EROAD
ANNUAL REPORT 2016
KEY DATES
04
AUGUST 2016
25
NOVEMBER 2016
Annual Shareholders Meeting
Half Year Results announcement*
30
SEPTEMBER 2016
31
MARCH 2017
Financial Half Year End
Financial Year End
This annual Report is dated 28 June 2016 and is signed on behalf
of the Board of EROAD by Michael Bushby, Chairman and Steven
Newman, Chief Executive Officer.
Michael Bushby, Chairman
Steven Newman, Chief Executive Officer
*Proposed date
CONTENTS
OVERVIEW
2016 Business Highlights
2016 Results in Brief
The EROAD Business
Chairman Report
CEO Report
GOVERNANCE
Board of Directors
Executive Management Team
Corporate Governance
FINANCIAL PERFORMANCE
Financial Review
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Independent Auditor’s Report
REGULATORY DISCLOSURES
Director Disclosures
Shareholder Information
Other Information
GLOSSARY
DIRECTORY
01
02
03
08
09
12
13
15
20
23
29
60
63
65
67
69
71
2016
Business Highlights
Q1 April to June 2015
• Awarded Callaghan Innovation Growth Grant, worth up to $3 million over three years
• Completed development and launched enhanced International Fuel Tax Agreement (IFTA) services in the
US Pacific North West
• Launched vehicle booking system to meet demand in New Zealand
• Continued to increase investment in research & development staff and development ahead of expected
Electronic Logging Device (ELD) regulations
Q2 July to September 2015
• Milestone 30,000 units contracted on EROAD system
• Launched EROAD’s services into the US states of Washington and Idaho
• Partnered with New Zealand’s largest commercial vehicle insurer NZI to offer insurance service
• Launched Drive Buddy driver behaviour safety feature in advance of New Zealand’s new health and safety laws
Q3 October to December 2015
• Ranked on the Deloitte Technology Fast500 Asia Pacific for the fourth consecutive year
• Entered into supply partnership agreement with FleetPartners, a leading New Zealand fleet leasing company
• Launched electronic logbook in North America in advance of the expected ELD regulations
• US government published final ELD regulations in line with EROAD expectations
Q4 January to March 2016
• Milestone of $1 billion of road users charges collected on behalf of New Zealand Transport Agency
• Selected as the sole technology provider to heavy vehicles in the California road charging pilot
• Reached 196 staff, with 29 in North America
• Entered into supply partnership agreement with Custom Fleet, a leading New Zealand fleet management company
• EROAD’s “next generation” Ehubo2 received NZTA approval as electronic distance recorder
01
1.0 OVERVIEW 2016
Results in Brief
40,000
30,000
20,000
10,000
-
30
25
20
15
10
5
-
60
50
40
30
20
10
-
TOTAL CONTRACTED UNITS
36,953
25,862
14,332
7,720
3,769
2012
2013
2014
2015
2016
REVENUE ($Millions)
26.0
17.6
10.0
6.2
2.9
2012
5.9
2012
2013
2014
2015
2016
FUTURE CONTRACTED INCOME ($Millions)
48.0
32.6
19.5
11.5
2013
2014
2015
2016
Revenue
49%
Total Contracted Units
43%
Future Contracted Income
47%
Retention Rate
97.1%
Staff Numbers
26%
Invested in R&D
$12.6m
Rental units continue to dominate our total contracted units.
TOTAL CONTRACTED UNITS
BY SALES TYPE
MARCH 2016
8%
Rented
Sold
TOTAL CONTRACTED UNITS
BY MARKET
MARCH 2016
Established Market
Commercial Market
4,501
92%
32,452
02
1.0 OVERVIEW The EROAD Business
WHO WE ARE
EROAD is a leading transport technology and services
company, headquartered in Auckland, New Zealand and
listed on the New Zealand Stock Exchange (NZX) under
the stock ticker of ERD. Its US business is based in Portland,
Oregon. EROAD’s in-vehicle technology and global services
platform provides customers with automated solutions to
manage and pay road user charges and weight-mile tax, to
meet regulatory and compliance obligations, and to provide
a range of valuable commercial services. Its goal is to offer
accurate and easy-to-use solutions based on its innovative
technology to assist in the creation of a transport sector that
is responsive to the evolving needs of business, government
and the wider community.
EROAD designs and manufactures in-vehicle hardware,
operates secure payment and merchant gateways and offers
web-based value-added services. The EROAD team are
experts in their field, highly qualified, and very experienced
in technology and security, SaaS and cloud infrastructure, the
transport industry and the public sector.
EROAD is a vertically integrated technology company which
has developed a product suite that integrates the complete
customer experience from hardware to software and
services. EROAD generates revenue and Future Contracted
Income from charging customers for its services and selling
or renting its hardware to customers. This arrangement
promotes strong customer relationships and ensures more
stable revenue streams.
WHAT WE DO
Road User Charging/Electronic Tax Management
EROAD has set the standard as the first provider to offer an
electronic road user charging solution in New Zealand. Since
the company commenced operations in 2009, it has built a
strong business, having collected more than $1 billion of RUC
on behalf of the New Zealand government from more than
2,000 client organisations.
In Oregon, EROAD became the first service provider
approved by the state government to electronically calculate,
process and pay weight-mile taxes (WMT) on behalf of
commercial transport carriers. The state government audit
concluded that the EROAD technology platform was accurate
and reliable, and found that the EROAD data, reports and
records were more accurate than the paper-based records
compiled and filed by carriers.
03
The company also provides a comprehensive fuel tax
reporting service in North America, making it much simpler
for trucking firms to file their quarterly fuel tax returns
required by the International Fuel Tax Agreement (IFTA).
Compliance Management
Operating a commercial vehicle fleet is a complex and
demanding task. Drivers and managers face increasing
regulatory oversight, infrastructure congestion and
competitive pressure. Creating a safe workplace is a key goal
for all transport operators, who recognise that driver error,
fatigue and speed are major factors in crashes.
EROAD’s advanced technology platform offers huge
opportunities to improve driver compliance and safety
outcomes, and the company has developed an electronic
logbook solution to support driver hours-of-service
obligations and record-keeping requirements, including a
powerful driver vehicle inspection product.
Research and development has begun to deliver a compliant
electronic logging device (ELD) to meet new US rules that
mandate electronic recording of hours of service from
December 2017.
Changing regulatory environments in our markets, especially
new health and safety legislation in New Zealand, and the
ELD mandate in the US, make it ever more important for
customers to have accurate, auditable electronic systems to
meet regulatory requirements.
Commercial Services
In New Zealand, the United States and Australia, EROAD
offers a range of value-added commercial services to improve
fleet management and performance. EROAD’s intuitive web-
based fleet management service offers improved operational
transparency and enhanced control. Real-time vehicle
information is displayed on digital maps, supplemented by a
wide variety of tools and reports.
Transport operators benefit from enhanced fleet productivity,
better route planning, higher customer satisfaction, timely
maintenance, superior fuel efficiency, the ability to monitor
driver performance and improved legal compliance.
Partnerships
EROAD’s platform has been specifically designed to allow
integration with third parties, and to provide additional
commercial services. As such, EROAD is able to align and
1.0 OVERVIEW partner with providers who operate in specialised areas,
such as cold chain logistics and monitoring, workflow
management and manifest services. Partnerships with
recognised technology leaders provide a richer client
experience and allows EROAD to market to a wider group
of potential clients.
THE EROAD ADVANTAGE
The road charging, compliance and commercial services
industries are complex, requiring the company to build and
maintain relationships with a wide range of industry, agency
and political stakeholders, as well as customers.
EROAD enjoys a high international profile, and is seen as a
credible and trusted expert in compliance, tolling, ecommerce
and security.
EROAD has built a strong brand based on quality design
as well as customer endorsements, advertising, alliances
and partnerships.
EROAD’s trusted party status amongst regulators and
customers is underpinned by the quality of our management,
system performance and product and process security.
EROAD’s web services platform achieves 99.9% availability.
EROAD employs best-of-breed technology to protect its
information systems, which are aligned with international and
United States federal government standards.
The company continues to enjoy a strong competitive position
underpinned by solution complexity, high security, financial
and performance requirements, and regulatory approvals.
Strong barriers to entry create considerable development risk
and long lead times to market for potential competitors, who
are usually burdened by legacy technology platforms.
GLOBAL ACTIVITIES
04
1.0 OVERVIEW EROAD FACTS AND FIGURES
COMMERCIAL MARKET
ESTABLISHED MARKET
TOTAL
Total Contracted Units*
4,501
32,452
36,953
Tax collected or miles measured
148,000,000 miles
$1,000,000,000
Employees
29
167
-
196
Future Contracted Income#
$8,185,394
$39,825,321
$48,010,715
* Total Contracted Units is a non GAAP-measure used by EROAD which represents the total units subject to a customer contract and includes
both Units on Depot and units pending installment.
# Future Contracted Income is a non-GAAP measure which represents future hardware and SaaS revenue under non-cancellable long-term
agreements for installed units. Refer to Note 5 of the Financial Statements.
PROGRESS AGAINST KEY STRATEGIES
1
Grow existing markets
Grew units by 43% across all markets
2 Expand Oregon operations to
Northwest & North America
3 Identify, foster and develop
new opportunities
4 Consider accelerated market
entry through acquisitions
5 Further develop commercial
services to support core offer
6
Validate new product markets
and business models
Expanded in Northwest (Washington & Idaho)
Won California Pilot and launched Electronic Logbook
Watching brief, no acquisitions in FY16
Launched health & safety products in NZ and enhanced IFTA for US
Partnered with insurer & light vehicle lease companies in NZ
05
1.0 OVERVIEW Tax reports are so simple and require little
to no human intervention. It’s like having
another all-star employee in the ranks. If this
was all EROAD did it would be a no brainer.
Brian Young
Equipment Division Manager,
Baker Rock Resources
Chairman
Report
EROAD’S first full year as a listed company has been
an exciting and productive year. We have continued to
grow strongly in New Zealand while making progress in the
development of our US business, where CEO Steven Newman
has spent considerable time during the year. We are equally
focused on refining our business model in the US to prepare
for significant opportunities in that market, and on deepening
and strengthening our New Zealand business, where
considerable potential remains.
Our share registry has continued to diversify with continued
support from cornerstone shareholders be they members
of the EROAD team, who continue to hold a significant
portion of shares, or financial institutions, and we continue to
welcome new shareholders. In keeping with the company’s
focus on growth and developing new products and markets,
there will be no dividend paid this year.
Domestically substantial opportunities remain in further
growing our dominant share of the New Zealand ERUC and
health and safety compliance market, and in expanding
beyond our existing client base.
In the United States the potential market for electronic
logging devices (ELDs) is of a scale that has required
significant investment in research and development, whilst
the company has also continued to grow our electronic
weight mile tax and other compliance and commercial
services.
Our team continues to grow, and we warmly welcomed
another 41 EROADers into the business this year. Like any
dynamic, high-growth business, we saw some changes
in our executive team, and the Board would like to
acknowledge the long-term contributions of former head
of sales Peter Batcheler and EROAD founder and US SVP
Brian Michie, who left their executive roles during the year,
but remain shareholders.
Recently we announced the appointment of Gregg Dal
Ponte as the company’s newest director. The board had
been seeking a US-based director for some time, and we are
delighted that Gregg agreed to join the board, following a
successful career in US transportation and public policy most
latterly as Administrator of the State of Oregon Department of
Transportation (ODOT), Motor Carrier Transportation Division.
We look forward to welcoming shareholders to our annual
meeting on 4 August 2016. The AGM will provide further
opportunity to update you on the progress that the business
is making as we deliver on our strategies and pursue the
creation of sustainable and lasting value for our customers,
our shareholders, and all our stakeholders.
Yours sincerely
Michael Bushby, Chairman
08
1.0 OVERVIEW CEO
Report
This year we made progress towards securing an international
leadership position in the provision of road user charging and
compliance services to the global heavy transport sector. We
extended our leadership position as the largest provider of
RUC in the New Zealand market. The release of the finalised
ELD regulations in the United States has enabled us to
accelerate our investment in research and development as
we create a fully compliant electronic logging device (ELD)
for the US market. In anticipation of an uplift in national sales
once we release our ELD we are realigning our US business
to allow the company to reach well beyond the Pacific North-
West. Together with our IFTA solution, our ELD solution will
give us a compelling market advantage as we expand across
North America.
We continued to refine our technology platform, and expand
our range of products and services to add value for customers
and give new customers even more reasons to go electronic.
By year end, EROAD’s Depot system had tracked vehicle
journeys covering 148 million miles in the United States and
processed over $1 billion in road user charges in New Zealand.
YEAR IN REVIEW
Our market share in New Zealand continues to grow as the
transition from manual reporting systems in transportation
to electronic gathers pace. During the year we marked
the collection of $1 billion of RUC on behalf of NZTA, and
EROAD is the ERUC provider of choice for heavy transport
operators. Health and safety reforms in New Zealand provide
additional reasons both for heavy transport operators and for
light vehicle fleets to install EROAD’s technology, to ensure
they have accurate, auditable driver, vehicle and journey
information. We are seeing growth driven both by customer
need for ERUC and health and safety compliance services.
During the year revenue grew by 49% to $26.2 million. We
added 11,091 contracted units, a growth rate of 43%. Our
customers continue to favour renting units over buying them
such that Future Contracted Income (FCI) grew by 47%, to
$48 million. Our team of EROADers expanded to 196, and we
continued to build our employment brand to attract high-
calibre team members. Our R&D team grew by 25 members,
a 44% increase. We moved into larger premises in Portland,
Oregon as our US footprint increased. We launched a number
of new products and services during the year, including our
09
automated IFTA reporting service and Electronic Logbook in
the US, and Drive Buddy, a driver behaviour safety feature in
New Zealand.
ESTABLISHED MARKET:
NEW ZEALAND AND AUSTRALIA
EROAD now collects 34% of New Zealand Heavy Vehicle RUC,
up from 29% a year ago. A major step forward this year for
New Zealand customers was our launch of electronic off-road
filing. Kiwi customers can now claim off-road refunds in a
completely paperless process. Automating off-road refunds
completes the innovative end-to-end solution EROAD
launched in 2009, enabling operators to purchase road
user charges online, receive automatic alerts when a RUC
licence expires, and have a vehicle’s RUC status displayed on
EROAD in-vehicle hardware, removing the need for paper
labels. Operators can now also submit off-road refund claims
electronically with the click of a button, at no extra charge.
A highlight of the year was receiving NZTA approval for
Ehubo2, our second-generation in-vehicle device, as an
approved electronic distance recorder (EDR). Of the three
approved EDRs on the market in New Zealand, two are
EROAD products. The Ehubo2 helps improve safety outcomes
with a touchscreen colour display that delivers real-time in-
cab driver feedback and EROAD’s driver messaging service.
Ehubo2 underwent a rigorous product testing and validation
process in New Zealand, Australia and the USA, covering in
excess of 200 million kilometres.
In keeping with our commitments to privacy and accuracy
of all customer data, Ehubo2 is the only electronic distance
recorder in the world to meet international security standards
including Federal Information Processing Standards (FIPS)
140-2 Level 3. We now offer customers a choice of EDR.
We now offer customers a choice of two EDRs, with the
Ehubo2 units available alongside the more than 30,000
Ehubo1 units that are installed in heavy and light vehicles
across New Zealand.
We enjoyed further sales in Australia, mainly from New
Zealand customers with operations across the Tasman and
Australian operators looking for secure telematics, and we
continue to engage at a business development level with
future opportunities arising from regulatory reform.
1.0 OVERVIEW THE YEAR AHEAD
Looking forward, we will continue to execute our growth
plans, while at the same time becoming more cost conscious
as the business grows, to ensure we can grow sustainably. In
New Zealand, an opportunity exists to offer additional benefits
to customers with our Ehubo2, which we are confident the
market will respond positively to, as well as continuing to offer
our Ehubo1 units. We also anticipate demand from a wider
range of vehicle fleets will continue to grow as health and
safety requirements prompt companies to improve vehicle
safety as well as their audit and information systems.
