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Contents
FY2021 in Review ................................................... 1
Chairman’s Report ................................................2
Managing Director & CEO’s Report ..............3
Directors’ Report ...................................................4
– Operating and Financial Review .................11
– Remuneration Report ................................... 26
Auditors’ Independence Declaration ..........41
Corporate Governance Statement ............. 42
Financial Report ..................................................48
Shareholder Information ...............................108
Glossary ..................................................................110
Corporate Information ....................................112
Our vision
To be the first choice for bulk commodity
transport solutions.
Our purpose
To grow regional Australia by delivering bulk
commodities to the world.
Our values
SAFETY
We know safe, we choose safe.
PEOPLE
We seek diverse perspectives.
INTEGRITY
We have the courage to do the right thing.
CUSTOMER
We strive to be the first choice for customers.
EXCELLENCE
We set and achieve ambitious goals.
FY2021 in Review
Result highlights (Underlying and statutory continuing operations)
($M)
Total revenue
EBITDA
EBIT
Adjustments
EBIT Statutory
NPAT
NPAT Statutory
Free cash flow (FCF) (continuing and discontinued operations)
Final dividend (cps)
Total dividend (cps)
Earnings per share (cps)
Return on invested capital (ROIC)
EBITDA margin (%)
Operating ratio (OR) (%)
Above Rail Tonnes (m)
Above Rail opex/NTK (excluding access) ($/’000 NTK)
Gearing (net debt/(net debt + equity)) (%)
Performance overview
› EBITDA up 1% to $1,482.2m with:
• Network up $50.7m (6%) with higher
revenue from the commencement of
Wiggins Island Rail Project (WIRP)
fee billing offsetting volume-driven
under-recoveries
• Bulk up $29.8m (27%) with higher
revenue through new contracts
• Coal down $83.1m (13%) driven by a
6% reduction in volume
• Other improved by $17.2m (30%) due
to asset sales and lower project costs.
› FCF increased 1% to $734.4m consistent
with EBITDA growth and inclusive of net
proceeds from the sale of the Acacia Ridge
Intermodal Terminal.
› Final dividend 14.4cps (70% franked)
representing a payout ratio of 100%
of underlying NPAT for the continuing
operations, an increase of 5% and resulting
in a total FY2021 dividends of 28.8cps.
› Completion of a $300.0m on market share
buy-back.
Major items
› Network — EBITDA growth reflects
commencement of WIRP fee billing more than
offsetting volume-driven under-recoveries.
Operating costs also reduced in line with lower
volumes and reduced maintenance spend.
› Bulk — strong financial performance continues
with full-year benefit of recent contract
wins and ongoing operational efficiency
improvements. Bulk now accounts for 32% of
above rail revenue1 and 26% of above rail EBIT.
› Coal — decline in EBITDA driven by 6% lower
volumes, lower revenue quality and non-pass
through of Take-or-Pay. Operating costs
excluding access 4% lower with a reduction in
fuel, traincrew and maintenance costs.
› Three debt market capital issuances
representing $1.075bn with terms from
7.0-years to 10.5-years (and coupons of
2.9% to 3.3%) including an inaugural issuance
for Aurizon Operations — 7.0-year A$500.0m
Medium Term Note at a coupon of 3.0%.
FY2021
3,019.3
1,482.2
903.1
8.2
911.3
533.2
606.7
734.4
14.4
28.8
28.5
10.7%
49.1%
70.1%
253.2
21.2
45.6%
FY2020
3,064.6
1,467.6
909.0
105.4
1,014.4
531.3
605.1
725.0
13.7
27.4
27.2
10.9%
47.9%
70.3%
262.0
20.9
45.1%
VARIANCE
(1%)
1%
(1%)
(92%)
(10%)
-
-
1%
5%
5%
5%
(0.2ppt)
1.2ppt
0.2ppt
(3%)
(1%)
(0.5ppt)
Outlook
Underlying EBITDA guidance for FY2022
of $1,425m to $1,500m and sustaining
capital expenditure of $475m to $525m.
Key assumptions:
› Coal — ~5% volume growth and lower costs
offset by lower contracted rates.
› Bulk — revenue growth from full year impact
of recent contract wins and port acquisitions.
› Network — non-recurrence of retrospective
WIRP fees ($49.8m) and Maximum
Allowance Revenue (MAR) reduction due
to capital recoveries.
› No material disruptions to commodity
supply chains (such as adverse weather
and/or impacts from COVID-19 related
restrictions).
1 Above Rail Revenue is calculated excluding track access
FY2021 IN REVIEW
1
Chairman’s Report
A message from the Chairman
Dear fellow shareholders
Despite another very challenging year for
the Australian economy and our communities,
I am pleased to report that a resilient Aurizon
business has delivered a solid performance for
shareholders in FY2021.
Aurizon delivered Earnings Before Interest and
Tax (EBIT) of $903m in FY2021, which was
within our guidance range of $870 - $910m.
In FY2021, Aurizon also generated free cash
flow of $734m. In a year where our above rail
and network volumes were lower, these results
highlight the strength and resilience of our
business, with stable and consistent cash flows
enabling Aurizon to increase dividends and
undertake another share buyback.
Aurizon has decided to pay out 100% of
Underlying Net Profit After Tax as dividends.
The Board has declared a final dividend of
14.4 cents per share, 70% franked. This will take
total dividends in respect of FY2021 to 28.8 cents
per share, 70% franked, an increase of 5% from
FY2020. With the completion of the $300m
share buyback in FY2021, distributions to
shareholders have totalled more than $4 billion
over the past six years.
Aurizon continued to make good progress on
key priorities during FY2021, including:
› Continuing the successful execution of the
Bulk business turnaround, with multiple paths
for growth in volumes, revenue, EBITDA
and EBIT. This includes the acquisitions of
port and logistics businesses in Townsville
(in FY2020) and Newcastle (FY2021) under
the banner of Aurizon Port Services. Bulk
now accounts for 32% of above rail revenue.
We see a rebalancing of our portfolio
in coming years as Bulk taps into the
rapidly-expanding demand for Australian
commodities as inputs for batteries, electric
vehicles, telecommunications, solar panels
and wind turbines; for urban and transport
infrastructure; and high-quality Australian
agricultural products, food and fertiliser.
› In October 2020, Aurizon released its
Climate Strategy and Action Plan. This
includes a target of net-zero operational
emissions (scope 1 and 2) by 2050; a $50m
investment over 10 years in low-carbon
technologies for our locomotive fleet; and,
the use of more renewable energy for our
electrified rail network. Work has started
on a project to develop battery-powered
heavy-haul locomotives, and Aurizon is also
assessing the longer-term opportunity for
hydrogen-powered freight trains.
› The $205m sale of the Acacia Ridge Terminal
in Queensland was completed in March 2021,
following the High Court’s dismissal of an
application for special leave to appeal by
the Australian Consumer and Competition
Commission. This sale finalises Aurizon’s
staged exit from the loss-making Intermodal
business that was commenced in 2017.
› The Queensland Court of Appeal dismissed
the customers' appeal on the payment of
fees for the Wiggins Island Rail Project.
This resulted in $60m of fees being
recognised by Aurizon in FY2021 (including
retrospective payments for the period
FY2016-FY2020), and ongoing annual fees
of ~$11m payable until 2035.
Aurizon continues to refine our business
strategy in response to the changing external
environment and based on detailed market
analysis. Our strategic aim is to ensure
Aurizon’s core business is highly efficient
and resilient in this changing market
environment, while positioning to seize the
higher-growth opportunities that are emerging
for Aurizon Bulk.
Aurizon Bulk provides integrated supply chain
services, including rail and road transportation,
port services and material handling for a range
of mining, metal, industrial and agricultural
customers throughout Queensland, New South
Wales and Western Australia. We are also
well-positioned in markets serving the global
uptake of electric vehicles, telecommunications
and renewable energy infrastructure that is
driving demand for Australian resources such
as cobalt, copper and lithium.
We are actively seeking further opportunities
to grow our Bulk portfolio. This builds on the
work in recent years to simplify our business
and exit the non-profitable parts, so we can
focus our core capabilities on delivering for
customers. Transformation, productivity
initiatives and continuing cost reduction in
all of our businesses will also remain key
drivers for Aurizon’s financial and operational
performance. Our teams are finding safer,
simpler and more innovative solutions for our
customers, particularly as we leverage the latest
in information and operational technology.
Safety is a value for Aurizon. This year,
the Board requested a specific Board Safety
Strategy Day to review with management a
refined Safety Strategy. The objective is to
support continuous improvement of safety.
During FY2021 our Company Secretary,
Dominic Smith, left Aurizon. Dominic worked
with the Company through the ASX listing
process in 2010 and has been the Company
Secretary since that time. On behalf of the
Board I would like to thank Dominic for his
outstanding service and guidance and wish
him well for the future.
In his report on the following page, our
Managing Director & CEO Andrew Harding
provides some detail on how we are supporting
the nation’s efforts in responding to the
COVID-19 pandemic, including the ongoing
operation of freight supply chains that are vital
for our communities, farmers, manufacturers
and the resource sector. The Board
acknowledges the work of Andrew and our
leadership team in guiding Aurizon’s response
during the pandemic and the outstanding
commitment of our teams in serving customers
during these difficult times.
Finally, I acknowledge the continued support
of our shareholders. We have built solid
foundations for our Company and are well-
positioned in existing and emerging markets
for continued success. With a resilient business,
a strong balance sheet and good cash flows,
we look forward to continuing to reward you
on your investment.
Tim Poole
Chairman
9 August 2021
2
AURIZON ANNUAL REPORT 2020–21
Managing Director & CEO’s Report
A message from the
Managing Director & CEO
Dear fellow shareholders
I begin my report to you on our business
results by addressing operational safety
performance and employee health and
wellbeing during FY2021.
With the rapidly changing COVID-19 situation
in Australia, Aurizon has maintained constant
vigilance across our national footprint to protect
the health of our employees together with the
customers we serve in our freight supply chains.
As an essential service, we have been fortunate
to continue operating services throughout
COVID-19 and have implemented additional
health and hygiene protocols in our operations.
We understand the responsibility that comes
with continued operation, and the important
role we play in delivering freight across
Australia, as well as for export industries in the
resource, manufacturing and agriculture sectors.
We have responded to the community COVID-19
outbreaks that have occurred, including
imposing restrictions on non-essential travel
and increasing preventative measures in
workplaces, aligned with government advice.
We have promoted flexible and remote working
where it is possible and enhanced our IT
and technical support to boost productivity
and connectivity for employees. We are
also fortunate that the vast majority of train
services do not cross interstate borders and
more than 80% of our employees live and work
in regional communities of Australia which
generally have been less impacted by COVID-19.
Aurizon is actively encouraging employees to
get vaccinated to protect themselves, work
colleagues, their families and local communities.
Turning now to operational safety performance.
Our results have been flat across the safety
metrics of Total Recordable Injury Frequency
Rate (TRIFR), Lost Time Injury Frequency Rate
(LTIFR) and Rail Process Safety (RPS).
TRFIR has deteriorated 3% in comparison
with last year’s improvement of 10%. This
deterioration has been the result of an increase
in low-severity strain and sprain injuries. LTIFR
has improved 8% year-on-year, which is a
positive trend.
RPS, a measure designed by Aurizon to improve
rail safety operations, including derailments,
signals passed at danger and rollingstock
collisions, has been flat in recent years. RPS
deteriorated 8% in FY2021. This has been
caused by an increase in low severity yard
derailments.
During the year we continued the Safety
Leadership program that equips operational
leaders with skills to effectively lead our Safety
Strategy and continually improve safety in
their team. We are also focussing on initiatives
to accelerate safety improvement through
targeting the main contributors to TRIFR and
RPS, and a specific focus on identifying and
learning from events that have the potential
for Serious Injury and Fatality.
In respect to the operational and financial
performance, the Company has performed well
despite the economic uncertainty and social
disruption of COVID-19 for our industry and
the economy.
The Bulk business has delivered another strong
result in FY2021, with EBIT increasing 25% to
$112m. Revenue has been driven higher with new
contracts and growth with existing customers,
together with extended services such as the
acquisition of the ConPorts business at the
Port of Newcastle. After year's end, in August
2021, we were pleased to announce a long-
term rail haulage and maintenance agreement
with CBH in Western Australia covering all rail
requirements for CBH’s Western Australian grain
harvests. This contract underlines the capability
and the potential opportunity for our Bulk
business in providing integrated supply chain
services for a range of mining, metal, industrial
and agricultural customers across a national
footprint. This opportunity not only includes
traditional products such as iron ore, bauxite,
alumina, base metals, grains and fertiliser
but also the inputs for rapidly expanding
markets for batteries, telecommunications
and electric vehicles.
Above rail coal tonnages were down 6% in
FY2021 against the prior period primarily as a
result of COVID-19 and China import restrictions.
Consequently, EBIT for Coal was down 21% to
$325m, compared to FY2020. We expect to
see haulage volumes to grow by around ~5% in
FY2022. During FY2021, the Coal business was
successful in extending its long-term contract
book with a number of contract wins, including
Anglo American (renewed contract for Dawson
and securing additional tonnages from the
Moranbah North, Grosvenor and German Creek
mines, commencing early 2022) and Glencore
(renewed contract as primary hauler for
Newlands, Blackwater and Goonyella,
excluding Hail Creek).
The Network business had another solid EBIT
result in FY2021 of $509m, a 9% increase on
the prior period, despite an 8% decrease in
volumes. During FY2021, we were successful in
recovering outstanding fees of $60m (including
retrospective payments) for the Wiggins Island
Rail Project.
As well as delivering products and
commodities, Aurizon is committed to
supporting the communities in which our
employees live and work. Since 2011, we have
supported more than 430 community groups
through our Community Giving Fund. In
FY2021, we provided grants to 46 charities and
community organisations in the areas of health
and wellbeing, community safety, environment
and education.
During the year, we extended our reach into
the community with two major partnerships.
The first is a three-year partnership with
Orange Sky Australia, which offers free laundry
and shower services for people experiencing
homelessness while providing a safe
environment to connect with the community.
As well as financial support, Aurizon employees
are volunteering, individually and in teams, to
support Orange Sky services across Australia.
Aurizon also became the new Principal Partner
of the Queensland Firebirds who compete
in the national Super Netball competition.
Aurizon is committed to building a more
inclusive, diverse team across our national
operations and having a pipeline of young
women leaders to support our future success.
We see great alignment with the Firebirds in
their championing of success and excellence
in sport, with an ever-growing participation of
young women in netball.
During FY2021, we had some changes to
our senior leadership team. I would like to
acknowledge the outstanding contribution of
Group Executive Technical Services & Planning
(TSP), Michael Carter who announced his
retirement. Mike has been with the Company for
35 years and is highly regarded in the Australian
rail industry. As a result of Mike leaving, we took
the opportunity to streamline the Corporate
and TSP areas under one executive and were
pleased to appoint internal candidate Gareth
Long as Group Executive Corporate.
Finally, my thanks go to our employees
across our national footprint who are at
the heart of the continuing success of our
Company. They have shown dedication and
discipline in carrying out their jobs during
a very challenging period for the Australian
community. This has been the foundation for
continued safe, reliable service delivery for our
customers and in looking after the health and
wellbeing of themselves and work colleagues.
Andrew Harding
Managing Director & CEO
9 August 2021
MANAGING DIRECTOR & CEO’S REPORT
3
Directors’ Report
T Poole
Experience: Mr Poole began his executive
career in 1990 at PricewaterhouseCoopers
(then Price Waterhouse) before joining
Hastings Funds Management in 1995.
He helped to build Hastings into a global
investor in private market assets, principally
equity and debt issued by infrastructure
companies and was the Managing Director
from 2005 to 2007.
Since retiring from Hastings, Mr Poole has
been an investor and non-executive director
of a range of public and private companies
in sectors including infrastructure, transport,
property, financial services and mining.
Qualifications: BCom.
Special responsibilities: Chairman of
Nomination & Succession Committee. Member
of Audit, Governance & Risk Management
Committee. Member of Safety, Health &
Environment Committee.
Australian Listed Company Directorships held
in the past three years: Lifestyle Communities
Limited — Chairman (19 November 2007 to
14 August 2019); McMillan Shakespeare Limited
— Non-Executive Director (17 December 2013 –
ongoing); and Reece Limited — Non-Executive
Director (28 July 2016 – ongoing).
A Harding
Experience: Mr Harding was appointed
Managing Director & CEO of Aurizon in
December 2016.
At Aurizon, Mr Harding has implemented
initiatives to leverage the core expertise
of the business in heavy haulage and rail
infrastructure. These include a new operating
structure, a renewed leadership team and a
refreshed Company strategy.
Prior to starting with Aurizon, Mr Harding was
the global Chief Executive of Rio Tinto’s Iron
Ore business.
Mr Harding completed a Bachelor of Mining
Engineering at the University of New South
Wales and holds an MBA from Deakin
University.
Qualifications: B.Eng. (Mining Engineering), MBA.
Special responsibilities: Managing Director
& CEO of Aurizon. Director of Aurizon
subsidiary companies including Aurizon
Network Pty Ltd. Member of Safety, Health
& Environment Committee.
Australian Listed Company Directorships
held in the past three years: None other
than Aurizon Holdings Limited.
Aurizon Holdings Limited
For the year ended 30 June 2021
The Directors of Aurizon Holdings Limited
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 2021 and the
Independent Auditors’ 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:
T Poole
(Appointed 1 July 2015)
(Chairman, Independent Non-Executive Director)
A Harding
(Appointed 1 December 2016)
(Managing Director & Chief Executive Officer)
M Bastos
(Appointed 15 November 2017)
(Independent Non-Executive Director)
R Caplan
(Appointed 14 September 2010)
(Independent Non-Executive Director)
M Fraser
(Appointed 15 February 2016)
(Independent Non-Executive Director)
S Lewis
(Appointed 17 February 2015)
(Independent Non-Executive Director)
S Ryan
(Appointed 1 December 2019)
(Independent Non-Executive Director)
L Strambi
(Appointed 1 December 2019)
(Independent Non-Executive Director)
K Vidgen
(Appointed 25 July 2016)
(Independent Non-Executive Director)
Details of the experience, qualifications, 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.
4
AURIZON ANNUAL REPORT 2020–21 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 and Non-Executive
Director of Horizon Roads Pty Ltd.
He is a former Chairman of the Melbourne
and Olympic Parks Trust, the Australian
Institute of Petroleum and Orica Limited
and Non-Executive Director of Woodside
Petroleum Limited.
Qualifications: LLB, FAICD, FAIM.
Special responsibilities: Member of
Remuneration and People Committee.
Member of Audit, Governance & Risk
Management Committee.
Australian Listed Company Directorships
held in the past three years: None other than
Aurizon Holdings Limited.
M Fraser
Experience: Mr Fraser has more than 35 years
of experience in the Australian energy industry.
He has held various executive positions at AGL
Energy culminating in his role as Managing
Director & Chief Executive Officer for a period
of seven years until February 2015. Mr Fraser is
currently Chairman and Non-Executive Director
of the ASX-listed APA Group.
Mr Fraser is former Chairman of the Clean
Energy Council, Elgas Limited, ActewAGL and
the NEMMCo Participants Advisory Committee,
as well as a former Director of Queensland
Gas Company Limited, the Australian Gas
Association, and the Energy Retailers
Association of Australia.
Qualifications: BComm, FCPA, MAICD.
Special responsibilities: Chairman of Aurizon
Network Pty Ltd. Member of Remuneration and
People Committee.
Australian Listed Company Directorships
held in the past three years: APA Group —
Chairman and Non-Executive Director
(1 September 2015 – ongoing).
M Bastos
Experience: Mr Bastos has more than 30 years
of experience globally in the mining industry.
He has extensive experience in major project
development, operations, logistics and senior
leadership in most of the major sectors of
the mining industry including iron ore, gold,
copper, nickel, zinc and coal.
Previously Mr Bastos was the Chief Operating
Officer of MMG Limited with responsibility for
the business in four continents and a member
of many of the company Boards. Before MMG
he spent seven years with BHP Billiton where
he served as President Nickel Americas,
President Nickel West (based in Perth), and
Chief Executive Officer and President of BHP
Billiton Mitsubishi Alliance (based in Brisbane).
Mr Bastos also had a 19-year career with Vale in
a range of senior management and operational
positions in Brazil, including General Manager
of Carajas in the northern region and also
Director of Non Ferrous – Copper business.
Mr Bastos is currently a Non-Executive Director
of IIuka Resources Limited, Non-Executive
Director of Anglo American PLC, and was an
External Director (Non-Executive Independent)
of Golder Associates from 2017 to 2021.
Qualifications: B.Eng. Mechanical (Hons),
MBA (FDC-MG), MAICD.
Special responsibilities: Chairman of
Safety, Health & Environment Committee.
Non-Executive Director of Aurizon Network
Pty Ltd.
Australian Listed Company Directorships held
in the past three years: lluka Resources
Limited — Non-Executive Director (February
2014 – ongoing); OZ Minerals Limited —
Non-Executive Director (September 2018
to April 2019).
DIRECTORS’ REPORT
5
Directors’ Report (continued)
S Lewis
Experience: Ms Lewis has extensive financial
experience, including as a lead auditor of a
number of major Australian listed entities.
Ms Lewis has significant experience working
with clients in the manufacturing, consumer
business and energy sectors, and in addition
to external audits, has provided accounting
and transactional advisory services to other
major organisations in Australia. Ms Lewis’
expertise includes accounting, finance,
auditing, risk management, corporate
governance, capital markets and due diligence.
Ms Lewis is currently a Non-Executive Director
and Chairman of the Audit & Compliance
Committee of Orora Limited, Chairman of
APRA’s Audit and Risk Committee, and a
Non-Executive Director and Chairman of the
Audit & Risk Committee of Nine Entertainment
Co. Holdings Limited. Previously, Ms Lewis was
an Assurance & Advisory partner from 2000 to
2014 with Deloitte Australia.
Qualifications: BA (Hons) EC, CA, ACA, GAICD.
Special responsibilities: Chair of Audit,
Governance & Risk Management Committee.
Member of Remuneration and People
Committee. Member of Nomination &
Succession Committee.
Australian Listed Company Directorships
held in the past three years: Orora Limited —
Non-Executive Director (1 March 2014 –
ongoing); and Nine Entertainment Co.
Holdings Limited — Non-Executive Director
(20 March 2017 – ongoing).
S Ryan
Experience: Dr Sarah Ryan has approximately
30 years of international experience in the oil
and gas industry. Initially Sarah spent 20 years
in various technical, operational and senior
management positions, including 15 years with
Schlumberger Limited both in Australia and
overseas. Dr Ryan then spent 10 years as an
equity analyst covering natural resources with
institutional investment firm Earnest Partners,
based in the US. Dr Ryan is currently a Non-
Executive Director of ASX-listed Woodside
Petroleum Limited, Viva Energy Group Limited
and, OZ Minerals Limited, and a Non-Executive
Director of Future Battery Industry Cooperative
Research Centre. Dr Ryan is a former Non-
Executive Director of Norwegian listed Akastor
ASA. Dr Ryan is a Fellow of the Australian
Academy of Technology and Engineering.
Qualifications: PhD (Petroleum and
Geophysics), BSc (Geophysics) (Hons 1),
BSc (Geology), FTSE.
Special responsibilities: Member of Audit,
Governance & Risk Management Committee.
Member of Safety, Health & Environment
Committee.
Australian Listed Company Directorships
held in the past three years: Woodside
Petroleum Limited — Non-Executive Director
(24 October 2012 — ongoing); Viva Energy
Group — Non-Executive Director (18 June
2018 – ongoing); and OZ Minerals Limited —
Non-Executive Director (17 May 2021 – ongoing).
L Strambi
Experience: Mr Strambi was appointed CEO
and Managing Director of Australia Pacific
Airports Corporation (APAC) in September
2015. He is responsible for the operation and
development of both the Melbourne and
Launceston airports.
Mr Strambi has a wealth of experience in
the aviation sector both in Australia and
abroad, spanning 40 years. As APAC’s leader,
Mr Strambi is responsible for overseeing
a direct workforce of 300 staff and assets
valued in excess of $10 billion.
Prior to commencing at APAC, Mr Strambi
was the Chief Executive Officer of Qantas
Airways Domestic, a role he held for three
years following four years as the airline’s
Group Executive Operations. Between 2001
and 2008 Mr Strambi was based in London,
working in senior roles at Virgin Atlantic that
included Executive Director – Airline Services
and followed by six years as Chief Operating
Officer.
Mr Strambi is a Graduate and Fellow of the
Australian Institute of Company Directors
and a Member of the Australian Institute of
Management. He holds a Bachelor of Business
in Accounting and Finance.
As a Director, Mr Strambi has held positions
with Star Track Express, Traveland and
Southern Cross Distribution Systems and
was President of the Royal Flying Doctors
SE. Currently Mr Strambi is an APAC Board
Member.
Qualifications: BBus (Accy), FAICD.
Special responsibilities: Non-Executive
Director of Aurizon Network Pty Ltd. Member
of Safety, Health & Environment Committee.
Australian Listed Company Directorships held
in the past three years: None other
than Aurizon Holdings Limited.
6
AURIZON ANNUAL REPORT 2020–21 K Vidgen
Experience: Ms Vidgen began her career
as a banking, finance and energy lawyer at
Malleson Stephen Jacques and in 1998 started
in the Infrastructure advisory team within the
Macquarie Group.
During her time at Macquarie, Ms Vidgen has
traversed a number of sectors with a focus on
infrastructure, energy and resources. Ms Vidgen
remains an Executive Director at Macquarie
Capital and is currently the Head of Industrial
Transition and Clean Fuels globally, across
Macquarie Capital and the Green Investment
Group. This role is focused on developing the
strategy and teams to deploy the Macquarie
balance sheet across the energy value chain
with a specific focus on clean fuels and
deep decarbonisation. Ms Vidgen also sits
on a number of leadership and governance
committees within Macquarie Capital, the
Green Investment Group and the broader
Macquarie Group.
In June 2021 Ms Vidgen was appointed to the
Board of the Clean Energy Regulator.
Ms Vidgen is a member of Chief Executive
Women and a director of Bond University Limited.
Company Secretary
David Wenck was appointed Company
Secretary in April 2021. He joined Aurizon in
2010 as Group General Counsel and has over
20 years’ experience in corporate and
commercial law. Prior to joining Aurizon,
David was a partner in a leading Australian law
firm practising in corporate, commercial and
competition law.
David holds a Bachelor of Laws with honours
and is a member of the Australian Institute of
Company Directors.
Qualifications: Bachelor of Laws (Hons.),
Graduate Diploma of Legal Practice (UTS),
MAICD.
Deputy Company Secretary
Naomi Wecker was appointed Deputy Company
Secretary in April 2021 and has been with
Aurizon since July 2010. She has over seven
years corporate legal experience including
strategic transactions, finance and governance.
Naomi holds a Bachelor of Laws, Bachelor of
Business (Advertising) and Graduate Diploma
of Legal Practice from the Queensland
University of Technology.
Principal activities
The principal activities of entities within the
Group during the year were:
Network
Manages the provision of access to, and
operation of, the Central Queensland Coal
Network (CQCN), provision of maintenance
and renewal of network assets.
Coal
Transport of coal from mines in Queensland
and New South Wales to end customers
and ports.
Bulk
Integrated supply chain services, including
rail and road transportation, port services
and material handling for a range of mining,
metal, industrial and agricultural customers
throughout Queensland, New South Wales and
Western Australia.
Review of operations
A review of the Group’s operations for
the financial year and the results of those
operations, are contained in the Operating
and Financial Review as set out on pages
11 to 25 of this report.
Qualifications: LLB (Hons), BA, GAICD.
Qualifications: LLB, BBus, GradDipLegalPrac.
Dividends
Special responsibilities: Chair of Remuneration
and People Committee.
Member of Nomination & Succession
Committee. Non-Executive Director of
Aurizon Network Pty Ltd.
Australian Listed Company Directorships held
in the past three years: None other
than Aurizon Holdings Limited.
A final dividend of 13.7 cents per fully paid
ordinary share (70% franked) was paid on
21 September 2020 and an interim dividend
of 14.4 cents per fully paid ordinary share
(70% franked) was paid on 31 March 2021.
Further details of dividends provided for, or
paid, are set out in note 15 to the consolidated
financial statements.
Since the end of the financial year, the
Directors have declared to pay a final dividend
of 14.4 cents per fully paid ordinary share.
The dividend will be 70% franked and is
payable on 22 September 2021.
State of affairs
In the opinion of the Directors, there were no
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 or note 32 of the Financial 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.
DIRECTORS’ REPORT
7
Directors’ Report (continued)
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 set out on page 2 of this report and the
Managing Director & CEO’s Report set out on
page 3 of this report, and at a high level in the
outlook provided on page 1 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.
Effective governance for sustainability
Aurizon believes corporate governance is a
critical pillar on which its business objectives
and, in turn, shareholder value must be built.
Aurizon Board members possess skills and
experience from a range of sectors such as
transport and logistics, mining, finance, strategy,
technology, government relations, safety, health,
and environment, among others. As such, the
Board is well-equipped to consider a range
of sustainability-related issues. The Board
provides oversight and strategic direction to
sustainability and has ultimate responsibility for
the Company’s consideration of climate-related
risk. It is guided by the Audit, Governance
and Risk Management Committee and Safety,
Health and Environment Committee as part of
Aurizon’s risk framework and broader corporate
strategy and planning.
Aurizon understands that climate change is one
of the key interests to stakeholders. Aurizon
accepts the scientific consensus on climate
change and supports the objective of finding
a pathway to limit global warming to less than
2°C, aligned to the Paris Agreement. It also
acknowledges the Intergovernmental Panel on
Climate Change’s (IPCC) Special Report on the
impacts of global warming of 1.5°C above pre-
industrial levels.
During FY2021, Aurizon published its first
Climate Strategy and Action Plan (CSAP).
The CSAP establishes a target of net-zero
operational emissions (scope 1 and 2) by 2050
and provides a foundation for Aurizon’s long-
term approach to climate change, underpinned
by strategies and associated actions to mitigate
climate risk and take advantage of climate-
related opportunities. The CSAP is built on
three key pillars:
1. Manage risk and build resilience.
2. Deliver decarbonisation.
3. Create carbon abatement opportunities.
Following the launch of the CSAP, Aurizon
has progressed laying the foundations for
its climate resilience and decarbonisation
roadmap. This has involved establishing a
cross-functional CSAP Steering Committee,
responsible for guiding the implementation
of the CSAP and aligning initiatives under the
three key pillars.
Between 2010 and 2020 Aurizon achieved a
20% emissions intensity reduction across its
locomotive operations. To support its long-
term goal of net-zero operational emissions
by 2050, Aurizon is targeting a further 10%
emissions intensity reduction across its entire
operational portfolio by 20302. This approach
places an emphasis on direct abatement
through supporting the development and
adoption of low-carbon technology across
Aurizon’s operations and Australia’s freight
sector. Performance against the 2030 target
will be reported annually via Aurizon’s
Sustainability Report.
Aurizon also continues to adopt the
recommendations of the Financial Stability
Board’s (FSB) Final Report: Recommendations
of the Taskforce on Climate-related Financial
Disclosures (TCFD), when considering climate-
related risks (see pages 46 and 47 of this
Annual Report). Although Aurizon’s business
is exposed to transition and physical risks, it
is also well positioned to take advantage of
climate-related opportunities.
Climate change risk is incorporated into
Aurizon’s Enterprise Risk Management
Framework & Appetite and is therefore
specifically considered when making
investment decisions. The internal management
process governing investment decisions, the
Aurizon Investment Standard, has also been
updated to ensure management considers
climate change risk and carbon pricing on a
materiality basis in decisions to recommend
investment of capital.
Scenario analysis is conducted under
the Strategy in Uncertainty framework,
which takes climate-related transition risks
into consideration. The Board is directly
engaged in identifying the scenarios for
consideration under this framework, as well
as developing plans and initiatives to position
the organisation to mitigate risks and take
advantage of opportunities. This strategic
process is repeated periodically to ensure that
strategic priorities are continually updated
to proactively respond to emerging market
dynamics and opportunities. The key drivers
used in scenario analysis are outlined in
Aurizon’s annual Sustainability Report.
For further information, refer to Aurizon’s CSAP
and Sustainability Report, available on the
Aurizon website aurizon.com.au/sustainability.
Environmental regulation and
performance
Aurizon is committed to managing its
operational activities and services in an
environmentally responsible manner to meet
legal, social and moral obligations. To deliver on
this commitment, Aurizon seeks to comply with
all applicable environmental laws and regulations.
In 2019, the NSW government introduced
legislation requiring Rolling Stock Operators
(RSOs) to apply for an Environment Protection
Licence (EPL). The mandatory EPLs were
finalised in August 2020, and their requirements
are being steadily integrated into operations.
The NSW Environment Protection Authority
(EPA) administer the EPLs. The EPA’s key areas
of concern are diesel emissions and rail noise,
and initial thresholds for both were set as
conditions of the EPLs. The EPA has recognised
past efforts of RSOs, led by Aurizon, to develop
the 2018 Rail Industry Safety and Standards
Board’s Code of Practice – Management of
Locomotive Exhaust Emissions.
The NSW EPLs stipulate a range of annual
testing, monitoring and remedial regimes for
both locomotives and wagons to meet noise
thresholds, along with progressive improvements
to address current rail noise generated through
horns, braking and idling. These measures are
available to the public and are used to validate
the EPA’s commitment to reducing complaints.
Aurizon recently submitted its first Annual Rolling
Stock Performance Report to the EPA, confirming
all locomotives that had major engine overhauls
in 2020 were compliant with required noise
thresholds, and that all Aurizon freight wagons in
operation comply with specifications for Angle of
Attack (a key contributor to wheel squeal).
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.
At the close of the fourth Emissions Reduction
Fund Safeguard Mechanism (Safeguard)
compliance period (ended on 30 June 2020),
three of Aurizon’s NGER facilities were
captured. Through effective management of
the Company’s emissions, Aurizon remained
below its respective baselines and achieved
full compliance with the Safeguard. Following
amendments to the National Greenhouse and
Energy Reporting (Safeguard Mechanism) Rule
2015 in 2019, Aurizon is well positioned for
a timely transition of its remaining reported
baselines over the coming reporting period.
Further details of the Company’s climate and
environmental performance will be published
in Aurizon’s forthcoming Sustainability Report
which will be published in October 2021.
2 From a 2021 baseline on a tonnes of carbon dioxide per net tonne kilometre basis.
8
AURIZON ANNUAL REPORT 2020–21 Environmental prosecutions
In FY2021, Aurizon Port Services Pty Ltd
incurred a monetary fine of $10,008, issued
under the Environmental Protection Act 1994
(Qld) related to the discharge of prescribed
contaminants, namely wastewater generated
from outdoor cleaning, to receiving waters at
the Port of Cairns following a ship unloading
event. The matter was investigated internally,
and appropriate actions taken.
Risk management
Aurizon recognises that risk is characterised by
both threat and opportunity, and manages risk
to enhance opportunities and reduce threats to
sustain shareholder value. Aurizon fosters a risk-
aware culture through the application of high-
quality, integrated risk assessments to support
informed decision-making.
The Board is ultimately responsible for risk
management, which considers a wide range of
risks within strategic planning. Aurizon has a
commitment to effective risk management as a
key element of business success.
The Audit, Governance & Risk Management
Committee monitors management’s
performance against Aurizon’s risk management
framework, including whether it is operating
within the risk appetite set by the Board (see
page 46 of this Annual Report). The Company’s
Risk and Assurance Function is responsible for
providing oversight of the risk management
framework and assurance on the management
of significant risks to the Managing Director &
CEO and the Board.
Aurizon’s risk-aware culture has an emphasis
on frontline accountability for effective risk
management. The consideration of risk features
heavily in our thinking, from the framing
of strategy through to informing decision-
making. Aurizon’s Enterprise Risk Management
Framework and Appetite and supporting Risk
Assessment Procedure are aligned to the
international standard for risk management
(AS/NZS ISO 31000:2018), supports the
identification, assessment and reporting of risk
across the business, and includes both financial
and non-financial risks.
Processes exist for the prevention, detection and
management of fraud within the Company, and
for fair dealing in matters pertaining to fraud.
Further details of risks and risk management
are set out on pages 22 to 24 of the Directors’
Report.
TABLE 1 – DIRECTORS’ MEETINGS AS AT 30 JUNE 2021
DIRECTOR
AURIZON HOLDINGS
BOARD
AUDIT, GOVERNANCE
& RISK MANAGEMENT
COMMITTEE
REMUNERATION AND
PEOPLE COMMITTEE
SAFETY, HEALTH
& ENVIRONMENT
COMMITTEE
NOMINATION
& SUCCESSION
COMMITTEE
T Poole1
A Harding1
M Bastos
R Caplan
M Fraser
S Lewis
S Ryan
L Strambi
K Vidgen
A
14
14
14
14
14
14
14
14
14
B
14
14
14
14
14
14
14
14
13
A
8
–
–
8
–
8
8
–
–
B
8
–
–
8
–
8
8
–
–
A
–
–
–
7
7
7
–
–
7
B
–
–
–
7
7
7
–
–
7
A
5
5
5
–
–
–
5
5
–
B
5
5
5
–
–
–
5
5
–
A
1
–
–
–
–
1
–
–
1
B
1
–
–
–
–
1
–
–
1
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 T Poole and A Harding met respectively on two occasions.
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 above.
During the year, the Aurizon Network Pty Ltd
Board met on seven occasions.
Directors’ interests
Directors’ interests are as at 30 June 2021.
TABLE 2 – DIRECTORS’ INTERESTS AS AT 30 JUNE 2021
DIRECTOR
T Poole
A Harding
M Bastos
R Caplan
M Fraser
S Lewis
S Ryan
L Strambi
K Vidgen
NUMBER OF ORDINARY SHARES
135,500
576,525
45,947
82,132
70,000
63,025
48,000
42,787
40,000
Only Mr Harding, Managing Director & CEO receives performance rights, details of which are set out in the
Remuneration Report.
DIRECTORS’ REPORT
9
Directors’ Report (continued)
External audit services
PwC have been the Company’s external auditor
since December 2010.
Following completion of a tender process,
the Company intends to recommend the
appointment of Deloitte Touche Tohmatsu
(Deloitte) as the Company’s external auditor
commencing for the year ending 30 June 2022,
subject to regulatory and shareholder approval.
Ms Lewis, Chair of the Audit, Governance &
Risk Management Committee, is a former
partner of Deloitte, having retired in
March 2014. She has no ongoing financial
arrangements with Deloitte.
Auditor’s Independence Declaration
A copy of the Auditor’s Independence
Declaration, as required under section 307C of
the Corporations Act 2001, is set out on page 41.
The Directors’ Report is made in accordance
with a resolution of the Directors of the Company.
Tim Poole
Chairman
9 August 2021
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 2001.
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 respects in relation to
the reporting of financial risks.
Indemnification and insurance
of officers
The Company’s Constitution provides that the
Company may indemnify any person who is,
or has been, an officer of the Group, including
the Directors and Company Secretary, against
liabilities incurred while acting as such officers
to the maximum 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 civil
litigation proceedings, arbitration proceedings,
administration appeals, or criminal or
governmental prosecutions of a material nature
which are not set out in this report or note 31
of the Financial Report 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 26
to 40 and forms part of the Directors’ Report for
the financial year ended 30 June 2021.
Rounding of amounts
The amounts contained in this report and in
the financial statements have been rounded
to the nearest $100,000 unless otherwise
stated (where rounding is applicable) in
accordance with ASIC Corporations (Rounding
in Financial/Directors’ Reports) Instrument
2016/191. The Company is an entity to which
the instrument applies.
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 2001.
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
Total remuneration for
other assurance services
OTHER SERVICES
Total remuneration
for other services
2021
$’000
60
80
10
AURIZON ANNUAL REPORT 2020–21
Directors’ Report (continued)
OPERATING AND FINANCIAL REVIEW
CONSOLIDATED RESULTS (Underlying continuing operations unless stated)
The Group’s financial performance is explained using measures that are not defined under IFRS and are therefore termed Non-IFRS measures.
The Non-IFRS financial information contained within this Directors’ Report and Notes to the Consolidated Financial Statements has not been audited
in accordance with Australian Auditing Standards. The Non-IFRS measures used to monitor Group performance are EBITDA (Statutory and
Underlying), EBITDA margin (Statutory and Underlying), EBIT (Statutory and Underlying), NPAT Underlying, Return on Invested Capital (ROIC),
Net debt and Net gearing ratios. Each of these measures is discussed in more detail on page 107. Unless otherwise noted, the Operating and Financial
Review information excludes discontinued operations being Intermodal.
