More annual reports from Aurizon:
2023 ReportPeers and competitors of Aurizon:
Globaltrans Investment Plc2022 – 2023
Annual
Report
Contents
FY2023 in Review .................................................. 1
Chairman’s Report ................................................2
Managing Director & CEO’s Report ..............3
Directors’ Report ...................................................4
– Operating and Financial Review ................13
– Remuneration Report .....................................31
Auditor’s Independence Declaration .........47
Corporate Governance Statement .............48
Financial Report ...................................................55
Shareholder Information ...............................120
Glossary .................................................................122
Corporate Information ...................................124
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.
FY2023 in Review
Result highlights (Underlying and statutory continuing operations)
($M)
Total revenue
EBITDA
EBIT
Significant items — acquisition costs
EBIT Statutory
NPAT
NPAT Statutory
Free cash flow (FCF)1
Final dividend (cps)
Total dividend (cps)
Earnings per share (cps)
Return on invested capital (ROIC)
EBITDA margin
Operating ratio (OR)
Above Rail Tonnes (m)
Gearing (net debt / (net debt + equity))
Performance Overview
› EBITDA down $39m (3%) to $1,428m with:
• Coal down $86m (16%) primarily due
to lower volumes (from the impact of
prolonged wet weather), in addition to
higher Network Take-or-Pay (non-pass
through) expense and costs due to wage
and materials escalation
• Bulk up $79m (59%) with the inclusion
of the One Rail Australia bulk business
(Bulk Central) following completion of
the transaction in July 2022, higher grain
and iron ore volumes in Western Australia,
partly offset by wet weather, a number
of derailments and customer specific
production issues in Queensland, New
South Wales and the Northern Territory
• Network up $12m (1%) due to Take-or-Pay
triggering in two major systems plus GAPE
($76m of Take-or-Pay revenue excluding
GAPE) as volumes were 19mt below
regulatory forecast
• Other down $44m (440%) due to prior
period divestment of Rockhampton
workshops and the recognition of a $15m
long service leave provision adjustment.
FY2023
FY2022
VARIANCE
VARIANCE %
3,511
1,428
762
(49)
713
367
324
297
8.0
15.0
19.9
7.5%
40.7%
78.3%
253.2
53.7%
› Commencement of services in April 2023
under the new Team Global Express contract
for Containerised Freight.
› The divestment of East Coast Rail was
announced in December 2022 and
completed in February 2023.
› Final dividend declared of 8.0cps (60% franked)
represents a payout ratio of 75% of
underlying NPAT for continuing operations.
3,075
1,467
875
(14)
861
525
513
765
10.9
21.4
28.5
10.3%
47.7%
71.5%
244.8
40.9%
436
(39)
(113)
(35)
(148)
(158)
(189)
(468)
(2.9)
(6.4)
(8.6)
(2.8ppt)
(7.0ppt)
(6.8ppt)
8.4
(12.8ppt)
14%
(3%)
(13%)
(250%)
(17%)
(30%)
(37%)
(61%)
(27%)
(30%)
(30%)
–
–
–
3%
–
Outlook
Group underlying EBITDA for FY2024 is
expected to increase and be in the range of
$1,590m – $1,680m. Sustaining capex expected
to be $600-$660m (including ~$40m of
transformational project capital) and
growth capex expected to be $250 – $300m.
Key assumptions:
› Network: revenue and EBITDA growth driven
by a $125m increase in the (regulated)
Maximum Allowable Revenue. Volumes are
assumed at the approved regulatory forecast
of 207.8mt
› Coal: revenue and EBITDA growth with
volumes expected to be higher than FY2023
(and revenue yield improvement)
› Bulk: revenue and EBITDA growth with
volumes expected to be higher than FY2023
and the full year inclusion of Bulk Central
(and full realisation of targeted synergies)
› Other: Containerised Freight expected
to be broadly EBITDA neutral as national
interstate services ramp up to full schedule
by April 2024
› No significant disruptions to supply chains
(such as major derailments or extreme/
prolonged wet weather).
1 Free Cash Flow defined as net cash flow from operating activities (less non-growth capex) and includes interest paid. It excludes growth capex of $203m, the acquisition
of One Rail Australia ($1,404m), cash costs associated with the acquisition ($49m pre-tax) and the purchase of an additional investment in Ox Mountain ($30m).
1
FY2023 IN REVIEW During the year, we announced changes to
the Aurizon Board as we continue to renew
and add diversity to our Board composition.
Tim Longstaff, a chartered accountant with a
25-year career in investment banking, joined
as a non-executive director on 1 June 2023.
Samantha Tough, a lawyer with extensive
experience in executive and director roles,
will join as a non-executive director on
1 September 2023. I would also like to
acknowledge Kate Vidgen who retired as
a non-executive director of Aurizon on
31 May 2023. I would like to thank Kate for
her dedication and hard work over the past
seven years. Kate is an outstanding director
who has made a significant contribution to
Aurizon and we wish her the very best for
the future.
Finally, thank you to our shareholders for your
continued support through a significant period
of transformation for Aurizon. The Board is
excited with the changes happening in the
business and the growth we have in front of us,
as we build on our core strengths and leverage
the national and broader range of services that
Aurizon is now able to offer our customers.
As we embed this strategy and execute the
various initiatives outlined above, we look
forward to continuing to deliver value and
returns for shareholders.
Tim Poole
Chairman
14 August 2023
Chairman’s Report
Dear fellow shareholders
I am pleased to present our FY2023 Annual
Report.
The year presented a tough operating
environment for Aurizon, with prolonged
wet weather in eastern Australia significantly
impacting volumes carried by the business.
This was compounded by mine production
issues, a major third-party derailment and
labour shortages emerging for critical roles
such as train drivers.
As a result, Underlying Earnings Before
Interest, Tax, Depreciation and Amortisation
(EBITDA) of $1,428 million in FY2023 was at
the lower end of our revised guidance range
of $1,420 million – $1,470 million. The Board
has declared a final dividend of 8.0 cents
per share, 60% franked. This will take total
dividends for FY2023 to 15 cents. The dividend
payout ratio is consistent with our commitment
to maintain strong investment grade credit
ratings during the current investment cycle
for our Bulk and Containerised Freight
businesses. Since FY2016, Aurizon has returned
approximately $5 billion to shareholders
through dividends and share buybacks.
We were delighted to progress major
strategic initiatives during FY2023, which are
underpinning the transformation, diversification
and growth of our business. We now have a
truly national footprint with track infrastructure,
rollingstock, terminal and port assets, together
with a highly-capable team to deliver on the
next phase of growth for Aurizon. Key initiatives
put in place during FY2023 included:
› Completion of the $1.4 billion acquisition
of One Rail Australia in Central Australia
(now called Bulk Central), successful
divestment of East Coast Rail and the
subsequent and seamless integration of
Bulk Central into our national Bulk business;
› Securing a key strategic position in
Australia’s growing containerised freight
market, with the announcement of a new
11-year national linehaul contract with Team
Global Express (TGE); and
› Investing approximately $210 million in new
rollingstock, track infrastructure, terminals,
and port equipment to support growth in
Bulk and Containerised Freight. We expect
to invest a further $250 – $300 million
in growth capital in these businesses
during FY2024.
These initiatives are the building blocks for the
continued commercial success of Aurizon, as
we move to capitalise on growth in emerging
markets for the Australian economy. This was
the core message delivered by our Managing
Director & CEO Andrew Harding and our
senior leadership team at our 2023 Investor
Day which was held in Darwin in July 2023.
At this event, Andrew detailed our updated
strategic aims:
› Continue to optimise the highly resilient
and cash-generative businesses of Network
and Coal;
› Aspire to achieve a larger share of the
available Bulk products supply chain
market; and
› Establish a nationally significant
containerised freight supply chain
for customers.
The Board is committed to creating a more
diversified and valuable business aligned
to changes in the Australian and global
economies, while maintaining the strong and
stable cash flows that are core to Aurizon.
We recognise the global energy transition
comes with challenges and opportunities.
We will continue to grow non-coal revenue
streams, re-balancing our portfolio towards
rapidly-growing markets. The expected
growth in those businesses recognises our
leading position in key commodity-rich
regions of Australia, with strong exposure to
new-economy commodities such as bauxite,
copper, nickel, phosphate, rare earths, and
grain. Australia is well placed to provide these
commodities to the world for decades to come,
and likewise Aurizon, as the nation’s largest
integrated rail provider, is in a strong position
to capitalise on this opportunity.
In closing, I would like to acknowledge the
ongoing commitment of our employees across
Aurizon in delivering safe and reliable services
to our customers. What has been abundantly
clear over recent years — during COVID-19
and more recently during the extreme weather
events — is that we have a highly-capable and
resilient team of employees. The Board is also
pleased to note the continuing improvements
across key safety metrics during FY2023.
Andrew Harding shares more detail in his
report on the following page.
22
AURIZON ANNUAL REPORT 2022–23 Managing Director & CEO’s Report
Dear fellow shareholders
I am pleased to report strong progress during
FY2023 in implementing a range of key
initiatives and investments that are supporting
national expansion and diversification, and
underpinning future revenue and volume growth
for Aurizon. This activity is focussed on Bulk
and Containerised Freight — two businesses for
which we have significant aspirations over the
next decade and beyond. I will cover this work
and the performance of Aurizon’s business units
later in my report.
First, I will address operational safety
performance. While overall safety metrics
improved in FY2023, unfortunately a number of
injuries were sustained by our Train Crew in level
crossing collisions. Level crossing risk remains
one of the areas of most concern for the rail
industry, and we are stepping up education and
awareness activity in the communities where we
operate, as well as advocacy and engagement
with key stakeholders.
Aurizon uses two primary safety metrics to
measure safety performance: Total Recordable
Injury Frequency Rate (TRIFR) and potential
and actual Serious Injury and Fatality Frequency
Rate (SIFR(a+p)). In FY2023, TRIFR improved
by 2% and SIFR(a+p) improved 56%. These
numbers do not include the newly acquired Bulk
Central business, which will be integrated into
enterprise-wide safety metrics from FY2024.
Further details are available in the Operating
and Financial Review.
As the Chairman outlined in his report, the
Company had a challenging year from an
operational perspective, including prolonged
wet weather. This impacted our volumes and
our financial results for FY2023. Underlying
Earnings Before Interest, Tax, Depreciation and
Amortisation (EBITDA) was $1,428 million, at the
lower end of our revised guidance range. Below
is an overview of the performance and some key
initiatives in each of the business units.
Bulk
There was a significant increase in earnings for
Bulk in FY2023, primarily driven by Bulk Central
which contributed its first year of revenue
(following the completion of the One Rail
acquisition on 29 July 2022). Tonnes increased
34% to 68 million, with EBITDA increasing
$79 million to $214 million, a 59% increase
compared to FY2022. We were pleased to
secure a number of new contracts including:
› Northparkes, NSW for the port services
of copper concentrate
› IPL, Queensland for road, rail and
stevedoring of sulphur
› Aeris Resources, NSW for road, rail and
stevedoring for base metals.
We have continued to invest in additional
locomotives and wagons, port assets
and terminals, as well as upgrading track
infrastructure to support the growth of
new and existing Bulk customers. A good
example is the installation of improved rail
infrastructure and the introduction of higher
capacity locomotives for Gypsum Australia in
South Australia.
Coal
Coal haulage volumes decreased 5% to
185 million tonnes in FY2023 and was the
primary reason for a 16% decrease in EBITDA
to $455 million, compared to the previous year.
During FY2023, the Coal business secured a
number of contracts including:
› 10-year contract with Malabar for the
Maxwell Underground Mine, NSW
› 5-year contract with New Wilkie
Energy, Queensland
› BMA Rail maintenance
› 5-year contract with SIMEC Mining for
the Tahmoor Underground Mine, NSW
(signed in August 2023).
Our Coal haulage business remains a highly-
efficient, cash-generative business for
Aurizon, serving metallurgical and thermal
coal producers in Queensland and New South
Wales. We are continuing to implement key
technology and transformation initiatives
for Coal, including the TrainGuard project
which is supporting safer and more efficient
train operations.
Containerised Freight
In February 2023, we secured the largest ever
non-coal contract for Aurizon with the new
national linehaul services for Team Global
Express (TGE). We are currently ramping up to
a full service profile for TGE, with all east-west
(Melbourne-Perth) and north-south services
(Melbourne-Sydney-Brisbane) to be in place by
the first half of calendar year 2024. With TGE
as the cornerstone, we will build volumes with
other customers along these corridors.
The Containerised Freight business leverages
assets and track infrastructure across a national
footprint which are already part of our existing
Bulk business. This includes, for example, Bulk’s
investment in harbour cranes at the Port of
Darwin. Not only will this support the growth
of export volumes, but it will also allow us
to develop opportunities for land-bridging
imports through Darwin to southern capitals.
We see land-bridging as a natural extension
of the national container services we are
providing to customers, with a relatively
modest investment profile to support the initial
stage of land-bridging.
Network
The Network business achieved EBITDA of $813
million, an increase of 1% compared to FY2022.
Tonnages across the Central Queensland Coal
Network increased by 1% to 207.6 million tonnes,
though this was lower than expected due to
prolonged wet weather during the second and
third quarters of FY2023. Aurizon Network
operates Australia’s largest rail supply chain
for export coal, with 2,670 kilometres of track
connecting customers from more than 40 mines
to five export terminals located across three
ports. The business remains core to Aurizon’s
commercial strength and is responsible for more
than 50% of total Company earnings, which in
turn, supports important investment in other
parts of Aurizon’s business.
Sustainability
Aurizon continues to develop the resilience and
sustainability of our business, with a target of
achieving net-zero operational emissions by
2050. We have a range of initiatives underway
to reduce emissions which are detailed in our
Climate Strategy and Action Plan and our
Sustainability Report, available on our website.
In May 2023, at Redbank in Queensland, we
launched work on a prototype for a zero-
emissions capable freight locomotive, a first
for Australia. Our diesel locomotive fleet is
responsible for the majority of our greenhouse
gas emissions, so this is an exciting project as
we aim to develop the next generation of low-
carbon freight solutions for our customers and
to contribute to lower emissions in Australia’s
transport sector.
In closing, I extend my gratitude to our
5,700 employees across Australia for their
dedication and commitment in delivering
safe and reliable services for our customers.
We are transforming and growing this business
for the benefit of customers, communities,
shareholders and the Australian economy.
Andrew Harding
Managing Director & CEO
14 August 2023
3
MANAGING DIRECTOR AND CEO’S REPORT Directors’ Report
Aurizon Holdings Limited
For the year ended 30 June 2023
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 2023 and the
Independent Auditors’ Report thereon.
Board of Directors
The following people are Directors of the
Company, or were Directors during the
reporting period:
Tim 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.
Andrew Harding
(Appointed 1 December 2016)
(Managing Director & Chief Executive Officer)
Marcelo Bastos
(Appointed 15 November 2017)
(Independent Non-Executive Director)
Russell Caplan
(Appointed 14 September 2010)
(Independent Non-Executive Director)
Samantha Lewis
(Appointed 17 February 2015)
(Independent Non-Executive Director)
Tim Longstaff
(Appointed 1 June 2023)
(Independent Non-Executive Director)
Sarah Ryan
(Appointed 1 December 2019)
(Independent Non-Executive Director)
Lyell Strambi
(Appointed 1 December 2019)
(Independent Non-Executive Director)
Kate Vidgen
(Appointed 25 July 2016 – 31 May 2023)
(Independent Non-Executive Director)
Ms Vidgen retired from the Board effective
31 May 2023.
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.
Tim 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.
Acting Chairman of Remuneration and People
Committee. Member of Audit, Governance
& Risk Management Committee. Member of
Safety, Health & Environment Committee.
Australian Listed Company Directorships
held in the past three years: McMillan
Shakespeare Limited — Non-Executive Director
(17 December 2013 – 31 August 2022); and
Reece Limited — Non-Executive Director
(28 July 2016 – ongoing); (Chairman from
22 May 2023).
44
AURIZON ANNUAL REPORT 2022–23 Russell 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.
Andrew 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.
Marcelo 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).
5
DIRECTORS’ REPORT Directors’ Report
(continued)
Samantha 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 and Non-Executive Director
and Chairman of the Audit & Risk Committee
of Nine Entertainment Co. Holdings Limited.
Ms Lewis is also a Non-Executive Director of
Australia Pacific Airports Corporation (APAC).
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).
Tim Longstaff
Experience: Mr Longstaff’s over 35 year
professional career brings a depth of
experience in finance, accounting, strategy,
acquisitions & divestments, debt & equity
capital markets, risk management, and
investor engagement amongst asset-intensive
industrial companies.
Mr Longstaff qualified as a Chartered
Accountant with Price Waterhouse before
a 25 year career in investment banking at
first-tier global firms including JPMorgan and
Deutsche Bank in Australia and internationally.
In this time Mr Longstaff was a strategic
partner and advised the Boards and CEOs
of leading Australian and global companies
on transformational M&A and capital
markets transactions.
More recently, Mr Longstaff served as Senior
Advisor to a Federal Cabinet Minister in the
Trade & Investment and Finance portfolios.
Through this experience he brings global
geo-political perspectives and insights into
transport and infrastructure policies, the
workings of Government, and regulated assets.
Mr Longstaff is a non-executive director of the
ASX-listed Ingham’s Group Limited and Perenti
Limited, and also of Snowy Hydro Limited and
The George Institute for Global Health. He is a
member of the Takeovers Panel.
Qualifications: BEc, FCA, GAICD, SF Fin.
Special responsibilities: Non-Executive
Director of Aurizon Network Pty Ltd.
Member of Audit, Governance & Risk
Management Committee.
Australian Listed Company Directorships
held in the past three years: Ingham’s Group
Limited (20 January 2022 – present); and
Perenti Limited (16 August 2021 – present).
Sarah Ryan
Experience: Dr 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 Viva Energy Group Limited and
a Non-Executive Director of Future Battery
Industry Cooperative Research Centre. Dr Ryan
is a former Non-Executive Director of ASX-
listed Woodside Energy Group Ltd, Oz Minerals
Limited and 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: Viva Energy
Group — Non-Executive Director (18 June 2018
– ongoing); Woodside Energy — Non-Executive
Director (24 October 2012 – 28 April 2023);
and OZ Minerals Limited — Non-Executive
Director (17 May 2021 – 2 May 2023).
66
AURIZON ANNUAL REPORT 2022–23
FIGURE 1 — BOARD DIVERSITY
DIRECTORS BY GENDER:
FEMALE 33%
DIRECTORS BY BOARD TENURE: YEARS
MALE 67%
0–2 23%
2–4 22%
4–6 11% 6–8 11%
8–10 22%
>10 11%
DIRECTORS BY AGE:
53–57 34%
57–61 44% 65–69 11% >69 11%
Lyell 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.
Note: This reflects the position as at 1 September 2023
Company Secretary
David Wenck
Mr Wenck was appointed Company Secretary
in April 2021. He joined Aurizon in 2010 as
Group General Counsel and has over 30 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.
Qualifications: BBus (Accy), FAICD.
Nicole Allder
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.
Ms Allder was appointed Company Secretary
in February 2023, having joined Aurizon as a
Legal Counsel in 2018. She has over 20 years’
experience in providing in-house legal and
company secretariat services. Prior to joining
Aurizon, Nicole held positions at ASX-listed
companies including General Counsel &
Company Secretary at CSG Limited, and
Deputy Company Secretary and Legal Counsel
at the Virgin Australia Group.
Nicole holds a Bachelor of Laws and a Graduate
Diploma in Applied Corporate Governance.
Qualifications: LLB, GradDipLP, GradDipACG
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
Figure 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.
7
DIRECTORS’ REPORT 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. 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.
4. Transactions and
capital markets
Experience in completing significant corporate
transactions, equity/debt capital markets and
capital management.
5. Customer
and business
development
6. Technology
Experience in business development and developing
customer-focused strategies with detailed knowledge
of Aurizon’s customer base.
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.
Note: This reflects the position as at 1 September 2023.
88
AURIZON ANNUAL REPORT 2022–23
TABLE 1 — DIRECTORS’ MEETINGS AS AT 30 JUNE 2023
DIRECTOR
T Poole1
A Harding¹
M Bastos
R Caplan
S Lewis
T Longstaff2
S Ryan
L Strambi
K Vidgen3
AURIZON HOLDINGS
BOARD
AUDIT, GOVERNANCE
& RISK MANAGEMENT
COMMITTEE
REMUNERATION AND
PEOPLE COMMITTEE
SAFETY, HEALTH
& ENVIRONMENT
COMMITTEE
NOMINATION
& SUCCESSION
COMMITTEE
A
17
17
17
17
17
2
17
17
15
B
17
17
16
17
17
2
14
17
15
A
7
7
7
1
7
B
7
7
7
1
6
A
1
4
4
3
B
1
4
4
3
A
4
4
4
4
4
B
4
4
4
3
4
A
1
1
1
B
1
1
1
A Number of meetings held while appointed as a Director or Member of a Committee.
B Number of meetings attended by the Director while appointed as a Director or Member of a Committee.
1 In addition to the meetings above, a Committee of the Board comprising T Poole and A Harding met on two occasions.
2 T Longstaff joined the Board on 1 June 2023.
3 K Vidgen retired from the Board on 31 May 2023.
TABLE 2 — DIRECTORS’ INTERESTS AS AT 30 JUNE 2023
DIRECTOR
T Poole
A Harding
M Bastos
R Caplan
S Lewis
T Longstaff
S Ryan
L Strambi
NUMBER OF ORDINARY SHARES
250,500
2,162,262
65,947
82,132
63,025
–
63,000
62,362
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 nine occasions.
Directors’ interests
Directors’ interests set out in Table 2 are as at
30 June 2023.
9
DIRECTORS’ REPORT Directors’ Report
(continued)
Principal activities
The principal activities of entities within the
Group during the year were:
Network
This segment manages the provision of access
to the CQCN below rail infrastructure and
operation and maintenance of the network.
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 Australia. This segment
also manages the Tarcoola-to-Darwin rail
infrastructure, the intrastate rail freight network
in South Australia, and containerised freight
services between Adelaide and Darwin.
Other
This segment includes other containerised
freight, which is not considered a separate
reportable segment, as well as other revenue
and central costs not allocated such as Board,
Managing Director & CEO, Company Secretary,
strategy and investor relations.
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 – 30 of
this report.
Dividends
A final dividend of 10.9 cents per fully paid
ordinary share (100% franked) was paid on
21 September 2022 and an interim dividend of
7.0 cents per fully paid ordinary share (100%
franked) was paid on 29 March 2023.
Sustainability performance
Aurizon is committed to managing its
operational activities and services in a
sustainable manner and has continued to
monitor performance against key sustainability
targets and objectives, which include:
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 8.0 cents per fully paid ordinary share.
The dividend will be 60% franked and is
payable on 27 September 2023.
State of affairs
The acquisition of One Rail Australia completed
on 29 July 2022. Refer to note 22 for further
information.
In the opinion of the Directors, there were no
other significant changes in the state of affairs
of the Company that occurred during the
financial year under review.
Events since the end of the
financial year
The Directors are not aware of any events or
developments which are not set out in this
report 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.
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.
› 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 improving 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 Serious Injury and Fatality Frequency
Rate (SIFRa+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.
Details on our progress against the targets and
objectives, together with the steps that are
taken by the Board to ensure there is effective
governance and oversight, are published in
Aurizon’s Sustainability Report.
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 a planning, environmental or cultural
heritage focus.
Integration of Bulk Central (formerly One
Rail Australia) presented opportunities to
streamline statutory licences (e.g. Environment
Protection Licences in South Australia
for rollingstock operation) held by both
organisations, and to commence work aligning
Cultural Heritage governance processes.
1 From a baseline of tonnes of carbon dioxide per net tonne kilometre
1010
AURIZON ANNUAL REPORT 2022–23 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.
Indemnification and insurance
of officers
The Company’s Constitution provides that the
Company may indemnify any person who is,
or has been, an officer of the Group, including
the Directors and Company Secretary, against
liabilities incurred while acting as such officers
to the maximum extent permitted by law.
The Company has entered into a Deed of
Access, Indemnity and Insurance with each of
the Company’s Directors. No Director or officer
of the Company has received benefits under
an indemnity from the Company during or
since the end of the year.
The Company has paid a premium for
insurance for Directors and 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.
In FY2023, statutory approvals obtained and
land use planning enabling Bulk growth and
expansion included:
› the Stuart Industrial Subdivision (Far North
Queensland) through the Environment
Protection and Biodiversity Conservation
Act 1999 (Cth)
› rail infrastructure expansion at the
Port of Townsville, optimising rail-ship
freight transfer
› Kwinana yard optimisation approvals
(Western Australia (WA)) pursuant to the
Planning and Development Act 2005 (WA).
Aurizon maintained compliance with stringent
noise requirements related to locomotive
engines and wheel/rail interface outlined in
both New South Wales (NSW) and South
Australia EPA rollingstock licencing. This
performance contributed to the NSW EPA
removing noise pollution studies directed
at idling, horn use, braking, bunching, and
stretching from Aurizon’s licence.
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 sixth Emissions Reduction
Fund Safeguard Mechanism (Safeguard)
compliance period (ended on 30 June 2022),
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. In March 2023,
Aurizon successfully transitioned its three
NGER facilities to a single National Transport
Facility with a production-adjusted baseline.
Aurizon had extensive engagement with
the Federal Government regarding the
Safeguard Mechanism Scheme reforms, which
commenced on 1 July 2023, and is undertaking
appropriate steps to prepare for and effectively
manage obligations associated with this
regulatory change.
Further details of the Company’s climate and
environmental performance, including climate-
related risks and assumptions, will be published
in Aurizon’s 2023 Sustainability Report, which
will be published in October 2023.
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 FY2023.
Risk management
Aurizon recognises that risk is characterised by
both threat and opportunity, and manages risk
to enhance opportunities and reduce threats
to sustain shareholder value. Aurizon fosters
a risk-aware culture through the application
of high-quality, integrated risk assessments to
support informed decision-making.
The Board is ultimately responsible for risk
management, which considers a wide range of
risks within strategic planning. Aurizon has a
commitment to effective risk management as
a key element of business success.
The Audit, Governance & Risk Management
Committee monitors management’s
performance against Aurizon’s risk
management framework, including whether
it is operating within the risk appetite set by
the Board (See Principle 7 on page 52 of this
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 23-30 of the
Directors’ Report.
11
DIRECTORS’ REPORT Directors’ Report
(continued)
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 31 – 46 and forms part of the
Directors’ Report for the financial year
ended 30 June 2023.
Rounding of amounts
The amounts contained in this report and in
the financial statements have been rounded
to the nearest $1,000,000 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
ended 30 June 2022.
Non-audit services
During the year, the Company’s auditor,
Deloitte Touche Tohmatsu (Deloitte),
performed other services in addition to its
audit responsibilities.
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 2001.
All non-audit services were subject to the
Company’s Non-Audit Services Policy and do
not undermine the general principles relating
to auditor independence set out in APES 110
Code of Ethics for Professional Accountants as
they did not involve reviewing or auditing the
auditor’s own work, acting in a management or
decision-making capacity for the Company,
or jointly sharing risks and rewards.
Ms Lewis, Chair of the Audit, Governance &
Risk Management Committee, is a former
partner of Deloitte. She has no ongoing
financial arrangements with Deloitte. No other
officer of the Company was a former Partner or
Director of Deloitte.
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
2023
$’000
142
187
Auditor’s Independence Declaration
A copy of the Auditor’s Independence
Declaration, as required under section 307C
of the Corporations Act, is set out on page 47.
The Directors’ Report is made in accordance
with a resolution of the Directors of
the Company.
Tim Poole
Chairman
14 August 2023
1212
AURIZON ANNUAL REPORT 2022–23
Directors’ Report (continued)
OPERATING AND FINANCIAL REVIEW
CONSOLIDATED RESULTS (Underlying continuing operations unless stated)
The Group’s financial performance is explained using measures that are not defined under IFRS and are therefore termed Non-IFRS measures. The
Non-IFRS financial information contained within this Directors’ Report and Notes to the Consolidated Financial Statements has not been audited in
accordance with Australian Auditing Standards. The Non-IFRS measures used to monitor Group performance are EBITDA (Statutory and Underlying),
EBITDA margin (Statutory and Underlying), EBIT (Statutory and Underlying), NPAT Underlying, Return on Invested Capital (ROIC), Net debt and Net
gearing ratios. Each of these measures is discussed in more detail on page 119. Unless otherwise noted, the Operating and Financial Review information
excludes discontinued operations being One Rail Australia Holdings.
