Aurizon is Australia’s largest rail freight
operator with almost 150 years of
experience. Each day the Company moves
on average more than 700,000 tonnes of
coal, iron ore and other minerals as well
as agricultural and general freight across
the nation.
Aurizon operates a coal network made up of approximately
2,670 kilometres of heavy haul rail infrastructure in Central
Queensland. The Company also provides a range of specialist
services in rail design, engineering, construction, management and
maintenance, and offers large-scale supply chain solutions to a
diverse range of customers Australia-wide.
Aurizon has played a critical role in the economic development
and growth of the minerals-rich state of Queensland, providing
the transport backbone for one of the world’s largest coal supply
chains. Over recent years Aurizon has extended its business
focus beyond its Queensland heritage and applied its expertise
and capabilities to coal and iron ore opportunities in New South
Wales and Western Australia, as well as intermodal freight across
the nation.
Aurizon’s business comprises four major product lines – Coal, Iron
Ore, Intermodal & Bulk and Network. The Company’s performance
and future growth is linked to the key demand drivers of the
Australian resources sector and ongoing strength of the Australian
economy. Aurizon is well placed to benefit from the continued
long-term growth in demand for coal and iron ore, particularly from
fast growing Asian economies such as China and India.
Our Vision
Grow our People. Grow with our Customers. Grow the Nation.
Our Mission
To be a world leading transport business, to partner with customers
for growth and to double the value of the Company every five years,
while becoming the safest transport company in the world.
Our Employee Promise
To build a diverse, collaborative and creative workplace where
people know what they are accountable to do and can count on
having what they need to succeed.
Our Values
Safety – Safety of ourselves and others is our number one priority.
Integrity – We are honest and fair and conduct business with the
highest ethical standards.
Leadership, Passion & Courage – We are passionate about leading
change. We deliver results with energy and conviction.
World Class Performance – We deliver world class performance
and superior value for our shareholders, customers and staff.
Contents
Highlights ................................................................3
Chairman’s Report ...............................................4
Managing Director & CEO’s Report ..............6
Year in Review .......................................................8
Sustainability ......................................................16
Directors’ Report ................................................22
Remuneration Report ......................................28
Corporate Governance Statement ..............49
Financial Report.................................................57
Shareholder Information ............................ 101
Glossary .............................................................. 103
Corporate Information ................................. 105
On track for
Operating Ratio in respect of FY15.
3
0
2
3
,
6
6
7
3
,
6
3
5
3
,
+7%
2
8
1
6
8
1
4
9
1
+4%
1
5
2
1
,
8
4
0
1
,
+19%
33%
30%
0
4
8
26%
4
5
7
4
8
5
3
8
3
88%
+29%
83%
80%
FY11
FY12
FY13
FY11
FY12
FY13
FY11
FY12
FY13
FY11
FY12
FY13
Coal volumes (mt)
Revenue ($m)
1 Underlying, which adjusts for significant items.
EBITDA1 ($m)
EBITDA Margin
EBIT1 ($m)
Operating Ratio
FINANCIAL RESULTS SUMMARY
FY13
FY12 VARIANCE
Total revenue(1)
EBITDA
- Statutory
- Underlying(2)
EBIT
- Statutory
- Underlying(2)
Net finance costs
Tax expense
- Statutory
- Underlying(2)
NPAT
- Statutory
- Underlying(2)
EPS(3)
- Statutory
- Underlying(2)
3,766
1,182
1,251
685
754
(103)
(135)
(164)
447
487
19.8
21.6
3,536
1,057
1,048
593
584
(39)
(113)
(125)
441
420
18.1
17.2
7%
12%
19%
16%
29%
(164%)
(19%)
(31%)
1%
16%
9%
26%
(1) FY12 revenue has been adjusted to reflect reclassification of diesel fuel rebate
(2) Underlying adjusts for significant items
(3) EPS calculated on weighted average number of shares on issue
2,257,248,177 in FY2013 and 2,440,000,000 in FY2012
OPERATING HIGHLIGHTS
FY13
FY12 VARIANCE
Revenue / NTK ($/000 NTK)
Labour Costs / Revenue
NTK / employee (MNTK)
Opex / NTK ($/000 NTK)
55.8
29%
8.4
44.5
56.0
32%
7.0
46.7
Operating Ratio(4)
79.8%
83.4%
0%
3ppt
20%
5%
3.6ppt
1.3ppt
7%
6%
11%
78%
8.0%
67.0
267.7
7,969
8.2
6.7%
62.9
252.2
8,969
4.6
26.7%
13.1%
(13.6ppt)
ROIC
NTK (bn)
Tonnes (m)
People(5)
Final dividend (cps)
Gearing
(4) FY2012 Operating Ratio restated to reflect reclassification of diesel fuel rebate
(5) The 11% variance in FY2013 vs. FY2012 for people, reflects the favourable
impact of the voluntary redundancy program on headcount
SEGMENT SUMMARY –
UNDERLYING EBIT
Network
Coal
Iron Ore
Freight
Unallocated
Group
FY13
FY12 VARIANCE
424
320
97
23
(110)
754
334
257
32
68
(107)
584
27%
25%
203%
(66%)
(3%)
29%
Image: Mario Marinelli and Heather Swinson at the
Mt Arthur coal loading station, Hunter Valley NSW
PERFORMANCE HIGHLIGHTS | AURIZON
3
Highlights
8
0
3
.
0
4
2
.
5
9
0
.
-60%
6
2
9
1
.
4
7
0
1
.
0
9
4
.
-54%
FY11
FY12
FY13
FY11
FY12
FY13
Lost Time Injury Frequency Rate
(per million man-hours worked)
Medically Treated Injury Frequency Rate
(per million man-hours worked)
reduction in the
Lost Time Injury Rate.
reduction in the
Medically Treated
Injury Frequency Rate.
0
0
8
8
.
0
4
3
8
.
0
8
9
7
.
-3.6ppt
0
0
8
.
0
7
6
.
+1.3ppt
0
4
4
.
FY11
FY12
FY13
FY11
FY12
FY13
Operating Ratio
Return on Invested Capital
(ROIC)
reduction in the
group Operating Ratio.
increase in return
on invested capital.
4
ANNUAL REPORT 2012–13
Chairman’s
Report
Image: Linkin Quakawoot and Kaio Kris manual welding on the Northern Missing Link Project
Total
Shareholder Return.
The completion of Aurizon’s
second full financial year as
a publicly listed company
is another important
milestone in our history of
almost 150 years. Over the
last year we have continued
to focus on shareholder
wealth, cost reductions and
improving efficiency for
long-term growth.
In December 2012, QR National adopted the
new name Aurizon. Aurizon is a combination of
Australia and horizon. The new name conveys the
geographical scope of the Company’s operations
as well as the long-term growth opportunities on
the horizon and beyond.
At Aurizon we strive to be a world class company
that global investors want to invest in; a company
that values its people and keeps them safe; and,
that delivers outstanding service to customers
with rail and road transportation services in the
coal, iron ore and bulk freight markets.
The Board regularly reviews the Company strategy.
Significant work has been undertaken to better
define and articulate Aurizon’s three strategic
pillars to success:
1. Developing a world class core business
2. Operating, developing and integrating bulk
supply chains
3. Maximising the value of freight and logistics.
The first pillar of this strategy is all about
achieving the core capabilities and level of
performance to put us among the world’s best.
These are fundamental drivers of company
performance, including having a competitive cost
base; a safety and performance-driven culture;
deep engagement with our customers; and
strength in technology.
The second pillar means we will leverage our
core business and competitive strengths to take
advantage of medium to long-term growth
opportunities. Good examples can be seen in the
business development work we’re doing in the
Bowen and Galilee Basins, the Hunter Valley and
iron ore in the Pilbara, Western Australia.
CHAIRMAN’S REPORT | AURIZON
5
Resources are fundamentally a cyclical, long-run
sector. While we’ve put intense focus on costs
during the down cycle, the Company will not lose
sight of long-term growth opportunities and value
creation for shareholders. Aurizon will continue to
invest prudently Australia-wide through the cycle
as we did in 2012-13 and strategically position
ourselves for the decades ahead.
In doing so, we will continue to collaborate with
our customers on supply chain solutions across
our business; notably for coal infrastructure assets
in Queensland and New South Wales, and new
assets for the growing iron ore business in Western
Australia. This will support organic growth from
well-established businesses.
During the year, the Company also achieved
significant milestones for potential future
expansions in the Bowen and Galilee Basins in
Queensland, as well iron ore infrastructure and
haulage opportunities in the Pilbara. You can read
more about our projects on pages 14-15.
Fundamentally, we’re positioning your Company
alongside major Australian and global names in
mining for the long-term future growth of Australian
resource exports. The Board also remains confident
in the outlook for rail freight generally, given the
underlying strength and resilience of the domestic
economy and the progress being made to lift the
Company’s competitiveness.
Acknowledgements
The Board and I would like to express our collective
appreciation to Aurizon’s shareholders, employees
and contractors for their ongoing commitment
during the year.
Our appreciation goes to the executive team, led by
Managing Director & CEO Lance Hockridge, for the
significant progress made over the past 12 months
in transforming your Company.
I look forward to welcoming you at the Company’s
Annual General Meeting on 13 November 2013 at
the Brisbane Convention & Exhibition Centre.
John B Prescott AC
Chairman
The third and final pillar is how Aurizon maximises
the value from freight and logistics. We believe
there’s a range of options for the Company to be
more involved in the Australian general freight and
logistics market, including linehaul and terminal
work, partnering with major logistics players and
encouraging a broader modal shift from road to rail.
Our focus on our strategy is unwavering. An intense
round of work is underway across the Company,
with scores of separate initiatives, to execute the
strategy. This is a work in progress through to 2015
and beyond.
Solid results in challenging conditions
The past year has seen an increasingly difficult
domestic economic environment as well as
continuing volatility in global markets. Companies
continue to rein in costs, curb growth expectations
and seek more efficiency from existing assets and
supply chains. Again our customers experienced
significant impacts on coal tonnages caused by
flood-related events in Queensland. These factors
have combined to present Aurizon with some
very real operational and commercial challenges.
Despite this environment, we have delivered a solid
financial result and achieved considerable gains
with our transformation and growth programs.
The Company has posted a 1% increase in net
profit after tax to $447 million. Underlying Earnings
Before Interest and Tax (EBIT) was $754 million,
a 29% increase over the prior year, and earned
on revenues of $3.77 billion.
The Board has agreed to amend the company’s
dividend guidance from a payout ratio of 50% to a
range of 60-70%. The payout ratio for the FY2013
Final Dividend has been increased to 65%.
The Aurizon Board declared a 90% franked final
dividend of 8.2 cents per share, giving a full-year
dividend of 12.3 cents per share. This represents
an increase of 4.0 cents, or 48% over the prior year.
Aurizon’s Total Shareholder Returns for the year
was 25.26% outperforming the S&P/ASX 200 index
by 3.66%.
The financial performance for the 2012-13 year is
set out in detail on pages 57-98.
Safety and sustainability
At Aurizon, safety is a core value and the
Company’s number one priority. Providing a safe
environment for our stakeholders, particularly our
8,000 employees from around Australia, is our most
important responsibility.
While significant improvements across all aspects of
safety have been made, we can never be satisfied
with anything less than ZEROHARM, which means
no injuries to anyone, ever.
In 2012-13 we improved across all the key safety
metrics, in particular Lost Time Injury Frequency
Rate (LTIFR) and Medically Treated Injury
Frequency Rate (MTIFR).
These achievements and the positive cultural
change we are progressing make Aurizon a better
place to work and a better company to partner with.
Our commitments and progress in the areas of
safety, environment, community and people are
discussed in detail on pages 16-21 of this report.
Capital management
The year has seen a number of very significant
capital management initiatives that have both
diversified the shareholder base and provided the
platform for an effective long-term capital structure
for Aurizon.
In August 2012, we announced an on-market share
buy-back program in which 14.5 million shares were
bought back at a cost of around $54 million.
In October, Aurizon advised its proposed
participation in a selective buy-back of $1.1 billion
of Queensland Treasury Holdings’ (QTH)
shareholding (subsequently approved by
shareholders at an Extraordinary General Meeting).
QTH held the shares on behalf of the Queensland
Government. At the same time, QTH sold
$500 million of shares through an institutional
placement to investors. In March 2013, QTH
undertook a similar placement of $806 million
of shares. The net effect of these initiatives was
a reduction of the Queensland Government
shareholding in Aurizon from 34% to 8.9%.
In May 2013, we announced completion of a review
to determine an effective long-term capital structure
for Aurizon. This was aligned with the Company’s
ongoing debt strategy to balance the diversity and
maturity of funding sources and the cost of financing
while delivering funding flexibility to Aurizon and its
shareholders. In June 2013, we completed a major
refinancing program, including implementing stand
alone debt facilities at both Aurizon Group (through
its finance vehicle Aurizon Finance Pty Ltd) and
Aurizon Network Pty Ltd (a wholly-owned subsidiary
of Aurizon), creating a transparent and sustainable
financial structure with debt placed appropriately
against the regulated Central Queensland Coal
Network (CQCN) and with the ability to further
diversify funding sources in the future.
The new financial structure also delivers the
flexibility to introduce a minority equity interest in
Aurizon Network if desired, allowing redeployment
of capital from the regulated business into either
capital management initiatives or long-term growth
projects where appropriate.
Outlook
As we enter 2013-14, there are mixed views on
the relative strength and growth trajectory of the
Australian economy and its place as an enduring
source of global commodities. What is clear is that
resource sector investment has peaked and broader
economic growth expectations have moderated.
That said, Aurizon remains confident in the medium
to long-term global demand for Australian resources,
particularly coal and iron ore. The extraordinary
period of mining investment is giving way to a
period of solid growth as new assets start producing
and improvements to installed capacity take effect.
6
ANNUAL REPORT 2012–13
Managing
Director &
CEO’s Report
Image: Hauling iron ore near Geraldton WA
New Form coal
haulage contracts secured.
During 2012-13 Aurizon
maintained strong
momentum, relentlessly
pursuing our company-wide
transformation, improving
service to our customers and
creating shareholder value.
Management’s focus on improving productivity,
increasing efficiency and delivering major cost
reductions deepened substantially during the
year. The Company has a clear roadmap of reform
to deliver on our target of an Operating Ratio
target of at least 75% (or 25% EBIT margin) in
respect of the financial year 2015.
Despite the economic headwinds, your Company
continues to carve out a strong future by lifting
commercial and operational performance and
delivering on core commitments to shareholders.
Financial performance
The combination of revenue growth, cost
reduction and reform initiatives resulted in a
29% increase in underlying Earnings Before
Interest and Tax (EBIT) for the year to
$754 million (FY12: $584 million).
This is a strong result in the context of the
challenging economic conditions, weaker demand
for Australian resources and flood-related impacts
on coal tonnages in Queensland during 2012-13.
Revenue rose to $3.77 billion for the reporting
period to 30 June 2013, a 7% increase over
the prior year (FY12: $3.5 billion). Underlying
Earnings Before Interest, Tax, Depreciation and
Amortisation (EBITDA) improved 19% to
$1,251 million (FY12: $1,048 million).
Earnings per share was 19.8 cents, a 9%
improvement on the prior comparable period.
We continued to generate strong cash flows to
fund our growth projects, with capital expenditure
totalling $981 million for the year. The Company’s
net debt position as at 30 June was $2.5 billion,
reflecting a net gearing ratio of 26.7%.
We achieved a 3.6 percentage point improvement
to Operating Ratio of 79.8%, a successful
milestone on our journey to 75% in respect
of FY2015. Return on Invested Capital (ROIC)
improved 1.3 percentage points to 8%
in 2012-13.
Operational performance
Coal tonnages were up by 3% in Queensland
compared to the prior year and up 12% in
New South Wales which reflects our progress in
that market. This resulted in a net 4% improvement
in coal volumes to 193.7 million tonnes compared
to 2011-12.
Improvement in revenue quality continued through
the period, with new form contracts at the end of
2012-13 representing approximately 42% of total
coal volumes hauled, up from 38% at 2011-12.
In the Western Australian iron ore market the
Company continued to make significant progress,
with the business increasing iron ore volumes over
the prior year by 82% to 24.7 million tonnes and
progressing to schedule its plans to achieve
30 million tonnes per annum (mtpa) in haulage
by 2013-14.
Bulk, general and intermodal freight volumes
of 49.3 million tonnes were down 7% on 2011-12
volumes of 53.0 million tonnes with the completion
of the CBH grain contract in Western Australia and
softer intermodal freight market conditions.
Safety
Aurizon’s journey towards becoming world class
in safety progressed substantially in 2012-13, with
the achievement of major safety reduction targets
during the year.
The key measures of employee safety, Lost Time
Injury Frequency Rate (LTIFR) and Medically
Treated Injury Frequency Rate (MTIFR) reduced
by 60% and 54% respectively compared to the
previous financial year.
The major operational safety measures of
running line derailments and Signals Passed at
Danger (SPADs) rates reduced by 42% and 20%
respectively compared to last financial year.
I am pleased that the range of safety, health
and behavioural change campaigns targeting
ZEROHARM, injury prevention, road safety and
workplace health and safety are working.
Employees are taking accountability for their
personal safety and looking out for their colleagues.
Safety performance is becoming an ingrained
part of our performance culture. It reflects better
operating discipline and a milestone on our journey
to world class performance.
Transformation
This year we lifted the intensity of work on the
transformation program, particularly cost reduction
and productivity improvement. Our target is an
Operating Ratio of 75% in respect of the financial
year 2015. In other words, we would earn 25 cents
profit in every $1 we make.
The current Operating Ratio is still too high when
compared to global rail industry peers. In July 2013,
the Company detailed a program to deliver more
than $230 million in cost reductions and operational
efficiency improvements by 30 June 2015 (read
more about our “Drive to 75” on pages 12-13).
MANAGING DIRECTOR & CEO’S REPORT | AURIZON
7
In December 2012, our Company adopted Aurizon
as a name to replace QR National. This transition
marked a major milestone for our business, as we
transform to a world class company.
In this respect, we’re well progressed on a $2 billion
expansion of the Central Queensland Coal Network
that will deliver an extra 70 million tonnes of
capacity for our customers by 2015.
During the year we also strengthened our long-
term position with the advancement of growth
opportunities in target markets of Queensland,
Western Australia and New South Wales.
A key example has been the proposal between
Aurizon and GVK Coal Infrastructure (Singapore)
Pte Ltd (GVK Hancock) to progress the proposed
development of rail and port infrastructure to unlock
Galilee Basin coal reserves, as well as a process to
support the next phase of coal growth in the
Bowen Basin.
Another example is the securing of Queensland
Government support for the NorthHub consortium,
a joint venture initiative between Aurizon and Lend
Lease, to potentially develop a new coal terminal at
Abbot Point.
In Western Australia’s Pilbara, we are continuing to
investigate strategic opportunities that leverage our
capability to build and operate multi-user railways.
Details of our progress on growth projects can be
found on pages 14-15 of this report.
Acknowledgments
On behalf of all of the employees at Aurizon,
I would like to express our gratitude to our
shareholders for your continued support of
the Company.
I would like to acknowledge the outstanding
contribution of former Chief Financial Officer
Deb O’Toole, who left the Company during
2012-13 and played such a pivotal role in Aurizon’s
transformation since listing in 2010.
We are grateful to our customers for their business
in 2012-13. With our firm focus on customer service,
we try to exceed their expectations in everything
that we do.
Finally, for both the strong financial performance
and our ongoing transformation, I appreciate
greatly the efforts of all our people and leadership
of my Executive Committee.
Lance Hockridge
Lance Hockridge
Lance Hockridge
Managing Director & CEO
In 2012-13, we finalised the functional restructure
of the Company that commenced in 2011.
The restructure included a range of initiatives
targeting greater productivity and lower costs,
and better alignment with customer service
requirements and the external market.
A second major round of voluntary redundancies
was undertaken during 2012-13 resulting in
921 employees leaving the Company.
The restructure created the Commercial &
Marketing function to ensure the customer was
put at the front and centre of all we do. In 2012-13,
we saw the benefits of this change flowing through
strongly with the securing of circa 120 mtpa of
coal haulage contracts with Rio Tinto, BMA/BMC,
Glencore Xstrata, Whitehaven, Ensham, MMG
and Graincorp. Not only do the wins provide big
baseload tonnages well into the next decade,
they will also deliver improved commercial returns
through new performance-based contracts.
In 2012-13 we also welcomed three new leaders to
our business.
Keith Neate was appointed Executive Vice President
& Chief Financial Officer (EVP & CFO) after serving
as finance head for the coal business since 2011.
Keith has a wealth of experience, including serving
as the CFO of Virgin Blue and in senior roles at
KPMG in the United Kingdom.
Mike Franczak was appointed Executive Vice
President Operations and joins the team
with 25 years experience at Canadian Pacific
Railway Limited, including his most recent role
as Chief Operations Officer. His experience in
the transportation of bulk commodities will be
invaluable to our customers and his expertise is
essential to the transformation of our business.
Alex Kummant was appointed to the role of
Executive Vice President Strategy and brings more
than 25 years of experience in the North American
industrial sector, including executive positions at
Emerson Electric, SPX and Union Pacific. He was also
Chief Executive Officer at Amtrak, the US national
passenger rail service.
Growth
As the Company undergoes an unparalleled
transformation, we must also pursue mid to longer-
term strategic growth and leverage our superior
capability to operate, integrate and develop bulk
supply chains across Australia.
In 2013-14, our current expectations are for coal
haulage volumes to increase around 5% to a range
of approximately 200 – 205 million tonnes.
We remain confident in the long-term global
demand for Australian resources and experience
tells us we must invest through the commodity
cycle. Even in tough economic conditions, we have
to make prudent and strategic decisions to reap the
rewards that long term-growth will bring.
In the near-term, we will leverage our existing assets
to increase system capacity and extra efficiencies
across the supply chain.
8
ANNUAL REPORT 2012–13
Year in Review
Overview
Image: Electric coal train near Gladstone
improvement in
Operating Ratio.
4
2
4
4
3
3
5
9
2
+27%
FY11
FY12
FY13
Network – Underlying EBIT
($M)
Financial Year 2011 and 2012 EBIT adjusted to
reflect the reallocation of external Rollingstock
Services from Network to Unallocated
($6.5 million) and ($7.7 million) respectively.
0
2
3
7
5
2
9
5
1
+25%
FY11
FY12
FY13
Coal – Underlying EBIT
($M)
7
9
+203%
2
3
5
1
FY11
FY12
FY13
Iron Ore – Underlying EBIT
($M)
8
6
-66%
3
2
6
1
FY11
FY12
FY13
Freight – Underlying EBIT
($M)
Year In reVIeW | aurIZon
9
NETWORK
NETWORK PROFiT & LOss – UNDERLYiNG
NETWORK mETRics
Tonnes (m)
NTK (bn)
Access revenue/NTK ($/000 NTK)
Maintenance/NTK ($/000 NTK)
Opex/NTK ($/000 NTK)
FY13
182.3
44.7
20.6
2.5
14.2
FY12 varIancE
9%
166.7
8%
41.2
14%
18.1
4%
2.6
0%
14.2
- Access
- Services
- Other
$M
Revenue
Total Revenue
Operating costs
EBITDA
EBITDA margin
Depreciation expense
EBIT
Operating Ratio
COAL
FY13
921
90
47
1,058
(435)
623
FY12 varIancE
24%
744
(29%)
126
(6%)
50
15%
920
(8%)
(401)
20%
519
2.5ppt
58.9% 56.4%
(8%)
(185)
27%
334
3.8ppt
59.9% 63.7%
(199)
424
cOaL PROFiT & LOss – UNDERLYiNG
cOaL mETRics
- Above Rail
- Below Rail
- Other
$M
Revenue
Total revenue
Operating costs
EBITDA
EBITDA margin
Depreciation expense
EBIT
Operating Ratio
IRON ORE
FY13
1,079
776
8
1,863
(1,369)
494
FY12 varIancE
5%
1,026
6%
732
(43%)
14
5%
1,772
(2%)
(1,339)
14%
433
2.1ppt
26.5% 24.4%
1%
(176)
25%
257
2.7ppt
82.8% 85.5%
(174)
320
Tonnes hauled (m)
NTK (bn)
- QLD
- NSW
- Total
- QLD
- NSW
- Total
Revenue/NTK ($/000 NTK)
Opex/NTK ($/000 NTK)
FY13
155.8
FY12 varIancE
3%
151.7
37.9
33.9
193.7 185.6
36.8
5.1
37.8
5.8
43.6
42.7
35.4
41.9
42.3
36.2
12%
4%
3%
14%
4%
1%
2%
iRON ORE PROFiT & LOss – UNDERLYiNG
iRON ORE mETRics
$M
Total Revenue
Operating costs
EBITDA
EBITDA margin
Depreciation expense
EBIT
Operating Ratio
FREIGHT
FY13
357
(223)
134
FY12 varIancE
81%
197
(56%)
(143)
148%
54
10.3ppt
37.5% 27.2%
(68%)
(22)
203%
32
11.0ppt
72.8% 83.8%
(37)
97
Tonnes hauled
NTK (bn)
Revenue/NTK ($/000 NTK)
Opex/NTK ($/000 NTK)
FY13
24.7
10.3
34.7
25.2
FY12 varIancE
82%
13.6
54%
6.7
18%
29.4
(2%)
24.6
FREiGhT PROFiT & LOss – UNDERLYiNG
FREiGhT mETRics
FY13
1,082
(1,002)
80
$M
Total Revenue
Operating costs
EBITDA
EBITDA margin
Depreciation expense
EBIT
Operating Ratio
Note: FY13 vs. FY12 variance “Favourable/(Adverse)” outcome
FY12 varIancE
(8%)
1,173
5%
(1,054)
(33%)
119
(2.7ppt)
7.4% 10.1%
(12%)
(51)
(66%)
68
(3.7ppt)
97.9% 94.2%
(57)
23
Tonnes hauled
NTK (bn)
Revenue/NTK ($/000 NTK)
Opex/NTK ($/000 NTK)
FY13
49.3
13.2
82.0
80.2
FY12
53.0
14.3
82.0
77.3
varIancE
(7%)
(8%)
0%
(4%)
10
annual report 2012–13
A number of significant
enterprise-level initiatives
were commenced or completed
during 2012-13 as part of the
Company’s business strategy
and long-term transformation.
These are outlined below.
Business-specific initiatives
are covered in the respective
business segments.
Strategy
Aurizon’s enterprise strategy is designed to deliver
improved shareholder value by reforming the
business to achieve at least 75% Operating Ratio
target (or 25% Earnings Before Interest and Tax
margin) in respect of FY15; targeting further
improvements to achieve world class performance;
and securing growth opportunities to lift longer-
term earnings (read more in Chairman’s report
on page 4).
Over the next two years the focus will continue to
be on cost savings and productivity improvements
with a targeted benefit of more than $230 million
to be delivered by 30 June 2015. Some of the
risks facing the business during this time will be
the global demand of coal and iron ore volumes,
contract renegotiation of coal, freight and iron ore
volumes, Enterprise Agreement negotiations and
finalisation of the Draft Access Undertaking (UT4)
submission with approved rates for the Central
Queensland Coal Network (read more in the
Transformation and Growth sections on
pages 12 -15).
Capital management
During the year Aurizon completed a $54 million
on-market share buy-back of ~14.5 million shares
as well as a $1.1 billion selective share buy-back
of a tranche of Queensland Treasury Holdings’
(QTH) shares in Aurizon. QTH held 18% post
buy-back and subsequently arranged placement
of an additional parcel of shares to reduce their
holding to 8.9% as at 30 June 2013.
Debt restructure
The Company, in June 2013, completed a major
refinancing program, including implementing
stand alone debt facilities at both Aurizon Group
(through its finance vehicle Aurizon Finance Pty
Ltd) and Aurizon Network Pty Ltd (a wholly-owned
subsidiary of Aurizon), creating a transparent and
sustainable financial structure with debt placed
appropriately against the regulated CQCN and the
ability to further diversify funding sources.
As at 30 June 2013, gearing (net debt/net debt
plus equity) has increased by 14 percentage points
to 27%, principally due to the completion
of the share buy-back. This increased level of
debt has also resulted in increased finance costs.
This increased level of debt maintains a BBB+/
Baa1 credit rating. Interest cost on drawn debt
reduced to 5.1% for this financial year
(from 6.1% in FY12).
Enterprise Agreements
From July 2013 to June 2015, a total of 18 of
the Company’s 19 Enterprise Agreements (EAs)
are up for renewal, covering approximately 90%
of our 8,000 employees. The objective in the
renegotiations is to create fair, competitive and
commercially-driven agreements that facilitate
cultural and operational transformation,
including an Operating Ratio of 75%
in respect of FY15.
The Company has established a project to
undertake the extensive work required for the
renegotiations and to ensure comprehensive
contingency plans are in place to mitigate
industrial relations risks.
Unallocated segment note
The functional model has nine functions –
Commercial & Marketing, Operations and Network
are the three business functions, with six support
functions that provide services to the business
functions. The business functions’ costs are
directly allocated through to the segments.
The support functions were centralised under the
functional model in order to significantly improve
transparency over the cost base of the business
and drive value though efficiency and productivity.
The costs are allocated to the segments based
on services provided. However, there are costs
which cannot be distinguished between each
of the segments and, as such, are reported in
these financial statements as ‘Unallocated’.
Further details are provided in Note 4(a) in the
Financial Statements.
NETWORK
Business summary
Aurizon Network operates the 2,670 kilometre
Central Queensland Coal Network (CQCN).
The open access network is the largest coal rail
network in Australia and one of the country’s most
complex, connecting multiple customers from more
than 50 mines to four ports. The CQCN includes
four major coal systems; the Moura; Blackwater;
Goonyella; and Newlands.
Performance overview
In 2012-13 coal tonnages were higher than the
prior year despite softer global demand for coal,
a train derailment on the CQCN and the short-term
infrastructure impacts caused by wet weather in
Queensland. Railings across the network increased
to 182.3 million tonnes, a 9% increase on 166.7
million tonnes in 2011-12. The increase in
tonnages reflects the ramp up of contracted tonnes
in the Goonyella to Abbot Point Expansion (GAPE)
and growth in customer demand.
Network contributed full year revenue of
$1,058 million and underlying EBIT of $424 million,
which was better than the prior comparable period,
up by 15% and 27% respectively. Revenue was
favourably impacted by the inclusion of 2010-11
revenue cap adjustment and the full year benefits
of GAPE.
There was an 8% increase ($34 million) in
operating costs, largely comprising a $26 million
increase in traction costs from the new Blackwater
Feeder stations and associated increased electric
traffic, as well as flood rectification, repairs and
derailment costs.
Work continued on a number of strategic growth
projects, with capital expenditure for the year
totalling $624 million. These included the Wiggins
Island Rail Project Stage 1, Hay Point Expansion
and the Asset Renewal program.
On 30 April 2013, Aurizon Network submitted its
Draft Access Undertaking (UT4) for the period
1 July 2013 to 30 June 2017. The Undertaking sets
out the terms upon which access to the CQCN is
made available, prices it proposes to charge access
seekers and processes for the maintenance and
expansion of the network. Aurizon Network has
commenced consultation with the industry on the
proposal. The Queensland Competition Authority
(QCA) will make a determination on UT4. On
31 May 2013, the QCA approved the extension
of the current Undertaking until 30 June 2014
and the implementation of transitional tariffs to
cover the interim period. The difference between
the transitional tariffs and those finally agreed
by the QCA as part of UT4 will then be refunded
or recovered from the network users through an
adjustment charge mechanism.
COAL
IRON ORE
FREIGHT
YEAR IN REVIEW | AURIZON
11
Business summary
Aurizon is Australia’s largest iron ore haulier
outside of Western Australia’s Pilbara region and
has continued to grow the business rapidly from a
base of 13.6 million tonnes per annum (mtpa) in
2011-12. The expansion has been supported with
significant increases in local employment and new
investment in rollingstock and rail support facilities
at Esperance and Geraldton.
Performance overview
In 2012-13, the business transported 24.7 million
tonnes compared to 13.6 million tonnes in the
prior year. Revenue rose 81% in 2012-13,
or $160 million, to $357 million.
Underlying EBIT for Iron Ore as a segment tripled
in 2012-13 from $32 million in the previous year
to $97 million.
A 56% ($80 million) increase in operating costs
reflects the necessary increase in costs to support
the 82% increase in volumes hauled during
the period.
The strong result in this segment reflects the
growth in customer demand and the revenue
protection of the new form contracts.
Iron Ore capital spend of $63 million is largely
attributable to the new standard gauge
locomotives that were purchased during the year
for the increased volumes.
Aurizon is optimistic that global demand for
Australian iron ore will continue in the long-term
and drive solid growth for rail haulage services.
By working closely with customers and supply chain
partners, Aurizon’s objective is to help sustain the
global competitiveness of its customers’ product.
This will assist in mitigating risks associated
with reduced global demand for iron ore and/or
deterioration in prices.
Business summary
Aurizon’s freight business supports a range
of customers nationally for bulk minerals and
commodities, agricultural products, mining
and industrial inputs, and general and
containerised freight.
Due to the growth in the Iron Ore business,
the results have been separated from the
Freight segment and reported individually
for the first time.
Performance overview
In 2012-13, the business transported 49.3 million
tonnes of freight compared to 53.0 million tonnes
in the prior year. This represented a decrease
of 7%. The key driver of the reduction was the
loss of the CBH grain haulage contract in
Western Australia.
Total revenue was down 8% in 2012-13,
or $91 million, to $1,082 million over the prior year.
Underlying EBIT was down by 66%, or $45 million,
to $23 million. This result was impacted by the
loss of the CBH grain haulage contract which
reduced revenue by $56 million, as well as lower
revenue from Transport Service Contracts.
The reduction in revenue was partially mitigated
through substantial cost savings made by the
business as a result of the transformation program.
It also presents the Intermodal business with an
opportunity to undertake reforms to make services
more profitable.
A 5% ($52 million) decrease in operating costs
largely comprised a $38 million of flow-through
benefits to labour costs from the voluntary
redundancy program as well as a decrease in fuel
costs and access charges due to lower volumes
principally from the end of the CBH grain contract
in October 2012.
Business summary
Aurizon’s coal business is one of the world’s
largest rail transporters of coal from mine to
port for export markets, hauling an average
530,000 tonnes a day.
Aurizon provides a critical link in Australia’s six
major coal chain systems for the majority of
Australia’s coal producers. Our coal transport
operation links mines in the Newlands, Goonyella,
Blackwater, Moura and West Moreton systems in
Queensland, and the Hunter Valley coal system
in New South Wales, to end customers and ports
across Australia.
Performance overview
In 2012-13 coal haulage volumes of 193.7 million
tonnes were up 4% up on the year prior of
185.6 million tonnes. This included increases of
3% and 12% respectively for Queensland and
New South Wales. The 2012-13 volumes were
however impacted by flood-related interruptions in
Queensland and softening global demand.
Underlying EBIT increased by 25% or $63 million,
to $320 million due to stronger above rail revenue
rates, receipt of contract performance payments,
major cost reduction and achieving better
maintenance efficiencies. Revenue increased in
2012-13 by 5% to $1,863 million and revenue per
NTK (net tonne/kilometre) by 1%.
There was a $30 million increase in operating costs,
largely due to a $78 million increase in access
charges partly offset by a $54 million decrease in
Aurizon Network Take-or-Pay charges.
In 2012-13 the continued renegotiation of legacy
contracts progressed with coal volumes under
new form contracts now at approximately 42%.
The new contracts provide customers with greater
certainty and flexibility to meet volume demands
in return for more favourable revenue protection
arrangements.
Coal capital expenditure for the year totalled
$93 million and was largely made up of wagon
overhauls and commencement of Hexham facilities
in New South Wales.
By 2017-18, 97% of forecasted contracted
volumes will be under new form contracts. Aurizon
remains confident in the long-term growth for
coal haulage services based on global demand
forecasts and the continued competitiveness of
Australian coal producers. Aurizon is managing
the risk of any near-term deterioration in the coal
market by working closely with customers on lifting
supply chain efficiency and enhancing the revenue
protection measures for Aurizon in its haulage
contracts with customers.
Image: Sharni Bliss, 2012 Trainee of
the Year with Raymond Palmer in the
Network Control Centre Acacia Ridge
12
ANNUAL REPORT 2012–13
Transformation
Image: George Rueben and Apprentice Vehicle Builder
Nathaniel Akee in the Townsville workshops
in cost savings
and productivity
efficiencies.
While Australian
companies face domestic
and global economic
challenges and adjust their
growth aspirations in the
marketplace, Aurizon has
been busy with its own
transformation program.
Once a government-owned entity, Aurizon is
now listed on the Australian Stock Exchange
(ASX) and is Australia’s largest rail freight
operator. The Company is three years into a
major transformation journey which will take
it to 2020 and beyond.
Perhaps the most symbolic part of the
Company’s transformation has been the new
name Aurizon, which captures the Company’s
aspirations and national scope of operations.
The Company’s transformation has its roots
in the corporate strategy. Aurizon’s strategy
is simple. It is based on three value creation
pillars to achieve success:
> Develop a world class core – which outlines
how to become a world class company by
increasing efficiency and productivity and
cutting costs across the business
> Operate, develop and integrate bulk supply
chains – which describes how Aurizon
expands its presence in new and existing
bulk supply chains in Australia and beyond
> Maximise value in the Australian freight
and logistics market – assess potential
long-term opportunities which may
include expansion of terminals, winning
new linehaul customers, partnering with
logistics companies and encouraging the
shift from road to rail.
Aurizon’s aspiration is to become a world class
company. By this we mean a company that
delivers outstanding service to customers,
values its people and keeps them safe.
Such a world class company is an attractive
investment to global shareholders and is seen
as a global benchmark for its competitors.
Achieving this aspiration will keep Aurizon
ahead of the competition.
What is transformation?
Transformation has a number of short, medium
and longer-term targets.
In the short-term, transformation is focused on
cost reduction, achieving efficiency of operations
and better productivity. We have sharpened
our reform programs, linked our planning to our
review processes, which makes our activity more
transparent, and we are following a detailed
roadmap for world class transformation.
We’re driving the business to an Operating Ratio
of 75 per cent in respect of FY15, a key milestone
for the Company’s transformation.
Over the medium-term we will focus on a number
of initiatives which will leverage our new functional
model. Over the next two years, Aurizon is
targeting an additional $230 million worth of
cost-out and productivity opportunities. Of the
estimated $230 million cost savings, $130 million
will come from productivity improvements in
operations and $100 million from reductions in
centralised support costs, including labour, real
estate and information technology efficiencies.
These initiatives include; the removal of overlap
and increasing our accountabilities; harnessing the
power of technology to drive asset productivity;
running trains that are longer, faster and have
more capacity; driving capability improvement and
structural change programs which will increase
our organic growth and keep our costs down and
continuing the major cultural shift towards a safety
and performance-driven organisation.
By improving operational productivity and
liberating latent capacity in existing assets,
Aurizon will continue to lift its capital efficiency as
measured by Return on Invested Capital (ROIC).
Over the longer-term Aurizon will become a world
class company: a transport company with the best
safety and performance culture, which operates
highly efficient and integrated mine to port supply
chains and leverages technology to deliver first-
class customer service every day.
Technology
Technology has the power to transform the way
Aurizon runs its business. It can improve our
customer service and deliver better returns for
our customers and consequently, our Company.
The benefits from implementing new
information technology and operational
technology are plentiful.
Aurizon is undertaking train consist design
programs where improved payload capacities can
be achieved by increasing the density of the train.
In the Newlands system the 80 tonne wagons
were replaced by 106 tonne wagons and the
trains lengthened from 68 wagons to 82 wagons.
This resulted in a substantial payload
improvement and as a result we are potentially
moving 20 per cent more coal with the same
number of train starts.
In the rail industry, technology means safer and
smarter trains, higher utilisation of track capacity
and more efficient operations.
Within our Network Operations unit, an
information technology project is underway to
implement a world class planning, scheduling and
execution system which manages train traffic on
the Central Queensland Coal Network (CQCN).
The three-year project involves a software
solution, known as APEX (Advanced Planning and
Execution), which is being installed to optimise
and integrate the planning and scheduling of
trains across Queensland’s coal rail network.
This application takes existing planning and
scheduling processes and optimises them using
advanced computer software which means our
teams can respond more effectively to customer
requirements and increasingly complex and
dynamic traffic management tasks.
APEX will enable Aurizon to deliver better train
schedules and services for our customers, thus
improving customer satisfaction and network
utilisation. Optimised scheduling and recovery
to schedule capability will benefit customers by
potentially reducing train service cancellations
and improving cycle-times, therefore enabling the
delivery of their product to port in full and on time.
Through the improvements to the way we plan
and schedule trains, Aurizon can unlock the latent
capacity in the network to enable our customers
to move more coal.
tranSForMatIon | aurIZon
13
What Is thE “DrIVE to 75”?
Seen as a measure of good business – an Operating
Ratio (OR) or an operating expense ratio – is a
comparison of a company’s operating expenses against
the company’s revenue.
It is an accepted rail industry metric used by the North
American class 1 railroads which are acknowledged as
setting global performance benchmarks. The ORs of the
best of these railways typically are between the late 60s
to the early 70s.
The OR at Aurizon was 80 per cent in 2012-13. At the
time of listing in 2010 it was 91 per cent. Clearly we are
making progress with the changes required but the OR
still remains unfavourable compared to our competitors
and global rail industry peers.
At Aurizon, we are committed to achieving an OR of
75 per cent in respect of the financial year 2015.
In simple terms, Aurizon would earn 25 cents profit in
every $1 it makes.
To reduce the operating ratio there is a company-wide
focus on the “Drive to 75” initiative. This includes a
range of corporate and employee-led initiatives to
reduce costs and lift productivity. The drive to a 75 per
cent OR will demonstrate the efficiency of the company
by comparing operating expense to net sales. Refer to
Dan’s story below for more on employee-led initiatives.
DanIEL DaVIE’s story
A range of initiatives, big and small, have commenced
across the Company. This is tapping into the core
capability of our experienced workforce where
employees have been busy finding simple ways to
reduce costs and improve efficiency under the “Drive
to 75” Team Challenge (pilot themed “5k Your Way”)
program. The program is one way for front line
employees to assist the Company to reach its Operating
Ratio (OR) and Return On Invested Capital (ROIC) goals.
A great example of this employee-led improvement
is the recent work by Daniel Davie, a Service Delivery
Supervisor who works at our Callemondah coal
operations facility in Gladstone.
Dan leads a team of train drivers who deliver coal from
the mines to the port on the Blackwater and Moura
coal systems. He has identified savings of up $2,500 a
day in diesel fuel in this depot by altering the driving
methodology of empty coal trains that’s as easy as
flicking a switch.
Running a loaded train on the Central Queensland
Coal Network (CQCN) requires all locomotives in the
consist to be powered in order to navigate the track
geometry. Dan realised that running the empty train to
the mine loadout in this way results in the train being
overpowered. So he worked with other parts of the
business to find a way to remove power from the second
locomotive without impacting on train handling or
braking capability.
In the first three months of the trial in the Moura
system, Dan’s changes resulted in a saving of $193,000
of diesel fuel. As the trial produced such significant
savings, the same methodology has also been rolled out
to the Blackwater system. Other parts of our business
are keen to replicate the idea and create their own cost
savings. Dan’s thinking about how to reduce diesel
usage in the fleet makes the business of running trains
more efficient and cost effective, generating savings for
the Company.
14
ANNUAL REPORT 2012–13
Growth
Image: Cut 8 at the Wiggins Island Balloon Loop construction site near Gladstone
in Capital expenditure
in FY13.
As Aurizon makes significant
structural, operational and
financial reforms under its
transformation program,
strategic growth remains an
important requirement for
the Company to deliver value
to shareholders.
We are committed to prudently investing
through the resources cycle and ensuring the
Company is well positioned to benefit from
future growth. We will leverage our industry-
leading capability to operate, integrate and
develop bulk supply chains across Australia.
With respect to coal rail infrastructure,
Aurizon will leverage its existing assets in
Central Queensland to increase system
capacity and efficiencies across the supply
chain. We are midway through a $2 billion
expansion of the Central Queensland Coal
Network (CQCN)that is progressively delivering
more than 70 million tonnes of extra capacity
for our customers for the period 2011-15.
There was a total of $624 million of Network
capital expenditure during 2012-13 with the
key projects being the Wiggins Island Rail
Project and the Hay Point Expansion Project.
During the year we also strengthened our
long-term position with the advancement
of significant growth opportunities in target
markets of Queensland and Western Australia.
These aim to capitalise on our capability to
build and operate multi-user railways and
seek further opportunity to integrate along
the supply chain for rail and port facilities.
We clearly acknowledge the challenges of
the current economic outlook, however our
vision for growth means it’s important to
consistently evaluate opportunities to
deliver long-term value.
Aurizon has a broad portfolio of capital projects at
various stages:
Blackwater Power Systems
Strengthening Project
In September 2012, Aurizon commissioned
the $195 million Blackwater Power System
Strengthening Project, which almost doubled the
electric capacity on the Blackwater rail system.
The electrification of the Blackwater line boosts
coal export capacity by approximately nine million
tonnes per year, enabling the system to deliver up
to 85 million tonnes of coal per annum.
Wiggins Island Rail Project
In September 2011, Aurizon signed an agreement
with a consortium of coal companies to construct
the Wiggins Island Rail Project to service the
new Wiggins Island Coal Export Terminal
(WICET) at the Port of Gladstone. The project will
support the initial 27 million tonnes per annum
(mtpa) of coal to WICET and leverage Aurizon’s
existing rail infrastructure to boost coal exports
from the southern end of the Bowen Basin by
30%. Construction began in March 2012, with
timeframes aligned to the coal export terminal
and the development of related mining projects.
First railings are scheduled for 2014 and overall
project completion by 2015.
Rolleston Electrification
Aurizon is investing in the electrification of the
existing 107 kilometre Bauhinia rail spur, from
Rangal south to Rolleston in Central Queensland,
to harness the operational and cost benefits of
electric trains.
