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Contents
FY2022 in Review .................................................. 1
Chairman’s Report ................................................2
Managing Director & CEO’s Report ..............3
Directors’ Report ...................................................4
– Operating and Financial Review ................13
– Remuneration Report ....................................33
Auditor’s Independence Declaration ........49
Corporate Governance Statement .............50
Financial Report ...................................................57
Shareholder Information ................................118
Glossary .................................................................120
Corporate Information ...................................122
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.
2
AURIZON ANNUAL REPORT 2021–22 FY2022 in Review
Result highlights (Underlying and statutory continuing operations)
($M)
Total revenue
EBITDA
EBIT
Adjustments (refer to note 1(c))
EBIT Statutory
NPAT
NPAT Statutory
Free cash flow (FCF)
Final dividend (cps)
Total dividend (cps)
Earnings per share (cps)
Return on invested capital (ROIC)
EBITDA margin (%)
Operating ratio (OR) (%)
Above Rail Tonnes (m)
Above Rail opex/NTK (excluding access) ($/’000 NTK)
Gearing (net debt/(net debt + equity)) (%)
Major items
Following approval from the Australian
Competition and Consumer Commission
(ACCC) on 14 July 2022, the acquisition of
One Rail Australia Holdings LP (One Rail)
completed on 29 July 2022. The focus for
Aurizon is the integration of the One Rail Bulk
operations and the divestment of East Coast
Rail. This divestment will be undertaken either
through a demerger or trade sale, whichever
creates greater shareholder value. The financial
effects of the transaction have not been
recognised at 30 June 2022, refer to note
31 for further information.
Performance overview
› EBITDA down 1% to $1,467.6m with:
• Network down $47.5m (6%) driven by
lower WIRP fees and the impact of the
risk-free rate reset on GAPE revenues
• Bulk down $9.8m (7%) due to the end of
contracts for Mt Gibson and Queensland
livestock and approximately $10m worth
of one-off factors such as stand-up
costs associated with new contracts,
weather and an extended shut by a
major customer which more than offset
7% revenue growth
• Coal up $7.9m (1%) despite a 4%
reduction in volume, driven by higher
revenue quality and cost management
• Other improved by $34.8m (87%) due to
asset sales including the Rockhampton
workshops and the benefit to provisions
from higher discount rates.
› Free cash flow increased 13% to $663.6m
driven by lower cash taxes, the sale of
Rockhampton workshops and receipt of
FY2021 Network Take-or-Pay in the first
quarter of FY2022.
› Final dividend declared of 10.9cps (100%
franked) represents a payout ratio of 75%
of underlying NPAT for the continuing
operations.
FY2022
3,075.3
1,467.6
875.3
(14.2)
861.1
524.9
513.0
663.6
10.9
21.4
28.5
10.3%
47.7%
71.5%
244.8
23.8
40.9%
FY2021
3,019.3
1,482.2
903.1
8.2
911.3
533.2
606.7
588.6
14.4
28.8
28.5
10.7%
49.1%
70.1%
253.2
21.2
45.6%
VARIANCE
2%
(1%)
(3%)
(273%)
(6%)
(2%)
(15%)
13%
(24%)
(26%)
–
(0.4ppt)
(1.4ppt)
(1.4ppt)
(3%)
(12%)
4.7ppt
Outlook
Underlying group EBITDA guidance for FY2023
of $1,470m to $1,550m and non-growth capital
expenditure of $500m to $550m. This guidance
includes the impact from wet weather in July
2022 and 11 months of contribution from One
Rail Bulk with key assumptions as follows:
› Coal — volume expected to increase
but EBITDA to be lower due to revenue
yield reduction
› Bulk — revenue and EBITDA growth from
increased volumes and services and the
inclusion of One Rail Bulk
› Network — flat EBITDA assuming volumes
align to regulatory forecast, with higher
FY2023 MAR offset by the non-recurring
catch-up of historical WIRP fees
› No material disruptions to commodity
supply chains (such as extreme or prolonged
wet weather and/or significant impacts from
COVID-19 related disruptions)
› East Coast Rail is excluded from guidance
as it will be classified as a discontinued
operation held for sale from acquisition and
no dividend will be paid during Aurizon
Holdings’ ownership.
FY2022 IN REVIEW
1
Chairman’s Report
Dear fellow shareholders
I am pleased to present our FY2022 Annual
Report.
It has been a challenging but productive year
for Aurizon. We have navigated a number
of significant headwinds to deliver a solid
financial, operational and safety performance.
At the same time, we have continued to work
hard on transformation initiatives and the
securing of long-term growth opportunities
for the business.
Aurizon delivered Underlying Earnings Before
Interest, Tax, Depreciation and Amortisation
(EBITDA) of $1,468 million in FY2022, which is
in the middle of our guidance range of $1,425–
$1,500 million. This was a good result in a year
when our above rail and network volumes were
lower than we expected.
Aurizon’s business model and financial
performance has remained resilient despite many
challenges through the year, and ongoing issues
facing the Australian and global economies.
Like other Australian businesses, Aurizon is also
facing rising costs and a tight labour market for
skilled employees, including train crew.
Aurizon has a number of revenue protections
in its above rail haulage contracts and network
regulatory arrangements to help mitigate
the impact of inflation, higher energy costs
and lower tonnages. This has helped support
strong, stable cash flow and returns for the
business. Significant events in FY2022 that
impacted our business included:
› major flooding in parts of Queensland and
New South Wales that disrupted operations
of rail and port infrastructure and lowered
the production levels of our mining and
agricultural customers, resulting in reduced
haulage tonnes for Aurizon’s Bulk and Coal
businesses; and
› the ongoing impact of the COVID-19
pandemic on customers’ production
(primarily labour interruptions and supply
chain constraints), which escalated as borders
were re-opened and further outbreaks
occurred with Omicron variants, resulting in
lower demand for our rail haulage services.
The Board has declared a final dividend of
10.9 cents per share, 100% franked. This will
take total dividends in respect of FY2022 to
21.4 cents. As advised in February 2022, we
reduced our dividend payout ratio to 75% to
support Aurizon’s commitment to maintain our
strong investment grade credit ratings as we
complete the acquisition of One Rail Australia
Holdings LP (ORA). Including this final
dividend, Aurizon has returned to shareholders
$4.8 billion over the past seven years through
dividends and share buybacks.
To date Aurizon has been largely successful in
continuing to operate throughout the COVID-19
pandemic period without major interruptions
to our business. Across our national footprint,
local workplaces have done a good job in
protecting the health and well-being of
employees while ensuring transport and access
services continued for our customers and for
the benefit of the broader economy.
In terms of operational safety, the Board is
pleased to note the improvement in FY2022
across our key safety metrics, together with a
range of initiatives to support our employees’
physical and mental well-being. Our Managing
Director & CEO, Andrew Harding, shares more
detail in his report on the following page.
After year end, on 14 July 2022, we welcomed
regulatory approval of our $2,350 million
acquisition of ORA, which Aurizon first
announced in October 2021. This has involved
substantial work to date by the Aurizon project
and Bulk teams and we are now focused on
finalising all elements of the transaction.
The acquisition sets the stage for the next
growth phase for Aurizon, aligned with
our strategy to extend our reach into new
commodity-rich regions of Australia. It is also
a key plank in re-balancing Aurizon’s portfolio
over the next decade, with our Bulk business
positioned to assume a greater proportion of
Group revenue and earnings compared to coal-
related earnings. While high-quality Australian
metallurgical and thermal coal remains in high
demand globally and continues to be a strong
revenue and earnings source for Aurizon, we
view the transition to a lower-carbon world as a
major opportunity for the Australian economy
and for Aurizon. Australia has an abundance of
critical minerals and agricultural produce that will
help fuel and feed economies across the globe in
the decades to follow. With the ORA acquisition
coupled with our existing Bulk business, Aurizon
is well-positioned in those regions producing
these commodities, in Queensland, New South
Wales, Western Australia, South Australia and
the Northern Territory.
A range of initiatives are underway to reduce
our carbon footprint and to deliver lower
carbon supply chains for our customers. These
are captured in Aurizon’s Climate Strategy
and Action Plan that was released in 2020 and
which provides our roadmap to reach a target
of net-zero operational emissions (scope 1 and
2) by 2050. During the year, work was advanced
on developing low-carbon technologies for our
locomotive fleet including collaborating with
global mining company Anglo American on a
study to assess the introduction of hydrogen-
powered freight trains.
Work is also continuing with the University
of Queensland and Central Queensland
University on rollingstock and infrastructure
requirements for battery and hydrogen-
powered rail solutions. In June 2022,
Aurizon Network finalised a new electricity
contract for our Central Queensland Coal
Network which includes 25% of energy
acquired from renewable sources such as
solar and wind farms.
We know that rail is already the safest, most
efficient and lowest-carbon solution for
the land transport of bulk freight. Rapidly
developing battery and hydrogen technology
offers an exciting opportunity to take it to the
next level, where we can significantly lower
emissions for Aurizon, our customers and the
national economy. Zero or low-carbon supply
chains not only provide environmental benefits
for the community but also deliver competitive
advantage for Australian companies and our
export industries in global markets.
In closing, I would like to acknowledge the
tremendous effort and commitment of our
employees across the business during the last
year. Many parts of our operations dealt with
unprecedented flooding events, and all areas
of Aurizon worked hard to manage the health
and operational impacts of the pandemic. The
Board also extends its thanks and appreciation
to our Managing Director & CEO, Andrew
Harding, and his leadership team in guiding the
Company through this period and ensuring our
focus remained on delivering safe and reliable
services for our customers.
I also acknowledge the contribution of
Michael Fraser who retired as a Director of
the Company in February 2022. Michael was
a highly effective and valuable Director of
Aurizon and Chairman of Aurizon Network
over six years. His experience and insight,
particularly in relation to regulatory, competition
and legal issues was of great value to the
Aurizon Board and management team.
Finally, thank you to our shareholders for
your continued support. We have worked
hard to improve and re-position the
Company in recent years, building on a strong
platform of performance in our above rail
and network coal businesses and pivoting to
new growth opportunities in future-facing
markets for our Bulk business. With the ORA
acquisition, Aurizon is now entering its next
stage of growth where we continue our
commitment to create value and deliver
returns for shareholders.
Tim Poole
Chairman
8 August 2022
22
AURIZON ANNUAL REPORT 2021–22
Managing Director & CEO’s Report
Dear fellow shareholders
I open my report to you for FY2022 by
addressing our operational safety performance
and measures to support the health and well-
being of our employees.
As I write, another wave of COVID-19 has
emerged in parallel with a worse than usual
flu season. It is a time for renewed vigilance
in our communities and businesses, so we
can continue the gradual return to our regular
lives. Likewise in Aurizon, we are remaining
vigilant across our workplaces to protect the
health and well-being of our employees while
continuing to deliver for customers and for
the Australian economy. Many of the specific
health and hygiene measures we adopted
early in the pandemic in 2020 have become a
normal part of our working lives, just like they
have in the community. Practices such as social
distancing, heightened cleaning regimes and
good hygiene are supporting improved health
and productivity outcomes, now and for the
longer term. Our frontline teams have done
an excellent job in remaining disciplined and
diligent in the workplace, allowing the continued
delivery of safe, reliable services for customers.
Flexible working for non-operational employees
has become standard practice in Aurizon.
Teams have found new ways to connect and
to collaborate in this hybrid environment,
travel requirements and costs have reduced,
and technology solutions continue to evolve
to support improved productivity.
We know our employees are our greatest
asset and absolutely fundamental to our
Company’s continued success. Supporting
healthy employees and healthy communities
is a solid investment in our collective futures.
In recent years we have stepped up mental
health initiatives across the business, recognising
the extra challenges that arrived with COVID-19.
For example, Aurizon’s Mental Health Peer
Support Program has established a network
of volunteer Mental Health First Aiders.
The program provides volunteers from each
site/business unit with the skills required to
confidently support their peers in times of
need, before (if required) accessing
professional services provided by Aurizon.
Through our Community Giving Fund, Aurizon
supports the health and well-being of local
communities where our people live and work.
In FY2022, we provided grants to 43 charities
and community organisations in the areas
of health and well-being, safety, education
and environment. More than 500 groups
have benefitted from grants over the past 11
years, which represents a major commitment
by Aurizon in delivering social value to the
communities in which our business operates.
It’s been a little over 12 months since Aurizon
launched our national partnership with Orange
Sky Australia, the world’s first free mobile
laundry service for people experiencing
homelessness. Aurizon’s partnership has
assisted Orange Sky maintain and grow
their operations across Australia. It has also
connected Aurizon’s team in volunteering and
fundraising efforts across numerous campaigns.
Turning now to operational safety performance,
I am pleased to report significant improvements
in safety as we work at Aurizon to protect
ourselves, each other and our communities.
Importantly, none of our people was seriously
injured while at work.
The Total Recordable Injury Frequency Rate
improved 17.6% against the prior financial year.
Incident severity continues to reduce with soft
tissue injuries (low severity body strains) being
the most common. Several injury prevention and
management initiatives to reduce the frequency
of low severity injuries were implemented in
FY2022. Rail Process Safety, which measures
operational rail safety, including derailments,
signals passed at danger, and rollingstock
collisions, improved by 17.3% compared to
FY2021. Aurizon continues to progress several
strategic initiatives, including a focus on
improving yard safety interfaces to reduce
the number of yard incidents.
As the Chairman outlined in his report, the
Company has delivered good financial results
despite the economic disruption of COVID-19
and extreme weather events in Queensland and
New South Wales. At a group level, Aurizon
delivered Underlying Earnings Before Interest,
Tax, Depreciation and Amortisation (EBITDA) of
$1,468 million in FY2022. Below is an overview of
performance in each of our three business units.
Aurizon Bulk
After a number of years of rapid growth,
FY2022 was a year of consolidation and
investment for the Bulk business. It also
experienced a range of impacts that lowered
volumes including major flooding events,
COVID-related disruptions and customer-specific
reductions in production. Bulk’s EBITDA in
FY2022 was $130 million, down 7% compared
to FY2021.
Bulk incurred start-up costs in FY2022 for new
long-term business secured during the year,
including a 6+4-year contract for CBH grain
haulage in Western Australia and a 5+5-year
contract with Tronox for the transcontinental
haul of mineral sands concentrate from New
South Wales to Western Australia (WA).
Other contracts won during the year included
a five-year contract extension with Alcoa WA for
alumina and associated inputs and a five-year
contract with rare earths producer Lynas in WA.
In December 2021, the Queensland Government
advised we had been unsuccessful in retaining
the livestock contract in North Queensland.
We were pleased to complete the acquisition of
One Rail Australia in July 2022. This will result
in an uplift in revenues and tonnages for the
Bulk business, with strong opportunities as we
expand into commodity-rich regions of South
Australia (SA) and the Northern Territory (NT).
We will now also progress the divestment of
One Rail Australia’s coal haulage business,
which we refer to as East Coast Rail.
Aurizon Coal
Although overall tonnages of 194 million tonnes
in FY2022 were down 4% compared to FY2021,
the business has delivered a solid financial result
with EBITDA of $541 million, 1% more than the
prior year. This is primarily the result of improved
yield on contracted tonnes and lower costs for
track access, train crew and maintenance.
During FY2022, the Coal business secured a
number of contracts including a 10-year haulage
agreement with Pembroke Resources for the
new Olive Downs metallurgical coal mine in
Queensland, due to commence in late 2023;
and a five-year extension for Baralaba Coal in
Queensland. In addition, Aurizon remains the
primary hauler for South Walker Creek and
Poitrel mines in Queensland, following the sale
of these mines to Stanmore during FY2022.
Two contracts ended during FY2022, both in
December 2021. These were New Hope’s New
Acland mine (end of mine life) and Yancoal’s
Moolarben mine.
Aurizon Network
The Network business achieved EBITDA of $801
million, down 6% compared to FY2021. Revenue
reduced by 3%, with volumes lower than the
regulatory forecast in FY2022 resulting in an
under-recovery of revenue. Despite higher global
market demand for Australian coal, largely as a
result of the embargo on Russian coal supplies,
volumes across the Central Queensland Coal
Network declined by 1% to 206.5 million tonnes.
The volume reductions were largely attributable
to wet weather, mine-specific maintenance and
production issues as well as COVID-19 related
restrictions and disruptions.
In closing, I extend my gratitude to the
continuing efforts and dedication of Aurizon
teams across the country. In July 2022,
we have welcomed 400+ new employees to
the Company as we expand our national
footprint to SA and NT. I look forward to their
contribution in growing our business and
delivering each and every day for customers.
Andrew Harding
Managing Director & CEO
8 August 2022
MANAGING DIRECTOR & CEO’S REPORT
3
Directors’ Report
Aurizon Holdings Limited
For the year ended 30 June 2022
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 2022 and the
Independent Auditors’ Report thereon.
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)
This Directors’ Report has been prepared in
accordance with the requirements of Division 1
of Part 2M.3 of the Corporations Act.
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 – 11 February
2022)
(Independent Non-Executive Director)
Mr Fraser retired from the Board effective
11 February 2022.
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 each Director’s experience,
qualifications, special responsibilities and
other Directorships of listed companies as at
the date of this Directors’ Report are set out in
the pages following.
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).
44
AURIZON ANNUAL REPORT 2021–22 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.
A Harding
Experience: Mr Harding was appointed
Managing Director & CEO of Aurizon in
December 2016.
Mr Harding has more than 30 years’ experience
across the resource and rail sectors, as a leader
committed to creating sustainable, productive
businesses that make meaningful contributions
to the community.
Mr Harding has led initiatives to leverage
Aurizon’s core expertise in heavy haulage
and rail infrastructure and to drive improved
safety and operational performance.
Mr Harding champions the role of rail in
decarbonising the nation’s supply chains,
leveraging the environmental, safety and
productivity benefits of rail freight for
economic and community benefit.
Prior to starting with Aurizon, Mr Harding was
the global Chief Executive of Rio Tinto’s Iron
Ore business with responsibility for managing
supply chains for the world’s largest integrated
portfolio of iron ore assets.
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.
M Bastos
Experience: Mr Bastos has more than 35 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 — Chair
of Sustainability Committee, Non-Executive
Director of Anglo American PLC — Chair of
Global Workforce Advisory Panel. Mr Bastos
is also a Technical Review Board Member
of Sumitomo Corporation. He 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 is currently a full-time
Non-Executive Director. In addition to Aurizon,
her current roles are Non-Executive Director
and Chairman of the Audit & Compliance
Committee of Orora Limited, Non-Executive
Director and Chairman of the Audit & Risk
Committee of Nine Entertainment Co. Holdings
Limited and Chairman of APRA’s Audit and
Risk Committee. Previously, Ms Lewis was an
Assurance & Advisory partner from 2000 to
2014 with Deloitte Australia.
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.
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 Dr Ryan 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 Energy, 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 Energy
— 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 has a wealth of
experience in the aviation sector both in
Australia and abroad, spanning 40 years.
In June 2020, Mr Strambi concluded his
tenure as CEO and Managing Director of
Australia Pacific Airports Corporation (APAC).
Having been appointed in September 2015,
during his time at APAC he was responsible
for the operation and development of both
the Melbourne and Launceston airports and
for overseeing a direct workforce of 300 staff
and assets valued in excess of $10 billion.
Prior to his role 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.
As a Director, Mr Strambi has held positions
with APAC, StarTrack Express, Traveland and
Southern Cross Distribution Systems and was
President of the Royal Flying Doctors SE.
Qualifications: BBus (Accy), FAICD.
Special responsibilities: Chair 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.
66
AURIZON ANNUAL REPORT 2021–22
K Vidgen
Experience: Ms Vidgen began her career
as a banking, finance and energy lawyer
at Mallesons 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 Asset Management and is currently
the Head of Industrial Transition and Clean
Fuels globally, within 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 the Green Investment
Group and the broader Macquarie Group,
including chairing Macquarie Group’s Climate
Solutions Taskforce.
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.
Qualifications: LLB (Hons), BA, GAICD.
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.
FIGURE 1 — BOARD DIVERSITY
DIRECTORS BY GENDER:
FEMALE
38%
MALE 62%
DIRECTORS BY BOARD TENURE: YEARS
2-4 25%
4-6 37%
6–8 25% 10-12 13%
DIRECTORS BY AGE:
52-56 25%
56-60 50%
64-68 12%
>68 13%
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: LLB (Hons.), GDLP (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 eight 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.
Qualifications: LLB, BBus, GDLP
Board skills and experience
During the year, the Board reviewed and
updated its Board Skills Matrix to reflect the
mix of diverse skills and experience considered
optimal for the Board.
The Board considers its Directors collectively
have the range of skills, knowledge and
experience necessary to direct the Company.
The depth of experience held by the current
Board members across key skill and experience
areas including leadership, strategy and
governance is reflected in the matrix in Table 2
on the following page.
The Board is an advocate for diversity of
thinking and its gender, age and tenure
diversity is depicted in Figure 1.
In instances where the Board recognises
additional experience in a particular area
would be beneficial to the Board’s
performance, the Board takes the approach
of enhancing its experience in those areas,
including through development opportunities
such as conducting site visits, receiving further
briefings from management and third parties,
or undertaking workshops.
In identifying and selecting potential new
Directors, the Skills Matrix assists in identifying
the experience and skills that will best equip
the Board to fulfil its role.
DIRECTORS’ REPORT
7
Directors’ Report
(continued)
FIGURE 2 — BOARD SKILLS & EXPERIENCE
CATEGORY
1. Leadership
DESCRIPTION
SKILLS AND EXPERIENCE MIX
Both senior executive and non-executive director
experience with a significant listed or private company.
Significant skills
and experience
Limited skills
and experience
2. Strategy
Experience developing, assessing and executing strategic
plans to drive long term growth and transformation.
3. Transactions and
capital markets
Experience in completing significant corporate
transactions, equity/debt capital markets and
capital management.
4. Customer
and business
development
Experience in business development and developing
customer-focused strategies with a detailed knowledge
of Aurizon’s customer base.
5. Industry experience
Experience as a senior executive or advisor to a
transport business, a regulated infrastructure business,
or a business involved in bulk supply chains.
6. Technology
Experience in managing and protecting information,
identifying emerging or disruptive technologies,
and in critically assessing technology projects.
7. People and culture
Experience in employee relations strategies, governing
executive remuneration frameworks for listed companies,
and overseeing workplace culture and safety.
8. Sustainability
Experience in climate-exposed industries, transition
strategies, and emerging technologies or sources
of energy.
9. Government, industry
and community
Experience working with government, government
departments, relevant industry associations and
community stakeholders.
10. Financial expertise
Qualifications or experience in accounting or financial
reporting, and in assessing related reporting and
internal controls.
11. Risk management
Experience in overseeing risk frameworks and controls,
and in identifying and monitoring key risks and controls
and the effectiveness of risk and compliance functions.
12. Governance
Knowledge and experience of high standards
of corporate governance for listed companies.
88
AURIZON ANNUAL REPORT 2021–22 TABLE 1 — DIRECTORS’ MEETINGS AS AT 30 JUNE 2022
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 Fraser2
S Lewis
S Ryan
L Strambi
K Vidgen3
A
18
18
18
18
14
18
18
18
18
B
18
17
18
18
14
18
18
18
14
A
7
7
7
7
B
7
7
7
7
A
4
3
4
4
B
4
3
4
4
A
5
5
5
5
5
B
5
5
5
5
5
A
4
4
4
B
4
4
4
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 T Poole and A Harding met on two occasions.
2 M Fraser retired from the Board on 11 February 2022.
3 The four meetings not attended by Ms Vidgen were out of cycle board meetings called for a specific purpose, with Ms Vidgen excusing
herself on each occasion having regard to a potential conflict.
TABLE 2 — DIRECTORS’ INTERESTS AS AT 30 JUNE 2022
DIRECTOR
T Poole
A Harding
M Bastos
R Caplan
S Lewis
S Ryan
L Strambi
K Vidgen
NUMBER OF ORDINARY SHARES
180,500
1,728,659
60,947
82,132
63,025
63,000
42,787
40,000
Details regarding remuneration and shareholding of Directors is set out in the Remuneration Report.
Only Mr Harding, Managing Director & CEO, receives performance rights, details of which are set out
in the Remuneration Report.
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 four occasions.
Directors’ interests
Directors’ interests set out in Table 2 are as at
30 June 2022.
DIRECTORS’ REPORT
9
Directors’ Report
(continued)
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).
Coal
Transport of metallurgical and thermal coal
from mines in Queensland and New South
Wales to domestic customers and coal
export terminals.
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 13–32 of
this report.
Dividends
A final dividend of 14.4 cents per fully paid
ordinary share (70% franked) was paid on 22
September 2021 and an interim dividend of
10.5 cents per fully paid ordinary share (95%
franked) was paid on 30 March 2022.
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 10.9 cents per fully paid ordinary share.
The dividend will be 100% franked and is
payable on 21 September 2022.
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 31 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.
Since the end of the financial year, the
acquisition of One Rail LP completed
on 29 July 2022. Refer to note 31 for
further information.
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
We believe corporate governance is a critical
pillar on which our business objectives and,
in turn, shareholder value must be built. The
Board has adopted a suite of charters and
key corporate governance documents that
articulate the policies and procedures our
business follows in achieving our objectives.
Board skills and experience
Our Board is structured to include a
range of optimum skills that enable the
effective governance of our business. We
carefully consider the character, experience,
education and skill set as well as interests
and associations of potential candidates for
appointment to the Board, and we conduct
appropriate checks to verify the suitability
of candidates before their appointment. Our
Board members possess a range of skills and
experience across areas such as strategy,
transactions, technology, sustainability,
industry, government, and community
relations and governance (see pages 7 to 8
of this report for more detail). Therefore, our
Board is well equipped to consider a range of
sustainability– related issues.
Committees and meetings
The Board provides oversight and strategic
direction to sustainability and has ultimate
responsibility for our Company’s consideration
of climate-related risk. It is guided by our
Audit, Governance and Risk Management
Committee (AGRMC) and Safety, Health and
Environment Committee (SHEC) as part of our
risk framework and broader corporate strategy
and planning.
The AGRMC includes several members of
the Board, including the Chairman, and is
responsible for reviewing our governance
policies, framework and compliance. The
SHEC is responsible for reviewing and making
recommendations to the Board on matters
relating to safety, health and environmental
performance and policies.
The Board understands that climate change
is one of the key interests for stakeholders.
Following the launch of the Climate Strategy
and Action Plan (CSAP) during FY2021, the
cross-functional CSAP Steering Committee
has continued to guide the implementation
of the CSAP and to align initiatives under
the three key pillars: Manage Risk and Build
Resilience; Deliver Decarbonisation; and
Create Carbon Abatement Opportunities.
Discussions across a range of sustainability-
related topics, including climate change, occur
frequently at Board meetings. During FY2022,
the Board:
› provided guidance and approval of the
Sustainability Report and the implementation
of the CSAP
› oversaw progress and implementation
of the CSAP
› were directly engaged in reviewing the
scenarios for consideration under our
Strategy in Uncertainty 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 at least
annually to ensure that our strategic
priorities are continually updated so we
can proactively respond to emerging
market dynamics and opportunities.
Embedding sustainability into decision-making
The AGRMC Charter acknowledges the need
for the Board and, in turn, management
to maintain effective risk management to
identify and manage risks. This includes, but
is not limited to, contemporary or emerging
risks, such as conduct risk, digital disruption,
and cyber risks, and climate change and
sustainability risks. A copy of the charter
is available in the Governance section of
our website.
1010
AURIZON ANNUAL REPORT 2021–22 In that regard, climate change risk is
incorporated into our Enterprise Risk
Management Framework and is therefore
specifically considered during investment
decisions. Our Executive Committee and
AGRMC regularly review and update the
enterprise risk profile that applies the
Enterprise Risk Management Framework
to identify and rate enterprise-level risks for
our Company.
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 capital investment.
Managing sustainability performance through
targets and monitoring
We continue to manage our progress as an
organisation by monitoring our performance
against key sustainability targets and
objectives. Examples include (but are not
limited to):
› a net-zero operational emissions (scope 1
and 2) by 2050 target
› an additional emissions intensity reduction
target of 10% by 20301 to maintain an
emphasis on using existing capabilities and
assets in the near term
› two primary safety metrics to measure
safety outcomes across the enterprise: Total
Recordable Injury Frequency Rate (TRIFR)
and Potential Serious Injury and Fatality
Frequency Rate (SIFR(a+p))
› gender representation on the Board
› representation of women in senior
executive roles
› representation of women in the workforce
› representation of Aboriginal and Torres Strait
Islander men and women in the workforce.
At the start of the performance year, the Board
determines individual strategic measures for
the Managing Director & CEO. These measures
are based on our strategy of continuing to
optimise, excel and extend the business.
Relevant measures are subsequently cascaded
to the Executive Committee and throughout
the organisation.
Environmental and Cultural Heritage
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 laws and regulations
that have an environmental or cultural
heritage focus.