1. Annual comparison
FINANCIAL SUMMARY
($M)
Total revenue and other income
Operating costs
Employee benefits
Energy and fuel
Track access
Consumables
Other
EBITDA
Statutory EBITDA
Depreciation and amortisation
EBIT
Statutory EBIT
Net finance costs
Income tax expense
Statutory Income tax expense
NPAT
Statutory NPAT
Statutory NPAT from discontinued operations
NPAT (group) Statutory
Earnings per share1
Statutory
Earnings per share1 (continuing and discontinued operations)
Statutory
Return on invested capital (ROIC)2
Net cash flow from operating activities
Total dividend per share (cps)
Gearing (net debt / (net debt + equity)) (group)
Net tangible assets per share ($) (group)
People (FTE)
Labour costs3 / Revenue
EBITDA BY SEGMENT
($M)
Coal
Bulk
Network
Other
Group (Continuing operations)
FY2023
3,511
FY2022
3,075
VARIANCE
14%
(977)
(438)
(110)
(539)
(19)
1,428
1,379
(666)
762
713
(230)
(165)
(159)
367
324
(48)
276
19.9
17.6
21.8
15.0
7.5%
1,015
15.0
53.7%
2.2
5,618
27.7%
FY2023
455
214
813
(54)
1,428
(853)
(255)
(78)
(419)
(3)
1,467
1,453
(592)
875
861
(125)
(225)
(223)
525
513
–
513
28.5
27.9
28.5
27.9
10.3%
1,320
21.4
40.9%
2.3
4,917
27.3%
(15%)
(72%)
(41%)
(29%)
(533%)
(3%)
(5%)
(13%)
(13%)
(17%)
(84%)
27%
29%
(30%)
(37%)
–
(46%)
(30%)
(37%)
(24%)
(46%)
(2.8ppt)
(23%)
(30%)
(12.8ppt)
(4%)
(14%)
(0.4ppt)
FY20224
541
135
801
(10)
1,467
VARIANCE
(16%)
59%
1%
(440%)
(3%)
1 Calculated on weighted average number of shares on issue – 1,841m for both FY2022 and FY2023.
2 ROIC is defined as underlying rolling twelve-month EBIT divided by the average invested capital. The average invested capital is calculated as the rolling twelve-month
average of net assets (excluding cash, borrowings, tax, derivative financial assets and liabilities).
3 FY2023 excludes $5m in redundancy costs (FY2022 excludes $13m in redundancy costs).
4 The Bulk and Other segments for FY2022 have been restated for consistency with current year presentation.
13
OPERATING AND FINANCIAL REVIEW
Directors’ Report (continued)
OPERATING AND FINANCIAL REVIEW
Group performance overview
Group EBITDA decreased $39m or 3% with the uplift in Bulk and Network offset by reductions in Coal and Other. The inclusion of Bulk Central was the
largest contributor to the increase in Bulk EBITDA with the acquisition completed in July 2022. Network volumes were below the regulatory forecast
by 19mt resulting in an under-recovery of allowable revenue, triggering regulatory revenue protection mechanisms including $76m of Take-or-Pay
revenue. When combined with a WIRP termination fee, Network EBITDA was 1% higher. For Coal, lower volumes (5%) from the prolonged wet weather,
along with higher Network Take-or-Pay (non-pass through) expense was the driver of lower EBITDA. Other EBITDA was lower due to the prior period
divestment of the Rockhampton workshops and the recognition of a $15m long service leave provision adjustment.
Revenue increased by 14%, driven by Bulk and Network, more than offsetting lower revenue in Coal and Other.
Operating costs increased by $475m (30%), primarily due to the inclusion of Bulk Central. Costs also increased due to higher fuel and energy (largely
pass-through), more than offsetting transformation benefits.
EBIT declined by $113m (13%) primarily due to increased depreciation ($74m or 13%) with the inclusion of Bulk Central, higher capital expenditure in
Bulk and Containerised Freight to support growth and increased ballast and rail renewals in Network, and lower EBITDA.
ROIC was 2.8ppts lower at 7.5% due to lower EBIT and higher invested capital.
Reconciliation to statutory earnings
Underlying earnings is a non-statutory measure and is the primary reporting measure used by management and the Group’s chief operating
decision-making bodies for managing and assessing the financial performance of the business. Underlying earnings is derived by adjusting statutory
earnings for significant items as noted in the following table:
($M)
Continuing operations
Underlying EBITDA
Depreciation and amortisation
Underlying EBIT
Continuing operations significant items — acquisition costs
Statutory EBIT
Net finance costs
Statutory Profit before tax
Income tax expense
Statutory NPAT — Continuing operations
Continuing operations significant items, net of tax
Underlying NPAT — Continuing operations
Statutory NPAT — Discontinued operations
Discontinued operations significant items, net of tax
Underlying NPAT — Discontinued operations
Statutory NPAT — Continuing and discontinued operations
Underlying NPAT — Continuing and discontinued operations
FY2023
FY2022
1,428
(666)
762
(49)
713
(230)
483
(159)
324
43
367
(48)
82
34
276
401
1,467
(592)
875
(14)
861
(125)
736
(223)
513
12
525
–
–
–
513
525
Acquisition costs for One Rail Australia of $49m ($43m post tax) includes landholder duty, advisory fees and other costs. This amount has been
expensed to profit or loss during the year and classified in other expenses. The loss from discontinued operations after tax of $48m for the year
includes underlying net profit after tax of $34m, adjusted for significant items including impairment expense of $57m ($75m pre-tax), sale and
divestment costs $23m ($26m pre-tax) and loss on disposal $2m ($2m pre-tax).
1414
AURIZON ANNUAL REPORT 2022–23 2. Other financial information
BALANCE SHEET SUMMARY
($M)
Current assets
Property, plant and equipment (PP&E)
Other 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
Current assets increased by $333m largely due to:
30 JUNE 2023
30 JUNE 2022
1,193
9,945
541
11,679
5,142
744
1,440
7,326
4,353
53.7%
54.4%
860
8,416
400
9,676
3,221
713
1,330
5,264
4,412
40.9%
42.5%
› increase in trade and other receivables predominantly due to Network Take-or-Pay, the Bulk Central acquisition and the deferred consideration from
the sale of One Rail Australia Holdings Limited (ORAH) (receivable in February 2024)
› increase in inventories of $49m predominately due to the Bulk Central acquisition and above rail maintenance and renewal programs
› a current tax receivable position of $104m due to the FY2023 instalments exceeding expected tax payable, to be received in 2HFY2024 following
lodgement of the Group Income Tax Return
› partly offset by a reduction of $80m in cash and cash equivalents and a reduction in derivative financial instruments due to the maturity of the
interest rate swaps in June 2023 in line with the UT5 WACC reset.
Property, plant and equipment increased by $1,529m predominately due to the Bulk Central acquisition. Other non-current assets increased by $141m,
including a $81m favourable movement on derivative financial instruments predominately due to floating interest on borrowings being swapped for
fixed interest payments.
Total borrowings increased by $1,921m due to the acquisition of One Rail Australia and funding for capital purchases to support Bulk and Containerised
Freight growth.
Other current liabilities, excluding borrowings increased by $31m largely due to an increase in trade and other payables of $68m due to an increase in
capital accruals as a result of the Bulk Central acquisition and capital purchases and an increase in other current liabilities of $26m including contract
and lease liabilities. This was partly offset by a decrease in current tax liabilities of $69m due to the recognition of a current tax receivable in FY2023.
Other non-current liabilities increased by $110m largely due to a $143m increase in net deferred tax liabilities due to accelerated fixed asset adjustments
for the Bulk Central acquisition, offset by a $14m favourable movement on derivative financial instruments and a reduction of $29m for the
amortisation of contract liabilities.
Gearing (net debt / (net debt + equity)) was 53.7% as at 30 June 2023 reflecting higher borrowings.
OPERATING AND FINANCIAL REVIEW
15
Directors’ Report (continued)
OPERATING AND FINANCIAL REVIEW
CASH FLOW SUMMARY
($M)
Statutory EBITDA (Continuing operations)
Working capital and other movements
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
Distributions from joint ventures and proceeds from sale of PP&E
Net cash outflow from investing activities from Continuing operations
Net investing cash flows from Discontinued operations
Net investing cash flows
Cash flows from financing activities
Net proceeds/(repayment) from borrowings
Payment of transaction costs related to borrowings
Payment for share buy-back, share-based payments and transaction costs
Interest paid
Dividends paid to Company shareholders
Principal elements of lease payments
Net cash inflow/(outflow) from financing activities from Continuing operations
Net financing cash flows from Discontinued operations
Net financing cash flows
Net increase in cash from Continuing operations
Net decrease in cash from Discontinued operations
Free Cash Flow (FCF)5 from Continuing operations
FY2023
1,379
(183)
13
1,209
3
(204)
7
1,015
48
1,063
(762)
(1,434)
7
(2,189)
(662)
(2,851)
1,850
(15)
(7)
(210)
(329)
(20)
1,269
439
1,708
95
(175)
297
FY2022
1,453
(58)
2
1,397
2
(86)
7
1,320
–
1,320
(551)
(17)
40
(528)
–
(528)
(164)
–
–
(128)
(459)
(17)
(768)
–
(768)
24
–
765
Cash flow movements
Net cash inflow from operating activities from continuing operations decreased by $305m (23%) to $1,015m largely due to:
› reduction in statutory EBITDA and unfavourable working capital. This predominately relates to an increase in trade and other receivables due to
higher revenue and Take-or-Pay accruals for FY2023
› increase in income taxes paid in comparison to the prior year which included a tax benefit recognised on the disposal of shares held in Aquila.
Net cash outflow from investing activities from continuing operations increased by $1,661m (315%) to $2,189m, predominately due to the acquisition of
One Rail Australia, an increase in shareholding for the Ox Mountain joint venture and an increase in capital expenditure.
Net cash inflow from financing activities from continuing operations increased by $2,037m to $1,269m due to the net drawdown of borrowings to fund
the acquisition of One Rail Australia and greater capital expenditure in comparison to the prior year which included a net repayment of borrowings and
a reduction in dividends paid. This was partly offset by interest paid due to the increased borrowings.
5 Free Cash Flow defined as net cash flow from operating activities (less non-growth capex) and interest paid. It excludes growth capex of $203m, the acquisition of
One Rail Australia ($1,404m), cash costs associated with the acquisition ($49m pre-tax) and the purchase of an additional investment in Ox Mountain ($30m).
1616
AURIZON ANNUAL REPORT 2022–23 Discontinued operations
The acquisition of One Rail Australia on
29 July 2022 comprised two business
segments, including East Coast Rail, a coal
haulage business in New South Wales (NSW)
and Queensland (QLD).
The investments held in the East Coast Rail
entities were transferred to ORAH (formerly
NHK Pty Ltd), a subsidiary of the Company, on
29 July 2022 and classified as a discontinued
operation held for sale. The Company signed
a binding agreement with Magnetic Rail
Group Pty Ltd (Magnetic) on 16 December
2022 to sell 100% of the shares of ORAH and
the sale completed on 17 February 2023 for
consideration of $438m including completion
adjustments. The total consideration includes
$313m cash proceeds received on completion
of the sale and $125m cash proceeds receivable
in February 2024. On completion of the sale,
Magnetic assumed ORAH’s existing borrowings
of $474m.
Dividend
The Board has declared a final dividend for
FY2023 of 8.0cps (60% franked) based on a
payout ratio of 75% in respect of underlying
NPAT from continuing operations.
The relevant final dividend dates are:
› 28 August 2023 — ex-dividend date
› 29 August 2023 — record date
› 27 September 2023 — payment date.
Tax
Underlying income tax expense from
continuing operations for FY2023 was $165m.
Statutory income tax expense for continuing
operations was $159m with an income tax
benefit of $6m from the payment of acquisition
costs which are expected to be tax deductible
and have been treated as a significant item.
The Group statutory effective tax rate was
35.6%, which is more than 30% due to
non-deductible landholder duty arising in
respect of the acquisition of Bulk Central,
non-deductible transaction costs in respect of
the disposal of ORAH and a non-deductible
impairment in discontinued operations.
The Group statutory cash tax rate was 11.1%,
which is less than 30% due to accelerated
tax depreciation deductions from Bulk
Central, immediate tax deduction of eligible
capital expenditure under the temporary full
expensing measure, and the treatment of Take-
or-Pay income as not derived for tax purposes
at 30 June 2023. Take-or-Pay will be assessable
in FY2024 once invoiced to customers. The
underlying effective tax rate6 for FY2024 is
expected to be in the range of 29-31% and
the underlying cash tax rate7 is expected to
remain approximately 25% for the short to
medium term.
Aurizon publishes additional tax information
in accordance with the voluntary Tax
Transparency Code in its Sustainability Report.
See the Sustainability section of the Aurizon
website for further detail.
Funding
The Group continues to be committed
to diversifying its debt investor base and
increasing average debt tenor.
Aurizon Network funding activity
during FY2023:
› A$100m (in total) of 10 and 12 year private
placements issued in December 2022 and
February 2023
› A$1,090m re-financing of existing bilateral
bank debt facilities completed in January
2023 with maturities lengthened across
FY2026 to FY2028
› A$306m of United States Private Placement
(USPP) Notes issued in June 2023 across
tenors of 10 and 12 years (debut issuance).
Aurizon Operations funding activity
during FY2023:
› A$1,450m of new bank debt facilities were
established as part of the One Rail Australia
acquisition in July 2022, of which, $1,050m
was drawn
› A$465m re-financing of existing bilateral
bank debt facilities completed in June 2023,
including $50m which became effective July
2023 with maturities lengthened to FY2027
› A$300m of bank debt repaid, sourced as
part of the One Rail Australia acquisition
› A$503m of USPP Notes issued in July 2023
across tenors of 7, 10, 11 and 12 years, with
funds used to repay debt sourced as part
of the One Rail Australia acquisition
(debut issuance).
In respect of FY2023:
› weighted average debt maturity tenor was
3.6 years as at 30 June 2023 which compares
to 3.4 years in FY2022
› Group interest cost on drawn debt was 4.1%
(FY2022: 3.4%)
› Available liquidity (undrawn facilities + cash)
as at 30 June 2023 was $1,244m (FY2022:
$1,622m)
› Group gearing (net debt / (net debt +
equity)) as at 30 June 2023 was 53.7%
(FY2022: 40.9%)
› Aurizon Network’s gearing (net debt /
Regulatory Asset Base (excluding Access
Facilitation Deeds)) as at 30 June 2023 was
63.8% (FY2022: 53.7%)
› Aurizon Operations’ gearing (net debt /
(net debt + equity)) as at 30 June 2023 was
29.8% (FY2022: 5.6%)
› Aurizon Operations’ and Aurizon Network’s
credit ratings have each been maintained at
BBB+/Baa1.
6 Underlying effective tax rate = income tax expense excluding the impact of significant items / underlying consolidated profit before tax
7 Underlying cash tax rate = cash tax payable excluding the impact of significant items / underlying consolidated profit before tax
17
OPERATING AND FINANCIAL REVIEW Directors’ Report (continued)
OPERATING AND FINANCIAL REVIEW
BUSINESS UNIT REVIEW
COAL
Aurizon’s Coal business provides a critical service to Australia’s export coal industry, the nation’s largest source of export revenue in FY2023.
Aurizon hauls around half of Australia’s export coal volume. Coal hauled is split approximately evenly between metallurgical coal and thermal coal,
with demand linked to Asian steel production and energy generation, respectively.
Aurizon transports coal from mines in the Newlands, Goonyella, Blackwater, Moura and West Moreton systems in QLD and the Hunter Valley and
Illawarra coal systems in NSW, to domestic customers and coal export terminals.
FINANCIAL SUMMARY
($M)
Revenue
Above Rail
Track Access
Other
Total revenue
Track Access costs
Operating costs
EBITDA
Depreciation and amortisation
EBIT
METRICS
Total tonnes hauled (m)
CQCN
NSW & SEQ
Contract utilisation
Total NTK (b)
CQCN
NSW & SEQ
Average haul length (km)
Total revenue / NTK ($/'000 NTK)
Above Rail Revenue / NTK ($/'000 NTK)
Operating Ratio
Opex / NTK ($/'000 NTK)
Opex / NTK (excluding access costs) ($/'000 NTK)
Locomotive productivity (‘000 NTK / Active locomotive day)
Active locomotives (as at 30 June)
Wagon productivity (‘000 NTK / Active wagon day)
Active wagons (as at 30 June)
Payload (tonnes)
FY2023
FY2022
VARIANCE
1,175
350
6
1,531
(400)
(676)
455
(204)
251
FY2023
185.0
133.6
51.4
80%
42.2
33.0
9.2
228
36.3
27.8
83.6%
30.3
20.9
373.2
311
14.2
8,201
7,859
1,195
360
4
1,559
(376)
(642)
541
(208)
333
FY2022
194.0
141.1
52.9
84%
45.2
35.3
9.9
233
34.5
26.4
78.6%
27.1
18.8
389.1
314
14.7
8,285
7,938
(2%)
(3%)
50%
(2%)
(6%)
(5%)
(16%)
2%
(25%)
VARIANCE
(5%)
(5%)
(3%)
(4ppt)
(7%)
(7%)
(7%)
(2%)
5%
5%
(5.0ppt)
(12%)
(11%)
(4%)
(1%)
(3%)
(1%)
(1%)
Coal performance overview
Coal EBITDA decreased $86m (16%) to $455m primarily due to a decrease in volumes, higher Network Take-or-Pay (non-pass through) expense and costs
due to wage and materials escalation.
Volumes decreased 9.0mt (5%) to 185.0mt with reductions in the Central Queensland Coal Network (CQCN), NSW and South-East Queensland (SEQ).
› Across the CQCN, volumes decreased by 7.5mt (5%) to 133.6mt with performance impacted by a range of factors including prolonged wet weather,
numerous incidents including a major third-party derailment, mine production issues and labour availability. This was partly offset by increased
railings from the Anglo contract.
› In NSW and SEQ, volumes decreased by 1.5mt (3%) to 51.4mt due to end of contracts for Yancoal Moolarben and New Acland in addition to
significant wet weather in 1HFY2023, partly offset by improved operational performance in 2HFY2023.
1818
AURIZON ANNUAL REPORT 2022–23 Coal revenue decreased by $28m (2%) to $1,531m largely due to the reduction in volumes. Revenue yield improved due to CPI-linked price escalation and
higher fuel revenue from higher prices. Above Rail revenue per NTK increased by 5% driven by CPI-linked price escalation, partly offset by the contract
cessations detailed above and the impact of a contract rollover.
Total operating costs increased by $58m (6%) to $1,076m largely due to Network Take-or-Pay (non-pass through), higher fuel costs and higher wage and
materials escalation. The major drivers of these movements are:
› track access costs increased by $24m (6%) due to Network Take-or-Pay (non-pass through) and higher CQCN electric access costs partly offset by
lower volumes
› other operating costs increased $34m (5%) primarily due to higher fuel relating to higher prices in addition to higher traincrew and maintenance
costs impacted by higher inflation on labour and materials.
Depreciation decreased $4m (2%), resulting in an EBIT decrease of 25% against the prior year.
Operationally, key productivity metrics were lower compared to the prior year due to lower volumes. Active locomotives decreased with the transfer of
units to support Bulk growth.
Contract update
› 10-year contract with Malabar for the haulage of coal from the Maxwell Underground Mine in the Upper Hunter Valley with the first service in June 2023.
› 5-year contract with New Wilkie Energy for the haulage of coal from the New Wilkie Mine in SEQ commencing in FY2024.
› BMA Rail Maintenance agreement commenced on 1 July 2023.
› 5-year contract (signed in August 2023) with SIMEC Mining for the haulage of coal from the Tahmoor Mine in the Illawarra coal region, commencing
in Q1FY2024.
BULK
Aurizon’s Bulk business provides integrated supply chain services, including rail and road transportation, port services and material handling for a
range of mining, metal, industrial and agricultural customers throughout Australia. Aurizon’s Bulk business also manages the Tarcoola-to-Darwin rail
infrastructure, the intrastate rail freight network in South Australia and containerised freight services between Adelaide and Darwin.
FINANCIAL SUMMARY
($M)
Revenue
Freight Transport
Other
Total revenue
Operating costs
EBITDA
Depreciation and amortisation
EBIT
Total tonnes hauled (m)
Operating Ratio
FY2023
FY20228
VARIANCE
1,035
28
1,063
(849)
214
(108)
106
68.2
90.0%
672
28
700
(565)
135
(39)
96
50.8
86.3%
54%
–
52%
(50%)
59%
(177%)
10%
34%
(3.7ppt)
Bulk performance overview
Bulk EBITDA increased by $79m (59%) to $214m due to the acquisition of Bulk Central on 29 July 2022, higher grain and iron ore volumes and growth
from new contracts. Revenue increased $363m (52%) to $1,063m with:
› the acquisition of Bulk Central on 29 July 2022
› stronger grain volumes nationally, including in WA with the CBH contract which commenced during 1HFY2022
› the commencement of the Centrex contract in QLD in 1HFY2023
› the commencement of a long-term haulage contract with Tronox in 2HFY2022
› improved volumes from existing and new customers on the Kalgoorlie Freighter.
This was partly offset by the loss of the QLD livestock contract in the prior year and significant weather and derailment events in QLD and NSW.
Operating costs increased $284m (50%) with:
› the acquisition of Bulk Central on 29 July 2022
› increased costs to support contract wins in grain (including ramp up costs for traincrew, rollingstock and facilities)
› increased costs to support the new Tronox contract from 2HFY2022
› increased costs from four significant derailment events
› partly offset by ongoing cost benefits from the Bulk transformation program and lower costs from the loss of the QLD livestock contract.
Depreciation increased $69m (177%) due to the acquisition of Bulk Central and increased capital expenditure supporting growth.
8 The Bulk and Other segments for FY2022 have been restated for consistency with current year presentation.
19
OPERATING AND FINANCIAL REVIEW Directors’ Report (continued)
OPERATING AND FINANCIAL REVIEW
Contract update
The contract wins detailed below have terms with a range of one to six years in length:
› Northparkes — contract for the port services of copper concentrate in NSW
› Aurelia Peak — contract for road, rail and stevedoring of base metals in NSW
› IPL — contract for road, rail and stevedoring of sulphur in QLD
› Chinova — contract for road, rail and stevedoring of copper concentrate in QLD
› Seaway — contract for rail of grain and cotton in QLD
› Centrex — contract for road, rail and stevedoring of phosphate rock in north QLD
› Aeris Resources — contract for road, rail and stevedoring for base metals in NSW
› ANL — contract for stevedoring in Port of Gladstone
Contract extensions: GrainCorp (grain, QLD), Thallon (grain, QLD), Cargill (grain, QLD), BHP: Copper South Australia (copper, SA), SIMEC (iron ore, SA),
AOL (iron ore, SA), Woolworths (containerised freight, SA/NT), BP (fuel, WA).
NETWORK
Network refers to the business of Aurizon Network Pty Ltd (Network) which operates the 2,670km CQCN. The open access network is the largest coal
rail network in Australia, connecting multiple customers from more than 40 mines to five export terminals located at three ports. The CQCN includes
four major coal systems (Moura, Blackwater, Goonyella and Newlands) and a connecting link, the Goonyella to Abbot Point Expansion (GAPE).
FINANCIAL SUMMARY
($M)
Revenue
Track Access
Services and other
Total revenue
Energy and fuel
Operating costs
EBITDA
Depreciation and amortisation
EBIT
METRICS
Tonnes (m)
NTK (b)
Operating Ratio
Maintenance / NTK ($/'000 NTK)
Opex / NTK ($/'000 NTK)
Cycle Velocity (km/hr)
System Availability
Average haul length (km)
FY2023
FY2022
VARIANCE
1,255
82
1,337
(215)
(309)
813
(351)
462
1,134
59
1,193
(108)
(284)
801
(345)
456
11%
39%
12%
(99%)
(9%)
1%
(2%)
1%
FY2023
FY2022
VARIANCE
207.6
50.4
65.4%
2.8
17.4
21.5
83.4%
243
206.5
51.9
61.8%
2.6
14.2
22.8
82.6%
251
1%
(3%)
(3.6ppt)
(8%)
(23%)
(6%)
0.8ppt
(3%)
Network performance overview
Network EBITDA increased $12m (1%) to $813m in FY2023, with increased revenue of $144m (12%) and increased operating, energy and fuel costs of
$132m (34%).
Regulatory access revenue has been accounted for based on actual railed tonnes using tariffs approved by the Queensland Competition Authority
(QCA) on 26 May 2022 and the subsequent Electric Energy Charge Draft Amending Access Undertaking (DAAU) approved on 16 November 2022 and
Minerva DAAU approved on 16 February 2023.
Total Access Revenue increased by $121m (11%) with the main drivers being:
› Electric Energy Charge (EC) was $102m higher in FY2023 due to the EC tariff increasing from $1.11 to $2.82 per EGTK’000
› Allowable Revenue increased by $34m primarily due to the capital underspends in FY2019 and FY2020 that reduced Allowable Revenue in FY2022
› reduced volumes compared to the regulatory forecast resulted in an under-recovery after Take-or-Pay (excluding GAPE) of $21m in FY2023
(Access Revenue in FY2023 included the recognition of $76m Take-or-Pay revenue). This compares to an under-recovery of $39m (including
$33m of Take-or-Pay) in FY2022
› net unfavourable Revenue Cap movements of $6m relating to FY2020 and FY2021
2020
AURIZON ANNUAL REPORT 2022–23 › GAPE revenue was $9m lower primarily
› On 23 March 2023, the QCA approved
amendments to UT5 to allow for further
studies on Transitional Arrangements,
recovery of reasonable costs incurred by
Network in undertaking those studies and
the staged implementation of any initiatives.
› The QCA published the IE’s Annual Capacity
Assessment Report 2023 (ACAR) on 29 June
2023. 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 ~5%
to ~98%
• Blackwater System has improved by ~8%
to ~104%
• GAPE System is slightly lower by 1% to 63%;
• Moura System has improved by ~6%
to ~99%
• Newlands System has improved by 4%
to 70%.
Report Date and Weighted Average Cost of
Capital (WACC)
› The QCA-approved reference tariffs assumed
an uplift in the WACC to 6.3% would be
effected from 1 March 2020. As a result of
the delay in the ICAR being published, there
was an over-collection of access charges
(the difference between 5.9% and 6.3%) in
FY2022, which will be returned to Access
Holders as part of the FY2022 Revenue
Adjustment Amount, reflected in FY2024
Access Tariffs.
› On 15 December 2022, the QCA rejected
the FY2022 Revenue Adjustment Amount
submission, taking the view that the WACC
uplift did not apply from 12 November 2021
but instead from 14 March 2022 (the date
upon which Network submitted its Detailed
Report in response to the ICAR).
› Network considers it met the requirements
of the Report Date when it notified the Chair
of the RIG of its Preliminary Response to the
ICAR on 12 November 2021, resulting in an
increase in Network’s WACC from 5.9% to
6.3%. The WACC adjustment associated with
a 14 March 2022 Report Date would see an
additional return to Access holders of $9m in
FY2024 tariffs.
due to the depreciating asset value and the
Transfer Fee collected in FY2021 that is being
returned via FY2023 Access Charges
› WIRP Fees were $10m lower due to FY2022
including $30m of historical fees relating to
FY2016 – FY2021, partially offset by a $19m
termination fee included in FY2023
› other Access Revenue was $8m lower.
Services and other revenue was $23m (39%)
higher in FY2023 primarily due to higher
external construction revenue.
Total operating costs increased by $132m
(34%) with the main drivers being:
› electric traction charges increased $107m
(100%) (offset in Access Revenue) due to
higher wholesale energy prices and higher
connection costs
› higher external construction costs
associated with the higher revenue and
higher maintenance costs partly offset by
operational cost savings.
Depreciation increased $6m (2%) primarily
due to historical rail renewal and ballast
undercutting investment.
Network’s 2022-2023 Regulatory Asset Base
(RAB) roll-forward is estimated to be $6.2bn9
(including Access Facilitation Deeds of $0.3bn)
as at 1 July 2023.
Regulation update
Network continues to implement the 2017
Access Undertaking (UT5) which was approved
by the QCA on 19 December 2019. The status
of key aspects of UT5 are summarised below.
Capacity Assessments
› The QCA published the Independent Expert’s
(IE) Initial Capacity Assessment Report
(ICAR) on 1 November 2021 which identified
Existing Capacity Deficits (ECD) within each
Coal System.
