McMillan Shakespeare : Preliminary-Final-Results

23 August 2017

Manager Company Announcements ASX Limited

Level 4

20 Bridge Street

SYDNEY NSW 2000

By E-lodgement McMillan Shakespeare Limited 2017 Appendix 4E

This release contains an announcement to the Australian Stock Exchange Limited (ASX) regarding the following Appendix 4E in accordance with listing rule 4.3A of the ASX Listing Rules.

Yours faithfully

McMillan Shakespeare Limited

Mark Blackburn

Chief Financial Officer and Company Secretary

McMillan Shakespeare Limited

Appendix 4E

Preliminary Final Report Provided Under Listing Rule 4.3A

Year Ended 30 June 2017

1. Details of the reporting period and the previous corresponding period

   Current period: 1 July 2016 to 30 June 2017

   Previous corresponding period: 1 July 2015 to 30 June 2016

2. Results for announcement to the market

Percentage Key information change		Year ended 30 June 2017 $'000
Revenue from continuing operations	1.7%	513,032
Profit from ordinary activities after income tax attributable to members	(17.7%)	67,902
Net profit from ordinary activities after income tax attributable to members	(17.7%)	67,902

2.1

2.2

2.3

2.4

Dividends

Amount per security	Franked amount per security
Final dividend	$0.35	$0.35
Interim dividend	$0.31	$0.31
Total dividend (interim plus final)	$0.66	$0.66

There is no dividend reinvestment plan in operation.

2.5	Dividend record date

Ex-dividend date	28 September 2017
Record date for determining entitlements to the dividend	29 September 2017
Dividend payment date	13 October 2017

1. Results for announcement to the market (continued)

   2.6 Commentary on results for the financial year

   Underlying Net Profit after Income Tax and Amortisation (UNPATA), being net profit after tax but before the after-tax impact of acquisition related items (including impairment charge for intangible assets, acquisition expenses, amortisation of acquired intangible assets and deferred consideration

   items) has been used to measure financial performance of the Group. The Group believes this measure of performance best represents the underlying operating results of the Group. For the year ended 30 June 2017, Group UNPATA of $87.2 million was in line with the previous year.

   FY17 $'000	FY16 $'000
   NPAT (item 2.2)	67,902	82,469
   Impairment of intangible assets after-tax 1	15,345	-
   Acquisition transactions costs after-tax	991	1,937
   Amortisation of intangibles from acquisitions after-tax	3,019	2,767
   Deferred consideration fair valuation	(90)	-
   Consolidated UNPATA	87,167	87,173

   1 Non-cash impairment for the carrying value of intangible assets in the warranty and insurance business which forms part of the Group's Retail Financial Services (RFS) segment. This business represents approximately 5% of the Group's FY17 UNPATA.

   UNPATA for the Group matched last year's record result.

   FY17 $'000	FY16 $'000	FY17 $'000	FY16 $'000
   Revenue		UNPATA 3
   Group Remuneration Services	189,709	188,310	58,341	58,662
   Asset Management 1	215,748	204,812	17,506	15,262
   Retail Financial Services 2	106,023	110,037	12,379	13,966
   Segment operations	511,480	503,159	88,226	87,890

2. Asset Management includes the acquisition in the UK of EVC on 1 December 2016, CAPEX on 3 January 2017 and Anglo Scottish Finance Limited plc on 4 November 2015.

3. Retail Financial Services includes the United Financial Services entities from 31 July 2015.

4. Segment UNPATA does not include unallocated public company costs and interest from Group treasury funds.

Basic earnings per share as shown in the financial statements was 81.6 cents per share (2016: 99.4 cents per share) and on a diluted basis was 81.5 cents per share (2016: 99.0 cents per share). Basic UNPATA per share is 104.8 cents per share (2016: 105.1 cents).

Refer to the FY17 Results Presentation announced to the ASX on 23 August 2017.

5. Statement of Comprehensive Income

   Refer attached Consolidated Income Statement

6. Statement of Financial Position

   Refer attached.

7. Statement of Cash Flows

   Refer attached.

8. Statement of Changes in Equity

   Refer attached.

9. Details of Dividend Payments

   Refer attached.

10. Dividend reinvestment plan

    None.