Aurizon contributed to reducing horn impacts
on the community, while maintaining safe
operations, by playing a key role in the
development of the 2022 Rail Industry Safety
and Standard Board’s Rail Traffic Horn Use
Code of Practice. In NSW, where noise remains
a focus of the EPA’s rollingstock licensing,
Aurizon’s operations continue to be compliant.
In FY2022, Aurizon completed a
comprehensive review of its Cultural
Heritage (CH) management resources. This
involved detailed gap analyses of existing
CH documentation, statutory obligations and
current agreements with Aboriginal parties.
The analyses yielded a CH Action Plan and
specialist CH and legal consultants were
engaged to advise on development of a CH
Governance Framework (CHGF) with key
success criteria being that it must be:
› contemporary, enabling Aurizon to meet
its regulatory obligations
› expanded such that it applies to Aurizon’s
national operational footprint
› aware of both Aboriginal and
non-Indigenous CH;
› effectively communicated, practical and
simple to implement.
Leading the CHGF is the CH Commitment
Statement, which is ‘to minimise our impact
on Indigenous and non-Indigenous cultural
heritage through a framework founded on
knowledge, understanding and respect’.
The Commitment Statement is underpinned
by an implementation framework, which:
› specifies jurisdictional requirements
› articulates organisational responsibilities and
accountabilities
› outlines, through bespoke guidelines and
procedures, how Aurizon’s CH obligations
are to be achieved during the planning and
execution of work, including engagement
with Aboriginal parties.
The CHGF was launched in November 2021 and
is available to all employees and contractors.
For the Central Queensland Coal Network,
the CHGF is further supported by an online
mapping resource that provides additional
guidance to enable compliant interface with
areas of CH value. Two online modules are
available which promote awareness of CH,
provide linkages to the CHGF and outline
scenarios that demonstrate how CH values
are protected during the conduct of work.
The modules are mandatory for roles where
there is a reasonable likelihood of encountering
CH during the ordinary conduct of work.
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 fifth Emissions Reduction
Fund Safeguard Mechanism (Safeguard)
compliance period (ended on 30 June 2021),
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 has successfully
transitioned all facilities remaining on reported
baselines to production-adjusted baselines.
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 2022.
Environmental and Cultural
Heritage prosecutions
Aurizon did not incur any monetary fines,
nor was it subject to any prosecutions related
to environment or cultural heritage regulations
in FY2022.
1 From a 2021 baseline of tonnes of carbon dioxide per net tonne kilometre.
DIRECTORS’ REPORT
11
Directors’ Report
(continued)
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.
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 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 AGRMC 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 54 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 24–30 of the
Directors’ Report.
CEO and CFO declaration
The Managing Director & CEO and Chief
Financial Officer (CFO) have provided a written
statement to the Board in accordance with
Section 295A of the Corporations Act.
With regard to the financial records and
systems of risk management and internal
compliance in this written statement,
the Board received assurance from the
Managing Director & CEO and CFO that the
declaration was founded on a sound system
of risk management and internal control,
and that the system was operating effectively
in all material respects in relation to the
reporting of financial risks.
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
that are not set out in this report or note 30
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
33–48 and forms part of the Directors’ Report
for the financial year ended 30 June 2022.
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.
External audit services
Deloitte were appointed at the 12 October 2021
Annual General Meeting as the Company’s
external auditor commencing for the year
ending 30 June 2022.
1212
Non-audit services
During the year, the Company’s auditor,
Deloitte Touche Tohmatsu (Deloitte),
performed other services in addition to its
audit responsibilities, the majority of which
commenced prior to Deloitte’s appointment
as auditor and have now been completed.
The Directors are satisfied that the provision
of non-audit services by Deloitte during the
reporting period did not compromise the
auditor independence requirements set out
in the Corporations Act.
All non-audit services were subject to the
Company’s Non-Audit Services Policy and do
not undermine the general principles relating
to auditor independence set out in APES 110
Code of Ethics for Professional Accountants as
they did not involve reviewing or auditing the
auditor’s own work, acting in a management
or decision-making capacity for the Company,
or jointly sharing risks and rewards.
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.
No other officer of the Company was a former
Partner or Director of Deloitte and a copy of
the auditor’s independence declaration as
required under the Corporations Act 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
2022
$’000
–
610
Auditor’s Independence Declaration
A copy of the Auditor’s Independence
Declaration, as required under section 307C
of the Corporations Act, is set out on page 49.
The Directors’ Report is made in accordance with
a resolution of the Directors of the Company.
Tim Poole
Chairman
8 August 2022
AURIZON ANNUAL REPORT 2021–22 Directors’ Report (continued)
OPERATING AND FINANCIAL REVIEW
CONSOLIDATED RESULTS (Underlying continuing operations unless stated)
The Group’s financial performance is explained using measures that are not defined under IFRS and are therefore termed Non-IFRS measures.
The Non-IFRS financial information contained within this Directors’ Report and Notes to the Consolidated Financial Report has not been
audited in accordance with Australian Auditing Standards. The Non-IFRS measures used to monitor Group performance are EBITDA (Statutory
and Underlying), EBITDA margin (Statutory and Underlying), EBIT (Statutory and Underlying), NPAT Underlying, Return on Invested Capital (ROIC),
Net debt and Net gearing ratios. Each of these measures is discussed in more detail on page 117.
1. Annual comparison
FINANCIAL SUMMARY
($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 Profit after tax from discontinued operations
NPAT (group) Statutory
Earnings per share1
Statutory
Earnings per share1 (continuing and discontinuing 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)
FY2022
3,075.3
(853.4)
(255.2)
(77.7)
(418.9)
(2.5)
1,467.6
1,453.4
(592.3)
875.3
861.1
(125.0)
(225.4)
(223.1)
524.9
513.0
–
513.0
28.5
27.9
28.5
27.9
10.3%
1,320.1
21.4
40.9%
2.3
4,917
27.3%
244.8
FY2022
541.2
130.1
801.3
(5.0)
1,467.6
FY2021
3,019.3
(840.7)
(191.4)
(81.1)
(411.7)
(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
VARIANCE
2%
(2%)
(33%)
4%
(2%)
80%
(1%)
(2%)
(2%)
(3%)
(6%)
14%
–
(40%)
(2%)
(15%)
(100%)
(30%)
–
(14%)
(2%)
(29%)
(0.4ppt)
3%
(26%)
4.7ppt
–
(2%)
(0.1ppt)
(3%)
VARIANCE
1%
(7%)
(6%)
87%
(1%)
1 Calculated on weighted average number of shares on issue — 1,841m FY2022 and 1,869m FY2021.
2 ROIC is defined as underlying rolling 12-month EBIT divided by the average invested capital. The average invested capital
is calculated as the rolling 12-month average of net assets (excluding cash, borrowings, tax, derivative financial assets and liabilities).
3 FY2022 excludes $12.7m redundancy costs (FY2021 excludes $13.9m redundancy costs).
4 Includes both Coal and Bulk.
OPERATING AND FINANCIAL REVIEW
13
Directors’ Report (continued)
OPERATING AND FINANCIAL REVIEW
Group performance overview
Group EBITDA decreased $14.6m or 1% driven by reduced WIRP fees for Network (noting that FY2021 included higher historical fees), in addition to
the impact of a risk-free-rate reset in June 2021 for GAPE fees. Bulk EBITDA also declined mainly due to lower iron ore volumes, approximately $10m
one-off items including weather, start-up costs and the impact from a major customer shut-down which more than offset new customer growth, some
of which were not operational for the full financial year. These declines more than offset growth in EBITDA for Coal which was driven by higher revenue
yield and cost management. The improvement in Other EBITDA is principally due to asset sales and the positive impact of higher discount rates on
some balance sheet provisions.
Revenue increased 2% with Bulk and Coal growth (including the impact of higher fuel prices) more than offsetting lower revenue in Network.
Operating costs increased $70.6m or 5% with increases in all business units due to increased volumes and one-off costs in Bulk and higher fuel and
energy costs (largely pass-through costs) more than offsetting transformation benefits.
Depreciation increased $13.2m or 2% 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 $27.8m or 3%.
ROIC was 0.4ppts lower to 10.3% due to the decreased EBIT and slightly higher invested capital.
Reconciliation to statutory earnings
Underlying earnings is a non-statutory measure and is the primary reporting measure used by management and the Group’s chief operating decision-
making bodies for managing and assessing the financial performance of the business. Underlying earnings is derived by adjusting statutory earnings
for significant items as noted in the following table:
($M)
Continuing operations
Underlying EBITDA
Depreciation and amortisation
Underlying EBIT
Significant items
Transaction costs incurred for ORA
Net gain on sale of shares in Aquila
Statutory EBIT
Net finance costs
Statutory Profit before tax
Income tax expense
Statutory NPAT — Continuing operations
Significant items, net of tax5
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
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
FY2022
FY2021
1,467.6
(592.3)
875.3
(14.2)
(14.2)
–
861.1
(125.0)
736.1
(223.1)
513.0
(11.9)
–
524.9
–
–
–
–
–
–
–
513.0
524.9
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
5 Transaction costs incurred for ORA include amounts which are not deductible in calculating taxable income.
1414
AURIZON ANNUAL REPORT 2021–22 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
Total borrowings
Other current liabilities
Other non-current liabilities
Total liabilities
Net assets
Gearing (net debt/(net debt + equity)) (%)
Gearing (net debt/(net debt + accumulated fair value adjustments + equity)) (%)
Balance sheet movements
Total current assets increased by $48.3m largely due to:
› Increase in cash and cash equivalents of $23.3m
› Increase in inventories of $35.8m to support maintenance and renewal programs
› Increase in derivative financial instruments due to favourable movement in interest rate swaps.
30 JUNE 2022
30 JUNE 2021
0.1
860.1
860.2
8,406.8
408.5
8,815.3
9,675.5
3,220.8
711.8
1,330.6
5,263.2
4,412.3
40.9%
42.5%
5.0
806.9
811.9
8,445.3
507.4
8,952.7
9,764.6
3,738.0
658.2
1,093.8
5,490.0
4,274.6
45.6%
44.6%
This was partly offset by a reduction of $49.7m in trade and other receivables predominately due to a lower Take-or-Pay accrual and a reduction in
trade debtors.
Total non-current assets decreased by $137.4m largely due to an $87.1m unfavourable movement on derivative financial instruments and a decrease of
$52.6m in the carrying value of property, plant and equipment and intangible assets.
Total current liabilities, excluding borrowings increased by $53.6m largely due to:
› Increase in current tax liabilities of $68.6m, primarily due to FY2021 being in a current tax asset position because of transactions and events that
occurred in that reporting period
› Increase in trade and other payables of $24.8m due to an increase in capital accruals.
This was partly offset by a reduction of $39.2m in provisions and other liabilities predominately due to lower employee benefits provisions and revenue
recognised for contract liabilities.
Total borrowings decreased by $517.2m predominately due to a net repayment of bank debt facilities of $164.0m and a net fair value adjustment of
$359.8m on Medium-Term notes subject to fair value hedges.
Other non-current liabilities increased by $236.8m largely due to a $199.6m unfavourable movement on fair value hedges and a $91.6m increase in net
deferred tax liabilities due to accelerated fixed asset adjustments.
Gearing (net debt/(net debt + equity)) was 40.9% as at 30 June 2022.
OPERATING AND FINANCIAL REVIEW
15
Directors’ Report (continued)
OPERATING AND FINANCIAL REVIEW
CASH FLOW SUMMARY
($M)
Statutory EBITDA (Continuing operations)
Working capital and other movements
Transaction costs incurred for ORA
Net gain on sale of shares in Aquila
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 business acquisitions and investment in joint venture
Proceeds from shares held in associate
Distributions from investments 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 (repayment)/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
Principle 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 increase/(decrease) in cash from Continuing operations
Net increase in cash from Discontinued operations
Free Cash Flow (FCF)6 from Continuing operations
Free Cash Flow (FCF)6 from Discontinued operations
FY2022
1,453.4
(72.4)
14.2
–
2.1
1,397.3
1.7
(86.0)
7.1
1,320.1
–
1,320.1
(551.0)
(16.9)
–
39.5
(528.4)
–
(528.4)
(164.1)
–
(128.1)
(458.3)
(17.3)
(767.8)
–
(767.8)
23.9
–
663.6
–
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
Cash flow movements
Net cash inflow from operating activities from continuing operations increased by $43.1m (3%) to $1,320.1m primarily due to lower income taxes paid
in FY2022 because of an income tax benefit recognised on disposal of the shares held in Aquila Resources Limited in FY2021. Network Take-or-Pay
revenue of $77.5m from the prior year also contributed to cash inflows given this revenue was collected in FY2022. This was partly offset by a
reduction in EBITDA and working capital, which was mainly due to an increase in inventory and reduction in provisions.
Net cash outflow from investing activities from continuing operations decreased by $4.7m (1%) to $528.4m, due to lower payments for acquisitions
than in FY2021 partly offset by an increase in payments for property, plant and equipment and intangibles.
Net cash outflow from financing activities from continuing operations reduced by $2.5m to $767.8m.
Free cash flow from continuing operations increased $75.0m or 13%.
6 FCF — Defined as net cash flow from operating activities less net cash outflow from investing activities less interest paid.
1616
AURIZON ANNUAL REPORT 2021–22
Funding
The Group continues to be committed
to diversifying its debt investor base and
increasing average debt tenor.
During FY2022 there were no adjustments to
the funding mix for the Aurizon Group with
significant increases in funding occurring
after balance date with the completion of the
acquisition of ORA. With this One Rail debt
now drawn to enable the acquisition, the focus
for FY2023 will be on terming this debt out in
capital markets.
In respect of FY2022:
› Weighted average debt maturity tenor was
3.4 years as at 30 June 2022 which compares
to 4.4 years in FY2021
› Group interest cost on drawn debt was 3.4%
(FY2021: 4.1%)
› Available liquidity (undrawn facilities + cash)
as at 30 June 2022 was $1,622.1m (FY2021:
$1,618.2m)
› Group gearing (net debt/(net debt + equity))
as at 30 June 2022 was 40.9% (FY2021:
45.6%)
› Aurizon Network’s gearing (net debt/
Regulatory Asset Base (excluding Access
Facilitation Deeds)) as at 30 June 2022 was
53.7% (FY2021: 60.8%)
› Aurizon Operations’ gearing (net debt/(net
debt + equity)) as at 30 June 2022 was 5.6%
(FY2021: 10.5%)
› Aurizon Operations’ and Aurizon Network’s
credit ratings have each been maintained at
BBB+/Baa1
› Aurizon Operations expanded the number of
lenders by three to 15 banks.
Dividend
The Board has declared a final dividend for
FY2022 of 10.9cps (100% franked) based on
a payout ratio of 75% in respect of underlying
NPAT from continuing operations.
The relevant final dividend dates are:
› 22 August 2022 — ex-dividend date
› 23 August 2022 — record date
› 21 September 2022 — payment date.
Tax
Underlying income tax expense for FY2022
was $225.3m and the underlying effective tax
rate7 was 30%. Statutory income tax expense
was similar at $223.1m, resulting in a statutory
effective tax rate of 30.3%.
The FY2022 underlying cash tax rate8 was
22.2%, which is less than 30% primarily due to
accelerated fixed asset related adjustments.
Excluding the impact from ORA earnings, the
underlying effective tax rate for FY2023 is
expected to be in the range of 29–31% and the
underlying cash tax rate is expected to be less
than 28% 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.
Discontinued operations
The Group completed the sale of the Acacia
Ridge Intermodal Terminal to Pacific National on
26 March 2021.
7 Underlying effective tax rate = income tax expense excluding the impact of significant items/underlying consolidated profit before tax.
8 Underlying cash tax rate = cash tax payable excluding the impact of significant items/underlying consolidated profit before tax.
OPERATING AND FINANCIAL REVIEW
17
Directors’ Report (continued)
OPERATING AND FINANCIAL REVIEW
BUSINESS UNIT REVIEW
COAL
Aurizon’s Coal business provides a critical service to Australia’s $110bn9 export coal industry, the nation’s second largest source of export revenue in
FY2022. Aurizon hauls around half of Australia’s export coal volume. Coal hauled is split approximately evenly between metallurgical coal and thermal
coal, with demand linked to Asian steel production and energy generation, respectively.
Aurizon transports coal from mines in the Newlands, Goonyella, Blackwater, Moura and West Moreton systems in Queensland (QLD) and the Hunter
Valley and Illawarra coal systems in New South Wales (NSW) to domestic customers and coal export terminals.
FINANCIAL SUMMARY
($M)
Revenue
Above Rail10
Track access10
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)10
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)
FY2022
FY2021
VARIANCE
1,195.1
359.7
4.7
1,559.5
(376.2)
(642.1)
541.2
(208.7)
332.5
FY2022
194.0
141.1
52.9
84%
45.2
35.3
9.9
233
34.5
26.4
78.7%
27.1
18.8
389.1
314
14.7
8,285
7,938
1,179.9
428.8
3.4
1,612.1
(451.0)
(627.8)
533.3
(208.7)
324.6
1%
(16%)
38%
(3%)
17%
(2%)
1%
–
2%
FY2021
VARIANCE
202.1
143.7
58.4
83%
47.1
35.8
11.3
233
34.2
25.1
79.9%
27.3
17.8
390.5
329
14.9
8,723
7,887
(4%)
(2%)
(9%)
1ppt
(4%)
(1%)
(12%)
–
1%
5%
1.2ppt
1%
(6%)
–
(5%)
(1%)
(5%)
1%
9 Australian Bureau of Statistics (FY2022).
10 $16.3 million has been reclassified from access revenue to above rail revenue for FY2021 for consistency with current year presentation.
1818
AURIZON ANNUAL REPORT 2021–22 Coal performance overview
Coal EBITDA increased $7.9m (1%) to $541.2m
primarily due to higher above rail revenue
relating to improved revenue quality and fuel
revenue in addition to lower track access,
traincrew and maintenance costs. This was
partly offset by lower volumes, lower track
access revenue and higher fuel costs.
Volumes decreased 8.1mt or 4% to 194.0mt
with reductions across NSW, South-East
Queensland (SEQ) and the Central Queensland
Coal Network (CQCN).
› In NSW and SEQ, volumes decreased by
5.5mt (9%) to 52.9mt due to the cessation
of the New Acland and Moolarben contracts,
weather impacts, customer maintenance and
production issues and COVID-19 impacts.
This was partly offset by higher railings in
the Illawarra corridor.
› Across the CQCN, volumes decreased by
2.6mt (2%) to 141.1mt due to customer
production which saw mines impacted by
weather and labour challenges as a result
of COVID-19.
Coal revenue decreased by $52.6m (3%) to
$1,559.5m with an 8.1mt reduction in volumes
and lower track access revenue partly offset
by improved revenue quality, including CPI
favourably impacting contract rates, and higher
fuel revenue (price related). Track access
revenue decreased with additional volumes
moving to end user agreements, lower overall
volumes, contract expiry and prior year
Take-or-Pay impacts. Above rail revenue per
NTK increased by 5% due to CPI benefits,
higher fuel revenue and customer mix changes
towards higher yielding customers against
prior comparative period.
Total operating costs decreased $60.5m
(6%) to $1,018.3m with lower track access,
traincrew and maintenance costs partly offset
by higher fuel costs. The major drivers of these
movements are:
› Track access costs decreased by $74.8m
(17%) due to additional volume moving to
end user agreements, lower overall volumes,
prior year Take-or-Pay expense and expiry
of contracts.
› Other operating costs increased $14.3m
(2%) largely due to higher fuel partly offset
by lower traincrew and maintenance costs.
Traincrew costs reduced due to lower FTEs
relating to the end-of-contract impacts,
partly offset by increased CPI and higher
overtime and leave impacts due to COVID-19.
Maintenance costs declined with lower
active locomotives and wagons due to lower
volumes and transformation activities, partly
offset by CPI impacts.
Depreciation remained flat, resulting in a
2% increase to EBIT against a 1% increase in
EBITDA.
Operationally, key productivity metrics
deteriorated against the prior comparative
period with lower volumes and NTKs.
Active locomotives decreased with contracted
volume reduction and transfers to Bulk to
support growth opportunities. Average
payloads increased due to change in volume
mix relating to lower SEQ volumes which have
a lower payload.
Market update
Australia exported 359mt of coal in FY2022,
down 1% against the prior year as volumes were
impacted by adverse weather and COVID-19
related labour constraints.
Australia exported 162mt of metallurgical coal
in FY2022, down 5% against the prior year.
India remained Australia’s largest metallurgical
coal export market with export volume of 49mt
(30% share), followed by Japan at 38mt (24%
share) and South Korea at 24mt (15% share).
In FY2022, Global crude steel production
decreased 5% against the prior year, whilst India
and Japan’s crude steel output increased 8% and
6% respectively. The average hard coking coal
(Premium Low Vol) price in FY2022 increased by
222% (compared to the prior year) to US$391/t
primarily driven by supply constraints. At 29 July
2022, the hard coking coal (Premium Low Vol)
price was US$191/t.
Australia exported 197mt of thermal coal in
FY2022, up 2% against the prior year. Japan
remained Australia’s largest thermal coal export
market with export volume of 86mt (44% share),
followed by South Korea at 36mt (18% share)
and Taiwan at 27mt (14% share). The average
Newcastle benchmark thermal coal price in
FY2022 increased by 216% (compared to the
prior year) to US$246/t. At 29 July 2022,
the thermal coal price was US$404/t.
Contract update
› Stanmore — Aurizon remains the primary
Goonyella system hauler for South Walker
Creek and Poitrel mines following on from
Stanmore’s acquisition of the BHP Mitsui
Coal assets.
› Pembroke — Aurizon has secured a
long-term haulage agreement with
Pembroke Resources, expected to
commence haulage late CY2023 at the
new Olive Down Complex located in the
Goonyella system.
› Baralaba — Aurizon has secured a five-year
extension to the haulage agreement with
Baralaba Coal in the Moura System.
› New Hope — New Acland contract ended
December 2021 (end of mine life).
› Yancoal — Moolarben contract ended
December 2021.
OPERATING AND FINANCIAL REVIEW
19
Directors’ Report (continued)
OPERATING AND FINANCIAL REVIEW
BULK
Aurizon’s Bulk business provides integrated supply chain services, including rail and road transportation, port services and material handling for a
range of mining, metal, industrial and agricultural customers. Following on from the acquisition of ORA in July 2022, the Bulk business also includes the
integrated rail business with 2,460km of track infrastructure in South Australia and the Northern Territory.
FINANCIAL SUMMARY
($M)
Revenue
Freight transport
Other
Total revenue
Operating costs
EBITDA
Depreciation and amortisation
EBIT
Total tonnes hauled (m)
Operating ratio (%)
FY2022
FY2021
VARIANCE
673.0
18.2
691.2
(561.1)
130.1
(36.7)
93.4
50.8
86.5%
612.2
22.6
634.8
(494.9)
139.9
(27.9)
112.0
51.1
82.4%
10%
(19%)
9%
(13%)
(7%)
(32%)
(17%)
(1%)
(4.1ppt)
Bulk performance overview
Operating costs increased $66.2m (13%) with:
› During the March 2022 quarter, the Australian
› Increased costs to support contract wins
predominately in grain (including ramp
up costs for both traincrew, rollingstock a
nd facilities)
› The acquisition of ConPorts Pty Ltd
(renamed Aurizon Port Services NSW Pty
Ltd) on 31 December 2020
› Significantly higher fuel prices in FY2022
compared to the prior comparative period
› A major derailment on the North Coast Line
in QLD in 2HFY2022
› Partly offset by ongoing cost benefits from
the Bulk transformation program and lower
costs from the loss of BHP Nickel West.
Depreciation increased $8.8m or 32% with
increased capital expenditure supporting the
growth in the Bulk business. Therefore, EBIT
decreased 17% compared to a 7% decrease
in EBITDA.
Market update
Demand for bulk commodities is projected
to continue to be driven by infrastructure
development in addition to opportunities from
new economy markets and increasing global
food consumption.
Bulk EBITDA decreased $9.8m (7%) to $130.1m
due to lower iron ore volumes, significant one-
off items in FY2022 offset by growth in new
contract wins. Revenue increased $56.4m (9%)
to $691.2m with:
› The commencement of the CBH Grain contract
in Western Australia (WA) in 1HFY2022
› Stronger grain volumes in both QLD and NSW
compared to the prior comparative period
› The commencement of a long-term haulage
contract with Tronox in 2HFY2022
› The acquisition of ConPorts Pty Ltd
(renamed Aurizon Port Services NSW Pty
Ltd) on 31 December 2020
› Higher fuel prices in FY2022 compared to
the prior comparative period
› Marginal revenue yield improvements
including CPI increases.
Partly offsetting this was lower iron ore
volumes and the loss of the QLD livestock
contract in 2HFY2022 and BHP Nickel West
in 2HFY2021. In addition, there was a major
scheduled planned maintenance for IPL
on the Mt Isa Line in 2HFY2022.
In Bulk East, volumes increased by 0.3mt
driven by stronger grain volumes in NSW and
QLD, partly offset by lower livestock volumes.
In Bulk West, iron ore volume was down 3.2mt
driven by the cessation of Mt Gibson volumes
in December 2020 and lower MRL volumes into
Esperance. Non-iron ore Bulk West volumes
increased by 2.6mt due to the ramp up of CBH
grain volumes partly offset by lower BHP Nickel
West volumes and Alcoa volumes due to the
ceasing of export bauxite.
Bureau of Statistics reported that nickel
(including cobalt) exploration expenditure
in Australia rose by 37% (compared to the
same period of the prior year) and copper
exploration expenditure increased by 12%
across the same period. Australian metal
ore mining capital expenditure increased in
the March 2022 quarter by 10% against the
prior comparative period to A$4.9b, the 18th
consecutive quarter of year-on-year growth
for the sector.
› In June 2022, the Australian Bureau of
Agricultural and Resource Economics and
Sciences (ABARES) has projected Australian
export volume for major crops of wheat,
barley and canola, with a record combined
total of 39.6mt for the 2021–22 season.
Strong volumes are expected to continue
into the 2022–23 season, with the ABARES
forecasting 35.3mt, the fourth highest year
on record.
Contract update
› CBH — 10-year11 grain haulage contract
commenced October 2021
› Alcoa — five-year contract extension for
alumina and associated inputs
› Lynas — five-year contract for WA
operations including new facility currently
under construction
› Tronox — five plus five-year term executed
for the transport of mineral sands
concentrate from Broken Hill region
› Queensland Government (Department
of Transport and Main Roads) — loss of
Livestock contract in QLD from
December 2021.
11 The performance-based agreement has an initial term of six years, with options to extend to 10 years.
2020
AURIZON ANNUAL REPORT 2021–22 NETWORK
Network refers to the business of Aurizon Network Pty Ltd (Network) which operates the 2,670km CQCN. The open access network is the largest
coal rail network in Australia and one of the country’s most complex, connecting multiple customers from more than 40 mines to five export terminals
located at three ports. The CQCN includes four major coal systems (Moura, Blackwater, Goonyella and Newlands) and a connecting link, the Goonyella
to Abbot Point Expansion (GAPE).
FINANCIAL SUMMARY
($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)
FY2022
FY2021
VARIANCE
1,133.7
59.2
1,192.9
(391.6)
801.3
(344.8)
456.5
1,178.9
46.0
1,224.9
(376.1)
848.8
(339.7)
509.1
(4%)
29%
(3%)
(4%)
(6%)
(2%)
(10%)
FY2022
FY2021
VARIANCE
206.5
51.9
61.7%
2.6
14.2
22.8
82.6%
251
208.3
52.4
58.4%
2.4
13.7
23.0
84.1%
252
(1%)
(1%)
(3.3ppt)
(8%)
(4%)
(1%)
(1.5ppt)
–
Network performance overview
Network EBITDA declined $47.5m (6%) to
$801.3m in FY2022, with decreased revenue of
$32.0m (3%) and increased operating costs of
$15.5m (4%).
Regulatory access revenue has been accounted
for based on actual railed volumes using tariffs
approved by the Queensland Competition
Authority (QCA) on 22 June 2021. Actual
net tonnes were 206.5mt compared to the
regulatory system forecast of 226.9mt. Total
Access Revenue in FY2022 reduced by $45.2m
(4%) compared to FY2021:
› Allowable Revenue was lower by $11.2m in
FY2022 primarily due to capital underspends
in FY2019 and FY2020
› Reduced volumes compared to the
regulatory forecast resulted in an under-
recovery (excluding GAPE) after Take-or-Pay
of $39.0m in FY2022 (Access Revenue in
FY2022 included the recognition of $32.8m
Take-or-Pay revenue). This compares to an
under-recovery of $34.6m (including $88.2m
of Take-or-Pay) in FY2021.
› Network settled all disputes with WIRP
customers under their respective WIRP
Deeds in July 2022. WIRP fees of $47.0m,
including $30.3m of historical fees relating
to FY2016 — FY2021, have been recognised
in FY2022 (FY2021: $60.3m, including
$48.9m of historical fees).