In the US we look forward to completing the realignment of
our business to better address our target segments in Oregon
and across North America. We are focused on delivering a
compliant ELD, and being among the first movers in this very
significant market space.
It has been another year of dynamic transformation at
EROAD. My thanks to our dedicated team that continues to
demonstrate our philosophy of agile thinking and innovation,
as well as a commitment to our values and ambition
to achieve global leadership in our market space.
Steven Newman, CEO
COMMERCIAL MARKET: OREGON
The evolving regulatory environment in the US continues
to present increasing opportunities. In December, the US
Department of Transportation’s Federal Motor Carrier Safety
Administration (FMCSA) published its final rule requiring
the use of electronic logging devices (ELD) for drivers to
record their hours of service information. The rules were
consistent with EROAD’s expectations, and our focus is
to complete a high-quality, compliant ELD and bring it
to market as quickly as we can. It is estimated that more
than three million drivers and vehicles are affected by
this rule, which represents a significant opportunity for
EROAD to provide customers across North America with a
comprehensive electronic tax and compliance solution on our
secure technology platform. An ELD offering complements
our Electronic Logbook service, launched in the US this year,
providing transport operators with an innovative electronic
HOS (hours of service) solution to help improve compliance
and reduce paperwork.
During the year, we re-set expectations for our rate of
growth in the US in the short term, having chosen to invest
in refining our sales model to support ELD customers, as
well as achieving a compliant ELD as soon as possible. Many
potential customers are holding off on purchase decisions
to ensure any new purchases are ELD compliant. Even so,
we continue to grow in the US faster we than we did in New
Zealand at a comparable stage, now with 4,501 units in
vehicles, and Future Contracted Income of $8.2 million, an
annual growth rate of 126%. We are selling around 14 units
per customer in the US, compared to two to three units
per customer in New Zealand at the same stage of market
development. As we complete our ELD offer, and further
refine the market segments that offer EROAD the best
opportunities, we are confident we can accelerate our
growth track.
A significant step for EROAD was its selection by the
California Department of Transportation (Caltrans) as its
heavy vehicle technology provider for the California Road
Charge Pilot. This is the United States’ largest road charge
pilot to date and is scheduled to run for nine months from
this July. EROAD was named the sole provider in the heavy
vehicle category. The pilot will provide data for the state to
consider as it assesses alternative road charging options to
California’s existing fuel tax regime
10
1.0 OVERVIEW 2.0
GOVERNANCE
11
Board of Directors
MICHAEL BUSHBY
Chairman
Michael is General Manager of the Ventia Asset and Infrastructure Services division
(previously known as Leighton Contractors Infrastructure Services). Ventia is one of the
largest telecommunications, infrastructure and utilities services providers operating in
Australia and New Zealand. He was previously Chief Executive of the New South Wales
Roads and Traffic Authority. Michael joined the EROAD board in May 2012 and was
appointed chair shortly thereafter.
TONY GIBSON
Independent Director, Chairman of Remuneration,
Talent and Nomination Committee, and Finance Risk and Audit Committee
Tony is the Chief Executive of Ports of Auckland and one of New Zealand’s most
experienced transport professionals, with 30 years in shipping and logistics. He has worked
in various senior management roles in Africa, Asia and Europe. In 2008 the Minister of
Transport appointed him to the Road User Review Group. Tony joined EROAD’s board in
October 2009.
SEAN KEANE
Independent Director, Chairman of Finance Risk and Audit Committee
Sean is the founder and Managing Director of Triple T Consulting, a financial market
commentary and advisory company. Sean’s career spans 27 years in the financial markets,
in a variety of senior roles in London, Wellington, Sydney, Singapore and Tokyo. Most
recently he was Managing Director of Interest Rate Trading and Funding for Credit Suisse.
Sean is a non-executive Director of First NZ Capital. He was appointed to EROAD’s board in
February 2013.
CANDACE KINSER
Independent Director, Member of Remuneration,
Talent and Nomination Committee, and Finance Risk and Audit Committee
Candace is an experienced director, CEO and tech entrepreneur. Previously the CEO of
the NZ Technology Industry Association and science software company Biomatters, she is
currently an Advisor for Palantir Technologies. She is also a Director for global technology
recruitment company Talent International, an Advisor for the University of Waikato’s Cyber
Security Lab and a Director for the Cloud Security Alliance New Zealand chapter. Candace
joined the EROAD Board in April 2014.
STEVEN NEWMAN
Executive Director/CEO
Steven brings a wealth of experience to EROAD after a long and successful association
with Navman, which he co-founded. In his roles as COO and CEO, Steven helped establish
Navman as a leading international brand within the Marine Electronics, Fleet Tracking,
Precision GPS Modules and Consumer Car Navigation sectors, with annual sales in excess
of NZ$500 million. Steven has been CEO and a member of the EROAD board since 2007.
GREGG DAL PONTE
Non-independent Director
Gregg will join the EROAD Board on 1 July 2016. Gregg has served in multiple executive leadership positions in the
transportation industry throughout his career. From 1996 until recently, he served as Administrator for Oregon Department
of Transport’s Motor Carrier Transportation Division.
121212
2.0 GOVERNANCE Executive Management Team
STEVEN NEWMAN
Executive Director/CEO
(See previous page)
Steven is also acting President of EROAD North America.
BRUCE WILSON
Chief Technology Officer & Head of Product
Bruce is responsible for technical leadership across product
development at EROAD. Bruce provides technical guidance
to the engineering, enterprise and market development
teams. Bruce joined EROAD in 2008. Bruce has worked
locally and internationally on many wireless embedded
projects for companies such as Nokia and Navman.
MARK SIMPSON
Chief Financial Officer
JARRED CLAYTON
Executive Vice President, Engineering
Mark is responsible for EROAD’s financial management and
legal affairs. Mark joined EROAD in 2011 and has 25 years’
experience as a finance professional including roles as CFO
and CEO of publicly listed organisations in New Zealand, and
consulting through KPMG.
Jarred oversees technical delivery to customers through his
management of EROAD’s engineering teams. Jarred joined
EROAD in 2008 with a wealth of experience from engineering
in the telecommunications industry and consulting on
architecture and agile development.
1313
2.0 GOVERNANCE TONY WARWOOD
General Manager New Zealand
REBECCA MCKASKELL
Vice President, People & Capability
Tony leads EROAD’s New Zealand business. Tony joined
EROAD in 2009 having worked in the heavy transport
industry for a number of years. Until October 2015 Tony
led the New Zealand sales team as National Sales Manager.
Rebecca is responsible for all aspects of People & Capability,
including recruitment, staff engagement, training and career
development. Rebecca joined EROAD in 2012 after extensive
HR and recruitment experience in New Zealand and the
UK. Since joining, Rebecca has overseen the growth in the
EROAD team from 34 employees to 196.
SARA GOESSI
Vice President Communications & Marketing
Sara has responsibility for EROAD’s global marketing
and communications. Sara joined EROAD in 2012, after
working in media relations and marketing for New Zealand
high-tech companies.
MARK HEINE
Executive Vice President, General Counsel & Company Secretary
Mark is responsible for all aspects of legal compliance at
EROAD including health and safety. Mark joined EROAD in
2015 after a career in the legal profession, having worked for
Bell Gully in Auckland and Allens in Sydney.
141414
2.0 GOVERNANCE Corporate Governance
The Board and management of EROAD are committed
to ensuring that the company adheres to best practice
governance principles and maintains the highest ethical
standards. The Board reviews and assesses the company’s
governance structures to ensure that they are consistent with
best practice.
EROAD’s corporate governance is aligned with the NZX Main
Board Listing Rules relating to corporate governance, the
NZX Corporate Governance Best Practice Code, and the New
Zealand Financial Markets Authority Corporate Governance
in New Zealand Principles and Guidelines. In this Corporate
Governance section, we report on how the company has
followed the recommendations set out in these principles.
The company’s corporate governance policies, practices and
procedures can be found on the Company’s website.
PRINCIPAL ACTIVITIES
EROAD has created an electronic solution to manage and
pay road user charges (RUC) and road tax regimes, support
regulatory compliance as well as provide value-added
commercial services to the heavy vehicle industry. There were
no significant changes to the company’s principal activities
during the financial year.
CODE OF ETHICS
The company expects its employees and directors to
maintain high ethical standards. The Code of Ethics for the
company sets out these standards and addresses amongst
other things:
• confidentiality
• conflicts of interest and corporate opportunities;
• receipt of gifts and personal benefits;
• expected conduct; and
• reporting concerns regarding breaches of this code, other
policies and the law.
The Code of Ethics requires employees to act in the best
interests of the company at all times and to not accept from,
or offer to, anyone, bribes or improper inducements.
The Code of Ethics specifically addresses EROAD’s
commitment to providing equal employment opportunities.
EROAD ensures that its selection process for recruitment and
employee development opportunities are free from bias and
are based on merit.
The company’s Code of Ethics can be found on the
Company’s website.
15
RESPONSIBILITIES OF THE BOARD
AND EXECUTIVE MANAGEMENT
The business and affairs of the company are managed under
the direction of the Board of Directors. At a general level, the
Board is elected by shareholders to:
• form the company’s objectives;
• advance major strategies for achieving the company’s
objectives;
• manage risks;
• determine the overall policy framework within which the
business of the company is conducted; and
• monitor management’s performance with respect to
these matters.
The Board Charter sets internal Board procedure and
defines the Board’s specific role and responsibilities.
The Board delegates management of the day-to-day
operations and responsibilities of the company to the
executive management team under the leadership of the
Chief Executive Officer to deliver the strategic direction
and goals determined by the Board.
THE BOARD
Board Composition
At present, there are five directors on the Board, four of
which are non-executive directors. Steven Newman, Chief
Executive Officer, is the only executive director on the Board.
The Chairman of the Board is Michael Bushby.
A brief biography of each Board member, including each
director’s experience, expertise, role and the term of office
held at the date of this Annual Report, is set out in the “The
Board” section of this Annual Report. Gregg Dal Ponte will
be appointed as a non-executive, non-independent director
on 1 July 2016.
INDEPENDENCE OF DIRECTORS
The factors that the company takes into account when
assessing the independence of its directors are set out in
the Board Charter. After consideration of these factors, the
company is of the view that:
1. No non-executive director is a substantial shareholder
of the company or an officer of, or otherwise associated
directly with, a substantial shareholder of the company.
2. Steven Newman is a director who, within the last three
years, has been employed in an executive capacity by
the company and is a substantial shareholder.
2.0 GOVERNANCE 3. No director has been a principal of a material
professional adviser to the company, or an employee
materially associated with such service provider, within
the last three years.
4. No director is a material supplier or customer of the
company, or an officer of, or otherwise associated
directly or indirectly with, a material supplier or
customer.
5. No director has a material contractual relationship with
the company other than as a director of the company
and in the case of Steven Newman only, as an employee
of the company and substantial shareholder.
6. No director has served on the Board for a period which
could, or could reasonably be perceived to, materially
interfere with the director’s ability to act in the best
interests of the company.
7. All directors are free from any close family ties with any
person who falls within the above categories.
8. All directors are free from any interest or any business
or other relationship which could, or could reasonably
be perceived to, materially interfere with the director’s
ability to act in the best interests of the company.
Based on these assessments, the company considers that, as
at 31 March 2016, Michael Bushby, Tony Gibson, Sean Keane
and Candace Kinser were independent directors
COMMITTEES
Specific responsibilities are delegated to the Finance,
Risk and Audit Committee and the Remuneration, Talent
and Nomination Committee. These Board committees
support the Board by working with management and
advisors on relevant issues at a suitably detailed level
and report to the Board. These committees have specific
charters setting out objectives, procedures, composition
and responsibilities. Copies of these charters are available
on the Company’s website.
Finance, Risk and Audit Committee
The primary function of the Finance, Risk and Audit
Committee is to assist the Board in fulfilling its oversight
responsibilities relating to the company’s risk management
and internal control framework, the integrity of its financial
reporting and the company’s auditing processes and
activities. Six meetings of the Finance, Risk and Audit
Committee were held during the financial year ended 31
March 2016.
Under the Finance, Risk and Audit Committee Charter, the
Committee must be comprised of non-executive directors,
all of whom must be independent. Further, the Chair of the
Committee must be an independent director and cannot be
the Chairman of the Board.
The current members of the Finance, Risk and Audit
Committee are Sean Keane (Chairman), Anthony Gibson and
Candace Kinser and their qualifications are specified in “The
Board” section of this Annual Report. All members of the
Finance, Risk and Audit Committee are independent non-
executive directors.
Remuneration, Talent and Nomination Committee
The Remuneration, Talent and Nomination Committee’s role
is to oversee and regulate remuneration and organisation
matters of the company and recommend candidates to
be nominated as a director or candidate for a committee.
Responsibilities encompass remuneration and benefits
policies; performance objectives and remuneration of the
company’s senior executives; succession planning and
associated management development for the chief executive
and senior executives. When recommending candidates
to act as director, the committee takes into account such
factors as it deems appropriate, including the diversity of
background, experience and qualifications of the candidate.
The current members of the Remuneration, Talent and
Nomination Committee are Anthony Gibson (Chairman),
Candace Kinser and Steven Newman. The majority of
members of the Remuneration, Talent and Nomination
Committee are independent directors.
Board
Finance, Risk and
Audit Committee
Remuneration, Talent and
Nomination Committee
Eligible to attend
Attended
Eligible to attend
Attended
Eligible to attend
Attended
Michael Bushby
Sean Keane
Anthony Gibson
Candace Kinser
Steven Newman
9
9
9
9
9
9
9
9
9
9
-
6
6
6
-
-
6
6
5
6
-
-
1
1
1
-
-
1
1
1
16
2.0 GOVERNANCE Directors do not take a portion of their remuneration under
a share plan but directors may hold shares in the company,
details of which are set out in the “Directors’ Shareholdings”
section of this Annual Report. It is the company’s policy to
encourage directors to acquire shares on-market.
Steven Newman, acting in his capacity as an employee of
the company, received fixed remuneration in the year ended
31 March 2016 of $524,000.
In addition to this fixed remuneration, Steven Newman also
received performance based at-risk components of $95,403.
Steven Newman, in his capacity as an executive director, does
not receive remuneration as a director of the company.
No director of any EROAD subsidiary receives or retains any
remuneration or other benefits in their capacity as a director.
EXECUTIVE MANAGEMENT REMUNERATION
The Remuneration, Talent and Nomination Committee is
responsible for reviewing the remuneration of the company’s
executive management in consultation with EROAD’s Chief
Executive Officer.
The remuneration packages of executive management
consist of a mixture of a base remuneration package,
a variable remuneration component based on relevant
performance measures, and participation in the company’s
employee share purchase plan.
The remuneration policy for executive management is
designed to attract, motivate and retain high quality
employees who will enable the company to achieve both its
short and long term objectives. The policy includes providing
incentives that allow executives to share in the long term
success of the company and share purchase plans intended
to encourage the retention of executive management and
increase the alignment between the interests of management
and shareholders
EMPLOYEE REMUNERATION
The company and its subsidiaries operate in three countries
where remuneration market levels differ. The overseas
remuneration amounts are converted into New Zealand
dollars. Of the employees noted in the table below 23% are
employed by EROAD outside New Zealand. During the year
a number of employees, not being directors of the company
and its subsidiaries, received remuneration and other benefits
that exceeded NZ$100,000 in value as follows:
BOARD PROCESSES
The Board held 9 meetings during the year ended 31 March
2016. The table above shows attendance at the Board and
committee meetings.
If circumstances arise where a director needs to obtain
independent advice, that director is, as a matter of practice,
at liberty to seek such advice at the expense of the company.
At the company’s Annual Meeting of Shareholders held on
Thursday 6th August 2015, all of the then-serving directors
attended the meeting.
