant strides in strengthening our commitment to HSW across all sites. As part of our proactive management approach, safety plans were implemented for all business segments to drive segment-specific strategies to safeguard our workforce. Segment Safety Plans include a comprehensive set of objectives, including compliance-based training, heightened first aid reporting, and the adoption of an integrated health management system – Donesafe. These initiatives have contributed significantly to a safer and healthier work environment for our employees and we recorded a 32% reduction in the TRIFR.

To further enhance our understanding of psychological risk in the workplace, Bapcor engaged a specialist service provider in FY23 to conduct a Psychological Risk Assessment. Findings and recommendations from the risk assessment are currently under review and will inform the implementation of solutions and control measures.

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35
30
25
20
15
10
5
0
FY20 FY21 FY22 FY23
TRIFR LTIFR
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HOW are we managing it?

At Bapcor, we prioritise a ‘One Bapcor’ approach in leading our 5,500+ team members. To do this, we have established the ‘Bapcor Pit-Crew’ comprising our 100 senior leaders; we are investing in their development, growth, and well-being with a commitment to build strong leaders and align culture.

We are currently in the process of developing a learning and Development framework, which will serve as a whole-of-organisation approach to career development. This framework aims to provide clear career pathways for employees while fostering a culture of continuous growth and development. Initially, the focus will be on developing front line leaders, aligning their skills and competencies with ‘the Bapcor Way’. Over time, the framework will expand to encompass a broader range of roles and responsibilities, ensuring that career and learning pathways are well-aligned.

Bapcor ensures training for team members at various levels covering important topics including Anti-Bribery and Corruption, IT Security Awareness, Chain of Responsibility-Zero Harm Course, understanding Workplace Mental Health and Wellbeing for people leaders and team members, Inclusive leadership, and Modern Slavery training.

In FY23, we also rolled out a digital ‘manager essentials’ program to 1,000 Bapcor people leaders which focused on building essential management skills to lead our large and diverse front line.

BAPCOR ANNuAl REPORT 2023

AREA OF FOCUS: GOOD GOVERNANCE & SUPPORTING AND DEVELOPING TEAM MEMBERS CONTINUED

CASE STUDY EXECUTIVE HEALTH ASSESSMENTS

In FY23, Bapcor partnered with a specialist Health Care provider to offer a proactive health assessment to the Bapcor Pit Crew, providing insights in an individualised report to focus areas of their health and wellbeing,

Between launch of the program and the end of FY23, 54 of Bapcor’s senior leaders across Australia and New Zealand participated. This supports our leaders to model a holistic approach to wellbeing and be proactive in maintaining their health.

Diversity and Inclusion

Privacy Protection

WHAT does this mean to us?

Bapcor embraces diversity, equity, and inclusion as integral components of our organizational culture. We recognise that diverse perspectives and experiences contribute to innovation and better decision-making, and we strive to create an inclusive workplace where individuals are valued and respected.

HOW are we managing it?

Moving forward, Bapcor will further enhance its inclusion and diversity strategy to support a holistic approach to inclusion in the workplace. As part of this work, our existing gender diversity measures will be revisited to ensure they are appropriately aligned.

While this work is being undertaken, Bapcor has continued with several key inclusion initiatives, namely:

› Continuing the Ignition Program – mentoring for women.
› launch of new policies – Parental leave (update), domestic and Family Violence Policy (new), and a new leave Policy (including Purchased leave and other flexible leave days).
› “Bapday” – Annual birthday leave provided to all team members.

WHAT this means to Bapcor?

Bapcor recognises the importance of protecting the privacy and personal information of our stakeholders. We implement robust data protection measures and comply with applicable privacy laws and regulations. Bapcor maintains transparency regarding data handling practices and is committed to safeguarding the privacy rights of our customers, employees, and other stakeholders.

HOW are we managing it?

Bapcor maintains a proactive approach to privacy protection by conducting regular internal assessments, reviews, and audits. These evaluations aim to continually enhance our processes, policies, and technology to safeguard sensitive information. Bapcor is in the process of implementing the next phase of its cyber program comprising multiple initiatives to establish and improve cyber controls, governance processes, policies and technologies aimed at protecting Bapcor’s data, and IT systems from cyber threats.

The cyber program is based on the National Institute of Standards and Technology (NIST) Cybersecurity Framework and its key governance processes include risk assessment, threat detection, incident response, vulnerability management, and security awareness training.

The main objective of the program is to protect the confidentiality, integrity, and availability of data, particularly privacy and sensitive information and ensure legal and regulatory compliance.

CASE STUDY IGNITION WOMEN’S MENTORING PROGRAM

In FY23, Bapcor partnered with an expert service provider in women’s professional development to provide a series of both personal and professional development webinars for women. 25 women from across the organisation were involved in the program and 15 internal senior leaders volunteered

and participated as mentors. Those who completed the program noted that they found new self-confidence in themselves and a greater understanding of the business. This program will run again in FY24 and will be targeted at emerging female leaders.

BAPCOR ANNuAl REPORT 2023

AREA OF FOCUS: POSITIVELY IMPACTING OUR COMMUNITIES

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Bapcor collaborates with local organisations and stakeholders to address community needs and contribute to the overall well-being of society. This includes our commitment to pay our fair share of tax in all the jurisdictions in which we operate.

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SDG GRI
Key Topic Objective/Initiative FY22 FY23 Target Alignment Alignment
Bapcor stores to not $728 k in Ongoing 413-1
support at least two available community
community initiatives investment
in their local area
Community
Engagement
Pay fair share of tax $57.5M $53.0M Ongoing 207-1
across jurisdictions income income
207-2
in which we operate tax paid * tax paid
Fair Tax
Contributions
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Significant other tax contributions have been made. i.e. Federal, State and local taxes and duties, pay-as-you-go withholdings and indirect taxes (GST, VAT).

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CASE STUDY BAPCOR’S RESPONSE TO CYCLONE GABRIELLE

Bapcor New Zealand, through its “Blue Army Program” promptly coordinated a Group wide approach responding to Cyclone Gabrielle’s impact on the North Island. Bapcor’s emergency plan focused on immediate support and relief efforts in areas where Bapcor has operations: Hawkes Bay and Gisborne. We had a three-staged response to the devastation:

› Give A little: We launched a Bapcor Give a little webpage to raise funds for essential supplies, impacted customers, and those in need. Generous contributions enabled the purchase of supplies and support from the Community Grants Squad.

› Dry Food Drive: The Blue Army collected and donated dry food items, supplementing support with essentials such as toilet paper, bottled water, hygiene products, and more. Volunteers assisted in packing and distribution from our Auckland and Christchurch locations.

› linen and Towels: Spare bedding and towels were gathered, packed in clean plastic bin-liners, and transported to distribution centres in Auckland and Christchurch to meet the urgent need for such items.

Through our collective efforts, the Blue Army demonstrated unity and compassion, providing immediate support to those affected by Cyclone Gabrielle. In total employees and business units across the company generously contributed over $56,000 towards relief efforts.

BAPCOR ANNuAl REPORT 2023

AREA OF FOCUS: POSITIVELY IMPACTING OUR COMMUNITIES CONTINUED

Community Engagement

Fair Tax Contributions

WHAT does this mean to us?

At Bapcor we are committed to actively serving and contributing to the local communities in which we operate. We actively engage in community investment initiatives that support and strengthen local communities. We aim to leave a lasting and meaningful legacy with each location we operate.

HOW are we managing it?

In FY23, stores across all Bapcor businesses segments continued to support the local communities in which they operate including social, charitable, and sporting initiatives. In total, we contributed $728,000 towards community initiatives, as well as significant stock donations; all of which are a testament to our foothold in our local communities.

WHAT does this mean to us?

Bapcor has a strong commitment to tax risk management and corporate governance. Bapcor is committed to a high standard of integrity and acts as a responsible taxpayer. under Bapcor’s Tax Governance Policy, the Board has approved the following principles:

› A low tolerance for tax risk;
› Not sanction or support any activity that has as its principal function the avoidance of tax; and
› To conduct our tax affairs in compliance with the laws of all jurisdictions in which Bapcor operates.

HOW are we managing it?

As outlined in Bapcor’s annual Tax Transparency Report, the majority of Bapcor’s taxes are paid in Australia and New Zealand, being the areas where most of Bapcor’s business operations are located. Bapcor’s overall tax payments consist of income tax on the one hand, and various other tax contributions on the other hand. For income tax, Bapcor paid $53M in FY23 which is on a similar scale to FY22. With regards to other tax contributions, Bapcor pays various Federal, State and local taxes, duties, levies and charges, including fringe benefits tax, payroll tax and stamp duty. Bapcor also collects and pays taxes on behalf of others including taxes on employee earnings (PAYG/PAYE withholding), indirect taxes such as goods and services tax (GST) and value added tax (VAT). In total, all of these other tax contributions have amounted to more than $150M annually in the prior years.

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DIRECTORS’ REPORT

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BAPCOR ANNuAl REPORT 2023

30 June 2023

DIRECTORS’ REPORT

The Directors present their report, together with the financial statements, on the consolidated entity (‘consolidated entity’) consisting of Bapcor Limited (‘company’ or ‘parent entity’) and the entities it controlled at the end of, or during, the year ended 30 June 2023 (‘FY23’).

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:

Margaret Haseltine	Independent, Non‑Executive Chair
Noel Meehan	Managing Director (appointed 1 September 2022) and Chief Executive Officer
Mark Bernhard	Independent, Non‑Executive Director
Mark Powell	Independent, Non‑Executive Director
Brad Soller	Independent, Non‑Executive Director (appointed 1 November 2022)
Kathryn Spargo	Independent, Non‑Executive Director (appointed 1 March 2023)
James Todd	Independent, Non‑Executive Director
Therese Ryan	Independent, Non‑Executive Director (retired 30 September 2022)
Jennifer Macdonald	Independent, Non‑Executive Director (retired 19 October 2022)

Principal activities

The principal activities of Bapcor were the sale and distribution of vehicle parts, accessories, automotive equipment, service and solutions.

Bapcor is one of the largest suppliers of vehicle parts, accessories, equipment, service and solutions in Asia Pacific with an operational network covering c. 1,000 locations and employing c. 5,500 team members.

Significant changes in the state of affairs

At the Bapcor Investor Day held on 22 November 2022, Bapcor announced the ‘Better than Before’ program – a strategic multi‑year transformation program to enable additional, sustainable growth with a goal of at least $100M net earnings before interest and tax benefit by FY25[1] , a further improved return on invested capital to greater than 12% (3 year simple average of FY23 – FY25) and an enhanced employee engagement. During FY23, Bapcor completed the diagnostics and planning phases and moved into implementation and execution of this ambitious program.

During FY23, the delivery of a state‑of‑the‑art distribution centre in Redbank, Queensland continued with construction of the building achieving practical completion early in 2H23 and the official opening held on 2 March. Installation of the Goods to Person (GTP) system commenced in 2H23. The new facility will consolidate seven existing distribution centres into one.

There were no other significant changes in the state of affairs of the consolidated entity during the financial year.

Dividends

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

Dividends Fully franked dividends paid during the financial year were as follows:
$M	$M	CENTS PER SHARE
Final dividend FY22 on 16 September 2022	39.0	11.5
Interim dividend FY23 on 17 March 2023	35.6	10.5

The Board has declared a final dividend in respect of FY23 of 11.5 cents per share, fully franked. The final dividend will be paid on 19 September 2023 to shareholders registered on 31 August 2023.

The final dividend takes the total dividends declared in relation to FY23 to 22.0 cents per share, fully franked, representing an increase of dividends paid of 2.3% compared to the prior financial year. Dividends paid and declared in relation to FY23 represent 59.6% of pro‑forma net profit after tax.

(1) Discrete Better than Before program target benefits do not indicate/guide on overall FY25 financial outcomes, which are subject to business‑as‑usual trading and general market conditions.

DIRECTORS’ REPORT continued

Review of operations

In FY23, Bapcor has delivered record revenue of $2.0B, up 9.7% on FY22, with growth across all segments demonstrating the resilience of Bapcor’s diversified business model. While Bapcor was subject to temporary margin compression due to input cost inflation and capability build in FY23, operating margins in all Trade and Wholesale segments improved in 2H23 versus 1H23, with only the Retail market facing ongoing macro headwinds. Pro‑forma EBITDA of $298.6M was up 2.4% on FY23. Higher finance costs due to higher interest rates and a higher average debt balance, as well as higher depreciation and amortisation resulted in a 4.8% decline in Pro‑forma NPAT to $125.3M, in line with market guidance.

Revenue growth was supported by continued network expansion with 2 new stores in Trade, 11 new stores in Specialist Wholesale, 16 additional company owned stores in Retail and 2 additional stores in New Zealand (all new location numbers including acquisitions and franchise conversions, and excluding effects from network consolidations). Concurrently, Bapcor continued to improve its distribution supply rates from the Distribution Centre Victoria (‘DCV’) and achieved practical completion of the new Distribution Centre Queensland (‘DCQ’), including commencing the installation of the Good to Person system and transitioning initial operations into DCQ at the end of FY23.

During the year, the Better than Before transformation progressed significantly, and $19.9M of one‑off operating costs relating to the program were incurred, which is in line with previously communicated targets. These costs include planning, implementation and execution cost associated with the multi‑year transformation program.

Statutory (versus FY22):

› Revenue increased by 9.7% from $1,842M to $2,021M
› Statutory earnings before interest, taxes, depreciation and amortisation (‘EBITDA’) decreased by 4.3% to $274.0M
› Statutory NPAT decreased by 15.4% to $106.4M and statutory earnings per share (‘EPS’) decreased by 15.4% to 31.36 cents per share (‘cps’)

Pro‑forma (versus FY22):

› Revenue increased by 9.7% from $1,842M to $2,021M
› Pro‑forma EBITDA increased by 2.4% to $298.6M
› Pro‑forma NPAT decreased by 4.8% to $125.3M and pro‑forma EPS decreased by 4.8% to 36.92 cps

Net debt:

› Pro‑forma net debt at 30 June 2023 was $251.7M representing a leverage ratio of 1.12X (Pro‑forma net debt: last twelve months pro‑forma EBITDA[1] ), which is an improvement compared to pro‑forma net debt of $262.0M and a leverage ratio of 1.18X at 30 June 2022.

The tables below, which are subject to rounding, reconcile the FY23 and FY22 pro‑forma results to the statutory results.

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CONSOLIDATED
$M NOTE FY23 FY22
Statutory NPAT 1 106.4 125.8
DC consolidations 2 7.0 8.4
Transformation activities 3 19.9 –
Tax adjustment 4 (8.0) (2.5)
Pro‑forma NPAT 125.3 131.6
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Note 1: NPAT attributable to members of Bapcor Limited.

Note 2: DC consolidations relate to the significant transition costs incurred in relation to DCV and DCQ. Note 3: Transformation activities in current period relate to one‑off costs incurred as part of the ‘Better than Before’ transformation. Note 4: Tax adjustment reflects the tax effect of the above adjustments based on local effective tax rates.

(1) Pro‑forma net debt is calculated as statutory net debt excluding the impact of lease liabilities and adjusting for the net derivative financial instruments position. Pro‑forma EBITDA excludes any impact of AASB16. This approach is consistent with banking covenant requirements. Refer to note 16 of the financial report for a reconciliation between statutory and pro‑forma net debt.

BAPcoR ANNuAL REPORT 2023

DIRECTORS’ REPORT continued

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CONSOLIDATED
$M NOTE FY23 FY22
Statutory NPBT 148.4 178.1
Add depreciation and amortisation 96.7 88.8
Add finance costs 28.9 19.3
Statutory EBITDA 274.0 286.2
DC consolidations 1 4.7 5.3
Transformation activities 2 19.9 –
Pro‑forma EBITDA 298.6 291.5
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Note 1: DC consolidations relate to the significant transition costs incurred in relation to DCV and DCQ. Note 2: Transformation activities in current period relate to one‑off costs incurred as part of the ‘Better than Before’ transformation.

The table below, which is subject to rounding, reconciles the statutory and pro‑forma results for FY23 and FY22 to the earnings per share.

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CONSOLIDATED
FY23 FY22
$M NOTE STATUTORY PRO‑FORMA STATUTORY PRO‑FORMA
NPAT 1 106.4 125.3 125.8 131.6
Weighted average number
of ordinary shares 339.4 339.4 339.4 339.4
Earnings per share (cps) 31.36 36.92 37.05 38.78
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The directors’ report includes references to pro‑forma results to exclude the impact of the adjustments 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.

operating and financial review – Segment overview

The table below, with amounts subject to rounding and change percentages based on non‑rounded values, presents revenue and pro‑forma EBITDA by segment.

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REVENUE PRO‑FORMA EBITDA
$M NOTE FY23 FY22 CHANGE FY23 FY22 CHANGE
Trade 763.2 685.6 11.3 % 124.2 115.1 7.9%
Specialist
Wholesale 766.0 699.5 9.5% 102.9 102.0 0.9%
Retail 426.2 393.5 8.3% 67.6 66.5 1.7%
New Zealand 176.1 171.0 3.0% 29.9 32.8 (8.9 %)
unallocated/
Head Office 1 (110.4) (107.7) – (26.0) (24.9) –
Total 2,021.1 1,841.9 9.7 % 298.6 291.5 2.4 %
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Note 1: Revenue relates to intersegment sales eliminations. EBITDA relates to Bapcor head office costs, intersegment EBITDA elimination and profit from associates.

DIRECTORS’ REPORT continued

operating and financial review – Trade

Bapcor’s Trade segment is Australia’s leading distributor of vehicle parts and equipment solutions for the Trade market. It consists of the Burson Auto Parts, Precision Automotive Equipment and Independents business units in Australia as well as the Thailand operations. 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 achieved revenue growth of 11.3% compared to FY22, largely driven by same store sales growth of 8.8% (2.7% in FY22) and supported by various targeted customer relationship initiatives. Bapcor Trade’s EBITDA grew 7.9% year on year, with EBITDA margins improving in 2H23 driven by the successful implementation of category and pricing initiatives, and supported by growth in own brand sales leveraging Bapcor’s internal supply chain.

Trade continued to expand its store network in FY23 with the number of stores increasing from 224 at 30 June 2022 to 226 at 30 June 2023. Two greenfield stores were opened during FY23 strengthening Bapcor Trade’s customer offerings in Morley, Western Australia and Ballina, New South Wales.

operating and financial review – Specialist Wholesale

Bapcor’s Specialist Wholesale segment is a leader in both the Australian truck and specialist wholesale markets; and acts as aggregator and importer for One Bapcor. It consists of the Specialist Networks business including the Commercial Vehicle Group comprising Truckline as well as the auto electrical businesses of JAS Oceania and Baxters/MTQ; and the Wholesale business that is a specialised leader in automotive aftermarket wholesale operations through brands such as AAD, Bearing Wholesalers, Roadsafe, Premier Auto Trade, Federal Batteries, Diesel Distributors, and AADi.

The Specialist Wholesale segment achieved revenue growth of 9.5%, particularly driven by strong same store growth in regional truck markets and truck‑adjacent mining & agricultural sectors, and supported by organic and M&A network expansion; with EBITDA growth of 0.9% compared to FY22. While FY23 EBITDA margins softened temporarily compared to previous year, in 2H23 margins improved to above longer‑term averages through leveraging growth, improved own brand performance and successfully piloting integrated “light truck – heavy truck” offerings.

In FY23, the Specialist Wholesale network remained at 168 locations with 11 new sites in the commercial vehicle and Electrical businesses offset by 8 site consolidations and 3 site closures in other businesses. Three acquisitions were made during the year in the truck and commercial vehicle business: Absolute Spares, New South Wales, MJF Truck and Trailer Parts, Victoria and E‑Max, Victoria.

operating and financial review – Retail

Bapcor’s Retail segment is one of Australia’s leading full‑offer retailer and service centre providing best‑in‑class omni‑channel customer experiences. It consists of business units that are retail customer focused, and include the Autobarn, Autopro and Opposite Lock brands as well as the Midas and ABS workshop service brands. This segment is comprised of mostly company‑owned flagship stores in the Autobarn channel, with a mix of company‑owned and franchised stores and workshops across Retail’s other brands.

The Retail segment achieved revenue growth of 8.3% year on year driven by solid same store sales, notwithstanding during FY23 the overall Retail market became increasingly impacted by macro headwinds which led to growth slowing down in 2H23. While EBITDA in FY23 increased 1.7% compared to FY22, EBITDA margins reduced by ~100 basis points due to the deterioration in the macro retail environment leading to cost of living pressures on consumer discretionary spending, that were only partially offset by increased own brand sales and disciplined seasonal range reviews.

Bapcor Retail has continued to grow the number of company owned stores via both greenfield stores as well as conversion of some franchise stores to company owned stores. The total number of company‑owned stores at 30 June 2023 was 118 stores, an increase of 11 from the 107 as at 30 June 2022.

BAPcoR ANNuAL REPORT 2023

DIRECTORS’ REPORT continued

operating and financial review – New Zealand

Bapcor’s New Zealand segment is the leading integrated trade and wholesale group providing parts and equipment solutions across New Zealand. It consists of Trade and Specialist Wholesale businesses based in New Zealand operating across 89 locations, as well as 127 Battery Town and Shock Shop locations. Brake & Transmission (‘BNT’) is the predominant business supplying automotive parts and accessories to workshops, as well as truck and trailer parts through the Truck and Trailer Parts brand. New Zealand also includes the Specialist Wholesale businesses of HCB – batteries, Autolign – steering and suspension, JAS – auto electrical and Precision Equipment NZ – vehicle workshop equipment.

The New Zealand segment revenue increased by 3.0% (5.5% in NZD) compared to FY22, largely driven by same store sales growth of 4.1% in FY23, with revenue stabilising during FY23 and some recovery growth in 2H23. While both EBITDA and margins declined overall in FY23, mainly due to input cost pressure and ongoing headwinds in the New Zealand economy, in 2H23 margins improved to above longer‑term averages through market pricing disciplines.

In FY23, the overall New Zealand network expanded by 1 store to 89 locations (excluding Battery Town and Shock Shop locations), with new “Large Store” and “Superstore” pilots being trialled to test blueprints for further network expansion.

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. It also includes the elimination of intercompany sales and EBITDA. Intercompany sales increased by 2.4% compared to FY22.

Financial Position – capital Raising and Debt

There have been no issues of new shares during the year. As a result, ordinary shares on issue remain at 339,412,500 as at 30 June 2023.

During FY23, Bapcor entered into fixed interest rate swaps to hedge the impact of rising interest rates. A total of $120.0M of swaps were entered into at an average interest rate of 3.81%. Refer to note 27 of the financial report for further details.

During FY23, Bapcor refinanced $150.0M of debt facilities due to mature in July 2024, with two new tranches totalling $250.0M maturing in July 2027 and July 2028, taking advantage of favourable market conditions and strong inbound lender interest. Following the completion of this refinancing Bapcor has access to a total debt facility of $620.0M, an increase of $100.0M on the prior year. Refer to note 16 of the financial report for details on the revised facility tranches.

AASB 16 Leases increases reportable net debt by the inclusion of $311.3M of lease liabilities as at 30 June 2023. Given this is excluded from a banking covenant perspective, pro‑forma net debt has also been disclosed. Pro‑forma net debt at 30 June 2023 was $251.7M, representing a leverage[1] ratio of 1.12X which is well within debt capacity and an improvement compared to FY22.