› GAPE revenue was $20.0m lower primarily
due to the risk-free rate reset in June 2021
and the inclusion of a Transfer Fee in FY2021.
› The above movements were partly offset by
higher Other Access revenue of $3.7m.
Services and other revenue were $13.2m (29%)
higher in FY2022. This was primarily due to
higher construction revenue in FY2022 and is
partly offset in higher operating costs.
Operating costs increased by $15.5m
(4%) primarily due to higher construction
costs associated with the higher revenue,
increased electric traction charges and higher
maintenance costs.
Depreciation increased $5.1m (2%) primarily
due to ongoing rail renewal, plant and ballast
undercutting investment.
The Regulatory Asset Base (RAB) roll-forward
is estimated to be $5.4bn12 (excluding Access
Facilitation Deeds of $0.3bn) as at 1 July 2022.
Regulation update
Network 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 QCA published the Independent Expert’s
(IE) Initial Capacity Assessment Report
(ICAR) on 1 November 2021. The ICAR
identified that the average annual deliverable
network capacity of each coal system in the
CQCN for the period FY2022 — FY2024,
when measured as a percentage of the
current contracted capacity for each coal
system, is estimated as follows:
• Goonyella: ~93%
• Blackwater System: ~96%
• GAPE System: ~64%
• Moura System: ~93%
• Newlands System: ~66%.
12 Includes deferred capital.
OPERATING AND FINANCIAL REVIEW
21
Directors’ Report (continued)
OPERATING AND FINANCIAL REVIEW
Operational update
Network maintained strong operational
performance during FY2022:
› CQCN volumes declined by 1% to 206.5mt.
The volume reductions were largely
attributable to wet weather, mine specific
maintenance and production issues as well as
COVID-19 related restrictions and disruptions
› Total System Availability was 82.6%
compared to 84.1% in the PCP
› Cancellations due to the Network rail
infrastructure increased from 1.6%. to 2.1%
› Cycle velocity declined marginally from
23.0km/h to 22.8km/h.
Wiggins Island Rail Project (WIRP)
Network settled all disputes with WIRP
customers under their respective WIRP Deeds
in July 2022. WIRP fees of $47.0m, including
$30.3m of historical fees relating to FY2016–
FY2021, have been recognised in FY2022
(FY2021: $60.3m, including $48.9m of
historical fees).
› On 12 November 2021, Network provided
the Chair of the Rail Industry Group (RIG)
and the QCA its preliminary response to the
ICAR, which set out the proposed options
to address the capacity deficits identified in
each coal system by the IE in the ICAR.
› Consistent with the definition of the term
‘Report Date’ in UT5, this notification to
the Chair of the RIG on 12 November 2021
triggered an increase in Network’s Weighted
Average Cost of Capital (WACC) from 5.9%
to 6.3%. The QCA-approved reference tariffs
assumed 6.3% WACC from 1 March 2020.
As a result of the delay in the ICAR, there
has been an over-collection of access
charges (the difference between 5.9% and
6.3%) in FY2022 of $9.3m. This will be
included in the FY2022 revenue adjustment
amount and recovered in the FY2024 tariffs.
› On 14 March 2022, Network provided its
detailed report in response to the ICAR to
the QCA and the Chair of the RIG, outlining
a program of works to rectify the relevant
coal systems’ capacity deficits. Network’s
response also included a proposal to allow
for both Network and the IE to recommend
that a further expansion study be completed
where there are one or more alternative
expansions that could assist in resolving
the relevant capacity deficit. As the current
approved form of UT5 does not allow for
such further studies, Network submitted a
Draft Amending Access Undertaking (DAAU)
on 8 June 2022 for QCA approval.
› The QCA published the IE’s Annual Capacity
Assessment Report 2022 (ACAR) on 23 June
2022. The ACAR identified some differences
between it and the findings in the ICAR in
relation to the average annual deliverable
network capacity of each coal system for the
period FY2022 — FY2024, when measured as a
percentage of the current contracted capacity
for each coal system, which are as follows:
• Goonyella System has improved by ~2%
to ~93 – 95%;
• Blackwater System has improved by
~2-4% and is forecast to be at ~100% in
FY2026;
• GAPE System is slightly lower for FY2023
and FY2024 then at similar levels for
other years;
• Moura System has improved by ~7% to
~99%; and
• Newlands System is lower in FY2023
compared to the ICAR, however similar
for other years.
› As required under UT5, on 17 June 2022,
the IE made a recommendation to the QCA
on which of the Transitional Arrangements
identified in Network’s Detailed Report
would most effectively and efficiently resolve
the deficits identified in the ICAR, following
which the QCA will make a decision. The
QCA has not made such a determination
yet and therefore the impact of any such
determination has not been assessed.
› The Performance Rebate mechanism in UT5
came into effect on 12 November 2021. The
Performance Rebate is payable if an End User
does not receive its contracted Train Service
Entitlement for the period 12 November 2021
until 30 June 2022 due to a performance
breach by Network as determined by the IE
under UT5, with certain permitted exclusions.
Any transitional arrangements that are
implemented to rectify an Existing Capacity
Deficit will be taken into consideration in the
calculation of the Performance Rebate. The
FY2022 Performance Rebate is currently
being considered by the IE.
› On 8 June 2022, Network submitted to the
QCA a DAAU to adjust the Electric Energy
Charge (EC) under UT5 for FY2023.
Due to the significant increase and forecast
volatility in the wholesale electricity rates,
it was necessary to submit the DAAU to
adjust the EC tariff from $1.11 to $2.82 per
eGTK. A QCA decision on the DAAU is
expected in Q1 FY2023. Recognising the
current price volatility in the electricity
market, Aurizon Network has made a
commitment to review and if required,
submit a further update to the FY2023 EC
Tariff and other regulatory inputs including
coal volumes to the QCA no later than Q4
of FY2023 via a further DAAU.
› UT5 provides for certain variable
components of WACC (predominately
risk-free rate, debt risk premium, inflation
and the tax allowance) (Reset Values) to
be reset on 1 July 2023 to take account of
prevailing market conditions at that time.
The two-stage process will involve
preliminary Reset Values submitted to the
QCA for consultation in July 2022 which will
inform FY2024 tariffs and final Reset Values
agreed in July 2023 which will apply from
1 July 2024. Any variation between final
Reset Values and preliminary Reset Values
will be included in FY2026 Revenue
Adjustment Amounts.
2222
AURIZON ANNUAL REPORT 2021–22 OTHER
Other includes the provision of maintenance services to internal and
external customers and central costs not allocated such as the Board,
Managing Director & CEO, Investor Relations, Strategy and Company
Secretariat.
($M)
Total revenue
Operating costs
EBITDA
Depreciation and
amortisation
EBIT
FY2022
FY2021
VARIANCE
45.1
(50.1)
(5.0)
(2.1)
32.4
(72.2)
(39.8)
(2.8)
(7.1)
(42.6)
39%
31%
87%
25%
83%
Other performance overview
EBITDA improved by $34.8m (87%) mainly due to asset sales including
the sale of the Rockhampton workshops and the benefit to provisions
from an increase in discount rates.
INTERMODAL — DISCONTINUED OPERATION
($M)
Total revenue
Operating costs
EBITDA — Underlying
Depreciation and
amortisation
EBIT — Underlying
Significant items
Income tax expense
NPAT (Discontinued
operations) — Statutory
FY2022
FY2021
VARIANCE
–
–
–
–
–
–
–
–
21.6
(6.7)
14.9
–
14.9
161.1
(52.4)
123.6
nm
nm
nm
nm
nm
nm
nm
nm
Intermodal performance overview
The Group completed the sale of the Acacia Ridge Intermodal Terminal
to Pacific National on 26 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. Project Precision is transitioned to business
as usual in FY2022 with accountability now embedded in the Network
Planning and Scheduling function.
Outlined below are the major initiatives currently being pursued in
the business.
Automated Track Inspection System (ATIS)
The ATIS initiative seeks to measure track and overhead line alignment
via locomotive-mounted equipment using lasers to achieve precise
measurements at line speed. ATIS is a collection of systems including
a Track Geometry Measurement System (TGMS), a Wire Geometry
Measurement System (WGMS) and a Pantograph Collision Detection System
(PCDS). Network currently uses a track-recording car to obtain these
measurements, with the service provided by a third party which consumes
train paths that would otherwise be used by revenue 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 ATIS may include reduced cost
and improved access by removing the requirement to utilise the track-
recording car.
During FY2022 Network successfully trialled and completed verification
reporting of the WGMS and PCDS systems confirming that overhead wire
alignment information can also be captured via automated means.
Following the successful trials and support from our customers, the ATIS
initiative will be implemented across the CQCN in FY2023.
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. Site integration testing
of TrainGuard was successfully completed in July 2022. The project
is scheduled to deploy the technology on the Blackwater mainline
(Callemondah to Bluff) in FY2023 with work in the Goonyella system
to follow.
Asset maintenance
Above Rail Asset Management (ARAM) is a multi-year transformation
project and has progressed with the dedicated project team for a third
year working in close collaboration with 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.
FY2022 has seen the successful implementation of more mature
maintenance strategies across three of four major rollingstock fleets
and will allow the business to continue on the maintenance maturity
journey. These strategies contributed to maintenance cost reductions
in the Coal business in FY2022. The project drew to a close at the end
of FY2022 and sustainable business-as-usual (BAU) plans have been
put in place. The value created will continue into future years, delivering
sustained and further optimisation of the maintenance life cycle for
Aurizon’s rollingstock.
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 the CQCN Siemens electric locomotive
fleet, installation across the CQCN diesel is scheduled for completion
during FY2023.
OPERATING AND FINANCIAL REVIEW
23
Directors’ Report (continued)
OPERATING AND FINANCIAL REVIEW
Aurizon’s Enterprise Risk Profile is actively
managed and regularly reported to the Board.
It includes both those material inherent risks
related to the enduring nature of Aurizon’s
business and also those that present an
exposure linked to the changing operating
landscape or point-in-time external factors.
These risks have been grouped around
three themes of operational, market and
strategic risk. The commentary has been
provided to describe and summarise each key
risk, the nature of the potential impacts to
Aurizon, our view on our ability to influence the
risk and consequences being realised, and a
description of management’s response to that
risk. This is not intended to be a comprehensive
list of all risks that the business is or could be
exposed to.
It represents Aurizon’s own assessment of
these risks at a point in time and, given the
complexities and nature of these risks, this
information is subjective and may be subject
to change. Investors need to form their own
assessment and conclusions.
ADDITIONAL INFORMATION
Risk
We foster a risk-aware culture through a
combination of leadership focus, training
and the application of high-quality,
integrated risk analysis and management.
The consideration of risk features heavily
in our thinking, from the framing of strategy
through to informing decision-making at the
front line. Our Enterprise Risk team, together
with all leaders in the business, closely
monitors the environment in which we operate
to enable the business to understand and
proactively manage key risk exposures and
situational developments.
The Board-approved Enterprise Risk
Management Framework and Appetite
encompasses a broad range of risks,
enabling continuous consideration and
strategy development 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 and support a consistent
approach to comprehensive, proportionate
and effective risk management.
LEGEND
RISK IMPACT ICONS
Strategy & Execution
Stakeholder & Reputation
Operational
Financial
Health & Safety
Environment & Climate
RISK INFLUENCE METER
The risk influence meter is provided to
acknowledge that there are internal and
external contributions to all of the risks
that the business is exposed to. The meter
is subjective and reflects only one way to
consider further the risks presented.
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
A risk influence rating here means that
Aurizon can significantly influence this
risk; for instance, it is largely driven by
internal factors or is readily managed.
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
A risk influence rating here means that
Aurizon has limited ability to influence
this risk; for instance, it is largely driven by
external factors or is complex to manage.
2424
AURIZON ANNUAL REPORT 2021–22
RISK
RISK DESCRIPTION AND POTENTIAL IMPACTS
IMPACTS AND
INFLUENCE
MANAGEMENT RESPONSE
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
Aurizon’s commitment to keeping
people safe and healthy is a priority.
Our safety value ‘We know safe,
we choose safe’ promotes leadership
and personal accountability for safety.
Aurizon’s leadership team and Board
regularly review safety performance,
improvement strategies and activities
across the business, aligned to a defined
enterprise safety strategy.
Refer to page 31 for further information
on safety.
OPERATIONAL RISK
Major Hazard,
Serious Injury
or Fatality
Cyber Security and
Technology Reliance
Given the nature and scale of Aurizon’s operations,
there are hazards in the business that, if not managed,
have the potential to cause a serious injury or fatality.
Aurizon’s safety risk exposure is impacted by the
diversity and scale of its operations — from train
operations, on-track works, ports and heavy vehicle
haulage. Incidents could include:
› Process Safety Incident — major process safety
event leading to death or injuries to our people
› Road Vehicle Incident — death or injuries to our
people from operating road vehicles
› Trespass — safety risks to employees and individuals
due to persons illegally entering the rail corridor
and danger zone intentionally (theft or protest)
or otherwise.
The potential realisation of these risks could have
direct safety, operational disruption and reputational
consequences including licence to operate.
The rapidly evolving cyber threat landscape continues
to challenge industry. Malicious attacks resulting in
business interruptions, nationally and internationally,
are increasing. Aurizon relies on technology and is
exposed to cyber-related risks which can arise through
a multitude of vectors including malicious external
hackers, insider threats, unintentional human error or
through links to third parties.
A cyber breach or other technology-related disruption
could impact Aurizon’s operations and impair its ability
to provide services. Such an event could potentially
result in financial losses, reputational damage, legal or
regulatory action or other adverse consequences.
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
Severe Weather
Aurizon owns and maintains rail track infrastructure
in addition to other rail assets, maintenance facilities,
rail depots and worksites across Australia. Maintaining
a large physical footprint exposes Aurizon to risks
caused by the increasing severity and prolonged nature
of extreme weather events, such as flooding, bushfires,
heatwaves and cyclones.
Damage caused by destructive weather events
could cause safety, health and environmental risks,
operational disruption, increasing operational costs or
driving financial losses.
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
Cyber security controls including
identification, prevention, detection and
recovery controls are in place and are
tested regularly. Policies, frameworks,
tools and training to ensure baseline
expectations for the management of
cyber risks are understood and adhered to.
Aurizon participates in cross-industry
collaboration and provides the threat
intelligence required to improve defences
based on emerging threats and real-time
incident data.
Aurizon has developed a cyber security
investment roadmap to continue to
enhance its protective cyber security
capabilities in a targeted manner that will
prioritise those assets most critical to the
business to increase resilience.
Incident management and business
continuity planning, protocols and
expertise are essential to manage a
safe and effective response to severe
weather events. Assessments of
operational resilience are undertaken
and consideration is made of resilience
in engineering design (adaptive design
approach).
Weather patterns and forecasts are
monitored to provide early warning of
potential severe weather and planning
time for safe provision of service.
OPERATING AND FINANCIAL REVIEW
25
Directors’ Report (continued)
OPERATING AND FINANCIAL REVIEW
RISK
RISK DESCRIPTION AND POTENTIAL IMPACTS
IMPACTS AND
INFLUENCE
Prolonged Pandemic
Supply Chain
Reliability
The Coronavirus pandemic exposed employees
to health issues which has had a minor impact on
Aurizon’s ability to provide services to customers. This
risk was also realised by other supply chain participants,
such as mines and ports, and their ability to provide
continuity of service with increased staff absenteeism.
As the Coronavirus evolves and international travel
continues to return to pre-pandemic levels, there is a
risk that there are ongoing implications to employee
health potentially increasing absenteeism and further
impacting services.
Related risks of changes in commodity demand,
economic and supply chain risks are considered below.
Building resilient supply chains and effective
inventory management is critical to ensure optimal
levels of supply, minimise costs and ensure Aurizon’s
operational assets are appropriately maintained to
enable uninterrupted service delivery.
A number of recent events have increased supply
chain complexity and challenged reliability, including
the global pandemic, evolving international trade
relations tensions, labour shortages, constraints on
the availability of raw materials and risk of engaging
with suppliers who are either directly or indirectly
implicated in modern-day slavery.
These risks will continue to manifest with increasing
supply chain costs, lead times and delays in obtaining
goods and services, which could result in operational
disruption.
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
People and Capability Aurizon’s workforce comprises individuals with a wide
array of specialist skills, technical knowledge and
subject matter expertise. An inability to attract and
retain talent with the right skill sets necessary to drive
the business forward could have material negative
impacts on Aurizon’s market value proposition and
ability to compete.
This could result in adverse financial impacts,
reputational damage, suboptimal service delivery,
employee disengagement and other adverse impacts.
Aurizon has a range of programs and initiatives,
focusing on transformation to:
› be more cost competitive
› support the development of compelling
service offerings
› enable longer term growth ambitions; and
› improve safety and operational processes.
Impacts of non-delivery include reduction in EBITDA
margins, not achieving budget and failure to maximise
volumes within customer contracts with reputational
risk impact and suboptimal return on capital deployed
undermining the long-term Board Strategy.
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
Delivery of
Transformation
Programs
2626
MANAGEMENT RESPONSE
Effective business resilience planning and
crisis management activities supported
the navigation through the pandemic and
minimised operational disruption.
Our employee education and awareness
program, alongside careful planning,
has supported our people’s ability to
stay safe.
Contractual provisions such as force
majeure and Take-or-Pay mechanisms
provided some protection against loss
of revenue resulting from the disruption.
Aurizon is addressing these challenges
by working closely with key suppliers,
assessing and managing supply chain
resilience and taking action to diversify
supplier bases, including the creation of
dual supply.
Our key focus remains on demand
forecasting, refreshing inventory
management approaches and
strengthening inventory levels, and
through monitoring of emerging supply
chain risks.
In December 2021, Aurizon published
its second Modern Slavery Statement,
which addresses the Company’s
obligations contained in the Modern
Slavery Act 2018 (Cth).
Talent attraction and retention strategies
have been implemented including career
progression pathways, remuneration and
other incentives, and through investment
in learning and internal development
opportunities.
People and capability planning also
forms part of organisational and business
strategy development, such as the
identification of critical roles to inform
recruitment strategies.
Each of the transformation programs
has a structure and reporting process to
support effective delivery, including:
› Steering Committee structures and
Executive sponsors
› oversight and reporting from the
Program Liaison Office
› dedicated transformation change
management support
› business-unit led transformation and
continuous improvement function
› assurance activities.
AURIZON ANNUAL REPORT 2021–22 RISK
RISK DESCRIPTION AND POTENTIAL IMPACTS
IMPACTS AND
INFLUENCE
Greenhouse Gas
Emissions, Metrics
and Targets
MARKET RISK
Competition
Counterparty
Aurizon is an emitter of GHG (Greenhouse Gases)
through consumption of fossil fuels used in delivering
services to customers and in the creation, purchase
and utilisation of our assets. Under the Safeguard
Mechanism, Aurizon is required to maintain its scope 1
emissions below regulated baselines. Failure to do so
could expose Aurizon to direct carbon costs and/or
regulatory action.
Australian and international governments will continue
to evolve expectations on emissions management and
reporting, which could impact Aurizon.
Aurizon has set targets for the reduction of emissions;
however, with a large, complex and multi-year
decarbonisation program there are risks relating to:
› the ability to reduce those emissions as committed
to the market
› the availability of technology at scale to meet those
ambitions
› the targets, or actions taken in progressing towards
those targets, not being considered sufficient to key
stakeholders.
These risks could result in increasing operational
costs, damage to social licence, shareholder action or
litigation or other reputational impacts.
Aurizon may face competition from parties willing
to compete at reduced margins, with lower returns
or greater risk positions than Aurizon would accept.
Market factors and changes in customer expectations
may compel Aurizon to take on more risk or reduce
rates to retain customers or win new work.
Increased competition may come from new entrants or
existing competitors and could include customers in-
sourcing services, impacting Aurizon’s competitiveness,
and is a risk to future financial performance.
Macroeconomic drivers may degrade overall
counterparty quality and creditworthiness. A move
from some to divest coal assets and new Bulk customer
profiles are changing Aurizon’s counterparties.
Deterioration of counterparty quality could stem
from volatile commodity demand, production rates
and commodity price, which increase the risk of a
counterparty default, challenges of operator solvency,
stranded asset risk or financial losses.
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
MANAGEMENT RESPONSE
Aurizon is taking action to:
› design, invest and support the delivery
of fleet decarbonisation projects and
carbon abatement initiatives
› incorporate the assessment of the
impact on greenhouse gas emissions
as part of investment decision-making,
› engage with government and
regulators regarding policy and
advocacy to promote fair and
equitable treatment of rail as a low
carbon form of land-based bulk freight
transportation.
Aurizon provides accurate and timely
reporting of emissions and provides
information about the programs in hand
to reduce those emissions.
For more information on our approach to
climate change, including risks relating to
decarbonising and reporting, refer to the
annual Sustainability Report.
To reduce exposure to competition risk,
management is focused on the delivery
of high-quality service to support
recontracting of existing key customers
on long dated terms wherever possible.
In addition, strategic targeting of
suitable growth and new work winning
opportunities is in place across all
business units supported by a central
strategy team.
The Market Intelligence, Strategy and
Business Unit teams work together to
assess long-term demand planning and
mine viability analysis and support the
strategic targeting of suitable growth
opportunities.
Counterparty credit quality is assessed
and monitored by treasury and business
unit leadership teams.
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
OPERATING AND FINANCIAL REVIEW
27
Directors’ Report (continued)
OPERATING AND FINANCIAL REVIEW
RISK
RISK DESCRIPTION AND POTENTIAL IMPACTS
IMPACTS AND
INFLUENCE
Evolving Commodity
Demand
Aurizon is linked to the demand for and supply of
Australian commodities, and notably to coal, and those
commodities are almost entirely destined for export
markets in Asia.
A quicker transition away from global seaborne
coal demand could impact Aurizon’s coal customer
volumes, exacerbate key market dependencies and
commodity mix and negatively impact customer
pricing. A failure to recognise this transition could also
lead to suboptimal investment decisions and missed
opportunities for non-coal customers.
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
Environment and
Finance
Geopolitics
As the transition to a lower carbon global economy
continues to gain momentum, the availability and cost
of debt capital may become more challenging for the
mining and logistical services sectors. The availability
and cost of insurance may also be impacted as
some insurers seek to reduce their exposure to fossil
fuel industries.
Investor sentiment and shareholder expectations will
continue to focus increasingly on Environmental and
Social Governance (ESG) related issues.
Where these risks are unmitigated, they could impact
the financial viability of our current clients, restrict
future mining investments, lead to increasing costs of
finance and insurance, or, where investor expectations
are unmet, damage to reputation and social licence
to operate.
Aurizon’s customer base is exposed to fluctuating
overseas demand for Australian bulk commodities,
predominantly in key export markets in South-East
Asia. Recent geopolitical developments, particularly
in relation to Australia’s trade relationship with
China, and the Russian invasion of Ukraine, have the
potential to impact Australian coal and other bulk
commodity exports.
Instability in trade relations could impact demand
resulting in changes to end customer profitability or
viability, or disrupt global supply chains, which in turn
affect Aurizon’s financial performance.
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
MANAGEMENT RESPONSE
The Bulk Growth Strategy was developed
to set out a proactive approach to the
evolution of commodity supply and
demand, targeting diversification of
revenue streams, including fleet cascade
opportunities from the Coal fleet to
support Bulk growth.
The Strategy in Uncertainty Framework
enables the monitoring of key market
indicators and, alongside Free Cash
Flow modelling, supports informed
decision-making relating to work
winning, capital investment and other
core business decisions.
For more information on our approach to
climate change, including risks relating
to supply and demand of commodities,
refer to the annual Sustainability Report.
Early renegotiation of maturing debt
helps to ensure capacity of funding
and reduce impacts of increasing
costs of funding. For the details of the
maturity profile of existing financing
arrangements, please refer to Note 18
of the Financial Report.
Ongoing engagement with insurers and
brokers allows closer understanding of
market developments to allow policy
design and renewal programs to be
designed accordingly.
For more information on our approach to
climate change, including risks relating
to financing and insurance, refer to our
Climate Strategy and Action Plan and the
annual Sustainability Report.
The Bulk Growth Strategy has been
developed to target diversification
of revenue streams. The Strategy in
Uncertainty Framework enables the
monitoring of key market indicators,
including geopolitical risk factors,
which then supports informed decision-
making relating to work winning, capital
investment and other core business
decisions.
Active situation monitoring of political
and international trade performance
allows for the identification of impacts
and appropriate planning.
2828
AURIZON ANNUAL REPORT 2021–22 RISK
RISK DESCRIPTION AND POTENTIAL IMPACTS
IMPACTS AND
INFLUENCE
Regulation and
Compliance
Macroeconomic
Aurizon’s operations and financial performance
are subject to legislative and regulatory oversight.
Unfavourable regulatory changes may occur 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.
Aurizon is also exposed to the risk of material
regulatory breaches resulting in the loss of operating
licences, additional regulatory oversight and financial
penalties. In the event of a loss of licence, critical
business operations may not be supplied to customers,
impacting profitability and reputation.
After an extended period of low interest rates and
inflation for several years, both are starting to climb.
The price of electricity and fuel has increased notably,
impacting core costs of Aurizon’s service delivery. In
April 2022, the International Monetary Fund (IMF)
reduced its forecast for global economic growth post
pandemic and, in June 2022, the World Bank has
warned of an increased risk of global recession.
Aurizon is exposed to changes in the macroeconomic
environment. This includes economic growth driving or
restricting demand for commodities hauled, as well as
exposure to increasing costs in delivering of services, in
servicing debt obligations and through an exposure to
the financial viability of key customers and suppliers.
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
STRATEGIC RISK
Delivering Bulk
Growth
Aurizon aspires to double Bulk EBIT by 2030,
and therefore faces the risk of failing to achieve
this target. This could occur due to an inability to
identify and execute suitable growth opportunities,
a lack of available resources and funding or other
associated factors.
Failing to achieve this deliverable could result
in stranded assets, material damage to investor
sentiment, and reputational damage.
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
MANAGEMENT RESPONSE
Aurizon is an active participant in
consultation on future legislation, and
provides participation and leadership
within industry advocacy groups to
bring influence on regulatory change
as needed.
In relevant jurisdictions where Aurizon is
the Access Provider, prior to submissions
being made to the relevant regulator,
engagement with industry groups is
sought to reduce the risk of adverse
regulatory outcomes.
To enable our people to support the
business’s compliance with legislative
requirements, employee training and
education are provided, along with the
Employee Code of Conduct, and internal
quality assurance, checks and controls.
The majority of Aurizon’s debt funding is
in the Network business unit, with interest
rate movements being recovered through
Network’s WACC. The remaining interest
rate exposure is managed primarily by
maintaining a mix of fixed and floating
rate borrowings. In contemplation of the
future debt structure post the acquisition
of One Rail and in contemplation of a
changing interest rate landscape, the
Treasury policy is being refreshed.
Hedging strategies are employed to
manage some exposures, including
foreign exchange risk. Please refer to
Note 18 to the Financial Report which
sets out Aurizon’s approach to Financial
Risk Management.
Escalation clauses in revenue contracts
provide some protection against
increasing costs of service delivery
through inflation recovery, and
counterparty credit monitoring and
supply chain resilience reviews consider
financial viability to manage credit risk.
A clear strategy has been developed to
achieve this objective by diversifying our
Bulk portfolio and expanding our supply
chain services. To support the delivery
of Bulk Growth strategy, allocation has
been made of appropriate resources,
funding and expertise, along with the
identification and targeting of multiple
success pathways for organic and
inorganic growth, to support delivery
of this strategic objective.
OPERATING AND FINANCIAL REVIEW
29
Directors’ Report (continued)
OPERATING AND FINANCIAL REVIEW
RISK
RISK DESCRIPTION AND POTENTIAL IMPACTS
IMPACTS AND
INFLUENCE
One Rail Australia —
Divestment of East
Coast Rail (ECR)
On 29 July 2022, Aurizon completed the acquisition
of One Rail Australia. One Rail’s coal haulage business
in New South Wales and Queensland, known as East
Coast Rail (ECR), will be divested under the terms of
an undertaking given to the Australian Competition
and Consumer Commission (ACCC). There is a risk
that Aurizon fails to divest ECR in an optimal and
timely manner.
Failure to effectively divest ECR could result in financial
losses, negative investor sentiment, reputational
damage and impairment on the achievement of
strategic objectives.
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
One Rail Australia —
Integration
Aurizon’s ability to generate value from the acquisition
of One Rail is dependent on the successful integration
of One Rail into Aurizon’s Bulk business unit.
Fleet Strategy
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
Aurizon faces the risk that it fails to effectively
integrate One Rail and to achieve the underlying
business case and associated financial benefits of
the acquisition.
Materialisation of these risks could result in financial
losses, negative investor sentiment, reputational
damage and impairment on the achievement of
strategic objectives.
