EROAD
ANNUAL REPORT 2017
ABOUT US
EROAD modernises road charging and
compliance for road transport by replacing
paper-based systems with easy-to-use
electronic systems that also improve fleet
management, bringing benefits to our
customers who operate transport fleets,
as well as benefits to communities and
the wider public through improved road
safety and valuable data about road use
to improve the planning, management and
maintenance of our roads.
KEY DATES
03 AUGUST 2017
Annual Shareholders Meeting
30 SEPTEMBER 2017
Financial Half Year End
24 NOVEMBER 2017
Half Year Results announcement*
31 MARCH 2018
Financial Year End
*Proposed date
This annual Report is dated 29 June 2017 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
CONTENTS
OVERVIEW
2017 Business Highlights
2017 Results in Brief
The EROAD Business
Chairman Report
CEO Report
CFO 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
COMPANY TIMELINE
DIRECTORY
01
02
03
10
11
13
16
17
19
24
27
33
60
67
69
71
73
75
76
2017 Business Highlights
• EROAD launched the first comprehensive, in-cab, compliant Electronic Logging Device (ELD) solution on time
to enable a go-to-market offer in the US in the new financial year (2018). US trucking firms must comply with the
Federal Motor Carrier Safety Administration (FMCSA) electronic logging device (ELD) mandate, effective December
2017
• Responded to market demand for health and safety products by releasing a comprehensive suite of health and
safety products including Max Speed Alert, EROAD Inspect, Driver Login, Trip Investigator and enhanced EROAD
Share
• Successful year for R&D, rolling out 50+ new features and improvements to EROAD’s product suite
• US sales strategy refined using independent analysis of US market from external partners, including a ‘Big 4’ firm,
commissioned to test and guide US strategy and business planning – refined both direct and indirect sales channels
• EROAD became a Corporate Partner of the American Trucking Associations (ATA), the USA’s largest national trade
association for the transportation industry
• Three record sales months in New Zealand as heavy vehicles continue to switch from paper-based RUC to eRUC,
including large enterprise customers, and an ever diversifying range of customers seek health and safety compliance
services
• Ended year by signing three major enterprise accounts, Fulton Hogan, Waste Management and Downer thus
finished the year with orders of more than 6,100 new units which underpins what is expected to be EROAD’s largest
ever unit growth year in FY18
• Team strengthened by the appointment of Chief
Operating Officer, new Chief Financial Officer and
new President of EROAD’s US business.
• One of America’s leading transportation experts,
Gregg Dal Ponte, joined the EROAD Board. Mr Dal
Ponte is Oregon’s former Administrator of the State
of Oregon Department of Transportation (ODOT),
Motor Carrier Transportation Division, and has held
a number of executive leadership positions in the US
transportation industry
• EROAD appointed global health and safety expert
Chris Evans as Health and Safety Stakeholder Manager
to support the company’s best practice in health and
safety, as well as improving the company’s health and
safety compliance services for customers
• Successfully completed the California Road Charge
“With the closeout of the Road Charge Pilot Program,
we are excited to see great results within the
commercial trucking segment of the pilot. California’s
program was the first in the nation to test combined
light and heavy duty vehicles, with commercial trucks
making up almost 8% of the more than 37 million miles
traveled. The California Transportation Commission will
be looking carefully at this commercial trucking data in
formulating recommendations on next steps for road
charge in California.”
Commissioner Jim Madaffer
Chairman of the Technical Advisory Committee (TAC)
for the Road Charge Pilot Program
Pilot, the largest road user charging pilot in the US, established by the California Department of Transportation to
evaluate a move to road user charging, which concluded on 31 March 2017. At the conclusion of the pilot, 44% of
the participating heavy vehicles will remain equipped with EROAD’s technology, after electing to become EROAD
customers
• The Safe Driving Rewards Programme, a collaboration in New Zealand between insurers NZI / Lumley and EROAD,
won Innovation of the Year at the New Zealand Insurance Industry Awards. The programme has saved customers
more than $232,000 in waived insurance excesses thanks to good driver behavior
• Finalist in three categories of the 2017 NZ Hi-Tech Awards; Best Technology Solution for the Public Sector, Most
Innovative Hardware Product, and Innovative Hi-Tech Service
01
1.0 OVERVIEW 2017 Results in Brief
50,000
40,000
30,000
20,000
10,000
-
35.0
30.0
25.0
20.0
15.0
10.0
5.0
-
60.0
50.0
40.0
30.0
20.0
10.0
-
TOTAL CONTRACTED UNITS
48,041
11,088
36,953
11,091
25,862
11,530
14,332
6,612
7,720
3,769
3,951
2012
2013
2014
2015
2016
2017
REVENUE ($Millions)
32.8
26.2
17.6
10.0
6.2
2.9
2012
2013
2014
2015
2016
2017
FUTURE CONTRACTED INCOME ($Millions)
Commercial Market
Established Market
5.9
11.5
2.7
29.9
19.5
8.7
49.8
8.2
39.8
2012
2013
2014
2015
2016
2017
Rental units continue to dominate our total contracted units.