The Bauhinia Electrification Project will lead to
increased efficiency by harnessing the operational
and cost benefits of electric trains, greater power
system reliability and optimal capacity of the
Blackwater Rail System to cater for forecast
increases in coal haulage demand. Construction of
the Bauhinia Electrification Project commenced in
mid-2013 with planned completion by late-2014.
Hay Point Expansion (X140 Goonyella
Expansion)
Aurizon is currently investing in the revised
$130 million expansion to the Goonyella System to
enhance system capacity from 129 to 140 mtpa to
align with the Hay Point Coal Terminal expansion
operated by the BHP Billiton Mitsubishi Alliance.
The Goonyella System Expansion project will be
completed by mid-2014, which will align with
the completion of the Hay Point Coal
Terminal expansion.
Hexham Train Support Facility
During 2012-13, Aurizon reconfirmed its long-term
commitment to the Hunter Valley by announcing
plans for the construction of the support facility to
commence in 2013 and be operational by the end
of 2014.
This is a significant capital investment in excess of
$100 million. The proposed Hexham facility will
support the Company’s growing New South Wales
coal haulage business and help alleviate capacity
pressures in the Hunter Valley coal supply chain.
The project is in the final stages of development
and depending on government planning approvals
and consultation with stakeholders, construction is
planned to commence later this year.
Central Queensland Integrated Rail
Project (CQIRP)
Aurizon’s CQIRP is well positioned to capture
potential future growth in the Northern Bowen
Basin and the emerging Galilee Basin. The Company
is progressing options to develop and operate
co-ordinated rail-port coal supply chains in
Queensland. These expansions aim to offer coal
producers efficient, cost-effective infrastructure
solutions by delivering greenfield infrastructure
fully aligned to a timely expansion of brownfield
rail capacity.
Aurizon’s solutions are designed to be staged,
which supports customer projects by matching
shipment volume profiles during the challenging
ramp-up period of their projects. Our solutions are
also planned to be open-access and multi-user,
providing the opportunity to consolidate volumes
and deliver scale benefits to users.
One example is the proposed development of
Galilee Basin rail and port infrastructure with
GVK Coal Infrastructure (Singapore) Pte Ltd
(GVK Hancock). Aurizon and GVK Hancock are
progressing the proposed development of rail and
port infrastructure to Abbot Point to unlock Galilee
Basin coal reserves and to support the next phase
of coal growth in the Bowen Basin. Under the
proposal, Aurizon would use elements of its CQIRP
project together with parts of the GVK Hancock rail
and port project.
NorthHub Project
In April 2013, Aurizon welcomed the shortlisting
by the Queensland Government of the NorthHub
Consortium, comprised of Aurizon (75%) and
Lend Lease (25%), for the potential staged
expansion of new export coal capacity at the
Abbot Point Coal Terminal in North Queensland.
The NorthHub proposal offers multi-user terminal
capacity to coal producers for the Bowen and
Galilee coal basins. The consortium is working
with the Queensland Government to conclude
agreements that will shape the terminal
development proposal for the potential expansion.
The proposal will include options for staged
development according to customer and
market demand.
GROWTH | AURIZON
15
East Pilbara Independent Railway
As the largest hauler of iron ore outside the
Pilbara, Aurizon is well positioned for involvement
in the expanding iron ore haulage markets in
Western Australia. Aurizon has identified growth
opportunities in the Pilbara, Mid-West and Yilgarn
as part of its strategy in growing its Iron Ore
business through a combination of greenfield and
brownfield projects.
Aurizon, in conjunction with Brockman Mining
and Atlas Iron under an Alliance Study Agreement,
completed a study during 2012-13 for a new
independent iron ore railway in the Pilbara.
The study demonstrated the merits of a new,
standard-gauge railway in the East Pilbara,
connected to dedicated port facilities at
Port Hedland, which aggregates production
from a number of mines.
Aurizon has the capability to develop and
operate multi-party supply chain solutions where
optimisation is critical in delivering efficient,
long-term services to customers. Aurizon continues
to participate in a range of discussions with
potential customers in the Pilbara and remains
confident in long-term opportunities in the region.
Surat Basin Railway
The proposed Surat Basin Rail in Central
Queensland includes a new 210 kilometre rail
corridor from Wandoan to the Moura system near
Banana, 130 kilometres west of Gladstone, which
will align with the second stage of the development
of the Wiggins Island Coal Export Terminal (yet to
be committed). Aurizon is a one-third joint venture
partner in the Surat Basin Railway with the ATEC
Rail Group and Glencore Xstrata Coal.
Image: Apprentice Electrician Makayla Louden
in the Callemondah locomotive workshop
16
ANNUAL REPORT 2012–13
Sustainability
Aurizon is committed to the
safety of our people, those we
work with, the environment
and the communities in
which we operate. A safety
and performance-driven
culture is a key enabler
on Aurizon’s journey to
a sustainable future.
Image: Graduates Jessica Muller (L) and Ben Single (R) in the field with Peter Southam (C)
On track to treble our trainee,
apprentice and graduate intake
from over 75 to 300 per annum.
SUSTAINABILITY | AURIZON
17
In 2012-13 a number of initiatives were
implemented by the Isolation and Lockout,
Road Safety and Trackside Safety Communities of
Competence that enhanced our existing practices
and continued to improve safety performance.
Other 2012-13 safety highlights include:
>
In February 2013, Aurizon launched an internal
safety program targeting the prevention of
incidents and injuries. The campaign “Are you
in the game when it comes to safety?” focuses
on the behaviours employees need to avoid to
create a safer workplace including distractions,
fatigue, rushing and complacency
> A national partnership with the Heart
Foundation was established and a “Start Your
Heart” cardiovascular health campaign was
rolled out. The six-week program encouraged
employees to make small, realistic changes to
improve their long-term heart health
> Aurizon continues to actively support the
Australasian Railway Association’s trackSAFE
foundation to reduce incidents on the rail
network across Australia
> Aurizon partnered with trackSAFE and the
Sunday Night program on Channel Seven
for a special report highlighting the trauma
experienced by train drivers involved in near
misses and fatalities on rail networks around
the country. More than two million Australians
watched the program.
In Queensland, around $15 million has been
allocated to upgrade passive level crossings
specifically to boom gates and/or flashing lights
on the Central Queensland Coal Network (CQCN)
as part of a continuous improvement program.
In May 2013, Aurizon and the Department of
Transport and Main Roads officially opened a new
road overpass which will allow for the closure of
two high risk level crossings at Gracemere
in Queensland. The Company contributed
$10 million towards the $50 million overpass.
The new Gracemere overpass improves the safety
of motorists and helps protect train drivers who
use the crossings.
In New South Wales, Aurizon, through its
partnership with the Newcastle Knights and
Newcastle Jets, conducted a joint schools rail
safety program targeting primary schools
along the rail corridor. To date, more than
4,000 Newcastle and Upper Hunter students have
received educational awareness of rail safety,
particularly the dangers associated with rail level
crossings and trespassing.
SAFETY
Aurizon’s core values of safety, integrity,
leadership, passion and courage, and world class
performance shape how we make decisions,
how we treat each other, how we run our business
and how we achieve results.
Our aim is to become world class in safety
and to do this we are on a path of continuous
improvement across the Company. Our
comprehensive approach to safety and risk
management includes targeted initiatives to
improve safety culture and establish robust
systems and behaviours throughout the workforce.
The Company’s uncompromising focus on
safety is delivering results. Over the last five
years, our employees have advanced our safety
transformation and we have measurable
improvements in safety performance.
Improvements include significant reductions in
our Lost Time Injury Frequency Rate (LTIFR) and
Medically Treated Injury Frequency Rate (MTIFR).
Since June 2009, Aurizon has achieved a 92%
reduction on our LTIFR (0.95) and 89% reduction
on our MTIFR (4.90).
These metrics demonstrate Aurizon’s transition to
an organisation in which safety is a core value and
intrinsic in decision making; be it in the boardroom
or on-site.
Communities of Competence, which provide
a collaborative, coordinated and best-practice
approach in targeted areas including Trackside
Safety, Road Safety, Isolation and Lockout,
Derailment Prevention, Signals Passed at
Danger (SPADs) and the Environment, are
continuing to make a real difference to how
the Company operates.
Significant safety improvements have come
from the Derailment Prevention Community of
Competence. Over the past 12 months they have
established and trained corridor-based derailment
prevention champions focused on improving
infrastructure maintenance and developed
a number of new resources for employees,
including training videos.
This past year has also had a particular focus on
SPADs improvement. The SPADs Community of
Competence worked to introduce new threat and
error management SPADs elimination principles.
The Company also contributed to the Australian
and New Zealand SPADs Working Group sponsored
by the Australasian Railway Association.
As a result of these initiatives, Aurizon has achieved
a 42% improvement in the running line derailment
rate and a 20% improvement in the running
line SPADs rate over the past 12 months. This is
considered to be world class safety performance.
8
0
3
.
0
4
2
.
5
9
0
.
6
2
9
1
.
4
7
0
1
.
0
9
4
.
FY11
FY12
FY13
FY11
FY12
FY13
Lost Time Injury
Frequency Rate (LTIFR)
Medically Treated Injury
Frequency Rate (MTIFR)
6
6
1
.
3
2
1
.
9
9
0
.
2
1
1
.
0
9
0
.
5
6
0
.
FY11
FY12
FY13
FY11
FY12
FY13
SPAD rate per MTkm
(running line)
Derailment rate per MTkm
(running line)
18
ANNUAL REPORT 2012–13
Sustainability
(continued)
PEOPLE
A safety and performance-driven culture is one
of the key enablers on Aurizon’s journey to
world class performance and it is the capability
and commitment of our people that will get us
there. The Company’s Enterprise People Strategy
articulates our shared goals and aspirations.
These goals represent the key areas of focus for
the enterprise to ensure that we are able to deliver
on our employee promise and position Aurizon for
long-term growth and superior performance:
> We are striving for a collaborative, diverse,
capable and engaged workforce, passionate
about delivering world class service to
our customers
> We have capable leaders who know what they
have to achieve and display the core leader
behaviours that drive a safety and performance-
driven culture where individual, team and
organisational objectives are achieved
> We are a values-based workplace focused
on designing and implementing the right
structures, systems and processes to support
a safety and performance-driven culture.
In line with our vision to grow our people, Aurizon
has a sustained focus on building leadership
capabilities and performance at all levels.
This has a significant impact on our culture and
achievements. This year we have introduced a
new Leadership Framework and Model with the
foundation comprising of a Leadership Essentials
development program for our frontline leaders.
Our 7,969 employees live and work in local
communities throughout Australia where Aurizon
operates. The majority of our employees live and
work in regional Australia, outside of State capitals.
Our values
> Safety
>
> Leadership, passion and courage
> World class performance.
Integrity
Aurizon’s four values continue to play an integral
role in our organisational effectiveness and
performance. They are the solid foundation of
the Company’s decision making. Our values are
a key component of our Code of Conduct which
clearly identifies a high set of expectations in the
way our employees interact with one another,
our customers and other stakeholders to ensure
our business is respected for its safe, professional,
honest and commercial outlook.
This includes all employees:
> Striving for ZEROHARM
> Living our values and complying with our
policies, standards and other management
frameworks
> Valuing and appreciating each others’ unique
contributions to the Company’s future and
treating one another with respect.
The annual Aurizon Employee Excellence Awards
is a recognition program which acknowledges
team and individual achievements, exceptional
performance and the contribution of employees
at all levels who exemplify our company values.
The Awards night also includes recognition of
our high performing graduates, apprentices
and trainees.
For more information on Aurizon’s values, please
refer to the Corporate Governance Statement on
page 49 of this report. The Company’s Code of
Conduct is available on our website at aurizon.com.
au/Corporate/Pages/Governance.aspx
1,050
62
North Queensland 799
6,240
Central Queensland 2,395
South Queensland 3,046
388
229
Total employees 7,969
Diversity
Diversity at Aurizon is about creating a workplace
that respects and includes differences, recognising
the unique contributions and perspectives that all
our employees bring to the table. At Aurizon, we
strive for diversity to underpin everything we do
and in particular our decision-making processes.
We value diversity and recognise it in the way
we do business. Increased engagement of the
entire workforce has been linked with productivity,
profitability, employee commitment and retention.
With this potential comes the ability to further
extend our market share.
Diversity for Aurizon not only includes differences
in age, gender, language, ethnicity, cultural
background, sexual orientation, religious beliefs,
family responsibilities and people with disabilities.
It also includes differences in life and work
experiences, socioeconomic status, type of work
and work environment, educational background
and lifestyle choices.
Aurizon’s leadership group continues to strive to
achieve a diverse and engaged workforce. Research
and our own experiences within the Company tell
us that diverse teams operate more effectively.
They create new ideas, new insights and new
approaches – unlocking value for teams and
our Company.
Aurizon’s Diversity Council continues to work with
leaders and the broader workforce to increase an
awareness of the value and clear business benefits
of a diverse and engaged workforce. A two-year
diversity plan comprising a range of initiatives and
actions is being implemented and progressively
evaluated. These initiatives are noted in the
Corporate Governance Statement on page 54 of
this report.
Female participation has increased by almost
1% in the 2012-13 financial year. Across the
workforce, 13.23% of employees are female.
Aurizon has lodged its first annual report under
the Workplace Gender Equality Act (WGE Act). The
report is available on our website aurizon.com.au/
Corporate/Pages/Diversity.aspx
Aurizon has made a major commitment to
improving gender diversity in the workplace by
signing a two-year empowerment partnership with
the Australian National Committee for United
Nations (UN) Women. The partnership will support
the work UN Women do in advancing equality for
women globally. The Company has also signed the
UN’s Women Empowerment Principles. Just under
600 companies from around the world have signed
up to these principles and only 10 signatories are
CEOs from Australian companies.
SUSTAINABILITY | AURIZON
19
‘Grow our own’
In August 2010, Managing Director & CEO
Lance Hockridge, announced Aurizon would
treble its trainee, apprentice and graduate
intake from over 75 to 300 per annum by 2013.
This commitment included a strong focus on
regional and youth employment, mentoring and
links to education providers.
Currently, for financial year 2012-13, the intake
is 258 and we are on track to achieve the target
of 300 by December 2013. In this financial year
Aurizon has recruited 77 apprentices, 77 trainees
and 104 graduate students. Engineering-specific,
finance, human resources and business analysts
were well represented in the graduate intake for
2013. Electrical and mechanical trades formed the
majority of the apprentice intake.
We have continued our proactive attraction
campaign to increase female and Indigenous
recruitment. Our total graduate, apprentice and
trainee recruitment has successfully employed
66 females (25.6%).
Aurizon continues to work hard on its commitment
under the Australian Employment Covenant
to provide sustainable job opportunities for
Indigenous Australians. This year we have
recruited 25 new Indigenous employees across
the enterprise predominantly in entry-level roles
related to apprenticeships and traineeships.
We continue to work closely with Indigenous
communities to attract and retain Indigenous
employees, while providing support mechanisms
for the development of long-term careers with
the Company.
We have designed and implemented Aurizon-
specific work experience programs within our
regional locations assisting in continuing to
build community connections. This has resulted
in a higher level of interest in work experience
placements and school-based apprenticeships from
female and Indigenous school students.
We have continued to build established connections
with education providers in regional centres,
including local schools, TAFEs and universities,
to create pathways into apprenticeship, traineeship
and higher education opportunities.
Mentor matching with senior leaders across the
graduates, apprentices and trainees within Aurizon
also continues. Specific Indigenous mentors
work with Steve Renouf, Aurizon’s Indigenous
Ambassador, to assist in progressing Indigenous
employee engagement and retention strategies.
ENVIRONMENT
Aurizon’s commitment to environmental
sustainability is crucial to maintaining our
social licence to operate and to the Company’s
performance. As a significant player in Australian
transport, Aurizon recognises the opportunity
to lead the industry to become world class in
delivering ZEROHARM to the environment.
The Company’s Environmental Policy represents
the commitment to the environment and
provides guidance on continual environmental
improvement. Under this Policy, Aurizon assesses
environmental risk before undertaking activities.
Aurizon’s Environmental Management
Principle provides a framework to enable
effective environmental management and
includes the mechanisms required to achieve
legislative compliance, the Board’s policies
and directives, continual environmental
performance improvements and gives effect to
the Environmental Policy. This Policy is available
on the Aurizon website at the following address:
aurizon.com.au/corporate/pages/
environment.aspx
Energy
Aurizon continues to meet its reporting obligations
under the National Greenhouse and Energy
Reporting Act 2007 (NGER) (Cth). An online
system for environmental compliance is now
available to allow live compliance tracking
against all compliance requirements and to
measure, collate and validate NGER information.
The 2012-13 |NGER report is due to be submitted
to the regulator by 31 October.
In the past year, Aurizon submitted an Energy
Efficiency Opportunity (EEO) Assessment Plan as
part of the Company’s obligations under the
Energy Efficiency Opportunity Act 2006 (Cth).
The plan sets out improvements in the measurement
of energy use and identification of energy reduction
initiatives. An energy saving assessment report will
be available in December 2013.
Image: Vehicle Builder Apprentice Merv Walker, Electrical Apprentice Nick Sinn and Apprentice Mechanical Fitter Brett Mills from the Redbank workshops
20
annual report 2012–13
Sustainability
(continued)
Carbon Disclosure Project
This year marks our inaugural participation in the
Carbon Disclosure Project (CDP), an independent
not-for-profit organisation that compiles
corporate climate change information for the
investor community. Our participation in the CDP
improves transparency around our climate change
performance and demonstrates our commitment
to identify and assess initiatives to reduce our
carbon footprint.
Coal dust
Aurizon continues to collaborate with our
industry partners to implement a Coal Dust
Management Plan in Queensland. This involves
the implementation of spray stations with dust
suppressing chemicals, known as “veneers”, to
reduce coal dust produced from moving wagons.
Aurizon has implemented 12 veneering station
installations to service 13 mines in Central
Queensland and provides monitoring reports to
the Department of Environment, Heritage and
Protection (DEHP) to demonstrate results of the
veneering stations. Central Queensland mines
have a goal to complete installation of the spray
stations at all mines by December 2013.
Aurizon is also working with supply chain
partners and stakeholders to develop a Coal Dust
Management Plan which describes our approach
to coal dust management on the South West
Queensland network. In the Hunter Valley, we
are working with our supply chain partners and
government, participating in an industry working
group to address stakeholder concerns.
Vegetation offsets
In 2012-13, Aurizon has taken significant steps to
secure in excess of 290 hectares of vegetation for
active rehabilitation and conservation purposes as
part of its commitment to offset clearing activities
associated with some of its major construction
projects, including the Goonyella to Abbot Point
Expansion (GAPE), Wiggins Island Rail Project
(WIRP) and the Goonyella Rail Expansion Project.
The process has involved active engagement with
rural landholders and the Department of Natural
Resources and Mines, and will act to conserve
endangered ecological communities listed under
both Commonwealth and State legislation in
addition to habitat for threatened fauna species.
Environment compliance
Our continual focus on environmental compliance
moves Aurizon closer to delivering our goal of
ZEROHARM to the environment.
Aurizon has two Transitional Environment
Programs (TEPs) in place at the Callemondah
locomotive and wagon depots at Gladstone in
Central Queensland with the Department of
Environment, Heritage and Protection. By the end
of November 2013 all actions contained by the
TEPs will be addressed.
In 2012-13, Aurizon retained its ISO14001
Environmental Management System Certification
through a third party, independent audit for both
the Intermodal Logistics business and Whyte
Island facility.
COMMUNIty
Aurizon continues to make a positive contribution
to society. Our business and future growth is reliant
upon our ability to maintain long-term, positive
relationships within the local communities where
we operate and our employees reside. We strive
to have an open and transparent dialogue with
the local community as we journey to become
world class.
Our community responsibility
In 2013 the Company developed a community
engagement charter outlining the principles,
frameworks, considerations and processes for
community involvement, consultation and
feedback. Aurizon has begun implementing
this Charter across project, operations and
maintenance areas as well as throughout corporate
functions. The Company advocates that building
sustainable positive community relationships is
the responsibility of every Aurizon employee.
A summarized version of the Charter can be found
at aurizon.com.au/sustainability
Beyond dialogue, we are also an active member
of the local community through our Community
Giving program which encompasses philanthropic
endeavours, key partnerships, as well as our
contribution to local community initiatives and
events. The Aurizon Community Giving program
has three areas of interest: health and well being;
community safety and education.
Supporting regional and rural Australia
The Company understands that the backbone
of our industry weaves through urban, regional
and rural towns across Australia. To support these
communities, in 2011 Aurizon launched its flagship
community investment program, the Community
Giving Fund. This biannual philanthropic fund has
been specifically designed to target the needs
of local communities.
To date, the Community Giving Fund has supported
over 100 charities nationally with over 55 charities
receiving grants during 2012-13.
The following graphs outline the level of
investment by region and genre for the Community
Giving Fund over the last 12 months.
55.5%
Queensland
15.3%
Hunter
7.2%
Melbourne
22.0% Western Australia
Community Giving Fund
Grants by region (%)
54.8%
Health and wellbeing
24.6%
Community safety
20.6%
Education
Community Giving Fund
Focus area of support (%)
More on Aurizon’s Community Giving Fund
recipients is available at aurizon.com.au/
community
Community Partnerships; heart-felt
support in our communities
With the knowledge that cardiovascular disease is
the number one killer in Australia for both men and
women and with even higher incident rates for this
disease affecting regional and rural communities,
Aurizon is on a mission as Foundation Sponsor
of the Heart Foundation to raise awareness,
get our employees and communities active,
and reduce the number of cardiovascular-related
deaths nationally.
Throughout the year, Aurizon supported the Heart
Foundation’s national awareness campaigns such
as Warning Signs, Go Red for Women and Jump
Rope for Heart, and was a founding member of
the corporate initiative Start your Heart.
SuStaInaBIlItY | aurIZon
21
COMMUNIty GIVING fUND
ReCIPIeNtS
EDUCATION – WA
“Protecting our future in
Western Australia”
Life Education WA Inc (Round 4 recipient).
Life Education provides health education in lower
and middle primary schools including cyber
safety and education on drugs, alcohol and
smoking. The Aurizon Community Giving Fund’s
cash grant will enable Life Education
WA to have an educator based in Geraldton,
with a mobile learning centre to deliver programs
to approximately 5,000 students in four schools
in the Mid-West region. These programs provide
up-to-date resources for teachers, promoting
personal safety, the benefits of physical
activities, healthy diets, positive life choices
and decision-making.
COMMUNITY SAFETY – QLD
“Ensuring our communities are
in safe hands”
Mount Larcom Rural Fire Brigade
(Round 3 recipient).
The Brigade, manned by community volunteers,
responds to fire and assists landowners to reduce
the hazards posed by wildfire in a wide, rural
geographical area. They are an invaluable part
of the region’s emergency response network.
The Aurizon Community Giving Fund’s cash grant
will part-fund an operations and training centre
upgrade to support the Brigade’s fire fighting
operations. As the Wiggins Island Rail Project is
nearby, Aurizon is further committed to helping
this Brigade in-kind as part of its commitment to
community safety.
HEALTH – NSW
“Providing help where it’s
most needed”
Foodbank NSW Ltd (Round 3 recipient).
The Hunter Hidden Helping Hand Project, run
by Foodbank NSW, will supply and distribute
healthy, nutritious staple food items such
as milk, bread, fresh fruits, vegetables and
essential toiletries to 45 welfare agencies
providing emergency food relief to economically
disadvantaged families and individuals within the
greater Hunter region. The Aurizon Community
Giving Fund’s cash grant will enable the provision
of approximately 6,000 meals weekly for over
3,000 families.
Our partnerships include the Gladstone CBD Safety
Initiative, installation of shade sails at Sarina State
School, rail safety presentations at Gladstone
Harbour Festival and the support of a defensive
driving awareness campaign through the Jason
Rich Foundation in Rockhampton and Gracemere,
targeting Year 12 students in an effort to keep our
youth safe on the roads.
In times of need
In January 2013, Queensland communities were
once again battered by severe summer weather
affecting the mining regions. To assist with the
recovery and rebuild, Aurizon donated $150,000 to
the Australian Red Cross to assist individuals and
families in disaster-affected areas.
We are also proud to provide a Queensland-based
freight assistance program to several charities each
year, to reduce administrative costs for charities
for their transport needs and also provides vital
clothing, books and toys to families in need across
the State. Over the last year, the charities supported
through the freight assistance program include:
> The Salvation Army
> Australian Red Cross
> St Vincent de Paul Society
> Flood Relief NQ
> Samaritan’s Purse
> Community Care – Lifeline
Striving for excellence
In 2012-13 Aurizon was awarded Highly
Commended in the Public Relations Institute of
Australia – Queensland State Awards For Excellence
in the category of Corporate Social Responsibility
for the GAPE project, as well as commended in the
Public Relations Institute of Australia National
Excellence Awards in the category of Corporate
Social Responsibility for the GAPE project for
community consultation in 2012.
We are also proud to have been an Australian
Institute of Marketing’s national finalist in
the Excellence Awards for the Corporate Social
Responsibility category for the Community Giving
Fund in 2012.
For a full overview of Aurizon’s community
investments visit aurizon.com.au/community
Some of the key outcomes from our support over
the last year include:
> 107 female employees participated in the
Go Red for Women Challenge in 2012
> Over 600 employees participated in the
Start your Heart program
>
> 364 Aurizon employees participated in the
Warning Signs presentations nationally
> Supported 12 outreach schools nationally
through the Jump Rope for Heart program
Implemented healthy catering guidelines
across the organisation
Implemented a company-wide walking
group initiative and encouraged employee
participation in fun runs and events across
the country.
>
To complement our support of the Heart
Foundation, Aurizon secured a partnership with the
Wesley Research Institute focusing on preventative
cardiovascular related research. The Company
has also promoted health and wellbeing through
partners such as the Central Queensland NRL
(CQNRL) Bid and the Queensland Independent
Secondary School Rugby League Confraternity
Carnival in Townsville.
Kicking goals for the Hunter
community
With the dual-club sponsorship of the Newcastle
Knights and Newcastle Jets entering its second
year, the regional sponsorship has enabled Aurizon
to cement its local presence in the region whilst
allowing the Company to continue to promote
safety, health and wellbeing and education.
The partnership’s main community program is the
Rail Safety Term, which is a dedicated program
visiting primary schools along the Hunter Valley
rail corridor. In the last year, the program visited
over 31 schools, reaching over 4,000 students.
Players James McManus (Knights) and Michael
Bridges (Jets) were official Aurizon Rail Safety
Ambassadors and the campaign extended into
Community Gala Days throughout the region.
Improving the safety of our
communities
As safety is the Company’s number one priority,
Aurizon’s major infrastructure projects partnered
with key community events and initiatives to
improve the overall safety within and around our
construction and building works.
22
annual report 2012–13
Directors’ Report
Aurizon Holdings Limited
Directors’ Report
For the year ended 30 June 2013
The Directors of Aurizon Holdings present their
Directors’ Report together with the Financial
Report of the Company and its controlled entities
(collectively, “the Consolidated Entity” or “the
Group”) for the financial year ended 30 June 2013
and the Independent Auditor’s Report thereon.
This Directors’ Report has been prepared in
accordance with the requirements of Division 1
of Part 2M.3 of the Corporations Act.
Board Of Directors
The following people are Directors of the Company,
or were Directors during the reporting period:
J B Prescott AC
(appointed 14 September 2010)
(Chairman, Independent Non-Executive Director)
L E Hockridge
(appointed 14 September 2010)
(MD & CEO)
J Atkin
(appointed 14 September 2010)
(Independent Non-Executive Director)
R R Caplan
(appointed 14 September 2010)
(Independent Non-Executive Director)
J D Cooper
(appointed 19 April 2012)
(Independent Non-Executive Director)
K L Field
(appointed 19 April 2012)
(Independent Non-Executive Director)
G T John AO
(appointed 14 September 2010)
(Independent Non-Executive Director)
A J P Staines
(appointed 14 September 2010)
(Independent Non-Executive Director)
G T Tilbrook
(appointed 14 September 2010)
(Independent Non-Executive Director)
Details of the experience, qualifications and special
responsibilities and other Directorships of listed
companies in respect to each of the Directors as at
the date of this Directors’ Report are set out in the
pages following.
J B Prescott AC
Experience: Mr Prescott has
substantial experience in
the mining, manufacturing,
transport and government
sectors. He was a long-term
executive of The Broken Hill
Proprietary Company Limited (now BHP Billiton
Limited), serving 10 years as an Executive Director
and seven years as Managing Director and Chief
Executive Officer (1991–1998). He was also
Chairman of ASC (formerly Australian Submarine
Corporation Pty Ltd) (2000–2009) and a Director
of Newmont Mining Corporation (2002–2013).
Mr Prescott has been a Global Counsellor of The
Conference Board since 2001 and a member of
the Commonwealth Remuneration Tribunal since
2010. Other Directorships and consulting/advisory
positions have included Conference Board USA,
World Economic Forum, Booz Allen and Hamilton,
J.P. Morgan Chase & Co, Proudfoot Consulting and
Asia Pacific Advisory Committee of New York
Stock Exchange.
Qualifications: BCom (Indus Rel), HonDsc, HonLLD,
FAICD, FAIM, FTSE
Special Responsibilities:
Member of:
(i) Remuneration, Nomination & Succession
Committee (formerly Remuneration &
Succession Committee)
(ii) Safety, Health & Environment Committee
(formerly Safety & Environment Committee)
Australian Listed Company Directorships held
in the past three years: None other than Aurizon
Holdings Limited.
L E Hockridge
Experience: Mr Hockridge
joined QR Limited (now Aurizon
Operations Limited) as Chief
Executive Officer in 2007
with extensive experience in
the transportation and heavy
industrial sectors in Australia and the United
States. He is a Director of a number of Aurizon
Holdings Limited wholly-owned subsidiaries and
Chairman of the Australasian Railway Association.
During a 30-year career with The Broken Hill
Proprietary Company Limited (now BHP Billiton
Limited) and BlueScope Steel, Mr Hockridge was
a member of the leadership team that led to
BlueScope Steel’s successful de-merger from BHP
and the creation of a new publicly listed company.
In 2005, Mr Hockridge was appointed President
of BlueScope Steel’s North American operations
where he led a major turnaround in safety,
production and financial performance. Other roles
at BHP included human resources and industrial
relations, General Manager of BHP Transport,
Head of Long Products Business and President of
Industrial Markets.
Qualifications: FCILT, FAIM, MAICD
Special Responsibilities: Director of Aurizon
Network Pty Ltd. Member of Safety, Health &
Environment Committee (formerly Safety &
Environment Committee).
Australian Listed Company Directorships held
in the past three years: None other than Aurizon
Holdings Limited.
J Atkin
Experience: Mr Atkin has more
than 25 years experience in
financial services and the legal
profession in Australia and
internationally. Mr Atkin is
a Director of The Australian
Outward Bound Foundation and a member of
the Financial Services Advisory Council of the
Australian Government. Previously, Mr Atkin was
Chief Executive Officer of The Trust Company
Limited (2009–2013), was Managing Partner of
Blake Dawson (2002–2008) and a Corporate,
and Mergers & Acquisitions partner at Mallesons
Stephen Jaques (1987–2002). Mr Atkin continues
to provide consulting services to the corporate
trust division of the Trust Company on a
transitional basis.
Qualifications: BA (Hons), LLB (Hons), FAICD
Special Responsibilities: Non-Executive Director
of Aurizon Network Pty Ltd (appointed Chairman
21 May 2013)
Member of:
(i) Remuneration, Nomination & Succession
Committee (formerly Remuneration &
Succession Committee)
(ii) Chairman of Governance & Nomination
Committee (1 July 2012 – 21 May 2013)
Australian Listed Company Directorships held in
the past three years: The Trust Company Limited –
CEO and Executive Director (19 January 2009 –
15 April 2013).
DIreCtorS’ report | aurIZon
23
R R Caplan
Experience: Mr Caplan has
extensive international
experience in the oil and gas
industry. In a 42-year career
with Shell, he held senior
roles in the upstream and
downstream operations, and corporate functions in
Australia and overseas. From 1997 to 2006 he had
senior international postings in the UK, Europe and
the USA. From 2006 to July 2010 he was Chairman
of the Shell Group of Companies in Australia.
Mr Caplan is Chairman of the Melbourne and
Olympic Parks Trust, Chairman of the Cooperative
Research Centre for Contamination Assessment
and Remediation of the Environment, a
Non-Executive Director and Chairman elect of
Orica Limited, and member of the Board of the
Committee for the Economic Development of
Australia (CEDA). He is a former Non-Executive
Director of Woodside Petroleum Limited and
the former Chairman of the Australian Institute
of Petroleum.
Qualifications: LLB, FAICD, FAIM
Special Responsibilities: Chairman of
Remuneration, Nomination & Succession
Committee (formerly Remuneration & Succession
Committee). Member of Audit, Governance & Risk
Management Committee (formerly Audit & Risk
Management Committee)
Australian Listed Company Directorships held
in the past three years: Orica Limited –
Non-Executive Director Commenced – 1 October
2007 (ongoing)
J D Cooper
Experience: Mr Cooper has
more than 35 years experience
in the construction and
engineering sector in Australia
and overseas. Currently,
Mr Cooper is Chairman and
Non-Executive Director of Southern Cross Electrical
Engineering Limited and also holds Non-Executive
Directorships with NRW Holdings Limited.
During his career as an executive, Mr Cooper’s roles
have encompassed large civil, commercial and
infrastructure projects, and complex engineering
and project management activities in the mining,
oil and gas, engineering and property sectors.
Qualifications: BSc (Building) (Hons), FIE Aust,
FAICD, FAIM
Special Responsibilities: Non-Executive Director of
Aurizon Network Pty Ltd. Member of Safety, Health
& Environment Committee (formerly Safety &
Environment Committee)
Australian Listed Company Directorships held
in the past three years: Southern Cross Electrical
Engineering Limited – Chairman and Non-Executive
Director Commenced – 30 October 2007 (ongoing),
Flinders Mines Limited – Non-Executive Director
(13 September 2010 – 18 December 2012),
NRW Holdings Limited – Non-Executive Director
Commenced – 29 March 2011 (ongoing),
Neptune Marine Services Ltd – Non-Executive
Director (4 April 2012 – 25 June 2013), Clough
Limited (24 August 2006 – 31 January 2010).
K L Field
Experience: Mrs Field has more
than 30 years experience in
the mining industry in Australia
and overseas and has a strong
background in human resources
and project management.
Currently Mrs Field is the Deputy Chairman and
Non-Executive Director of the Water Corporation of
Western Australia and a Non-Executive Director of
a number of listed and unlisted entities including
Sipa Resources Limited. Prior to this, Mrs Field
held Non-Executive Directorships with the Centre
for Sustainable Resource Processing, Electricity
Networks Corporation (Western Power), MACA
Limited and Perilya Limited.
In addition, Mrs Field is a Director of a number
of community-based organisations including
aged care provider Amana Living Inc, The Gravity
Discovery Centre Foundation and the University of
Western Australia’s Centenary Trust for Women.
Qualifications: B Econ, FAICD
Special Responsibilities: Chairman of Safety,
Health & Environment Committee (formerly Safety
& Environment Committee)
Member of:
(i) Audit, Governance & Risk Management
Committee (formerly Audit & Risk Management
Committee)
(ii) Remuneration, Nomination & Succession
Committee (1 July 2012 – 21 May 2013)
(formerly Remuneration & Succession
Committee)
Australian Listed Company Directorships held
in the past three years: Sipa Resources Limited –
Independent Non-Executive Director Commenced
– 16 September 2004 (ongoing), MACA Limited
(27 May 2011 – 1 May 2012), Perilya Limited
(16 August 2007 – 5 February 2009).
G T John AO
Experience: Mr John has
30 years management
experience in the transport
operations sector including
16 years as Managing Director
of Australia Post. He was also
a Senior Executive of TNT Australia Ltd.
Mr John is a Director of Seven West Media Ltd,
Racing Victoria and a commissioner of the
Australian Football League. His previous roles
include Chairman of Australian Air Express,
Chairman of Star Track Express, Chairman of the
Kahala Posts Group, Director of the International
Post Corporation (Netherlands), Vice Chairman of
Sai-Cheng Logistics International (China) and a
trustee of the Committee for Melbourne and the
MCG. He has received the Australian Sports Medal
and Centenary Medal.
Qualifications: FCILT, MAICD
Special Responsibilities: Non-Executive Director of
Aurizon Network Pty Ltd
Member of:
(i) Safety, Health & Environment Committee
(formerly Chairman of Safety & Environment
Committee 1 July 2012 – 21 May 2013)
(ii) Remuneration, Nomination & Succession
Committee (1 July 2012 – 21 May 2013)
(formerly Remuneration & Succession
Committee)
Australian Listed Company Directorships held
in the past three years: Seven West Media Ltd –
Non-Executive Director Commenced – 3 December
2008 (ongoing).
A J P Staines
Experience: Ms Staines has
extensive corporate, financial
and commercial and advisory
experience in governance,
strategy and risk management.
Ms Staines is a Director of
Goodstart Early Learning and the NSW Transport
Advisory Board. Former Directorships include the
Australian Rail Track Corporation, Gladstone Ports
Corporation, North Queensland Airports, Allconnex
Water and Early Learning Services (now G8).
24
annual report 2012–13
Directors’ Report
(continued)
Ms Staines is a former Chief Executive Officer
of Australian Airlines, a Qantas subsidiary she
co-launched in 2002 as a member of the carrier’s
12-person senior team. She previously held
various financial, strategy and economic roles
at Qantas. Prior to this, Ms Staines held various
financial roles at American Airlines’ headquarters
in Dallas. Ms Staines is a Member of CEW
(Chief Executive Women).
Australian Listed Company Directorships held
in the past three years: Orica Limited – Non-
Executive Director Commenced – 14 August 2013
(ongoing), GPT Group Limited – Non-Executive
Director Commenced – 11 May 2010 (ongoing),
Fletcher Building Limited – Non-Executive Director
Commenced – 1 September 2009 (ongoing),
Transpacific Industries Group Ltd – Non-Executive
Chairman (3 September 2009 – 1 March 2013).
Qualifications: BEcon, MBA, FAICD
Company Secretary
Special Responsibilities:
Member of:
(i) Audit, Governance & Risk Management
Committee (formerly Audit & Risk Management
Committee)
(ii) Remuneration, Nomination & Succession
Committee (21 May 2013 – ongoing) (formerly
Remuneration & Succession Committee)
(iii) Chairman and Non-Executive Director of
Aurizon Network Pty Ltd (1 July 2012 –
21 May 2013).
Australian Listed Company Directorships held
in the past three years: G8 Education Limited
(12 May 2009 – 27 May 2010).
G T Tilbrook
Experience: Mr Tilbrook has
broad experience in corporate
strategy, investment and
finance. He joined Wesfarmers
in 1985 and was an Executive
Director from 2002 to 2009.
Between 2000 and 2006, when Wesfarmers was
a joint owner of the Australian Railroad Group
(ARG), he was a Director of ARG and Chairman
of Westnet Rail. Mr Tilbrook is a Director of
Fletcher Building, GPT Group, the Bell Shakespeare
Company and the Committee for Perth. He is
also a Councillor of Curtin University and the
Australian Institute of Company Directors WA. He
was recently appointed a director of Orica Limited
effective 14 August 2013.
Qualifications: BSc, MBA, FAICD
Special Responsibilities: Chairman of Audit,
Governance & Risk Management Committee
(formerly Audit & Risk Management Committee)
Member of:
(i) Remuneration, Nomination & Succession
Committee (21 May 2013 – ongoing) (formerly
Remuneration & Succession Committee)
(ii) Governance & Nomination Committee
(1 July 2012 – 21 May 2013)
Mr D D Smith, BA, LLB, LLM,
DipLegS, FCSA, FCIS, FAICD,
was appointed Company
Secretary of the QR Limited
Group in May 2010 and to
Aurizon Holdings Limited upon
its incorporation on 14 September 2010.
Mr Smith has over 20 years ASX listed company
secretariat, governance, corporate legal and
senior management experience across a range
of industries. Mr Smith holds a Masters of Laws
degree from the University of Sydney and is a
Fellow of both the Chartered Secretaries Australia,
and the Australian Institute of Company Directors.
Principal activities
The principal activities of entities within the Group,
during the year, were:
Integrated heavy haul freight railway operator
>
> Rail transporter of coal from mine to port for
export markets
> Bulk, general and containerised freight
businesses
> Large-scale rail services activities.
Coal
Transport of coal from mines in Queensland and
New South Wales to end customers and ports.
Freight
Transport of bulk mineral commodities (including
iron ore), agricultural products, mining and
industrial inputs, and general freight throughout
Queensland and Western Australia, and
containerised freight throughout Australia.
Network
Provision of access to, and operation and
management of, the Queensland coal network.
Provision of design, construction, overhaul,
maintenance and management services to the
Group, as well as external customers.
Review of operations
A review of the Group’s operations for the financial
year, and the results of those operations, are
contained in the Chairman’s Report, the MD &
CEO’s Report, and the Year in Review as set out on
pages 4 to 11 of this report.
Dividends
An unfranked final dividend of 4.6 cents per fully
paid ordinary share was paid on 28 September
2012 and a 70% franked interim dividend of
4.1 cents per fully paid ordinary share was paid
on 27 March 2013. Further details of dividends
provided for or paid are set out in Note 25 to the
consolidated financial statements.
Since the end of the financial year, the Directors
have declared to pay a final dividend of 8.2 cents
per fully paid ordinary share. The dividend will be
90% franked and is payable on 23 September 2013.
State of affairs
During the year the Company received shareholder
approval and bought back approximately 288
million ordinary shares from Queensland Treasury
Holdings in November 2012. The Company
also announced to the ASX in May 2013 the
implementation of a long-term capital structure.
In the opinion of the Directors there were no other
significant changes in the state of affairs of the
Company that occurred during the financial year
under review.
Events since the end of the
financial year
The Directors are not aware of any events or
developments which are not set out in this report
that have, or would have, a significant effect on
the Group’s state of affairs, its operations or its
expected results in future years.
Likely developments
Information about likely developments in the
operations of the Group and the expected results
of those operations are covered in the Chairman’s
Report, the MD & CEO’s Report, and the Year in
Review as set out on pages 4 to 11 of this report.
In the opinion of the Directors, disclosure of any
further information would be likely to result in
unreasonable prejudice to the Group.
DIreCtorS’ report | aurIZon
25
Environmental regulation and
performance
Aurizon Holdings is committed to managing
its operational activities and services in an
environmentally responsible manner to meet legal,
social and moral obligations. In order to deliver
on this commitment, Aurizon Holdings seeks to
comply with all applicable environmental laws
and regulations.
The Energy Efficiency Opportunity Act 2006 (EEO)
(Cth) requires the Group to assess its energy usage
including the identification, investigation and
evaluation of energy-saving opportunities, and
to report publicly on the assessments undertaken
including what action the Group intends to take
as a result. The Group continues to meet its
obligations under the EEO Act.
The National Greenhouse and Energy Reporting
Act 2007 (NGER) (Cth) requires the Group to report
its annual greenhouse gas emissions and energy
use. The Group has implemented systems and
processes for the collection and calculation of
the data required and is registered under the
NGER Act.
Further details of the Company’s environmental
performance are set out on pages 19 to 20 of this
Annual Report.
Environmental prosecutions
There have been no environmental prosecutions
during this financial year.
Risk management
The Company is committed to managing its
risks in an integrated, systematic and practical
manner. The overall objective of risk management
is to assist the Company to achieve its objectives
by appropriately considering both threats and
opportunities, and making informed decisions.
The Audit & Risk Management Committee
(renamed Audit, Governance & Risk Management
Committee on 21 May 2013) oversees the process
for identification and management of risk in the
Company (see page 51 of this Annual Report).
The Company’s Risk Management Division is
responsible for providing oversight of the risk
management function and assurance on the
management of significant risks to the MD & CEO
and the Board.
The Company’s risk management framework,
responsibilities and accountabilities are aligned
with the Company’s business model where
the individual businesses are accountable for
demonstrating they are managing their risks
effectively and in accordance with the Board-
approved risk management policy and framework.
The risk management framework has a strong
focus on key organisational controls. A focus on
the key organisational controls helps to shape
the strategies, capabilities and culture of the
organisation, identify and address vulnerabilities,
strengthen the system of internal controls and
build a more resilient organisation.
The Company also has a risk register with risk
profiles populated at the various layers of the
organisation and a management specification that
outlines the processes for the prevention, detection
and management of fraud within the Company,
and for fair dealing in matters pertaining to fraud.
Directors’ meetings
The number of Board meetings (including Board
Committee meetings) and number of meetings
attended by each of the Directors of the Company
during the financial year are listed below.
DIRECTOR
J B Prescott AC
L E Hockridge
J Atkin
R R Caplan
J D Cooper
K L Field
G T John AO
A J P Staines
G T Tilbrook
AURIZON
HOLDINGS
A
B
AUDIT & RISK
MANAGEMENT
B
A
GOVERNANCE &
NOMINATION
B
A
REMUNERATION &
SUCCESSION
B
A
SAFETY &
ENVIRONMENT
B
A
161
161
16
16
16
16
16
16
16
16
16
16
16
14
16
16
16
15
-
-
-
82
-
82
-
82
82
-
-
-
8
-
8
-
8
8
4
4
4
-
-
-
-
-
4
4
4
4
-
-
-
-
-
4
8
-
13
8
-
7
7
13
13
8
-
1
8
-
7
6
1
1
3
3
-
-
3
-
3
-
-
3
3
-
-
2
-
3
-
-
A Number of meetings held while appointed as a Director or Member of a Committee.
B Number of meetings attended by the Director while appointed as a Director or Member of a Committee.
1 In addition to the meetings above, a Committee of the Board comprising of Mr J B Prescott and Mr L E Hockridge met on three occasions.
2 The Audit & Risk Management Committee was renamed Audit, Governance & Risk Management on 21 May 2013.
3 Ms A J P Staines, Mr J Atkin and Mr G T Tilbrook were appointed to the renamed Remuneration, Nomination & Succession Committee on 21 May 2013.