Aurizon’s ability to effectively serve its customers
is largely dependent on its ability to make optimal
use of its long-life operational assets. Suboptimal
management of the Aurizon fleet resulting in degraded
operational performance could result in financial
losses attributable to performance penalties, foregone
demand or failure to deliver on key strategic objectives,
such as growing Bulk earnings.
Lack of alignment with organisational strategy or
suboptimal development or execution of the near-
and longer-term fleet strategy can impact the pursuit
of opportunities, erosion of customer and investor
confidence, and safety risks for employees and the
broader public.
As we prepare to decarbonise our fleet, new
technology will be employed that may not be
sustainable, may result in financial losses or may
cause delays in meeting our climate commitments.
MANAGEMENT RESPONSE
Aurizon has commenced a dual track
process for the divestment, to be
completed via a trade sale or demerger.
Until divestment, ECR will be held and
operated separately to Aurizon, with an
independent Board and management
and an Independent Manager approved
by the ACCC.
A divestment project team has
been established and provided with
appropriate resources to ensure optimal
deal execution is achieved, including
the use of experts throughout due
diligence and transaction phases to build
divestment readiness.
The Board will continue to receive regular
updates relating to transaction progress
and risk through regular meetings with
management and reporting.
An integration project team has
been established and provided with
appropriate resources to ensure effective
integration and longer-term value
generation for the Bulk business unit.
The Board will receive regular updates
relating to integration progress and
risk through regular meetings with
management and reporting.
Aurizon regularly reviews both fleet
allocation and performance to optimise
service delivery. Track-based condition
monitoring equipment provides real-time
data to support efficient maintenance
practices and performance management.
Specific transformation initiatives have
been undertaken to improve asset
availability, reliability and utilisation while
optimising total operating costs.
A key focus has been the development
of an over-arching Fleet Strategy
that addresses:
› the divergence in demand outlook
between coal and non-coal markets
› the imperative to deliver an ambitious
but credible decarbonisation pathway
towards net-zero operational emissions.
This Strategy combines operational,
financial, and market intelligence to
understand the value implications of fleet
positions (e.g., long/short; surplus/deficit)
and prioritise strategic interventions.
It also applies an enterprise lens to
fleet decision-making that seeks to
point assets to the right value-creating
opportunities and time horizons so that
Aurizon can sustainably achieve both its
free cash flow resilience objectives and
decarbonisation ambitions.
3030
AURIZON ANNUAL REPORT 2021–22 In FY2023, Aurizon is changing its key
operational safety metrics as foreshadowed
in our half-year results by removing RPS and
replacing it with SIF Rate, including both
actual and potential events (SIFR(a+p)).
The measure change is important for Aurizon
as it recognises our significant growth
journey and operational diversification.
While SIF actual and potential events have
been internally reported, in FY2023 we will
now be monitoring the rate of SIF actual and
potential events across our operation, per
million hours worked. Unlike RPS, SIFR(a+p)
captures our full breadth of activities across
ports, terminals, road transport, and broader
infrastructure activities. As such, it will help
direct our efforts to preventing serious injury
events across all of Aurizon’s operations.
During FY2022, we have continued to embed
our Safety Strategy through nine key priorities
focused on building and implementing simple
systems and processes, understanding and
controlling safety hazards and risks, and
building leadership capability with a strong
in-field presence.
Sustainability
Aurizon keeps stakeholders informed of
our corporate governance and financial
performance via announcements to the
Australian Securities Exchange (ASX) and
our website. Investors can access copies
of announcements to the ASX, notices of
meetings, annual reports, policies, investor
presentations, webcasts, and transcripts of
those presentations on our website.
In addition to the above disclosures, we take
a direct approach to reporting environmental,
social and governance (ESG) disclosures to our
stakeholders with the publication of our annual
Sustainability Report.
We recognise that our climate change
disclosures are one of the key areas of
interest to stakeholders. Since 2017, we have
aligned our climate-related disclosures to
the Task Force on Climate-related Financial
Disclosures (TCFD) as recommended by the
Financial Stability Board. This framework
enables consistent climate-related financial risk
disclosures for use by companies in providing
information to investors, lenders, insurers, and
other stakeholders.
In June 2022, we received a ‘Comprehensive’
rating, the highest rating for an eighth
consecutive year by the Australian Council of
Superannuation Investors (ACSI) for corporate
sustainability reporting in Australia.
Safety
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).
In FY2022, the primary safety metrics to
measure safety performance across the
enterprise were Total Recordable Injury
Frequency Rate (TRIFR) and Rail Process
Safety (RPS).
Importantly, none of our people were seriously
or fatally injured while at work.
TRIFR was 8.41 injuries per million hours
worked, which was an 18% improvement
against the prior comparative period. Several
injury prevention and management initiatives
to reduce the frequency of low severity injuries
were implemented in FY2022. There is ongoing
support to embed Telehealth and proactive
intervention strategies to ensure our people are
provided support whenever it is needed.
Rail Process Safety, which measures
operational rail safety, including derailments,
signals passed at danger, and rollingstock
collisions (expressed per million train
kilometres) improved by 17% against the
prior comparative period to 4.24. Aurizon
continues to progress several strategic
initiatives, including a community of practice
focused on improving yard safety interfaces to
reduce the number of yard incidents. RPS as
a consolidated frequency rate measure will no
longer be reported internally or externally after
FY2022. Instead, the sub-component parts will
continue to be managed and monitored by
management and operational leaders.
OPERATING AND FINANCIAL REVIEW
31
Directors’ Report (continued)
OPERATING AND FINANCIAL REVIEW
In FY2022, Aurizon launched its Cultural
Heritage Governance Framework (CHGF).
Leading the CHGF is a Commitment
Statement which is ‘to minimise our impact
on Indigenous and non-Indigenous cultural
heritage through a framework founded on
knowledge, understanding and respect.’ The
CHGF provides an implementation framework,
specifying jurisdictional requirements,
articulating responsibilities, accountabilities,
and providing direction to bespoke guidelines
and procedures. The CHGF is supported by a
Cultural Heritage Awareness learning package
available to all Aurizon employees.
In FY2022:
› Aurizon did not incur any fines, penalties or
prosecutions arising from environmental or
cultural heritage related incidents; and
› Aurizon had three notifiable environmental
incidents. Remedial actions were
implemented as required and no ongoing
material environmental impacts are
anticipated.
Environment
We recognise that we are responsible for
helping our local communities and supply
chains to deliver environmental value through
effective management of environmental
risks and improved enterprise environmental
performance. We employ proactive and
evidence-based management measures
covering key environmental issues such as
climate change, resource use and clean air.
In FY2022, Aurizon contributed to the
development of Rail Industry Safety and
Standards Board’s (RISSB) Train Horn Use
Code of Practice (CoP). The CoP seeks to
minimise horn use impacts on the community
whilst maintaining safe operations, through
standardisation of network rules and improved
driver awareness.
Aurizon continues to work collaboratively
with supply chain partners to minimise coal
dust emissions associated with Aurizon’s coal
haulage operations. Data from the CQCN
opacity monitoring stations indicated FY2022
continued to yield low rates of coal dust loss
from tops of wagons well below the long-term
average. For further detail in relation to coal
dust management and monitoring processes,
refer to Aurizon’s annual Sustainability Report.
Aurizon successfully transitioned its Safeguard
Mechanism Facilities (covering Scope 1 GHG
emissions associated with rail activities in QLD
and WA) from reported safeguard baselines
to production-adjusted safeguard baselines.
To date, Aurizon has not been required to
purchase or retire Australian Carbon Credit
Units (ACCUs) to meet its obligations under
the safeguard mechanism. This has been
achieved through effective management
of its scope 1 emissions intensity to remain
below baselines.
People
At Aurizon, our people are our greatest
asset. We have over 5,000 employees,
with more than 85% living and working in
regional Australia, including more than 20%
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 to enable great outcomes.
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:
› embedding 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
› supporting development at all levels, with
targeted capability programs and a new,
self-paced learning platform
› further improvements to our people,
processes and systems with a focus on our
annual performance, talent and succession
process facilitating the development of our
internal talent pool. This engages and retains
valued employees, and their knowledge,
while reducing external recruitment costs
and ensures we maintain our focus on our
current and future capability requirements
› continuing to strive towards creating an
inclusive culture by embedding flexible work
practices, creating awareness and driving
action for inclusion through employee
representative groups (across gender,
Aboriginal and Torres Strait Islander and
LGBTQIA+ inclusion), meeting workforce
representation targets and actively reducing
the gender pay gap.
3232
AURIZON ANNUAL REPORT 2021–22 Directors’ Report (continued)
REMUNERATION REPORT
Dear fellow shareholders
On behalf of the Board, we are pleased to present Aurizon’s Financial Year (FY) 2022 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, Tax, Depreciation and Amortisation (EBITDA) in FY2022 of $1,468 million. This was a solid result
given the uncertain business environment during the period, including major flooding events on the East Coast of Australia and ongoing COVID-19 related
impacts on production for many of our customers. Aurizon’s ability to deliver within guidance demonstrates the resilience of our Company, with strong
operating discipline and revenue protection mechanisms in place, and the ongoing efforts and dedication of our employees during a challenging time.
Despite 4% lower volumes in FY2022, the Coal business recorded higher Underlying EBITDA of $541 million, which represented a 1% increase compared
to FY2021.
The Network business achieved an Underlying EBITDA of $801 million, down 6% compared to FY2021. Revenue reduced by 3%, with volumes in FY2022
lower than the regulatory forecast resulting in an under-recovery of revenue.
The Bulk business recorded an Underlying EBITDA of $130 million which was down 7% compared to the prior period. This was the result of lower volumes,
due to the end of contracts for Mt Gibson and Queensland livestock and one-off factors such as stand-up costs associated with new contracts, weather
and an extended shut-down by a major customer which more than offset 7% revenue growth. After year end, in July 2022, we were pleased to announce
that Aurizon had received the regulatory approval to progress with the acquisition of One Rail Australia. This is a significant outcome for Aurizon and a
great opportunity to grow and expand our service offering. Delivering on the growth from this acquisition and integration synergies will be a key focus for
management with targets being built into management scorecards to drive outcomes for shareholders.
The Short Term Incentive (STI) Award for FY2022 continued to be based on annual performance measures of Underlying EBITDA, Safety and Individual
Key Deliverables. Business Unit earnings metrics also continue to be used for Bulk, Coal and Network.
In FY2022, Group Underlying EBITDA achieved a Target performance with Underlying EBITDA outcomes varying across the Business Units. Network
achieved an Underlying EBITDA outcome above Target, Coal achieved an outcome just below Target performance while Bulk was below Threshold.
At Aurizon, we are committed to protecting ourselves, each other and our communities. In FY2022, we retained two primary safety metrics 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 significant improvement in both TRIFR
(17.6% improvement) and RPS (17.3% improvement) against the prior year with both metrics achieving Stretch performance for FY2022.
The STI Award also considers performance against individual objectives which vary for Key Management Personnel (KMP). Throughout the year progress
has been made against key transformation initiatives to improve efficiency and competitiveness, continue growth plans within the Bulk contract book
including capital optimisation and fleet cascading to support this growth, continuing with inorganic growth plans and continued improvement of safety
and performance culture.
Through Aurizon’s Climate Strategy and Action Plan (CSAP), which forms part of Executive performance deliverables, we continue to focus on specific
initiatives to build resilience, manage risk, leverage opportunities and decarbonise our operations. During FY2022, we have continued to progress our
fleet decarbonisation program, which is supported by a multi-year research program and industry partnerships. Aurizon and Anglo American entered into
an agreement to conduct a feasibility study exploring the application of Anglo American’s proprietary hydrogen fuel cell and hybrid battery power units
in heavy haul freight operations. Aurizon Network also finalised a new electricity contract for the Central Queensland Coal Network which includes 25%
energy acquired from renewable sources such as solar and wind farms.
The varied performance across the Enterprise and Business Unit earnings measures, the significant improvement in safety measures and performance against
individual measures are reflected directly in the STI payments for our Executive KMP. The Board has determined that an overall outcome above Target will be
awarded to Coal, Network and Support Unit participants and an overall outcome below Target will be awarded to Bulk participants.
The Long Term Incentive (LTI) Award performance measures are Return on Invested Capital (ROIC) and relative Total Shareholder Return (TSR). During
FY2022, the 2018 LTI Award was subject to testing. No portion of the TSR component vested and these rights will lapse. ROIC achieved an outcome
above the maximum vesting point and therefore 50% of the total award will vest in August 2022.
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 Leadership Team.
During FY2022, the Board continued to review and refine Aurizon’s Remuneration Framework. With the continued growth of the business beyond rail,
from FY2023 Aurizon is moving to a more comprehensive safety metric, Potential Serious Injury and Fatality Frequency Rate (SIFRa+p). Encompassing
all our activities across rail, ports, terminals, road transport and broader infrastructure, this measure will support our efforts in preventing serious injury
events and driving improved safety performance. This metric will replace RPS. In addition, in response to shareholder feedback and to further align
incentive structures with business strategy, the strategic transformation measure in the 2022 LTI Award will change from a non-coal gross revenue
growth measure to a non-coal Underlying EBITDA growth measure. This change will continue to recognise the importance of growth opportunities as
we build non-coal revenue across our portfolio but also ensures the Leadership Team maintains focus on driving value from the Bulk business, including
the One Rail and ConPorts acquisitions. Further changes may be implemented from FY2024 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
Kate Vidgen
Chair, Remuneration and People Committee
REMUNERATION REPORT
33
Directors’ Report (continued)
REMUNERATION REPORT
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 2022 is set out as per Table 1. The
information in this Report has been audited.
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 2022 are identified in Table 2.
Table 3 identifies other persons who were KMP at some time during FY2022.
TABLE 2 — KEY MANAGEMENT PERSONNEL
NAME
POSITION
TABLE 1 — TABLE OF CONTENTS
NON-EXECUTIVE DIRECTORS
SECTION CONTENTS
PAGE
1
2
3
4
5
6
7
8
9
10
Remuneration Report
Introduction
Directors and Executives
Remuneration
Framework Components
Company Performance
Financial Year 2022
Take Home Pay
Short Term Incentive
Award
Long Term Incentive
Award
Executive Employment
Agreements
Non-Executive Director
Remuneration
Executive Remuneration
Financial Year 2022
34
34
35
37
38
39
41
43
44
46
T Poole
M Bastos
R Caplan
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
Managing Director & Chief Executive Officer
Group Executive Network
Chief Financial Officer & Group Executive Strategy
Group Executive Bulk
Group Executive Coal
TABLE 3 — FORMER KEY MANAGEMENT PERSONNEL
NAME
POSITION
FORMER NON-EXECUTIVE DIRECTOR
M Fraser1
Independent Non-Executive Director
1 M Fraser retired on 11 February 2022.
3434
AURIZON ANNUAL REPORT 2021–22 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 which is subject
to claw-back for financial misstatements
and misconduct
› 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 FY2022 for the MD & CEO and Executive
KMP is set out in Figure 1: Total potential
remuneration. The remuneration mix for
MD & CEO and remaining Executive KMP
remains unchanged.
0
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.
FIGURE 1 — TOTAL POTENTIAL REMUNERATION1
MD & CEO: CASH COMPONENT: 47%
EQUITY COMPONENT: 53%
24%
23%
15%
38%
EXECUTIVE KMP: CASH COMPONENT: 52%
EQUITY COMPONENT: 48%
31%
21%
14%
34%
Fixed Remuneration
STIA Cash
STIA Deferred
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.
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 the remuneration for Non-Executive
Directors, MD & CEO, Executive KMP and the
remaining Group Executives
› 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
› considers and determines the STIA outcomes of
the Executive KMP and remaining Group Executives
20
100
based on the recommendations of the MD & CEO.
80
60
40
0
20
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, Executive KMP
and the remaining Group Executives
› 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 Executive remuneration
matters.
100
60
80
40
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 recommendations and
advice provided by external
advisors are used to assist
the Board — they do not
substitute for the Board and
Remuneration and People
Committee processes.
REMUNERATION REPORT
35
Directors’ Report (continued)
REMUNERATION REPORT
Remuneration Framework and objectives
The Board is continuing to review and refine Aurizon’s Remuneration Framework. Summarised in Figure 3 are the changes that were implemented in
FY2022 and the changes being implemented in FY2023. Further changes may be implemented from FY2024 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
PERFORMANCE MEASURE
STRATEGIC OBJECTIVES AND
LINK TO PERFORMANCE
FY2022 AND FY2023
FRAMEWORK CHANGES
D
E
X
F
I
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T
A
R
E
N
U
M
E
R
M
R
E
T
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R
O
H
S
D
R
A
W
A
E
V
T
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N
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I
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R
E
T
G
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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 EBITDA (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)
(25%)
› Strategic Transformation (25%)
› 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.
Effective 1 July 2021, fixed
remuneration increases were
provided to ensure alignment with
external peer group:
› MD & CEO: from $1.717m to $1.75m
(1.9%)
› Other Executive KMP: between
1.5% and 7.1%.
The Board reviews Executive
remuneration annually.
› From FY2022 the financial
performance measure was adjusted
to Underlying EBITDA in place of
Underlying EBIT in line with
guidance reporting
› From FY2023 there will be increased
focus and alignment of KMP individual
deliverables with the Climate Strategy
and Action Plan (CSAP)
› As flagged at FY2022 half-year
results the FY2023 safety measure
Rail Process Safety (RPS) will be
replaced with Potential Serious
Injury and Fatality Frequency Rate
(SIFRa+p) measure. The weightings
remain unchanged.
› From the 2021 Award, a strategic
transformation measure (25%
weighting) was introduced which
reduced the portion of the award
weighted towards relative TSR
(from 50% to 25% weighting)
› From the 2022 Award the
strategic transformation measure
will change from Non-Coal Gross
Revenue Growth to Non-Coal
Underlying EBITDA Growth. The
weightings remain unchanged.
› To attract and retain Executives with
the right capability to achieve results.
The financial and non-financial
performance measures were chosen
because:
› Underlying EBITDA 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’s
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 peer group of companies (from the
ASX100 Index)
› Strategic Transformation reflects
the growing aspirations of the
Bulk business and other non-coal
investments
› 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
remaining Group Executives encourage
retention of shares and alignment with
shareholder interests.
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.
3636
AURIZON ANNUAL REPORT 2021–22
4. Company Performance for Financial Year 2022
Aurizon reported Group Underlying EBITDA of $1,468 million for continuing operations for year ended 30 June 2022 in line with the EBITDA guidance
range ($1,425m–$1,500m).
This was a solid result given the uncertain business environment during the period, including major flooding events on the East Coast of Australia and
ongoing COVID-19 related impacts on production for many of our customers. Aurizon’s ability to deliver within guidance demonstrates the resilience of
our Company, with strong operating discipline and revenue protection mechanisms in place, and the ongoing efforts and dedication of our employees
during a challenging time.
Table 4 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 FY2022 STIA performance measures is provided in Table 6 (page 40). Table 8
(page 41) provides additional information related to the LTIA performance outcomes.
TABLE 4 — HISTORICAL COMPANY PERFORMANCE AGAINST KEY MEASURES
KEY PERFORMANCE MEASURES
DESCRIPTION
Group Underlying EBITDA1
Bulk Underlying EBITDA1
Coal Underlying EBITDA1
Network Underlying EBITDA1
Return on Invested Captial (ROIC)
$m
$m
$m
$m
%
Total Recordable Injury Frequency Rate (TRIFR)
per million work hours
Rail Process Safety (RPS)
per million train kilometres
Total Shareholder Return (TSR)
4-year TSR2
Share Buy Back
Share price at beginning of year
Share price at end of year
Dividends per share3
Dividends4
%
%
$m
$
$
cps
$m
FY2022
1,467.6
130.1
541.2
801.3
10.3
8.41
4.24
10.4
13.8
–
3.73
3.80
21.4
394
FY2021
1,482.2
139.9
533.3
848.8
10.7
10.21
5.13
(14.9)
(11.1)
300
4.80
3.72
28.8
533
FY2020
1,467.6
110.1
616.4
798.1
10.9
9.92
4.74
(9.6)
400
5.40
4.92
27.4
529
FY2019
1,371.6
54.5
609.8
721.2
9.7
11.07
4.38
28.2
–
4.32
5.40
23.8
474
FY2018
1,466.1
75.2
611.2
788.6
10.9
10.02
5.08
(13.6)
300
5.32
4.33
27.1
540
1 Continuing operations.
2 Reporting on 4-year TSR was aligned to the commencement of a 4–year performance period from the 2017 LTIA. Prior to this the TSR was aligned to a 3-year
performance period.
3 Dividends per share for each Financial Year (the final dividend is paid in the following financial year).
4 Dividends for each Financial Year (the final dividend is paid in the following financial year).
REMUNERATION REPORT
37
Directors’ Report (continued)
REMUNERATION REPORT
5. Take Home Pay
Table 5 identifies the actual remuneration earned during FY2022 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 46).
Following a market review, effective 1 July 2021, fixed remuneration increases were provided to the MD & CEO (1.9%) and other Executive KMP
(between 1.5% and 7.1%) to ensure alignment with external peer groups.
The remuneration outcomes identified in Table 5 are directly linked to the Company performance described in Section 6 (page 39) and Section 7
(page 41).
The actual STIA is dependent on Aurizon, Business Unit and individual performance as described in Section 6.
Varying performance across our key measures is also reflected directly in the STIA payments for our Executive KMP, which range from 50% to 83% 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 FY2022, the 2018 Award was subject to testing. No portion of the relative TSR component vested and these rights will lapse. ROIC achieved an
outcome above the maximum vesting point and therefore 50% of this Award will vest in August 2022.
Movement in the Aurizon share price over the various performance periods is reflected in the remuneration outcomes for Executive KMP, aligning the
Executive KMP outcomes with the shareholder experience.
TABLE 5 — REMUNERATION EARNED IN FINANCIAL YEAR 2022
FIXED
REMUNERATION
$’000
NON-MONETARY
BENEFITS1
$’000
STIA
CASH2
$’000
STIA DEFERRED
FROM PRIOR YEAR3
$’000
LTIA
VESTING4
$’000
SHARE PRICE
DEPRECIATION5
$’000
ACTUAL FY2022
REMUNERATION OUTCOMES
$’000
NAME
EXECUTIVE KMP
A Harding
P Bains
G Lippiatt
C McDonald
E McKeiver
1,750
800
750
710
710
–
–
–
–
–
1,253
447
398
239
370
760
313
223
257
182
1,030
422
140
341
371
(142)
(58)
(17)
(47)
(53)
4,651
1,924
1,494
1,500
1,580
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 FY2022 STIA which will be paid in September 2022.
3 The amount relates to the deferred component (40%) of the FY2021 STIA which was awarded in performance rights and will become unrestricted in September 2022
(calculation based on share price of $3.73 at date of issue).
4 The amount relates to the portion of the 2018 Award which was subject to testing in FY2022 but will vest in August 2022 (calculation based on share price of $4.48 at
date of issue).
5 The amount is the number of rights which vest multiplied by the increase or decrease in the Aurizon share price over the period ended 30 June 2022
(calculation assumes share price appreciation of $0.07 Deferred STIA and a share price depreciation of $0.68 LTIA).
3838
AURIZON ANNUAL REPORT 2021–22 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
other eligible employees. For the MD &
CEO, Executive KMP and the remaining
Group Executives 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 EBITDA, 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 and strengthen
and grow our current business while continuing
to transform the Enterprise.
This is achieved through a focus on people
and asset efficiencies while 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’s 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 EBITDA, 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.
FIGURE 4 —
STRATEGIC MEASURES CASCADING PROCESS
Managing
Director
& Chief
Executive
Officer
Executive
Committee
Direct
Reports
to the
Executive
Committee
Other
STIA
Participants
OPTIMISE
EXCEL
EXTEND
What are the outcomes for FY2022?
Table 6 identifies the performance measures,
relevant weightings and outcomes for FY2022.
Target performance was achieved for Group
Underlying EBITDA.
Underlying EBITDA outcomes varied across
the Business Units, with Network achieving
an outcome above Target performance, Coal
achieving an outcome slightly below Target
performance while Bulk performance was
below Threshold.
During the year Aurizon has progressed a
number of initiatives to accelerate safety
performance improvement which has seen a
significant improvement in both TRIFR and
RPS. As a result, both TRIFR and RPS have
achieved a performance outcome above
Stretch.
The STIA also considers performance
against individual deliverables which vary
for Executives and are aligned to strategic
enterprise objectives.
During FY2022, an example of a key individual
deliverable has been progress against Aurizon’s
Climate Strategy and Action Plan (CSAP),
including our fleet decarbonisation program,
which is supported by a multi-year research
program and industry partnerships, and a new
electricity contract for the Central Queensland
Coal Network which includes 25% energy
acquired from renewable sources such as solar
and wind farms.
From FY2023, a Potential Serious Injury
and Fatality Frequency Rate (SIFRa+p)
performance measure will replace RPS.
Changing the metric will ensure safety remains
core to the business with increasing focus on
high severity events that have the potential to
seriously injure our people.
The FY2022 actual outcomes for Executive
KMP are identified in Table 7.
FIGURE 5 —
STIA AT-TARGET PERFORMANCE
OUTCOME CALCULATION
MD & CEO AND SUPPORT FUNCTION PARTICIPANTS
60%
+ 10%
+
30%
=
100%
BUSINESS UNIT PARTICIPANTS
30%
+
10%
+
30%
+
30%
=
100%
Enterprise
Measures
(EBITDA)
Enterprise
Safety
Measures
(TRIFR, RPS)
Business
Unit
Measures
(EBITDA)
Individual
Deliverable
Measures
(varied)
STIA
OUTCOME
REMUNERATION REPORT
39
Directors’ Report (continued)
REMUNERATION REPORT
TABLE 6 — SHORT TERM INCENTIVE AWARD FINANCIAL YEAR 2022 OBJECTIVES1
PERFORMANCE MEASURE
ENTERPRISE
Group Underlying EBITDA: Underlying EBITDA delivers financial benefit to
shareholders 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 Recordable Injury Frequency Rate (TRIFR)
› Rail Process Safety (Total Accident Rate and Signals Passed at Danger)
BUSINESS UNIT
Coal Underlying EBITDA:
Bulk Underlying EBITDA:
Network Underlying EBITDA:
INDIVIDUAL: At the start of the performance year the Board determines
the MD & CEO’s 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
KMP and throughout the organisation. During FY2022 key deliverables for
the MD & CEO and across the organisation were:
› Progress key transformation efforts to improve efficiency and
competitiveness
› Grow the Bulk contract book
› Continue implementation of Aurizon’s Climate Strategy and Action Plan
› Capital optimisation and fleet cascading to support Bulk growth
› Continue inorganic growth plans
› Deliver safety and performance culture transformation plan.
TOTAL OUTCOME
1 Company performance hurdles relate to continuing operations.
WEIGHTING
MD & CEO
& CFO
COAL,
BULK &
NETWORK
TARGET
FY2022
PERFORMANCE
OUTCOME
60%
30%
$1,467m
$1,468m
5%
5%
5%
5%
–
30%
9.19
4.62
$543m
$164m
$793m
8.41
4.24
$541m
$130m
$801m
30%
30% Individual performance
targets vary for each
specific role
Personal outcomes
for MD & CEO and
Executive KMP varied
between Threshold and
Stretch depending on
performance against
individual KPIs
100%
100%
MD & CEO, CFO, Coal & Network
Bulk
Stretch Between Target and Stretch Target Between Threshold and Target Threshold Below Threshold
TABLE 7 — SHORT TERM INCENTIVE AWARDED IN FINANCIAL YEAR 2022
TARGET STIA
$’000
MAXIMUM
POTENTIAL
STIA $’000
STIA CASH
COMPONENT
STIA
DEFERRED SHARE
COMPONENT1
TOTAL STIA
PAYMENT
% OF
TARGET STIA
% OF
MAXIMUM STIA2
AWARDED FY2022 $’000
1,750
600
563
533
533
2,625
900
844
799
799
1,253
447
398
239
370
835
298
265
160
246
2088
745
663
399
616
119
124
118
75
116
80
83
79
50
77
NAME
EXECUTIVE KMP
A Harding
P Bains
G Lippiatt
C McDonald
E McKeiver
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 Executives have forfeited between 17% and 50% of their maximum potential outcomes.
4040
AURIZON ANNUAL REPORT 2021–22 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 Group Executives
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 2018 Award through to the 2020 Award
have two performance hurdles: Relative Total
Shareholder Return and Average Return
on Invested Capital. From the 2021 Award
a Strategic Transformation measure was
introduced to reflect the growing aspirations
of the Bulk business and other non-Coal
investments as outlined in Table 9.
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 8 and Table 9.
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 2018 LTIA are identified in Table 8.
Partial vesting of the LTIA has occurred which
is aligned with the shareholder experience
over the performance period.