8%
6,102
TOTAL CONTRACTED UNITS
MARCH 2017
Rented
Sold
TOTAL CONTRACTED UNITS
MARCH 2017
Established Market
Commercial Market
92%
Revenue
25%
Total Contracted Units
30%
Future Contracted Income
22%
Retention Rate
99%
Staff Numbers
17%
Invested in R&D
$13m
41,939
02
1.0 OVERVIEW
The EROAD Business
WHO WE ARE
The company formed in 2000, is headquartered in Auckland,
New Zealand, and listed on the New Zealand Exchange
(NZX). Its US business is based in Portland, Oregon, serving
customers with vehicles operating in every US mainland
state, growing outward in concentration from the Northwest.
In 2009 EROAD introduced the world’s first nationwide
electronic road user charging (eRUC) system in New Zealand
and during 2017 more than 50% of heavy transport RUC is
expected to be collected electronically.
In 2014 EROAD introduced the first electronic Weight Mile
Tax (WMT) service in the US, and also offers electronic
International Fuel Tax Agreement (IFTA) and International
Registration Plan (IRP) services as well as an Electronic
Logging Device (ELD) solution.
EROAD is also a leading provider of health and safety
compliance services, including vehicle management and
driver behaviour and performance measures. Its integrated
platform also provides for advanced fleet management
services, including fuel and vehicle management.
EROAD’s technology platform comprises in-vehicle hardware,
units the company manufactures in Auckland, as well as a
cloud-based Software as a Service (SaaS) suite called Depot
from which customers can customise their compliance, safety
and fleet management services. This includes a bank-grade
secure payments system. EROAD’s platform and technology
have earned approval from the New Zealand and Oregon,
USA transport regulators to collect tax and user charges.
The company’s areas of expertise include research and
development, design and manufacture, policy and regulatory
analysis, customer sales and support,
and big data analytics. Both the
Oregon state government in the US
and the New Zealand Transport Agency
utilise data from EROAD’s platform to
improve transport planning and road
management.
EROAD’s technology platform is a
well-established part of the New
Zealand transport ecosystem, enabling
innovation in related fields like insurance
and freight management, as well as
supporting improved highway planning
and maintenance by roading authorities.
EROAD’s platform has been designed to
support integration with third parties, to
provide additional commercial services,
such as cool chain management logistics
and monitoring, workflow management
and manifest services.
“Recent changes to health and safety legislation in New Zealand
pose a particular challenge to transport operators. Everyone wants
to make their work places as safe as possible, including those
with fleets of vehicles operating across New Zealand’s varied and
challenging road conditions. But the challenge of doing this when a
fleet of trucks or light vehicles is part of your workplace is significant.
EROAD’s suite of Health and Safety services is a game-changer
for our members. By enabling drivers and their employers to be in
regular, real time contact via Depot and driver messaging, drivers no
longer feel so isolated on the roads.
Quite simply, EROAD’s Health and Safety service is revolutionising
health and safety compliance in road transport. It is making a
tougher regulatory environment less daunting for our members,
and is making a very significant contribution to not only improved
business performance for our members, but safer roads for our
drivers and for all road users.
It is an example of a highly innovative service that is driving radical
change for the better in our industry.”
Dennis Robertson
CEO – Road Transport Association NZ
03
1.0 OVERVIEW GLOBAL ACTIVITIES
This map illustrates EROAD’s global activities. EROAD’s
core product offering in New Zealand is RUC compliance
with growing health and safety and fleet management
offerings. Australia does not operate a Road User Charges
scheme, so EROAD offers only the health and safety and fleet
management services. In North America EROAD offers
ELD and tax compliance, safety compliance and fleet
management services.
BUSINESS MODEL
EROAD customers usually lease their in-vehicle units and pay
for a monthly service plan to use services on Depot, usually
on a 36-month term. EROAD enjoys a very high customer
renewal rate of between 97% and 99%.
EROAD’s revenue comes from the lease (or sale) of in-vehicle
hardware as well as service plans for its SaaS services. It also
earns transaction fees as a RUC agent for the sale of RUC
electronically on behalf of the New Zealand Transport Agency
(NZTA).
A feature of the business is EROAD’s strong growth in
Future Contracted Income (FCI), arising from its future
contracted income from customer service plans. As its
customer base grows, better-utilising R&D and investment
in software services, EROAD intends to steadily improve
EBITDA, especially in its New Zealand business.
Australia
Tax
Health & Safety
Fleet Management
Canada
ELD & Tax Compliance
Safety Compliance
Fleet Management
USA
ELD & Tax Compliance
Safety Compliance
Fleet Management
New Zealand
EROAD ACTIVITY
RUC Compliance
Health & Safety
Fleet Management
Active
Planned
Research
04
1.0 OVERVIEW 1.0 OVERVIEW
EROAD FACTS AND FIGURES
COMMERCIAL MARKET
ESTABLISHED MARKET
TOTAL
Total Contracted Units*
6,102
41,939
48,041
Tax collected or miles measured
370,852,944 miles
$1,437,511,052
Employees (FTE)
Future Contracted Income#
41
$8.7m
188
$49.8m
-
229
$58.5m
* 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 installation.