› 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 ECD identified in each Coal
System. Network provided a Detailed Report
in response to the ICAR on 14 March 2022.
› On 16 November 2022, the QCA made
an initial determination on Transitional
Arrangements proposed by Network to be
implemented, the most notable being the
installation of remote-control signalling in the
Newlands System which the IE subsequently
assessed as being prudent and efficient.
9 Includes deferred capital
› To allow any dependent regulatory processes
to continue to progress, on 20 January 2023,
Network submitted an amended FY2022
Revenue Adjustment Amounts submission
in compliance with the QCA’s decision and
reserved its rights in relation to the proper
interpretation of the Report Date. On the
same day, Network lodged an application
with the Supreme Court of Queensland
to appeal the QCA decision, seeking a
declaration from the court about the proper
interpretation of the definition of the Report
Date. The Supreme Court hearing took place
on 14 June 2023.
› On 28 July 2023, the Supreme Court
dismissed Network’s application and
decided that the Report Date is 14 March
2022. Network is considering the judgement
and its next steps. At this time, there is no
requirement for any further adjustment to
FY2024 tariffs.
Performance Rebate
› The Performance Rebate mechanism in UT5
came into effect on the ‘Report Date’. The
Performance Rebate is payable if an End
User does not receive its contracted Train
Service Entitlement due to a performance
breach by Network as determined by the IE
under UT5.
› In accordance with the terms of UT5,
stakeholders requested the QCA undertake
a review of the Performance Rebate
mechanism and more specifically whether
the Rebate Objectives set out in UT5 had
been met in a material way.
› On 23 March 2023, the QCA issued a Draft
Decision recommending that no changes be
made to the UT5 Rebate mechanism. This
Draft Decision resulted in Network engaging
with stakeholders, which concluded with
Network responding to the Draft Decision
with voluntary UT5 amendments agreed with
stakeholders relating to further information
gathering processes to support the IE’s
annual rebate calculation.
› Due to Network’s response to the Draft
Decision, on 29 June 2023 the QCA provided
its Final Decision determining that the
Performance Rebate mechanism had not met
the defined Rebate Objectives in a material
way and that drafting changes were required
to UT5 in the form provided to the QCA
by Network.
› Network responded to the Final Decision
on 30 June 2023 with a DAAU with the
stakeholder agreed amendments.
21
OPERATING AND FINANCIAL REVIEW Directors’ Report (continued)
OPERATING AND FINANCIAL REVIEW
Other performance overview
EBITDA reduced by $44m due to the divestment of Rockhampton
workshops in the prior year and the recognition of a $15m long service
leave provision adjustment, the latter as a result of a legislative change
relating to a period prior to the Initial Public Offering. Other also includes
the Containerised Freight business which was established in 2HFY2023
and commenced railing under the Team Global Express contract in
April 2023.
OPERATIONAL EFFICIENCY IMPROVEMENT UPDATE
As part of Aurizon’s Strategy In Action, particularly the Optimise and
Excel levers, Aurizon continues to focus on operational efficiency to
continuously improve its operational performance, asset efficiency
and cost competitiveness. Through the Optimise and Excel levers,
Aurizon is making targeted investments in technology on the journey
to continuous improvement.
Outlined below are the major initiatives currently being pursued in
the business.
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. The technology was
deployed on all electric trainsets (and associated track infrastructure) in
Blackwater (Callemondah to Bluff) and the first TrainGuard operational
service commenced in December 2022. Goonyella system to follow. The
first TrainGuard driver-only operational service successfully commenced
on 3 July 2023 and the ramp up of driver-only services are still underway.
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. CQCN
Siemens electric locomotive fleet and the EMD CQCN diesel fleet have
been completed. TrainHealth has expanded to the NSW Coal system
and is leveraging the technology solutions delivered in CQCN with all
installation completed. In addition to the expansion of TrainHealth across
the Coal business unit, WA Bulk have invested in TrainHealth with the
6000 class equivalent fleet installation completed.
UT5 Reset Values
› UT5 provides for certain components of allowable revenue and WACC
(predominately risk-free rate, debt risk premium, inflation and the tax
allowance) (together the Reset Values) to be reset on 1 July 2023 to take
account of prevailing market conditions at that time. The reset process
involves the establishment of:
• Preliminary Reset Values in FY2023 to form the basis of tariffs
that will apply in FY2024. On 25 May 2023, the QCA approved
Network’s preliminary Reset Values.
• Final Reset Values will be determined in FY2024. On 31 July 2023,
Network submitted final Reset Values to the QCA for approval.
› Preliminary Allowable Revenues and Reference Tariffs for FY2024
will be based on the QCA’s approved preliminary WACC of 8.18% and
opening FY2024 RAB Value of $6.2bn10 (including Access Facilitation
Deeds in respect of mine specific infrastructure of $0.3bn).
› Network’s final Reset Values submission proposed a final reset WACC
of 8.51% based on a risk-free rate of 3.87% and a debt risk premium
of 2.48%. Network is providing additional information to the QCA
in support of its submission prior to it being published. Network’s
proposed final Reset Values remain subject to approval by the QCA,
following a period of stakeholder consultation.
› While the final Reset Values will take effect from 1 July 2023, FY2024
Allowable Revenues and Tariffs will not be amended during that year
to reflect the QCA’s decision on the final Reset Values. The difference
between the preliminary and final Reset Allowable Revenues for
FY2024 (1 July 2023 to 30 June 2024) will be reconciled through the
usual Revenue Adjustment Amounts (Revenue Cap) process in two
years’ time and will be incorporated into FY2026 Reference Tariffs.
Operational update
During FY2023:
› CQCN volumes increased by 1% to 207.6mt. Volumes were impacted
by prolonged periods of wet weather, mine specific maintenance and
production issues, and a derailment at Marmor in the Blackwater system
› wet weather, access to skilled labour and rising sub-contractor costs
impacted maintenance and asset renewal expenditure
› employees covered by the Aurizon Infrastructure Enterprise Agreement
(QLD) voted in favour of the proposed terms which were subsequently
approved by Fair Work Australia on 28 July 2023
› total System Availability was 83.4% compared to 82.6% in the prior year
› cancellations due to the Network rail infrastructure increased from
2.1% to 2.3%
› cycle velocity declined marginally from 22.8km/h to 21.5km/h.
OTHER
Other includes other containerised freight, which is not considered a
separate reportable segment, as well as other revenue and central costs
not allocated such as the Board, Managing Director & CEO, Company
Secretary, strategy and investor relations.
($M)
Total revenue
Operating costs
EBITDA
Depreciation and amortisation
EBIT
FY2023
FY202211
VARIANCE
19
(73)
(54)
(3)
(57)
36
(46)
(10)
-
(10)
(47%)
(59%)
(440%)
-
(470%)
10 Includes deferred capital.
11 The Bulk and Other segments for FY2022 have been restated for consistency with current year presentation.
2222
AURIZON ANNUAL REPORT 2022–23 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.
23
OPERATING AND FINANCIAL REVIEW
Directors’ Report (continued)
OPERATING AND FINANCIAL REVIEW
RISK
RISK DESCRIPTION AND POTENTIAL IMPACTS
IMPACTS AND
INFLUENCE
MANAGEMENT RESPONSE
OPERATIONAL
RISK
Major Hazard,
Serious Injury
or Fatality
Cyber Security
and Technology
Reliance
Severe Weather
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, consequential safety,
legal or regulatory action or other adverse consequences.
Aurizon owns and maintains rail track infrastructure in
addition to other assets (rail and non-rail), maintenance
facilities, 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. These extreme
weather events also impact our customers’ ability to
produce. Damage caused by destructive weather events
could cause safety, health and environmental risks and
operational disruption, increasing operational costs or
driving financial losses, in addition to a reduction in
demand for our services.
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
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 29 for further information
on safety.
Cyber security controls including
identification, prevention, detection, and
recovery controls are assessed and tested.
Policies, frameworks, tools, and training
are also assessed to assist management’s
awareness of this risk. Aurizon participates
in cross-industry collaboration and
provides the threat intelligence to improve
defences based on emerging threats
and real-time incident data. Aurizon has
developed a cyber security transformation
program to continue the ongoing
enhancement of its protective cyber
security capabilities.
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.
2424
AURIZON ANNUAL REPORT 2022–23 IMPACTS AND
INFLUENCE
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
MANAGEMENT RESPONSE
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 where possible.
Our key focus remains on demand
forecasting, refreshing inventory
management approaches and
strengthening inventory levels, and
monitoring of emerging supply chain risks.
In December 2022, Aurizon published
its third 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 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.
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,
› continue engagement 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
› develop and implement an ACCU
purchasing strategy.
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, also refer to
our annual Sustainability Report.
RISK
Supply Chain
Reliability
People and
Capability
Greenhouse Gas
Emissions, Metrics
and Targets
RISK DESCRIPTION AND POTENTIAL IMPACTS
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.
Ongoing events have increased supply chain complexity
and challenged reliability, including the global pandemic,
evolving international trade relations tensions, cyber
security risks, 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.
Aurizon’s workforce comprises individuals with a wide
array of specialist skills, technical knowledge and subject
matter expertise. An inability to plan, 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, impairment of our strategic growth and
other adverse impacts.
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 reforms
which commenced on 1 July 2023, Aurizon is required to
maintain its Scope 1 emissions below an annually declining
regulated baseline. Failure to do so will expose Aurizon
to direct carbon costs and/or regulatory action. Due to
current technology constraints, Aurizon will be required
to purchase and retire Australian Carbon Credit Units
(ACCUs) to meet its compliance obligations from FY2024.
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 availability and efficiency of renewable energy to
power the transition
› reliance on third parties, including the implementation
of government policy, to facilitate the transition
› costs such as decarbonisation technologies, energy
sources or ACCUs
› 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.
25
OPERATING AND FINANCIAL REVIEW Directors’ Report (continued)
OPERATING AND FINANCIAL REVIEW
RISK
RISK DESCRIPTION AND POTENTIAL IMPACTS
IMPACTS AND
INFLUENCE
Regulation and
Compliance
MARKET RISK
Competition
Counterparty
Evolving
Commodity
Demand
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.
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.
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
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
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.
To reduce exposure to competition risk,
management is focused on the delivery of
high-quality service to support
re-contracting 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.
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.
2626
AURIZON ANNUAL REPORT 2022–23 RISK
RISK DESCRIPTION AND POTENTIAL IMPACTS
IMPACTS AND
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.
These risks could impact the financial viability of our
current clients, restrict future mining investments, lead
to increasing costs of finance and insurance, reduction in
credit rating 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 Asia. Ongoing
geopolitical unrest, 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
Macroeconomic
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
MANAGEMENT RESPONSE
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 also
refer to our 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.
Aurizon sources funding from both bank
and debt capital markets (AMTN, EMTN,
USPP) giving it access to a diversified
investor base. The ability to raise capital
in a variety of markets allows Aurizon
flexibility in its approach to refinancing
activities and future capital raisings.
Hedging strategies are employed to
manage some financial exposures,
including interest rate and foreign
exchange risk. Aurizon employs a duration
based hedging strategy which is annually
refreshed and presented to the Board.
Escalation clauses in haulage contracts
provide some protection against
increasing costs through inflation
recovery, and counterparty credit
monitoring and supply chain resilience
reviews consider financial viability to
manage credit risk.
Please refer to Note 18 of the Financial
Report which sets out Aurizon’s approach
to Financial Risk Management.
27
OPERATING AND FINANCIAL REVIEW Directors’ Report (continued)
OPERATING AND FINANCIAL REVIEW
RISK
RISK DESCRIPTION AND POTENTIAL IMPACTS
IMPACTS AND
INFLUENCE
MANAGEMENT RESPONSE
STRATEGIC RISK
Delivering Bulk
Growth
Expansion of
Containerised
Freight
Fleet Strategy
Aurizon aspires to materially increase earnings from the
Bulk business unit and therefore faces the risk of failing to
achieve this growth. This could occur due to an inability to
retain and extend existing contracts, identify and execute
suitable growth opportunities, a lack of available resources
and funding or other associated factors.
Materialisation of these risks could result in financial
losses, stranded assets, negative investor sentiment,
reputational damage and failure to achieve
strategic objectives.
Aurizon recently expanded services as part of a
containerised freight service offering, leveraging existing
national footprint and expertise. As this service offering
expands, Aurizon is exposed to risk, including an inability
to deliver suitable growth opportunities to capitalise on
the demand for services, as a result of ineffective planning,
insufficient talent, resources and assets.
Materialisation of these risks could result in financial
losses, stranded assets, negative investor sentiment,
reputational damage and failure to achieve
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.
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
LIMITED
INFLUENCE
SIGNIFICANT
INFLUENCE
A clear strategy has been developed to
achieve this aspiration 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.
Aurizon has formulated a strategy
to facilitate the expansion of our
Containerised Freight service offering.
This strategy includes accessing and
developing key terminals and pathing,
procuring and managing the required
rollingstock and other assets, and
implementing suitable IT systems. It also
includes leveraging existing containerised
freight expertise and operations and
recruiting additional personnel with
the necessary expertise and skill
sets, including the appointment of an
experienced Group Executive.
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.
For more information on our approach to
climate change, including risks relating to
decarbonising and reporting, refer to our
annual Sustainability Report.
2828
AURIZON ANNUAL REPORT 2022–23 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,
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 interests 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. Our response to
climate-related risks is outlined in our annual
Sustainability Report.
In FY2021, we published our Climate Strategy
and Action Plan (CSAP). The strategy builds
on our existing work in reducing our carbon
footprint. We recognise that we all have a
responsibility to act on climate change —
government, business, and the general
community — so we can achieve an effective
transition to a low-carbon future.
For more information on our approach to
climate change, including risks relating to
decarbonisation, refer to the Risk section of the
Directors’ Report in the FY2023 Annual Report
and our annual Sustainability Report.
In 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
our people and the communities in which we
operate.
During FY2023, we embedded our Safety
Strategy focused on nine key priorities and
delivered several key strategic projects
and initiatives. In April, Aurizon launched
its Enterprise Critical Control Management
framework. While Aurizon’s business units have
traditionally managed critical risk at a local
level, the new enterprise program is designed
to simplify process and enable a consistent
approach to our eleven Critical Safety Risks
across our national operations. Also, in late
FY2023, Aurizon launched its new Event
Learning Framework to further facilitate the
prioritisation of learning from events, enabling
stronger and more resilient systems to keep
our people safe.
Throughout FY2023, Aurizon has continued
to deliver against its Mental Health and
Wellbeing Strategy, including conducting a
psychosocial risk management pilot focused
on understanding psychosocial risk hazards
present in our operations.
As we move into FY2024, Aurizon continues
to focus on embedding our strategy and focus
our attention on simple systems and process,
understanding and controlling risk and building
leadership and the capability of our people.
For example, enhancements in contractor
safety and fatigue risk management.
Aurizon uses two primary safety metrics
to measure safety performance across the
enterprise: Total Recordable Injury Frequency
Rate (TRIFR) and potential and actual Serious
Injury and Fatality Frequency Rate (SIFR(a+p)).
For FY2023, Aurizon has reported these two-
core metrics excluding Bulk Central. Moving
into FY2024, Aurizon enterprise and Bulk
Central will be integrated into the one metric.
FY2023 TRIFR (excluding Bulk Central)
was 8.36 injuries per million hours
worked compared to 8.51 for FY2022, an
improvement in our overall TRIFR of 1.76%.
FY2023 SIFR(a+p) (excluding Bulk Central)
was 1.92 events per million hours worked
compared to 4.41 for FY2022, representing a
56% improvement.
Bulk Central TRIFR for FY2023 is 10.26
compared to 4.09 in FY2022, representing a
deterioration of 151%. The increase is the result
of a single event in June 2023 whereby a heavy
vehicle pulled into the path of an Aurizon
train at a protected level crossing outside of
Katherine, in the Northern Territory resulting
in injuries to all four train crew. Excluding
this event, Bulk Central was representing
a year-on-year improvement of 11%. Bulk
Central SIFR(a+p) for FY2023 is 6.41 and is
the first period Bulk Central has been using
this measure.
Environment
Aurizon recognises our responsibility to aid
our local communities and supply chains
by delivering 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.
Following the acquisition of Bulk Central,
environmental licences in South Australia have
been consolidated. Bulk Central has been
steadily integrated into Aurizon’s existing
annual second line environmental assurance
program which assesses compliance with
legislative obligations and applicable licences.
No material non-compliances were reported.
29
OPERATING AND FINANCIAL REVIEW Directors’ Report (continued)
OPERATING AND FINANCIAL REVIEW
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
FY2023 continues to yield low rates of coal
dust loss from tops of wagons. For further
detail in relation to coal dust management and
monitoring processes, refer to Aurizon’s annual
Sustainability Report.
Aurizon successfully transitioned its three
Safeguard Mechanism Facilities (covering
Scope 1 GHG emissions associated with rail
activities in QLD, NSW and WA) to a single
National Transport Facility, with approval
granted by the Clean Energy Regulator
on 29 March 2023. Bulk Central’s emission
reporting requirements, including National
Greenhouse and Energy Reporting (NGER)
and National Pollutant Inventory (NPI) have
been incorporated into national reporting
requirements for Aurizon. Aurizon will not
be required to purchase or retire Australian
Carbon Credit Units (ACCUs) to meet its
obligations under the Safeguard Mechanism
in FY2023. This was achieved through
effective management of its Scope 1 emissions
intensity to remain below baselines. The
Safeguard Mechanism reforms passed by
Federal parliament in March 2023, which
commenced on 1 July 2023, mean that
Aurizon is estimated to have a carbon
liability for the first time in FY2024. Sufficient
ACCUs have been purchased to achieve this
compliance obligation.
In FY2023:
› Aurizon has not incurred any fines, penalties
or prosecutions arising from environmental
or cultural heritage related incidents; and
› Aurizon has had four notifiable
environmental incidents. Remedial actions
were implemented as required and no
ongoing material environmental impacts
are anticipated.
People
At Aurizon, our people are our greatest
asset. We have over 5,700 employees living
and working across our national footprint of
operations. 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:
› providing meaningful ways for our people to
develop their skills and capabilities, now and
for the future. Our established Leadership
programs are 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. We also recognise the
need for development at all levels and rolled
out new programs for emerging leaders.
We also implemented a new Capability
Framework to help our people identify
development opportunities for current and
future roles
› ensuring our people processes and systems
adapt to the needs of our leaders and
people, and actively facilitates the attraction
and retention of our current and future
workforce. This year we have focused on
renewing our workforce planning process
and initiatives as well as progressing a
refreshed employee value proposition
› 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,
First Nations peoples and LGBTQIA+),
meeting workforce representation targets
and actively reducing the gender pay gap.
In August 2022, we launched our first ALL in
Action Plan ‘Advancing LGBTQIA+ Inclusion
at Aurizon’ — aligning our activities to three
pillars to support the Group’s vision —
visibility, education and connection
› integrating the Bulk Central business
into Aurizon’s existing processes,
ensuring alignment across people and
performance priorities, complementing the
established cultures.
3030
AURIZON ANNUAL REPORT 2022–23 Directors’ Report (continued)
REMUNERATION REPORT
Dear fellow shareholders
On behalf of the Board, I am pleased to present Aurizon’s Financial Year (FY) 2023 Remuneration Report.
Aurizon delivered Underlying Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) in FY2023 of $1,428 million. This was 3% lower than
the prior year, due to prolonged wet weather, mine production issues and some labour shortages. Despite the challenging operating environment, Aurizon
has continued to deliver a strong operating discipline and safety performance which is a credit to the ongoing efforts and dedication of our employees.
We have a resilient business, with a strong balance sheet and important revenue protection mechanisms which help support our earnings in the current
elevated inflationary environment.
During the year, the Company has delivered a number of key strategic initiatives, including completing the acquisition and integration of the One
Rail Australia business (and subsequent divestment of East Coast Rail) and the establishment of a national Containerised Freight business. These are
important building blocks for the future growth of Aurizon, where we diversify the products we transport for customers and tap into growing and
emerging markets.
The Coal business recorded lower Underlying EBITDA of $455 million, down 16% from the prior year primarily due to a decrease in volumes, Take-or-Pay
expenses and higher costs, partially offset by higher CPI benefits in haulage contracts.
The Network business achieved 1% higher Underlying EBITDA of $813 million. Volume uplift (1%) was limited due to the impact of prolonged wet weather
offset by the recognition of Take-or-Pay revenue.
The Bulk business recorded a 59% increase in Underlying EBITDA of $214 million, due to the acquisition of One Rail Australia, higher iron ore and grain
volumes and growth with new contracts.
The Short Term Incentive (STI) Award for FY2023 continued to be based on the three annual performance measures of Underlying EBITDA, Safety and
Individual Key Deliverables. Business Unit earnings metrics continue to be used for Bulk, Coal and Network.
Group Underlying EBITDA fell below Threshold in the scorecard. Coal and Bulk Underlying EBITDA also resulted in a below Threshold outcome, with
Network Underlying EBITDA achieving an above Target result.
During FY2023, several key strategic initiatives in our Safety Strategy were delivered, including our Enterprise Critical Control Management framework.
While Aurizon’s business units have traditionally managed critical risk at a local level, this program is designed to simplify process and enable a consistent
approach to Critical Safety Risks across our national operations.
In FY2023, Aurizon utilised two primary safety metrics in the remuneration framework: Total Recordable Injury Frequency Rate (TRIFR) and Serious Injury
and Fatality Frequency Rate, including both actual and potential events (SIFR(a+p)). We have seen significant improvement in SIFR(a+p), resulting in a
Stretch outcome. Although there was modest, but continued year-on-year improvement in TRIFR, the result was below Threshold.
As we move into FY2024, Aurizon continues to embed our Safety Strategy, focusing our attention on simple systems and processes, understanding and
controlling risk, and building leadership and the capability of our people such as enhancements in contractor safety and fatigue risk management.
The STI Award also considers performance against individual objectives which vary for Key Management Personnel (KMP). Management has made strong
progress across the strategic levers (Optimise, Excel and Extend) including commencement of the project to build a zero-emissions capable freight
locomotive, powered by batteries and other Climate Strategy and Action Plan (CSAP) initiatives. Consistent with prior years, delivery against Aurizon’s
CSAP will continue to form part of the MD & CEO and Executive individual deliverables in FY2024 and is cascaded broadly.
The varied performance across the STI measures is reflected directly in the STI payments for our Executive KMP. The Board has determined that overall
outcomes between Threshold and Target will be awarded for Executive KMP.
During FY2023, the 2019 Long Term Incentive (LTI) Award was subject to testing. It included relative Total Shareholder Return (TSR) and Return on
Invested Capital (ROIC) measures. No portion of the relative TSR component vested and these rights will lapse. ROIC achieved an outcome between the
minimum and maximum vesting point, with 35% of the total award to vest.
The Board considers that these overall remuneration outcomes reach an appropriate balance between business performance, shareholder outcomes and
recognising the contribution of the Leadership Team.
During FY2023, the Board continued to review and refine Aurizon’s Remuneration Framework. For FY2024 the STI scorecard will not include a Network
business unit EBITDA measure, reverting to the Group EBITDA financial measure to better align Network with enterprise performance outcomes.
Additionally, an operational measure will be included in the Network individual deliverables focused on improving network velocity and disciplined train
operations. For the 2023 LTI Award, there has been an increase in the non-coal growth target in line with the upgraded aspirations for the Bulk and
Containerised Freight business units.
Further changes may be implemented from FY2024 to ensure the framework continues to deliver against our remuneration principles and long-term
strategic outlook, and to ensure it remains effective in driving strong performance.
Tim Poole
Chairman
31
REMUNERATION REPORT 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 2023 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 2023 are identified in Table 2.
Table 3 identifies other persons who were KMP at some time during FY2023.
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 2023
Take Home Pay
Short Term Incentive
Award
Long Term Incentive
Award
Executive Employment
Agreements
Non-Executive Director
Remuneration
Executive Remuneration
Financial Year 2023
32
32
33
35
36
37
39
41
42
44
T Poole
M Bastos
R Caplan
S Lewis
T Longstaff1
S Ryan
L Strambi
EXECUTIVE KMP
A Harding
P Bains
A Dartnell2
G Lippiatt
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 (MD & CEO)
Group Executive Network
Group Executive Bulk
Chief Financial Officer & Group Executive Strategy
Group Executive Coal
1 T Longstaff was appointed Director on 1 June 2023.
2 A Dartnell was appointed Group Executive Bulk on 2 May 2023.
TABLE 3 — FORMER KEY MANAGEMENT PERSONNEL
NAME
POSITION
NON-EXECUTIVE DIRECTORS
K Vidgen1
EXECUTIVE KMP
C McDonald2
Independent Non-Executive Director
Group Executive Bulk
1 K Vidgen retired on 31 May 2023.
2 C McDonald ceased in role on 1 May 2023 and with the Company on 14 July 2023.
32
AURIZON ANNUAL REPORT 2022–23 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 FY2023 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
Deferred STIA
LTIA
1 Assumes achievement of the stretch performance hurdle outcomes for STIA, full vesting of the Deferred STIA and
LTIA at a value equal to the maximum opportunity of the original award i.e. assuming no share price appreciation.
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.
40
60
80
0
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
80
60
40
20
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.
33
REMUNERATION REPORT 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
FY2023 and the changes being implemented in FY2024. Further changes may be implemented from FY2025 to ensure the framework continues to
deliver against our remuneration principles and 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
FY2023 AND FY2024
FRAMEWORK CHANGES
D
E
X
F
I
I
N
O
T
A
R
E
N
U
M
E
R
M
R
E
T
T
R
O
H
S
D
R
A
W
A
E
V
T
N
E
C
N
I
I
M
R
E
T
G
N
O
L
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 2022, fixed
remuneration increases were
provided to ensure alignment with
external peer group:
› MD & CEO: from $1.75m to $1.8m
(2.9%)
› Other Executive KMP: between 3%
& 6.7%.
The Board reviews Executive
remuneration annually.
› From FY2023 continued focus
and alignment of KMP individual
deliverables with the Climate Strategy
Action Plan (CSAP)
› From FY2024 the Network Business
Unit scorecard will not include a
Business Unit EBITDA measure,
reverting to Group EBITDA measure
to better align Network with
enterprise performance outcomes
› The Non-Coal Growth Strategic
Transformation measure will
continue with an increase in the
target reflecting the upgraded
Bulk and Containerised Freight
growth aspiration
› 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 Executive encourages
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.
34
AURIZON ANNUAL REPORT 2022–23
4. Company Performance for Financial Year 2023
Aurizon reported Group Underlying EBITDA of $1,428 million for continuing operations for year ended 30 June 2023 in line with the revised EBITDA
guidance range ($1,420m – $1,470m).
The past 12 months have been challenging due to prolonged wet weather, mine production issues and some labour shortages. This has resulted in
Group EBITDA at the lower end of guidance.
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 FY2023 STIA performance measures is provided in Table 6 (page 38). Table 9
(page 40) provides additional information related to the LTIA performance outcomes.
TABLE 4 — HISTORICAL COMPANY PERFORMANCE AGAINST KEY MEASURES
KEY PERFORMANCE MEASURES
DESCRIPTION
FY2023
FY2022
FY2021
FY2020
FY2019
Group Underlying EBITDA1
Bulk Underlying EBITDA1
Coal Underlying EBITDA1
Network Underlying EBITDA1
Return on Invested Capital (ROIC)
$m
$m
$m
$m
%
Total Recordable Injury Frequency Rate (TRIFR)
per million work hours
SIFR(a+p)2
Total Shareholder Return (TSR)
4-year TSR
Share Buy Back
Share price at beginning of year3
Share price at end of year3
Dividends per share4
Dividends5
per million work hours
%
%
$m
$
$
cps
$m
1,428
1,467
1,482
1,468
214
455
813
7.5
8.36
1.92
2.7
(14.9)
-
3.83
3.92
15.0
275
135
541
801
10.3
8.51
-
10.4
13.8
-
3.73
3.80
21.4
395
140
533
849
10.7
10.21
-
(14.9)
(11.1)
300
4.80
3.72
28.8
533
110
616
798
10.9
9.92
-
(9.6)
400
5.40
4.92
27.4
529
1,372
55
610
721
9.7
11.07
-
28.2
-
4.32
5.40
23.8
474
1 Continuing operations.
2 From FY2023 the safety metric Serious Injury and Fatality Frequency Rate, including both actual and potential events (SIFR(a+p)) replaced Rail Process Safety (RPS)
in the Short Term Incentive Award scorecard.