1. Annual comparison
FINANCIAL SUMMARY
($M)
Total revenue
Operating costs
Employee benefits
Energy and fuel
Track access
Consumables
Other
EBITDA
Statutory EBITDA
Depreciation and amortisation
EBIT
Statutory EBIT
Net finance costs
Income tax expense
Statutory Income tax expense
NPAT
Statutory NPAT
Statutory NPAT from discontinued operations
NPAT (group) Statutory
Earnings per share1
Statutory
Earnings per share1 (continuing and discontinued operations)
Statutory
Return on invested capital (ROIC)2
Net cash flow from operating activities
Total dividend per share (cps)
Gearing (net debt/(net debt + equity)) (%) (group)
Net tangible assets per share ($) (group)
People (FTE)
Labour costs3/Revenue
Above Rail Tonnes (m)4
EBITDA BY SEGMENT
($M)
Coal
Bulk
Network
Other
Group (Continuing operations)
FY2021
3,019.3
(836.2)
(191.4)
(81.1)
(416.2)
(12.2)
1,482.2
1,490.4
(579.1)
903.1
911.3
(145.3)
(224.6)
(159.3)
533.2
606.7
123.6
730.3
28.5
32.5
29.1
39.1
10.7%
1,277.0
28.8
45.6%
2.3
4,825
27.2%
253.2
FY2021
533.3
139.9
848.8
(39.8)
1,482.2
FY2020
3,064.6
(791.6)
(231.3)
(107.2)
(440.7)
(26.2)
1,467.6
1,573.0
(558.6)
909.0
1,014.4
(148.5)
(229.1)
(260.8)
531.3
605.1
10.8
615.9
27.2
31.0
27.7
31.5
10.9%
1,237.5
27.4
45.1%
2.2
4,883
25.3%
262.0
FY2020
616.4
110.1
798.1
(57.0)
1,467.6
VARIANCE
(1%)
(6%)
17%
24%
6%
53%
1%
(5%)
(4%)
(1%)
(10%)
2%
2%
39%
‑
-
1,044%
19%
5%
5%
5%
24%
(0.2ppt)
3%
5%
(0.5ppt)
5%
1%
(1.9ppt)
(3%)
VARIANCE
(13%)
27%
6%
30%
1%
1 Calculated on weighted average number of shares on issue — 1,869m FY2021 and 1,953m FY2020.
2 ROIC is defined as underlying rolling twelve-month EBIT divided by the average invested capital. The average invested capital is calculated as the rolling twelve-month
average of net assets (excluding cash, borrowings, tax, derivative financial assets and liabilities).
3 FY2021 excludes $13.9m redundancy costs (FY2020 excludes $16.0m redundancy costs).
4 Includes both Coal and Bulk.
OPERATING AND FINANCIAL REVIEW
11
Directors’ Report (continued)
OPERATING AND FINANCIAL REVIEW
EBIT BY SEGMENT
($M)
Coal
Bulk
Network
Other
Group (Continuing operations)
FY2021
324.6
112.0
509.1
(42.6)
903.1
FY2020
410.6
89.9
468.8
(60.3)
909.0
VARIANCE
(21%)
25%
9%
29%
(1%)
Group performance overview
Group EBITDA improved $14.6m or 1% due to higher revenue in Network from the commencement of WIRP fee billing and volume growth in Bulk. The
increase in Network and Bulk more than offset the decline in Coal EBITDA which was principally due to a 6% decrease in volumes and a 2% decrease in
above rail revenue per NTK. The improvement in Other EBITDA is principally due to asset sales and lower project costs.
The increase in Network and Bulk revenue, combined with the reduction in net central costs (Other), more than offset lower revenue in Coal.
Operating costs decreased $59.9m or 4% with reductions in all Business Units due to transformation benefits and lower fuel and access costs more
than offsetting an increase in labour costs.
Depreciation increased $20.5m or 4% primarily due to capital expenditure in Bulk to support growth and increased ballast and rail renewals in Network.
With the increase in depreciation, EBIT declined $5.9m or 1%.
ROIC was 0.2ppts lower with the decreased EBIT and slightly higher invested capital.
Reconciliation to statutory earnings
Underlying earnings is a non-statutory measure and is the primary reporting measure used by management and the Group’s chief operating decision-
making bodies for managing and assessing the financial performance of the business. Underlying earnings is derived by adjusting statutory earnings
for significant items as noted in the following table:
($M)
Continuing operations
Underlying EBITDA
Depreciation and amortisation
Underlying EBIT
Significant items
Net gain on sale of shares in Aquila
Net gain on sale of Rail Grinding business
Statutory EBIT
Net finance costs
Statutory Profit before tax
Income tax expense
Statutory NPAT – Continuing operations
Significant items, net of tax
Significant items – Aquila income tax benefit
Underlying NPAT – Continuing operations
Discontinued operations
Underlying EBIT
Significant items
Net gain on sale of Acacia Ridge Intermodal Terminal
Intermodal closure benefit
Income tax expense
Statutory NPAT – Discontinued operations
Significant items, net of tax
Underlying NPAT – Discontinued operations
Statutory NPAT – Continuing and discontinued operations
Underlying NPAT – Continuing and discontinued operations
12
FY2021
FY2020
1,482.2
579.1
903.1
8.2
8.2
-
911.3
(145.3)
766.0
(159.3)
606.7
5.7
67.8
533.2
14.9
161.1
161.1
-
(52.4)
123.6
112.8
10.8
730.3
544.0
1,467.6
558.6
909.0
105.4
-
105.4
1,014.4
(148.5)
865.9
(260.8)
605.1
73.8
-
531.3
12.7
2.5
-
2.5
(4.4)
10.8
1.8
9.0
615.9
540.3
AURIZON ANNUAL REPORT 2020–21 2. Other financial information
BALANCE SHEET SUMMARY
($M)
Assets classified as held for sale
Other current assets
Total current assets
Property, plant and equipment (PP&E)
Other non-current assets
Total non‑current assets
Total Assets
Liabilities classified as held for sale
Other current liabilities
Total borrowings
Other non-current liabilities
Total Liabilities
Net Assets
Gearing (net debt/(net debt + equity)) (%)
Balance sheet movements
Total current assets increased by $96.6m largely due to:
30 JUNE 2021
30 JUNE 2020
5.0
806.9
811.9
8,483.2
469.5
8,952.7
9,764.6
-
(658.2)
(3,738.0)
(1,093.8)
(5,490.0)
4,274.6
45.6%
65.1
650.2
715.3
8,537.1
519.6
9,056.7
9,772.0
(0.7)
(814.1)
(3,607.2)
(992.3)
(5,414.3)
4,357.7
45.1%
› increase in cash and cash equivalents of $119.5m
› increase in trade and other receivables of $23.7m predominantly due to a higher Take-or-Pay accrual.
This was partly offset by a net reduction of $60.1m in assets classified as held for sale due to the completion of the Acacia Ridge Intermodal Terminal
sale and the partial divestment of the Forrestfield Intermodal Terminal.
Total non-current assets decreased by $104.0m largely due to a $95.8m unfavourable valuation of derivative financial instruments and decrease of
$53.9m in the carrying value of property, plant and equipment. This was partly offset by an increase in investments accounted for using the equity
method of $23.4m due to the investment in Ox Mountain Limited.
Total current liabilities, excluding borrowings, decreased by $155.9m largely due to:
› decrease in current tax liabilities of $83.4m, primarily due to tax associated with the sale of the Acacia Ridge Intermodal Terminal ($32.5m) and the
Rail Grinding business ($38.7m)
› decrease in trade and other payables of $53.9m due to a reduction in trade creditors
› decrease in derivative financial instruments of $34.5m due to the settlement of interest rate swaps in June 2021.
Total borrowings increased by $130.8m due to the Company’s strategy to increase leverage in the above rail business in order to create a more efficient
balance sheet structure.
Other non-current liabilities increased by $101.5m largely due to a $100.6m increase in net deferred tax liabilities.
Gearing (net debt/(net debt + equity)) was 45.6% as at 30 June 2021.
OPERATING AND FINANCIAL REVIEW
13
Directors’ Report (continued)
OPERATING AND FINANCIAL REVIEW
CASH FLOW SUMMARY
($M)
Statutory EBITDA (Continuing operations)
Working capital and other movements
Net gain on sale of shares in Aquila
Net gain on sale of Rail Grinding business
Non-cash adjustments - asset impairments
Net cash inflow from Continuing operations
Interest received
Income taxes paid
Principal elements of lease receipts
Net cash inflow from operating activities from Continuing operations
Net operating cash flows from Discontinued operations
Net operating cash flows
Cash flows from investing activities
Payments for PP&E and intangibles, net of interest paid on qualifying assets
Payments for acquisitions of subsidiary and investment in joint venture
Proceeds from sale of business and shares held in associate
Distributions from joint ventures and proceeds from sale of PP&E
Net cash outflow from investing activities from Continuing operations
Net investing cash flows from Discontinued operations
Net investing cash flows
Cash flows from financing activities
Net proceeds from borrowings, net of transaction costs
Payment for share buy-back, share-based payments and transaction costs
Interest paid
Dividends paid to Company shareholders
Principal elements of lease payments
Net cash outflow from financing activities from Continuing operations
Net financing cash flows from Discontinued operations
Net financing cash flows
Net decrease in cash from Continuing operations
Net increase in cash from Discontinued operations
Free Cash Flow (FCF)5 from Continuing operations
Free Cash Flow (FCF)5 from Discontinued operations
FY2021
1,490.4
(43.4)
(8.2)
-
3.1
1,441.9
4.2
(175.6)
6.5
1,277.0
(23.0)
1,254.0
(518.5)
(63.5)
10.0
38.9
(533.1)
168.8
(364.3)
236.2
(306.0)
(155.3)
(528.8)
(16.4)
(770.3)
-
(770.3)
(26.4)
145.8
588.6
145.8
FY2020
1,572.8
(97.6)
-
(105.4)
5.7
1,375.5
2.8
(146.5)
5.7
1,237.5
9.9
1,247.4
(528.3)
(24.5)
165.3
15.8
(371.7)
0.4
(371.3)
211.2
(403.6)
(151.1)
(513.8)
(14.6)
(871.9)
-
(871.9)
(6.1)
10.3
714.7
10.3
Cash flow movements
Net cash inflow from operating activities from continuing operations increased by $39.5m (3%) to $1,277.0m due to an improvement in working capital
movements of $54.2m (mainly due to trade and other receivables) and improved EBITDA (excluding the sale of Aquila and the Rail Grinding business)
partly offset by additional income taxes paid in FY2021 relating to the sale of the Rail Grinding business.
Net cash outflow from investing activities from continuing operations increased by $161.4m (43%) to $533.1m, driven by the acquisition of ConPorts Pty
Ltd (renamed Aurizon Port Services NSW Pty Ltd) and the investment in Ox Mountain Limited, partly offset by the sale of PP&E of $23.1m. In addition,
FY2020 included $164.5m of proceeds from the sale of the Rail Grinding business.
Net cash outflow from financing activities from continuing operations reduced by $101.6m (12%) to $770.3m due to an increase in net proceeds from
borrowings of $25.0m and lower share buy-back expenditure of $97.6m, partly offset by higher dividend payments of $15.0m.
5 FCF — Defined as net cash flow from operating activities less net cash outflow from investing activities less interest paid.
14
AURIZON ANNUAL REPORT 2020–21
Discontinued operations
On 26 March 2021, the Group completed the
sale of the Acacia Ridge Intermodal Terminal to
Pacific National.
Funding
The Group continues to be committed
to diversifying its debt investor base and
increasing average debt tenor.
During FY2021 Aurizon Network:
› Issued a 10.0-year, $500.0 million A$ Medium
Term Note (AMTN) in September 2020, at
a coupon of 2.9%. The proceeds were used
to repay a $525.0 million AMTN maturing in
October 2020.
› Cancelled $100.0 million from the existing
$850.0 million bank debt bilateral facilities
expiring in June 2023.
› Issued a 10.5-year, $75.0m A$ Private
Placement at a coupon of 3.3%.
During FY2021, Aurizon Operations:
› Added $175.0 million of bank debt to the
existing $450.0m bilateral facilities expiring
in 2023 and 2025
› Issued a 7.0-year $500.0m AMTN in March
2021 at a coupon of 3.0%. This represented
the debut capital markets issuance for
Aurizon Finance (the financing entity for
Aurizon Operations).
In respect of FY2021:
› Weighted average debt maturity tenor was
4.4 years as at 30 June 2021. This was higher
than FY2020 (3.8 years) due to replacing
the existing AMTN expiring in October 2020
with the new 10.0-year AMTN, the issuance
of a 10.5-year Private Placement in Network
and the issuance of a 7.0-year AMTN in
Operations, partly offset by the debt
portfolio’s duration reducing by 12 months.
› Group interest cost on drawn debt was 4.1%
(FY2020 4.5%).
› Available liquidity (undrawn facilities plus
cash) as at 30 June 2021 was $1,618.2m.
› Group gearing (net debt/(net debt + equity))
as at 30 June 2021 was 45.6% (FY2020
45.1%).
› Aurizon Network’s gearing (net debt/
Regulatory Asset Base (excluding Access
Facilitation Deeds)) as at 30 June 2021 was
60.8% (FY2020 59.7%).
› Aurizon Operations' gearing (net debt/(net
debt + equity)) as at 30 June 2021 was 10.5%
(FY2020 10.2%).
› Aurizon Operations’ and Aurizon Network’s
credit ratings have each been maintained at
BBB+/Baa1.
Dividend
The Board has declared a final dividend for
FY2021 of 14.4cps (70% franked) based on a
payout ratio of 100% in respect of underlying
NPAT from continuing operations.
The relevant final dividend dates are:
› 23 August 2021 — ex-dividend date
› 24 August 2021 — record date
› 22 September 2021 — payment date.
Share buy-back
On 10 August 2020, Aurizon announced its
intention to undertake an on-market share
buy-back of up to $300.0m during FY2021.
During the year 73,938,850 shares at a total
consideration of $300.0m were bought back
and subsequently cancelled.
Tax
Underlying income tax expense from
continuing operations was $224.6m and the
statutory income tax expense was $159.3m
due to a net income tax benefit of $65.3m
recognised as a significant item as a result of
the sale of the shares held in Aquila Resources
Limited (Aquila). The net income tax benefit
includes $67.8m relating to an unrecognised
deferred tax asset associated with the
impairment of the carrying amount of the
shares held in Aquila in FY2016 partly offset by
the tax effect of the net gain of sale of $2.5m.
Statutory income tax expense for the Group
(continuing and discontinued operations)
was $211.7m. The Group underlying effective
tax rate6 was 29.6% which is less than 30%
due to the recognition of other previously
unrecognised deferred tax assets and a prior
year research and development tax incentive.
The Group underlying cash tax rate7 was
19.3%, which is less than 30% primarily due to
accelerated fixed asset related adjustments.
The underlying effective tax rate for FY2022 is
expected to be in the range of 29-31% and the
underlying cash tax rate is expected to be less
than 25% for the short to medium term.
Aurizon publishes additional tax information
in accordance with the voluntary Tax
Transparency Code in its Sustainability Report.
See the Sustainability section of the Aurizon
website for further detail.
6 Underlying effective tax rate — income tax expense excluding the impact of significant items/underlying consolidated profit before tax.
7 Underlying cash tax rate = cash tax payable excluding the impact of significant items/underlying consolidated profit before tax.
OPERATING AND FINANCIAL REVIEW
15
Directors’ Report (continued)
OPERATING AND FINANCIAL REVIEW
BUSINESS UNIT REVIEW
COAL
Aurizon’s Coal business provides a critical supply chain link for the majority of Australia’s coal producers. The coal transport operation connects mines
in the Newlands, Goonyella, Blackwater, Moura and West Moreton systems in Queensland (QLD) and the Hunter Valley and Illawarra coal systems in
New South Wales (NSW), with domestic customers and coal export terminals.
FINANCIAL SUMMARY
($M)
Revenue
Above Rail
Track access
Other
Total revenue
Track access costs
Operating costs
EBITDA
Depreciation and amortisation
EBIT
METRICS
Total tonnes hauled (m)
CQCN
NSW & SEQ
Contract utilisation
Total NTK (bn)
CQCN
NSW & SEQ
Average haul length (km)
Total revenue/NTK ($/’000 NTK)
Above Rail Revenue/NTK ($/’000 NTK)
Operating ratio (%)
Opex/NTK ($/’000 NTK)
Opex/NTK (excluding access costs) ($/’000 NTK)
Locomotive productivity (‘000 NTK/Active locomotive day)
Active locomotives (as at 30 June)
Wagon productivity (‘000 NTK/Active wagon day)
Active wagons (as at 30 June)
Payload (tonnes)
Velocity (km/hr)
Fuel consumption (l/d GTK)
FY2021
FY2020
VARIANCE
1,163.6
445.1
3.4
1,612.1
(451.0)
(627.8)
533.3
(208.7)
324.6
FY2021
202.1
143.7
58.4
83%
47.1
35.8
11.3
233
34.2
24.7
79.9%
27.3
17.8
390.5
329
14.9
8,723
7,887
23.9
2.86
1,260.3
512.8
2.2
1,775.3
(507.6)
(651.3)
616.4
(205.8)
410.6
FY2020
213.9
150.1
63.8
86%
50.0
37.8
12.2
234
35.5
25.2
76.9%
27.3
17.1
405.5
332
15.7
8,721
7,676
23.5
2.86
(8%)
(13%)
55%
(9%)
11%
4%
(13%)
(1%)
(21%)
VARIANCE
(6%)
(4%)
(8%)
(3ppt)
(6%)
(5%)
(7%)
–
(4%)
(2%)
(3.0ppt)
–
(4%)
(4%)
(1%)
(5%)
–
3%
2%
–
Coal performance overview
Coal EBITDA decreased $83.1m (13%) to $533.3m primarily due to a reduction in above rail and access revenue from lower volumes and a reduction in
revenue quality. This was partly offset by lower expenses primarily associated with lower access and fuel costs.
Volumes decreased 11.8mt or 6% to 202.1mt with reductions in the Central Queensland Coal Network (CQCN), NSW and South-East Queensland (SEQ).
› Across the CQCN, volumes decreased by 6.4mt (4%) to 143.7mt due to lower end-market demand impacted by COVID-19 and the challenging trade
environment with China, end-of-contract impacts and customer-specific maintenance and production issues. This was partly offset by increased
railings for the new Peabody contract and small increases for a number of other mines
› In NSW and SEQ, volumes decreased by 5.4mt (8%) to 58.4mt due to the ramp-down of the New Acland mine as it approaches end of mine life,
customer maintenance and production issues and weather impacts. This was partly offset by railings from the new BlueScope contract in the Illawarra.
16
AURIZON ANNUAL REPORT 2020–21 Contract update
› Glencore — existing agreement as primary
hauler for Queensland mines extended for
Newlands, Goonyella (excluding Hail Creek)
and Blackwater mines.
› Anglo: Goonyella — new agreement across
various mines; Blackwater — new agreement
for German Creek mine; Moura — extension
of Dawson mine.
› Stanwell — unsuccessful in retaining 3.2mtpa
domestic contract (ended December 2020).
› New Hope — New Acland contract ends
December 2021 (end of mine life).
Market update
Australia exported 363mt of coal in FY2021,
down 7% against the prior year. Although import
restrictions remain for Australian export volume
into China, alternative markets continue to be
found for Australian coal. For the June quarter,
despite zero export volume to China, total
Australian export volume was just 1% lower than
the prior year.
Australia exported 171mt of metallurgical coal in
FY2021, down 4% against the prior year. India
remained Australia's largest metallurgical coal
export market with record high export volume
of 56mt (33% share), followed by Japan at
36mt (21% share) and South Korea at 20mt
(12% share). In the six months to June, crude
steel production in China increased by 11%, India
increased by 31% and Japan increased by 14%
against the same period of the prior year as
economies recover from the impact of COVID-19
related restrictions. The average hard coking
coal (Premium Low Vol) price in FY2021 fell by
15% (compared to the prior year) to US$122/t.
At 30 June 2021, the hard coking coal (Premium
Low Vol) price was US$194/t.
Australia exported 192mt of thermal coal in
FY2021, down 10% against the prior year. Japan
remained Australia’s largest thermal coal export
market with export volume of 73mt (38% share),
followed by South Korea at 34mt (18% share)
and Taiwan at 23mt (12% share). The average
Newcastle benchmark thermal coal price in
FY2021 increased by 20% (compared to the
prior year) to US$78/t. At 30 June 2021, the
thermal coal price was US$135/t.
Coal revenue decreased by $163.2m (9%)
to $1,612.1m due to the 11.8mt reduction in
volumes, lower revenue quality and lower fuel
revenue resulting from a decrease in price.
In addition, track access revenue decreased
with the lower volumes, access rights being
transferred to end users and tariff reductions
partly offset by higher Take-or-Pay revenue.
Above rail revenue per NTK decreased by
2% due to reduced average rates per tonne
including a reduced proportion of revenue from
capacity charges.
Total operating costs decreased $80.1m (7%)
to $1,078.8m with lower track access, fuel,
traincrew and maintenance costs. The major
drivers of these movements are:
› Track access costs decreased by $56.6m
(11%) due to the decrease in volumes, access
rights being transferred to end users and
tariff reductions partly offset by higher Take-
or-Pay expense.
› Other operating costs decreased $23.5m
(4%) due to lower fuel (largely price related),
traincrew and maintenance costs. Traincrew
costs reduced from lower overtime, FTEs and
increased annual leave partly offset by CPI
impacts. Maintenance slightly reduced due
to volume reductions and lower corrective
maintenance partly offset by CPI labour
impacts.
Depreciation increased $2.9m (1%) relating
to the additional installed fleet and overhauls
of existing rollingstock. Accordingly, EBIT
decreased 21% compared to a 13% decrease
in EBITDA.
Operationally, key productivity metrics
deteriorated with lower volumes and NTKs.
However, average payloads and velocity have
increased as a result of successful efficiency
initiatives, including increasing train set lengths
in the Hunter Valley and SEQ, implementing
improved driver methodologies and a reduction
in empty wagons on the CQCN.
OPERATING AND FINANCIAL REVIEW
17
Directors’ Report (continued)
OPERATING AND FINANCIAL REVIEW
BULK
Aurizon’s Bulk business provides integrated supply chain services, including rail and road transportation, port services and material handling for a
range of mining, metal, industrial and agricultural customers throughout QLD, NSW and Western Australia (WA).
FINANCIAL SUMMARY
($M)
Revenue
Freight transport
Other
Total revenue
Operating costs
EBITDA
Depreciation and amortisation
EBIT
Total tonnes hauled (m)
Operating ratio (%)
FY2021
FY2020
VARIANCE
612.2
22.6
634.8
(494.9)
139.9
(27.9)
112.0
51.1
82.4%
583.4
25.4
608.8
(498.7)
110.1
(20.2)
89.9
48.1
85.2%
5%
(11%)
4%
1%
27%
(38%)
25%
6%
2.8ppt
Contract update
› CBH — 10-year grain haulage contract
commencing August 2021.
› South32 Worsley — three-year contract
extension for alumina and associated inputs.
› Mineral Resources — expansion of services
(beyond Esperance) with additional iron ore
services into Kwinana.
› BHP Nickel West — railing ceased in March
2021.
Bulk performance overview
Bulk EBITDA increased $29.8m (27%) to
$139.9m due to the full-year impact of volume
growth commencing during FY2020 and
ongoing operational efficiencies. Revenue
increased $26.0m (4%) to $634.8m with:
› the commencement of the Rio Tinto contract
for the operation and maintenance of Rio
Tinto’s ballast cleaning machine on its WA
Pilbara network in February 2020
› the commencement of the Mineral Resources
contract for the lease of rollingstock,
provision of mainline crew and Esperance
yard operations during 2HFY2020
› a full year of contribution from the
acquisition of Townsville Bulk Storage and
Handling (Aurizon Port Services Pty Ltd)
following the acquisition in 2HFY2020
› the acquisition of ConPorts Pty Ltd (renamed
Aurizon Port Services NSW Pty Ltd) on 31
December 2020
› marginal revenue yield improvement despite
lower CPI.
Partly offsetting this was lower access costs
due to a customer transitioning to an to an
end-user arrangement on the Mt Isa corridor
during 2HFY2020 and lower average fuel
prices compared to the prior year.
In Bulk East, volumes increased by 0.1mt driven
by stronger grain volumes in NSW and QLD,
partly offset by lower livestock volumes. In Bulk
West, iron ore volume was up 3.0mt driven
by the ramp-up of Mineral Resources volumes
partly offset by lower Mt Gibson volumes due
to end of mine life. Non-iron ore Bulk West
volumes decreased by 0.1mt largely due
to lower volumes on the Kalgoorlie
freighter service.
Operating costs decreased $3.8m (1%) despite
increased costs associated with the new
volumes from Rio Tinto and Mineral Resources
and the Aurizon Port Services acquisitions. This
was due to ongoing cost benefits from the Bulk
transformation program, lower average fuel
prices compared to the prior year and lower
access costs due to a customer transitioning to
an end-user agreement on the Mt Isa corridor
during 2HFY2020.
Depreciation increased $7.7m or 38% with
increased capital expenditure supporting the
growth in revenue and EBITDA. Therefore, EBIT
increased 25% compared to a 27% increase in
EBITDA.
Market update
Aurizon’s Bulk business includes haulage of
a range of bulk commodities such as iron
ore, bauxite, alumina, base metals, grain and
livestock across WA, NSW and QLD. In addition
to commodities required to build infrastructure,
opportunities are coming from new markets
such as renewables and batteries, and growing
food consumption. In terms of batteries, the
global uptake of electric vehicles is expected to
drive demand for commodities such as nickel,
cobalt, copper and lithium. This is supported by
increased exploration expenditure in Australia
— in the March 2021 quarter, nickel (including
cobalt) exploration expenditure rose by 24%
(compared to the same period of the prior
year) and copper exploration expenditure
increased by 8% across the same period.
Australian metal ore mining capital expenditure
increased in the March quarter by 22% against
the prior year to A$4.5bn, the 14th consecutive
quarter of year-on-year growth for the sector.
18
AURIZON ANNUAL REPORT 2020–21 NETWORK
Network refers to the business of Aurizon Network Pty Ltd (Network) which operates the 2,670km CQCN. The open access network is the largest
coal rail network in Australia and one of the country’s most complex, connecting multiple customers from more than 40 mines to five export terminals
located at three ports. The CQCN includes four major coal systems (Moura, Blackwater, Goonyella and Newlands) and a connecting link (the Goonyella
to Abbot Point Expansion (GAPE)).
FINANCIAL SUMMARY
($M)
Revenue
Track access
Services and other
Total revenue
Operating costs
EBITDA
Depreciation and amortisation
EBIT
METRICS
Tonnes (m)
NTK (bn)
Operating ratio (%)
Maintenance/NTK ($/’000 NTK)
Opex/NTK ($/’000 NTK)
Cycle velocity (km/hr)
System availability (%)
Average haul length (km)
FY2021
FY2020
VARIANCE
1,178.9
46.0
1,224.9
(376.1)
848.8
(339.7)
509.1
1,131.7
56.8
1,188.5
(390.4)
798.1
(329.3)
468.8
4%
(19%)
3%
4%
6%
(3%)
9%
FY2021
FY2020
VARIANCE
208.3
52.4
58.4%
2.4
13.7
23.0
84.1%
252
226.9
56.2
60.6%
2.3
12.8
23.3
83.3%
248
(8%)
(7%)
2.2ppt
(4%)
(7%)
(1%)
0.8ppt
2%
Network performance overview
Network EBITDA improved $50.7m (6%) to
$848.8m in FY2021, with increased revenue of
$36.4m (3%) and reduced operating costs of
$14.3m (4%).
Regulatory access revenue has been accounted
for based on actual railed tonnes using tariffs
approved by the Queensland Competition
Authority (QCA) on 17 December 2020. Actual
net tonnes were 208.3mt compared to the
regulatory system forecast of 239.7mt. Total
Access Revenue increased by $47.2m (4%):
› Allowable Revenue was lower by $3.9m in
FY2021.
› Reduced volumes compared to the
regulatory forecast resulted in an under-
recovery after Take-or-Pay of $34.6m in
FY2021 (Access Revenue in FY2021 included
the recognition of $88.2m Take-or-Pay
revenue in relation to the Blackwater,
Goonyella, Moura and Newlands systems).
This compares to an under-recovery of
$22.6m in FY2020.
› Customer-funded infrastructure rebates were
also higher by $6.2m in FY2021 compared
to FY2020, as a result of the true-up
adjustment in FY2020 partly offset by the
impact of lower volumes in FY2021.
› FY2021 Access Revenue benefited from
favourable Revenue Cap movements of
$13.0m. FY2020 included a repayment of
$0.8m in relation to FY2018 and $12.2m in
relation to FY2019.
› Other Access Revenue was lower by $4.0m.
This included lower pass-through Energy
Costs (EC) revenue due to the lower
volumes, offset in lower expenses.
› The above movements were more than offset
by the recognition of WIRP fees of $60.3m
in FY2021, including recovery of historical
fees following the successful Supreme Court
decision in September 2020. No WIRP fees
were recognised in FY2020.
Services and other revenue was $10.8m (19%)
lower in FY2021. This was primarily due to
lower external construction revenue in FY2021
and insurance recoveries that were received in
FY2020.
Operating costs decreased by $14.3m (4%)
primarily due to lower external construction
costs associated with the lower revenue,
reduced electric traction charges (offset
in Access Revenue and EC revenue) and
lower maintenance costs partially offset
by expenditure incurred on the Precision
railroading initiative.
Depreciation increased $10.4m (3%) primarily
due to historic rail renewal and ballast
undercutting investment.
Network’s 2019-2020 Regulatory Asset Base
(RAB) roll-forward is estimated to be $5.3bn8
(excluding Access Facilitation Deeds of
$0.4bn).
8 Includes deferred capital.
OPERATING AND FINANCIAL REVIEW
19
Directors’ Report (continued)
OPERATING AND FINANCIAL REVIEW
On 14 February 2021, the Rail Industry Group
(RIG) notified Network that End Users had
elected to approve the Maintenance and
Renewal Strategy and Budgets for each coal
system except for:
› The Maintenance Strategy and Budget for
Newlands which was subsequently approved
by the QCA on 26 May 2021; and
› The Renewals Strategy and Budget for both
Newlands and GAPE. As required under UT5,
the draft renewals budget for Newlands and
GAPE were incorporated into the FY2022
Annual Review of Reference Tariffs which
were approved by the QCA on 22 June 2021.
Renewals expenditure in Newlands and GAPE
in FY2022 will be reviewed by the QCA
for prudency and efficiency as part of the
Annual Capital Claim process.
Network’s FY2020 Capital Expenditure
Claim for $238m was approved by the QCA
on 19 February 2021 and this amount was
subsequently approved for entry into the
RAB on 8 April 2021.
The QCA approved Network’s FY2022 Annual
Review of Reference Tariffs including FY2022
coal volumes for the CQCN at 226.9mt.
Regulation update
Aurizon continues to progress the
implementation of the 2017 Access
Undertaking (UT5) which was approved by the
QCA on 19 December 2019. The status of key
aspects of UT5 are:
› The Independent Expert (IE), Coal Network
Capacity Co, continues the development
of the Initial Capacity Assessment Report
(ICAR) with the assistance of external
consultants. The current expectation is that
the ICAR will be completed at the end of
Q1FY2022. Following delivery of the ICAR,
should a capacity deficit be identified
Aurizon Network has 20 business days
to provide its initial views on potential
transitional arrangements that could be
implemented to address the deficit.
› While the IE continues to progress the ICAR,
Network's Weighted Average Cost of Capital
(WACC) remains at 5.9%. The increase
to 6.3% will apply upon the completion
of specific milestones by both the IE and
Network (Report Date).
› Current QCA-approved reference tariffs
continue to assume the 6.3% WACC from
1 March 2020. Future tariffs will be adjusted
to reflect the actual Report Date.
› The Performance Rebate mechanism was not
applicable for FY2021. The rebate will come
into effect once the Report Date is reached.
Transitional arrangements may be in effect
depending on the outcomes of the ICAR and
any resulting remedial requirements.
Operational update
Network maintained strong operational
performance during FY2021 despite challenges
presented by wet weather and the COVID-19
related restrictions and disruptions.
› As a result of lower end-market demand
impacted by COVID-19 and the challenging
trade environment with China, in addition to
mine-specific maintenance and production
issues, CQCN volumes declined by 8% to
208.3mt. Notwithstanding the reduced
demand, all-time haulage records were
achieved in the GAPE system.
› Total System Availability was 84.1%.
As FY2021 utilises a new capacity model,
it is noted that the System Availability
measure is not directly comparable to
prior years.
› Cancellations due to the Network rail
infrastructure decreased from 2.5% to 1.6%.
› Cycle velocity declined marginally from
23.3km/h to 23.0km/h.
The RM902, Network’s new ballast
cleaning machine, is completing in-service
commissioning. It is expected that the machine
will be fully operational in Q1FY2022.
Wiggins Island Rail Project (WIRP)
On 1 September 2020, the Queensland Court
of Appeal affirmed the Supreme Court decision
in Network’s favour and the WIRP customers
did not seek leave to appeal that decision.
As a result, Network is able to charge
customers non-regulatory WIRP fees with
effect from March 2016 and commenced billing
in November 2020.
The WIRP customers previously initiated
other disputes under their respective WIRP
Deeds which were the subject of an Expert
Determination in February 2019. The Expert’s
Determination was issued on 4 June 2019 and
found that the WIRP Fee should be partially
reduced. Network lodged proceedings against
the WIRP customers in the Supreme Court of
Queensland on 18 December 2020 to appeal
the Expert's Determination and the WIRP
customers filed their defence on 1 March 2021.
20
AURIZON ANNUAL REPORT 2020–21 OTHER
Other includes the provision of maintenance services to internal and
external customers and central costs not allocated such as the Board,
Managing Director & CEO, Investor Relations, Strategy and Company
Secretariat.
($M)
Total revenue
Operating costs
EBITDA
Depreciation and
amortisation
EBIT
FY2021
FY2020
VARIANCE
32.4
(72.2)
(39.8)
(2.8)
40.7
(97.7)
(57.0)
(3.3)
(42.6)
(60.3)
(20%)
26%
30%
15%
29%
Other performance overview
EBITDA improved by $17.2m (30%) mainly due to asset sales and lower
project costs.
INTERMODAL – DISCONTINUED OPERATION
($M)
Total revenue
Operating costs
EBITDA – Underlying
Depreciation and
amortisation
EBIT – Underlying
Significant items
Income tax expense
NPAT – Statutory
FY2021
FY2020
VARIANCE
21.6
(6.7)
14.9
–
14.9
161.1
(52.4)
123.6
25.0
(12.1)
12.9
(0.2)
12.7
2.5
(4.4)
10.8
(14%)
45%
16%
100%
17%
nm
nm
nm
Intermodal performance overview
The EBITDA position for Intermodal improved $2.0m to $14.9m ahead
of the completion of the sale of the Acacia Ridge Intermodal Terminal in
March 2021.
OPERATIONAL EFFICIENCY IMPROVEMENT UPDATE
As part of Aurizon’s Strategy In Action, particularly the Optimise and
Excel levers, Aurizon continues to focus on operational efficiency to
continuously improve its operational performance, asset efficiency and
cost competitiveness. Through the Optimise and Excel levers, Aurizon is
making targeted investments in technology on the journey to continuous
improvement. Outlined below are the major initiatives being pursued in
the business.
Precision railroading operations
Project Precision is a multi-year supply chain efficiency program led by
Network. The objective is to deliver more volume with existing capital for
all users, through faster turnaround time and Disciplined Train Operations
(DTO) — a process designed to remove the variability and improve
schedule adherence and on-time running performance of all trains on the
network.
Built upon modern scheduling techniques, integrated planning
determines the optimal distribution of trains on the Network. In
periods of high demand, this approach can result in additional services
compared to conventional techniques. In periods of low demand, modern
scheduling optimises the train sets deployed in the system to maximise
capital productivity while meeting customer demand.
Supported by all rail operators in CQCN, a trial took place in FY2021
where Network undertook planning on behalf of all operators. This
enabled Network to optimise planned throughput in line with the weekly
train-ordering process. Taking into account the respective operators'
access entitlements, an additional benefit of the integrated planning
was the removal of contested access requests whereby two or more
operators seek the same path on the Network.
In FY2021, DTO was implemented in all systems on the CQCN, with the
following results9 for Aurizon Above Rail:
In Newlands:
› on time (or early) departure from origin improved from 90% to 97%
› on time (or early) arrival at mine improved from 48% to 56%; and
› on time (or early) arrival port improved from 26% to 48%.
In Goonyella:
› on time (or early) departure from origin improved from 80% to 95%
› on time (or early) arrival at mine improved from 41% to 57%; and
› on time (or early) arrival port improved from 19% to 34%.
In Blackwater:
› on time (or early) departure from origin improved from 87% to 99%
› on time (or early) arrival at mine improved from 53% to 64%; and
› on time (or early) arrival port improved from 22% to 46%.
In Moura:
› on time (or early) departure from origin improved from 74% to 97%
› on time (or early) arrival at mine improved from 22% to 61%; and
› on time (or early) arrival port improved from 11% to 51%.
9 FY2021: 29 June 2020 to 27 June 2021. Prior period: Blackwater (11 March 2019 to 8 September 2019), Moura (7 January 2019 to 19 May 2019), Newlands
and Goonyella (1 July 2019 to 28 June 2020).
OPERATING AND FINANCIAL REVIEW
21
Directors’ Report (continued)
OPERATING AND FINANCIAL REVIEW
Automated Track Inspection System (ATIS)
Asset maintenance
Above Rail Asset Management (ARAM) is a
multi-year transformation project and has
progressed with the dedicated project team
working in close collaboration with the various
business stakeholders.
The program of work has matured Aurizon
supply chain and vendor management
processes, standardised planning processes
across the business, improved depot work
execution efficiency and is now transitioning
Aurizon’s major rollingstock fleets from simple
time-based to more mature condition-based
maintenance strategies.
FY2021 has seen the first of four major
rollingstock fleets transition towards
condition-based maintenance with the others
planned from FY2022. In addition, traditional
maintenance tasks are being removed by
leveraging advances in condition monitoring
technology such as Aurizon-owned Wayside
Equipment and on-board locomotive
monitoring equipment resulting from
TrainHealth.
TrainHealth
TrainHealth provides Aurizon with capability
to monitor performance of locomotives and
train handling/utilisation in real-time. This
initiative enables access to real-time asset
data that is being used to inform the health
of the locomotive, enhance asset reliability
and maintenance decisions for the fleet, in
addition to providing greater visibility on driver
variability and support business decisions for
on-time running. With installation completed
for 99% of the CQCN Siemens electric
locomotive fleet, installation across the CQCN
diesel fleet is scheduled to commence in
August 2021.
ADDITIONAL INFORMATION
Senior management changes
Gareth Long was appointed to the role of
Group Executive Corporate in May 2021.
Gareth's appointment follows the decision
to amalgamate the majority of activities in
Technical Services and Planning and Corporate
under the leadership of one role. Accordingly,
Mike Carter (previously Group Executive
Technical Services and Planning) will leave the
Company during FY2022.
The ATIS initiative seeks to measure track
and overhead line alignment via locomotive-
mounted equipment using lasers to achieve
precise measurements at line speed. Network
currently uses a track-recording car to obtain
these measurements, with the service provided
by a third party and consuming paths that
would otherwise be used by train services.
It is intended that ATIS will enable an increase
in the timeliness of data allowing a move to
a condition-based track resurfacing scope,
tracking of defects and the ability to trend
degradation to predict future fail points
or intervention triggers. Other benefits of
the system may include reduced cost and
improved access by removing the requirement
to utilise the track-recording car.
During FY2021, the project team trialled
the use of a Track Geometry Measurement
System (TGMS) that was installed on a diesel
locomotive based in Callemondah. The trial
successfully proved that track geometry
information could be captured via an
autonomous device mounted to a locomotive
at a quality level comparable to the track-
recording car. This unit continues to provide
track geometry measurements across the
Blackwater and Moura systems.
Network is currently trialling an overhead Wire
Geometry Measurement System (WGMS) and
Pantograph Collision Detection System (PCDS).
The trial seeks to confirm that overhead wire
alignment information can also be captured via
automated means.
Assuming the WGMS and PCDS trials are
successful, Network will look to roll out the
technology into other systems subject to
customer approval.