# 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 30% across all markets
2 Expand Oregon operations to
Northwest & North America
After advice from external consultants, expanded team and partners to cover
US with emphasis on areas best suited to EROAD
3 Identify, foster and develop
new opportunities
4 Consider accelerated market
entry through acquisitions
Delivered successful California Pilot and launched Electronic Logging Device
Watching brief, no acquisitions in FY17
5 Further develop fleet management
services to support core offer
Added to health and safety suite of services in New Zealand
6
Validate new product markets
and business models
Partnered with the American Trucking Associations as a featured
product partner
05
1.0 OVERVIEW
MARKET OUTLOOK
To provide shareholders with additional context with respect
to EROAD’s progress and future opportunities, this section
offers an overview of the markets in which EROAD operates.
Australian and New Zealand (ANZ) market
The ANZ market continues to offer a significant growth
opportunity for EROAD. Independent market research
indicates the telematics market in Australia and New Zealand
is in a growth period. The number of units in use is forecast to
grow at a compound annual growth rate (CAGR) of 16% from
0.5 million units in 2015 to 1.1 million in 2020. In December
2015, research company, Berg Insight, ranked Teletrac Navman
as the largest telematics provider in Australia and New
Zealand with around 80,000 units in the region. EROAD was
the second-largest provider with 31,000 units in the region.
Since then EROAD has grown its units to 41,939.
EROAD’s growth has exceeded that forecast for the telematics
market as a whole in Australia and New Zealand. EROAD has
grown units by a CAGR of 36% from the start of FY15 to the
end of FY17. EROAD’s growth looks set to continue in the next
financial year with a strong pipeline of demand from both
heavy and light fleets.
EROAD’s growth has been built off expansion in both the
heavy vehicle and light vehicle markets. Growth has been
driven by increased regulation, such as health and safety, and
“It is hard to think of a high-tech solution in transportation
that has brought more benefits to New Zealanders, especially
the public sector, than EROAD’s technology. Unquestionably,
EROAD’s ERUC technology has made the prospect of paying
road charges less of an imposition and more palatable
to many of our members, both by reducing the cost of
compliance and knowing data collected can be put to good
use to improve our networks. The benefits to the public sector
are clear. And all New Zealanders benefit when the cost of
road transport can be reduced.”
Ken Shirley
Chief Executive, Road Transport Forum
New Zealand
38% of total heavy vehicle RUC. Further, EROAD’s new
products are targeting a broader range of customer needs.
EROAD has recognised customer demand for products to
help manage fleet efficiency, compliance and safety with
products like EROAD Inspect and EROAD Leaderboard.
EROAD has seen healthy growth in sales to operators of
commercial light vehicles (vehicles weighing less than 3.5
tonnes) over the last financial year with over 9,000 units
installed in light vehicles. This has been partially driven by
EROAD’s heavy vehicle customers introducing EROAD into
their light vehicle fleets as well as uptake by light vehicle fleets
that are particularly focused on health and safety compliance.
Currently, only a small proportion of the estimated 500,000
commercial light vehicles on the road in New Zealand are
thought to have purchased telematics services. EROAD
foresees significant growth potential in this market fuelled
by recent changes to health and safety regulation in New
Zealand. These more onerous obligations on employers have
led to an increased demand for EROAD’s suite of telematics
products to enable fleet managers to monitor driver location,
speed, safety and behaviour. In New Zealand health and
safety is now a significant driver alongside RUC and efficiency,
especially in light of the recent Kaikoura earthquake which has
challenged the trucking industry.
Australia’s 700,000-strong heavy vehicle fleet and 2.9 million-
strong light commercial vehicle fleet still has
relatively low levels of market penetration for
advanced transport technology services like
telematics. In addition, a number of Australian
states, as well as the Federal government, are
considering user pays options for new road
networks. During the year in review, EROAD
hosted Australia’s Federal Minister for Urban
Infrastructure, the Hon Paul Fletcher, MP who
was interested to learn about New Zealand’s
RUC system and technology options for
smarter road pricing and road management.
North American market
North America presents a significant and multi-
faceted opportunity for EROAD. The mandate
put forward by the Federal Motor Carrier
Safety Administration (FMCSA) for commercial
drivers to adopt and use an electronic logging
device (ELD) by December 2017 impacts not
a focus on improving fleet efficiency to better manage costs
and a continued expansion and improvement of EROAD’s
services offer to meet changing customer needs.
EROAD still has significant headroom for growth in the heavy
vehicle market. Electronic Road User Charges are quickly
becoming the market standard method of paying for Road
User Charges. Electronic RUC (eRUC) now accounts for 47%
of all heavy vehicle RUC collected in New Zealand. EROAD is
the clear leader in the heavy vehicle market, now collecting
only commercial carriers transitioning from a paper-based
methodology to electronic means of capture, it also includes
those carriers who work with older technology in their fleets
that will not accommodate the new requirements. Additionally,
those carriers who have employed legacy technology are
evaluating the market to determine whether they will opt to
upgrade or change vendors upon renewal of their contracts
to take up a better user experience and implement the new
compliance status.