EMPLOYEE AND DIRECTOR GENDER MIX
The table below shows the respective number of men and
women on the Board, in executive management positions (as
“Officers”) and across the whole organisation as at 31 March
2015 and 31 March 2016:
2015
2016
Women
Men Women
Men
1
2
45
4
6
110
1
2
61
4
6
137
Board
Officers
All employees
“Officers” are the Chief Executive Officer and senior executives
reporting directly to the Chief Executive Officer, who are
concerned or take part in the management of the company
DIRECTORS’ REMUNERATION
The Remuneration, Talent and Nomination Committee is
responsible for establishing and monitoring remuneration
policies and guidelines for directors which enable the
company to attract, motivate and retain directors who will
contribute to the successful governing of the company and
create value for shareholders.
The company also takes advice from independent advisors,
and takes into account fees paid to directors of comparable
New Zealand companies as part of its assessment of the
appropriate level of remuneration of directors.
Non-executive directors received the following directors’ fees
from the company in the year ended 31 March 2016:
Michael Bushby
Candace Kinser
Sean Keane
Anthony Gibson
Total
NZ$
76,792
49,061
49,061
49,061
233,975
The maximum total financial sum payable by the company by
way of directors’ fees is $300,000 per annum as approved by
shareholders at the 2014 annual general meeting.
17
2.0 GOVERNANCE NZ$
100,000 – 110,000
110,001 – 120,000
120,001 – 130,000
130,001 – 140,000
140,001 – 150,000
150,001 – 160,000
160,001 – 170,000
170,001 – 180,000
180,001 – 190,000
190,001 – 200,000
210,001 – 220,000
220,001 – 230,000
310,001 – 320,000
480,001 – 490,000
610,001 – 620,000
Total
Number of Employees
9
14
11
5
11
1
1
2
2
1
1
1
1
1
1
62
PERFORMANCE EVALUATION
The Board has a policy in place relating to the performance
evaluation of the Board, the Board’s committees, individual
directors and senior executives. For the year ended 31 March
2016, performance evaluations took place in relation to the
Board, the Board’s committees, individual directors and
senior executives in accordance with the company’s policies.
The Board Charter requires the Board to undertake an annual
performance evaluation of itself that:
• compares the performance of the Board with the
requirements of its Charter;
• reviews the performance of the Board’s committees and
individual Directors; and
• makes improvements to the Board Charter where
considered appropriate.
RISK MANAGEMENT
The company has a number of risk management policies for
the oversight and management of financial and non-financial
material business risks, as well as related internal systems
that are designed to:
• optimise the return to, and protect the interests of,
stakeholders;
• safeguard the company’s assets and maintain its
reputation;
• improve the company’s operating performance; and
• support the company’s strategic objectives.
A summary of the company’s Risk Management Policy is
available on the Company’s website. The Board ultimately
has responsibility for internal compliance and control. The
Finance, Risk and Audit Committee undertakes an annual
review of the risk management framework. In addition,
a review is undertaken, with the external auditors and
management, of the policies and procedures in relation to
material business risks.
The Finance, Risk and Audit Committee, in conjunction with
management, reports to the Board on the effectiveness of
the company’s management of its material business risks
and whether the risk management framework is operating
effectively in all material respects.
POLICIES
The company has in place a number of policies including
those covering external auditors, remuneration, market
disclosure, communication with shareholders and securities
trading. Further information with respect to a number of
these policies appears below.
Securities Trading
The Securities Trading Policy identifies circumstances where
directors, officers, employees and advisors are permitted
to trade, or prohibited from trading, company shares. The
company is committed to ensuring its directors, officers,
employees and advisors do not trade company shares while
in possession of inside information. The Securities Trading
Policy is available on the Company’s website.
Market Disclosure Policy
The company is committed to the promotion of investor
confidence by ensuring that the trading of company shares
takes place in an efficient, competitive and informed market.
The company’s Market Disclosure Policy establishes the
company’s disclosure policies for meeting the continuous
disclosure requirements of the NZX Main Board. The Market
Disclosure Policy is available on the Company’s website.
Shareholder Communication Policy
The aim of the company’s communication arrangements
is to provide all shareholders with information about the
company and to enable shareholders to actively engage
with the company and exercise their rights as shareholders
in an informed manner. The company’s Shareholder
Communication Policy facilitates communication with
shareholders through written and electronic communication,
and by facilitating shareholder access to directors, executive
management and the company’s auditors. The Shareholder
Communication Policy is available on the Company’s website.
External Auditor Independence
The company maintains external auditor independence
consistent with regulatory and stock exchange requirements
and current best practice in New Zealand for companies of
similar nature and size.
18
2.0 GOVERNANCE 3.0
FINANCIAL
PERFORMANCE
19
Financial Review
The Group’s result reflects continued revenue growth across all markets with total revenues of $26.2m,
an increase of 49% compared to the prior years $17.6m. Total Contracted Units grew by 43% to 36,953
at 31 March 2016.
PERFORMANCE INDICATORS
30
25
20
15
10
5
-
40,000
30,000
20,000
10,000
-
60
50
40
30
20
10
-
REVENUE ($Millions)
10.0
6.2
26.0
17.6
2013
2014
2015
2016
TOTAL CONTRACTED UNITS
36,953
25,862
2.9
2012
14,332
7,720
3,769
2012
2013
2014
2015
2016
FUTURE CONTRACTED INCOME ($Millions)
48.0
32.6
19.5
11.5
5.9
2012
2013
2014
2015
2016
Total Contracted Units is a measure that represents
Units on Depot and Units that have been dispatched
pending installation. Total Contracted Units is a non-
GAAP measure that EROAD management uses to
track sales growth.
Future Contracted Income is a non-GAAP
measure which represents future hardware and
SaaS revenue under non-cancellable long-term
agreements for installed units. Refer to Note 5 of
the Financial Statements.
Retention Rate
2011
100%
2012
100%
2013
99.5%
2014
99.3%
2015
99.2%
2016
97.1%
Retention Rate is a non-GAAP measure that represents the number of Units installed at the beginning of the period and retained on Depot at the
end of the period as a percentage of the number of Units on Depot at the beginning of that period. A unit ceases to be on Depot if the contract is
terminated and the Unit is returned to EROAD.
20
3.0 FINANCIAL PERFORMANCE
FIVE YEAR SUMMARY
($'000)
Revenue
2012
2013
2014
2015
2016
2,860
6,209
9,964
17,550 26,165
EBITDA before
non-operating costs1
228
1,782
4,029
5,038 5,687
Depreciation
Amortisation
(766)
(1,684)
(2,320)
(3,560)
(5,813)
(193)
(353)
(648)
(1,140) (1,676)
EBIT before
non-operating costs
(731)
(255)
1,062
338 (1,802)
Net financing costs
(21)
(43)
(42)
758
491
Net Profit
before listing costs
(752)
(298)
1,020
1,096
(1,311)
Total Assets
7,533
14,812
31,595
71,310 66,835
Net Assets
102
1,592
11,549
51,763 50,718
1 EBITDA before non-operating costs is earnings before interest income and
expense, taxation, depreciation, amortisation and non-operating costs. EBITDA
before non-operating costs is a non-GAAP measure presented to enable readers
to consider EROAD’s profitability before non-operating costs. Non-operating
costs in the year-ended 31 March 2015 comprised costs of listing on the NZX
Main Board.
CURRENT YEAR FINANCIAL PERFORMANCE
The Group’s financial statements for the year ended 31 March
2016 and comparative financial information for the year
ended 31 March 2015 have been prepared under New Zealand
Equivalents to International Financial Reporting Standards
(NZ IFRS). The Group’s full audited financial statements are
presented on pages 25 to 59.
Revenue
Revenues of $26.2m were 49% higher than the prior year.
The increase in revenue was primarily driven by an increase
in Contracted Units of 11,091 (43%) from prior year. Also
contributing to the revenue growth was the introduction of
grant revenue of $0.7m following the successful application for
a Callaghan Innovation Research & Development Growth Fund.
The Group continued its strong record of revenue growth
in its Established market which includes New Zealand and
Australia. External revenues were up 40% on the previous
year to $24.0m. Contracted Units grew by 8,580 (36%).
The Group’s Commercial market which includes the
Northwest of the United States contributed $2.2m of revenue,
21
up from $0.4m in the prior period driven by growth in
Contracted Units of 2,511 (126%) in the year. As previously
reported to the market, growth in Contracted Units in the
Commercial market was below expectations which the Group
attributes largely to customer uncertainty arising from the
new Federal regulations surrounding Electronic Logging
Devices (ELDs).
Operating Expenses
Operating expenses of $20.4m were 64% higher than the
prior year. The increase in operating expenses is reflective
of increased headcount to resource our research and
development activities and increased headcount in the US
to gear the business to take advantage of the sales and
regulatory opportunities which exist in the Commercial market.
Included within operating expenditure there is $3.5m of
expensed research and development related costs. The
increase of 71% on prior year is driven by the increased
research and development headcount and a reduction in the
percentage of costs capitalised as development assets as a
result of more time being spent on projects that are in the
earlier stage of the research and development process.
Depreciation and Amortisation
Depreciation costs of $5.8m were 63% higher than the
previous year. $4.9m of the depreciation costs relate to
Leased Assets. Growth in Leased Asset depreciation is driven
by the growth in rental units and a full years depreciation on
rented units in the Commercial market, most of which were
added in the latter months of the prior financial year.
Amortisation of Intangible Assets was $1.7m, an increase
of 47% from the previous period. Development Assets are
amortised on a per unit basis at a rate expected to amortise
the intangible asset over its estimated useful life.
Finance Income and Finance Expenses
Finance Income of $0.7m down 13% on the prior period due
to lower interest being earned on interest bearing deposits.
Finance expenses of $0.2m are primarily the result of realised
foreign exchange losses during the period.
2016
2015
Earnings Per Share - Ordinary
(1.84)
(2.24)
Earnings Per Share - Diluted
(1.84)
(2.24)
Net Tangible Assets per Security
0.46
0.60
3.0 FINANCIAL PERFORMANCE
FINANCIAL POSITION AND CASH FLOW
Property, Plant & Equipment
Additions to Property, Plant and Equipment amounted to
$12.1m up 29% on prior year. $10.6m of the additions related
to the increase in Leased Assets reflecting the overall growth
in Contracted Units and the continued strong demand for our
rental offering over outright hardware sales. Renting units
does have an upfront cash flow impact due to the cost of
the hardware being recovered over the term of the rental, as
opposed to being received upfront for outright hardware sales.
After depreciation the net increase in Property, Plant and
Equipment for the period was $6.2m.
Development Assets
The research and development team grew by 25 members
during the year, up 44% on 2015. This expansion was
undertaken in order to resource for the significant US ELD
opportunity. The increased headcount had a direct impact
on the amount of development costs capitalised in the
period which was $8.0m, up 30% on the previous period.
Significant projects in the period included development
required to obtain NZTA approval for our next-generation
hardware (Ehubo2) as an electronic distance recorder, and
work relating to electronic log books and other ELD related
projects. The proportion of total research and development
costs capitalised was lower than the previous year as a result
of a higher proportion of earlier stage research work (which
must be expensed) being performed by the team particularly
in relation to the ELD opportunity.
After amortisation the net increase in Development Assets
for the period was $6.8m.
Cash flow
Total cash held decreased by $20.7m during the period.
Cash inflows from underlying operations were $3.4m with
strong operating cash flows in the Established market of
$7.4m being partly offset by operating cash outflows in the
Commercial market. Cash outflows from investing activities
were $21.2m up 29% on the previous year with $12.0m spent
on Property, Plant and Equipment largely relating to funding
our rental offering and $9.1m on Intangible Assets relating to
development activities.
The Group had cash inflows from finance activities of $1m.
During the period EROAD entered into a $10m Committed
Cash Advance Facility to help support the growth of our
rental offering and development activities. $1m of this facility
was drawn during the year.
DIVIDEND
Consistent with its Dividend Policy, EROAD does not intend
to pay a final dividend for the year ended 31 March 2016.
RESEARCH AND DEVELOPMENT
RESEARCH AND
DEVELOPMENT
CAPITALISED*
FY16
$4.5m
$1.6m
$1.9m
* Excludes software,
trademarks and patents
(cid:31) NA
(cid:31) NZ
(cid:31) Global
OREGON NORTHWEST NORTH AMERICA
IFTA & IRP
SERVICES,
USA, 2.9M
VEHICLES
ELECTRONIC
LOGGING
DEVICES
(ELDS), USA
– HOURS OF
SERVICE, 3+M
VEHICLES,
INTERSTATE
ONLY
EXTENSION OF
ELECTRONIC WMT
TO NEW YORK, NEW
MEXICO & KENTUCKY
600,000 VEHICLES
PROSPECT:
CALIFORNIA
OREGON
ELECTRONIC
WMT,
306,000
VEHICLES
New Zealand
ELECTRONIC
RUC,
120,000
VEHICLES
ELECTRONIC
LOGGING DEVICE
– HOURS OF
SERVICE, USA,
CANADA & MEXICO,
INTERSTATE ONLY
ELECTRONIC
LOGGING DEVICE
– HOURS OF
SERVICE, USA,
CANADA, MEXICO
INCLUDING
INTRASTATE
EROAD is leveraging its platform, initially built for NZ RUC, to access signifi cantly larger market opportunities.
22
3.0 FINANCIAL PERFORMANCE X.0 HEADER
Financial
Statements
- Directors’ Responsibility Statement
- Consolidated Statement of Comprehensive Income
- Consolidated Statement of Financial Position
- Consolidated Statement of Changes in Equity
- Consolidated Statement of Cash Flows
- Notes to the Consolidated Financial Statements
- Independent Auditor’s Report
23
Directors’
Responsibility Statement
In the opinion of the Directors of EROAD Limited, the consolidated financial statements
and notes, on pages 25 to 59, comply with New Zealand Generally Accepted Accounting
Practice and have been prepared using the appropriate accounting policies, which have
been consistently applied and supported by reasonable judgements and estimates.
The Directors believe that proper accounting records have been kept which enable, with
reasonable accuracy, the determination of the financial position of EROAD Limited and its
subsidiaries (the “Group”) and facilitate compliance of the financial statements with the
Financial Reporting Act 2013 and the Financial Markets Conduct Act 2013.
The Directors consider that they have taken adequate steps to safeguard the assets of the
Group, and to prevent and detect fraud and other irregularities. Internal control procedures
are also considered to be sufficient to provide reasonable assurance as to the integrity and
reliability of the financial statements.
The Directors are pleased to present the financial statements of the Group for the period
ended 31 March 2016.