TABLE 8 — COMPANY PERFORMANCE AGAINST LONG TERM INCENTIVE AWARDS SUBJECT TO TESTING IN FINANCIAL YEAR 2022
COMPANY HURDLE AND PERFORMANCE MEASUREMENT PERIOD
WEIGHTING
RESULT
%
VESTED
%
LAPSED
2018 AWARD: 01 JULY 2018 — 30 JUNE 2022
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
FY2019–FY2022
50% of rights vest with an average ROIC of 9%,
up to 100% at 10%
Maximum Between Minimum and Maximum Minimum Below Minimum
50%
Below Median
0%
100%
50%
10.3%
100%
0%
REMUNERATION REPORT
41
Directors’ Report (continued)
REMUNERATION REPORT
TABLE 9 — 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.
STRATEGIC TRANSFORMATION
Measures the growth aspirations of the Bulk business and other
non-Coal investments.
Aligns with the long-term strategic direction to more than double
the size of the bulk business by FY2030 by expanding across the bulk
commodities supply chain.
› For the 2021 Award, determined by reference to non-coal gross
revenue growth over the performance period
› From the 2022 Award, determined by reference to Non-Coal
Underlying EBITDA growth over the performance period. The 2022
Award baseline reflects combined Underlying EBITDA for Bulk and
One Rail Australia (excluding East Coast Rail).
VESTING THRESHOLDS
Vesting Thresholds are consistent across all outstanding Awards
WEIGHTING
MINIMUM
VESTING
MAXIMUM
VESTING
Outstanding
2019 Award
2020 Award
2021 Award
Future
2022 Award
50%
50%
25%
25%
30% of
rights
vest at
the 50th
percentile
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
vesting points
Vesting Thresholds are consistent across all outstanding Awards
WEIGHTING
MINIMUM
VESTING
MAXIMUM
VESTING
Outstanding
2019 Award
2020 Award
2021 Award
Future
2022 Award
50%
50%
50%
50%
50% of Rights vest
with an average
ROIC of 9.5%
100% of Rights vest
with an average
ROIC of 10.5%
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
Outstanding
2021 Award
Future
2022 Award
25%
25%
50% of Rights
vest with non-coal
gross revenue
growth of 29%
100% of Rights
vest with non-coal
gross revenue
growth of 43%
50% of Rights
vest with
Non-Coal
Underlying
EBITDA growth
of 45%
100% of Rights
vest with
Non-Coal
Underlying
EBITDA growth
of 60%
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 2019 Award and 2020 Award.
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. During FY2022, no retention awards were issued to Executive KMP and 78,900 performance rights were issued across three employees.
Further information is available in note 27 of the Financial Report (page 104).
4242
AURIZON ANNUAL REPORT 2021–22
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 10.
Minimum shareholding and
retention policy
To align KMP and Group Executives 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 Group
Executives 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
2022 are set out in Table 11.
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 10 — 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
20221
NOTICE PERIOD2
BY EXECUTIVE
BY COMPANY3
Ongoing
Ongoing
Ongoing
Ongoing
Ongoing
$1,750,000
$800,000
$750,000
$710,000
$710,000
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 are 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 (unless approved by shareholders).
TABLE 11 — KMP SHAREHOLDINGS AS AT 30 JUNE 2022
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
S Lewis2
S Ryan
L Strambi
K Vidgen3
EXECUTIVE KMP
A Harding
P Bains
G Lippiatt
C McDonald
E McKeiver
135,500
45,947
82,132
63,025
48,000
42,787
40,000
576,525
126,132
67,959
156,001
122,1514
–
–
–
–
–
–
–
152,134
50,754
–
61,077
31,092
45,000
15,000
–
–
15,000
–
–
1,000,000
–
10,000
(19,398)
–
180,500
60,947
82,132
63,025
63,000
42,787
40,000
1,728,659
176,886
77,959
197,680
153,243
140%
103%
150%
105%
115%
71%
68%
375%
84%
39%
106%
82%
1 Assumes Total Directors’ Fees and Fixed Remuneration as at 30 June 2022 and the calculation assumes a share price of $3.80.
2 KMP required to meet the minimum shareholding requirement due to length of service in a KMP role being longer than six years.
3 Ms Vidgen became a KMP required to meet the minimum shareholding requirement due to length of service on 25 July 2022. Having regard to the Company’s Securities
Dealing Policy, Directors have had limited windows to trade shares during FY2022.
4 Restated from FY2021.
REMUNERATION REPORT
43
Directors’ Report (continued)
REMUNERATION REPORT
What are the aggregate fees approved
by shareholders?
The aggregate fees are $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.
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 12.
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 13.
The base Directors’ fee and Committee 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 a
performance pay.
The actual remuneration outcomes for the
Non-Executive Directors of the Company
are summarised in Table 14. Details of the
Non-Executive Director membership are
disclosed on page 9.
4444
AURIZON ANNUAL REPORT 2021–22 TABLE 12 — DIRECTORS’ FEES
DIRECTORS
Chairman
TERM
Directors’ fees (inclusive of all responsibilities and superannuation)
Other Non-Executive Directors
Directors’ fees (inclusive of all responsibilities and superannuation)
FEES
$490,000
$170,000
TABLE 13 — COMMITTEE FEES
Chairperson
Member
NETWORK BOARD
$40,000
$20,000
AUDIT, GOVERNANCE
AND RISK MANAGEMENT
COMMITTEE
REMUNERATION
AND PEOPLE
COMMITTEE
SAFETY, HEALTH
AND ENVIRONMENT
COMMITTEE
$40,000
$20,000
$35,000
$17,500
$35,000
$17,500
TABLE 14 — NON-EXECUTIVE DIRECTORS’ REMUNERATION
NAME
NON-EXECUTIVE DIRECTORS
T Poole
M Bastos
R Caplan
S Lewis
S Ryan
L Strambi
K Vidgen
FORMER NON-EXECUTIVE DIRECTOR
M Fraser
Total
SHORT-TERM EMPLOYEE
BENEFITS
POST-EMPLOYMENT
BENEFITS
YEAR
SALARY AND
FEES1 $’000
NON-
MONETARY
BENEFITS2
$’000
SUPERANNUATION
$’000
TOTAL
REMUNERATION
$’000
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
466
468
205
205
189
208
207
222
208
208
195
189
205
205
135
208
1,810
1,913
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
24
22
20
20
19
–
21
6
–
–
20
18
20
20
14
20
138
106
490
490
225
225
208
208
228
228
208
208
215
207
225
225
149
228
1,948
2,019
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
45
Directors’ Report (continued)
REMUNERATION REPORT
10. Executive Remuneration for Financial Year 2022
The table below details the number and value of movements in equity awards during FY20221.
TABLE 15 — RIGHTS GRANTED AS COMPENSATION
INCENTIVE
PLAN
BALANCE AT
BEGINNING
OF YEAR
RIGHTS
AWARDED
DURING THE
YEAR2
VALUE OF
RIGHTS
GRANTED IN
YEAR
VESTED IN
YEAR
VESTED IN
YEAR
FORFEITED IN
YEAR
FORFEITED IN
YEAR
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
NO.
NO.
$’000
%
NO.
NO.
NAME
EXECUTIVE KMP
A Harding
P Bains
G Lippiatt
C McDonald
E McKeiver
2017 (4 year)3
20184
2019
2020 STIAD5
2020
2021 STIAD6
2021
2017 (4 year)3
20184
2019
2020 STIAD5
2020
2021 STIAD6
2021
2017 (4 year)3
20184
2019
2020
2021 STIAD6
2021
2017 (4 year)3
20184
2019
2020 STIAD5
2020
2021 STIAD6
2021
2017 (4 year)3
20184
2019
2020 STIAD5
2020
2021 STIAD6
2021
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
–
–
203,647
654,613
760
1,781
83,786
224,439
59,735
210,411
68,828
199,190
48,946
199,190
313
610
223
572
257
542
183
542
(295,938)
100
(152,134)
%
100
(114,241)
100
(37,573)
100
(97,921)
100
(104,449)
100
100
(50,754)
100
(61,077)
100
(31,092)
$’000
885
351
115
301
321
NO.
459,911
347,454
–
0
556,263
203,647
654,613
188,337
149,494
191,469
83,786
224,439
62,500
48,799
170,086
59,735
210,411
152,176
126,539
162,068
68,828
199,190
165,737
129,574
165,956
48,946
199,190
–
–
–
–
–
–
–
$
2.99
2.58
3.95
4.30
2.51
3.73
2.72
3.07
2.56
3.95
4.30
2.51
3.73
2.72
3.07
2.56
3.95
2.51
3.73
2.72
3.07
2.56
3.95
4.30
2.51
3.73
2.72
3.07
2.56
3.95
4.30
2.51
3.73
2.72
18-Oct-17
18-Oct-18
17-Oct-19
28-Sep-20
14-Oct-20
27-Sep-21
13-Oct-21
6-Oct 17
5-Oct-18
17-Oct-19
28-Sep-20
14-Oct-20
27-Sep-21
13-Oct-21
6-Oct 17
5-Oct-18
17-Oct-19
14-Oct-20
27-Sep-21
13-Oct-21
6-Oct 17
5-Oct-18
17-Oct-19
28-Sep-20
14-Oct-20
27-Sep-21
13-Oct-21
6-Oct 17
5-Oct-18
17-Oct-19
28-Sep-20
14-Oct-20
27-Sep-21
13-Oct-21
18-Oct-21
18-Oct-22
17-Oct-23
28-Sep-21
14-Oct-24
27-Sep-22
13-Oct-25
6-Oct 21
5-Oct-22
17-Oct-23
28-Sep-21
14-Oct-24
27-Sep-22
13-Oct-25
6-Oct 21
5-Oct-22
17-Oct-23
14-Oct-24
27-Sep-22
13-Oct-25
6-Oct 21
5-Oct-22
17-Oct-23
28-Sep-21
14-Oct-24
27-Sep-22
13-Oct-25
6-Oct 21
5-Oct-22
17-Oct-23
28-Sep-21
14-Oct-24
27-Sep-22
13-Oct-25
31-Dec-21
31-Dec-22
31-Dec-23
31-Dec-21
31-Dec-24
31-Dec-22
31-Dec-25
31-Dec-21
31-Dec-22
31-Dec-23
31-Dec-21
31-Dec-24
31-Dec-22
31-Dec-25
31-Dec-21
31-Dec-22
31-Dec-23
31-Dec-24
31-Dec-22
31-Dec-25
31-Dec-21
31-Dec-22
31-Dec-23
31-Dec-21
31-Dec-24
31-Dec-22
31-Dec-25
31-Dec-21
31-Dec-22
31-Dec-23
31-Dec-21
31-Dec-24
31-Dec-22
31-Dec-25
1 Each equity instrument granted, vested or exercised (as applicable) were issued by Aurizon and resulted or will result in a right to receive one ordinary share
in Aurizon being provided.
2 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.
3 Details of the vesting outcomes are described in Table 7 of the FY2021 Remuneration Report.
4 Details of vesting outcomes are described in Table 8.
5 Deferred STIA component as described in Section 3 and Section 6 of this report and Table 7 in the FY2020 Remuneration Report.
6 Deferred STIA component as described in Section 3 and Section 6 of this report and Table 6 in the FY2021 Remuneration Report.
4646
AURIZON ANNUAL REPORT 2021–22 10. Executive Remuneration for Financial Year 2022
The table below details the number and value of movements in equity awards during FY20221.
TABLE 15 — RIGHTS GRANTED AS COMPENSATION
NAME
INCENTIVE
PLAN
EXECUTIVE KMP
A Harding
2017 (4 year)3
BALANCE AT
BEGINNING
OF YEAR
NO.
RIGHTS
AWARDED
VALUE OF
RIGHTS
DURING THE
GRANTED IN
VESTED IN
VESTED IN
FORFEITED IN
FORFEITED IN
YEAR2
NO.
YEAR
$’000
YEAR
%
YEAR
NO.
YEAR
NO.
YEAR
%
(295,938)
100
P Bains
2017 (4 year)3
(114,241)
100
G Lippiatt
2017 (4 year)3
(37,573)
100
C McDonald
2017 (4 year)3
(97,921)
100
2020 STIAD5
2021 STIAD6
2020 STIAD5
2021 STIAD6
20184
2019
2020
2021
20184
2019
2020
2021
20184
2019
2020
2021
20184
2019
2020
2021
20184
2019
2020
2021
2021 STIAD6
2020 STIAD5
2021 STIAD6
2020 STIAD5
2021 STIAD6
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
–
–
–
–
–
–
–
–
–
–
203,647
654,613
760
1,781
100
(152,134)
100
(50,754)
83,786
224,439
59,735
210,411
68,828
199,190
48,946
199,190
313
610
223
572
257
542
183
542
100
(61,077)
100
(31,092)
E McKeiver
2017 (4 year)3
(104,449)
100
1 Each equity instrument granted, vested or exercised (as applicable) were issued by Aurizon and resulted or will result in a right to receive one ordinary share
in Aurizon being provided.
2 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.
3 Details of the vesting outcomes are described in Table 7 of the FY2021 Remuneration Report.
4 Details of vesting outcomes are described in Table 8.
5 Deferred STIA component as described in Section 3 and Section 6 of this report and Table 7 in the FY2020 Remuneration Report.
6 Deferred STIA component as described in Section 3 and Section 6 of this report and Table 6 in the FY2021 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
885
351
115
301
321
NO.
–
459,911
347,454
0
556,263
203,647
654,613
–
188,337
149,494
–
191,469
83,786
224,439
–
62,500
48,799
170,086
59,735
210,411
–
152,176
126,539
–
162,068
68,828
199,190
–
165,737
129,574
–
165,956
48,946
199,190
$
2.99
2.58
3.95
4.30
2.51
3.73
2.72
3.07
2.56
3.95
4.30
2.51
3.73
2.72
3.07
2.56
3.95
2.51
3.73
2.72
3.07
2.56
3.95
4.30
2.51
3.73
2.72
3.07
2.56
3.95
4.30
2.51
3.73
2.72
18-Oct-17
18-Oct-18
17-Oct-19
28-Sep-20
14-Oct-20
27-Sep-21
13-Oct-21
6-Oct 17
5-Oct-18
17-Oct-19
28-Sep-20
14-Oct-20
27-Sep-21
13-Oct-21
6-Oct 17
5-Oct-18
17-Oct-19
14-Oct-20
27-Sep-21
13-Oct-21
6-Oct 17
5-Oct-18
17-Oct-19
28-Sep-20
14-Oct-20
27-Sep-21
13-Oct-21
6-Oct 17
5-Oct-18
17-Oct-19
28-Sep-20
14-Oct-20
27-Sep-21
13-Oct-21
18-Oct-21
18-Oct-22
17-Oct-23
28-Sep-21
14-Oct-24
27-Sep-22
13-Oct-25
6-Oct 21
5-Oct-22
17-Oct-23
28-Sep-21
14-Oct-24
27-Sep-22
13-Oct-25
6-Oct 21
5-Oct-22
17-Oct-23
14-Oct-24
27-Sep-22
13-Oct-25
6-Oct 21
5-Oct-22
17-Oct-23
28-Sep-21
14-Oct-24
27-Sep-22
13-Oct-25
6-Oct 21
5-Oct-22
17-Oct-23
28-Sep-21
14-Oct-24
27-Sep-22
13-Oct-25
31-Dec-21
31-Dec-22
31-Dec-23
31-Dec-21
31-Dec-24
31-Dec-22
31-Dec-25
31-Dec-21
31-Dec-22
31-Dec-23
31-Dec-21
31-Dec-24
31-Dec-22
31-Dec-25
31-Dec-21
31-Dec-22
31-Dec-23
31-Dec-24
31-Dec-22
31-Dec-25
31-Dec-21
31-Dec-22
31-Dec-23
31-Dec-21
31-Dec-24
31-Dec-22
31-Dec-25
31-Dec-21
31-Dec-22
31-Dec-23
31-Dec-21
31-Dec-24
31-Dec-22
31-Dec-25
REMUNERATION REPORT
47
Directors’ Report (continued)
REMUNERATION REPORT
Details of the remuneration paid to Executives are set out below and have been prepared in accordance with the accounting standards.
TABLE 16 — EXECUTIVE REMUNERATION
SHORT-TERM EMPLOYEE BENEFITS
POST-
EMPLOYMENT
BENEFITS
LONG-TERM
BENEFITS
EQUITY-
SETTLED
SHARE-
BASED
PAYMENTS
CASH
SALARY
AND FEES1
$’000
CASH
BONUS2
$’000
ANNUAL
LEAVE3
$’000
NON-
MONETARY
BENEFITS4
$’000
OTHER5
$’000
SUPER-
ANNUATION6
$’000
LONG-
SERVICE
LEAVE
$’000
RIGHTS7
$’000
TOTAL
$’000
PROPORTION OF
COMPENSATION
PERFORMANCE
RELATED8 %
REMUNERATION
CONSISTING
OF RIGHTS FOR
THE YEAR %
NAME
EXECUTIVE KMP
A Harding
P Bains
G Lippiatt
C McDonald
E McKeiver
YEAR
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
A
B
1,726
1,695
1,253
1,139
773
763
726
678
686
645
686
661
447
469
398
334
239
385
370
274
Total Executive KMP
compensation (group)
2022
4,597
2,708
2021
4,442
2,601
1
Cash salary and fees include any salary sacrifice benefits.
C
(98)
98
(8)
(28)
2
35
57
10
14
(21)
(33)
94
D
–
–
–
–
–
–
–
10
–
4
–
E
–
515
–
105
–
158
–
109
–
154
–
14
1,041
F
24
22
27
25
24
22
24
22
24
22
123
113
G
38
44
2
18
13
68
13
13
(39)
11
27
154
H
2,189
1,426
885
528
509
165
724
482
651
393
I
5,132
4,939
2,126
1,880
1,672
1,460
1,743
1,676
1,706
1,498
4,958 12,379
2,994
11,453
J
67
62
63
59
54
45
55
58
60
55
62
58
K
43
29
42
28
30
11
42
29
38
26
40
26
2
This amount relates to the cash component (60%) of the FY2022 STIA which will be paid in September 2022.
3 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.
4 Non-monetary benefits represent the value of Reportable Fringe Benefits for the respective FBT year ending 31 March.
5 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 one-off cash payment would be made to recognise the WIRP fees payable between FY2016 — FY2020 but collected in
FY2021. Payment was made to Executive KMP in September 2021.
6 Superannuation amounts represent employers’ contribution to superannuation.
7
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 27 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.
8 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.
4848
AURIZON ANNUAL REPORT 2021–22 Deloitte Touche Tohmatsu
ABN 74 490 121 060
Level 23, Riverside Centre
123 Eagle Street
Brisbane, QLD, 4000
Australia
Phone: +61 7 3308 7000
www.deloitte.com.au
8 August 2022
Board of Directors
Aurizon Holdings Limited
900 Ann Street
Fortitude Valley, QLD 4006
Australia
Dear Board Members
AAuuddiittoorr’’ss IInnddeeppeennddeennccee DDeeccllaarraattiioonn ttoo AAuurriizzoonn HHoollddiinnggss LLiimmiitteedd
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration
of independence to the Board of Directors of Aurizon Holdings Limited.
As lead audit partner for the audit of the financial report of Aurizon Holdings Limited for the year ended 30 June
2022, I declare that to the best of my knowledge and belief, there have been no contraventions of:
•
•
The auditor independence requirements of the Corporations Act 2001 in relation to the audit and
Any applicable code of professional conduct in relation to the audit.
Yours faithfully
DELOITTE TOUCHE TOHMATSU
Matthew Donaldson
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte organisation.
AUDITOR’S INDEPENDENCE DECLARATION
49
Corporate Governance Statement
Aurizon Holdings Limited and the entities it controls (Aurizon 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.
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 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 5 August 2022.
Principle 1: Lay solid foundations for management and oversight
RECOMMENDATION
AURIZON’S 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 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 (e.g. 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 entered into with each Director 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)
are 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 43 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 Charter also
sets out the responsibilities of the Company Secretary.
In accordance with the Company’s Constitution and 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 2021–22 Principle 1: Lay solid foundations for management and oversight (continued)
RECOMMENDATION
AURIZON’S COMPLIANCE WITH RECOMMENDATIONS
1.5 Diversity
Aurizon has had an Inclusion and Diversity 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. It is available
in the Governance section of the Company’s website aurizon.com.au.
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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 Board for FY2022, are set out below:
ENTERPRISE MEASURES
FY2022 TARGET
FY2022 ACTUAL
Gender representation on the Board Minimum 30% (each gender)
38% women/62% men
Representation of women in senior
executive roles (being the Group
Executives)
Representation of women in
the workforce
Representation of Aboriginal and
Torres Strait Islander men and
women in Aurizon
30%
24%
7%
20%
23%
6.6%
1.6 Board reviews
In compliance with the Workplace Gender Equality Act 2012, Aurizon submitted its annual compliance reports to
the Workplace Gender Equality Agency in 2022. Aurizon’s most recent Gender Equality Indicators (as defined in
the WGE Act) are available on the Workplace Gender Equality Agency website www.wgea.gov.au.
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 FY2022 an external independent consultant was engaged to undertake a comprehensive review of
both the collective and individual performance of the Board, its Committees and individual Directors including
the Chairman.
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 of, progress made
towards and their performance against their set key deliverables.
A performance evaluation as described was undertaken for all senior executives in FY2022. 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’S 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 4–7 of the Annual Report.
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The number of meetings held and attended by each member of the Nomination and Succession Committee during the
financial year are set out on page 9 of the Annual Report.
The Nomination & Succession Committee assists the Board by facilitating and making recommendations on matters
of Board composition, succession planning, the appointment and recruitment of Directors, together with the ongoing
implementation of professional development programs as well as the Board review processes. During FY2022 the
Nomination & Succession Committee assisted the Board in, among other things, reviewing the appropriate mix of
skills, competencies and experience of its members and facilitating the external Board review process.
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.
CORPORATE GOVERNANCE STATEMENT
51
Corporate Governance Statement
(continued)
RECOMMENDATION
AURIZON’S COMPLIANCE WITH RECOMMENDATIONS
2.2 Board skills
During the reporting period, the Board reviewed and updated its board skills matrix to set out the diverse mix of
skills and experience considered optimal for the Board. The Board considers that Directors have an appropriate
range of skills, knowledge and experience necessary to direct the Company.
2.3 Disclose
independence and
length of service
Detail regarding the board skills matrix, and the skills and experience of each Director and the Board collectively is
included on pages 4–8 of the Annual Report.
Details regarding which Directors are considered independent and the length of their service are set out on page 4
of the Annual Report.
Mr Fraser retired as Director of Aurizon Holdings Limited and Chairman of Aurizon Network Pty Ltd on 11 February
2022. Mr Strambi was subsequently appointed to the role of Chairman of the Board of Aurizon Network Pty Ltd.
In FY2022, Mr Caplan will have served as a Director of Aurizon for over 11 years. The Board remains satisfied that
the interests of security holders are well served as Mr Caplan continues to bring independent judgement 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 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 4–7 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, Directors
participate, from time to time, in Aurizon leadership forums and actively engage with Aurizon 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 periodically on relevant matters including legal, accounting, regulatory and
technology developments.
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 across the Bulk,
Coal and Network businesses in Queensland and New South Wales.
Principle 3: Instil a culture of acting lawfully, ethically and responsibly
RECOMMENDATION
AURIZON’S 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 their acknowledgement 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 & 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
Anti-Corruption Policy
The Company has an Anti-Bribery and Anti-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 & 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 2021–22 Principle 4: Safeguard the integrity of corporate reports
RECOMMENDATION
AURIZON’S 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 4–7 of the Annual Report.
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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 reviews and makes recommendations to the Board on
matters including the Company’s financial and governance reporting processes, the governance and risk policies
and frameworks of the Company, the internal and external audit functions, risk and control culture and the control
environment. During FY2022, among other things, the Committee has overseen the external audit plan and
approach, transition reports and insights provided as part of the FY2022 audit following the appointment
and transition of the external audit to Deloitte.
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, that
there is integrity in the statements and 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, accounting standards or governance.
For other types of periodic corporate reports (including the annual Directors’ 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’S COMPLIANCE WITH RECOMMENDATIONS
5.1 Disclosure and
Communications
Policy
Aurizon has a Disclosure & 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 has guidelines to assist officers and employees of the Company comply with the Company’s Disclosure &
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
53
Corporate Governance Statement
(continued)
Principle 6: Respect the rights of security holders
RECOMMENDATION
AURIZON’S 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 keeps investors informed of its corporate governance, financial performance and prospects via
announcements to the ASX and the Company’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 conducts regular market briefings including in relation to its half-year and full-year results
announcements, holds investor days and 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 the
Company’s website, including the webcast and transcript if applicable.
Aurizon uses technology to facilitate the participation of security holders in meetings including webcasting of the
Annual General Meeting (AGM).
In 2022, the Company will host a hybrid AGM in Townsville giving security holders (or their proxies or
representatives) the opportunity to attend, comment and ask questions, and vote either online or in person.
Shareholders are encouraged to participate and are given an opportunity to ask questions of the Company and its
auditor at the AGM. All resolutions put to shareholders at the Company’s AGM 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’S COMPLIANCE WITH RECOMMENDATIONS
7.1 Risk Committee
Aurizon Audit, Governance & Risk Management Committee oversees the process for identifying and managing
material risks faced by the Company in accordance with the Aurizon Enterprise Risk Management Framework,
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 attendance at those meetings, are set out in response to Recommendation 4.1 and on page 9
of the Annual Report.
The Board reviews Aurizon’s Enterprise Risk Management Framework and Appetite at least annually to approve
updates, where required. In FY2022, 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 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 Committee’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.
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5454
AURIZON ANNUAL REPORT 2021–22
RECOMMENDATION
AURIZON’S COMPLIANCE WITH RECOMMENDATIONS
7.4 Sustainability risks
Aurizon discloses material exposures to environmental, social and governance (ESG) risks and associated risk
management strategies through our annual Sustainability Report. During FY2022, the Company published its eighth
Sustainability Report (for the period ended 30 June 2021). A copy of this report is available in the Sustainability
section of the Company’s website aurizon.com.au.
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Aurizon’s FY2022 Sustainability Report will be published in October 2022. This will be the sixth 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.
During FY2021, Aurizon 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 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
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 FY2022, the
Company published its second 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 Company’s website.
Principle 8: Remunerate fairly and responsibly
RECOMMENDATION
AURIZON’S COMPLIANCE WITH RECOMMENDATIONS
8.1 Remuneration
Committee
Aurizon’s remuneration function is performed by the Remuneration & People Committee, comprising
four members, all of whom are Independent Non-Executive Directors. Details of the membership of the
Remuneration & People Committee, including the names and qualifications of the Committee members,
are set out on pages 4–7 of the Annual Report.
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The number of meetings held and attended by each member of the Remuneration & People Committee during
the financial year are set out on page 9 of the Annual Report.
The Remuneration & People Committee makes recommendations to the Board on the remuneration policies
and practices for Board members and senior executives (including the MD & CEO), as well as the Company’s
remuneration strategy and incentive programs, and the Company’s people, diversity and inclusion policies
and practices.
During FY2022, the Remuneration & People Committee undertook its usual practices and activities in regard to
remuneration and performance, and continued to have a focus on broader people-related priorities and initiatives.
The Charter governing the conduct of the Remuneration & People Committee is reviewed annually and is available
in the Governance section of the Company’s website aurizon.com.au.
CORPORATE GOVERNANCE STATEMENT
55
Corporate Governance Statement
(continued)
Principle 8: Remunerate fairly and responsibly (continued)
RECOMMENDATION
AURIZON’S COMPLIANCE WITH RECOMMENDATIONS
8.2 Disclosure
of Executive and
Non-Executive
Director remuneration
policy
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.
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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 pages 44 to 45.
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 33 to 48 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.
8.3 Policy on hedging
equity incentive
schemes
Aurizon’s 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.
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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 the role’s direct reports and any other person entitled to participate in an Aurizon 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’S COMPLIANCE WITH RECOMMENDATIONS
9.1–9.3 Additional
recommendations
Recommendations 9.1–9.3 of the ASX Principles and Recommendations do not apply to Aurizon, and did not at any stage
during FY2022, and are therefore not relevant to the period.
5656
AURIZON ANNUAL REPORT 2021–22 Financial Report
for the year ended 30 June 2022
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
management
14. Capital risk
19. Joint ventures
2. Revenue
7.