06
1.0 OVERVIEW
ELD is not simply a change in compliance, it is a complete
change in the way compliance is managed within a carrier’s
business.
EROAD has self-certified and registered the first fixed in-cab,
ELD solution with the FMCSA. Fixed in-cab hardware offers
greater reliability, convenience and accuracy than app-based
phone or tablet alternatives currently available on the market.
EROAD’s additional services offered in conjunction with ELD,
such as electronic Weight Mile Tax, IFTA, fleet management
services and driver behaviour solutions help to differentiate
EROAD from its competition.
EROAD’s work with external consultants to assess the total
potential market created by the ELD mandate places the
opportunity at approximately four million vehicles. EROAD
has segmented this market and is targeting its initial efforts
on fleets that represent close to one million vehicles. These
are the vehicles and fleets whose needs most closely match
EROAD’s product offering.
To access and service these fleets, EROAD has spent the
last financial year building a sales and operational support
platform in the US to provide a scalable model to meet
expected ELD demand across North America.
In the longer term, EROAD expects to expand its market
focus beyond this initial target segment. While the December
2017 deadline for operators to adopt an ELD system is a
major focus for EROAD, this represents the first phase of
development in this market. Longer term, customers will
continue to seek reliable, future-proofed solutions like
EROAD’s, even if they have initially adopted a lower-cost app-
based solution. EROAD’s market research shows:
1. Carriers with smaller fleets, including owner-operators,
may initially opt for a simple and less expensive app-based
ELD solution, but that many of these carriers are likely to
seek additional capability and improved reliability offered
by in-cab fixed hardware like EROAD. As a result, EROAD
expects carriers switching from less robust app-based
ELDs to make up our target customers in FY19.
2. Carriers operating legacy in-cab technology have a
two-year extension to their deadline, to December 2019,
to install ELDs. These carriers are typically larger in fleet
size and will face more operational change management
aspects and will require more time for planning, training
and implementation. These carriers will make up some of
our target customers in FY19 and FY20.
Key business decision drivers among our target customers
include controlling costs, including fuel, repairs and
maintenance, and Insurance, as well as improved driver
training and retention. In the US regulation through ELD, IFTA
and WMT, when combined with an aging driver population,
are contributing to staff churn and increased costs. The
07
industry is looking to telematics to help manage costs, and
improve driver satisfaction and hence safety and retention.
Beyond the existing compliance framework, a number of
states, as well as the federal administration, are looking
at better ways to fund infrastructure maintenance and
improvement, including roads and highways. America’s
infrastructure deficit remains a major issue, and moves
like the California Road Charging Pilot are an example of
roading authorities and infrastructure owners exploring more
sustainable solutions.
EROAD’S INNOVATION
EROAD’s mission is to bravely solve transportation problems
by delivering intuitive solutions to help our customers to
succeed. Our development capability is integral to delivering
on our mission and ultimately our vision: to be number one in
every market segment in which we choose to compete.
For EROAD, helping customers to succeed means
understanding regulations and regulators to ensure our
products are legally compliant, reliable and accurate. Our
development team works alongside our customers to
understand their complex challenges and produce world-class
solutions to meet them.
EROAD has a proven track record of investing in R&D
projects which provide market leading solutions to regulatory
requirements and provide our customers with the best tools to
enhance their decision-making capability. EROAD has created:
• New Zealand’s first and leading electronic Road User
Charges solution in compliance with the New Zealand
Transport Agency’s regulations. EROAD led a transition
from paper-based RUC licences to eRUC such that nearly
50% of all RUC for heavy vehicles annually is paid and
collected electronically;
• Oregon’s only end-to-end electronic Weight Mile Tax
(WMT) solution as approved by the Oregon Department
of Transportation (ODOT);
• An electronic logging device (ELD) that complies with
the more than 600 pages of regulations contained in the
Federal Motor Carrier Safety Administration’s (FMCSA)
ELD mandate, and is easy to use for customers.
EROAD’s customer retention for the 2017 financial year has
improved to 99%. The 2017 financial year is EROAD’s fourth in
a row demonstrating its customer retention at 97% or higher,
proving that EROAD is bringing long-term, sustainable value
to our customer base.
EROAD’s recent R&D investments have been specifically
targeted to enable us to capture a portion of the ELD market.
Relative to EROAD’s R&D investment, this market is very
attractive with our ELD opening up a total potential market
1.0 OVERVIEW
estimated at US$660 million in annual revenue. Beyond ELD
and Oregon WMT we expect, in coming years, EROAD will
be able to reap the benefit of investing in our core product
platform by introducing it into new markets as states and
countries in North America move towards a weight mile tax
system to complement or replace fuel tax.
The quality and compliance of EROAD’s ELD has been proven
to the market. In order to provide our customers additional
assurance that EROAD’s ELD meets all FMCSA regulations
and to further differentiate ourselves from the competition,
we have undertaken the process of independent verification
for our ELD solution by partnering with the PIT Group, an
expert in third party transportation engineering and testing.
This approach aligns with EROAD’s customer-
centric innovation in the regulatory space. PIT
Group will announce the results of its verification
process with a full report in June 2017.