3 Share price at close of day.
4 Dividends per share for each Financial Year (the final dividend is paid in the following financial year).
5 Dividends for each Financial Year (the final dividend is paid in the following financial year).
35
REMUNERATION REPORT Directors’ Report (continued)
REMUNERATION REPORT
5. Take Home Pay
Table 5 identifies the actual remuneration earned during FY2023 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 44).
Following a market review, effective 1 July 2022, fixed remuneration increases were provided to the MD & CEO (2.9%) and other Executive KMP
(between 3% & 6.7%) 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 37) and Section 7
(page 39).
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 29% to 65% 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 FY2023, the 2019 Award was subject to testing. No portion of the relative TSR component vested and these rights will lapse. ROIC achieved an
outcome between the minimum and maximum vesting point and therefore 35% of this Award will vest in October 2023.
Movement in the Aurizon share price over the various performance periods is reflected in the remuneration outcomes for Executive KMP, aligning
Executive KMP outcomes with the shareholder experience.
TABLE 5 — REMUNERATION EARNED IN FINANCIAL YEAR 2023
FIXED
REMUNERATION
$’000
NON-MONETARY
BENEFITS1
$’000
STIA
CASH2
$’000
STIA DEFERRED
FROM PRIOR YEAR3
$’000
LTIA
VESTING4
$’000
SHARE PRICE
DEPRECIATION5
$’000
ACTUAL FY2023
REMUNERATION OUTCOMES
$’000
NAME
EXECUTIVE KMP
A Harding
P Bains
A Dartnell6
G Lippiatt
E McKeiver
1,800
824
110
800
731
FORMER EXECUTIVE KMP
C McDonald7
731
–
–
–
–
–
–
570
363
22
182
149
–
835
298
–
265
246
–
721
310
83
101
269
–
(178)
(81)
(28)
(13)
(71)
–
3,748
1,714
187
1,335
1,324
731
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 FY2023 STIA which will be paid in September 2023.
3 The amount relates to the deferred component (40%) of the FY2022 STIA which was awarded in performance rights and will become unrestricted in September 2023
(calculation assumes a share price of $3.63 at date of issue).
4 The amount relates to the portion of the 2019 Award which was subject to testing in FY2023 but will vest in October 2023 (calculation based on share price of $5.93 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 2023 (calculation
assumes share price appreciation of $0.29 DSTIA and a share price depreciation of $2.01 LTIA).
6 The amount relates to the Fixed Remuneration and STIA attributable to the Group Executive Bulk role (commenced as KMP on 2 May 2023).
7 C McDonald rights awarded under 2019 LTIA, 2022 DSTIA and FY2023 STIA lapsed upon cessation on 14 July 2023.
36
AURIZON ANNUAL REPORT 2022–23 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 or 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, 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. 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 based on the
FY2023 scorecard.
What are the outcomes for FY2023?
Table 6 identifies the performance measures,
relevant weightings, and outcomes for
FY2023. Group Underlying EBITDA
performance resulted in a Below Threshold
outcome, reflecting a challenging year
due to prolonged wet weather, mine
production issues and labour shortages.
Business Unit Underlying EBITDA performance
resulted in a Below Threshold outcome for Coal
and Bulk, and an outcome between Target and
Stretch for Network.
In FY2023 the safety metric Serious Injury and
Fatality Frequency Rate, including both actual
and potential events (SIFR(a+p)) replaced
Rail Process Safety (RPS). The new metric
will ensure safety remains core to the business
with increased focus on high severity events
that have the potential to seriously injure
our people.
FY2023 performance resulted in a TRIFR
Below Threshold and SIFR(a+p) at Stretch.
The STIA also considers performance
against individual deliverables which vary
for Executives and are aligned to strategic
enterprise objectives.
During FY2023, individual deliverables
continued to focus on strategic levers
(Optimise, Excel and Extend). Some of the
initiatives successfully delivered include the
deployment of TrainGuard, implementation
of critical control management, the One Rail
Australia acquisition and integration, and
successful divestment of East Coast Rail and
establishment of a national Containerised
Freight business.
The FY2023 actual outcomes for Executive
KMP are identified within Table 7.
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
FIGURE 5 — STIA 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
Business
Unit
Measures
(EBITDA)
Individual
Deliverable
Measures
(varied)
STIA
OUTCOME
37
REMUNERATION REPORT
Directors’ Report (continued)
REMUNERATION REPORT
TABLE 6 — SHORT TERM INCENTIVE AWARD FINANCIAL YEAR 2023 OBJECTIVES1
PERFORMANCE MEASURE
ENTERPRISE
Group Underlying EBITDA: Underlying EBITDA delivers financial
benefit to shareholders through the achievement of underlying
operating earnings
Group Safety2: 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)
› Serious Injury and Fatality Frequency Rate, including both actual
and potential events (SIFR(a+p))3
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 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 Group Executives and the
organisation. During FY2023 key deliverables included:
› Progress scale growth initiatives and other non-coal growth execution
› Deliver efficiency through continued transformation
› Deliver safety and performance culture initiatives
› Targeted capital investment and portfolio changes that support
decarbonisation trajectory and optimise fleet composition
› Continue implementation of Aurizon’s Climate Strategy and Action Plan.
TOTAL OUTCOME
1 Company performance hurdles relate to continuing operations.
2 SIFR(a+p) and TRIFR excludes Aurizon Bulk Central for remuneration purposes in FY2023.
3 From FY2023 the SIFR(a+p) measure replaced Rail Process Safety (RPS).
WEIGHTING
MD & CEO
& CFO
COAL,
BULK &
NETWORK
TARGET
FY2023
PERFORMANCE
OUTCOME
60%
30%
$1,528m
$1,428m
5%
5%
5%
5%
–
30%
7.57
4.19
$508m
$261m
$797m
8.36
1.92
$455m
$214m
$813m
30%
30% Individual performance
targets vary for each
specific role
Personal outcomes
for MD & CEO and
Executive KMP were
between Target
and Stretch
100%
100%
Executive KMP
Stretch Between Target and Stretch Target Between Threshold and Target Threshold Below Threshold
TABLE 7 — SHORT TERM INCENTIVE AWARDED IN FINANCIAL YEAR 2023
TARGET STIA
$’000
MAXIMUM
POTENTIAL
STIA $’000
STIA CASH
COMPONENT
STIA
DEFERRED SHARE
COMPONENT2
TOTAL STIA
PAYMENT
% OF
TARGET STIA
% OF
MAXIMUM STIA3
AWARDED FY2023 $’000
1,800
618
83
600
548
2,700
927
124
900
823
570
363
22
182
149
380
242
14
121
99
950
605
36
303
248
53
98
44
51
45
35
65
29
34
30
NAME
EXECUTIVE KMP1
A Harding
P Bains
A Dartnell4
G Lippiatt
E McKeiver
1 C McDonald resigned and was not eligible for an STI payment.
2 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’.
3 Executives have forfeited between 35% and 71% of their maximum potential outcomes.
4 The amount relates to the STIA attributable to the Group Executive Bulk role (commenced as KMP 2 May 2023).
38
AURIZON ANNUAL REPORT 2022–23 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 2019 Award and 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 2019 LTIA is 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 20231
COMPANY HURDLE AND PERFORMANCE MEASUREMENT PERIOD
WEIGHTING
RESULT
%
VESTED
%
LAPSED
2019 AWARD: 01 JULY 2019 — 30 JUNE 2023
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
FY2020 – FY2023
50% of rights vest with an average ROIC of 9.5%,
up to 100% at 10.5%
1 Vesting will occur in October 2023.
Maximum Between Minimum and Maximum Minimum Below Minimum
50%
50%
Below 50th
Percentile
0%
100%
9.9%
70%
30%
39
REMUNERATION REPORT
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 and Containerised Freight 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)
› From the 2023 Award, determined by reference to Non-Coal
Underlying EBITDA growth over the performance period.
The 2023 Award baseline reflects Total Underlying Group
EBITDA less Network and Coal EBITDA.
VESTING THRESHOLDS
Vesting Thresholds are consistent across all outstanding Awards
WEIGHTING
MINIMUM
VESTING
MAXIMUM
VESTING
Outstanding
2020 Award
2021 Award
2022 Award
Future
2023 Award
50%
25%
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 minimum
and maximum vesting points
Vesting Thresholds are consistent across all outstanding Awards
WEIGHTING
MINIMUM
VESTING
MAXIMUM
VESTING
Outstanding
2020 Award
2021 Award
2022 Award
Future
2023 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
25%
2022 Award
25%
Future
2023 Award
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%
50% of Rights
vest with
Non-Coal
Underlying
EBITDA growth
of 121%
100% of Rights
vest with
Non-Coal
Underlying
EBITDA growth
of 146%
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 FY2023, no retention awards were issued to Executive KMP and 176,425 performance rights were issued across a number of
other employees. Further information is available in note 27 of the Financial Report (page 107).
40
AURIZON ANNUAL REPORT 2022–23
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
2023 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
A Dartnell
G Lippiatt
E McKeiver
DURATION OF
EMPLOYMENT AGREEMENT
FIXED REMUNERATION
AT END OF FINANCIAL
YEAR 20231
NOTICE PERIOD2
BY EXECUTIVE
BY COMPANY3
Ongoing
Ongoing
Ongoing
Ongoing
Ongoing
1,800,000
824,000
670,000
800,000
731,300
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 2023
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 Lewis2,5
T Longstaff3
S Ryan5
L Strambi
EXECUTIVE KMP
A Harding2
P Bains2
A Dartnell4
G Lippiatt
E McKeiver2
180,500
60,947
82,132
63,025
–
63,000
42,787
1,728,659
176,886
–
77,959
153,243
–
–
–
–
–
–
–
433,603
177,955
24,570
90,985
131,815
70,000
5,000
–
–
–
–
19,575
–
–
–
–
(138,815)
250,500
65,947
82,132
63,025
–
63,000
62,362
2,162,262
354,841
24,570
168,944
146,243
1 Assumes Total Directors’ Fees and Fixed Remuneration as at 30 June 2023 and the calculation assumes a share price of $3.92.
2 KMP required to meet the minimum shareholding requirement due to length of service in a KMP role being longer than six years.
3 T Longstaff commenced on 1 June 2023.
4 A Dartnell commenced in role on 2 May 2023.
5 The one-off fees in FY2023 for the Due Diligence Committee relating to the possible demerger of East Coast Rail did not form part of fixed remuneration.
200%
115%
155%
109%
0%
119%
107%
471%
169%
14%
83%
78%
41
REMUNERATION REPORT 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
Director 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 Committees fees
include both cash and any contributions to
a fund for the purposes of superannuation
benefits. There are no other retirement
benefits in place for Non-Executive Directors.
Non-Executive Directors do not receive a
performance pay.
The actual remuneration outcomes for the
Non-Executive Directors of the Company
is summarised in Table 14. Details of the
Non-Executive Director membership is
disclosed on page 9.
42
AURIZON ANNUAL REPORT 2022–23 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 FEES1,2
Chairperson
Member
NETWORK
BOARD
$40,000
$20,000
AUDIT AND RISK
COMMITTEE
REMUNERATION
AND PEOPLE
COMMITTEE
SAFETY, HEALTH
& ENVIRONMENT
COMMITTEE
$40,000
$20,000
$35,000
$17,500
$35,000
$17,500
1 A Due Diligence Committee was established in FY2023 for the possible demerger of East Coast Rail. One-off Committee fees were approved by the Board; S Lewis
(Chair: $40,000), S Ryan (Member: $20,000)
2 There are no fees for the Nomination and Succession Committee
TABLE 14 — NON-EXECUTIVE DIRECTORS’ REMUNERATION
NAME
NON-EXECUTIVE DIRECTORS
T Poole
M Bastos
R Caplan
S Lewis
T Longstaff3
S Ryan
L Strambi
FORMER NON-EXECUTIVE DIRECTOR
K Vidgen
M Fraser
Total
YEAR
2023
2022
2023
2022
2023
2022
2023
2022
2023
2023
2022
2023
2022
2023
2022
2022
2023
2022
SHORT-TERM EMPLOYEE
BENEFITS
POST-EMPLOYMENT
BENEFITS
SALARY
AND FEES1
$’000
NON-
MONETARY
BENEFITS2
$’000
SUPERANNUATION
$’000
TOTAL
REMUNERATION
$’000
465
466
204
205
208
189
243
207
9
228
208
206
195
194
205
135
1,757
1,810
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
25
24
21
20
–
19
25
21
1
–
–
22
20
20
20
14
114
138
490
490
225
225
208
208
268
228
10
228
208
228
215
214
225
149
1,871
1,948
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.
3 T Longstaff commenced 1 June 2023.
43
REMUNERATION REPORT Directors’ Report (continued)
REMUNERATION REPORT
10. Executive Remuneration for Financial Year 2023
The table below details the number and value of movements in equity awards during FY20231.
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
NO.
NO.
$’000
%
NO.
NO.
50
(229,956)
(229,955)
100
(203,647)
%
50
NAME
EXECUTIVE KMP
A Harding
P Bains
A Dartnell8
G Lippiatt
E McKeiver
20183
20194
2020
2021 DSTIA5
2021
2022 DSTIA6
2022
20183
20194
2020
2021 DSTIA5
2021
2022 DSTIA6
2022
20194
2020
2021
2022
20183
20194
2020
2021 DSTIA5
2021
2022 DSTIA6
2022
20183
20194
2020
2021 DSTIA5
2021
2022 DSTIA6
2022
FORMER EXECUTIVE KMP
C McDonald7
20183
20194
2020
2021 DSTIA5
2021
2022 DSTIA6
2022
459,911
347,454
556,263
203,647
654,613
–
–
188,337
149,494
191,469
83,786
224,439
–
–
40,135
51,404
61,097
–
62,500
48,799
170,086
59,735
210,411
–
–
165,737
129,574
165,956
48,946
199,190
–
–
152,176
126,539
162,068
68,828
199,190
–
–
230,055
694,087
835
1,685
82,182
238,303
298
578
65,799
160
73,017
231,362
265
562
67,890
211,494
246
513
50
(94,169)
(94,168)
50
160
100
(83,786)
50
(31,250)
(31,250)
50
100
(59,735)
50
(82,869)
(82,868)
50
100
(48,946)
50
(76,088)
(76,088)
50
129
100
(68,828)
43,950
211,407
160
513
VALUE OF RIGHTS
FORFEITED IN YEAR
BALANCE AT
END OF YEAR
$’000
NO.
WEIGHTED FAIR
VALUE PER RIGHT
AT GRANT DATE
GRANT
DATE
DATE ON WHICH
GRANT VESTS
EXPIRY
DATE
407
53
141
–
–
–
–
347,454
556,263
654,613
230,055
694,087
149,494
191,469
224,439
82,182
238,303
40,135
51,404
61,097
65,799
48,799
170,086
–
–
–
–
210,411
73,017
231,362
129,574
165,956
199,190
67,890
211,494
126,539
162,068
–
–
199,190
43,950
211,407
$
2.58
3.95
2.51
3.73
2.72
3.63
2.43
2.56
3.95
2.51
3.73
2.72
3.63
2.43
3.95
2.51
2.72
2.43
2.56
3.95
2.51
3.73
2.72
3.63
2.43
2.56
3.95
2.51
3.73
2.72
3.63
2.43
2.56
3.95
2.51
3.73
2.72
3.63
2.43
18-Oct-18
17-Oct-19
14-Oct-20
27-Sep-21
13-Oct-21
26-Sep-22
14-Oct-22
5-Oct-18
17-Oct-19
14-Oct-20
27-Sep-21
13-Oct-21
26-Sep-22
14-Oct-22
17-Oct-19
14-Oct-20
13-Oct-21
14-Oct-22
5-Oct-18
17-Oct-19
14-Oct-20
27-Sep-21
13-Oct-21
26-Sep-22
14-Oct-22
5-Oct-18
17-Oct-19
14-Oct-20
27-Sep-21
13-Oct-21
26-Sep-22
14-Oct-22
5-Oct-18
17-Oct-19
14-Oct-20
27-Sep-21
13-Oct-21
26-Sep-22
14-Oct-22
18-Oct-22
17-Oct-23
14-Oct-24
27-Sep-22
13-Oct-25
26-Sep-23
14-Oct-26
5-Oct-22
17-Oct-23
14-Oct-24
27-Sep-22
13-Oct-25
26-Sep-23
14-Oct-26
17-Oct-23
14-Oct-24
13-Oct-25
14-Oct-26
5-Oct-22
17-Oct-23
14-Oct-24
27-Sep-22
13-Oct-25
26-Sep-23
14-Oct-26
5-Oct-22
17-Oct-23
14-Oct-24
27-Sep-22
13-Oct-25
26-Sep-23
14-Oct-26
5-Oct-22
17-Oct-23
14-Oct-24
27-Sep-22
13-Oct-25
26-Sep-23
14-Oct-26
31-Dec-22
31-Dec-23
31-Dec-24
31-Dec-22
31-Dec-25
31-Dec-23
31-Dec-26
31-Dec-22
31-Dec-23
31-Dec-24
31-Dec-22
31-Dec-25
31-Dec-23
31-Dec-26
31-Dec-23
31-Dec-24
31-Dec-25
31-Dec-26
31-Dec-22
31-Dec-23
31-Dec-24
31-Dec-22
31-Dec-25
31-Dec-23
31-Dec-26
31-Dec-22
31-Dec-23
31-Dec-24
31-Dec-22
31-Dec-25
31-Dec-23
31-Dec-26
31-Dec-22
31-Dec-23
31-Dec-24
31-Dec-22
31-Dec-25
31-Dec-23
31-Dec-26
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 8 in the FY2022 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 6 in the FY2021 Remuneration Report.
6 Deferred STIA component as described in Section 3 and Section 6 of this report and Table 7 in the FY2022 Remuneration Report.
7 C McDonald rights awarded under LTIA and 2022 DSTIA lapse following cessation.
8 A Dartnell all performance rights listed relate to role held prior to appointment as Group Executive Bulk
44
AURIZON ANNUAL REPORT 2022–23 10. Executive Remuneration for Financial Year 2023
The table below details the number and value of movements in equity awards during FY20231.
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
FORFEITED
IN YEAR
IN YEAR
NO.
NO.
$’000
%
NO.
NO.
VALUE OF RIGHTS
FORFEITED IN YEAR
BALANCE AT
END OF YEAR
$’000
NO.
50
(229,956)
(229,955)
407
P Bains
50
(94,169)
(94,168)
50
160
E McKeiver
50
(82,869)
(82,868)
50
50
(31,250)
(31,250)
50
53
141
FORMER EXECUTIVE KMP
C McDonald7
50
(76,088)
(76,088)
50
129
–
347,454
556,263
–
654,613
230,055
694,087
–
149,494
191,469
–
224,439
82,182
238,303
40,135
51,404
61,097
65,799
–
48,799
170,086
–
210,411
73,017
231,362
–
129,574
165,956
–
199,190
67,890
211,494
–
126,539
162,068
–
199,190
43,950
211,407
%
50
NAME
EXECUTIVE KMP
A Harding
A Dartnell8
G Lippiatt
2021 DSTIA5
2022 DSTIA6
2021 DSTIA5
2022 DSTIA6
20183
20194
2020
2021
2022
20183
20194
2020
2021
2022
20194
2020
2021
2022
20183
20194
2020
2021
2022
20183
20194
2020
2021
2022
20183
20194
2020
2021
2022
2021 DSTIA5
2022 DSTIA6
2021 DSTIA5
2022 DSTIA6
2021 DSTIA5
2022 DSTIA6
459,911
347,454
556,263
203,647
654,613
188,337
149,494
191,469
83,786
224,439
–
–
–
–
40,135
51,404
61,097
–
62,500
48,799
170,086
59,735
210,411
165,737
129,574
165,956
48,946
199,190
–
–
–
–
152,176
126,539
162,068
68,828
199,190
–
–
100
(203,647)
100
(83,786)
100
(59,735)
100
(48,946)
230,055
694,087
835
1,685
82,182
238,303
298
578
65,799
160
73,017
231,362
265
562
67,890
211,494
246
513
100
(68,828)
43,950
211,407
160
513
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 8 in the FY2022 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 6 in the FY2021 Remuneration Report.
6 Deferred STIA component as described in Section 3 and Section 6 of this report and Table 7 in the FY2022 Remuneration Report.
7 C McDonald rights awarded under LTIA and 2022 DSTIA lapse following cessation.
8 A Dartnell all performance rights listed relate to role held prior to appointment as Group Executive Bulk
WEIGHTED FAIR
VALUE PER RIGHT
AT GRANT DATE
GRANT
DATE
DATE ON WHICH
GRANT VESTS
EXPIRY
DATE
$
2.58
3.95
2.51
3.73
2.72
3.63
2.43
2.56
3.95
2.51
3.73
2.72
3.63
2.43
3.95
2.51
2.72
2.43
2.56
3.95
2.51
3.73
2.72
3.63
2.43
2.56
3.95
2.51
3.73
2.72
3.63
2.43
2.56
3.95
2.51
3.73
2.72
3.63
2.43
18-Oct-18
17-Oct-19
14-Oct-20
27-Sep-21
13-Oct-21
26-Sep-22
14-Oct-22
5-Oct-18
17-Oct-19
14-Oct-20
27-Sep-21
13-Oct-21
26-Sep-22
14-Oct-22
17-Oct-19
14-Oct-20
13-Oct-21
14-Oct-22
5-Oct-18
17-Oct-19
14-Oct-20
27-Sep-21
13-Oct-21
26-Sep-22
14-Oct-22
5-Oct-18
17-Oct-19
14-Oct-20
27-Sep-21
13-Oct-21
26-Sep-22
14-Oct-22
5-Oct-18
17-Oct-19
14-Oct-20
27-Sep-21
13-Oct-21
26-Sep-22
14-Oct-22
18-Oct-22
17-Oct-23
14-Oct-24
27-Sep-22
13-Oct-25
26-Sep-23
14-Oct-26
5-Oct-22
17-Oct-23
14-Oct-24
27-Sep-22
13-Oct-25
26-Sep-23
14-Oct-26
17-Oct-23
14-Oct-24
13-Oct-25
14-Oct-26
5-Oct-22
17-Oct-23
14-Oct-24
27-Sep-22
13-Oct-25
26-Sep-23
14-Oct-26
5-Oct-22
17-Oct-23
14-Oct-24
27-Sep-22
13-Oct-25
26-Sep-23
14-Oct-26
5-Oct-22
17-Oct-23
14-Oct-24
27-Sep-22
13-Oct-25
26-Sep-23
14-Oct-26
31-Dec-22
31-Dec-23
31-Dec-24
31-Dec-22
31-Dec-25
31-Dec-23
31-Dec-26
31-Dec-22
31-Dec-23
31-Dec-24
31-Dec-22
31-Dec-25
31-Dec-23
31-Dec-26
31-Dec-23
31-Dec-24
31-Dec-25
31-Dec-26
31-Dec-22
31-Dec-23
31-Dec-24
31-Dec-22
31-Dec-25
31-Dec-23
31-Dec-26
31-Dec-22
31-Dec-23
31-Dec-24
31-Dec-22
31-Dec-25
31-Dec-23
31-Dec-26
31-Dec-22
31-Dec-23
31-Dec-24
31-Dec-22
31-Dec-25
31-Dec-23
31-Dec-26
45
REMUNERATION REPORT 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
NAME
EXECUTIVE KMP
A Harding
P Bains
A Dartnell8
G Lippiatt
E McKeiver
CASH
SALARY
AND FEES1
$’000
CASH
BONUS2
$’000
A
B
1,775
570
1,726
1,253
797
773
85
775
726
706
686
363
447
22
182
398
149
370
YEAR
2023
2022
2023
2022
2023
2023
2022
2023
2022
FORMER EXECUTIVE KMP
C McDonald9
2023
706
–
2022
686
239
Total Executive KMP
compensation (group)
2023
4,844
1,286
2022
4,597
2,707
1 Cash salary and fees include any salary sacrifice benefits.
ANNUAL
LEAVE3
$’000
C
(18)
(98)
9
(8)
24
55
2
4
14
(29)
57
45
(33)
NON-
MONETARY
BENEFITS4
$’000
OTHER
$’000
SUPER-
ANNUATION5
$’000
LONG-
SERVICE
LEAVE
$’000
D
–
–
–
–
–
–
–
–
–
–
–
–
–
E
–
–
–
–
–
–
–
–
–
–
–
–
–
F
25
24
27
27
3
25
24
25
24
25
24
130
123
RIGHTS6
$’000
TOTAL
$’000
H
I
2,128
4,552
2,189
5,132
779
2,006
885
2,126
20
175
659
1,727
509
1,672
634
1,534
G
72
38
31
2
21
31
13
16
(39)
651
1,706
21
13
192
27
487
1,210
724
1,743
4,707
11,204
4,958
12,379
PROPORTION OF
COMPENSATION
PERFORMANCE
RELATED7 %
REMUNERATION
CONSISTING
OF RIGHTS FOR
THE YEAR %
J
59%
67%
57%
63%
24%
49%
54%
51%
60%
40%
55%
53%
62%
K
47%
43%
39%
42%
11%
38%
30%
41%
38%
40%
42%
42%
40%
2 This amount relates to the cash component (60%) of the FY2023 STIA which will be paid in September 2023.
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 Superannuation amounts represent employers’ contribution to superannuation.
6 The accounting expense recognised in relation to rights granted in the year is the fair value independently calculated at grant date using an expected outcome model.
This was consistent with the Monte-Carlo simulation conducted in the prior year and resulted in similar outcomes. This amount is progressively expensed over the
vesting period. Refer to note 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.
7 The short-term incentives (cash bonus), deferred short-term incentives and long-term incentives (equity settled share-based payments) represent the at-risk
performance related remuneration.
8 A Dartnell was appointed Group Executive Bulk on 2 May 2023. The cash salary and fees (column A) and cash bonus (column B) reflect the salary and STIA attributable
to the Group Executive Bulk role.
9 No remuneration was received associated with the FY2023 STIA.
46
AURIZON ANNUAL REPORT 2022–23 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
14 August 2023
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
2023, 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
47
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 11 August 2023.
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 41 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.
P
P
P
P
4848
AURIZON ANNUAL REPORT 2022–23 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.
P
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 FY2023, are set out below:
ENTERPRISE MEASURES
FY2023 TARGET
FY2023 ACTUAL
Gender representation on the Board Minimum 30% (each gender)
25% women/75% 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%
50%
21%
7%
1.6 Board reviews
* Note: This reflects the position at 30 June 2023. Between 1 July 2022 and 31 May 2023, the representation of women on the
Board was 38%. From 1 September 2023, the representation of women on the Board will be 33%.
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 FY2023 an internal review was undertaken led by 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 FY2023. In respect of
the Managing Director & CEO, the evaluation was led by the Chairman 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.
P
P
P
The number of meetings held and attended by each member of the Nomination & Succession Committee during the
financial year are set out on page 9 of the 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 FY2023 the
Nomination & Succession Committee assisted the Board in, among other things, reviewing the appropriate mix of skills,
competencies and experience of its members and assisted with the identification and recruitment of new Directors.
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.
49
CORPORATE GOVERNANCE STATEMENT Corporate Governance Statement
(continued)
Principle 2: Structure the Board to be effective and add value (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.
Ms Vidgen retired as a Director of Aurizon Holdings Limited on 31 May 2023.
In FY2023, Mr Caplan will have served as a Director of Aurizon for over 12 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, New South Wales, South Australia, Western Australia and
Northern Territory.
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 Committees 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. The Board, through the Audit, Governance & Risk Management Committee, reviews
investigation processes and outcomes of all matters reported under the Whistleblower Policy.
3.4 Anti-Bribery and
Anti-Corruption 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. The Board, through the Audit, Governance & Risk Management Committee, reviews
investigation processes and outcomes of all matters reported under the Whistleblower Policy.
P
P
P
P
P
P
P
P
P
5050
AURIZON ANNUAL REPORT 2022–23 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 five 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.
P
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.
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 and the Annual Results
Presentation), 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 substantiated 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.
P
P
P
P
P
51
CORPORATE GOVERNANCE STATEMENT
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 do’ 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 2023, the Company will host a hybrid AGM in Brisbane, Queensland 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’s 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 FY2023 the Board considered and reviewed the Enterprise Risk Framework and
Appetite. Further review and update will take place in early FY2024. 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.