For and on behalf of the Board of Directors:
Michael Bushby
28 June 2016
Steven Newman
28 June 2016
24
3.0 FINANCIAL PERFORMANCE
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2016
Continuing operations
Revenue
Expenses
Earnings before interest, taxation, depreciation, amortisation and costs of listing
Depreciation
Amortisation
Earnings before interest, taxation, and costs of listing
Finance income
Finance expense
Net financing costs
Profit before tax expense and costs of listing
Costs of listing
Profit/(loss) before tax
Income tax (expense)/benefit
GROUP
31 March 2016
31 March 2015
Notes
$
$
26,164,570
17,550,323
(20,477,298)
(12,511,682)
5,687,272
5,038,641
(5,812,543)
(3,560,474)
(1,676,471)
(1,140,251)
(1,801,742)
337,916
735,836
(244,959)
490,877
843,662
(86,020)
757,642
(1,310,865)
1,095,558
-
(2,022,675)
(1,310,865)
(927,117)
211,351
(293,563)
2
12
13
6
6
2
7
Profit/(loss) from continuing operations
(1,099,514)
(1,220,680)
Profit/(loss) after tax for the year attributable to the shareholders
(1,099,514)
(1,220,680)
Other comprehensive income - net of tax
(47,986)
(61,715)
Total comprehensive income/(loss) for the year
(1,147,500)
(1,282,395)
Earnings per share - Basic & Diluted (cents)
9
(1.84)
(2.24)
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
25
3.0 FINANCIAL PERFORMANCE • CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2016
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Finance lease receivable
Loan to shareholders and directors
Current tax receivable
Total Current Assets
NON-CURRENT ASSETS
Property, plant and equipment
Intangible assets
Finance lease receivable
Loan to shareholders and directors
Deferred tax assets
Total Non-Current Assets
TOTAL ASSETS
CURRENT LIABILITIES
Borrowings
Trade payables and accruals
Payable to NZTA
Deferred revenue
Employee entitlements
Total Current Liabilities
NON-CURRENT LIABILITIES
Deferred revenue
Total Non-Current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Share capital
Translation reserve
Retained earnings
TOTAL SHAREHOLDERS' EQUITY
GROUP
31 March 2016
31 March 2015
Notes
$
$
10
11
5
25
12
13
5
25
8
15
14
17
17
9
13,377,680
5,112,645
294,678
279,996
456,881
34,117,652
3,828,751
127,810
-
168,718
19,521,880
38,242,931
21,361,280
23,268,959
730,599
-
1,952,706
47,313,544
15,138,577
15,816,083
182,556
279,996
1,649,754
33,066,966
66,835,424
71,309,897
1,002,305
3,261,460
5,558,453
3,378,928
920,078
14,121,224
1,995,719
1,995,719
-
1,865,388
9,567,274
4,082,183
718,867
16,233,712
3,313,209
3,313,209
16,116,943
19,546,921
50,718,481
51,762,976
58,819,932
(109,701)
(7,991,750)
50,718,481
58,819,932
(61,715)
(6,995,241)
51,762,976
Chairman, 28 June 2016
Executive Director, 28 June 2016
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
26
3.0 FINANCIAL PERFORMANCE • CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2016
GROUP
Share Capital
Retained Earnings
Translation Reserve
Balance at 1 April 2014
17,471,968
(5,923,268)
Notes
$
$
Total
$
11,548,700
(1,220,680)
$
-
-
Profit after tax for the period
Other comprehensive income
Total comprehensive loss for the period - net of tax
Equity settled share-based payments
-
-
-
-
Share capital issued
9
41,347,964
(1,220,680)
-
(61,715)
(61,715)
(1,220,680)
(61,715)
(1,282,395)
148,707
-
-
-
148,707
41,347,964
Balance at 31 March 2015
58,819,932
(6,995,241)
(61,715)
51,762,976
Balance as at 1 April 2015
58,819,932
(6,995,241)
(61,715)
51,614,269
Profit after tax for the period
Other comprehensive income
Total comprehensive loss for the period - net of tax
Equity settled share-based payments
Share capital issued
9
-
-
-
-
-
(1,099,514)
-
(1,099,514)
-
(47,986)
(47,986)
(1,099,514)
(47,986)
(1,147,500)
103,005
-
-
-
103,005
-
Balance at 31 March 2016
58,819,932
(7,991,750)
(109,701)
50,718,481
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
27
3.0 FINANCIAL PERFORMANCE • CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2016
Cash flows from operating activities
Cash received from customers
Payments to suppliers and employees
Interest received/ (paid)
Tax paid
GROUP
31 March 2016
31 March 2015
Notes
$
$
22,145,020
13,477,547
(18,916,597)
(11,673,877)
490,877
757,642
(288,163)
(123,936)
Net cash inflow from operating activities before listing costs and NZTA collections
3,431,137
2,437,376
Payments made to suppliers in listing on NZX
Net cash received from customers / (paid to NZTA)
-
(2,022,675)
(4,008,821)
2,938,065
Net cash inflow from operating activities
23
(577,684)
3,352,766
Cash flows from investing activities
Payments for purchase of property, plant & equipment
Payments for purchase of intangible assets
Net cash outflow from investing activities
Cash flows from financing activities
Loan from/(repayment) bank
Net proceeds from equity raising
Net cash outflow from financing activities
(12,035,246)
(9,375,573)
(9,129,347)
(6,982,060)
(21,164,593)
(16,357,633)
1,002,305
(3,101,274)
-
41,067,968
1,002,305
37,966,694
Net increase/(decrease) in cash held
(20,739,972)
24,961,827
Cash at beginning of the financial period
34,117,652
9,155,825
Closing cash and cash equivalents (net of overdrafts)
13,377,680
34,117,652
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
28
3.0 FINANCIAL PERFORMANCE • CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2016
NOTE 1 • SUMMARY OF SIGNIFICANT GROUP ACCOUNTING POLICIES
EROAD Limited (the “Parent”) is a company domiciled in New Zealand registered under the Companies Act 1993
and listed on the New Zealand Stock Exchange (NZX) Main Board. The Company is an FMC reporting entity for the
purposes of the Financial Markets Conduct Act 2013 and the financial statements have been prepared in accordance
with the requirements of that Act and the Financial Reporting Act 2013. The consolidated financial statements
comprise EROAD Limited and its subsidiaries (the “Group”). The Group provides electronic on-board units and
software as a service to the heavy vehicle industry.
The financial statements for the Group are for the period ended 31 March 2016.
The financial statements were authorised for issue by the directors on 28 June 2016.
The accounting policies below have been applied consistently to all periods presented in these financial statements.
(a) Basis of preparation
Statement of compliance with IFRS
The consolidated financial statements comprise the following: consolidated statement of comprehensive income,
consolidated statement of changes in equity, consolidated statement of financial position, consolidated statement of
cash flows, and accounting policies and notes to the financial statements contained on pages 25 to 59.
The consolidated financial statements have been prepared in accordance with New Zealand Generally Accepted
Accounting Practice (“NZ GAAP”). They comply with the New Zealand equivalents to International Financial Reporting
Standards (NZ IFRS) and other applicable Financial Reporting Standards as appropriate to Tier 1 for-profit entities. The
financial statements also comply with International Financial Reporting Standards (“IFRS”).
Comparative Figures
Where a change in presentation of the financial statement has been made during the period, comparative figures
have been restated accordingly.
Basis of measurement
The financial statements are prepared on the historical cost basis. Except for certain financial instruments carried
at fair value as described in (g) and (h).
Going concern
The financial statements have been prepared using the going concern assumption.
Presentation currency
The financial statements are presented in New Zealand dollars and all values are rounded to the nearest dollar ($).
The functional currency of EROAD Limited is New Zealand Dollars (NZD).
Use of estimates and judgements
In preparing these consolidated financial statements in conformity with NZ IFRS, management has made
judgements, estimates and assumptions that affect the application of the Group’s accounting policies and the
reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised
and in any future periods affected.
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material
adjustment within the next financial period are included in the following notes:
29
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 • SUMMARY OF SIGNIFICANT GROUP ACCOUNTING POLICIES (CONTINUED)
• Note 8: recognition of deferred tax assets: availability of future taxable profit against which carry forward tax
losses can be used.
• Note 13: impairment testing for intangible assets, key assumptions underlying recoverable amounts, including
the recoverability of development costs.
• Notes 5: Assessment of whether whether a long-term rental agreement is a finance or operating lease (also
refer note (d) below).
(b) Basis of Consolidation
The Group financial statements consolidate the financial statements of subsidiaries using the purchase method
of accounting. Subsidiaries are entities controlled by the Group. The Group controls an entity when it 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 over the entity. The financial statements of subsidiaries are included in the consolidated
financial statements from the date on which control commences until the date on which control ceases.
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group
transactions, are eliminated.
(c) Business Combinations
The Group accounts for business combinations using the acquisition method when control is transferred to the
Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable
net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is
recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue
of debt or equity securities.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships.
Such amounts are generally recognised in the profit or loss. Any contingent consideration is measured at fair
value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a
financial instrument is classified as equity, then it is not remeasured and settlement is accounted for within equity.
Otherwise, subsequent changes in the fair value of contingent consideration are recognised in equity.
(d) Revenue
Hardware
Revenue from the sale of goods and services is recognised in the statement of comprehensive income when the
significant risks and rewards of ownership have been transferred to the buyer. No revenue is recognised if there
are significant uncertainties regarding recovery of the consideration due, associated costs or possible return of
goods, or where there is continuing management involvement with the goods.
Lease revenue as a lessor
In certain circumstances, the Group retains the significant risks and rewards of ownership of hardware products.
In such cases the hardware assets are carried on the balance sheet and revenue relating to the hardware is
accounted for as an operating lease and recognised in the statement of comprehensive income on a straight
line basis over the term of the lease. Any lease incentives provided are recognised as an integral part of the total
lease, over the term of the lease.
Finance lease revenue
The Group, on rare occasions, leases out hardware products for a period longer than the usual 36 month rental. In
such circumstances the substance of the transaction is assessed and if it is considered that substantially all the risks
and rewards incident to ownership have been transferred, the arrangement is accounted for as a finance lease.
30
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 • SUMMARY OF SIGNIFICANT GROUP ACCOUNTING POLICIES (CONTINUED)
Service Fee Revenue
Revenue from services rendered is recognised in the Statement of Comprehensive Income in proportion to the
stage of completion.
Transaction Fees
When the Group acts in the capacity of an agent rather than as the principal in a transaction, the revenue
recognised is the net amount of commission made by the Group.
(e) Finance income and finance expenses
The Group’s finance income and finance expenses include: interest payable and receivable recognised using
the effective interest rate method, foreign exchange gains and losses and fair value movements on derivative
financial instruments.
(f) Taxation
Income tax expense comprises current and deferred tax. Current tax and deferred tax is recognised in profit or
loss except to the extent that it relates to a business combination, or items recognised directly in equity or in
other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the period, using tax rates
enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous
periods. Current tax payable also includes any tax liability arising from the declaration of dividends.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured
at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws
that have been enacted or substantively enacted by the reporting date.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the
extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred
tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the
related tax benefit will be realised.
(g) Financial Instruments
Derivative financial instruments
The Group, may on occasion, use derivative financial instruments to hedge its exposure to foreign currency
fluctuations.
Derivatives are initially recognised at fair value; any directly attributable transaction costs are recognised in profit
or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein
are generally recognised in profit or loss.
Non-derivative financial instruments
The Group initially recognises loans and receivables, deposits, debt securities issued and subordinated liabilities
on the date that they are originated. All other financial assets and liabilities are recognised initially on the trade
date, which is the date that the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire,
or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which
substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in
transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.
31
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 • SUMMARY OF SIGNIFICANT GROUP ACCOUNTING POLICIES (CONTINUED)
Financial assets and liabilities are offset and the net amount presented in the statement of financial position
when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis
or to realise the asset and settle the liability simultaneously.
The Group classifies non-derivative financial assets and liabilities into the following categories: loans and
receivables and other financial liabilities.
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active
market. Such assets are recognised initially at fair value plus any directly attributable transaction costs.
Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective
interest method, less any impairment losses.
Loans and receivables comprise cash and cash equivalents, trade and other receivables and loans to shareholders
and directors.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less.
Other liabilities
The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such financial
liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial
recognition, these financial liabilities are measured at amortised cost using the effective interest method. Other
financial liabilities comprise loans and borrowings, bank overdrafts, and trade and other payables.
(h) Fair value estimation
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for
disclosure purposes.
The fair values of financial instruments that are not traded in an active market are determined using valuation
techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions
existing at each balance date. Other techniques, such as estimated discounted cash flows, are used to determine
fair value for the remaining financial instruments. The fair value of forward exchange contracts is determined
using forward exchange market rates at the balance sheet date. Fair values reflect the credit risk of the financial
instrument and include adjustments to take account of the credit risk of the Group and counterparty when
appropriate.
The carrying value less impairment provision of trade receivables is assumed to approximate its fair value due
to its short term nature. The fair value of non-current financial liabilities for disclosure purposes is estimated by
discounting the future contractual cash flows at the current market interest rate that is available to the Group for
similar financial instruments.
(i) Property, Plant and Equipment
Owned assets
Items of plant and equipment are stated at cost, less accumulated depreciation and impairment losses. Cost
includes the purchase consideration, and those costs directly attributable to bringing the asset to the location and
condition necessary for its intended use. Where an item of plant and equipment is disposed of, the gain or loss
recognised in the statement of comprehensive income is calculated as the difference between the net sales price
and the carrying amount of the asset.
32
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 • SUMMARY OF SIGNIFICANT GROUP ACCOUNTING POLICIES (CONTINUED)
Subsequent costs
The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing
part of such an item when that cost is incurred if it is probable that the future economic benefits embodied within
the item will flow to the Group and the cost of the item can be measured reliably. All other costs are recognised in
the statement of comprehensive income as an expense in the period they are incurred.
Depreciation
Depreciation begins when the asset is in the location and condition necessary for it to be capable of operating in
the manner intended by management. The following rates have been used:
Leasehold improvements
12 - 30% Straight line
Leased equipment
20 - 33% Straight line
Plant and equipment
9 - 30% Straight line
Computer/Office equipment
36 - 60% Straight line
Motor vehicles
20 - 30% Straight line
The above rates reflect the estimated useful lives of the respected categories. Leasehold improvements are
depreciated over the contracted lease term.
(j) Leases as a lessee
Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified
as finance leases. Other leases are operating leases and the leased assets are not recognised on the Group’s
statement of financial position. Payments made under operating leases are recognised in the statement of
comprehensive income on a basis representative of the pattern of benefits expected to be derived from the
leased asset.
(k) Intangible assets
Research and Development
Expenditure on research activities, undertaken with the prospect of gaining new technical knowledge and
understanding, is recognised in the profit or loss when incurred.
Development activities involve a plan or design for the production of new or substantially improved products
and processes. Development expenditure is capitalised only if development costs can be measured reliably, the
product or process is technically and commercially feasible, future economic benefits are probable, and the
Group intends to and has sufficient resources to complete development and to use or sell the asset.
The expenditure capitalised includes the cost of materials, direct labour and overhead costs that are directly
attributable to preparing the asset for its intended use. Other development expenditure is recognised in the
profit or loss when incurred.
Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated
impairment losses.
Other intangible assets
Other intangibles assets that are acquired by the Group, which have finite useful lives, are measured at cost less
accumulated amortisation and accumulated impairment losses.
Subsequent expenditure
Subsequent expenditure is only capitalised only when it increases the future economic benefits embodied in the
specific asset to which is relates. All other expenditure, including expenditure on internally generated goodwill
and brands, is recognised in the statement of comprehensive Income when incurred.
33
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 • SUMMARY OF SIGNIFICANT GROUP ACCOUNTING POLICIES (CONTINUED)
Amortisation
Amortisation is recognised in the statement of comprehensive Income on a per unit basis at a rate expected to
amortise the intangible asset over the estimated useful life of intangible asset. The estimated useful lives for the
current and comparative periods are as follows:
Patents
Development
Software
10-20 years
5-7 years
5-7 years
(l) Inventories
Inventories are valued at the lower of cost or net realisable value. Costs are based on actual costs, applying the
first in first out principle, and include expenditure incurred in acquiring the inventories and bringing them to the
existing condition and location. In the case of manufactured inventories, cost includes direct materials and labour
(m) Foreign Currencies
Transactions in foreign currencies are translated into the respective functional currencies of Group companies at
the exchange rates at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies are translated into functional currency at
the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value
in a foreign currency are translated into the functional currency at the exchange rate when the fair value was
determined. Foreign currency differences are generally recognised in profit or loss. Non-monetary items that are
measured based on historical cost in a foreign currency are not translated. Foreign currency gains and losses are
reported on a net basis as either finance income or finance expenses.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on
acquisition, are translated into NZD at the exchange rates at the reporting date. The income and expenses
of foreign operations are translated into NZD at the exchange rates at the dates of the transactions. Foreign
currency differences are recognised in Other Comprehensive Income and accumulated in the translation reserve.
(n) Goods and Services Tax
All amounts are shown exclusive of Goods and Services Tax (GST), except for receivables and payables that are
stated inclusive of GST.
(o) Employee benefits
Short-term employee benefits
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the
amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a
result of past service provided by the employee and the obligation can be estimated reliably.
Shared-based payments
The grant-date fair value of equity-settled share-based payment awards to employees is generally recognised as an
expense, with a corresponding increase in equity, over the vesting period of the awards. The amounts recognised as
an expense is adjusted to reflect the number of awards for which the related service and non-market conditions are
expected to be met, such that the amount ultimately recognised is based on the number of awards that meet the
related service and non-market performance conditions at the vesting date. For share-based payment awards with
non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions
and there is no true-up for differences between the expected and actual outcomes.