Inventories
15. Dividends
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
20. Material
subsidiaries
21. Parent entity
disclosures
22. Acquisition
of businesses
and interests in
joint ventures
23. Discontinued
operations
24. Notes to the
consolidated
statement of
cash flows
25. Related party
transactions
26. Key
Management
Personnel
27. Share-based
payments
28. Auditor’s
remuneration
29. Summary of
other significant
accounting
policies
Page 58
Page 59
Page 60
Page 61
Page 62
Page 63
Page 63
Page 63
Unrecognised
items and events
after reporting date
30. Commitments
and
contingencies
31. Events
occurring after
the reporting
period
SIGNED REPORTS
Directors’ declaration
Independent auditor’s report to the members of Aurizon Holdings Limited
ASX INFORMATION
Non-IFRS Financial Information
Page 111
Page 112
Page 117
FINANCIAL REPORT 57
FINANCIAL REPORT
Consolidated income statement
for the year ended 30 June 2022
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 of investments 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
2022
$m
3,047.9
27.4
3,075.3
(853.4)
(255.2)
(77.7)
(433.1)
(592.3)
(2.1)
(0.8)
0.4
861.1
1.9
(126.9)
(125.0)
736.1
(223.1)
513.0
–
513.0
2021
$m
3,005.9
21.6
3,027.5
(840.7)
(191.4)
(81.1)
(411.7)
(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
Cents
27.9
27.8
27.9
27.8
32.5
32.4
39.1
39.0
58
AURIZON ANNUAL REPORT 2021–22
Consolidated statement
of comprehensive income
for the year ended 30 June 2022
Profit for the year
Other comprehensive income
Items that may be reclassified to profit or loss:
Changes in the fair value of cash flow hedges
Income tax relating to changes in fair value of cash flow hedges
Reclassification to profit or loss on cessation of joint venture
Exchange differences on translation of foreign operations
Reclassification to profit or loss on disposal of shares in associate
Other comprehensive income for the year, net of tax
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.
Notes
16(b)
16(b)
16(b)
16(b)
16(b)
2022
$m
513.0
107.1
(32.1)
(0.2)
(1.0)
–
73.8
586.8
2021
$m
730.3
22.1
(6.6)
–
(0.1)
1.8
17.2
747.5
59
FINANCIAL REPORT Consolidated balance sheet
as at 30 June 2022
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 equipment1
Intangible assets1
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
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 equity2
Reserves2
Retained earnings
Total equity
Notes
2022
$m
2021
$m
6
7
18(a)
10
7
18(a)
8
9
10
19
11
17
18(a)
12
13
17
18(a)
4(c)
12
13
16(a)
16(b)
172.1
434.1
186.2
43.8
–
23.9
0.1
860.2
55.6
37.9
148.8
483.8
150.4
0.1
8.5
15.3
5.0
811.9
45.9
125.0
8,406.8
8,445.3
217.7
75.3
22.0
8,815.3
9,675.5
293.9
255.0
–
68.6
280.6
68.7
966.8
231.8
78.6
26.1
8,952.7
9,764.6
269.1
59.0
0.6
–
296.9
91.6
717.2
2,965.8
3,679.0
266.3
797.5
49.1
217.7
4,296.4
5,263.2
4,412.3
3,673.7
26.4
712.2
66.6
705.9
64.2
257.1
4,772.8
5.490.0
4,274.6
3,673.7
(56.6)
657.5
4,412.3
4,274.6
1 FY2021 is restated to reclassify $37.9 million to intangible assets, refer to note 8 and 9.
2 FY2021 is restated to reclassify the capital reserve of $3,467.1 million to contributed equity, refer to key events and transactions.
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
60
AURIZON ANNUAL REPORT 2021–22 Consolidated statement of changes in equity
for the year ended 30 June 2022
Balance at 1 July 2021
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Dividends provided for or paid
Share-based payments
Balance at 30 June 2022
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
Attributable to owners of Aurizon Holdings Limited
Notes
16(b)
15
16(b)
16(b)
16(a)
15
16(b)
Contributed
equity¹
$m
3,673.7
–
–
–
–
–
–
3,673.7
3,973.7
–
–
–
(300.0)
–
–
(300.0)
3,673.7
Reserves¹
$m
Retained
earnings
$m
(56.6)
–
73.8
73.8
–
9.2
9.2
26.4
(72.0)
–
17.2
17.2
–
–
(1.8)
(1.8)
(56.6)
657.5
513.0
–
513.0
(458.3)
–
(458.3)
712.2
456.0
730.3
–
730.3
–
(528.8)
–
(528.8)
657.5
Total
equity
$m
4,274.6
513.0
73.8
586.8
(458.3)
9.2
(449.1)
4,412.3
4,357.7
730.3
17.2
747.5
(300.0)
(528.8)
(1.8)
(830.6)
4,274.6
1 Balance at 1 July 2020 is restated to reclassify the capital reserve of $3,467.1 million to contributed equity, refer to key events and transactions.
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
61
FINANCIAL REPORT Consolidated statement of cash flows
for the year ended 30 June 2022
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 from operating activities from discontinued operations
Net cash inflow from operating activities
Cash flows from investing activities
Payments for business acquisitions (net of cash acquired) and investment in joint venture
Payments for property, plant and equipment
Proceeds from sale of shares held in associate
Proceeds from sale of property, plant and equipment
Payments for intangibles
Interest paid on qualifying assets
Distributions received from investments
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 increase/(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
24
23
22
3
23
15
23
23
2022
$m
3,402.1
(2,004.8)
1.7
(86.0)
7.1
1,320.1
–
2021
$m
3,326.3
(1,884.4)
4.2
(175.6)
6.5
1,277.0
(23.0)
1,320.1
1,254.0
(16.9)
(534.9)
–
39.0
(14.2)
(1.9)
0.5
(528.4)
–
(528.4)
60.0
(224.0)
(0.1)
(17.3)
(128.1)
–
–
–
(458.3)
(767.8)
–
(767.8)
23.9
–
148.8
(0.6)
172.1
(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
62
AURIZON ANNUAL REPORT 2021–22 Notes to the consolidated financial statements
30 June 2022
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 2021;
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 2022 (FY2022) has been authorised for issue in accordance with
a resolution of the Directors on 8 August 2022. 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) Acquisitions
One Rail Australia LP
The Group signed a Partnership Interest Sale Agreement with Macquarie Asset
Management (on behalf of its managed funds and clients) on 21 October 2021
to acquire 100% of the partnership interest in One Rail Australia Holdings
LP (ORA) for consideration of $2,350.0 million. The acquisition completed
on 29 July 2022 and the financial effects of the transaction have not been
recognised at 30 June 2022. Refer to note 31 for further information.
ORA comprises of two main business segments:
› Integrated bulk rail haulage and general freight assets in South
Australia (SA) and the Northern Territory (NT) and below rail operator
and economic owner of 2,460km of rail infrastructure including the
2,245km Tarcoola-to-Darwin railway line (ORA Bulk); and
› Coal haulage in New South Wales (NSW) and Queensland (QLD) (East
Coast Rail or ECR), including a long-term coal haulage contract with
Glencore for its mines in the Hunter Valley and Central Queensland.
ORA Bulk will be integrated into the Group’s bulk segment. ORA Bulk is
the sole rail freight operator along the SA/NT corridor and commodities
hauled include copper, grain, magnetite, phosphate and rare earths. Below
rail infrastructure is operated under two long-term government concessions
including the Tarcoola-to-Darwin Railway expiring 2054 and SA regional lines
expiring 2047 and are regulated by the Essential Services Commission of
South Australia (ECOSA).
ECR will be classified as a discontinued operation held for sale and will be
divested through either a demerger or trade sale, whichever creates greater
value for shareholders, in accordance with the terms of a Court-enforceable
undertaking given by the Company to the Australian Competition and
Consumer Commission (ACCC).
The acquisition was funded from a combination of existing bank debt
facilities and new underwritten facilities. The acquisition facilities include
$1,450.0 million bank debt facilities with terms of 2 – 5 years for Aurizon
Finance Pty Ltd, the financing entity for Aurizon Operations Limited (a wholly
owned subsidiary of the Group) and $500.0 million secured amortising bank
debt facilities with terms of 2 – 5 years for ECR. Borrowing costs for the
acquisition facilities are estimated to be $25.0 million and will be capitalised
to balance sheet and amortised to profit or loss over the expected term of
the bank debt facilities.
63
FINANCIAL REPORT Notes to the consolidated financial statements
30 June 2022 (continued)
Consistent with the definition of the Report Date in UT5, notification
to the Chair of the RIG on 12 November 2021 triggered an increase
in the WACC from 5.90% to 6.30%. UT5 assumed the ICAR would be
completed by 1 March 2020 and therefore a WACC of 6.30% was applied
in determining tariffs from that date. As a result of the delay in the
publication of the ICAR, there has been an over-collection of access
charges (the difference between 5.90% and 6.30%) in FY2022 estimated
to be $9.3 million that will be captured in the FY2022 revenue adjustment
amount. The total FY2022 revenue adjustment amount to be recovered in
FY2024 tariffs, is estimated to be a net under recovery of approximately
$42.0 million ($30.0 million excluding GAPE), driven by annual volumes
being lower than regulatory forecast and other adjustments, partly
offset by Take-or-Pay of $28.2 million recognised in FY2022. The FY2022
revenue adjustment is subject to approval by the QCA.
Wiggins Island Rail Project (WIRP)
Aurizon Network Pty Ltd settled all disputes with WIRP customers
under their respective WIRP Deeds in July 2022. WIRP fees of $47.0
million have been recognised in FY2022 (2021: $60.3 million), including
additional historical fees of $30.3 million relating to FY2016 - FY2021 and
$16.7 million in fees relating to FY2022.
(c) Australian Taxation Office (ATO) declaratory
relief proceedings
Prior to the Initial Public Offering in FY2010, the Queensland Government
(the State) made an equity contribution to the Company of $4,388.3
million. This contribution was recorded separately to issued capital, in a
capital distribution account (classified as capital reserve). Following on
from engagement with the Australian Taxation Office (ATO) in relation
to the tax technical treatment of the State’s contribution, the Company
commenced proceedings in the Federal Court of Australia (the Court)
seeking a declaration from the Court that the capital distribution account
is contributed equity for the purposes of tax law. In April 2022, the Court
made a declaration that the Company’s capital distribution account is
share capital for tax purposes. The Court’s declaration was not appealed
by the ATO.
Certain share buy-backs and incremental costs attributable to share buy-
backs have been deducted from the initial contribution and the carrying
amount of the capital reserve at 1 July 2020 was $3,467.1 million. FY2021
is restated to reclassify the capital reserve to contributed equity.
Key events and transactions for
reporting period (continued)
(a) Acquisitions (continued)
One Rail Australia LP (continued)
Acquisition costs, including stamp duty and advisory related fees are
estimated to be $50.0 million. Separation and divestment related costs
are estimated to be $25.0 million and include advisory fees, IT system
separation costs, recruitment and other costs.
Transaction costs of $14.2 million included in the estimates above have
been incurred in FY2022 and expensed to profit or loss. This amount has
been classified as a significant item.
Kooregah Pastoral Co Pty Ltd (KPC)
The Group acquired the business of KPC for consideration of $8.3 million
on 28 October 2021. KPC is a trucking and material handling business
that operates in and around Hermidale in NSW. Refer to note 22 for
further information.
South Maitland Railways Pty Ltd (SMR)
The Group acquired 100% of the issued shares in SMR, a railway storage
and maintenance provider near Newcastle in NSW, for consideration of
$8.2 million and a land holding for $0.4 million on 1 March 2022. Refer to
note 22 for further information.
(b) Key events and transactions for the period
2017 Access Undertaking
The 2017 Access Undertaking (UT5) approved by the Queensland
Competition Authority (QCA) on 19 December 2019 included an increase
in the Weighted Average Cost of Capital (WACC) from 5.90% to 6.30%
upon Aurizon Network Pty Ltd (a wholly owned subsidiary of the Group)
notifying the Chair of the Rail Industry Group (RIG) of its proposed
options to address any capacity deficits identified in the independent
capacity assessment of the Central Queensland Coal Network (CQCN)
completed by an Independent Expert.
The Independent Expert completed the Initial Capacity Assessment
Report (ICAR) on 28 October 2021 and on 12 November 2021, Aurizon
Network Pty Ltd provided the Chair of the RIG and the QCA its
preliminary response to the ICAR. This was followed by a more detailed
report, following consultation with customers, on 14 March 2022,
on potential transitional arrangements to rectify the relevant coal
systems’ capacity deficits. On 17 June 2022, the Independent Expert
made a recommendation to the QCA on which of the transitional
arrangements identified in the detailed report would most effectively and
efficiently resolve the capacity deficits identified in the ICAR, following
which the QCA will make a decision. The QCA has not made such a
determination yet and therefore the impact of any such determination
has not been assessed.
Future transitional arrangements and associated capital expenditure
requirements will be subject to a range of factors including (i) concept
and feasibility studies, (ii) staged reviews of certain transitional
arrangements pending reviews of existing capacity deficits post
execution of other arrangements and (iii) QCA approval. As a result of
customer consultation, both Aurizon Network Pty Ltd and customers
have agreed that forecast demand in the relevant coal system will also
be a relevant factor and have submitted to the QCA that this should be
taken into account.
64
AURIZON ANNUAL REPORT 2021–22 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 66
Page 69
Page 71
Page 72
Page 73
FINANCIAL REPORT 65
Notes to the consolidated financial statements
30 June 2022 (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
earnings before net interest and tax (EBIT) from continuing operations.
(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.
Coal
This segment provides transport of metallurgical and thermal coal from
mines in Queensland and New South Wales to domestic customers and
coal export terminals.
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.
66
AURIZON ANNUAL REPORT 2021–22 1 Segment information (continued)
(b) Segment information
The results of the reportable segments are measured on the same basis as the accounting policies described in the consolidated financial statements.
The results of the reportable segments are set out as below:
Network
$m
Coal
$m
Bulk
$m
Other
$m
Total continuing
operations
$m
30 June 2022
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 117 for Non-IFRS Financial Information.
752.0
–
15.8
32.8
800.6
381.7
–
10.6
392.3
1,192.9
–
1,192.9
801.3
(344.8)
456.5
359.7
1,195.1
–
4.7
1,559.5
–
–
–
–
1,559.5
–
1,559.5
541.2
(208.7)
332.5
–
657.4
10.3
3.9
671.6
–
15.6
1.8
17.4
689.0
2.2
691.2
130.1
(36.7)
93.4
–
0.9
4.5
10.8
16.2
–
–
3.7
3.7
19.9
25.2
45.1
(5.0)
(2.1)
(7.1)
1,111.7
1,853.4
30.6
52.2
3,047.9
381.7
15.6
16.1
413.4
3,461.3
27.4
3,488.7
(413.4)
3,075.3
1,467.6
(592.3)
875.3
(14.2)
861.1
(125.0)
736.1
67
Notes to the consolidated financial statements30 June 2022 (continued)FINANCIAL REPORT 1 Segment information (continued)
(b) Segment information (continued)
Network
$m
Coal
$m
Bulk
$m
Other
$m
Total continuing
operations
$m
30 June 2021
External revenue
Revenue from external customers
Services revenue
Track access1
Freight transport1
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)2
Depreciation and amortisation
Continuing EBIT (Underlying)2
Significant adjustments (note 1(c))
EBIT2
Net finance costs
Profit before income tax from continuing operations
721.3
–
9.3
31.2
761.8
457.6
–
5.5
463.1
1,224.9
–
1,224.9
848.8
(339.7)
509.1
428.8
1,179.9
–
3.4
1,612.1
–
–
–
–
1,612.1
–
1,612.1
533.3
(208.7)
324.6
–
594.8
20.3
1.3
616.4
–
17.4
1.0
18.4
634.8
–
634.8
139.9
(27.9)
112.0
–
–
6.0
9.6
15.6
–
–
3.4
3.4
19.0
13.4
32.4
(39.8)
(2.8)
(42.6)
1,150.1
1,774.7
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
1 $16.3 million has been reclassified from access revenue to freight transport revenue in the Coal segment for FY2021 for consistency with current year presentation.
2 Refer to page 117 for Non-IFRS Financial Information.
68
Notes to the consolidated financial statements30 June 2022 (continued)AURIZON ANNUAL REPORT 2021–22 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.
(a) Disaggregation of revenue from contracts
with customers
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:
Transaction costs incurred for ORA
Net gain on sale of shares in Aquila
2022
$m
(14.2)
–
(14.2)
2021
$m
–
8.2
8.2
Significant adjustments, net of tax are reconciled in the Non-IFRS
Financial Information on page 117.
(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 and relate to the Coal
and Network reportable segments:
2022
$m
2021
$m
Current
Contract assets for freight transport
9.1
2.1
Non-current
Contract assets for freight transport
41.5
37.1
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 the
accounting policy in note 6 (2021: $nil).
Customer 1
Customer 2
Total
2 Revenue
2022
$m
520.8
447.0
967.8
2021
$m
2022
credit rating
2021
credit rating
530.5
418.8
949.3
A-
BBB+
A
BBB+
Within one year
Later than one year but not later than five years
Later than five years
2022
$m
9.1
35.9
5.6
50.6
2021
$m
2.1
32.9
4.2
39.2
(ii) Contract liabilities
The Group has recognised the following revenue-related
contract liabilities:
The Group recognises revenue primarily from the provision of
freight haulage services across Australia and the provision of
access to the CQCN.
The Group derives the following types of revenue from the provision
of services over time:
Services revenue
Track access1
Freight transport1
Other services2
Other revenue2
2022
$m
2021
$m
1,111.7
1,853.4
30.6
52.2
1,150.1
1,774.7
35.6
45.5
Current
Advances for track access
Advances for freight transport
Advances for other services
Non-current
Advances for freight transport
Advances for other services
2022
$m
2021
$m
–
1.8
45.7
47.5
12.5
96.7
109.2
26.3
4.8
25.4
56.5
11.8
123.2
135.0
Total revenue from continuing operations
3,047.9
3,005.9
1 $16.3 million has been reclassified from access revenue to freight transport
revenue for FY2021 for consistency with current year presentation.
2 Other services includes revenue from a Transport Services Contract for
Livestock (ceased 31 December 2021). Other revenue includes revenue
from customer-funded infrastructure and property leases.
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 recognised in revenue using the output method as performance
obligations are satisfied over time.
69
Notes to the consolidated financial statements30 June 2022 (continued)FINANCIAL REPORT
Notes to the consolidated financial statements
30 June 2022 (continued)
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
2022
$m
47.5
80.0
29.2
156.7
2021
$m
56.5
99.8
35.2
191.5
The decrease in contract liabilities represents revenue recognised for
track access and the provision of services under agreements for mine-
specific infrastructure.
(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 track access
Advances for other services
Advances for freight transport
2022
$m
2021
$m
26.3
24.9
5.6
56.8
–
26.5
4.5
31.0
(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-invoice
basis because the right for consideration corresponds directly with the
Group’s performance obligations completed to date, except for contracts
with a timing difference for which a contract asset or contract liability
has been recognised.
As at 30 June 2022, future contracted revenues for contracts with a
timing difference are approximately $2,014.3 million, of which $506.2
million is expected to be recognised in FY2023. These amounts relate
to track access, freight transport and other services from contracts with
customers being high credit worthy counterparties. Future contracted
revenues are in nominal FY2022 dollars. Variable revenue is not included.
As such, the future contracted revenues described above represent only
part of the Group’s forecast revenues for FY2023 and beyond.
The Group applies the practical expedient in AASB 15 Revenue from
Contracts with Customers (AASB 15), paragraph 121 to all other contracts
and does not disclose information on future contracted revenues. This is
because the right to consideration from a customer corresponds directly
with the Group’s performance obligations completed to date.
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 $28.2 million has been recognised at
30 June 2022 (2021: $77.5 million).
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. 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% (2021: 6.30%).
Refer to key events and transactions for further information.
70
AURIZON ANNUAL REPORT 2021–22 2 Revenue (continued)
3 Expenses
Profit before income tax from continuing operations includes the
following specific expenses:
2022
$m
2021
$m
Employee benefits expense
Salaries, wages and allowances including on-costs
766.7
757.7
Defined contribution superannuation expense
Redundancies
Depreciation and amortisation
Depreciation of property, plant and equipment
Amortisation of intangibles
74.0
12.7
69.1
13.9
853.4
840.7
562.9
29.4
592.3
547.8
31.3
579.1
Finance expenses
Interest and finance charges paid/payable
127.5
149.8
Discounting of land rehabilitation provision
Interest paid on lease liability
Amortisation of capitalised borrowing costs
Amortisation of AMTN 2 fair value adjustment
Hedge ineffectiveness1
Capitalised interest paid on qualifying assets
1 Refer to the accounting policy in note 18.
0.7
4.8
4.5
(2.4)
(6.3)
128.8
(1.9)
0.2
5.1
4.2
(2.4)
(3.8)
153.1
(3.7)
126.9
149.4
(c) Accounting policies (continued)
(i) Track access (continued)
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.
(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.
71
Notes to the consolidated financial statements30 June 2022 (continued)FINANCIAL REPORT Notes to the consolidated financial statements
30 June 2022 (continued)
(c) Deferred tax balances
The table below outlines the items which comprise the deferred tax
balances:
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:
2022
$m
179.7
43.3
(16.3)
16.4
223.1
2021
$m
153.4
60.2
(31.5)
29.6
211.7
Deferred tax assets
Inventories
Provisions and accruals
Contract liabilities and income received in
advance
Financial instruments
Lease liabilities
Other items
Total deferred tax assets
Set-off against deferred tax liabilities
Net deferred tax assets
2022
$m
2021
$m
–
101.1
10.3
16.3
37.2
12.0
0.2
112.2
4.4
63.6
41.8
10.6
176.9
232.8
(176.9)
(232.8)
–
4.8
–
–
Profit from continuing operations
223.1
159.3
Deferred tax liabilities
Profit from discontinued operations
(note 23)
Deferred income tax expense included in
income tax expense comprises:
Decrease in deferred tax assets
Increase in deferred tax liabilities
Inventories
–
223.1
24.2
35.5
59.7
52.4
211.7
43.6
46.2
89.8
Property, plant and equipment
900.4
848.4
Intangible assets
Financial instruments
Other items
Total deferred tax liabilities
Set-off of deferred tax assets
Net deferred tax liabilities
29.3
24.5
15.4
32.9
37.5
19.9
974.4
938.7
(176.9)
(232.8)
797.5
705.9
(b) Numerical reconciliation of income tax expense to prima
facie tax payable
The table below outlines the items which comprise deferred income
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%
(2021: 30%)
Tax effect of amounts which are not deductible
(taxable) in calculating taxable income:
Transaction costs
Unrecognised deferred tax asset arising
from previous impairment¹
Other
Adjustments for current tax of prior periods
2022
$m
2021
$m
736.1
766.0
–
736.1
176.0
942.0
220.8
282.6
Inventories
Provisions and accruals
Contract liabilities and income received in
advance
Financial instruments
Lease liabilities
Other items
2.0
–
0.2
0.1
223.1
Decrease in deferred tax assets
Property, plant and equipment
–
Intangible assets
(67.8)
Financial instruments
(1.2)
(1.9)
211.7
Other items
Inventories
Increase in deferred tax liabilities
Net deferred income tax expense
2022
$m
0.2
12.2
(5.9)
15.2
4.6
(2.1)
24.2
51.8
(3.6)
(13.0)
(4.5)
4.8
35.5
59.7
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
1 The Group sold its shares in Aquila Resources Limited on 26 May 2021. As a
result of the sale, the Group 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) was $65.3 million.
72
AURIZON ANNUAL REPORT 2021–22 Notes to the consolidated financial statements
30 June 2022 (continued)
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 or payable equal to the tax liability or
tax 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
2022
Cents
2021
Cents
27.9
27.8
27.9
27.8
32.5
32.4
39.1
39.0
2022
Number
’000
2021
Number
’000
1,840,605
1,868,553
3,992
1,909
Weighted average number of ordinary shares
for diluted earnings per share
1,844,597
1,870,462
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.
73
FINANCIAL REPORT 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 75
Page 75
Page 76
Page 81
Page 83
Page 83
Page 83
Page 84
74 AURIZON ANNUAL REPORT 2021–22
6 Trade and other receivables
7 Inventories
Current
Trade receivables
2022
$m
2021
$m
Current
313.4
329.0
Raw materials and stores — at cost
Provision for impairment
(0.7)
(2.4)
Provision for inventory obsolescence
Net trade receivables
Other receivables1
312.7
121.4
434.1
326.6
157.2
483.8
1 Other receivables include revenue for services performed but not yet invoiced
under contracts including Take-or-Pay and annual GAPE fees.
The Group has recognised a net reduction of $1.7 million (2021:
net reduction of $5.3 million) in the provision for impairment of
trade receivables. No amounts were written off in the financial
year (2021: $3.0 million).
(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 and other 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 and other
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.
2022
$m
2021
$m
194.6
(8.4)
186.2
68.8
(13.2)
55.6
160.0
(9.6)
150.4
59.0
(13.1)
45.9
Non-current
Raw materials and stores — at cost
Provision for inventory obsolescence
(a) Accounting policies
Inventories include 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.
75
Notes to the consolidated financial statements30 June 2022 (continued)FINANCIAL REPORT Notes to the consolidated financial statements
30 June 2022 (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
2022
Opening net book amount
230.4
124.0
235.6
268.5
2,170.8
5,321.5
94.5
8,445.3
Additions
Transfers between asset classes
Acquisitions through business
combinations
Disposals
Adjustments to leased assets
Depreciation
Impairment
520.5
(481.0)
–
–
–
–
(1.2)
–
0.1
4.7
(0.4)
–
–
–
–
5.4
0.4
(3.5)
–
(13.1)
–
–
78.1
6.2
(1.4)
–
(44.5)
–
Closing net book amount
268.7
128.4
224.8
306.9
–
136.3
–
(3.6)
–
(175.4)
(0.9)
2,127.2
–
261.1
3.5
(2.4)
–
2.2
522.7
–
–
–
0.3
–
14.8
(11.3)
0.3
(316.8)
(13.1)
(562.9)
–
–
(2.1)
5,266.9
83.9
8,406.8
At 30 June 2022
Cost
Accumulated depreciation
and impairment
Net book amount
2021
268.7
128.4
470.0
761.7
5,548.0
8,429.4
135.7
15,741.9
–
–
(245.2)
(454.8)
(3,420.8)
(3,162.5)
(51.8)
(7,335.1)
268.7
128.4
224.8
306.9
2,127.2
5,266.9
83.9
8,406.8
Opening net book amount1
263.2
124.3
211.4
Additions
Transfers between asset classes
Acquisitions through business
combinations
Disposals
Adjustments to leased assets
Assets classified as held for sale
Depreciation
Impairment
482.3
(514.0)
0.1
–
–
(1.2)
–
–
–
2.5
–
(2.8)
–
–
–
–
–
31.3
9.3
(2.2)
–
–
(12.7)
(1.5)
Closing net book amount
230.4
124.0
235.6
270.1
–
31.8
10.7
(2.3)
–
–
(41.5)
(0.3)
268.5
2,178.9
0.7
163.9
–
(3.6)
–
–
(169.1)
–
2,170.8
5,356.9
94.4
8,499.2
–
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)
5,321.5
94.5
8,445.3
At 30 June 2021
Cost
Accumulated depreciation and
impairment
230.4
124.0
494.2
699.3
5,432.7
8,177.3
133.3
15,291.2
–
–
(258.6)
(430.8)
(3,261.9)
(2,855.8)
(38.8)
(6,845.9)
Net book amount
230.4
124.0
235.6
268.5
2,170.8
5,321.5
94.5
8,445.3
1 Balance as at 1 July 2020 has been restated for an amount of $37.9 million reclassified from assets under construction to software under development.
76
AURIZON ANNUAL REPORT 2021–22 8 Property, plant and equipment (continued)
A range of indicators of global coal demand over the short, medium
and long term are reviewed annually to assess the appropriateness of
useful lives assigned to infrastructure assets for statutory reporting
purposes. 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
› government policies, including the ability of customers to gain
regulatory approvals and raise funding to support development of
their resource base
› climate policy targets and how they are intended to be met at both a
country and corporate level, including net-zero emissions targets set
by major import nations of Australian coal. Major import nations of
Australian coal with net-zero emissions targets include India (2070),
Japan (2050), South Korea (2050) and China (2060).
› 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 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
useful lives assigned to infrastructure assets may require revision in
the future, resulting in a change in depreciation rates on a prospective
basis. Figure 1 below summarises the annual depreciation profile of the
current written down value of total infrastructure assets of $5,266.9
million over the useful life applied for each class of assets described in
note 8(b)(i) and excludes future capital investments.
FIGURE 1 — INFRASTRUCTURE ASSETS DEPRECIATION PROFILE
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 (87 years) 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.
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
CQCN network is 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.
Network earns a Return of Capital as part of Allowable Revenue for
each coal system under the QCA approved Access Undertaking.
The Return of Capital compensates Network for depreciation of the
Regulatory Asset Base (RAB) over QCA endorsed regulatory lives for
individual asset classes which differ to the expected engineering life
used for statutory reporting purposes. The QCA has also approved an
accelerated depreciation profile for additions to the RAB from FY2010
onwards. As a result, at the commencement of each regulatory period,
where an asset class has a remaining regulatory useful life:
› higher than 20 years, RAB depreciation is based on a 20-year
rolling life, which resets to 20 years each regulatory period
› lower than 20 years, depreciation is calculated on a straight-line basis.
The accelerated depreciation profile adopted by the QCA increases
the rate at which Network recovers the Return of Capital and increases
Allowable Revenue in the near term.