In addition to ELD, during 2017, EROAD released
a number of new services on its platform
including:
− IFTA Easy File, an enhancement to its IFTA
Electronic Tax Management solution. Easy
File reduces the time and complexity of
filing quarterly IFTA (International Fuel Tax
Agreement) returns.
− EROAD Inspect, which allows drivers to carry
out pre-and post-trip safety inspection checks
on a mobile device.
While heavy vehicles only represented 1% of the total
number of vehicles enrolled in the pilot, these vehicles
accounted for almost 10% of the total miles travelled during
the pilot by all participating vehicles (including light vehicles)
and were responsible for more than half of the associated
road wear. Engineers estimate that a fully loaded truck at
the interstate maximum legal weight of 80,000 pounds
causes more damage to a highway than between five and ten
thousand cars.
During the California pilot, the heavy vehicle participants
could also take advantage of the full range of EROAD
ancillary services including electronic IFTA, electronic
logbook, Oregon Weight Mile Tax, driver metrics, idle
Adam liked EROAD’s device so much that he upped the order
from the original two trucks to 17 in which they’re mounted on
the dashboard near the windshield.
“Every driver should be paying equally to maintain the roads.
As we get these more fuel-efficient vehicles, they use the
roads the same amount, but they’re not generating the same
tax revenue to fix the roads. The EROAD device also gives us a
lot of other information including electronic logging. We think
it’s going to be beneficial for our company.”
Adam Gallagher, Safety Director for Devine Intermodal
Participant in California Road Charge Pilot
− A unique identification system for drivers
using EROAD Driver Login - a simple, secure and intuitive
PIN-based login on Ehubo2 units that enables drivers to
identify themselves before they start driving.
− Max Speed Alert, which provides real-time speeding
notifications to help fleet managers to maintain ORS
(Operator Rating System) ratings, avoid on-road incidents
and support driver training and incentive programs.
CALIFORNIA ROAD USER CHARGE PILOT
In 2016, California passed legislation to move forward with a
Road User Charge Pilot. The scope of the pilot covered both
heavy and light vehicles. The pilot operated for nine months
and concluded on 31 March 2017. The California Department
of Transportation selected EROAD as the sole technology
provider to administer the heavy vehicle component of
the CA Road Charge Pilot program. EROAD enrolled 55
participating heavy vehicles in the pilot. Taken together the
heavy and light vehicles enrolled in the California pilot project
represented the largest road charge pilot to date in the
United States.
reporting, vehicle maintenance reporting and more for no
cost. EROAD has received great feedback from the pilot
carriers using EROAD services and are pleased to announce
that 44% of the vehicles participating in the pilot will remain
equipped with the EROAD hardware upon the conclusion of
the pilot as the motor carriers have now elected to become
EROAD customers.
Other states in the United States are currently considering
implementing a road user charge pilot program and are
considering inclusion of heavy vehicles for a full evaluation.
EROAD continues to provide subject matter expertise on
technology relevant to these pilots. EROAD’s expertise in
leveraging multiple tax and compliance solutions on a single
technology platform will likely continue to be of great interest
to future pilot projects.
08
“With the EROAD ELD, we get away from drivers having
to do paperwork. In fact, the less they have to do – like
having to remember and write it all down – is a huge plus.
We’ve seen that it’s cut down on the time in the yard
every morning.
EROAD’s ELD is simple to use. Some of our drivers are not
computer-savvy. The EROAD design with the icons have
made it so easy for them. The drivers just log in to the ELD,
do what they need to do, and boom they’re done!
The EROAD team has been helpful. We’ve been so pleased
to see that our questions are answered and they will get
back to us in a timely way. We’ve had a good experience
working with EROAD. Any suggestions we have made,
EROAD works with us to make it better, and drivers really
like seeing that happen.
It’s been valuable for us to run the ELD before it is
mandated. We have been able to experience how it works
for our business and for our drivers.”
Mike Weigel
Assistant Dispatcher, Freres Lumber Co. Inc.
09
1.0 OVERVIEW Chairman
Report
On behalf of your Board of Directors, I’m pleased to report
another productive year in EROAD’s investment to build a
global leadership position in the technology services sector
for transport.
We have made progress both on advancing our technology
platform to enable us to offer customers market leading
products and services, and on building the EROAD team
and investing in our company systems and processes to
scale for growth.
Refining our business strategy in the US was a focus
of the year, based on independent research and analysis
we commissioned from two leading firms. This has helped
guide our team’s planning and recruitment as we seek to
now support customers nationwide as we go to market with
our ELD solution, as well as other services. Your Board has
appreciated the contribution of US-based director Gregg
Dal Ponte, who joined the board this year following a
successful career in US transportation and public policy.
We are pleased with the continued strong performance of
our New Zealand business, which gives us the confidence to
invest in our global opportunities, particularly in the US. The
opportunities for continued growth both in New Zealand and
the US remain considerable.