TrainGuard
TrainGuard is a platform utilising ETCS
(European Train Control System) technology
to support driver decision-making, particularly
in relation to speed control and signal
enforcement. TrainGuard will support safer and
more efficient train operations with reduced
rail process safety issues and improved train
handling. TrainGuard is also a pathway to
expanding our driver-only operations in Central
Queensland. Operational demonstration of
TrainGuard was completed as planned in
FY2020. Following this, the business decision
to proceed with deployment of TrainGuard
across Blackwater and Goonyella has been
communicated to stakeholders. Preparations
continue for TrainGuard’s deployment on the
Blackwater mainline (Callemondah to Bluff)
which is now scheduled for 2HFY2022.
Risk
Aurizon promotes a risk-aware culture with
an emphasis on frontline accountability for
effective risk management. Aurizon’s thinking
is heavily informed by risk, from the framing
of strategy through to informing decision-
making. The Board approved Enterprise
Risk Management Framework and Appetite
encompasses consideration not only of risks
related to operational, legal, financial, safety,
health and environment but also strategy
execution, climate change, reputational and
culture and conduct-related risks, ensuring that
Aurizon continues to consider and develop
strategies to manage the full scope of risks
faced by our business.
Risk reporting provided both to our Board
and supporting Committees, facilitates the
early identification and proactive management
of emerging risks where the impacts and
opportunities are continually evolving. Risk
management procedures and templates
deployed throughout the business, further
integrate the assessment of safety and non-
safety risks, as well as supporting a consistent
approach to the management of risks in a
manner which is comprehensive and user-
friendly.
Risks to the delivery of strategy have been
categorised into the three strategic levers of
Optimise, Excel and Extend.
Optimise strategic lever
Delivery of Optimise initiatives
Aurizon maintains a pipeline of efficiency
initiatives that are expected to deliver a
cost effective and customer aligned model.
Failure to be the lowest cost or highest
service provider may occur due to a lack of
definition in the target state or unsuccessful
implementation of the associated action plans.
Impacts of non-delivery include not achieving
budget, failure to maximise volumes within
customer contracts, and sub-optimal return on
capital deployed.
Operational agility
A lack of operational agility would result
in Aurizon’s inability to flex operations and
support an alignment between costs and
revenue. If operational agility is not achieved
it may result in missed revenue during market
upturns due to a lag in accessing the required
resources, or static costs during downturns
eroding financial performance.
22
AURIZON ANNUAL REPORT 2020–21 Business interruption
Aurizon may experience business interruption
and consequential financial impacts from a
range of circumstances including, but not
limited to:
› Road vehicle incident — death or injuries to
our people from operating road vehicles.
› Process safety incident — major process
safety event leading to death or injuries to
our people, significant distraction or loss of
licence to operate.
› Illegal protest activity — safety risks to
employees and individuals due to anti-coal
protesters illegally entering the rail corridor
and danger zone to conduct blockades.
› Cyber-security incidents from external
penetration of Aurizon’s corporate and
operational systems.
› Technology incidents — failure of technical
infrastructure impacting technology-
dependent systems and operations.
› Adverse weather events could impact
Aurizon’s operations, assets or customers.
Pandemic — COVID-19
The global Coronavirus pandemic exposes
Aurizon to two primary risks:
› Reduced demand — due to export markets
requiring less of the commodities we haul
which could reduce Aurizon’s profitability.
› Service delivery — employee health issues
limiting our ability to provide services to
customers. This risk extends to other supply
chain participants such as mines and ports,
and their ability to provide continuity of
service.
Excel strategic lever
Competition in current markets
Aurizon may face competition from parties
willing to compete at reduced margins and/or
accept lower returns and greater risk positions
than Aurizon. This may potentially negatively
impact Aurizon’s competitiveness. Most of
Aurizon’s significant customer contracts
are secured on long-dated terms, however
failure to win or retain customer contracts at
acceptable rates will be a risk to future financial
performance. Increased competition may be
experienced from new entrants to Aurizon’s
core markets in both above and below rail
and includes existing customers in-sourcing
Aurizon’s services. Competitors may also
deploy technology or innovation more rapidly
than Aurizon.
General regulatory risk
Aurizon’s operations and financial performance
are subject to legislative and regulatory
oversight. Unfavourable changes may be
experienced with respect to access regimes,
safety accreditation, taxation, carbon
reduction, environmental and industrial
(including occupational health and safety)
regulation, government policy, and approval
processes. Implementation of these changes
may have a material adverse impact on project
investment, Aurizon’s profitability and business
in general, as well as Aurizon’s customers.
Continued delays in the implementation of the
UT5 obligation to publish an ICAR may also
result in adverse financial outcomes.
Aurizon is also exposed to the risk of material
regulatory breaches resulting in the loss of
operating licences and financial penalties. In
the event of a loss of licence, critical business
operations may not be supplied to customers,
impacting profitability and reputation.
Counterparty risk
Aurizon’s earnings are concentrated in
commodity markets across a relatively small
number of customers and may be impacted
by deterioration in counterparty credit
quality, mine sale to a lower-tier party, mine
profitability, contract renewals, supply chain
disruptions and/or macro-industry issues.
General economic conditions
Aurizon develops its own position regarding
future coal demand through our Strategy in
Uncertainty framework which includes a broad
range of scenario analysis and portfolio stress-
testing. This process considers both short-term
impacts as well as risks that emerge over the
medium to long term, where the timing and
magnitude are less certain. In developing
our own scenario analysis, we assess global
seaborne demand for metallurgical and thermal
coal, driven primarily by steel production
and energy generation respectively. Based
on this addressable market, Australian
supply is assessed considering the risks and
opportunities for both current and future coal
production. Given our customers' exposure
(almost entirely) to export markets, trade, net-
zero emission strategies and geopolitical risk
may impact demand for Aurizon services.
Geopolitical risk
Recent geopolitical developments, particularly
in relation to Australia’s trade relationship with
China, have the potential to impact Australian
coal and other bulk commodity exports to
China. Prolonged uncertainty as to when
Australian coal exports to China will resume
could result in adverse financial impacts if
export volumes cannot be reallocated to
alternative markets.
Extend strategic lever
Growth strategy execution risk
Aurizon faces risks associated with the
successful execution and delivery of the
Enterprise Strategy and the ability to realise
the future non-coal growth aspirations of the
business. The recent non-coal investor day
held in June 2021, signalled Aurizon’s intent to
double the size of the Bulk business by 2030,
which will largely depend upon Aurizon’s ability
to identify and capitalise on suitable growth
opportunities, both organic and inorganic, in an
increasingly competitive environment.
Modern slavery risk
Aurizon understands that modern slavery and
human trafficking can occur in many forms
and recognises that we may be exposed to
modern-day slavery risks in our supply chain
that we may not be able to fully mitigate.
The Company is committed to operating
responsibly and ensuring that robust standards
and processes are in place to minimise and
address modern slavery risks. Aurizon is also
committed to providing transparency on its
modern slavery risks and how they are being
addressed.
In October 2020, Aurizon published its first
Modern Slavery Statement, which addresses
the Company’s obligations contained in the
Modern Slavery Act 2018 (Cth). The purpose of
the statement is to:
› describe the risk of modern slavery in
Aurizon’s operations and supply chains
› explain actions taken to address those risks
› introduce the Company’s continuous
improvement framework, against which the
effectiveness of its actions will be assessed,
and future commitments outlined.
OPERATING AND FINANCIAL REVIEW
23
Directors’ Report (continued)
OPERATING AND FINANCIAL REVIEW
Physical risks
› current and future disruption arising
from increased severity and/or frequency
of extreme weather events (higher
temperatures, strong winds, flooding and
associated erosion, bushfires, and others).
Since 2017, Aurizon has incorporated
recommendations from the Financial Stability
Board’s Final Report: Recommendation of
the Task Force on Climate-related Financial
Disclosures (TCFD), in the Company’s annual
Sustainability Report. In October 2020,
Aurizon published its first CSAP, outlining
the Company’s position on climate change,
underpinned by long-term strategies and
associated actions to mitigate climate risk
and take advantage of climate-related
opportunities, including a target of net-zero
operational emissions by 2050.
Progress towards Aurizon’s CSAP initiatives
will be made available through the annual
Sustainability Report.
Sustainability
Aurizon takes a direct approach to reporting
Environmental, Social and Governance
(ESG) disclosures to stakeholders with the
publication of its annual Sustainability Report.
This Report is prepared with reference to the
Global Reporting Initiative’s (GRI) standards to
provide investors with comparable information
relating to ESG performance.
In May 2021, Aurizon maintained a 'Leading’
rating for the seventh consecutive year by the
Australian Council of Superannuation Investors
(ACSI) for Corporate Sustainability Reporting
in Australia. Having received this rating for
five or more consecutive years, Aurizon has
again been considered a 'Leader' by ACSI.
Further information on Aurizon’s approach to
sustainability is included on page 8.
Climate change risk
Aurizon acknowledges that climate change
is affecting a wide range of industries around
the world, resulting in financial implications.
Through our Climate Strategy and Action Plan
(CSAP) we are focusing on specific targets,
initiatives and investments to reduce our
carbon footprint. Transition risks, related to
energy policy, regulation, technology, and
market shifts (that are necessary to achieve the
transition to a low-carbon economy) will affect
the demand for the commodities that Aurizon
hauls. Physical risks related to extreme weather
events will also continue to affect Aurizon
through supply chain disruptions. Along with
the transition and physical risks of climate
change, Aurizon faces the risk of not delivering
on our commitments under the CSAP.
The long-term implications of climate change
may impact Aurizon on several fronts. For
example:
Transition risks
› demand for seaborne thermal coal is subject
to energy policy and fuel-mix decisions
driven by energy costs, energy security,
and regulation of GHG emissions (including
carbon pricing mechanisms) in coal import
nations
› demand for seaborne metallurgical coal
is subject to factors such as economic
development, steel-intensive growth, method
of steel production (including emerging
lower-carbon processes), import reliance, and
regulation of GHG emissions (including carbon-
pricing mechanisms) in coal import nations
› Australia’s supply of both metallurgical
and thermal coal to seaborne export
markets is subject to factors such as global
competitiveness, operating coal mine
production, and domestic climate policies
› investor concern over climate-related risks
may result in an inability for our business
and customers to gain licences, funding or
insurance for coal mining and transport and/
or an increased risk of litigation/social action
against our business and customers
› carbon liability under the Safeguard
Mechanism Rule and potential penalties for
inappropriate carbon reporting under the
National Greenhouse and Energy Reporting
(NGER) Act 2007 (Cth).
24
AURIZON ANNUAL REPORT 2020–21 People
At Aurizon, our people are our greatest asset.
We have more than 4,800 employees, with
more than 80% living and working in regional
Australia, including over a quarter of our senior
management. Our Aurizon values (Safety,
People, Integrity, Customer and Excellence)
guide our people’s work, in delivering bulk
commodities to the world, and are underpinned
by a workplace culture of connection.
Through our commitment to safe and efficient
delivery for our customers, we are building our
workforce for the future. Strong leadership,
culture and values-aligned people practices lay
the foundation to achieve this. During the year
we progressed key initiatives, including:
› the continued roll-out of our three core
Leadership programs designed to embed a
safe and high performing culture where our
people live our values and are engaged and
enabled to do their best work
› further improvements to our people,
processes and systems with a focus
on embedding a quality performance
management cycle through the organisation
› continuing to strive towards creating an
inclusive work environment by embedding
flexible work practices, creating awareness
and driving action for inclusion through
employee representative groups (across
gender, Aboriginal and Torres Strait Islander
and LGBTIQ inclusion), meeting workforce
representation targets, actively reducing
the gender pay gap and our continued
commitment to employment of Veterans.
Safety
Environment
Aurizon’s vision is to deliver environmental
value through effective management of
material environmental risks and improved
enterprise environmental performance. This
vision is driven by proactive and evidence-
based management measures covering key
environmental issues such as, climate change,
rail noise, and clean air.
Aurizon continues to work collaboratively
with supply chain partners to minimise coal
dust emissions associated with Aurizon’s
coal haulage operations. For further detail
in relation to coal dust management and
monitoring processes, refer to Aurizon’s annual
Sustainability Report.
As Bulk expands its service offering beyond
core rail capacity into stevedoring at key
locations along the East Coast, Aurizon’s
environmental risk profile has changed.
Accordingly, Aurizon’s management measures
have been adapted to cater for additional
activities (such as loading of bulk mineral
concentrates) and compliance requirements
following extensive due diligence.
In FY2021 Aurizon had three notifiable
environmental incidents. Remediation
actions have been implemented as required
and no ongoing environmental impacts are
anticipated.
At Aurizon, we are committed to protecting
ourselves, each other, and our communities.
We are determined to focus on managing what
matters, with a specific focus on identifying
and learning from events that have the
potential for Serious Injury and Fatality (SIF).
During FY2021, we have continued to embed
an operational Critical Control Management
(CCM) framework. CCM forms part of our
enterprise approach to risk management.
Combined with other safety, leadership and
technical processes, it ensures we apply an
effective and integrated approach.
In FY2021, we have retained two primary safety
metrics to measure safety outcomes across the
enterprise including Total Recordable Injury
Frequency Rate (TRIFR) and Rail Process
Safety (RPS).
RPS, which measures operational safety
including derailments, signals passed at danger
and rollingstock collisions deteriorated 8%
against the prior year to 5.13. Aurizon continues
to progress several initiatives, including
TrainGuard, to strengthen RPS, along with
improving yard safety interfaces to reduce the
number of yard incidents, a major contributor
to RPS in FY2021.
TRIFR was 10.21 injuries per million hours
worked, which was a 3% deterioration against
the prior period. This deterioration has been
the result of an increase in low-severity strain
and sprain injuries. These injuries are commonly
caused by a high number of lower body strains
and sprains while walking on uneven surfaces
in the rail corridor, and an increase in upper
body manual handling strains caused by lifting
equipment, setting points, applying handbrakes
and accessing/egressing locomotives. Aurizon
is committed to a reduction in these types of
injuries. We will be delivering a program using
technology to review high-risk body stressing
tasks, developing approaches to reduce risk
exposure, and in FY2022 reviewing our injury
management program holistically to improve
our proactive and reactive injury management
strategies. Lost time injuries continue to show
improvements, with an 8% decrease in the
frequency of these type of injuries (LTIFR)
against the prior period.
In FY2022, we have a strong focus on initiatives
to accelerate safety performance improvement
through targeting the main contributors
to TRIFR and RPS, and a specific focus on
identifying and learning from events that have
the potential for SIF.
OPERATING AND FINANCIAL REVIEW
25
Directors’ Report (continued)
REMUNERATION REPORT
Dear fellow shareholders
On behalf of the Board, we are pleased to present Aurizon’s Financial Year (FY) 2021 Remuneration Report. The Board believes that the Company has
performed well and wishes to recognise the Leadership Team’s performance in executing our business strategy and for achieving key milestones during
the year. The Board would also like to thank all employees for their commitment and contributions throughout the year.
Aurizon delivered Underlying Earnings Before Interest and Tax (EBIT) in FY2021 of $903 million, including net earnings of $37 million relating to the
favourable Queensland Court of Appeal decision on the Wiggins Island Rail Project (WIRP) fees. This was a solid result given the uncertain business
environment. Aurizon’s ability to deliver at the top end of guidance demonstrates the resilience of our Company, and the ongoing efforts and dedication
of our employees at a challenging time.
The turnaround of the operational and financial performance of the Bulk business has continued during FY2021. The Aurizon Port Services business was
expanded with the acquisition of ConPorts in Newcastle, volume growth has continued and ongoing efficiency improvements have been implemented. In
the space of four years, Bulk has improved its EBIT by more than $100 million, from negative $14 million in FY2017 to $112 million in FY2021.
The Coal business delivered 202 million tonnes (mt) for customers during FY2021 and an EBIT of $325 million.
The Network business achieved an EBIT of $509 million in FY2021, including WIRP fees. Network achieved lower operating and maintenance costs
compared to the prior comparative period despite increased Project Precision, legal and technology costs. Network achieved improved operational
performance with below rail cancellations reducing to 1.6% in FY2021 from 2.5% in FY2020.
At Aurizon, we are committed to protecting ourselves, each other, and our communities. In FY2021, we have retained two primary safety metrics in our
framework to measure safety outcomes across the enterprise including Total Recordable Injury Frequency Rate (TRIFR) and Rail Process Safety (RPS),
which measures operational safety including derailments, signals passed at danger and rollingstock collisions. There has been a deterioration in both
TRIFR and RPS during the year. While there was a significant improvement in TRIFR in the second half of the year, it is appropriate that no reward has
been allocated for Safety performance in FY2021. Although not a primary measure, the Board notes the improvement in our Lost Time Injury Frequency
Rate (LTIFR) which saw an 8% improvement in the frequency of injuries against the prior period.
A number of safety, health and wellbeing initiatives were delivered during the year, focusing on safety leadership and culture. Initiatives included the
implementation of the new Safety Operating Model, a new second line of defense assurance program, our Leading for Safety leadership program,
development of a new modern safety, health and environment reporting system, improvements in safety investigations, and the introduction of Aurizon’s
first mental wellbeing survey. In FY2022, we aim to accelerate safety performance improvement by targeting the main contributors to TRIFR and RPS,
with a specific focus on identifying, preventing and learning from events that have the potential for Serious Injury and Fatality. In line with the execution
of the Safety Strategy, the Board will consider measures that drive improved safety performance for future Awards.
The Short Term Incentive (STI) Award for FY2021 continued to be based on annual performance measures of Underlying EBIT, Safety and Individual Key
Deliverables. Business Unit earnings metrics also continue to be used for Bulk, Coal and Network.
For the purposes of the FY2021 STI Award targets, the Board determined the receipt of retrospective WIRP fees would not contribute to FY2021
Underlying EBIT but would be assessed separately as noted below. As such, group Underlying EBIT in FY2021 was slightly above Target performance
with EBIT outcomes varying across the Business Units. Network achieved an Underlying EBIT outcome of Stretch, Bulk achieved above Target whilst Coal
performance was between Threshold and Target.
The mixed performance across the Enterprise and Business Unit earnings measures and individual measures is reflected directly in the STI payments for our
Key Management Personnel (KMP). The Board has determined that an overall outcome above Target will be awarded to Bulk and Network participants; an
overall outcome below Target will be awarded to Coal participants with the remaining participants receiving an overall outcome around Target.
In assessing the overall performance for FY2021, the Board acknowledged the receipt of the WIRP fees which were payable following the decision of
the Queensland Court of Appeal. As a result, the FY2021 STI Award payment will include a separate amount related to the FY2016-FY2020 WIRP fees,
collected and recognised in FY2021. This payment rewards current participants for lower past STI Award outcomes due to WIRP fees not being collected
or recognised in those years. This amount does not exceed what would have been paid if the WIRP fees had been received in the respective periods
(FY2016-FY2020). These retrospective cash payments amounted to 30% of eligible employees Target STI Award. In line with the framework, a cap has
been applied where participants STI Award reached the maximum potential award (150% of target percentage). Any future collection of WIRP fees will be
treated as Underlying Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA).
The Long Term Incentive (LTI) Award performance measures are Return on Invested Capital (ROIC) and relative Total Shareholder Return (TSR). During
FY2021, the 2017 (4 year) Long Term Incentive (LTI) Award was subject to testing. No portion of the award will vest and these rights will lapse.
The Board considers that these overall remuneration outcomes reach an appropriate balance between business performance, shareholder outcomes and
recognising the value-adding contribution of the MD & CEO and the Leadership Team.
During FY2021, the Board continued to review and refine Aurizon’s remuneration framework. To further align incentive structures with business strategy, a
strategic transformation measure has been added to the 2021 LTI Award to reflect the growth aspirations of the Bulk business and other non-Coal investments.
In addition, the Board is adopting EBITDA from FY2022 in place of EBIT in the STI Award to align with a similar shift in how guidance will be provided and the
Company’s focus on cash flow. Further changes may be implemented from FY2023 to ensure the framework continues to deliver against our remuneration
principles, long-term strategic outlook and to ensure it remains effective in driving strong performance.
We are grateful for your ongoing support.
Yours faithfully,
Tim Poole
Chairman
26
Kate Vidgen
Chair, Remuneration and People Committee
AURIZON ANNUAL REPORT 2020–21
2. Directors and Executives
The Key Management Personnel (KMP) of the Group (being those whose remuneration must be
disclosed in this Report) include the Non-Executive Directors and those Executives who have the
authority and responsibility for planning, directing and controlling the activities of Aurizon.
The Non-Executive Directors and Executives that formed part of the KMP for the Financial Year
(FY) as at 30 June 2021 are identified in Table 2.
TABLE 2 – KEY MANAGEMENT PERSONNEL
NAME
POSITION
NON‑EXECUTIVE DIRECTORS
T Poole
M Bastos
R Caplan
M Fraser
S Lewis
S Ryan
L Strambi
K Vidgen
EXECUTIVE KMP
A Harding
P Bains
G Lippiatt
C McDonald
E McKeiver
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
Managing Director & Chief Executive Officer
Group Executive Network
Chief Financial Officer & Group Executive Strategy
Group Executive Bulk
Group Executive Coal
1.
Remuneration Report Introduction
Aurizon’s remuneration practices are aligned
with the Company’s strategy of providing
rewards that drive and reflect the creation
of shareholder value while attracting and
retaining Directors and Executives with the
right capability to achieve results.
The Remuneration Report for the year ended
30 June 2021 is set out as per Table 1. The
information in this Report has been audited.
TABLE 1 – TABLE OF CONTENTS
SECTION CONTENTS
1
2
3
4
5
6
7
8
9
10
Remuneration Report
Introduction
Directors and Executives
Remuneration
Framework Components
Company Performance
Financial Year 2021
Take Home Pay
Short Term Incentive
Award
Long Term Incentive
Award
Executive Employment
Agreements
Non-Executive Director
Remuneration
Executive Remuneration
Financial Year 2021
PAGE
27
27
28
30
31
32
34
36
37
38
REMUNERATION REPORT
27
Directors’ Report (continued)
REMUNERATION REPORT
3. Remuneration Framework
Components
Total Potential Remuneration
Aurizon’s Remuneration Framework for each
Executive comprises three components:
› Fixed remuneration (not ‘at risk’) that
comprises salary and other benefits,
including superannuation
› Short Term Incentive Award (STIA) (‘at risk’
component, awarded on the achievement
of performance conditions over a 12-month
period) that comprises both a cash
component and a component deferred
for 12 months into equity
› Long Term Incentive Award (LTIA) (‘at risk’
component, awarded on the achievement
of performance conditions over a four-
year period) that comprises only an
equity component.
The structure is intended to provide an
appropriate mix of fixed and variable
remuneration, and provide a combination
of incentives intended to drive performance
against the Company’s short and longer-term
business objectives.
The mix of potential remuneration components
for FY2021 for the MD & CEO and Executive
KMP is set out in Figure 1: Total Potential
Remuneration. This diagram demonstrates
the revised remuneration mix for the MD
& CEO that was implemented in FY2021
where a greater portion of the total potential
remuneration is weighted towards the LTIA
(from 120% to 150%). The remuneration mix for
the other Executive KMP remains unchanged.
Executive Remuneration Governance
Figure 2 represents Aurizon’s remuneration
governance framework. Details on the
composition of the Remuneration and
People Committee (Committee) are set out on
page 9 of this report. The Committee’s Charter
is available in the Governance section of the
Company’s website at www.aurizon.com.au
28
FIGURE 1 – TOTAL POTENTIAL REMUNERATION1,2
MD & CEO: CASH COMPONENT: 47%
EQUITY COMPONENT: 53%
24%
23%
15%
38%
EXECUTIVE KMP: CASH COMPONENT: 51%
EQUITY COMPONENT: 49%
30%
21%
14%
35%
Fixed Remuneration
STIA
Deferred STIA
LTIA
1 Assumes achievement of the stretch performance hurdle outcomes for STIA, full vesting of the Deferred STIA and
LTIA at a value equal to the maximum opportunity of the original award i.e. assuming no share price appreciation
2 Does not include the WIRP fee component payable in FY2021 as cash
FIGURE 2 – REMUNERATION GOVERNANCE FRAMEWORK
BOARD
The Board:
› Approves the overall remuneration policy and
ensures it is competitive, fair and aligned with the
long-term interests of the Company
› Approves Non-Executive Director remuneration, MD
& CEO and Executive Committee remuneration
› Assesses the performance of, and determines the
STIA outcome for, the MD & CEO giving due weight
to objective performance measures while retaining
discretion to determine final outcomes
80
100
60
20
40
0
› Considers and determines the STIA outcomes
of the Executive Committee based on the
recommendations of the MD & CEO.
REMUNERATION AND PEOPLE COMMITTEE
The Remuneration and People Committee is delegated
responsibility by the Board to review and make
recommendations on:
› The remuneration policies and framework for
the Company
› Non-Executive Director remuneration
› Remuneration for MD & CEO and Executive Committee
› Executive incentive arrangements.
MANAGEMENT
› Provides information relevant to remuneration decisions
and makes recommendations to the Remuneration and
People Committee
› Obtains remuneration information from external
advisors to assist the Remuneration and People
Committee (i.e. market data, legal advice, accounting
advice, tax advice).
CONSULTATION WITH
SHAREHOLDERS AND
OTHER STAKEHOLDERS
REMUNERATION
CONSULTANTS AND
OTHER EXTERNAL
ADVISORS
In performing duties and
making recommendations to
the Board, the Remuneration
and People Committee may
from time to time appoint
and engage independent
advisors directly in relation
to remuneration matters.
These advisors:
› Review and provide
recommendations on the
appropriateness of the
MD & CEO and Executive
remuneration
› Provide independent
advice, information and
recommendations relevant
to remuneration decisions.
Any advice or
recommendations provided
by external advisors are
used to assist the Board –
they do not substitute for
the Board and Remuneration
and People Committee
processes.
AURIZON ANNUAL REPORT 2020–21
Remuneration Framework and objectives Financial Year 2021
The Board is continuing to review and refine Aurizon’s remuneration framework. Summarised in Figure 3 are the changes that were implemented in
FY2021 and the changes being implemented in FY2022. Further changes may be implemented from FY2023 to ensure the framework continues to
deliver against our remuneration principles, long-term strategic outlook and to ensure it remains effective in driving strong performance.
FIGURE 3 – REMUNERATION FRAMEWORK AND OBJECTIVES FOR FINANCIAL YEAR 2021
PERFORMANCE MEASURE
STRATEGIC OBJECTIVES AND
LINK TO PERFORMANCE
FY2021 AND FY2022
FRAMEWORK CHANGES
D
E
X
F
I
I
N
O
T
A
R
E
N
U
M
E
R
M
R
E
T
T
R
O
H
S
D
R
A
W
A
E
V
T
N
E
C
N
I
I
Considerations:
› Experience and qualifications
› Role and responsibility
› Retain key capability
› Reference to remuneration paid by similar
sized companies in similar industry sectors
›
Internal and external relativities.
› Underlying EBIT (Enterprise and, if
applicable, Business Unit) (60%)
› Safety (10%)
›
Individual (30%)
Measured over a one-year performance period
Participants can earn up to a maximum of
150% of “at-target” percentage
STIA at Risk:
MD & CEO: Target 100% of Fixed
Remuneration and maximum 150% of
Fixed Remuneration
Other Executive KMP: Target 75% of
Fixed Remuneration and maximum 112.5%
of Fixed Remuneration.
› Relative Total Shareholder Return (TSR)
(50%)
› Return on Invested Capital (ROIC) (50%)
Measured over a four-year performance
period
LTIA at Risk (Maximum):
MD & CEO: 150% of Fixed Remuneration
Other Executive KMP: 112.5% of Fixed
Remuneration.
M
R
E
T
G
N
O
L
D
R
A
W
A
E
V
T
N
E
C
N
I
I
› To attract and retain Executives with
the right capability to achieve results.
› The Executive KMP did not
receive a fixed remuneration
increase in FY2021.
The financial and non-financial
performance measures were
chosen because:
› Underlying EBIT delivers direct
financial benefits to shareholders
› Safety drives a continuous safety
›
improvement culture and embeds safe,
efficient and effective processes across
all aspects of a heavy industry business
Individual aligns employee contribution
to the achievement of Aurizon’s
strategy. At the start of the performance
year the Board determines the MD &
CEO individual deliverables. Relevant
measures are cascaded to the Executive
Committee and throughout the
organisation.
› Relative TSR is a measure of the
return generated for Aurizon’s
shareholders over the performance
period relative to a specific peer
group of companies (from the
ASX100 Index)
› ROIC reflects the fact that Aurizon
operates a capital-intensive
business and our focus should be
on maximising the level of return
generated on the capital we invest
Note: Minimum shareholding
requirements for Executive KMP and the
remainder of the Executive Committee
encourages retention of shares and
alignment with shareholder interests.
› From FY2022 the financial
performance measure will be
adjusted to Underlying EBITDA
in place of EBIT in line with
guidance reporting.
› For the MD & CEO, from FY2021,
the maximum opportunity of the
LTI was increased from 120% to
150% of Fixed Remuneration
› From the 2021 Award, the Relative
TSR peer group has been adjusted
from company classification to
industry sectors. Peer group will
now include companies in the
Industrials, Energy, Materials, Real
Estate and Utilities Industry Sectors
› From the 2021 Award,
introduction of a strategic
transformation measure (25%
weighting) reducing the portion
of the award weighted towards
Relative TSR (from 50% to 25%
weighting). ROIC weighting
remains at 50%.
Total Remuneration
Overall, Executive remuneration is designed to support the delivery of superior shareholder returns by placing a significant proportion of an
Executive’s total potential remuneration at risk and awarding a significant portion of at risk pay in equity.
REMUNERATION REPORT
29
Directors’ Report (continued)
REMUNERATION REPORT
4. Company Performance for Financial Year 2021
Aurizon reported Group Underlying Earnings Before Interest and Tax (EBIT) of $903 million for continuing operations for year ended 30 June 2021.
As an essential service provider to the Australian economy, Aurizon has also continued to operate throughout the challenging coronavirus pandemic
(COVID-19) period, with the health and wellbeing of our employees our highest priority. Progress in refining and executing the business strategy and
achieving key milestones during FY2021 has provided long-term certainty for the business.
Table 3 shows historical Company performance across a range of key measures. Performance across earnings and individual measures is reflected
directly in STIA payments. Detail related to performance against the FY2021 STIA performance measures is provided in Table 5 (page 33). Table 7
(page 34) provides additional information related to the LTIA performance outcomes.
TABLE 3 – HISTORICAL COMPANY PERFORMANCE AGAINST KEY MEASURES
KEY PERFORMANCE MEASURES
DESCRIPTION
FY2021
FY2020
FY2019
FY2018
FY2017
Group Underlying EBIT1
Bulk Underlying EBIT2
Coal Underlying EBIT2
Network Underlying EBIT2
Return on invested capital
$m
$m
$m
$m
%
Total Recordable Injury Frequency Rate (TRIFR)3
per million work hours
Rail Process Safety (RPS)4
per million train kilometres
Total Shareholder Return (TSR)
3-year TSR
4-year TSR5
Share Buy Back
Dividends6
%
%
%
$m
$m
903
112
325
509
10.7
10.21
5.13
-14.9
1.2
-11.1
300
533
909
90
411
469
10.9
9.92
4.74
-9.6
6.0
400
529
829
37
415
400
9.7
11.07
4.38
28.2
25.5
–
474
941
50
429
481
10.9
10.02
5.08
-13.6
-5.5
300
540
884
9.3
7.12
15.8
26.3
–
462
1 Continuing operations
2 Business Unit model was introduced from FY2018
3 From FY2018, TRIFR definition has been redefined and contractor statistics have been included. Performance unaudited prior to FY2018.
4 Rail Process Safety (Total Accident Rate and Signals Passed at Danger) was introduced from FY2018
5 Reporting on 4-year TSR was aligned with the commencement of a 4-year performance period from the 2017 LTIA
6 Dividends for each Financial Year (the final dividend is paid in the following financial year)
30
AURIZON ANNUAL REPORT 2020–21 5. Take Home Pay
Table 4 identifies the actual remuneration earned during FY2021 for Executive KMP.
The table has not been prepared in accordance with accounting standards but has been provided to ensure shareholders are able to clearly understand
the remuneration outcomes for Executive KMP. Remuneration outcomes, which are prepared in accordance with the accounting standards, are
provided in Section 10 (page 38).
The Executive KMP did not receive a fixed remuneration increase during FY2021.
The remuneration outcomes identified in Table 4 are directly linked to the Company performance described in Section 6 (page 32) and Section 7
(page 34).
The actual STIA is dependent on Aurizon, Business Unit and individual performance as described in Section 6.
In assessing the overall performance for FY2021, the Board acknowledged the receipt of the WIRP fees which were payable following the decision
of the Queensland Court of Appeal. Further information in relation to the WIRP Component can be found in Section 6.
Varying performance across our key measures is also reflected directly in the payments for our Executive KMP, which range from 79% to 100% of
their potential maximum.
The actual vesting of the LTIA is dependent on Aurizon’s performance and the outcomes are further described in Section 7.
During FY2021, the 2017 Award (4 year) was subject to testing. However, Aurizon’s performance resulted in no portion of this Award vesting.
Movement in the Aurizon share price over the various performance periods is reflected in the remuneration outcomes for Executive KMP through
the deferred portion of the STIA into equity. This aligns the Executive KMP outcomes with the shareholder experience.
TABLE 4 – REMUNERATION EARNED IN FINANCIAL YEAR 2021
FIXED
REMUNERATION
$’000
NON‑MONETARY
BENEFITS1
$’000
STIA
CASH2
$’000
STIA DEFERRED
FROM PRIOR YEAR3
$’000
WIRP
COMPONENT4
$’000
LTIA
VESTING5
$’000
SHARE PRICE
DEPRECIATION6
$’000
ACTUAL FY2021
REMUNERATION
OUTCOMES $’000
NAME
EXECUTIVE KMP
A Harding
P Bains
G Lippiatt
C McDonald
E McKeiver
1,717
788
700
667
683
-
-
-
10
4
1,139
469
334
385
274
654
218
-
263
134
515
105
158
109
154
-
-
-
-
-
(88)
(29)
-
(35)
(18)
3,937
1,551
1,192
1,399
1,231
1 Non-monetary benefits represent the value of Reportable Fringe Benefits for the respective FBT year ending 31 March
2 The amount relates to the cash component (60%) of the FY2021 STIA which will be paid in September 2021
3 The amount relates to the deferred component (40%) of the FY2020 STIA which was awarded in performance rights and will become unrestricted in September 2021
(calculation assumes a share price of $4.30 at time of award). G Lippiatt was not remunerated as an Executive KMP for FY2020 therefore his STIA was awarded
entirely as cash
4 In assessing the overall performance for FY2021, the Board acknowledged the receipt of the WIRP fees which were payable following the decision of the Queensland
Court of Appeal. The Board determined that a cash payment would be made to recognise the WIRP fees payable between FY2016 – FY2020 but collected in FY2021.
This amounted to 30% of eligible employees Target STIA
5 The amount is the value of rights from the 2017 Award (4-year) which would have vested in August 2021. As the performance hurdles were not met no rights vested
6 The amount is the number of rights from the deferred FY2020 STIA which vest multiplied by the decrease in the Aurizon share price over the period ended 30 June 2021
(calculation assumes share price depreciation of $0.58)
REMUNERATION REPORT
31
Directors’ Report (continued)
REMUNERATION REPORT
6. Short Term Incentive Award
What is the STIA and who participates?
The STIA is ‘at risk’ remuneration subject to the
achievement of pre-defined Company, Business
Unit and individual performance measures
which are set annually by the Board at the
beginning of the performance period.
For each component of the STIA, three
performance levels are set:
› Threshold, below which no STIA is paid for
that component
› Target, which typically aligns to relevant
corporate plans and budgets, a business
improvement targeted outcome or reflects
an improvement on historical achievement
› Stretch, outcomes which are materially
better than Target
The STIA applies in a similar manner to
eligible non-enterprise agreement employees.
For the MD & CEO, Executive KMP and the
remaining Executive Committee (direct reports
to the MD & CEO) a portion (40%) will be
deferred into equity for a period of 12 months,
which is subject to claw-back for financial
misstatements and misconduct.
What are the Company performance
measures?
The performance measures which apply to all
participants are Underlying EBIT, Safety and
Individual performance.
Business Unit measures are included in the
scorecard for Bulk, Coal and Network.
Each measure has a defined level of
performance. The measures drive a continuous
safety improvement culture, strengthen and
grow our current business while continuing to
transform the Enterprise.
This is achieved through a focus on people
and asset efficiencies whist at the same time
delivering benefits to shareholders.
Individual performance measures relate to
each specific role and measure an individual’s
contribution against a range of operational and
strategic performance measures (including
additional safety measures). At the start of the
performance year the Board determines the
MD & CEO individual deliverables. Relevant
deliverables are cascaded to the Executive
Committee and throughout the organisation as
reflected in Figure 4.
What is the amount that participants
can earn through an STIA?
The employment agreements specify a target
STIA, expressed as a percentage of Fixed
Remuneration (100% for the MD & CEO and
75% for the remaining Executive KMP). Each
participant can earn between 0% up to a
maximum of 150% of this target percentage,
depending on performance and subject to
Board discretion. Depending on performance
assessed at year end, participants may earn for
each enterprise measure: 0% for performance
below Threshold, 50% at Threshold (for
measures other than Underlying EBIT, for
which Threshold earnings are 30%) with a
linear scale up to 100% at Target performance;
and a further linear scale to 200% at Stretch
performance.
STIA outcomes are determined by calculating
the performance outcome against the
relevant weighted performance measure.
Figure 5 provides an example of an at-target
performance outcome.
What are the outcomes for FY2021?
Table 5 identifies the performance measures,
relevant weightings and outcomes for FY2021.
These measures were assessed excluding
net earnings of $37 million related to WIRP
fees payable between FY2016 – FY2020. An
outcome slightly above Target performance
was achieved for Group Underlying EBIT.
Underlying EBIT outcomes varied across the
Business Units, with Network achieving Stretch
performance, Bulk achieving an outcome
just below Stretch performance while Coal
performance was between Threshold and Target.
There has been a deterioration in both TRIFR
and RPS during the year. While there was a
significant improvement in TRIFR in the second
half of the year, it is appropriate that no reward
has been allocated for Safety performance
in FY2021. Aurizon continues to progress
a number of initiatives to accelerate safety
performance improvement.
In assessing the overall performance for FY2021,
the Board acknowledged the receipt of the
WIRP fees which were payable following the
decision of the Queensland Court of Appeal.
As a result, the FY2021 STIA payment will
include a separate amount related to the
WIRP fees payable during FY2016 – FY2020,
collected and recognised in FY2021. This
payment rewards current participants for lower
past STIA outcomes due to WIRP fees not
being collected or recognised in those years.
This amount does not exceed what would have
been paid if the WIRP fees had been received
in the respective periods (FY2016-FY2020).
These respective cash payments amounted to
30% of the eligible employees Target STIA. In
line with the framework, a cap has been applied,
where participants STIA reached the maximum
potential award (150% of target percentage).
Any future collection of WIRP fees will be
treated as Underlying Earnings Before Interest,
Tax, Depreciation and Amortisation (EBITDA).
The FY2021 actual outcomes for Executive
KMP are identified within Table 6. Figure 6
provides an example of how the WIRP fees will
be applied on top of the STIA performance
outcome calculation.
FIGURE 4 –
STRATEGIC MEASURES CASCADING PROCESS
FIGURE 5 –
STIA PERFORMANCE OUTCOME CALCULATION
FIGURE 6 –
STIA + WIRP PAYMENT
i
f
e
h
C
&
r
o
t
c
e
r
i
D
g
n
g
a
n
a
M
i
r
e
c
ffi
O
e
v
i
t
u
c
e
x
E
e
e
t
t
i
m
m
o
C
e
v
i
t
u
c
e
x
E
e
v
i
t
u
c
e
x
E
e
h
t
o
t
s
t
r
o
p
e
R
t
c
e
r
i
D
e
e
t
t
i
m
m
o
C
s
t
n
a
p
i
c
i
t
r
a
P
A
I
T
S
r
e
h
t
O
MD & CEO AND SUPPORT FUNCTION PARTICIPANTS
WIRP PAYMENT
60%
+ 10%
+
30%
=
100%
+
30%
=
130%
BUSINESS UNIT PARTICIPANTS
30%
+
10%
+
30%
+
30%
=
100%
+
30%
=
130%
Enterprise
Measures
(EBIT)
Enterprise
Safety
Measures
(TRIFR, RPS)
Business
Unit
Measures
(EBIT)
Individual
Deliverable
Measures
(varied)
STIA
OUTCOME
WIRP
Payment
WIRP ADJUSTED
STIA OUTCOME
OPTIMISE
EXCEL
EXTEND
32
AURIZON ANNUAL REPORT 2020–21
TABLE 5 – SHORT TERM INCENTIVE AWARD FINANCIAL YEAR 2021 OBJECTIVES1,2
PERFORMANCE MEASURE
ENTERPRISE
Group EBIT: Underlying EBIT delivers financial benefit to shareholder through the
achievement of underlying operating earnings
Group Safety: The measures drive a commitment to delivering a continuous
safety improvement culture across all of the Company measured through equally
weighted parameters which include:
› Total Reportable Injury Frequency Rate (TRIFR)
› Rail Process Safety (Total Accident Rate and Signals Passed at Danger)
BUSINESS UNIT
Coal EBIT:
Bulk EBIT:
Network EBIT:
WEIGHTING
MD & CEO
& CFO
COAL,
BULK &
NETWORK
TARGET
FY2021 PERFORMANCE
OUTCOME
60%
30%
$863m
$866m
5%
5%
5%
5%
–
30%
8.43
4.03
$344m
$101m
$419m
10.21
5.13
$325m
$112m
$460m
INDIVIDUAL: At the start of the performance year the Board determines the
MD & CEO individual deliverables. These individual deliverables are based on
the Aurizon strategy of continuing to optimise, excel and extend the business.