11. Net tangible assets per security

    Year ended 30 June 2017 $	Year ended 30 June 2016 $
    Per ordinary share	1.45	1.39

12. Control gained over entities during the financial year

    Details of the control gained over entities during the financial year as follows:

    • European Vehicle Contracts Limited (100%)

    • Capex Asset Finance Limited (100%)

      These entities are incorporated in the UK and provide brokerage and finance procurement services to complement Asset Management's business in the UK.

      MMS

      Appendix 4E 4

13. Investment in associates and joint ventures

    The Group's 50% joint venture interest in Maxxia Limited, a company operating in the UK that was acquired on 1 February 2013, was a loss of $1,260,000 (2016: $1,495,000 loss).

14. Other significant information

    Refer financial statements and notes thereto and the accompanying investor presentation.

15. Foreign entities reporting in Australia

    Not applicable.

16. Commentary on results for the period

    Refer Review of Operations attached.

17. Audit

This report is based on accounts which are currently in the process of being audited.

Consolidated Income Statement

For the year ended 30 June 2017 5

Note		2017 $'000	2016 $'000
Revenue and other income	3	513,032	504,666
Employee benefits expense	(121,421)	(120,206)
Depreciation and amortisation expenses	(89,046)	(91,380)
Leasing and vehicle management expenses	(72,082)	(60,063)
Brokerage commissions and incentives	(45,746)	(46,960)
Net claims incurred	(9,392)	(7,823)
Consulting expenses	(3,265)	(3,003)
Marketing expenses	(4,102)	(3,380)
Property and corporate expenses	(11,371)	(11,230)
Technology and communication expenses	(10,560)	(11,206)
Other expenses	(11,011)	(13,327)
Finance costs	(11,353)	(12,841)
Share of equity accounted joint venture loss	(1,260)	(1,495)
Impairment charge	4	(20,000)	-
Acquisition expenses	(1,076)	(2,289)
Profit before income tax		101,347	119,463
Income tax expense		(33,445)	(36,994)
Profit attributable to members of the parent entity		67,902	82,469
Other comprehensive income		685	(73)
Items that may be re-classified subsequently to profit or loss:
Changes in fair value of cash flow hedges
Exchange differences on translating foreign operations		(3,662)	(8,145)
Income tax on other comprehensive income		(165)	(16)
Total other comprehensive income for the year		(3,142)	(8,234)
Total comprehensive income for the year		64,760	74,235

Basic earnings per share (cents) 2 Diluted earnings per share (cents) 2

81.6 81.5

99.4 99.0

Consolidated Statement

of Financial Position 6

As at 30 June 2017

Note		2017 $'000	2016 $'000
Current assets		59,416	95,583
Cash and cash equivalents	6
Trade and other receivables		45,922	37,396
Finance lease receivables		60,920	46,280
Inventory		6,047	7,282
Prepayments		6,564	7,827
Deferred acquisition costs		2,246	2,084
Total current assets		181,115	196,452
Non current assets		306,731	302,132
Property, plant and equipment	14
Finance lease receivables		107,255	89,279
Intangible assets	5	250,746	261,365
Other financial assets		1,583	1,732
Deferred tax assets		175	194
Deferred acquisition costs		1,375	964
Total non current assets		667,865	655,666
TOTAL ASSETS		848,980	852,118

Consolidated Statement

of Financial Position 7

As at 30 June 2017

Note		2017 $'000	2016 $'000
Current liabilities		73,301	70,561
Trade and other payables
Unearned premium liability		6,949	5,966
Other liabilities	7	14,007	16,384
Provisions	8	12,997	13,023
Current tax liability		7,833	10,116
Borrowings	9	88,727	12,944
Derivative financial instruments		134	819
Total current liabilities		203,948	129,813
Non-current liabilities		250,877	332,626
Borrowings	9
Unearned premium liability		3,926	2,755
Other financial liabilities		10,815	6,740
Provisions	8	2,900	1,705
Deferred tax liabilities		5,519	7,984
Total non-current liabilities		274,037	351,810
TOTAL LIABILITIES		477,985	481,623
NET ASSETS		370,995	370,495
Equity		141,088	144,380
Issued capital	10
Reserves		(5,948)	4,086
Retained earnings		235,855	222,029
TOTAL EQUITY		370,995	370,495