Strategy

Bapcor’s ambition is to be Asia Pacific’s most trusted and leading provider of vehicle parts, accessories, equipment, service and solutions. This strategic vision is underpinned by six strategic priorities:

› Become One Bapcor;
› Deliver capital efficient growth;
› Embed an agile ‘Culture of Transformation’;
› Connect though digital and data;
› Extend and optimise our customer reach; and
› Embed sustainability into our operations.
(1) Leverage is calculated by dividing pro‑forma net debt by the last twelve months’ pro‑forma EBITDA. Pro‑forma net debt is excluding the impact of lease liabilities and adjusting for the net derivative financial instruments relating to forward exchange contracts position. Pro‑forma EBITDA excludes any impact of AASB16. Refer to note 16 of the financial report for a reconciliation between statutory and pro‑forma net debt.

DIRECTORS’ REPORT continued

competitive advantages

Team Members – Our team members are the key to our success. 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 is a priority for the group.

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 improvement opportunities. Increasing the proportion of own brand products is a core target, as these products generally achieve greater margins than the alternatives.

Industry trends

The automotive aftermarket parts market in Australia, NZ and Asia continues to experience growth based on:

› population growth;
› increasing number of vehicles;
› increase in total kilometres driven;
› change in the age mix and complexity of vehicles (i.e. more vehicles in the four years or older range); and
› an increase in the value of parts sold.

Demand for automotive parts, accessories and services continues to be resilient as maintenance is critical to operating a vehicle. Vehicle servicing is predominately driven by the number of kilometres travelled, with the number of kilometres travelled by passenger and light commercial vehicles not normally 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. With the impact of COVID‑19, demand for second hand vehicles increased as people seek to ensure social distancing with reduced reliance on public transport. All of these factors lead to ongoing demand for vehicle servicing, replacement parts and maintenance.

Online channels to market are now a common medium for retail businesses albeit only a small percentage of automotive retail sales are online. Through our retail businesses, Bapcor has online sales channels, including ‘click and collect’ and ‘click and deliver’. In the trade and wholesale channels the group offers electronic ‘B2B’ trading including an extensive parts catalogue. Bapcor is investing in expanding its online capabilities, including in Bapcor’s eCommerce platforms.

In the trade business Bapcor’s fast delivery capabilities, wide product range and knowledgeable people are the key to Bapcor’s customer offering which on‑line businesses cannot match at this point in time.

The car parc is always evolving driven by changes in the makes and models in Australia and New Zealand due to technical innovation and changing customer preferences, with the latest being the introduction of electric vehicles. Bapcor has always embraced changes in the car parc, including the introduction of electric vehicles, as both an opportunity and risk. Electric vehicles are adding to the size and complexity of the car parc, with the introduction of new and more makes and models to stock replacement parts for, all of which provides upside to Tier 1 automotive aftermarket providers such as Bapcor. Bapcor has initiated “Project Zero” with the aspiration to also be a market leader in the supply of parts and technologies to Zero Emission Vehicles (ZEVs), and a significant portion of Bapcor’s existing parts and accessories can already be utilised in ZEVs.

Key business risks

Bapcor is committed to maintaining and continually improving systems and processes to identify and effectively manage risk. Key risks faced by Bapcor that could have a material impact on Bapcor’s financial prospects include:

Pandemic risk – As has been shown since the outbreak of COVID‑19, a pandemic which results in restrictions on doing business will have impacts on Bapcor and is unpredictable by its very nature. Once such situations are evident, Bapcor will move swiftly to minimise the impact on its revenue, profitability and cash. This risk also includes post‑pandemic macro headwinds such as some of the inflation‑ and cost‑related challenges currently impacting the economy.

Delivery risk in Better than Before transformation – The BTB program may experience execution issues or may not realise the full benefits of the program due to a lack of capability or capacity to deliver all the initiatives. To mitigate this risk, a transformation office has been established with the appropriate governance and project management structures in place, as well as resourcing, change management skills and training being provided.

BAPcoR ANNuAL REPORT 2023

DIRECTORS’ REPORT continued

changes in economic conditions – Any downturn in economic conditions globally or in the markets Bapcor operates in has the potential to impact demand for Bapcor’s products and services. Economic downturns can be triggered by a variety of factors, including geopolitical instability and other whole‑of‑economy risks such as energy supply stability. Bapcor seeks to manage this risk by monitoring economic indicators, and by having agile processes that are able to respond to changes in demand. Changes in economic conditions include indirect impacts such as rising fuel prices which might reduce road travel.

changes in consumer demand – Customer demand and preferences can change in response to economic conditions, changes in the type of vehicles manufactured, government legislation to reduce vehicle emissions and digital technology. These changes may impact Bapcor’s revenue mix and earnings as consumers purchase electric vehicles or shift purchases online. Bapcor is targeting to mitigate these risks by increasing the aftermarket product range used in electric vehicles and the introduction of online platforms across the businesses.

competition – The markets and industries Bapcor operates in are competitive and Bapcor may face increased pressure from existing competitors, 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.

Bargaining power of customers – Bapcor may experience increased bargaining power from customers due to consolidation of existing workshops, greater participation of existing workshops in purchasing and buying groups, and closure of independent workshops resulting in greater market share of larger chains. This may also include changes in end‑customer behaviour with regards to vehicle ownership models and changes to overall mobility behaviours. An increase in customer bargaining power may result in a decrease in prices or loss of customer accounts, which may in turn adversely affect Bapcor’s sales and profitability.

Suppliers – Bapcor’s business model depends on having access to a wide range of automotive parts. Factors such as changes in supplier pricing, product availability, or the quality of Bapcor’s relationships with suppliers, may increase the prices at which Bapcor procures parts or limit Bapcor’s ability to procure parts. Supplier risk factors can also include changes to the demand for parts due to new car construction methods or risks due to the emergence of new players in the supply chain, e.g. direct‑to‑customer‑lifetime service strategies by technology companies entering the automotive sector. Changes in price or availability of parts may result in decreased sales or margins, which in turn may have an adverse effect on Bapcor’s financial performance.

Expansion – A key part of Bapcor’s growth strategy is to increase the size of its store network via store acquisitions and greenfield developments. If suitable acquisition opportunities or greenfield sites are not available this may limit Bapcor’s ability to execute the growth strategy, which could negatively impact Bapcor’s financial performance and growth. To mitigate this risk Bapcor senior management takes an active role in the rollout and progress of store expansion.

Managing growth and integration – The integration of acquired businesses and the continued strategy of growing the store network requires Bapcor to continually improve operational and financial systems, procedures and controls. There is a risk of an 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 takes an active role in the integration of acquired businesses.

Natural events – External and unpredictable natural events such as fires and floods can cause significant disruption to businesses, including Bapcor. Bapcor seeks to manage the impact of such risks through a number of means, including robust approaches to crisis and business continuity management.

People and skills – Bapcor is a highly customer‑focussed service business, and its team members and senior management are key to maintaining the level of operational service to its customers, as well as executing Bapcor’s strategy. In an environment where there are high levels of employment and shortages of certain skill sets the ability to attract and retain team members takes on an increased level of importance. This risk is managed through ongoing investment in brand awareness and strength, and by strong focus on development of knowledge and skills. It is also managed through contractual obligations, succession planning, and incentives schemes.

Safety – unlike manufacturing or resources businesses, Bapcor is not in a sector where health and safety represent a very high risk. However, Bapcor does have exposure to health and safety risks, both to team members and third parties. These risks come from areas including warehouse operations and team members travelling on Bapcor business. Bapcor’s safety management system enables us to manage our health and safety processes and risk.

Information technology – Bapcor’s business operations rely on information technology platforms. Weaknesses in information technology operations could result in negative outcomes including unplanned downtime, system failures or data breaches, resulting in impacts to customers and employees, and the continuity and security of operations and data. Bapcor manages such risks through IT improvement and maintenance, IT disaster recovery planning, and cyber security management processes.

DIRECTORS’ REPORT continued

Sustainability – An actual or perceived failure to address sustainability‑related topics, including climate change and the transition to a net carbon zero economy, has the ability to impact Bapcor’s financial performance, reputation and operations, either directly within Bapcor’s business or due to changing stakeholder expectations. To address this risk, Bapcor seeks to execute its integrated approach towards economic, environmental and social sustainability. Ensuring this approach is effective means ensuring a range of practices are maintained and continually improved, including managing potential issues in our supply chain, sourcing sustainable products and packaging, and reducing carbon emissions.

Exchange rates – A large proportion of Bapcor’s parts are sourced from overseas, which 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 price increases. If 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.

Availability of financing – Access to funding, including ongoing availability of debt finance, helps Bapcor fund business operations and growth initiatives. Any inability to fund operations and growth, for example as a result of constrained ability to maintain banking facilities, could have a negative impact on financial performance and position. Bapcor manages this risk through careful management of working capital and capital expenditure, maintaining banking facilities with differing maturities and a variety of counterparties, and ongoing monitoring of liquidity.

Franchise regulations – Bapcor has a large franchise network. 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 and implement appropriate changes.

Legal and regulatory compliance – Bapcor is required to maintain compliance with all applicable laws and regulations. These include requirements related to Modern Slavery, consumer protection, product quality, chain of responsibility and transport safety. The nature and extent of rules relevant to Bapcor and to businesses more broadly have been increasing, and this trend is likely to continue. Failure to comply with such laws and regulations could result in regulatory action or other claims which could have an adverse impact on the Group’s reputation, financial performance and profitability.

Inflation and interest rates – Increasing inflation and changes in interest rates can impact Bapcor’s business and funding. Rising inflation can decrease Bapcor’s profitability, however, Bapcor will target to mitigate inflation risks by passing on their impact through active category and pricing management. Increases in interest rates can increase Bapcor’s cost of funding or limit the availability of funding; and to mitigate this risk, Bapcor prudently manages working capital and capital expenditure, maintenance of banking facilities with differing maturities, and ongoing monitoring of liquidity, as well as considering hedging strategies.

Likely development and expected results of operations

For FY24, Bapcor expects a solid underlying[1] performance subject to market conditions[2] and for the Better than Before program to deliver its targeted FY24 goals. This outlook is based on:

› Solid demand in Trade segment to continue, but with market growth rate to return to more normalised longer‑term levels;
› Specialist Wholesale segment to benefit from growth and consolidation opportunities in the Truck market;
› Retail segment to face ongoing challenging market conditions and a more uncertain trading environment, with impact of loyalty program and increase in own brand sales targeted to mitigate some of these market impacts;
› underlying demand in New Zealand segment expected to improve (versus prior year); and
› Macro headwinds due to ongoing temporary margin pressures from cost inflation and other external factors such as increasing payroll taxes, the investment in capability, depreciation and amortisation costs and higher interest.

(1) Excludes costs/benefits from Better Than Before and DC consolidation.

(2) Particularly with regards to macroeconomic volatility as well as input cost and inflationary pressures.

BAPcoR ANNuAL REPORT 2023

DIRECTORS’ REPORT continued

Director information

Margaret Haseltine (BA, GradDipTchg(Sec), FAICD)

Independent Non‑executive Chair

During her career, Margaret (Margie) gained extensive leadership and human capital management skills, which she brings to her role as Chair of the Board. Margie has spent more than 30 years in various senior executive roles in FMCG, including senior roles at Mars Food Australia, a subsidiary of Mars Inc., where she was responsible for strategy, risk management, product innovation & brand launching, and implementation of new systems. From 2002 to 2007, Margie served as the CEO of Mars Food Australia, with responsibility for the APAC market and was also responsible for ensuring sustainability of the business and its supply chain.

Margaret currently serves as a non‑executive director of Metcash Limited (ASX:MTS), Real Pet Food Company Pty Ltd and Kennards Hire Pty Ltd and was a director of various government and not‑for‑profit boards, including National Food Precinct, Central Coast Grammar School and AGRIFOOD Skills. Margaret is also a non‑executive director of Tye Soon Limited (SGX:BFu), a listed Singapore company in which Bapcor owns 25%.

Noel Meehan (BSc Hons, MAICD, FCPA, AMP (HBS))

Managing Director and Chief Executive Officer

Noel joined Bapcor on 1 June 2020 as Chief Financial Officer, was appointed as Chief Executive Officer on 8 February 2022, and Managing Director and Chief Executive Officer on 1 September 2022.

Noel brings over 30 years of executive leadership experience, both in Australia and internationally, across the logistics and transport, mining services and winemaking industries. Prior to joining Bapcor, Noel has held the office of Chief Financial Officer at Toll Group, Treasury Wine Estates Limited and Orica Limited.

Noel is a non‑executive director of Tye Soon Limited (SGX:BFu), a listed Singapore company in which Bapcor owns 25%.

Mark Bernhard (BBus (Acc), GAICD, MBA)

Independent Non‑executive Director

During his career, Mark has gained significant board and executive management experience in the automotive industry across a range of geographies including Australia, Europe, the united States, South‑East Asia and China. Mark has more than 30 years’ experience in the automotive industry in Finance and various senior executive roles. From 2011 to 2015, Mark was the Chief Financial Officer and Vice‑President of Shanghai General Motors, returning to Australia in 2015 as the Chairman and Managing Director of General Motors Holden Australia until 2018.

Since 2019, Mark has served as a non‑executive director of Carbon Revolution Limited (ASX:CBR). Mark has also been a non‑executive director of a not‑for‑profit, Healthy Male, since 2020 and is chair of their Audit and Risk Committee.

Mark Powell (BSc (Hons), MSc, MBA, BApp. Theol, MA (Hons), GAICD, CMInstD (NZ))

Independent Non‑executive Director

Mark brings over 30 years of leadership and executive experience in retail, wholesale, logistics and distribution. Mark has held executive roles at Iceland plc, Booker Wholesale and Tesco in the uK, Logistics services provider Tibbett & Britten in Spain and Canada (including running of Walmart Canada’s logistics operations), and The Warehouse Group in Australia and New Zealand. Between 2009 and 2016, Mark was CEO of Warehouse Stationary and then Group CEO for NZX‑listed retailer The Warehouse Group.

Mark currently serves as a non‑executive director of JB Hi‑Fi Group Limited (ASX:JBH), 7‑Eleven Australia Pty Ltd, STIHL Pty. Ltd and My Food Bag Limited (NZX:MFB). Mark was previously a non‑executive director of Kiwi Property Group Limited (NZX:KPG).

DIRECTORS’ REPORT continued

Brad Soller (B.Com, B.Acc, M.Com, CA (SA))

Independent Non‑executive Director

Brad is a highly experienced executive, having held various CFO positions with public companies in both Australia and the united Kingdom. Brad was Group CFO of Metcash, a position he held for six years, and prior to that served as the CFO of David Jones and as Group CFO of Lendlease. Before moving to Australia, Brad held a number of senior financial positions in the united Kingdom including that of Chief Financial Officer at BAA McArthur Glen Limited and Director of Finance at uK listed electrical retailer, Thorn plc.

Brad is a non‑executive director of Reliance Worldwide Corporation Limited (ASX: RWC) and Big River Industries Limited (ASX: BRI).

Kathryn Spargo (LLB (Hons), BA, FAICD)

Independent Non‑executive Director

Kathryn (Kate) has gained broad business experience both as a legal advisor, having worked in private practice and government, and over two decades of experience as a non‑executive director in the public and private sectors across various industries spanning infrastructure, energy, renewables, healthcare, engineering services, construction, retail, financial services and intellectual property.

Kate is currently a non‑executive director at Sigma Healthcare Ltd (ASX: SIG), Sonic Healthcare Ltd (ASX: SHL), Adairs Ltd (ASX: ADH), CIMIC Group Limited, Geelong Football Club, Jellis Craig Corporation Pty Ltd and Future Fuels CRC Ltd.

James Todd (BCom, LLB, MAICD, F FIN)

Independent Non‑executive Director

James is an experienced company director, corporate adviser, and investor. James has over 30 years’ experience in finance across various entities, including Hambros Banking Group and Wolseley Private Equity. James’ last executive role was as Managing Director of Wolseley Private Equity, an independent private equity firm which he co‑founded in 1999 and served in until 2018. Through his extensive private equity experience, James had exposure across various sectors including retail, media, FMCG, business services, and international supply chains. His corporate transaction and investment experience has been gained across multiple markets including Australia, New Zealand and Asia (including Hong Kong, China, Singapore, Vietnam, Cambodia, Thailand, and Indonesia).

James is currently a non‑executive director of IVE Group Limited (ASX:IGL) and Coventry Group Limited (ASX:CYG) and was previously a director of HRL Holdings Limited.

Note: former directorships mandatorily disclosed above are those held in the last 3 years for listed entities only. Directors’ interests in shares are detailed in section 8.5 of the remuneration report.

company Secretary and officers

Stefan camphausen (MBA, BA)

Chief Financial Officer (4 July 2022 – present)

Stefan commenced as Chief Financial Officer of Bapcor in July 2022, after more than 20 years in Executive Finance roles across Asia Pacific, Europe and the Americas. Prior to joining Bapcor, Stefan held various other Chief Financial Officer positions, including at ASX‑listed CIMIC Group and leading Asian‑Pacific contracting service providers CPB Contractors and Thiess.

George Sakoufakis (BCom, LLB, admitted to legal practice in Victoria)

General Counsel (13 May 2019 – present); Company Secretary (1 February 2021 – present)

George commenced with Bapcor on 13 May 2019 as General Counsel and was appointed as Company Secretary on 1 February 2021. George is an Australian legal practitioner and prior to joining Bapcor held various legal and governance roles at the Foster’s Group including as Acting General Counsel and Legal Director at Carlton and united Breweries.

BAPcoR ANNuAL REPORT 2023

DIRECTORS’ REPORT continued

Meetings of directors

The below table shows the number of meetings of the company’s Board and of each Board committee held during the year ended 30 June 2023, with ‘held’ representing the number of meetings held during the time the director held office or was a member of the relevant committee.

The number of meetings attended by each director were:

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NOMINATION, REMUNERATION
BOARD AND ESG COMMITTEE AUDIT AND RISK COMMITTEE
NOTE HELD ATTENDED HELD ATTENDED HELD ATTENDED
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Margaret Haseltine		9	9	–	–	–	–
Noel Meehan	1	7	7	–	–	–	–
Mark Bernhard		9	9	3	3	5	5
Mark Powell		9	9	4	4	–	–
Brad Soller	2	6	6	–	–	3	3
Kathryn Spargo	3	3	2	1	1	–	–
James Todd		9	9	3	3	5	5
Therese Ryan	4	2	2	1	1	2	2
Jennifer Macdonald	5	3	3	1	1	2	2

Note 1: Noel Meehan was appointed as Managing Director on 1 September 2022. Note 2: Brad Soller was appointed as Director on 1 November 2022.

Note 3: Kathryn Spargo was appointed as Director on 1 March 2023. Note 4: Therese Ryan retired as Director on 30 September 2022. Note 5: Jennifer Macdonald retired as Director on 19 October 2022.

The Board has two sub‑committees, being the Audit and Risk Committee and the Nomination, Remuneration and ESG Committee.

The current members of the Audit and Risk Committee are Brad Soller (Chair) (appointed 1 November 2022), Mark Bernhard and James Todd. Therese Ryan and Jennifer Macdonald were members during FY23 until they retired on 30 September 2022 and 19 October 2022 respectively. Noel Meehan, whilst not a member of the Audit & Risk Committee, attended all Audit & Risk Committee meetings by invitation from the Committee.

The current members of the Nomination, Remuneration and ESG Committee are Mark Powell (Chair), Mark Bernhard, James Todd and Kathryn Spargo (appointed 1 March 2023). Therese Ryan and Jennifer Macdonald were members during FY23 until they retired on 30 September 2022 and 19 October 2022 respectively. Noel Meehan, whilst not a member of the Nomination, Remuneration and ESG Committee, attended all Nomination, Remuneration and ESG Committee meetings by invitation from the Committee.

Matters subsequent to the end of the financial year

Apart from the final dividend declared, no other matter or circumstance has arisen since 30 June 2023 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.

Environmental regulation

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

DIRECTORS’ REPORT continued

Indemnity and insurance of officers

The company has indemnified the directors and executives of the company for costs incurred, in their capacity as a director or executive, for which they may be held personally liable, except where there is a lack of good faith.

During the financial year, the company paid a premium in respect of a contract to insure the directors and executives of the company against a liability to the extent permitted by the Corporations Act 2001 . The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.

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.

Auditor

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

Non‑audit services

There were no non‑audit services provided during the financial year by the auditor.

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 83 of the directors’ report.

Indemnity of auditor

The company has agreed to indemnify their auditors, PricewaterhouseCoopers, to the extent permitted by law, against any claim by a third party arising from the company’s breach of their agreement with PricewaterhouseCoopers. The indemnity stipulates that the company will meet the full amount of any such liabilities including a reasonable amount of legal costs. No liability has arisen under this indemnity.

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DIRECTORS’ REPORT continued

Remuneration report

Dear Shareholder,

On behalf of the Board, I am pleased to share with you our Remuneration Report for the year ended 30 June 2023 (FY23).

FY23 has been a year of significant external macroeconomic change and internal strategic transformation at Bapcor. Our team has continued to perform well despite these challenging demands. The business landscape has been shaped by various factors, such as economic uncertainty, market volatility, rising costs and supply chain constraints. These challenges have required careful navigation to maintain our competitive edge and ensure sustainable growth.

Throughout, Bapcor has continued to demonstrate resilience and adaptability. The business has leveraged its strategic strengths, focused on operational efficiency, and capitalised on emerging opportunities. At the same time, Bapcor has not just looked to perform for the short term but to also transform for the future, with the establishment of the ambitious Better Than Before (BTB) transformation program.

Executive remuneration

The Board acknowledges the importance of aligning executive remuneration outcomes with the long‑term interests of our shareholders. We are committed to ensuring our remuneration framework enables the Company to attract and retain exceptional talent, motivates executives to excel and prioritise our customers, whilst ensuring responsible remuneration practices that align with maximising shareholder returns.

Last year, changes to our executive incentive schemes were flagged that further enhance the alignment between executive remuneration and shareholder value creation. In FY23, a Short‑Term Incentive (STI) Behaviours Modifier was introduced that could potentially reduce, but not increase, the level of STI earned if appropriate cultural and values expectations are not achieved. Additionally, two changes were made to the operation of the long‑term incentive (LTI) plan; the introduction of Return On Invested Capital (ROIC) in place of Earnings Per Share (EPS) as a measure, and the shift to the ASX 200 peer group to assess relative Total Shareholder Return (rTSR).

company performance and remuneration outcomes

The Board is pleased with the Company’s continued returns to shareholders in FY23, despite the challenges faced. Bapcor achieved record revenue of $2.0B, up 9.7% from FY22, with growth across all segments demonstrating a robust and diversified business. Temporary margin compression and an investment in Bapcor’s capability resulted in Pro‑Forma Net Profit After Tax (NPAT) declining by 4.8% to $125.3M. In line with market guidance, the second half Pro‑Forma NPAT was slightly ahead of the first half, while at the same time, our team has built the foundation from which we’ve launched the multi‑year ‘Better than Before’ (BTB) business transformation program.

The Board has determined the team partially achieved the financial objectives and achieved the majority of the core strategic non‑financial objectives.