34
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 • SUMMARY OF SIGNIFICANT GROUP ACCOUNTING POLICIES (CONTINUED)
(p) Impairment of assets
The carrying amounts of the Group’s assets other than inventories are reviewed at each balance date to
determine whether there is any objective evidence of impairment. If any such indication exists, the assets
recoverable amount is estimated.
If the estimated recoverable amount of an asset is less than its carrying amount, an impairment test is undertaken
to reduce the carrying amount of assets to the estimated recoverable amount and an impairment loss is
recognised in the income statement.
Estimated recoverable amount receivables carried at amortised cost is calculated as the present value of
estimated future cash flows, discounted at their original effective interest rate. Receivables with a short duration
are not discounted.
Estimated recoverable amount of other assets is the greater of their fair value less costs to sell and value in use.
Value in use is determined by estimating future cash flows from the use and ultimate disposal of the asset and
discounting these to their present value using a pre-tax discount rate that reflects current market rates and the
risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable
amount is determined for the cash-generating unit to which the asset belongs.
(q) Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset
are capitalised as part of the cost of that asset. Other borrowing costs are recognised as an expense in the period
in which they are incurred.
(r) Grant income
Government grants are recognised at fair value in the statement of comprehensive income over the same periods
as the costs for which the grants are intended to compensate.
(s) Segment reporting
Segment results that are reported to the CEO include items directly attributable to a segment as well as those
that can be allocated on a reasonable basis. Unallocated items comprise income tax.
(t) Standards issued but not yet adopted
A number of new standards, amendments to standards and interpretations are effective for annual periods
beginning on or after a 1 April 2015, and have not been applied in preparing these consolidated financial statements.
NZ IFRS 15 Revenue from Contracts with Customers - The standard establishes a comprehensive framework for
determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance,
including NZ IAS 18 Revenue, NZ IAS 11 Construction Contracts and NZ IFRIC 13 Customer Loyalty Programmes. NZ
IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2017 with early adoption permitted.
The Group is assessing the potential impact on its consolidated financial statements resulting from the application of
NZ IFRS 15.
NZ IFRS 9 Financial Instruments - The standard replaces the existing guidance in NZ IAS 39 Financial Instruments:
Recognition and Measurement. NZ IFRS 9 includes revised guidance on the classification and measurement of
financial instruments, including a new expected credit loss model for calculating impairment on financial assets,
and the new general hedge accounting requirements. It also carries forward the guidance on recognition and
derecognition of financial instruments from NZ IAS 39. NZ IFRS 9 is effective for annual reporting periods beginning
on or after 1 January 2018. The Group is assessing the potential impact on its financial statements resulting from the
application of NZ IFRS 9.
35
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 • SUMMARY OF SIGNIFICANT GROUP ACCOUNTING POLICIES (CONTINUED)
NZ IFRS 16 Leases - The standard requires lessees to account for all leases under a single on-balance sheet model
(subject to certain exemptions) in a similar way to finance leases under NZ IAS 17. Lessees recognise a liability to pay
rentals with a corresponding asset, and recognise interest expense and depreciation separately. Lessor accounting
is substantially the same as NZ IAS 17’s dual classification approach. Application of NZ IFRS 16 is required for annual
periods beginning on or after 1 January 2019 with early adoption permitted but not before an entity applied NZ IFRS 15.
There are a number of other new or amended standards that are effective for annual period beginning on or after
1 April 2016 that are not expected to have a significant impact on the Group’s consolidated financial statements.
NOTE 2 • EXPENSES
Personnel expenses
Administrative and another operating expenses
Auditor's remuneration - KPMG
Tax compliance services - KPMG
Auditors remuneration for investigative accountants report in prospectus - KPMG
Health & safety, IT and deal advisory - KPMG
Operating lease expense
Directors fees
GROUP
2016
Notes
$
2015
$
4
9,040,428
5,595,157
6,594,544
3,720,373
145,000
143,500
140,315
-
52,672
131,417
311,705
-
16
25
964,843
652,687
223,975
191,123
During the year the costs expensed in Research and Development was $3,535,466 (2015: $2,061,984).
The costs of listing expensed in the income statement in the year ended 31 March 2015 are the proportion
of the listing costs incurred when listing on the New Zealand Stock Exchange, that relate to the shares held
before allotment.
NOTE 3 • SEGMENTAL NOTE
The group has three segments as described below, which are the group’s strategic divisions. The strategic
divisions offer different services and are managed separately because they require different technology,
services and marketing strategies. For each strategic division, the group’s CEO (the chief operating decision
maker) reviews internal management reports. The following summary describes the operations in each of the
group’s segments.
EROAD reports selected financial information depending on the stage of its development in each market:
• Development Markets: the market opportunity has been validated, or has been
identified and is in the process of being validated
• Commercial Markets: the market has been entered and trading has commenced
• Established Markets: a sustainable business has been established in the market.
Inter-segment pricing is determined on an arm’s length basis.
Due to changes in the group and the information provided to the chief operating decision maker, the group has
changed its reportable segments from those reported in 2015. As a result, comparative amounts in the operating
segment disclosure below have been restated to align with the current years presentation.
36
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 • SEGMENTAL NOTE (CONTINUED)
Reportable segment information
Information related to each reportable segment is set out below. Segment result represents net profit before tax,
which is the measure reported to the chief operating decision maker.
Development Markets
Commercial Markets
Established Markets
2016
$
2015
$
2016
$
2015
$
2016
$
2015
$
Revenue ₁
-
-
2,176,606
384,078
25,873,395
18,537,842
Net profit (loss) before taxation
and costs of listing
Total assets
Depreciation
Amortisation
(3,535,466)
(2,061,984)
(4,035,980)
(1,098,204)
6,721,587
4,598,381
-
-
-
2,131,001
4,668,683
2,321,177
66,869,139
70,259,021
-
-
(767,405)
(52,782)
(5,209,657)
(3,507,692)
-
-
(1,676,471)
(1,140,251)
₁ Revenue from Established Markets includes R&D Grant Income of $707,093.
Reconciliation of information on reportable segments
GROUP
Revenue
Total revenue for reportable segments
Elimination of inter-segment revenue
Consolidated revenue
Net profit (loss) before taxation and costs of listing
Total profit before tax for reportable segments
Profit before tax for other segments
Elimination of inter-segment profit
Consolidated net profit (loss) before taxation and costs of listing
Depreciation
Total depreciation for reportable segments
Elimination of inter-segment profit
Consolidated depreciation
Total assets
Total assets for reportable segments
Total assets for other segments
Elimination of inter-segment balances
Consolidated total assets
37
2016
$
2015
$
28,050,001
18,921,920
(1,885,431)
(1,371,597)
26,164,570
17,550,323
(849,859)
1,438,193
-
-
(461,006)
(342,635)
(1,310,865)
1,095,558
(5,977,062)
(3,560,474)
164,519
-
(5,812,543)
(3,560,474)
71,537,822
74,711,199
-
-
(4,702,398)
(3,401,302)
66,835,424
71,309,897
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 • SEGMENTAL NOTE (CONTINUED)
Geographic information
The geographic information below analyses the group’s revenue and non-current assets by the company’s country
of domicile and other countries. In presenting the following information segment revenue has been based on the
geographic location of customers and segment assets were based on the geographic location of the assets.
Revenue
New Zealand
All foreign countries:
USA
Australia
Total revenue
Non-current assets
New Zealand
All foreign countries:
USA
Australia
Total non-current assets
Non-current assets exclude financial instruments and deferred tax assets.
NOTE 4 • PERSONNEL EXPENSES
Salaries and wages - excluding sales commissions capitalised
Annual leave
Performance bonus
Share-based payments
Salaries and wages capitalised to development and software assets
Total personnel expenses
GROUP
2016
$
2015
$
23,442,964
16,969,719
2,176,606
384,078
545,000
196,526
26,164,570
17,550,323
42,120,404
29,475,725
2,906,581
1,883,527
333,853
57,960
45,360,838
31,417,212
GROUP
2016
$
2015
$
15,751,116
10,217,250
167,106
283,844
686,424
650,080
103,005
148,707
(7,667,223)
(5,704,724)
9,040,428
5,595,157
38
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 • LEASES AS A LESSOR
Operating leases
The Group leases out products on long-term rentals, usually for a period of 36 months. At 31 March, the future
minimum lease payments (future contracted income) under non-cancellable operating leases are receivable as follows.
Future minimum lease payments
Not later than one year
Later than one year, not later than five years
Later than five years
GROUP
2016
$
2015
$
8,185,884
5,103,287
8,062,245
5,724,398
-
-
16,248,129
10,827,685
During the period $20,776,453 was recognised as revenue in the statement of comprehensive income in relation
to long-term rentals accounted for as operating leases and related Software as a Service (SaaS) revenue
(2015: $14,519,059).
Finance leases
The Group, on rare occasions, leases out hardware products for a period longer than the usual 36 month rental.
In such circumstances the substance of the transaction is assessed and if it is considered that substantially all the
risks and rewards incident to ownership have been transferred, the arrangement is accounted for as a finance
lease. At 31 March, the future minimum lease payments (future contracted income) under non-cancellable leases
are receivable as follows.
Gross investment
in the lease
Unearned
finance income
Present value of minimum
lease payments
2016
$
2015
$
2016
$
2015
$
2016
$
2015
$
Not later than one year
329,811
133,131
35,133
5,321
294,678
127,810
Later than one year not later
than five years
770,354
199,696
39,755
17,140
730,599
182,556
Later than five years
-
-
-
-
-
-
1,100,165
332,827
74,888
22,461
1,025,277
310,366
During the period $926,965 (2015: $376,176) was recognised as revenue in relation to long-term rentals accounted
for as finance leases. The net impact of finance leases recognised in the statement of comprehensive income in
relation to leases was $727,984 (2015: $65,565).
Total Future Contracted Income
Amounts disclosed above in relation to future minimum lease payments (operating leases) and gross investment
in leases (finance leases) only relate to the hardware element of long-term rentals accounted for as leases. The
Total Future Contracted Income (hardware and SaaS) under non-cancellable long-term agreements at 31 March
2015 is $48,010,715 (2015: $32,658,552).
39
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 • FINANCE INCOME & FINANCE EXPENSES
Finance income
Interest income
Foreign exchange gains
Finance expenses
Interest expense
Interest expense - intercompany
Foreign exchange losses
Net financing costs
NOTE 7 • INCOME TAX EXPENSE
(a) Reconciliation of effective tax rate
Profit/(Loss) before income tax
Income tax using the Company's domestic tax rate of 28%
Non-deductible expense/(non-assessable income)
Temporary differences
Losses and timing differences (recognised)/not recognised
Effect of different tax rates
Income tax expense/(benefit)
(b) Current tax (benefit)/expense
Current period
(c) Deferred tax (benefit)/expense
Current period
GROUP
2016
$
2015
$
649,419
825,575
86,417
18,087
735,836
843,662
(2,285)
(86,020)
-
(242,674)
-
-
(244,959)
(86,020)
490,877
757,642
GROUP
2016
$
2015
$
(1,310,865)
(927,117)
(367,043)
(259,593)
79,472
576,574
71,297
(24,856)
4,923
1,438
(211,351)
293,563
-
-
-
-
(211,351)
293,562
(211,351)
293,562
At 31 March 2016 there were no imputation credits available to shareholders (2015: Nil)
40
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 • DEFERRED TAX ASSETS / (LIABILITIES)
Recognised deferred tax assets and liabilities
Deferred tax assets and (liabilities) are attributable to the following:
Tax loss carry forward
Property, plant and equipment
Deferred development expenditure
Provisions and accruals
Equity-settled share-based payments
Revenue recognition
Total deferred tax asset/(liability)
GROUP
2016
$
2015
$
4,961,509
1,866,205
125,688
(24,288)
(1,915,689)
(326,881)
232,840
70,479
189,282
41,638
(1,522,121)
(96,202)
1,952,706
1,649,754
The movement in temporary differences has been recognised in profit or loss. Deferred tax assets have been
recognised at a rate of 28% at which they are expected to be realised.
Movement in temporary differences during the period:
Balance
31 March 16
Recognised
in profit
or loss
Under/(over)
from prior
periods
Currency
Translation
Balance
31 March 15
Recognised
in profit
or loss
Balance
31 March 14
GROUP
$
$
$
$
$
$
$
Tax loss carry forward
4,961,509
3,217,066
(150,135)
28,373
1,866,205
1,809,606
56,599
125,688
(645)
88,594
62,027
(24,288)
(24,288)
-
Property, plant and
equipment
Deferred development
expenditure
(1,915,689)
(1,588,808)
Provisions and accruals
232,840
43,558
Equity-settled share-
based payments
70,479
28,841
Revenue recognition
(1,522,121)
(1,427,120)
-
-
-
-
-
-
-
(326,881)
(1,164,051)
837,170
189,282
66,389
122,893
41,638
41,638
-
1,201
(96,202)
(1,001,293)
905,091
Total
1,952,706
272,892
(61,541)
91,601
1,649,754
(271,999)
1,921,753
The New Zealand tax group consists of EROAD Limited, EROAD New Zealand Limited and EROAD Financial
Services Limited. Losses incurred within this group are transferred freely within the group with no compensation
being recognised. Deferred tax assets have been recognised in respect of these items because it is probable
that future taxable profit will be available against which the Group can utilise the benefits there from based on
the expected profitability in the New Zealand group. Determining the extent to which the losses will be utilised
requires judgment.
41
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 • PAID UP CAPITAL
All issued shares are fully paid up and have equal voting rights and share equally in dividends and surplus on
winding up.
Number of
ordinary shares
Issue price
$
Issued Capital
$
GROUP
At 31 March 2014
Issue of shares pursuant to LTI plan
Held in trust as treasury stock
Issue of shares
Share split at 4.5771 for each share
New shares issued on listing with NZX
New shares issued to directors
Cost relating to raising capital
At 31 March 2015
9,996,855
48,595
$12.68
$12.68
$3.00
$3.00
129,796
10,175,246
36,398,174
13,333,248
93,332
-
60,000,000
17,471,968
616,185
(616,185)
1,645,812
19,117,780
-
39,999,744
279,996
(577,588)
58,819,932
614,378
(614,378)
58,819,932
Issue of shares pursuant to LTI plan
168,864
$3.64
Held in trust as treasury stock
At 31 March 2016
60,168,864
At 31 March 2016 there was 60,168,864 authorised and issued ordinary shares (2015: 60,000,000).
391,296 (2015: 222,432) shares are held in trust for employees in relation to the long-term incentive plan and are
accounted for as treasury stock.
The calculation of both basic and diluted earnings per share at 31 March 2016 was based on the profit attributable
to ordinary shareholders of ($1,099,514) (2015: ($1,220,680)) and a weighted number of ordinary shares of
59,777,568 (2015: 56,612,679).
Other components of equity include:
• Translation reserve - comprises foreign currency translation differences arising from the translation of financial
statements of the Group’s foreign subsidiaries into New Zealand Dollars.
• Retained earnings - includes all current and prior period retained profits and share-based employee
remuneration.
42
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 • CASH AND CASH EQUIVALENTS
Cash and bank
Term deposits
Restricted bank account
GROUP
2016
$
2015
$
7,873,012
4,611,093
-
20,000,000
5,504,668
9,506,559
13,377,680
34,117,652
The restricted bank relates to Road Users tax collected from clients due for payment to the local government agency.