Relevant measures are subsequently cascaded to the Executive Committee and
throughout the organisation. During FY2021 some of the key deliverables for the
MD & CEO and across the organisation were:
› Deliver key operational efficiency
› Grow Bulk contract book
› Continue inorganic growth
› Continue safety and performance
improvement programs (including Project
Precision and Network Optimisation Program)
› Implement Aurizon climate & ESG response plan
TOTAL OUTCOME
30%
30% Individual performance
targets vary for each
specific role
Personal outcomes
for MD & CEO and
Executive KMP varied
between above Target
and Stretch depending
on performance against
individual KPIs
culture transformation plan
100%
100%
MD & CEO, CFO, Bulk & Network
Coal
1 Company performance hurdles relate to continuing operations
2 Underlying EBIT for the purpose of the scorecard excludes WIRP fees
Stretch Between Target & Stretch Target Between Threshold & Target Threshold Below Threshold
TABLE 6 – SHORT TERM INCENTIVE AWARDED IN FINANCIAL YEAR 2021
NAME
TARGET STIA
$’000
EXECUTIVE KMP
A Harding
P Bains
G Lippiatt
C McDonald
E McKeiver
1,717
591
525
500
512
MAXIMUM
POTENTIAL
STIA $’000
STIA CASH
COMPONENT
STIA
DEFERRED SHARE
COMPONENT1
WIRP
COMPONENT2
TOTAL
STIA
PAYMENT
% OF
TARGET STIA
% OF
MAXIMUM STIA3
AWARDED FY2021 $’000
2,576
887
788
750
768
1,139
469
334
385
274
760
313
223
256
182
515
105
158
109
154
2,414
887
715
750
610
141
150
136
150
119
94
100
91
100
79
1 A portion (40%) of the STIA awarded in the form of rights to shares, which vest on the first anniversary of payment of the cash component subject to Board’s ability to
‘claw-back’
2 In assessing the overall performance for FY2021, the Board acknowledged the receipt of the WIRP fees which were payable following the decision of the Queensland
Court of Appeal. The Board determined that a cash payment would be made to recognise the WIRP fees payable between FY2016 – FY2020 but collected in FY2021.
The value of this cash payment equates to 30% of the Executives Target STIA, with a cap applied where participants STIA reached the maximum potential award
(150% of target percentage)
3 Executives have forfeited between 0% and 21% of their maximum potential outcomes
REMUNERATION REPORT
33
Directors’ Report (continued)
REMUNERATION REPORT
7. 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 whom the
Board has identified as being able to contribute
directly to the generation of long-term
shareholder returns. This includes the MD &
CEO, Executive KMP, the remaining Executive
Committee (direct reports to the MD & CEO) and
a number of other management employees.
What is the amount that Executives can
earn through an LTIA?
The maximum potential remuneration (expressed
as a percentage of Fixed Remuneration) available
through the LTIA is 150% in the case of the MD &
CEO and 112.5% for the remaining Executive KMP.
What is the performance period?
The company hurdles for the LTIA are measured
over a four year period. Retesting does not form
part of any award.
What are the performance hurdles?
The outstanding LTIA (2017 Award – 2020
Award) have two performance hurdles - Relative
Total Shareholder Return and Average Return
on Invested Capital. From the 2021 Award an
additional Non-Coal Gross Revenue Growth
measure has been introduced as outlined in
Table 8.
How is the LTIA determined?
The number of performance rights issued
under the LTIA to each Executive is calculated
by dividing their respective LTIA potential
remuneration (expressed as a percentage of
Fixed Remuneration) by the five-day Volume
Weighted Average Price (VWAP) of Aurizon
shares at the time of their award.
Each performance right is a right to receive
one share in Aurizon upon vesting. The number
of performance rights that vest is determined
by performance outcomes compared against
predetermined company hurdles as described in
Table 7 and Table 8.
What happens when performance
rights vest?
Performance rights awarded under the LTIA
vest subject to the satisfaction of company
hurdles. Rights vest and the resulting shares are
transferred to the Executive at no cost to the
Executive. Value of the award will be subject
to movements in the Aurizon share price over
the performance period, aligning Executive
outcomes and shareholder experience.
Company performance and vesting outcomes
for the 2017 LTIA (4 year) is identified in Table 7.
Aurizon’s performance resulted in no component
of this Award vesting.
TABLE 7 – COMPANY PERFORMANCE AGAINST LONG TERM INCENTIVE AWARDS SUBJECT TO TESTING IN FINANCIAL YEAR 2021
COMPANY HURDLE AND PERFORMANCE MEASUREMENT PERIOD
WEIGHTING
RESULT
%
VESTED
%
LAPSED
2017 AWARD (4 YEAR): 01 JULY 2017 – 30 JUNE 20211
Relative TSR: against peer
group within ASX100 Index
30% of rights vest at the 50th percentile, 75% at the
62.5th percentile up to 100% at the 75th percentile
ROIC: average annual ROIC
FY2018 – FY20212
50% of rights vest with an average ROIC of 10.5%,
up to 100% at 11.5%
50%
Below Median
50%
9.5%
0%
0%
100%
100%
1 From the 2017 Award, company hurdles are measured over an extended performance period, which increased from a three-year performance period to a four-year
performance period. In order to facilitate this transition two awards were issued at 75% of the maximum vesting opportunity in FY2018
2 Following the expected Network regulatory outcomes, the Board has determined that no adjustment will be made to the hurdles for 2017 and 2018 Awards
Maximum Between Minimum and Maximum Minimum Below Minimum
34
AURIZON ANNUAL REPORT 2020–21
TABLE 8 – LONG TERM INCENTIVE AWARD PERFORMANCE OVERVIEW AND HURDLES FOR FUTURE AWARDS
DEFINITION
RELATIVE TOTAL SHAREHOLDER RETURN
Measures the growth in share price plus cash distributions notionally
reinvested in shares and is:
› Conditional on Aurizon’s TSR performance relative to a peer group of
companies in the ASX 100 index that are broadly comparable to Aurizon
(i.e. with which Aurizon competes for capital and/or capability)
› From the 2021 Award, companies in the industrials, energy, materials,
real estate and utilities Industry Sectors are included in the peer group
(approximately 50)1
› Determined by reference to a VWAP over a period to smooth any short-
term ‘peaks’ or ‘troughs’
› Verified by an independent expert.
RETURN ON INVESTED CAPITAL
For the purposes of LTIA, ROIC is underlying EBIT divided by Invested
Capital and will be calculated on the same basis as published ROIC with the
following exceptions:
› Adjusted, for Invested Capital, to exclude major (infrastructure
investments with an approved budget capital expenditure over $250m)
assets under construction until these investments are planned to
generate income, subject to Board discretion (for example, in the case of
a delay judged to be outside the control of management and not able to
be foreseen or mitigated)
› Adjusted (add-back depreciation charge and invested capital) to reflect
asset impairments which occur during the performance period, excluding
asset impairments driven by continued efficiency and productivity
improvements.
VESTING THRESHOLDS
Vesting Thresholds are consistent across all outstanding Awards
WEIGHTING
Outstanding
2018 Award
2019 Award
2020 Award
Future
2021 Award
50%
50%
50%
25%
MINIMUM
VESTING
30% of
rights vest
at the 50th
percentile
MAXIMUM
VESTING
75% of
rights
vest at
the 62.5th
percentile
100% of
rights
vest at
the 75th
percentile
All rights will vest pro-rata on a straight-line basis between the
minimum and maximum vesting points
Vesting Thresholds vary across outstanding Awards
WEIGHTING
MINIMUM
VESTING
MAXIMUM
VESTING
50% of Rights
vest with an
average ROIC of:
100% of Rights
vest with an
average ROIC of:
Outstanding
2018 Award2
2019 Award3,4
2020 Award3,4
Future
2021 Award3,4
50%
50%
50%
9%
9.5%
9.5%
50%
9.5%
10%
10.5%
10.5%
10.5%
All rights will vest pro-rata on a straight-line basis between the
minimum and maximum vesting points
NON‑COAL GROSS REVENUE GROWTH
Measures the growth of revenue in the bulk business and other revenues
not driven by coal markets.
WEIGHTING
MINIMUM
VESTING
MAXIMUM
VESTING
Aligns with the long-term strategic direction to double the size of the bulk
business by expanding across the bulk commodities supply chain.
Future
2021 Award
25%
Determined by reference to non-coal gross revenue growth over the
performance period in line with strategic objective for FY2030.
50% of Rights
vest with
non-coal gross
revenue growth
of 29%
100% of Rights
vest with non-coal
gross revenue
growth of 43%
All rights will vest pro-rata on a straight-line basis between the minimum
and maximum vesting points
1 An adjustment was made to the peer group in the 2021 Award which resulted in a shift from company classifications to industry sectors. Companies in the financial,
healthcare, biotechnology, casinos and gaming companies were excluded from the peer group for the 2018 Award, 2019 Award and 2020 Award
2 Following the expected Network regulatory outcomes, the Board has determined that no adjustment will be made to the hurdles for 2017 Award and 2018 Awards
3 With the introduction of the new lease accounting standard effective from 1 July 2019 which had the effect of bringing leases on balance sheet, in FY2020 we completed
a review the ROIC calculation and simplified the definition of invested capital
4 ROIC hurdles have been set taking into account the current business outlook and the expected Network regulatory outcomes
How does Aurizon utilise Retention awards?
In some circumstances, as approved by the Board, Management may recommend using retention awards where the services of an individual are
considered critical to Aurizon over the short-to-medium term and the existing remuneration arrangements are thought to be insufficient to retain those
services. Retention awards may be time-based or project-based and are governed by stringent performance conditions and may be cash-based or
equity-based. In FY2018, an award was issued to an Executive who has subsequently been appointed to the Executive Committee (CFO & GE Strategy)
and which subsequently vested during FY2021. During FY2021, no retention awards were issued to Executive KMP and 46,296 performance rights were
issued to one employee. Further information is available in note 28 of the Financial Report (page 94).
REMUNERATION REPORT
35
Directors’ Report (continued)
REMUNERATION REPORT
8. Executive Employment Agreements
Executive Employment Agreements
Remuneration and other terms of employment
for the MD & CEO and Executive KMP are
formalised in an Employment Agreement as
summarised in Table 9.
Minimum Shareholding policy
for Executives
To align KMP and the Executive Committee
(direct reports to the MD & CEO) with
shareholders, the Company requires:
› Non-Executive Directors to accumulate and
maintain one year’s Total Directors’ fees
(consisting of Directors’ fee plus applicable
Committee fee/s) of shares in the Company
› the MD & CEO to accumulate and maintain
one year’s Fixed Remuneration of shares in
the Company
› the remaining Executive KMP and Executive
Committee to accumulate and maintain 50%
of one year’s Fixed Remuneration of shares
in the Company.
This is to be achieved within six years of
the date of their appointment. This will be
calculated with reference to the Total Directors’
fees and Executives’ Fixed Remuneration
during the period divided by the number of
years.
Details of KMP shareholdings as at 30 June
2021 are set out in Table 10.
Hedging and margin lending policies
Aurizon has in place a policy that prohibits
Executives from hedging economic exposure to
unvested rights that have been issued pursuant
to a Company 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 Executive signing an annual
declaration of compliance with the policy.
TABLE 9 – EMPLOYMENT AGREEMENTS
NAME
EXECUTIVE KMP
A Harding
P Bains
G Lippiatt
C McDonald
E McKeiver
DURATION OF
EMPLOYMENT AGREEMENT
FIXED REMUNERATION AT
END OF FINANCIAL YEAR
20211
NOTICE PERIOD2
BY EXECUTIVE
BY COMPANY3
Ongoing
Ongoing
Ongoing
Ongoing
Ongoing
1,717,000
788,000
700,000
667,000
683,000
6 months
3 months
3 months
3 months
3 months
12 months
6 months
6 months
6 months
6 months
1 Fixed remuneration includes a superannuation component
2 Post employment restraints in any competitor business in Australia is aligned to the notice period
3 Any termination payment will be subject to compliance with the Corporations Act 2001 and will not exceed 12 months
TABLE 10 ‑ KMP SHAREHOLDINGS AS AT 30 JUNE 2021
NAME
NON–EXECUTIVE DIRECTORS
BALANCE
AT THE START
OF THE YEAR
RECEIVED
DURING THE YEAR
ON VESTING
OTHER
CHANGES DURING
THE YEAR
BALANCE
AT THE END
OF THE YEAR
% OF FIXED
REMUNERATION1
T Poole2
M Bastos
R Caplan2
M Fraser2
S Lewis2
S Ryan
L Strambi
K Vidgen
EXECUTIVE KMP
A Harding
P Bains
G Lippiatt
C McDonald
E McKeiver
110,500
25,947
82,132
70,000
43,025
13,000
5,355
40,000
316,997
51,369
11,935
94,410
56,929
-
-
-
-
-
-
-
-
219,528
74,763
51,024
61,332
63,152
25,000
20,000
-
-
20,000
35,000
37,432
-
40,000
-
5,000
259
-
135,500
45,947
82,132
70,000
63,025
48,000
42,787
40,000
576,525
126,132
67,959
156,001
120,081
103%
76%
147%
114%
103%
86%
77%
66%
125%
60%
36%
87%
65%
1 Assumes Total Directors’ Fees and Fixed Remuneration as at 30 June 2021 and the calculation assumes a share price of $3.72
2 KMP required to meet the minimum shareholding requirement due to length of service in a KMP role being longer than six years
36
AURIZON ANNUAL REPORT 2020–21 9. Non‑Executive Director
Remuneration
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.
Remuneration for Non-Executive Directors
is reviewed by the Committee and set by
the Board, taking into account external
benchmarking. 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 does not
participate in any discussions relating to the
determination of his own remuneration.
Fee Structure
The current annual base fees for the Non-
Executive Directors are set out in Table 11.
The Chairman’s fee is inclusive of fees for
Committee memberships.
In addition, to the base Directors’ fee, the other
Non-Executive Directors receive the applicable
fee component for chairperson and/or
membership responsibilities. These Committee
fees are set out in Table 12.
The base Directors’ fee and Committees fees
include both cash and any contributions to
a fund for the purposes of superannuation
benefits. There are no other retirement
benefits in place for Non-Executive Directors.
Non-Executive Directors do not receive
performance pay.
The actual remuneration outcomes for the
Non-Executive Directors of the Company is
summarised in Table 13. Details of the Non-
Executive Director membership is disclosed on
page 9.
What are the aggregate fees approved
by shareholders?
$2.5 million. The cap does not include
remuneration for performing additional or
special duties for Aurizon at the request of the
Board or reasonable travelling, accommodation
and other expenses of Directors in attending
meetings and carrying out their duties.
TABLE 11 – DIRECTORS’ FEES
DIRECTORS
Chairman
TERM
Directors’ fees (inclusive of
all responsibilities
and superannuation)
FEES
$490,000
Other Non-Executive Directors Directors’ fees (inclusive of
$170,000
all responsibilities
and superannuation)
TABLE 12 – COMMITTEE FEES
NETWORK
BOARD
AUDIT AND RISK
COMMITTEE
$40,000
$20,000
$40,000
$20,000
REMUNERATION
AND PEOPLE
COMMITTEE
SAFETY,
HEALTH AND
ENVIRONMENT
COMMITTEE
$35,000
$17,500
$35,000
$17,500
Chairperson
Member
TABLE 13 – NON‑EXECUTIVE DIRECTORS’ REMUNERATION
SHORT‑TERM
EMPLOYEE BENEFITS
POST‑EMPLOYMENT
BENEFITS
SALARY
AND
FEES1
$’000
NON‑
MONETARY
BENEFITS2
$’000
SUPERANNUATION
$’000
TOTAL
REMUNERATION
$’000
NAME
YEAR
NON‑EXECUTIVE DIRECTORS
T Poole
M Bastos
R Caplan
M Fraser
S Lewis
S Ryan
L Strambi
K Vidgen
Total
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
468
479
205
205
208
200
208
208
222
208
208
115
189
102
205
203
1,913
1,720
‑
3
‑
-
‑
-
‑
-
‑
3
‑
-
‑
-
‑
-
‑
6
22
11
20
20
‑
9
20
20
6
20
‑
1
18
10
20
19
106
110
490
493
225
225
208
209
228
228
228
231
208
116
207
112
225
222
2,019
1,836
1 Salary and fees include any salary sacrificed benefits
2 Non-monetary benefits represent the value of Reportable Fringe Benefits for the respective FBT year
ending 31 March
REMUNERATION REPORT
37
Directors’ Report (continued)
REMUNERATION REPORT
10. Executive Remuneration for Financial Year 2021
The table below details the number and value of movements in equity awards during FY2021.
TABLE 14 – RIGHTS GRANTED AS COMPENSATION
NAME
EXECUTIVE KMP
A Harding
P Bains
G Lippiatt
C McDonald
E McKeiver
INCENTIVE
PLAN
BALANCE AT
BEGINNING
OF YEAR
RIGHTS
AWARDED
DURING THE
YEAR1
VALUE OF
RIGHTS
GRANTED IN
YEAR
VESTED IN
YEAR
EXERCISED
DURING THE
YEAR
FORFEITED IN
YEAR
FORFEITED IN
YEAR
NO.
NO.
$’000
%
NO.
NO.
%
VALUE OF RIGHTS
BALANCE AT END
VALUE PER RIGHT
FORFEITED IN YEAR
OF YEAR
AT GRANT DATE
GRANT
DATE
DATE ON WHICH
GRANT VESTS
EXPIRY
DATE
WEIGHTED FAIR
2017 (3 year)2
2017 (4 year)3
2018
2019 STIAD4
2019
2020 STIAD5
2020
2017 (3 year)2
2017 (4 year)3
2018
2019 STIAD4
2019
2020 STIAD5
2020
2017 (3 year)2
2017 (4 year)3
2018 – Ret6
2018
2019
2020
2017 (3 year)2
2017 (4 year)3
2018
2019 STIAD4
2019
2020 STIAD5
2020
2017 (3 year)2
2017 (4 year)3
2018
2019 STIAD4
2019
2020 STIAD5
2020
295,938
295,938
459,911
170,846
347,454
-
-
114,241
114,241
188,337
55,970
149,494
-
-
37,573
37,573
44,843
62,500
48,799
-
97,921
97,921
152,176
45,224
126,539
-
-
104,449
104,449
165,737
45,970
129,574
-
-
152,134
556,263
654
1,396
50,754
191,469
218
481
16%
(48,682)
(247,256)
84%
100%
(170,846)
16%
(18,793)
(95,448)
84%
100%
(55,970)
16%
(6,181)
(31,392)
84%
100%
(44,843)
170,086
427
16%
(16,108)
(81,813)
84%
100%
(45,224)
16%
(17,182)
(87,267)
84%
100%
(45,970)
61,077
162,068
263
407
31,092
165,956
134
417
$’000
764
304
100
260
278
NO.
-
-
-
-
-
-
-
-
-
-
295,938
459,911
347,454
152,134
556,263
114,241
188,337
149,494
50,754
191,469
37,573
62,500
48,799
170,086
97,921
152,176
126,539
61,077
162,068
104,449
165,737
129,574
31,092
165,956
$
3.09
2.99
2.58
6.03
3.95
4.30
2.51
3.18
3.07
2.56
6.03
3.95
4.30
2.51
3.18
3.07
4.46
2.56
3.95
2.51
3.18
3.07
2.56
6.03
3.95
4.30
2.51
3.18
3.07
2.56
6.03
3.95
4.30
2.51
18-Oct-17
18-Oct-17
18-Oct-18
30-Sept-19
17-Oct-19
28-Sep-20
14-Oct-20
6-Oct-17
6-Oct 17
5-Oct-18
30-Sept-19
17-Oct-19
28-Sep-20
14-Oct-20
6-Oct-17
6-Oct 17
10-Aug-18
5-Oct-18
17-Oct-19
14-Oct-20
6-Oct-17
6-Oct 17
5-Oct-18
30-Sept-19
17-Oct-19
28-Sep-20
14-Oct-20
6-Oct-17
6-Oct 17
5-Oct-18
30-Sept-19
17-Oct-19
28-Sep-20
14-Oct-20
18-Oct-20
18-Oct-21
18-Oct-22
30-Sept-20
17-Oct-23
28-Sep-21
14-Oct-24
6-Oct-20
6-Oct 21
5-Oct-22
30-Sept-20
17-Oct-23
28-Sep-21
14-Oct-24
6-Oct-20
6-Oct 21
13-Aug-20
5-Oct-22
17-Oct-23
14-Oct-24
6-Oct-20
6-Oct 21
5-Oct-22
30-Sept-20
17-Oct-23
28-Sep-21
14-Oct-24
6-Oct-20
6-Oct 21
5-Oct-22
30-Sept-20
17-Oct-23
28-Sep-21
14-Oct-24
31-Dec-20
31-Dec-21
31-Dec-22
31-Dec-20
31-Dec-23
31-Dec-21
31-Dec-24
31-Dec-20
31-Dec-21
31-Dec-22
31-Dec-20
31-Dec-23
31-Dec-21
31-Dec-24
31-Dec-20
31-Dec-21
31-Dec-20
31-Dec-22
31-Dec-23
31-Dec-24
31-Dec-20
31-Dec-21
31-Dec-22
31-Dec-20
31-Dec-23
31-Dec-21
31-Dec-24
31-Dec-20
31-Dec-21
31-Dec-22
31-Dec-20
31-Dec-23
31-Dec-21
31-Dec-24
1 The number of performance rights awarded, as described in Section 7, is a function of the market price (5-day VWAP) at the time of the award, that is, ‘face value’.
For remuneration purposes, Aurizon does not use fair value to determine LTI Awards
2 Details of the vesting outcomes are described in Table 8 in the FY2020 Remuneration Report
3 Details of the vesting outcomes are described in Table 7
4 Deferred STIA component as described in Section 3 and Section 5 of this report and Table 6 in the FY2019 Remuneration Report
5 Deferred STIA component as described in Section 3 and Section 5 of this report and Table 7 in the FY2020 Remuneration Report
6 Retention Award as described in Section 7 in the FY2018 Remuneration Report
3838
AURIZON ANNUAL REPORT 2020–21 10. Executive Remuneration for Financial Year 2021
The table below details the number and value of movements in equity awards during FY2021.
TABLE 14 – RIGHTS GRANTED AS COMPENSATION
NAME
INCENTIVE
PLAN
EXECUTIVE KMP
A Harding
BALANCE AT
BEGINNING
OF YEAR
NO.
RIGHTS
AWARDED
VALUE OF
RIGHTS
EXERCISED
DURING THE
GRANTED IN
VESTED IN
DURING THE
FORFEITED IN
FORFEITED IN
YEAR1
NO.
YEAR
$’000
YEAR
%
YEAR
NO.
YEAR
NO.
YEAR
%
16%
(48,682)
(247,256)
84%
P Bains
16%
(18,793)
(95,448)
84%
G Lippiatt
16%
(6,181)
(31,392)
84%
C McDonald
16%
(16,108)
(81,813)
84%
2017 (3 year)2
2017 (4 year)3
2019 STIAD4
2020 STIAD5
2017 (3 year)2
2017 (4 year)3
2019 STIAD4
2020 STIAD5
2017 (3 year)2
2017 (4 year)3
2018 – Ret6
2017 (3 year)2
2017 (4 year)3
2019 STIAD4
2020 STIAD5
2017 (3 year)2
2017 (4 year)3
2019 STIAD4
2020 STIAD5
2018
2019
2020
2018
2019
2020
2018
2019
2020
2018
2019
2020
2018
2019
2020
295,938
295,938
459,911
170,846
347,454
114,241
114,241
188,337
55,970
149,494
37,573
37,573
44,843
62,500
48,799
97,921
97,921
152,176
45,224
126,539
104,449
104,449
165,737
45,970
129,574
-
-
-
-
-
-
-
-
-
152,134
556,263
654
1,396
50,754
191,469
218
481
170,086
427
61,077
162,068
263
407
31,092
165,956
134
417
100%
(170,846)
100%
(55,970)
100%
(44,843)
100%
(45,224)
100%
(45,970)
E McKeiver
16%
(17,182)
(87,267)
84%
1 The number of performance rights awarded, as described in Section 7, is a function of the market price (5-day VWAP) at the time of the award, that is, ‘face value’.
For remuneration purposes, Aurizon does not use fair value to determine LTI Awards
2 Details of the vesting outcomes are described in Table 8 in the FY2020 Remuneration Report
3 Details of the vesting outcomes are described in Table 7
4 Deferred STIA component as described in Section 3 and Section 5 of this report and Table 6 in the FY2019 Remuneration Report
5 Deferred STIA component as described in Section 3 and Section 5 of this report and Table 7 in the FY2020 Remuneration Report
6 Retention Award as described in Section 7 in the FY2018 Remuneration Report
VALUE OF RIGHTS
FORFEITED IN YEAR
BALANCE AT END
OF YEAR
WEIGHTED FAIR
VALUE PER RIGHT
AT GRANT DATE
GRANT
DATE
DATE ON WHICH
GRANT VESTS
EXPIRY
DATE
$’000
764
304
100
260
278
NO.
-
295,938
459,911
-
347,454
152,134
556,263
-
114,241
188,337
-
149,494
50,754
191,469
-
37,573
-
62,500
48,799
170,086
-
97,921
152,176
-
126,539
61,077
162,068
-
104,449
165,737
-
129,574
31,092
165,956
$
3.09
2.99
2.58
6.03
3.95
4.30
2.51
3.18
3.07
2.56
6.03
3.95
4.30
2.51
3.18
3.07
4.46
2.56
3.95
2.51
3.18
3.07
2.56
6.03
3.95
4.30
2.51
3.18
3.07
2.56
6.03
3.95
4.30
2.51
18-Oct-17
18-Oct-17
18-Oct-18
30-Sept-19
17-Oct-19
28-Sep-20
14-Oct-20
6-Oct-17
6-Oct 17
5-Oct-18
30-Sept-19
17-Oct-19
28-Sep-20
14-Oct-20
6-Oct-17
6-Oct 17
10-Aug-18
5-Oct-18
17-Oct-19
14-Oct-20
6-Oct-17
6-Oct 17
5-Oct-18
30-Sept-19
17-Oct-19
28-Sep-20
14-Oct-20
6-Oct-17
6-Oct 17
5-Oct-18
30-Sept-19
17-Oct-19
28-Sep-20
14-Oct-20
18-Oct-20
18-Oct-21
18-Oct-22
30-Sept-20
17-Oct-23
28-Sep-21
14-Oct-24
6-Oct-20
6-Oct 21
5-Oct-22
30-Sept-20
17-Oct-23
28-Sep-21
14-Oct-24
6-Oct-20
6-Oct 21
13-Aug-20
5-Oct-22
17-Oct-23
14-Oct-24
6-Oct-20
6-Oct 21
5-Oct-22
30-Sept-20
17-Oct-23
28-Sep-21
14-Oct-24
6-Oct-20
6-Oct 21
5-Oct-22
30-Sept-20
17-Oct-23
28-Sep-21
14-Oct-24
31-Dec-20
31-Dec-21
31-Dec-22
31-Dec-20
31-Dec-23
31-Dec-21
31-Dec-24
31-Dec-20
31-Dec-21
31-Dec-22
31-Dec-20
31-Dec-23
31-Dec-21
31-Dec-24
31-Dec-20
31-Dec-21
31-Dec-20
31-Dec-22
31-Dec-23
31-Dec-24
31-Dec-20
31-Dec-21
31-Dec-22
31-Dec-20
31-Dec-23
31-Dec-21
31-Dec-24
31-Dec-20
31-Dec-21
31-Dec-22
31-Dec-20
31-Dec-23
31-Dec-21
31-Dec-24
REMUNERATION REPORT
39
Directors’ Report (continued)
REMUNERATION REPORT
Details of the remuneration paid to Executives are set out below and has been prepared in accordance with the accounting standards.
TABLE 15 – EXECUTIVE REMUNERATION
SHORT‑TERM EMPLOYEE BENEFITS
POST‑
EMPLOYMENT
BENEFITS
LONG‑
TERM
BENEFITS
EQUITY‑
SETTLED
SHARE‑BASED
PAYMENTS
NAME
EXECUTIVE KMP
A Harding
P Bains
G Lippiatt8
C McDonald
E McKeiver
CASH
SALARY
AND FEES1
$’000
A
1,695
1,696
763
764
678
122
645
646
661
662
YEAR
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
CASH
BONUS
$’000
B
1,139
981
469
328
334
61
385
394
274
200
Total Executive KMP
compensation (group)
2021
4,442
2020
3,890
2,601
1,964
1 Cash salary and fees include any salary sacrifice benefits
ANNUAL
LEAVE2
$’000
NON‑
MONETARY
BENEFITS3
$’000
OTHER4
$’000
SUPER‑
ANNUATION5
$’000
LONG‑
SERVICE
LEAVE
$’000
RIGHTS6
$’000
TOTAL
$’000
PROPORTION OF
COMPENSATION
PERFORMANCE
RELATED7 %
REMUNERATION
CONSISTING
OF RIGHTS FOR
THE YEAR %
C
98
51
(28)
22
35
(6)
10
34
(21)
(2)
94
99
D
‑
-
‑
5
‑
-
10
29
4
3
E
515
-
105
-
158
-
109
-
154
-
14 1,041
37
-
F
22
21
25
24
22
7
22
21
22
21
113
94
G
44
32
18
46
68
28
13
24
11
(23)
154
107
H
1,426
1,560
528
543
165
32
482
461
393
477
I
4,939
4,341
1,880
1,732
1,460
244
1,676
1,609
1,498
1,338
2,995
11,454
3,073
9,264
J
62
59
59
50
45
38
58
53
55
51
58
54
K
29
36
28
31
11
13
29
29
26
36
26
33
2
Annual leave represents annual leave accrued or utilised during the financial year and excludes periods of unpaid annual leave. Negative amounts represent the
utilisation of annual leave
3 Non-monetary benefits represent the value of Reportable Fringe Benefits for the respective FBT year ending 31 March
4 In assessing the overall performance for FY2021, the Board acknowledged the receipt of the WIRP fees which were payable following the decision of the Queensland
Court of Appeal. The Board determined that a cash payment would be made to recognise the WIRP fees payable between FY2016 – FY2020 but collected in FY2021.
5 Superannuation amounts represent employers’ contribution to superannuation
6 The accounting expense recognised in relation to 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 28 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. This includes the cost of deferred short-term incentives and long-term incentives
7 The short-term incentives (cash bonus), deferred short-term incentives and long-term incentives (equity settled share-based payments) represent the at-risk
performance related remuneration
8 G Lippiatt was appointed Chief Financial Officer & Group Executive Strategy on 9 March 2020 in an acting capacity, and permanently on 30 June 2020. The FY2020
cash salary and fees (column A) and cash bonus (column B) reflect the salary and STIA attributable to the Chief Financial Officer & Group Executive Strategy role
40
AURIZON ANNUAL REPORT 2020–21 Auditor’s Independence Declaration
As lead auditor for the audit of Aurizon Holdings Limited for the year ended 30 June 2021, 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.
Nadia Carlin
Partner
PricewaterhouseCoopers
Brisbane
9 August 2021
PricewaterhouseCoopers, ABN 52 780 433 757
480 Queen 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.
AUDITOR’S INDEPENDENCE DECLARATION
41
Corporate Governance Statement
Aurizon Holdings Limited and the entities it controls (Aurizon Holdings or Company) believe corporate governance is a critical pillar on which business
objectives and, in turn, shareholder value must be built.
The Board has adopted a suite of charters and key corporate governance documents which articulate the policies and procedures followed by Aurizon
Holdings. These documents are available in the Governance section of the Company’s website aurizon.com.au. These documents are reviewed
periodically to address any changes in governance practices and the law.
This Statement explains how Aurizon Holdings complies with the ASX Corporate Governance Council’s Corporate Governance Principles and
Recommendations – 4th Edition (ASX Principles and Recommendations), and all the practices outlined in this Statement unless otherwise stated, have
been in place for the full reporting period.
This Statement was adopted by the Board on 6 August 2021.
Principle 1: Lay solid foundations for management and oversight
RECOMMENDATION
AURIZON HOLDINGS’ COMPLIANCE WITH RECOMMENDATIONS
1.1 Role of Board and
management which
is set out in a Board
Charter
1.2 Information
regarding election
and re‑election of
Director candidates and
appropriate checks are
undertaken on Director
and senior executive
appointments
1.3 Written agreements
setting out terms of
appointment
1.4 Company Secretary
The Board has established a clear distinction between the functions and responsibilities reserved for the Board
and those delegated to management, which are set out in the Aurizon Holdings Board Charter (Charter).
The Charter also provides an overview of the roles of the Chairman, individual Directors, the Managing Director &
CEO and the Company Secretary.
A copy of the Charter is available in the Governance section of the Company’s website aurizon.com.au.
Aurizon carefully considers the character, experience, education, skill set as well as interests and associations of
potential candidates for appointment to the Board and conducts appropriate checks to verify the suitability of
each candidate prior to their appointment.
Aurizon has appropriate procedures in place to ensure material information relevant to a decision to elect or
re-elect a Director is disclosed in the Notice of Meeting provided to shareholders. Aurizon also conducts checks
in relation to character, experience, education, criminal records and bankruptcy history of each candidate before
appointing a new Director or a senior executive (eg. the Managing Director & CEO and their direct reports).
In addition to being set out in the Charter, the roles and responsibilities of Directors are also formalised in a letter
of appointment which each Director receives and commits to on their appointment. The letters of appointment
specify the term of appointment, time commitment envisaged, expectations in relation to committee work and
any other special duties attached to the position (if any), reporting lines, remuneration arrangements, disclosure
obligations in relation to personal interests, confidentiality obligations, insurance and indemnity entitlements and
details of the Company’s key governance policies, such as the Securities Dealing Policy.
A copy of the Company’s key governance policies can be found on the Company’s website aurizon.com.au.
Each senior executive enters into a service contract which sets out the material terms of employment, including a
description of the senior executive’s position and duties, reporting lines, remuneration arrangements, termination
rights and entitlements. The details and experience of each senior executive (known as the Executive Committee)
is listed in the Leadership section of the Company’s website aurizon.com.au.
The material terms of the appointment of those senior executives who are Key Management Personnel can be
found on page 36 of the Annual Report.
Each Company Secretary is directly accountable to the Board, through the Chairman, for facilitating and advising
on the Company’s corporate governance processes and on all matters to do with the proper functioning of the
Board. Each Director is entitled to access the advice and services of each Company Secretary. The Board Charter
also sets out the responsibilities of the Company Secretary.
In accordance with the Company’s Constitution and Board Charter, the appointment or removal of a Company
Secretary is a matter for the Board as a whole. Details of each Company Secretary’s experience and qualifications
are set out on page 7 of the Annual Report.
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AURIZON ANNUAL REPORT 2020–21 Principle 1: Lay solid foundations for management and oversight (continued)
RECOMMENDATION
AURIZON HOLDINGS’ COMPLIANCE WITH RECOMMENDATIONS
1.5 Diversity
Aurizon Holdings has had a Diversity and Inclusion Policy since 2011 which is reviewed periodically, and which sets
out its objectives including its stated values and reporting practices with respect to inclusion and diversity and is
available in the Governance section of the Company’s website aurizon.com.au.
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Executive Committee movements during FY2021 have resulted in a reduction of female representation in senior
roles from 33.3% to 20%. The Board and Management remain committed to increasing female representation at all
levels within the Company.
The measurable objectives and outcomes for diversity, agreed by the Aurizon Holdings Board for FY2021, are set
out below:
ENTERPRISE MEASURES
FY21 TARGET
FY21 ACTUAL
Gender representation on the Board Minimum 30% (each gender)
38% women/62% men
Representation of women in senior
executive roles (direct reports to
the MD & CEO)
Representation of women in
the workforce
Representation of Aboriginal and
Torres Strait Islander men and
women in Aurizon
30%
23%
5.5%
20%
23%
6.6%
1.6 Board reviews
In compliance with the Workplace Gender Equality Act 2012, Aurizon Holdings submitted its annual compliance
reports to the Workplace Gender Equality Agency in 2021. Aurizon’s most recent Gender Equality Indicators (as
defined in the WGE Act) are available on the Workplace Gender Equality Agency website.
Further details on the Company’s inclusion and diversity performance and activities can be found on the Company
website aurizon.com.au, including within Aurizon’s Sustainability Report.
A performance review is undertaken annually in relation to the Board and the Board Committees. Periodically
the Board reviews the individual performance of the Directors (including the Chairman) and engages a
professional independent consultant experienced in Board reviews to conduct a review of the Board and its
Committees, and the effectiveness of the Board as a whole.
In relation to FY21 the Board conducted an internal review of its Board (and its Chairman) and Committees and
their effectiveness, with the findings presented to Board.
1.7 Management
reviews
Each year the Board sets financial, operational, management and individual targets for the Managing Director
& CEO. The Managing Director & CEO (in consultation with the Board) in turn, sets targets for senior executives.
Performance against these targets is assessed periodically throughout the year, and a formal performance
evaluation for senior executives is completed for the year-end. The Company’s Remuneration and People
Committee reviews the remuneration and performance management frameworks during the year. In addition, the
Managing Director & CEO and each senior executive presents to the Board on the status, progress made and their
performance against their set key deliverables.
A performance evaluation as described was undertaken for all senior executives in FY21. In respect of the
Managing Director & CEO, the evaluation was led by the Chair and discussed with the Remuneration and People
Committee.
Principle 2: Structure the Board to be effective and add value
RECOMMENDATION
AURIZON HOLDINGS’ COMPLIANCE WITH RECOMMENDATIONS
2.1 Nominations
Committee
The Nomination & Succession Committee comprises three members (including the Chairman), all of whom are
Independent Non-Executive Directors. Details of the membership of the Nomination & Succession Committee,
including the names and qualifications of the Committee members, are set out on pages 4 to 7 of the Annual Report.
The number of meetings held and attended by each member of the Nomination & Succession Committee during the
financial year are set out on page 9 of the Directors’ Report within the Annual Report.
The Charter governing the conduct of the Nomination & Succession Committee is reviewed annually and is available in
the Governance section of the Company’s website aurizon.com.au. Aurizon also has in place a policy on election and
appointment of Non-Executive Directors, which is reviewed annually.
2.2 Board skills
The skills listed below have been identified as the optimum skills Aurizon Holdings seeks to achieve across its Board
membership. The Aurizon Holdings Board possesses a good blend of these skills.
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43
Corporate Governance Statement
(continued)
Principle 2: Structure the Board to be effective and add value (continued)
RECOMMENDATION
AURIZON HOLDINGS’ COMPLIANCE WITH RECOMMENDATIONS
General
› Board experience
› Senior management experience
› ASX-listed company governance
› Risk management.
Industry
› Transport and logistics
› Mining and resources
› Government relations
› Safety, health and environment.
Technical
› Finance and accounting
› Regulatory
› Corporate strategy
› Capital allocation including
acquisitions and divestments
› Information and operational technology
› Capital markets
› Engineering and construction
› Human resources.
2.3 Disclose
independence and
length of service
Further details regarding the skills and experience of each Director are included on pages 4 to 7 of the Report.
Details regarding which Directors are considered independent and the length of their service are set out on page 4
of the Annual Report.
In FY2021, Mr Caplan will have served as a Director of Aurizon Holdings for over 10 years. The Board remains
satisfied that the interests of security holders are well served as Mr Caplan continues to bring independent
judgment and deep operational understanding of the Company to bear on issues before the Board.
Only the Managing Director & CEO is not considered independent, by virtue of the role being an Executive of
the Company.