Following a review of the financial and non‑financial performance, the Board has approved the following outcomes for Executive KMP:

› FY23 STI outcomes of 23.3% of maximum opportunity for the MD & CEO and 31.1% of maximum opportunity for the CFO.
› FY21‑23 LTI plan vesting outcome of 0%, indicating that the Company did not meet the threshold performance, resulting in no vested performance rights.

Fixed remuneration was also reviewed in FY23 for Executive KMP. The Board determined no changes would be made.

change in Executive Key Management Personnel (KMP)

As noted in FY22, Stefan Camphausen was appointed as Chief Financial Officer in July 2022. In addition, as a result of restructuring due to business growth and expansion, the portfolio of the EGM Wholesale was split and a new executive appointed to lead the Specialist Networks business. As a consequence of these changes, the Board determined that Craig Magill ceased to be a KMP on 1 July 2022 and therefore his remuneration is not disclosed in the FY23 remuneration report.

DIRECTORS’ REPORT continued

Implementation of the BTB Incentive Plan

The BTB program has identified significant operational and financial efficiency potential and expects to deliver exceptional outcomes that will benefit our team members, customers, and shareholders. A BTB Incentive Plan has been implemented to align team members at all levels to the delivery of the program, and ultimately reward team members by sharing in its successful delivery. Ambitious ROIC and net EBIT targets for this plan have been set and are above and beyond targets in previously existing incentive plans. The EBIT target is net of any incentives paid under this plan and as such, the plan is self‑funding. Further detail in relation to the BTB incentive plan can be found in the Q&A section on page 60.

Enhancements to the executive remuneration framework in FY24

In FY24, two enhancements are proposed to further align executive remuneration and shareholder value creation. Firstly, Group financial and non‑financial measures and targets are to be introduced for all Group Leadership Team members to embed the ‘One Bapcor’ philosophy. Secondly, the Board intends to introduce a ‘stretch‑max’ performance target in the LTI FY24‑25 plan to reward executives for stretch outcomes. This is explained further in the following Q&A section.

change in composition of the Board

During the 2023 financial year, Brad Soller and Kathryn Spargo joined the Board as Non‑Executive Directors whilst Therese Ryan and Jennifer MacDonald retired. We thank the retiring Directors for their service and contribution to Bapcor.

In FY24, we will continue our focus on delivering Bapcor’s strategic agenda to “perform and transform” and drive business growth and value for our shareholders.

We welcome shareholder feedback on this Remuneration Report and thank you for your support.

Sincerely,

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Mark Powell

Chair of the Nomination, Remuneration and Environmental, Social & Governance Committee

16 August 2023 Melbourne

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Questions and answers

The following is intended to assist readers to better understand key aspects of Bapcor’s remuneration approach in FY23.

QUESTION	ANSWER
Why is the number of KMP reducing?	The number of KMP has decreased due to the removal of the EGM Wholesale from the remuneration report from FY23. This change resulted from restructuring the role due to business growth and expansion. The EGM Wholesale portfolio was split, and a new executive was appointed to oversee the Specialist Networks business. As a result of the EGM Wholesale role’s changed scale, the Board determined it no longer be considered KMP.
What changes have been made to the Remuneration Framework in FY23?	The changes to the Remuneration Framework for FY23 are as follows: › STI: – A reduction in the number of Performance Measures to enhance clarity and emphasise critical deliverables. – The deferred component within the plan for Executive KMP was increased from 25% to 50%, creating further alignment of executive and shareholder interests. – An STI Behaviours Modifier was introduced, highlighting the significance of the Company values. It ensures that the focus is not solely on ‘what’ gets achieved but also on ‘how’ it gets achieved, aiming to drive a positive Company culture and achieve better outcomes. The modifier is designed to potentially reduce, but not increase, the level of STI earned if appropriate cultural and values expectations are not achieved. › LTI: – A revision of performance measures resulted in Return On Invested Capital (ROIC) replacing the Earnings Per Share (EPS) measure, reflecting a stronger emphasis on both profitability and capital efficiency. This change allows executives to be rewarded for their efforts in driving strategic investments, operations excellence, and value creation throughout the Company. – While relative Total Shareholder Return (rTSR) remains a performance measure, the Peer Group has been revised, with the ASX200 adopted as a more appropriate benchmark.
What is the BTB incentive plan and how does it interact with existing incentive plans?	In February 2023, Bapcor launched the Better Than Before (BTB) plan to drive a collective focus on the successful execution of our business transformation program. The plan will be in effect during the performance period from 22 November 2022 to 30 June 2025. It aims to reward all team members at all levels for successful delivery. The plan is focused on achieving stretch targets for ROIC and Net EBIT measures and is self‑funding, with a clear emphasis on setting targets above those within existing STI and LTI plans, ensuring there is no overlap. METRIC MEASURED BY PERFORMANCE HURDLE RATIONALE ROIC Simple average of the Company’s ROIC as at 30 June 2023, 30 June 2024 and 30 June 2025. Threshold>12.0% ROIC acts as the ‘gate’ to any incentive being paid. ROIC stretch target of greater than 12.0%, above the FY23 LTI plan measures, ensuring no overlap with existing plans. Net EBIT benefit The net EBIT benefit at 30 June 2025 from initiatives included in Better than Before and after deducting the costs for this incentive program. Threshold $100M which can lead to a Maximum payout of 100% of fixed remuneration. Aligned to communication to the market on 22 November 2022, an ambitious target net of any incentives payable. Straight line pro‑rata vesting.

DIRECTORS’ REPORT continued

Are further changes to the In FY24, further enhancements to Bapcor’s remuneration approach are under remuneration approach consideration. These include: being considered? › STI: – Group financial and non‑financial measures and targets to be introduced for all within the Group Leadership Team, emphasising the importance of collaborative decision‑making and to foster an environment where collective achievements are prioritised over individual segment performance.
› LTI: – The Board intends to introduce a ‘stretch‑max’ performance level within the FY24 plan. The stretch‑max is designed to incentivise executives to achieve outstanding performance, leading to exceptional benefits for shareholders. To achieve the stretch‑max target, an extraordinary improvement in ROIC and rTSR would be required. As such, the CEO’s maximum earning potential would increase from 100% to 150%. The Group Leadership Team’s maximum earning potential would rise from 50% to 75%. Both the threshold and stretch‑max targets build further on any achievement of the Better than Before targets in FY25.

An outline of the plan, including targets, is summarised in the table below:

MEASURE MEASURED BY PERFORMANCE HURDLE	RATIONALE
ROIC (50% of total Rights) Simple average over the preceding three years during the perfor‑ mance period. Threshold 12.5% Stretch‑max 13.5% Straight line pro‑rata vesting	Significant stretch compared to the ROIC achieved at 30 June over the previous five years: FY19 10.2% FY20 9.3% FY21 11.6% FY22 10.6% FY23 10.4%
rTSR (50% of total Rights) ASX 200 Threshold 50th percentile Stretch‑max≥ 87.5th percentile Vesting scale: Between 50th to 75th percentile – straight line pro‑rata vesting for each percentile movement in outcomes. Between 75th to 87.5th percentile – straight line pro‑rata vesting for each percentile movement in outcomes. Straight line pro‑rata vesting.	Attaining the 87.5th percentile presents a substantial stretch for executives. Vesting accelerates when the 75% percentile is reached.

BAPcoR ANNuAL REPORT 2023

DIRECTORS’ REPORT continued

Remuneration report 2023

In this section

1.	Key Management Personnel	Page 62
2. Nomination, Remuneration and Environment, Social & Governance Committee.		Page 63
3. Financial performance and relationship to remuneration		Page 63
4. Remuneration governance		Page 65
5. Executive remuneration framework and outcomes		Page 66
6. Better Than Before (BTB) Incentive Plan		Page 72
7.	Executive KMP realised remuneration (non‑statutory)	Page 74
8. Statutory details of remuneration		Page 75

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 .

1. Key Management Personnel

This Report outlines Bapcor’s remuneration approach and outcomes for Key Management Personnel (KMP), who have the authority and responsibility for planning, directing and controlling the activities of the Company during FY23.

NAME	POSITION
Non‑Executive Directors (NEDs)
Margaret Haseltine	Non‑Executive Chair
Mark Powell	Non‑Executive Director
James Todd	Non‑Executive Director
Mark Bernhard	Non‑Executive Director
Brad Soller	Non‑Executive Director (from 1 November 2022)
Kathryn Spargo	Non‑Executive Director (from 1 March 2023)
Therese Ryan	Non‑Executive Director (until 30 September 2022)
Jennifer Macdonald	Non‑Executive Director (until 19 October 2022)
Executive Director
Noel Meehan	Managing Director (from 1 September 2022) and Chief Executive Officer
	(from 8 February 2022)
Executive KMP
Stefan Camphausen	Chief Financial Officer (from 4 July 2022)
Former Executive KMP
Craig Magill1	Executive General Manager Wholesale (until 30 June 2022)

(1) Craig Magill ceased to be a KMP following operational and role accountability changes. As a result, the role is no longer considered KMP.

DIRECTORS’ REPORT continued

2. Nomination, Remuneration and Environment, Social & Governance committee.

The Nomination, Remuneration and Environment, Social and Governance Committee (NRESGC) operates under the delegated authority of the Board of Directors. The NRESGC charter is included on the Bapcor website (www.bapcor.com.au). The Non‑Executive Directors who were members of the NRESGC are as follows:

Mark Powell	Committee Chair
James Todd	Committee Member (from 1 October 2022)
Mark Bernhard	Committee Member (from 1 October 2022)
Kathryn Spargo	Committee Member (from 1 March 2023)
Therese Ryan	Committee Member (until 30 September 2022)
Jennifer Macdonald	Committee Member (until 19 October 2022)

The Committee is authorised by the Board to obtain external professional advice, and to secure the attendance of advisers with relevant experience and expertise if it considers this necessary.

3. Financial performance and relationship to remuneration

The Board maintains its focus on ensuring there is a strong relationship in place between Executive performance and remuneration outcomes. This section provides an overview of Bapcor’s financial performance over the past five years and how it relates to remuneration outcomes.

3.1 company Five‑year Financial Performance

Notably, over the past five years, Bapcor’s financial performance continues to strengthen, along with the returns provided to our shareholders.

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Revenue Proforma
10.3% CAGR NPAT 7.7% CAGR
over 5 years over 5 years
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EPS 3.6% Dividends
CAGR over 7.3% CAGR
5 years over 5 years
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The table below provides a detailed account of the Company’s financial performance over a five‑year period.

	2019	20203	2021	2022	2023
Revenue from continuing operations $m Increase/(decrease) in revenue Return on Invested Capital (‘ROIC’)5 Increase/(decrease) in ROIC Pro‑forma NPAT from continuing operations $m2,3 Increase/(decrease) in pro‑forma NPAT Pro‑forma EPS from continuing operations (cents)1,3 Increase/(decrease) in pro‑forma EPS Statutory NPAT $m2 Increase/(decrease) in statutory NPAT Statutory EPS (cents)1,3,4 Increase/(decrease) in statutory EPS1,3,4 Dividend declared (cents per share) Increase/(decrease) in dividend declared Share price 30 June $ Market capitalisation $m 30 June Relative TSR percentile achieved	1,296.6 4.8% 10.2% (3.4%) 94.3 9.0% 33.45 8.0% 97 2.4% 34.40 1.5% 17.0 9.7% 5.58 1,582 40.4%	1,462.7 12.8% 9.3% (8.5%) 88.7 (5.5%) 30.23 (9.2%) 79.2 (18.4%) 26.97 (21.6%) 17.5 2.9% 5.90 2,003 78.4%	1,761.7 20.4% 11.6% 24.9% 130.1 46.5% 38.32 26.8% 118.8 50.0% 34.99 29.8% 20.0 14.3% 8.50 2,885 43.7%	1,841.9 4.6% 10.6% (8.9%) 131.6 1.2% 38.78 1.2% 125.8 5.9% 37.05 5.9% 21.5 7.5% 6.08 2,064 38%	2,021.1 9.7% 10.4% (1.9%) 125.3 (4.8%) 36.92 (4.8%) 106.4 (15.4%) 31.36 (15.4%) 22.0 2.3% 5.94 2,016 38%

(1) Where appropriate, EPS has been adjusted to take into consideration the impact of rights issues performed and the impact on the number of shares as per AASB 133 Earnings Per Share

(2) NPAT attributable to members of Bapcor Limited

(3) Excludes the impact of AASB 16 Leases up to 2019. From 2020 the AASB Leases impact is included. The impact of implementing AASB Leases on NPAT is immaterial, being less than $0.5M.

(4) Issued shares increased by 55.4M shares or 20% in April/May 2020.

(5) ROIC has been calculated as Proforma EBIT after Tax on Net Debt + Equity

Five‑year Remuneration outcomes

Executive KMP remuneration outcomes are aligned to core short‑term and long‑term performance outcomes. The table below provides the remuneration outcomes for Executive KMP over a five‑year period.

REMUNERATION OUTCOMES	FY19	FY20	FY21	FY22	FY23
STI outcome (average % of maximum)	43%	53%	89%	48%	23%
LTI vesting outcome (% of maximum)	0%	78%	0%	0%	0%

DIRECTORS’ REPORT continued

4. Remuneration governance

The following diagram outlines Bapcor’s approach to remuneration governance.

BAPCOR BOARD

› Overall accountability for Bapcor’s remuneration approach.
› Determines remuneration quantum and structure for executive and non-executive KMP after considering recommendations made by the NRESGC.
› Discretion in determining the outcomes of incentive arrangements.
› Has discretion to exercise clawback provisions should any material financial misstatements arise.

NOMINATION, REMUNERATION AND ENVIRONMENT, SOCIAL & GOVERNANCE COMMITTEE (NRESGC)

Meets regularly to:

› Understand and review the effectiveness of the remuneration arrangements;
› Review the remuneration framework to ensure it is fit for purpose and make recommendations to the Board on any changes;
› Determine recommendations to the Board regarding fixed remuneration, STI outcomes and LTI outcomes;
› Discretion, both positive and negative, in determining the outcomes of incentive arrangements; and
› Assess executive KMP performance.

EXTERNAL ADVISORS

› NRESGC seeks external advice and assistance from independent remuneration consultants as it considers appropriate with protocols in place to ensure independence from Management.
› During FY23 the NRESGC engaged Godfrey Remuneration Group (GRG) to provide benchmarking reports and remuneration recommendations (as defined in the section 9B of the Corporations Act). GRG was engaged directly by the NRESGC Chair under delegated authority from the Board with the report provided directly to the NRESGC Chair. GRG was paid $37,500 excluding GST for their services. The Board is satisfied the recommendations made are free from any undue influence.

This year, the Board has actively engaged with major shareholders and proxy advisors to enhance understanding of Bapcor’s remuneration approach and decisions.

BAPcoR ANNuAL REPORT 2023

DIRECTORS’ REPORT continued

5. Executive remuneration framework and outcomes

The Executive Remuneration Framework is designed to attract, motivate and retain high calibre talent, while also supporting the delivery of the Company’s strategic objectives and sustainable shareholder returns.

5.1 Remuneration Principles

Our remuneration principles serve as a guiding compass for determining the design of remuneration plans and programs, as well as informing decision‑making processes regarding remuneration outcomes.

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OUR REMUNERATION PRINCIPLES
Market competitive Alignment Fairness consistency
Attract, motivate Remuneration outcomes Appropriate and Maintaining clarity
and retain high align with company reasonable outcomes and consistency of
calibre talent performance and balanced in the best application of outcomes
shareholder interests of shareholders
value creation and Management
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5.2 Remuneration Mix

The total remuneration for Executive KMP comprises fixed remuneration, variable short‑term incentives, and variable long‑term incentives. The chart below illustrates the Executive KMP remuneration mix at maximum potential for FY23. Mr. Meehan’s total FY23 remuneration includes a BTB award, intended to be allocated via performance rights and contingent upon shareholder approval sought during the upcoming Bapcor AGM.

FY23 Executive KMP potential maximum pay mix

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MD & CEO 25% 25% 25% 25%
CFO 31% 23% 15% 31%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Fixed Remuneration Maximum STI Maximum LTI Maximum BTB
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From time to time the Board may give consideration to awarding additional incentives which are aligned to deliverables that create further shareholder value (eg. BTB incentive. See section 6).

DIRECTORS’ REPORT continued

5.3 Fixed remuneration

Fixed remuneration comprises base salary, superannuation, and non‑cash benefits such as a motor vehicle allowance. It is reviewed annually and set competitively to attract and retain high calibre talent. Consideration is given to expertise, scope and complexity of the role, performance, internal relativities, and market changes.

An independent market benchmarking exercise was conducted in FY23. Market benchmarks are typically set with reference to relevant comparator groups, as determined by the NRESGC each year.

The table below outlines the fixed remuneration for Executive KMP in FY22 and FY23.

EXECUTIVE KMP	POSITION	FY22	FY23	% CHANGE
N Meehan1	Managing Director and Chief Executive Officer	$1,073,568	$1,073,568	0.0%
S Camphausen	Chief Financial Officer	N/A	$700,000	N/A
FORMER EXECUTIVE KMP
C Magill	Executive General Manager, Wholesale	$605,000	N/A	N/A

(1) N Meehan was appointed Acting CEO on 6 December 2021, CEO on 8 February 2022, and MD & CEO on 1 September 2022. Prior to these appointments, N Meehan undertook the CFO role with a fixed remuneration of $715,000.

5.4 Short‑Term Incentive (STI) Plan

The STI is an annual incentive plan designed to motivate and reward Executive KMP for the achievement of pre‑determined financial and non‑financial measures, as set by the Board. These performance‑based outcomes provide an appropriate link between Executive KMP remuneration and the creation of shareholder wealth.

Delivery of award Following the performance assessment, the STI award will be delivered as 50% cash and the remaining 50% as deferred equity, until the equivalent of one year’s fixed remuneration is held in equity, in line with the minimum shareholding requirements. Should the participant hold the equivalent of one year’s fixed remuneration in equity, the award can be delivered as deferred cash (for a period of twelve months). If a participant resigns or leaves the Company before the receipt of any deferred STI, they will remain entitled to the deferred component unless it is subject to the Company’s ‘clawback’ policy (please refer to ‘Clawback’ section for further details). No dividends are payable until the performance rights vest into ordinary shares once the twelve‑month period has concluded. STI opportunity The STI opportunity is set in accordance with the scope, complexity and accountability within each role. Market benchmarks are also taken into consideration.

If a participant resigns or leaves the Company before the receipt of any deferred STI, they will remain entitled to the deferred component unless it is subject to the Company’s ‘clawback’ policy (please refer to ‘Clawback’ section for further details).

No dividends are payable until the performance rights vest into ordinary shares once the twelve‑month period has concluded.

The table below outlines the Executive KMP STI opportunity at Target and Maximum:

ROLE	TARGET STI OPPORTUNITY	MAXIMUM STI OPPORTUNITY
MD & CEO	50% of Fixed Remuneration	100% of Fixed Remuneration
CFO	50% of Fixed Remuneration	75% of Fixed Remuneration

In the STI plan, Executive KMP must reach 115% of the target performance level to attain the maximum earning potential available under the plan. This upside earning potential beyond the target level has been set to incentivise and encourage outperformance.

BAPcoR ANNuAL REPORT 2023

DIRECTORS’ REPORT continued

Performance measures and weightings	STI outcomes are determined by the Board at the end of each financial year, based on the achievement of pre‑determined financial and non‑financial metrics, through a balanced scorecard. The performance measures are aligned with Group and Segment targets as well as key strategic priorities for the twelve‑month period, complimenting the achievement of the Group’s long‑term strategy. CATEGORY PERFORMANCE MEASURE WEIGHTING Financial Group NPAT 40% Average Group Return On Invested Capital 15% Average Group Inventory to Sales Percentage 15% Non‑Financial ES&G 15% Culture 15% STI Behaviours Modifier – 80% to 100% of overall STI earned In FY23, the number of Performance Measures was reduced to steer a clearer focus on key deliverables and effectively drive Company growth. Further, the STI Behaviours Modifier was introduced, highlighting the significance of the Company values. It ensures that the focus is not solely on ‘what’ gets achieved but also on ‘how’ it gets achieved, aiming to drive a positive Company culture and achieve better outcomes. This modifier is designed to potentially reduce, but not increase, the level of STI earned if appropriate cultural and values expectations are not achieved.	STI outcomes are determined by the Board at the end of each financial year, based on the achievement of pre‑determined financial and non‑financial metrics, through a balanced scorecard. The performance measures are aligned with Group and Segment targets as well as key strategic priorities for the twelve‑month period, complimenting the achievement of the Group’s long‑term strategy. CATEGORY PERFORMANCE MEASURE WEIGHTING Financial Group NPAT 40% Average Group Return On Invested Capital 15% Average Group Inventory to Sales Percentage 15% Non‑Financial ES&G 15% Culture 15% STI Behaviours Modifier – 80% to 100% of overall STI earned In FY23, the number of Performance Measures was reduced to steer a clearer focus on key deliverables and effectively drive Company growth. Further, the STI Behaviours Modifier was introduced, highlighting the significance of the Company values. It ensures that the focus is not solely on ‘what’ gets achieved but also on ‘how’ it gets achieved, aiming to drive a positive Company culture and achieve better outcomes. This modifier is designed to potentially reduce, but not increase, the level of STI earned if appropriate cultural and values expectations are not achieved.
calculation of the STI award	The STI award is calculated as follows: Fixed remuneration $ x STI Opportunity % x Performance Outcome % x	Behaviours Modifier % = STI Award $
Determination of the STI award	The STI award is determined after the end of the financial year following a review of performance against the STI performance measures.
cessation of employment	If an Executive KMP ceases employment with Bapcor prior to the STI payment being paid, the Executive KMP will forfeit any awards that were to be received for the performance period, unless the Board determines otherwise. Should an Executive KMP be dismissed for serious misconduct post the STI payment date, any deferred amount will be forfeited in accordance with the Clawback policy.
change of control	In the event that a ‘Change of Control’ occurs or the Company sells the whole or a substantial part of Bapcor Limited, the Board may in its discretion determine whether and in what amount to pay any STI awards.
clawback	The Board retains the discretion to adjust or forfeit an STI award or to seek recovery from an Executive after a payment or issue including, but not limited to, instances of material financial misstatements, major negligence, significant legal, regulatory and/or policy noncompliance and significant harmful act by an individual.

DIRECTORS’ REPORT continued

5.5 Short‑term incentive – performance outcomes

The following tables shows the actual STI performance outcomes for Executive KMP in FY23:

PERFORMANCE			FY23 PERFORMANCE
MEASURE	OBJECTIVE	SCORECARD PERFORMANCE	LEVEL OF ACHIEVEMENT
Financials
Group pro‑forma	Increase group	Solid underlying financial performance with record	Not achieved
NPAT	pro‑forma NPAT	revenue growth, yet pro‑forma NPAT outcome
	subject to market	impacted by temporary margin compression
	conditions	and an investment in Bapcor’s capability build.
		Below threshold. (Actual: $125.3M).
Average Group	Focus on capital	Disciplined financial prudence and adept capital	Partially achieved
ROIC	efficiency	management resulted in performance meeting
		threshold. (FY23 Actual: 10.4%, FY22 Actual: 10.6%).
Average Group	Improve performance	Effective inventory management and optimised	Partially achieved
Inventory as a	by increasing	sales strategies led to threshold performance
% of Sales	inventory turns	outcome. (Actual: 26.8%).
Non‑financial
Environmental,	Progress strategy	Development of a carbon emission reduction	Achieved
Social and	as articulated in	roadmap for entire business, established a
Governance (ESG)	2022 Annual Report.	risk‑based approach to improve supply chain
		transparency in relation to processes and sourcing
		to mitigate modern slavery risks, conducted an
		extensive waste management review, and reduced
		the Total Recordable Injury Frequency Rate (TRIFR)
		from 20.58 to 13.99.
Culture	Improvement in	Bapcor’s Purpose clearly defined and will be	Partially achieved
	organisation health	launched in H1 of FY24. An emphasis on leadership
		alignment to underpin this period of significant
		transformation has established a solid foundation
		for culture change.