NOTE 11 • TRADE AND OTHER RECEIVABLES
Trade receivables
Provision for doubtful debts
Prepayments and other receivables
(a) Credit risk
The ageing of the Group’s Trade receivables at the reporting date was as follows:
GROUP
2016
$
2015
$
2,319,312
2,220,538
(18,684)
-
2,300,628
2,220,538
2,812,017
1,608,213
5,112,645
3,828,751
Gross
2016
$
1,266,487
796,959
102,126
153,740
2,319,312
Allowance for
doubtful debts
2016
$
(51)
(2,086)
(2,207)
(14,340)
(18,684)
Gross
2015
$
1,396,156
398,335
173,032
253,015
2,220,538
Allowance for
doubtful debts
2015
$
-
-
-
-
-
GROUP
Not past due
Past due 1-30 days
Past due 31-60 days
Past due over 61 days
43
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 • PROPERTY, PLANT AND EQUIPMENT
Leased
equipment
Plant and
equipment
Leasehold
improvements
Motor
vehicles
Office
equipment
Computers
GROUP
$
$
$
$
$
$
Total
$
Year ended 31 March 2015
Opening net book
amount
Additions
Disposals
7,649,525
50,985
178,427
319,806
222,820
901,915
9,323,478
8,386,705
80,169
97,457
285,151
268,212
284,055
9,401,749
-
-
-
(30,144)
-
-
(30,144)
Depreciation charge
(2,954,491)
(36,863)
(38,137)
(92,263)
(79,461)
(359,259)
(3,560,474)
Depreciation
recovered
Effect of movement
in exchange rates
Closing net book
amount
Cost
Accumulated
depreciation
-
(2,436)
-
-
-
-
7,317
-
(473)
(440)
-
-
7,317
(3,349)
13,079,303
94,291
237,747
489,394
411,131
826,711
15,138,577
19,914,911
246,197
542,930
664,127
577,866
1,959,374
23,905,405
(6,835,608)
(151,906)
(305,183)
(174,733)
(166,735)
(1,132,663)
(8,766,828)
Net book amount
13,079,303
94,291
237,747
489,394
411,131
826,711
15,138,577
Leased
equipment
Plant and
equipment
Leasehold
improvements
Motor
vehicles
Office
equipment
Computers
Total
GROUP
$
$
$
$
$
$
$
Year ended 31 March 2016
Opening net book
amount
Additions
Disposals
13,079,303
94,291
237,747
489,394
411,131
826,711
15,138,577
10,615,330
30,531
576,403
204,111
281,451
397,111
12,104,937
-
-
-
(102,160)
-
-
(102,160)
Depreciation charge
(4,931,419)
(34,606)
(89,016)
(151,206)
(154,428)
(451,868)
(5,812,543)
Depreciation
recovered
Effect of movement
in exchange rates
Closing net book
amount
Cost
Accumulated
depreciation
-
(27,760)
-
-
-
42,203
-
-
42,203
572
6,931
10,061
462
(9,734)
18,735,454
90,216
725,706
489,273
548,215
772,416
21,361,280
30,497,989
276,729
1,119,333
773,564
869,748
2,356,485
35,893,848
(11,762,535)
(186,513)
(393,627)
(284,291)
(321,533)
(1,584,069)
(14,532,568)
Net book amount
18,735,454
90,216
725,706
489,273
548,215
772,416
21,361,280
Included in the Leased equipment is equipment under construction to be leased of $4,243,191 (2015: $3,123,750).
44
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 • INTANGIBLE ASSETS
GROUP
$
$
$
$
Patents
Trade Marks
Development
Software
Year ended 31 March 2015
Opening net book amount
Additions
Amortisation charge
Closing net book amount
Cost
Accumulated amortisation
Net book amount
15,700
-
(349)
15,351
17,800
(2,449)
15,351
Total
$
9,974,274
6,982,060
(1,140,251)
15,816,083
32,576
8,665,454
1,260,544
-
-
6,166,163
(847,543)
32,576
13,984,074
815,897
(292,359)
1,784,082
32,576
16,032,159
-
(2,048,085)
2,145,513
(361,431)
18,228,048
(2,411,965)
32,576
13,984,074
1,784,082
15,816,083
GROUP
$
$
$
$
Patents
Trade Marks
Development
Software
Total
$
Year ended 31 March 2016
Opening net book amount
Additions
Disposals
Amortisation charge
Closing net book amount
Cost
Accumulated amortisation
Net book amount
15,351
32,576
13,984,074
-
-
(350)
15,001
17,800
(2,799)
15,001
1,784,082
1,131,501
-
15,816,083
9,129,347
-
7,997,846
-
-
-
-
(1,156,871)
(519,250)
(1,676,471)
32,576
20,825,049
2,396,333
23,268,959
32,576
24,030,005
3,277,013
27,357,394
-
(3,204,956)
(880,680)
(4,088,435)
32,576
20,825,049
2,396,333
23,268,959
The useful lives of the Group’s Intangible Assets are assessed to be finite. Assets with finite lives are amortised
over their useful lives and tested for impairment whenever there are indications that the assets may be impaired.
In considering indicators of impairment, the assessment of the addressable market opportunity to deliver new
and existing products supports the carrying value of the intangible assets which is qualitative and judgemental.
Where an indicator of impairment exists the Group makes a formal assessment of the recoverable amount. Where
the carrying value of an asset exceeds its recoverable amount, the asset is considered impaired and is written
down to its recoverable amount. The recoverable amount is the greater of fair value less costs to sell of the assets
value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash flows (cash-generating units).
No impairment tests were performed during the year ended 31 March 2016 as there were no indicators of
impairment.
45
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 • TRADE PAYABLES AND ACCRUALS
Trade creditors
Sundry accruals
NOTE 15 • BORROWINGS
Current borrowings
Secured bank loan
GROUP
2016
$
2015
$
1,277,086
527,279
1,984,374
1,338,109
3,261,460
1,865,388
GROUP
2016
$
2015
$
1,002,305
1,002,305
-
-
During the year EROAD Limited entered into a $10,000,000 Committed Cash Advance Facility of which
$1,002,305 was drawn at 31 March 2016. Each drawdown has a 365-day term, with the facility itself having a
two-year term. The interest rate is variable based on our Banks CCAF Prime Rate on the date of each individual
drawdown plus a margin of 1.75%. The facility is secured by the value all present and after acquired property of
EROAD Limited including the value of its long-term rental agreements.
EROAD Limited also has an overdraft of a $1,000,000 facility of which no amount has been drawn at 31 March
2016 (2015: Nil). The facility is to allow for the working capital requirements of the business (if needed) and is on
call. This is an on demand Facility.
EROAD’s operating covenants to support the above facilities include debt service coverage ratio and funding
base:drawn down balance. EROAD was compliant with all covenants at 31 March 2016.
Terms and debt repayment schedule
Nominal
Interest
Year of
Maturity
2016
Face
Value
$
2016
Carrying
amount
$
GROUP
Secured bank loan
4.95%
2017
1,002,305
1,002,305
1,002,305
1,002,305
2015
Face
Value
2015
Carrying
Amount
$
-
-
$
-
-
46
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16 • OPERATING LEASES AS A LESSEE
Leases as lessee
Non-cancellable operating lease commitments due:
Not later than one year
Later than one year not later than five years
Later than five years
Operating lease expense recognised
GROUP
2016
$
2015
$
899,783
662,976
2,625,674
1,962,880
608,901
-
4,134,358
2,625,856
964,843
652,687
The Group leases premises. Operating leases held over properties give the Group the right to renew the lease
subject to redetermination of the lease rental by the lessor. The lease for the head office expires on 10 July 2019
and has a current annual rental of $572,800.
NOTE 17 • DEFERRED REVENUE
The Group has dealer agreements with third-party financiers. Under the terms of the dealer agreements, the third
parties enter into a lease agreement with the Company’s customers (where agreed by all parties) and the third
party makes an upfront payment for the use of the Company’s hardware products. Under the revenue recognition
policy for hardware income it is deemed that the Company in substance retains the significant risks and rewards
of ownership of the hardware assets. Revenue relating to hardware is therefore accounted for an operating lease
and recognised in the statement of comprehensive income on a straight-line basis over the term of the lease, and
any amounts received in advance are included as deferred revenue. Under the terms of the dealer agreements,
the Company would be liable to repay the third parties in the event the customer operating lease was cancelled
prior to the end of the agreed term.
In addition, the Group provides hardware to clients under long-term rental agreements. These are accounted for
as operating leases. If the Group receives any up-front payments for installation fees, these amounts are initially
deferred and recognised in the statement of comprehensive income over the life of the rental agreement.
Opening balance
Amounts deferred during the period
Amount recognised in the Statement of Comprehensive Income
GROUP
2016
$
2015
$
7,395,392
8,503,465
3,107,355
4,602,797
(5,128,100)
(5,710,870)
5,374,647
7,395,392
At 31 March 2016, $3,378,928 is expected to be recognised in the Statement of Comprehensive Income in the next
financial period and has therefore been classified as a current liability on the balance sheet (2015: $4,082,183).
47
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 • FINANCIAL RISK MANAGEMENT
The Group’s principal financial instruments include trade receivables and payables, cash and short term deposits,
and advances from group companies.
As a result of the Group’s operations and sources of finance, it is exposed to credit risk, liquidity risk and
market risks which include foreign currency risk, commodity price risk and interest rate risk. These risks are
described below.
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk
management framework. The Group’s risk management policies are established to identify and analyse the
financial risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence
to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions
and the Group’s activities.
Details of the significant accounting policies and methods adopted, including the criteria for recognition,
the basis of measurement and the basis upon which income and expenses are recognised, in respect of each
class of financial asset and financial liability are disclosed in the Statement of Accounting Policies to the
financial statements.
The Group holds the following financial instruments:
GROUP
Financial assets
Cash and cash equivalents
Trade receivables
Other receivables
Financial liabilities
Borrowings
Employee Entitlements
Trade and other payables
Payable to NZTA
2016
2015
$
$
$
$
Loans and
receivables
Other
amortised cost
Loans and
receivables
Other
amortised cost
13,377,680
2,319,312
250,986
15,947,978
-
-
-
-
34,117,652
2,220,538
-
36,338,190
-
-
-
-
-
1,002,305
920,078
3,261,460
5,558,453
10,742,296
-
-
-
-
-
-
-
-
-
-
718,867
1,865,388
9,567,274
12,151,529
(a) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to
meet its contractual obligations, and it arises principally from the Group’s trade receivables from customers in the
normal course of business.
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer.
The creditworthiness of a customer, financial institution or other counterparty is determined by a number of
qualitative and quantitative factors. Qualitative factors include external credit ratings (where available), payment
history and strategic importance of customer or counterparty. Quantitative factors include transaction size, net
assets of customer or counterparty, and ratio analysis on liquidity, cash flow and profitability.
48
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 • FINANCIAL RISK MANAGEMENT (CONTINUED)
In relation to trade receivables, it is the Group’s policy that all customers who wish to trade on terms are subject
to credit verification on an ongoing basis with the intention of minimising bad debts. The nature of the Group’s
trade receivables is represented by regular turnover of product and billing of customers based on the Group’s
contractual payment terms.
The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of
trade and other receivables. The main components of this allowance are a specific loss component that relates
to individually significant exposures, and a collective loss component established for groups of similar assets in
respect of losses that have been incurred but not yet identified.
The carrying amount of the Group’s financial assets represents the maximum credit exposure as summarised above.
Refer to note 11 for an aging profile for the Group’s trade receivables at reporting date.
(b) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as and when they become
due and payable. The Group’s approach to managing liquidity risk is to ensure, as far as possible, that it will
always have sufficient liquidity to meet its liabilities when they become due and payable, under both normal and
stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The Group ensures that it has sufficient cash on demand to meet expected operational expenses for a period
of 90 days, including the servicing of financial obligations; this excludes the potential impact of extreme
circumstances that cannot reasonably be predicted, such as natural disasters.
Maturities of financial liabilities
The following table details the Group’s contractual maturities of financial liabilities, including estimated interest
payments and excluding the impact of netting agreements, as at the reporting date:
GROUP 2016
Non-derivative financial liabilities
Borrowings
Trade and other payables
Payable to NZTA
1 year or less
$
1,002,305
3,261,460
5,558,453
9,822,218
Over
1 to 5 years
Over
5 years
$
-
-
-
-
$
-
-
-
-
Total
contractual
cash flows
Carrying
amount of
liabilities
$
$
1,002,305
1,002,305
3,261,460
3,261,460
5,558,453
5,558,453
9,822,218
9,822,218
49
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 • FINANCIAL RISK MANAGEMENT (CONTINUED)
1 year or less
Over
1 to 5 years
Over
5 years
Total
contractual
cash flows
Carrying
amount of
liabilities
GROUP 2015
Non-derivative financial liabilities
Borrowings
Trade and other payables
Payable to NZTA
$
-
1,865,388
9,567,274
11,432,662
$
-
-
-
-
$
-
-
-
-
$
-
$
-
1,865,388
1,865,388
9,567,274
9,567,274
11,432,662
11,432,662
(c) Market risk
Market risk is the risk that changes in market prices, such as commodity prices, foreign exchange rates and
interest rates, will affect the Group’s income or the value of its holdings of financial instruments. The objective of
market risk management is to manage and control market risk exposures within acceptable parameters, while
optimising the return on risk.
Foreign currency risk
The Group is exposed to currency risk on sales transactions that are denominated in a currency other than the
respective functional currencies of Group entities, primarily the US Dollars (USD) and Australian Dollar (AUD).
The Group, may on occasion, enter into forward exchange contracts to hedge the exposure to foreign currency
fluctuations on sales receipts.
The Group reports in New Zealand dollars. Movements in foreign currency exchange rates affect reported
financial results, financial position and cash flows. Where practical, the Group attempts to reduce this risk by
matching revenues and expenditures, as well as assets and liabilities, by country and by currency.
Foreign exchange rates applied against the New Zealand Dollar, at 31 March are as follows:
AUD 1
USD 1
2016
2015
$
0.90
0.69
$
0.99
0.76
The Group’s exposure to foreign currency risk on its financial assets and liabilities at the reporting date was as
follows (all amounts are denominated in New Zealand Dollars):
2016
Cash and cash equivalents
2015
Cash and cash equivalents
AUD
USD
$
$
45,399 1,293,415
AUD
USD
$
$
44,710
357,269
50
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 • FINANCIAL RISK MANAGEMENT (CONTINUED)
Interest rate risk
At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:
Secured bank loan
Net exposure to interest rate risk
2016
2015
Carrying
amount
$
%
4.95%
1,002,305
1,002,305
%
-
Carrying
amount
$
-
-
Summarised sensitivity analysis
The following table summarises the sensitivity of the Group’s financial assets and financial liabilities to foreign
currency risk and interest rate risk.
Foreign currency risk(1)
Interest rate risk(2)
-10%
+10%
-100bps
+100bps
Profit
Equity
Profit
Equity
Profit
Equity
Profit
Equity
GROUP 2016
$
$
$
$
$
$
$
$
Cash and cash equivalents
(89,246)
(89,246)
89,246
89,246 (133,777)
(133,777)
133,777
133,777
Borrowings
-
-
-
-
10,023
10,023
(10,023)
(10,023)
Total increase/ (decrease)
(89,246)
(89,246)
89,246
89,246 (123,753)
(123,753)
123,753
123,753
Foreign currency risk(1)
Interest rate risk(2)
-10%
+10%
-100bps
+100bps
Profit
Equity
Profit
Equity
Profit
Equity
Profit
Equity
GROUP 2015
$
$
$
$
$
$
$
$
Cash and cash equivalents
(27,152)
(27,152)
27,152
27,152
(341,177)
(341,177)
341,177
341,177
Borrowings
-
-
-
-
-
-
-
-
Total increase/ (decrease)
(27,152)
(27,152)
27,152
27,152
(341,177)
(341,177)
341,177
341,177
The Parent is subject to foreign currency risk on its intercompany receivable from its subsidiary Eroad Inc which is
denominated in US dollars. At 31 March 2016 the amount receivable in NZ dollars was $3,109,393
(2015: $2,157,497)
(1)The foreign currency sensitivity above represents a 10% decrease and increase in spot foreign exchange rates.
(2)The interest rate sensitivity above represents a 100 basis point decrease and increase in variable interest rates.
(d) Capital management
The Group’s policy 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 Board monitors the return on capital employed, which the
Group defines as reported EBIT (Earnings Before Interest and Tax) divided by capital employed.
(e) Fair value measurement
The carrying amounts of the Groups financial assets and liabilities approximate their fair value due to their short
maturity periods or fixed rate nature.