Consolidated Cash Flow Statement

For the year ended 30 June 2017 8

Note		2017 $'000	2016 $'000
Cash flows from operating activities		570,101	516,531
Receipts from customers
Payments to suppliers and employees		(254,380)	(226,279)
Proceeds from sale of assets under lease		63,587	52,188
Proceeds from sale of lease portfolio		-	32,805
Payments for assets under lease		(281,412)	(234,601)
Interest received		1,410	1,855
Interest paid		(10,531)	(11,329)
Income taxes paid		(40,635)	(33,586)
Subsidiaries' acquisition expense		(1,076)	(2,612)
Net cash from operating activities		47,064	94,972
Cash flows from investing activities		(6,888)	(3,396)
Payments for capitalised software
Payments for plant and equipment		(1,353)	(4,468)
Payments for subsidiary investments (net of cash acquired)	13	(8,919)	(39,000)
Payments for joint venture subordinated loans		(1,220)	(1,356)
Net cash used in investing activities		(18,380)	(48,220)
Cash flows from financing activities		58,032	116,360
Proceeds from borrowings
Repayment of borrowings		(58,042)	(111,343)
Payment for treasury shares		(10,184)	-
Proceeds from share issues		-	5,358
Payment of borrowing costs		-	(184)
Dividends paid by parent entity	15	(54,076)	(46,589)
Net cash used in financing activities		(64,270)	(36,398)
Effect of exchange changes on cash and cash equivalents		(581)	(500)
Net (decrease) / increase in cash and cash equivalents		(36,167)	9,854
Cash and cash equivalents at beginning of year		95,583	85,729
Cash and cash equivalents at end of year	6	59,416	95,583

Consolidated Statement

of Changes in Equity 9

For the year ended 30 June 2017

2017	Note	Issued capital $'000	Retained Earnings $'000	Option Reserve $'000	Cash flow Hedge Reserve $'000	Foreign Currency Translation Reserve $'000	Treasury Reserve $'000	Total $'000
Equity as at beginning of year		144,380	222,029	10,092	(615)	(5,391)	-	370,495
Profit attributable to members of the parent entity		-	67,902	-	-	-	-	67,902
Other comprehensive income after tax		-	-	-	520	(3,662)	-	(3,142)
Total comprehensive income for the period		-	67,902	-	520	(3,662)	-	64,760
Transactions with owners in their capacity as owners:
Treasury shares	10	(3,292)	-	-	-	-	(6,892)	(10,184)
Dividends paid	15	-	(54,076)	-	-	-	-	(54,076)
Equity as at 30 June 2017		141,088	235,855	10,092	(95)	(9,053)	(6,892)	370,995

2016	Note	Issued capital $'000	Retained Earnings $'000	Option Reserve $'000	Cash flow Hedge Reserve $'000	Foreign Currency Translation Reserve $'000	Treasury Reserve $'000	Total $'000
Equity as at beginning of year		121,617	186,149	8,449	(526)	2,754	-	318,443
Profit attributable to members of the parent entity		-	82,469	-	-	-	-	82,469
Other comprehensive income after tax		-	-	-	(89)	(8,145)	-	(8,234)
Total comprehensive income for the period		-	82,469	-	(89)	(8,145)	-	74,235
Transactions with owners in their capacity as owners:		22,763
Contributions of equity, net of transaction costs			-	-	-	-	-	22,763
Employee share schemes - value of employee services		-	-	1,643	-	-	-	1,643
Dividends paid	15	-	(46,589)	-	-	-	-	(46,589)
Equity as at 30 June 2016		144,380	222,029	10,092	(615)	(5,391)	-	370,495

Notes to the

Financial Statements 10

1. Basis of preparation

This preliminary final report has been prepared in accordance with ASX Listing Rule 4.3A and the disclosure requirements of ASX Appendix 4E.

The preliminary final report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards, including Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.

The preliminary final report covers the consolidated group of McMillan Shakespeare Limited and its controlled entities (Consolidated Group). McMillan Shakespeare Limited is a listed public company, incorporated and domiciled in Australia.

The preliminary final report of McMillan Shakespeare Limited and its controlled entities complies with all International Financial Reporting Standards (IFRS) in their entirety.

Reporting Basis and Conventions

The preliminary final report has been prepared on an accruals basis and is based on historical costs modified by the revaluation of selected non-current assets, and financial assets and financial liabilities for which the fair value basis of accounting has been applied.