The QCA approved economic life of the CQCN can be re-assessed at
the commencement of each regulatory period and therefore the QCA
approved economic life of the CQCN RAB is not an indicator that useful
lives adopted for statutory reporting purposes should be revised.
77
Notes to the consolidated financial statements30 June 2022 (continued)020302040205020602070Current Infrastructure Asset ProfileFinancial YearWritten Down Value $mAnnual Depreciation $m208020902100501001502002503003501,0002,0003,0004,0005,0006,000Written Down Value $mAnnual Depreciation $mFINANCIAL REPORT 8 Property, plant and equipment (continued)
SIGNIFICANT JUDGEMENTS AND ESTIMATES (CONTINUED)
All infrastructure assets have a maximum useful life of FY2109. As an
indication of sensitivity, the table below summarises the increase in
annual depreciation if the maximum useful life of current infrastructure
assets are reduced by 10, 20, 30 or 40 years.
(WA), narrow gauge fleet between Queensland and WA, and
between commodities within states
› competitors, fleet mix and their associated investment profile
over time
Reduction in maximum
useful life (years):
Increase in annual
depreciation ($m p.a):
10
20
30
40
2
6
10
18
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
› 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.
(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.
Other leased assets
The following table summarises the coal infrastructure and corridor land and buildings leases:
Lessee
Lessor
Term
Expiry
Rental Amount
Extension
Option1
Leases
CQCN
Aurizon Network Pty Ltd
Part of the North
Coast Line
Aurizon Network Pty Ltd
State of Queensland (land)
and Queensland Treasury
Holdings (infrastructure)
State of Queensland (land)
and Queensland Rail
(infrastructure)
99 years
30 June 2109
$1 if demanded
99 years
99 years
30 June 2109
$1 if demanded
99 years
1 The extension option is on the same terms as the initial lease period. Notice must be provided within at least 20 years prior to the expiring of the existing term.
The extension option under the corridor land leases are dependent on the infrastructure lease extension being exercised and granted.
78
Notes to the consolidated financial statements30 June 2022 (continued)AURIZON ANNUAL REPORT 2021–22 8 Property, plant and equipment
(continued)
(a) Leases (continued)
(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
Total lease liabilities
2022
$m
2021
$m
83.3
0.6
83.9
91.5
3.0
94.5
4,307.1
4,341.1
25.8
1.6
25.8
1.8
4,334.5
4,368.7
4,418.4
4,463.2
16.0
107.1
123.1
17.0
120.7
137.7
1 CQCN and part of the 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
2022
$m
2021
$m
10.5
2.6
13.1
264.8
0.2
265.0
278.1
4.8
0.7
7.8
10.1
2.6
12.7
257.3
0.2
257.5
270.2
5.1
1.6
5.9
The total cash outflow for leases during the financial year was
$30.4 million (2021: $29.0 million).
(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 — 99 years
30 — 99 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.
79
Notes to the consolidated financial statements30 June 2022 (continued)FINANCIAL REPORT 8 Property, plant and equipment
(continued)
(a) Accounting policies (continued)
(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.
80
Notes to the consolidated financial statements30 June 2022 (continued)AURIZON ANNUAL REPORT 2021–22 9 Intangible assets
2022
Opening net book amount
Additions
Transfers between asset classes
Acquisitions through business combinations
Disposals
Amortisation
Closing net book amount
At 30 June 2022
Cost
Accumulated amortisation and impairment
Net book amount
2021
Opening net book amount1
Additions
Transfers between asset classes
Acquisitions through business combinations
Amortisation
Closing net book amount
At 30 June 2021
Cost
Accumulated amortisation and impairment
Net book amount
Goodwill
$m
Software
$m
Software under
development
$m
24.9
–
–
1.8
–
–
26.7
26.7
–
26.7
5.2
–
–
19.7
–
24.9
24.9
–
24.9
162.6
–
11.6
–
(1.5)
(29.4)
143.3
413.2
(269.9)
143.3
160.1
–
33.8
–
(31.3)
162.6
404.4
(241.8)
162.6
44.3
15.0
(11.6)
–
–
–
47.7
47.7
–
47.7
60.1
15.4
(31.2)
–
–
44.3
44.3
–
44.3
Total
$m
231.8
15.0
–
1.8
(1.5)
(29.4)
217.7
487.6
(269.9)
217.7
225.4
15.4
2.6
19.7
(31.3)
231.8
473.6
(241.8)
231.8
1 Balance as at 1 July 2020 has been restated for an amount of $37.9 million reclassified to software under development from assets under construction.
(a) Impairment tests for goodwill
For the purpose of impairment testing, goodwill is allocated to CGUs
according to the level at which management monitors goodwill. Goodwill
is tested annually or more regularly if there are indicators of impairment.
The recoverable amount of a CGU is determined based on the higher
of the value-in-use (VIU) method or the fair value less cost of disposal
(FVLCD) method, both of which require the use of assumptions. These
calculations use cash flow projections extrapolated using estimated
growth rates.
The following table presents a summary of the goodwill allocation and
the key assumptions used in determining the recoverable amount:
2022
Goodwill allocation ($m)
Valuation approach
Discount rate basis
Discount rate (%)
Cash flow projection (years)
Long-term growth rate (%)
2021
Goodwill allocation ($m)
Valuation approach
Discount rate basis
Discount rate (%)
Cash flow projection (years)
Long-term growth rate (%)
Bulk
NSW
Bulk
QLD
21.5
FVLCD
5.2
VIU
Post-tax
Pre-tax
8.0
20
2.5
19.7
FVLCD
11.5
4
2.5
5.2
VIU
Post-tax
Pre-tax
8.5
20
2.0
10.8
4
2.0
81
Notes to the consolidated financial statements30 June 2022 (continued)FINANCIAL REPORT (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 licences 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 services, 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.
SIGNIFICANT JUDGEMENTS AND ESTIMATES
Impairment tests for cash generating units (CGUs) and goodwill
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.
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 11.5% (2021: 10.8%) and a
long-term growth rate of 2.5% (2021: 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 recoverable amount of the Bulk NSW CGU has been determined
based on FVLCS methodology and the cash flow projection, post-tax
discount rate and long-term growth rate as described in note 9(a).
The recoverable amount is sensitive to changes in customer contractual
arrangements and, should forecast growth in revenue not be achieved,
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 impairment has been recognised.
82
Notes to the consolidated financial statements30 June 2022 (continued)AURIZON ANNUAL REPORT 2021–22 2022
$m
2021
$m
235.6
11.5
31.4
2.1
255.1
13.7
25.0
3.1
280.6
296.9
12.8
13.3
20.0
3.0
49.1
329.7
2022
$m
72.8
105.3
70.3
248.4
13.9
12.3
35.3
2.7
64.2
361.1
2021
$m
68.0
117.8
83.2
269.0
10 Other assets
12 Provisions
Current
Contract assets (a)
Lease receivable (b)
Other current assets
Non-current
Contract assets (a)
Lease receivable (b)
2022
$m
2021
$m
9.1
7.7
7.1
23.9
41.5
33.8
75.3
2.1
7.2
6.0
15.3
37.1
41.5
78.6
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
(a) Contract assets
Refer to note 2(b) for further information relating to contract assets.
Land rehabilitation
Make good and other provisions
(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. The collectability of lease
receivables is reviewed on an ongoing basis. No provision for impairment
of lease receivables has been recognised, refer to the accounting policy
in note 6 (2021: $nil).
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
2022
$m
9.0
24.2
13.6
46.8
(5.3)
41.5
1.6
5.4
2021
$m
8.7
28.6
18.2
55.5
(6.8)
48.7
1.8
7.1
The total cash inflow for sub-leases in the financial year was $14.1 million
(2021: $15.4 million).
11 Trade and other payables
Current
Trade payables
Other payables
2022
$m
2021
$m
253.5
40.4
293.9
234.0
35.1
269.1
(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.
Total provisions
(a) Employee benefits
Annual leave
Long service leave
Other
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 employee benefits or require payment within the next 12 months
based on past experience. The current provision for employee benefits
includes $100.3 million (2021: $109.5 million) that is not expected to be
taken or paid within the next 12 months.
(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.
83
Notes to the consolidated financial statements30 June 2022 (continued)FINANCIAL REPORT 12 Provisions (continued)
(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.
(iii) Provision for insurance claims
A provision is raised for insurance claims external to the Group for claims
in relation to loss or damage to property, plant and equipment.
(iv) 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.
(v) 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 2.6% (2021: 2.4%) is applied to estimate future land
rehabilitation costs. This estimate is discounted at a weighted average
discount rate of 3.8% (2021: 2.0%) to determine the present value of the
provision. The unwinding of the discount is recognised in profit or loss in
finance costs and the movement in the provision is recognised in profit or
loss in other expenses.
13 Other liabilities
Current
Contract liabilities (a)
Income received in advance
Lease liabilities (b)
Other current liabilities
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.
Non-current
Contract liabilities (a)
Lease liabilities (b)
Other non-current liabilities
2022
$m
2021
$m
47.5
–
16.0
5.2
68.7
109.2
107.1
1.4
217.7
56.5
1.3
17.0
16.8
91.6
135.0
120.7
1.4
257.1
(ii) Superannuation
Aurizon Holdings Limited and the following subsidiaries are members
of the State Public Sector Superannuation Scheme (QSuper) multi-
employer defined benefit superannuation plan and are required to
contribute a specific percentage of employee benefits expense to fund
the retirement benefits of 546 employees (2021: 593):
› Aurizon Operations Limited
› Aurizon Network Pty Ltd
› Australia Eastern Railroad Pty Ltd
› Australia Western Railroad Pty Ltd
› Aurizon Intermodal Pty Ltd
› Interail Australia Pty Ltd.
In accordance with the requirements of AASB 119 Employee Benefits,
given the lack of sufficient information available, the plan is accounted
for as if it were a defined contribution plan. Defined contribution
superannuation expense in note 3 includes $8.4 million (2021:
$9.7 million) relating to the QSuper defined benefit plan.
84
(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 the Group’s
incremental borrowing rate
Total lease liabilities
2022
$m
20.4
67.9
56.6
144.9
2021
$m
21.8
70.4
71.7
163.9
(21.8)
123.1
(26.2)
137.7
Notes to the consolidated financial statements30 June 2022 (continued)AURIZON ANNUAL REPORT 2021–22 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 86
Page 86
Page 86
Page 88
Page 89
FINANCIAL REPORT 85
Notes to the consolidated financial statements30 June 2022 (continued) 14 Capital risk management
The Group’s objective is to maintain a strong capital base so
as to maintain investor, creditor and market confidence, and
to sustain future development of the business. The Group
monitors its capital structure by reference to 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 117.
Total borrowings
Notes
2022
$m
2021
$m
17
3,220.8
3,738.0
16 Equity
(a) Contributed equity
Issued capital
(i)
At 1 July 2020
On-market share buy-back
At 30 June 2021
At 30 June 2022
Number
of shares
’000
$m
1,914,643
506.6
(73,939)
(300.0)
1,840,704
1,840,704
206.6
206.6
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 share capital
and the ordinary shares are cancelled.
Less: cash and cash equivalents
(172.1)
(148.8)
At 30 June the Company did not hold any treasury shares (2021: 407,694).
Net debt
Total equity
Total capital
Net gearing ratio
Alternative net gearing ratio
15 Dividends
Declared and paid during the period
For the year ended 30 June 2022
Final dividend for 2021 (70% franked)
Interim dividend for 2022 (95% franked)
For the year ended 30 June 2021
Final dividend for 2020 (70% franked)
Interim dividend for 2021 (70% franked)
3,048.7
3,589.2
(ii) Other contributed equity
Balance at 1 July
Buy-back of ordinary shares
Aggregate deferred tax
debited/(credited) to equity
Balance 30 June
2022
$m
2021
$m
3,467.1
3,467.1
–
–
(0.3)
0.3
3,467.1
3,467.1
Prior to the Initial Public Offering in FY2010, the Queensland Government
(the State) made an equity contribution to the Company of $4,388.3
million. This contribution was recorded separately to issued capital, in a
capital distribution account (classified as capital reserve). Certain share
buy-backs and incremental costs attributable to share buy-backs have
been deducted from the initial contribution and the carrying amount of
the capital reserve at 1 July 2020 was 3,467.1 million. The capital reserve
has been reclassified to contributed equity, refer to key events and
transactions for further information.
4,412.3
4,274.6
7,461.0
7,863.8
40.9%
42.5%
45.6%
44.6%
Cents
per
share
$m
14.4
10.5
13.7
14.4
265.0
193.3
458.3
262.3
266.5
528.8
Proposed and unrecognised at period end
For the year ended 30 June 2022
Final dividend for 2022 (100% franked)
10.9
200.6
For the year ended 30 June 2021
Final dividend for 2021 (70% franked)
14.4
266.2
Franked dividends
Franking credits are available to shareholders of the Company at the 30%
(2021: 30%) corporate tax rate. The balance of franking credits available
as at 30 June 2022 is $62.6 million (2021: $57.2 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.
86
Notes to the consolidated financial statements30 June 2022 (continued)AURIZON ANNUAL REPORT 2021–22
16 Equity (continued)
(b) Reserves
Share
of an
associate’s
OCI
$m
Notes
Cash
flow
hedges
$m
Share-
based
payments
$m
Foreign
currency
translation
$m
(0.4)
0.3
Balance at 1 July 2021
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 cessation of
joint venture
Other comprehensive income
Transactions with owners in their capacity as owners:
Share-based payments expense
27
Aggregate deferred tax debited/(credited) to equity
Balance at 30 June 2022
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:
Share-based payments expense
27
Purchase of share for performance rights plans
Aggregate deferred tax debited/(credited) to equity
Balance at 30 June 2021
–
–
–
–
–
–
–
–
–
–
(1.8)
–
–
–
–
1.8
1.8
–
–
–
–
(56.5)
106.8
0.3
(32.1)
–
–
75.0
–
–
18.5
(72.0)
25.7
(3.6)
(6.6)
–
–
15.5
–
–
–
(56.5)
–
–
–
–
–
–
9.0
0.2
8.8
1.4
–
–
–
–
–
–
4.9
(5.7)
(1.0)
(0.4)
Total
$m
(56.6)
106.8
0.3
(32.1)
(1.0)
(0.2)
73.8
9.0
0.2
–
–
–
(1.0)
(0.2)
(1.2)
–
–
(0.9)
26.4
0.4
(72.0)
–
–
–
(0.1)
–
(0.1)
–
–
–
25.7
(3.6)
(6.6)
(0.1)
1.8
17.2
4.9
(5.7)
(1.0)
0.3
(56.6)
87
Notes to the consolidated financial statements30 June 2022 (continued)FINANCIAL REPORT 16 Equity (continued)
(b) Reserves (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 27 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) 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 of, or ceases, 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
Bank debt facilities
Non-current — Unsecured
Medium-Term Notes
Bank debt facilities
Capitalised borrowing costs
Total borrowings
2022
$m
2021
$m
255.0
255.0
59.0
59.0
2,852.8
3,210.4
120.0
480.0
(7.0)
(11.4)
2,965.8
3,679.0
3,220.8
3,738.0
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).
(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.
88
Notes to the consolidated financial statements30 June 2022 (continued)AURIZON ANNUAL REPORT 2021–22 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
Mitigation
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
currency 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, trade and other receivables,
contract assets and lease receivables. The maximum
exposure to credit risk at reporting date is the carrying
amount, net of any provisions 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 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 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, contract asset and
lease receivables.
89
Notes to the consolidated financial statements30 June 2022 (continued)FINANCIAL REPORT Amounts recognised in profit or loss
The Group recognised a net loss on interest rate swaps of $13.7 million
(2021: $40.1 million) as a result of market interest rates (i.e. floating rates)
closing lower than the fixed interest rates hedged resulting in a loss on
the floating-to-fixed interest rate swaps, partly offset by a gain on the
fixed-to-floating interest rate swaps. The net 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:
2022
$m
2021
$m
Current assets
Interest rate swaps
Foreign exchange contracts
Weighted
average
interest
rate
%
1.7
1.0
Balance
$m
3,020.8
(2,300.0)
720.8
2.4
3,109.8
Non-current assets
Interest rate swaps — Finance AMTN 1
1.8
(2,775.0)
CCIRS — Network EMTN 1
334.8
CCIRS — Network EMTN 2
42.3
1.5
43.8
–
37.9
–
37.9
81.7
–
–
–
–
66.1
10.8
105.1
13.0
71.3
266.3
266.3
–
0.1
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
Total derivative financial instrument assets
Current liabilities
Foreign exchange contracts
Interest rate swaps
Non-current liabilities
Interest rate swaps
Interest rate swaps — Finance AMTN 1
Interest rate swaps — Network AMTN 3
Interest rate swaps — Network AMTN 4
Interest rate swaps — Network AMTN 5
CCIRS — Network EMTN 2
Total derivative financial instrument liabilities
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.
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:
2022
Variable rate exposure
Interest rate swaps
(including debt credit margins)
Net exposure to interest rate risk
2021
Variable rate exposure
Interest rate swaps
(including debt credit margins)
Net exposure to interest rate risk
Interest rate derivatives used for hedging
The Group currently has interest rate swaps in place to cover 76% (2021:
89%) 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 less than one year (2021: 1.8 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.
2022
Effect on profit
Effect on equity
2021
Effect on profit
Effect on equity
Increase
$m
Decrease
$m
(7.2)
18.2
(3.3)
44.6
7.2
(18.5)
3.3
(45.6)
90
Notes to the consolidated financial statements30 June 2022 (continued)AURIZON ANNUAL REPORT 2021–22
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, recognised as derivative financial instruments
in the consolidated balance sheet:
Cash flow hedges
Foreign exchange risk
Forward contracts1
Forward contracts1
Interest rate risk
Interest rate swaps2
Foreign exchange and interest rate risks
CCIRS — Network EMTN 13
CCIRS — Network EMTN 23
Fair value hedges
Interest rate risk
Interest rate swaps — Finance AMTN 14
A$500.0m
A$500.0m
Interest rate swaps — Network AMTN 34
A$82.0m
A$82.0m
Interest rate swaps — Network AMTN 44
A$500.0m
A$500.0m
Interest rate swaps — Network AMTN 54
A$75.0m
–
Foreign exchange and interest rate risks
CCIRS — Network EMTN 13
CCIRS — Network EMTN 23
€500.0m
€500.0m
€500.0m
€500.0m
Notional amount
2022
2021
Carrying amount
assets/(liabilities)
Favourable/(unfavourable)
change in fair value
used for measuring
ineffectiveness for the year
2022
$m
2021
$m
2022
$m
2021
$m
US$18.5m
US$4.5m
€2.3m
€2.5m
1.5
–
(0.1)
(0.3)
1.6
0.3
0.6
0.5
A$2,300.0m
A$2,775.0m
42.3
(40.3)
82.6
38.8
€500.0m
€500.0m
€500.0m
€500.0m
(1.3)
(10.7)
(66.1)
(10.8)
(105.1)
(13.0)
39.2
(60.6)
(1.0)
(10.8)
1.9
(0.4)
(26.0)
–
110.2
24.7
(0.3)
0.1
(69.1)
(10.7)
(82.3)
(13.7)
(80.0)
(101.5)
(1.2)
(4.0)
1.6
(3.9)
(27.3)
–
(41.2)
(38.9)
1 Forward contracts have an average AUD:USD exchange rate of 0.7299 (2021: 0.7429) and AUD:EUR exchange rate of 0.6566 (2021: 0.5720) related to capital commitments.
2 Floating-to-fixed interest rate swaps have an average fixed interest rate of 0.96% (2021: 1.09%) and receive floating BBSW.
3 CCIRS have an average fixed EUR interest rate of 2.56%, an average floating AUD interest rate of BBSW + 2.93% spread, and an average AUD:EUR exchange rate of 0.6730,
over the same term as the EMTNs.
4 Fixed-to-floating interest rate swaps have an average floating BBSW + 1.86% spread (2021: BBSW + 1.88% spread) and an average fixed interest rate of 2.97% (2021: 2.95%),
over the same term as the AMTNs.
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 hedges (before tax)
Foreign exchange risk
Capital commitments
Interest rate risk
Forecast floating interest payments
Foreign exchange and interest rate risks
Network EMTN 1
Network EMTN 2
Cash flow hedge reserve1
(Favourable)/unfavourable
change in fair value used for
measuring ineffectiveness
for the year
Hedging gain/(loss)
recognised in
comprehensive income1
2022
$m
2021
$m
2022
$m
2021
$m
2022
$m
2021
$m
(1.5)
(42.3)
3.3
14.1
0.4
40.3
11.8
28.0
(1.9)
(1.1)
1.9
(82.6)
(38.8)
82.6
0.3
(0.1)
1.2
4.0
8.6
13.9
1.1
39.1
(6.6)
(11.5)
1 Cash flow hedge reserve includes the cumulative impact of cross-currency basis relating to EMTN 1 and EMTN 2 of $33.2 million (2021: $19.4 million). The hedging gain
recognised in other comprehensive income includes the cross-currency basis relating to EMTN 1 and EMTN 2 of $22.3 million (2021: hedging loss of $13.1 million).
91
Notes to the consolidated financial statements30 June 2022 (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 hedged items designated in fair value hedging relationships, recognised as borrowings in the
consolidated balance sheet:
Fair value hedges (before tax)
Interest rate risk
Finance AMTN 1
Network AMTN 22
Network AMTN 3
Network AMTN 4
Network AMTN 5
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
(Favourable)/unfavourable
change in fair value
used for measuring
ineffectiveness for the year
2022
$m
2021
$m
2022
$m
2021
$m
2022
$m
2021
$m
(432.5)
–
(70.8)
(390.4)
(61.3)
(955.0)
(752.9)
(722.4)
(1,475.3)
(2,430.3)
(501.6)
–
(81.5)
(472.7)
–
(1,055.8)
(832.6)
(824.3)
(1,656.9)
(2,712.7)
67.5
(4.7)
11.2
109.6
13.7
197.3
(42.3)
55.8
13.5
210.8
(1.6)
(7.1)
0.5
27.3
–
19.1
(122.0)
(46.1)
(168.1)
(149.0)
69.1
–
10.7
82.3
13.7
175.8
79.7
101.9
181.6
357.4
(1.6)
–
3.9
27.3
–
29.6
41.2
38.9
80.1
109.7
1 Carrying amount excludes the effect of discounts on the face value of AMTNs and EMTNs issued.
2 Hedge accounting for Network AMTN 2 was discontinued in FY2019. During FY2022, an amount of $2.4 million (2021: $2.4 million) has been recognised in profit or loss
in finance costs.
92
Notes to the consolidated financial statements30 June 2022 (continued)AURIZON ANNUAL REPORT 2021–22 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 22
Network AMTN 32
Network AMTN 42
Network AMTN 52
Network EMTN 12
Network EMTN 22
Total Group financing arrangements
Utilised1
Facility limit
Maturity
2022
$m
2021
$m
2022
$m
2021
$m
Jun-23
Jun-23
Nov-23
Nov-25
19.0
15.1
–
–
–
–
–
–
125.0
50.0
125.0
50.0
500.0
500.0
75.0
75.0
Mar-28
500.0
500.0
500.0
500.0
519.0
515.1
1,250.0
1,250.0
Jun-23
2.5
Jun-23
255.0
Jun-24
Jun-25
60.0
60.0
Jun-24
425.0
Mar-30
82.0
60.5
370.0
110.0
-
425.0
82.0
75.0
750.0
300.0
150.0
425.0
82.0
75.0
750.0
300.0
150.0
425.0
82.0
Sept-30
500.0
500.0
500.0
500.0
Dec-31
Sept-24
Jun-26
75.0
710.6
778.2
75.0
710.6
778.2
75.0
710.6
778.2
75.0
710.6
778.2
2,948.3
3,111.3
3,845.8
3,845.8
3,467.3
3,626.4
5,095.8
5,095.8
1 Amount utilised includes bank guarantees of $21.5 million (2021: $16.6 million) and excludes capitalised borrowing costs of $7.0 million (2021: $11.4 million) and discounts on
Medium-Term Notes of $7.2 million (2021: $9.5 million).
2 Amounts utilised on EMTNs and AMTNs excludes accumulated fair value adjustments of $210.8 million (2021: $149.0 million). EMTN 1 and EMTN 2 have a notional amount of
€500.0 million, converted to AUD at an exchange of 0.7036 and 0.6425 respectively.
The Group has access to working capital facilities totalling $200.0 million (2021: $200.0 million) which can be utilised for short-term working capital and
financial bank guarantees. At 30 June, the Group utilised $21.5 million (2021: $16.6 million) for financial bank guarantees.
93
Notes to the consolidated financial statements30 June 2022 (continued)FINANCIAL REPORT
Notes to the consolidated financial statements
30 June 2022 (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:
2022
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
Interest rate swaps — Network AMTN 5
CCIRS — Network EMTN 1
CCIRS — Network EMTN 2
Gross settled forward exchange contracts (inflow)
Total derivatives
2021
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
293.9
361.4
21.5
20.4
697.2
(43.0)
(5.7)
–
9.7
0.9
19.8
29.1
1.5
12.3
269.1
159.0
16.6
21.8
–
2,328.0
–
67.9
2,395.9
–
1.4
1.8
15.0
1.6
(27.8)
132.0
–
124.0
–
1,239.8
–
56.6
1,296.4
293.9
3,929.2
21.5
144.9
4,389.5
–
2.2
4.9
49.8
8.3
–
–
–
65.2
(43.0)
(2.1)
6.7
74.5
10.8
(8.0)
161.1
1.5
201.5
293.9
3,220.8
–
123.1
3,637.8
(42.3)
66.1
10.8
105.1
13.0
(37.9)
71.3
(1.5)
184.6
–
–
269.1
269.1
2,817.9
1,273.8
4,250.7
3,738.0
–
70.4
–
71.7
16.6
163.9
–
137.7
Total non-derivative financial instruments
466.5
2,888.3
1,345.5
4,700.3
4,144.8
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
24.7
(5.7)
–
(3.8)
(2.2)
6.5
(0.5)
19.0
16.8
(4.5)
(0.5)
2.9
(88.3)
42.5
–
(31.1)
–
2.2
0.4
21.9
–
–
–
24.5
41.5
(8.0)
(0.1)
21.0
40.3
(1.9)
0.4
26.0
(90.5)
(109.2)
49.0
(0.5)
12.4
(13.9)
0.4
(57.9)
9494
AURIZON ANNUAL REPORT 2017–18AURIZON ANNUAL REPORT 2021–22 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.
A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is
not due to be realised or settled within 12 months. Other derivatives are presented as current assets or current liabilities.
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.
The main source of hedge ineffectiveness is the effect of the credit risk differential between the Group and its respective counterparties (i.e. credit
curves) on the fair value of interest rate swaps and CCIRS, which is not reflected in the fair value of the hedged item. Ineffectiveness may be due to
differences in the critical terms between the interest rate swaps and loans or in the timing of forecast transactions. Hedge ineffectiveness is recognised
against the mark-to-market position of the derivative financial instrument and in profit or loss in finance costs.
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:
Fair value hedge
Cash flow hedge
What is it?
Movement in fair value
Discontinuation
of hedge accounting
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 or 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.
95
Notes to the consolidated financial statements30 June 2022 (continued)FINANCIAL REPORT 18 Financial risk management (continued)
(c) Hedging instruments (continued)
(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.
The following table presents the recognised financial instruments that are offset, or subject to enforceable master netting arrangements. The net
amount shows the impact on the Group’s balance sheet if all set-off rights were exercised.
Effects of offsetting on the balance sheet
Related amounts not offset
Gross amounts
$m
Gross amounts
set-off in the
balance sheet
$m
Net amounts
presented in the
balance sheet
$m
Amounts subject
to master netting
arrangements
$m
Net amount1
$m
2022
Financial assets
Derivative financial instruments
Financial liabilities
Derivative financial instruments
2021
Financial assets
Derivative financial instruments
Financial liabilities
Derivative financial instruments
1 No financial instrument collateral.
81.7
(266.3)
125.1
(67.2)
–
–
–
–
81.7
(143.1)
(61.4)
(266.3)
143.1
(123.2)
125.1
(67.2)
(0.4)
0.4
124.7
(66.8)
(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 6.6% (2021: 1.0% and 3.2%)
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 (2021: Level 2). During the period, there were no transfers between Level 1, Level 2
or Level 3 in the fair value hierarchy (2021: nil).