P
P
P
P
P
P
P
P
52
AURIZON ANNUAL REPORT 2022–23
Principle 7: Recognise and manage risk (continued)
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 FY2023, the Company published its
ninth Sustainability Report. A copy of this report is available in the Sustainability section of the Company’s website
aurizon.com.au.
P
Aurizon’s 2023 Sustainability Report will be published in October 2023. This will be the seventh 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.
In 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 FY2023, the
Company published its third 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 and People Committee, comprising
three members, all of whom are Independent Non-Executive Directors. Details of the membership of the
Remuneration and People Committee, including the names and qualifications of the Committee members,
are set out on pages 4 – 7 of the Annual Report.
P
The number of meetings held and attended by each member of the Remuneration and People Committee during
the financial year are set out on page 9 of the Annual Report.
The Remuneration and 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 FY2023, the Remuneration and 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 and People Committee is reviewed annually and is
available in the Governance section of the Company’s website aurizon.com.au.
53
CORPORATE GOVERNANCE STATEMENT
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.
P
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 42 to 43.
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 31 to 46 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.
P
For the purposes of this policy, hedging includes the entry into any transaction, arrangement or financial product
which operates to limit the economic risk of a security holding in the Company and includes financial instruments
such as equity swaps and contracts for differences. The term ‘Executive’ is broadly defined to include the Managing
Director & CEO and 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 FY2023, and are therefore not relevant to the period.
54 AURIZON ANNUAL REPORT 2022–23
Financial Report
for the year ended 30 June 2023
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
operation
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 56
Page 57
Page 58
Page 59
Page 60
Page 61
Page 61
Page 61
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 112
Page 113
Page 119
55
FINANCIAL REPORT Consolidated income statement
for the year ended 30 June 2023
Revenue from continuing operations
Other income
Total revenue and other income
Employee benefits expense
Energy and fuel
Track access
Consumables1
Depreciation and amortisation
Impairment losses
Other expenses1
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
Loss from discontinued operations after tax
Profit for the year attributable to the owners of Aurizon Holdings Limited
Earnings per share for profit from continuing operations attributable to the owners
of Aurizon Holdings Limited
Basic earnings per share
Diluted earnings per share
Earnings per share for profit attributable to the owners of Aurizon Holdings Limited
Basic earnings per share
Diluted earnings per share
1 Amounts for FY2022 have been reclassified for consistency with current year presentation.
The above consolidated income statement should be read in conjunction with the accompanying notes.
Notes
2
3
3
3
4
5
5
2023
$m
3,511
–
3,511
(977)
(438)
(110)
(539)
(666)
(13)
(56)
1
713
3
(233)
(230)
483
(159)
324
(48)
276
2022
$m
3,048
27
3,075
(853)
(255)
(78)
(419)
(592)
(2)
(15)
–
861
2
(127)
(125)
736
(223)
513
–
513
Cents
Cents
17.6
17.6
15.0
15.0
27.9
27.8
27.9
27.8
565656
AURIZON ANNUAL REPORT 2022–23
Consolidated statement
of comprehensive income
for the year ended 30 June 2023
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
Exchange differences on translation of foreign operations
Other comprehensive income for the year, net of tax
Notes
16(b)
16(b)
16(b)
Total comprehensive income for the year attributable to the owners of Aurizon Holdings Limited
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
2023
$m
276
(13)
4
4
(5)
271
2022
$m
513
107
(32)
(1)
74
587
57
FINANCIAL REPORT Consolidated balance sheet
as at 30 June 2023
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative financial instruments
Current tax receivables
Other assets
Total current assets
Non-current assets
Inventories
Derivative financial instruments
Property, plant and equipment
Intangible assets
Other assets
Investments accounted for using the equity method
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
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 equity
Reserves
Retained earnings
Total equity
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
585858
Notes
2023
$m
2022
$m
6
7
18(a)
10
7
18(a)
8
9
10
19
11
17
12
13
17
18(a)
4(c)
12
13
16(a)
16(b)
92
728
235
2
104
32
1,193
60
119
9,945
220
86
56
10,486
11,679
362
566
–
287
95
1,310
172
434
186
44
–
24
860
56
38
8,416
209
75
22
8,816
9,676
294
255
69
281
69
968
4,576
2,966
252
940
52
196
6,016
7,326
4,353
3,674
20
659
4,353
266
797
49
218
4,296
5,264
4,412
3,674
26
712
4,412
AURIZON ANNUAL REPORT 2022–23 Consolidated statement of changes in equity
for the year ended 30 June 2023
Balance at 1 July 2022
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Dividends paid
Share-based payments
Balance at 30 June 2023
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 paid
Share-based payments
Balance at 30 June 2022
Attributable to the owners of Aurizon Holdings Limited
Notes
16(b)
15
16(b)
16(b)
15
16(b)
Contributed
equity
$m
3,674
–
–
–
–
–
–
3,674
3,674
–
–
–
–
–
–
3,674
Reserves
$m
Retained
earnings
$m
26
–
(5)
(5)
–
(1)
(1)
20
(57)
–
74
74
–
9
9
26
712
276
–
276
(329)
–
(329)
659
658
513
–
513
(459)
–
(459)
712
Total
equity
$m
4,412
276
(5)
271
(329)
(1)
(330)
4,353
4,275
513
74
587
(459)
9
(450)
4,412
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
59
FINANCIAL REPORT Consolidated statement of cash flows
for the year ended 30 June 2023
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 inflow 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 property, plant and equipment
Payments for intangibles
Interest paid on qualifying assets
Distributions from joint ventures
Net cash outflow from investing activities from continuing operations
Net cash outflow 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 shares acquired for share-based payments
Dividends paid to Company's shareholders
Net cash inflow/(outflow) from financing activities from continuing operations
Net cash inflow from financing activities from discontinued operations
Net cash inflow/(outflow) from financing activities
Net increase in cash and cash equivalents from continuing operations
Net decrease 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
22
3
15
2023
$m
3,766
(2,557)
3
(204)
7
1,015
48
1,063
(1,434)
(743)
6
(15)
(4)
1
(2,189)
(662)
(2,851)
2,210
(360)
(15)
(20)
(210)
(7)
(329)
1,269
439
1,708
95
(175)
172
–
92
2022
$m
3,402
(2,005)
2
(86)
7
1,320
–
1,320
(17)
(535)
39
(14)
(2)
1
(528)
–
(528)
60
(224)
–
(17)
(128)
–
(459)
(768)
–
(768)
24
–
149
(1)
172
606060
AURIZON ANNUAL REPORT 2022–23 Notes to the consolidated financial statements
30 June 2023
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 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
The financial report is a general purpose financial report which:
— for example acquisitions or divestments; or
› has been prepared on the going concern basis of accounting;
› 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
$1,000,000 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 2022; 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 2023 (FY2023) has been authorised for issue in accordance with
a resolution of the Directors on 14 August 2023. 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 life of Network infrastructure assets
Useful lives of rollingstock
Recoverable amount of property, plant and
equipment (Western Australia cash generating
unit (CGU))
Impairment tests for goodwill (Bulk Queensland,
Bulk New South Wales and Bulk Central CGUs)
Business combination
Note
2
8
8
8
9
22
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.
› 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) Acquisition of subsidiaries and interests in joint ventures
One Rail Australia
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 general and limited partnership
interests in Aurizon Bulk Central Holdings LP (formerly One Rail Australia
Holdings LP). Aurizon Bulk Central Holdings LP and its subsidiaries are
collectively referred to as ‘One Rail Australia’. The acquisition completed
on 29 July 2022 for consideration of $2,404 million.
One Rail Australia comprised two main business segments:
› One Rail Bulk: Integrated bulk rail haulage and general freight assets
in South Australia and the Northern Territory and below rail operator
and economic owner of 2,460km of rail infrastructure including the
2,245km Tarcoola-to-Darwin railway line; and
› East Coast Rail: Coal haulage in New South Wales and Queensland.
One Rail Bulk has been integrated into the Group’s Bulk segment and renamed
Aurizon Bulk Central. Aurizon Bulk Central is the only rail freight operator
along the South Australia/Northern Territory corridor and products hauled
include copper, grain, iron ore, gypsum and containerised freight. Aurizon Bulk
Central also manages the Tarcoola-to-Darwin rail infrastructure, and the
intrastate rail freight network in South Australia. Provision of access to the
below rail infrastructure is regulated by the Essential Services Commission of
South Australia (ESCOSA).
The investments held in the East Coast Rail entities were transferred to One
Rail Australia Holdings Limited (ORAH) (formerly NHK Pty Ltd), a subsidiary
of the Company, on 29 July 2022. During the year, the Group completed the
divestment of ORAH in accordance with the Company’s Undertaking to the
Australian Competition and Consumer Commission (ACCC) as part of its
acquisition of One Rail Australia. Refer to section (b) for further information on
the divestment of ORAH.
The acquisition of One Rail Australia was funded from cash, existing bank
debt facilities and new bank debt facilities. Refer to note 18(b)(i) for further
information on the Group’s financing arrangements.
Acquisition costs of $49 million (2022: $14 million) including landholder duty,
advisory fees and other costs have been expensed to profit or loss during the
year and classified in other expenses. This amount has been classified as a
significant item in continuing operations.
Refer to note 22 for further information on the One Rail Australia acquisition.
61
FINANCIAL REPORT Notes to the consolidated financial statements
30 June 2023 (continued)
Key events and transactions for
the reporting period (continued)
(a) Acquisition of subsidiaries and interests in joint
ventures (continued)
Ox Mountain Limited
The Group increased its ownership interest in Ox Mountain Limited
(UK registered) from 42% to 69% on 9 January 2023 for consideration of
$30 million. Ox Mountain Limited is a maintenance software developer
and distributor focusing on asset intensive sectors such as mining and rail
operations/infrastructure and has customers and operations in Australia
and globally. The investment continues to be classified as a joint venture
due to the Group having joint control and is accounted for using the
equity method of accounting.
(b) Disposals
One Rail Australia Holdings Limited (ORAH)
The Group completed the sale of ORAH to Magnetic Rail Group Pty
Ltd (Magnetic) on 17 February 2023 for consideration of $438 million
including completion adjustments. The total consideration includes
$313 million cash proceeds received on completion of the sale and
$125 million cash proceeds receivable in February 2024. On completion
of the sale, Magnetic assumed ORAH’s existing borrowings of
$474 million.
The loss from discontinued operations after tax of $48 million for the
year includes operating net profit after tax for the period 30 July 2022 to
17 February 2023 of $34 million excluding significant items.
Refer to note 23 for further information on the discontinued operation.
(c) Debt financing
Aurizon Operations Limited (via a wholly owned subsidiary
Aurizon Finance Pty Ltd)
To fund the acquisition of One Rail Australia in July 2022, the Group
added $1,450 million of capacity to existing unsecured bank debt
facilities. The additional capacity included a $650 million bridge
facility maturing July 2024, a $400 million revolving facility maturing
July 2025, and a $400 million term loan facility maturing July 2027.
The $650 million bridge facility has been partly repaid during FY2023,
with the facility limit reduced to $350 million at reporting date.
The Group successfully priced a US Private Placement (USPP) comprising
of both USD and AUD tranches (~A$503 million equivalent) in June 2023
which settled subsequent to the reporting date on 26 July 2023
(Finance USPP). The proceeds from the Finance USPP have been used
to repay the remainder of the $350 million bridge facility drawn to
fund the acquisition of One Rail Australia. The Finance USPP includes
a A$50 million tranche maturing July 2033, a A$50 million tranche
maturing July 2034, a US$133 million tranche maturing July 2030, a
US$70 million tranche maturing July 2033 and a US$70 million tranche
maturing July 2035. Cross-currency interest rate swaps covering the
entirety of the US$273 million issued have been executed to swap USD
tranches to AUD floating rate debt.
In June 2023, the Group also re-financed existing floating rate bilateral
facilities and reduced the capacity from $625 million to $605 million
(the capacity at reporting date was $555 million, with $50 million
capacity added on 3 July 2023). The re-financed bilateral facilities
include $465 million ($415 million at reporting date) maturing July 2026,
$65 million maturing November 2023, and $75 million maturing
November 2025. The maturity of the $125 million working capital facility
was also extended to June 2024.
Floating-to-fixed rate interest rate swaps with a notional amount of
$1,550 million have been executed with a range of maturities from
three to 10 years. As at 30 June 2023, variable rate borrowings are 98%
hedged through fixed rate interest rate swaps for an average period of
4.6 years.
Aurizon Network Pty Ltd (Network)
The Group privately placed two AUD fixed rate Medium-Term Notes
(AMTNs) in December 2022, including a $50 million AMTN maturing
December 2032 (Network AMTN 6) and a $20 million AMTN maturing
December 2034 (Network AMTN 7). The capacity of Network AMTN 6
was increased by $30 million to $80 million in February 2023. Interest
rate swaps with a notional amount of $100 million have been executed to
swap the fixed rate AMTNs to floating rate debt.
In January 2023, the Group re-financed existing floating rate bilateral
facilities and reduced the capacity from $1,200 million to $1,090 million.
The re-financed bilateral facilities include $575 million maturing January
2026, $310 million maturing January 2027, and $205 million maturing
January 2028. The maturity of the $75 million working capital facility was
extended to June 2024.
The Group successfully priced a USPP comprising of both USD and AUD
tranches (~A$306 million equivalent) in April 2023, which settled in June
2023 (Network USPP). The proceeds from the Network USPP, along with
Network AMTN 6 and Network AMTN 7, will be used to repay Network
AMTN 2 maturing June 2024. In the interim period, the proceeds have
been used to repay drawn bank debt facilities. The Network USPP
includes a A$55.5 million tranche maturing June 2033, a A$55.5 million
tranche maturing June 2035, a US$87 million tranche maturing June
2033, and a US$45 million tranche maturing June 2035. Cross-currency
interest rate swaps covering the entirety of the US$132 million have been
executed to swap USD tranches to AUD floating rate debt.
Floating-to-fixed interest rate swaps with a notional amount of $2,300
million matured June 2023, in line with the WACC reset date in the 2017
Access Undertaking (UT5). The floating-to-fixed interest rate swaps were
replaced with a notional amount of $2,900 million (including $570 million
future dated swaps) maturing June 2027 to align with the remaining term
of UT5. As at 30 June 2023, variable rate borrowings are 88% hedged
through fixed rate interest rate swaps for an average period of 4.0 years.
626262
AURIZON ANNUAL REPORT 2022–23 Notes to the consolidated financial statements
30 June 2023
Key events and transactions for
the reporting period (continued)
(d) Access revenue
2017 Access Undertaking (UT5)
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 Network notifying the Chair of the Rail Industry Group (RIG) of its
proposed options to address any capacity deficits identified in the Initial
Capacity Assessment Report (ICAR) of the Central Queensland Coal
Network (CQCN) completed by the Independent Expert appointed under
UT5 (Report Date).
On 15 December 2022, the QCA rejected the FY2022 Revenue Adjustment
Amount of $45 million (net under-recovery) ($33 million excluding
GAPE) on the view that the Report Date was 14 March 2022, instead of
12 November 2021 used to calculate the FY2022 Revenue Adjustment
Amount. Network submitted an amended FY2022 Revenue Adjustment
Amount of $36 million (net under-recovery) ($25 million excluding
GAPE) on 20 January 2023 in compliance with the QCA’s decision,
so as to ensure the other aspects of the QCA’s decision could operate
without delays arising, and reserved its rights in relation to the proper
interpretation of the Report Date. On the same day, Network lodged
an application with the Supreme Court of Queensland to appeal the
QCA’s decision, seeking a declaration from the court about the proper
interpretation of the definition of Report Date. The Supreme Court
hearing took place on 14 June 2023. On 28 July 2023, the Supreme Court
dismissed Network's application and decided that the Report Date is
14 March 2022. Network is considering the judgement and next steps.
At this time, there is no requirement for any further adjustment to
FY2024 tariffs.
The QCA’s decision has no impact on FY2023 access revenue as the
FY2022 Revenue Adjustment Amount will be reflected in reference tariffs
for FY2024.
In FY2023 annual volumes were lower than the regulatory forecast
resulting in Take-or-Pay of $100.2 million ($76.1 million excluding
GAPE) being recognised. In addition, there was a net under-recovery
amount of approximately $31.5 million ($27.2 million excluding GAPE)
which represents the FY2023 Revenue Adjustment Amount that will
be recovered in FY2025. The FY2023 Revenue Adjustment Amount is
subject to approval by the QCA.
UT5 includes a defined process to reset the WACC at 1 July 2023
(Preliminary Reset Values) and 1 July 2024 (Final Reset Values).
On 25 May 2023, the QCA approved Preliminary Reset Values, including
a WACC of 8.18% (applying a risk-free rate of 3.47% and a debt risk
premium of 2.60%), to be incorporated into reference tariffs for FY2024.
On 31 July 2023, Network submitted to the QCA the Final Reset Values
including a WACC of 8.51% (applying a risk-free rate of 3.87% and a debt
risk premium of 2.48%). Network is providing additional information
to the QCA in support of its submission prior to it being published.
Following a QCA consultation and decision process on the Final Reset
Values, the WACC will be incorporated into reference tariffs for FY2025.
Any difference between the Preliminary and Final Reset allowable
revenues for FY2024 will be reconciled through the FY2024 Revenue
Adjustment Amount and reflected in reference tariffs for FY2026.
63
FINANCIAL REPORT Results for the year
IN THIS SECTION
Results for the year provides segment information and a
breakdown of individual line items in the consolidated income
statement that the Directors consider most relevant, including a
summary of the accounting policies, judgements and estimates
relevant to understanding these line items.
1
Segment information
2 Revenue
3 Expenses
4
Income tax
5 Earnings per share
Page 65
Page 68
Page 70
Page 70
Page 72
646464
Section Title (continued)AURIZON ANNUAL REPORT 2022–23 Notes to the consolidated financial statements
30 June 2023 (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).
The following segment information has been presented for continuing
operations only.
(a) Description of reportable segments
The following summary describes the operations of each reportable
segment:
Network
This segment manages the provision of access to the CQCN rail
infrastructure and operation and maintenance of the network.
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 Australia.
This segment also manages the Tarcoola-to-Darwin rail infrastructure, the
intrastate rail freight network in South Australia, and containerised freight
services between Adelaide and Darwin.
Other
This segment includes other containerised freight, which is not
considered a separate reportable segment, as well as other revenue and
central costs not allocated such as Board, Managing Director & CEO,
Company Secretary, strategy and investor relations.
65
FINANCIAL REPORT Notes to the consolidated financial statements
30 June 2023 (continued)
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 2023
External revenue
Revenue from external customers
Services revenue
Track access
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 items (note 1(c))
EBIT2
Net finance costs
Profit before income tax from continuing operations
849
–
34
38
921
406
–
10
416
1,337
–
1,337
813
(351)
462
350
1,175
–
6
–
1,018
6
16
1,531
1,040
–
–
–
–
1,531
–
1,531
455
(204)
251
–
17
6
23
1,063
–
1,063
214
(108)
106
–
6
–
13
19
–
–
–
–
19
–
19
(54)
(3)
(57)
1,199
2,199
40
73
3,511
406
17
16
439
3,950
–
3,950
(439)
3,511
1,428
(666)
762
(49)
713
(230)
483
1 As a result of the integrated bulk rail haulage and general freight assets in South Australia and the Northern Territory, freight transport revenue for Bulk includes track
access as it is not separately invoiced to customers.
2 Refer to page 119 for Non-IFRS Financial Information.
666666
AURIZON ANNUAL REPORT 2022–23
Notes to the consolidated financial statements
30 June 2023 (continued)
1 Segment information (continued)
(b) Segment information (continued)
Network
$m
Coal
$m
Bulk1
$m
Other1
$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)2
Depreciation and amortisation
Continuing EBIT (Underlying)2
Significant items (note 1(c))
EBIT2
Net finance costs
752
–
16
33
801
382
–
10
392
1,193
–
1,193
801
(345)
456
360
1,195
–
4
1,559
–
–
–
–
1,559
–
1,559
541
(208)
333
–
657
15
5
677
–
15
6
21
698
2
700
135
(39)
96
–
1
–
10
11
–
–
–
–
11
25
36
(10)
–
(10)
Profit before income tax from continuing operations
1 The Bulk and Other segments for FY2022 have been restated for consistency with current year presentation.
2 Refer to page 119 for Non-IFRS Financial Information.
1,112
1,853
31
52
3,048
382
15
16
413
3,461
27
3,488
(413)
3,075
1,467
(592)
875
(14)
861
(125)
736
67
FINANCIAL REPORT
Notes to the consolidated financial statements
30 June 2023 (continued)
1 Segment information (continued)
(c) Significant items
(a) Disaggregation of revenue from contracts
with customers
Revenue is disaggregated by the Group’s reportable segments, refer
to note 1(b).
The Group’s underlying results differ from the statutory results.
The exclusion of certain items permits a more relevant analysis of the
Group’s underlying performance on a comparative basis.
(b) Contract assets and liabilities
(i) Contract assets
The Group has recognised the following revenue-related contract assets:
Acquisition costs for One Rail Australia
2023
$m
(49)
2022
$m
(14)
Current
2023
$m
2022
$m
11
64
9
41
Contract assets for freight transport
Non-current
Contract assets for freight transport
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 (2022: $nil).
Within one year
Later than one year but not later than five years
Later than five years
2023
$m
2022
$m
11
45
19
75
9
36
5
50
(ii) Contract liabilities
The Group has recognised the following revenue-related contract liabilities:
Current
Advances for freight transport
Advances for other services
Non-current
Advances for freight transport
Advances for other services
2023
$m
2022
$m
9
55
64
10
70
80
2
46
48
12
97
109
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 either as volumes are delivered or on a straight
line basis over the contract term, as performance obligations are satisfied
over time.
Significant items is reconciled in the Non-IFRS Financial Information on
page 119.
(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:
Customer 1
Customer 2
Total
2023
$m
570
532
1,102
20221
$m
573
532
1,105
1 Amounts for FY2022 have been updated.
2 Revenue
2023
Credit
Rating
A-
BBB+
2022
Credit
Rating
A-
BBB+
The Group recognises revenue primarily from the provision
of freight haulage services across Australia and the
provision of access to the CQCN, and the rail infrastructure
in South Australia and the Northern Territory.
The Group derives the following types of revenue from the provision of
services over time:
Services revenue
Track access
Freight transport
Other services
Other revenue1
2023
$m
2022
$m
1,199
2,199
40
73
1,112
1,853
31
52
Total revenue from continuing operations
3,511
3,048
1 Other revenue includes revenue from customer-funded infrastructure and
property leases.
686868
AURIZON ANNUAL REPORT 2022–23
Notes to the consolidated financial statements
30 June 2023 (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
2023
$m
2022
$m
64
61
19
144
48
80
29
157
The decrease in contract liabilities represents revenue recognised for 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 freight transport
Advances for other services
2023
$m
2022
$m
–
3
42
45
26
6
25
57
(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 2023, future contracted revenues for contracts with a
timing difference are approximately $1,799 million (2022: $2,014 million),
of which $550 million is expected to be recognised in FY2024. These
amounts relate to track access, freight transport and other services from
contracts with customers. Future contracted revenues are in FY2023
dollars. Variable revenue is not included. As such, the future contracted
revenues described above represent only part of the Group’s forecast
revenues for FY2024 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
Network 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 cancellations which are determined to be either
of below rail cause, above rail operator cause and/or mine cause.
This determination impacts the calculation of Take-or-Pay and the
receivable recognised in the year that the contractual railings were
not achieved as a result of rail operator and/or mine cancellations.
At the reporting date, the Group recognised Take-or-Pay revenue of
$59 million (2022: $28 million), after an adjustment for Take-or-Pay
eliminated on consolidation. Take-or-Pay will be collected in the first
half of FY2024.
(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 reporting 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% (2022: 6.30%).
Refer to key events and transactions for further information.
Track access revenue is also generated from the provision of access
to, and operation of, the rail infrastructure in South Australia and the
Northern Territory. Track access revenue is recognised over time as
access to the rail network is provided. Track access revenue recognised
for services provided between related parties within the Group, as a
result of the integrated bulk rail haulage and general freight assets in
South Australia and the Northern Territory, are eliminated.
(ii) Freight transport
Freight transport revenue is recognised as the relevant performance
obligations are satisfied over time, being the provision of freight
transport services.
69
FINANCIAL REPORT Notes to the consolidated financial statements
30 June 2023 (continued)
2 Revenue (continued)
(c) Accounting policies (continued)
(ii) Freight transport (continued)
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 reporting
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.
3 Expenses
Profit before income tax from continuing operations includes the
following specific expenses:
Employee benefits expense
Salaries, wages and allowances including on-costs
Defined contribution superannuation expense
Redundancies
Depreciation and amortisation
Depreciation of property, plant and equipment
Amortisation of intangibles
2023
$m
2022
$m
888
84
5
977
637
29
666
767
74
12
853
563
29
592
Finance expenses
Interest and finance charges paid/payable
218
127
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.
Discounting of land rehabilitation provision
Interest paid on lease liability
Amortisation of capitalised borrowing costs
Amortisation of AMTN 2 fair value adjustment
(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.
Hedge ineffectiveness1
Capitalised interest paid on qualifying assets
1 Refer to the accounting policy in note 18.
4 Income tax
1
6
6
(2)
8
237
(4)
233
1
5
4
(2)
(6)
129
(2)
127
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:
Profit from continuing operations
Loss from discontinued operations
Deferred income tax expense included in
income tax expense comprises:
(Increase)/decrease in deferred tax assets
Increase in deferred tax liabilities
2023
$m
2022
$m
47
102
(8)
12
153
159
(6)
153
(13)
127
114
180
43
(16)
16
223
223
–
223
24
35
59
707070
AURIZON ANNUAL REPORT 2022–23 Notes to the consolidated financial statements
30 June 2023 (continued)
4 Income tax (continued)
(b) Numerical reconciliation of income tax expense to prima
facie tax payable
The Group has unused capital losses for which no deferred tax asset has
been recognised of $28 million (2022: $nil), which arose from the sale of
ORAH. These losses can be carried forward indefinitely and may be used
to reduce future capital gains.
The table below outlines the items which comprise deferred income tax
expense:
Profit before income tax expense from
continuing operations
Loss before income tax expense from
discontinued operations
Tax at the Australian tax rate of 30% (2022: 30%)
Tax effect of amounts which are not deductible
(taxable) in calculating taxable income:
Non-deductible acquisition costs
Non-deductible sale and divestment costs
Non recognition of capital loss
on impairment
Non recognition of capital loss on disposal
Other
Adjustments for tax of prior periods
2023
$m
2022
$m
483
736
(54)
429
129
–
736
221
Provisions and accruals
Contract liabilities
Financial instruments
Lease liabilities
Other items
9
4
4
1
2
4
2
–
–
–
–
–
(Increase)/decrease in deferred tax assets
Inventories
Property, plant and equipment
Intangible assets
Financial instruments
Other items
Increase in deferred tax liabilities
Net deferred income tax expense
153
223
2023
$m
2022
$m
1
(3)
(13)
3
(1)
(13)
1
97
3
12
14
127
114
12
(6)
15
5
(2)
24
5
52
(4)
(13)
(5)
35
59
(c) Deferred tax balances
The table below outlines the items which comprise the deferred tax
balances:
2023
$m
2022
$m
Deferred tax assets
Provisions and accruals
Contract liabilities
Financial instruments
Lease liabilities
Other items
Total deferred tax assets
Set-off against deferred tax liabilities
Net deferred tax assets
Deferred tax liabilities
Inventories
Property, plant and equipment
Intangible assets
Financial instruments
Other items
Total deferred tax liabilities
Set-off of deferred tax assets
Net deferred tax liabilities
109
13
34
40
15
211
(211)
–
6
1,024
32
50
39
1,151
(211)
940
101
10
17
37
12
177
(177)
–
5
900
29
25
15
974
(177)
797
(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 or 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.
71
FINANCIAL REPORT Notes to the consolidated financial statements
30 June 2023 (continued)
4 Income tax (continued)
(d) Accounting policies (continued)
(ii) Deferred tax
Deferred tax represents taxes to be paid or deductions available in future
income years and any adjustment to deferred tax amounts in respect
of prior periods. Deferred tax is recognised on temporary differences
arising between the tax bases of assets and liabilities, and their carrying
amounts in the consolidated financial statements, except:
› when arising on the initial recognition of goodwill;
› when arising from the initial recognition of assets or liabilities in a
transaction that is not a business combination and that affects neither
accounting or taxable profit; or
› where it is not probable that future amounts will be available to utilise
those temporary differences or carried-forward tax losses.