As the company grows, we are continuing to develop our
team and operating systems. Jarred Clayton’s appointment
as Chief Operating Officer, and Jason Dale’s arrival as Chief
Financial Officer are significant appointments that strengthen
our executive leadership. Norm Ellis’ appointment in the US
brings high quality leadership to our US business and enables
CEO Steven Newman, who has spent considerable time in
the US as we re-organised that business, to resume a more
balanced travel roster between New Zealand and the US.
On behalf of the Board and all EROAD staff I would like to
acknowledge the significant contribution Sean Keane made
to EROAD and the Board during his term as an Independent
Director. Sean unfortunately resigned for personal reasons in
May 2017, having joined the Board in February 2013.
In keeping with our investment strategy, there will be no
dividend paid this year.
For those shareholders able to be in Auckland, we look
forward to seeing you at our annual meeting on 3 August
2017 by which time we will have an early indication of the
market’s response to our ELD solution in the US as well as
further progress with our strong New Zealand sales pipeline.
Yours sincerely
Michael Bushby, Chairman
10
1.0 OVERVIEW CEO
Report
This year saw the culmination of a major research and
development push to deliver our US ELD solution. My thanks
to everyone in our engineering and product teams who have
worked so hard to deliver this project on time. In the year
ahead we are likely to see more than 50% of New Zealand’s
heavy transport RUC paid and collected electronically –
a remarkable transition from what was a fully mechanical
and paper-based system just seven years ago when EROAD
launched eRUC and created the world’s first nationwide
electronic user charges system for heavy vehicles.
Our challenge now is twofold: to maintain and enhance our
New Zealand market leadership to consolidate a strong and
sustainable business at the heart of New Zealand’s transport
services ecosystem; and to manage and build our US sales
and marketing capabilities to make the most of these great
products and services so that American transport operators
can enjoy the benefits they bring, especially as we bring ELD
to market. Underpinning this effort will be further investment
in our ‘back office’ systems, led by CFO Jason Dale, to ensure
our operational capability to scale up and grow matches the
scaleability of the technology platform that our customers
know and love.
We can have confidence in our ability to achieve these
challenges. Firstly our NZ sales pipeline remains very healthy,
thanks to a strong market response to the added functionality
of our Ehubo2, in particular with respect to the health and
safety compliance services it offers. With the signing of three
major enterprise accounts at the end of the financial year,
namely Fulton Hogan, Waste Management and Downer, we
are positioned to deliver our highest ever unit growth year in
FY18. Secondly, our US business is now benefiting from the
leadership of our new President Norm Ellis, who understands
the market well, and has the benefit of the independent
research and analysis that EROAD commissioned this year
to test and guide our strategy. We now have a much clearer
idea of our target markets, how to reach them, and the kind of
sales pitch to which they will respond. Finally, Jason’s review
of EROAD’s operating systems, as well as our accounting
treatments and practices, is already yielding improvements
and helping to put the business on a surer footing for growth.
11
YEAR IN REVIEW
During the year, the company made progress building its
leadership team for the future. Jarred Clayton’s appointment
to a COO role, as well as Jason Dale’s CFO appointment,
are important steps forward for the company. Norm Ellis’s
decision to accept a position as President of EROAD’s
US business adds not only Norm’s knowledge of the US
telematics industry, but also his skills and experience as a
team builder and business leader to take our US business
forward. These three appointments have bolstered our senior
leadership capabilities.
Our team at EROAD continues to grow our sales and
marketing capability in the US and to support our ever-
growing number of customers who are also using our diverse
and sophisticated services in new ways while maintaining
our innovative R&D program. At 31 March there were 229
EROADers up 17% on last year. Our team comes from 25
countries around the world, reflecting a global community
working together towards our global ambitions.
ESTABLISHED MARKET:
NEW ZEALAND AND AUSTRALIA
It has been another strong year for our New Zealand and
Australia business. We began installing in-vehicle units in
the fleets of a number of major new enterprise customers,
including Downer and Watercare. Our pipeline for New
Zealand installs remains strong with Waste Management,
Fulton Hogan and Downer all signing to add units in FY18.
EROAD continues to collect a growing share of RUC for NZTA,
now accounting for 38% of New Zealand Heavy Vehicle RUC,
up from 34% a year ago. Our market share continues to grow
as eRUC approaches 50% of all heavy transport RUC. While
this represents strong progress it also reflects how much
opportunity remains to convince operators using paper-based
RUC and compliance systems to switch to the benefits of
eRUC and electronic compliance.
The commercial release of Ehubo2 in May 2016 was a
milestone for EROAD. It offers customers a choice of
in-vehicle devices to suit the needs of their fleet. Our first
generation Ehubo delivers electronic RUC in New Zealand
while Ehubo2 enables a wide array of additional products
and services, in many jurisdictions, on our integrated,
global platform. Not surprisingly, Kiwi customers have
been enthusiastic adopters, given Ehubo2’s capabilities to
incentivise improved driver behaviour and fleet management,
as well as being an approved electronic distance recorder
(EDR). In New Zealand, Ehubo2 has underpinned the rapid
expansion of our health and safety compliance services as
companies adapt to the 2015 legislative reform of Health and
1.0 OVERVIEW THE YEAR AHEAD
The coming year will see a focus on bringing to market our
ELD service in the US and using market interest in the FMSCA
rule to promote the benefits of our integrated solution. We
know we need to lift our sales rate in the US and are working
hard to ensure the building blocks are in place so that we can
access the opportunity created by ELD. In New Zealand and
Australia our focus will be on continuing to grow as fast as
we can, and on diversifying our service offer, especially in the
health and safety area. We expect to deliver our highest ever
unit growth year in FY18.