FY23 Executive KMP STI outcomes

The following table outlines the Executive KMP FY23 STI outcomes. As per the FY23 STI plan, 50% of the awarded STI is allocated in Equity, with vesting deferred for an additional 12 months from the date of grant.

		ACTUAL STI AS	STI FORFEITED		DEFERRED STI $
	MAXIMUM STI	A % OF	AS A % OF	ACTUAL STI	(50% OF
EXECUTIVE KMP	AS A % OF FAR	MAXIMUM	MAXIMUM	AWARDED $	ACTUAL STI)1
N Meehan	100.0%	23.3%	76.7%	250,141	125,071
S Camphausen	75.0%	31.1%	68.9%	163,100	81,550
Total				413,241	206,621

(1) The Deferred STI expense is amortized over a period of 15 months (within table 8.1) with the expected grant date to be in October 2023.

FY22 Deferred STI outcome

The table below provides details of the 2022 deferred shares that have vested within FY23.

			FAIR VALUE PER SHARE RIGHT	NUMBER OF SHARE RIGHTS
GRANT DATE	VESTING DATE	EXPIRY DATE	AT GRANT DATE	AT GRANT DATE	% VESTED
12/10/2022	12/10/2022	12/10/2022	$6.34	11,117	100

BAPcoR ANNuAL REPORT 2023

DIRECTORS’ REPORT continued

5.6 FY23 Long‑Term Incentive (LTI) plan

The LTI plan acknowledges and rewards the contributions of Executive KMP in generating sustainable long‑term value over a three‑year performance period. The plan serves to attract and retain key executives whilst fostering a strong alignment with shareholder interests by promoting long‑term growth and value creation for both the Company and its shareholders.

The key features of the FY23 LTI plan under which grants were made in FY23 are as follows:

Participants under the plan	Executives who were employed at the commencement of the financial year were invited to participate.
LTI opportunity	The LTI opportunity is set in reflection of scope, accountabilities and impact that a role would make over a three‑year performance period. Market benchmarks are also taken into consideration when determining the opportunity. The maximum face value of LTI opportunity that can be granted, expressed as a percentage of Fixed Remuneration is: ROLE MAXIMUM (CAP) MD & CEO 100% of Fixed Remuneration CFO 50% of Fixed Remuneration
Instrument	Performance rights will vest upon the Board’s satisfaction of the performance conditions being met, and do not carry any voting rights or dividend entitlements. Participants with performance rights that have vested can elect to exercise these rights for a period up to 15 years from the date on which the vesting conditions were satisfied.
Allocation of Performance Rights	The number of performance rights issued to each executive is determined by dividing the participants maximum LTI value by the face value basis using a 10‑day volume weighted average price (VWAP) of Bapcor shares prior to 30 June 2022.
Performance period	The performance period is three years.
Performance measures	The performance measures and their relative weightings are given below: PERFORMANCE MEASURE WEIGHTING % Relative Total Shareholder Return (rTSR) 50% Return On Invested Capital (ROIC) 50%

During FY22, the Board reviewed the Company’s LTIP performance measures to further enhance alignment between executive long‑term decision‑making, the Company’s strategy and shareholder interests. As a result, from FY23, the relative Total Shareholder Return (rTSR) comparator group was expanded to constituents of the broader S&P/ASX 200 index. The Board considers that the S&P/ASX 200 index provides a more reliable comparative basis for the purposes of measuring relative Total Shareholder Return (rather than a fixed set of comparator companies, which may be subject to significant corporate actions which may result in distortion of total shareholder return). In addition, it is a simpler to apply approach, and provides greater visibility and alignment for participants.

rTSR will be tested by comparing the Company’s rTSR performance over the performance period relative to the ASX 200 Index as of 30 June 2022. The test will be conducted by an independent, external provider. rTSR incorporates both share appreciation and dividends. For Bapcor and the ASX 200 Index constituents as at 30 June 2022, the share price at the start and end of the performance period will be the 10‑day VWAP of the Company’s shares preceding the start and end of the performance period. Dividends will be assumed to have been reinvested on the ex‑dividend date.

A ‘Return on Invested Capital’ metric has been adopted as the second performance hurdle and replaced the previously utilised Earnings per Share (‘EPS’) metric. Return on Invested Capital focuses on capital efficiency and returns, which complements Bapcor’s other existing remuneration key performance indicators, including those that continue to be focused on growth and expansion.

The ROIC hurdle will be calculated as the simple average of the Company’s ROIC as at 30 June 2023, 30 June 2024 and 30 June 2025 (Average ROIC).

DIRECTORS’ REPORT continued

Vesting Scales	MEASURE PERFORMANCE LEVEL VESTING % rTSR Below the 50th percentile 0% At the 50th percentile 50% Between the 50th and 75th percentiles Pro rata vesting on a straight‑line basis At or above the 75th percentile 100% ROIC Below 11.5% Nil At 11.5% 50% Between 11.5% and 12.0% Pro rata vesting on a straight‑line basis At and above 12.0% 100%
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.
Other terms	Shares acquired on the conversion of vested Performance Rights cannot be sold for a period of twelve months from the date the rights satisfied the performance hurdles. Performance Rights cannot be transferred, encumbered, or hedged.
Cessation of employment	The LTI Performance Rights are subject to the participant being employed (or contracted) for the full performance period of 3 years. If the participant is a “good leaver”, the prorate number of months completed may vest if the performance hurdles are achieved. If the participant is not a “good leaver”, any unvested rights will automatically lapse on the date of the cessation of employment, subject to any determination otherwise by the Board in its sole and absolute discretion.
Clawback	Where, in the opinion of the Board, the participant: › acts fraudulently, or dishonestly; › wilfully breaches their duties to the Group; or › is responsible for material financial misstatements, major negligence, significant legal, regulatory and/or policy non‑compliance, or a significant harmful act; and the Board may, at its sole and absolute discretion, deem some or all of the unvested, or vested but unconverted, performance rights granted to that participant to be forfeited and to have lapsed. under specific circumstances any vested equity can be clawed back from the participant.

5.7 FY21 Long‑term incentive plan outcomes

During FY23, the performance outcomes for the FY21‑23 LTI plan were independently tested by third parties and resulted as follows:

MEASURE	WEIGHTING	THRESHOLD TARGET	PERFORMANCE OUTCOME	VESTING OUTCOME
rTSR	50%	50th percentile ranking	38th percentile ranking relative to TSR peer group.	0.0%
EPS	50%	7.5%	6.9%	0.0%

As a result of not meeting threshold targets, no vesting has occurred for the FY21 LTI plan.

BAPcoR ANNuAL REPORT 2023

DIRECTORS’ REPORT continued

6. Better Than Before (BTB) Incentive Plan

In February 2023, the BTB incentive plan was introduced to drive a collective focus on the successful execution of our business transformation program. It aims to reward all team members at all levels for successful delivery.

The plan is focused on achieving stretch targets for ROIC and Net EBIT measures and is self‑funding, with a clear emphasis on setting targets above those within existing STI and LTI plans, ensuring there is no overlap.

The key features of the BTB plan in relation to Executive KMP are as follows:

BTB opportunity	The BTB opportunity is set recognising the scope, complexity, accountability and impact that a role would make over the performance period. Executive KMP are entitled to a maximum opportunity of 100% of Fixed Remuneration.
Instrument	The reward vehicle under the BTB incentive plan will be Performance Rights for Executive KMP, that will vest upon the Board’s satisfaction of the performance conditions being met. Performance Rights do not carry any voting rights or dividend entitlements. In accordance with ASX Listing Rule 10.14.1, as Mr Meehan is a Director of the Company, shareholder approval is necessary for the granting of securities, including performance rights under the BTB plan. Mr. Meehan’s total FY23 remuneration includes a BTB award, intended to be allocated via performance rights, contingent upon shareholder approval sought during the upcoming Bapcor AGM.
Allocation of Performance Rights	The number of Performance Rights granted has been calculating dividing the incentive opportunity by the 10‑day volume weighted average share price (VWAP) prior to 22 November 2022 (Investor Day).
Performance period	22 November 2022 to 30 June 2025
Performance measures	The performance measures and their relative weightings are given below: PERFORMANCE MEASURE WEIGHTING % Return On Invested Capital (ROIC) 50% Net EBIT benefit 50%

Return on Invested Capital acts as the ‘gate’ for incentive payment under the plan, necessitating the achievement of specified targets. Return on Invested Capital focuses on capital efficiency and returns, which complements Bapcor’s other existing remuneration key performance indicators, including those that continue to be focused on growth and expansion.

The ROIC hurdle will be calculated at the end of the performance period, as the simple average of the Company’s ROIC as at 30 June 2023, 30 June 2024 and 30 June 2025.

The Net EBIT Benefit will be calculated at the end of the performance period, as the EBIT benefit at 30 June 2025 from initiatives included in Better than Before and after deducting the costs for this incentive program.

DIRECTORS’ REPORT continued

Vesting Scales	MEASURE PERFORMANCE LEVEL VESTING % ROIC Below 12.0% 0% Over and above 12.0% 100% Net EBIT benefit Below $100M 0% Above $100M to Maximum Pro‑rata vesting on a straight‑line basis to 100%
Amendments	To the extent permitted by the ASX Listing Rules, the Board retains the discretion to vary the terms and conditions of the BTB Incentive. 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.
cessation of employment	The BTB Incentive Performance Rights are subject to the participant being employed at the end of the performance period and at the time any rights have vested. If the participant is determined to be a “good leaver”, as defined in the plan, the prorate number of months completed out of the three years may vest if the performance hurdles are achieved. If the participant is not a “good leaver”, any unvested rights will automatically lapse on the date of the cessation of employment, subject to any determination otherwise by the Board in its sole and absolute discretion.
clawback	Where, in the opinion of the Board, the participant: › acts fraudulently, or dishonestly; › wilfully breaches their duties to the Group; or › is responsible for material financial misstatements, major negligence, significant legal, regulatory and/or policy non‑compliance, or a significant harmful act; and the Board may, at its sole and absolute discretion, deem some or all of the unvested, or vested but unconverted, performance rights granted to that participant to be forfeited and to have lapsed. under specific circumstances any vested equity can be clawed back from the participant.

BAPcoR ANNuAL REPORT 2023

DIRECTORS’ REPORT continued

7. Executive KMP realised remuneration (non‑statutory)

The following table provides a summary of remuneration received by Executive KMP during FY23. This information provides further transparency to give shareholders a clearer understanding of Executive KMP remuneration and is supplementary to the Statutory details of remuneration given in the subsequent section of this report.

the Statutory details	of remuneration given in the subsequent section of this report.
	PREVIOUS YEAR AWARDS THAT VESTED DURING FY23
EXECUTIVE KMP	YEAR FIXED REMUN‑ ERATION1 $ TERMI‑ NATION PAY MENTS5 $ CASH STI2 $ PRIOR YEAR DEFERRED STI $ VESTED AND UNRE‑ STRICTED LTI3 $ NON‑ MONETARY TOTAL RECEIVED $
N Meehan6,7	FY23 1,073,568 – 125,071 70,482 – – 1,269,120
	FY22 900,348 – 185,104 120,578 – – 1,206,030
S Camphausen4,11	FY23 764,247 – 81,550 – – 111,789 957,586
	FY22 N/A – N/A N/A N/A N/A N/A
Former KMP
C Magill7,8,10	FY23 N/A – N/A N/A N/A N/A N/A
	FY22 605,000 – 132,684 102,494 – – 840,178
D Abotomey5,9	FY23 N/A – N/A N/A N/A N/A N/A
	FY22 572,073 1,841,998 711,447 307,397 695,976 – 4,128,891
Total	FY23 1,837,815 – 206,621 70,482 – 111,789 2,226,706
	FY22 2,077,421 1,841,998 1,029,235 530,469 695,976 – 6,175,099

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

(2) FY23 cash STI is the amount accrued and payable in respect of FY23 STI opportunity. It is the cash amount to be paid in August 2023 and excludes any deferred component. It will differ to the amount in section 8.1 as it doesn’t include any adjustment relating to prior year under or over accrual.

(3) 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 which was $6.70 per share.

(4) S Camphausen receives fully paid travel and accommodation for commute from Sydney to Melbourne as an employment condition.

(5) The termination payments to D Abotomey referred to here only include the payments of accrued annual and long service leave of $579,258 up to the retirement date as well as the payment of 50 weeks’ in lieu of notice of $1,262,740.

(6) N Meehan’s fixed remuneration and FY22 cash STI pro‑ratas for his role as CFO until 6 December 2021, then interim CEO until 8 February 2022 when he was appointed CEO.

(7) In FY22, the deferred STI component for N Meehan and C Magill was recognised as cash settled whereas it was partially equity settled in FY23. Hence, the FY22 numbers above have been restated to reclass N Meehan by $37,021 and C Magill by $26,537 from cash STI to Equity settled.

(8) In FY22, C Magill fixed remuneration excludes the $30,250 allowance for higher duties included in 8.1 as it was a once off and has been accrued and not paid.

(9) D Abotomey retired on 6 December 2021 and his fixed remuneration reflects the period under employment. Within the FY22 remuneration report, an amount of $711,447 was initially recorded as accrued FY22 cash STI for D Abotomey. During the AGM on October 19,2022, the resolution on the deferred STI was not carried by the AGM. Subsequently, the accrual was reversed in FY23.

(10) From 1 July 2022, the role of EGM Trade was no longer considered to be a KMP. C Magill’s remuneration reflects his period as KMP.

(11) In FY23, S Camphausen fixed remuneration includes $70,000 allowance for higher duties and has been accrued and not paid.

DIRECTORS’ REPORT continued

8. Statutory details of remuneration

The statutory remuneration disclosures for the year ended 30 June 2023 are detailed below under the following headings and are prepared in accordance with Australian Accounting Standards (AASBs).

8.1 Remuneration of KMP

	SHORT‑TERM BENEFITS1 POST‑ EM PLOY‑ MENT BENE FITS LONG‑ TERM BENE‑ FITS SHARE BASED PAYMENTS OTHER PERCENTAGE OF REMUNERATION FIXED AND AT RISK
2023	YEAR CASH SALARY AND FEES2 $ CASH STI13 $ NON‑ MONE‑ TARY2 $ SUPER‑ ANNU‑ ATION $ ANNUAL & LONG SERV ICE LEAVE $ EQUITY SETTLED8 $ TERM PAY MENTS $ TOTAL $ FIXED % AT RISK – STI % AT RISK – LTI %
NED M Haseltine3,7
	FY23 274,708 – – 19,057 – – – 293,765 100% – –
	FY22 362,774 – – 28,987 – – – 391,761 100% – –
T Ryan10	FY23 35,607 – – 3,762 – – – 39,369 100% – –
	FY22 121,629 – – 12,163 – – – 133,792 100% – –
J Macdonald10	FY23 46,746 – – 4,935 – – – 51,681 100% – –
	FY22 139,878 – – 13,988 – – – 153,866 100% – –
J Todd	FY23 136,826 – – 14,388 – – – 151,214 100% – –
	FY22 112,504 – – 11,250 – – – 123,754 100% – –
M Powell	FY23 140,271 – – 14,754 – – – 155,025 100% – –
	FY22 130,753 – – 13,075 – – – 143,828 100% – –
M Bernhard4	FY23 136,826 – – 14,388 – – – 151,214 100% – –
	FY22 35,561 – – 3,556 – – – 39,117 100% – –
B Soller10	FY23 93,335 – – 9,800 – – – 103,135 100% – –
	FY22 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
K Spargo10	FY23 42,232 – – 4,434 – – – 46,666 100% – –
	FY22 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Executive Director N Meehan6
	FY23 1,048,275 242,321 – 25,292 21,485 403,874 – 1,741,246 63% 14% 23%
	FY22 879,288 197,140 – 23,568 39,905 235,521 – 1,375,422 63% 13% 24%
D Abotomey5	FY23 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
	FY22 547,874 631,108 – 24,135 35,701 1,124,492 2,318,248 4,681,558 63% 13% 24%
other KMP S Camphausen10,12 FY23 742,031 81,550 111,789 25,292 47,055 259,712 – 1,267,430 74% 6% 20% FY22 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
	FY22 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
C Magill7,9,11	FY23 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
	FY22 631,919 118,747 – 31,334 14,038 71,422 – 849,460 78% 14% 8%
Total	FY23 2,696,857 323,871 111,789 136,102 68,540 663,586 – 4,000,745
	FY22 2,944,180 946,995 – 162,056 89,644 951,338 2,318,248 7,892,558

BAPcoR ANNuAL REPORT 2023

DIRECTORS’ REPORT continued

(1) S Camphausen receives fully paid travel and accommodation for commute from Sydney to Melbourne as an employment condition. There is no non‑monetary benefits to KMP in FY23 and FY22.
(2) In FY23, Cash salary and fees excludes accrued annual leave and for FY22, $53,463 relating to Executive Director and other KMP have been adjusted to include annual leave accrual in the ‘Annual & Long service leave’ column which had previously disclosed in cash salary fees.
(3) In FY22, M Haseltine was Interim Executive Chair from 6 December 2021 until 31 March 2022 and received $95,342 for these additional services.
(4) M Bernhard was appointed 1 March 2022.
(5) D Abotomey retired 6 December 2021. In FY22, D Abotomey had $711,447 as FY22 cash STI, $476,250 as separation payment and $480,097 in LTI performance rights accrued but only paid if approved by shareholders at the AGM on 19 October 2022. Since the resolution on the deferred STI, the separation payment, and LTI performance rights was not approved by shareholders. the accrual was subsequently reversed in FY23.
(6) N Meehan was appointed Acting CEO on 6 December 2021, CEO on 8 February 2022 and MD & CEO on 1 September 2022.
(7) M Haseltine and C Magill received superannuation over the cap of $23,568 due to a processing error in FY22. Amounts paid over the cap reduce FY23 remuneration accordingly.
(8) Includes BTB incentive plan. The total amount expensed is determined by reference to market and non‑market vesting conditions having regard to the terms and conditions upon which the instruments were granted.
(9) In FY22, C Magill’s cash salary and fees includes a once off payment of $30,250 for higher duties for accountabilities in addition to his EGM Wholesale role during FY22. This has been accrued and cleared in FY23.
(10) T Ryan and J Macdonald retired on 30 September 2022 and 19 October 2022 respectively. B Soller, K Spargo and S Camphausen commenced on 1 November 2022, 1 March 2023 and 4 July 2022 respectively.
(11) From 1 July 2022, the role of EGM Trade was no longer considered to be a KMP. C Magill’s remuneration reflects his period as KMP.
(12) In FY23, S Camphausen fixed remuneration included $70,000 allowance for higher duties in addition to his CFO role during FY23. This has been accrued and not paid in FY23.
(13) Bonus includes any prior year variance for accrual estimate versus actual cash paid. In FY22, the deferred STI component for N Meehan and C Magill was recognised as cash settled whereas it was partially equity settled in FY23. Hence, the FY22 numbers above have been restated to reclass N Meehan by $37,021 and C Magill by $26,537 from cash STI to Equity settled.

DIRECTORS’ REPORT continued

8.2 Service agreements

Remuneration and other terms of employment for Executive KMP are formalised in service agreements. The provisions of the agreements include:

CONTRACT TERMS	MD & CEO	CFO
Commencement	8 February 2022	4 July 2022
date
Term of agreement	Open ended	Open ended
Fixed annual	Contract specifies the FAR inclusive of	Contract specifies the FAR inclusive of
remuneration	superannuation, motor vehicle, non‑cash	superannuation, motor vehicle, non‑cash
(‘FAR’)	benefits and FBT thereon.	benefits and FBT thereon.
Review of FAR	Subject to annual review with no obligation	Subject to annual review with no obligation
	on the company to make changes.	on the company to make changes.
Variable pay	Eligible to participate in the company’s incentive	Eligible to participate in the company’s
	arrangements that can vary from time to time.	incentive arrangements that can vary from time
	The maximum STI opportunity is 100% of the	to time. The maximum STI opportunity is 75%
	executive’s FAR and the maximum LTI opportunity	of the executive’s FAR and the maximum LTI
	is 100% of the executive’s FAR in FY23.	opportunity is 50% of the executive’s FAR in FY23.
Notice period	Subject to a six‑month notice period both	Subject to a six‑month notice period both by the
	by the company and by the Executive.	company and by the Executive.
Confidentiality	Contract includes provisions requiring the	Contract includes provisions requiring the
	Executive to maintain the confidentiality of	Executive to maintain the confidentiality of
	company information.	company information.
Leave	Contract provides for leave entitlements,	Contract provides for leave entitlements,
	as a minimum, in accordance with	as a minimum, in accordance with
	respective legislation.	respective legislation.
Restraint of trade	Contract includes restraint of trade provision	Contract includes restraint of trade provision
	for a period of twelve months after termination	for a period of six months after termination
	of employment.	of employment.
Termination	Contract includes termination payments relating	Contract includes termination payments relating
payments	to amounts accrued and earned such as annual	to amounts accrued and earned such as annual
	leave, long service leave, STI and LTI (subject to	leave, long service leave, STI and LTI (subject to
	vesting conditions and Board approval).	vesting conditions and Board approval).

Bapcor or the Executive KMP may terminate the employment contract by giving the other six months’ written notice before the proposed date of termination, or in Bapcor’s case, payment in lieu of notice. Bapcor may terminate the Executive KMP employment immediately and without payment in lieu of notice in certain circumstances including for any serious misconduct. Other than any amounts accrued and earned such as annual leave, long service leave, STI and LTI (subject to vesting conditions and Board approval) there are no termination payments included in the Executive KMP contracts.

BAPcoR ANNuAL REPORT 2023

DIRECTORS’ REPORT continued

8.3 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 NRESGC. The NRESGC 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 NRESGC 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. Refer section four for more details on independent remuneration consultancy received in FY23.

The maximum aggregate fee pool of $1,500,000 was approved by shareholders at the AGM on 20 October 2020.

The following fee policy for the Board and Committees took effect from 1 July 2022:

	BOARD	NRESGC	ARC
NED TYPE1	$	$	$
Chair	300,000	30,000	30,000
Member	125,000	15,000	15,000

(1) All fee amounts are inclusive of compulsory superannuation obligations.

Fees paid to NEDs in FY23 are set out in the following table. Fees are paid in cash and NEDs were not granted options or share rights. 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.