(iii) Offsetting deferred tax balances
Deferred tax assets and liabilities are offset where there is a legally
enforceable right to offset and when the deferred tax balances relate to
taxes levied by the same tax authority.
(iv) Tax consolidation legislation
The Company and its wholly owned Australian entities elected to form a
tax consolidated group, and are taxed as a single entity. The head entity
of the tax consolidated group is Aurizon Holdings Limited.
The Company and the entities in the tax consolidated group account
for their own current and deferred tax amounts. These tax amounts are
measured as if each entity in the tax consolidated group continues to be
a stand-alone taxpayer.
In addition to its own current and deferred tax amounts, the Company
also recognises the current tax liabilities (or assets) and the deferred tax
assets arising from unused tax losses and unused tax credits assumed
from entities in the tax consolidated group.
The entities have entered into tax sharing and tax funding agreements.
The tax funding agreement sets out the funding obligations of members
of the tax consolidated group in respect of income tax amounts and
requires payments to the Company equal to the current tax liability
assumed by the Company. The Company is required to make payments
equal to the current tax asset or deferred tax asset arising from unused
tax losses and tax credits assumed from a subsidiary member. The tax
funding arrangement results in the Company recognising a current
inter-entity receivable 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.
(v) Pillar Two income taxes
The Group is currently assessing the impact of AASB 2023-2
Amendments to Australian Accounting Standards — International Tax
Reform — Pillar Two Model Rules (the Amendments) as the Company
has a subsidiary incorporated in the United Kingdom that is not an
Australian resident for tax purposes. The Amendments clarify that AASB
112 Income Taxes applies to income taxes arising from tax law enacted or
substantively enacted to implement the Pillar Two Model Rules published
by the Organisation for Economic Co-operation and Development
(OECD), including tax law that implements qualified domestic minimum
top-up taxes. Such tax legislation, and the income taxes arising from
it, are referred to as ‘Pillar Two legislation’ and ‘Pillar Two income
taxes’. The Group has applied the mandatory temporary exception to
recognising and disclosing information about deferred tax assets and
liabilities related to Pillar Two income taxes.
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.
Basic earnings per share
Continuing operations
Discontinued operations
Diluted earnings per share
Continuing operations
Discontinued operations
Underlying basic earnings per share1
Continuing operations
Discontinued operations
2023
Cents
2022
Cents
17.6
(2.6)
15.0
17.6
(2.6)
15.0
19.9
1.9
21.8
27.9
–
27.9
27.8
–
27.8
28.5
–
28.5
1 Underlying basic earnings per share has been calculated by dividing the net
profit after tax for continuing operations of $324 million, less significant items,
net of tax, of $43 million by the weighted average number of ordinary shares
outstanding of 1,841 million.
Weighted average number of ordinary
shares for basic earnings per share
Dilution due to rights issued pursuant to
performance rights plans
Weighted average number of ordinary
shares for diluted earnings per share
2023
Number
’000
2022
Number
’000
1,840,704
1,840,605
3,794
3,992
1,844,498
1,844,597
727272
AURIZON ANNUAL REPORT 2022–23 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 74
Page 74
Page 75
Page 81
Page 83
Page 83
Page 84
Page 85
73
FINANCIAL REPORT Notes to the consolidated financial statements
30 June 2023 (continued)
6 Trade and other receivables
7 Inventories
Current
Raw materials and stores — at cost
Provision for inventory obsolescence
Non-current
Raw materials and stores — at cost
Provision for inventory obsolescence
(a) Accounting policies
2023
$m
2022
$m
246
(11)
235
73
(13)
60
194
(8)
186
69
(13)
56
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.
Current
Trade receivables
Provision for impairment
Net trade receivables
Other receivables1
2023
$m
2022
$m
395
(2)
393
335
728
313
(1)
312
122
434
1 Other receivables includes revenue for services performed but not yet invoiced
under contracts including Take-or-Pay of $59 million (2022: $28 million),
annual GAPE fees of $33 million (2022: $34 million) and deferred consideration
receivable of $125 million (2022: $nil) in respect of the sale of ORAH (refer to
note 23).
The Group has recognised a net increase of $1 million (2022: net
reduction of $2 million) in the provision for impairment of trade
receivables. No amounts were written off in the financial year
(2022: $nil).
(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.
747474
AURIZON ANNUAL REPORT 2022–23 Notes to the consolidated financial statements
30 June 2023 (continued)
8 Property, plant and equipment
Assets under
construction
$m
Land
$m
Buildings
$m
Plant and
equipment
$m
Rollingstock
$m
Infrastructure
$m
2023
Opening net book amount
Additions
Transfers between asset classes
Acquisitions through business
combinations (note 22)
Disposals
Depreciation
Impairment
278
764
(782)
37
–
–
–
128
–
28
78
–
(2)
–
Closing net book amount
297
232
225
–
4
4
–
(14)
–
219
307
–
83
16
(3)
(52)
–
351
2,127
–
292
227
(1)
(195)
(8)
2,442
5,267
–
375
1,026
(5)
(359)
(1)
6,303
Other
leased
assets
$m
84
11
–
21
–
(15)
–
101
Total
$m
8,416
775
–
1,409
(9)
(637)
(9)
9,945
At 30 June 2023
Cost
Accumulated depreciation
and impairment
Net book amount
2022
Opening net book amount
Additions
Transfers between asset classes
Acquisitions through
business combinations
Disposals
Depreciation
Impairment
Closing net book amount
At 30 June 2022
Cost
Accumulated depreciation
and impairment
Net book amount
297
234
475
823
6,055
9,808
160
17,852
–
297
239
521
(481)
–
–
–
(1)
278
(2)
232
(256)
219
(472)
351
(3,613)
2,442
(3,505)
6,303
(59)
(7,907)
101
9,945
124
235
–
–
5
(1)
–
–
128
–
6
–
(3)
(13)
–
225
269
–
78
6
(1)
(45)
–
307
2,171
–
136
–
(4)
(175)
(1)
2,127
5,321
–
261
4
(2)
(317)
–
5,267
95
8,454
2
–
–
–
523
–
15
(11)
(13)
(563)
–
84
(2)
8,416
278
128
470
762
5,548
8,429
136
15,751
–
278
–
128
(245)
225
(455)
307
(3,421)
2,127
(3,162)
5,267
(52)
(7,335)
84
8,416
75
FINANCIAL REPORT Notes to the consolidated financial statements
30 June 2023 (continued)
8 Property, plant and equipment (continued)
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.
The Group assumes the regulatory framework continues throughout the
lease term.
Indicators
The key drivers for the future supply and demand for Australian
metallurgical coal over the short term as well as risks that emerge
over the medium to long term where the timing and magnitude is less
certain are reviewed annually to assess the appropriateness of useful
lives assigned to Network infrastructure assets. Indicators monitored
include the following:
› government policies, including the ability of customers to gain
regulatory approvals and raise funding to support the development
of metallurgical coal reserves in the CQCN
› global crude steel production and the share of Australian
metallurgical coal used in the process
› 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 metallurgical coal demand
› the average age of steel plants for end markets of Australian
metallurgical coal
› global supply competitiveness and Australia’s share of seaborne
metallurgical coal supply
› 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.
SIGNIFICANT JUDGEMENTS AND ESTIMATES
Useful life of Network infrastructure assets
The Group is the below rail operator and economic owner of the
2,670km CQCN through a long term lease. Network is responsible for
the provision of access to, and operation of the regulated infrastructure
assets which connect 40 coal mines to five export terminals, as well
as to domestic customers. The useful life of infrastructure assets is
determined based on the expected engineering life, capped at the
remaining term of the infrastructure lease. In adopting this basis, the
Group assumes that the infrastructure assets will remain economically
viable throughout the lease term which, as explained further below,
is dependent on the ongoing future supply and demand for
Australian coal.
Around 70% of volume hauled across the CQCN is metallurgical coal
which is primarily used to produce steel. Thermal coal, which is used
as a heat source in energy generation, accounts for the remaining
30% of volume hauled. Metallurgical coal is expected to be in demand
for longer than thermal coal. The useful life of Network infrastructure
assets will be impacted by the future supply and demand for Australian
metallurgical coal rather than thermal coal.
As part of the Group’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 supply and demand for commodities transported over the
short term as well as risks that emerge over the medium to long term.
This analysis is extended over the lease term where the timing and
magnitude is less certain.
The future supply of Australian metallurgical coal is dependent
on government policies, including the ability of customers to gain
regulatory approvals and raise funding to support the development
of their resource base. Demand for Australian metallurgical coal
is dependent on seaborne-traded markets which are increasingly
concentrated in Asia and linked to Asian steel production. Future
demand is dependent on economic development in Asia including steel
intensive growth, alternatives to steel and current steel production
methods, technology advancements, competing supply of metallurgical
coal, and changes in government policies including preference for
domestic or imported coal and net-zero emission targets. Major
import nations of Australian metallurgical coal with net-zero emissions
targets include India (2070), Japan (2050), South Korea (2050) and
China (2060).
Regulatory framework considerations
As the CQCN is a regulated asset, 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.
767676
AURIZON ANNUAL REPORT 2022–23
Notes to the consolidated financial statements
30 June 2023 (continued)
8 Property, plant and equipment (continued)
Sensitivity
The indicators monitored are extended over the lease term where
the timing and magnitude is less certain. Consequently, a change in
indicators reviewed may result in a revision of useful lives assigned to
the Network infrastructure assets in the future, resulting in a change
in depreciation on a prospective basis. The graph below summarises
the annual depreciation profile of the current written down value
of Network infrastructure assets of $4,907 million (leased assets of
$4,361 million and owned assets of $546 million) over the useful life
applied for each class of assets described in note 8(b)(i) and excludes
future capital investments.
FIGURE 1 — NETWORK INFRASTRUCTURE ASSETS
DEPRECIATION PROFILE
l
m
$
e
u
a
V
n
w
o
D
n
e
t
t
i
r
W
Current Infrastructure Asset Profile
6,000
5,000
4,000
3,000
2,000
1,000
2030 2040 2050 2060 2070
2080 2090 2100
Financial Year
Written Down Value $m
Annual Depreciation $m
350
300
250
200
150
100
50
0
m
$
n
o
i
t
a
c
e
r
p
e
D
i
l
a
u
n
n
A
The Network 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 Network
infrastructure assets are reduced by 10, 20, 30 or 40 years.
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
The Group has approximately 592 active locomotives and 13,438 active
wagons, which are predominately used by the Coal and Bulk business
units to transport bulk commodities and containerised freight to end
customers and ports. The fleet is a mix of standard gauge and narrow
gauge, with 138 active electric locomotives and 454 active diesel
locomotives. The useful life of rollingstock is determined based on the
expected engineering life.
In adopting the expected engineering life of rollingstock, the Group
monitors a range of indicators including:
› the flexibility of fleet capacity, including the ability to shift standard
gauge fleet between New South Wales, Western Australia, South
Australia and the Northern Territory, narrow gauge fleet between
Queensland and sections of track infrastructure in South Australia
and Western Australia, and between commodities within states
› the risk of obsolescence as alternative technologies such as battery
and hydrogen 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
› competitors fleet mix and their associated investment profile
over time.
There is a risk that the indicators monitored could positively or
negatively impact the expected engineering life of rollingstock resulting
in a change in depreciation on a prospective basis.
Recoverable amount of property, plant and equipment
(Western Australia CGU)
The Western Australia CGU provides integrated supply chain services
including road transportation and material handling for a range of
products and has previously been impaired. The Western Australia CGU
has a carrying amount of $333 million and includes property, plant
and equipment, software and working capital. There are indicators the
previously recognised impairment losses for the Western Australia CGU
may no longer be required. The recoverable amount of the Western
Australia CGU has been determined based on a value-in-use calculation.
The estimate uses a four-year cash flow projection (2022: four-year),
a pre-tax discount rate of 11.63% (2022: 11.5%) and a long-term growth
rate of 2.5% (2022: 2.5%). The recoverable amount of the CGU supports
the carrying amount, therefore no further impairment or impairment
reversal has been recognised.
The Western Australia CGU has a small number of customers,
and the recoverable amount is sensitive to changes in these
customer contractual arrangements, particularly iron ore customers.
The recoverable amount of the CGU was determined taking into
consideration the expected expiry and renewal of iron ore customer
contracts. Should contracts with customers not be renewed, or
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 further impairment.
In addition, the terminal value calculation assumes a level of sustaining
capital expenditure into perpetuity and the recoverable amount is
sensitive to changes in this estimate. If the amount of sustaining capital
expenditure required is lower or higher than the estimated amount,
it may result in a further impairment or impairment reversal.
77
FINANCIAL REPORT
Notes to the consolidated financial statements
30 June 2023 (continued)
8 Property, plant and equipment (continued)
(a) Leases
Network and Bulk leased assets
The Group is the below rail operator and economic owner of more than 5,100km of rail infrastructure including the 2,670km CQCN and the 2,245km
Tarcoola-to-Darwin railway line through long term leases. The infrastructure and land leases include corridor land and buildings. The assets associated
with the leases are classified in infrastructure, land, buildings and plant and equipment.
The following table summarises the infrastructure and land leases:
Leases
Lessee
Lessor
Term
Expiry
Rental
Amount
Extension
Option
Network leased assets
CQCN
Aurizon Network Pty Ltd
Part of the North
Coast Line
Aurizon Network Pty Ltd
Bulk leased assets
Tarcoola-to-
Darwin
Aurizon Bulk Central
Network Pty Ltd
State of Queensland (land)
and Queensland Treasury
Holdings (infrastructure)
State of Queensland (land)
and Queensland Rail
(infrastructure)
The AustralAsia Railway
Corporation, The Northern
Territory of Australia and the
State of South Australia
99 years
30 June 2109
$1 if demanded
99 years1
99 years
30 June 2109
$1 if demanded
99 years1
32 years3
14 January
2054
$1 if demanded
None
Intrastate rail
freight network in
South Australia
Aurizon Bulk Central
Pty Ltd
State of South Australia
25 years3
7 November
2047
15 years2
$1 per annum (rail
corridor land) and
commercial rent
(balance of land)
1 The State of Queensland and Queensland Rail have an option to extend the leases by a further 99 years. The extension option is on the same terms as the initial lease
period. Notice must be provided at least 20 years prior to the expiry of the existing term. The extension option under the corridor land leases are dependent on the
infrastructure lease extension being exercised and granted.
2 The Group has an option to extend the lease by a further 15 years. The extension option is on the same terms as the initial lease period. Notice must be provided at any
time after the expiry of 40 years and before the expiry of 45 years after the commencement date of 7 November 1997. The extension option is dependent on the Group
providing and undertaking to carry out a Renewal Investment Plan.
3 Remaining lease term from 29 July 2022, being the date of acquisition of the lessee company.
Other leased assets
The Group primarily leases buildings with terms mostly ranging from one to 32 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.
787878
AURIZON ANNUAL REPORT 2022–23 Notes to the consolidated financial statements
30 June 2023 (continued)
8 Property, plant and equipment
(continued)
(a) Leases (continued)
(ii) Amounts recognised in the consolidated income statement
The consolidated income statement includes the following amounts
relating to leased assets:
(i) Amounts recognised in the consolidated balance sheet
Property, plant and equipment includes the following amounts relating to
leased assets:
Depreciation of Network and Bulk
leased assets
2023
$m
2022
$m
Network leased assets
Bulk leased assets
4,361
4,307
Depreciation of other leased assets
26
1
26
2
Buildings
Plant and equipment
4,388
4,335
Rollingstock
2023
$m
2022
$m
275
34
309
11
2
2
15
265
–
265
10
3
–
13
Network leased assets1
Network infrastructure
Corridor land
Buildings
Bulk leased assets2
Bulk infrastructure
Land3
Buildings
Plant and equipment
Other leased assets
Land
Buildings
Plant and equipment
Rollingstock
Total leased assets
5,555
4,419
Other liabilities includes the following amounts relating to lease liabilities:
Lease liabilities
Current
Non-current
Total lease liabilities
2023
$m
2022
$m
20
114
134
16
107
123
1 Network leased assets include the CQCN and part of the North Coast Line.
2 Bulk leased assets include the Tarcoola-to-Darwin railway line and the intrastate
rail freight network in South Australia. Leased assets have been recognised
on acquisition to reflect favourable or unfavourable terms of a lease when
compared to market terms and are depreciated over the lease term.
3 Land includes the beneficial leasehold interests in respect of the intrastate rail
freight network in South Australia.
996
66
2
2
1,066
5
83
7
6
101
–
–
–
–
–
–
83
1
–
84
Total leased assets depreciation
324
278
Interest expense
Expenses relating to short-term leases
Expenses relating to variable lease payments
not included in lease liabilities
6
1
5
5
1
8
The total cash outflow for leases during the financial year was $31 million
(2022: $30 million).
(b) Accounting policies
(i) Property, plant and equipment
Carrying value
Property, plant and equipment (including leased 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.
79
FINANCIAL REPORT Notes to the consolidated financial statements
30 June 2023 (continued)
Other leased 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.
Other leased assets are generally depreciated over the shorter of the
asset’s useful life and the lease term on a straight-line basis. If the
Group is reasonably certain to exercise a purchase option, the asset is
depreciated over the underlying asset’s useful life.
(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 costs 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.
8 Property, plant and equipment
(continued)
(b) Accounting policies (continued)
(i) Property, plant and equipment (continued)
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.
(ii) Leases
An asset and a corresponding liability, except for where the lease is
prepaid, are recognised at the date at which the 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 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.
808080
AURIZON ANNUAL REPORT 2022–23 Notes to the consolidated financial statements
30 June 2023 (continued)
9 Intangible assets
2023
Opening net book amount
Additions
Transfers between asset classes
Acquisitions through business combinations
(note 22)
Amortisation
Closing net book amount
At 30 June 2023
Cost
Accumulated amortisation and impairment
Net book amount
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
Goodwill
$m
Software
$m
Software under
development
$m
27
–
–
23
–
50
50
–
50
25
–
–
2
–
–
27
27
–
27
143
–
39
–
(29)
153
452
(299)
153
163
–
11
–
(2)
(29)
143
413
(270)
143
39
17
(39)
–
–
17
17
–
17
35
15
(11)
–
–
–
39
39
–
39
Total
$m
209
17
–
23
(29)
220
519
(299)
220
223
15
–
2
(2)
(29)
209
479
(270)
209
(a) Impairment tests for goodwill
Goodwill is allocated to the Group’s CGUs identified according to the group of assets at the time of acquisition. The Group tests goodwill for
impairment on at least an annual basis.
The recoverable amount of a CGU is determined based on the higher of value-in-use or fair value less costs of disposal calculations 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:
$m
2023
2022
Bulk QLD
Bulk NSW
Bulk Central
5
5
22
22
23
–
81
FINANCIAL REPORT Notes to the consolidated financial statements
30 June 2023 (continued)
9 Intangible assets (continued)
SIGNIFICANT JUDGEMENTS AND ESTIMATES
Impairment tests for goodwill
Goodwill of $50 million (2022: $27 million) is allocated to CGUs within
the Bulk segment and is a result of business acquisitions.
Long-term financial impacts of climate change
The Group has a net zero operational emissions target (Scope 1 & 2)
by 2050. In addition, the Group is one of the companies within the
transport industry captured by the Australian Government’s Safeguard
Mechanism policy. The Safeguard Mechanism baseline commences
from 1 July 2023 and requires a decline in the rate of 4.9% each year
to be applied to all safeguard facilities to 2030. Decarbonising of the
Group’s operations are being pursued through a range of initiatives and
investments set out in the Group’s Climate Strategy and Action Plan
(CSAP), including:
› leveraging existing energy efficiency capabilities and assets, such as
electrified rail in the CQCN
› investing in the development and adoption of low-carbon
technologies through the Group’s $50 million Future Fleet Fund
› integrating renewable energy into the Group’s current energy mix
› using carbon offsets through project development/investment and/or
purchase where required to meet decarbonsation goals.
The potential long-term financial impacts of climate change, including
the cost of reaching the Group’s net zero operational emissions target
by 2050, are continuing to be assessed. At this stage, based on the
potential to recover or pass on these costs in customer contracts,
we do not consider the potential impacts of climate change to present
a risk of impairment of the carrying value of any CGU.
There are risks, including factors outside of Aurizon's control which
may impact assumptions. These are outlined in the Risk section of the
Directors' Report.
Bulk NSW CGU
The Bulk NSW CGU provides integrated supply chain services, including
rail and road transportation, port services and material handling for
a range of products. The Bulk NSW CGU has a carrying amount of
$151 million and includes property, plant and equipment, goodwill,
software and working capital. The recoverable amount of the Bulk NSW
CGU has been determined based on a fair value less costs of disposal
calculation. The estimate uses a 10-year cash flow projection (2022:
20-year) based on a pipeline of known opportunities and estimated
volume growth rates between nil and 1.2% per annum, a long-term
growth rate of 2.5% (2022: 2.5%) and a post-tax discount rate of
8.1% (2022: 8.0%). The cash flow projections are developed using the
Group’s own information with benchmarking to external sources and
are therefore Level 3 inputs in the fair value hierarchy.
The recoverable amount of the CGU supports the carrying amount,
therefore no impairment has been recognised.
Bulk QLD CGU
The Bulk QLD CGU provides integrated supply chain services, including
rail and road transportation, port services and material handling for
a range of products and has previously been impaired. The Bulk QLD
CGU has a carrying amount of $212 million and includes property,
plant and equipment, goodwill, software and working capital. The
recoverable amount of the Bulk QLD CGU has been determined based
on a fair value less costs of disposal calculation (2022: value-in-use
calculation). The estimate uses a four-year cash flow projection (2022:
four-year) including expected volume growth relating to existing
contractual arrangements and anticipated cost savings, a long-term
growth rate of 2.5% (2022: 2.5%) and a post-tax discount rate of 8.1%
(2022: pre-tax discount rate of 11.5%). The cash flow projections are
developed using the Group’s own information and are therefore Level 3
inputs in the fair value hierarchy.
The recoverable amount of the Bulk QLD CGU is sensitive to changes in
customer contractual arrangements, growth in volumes and realisation
of anticipated cost savings. Any reasonably possible change in these
assumptions could lead to a further impairment or impairment reversal.
Bulk Central CGU
The Bulk Central CGU provides integrated supply chain services
including rail transportation and material handling for a range
of products. This CGU also manages the Tarcoola-to-Darwin rail
infrastructure, the intrastate rail freight network in South Australia, and
containerised freight services between Adelaide and Darwin. The Bulk
Central CGU has a carrying amount of $1,423 million and includes
property, plant and equipment, goodwill and working capital.
The recoverable amount of the Bulk Central CGU has been estimated
on a fair value less costs of disposal basis. The estimate uses a 10-year
cash flow projection based on a pipeline of known opportunities and
estimated volume growth rates, a long term growth rate of 2.5% and a
post-tax discount rate of 8.1%. The cash flow projections are developed
using the Group’s own information with benchmarking to external
sources and are therefore Level 3 inputs in the fair value hierarchy.
As the Bulk Central CGU was recently acquired, the carrying amount
approximates the recoverable amount. Goodwill of $23 million solely
arose from a net deferred tax liability recognised on acquisition in
accordance with accounting standards (refer to note 22 for further
information). If the timing of future growth opportunities is delayed
or forecast growth in volumes is not achieved, it may lead to a future
impairment of the Bulk Central CGU.
828282
AURIZON ANNUAL REPORT 2022–23 Notes to the consolidated financial statements
30 June 2023 (continued)
(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 (2022: $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
2023
$m
2022
$m
9
17
7
33
(3)
30
1
11
9
24
14
47
(5)
42
2
5
The total cash inflow for sub-leases in the financial year was $20 million
(2022: $14 million).
11 Trade and other payables
Current
Trade payables
Other payables
2023
$m
2022
$m
307
55
362
254
40
294
(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.
9 Intangible assets (continued)
(b) Accounting policies
(i) Goodwill
The goodwill recognised by the Group is a result of business
combinations and generally represents the future economic benefits that
arise from assets that are not capable of being individually identified and
separately recognised. Goodwill may also arise as a result of temporary
differences recognised in a business combination. 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.
No amounts were capitalised in the year.
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 15 years (2022:
three to 11 years).
10 Other assets
Current
Contract assets (a)
Lease receivable (b)
Other current assets
Non-current
Contract assets (a)
Lease receivable (b)
2023
$m
2022
$m
11
8
13
32
64
22
86
9
8
7
24
41
34
75
(a) Contract assets
Refer to note 2(b) for further information relating to contract assets.
83
FINANCIAL REPORT Notes to the consolidated financial statements
30 June 2023 (continued)
12 Provisions
Current
Employee benefits (a)
Provision for insurance claims
Litigation and workers compensation provision
Other provisions
Non-current
Employee benefits (a)
Litigation and workers compensation provision
Land rehabilitation
Make good and other provisions
Total provisions
(a) Employee benefits
Annual leave
Long service leave
Other
2023
$m
2022
$m
239
21
26
1
287
16
12
21
3
52
236
12
31
2
281
13
13
20
3
49
339
330
2023
$m
2022
$m
85
123
47
255
73
105
71
249
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 $120 million (2022: $100 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.
(i) Employee benefits
The provision for employee benefits includes accrued annual leave, leave
loading, retirement allowances, long service leave, short-term incentive
plans and termination benefits.
Liabilities for wages, salaries and accumulating non-monetary benefits
expected to be settled within 12 months of the reporting date, are
recognised in respect of employees’ services up to the end of the
reporting date. They are measured at the amounts expected to be paid
when the liabilities are settled.
Liabilities for annual leave and long service leave are measured as the
present value of expected future payments to be made in respect of
services provided by employees up to the end of the reporting date.
Expected future payments that are not expected to be settled within
12 months are discounted using market yield at the reporting date of
Australian corporate bond rates and reflects the terms to maturity.
Remeasurements as a result of adjustments and changes in actuarial
assumptions are recognised in profit or loss.
A liability for short-term incentive plans is recognised based on a
formula that takes into consideration the Group and individual key
performance indicators. The Group recognises a provision where
contractually obliged or where there is a past practice that has created a
constructive obligation.
A termination benefit is payable when the Group decides to terminate
the employment, or when an employee accepts redundancy in
exchange for these benefits. A provision is recognised at the earlier
of when the Group can no longer withdraw the offer of those benefits
or when the Group recognises costs for restructuring and is measured
using the present value of the expected amounts to be paid to settle
the obligation.
Employee benefits are presented as current liabilities in the balance sheet
if the Group does not have any unconditional right to defer settlement
for at least 12 months after the reporting period, regardless of when the
actual settlement is expected to occur.
(ii) 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 482 employees (2022: 546):
› 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 million (2022: $8 million)
relating to the QSuper defined benefit plan.
(iii) Provision for insurance claims
The Group Insurance Program includes certain placements with a wholly
owned captive insurance company, Iron Horse Insurance Company Pte
Ltd (incorporated in the Republic of Singapore). The captive insurance
company underwrites the Company and its subsidiaries for property and
liability insurance. A provision is recognised for the estimated liability of
known claims and an allowance for Incurred But Not Reported claims for
property and liability. Estimates are based on expected claim costs.
(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.
848484
AURIZON ANNUAL REPORT 2022–23 Notes to the consolidated financial statements
30 June 2023 (continued)
12 Provisions (continued)
13 Other liabilities
(b) Accounting policies (continued)
(v) Land rehabilitation
A provision is recognised for the present value of estimated costs of
land rehabilitation and make good where the Group has a legal or
constructive obligation to restore a site. The present value of estimated
costs is calculated by inflating estimated costs at 2.9% (2022: 2.6%) and
discounting at a weighted average discount rate of 4.1% (2022: 3.8%).
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.
CQCN
The Group is the below rail operator and economic owner of the 2,670km
CQCN under long-term infrastructure and land leases as described
in note 8. The CQCN is required to be managed and maintained in
accordance with good operating practice. At expiry of the long-term
leases, the Group has the right to remove the infrastructure (or parts
of it) by agreement with the lessor or to be paid the fair market value of
the infrastructure that is not removed. Therefore, no land rehabilitation
provision is recognised in respect of the CQCN.
Tarcoola-to-Darwin railway and intrastate rail freight network in
South Australia
The Group is the below rail operator and economic owner of the
2,245km Tarcoola-to-Darwin railway line and 215km of intrastate rail
freight network in South Australia under long-term infrastructure (the
Concession Deed) and land leases as described in note 8. At expiry of
the Concession Deed, the Tarcoola-to-Darwin railway is required to be
returned in a condition which is capable of continued operations. The
Concession Deed does not require the removal of track infrastructure.