During the year, the Aurizon Network Pty Ltd Board met on ten occasions. Apologies were recorded for two meetings only with Mr Carter and Mr Cooper unable to
attend two meetings each.
Directors’ interests
DIRECTOR
J B Prescott AC
L E Hockridge
J Atkin
R R Caplan
G T John AO
NUMBER OF ORDINARY SHARES
215,434
872,096
35,072
82,132
57,132
DIRECTOR
A J P Staines
G T Tilbrook
K L Field
J D Cooper
NUMBER OF ORDINARY SHARES
14,223
49,112
14,245
20,000
Directors’ interests are as at 30 June 2013.
Only Mr Hockridge, the MD & CEO, receives performance rights and these details are set out in Section 4.2 of the Remuneration Report.
26
ANNUAL REPORT 2012–13
Directors’ Report
(continued)
Non-audit services
During the year the Company’s auditor
PricewaterhouseCoopers (PwC) performed other
services in addition to its audit responsibilities.
The Directors are satisfied that the provision
of non-audit services by PwC during the
reporting period did not compromise the auditor
independence requirements set out in the
Corporations Act.
All non-audit services were subject to the
Company’s Non-Audit Services Policy and do
not undermine the general principles relating to
auditor independence set out in APES 110 Code
of Ethics for Professional Accountants as they did
not involve reviewing or auditing the auditor’s own
work, acting in a management or decision-making
capacity for the Company, or jointly sharing risks
and rewards.
No officer of the Company was a former Partner
or Director of PwC and a copy of the auditor’s
independence declaration as required under the
Corporations Act 2001 is set out in, and forms part
of, this Directors’ Report.
Details of the amounts paid to the auditor of the
Company and its related practices for non-audit
services provided throughout the year are as set
out below:
OTHER ASSURANCE SERVICES
PwC Australian firm:
Audit of regulatory returns
Other assurance services
Total remuneration for other
assurance services
TAXATION SERVICES
PwC Australian firm:
Tax compliance services
Total remuneration for
taxation services
OTHER SERVICES
PwC Australian firm:
Advisory services
Total remuneration for
other services
2013
$’000
285.1
583.5
868.6
421.9
421.9
846.0
846.0
CEO and CFO declaration
The Managing Director & CEO, and Chief Financial
Officer (CFO) have provided a written statement to
the Board in accordance with Section 295A of the
Corporations Act.
With regard to the financial records and systems
of risk management and internal compliance
in this written statement, the Board received
assurance from the Managing Director & CEO,
and CFO that the declaration was founded on a
sound system of risk management and internal
control, and that the system was operating
effectively in all material aspects in relation to
the reporting of financial risks.
Indemnification and insurance
of officers
The Company’s Constitution provides that it may
indemnify any person who is, or has been, an
officer of the Group, including the Directors, the
Secretaries and other Executive Officers, against
liabilities incurred whilst acting as such officers to
the extent permitted by law. The Company has
entered into a Deed of Access, Indemnity and
Insurance with each of the Company’s Directors.
No Director or officer of the Company has received
benefits under an indemnity from the Company
during or since the end of the year.
The Company has paid a premium for insurance
for officers of the Group. This insurance is against a
liability for costs and expenses incurred by officers
in defending civil or criminal proceedings involving
them as such officers, with some exceptions. The
contract of insurance prohibits disclosure of the
nature of the liability insured against and the
amount of the premium paid.
Proceedings against the Company
The Directors are not aware of any current or
threatened civil litigation proceedings, arbitration
proceedings, administration appeals, or criminal
or governmental prosecutions of a material nature
in which Aurizon Holdings is directly or indirectly
concerned which are likely to have a material
adverse effect on the business or financial position
of the Company.
Remuneration Report
The Remuneration Report is set out on pages 28 to
48 and forms part of the Directors’ Report for the
financial year ended 30 June 2013.
Rounding of amounts
The Group is within the class specified in ASIC
Class Order 98/100 dated 10 July 1998 relating
to the “rounding off” of amounts in the Directors’
Report and the Financial Report. Amounts in the
Directors’ Report and Financial Report have been
rounded off to the nearest hundred thousand
dollars, in accordance with ASIC Class Order
98/100, except where stated otherwise.
Auditor’s Independence Declaration
A copy of the Auditor’s Independence Declaration,
as required under section 307C of the Corporations
Act, is set out on page 27. The Directors’ Report
is made in accordance with a resolution of the
Directors of the Company.
John B Prescott AC
Chairman
19 August 2013
DIRECTORS’ REPORT | AURIZON
27
Auditor’s Independence Declaration
As lead auditor for the audit of Aurizon Holdings Limited for the year ended 30 June 2013, 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 Aurizon Holdings Limited and the entities it controlled during the period.
John Yeoman
Partner
PricewaterhouseCoopers
Brisbane
19 August 2013
PricewaterhouseCoopers, ABN 52 780 433 757
Riverside Centre, 123 Eagle Street, BRISBANE QLD 4000, GPO Box 150, BRISBANE QLD 4001
T: +61 7 3257 5000, F: +61 7 3257 5999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
28
ANNUAL REPORT 2012–13
Directors’ Report (continued)
Remuneration Report
The Directors of Aurizon present
the Remuneration Report
prepared in accordance with
Section 300A of the Corporations
Act 2001 for the year ended
30 June 2013. The information
provided in this Remuneration
Report has been audited as
required by Section 308(3C)
of the Corporations Act 2001.
1. Executive remuneration, shareholder
wealth & company performance
1.1 Executive remuneration
Aurizon’s remuneration framework is designed
to support the delivery of superior shareholder
returns, achieved with the following components:
> Fixed Remuneration Component: not subject
to performance conditions
> Short Term Incentive Award (“STIA”) –
‘At Risk’ Component: awarded on the
achievement of performance conditions over
a 12 month period
> Long Term Incentive Award (“LTIA”) –
‘At Risk’ Component: awarded on the
achievement of performance conditions over
a 3 year period (with a potential year 4
re-test period).
Section 3: Remuneration Framework components,
provides additional detail in relation to the
components of the Executive remuneration.
The mix of remuneration components for the
Managing Director & Chief Executive Officer
(“MD & CEO”) and the Key Management Personnel
(“KMP”) are set out in Diagram 1: Total Potential
Remuneration. Total Potential Remuneration
is subject to performance conditions and the
achievement of hurdles, if these performance
hurdles are not met, Executives lose that part of
their potential remuneration.
Changes to Executive Remuneration
Components from Financial Year 2014: During
the year the Board undertook a review of the
various aspects of Aurizon’s Remuneration
Framework. As an outcome of the review the
Board determined that two key enhancements
be implemented in relation to the STIA and LTIA
components of Executive remuneration. The
enhancements include the introduction of a STIA
Deferral and Clawback; and an adjustment to
the performance condition ratio within the LTIA,
increasing the importance of Operating Ratio
improvement.
In respect of the Operating Ratio calculation,
treating the diesel fuel rebate as a cost recovery
against the fuel expense rather than as revenue
has the effect of decreasing the Operating Ratio.
In accordance with the statement to the market
following the half-year Financial Year 2013 results,
the calculation of Operating Ratio for the purpose
of the LTIA performance hurdle will include the
rebate as revenue to ensure that management
is not advantaged by the change in accounting
treatment.
In addition to these enhancements the Board has
clarified the circumstances in which it will exercise
discretion and has determined that Executives
will not be advantaged by the share buy-back in
relation to the calculation of Earnings Per Share
(“EPS”) growth for the 2012 LTIA. Further detail
regarding the review, outcomes and additional
enhancements are available in Section 5.1:
Changes to Executive Remuneration
components Financial Year 2014.
DIAGRAM 1 – TOTAL POTENTIAL REMUNERATION1
MD & CEO
FY13
MD & CEO
FUTURE
KMP
FY13
KMP
FUTURE
CASH COMPONENT: 71%
EQUITY COMPONENT: 29%
CASH COMPONENT: 54%
29%
29%
42%
29%
EQUITY COMPONENT: 46%
25%
17%
29%
CASH COMPONENT: 74%
EQUITY COMPONENT: 26%
CASH COMPONENT: 58%
35%
35%
39%
26%
EQUITY COMPONENT: 42%
23%
16%
26%
FIXED PAY
STIA
Deferred STIA
LTIA
1 Assumes achievement of the ‘stretch’ performance hurdle outcomes for STIA, full provision of the
Deferred STIA in future and vesting of the LTIA at a value equal to the original award.
DIreCtorS’ report | aurIZon
29
1.2 Executive remuneration and shareholder wealth
In order to align Directors and Executives with shareholders, the Company:
> Requires that Directors’ and Executives’ accumulate share ownership
> Links Executive remuneration to improving shareholder returns and the generation of long term shareholder wealth.
Accumulation of share ownership
In order to align Director and Executive interests with shareholders, the Company has a policy
which requires:
>
Non-Executive Directors to accumulate and maintain one year’s Directors’ fees worth of shares
in the Company;
the MD & CEO to accumulate and maintain one year’s fixed remuneration of shares in
the Company; and
the KMP to accumulate and maintain 50% of one year’s fixed remuneration of shares
in the Company;
>
>
within six years of the date of listing of the Company or their appointment (whichever is the later).
This will be calculated with reference to the Directors’ fees/Executives’ total fixed remuneration during
the period divided by the number of years.
Linking executive remuneration to
shareholder returns and wealth
Further alignment with shareholders is attained by providing a part of the Executives’ remuneration
in equity and by linking the ‘at risk’ components of the remuneration to performance conditions.
These performance conditions are designed to enhance shareholder value and include:
STIA Performance Conditions:
> Underlying Earnings Before Interest & Tax (“EBIT”);
> Transformation;
> Safety;
> Return on Invested Capital (“ROIC”).
LTIA Performance Conditions:
> Operating Ratio improvement;
>
Total Shareholder Return (“TSR”)
performance relative to a peer group;
> Earnings Per Share (“EPS”) growth.
Performance hurdles against each performance condition are established at the beginning of the
performance period. Within the STIA, the hurdles are Threshold, Target and Stretch performance.
For the LTIA, vesting varies between 0% and 100% of the award, depending on the performance hurdle
established at the outset. Total Potential Remuneration or the maximum remuneration for an Executive
occurs when stretch performance is achieved for STIA and when 100% vesting occurs for LTIA.
1.3 2013 Company performance
One of the key indicators of performance of Aurizon is the share price appreciation since Initial Public Offering (“IPO”). Diagram 2 below shows the movements
in both the Aurizon share price and ASX100 index value over the period from listing date 22 November 2010 to 30 June 2013. The diagram assumes that a
shareholder starts with an initial investment of $100 in Aurizon and the ASX100 index and shows the change in the value of that investment, based on changes
in share price / index value over the period. For Aurizon, the diagram assumes a starting price of $2.45, being the initial retail share price at listing.
Diagram 2 – SharE PricE growTh of aZJ aND aSX100 iNDEX (22 NovEmbEr 2010 To 30 JuNE 2013)1
$190
$180
$170
$160
$150
$140
$130
$120
$110
$100
$90
$80
$170
$106
NOV
2010
MAR
2011
JUL
2011
NOV
2011
MAR
2012
JUL
2012
NOV
2012
MAR
2013
JUL
2013
Assumes AZJ day 1 starting share price for retail investors of $2.45
AZJ
ASX100 Index
1 The diagram excludes the value that would have been received from dividend payments during the year and is not equivalent to TSR.
30
annual report 2012–13
Directors’ Report (continued)
Remuneration Report
In addition to the operational and financial
achievements described on pages 6 to 7 the
Company has achieved many growth and
transformational advances during Financial Year
2013 including:
> Secured several high-volume coal haulage
contracts totalling circa 120 million tonnes per
annum including the BHP Billiton Mitsubishi
Alliance Coal Operations (BMA) and BHP
Billiton Mitsui Coal (BMC) contract which was
the largest contestable coal haulage contract in
Australia in a decade
> Delivered transformation benefits of $66 million,
including a Voluntary Redundancy Program
which resulted in 921 employees leaving during
Financial Year 2013
> Ramped-up iron ore haulage in Western
Australia with tonnages increasing by 82%,
EBIT by 203% compared to Financial Year 2012
> Achieved major improvements in safety
(60% and 54% decrease in Lost Time Injury
Frequency Rate (“LTIFR”) and in Medically
Treated Injury Frequency Rate (“MTIFR”)
respectively) which are now approaching world-
class performance levels, reflecting genuine
cultural change and operating discipline across
the Company
> Completed a major refinancing program,
including stand alone debt facilities at both
Aurizon Group and Aurizon Network, with the
ability to further diversify funding sources
> Completed a $1 billion selective buy-back of
Queensland Treasury Holdings’ (QTH) shares
and a $54 million on-market buy-back
> Delivered $981 million in capital investment
of which $624 million was on growth projects,
including the Wiggins Island Rail Project (QLD),
Hay Point Expansion (QLD) and Hexham Train
Support Facility (NSW)
TablE 1 – comPaNy PErformaNcE agaiNST fiNaNcial yEar 2013 PErformaNcE hurDlES
> Rationalised real estate portfolio, sold surplus
rollingstock assets and closed a number of
rollingstock facilities including the wagon
manufacturing facility at Redbank
> Developed a two year diversity plan
comprising a range of initiatives and actions
which are being implemented and
progressively evaluated.
Company Performance related to Executive
Remuneration is identified in Table 1: Company
performance against Financial Year 2013
performance hurdles
Further detail in relation to the performance
conditions and hurdles is provided in Section 3:
Remuneration Framework components.
30 JunE 2013
30 JunE 2012
30 JunE 2011
PERFoRmAnCE ouTComES
PERFoRmAnCE
AgAInST FY13
HuRdLES
SHoRT TERm InCEnTIvE AwARd PERFoRmAnCE mETRICS
Above Target
underlying EBIT
Safety
MTIFR
LTIFR
Safety Interactions
Stretch
Stretch
Stretch
Transformation
Project completion,
benefit delivery & capability
Above Target4
RoIC
Above Target
$754m
$584m
$383m1
4.90
0.95
10.74
2.4
19.26
3.08
1.15 per employee
per month
Majority completed
on-time, in full
8.0%
1.13 per employee
per month
Majority completed
on-time, in full
6.7%
1.10 per employee
per month
Majority completed
on-time, in full
4.4%
Long TERm InCEnTIvE AwARd PERFoRmAnCE mETRICS
EPS
See 3.1.4 LTIA
for performance
outcomes
TSR2
operating Ratio3
Treating diesel fuel rebate
as revenue3
AddITIonAL ComPAnY PERFoRmAnCE mETRICS
Closing share price / Change in share price
Dividends per share
19.8
25.3%
79.8%
80.3%
18.1
1.3%
83.4%
83.9%
15.4
20.2%
88.0%
88.3%
4.16
($1.71 above ‘retail’ price)
8.7 cents
3.40
(95c above ‘retail’ price)
7.4 cents
3.38
(93c above ‘retail’ price)
n/a
1
Restated underlying EBIT due to change in accounting policy.
2 Long Term Incentive Award performance condition is relative TSR.
3 LTIA performance condition Operating Ratio improvement hurdle is measured against the ratio calculated by including the diesel fuel rebate in revenue
4
Transformation result was assessed at above target. Board exercised discretion to assess a remuneration outcome below target to recognise the need to ensure sustainability
of the transformation.
DIreCtorS’ report | aurIZon
31
1.4 Executive remuneration and
company performance
As described in 1.1 Executive remuneration,
Total Potential Remuneration is subject to
performance conditions and the achievement
of hurdles. The achievement of performance
hurdles results in performance payments, whilst
under achievement against performance hurdles
results in the forfeiture of performance payments
(or, in the case of the unvested LTIA, subject to
re-testing in the following financial year).
Diagram 3: Potential remuneration outcomes,
represents the Financial Year 2013 actual and
forfeited remuneration of the MD & CEO and
an example KMP. The remuneration outcomes
identified in these diagrams are directly linked
to company performance described in Table 1:
Company performance against Financial Year 2013
performance hurdles and 3.1.4 Long Term
Incentive Awards.
Diagram 3 – PoTENTial rEmuNEraTioN ouTcomES
22%
28%
Fixed Remuneration
STIA: Actual FY13
5% STIA: Forfeited FY13
15% STIAD: Actual FY13
29% LTIA: 2010 Award
1%
LTIA: Forfeited/Subject to Re-testing
MD & CEO Financial Year 2013 Remuneration1
(as a proportion of total potential remuneration)
35%
33%
Fixed Remuneration
STIA: Actual FY13
5% STIA: Forfeited FY13
5% STIAD: Actual FY13
21% LTIA: 2010 Award
1%
LTIA: Forfeited/Subject to Re-testing
Example KMP Financial Year 2013 Remuneration1
(as a proportion of total potential remuneration)
1 Remuneration outcomes have been developed as a proportion of Total Potential
Remuneration (as identified within Section 3: Remuneration Components),
addressed with reference to company performance (as identified within Section
1.3: Company performance) and assuming vesting of the LTIA 2010 award based
on testing conducted as at 30th June 2013 with a Share Price of $4.16 (rights to
shares do not actually vest until the end of the performance period as described
in 3.1.4 Long Term Incentive Award).
32
annual report 2012–13
Directors’ Report (continued)
Remuneration Report
The way in which the components of our Remuneration Framework deliver our remuneration objectives is set out below.
Our GuidinG PrinciPles
Our Remuneration Framework is designed to support delivery of superior shareholder returns by placing a significant
proportion of an executive’s total target remuneration at risk and awarding a significant portion of at risk pay in equity.
Market competitive
> The quantum and structure of
remuneration is determined with
reference to competitive market practices
evident at similarly sized companies in
similar industry sectors
> Remuneration is set at what is required
to ensure that we have the right people
to deliver on Aurizon’s potential. At times
this means we pay remuneration above
median for the right experience, skills
and qualifications
Performance
> Remuneration is closely integrated
with performance improvement and
performance management programs
> Superior performance is rewarded and
differentiated from performance which
is only adequate or inferior
> Performance conditions and hurdles are
derived from the Aurizon strategy.
In addition, all participants in the
incentive plans are rewarded only in
the event that the Aurizon values and
behaviours are consistently demonstrated
Shareholder alignment
> The determination of incentive outcomes
depends on the achievement of
performance hurdles which, if achieved,
will enhance shareholder value
> A portion of short term rewards are
delivered in restricted equity to ensure
executives think like owners
> Policies are set which require executives
to acquire a minimum number of
Aurizon shares
> Set with reference to an individual’s
> Remuneration increases are not
experience, qualifications and specific
role and responsibilities
> Reference is had to the remuneration
paid by similar sized companies in similar
industry sectors
automatic
> Any increases are dependent on
performance against goals set at
the start of the year (with additional
reference to market conditions)
> Set to attract and retain executives with
the right talent to deliver results
> Participation levels are set with
reference to the appropriate levels
of short term incentive offered by our
peers in the market
> Short Term Incentive Awards may only
be earned for meeting or exceeding
annual performance conditions set at
the beginning of each year
> Achievement of performance conditions
designed to enhance shareholder value
must be achieved before any Short
Term Incentive Award is made
> Only those senior employees who
can influence long-term outcomes of
Aurizon participate
> The number of performance rights
awarded is determined by a percentage
of fixed remuneration divided by the
share price (Volume Weighted Average
Price) at the time of the award
> Percentage of fixed remuneration is,
in turn, assessed with reference to
market practices and is the same for
all participants at the same level
> Vesting depends on a reduction in
Aurizon’s Operating Ratio, Total
Shareholder Return performance
relative to a peer group and Earnings
Per Share growth
> Achievement of performance outcomes
is required to receive incentive, which if
achieved will add to shareholder value
> Performance rights granted entitle their
holder to a share upon vesting
Note: Minimum shareholding requirements
for Executives encourage retention of
these shares and alignment with
shareholder interests
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DIreCtorS’ report | aurIZon
33
2. Key Management Personnel
The KMP of the Group (which is a defined term
under the Australian Accounting Standards)
comprises all of the Directors of Aurizon and
those Executives who have the authority
and responsibility for planning, directing and
controlling the activities of Aurizon. The Executives
that form part of the KMP have been determined
to be MD & CEO and those members of the
Executive Committee reporting directly
to the MD & CEO who have authority and
responsibility for directing and controlling the
business. The KMP of Aurizon for the whole of
the financial year ended 30 June 2013 (unless
otherwise indicated) were:
nAmE
ExECuTIvE
L E Hockridge
m g Carter
J m Franczak1
A Kummant2
K R Lewsey3
K neate4
g P Pringle
g Robinson3
P Scurrah
R J Stephens
FoRmER ExECuTIvE
d m o’Toole5
L J Cooper6
PoSITIon
Managing Director & Chief Executive Officer
Executive Vice President, Network
Executive Vice President, Operations
Executive Vice President, Strategy
Executive Vice President, Business Development
Executive Vice President and Chief Financial Officer
Executive Vice President, Enterprise Services
Executive Vice President, Business Sustainability
Executive Vice President, Commercial & Marketing
Executive Vice President and Chief Human Resources Officer
Executive Vice President and Chief Financial Officer
Executive Vice President, Operations (Acting)
1 J M Franczak commenced in the role 3 April 2013
2 A Kummant commenced in the role 8 October 2012
3 K R Lewsey and G Robinson will be leaving the Group in the Financial Year ending 30 June 2014
and the terms are yet to be finalised
4 K Neate commenced acting in the role 19 November 2012, confirmed in the role 8 April 2013
5 D M O’Toole ceased in the CFO role 20 November 2012
6 L J Cooper ceased acting in the role 31 December 2012
non-ExECuTIvE dIRECToRS
J B Prescott AC
J Atkin
R R Caplan
J d Cooper
K L Field
g T John Ao
A J P Staines
g T Tilbrook
Chairman, Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
34
annual report 2012–13
Directors’ Report (continued)
Remuneration Report
3. Remuneration Framework components
3.1 Executive remuneration components
3.1.1 Remuneration Framework
what are the components
of the Remuneration
Framework?
Aurizon’s Remuneration Framework for each Executive comprises three components:
> Fixed remuneration
> STIA
> LTIA
The components are intended to provide an appropriate mix of fixed and variable remuneration, and a blend of short and
long term incentives.
3.1.2 Fixed remuneration
what is Fixed
Remuneration and how
is it set?
How is Fixed
Remuneration reviewed?
In setting fixed remuneration, regard is given to particular roles and responsibilities, the skills and experience of individuals,
market conditions and Aurizon’s peers in similar sized companies in similar industries.
Where required, advice is taken from independent external professional advisers to determine the remuneration range
evident in the marketplace and the individual is paid within that range. A fully competent individual can expect to be
paid close to the middle of the market range, while an individual growing into a role can expect to be paid towards the
bottom of the market range until they are able to demonstrate full competency. An individual who consistently exceeds
the requirements of the role by virtue of their experience, qualifications, performance and marketability is likely to be paid
towards the top of the market range.
From time to time the skill set required is not readily available in the Australian market. This is particularly the case where
we are seeking to inject practices evident in the Class 1 international railways. In these cases the market forces evident
in those markets must be considered and met. The remuneration tables in this report include the details relating to two
Executives recruited in non-Australian markets.
The fixed remuneration amount is used as the basis for calculating the variable components within the Remuneration
Framework (i.e. STIA and LTIA potential remuneration components are expressed as a percentage of fixed remuneration).
Remuneration reviews are closely aligned with our performance management programs – the Remuneration, Nomination
and Succession Committee (“Committee”) reviews the remuneration and other terms of employment of the KMP, having
regard to performance hurdles set at the start of the year.
There are no guaranteed fixed remuneration increases included in any Executive’s contracts.
For Financial Year 2014, the Board has decided there will be no increase for Aurizon Executives, which includes the MD
& CEO, the KMP and the direct reports to the KMP. Section 5.1.2: Executive Remuneration components for Financial Year
2014 provides further detail in relation to fixed remuneration changes for Financial Year 2014.
3.1.3 Short Term Incentive Award
what is the STIA and who
participates?
what is the amount
that Executives can earn
through an STIA?
The STIA component is a cash bonus subject to the achievement of pre-defined company and individual annual
performance hurdles set by the Committee. The STIA also applies equally (other than the potential remuneration
percentage) to all non-enterprise agreement employees.
From Financial Year 2014, an STIA (if any) will have a portion awarded in the form of rights to shares, which vest on the
first anniversary of payment of the cash component. This condition is to be introduced over a two year period, viz, 20% in
Financial Year 2014 increasing to 40% in Financial Year 2015 and will apply to the MD & CEO and KMP.
Section 5.1.2: Executive Remuneration components for Financial Year 2014 provides further detail in relation to STIA
changes for Financial Year 2014.
The potential remuneration (expressed as a percentage of fixed remuneration) available to Executives through the STIA
for Financial Year 2013 and Financial Year 2014 is identified below:
PERFoRmAnCE HuRdLE ACHIEvEmEnT
md & CEo
KmP ExECuTIvES
% oF FIxEd REmunERATIon
Below Threshold
Between Threshold & Target1
Target
Stretch (Maximum)
0%
30 – 99%
100%
150%
0%
30 – 74%
75%
112.5%
1
Achieving a threshold EBIT result generates an STIA outcome of 30% of target subject to Board discretion. Other performance conditions generate a 50%
outcome at threshold achievement also subject to Board discretion.
DIreCtorS’ report | aurIZon
35
what are the performance
hurdles and why were
these performance
measures chosen?
The Board sets the performance hurdles applicable to the STIA at the beginning of the performance period, ensuring
alignment to Aurizon’s performance improvement and performance management program.
The four key performance conditions were chosen because they captured the need to continuously improve safety across
all aspects of the business, the need to quickly change from a statutory government owned organisation to a world-class,
profitable listed company and, at the same time, deliver benefits to shareholders.
The performance hurdles for Financial Year 2013 and Financial Year 2014 are as follows:
EBIT
Minimum performance below which no EBIT
component is payable
The target level of achievement
The stretch performance level
SAFETY
Minimum safety performance level below which
no safety component is payable
The target level of achievement
The stretch performance level
TRAnSFoRmATIon
‘Threshold’ is set above previous year actual.
Is the EBIT level that Aurizon is considered to have a 75% chance of
achievement, under favourable market and environmental conditions.
Is higher than the target level and the likelihood of attainment,
although assessed by the Board as being achievable, would be
considered very difficult even under favourable market conditions.
A consistent reduction in the Lost Time Injuries (LTI), Medically Treated
Injuries (MTI) and a consistent frequency of safety interactions. That
is, it is not sufficient to maintain the number of LTIs and MTIs; it is a
minimum requirement that the number of hours lost to injury and the
number of injuries be reduced.
Is a more significant reduction in LTIs and MTIs and a greater
frequency of safety interactions.
Is the achievement of what would be considered a world-class
reduction in LTIs and MTIs and a significant frequency of safety
interactions.
Minimum performance below which no
transformation component is payable
Demonstrable transformation having regard to specified milestones
and outcomes.
The target level of achievement
Substantial transformation having regard to specified milestones and
outcomes.
The stretch performance level
Transformation which far exceeds the target level.
The Board recognised the strategic imperative that Aurizon be transformed very quickly after the IPO from the
characteristics typical of a long-standing public sector organisation to an efficient, profitable, listed market leader. To do
this, a number of specific change programs were identified and allocated to specific KMP. Minimum, target and stretch
levels of achievement were identified in relation to each transformation project and in relation to transformation overall.
Performance is defined in terms of project and program completion (or milestone achievement) and benefits delivery (or
progression towards delivery for lengthy transformational projects). An assessment is then performed by the Committee
to assess the level of achievement in relation to each transformation project, having regard to pre-determined levels of
expected achievement.
RoIC
Minimum performance level below which no
ROIC component is payable
The target level of achievement
The stretch performance level
‘Threshold’ is set with reference to corporate plan.
Is the ROIC that Aurizon is considered to have a 75% chance of
achievement, under favourable market and environmental conditions.
A % return which, although considered by the Board to be achievable,
would be very difficult to achieve under favourable market conditions.
In order to meet the long term contractual undertakings with our customers, Aurizon needs to invest heavily in
infrastructure, process improvement, systems and capacity.
The ROIC performance measure is intended to ensure that there is alignment between these investment decisions and
superior returns for shareholders.
36
annual report 2012–13
Directors’ Report (continued)
Remuneration Report
3.1.3 Short Term Incentive Award (continued)
To what extent were
performance conditions
met in Financial Year
2013?
The performance hurdle outcomes for Financial Year 2013 are identified below:
PERFoRmAnCE HuRdLE EBIT
FY13 Achievement
Above Target
SAFETY
Stretch
TRAnSFoRmATIon RoIC
Above Target1
Above Target
Specific information relating to the STIA payable for the Financial Year 2013 based on achievement of the STIA
performance hurdles for the MD & CEO and KMP is set out in Table 2: Summary of the STIA for Financial Year 2013.
1 Transformation result was assessed at above target. Board exercised discretion to assess a remuneration outcome below target to recognise the need to
ensure sustainability of the transformation.
Table 2 – Summary of the STIA for Financial Year 2013
nAmE
ExECuTIvE
L E Hockridge
m g Carter
J m Franczak
A Kummant
K R Lewsey
K neate
g P Pringle
g Robinson
P Scurrah
R J Stephens
FoRmER ExECuTIvE
d m o’Toole
L J Cooper
ACTuAL STIA PAYmEnT
% oF mAxImum STIA PAYABLE
% oF mAxImum STIA FoRFEITEd
2,505,360
725,000
750,000
750,000
702,500
562,500
575,000
575,000
825,000
575,000
607,500
N/A
86%
86%
67%
79%
83%
82%
84%
84%
88%
84%
69%
N/A
14%
14%
33%
21%
17%
18%
16%
16%
12%
16%
31%
N/A
3.1.4 Long Term Incentive Award
what is the LTIA and who
participates?
The LTIA is the component of Total Potential Remuneration linked to providing long-term incentives for selected Executives
who the Board has identified as being able to contribute directly to the generation of long term shareholder returns.
This includes the MD & CEO, KMP, the direct reports to KMP and a small number of other management employees.
How is the LTIA grant
determined?
what is the performance
period?
The number of performance rights issued under the LTIA to each employee is calculated by dividing their respective LTIA
potential remuneration (expressed as a percentage of fixed remuneration) by the 5 day Volume Weighted Average Price
(“VWAP”) of Aurizon shares at the time of their award.
Participation levels for Financial Year 2013 and Financial Year 2014 are at 100% of fixed remuneration for the MD & CEO
and 75% of fixed remuneration for KMP Executives. With minor exceptions, the direct reports to the KMP Executives are
awarded between 30-60%, depending on the relevant role.
Each performance right is a right to acquire one share in Aurizon upon vesting.
The performance hurdles for the LTIA are measured over a three year period. In the event that the performance hurdle is
not achieved, the Board has the discretion to extend the performance period for a further year.
In the event of a performance period extension, given the cumulative nature of EPS growth and relative TSR, in order for
any additional performance rights to vest on the later date, Aurizon has to achieve stronger performance in the final year.
Similarly for Operating Ratio, in order for rights to vest during the extension period, the % improvement required would be
greater than that required for the original performance period.
DIreCtorS’ report | aurIZon
37
what are the performance
hurdles?
The Board sets the performance hurdles applicable to the LTIA at the beginning of the performance period, ensuring
alignment to Aurizon’s long term performance improvement and performance management program.
The performance hurdles for the LTIA are as follows:
oPERATIng RATIo ImPRovEmEnT HuRdLE
Operating Ratio improvement, which essentially measures the operating cost (in cents) of earning each dollar of revenue,
remains a key metric for Aurizon. Aurizon is committed to its target of reducing Operating Ratio to 75% in respect of
Financial Year 2015. This will require further implementation of transformation initiatives, growth initiatives and continued
tight operational and financial discipline.
The Board has determined to increase the proportion of the LTIA that is subject to the Operating Ratio improvement
performance condition to 50% of the 2013 LTIA (2012 LTIA: 33%).
The following table sets out the percentage of rights to vest under the 2013 LTIA for the Operating Ratio improvement
hurdle under the relevant performance outcome.
oPERATIng RATIo ImPRovEmEnT HuRdLE
PERFoRmAnCE ouTComE
(as at 30 June 2016)
% oF HuRdLE RIgHTS To vEST
Operating Ratio more than 75%
No vesting of Rights will occur
Operating Ratio 75%
50% of the Rights will vest
Operating Ratio between 75% and 73%
Vests pro-rata on a straight-line basis
Operating Ratio 73% or less
100% of the Rights will vest
It should be noted that the target Operating Ratio in 2016 is a significant decrease below the 2015 target of 75% and
that this rate of decline cannot be expected to be maintained indefinitely into the future. The Board considers 73% to be
an extremely difficult target in such a short time. To put the target level of achievement in perspective, to achieve 73% by
2016 will require a 3% reduction year-on-year from IPO to 2016.
EARnIngS PER SHARE gRowTH HuRdLE
EPS is calculated by dividing Aurizon’s Net Profit After Tax (NPAT) by the weighted average number of ordinary shares on
issue during the relevant period. EPS growth measures the growth in earnings on a per share basis.
The proportion of the LTIA that is subject to the EPS growth performance condition is 25% of the 2013 LTIA
(2012 LTIA: 33%).
The following table sets out the percentage of rights to vest under the 2013 LTIA for the EPS growth hurdle under the
relevant performance outcome.
EPS gRowTH HuRdLE
PERFoRmAnCE ouTComE
(as at 30 June 2016)
% oF HuRdLE RIgHTS To vEST
Average annual EPS growth is less than 7.5%
No vesting of Rights will occur
Average annual EPS growth is at 7.5%
50% of the Rights will vest
Average annual EPS growth is between 7.5%
and 10%
Vests pro-rata on a straight-line basis
Average annual EPS growth is 10% or more
100% of the Rights will vest
38
annual report 2012–13
Directors’ Report (continued)
Remuneration Report
3.1.4 Long Term Incentive Award (continued)
what are the performance
hurdles? (continued)
RELATIvE TSR gRowTH HuRdLE
The remaining performance hurdle associated with the LTIA is relative TSR. The vesting of rights associated with relative
TSR growth is conditional on Aurizon’s TSR performance relative to a peer group of companies. The peer group is defined
as the companies in the ASX Top 100 index, other than financial, medical, telecommunications, pharmaceutical, gaming
and property trusts at the time of the award.
TSR measures the growth in the price of shares plus cash distributions notionally reinvested in shares. To determine
whether and to what extent the TSR tested performance rights will vest, the TSR of Aurizon over the performance
period will be compared to the TSR of all of the companies in the peer group which are still listed at the end of the
performance period.
For the purposes of calculating the TSR measurement, the relevant shares prices will be determined by reference to a VWAP
over a period to smooth any short term ‘peaks’ or ‘troughs’. Relative TSR performance is monitored by an independent
expert at the end of each financial year.
The proportion of the LTIA that is subject to the relative TSR growth performance condition is 25% of the 2013 LTIA
(2012 LTIA: 33%).
The following table sets out the percentage of rights to vest under the 2013 LTIA for the relative TSR growth under the
relevant performance outcome.
RELATIvE TSR gRowTH HuRdLE
PERFoRmAnCE ouTComE
(as at 30 June 2016)
% oF HuRdLE RIgHTS To vEST
Below the 50th percentile
No vesting of Rights will occur
At the 50th percentile
50% of the Rights will vest
Between the 50th and 75th percentile
Vests pro-rata on a straight-line basis
Between the 75th and 100th percentile of the
peer group
100% of the Rights will vest
DIreCtorS’ report | aurIZon
39
To what extent were
performance conditions
met in Financial Year
2013?
The performance hurdle outcomes as at 30 June 2013 for the LTIA are as follows:
PERFoRmAnCE
mEASuREmEnT
PERIod
LTIA
PERFoRmAnCE
CondITIon
PERFoRmAnCE
HuRdLE
wEIgHTIng RESuLT
% oF
PERFoRmAnCE
RIgHTS
vESTIng
IPO
(2010)
01 July 2010 –
30 June 2013
EPS growth from
FY12 – FY13
22 November 2010
– 22 November
2013
Relative TSR
against peer
group within
ASX100 Index
2011
01 July 2011 –
30 June 2014
Average annual
EPS growth
Relative TSR
against peer
group within
ASX100 Index
2012
01 July 2012 –
30 June 2015
Operating Ratio
Improvement
Average annual
EPS growth
Relative TSR
against peer
group within
ASX100 Index
50% of rights vest
with an average
annual growth
rate of 7.5%, up to
100% at an average
annual growth rate
of 10% (with rights
vesting pro-rata on a
straight-line basis)
50% of rights vest at
the 50th percentile,
up to 100% at the
75th percentile
(with rights vesting
pro-rata on a
straight-line basis)
50% of rights vest
with an average
annual growth
rate of 7.5%, up to
100% at an average
annual growth rate
of 10% (with rights
vesting pro-rata on a
straight-line basis)
50% of rights vest at
the 50th percentile,
up to 100% at the
75th percentile
(with rights vesting
pro-rata on a
straight-line basis)
50% of rights will
vest with a FY15
Operating Ratio of
79.5%, up to 100%
at 75% (with rights
vesting pro-rata on a
straight-line basis)
50% of rights vest
with an average
annual growth
rate of 7.5%, up to
100% at an average
annual growth rate
of 10% (with rights
vesting pro-rata on a
straight-line basis)
50% of rights vest at
the 50th percentile,
up to 100% at the
75th percentile
(with rights vesting
pro-rata on a
straight-line basis)
50%
9.4%
92%
50%
50%
50%
33%
33%
33%
40
annual report 2012–13
Directors’ Report (continued)
Remuneration Report
To what extent were
performance conditions
met in Financial Year
2013? (continued)
LTIA
2013
PERFoRmAnCE
mEASuREmEnT
PERIod
PERFoRmAnCE
CondITIon
PERFoRmAnCE
HuRdLE
01 July 2013 –
30 June 2016
Operating Ratio
Improvement
Average annual
EPS growth
Relative TSR
against peer
group within
ASX100 Index
50% of rights will
vest with a FY16
Operating Ratio of
75%, up to 100%
at 73% (with rights
vesting pro-rata on a
straight-line basis)
50% of rights vest
with an average
annual growth
rate of 7.5%, up to
100% at an average
annual growth rate
of 10% (with rights
vesting pro-rata on a
straight-line basis)
50% of rights vest at
the 50th percentile,
up to 100% at the
75th percentile (with
rights vesting pro-
rata on a straight-
line basis)
% oF
PERFoRmAnCE
RIgHTS
vESTIng
wEIgHTIng RESuLT
50%
25%
25%
Specific information relating to the LTIA grants made to the MD & CEO and KMP during Financial Year 2013 (i.e under the 2012 LTIA) are set out in
Table 3 below.
Further detail relating to rights granted is available in Table 8: Rights granted as compensation.
TablE 3 – Summary of awarDS maDE uNDEr ThE lTia DuriNg ThE fiNaNcial yEar 2013
nAmE
L E Hockridge
m g Carter
J m Franczak1
A Kummant2
K R Lewsey
K neate3
g P Pringle
g Robinson
P Scurrah
R J Stephens
FoRmER ExECuTIvE
d m o’Toole4
L J Cooper5
ALLoCATEd AT
23 AuguST 2012
FAIR vALuE AT
ALLoCATIon
$'000
FoRFEITEd
duRIng YEAR
582,090
167,910
-
188,059
167,910
93,152
137,016
137,016
186,270
137,016
181,344
137,059
1,675
483
-
541
483
268
394
394
536
394
522
394
-
-
-
-
-
-
-
-
-
-
(90,672)
(137,059)
1 Mr Franczak commenced in the role 3 April 2013
2 Mr Kummant commenced in the role 8 October 2012
3 Mr Neate commenced acting in the role 19 November 2012, confirmed in the role 8 April 2013
4 Ms O’Toole ceased in the CFO role 20 November 2012
5 Mr Cooper ceased acting in the role 31 December 2012
DIreCtorS’ report | aurIZon
41
3.2 Executive service agreements
Remuneration and other terms of employment for the MD & CEO, as with the other KMP Executives, are formalised in a Service Agreement. Table 4: Service
Agreement summary provides a summary of the service agreements for the MD & CEO and KMP. Further details relating to compensation of the MD & CEO and
KMP for the financial year ended 30 June 2013 and 30 June 2012 are available in Section 4: Actual Remuneration Outcomes.
TablE 4 – SErvicE agrEEmENT Summary1
KmP ExECuTIvES
md & CEo
TERm
Duration
Termination by the MD & CEO
Termination by the Company
All other KmP Executives
m g Carter
J m Franczak
A Kummant
K R Lewsey
K neate
g P Pringle
g Robinson
P Scurrah
R J Stephens
Post-employment restraints
Fixed Remuneration including superannuation
Duration
Post-employment restraints
Termination by the Executive
Termination by the Company
Fixed Remuneration including superannuation
Termination by the Executive
Termination by the Company
Fixed Remuneration including superannuation
Termination by the Executive
Termination by the Company
Fixed Remuneration including superannuation
Termination by the Executive
Termination by the Company
Fixed Remuneration including superannuation
Termination by the Executive
Termination by the Company
Fixed Remuneration including superannuation
Termination by the Executive
Termination by the Company
Fixed Remuneration including superannuation
Termination by the Executive
Termination by the Company
Fixed Remuneration including superannuation
Termination by the Executive
Termination by the Company
Fixed Remuneration including superannuation
Termination by the Executive
Termination by the Company
Fixed Remuneration including superannuation
SERvICE AgREEmEnT SummARY
Ongoing, until notice given by either party.
6 months notice.
12 months notice. Termination payment of 12 months fixed pay.
Treatment of unvested prior year STIA and LTIA will be in accordance
with the plan rules and Board-approved policies.
12 months in any competitor business in Australia.
$1,950,000
Ongoing, until notice given by either party.
Restricted from competitive business in Australia for a period aligned
to the notice period.
3 months notice.
6 months notice.
$750,000
3 months notice.
12 months notice.
$1,000,000
3 months notice.
12 months notice.
$840,000
3 months notice.
6 months notice.
$750,000
3 months notice.
6 months notice.
$730,000
3 months notice.
6 months notice.
$612,000
3 months notice.
6 months notice.
$612,000
3 months notice.
9 months notice.
$832,000
3 months notice.
6 months notice.
$612,000
1 Termination payments are governed by the conditions outlined in the individual service agreements and the Corporations Act
3.3 Hedging and margin lending policies
Upon listing on the ASX, Aurizon introduced a policy that prohibits Executives granted share-based payments as part of their remuneration from hedging economic
exposure to unvested Rights that have been issued pursuant to a Group employee share plan. The policy also prohibits margin loan arrangements for the purpose
of purchasing Aurizon shares. Adherence to this policy is monitored regularly and involves each KMP signing an annual declaration of compliance with the policy.
42
annual report 2012–13
Directors’ Report (continued)
Remuneration Report
3.4 Non-Executive Director remuneration
3.4.1 Policy
overview of policy
Aggregate fees approved
by shareholders
How are individual fees
determined?
On appointment to the Board, all Non-Executive Directors enter into a Service Agreement with Aurizon, incorporated in a
letter of appointment which includes details of the compensation relevant to the office of Director.
The Directors’ Fee is a composite fee and covers all responsibilities of the respective members including Board and
Committee duties. The Fee is also a total fee in that it covers both cash and any contributions to a fund for the purposes
of superannuation benefits. Apart from superannuation, there are no other retirement benefits in place for Non-Executive
Directors. Non-Executive Directors do not receive performance-based pay.
Fees for Non-Executive Directors are set at a level to attract and retain Directors with the necessary skills and experience to
allow the Board to have a proper understanding of, and competence to deal with, current and emerging issues for Aurizon.
Under Aurizon’s Constitution, Non-Executive Directors are to be paid by way of fees for their services within an initial
maximum aggregate cap of $2.5 million.
The cap does not include remuneration for performing additional or special duties for Aurizon at the request of the Board.
The Constitution also states that the Company will pay all reasonable travelling, accommodation and other expenses of
Directors in attending meetings and carrying out their duties.
Within the aggregate cap, remuneration for Non-Executive Directors is reviewed by the Committee and set by the Board,
taking into account recommendations from an external expert.
Fees and payments to Non-Executive Directors are reviewed annually by the Board and reflect the demands which are
made on, and the responsibilities of, the Directors.
The Chairman’s fees are determined independently to the fees of Non- Executive Directors, based on comparative
roles in the external market. The Chairman is not present at any discussions relating to the determination of his own
remuneration.
3.4.2 directors’ Fees
The current annual base fees for the Non-Executive Directors are set out in Table 5: Directors’ Fees. There has been no increase applied to the Directors’ fees since
1 July 2012.
TablE 5 – DirEcTorS’ fEES
dIRECToRS
Chairman
TERm
Directors fees (inclusive of all responsibilities and superannuation)
SERvICE AgREEmEnT SummARY
$475,000
other non-Executive directors
Directors fees (inclusive of all responsibilities and superannuation)
$190,000
DIreCtorS’ report | aurIZon
43
4. Actual remuneration outcomes
4.1 Actual Remuneration Outcomes
Details of the nature and amount of each major element of compensation of each KMP for the financial year ended 30 June 2013 and 30 June 2012 are
set out below.