2.4 Majority of
Directors independent
In accordance with the Board Charter, the majority of Directors are considered to be independent, and Directors abstain
from participating in discussion or voting on matters in which they have a material personal interest. Details regarding
which Directors are considered independent and the length of their service are set out on page 4 of the Annual Report
and in response to Recommendation 2.3 above..
2.5 Chair independent
The Chairman, Tim Poole, is an Independent Non-Executive Director. The role of Managing Director & CEO is
performed by another Director.
2.6 Induction
and professional
development
Further details regarding the Directors are set out on pages 4 to 7 of the Annual Report.
An induction process including appointment letters and ongoing education exists to promote early, active and
relevant involvement of new and existing members of the Board.
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 operational sites to gain an understanding of the Company’s operating environment.
During the year, Directors receive accounting policy updates, especially around the time the Board considers the
half-year and full-year financial statements.
The Board also receives briefings from time-to-time on legal, accounting, regulation, developments in
communication and human resource management and technology.
Directors are encouraged and given the opportunity to broaden their knowledge of the business by visiting offices
and sites in different locations. During the financial year, Directors made visits to operational sites in Queensland and
virtually in New South Wales.
Principle 3: Instil a culture of acting lawfully, ethically and responsibly
RECOMMENDATION
AURIZON HOLDINGS’ COMPLIANCE WITH RECOMMENDATIONS
3.1 The values of
the Company are
articulated and
disclosed
3.2 Code of Conduct
The Company has a clear set of core values. These core values are Safety, People, Integrity, Customer and
Excellence. A description of these values is set out in the Company’s Code of Conduct and the Company’s Annual
Report. The Company’s values, their articulation and acknowledgment are embedded in all meetings of the Board,
Board Committee and the Managing Director & CEO’s Executive meetings and form part of the performance and
remuneration framework of the Company.
The Board has a Code of Conduct for its Directors, senior executives and employees, a copy of which is available in
the Governance section of the Company’s website aurizon.com.au. The Company’s Code of Conduct forms part of
the induction of Directors as well as new employees. The code is reviewed periodically by the Board. The Board is
informed of any material breaches of the code either through the whistleblower reports or the governance reports
that are presented from time to time to the Company’s Audit, Governance and Risk Management Committee.
3.3 Whistleblower
Policy
The Company has a Whistleblower Policy, a copy of which is available in the Governance section of the Company’s
website aurizon.com.au and the Board, through the Audit, Governance & Risk Management Committee, reviews
reports on concerns raised or material breaches under the Whistleblower Policy.
3.4 Anti‑Bribery and
Corruption Policy
The Company has an Anti-Bribery and Corruption Policy a copy of which is available in the Governance section of the
Company’s website aurizon.com.au and the Board, through the Audit, Governance and Risk Management Committee,
receives an update annually on any material breaches of this policy through the Governance report to the Committee.
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AURIZON ANNUAL REPORT 2020–21 Principle 4: Safeguard the integrity of corporate reports
RECOMMENDATION
AURIZON HOLDINGS’ COMPLIANCE WITH RECOMMENDATIONS
4.1 Audit Committee
The Audit, Governance & Risk Management Committee comprises four members, all of whom are Independent
Non-Executive Directors. Details of the membership of the Audit, Governance & Risk Management Committee,
including the names and qualifications of the Committee members, are set out on pages 4 to 7 of the Annual Report.
In addition to the Audit, Governance & Risk Management Committee members, the Managing Director & CEO, CFO,
Head of Risk & Assurance, external auditors and each Company Secretary attend the Audit, Governance & Risk
Management Committee meetings.
The number of meetings held and attended by each member of the Audit, Governance & Risk Management
Committee during the financial year are set out on page 9 of the Annual Report.
The Audit, Governance & Risk Management Committee Charter is reviewed annually and is available on the
Company’s website aurizon.com.au. Among other things, the Audit, Governance & Risk Management Committee
reviews the processes that validate the Directors' Report and the Annual Report. The Board, as a whole, has
oversight of other corporate reporting, such as investor presentations prepared for full-year and half-year results
briefings or at other times.
4.2 CEO and CFO
certification of
financial statements
The Board has obtained a written assurance from the Managing Director & CEO and CFO that the declaration
provided under Section 295A of the Corporations Act 2001 (and for the purposes of Recommendation 4.2) is
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.
4.3 Disclose processes
to verify the integrity
of periodic corporate
reports released to
the market
The periodic corporate reports, being the half-year and full-year financial statements, including the Company’s
Annual Report, are underpinned by a certification process whereby each Group Executive and finance partner for
each Business Unit responds to set questionnaires and signs a certification. This process provides verification and
sign off for the Managing Director & CEO and CFO then to provide a signed representation letter to the external
auditors and also a signed declaration to the Board that supports that the accounts provide a true and fair view, and
that there is integrity in the statements that the financial statements comply with the Corporations Act 2001 and
relevant Accounting standards. The certification process is reviewed annually with the view that it remains current
having regard to any changes in the Corporations Act 2001, accountings standards or governance.
In FY2021, the Company also provided quarterly above rail volume reports to the market. These reports are verified
by each of the respective business unit Group Executives.
For other types of periodic corporate reports (including the annual Director’s Report), the Company conducts an
internal review and verification process to ensure that such reports, are materially accurate, balanced and provide
investors with appropriate information. Where applicable, the relevant reports will be approved in accordance with
the Company's Disclosure and Communication Policy.
The annual Sustainability Report draws upon information that is verified by respective Business Units through
existing verification processes as described above, and undergoes an internal review process. In addition, Aurizon’s
greenhouse gas emissions data (scope 1, 2 and 3) provided in the Sustainability Report also undergoes an external,
independent assurance process. A statement of limited assurance is provided in the annual Sustainability Report.
Principle 5: Make timely and balanced disclosure
RECOMMENDATION
AURIZON HOLDINGS’ COMPLIANCE WITH RECOMMENDATIONS
5.1 Disclosure and
Communications
Policy
Aurizon Holdings has a Disclosure and Communications Policy which sets out the processes and practices to ensure
compliance with the continuous disclosure requirements under the ASX Listing Rules and the Corporations Act 2001.
Aurizon Holdings has guidelines to assist officers and employees of the Company comply with the Company’s
Disclosure and Communications Policy. A copy of the policy is available on the Company’s website aurizon.com.au.
5.2 Material Market
Announcements
The Board receives a copy of all announcements under Listing Rule 3.1 immediately prior to those announcements
being made to the ASX (noting that the Board may not approve or authorise all announcements made to the ASX).
5.3 New and
substantive investor or
analyst presentation
materials to be released
to the ASX ahead of
the presentation
Aurizon releases new and substantive presentations to the ASX prior to them being presented. This will typically
occur at the half-year and full-year results briefings, prior to the Annual General Meeting, and when an investor day
is held.
Where practicable, shareholders are provided with the opportunity to participate in such presentations, for example,
by providing dial-in details.
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CORPORATE GOVERNANCE STATEMENT
45
Corporate Governance Statement
(continued)
Principle 6: Respect the rights of security holders
RECOMMENDATION
AURIZON HOLDINGS’ COMPLIANCE WITH RECOMMENDATIONS
6.1 Information
on website
6.2 Investor relations
programs
6.3 Facilitate
and encourage
participation at
meetings of security
holders
6.4 Resolutions
decided by Poll
6.5 Option to receive
communications
electronically
Aurizon Holdings keeps investors informed of its corporate governance, financial performance and prospects via
announcements to the ASX and Aurizon's website. Investors can access copies of all announcements to the ASX,
notices of meetings, annual reports, investor presentations, webcasts and/or transcripts of those presentations and
a key event calendar via the ‘Investors’ tab. Investors can access general information regarding the Company and
the structure of its business under the ‘Company’, ‘What we deliver’ and ‘Sustainability’ tabs.
Aurizon Holdings conducts regular market briefings including in relation to its half-year and full-year results
announcements, investor days, site visits, and attends regional and industry-specific conferences in order to
facilitate effective two-way communication with investors and other financial markets participants. Access
to senior executives and operational management is provided to investors and analysts at these events, with
separate one-on-one or group meetings offered, whenever possible. The presentation material provided at these
events is sent to the ASX prior to commencement and subsequently posted on the ‘Investors’ tab on Aurizon’s
website, including the webcast and transcript, if applicable.
Aurizon Holdings uses technology to facilitate the participation of security holders in meetings including webcasting
of the Annual General Meeting. In 2020, Aurizon Holdings hosted the Annual General Meeting virtually giving
security holders the opportunity to attend, ask questions and vote online or by proxy.
Shareholders are encouraged to participate and are given an opportunity to ask questions of the Company and its
auditor at the Annual General Meeting.
All resolutions put to shareholders at the Company’s Annual General Meeting are determined by Poll.
Aurizon provides shareholders the option to receive communications from, and send communications to, the Company
and the share registry electronically.
Principle 7: Recognise and manage risk
RECOMMENDATION
AURIZON HOLDINGS’ COMPLIANCE WITH RECOMMENDATIONS
7.1 Risk Committee
Aurizon Holdings’ Audit, Governance & Risk Management Committee oversees the process for identifying and managing
material risks faced by the Company in accordance with the Aurizon Risk Management Framework (Risk Policy),
and undertakes the functions of a risk committee as set out in the ASX Principles and Recommendations.
7.2 Annual risk review
Further details regarding the Committee, its membership, charter, and the number of meetings held during the
financial year and attendence at those meetings, is set out in response to Recommendation 4.1 and on page 9
of the Annual Report.
The Board reviews Aurizon Holdings’ Enterprise Risk Management Framework and Appetite at least annually to
approve updates, where required. In FY2021, the Board considered updates to and reviewed the Enterprise Risk
Management Framework. The Audit, Governance & Risk Management Committee also monitors management’s
performance against the Company’s Enterprise Risk Management Framework, including whether it is operating
within the risk appetite set by the Board. The Executive Committee regularly reviews and updates the enterprise
risk profile to satisfy itself that Aurizon is operating with due regard to the risk appetite set by the Board. The
Company’s Risk and Assurance Function is responsible for providing oversight of the risk management framework
and assurance on the management of significant risks to the Managing Director & CEO and the Board.
7.3 Internal audit
The Company has an Assurance (internal audit) function that operates under a Board-approved Internal Audit Charter.
The Assurance function is independent of management and the external auditor and is overseen by the Audit,
Governance & Risk Management Committee. In accordance with the Committee Charter, the Committe’s role includes
making recommendations to the Board in relation to the appointment or removal of the Head of Risk & Assurance.
The Head of Risk & Assurance provides ongoing Assurance reports to the Audit, Governance & Risk Management
Committee, as well as an annual assessment of the adequacy and effectiveness of the Company’s control processes
and risk management procedures.
Aurizon Holdings discloses material exposures to environmental, social and governance (ESG) risks and associated
risk management strategies through our annual Sustainability Report. During FY2021, the Company published
its seventh Sustainability Report (for the period ended 30 June 2020). A copy of this report is available in the
Sustainability section of the Company’s website aurizon.com.au.
Aurizon Holdings’ FY2021 Sustainability Report will be published in October 2021. This will be the fifth reporting
period in which Aurizon incorporates recommendations from the Financial Stability Board’s (FSB) Final Report:
Recommendation of the Task Force on Climate-related Financial Disclosures (TCFD), released in June 2017.
Aurizon Holdings acknowledges and supports the objectives of the Paris Agreement to find a pathway to limiting
global warming to below 2°C. Aurizon Holdings also acknowledges the objectives of the Paris Agreement to pursue
efforts to limit the temperature increase even further to 1.5°C. Climate change is affecting a wide range of industries
globally, resulting in financial implications. Transition risks, related to energy policy, regulation, technology and
market shifts (that are necessary to achieve the transition to a low-carbon economy) will affect the demand for the
commodities that Aurizon Holdings hauls.
7.4 Sustainability risks
46
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AURIZON ANNUAL REPORT 2020–21
Principle 7: Recognise and manage risk (continued)
RECOMMENDATION
AURIZON HOLDINGS’ COMPLIANCE WITH RECOMMENDATIONS
7.4 Sustainability risks
(continued)
Physical risks related to extreme weather events will also continue to affect Aurizon Holdings through supply chain
disruptions. The Company’s primary channel for engaging with stakeholders on all ESG matters, including our climate-
related disclosures, is through the publication of our Sustainability Report, which is updated and issued annually.
During FY2021, Aurizon Holdings published its inaugural Climate Strategy and Action Plan which consolidated
Aurizon’s position on climate change underpinned by long-term strategies, actions and targets to mitigate climate
risk and leverage emerging opportunities.
A copy of the Company’s Climate Strategy and Action Plan is available in the Sustainability section of the
Company’s website.
Aurizon Holdings commits to supporting and respecting the protection of internationally proclaimed human
rights, as set out in the Universal Declaration of Human Rights and the 10 principles of the United Nations
Global Compact. Aurizon Holdings understands its responsibility to respect human rights and has committed to
providing transparency on any risks that exist in the Company's supply chain and how they are being addressed. In
accordance with legislation, in FY2021, the Company published its first Modern Slavery Statement, which described
the modern slavery risks associated with its business activities and actions taken to address those risks. A copy of
the Modern Slavery Statement is available in the Sustainability section of the Aurizon website.
Principle 8: Remunerate fairly and responsibly
RECOMMENDATION
AURIZON HOLDINGS’ COMPLIANCE WITH RECOMMENDATIONS
8.1 Remuneration
Committee
Aurizon Holdings’ remuneration function is performed by the Remuneration and People Committee, comprising
four members, all of whom are Independent Non-Executive Directors. Details of the membership of the
Remuneration and People Committee, including the names and qualifications of the Committee members, are
set out on pages 4 to 7 of the Annual Report.
8.2 Disclosure
of Executive and
Non‑Executive
Director remuneration
policy
The number of meetings held and attended by each member of the Remuneration and People Committee during
the financial year are set out on page 9 of the Annual Report.
The Charter governing the conduct of the Remuneration and People Committee is reviewed annually and is
available in the Governance section of the Company’s website aurizon.com.au.
The Company seeks to attract and retain high performing Directors and senior executives with appropriate skills,
qualifications and experience to add value to the Company and fulfil the roles and responsibilities required.
It reviews requirements for additional capabilities at least annually.
Executive remuneration is to reflect performance and accordingly, remuneration is structured with a fixed
component and a performance-based component.
Non-Executive Directors are paid fixed fees for their services in accordance with the Company’s Constitution.
The Chairman’s fee is inclusive of fees for Committee membership and the other Non-Executive Directors are paid a
fixed base fee plus Committee fees, as applicable. Further detail is set out in the Remuneration Report on page 37.
The Company has in place a Share Holding and Retention Policy which applies to Non-Executive Directors, the
Managing Director & CEO and the direct reports of the Managing Director & CEO.
Further details regarding remuneration and share retention policies, and the remuneration of senior executives and
Non-Executive Directors, are set out on pages 26 to 40 of the Annual Report. The Company also has in place a
Related Party Transaction Policy. The policy and disclosures under that policy are reviewed annually by the Board.
During the year, there were no agreements entered for the provision of consulting or similar services by a Director
or senior executive, or by a related party of a Director or senior executive.
P
P
8.3 Policy on hedging
equity incentive
schemes
Aurizon Holdings’ Executives must not enter into any hedge arrangement in relation to any performance rights they
may be granted or otherwise entitled to under an incentive scheme or plan, prior to exercising those rights or, once
exercised, while the securities are subject to a transfer restriction.
P
For the purposes of this policy, hedging includes the entry into any transaction, arrangement or financial product
which operates to limit the economic risk of a security holding in the Company and includes financial instruments
such as equity swaps and contracts for differences. The term ‘Executive’ is broadly defined to include the
Managing Director & CEO and his direct reports and any other person entitled to participate in an Aurizon Holdings
performance rights plan. Further details regarding the Company’s hedging policy are set out in the Company’s
Securities Dealing Policy which is available on the Governance section of the website aurizon.com.au.
Principle 9: Additional recommendations
RECOMMENDATION
AURIZON HOLDINGS’ COMPLIANCE WITH RECOMMENDATIONS
9.1 – 9.3 Additional
recommendations
Recommendations 9.1 – 9.3 of the ASX Principle and Recommendations do not apply to Aurizon Holdings, and did not at any
stage during FY21, and are therefore not relevant to the period.
CORPORATE GOVERNANCE STATEMENT
47
Financial Report
for the year ended 30 June 2021
FINANCIAL STATEMENTS
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
About this report
– Significant judgements and estimates
– Key events and transactions for the reporting period
Results for
the year
Operating assets
and liabilities
Capital and
financial risk
management
Group
structure
Other
notes
1.
Segment
information
6. Trade and other
receivables
14. Capital risk
management
19. Associates and
joint ventures
2. Revenue
7.
Inventories
15. Dividends
20. Material
3. Expenses
4. Income tax
5. Earnings
per share
16. Equity
17. Borrowings
18. Financial risk
management
8. Property, plant
and equipment
9. Intangible
assets
10. Other assets
11. Trade and other
payables
12. Provisions
13. Other liabilities
subsidiaries
21. Parent entity
disclosures
22. Acquisition of
subsidiaries and
interests in joint
ventures
23. Discontinued
operations
24. Assets
classified as
held for sale
25. Notes to the
consolidated
statement of
cash flows
26. Related party
transactions
27. Key
Management
Personnel
28. Share-based
payments
29. Auditor’s
remuneration
30. Summary of
other significant
accounting
policies
Page 49
Page 50
Page 51
Page 52
Page 53
Page 54
Page 54
Page 54
Unrecognised
items and events
after reporting date
31. Commitments
and
contingencies
32. Events
occurring after
the reporting
period
SIGNED REPORTS
Directors’ declaration
Independent auditors’ report to the members of Aurizon Holdings Limited
ASX INFORMATION
Non-IFRS Financial Information
Page 99
Page 100
Page 107
48
AURIZON ANNUAL REPORT 2020–21
Consolidated income statement
for the year ended 30 June 2021
Revenue from continuing operations
Other income
Total revenue and other income
Employee benefits expense
Energy and fuel
Track access
Consumables
Depreciation and amortisation
Impairment losses
Other expenses
Share of net profit/(loss) of associates and joint ventures accounted for using the equity method
Operating profit
Finance income
Finance expenses
Net finance costs
Profit before income tax
Income tax expense
Profit from continuing operations after tax
Profit from discontinued operations after tax
Profit for the year attributable to owners of Aurizon Holdings Limited
Earnings per share for profit from continuing operations attributable to the ordinary equity holders
of Aurizon Holdings Limited
Basic earnings per share
Diluted earnings per share
Earnings per share for profit attributable to the ordinary equity holders of Aurizon Holdings Limited
Basic earnings per share
Diluted earnings per share
The above consolidated income statement should be read in conjunction with the accompanying notes.
Notes
2
3
3
3
4
23
5
5
2021
$m
3,005.9
21.6
3,027.5
(836.2)
(191.4)
(81.1)
(416.2)
(579.1)
(3.1)
(9.4)
0.3
911.3
4.1
(149.4)
(145.3)
766.0
(159.3)
606.7
123.6
730.3
Cents
32.5
32.4
39.1
39.0
2020
$m
3,061.6
108.4
3,170.0
(791.6)
(231.3)
(107.2)
(440.7)
(558.6)
(5.7)
(20.4)
(0.1)
1,014.4
2.5
(151.0)
(148.5)
865.9
(260.8)
605.1
10.8
615.9
Cents
31.0
30.9
31.5
31.5
49
FINANCIAL REPORT
Consolidated statement
of comprehensive income
for the year ended 30 June 2021
Profit for the year
Other comprehensive income/(expense)
Items that may be reclassified to profit or loss:
Changes in the fair value of cash flow hedges
Income tax relating to changes in fair value of cash flow hedges
Exchange differences on translation of foreign operations
Reclassification to profit or loss on disposal of shares in associate
Other comprehensive income/(expense) for the year, net of tax
Notes
16(b)
16(b)
16(b)
16(b)
Total comprehensive income for the year attributable to owners of Aurizon Holdings Limited
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
2021
$m
730.3
22.1
(6.6)
(0.1)
1.8
17.2
747.5
2020
$m
615.9
(35.7)
10.7
–
–
(25.0)
590.9
50
AURIZON ANNUAL REPORT 2020–21 Consolidated balance sheet
as at 30 June 2021
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Current tax receivables
Other assets
Assets classified as held for sale
Total current assets
Non-current assets
Inventories
Derivative financial instruments
Property, plant and equipment
Intangible assets
Other assets
Investments accounted for using the equity method
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Current tax liabilities
Provisions
Other liabilities
Liabilities directly associated with assets classified as held for sale
Total current liabilities
Non-current liabilities
Borrowings
Derivative financial instruments
Deferred tax liabilities
Provisions
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.
Notes
2021
$m
2020
$m
6
7
18(a)
10
24
7
18(a)
8
9
10
19
11
17
18(a)
12
13
17
18(a)
4(c)
12
13
16(a)
16(b)
148.8
483.8
150.4
0.1
8.5
15.3
5.0
811.9
45.9
125.0
8,483.2
193.9
78.6
26.1
8,952.7
9,764.6
269.1
59.0
0.6
–
296.9
91.6
–
717.2
29.3
460.1
145.8
0.2
–
14.8
65.1
715.3
38.1
220.8
8,537.1
187.5
70.5
2.7
9,056.7
9,772.0
323.0
657.6
35.1
83.4
271.3
101.3
0.7
1,472.4
3,679.0
2,949.6
66.6
705.9
64.2
257.1
4,772.8
5,490.0
4,274.6
206.6
3,410.5
657.5
4,274.6
45.7
605.3
64.0
277.3
3,941.9
5,414.3
4,357.7
506.6
3,395.1
456.0
4,357.7
51
FINANCIAL REPORT Consolidated statement of changes in equity
for the year ended 30 June 2021
Balance at 1 July 2020
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 2021
Balance at 1 July 2019
Adjustment on adoption of AASB 16
Total equity at the beginning of the financial year
Profit for the year
Other comprehensive expense
Total comprehensive income/(expense) 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 2020
Attributable to owners of Aurizon Holdings Limited
Contributed
equity
$m
Notes
Reserves
$m
Retained
earnings
$m
16(b)
16(a)
15
16(b)
16(b)
16(a)
15
16(b)
506.6
3,395.1
–
–
–
(300.0)
–
–
(300.0)
206.6
906.6
–
906.6
–
–
–
–
17.2
17.2
–
–
(1.8)
(1.8)
3,410.5
3,418.5
–
3,418.5
–
(25.0)
(25.0)
(400.0)
(0.4)
–
–
(400.0)
506.6
–
2.0
1.6
3,395.1
456.0
730.3
–
730.3
–
(528.8)
–
(528.8)
657.5
352.3
1.6
353.9
615.9
–
615.9
–
(513.8)
–
(513.8)
456.0
Total
equity
$m
4,357.7
730.3
17.2
747.5
(300.0)
(528.8)
(1.8)
(830.6)
4,274.6
4,677.4
1.6
4,679.0
615.9
(25.0)
590.9
(400.4)
(513.8)
2.0
(912.2)
4,357.7
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
52
AURIZON ANNUAL REPORT 2020–21 Consolidated statement of cash flows
for the year ended 30 June 2021
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Income taxes paid
Principal elements of lease receipts
Net cash inflow from operating activities from continuing operations
Net cash (outflow)/inflow from operating activities from discontinued operations
Net cash inflow from operating activities
Cash flows from investing activities
Payment for acquisition of subsidiary (net of cash acquired) and investment in joint venture
Payments for property, plant and equipment
Proceeds from sale of business and shares held in associate
Proceeds from sale of property, plant and equipment
Payments for intangibles
Interest paid on qualifying assets
Distributions received from associates
Net cash outflow from investing activities from continuing operations
Net cash inflow from investing activities from discontinued operations
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Payments of transaction costs related to borrowings
Principal elements of lease payments
Interest paid
Payments for buy-back of ordinary shares
Payments of transaction costs for buy-back of ordinary shares
Payments for shares acquired for share-based payments
Dividends paid to Company’s shareholders
Net cash outflow from financing activities from continuing operations
Net cash inflow/(outflow) from financing activities from discontinued operations
Net cash outflow from financing activities
Net decrease in cash and cash equivalents from continuing operations
Net increase in cash and cash equivalents from discontinued operations
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of the financial year
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Notes
25
23
22
3
23
15
23
23
2021
$m
3,326.3
(1,884.4)
4.2
(175.6)
6.5
1,277.0
(23.0)
1,254.0
(63.5)
(496.6)
10.0
38.5
(18.2)
(3.7)
0.4
(533.1)
168.8
(364.3)
1,130.6
(889.0)
(5.4)
(16.4)
(155.3)
(300.0)
(0.3)
(5.7)
(528.8)
(770.3)
–
(770.3)
(26.4)
145.8
29.3
0.1
148.8
2020
$m
3,407.6
(2,032.1)
2.8
(146.5)
5.7
1,237.5
9.9
1,247.4
(24.5)
(492.3)
165.3
15.8
(32.1)
(3.9)
–
(371.7)
0.4
(371.3)
702.0
(486.0)
(4.8)
(14.6)
(151.1)
(400.0)
(0.4)
(3.2)
(513.8)
(871.9)
–
(871.9)
(6.1)
10.3
25.2
(0.1)
29.3
53
FINANCIAL REPORT Notes to the consolidated financial statements
30 June 2021
About this report
Aurizon Holdings Limited (the Company) is a for-profit entity for the
purpose of preparing this financial report and is domiciled in Australia.
The consolidated financial report comprises the financial statements
of the Company and its subsidiaries (collectively referred to as the
Group or Aurizon).
The financial report is a general purpose financial report which:
› has been prepared in accordance with the requirements of the
Corporations Act 2001, Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board
(AASB) and International Financial Reporting Standards (IFRS) issued
by the International Accounting Standards Board (IASB);
› has been prepared under the historical cost convention, as modified by
the revaluation of financial assets and liabilities (including derivative
instruments) at fair value;
› is presented in Australian dollars, with values rounded to the nearest
$100,000 unless otherwise stated, in accordance with the ASIC
Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191;
› presents reclassified comparative information where required for
consistency with current year presentation;
› adopts all new and amended Accounting Standards and Interpretations
issued by the AASB that are relevant to the operations of the Group
and effective for reporting periods beginning on or after 1 July 2020;
and
› has applied the Group accounting policies consistently to all periods
presented.
The general purpose financial report for the Group for the year ended
30 June 2021 (FY2021) has been authorised for issue in accordance with
a resolution of the Directors on 9 August 2021. The Directors have the
power to amend and reissue the financial report.
SIGNIFICANT JUDGEMENTS AND ESTIMATES
The preparation of the financial statements requires management
to exercise judgement in applying the Group’s accounting policies.
It also requires the use of estimates and assumptions of assets,
liabilities, income and expense.
The areas involving a higher degree of judgement or complexity are
set out below and in more detail in the related notes:
Revenue
Useful lives of property, plant and equipment
Impairment of property, plant and equipment
Impairment of cash generating units (CGUs)
and goodwill
Note
2
8
8
9
Other accounting policies
Significant and other accounting policies that summarise the
measurement basis used, and are relevant to an understanding of the
financial statements, are provided throughout the notes to the financial
statements.
The notes to the financial statements
The following notes include information which is material and relevant
to the operations, financial position and performance of the Group.
Information is considered material and relevant due to its size and nature
or if the information:
› is important for understanding the Group’s current period results;
› provides an explanation of significant changes in the Group’s business —
for example acquisitions or divestments; or
› relates to an aspect of the Group’s operations that are important to its
future performance.
Key events and transactions for the
reporting period
(a) Access revenue
2017 Access Undertaking
The Weighted Average Cost of Capital (WACC) applied under the 2017 Access
Undertaking is 5.90%, increasing to 6.30% upon completion of an independent
capacity assessment of the Central Queensland Coal Network (CQCN). In the
event that a capacity deficit is identified, the WACC increase to 6.30% will
commence when Aurizon Network Pty Ltd (a wholly owned subsidiary of the
Group) notifies relevant parties of proposed options to address the deficit.
The Independent Expert continues the development of the Initial Capacity
Assessment Report (ICAR) with the assistance of external consultants. The
Independent Expert has advised that the ICAR is expected to be completed
at the end of September 2021.
The 2017 Access Undertaking assumed the independent capacity assessment
would be complete by 1 March 2020 and therefore, a WACC of 6.30% applied
for FY2021. As a result of the delay in the independent capacity assessment,
there has been an over-collection of access charges in FY2021 (the difference
between 5.90% and 6.30%). The over-collection of access charges in FY2021
has been partially offset by lower revenue resulting from reduced actual
volumes (net of Take-or-Pay triggering in four rail network systems). A net
under or over recovery of access charges by system after adjustments forms
part of the revenue adjustment amount (revenue cap). The FY2021 net
revenue cap adjustment is a recovery by customers of up to $16.0 million
through tariff adjustments in FY2023. The FY2021 revenue cap adjustment
is subject to approval by the Queensland Competition Authority (QCA).
Access revenue for the period has been recognised based on the 2017
Access Undertaking applying a WACC rate of 6.30% (2020: average WACC
rate of 6.03%).
54
AURIZON ANNUAL REPORT 2020–21 (d) Debt refinancing
During the year, Aurizon Network Pty Ltd:
› issued a $500.0 million 10-year fixed Medium-Term Note (Network
AMTN 4) maturing 2 September 2030;
› repaid a $525.0 million fixed Medium-Term Note (Network AMTN 1)
maturing 28 October 2020;
› reduced the $850.0 million Bilateral Facility maturing 5 June 2023 by
$100.0 million to $750.0 million;
› issued a $75.0 million 10.5-year fixed Private Placement (Network
AMTN 5) maturing 15 December 2031; and
› re-financed an existing $100.0 million Working Capital Facility in
December 2020 until June 2021, which was subsequently extended to
June 2022 at a limit of $75.0 million.
During the year, Aurizon Finance Pty Ltd:
› added $175.0 million to the existing $450.0 million Bilateral Facilities in
November 2020, increasing total limits across the facilities to
$625.0 million. The existing $450.0 million facilities mature
26 November 2023. The additional facilities mature 5 June 2023
($50.0 million), 3 November 2023 ($50.0 million) and 3 November
2025 ($75.0 million);
› issued a $500.0 million seven-year fixed Medium-Term Note (Finance
AMTN 1) maturing 9 March 2028; and
› re-financed an existing $150.0 million Working Capital Facility in
December 2020 until June 2021, which was subsequently extended to
June 2022 at a limit of $125.0 million.
(e) On-market share buy-back scheme
The Group completed an on-market share buy-back program on
15 March 2021. The Group acquired 73.9 million shares for total
consideration of $300.0 million.
Key events and transactions for
reporting period (continued)
(a) Access revenue (continued)
Wiggins Island Rail Project (WIRP)
On 1 September 2020, the Queensland Court of Appeal affirmed the
Supreme Court decision in the Group’s favour and the WIRP customers
did not seek leave to appeal that decision. As a result, the Group was
able to charge customers non-regulated WIRP fees with effect from
March 2016 and commenced billing in November 2020.
The WIRP customers previously initiated other disputes under
their respective WIRP Deeds which were the subject of an Expert
Determination in February 2019. The Expert’s Determination was
issued on 4 June 2019 and found that the WIRP fee should be partially
reduced. Aurizon Network Pty Ltd lodged proceedings against the WIRP
customers in the Supreme Court of Queensland on 18 December 2020
to appeal the Expert’s Determination and the WIRP customers filed their
defence on 1 March 2021.
The amount of WIRP fees ultimately payable by WIRP customers will be
dependent upon finalisation of the appeal of the Expert’s Determination
and finalisation of a cost variation factor related to WIRP project costs.
WIRP fees of $60.3 million, including $48.9 million of historical fees
(relating to FY2016 – FY2020), have been recognised in FY2021
(2020: $nil).
(b) Disposals
› On 26 March 2021, the Group completed the sale of the Acacia Ridge
Intermodal Terminal to Pacific National. The net gain on sale before
income tax of $161.1 million has been classified as a significant item in
discontinued operations.
› On 26 May 2021, the Group sold its shares held in Aquila Resources
Limited to Mineral Resources Limited for $10.0 million. As a result of
the sale, the Group has recognised a tax benefit of $67.8 million for
a previously unrecognised deferred tax asset associated with the
impairment of the carrying amount of the shares held in FY2016. The
net gain on sale before income tax of $8.2 million has been classified as
a significant item in earnings before income tax (EBIT). The net income
tax benefit of $65.3 million has been recognised as a significant item in
profit after tax.
(c) Acquisition of subsidiaries and interests in joint ventures
During the year, the Group:
› acquired a 41.67% investment in Ox Mountain Limited (UK registered),
a maintenance software developer and provider, for consideration of
$22.4 million on 28 August 2020. The investment is accounted for
using the equity method of accounting; and
› acquired 100% of the issued shares in ConPorts Pty Ltd (renamed to
Aurizon Port Services NSW Pty Ltd), a shiploading services provider
in Newcastle, for consideration of $42.7 million on 31 December 2020.
The acquisition includes long-term leases at the Port of Newcastle with
shiploading facilities adjacent to rail lines.
Refer to note 22 for further information.
55
Notes to the consolidated financial statements30 June 2021 (continued)FINANCIAL REPORT Results for the year
IN THIS SECTION
Results for the year provides segment information and a
breakdown of individual line items in the consolidated income
statement that the Directors consider most relevant, including a
summary of the accounting policies, judgements and estimates
relevant to understanding these line items.
1
Segment information
2 Revenue
3 Expenses
4
Income tax
5 Earnings per share
Page 57
Page 60
Page 62
Page 63
Page 64
56
AURIZON ANNUAL REPORT 2020–21
Notes to the consolidated financial statements
30 June 2021 (continued)
1 Segment information
The Group determines and presents operating segments on a business unit
structure basis as this is how the results are reported internally and how
the business is managed. The Managing Director & CEO and the Executive
Committee (the chief operating decision-makers) assess the performance
of the Group based on underlying earnings before net interest, tax,
depreciation and amortisation (EBITDA) and underlying EBIT.
The following segment information has been presented for continuing
operations only. Refer to note 23 for the financial results of the divested
Intermodal business.
(a) Description of reportable segments
The following summary describes the operations of each reportable
segment:
Network
This segment manages the provision of access to, and operation of, the
CQCN, provision of maintenance and renewal of Network assets.
Coal
This segment provides transport of coal from mines in Queensland and
New South Wales to end customers and ports.
Bulk
This segment provides integrated supply chain services, including rail
and road transportation, port services and material handling for a range
of mining, metal, industrial and agricultural customers throughout
Queensland, New South Wales and Western Australia.
Other
This segment includes provision of services to internal and external
customers and central costs not allocated such as Board, Managing
Director & CEO, Company Secretary, strategy and investor relations.
FINANCIAL REPORT 57
1 Segment information (continued)
(b) Segment information
The results of the reportable segments are set out as below:
30 June 2021
External revenue
Revenue from external customers
Services revenue
Track access
Freight transport
Other services
Other revenue
Total revenue from external customers
Internal revenue
Services revenue
Track access
Freight transport
Other services
Total internal revenue
Total external and internal revenue
Other income
Total revenue and other income
Internal revenue elimination
Consolidated revenue and other income
Continuing EBITDA (Underlying)1
Depreciation and amortisation
Continuing EBIT (Underlying)1
Significant adjustments (note 1(c))
EBIT1
Net finance costs
Profit before income tax from continuing operations
1 Refer to page 107 for Non-IFRS Financial Information.
Network
$m
Coal
$m
Bulk
$m
Other
$m
Total continuing
operations
$m
721.3
–
9.3
31.2
761.8
457.6
–
5.5
463.1
1,224.9
–
1,224.9
445.1
1,163.6
–
3.4
1,612.1
–
–
–
–
1,612.1
–
1,612.1
–
594.8
20.3
1.3
616.4
–
17.4
1.0
18.4
634.8
–
634.8
–
–
6.0
9.6
15.6
–
–
3.4
3.4
19.0
13.4
32.4
848.8
(339.7)
509.1
533.3
(208.7)
324.6
139.9
(27.9)
112.0
(39.8)
(2.8)
(42.6)
1,166.4
1,758.4
35.6
45.5
3,005.9
457.6
17.4
9.9
484.9
3,490.8
13.4
3,504.2
(484.9)
3,019.3
1,482.2
(579.1)
903.1
8.2
911.3
(145.3)
766.0
58
Notes to the consolidated financial statements30 June 2021 (continued)AURIZON ANNUAL REPORT 2020–21 1 Segment information (continued)
(b) Segment information (continued)
Network
$m
Coal
$m
Bulk
$m
Other
$m
Total continuing
operations
$m
30 June 2020
External revenue
Revenue from external customers
Services revenue
Track access
Freight transport
Other services
Other revenue
Total revenue from external customers
Internal revenue
Services revenue
Track access
Freight transport
Other services
Total internal revenue
Total external and internal revenue
Other income
Total revenue and other income
Internal revenue elimination
Consolidated revenue and other income
Continuing EBITDA (Underlying)1
Depreciation and amortisation
Continuing EBIT (Underlying)1
Significant adjustments (note 1(c))
EBIT1
Net finance costs
Profit before income tax from continuing operations
1 Refer to page 107 for Non-IFRS Financial Information.
617.4
–
18.7
29.0
665.1
514.3
–
9.1
523.4
1,188.5
–
1,188.5
798.1
(329.3)
468.8
512.8
1,260.3
–
2.2
1,775.3
–
–
–
–
1,775.3
–
1,775.3
616.4
(205.8)
410.6
–
568.8
23.1
1.0
592.9
–
14.6
1.3
15.9
608.8
–
608.8
–
–
16.2
12.1
28.3
–
–
9.4
9.4
37.7
3.0
40.7
110.1
(20.2)
89.9
(57.0)
(3.3)
(60.3)
1,130.2
1,829.1
58.0
44.3
3,061.6
514.3
14.6
19.8
548.7
3,610.3
3.0
3,613.3
(548.7)
3,064.6
1,467.6
(558.6)
909.0
105.4
1,014.4
(148.5)
865.9
59
Notes to the consolidated financial statements30 June 2021 (continued)FINANCIAL REPORT
1 Segment information (continued)
(c) Significant adjustments
The Group’s underlying results differ from the statutory results.
The exclusion of certain items permits a more appropriate and
meaningful analysis of the Group’s underlying performance on a
comparative basis.
Net gain on sale of shares in Aquila (before
income tax)
Net gain on sale of Rail Grinding business
(before income tax)
2021
$m
2020
$m
8.2
–
8.2
–
105.4
105.4
Total significant adjustments from continuing operations net of tax is
$73.5 million (2020: $73.8 million) and is reconciled in the Non-IFRS
Financial Information on page 107.
(d) Customer disclosure
The nature of the Group’s business is that it enters into long-term
contracts with key customers. Two customers each contribute more than
10% of the Group’s total revenue as detailed below:
(a) Disaggregation of revenue from contracts
with customers
The Group derives revenue from the provision of services over time.
Revenue is disaggregated by the Group’s reportable segments, refer
to note 1(b).
(b) Contract assets and liabilities
(i) Contract assets
The Group has recognised the following revenue-related contract assets:
2021
$m
2020
$m
Current
Contract assets for freight transport
2.1
1.3
Non-current
Contract assets for freight transport
37.1
21.9
Contract assets primarily represent incremental costs incurred to secure
new, or extensions to existing, customer contracts. These amounts
are capitalised and amortised against revenue as the performance
obligations are satisfied over time. No provision for impairment of
contracts assets has been recognised, refer to accounting policy in
note 6 (2020: $nil).
2020
$m
2021
credit rating
2020
credit rating
Within one year
522.2
438.2
960.4
A
BBB+
A
BBB+
Later than one year but not later than five years
Later than five years
2021
$m
2.1
32.9
4.2
39.2
2020
$m
1.3
16.3
5.6
23.2
2021
$m
530.5
418.8
949.3
Customer 1
Customer 2
Total
2 Revenue
(ii) Contract liabilities
The Group has recognised the following revenue-related
contract liabilities:
Current
Advances for track access
Advances for freight transport
Advances for other services
Non-current
Advances for freight transport
Advances for other services
2021
$m
2020
$m
26.3
4.8
25.4
56.5
11.8
123.2
135.0
–
2.0
26.5
28.5
14.4
136.0
150.4
Contract liabilities primarily represent amounts received from customers
as advances for track access and the provision of services under
agreements for mine-specific infrastructure. These amounts are deferred
and earned over the term of the agreements using the output method as
performance obligations are satisfied.
The Group recognises revenue primarily from the provision
of access to the CQCN and the provision of freight haulage
services across Australia.