At expiry of the land lease for the intrastate rail freight network in
South Australia, the lessor may elect to acquire all or any part of the
track infrastructure for fair market value. For any unacquired track
infrastructure, the Group may remove that part of the track infrastructure
or return it to the lessor. Therefore, no land rehabilitation provision is
recognised in respect of the Tarcoola-to-Darwin railway or the intrastate
rail freight network in South Australia.
Current
Contract liabilities (a)
Lease liabilities (b)
Other current liabilities
Non-current
Contract liabilities (a)
Lease liabilities (b)
Other non-current liabilities
2023
$m
2022
$m
64
20
11
95
80
114
2
196
48
16
5
69
109
107
2
218
(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
2023
$m
2022
$m
26
77
78
181
(47)
134
20
68
57
145
(22)
123
85
FINANCIAL REPORT 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 87
Page 87
Page 87
Page 89
Page 90
868686
86
Section Title (continued)AURIZON ANNUAL REPORT 2022–23 Notes to the consolidated financial statements
30 June 2023 (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.
Franked dividends
Franking credits are available to shareholders of the Company at the
30% (2022: 30%) corporate tax rate. The franking credit account balance
as at 30 June 2023 was $58 million (2022: $nil). The balance of franking
credits available as at the reporting date, adjusted for franking credit
impact that arises from the refund of current tax receivables or the
payment of current tax liabilities, is a deficit of $34 million (2022: surplus
of $63 million).
16 Equity
(a) Contributed equity
(i)
Issued capital
At 1 July 2021
At 30 June 2022
At 30 June 2023
Number
of shares
’000
1,840,704
1,840,704
1,840,704
$m
207
207
207
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.
(ii) Other contributed equity
Balance at 1 July
Balance 30 June
2023
$m
3,467
3,467
2022
$m
3,467
3,467
Prior to the Initial Public Offering in 2010, the Queensland Government
(the State) made an equity contribution to the Company. 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. The capital distribution account is treated as
share capital for tax purposes.
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 119.
Notes
17
Total borrowings
Less: cash and cash equivalents
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 2023
Final dividend for 2022 (100% franked)
Interim dividend for 2023 (100% franked)
For the year ended 30 June 2022
Final dividend for 2021 (70% franked)
Interim dividend for 2022 (95% franked)
2023
$m
5,142
2022
$m
3,221
(92)
(172)
5,050
4,353
9,403
53.7%
54.4%
3,049
4,412
7,461
40.9%
42.5%
Cents
per
share
10.9
7.0
14.4
10.5
$m
201
128
329
265
194
459
Proposed and unrecognised at period end
For the year ended 30 June 2023
Final dividend for 2023 (60% franked)
8.0
147
For the year ended 30 June 2022
Final dividend for 2022 (100% franked)
10.9
201
87
FINANCIAL REPORT
Notes to the consolidated financial statements
30 June 2023 (continued)
16 Equity (continued)
(b) Reserves
Balance at 1 July 2022
Fair value gains/(losses) taken to equity
Fair value (gains)/losses transferred to property, plant and equipment
Fair value (gains)/losses taken to profit or loss
Tax expense/(benefit) relating to items of other comprehensive income
Other currency translation differences
Other comprehensive income
Transactions with owners in their capacity as owners:
Share-based payments expense
Purchase of shares for performance rights plans
Aggregate deferred tax debited/(credited) to equity
Balance at 30 June 2023
Balance at 1 July 2021
Fair value gains/(losses) taken to equity
Tax expense/(benefit) relating to items of other comprehensive income
Other currency translation differences
Other comprehensive income
Transactions with owners in their capacity as owners:
Share-based payments expense
Balance at 30 June 2022
Cash flow
hedges
$m
Share-based
payments
$m
Notes
Foreign
currency
translation
$m
Total
$m
18
26
3
(42)
4
–
(9)
–
–
–
9
(57)
107
(32)
–
75
–
18
27
27
9
–
–
–
–
–
–
7
(7)
(1)
8
–
–
–
–
–
9
9
(1)
–
–
–
–
4
4
–
–
–
3
–
–
–
(1)
(1)
–
(1)
26
26
3
(42)
4
4
(5)
7
(7)
(1)
20
(57)
107
(32)
(1)
74
9
26
(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.
888888
AURIZON ANNUAL REPORT 2022–23 Notes to the consolidated financial statements
30 June 2023 (continued)
17 Borrowings
The Group borrows money through bank debt facilities and
the issuance of debt securities in capital markets.
The carrying amount of the Group’s borrowings are as follows:
Current — Unsecured
Medium-Term Notes
Bank debt facilities
Non-current — Unsecured
Medium-Term Notes
US Private Placement Notes
Bank debt facilities
Other borrowings1
Capitalised borrowing costs
Total borrowings
2023
$m
2022
$m
427
139
566
2,600
305
1,680
6
(15)
4,576
5,142
–
255
255
2,853
–
120
–
(7)
2,966
3,221
1 Other borrowings includes the Term Loan Facility with The AustralAsia Railway
Corporation in connection with the Tarcoola-to-Darwin Concession Deed.
The Group’s bank debt facilities contain financial covenants. The bank
debt facilities, Medium-Term Notes, and US Private Placement 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. At reporting
date, the Group has a net current liability position of $117 million due to
the classification of Network AMTN 2 with a notional amount of $425
million maturing June 2024 as a current liability. The proceeds from
the Network US Private Placement, along with Network AMTN 6 and
Network AMTN 7, will be used to repay Network AMTN 2 and replace
this capacity.
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, Medium-Term Notes, and
US Private Placement 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.
89
FINANCIAL REPORT Notes to the consolidated financial statements
30 June 2023 (continued)
18 Financial risk management
Financial risks, including market risk, liquidity and funding risk and credit risk, are managed through policies that have been approved
by the Board. The policies outline 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. The
Group typically uses derivative financial instruments to hedge underlying exposures arising from operational activities relating to
changes in foreign exchange rates and interest rates.
Aurizon Operations Limited (via a wholly owned subsidiary Aurizon Finance Pty Ltd) relies on an annually reviewed duration based
hedging strategy to minimise any negative impact to its financial position that may arise as a result of movements in underlying
interest rates.
Under the QCA approved regulatory regime, Network receives compensation for its cost of debt through the WACC. The risk-free
rate and debt risk premium used to determine WACC are based on observed market data in the 20 business days prior to a WACC
reset date. This interest rate risk is managed through the establishment of financial derivatives to fix the underlying interest rate of
forecast debt over this period.
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) and
US dollar (US$) denominated Private Placement
Notes (USPP).
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 foreign currency
denominated borrowings, the Group enters into cross-
currency interest rate swaps (CCIRS) to replace foreign
currency 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 and
option 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 assets
and lease receivables.
909090
AURIZON ANNUAL REPORT 2022–23 Notes to the consolidated financial statements
30 June 2023 (continued)
18 Financial risk management
(continued)
(a) Market risk
(i)
Interest rate risk
Exposure
The Group had the following variable rate borrowings and interest rate
swap contracts outstanding at 30 June:
Weighted
average
interest
rate
%
Balance
$m
Amounts recognised in profit or loss
The Group recognised a net gain on interest rate swaps of $22 million
(2022: net loss of $14 million), as a result of market interest rates
(i.e. floating rates) closing higher than the fixed interest rates hedged,
resulting in a gain on the floating-to-fixed interest rate swaps, partly
offset by a loss on the fixed-to-floating interest rate swaps. The net gain
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:
2023
$m
2022
$m
2023
Variable rate exposure
Interest rate swaps
(including debt credit margins)
Net exposure to interest rate risk
2022
Variable rate exposure
Interest rate swaps
(including debt credit margins)
Net exposure to interest rate risk
4.0
1.2
1.7
1.0
Current assets
4,871
Foreign exchange contracts
(4,450)
421
Interest rate swaps
Non-current assets
Interest rate swaps
3,021
CCIRS — Network EMTN 1
(2,300)
721
Interest rate derivatives used for hedging
The Group currently has interest rate swaps in place to cover 91%
(2022: 76%) 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 4.8 years (2022: less than one year).
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.
Total derivative financial instrument assets
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
Interest rate swaps — Network AMTN 6
Interest rate swaps — Network AMTN 7
Interest rate swaps — Network USPP
Increase
$m
Decrease
$m
CCIRS — Network EMTN 2
CCIRS — Network USPP
CCIRS — Finance USPP
2
–
2
41
78
119
121
1
63
12
104
13
3
1
4
39
5
7
2
42
44
–
38
38
82
–
66
11
105
13
–
–
–
71
–
–
2023
Effect on profit
Effect on equity
2022
Effect on profit
Effect on equity
(4)
140
(7)
18
4
(149)
7
(19)
Total derivative financial instrument liabilities
252
266
The Group has issued Australian dollar Medium-Term Notes (AMTNs),
EMTNs and USPPs under its wholly owned subsidiaries Aurizon Network
Pty Ltd and Aurizon Finance Pty Ltd which have separate designations in
hedging relationships.
91
FINANCIAL REPORT
Notes to the consolidated financial statements
30 June 2023 (continued)
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 contracts2
Forward contracts2
Interest rate risk
Interest rate swaps (current)3
Interest rate swaps (forward dated)3
Foreign exchange and interest rate risks
CCIRS — Network EMTN 14
CCIRS — Network EMTN 24
CCIRS — Network USPP6
CCIRS — Finance USPP7
Fair value hedges
Interest rate risk
Interest rate swaps — Finance AMTN 15
Interest rate swaps — Network AMTN 35
Interest rate swaps — Network AMTN 45
Interest rate swaps — Network AMTN 55
Interest rate swaps — Network AMTN 65
Interest rate swaps — Network AMTN 75
Interest rate swaps — Network USPP6
Interest rate swaps — Finance USPP7
Foreign exchange and interest rate risks
CCIRS — Network EMTN 14
CCIRS — Network EMTN 24
CCIRS – Network USPP6
CCIRS – Finance USPP7
Notional amount
2023
2022
US$65m
€10m
US$19m
€2m
A$3,880m
A$2,300m
A$570m
–
€500m
€500m
US$132m
US$273m
A$500m
A$82m
A$500m
A$75m
A$80m
A$20m
A$111m
A$50m
€500m
€500m
US$132m
US$273m
€500m
€500m
–
–
A$500m
A$82m
A$500m
A$75m
–
–
–
–
€500m
€500m
–
–
Carrying amount
assets/(liabilities)
Favourable/(unfavourable)
change in fair value
used for measuring
ineffectiveness for the year1
2023
$m
2022
$m
2023
$m
2022
$m
2
–
38
2
–
(6)
(5)
(9)
(63)
(12)
(104)
(13)
(3)
(1)
(4)
–
78
(33)
–
2
2
–
42
–
(1)
(11)
–
–
(66)
(11)
(105)
(13)
–
–
–
–
39
(60)
–
–
–
–
(4)
2
1
5
(5)
(9)
4
(1)
5
–
(3)
(1)
(3)
–
41
30
–
2
2
–
83
–
–
–
–
–
(69)
(11)
(82)
(14)
–
–
–
–
(80)
(102)
–
–
1 The change in fair value for fair value hedges excludes the impact of ineffectiveness.
2 Forward contracts have an average AUD:USD exchange rate of 0.6745 (2022: 0.7299) and AUD:EUR exchange rate of 0.6129 (2022: 0.6566) related to capital commitments.
3 Floating-to-fixed interest rate swaps have an average fixed interest rate of 3.86% (2022: 0.96%) and receive floating BBSW. Forward dated interest rate swaps entered
include $145 million commencing July 2023 and $425 million commencing June 2024.
4 CCIRS have an average fixed EUR interest rate of 2.56% (2022: 2.56%), an average floating AUD interest rate of BBSW + 2.93% spread (2022: BBSW + 2.93% spread),
and an average AUD:EUR exchange rate of 0.6730 (2022: 0.6730), over the same term as the EMTNs.
5 Fixed-to-floating interest rate swaps have an average floating BBSW + 1.91% spread (2022: BBSW + 1.86% spread) and an average fixed interest rate of 3.24%
(2022: 2.97%), over the same term as the AMTNs.
6 The Network USPP has four tranches maturing June 2033 and maturing June 2035. The CCIRS have an average fixed USD interest rate of 6.56%, an average floating
AUD interest rate of BBSW + 3.68% spread, and an average AUD:USD exchange rate of 0.6748. The fixed-to-floating interest rate swaps have an average floating BBSW +
3.79% spread and an average fixed rate of 7.66%.
7 The Finance USPP has five tranches maturing July 2030, July 2033 and July 2035. The CCIRS have an average fixed USD interest rate of 6.79%, an average floating AUD
interest rate of BBSW + 3.58% spread, and an average AUD:USD exchange rate of 0.6770. The fixed-to-floating interest rate swaps have an average floating BBSW +
3.61% spread and an average fixed rate of 7.82%. The Finance USPP settled subsequent to reporting date on 26 July 2023.
929292
AURIZON ANNUAL REPORT 2022–23
Notes to the consolidated financial statements
30 June 2023 (continued)
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 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 payments2
Foreign exchange and interest rate risks
Network EMTN 1
Network EMTN 2
Network USPP
Finance USPP3
Cash flow hedge reserve1
(Favourable)/unfavourable
change in fair value used for
measuring ineffectiveness
for the year
Hedging gain/(loss)
recognised in
comprehensive income1
2023
$m
2022
$m
2023
$m
2022
$m
2023
$m
2022
$m
(2)
(39)
4
11
6
8
(2)
(42)
3
14
–
–
–
2
(1)
(5)
5
9
(2)
(83)
–
–
–
–
–
(2)
(1)
4
(6)
(8)
2
83
9
14
–
–
1 Cash flow hedge reserve includes the cumulative impact of cross-currency basis relating to EMTN 1 and EMTN 2 of $9 million (2022: $33 million) and relating to the
USPP of $6 million (2022: $nil). The hedging loss recognised in other comprehensive income includes the cross-currency basis relating to EMTN 1 and EMTN 2 of
$4 million (2022: hedging gain of $22 million) and relating to the USPP of $6 million (2022: $nil).
2 The Group undertook a restructure of its interest rate swaps, resulting in the hedge being discontinued. The effective portion of $6 million has been deferred in the cash
flow hedge reserve with no immediate impact on the profit or loss upon restructuring and will be reclassified to the finance cost over the maturity of the original swap
subject to the existence of the hedged item.
3 The Group successfully priced the Finance USPP in June 2023 which settled subsequent to reporting date on 26 July 2023. Interest rate swaps and cross-currency
interest rate swaps have been executed in June 2023 to swap fixed rate debt to floating rate debt.
93
FINANCIAL REPORT Notes to the consolidated financial statements
30 June 2023 (continued)
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
Network AMTN 6
Network AMTN 7
Network USPP
Foreign exchange and interest rate risks
Network EMTN 1
Network EMTN 2
Network USPP
Finance USPP3
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
2023
$m
2022
$m
2023
$m
2022
$m
2023
$m
2022
$m
(437)
–
(70)
(395)
(61)
(78)
(19)
(108)
(1,168)
(793)
(752)
(195)
–
(1,740)
(2,908)
(433)
–
(71)
(390)
(61)
–
–
–
(955)
(753)
(722)
–
–
(1,475)
(2,430)
63
(2)
12
105
14
3
1
3
199
(83)
26
–
(2)
(59)
140
67
(5)
11
110
14
–
–
–
197
(42)
56
–
–
14
211
(4)
–
1
(5)
–
3
1
3
(1)
(41)
(30)
–
(2)
(73)
(74)
69
–
11
82
14
–
–
–
176
80
102
–
–
182
358
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 FY2023, an amount of $2 million (2022: $2 million) has been recognised in profit or loss in
finance costs.
3 The Group successfully priced the Finance USPP in June 2023 which settled subsequent to reporting date on 26 July 2023. Interest rate swaps and cross-currency
interest rate swaps have been executed in June 2023 to swap fixed rate debt to floating rate debt.
949494
AURIZON ANNUAL REPORT 2022–23 Notes to the consolidated financial statements
30 June 2023 (continued)
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.
The Group has access to working capital facilities totalling $200 million (2022: $200 million) which can be utilised for short-term working capital and
financial bank guarantees. At 30 June, the Group utilised $25 million (2022: $22 million) for financial bank guarantees.
Refer to key events and transactions for the reporting period for further information on the Group's debt financing activities, including the repayment of
the bridge facility and Network AMTN 2.
Aurizon Finance Pty Ltd
Working capital facility
Bilateral facility2
Bilateral facility2
Bilateral facility2
Bilateral facility2
Bridge loan facility
Revolver loan facility
Term loan facility
Finance AMTN 13
Aurizon Network Pty Ltd
Working capital facility
Bilateral facility4
Bilateral facility4
Bilateral facility4
Bilateral facility4
Bilateral facility4
Bilateral facility4
Network AMTN 23
Network AMTN 33
Network AMTN 43
Network AMTN 53
Network AMTN 63
Network AMTN 73
Network EMTN 13
Network EMTN 23
Network USPP3
Network USPP3
Total Group financing arrangements
Utilised1
Facility limit
Maturity
2023
$m
2022
$m
2023
$m
2022
$m
Jun-24
Jun-23
Nov-23
Nov-25
Jul-26
Jul-24
Jul-25
Jul-27
Mar-28
Jun-24
Jun-23
Jun-24
Jun-25
Jan-26
Jan-27
Jan-28
Jun-24
Mar-30
Sep-30
Dec-31
Dec-32
Dec-34
Sep-24
Jun-26
Jun-33
Jun-35
62
–
65
–
195
350
25
400
500
1,597
36
–
–
–
575
135
–
425
82
500
75
80
20
711
778
184
19
–
–
–
–
–
–
–
500
519
3
255
66 60
60
–
–
–
425
82
500
75
–
–
711
778
–
125
–
65
75
415
350
400
400
125
50
500
75
–
–
–
–
500
2,330
500
1,250
75
–
–
–
575
310
205
425
82
500
75
80
20
711
778
184
75
750
300
150
–
–
–
425
82
500
75
–
–
711
778
–
122
3,723
5,320
–
2,949
3,468
122
4,142
6,472
–
3,846
5,096
1 Amount utilised includes bank guarantees of $25 million (2022: $21 million) and excludes capitalised borrowing costs of $15 million (2022: $7 million) and discounts on
Medium-Term Notes of $5 million (2022: $7 million). The facilities above exclude the Term Loan Facility with The AustralAsia Railway Corporation in connection with the
Tarcoola-to-Darwin Concession Deed. The fair value of the Term Loan Facility is $6 million.
2 In June 2023, Aurizon Finance Pty Ltd re-financed the existing floating rate bilateral facility, reducing capacity from $625 million to $605 million (the capacity at reporting
date was $555 million, with $50 million capacity added on 3 July 2023). The $50 million bilateral facility that matured June 2023 was extended to July 2026, along with a
portion of the $500 million bilateral facility maturing November 2023.
3 Amounts utilised on EMTNs, AMTNs and USPPs excludes accumulated fair value adjustments of $140 million (2022: $211 million). EMTN 1 and EMTN 2 have a notional
amount of €500.0 million, converted to AUD at an exchange rate of 0.7036 and 0.6425 respectively. The USD tranches of the Network USPP have a notional amount of
US$132 million, converted to AUD at an exchange rate of 0.6748.
4 In January 2023, Aurizon Network Pty Ltd re-financed the existing bilateral facility, reducing the combined facility limit from $1,200 million to $1,090 million. The maturity
of the bilateral facility tranches were extended to January 2026 ($575 million), January 2027 ($310 million) and January 2028 ($205 million).
95
FINANCIAL REPORT Notes to the consolidated financial statements
30 June 2023 (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:
1 year
or less
$m
1 – 5
years
$m
More than
5 years
$m
Total
contractual
cash flows
$m
Carrying
amount
(assets)/
liabilities
$m
2023
Non-derivative financial instruments
Trade and other payables
Borrowings (excluding the effect of CCIRS)
Financial guarantees
Lease liabilities
362
789
25
26
–
3,956
–
77
–
1,272
–
78
362
6,017
25
181
Total non-derivative financial instruments
1,202
4,033
1,350
6,585
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
Interest rate swaps — Network AMTN 6
Interest rate swaps — Network AMTN 7
Interest rate swaps — Network USPP
CCIRS — Network EMTN 1
CCIRS — Network EMTN 2
CCIRS — Network USPP
CCIRS — Finance USPP
Gross settled forward exchange contracts (inflow)
Total derivatives
2022
Non-derivative financial instruments
Trade and other 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
969696
(23)
17
3
19
2
1
–
1
29
40
3
21
2
115
294
361
22
20
697
(43)
(6)
–
10
1
20
29
2
13
362
5,142
–
134
5,638
(40)
63
12
104
13
3
1
4
(78)
39
5
7
(2)
131
294
3,221
–
123
(15)
56
9
72
8
2
1
2
(115)
33
8
10
–
71
(5)
–
4
39
8
3
1
5
–
–
13
–
–
68
(43)
73
16
130
18
6
2
8
(86)
73
24
31
2
254
–
2,328
–
68
–
1,240
–
57
294
3,929
22
145
2,396
1,297
4,390
3,638
–
1
2
15
2
(28)
132
–
124
–
2
5
50
8
–
–
–
65
(43)
(3)
7
75
11
(8)
161
2
202
(42)
66
11
105
13
(38)
71
(2)
184
AURIZON ANNUAL REPORT 2022–23 Notes to the consolidated financial statements
30 June 2023 (continued)
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 'mark-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, in the timing of forecast transactions or any off-market derivatives. 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.
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 for hedge
accounting, any cumulative gain or loss existing in equity
at that time remains in equity and is recognised when the
forecast transaction is ultimately recognised in profit or loss.
When a forecast transaction is no longer expected to occur,
the cumulative gain or loss that was reported in equity is
immediately transferred to profit or loss.
97
FINANCIAL REPORT Notes to the consolidated financial statements
30 June 2023 (continued)
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 Master Agreements 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
121
(252)
82
(266)
–
–
–
–
121
(252)
82
(266)
(187)
187
(143)
143
(66)
(65)
(61)
(123)
2023
Financial assets
Derivative financial instruments
Financial liabilities
Derivative financial instruments
2022
Financial assets
Derivative financial instruments
Financial liabilities
Derivative financial instruments
1 No financial instrument collateral.
(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 4.8% and 7.1% (2022: 1.0% and 6.6%) 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 foreign exchange contracts is 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 (2022: Level 2). During the period, there were no transfers between Level 1, Level 2
or Level 3 in the fair value hierarchy (2022: nil).
989898
AURIZON ANNUAL REPORT 2022–23 Notes to the consolidated financial statements
30 June 2023 (continued)
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
CCIRS — Network EMTN 1
Financial assets carried at amortised cost
Cash and cash equivalents
Trade and other receivables
Financial liabilities carried at fair value
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
Interest rate swaps — Network AMTN 6
Interest rate swaps — Network AMTN 7
Interest rate swaps — Network USPP
CCIRS — Network EMTN 2
CCIRS — Network USPP
CCIRS — Finance USPP
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 $2,908 million (2022: $2,430 million) subject to fair value hedges.
Carrying amount
2023
$m
2022
$m
Fair value
2023
$m
2022
$m
Notes
6
2
41
78
121
92
728
820
(1)
(63)
(12)
(104)
(13)
(3)
(1)
(4)
(39)
(5)
(7)
(252)
2
42
38
82
172
434
606
–
(66)
(11)
(105)
(13)
–
–
–
(71)
–
–
(266)
2
41
78
121
92
728
820
(1)
(63)
(12)
(104)
(13)
(3)
(1)
(4)
(39)
(5)
(7)
(252)
2
42
38
82
172
434
606
–
(66)
(11)
(105)
(13)
–
–
–
(71)
–
–
(266)
11
17
(362)
(5,142)
(5,504)
(294)
(3,221)
(3,515)
(362)
(5,186)
(5,548)
(294)
(3,243)
(3,537)
–
–
–
–
–
–
–
–
–
–
19
447
–
(25)
441
19
309
1
(22)
307
99
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 101
Page 101
Page 102
22 Acquisition of businesses and interests in joint ventures
Page 102
23 Discontinued operation
Page 104
100100100
Section Title (continued)AURIZON ANNUAL REPORT 2022–23 Notes to the consolidated financial statements
30 June 2023 (continued)
19 Joint ventures
20 Material subsidiaries
The Group has an interest in the following joint ventures:
Ownership interest
Country of
operation
2023
%
2022
%
Principal
activity
The ultimate parent of the Group is Aurizon Holdings Limited. The
companies listed below are those whose results, in addition to the parent
entity, principally affect the amounts shown in the financial report:
Name
Coal Network
Capacity Co Pty Ltd
Ox Mountain
Limited1
ARG Risk
Management
Limited
Australia
United
Kingdom
Bermuda
Integrated Logistics
Company Pty Ltd
Australia
ACN 169 052 288
Australia
8
69
50
14
15
8
42
50
14
15
Independent
Expert
Software
Controlled entities
Aurizon Operations Limited
Insurance
Australia Eastern Railroad Pty Ltd
Australia Western Railroad Pty Ltd
Consulting
Aurizon Network Pty Ltd
Aurizon Property Pty Ltd
Dormant
Aurizon Finance Pty Ltd
1 The Group's investment in Ox Mountain Limited continues to be classified as a
joint venture due to the Group having joint control and is accounted for using
the equity method of accounting. Refer to note 22 for further information.
The Group's share of net profit from investments in joint ventures for
the period is $1 million (2022: $nil). The Group's share of net assets from
investments in joint ventures at reporting date is $56 million (2022:
$22 million).
(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.
Consideration transferred to acquire additional shares is added to the
existing carrying amount of the investment without remeasurement
of the previously held interest and without specific allocation to the
underlying assets and liabilities of the investee.
The carrying amount of investments are tested for impairment in
accordance with the policy described in note 8.
Ownership
interest
Country of
incorporation
2023
%
2022
%
Australia
Australia
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
100
–
–
100
Aurizon Port Services Pty Ltd
Aurizon Port Services NSW Pty Ltd
Aurizon Bulk Central Pty Ltd
Aurizon Bulk Central Network Pty Ltd
Iron Horse Insurance Company Pte Ltd
Singapore
(a) Principles of consolidation
The consolidated financial statements incorporate the assets and
liabilities of all subsidiaries of the Group as at reporting date and the
results of all subsidiaries for the financial year.
Subsidiaries are all entities over which the Group has control. The Group
controls an entity when the Group is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect
those returns through its power to direct the activities of the entity.
Subsidiaries are fully consolidated from the date on which control
is transferred to the Group and de-consolidated from the date that
control ceases. Transactions between continuing and discontinued
operations are treated as external from the date that the operation
was discontinued. Where arrangements between the continuing
and discontinued operations will continue subsequent to disposal,
transactions including revenue and expenses are included in continuing
operations profit or loss with elimination entries recognised in profit or
loss of the discontinued operation.
Inter-company transactions and balances are eliminated on consolidation.
(b) Changes in ownership interest
When the Group ceases to have control, joint control or significant
influence, any retained interest in the entity is remeasured to its fair value
with the change in carrying amount recognised in profit or loss. The re-
measured fair value becomes the initial carrying amount for the purposes
of subsequently accounting for the retained interest of an associate, joint
venture or financial asset. Any amounts previously recognised in other
comprehensive income are accounted for as if the Group had directly
disposed of the related assets or liabilities and may result in amounts
previously recognised in other comprehensive income being reclassified
to profit or loss.
If the ownership interest in a joint venture or an associate is reduced
but joint control or significant influence is retained, only a proportionate
share of the amounts previously recognised in other comprehensive
income are reclassified to profit or loss where appropriate.
101
FINANCIAL REPORT Notes to the consolidated financial statements
30 June 2023 (continued)
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.
22 Acquisition of businesses and
interests in joint ventures
(a) Summary of acquisitions in 2023
(i) One Rail Australia
(a) Summary financial information
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
Profit for the year
Total comprehensive income
2023
$m
267
3,534
3,801
135
–
135
2022
$m
70
3,712
3,782
69
–
69
3,666
3,713
3,674
3,674
(5)
(3)
3,666
282
282
(5)
44
3,713
459
459
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 $75 million
(2022: $95 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 2023 (2022: $nil).