TablE 6 – fiNaNcial yEar 2013 KEy maNagEmENT PErSoNNEl rEmuNEraTioN
2013
nAmE
SHoRT-TERm EmPLoYEE BEnEFITS
PoST-
EmPLoYmEnT
BEnEFITS
Long-TERm BEnEFITS
EquITY-
SETTLEd
SHARE-
BASEd
PAYmEnTS
PRoPoRTIon oF
ComPEnSATIon
PERFoRmAnCE
RELATEd3
REmunERATIon
ConSISTIng
oF RIgHTS FoR
THE YEAR
CASH SALARY
And FEES
CASH
BonuS3
non-
monETARY
BEnEFITS1
$’000
$’000
$’000
oTHER
$’000
SuPER-
AnnuATIon
Long-
SERvICE
LEAvE
TERmInATIon
BEnEFITS
$’000
$’000
$’000
RIgHTS2
$’000
ToTAL
$’000
%
%
non-ExECuTIvE dIRECToRS
457
J B Prescott AC
174
J Atkin
174
R R Caplan
174
J D Cooper
174
K L Field
174
G T John AO
174
A J P Staines
174
G T Tilbrook
Sub-total
non-Executive
directors
ExECuTIvES
L E Hockridge
M G Carter
J M Franczak4
A Kummant5
K R Lewsey
K Neate6
G P Pringle
G Robinson
P Scurrah
R J Stephens
1,675
1,927
622
672
736
722
387
585
548
813
593
-
-
-
-
-
-
-
-
-
2,505
725
750
750
703
563
575
575
825
575
6
-
-
-
-
-
-
-
6
205
64
33
69
17
21
14
8
8
(44)
FoRmER ExECuTIvES
D M O'Toole7
L J Cooper8
778
704
608
-
(124)
(39)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
16
16
16
16
16
16
16
16
128
17
126
-
12
25
15
25
25
17
17
17
52
-
-
-
-
-
-
-
-
-
129
57
2
4
33
8
12
9
46
21
(38)
(410)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
479
190
190
190
190
190
190
190
-
1,809
1,327
360
169
782
379
106
319
211
292
319
6,110
1,954
1,626
2,353
1,879
1,100
1,530
1,376
2,001
1,481
749
546
234
60
2,224
913
-
-
-
-
-
-
-
-
-
63
56
57
65
58
61
58
57
56
60
38
7
-
-
-
-
-
-
-
-
-
22
18
10
33
20
10
21
15
15
22
11
7
Total Key
management
Personnel
compensation
(group)
17
1 Non-monetary benefits represent the value of Reportable Fringe Benefits for the respective Fringe Benefits Tax year ending 31 March, the estimated value of car
10,762
26,356
9,154
4,558
1,295
(127)
476
238
52
-
parking provided, motor vehicle lease payments and annual leave accrued or utilised during the financial year.
2 The value of rights granted in the year is the fair value independently calculated at grant date using an expected outcome model, this was consistent with the
Monte-Carlo simulation conducted in the prior year and resulted in similar outcomes. This amount is progressively expensed over the vesting period. Refer to
Note 35 for further details regarding the fair value of Rights. These values may not represent the future value that the Executive will receive, as the vesting of the
Rights is subject to the achievement of performance conditions.
3 The short-term incentives (cash bonus) and deferred short-term incentives and long-term incentives (equity-settled share-based payments) represent the at risk
performance-related remuneration.
4 J M Franczak commenced in the role 3 April 2013.
5 A Kummant commenced in the role 8 October 2012.
6 K Neate commenced acting in the role 19 November 2012, confirmed in the role 8 April 2013.
7 D M O’Toole ceased in the CFO role 20 November 2012 and worked for the Company for the remainder of the year.
8 L J Cooper ceased acting in the role 31 December 2012. Subsequent to the cessation of L J Cooper’s employment, he has provided consultancy services to the
Group through an agreement with JP Corporation Pty Ltd as well as Lindsay Cooper Management Services Pty Ltd resulting in payments of $82,500 for the year
ended 30 June 2013.
44
annual report 2012–13
Directors’ Report (continued)
Remuneration Report
4.1 Actual Remuneration Outcomes (continued)
TablE 7 – fiNaNcial yEar 2012 KEy maNagEmENT PErSoNNEl rEmuNEraTioN
2012
nAmE
SHoRT-TERm EmPLoYEE BEnEFITS
PoST-
EmPLoYmEnT
BEnEFITS
Long-TERm BEnEFITS
EquITY-
SETTLEd
SHARE-
BASEd
PAYmEnTS
PRoPoRTIon oF
ComPEnSATIon
PERFoRmAnCE
RELATEd5
REmunERATIon
ConSISTIng
oF RIgHTS
FoR THE YEAR
CASH SALARY
And FEES
CASH
BonuS5
non-
monETARY
BEnEFITS1
$’000
$’000
$’000
oTHER
$’000
SuPER-
AnnuATIon
Long
SERvICE
LEAvE
TERmInATIon
BEnEFITS
$’000
$’000
$’000
RIgHTS2
$’000
ToTAL
$’000
%
%
non-ExECuTIvE dIRECToRS
359
J B Prescott AC
165
J Atkin
165
R R Caplan
75
A J Davies
165
G T John AO
45
P C Kenny
165
A J P Staines
165
G T Tilbrook
33
K Field
33
J Cooper
Sub-total
non-Executive
directors
ExECuTIvE
L E Hockridge
D M O'Toole
K R Lewsey
M G Carter
G P Pringle
R J Stephens
L J Cooper
G Robinson3
P Scurrah3
M P McAuliffe4
C M Davies4
1,370
1,651
755
658
526
553
539
472
575
391
685
690
-
-
-
-
-
-
-
-
-
-
-
1,539
450
400
375
345
345
340
340
400
-
-
6
-
-
-
-
-
-
-
-
-
6
25
(37)
(12)
4
31
31
48
49
94
(59)
(24)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
42
15
15
7
15
3
15
15
3
3
133
50
16
25
105
25
39
88
51
7
16
15
-
-
-
-
-
-
-
-
-
-
-
31
16
14
60
9
10
97
6
35
(17)
(5)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
556
615
-
-
-
-
-
-
-
-
-
-
407
180
180
82
180
48
180
180
36
36
-
1,509
1,270
293
261
237
223
223
205
129
251
105
41
4,566
1,493
1,346
1,307
1,186
1,187
1,250
1,150
1,178
1,286
1,332
-
-
-
-
-
-
-
-
-
-
-
62
50
49
47
48
48
44
41
55
8
3
-
-
-
-
-
-
-
-
-
-
-
28
20
19
18
19
19
16
11
21
8
3
Total Key
management
Personnel
compensation
17
(group)
1 Non-monetary benefits represent the value of Reportable Fringe Benefits for the respective Fringe Benefits Tax year ending 31 March, the estimated value of car
18,790
8,865
4,534
3,238
1,171
156
570
256
41
-
parking provided, and annual leave accrued or utilised during the financial year.
2 The value of rights granted in the year is the fair value independently calculated at grant date using an expected outcome model, this was consistent with the
Monte-Carlo simulation conducted in the prior year and resulted in similar outcomes. This amount is progressively expensed over the vesting period. The value
disclosed includes the value of rights to be granted under the STIAD based on 50% of the 2012 cash STIA. Refer to Note 35 for further details regarding the
fair value of Rights. These values may not represent the future value that the Executive will receive, as the vesting of the Rights is subject to the achievement of
performance conditions.
3 Mr Robinson was appointed on 1 December 2011 and Mr Scurrah was appointed on 1 January 2012.
4 Mr Davies ceased employment on 25 May 2012 and Mr McAuliffe ceased employment 30 June 2012.
5 The short-term incentives (cash bonus) and deferred short-term incentives and long-term incentives (equity-settled share-based payments) represent the at risk
performance-related remuneration.
DIreCtorS’ report | aurIZon
45
4.2 Rights granted as compensation
Details of Rights granted as compensation, exercised and forfeited during the year in the Performance Rights Plan, including vesting profiles, are as follows:
TablE 8 – righTS graNTED aS comPENSaTioN
nAmE
dATE
gRAnTEd
InCEnTIvE
PLAn
BALAnCE
AT BEgIn-
nIng oF
YEAR
RIgHTS
AwARdEd
duRIng
THE YEAR
ExERCISEd
duRIng
THE YEAR
FoRFEITEd
In YEAR
BALAnCE
AT End oF
YEAR
FAIR
vALuE
PER
RIgHT
AT
gRAnT
dATE
ExERCISE
PRICE
vESTEd
In YEAR
FoRFEITEd
In YEAR
vALuE oF
RIgHTS
gRAnTEd
In YEAR1
vALuE oF
RIgHTS
FoRFEITEd
In YEAR
dATE on
wHICH
gRAnT
vESTS
ExPIRY
dATE
no.
no.
no.
no.
no.
$
$
%
%
$’000
$’000
-
-
27,985
27,985
100,000
100,000
(25,618)
-
-
-
-
-
100,000
(100,000)
L E
Hockridge
22-Nov-10 STIAD
333,333
1-Dec-10
LTIAD - EPS
333,333
1-Dec-10
LTIAD - TSR
333,333
22-Aug-11 LTIAD - EPS
247,093
22-Aug-11 LTIAD - TSR
247,093
-
-
-
-
-
M G
Carter
23-Aug-12 LTIAD - EPS
23-Aug-12 LTIAD - TSR
23-Aug-12 LTIAD - OR
22-Nov-10 LTIAD - EPS
22-Nov-10 LTIAD - TSR
22-Aug-11 LTIAD - EPS
22-Aug-11 LTIAD - TSR
23-Aug-12 LTIAD - EPS
23-Aug-12 LTIAD - TSR
23-Aug-12 LTIAD - OR
28-Sep-11 STIAD
28-Sep-11 STIAD
10-Oct-12
STIAD
10-Oct-12
STIAD
J M
Franczak
4-Apr-13
Retention
4-Apr-13
Retention
A
Kummant
9-Oct-12
Retention
9-Oct-12
Retention
K R
Lewsey
23-Aug-12 LTIAD - EPS
23-Aug-12 LTIAD - TSR
23-Aug-12 LTIAD - OR
22-Nov-10 LTIAD - EPS
22-Nov-10 LTIAD - TSR
22-Aug-11 LTIAD - EPS
22-Aug-11 LTIAD - TSR
23-Aug-12 LTIAD - EPS
23-Aug-12 LTIAD - TSR
23-Aug-12 LTIAD - OR
28-Sep-11 STIAD
28-Sep-11 STIAD
10-Oct-12
STIAD
10-Oct-12
STIAD
K Neate
8-Aug-11
Retention
22-Aug-11 LTIAD - EPS
22-Aug-11 LTIAD - TSR
23-Aug-12 LTIAD - EPS
23-Aug-12 LTIAD - TSR
23-Aug-12 LTIAD - OR
10-Oct-12
STIAD
10-Oct-12
STIAD
-
-
-
194,030
194,030
194,030
58,824
58,824
45,785
45,785
-
-
-
-
-
-
-
55,970
55,970
55,970
25,618
25,618
-
-
-
-
-
-
-
-
-
63,725
63,725
49,600
49,600
100,000
62,686
62,686
62,687
-
-
-
-
-
-
-
55,970
55,970
55,970
29,615
29,615
-
-
-
-
29,851
29,851
20,000
29,070
29,070
-
-
-
-
-
-
-
-
31,051
31,051
31,050
16,567
16,567
(333,333)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(29,615)
-
-
-
(20,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
333,333
333,333
247,093
247,093
194,030
194,030
194,030
58,824
58,824
45,785
45,785
55,970
55,970
55,970
-
25,618
27,985
27,985
100,000
100,000
-
100,000
62,686
62,686
62,687
63,725
63,725
49,600
49,600
55,970
55,970
55,970
-
29,615
29,851
29,851
-
29,070
29,070
31,051
31,051
31,050
16,567
16,567
2.07
1.14
0.94
2.93
1.28
3.29
2.06
3.29
1.14
0.94
2.93
1.28
3.29
2.06
3.29
3.44
2.99
3.54
3.46
4.01
4.01
3.73
3.53
3.29
2.06
3.29
1.14
0.94
2.93
1.28
3.29
2.06
3.29
3.44
2.99
3.54
3.46
3.38
2.93
1.28
3.29
2.06
3.29
3.54
3.46
3.40
100.00
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3.40
100.00
-
-
-
-
-
-
-
-
-
-
3.73
100.00
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3.40
100.00
-
-
-
-
-
-
3.50
100.00
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
638
400
638
-
-
-
-
184
115
184
-
-
99
97
401
401
373
353
206
129
206
-
-
-
-
184
115
184
-
-
106
103
-
-
-
102
64
102
59
57
- 22-Nov-12 30-Sep-13
- 22-Nov-13 31-Dec-14
- 22-Nov-13 31-Dec-14
- 30-Jun-14
31-Dec-15
- 30-Jun-14
31-Dec-15
- 23-Aug-15 31-Dec-16
- 23-Aug-15 31-Dec-16
- 23-Aug-15 31-Dec-16
- 30-Sep-13 31-Dec-14
- 22-Nov-13 31-Dec-14
- 30-Jun-14
31-Dec-15
- 30-Jun-14
31-Dec-15
- 23-Aug-15 31-Dec-16
- 23-Aug-15 31-Dec-16
- 23-Aug-15 31-Dec-16
- 28-Sep-12 1-Oct-14
- 28-Sep-13 1-Oct-14
- 10-Oct-13
10-Oct-13
- 10-Oct-14
10-Oct-14
- 28-Jan-14
28-Jan-14
- 28-Jan-15
28-Jan-15
- 9-Oct-12
9-Oct-12
- 9-Oct-13
9-Oct-13
- 23-Aug-15 31-Dec-16
- 23-Aug-15 31-Dec-16
- 23-Aug-15 31-Dec-16
- 30-Sep-13 31-Dec-14
- 22-Nov-13 31-Dec-14
- 30-Jun-14
31-Dec-15
- 30-Jun-14
31-Dec-15
- 23-Aug-15 31-Dec-16
- 23-Aug-15 31-Dec-16
- 23-Aug-15 31-Dec-16
- 28-Sep-12 1-Oct-14
- 28-Sep-13 1-Oct-14
- 10-Oct-13
10-Oct-13
- 10-Oct-14
10-Oct-14
- 8-Aug-12
8-Aug-12
- 30-Jun-14
31-Dec-15
- 30-Jun-14
31-Dec-15
- 23-Aug-15 31-Dec-16
- 23-Aug-15 31-Dec-16
- 23-Aug-15 31-Dec-16
- 10-Oct-13
10-Oct-13
- 10-Oct-14
10-Oct-14
46
annual report 2012–13
Directors’ Report (continued)
Remuneration Report
nAmE
dATE
gRAnTEd
InCEnTIvE
PLAn
BALAnCE
AT BEgIn-
nIng oF
YEAR
RIgHTS
AwARdEd
duRIng
THE YEAR
ExERCISEd
duRIng
THE YEAR
FoRFEITEd
In YEAR
BALAnCE
AT End oF
YEAR
FAIR
vALuE
PER
RIgHT
AT
gRAnT
dATE
ExERCISE
PRICE
vESTEd
In YEAR
FoRFEITEd
In YEAR
vALuE oF
RIgHTS
gRAnTEd
In YEAR1
vALuE oF
RIgHTS
FoRFEITEd
In YEAR
dATE on
wHICH
gRAnT
vESTS
ExPIRY
dATE
no.
no.
no.
no.
no.
$
$
%
%
$’000
$’000
G P
Pringle
G
Robinson
22-Nov-10 LTIAD - EPS
22-Nov-10 LTIAD - TSR
22-Aug-11 LTIAD - EPS
22-Aug-11 LTIAD - TSR
23-Aug-12 LTIAD - EPS
23-Aug-12 LTIAD - TSR
23-Aug-12 LTIAD - OR
28-Sep-11 STIAD
28-Sep-11 STIAD
STIAD
10-Oct-12
10-Oct-12
STIAD
22-Aug-11 LTIAD - EPS
22-Aug-11 LTIAD - TSR
23-Aug-12 LTIAD - EPS
23-Aug-12 LTIAD - TSR
23-Aug-12 LTIAD - OR
10-Oct-12
STIAD
10-Oct-12
STIAD
53,922
53,922
41,969
41,969
-
-
-
25,436
25,436
-
-
17,442
17,442
-
-
-
-
-
P Scurrah
1-Jan-12
Retention
30,000
23-Aug-12 LTIAD - EPS
23-Aug-12 LTIAD - TSR
23-Aug-12 LTIAD - OR
10-Oct-12
STIAD
STIAD
R J
Stephens
10-Oct-12
22-Nov-10 LTIAD - EPS
22-Nov-10 LTIAD - TSR
22-Aug-11 LTIAD - EPS
22-Aug-11 LTIAD - TSR
23-Aug-12 LTIAD - EPS
23-Aug-12 LTIAD - TSR
23-Aug-12 LTIAD - OR
28-Sep-11 STIAD
28-Sep-11 STIAD
STIAD
10-Oct-12
STIAD
10-Oct-12
FoRmER ExECuTIvES
D M
O'Toole
22-Nov-10 LTIAD - EPS
22-Nov-10 LTIAD - TSR
22-Aug-11 LTIAD - EPS
22-Aug-11 LTIAD - TSR
23-Aug-12 LTIAD - EPS
23-Aug-12 LTIAD - TSR
23-Aug-12 LTIAD - OR
28-Sep-11 STIAD
28-Sep-11 STIAD
10-Oct-12
STIAD
10-Oct-12
STIAD
22-Nov-10 LTIAD - EPS
22-Nov-10 LTIAD - TSR
22-Aug-11 LTIAD - EPS
22-Aug-11 LTIAD - TSR
23-Aug-12 LTIAD - EPS
23-Aug-12 LTIAD - TSR
23-Aug-12 LTIAD - OR
28-Sep-11 STIAD
28-Sep-11 STIAD
L J
Cooper
-
-
-
-
45,672
45,672
45,672
-
-
25,746
25,746
-
-
45,672
45,672
45,672
25,373
25,373
62,090
62,090
62,090
29,851
29,851
-
-
-
-
45,672
45,672
45,672
-
-
25,746
25,746
-
-
-
-
-
-
-
-
-
53,922
53,922
41,969
41,969
-
-
-
25,436
25,436
-
-
68,627
68,627
55,959
55,959
-
-
-
60,448
60,448
60,448
33,612
33,612
-
-
-
-
33,582
33,582
49,020
49,020
38,154
38,154
-
-
-
-
-
-
-
45,686
45,686
45,687
22,529
22,529
-
-
-
-
-
-
-
-
-
(25,436)
-
-
-
-
-
-
-
-
-
-
(30,000)
-
-
-
-
-
-
-
-
-
-
-
-
(25,436)
-
-
-
(68,627)
(68,627)
-
-
-
-
-
(33,612)
-
-
-
-
-
-
-
-
-
-
(22,529)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(30,224)
(30,224)
(30,224)
-
(33,612)
(33,582)
(33,582)
(14,216)
(14,216)
(19,077)
(19,077)
(45,686)
(45,686)
(45,687)
-
-
(22,529)
53,922
53,922
41,969
41,969
45,672
45,672
45,672
-
25,436
25,746
25,746
17,442
17,442
45,672
45,672
45,672
25,373
25,373
-
62,090
62,090
62,090
29,851
29,851
53,922
53,922
41,969
41,969
45,672
45,672
45,672
-
25,436
25,746
25,746
-
-
55,959
55,959
30,224
30,224
30,224
-
-
-
-
34,804
34,804
19,077
19,077
-
-
-
-
-
1.14
0.94
2.93
1.28
3.29
2.06
3.29
3.44
2.99
3.54
3.46
2.93
1.28
3.29
2.06
3.29
3.54
3.46
3.44
3.29
2.06
3.29
3.54
3.46
1.14
0.94
2.93
1.28
3.29
2.06
3.29
3.44
2.99
3.54
3.46
1.14
0.94
2.93
1.28
3.29
2.06
3.29
3.44
2.99
3.54
3.46
1.14
0.94
2.93
1.28
3.29
2.06
3.29
3.44
2.99
-
-
-
-
-
-
-
-
3.40
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100.00
-
-
-
-
-
-
-
-
-
-
3.50
100.00
-
-
-
-
-
-
-
-
-
-
-
-
3.40
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100.00
-
-
-
4.50
100.00
4.50
100.00
-
-
-
-
-
-
-
-
-
-
3.40
100.00
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3.40
100.00
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50.00
50.00
50.00
-
100.00
100.00
100.00
29.00
29.00
50.00
50.00
100.00
100.00
100.00
-
100.00
-
-
-
-
150
94
150
-
-
91
89
-
-
150
94
150
90
88
-
204
128
204
106
103
-
-
-
-
150
94
150
-
-
91
89
-
-
-
-
199
125
199
-
-
119
116
-
-
-
-
150
94
150
-
-
- 30-Sep-13 31-Dec-14
- 22-Nov-13 31-Dec-14
31-Dec-15
- 30-Jun-14
- 30-Jun-14
31-Dec-15
- 23-Aug-15 31-Dec-16
- 23-Aug-15 31-Dec-16
- 23-Aug-15 31-Dec-16
- 28-Sep-12 1-Oct-14
- 28-Sep-13 1-Oct-14
- 10-Oct-13
- 10-Oct-14
- 30-Jun-14
10-Oct-13
10-Oct-14
31-Dec-15
- 30-Jun-14
31-Dec-15
- 23-Aug-15 31-Dec-16
- 23-Aug-15 31-Dec-16
- 23-Aug-15 31-Dec-16
- 10-Oct-13
10-Oct-13
- 10-Oct-14
10-Oct-14
-
1-Jan-13
1-Jan-13
- 23-Aug-15 31-Dec-16
- 23-Aug-15 31-Dec-16
- 23-Aug-15 31-Dec-16
- 10-Oct-13
10-Oct-13
- 10-Oct-14
10-Oct-14
- 30-Sep-13 31-Dec-14
- 22-Nov-13 31-Dec-14
31-Dec-15
- 30-Jun-14
- 30-Jun-14
31-Dec-15
- 23-Aug-15 31-Dec-16
- 23-Aug-15 31-Dec-16
- 23-Aug-15 31-Dec-16
- 28-Sep-12 1-Oct-14
- 28-Sep-13 1-Oct-14
- 10-Oct-13
- 10-Oct-14
10-Oct-13
10-Oct-14
- 30-Sep-13 31-Dec-14
- 22-Nov-13 31-Dec-14
- 30-Jun-14
31-Dec-15
- 30-Jun-14
31-Dec-15
99 23-Aug-15 31-Dec-16
62 23-Aug-15 31-Dec-16
99 23-Aug-15 31-Dec-16
- 28-Sep-12 1-Oct-14
100 28-Sep-13 1-Oct-14
119 10-Oct-13
10-Oct-13
116 10-Oct-14
10-Oct-14
16 30-Sep-13 31-Dec-14
13 22-Nov-13 31-Dec-14
56 30-Jun-14
31-Dec-15
24 30-Jun-14
31-Dec-15
150 23-Aug-15 31-Dec-16
94 23-Aug-15 31-Dec-16
150 23-Aug-15 31-Dec-16
- 28-Sep-12 1-Oct-14
67 28-Sep-13 1-Oct-14
-
9,116
1,168
1 The value of Rights granted in the year is the fair value independently calculated at grant date using an expected outcome model, this was consistent with
the Monte-Carlo simulation conducted in the prior year and resulted in similar outcomes. This amount is progressively expensed over the vesting period.
3,204,653 2,944,244
(782,833)
(417,622)
4,948,442
DIreCtorS’ report | aurIZon
47
5. Remuneration governance
The Board takes an active role in the governance
and oversight of Aurizon’s remuneration policies
and practices. The Committee (details of which
are set out on pages 25, 51 and 52 of the Annual
Report) assists the Board in relation to Aurizon’s
remuneration framework.
The Committee seeks to ensure that Aurizon strikes
a balance between the ability to compete for
talent and the need to ensure that remuneration
arrangements are reasonable, appropriate,
understandable and aligned with shareholder
interests. In addition, the Committee undertakes
functions delegated to it by the Board including
consideration and approval of the annual
remuneration program and all aspects of the short
and long term incentive awards. The Committee’s
Charter is available on the Aurizon website
(aurizon.com.au).
The Committee is independent of management
and obtains advice from independent experts
as necessary. To assist in performing its duties
and making recommendations to the Board,
the Committee seeks independent advice from
external consultants on various remuneration
related matters. The Committee is satisfied that
advice received was free from any undue influence
as the Committee follows protocols around the
engagement and use of external remuneration
consultants to ensure compliance with relevant
legislation. All remuneration recommendations are
provided by the external consultant directly to
the Committee.
During Financial Year 2013, the Committee
engaged jws Consulting to provide “remuneration
recommendations” regarding KMP remuneration
and jws Consulting were paid $45,034 for these
services. In addition, the Committee sought advice
in relation to remuneration related issues from
Egan Associates, Ernst & Young, jws Consulting
and Towers Watson which did not constitute a
“remuneration recommendation” regarding KMP.
Aurizon received 83% of “For” votes on its
remuneration report for Financial Year 2012.
The Board considers that 17% is an unacceptably
large proportion of shareholders who did not
support Aurizon’s remuneration report. Although
the many changes referred to throughout
this report were not made in order to elicit
a stronger vote, the Board’s objective is the
continual improvement and transparency of the
remuneration approach and enhancement of
alignment to shareholders will be considered more
positively this year and in the years ahead.
5.1 Changes to Executive Remuneration
components for Financial Year 2014
5.1.1 2013 Remuneration Framework review
As Aurizon is now in its third financial year
following the IPO of its securities, the Board
undertook a review during the year of various
aspects of Aurizon’s remuneration and, in
particular, its remuneration framework in the
context of both:
> ensuring that the remuneration framework is
motivating our people to achieve the strategic
objectives of the Company
feedback received from shareholders.
>
The Board concluded that, in general, the
remuneration framework is operating effectively.
It has, however, determined to implement the
following enhancements:
> STIA deferral and ‘Claw back’: Following the
termination of the STIA Deferral (“STIAD”)
there will no longer be any part of STIA subject
to deferral, unless the Board expressly decides
to defer what would otherwise be paid in cash.
The STIAD was established as an interim
arrangement which was introduced on IPO
until awards under the LTIA became eligible
for testing. The Board believes that deferral
of a portion of the STIA is desirable in order
to align our short term rewards with medium
term shareholder wealth. Accordingly, the
Board has determined that a portion (40%)
of any STIA for the MD & CEO as well as the
KMP will be awarded in rights to shares and
deferred for a period of one year. This will be
introduced over a two year period, viz, 20%
in Financial Year 2014, increasing to 40% in
Financial Year 2015. The Board will also have
the ability to ‘claw back’ the deferred portion
of the award under the STIA in the event of
material financial misstatement. Overall STIA
opportunity levels, as a percentage of fixed
remuneration, have not changed.
> Importance of operating Ratio improvement:
as foreshadowed last year, the Board
introduced a third performance condition
to the 2012 LTIA, requiring a reduction
in Aurizon’s Operating Ratio. The Board
considered the three metrics applicable to the
LTIA, and continues to consider Operating
Ratio to be an appropriate metric as it focuses
management on world’s best cost to revenue
ratio. Additionally, the Board continues to
consider EPS growth and relative TSR growth
to be appropriate performance hurdles as
they focus Executives on increasing
shareholder wealth.
However, given the importance to Aurizon’s
future success of reducing its Operating Ratio
to 75% in respect of Financial Year 2015, the
Board determined to increase the proportion
of the LTIA that is subject to the Operating
Ratio performance hurdle to 50%, with a 25%
proportion applied to each of the other two
performance hurdles of the LTIA.
> Policy on exercise of Board discretion: The
Board is cognisant of stakeholder concerns
about how the company has taken into
account one-off items when assessing
performance outcomes over the past
three years. During the year, the Board adopted
a policy that it will not, in general, adjust
performance targets under the Company’s
incentive plans. The Board does, however,
reaffirm that in order to ensure the efficacy
of its incentive plans; it retains discretion
to vary performance hurdles in exceptional
circumstances. While the Board does not intend
to exercise this discretion as a rule, it may
exercise it in circumstances where an event,
with either a positive or negative effect on
the relevant performance hurdle, is beyond
the control of management and is one that
the Board does not consider would have been
reasonable for management to have foreseen
and mitigated.
> Impact of share buy-back on EPS: The
Board considered the effect of the buy-back
undertaken by the Company in late 2012
in the context of its policy described above
and its impact on the calculation of the EPS
performance hurdle for the LTIA. The Board
determined that, consistent with its policy and
the approach of a number of other companies,
it will not adjust the EPS performance hurdle to
exclude the effect of the buy-back in respect of
the 2010 and 2011 LTIA. However, in respect
of the 2012 LTIA, the Board determined
that exceptional circumstances exist such
that it considers it appropriate that the EPS
performance hurdle be adjusted to exclude
the full effect of the buy-back (i.e. transaction
costs and the reduction in the number of shares
on issue). This was on the basis that, as the
buy-back was effected at around the time of
the 2012 LTIA grant, the Board did not consider
it appropriate for the buy-back to effectively
deliver a ‘windfall gain’ to Executives.
48
annual report 2012–13
Directors’ Report (continued)
Remuneration Report
5.1.2 Executive Remuneration components for Financial Year 2014
Fixed Remuneration
STIA
LTIA
Fixed Remuneration amounts: Analysis of fixed remuneration market movements reveals that many companies
are freezing Executive’s remuneration and some are decreasing fixed remuneration both for incumbents and new
appointments. The Board has decided there will be no increase for Aurizon Executives, which includes the MD & CEO,
the KMP and direct reports to the KMP.
It should be noted that between IPO and the end of Financial Year 2014 (a 4 year period), the MD & CEO will have
received one increase in fixed remuneration which occurred on 1 July 2012.
Section 3.1.2: Fixed Remuneration, provides further detail in relation to the fixed remuneration component of the
Executive remuneration.
Target Percentages: Analysis of movements in target STIA as a percentage of fixed remuneration show that Aurizon’s
target percentages are at, or close to, market median and the Board has approved no change to the target percentages
for Financial Year 2014.
STIA deferral and ‘Claw back’: The introduction of STIA deferral will allow for Aurizon’s policy on ‘claw back’ to be
activated should the need arise. After analysing market trends the Board approved the phased introduction of STIA
deferral from Financial Year 2014. In relation to the MD & CEO and KMP, the Board approved the provision of 40% of
STIA (if any) in the form of rights to shares, which vest on the first anniversary of payment of the cash component, to be
introduced over two years, viz, 20% in Financial Year 2014 increasing to 40% in Financial Year 2015.
STIA Conditions: Aurizon’s STIA conditions for Financial Year 2014 will remain unchanged and will include Underlying
EBIT, Safety, Transformation and ROIC.
STIA Hurdles: Aurizon’s STIA targets for Financial Year 2014 are commercially sensitive. In relation to EBIT, Safety and
ROIC it is safe to assume increases of between 10% and 15% above Financial Year 2013 actuals depending on the
measure. In relation to Transformation, the Board has identified a number of areas which will determine whether Aurizon
continues to transform and targets have been set in respect of each.
Section 3.1.3: Short Term Incentive Award, provides further detail in relation to the STIA component of the Executive
remuneration.
Target Percentages: Similarly, the value of the LTIA as a percentage of fixed remuneration remains in line with market
practices and the Board has approved no change to those percentages.
LTIA Conditions: Aurizon’s 2013 LTIA conditions will remain unchanged and will include Operating Ratio improvements,
relative TSR performance and EPS growth.
LTIA Hurdles: Aurizon’s 2013 LTIA targets are provided in Section 3.1.4: Long Term Incentive Award, along with further
detail in relation to the LTIA component of the Executive remuneration.
CORPORATE GOVERNANCE STATEMENT | AURIZON
49
Corporate Governance Statement
Details of Directors’ skills, experience and
expertise are disclosed on pages 22 to 24 of
the Annual Report.
The Board’s composition is determined by the
Company’s Constitution and the principles set out
in the Board Charter, Diversity Policy and Selection,
Appointment and Re-election of Non-Executive
Director Policy.
In summary, the Board composition principles are
as follows:
> A majority of Directors are to be Independent,
Non-Executive Directors
> There are to be a minimum of three Directors
> There must be at least one female Director
> The roles of Chairman and that of MD & CEO
must be held by separate persons
> The Chairman must be an Independent
Non-Executive Director
> The Board as a whole should comprise a range
and mix of skills and experience
> The principles of diversity are to be embraced
In the absence of special circumstances
>
or a contrary decision by the Board,
a Non-Executive Director must retire (or stand
for re-election annually) at the next Annual
General Meeting (AGM) held after that
Director has served nine years or more on
the Board, calculated from the date of the
Director’s first election to the Aurizon Board.
The Company’s Constitution provides a maximum
Board size of 10 Directors. The Board conducts an
annual review of its composition and performance
and more frequently as required.
In operating its portfolio of above and below rail
and road transport assets, the business objectives
of Aurizon Holdings Limited and the entities it
controls (Aurizon Holdings or the Company),
is to create sustainable value growth for its
shareholders by:
> Raising performance of the Company’s
operations to ‘best in class’ levels
> Maximising the Company’s share of the strong
underlying growth within core markets through
innovative customer-focused solutions
> Seeking out profitable new growth
opportunities in existing and adjacent markets.
Fundamental to the long-term success of Aurizon
Holdings’ business objective is a commitment
to achieving and demonstrating the highest
standards of corporate governance.
The Board is committed to pursuing its business
objectives in a manner which is consistent with the
highest standards of corporate governance and,
in so doing, to embed, promote and foster high
standards of corporate integrity, transparency and
ethical standards in all its activities.
This Statement sets out Aurizon Holdings’
corporate governance practices as at 30 June 2013.
Since listing on the Australian Securities Exchange
(ASX) on 22 November 2010, the Company has
complied with all of the Corporate Governance
Principles and Recommendations released by the
ASX Corporate Governance Council.
Further information regarding the Company’s
corporate governance and Board practices,
including copies of the Company’s Constitution,
Charters and key corporate governance documents
referred to in this Statement, are available in the
Corporate Governance section of the Company’s
website, aurizon.com.au. These documents are
reviewed regularly to address any changes in
governance practices and changes to the law.
Any additional key corporate governance
documents that may be adopted by the Company
during the year will also be made available via
the Company’s website at, or about the time they
are adopted.
The Board of Directors
The Board is responsible for the overall
stewardship, strategic direction, governance and
performance of Aurizon Holdings.
The Company’s Constitution empowers the Board
to conduct the business of the Company and also
enables the Board to delegate authority to Board
Committees and/or the MD & CEO.
The Board operates under a Charter which sets out
the responsibilities of the Board and also the roles
of the Chairman, individual Directors, the MD &
CEO and the Company Secretary.
The key functions and responsibilities reserved to
the Board include:
> The appointment of the MD & CEO and reports
> Approval of the overall Company strategy
> Approving annual budgets
> Approving and monitoring the framework on
governance, safety and risk management
> The succession and remuneration of the Board
and senior Executives.
The roles and responsibilities of Directors are also
formalised in the letter of appointment which
each Director receives and commits to on their
appointment.
The letters of appointment also specify the time
commitment envisaged, expectations in relation
to committee work, remuneration arrangements,
induction processes and details of the Company’s
key governance policies, such as the Securities
Dealing Policy.
Board Membership and Size
The Board currently comprises nine Directors,
including a Non-Executive Chairman, seven
Non-Executive Directors and the MD & CEO.
The Chairman, MD & CEO, and five of the
Non-Executive Directors were appointed on
the date of incorporation of Aurizon Holdings
(14 September 2010). Two of the Non-Executive
Directors were appointed on 19 April 2012.
The Board comprises Directors who bring with
them a range of skills, expertise and experience
in finance, human resources, engineering,
transportation and heavy industry, mining and
resources, strategy, governance, risk management
and government. The Board is skills-based and all
of the Non-Executive Directors are independent.
50
ANNUAl REPORT 2012–13
Corporate Governance Statement
(continued)
The Board considers materiality thresholds on
a case-by-case basis, if required. Each Director
confirms their independence at each Board
meeting and the Board as a whole assesses
Directors’ independence regularly. The Board
has confirmed the independence of all
Non-Executive Directors.
All Directors must declare actual or potential
conflicts of interest and excuse themselves from
discussions on issues where they may have an
actual or potential conflict of interest.
In circumstances where a conflict is believed to
exist, the Director concerned will not take part
in any decision or consideration of the issue.
In addition, the Director will not receive copies
of the relevant Board papers.
A Related Party Transactions Policy and Procedure
operates in the Company. This policy further
refines the procedure for identifying, disclosing
and, as required, seeking approval of related
party transactions.
Tenure and Retirement
To promote demonstrable independence, the
Company has in place a tenure policy for Directors
which provides that, in the absence of special
circumstances or a decision made otherwise by
the Board, a Non-Executive Director must retire
(or stand for re-election annually) at the next
AGM which is held after a Director has served nine
years or more on the Board from the date of their
first election to the Aurizon Board.
In accordance with the Company’s Constitution
and ASX Listing Rules, a Non-Executive
Director who wishes to continue in their role as
Non-Executive Director must seek re-election by
shareholders at a general meeting.
Director Independence
In accordance with the Board Charter the majority
of Directors are independent. Only the MD & CEO
is not considered independent, by virtue of being
an Executive of the Company.
The Board Charter provides that an independent
Director is a Non-Executive Director who is not a
member of management and whom the Board
considers independent, having regard to the
following guidelines, without limitation:
> The Director is not a substantial shareholder
of the Company or an officer of a substantial
shareholder of the Company. The Director has
not, within the past three years, been employed
by the Company in an executive capacity, or
in the past three years, been a principal or
employee of a material professional adviser or
consultant of the Company
> The Director has not been a material supplier
or customer of the Company, or otherwise been
associated directly or indirectly with a material
supplier or customer of the Company, where
materiality as a customer of the Company
refers to payments of more than 2% of
the Company’s total consolidated revenue
accumulated over the Company’s past financial
year, and in relation to materiality as a
supplier, to payments that are the greater of
either $250,000 or 2% of total consolidated
revenue accumulated over the supplier’s past
financial year
In the absence of special circumstances or a
contrary decision by the Board, the period of
office held by the Director is not more than
nine years, calculated from the date of the
Director’s first election
>
> The Director is free from any interest or
relationship which could, or could reasonably
be perceived to materially interfere with the
Director’s ability to act in the best interests of
the Company.
If a Director does not meet these guidelines, it is
not conclusive that the Director is independent.
The decision as to whether a Director is
independent is a decision made by the Board.
Chairman
John Prescott AC, an Independent Non-Executive
Director, has been Chairman of the Company
since September 2010. The role of the Chairman
is clearly set out in the Board Charter. It includes
chairing meetings, providing Board leadership and
promoting a respectful, consultative relationship
between Board and management, as well as
maintaining relationships with key stakeholders.
Company Secretary
The Company Secretary is accountable to the
Board for facilitating the Company’s corporate
governance processes. Each Director is entitled
to access the advice and services of the
Company Secretary.
In accordance with the Company’s Constitution,
the appointment or removal of the Company
Secretary is a matter for the Board as a whole.
Details of the Company Secretary’s experience
and qualifications are set out on page 24 of the
Annual Report.
Board Process
Formal Board meetings are held at least nine
times during the year. In addition to these formal
meetings, the Board schedules off-site meetings
dedicated to strategy and site visits of the
Company’s operations.
The Board also holds supplementary meetings
to address financial updates and any significant
matters that may arise.
Details of Board and Committee meetings
held during the year, and attendances at those
meetings, are set out in the Annual Report on
page 25.
Each formal Board meeting considers various
matters including, but not limited to, the MD &
CEO’s Report, the Aurizon Holdings Group Monthly
Performance Report and a Workplace Health and
Safety Report. Periodic reports are also provided
on diversity, governance and compliance,
as well as submissions on the items specified
in the Board Charter. At the end of each Board
meeting, the Non-Executive Directors meet
without management.
CORPORATE GOVERNANCE STATEMENT | AURIZON
51
Each Committee is chaired by a Non-Executive
Director and comprises a majority of Independent
Non-Executive Directors.
Each Committee is governed by its own Charter
which is reviewed annually.
Details of the membership of each of the
Committees, including the names and
qualifications of the Committee members are
set out on pages 22 to 24 of the Annual Report.
Audit, Governance & Risk
Management Committee
The Audit, Governance & Risk Management
Committee assists the Board by reviewing and
monitoring the integrity of Aurizon Holdings’
financial reporting systems, as well as governance,
risk management, internal control structures and
compliance systems.
Under the Audit, Governance & Risk Management
Committee’s Charter there must be at least three
members of the Committee, all of whom must be
Independent, Non-Executive Directors, and the
Chair of the Committee must not be the Chairman
of the Board. Currently, the Committee consists of
four members that are all (including the Chairman)
Independent Non-Executive Directors.
In addition to the Audit, Governance & Risk
Management Committee members, the MD
& CEO, CFO, Chief Internal Auditor, external
auditors and Company Secretary regularly attend
Audit, Governance & Risk Management
Committee meetings.
The Chief Financial Officer (CFO) and Company
Secretary are present at all Aurizon Holdings Board
meetings and other senior Executives attend from
time to time at the invitation of the Board or
when a matter under their responsibility is being
considered. In accordance with the Board Charter,
Directors may also access senior management
at any time through the Chairman, MD & CEO or
Company Secretary.
To provide due consideration of items for
discussion and/or decision, Board and Committee
Papers are distributed five business days prior to
each meeting. The Company continues to deliver
Board and Committee Papers electronically, as part
of the Company’s commitment to governance
excellence and innovation.
Director Induction and Ongoing
Education
An induction process including appointment letters
and ongoing education exists to promote early,
active and relevant involvement of new members
of the Board.
All Aurizon Holdings Directors are members of the
Australian Institute of Company Directors (AICD)
and are encouraged to further their knowledge
through participation in industry, governance and
government forums, and attend seminars hosted
by the AICD and other peak professional bodies.
In addition to peer review, interaction and
networking with other Directors and industry
leaders, Aurizon Holdings’ Directors participate,
from time to time, in Aurizon Holdings’ leadership
forums and actively engage with Aurizon Holdings
employees by visiting Aurizon Holdings operations
to gain an understanding of operational employee
requirements, challenges and issues.
Directors are encouraged and given the
opportunity to broaden their knowledge of the
business by visiting offices in different locations.
During the year, Directors conducted site visits in
Western Australia and regional Queensland.
Independent Advice and Access
to Information
A process is in place whereby Directors, either
collectively or individually, may seek independent
professional advice where it is considered
necessary to fulfil their duties and responsibilities.
This is done at Aurizon Holdings’ expense.
A Director wishing to seek such advice must
obtain the approval of the Chairman.
Board Committees
During the year, four Committees operated to
assist the Board in performing its responsibilities.
Those Committees were:
> Audit, Governance & Risk Management
Committee (formerly called Audit & Risk
Management Committee)
> Remuneration, Nomination & Succession
Committee (formerly called Remuneration &
Succession Committee)
> Governance & Nomination Committee
(dissolved effective 21 May 2013)
> Safety, Health & Environment Committee
(formerly called Safety & Environment
Committee).
On 21 May 2013, following an evaluation,
the Board resolved to dissolve the Governance
& Nomination Committee and transfer the
governance functions of that Committee to the
Audit & Risk Management Committee (which
was renamed the Audit, Governance & Risk
Management Committee) and the nomination
functions to the Remuneration & Succession
Committee (which was renamed the Remuneration,
Nomination & Succession Committee). Mr J Atkin,
whom was formerly Chair of the Governance
& Nomination Committee, replaced Ms AJP Staines
as Chairman of Aurizon Network Pty Limited.
Ms AJP Staines was appointed to the
Remuneration, Nomination & Succession
Committee and resigned as Non-Executive Director
and Chairman of Aurizon Network Pty Limited.
Mr J Atkin and Mr GT Tilbrook were appointed
to the Remuneration, Nomination & Succession
Committee. The Safety & Environment Committee
was renamed the Safety, Health & Environment
Committee and Mr GT John AO was replaced by
Mrs KL Field as the Committee’s Chairman.
52
ANNUAl REPORT 2012–13
Corporate Governance Statement
(continued)
Remuneration, Nomination &
Succession Committee
The Remuneration, Nomination & Succession
Committee assists the Board by reviewing and
providing recommendations to the Board on the
recruitment, retention and remuneration of the
MD & CEO, and senior Executives, as well as the
performance measurement arrangements for
Directors, the MD & CEO and senior Executives.
Under the Remuneration, Nomination & Succession
Committee’s Charter there must be at least three
members of the Committee, a majority of whom
must be Independent, Non-Executive Directors,
and the Chair of the Committee must be an
Independent Non-Executive Director. Currently,
the Committee consists of five members that
are all (including the Chairman) Independent
Non-Executive Directors.
Governance & Nomination Committee
As stated above, the Governance & Nomination
Committee was dissolved on 21 May 2013.
Up until its dissolution on 21 May 2013 the
Committee assisted the Board by reviewing and
making recommendations on the governance
framework, policies and compliance, as well as
on Board appointments, succession, diversity,
composition and performance.
The nomination function is now carried out by
the Remuneration, Nomination & Succession
Committee and the governance function is now
carried out by the Audit, Governance & Risk
Management Committee.
In accordance with its Charter, the Governance
& Nomination Committee consisted of at least
three Board members. The Committee consisted
of four members, including three Independent,
Non-Executive Directors. The Chairman of
the Committee was an Independent
Non-Executive Director.
Safety, Health & Environment
Committee
The Safety, Health & Environment Committee
assists the Board by reviewing and making
recommendations to the Board on safety, health
and environmental performance, strategies,
policies and compliance.
Under its Charter, the Safety, Health &
Environment Committee is to consist of at
least three Board members. The Committee
currently consists of five members, including
four Independent, Non-Executive Directors.
The Chairman of the Safety, Health &
Environment Committee is an Independent,
Non-Executive Director.
Aurizon Network Board
Aurizon Network Pty Ltd (Aurizon Network) is
a wholly-owned subsidiary of Aurizon Holdings
and operates the below rail business of Aurizon
Holdings. Aurizon Network is subject to ring-
fencing obligations under the Queensland
Competition Authority Act 1997 (Qld) and the
access undertakings it provides to the Queensland
Competition Authority from time to time.
Additional governance requirements operate
to ensure that Aurizon Network’s ring-fencing
obligations are met.
A majority of Aurizon Network Directors are
required to be independent. The Aurizon Network
Board is currently comprised of five Directors,
including three Independent Non-Executive
Directors. The Network Board Charter is available
on the Aurizon Holdings website.
Throughout the year the Chairman of the Aurizon
Network Board remained an Independent
Non-Executive Director.
Board and Committee Performance
Evaluation
A performance review is undertaken annually in
relation to the Board and the Board Committees.