51
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19 • SHARE-BASED PAYMENTS
At 31 March 2016, the Group had the following share-based payment arrangements:
EROAD LTI Plan (equity-settled)
During the period the Group established the EROAD LTI plan whereby eligible employees were invited to
purchase EROAD shares.
Under the terms of the scheme the purchase of the shares is funded by a loan granted to the eligible employees
by EROAD Limited. At the end of the vesting period the employee will be paid a net bonus in relation to the
shares that vest to the employee, equal to the amount of their loan outstanding to the Company, enabling the
loan to be repaid.
Shares issued under the scheme are held in trust for the employees during a 3 year restrictive period. If the
employee ceases to be an employee during the restrictive period the Trustees will repurchase the employees
shares at the original issue price.
The eligible employees must meet certain performance conditions during each year of the restrictive period,
as determined by the remuneration committee and approved by the board. 50% of the scheme shares initially
granted will be forfeited for each year the participant fails to achieve their performance conditions. Additionally
the employee’s shares will also be forfeited if the enterprise value of the Company has not doubled by the end of
the restrictive period.
Employee’s shares that are forfeited due to failure to meet market and non-market performance conditions will
be repurchased by the Trustee at the original grant date price.
All employees who had been granted shares on 1 April 2014 under the previous Employee Share Purchase
Scheme - Scheme C agreed for their share entitlements under that scheme to be transferred to the new scheme
and subject to the EROAD LTI plan rules. The vesting conditions under the EROAD LTI plan are consistent with the
vesting conditions of the previous scheme.
The EROAD LTI Plan has been accounted for as grant of shares to employees in accordance with NZ IFRS 2. The
key terms and conditions relating to the grants under this Scheme are as follows:
Grant date/
employees entitled
Shares
granted
Vesting
conditions
Vesting
period
Shares granted to key management personnel
On 1 April 2014
51,171
• 3 years service from grant date
3 years
• Employees performance equal
or greater than the company’s as
determined by remuneration committee
• Enterprise value must double by end of
restrictive period
On 1 April 2015
69,896
• As above
3 years
Shares granted to other employees
On 1 April 2014
171,261
• 3 years’ service from grant date
3 years
• Employee’s performance equal
or greater than the company’s as
determined by remuneration committee
• Enterprise value must double by end of
restrictive period
On 1 April 2015
98,968
• As above
3 years
391,296
52
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19 • SHARE-BASED PAYMENTS (CONTINUED)
Measurement of fair value
The fair value of the shares issued under the EROAD LTI plan during the year ended 31 March 2016 was
determined with reference to the Company’s share price on the NZX at grant date. A discount was applied to the
fair value of the shares issued under the scheme to reflect the non-vesting market condition.
The 1 April 2014 grant was prior to the Group’s listing on the NZX, therefore the fair value of the shares issued was
based on a valuation performed by an independent professional services firm. The number of shares granted and
forfeited during the period were as follows:
Outstanding at 1 April
Granted during the period
Forfeited during the period
Outstanding at 31 March
GROUP
2016
$
214,726
168,864
(162,563)
221,027
2015
$
-
222,432
(7,706)
214,726
During the year-ended 31 March 2016 an amount of $103,005 (2015: $148,707) was recognised as an expense
within the Statement of Comprehensive Income in relation to share-based payments.
NOTE 20 • CAPITAL COMMITMENTS
The capital expenditure commitments as at 31 March 2016 are Nil. (2015: Nil).
NOTE 21 • CONTINGENT LIABILITIES
There are no contingent liabilities to report at 31 March 2016 (2015: Nil)
NOTE 22 • EVENTS SUBSEQUENT TO BALANCE DATE
There are no other events subsequent to balance date which have not already been taken up in the accounts (2015: Nil).
NOTE 23 • RECONCILIATION OF CASH FLOWS
Reconciliation of operating cash flows with reported profit/(loss) after tax:
Profit/(loss) after tax for the year attributable to the shareholders
Add/(less) non-cash items
Tax asset recognised
Depreciation and amortisation
Other non-cash expenses/(income)
Add/(less) movements in other working capital items:
Decrease/(increase) in trade and other receivables
Decrease/(increase) in finance lease receivables
Decrease/(increase) in current tax receivables
Increase/(decrease) in deferred income
Increase /(decrease) in NZTA payable
Increase /(decrease) in trade payables and accruals
Net cash from operating activities
53
GROUP
2016
$
2015
$
(1,099,514)
(1,220,680)
(211,351)
271,999
7,489,014
4,700,725
(36,582)
86,992
7,241,081
5,059,716
(1,283,894)
(2,686,755)
(714,911)
(310,366)
(288,163)
(91,518)
(2,020,745)
(1,108,073)
(4,008,821)
2,938,065
1,597,283
772,377
(6,719,251)
(486,270)
(577,684)
3,352,766
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 24 • COMPARISON TO PROSPECTIVE FINANCIAL INFORMATION
The Group’s Investment Statement and Prospectus dated 18 July 2014 included prospective financial statements
from 1 April 2014 to 31 March 2016. Below is the actual year’s trading result covering the period 1 April 2015 to
31 March 2016, which is compared to the prospective financial statements.
Prospective Consolidated Statement of Comprehensive Income
For the year ended 31 March 2016
Continuing operations
Revenue
Expenses
Depreciation
Amortisation
Earnings before interest, taxation, and costs of listing
Finance income
Finance expense
Net financing costs
Profit/(loss) before tax
Income tax (expense)/benefit
GROUP
Actual
2016
Prospective
2016
Notes
$
$
(a)
(b)
(c)
(d)
(e)
(f)
26,164,570
34,098,000
(20,477,298)
(21,413,000)
5,687,272
12,685,000
(5,812,543)
(3,024,000)
(1,676,471)
(3,282,000)
(1,801,742)
6,379,000
735,836
1,327,000
(244,959)
-
490,877
1,327,000
(1,310,865)
7,706,000
211,351
(2,200,000)
Profit/(loss) from continuing operations
(1,099,514)
5,506,000
Profit/(loss) after tax for the year attributable to the shareholders
(1,099,514)
5,506,000
Other comprehensive income
(47,986)
-
Total comprehensive income/(loss) for the year
(1,147,500)
5,506,000
54
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 24 • COMPARISON TO PROSPECTIVE FINANCIAL INFORMATION (CONTINUED)
Prospective Consolidated Statement of Financial Position
As at 31 March 2016
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventory
Finance lease receivable
Loans to Directors (to acquire shares)
Current tax receivable
Total Current Assets
NON-CURRENT ASSETS
Property, plant and equipment
Intangible assets
Finance lease receivable
Deferred tax assets
Total Non-Current Assets
TOTAL ASSETS
CURRENT LIABILITIES
Borrowings
Trade payables and accruals
Payable to NZTA
Deferred revenue
Employee entitlements
Total Current Liabilities
NON-CURRENT LIABILITIES
Deferred revenue
Deferred Tax Liabilities
Total Non-Current Liabilities
TOTAL LIABILITIES
NET ASSETS
TOTAL SHAREHOLDERS' EQUITY
55
GROUP
Actual
2016
Prospective
2016
Notes
$
$
(g)
(h)
(i)
(h)
(j)
(i)
(k)
13,377,680
42,642,000
5,112,645
2,180,000
-
2,252,000
294,678
279,996
456,881
-
280,000
-
19,521,880
47,354,000
21,361,280
9,288,000
23,268,959
17,423,000
730,599
1,952,706
-
-
47,313,544
26,711,000
66,835,424
74,065,000
1,002,305
3,261,460
-
1,819,000
5,558,453
6,600,000
3,378,928
5,206,000
920,078
649,000
14,121,224
14,274,000
1,995,719
2,018,000
-
379,000
1,995,719
2,397,000
16,116,943
16,671,000
50,718,481
57,394,000
50,718,481
57,394,000
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 24 • COMPARISON TO PROSPECTIVE FINANCIAL INFORMATION (CONTINUED)
Prospective Consolidated Statement of Cash Flows
For the year ended 31 March 2016
Cash flows from operating activities
Cash received from customers
Payments to suppliers and employees
Net interest received/ (paid)
Net tax paid
GROUP
Actual
2016
Prospective
2016
Notes
$
$
22,145,020
33,119,000
(18,916,597)
(20,833,000)
490,877
1,327,000
(288,163)
(234,000)
Net cash inflow from operating activities before listing costs and NZTA collections
(l)
3,431,137
13,379,000
Net cash received from customers / (paid to) NZTA
(4,008,821)
-
Net cash inflow from operating activities
(m)
(577,684)
13,379,000
Cash flows from investing activities
Payments for purchase of property, plant & equipment
Payments for purchase of intangible assets
(12,035,246)
(4,075,000)
(9,129,347)
(6,936,000)
Net cash outflow from investing activities
(n)
(21,164,593)
(11,011,000)
Cash flows from financing activities
Loan from / (repayment) bank
Net cash outflow from financing activities
1,002,305
(o)
1,002,305
-
-
Net increase/(decrease) in cash held
(20,739,972)
2,368,000
Cash at beginning of the financial period
34,117,652
40,274,000
Closing cash and cash equivalents (net of overdrafts)
13,377,680
42,642,000
56
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 24 • COMPARISON TO PROSPECTIVE FINANCIAL INFORMATION (CONTINUED)
EXPLANATIONS OF VARIANCES
(a) Revenue was below PFI due to both lower units and significant uptake of our rental offering in the US
compared to outright sales that were anticipated in the PFI.
Total Contracted Units of 36,953 were 16% below the PFI forecast of 44,057. Substantially all of the shortfall
relates to the shortfall in forecast units in the US which has been previously signalled to the market.
The PFI had assumed that all units in the US would be outright sales, however long-term rentals now account for
80% of all Contracted Units in the US. With the long-term rental offering, the hardware revenue is spread over the
life of the lease, as opposed to outright sales where the full hardware sale is recognised immediately.
(b) Expenses were broadly in line with PFI. With the higher demand for our rental offering over outright sales
there was lower than forecast cost of sales relating to hardware sales. This was partly offset by higher than
forecast non-capitalised research costs as a result of higher investment in research activities.
(c) Depreciation was higher than PFI as a result of the higher than forecast leased assets balance due to the
higher than forecast uptake of our rental offering compared to outright sales.
(d) A large portion of development spend in recent years has been focussed on the US market and our
Generation 2 hardware. Amortisation is lower than forecast due to the lower than forecast unit uptake in the US.
(e) Finance Income was lower than PFI. Funding of rentals and lower revenue in the US has resulted in lower
interest generating deposits.
(f) Finance expenses largely relate to realised foreign exchange gains that were not anticipated in the PFI.
(g) Cash balances are significantly lower than PFI due to lower revenue (outlined above) and higher than
anticipated funding of hardware units in the US as a result of the higher proportion of rentals.
(h) Property, plant and equipment was higher than PFI. This is primarily due to the higher amount of leased
assets as a result of a higher proportion of rental sales than the PFI forecast. Inventory balances have also been
reclassified as leased assets under construction to reflect the fact that we expect most units will be rented in the
future.
(i) There were no finance leases anticipated in the PFI (see (a)).
(j) Intangible assets were higher than PFI due to additional investment in development focussed on the US
market. There was also lower than forecast amortisation due to the lower number of Contracted Units in the US.
(k) Deferred tax balances were not forecast in the PFI. The deferred tax balance is driven by higher losses and
temporary differences.
(l) Net cash inflows from underlying operations were lower than PFI largely driven by the lower cash received
from customers as a result of the lower revenue compared to PFI (outlined above).
(m) Cash flows in the restricted NZTA bank account were lower than PFI due to the timing of the NZTA cash
collection cycle, this decrease is offset by a corresponding decrease in the payable to NZTA.
(n) Cash outflows from investing activities were higher than PFI primarily due to the additional rentals. There was
also additional investment in development activities, and software to support these activities, resulting in a higher
level of intangible assets.
(o) During the period the company entered into a $10,000,000 Committed Cash Advance Facility to help provide
funding for rental agreements and continued investment in research and development. $1,025,305 was drawn at
31 March 2016.
57
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 25 • RELATED PARTY TRANSACTIONS
The subsidiaries of the Company are:
Company
Country of Incorporation
Interest %
Principal activity
EROAD Financial Services Ltd
New Zealand
EROAD (New Zealand) Ltd
New Zealand
EROAD LTI Trustee Limited
New Zealand
EROAD (Australia) Pty Limited
Australia
EROAD Inc
United States of America
Key management personnel compensation comprised:
100
100
100
100
100
Financing activities within group
Non Trading
LTI Scheme Trustee
Transport Technology & SaaS
Transport Technology & SaaS
Short-term employee benefits
Share-based payments
(a) Loans to key management personnel
There have been no loans to management personnel.
2016
$
2015
$
2,179,797
1,661,364
45,079
129,076
2,224,876
1,790,440
(b) Other transactions with key management personnel
There were no other transactions with key management personnel during the period. From time to time, key
management personnel of the Group may purchase goods from the Group. These purchases are on the same terms
and conditions as those entered into by other Group employees or customers and are trivial or domestic in nature.
(c) Remuneration of Non-Executive Directors
Michael Bushby
Anthony Gibson
Sean Keane
Candace Kinser
2016
2015
$
$
76,792
65,223
49,061
42,959
49,061
42,959
49,061
39,982
223,975
191,123
The following additional fees were paid to certain Directors for additional consultancy in relation to the Company’s IPO:
Sean Keane
Candace Kinser
2016
2015
$
$
-
-
15,000
5,000
-
20,000
58
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 25 • RELATED PARTY TRANSACTIONS (CONTINUED)
Sean Keane is also a Director of First NZ Capital. During the year ended 31 March 2015, First NZ Capital provided
the Company with advisory and brokerage services to a value of $1,416,994. Amounts were charged on normal
market rates for such services and were due and payable under normal payment terms. At 31 March 2015, an
amount of $66,998 remained payable to First NZ Capital. No additional transactions were entered into during the
year ended 31 March 2016.
(d) Loans to Non-executive Directors
In order to further align Director and Shareholder interests, during the year ended 31 March 2015 EROAD provided
loans to its non-executive Directors for the sole purpose of enabling each of them to subscribe for shares. The
loans are secured, interest free and repayable upon the earlier of two years from the drawn down date or the date
on which a Director ceases to hold any shares.
2016
2015
$
$
69,999
69,999
69,999
69,999
69,999
69,999
69,999
69,999
279,996
279,996
2016
2015
$
$
622,572
388,889
35,440
35,441
658,012
424,330
Michael Bushby
Anthony Gibson
Sean Keane
Candace Kinser
(e) Remuneration of Executive Directors
Salary and bonus
Share-based payments
59
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.0 FINANCIAL PERFORMANCE • INDEPENDENT AUDITOR’S REPORT
INDEPENDENT AUDITOR’S REPORT
To the shareholders of EROAD Limited
We have audited the accompanying consolidated financial statements of EROAD Limited and its subsidiaries (‘’the
group’’) on pages 25 to 59. The financial statements comprise the consolidated statement of financial position as
at 31 March 2016, the consolidated statements of comprehensive income, changes in equity and cash flows for the
year then ended, and a summary of significant accounting policies and other explanatory information.
This report is made solely to the shareholders as a body. Our audit work has been undertaken so that we might
state to the company’s shareholders those matters we are required to state to them in the auditor’s report and for
no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the company’s shareholders as a body, for our audit work, this report or any of the opinions we have formed.
Directors’ responsibility for the consolidated financial statements
The directors are responsible on behalf of the company for the preparation and fair presentation of the consolidated
financial statements in accordance with generally accepted accounting practice in New Zealand (being New Zealand
Equivalents to International Financial Reporting Standards) and International Financial Reporting Standards, and
for such internal control as the directors determine is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We
conducted our audit in accordance with International Standards on Auditing (New Zealand). Those standards
require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the group’s preparation and
fair presentation of the consolidated financial statements 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. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness
of accounting estimates, as well as evaluating the presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Our firm has also provided other services to the group in relation to other assurance services, taxation compliance,
health and safety and other advisory services. Subject to certain restrictions, partners and employees of our firm
may also deal with the group on normal terms within the ordinary course of trading activities of the business of
the group. These matters have not impaired our independence as auditor of the group. The firm has no other
relationship with, or interest in, the group.