The Group derives the following types of revenue:
Services revenue
Track access
Freight transport
Other services
Other revenue
2021
$m
2020
$m
1,166.4
1,758.4
35.6
45.5
1,130.2
1,829.1
58.0
44.3
Total revenue from continuing operations
3,005.9
3,061.6
60
Notes to the consolidated financial statements30 June 2021 (continued)AURIZON ANNUAL REPORT 2020–21
2 Revenue (continued)
(b) Contract assets and liabilities (continued)
(ii) Contract liabilities (continued)
Within one year
Later than one year but not later than five years
Later than five years
2021
$m
56.5
99.8
35.2
191.5
2020
$m
28.5
109.7
40.7
178.9
The increase in contract liabilities represents revenue received in advance
for non-regulated track access charges, offset by revenue recognised for
prepayments from future access charges in previous financial years.
(iii) Revenue recognised in relation to contract liabilities
The following table shows how much of the revenue recognised in the
current reporting period relates to carried-forward contract liabilities.
Revenue recognised that was included in the
contract liability balance at the beginning of
the year
Advances for freight transport
Advances for other services
2021
$m
2020
$m
4.5
26.5
31.0
0.4
26.8
27.2
(iv) Unsatisfied performance obligations
The Group has a number of long-term contracts to provide services to
customers in future periods. Revenue is recognised on an as-invoiced
basis, except for contracts that have a contract asset or a contract
liability balance. For all other contracts, the right to consideration from a
customer corresponds directly with the Group’s performance obligations
completed to date.
Long-term track access and freight transport contracts are considered
to be a series of annual performance obligations that are satisfied within
each financial year. Any amounts received in advance are recognised
over the term of the agreement as performance obligations are satisfied.
The Group applies the practical expedient in paragraph 121 of AASB 15
Revenue from Contracts with Customers (AASB 15) and does not disclose
information on the transaction price allocated to performance obligations
that are unsatisfied.
All other track access and freight transport contracts for periods of
one year or less are billed monthly based on the services provided.
As permitted under AASB 15 the transaction price allocated to these
unsatisfied performance obligations are not disclosed.
SIGNIFICANT JUDGEMENTS AND ESTIMATES
Take-or-Pay revenue
Aurizon Network Pty Ltd is able to recover in the financial year part
of an Allowable Revenue shortfall through Take-or-Pay clauses which
may trigger when annual volumes railed are less than the regulatory
forecast. Take-or-Pay is calculated based on management’s judgement
of below rail cause and above rail operator and/or mine cancellations.
This judgement impacts the calculation of Take-or-Pay and the
receivable recognised in the year that the contractual railings were not
achieved. Take-or-Pay revenue of $77.5 million has been recognised at
30 June 2021 (2020: $25.6 million).
Wiggins Island Rail Project (WIRP) Access Revenue
On 1 September 2020, the Queensland Court of Appeal affirmed
the Supreme Court decision in the Group’s favour and the WIRP
customers did not seek leave to appeal that decision. As a result, the
Group was able to charge customers non-regulated WIRP fees with
effect from March 2016 and commenced billing in November 2020.
The WIRP customers previously initiated other disputes under
their respective WIRP Deeds which were the subject of an Expert
Determination in February 2019. The Expert’s Determination was
issued on 4 June 2019 and found that the WIRP fee should be partially
reduced. Aurizon Network Pty Ltd lodged proceedings against the
WIRP customers in the Supreme Court of Queensland on 18 December
2020 to appeal the Expert’s Determination and the WIRP customers
filed their defence on 1 March 2021.
The amount of WIRP fees ultimately payable by WIRP customers
will be dependent upon finalisation of the appeal of the Expert’s
Determination and finalisation of a cost variation factor related to the
WIRP project costs. WIRP fees of $60.3 million, including $48.9 million
of historical fees (relating to FY2016 – FY2020), have been recognised
in FY2021 (2020: $nil).
Freight Transport Contract Modifications
Modifications to existing agreements where there is also a new
agreement put in place are assessed based on the facts and substance
of the individual contractual arrangements, and will be accounted
for as either combined or separate contracts in accordance with
AASB 15. There is significant judgement exercised in determining if a
modification to an existing agreement should be treated as a combined
or a separate contract. Judgement, including expected volumes to
be railed in individual contract years and whether the contract price
represents the market price in the respective contract period, is applied
in determining the calculation of contract assets or contract liabilities
recorded. These judgements impact the timing of revenue recognised
over the term of the individual contract.
(c) Accounting policies
The Group recognises revenue as performance obligations are satisfied.
Revenue includes the provision of track access and freight transport
services as described below.
(i) Track access
Track access revenue is generated from the provision of access to, and
operation of, the CQCN under an approved Access Undertaking. Track
access revenue is recognised over time as access to the rail network
is provided and is measured on a number of operating parameters
including volumes hauled applied to regulator approved tariffs.
61
Notes to the consolidated financial statements30 June 2021 (continued)FINANCIAL REPORT (iii) Capitalisation of customer contract costs
Where incremental costs are incurred to secure a new contract or an
extension to an existing customer contract, these costs are capitalised
as a contract asset and amortised against revenue as the performance
obligations are satisfied over time.
Where an arrangement contains a significant financing component,
the transaction price is adjusted to reflect the effects of the financing
component, and a contract asset is recognised and amortised against
revenue as the performance obligations are satisfied over time.
3 Expenses
Profit before income tax from continuing operations includes the
following specific expenses:
2021
$m
2020
$m
Employee benefits expense
Salaries, wages and allowances including on-costs
753.2
707.5
Defined contribution superannuation expense
Defined benefit superannuation expense
Redundancies
Depreciation and amortisation
Depreciation of property, plant and equipment
Amortisation of intangibles
59.4
9.7
13.9
57.9
10.2
16.0
836.2
791.6
547.8
31.3
579.1
530.8
27.8
558.6
Finance expenses
Interest and finance charges paid/payable
149.8
152.3
Discounting on land rehabilitation provision
Interest paid on lease liability
Amortisation of capitalised borrowing costs
Amortisation of AMTN 2 fair value adjustment
Counterparty credit risk adjustments
Capitalised interest paid on qualifying assets
0.2
5.1
4.2
(2.4)
(3.8)
153.1
(3.7)
149.4
–
5.1
3.8
(2.4)
(3.9)
154.9
(3.9)
151.0
2 Revenue (continued)
(c) Accounting policies (continued)
(i) Track access (continued)
The tariffs charged are determined with reference to the total allowable
revenue, applied to the regulatory approved annual volume forecast for
each rail system. At each balance date, track access revenue includes an
amount of revenue for which performance obligations have been met
under the respective contract but have not yet settled. These amounts
are recognised as trade receivables.
Where annual volumes railed are less than the regulatory forecast,
Take-or-Pay may trigger. Take-or-Pay is recognised as revenue and a
receivable in the year that the contractual railings were not achieved as
the related performance obligations have been satisfied.
Regulated access revenue is subject to a revenue cap mechanism that
serves to ensure the rail network recovers its Allowable Revenue over the
regulatory period. A revenue adjustment event results in the under or over
recovery of regulatory access revenue (net of Take-or-Pay revenue) for a
financial year being recognised in the accounting revenues of the second
financial year following the financial year in which the event occurred as
per the Access Undertaking.
Access revenue for the financial year has been recognised based on the
2017 Access Undertaking applying a WACC rate of 6.30% (2020: average
WACC rate of 6.03%). Refer to key events and transactions for the
reporting period for further information.
A contract liability is recorded for revenue received in advance of
satisfying a performance obligation and is subsequently recognised in
profit and loss as revenue, as the performance obligation is satisfied during
the term of the contract.
(ii) Freight transport
Freight transport revenue is recognised as the relevant performance
obligations are satisfied over time, being the provision of freight
transport services.
Freight transport revenue is billed monthly in arrears and recognised
at rates specified in each contractual agreement, and adjusted for the
amortisation of customer contract assets or contract liabilities. At each
balance date, freight transport revenue includes an amount of revenue
for which performance obligations have been met under the respective
contract but have not yet settled. These amounts are recognised as trade
receivables.
A contract modification is a separate contract if the scope of services is
increased by distinct additional services and the total price increases by
the market rate for those services over the remaining contract period.
Where the distinct services don’t indicate market prices, weighted-
average contract rates are applied, which may result in the recognition of
a contract asset or a contract liability that amortise over the term of the
individual contract. Modifications to existing agreements where there is
also a new agreement put in place are assessed based on the facts and
substance of the individual contractual arrangements, and are accounted
for as either combined or separate contracts.
A contract asset is recorded for revenue when the Group does not
have an unconditional right to invoice the customer for performance
obligations satisfied. A contract liability is recorded for revenue received
in advance of satisfying a performance obligation and is recognised over
the term of the contract.
62
Notes to the consolidated financial statements30 June 2021 (continued)AURIZON ANNUAL REPORT 2020–21 4 Income tax
Income tax comprises current and deferred tax
recognised in profit or loss or directly in equity or other
comprehensive income.
(a) Income tax expense
Current tax
Deferred tax
Current tax relating to prior periods
Deferred tax relating to prior periods
Income tax expense is attributable to:
2021
$m
153.4
60.2
(31.5)
29.6
211.7
2020
$m
186.6
81.2
1.1
(3.7)
265.2
(c) Deferred tax balances
The table below outlines the items which comprise the deferred tax
balances:
Deferred tax assets
Inventories
Provisions and accruals
Contract liabilities and income received
in advance
Financial instruments
Lease liabilities
Other items
Total deferred tax assets
2021
$m
2020
$m
0.2
112.2
4.4
63.6
41.8
10.6
232.8
9.1
106.3
9.0
100.9
43.0
15.4
283.7
Set-off against deferred tax liabilities
(232.8)
(283.7)
Net deferred tax assets
–
–
Profit from continuing operations
159.3
260.8
Deferred tax liabilities
Profit from discontinued operations
(note 23(b))
Deferred income tax expense included in
income tax expense comprises:
Decrease in deferred tax assets
Increase in deferred tax liabilities
Property, plant and equipment
848.4
768.2
52.4
211.7
4.4
265.2
43.6
46.2
89.8
11.8
65.7
77.5
Intangible assets
Financial instruments
Other items
Total deferred tax liabilities
Set-off of deferred tax assets
Net deferred tax liabilities
32.9
37.5
19.9
33.3
66.3
21.2
938.7
889.0
(232.8)
(283.7)
705.9
605.3
(b) Numerical reconciliation of income tax expense to prima
facie tax payable
The table below outlines the items which comprise deferred tax expense:
Profit before income tax expense from
continuing operations
Profit before income tax expense from
discontinued operations
Tax at the Australian tax rate of 30%
(2020: 30%)
Tax effect of amounts which are not deductible
(taxable) in calculating taxable income:
Capital losses not recognised
Unrecognised deferred tax asset arising
from previous impairment1
Other
Adjustments for current tax of prior periods
2021
$m
2020
$m
Inventories
Provisions and accruals
766.0
865.9
Customer contracts
176.0
942.0
15.2
881.1
Contract liabilities and income received in
advance
Financial instruments
Lease liabilities
282.6
264.3
Other items
–
(67.8)
(1.2)
(1.9)
211.7
1.1
–
2.4
(2.6)
265.2
Decrease in deferred tax assets
Property, plant and equipment
Intangible assets
Financial instruments
Other items
Increase in deferred tax liabilities
Net deferred income tax expense
1 The Group sold its shares in Aquila Resources Limited on 26 May 2021. As a
result of the sale, the Group has recognised a tax benefit of $67.8 million relating
to an unrecognised deferred tax asset associated with the impairment of the
carrying amount of the shares held in FY2016. The FY2021 net income tax
benefit (including the tax effect of the net gain on sale) is $65.3 million.
2021
$m
8.9
(5.6)
–
4.6
30.7
4.1
0.9
43.6
76.7
(0.4)
(28.8)
(1.3)
46.2
89.8
2020
$m
(2.1)
2.6
7.3
3.2
(5.1)
1.8
4.1
11.8
38.0
20.4
7.0
0.3
65.7
77.5
63
Notes to the consolidated financial statements30 June 2021 (continued)FINANCIAL REPORT
Notes to the consolidated financial statements
30 June 2021 (continued)
4 Income tax (continued)
(d) Accounting policies
The tax position is calculated based on the tax rates and laws enacted
or substantively enacted at the reporting date, in the relevant operating
jurisdiction. The tax laws and accounting standards have different rules
in respect of timing and recognition of income and expense, resulting
in temporary differences (which reverse over time) and non-temporary
differences (which do not reverse over time or are temporary differences
that do not meet the recognition criteria under the accounting
standards).
Income tax expense is calculated as the profit/(loss) before tax,
multiplied by the applicable tax rate, and adjusted for non-temporary
differences. Income tax expense includes a current tax and deferred tax
component and is recognised in the profit or loss, except to the extent
that it relates to items recognised in equity or in other comprehensive
income.
(i) Current tax
Current tax is the expected tax payable for the period, and any
adjustment to tax payable in respect of prior periods. Current tax
includes both temporary differences and non-temporary differences.
The positions taken in tax returns with respect to situations in which
applicable tax regulation is subject to interpretation are periodically
evaluated and provisions are provided where appropriate based on
amounts expected to be paid to the tax authorities.
Current tax assets and liabilities are offset where the Group has a legally
enforceable right to offset and intends either to settle on a net basis, or
to realise the assets and settle the liabilities simultaneously.
(ii) Deferred tax
Deferred tax represents taxes to be paid or deductions available in future
income years and any adjustment to deferred tax amounts in respect
of prior periods. Deferred tax is recognised on temporary differences
arising between the tax bases of assets and liabilities, and their carrying
amounts in the consolidated financial statements, except:
› when arising on the initial recognition of goodwill;
› when arising from the initial recognition of assets or liabilities in a
transaction that is not a business combination and that affects neither
accounting or taxable profit; or
› where it is not probable that future amounts will be available to utilise
those temporary differences or carried-forward tax losses.
(iii) Offsetting deferred tax balances
Deferred tax assets and liabilities are offset where there is a legally
enforceable right to offset and when the deferred tax balances relate to
taxes levied by the same tax authority.
(iv) Tax consolidation legislation
The Company and its wholly owned Australian entities elected to form a
tax consolidated group, and are taxed as a single entity. The head entity
of the tax consolidated group is Aurizon Holdings Limited.
The Company and the 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 addition to its own current and deferred tax amounts, the Company
also recognises the current tax liabilities (or assets) and the deferred tax
assets arising from unused tax losses and unused tax credits assumed
from entities in the tax consolidated group.
The entities have entered into tax sharing and tax funding agreements.
The tax funding agreement sets out the funding obligations of members
of the tax consolidated group in respect of income tax amounts and
requires payments to the Company equal to the current tax liability
assumed by the Company. The Company is required to make payments
equal to the current tax asset or deferred tax asset arising from unused
tax losses and tax credits assumed from a subsidiary member. The tax
funding arrangement results in the Company recognising a current
inter-entity receivable/payable equal to the tax liability/asset assumed.
The tax sharing agreement limits the joint and several liability of the
wholly owned entities in the case of a default by the Company.
5 Earnings per share
Earnings per share (EPS) is the amount of post-tax
profit attributable to each share. Basic EPS is calculated
by dividing the profit attributable to the owners of the
Company by the weighted average number of ordinary
shares outstanding. Diluted EPS is calculated by dividing
the profit attributable to the owners of the Company by the
weighted average number of ordinary shares outstanding
after adjustment for the effects of all dilutive potential
ordinary shares.
Earnings per share for continuing operations
Basic earnings per share
Diluted earnings per share
Earnings per share
Basic earnings per share
Diluted earnings per share
Weighted average number of ordinary
shares for basic earnings per share
Dilution due to rights issued pursuant to
performance rights plans
2021
Cents
2020
Cents
32.5
32.4
39.1
39.0
31.0
30.9
31.5
31.5
2021
Number
‘000
2020
Number
‘000
1,868,553
1,952,895
1,909
2,918
Weighted average number of ordinary shares
for diluted earnings per share
1,870,462
1,955,813
64 AURIZON ANNUAL REPORT 2020–21
Operating assets
and liabilities
IN THIS SECTION
Operating assets and liabilities provides information about the
working capital of the Group and major balance sheet items,
including the accounting policies, judgements and estimates
relevant to understanding these items.
6 Trade and other receivables
7
Inventories
8 Property, plant and equipment
9
Intangible assets
10 Other assets
11 Trade and other payables
12 Provisions
13 Other liabilities
Page 66
Page 66
Page 67
Page 71
Page 73
Page 73
Page 74
Page 75
FINANCIAL REPORT
FINANCIAL REPORT
65
Notes to the consolidated financial statements
30 June 2021 (continued)
6 Trade and other receivables
7 Inventories
2021
$m
2020
$m
Current
Trade receivables
Provision for impairment
Net trade receivables
Other receivables1
329.0
(2.4)
326.6
157.2
483.8
344.4
115.7
460.1
1 Other receivables include revenue for services performed but not yet invoiced
under contracts including external construction contracts, Take-or-Pay and
annual GAPE fees.
Current
352.1
Raw materials and stores – at cost
(7.7)
Provision for inventory obsolescence
Non-current
Raw materials and stores – at cost
Provision for inventory obsolescence
2021
$m
2020
$m
160.0
(9.6)
150.4
59.0
(13.1)
45.9
155.9
(10.1)
145.8
50.5
(12.4)
38.1
The Group has recognised a net reduction of $5.3 million (2020:
net increase of $1.9 million) in the provision for impairment of trade
receivables, including $3.0 million (2020: $nil) written off in the
financial year.
(a) Accounting policies
Inventories includes infrastructure and rollingstock items held in
centralised stores, workshops and depots. Items expected to be
consumed after more than 12 months are classified as non-current.
Inventories are valued at the lower of cost and net realisable value.
The cost of individual items of inventory are determined using weighted
average cost.
The Group recognises a provision for inventory obsolescence based
on an assessment of damaged stock, slow-moving stock and stock
that has become obsolete. The amount of the provision for inventory
obsolescence is recognised in profit or loss in other expenses.
(a) Accounting policies
(i) Trade receivables
Trade receivables are initially recognised at fair value and subsequently at
amortised cost using the effective interest rate method. Trade receivables
are generally due for settlement within 31 days and are therefore
classified as current.
(ii) Provision for impairment
The collectability of trade and other receivables is reviewed on an
ongoing basis. Individual debts which are known to be uncollectable are
written off when identified.
The Group recognises a provision for impairment based on expected
lifetime losses of trade receivables. The amount of the provision for
impairment is recognised in profit or loss in other expenses.
(b) Credit risks related to receivables
In assessing an appropriate provision for impairment of trade receivables,
consideration is given to historical experience of bad debts, the aging
of receivables, knowledge of debtor insolvency and individual account
assessment.
The Group’s trade receivables exhibit similar credit risk characteristics
and exposures. Customer credit risk is managed in accordance with the
procedures and controls set out in the Group’s credit risk management
policy. Credit limits are established for all customers based on external
and internal credit rating criteria. For some trade receivables, the Group
may also obtain security in the form of guarantees, deeds of undertaking
or letter of credit which can be called upon if the counterparty is in
default under the terms of the agreement.
66 AURIZON ANNUAL REPORT 2020–21
Notes to the consolidated financial statements
30 June 2021 (continued)
8 Property, plant and equipment
Assets under
construction
$m
Land
$m
Buildings
$m
Plant and
equipment
$m
Rollingstock
$m
Infrastructure
$m
Right-
of-use
$m
Total
$m
2021
Opening net book amount
301.1
124.3
211.4
270.1
2,178.9
5,356.9
94.4
8,537.1
Additions
Transfers between asset classes
Acquisition of subsidiary
Disposals
Adjustments to leased assets
Assets classified as held for sale
Depreciation
Impairment
482.3
(514.0)
0.1
–
–
(1.2)
–
–
–
2.5
–
–
31.3
9.3
(2.8)
(2.2)
–
–
–
–
–
–
(12.7)
(1.5)
Closing net book amount
268.3
124.0
235.6
–
31.8
10.7
(2.3)
–
–
(41.5)
(0.3)
268.5
0.7
163.9
–
(3.6)
–
–
(169.1)
–
–
281.9
2.7
(5.2)
–
(1.7)
(311.8)
(1.3)
3.4
–
9.7
–
(0.3)
–
486.4
(2.6)
32.5
(16.1)
(0.3)
(2.9)
(12.7)
(547.8)
–
(3.1)
2,170.8
5,321.5
94.5
8,483.2
At 30 June 2021
Cost
Accumulated depreciation
and impairment
268.3
124.0
494.2
699.3
5,432.7
8,177.3
133.3
15,329.1
–
–
(258.6)
(430.8)
(3,261.9)
(2,855.8)
(38.8)
(6,845.9)
Net book amount
268.3
124.0
235.6
268.5
2,170.8
5,321.5
94.5
8,483.2
2020
Opening net book amount
281.7
138.9
266.1
285.7
2,202.0
5,361.9
–
8,536.3
Adjustment for change in
accounting policy
–
–
(48.9)
Restated opening net book amount
281.7
138.9
217.2
Additions
Transfers between asset classes
Acquisition of subsidiary
Disposals
494.6
(473.9)
–
–
–
0.3
–
(1.1)
Assets classified as held for sale
(1.3)
(13.8)
Depreciation1
Impairment
–
–
–
–
Closing net book amount
301.1
124.3
–
10.5
6.1
(2.6)
(7.2)
(12.6)
–
211.4
–
285.7
–
20.5
11.6
(1.9)
(0.1)
(43.8)
(1.9)
270.1
–
–
102.2
53.3
2,202.0
5,361.9
102.2
8,589.6
–
139.4
–
(0.1)
–
(162.4)
–
2,178.9
–
303.3
0.9
(5.4)
(5.8)
0.3
–
14.6
(4.7)
–
494.6
0.1
33.2
(15.8)
(28.2)
(298.0)
(14.2)
(531.0)
–
(3.8)
(5.7)
5,356.9
94.4
8,537.1
At 30 June 2020
Cost
Accumulated depreciation
and impairment
301.1
124.3
461.1
670.1
5,284.7
7,917.6
120.0
14,878.9
–
–
(249.7)
(400.0)
(3,105.8)
(2,560.7)
(25.6)
(6,341.8)
Net book amount
301.1
124.3
211.4
270.1
2,178.9
5,356.9
94.4
8,537.1
1 Depreciation includes continuing operations $530.8 million (note 3) and discontinued operations $0.2 million (note 23).
67
FINANCIAL REPORT Notes to the consolidated financial statements
30 June 2021 (continued)
8 Property, plant and equipment (continued)
SIGNIFICANT JUDGEMENTS AND ESTIMATES
Useful lives
Context of judgements
Aurizon’s business is primarily linked to the demand for and supply of
Australian commodities, almost entirely destined for export markets in
Asia. As part of Aurizon’s Strategy in Uncertainty framework, scenario
analysis is used to test market drivers and evaluate capital, fleet and
haulage opportunities and sustainability in the context of climate
change risks. A key component of this analysis is understanding the
drivers of demand and supply for commodities transported. This
process considers short-term impacts as well as risks that emerge
over the medium to long term, where the timing and magnitude
is less certain. In addition to the fundamental drivers of Australian
commodities, more subjective factors are also considered including
government policy and trade considerations.
Useful lives of infrastructure assets
The useful lives of infrastructure assets are determined based on
the expected engineering life, capped at the remaining term of
the infrastructure leases and are reviewed annually. Infrastructure
predominantly relates to CQCN assets. Aurizon Network Pty Ltd
(Network) is responsible for the provision of access to, and operation
of, the below rail regulated CQCN which connects 40 mines to five
export terminals as well as to domestic customers.
Access to the rail network is managed under a process approved by
the QCA. The QCA determines Network’s access pricing based on the
estimated value of our assets, which is known as the Regulatory Asset
Base (RAB). Economic depreciation considered for regulatory purposes
within Allowable Revenue varies from depreciation applied for statutory
reporting purposes as a result of an accelerated depreciation profile
and differences in applied asset lives. For example, under the 2017
Access Undertaking, the QCA determined that the existing depreciation
approach would be retained, including 20-year rolling depreciation for
assets included in the RAB post 1 July 2009.
Demand for Australian coal is dependent on seaborne-traded markets
which are increasingly concentrated in Asia. Metallurgical coal is
primarily used to produce steel and thermal coal is used as a heat
source in energy generation. Around 70% of volumes hauled across
the network is considered to be metallurgical coal (remaining 30%
thermal coal), with demand linked to Asian steel production. Therefore,
the useful life of infrastructure assets will be impacted primarily by the
future demand for Australian metallurgical coal which is dependent
on economic development in Asia including steel intensive growth,
alternatives to steel and current steel production methods, competing
supply of metallurgical coal, changes in government policies (for
example, domestic/imported coal preferences and net-zero emission
targets) and technological advancements.
During the period, major import nations of Australian coal have set
net-zero emissions targets and include China (2060), Japan (2050) and
South Korea (2050). India, who is also a significant export market for
Australian coal, is yet to set a long-term emissions target.
In performing its annual review of the appropriateness of the useful
lives of infrastructure assets, management monitors and assesses a
range of indicators of global coal demand over the short, medium, and
long term. Indicators include the following:
› Asian GDP growth and steel-related demand
› crude steel production method and scrap metal availability
› global supply competitiveness and Australian supply constraints for
metallurgical coal
› climate policy targets and how they are intended to be met at both
a country and corporate level
› the viability of new and alternative technologies that are developed
to reduce emissions targets such as carbon capture, utilisation
and storage (CCUS), and hydrogen-based steel making, that may
positively or negatively impact future coal demand
› the ability of customers to gain regulatory approvals and raise
funding to support development of their resource base.
The impact of the above indicators and other factors that may emerge
on global coal demand and Australian coal supply are uncertain at
this time and difficult to predict. Consequently, there is a risk that the
engineering useful lives assigned to infrastructure assets may require
revision to an alternate benchmark in the future, resulting in a change in
depreciation rates on a prospective basis. As an indication of sensitivity,
if the useful life of assets with a remaining life greater than 50 years
were capped at 60 to 70 years, annual depreciation would increase by
$4.0 – $9.0 million per annum.
Useful lives of rollingstock
Rollingstock assets are predominantly used by the Coal and Bulk
business units to transport bulk commodities to end customers and
ports. The useful lives of rollingstock assets are determined based on
the expected engineering life and are reviewed annually.
In performing the annual review of the appropriateness of the useful
lives of rollingstock assets, management monitors and assesses a range
of indicators influencing demand and supply of rollingstock over the
short, medium and long term. Indicators include the following:
› long-term market and commodity demand under six scenarios
developed under our Strategy in Uncertainty framework
› our contract position in key markets
› flexibility of fleet capacity, including the ability to shift standard
gauge fleet between New South Wales and Western Australia (WA),
narrow gauge fleet between Queensland and WA, and between
commodities within states
› competitors fleet mix and their associated investment profile over time
› the risk of obsolescence as alternative technologies are developed
› continuous improvement in fleet investment strategies such as
those predicated on condition-based and preventative maintenance
approaches, as well as advancements in component change-out models.
The impact of the above indicators, and other factors that may emerge,
on demand and supply of rollingstock are uncertain. Consequently,
there is a risk (both upside and downside) that the engineering useful
lives assigned to rollingstock assets may require revision to an alternate
benchmark in the future, resulting in a change in depreciation rates on
a prospective basis.
Impairment tests for property, plant and equipment
Property, plant and equipment is reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount
may not be recoverable. The level of rollingstock required is determined
with consideration of the Group’s Enterprise Fleet Plan (EFP). Key
assumptions include forecast volumes, productivity and contingent
fleet requirements. There is a risk that the key assumptions applied
in the EFP may be impacted by the effects of indicators described
in the useful lives judgements, and do not reflect actual rollingstock
requirements. For further information on impairment test for cash-
generating units refer to note 9.
68
AURIZON ANNUAL REPORT 2020–21 Notes to the consolidated financial statements
30 June 2021 (continued)
8 Property, plant and equipment
(continued)
(a) Leases
Right-of-use assets
The Group primarily leases buildings with terms mostly ranging from
one to 20 years. The leases generally provide the Group with the right
to renewal at which time the lease terms are renegotiated. The Group
applies the following practical expedients permitted by the standard:
› payments for short-term leases of less than 12 months are recognised
as an expense in profit or loss as incurred; and
› payments for leases for which the underlying asset is of a low value are
recognised as an expense in profit or loss as incurred.
Coal infrastructure
The Group leases infrastructure assets including:
› CQCN from the State of Queensland; and
› North Coast Line owned by Queensland Rail.
The coal infrastructure assets are leased to Aurizon Network Pty Ltd. The
term of each lease is 99 years, expiring on 30 June 2109, at a rental of
$1 per year if demanded. The State of Queensland and Queensland Rail
(Infrastructure Lessors) have an option to extend the infrastructure leases
by a further 99 years, with at least 20 years notice prior to expiry of the
existing term. As the rental is only payable if demanded, no lease liability
is recognised on the balance sheet for coal infrastructure assets.
Corridor land and buildings
Aurizon Network Pty Ltd, leases corridor land and buildings owned by
the State of Queensland. The leases expire on 30 June 2109 and rental is
$1 per year if demanded. As the total rental is minimal and only payable
if demanded, no lease liability is recognised on the balance sheet for
corridor land and buildings.
(i) Amounts recognised in the consolidated balance sheet
The consolidated balance sheet includes the following amounts relating to
leased assets:
Right-of-use assets
Buildings
Equipment
Other leased assets1
Coal infrastructure
Corridor land
Buildings
Total leased assets
Lease liabilities
Current
Non-current
2021
$m
2020
$m
91.5
3.0
94.5
88.8
5.6
94.4
4,341.1
4,371.4
25.8
1.8
25.8
1.9
4,368.7
4,399.1
4,463.2
4,493.5
17.0
120.7
137.7
17.4
125.4
142.8
1 CQCN and North Coast Line assets.
(ii) Amounts recognised in consolidated income statement
The consolidated income statement includes the following amounts
relating to leased assets:
Depreciation of right-of-use assets
Buildings
Equipment
Depreciation of other leased assets
Coal infrastructure
Buildings
Total leased assets depreciation
Interest expense
Expenses relating to short-term leases
Expenses relating to variable lease payments
not included in lease liabilities
2021
$m
2020
$m
10.1
2.6
12.7
257.3
0.2
257.5
270.2
5.1
1.6
5.9
13.5
0.7
14.2
245.7
0.2
245.9
260.1
5.1
1.4
4.8
The total cash outflow for leases during the financial year was
$29.0 million (2020: $25.9 million).
FINANCIAL REPORT 69
8 Property, plant and equipment
(continued)
(b) Accounting policies
(i) Property, plant and equipment
Carrying value
Property, plant and equipment (including leased coal infrastructure,
corridor land and buildings) is stated at historical cost, less any
accumulated depreciation and impairment. Costs include expenditure
that is directly attributable to the acquisition of the items and borrowing
costs that are related to the acquisition or construction of an asset.
Costs 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.
Subsequent costs are included in the asset’s carrying amount or
recognised as a separate asset only when it is probable that future
economic benefits associated with the item will flow to the Group. All
repairs and maintenance are charged to profit or loss during the financial
period in which they are incurred.
Depreciation
Depreciation is calculated on a straight-line basis, except for motor
vehicles included in plant and equipment for which depreciation is
calculated on a diminishing value method. Straight-line allocates the
cost of an item of property, plant and equipment net of residual values
over the expected useful life of each asset. Estimates of remaining useful
life and residual values are reviewed and adjusted, if appropriate, on an
annual basis.
The useful lives applied for each class of assets are:
Infrastructure, including:
– Tracks
– Track turnouts
– Ballast
– Civil works
– Bridges
– Electrification
– Field signals
Buildings
Rollingstock, including:
– Locomotives
– Locomotives componentisation
– Wagons
– Wagon componentisation
Plant and equipment
7 – 50 years
20 – 25 years
8 – 20 years
20 – 88 years
30 – 88 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
An asset’s carrying amount is written down immediately to its recoverable
amount if the asset’s carrying amount is greater than its estimated
recoverable amount.
(ii) Leases
Leases are recognised as a right-of-use asset and a corresponding
liability at the date at which the leased asset is available for use by the
Group. Where the Group is a sub-lessor and the sub-lease is for the
duration of the head lease, the right-of-use asset recognised from the
head lease is derecognised and a lease receivable equal to the present
value of future lease payments receivable is recognised.
Assets and liabilities arising from a lease are initially measured on a
present-value basis. Lease liabilities include the net present value of the
following lease payments:
› fixed payments (including in-substance fixed payments), less any lease
incentives receivable;
› variable lease payments that are based on an index or a rate; and
› payments of penalties for terminating the lease, if the lease term
reflects the lessee exercising that option.
The lease payments are discounted using the Group’s incremental
borrowing rate, being the rate that the Group would have to pay to
borrow the funds necessary to obtain an asset of similar value in a similar
economic environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the following:
› the amount of the initial measurement of lease liability;
› any lease payments made at or before the commencement date less
any lease incentives received; and
› any initial direct costs.
Right-of-use assets are depreciated over the shorter of the asset’s useful
life and the lease term on a straight-line basis. Depreciation is calculated
using the straight-line method over the estimated useful life which varies
from two to 20 years.
(iii) Impairment tests for property, plant and equipment
Property, plant and equipment subject to depreciation is reviewed for
impairment whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable.
In testing for impairment, the recoverable amount is estimated for an
individual asset or, if it is not possible to estimate the recoverable amount
for the individual asset, the recoverable amount for the cash generating
unit (CGU) to which the asset belongs. CGUs are the smallest identifiable
group of assets that generate cash flows that are largely independent
from the cash flows of other assets or group of assets. Each CGU is no
larger than a reportable segment.
Assets are impaired if their carrying value exceeds their recoverable
amount. The recoverable amount of an asset or CGU is determined as the
higher of its fair value less cost of disposal or value-in-use.
An impairment loss is recognised in profit or loss if the carrying amount
of the asset or a CGU exceeds its recoverable amount. Impairment losses
recognised in respect of CGUs are allocated first to reduce the carrying
amount of any goodwill allocated to the CGU (group of CGUs) and then to
reduce the carrying amount of other assets in the CGU (group of CGUs).
Where there is an indicator that previously recognised impairment
losses may no longer exist or may have decreased, the asset is tested for
impairment. The impairment loss is reversed if there has been a change in
the estimates used to determine the recoverable amount of the asset and
is reversed only to the extent that the carrying amount of the asset does
not exceed the carrying amount that would have been determined, net of
depreciation or amortisation, had no impairment loss been recognised.
70
Notes to the consolidated financial statements30 June 2021 (continued)AURIZON ANNUAL REPORT 2020–21 9 Intangible assets
2021
Opening net book amount
Additions
Transfers between asset classes
Acquisition of subsidiary (note 22)
Amortisation
Closing net book amount
At 30 June 2021
Cost
Accumulated amortisation and impairment
Net book amount
2020
Opening net book amount
Additions
Transfers between asset classes
Acquisition of subsidiary (note 22)
Amortisation
Closing net book amount
At 30 June 2020
Cost
Accumulated amortisation and impairment
Net book amount
Goodwill
$m
Software
$m
Software under
development
$m
5.2
–
–
19.7
–
24.9
24.9
–
24.9
–
–
–
5.2
–
5.2
5.2
–
5.2
160.1
–
33.8
–
(31.3)
162.6
404.4
(241.8)
162.6
158.2
–
29.7
–
(27.8)
160.1
371.3
(211.2)
160.1
22.2
15.4
(31.2)
–
–
6.4
6.4
–
6.4
18.7
33.3
(29.8)
–
–
22.2
22.2
–
22.2
Total
$m
187.5
15.4
2.6
19.7
(31.3)
193.9
435.7
(241.8)
193.9
176.9
33.3
(0.1)
5.2
(27.8)
187.5
398.7
(211.2)
187.5
71
Notes to the consolidated financial statements30 June 2021 (continued)FINANCIAL REPORT Western Australia CGU
The recoverable amount of the Western Australia CGU has been
determined based on VIU methodology. The calculation uses a four-
year cash flow projection, a pre-tax discount rate of 10.8% (2020:
10.4%) and a long-term growth rate of 2.0% (2020: 2.0%). The Western
Australia CGU was tested for sensitivity of the pre-tax discount rate as
well as other factors noted below.
The Western Australia CGU has a small number of customers and
the recoverable amount is sensitive to changes in iron ore customer
contractual arrangements. The recoverable amount of the CGU was
determined taking into consideration expected expiry of iron ore
customer contracts. Should contracts with iron ore customers not
be renewed or the iron ore customers either cease to operate before
the expected end-of-mine life or be unable to comply with current
contractual arrangements, it may result in a change to the impairment
recorded for the CGU. The recoverable amount of the CGU supports
the carrying amount, therefore no further impairment has been
recognised. Due to the carrying value being highly sensitive to the iron
ore customer assumptions, no reversal of previous impairments has
been recognised.
Bulk QLD CGU
The recoverable amount of the Bulk QLD CGU has been determined
based on VIU methodology and the cash flow projection, pre-tax
discount rate and long-term growth rate as described in note 9(a). The
Bulk QLD CGU was tested for sensitivity of the pre-tax discount rate
and changes in customer contractual arrangements.
The recoverable amount is sensitive to changes in customer
contractual arrangements and should any major contracts not be
renewed it may result in a reduction to the recoverable amount of
the CGU. The recoverable amount of the CGU supports the carrying
amount, including goodwill, therefore no further impairment has
been recognised. Due to the sensitivity of the recoverable amount
to the renewal of major customer contracts, no reversal of previous
impairments has been recognised.
Bulk NSW CGU
The Bulk NSW CGU includes goodwill recognised on acquisition of a
subsidiary (refer to note 22(a)) in FY2021. The recoverable amount of the
CGU has been determined based on FVLCD methodology and the cash
flow projection, post-tax discount rate and a long-term growth rate as
described in note 9(a). The recoverable amount of the CGU supports the
carrying amount, therefore no impairment has been recognised.
9 Intangible assets (continued)
(a) Impairment tests for goodwill
For the purpose of impairment testing, goodwill is allocated to CGUs
according to the level at which management monitors goodwill. Goodwill
is tested annually or more regularly if there are indicators of impairment.
The recoverable amount of a CGU is determined based on the higher
of the value-in-use (VIU) method or the fair value less cost of disposal
(FVLCD) method, both of which require the use of assumptions. These
calculations use cash flow projections extrapolated using estimated
growth rates.
The following table presents a summary of the goodwill allocation and
the key assumptions used in determining the recoverable amount:
2021
Goodwill allocation ($m)
Valuation approach
Discount rate basis
Discount rate (%)
Cash flow projection (years)
Long-term growth rate (%)
2020
Goodwill allocation ($m)
Valuation approach
Discount rate basis
Discount rate (%)
Cash flow projection (years)
Long-term growth rate (%)
Bulk
NSW
Bulk
QLD
19.7
FVLCD
5.2
VIU
Post-tax
Pre-tax
8.5
20
2.0
–
–
–
–
–
–
10.8
4
2.0
5.2
VIU
Pre-tax
10.4
4
2.0
SIGNIFICANT JUDGEMENTS AND ESTIMATES
Impairment tests for cash generating units (CGUs) and goodwill
Following the acquisition of ConPorts Pty Ltd on 31 December 2020
(refer to note 22(a)), the existing NSW CGU was separated into Bulk NSW
and Coal NSW, and the existing Bulk East CGU was renamed Bulk QLD.
CGUs are tested for impairment whenever events or circumstances
indicate that the carrying amount may not be recoverable. CGUs
containing goodwill are tested for impairment annually, or more
frequently if events or changes in circumstances indicate that it might
be impaired. CGUs that have previously recognised an impairment to
the carrying amount are reviewed for impairment reversal whenever
events or changes in circumstances indicate that the recoverable
amount may exceed the carrying amount.
Indicators of impairment reversal were identified for the Western Australia
CGU. The carrying amount of the Bulk QLD and Bulk NSW CGUs contain
goodwill and have therefore also been tested for impairment.
There is a risk that the assumptions applied in calculating the
recoverable amount of the CGUs may be impacted by the effects of
indicators described in the useful lives judgements and as a result
change the estimated recoverable amount.
72
Notes to the consolidated financial statements30 June 2021 (continued)AURIZON ANNUAL REPORT 2020–21
Notes to the consolidated financial statements
30 June 2021 (continued)
(b) Accounting policies
(i) Goodwill
The goodwill recognised by the Group is a result of business
combinations and represents the future economic benefits that arise
from assets that are not capable of being individually identified and
separately recognised. Goodwill is initially measured as the amount the
Group paid to acquire a business over and above the fair value of net
assets acquired.