In addition to individual evaluation sessions
between the Chairman and individual Directors,
a formal self-evaluation questionnaire is used to
facilitate the annual performance review process.
During the year the annual review of the position
of the Chairman of the Board was facilitated by
the Chairman of the former Governance &
Nomination Committee.
During the year, a review and evaluation of
the performance of the Board, the Chairman,
each Director and each Board Committee was
conducted in accordance with the process
described above.
As part of its ongoing responsibilities, the Board
actively focuses on strategy development, the
development of talent and Executive succession,
and engagement in the Company’s operations by
undertaking site visits.
Management Performance Evaluation
A key function of the Board is to monitor the
performance of management according to the
strategies and objectives decided by the Board.
The Board sets the financial, operational,
management and individual targets of the MD &
CEO annually. The MD & CEO (in consultation with
the Board) sets targets for his direct reports.
Performance against these targets is assessed
periodically throughout the year. Performance
evaluations for senior management have been
completed for the year end and details of the
process followed are set out in the Remuneration
Report within the Annual Report.
The Board, together with the Remuneration,
Nomination & Succession Committee, reviews
the performance of the MD & CEO and Executive
Committee members and Company Secretary.
Further details are set out in the Remuneration
Report within the Annual Report.
CORPORATE GOVERNANCE STATEMENT | AURIZON
53
Non-Executive Directors are paid fixed fees for
their services in accordance with the Company’s
Constitution. Fees paid are a composite fee
(covering all Board and Committee responsibilities)
and any contributions by Aurizon Holdings to
a fund for the purposes of superannuation
benefits for a Director. No other retirement
benefits schemes are in place in respect to
Non-Executive Directors.
Senior Executive and Non-Executive
Director Share Holding and
Retention Policy
The Company has in place a share holding and
retention policy which applies to Non-Executive
Directors, the MD & CEO and the direct reports of
the MD & CEO. It provides that within six years of
the date of listing of the Company or appointment
(whichever is the later date):
> Non-Executive Directors are expected to
accumulate and maintain one year’s worth
of Directors’ fees of shares in the Company
(to be calculated with reference to the total
fees paid during the period divided by the
number of years)
> The MD & CEO is expected to accumulate
and maintain one year’s worth of Fixed
Remuneration in shares in the Company
(to be calculated with reference to the total
Fixed Remuneration paid during the period
divided by the number of years)
> The MD & CEO’s direct reports are expected to
accumulate and maintain 50% of one year’s
worth of Fixed Remuneration in shares in the
Company (to be calculated with reference to
the total Fixed Remuneration paid during the
period divided by the number of years).
Further information on remuneration is disclosed
on pages 28 to 48 in the Remuneration Report
within the Annual Report.
Code of Conduct
The Company recognises the critical importance of
integrity, honesty and fairness in its dealings.
Aurizon Holdings has adopted and continues to
promote its Company values, which are:
> Safety – Safety of ourselves and others is our
number one priority.
> Integrity – We are honest and fair and conduct
business with the highest ethical standards.
> Leadership, Passion and Courage – We are
passionate about leading change. We deliver
results with energy and conviction.
> World Class Performance – We deliver world
class performance and superior value for our
shareholders, customers and staff.
These values shape how Aurizon Holdings makes
decisions, treats people, runs its business and
gets results.
Aurizon Holdings’ Code of Conduct supports the
Company’s values and provides guidance on
Company expectations with respect to compliance
with its ethical, legal and statutory obligations.
The key principles of the Code of Conduct provide
that Aurizon Holdings Group employees must:
> Be safe and fit for work
> Behave professionally
> Respect others
> Conduct themselves lawfully, ethically
and fairly
> Responsibly manage conflicts of interest
> Protect confidential information
> Use the Company’s systems, equipment,
property and tools appropriately
> Uphold securities exchange requirements
> Consider the community and the environment
> Report suspected breaches of the Code
of Conduct.
MD & CEO, Senior Management
and Delegations
The day-to-day management of the Company
and the execution of the Company’s policies and
strategies are delegated to the MD & CEO, and
through the MD & CEO to other senior Executives.
The MD & CEO and senior management have
their roles and responsibilities set out in their
employment contracts.
Delegations made by the Board and the delegation
framework supporting delegations by the MD &
CEO are reviewed annually by the Board.
Executive Management Structure
The senior executive leadership of the Company
(known as the Executive Committee) comprises the
MD & CEO and his direct reports.
The role of the Executive Committee is to provide
the MD & CEO with support and assistance
in managing the Group’s performance, and
implementing the key strategic initiatives set by
the Board.
The Executive Committee supports the MD & CEO
in leading change in the Aurizon Holdings Group,
assessing risk and executing mitigation actions,
monitoring compliance with policies, developing
strategies for Board approval, assessing business
and key organisational matters, and making
recommendations on courses of action.
The Executive Committee also provides
organisational leadership to ensure alignment and
execution of corporate strategy.
Typically, the Executive Committee meets every
week and has full-day meetings once a month.
Remuneration Practices
The Company seeks to attract and retain high
performance Directors and Executives with
appropriate skills, qualifications and experience to
add value to the Company and fulfil the roles and
responsibilities required.
Executive remuneration is to reflect performance
and, accordingly, remuneration is structured
with a fixed component and performance-based
remuneration component.
54
ANNUAl REPORT 2012–13
Corporate Governance Statement
(continued)
Compliance and Assurance
Adherence to the Company’s Code of Conduct
and other policies is monitored by Aurizon
Holdings’ Internal Audit and Risk Management
teams. The Company also conducts an annual
compliance certificate process through which
business units evaluate and report to management
on their compliance with the Company’s key
legislative obligations.
An e-learning module operates to assist all Aurizon
Holdings employees to understand the Code.
This training package was recognised with an
award at the Asia Pacific Learning and Technology
Impact Awards in 2012.
Whistleblower Policy
The Company is committed to ensuring all of its
business activities are carried out in a way that is
both ethical and compliant, and also recognises
that any genuine commitment to detecting and
preventing illegal and/or improper conduct must
include a mechanism whereby employees and
others can report their concerns freely and without
fear of reprisal or intimidation. Aurizon Holdings
has in place a Whistleblower Policy that provides
such a mechanism.
The Whistleblower Policy provides guidance on
how illegal or improper conduct can be reported,
how it will be investigated and the protection
available to those acting as whistleblowers. Aurizon
Holdings has established a Whistleblower Hotline
as a means by which concerns about illegal or
improper conduct can be reported.
Political Donations
Aurizon Holdings has a policy of impartiality
with respect to party politics and does not make
donations to political parties or their members.
Diversity
Aurizon Holdings has a Diversity Policy which
sets out its objectives and reporting practices
with respect to diversity. This policy is available
on the Aurizon Holdings website. In addition,
Aurizon’s first Workplace Equality Gender report
was submitted to the Federal Government for the
reporting period 01 April 2012 – 31 March 2013.
The measurable objectives for gender diversity,
agreed by the Aurizon Holdings Board for
FY2012-13, are set out below:
> At least one female Director at all times
> The percentage of females in the Management
Leadership Team to be a minimum of 15% by
the end of FY13
> From FY12 at least 25% of future graduate
intakes to be female.
A comparative of Aurizon Holdings Group’s female
employees between 30 June 2012 and 30 June
2013 is set out below:
> 13.23% of total employees at
30 June 2013 (12.35% at 30 June 2012)
> 21% of Management Leadership
Team at 30 June 2013 (10.53% at
30 June 2012)
> 40% of graduate intake for FY2012-13
(30% for FY2011-12)
> 22% of the Board at 30 June 2013
(22% at 30 June 2012).
The Aurizon Diversity Council continues to guide
strategies and sponsors initiatives to create a
more inclusive and innovative culture – one
that aligns to our Aurizon Diversity Policy and
supports our strategic objectives. This work is
undertaken with the leadership team through the
implementation and ongoing evaluation of a
two-year diversity plan underpinned by the
Council’s four key objectives:
1. Attract and recruit a more diverse workforce
2. Develop and grow target groups to ensure
we retain and progress them through the
leadership pipeline
3. Hold leaders responsible and accountable for
their commitments and actions
4. Drive an understanding and acceptance of the
need and value of a diverse workforce.
During the financial year, the Diversity Council
successfully established various nationwide
initiatives including:
> Diversity Action Plans in place for each
functional leadership team. These plans
identify key actions the leadership team are
committed to achieving in several aspects
of work, whether it is promoting inclusive
behaviours in management, recruitment targets
and equitable development opportunities, or
promoting flexible work options
> A strategic plan was developed to focus on
Aboriginal and Torres Strait Islander initiatives
and actions to be undertaken to strengthen
community connections and increase
indigenous employment at Aurizon
> The inaugural Aurizon Women’s Conference
was launched. 400 women attended a full
day of internal and external speakers, panel
discussions and workshops
> Leadership teams have previously undertaken
development in addressing unconscious bias.
This development has now been cascaded
down to next-level management. This is
specifically to raise awareness of how ingrained
stereotypes can affect decision-making in
many ways, whether it be decisions regarding
selection, development and/or promotion
> Regional/Interstate Women’s Forums is a new
initiative with forums held twice a year to focus
on specific issues impacting on Aurizon women.
In addition, we connect with women from
local Women’s Refuges, Resource Centres and
Women Advisory Councils
> A new rotation program for women sponsored
by the MD & CEO. Over a four-month period
each selected woman, as an Associate
Executive Officer, will experience the highest
level of the Company in issues management,
strategic direction and shareholder
engagement
> A new Senior Development Program was
also launched in 2013. The opportunity is for
women to be seconded as an Executive Officer
attached to an Executive Vice President or
Senior Vice President for a period of six months
to gain development experience that prepare
them for senior level roles
CORPORATE GOVERNANCE STATEMENT | AURIZON
55
> Transition to Operations Program is a new
program to provide on-the-job training and
in-depth experience to identified Aurizon
women wanting to make a career transition
to an operational role. The program plans
to broaden their skill base and fast-track
development required to take up an operational
role by the end of the 18-month program
> Aurizon’s formal mentoring approach for
women was launched in 2013 comprising
three key elements: a self-paced, 12 week
mentoring program; ‘Mentoring Circles’ with
male and female senior mentors’; and one
on-one mentoring with internal and external
executive mentors
> The annual Aurizon International Women’s
Day lunch was held with 320 guests including
external women from local high schools,
universities and Indigenous community groups
> An initiative that has arisen from the
Diversity Council’s Indigenous Strategy is
Cultural Awareness Training. The purpose of
these sessions is to enhance participant’s
understanding of the issues and perspectives of
working in a cross-cultural setting and provide
hands-on strategies to use in such situations
> Several times a year, as part of its succession
planning process, Aurizon works through what
is called an Organisational People Inventory
(OPI) with each of the functional leadership
teams. A ‘diversity lens’ has been applied to
this process so that it is an up-front discussion
with leaders about the diversity of their teams.
Corporate Responsibility Statement
Aurizon Holdings recognises that acting
responsibly, operating in a sustainable manner and
making a positive contribution to society is vital
to our ongoing business success. We adhere to the
following principles:
Safety
> Safety for ourselves and others is our number
one priority
> We work with our people, customers and
suppliers to create and maintain a safe
workplace
> We have comprehensive safety policies and
are committed to our target of ZEROHARM.
Community
> We support the communities in which we
work through community investment and
engagement programs
> We are part of the community and we are
here for the long term.
People
> We are committed to promoting a
nondiscriminatory, diverse, inclusive, respectful
and collaborative business
> We promote equal employment opportunity
in our recruitment, selection and employment
practices
> We are committed to the ongoing education
and training of our people.
Performance
> We strive to deliver world-class performance
and superior value for our customers
> We deliver results with energy and conviction
> We commit to delivering outstanding corporate
performance and returns to our shareholders.
Integrity
> We adhere to our Code of Conduct
> We are honest and fair, and conduct business
with the highest ethical standards
> We adhere to high standards of corporate
governance and report annually on our
corporate governance.
Environment
> We responsibly consider the community and
the environment in our actions and decisions
> We are committed to the efficient use of
resources, and waste minimisation
> We are committed to promoting rail as an
energy efficient mode of transport.
Details of the Company’s safety, people,
environment and community activities, and details
of the Company’s sustainability activities are set
out on pages 16 to 21 of the Annual Report.
Disclosure and Communications Policy
Aurizon Holdings’ is committed to keeping its
shareholders fully informed on all matters that are
relevant or material to its financial performance.
Aurizon Holdings has detailed policies and
procedures in place to ensure compliance with
ASX Listing Rules and Corporations Act continuous
disclosure requirements, including a Disclosure and
Communications Policy.
During the year the Company reviewed and
amended its Disclosure and Communications Policy
to ensure consistency with the ASX listing rules and
guidance note 8 on continuous disclosure, which
took effect from 1 May 2013.
In addition to complying with its disclosure
obligations under Listing Rule 3.1 by issuing ASX
announcements, Aurizon Holdings communicates
with its shareholders through its Half Year Results,
Full Year Results and Annual Report. Market
announcements made to the ASX are also made
available on the Aurizon Holdings website.
Shareholders are also given an opportunity to
ask questions of the Company at its AGM.
These policies and practices ensure that all
shareholders and investors have equal access to
Aurizon Holdings information.
Disclosure Committee
In accordance with the Company’s Disclosure
and Communications Policy, the Company has
established a Disclosure Committee.
The Disclosure Committee’s role is to consider
potentially material, price sensitive information
and determine whether that information is
required to be disclosed to the ASX.
The members of the Committee may vary from
time to time but must consist of at least two
members of the Executive Committee and a
Non-Executive Director of the Company.
In practice, the Committee has comprised the
MD & CEO, CFO, Company Secretary and Chairman
of the Board.
The Company has established guidelines to assist
officers and employees of the Company with
complying with the Company’s Disclosure and
Communications Policy, and these are available on
the Aurizon Holdings website.
56
ANNUAl REPORT 2012–13
Corporate Governance Statement
(continued)
The Non-Audit Services Policy also sets out
prohibited services which PwC may not provide
to the Company in order to maintain the
independence required to execute the role of
external auditor. In essence, this policy provides
that PwC must not provide services that have
the potential to impair, or appear to impair,
the independence of its audit role.
PwC has provided an Auditor’s Independence
Declaration in relation to its audit of the
Aurizon Holdings FY13 Financial Report.
A copy of this Declaration is set out on page 27
of the Annual Report.
Further details are set out in the Directors’ Report
on pages 22 to 48 of the Annual Report.
MD & CEO and CFO Declaration
The Board has obtained a written assurance from
the MD & CEO and CFO that the declaration
provided under section 295A of the Corporations
Act and Corporate Governance Principle 7.3 are
founded on a sound system of risk management
and internal control, and that the system is
operating effectively in all material respects
in relation to financial reporting and material
business risks.
The MD & CEO and CFO Declaration relating to
the Company’s Financial Report for the year ended
30 June 2013 was provided prior to approving and
signing the Financial Report.
Securities Dealing Policy
Aurizon Holdings is committed to ensuring the
Company and its employees act lawfully at all
times in their dealings with securities and inside
information.
The Company’s Securities Dealing Policy applies to
all Directors and employees of the Group and:
> Provides guidance on the legal restrictions on
dealing in securities
> Prescribes share trading black-out periods
(including the periods commencing 1 January
and 1 July and continuing until, and inclusive
of, the day of filing each of the Half Year and
Full Year Financial Reports respectively)
> Sets out additional limitations on trading by
Directors and Executives including a prohibition
on margin loans and hedging arrangements.
Material Business Risk Management
The Company is committed to managing risks in
an integrated, systematic and practical manner.
The overall objective of risk management is to
assist the Company to achieve its objectives
by appropriately considering both threats and
opportunities, and making informed decisions.
The Audit, Governance & Risk Management
Committee oversees the process for identifying and
managing risk in Aurizon Holdings in accordance
with the Risk Management, Compliance &
Assurance Policy (Risk Policy).
The Risk Policy, summarised below, sets out the
actions that Aurizon Holdings will undertake
to manage risk at the enterprise level and at
the business level, for each major category of
identified risks:
> Developing, implementing and maintaining
principles and processes that support the
effective management of Aurizon Holdings
compliance obligations
> Effectively managing risks and compliance
obligations, documenting risk management
and compliance activities, and providing timely
assurance to the MD & CEO and the Board
> Assessing and continuously improving the
effectiveness of the risk management and
compliance processes and controls through
training, ongoing monitoring, periodic reviews,
communication and consultation.
During the reporting period, management has
reported to the Board on the effectiveness of the
Company’s management of material business
risks. Management has confirmed that the
Company’s Risk Management, Compliance &
Assurance Framework (Framework) and Risk Policy
align with the international risk management
standard, AS/NZS ISO 31000:2009, and that the
Framework is adequate in terms of its design and
content to give effect to the Risk Policy.
Further supporting the Company’s risk
management processes, Aurizon Holdings has:
> An internal audit function that is independent
of the external auditor (described below)
> A risk register with risk profiles populated at the
various layers of the organisation
> A management specification that outlines
the processes for the prevention, detection
and management of fraud within Aurizon
Holdings, and for fair dealing in matters
pertaining to fraud
> An insurance program driven by risk
assessments that seeks to transfer risk to the
insurance market where appropriate.
Internal and External Audit
The Company has an internal audit function that
operates under an internal audit charter.
The internal audit function is independent of
management and the external auditor, and
is overseen by the Audit, Governance & Risk
Management Committee.
The Chief Internal Auditor provides ongoing
audit reports to the Audit, Governance & Risk
Management Committee, as well as an annual
assessment of the adequacy and effectiveness
of the Group’s control processes and risk
management procedures.
The external audit function is performed by
PricewaterhouseCoopers (PwC).
Aurizon Holdings has adopted a Non-Audit
Services Policy which prescribes the manner
in which Aurizon Holdings will engage PwC,
without compromising their independence as
the Company’s external auditor.
Financial Report
for the year ended 30 June 2013
ABN: 14 146 335 622
These financial statements are the consolidated
financial statements of the consolidated entity
consisting of Aurizon Holdings Limited and its
subsidiaries (“Group”). The financial statements
are presented in Australian dollars.
Aurizon Holdings Limited is a company limited by
shares, incorporated and domiciled in Australia.
Its registered office is:
Aurizon Holdings Limited
Level 17
175 Eagle Street
BRISBANE QLD 4000
A description of the nature of the consolidated
entity’s operations and its principal activities are
included in the review of operations and activities
and in the Directors’ Report, which are not part of
these financial statements.
The financial statements were authorised for issue
by the Directors on 19 August 2013. The Directors
have the power to amend and reissue the
financial statements.
All press releases, financial reports and other
information are available at our Investor Centre
on our website: aurizon.com.au
Image: Hauling coal on the Moura system, Central QLD
FINANCIAL REPORT | AURIZON
57
Consolidated income statement .........................................58
Consolidated statement of comprehensive income ...58
Consolidated balance sheet...................................................59
Consolidated statement of changes in equity ..............60
Consolidated statement of cash flows ..............................61
Notes to the consolidated financial statements ..........62
1 Summary of significant accounting policies...........62
2 Critical accounting estimates and judgements ....72
3 Financial risk management ............................................73
4 Segment information ........................................................77
5 Revenue ...................................................................................79
6 Other income ........................................................................79
7 Expenses .................................................................................79
8 Income tax expense ..........................................................80
9 Cash and cash equivalents .............................................80
10 Trade and other receivables ...........................................80
11 Inventories .............................................................................81
12 Derivative financial instruments ..................................81
13 Other assets ...........................................................................81
14 Investments accounted for using the
equity method ......................................................................81
15 Property, plant and equipment ....................................82
16 Intangible assets .................................................................83
17 Deferred tax assets .............................................................83
18 Trade and other payables ...............................................84
19 Borrowings .............................................................................84
20 Provisions ................................................................................84
21 Other liabilities .....................................................................85
22 Deferred tax liabilities .......................................................85
23 Contributed equity .............................................................86
24 Reserves ...................................................................................87
25 Dividends ................................................................................87
26 Key Management Personnel disclosures ..................88
27 Contingencies .......................................................................90
28 Commitments .......................................................................90
29 Interests in joint ventures and associates ...............91
30 Related party transactions ..............................................92
31 Deed of cross guarantee ..................................................93
32 Remuneration of auditors ...............................................95
33 Reconciliation of profit after income tax to
net cash inflow from operating activities.................95
34 Earnings per share ..............................................................95
35 Share-based payments ....................................................95
36 Parent entity financial information ............................97
37 Events occurring after the reporting period ............97
Directors’ declaration ...............................................................98
Independent auditor’s report to the members
of Aurizon Holdings Limited ..................................................99
58
annual report 2012–13
Consolidated income statement
For the year ended 30 June 2013
Revenue from continuing operations
Other income
Consumables
Employee benefits expense
Depreciation and amortisation expense
Other expenses
Finance costs
Share of net profit of associates and joint venture partnership accounted for using the equity method
Profit before income tax
Income tax expense
Profit for the year
Earnings per share for profit attributable to the ordinary equity holders of the Company:
Basic and diluted earnings per share
The above consolidated income statement should be read in conjunction with the accompanying notes.
Consolidated statement of comprehensive income
For the year ended 30 June 2013
Profit for the year
Other comprehensive income
Items that may be reclassified to profit or loss
Changes in the fair value of cash flow hedges
Income tax relating to these items
Other comprehensive income for the year, net of tax
Notes
5
6
7
7
7
7
7
8
34
Notes
24(a)
8(c)
2013
$m
3,724.1
41.4
(1,353.2)
(1,182.5)
(496.3)
(51.0)
(105.6)
5.4
582.3
(135.4)
446.9
Cents
19.8
2013
$m
446.9
3.0
(0.9)
2.1
2012
$m
3,504.0
32.3
(1,302.3)
(1,132.7)
(463.7)
(41.9)
(41.5)
0.1
554.3
(113.4)
440.9
Cents
18.1
2012
$m
440.9
0.4
(0.1)
0.3
Total comprehensive income for the year
449.0
441.2
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
Consolidated balance sheet
As at 30 June 2013
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Other assets
Assets classified as held for sale
Total current assets
Non-current assets
Inventories
Derivative financial instruments
Property, plant and equipment
Intangible assets
Investments accounted for using the equity method
Other assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Derivative financial instruments
Trade and other payables
Provisions
Other liabilities
Current tax liabilities
Total current liabilities
Non-current liabilities
Derivative financial instruments
Provisions
Borrowings
Deferred tax liabilities
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Retained earnings
Total equity
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
FINANCIAL REPORT | AURIZON
59
Notes
9
10
11
12
13
11
12
15
16
14
12
18
20
21
12
20
19
22
21
23(b)
24(a)
2013
$m
107.6
579.5
212.2
0.4
10.2
23.0
932.9
19.0
0.2
9,473.4
11.4
79.2
3.0
9,586.2
10,519.1
0.8
320.7
359.3
42.3
68.2
791.3
-
78.6
2,478.6
408.2
266.8
3,232.2
4,023.5
6,495.6
5,071.4
0.1
1,424.1
6,495.6
2012
$m
98.8
548.1
215.8
0.1
8.0
8.7
879.5
8.7
-
9,037.2
16.6
78.0
0.5
9,141.0
10,020.5
1.3
349.6
371.4
37.5
7.9
767.7
2.0
81.3
1,201.6
363.5
310.2
1,958.6
2,726.3
7,294.2
6,119.1
(2.0)
1,177.1
7,294.2
60
annual report 2012–13
Consolidated statement of changes in equity
For the year ended 30 June 2013
Balance at 1 July 2011
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Dividends provided for or paid
Share-based payments
Balance at 30 June 2012
Balance at 1 July 2012
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Buy-back of ordinary shares
Dividends provided for or paid
Share-based payments
Balance at 30 June 2013
Attributable to owners of Aurizon Holdings Limited
Notes
25(a)
25(a)
Contributed
equity
$m
6,111.9
-
-
-
-
7.2
6,119.1
6,119.1
-
-
-
(1,054.1)
-
6.4
(1,047.7)
5,071.4
Reserves
$m
(2.3)
-
0.3
0.3
-
-
(2.0)
(2.0)
-
2.1
2.1
-
-
-
-
0.1
Retained
earnings
$m
916.8
440.9
-
440.9
(180.6)
-
1,177.1
1,177.1
446.9
-
446.9
-
(199.9)
-
(199.9)
1,424.1
Total equity
$m
7,026.4
440.9
0.3
441.2
(180.6)
7.2
7,294.2
7,294.2
446.9
2.1
449.0
(1,054.1)
(199.9)
6.4
(1,247.6)
6,495.6
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Consolidated statement of cash flows
For the year ended 30 June 2013
Cash flows from operating activities
Receipts from customers
Interest received
Payments to suppliers and employees
Interest and other costs of finance paid
Income taxes paid
Net cash inflow from operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Payments for property, plant and equipment
Payments for investment in associates
Distributions received from associates
Net cash (outflow) from investing activities
Cash flows from financing activities
Proceeds from borrowings
Payments for share buy-back
Payments for shares acquired for share-based payments
Payment of transaction costs related to borrowings and share buy-back
Repayment of borrowings
Dividends paid to Company’s shareholders
Net cash (outflow) inflow from financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at end of year
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
FINANCIAL REPORT | AURIZON
61
Notes
33
25(a)
9
2013
$m
4,057.0
2.4
(3,007.6)
(114.1)
(31.4)
906.3
48.9
(943.5)
(1.8)
5.5
(890.9)
3,720.0
(1,049.8)
(5.9)
(56.0)
(2,415.0)
(199.9)
(6.6)
8.8
98.8
107.6
2012
$m
3,786.5
2.5
(2,783.9)
(80.7)
-
924.4
45.8
(1,156.3)
(41.2)
-
(1,151.7)
390.0
-
-
-
-
(180.6)
209.4
(17.9)
116.7
98.8
62
annual report 2012–13
Notes to the consolidated financial statements
30 June 2013
1. Summary of significant accounting policies
The principal accounting policies adopted in the preparation of these
consolidated financial statements are set out below. These policies have
been consistently applied to all the years presented, unless otherwise stated.
Where necessary, comparative information has been restated to conform with
changes in presentation in the current year. The financial statements are for
the consolidated entity consisting of Aurizon Holdings Limited (“the Company”)
and its subsidiaries, and together are referred to as the “Group” or “Aurizon”.
(a) Basis of preparation
These general purpose financial statements have been prepared in accordance
with Australian Accounting Standards, and Interpretations issued by the
Australian Accounting Standards Board and the Corporations Act 2001.
Aurizon Holdings Limited is a for-profit entity for the purpose of preparing
the financial statements.
The financial statements were approved for issue by the Directors on
19 August 2013. The Directors have the power to amend and reissue the
financial statements.
Compliance with IFRS
(i)
The consolidated financial statements of the Group also comply with
International Financial Reporting Standards (“IFRS”) as issued by the
International Accounting Standards Board (“IASB”).
New and amended standards adopted by the Group
(ii)
None of the new standards and amendments to standards that are mandatory
for the first time for the financial year beginning 1 July 2012 affected any of the
amounts recognised in the current period or any prior period, and are not likely
to affect future periods. However, amendments made to AASB 101 Presentation
of Financial Statements, effective 1 July 2012, now require the statement of
comprehensive income to show the items of comprehensive income grouped into
those that are not permitted to be reclassified to profit or loss in a future period
and those that may have to be reclassified if certain conditions are met.
(iii) Historical cost convention
These financial statements have been prepared under the historical cost
convention, as modified by the revaluation of available-for-sale financial
assets and financial assets and liabilities (including derivative instruments)
at fair value.
(iv) Critical accounting estimates
The preparation of financial statements requires the use of certain critical
accounting estimates. It also requires management to exercise its judgement
in the process of applying the Group’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.
(b)
Principles of consolidation
Subsidiaries
(i)
The consolidated financial statements incorporate the assets and liabilities
of all subsidiaries of the Group as at reporting date and the results of all
subsidiaries for the year then ended.
Subsidiaries are all entities over which the Group has the power to govern the
financial and operating policies, generally accompanying a shareholding of
more than one-half of the voting rights.
Subsidiaries are fully consolidated from the date on which control is transferred
to the Group and de-consolidated from the date that control ceases.
Transactions between continuing and discontinued operations are treated as
external from the date that the operation was discontinued.
Intercompany transactions, balances and unrealised gains on transactions
between Group companies are eliminated on consolidation.
(ii) Associates
Associates are all entities over which the Group has significant influence but
not control or joint control, generally accompanying a shareholding of between
20 per cent and 50 per cent of the voting rights. Investments in associates
are accounted for using the equity method of accounting, after initially being
recognised at cost. The Group’s investment in associates includes goodwill
identified on acquisition. Details of investment in associates are set out in
note 29(d).
The Group’s share of its associates’ post-acquisition profits or losses
is recognised in profit or loss, and its share of post-acquisition other
comprehensive income is recognised in other comprehensive income.
The cumulative post-acquisition movements are adjusted against the carrying
amount of the investment. Dividends receivable from associates are recognised
as reduction in the carrying amount of the investment.
When the Group’s share of losses in an associate equals or exceeds its interest
in the associate, including any other unsecured long-term receivables, the
Group does not recognise further losses, unless it has incurred obligations or
made payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are
eliminated to the extent of the Group’s interest in the associates. Unrealised
losses are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred. Accounting policies of associates have
been changed where necessary to ensure consistency with the policies adopted
by the Group.
(iii) Joint ventures
Jointly controlled assets or operations
Where the Group has jointly controlled assets or operations, the proportionate
interests in the assets, liabilities, revenues and expenses of a joint venture
activity are incorporated in the financial statements under the appropriate
headings. Details of joint venture operations and jointly controlled assets are
set out in note 29(a) and (b).
Joint venture entities
Where the Group has an interest in a joint venture entity, the interest is
accounted for using the equity method after initially being recognised at cost.
Under the equity method, the share of the profits or losses of the joint venture
entity is recognised in the income statement and the share of post-acquisition
movements in reserves is recognised in other comprehensive income. Details of
joint venture entities are set out in note 29(c).
Profits or losses on transactions establishing the joint venture entity and
transactions with the joint venture are eliminated to the extent of the Group’s
ownership interest until such time as they are realised by the joint venture
entity on consumption or sale. However, a loss on the transaction is recognised
immediately if the loss provides evidence of a reduction in the net realisable
value of current assets, or an impairment loss.
Segment reporting
(c)
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief operating
decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Executive
Committee inclusive of the Managing Director & Chief Executive Officer.
financial report | auriZon
63
Notes to the consolidated financial statements
30 June 2013
1. Summary of significant accounting policies (continued)
(d)
Foreign currency and commodity transactions
Functional and presentation currency
(i)
Items included in the financial statements of each of the Group’s entities are
measured using the currency of the primary economic environment in which
the entity operates (“the functional currency”). The consolidated financial
statements are presented in Australian dollars, which is the Aurizon Holdings
Limited’s functional and presentation currency.
Transactions and balances
(ii)
Where the Group is exposed to the risk of fluctuations in foreign exchange
rates, market interest rates and commodity prices, it enters into financial
arrangements to reduce this exposure. While the value of these financial
instruments is subject to risk that market rates/prices may change subsequent
to acquisition, such changes will generally be offset by opposite effects on the
items being hedged.
Foreign currency transactions are translated into the functional currency
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 year end exchange rates of monetary
assets and liabilities denominated in foreign currencies, are recognised in profit
or loss, except when they are deferred in equity as qualifying cash flow hedges
and qualifying net investment hedges, or are attributable to part of the net
investment in a foreign operation.
Foreign exchange gains and losses that relate to borrowings are presented in
the income statement, within finance costs. All other foreign exchange gains
and losses are presented in the income statement on a net basis within other
income or other expenses.
Non-monetary items that are measured at fair value in a foreign currency
are translated using the exchange rates at the date when the fair value was
determined. Translation differences on assets and liabilities carried at fair value
are reported as part of the fair value gain or loss. For example, translation
differences on non-monetary assets and liabilities, such as equities held at fair
value through profit or loss are recognised in profit or loss as part of the fair
value gain or loss and translation differences on non-monetary assets such as
equities classified as available-for-sale financial assets are recognised in other
comprehensive income.
Revenue recognition
(e)
Revenue is measured at the fair value of the consideration received or receivable.
Amounts disclosed as revenue are net of returns, trade allowances, rebates and
amounts collected on behalf of third parties.
The Group recognises revenue when the amount of revenue can be reliably
measured; it is probable that future economic benefits will flow to the entity;
and specific criteria have been met for each of the Group’s activities as
described below. The Group bases its estimates on historical results, taking into
consideration the type of customer, the type of transaction and the specifics of
each arrangement.
Revenue is recognised for the major business activities as follows:
Services revenue
(i)
Services revenue comprises revenue earned from the provision of the
following services:
Track access
>
Freight transport
>
Other services revenue
>
The Group also has operations which provide construction and
engineering services that are substantially internal to the Group and
eliminate on consolidation.
Track access
Access revenue generated from the regulated rail access services provided
on the Central Queensland Coal Network (“CQCN”), is recognised as services
are provided and is calculated on a number of operating parameters, such as
the tonnage hauled, and applied to regulator-approved tariffs. The tariff is
determined by the total maximum allowable revenue, applied to the regulatory
approved annual tonnage forecast.
Where annual actual tonnages railed are less than the annual tonnage
forecast, an annual take or pay mechanism may become operative. A variable
component of take or pay may also be applied where tonnage forecasts do not
meet certain consecutive monthly thresholds. The take or pay portion of access
revenue is recognised in the year that the contractual railings were not achieved.
In addition, the majority of access revenue is subject to a revenue cap
mechanism that serves to ensure the network recovers its maximum allowable
revenue over the regulatory period such that where actual tonnages railed
are less than the regulatory approved tonnage forecast, the revenue shortfall
(net of Take or Pay) is recovered in subsequent years and conversely, where
actual tonnages railed are greater, the excess revenue received is refunded
through the access tariffs in subsequent years. The majority of under or over
recovery in access tariffs (net of Take or Pay charges) are recognised as revenue
in the second year following the period in which the contractual railings were
not achieved in accordance with the regulatory framework and includes an
adjustment at the weighted average cost of capital to account for the time lag
in which the adjustment to reference tariffs occurs.
Freight transport
Revenue from freight transport services is calculated based on the rates agreed
with the customer on a tonnes per delivery basis either by way of long-term
contract or on an ad-hoc basis. Revenue is recognised once the service has
been provided.
In some circumstances, the Group is able to recover extra charges where
the revenue receivable based on tonnage hauled and agreed price falls
below minimum levels set in contractual arrangements with customers.
These additional revenues include Deficit Tonnage Charges (“DTC”).
Recognition of DTC revenue is considered on a contract by contract basis and
generally recognised in the period following that in which the service was due
to be provided where the customer elects to pay the charges rather than to
reduce future tonnage entitlements.
Other services revenue
Revenue includes Transport Service Contract (“TSC”) payments received from
the Queensland Department of Transport and Main Roads for some specific rail
and road-based regional freight services and livestock transportation services.
Base amounts receivable under the TSC (regional freight and livestock) are
recognised on a straight-line basis over the term of the contract. Additional
payments are recognised when the revenue can be measured reliably on a
stage of completion basis over the term of the agreement. Refer to note 5 for
details related to TSC revenue recognised in the financial statements.
(ii) Other revenue
Revenue from other service works is recognised by reference to the
contractual entitlement.
Access facilitation deeds for mine-specific infrastructure
The Group builds or acquires mine-specific infrastructure for customers and
provides access to those clients under access facilitation deeds. In substance,
charges under the deeds comprise capital charges and interest charges where
the Group finances the assets. The capital charges are recognised on
64
annual report 2012–13
Notes to the consolidated financial statements
30 June 2013
1. Summary of significant accounting policies (continued)
(e) Revenue recognition (continued)
(ii) Other revenue (continued)
a straight-line basis over the term of the access facilitation deed while the
interest charges are accrued in accordance with the contractual terms of
the access facilitation deed arrangements. Where the customer prepays the
future charges, the amounts received are recognised as deferred income and
recognised within income on a straight-line basis over the term of the access
facilitation deed.
Liquidated damages
Liquidated damages occur when contractors fail to meet the key performance
indicators set out in their contract with the Group. Income resulting from
claims for liquidated damages is recognised as other income when all
performance obligations are met (including when a contractual entitlement
exists); it can be reliably measured (including the impact of the receipt, if any,
on the underlying asset’s carrying value); and it is probable that the economic
benefits will flow to the Group.
External maintenance and overhaul
External maintenance and overhaul revenue comprises revenue earned on the
maintenance of third party rollingstock and components. The majority of the
revenue arises from the overhaul of the Queensland Rail passenger fleet.
(f)
Other income
Disposal of assets
(i)
The gain or loss on disposal of assets is recognised at the date the significant
risks and rewards of ownership of the asset passes to the buyer, usually when
the purchaser takes delivery of the assets. The gain or loss on disposal is
calculated as the difference between the carrying amount of the asset at the
time of disposal and the net proceeds on disposal, and is recognised as other
income or expenses in the income statement.
Interest revenue
(ii)
Interest revenue is recognised using the effective interest method.
(iii) Government grants
Grants from the government are recognised at their fair value where there is a
reasonable assurance that the grant will be received and the Group will comply
with all attached conditions.
Government grants relating to costs are deferred and recognised in the income
statement over the period necessary to match those with the costs that they
are intended to compensate.
(iv) Dividends
Dividends are recognised as revenue when the right to receive payment
is established.
Income tax
(g)
The income tax expense or revenue for the period is the tax payable on the
current period’s taxable income based on the applicable income tax rate for
each jurisdiction adjusted for the changes in deferred tax assets and liabilities
attributable to temporary differences and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws
enacted or substantively enacted at the end of the reporting period in the
countries where the Group’s subsidiaries and associates operate and generate
taxable income. Management periodically evaluates positions taken in tax
returns with respect to situations in which applicable tax regulation is subject
to interpretation. It establishes provisions, where appropriate, on the basis of
amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary
differences arising between the tax bases of assets and liabilities and their
carrying amounts in the consolidated financial statements. However, deferred
tax liabilities are not recognised if they arise from the initial recognition of
goodwill. Deferred income tax is also not accounted for if it arises from initial
recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting
nor taxable profit or loss. Deferred income tax is determined using tax rates
(and laws) that have been enacted or substantially enacted by the end of the
reporting period and are expected to apply when the related deferred income
tax asset is realised or the deferred income tax liability is settled.
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.
Deferred tax liabilities and assets are not recognised for temporary differences
between the carrying amount and tax bases of investments in foreign
operations where the Company is able to control the timing of the reversal
of the temporary differences and it is probable that the differences will not
reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable
right to offset current tax assets and liabilities, and when the deferred tax
balances relate to the same taxation authority. Current tax assets and tax
liabilities are offset where the entity has a legally enforceable right to offset
and intends either to settle on a net basis, or to realise the asset and settle the
liability simultaneously.
To the extent that an item is recognised directly in equity, the deferred tax is
also recognised directly in equity.
(h)
Leases
Leases on property, plant and equipment
Leases of property, plant and equipment where the Group, as lessee, has
substantially all the risks and rewards of ownership are classified as finance
leases. Finance leases are capitalised at the lease’s inception at the fair value
of the leased property or, if lower, the present value of the minimum lease
payments. The corresponding rental obligations, net of finance charges, are
included in other short-term and long-term payables. Each lease payment is
allocated between the liability and finance cost. The finance cost is charged to
profit or loss over the lease period so as to produce a constant periodic rate of
interest on the remaining balance of the liability for each period. The property,
plant and equipment acquired under finance leases is depreciated over the
asset’s useful life or over the shorter of the asset’s useful life and the lease
term if there is no reasonable certainty that the Group will obtain ownership
at the end of the lease term.
Leases in which a significant portion of the risks and rewards of ownership
are not transferred to the Group as lessee are classified as operating leases.
Payments made under operating leases (net of any incentives received from
the lessor) are charged to the income statement on a straight-line basis over
the period of the lease.
Rental revenue from operating leases, where the Group is a lessor is recognised
as income on a straight-line basis over the lease term. Where a sale and lease
back transaction has occurred, the lease is classified as either a finance lease or
operating lease based on the factors described above.
Cross border leases
The cross border lease arrangements involve transferring the legal title to, or
head leasing, the rollingstock to the lessor, but the Group substantially retains
the risks and rewards incidental to ownership of the rollingstock and enjoys
substantially the same rights to its use as before the arrangement. Under the
cross border lease arrangement, the ability of the Group to dispose of or
financial report | auriZon
65
Notes to the consolidated financial statements
30 June 2013
1. Summary of significant accounting policies (continued)
(h)
Leases (continued)
Cross border leases (continued)
otherwise deal with its interest in the rollingstock is restricted and cannot be
sold without the consent of the lessor. The rollingstock is depreciated based
on its estimated useful life as the Group intends to re-acquire the legal title of
these assets. Benefits received from the cross border lease arrangement were
recognised as income at the inception of the arrangement.
Where it is necessary under the cross border lease provisions to terminate
part or all of a lease due to damaged or disposed leased assets and there is a
difference between the value of the owned asset and the termination cost of
the leased asset, the net book value of the damaged asset is recognised in the
income statement as loss (or gain) on disposal and termination costs incurred
are recognised in the income statement as other expenses.
Business combinations
(i)
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 by the Group. 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,
the Group recognises any non-controlling interest in the acquiree 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 re-measured to fair
value with changes in fair value recognised in profit or loss.
Impairment of assets
(j)
Goodwill and 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 tested 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. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash flows which are largely independent of the cash
flows from other assets or groups of assets (cash-generating units).
The recoverable amount is the greater of an asset’s fair value less costs to sell
and value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific
to the asset.
Impairment losses are recognised in the income statement. After the
recognition of an impairment loss, the depreciation (amortisation) charge for
the asset is adjusted in future periods to allocate the asset’s revised carrying
amount, less its residual value (if any), on a systematic basis over its remaining
useful life. Impairment losses, if any, recognised in respect of cash-generating
units are allocated first to reduce the carrying amount of any goodwill
allocated to cash-generating units and then to reduce the carrying amount of
other assets in the unit on a pro-rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other
non-financial assets, impairment losses recognised in prior periods are assessed
at each reporting date for any indications that the loss has decreased or no
longer exists. An impairment loss is reversed only to the extent that the asset’s
carrying amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no impairment loss had
been recognised.
Cash and cash equivalents
(k)
For the purpose of presentation in the statement of cash flow, 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.
Trade and other receivables
(l)
Trade and other receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective interest method,
less provision for impairment. Trade receivables generally have credit terms
ranging from seven to 31 days. They are presented as current assets unless
collection is not expected for more than 12 months after the reporting date.
Collectability of trade and other receivables is reviewed on an ongoing basis.
Debts which are known to be uncollectible are written off by reducing the
carrying amount directly. A provision for impairment of trade and other
receivables is established when there is objective evidence that the Group
will not be able to collect all amounts due according to the original terms
of the receivables.
Significant financial difficulties of the debtor, probability that the debtor will
enter bankruptcy or financial reorganisation, and default or delinquency in
payments (more than 90 days overdue) are considered indicators that the
trade receivable is impaired. The amount of the impairment allowance is the
difference between the asset’s carrying amount and the present value of
estimated future cash flows, discounted at the original effective interest rate.
Cash flows relating to short-term receivables are not discounted if the effect of
discounting is immaterial.
The amount of the impairment loss is recognised in the income statement
within other expenses. When a trade or other receivable for which an
impairment allowance had been recognised becomes uncollectible in a
subsequent period it is written off against the allowance account.
Subsequent recoveries of amounts previously written off are credited
against other expenses in the income statement.
(m) Inventories
Inventories include items held in centralised stores, workshops, and
infrastructure and rollingstock depots, and are stated at the lower of cost and
net realisable value. Cost comprises the cost of purchase, cost of conversion
and other costs incurred in bringing the inventories to its present location and
condition. Cost is determined predominantly on an average cost basis.
66
annual report 2012–13
Notes to the consolidated financial statements
30 June 2013
1. Summary of significant accounting policies (continued)
(m)
Inventories (continued)
Items expected to be consumed after more than one year are classified as
non-current.
The provision for inventory obsolescence is based on assessments by
management of particular inventory classes and relates specifically to
infrastructure and rollingstock maintenance items. The amount of the provision
is based on a proportion of the value of damaged stock, slow moving stock and
stock that has become obsolete during the reporting period.
(n) Non-current assets (or disposal groups) held for sale and
discontinued operations
Non-current assets (or disposal groups) are classified as held for sale if their
carrying amount will be recovered principally through a sale transaction,
rather than through continuing use and a sale is considered highly probable.
They are measured at the lower of their carrying amount and fair value less
costs to sell except for assets such as deferred tax assets; assets arising from
employee benefits; financial assets; and investment property that are carried
at fair value, and contractual rights under insurance contracts which are
specifically exempt from this requirement.
Non-current assets (including those that are part of a disposal group) are not
depreciated or amortised while they are classified as held for sale. Interest and
other expenses attributable to the liabilities of a disposal Group classified as
held for sale continue to be recognised.
Non-current assets classified as held for sale and the assets of a disposal group
classified as held for sale are presented separately from the other assets in the
consolidated balance sheet.
(o) Investments and other financial assets
Classification
The Group classifies its non-derivative financial assets in the following
categories: financial assets at fair value through profit or loss; loans, and
receivables. The classification depends on the purpose for which the
investments were acquired. Management determines the classification of
its investments at initial recognition.
(i) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for
trading. A financial asset is classified in this category if acquired principally
for the purpose of selling in the short term. Derivatives are classified as held
for trading unless they are designated as hedges. Assets in this category are
classified as current assets if they are expected to be settled within 12 months,
otherwise they are classified as non-current.
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They are
included in current assets, except for those with maturities greater than
12 months after the reporting period which are classified as non-current assets.
Loans and receivables are included in trade and other receivables (note 10) in
the balance sheet.