NED	FINANCIAL YEAR BOARD FEES $ COMMITTEE FEES $ SUPER‑ ANNUATION $ TOTAL $
M Haseltine4	2023 274,708 N/A 19,057 293,765
	2022 362,774 N/A 28,987 391,761
T Ryan1	2023 27,892 7,715 3,762 39,369
	2022 103,380 18,249 12,163 133,792
J Macdonald1	2023 33,716 13,030 4,935 51,681
	2022 103,380 36,498 13,988 153,866
M Powell	2023 111,875 28,396 14,754 155,025
	2022 103,380 27,373 13,075 143,828
J Todd6	2023 111,875 24,951 14,388 151,214
	2022 103,380 9,124 11,250 123,754
M Bernhard5	2023 111,875 24,951 14,388 151,214
	2022 35,301 260 3,556 39,117
B Soller2	2023 74,175 19,160 9,800 103,135
	2022 N/A N/A N/A N/A
K Spargo3	2023 37,394 4,838 4,434 46,667
	2022 N/A N/A N/A N/A

(1) T Ryan retired from the Board from 30 September 2022 and J Macdonald retired from the Board from 19 October 2022.

(2) B Soller was appointed as an Independent, Non‑Executive Director 1 November 2022.

(3) K Spargo was appointed as an Independent, Non‑Executive Director 1 March 2023.

(4) M Haseltine was Interim Executive Chair from 6 December 2021 until 31 Match 2022 and paid $95,342 for these additional services. M Haseltine also received superannuation over the cap of $23,568 due to a processing error in FY22. Amounts paid over the cap will reduce FY23 remuneration accordingly.

(5) M Bernhard was appointed as an Independent, Non‑Executive Director 1 March 2021. He became a member of the ARC from 30 May 2022, and a member of the NRESG from 1 October 2022.

(6) J Todd became a member of the NRESG from 1 October 2022.

DIRECTORS’ REPORT continued

Following external benchmarking, from 1 July 2023 the fee for the Board Chair will increase to $335,000 and the Members’ fees will increase to $140,000.

Shares held by NEDs

The Board has a guideline that Non‑Executive Directors increase their holding of shares in the company so that within three years of appointment it reaches a minimum level of one times the base board fees. The current shareholding interests of the NEDs is set out in section 8.5.

8.4 Share‑based compensation

The following table outlines the details of the LTI grants outstanding for each Executive KMP participant and other movements in performance rights in the year. As performance rights will not vest if the performance conditions are not satisfied, the minimum value of the performance right yet to vest is nil. From FY21 the weighted average face value of shares is used to calculate the number of LTI Performance Rights granted. There were no amounts paid and there were no amounts outstanding or due from KMP in relation to the grant of performance rights during the year.

													MAXIMUM
													TOTAL
											QUAN TITY		VALUE OF
		BALANCE			EXER‑	VALUE AT				FOR‑	REMAIN‑	VALUE	GRANT YET
		AT START	GRANT ED		CISE	GRANT	QUAN‑		QUAN TITY	FEITED/	ING	EXPENSED	TO BE
	GRANT	OF YEAR	DURING	VEST	PRICE	DATE1	TITY	VEST ED	FOR FEITED/	LAPSED	(UNVES‑	THIS YEAR	EXPENSED
KMP	DATE	(NUMBER)	THE YEAR	DATE	$	$	VEST ED	%	LAPSED	%	TED)	$2	$
N
Meehan	10/09/20	71,428	–	30/06/23	–	390,354	–	0%	(71,428)	–100%	–	(38,024)	N/A
	30/08/21	51,316	–	30/06/24	–	270,948	–	0%	–	0%	51,316	(26,000)	32,158
	29/03/22	27,040	–	30/06/24	–	117,624	–	0%	–	0%	27,040	(14,872)	12,168
	12/10/22	–	11,117	12/10/22	–	70,482	(11,117)	100%	–	0%	–	33,461	N/A
	19/10/22	–	184,297	30/06/25	–	903,978	–	0%	–	0%	184,297	159,294	318,587
	8/03/23	–	156,268	30/06/25	–	837,596	–	0%	–	0%	156,268	193,766	644,219
S
Camphausen	12/10/22	–	60,083	30/06/25	–	299,515	–	0%	–	0%	60,083	53,453	106,907
	8/03/23	–	101,892	30/06/25	–	620,318	–	0%	–	0%	101,892	143,502	476,817
Total		149,784	513,657			3,510,815	(11,117)		(71,428)		580,896	504,580	1,590,856

(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 year 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.

BAPcoR ANNuAL REPORT 2023

DIRECTORS’ REPORT continued

8.5 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	RECEIVED	DIVIDEND			RESIGNED/	BALANCE
	AT START OF	DURING	REINVESTMENT	PURCHASE	SALE OF	CEASED	AT THE END
2023	THE YEAR	THE YEAR	PLAN	OF SHARES	SHARES	TO BE KMP	OF THE YEAR
Directors M Haseltine J Todd M Powell M Bernhard N Meehan K Spargo B Soller	61,314 20,000 20,000 5,000 43,325 – –	– – – – – – –	– – – – – – –	12,915 7,500 5,000 17,500 37,880 10,000 7,500	– – – – – – –	– – – – – – –	74,229 27,500 25,000 22,500 81,205 10,000 7,500
other KMP S Camphausen	–	–	–	–	–	–	–
Prior KMP1 C Magill T Ryan J Macdonald	448,719 40,256 35,013	– –– ––	– – –	– – 3,000	(50,000) – –	(398,719) (40,256) (38,013)	– – –
Total	673,627	–	–	101,295	(50,000)	(476,988)	247,934
	BALANCE	RECEIVED	DIVIDEND			RESIGNED/	BALANCE
	AT START OF	DURING	REINVESTMENT	PURCHASE	SALE OF	CEASED	AT THE END
2022	THE YEAR	THE YEAR	PLAN	OF SHARES	SHARES	TO BE KMP	OF THE YEAR
Directors
M Haseltine	49,849	–	–	11,465	–	–	61,314
T Ryan	40,256	–	–	–	–	–	40,256
J Macdonald	30,013	–	–	5,000	–	–	35,013
J Todd	20,000	–	–	–	–	–	20,000
M Powell	13,000	–	–	7,000	–	–	20,000
M Bernhard	–	–	–	5,000	–	–	5,000
D Abotomey	1,441,154	–	–	–	–	(1,441,154)	–
other KMP
N Meehan	14,000	–	–	29,325	–	–	43,325
C Magill	448,719	–	–	–	–	–	448,719
Prior KMP1
M Cooper	47,027	–	–	–	–	(47,027)	–
A Laing	3,000	–	–	–	–	(3,000)	–
T Cockayne	14,184	–	–	–	–	(14,184)	–
S Drummy	5,750	–	–	–	–	(5,750)	–
J Nicol	690	–	–	–	–	(690)	–
Total	2,127,642	–	–	57,790	–	(1,511,805)	673,627

(1) Prior year KMP included in FY23 to ensure opening balance aligns with historical disclosure.

DIRECTORS’ REPORT continued

8.6 Total shares under right to KMP

8.6 Total shares under right to KMP
			EXERCISE
			PRICE
DATE GRANTED	VEST DATE	EXPIRY DATE	OF RIGHTS	QUANTITY
Performance rights plans
30/08/2021	30/06/2024	30/08/2036	–	51,316
29/03/2022	30/06/2024	29/03/2036	–	27,040
12/10/2022	12/10/2022	12/10/2037	–	60,083
19/10/2022	30/06/2025	19/10/2037	–	184,297
8/03/2023	30/06/2025	8/03/2038	–	101,892
To be determined in FY23 AGM (Not granted)
8/03/2023	30/06/2025	8/03/2038	–	156,268
Total shares under right				580,896

8.7 Equity granted in the 2023 financial year

The information provided below provides a list of performance rights granted during the 2023 financial year.

8.7.1 Long‑term incentive plan

An offer to participate in the FY23 LTI plan was made to two Executive KMP. A summary of the key features of plan is in the following table:

following table:
Grant date	12/10/2022	19/10/2022
Performance hurdle	Relative TSR ROIC	Relative TSR ROIC
Performance period	1/07/2022 to 30/06/2025	1/07/2022 to 30/06/2025
Test date	30/06/2025	30/06/2025
Expiry date	12/10/2037	19/10/2037
Quantity granted2	30,042 30,041	92,148 92,149
Exercise price	Nil	Nil
Fair value at grant date1	$4.18 $5.79	$4.03 $5.78
	Sale restriction to	Sale restriction to
Other conditions	30/06/2026	30/06/2026
Share price on valuation date	$6.35	$6.34
Volatility	40.55%	40.55%
Dividend yield	3.47%	3.47%
Risk free rate	3.41%	3.41%

(1) The fair value represents the value used to calculate the accounting expense as required by accounting standards.

(2) Due to rounding the total shares per tranche are not exactly 50/50 split but approximate that.

BAPcoR ANNuAL REPORT 2023

DIRECTORS’ REPORT continued

8.7.2 Better Than Before incentive plan – structure

An offer to participate in the BTB plan was made to Mr. Camphausen. Mr. Meehan’s total FY23 remuneration includes a BTB award, intended to be allocated via performance rights, contingent upon shareholder approval sought during the upcoming Bapcor AGM. A summary of the key features of plan in the following table:

Grant date	08/03/2023	08/03/2023	Yet to be determined
Performance hurdle	ROIC	Net EBIT	ROIC Net EBIT
Performance period	22/11/2022 to 30/6/2025		22/11/2022 to 30/6/2025
Vesting date	30/06/2025		30/06/2025
Expiry date	8/03/2038		8/03/2038
Quantity granted	50,946	50,946	78,134 78,134
Exercise price		Nil	Nil
Fair value at grant date1		$6.088	$5.36
			Issuance of performance
			rights subject to shareholder
			approval at the Company’s
Other conditions			2023 Annual General Meeting
Share price on valuation date		$6.73	$5.94
Dividend yield		3.27%	3.53%

(1) The fair value represents the value used to calculate the accounting expense as required by accounting standards.

8.8 Loans and other transactions with KMP

No loans were made to any KMP in FY23 and there are no outstanding loans to any KMP. No other transactions occurred in FY23 with any KMP.

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

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Margaret Haseltine Chair

16 August 2023 Melbourne

AUDITOR’S INDEPENDENCE DECLARATION

Auditor’s Independence Declaration

As lead auditor for the audit of Bapcor Limited for the year ended 30 June 2023, 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.

Alison Tait Milner Melbourne Partner 16 August 2023 PricewaterhouseCoopers

PricewaterhouseCoopers, ABN 52 780 433 757

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 ANNuAL REPORT 2023

FINANCIAL REPORT

Consolidated Statement of Comprehensive Income	85
Consolidated Statement of Financial Position	86
Consolidated Statement of Changes in Equity	87
Consolidated Statement of Cash Flows	88
Notes to the Consolidated Financial Statements	89
Directors’ Declaration	138
Independent Auditor’s Report	139
Shareholder Information	144
Corporate Directory	146

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 June 2023

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CONSOLIDATED
2023 2022
NOTE $'000 $'000
Revenue 4 2,021,135 1,841,905
Share of profits of associates accounted for using the equity method 13 1,937 575
Other income 5 2,182 1,709
Expenses
Cost of sales (1,077,325) (982,466)
Employee expenses (446,749) (392,889)
Freight (34,839) (27,334)
Advertising (36,668) (33,654)
Other expenses (107,984) (80,292)
Motor vehicles (17,351) (14,811)
IT and communications (30,342) (26,542)
Depreciation and amortisation expense 6 (96,657) (88,783)
Finance costs 6 (28,932) (19,336)
Profit before income tax expense 148,407 178,082
Income tax expense 7 (42,238) (52,527)
Profit after income tax expense for the year 106,169 125,555
other comprehensive income
Items that may be reclassified to profit or loss
Foreign currency translation 3,681 (6,604)
Changes in the fair value of cash flow hedges (2,021) 3,045
Other comprehensive income for the year, net of tax 1,660 (3,559)
Total comprehensive income for the year 107,829 121,996
Profit for the year is attributable to:
Non‑controlling interest (279) (204)
Owners of Bapcor Limited 22 106,448 125,759
106,169 125,555
Total comprehensive income for the year is attributable to:
Non‑controlling interest 104 (235)
Owners of Bapcor Limited 107,725 122,231
107,829 121,996
CENTS CENTS
Basic earnings per share 25 31.36 37.05
Diluted earnings per share 25 31.23 36.92
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The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.

BAPcoR ANNuAL REPORT 2023

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2023

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CONSOLIDATED
2023 2022
NOTE $'000 $'000
Assets
current assets
Cash and cash equivalents 78,634 80,213
Trade and other receivables 8 239,593 209,826
Inventories 9 519,659 538,688
Derivative financial instruments 18 3,381 6,393
Income tax receivable 7 17,149 6,410
Other assets – 129
Total current assets 858,416 841,659
Non‑current assets
Right‑of‑use assets 10 283,775 230,199
Property, plant and equipment 11 115,218 106,924
Intangibles 12 798,740 779,788
Investments accounted for using the equity method 13 10,997 9,071
Deferred tax 7 25,229 23,934
Total non‑current assets 1,233,959 1,149,916
Total assets 2,092,375 1,991,575
Liabilities
current liabilities
Trade and other payables 14 259,940 236,561
Provisions 15 47,506 45,958
Lease liabilities 17 72,095 65,067
Derivative financial instruments 18 243 344
Total current liabilities 379,784 347,930
Non‑current liabilities
Provisions 15 17,164 16,744
Borrowings 16 331,138 346,702
Lease liabilities 17 239,184 187,942
Total non‑current liabilities 587,486 551,388
Total liabilities 967,270 899,318
Net assets 1,125,105 1,092,257
Equity
Issued capital 20 867,972 867,972
Reserves 21 4,458 3,149
Retained profits 22 251,665 219,888
Equity attributable to the owners of Bapcor Limited 1,124,095 1,091,009
Non‑controlling interest 23 1,010 1,248
Total equity 1,125,105 1,092,257
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The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 June 2023

					NON‑
	CONTRIBUTED			RETAINED	CONTROLLING
	EQUITY	OTHER	RESERVES	EARNINGS	INTERESTS	TOTAL EQUITY
CONSOLIDATED	$’000	$’000	$’000	$’000	$’000	$’000
Balance at 1 July 2021	878,652	(10,680)	8,412	165,406	1,405	1,043,195
Profit/(loss) after income
tax expense for the year	–	–	–	125,759	(204)	125,555
Other comprehensive
income for the year,
net of tax	–	–	(3,528)	–	(31)	(3,559)
Total comprehensive
income for the year	–	–	(3,528)	125,759	(235)	121,996
Transactions with
owners in their
capacity as owners:
Share‑based payments
(note 34)	–	–	(1,735)	–	–	(1,735)
Non‑controlling interest
capital	–	–	–	–	78	78
Dividends paid (note 24)	–	–	–	(71,277)	–	(71,277)
Balance at 30 June 2022	878,652	(10,680)	3,149	219,888	1,248	1,092,257
					NON‑
	CONTRIBUTED			RETAINED	CONTROLLING
	EQUITY	OTHER	RESERVES	EARNINGS	INTERESTS	TOTAL EQUITY
CONSOLIDATED	$’000	$’000	$’000	$’000	$’000	$’000
Balance at 1 July 2022	878,652	(10,680)	3,149	219,888	1,248	1,092,257
Profit/(loss) after income
tax expense for the year	–	–	–	106,448	(279)	106,169
Other comprehensive
income for the year,
net of tax	–	–	1,619	–	41	1,660
Total comprehensive
income for the year	–	–	1,619	106,448	(238)	107,829
Transactions with
owners in their
capacity as owners:
Share‑based payments
(note 34)	–	–	(310)	–	–	(310)
Dividends paid (note 24)	–	–	–	(74,671)	–	(74,671)
Balance at 30 June 2023	878,652	(10,680)	4,458	251,665	1,010	1,125,105

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

BAPcoR ANNuAL REPORT 2023

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 30 June 2023

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CONSOLIDATED
2023 2022
NOTE $'000 $'000
cash flows from operating activities
Receipts from customers (inclusive of GST) 2,202,621 2,008,118
Payments to suppliers and employees (inclusive of GST) (1,881,913) (1,822,784)
Net cash converted 320,708 185,334
Payments for new store initial inventory purchases (14,535) (9,347)
Payments for restructuring costs (4,803) (5,826)
–
Payments for transformation costs (19,934)
Borrowing costs (14,378) (7,378)
Transaction costs relating to acquisition of business (329) (442)
Income taxes paid (53,000) (57,518)
Net cash from operating activities 26 213,729 104,823
cash flows from investing activities
Payment for purchase of business, net of cash and cash equivalents 29 (19,381) (20,602)
Payment for deferred settlements (1,007) (2,047)
Payments for property, plant and equipment 11 (33,751) (43,577)
Payments for intangibles 12 (7,594) (13,824)
Proceeds from disposal of property, plant and equipment 2,727 15,553
Net cash used in investing activities (59,006) (64,497)
cash flows from financing activities
Net proceeds/(repayments) of borrowings (15,000) 143,049
Dividends paid 24 (74,671) (71,277)
Repayment of lease liabilities (66,290) (69,989)
Borrowing transaction costs (1,255) (1,012)
Net cash from/(used in) financing activities (157,216) 771
Net increase/(decrease) in cash and cash equivalents (2,492) 41,097
Cash and cash equivalents at the beginning of the financial year 80,213 39,598
Effects of exchange rate changes on cash and cash equivalents 914 (482)
Cash and cash equivalents at the end of the financial year 78,634 80,213
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The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 June 2023

Note	1.	Significant accounting policies	90
Note	2.	Critical accounting judgements, estimates and assumptions	92
Note	3.	Segment information	93
Note	4.	Revenue	95
Note	5.	Other income	96
Note	6.	Expenses	96
Note	7.	Income tax	97
Note	8.	Trade and other receivables	100
Note	9.	Inventories	101
Note	10.	Right‑of‑use assets	102
Note	11.	Property,plant and equipment	104
Note	12.	Intangibles	105
Note	13.	Investments accounted for usingthe equitymethod	109
Note	14.	Trade and otherpayables	109
Note	15.	Provisions	110
Note	16.	Borrowings	112
Note	17.	Lease liabilities	114
Note	18.	Derivative financial instruments	115
Note	19.	Fair value measurement	116
Note	20.	Issued capital	117
Note	21.	Reserves	118
Note	22.	Retainedprofits	119
Note	23.	Non‑controllinginterest	119
Note	24.	Dividends	119
Note	25.	Earningsper share	120
Note	26.	Reconciliation of profit after income tax
		to net cash from operatingactivities	121
Note	27.	Financial risk management	122
Note	28.	Relatedpartytransactions	126
Note	29.	Business combinations	126
Note	30.	Deed of crossguarantee	128
Note	31.	Parent entityinformation	131
Note	32.	Interests in subsidiaries	132
Note	33.	Related party transactions – key management personnel
		disclosures	133
Note	34.	Share‑basedpayments	133
Note	35.	Remuneration of auditors	136
Note	36.	Commitments and contingent liabilities	137
Note	37.	Events after the reporting period	137

BAPcoR ANNuAL REPORT 2023

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Note 1. Significant accounting policies

The principal accounting policies adopted in the preparation of the financial statements are set out either in the respective notes or 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.

Reclassifications in prior year

The financial statements contain some reclassifications of prior year disclosures to ensure comparability with the current year and are detailed in the respective notes where they have occurred.

Basis of preparation

These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the AASB and the Corporations Act 2001 , as appropriate for for‑profit oriented entities. These financial statements also comply with International Financial Reporting Standards (‘IFRS’) 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 financial assets and liabilities at fair value through profit or loss, financial assets at fair value through other comprehensive income 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 31.

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 2023 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 on consolidation. 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.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

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.

Associates

Associates are entities over which the consolidated entity has significant influence but not control or joint control. Investments in associates are accounted for using the equity method. under the equity method, the share of the profits or losses of the associate is recognised in profit or loss and the share of the movements in equity is recognised in other comprehensive income. Investments in associates are carried in the statement of financial position at cost plus post‑acquisition changes in the consolidated entity’s share of net assets of the associate. Goodwill relating to the associate is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment. Dividends received or receivable from associates reduce the carrying amount of the investment.

When the consolidated entity’s share of losses in an associate equals or exceeds its interest in the associate, including any unsecured long‑term receivables, the consolidated entity does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

The consolidated entity discontinues the use of the equity method upon the loss of significant influence over the associate and recognises any retained investment at its fair value. Any difference between the associates carrying amount, fair value of the retained investment and proceeds from disposal is recognised in profit or loss.

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.

current and non‑current classification

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

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 twelve 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 twelve 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 twelve months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period. All other liabilities are classified as non‑current.

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

BAPcoR ANNuAL REPORT 2023

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

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.

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

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 within the next financial year are included in the following notes to the consolidated financial statements:

› Note 8 – Trade and other receivables
› Note 9 – Inventories
› Note 11 – Property, plant and equipment
› Note 12 – Intangibles
› Note 15 – Provisions
› Note 17 – Lease liabilities
› Note 29 – Business combinations
› Note 34 – Share‑based payments

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Note 3. Segment information

Description of segments

The consolidated entity has identified four operating segments based on the internal reports that are reviewed and used by the MD & CEO (who is identified as the Chief Operating Decision Maker (‘CODM’)) and is supported by the other members of the executive team and the Board of Directors where required 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:

Bapcor Trade	Represents the trade focused automotive aftermarket parts distribution to independent
	and chain mechanic workshops. Includes the operations of Burson Auto Parts, Precision
	Automotive Equipment, Blacktown Auto Spares and the Thailand based operations.
Bapcor Specialist	Includes the specialised wholesale distribution and network channel areas of the
Wholesale	organisation that focus on a specific automotive area. Includes the operations of AAD,
	Baxters, Bearing Wholesalers, MTQ Engine Systems, Roadsafe, Diesel Distributors,
	Federal Batteries, JAS Oceania, Premier Auto Trade, Toperformance, Truckline and WANO.
Bapcor Retail	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, Midas, ABS and Opposite Lock.
Bapcor NZ	Includes the operations of Brake & Transmission (‘BNT’), Autolign and HCB Technologies.

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, tax and other items which are determined to be outside of the control of the respective segments.

BAPcoR ANNuAL REPORT 2023

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

operating segment information

	BAPCOR TRADE BAPCOR SPECIALISTS WHOLESALE BAPCOR RETAIL BAPCOR NZ UNALLOCATED/ HEAD OFFICE	TOTAL
CONSOLIDATED – 2023	$’000 $’000 $’000 $’000 $’000	$’000
Revenue Sales Total segment revenue Intersegment sales Total revenue EBITDA Intersegment EBITDA Depreciation and amortisation Finance costs Profit before income tax expense Income tax expense Profit after income tax expense Assets Segment assets
	763,158 765,953 426,185 176,087 14	2,131,397
	763,158 765,953 426,185 176,087 14	2,131,397
		(110,262)
		2,021,135
	124,246 102,891 67,648 29,880 (50,368)	274,297
		(301)
		(96,657)
		(28,932)
		148,407
		(42,238)
		106,169

	431,262 659,678 500,051 286,373 215,011	2,092,375
Total assets Liabilities Segment liabilities		2,092,375

	147,986 158,274 157,065 51,188 452,757	967,270
Total liabilities		967,270
	BAPCOR TRADE BAPCOR SPECIALISTS WHOLESALE BAPCOR RETAIL BAPCOR NZ UNALLOCATED/ HEAD OFFICE	TOTAL
CONSOLIDATED – 2022	$’000 $’000 $’000 $’000 $’000	$’000
Revenue Sales Total segment revenue Intersegment sales Total revenue EBITDA Intersegment EBITDA Depreciation and amortisation Finance costs Profit before income tax expense Income tax expense Profit after income tax expense Assets Segment assets	685,584 699,450 393,521 171,049 –	1,949,604
	685,584 699,450 393,521 171,049 –	1,949,604 (107,699)
	115,069 102,003 66,533 32,848 (27,382)
		1,841,905
		289,071 (2,870) (88,783) (19,336)
	438,474 633,512 486,240 285,021 148,328
		178,082 (52,527)
		125,555
		1,991,575
Total assets Liabilities Segment liabilities	153,658 131,630 137,784 48,598 427,648	1,991,575
		899,318
Total liabilities		899,318

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Geographical information

	GEOGRAPHICAL NON‑CURRENT	GEOGRAPHICAL NON‑CURRENT
		ASSETS
Australia	2023 $’000 1,022,573	2022 $’000 943,926
New Zealand	185,408	181,168
Other	734	888
	1,208,715	1,125,982

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.