Our R&D demands are unlikely to be at levels of this year, but
ongoing review of our ‘back office’ systems have identified
improvements we need to make to ensure the business can
scale quickly with our customers as we grow. Improving
these operational platforms and processes will be the
focus of investment in the year ahead. Other areas of focus
are on EROAD’s connectivity with the large US transport
management systems used by our largest customers.
Improved US sales growth combined with continued strong
performance in New Zealand and Australia should deliver
improved EBITDA margins over time.
Without ever losing sight of our New Zealand home base,
2018 will see further steps to develop our international
opportunities based on our unique, integrated global platform.
Yours sincerely
Steven Newman, CEO
Safety regulations. As well as adding further value for heavy
vehicle customers, our health and safety suite of services has
broadened our offer to light vehicle fleets, including many
local authorities and other public organisations committed to
health and safety best practice.
EROAD continues to enjoy modest but steady growth in
Australia, mainly supporting trans-Tasman customers with
operations both sides of ‘The Ditch’, but also among larger
fleets looking for the security and reliability our platform
offers. It also provides future proofing as Australian states, and
the federal government, like a number of jurisdictions around
the world, look to how electronic road pricing and other
compliance measures might be used in future.
COMMERCIAL MARKET: OREGON & USA
This year saw EROAD continue to modestly grow sales
mainly in Oregon and the Northwest of the US, while
preparing for our first nationwide offer of our ELD service.
Releasing the market’s first comprehensive, in-cab compliant
ELD on time was a significant achievement for the company,
and our focus now is making the most of the commercial
opportunity this provides.
The US Department of Transportation’s Federal Motor
Carrier Safety Administration (FMCSA) rule requiring the
use of electronic logging devices (ELD) for drivers to
record their hours of service information means that an
ELD capability is essential for future service offerings in our
space. Now that our US offer includes a compliant ELD, we
can focus not only on customers exclusively seeking an ELD
solution, but more importantly on operators open to the
benefits of an integrated platform that offers not only ELD,
but also electronic Weight Mile Tax (WMT) and electronic IFTA
(International Fuel Tax Agreement) and IRP (International
Registration Plan) services, as well as sophisticated safety
compliance and fleet management.
This year we commissioned independent advice from two
leading firms to test our strategies and go-to-market plans in
the US. This enables our team, now under the able leadership
of President Norm Ellis, to target the market segments that
offer the most opportunity for EROAD, and to build a sales
structure to exploit this. We are continuing to develop both
direct and indirect sales capabilities as we grow. EROAD is
establishing its reputation among industry players, as it did
in New Zealand, for the quality of its products and services,
their ease of use, and their ability to add value to customers’
business operations. Becoming a corporate partner of the
American Trucking Associations (ATA), and participating in
the California Road Charge Pilot are good examples of the
interest in what EROAD has to offer in the US.
12
1.0 OVERVIEW CFO
Report
I was excited to join the EROAD team in late December
2016. I was attracted to the company by the significant
opportunities for continued growth both in our established
market in New Zealand where we continue to lead the
market, and our international expansion into North America,
where we are a relative newcomer, but have recently
launched what we believe to be a best-in-class solution to
address the upcoming federal ELD mandate.
Future proofing systems and processes
One of the main focuses for my first full quarter at EROAD
was on gaining a thorough understanding of the internal
capabilities of the business, including our people, systems
and processes. My initial observations were that whilst
systems and processes are functional, they have a number
of limitations that will cause strain and risk falling behind the
evolving needs of the business as we continue to grow. In
order to address this we have recently commenced a review
and redesign of our processes with the aim of creating
consistent, robust and scalable processes to handle our
future growth in all markets. We have also commenced a
significant project to replace our financial system. This is an
investment that will greatly improve our reporting, analysis
and performance management capabilities to meet the
future needs of the business.
Following some recent recruitment I am confident that we
have a strong group of talented EROADers in place to deliver
on the change initiatives that we have recently commenced
and I am encouraged by some of the early progress.
Review of amortisation method
Following a review of our accounting policies and estimates,
it was determined that it was appropriate to change the
method for amortising our development assets. Under
the previous approach the Group amortised capitalised
development costs using a per unit rate upfront at the
time of dispatch, with the rate determined based on the
number units expected to be sold over the useful life of the
relevant development assets. The change to a straight line
method of amortisation better aligns with the Group’s use
of development assets, the benefits of which are primarily
consumed by our customers over time, using a recurring
monthly hardware rental and software as a service (SaaS)
offering. The move to straight-line also provides the benefit
13
of greater certainty over the amortisation charge and better
matching of amortisation with revenue earned. The change in
accounting estimate has had an adverse impact on our result
for FY17, the total amortisation charge (non-cash) for the year
of $4.0m was $1.4m higher as a result of the change.