Recognition and derecognition
Regular purchases and sales of financial assets are recognised on trade date –
the date on which the Group commits to purchase or sell the asset. Financial
assets are derecognised when the rights to receive cash flows from the financial
assets have expired or have been transferred and the Group has transferred
substantially all the risks and rewards of ownership.
Measurement
At initial recognition, the Group measures a financial asset at its fair value
plus, in the case of a financial asset not at fair value through the income
statement, transaction costs that are directly attributable to the acquisition
of the financial asset. Transaction costs of financial assets carried at fair value
through the income statement are expensed in the income statement.
Loans and receivables are subsequently carried at amortised cost using the
effective interest method.
The Group assesses at each reporting date whether there is objective evidence
that a financial asset (or group of financial assets) are impaired. A financial
asset (or a group of financial assets) is impaired, and impairment losses are
incurred, only if there is objective evidence of impairment as a result of one
or more events that occurred after the initial recognition of the asset (a “loss
event”) and that loss event (or events) has an impact on the estimated future
cash flows of the financial asset (or group of financial assets) that can be
reliably estimated. In the case of securities classified as available-for-sale,
a significant or prolonged decline in the fair value of a security below its cost
is considered as an indicator that the securities are impaired.
Assets carried at amortised cost
For loans and receivables, the amount of the loss is measured as the difference
between the asset’s carrying amount and the present value of estimated
future cash flow (excluding future credit losses that have not been incurred)
discounted at the financial asset’s original effective interest rate. The carrying
amount of the asset is reduced and the amount of the loss is recognised in the
income statement. If a loan has a variable interest rate, the discount rate for
measuring any impairment loss is the current effective interest rate determined
under the contract. As a practical expedient, the Group may measure
impairment on the basis of an instrument’s fair value using an observable
market price.
If, in a subsequent period, the amount of the impairment loss decreases
and the decrease can be related objectively to an event occurring after the
impairment was recognised (such as an improvement in the debtor’s credit
rating), the reversal of the previously recognised impairment loss is recognised
in the income statement.
Derivatives and hedging activities
(p)
Derivatives are initially recognised at fair value on the date a derivative
contract is entered into and are subsequently re-measured to their fair value
at the end of each reporting period. 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.
The Group designates certain derivatives as hedges of the cash flows of
recognised assets and liabilities, and highly probable forecast transactions
(“cash flow hedges”).
At inception, the Group documents the relationship between hedging
instruments and hedged items, as well as its risk management objective
and strategy for undertaking various hedge transactions. The Group also
documents its assessment, both at hedge inception and on an ongoing basis,
of whether the derivatives that are used in hedging transactions have been,
and will continue to be, highly effective in offsetting future cash flows of
hedged items.
The fair values of derivative financial instruments used for hedging purposes
are disclosed in note 12. The full fair value of a hedging derivative is classified
as a non-current asset or liability when the remaining maturity of the hedged
item is more than 12 months; it is classified as a current asset or liability when
the remaining maturity of the hedged item is less than 12 months.
financial report | auriZon
67
Notes to the consolidated financial statements
30 June 2013
1. Summary of significant accounting policies (continued)
(p) Derivatives and hedging activities (continued)
The land subleases will automatically be renewed for a period of 99 years
if the infrastructure leases are renewed for that period (refer leased coal
infrastructure below).
Cash flow hedge
(i)
The effective portion of changes in the fair value of derivatives that
are designated and qualify as cash flow hedges is recognised in other
comprehensive income, and accumulated in reserves in equity. The gain or loss
relating to the ineffective portion is recognised immediately in profit or loss
within other income or other expense.
Amounts accumulated in equity are reclassified to profit or loss in the periods
when the hedged item affects profit or loss. However, when the forecast
transaction that is hedged results in the recognition of a non-financial asset,
the gains and losses previously deferred in equity are reclassified from equity
and included in the initial measurement of the cost or carrying amount of
the asset.
When a hedging instrument expires or is sold or terminated, or when a hedge
no longer meets the criteria for hedge accounting, any cumulative gain or loss
existing in equity at that time remains in equity and is recognised when the
forecast transaction is ultimately recognised in profit or loss. When a forecast
transaction is no longer expected to occur, the cumulative gain or loss that was
reported in equity is immediately reclassified to profit or loss.
Derivatives that do not qualify for hedge accounting
(ii)
Certain derivative instruments do not qualify for hedge accounting. Changes
in fair value of any derivative instrument that does not qualify for hedge
accounting are recognised immediately in profit or loss in other income
or expense.
Embedded derivatives
(iii)
Through the Group’s purchase and sale contracts, it is possible that embedded
derivatives have been entered into. An embedded derivative will cause some
or all of the cash flows of the purchase or sale contract (i.e. the host contract)
to be modified by reference to a variable, such as a foreign exchange rate or a
commodity price.
Embedded derivatives are separated from the host contract and accounted
for as a stand-alone derivative if the economic characteristics and risks of the
embedded derivatives are not closely related to those of the host contract.
(q) Property, plant and equipment
(i)
Methodology for valuation of fixed assets
Buildings, plant and equipment, and rollingstock
Buildings, plant and equipment, and rollingstock are carried at cost less
accumulated depreciation. Cost includes expenditure that is directly
attributable to the acquisition of the asset or the fair value of the other
consideration given to acquire an asset at the time of its acquisition or
construction. Cost may also include transfers from equity of any gains or losses
on qualifying cash flow hedges of foreign currency purchases of property, plant
and equipment, and capitalised interest.
Land
Land is carried at cost. As the Transport Infrastructure Act 1994 stipulates
that corridor land is owned by the State, only non-corridor land owned by the
Group is recorded in the financial statements. Ownership of corridor land is
with the Department of Environment and Resource Management, on behalf of
the State. This land is leased to the Department of Transport and Main Roads
and subsequently sub-leased to Aurizon Network Pty Ltd under two separate
subleases, each with a rental of $1.00 per year if demanded. The subleases
each expire on 30 June 2109.
Leased property, plant and equipment
Leases of property, plant and equipment where the Group, as lessee, has
substantially all the risks and rewards of ownership, are classified as finance
leases. Assets held under finance leases are recorded at the lower of the net
present value of the minimum lease payments or the fair value of the leased
asset at the inception of the lease. Each lease payment is allocated between
the liability and finance cost. The finance cost is charged to profit or loss on an
effective interest rate basis.
Owned infrastructure
Infrastructure assets are transferred from Assets under construction once
fully constructed and available for use. They are carried at cost and represent
capitalised expenditures that are directly related to capital projects and may
include materials, labour and equipment, in addition to an allocable portion of
indirect costs that clearly relate to a particular project that will provide future
economic benefit and remain within the control of the Group.
Leased coal infrastructure
Coal infrastructure assets are owned by (a) the State, with respect to the
Central Queensland Coal Network (CQCN) and (b) Queensland Rail, with
respect to the North Coast Line (each referred to as the Infrastructure Lessors).
Under each infrastructure lease the infrastructure is leased to Aurizon Network
Pty Ltd, a controlled entity. The term of each of the leases is 99 years (at a
peppercorn rate of $1.00 per year), unless the Infrastructure Lessor exercises
an option to extend its lease for a further 99 years. The notice period for the
Infrastructure Lessor to renew or allow expiry of the lease is not less than
20 years prior to the end of the 99 year term. To the extent that the lease
expires at the end of 99 years, the Infrastructure Lessor will pay Aurizon
Network Pty Ltd the fair market value of the infrastructure assets, including
the infrastructure existing on commencement of the lease as well as any
railway assets added during the lease term as are reasonably required
to enable the infrastructure to be operated as a fully functioning railway
network. As the assets are not considered to be providing a public service,
the Group’s economic interest in the assets is accounted for as property,
plant and equipment.
Assets under construction
Assets under construction represents the cost of fixed assets currently under
construction and includes the cost of all materials used in construction, direct
labour, site preparation, interest, and foreign currency gains and losses incurred
where applicable. Also included in assets under construction are costs directly
attributable with the development of significant strategic infrastructure
projects (refer note 2(vi)). The development costs relate to directly attributable
expenditure predominantly on engineering design, environmental and building
approvals and project management.
Costs of assets under construction are only capitalised when it is probable that
future economic benefits associated with the asset will flow to the Group and
the costs can be measured reliably.
(ii) Subsequent costs
Subsequent costs are included in the asset’s carrying amount or recognised
as a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably. The carrying amount of any component
accounted for as a separate asset is derecognised when replaced. All other
repairs and maintenance are charged to the income statement during the
reporting period in which they are incurred.
68
annual report 2012–13
Notes to the consolidated financial statements
30 June 2013
1. Summary of significant accounting policies (continued)
(q) Property, plant and equipment (continued)
(iii) Depreciation and amortisation
Assets are depreciated or amortised from the date of acquisition, or, in respect
of internally constructed or manufactured assets, from the time an asset is
completed and held ready for use.
Buildings, infrastructure, rollingstock, plant and equipment are depreciated
using the straight-line method to allocate their costs, net of their residual
values, over their estimated useful lives. Motor vehicles are depreciated using
the diminishing value basis (percentages range from 13.6 per cent to 35.0 per
cent). Land and assets under construction are not depreciated.
Assets controlled by the Group under finance leases are amortised over the
useful lives of the assets. Leasehold improvements are depreciated over the
shorter of either the unexpired period of the lease or the estimated useful lives
of the improvements.
Where assets have separately identifiable components that are subject to
regular replacement, these components are assigned useful lives distinct from
the asset to which they relate. Any expenditure that increases the originally
assessed capacity or service potential of an asset is capitalised and the new
depreciable amount is depreciated over the remaining life of the asset.
The Group builds mine-specific infrastructure for customers and provides access
to those clients under access facilitation deeds. Infrastructure controlled by
the Group under these deeds is depreciated over the term of the deed, except
where economic benefits are expected to flow to the Group after the end of the
term of the deed.
The depreciation and amortisation rates used during the year were based on
the following range of useful lives:
– Owned and leased infrastructure, including:
Tracks
Track turnouts
Ballast
Civil works
Bridges
Electrification
Field signals
– Buildings
– Rollingstock, including:
Locomotives
Locomotive componentisation
Wagons
Wagon componentisation
– Plant and equipment
– Leased property
30–45 years
20–25 years
8–20 years
20–100 years
50–100 years
20–50 years
15–40 years
10–40 years
25–35 years
8–12 years
25–35 years
10–17 years
3–20 years
3–40 years
The depreciation and amortisation rates are reviewed annually and adjusted if
appropriate, refer note 2(iv). An asset’s carrying amount is written down to its
recoverable amount if the asset’s carrying amount is greater than its estimated
recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with the
carrying amount and are recognised in the income statement.
(r) Intangible assets
(i) Goodwill
Goodwill represents the excess of the purchase consideration for an acquisition
over the fair value of the Group’s share of the net identifiable assets of the
acquired subsidiary at the date of acquisition. Goodwill on acquisitions of
subsidiaries is included in intangible assets. Goodwill is not amortised but is
tested for impairment annually or more frequently if events or changes in
circumstances indicate that it might be impaired, and is carried at cost less
accumulated impairment losses. Gains and losses on the disposal of an entity
include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment
testing. The allocation is made to those cash-generating units or groups of
cash-generating units that are expected to benefit from the business
combination in which the goodwill arose, and is identified according to
operating segments.
(ii) IT development and software
Software (mainly comprising SAP development costs) has a finite useful
life and is carried at cost less accumulated amortisation and impairment.
Amortisation is calculated using the straight-line method over the estimated
useful life which varies from three to 11 years.
(iii) Key customer contracts
Key customer contracts have a finite useful life and are carried at cost less
accumulated amortisation and impairment losses. Amortisation is calculated
using the straight-line method over the useful life which varies from three to
six years.
(iv) Research and development
Research expenditure is recognised as an expense as incurred. Costs incurred
on development projects (relating to the design and testing of new or
improved products) are recognised as intangible assets when it is probable
that the project will, after considering its commercial and technical feasibility,
be completed and generate future economic benefits, and its costs can
be measured reliably. The expenditure capitalised comprises all directly
attributable costs, including costs of materials, services and direct labour. Other
development expenditures that do not meet these criteria are recognised as an
expense as incurred. Development costs previously recognised as an expense
are not recognised as an asset in a subsequent period. Capitalised development
costs are recorded as intangible assets and amortised from the point at which
the asset is ready for use on a straight-line basis over its useful life.
(s) Trade and other payables
These amounts represent liabilities for goods and services provided to the
Group prior to the end of financial year which are unpaid. The amounts are
unsecured and are usually paid within 30 days or within the terms agreed
with the supplier. Trade and other payables are presented as current liabilities.
They are recognised initially at their fair value and subsequently measured at
amortised cost using the effective interest method.
(t) Borrowings and borrowing costs
(i) Borrowings
Borrowings are initially recognised as fair value, net of transaction costs
incurred. Borrowings are subsequently measured at amortised cost,
using the effective interest rate method.
Interest costs are calculated using the effective interest rate method.
The effective interest rate is the rate that exactly discounts estimated
future cash payments or receipts through the expected life of the financial
instrument. Interest is accrued monthly and paid on maturity. Commitment
and agency fees are accrued monthly and paid quarterly.
Fees paid on the establishment of loan facilities are recognised as transaction
costs and have been capitalised and amortised over the life of the facility.
Notes to the consolidated financial statements
30 June 2013
financial report | auriZon
69
1. Summary of significant accounting policies (continued)
(t) Borrowings and borrowing costs (continued)
(i) Borrowings (continued)
Borrowings are removed from the balance sheet when the obligation specified
in the contract is discharged, cancelled or expired. The difference between
the carrying amount of a financial liability that has been extinguished or
transferred to another party and the consideration paid, including any
non-cash assets transferred or liabilities assumed, is recognised in profit
or loss as other income or finance costs.
Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least 12 months
after the reporting date.
(ii) Borrowing costs
Borrowing costs which are directly attributable to the acquisition, construction
or production of a material qualifying asset are capitalised during the period
of time that is required to complete and prepare the asset for its intended use
or sale. A qualifying asset is an internally funded asset that necessarily takes
a substantial period of time to be prepared for its intended use or sale. The
rate used to determine the amount of borrowing costs to be capitalised is the
interest rate applicable to the Group’s outstanding borrowings during the year.
Other borrowing costs are expensed.
(u) Provisions
Provisions are recognised when the Group has a present legal or constructive
obligation as a result of past events, it is probable that an outflow of resources
will be required to settle the obligation, and the amount has been reliably
estimated. Provisions are not recognised for future operating losses.
Provisions are measured at the present value of management’s best estimate
of the expenditure required to settle the present obligation at the reporting
date. The discount rate used to determine the present value is a pre-tax rate
that reflects current market assessments of the time value of money and the
risks specific to the liability. The increase in the provision resulting from the
passage of time is recognised in finance costs.
In accordance with Group’s environmental sustainability policy and
applicable legal and constructive obligations, a provision for land
rehabilitation in respect of contaminated land, is recognised when an
obligation for rehabilitation is identified.
(v) Employee benefits
Short-term obligations
(i)
Liabilities for wages and salaries, including non-monetary benefits, annual leave
and leave loading are recognised as current liabilities. These liabilities are in
respect of employees’ services up to the reporting date and are measured at the
amounts expected to be paid when the liabilities are settled plus related on-costs.
Other long-term employee benefit obligations
(ii)
Liabilities for long service leave, where employees have completed the
required period of service or are entitled to pro-rata payments, are recognised
as current liabilities. The remaining unvested liabilities are included as
non-current liabilities.
(iii) Retirement allowance
Retirement allowance is payable to employees who fulfil the following
requirements:
>
Employees who retire or who are paid according to Voluntary Redundancy
Scheme or Medical Separation;
are not members of an accumulation super fund; and
>
> were employed prior to 1 February 1995.
Liabilities for retirement allowance for employees who have fulfilled these
requirements are recognised as current liabilities. The remaining liabilities are
included within employee benefits and recognised as non-current liabilities.
The non-current liability for retirement allowance is measured at the present
value of expected future payments to be made in respect of services provided
by qualifying employees. Consideration is given to expected future wage and
salary levels, experience of the departure of qualifying employees and periods
of service. Expected future payments are discounted using market yields at
the reporting date on Commonwealth Government bonds with maturities that
match, as closely as possible, to the estimated future cash outflows.
(iv) Share-based payments
The fair value of rights granted under the Performance Rights Plan is
recognised as an employee benefits expense with a corresponding increase in
equity. The total amount to be expensed is determined by reference to the fair
value of the rights 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 rights that are expected to vest. The total expense is recognised over the
vesting period, which is the period over which all of the specified vesting
conditions are to be satisfied. At the end of each period, the entity revises its
estimates of the number of rights that are expected to vest based on the non-
marketing vesting conditions. It recognises the impact of the revision to original
estimates, if any, in profit or loss, with a corresponding adjustment to equity.
For the year share-based compensation was settled by making on-market
purchases of the Company’s ordinary shares.
(v) Bonus plans
The Group recognises a liability and an expense for bonuses based on
a formula that takes into consideration the Group and individual key
performance indicators, including profit attributable to the Company’s
shareholders after certain adjustments. The Group recognises a provision
where contractually obliged or where there is a past practice that has created
a constructive obligation.
(vi) Sick leave
Sick leave is not provided for on the grounds that it is non-vesting and on
average, no more than the annual entitlement is taken each year.
(vii) Superannuation
Contributions are expensed as they are made.
The Group pays an employer subsidy to the Government Superannuation
Office in respect of employees who are contributors to the Public Sector
Superannuation (QSuper) scheme.
The liability for long service leave is measured using the present value of
the expected future payments to be made in respect of services provided by
employees up to the reporting date. Consideration is given to expected future
wage and salary levels, experience of employee departures and periods of
service. Expected future non-current payments are discounted using market
yields at the reporting date on Commonwealth Government bonds with
terms to maturity that match, as closely as possible, the estimated future
cash outflows.
Employer contributions to the QSuper Defined Benefit Fund are determined
by the State of Queensland Treasurer having regard to advice from the State
Actuary. The primary obligation to fund the defined benefits obligations
are that of the State. However, the Treasurer has the discretion to request
contributions from employers that contribute to the defined benefit category
of QSuper. No liability is recognised for accruing superannuation benefits as
this liability is held on a Whole of Government basis and reported in the Whole
of Government financial statements.
70
annual report 2012–13
Notes to the consolidated financial statements
30 June 2013
1. Summary of significant accounting policies (continued)
(v) Employee benefits (continued)
(vii) Superannuation (continued)
The State Actuary performs a full actuarial valuation of the assets and
liabilities of the fund on a triennial basis. The latest valuation was completed
as at 30 June 2010 and the State Actuary found the fund was in surplus from
a Whole of Government perspective. In addition, from late 2007, the Defined
Benefit Fund was closed to new members so any potential future deficit
would be diluted as membership decreases. Accordingly, no liability/asset is
recognised for the Group’s share of any potential deficit/surplus of the Super
Defined Benefit Fund of QSuper. The State of Queensland has provided Aurizon
with an indemnity if the Treasurer requires Aurizon to pay any amounts
required to meet the potential deficit/surplus.
The Group also makes superannuation guarantee payments into the QSuper
Accumulation Fund (Non-Contributory) and QSuper Accumulation Fund
(Contributory) administered by the Government Superannuation Office and to
other complying Superannuation Funds designated by employees nominating
Choice of Fund.
(w) Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable
to the issue of new shares are shown in equity as a deduction, net of tax, from
the proceeds.
Where any Group company purchases the Company’s equity instruments, for
example as the result of a share-based payment plan, the consideration paid,
including any directly attributable incremental costs (net of income taxes) is
recognised directly in equity.
(x) Dividends
Provision is made for the amount of any dividend declared, being appropriately
authorised and no longer at the discretion of the entity, on or before the end of
the financial year but not distributed at reporting date.
(y) Earnings per share
(i) Basic earnings per share
Basic earnings per share are calculated by dividing:
>
>
the profit attributable to owners of the Company, 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 year.
(ii) 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 additional ordinary shares that would
have been outstanding assuming the conversion of all dilutive potential
ordinary shares.
>
(z) Goods and Services Tax (“GST”)
Revenues, expenses and assets are recognised net of the amount of associated
GST, unless the amount of GST incurred is not recoverable from the Australian
Taxation Office (“ATO”). In this case, the GST is recognised as part of the cost
of 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 ATO is
included with other receivables or payables in the balance sheet.
Cash flows are presented in the cash flow statement on a gross basis. The GST
components of cash flows arising from investing or financing activities which are
recoverable from, or payable to the ATO, are presented as operating cash flows.
Aurizon Holdings Limited and its subsidiaries are grouped for GST purposes.
Therefore, any inter-company transactions within the Group do not attract GST.
(aa) Rounding of amounts
The Company is of a kind referred to in Class Order 98/100, issued by the
Australian Securities and Investments Commission, relating to the ‘rounding
off’ of amounts in the financial report. Amounts in the financial report have
been rounded off in accordance with that Class Order to the nearest hundred
thousand dollars, unless otherwise indicated.
(ab) New accounting standards and interpretations
Certain new accounting standards and interpretations have been published
that are not mandatory for 30 June 2013 reporting periods and have not
yet been applied in the financial statements. The Group’s assessment of the
impact of these new standards and interpretations is set out below.
(i) AASB 9 Financial Instruments, AASB 2009-11 Amendments to
Australian Accounting Standards arising from AASB 9, AASB 2010-7
Amendments to Australian Accounting Standards arising from AASB
9 (December 2010) and AASB 2012-6 Amendments to Australian
Accounting Standards – Mandatory Effective Date of AASB 9 and
Transition Disclosures (effective from 1 January 2015)
AASB 9 Financial Instruments addresses the classification, measurement and
derecognition of financial assets and financial liabilities. The standard is not
applicable until 1 January 2015 but is available for early adoption. When
adopted, the standard will affect in particular the Group’s accounting for its
available-for-sale financial assets, since AASB 9 only permits the recognition
of fair value gains and losses in other comprehensive income if they relate to
equity investments that are not held for trading.
There will be no impact on the Group’s accounting for financial liabilities, as the new
requirements only affect the accounting for financial liabilities that are designated
at fair value through profit or loss, and the Group does not have any such
liabilities. The derecognition rules have been transferred from AASB 139 Financial
Instruments: Recognition and Measurement and have not been changed. The
Group is considering early adopting the new standard before the operative date.
(ii) AASB 10 Consolidated Financial Statements, AASB 11 Joint
Arrangements, AASB 12 Disclosure of Interests in Other Entities, revised
AASB 127 Separate Financial Statements and AASB 128 Investments
in Associates and Joint Ventures and AASB 2011-7 Amendments to
Australian Accounting Standards arising from the Consolidation and
Joint Arrangements Standards and AASB 2012-10 Amendments to
Australian Accounting Standards – Transition Guidance and Other
Amendments (effective 1 January 2013)
In August 2011, the AASB issued a suite of five new and amended standards
which address the accounting for joint arrangements, consolidated financial
statements and associated disclosures.
AASB 10 replaces all of the guidance on control and consolidation in AASB 127
Consolidated and Separate Financial Statements, and Interpretation 12
Consolidation – Special Purpose Entities. The core principle that a consolidated
entity presents a parent and its subsidiaries as if they are a single economic
entity remains unchanged, as do the mechanics of consolidation. However, the
standard introduces a single definition of control that applies to all entities.
It focuses on the need to have both power and rights or exposure to variable
returns before control is present. Power is the current ability to direct the
activities that significantly influence returns. Returns must vary and can be
positive, negative or both. There is also new guidance on participating and
protective rights and on agent/principal relationships. The Group does not
expect the new standard to have a substantial impact on its composition.
financial report | auriZon
71
Notes to the consolidated financial statements
30 June 2013
1. Summary of significant accounting policies (continued)
(ab) New accounting standards and interpretations (continued)
(ii)
AASB 10 Consolidated Financial Statements, AASB 11 Joint
Arrangements, AASB 12 Disclosure of Interests in Other Entities, revised
AASB 127 Separate Financial Statements, AASB 128 Investments
in Associates and Joint Ventures, AASB 2011-7 Amendments to
Australian Accounting Standards arising from the Consolidation and
Joint Arrangements Standards and AASB 2012-10 Amendments to
Australian Accounting Standards – Transition Guidance and Other
Amendments (effective 1 January 2013) (continued)
AASB 11 introduces a principles based approach to accounting for joint
arrangements. The focus is no longer on the legal structure of joint
arrangements, but rather on how rights and obligations are shared by the
parties to the joint arrangement. Based on the assessment of rights and
obligations, a joint arrangement will be classified as either a joint operation
or a joint venture. Joint ventures are accounted for using the equity method,
and the choice to proportionately consolidate will no longer be permitted.
Parties to a joint operation will account their share of revenues, expenses,
assets and liabilities in much the same way as under the previous standard.
AASB 11 also provides guidance for parties that participate in joint
arrangements but do not share joint control. The Group does not expect
the new standard to have any significant impact on its financial statements.
AASB 12 sets out the required disclosures for entities reporting under the
two new standards, AASB 10 and AASB 11, and replaces the disclosure
requirements currently found in AASB 128. Application of this standard by
the Group will not affect any of the amounts recognised in the financial
statements, but will impact the type of information disclosed in relation
to the Group’s investments.
AASB 127 is renamed Separate Financial Statements and is now a standard
dealing solely with separate financial statements. Application of this standard
by the Group will not affect any of the amounts recognised in the financial
statements.
Amendments to AASB 128 provide clarification that an entity continues to
apply the equity method and does not re-measure its retained interest as part
of ownership changes where a joint venture becomes an associate, and vice
versa. The amendments also introduce a ‘partial disposal’ concept. There will
be no impact on the Group’s financial statements from these amendments.
The Group does not intend to adopt the new standards before their operative
date. They would therefore be first applied in the financial statements for the
annual reporting period ending 30 June 2014.
of the so called ‘corridor’ method) and the calculation of a net interest expense
or income by applying the discount rate to the net defined benefit liability
or asset. This replaces the expected return on plan assets that is currently
included in profit or loss. The standard also introduces a number of additional
disclosures for defined benefit liabilities/assets and could affect the timing of
the recognition of termination benefits. It also changes the distinction between
short and long-term benefits for measurement purposes to be based on when
payment is expected to be made, not when payment can be demanded.
Since Aurizon Holdings Limited does not have any defined benefit obligations,
the amendments are not expected to have any significant impact on the
Group’s financial statements. The Group does not intend to adopt the new
standard before their operative date, which means that it would be first applied
in the annual reporting period ending 30 June 2014.
(v) AASB 2012-3 Amendments to Australian Accounting Standard –
Offsetting Financial Assets and Financial Liabilities and AASB 2012-2
Disclosures -Offsetting Financial Assets and Financial Liabilities
(effective 1 January 2014 and 1 January 2013 respectively)
In June 2012, the AASB approved amendments to the application guidance
in AASB 132 Financial Instruments: Presentation, to clarify some of the
requirements for offsetting financial assets and financial liabilities in the
balance sheet. These amendments are effective from 1 January 2014.
They are unlikely to affect the accounting for any of the entity’s current
offsetting arrangements. However, the AASB has also introduced more
extensive disclosure requirements into AASB 7 which will apply from 1 January
2013. When they become applicable, the Group will have to provide a
number of additional disclosures in relation to its offsetting arrangements.
The Group intends to apply the new rules for the first time in the financial year
commencing 1 July 2013.
(vi) AASB 2011-4 Amendments to Australian Accounting Standards
to Remove Individual Key Management Personnel Disclosure
Requirements (effective 1 July 2013)
In July 2011, the AASB removed the individual key management personnel
(KMP) disclosure requirements from AASB 124 Related Party Disclosures, to
achieve consistency with the international equivalent standard and remove a
duplication of the requirements with the Corporations Act 2001. While this will
reduce the disclosures that are currently required in the notes to the financial
statements, it will not affect any of the amounts recognised in the financial
statements. The amendments apply from 1 July 2013 and cannot be adopted
early. The Corporations Act requirements in relation to remuneration reports
will remain unchanged for now, but these requirements are currently subject to
review and may also be revised in the near future.
(iii) AASB 13 Fair Value Measurement and AASB 2011-8 Amendments
(vii) AASB 2013-4 Amendments to Australian Accounting Standards
to Australian Accounting Standards arising from AASB 13
(effective 1 January 2013)
AASB 13 was released in September 2011. It explains how to measure fair
value and aims to enhance fair value disclosures. The Group has determined
the impact of the new guidance to be immaterial in future financial periods
based on current exposures. Application of the new standard will impact the
type of information disclosed in the notes to the financial statements. The
Group does not intend to adopt the new standard before its operative date,
which means that it would be first applied in the annual reporting period
ending 30 June 2014.
(iv) Revised AASB 119 Employee Benefits, AASB 2011-10 Amendments
to Australian Accounting Standards arising from AASB 119
(September 2011) (effective 1 January 2013)
In September 2011, the AASB released a revised standard on accounting for
employee benefits. It requires the recognition of all remeasurements of defined
benefit liabilities/assets immediately in other comprehensive income (removal
– Novation of Derivatives and Continuation of Hedge Accounting
(effective 1 January 2014)
In July 2013, the AASB made amendments to AASB 139 Financial Instruments:
Recognition and Measurement, which permits the continuation of hedge
accounting in circumstances where a derivative, which has been designated
as a hedging instrument and is novated from one counterparty to a central
counterparty as a consequence of laws or regulations. Since the Group
transacts derivatives directly with banks, the amendments are not expected to
have a significant impact on the Group’s financial statements. The Group does
not intend to adopt the new standard before its operative date, which means
that it would be first applied in the annual reporting period ending June 2015.
(ac) Parent entity financial information
The financial information for the parent entity, Aurizon Holdings Limited,
disclosed in note 36 has been prepared on the same basis as the consolidated
financial statements, except as set out below.
72
annual report 2012–13
Notes to the consolidated financial statements
30 June 2013
1. Summary of significant accounting policies (continued)
(ac) Parent entity financial information (continued)
Investments in subsidiaries, associates and joint venture entities
(i)
Investments in subsidiaries, associates and joint venture entities are
accounted for at cost in the financial statements of Aurizon Holdings Limited.
Dividends received from associates are recognised in the parent entity’s
income statement, rather than being deducted from the carrying amount
of these investments.
(ii) Tax consolidation legislation
Aurizon and its wholly-owned, Australian controlled entities have
implemented the tax consolidation legislation with effect from 22 November
2010. All Australian wholly-owned companies in the Aurizon Holdings Limited
Group are part of the tax consolidated group and are therefore taxed as a
single entity. The head entity of the tax consolidated group is Aurizon Holdings
Limited. The Group has notified the ATO that it has formed a tax consolidated
group, applying from 22 November 2010.
The head entity, Aurizon Holdings Limited, and the controlled entities in the tax
consolidated group account for their own current and deferred tax amounts.
These tax amounts are measured as if each entity in the tax consolidated
group continues to be a stand-alone taxpayer in its own right.
In addition to its own current and deferred tax amounts, Aurizon also
recognises the current tax liabilities (or assets) and the deferred tax assets
arising from unused tax losses and unused tax credits assumed from controlled
entities in the tax consolidation group.
The entities have also entered into a tax funding agreement which sets out
the funding obligations of members of the tax consolidated group in respect
of income tax amounts. The tax funding arrangements require payments to
the head entity equal to the current tax liability assumed by the head entity.
In addition, the head entity is required to make payments equal to the current
tax asset or deferred tax asset arising from unused tax losses and tax credits
assumed by the head entity from a subsidiary member.
These tax funding arrangements result in the head entity recognising a current
inter-entity receivable/payable equal in amount to the tax liability/asset assumed.
(iii) Employee benefits – share-based payments
The grant by the Company of rights over its equity instruments to the
employees of subsidiary undertakings in the Group is treated as a capital
contribution to that subsidiary undertaking. The fair value of employee services
received, measured by reference to the grant date fair value, is recognised over
the vesting period as an increase to investment in subsidiary undertakings, with
a corresponding credit to equity.
2. Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on
historical experience and other factors, including expectations of future events
that may have a financial impact on the entity and that are believed to be
reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom equal the
related actual results. The 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 discussed below.
Impairment
(i)
The Group considers annually whether there has been any indicators of
impairment and then tests whether non-current assets, including goodwill,
have suffered any impairment, in accordance with the accounting policy
stated in note 1(j). The recoverable amounts of cash generating units have
been determined based on value in use calculations or fair value less costs to
sell. These calculations require the use of assumptions. Refer to note 15 and
16 for further details on the carrying amounts of non-current assets subject to
impairment testing.
(ii) Employee benefits
The determination of the provisions required is dependent on specific
assumptions including expected wage increases, length of employee service
and bond rates. Refer to note 20 for more information.
(iii) Taxation
The Group’s accounting policy for taxation requires management’s judgement as
to the types of arrangements considered to be subject to tax. Judgement is also
required in assessing whether certain deferred tax assets and certain deferred tax
liabilities are recognised on the balance sheet. Deferred tax assets, including those
arising from non-recoupable tax losses, capital losses and temporary differences,
are recognised only when it is considered probable that they will be recovered.
Recoverability is dependent on the generation of sufficient future taxable profits.
Assumptions about the generation of future taxable profits depend on
management’s estimates of future cash flows. These in turn depend on
estimates of future sales volumes, operating costs, capital expenditure and
other capital management transactions. Judgements are also required about
the application of income tax legislation. These judgements and assumptions
are subject to risk and uncertainty; hence, there is a possibility that changes
in circumstances will alter expectations, which may impact the amount of
deferred tax assets and deferred tax liabilities recognised on the balance
sheet and the amount of other tax losses and temporary differences not yet
recognised. In such circumstances, some or all of the carrying amounts of
recognised deferred tax assets and liabilities may then require adjustment,
resulting in a corresponding credit or charge to the income statement.
Refer to notes 17 and 22 for carrying amounts of deferred tax assets and
deferred tax liabilities.
(iv) Depreciation
Management estimates the useful lives and residual values of property, plant
and equipment based on the expected period of time over which economic
benefits from use of the asset will be derived. Management reviews useful
life assumptions on an annual basis having given consideration to variables
including historical and forecast usage rates, technological advancements and
changes in legal and economic conditions. Refer to note 1(q) for details of
current depreciation rates used.
(v) Take or Pay
The calculation of Take or Pay is based on an assessment of access charges
from contracted railings that have not been achieved subject to an adjustment
for Aurizon Network Pty Ltd (“below rail”) cause. Below rail cause is based on
information on below rail versus operator/mine cancellations in the relevant
year. The estimate of Take or Pay is based on management’s judgement of
below rail cause and is recognised in the year in which the contractual railings
have not been achieved.
(vi) Significant strategic infrastructure projects
During the period, work continued on various significant infrastructure projects
in relation to above and below rail development. As at 30 June 2013, $108.1
million (2012: $51.7 million) of costs were capitalised. The previously reported
amount of $42.3 million for 2012 has been updated to $51.7 million to include
the costs for the Surat Basin Railway. The development costs relate to directly
attributable expenditure predominantly on engineering design, environmental
and building approvals and project management. Management’s judgement
has been applied to the extent to which capitalisation of these projects is
financial report | auriZon
73
Notes to the consolidated financial statements
30 June 2013
2. Critical accounting estimates and judgements (continued)
(vi) Significant strategic infrastructure projects (continued)
appropriate. The application of this judgement will be re-assessed throughout
the life of the projects.
In March 2013, Aurizon and GVK Coal Infrastructure (Singapore) Pte Ltd
(GVK Hancock) signed a non-binding term sheet to jointly progress the
development of rail and port infrastructure to unlock Galilee basin coal
reserves and a process to support the next phase of coal growth in the
Bowen Basin. Under the proposed framework Aurizon would acquire a majority
(51%) interest in Hancock Coal Infrastructure Pty Ltd (HCI), which owns GVK
Hancock’s rail and port projects. This follows the Queensland Government
declaring the project to be of State significance in early 2012.
Aurizon and GVK Hancock are seeking the development of a potential 60 mtpa
port and rail project that would underpin the opening of reserves in the Galilee
basin and continued growth of the Bowen basin. Following completion of the
transaction, Aurizon would gain the rights to operate and jointly manage with
GVK the rail infrastructure and to exclusively provide above rail haulage from
GVK Hancock’s Alpha and Kevin’s Corner mines for up to 60mtpa of coal.
Aurizon is continuing to work with a range of stakeholders in the Pilbara in
Western Australia regarding the establishment of a standard gauge heavy haul
railway line linking the Hamersley Ranges to the Port Hedland Port and the yet
to be constructed Anketell Port, with Aurizon providing above and below rail
services. In July 2013 Aurizon and Brockman Australia entered into a binding
Relationship Agreement for a period of three years under which Aurizon will
be the exclusive supplier to develop and operate the infrastructure required by
Brockman Australia. Aurizon is also continuing to engage in discussions with
other miners and stakeholders in the Pilbara.
Aurizon is a one-third joint venture partner in the Surat Basin Railway with the
ATEC Rail Group and Glencore Xstrata Coal. The proposed Surat Basin Rail in
Central Queensland includes a new 210 kilometre rail corridor from Wandoan
to the Moura system near Banana, 130 kilometres west of Gladstone, which
will align with the second stage of the development of the Wiggins Island Coal
Export Terminal (yet to be committed).
3. Financial risk management
The Group has exposure to a variety of financial risks including market risk
(foreign exchange risk, interest rate risk and fuel price risk), credit risk and
liquidity risk. Risk management is carried out by a central Treasury function on
behalf of the Group under Treasury Policies approved by the Board. Trading for
speculation is strictly prohibited. Compliance with the Policies is monitored on
an ongoing basis through regular reporting to the Board.
(a) Market risk
Market risk is the risk that adverse movements in fuel price, foreign exchange,
interest rates and equity prices will affect the Group’s financial performance or
the value of its holdings of financial instruments. The Group measures market
risk using cash flow at risk. The objective of risk management is to manage the
market risks inherent in the business to protect profitability and return on assets.
(i) Foreign exchange risk
Exposure to foreign exchange risk
Foreign exchange risk arises from commercial transactions and recognised
assets and liabilities that are denominated in or related to a currency that is
not the entity’s functional currency. These transactions apply in large part to
the US Dollar (“USD”) and the Euro (“EUR”).
The Group’s exposure to foreign currency risk together with the derivatives
which have been entered into to manage these exposures at the end of the
reporting period, expressed in AUD, was as follows:
Cash and cash equivalents
Net forward exchange contracts
Net exposures
2013
2012
USD
$m
0.9
(5.8)
(4.9)
EUR
$m
1.4
(3.1)
(1.7)
USD
$m
1.1
(8.8)
(7.7)
EUR
$m
0.1
(5.1)
(5.0)
Risk management
In order to protect against foreign exchange movements, the Group enters into
forward foreign exchange contracts. These contracts are hedging highly probable
forecast foreign currency exposures. Such contracts are designated as cash flow
hedges. Realised gains or losses on these contracts arise due to differences between
the spot rates on settlement and the forward rates of the derivative contracts.
During the year, the net realised loss arising from foreign exchange hedging
activities for the Group was $1.0 million (2012: loss of $16.3 million) as a
result of the AUD appreciating above the average hedged price. Of this net
amount, a realised loss of $0.5 million (2012: loss of $9.3 million) represents
the effective portion of the hedges which has been recognised in the relevant
expenditure category or capitalised to a project, and a realised loss of
$0.5 million (2012: loss of $7.0 million) represents the ineffective portion
of hedges and non-designated derivatives which have been recognised in
other expenses.
(ii) Fuel price risk
Exposure to fuel price risk
Fuel price risk arises on the Group’s exposure to fuel prices, predominately
Gasoil. Fuel price risk exposure has decreased significantly during the year as
a result of fuel price risk management incorporated in new form customer
contracts. As a result, residual exposures were immaterial for the Group.
Risk management
In order to protect against adverse fuel price movements, the Group from time
to time enters into commodity swap contracts. During the reporting period no
commodity hedging contracts were undertaken by the Group.
In the prior period, fuel commodity hedging derivatives were closed out for a
net realised gain of $9.9 million. Of this net amount, a realised gain of
$6.0 million represented the effective portion of the hedges, which was
recognised in diesel expense, and $3.9 million represented the ineffective
portion which was recognised in other expenses.
(iii) Interest rate risk
Exposure to interest rate risk
The Group holds both interest bearing assets and interest bearing liabilities,
and therefore the Group’s income and operating cash flows are subject to
changes in market interest rates.
The Group’s main interest rate risk arises from long term borrowings.
Borrowings issued at variable rates expose the Group to cash flow interest rate
risk. The Group manages its cash flow interest rate risk by using floating-to-
fixed interest rate swaps.
At the reporting date, the interest rate profile of the Group’s interest bearing
financial instruments was:
74
annual report 2012–13
Notes to the consolidated financial statements
30 June 2013
3. Financial risk management (continued)
(iii)
Interest rate risk (continued)
30 June 2013
30 June 2012
Weighted
average
interest rate Balance
$m
%
Weighted
average
interest rate
%
Balance
$m
4.3% 2,525.0
5.4% 1,220.0
3.5%
(300.0)
3.6% (500.0)
2,225.0
720.0
Bank overdrafts
and bank loans
Interest rate
swaps
Net exposure
cash flow
interest rate risk
Risk management
In order to protect against adverse interest rate movements, the Group enters
into derivative contracts.
During the year, the net realised loss arising from interest rate hedging
activities for the Group was $2.0 million (2012: gain of $1.5 million) as a result
of market interest rates closing lower than the average hedged rate. The total
realised loss represents the effective portion of the hedges which has been
recognised in interest expense.
The Group accounts for financial assets at fair value through profit or loss, and
financial liabilities at amortised cost using the effective interest method.
(iv) Sensitivity on foreign exchange and interest rate risk
The following table summarises the gain/(loss) impact of reasonably possible
changes in market risk, relating to existing financial instruments, on net
profit and equity before tax. For the purpose of this disclosure, the following
assumptions were used:
>
15 per cent (2012: 15 per cent) appreciation/depreciation of foreign
currency rates
100 basis points increase/decrease in interest rates
Sensitivity analysis assumes hedge designations and effectiveness test
results as at 30 June 2013 remain unchanged
Sensitivity analysis is isolated for each risk assuming all other variables
remain constant
Sensitivity analysis on foreign currency rates represent current market
conditions.
>
>
>
>
Profit
(before
tax)
Equity
(before
tax)
2013
$m
2012
$m
2013
$m
2012
$m
-
-
-
-
0.2
-
(0.1)
-
1.0
0.6
1.5
0.9
(0.7)
(0.4)
(1.1)
(0.7)
15% movement in foreign currency
rates
15% decrease in foreign currency rates
USD depreciation
EUR depreciation
15% increase in foreign currency rates
USD appreciation
EUR appreciation
Profit
(before
tax)
Equity
(before
tax)
2013
$m
2012
$m
2013
$m
2012
$m
23.2
10.9
-
-
-
-
(0.8)
(4.2)
100 bps movement in interest rates
100 bps decrease in interest rates
Borrowings
Derivatives
100 bps increase in interest rates
Borrowings
Derivatives
(23.2)
(10.9)
-
-
-
0.8
-
4.2
During the period, fuel price risk exposures remained immaterial therefore no
sensitivity analysis was required.
(b) Credit risk
Credit risk is managed on a Group basis. Credit risk is the risk of financial loss to
the Group if a customer or counterparty to a financial instrument fails to meet
its contractual obligations. Credit risk arises from cash and cash equivalents,
derivative financial instruments, deposits with financial institutions and
receivables from customers.
The maximum exposure to credit risk, excluding the value of any collateral or
other security, at balance date to recognised financial assets, is the carrying
amount, net of any provisions for impairment of those assets, as disclosed in
the balance sheet and notes to the financial statements. Credit risk further
arises in relation to financial guarantees given to certain parties. Refer to
note 3(d) for further details.
The Group does not have any material credit risk exposure to any single
receivable or group of receivables under financial instruments entered into by
the Group. For some trade receivables, the Group may also obtain security in
the form of guarantees, deeds of undertaking or letters of credit which can be
called upon if the counterparty is in default under the terms of the agreement.
Refer to note 3(d) for further details.
The Group has policies in place to ensure that sales of services are only made
to customers with an appropriate credit profile. If customers are independently
rated, these ratings are used. Otherwise, if there is no independent rating, the
credit quality of the customer is assessed, taking into account its financial
position, past experience and other factors.
Credit risk on cash transactions and derivative contracts is managed through
the Board approved Group Treasury Policies which restricts the Group
to financial institutions whose long-term credit ratings, determined by a
recognised ratings agency, are at or above the minimum rating of A- .
This Policy also limits the amount of credit exposure to any one financial
institution. The Group’s net exposures and the credit ratings of its
counterparties are regularly monitored.
An analysis of the Group’s trade and other receivables that have been impaired
and the ageing of those that are past due but not impaired at the balance
date is presented in note 10(b).
(c) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulties in meeting
the obligations associated with its financial liabilities. The Group’s approach
to managing liquidity is to ensure, as far as possible, sufficient liquidity is
available to meet its liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage to the
Group’s reputation.
financial report | auriZon
75
Notes to the consolidated financial statements
30 June 2013
3. Financial risk management (continued)
Financing arrangements
The Group has access to the following arrangements at the end of the reporting period:
Aurizon Finance
Working capital facility
Syndicated facility
Syndicated facility
Syndicated facility
Syndicated facility
Aurizon Network
Working capital facility
Term loan facility
Syndicated facility
Syndicated facility
Total Group financing arrangements
Security
Maturity
Unsecured
Unsecured
Unsecured
Unsecured
Unsecured
Unsecured
Unsecured
Unsecured
Unsecured
Jun-2014
Dec-2014
Dec-2015
Jun-2016
Jun-2018
Jun-2014
Jun-2014
Jun-2016
Jun-2018
Utilised
Facility limit
2013
54.5
-
-
300.0
-
354.5
6.2
500.0
1,200.0
525.0
2,231.2
2,585.7
2012
-
1,200.0
25.0
-
-
1,225.0
-
-
-
-
-
1,225.0
2013
150.0
-
-
300.0
300.0
750.0
100.0
500.0
1,200.0
1,300.0
3,100.0
3,850.0
2012
-
1,425.0
1,575.0
-
-
3,000.0
-
-
-
-
-
3,000.0
During the year, the Group implemented a new long-term capital structure whereby standalone debt facilities were placed at the Aurizon level through Aurizon Finance
Pty Ltd and in its subsidiary Aurizon Network Pty Ltd. The Group repaid and cancelled its existing $3,000 million Syndicated Facility Agreement, which was drawn to
$2,415 million using the standalone debt facilities in Aurizon Finance and Aurizon Network.