Significant accounting policies

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.

Note 4. Revenue

Note 4. Revenue
	CONSOLIDATED
	2023 $’000	2022 $’000
Revenue from contracts with customers	2,021,135	1,841,905

Disaggregation of revenue

The disaggregation of revenue from contracts with customers is as follows:

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CONSOLIDATED
2023 2022
$’000 $’000
Geographical regions
Australia 1,947,961 1,773,580
New Zealand 176,087 171,049
Thailand 7,349 4,975
Intersegment sales (110,262) (107,699)
2,021,135 1,841,905
Timing of revenue recognition
Goods transferred at a point in time 2,097,632 1,918,267
Services transferred over time 33,765 31,337
Intersegment sales (110,262) (107,699)
2,021,135 1,841,905
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BAPcoR ANNuAL REPORT 2023

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Significant accounting policies

Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the consolidated entity: identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand‑alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised.

Sale of goods

Revenue from the sale of goods is recognised at the point in time when the customer obtains control of the goods, which is generally at the time of delivery.

Rendering of services – franchise and service fees

Revenue from services is recognised over time as the services are rendered in line with the customer contract terms.

Note 5. other income

Note 5. other income
	CONSOLIDATED
	2023 $’000	2022 $’000
Rental income	2,182	1,709

Rental income relates to rental recoveries from franchise locations.

Note 6. Expenses

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CONSOLIDATED
2023 2022
$’000 $’000
Profit before income tax includes the following specific expenses:
Depreciation and amortisation expense
Plant and equipment 16,056 15,356
Motor vehicles 7,620 6,743
Properties right‑of‑use assets 63,769 58,452
Motor vehicles right‑of‑use assets 487 936
Amortisation of intangibles 8,725 7,296
96,657 88,783
Finance costs
Interest and finance charges paid/payable 14,709 8,129
Interest and finance charges paid/payable on lease liabilities 14,223 11,207
28,932 19,336
Superannuation expense
Defined contribution superannuation expense 32,442 27,012
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Note 7. Income tax

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CONSOLIDATED
2023 2022
$’000 $’000
Income tax expense
Current tax on profits for the year 40,758 35,606
Deferred tax expense 3,769 16,734
Adjustment recognised for prior periods (2,289) 187
Aggregate income tax expense 42,238 52,527
Deferred tax included in income tax expense comprises:
Decrease/(increase) in deferred tax assets (16,254) 2,707
Increase in deferred tax liabilities 20,023 14,027
Deferred tax expense 3,769 16,734
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense 148,407 178,082
Tax at the statutory tax rate of 30% 44,522 53,425
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Other 454 (617)
44,976 52,808
Adjustment recognised for prior periods (2,289) 187
Difference in overseas tax rates (449) (468)
Income tax expense 42,238 52,527
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BAPcoR ANNuAL REPORT 2023

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

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CONSOLIDATED
2023 2022
$’000 $’000
Deferred tax asset
Deferred tax asset comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Property, plant and equipment 2,567 2,616
Employee benefits 13,051 12,438
Trade and other receivables 2,164 2,546
Inventory 18,394 20,342
Lease liabilities 92,854 75,405
Other 11,090 6,209
140,120 119,556
Amounts recognised in equity:
Transaction costs on share issue 278 567
Share‑based payment 620 677
898 1,244
Deferred tax asset 141,018 120,800
Movements:
Opening balance 120,800 117,370
Credited/(charged) to profit or loss 16,254 (2,707)
Charged to equity (289) (289)
Additions through business combinations 1,167 2,736
Charged to other comprehensive income (57) (1,254)
Adjustment recognised for prior periods 3,143 4,944
Deferred tax asset 141,018 120,800
Set‑off against Deferred tax liability (115,789) (96,866)
Net Deferred tax asset 25,229 23,934
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

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CONSOLIDATED
2023 2022
$’000 $’000
Deferred tax liability
Deferred tax liability comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Property, plant and equipment 8,806 6,606
Customer contracts 4,685 4,135
Trademarks 17,064 17,034
Right‑of‑use assets 84,293 67,295
114,848 95,070
Amounts recognised in equity:
Cash flow hedge 941 1,796
Deferred tax liability 115,789 96,866
Movements:
Opening balance 96,866 80,940
Charged to profit or loss 20,023 14,027
Charged to other comprehensive income (855) 1,204
Additions through business combinations (245) 695
Closing balance 115,789 96,866
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Significant accounting policies

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 is 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.

BAPcoR ANNuAL REPORT 2023

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Note 8. Trade and other receivables

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CONSOLIDATED
2023 2022
$’000 $’000
Current assets
Trade receivables 199,873 181,609
Less: Allowance for credit notes (1,726) (1,574)
Less: Allowance for expected credit losses (trade receivables) (4,694) (6,783)
193,453 173,252
Customer loans 129 210
Less: Allowance for expected credit losses (customer loans) (129) (210)
– –
Other receivables 35,733 24,091
Prepayments 10,407 12,483
46,140 36,574
239,593 209,826
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Trade receivables are non‑interest bearing and repayment terms vary by business unit. The total allowance for expected credit losses is $4,823,000 (2022: $6,993,000).

Customer loans relate to loans with franchisees. Loans with repayment terms of less than twelve months are classified as current. Total customer loans balance of $129,000 is non‑interest bearing (2022: $210,000).

Other receivables relate to rebates and other non‑trading receivables which are non‑interest bearing. Receivables with repayment terms of less than twelve months are classified as current. These receivables are all neither past due nor impaired.

The ageing of the net trade receivables and loans above are as follows:

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CONSOLIDATED
2023 2022
$’000 $’000
Current and not due 126,827 110,554
31 – 60 days 46,620 45,694
61 – 90 days 8,275 9,034
91+ days 11,731 7,970
193,453 173,252
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Movements in the allowance for expected credit losses of trade receivables and customer loans are as follows:

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CONSOLIDATED
2023 2022
$’000 $’000
Opening balance 6,993 7,381
Net additional provisions recognised/(de‑recognised) (371) 5
Additions through business combinations – 69
Amounts utilised for debt write‑off (1,801) (451)
Foreign currency translation 2 (11)
Closing balance 4,823 6,993
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Bapcor de‑recognised $(371,000) in respect of impaired receivables during the financial year (2022: recognised $5,000).

100

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Significant accounting policies

Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for specific debtors and general expected credit losses. Trade receivables are generally due for settlement within 30 to 60 days.

Other receivables are recognised at amortised cost, less any allowance for specific debtors and general expected credit losses.

Impairment

The impairment methodology applied depends on whether there has been a significant increase in credit risk, whereby specific provision will be applied to trade and other receivables not expected to be collected and expected credit losses associated with the trade and other receivables.

In assessing the expected credit losses, the consolidated entity first considers any specific debtors that have objective evidence that the consolidated entity will not be able to collect all amounts due according to the original terms of the receivables, taking into consideration the indicators of significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy and default or delinquency in payments. The consolidated entity then applies the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance, on the balance of receivables. To measure the expected credit losses, trade receivables have been grouped based on ageing.

critical accounting judgements, estimates and assumptions

The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is assessed by taking into account the ageing of receivables, historical collection rates and specific knowledge of the individual debtor’s financial position.

Note 9. Inventories

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CONSOLIDATED
2023 2022
$’000 $’000
Current assets
Stock in transit – at cost 23,722 46,878
Stock on hand – at cost 550,102 550,246
Less: Provision for slow moving inventory (54,165) (58,436)
495,937 491,810
519,659 538,688
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Total inventories at cost have decreased by $23.3M since 30 June 2022, due to improvements in managing inventory holdings and driving better efficiencies across the Group.

BAPcoR ANNuAL REPORT 2023

101

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Movements in provision for slow moving inventory

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CONSOLIDATED
2023 2022
$’000 $’000
Opening balance (58,436) (53,792)
Additional provisions released 4,523 (5,751)
Additions through business combinations (2,518) (3,594)
Inventory written off against provision 2,378 4,512
Foreign currency translation (112) 189
Closing balance (54,165) (58,436)
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Significant accounting policies

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.

The provision for slow moving inventory represents inventory held in excess of expected sales over defined periods or where the net realisable value is expected to be negligible.

critical accounting judgements, estimates and assumptions

The provision for slow moving inventory assessment requires a degree of estimation and judgement. The level of the provision is assessed by taking into account the recent sales experience and other factors that affect inventory obsolescence.

Note 10. Right‑of‑use assets

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CONSOLIDATED
2023 2022
$’000 $’000
Non‑current assets
Properties – right‑of‑use 504,785 387,719
Less: Accumulated depreciation (221,275) (158,149)
283,510 229,570
Motor vehicles – right‑of‑use 4,531 4,626
Less: Accumulated depreciation (4,266) (3,997)
265 629
283,775 230,199
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The large increase in property right‑of‑use assets in FY23 was primarily due to $49.5M recognised on commencement of the lease for the Distribution Centre in Queensland as well as $52.5M of option remeasurements. There was a corresponding increase to the property lease liability by the same amount. Refer to note 17.

102

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Reconciliations

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

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----- Start of picture text -----

MOTOR
PROPERTY VEHICLES TOTAL
CONSOLIDATED $’000 $’000 $’000
Balance at 1 July 2021 196,693 1,290 197,983
Additions 38,027 – 38,027
–
Additions through business combinations (note 29) 2,317 2,317
Disposals (4,526) (6) (4,532)
Remeasurements [1] 56,155 290 56,445
Foreign currency translation (644) (9) (653)
Depreciation expense (57,899) (936) (58,835)
Accelerated depreciation expense [2] (553) – (553)
Balance at 30 June 2022 229,570 629 230,199
Additions 66,298 – 66,298
Additions through business combinations (note 29) 816 – 816
–
Disposals (3,693) (3,693)
Remeasurements [1] 54,024 119 54,143
Foreign currency translation 263 5 268
Depreciation expense (62,279) (487) (62,766)
–
Accelerated depreciation expense [2] (1,490) (1,490)
Balance at 30 June 2023 283,509 266 283,775
----- End of picture text -----

(1) Remeasurements occur when options to renew that were previously excluded are subsequently included or when rentals change due to non‑fixed rent reviews, causing an adjustment to both right‑of‑use asset and lease liability balances.

(2) Accelerated depreciation relates to the DC Consolidation projects and is based on the estimated exit dates of each site.

Significant accounting policies

A right‑of‑use asset is recognised at the commencement date of a lease. The right‑of‑use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset.

Right‑of‑use assets are depreciated on a straight‑line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right‑of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities.

The consolidated entity has elected not to recognise a right‑of‑use asset and corresponding lease liability for short‑term leases with terms of twelve months or less and leases of low‑value assets. Lease payments on these assets are expensed to profit or loss as incurred.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Note 11. Property, plant and equipment

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CONSOLIDATED
2023 2022
$’000 $’000
Non‑current assets
Plant and equipment – at cost 173,195 150,817
Less: Accumulated depreciation (83,455) (67,348)
89,740 83,469
Motor vehicles – at cost 51,804 47,404
Less: Accumulated depreciation (26,326) (23,949)
25,478 23,455
115,218 106,924
----- End of picture text -----

The amount of work in progress included in plant and equipment is $10,402,000 (2022: $8,669,000) and relates to projects that are not yet completed and therefore are not being depreciated. The work in progress balance in both FY23 and FY22 predominately relate to the Queensland DC consolidation project.

Reconciliations

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

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PLANT AND MOTOR
EQUIPMENT VEHICLES TOTAL
CONSOLIDATED $’000 $’000 $’000
Balance at 1 July 2021 78,730 21,258 99,988
Additions 34,074 9,503 43,577
Additions through business combinations (note 29) 507 208 715
Disposals [1] (14,326) (693) (15,019)
Foreign currency translation (160) (78) (238)
Accelerated depreciation expense [2] (822) – (822)
Depreciation expense (14,534) (6,743) (21,277)
Balance at 30 June 2022 83,469 23,455 106,924
Additions 31,803 10,472 42,275
Additions through business combinations (note 29) 55 – 55
Disposals [3] (9,594) (829) (10,423)
Foreign currency translation 60 2 62
Accelerated depreciation expense [2] (822) – (822)
Depreciation expense (15,233) (7,620) (22,853)
Balance at 30 June 2023 89,738 25,480 115,218
----- End of picture text -----

(1) Disposals for plant and equipment includes the sale of assets for $13.7M to Australia Pacific Airports (Melbourne) Pty Ltd.

(2) Accelerated depreciation relates to the DC Consolidation projects and is based on the estimated exit dates of each site.

(3) Disposals for plant and equipment includes the fit‑out contribution of $8.5M for the Queensland DC.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Significant accounting policies

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.

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.

critical accounting judgements, estimates and assumptions

The consolidated entity determines the estimated useful lives and related depreciation charges for its property, plant and equipment assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation 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.

Note 12. Intangibles

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CONSOLIDATED
2023 2022
$’000 $’000
Non‑current assets
Goodwill 697,374 677,382
Trademarks 59,058 58,973
Less: Accumulated amortisation (1,346) (1,346)
57,712 57,627
Customer contracts 25,900 25,899
Less: Accumulated amortisation (13,891) (12,091)
12,009 13,808
Software 57,436 49,837
Less: Accumulated amortisation (25,791) (18,866)
31,645 30,971
798,740 779,788
----- End of picture text -----

The amount of work in progress included in software is $5,549,000 (2022: $12,444,000) and relates to eCommerce, inventory and rostering management projects that are not yet completed and therefore are not being amortised.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Reconciliations

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

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CUSTOMER COMPUTER
GOODWILL TRADEMARKS CONTRACTS SOFTWARE TOTAL
CONSOLIDATED $’000 $’000 $’000 $’000 $’000
Balance at 1 July 2021 667,879 57,741 15,636 22,628 763,884
Additions – – – 13,824 13,824
Additions through business combinations
(note 29) 13,582 – – – 13,582
Foreign currency translation (4,079) (114) 15 (28) (4,206)
– –
Amortisation expense (1,843) (5,453) (7,296)
Balance at 30 June 2022 677,382 57,627 13,808 30,971 779,788
Additions – – – 7,594 7,594
Additions through business combinations
(note 29) 17,489 – – – 17,489
Disposals – – – (2) (2)
Foreign currency translation 2,503 85 1 7 2,596
– –
Amortisation expense (1,800) (6,925) (8,725)
Balance at 30 June 2023 697,374 57,712 12,009 31,645 798,740
----- End of picture text -----

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. These calculations require the use of key assumptions on which management has based its cash flow projections, as well as pre‑tax discount rates. The testing was assessed up until the date of this financial report.

Cash flow projections were based on management forecast expectations based on the FY24 budget and the latest five year forecast model. 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.

The following key assumptions were used in testing for impairment:

› Pre‑tax discount rate: 13.00% for Australian CGus;13.75% for New Zealand CGu (2022:12.60% for Australian CGus and 13.40% for New Zealand CGus)
› Terminal value growth rate beyond 5 years: 2.50% for Australian CGus and 2.00% for New Zealand CGus (2022: 2.65% for all CGus)
› Forecast year on year revenue and EBITDA margin growth ranges as follows:

CGU	REVENUE GROWTH AVERAGE	EBITDA MARGIN GROWTH AVERAGE
Bapcor Trade	5.5%	0.3 percentage points
Bapcor Specialist Wholesale	5.5%	0.1 percentage points
Bapcor Retail	4.9%	0.2 percentage points
Bapcor New Zealand	5.4%	0.2 percentage points

A reasonable possible change in assumptions would not cause the carrying value of any CGu to exceed its recoverable amount, except for the Bapcor Retail and Bapcor New Zealand CGus, which remain relatively more sensitive to changes in trading conditions. The following tables show sensitivities based on a set of possible changes in assumptions to the major financial metric percentages within the calculations, and the resulting change to the headroom.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Bapcor Retail cGU

Bapcor Retail cGU	Bapcor Retail cGU
The recoverable amount of the Retail CGu is estimated to exceed its carrying		amount at 30 June 2023 by $83.4M.
FINANCIAL METRIC	+5% CHANGE	‑5% CHANGE
Discount rate	Decrease headroom to $54.8M	Increase headroom to $116.1M
Revenue growth (average)	Increase headroom to $86.9M	Decrease headroom to $79.9M
EBITDA margin (average)	Increase headroom to $107.5M	Decrease headroom to $59.2M
Terminal growth rate	Increase headroom to $99.9M	Decrease headroom to $66.8M

Bapcor New Zealand cGU (NZD)

The recoverable amount of the Bapcor New Zealand CGu is estimated to exceed its carrying amount at 30 June 2023 by $20.2M.

$20.2M.
FINANCIAL METRIC	+5% CHANGE	‑5% CHANGE	+10% CHANGE	‑10% CHANGE
Discount rate	Decrease headroom	Increase headroom
	to $4.7M	to $37.7M
Revenue growth	Increase headroom	Decrease headroom	Decrease headroom	Decrease headroom
(average)	to $22.1M	to $18.3M	to $17.0M	to $15.4M
EBITDA margin	Increase headroom	Decrease headroom
(average)	to $36.0M	to $4.4M	Impairment of $6.6M	Impairment of $18.2M
Terminal growth rate	Increase headroom	Decrease headroom
	to $29.5M	to $10.8M

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

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CONSOLIDATED
2023 2022
$’000 $’000
Goodwill:
Trade 117,048 117,048
Specialist Wholesale 286,617 273,792
Retail 146,077 141,413
Bapcor NZ 147,632 145,129
697,374 677,382
CONSOLIDATED
2023 2022
$’000 $’000
Other intangible assets:
Trade 9 26
Specialist Wholesale 18,097 18,097
Retail 46,330 48,193
Bapcor NZ 5,285 5,119
69,721 71,435
----- End of picture text -----

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Significant accounting policies

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.

Trademarks

Tradenames (including brands) 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.

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 5 years. Large scale projects are individually assessed as part of the approval process and determination of finite life may exceed this range.

Costs relating to the configuration and customisation of application software relating to a Software as a Service (‘SaaS’) arrangement are expensed when services are received, unless an asset that is under control of the consolidated entity can be separately identified.

critical accounting judgements, estimates and assumptions

The consolidated entity determines the estimated useful lives and related amortisation charges for its finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The 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.

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 above. 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.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Note 13. Investments accounted for using the equity method

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CONSOLIDATED
2023 2022
$’000 $’000
Non‑current assets
Investment in Tye Soon Limited (25% ownership) 10,997 9,071
Reconciliation
Reconciliation of the carrying amounts at the beginning and end of the current and
previous financial year are set out below:
Opening carrying amount 9,071 8,102
Profit after income tax 1,937 1,296
Other comprehensive income (672) (721)
Foreign currency translation 661 394
Closing carrying amount 10,997 9,071
----- End of picture text -----

Bapcor assessed the recoverable amount of this investment for impairment as at 30 June 2023 under the methodologies prescribed by AASB 136 Impairment of Assets utilising the publicly available share price on that date. The carrying value of the investment in Tye Soon is currently based on SGD $0.37 per share. The closing share price on 30 June 2023 was SGD $0.37 per share which indicates no further impairment required.

The reported total of profit after income tax and other comprehensive income of $1,265,000 (FY22: $575,000) has been estimated using the latest publicly available information on the Singapore Securities Exchange which is the Tye Soon Limited full‑year financial report ended 31 December 2022.

Note 14. Trade and other payables

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----- Start of picture text -----

CONSOLIDATED
2023 2022
$’000 $’000
Current liabilities
Trade payables 210,624 176,971
Accrued expenses 49,316 59,590
259,940 236,561
----- End of picture text -----

Refer to note 27 for further information on financial risk management.

Significant accounting policies

Trade payable and accrued expense 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 short‑term 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.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Note 15. Provisions

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----- Start of picture text -----

CONSOLIDATED
2023 2022
$’000 $’000
Current liabilities
Employee benefits 40,940 39,154
Deferred settlements – 1,006
Lease make good 3,675 2,884
Restructuring 2,891 2,914
47,506 45,958
Non‑current liabilities
Employee benefits 3,649 3,661
Deferred settlements 1,125 125
Lease make good 12,390 12,958
17,164 16,744
64,670 62,702
----- End of picture text -----

Deferred settlements

This provision represents the obligation to pay consideration following the acquisition of a business. It is measured at the present value of the estimated liability.

Lease make good

The 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.

Restructuring

This provision represents the estimated termination costs relating to the closure of a number of locations for the Victorian and Queensland DC consolidation projects.

Movements in provisions

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

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----- Start of picture text -----

DEFERRED LEASE MAKE
SETTLEMENTS GOOD RESTRUCTURING
CONSOLIDATED – 2023 $’000 $’000 $’000
Carrying amount at the start of the year 1,131 15,842 2,914
Additional provisions recognised – 408 –
Additions through business combinations (note 29) 1,000 397 –
Amounts used (1,006) (599) (23)
Foreign currency translation – 17 –
Carrying amount at the end of the year 1,125 16,065 2,891
----- End of picture text -----

110

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

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 twelve months.

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

	CONSOLIDATED	CONSOLIDATED
	2023 $’000	2022 $’000
Employee benefits obligation expected to be settled after twelve months	3,456	6,513

Significant accounting policies

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.

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 twelve 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 twelve 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.

critical accounting judgements, estimates and assumptions

The deferred settlements 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 settlement 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.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Note 16. Borrowings

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CONSOLIDATED
2023 2022
$’000 $’000
Non‑current liabilities
Secured bank loans 333,468 348,287
Less: unamortised transaction costs capitalised (2,330) (1,585)
331,138 346,702
----- End of picture text -----

Refer to note 27 for further information on financial risk management.

Refinancing

In June 2023, Bapcor successfully refinanced $150M of debt facilities due to mature in July 2024, with two new tranches totalling $250M split into tenors maturing in July 2027 and July 2028. Following the completion of this debt refinance, Bapcor has access to a $620M debt facility with a staggered maturity profile of Jul‑25, Jul‑26, Jul‑27 and Jul‑28 with ANZ, Westpac, MuFG Bank, HSBC, NAB, Citi and MetLife. The revised debt facility comprises the following tranches:

› $200M three year tranche (existing), available for general corporate purposes – expires July 2025;
› $100M seven year tranche (existing), available for general corporate purposes – expires July 2026;
› $70M four year tranche (existing), available for working capital purpose – expires July 2026;
› $135M four year tranche (revised), available for general corporate purpose – expires July 2027; and
› $115M five year tranche (revised), available for general corporate purposes – expires July 2028.