96
Notes to the consolidated financial statements30 June 2022 (continued)AURIZON ANNUAL REPORT 2021–22 18 Financial risk management (continued)
(d) Fair value measurement (continued)
The table below summarises the carrying amount and fair value of the Group’s financial assets and liabilities:
Financial assets carried at fair value
Foreign exchange contracts
Interest rate swaps
Interest rate swaps — Finance AMTN 1
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
CCIRS — Network EMTN 2
Interest rate swaps — Finance AMTN 1
Interest rate swaps — Network AMTN 3
Interest rate swaps — Network AMTN 4
Interest rate swaps — Network AMTN 5
Financial liabilities carried at amortised cost
Trade and other payables
Borrowings1
Off-balance sheet
Unrecognised financial assets
Third party guarantees
Bank guarantees
Insurance company guarantees
Unrecognised financial liabilities
Bank guarantees
1 Borrowings includes $2,430.3 million (2021: $2,712.7 million) subject to fair value hedges.
Carrying amount
2022
$m
2021
$m
Notes
6
1.5
42.3
–
37.9
–
81.7
172.1
434.1
606.2
–
–
(71.3)
(66.1)
(10.8)
(105.1)
(13.0)
(266.3)
0.1
–
1.9
109.2
13.9
125.1
148.8
483.8
632.6
(0.5)
(40.3)
–
–
(0.4)
(26.0)
–
(67.2)
Fair value
2022
$m
1.5
42.3
–
37.9
–
81.7
172.1
434.1
606.2
–
–
(71.3)
(66.1)
(10.8)
(105.1)
(13.0)
(266.3)
2021
$m
0.1
–
1.9
109.2
13.9
125.1
148.8
483.8
632.6
(0.5)
(40.3)
–
–
(0.4)
(26.0)
–
(67.2)
11
17
(293.9)
(3,220.8)
(3,514.7)
(269.1)
(3,738.0)
(4,007.1)
(293.9)
(3,242.8)
(3,536.7)
(269.1)
(3,912.6)
(4,181.7)
–
–
–
–
–
–
–
–
–
–
19.1
308.6
0.6
(21.5)
306.8
19.1
299.0
0.8
(16.6)
302.3
97
Notes to the consolidated financial statements30 June 2022 (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 Joint ventures
20 Material subsidiaries
21 Parent entity disclosures
Page 99
Page 99
Page 100
22 Acquisition of businesses and interests in joint ventures
Page 100
23 Discontinued operations
Page 101
98 AURIZON ANNUAL REPORT 2021–22
Notes to the consolidated financial statements30 June 2022 (continued) 19 Joint ventures
20 Material subsidiaries
The Group has an interest in the following joint ventures:
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:
Ownership interest
Country of
operation
2022
%
2021
%
Principal
activity
Ownership
interest
Country of
incorporation
2022
%
2021
%
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
100
Name
Joint ventures
Coal Network
Capacity Co Pty Ltd
Ox Mountain
Limited
Chun Wo/CRGL1
ARG Risk
Management Limited
Integrated Logistics
Company Pty Ltd
Australia
United
Kingdom
China —
Hong Kong
8
42
8
Independent
Expert
42
Software
–
17 Construction
Controlled entities
Aurizon Operations Limited
Australia Eastern Railroad Pty Ltd
Australia Western Railroad Pty Ltd
Aurizon Network Pty Ltd
Bermuda
50
50
Insurance
Aurizon Property Pty Ltd
ACN 169 052 288
Australia
Australia
14
15
14
15
Consulting
Dormant
1 The Chun Wo/CRGL joint venture ceased operations in March 2022.
Aurizon Finance Pty Ltd
Aurizon Port Services Pty Ltd
Aurizon Port Services NSW Pty Ltd
Iron Horse Insurance Company Pte Ltd
Singapore
The Group’s share of net profit from investments in joint ventures in the
period is $0.4 million (2021: $0.3 million). The Group’s share of net assets
from investment in joint ventures at reporting date are $22.0 million
(2021: $26.1 million) and are not considered material.
(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.
(a) Accounting policies
Investments in 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 joint venture.
The carrying amount of investments are tested for impairment in
accordance with the policy described in note 8.
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.
99
Notes to the consolidated financial statements30 June 2022 (continued)FINANCIAL REPORT Notes to the consolidated financial statements
30 June 2022 (continued)
22 Acquisition of businesses and
interests in joint ventures
(a) Summary of acquisitions in 2022
(i) South Maitland Railways Pty Ltd (SMR)
The Group acquired 100% of the issued shares in SMR, a railway storage
and maintenance provider near Newcastle in NSW, for consideration
of $8.2 million and a land holding for $0.4 million on 1 March 2022.
Acquisition costs were expensed to profit or loss. The net cash outflow
from investing activities for the acquisition in the period was $8.2 million
and acquisition of property, plant and equipment was $0.4 million.
(ii) Kooregah Pastoral Co Pty Ltd (KPC)
The Group acquired the business of KPC for consideration of $8.3
million on 28 October 2021. KPC is a trucking and material handling
business that operates in and around Hermidale in NSW. The acquisition
includes the assets and workforce associated with the business which
are expected to be complementary to Bulk’s NSW operations. Goodwill
of $1.8 million has been recognised which has been allocated to the Bulk
NSW CGU. Acquisition costs were expensed to profit or loss. The net
cash outflow from investing activities for the acquisition in the period
was $7.7 million.
(b) 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 and is classified as
a joint venture.
(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 included long-term leases
at the Port of Newcastle with shiploading facilities adjacent to rail
lines. The Group paid the contingent consideration of $1.0 million on
21 October 2021.
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 equity1
Reserves1
Retained earnings
Total equity
Profit for the year
Total comprehensive income
2022
$m
70.0
2021
$m
8.4
3,712.2
3,703.2
3,782.2
3,711.6
68.9
0.5
69.4
7.6
0.4
8.0
3,712.8
3,703.6
3,673.7
3,673.7
(5.4)
44.5
(14.3)
44.2
3,712.8
3,703.6
458.6
458.6
571.0
571.0
1 FY2021 is restated to reclassify the capital reserve of $3,467.1 million to
contributed equity, refer to key events and transactions.
All costs associated with employees of the parent entity are borne by
a subsidiary and recharged to the parent entity as they are incurred.
The parent entity disclosure includes employee benefit provisions and
other labour accruals for these employees.
(b) Guarantees entered into by the parent entity
The Company 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 $95.3 million
(2021: $93.3 million), however the Company has obtained a 100% cross
indemnity guarantee from Qube Holdings Ltd in respect of any call under
the 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 2022 (2021: $nil).
100
AURIZON ANNUAL REPORT 2021–22 23 Discontinued operation
(a) Closure and sale of Intermodal
On 26 March 2021, the Group completed the sale of the Acacia Ridge
Intermodal Terminal to Pacific National.
(i) Financial performance and cash flow information
The financial information relating to the discontinued operation is set out
below for the period to 26 March 2021.
Revenue
Other income
Employee benefits expense
Energy and fuel
Consumables
Other expenses
Profit before income tax
Income tax expense
Profit from discontinued operation after tax
Net cash outflow from operating activities
Net cash inflow from investing activities
Net cash inflow/(outflow) from financing activities
Net increase in cash generated by the discontinued
operation
(ii) Significant items
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.
2021
$m
21.5
161.2
(2.4)
(0.1)
(3.9)
(0.3)
176.0
(52.4)
123.6
(23.0)
168.8
–
145.8
2021
$m
Significant items
Net gain on sale of Acacia Ridge Intermodal Terminal
161.1
Net gain on sale 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.
101
Notes to the consolidated financial statements30 June 2022 (continued)FINANCIAL REPORT
Notes to the consolidated financial statements
30 June 2022 (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.
24 Notes to the consolidated statement of cash flows
Page 103
25 Related party transactions
26 Key Management Personnel
27 Share-based payments
28 Auditor’s remuneration
29 Summary of other significant accounting policies
Page 104
Page 104
Page 104
Page 105
Page 106
102 AURIZON ANNUAL REPORT 2021–22
Notes to the consolidated financial statements
30 June 2022 (continued)
24 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-current assets
Finance expenses
Share-based payment expense
Net gain on disposal of assets
Share of net profit of investments accounted for using equity method
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
Net cash inflow from operating activities from continuing operations
2022
$m
513.0
592.3
2.1
126.9
9.0
(22.4)
(0.4)
0.6
51.1
(45.4)
(5.0)
37.0
(43.7)
77.1
59.9
(32.0)
1,320.1
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
1,277.0
(b) Reconciliation of liabilities arising from financing activities to financing cash flows
Balance as at 1 July 2021
Reclassification
Financing cash flows2
Changes in fair value (including foreign exchange rates)
Other non-cash movements3
Balance as at 30 June 2022
Balance as at 1 July 2020
Financing cash flows2
Changes in fair value (including foreign exchange rates)
Other non-cash movements3
Balance as at 30 June 2021
Current
borrowings
$m
Non-current
borrowings
$m
Liabilities
held to
hedge
borrowings1
$m
Assets held
to hedge
borrowings1
$m
Total
$m
(59.0)
(3,679.0)
(66.7)
125.0
(3,679.7)
(255.0)
59.0
–
–
(255.0)
(657.6)
599.0
(0.4)
–
255.0
105.1
357.4
(4.3)
(2,965.8)
(2,949.6)
(835.2)
109.7
(3.9)
–
–
(199.6)
–
(266.3)
(79.1)
–
12.4
–
–
–
(44.8)
–
–
164.1
113.0
(4.3)
80.2
(3,406.9)
220.8
(3,465.5)
–
(236.2)
(95.8)
–
25.9
(3.9)
(59.0)
(3,679.0)
(66.7)
125.0
(3,679.7)
1 Assets and liabilities held to hedge borrowings exclude foreign exchange contracts included in note 18(a).
2 Financing cash flows includes the net amount of proceeds from borrowings, repayment of borrowings and payments of transaction costs related to borrowings.
3 Other non-cash movements includes the amortisation of AMTN 2 fair value adjustment, amortisation of capitalised borrowing costs and amortisation of discounts on the
face value of the AMTNs and EMTNs issued.
FINANCIAL REPORT 103
25 Related party transactions
Related parties include investments and Key Management Personnel
(KMP). There were no transactions with related parties during the
financial year (2021: $nil).
26 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
2022
$’000
2021
$’000
9,082
9,064
27
261
–
4,958
154
218
1,041
2,995
The table below summarises the total movements in the performance
rights issued by the Group:
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
2022
STIA
LTIA
391
541
(391)
–
541
8,512
3,364
–
(1,960)
9,916
Retention
84
79
(17)
–
146
Total
2021
STIA
LTIA
8,987
3,984
(408)
(1,960)
10,603
428
391
(428)
–
391
7,990
2,958
(267)
(2,169)
8,512
Retention
281
67
(264)
–
84
14,328
13,472
Total
8,699
3,416
(959)
(2,169)
8,987
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 (2021: nil).
27 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.
1 Balance of rights at the end of the year remains unvested.
During the period, the Group recognised a share-based payment expense
of $9.0 million (2021: $4.9 million).
The weighted average share price at the date performance rights were
exercised during the period was $3.71 (2021: $4.40). The weighted
average remaining contractual life of unvested rights at 30 June 2022
was 1.9 years (2021: 1.9 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
– GRG
Share price at grant date
Share price at grant date less
estimated dividend yield
Monte-Carlo simulation
technique
Share price at grant date less
estimated dividend yield
2022
$
3.73
3.80
2.97
1.97
2.97
2021
$
4.30
4.32
3.15
1.86
–
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)
2022
6.90
2021
6.40
22.00
39.20
3.92
0.80
4.00
4.07
0.20
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.
104
Notes to the consolidated financial statements30 June 2022 (continued)AURIZON ANNUAL REPORT 2021–22 Notes to the consolidated financial statements
30 June 2022 (continued)
28 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:
Deloitte Touche Tohmatsu
Audit and review of financial statements
Group
Controlled subsidiaries
Tax advisory services
Other advisory services
Total remuneration of Deloitte Touche
Tohmatsu
PwC Australia
Audit and review of financial statements
Group
Controlled subsidiaries
Other assurance services
Other advisory services
Total remuneration of PwC Australia
2022
$’000
2021
$’000
203
767
970
130
480
1,580
–
–
–
–
–
–
–
–
–
–
–
–
423
767
1,190
60
80
1,330
105
Notes to the consolidated financial statements30 June 2022 (continued)FINANCIAL REPORT 29 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 Group has applied the following amendment for the first time for the reporting period commencing 1 July 2021:
› AASB 2020-8 Amendments to Australia Accounting Standards — Interest Rate Benchmark Reform Phase 2.
The interest rate benchmark reform aims to discontinue Interbank Offered Rates (IBORs) and replace these interest rate benchmarks with alternative
Risk Free Rates (RFRs).
In the prior year, the Group had early adopted AASB 2019-3 Amendments to Australian Accounting Standards — Interest Rate Benchmark Reform and
AASB 2020-8 Amendments to Australian Accounting Standards — Interest Rate Benchmark Reform — Phase 2. These amendments modify specific
hedge accounting requirements related to the Group’s EMTNs and allow the Group to apply certain exemptions in respect of hedge relationships
that are impacted by market-wide interest rate benchmark reform. The Group has applied these reliefs resulting in no impact on the Group’s hedge
accounting. Upon transition to alternative benchmarks the Group will seek to apply further reliefs in AASB 9 and continue to apply hedge accounting
to its hedging arrangements.
The Group has no contractual cash flows linked to IBOR, as all foreign currency borrowings are fixed rate which are swapped back to domestic floating
using CCIRS, however, IBOR reform impacts the components of hedge designation in different hedge relations.
As at 30 June 2022, the Group had Euro dominated fixed rate borrowings that were swapped back to AUD floating BBSW through CCIRS hedges.
These hedging instruments have both fair value and cash flow hedge components:
Hedge
relationship
Fair value hedge
Cash flow hedge
Cash flow hedge
Prior to
transition
instrument type
Benchmark portion
of the receive fixed
EUR coupon relate
to EUR swap rates
Receive benchmark
EUR cash flow,
pay benchmark
AUD cash flow
combined with
EUR and AUD
notional principal
exchanges at
effective and
maturity date
Receive cash
margin above the
portion of the
fixed EUR interest
coupon of the
CCIRS equivalent
to credit margin
component of
the bond over
the benchmark
swap interest
rate and pay cash
margin above the
benchmark
Latest maturity
Sept-2024
Nominal in
foreign currency
Nominal in local
currency
Sept-2024
Sept-2024
€1,000.0m
$1,488.8m
Transition
progress
Working with
provider to
transition across
to the new
benchmark
Hedged item
Benchmark portion
of the EUR fixed
coupons related to
EUR swap interest
rates over the term
of the bond
EUR principal
repayment of the
bond from first
repayment date
until maturity of
the bond
Margin above
swap benchmark
rate portion of the
EUR fixed coupon
payable on the
bond (equivalent
to credit margin
on debt) over the
term of the bond
Management is expecting to have no significant impact of IBOR reform, except for the operational risk. The current treasury management system is
undergoing upgrades to fully manage the transition to alternative benchmark rates and there is a risk that such upgrades are not fully functional in
time, resulting in additional manual procedures which give rise to operational risks.
106
Notes to the consolidated financial statements30 June 2022 (continued)AURIZON ANNUAL REPORT 2021–22 Notes to the consolidated financial statements
30 June 2022 (continued)
29 Summary of other significant
accounting policies (continued)
(a) Basis of preparation (continued)
(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 2021 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 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 dollars 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.
(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.
107
Notes to the consolidated financial statements30 June 2022 (continued)FINANCIAL REPORT (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.
29 Summary of other significant
accounting policies (continued)
(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.
108
Notes to the consolidated financial statements30 June 2022 (continued)AURIZON ANNUAL REPORT 2021–22 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.
30 Commitments and contingencies
31 Events occurring after the reporting period
Page 110
Page 110
FINANCIAL REPORT 109
30 Commitments and contingencies
31 Events occurring after the
(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 August 2019 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 August 2019), 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).
(c) Capital commitments
At 30 June 2022, the Group has capital commitments contracted but
not provided for in respect of the acquisition of property, plant and
equipment of $140.1 million (2021: $77.3 million) which are due within
one year.
reporting period
(i) Acquisition of One Rail Australia LP (ORA)
The acquisition of ORA completed on 29 July 2022 and the transaction
has not been recognised at 30 June 2022. Details of the provisional
purchase price consideration, net assets acquired and goodwill have
not been disclosed as the Group had not yet completed the provisional
accounting for the acquisition at the time the financial statements were
authorised for issue as access to key information was restricted until
completion. Refer to key events and transactions for other information
in relation to the acquisition.
(ii) Debt financing
On 29 July 2022, the Group satisfied customary closing conditions on
new bank debt facilities summarised in the table below. The bank debt
facilities contain financial covenants and general undertakings, including
negative pledge clauses which restrict the amount of security the Group
can provide over assets in certain circumstances.
Aurizon Finance Pty Ltd — Unsecured
Bridge facility
Revolving facility
Term loan facility
NHK Pty Ltd (East Coast Rail) — Secured
Working capital facility
Bridge facility
Amortising loan facility
Maturity
Jul-24
Jul-25
Jul-27
Jul-23
Jul-24
Jul-27
Facility
Limit
$m
650.0
400.0
400.0
1,450.0
15.0
250.0
250.0
515.0
110
Notes to the consolidated financial statements30 June 2022 (continued)AURIZON ANNUAL REPORT 2021–22 Directors’ Declaration
30 June 2022
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 58 - 110 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 2022 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 63 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
8 August 2022
FINANCIAL REPORT
111
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Level 23, Riverside Centre
123 Eagle Street
Brisbane, QLD, 4000
Australia
Phone: +61 7 3308 7000
Deloitte Touche Tohmatsu
www.deloitte.com.au
ABN 74 490 121 060
Level 23, Riverside Centre
123 Eagle Street
Brisbane, QLD, 4000
Australia
Independent Auditor’s Report to the Members of Aurizon
Holdings Limited
Phone: +61 7 3308 7000
www.deloitte.com.au
RReeppoorrtt oonn tthhee AAuuddiitt ooff tthhee FFiinnaanncciiaall RReeppoorrtt
Independent Auditor’s Report to the Members of Aurizon
Holdings Limited
Opinion
We have audited the financial report of Aurizon Holdings Limited (the Company) and its subsidiaries (the Group)
which comprises the consolidated balance sheet as at 30 June 2022, the consolidated income statement, the
consolidated statement of comprehensive income, the consolidated statement of changes in equity and the
RReeppoorrtt oonn tthhee AAuuddiitt ooff tthhee FFiinnaanncciiaall RReeppoorrtt
consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a
summary of significant accounting policies and other explanatory information, and the directors’ declaration.
Opinion
We have audited the financial report of Aurizon Holdings Limited (the Company) and its subsidiaries (the Group)
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
which comprises the consolidated balance sheet as at 30 June 2022, the consolidated income statement, the
including:
consolidated statement of comprehensive income, the consolidated statement of changes in equity and the
• Giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its financial performance
consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a
summary of significant accounting policies and other explanatory information, and the directors’ declaration.
• Complying with Australian Accounting Standards and the Corporations Regulations 2001.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
Basis for Opinion
including:
for the year then ended and
for the year then ended and
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
• Giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its financial performance
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our
report. We are independent of the Group in accordance with the auditor independence requirements of the
• Complying with Australian Accounting Standards and the Corporations Regulations 2001.
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
Basis for Opinion
relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
accordance with the Code.
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to
report. We are independent of the Group in accordance with the auditor independence requirements of the
the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s
Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s
report.
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
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
accordance with the Code.
opinion.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to
the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s
report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte organisation.
112
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte organisation.
AURIZON ANNUAL REPORT 2021–22
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. These 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.
KKeeyy AAuuddiitt MMaatttteerr
Useful life of infrastructure assets
At 30 June 2022, the carrying value of
infrastructure assets was $5,267m including the
Central Queensland Coal Network infrastructure
assets (CQCN infrastructure assets) of $4,902m. As
disclosed in note 8, the Group determines the
useful lives of the CQCN infrastructure assets based
on the expected engineering life of these assets,
capped at the remaining term of the applicable
leases.
These assets are primarily used to transport coal
from mines to port, for subsequent export. As
such, any change in the export market demand for
Queensland coal or restrictions on the supply of
that coal may indicate that the useful lives of the
CQCN infrastructure assets should be changed.
There is uncertainty as to the future demand for
coal with climate change widely considered to be
one of the key issues facing the global community
and increasing pressure on governments and
industry to seek lower carbon solutions.
Given the significant carrying value of the CQCN
infrastructure assets, the estimate of the useful life
of the CQCN infrastructure assets is considered to
be a key audit matter.
HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy
AAuuddiitt MMaatttteerr
To assess the useful lives adopted by the Group for the
CQCN infrastructure assets, we performed the
following procedures amongst others:
• Obtained and evaluated information which
estimates the period over which there will be
demand for, and supply of, coal from Queensland
This included:
o
Publicly available global and regional
energy and coal forecasts and outlooks
from industry specialists and
o Management’s Strategy in Uncertainty
scenarios
• As metallurgical coal is expected to be in demand
longer than thermal coal, evaluated the period
over which metallurgical coal demand could be
supplied by Queensland mines, with reference to
publicly available metallurgical coal reserve and
production estimates
• Obtained publicly available information on the
current regulatory environment of the coal
industry in Queensland including mine approvals
and government policy statements
• As most publicly available information does not
forecast coal demand beyond 2050, management
undertook scenario analysis to assess the
economic viability of the CQCN infrastructure
assets beyond 2050. Together with our internal
specialist we evaluated this analysis including the
adopted methodology and the scenarios
considered
Evaluated the Group’s useful life disclosures in the
financial statements including the sensitivity
analysis outlining the impact on depreciation
expense of changes in the useful lives of assets
that are currently capped at the remaining term
of the applicable leases.
•
FINANCIAL REPORT
113
KKeeyy AAuuddiitt MMaatttteerr
HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy
AAuuddiitt MMaatttteerr
Recoverability of the Western Australia, Bulk
Queensland (Bulk QLD) and Bulk New South Wales
(Bulk NSW) cash-generating units (CGUs)
To evaluate the estimated recoverable value of the
Western Australia, Bulk QLD and Bulk NSW CGUs, we
performed the following procedures amongst others:
• Assessed the design and implementation of key
controls over management’s process for
determining the recoverable value of the CGUs
Tested whether the carrying value of the CGUs
included all assets and liabilities that are directly
attributable to the respective CGUs
•
• Agreed the cash flows included in management’s
models to the latest board approved budgets
• Assessed whether the cash flows include an
•
appropriate charge for any corporate assets that
were not allocated directly to CGUs
Evaluated the basis for determining the forecast
cash flows attributable to customer contracts in
management’s model, including an assessment of
key assumptions relating to volumes, contract
renewals and new customers
• Agreed forecast capital expenditure with capital
•
•
•
budgets
Evaluated the Group’s ability to forecast future
cash flows by comparing the current year and
historical results to budgets
Together with our valuation specialists, assessed
the discount rates and terminal growth rates used
to determine the recoverable value, the valuation
methodology and the mathematical accuracy of
the cash flow models
Performed analysis to understand the sensitivity
of the recoverable value to changes in key
assumptions
• Assessed the relevant disclosures included in the
financial statements.
At 30 June 2022, as disclosed in note 9,
management has undertaken an estimate of the
recoverable value of the following CGUs:
•
•
•
The Western Australia CGU, which has a
carrying value of $272m. The carrying value of
depreciable assets within this CGU has
previously been impaired due to the loss of,
and changes to, key customer contracts,
challenging market conditions and a review of
the freight business. Management has
identified potential impairment reversal
indicators during the year following the
commencement of a new grain haulage
contract in the 2022 financial year and the
performance of contracts with existing
customers
The Bulk QLD CGU, which has a carrying value
of $140m including goodwill of $5m. The
carrying value of depreciable assets within this
CGU has previously been impaired due to the
loss of key customer contracts, challenging
market conditions and a review of the freight
business
The Bulk NSW CGU, which has a carrying value
of $158m including $22m of goodwill.
Recoverable values have been estimated using a
value in use discounted cash flow model for the
Western Australia CGU and the Bulk QLD CGU and a
fair value less costs of disposal (FVLCD) discounted
cash flow model for the Bulk NSW CGU. The key
assumptions included in these models relate to
cash flows from customers, discount rates and
forecast capital expenditure. As these assumptions
require management to exercise significant
judgement, the recoverable value of the Western
Australia CGU, Bulk Qld CGU and Bulk NSW CGU is a
key audit matter.
Other Information
The directors are responsible for the other information. The other information comprises the information
included in the Group’s annual report for the year ended 30 June 2022, but does not include the financial report
and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any form of
assurance conclusion thereon.
114
AURIZON ANNUAL REPORT 2021–22
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, 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 has no realistic
alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and
maintain professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting
from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by the directors.
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may
cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on
the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may
cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and
whether the financial report represents the underlying transactions and events in a manner that achieves fair
presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the financial report. We are responsible for the direction,
supervision and performance of the Group’s audit. We remain solely responsible for our audit opinion.
FINANCIAL REPORT
115
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our
audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably
be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards
applied.
From the matters communicated with the directors, we determine those matters that were of most significance
in the audit of the financial report of the current period and are therefore the key audit matters. We describe
these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or
when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
RReeppoorrtt oonn tthhee RReemmuunneerraattiioonn RReeppoorrtt
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 33 to 48 of the Directors’ Report for the year ended
30 June 2022.
In our opinion, the Remuneration Report of Aurizon Holdings Limited, for the year ended 30 June 2022, 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.
DELOITTE TOUCHE TOHMATSU
Matthew Donaldson
Partner
Chartered Accountants
Brisbane, 8 August 2022
116 AURIZON ANNUAL REPORT 2021–22
Non-IFRS Financial Information
in the FY2022 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 (Statutory and
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. Underlying can differ from 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 flow by eliminating depreciation and
amortisation.
NPAT– Underlying represents the 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 12-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 have not been audited in
accordance with Australian Auditing Standards.
2022
2021
Continuing
operations
$m
Discontinued
operations
$m
Continuing
operations
$m
Discontinued
operations
$m
NPAT — Underlying
Significant adjustments,
net of tax1
Significant adjustment —
Aquila income tax benefit
NPAT — Statutory
Income tax expense
Profit before income tax
Net finance costs
EBIT — Statutory
Add back significant
adjustments:
– Transaction costs incurred
for ORA
– Net gain on sale of shares
in Aquila
– Net gain on sale of Acacia
Ridge Intermodal Terminal
EBIT — Underlying
Depreciation and amortisation
EBITDA — Underlying
Average invested capital
ROIC
524.9
(11.9)
–
513.0
223.1
736.1
125.0
861.1
14.2
–
–
875.3
592.3
1,467.6
8,464
10.3%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
533.2
5.7
67.8
606.7
159.3
766.0
145.3
911.3
–
(8.2)
–
903.1
579.1
1,482.2
8,418
10.7%
10.8
112.8
–
123.6
52.4
176.0
–
176.0
–
–
(161.1)
14.9
–
14.9
1 Transaction costs incurred for ORA includes amounts which are not deductible in calculating taxable income.
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).
2022
$m
3,220.8
(172.1)
3,048.7
4,412.3
7,461.0
40.9%
2022
$m
3,048.7
210.8
3,259.5
4,412.3
7,671.8
42.5%
2021
$m
3,738.0
(148.8)
3,589.2
4,274.6
7,863.8
45.6%
2021
$m
3,589.2
(149.0)
3,440.2
4,274.6
7,714.8
44.6%
FINANCIAL REPORT
117
Shareholder Information
TOTAL HOLDERS
UNITS
% OF ISSUED CAPITAL
RANGE OF FULLY PAID ORDINARY SHARES AS AT 1 AUGUST 2022
RANGE
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 Over
Total
22,667
31,172
7,384
5,708
182
67,113
13,455,629
74,519,433
54,119,028
123,711,914
1,574,897,978
1,840,703,982
UNMARKETABLE PARCELS AS AT 1 AUGUST 2022
Minimum $500.00 parcel at $4.10 per unit
MINIMUM PARCEL SIZE
122
HOLDERS
1,094
The number of shareholders holding less than the marketable parcel of shares is 1,094 (shares: 56,622).
0.73
4.05
2.94
6.72
85.56
100.00
UNITS
56,622
SUBSTANTIAL HOLDERS OF 5% OR MORE OF FULLY PAID ORDINARY SHARES AS AT 1 AUGUST 2022*
NAME
BlackRock Group
State Street Corporation
The Vanguard Group Inc
NOTICE DATE
06/01/2020
18/01/2022
23/06/2022
SHARES
141,036,686
112,656,938
92,070,702
* As disclosed in substantial shareholder notices received by the Company.
INVESTOR CALENDAR
2023 DATES
13 February 2023
29 March 2023
14 August 2023
DETAILS
Half Year results and interim dividend announcement
Interim dividend payment date
Full Year results and final dividend announcement
27 September 2023
Final dividend payment date
12 October 2023
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/azj.
To request information relating to investor
relations please contact our investor
relations team on 13 23 32 or email:
investor.relations@aurizon.com.au.
118
AURIZON ANNUAL REPORT 2021–22
TOP 20 HOLDERS OF FULLY PAID ORDINARY SHARES AS AT 1 AUGUST 2022
NAME
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
JP MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
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