Within the working capital facilities, the Group has access to financial accommodation arrangements totalling $250 million (2012: $52 million) which may be
utilised in the form of a short-term working capital funding and the issuance of insurance bonds, bank guarantees and performance guarantees. At the end of the
reporting period, the Group utilised $60.7 million (2012: $54.1 million) for financial bank guarantees.
The following table summarises the contractual timing of undiscounted cash flows, including estimated interest payments, of financial liabilities and derivative
instruments. The contractual amount assumes current interest rates and foreign exchange rates estimated using forward curves applicable at the end of the
reporting period.
Less than
1 year
$m
Between
1 and 5 years
$m
Over
5 years
$m
Total
contractual
cash flows
$m
Carrying amount
(assets)/
liabilities
$m
2013
Non-derivatives
Non-interest bearing
Borrowings
Financial guarantees
Total non-derivatives
Derivatives
Interest rate swaps used for hedging (net settled)
Foreign exchange contracts used for hedging
– (inflow)
– outflow
Total derivatives
2012
Non-derivatives
Non-interest bearing
Borrowings
Financial guarantees
Total non-derivatives
Derivatives
Interest rate swaps used for hedging (net settled)
Foreign exchange contracts used for hedging
– (inflow)
– outflow
320.7
98.9
60.7
480.3
1.3
(6.9)
6.5
0.9
349.6
60.2
54.1
463.9
(0.4)
(11.3)
12.1
-
2,784.3
-
2,784.3
-
(2.1)
1.9
(0.2)
-
1,254.6
-
1,254.6
(0.5)
(2.6)
3.0
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
320.7
2,883.2
60.7
3,264.6
1.3
(9.0)
8.4
0.7
349.6
1,314.8
54.1
1,718.5
(0.9)
(13.9)
15.1
320.7
2,478.6
-
2,799.3
0.7
(0.5)
-
-
0.2
349.6
1,201.6
-
1,551.2
2.4
0.8
-
-
76
annual report 2012–13
Notes to the consolidated financial statements
30 June 2013
3. Financial risk management (continued)
Total derivatives
0.4
(0.1)
-
0.3
3.2
(d) Fair value measurements
The net fair value of cash, cash equivalents and non-interest bearing financial assets and liabilities approximates their carrying value due to their short maturity.
The net fair value of other financial assets and liabilities is determined by valuing them at the present value of future contracted cash flows. Cash flows are
discounted using standard valuation techniques at the applicable market yield, having regard to the timing of the cash flows.
The net fair value of forward foreign exchange contracts is determined as the unrealised gain/loss at balance date by reference to market exchange rates. The net
fair value of interest rate swaps is determined as the present value of future contracted cash flows. Cash flows are discounted using standard valuation techniques
at the applicable market yield, having regard to the timing of the cash flow.
Financial assets carried
at fair value
Forward exchange contracts
Interest rate swaps
Financial assets carried
at amortised cost
Cash and cash equivalents
Trade and other receivables
Financial liabilities carried
at fair value
Forward exchange contracts
Interest rate swaps
Financial liabilities carried
at amortised cost
Trade and other payables
Borrowings
Off-balance sheet
Unrecognised financial assets
Third party guarantees
Bank guarantees
Insurance company guarantees
Unrecognised financial liabilities
Bank guarantees
Fair value hierarchy
The table on the right analyses financial instruments carried at fair value,
by valuation method. The different levels have been defined as follows:
>
Level 1: quoted prices (unadjusted) in active markets for identical assets
or liabilities
Level 2: inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (i.e. as prices)
or indirectly (i.e. derived from prices)
Level 3: inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
>
>
Carrying amount
2013
$m
0.6
-
0.6
107.6
579.5
687.1
(0.1)
(0.7)
(0.8)
2012
$m
0.1
-
0.1
98.8
548.1
646.9
(0.9)
(2.4)
(3.3)
Fair value
2013
$m
0.6
-
0.6
107.6
579.5
687.1
(0.1)
(0.7)
(0.8)
2012
$m
0.1
-
0.1
98.8
548.1
646.9
(0.9)
(2.4)
(3.3)
(320.7)
(2,478.6)
(2,799.3)
(349.6)
(1,201.6)
(1,551.2)
(320.7)
(2,558.8)
(2,879.5)
(349.6)
(1,210.6)
(1,560.2)
-
-
-
-
-
2013
Derivative financial assets
Derivative financial liabilities
Net financial instruments
measured at fair value
2012
Derivative financial assets
Derivative financial liabilities
Net financial instruments
measured at fair value
-
-
-
-
-
42.3
178.9
10.0
(60.7)
170.5
48.5
247.4
27.3
(54.1)
269.1
Level 1
$m
Level 2
$m
Level 3
$m
Total
$m
-
-
-
0.6
(0.8)
(0.2)
-
-
-
Level 1
$m
Level 2
$m
Level 3
$m
-
-
-
0.1
(3.3)
(3.2)
-
-
-
0.6
(0.8)
(0.2)
Total
$m
0.1
(3.3)
(3.2)
financial report | aUriZon
77
Notes to the consolidated financial statements
30 June 2013
4. Segment information
(a) Description of segments
Business Segments
The Group has determined operating segments based on the operating
structure of the Group and the different reports reviewed by the Executive
Committee. The segments are based on the operational structure of the Group
and the different products and services provided by each segment. The chief
operating decision-makers assess the performance of the operating segments
based on the underlying earnings before interest and tax (“EBIT”). Amounts
included in the report by the chief operating decision-maker are in accordance
with the Group’s accounting policies.
The following summary describes the operations in each of the Group’s
reportable segments:
Network
Provision of access to, and operation and management of the Central
Queensland Coal Network (CQCN). Provision of below rail design, construction,
overhaul, maintenance and management services to the Group.
Coal
Transport of coal from mines in Queensland and New South Wales to end
customers and ports.
Iron Ore
Transport of iron ore from mines in Western Australia to ports.
Freight
Transport of bulk mineral commodities, agricultural products, mining and
industrial inputs and general freight throughout Queensland, New South Wales
and Western Australia, and containerised freight throughout Australia.
Unallocated
Items of revenue and expense of a corporate nature, ineffective hedging gains
and losses, and minor operations within the Group including third party above
rail provision of overhaul and maintenance services to external customers.
Interest expense for the entire Group is not allocated to specific segments
but rather recorded as a corporate expense. With the exception of property,
plant and equipment, asset and liability positions of the Group are only
reviewed at the consolidated level.
(b) Segment information
2013
Segment revenue
Revenue from external customers
Services revenue
Track access
Freight transport
Other services
Other revenue
Total revenue from external customers
Intersegment revenue
Services revenue
Track access
Freight transport
Other services
Other revenue
Total intersegment revenue
Total revenue
Other income (note 6)
Total segment revenue and other
income
Intersegment elimination
Consolidated revenue and other income
Segment result
Underlying EBITDA
Depreciation and amortisation
Underlying EBIT
Significant adjustments (note 4(c))
EBIT
Net finance costs
Profit before income tax
Income tax expense
Profit for the year
Other segment information
Property, plant and equipment
Network
$m
Coal
$m
Iron Ore
$m
Freight
$m
Unallocated
$m
Total
$m
212.7
-
79.2
51.3
343.2
708.2
-
10.7
-
718.9
776.3
1,077.1
-
7.7
1,861.1
-
1.5
-
-
1.5
1,062.1
(4.0)
1,862.6
0.1
1,058.1
1,862.7
-
356.4
-
0.1
356.5
-
-
-
-
-
356.5
-
356.5
3.4
884.4
147.1
37.5
1,072.4
0.2
8.6
-
-
8.8
1,081.2
0.5
1,081.7
-
-
-
90.9
90.9
-
-
-
100.0
100.0
190.9
44.8
235.7
623.4
(199.2)
424.2
494.3
(174.4)
319.9
133.4
(36.8)
96.6
79.6
(56.6)
23.0
(80.0)
(29.3)
(109.3)
992.4
2,317.9
226.3
187.5
3,724.1
708.4
10.1
10.7
100.0
829.2
4,553.3
41.4
4,594.7
(829.2)
3,765.5
1,250.7
(496.3)
754.4
(68.8)
685.6
(103.3)
582.3
(135.4)
446.9
4,961.0
2,967.9
505.0
756.4
283.1
9,473.4
78
annUal report 2012–13
Notes to the consolidated financial statements
30 June 2013
4. Segment information (continued)
2012
Segment revenue
Revenue from external customers
Services revenue
Track access
Freight transport
Other services
Other revenue
Total revenue from external customers
Intersegment revenue
Services revenue
Track access
Freight transport
Other services
Other revenue
Total intersegment revenue
Total revenue
Other income (note 6)
Total segment revenue and other
income
Intersegment elimination
Consolidated revenue and other income
Segment result
Underlying EBITDA
Depreciation and amortisation
Underlying EBIT
Significant adjustments (note 4(c))
EBIT
Net finance costs
Profit before income tax
Income tax expense
Profit for the year
Other segment information
Property, plant and equipment
Network
$m
Coal
$m
Iron ore
$m
Freight
$m
Unallocated
$m
Total
$m
106.5
-
108.6
53.3
268.4
637.6
-
17.7
-
655.3
923.7
(3.5)
731.8
1,026.0
-
11.4
1,769.2
-
2.3
-
-
2.3
1,771.5
0.5
920.2
1,772.0
519.0
(185.3)
333.7
433.2
(176.2)
257.0
-
196.7
-
-
2.8
913.4
178.0
61.6
196.7
1,155.8
-
8.8
-
-
8.8
1,164.6
7.9
1,172.5
-
-
-
-
-
196.7
-
196.7
53.5
(21.8)
31.7
-
-
-
113.9
113.9
-
-
-
97.6
97.6
211.5
27.4
238.9
119.3
(51.1)
68.2
(76.8)
(29.3)
(106.1)
841.1
2,136.1
286.6
240.2
3,504.0
637.6
11.1
17.7
97.6
764.0
4,268.0
32.3
4,300.3
(764.0)
3,536.3
1,048.2
(463.7)
584.5
8.8
593.3
(39.0)
554.3
(113.4)
440.9
4,520.4
3,117.0
448.5
697.3
254.0
9,037.2
Coal Take or Pay revenue (amounts recovered from customers) has been reclassified as track access revenue (previously freight transport revenue) to more
accurately reflect the nature of this revenue.
(c) Significant adjustments
The Group’s underlying results differ from the statutory result. The exclusion
of certain items permits a more appropriate and meaningful analysis of the
Group’s underlying performance on a comparative basis. The significant
adjustments for the current and prior year are:
Voluntary redundancy schemes
Stamp duty
Total significant adjustments
2013
$m
95.7
(26.9)
68.8
2012
$m
-
(8.8)
(8.8)
2013
A major voluntary redundancy scheme was carried out during the year,
960 employees accepted the redundancy offer at a total cost of $95.7 million.
In 2010, the Group recognised an expense of $24.9 million for stamp duty
paid in relation to the 2006 acquisition of Australian Railroad Group (“ARG”).
The amount was paid based on an assessment issued by the Western Australia
(WA) Office of State Revenue (OSR) and as required under the Group’s Joint
Acquisition Agreement (“JAA”) with Brookfield Infrastructure Group (Australia)
Pty Ltd (“Brookfield”) (previously Prime Infrastructure). Brookfield, as the
primary legal party to the dispute, successfully appealed the stamp duty
assessment through to the Supreme Court of WA. Accordingly, on 24 June
2013, the WA OSR issued a reassessment of stamp duty and refunded the
stamp duty together with interest to Brookfield. On 27 June 2013 Brookfield
in turn refunded to Aurizon $26.9 million including penalty interest of
$2.1 million.
2012
New South Wales (NSW) stamp duty was triggered on 21 September
2010 with the interposing of Aurizon Holdings Limited as part of the
pre-IPO restructuring.
financial report | aUriZon
79
Notes to the consolidated financial statements
30 June 2013
4. Segment information (continued)
7. Expenses
(c) Significant adjustments (continued)
At the time of interposing there were some uncertainties regarding whether
NSW, stamp duty should be payable in respect of only the land held by the
Group in NSW or both the land and other assets (i.e. rollingstock) held in
NSW. Aurizon lodged an application with the NSW Office of State Revenue
(“OSR”) that stamp duty was only payable on the land, however at the time
of IPO, Aurizon raised a provision of $11.0 million on the assumption that
OSR may impose stamp duty on both land and rollingstock. After review, the
OSR confirmed that stamp duty was only payable in respect of the land ($2.2
million). Accordingly, the remaining provision of $8.8 million was released back
to the income statement.
(d) Customer disclosure
The nature of the Group’s business is that it enters into long-term contracts
with key customers. It also earns material revenues from the State of Queensland
for Transport services contracts. There is one customer that falls above the
10 per cent threshold that requires disclosure under the Accounting Standards.
This customer represents approximately $459.7 million (2012: $335.1 million)
of the Group’s total revenue.
5. Revenue
Services revenue
Track access
Freight transport
Other services revenue
Other revenue
2013
$m
2012
$m
992.4
841.1
2,317.9
2,136.1
226.3
187.5
286.6
240.2
3,724.1
3,504.0
Included in Track access is $59.5 million ($49.2 million rolled forward at the
approved weighted average cost of capital) (2012: nil) of Revenue Cap recovered
in the year in relation to contractual railings that were not achieved in 2011.
Also included in Track access is Take or Pay revenue of $52.0 million (2012:
$54.7 million) relating to the current year.
Included within the Freight transport revenue is $37.4 million (2012:
$28.6 million) of Deficit Tonnage Charges.
Included in Other services is revenue from Transport Service Contracts
(for Regional Freight and Livestock Transport Services) from the State of
Queensland of $146.8 million (2012: $177.9 million) including $18.5 million
(2012: $33.0 million) of accrued additional payments due to Aurizon under
the contract.
Profit/(loss) before income tax includes the following
specific expenses:
Consumables
Repairs and maintenance
Track access
Energy and fuel (*)
Other
Total consumables
Employee benefits expenses
Defined benefit superannuation expense
Defined contribution superannuation expense
Voluntary redundancies and ex-gratia payments
Salaries, wages and allowances
Other employment expenses including on-costs
Total employee benefit expense
Depreciation and amortisation expense
Depreciation
Amortisation
Total depreciation and amortisation of property,
plant and equipment (note 15)
Other amortisation
Software
Customer contracts
Total other amortisation (note 16)
2013
$m
2012
$m
284.8
328.9
374.8
364.7
1,353.2
18.5
68.9
95.7
619.0
380.4
1,182.5
290.2
371.4
332.1
308.6
1,302.3
21.0
64.0
14.9
686.9
345.9
1,132.7
305.8
183.9
322.8
122.8
489.7
445.6
5.2
1.4
6.6
16.3
1.8
18.1
Total depreciation and amortisation expense
496.3
463.7
Other expenses
Rental expense relating to leases
Inventory obsolescence
Research and development
Losses on derivatives at fair value through profit or loss
Stamp duty
Impairment losses – trade receivables
Other expenses
Total other expenses
36.2
2.0
0.4
0.3
-
5.1
7.0
51.0
18.9
2.9
0.1
1.1
0.2
0.7
18.0
41.9
* The 2012 comparative for Energy and Fuel includes the reclassification of diesel fuel
rebates of $97.8 million from Other Income (note 6) to conform to the presentation in
the current financial year.
2013
$m
2012
$m
6. Other income
Net gain on disposal of property, plant and equipment
Fair value gains on financial assets at fair value through
profit or loss
Foreign exchange gains (net)
Interest revenue
Stamp duty recovery
Other income
2013
$m
11.8
-
0.1
2.3
26.9
0.3
41.4
2012
$m
16.2
0.6
0.1
2.5
8.8
4.1
32.3
Finance costs
Interest and finance charges paid/payable
123.4
88.6
Provisions: unwinding of discount/change
in discount rate
Total finance costs
Amount capitalised to qualifying assets (a)
Finance costs expensed
4.4
127.8
(1.7)
86.9
(22.2)
(45.4)
105.6
41.5
(a) Capitalised borrowing costs
The capitalisation rate used to determine the amount of borrowing costs to
be capitalised is the weighted average interest rate applicable to the entity’s
outstanding borrowings during the year of 5.00 per cent (2012: 6.10 per cent).
80
annual report 2012–13
Notes to the consolidated financial statements
30 June 2013
8.
Income tax expense
(a) Income tax expense
Current tax
Deferred tax
Deferred tax base reset on consolidation and
privatisation
Prior period adjustments – deferred tax
Prior period adjustments – current tax
Income tax expense is attributable to:
Profit/(loss) from continuing operations
Deferred income tax expense included in income tax
expense comprises:
(Increase) decrease in deferred tax assets (note 17)
Increase (decrease) in deferred tax liabilities (note 22)
The Group has notified the ATO that it has formed a tax consolidated group,
applying from 22 November 2010.
(f) Tax base reset
During the year ended 30 June 2011, as a consequence of the privatisation
of Aurizon Holdings Limited and the proposed election to consolidate its
wholly-owned Australian subsidiaries under the Australian tax consolidation
regime, the Group reset the tax base of its assets and liabilities as required by
the specific privatisation tax rules and the tax consolidation regime. Due to a
reassessment of this net tax benefit upon privatisation, an additional income
tax benefit of $33.3 million was recognised in the year ended 30 June 2012.
(g) Tax sharing agreement
The entities within the Aurizon Holdings Limited tax consolidated group have
entered into a tax sharing agreement which limits the joint and several liability
of the wholly-owned entities in the case of a default by the head entity.
(h) Tax expense – non-assessable income
This amount represents accounting income recognised by the Group during the
year which relates to transactions or events occurring pre-IPO. This income is
non-assessable for income tax purposes under tax privatisation legislation.
2013
$m
85.2
58.2
2012
$m
7.9
138.8
-
(33.3)
(12.6)
4.6
-
-
135.4
113.4
135.4
113.4
(43.8)
89.4
45.6
45.3
60.2
105.5
(b) Numerical reconciliation of income tax expense to prima facie tax
payable
Profit before income tax expense
Tax at the Australian tax rate of 30% (2012: 30%)
Tax effect of amounts which are not deductible
(taxable) in calculating taxable income:
Entertainment
Research and development
Tax base reset on consolidation and privatisation
(note 8(f))
Non-assessable income (note 8(h))
Stamp duty refund on acquisition of subsidiary
(note 4(c))
Stamp duty on business restructure (note 4(c))
Other
Adjustment for income tax of previous periods
Total income tax expense
2013
$m
582.3
174.7
2012
$m
554.3
166.3
0.2
(6.5)
0.2
(6.0)
-
(17.5)
(33.3)
(7.7)
(8.1)
-
0.6
(8.0)
-
(2.7)
(3.4)
-
135.4
113.4
(c) Tax expense relating to items of other comprehensive income
9. Cash and cash equivalents
Cash on hand
Cash at bank
Total cash and cash equivalents
10. Trade and other receivables
Current
Trade receivables
Provision for impairment of receivables (a)
Net trade receivables
Other receivables
2013
$m
-
107.6
107.6
2012
$m
-
98.8
98.8
2013
$m
2012
$m
450.7
384.5
(8.0)
(2.9)
442.7
136.8
579.5
381.6
166.5
548.1
Other receivables include revenue for services performed but not yet invoiced
under contracts including Take or Pay and Transport Services Contract and a
provision for impairment of $4.1 million (2012: nil).
Cash flow hedges
2013
$m
0.9
2012
$m
0.1
(a) Impaired trade receivables
As at 30 June 2013, the amount of the provision for impaired trade receivables
was $8.0 million (2012: $2.9 million).
Movements in the provision for impairment of receivables are as follows:
(d) Tax privatisation legislation
Entities within the Group exited the State administered National Tax
Equivalents Regime upon privatisation on 22 November 2010. At the same
time, Aurizon Holdings Limited and its wholly-owned Australian subsidiaries
entered the Federal Tax Regime.
(e) Tax consolidation
Aurizon Holdings Limited and its wholly-owned Australian subsidiaries have
implemented the tax consolidation legislation as of 22 November 2010.
All Australian wholly-owned companies in the Aurizon Holdings Limited
Group are part of the tax consolidated group and are therefore taxed as
a single entity.
At 1 July
Provision for impairment recognised during the year
Receivables written off during the year as uncollectable
Unused amounts reversed
At 30 June
2013
$m
2012
$m
2.9
5.8
(0.4)
(0.3)
8.0
2.2
1.3
-
(0.6)
2.9
financial report | auriZon
81
Notes to the consolidated financial statements
30 June 2013
10. Trade and other receivables (continued)
12. Derivative financial instruments
Impaired trade receivables (continued)
(a)
The creation or release of the provision for impaired receivables has been
included in the income statement. Amounts charged to the provision account are
generally written off when there is no expectation of recovering additional cash.
Based on the credit history of the other classes within trade and other
receivables, it is expected that these amounts will be received when due.
(b) Past due but not impaired
As at 30 June 2013, trade receivables of $64.2 million (2012: $59.1 million)
were past due but not impaired. These relate to a number of customers
for whom there is no recent history of default. The ageing of these trade
receivables is as follows:
Up to 3 months
3 to 6 months
Over 6 months
11. Inventories
Current
Raw materials and stores – at cost
Work in progress – at cost
Non-current
Raw materials and stores – at cost
Provision for inventory obsolescence
Inventory at lower of cost or net realisable value
2013
$m
27.1
1.9
35.2
64.2
2012
$m
48.4
5.1
5.6
59.1
2013
$m
2012
$m
198.9
13.3
212.2
2013
$m
204.0
11.8
215.8
2012
$m
25.7
(6.7)
19.0
14.1
(5.4)
8.7
2013
$m
2012
$m
Current assets
Forward exchange contracts – cash flow hedges
Total current derivative financial instrument assets
Non-current assets
Forward foreign exchange contracts – cash flow hedges
Total non-current derivative financial instruments
Total derivative financial instrument assets
Current liabilities
Forward exchange contracts – cash flow hedges
Interest rate swap contracts – cash flow hedges
Total current derivative financial instrument liabilities
Non-current liabilities
Forward exchange contracts – cash flow hedges
Interest rate swap contracts – cash flow hedges
Total non-current derivative financial instrument
liabilities
0.4
0.4
0.2
0.2
0.6
0.1
0.7
0.8
-
-
-
Total derivative financial instrument liabilities
0.8
0.1
0.1
-
-
0.1
0.7
0.6
1.3
0.2
1.8
2.0
3.3
(a) Instruments used by the Group
The Group holds derivative financial instruments to hedge (including
economically hedge) its foreign currency and interest rate exposures in
accordance with the Group’s financial risk management policy (refer to note 3).
13. Other assets
Current
Prepayments
2013
$m
2012
$m
10.2
10.2
8.0
8.0
(a) Inventory expense
Inventory recognised as expense during the year ended 30 June 2013
amounted to $674.8 million (2012: $707.4 million). Write-downs of inventories
to net realisable value recognised as an expense during the year ended
30 June 2013 amounted to $2.3 million (2012: $1.9 million).
14. Investments accounted for using the equity method
Investments in associates (refer note 29(d))
Interest in joint ventures (refer note 29(c))
2013
$m
78.7
0.5
79.2
2012
$m
77.5
0.5
78.0
82
annual report 2012–13
Notes to the consolidated financial statements
30 June 2013
15. Property, plant and equipment
2013
Opening net book amount
Additions
Transfers between asset classes
Disposals
Impairment reversal
Asset classified as held-for-sale
Depreciation/amortisation
Closing net book amount
Cost
Accumulated depreciation and impairment
losses
Net book amount
Owned
Leased
2012
Opening net book amount
Additions
Transfers between asset classes
Disposals
Impairment reversal
Assets classified as held for sale
Depreciation/amortisation expense
Closing net book amount
Cost
Accumulated depreciation and impairment
Net book amount
Owned
Leased
Assets under
construction
$m
Land
$m
Build ings
$m
Plant and
equipment
$m
Rolling stock Infra structure
$m
$m
Total
$m
426.3
941.1
(495.9)
(0.2)
-
-
-
871.3
871.3
-
871.3
871.3
-
871.3
-
1,365.7
1,166.0
(2,107.5)
-
2.1
-
-
426.3
426.3
-
426.3
426.3
-
426.3
175.3
-
(10.2)
(0.7)
-
(13.8)
-
150.6
150.6
-
150.6
150.6
-
150.6
182.9
-
1.6
(2.7)
-
(6.5)
-
175.3
175.3
-
175.3
175.3
-
175.3
356.0
1.6
78.2
(2.6)
-
(2.3)
(16.5)
414.4
547.1
280.5
3,433.4
23.2
50.5
(7.7)
-
-
(48.0)
298.5
582.7
12.5
197.1
(19.9)
-
-
(234.8)
3,388.3
5,009.3
4,365.7
0.8
179.7
(5.3)
-
(0.2)
(190.4)
4,350.3
5,187.6
9,037.2
979.2
(0.6)
(36.4)
-
(16.3)
(489.7)
9,473.4
12,348.6
(132.7)
(284.2)
(1,621.0)
(837.3)
(2,875.2)
414.4
389.2
25.2
414.4
308.5
1.4
61.6
(0.9)
-
-
(14.6)
356.0
474.8
(118.8)
356.0
346.3
9.7
356.0
298.5
296.5
2.0
298.5
3,388.3
3,219.9
168.4
3,388.3
275.9
3,176.3
15.3
41.9
(9.0)
1.6
-
(45.2)
280.5
528.8
(248.3)
280.5
280.0
0.5
280.5
-
490.0
(13.2)
(0.1)
(2.2)
(217.4)
3,433.4
4,833.1
(1,399.7)
3,433.4
3,260.7
172.7
3,433.4
4,350.3
741.4
3,608.9
4,350.3
3,015.9
18.9
1,503.1
(3.8)
-
-
(168.4)
4,365.7
5,007.7
(642.0)
4,365.7
765.9
3,599.8
4,365.7
9,473.4
5,668.9
3,804.5
9,473.4
8,325.2
1,201.6
(9.3)
(29.6)
3.6
(8.7)
(445.6)
9,037.2
11,446.0
(2,408.8)
9,037.2
5,254.5
3,782.7
9,037.2
Assets under construction includes $108.1 million (2012: $51.7 million) that relates to significant strategic infrastructure projects (refer note 2(vi)).
Following a review of the fixed assets base there has been a reclassification during 2012 between Owned Infrastructure and Leased Infrastructure of
$1,814.1 million to more accurately reflect the nature of these assets.
(a) Non-current assets pledged as security
Leased rollingstock assets of $168.4 million (2012: $172.7 million) have been pledged as security under the terms of the cross border lease arrangements.
financial report | aUriZon
83
Notes to the consolidated financial statements
30 June 2013
16. Intangible assets
17. Deferred tax assets
The balance comprises temporary differences
attributable to:
Provisions/accruals
Tax losses
Customer contracts
Unearned revenue
Cash flow hedges
Other temporary differences
Set-off of deferred tax liabilities pursuant
to set-off provisions
Net deferred tax assets
2013
$m
2012
$m
129.8
-
75.3
4.6
0.2
9.9
70.5
-
91.4
2.9
1.0
9.3
219.8
175.1
(219.8)
(175.1)
-
-
Goodwill
$m
Software
$m
Key
customer
contracts
$m
2013
Opening net book amount
Additions
Transfers
Amortisation expense
Disposals
0.3
-
-
-
-
Closing net book amount
0.3
14.5
0.1
0.6
(5.2)
(0.7)
9.3
1.8
1.4
-
(1.4)
-
1.8
Total
$m
16.6
1.5
0.6
(6.6)
(0.7)
11.4
Cost
73.3
102.1
10.7
186.1
Accumulated amortisation
and impairment
Net book amount
2012
Opening net book amount
Additions
Transfers
Amortisation expense
Closing net book amount
(73.0)
(92.8)
(8.9)
(174.7)
0.3
0.3
-
-
-
0.3
9.3
1.8
11.4
21.5
-
9.3
(16.3)
14.5
3.1
0.5
-
24.9
0.5
9.3
(1.8)
(18.1)
1.8
16.6
Cost
73.3
107.2
9.3
189.8
Accumulated amortisation
and impairment
Net book amount
(73.0)
0.3
(92.7)
14.5
(7.5)
(173.2)
1.8
16.6
Movements
At 1 July 2011
(Charged)/credited
– to profit or loss
– to profit or loss as a result of
consolidation and privatisation
– to other comprehensive income
At 30 June 2012
At 1 July 2012
(Charged)/credited
– to profit or loss
– to profit or loss as a result of
consolidation and privatisation
– to other comprehensive income
At 30 June 2013
Provisions/
accruals
$m
Tax losses
$m
Customer
contracts
$m
Unearned
revenue
$m
Cash flow
hedges
$m
45.7
24.3
0.5
-
70.5
70.5
59.3
-
-
129.8
37.5
116.1
(37.5)
(15.8)
-
-
-
-
-
-
-
-
(8.9)
-
91.4
91.4
(16.1)
-
-
75.3
3.1
(0.2)
-
-
2.9
2.9
1.7
-
-
4.6
9.3
(8.2)
-
(0.1)
1.0
1.0
(1.7)
-
0.9
0.2
Other
$m
8.8
Total
$m
220.5
(0.1)
(37.5)
0.6
-
9.3
9.3
0.6
-
-
9.9
(7.8)
(0.1)
175.1
175.1
43.8
-
0.9
219.8
84
annUal report 2012–13
Notes to the consolidated financial statements
30 June 2013
Included in long service leave are all unconditional entitlements where
employees have completed the required period of service and also a provision
for the probability that employees will reach the required period of service.
Based on past experience, the Group does not expect all employees to take
the full amount of accrued leave or require payment within the next
12 months. The current provision for employee benefits includes an amount
of $148.5 million (2012:$197.5 million) that is not expected to be taken or paid
within the next 12 months.
Other employee benefit liabilities includes payroll tax and retirement allowances.
(b) Provision for insurance claims
The provision for insurance claims is raised for insurance claims external to the
Group and represents the aggregate deductible component in relation to loss
or damage to property, plant and equipment and rollingstock.
(c) Litigation and workers’ compensation
A provision of $41.2 million (2012: $39.5 million) is made for the estimated
liability for workers’ compensation and litigation claims. Claims are assessed
separately for common law, statutory and asbestos claims. The outstanding
liability is determined after factoring future claims inflation and discounting
future claim payments. Estimates are made based on the average number of
claims and average claim payments over a specified period of time. Claims
Incurred But Not Reported (“IBNR”) are also included in the estimate. Claims
are expected to be paid over a period exceeding more than one year.
(d) Decommissioning/make good and other provisions
A provision of $5.1 million (2012: $4.9 million) has been made for the
anticipated costs of the future restoration of leased office premises. Make
good requirements vary for different properties. The provision includes future
cost estimates associated with the restoration of office fixtures and fittings
to original condition; removal of all property and equipment to return the
premises to a vacant shell, and making good any damage caused by their
removal; and repairing and making good any damage which may be caused to
land adjoining the premises as a result of carrying out structural work or other
improvements. The provision has been calculated based on recent comparable
make good costs or independent assessments.
A provision of nil (2012: $0.7 million) has been made for onerous lease
contracts which represent the net unavoidable costs in meeting the obligations
under property leases over the remaining lease terms.
(e) Land rehabilitation
A provision of $31.6 million (2012: $36.2 million) has been recognised for the
estimated costs to remediate contaminated land in accordance with the Group’s
constructive obligations following the Board’s review of its revised sustainability
policy at 30 June 2010. The provision is based on an estimated long-term
inflation rate in the order of 2.9 per cent (2012: 3.2 per cent). The projected
remediation dates for the various sites ranges from 10 to 40 years. To measure
the present value of the estimated costs, a discount rate in the order of 4.5 per
cent (2012: 4.5 per cent) was used, based on the interest rate which reflects the
maturity profile of the liability.
18. Trade and other payables
Trade payables
Other payables
19. Borrowings
Non-current - Unsecured
Bank facilities
Capitalised borrowing costs
Total unsecured non-current borrowings
2013
$m
283.4
37.3
320.7
2012
$m
313.5
36.1
349.6
2013
$m
2012
$m
2,525.0
1,220.0
(46.4)
(18.4)
2,478.6
1,201.6
During the year, the Group repositioned $3,600 million of unsecured floating
rate bank facilities at the Aurizon and Aurizon Network level. Using the drawn
funds from these facilities, the Group repaid and cancelled the existing
$3,000 million syndicated debt facility.
The unsecured non-current borrowings impose certain covenants on the
Group to ensure that certain financial ratios are met and restrict the amount
of security that the Group and its subsidiaries can provide over their assets in
certain circumstances.
Details of the Group’s financing arrangements and exposure to risks arising
from current and non-current borrowings are set out in Note 3(c).
20. Provisions
Current
Employee benefits (a)
Provision for insurance claims (b)
Litigation and workers’ compensation provision (c)
Decommissioning/make good and other provisions (d)
Total current provisions
Non-current
Employee benefits (a)
Litigation and workers’ compensation claim (c)
Decommissioning/make good and other provisions (d)
Land rehabilitation (e)
Total non-current provisions
Total provisions
(a) Employee benefits
Annual Leave
Long service leave
Other
2013
$m
2012
$m
318.3
325.8
13.7
26.1
1.2
20.0
24.0
1.6
359.3
371.4
28.0
15.1
3.9
31.6
78.6
25.6
15.5
4.0
36.2
81.3
437.9
452.7
2013
$m
85.5
169.1
91.7
346.3
2012
$m
89.3
193.0
69.1
351.4
The current provision for employee benefits includes accrued annual leave,
leave loading, retirement allowances, long service leave and bonus accrual.
financial report | aUriZon
85
Notes to the consolidated financial statements
30 June 2013
20. Provisions (continued)
(f) Movements in provisions
Movements in each class of provision during the financial year, other than employee benefits, are set out below:
Provision for
insurance claims
$m
Litigation
and workers
compensation
provision
$m
Decommissioning/
make good and
other provision
$m
Provision for land
rehabilitation
$m
2013
Current and non-current
Carrying amount at start of the year
Charged/(credited) to profit or loss
Additional provision recognised
Unused amounts released or reversed
Charged/(credited) to the profit or loss –
unwinding of discount
Amounts used during the year
Carrying amount at end of year
2012
Current and non-current
Carrying amount at start of the year
Charged/(credited) to profit or loss
Additional provision recognised
Unused amounts released or reversed
Charged/(credited) to the profit or loss –
unwinding of discount
Amounts used during the year
Carrying amount at end of year
20.0
20.4
(8.8)
-
(17.9)
13.7
12.0
18.1
-
-
(10.1)
20.0
39.5
12.4
(3.0)
-
(7.7)
41.2
31.0
21.1
-
-
(12.6)
39.5
5.6
1.2
(1.1)
(0.5)
(0.1)
5.1
5.5
1.0
(0.3)
-
(0.6)
5.6
21. Other liabilities
22. Deferred tax liabilities
Current
Income received in advance
Other current liabilities
Non-current
Income received in advance
Other non-current liabilities
2013
$m
2012
$m
37.7
4.6
42.3
261.8
5.0
266.8
36.9
0.6
37.5
291.5
18.7
310.2
Income in advance represents amounts received from customers as
prepayment of future rentals under agreements of customer specific
infrastructure. These amounts are deferred and earned over the term of
the agreements.
Other non-current liabilities include a $3.8 million (2012:$17.1 million)
non-interest bearing loan with a former subsidiary, On Track Insurance Pty Ltd.
Property, plant and equipment
Capitalised deductible expenditure
Consumables and spares
Accrued income
Cash flow hedges
Other temporary difference
Total deferred tax liabilities
Set-off of deferred tax assets pursuant to set-off
provisions (note 17)
Net deferred tax liabilities
Total
$m
101.3
34.6
(14.2)
(4.4)
(25.7)
91.6
82.9
40.3
(0.3)
1.7
(23.3)
101.3
2012
$m
399.9
100.5
16.7
12.4
-
9.1
36.2
0.6
(1.3)
(3.9)
-
31.6
34.4
0.1
-
1.7
-
36.2
2013
$m
453.4
146.9
19.9
5.2
0.2
2.4
628.0
538.6
(219.8)
(175.1)
408.2
363.5
86
annual report 2012–13
Notes to the consolidated financial statements
30 June 2013
22. Deferred tax liabilities (continued)
Movements
At 1 July 2011
Charged/(credited)
– to profit or loss
– to profit or loss
as result of
consolidation and
privatisation
At 30 June 2012
At 1 July 2012
Charged/(credited)
– to profit or loss
– to profit or loss
as a result of
consolidation and
privatisation
At 30 June 2013
Property, plant
and equipment
$m
Capitalised
deductible
expenditure
$m
Consumables
and spares
$m
Accrued
income
$m
Cash flow
hedges
$m
416.7
22.5
(39.3)
399.9
399.9
53.5
-
453.4
32.4
68.1
-
100.5
100.5
46.4
-
146.9
14.3
2.8
(0.4)
16.7
16.7
3.2
-
19.9
1.5
10.9
-
12.4
12.4
(7.2)
-
5.2
7.5
(7.4)
(0.1)
-
-
0.2
-
0.2
Other
$m
6.0
4.5
(1.4)
9.1
9.1
(6.7)
-
2.4
Total
$m
478.4
101.4
(41.2)
538.6
538.6
89.4
-
628.0
23. Contributed equity
(a) Issued capital
2013
Shares
‘000
2012
Shares
‘000
2013
$m
2012
$m
Ordinary shares
Fully paid
2,137,285
2,440,000
1,508.3
1,711.7
(b) Other contributed equity
Share-based payments
Capital contributions from the State on retirement of
borrowings
Capital contribution from the State for employee gift
shares
Selective share buy-back
On-market share buy-back
Total contributed equity
(c) Movements in ordinary share capital
Date
1 July 2011
Details
Opening balance
2013
$m
16.5
2012
$m
10.1
4,388.3
4,388.3
9.0
(796.6)
(54.1)
9.0
-
-
3,563.1
4,407.4
5,071.4
6,119.1
Number
of shares
(‘000)
2,440,000
$m
1,711.7
30 June 2012
Closing balance
2,440,000
1,711.7
23 November 2012 On-Market share buy-back
(14,531)
-
26 November 2012 Selective share buy-back
(288,184)
(203.4)
30 June 2013
Closing balance
2,137,285
1,508.3
Since the commencement of the on-market buy-back program on 23 August
2012 Aurizon Holdings Limited acquired 14,531,059 shares. The on-market
share buy-back program was completed on 23 November 2012 at a total cost
of $54.1 million funded from other contributed equity, following the approval
of the selective share buy-back.
On 26 November 2012 Aurizon Holdings Limited completed the selective share
buy-back of 288,184,438 ordinary shares from Queensland Treasury Holdings
Pty Ltd for $1,000 million, apportioned between other contributed equity of
$796.6 million and $203.4 million share capital.
(d) Ordinary shares
Ordinary shares have no par value and the Group does not have a limited
amount of authorised capital. Ordinary shares entitle the holder to participate
in dividends and the proceeds on winding up of the Company in proportion to
the number of, and amounts paid on, the shares held.
(e) Share-based payments
Share-based payments represent the fair value of share-based remuneration
provided to employees.
(f) Capital risk management
The Group’s objective is to maintain a strong capital base so as to maintain
investor, creditor and market confidence, and to sustain future development of
the business.
The Group and the parent entity monitor its capital structure by reference to
its gearing ratio. This ratio is calculated as net debt divided by total capital.
Net debt is calculated as total borrowings less cash and cash equivalents.
Total capital is calculated as ‘equity’, as shown in the balance sheet, plus net
debt. There were no changes in the Group’s approach to capital management
during the year.
financial report | auriZon
87
Notes to the consolidated financial statements
30 June 2013
23. Contributed equity (continued)
(f) Capital risk management (continued)
25. Dividends
(a) Ordinary shares
Total borrowings
Less: cash and cash equivalents
Net debt
Total equity
Total capital
Gearing ratio
2013
$m
2012
$m
2,478.6
1,201.6
(107.6)
(98.8)
2,371.0
1,102.8
6,495.6
7,294.2
8,866.6
8,397.0
Interim dividend for the year ended 30 June 2013 of
4.1 cents (2012: 3.7 cents unfranked) per share, paid 27
March 2013 (70% franked)
Final dividend for the year ended 30 June 2012 of 4.6
cents per share, paid September 2012 (unfranked)
(2012: 3.7 cents unfranked)
2013
$m
2012
$m
87.6
90.3
112.3
199.9
90.3
180.6
26.7%
13.1%
(b) Dividends not recognised at the end of the reporting period
The Group has complied with externally imposed capital debt covenants.
Gearing ratio equals net debt divided by sum of net debt and total equity.
24. Reserves
(a) Reserves
Hedging reserve - cash flow hedges
Movements:
Hedging reserve - cash flow hedges
Balance 1 July
Fair value gains/(losses) taken to equity
Deferred tax
Fair value losses transferred to profit or loss
Deferred tax
Balance 30 June
2013
$m
0.1
0.1
2013
$m
(2.0)
2.2
(0.7)
0.8
(0.2)
0.1
2012
$m
(2.0)
(2.0)
2012
$m
(2.3)
(1.4)
0.4
1.8
(0.5)
(2.0)
Since 30 June 2013, the Directors have recommended
the payment of a final dividend of 8.2 cents per fully
paid ordinary share (2012: 4.6 cents), 90 per cent
franked. The aggregate amount of the proposed
dividend expected to be paid on 23 September 2013 out
of retained earnings, but not recognised as a liability at
year end is:
2013
$m
2012
$m
175.3
112.2
(c) Franked dividends
The franked portions of the final dividends recommended after 30 June 2013
will be franked out of existing franking credits or out of franking credits arising
from the payment of income tax in the year ended 30 June 2014.
Franking credits available for subsequent reporting
periods based on a tax rate of 30% (2012: 30%)
2013
$m
2012
$m
71.4
7.9
The above amounts represent the balance of the franking account as at the
end of the reporting period, adjusted for:
(a) franking credits that will arise from the payment of the amount of the
provision for income tax,
(b) franking debits that will arise from the payment of dividends recognised as
(b) Nature and purpose of reserves
a liability at the reporting date, and
Hedging reserve - cash flow hedges
The hedging reserve is used to record gains or losses on a hedging instrument
in a cash flow hedge that are recognised in other comprehensive income, as
described in note 1(p). Amounts are recognised in the income statement when
the associated hedged transaction affects the income statement.
(c) franking credits that will arise from the receipt of dividends recognised as
receivables at the reporting date.
The consolidated amounts include franking credits that would be available to
the parent entity if distributable profits of subsidiaries were paid as dividends.
88
annual report 2012–13
Notes to the consolidated financial statements
30 June 2013
26. Key Management Personnel disclosures
(b) Equity instrument disclosures relating to key management
personnel
(a) Key Management Personnel compensation
Short-term employee benefits
Post-employment benefits
Long-term benefits
Termination benefits
Share-based payments
2013
$’000
2012
$’000
20,154
13,555
476
(127)
1,295
4,558
570
256
1,171
3,238
26,356
18,790
(i) Rights provided as remuneration and shares issued on exercise
of such rights
Details of the rights provided as remuneration and shares issued on the
exercise of such rights, together with terms and conditions of the rights, can be
found in sections 3.1.4 and 4.2 of the Remuneration Report.
(ii) Rights holdings
The numbers of rights over ordinary shares in the Group held during the
financial year by each Director of Aurizon Holdings Limited and other key
management personnel of the Group, including their personally related parties,
are set out below.
Short term employee benefits include cash salary, at risk performance
incentives and fees and non monetary benefits. Non-monetary benefits
represent the value of Reportable Fringe Benefits for the respective Fringe
Benefits Tax year ending 31 March, the estimated value of car parking
provided, motor vehicle lease payments and annual leave accrued or utilised
during the financial year.
2013
Name
L E Hockridge
M G Carter
J M Franczak
A Kummant
K R Lewsey
K Neate
G P Pringle
G Robinson
P Scurrah
R J Stephens
D M O’Toole(1)
L J Cooper(1)
Balance at start
of the year
‘000
Granted as
compensation
‘000
Exercised
‘000
Other changes
‘000
1,494
261
-
-
285
78
243
35
30
243
316
219
582
223
200
388
228
126
188
188
246
188
249
137
(333)
(25)
-
(100)
(29)
(20)
(25)
-
(30)
(25)
(171)
(22)
-
-
-
-
-
-
-
-
-
-
(191)
(226)
Balance at end
of the year
‘000
1,743
459
200
288
484
184
406
223
246
406
203
108
Vested and
exercisable
‘000
-
-
-
-
-
-
-
-
-
-
-
-
(1) Ms O’Toole and Mr Cooper on the 20 November 2012 and 31 December 2012 respectively ceased to be considered as key management personnel.
2012
Name
L E Hockridge
M G Carter
K R Lewsey
G P Pringle
R J Stephens
G Robinson
P Scurrah
D M O’Toole
L J Cooper
M P McAuliffe
C M Davies
Balance at start
of the year
‘000
Granted as
compensation
‘000
Exercised
‘000
Other changes
‘000
1,333
118
127
108
108
-
-
137
98
118
118
494
143
158
135
135
51
70
179
121
144
51
(333)
-
-
-
-
(16)
(40)
-
-
(93)
-
-
-
-
-
-
-
-
-
-
(169)
(51)
Balance at end
of the year
‘000
1,494
261
285
243
243
35
30
316
219
-
118
Vested and
exercisable
‘000
-
-
-
-
-
-
-
-
-
-
-
Rights holdings listed above may differ to the Remuneration Report due to rounding adjustments.