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 less than 3.0X and the fixed cover charge ratio being greater than 1.75X (on a pre‑AASB 16 basis).

Establishment costs incurred during the refinancing are capitalised and amortised over the life of the refinanced tranches (extended periods only) and will be expensed to finance costs as effective interest expense in the statement of comprehensive income. As part of the refinancing process, no pre‑existing capitalised borrowing costs were required to be expensed as the refinancing costs incurred relate to the extension periods of the tranche tenor only, and as such the pre‑existing capitalised borrowing costs will continue to be amortised as per the original amortisation period identified.

Financing arrangements

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

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----- Start of picture text -----

CONSOLIDATED
2023 2022
$’000 $’000
Total facilities
Bank loans [1] 589,100 489,200
used at the reporting date
Bank loans [1] 333,468 348,287
unused at the reporting date
Bank loans [1] 255,632 140,913
----- End of picture text -----

(1) Total facilities available at 30 June was $620.0M (2022: $520.0M). The amount used in the above table excludes $30.9M (2022: $30.8M) of facility which relates to bank overdraft $25.0M (2022: $25.0M), credit cards $1.1M (2022: $1.1M) and bank guarantees $4.8M (2022: $4.7M).

112

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Net debt reconciliation

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----- Start of picture text -----

CONSOLIDATED
2023 2022
$’000 $’000
Cash and cash equivalents 78,634 80,213
Lease liabilities (311,279) (253,009)
Borrowings excluding unamortised transaction costs capitalised (333,468) (348,287)
Net debt (566,113) (521,083)
Add: Lease liabilities 311,279 253,009
Add: Net derivative financial instruments 3,138 6,049
Pro‑forma net debt as per debt facility agreement (251,696) (262,025)
----- End of picture text -----

A reconciliation of statutory net debt at the beginning and end of the current and previous financial year is set out below:

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----- Start of picture text -----

LEASE
CASH LIABILITIES [1] BORROWINGS TOTAL
CONSOLIDATED $’000 $’000 $’000 $’000
Balance at 30 June 2021 39,598 (226,330) (205,472) (392,204)
Cash flows 40,106 69,989 (143,049) (32,954)
Other 509 (96,668) 234 (95,925)
Balance at 30 June 2022 80,213 (253,009) (348,287) (521,083)
Cash flows (2,492) 66,290 15,000 78,798
Other 913 (124,560) (181) (123,828)
Balance at 30 June 2023 78,634 (311,279) (333,468) (566,113)
----- End of picture text -----

(1) The other movements in lease liabilities consists of recognition of new leases and remeasurements as described in note 10.

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.

BAPcoR ANNuAL REPORT 2023

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Note 17. Lease liabilities

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----- Start of picture text -----

CONSOLIDATED
2023 2022
$’000 $’000
Current liabilities
Lease liability – Properties 71,863 64,544
Lease liability – Motor vehicles 232 523
72,095 65,067
Non‑current liabilities
Lease liability – Properties 239,138 187,834
Lease liability – Motor vehicles 46 108
239,184 187,942
311,279 253,009
----- End of picture text -----

The large increase in property lease liabilities in FY23 was primarily due to $49.5M recognised on commencement of the lease for the Distribution Centre in Queensland. There was a corresponding increase to the right‑of‑use assets by the same amount (refer to note 10).

Refer to note 27 for further information on financial risk management.

Significant accounting policies

A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the consolidated entity’s incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred.

Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right‑of use asset, or to profit or loss if the carrying amount of the right‑of‑use asset is fully written down.

critical accounting judgements, estimates and assumptions

In determining the lease term, the consolidated entity considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated) and the option is due within the next 12‑24 months. The assessment is reviewed on an ongoing basis as well as if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) any option to renew.

114

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Note 18. Derivative financial instruments

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CONSOLIDATED
2023 2022
$’000 $’000
Current assets
Forward foreign exchange contracts – cash flow hedges 3,381 6,393
Current liabilities
Forward foreign exchange contracts – cash flow hedges (243) (344)
3,138 6,049
----- End of picture text -----

Refer to note 27 for further information on financial risk management.

Refer to note 19 for further information on fair value measurement.

Significant accounting policies

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.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Note 19. 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.

› Level 3: unobservable inputs for the asset or liability.
	LEVEL 1	LEVEL 2	LEVEL 3	TOTAL
CONSOLIDATED – 2023 Assets	$’000	$’000	$’000	$’000
Derivative financial instruments	–	3,381	–	3,381
Total assets	–	3,381	–	3,381
Liabilities
Derivative financial instruments	–	243	–	243
Deferred settlements	–	–	1,125	1,125
Total liabilities	–	243	1,125	1,368
	LEVEL 1	LEVEL 2	LEVEL 3	TOTAL
CONSOLIDATED – 2022	$’000	$’000	$’000	$’000
Assets
Derivative financial instruments	–	6,393	–	6,393
Total assets	–	6,393	–	6,393
Liabilities
Derivative financial instruments	–	344	–	344
Deferred settlements	–	–	1,131	1,131
Total liabilities	–	344	1,131	1,475

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 settlements are 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.

116

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Significant accounting policies

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.

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.

Note 20. Issued capital

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CONSOLIDATED
2023 2022 2023 2022
SHARES SHARES $’000 $’000
Ordinary shares 339,412,500 339,412,500 878,652 878,652
– –
Treasury shares (10,680) (10,680)
339,412,500 339,412,500 867,972 867,972
----- End of picture text -----

There was no movement in ordinary share capital during the current year.

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 nil (2022: nil) per share.

Significant accounting policies

Ordinary shares are classified as equity.

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

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Note 21. Reserves

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CONSOLIDATED
2023 2022
$’000 $’000
Foreign currency reserve (9,816) (13,456)
Cash flow hedge reserve 2,232 4,253
Share‑based payments reserve 12,042 12,352
4,458 3,149
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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.

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.

Movements in reserves

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

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FOREIGN SHARE‑BASED
CURRENCY CASH FLOW PAYMENTS
RESERVE HEDGE RESERVE RESERVE TOTAL
CONSOLIDATED $’000 $’000 $’000 $’000
Balance at 1 July 2021 (6,883) 1,208 14,087 8,412
Revaluation – 4,324 – 4,324
Deferred tax – (1,279) (1,254) (2,533)
Share‑based payment expense – – (481) (481)
– –
Foreign currency translation (6,573) (6,573)
Balance at 30 June 2022 (13,456) 4,253 12,352 3,149
Revaluation – (3,023) – (3,023)
Deferred tax – 1,002 (51) 951
Share‑based payment expense – – (259) (259)
– –
Foreign currency translation 3,640 3,640
Balance at 30 June 2023 (9,816) 2,232 12,042 4,458
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Note 22. Retained profits

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CONSOLIDATED
2023 2022
$’000 $’000
Retained profits at the beginning of the financial year 219,888 165,406
Profit after income tax expense for the year 106,448 125,759
Dividends paid (note 24) (74,671) (71,277)
Retained profits at the end of the financial year 251,665 219,888
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Note 23. Non‑controlling interest

Investment in car Bits Asia, Thailand

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CONSOLIDATED
2023 2022
$’000 $’000
Opening balance 1,248 1,405
Non‑controlling interest capital injection – 78
Non‑controlling interest loss for the financial year (279) (204)
Foreign currency translation 41 (31)
Closing balance 1,010 1,248
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In March 2018, the consolidated group entered into a tri‑party joint venture in Thailand of the incorporated entity Car Bits Asia., Co. Ltd for the purposes of opening Burson stores in Thailand. The consolidated group currently holds 58% of the shares and is considered to have effective control.

Investment in FiiViQ

In April 2022 Bapcor acquired a 50.5% controlling interest in FiiViQ Pty Ltd (‘FiiViQ’) to support Bapcor’s digital strategy. Their immaterial loss has been included in the table above.

Note 24. Dividends

Dividends

Dividends paid during the financial year were as follows:

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CONSOLIDATED
2023 2022
$’000 $’000
Final dividend for the year ended 30 June 2022 of 11.5 cents (2021: 11.0 cents) per
ordinary share 39,033 37,335
Interim dividend for the year ended 30 June 2023 of 10.5 cents (2022: 10.0 cents) per
ordinary share 35,638 33,942
74,671 71,277
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The Board has declared a final dividend in respect of FY23 of 11.5 cents per share, fully franked. The final dividend will be paid on 19 September 2023 to shareholders registered on 31 August 2023.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Franking credits

Franking credits
CONSOLIDATED
2023 $’000 2022 $’000 Franking credits available for subsequent financial years based on a tax rate of 30% 137,742 128,681

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; and
› franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.

Significant accounting policies

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

Note 25. Earnings per share

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CONSOLIDATED
2023 2022
$’000 $’000
Profit after income tax 106,169 125,555
Non‑controlling interest 279 204
Profit after income tax attributable to the owners of Bapcor Limited 106,448 125,759
CENTS CENTS
Basic earnings per share 31.36 37.05
Diluted earnings per share 31.23 36.92
NUMBER NUMBER
Weighted average number of ordinary shares used in calculating basic earnings per share 339,412,500 339,412,500
Adjustments for calculation of diluted earnings per share:
Options over ordinary shares 1,389,679 1,187,271
Weighted average number of ordinary shares used in calculating diluted earnings per share 340,802,179 340,599,771
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Significant accounting policies

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.

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.

120

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Note 26. Reconciliation of profit after income tax to net cash from operating activities

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CONSOLIDATED
2023 2022
$’000 $’000
Profit after income tax expense for the year 106,169 125,555
Adjustments for:
Depreciation and amortisation 96,657 88,783
Net gain on disposal of property, plant and equipment (826) (533)
Share of profit – associates (1,937) (575)
Amortisation of capitalised borrowing costs 514 669
Non‑cash share‑based payment expense (259) (481)
Lease liabilities interest unwind 14,223 11,206
Change in operating assets and liabilities:
Increase in trade and other receivables (18,709) (14,711)
Decrease/(increase) in inventories 22,001 (83,415)
Decrease/(increase) in other operating assets (6,189) 12,252
Increase/(decrease) in trade and other payables 16,841 (18,093)
–
Increase in other provisions 1,408
Decrease in other operating liabilities (16,164) (15,834)
Net cash from operating activities 213,729 104,823
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Significant accounting policies

Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions and other short‑term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Note 27. 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:

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CONSOLIDATED
2023 2022
$’000 $’000
Financial assets
Cash and cash equivalents 78,634 80,213
Trade and other receivables [1] 229,186 197,343
Derivative financial instruments 3,381 6,393
Total financial assets 311,201 283,949
Financial liabilities
Trade and other payables 259,940 236,561
Derivative financial instruments 243 344
Deferred settlements 1,125 1,131
Borrowings [2] 333,468 348,287
Lease liabilities 311,279 253,009
Total financial liabilities 906,055 839,332
----- End of picture text -----

(1) Trade and other receivables in the table excludes prepayments which are not classified as financial instruments.

(2) 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 twelve months.

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.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

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.

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AUD STRENGTHENED AUD WEAKENED
EFFECT ON EFFECT ON
PROFIT BEFORE EFFECT ON PROFIT BEFORE EFFECT ON
CONSOLIDATED – 2023 % CHANGE TAX EQUITY % CHANGE TAX EQUITY
Derivative financial
instruments 1% – 1,637 – – (775)
Other financial assets 1% (689) – – 703 –
Other financial liabilities 1% 590 – – (602) –
(99) 1,637 101 (775)
----- End of picture text -----

		AUD
		STRENGTHENED			AUD WEAKENED
CONSOLIDATED – 2022	% CHANGE	EFFECT ON PROFIT BEFORE TAX	EFFECT ON EQUITY	% CHANGE	EFFECT ON PROFIT BEFORE TAX	EFFECT ON EQUITY
Derivative financial
instruments	1%	–	1,182	1%	–	(1,208)
Other financial assets	1%	(602)	–	1%	614	–
Other financial liabilities	1%	576	–	1%	(588)	–
		(26)	1,182		26	(1,208)

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. The consolidated entity entered into interest rate swap contracts during the year ended 30 June 2023.

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

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2023 2022
WEIGHTED WEIGHTED
AVERAGE AVERAGE
INTEREST RATE BALANCE INTEREST RATE BALANCE
CONSOLIDATED % $’000 % $’000
Borrowings (fixed) 3.77% 100,000 3.77% 100,000
Borrowings (variable) 4.04% 233,468 1.41% 248,287
Net exposure to cash flow interest rate risk 333,468 348,287
----- End of picture text -----

As at 30 June, if the weighted average interest rate of the variable bank borrowings component had changed by a factor of +/– 10%, interest expense would increase/decrease by $943,000 (2022: $350,000).

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

During FY23, the consolidated entity entered into interest rate swaps to hedge against risk of interest rate increases on the variable borrowings. The total notional value of these interest rate swaps was $120.0M which mature beyond 12 months from the 30 June 2023 reporting date.

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:

1) The consolidated entity has a strict code of credit for all customers, including obtaining agency credit information, confirming references and setting appropriate credit limits.
2) Derivative counterparties and cash transactions are limited to high quality independently rated financial institutions with a minimum credit rating of ‘A’.
3) Concentrations of credit risk are minimised by undertaking transactions with a large number of customers.
4) 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 note 8. No trade receivables have an external credit rating, and management classify trade receivables on ageing profiles.

As well as identifying specific expected credit losses, the consolidated entity has adopted a lifetime expected loss allowance in estimating expected credit losses on the remaining trade receivable balances through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered representative across all customers of the consolidated entity based on recent sales experience, historical collection rates and forward‑looking information that is available.

Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual payments for a period greater than one year.

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:

unused borrowing facilities at the reporting date:
CONSOLIDATED
2023 $’000 2022 $’000 Bank loans1 255,632 140,913

(1) Total debt facilities available at 30 June was $620.0M (2022: $520.0M). The available amount applied to determine the unused amount in the above table excludes $30.9M (2022: $30.8M) of facility which relates to bank overdraft $25.0M (2022: $25.0M), credit cards $1.1M (2022: $1.1M) and bank guarantees $4.8M (2022: $4.7M). Prior year comparatives have been adjusted. Refer to note 16 for further details.

124

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 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.

					REMAINING
	1 YEAR	BETWEEN	BETWEEN	OVER	CONTRACTUAL
	OR LESS	1 AND 2 YEARS	2 AND 5 YEARS	5 YEARS	MATURITIES
CONSOLIDATED – 2023 Trade and other payables	$’000 259,940	$’000 –	$’000 –	$’000 –	$’000 259,940
Borrowings1	14,849	214,849	141,885	–	371,583
Deferred settlements	1,125	–	–	–	1,125
Lease liabilities	72,095	63,504	110,997	215,675	462,271
Total non‑derivatives	348,009	278,353	252,882	215,675	1,094,919
Derivatives
Forward foreign exchange contracts	243	–	–	–	243
Total derivatives	243	–	–	–	243
					REMAINING
	1 YEAR	BETWEEN	BETWEEN	OVER	CONTRACTUAL
	OR LESS	1 AND 2 YEARS	2 AND 5 YEARS	5 YEARS	MATURITIES
CONSOLIDATED – 2022	$’000	$’000	$’000	$’000	$’000
Trade and other payables	236,561	–	–	–	236,561
Borrowings1	8,063	8,063	232,731	130,000	378,857
Deferred settlements	1,006	125	–	–	1,131
Lease liabilities	65,067	55,345	91,018	117,766	329,196
Total non‑derivatives	310,697	63,533	323,749	247,766	945,745
Derivatives
Forward foreign exchange contracts	344	–	–	–	344
Total derivatives	344	–	–	–	344

(1) Borrowings contractual cash flows include 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.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

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
› a capital structure that provides adequate funding for potential acquisition and investment strategies, building future growth in shareholder value. The 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[1] 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); and
› Fixed charge cover ratio not below 1.75:1 (EBITDA plus Rent/Net Total Cash Interest plus Rent).

Note 28. Related party transactions

Parent entity

Bapcor Limited is the parent entity. Refer to note 31 for supplementary information about the parent entity including internal dividends received.

Subsidiaries

Interests in subsidiaries are set out in note 32.

Key management personnel

Disclosures relating to key management personnel are set out in note 33 and the remuneration report included in the directors’ report.

Note 29. Business combinations

current financial year acquisitions

The consolidated entity acquired the following businesses:

› Autobarn Altona
› Autobarn Cranbourne
› Autobarn Frankston
› Autobarn Dandenong
› Autobarn Mornington
› Autobarn Ferntree Gully
› Autobarn Ipswich
› Absolute Spares Pty Ltd
› MJF Truck and Trailer Parts
› E‑Max Australia Pty Ltd
(1) Banking covenants calculations exclude the impacts of AASB 16 Leases .

126

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

These acquisitions were made to strengthen the Bapcor offering as well as increase the company store network presence.

On 12 May 2023, Bapcor completed the acquisition of E‑Max Australia, a leading specialist product provider in the Australian truck market. The assets and liabilities recognised as a result of the E‑Max Australia acquisition is set out below. Stores and smaller business combinations have been aggregated. These are provisional at the time of this report and the fair values are to be finalised within the acquisition period of twelve months from acquisition date.

	E‑MAX	OTHER
	AUSTRALIA	ACQUISITIONS
	FAIR VALUE	FAIR VALUE	TOTAL
	$’000	$’000	$’000
Cash and cash equivalents	–	10	10
Trade and other receivables	80	–	80
Inventories	406	2,564	2,970
Plant and equipment	11	43	54
Right‑of‑use assets	–	816	816
Deferred tax asset	204	718	922
Trade and other payables	(194)	(188)	(382)
Provisions	(79)	(90)	(169)
Lease liability	–	(816)	(816)
Net assets acquired	428	3,057	3,485
Goodwill	11,465	6,026	17,491
Acquisition‑date fair value of the total consideration transferred	11,893	9,083	20,976
Representing:
Cash paid	10,893	8,498	19,391
Deferred settlement	1,000	–	1,000
Debt forgiven	–	585	585
	11,893	9,083	20,976
Cash used to acquire business, net of cash acquired:
Cash consideration	10,893	8,498	19,391
Less: cash and cash equivalents	–	(10)	(10)
Net cash used	10,893	8,488	19,381

Prior financial year acquisitions

No material changes have occurred to the prior financial year acquisitions.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Significant accounting policies

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.

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.

critical accounting judgements, estimates and assumptions

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.

Note 30. Deed of cross guarantee

The following entities are party to a deed of cross guarantee entered into in August 2020 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 Ltd

Bapcor Services Pty Ltd

Bapcor Logistics Services Pty Ltd[1]

Bapcor International Pty Ltd[1]

Burson Automotive Pty Ltd Car Bitz & Accessories Pty Ltd

Aftermarket Network Australia Pty Ltd

Bapcor Retail Pty Ltd Midas Australia Pty Ltd Specialist Wholesalers Pty Ltd MTQ Engine Systems (Aust) Pty Ltd

(1) These entities were added to the deed of cross guarantee in October 2021.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Baxters Pty Ltd

AADi Australia Pty Ltd Diesel Distributors Australia Pty Ltd Ryde Batteries (Wholesale) Pty Ltd Federal Batteries Qld Pty Ltd Premier Auto Trade Pty Ltd JAS Oceania Pty Ltd

Australian Automotive Electrical Wholesale Pty Ltd Low Voltage Pty Ltd Don Kyatt Spare Parts (QLD) Pty Ltd

He Knows Truck Parts Pty Ltd

I Know Parts and Wrecking Pty Ltd

Commercial Parts Pty Ltd Commercial Spares Pty Ltd

Bapcor Australia Pty Ltd

By entering into the deed, the wholly‑owned entities have been relieved from the requirement to prepare financial statements and directors’ report under Corporations Instrument 2016/785 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.

	2023	2022
STATEMENT OF COMPREHENSIVE INCOME	$’000	$’000
Revenue	1,837,699	1,666,016
Share of profits of associates accounted for using the equity method	1,937	575
Other income	2,182	1,709
Expenses	(1,716,346)	(1,513,737)
Profit before income tax expense	125,472	154,563
Income tax expense	(35,795)	(42,449)
Profit after income tax expense	89,677	112,114
other comprehensive income	1,620	(3,527)
Other comprehensive income for the year, net of tax	1,620	(3,527)
Total comprehensive income for the year	91,297	108,587
	2023	2022
EQUITY – RETAINED PROFITS	$’000	$’000
Retained profits at the beginning of the financial year	143,162	102,325
Profit after income tax expense	89,677	112,114
Dividends paid	(74,671)	(71,277)
Retained profits at the end of the financial year	158,168	143,162

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

	2023	2022
STATEMENT OF FINANCIAL POSITION	$’000	$’000
current assets Cash and cash equivalents Trade and other receivables Inventories Derivative financial instruments Income tax receivable Other	46,919 214,018 470,711 3,281 18,814 –	45,638 188,721 485,989 5,400 10,584 129
	753,743	736,461
Non‑current assets Right‑of‑use assets Property, plant and equipment Intangibles Deferred tax Intercompany Other	259,963 106,085 645,543 14,456 22 348,323	206,944 98,803 628,831 18,855 13,825 346,397
	1,374,392	1,313,655
Total assets	2,128,135	2,050,116
current liabilities Trade and other payables Provisions Lease liabilities Derivative financial instruments	235,933 45,007 64,789 163	215,631 43,811 58,282 274
	345,892	317,998
Non‑current liabilities Provisions Borrowings Lease liabilities	16,102 330,670 220,758	15,723 346,415 169,994
	567,530	532,132
Total liabilities	913,422	850,130
Net assets	1,214,713	1,199,986
Equity Issued capital Reserves Retained profits	867,972 188,573 158,168	867,972 188,852 143,162
Total equity	1,214,713	1,199,986

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Note 31. Parent entity information

Set out below is the supplementary information about the parent entity.