Opinion
In our opinion, the consolidated financial statements on pages 25 to 59 comply with generally accepted accounting
practice in New Zealand and present fairly, in all material respects, the consolidated financial position of EROAD
Limited as at 31 March 2016 and its consolidated financial performance and cash flows for the year then ended
in accordance with New Zealand Equivalents to International Financial Reporting Standards and International
Financial Reporting Standards.
28th June 2016
Auckland
60
60
4.0
REGULATORY
DISCLOSURES
62
Director
Disclosures
DIRECTORS
The persons who held office as directors of EROAD Limited
at any time during the year ended 31 March 2016, each of
whom remains a director as at the date of this Annual Report,
are as follows:
Michael Bushby Chairman, Non-Executive, Independent
Steven Newman Chief Executive Officer
Sean Keane
Non-Executive, Independent
Candace Kinser Non-Executive, Independent
Anthony Gibson Non-Executive, Independent
Gregg Dal Ponte will be appointed as a non-executive, non-
independent director on 1 July 2016.
SUBSIDIARY COMPANY DIRECTORS
The persons who held office as directors of subsidiary
companies at 31 March 2016 are as follows:
EROAD Financial Services Limited (New Zealand)
Anthony Gibson, Sean Keane
EROAD (Australia) Pty Limited (Australia)
Michael Bushby, Steven Newman
EROAD Inc. (USA)
Michael Bushby, Steven Newman
EROAD LTI Trustee Limited (New Zealand)
Anthony Gibson, Candice Kinser
INTERESTS REGISTER
In accordance with Section 140(2) of the Companies Act,
the directors named below have made a general disclosure
of interest by a general notice disclosed to the Board and
entered in the company’s interests register. General notices
given by directors which remain current as at 31 March 2016
are as follows:
Michael Bushby
• General Manager Infrastructure Services, Ventia Pty
Limited
• Director, Lowelly Pty Limited
• Director, 45 Mimosa Pty Limited
• Director, Gateway Motorway Services Pty Limited
• Director, Brisbane Motorway Services Pty Limited
6363
• Director, Delron Cleaning Pty Limited
• Director, Delron Group Facility Services Pty Limited
• Director, Infocus Infrastructure Management Pty Limited
• Director, Leighton Boral Amey NSW Pty Limited
• Director, Leighton Boral Amey QLD Pty Limited
• Director, Roads Australia Pty Limited
Sean Keane
• Financial Market Consultant, Credit Suisse
• Non-Executive Director, First NZ Capital
• Non-Executive Director, Foundation Life (NZ) Ltd
• Non-Executive Director, BRP General Partner Limited*
• Director, Triple T Consulting Limited
• Director, SLK Asset Management Limited
Anthony Gibson
• Chief Executive Officer, Ports of Auckland Limited
• Chairman, North Tugz Limited
• Director, AMG Consulting Limited
• Director, Seafuels Limited*
• Director, Waikato Freight Hub Limited*
Candace Kinser
• Non-Executive Director, Talent International Limited
(Australia)
• Non-Executive Director, Quotable Value Limited*
• Director, Kinser Trustee Limited*
• Director, Longhorn Investments Limited
• Director, Sagitas Consulting Limited
• Independent Director, Livestock Improvement
Corporation Limited*
• Chapter Director, Cloud Security Alliance (New Zealand
Chapter)
• Board Trustee, The Well Foundation
• Advisory Board Member, University of Waikato:
Cyber Security
• Advisor, Palantir Technologies
Steven Newman
• Director, NMC Trustees Limited
*Entries added by notices given by directors during the year ended
31 March 2016.
4.0 REGULATORY DISCLOSURES The following details included in the company’s interests register
as at 31 March 2015 have been removed as at 31 March 2016:
• Michael Bushby is no longer a director of EROAD
Directors’ relevant interests
Directors held relevant interests in the following ordinary
shares in the company as at 31 March 2016:
Offeror Limited
• Anthony Gibson is no longer a director of Ports of
Auckland Nominees Limited, Ports of Auckland
Investments Limited, Freemans Bay Properties Limited and
Life Flight Trust
Name
Steven Newman*
Michael Bushby
• Candace Kinser is no longer a director of 660 Main Road
Sean Keane
Stoke Limited
• Steven Newman is no longer a director of EROAD Offeror
Limited or a Member of the New Zealand Technology
Industry Association Board
Anthony Gibson
Candace Kinser
Ordinary shares
16,059,466
156,070
609,396
563,789
37,065
* Steven Newman also had a beneficial interest in 51,172
performance shares issued under the Performance Share Plan.
Share dealings by directors
In accordance with Section 148(2) of the Companies Act,
the Board has received disclosures from the director named
below of acquisitions or dispositions of relevant interests in
the company between 1 April 2015 and 31 March 2016, and
details of those dealings were entered in the company’s
interests register. The particulars of such disclosures are:
Anthony Gibson
• 1) purchased 26,900 ordinary shares, valued at $3.72
per share, on 20 July 2015; 2) purchased 3,000 ordinary
shares, valued at $1.98 per share, on 18 February 2016.
Use of company information
There were no notices from directors of the company
requesting to use company information received in their
capacity as directors that would not otherwise have been
available to them.
Directors’ and officers’ insurance and indemnity
EROAD has arranged, as provided for under the company’s
constitution, policies of directors’ and officers’ liability
insurance which, with a Deed of Indemnity entered into
with all directors, ensures that generally directors will incur
no monetary loss as a result of actions undertaken by them
as directors. Certain actions are specifically excluded, for
example, the incurring of penalties and fines that may be
imposed in respect of breaches of the law.
6464
4.0 REGULATORY DISCLOSURES 4.0 REGULATORY DISCLOSURES
Shareholder
Information
ANNUAL SHAREHOLDERS’ MEETING
The company’s 2016 annual shareholders’ meeting will be
held at AUT Millennium Building, The Finish Line Room,
17 Antares Place, Mairangi Bay, Auckland, New Zealand on
Thursday, 4th August 2016 commencing at 4:45pm.
DISTRIBUTION OF SHAREHOLDERS AND HOLDINGS
Size of
1 to 999
Number
of holders
%
Number of
ordinary shares
138
13.5
1,000 to 4,999
508
49.8
5,000 to 9,999
10,000 to 49,999
50,000 to 99,999
100,000 and over
145
155
27
48
14.2
15.2
2.6
4.7
%
0.1
1.9
1.5
5.3
3.2
64,062
1,122,419
875,496
3,218,171
1,948,781
53,016,731
88.0
Total
1021
100
60,245,660
100
The details set out above were as at 7 June 2016.
As disclosed in Note 19 of the Financial Statements, there
were 391,296 (2015, 222,432) performance shares on issue for
the benefit of employees as at 31 March 2016. The company
only has one class of shares on issue, ordinary shares, and
these shares are quoted on the NZX Main Board.
65
65
SUBSTANTIAL PRODUCT HOLDERS
According to notices given under the Financial Markets
Conduct Act 2013, the substantial product holders in ordinary
shares (being the only class of quoted voting products) of
the company and their relevant interests according to the
substantial product holder file as at 31 March 2016, were
as follows:
Substantial
product holder
Date of
Notice
Number of
shares
% of shares
on issue at 31
March 2016
Steven Newman
(includes NMC
Trustees Limited’s
relevant interest)
NMC Trustees Limited
as trustee of the NMC
Investment Trust
8/12/2015
16,059,466
26.691%
8/12/2015
15,999,194
26.59%
EROAD Limited
23/12/15
18,801,271
31.248%
Commonwealth Bank
of Australia
Colonial First State
Asset Management
AUS Limited
11/8/2015
3,033,133
5.041%
16/3/2016
3,028,199
5.033%
The total number of ordinary shares (being the only class of
quoted voting products) on issue in the company as at
31 March 2016 was 60,168,864.
PRINCIPAL SHAREHOLDERS
The names and holdings of the twenty largest registered
shareholders in the company as at 7 June 2016 were:
Holder Name
Shares
%
Shareholdings larger than 1% held through New Zealand
Central Securities Depository Limited (NZCSD):
Holder Name
Holding
Citibank Nominees (New Zealand) Limited
4,188,948
New Zealand Central Securities Depository
Limited
16,780,342
27.85
Accident Compensation Corporation
2,960,000
NMC Trustees Limited
FNZ Custodians Limited
15,999,195
26.55
2,581,880
4.28
BNP Paribas Nominees (NZ) Limited
2,531,787
HSBC Nominees (New Zealand) Limited
1,685,645
%
7.0
4.9
4.2
2.8
David Murray Jarrett & Julie Patricia Jarrett &
Vlatkovich & McGowan Trustee Company Limited
1,801,000
2.98
JP Morgan Chase Bank NA NZ Branch-
Segregated Clients Account
1,140,472
1.9
SW Trust Services (Twelve) Limited
1,269,375
2.10
Brian Edward Michie
Andrew Bowker
Brendon Thomas
1,170,915
1.94
951,131
1.57
915,425
1.51
New Zealand Superannuation Fund Nominees
Limited
1,100,705
1.8
HSBC Nominees (New Zealand) Limited A/C
State Street
917,197
BNP Paribas Nominees (NZ) Limited
690,395
1.5
1.1
JB Were (NZ) Nominees Limited
650,764
1.08
Shareholdings, over 1%, held through NZCSD
15,215,149
25.3
Matu Trust Limited
631,890
1.04
SLK Asset Management Limited
603,996
1.00
Angela Jane McNaught & Colin Mason McNaught
563,225
0.93
Anthony Gibson
Paul Geoffrey Hewlett & Catherine Patricia Carter
& Hoffman Trustees Limited
Bruce Wilson & Stephanie Wilson & SW Trust
Services (Thirteen) Limited
Jarred Blair Clayton
Alister Moss
Somac Holdings Limited
563,065
0.93
556,725
0.92
491,326
0.81
453,155
0.75
450,000
0.74
407,806
0.67
Investment Custodial Services Limited
397,775
0.66
Nicholas Moor
360,209
0.59
Top 20 largest registered shareholders
47,599,199
78.9
6666
4.0 REGULATORY DISCLOSURES Other
Information
NZX WAIVERS
No waivers were sought from the NZX within the 12-month
period prior to 31 March 2016.
DISCIPLINARY ACTION TAKEN BY THE NZX
The NZX has not taken any disciplinary action against the
company during the year ended 31 March 2016.
AUDITOR’S FEES
KPMG has continued to act as auditor of EROAD
and its subsidiaries. The amount payable by EROAD
and its subsidiaries to KPMG as audit fees during the year
ended 31 March 2016 was $145,000. The amount of fees
payable to KPMG for non-audit work during the year ended
31 March 2016 was $157,009.
DONATIONS
The company and its subsidiaries made donations totaling
$4,177 during the year ended 31 March 2016.
CREDIT RATING
The company does not currently have a credit rating.
67
4.0 REGULATORY DISCLOSURES 5.0
GLOSSARY
68
5.0 GLOSSARY
Glossary
Annualised Recurring Revenue
Monthly Recurring Revenue recognised or expected to be recognised in the month of March by 12.
Auditor
KPMG
Companies Act
Companies Act 1993
Depot
EBIT before
non-operating costs
Ehubo
Electronic Logbook
EROAD’s web-based platform that allows customers to manage (and pay) their RUC, WMT and fleet
management services.
Earnings before non-operating costs, interest and tax.
EROAD’s electronic distance recorder which replaces mechanical hubodometers.
® Ehubo is a trade mark registered in New Zealand
A substitute for a paper-based logbook, to ensure compliance with Hours of Service regulations. Hours
of Service regulations place limits on when and how long commercial motor vehicle drivers may drive to
ensure drivers have sufficient time to rest before getting behind the wheel.
Electronic Logging Device (ELD)
Device for logging electronic hours of service, mandated by US Department of Transportation for
commercial vehicles from December 2017.
EROAD
EROAD Limited, and where the context permits, includes its subsidiaries.
® EROAD is a trade mark registered in New Zealand
Future Contracted Income
Future Contracted Income is the total revenue to be earned from existing customer contracts
in future periods.
FY
Financial year ended March
Heavy Vehicle
A truck, or a truck and trailer, weighing over:
• 3.5 tonnes in New Zealand (required to pay RUC);
• 12 tonnes in Oregon (required to pay WMT); or
• 4.5 tonnes in Australia
International Fuel
Tax Agreement (IFTA)
International
Registration Plan (IRP)
A cooperative agreement between all states (excluding Alaska and Hawaii) of the United States, and the
Canadian provinces, designed to make it simpler for inter-jurisdictional carriers to report and pay fuel
excise taxes, requiring only one fuel licence to operate across multiple jurisdictions.
An agreement between all states (excluding Alaska, Hawaii and Washington D.C.) of the United States,
and the Canadian provinces, for the registration of inter-jurisdictional vehicles. Registration fees are
paid to a fleet’s base jurisdiction, which then distributes them to other jurisdictions based on the miles
travelled in each member jurisdiction.
Listing Rules
The listing rules applying to the NZX Main Board as amended from time to time.
Ministry of Transport (MOT)
The New Zealand government's principal transport policy adviser to the Minister and
Associate Minister of Transport.
New Zealand
Transport Agency (NZTA)
A government entity, whose role is to provide a link between government policy making and the
operation of the sector. NZTA aims to achieve better use of existing transport capacity, more efficient
freight and a resilient and secure transport network.
69
5.0 GLOSSARY
NZ GAAP or GAAP
New Zealand Generally Accepted Accounting Practice.
NZ IFRS
NZX
New Zealand equivalents to International Financial Reporting Standards.
NZX Limited
NZX Main Board
The main board equity security market, operated by NZX.
Oregon Department
of Transportation (ODOT)
A department of the state government of Oregon, responsible for managing the state's
transportation systems.
PFI
Prospective financial information for FY2015(P) and FY2016(P).
Recurring Revenue
Retention Rate
Road User Charges (RUC)
The revenue EROAD expects to receive in future months from existing Total Contracted Units from
monthly charging of services, monthly hardware rentals and current monthly rates of transaction fees.
Retention Rate is the number of Units installed at the beginning of the period and retained on Depot at
the end of the period as a percentage of the number of Units on Depot at the beginning of that period.
In New Zealand, RUC is applicable to Heavy Vehicles and all vehicles powered by a fuel not taxed at
source. The charges are paid into a fund called the National Land Transport Fund, which is controlled by
NZTA, and go towards the cost of repairing the roads.
Tubo
The trailer version of the Ehubo1.
Total Contracted Units
Total Contracted Units represents the total Units subject to a customer contract and includes both Units
on Depot and Units pending installment.
Unit
An EROAD device.
Units on Depot
The number of EROAD devices installed in vehicles and subject to a customer contract.
Weight-Mile Tax (WMT)
A mileage-based tax imposed on Heavy Vehicles according to a combination of the number of axles and/
or combined weight of the vehicle and the number of miles driven in Oregon, USA.
70
Directory
EROAD
NEW ZEALAND
260 Oteha Valley Road
Albany, Auckland, 0632
USA
7654 SW Mohawk Street
Tualatin, OR 97062
71
SHARE REGISTRAR
Computershare Investor Services Limited
Level 2, 159 Hurstmere Road
Takapuna, Auckland 0622
SOLICITORS
Chapman Tripp
Level 35, ANZ Centre
23-29 Albert Street, Auckland 1010
AUDITOR
KPMG
KPMG Centre
18 Viaduct Harbour Avenue, Auckland 1010
BANKER
Bank of New Zealand
80 Queen Street
Auckland Central, Auckland 1010
The Service module has allowed me to build
cases for replacement because it’s all there
at the touch of a button.
Blair Inglis
Fleet Compliance Manager,
Foodstuffs North Island
Will Gunderson - Owner driver
INNOVATION AND INTEGRITY
EROAD.COM