SIGNIFICANT JUDGEMENTS AND ESTIMATES
Business combination
One Rail Australia comprised two main business segments:
› One Rail Bulk: Integrated rail haulage and general freight assets in
South Australia and the Northern Territory and below rail operator
and economic owner of 2,460km of rail infrastructure including the
2,245km Tarcoola-to-Darwin railway line; and
› East Coast Rail: Coal haulage in New South Wales and Queensland.
One Rail Bulk has been integrated into the Group’s Bulk segment
and renamed Aurizon Bulk Central. Aurizon Bulk Central is the only
rail freight operator along the South Australia/Northern Territory
corridor and products hauled include copper, grain, iron ore, gypsum
and containerised freight. Aurizon Bulk Central also manages the
Tarcoola-to-Darwin rail infrastructure, and the intrastate rail freight
network in South Australia. Provision of access to the below rail
infrastructure is regulated by the ESCOSA.
The investments held in the East Coast Rail entities were transferred
to ORAH on 29 July 2022 and classified as a discontinued operation
held for sale at acquisition measured at fair value less cost of disposal.
During the year, the Group completed the divestment of ORAH in
accordance with the Company’s Undertaking to the ACCC as part
of its acquisition of One Rail Australia. Refer to note 23 for further
information on the divestment of ORAH.
The allocation of the purchase price to the business segments and the
determination of the fair values of net identifiable assets and goodwill
involves significant judgement.
Allocation of purchase consideration
The allocation of the purchase consideration to the business
segments involved judgement. The Group engaged third-party
valuers to advise on the methodology and assumptions applied. The
allocation of purchase consideration to the business segments was
determined based on fair value methodology.
Determination of the fair value of net identifiable assets
The determination of the fair values of net identifiable assets,
including property, plant and equipment and intangible assets
involved judgement. The Group engaged third-party valuers to advise
on the methodology and assumptions applied to value identifiable
assets. The fair value was determined based on commonly adopted
methodology for the identifiable assets, including depreciated
replacement cost after consideration of economic obsolescence and
discounted cash flows.
102102102
AURIZON ANNUAL REPORT 2022–23 Notes to the consolidated financial statements
30 June 2023 (continued)
Acquisition costs of $49 million, including landholder duty, advisory fees
and other costs have been expensed to profit or loss during the period
and classified in other expenses. This amount has been classified as a
significant item in continuing operations.
Total cash paid of $2,404 million included $1,454 million for continuing
operations and $950 million for discontinued operations held for sale.
Net cash outflow from investing activities for continuing operations was
$1,404 million, representing cash paid net of cash acquired of $50 million.
The acquired business contributed revenue for continuing operations
of $247 million for the period 29 July 2022 to 30 June 2023. If the
acquisition had occurred on 1 July 2022, consolidated continuing
operations pro-forma revenue for the year ended 30 June 2023 would
have been $3,533 million. These amounts have been calculated using
the subsidiary's results and adjusting them for differences in accounting
policies between the Group.
(ii) Ox Mountain Limited
The Group increased its ownership interest in Ox Mountain Limited
(UK registered), a maintenance software developer and distributor,
from 42% to 69% for consideration of $30 million on 9 January 2023.
The investment continues to be classified as a joint venture due to the
Group having joint control and is accounted for using the equity method
of accounting.
(b) 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 New South Wales, for
consideration of $8 million on 1 March 2022.
(ii) Kooregah Pastoral Co Pty Ltd (KPC)
The Group acquired the business of KPC, a trucking and material
handling business that operates in and around Hermidale in New South
Wales, for consideration of $8 million on 28 October 2021. The acquisition
included the assets and workforce associated with the business.
22 Acquisition of businesses and
interests in joint ventures (continued)
(a) Summary of acquisitions in 2023 (continued)
(i) One Rail Australia (continued)
The acquisition of One Rail Australia completed on 29 July 2022.
Details of the purchase consideration, net assets acquired and goodwill
are as follows:
Total purchase consideration
(after working capital and completion adjustments)
Cash
Trade and other receivables
Inventories
Other assets
Property, plant and equipment1
Assets held for sale
Trade and other payables
Borrowings
Provisions
Other current liabilities
Other non-current liabilities
Deferred tax liabilities
Liabilities directly associated with assets classified
as held for sale
Fair value of net identifiable assets acquired
Add: Goodwill
Fair value of net assets acquired
$m
2,404
Fair value on
acquisition date
$m
50
44
31
3
1,409
984
(18)
(5)
(31)
(11)
(18)
(23)
(34)
2,381
23
2,404
1 Includes Bulk leased assets of $1,100 million and other leased assets of $21 million.
Goodwill of $23 million solely arises from the net deferred tax liability
recognised on acquisition, in accordance with accounting standards.
The net deferred tax liability arises on leased assets (comprising
leasehold interests with below market rental payments) and the face
value of the Term Loan Facility, offset by deferred tax assets associated
with provisions. None of the goodwill is expected to be deductible for
tax purposes.
The gross contractual amount due and fair value of trade receivables
acquired is $44 million.
Borrowings acquired includes a $50 million Term Loan Facility with
The AustralAsia Railway Corporation in connection with the Tarcoola-to-
Darwin Concession Deed issued at below market interest rates. The Term
Loan Facility matures in 2054 at the expiry of the Concession Period. The
fair value of the loan acquired is $5 million.
103
FINANCIAL REPORT Notes to the consolidated financial statements
30 June 2023 (continued)
23 Discontinued operation
(a) One Rail Australia Holdings Limited (ORAH)
The Group completed the sale of ORAH to Magnetic Rail Group Pty
Ltd (Magnetic) on 17 February 2023 for consideration of $438 million
including completion adjustments. Total consideration includes
$313 million cash proceeds received on completion of the sale and
$125 million cash proceeds receivable in February 2024. On completion
of the sale, Magnetic assumed ORAH's existing borrowings of
$474 million.
(i) Significant items
The Group's underlying results differ from the statutory results.
The exclusion of certain items permits a more relevant analysis of
the Group's underlying performance on a comparative basis.
Significant items
Impairment of assets held for sale
Sale and divestment costs
Loss on sale of ORAH
2023
$m
(75)
(26)
(2)
(103)
Impairment expense of $75 million ($57 million post-tax) was recognised
to write down the carrying amount of net assets classified as held
for sale at 31 December 2022 to the estimated recoverable amount.
The reduction in the estimated recoverable amount was a result of
changes in market conditions subsequent to acquisition and net assets
including property, plant and equipment and intangible assets that are
not depreciated or amortised while classified as held for sale, despite
realising the benefit of these assets during the period.
Sale and divestment costs of $26 million ($23 million post-tax)
recognised in discontinued operations include IT separation costs,
advisory fees, legal fees and other costs.
The loss from discontinued operations after tax and significant items is
reconciled in the Non-IFRS Financial Information on page 119.
104104104
AURIZON ANNUAL REPORT 2022–23 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 106
25 Related party transactions
26 Key Management Personnel
27 Share-based payments
28 Auditor’s remuneration
29 Summary of other significant accounting policies
Page 107
Page 107
Page 107
Page 108
Page 108
105
FINANCIAL REPORT Notes to the consolidated financial statements
30 June 2023 (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 loss/(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
2023
$m
324
666
13
233
7
4
(1)
–
(123)
(22)
(22)
15
(15)
(171)
126
(19)
1,015
(b) Reconciliation of liabilities arising from financing activities to financing cash flows
Balance as at 1 July 2022
Reclassification
Financing cash flows2
Changes in fair value (including foreign exchange rates)
Other non-cash movements3
Balance as at 30 June 2023
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
Current
borrowings
$m
Non-current
borrowings
$m
(255)
(237)
(74)
–
–
(566)
(59)
(255)
59
–
–
(2,966)
237
(1,761)
(74)
(12)
(4,576)
(3,679)
255
105
357
(4)
(255)
(2,966)
Liabilities
held to
hedge
borrowings1
$m
(266)
–
–
14
–
(252)
(67)
–
–
(199)
–
(266)
Assets held
to hedge
borrowings1
$m
80
–
–
39
–
119
125
–
–
(45)
–
80
2022
$m
513
592
2
127
9
(23)
–
1
51
(45)
(5)
37
(44)
77
60
(32)
1,320
Total
$m
(3,407)
–
(1,835)
(21)
(12)
(5,275)
(3,680)
–
164
113
(4)
(3,407)
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.
106106106
AURIZON ANNUAL REPORT 2022–23
Notes to the consolidated financial statements
30 June 2023 (continued)
25 Related party transactions
The table below summarises the total movements in the performance
rights issued by the Group:
Related parties include investments and Key Management Personnel
(KMP). There were no transactions with related parties during the
financial year (2022: $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.
2023
STIA
LTIA
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
541
553
(541)
–
553
9,916
3,764
(1,129)
(2,076)
10,475
Short-term employee benefits
Long-term employee benefits
Post-employment benefits
Share-based payment expense
2023
$’000
2022
$’000
7,932
9,082
192
244
27
261
4,707
4,958
13,075
14,328
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 (2022: 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.
Retention
146
176
(92)
(29)
201
Total
2022
STIA
LTIA
10,603
4,493
(1,762)
(2,105)
11,229
391
541
(391)
–
541
8,512
3,364
–
(1,960)
9,916
Retention
84
79
(17)
–
146
Total
8,987
3,984
(408)
(1,960)
10,603
1 Balance of rights at the end of the year remains unvested.
During the period, the Group recognised a share-based payment expense
of $7 million (2022: $9 million).
The weighted average share price at the date performance rights were
exercised during the period was $3.98 (2022: $3.71). The weighted
average remaining contractual life of unvested rights at 30 June 2023
was 2.0 years (2022: 1.9 years).
Market valuation techniques were used to determine the fair value of
performance rights granted and are summarised below:
Scheme
STIA
Retention
LTIA
– ROIC
– TSR
Fair value
Share price at grant date
Share price at grant date
Share price at grant date
less estimated dividend yield
Monte-Carlo simulation
technique
– Strategic
Transformation1
Share price at grant date
less estimated dividend yield
2023
2022
$
3.63
3.68
$
3.73
3.80
2.72
2.97
1.55
1.97
2.72
2.97
1 The 2022 Award (FY2023) is determined by reference to Non-Coal Underlying
EBITDA Growth over the performance period. The 2021 Award (FY2022)
is determined by reference to Non-Coal Gross Revenue Growth over the
performance period.
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)
2023
6.60
2022
6.90
22.50
22.00
3.54
3.60
4.00
3.92
0.80
4.00
The expected price volatility of the Company's shares reflects the
assumption that the historical volatility is indicative of future trends,
which may not necessarily be the actual outcome.
107
FINANCIAL REPORT
Notes to the consolidated financial statements
30 June 2023 (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:
2023
$’000
2022
$’000
Deloitte Touche Tohmatsu
Audit and review of financial statements
Group
Controlled subsidiaries
Other assurance services
Tax advisory services
Other advisory services
618
967
1,585
142
–
187
Total remuneration of Deloitte Touche Tohmatsu
1,914
29 Summary of other significant
accounting policies
203
767
970
–
130
480
1,580
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 amendments for the first time for
the reporting period commencing 1 July 2022:
› AASB 2020-3 Amendments to Australian Accounting Standards —
Annual Improvements 2018-2020 and Other Amendments
› AASB 2021-7 Amendments to Australian Accounting Standards —
Effective Date of Amendments to AASB 10 and AASB 128 and
Editorial Corrections.
The amendments listed above did not have any impact on the amounts
recognised in prior periods and are not expected to significantly affect
the current or future reporting periods.
In FY2022, the Group adopted AASB 2020-8 Amendments to Australian
Accounting Standards Interest Rate Benchmark Reform — Phase 2.
From 1 July 2023, the treasury management system has been updated
to transition to an alternative benchmark rate of Secured Overnight
Financing Rate (SOFR) and Euro Short-Term Rate (ESTR). There was no
significant impact on the fair value amounts.
(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 2022 and have not been early adopted by the Group.
These standards are not expected to have a material impact on the
Group in the current or future reporting periods and on foreseeable
future transactions.
The Group is currently assessing the impact of AASB 17 Insurance
Contracts on self-insurance arrangements that is effective for the Group
from 1 July 2023.
(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.
108108108
AURIZON ANNUAL REPORT 2022–23 Notes to the consolidated financial statements
30 June 2023 (continued)
(ii) Financial assets measured at amortised cost
A financial asset is subsequently measured at amortised cost, using the
effective interest method and net of any impairment loss, if:
› the asset is held within the business model whose objective is to hold
assets in order to collect contractual cash flows; and
› the contractual terms of the financial asset give rise, on specified dates,
to cash flows that are solely payments of principal and interest.
The Group assesses at each reporting date whether there is objective
evidence that a financial asset (or group of financial assets) is impaired.
(iii) Non-derivative liabilities
The Group initially recognises loans and debt securities issued on the
date when they originate. Other financial liabilities are initially recognised
on the trade date. The Group derecognises a financial liability when its
contractual obligations are discharged or cancelled or expire.
Non-derivative financial liabilities are initially recognised at fair value
less any directly attributable transaction costs. Subsequent to initial
recognition, these liabilities are measured at amortised cost using the
effective interest method.
(g) Goods and Services Tax (GST)
Revenue, expenses and assets are recognised net of the amount of
associated GST, unless the amount of GST incurred is not recoverable
from the Australian Taxation Office (ATO). In this case, the GST is
recognised as part of the cost of acquisition of the asset or as part of
the expense.
Receivables and payables are stated inclusive of the amount of GST
receivable or payable. The net amount of GST recoverable from, or
payable to, the ATO is included with other receivables or payables in the
balance sheet.
Cash flows are presented in the cash flow statement on a gross basis.
The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the ATO, are
presented as operating cash flows.
The Company and its subsidiaries are grouped for GST purposes.
Therefore, any inter-company transactions within the Group do not
attract GST.
29 Summary of other significant
accounting policies (continued)
(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 costs 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 costs of disposal.
A gain is recognised for any subsequent increases in fair value less costs
of disposal of an asset (or disposal group), but not in excess of any
cumulative impairment loss previously recognised. A gain or loss not
previously recognised by the date of the sale of the non-current asset
(or disposal group) is recognised at the date of derecognition.
Non-current assets (including those that are part of a disposal group) are
not depreciated or amortised while they are classified as held for sale.
Interest and other expenses attributable to the liabilities of a disposal
group classified as held for sale continue to be recognised.
A discontinued operation is a component of the entity that has been
disposed of or is classified as held for sale and that represents a separate
major line of business or geographical area of operations, is part of a
single co-ordinated plan to dispose of such a line of business or area of
operations, or is a subsidiary acquired exclusively with a view to resale.
The results of discontinued operations are presented separately in the
consolidated income statement.
(f) Financial instruments
(i) Non-derivative financial assets
The Group initially recognises financial assets on the trade date at
which the Group becomes a party to the contractual provisions of
the instrument. Financial assets are derecognised when the rights to
receive cash flows from the financial assets have expired or have been
transferred, and the Group has transferred substantially all the risks and
rewards of ownership.
Financial assets are initially measured at fair value. If the financial asset
is not subsequently accounted for at fair value through profit or loss,
then the initial measurement includes transaction costs that are directly
attributable to the asset’s acquisition or origination. On initial recognition,
the Group classifies its financial assets as subsequently measured at
either amortised cost or fair value, depending on its business model
for managing the financial assets and the contractual cash flow
characteristics of the financial assets.
109
FINANCIAL REPORT 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 111
Page 111
110110110
Section Title (continued)AURIZON ANNUAL REPORT 2022–23 Notes to the consolidated financial statements
30 June 2023 (continued)
30 Commitments and contingencies
31 Events occurring after the
reporting period
No matter or circumstance, other than the matters disclosed in
key events and transactions for the reporting period, has occurred
subsequent to the financial period that has significantly affected, or may
significantly affect, the operations of the Group, the results of those
operations, or the state of affairs of the Group or economic entity in
subsequent financial periods.
(a) Contingent liabilities
Issues relating to common law claims, product warranties and regulatory
breaches are dealt with as they arise. There were no material contingent
liabilities requiring disclosure in the financial statements, other than as
set out below.
Guarantees and letters of credit
For information about guarantees and letters of credit given by the
Group, refer to note 18(d). For information about the MIC Parent
Company Guarantee, refer to note 21(b).
(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 2023, the Group has capital commitments contracted but
not provided for in respect of the acquisition of property, plant and
equipment of $232 million (2022: $140 million) which are due within one
year, $64 million (2022: $nil) which are due between one and five years
and $14 million (2022: $nil) which are due after five years.
111
FINANCIAL REPORT Directors’ Declaration
30 June 2023
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 55 to 109 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 2023 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
14 August 2023
112112112
AURIZON ANNUAL REPORT 2022–23
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
Independent Auditor’s Report to the Members of Aurizon
Holdings Limited
RReeppoorrtt oonn tthhee AAuuddiitt ooff tthhee FFiinnaanncciiaall RReeppoorrtt
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 2023, the consolidated income statement, the
consolidated statement of comprehensive income, the consolidated statement of changes in equity and the
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.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
• Giving a true and fair view of the Group’s financial position as at 30 June 2023 and of its financial performance
for the year then ended; and
• Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of
our report. We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are
relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities
in accordance with the Code.
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.
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 Network infrastructure assets
At 30 June 2023, the carrying value of the Central
Queensland Coal Network infrastructure assets
(Network infrastructure assets) was $4,907m. As
HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy
AAuuddiitt MMaatttteerr
To assess the useful economic lives adopted by the
Group for the Network infrastructure assets, we
performed the following procedures amongst others:
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte organisation.
113
FINANCIAL REPORT KKeeyy AAuuddiitt MMaatttteerr
HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy
AAuuddiitt MMaatttteerr
•
•
•
•
disclosed in note 8, the Group estimates the useful
lives of the Network infrastructure assets based on
the expected engineering life of these assets,
capped at the remaining term of the applicable
leases. In adopting this basis, the Group assumes
that the Network infrastructure assets will remain
economically viable throughout the lease term.
These assets are primarily used to transport coal
from mines to port for subsequent export. 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.
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
Network infrastructure assets should be reduced
resulting in an increase in the future depreciation
expense.
Given the significant carrying value of the Network
infrastructure assets and the uncertainty associated
with the impact of climate change, the estimate of
useful economic lives of the Network infrastructure
assets is considered to be a key audit matter.
Obtained and evaluated relevant information
which estimates the future demand for, and
supply of, coal from Queensland. This included
publicly available global and regional energy and
coal forecasts and outlooks from industry
specialists
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 reserves 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 to assess
future supply of coal
As most publicly available information does not
forecast coal demand beyond 2050, management
undertook an analysis to assess the economic
viability of the Network infrastructure assets
beyond 2050. Our procedures on management’s
analysis included:
o Understanding the methodology
adopted
o Together with our internal specialists,
testing the integrity and mechanical
accuracy of management’s calculations
o Comparing key assumptions used by
management to existing benchmarks and
publicly available information.
•
Evaluated the disclosures in the financial
statements including the sensitivity analysis
outlining the impact on depreciation expense of
changes in useful lives of assets (see note 8).
In conjunction with our valuation and taxation
specialists, our procedures included but were not
limited to:
•
•
Reviewing the terms and conditions in the key
acquisition agreements including the Partnership
Interest Sale Agreement (PISA) and Undertaking
to the ACCC (Undertaking)
Evaluating management’s accounting position
papers, including the conclusion that the
acquisition represents a business combination in
accordance with AASB 3
One Rail acquisition and East Coast Rail disposal
As disclosed in note 22, on 29 July 2022 the Group
acquired One Rail Australia (ORA), for total
consideration of $2,404m. The transaction has
been accounted for as a business combination in
accordance with AASB 3 Business Combinations
(AASB 3), requiring the Group to recognise the fair
value of ORA’s assets acquired and liabilities
assumed in the Consolidated Statement of Financial
Position from the date of acquisition.
ORA comprised two main business units being
Aurizon Bulk Central (ABC) and East Coast Rail
(ECR). In approving the acquisition of ORA, the
114114114
Section Title (continued)AURIZON ANNUAL REPORT 2022–23 KKeeyy AAuuddiitt MMaatttteerr
HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy
AAuuddiitt MMaatttteerr
Australian Competition and Consumer Commission
(ACCC) accepted the Group’s undertaking to
dispose of ECR by way of trade sale or demerger.
As a consequence, ECR was classified as a
discontinued operation held for sale at the date of
acquisition. ECR was disposed of on 17 February
2023, resulting in a loss on disposal of $2m after
recording an impairment expense of $75m (see
note 23).
The acquisition accounting for ORA is complex and
involves a high level of judgement in determining
the fair value of assets acquired and liabilities
assumed.
Due to the complexity and judgements involved in
the acquisition accounting, we determined this to
be a key audit matter.
•
•
•
•
Evaluating the competency, qualifications and
objectivity of management’s external valuation
experts and performing a detailed review of their
valuation report to understand the scope of their
work and any limitations in the report
Challenging the allocation of the consideration
between ABC and ECR by comparing the
respective implied internal rates of return to
independently calculated weighted average costs
of capital and the implied Earnings Before
Interest, Tax, Depreciation and Amortisation
(EBITDA) multiples to comparable companies.
Challenging management as to whether
information obtained during the measurement
period reflected the facts and circumstances that
existed at acquisition date
Challenging management’s determination of the
fair value of assets acquired and liabilities
assumed, including:
o Engaging a non-Deloitte component audit
firm to undertake specific audit procedures
over the purchase price accounting for ECR.
We obtained and reviewed their conclusions
and held discussions with them, as necessary
o Reviewing key ABC contractual agreements
o Evaluating and challenging the methodologies
adopted to value identified assets and
liabilities of ABC
o Evaluating the valuation model and assessing
the mathematical accuracy of significant
calculations
o Reviewing the methodology and recalculating
the entry allocable cost amount (ACA)
calculations and related deferred tax balances
arising on acquisition
•
Assessing the adequacy of the disclosures setting
out the nature and basis of the business
combination accounting and the assumptions
applied by management in accounting for the
acquisition (see note 22).
Assessment of the carrying value of the Western
Australia, Bulk Queensland (Bulk QLD), Bulk New
South Wales (Bulk NSW) and Bulk Central cash-
generating units (CGU)
To evaluate the estimated recoverable value of the
Western Australian, Bulk QLD, Bulk NSW and Bulk
Central CGUs, we performed the following procedures
amongst others:
115
FINANCIAL REPORT KKeeyy AAuuddiitt MMaatttteerr
HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy
AAuuddiitt MMaatttteerr
At 30 June 2023, as disclosed in notes 8 and 9,
management has undertaken an estimate of the
recoverable value of the following CGUs:
•
•
•
•
The Western Australia CGU, which has a
carrying value of $333m. The carrying value of
depreciable assets within this CGU had
previously been impaired. Management has
identified potential impairment reversal
indicators
The Bulk QLD CGU, which has a carrying value
of $212m including goodwill of $5m. The
carrying value of depreciable assets within this
CGU had previously been impaired
The Bulk NSW CGU, which has a carrying value
of $151m including goodwill of $22m
The Bulk Central CGU, which was established
on 29 July 2022 as part of the One Rail
acquisition and has a carrying value of $1,423m
including goodwill of $23m
As disclosed in notes 8 and 9, the recoverable
values of these CGUs have been estimated using a
value in use discounted cash flow model for the
Western Australia CGU and a fair value less costs of
disposal (FVLCD) discounted cash flow model for
the Bulk QLD, Bulk NSW and Bulk Central CGUs.
The key assumptions included in these models
relate to cash flows from customers, discrete
period growth rates, discount rates and forecast
capital expenditure. As these assumptions require
management to exercise significant judgement, the
assessment of the recoverable value of the
Western Australia CGU, Bulk QLD CGU, Bulk NSW
CGU and Bulk Central CGU is a key audit matter.
•
•
•
•
•
•
•
•
•
Assessed the design and implementation of key
controls over management’s process for
determining the recoverable value of the CGUs
Reconciled the assets and liabilities of the
respective CGUs to the Group balance sheet and
ensured that corporate assets were
appropriately allocated to CGUs
Agreed the cash flows included in management’s
models to the latest board approved budgets
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. This included,
where relevant, a comparison of management’s
assumptions to publicly available information
and evaluating the competency, qualifications
and objectivity of management’s expert and
assessing the adequacy of their work
Assessed the treatment of forecast expenditure
in respect of the Group’s decarbonisation
strategy and the Safeguard Mechanism
Evaluated the Group’s ability to forecast future
cash flows by comparing the current year and
historical results to budget
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 (see notes 8 and 9).
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 2023, 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.
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
116116116
Section Title (continued)AURIZON ANNUAL REPORT 2022–23 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.
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.
117
FINANCIAL REPORT 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 31 to 46 of the Directors’ Report for the year
ended 30 June 2023.
In our opinion, the Remuneration Report of Aurizon Holdings Limited, for the year ended 30 June 2023,
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
DELOITTE TOUCHE TOHMATSU
Matthew Donaldson
Partner
Chartered Accountants
Brisbane, 14 August 2023
118118118
AURIZON ANNUAL REPORT 2022–23 Non-IFRS Financial Information
in the FY2023 Annual Report
2023
2022
Continuing
operations
$m
Discontinued
operations
$m
Continuing
operations
$m
Discontinued
operations
$m
34
(82)
(48)
(6)
(54)
27
(27)
–
75
26
2
76
–
76
367
(43)
324
159
483
230
713
49
–
–
–
762
666
1,428
10,111
7.5%
NPAT — Underlying
Significant items, net of tax1
NPAT — Statutory
Income tax expense
Profit before income tax
Net finance costs
EBIT — Statutory
Add back significant items:
– Acquisition costs
– Impairment of assets held for sale
– Sale and divestment costs
– Loss on disposal
EBIT — Underlying
Depreciation and amortisation
EBITDA — Underlying
Average invested capital
(continuing operations)
ROIC (continuing operations)
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 adjustments2
Alternative Net Debt
Total equity
Total capital
Alternative Net Gearing Ratio
525
(12)
513
223
736
125
861
14
–
–
–
875
592
1,467
8,464
10.3%
2023
$m
5,142
(92)
5,050
4,353
9,403
53.7%
2023
$m
5,050
140
5,190
4,353
9,543
54.4%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2022
$m
3,221
(172)
3,049
4,412
7,461
40.9%
2022
$m
3,049
211
3,260
4,412
7,672
42.5%
1 Significant items for continuing operations includes acquisition costs for One Rail Australia of $49 million
($43 million post tax). Significant items for discontinued operations includes impairment expense of
$75 million ($57 million post tax), sale and divestment costs of $26 million ($23 million post tax) and loss
on disposal $2 million ($2 million post tax).
2 Refer to note 18(a)(ii).
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 relevant 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 items.
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, and assets
and liabilities held for sale). 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.
119
FINANCIAL REPORT
Shareholder Information
RANGE OF FULLY PAID ORDINARY SHARES AS AT 1 AUGUST 2023
RANGE
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 Over
Total
TOTAL HOLDERS
UNITS
% OF ISSUED CAPITAL
22,766
31,329
7,677
6,001
195
67,968
13,415,521
75,077,266
56,423,581
130,523,795
1,565,263,819
1,840,703,982
0.73
4.08
3.07
7.09
85.04
100.00
UNITS
89,485
UNMARKETABLE PARCELS AS AT 1 AUGUST 2023
Minimum $500.00 parcel at $3.81 per unit
MINIMUM PARCEL SIZE
132
HOLDERS
1,346
The number of shareholders holding less than the marketable parcel of shares is 1,346 (shares: 89,485).
Substantial holders of 5% or more of fully paid ordinary shares as at 1 August 2023*
NOTICE DATE
01/08/2022
01/08/2022
01/08/2023
02/09/2022
SHARES
112,656,938
92,070,702
111,283,294
114,082,981
NAME
State Street Corporation and subsidiaries
The Vanguard Group Inc.
Mondrian Investment Partners Limited
BlackRock Group
* As disclosed in substantial shareholder notices received by the Company.
INVESTOR CALENDAR
2024 DATES
12 February 2024
27 March 2024
12 August 2024
DETAILS
Half Year results and interim dividend announcement
Interim dividend payment date
Full Year results and final dividend announcement
25 September 2024
Final dividend payment date
10 October 2024
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 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.
120120120
AURIZON ANNUAL REPORT 2022–23
TOP 20 HOLDERS OF FULLY PAID ORDINARY SHARES AS AT 1 AUGUST 2023
NAME
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMS PTY LTD
Continue reading text version or see original annual report in PDF format above