(ii) Software
Costs incurred in developing products or systems, and costs incurred
in acquiring software and licenses that will contribute to future period
financial benefits through revenue generation and/or cost reduction are
capitalised to software and systems. Costs capitalised include external
direct costs of materials and service, employee costs and an appropriate
portion of relevant overheads. Software development costs include only
those costs directly attributable to the development phase, and are only
recognised following completion of technical feasibility and where the
Group has an intention and ability to use the asset.
Software-as-a-Service (SaaS) arrangements are service contracts which
provide the right to access the cloud provider’s application software
over the contract period. Costs incurred to configure or customise, and
the ongoing licence fees, are recognised as an expense in profit or loss.
Some of these costs incurred are for the development of software code
that enhances or creates additional capability to existing systems and are
recognised as an intangible asset when the recognition criteria are met.
Software is stated at historical cost, less any accumulated amortisation
or impairment. Amortisation is calculated using the straight-line method
over the estimated useful life which varies from three to 11 years.
10 Other assets
Current
Contract assets (a)
Lease receivable (b)
Other current assets
Non-current
Contract assets (a)
Lease receivable (b)
2021
$m
2020
$m
2.1
7.2
6.0
15.3
37.1
41.5
78.6
1.3
6.5
7.0
14.8
21.9
48.6
70.5
(a) Contract assets
Refer to note 2(b) for further information relating to contract assets.
(b) Lease receivable
Lease receivables represent the present value of future lease payments
receivable on sub-lease arrangements where the expiry of the term of
the sub-lease is the same as the head lease.
Minimum lease payments receivable on sub-leases are as follows:
Within one year
Later than one year but not later than five years
Later than five years
Less: Unearned interest income
Total lease receivables
Interest income relating to
sub-lease arrangements
Income relating to variable lease
payments received
2021
$m
8.7
28.6
18.2
55.5
(6.8)
48.7
1.8
7.1
2020
$m
8.2
32.9
22.6
63.7
(8.6)
55.1
1.9
7.6
The total cash inflow for sub-leases in the financial year was $15.4 million
(2020: $15.2 million).
11 Trade and other payables
Current
Trade payables
Other payables
2021
$m
2020
$m
234.0
35.1
269.1
289.0
34.0
323.0
(a) Accounting policies
Trade and other payables 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 45 days or within
the terms agreed with the supplier.
73
12 Provisions
Current
Employee benefits (a)
Provision for insurance claims
Litigation and workers compensation provision
Other provisions
Non-current
Employee benefits (a)
Litigation and workers compensation provision
Decommissioning/make good
Land rehabilitation
Total provisions
(a) Employee benefits
Annual leave
Long service leave
Other
2021
$m
2020
$m
255.1
13.7
25.0
3.1
296.9
13.9
12.3
2.7
35.3
64.2
361.1
229.3
8.6
20.9
12.5
271.3
13.4
9.7
2.9
38.0
64.0
335.3
2021
$m
68.0
117.8
83.2
269.0
2020
$m
67.1
112.0
63.6
242.7
Long service leave includes all unconditional entitlements where
employees have completed the required period of service and a provision
for the probability that employees will reach the required period of
service. The Group does not expect all employees to take the full amount
of accrued leave or require payment within the next 12 months based on
past experience. The current provision for employee benefits includes
$109.5 million (2020: $105.6 million) that is not expected to be taken or
paid within the next 12 months.
(i) Superannuation
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.
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. The State Actuary performs a full actuarial valuation of the
assets and liabilities of the fund at least every three years. The latest
valuation was completed as at 30 June 2020 and the State Actuary
found the fund was in surplus from a whole-of-Government perspective.
The Defined Benefit Fund was closed to new members in 2007, therefore
any potential future deficit would be diluted as membership decreases.
Accordingly, no asset or liability is recognised for the Group’s share of
any potential surplus or deficit of the QSuper Defined Benefit Fund. The
State has provided the Group with an indemnity if the Treasurer requires
the Group to pay any amounts required to meet any potential deficit. The
indemnity is subject to the Group not taking any unilateral action, other
than with the approval of the State that causes a significant increase in
unfunded liabilities.
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.
(b) Accounting policies
A provision is 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 measured at the
present value of the best estimate of the expenditure required to settle
the present obligation at the reporting date.
74
Notes to the consolidated financial statements30 June 2021 (continued)AURIZON ANNUAL REPORT 2020–21 Notes to the consolidated financial statements
30 June 2021 (continued)
12 Provisions (continued)
13 Other liabilities
Current
Contract liabilities (a)
Income received in advance
Lease liabilities (b)
Other current liabilities
Non-current
Contract liabilities (a)
Lease liabilities (b)
Other non-current liabilities
2021
$m
2020
$m
56.5
1.3
17.0
16.8
91.6
135.0
120.7
1.4
257.1
28.5
36.9
17.4
18.5
101.3
150.4
125.4
1.5
277.3
(a) Contract liabilities
Refer to note 2(b) for further information relating to contract liabilities.
(b) Lease liabilities
Lease liabilities represent the present value of future lease payments.
Minimum lease payments are as follows:
Within one year
Later than one year but not later than
five years
Later than five years
Less: Discounted using Group’s incremental
borrowing rate
Total lease liabilities
2021
$m
21.8
70.4
71.7
163.9
(26.2)
137.7
2020
$m
22.3
72.6
75.8
170.7
(27.9)
142.8
(b) Accounting policies (continued)
(i) Employee benefits
The provision for employee benefits includes accrued annual leave, leave
loading, retirement allowances, long service leave, short-term incentive
plans and termination benefits.
Liabilities for wages, salaries and accumulating non-monetary benefits
expected to be settled within 12 months of the reporting date, are
recognised in respect of employees’ services up to the end of the
reporting date. They are measured at the amounts expected to be paid
when the liabilities are settled.
Liabilities for annual leave and long service leave are measured as the
present value of expected future payments to be made in respect of
services provided by employees up to the end of the reporting date.
Expected future payments that are not expected to be settled within
12 months are discounted using market yield at the reporting date of
Australian corporate bond rates and reflects the terms to maturity.
Remeasurements as a result of adjustments and changes in actuarial
assumptions are recognised in profit or loss.
A liability for short-term incentive plans is recognised based on a formula
that takes into consideration the Group and individual key performance
indicators. The Group recognises a provision where contractually
obliged or where there is a past practice that has created a constructive
obligation.
A termination benefit is payable when the Group decides to terminate
the employment, or when an employee accepts redundancy in exchange
for these benefits. A provision is recognised at the earlier of when the
Group can no longer withdraw the offer of those benefits or when
the Group recognises costs for restructuring and is measured using
the present value of the expected amounts to be paid to settle the
obligation.
Employee benefits are presented as current liabilities in the balance sheet
if the Group does not have any unconditional right to defer settlement
for at least 12 months after the reporting period, regardless of when the
actual settlement is expected to occur.
(ii) Provision for insurance claims
A 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.
(iii) Litigation and workers compensation provision
A provision is made for the estimated liability for workers’ compensation
and litigation claims. Claims are assessed separately for common law,
statutory and asbestos claims. Estimates are made based on the average
number of claims and average claim payments over a specified period of
time. Claims that are Incurred But Not Reported are also included in the
estimate.
(iv) Land rehabilitation
A provision is recognised for the present value of estimated costs of land
rehabilitation where the Group has a legal or constructive obligation to
restore a site.
An inflation rate of 2.4% (2020: 1.6%) is applied to estimate future land
rehabilitation costs. This estimate is discounted at a weighted average
discount rate of 2.0% (2020: 1.2%) to determine the present value of the
provision. The unwinding of the discount is recognised in profit or loss in
finance costs.
75
Capital and financial
risk management
IN THIS SECTION
Capital and financial risk management provides information
about the capital management practices of the Group and
shareholder returns for the year, and discusses the Group’s
exposure to various financial risks, explains how these affect
the Group’s financial position and performance, and what
the Group does to manage these risks.
14 Capital risk management
15 Dividends
16 Equity
17 Borrowings
18 Financial risk management
Page 77
Page 77
Page 77
Page 79
Page 80
76
76 AURIZON ANNUAL REPORT 2020–21
14 Capital risk management
15 Dividends
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 Company monitor its capital structure by
reference to its gearing ratio, ability to generate free cash
flow and credit rating.
Net debt consists of borrowings (both current and non-current) less cash
and cash equivalents. Net debt excludes lease liabilities. Net gearing ratio
is defined as Net debt divided by Net debt plus Equity. Net debt and Net
gearing ratio are measures of the Group’s indebtedness and provides an
indicator of the balance sheet strength. An alternative net gearing ratio is
also disclosed and includes derivative financial instruments used to hedge
market risk on borrowings and is reconciled in the Non-IFRS Financial
Information on page 107.
Declared and paid during the period
For the year ended 30 June 2021
Final dividend for 2020 (70% franked)
Interim dividend for 2021 (70% franked)
For the year ended 30 June 2020
Final dividend for 2019 (70% franked)
Interim dividend for 2020 (70% franked)
Proposed and unrecognised at period end
For the year ended 30 June 2021
Cents
per
share
$m
13.7
14.4
12.4
13.7
262.3
266.5
528.8
246.8
267.0
513.8
Total borrowings
Notes
2021
$m
2020
$m
17
3,738.0
3,607.2
Final dividend for 2021 (70% franked)
14.4
266.2
For the year ended 30 June 2020
Final dividend for 2020 (70% franked)
13.7
262.3
Less: cash and cash equivalents
(148.8)
(29.3)
Net debt
Total equity
Total capital
Net gearing ratio
Alternative net gearing ratio
3,589.2
3,577.9
4,274.6
4,357.7
7,863.8
7,935.6
45.6%
44.6%
45.1%
43.2%
Franked dividends
Franking credits are available to shareholders of the Company at the 30%
(2020: 30%) corporate tax rate. The balance of franking credits available
as at 30 June 2021 is $57.2 million (2020: $92.6 million). The amounts
are calculated from the balance of the franking account as at the end of
the reporting period, adjusted for franking credits that will arise from the
payment or refund of the amount of the provision for income tax.
16 Equity
(a) Contributed equity
At 1 July 2019
On-market share buy-back
At 30 June 2020
On-market share buy-back
At 30 June 2021
Number
of shares
‘000
$m
1,990,128
906.6
(75,485)
(400.0)
1,914,643
506.6
(73,939)
(300.0)
1,840,704
206.6
Ordinary shares
Ordinary shares are classified as equity. The Company does not have
authorised capital or par value in respect of its issued shares. All issued
shares are fully paid. Ordinary shares entitle the holder to participate in
dividends, as declared from time to time, and are entitled to one vote
per share at meetings of the Company. Where the Company purchases
ordinary shares as a result of a share buy-back, the consideration paid,
net of any related income tax benefits, is deducted from contributed
equity and the ordinary shares are cancelled.
At 30 June the Company held 407,694 treasury shares to satisfy
performance rights plans, which are reported in contributed equity
(2020: nil).
77
Notes to the consolidated financial statements30 June 2021 (continued)FINANCIAL REPORT
16 Equity (continued)
(b) Reserves
Balance at 1 July 2020
Fair value gains/(losses) taken to equity
Fair value (gains)/losses transferred to property, plant
and equipment
Tax expense/(benefit) relating to items of other
comprehensive income
Other currency translation differences
Reclassification to profit or loss on disposal of shares in
associate
Other comprehensive income
Transactions with owners in their capacity as owners:
Buy-back of ordinary shares
Share-based payments expense
28
Purchase of share for performance rights plans
Aggregate deferred tax debited/(credited) to equity
Balance at 30 June 2021
Balance at 1 July 2019
Fair value gains/(losses) taken to equity
Fair value (gains)/losses transferred to property, plant
and equipment
Tax expense/(benefit) relating to items of other
comprehensive income
Other comprehensive income
Transactions with owners in their capacity as owners:
Buy-back of ordinary shares
Share-based payments expense
28
Purchase of share for performance rights plans
Aggregate deferred tax debited/(credited) to equity
Share
of an
associate’s
OCI
$m
Notes
Cash
flow
hedges
$m
Share-
based
payments
$m
Capital
reserves
$m
Foreign
currency
translation
$m
Total
$m
(1.8)
(72.0)
1.4
3,467.1
0.4
3,395.1
–
–
–
–
1.8
1.8
–
–
–
–
–
(1.8)
–
–
–
–
–
–
–
–
25.7
(3.6)
(6.6)
–
–
15.5
–
–
–
–
(56.5)
(47.0)
(39.3)
3.6
10.7
(25.0)
–
–
–
–
–
–
–
–
–
–
–
4.9
(5.7)
(1.0)
(0.4)
–
–
–
–
–
–
(0.3)
–
–
0.3
–
–
–
(0.1)
–
(0.1)
–
–
–
–
25.7
(3.6)
(6.6)
(0.1)
1.8
17.2
(0.3)
4.9
(5.7)
(0.7)
3,467.1
0.3
3,410.5
(0.6)
3,467.5
0.4
3,418.5
–
–
–
–
–
5.9
(3.2)
(0.7)
1.4
–
–
–
–
(0.4)
–
–
–
–
–
–
–
–
–
–
–
(39.3)
3.6
10.7
(25.0)
(0.4)
5.9
(3.2)
(0.7)
3,467.1
0.4
3,395.1
Balance at 30 June 2020
(1.8)
(72.0)
78
Notes to the consolidated financial statements30 June 2021 (continued)AURIZON ANNUAL REPORT 2020–21 16 Equity (continued)
17 Borrowings
(i) Cash flow hedge reserve
The cash flow hedge reserve comprises the effective portion of the
cumulative net change in the fair value of cash flow hedging instruments
related to hedge transactions that have not yet occurred.
(ii) Share-based payment reserve
The share-based payment reserve is used to recognise the fair value of
rights recognised as an expense. Refer to note 28 for further details of
the Group’s performance rights plans.
The fair value of rights granted are recognised as an employee benefits
expense in profit or loss with a corresponding increase in the share-
based payment reserve in equity and is spread over the vesting period
during which the employees become unconditionally entitled to the right.
Where the Company purchases ordinary shares to satisfy performance
rights plans, the consideration paid is deducted from the share-based
payment reserve.
(iii) Capital reserve
The capital reserve represents capital contributions from the Queensland
State Government prior to the listing of the Company on the ASX.
Incremental costs attributable to share buy-backs and certain on-market
share buy-backs are deducted from capital reserves.
(iv) Foreign currency translation reserve
On consolidation all exchange differences arising from translation of
controlled entities with a financial currency that is not Australian dollars
are recognised in other comprehensive income and accumulated in
the foreign currency translation reserve. When a foreign operation is
disposed, the cumulative amount recognised within the reserve relating
to that foreign operation is transferred to profit or loss.
The Group borrows money through bank debt facilities
and the issuance of debt securities in capital markets.
The carrying amount of the Group’s borrowings are as follows:
Current — Unsecured
Medium-Term Notes
Bank debt facilities
Non-current — Unsecured
Medium-Term Notes
Bank debt facilities
Capitalised borrowing costs
Total borrowings
2021
$m
2020
$m
–
59.0
59.0
524.6
133.0
657.6
3,210.4
2,249.8
480.0
(11.4)
710.0
(10.2)
3,679.0
2,949.6
3,738.0
3,607.2
The Group’s bank debt facilities contain financial covenants. The bank
debt facilities and Medium-Term Notes contain general undertakings
including negative pledge clauses which restrict the amount of security
that the Group can provide over assets in certain circumstances. The
Group has complied with all required covenants and undertakings
throughout the reporting period.
The Group manages its exposure to interest rate risk as set out in note
18(a). Details of the Group’s financing arrangements and exposure to
risks arising from borrowings are set out in note 18(b).
Details of changes to the Group’s financing arrangements during the
reporting period are outlined in key events and transactions.
(a) Accounting policies
Borrowings are initially recognised at fair value of the consideration
received, less directly attributable borrowing costs. Borrowings are
subsequently measured at amortised cost using the effective interest
rate method.
Directly attributable borrowing costs are capitalised and amortised over
the expected term of the bank debt facilities and Medium-Term Notes.
Borrowings are classified as current liabilities, except for those liabilities
where the Group has an unconditional right to defer settlement for at
least 12 months after the reporting period which are classified as non-
current liabilities.
79
Notes to the consolidated financial statements30 June 2021 (continued)FINANCIAL REPORT
18 Financial risk management
Financial risk management is carried out by Aurizon Group Treasury under policies that have been approved by the Board for
managing each of the below risks, including principles and procedures with respect to risk tolerance, delegated levels of authority on
the type and use of derivative financial instruments and the reporting of these exposures. The policies are subject to periodic reviews.
In accordance with Board approved policies, the Group typically uses derivative financial instruments to hedge underlying exposures
arising from the Group’s operational activities relating to changes in foreign exchange rates and changes in interest rates.
The Group’s overall financial risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse
effects on the Group’s financial performance as set out in the table below:
Risk
Market risks
– Interest rate risk
Exposure
Measurement
The Group is exposed to interest rate risk in respect
to short and long-term borrowings where interest is
charged at variable rates.
– Interest rate and foreign
exchange risk
The Group is exposed to interest rate and foreign
exchange risk in respect of the Euro (€) denominated
Medium-Term Notes (EMTNs).
The Group mitigates interest rate risk primarily by
maintaining an appropriate mix of fixed and floating rate
borrowings. Where necessary, the Group hedges interest
rates using derivative financial instruments — interest rate
swaps to manage cash flows and interest rate exposure.
To mitigate the risk of adverse movements in interest
rates and foreign exchange in respect of Euro
denominated borrowings, the Group enters into cross-
currency interest rate swaps (CCIRS) to replace Euro
principal and interest payments with Australian dollar
repayments.
– Foreign exchange risk
The Group is exposed to foreign exchange risk in
respect of purchases of inventory and property, plant
and equipment denominated in a foreign currency.
The Group manages foreign currency risk on contractual
commitments by entering into forward exchange
contracts.
Liquidity and
funding risk
Credit risk
The Group is exposed to liquidity and funding risk from
operations and borrowings, where the risk is that the
Group may not be able to refinance debt obligations or
meet other cash outflow obligations when required.
The Group is exposed to credit risk from financial
instrument contracts and trade and other receivables.
The maximum exposure to credit risk at reporting
date is the carrying amount, net of any provision for
impairment.
The Group mitigates liquidity and funding risk by ensuring
a sufficient range of funds are available to meet its
cash flow obligations when due under both normal and
stressed conditions without incurring unacceptable losses
or risking damage to the Group’s reputation.
The Group enters into financial instrument contracts with
high credit quality financial institutions with a minimum
long-term credit rating of A- or better by Standard &
Poor’s. The Board approved policies limit the amount of
credit exposure to any one financial institution by credit
rating band.
The Group manages counterparty credit risk through
approval, granting and renewal of credit limits, regularly
monitoring exposures against credit limits, and assessing
overall financial stability and strength of counterparties on
an ongoing basis. Refer to note 6 for credit risk exposures
relating to trade and other receivables.
80
Notes to the consolidated financial statements30 June 2021 (continued)AURIZON ANNUAL REPORT 2020–21 18 Financial risk management (continued)
(a) Market risk
(i)
Interest rate risk
Exposure
The Group had the following variable rate borrowings and interest rate
swap contracts outstanding at 30 June:
Weighted
average
interest
rate
%
Balance
$m
Amounts recognised in profit or loss
The Group recognised a net realised loss arising from interest rate
swaps of $40.1 million (2020: $25.9 million) as a result of market interest
rates closing lower than the average interest rate hedged. The total
realised loss represents the effective portion of hedges which have been
recognised in finance expense.
(ii) Effects of hedge accounting
The table below summarises the hedging instruments used to manage
market risk:
2021
Variable rate exposure
Interest rate swaps
(including debt credit margins)
Net exposure to interest rate risk
2020
2.4
3,109.8
Current assets
1.8
(2,775.0)
Foreign exchange contracts
334.8
Non-current assets
Variable rate exposure
3.4
2,331.8
Interest rate swaps
(including debt credit margins)
Net exposure to interest rate risk
1.9
(2,175.0)
156.8
Interest rate derivatives used for hedging
The Group currently has interest rate swaps in place to cover 89% (2020:
93%) of the variable rate borrowings, including fixed rate borrowings
converted to variable rate borrowings as a result of fair value hedge
relationships outlined in note 18(a)(ii). The weighted average maturity of
interest rate swaps is 1.8 years (2020: 2.0 years).
Sensitivity
The following table summarises the gain/(loss) impact of a 100 basis
points (bps) increase or decrease in interest rates on net profit and
equity before tax.
2021
Effect on profit
Effect on equity
2020
Effect on profit
Effect on equity
Increase
$m
Decrease
$m
(3.3)
44.6
(1.6)
68.1
3.3
(45.6)
1.6
(69.8)
Interest rate swaps – Finance AMTN 1
Interest rate swaps – Network AMTN 3
CCIRS – Network EMTN 1
CCIRS – Network EMTN 2
Total derivative financial instrument assets
Current liabilities
Foreign exchange contracts
Interest rate swaps
Non-current liabilities
Foreign exchange contracts
Interest rate swaps
Interest rate swaps – Network AMTN 3
Interest rate swaps – Network AMTN 4
Total derivative financial instrument liabilities
2021
$m
2020
$m
0.1
1.9
–
109.2
13.9
125.0
125.1
(0.5)
(0.1)
(0.6)
–
(40.2)
(0.4)
(26.0)
(66.6)
(67.2)
0.2
–
3.2
155.3
62.3
220.8
221.0
(1.5)
(33.6)
(35.1)
(0.2)
(45.5)
–
–
(45.7)
(80.8)
The Group has issued Australian dollar Medium-Term Notes (AMTNs) and
EMTNs under its wholly owned subsidiaries Aurizon Network Pty Ltd and
Aurizon Finance Pty Ltd which have separate designations in hedging
relationships.
81
Notes to the consolidated financial statements30 June 2021 (continued)FINANCIAL REPORT
18 Financial risk management (continued)
(a) Market risk (continued)
(ii) Effects of hedge accounting (continued)
The following table summarises the impact of hedging instruments designated in hedging relationships on the consolidated balance sheet:
Cash flow hedges
Foreign exchange risk
Forward contracts
Forward contracts
Interest rate risk
Interest rate swaps1
Foreign exchange and interest rate risks
CCIRS – Network EMTN 1
CCIRS – Network EMTN 2
Fair value hedges
Interest rate risk
Interest rate swaps – Finance AMTN 1
A$500.0m
–
Interest rate swaps – Network AMTN 3
A$82.0m
A$82.0m
Interest rate swaps – Network AMTN 4
A$500.0m
–
Foreign exchange and interest rate risks
CCIRS – Network EMTN 1
CCIRS – Network EMTN 2
€500.0m
€500.0m
€500.0m
€500.0m
Notional amount
2021
2020
Carrying amount
assets/(liabilities)
Change in fair value
used for measuring
ineffectiveness for the year
2021
$m
2020
$m
2021
$m
2020
$m
US$4.5m
US$4.0m
€2.5m
€13.0m
(0.1)
(0.3)
(0.7)
(0.8)
0.6
0.5
(1.2)
(1.1)
A$2,775.0m
A$4,725.0m
(40.3)
(79.1)
38.8
(30.0)
€500.0m
€500.0m
€500.0m
€500.0m
(1.0)
(10.8)
1.9
(0.4)
(26.0)
110.2
24.7
0.2
(6.8)
–
3.2
–
155.1
69.1
(1.2)
(4.0)
1.6
(3.9)
(27.3)
(41.2)
(38.9)
(0.7)
(2.5)
–
3.4
–
2.9
15.7
1 Amounts for FY2020 include forward dated interest rate swaps for a notional amount of A$2,550.0 million which commenced in June 2021.
The following table summarises the impact of hedged items designated in cash flow hedging relationships on the consolidated balance sheet and the
effect of the hedge relationships on other comprehensive income:
Cash flow hedge reserve1
Change in fair value used for
measuring ineffectiveness
for the year
Hedging gain/(loss)
recognised in
comprehensive income1
2021
$m
2020
$m
2021
$m
2020
$m
2021
$m
2020
$m
Cash flow hedges (before tax)
Foreign exchange risk
Firm commitments
Interest rate risk
Forecast floating interest payments
Foreign exchange and interest rate risks
Network EMTN 1
Network EMTN 2
0.4
40.3
11.8
28.0
1.5
79.1
5.2
16.5
(1.1)
2.3
(38.8)
30.0
1.2
4.0
0.7
2.5
1.1
39.1
(6.6)
(11.5)
(2.3)
(30.0)
(0.7)
(2.7)
1 Cash flow hedge reserve includes the cumulative impact of cross-currency basis relating to EMTN 1 and EMTN 2 of $19.4 million (2020:$19.3 million). The hedging loss
recognised in other comprehensive income includes the cross-currency basis relating to EMTN 1 and EMTN 2 of $13.1 million (2020: $0.3 million).
82
Notes to the consolidated financial statements30 June 2021 (continued)AURIZON ANNUAL REPORT 2020–21
18 Financial risk management (continued)
(a) Market risk (continued)
(ii) Effects of hedge accounting (continued)
The following table summarises the impact of hedged items designated in fair value hedging relationships on the consolidated balance sheet:
Fair value hedges (before tax)
Interest rate risk
Finance AMTN 1
Network AMTN 2
Network AMTN 3
Network AMTN 4
Foreign exchange and interest rate risks
Network EMTN 1
Network EMTN 2
Total borrowings subject to fair value hedges
Carrying amount1
Accumulated fair value
adjustment
Change in fair value
used for measuring
ineffectiveness for the year
2021
$m
2020
$m
2021
$m
2020
$m
2021
$m
2020
$m
(501.6)
–
(81.5)
(472.7)
(1,055.8)
(832.6)
(824.3)
(1,656.9)
(2,712.7)
–
–
(85.4)
–
(85.4)
(873.9)
(863.2)
(1,737.1)
(1,822.5)
(1.6)
(7.1)
0.5
27.3
19.1
(122.0)
(46.1)
(168.1)
(149.0)
–
(9.5)
(3.4)
–
(12.9)
(163.2)
(85.0)
(248.2)
(261.1)
(1.6)
–
3.9
27.3
29.6
41.2
38.9
80.1
109.7
–
–
(3.4)
–
(3.4)
(2.9)
(15.7)
(18.6)
(22.0)
1 Carrying amount excludes the effect of discounts on the face value of AMTNs and EMTNs issued.
83
Notes to the consolidated financial statements30 June 2021 (continued)FINANCIAL REPORT 18 Financial risk management (continued)
(b) Liquidity and funding risk
(i) Financing arrangements
The table below summarises the financing arrangements the Group had access to at the end of the period. The facilities are unsecured.
Aurizon Finance Pty Ltd
Working capital facility
Bilateral facility
Bilateral facility
Bilateral facility
Finance AMTN 12
Aurizon Network Pty Ltd
Working capital facility
Bilateral facility
Bilateral facility
Bilateral facility
Network AMTN 1
Network AMTN 22
Network AMTN 32
Network AMTN 42
Network AMTN 52
Network EMTN 12
Network EMTN 22
Total Group financing arrangements
Utilised1
2021
$m
2020
$m
Facility limit
2021
$m
2020
$m
Maturity
Jun-22
Jun-23
Nov-23
Nov-25
15.1
–
–
–
83.3
–
125.0
50.0
150.0
–
290.0
500.0
450.0
–
–
75.0
500.0
–
–
Mar-28
500.0
515.1
373.3
1,250.0
600.0
Jun-22
60.5
67.5
Jun-23
370.0
420.0
Jun-24
Jun-25
Oct-20
110.0
–
–
Jun-24
425.0
Mar-30
82.0
Sept-30
500.0
Dec-31
Sept-24
Jun-26
75.0
710.6
778.2
–
–
525.0
425.0
82.0
–
–
710.6
778.2
75.0
750.0
300.0
150.0
–
425.0
82.0
500.0
75.0
710.6
778.2
100.0
850.0
300.0
150.0
525.0
425.0
82.0
–
–
710.6
778.2
3,111.3
3,008.3
3,845.8
3,920.8
3,626.4
3,381.6
5,095.8
4,520.8
1 Amount utilised includes bank guarantees of $16.6 million (2020: $17.8 million) and excludes capitalised borrowing costs of $11.4 million (2020: $10.2 million) and
discounts on Medium-Term Notes of $9.5 million (2020: $7.1 million).
2 Amounts utilised on EMTNs and AMTNs excludes accumulated fair value adjustments of $149.0 million (2020: $261.1 million).
The Group has access to working capital facilities totalling $200.0 million (2020: $250.0 million) which can be utilised for short-term working capital
and financial bank guarantees. At 30 June, the Group utilised $16.6 million (2020: $17.8 million) for financial bank guarantees.
84
Notes to the consolidated financial statements30 June 2021 (continued)AURIZON ANNUAL REPORT 2020–21
Notes to the consolidated financial statements
30 June 2021 (continued)
18 Financial risk management (continued)
(b) Liquidity and funding risk (continued)
(ii) Maturities of financial liabilities
The table below analyses the Group’s financial liabilities, including derivatives, into relevant maturity groupings based on the period remaining until the
contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows (including interest) and will not reconcile
with the amounts disclosed in the consolidated balance sheet:
2021
Non-derivative financial instruments
Trade payables
Borrowings (excluding the effect of CCIRS)
Financial guarantees
Lease liabilities
Total non-derivative financial instruments
Derivatives
Interest rate swaps
Interest rate swaps – Finance AMTN 1
Interest rate swaps – Network AMTN 3
Interest rate swaps – Network AMTN 4
CCIRS – Network EMTN 1
CCIRS – Network EMTN 2
Gross settled forward exchange contracts (inflow)
Total derivatives
2020
Non-derivative financial instruments
Trade payables
Borrowings (excluding the effect of CCIRS)
Financial guarantees
Lease liabilities
1 year
or less
$m
1 – 5
years
$m
More than
5 years
$m
Total
contractual
cash flows
$m
Carrying
amount
(assets)/
liabilities
$m
269.1
159.0
16.6
21.8
466.5
24.7
(5.7)
–
(3.8)
(2.2)
6.5
(0.5)
19.0
323.0
745.9
17.8
22.3
–
2,817.9
–
70.4
2,888.3
16.8
(4.5)
(0.5)
2.9
(88.3)
42.5
–
(31.1)
–
1,273.8
–
71.7
1,345.5
–
2.2
0.4
21.9
–
–
–
24.5
269.1
4,250.7
16.6
163.9
4,700.3
41.5
(8.0)
(0.1)
21.0
(90.5)
49.0
(0.5)
12.4
269.1
3,738.0
–
137.7
4,144.8
40.3
(1.9)
0.4
26.0
(109.2)
(13.9)
0.4
(57.9)
–
–
323.0
2,207.7
938.4
3,892.0
–
72.6
–
75.8
17.8
170.7
323.0
3,607.2
–
142.8
Total non-derivative financial instruments
1,109.0
2,280.3
1,014.2
4,403.5
4,073.0
Derivatives
Interest rate swaps
Interest rate swaps – Network AMTN 3
CCIRS – Network EMTN 1
CCIRS – Network EMTN 2
Gross settled forward exchange contracts
(inflow)
outflow
Total gross settled forward exchange contracts
Total derivatives
43.1
–
(2.4)
6.2
–
(1.5)
0.2
(1.3)
45.6
38.0
(1.1)
(123.3)
33.6
–
(0.3)
–
(0.3)
(53.1)
–
(2.2)
–
(28.6)
–
–
–
–
81.1
(3.3)
(125.7)
11.2
–
(1.8)
0.2
(1.6)
79.1
(3.2)
(155.3)
(62.3)
1.5
–
–
–
(30.8)
(38.3)
(140.2)
8585
FINANCIAL REPORT FINANCIAL REPORT 18 Financial risk management (continued)
(c) Hedging instruments
(i) Accounting policies
Derivative financial instruments are recognised initially at fair value on the date the instrument is entered into and are subsequently remeasured at fair
value or ‘market to market’ at each reporting date. The gain or loss on remeasurement is recognised immediately in profit or loss unless the derivative
is designated as a hedging instrument, in which case the remeasurement is recognised in equity.
Hedge accounting
At inception of the hedge relationship, the Group formally designated the relationship between hedging instruments and hedged items, as well as its
risk management objective for undertaking various hedge transactions. The Group also documents its assessment at hedge inception date and on
an ongoing basis as to whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting
changes in fair values or cash flows of hedged items.
The Group enters into hedge relationships where the critical terms of the hedging instrument match exactly with the terms of the hedged item and
a qualitative assessment is performed to assess effectiveness. If changes in circumstances affect the terms of the hedged item, such as the terms no
longer match exactly with the critical terms of the hedged instrument, a hypothetical derivative method is used to assess effectiveness.
Rebalancing
If the hedge ratio for risk management purposes is no longer optimal but the risk management objective remains unchanged and the hedge continues
to qualify for hedge accounting, the hedge relationship will be rebalanced by adjusting either the volume of the hedging instrument or the volume
of the hedged item so that the hedge ratio aligns with the ratio used for risk management purposes. Any hedge ineffectiveness is calculated and
accounted for at the time of the hedge relationship rebalancing.
For the purpose of hedge accounting, hedges are classified as fair value hedges or cash flow hedges and are accounted for as set out in the table
below.
Hedges that meet the criteria for hedge accounting are accounted for as follows:
Risk
What is it?
Movement in fair value
Discontinuation
of hedge accounting
Fair value hedge
Cash flow hedge
A derivative or financial instrument designated as
hedging the change in fair value of a recognised asset
or liability or firm commitment. A fair value hedge is
used to swap fixed interest payments to variable interest
payments in order to manage the Group’s exposure to
interest rate risk.
Changes in the fair value of the derivative are
recognised in profit or loss, together with the changes in
fair value of the hedged asset or liability attributable to
the hedged risk.
The gain or loss relating to the effective portion of
interest rate swaps hedging fixed rate borrowings are
recognised in profit or loss within finance expenses,
together with the changes in fair value of the hedged
fixed rate borrowing attributable to interest rate risk.
The gain or loss relating to the ineffective portion is
recognised separately to the effective portion in profit
or loss within finance expenses.
If the hedge no longer meets the criteria for hedge
accounting, the adjustment to the carrying amount of a
hedged item for which the effective interest method is
used is amortised to profit or loss in finance income over
the period to maturity using a recalculated effective
interest rate.
A derivative or financial instrument hedging the exposure
to variability in cash flow attributable to a particular
risk associated with an asset, liability or forecasted
transaction. A cash flow hedge is used to swap variable
interest rate payments to fixed interest rate payments,
or to lock in foreign currency rates in order to manage
the Group’s exposure to interest rate risk and foreign
exchange risk.
The effective part of any gain or loss on the derivative
financial instrument is recognised in other comprehensive
income and accumulated in equity in the cash flow hedge
reserve. The change in the fair value that is identified
as ineffective is recognised immediately in profit or loss
within other income or other expense.
Amounts accumulated in equity are transferred to profit
or loss when the hedged item affects profit or loss. When
the forecast transaction results in the recognition of a
non-financial asset (property, plant and equipment),
the gains or losses previously deferred in equity are
transferred from equity and included in the measurement
of the initial 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 transferred to profit
or loss.
86
Notes to the consolidated financial statements30 June 2021 (continued)AURIZON ANNUAL REPORT 2020–21 18 Financial risk management (continued)
(c) Hedging instruments
(i) Accounting policies (continued)
Netting of payments
Derivative transactions are administered under International Swaps and
Derivatives Association (ISDA) Master Agreements. Where certain credit
events occur, such as default, the net position owing/receivable to a
single counterparty in the same currency will be taken as owing and all
the relevant arrangements terminated. The Group does not currently
have legally enforceable right of set-off between transaction types and
therefore these amounts are presented separately in the consolidated
balance sheet.
ISDA’s held with counterparties allow for the netting of payments and
receipts for the settlement of interest rate swap transactions.
(d) Fair value measurement
The carrying value of cash and cash equivalents, and non-interest bearing
financial assets and liabilities approximates fair value due to their short-
term maturity.
The fair value of borrowings is estimated by discounting future
contractual cash flows at the current market interest rates that are
available to the Group for similar financial instruments. The market
interest rates were determined to be between 1.0% and 3.2% (2020: 0.9%
and 3.0%) depending on the type of facility.
The Group measures the fair value of financial instruments using market
observable data where possible. Fair values are categorised into three
levels with each of these levels indicating the reliability of the inputs used
in determining fair value. The levels of the fair value hierarchy are:
Level 1: Quoted prices for an identical asset or liability in an active market
Level 2: Directly or indirectly observable market data
Level 3: Unobservable market data.
The fair value of forward exchange contracts are determined as the
unrealised gain/(loss) with reference to market rates. The fair value of
interest rate swaps is determined as the net present value of contracted
cash flows. The existing exposure method, which estimates future cash
flows to present value using credit adjusted discount factors after
counterparty netting arrangements, has been adopted for both forward
foreign exchange contracts and interest rate swaps.
The fair value of CCIRS is determined as the net present value of contract
cash flows. The future probable exposure method is applied to the
estimated future cash flows to reflect the credit risk of the Group and
relevant counterparties.
The Group’s derivative financial instruments are classified as Level 2
(2020: Level 2). During the period, there were no transfers between
Level 1, Level 2 or Level 3 in the fair value hierarchy (2020: nil).
The table below summarises the carrying amount and fair value of the
Group’s financial assets and liabilities:
Carrying
amount
Fair value
Notes
2021
$m
2020
$m
2021
$m
2020
$m
Financial assets
carried at fair value
Foreign exchange
contracts
Interest rate swaps –
Finance AMTN 1
Interest rate swaps –
Network AMTN 3
CCIRS – Network
EMTN 1
CCIRS – Network
EMTN 2
Financial assets carried
at amortised cost
Cash and cash
equivalents
Trade and other
receivables
Financial liabilities
carried at fair value
Foreign exchange
contracts
Interest rate swaps
Interest rate swaps –
Network AMTN 3
Interest rate swaps –
Network AMTN 4
0.1
1.9
–
0.2
–
3.2
0.1
1.9
–
0.2
–
3.2
109.2
155.3
109.2
155.3
13.9
125.1
62.3
221.0
13.9
125.1
62.3
221.0
148.8
29.3
148.8
29.3
6
483.8
632.6
460.1
489.4
483.8
632.6
460.1
489.4
(0.5)
(40.3)
(1.7)
(79.1)
(0.5)
(40.3)
(1.7)
(79.1)
(0.4)
(26.0)
(67.2)
–
–
(80.8)
(0.4)
(26.0)
(67.2)
–
–
(80.8)
Financial liabilities carried at
amortised cost
Trade and other
payables
11
(269.1)
(323.0)
(269.1)
(323.0)
Borrowings1
Off-balance sheet
Unrecognised financial
assets
Third party
guarantees
Bank guarantees
Insurance company
guarantees
Unrecognised
financial liabilities
Bank guarantees
17 (3,738.0) (3,607.2) (3,912.6) (3,688.6)
(4,011.6)
(4,007.1) (3,930.2)
(4,181.7)
–
–
–
–
–
–
–
–
–
–
19.1
299.0
19.1
315.6
0.8
2.3
(16.6)
302.3
(17.8)
319.2
1 Borrowings includes $2,712.7 million (2020: $1,822.5 million) subject to fair
value hedges.
87
Notes to the consolidated financial statements30 June 2021 (continued)FINANCIAL REPORT Group structure
IN THIS SECTION
Group structure provides information about particular
subsidiaries and associates, and how changes have affected
the financial position and performance of the Group.
19 Associates and joint ventures
20 Material subsidiaries
21 Parent entity disclosures
Page 89
Page 89
Page 90
22 Acquisition of subsidiaries and interests in joint ventures
Page 90
23 Discontinued operations
24 Assets classified as held for sale
Page 91
Page 91
88 AURIZON ANNUAL REPORT 2020–21
Notes to the consolidated financial statements30 June 2021 (continued) Notes to the consolidated financial statements
30 June 2021 (continued)
19 Associates and joint ventures
20 Material subsidiaries
The Group has an interest in the following associates and joint ventures:
Ownership interest
Country of
operation
2021
%
2020
%
Principal
activity
The ultimate parent of the Group is Aurizon Holdings Limited. The
companies listed below are those whose results, in addition to the parent
entity, principally affect the amounts shown in the financial report:
Name
Associates
Aquila Resources
Limited1
Joint ventures
Coal Network
Capacity Co Pty Ltd
Ox Mountain
Limited2
Chun Wo/CRGL
ARG Risk
Management Limited
Integrated Logistics
Company Pty Ltd
Australia
Australia
United
Kingdom
China –
Hong Kong
Bermuda
Australia
–
8
42
17
50
14
15
50
Insurance
14
15
Consulting
Dormant
ACN 169 052 288
Australia
1 The sale of the shares held in Aquila Resources Limited completed on 26 May
2021.