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PARENT
2023 2022
$’000 $’000
Statement of comprehensive income
Loss after income tax (28,203) (22,634)
Internal dividend income 18,008 322,000
Total comprehensive income (10,195) 299,366
PARENT
2023 2022
$’000 $’000
Statement of financial position
Total current assets – –
Total assets 909,491 994,665
Total current liabilities – –
Total liabilities – –
Equity
Issued capital 867,974 867,974
Other reserves 12,043 12,352
Current year profits/(losses) (28,203) (22,634)
Internal dividend income 18,008 322,000
Dividends paid (74,671) (71,277)
Prior years retained earnings 114,340 (113,750)
Total equity 909,491 994,665
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Note 32. 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:

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OWNERSHIP INTEREST
PRINCIPAL PLACE OF BUSINESS/ 2023 2022
NAME COUNTRY OF INCORPORATION % %
Bapcor Finance Pty Ltd Australia 100.0% 100.0%
FiiViQ Pty Ltd Australia 50.5% 50.5%
Bapcor Services Pty Ltd Australia 100.0% 100.0%
Bapcor Logistics Services Pty Ltd Australia 100.0% 100.0%
Bapcor International Pty Ltd Australia 100.0% 100.0%
Bapcor Asia Pte Ltd Singapore 100.0% 100.0%
Car Bits Asia Co. Ltd Thailand 57.8% 57.8%
Burson Automotive Pty Ltd Australia 100.0% 100.0%
Blacktown Auto Engineers Pty Ltd Australia 100.0% 100.0%
Car Bitz & Accessories Pty Ltd Australia 100.0% 100.0%
Aftermarket Network Australia Pty Ltd Australia 100.0% 100.0%
Bapcor Retail Pty Ltd Australia 100.0% 100.0%
Midas Australia Pty Ltd Australia 100.0% 100.0%
Specialist Wholesalers Pty Ltd Australia 100.0% 100.0%
MTQ Engine Systems (Aust) Pty Ltd Australia 100.0% 100.0%
Baxters Pty Ltd Australia 100.0% 100.0%
AADi Australia Pty Ltd Australia 100.0% 100.0%
A&F Drive Shaft Repair Queensland Pty Ltd [1] Australia 100.0% 100.0%
Diesel Distributors Australia Pty Ltd Australia 100.0% 100.0%
Ryde Batteries (Wholesale) Pty Ltd Australia 100.0% 100.0%
Federal Batteries Qld Pty Ltd Australia 100.0% 100.0%
Premier Auto Trade Pty Ltd Australia 100.0% 100.0%
JAS Oceania Pty Ltd Australia 100.0% 100.0%
Australian Automotive Electrical Wholesale Pty Ltd Australia 100.0% 100.0%
Low Voltage Pty Ltd Australia 100.0% 100.0%
Don Kyatt Spare Parts (Qld) Pty Ltd Australia 100.0% 100.0%
He Knows Truck Parts Pty Ltd Australia 100.0% 100.0%
I Know Parts and Wrecking Pty Ltd Australia 100.0% 100.0%
Commercial Spares Pty Ltd Australia 100.0% 100.0%
Commercial Parts Pty Ltd Australia 100.0% 100.0%
Bapcor New Zealand Ltd New Zealand 100.0% 100.0%
Bapcor Automotive Ltd New Zealand 100.0% 100.0%
Brake & Transmission NZ Ltd New Zealand 100.0% 100.0%
Diesel Distributors Ltd New Zealand 100.0% 100.0%
Bapcor Services New Zealand Ltd New Zealand 100.0% 100.0%
HCB Technologies Ltd New Zealand 100.0% 100.0%
Renouf Corporation International [1] united States 100.0% 100.0%
Benequity Properties, LLC [1] united States 100.0% 100.0%
Bapcor Australia Pty Ltd [1] Australia 100.0% 100.0%
Precision Equipment New Zealand New Zealand 100.0% 100.0%
Hellaby Resource Services Ltd [1] New Zealand 100.0% 100.0%
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(1) These subsidiaries are non‑trading.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Note 33. Related party transactions – key management personnel disclosures

compensation

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CONSOLIDATED
2023 2022
$ $
Short‑term employee benefits 3,132 4,008
Post‑employment benefits 136 162
Long‑term benefits 69 36
Share‑based payments 664 1,368
Other benefits [1] – 2,318
4,001 7,892
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(1) Other benefits for FY22 relates to termination payments as detailed in the Remuneration Report within the Directors’ Report.

Loans

Refer to the audited Remuneration Report within the Directors’ Report for further details on key management personnel compensation. There are no other transactions with key management personnel.

Note 34. Share‑based payments

The Long‑Term Incentive (‘LTI’) plan is intended to assist in the motivation, retention and reward of nominated senior executives. The LTI is a payment contingent on 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 FY23 the ambitious ‘Better Than Before’ (BTB) LTI plan was launched to drive a collective focus on the successful execution of Bapcor’s business transformation program. The BTB LTI plan is centred on surpassing stretch targets and will reward team members at multiple levels across the Group for successful delivery. The allocated Performance Rights have a performance period that ends on 30 June 2025 at which time the performance hurdles are tested.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

A summary of the terms for the Performance Rights granted in the current financial year is in the following table:

GRANT DATE 12/10/22 19/10/22 08/03/23 To be determined
PERFORMANCE HURDLE TSR ROIC TSR ROIC ROIC EBIT ROIC EBIT
PERFORMANCE PERIOD 1/7/22 to 30/6/25 1/7/22 to 30/6/25 22/11/22 to 30/6/25 22/11/22 to 30/6/25
TEST DATE 30/6/25 30/6/25 30/6/25 30/6/25
EXPIRY DATE 12/10/37 19/10/37 8/3/38 8/3/38
QUANTITY GRANTED 171,711 171,716 92,148 92,149 1,716,516 156,268
EXERCISE PRICE Nil Nil Nil Nil
FAIR VALUE AT GRANT DATE1 $4.18 $5.79 $4.03 $5.78 $6.09 $5.36
OTHER CONDITIONS Restriction on sale to 30/6/26 Restriction on sale to 30/6/26 Restriction on sale to 30/6/26 Restriction on sale to 30/6/26
SHARE PRICE ON VALUATION DATE $6.35 $6.34 $6.73 $6.73
VOLATILITY 40.55% 40.55% N/A N/A
DIVIDEND YIELD 3.47% 3.47% 3.27% 3.27%
RISK FREE RATE 3.41% 3.41% N/A N/A

(1) The fair value represents the value used to calculate the accounting expense as required by accounting standards.

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%

Return on Invested capital (‘RoIc’)

Fifty per cent of the Performance Rights granted to a participant will vest by reference to a ROIC performance hurdle over the performance period (being the simple average of the ROIC as at 30 June 2023, 30 June 2024 and 30 June 2025). Each tranche of Performance Rights subject to the ROIC hurdle will vest as follows:

BAPCOR’S COMPOUND ANNUAL ROIC GROWTH OVER THE PERFORMANCE PERIOD	PERCENTAGE OF EPS RIGHTS VESTING
Less than 11.5%	Nil
11.5%	50%
Greater than 11.5% and less than 12%	Pro‑rata straight‑line vesting
Equal to or greater than 12%	100%

Metrics for Performance Rights granted 08/03/2023

Vesting of Performance Rights granted 08/03/2023 is subject to continued service and meeting the return on invested capital (ROIC) hurdle and net earnings before interest and tax (EBIT) hurdle as set out below. Satisfaction of the net EBIT benefit hurdle applies on a straight‑line vesting basis between threshold and maximum EBIT performance.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

The Board has determined that the ROIC Hurdle will be calculated as the simple average of the ROIC as at 30 June 2023, 30 June 2024 and 30 June 2025.

The Board has determined that the Net EBIT Hurdle will be calculated as the EBIT benefit in FY25 from initiatives included in ‘Better than Before’ and after deducting the costs of this incentive program.

If the vesting conditions are met, the Performance Rights are converted into fully paid ordinary shares of the Company at the election of the Participant. As per the Bapcor Employee Equity Plan, the expiry date is 6 September 2035, however the Performance Rights lapse if vesting condition are not met.

Shares 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 which have been granted:

2023

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BALANCE AT EXPIRED/ BALANCE AT
EXERCISE THE START OF VESTED/ FORFEITED/ THE END OF
GRANT DATE VESTING DATE PRICE THE YEAR GRANTED EXERCISED OTHER THE YEAR
10/09/2020 30/06/2023 $0.00 264,030 – – (264,030) –
20/10/2020 30/06/2023 $0.00 134,006 – – (134,006) –
30/08/2021 30/06/2024 $0.00 201,434 – – (14,652) 186,782
19/10/2021 30/06/2024 $0.00 47,126 – – (47,126) –
29/03/2022 30/06/2024 $0.00 27,040 – – – 27,040
12/10/2022 [1] 12/10/2022 [1] $0.00 – 41,122 (41,122) – –
12/10/2022 30/06/2025 $0.00 – 343,427 – – 343,427
19/10/2022 30/06/2025 $0.00 – 184,297 – – 184,297
08/03/2023 [2] 30/06/2025 $0.00 – 1,716,516 – – 1,716,516
673,636 2,285,362 (41,122) (459,814) 2,458,062
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(1) The Performance Rights with a grant and vesting date of 12 October 2022 relate to the FY22 deferred STI which was to be issued as Performance Rights as detailed in the Remuneration Report within the 30 June 2022 Financial Report. They vested on the same day they were granted with no incremental performance hurdles (as the performance hurdles were met as part of the FY22 STI offer).

(2) In addition, Bapcor has made an offer of 156,268 Performance Rights to the Company’s CEO under the BTB incentive program. The issuance of such Performance Rights is subject to shareholder approval at the Company’s 2023 Annual General Meeting.

2022

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06/09/2019	30/06/2022	$0.00	305,338	–	–	(305,338)	–
01/11/2019	30/06/2022	$0.00	209,560	–	–	(209,560)	–
10/09/2020	30/06/2023	$0.00	374,574	–	–	(110,544)	264,030
20/10/2020	30/06/2023	$0.00	201,008	–	–	(67,002)	134,006
30/08/2021	30/06/2024	$0.00	–	231,936	–	(30,502)	201,434
19/10/2021	30/06/2024	$0.00	–	141,376	–	(94,250)	47,126
29/03/2022	30/06/2024	$0.00	–	27,040	–	–	27,040
			1,090,480	400,352	–	(817,196)	673,636

The weighted average exercise price for the Performance Rights exercised in the current financial year was nil. (2022: nil).

The weighted average contractual lives are 1.86 years (2022: 1.56 years).

The gain arising from share‑based payment transactions relating to the LTI during the year as part of employee benefits expense was $258,921 (2022: gain of $481,000). This was due to the reversal of forfeited and lapsed rights as well as reversal of expense on non‑market hurdles that have not been met.

Note: The numbers in the disclosures above include amounts relating to employees that are not key management personnel and therefore differ to those presented in audited Remuneration Report within the Directors’ Report.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Significant accounting policies

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.

critical accounting judgements, estimates and assumptions

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.

Note 35. Remuneration of auditors

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

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----- Start of picture text -----

CONSOLIDATED
2023 2022
$ $
Audit services – PricewaterhouseCoopers
Audit or review of the financial statements 696,262 649,317
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued

Note 36. commitments and contingent liabilities

commitments

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----- Start of picture text -----

CONSOLIDATED
2023 2022
$ $
Commitments
Committed at the reporting date but not recognised as liabilities, payable:
Guarantees in relation to leases 4,722 4,747
Supply of equipment [1] 5,588 13,427
----- End of picture text -----

(1) The commitments in relation to supply of equipment relate to the DC Consolidation projects.

contingent liabilities

There are no contingent liabilities (2022: Nil).

Note 37. Events after the reporting period

Apart from the dividend declared as disclosed in note 24, no other matter or circumstance has arisen since 30 June 2023 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.

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137

DIRECTORS’ DECLARATION

30 June 2023

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 2023 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 30 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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Margaret Haseltine Chair

16 August 2023 Melbourne

138

INDEPENDENT AUDITOR’S REPORT

to the Members of Bapcor Limited

Independent auditor’s report

To the members 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 2023 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 2023
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 significant accounting policies and other explanatory information
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 & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (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.

PricewaterhouseCoopers, ABN 52 780 433 757

2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001 T: 61 3 8603 1000, F: 61 3 8603 1999

Liability limited by a scheme approved under Professional Standards Legislation.

BAPcoR ANNuAL REPORT 2023

139

INDEPENDENT AUDITOR’S REPORT continued

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.

Materiality

Audit scope

● For the purpose of our audit we used overall ● Our audit focused on where the Group made Group materiality of $7.4 million, which subjective judgements; for example, significant represents approximately 5% of the Group’s accounting estimates involving assumptions and profit before tax. inherently uncertain future events. ● 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 benchmark against which the performance of the Group is most commonly measured. ● We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonly acceptable thresholds .

140

INDEPENDENT AUDITOR’S REPORT continued

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. We communicated the key audit matters to the Audit and Risk Committee.

Key audit matter

How our audit addressed the key audit matter

Carrying value of goodwill
(Refer to note 12)
At 30 June 2023, the Group recognised $697.4
million of goodwill.
At least annually, an impairment test is performed
by the Group over the goodwill and trademarks with
indefinite lives.
The Group identified the Cash Generating Units
(CGU) as Trade, Retail, Specialist Wholesale and
New Zealand, for the impairment assessment of
goodwill.
The Group performed an impairment assessment
for each CGU, by preparing a financial model to
determine if the carrying value of the assets is
supported by forecast future cash flows, discounted
to present value (the “models”).
We considered the carrying value of goodwill to be a
key audit matter due to the size of the balances and
assumptions applied by the Group in estimating
future cash flows.

Our audit procedures included the following, amongst
others:
●
Assessing whether the allocation of the Group’s
goodwill into CGUs was consistent with our
knowledge of the Group’s operations and internal
Group reporting
●
Assessing whether the grouping of CGUs
appropriately included the assets, liabilities and
cash flows directly attributable to each CGU and
an allocation of corporate assets
●
Assessing the Group’s historical ability to forecast
cash flows by comparing budgets to actual results
for the past 3 years
●
Assessing key assumptions within the models for
reasonableness with reference to external market
data where possible
●
Together with PwC valuation experts, comparing
the post-tax discount rate and terminal growth
rate used in the models to external market data
●
Evaluating the reasonableness of disclosures in
the financial report in light of the requirements of
Australian Accounting Standards.

Carrying value of inventory
(Refer to note 9)
At 30 June 2023, the Group recorded a provision for
slow-moving inventory of $54.2 million. The
provision is calculated by applying judgemental
provisioning rates to slow-moving inventory.
We considered this to be a key audit matter
because of the significant judgement required by the
Group in determining the methodology used to
calculate the net realisable value of inventory and
the potentially material impact that changes in the
provision could have on the financial report.

Our audit procedures included the following, amongst
others:
●
Considering whether all the necessary inventory
balances were included in the inventory provision
calculation
●
Obtaining the Group’s inventory provision
assessments and evaluating the appropriateness
of the methodology used in light of the
requirements of Australian Accounting Standards
●
Agreeing a sample of key inputs to supporting
evidence
●
Considering the reasonableness of disclosures in
light of the requirements of Australian Accounting
Standards.

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141

INDEPENDENT AUDITOR’S REPORT continued

Other information

The directors are responsible for the other information. The other information comprises the information included in the annual report for the year ended 30 June 2023, but does not include the financial report and our auditor’s report thereon. Prior to the date of this auditor's report, the other information we obtained included the Directors’ report. We expect the remaining other information to be made available to us after the date of this auditor's report.

Our opinion on the financial report does not cover the other information and we do not and will not express an opinion or any form of assurance conclusion thereon through our opinion on the financial report. We have issued a separate opinion on the remuneration report.

In connection with our audit of the financial report, our responsibility is to read the other information 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, 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 no realistic alternative but to do so.

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: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our auditor's report

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INDEPENDENT AUDITOR’S REPORT continued

Report on the remuneration report

Our opinion on the remuneration report

We have audited the remuneration report included in pages 62 to 82 of the directors’ report for the year ended 30 June 2023.

In our opinion, the remuneration report of Bapcor Limited for the year ended 30 June 2023 complies with section 300A of the Corporations Act 2001.

Responsibilities

The directors of the Company 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.

PricewaterhouseCoopers

Alison Tait Milner Melbourne Partner 16 August 2023

BAPcoR ANNuAL REPORT 2023

143

SHAREHOLDER INFORMATION

as at 16 August 2023

Distribution of ordinary shareholders

			% OF ISSUED
RANGE	TOTAL HOLDERS	SHARES	CAPITAL
1 – 1,000	7,856	3,465,780	1.02
1,001 – 5,000	7,751	19,610,656	5.78
5,001 – 10 000	1,710	12,013,451	3.54
10,001 – 100,000	997	20,901,765	6.16
100,001 +	49	283,420,848	83.51
Total	18,363	339,412,500	100%

Included in the above total are 582 shareholders holding less than a marketable parcel of 74 shares.

Distribution of holders of performance rights

	TOTAL	PERFORMANCE
RANGE	HOLDERS	RIGHTS	%
1 – 1,000	–	–	–
1,001 – 5,000	3	13,830	1
5,001 – 10 000	45	360,172	15
10,001 – 100,000	43	695,745	29
100,001 +	8	1,335,916	53
Total	99	2,405,663	100

The table above includes 63,882 performance rights that have vested but are yet to be exercised by the participant.

Distribution of holders of share rights

Distribution of holders of share	rights
	TOTAL	SHARE
RANGE	HOLDERS	RIGHTS	%
1 – 1,000	–	–	–
1,001 – 5,000	2	8,776	21
5,001 – 10 000	3	21,229	52
10,001 – 100,000	1	11,117	27
100,001 +	–	–	–
Total	6	41,122	100

Voting rights

The voting rights attaching to each class of equity securities are set out below:

a) Ordinary shares – at a general meeting of the Company, every holder of ordinary shares present in person or by proxy, attorney or representative has one vote on a show of hands and on a poll, one vote for each ordinary share held.

b) Performance rights and share rights – do not carry any voting rights.

Voluntary escrow

There are no securities subject to voluntary escrow in the Company, nor are there any restricted securities on issue in the Company, as at the Reporting Date.

on‑market buy‑back

The Company is not currently conducting an on‑market buy‑back.

144

SHAREHOLDER INFORMATION continued

Twenty largest ordinary shareholders

Twenty largest ordinary shareholders
		% OF ISSUED
NAME	SHARES	CAPITAL
HSBC CuSTODY NOMINEES (AuSTRALIA) LIMITED	106,691,838	31.43
J P MORGAN NOMINEES AuSTRALIA PTY LIMITED	90,420,081	26.64
CITICORP NOMINEES PTY LIMITED	39,398,505	11.61
BNP PARIBAS NOMS PTY LTD	11,889,525	3.50
NATIONAL NOMINEES LIMITED	10,636,916	3.13
GARRMAR INVESTMENTS PTY LTD	4,700,000	1.38
BNP PARIBAS NOMINEES PTY LTD HuB24 CuSTODIAL SERV LTD	4,425,336	1.30
CITICORP NOMINEES PTY LIMITED	1,639,697	0.48
NETWEALTH INVESTMENTS LIMITED	1,481,362	0.44
NETWEALTH INVESTMENTS LIMITED	825,777	0.24
BNP PARIBAS NOMINEES PTY LTD	816,431	0.24
HSBC CuSTODY NOMINEES (AuSTRALIA) LIMITED	781,045	0.23
GLENDALE INVESTMENT GROuP PTY LTD	670,000	0.20
RYASAR PTY LTD	661,660	0.19
EQuITY TRuSTEES LIMITED	600,371	0.18
HSBC CuSTODY NOMINEES (AuSTRALIA) LIMITED	525,923	0.15
SCHRAM INVESTMENTS PTY LTD	510,619	0.15
BNP PARIBAS NOMS PTY LTD	491,654	0.14
WOODROSS NOMINEES PTY LTD	393,747	0.12
MR CRAIG ANTHONY MAGILL	386,819	0.11
Total	277,947,306	81.89

Substantial holders

As at 30 June 2023 the substantial holders of the Company and the number of ordinary shares in which those substantial holders and their associates have a relevant interest, as disclosed in substantial holding notices given to the Company, are as follows:

are as follows:
		% OF ISSUED
	NUMBER HELD	CAPITAL
Australian Super Pty Ltd	36,478,796	10.75
Perpetual Limited	32,388,581	10.53
Aware Super Pty Ltd	17,948,275	5.29
Vanguard	16,973,866	5.00

corporate Governance Statement

Bapcor has prepared a Corporate Governance Statement which sets out the corporate governance practices that were in operation throughout the financial year for the Company. In accordance with ASX Listing Rule 4.10.3, the Corporate Governance Statement will be available for review on the Company’s website www.bapcor.com.au, and will be lodged with ASX at the same time that this Annual Report

BAPcoR ANNuAL REPORT 2023

145

CORPORATE DIRECTORY

Directors

Margaret Haseltine (Independent Non‑ Executive Chair) Noel Meehan (Managing Director and Chief Executive Officer) Mark Bernhard (Independent, Non‑Executive Director) Mark Powell (Independent, Non‑Executive Director) Brad Soller (Independent, Non‑Executive Director) Kathryn Spargo (Independent, Non‑Executive Director) James Todd (Independent, Non‑Executive Director)

Share register

computershare Investor Services Pty Ltd

452 Johnston Street Abbotsford VIC 3067 Australia Ph: +61 3 9415 4000 or 1300 850 505 (within Australia)

Auditor

Pricewaterhousecoopers

company Secretary

George Sakoufakis

Notice of annual general meeting

The details of the annual general meeting of Bapcor Limited are:

2 Riverside Quay Southbank VIC 3006 Australia

Stock exchange listing

Bapcor Limited shares are listed on the Australian Securities Exchange (ASX: BAP)

Date: 17 October 2023

Time: 1:30pm Address: 127‑139 Link Road, Melbourne Airport, VIC, 3045

Website

www.bapcor.com.au

Registered office

127‑139 Link Road Melbourne Airport VIC 3045 Australia

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bapcor.com.au

AI assistant

BAPCOR LIMITED — Annual Report 2023

64494_rns_2023-09-17_2988077e-2875-4c2c-be73-ecd7881b64f6.pdf

Acknowledgement of Country

Contents

OUR PURPOSE AND VALUES

BAPCOR PURPOSE

Our Values

STRATEGIC PRIORITIES

Extend and optimise our customer reach

Embed sustainability into our operations

BETTER THAN BEFORE

OUR SEGMENTS

Revenue by type

OUR FOOTPRINT

FY23 YEAR IN REVIEW

DIVIDEND

RETURN ON INVESTED CAPITAL

NETWORK EXPANSION

INAUGURAL EMISSIONS REDUCTION ROADMAP

Perform

Resilient operational performance

Network and Supply Chain capability further enhanced

Ongoing focus on capital efficiency

Transform

Continued investment in capability and culture

Launch of Better than Before transformation program

CHAIR’S REPORT

Dear shareholders, and all stakeholders of Bapcor,

Board succession

Better than Before

Safety and wellbeing

Environment, Social and Governance (ESG)

Thanks

MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER‘S REPORT

Dear shareholders, and all stakeholders,

Group leadership team

Our Purpose

Looking forward

Operational performance

Bapcor’s transformation

Thanks

BOARD OF DIRECTORS

MANAGEMENT TEAM

Noel Meehan

Stefan Camphausen

Steve Drummy

Abdul Jaafar

Kristoff Keele

Morris Lieberman

BAPCOR PURPOSE

Contents

AREA OF FOCUS: ETHICAL SUPPLY CHAIN & PROCUREMENT

Human Rights and Modern Slavery

WHAT does this mean to us?

HOW are we managing it?

Ethical Supply Chain and Procurement

WHAT does this mean to us?

HOW are we managing it?

CASE STUDY

DISTRIBUTION CENTRE QUEENSLAND

AREA OF FOCUS: ENVIRONMENTAL SUSTAINABILITY

AREA OF FOCUS: ENVIRONMENTAL SUSTAINABILITY CONTINUED

Net-Zero Emissions

WHAT this means to Bapcor?

HOW are we managing it?

GHG emissions – FY22 and FY23 comparison

CASE STUDY FLEET MANAGEMENT AND CARBON OFFSETTING

Scope 1 & 2 emissions – FY22 and FY23 comparison

AREA OF FOCUS: ENVIRONMENTAL SUSTAINABILITY CONTINUED

Our Decarbonisation Roadmap

GHG emissions

The Decarbonisation Roadmap

Key emissions insights

Emissions reduction pathway modelling

AREA OF FOCUS: ENVIRONMENTAL SUSTAINABILITY CONTINUED

Target setting

Waste Management

WHAT does this mean to us?

HOW are we managing it?

BAPCOR LIMITED Annual Report 2023