Unvested
‘000
1,743
459
200
288
484
184
406
223
246
406
203
108
Unvested
‘000
1,494
261
285
243
243
35
30
316
219
-
118
financial report | auriZon
89
Notes to the consolidated financial statements
30 June 2013
26. Key management personnel disclosures (continued)
(iii) Share holdings
The numbers of shares in the Group held during the financial year by each Director of Aurizon Holdings Limited and other key management personnel of the
Group, including their personally related parties, are set out below.
2013
Name
Directors of Aurizon Holdings Limited
J B Prescott AC
L E Hockridge
J Atkin
R R Caplan
J D Cooper
K L Field
G T John AO
A J P Staines
G T Tilbrook
Other Key Management Personnel of the Group(1)
M G Carter
J M Franczak
A Kummant
K R Lewsey
K Neate
G P Pringle
G Robinson
P Scurrah
R J Stephens
Balance at the
start of the year
‘000
Received during
the year on the
exercise of options
‘000
Other changes
during the year
‘000
Balance at end of
the year
‘000
215
539
21
82
12
-
57
5
31
63
0
0
63
0
30
45
40
91
-
333
-
-
-
-
-
-
-
25
0
100
29
20
26
0
30
25
-
-
14
-
8
14
-
9
18
(70)
4
215
872
35
82
20
14
57
14
49
88
0
100
92
20
56
45
0
120
(1) Ms O’Toole and Mr Cooper on the 20 November 2012 and 31 December 2012 respectively ceased to be considered as key management personnel.
2012
Name
Directors of Aurizon Holdings Limited
J B Prescott AC
L E Hockridge
J Atkin
R R Caplan
J D Cooper
K L Field
G T John AO
A J P Staines
G T Tilbrook
Other Key Management Personnel of the Group
M G Carter
K R Lewsey
G P Pringle
R J Stephens
G Robinson
P Scurrah
L J Cooper
D M O’Toole
Balance at the
start of the year
‘000
Received during
the year on the
exercise of options
‘000
Other changes
during the year
‘000
Balance at end of
the year
‘000
157
204
20
82
-
-
47
5
31
41
61
29
91
9
-
12
105
-
333
-
-
-
-
-
-
-
-
-
-
-
16
40
-
-
58
1
1
-
12
-
10
-
-
22
2
1
-
20
-
1
1
215
539
21
82
12
-
57
5
31
63
63
30
91
45
40
13
106
Share holdings listed above may differ to the Remuneration Report due to rounding adjustments.
90
annual report 2012–13
Notes to the consolidated financial statements
30 June 2013
26. Key management personnel disclosures (continued)
(c) Transactions with Directors and Key Management Personnel
Subsequent to the cessation of L J Cooper’s employment, he has provided
consultancy services to the Group through an agreement with JP Corporation
Pty Ltd as well as Lindsay Cooper Management Services Pty Ltd resulting in
payments of $82,500 for the year ended 30 June 2013.
Deficit tonnage charges
The Group has a contingent asset of $6.9 million (2012: $33.2 million) in
respect of deficit tonnage charges relating to contracts with a period ending
30 June 2013. Deficit tonnage charges are recognised in the period following
that in which the service was due to be provided where the customer elects to
pay the charges rather than reduce future tonnage entitlements.
27. Contingencies
The Group had contingencies at 30 June 2013 in respect of:
(a) Contingent liabilities
Issues relating to common law claims and product warranties are dealt with as
they arise. There were no material contingent liabilities requiring disclosures in
the financial statements, other than as set out below.
Litigation
A number of common law claims are pending against the Group. Provisions
are taken up for some of these exposures based on the management’s
determination where they expect to settle such claims, and are included as
such in note 20.
Flood recovery
The Group incurred $14.5 million of costs (2012: $6.9 million) to repair damage
resulting from the severe flood event across Central Queensland in early 2013.
It is likely more costs will be required to complete the flood repair works. The
Group is expected to lodge a submission with the Queensland Competition
Authority (QCA) for the recovery of these costs as adjustments to tariffs.
Guarantees and letters of credit
For information about guarantees given to the Group, refer to note 3(d).
28. Commitments
(a) Capital commitments
Guarantees and letters of credit
For information about guarantees and letters of credit given by the Group, refer
to note 3(d).
Property, plant and equipment
Within one year
Later than one year but not later than five years
Deed of cross guarantee
Cross guarantees are given by the Company and some of its wholly owned
subsidiaries as described in note 31.
Defined benefit fund liabilities
The State of Queensland has permitted existing employees of Aurizon Holdings
Limited and its subsidiaries including Aurizon Operations Limited (the Aurizon
Group), as at the date of the IPO, to retain their existing superannuation
arrangements with the State Superannuation Public Sector Scheme (QSuper),
and has provided the Group an indemnity if the State of Queensland Treasurer
requires the Group to pay any amounts required to meet the defined benefit
obligations. An actuarial assessment of the fund as at 30 June 2010 has
been completed which showed the fund to be in surplus. Existing contribution
arrangements are to continue into the foreseeable future.
Joint venture arrangements
Refer to note 29 for details of the Group’s share of the net asset deficiencies
in joint venture investments. The Group is required to contribute additional
capital, if requested, to make good any deficiency under the terms of the joint
venture agreements.
(b) Contingent assets
Revenue cap adjustments
The Group has a contingent asset in respect of revenue cap adjustments in
Network. Access revenue is subject to a revenue cap mechanism that serves to
ensure the network recovers its full regulated revenue over the regulatory period,
with the majority of under or over recovery in access tariffs (net of Take or Pay
charges) during a financial year being charged or refunded, and recognised
as revenue, in the second year following the period in which the contractual
railings were not achieved. Subject to regulatory approval and any adjustments
resulting from below rail cause, recovery of shortfalls via the revenue cap of
$35.3 million (2012: $65.3 million) plus interest, will be received during the year
ending 30 June 2014 ($13.9 million) and 30 June 2015 ($21.4 million).
2013
$m
2012
$m
96.5
2.0
98.5
254.2
2.3
256.5
2013
$m
2012
$m
27.1
55.7
1.7
84.5
46.8
56.7
3.9
107.4
(b) Lease commitments
Commitments for minimum lease payments in relation
to non-cancellable operating leases are payable as
follows:
Within one year
Later than one year but not later than five years
Later than five years
The above commitments flow primarily from operating leases of property and
machinery. These leases, with terms mostly ranging from one to ten years,
generally provide the Group with a right of renewal at which times the lease
terms are renegotiated. The lease payments comprise a base amount, while
the property leases also contain a contingent rental, which is based on either
the movements in the Consumer Price Index or another fixed percentage as
agreed between the parties.
(c) Lease commitments receivable: where the Group is the lessor
Some fixed assets are leased to tenants with rents
payable monthly. Minimum lease payments (excluding
GST) not recognised in the financial statements are
receivable as follows:
Within one year
Later than one year but not later than five years
Later than five years
2013
$m
2012
$m
4.4
6.2
5.6
8.2
6.2
7.2
16.2
21.6
Notes to the consolidated financial statements
30 June 2013
29. Interests in joint ventures and associates
(a) Joint venture operation
The Group has an interest in the Nickel West Land Logistics Joint Venture
Agreement. The Group severally provides rail freight services under this
agreement and the joint venture partner severally provides road freight
services. There are no assets jointly controlled by the operation.
Name
CHCQ
Chun Wo/CRGL
KMQR Sdn Bhd
financial report | aUriZon
91
Ownership interest
Country of
operation
2013
%
2012
%
Principal
activity
(b) Jointly controlled assets
The Group has a 33.3 per cent (2012: 33.3 per cent) participating interest in a
joint venture through its wholly owned subsidiary, Aurizon Surat Basin Pty Ltd,
together with two other parties.
The Group’s share of the joint assets, any liabilities that it has incurred directly,
and its share of any liabilities incurred jointly with the other venturers, income
from the sale or use of its share of the output of the joint venture, its share of
expenses incurred by the joint venture and expenses incurred directly in respect
of its interest in the joint venture are detailed below.
The amounts are included in the consolidated financial statements under their
respective asset, liability, income and expense categories:
Group’s share of:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Total net assets
Revenue
Expenses
Tax benefit
Net profit/(loss) after tax
0.4
16.3
(0.2)
(0.8)
15.7
1.0
8.7
(1.2)
(9.3)
(0.8)
2013
$m
2012
$m
-
-
-
-
-
-
-
-
The balance sheet and income statement is based on the unaudited financial
statements of the Surat Basin Rail joint venture as at 30 June 2013 (2012: 30
June 2012).
Under Clause 7.3 of the Aurizon Surat Basin Pty Ltd Joint Venture Agreement
dated 4 December 2006, the Project Director may call for additional
contributions of funding from the participants in order to fund any expenditure
incurred or to be incurred.
(c) Joint venture entities
The joint venture entities in which the Group has an interest and which are
equity accounted in the financial statements are as follows:
China-Hong Kong
China-Hong Kong
Malaysia
ARG Risk
Management Limited Australia
QLM Pty Ltd
Australia
Rail Innovation
Australia
Integrated Logistics
Company Pty Ltd
Australia
Australia
(i) Movements in carrying amounts
15
17
30
50
50
20
14
Carrying amount at the beginning of the financial year
2013
$m
2012
$m
Share of profits after income tax
Dividends received/receivable
Share of increment of revaluation of freehold land
Increase in investment
15 Construction
17 Construction
30 Consulting
50
Insurance
50 Dormant
20 Consulting
14 Consulting
2013
$m
0.5
2012
$m
0.5
-
-
-
-
-
-
-
-
Carrying amount at the end of the financial year
0.5
0.5
(ii) Share of joint ventures’ assets, liabilities, revenue, expenses and results
2013
$m
2012
$m
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Total net assets
Revenue
Expenses
Profit before income tax
Tax
Profit after income tax
(d) Investments in associates
(i) Movement in carrying values
Opening balance
Additional investments
Transfer from available-for-sale investments
Share of profit in associates
Dividends received
Share of increment of revaluation of freehold land
Closing balance (note 14)
5.4
-
5.4
(4.9)
-
(4.9)
0.5
0.1
-
-
-
-
2013
$m
77.5
1.8
-
5.4
(5.5)
(0.5)
78.7
2.2
-
2.2
(1.7)
-
(1.7)
0.5
-
-
-
-
-
2012
$m
-
41.1
36.3
0.1
-
-
77.5
92
annUal report 2012–13
Notes to the consolidated financial statements
30 June 2013
29. Interests in joint ventures and associates (continued)
30. Related party transactions
(ii) Fair value of unlisted investments in associates
Moorebank Industrial Property Trust
2013
$m
78.7
2012
$m
77.5
(iii) Summarised financial information of associates
The Group’s share of the results of its principal associates and its aggregated
assets (including goodwill) and liabilities are as follows:
Ownership
interest
%
Company’s share of:
Assets
$m
Liabilities
$m
Revenues
$m
Profit
$m
2013
Moorebank
Industrial
Property Trust
2012
Moorebank
Industrial
Property Trust
33.0
79.3
0.6
7.4
5.4
33.0
78.2
0.7
0.1
0.1
(iv) Contingent liabilities of associates
Share of contingent liabilities incurred jointly with other
investors
Contingent liabilities relating to liabilities of the
associate for which the Company is severally liable
2013
$m
2012
$m
-
-
-
-
-
-
(a) Parent entities
The parent and ultimate parent entity within the Group is Aurizon Holdings
Limited.
(b) Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and
results of the following principal subsidiaries in accordance with the accounting
policy described in note 1(b):
Name of entity
Aurizon Operations Limited
Country
of incorp-
oration
Australia Ordinary
Class of
shares
Aurizon Intermodal Pty Ltd Australia Ordinary
Interail Australia
Pty Ltd
Australia Ordinary
Logistics Australia Pty Ltd
Australia Ordinary
Golden Bros. Group
Pty Ltd
Australia Ordinary
CRT Group Pty Ltd
Australia Ordinary
NHK Pty Ltd
Australia Ordinary
Australian Rail Pty Ltd
Australia Ordinary
Equity holding
2013
%
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
2012
%
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Australia Eastern
Railroad Pty Ltd
Australia Ordinary
100.0
100.0
Australia Ordinary
100.0
100.0
Australia Ordinary
100.0
100.0
Aurizon Network Pty Ltd
Australia Ordinary
Australia Ordinary
100.0
100.0
100.0
100.0
Australian
Railroad Group
Employment
Pty Ltd
Australia Western
Railroad Pty Ltd
AWR Lease
Co Pty Ltd
Aurizon Surat Basin
Pty Ltd
Aurizon Property Holding
Pty Ltd
Aurizon Property
Pty Ltd
Aurizon Terminal
Pty Ltd
Aurizon Moorebank
Holdings Pty Ltd
Australia Ordinary
100.0
100.0
Australia Ordinary
100.0
100.0
Australia Ordinary
100.0
100.0
Australia Ordinary
100.0
100.0
Australia Ordinary
Aurizon Moorebank Pty Ltd Australia Ordinary
Aurizon Moorebank
Unit Trust
Australia Units
Aurizon Finance Pty Ltd
Australia Ordinary
Aurizon International Pty Ltd
Australia Ordinary
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
-
(c) Key management personnel
Disclosures relating to key management personnel are set out in note 26.
(d) Transactions with other related parties
The following transactions occurred with related parties:
Dividend revenue – other related parties
2013
$’000
2012
$’000
1
7
financial report | aUriZon
93
Notes to the consolidated financial statements
30 June 2013
30. Related party transactions (continued)
31. Deed of cross guarantee
(e) Terms and conditions of transactions with related parties other
than Key Management Personnel or entities related to them
All other transactions, other than those with the State of Queensland as
described below, were made on normal commercial terms and conditions
and at market rates, except that there are no fixed terms for the repayment
of loans between the parent and its subsidiaries. All loans are non interest
bearing. Outstanding balances are unsecured.
(f) Transactions with State of Queensland controlled entities
Until its 22 November 2010 listing on the ASX, the Group was a Queensland
Government Owned Corporation, with all shares held by the Shareholding
Ministers on behalf of the State. Following listing, the State retained a 34.0 per
cent interest in the Company that reduced to 8.9 per cent in March 2013, and
remains a related party to the Group.
Queensland Treasury Corporation (“QTC”) borrowings of $4,388.3 million were
replaced by a capital contribution from the State of Queensland via Transfer
Notice just prior to the listing on the ASX.
Transport Services Contracts
The Group has entered into Transport Services Contracts (“TSCs”) with the
State of Queensland (acting through the Department of Transport and
Main Roads) to provide general freight and livestock transportation services.
The contracts commenced on 1 July 2010 and expire on 30 June 2015,
and 31 December 2015 respectively.
Under the contracts, for the initial two and a half years, the Group will receive
monthly base payments and quarterly payments in aggregate totalling $150.0
million for the year ended 30 June 2011, $148.1 million for the year ended 30
June 2012 and $75.1 million for the six months ended 31 December 2012.
After 31 December 2012, and until expiry of the contract, there has been
a Deed of Variation for each contract agreed for the remaining terms. The
monthly base payments and quarterly payments in aggregate total $52.8
million for the six months to 30 June 2013, $109.8 million for the year ended
30 June 2014, $85.0 million for the year ended 30 June 2015 and $13.7 million
for the year ended 30 June 2016.
In addition, the contracts provide for additional payments of $90.0 million
(general freight) and $13.0 million (livestock) between 31 December 2012 and
the expiry of the contracts. Refer to note 5.
Service contracts with Queensland Rail
There exist a number of related party transactions between the Group and
Queensland Rail Limited (“Queensland Rail”) arising from the separation of
Queensland Rail from the Group on 30 June 2010. These transactions relate
to service contracts entered into between the parties that are broadly priced
on the basis of cost recovery plus a profit margin. At the conclusion of each
contract (tenures range between one and five years) they will ordinarily be
renegotiated by business as usual tender processes.
The largest service contracts (by financial value) are for the provision of
maintenance services; repairs, manufacture and overhaul of rollingstock; hook
and pull services for passenger rollingstock; IT services; and stowing services.
Aurizon Holdings Limited, Aurizon Finance Pty Ltd, Aurizon Property Holding
Pty Ltd, Aurizon Property Pty Ltd, Aurizon Terminal Pty Ltd, Aurizon Operations
Limited, Aurizon Intermodal Pty Ltd, Logistics Australasia Pty Ltd, Golden Bros.
Group Pty Ltd, CRT Group Pty Ltd, Interail Australia Pty Ltd, Australian Rail
Pty Ltd, Australia Eastern Railroad Pty Ltd, Australia Western Railroad Pty Ltd,
Australian Railroad Group Employment Pty Ltd and Aurizon Network Pty Ltd
(the “Aurizon Deed Parties” and each an “Aurizon Deed Party”) entered into
a Deed of Cross Guarantee dated 11 March 2011 (the “Cross Guarantee”) with
Aurizon Holdings Limited as the ‘Holding Entity’ under which each Aurizon
Deed Party guarantees the debts of each other Aurizon Deed Party.
By entering into the cross guarantee and lodging it with the Australian
Securities and Investments Commission (“ASIC”) on 29 March 2011, the
wholly-owned Aurizon Deed Parties have been relieved from the requirement
to prepare separate financial and Directors’ Reports by the operation of ASIC
Class Order 98/1418 (as amended) (the “Class Order”). The cross guarantee
became effective on lodgement with ASIC on 29 March 2011.
On 5 June 2013, each Aurizon Deed Party entered into a Revocation Deed
pursuant to which the Cross Guarantee is to be revoked in respect of Aurizon
Network Pty Ltd from the date the Revocation Deed becomes operative.
The Revocation Deed was lodged with ASIC on 15 July 2013 and a public
notice to creditors was printed in a national daily newspaper on 17 July 2013.
Pursuant to the provisions of the Revocation Deed it will become operative
on 16 January 2014, being the date six months and one day after the date
the Revocation Deed was lodged with ASIC. From the time the Revocation
Deed becomes operative, the financial results of Aurizon Network Pty Ltd will
no longer be consolidated into the financial statements of the remainder of
the Aurizon Deed Parties for the purposes of the Class Order. However, as the
Revocation Deed was not operative at 30 June 2013, Aurizon Network Pty
Ltd’s financial results are included in the consolidated income statement,
consolidated statement of comprehensive income and summary of movements
in consolidated retained earnings for the financial year ended 30 June 2013 as
set out below.
(a) Consolidated income statement, consolidated statement
of comprehensive income and summary of movements in
consolidated retained earnings
The Aurizon Deed Parties represent the ‘closed group’ for the purposes of
the Class Order and as there are no other parties to the cross guarantee that
are controlled by Aurizon Holdings Limited, they also represent the ‘extended
closed group’.
The results of all the Aurizon Deed Parties are presented below in the
consolidated income statement, a consolidated statement of comprehensive
income and a summary of movements in consolidated retained
earnings. This represents the results of the Group excluding NHK Pty Ltd,
AWR Lease Co Pty Ltd, Aurizon Moorebank Holdings Pty Ltd, Aurizon
Moorebank Pty Ltd, Aurizon Moorebank Unit Trust, Aurizon Surat Basin
Pty Ltd and Aurizon International Pty Ltd.
94
annUal report 2012–13
Notes to the consolidated financial statements
30 June 2013
31. Deed of cross guarantee (continued)
(a) Consolidated income statement, consolidated statement of
comprehensive income and summary of movements in
consolidated retained earnings (continued)
(b) Consolidated balance sheet
The balance sheet of the parties to the Deed of Cross Guarantee at each
reporting date is presented below:
Income statement
Revenue from continuing operations
Other income
Consumables
Employee benefits expense
Depreciation and amortisation expense
Other expenses
Share of net profits of associates and joint venture
partnership accounted for using the equity method
Finance costs
Profit before income tax
Income tax expense
Profit for the year
Statement of comprehensive income
Profit for the year
Other comprehensive income
Items that may be reclassified to profit or loss
2013
$m
2012
$m
3,728.5
3,496.1
Current assets
Cash and cash equivalents
41.5
32.4
Trade and other receivables
(1,353.2)
(1,302.3)
(1,182.5)
(1,132.6)
(495.9)
(463.5)
(51.0)
(41.6)
-
0.2
(105.6)
(41.5)
581.8
547.2
(135.4)
(117.7)
Inventories
Derivative financial instruments
Other assets
Assets classified as held for sale
Total current assets
Non-current assets
Other assets
Inventories
446.4
429.5
Property, plant and equipment
Intangibles
Investments accounted for using the equity method
446.4
429.5
Other financial assets
Derivative financial instruments
Total non-current assets
Total assets
Change in the fair value of cash flow hedges
3.0
0.4
Income tax relating to components of other
comprehensive income
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
(0.9)
2.1
(0.1)
0.3
448.5
429.8
Current liabilities
Trade and other payables
Derivative financial instruments
Summary of movements in consolidated
retained earnings
Retained earnings at the beginning
of the financial year
Profit for the year
Dividends provided for or paid
1,176.0
446.4
927.1
429.5
(199.9)
(180.6)
Retained earnings at the end of the financial year
1,422.5
1,176.0
Current tax liabilities
Provision
Other liabilities
Total current liabilities
Non-current liabilities
Derivative financial instruments
Borrowings
Deferred tax liabilities
Provisions
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
2013
$m
2012
$m
106.3
580.0
212.2
0.4
10.1
23.0
98.5
549.8
215.8
0.1
8.0
8.7
932.0
880.9
3.0
19.0
0.5
8.7
9,440.8
9,012.1
11.4
0.5
18.8
0.2
16.6
0.5
18.8
-
9,493.7
9,057.2
10,425.7
9,938.1
288.3
348.4
0.8
68.2
359.3
42.4
759.0
1.3
-
379.2
37.5
766.4
-
2.0
2,478.6
1,201.6
407.0
78.5
209.4
366.8
81.3
227.7
3,173.5
1,879.4
3,932.5
2,645.8
6,493.2
7,292.3
5,071.4
6,119.1
(0.7)
(2.8)
1,422.5
1,176.0
6,493.2
7,292.3
financial report | aUriZon
95
Notes to the consolidated financial statements
30 June 2013
32. Remuneration of auditors
During the year the following fees were paid or payable for services provided
by the auditor of the parent entity, its related practices and non-related
audit firms:
34. Earnings per share
(a) Basic earnings per share
2013
Cents
2012
Cents
PwC Australia
2013
$’000
2012
$’000
Total basic and diluted earnings per share attributable
to the ordinary equity holders of the Company
19.8
18.1
Audit and other assurance services
(b) Reconciliation of earnings used in calculating earnings per share
Audit and review of financial statements
1,950
1,670
Other assurance services
Audit of regulatory returns
Other assurance services
Total remuneration for audit and other assurance
services
Taxation services
Tax advisory services
Other services
Advisory services
Total remuneration of PwC Australia
2013
$m
2012
$m
446.9
440.9
285
584
230
79
Basic and diluted earnings per share
Profit from continuing operations
2,819
1,979
(c) Weighted average number of shares used as denominator
422
539
2013
Number
‘000
2012
Number
‘000
846
4,087
1,619
4,137
Weighted average number of ordinary shares
used as the denominator in calculating basic and
diluted earnings per share
2,257,248
2,440,000
33. Reconciliation of profit after income tax to net cash inflow
from operating activities
(d) Information on the classification of securities
All shares issued by Aurizon Holdings Limited are fully paid ordinary shares that
participate equally in profit distributions.
Profit for the year
Depreciation and amortisation
Impairment of financial assets
Amortisation of borrowing costs
Non-cash employee benefits expense -
share-based payments
Interest capitalised to qualifying assets
Net (gain) on sale of non-current assets
Inventory obsolescence
Amortisation of prepaid access facilitation deed charges
Fair value adjustment to derivatives
Share of profits of associates and joint venture
partnership
Change in operating assets and liabilities:
(Increase) in trade debtors
(Increase) in inventories
(Increase) decrease in other operating assets
(Decrease) increase in trade and other payables
(Decrease) increase in other operating liabilities
Increase in provision for income taxes payable
Increase in deferred tax liabilities
(Decrease) increase in other provisions
Net cash inflow from operating activities
2013
$m
446.9
496.3
5.1
18.4
12.3
(22.2)
(11.8)
2.0
(27.8)
0.3
2012
$m
440.9
463.7
0.7
-
7.2
(45.4)
(16.2)
2.9
(28.5)
(0.6)
(5.4)
-
(36.0)
(8.6)
(5.3)
(39.0)
(9.1)
68.2
44.7
(22.7)
906.3
(75.4)
(29.1)
27.2
36.2
81.9
-
-
58.9
924.4
35. Share-based payments
(a) Performance Rights Plan
The Performance Rights Plan was established by the Board of Directors
to provide long-term incentives to the Group’s senior executives based on
shareholder returns taking into account the Group’s financial and operational
performance. Under the Plan, eligible executives may be granted rights on
terms and conditions determined by the Board from time to time.
Participation in the plan is at the Board’s discretion so that no individual
has a contractual right to be awarded rights under the plan or to receive any
guaranteed benefits.
The Board will determine the exercise price payable on exercise of a vested
right and the exercise period of a right. The Board may, in its discretion,
determine that early vesting of a right will occur if there is a takeover bid,
scheme of arrangement or some other change of control transaction of the
Group. The Board may also accelerate the vesting of some or all of the rights
held by an executive in specified circumstances. These include, but are not
limited to, death, total and permanent disablement, or cessation
of employment.
Performance rights are granted by the Company for nil consideration.
Each right is a right to receive one fully-paid ordinary share in Aurizon Holdings
Limited at no cost if the vesting conditions are satisfied. Rights granted under
the plan carry no dividend or voting rights.
Deferred Short-term Incentive Award (“STIAD”)
The STIAD was implemented in the 2011 financial year under which rights
to the value of 50 per cent of the cash Short-term Incentive Awards (“STIA”)
received by eligible executives would be granted as rights to ordinary shares.
The rights will vest equally over a two year period and become exercisable
provided that the executive remains employed by the Group at the vesting
date, unless otherwise determined by the Board. This plan has now terminated.
The CEO was granted rights under STIAD on listing based on the likelihood
of achieving EBITDA performance hurdles.
96
annUal report 2012–13
Notes to the consolidated financial statements
30 June 2013
35. Share-based payments (continued)
Long-term Incentive Award (“LTIA”)
Performance rights are granted to senior executives as part of the Group’s
LTIA. The first grant of LTIA rights was in November 2010. The rights are
subject to the executives remaining employed by the Group and satisfying
market-based performance hurdles of Total Shareholder Return (“TSR”) and
non-market based EPS targets and Operating Ratio (“OR”).
The proportion of the LTIA rights that become exercisable will depend upon the
TSR achieved by the Group relative to a peer group of companies over a three
year period. The peer group comprises the companies in the ASX Top 100 index
other than financial, medical, telecommunications, pharmaceutical and gaming
companies. To determine to what extent the TSR-related performance rights
will vest, the TSR of the Group over the performance period will be compared to
the TSR of all the companies in the peer group. Each of these peer companies
will be ranked from highest to lowest based on their TSR over the performance
period and the number of rights that vest will depend on where the Group
is ranked amongst the peer group. For the purposes of calculating the TSR
measurement, the relevant share prices will be determined by reference to the
volume weighted average share price over the 20 business days after the grant
date and 20 business days before the end of the performance period.
The Operating Ratio, which essentially measures the operating cost (in cents)
of earning each dollar of revenue, remains a key metric for Aurizon for
measuring its success. Aurizon is committed to its target of reducing Operating
Ratio to 75 per cent by 2015. This will require further implementation of
transformation and growth initiatives and continued tight operational
and financial discipline. Accordingly, the Board determined to increase the
proportion of the LTIA that is subject to the Operating Ratio performance
condition to 50 per cent of the grant.
The following table sets out the percentage of Operating Ratio hurdle rights to
vest depending on performance. It should be noted that the target Operating
Ratio in 2016 is a significant decrease below the 2015 target of 75 per cent and
that this rate of decline cannot be expected to be maintained indefinitely into
the future. The Board considers 72 per cent to be an extremely difficult target
in such a short time. To put the target in perspective, to achieve 72 per cent by
2016 will require a three per cent reduction year-on-year from IPO to 2016.
Retentions
At the Board’s discretion, eligible executives may be granted retention rights
that may vest at the end of the specified retention period provided that the
executive remains employed by the Group at the vesting date.
Set out below are summaries of rights granted under the plan:
Balance
at start
of the
year
Number
‘000
Granted
during
the year
Number
‘000
Exercised
during
the year
Number
‘000
Forfeited
during
the year
Number
‘000
Balance
at end
of the
year
Number
‘000
1,715
7,719
420
1,749
6,669
455
(1,024)
(137)
(465)
(162)
(775)
(55)
2,278
13,476
355
9,854
8,873
(1,626)
(992)
16,109
667
4,582
-
5,249
1,573
3,774
476
5,823
(333)
(93)
(56)
(482)
(192)
(544)
-
(736)
1,715
7,719
420
9,854
Grant Date
2013
STIAD
LTI
Retentions
Total
2012
STIAD
LTI
Retentions
Total
The weighted average exercise price of rights granted during the year was nil
(2012: nil), as the rights have no exercise price.
The weighted average share price at the date of exercise for rights exercised
during the period was $3.56 (2012: $3.24).
The weighted average remaining contractual life of share rights outstanding at
30 June 2013 was 1.2 years (2012: 1.4 years).
Fair value of rights
In determining the fair value below standard market techniques for valuation
were applied in accordance with AASB2. The fair value of the STIAD and the
portion of LTIA rights, that are subject to non-market based performance
conditions, are determined by the share price at grant date less an adjustment
for estimated dividends payable during the vesting period. The fair value of the
LTIA rights subject to the TSR market based performance condition has been
calculated using the Monte-Carlo simulation techniques based on the inputs
disclosed in the table below. In estimating expected vesting it was assumed
an equal chance that each company in the TSR peer Group may finish the
performance period ranked at any position within the Group. Analysis was
performed comparing this approach to the Monte-Carlo simulation conducted
in the prior year and resulted in similar outcomes.
The model inputs for performance rights granted during the year ended
30 June 2013 included:
Tranche
Grant date
Vesting date
Share price at grant
date
Expected life
Volatility
Risk free rate
Dividend yield
Fair value
STIAD
Year 1
10 Oct
2012
10 Oct
2013
Year 2
10 Oct
2012
10 Oct
2015
TSR
23 Aug
2012
23 Aug
2015
LTIA
EPS
23 Aug
2012
23 Aug
2015
OR
23 Aug
2012
23 Aug
2015
$3.62
$3.62
$3.55
$3.55
$3.55
1 year
3 years 3.5 years 3.5 years 3.5 years
n/a
n/a
n/a
n/a
25%
2.7%
n/a
n/a
n/a
n/a
2.20 % 2.20 % 2.20% 2.20% 2.20%
$3.54
$3.46
$2.06
$3.29
$3.29
The key assumptions adopted for the valuation of performance rights granted
during 2012 are contained below:
Tranche
Grant date
Vesting date
Share price at grant date
Expected life
Dividend yield
Fair value
STIAD
LTIA
Year 1
Year 2
TSR EBIT/EPS
28 Sep
2011
28 Sep
2012
$3.17
1 year
28 Sep
2011
28 Sep
2013
22 Aug
2011
30 June
2014
22 Aug
2011
30 June
2014
$3.17
$3.25
$3.25
2 years 3.5 years 3.5 years
3.05% 3.05% 3.05% 3.05%
$3.08
$2.99
$1.28
$2.93
(b) Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised
during the period as part of employee benefit expense was $12.6 million
(2012: $8.7 million).
financial report | aUriZon
97
Notes to the consolidated financial statements
30 June 2013
36. Parent entity financial information
(a) Summary financial information
The individual financial statements for the parent entity show the following
aggregate amounts below.
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Shareholders’ equity
Contributed equity
Retained earnings
Total equity
2013
$m
68.2
2012
$m
7.8
6,129.2
6,121.3
(68.2)
(1,057.7)
(7.9)
(2.0)
5,071.5
6,119.2
5,071.4
6,119.1
0.1
0.1
5,071.5
6,119.2
The parent entity has several employees. All costs associated with these
employees are borne by a subsidiary of the parent entity and are not included
in the above disclosures.
(b) Guarantees entered into by the parent entity
There are cross guarantees given by Aurizon Holdings Limited, Aurizon
Operations Limited, Aurizon Finance Pty Ltd, Aurizon Property Holding Pty Ltd,
Aurizon Terminal Pty Ltd, Aurizon Property Pty Ltd, Aurizon Intermodal Pty Ltd,
Logistics Australasia Pty Ltd, Golden Bros. Group Pty Ltd, CRT Group Pty Ltd,
Interail Australia Pty Ltd, Australian Rail Pty Ltd, Australia Eastern Railroad Pty
Ltd, Australia Western Railroad Pty Ltd, Australian Railroad Group Employment
Pty Ltd and Aurizon Network Pty Ltd as described in note 31.
(c) Contingent liabilities of the parent entity
The parent entity did not have any material contingent liabilities as at 30 June
2013 or 30 June 2012. For information about guarantees given by the parent
entity, please see above.
(d) Contractual commitments for the acquisition of property, plant
or equipment
As at 30 June 2013, the parent entity did not have any contractual
commitments for the acquisition of property, plant or equipment (2012: nil).
37. Events occurring after the reporting period
No matters or circumstances have arisen since the end of the financial year
which have significantly affected, or may significantly affect the operations of
the Group, the results of those operations or the state of affairs of the Group.
98
ANNUAL REPORT 2012–13
Directors’ declaration
30 June 2013
In accordance with a resolution of the Directors of the Company, I state that:
In the opinion of the Directors of the Company:
(a) the financial statements and notes set out on pages 57 to 97 are in accordance with the Corporations Act 2001, including:
(i) complying with Accounting Standards and other mandatory professional reporting requirements as detailed above,
and the Corporations Regulations 2001; and
(ii) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2013 and of its performance for
the year ended on that date, and
(b) 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
(c) at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed group
identified in note 31 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 31.
Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board.
The Directors have been given the declarations by the Managing Director & Chief Executive Officer and Chief Financial Officer
required by section 295A of the Corporations Act 2001.
John B Prescott AC
Chairman
Brisbane QLD
19 August 2013
FINANCIAL REPORT | AURIZON
99
Independent auditor’s report to the members of
Aurizon Holdings Limited
Report on the financial report
We have audited the accompanying financial report of Aurizon Holdings Limited (the company), which comprises the
consolidated balance sheet as at 30 June 2013, and the consolidated income statement, the consolidated statement
of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for
the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’
declaration for both Aurizon Holdings Limited and the Aurizon Holdings Limited Group (the consolidated entity).
The consolidated entity comprises the company and the entities it controlled at the year’s end or from time to time
during the financial year.
Directors’ responsibility 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 is free from material
misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting
Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International
Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant
ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance
whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material
misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order
to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating
the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinions.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
100
ANNUAL REPORT 2012–13
ANNUAL REPORT 2012–13
Independent auditor’s report to the members of
Aurizon Holdings Limited
Auditor’s opinion
In our opinion:
(a) the financial report of Aurizon Holdings Limited is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2013 and of its
performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations)
and the Corporations Regulations 2001; and
(b) the financial report and notes also comply with International Financial Reporting Standards as disclosed in
Note 1.
Report on the Remuneration Report
We have audited the remuneration report included in pages 28 to 48 of the directors’ report for the year ended
30 June 2013. 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.
Auditor’s opinion
In our opinion, the remuneration report of Aurizon Holdings Limited for the year ended 30 June 2013, complies with
section 300A of the Corporations Act 2001.
PricewaterhouseCoopers
John Yeoman
Partner
Brisbane
19 August 2013
Shareholder Information
Range of Fully Paid Ordinary Shares as at 12 August 2013
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – 999,999,999
1,000,000,000 – 9,999,999,999
Rounding
Total
Unmarketable Parcels
SHAREHOLDER INFORMATION | AURIZON
101
ToTal holdeRs
UniTs % of issUed CapiTal
21,794
27,052
3,628
3,102
157
0
14,067,069
60,534,885
26,618,362
61,327,094
1,974,737,093
0
55,733
2,137,284,503
0.66
2.83
1.25
2.87
92.39
0.00
0.00
100
UniTs
17,793
Minimum $ 500.00 parcel at $ 4.50 per unit
MiniMUM paRCel size
holdeRs
112
515
The number of shareholders holding less than the marketable parcel of shares is 515 (shares: 17,793).
Substantial Holders of 5% or more of Fully Paid Ordinary Shares as at 12 August 2013*
naMe
Queensland Treasury Holdings Pty Ltd, Gerard Bradley (Under Treasurer of the State of Queensland)
Perpetual Limited
Children’s Investment Fund Management
UBS AG and its related bodies corporate
HSBC Holdings
* As disclosed in substantial shareholder notices received by the Company.
noTiCe daTe
22 March 2013
22 July 2013
8 May 2012
8 April 2013
7 December 2012
shaRes
189,229,499
154,918,972
125,051,143
119,486,989
109,882,901
Investor Calendar
2014 daTes
17 February 2014
28 March 2014
18 August 2014
22 September 2014
12 November 2014
deTails
Half Year results and interim dividend announcement
Interim dividend payment date
Full Year results and final dividend announcement
Final dividend payment date
Annual General Meeting
Note:
The payment of a dividend is subject to the Corporations Act and Board discretion.
The timing of any event listed above may change. Please refer regularly to the Company website, aurizon.com.au, for an up-to-date list of upcoming events.
ASX code: AZJ
Contact details
Aurizon
GPO Box 456
Brisbane, Qld, 4001
For general enquiries, please call 13 23 32 within Australia.
If you are calling from outside Australia, please dial +61 7 3019 9000
aurizon.com.au
Investor Relations
For all information about your shareholding, including employee
shareholdings, dividend statements and change of address, contact
the share registry Computershare on 1800 776 476 or visit
investorcentre.com/au
To request information relating to Investor Relations please contact
our Investor Relations team on +61 7 3019 1412 or email:
investor.relations@aurizon.com.au
102
ANNUAL REpORT 2012–13
Shareholder Information
(continued)
Top 20 Holders of Fully Paid Ordinary Shares as at 12 August 2013
NATIONAL NOMINEES LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
naMe
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
addRess
GPO BOX 5302, SYDNEY
NSW, 2001
GPO BOX 1406, MELBOURNE
VIC, 3001
LOCKED BAG 7, ROYAL
EXCHANGE NSW, 1225
GPO BOX 764G, MELBOURNE
VIC, 3001
C/- QUEENSLAND TREASURY,
CORPORATION, GPO BOX 1096,
BRISBANE QLD, 4001
JP MORGAN NOMINEES AUSTRALIA LIMITED LOCKED BAG 20049,
QUEENSLAND TREASURY HOLDINGS PTY LTD
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMS PTY LTD
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
CS FOURTH NOMINEES PTY LTD
BNP PARIBAS NOMINEES PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
UBS NOMINEES PTY LTD
CITICORP NOMINEES PTY LIMITED
ECAPITAL NOMINEES PTY LIMITED
AMP LIFE LIMITED
BNP PARIBAS NOMINEES PTY LTD
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 3
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
Totals: Top 20 holders of oRdinaRY fUllY paid shaRes (ToTal)
Total Remaining holders Balance
MELBOURNE VIC, 3001
PO BOX R209, ROYAL EXCHANGE
NSW, 1225
GPO BOX 5430, SYDNEY
NSW, 2001
C/-CREDIT SUISSE EQTS AUST
LTD, ATT: CORRINNA JOHNS,
41/101 COLLINS STREET,
MELBOURNE VIC, 3000
PO BOX R209, ROYAL EXCHANGE
NSW, 1225
GPO BOX 5302, SYDNEY
NSW, 2001
LEVEL 16, CHIFLEY TOWER,
2 CHIFLEY SQUARE, SYDNEY
NSW, 2000
GPO BOX 764G, MELBOURNE
VIC, 3001
GPO BOX 3804, SYDNEY
NSW, 2001
PO BOX R209, ROYAL EXCHANGE
NSW, 1225
PO BOX R209, ROYAL EXCHANGE
NSW, 1225
GPO BOX 5430, SYDNEY
NSW, 2001
GPO BOX 5302, SYDNEY
NSW, 2001
GPO BOX 5302, SYDNEY
NSW, 2001
GPO BOX 5430, SYDNEY
NSW, 2001
UniTs
443,609,594
350,367,097
305,784,940
177,569,171
171,458,210
90,830,036
60,473,932
55,348,855
31,421,891
31,382,600
30,222,470
26,513,092
25,440,726
17,476,003
15,019,690
14,404,857
11,148,225
11,079,986
8,437,262
8,227,363
% of UniTs
20.76
16.39
14.31
8.31
8.02
4.25
2.83
2.59
1.47
1.47
1.41
1.24
1.19
0.82
0.70
0.67
0.52
0.52
0.39
0.38
1,886,216,000
251,068,503
88.25
11.75
Glossary
Some terms and abbreviations used in this
document, together with industry specific terms,
have defined meanings.
These terms and abbreviations are set out in this
glossary and are used throughout this document.
A reference to dollars, $ or cents in this document is
a reference to Australian currency unless otherwise
stated. Any reference to a statute, ordinance,
code or other law includes regulations and any
other instruments under it and consolidations,
amendments, re-enactments or replacements of
any of them. Any reference to Annual Report is a
reference to this document.
GLOSSARY | AURIZON
103
ABN
Australian Business Number
CPS
Cents per share
above rail
Rollingstock – including locomotives and wagons
and associated infrastructure (e.g. maintenance
and operational depots)
CQCN
Central Queensland Coal Network
CQIRP
Central Queensland Integrated Rail Project
ACN
Australian Company Number
ASIC
Australian Securities and Investments Commission
ASX
Australian Securities Exchange operated by
ASX Limited (ABN 98 008 624 691)
ASX Listing Rules
The official listing rules of ASX
Aurizon
Aurizon Holdings Limited (ACN 146 335 622),
and where the context requires, includes any of its
subsidiaries and controlled entities
below rail
Track, electric infrastructure, signalling and
associated rail infrastructure
Board
The Board of Directors of Aurizon Holdings Limited
CAGR
Compound annual growth rate, expressed as a
percentage per year
CGT
Capital Gains Tax
Coal
The above rail coal haulage operating division of
Aurizon Holdings Limited
Company or Aurizon Holdings
Aurizon Holdings Limited (ACN 146 335 622),
and where the context requires, includes any of its
subsidiaries and controlled entities
Company Secretary
The Company Secretary of Aurizon Holdings
Limited
Constitution
The constitution of Aurizon Holdings Limited
Corporations Act
Corporations Act 2001 (Cth)
DTC
Deficit Tonnage Charges
EBIT
Earnings before interest and tax
EBITDA
Earnings before interest, tax, depreciation and
amortisation
EBIT Margin
Underlying earnings before interest and tax divided
by total revenue and other income
EEO
Energy Efficiency Opportunity
EEO Act
Energy Efficiency Opportunity Act 2006 (Cth)
EPS
Earnings Per Share
Freight
The above rail freight haulage operating division
of Aurizon Holdings Limited
FY
Financial year ended 30 June, as the context
requires
GAP
Goonyella to Abbot Point
GAPE
Goonyella to Abbot Point Expansion
GAAP
Generally Accepted Accounting Principles
IBNR
Incurred but not reported
IFRS
International Financial Reporting Standards
km
kilometre
LTIA
Long Term Incentive Awards
104
ANNUAL RepORt 2012–13
Glossary
(continued)
LTIFR
Lost Time Injury Frequency Rate, being a measure
of the number of lost time injuries per million hours
worked over a 12 month period
MTIFR
Medically Treated Injury Frequency Rate, being
a measure of the number of medically treated
injuries per million hours worked over a 12 month
period
MAR
Maximum Allowable Revenue that Aurizon Network
Pty Ltd is entitled to earn from the provision of coal
carrying train services in the CQCN across the term
of an access undertaking
mt
Millions of tonnes
mtpa
Millions of tonnes per annum
Network
Aurizon Network Pty Ltd (ACN 132 181 116),
a wholly-owned subsidiary of Aurizon Holdings
Network Services
The Network Services operating division of
Aurizon Holdings
NGER
National Greenhouse Energy Reporting
NGER Act
National Greenhouse Energy Reporting Act
2007 (Cth)
ntk
Net tonne kilometre, unit of measure representing
the movement over a distance of one kilometre of
one tonne of contents excluding the weight of the
locomotive and wagons
Operating Ratio
1 – EBIT margin, expressed as a percentage
OPEX
Operating expense including depreciation
and amortisation
PPT
Percentage point
QCA
Queensland Competition Authority
Queensland Rail
Queensland Rail Limited (ACN 132 181 090) –
this entity is owned by the State and operates
the core public rail passenger business
RAB
Regulated Asset Base the value of the asset
base on which pricing is determined by the price
regulator
ROIC
Return on Invested Capital
share
A fully paid ordinary share in Aurizon Holdings
STIA
Short-term Incentive Award
tonne
One metric tonne, being 1,000 kilograms
tonne kilometres
The product of tonnes and distance
TSC
Transport Services Contract entered into between
the Queensland State Government and the
Company for the provision of regional freight
and livestock services
WACC
Weighted Average Cost of Capital, expressed as
a percentage
WICET
Wiggins Island Coal Expansion Terminal
WIRP
Wiggins Island Rail Project
SECTION HEADING | AURIZON
CORPORATE INFORMATION | AURIZON
SECTION HEADING | AURIZON
105
105
Corporate Information
Aurizon Holdings Limited
ABN 14 146 335 622
Directors
John B Prescott AC
Lance E Hockridge
John Atkin
Russell R Caplan
John Cooper
Karen Field
Graeme John AO
Andrea Staines
Gene Tilbrook
Company Secretary
Dominic D Smith
Registered Office
Level 17, 175 Eagle Street
Brisbane QLD 4000
Auditors
PricewaterhouseCoopers
Share Registry
Computershare Investor
Services Pty Limited
117 Victoria Street,
West End, Qld 4001, Australia
Tel: 1800 776 476
(or +61 3 9938 4376)
Image: Joseph Canizares in the Mt Isa workshop
Aurizon Holdings Limited
ABN 14 146 335 622