2 Refer to note 22 for further information.
The Group’s share of net profit from investments in joint ventures in
the period is $0.3 million (2020: net loss $0.1 million). The Group’s
share of net assets from investment in joint ventures at reporting date
are $26.1 million (2020: $2.7 million) and are not considered material.
(a) Accounting policies
Investments in associates and joint ventures are accounted for using the
equity method of accounting. Investments are initially recognised at cost
and subsequently adjusted for the Group’s share of net profit or loss.
The carrying value of an investment is reduced by the value of dividends
received from the associate or joint venture.
When the Group’s share of losses in an associate equals or exceeds its
interest, 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.
The carrying amount of investments are tested for impairment in
accordance with the policy described in note 8.
15
8
–
Exploration
and mining
Controlled entities
Aurizon Operations Limited
Independent
Expert
Software
Australia Eastern Railroad Pty Ltd
Australia Western Railroad Pty Ltd
Aurizon Network Pty Ltd
Aurizon Property Pty Ltd
17 Construction
Aurizon Finance Pty Ltd
Ownership
interest
Country of
incorporation
2021
%
2020
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
100
Aurizon Port Services Pty Ltd
Aurizon Port Service NSW Pty Ltd
Iron Horse Insurance Company Pte Ltd
Singapore
(a) Principles of consolidation
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 financial year.
Subsidiaries are all entities over which the Group has control. The Group
controls an entity when the Group is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect
those returns through its power to direct the activities of the entity.
Subsidiaries are fully consolidated from the date on which control is
transferred to the 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.
Where arrangements between the continuing and discontinued
operations will continue subsequent to disposal, transactions including
revenue and expenses are included in continuing operations profit or loss
with elimination entries recognised in profit or loss of the discontinued
operation.
Inter-company transactions and balances are eliminated on consolidation.
(b) Changes in ownership interest
When the Group ceases to have control, joint control or significant
influence, any retained interest in the entity is remeasured to its fair value
with the change in carrying amount recognised in profit or loss. The re-
measured fair value becomes the initial carrying amount for the purposes
of subsequently accounting for the retained interest of an associate, joint
venture or financial asset. Any amounts previously recognised in other
comprehensive income are accounted for as if the Group had directly
disposed of the related assets or liabilities and may result in amounts
previously recognised in other comprehensive income being reclassified
to profit or loss.
If the ownership interest in a joint venture or an associate is reduced
but joint control or significant influence is retained, only a proportionate
share of the amounts previously recognised in other comprehensive
income are reclassified to profit or loss where appropriate.
89
FINANCIAL REPORT 206.7
506.6
Cash paid
3,452.7
3,453.5
Contingent consideration
44.2
2.0
Total purchase consideration
21 Parent entity disclosures
The financial information for the parent entity Aurizon Holdings Limited
has been prepared on the same basis as the consolidated financial
statements, except for investments in subsidiaries which are carried at
cost less accumulated impairment losses.
(a) Summary financial information
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
Profit for the year
Total comprehensive income
2021
$m
8.4
2020
$m
83.4
3,703.2
4,004.5
3,711.6
4,087.9
(7.6)
(0.4)
(8.0)
(83.2)
(42.6)
(125.8)
3,703.6
3,962.1
3,703.6
3,962.1
571.0
571.0
513.8
513.8
All costs associated with employees of the parent entity are borne by a
subsidiary and recharged by the parent entity as they are settled. The
parent entity disclosure includes employee benefit provisions and other
labour accruals for these employees.
(b) Guarantees entered into by the parent entity
Aurizon Holdings Limited has provided a Parent Company Guarantee
(PCG) in favour of Moorebank Intermodal Company (MIC) as a residual
obligation in relation to 50% of the cost to complete construction of
Terminal Works, and 25% of the contract sum for design and construction
of Rail Access. The estimated maximum exposure under the guarantee
is $93.3 million (2020: $65.8 million), however Aurizon Holdings Limited
has obtained a 100% cross indemnity guarantee from Qube Holdings Ltd
in respect of any call under the Aurizon Holdings Limited PCG.
The parent entity did not have any material contingent liabilities or
contractual commitments for the acquisition of property, plant and
equipment as at 30 June 2021 (2020: $nil).
90
22 Acquisition of subsidiaries and
interests in joint ventures
(a) Summary of acquisitions in 2021
(i) Ox Mountain Limited
The Group acquired a 41.67% investment in Ox Mountain Limited (UK
registered), a maintenance software developer and distributor, for
consideration of $22.4 million on 28 August 2020. The investment is
accounted for using the equity method of accounting.
(ii) ConPorts Pty Ltd
The Group acquired 100% of the issued shares in ConPorts Pty Ltd,
a shiploading services provider in Newcastle, for consideration of
$42.7 million on 31 December 2020. The company was renamed Aurizon
Port Services NSW Pty Ltd. The acquisition includes long-term leases at
the Port of Newcastle with shiploading facilities adjacent to rail lines.
Details of the provisional purchase consideration, the net assets acquired
and goodwill are as follows:
$m
41.7
1.0
42.7
Fair value
$m
34.4
(11.4)
23.0
19.7
42.7
Total assets
Total liabilities
Net identifiable assets acquired
Add: Goodwill
Net assets acquired
Goodwill is attributable to future customer growth and has been
allocated to the Bulk NSW CGU, refer to note 9 for further information.
None of the goodwill is expected to be deductible for tax purposes.
Acquisition costs of $2.1 million were expensed to profit or loss. Net cash
outflow from investing activities for the acquisition was $41.1 million,
representing cash paid of $41.7 million net of cash acquired of $0.6 million.
(b) Summary of acquisitions in 2020
(i) Flinders TBSH Pty Ltd
The Group acquired 100% of the issued shares in Flinders TBSH Pty Ltd,
a bulk transport, handling and stevedoring service provider in North
Queensland, for consideration of $24.8 million on 20 March 2020. The
company was renamed to Aurizon Port Services Pty Ltd. The acquisition
included long-term leases at the Port of Townsville with bulk storage
warehouses and handling facilities adjacent to rail lines. The business is
complementary to the Bulk QLD rail operation as it is located at the end
of the Mt Isa rail line connecting the Port of Townsville to the commodity-
rich North West Minerals Province.
The fair value of the net identifiable assets acquired was $19.6 million
resulting in goodwill of $5.2 million. Goodwill is attributable to future
customer growth and was allocated to the Bulk QLD CGU. Net cash
outflow from investing activities for the acquisition was $24.5 million,
representing cash paid of $24.8 million net of cash acquired of $0.3 million.
Notes to the consolidated financial statements30 June 2021 (continued)AURIZON ANNUAL REPORT 2020–21 Notes to the consolidated financial statements
30 June 2021 (continued)
23 Discontinued operations
24 Assets classified as held for sale
(a) Description
Closure and sale of Intermodal
On 26 March 2021, the Group completed the sale of the Acacia Ridge
Intermodal Terminal to Pacific National.
(b) Financial performance and cash flow information
The financial information relating to the discontinued operations is set
out below.
Property, plant and equipment
Trade and other receivables
Total assets held for sale
2021
$m
2020
$m
5.0
–
5.0
61.2
3.9
65.1
Revenue
Other income
Employee benefits expense
Energy and fuel
Consumables
Depreciation
Other expenses
Profit before income tax
Income tax expense
Profit from discontinued operations after tax
Net cash (outflow)/inflow from operating
activities
Net cash inflow from investing activities
Net cash inflow/(outflow) from financing
activities
Net increase in cash generated by the
discontinued operations
(c) Significant items
2021
$m
21.5
161.2
(2.4)
(0.1)
(3.9)
–
(0.3)
176.0
(52.4)
123.6
(23.0)
168.8
–
2020
$m
25.0
2.5
(3.6)
(0.2)
(8.4)
(0.2)
0.1
15.2
(4.4)
10.8
9.9
0.4
–
145.8
10.3
The Group’s underlying results differ from the statutory results.
The exclusion of certain items permits a more appropriate and
meaningful analysis of the Group’s underlying performance on a
comparative basis.
Significant items
Net gain on sale of Acacia Ridge Intermodal
Terminal (before income tax)
Net gain on sale of assets
2021
$m
2020
$m
161.1
–
161.1
–
2.5
2.5
Net gain on sale (before income tax) includes proceeds received of
$209.0 million less net assets at the date of disposal of $45.4 million and
disposal costs of $2.5 million.
FINANCIAL REPORT 91
Notes to the consolidated financial statements
30 June 2021 (continued)
Other notes
IN THIS SECTION
Other notes provides information on other items which require
disclosure to comply with Australian Accounting Standards and
other regulatory pronouncements, however are not considered
critical in understanding the financial performance or position of
the Group.
25 Notes to the consolidated statement of cash flows
26 Related party transactions
27 Key Management Personnel
28 Share-based payments
29 Auditor’s remuneration
30 Summary of other significant accounting policies
Page 93
Page 94
Page 94
Page 94
Page 95
Page 95
92
AURIZON ANNUAL REPORT 2020–21
25 Notes to the consolidated statement of cash flows
(a) Reconciliation of net cash inflow from operating activities to profit from continuing operations
Profit from continuing operations
Depreciation and amortisation
Impairment of non-financial assets
Net finance costs
Non-cash employee incentive expense
Net (gain)/loss on disposal of assets
Net gain on sale of business
Share of profits/(loss) of associates and joint ventures
Net exchange differences
Change in operating assets and liabilities:
(Increase)/Decrease in trade and other receivables
(Increase)/Decrease in inventories
(Increase)/Decrease in other operating assets
Increase/(Decrease) in trade and other payables
Increase/(Decrease) in other liabilities
Increase/(Decrease) in current tax liabilities
Increase/(Decrease) in deferred tax liabilities
Increase/(Decrease) in provisions
2021
$m
606.7
579.1
3.1
149.4
4.9
(16.5)
–
(0.3)
(0.1)
(20.2)
(12.2)
(8.5)
(25.5)
8.8
(91.8)
75.7
24.4
2020
$m
605.1
558.6
5.7
151.0
5.8
1.1
(105.4)
0.1
(0.1)
25.9
(26.2)
(19.2)
(77.3)
(3.5)
39.9
74.4
1.6
Net cash inflow from operating activities from continuing operations
1,277.0
1,237.5
(b) Reconciliation of liabilities arising from financing activities to financing cash flows
Balance as at 1 July 2020
Financing cash flows2
Effect of changes in exchange rates
Other changes in fair values
Other non-cash movements
Balance as at 30 June 2021
Balance as at 1 July 2019
Reclassification
Financing cash flows2
Effect of changes in exchange rates
Other changes in fair values
Other non-cash movements
Balance as at 30 June 2020
Current
borrowings
$m
Non-current
borrowings
$m
Liabilities
held to
hedge
borrowings1
$m
Assets held
to hedge
borrowings1
$m
Total
$m
(657.6)
(2,949.6)
(79.1)
220.8
(3,465.5)
599.0
(835.2)
–
(0.4)
–
(59.0)
(149.0)
(523.5)
16.0
–
(1.1)
–
53.7
53.9
(1.8)
(3,679.0)
(3,220.8)
523.5
(227.2)
(14.1)
(9.6)
(1.4)
(657.6)
(2,949.6)
–
–
12.4
–
(66.7)
(49.1)
–
–
–
(30.0)
–
(79.1)
–
(236.2)
(53.7)
(42.1)
–
125.0
196.8
–
–
14.1
9.9
–
–
23.8
(1.8)
(3,679.7)
(3,222.1)
–
(211.2)
–
(30.8)
(1.4)
220.8
(3,465.5)
1 Assets and liabilities held to hedge borrowings exclude foreign exchange contracts included in note 18(a).
2 Financing cash flows consists of the net amount of proceeds from borrowings, repayment of borrowings and payments of transaction costs related to borrowings.
93
Notes to the consolidated financial statements30 June 2021 (continued)FINANCIAL REPORT
26 Related party transactions
The table below summarises the total movements in the performance
rights issued by the Group:
Related parties include investments and Key Management Personnel
(KMP). There were no transactions with related parties during the
financial year (2020: $nil).
27 Key Management Personnel
KMP include the Non-Executive Directors and those Executives who
have the authority and responsibility for planning, directing and
controlling the activities of the Group.
Short-term employee benefits
Long-term employee benefits
Post-employment benefits
Other benefits
Share-based payments expense
2021
$’000
2020
$’000
9,064
8,054
154
218
1,041
2,995
13,472
119
214
386
2,662
11,435
Detailed remuneration disclosures are provided in the Remuneration
Report section of the Directors’ Report. Apart from the information
disclosed in this note, no Director has entered into a material contract
with the Group in the financial year and there were no material contracts
involving Directors’ interests existing at year end (2020: nil).
28 Share-based payments
The Group provides benefits to employees (including
senior executives) of the Group in the form of share-
based payment incentives. The performance rights
plans were established by the Board to motivate and
incentivise employees to develop and successfully
execute against short and long-term strategies that
grow the business and generate shareholder returns.
The schemes under the plan include a Short-term
Incentive Award (STIA), a Long-term Incentive Award
(LTIA) and a Retention award. The schemes have
various terms and performance measures.
This note should be read in conjunction with the Remuneration Report,
as set out in the Directors’ Report, which contains detailed information
regarding the setting of remuneration for KMP.
94
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 year1
Number
‘000
2021
STIA
LTIA
428
391
(428)
–
391
7,990
2,958
(267)
(2,169)
8,512
Retention
281
46
(264)
–
63
8,699
3,395
(959)
(2,169)
8,966
546
480
(546)
(52)
428
Total
2020
STIA
LTIA
10,679
2,354
Retention
263
18
–
–
(5,043)
7,990
–
281
Total
11,488
2,852
(546)
(5,095)
8,699
1 Balance of rights at the end of the year remains unvested.
During the period, the Group recognised a share-based payment expense
of $4.9 million (2020: $5.9 million).
The weighted average share price at the date performance rights were
exercised during the period was $4.40 (2020: $5.79). The weighted
average remaining contractual life of unvested rights at 30 June 2021 was
1.9 years (2020: 1.6 years).
Market valuation techniques were used to determine the fair value of
performance rights granted and are summarised below:
Scheme
Fair Value
STIA
Share price at grant date
Retention
LTIA
– ROIC
– TSR
Share price at grant date
Share price at grant date less
estimated dividend yield
Monte-Carlo simulation
technique
2021
2020
$
4.30
4.32
3.15
1.86
$
6.03
5.85
4.77
3.12
The table below summarises the inputs to the fair value calculation under
the Monte-Carlo simulation technique:
Inputs
Expected dividend yield (%)
Expected price volatility of the Company's
shares (%)
Share price at grant date ($)
Risk-free interest rate (%)
Expected life of rights (years)
2021
6.40
2020
5.30
39.20
17.80
4.07
0.20
4.00
5.80
0.80
4.00
The expected price volatility of the Company’s shares reflects the
assumption that the historical volatility is indicative of future trends,
which may not necessarily be the actual outcome.
Notes to the consolidated financial statements30 June 2021 (continued)AURIZON ANNUAL REPORT 2020–21 29 Auditor’s remuneration
During the year, the following fees were paid or payable for services
provided by the auditor of the parent entity and its related practices:
PwC Australia
Audit and review of financial statements
Group
Controlled subsidiaries
Other assurance services
Tax advisory services
Other advisory services
2021
$’000
2020
$’000
423
767
1,190
60
–
80
393
797
1,190
34
11
59
Total remuneration of PwC Australia
1,330
1,294
30 Summary of other significant
accounting policies
Other significant accounting policies adopted in the preparation of the
consolidated financial statements are set out below.
(a) Basis of preparation
(i) New and amended standards adopted by the Group
The IFRS Interpretations Committee (IFRIC) issued agenda decisions
relating to the accounting for SaaS arrangements. The Group has
implemented this guidance and determined that there is no material
impact as a result of the change in accounting policy.
The Group has applied the following standards and amendments for the
first time for the reporting period commencing 1 July 2020:
› AASB 2018-7 Amendments to Australian Accounting Standards –
Definition of Material
› AASB 2018-6 Amendments to Australian Accounting Standards –
Definition of a Business
› AASB 2019-3 Amendments to Australia Accounting Standards –
Interest Rate Benchmark Reform
› AASB 2019-5 Amendments to Australian Accounting Standards –
Disclosures of the Effect of New IFRS Standards Not Yet issued in
Australia
› AASB 2019-1 Amendments to Australia Accounting Standards –
References to the Conceptual Framework.
The Group also elected to adopt the following amendments early:
› AASB 2020-8 Amendments to Australia Accounting Standards –
Interest Rate Benchmark Reform Phase 2.
The Interest Rate Benchmark Reform amendments modify specific hedge
accounting requirements to allow hedge accounting to continue during
the period of uncertainty relating to the benchmark reforms for affected
cash flow and fair value hedges related to the Group’s EMTNs. The
Interest Rate Benchmark Reform and other amendments listed above did
not have any impact on the amounts recognised in prior years and are
not expected to significantly affect the current or future years.
(ii) New standards and interpretations not yet adopted
Certain new accounting standards and amendments to standards
have been published that are not mandatory for reporting periods
commencing 1 July 2020 and have not been early adopted by the Group.
These standards are not expected to have a material impact on the entity
in the current or future reporting periods and on foreseeable future
transactions.
(b) Cash and cash equivalents
Cash and cash equivalents include cash at-bank and on-hand, and short-
term money market investments with an original maturity of three months
or less and are classified as financial assets held at amortised cost.
Cash at-bank earns interest at floating rates based on daily bank
deposits. Short-term deposits are made for varying periods, depending
on the immediate cash requirements of the Group and earn interest at
the respective short-term deposit rates.
(c) Foreign currency and commodity transactions
Items included in the financial statements of each of the entities included
within the Group are measured using the currency of the economic
environment in which the entity primarily generates and expends cash.
These financial statements are presented in Australian dollars, which is
the functional and presentation currency of the Company.
Transactions in foreign currencies are initially recorded in the functional
currency of the entity using the exchange rate prevailing at the date
of the transaction. Monetary assets and liabilities denominated in
foreign currencies are translated at the rate of exchange ruling at the
balance sheet date. Foreign exchange gains and losses arising from the
translation of the monetary assets and liabilities, or from the settlement
of foreign currency translations, are recognised in profit or loss, except
when deferred in equity as qualifying cash flow hedges. The amounts
deferred in equity in respect of cash flow hedges are recognised in profit
or loss when the hedged item affects profit or loss.
As at the reporting date, the assets and liabilities of entities within the
Group that have a functional currency different from the presentation
currency, are translated into Australian dollar at the rate of exchange at
the balance sheet date and profit or loss are translated at the average
exchange for the year. The exchange differences arising on the balance
sheet translation are taken directly to a separate component in equity in
the foreign currency translation reserve.
95
Notes to the consolidated financial statements30 June 2021 (continued)FINANCIAL REPORT Notes to the consolidated financial statements
30 June 2021 (continued)
(d) Business combinations
The acquisition method of accounting is used to account for all business
combinations, regardless of whether equity instruments or other
assets are acquired. In accordance with the acquisition method, the
Group measures goodwill, at acquisition date, as the fair value of the
consideration transferred less the fair value of the identifiable assets
and liabilities acquired. The fair value of the consideration transferred
comprises the initial cash paid and an estimate for any future contingent
or deferred payments the Group may be liable to pay.
The application of the acquisition method requires certain estimates
and assumptions to be made particularly around the determination of
fair value of any contingent or deferred consideration, the acquired
intangible assets, property, plant and equipment, and liabilities assumed.
Such estimates are based on information available at acquisition date.
Acquisition-related costs are expensed as incurred.
Predecessor value method of accounting is used to account for all
business combinations that involve entities under common control.
Acquired assets and liabilities are recorded at their existing carrying
values and no goodwill is recorded. Retrospective presentation of the
acquired entity’s results and balance sheet are incorporated as if both
entities had always been combined.
(e) 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 cost of disposal, 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.
An impairment loss is recognised for any initial or subsequent write-
down of the asset (or disposal group) to fair value less cost of disposal.
A gain is recognised for any subsequent increases in fair value less cost
of disposal of an asset (or disposal group), but not in excess of any
cumulative impairment loss previously recognised. A gain or loss not
previously recognised by the date of the sale of the non-current asset (or
disposal group) is recognised at the date of derecognition.
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.
A discontinued operation is a component of the entity that has been
disposed of or is classified as held for sale and that represents a separate
major line of business or geographical area of operations, is part of a
single co-ordinated plan to dispose of such a line of business or area of
operations, or is a subsidiary acquired exclusively with a view to resale.
The results of discontinued operations are presented separately in the
consolidated income statement.
(f) Financial instruments
(i) Non-derivative financial assets
The Group initially recognises financial assets on the trade date at
which the Group becomes a party to the contractual provisions of
the instrument. 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.
Financial assets are initially measured at fair value. If the financial asset
is not subsequently accounted for at fair value through profit or loss,
then the initial measurement includes transaction costs that are directly
attributable to the asset’s acquisition or origination. On initial recognition,
the Group classifies its financial assets as subsequently measured at
either amortised cost or fair value, depending on its business model
for managing the financial assets and the contractual cash flow
characteristics of the financial assets.
(ii) Financial assets measured at amortised cost
A financial asset is subsequently measured at amortised cost, using the
effective interest method and net of any impairment loss, if:
› the asset is held within the business model whose objective is to hold
assets in order to collect contractual cash flows; and
› the contractual terms of the financial asset give rise, on specified dates,
to cash flows that are solely payments of principal and interest.
The Group assesses at each reporting date whether there is objective
evidence that a financial asset (or group of financial assets) is impaired.
(iii) Non-derivative liabilities
The Group initially recognises loans and debt securities issued on the
date when they originate. Other financial liabilities are initially recognised
on the trade date. The Group derecognises a financial liability when its
contractual obligations are discharged or cancelled or expire.
Non-derivative financial liabilities are initially recognised at fair value
less any directly attributable transaction costs. Subsequent to initial
recognition, these liabilities are measured at amortised cost using the
effective interest method.
(g) Goods and Services Tax (GST)
Revenue, 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.
The Company and its subsidiaries are grouped for GST purposes.
Therefore, any inter-company transactions within the Group do not
attract GST.
96 AURIZON ANNUAL REPORT 2020–21
Unrecognised items and
events after reporting date
IN THIS SECTION
Unrecognised items provides information about items that are
not recognised in the financial statements but could potentially
have a significant impact on the Group’s financial position and
performance. This section also includes events occurring after
the reporting date.
31 Commitments and contingencies
32 Events occurring after the reporting period
Page 98
Page 98
FINANCIAL REPORT 97
31 Commitments and contingencies
32 Events occurring after the
reporting period
No matter or circumstance, other than the matters disclosed in key events
and transactions for the reporting period, has occurred subsequent to the
financial period that has significantly affected, or may significantly affect,
the operations of the Group, the results of those operations, the state of
affairs of the Group or economic entity in subsequent financial periods.
(a) Contingent liabilities
Issues relating to common law claims, product warranties and regulatory
breaches are dealt with as they arise. There were no material contingent
liabilities requiring disclosure in the financial statements, other than as
set out below.
Guarantees and letters of credit
For information about guarantees and letters of credit given by the
Group, refer to note 18(d). For information about the MIC Parent
Company Guarantee, refer to note 21(b).
Transfer duty exemption
The transfer of ownership of Aurizon Network Pty Ltd from Aurizon
Operations Limited to Aurizon Holdings Limited in FY2019 qualified for
an exemption from transfer duty under the Queensland Duties Act 2001.
Should duty become payable in respect of the restructure (for example,
due to a change in ownership of Aurizon Network Pty Ltd within three
years of the transfer of the shares in FY2019), Aurizon estimates the duty
liability may be approximately $295 million.
(b) Contingent assets
Guarantees and letters of credit
For information about guarantees given to the Group, refer to note 18(d).
Wiggins Island Rail Project (WIRP)
The amount of WIRP fees ultimately payable by WIRP customers will be
dependent upon finalisation of the appeal of the Expert’s Determination
and finalisation of a cost variation factor related to WIRP project costs.
WIRP fees of $60.3 million, including $48.9 million of historical fees
(relating to FY2016 – FY2020), have been recognised in FY2021 (2020:
$nil).
(c) Capital commitments
At 30 June 2021, the Group has capital commitments contracted but
not provided for in respect of the acquisition of property, plant and
equipment of $77.3 million (2020: $102.6 million) which are due within
one year.
98
Notes to the consolidated financial statements30 June 2021 (continued)AURIZON ANNUAL REPORT 2020–21 Directors’ Declaration
30 June 2021
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 48 to 98 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,
(ii) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2021 and of its performance
for the financial 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.
Page 54 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.
Tim Poole
Chairman
Brisbane
9 August 2021
FINANCIAL REPORT
99
Independent auditors’ report
To the members of Aurizon Holdings Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Aurizon Holdings Limited (the Company) and its controlled
entities (together the Group) is in accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the Group's financial position as at 30 June 2021 and of its
financial performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
●
●
●
●
●
●
●
the consolidated balance sheet as at 30 June 2021
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the consolidated income statement for the year then ended
the notes to the consolidated financial statements, which include significant accounting policies
and other explanatory information
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditors’ responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence
Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
PricewaterhouseCoopers, ABN 52 780 433 757
480 Queen 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.
100
AURIZON ANNUAL REPORT 2020–21
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
Materiality
Audit scope
Key audit matters
● For the purpose of our audit we used
overall Group materiality of $35 million,
which represents approximately 5% of
the Group’s adjusted profit before
income tax.
● We applied this threshold, together with
qualitative considerations, to determine
the scope of our audit and the nature,
timing and extent of our audit
procedures and to evaluate the effect of
misstatements on the financial report as
a whole.
● We chose Group adjusted profit before
income tax because, in our view, it is the
benchmark against which the
performance of the Group is most
commonly measured. To calculate
materiality, we adjusted profit before
income tax for significant unusual items
such as the sale of an interest in an
equity-accounted investment and
discontinued operations. These
adjustments were tested separately
using a specific materiality level.
● We utilised a 5% threshold based on our
professional judgement, noting it is
within the range of commonly
acceptable thresholds.
● Our audit focused on
where the Group made
subjective judgements; for
example, significant
accounting estimates
involving assumptions and
inherently uncertain
future events.
● The Group is a large rail-
based freight operator and
transports coal, iron ore
and other bulk
commodities across
Australia.
● The Group also owns and
operates the Central
Queensland Coal Network
(CQCN) which is a multi-
user track network that
comprises four major coal
systems and one
connecting system serving
Queensland’s Bowen Basin
coal region.
● Amongst other relevant
topics, we
communicated the
following key audit
matters to the Audit,
Governance and Risk
Management
Committee:
− Access revenue
recognition
− Recoverability of
the Western
Australia and Bulk
Queensland cash
generating units
(CGUs)
− Assessment of
useful lives of
assets
● These are further
described in the Key
audit matters section of
our report.
101
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context.
Key audit matter
How our audit addressed the key audit
matter
Access revenue recognition
(Refer to note 2 and Key events and transactions for
the reporting period)
Take-or-Pay access revenue recognition - $77.5m
During the year ended 30 June 2021 (FY2021), the
Group recorded track access revenue of $1,166.4m.
Track access revenue is recognised over time as access
to the Central Queensland Rail Network (CQCN) is
provided and is measured on a number of operating
parameters, including the volume hauled and
regulator (Queensland Competition Authority (QCA))
approved pricing tariffs.
The tariffs are determined with reference to the total
allowable revenue, applied to the regulatory approved
annual volume forecast for each rail system.
Where annual volumes railed are less than the
regulatory forecast, Take-or-Pay clauses may be
triggered. Take-or-Pay is calculated based on the
Group’s judgement of below rail cause versus above
rail operator/mine cancellations.
In FY2021, the Group determined Take-or-Pay
clauses have been triggered under the 2017 Access
Undertaking resulting in $77.5m of revenue being
recognised where the Group considered that
customers have not railed their nominated forecast
volumes and the reason for the shortfall was not due
to Aurizon Network’s management of the CQCN.
There is judgement by the Group involved in respect
of the revenue recognised in accordance with the
Take-or-Pay clauses in determining whether the
shortfall to nominated forecast volumes is due to
below rail cause or above rail operator/mine
cancellations.
The following procedures, amongst others, were
performed in relation to Take-or-Pay access revenue
recognition:
● Obtained the computation for the Take-or-
Pay revenue and compared the basis of the
calculations to the 2017 Access Undertaking.
● Agreed on a sample basis the Take-or-Pay
calculation inputs (including operational
units such as tonnages hauled, train paths,
consist configuration, kilometres travelled
etc.) to underlying customer contracts and
other relevant documentation.
● Tested the mathematical accuracy of the
Take-or-Pay calculations.
● Compared the QCA approved tariffs and
forecast volumes to actual volumes and
revenue recognised during the financial year
to assess the shortfall and whether Take-or-
Pay clauses were triggered.
● Evaluated on a sample basis the evidence in
respect of the service cancellations
considered for Take or Pay calculations and
assessed the Group’s determination of
whether the cause for the resulting volume
shortfall was due to below rail or any other
cause.
102
AURIZON ANNUAL REPORT 2020–21
Wiggins Island Rail Project (WIRP) revenue
recognition - $60.3m
Wiggins Island Rail Project (WIRP) revenue
recognition
In FY2021, the Queensland Court of Appeal affirmed
a Supreme Court decision on the Group charging
customers non-regulated WIRP fees dating back to
March 2016.
Other disputes have been initiated by the customers
and were subject to expert determination. The
Expert’s determination was issued in June 2019 and
found that the WIRP fee should be partially reduced
however the Group has appealed this decision. Due to
this, the fee payable by the customers and revenue
recognised by the Group is dependent on the
finalisation of the appeal and finalisation of a cost
variation factor related to the project costs.
We considered revenue recognition to be a key audit
matter due to the complexity and judgement in the
determination of Take-or-Pay and WIRP revenue.
Recoverability of the Western Australia and
Bulk Queensland cash generating units
(CGUs)
(Refer to note 9)
● Obtained the computation for WIRP revenue
and on a sample basis, agreed the inputs
(target costs, base fee applicable to each of
the customers etc.) of the calculation to the
underlying WIRP Deeds and relevant
documentation.
● Tested the mathematical accuracy of the
WIRP revenue calculation.
● Obtained an understanding of the Group’s
assessment and determination of the
revenue recognised in relation to the
historical and current year’s fees in light of
the ongoing dispute between the parties to
the WIRP Deed.
● Evaluated the appropriateness of the
judgements made by the Group in relation to
the Expert’s determination and the pending
finalisation of the cost variation factor
related to WIRP project costs.
Western Australia (WA) and Bulk Queensland (QLD)
CGUs
To evaluate the Group’s assessment of the recoverable
amount of the WA and QLD CGUs, we performed a
number of procedures including the following:
The WA and Bulk QLD CGUs have been impaired
from FY2017 to FY2019 due to the loss of key
customers, challenging and competitive Bulk markets
and operational performance issues.
During FY2021, impairment reversal indicators have
been identified by the Group for the WA and Bulk
QLD CGUs.
The recoverable amounts of the CGUs have been
estimated using value in use (VIU) methodology
utilising a discounted cash flow model.
In estimating the recoverable amounts, the Group has
made the following key judgements:
● Current contractual arrangements with key
customers are complied with taking into
consideration the expected expiry and/or
renewal of the contracts; and
● A terminal value growth rate of 2.0% and the
pre-tax discount rate of 10.8%.
● Assessed whether the division of the Group’s
property, plant and equipment assets into
CGUs was consistent with our knowledge of
the Group’s operations and internal Group
reporting.
● Assessed whether the carrying value of the
CGUs included all assets and liabilities
directly attributable to the CGU and that the
model included all cash flows directly
attributable to the CGU and a reasonable
allocation of corporate overheads.
● Evaluated the Group’s historical ability to
forecast future cash flows by comparing
budgets with reported prior years’ actual
results.
103
Given the judgements incorporated by the Group, the
assessments of the recoverability of assets in relation
to the WA and Bulk QLD CGUs is considered to be a
key audit matter.
● Tested that forecast cash flows used in the
models were derived from the most up-to-
date corporate plan formally approved by the
Board.
● Evaluated the appropriateness of the
judgements made by the Group in relation to
key customers’ current and future
contractual arrangements.
● Assessed, with assistance from PwC
valuation experts:
o
o
o
the forecast terminal value growth
rate of 2.0% by comparing it to
economic forecasts;
that the pre-tax discount rate
applied in the model reflects the
risks of the CGU; and
the mathematical accuracy of the
model.
● Evaluated the Group’s sensitivity analysis to
assess whether a reasonably possible change
in underlying assumptions would give rise to
a further impairment or reversal of previous
impairments.
To evaluate the Group’s assessment of the useful lives
of assets, we performed the following procedures
amongst others:
● Evaluated the appropriateness of the
judgements made by the Group by
considering and/or assessing:
o
o
o
o
external reports including selected
reports on the future demand for
and supply of thermal and
metallurgical coal and forecast
global iron and steel production;
existing regulation regarding coal
mining in Queensland and New
South Wales;
selected reports on current
metallurgical coal reserves and
forecast production in Queensland;
current useful lives of selected coal
exposed businesses in Queensland
and New South Wales as well as
Global rail businesses; and
Assessment of useful lives of assets
(Refer to note 8)
During FY2021, the useful lives of assets used in the
Queensland Coal, New South Wales Coal and
Network cash generating units (CGUs) were reviewed
by the Group.
The useful lives of assets are determined based on the
expected engineering life and, where necessary,
capped at the remaining term of the applicable leases.
In determining whether the current useful lives
remain appropriate, the Group has reviewed a
number of indicators which are described in note 8 to
consider short-term impacts, as well as risks that may
emerge over the medium to long term, where the
timing and magnitude are less certain.
Given the judgements incorporated by the Group as
well as the magnitude of the asset balance, the
assessment of useful lives of assets is considered to be
a key audit matter.
104
AURIZON ANNUAL REPORT 2020–21
o
commitments to selected climate-
change policies of certain territories
and jurisdictions to which
Australian coal is exported and
used in the generation of electricity
and steel production.
● Evaluated the Group’s sensitivity analysis to
assess reasonable possible changes in the
useful lives that may give rise to additional
depreciation in the future.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 30 June 2021, but does not include the
financial report and our auditors’ report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditors’ report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditors’ report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
FINANCIAL REPORT 105
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of
our auditors’ report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 26 to 40 of the directors’ report for the
year ended 30 June 2021.
In our opinion, the remuneration report of Aurizon Holdings Limited for the year ended 30 June 2021
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
PricewaterhouseCoopers
Nadia Carlin
Partner
Brisbane
9 August 2021
Partner
Tim Allman
106 AURIZON ANNUAL REPORT 2020–21
Non-IFRS Financial Information
in FY2021 Annual Report
In addition to using profit as a measure of the
Group and its segments’ financial performance,
Aurizon uses EBITDA (Statutory and
Underlying), EBITDA margin – Underlying, EBIT
(Statutory and Underlying), NPAT – Underlying,
Return On Invested Capital (ROIC), Net debt
and Net gearing ratio. These measurements
are not defined under IFRS and are, therefore,
termed ‘Non-IFRS’ measures.
EBITDA – Statutory is Group profit before
net finance costs, tax, depreciation and
amortisation, while EBIT – Statutory is defined
as Group profit before net finance costs and
tax. EBIT – Underlying can differ from EBIT –
Statutory due to exclusion of significant items
that permits a more appropriate and meaningful
analysis of the underlying performance on a
comparative basis. EBITDA margin is calculated
by dividing underlying EBITDA by total revenue.
These measures are considered to be useful
measures of the Group’s operating performance
because they approximate the underlying
operating cash flows by eliminating depreciation
and amortisation.
NPAT – Underlying represents underlying EBIT
less finance costs, tax expense and the tax
impact of significant adjustments.
ROIC is defined as underlying rolling 12-month
EBIT divided by average invested capital.
Average invested capital is calculated as the
rolling twelve-month average of net assets
(excluding cash, borrowings, tax, derivative
financial assets and liabilities). This measure is
intended to ensure there is alignment between
investment in infrastructure and superior returns
for shareholders.
Net debt consists of borrowings (both current
and non-current) less cash and cash equivalents.
Net debt excludes lease liabilities. Net gearing
ratio is defined as Net debt divided by Net
debt plus Equity. Net debt and Net gearing
ratio are measures of the Group’s indebtedness
and provides an indicator of the balance sheet
strength. An alternative Net debt and Net
gearing ratio are also disclosed to include
derivative financial instruments used to hedge
market risk on borrowings.
These above mentioned measures are
commonly used by management, investors
and financial analysts to evaluate companies’
performance.
A reconciliation of the Non-IFRS measures and
specific items to the nearest measure prepared
in accordance with IFRS is included in the table.
The Non-IFRS financial information contained
within this Directors’ report and Notes to the
Financial Statements has not been audited in
accordance with Australian Auditing Standards.
NPAT – Underlying
Significant adjustments, net
of tax
Significant adjustment — Aquila
income tax benefit
NPAT – Statutory
Income tax expense
Profit before income tax
Net finance costs
EBIT – Statutory
Add back significant
adjustments:
– Net gain on sale of shares
in Aquila
– Net gain on sale of Acacia
Ridge Intermodal Terminal
– Net gain on sale of Rail
Grinding business
– Intermodal closure benefit
EBIT – Underlying
Depreciation and amortisation
EBITDA – Underlying
Average invested capital
ROIC
Net Gearing Ratio
Total borrowings
Less: cash and cash equivalents
Net debt
Total equity
Total capital
Net Gearing Ratio
Alternative Net Gearing
Ratio
Net debt
Accumulated fair value
adjustments1
Alternative Net Debt
Total equity
Total capital
Alternative Net Gearing Ratio
1 Refer to note 18(a)(ii).
2021
2020
Continuing
operations
$m
Discontinued
operations
$m
Continuing
operations
$m
Discontinued
operations
$m
533.2
5.7
67.8
606.7
159.3
766.0
145.3
911.3
10.8
112.8
–
123.6
52.4
176.0
-
176.0
(8.2)
–
(161.1)
–
–
14.9
–
14.9
–
–
–
903.1
579.1
1,482.2
8,418
10.7%
531.3
73.8
–
605.1
260.8
865.9
148.5
1,014.4
–
–
(105.4)
–
909.0
558.6
1,467.6
8,364
10.9%
2021
$m
3,738.0
(148.8)
3,589.2
4,274.6
7,863.8
45.6%
2020
$m
3,589.2
9.0
1.8
–
10.8
4.4
15.2
-
15.2
–
–
–
(2.5)
12.7
0.2
12.9
2020
$m
3,607.2
(29.3)
3,577.9
4,357.7
7,935.6
45.1%
2019
$m
3,577.9
(149.0)
(261.1)
3,440.2
4,274.6
7,714.8
44.6%
3,316.8
4,357.7
7,674.5
43.2%
107
FINANCIAL REPORT Shareholder Information
0.72
3.89
2.63
5.77
86.99
100.00
UNITS
77,198
RANGE OF FULLY PAID ORDINARY SHARES AS AT 2 AUGUST 2021
RANGE
1–1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 Over
Total
21,835
30,187
6,613
4,935
165
63,735
13,172,827
71,521,411
48,466,381
106,234,500
1,601,308,863
1,840,703,982
TOTAL HOLDERS
UNITS % OF ISSUED CAPITAL
UNMARKETABLE PARCELS AS AT 2 AUGUST 2021
Minimum $500.00 parcel at $3.88 per unit
MINIMUM PARCEL SIZE
129
HOLDERS
1,200
The number of shareholders holding less than the marketable parcel of shares is 1,200 (shares: 77,198).
SUBSTANTIAL HOLDERS OF 5% OR MORE OF FULLY PAID ORDINARY SHARES AS AT 2 AUGUST 2021*
NOTICE DATE
20/12/2017
28/01/2019
28/07/2021
SHARES
108,337,155
141,036,686
92,689,091
NAME
The Vanguard Group Inc
BlackRock Group
State Street Corporation
* As disclosed in substantial shareholder notices received by the Company.
INVESTOR CALENDAR
2022 DATES
14 February 2022
30 March 2022
8 August 2022
21 September 2022
13 October 2022
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
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 to the Company website,
aurizon.com.au, for an up-to-date list of upcoming events.
ASX code: AZJ
Investor Relations
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
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.
To request information relating to Investor
Relations please contact our Investor
Relations team on +61 7 3019 1127 or email:
investor.relations@aurizon.com.au.
108
AURIZON ANNUAL REPORT 2020–21
TOP 20 HOLDERS OF FULLY PAID ORDINARY SHARES AS AT 2 AUGUST 2021
NAME
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMINEES PTY LTD
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