Funding our growth
Our long-term rental offering (bundled hardware rental and
SaaS) has continued to be very popular, with 92% of all units
rented to customers and only 8% sold. This results in strong
future contracted income and profitability for the Group.
However, the rental model requires upfront cash outflows in
order to fund both the hardware and the cost of acquiring
customers, although these initial costs are more than
recovered over time with a strong and long-term subscription
based revenue stream. Whilst this inevitably means the faster
the Company grows the higher the upfront cash requirement
on the business, once the business matures we have built a
highly cash generative business. The Group aims to fund unit
growth with debt facilities whilst continuing to use equity to
fund our market development activities
We were pleased to announce on 14 June 2017 that the
Company had accepted a credit approved facility letter of
offer from the BNZ, EROAD’s existing banking partner with
whom EROAD has a long-term relationship. The total facilities
provided under this agreement are $33.4 million, for an initial
term of 12 months from the date of drawdown.
The new debt facilities will be used to consolidate previous
debt (which will be amortised over 30 months) and to provide
growth funding, to support the financing of new units leased
to customers in New Zealand, Australia and the United
States, which will be drawn down in accordance with the
execution of new rental contracts. Funding rates are in line
with previous borrowing costs, however US based debt reflects
the underlying US base rate. We expect to have finalised the
contractual arrangements by the end of June 2017.
Jason Dale, CFO
1.0 OVERVIEW “The EROAD system has delivered many benefits for
Fulton Hogan from reducing our Road User Charges
to monitoring truck idling times to reduce fuel costs.
EROAD’s addition of driver behaviour features to help
improve driver safety made the decision to install
EROAD’s technology in more of our fleet very easy.
As a business with more than 6,700 people on our
team, it’s important we stay safe at all times.
One of our key Health and Safety policies is to, ‘Set
objectives and targets to manage, measure and
improve our performance’. EROAD makes this
measurement and management simple by interfacing
with our existing systems.”
Graham Eaton, Mechanical Engineer
Fulton Hogan
14
2.0
GOVERNANCE
15
Board of Directors
MICHAEL BUSHBY
Chairman, Member of Finance, Risk and Audit Committee
Michael is a consultant at WSP Australia and a director of Lowelly Pty Limited. Michael has
previously held roles as General Manager of the Ventia Asset and Infrastructure Services division
and CEO at the Roads and Traffic Authority in New South Wales. 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 Chairman of 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 experience 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.
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 of
Livestock Improvement Corporation. Candace joined the EROAD Board in April 2014.
STEVEN NEWMAN
Executive Director/CEO, Member of Remuneration, Talent and Nomination Committee
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
Independent Director, Member of Remuneration, Talent and Nomination Committee
Gregg joined 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.
Gregg is Director of Regulatory Compliance for the Oregon Trucking Associations, Inc.
SEAN KEANE
Formerly an Independent Director and Chair of the Finance, Risk and Audit Committee
Sean joined the EROAD board in February 2013 and resigned for personal reasons in May 2017.
During his term on the Board as an Independent Director Sean made a significant contribution both
to the Board and to EROAD.
161616
2.0 GOVERNANCE Executive Management Team
STEVEN NEWMAN
CEO / Director
(See previous page)
JARRED CLAYTON
Chief Operating Officer
Jarred oversees EROAD’s global corporate, manufacturing, and research and development
operations. He joined EROAD in 2008, bringing a wealth of international software and leadership
experience. Jarred was instrumental in building EROAD’s initial SaaS platform and has been central
to the company’s growth, holding key positions, leading high-performing teams, and supporting
EROAD’s dedication to customer success.
JASON DALE
Chief Financial Officer
Jason is responsible for EROAD’s global financial functions. He has more than 25 years’ experience
in New Zealand, Australia and North America in finance and governance roles, and is a Fellow
of Chartered Accountants Australia and New Zealand. Jason was previously CFO at Sealord
Group, PGG Wrightson, and Auckland International Airport, and Commercial Director at Fonterra
(Ingredients).
BRUCE WILSON
Chief Technology Officer
Bruce is responsible for technical leadership across product development at EROAD. Bruce provides
technical guidance to the engineering, enterprise and market development teams to support the
company’s vision to become a global leader in electronic heavy vehicle charging and the provision of
related services. Bruce has worked locally and internationally on many wireless embedded projects
for companies such as Nokia and Navman.
NORM ELLIS
President – North America
Norm joined EROAD in 2017 to lead our North American business. He has more than 30 years’
experience in the transportation and telematics sectors, in some of the largest businesses in the
US market. He was previously COO at I.D. Systems, Inc., a producer of wireless asset management
systems for the transport sector, and prior to that, led sales, services and marketing efforts at
Omnitracs for the US and Canada.
1717
2.0 GOVERNANCE TONY WARWOOD
General Manager
New Zealand
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.
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.
REBECCA MCKASKELL
Vice President
People & Capability
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 229.
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.
181818
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 and light vehicle transport
sectors. 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 the 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.
19
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.
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
except as follows: Steven Newman is an employee of
the company and substantial shareholder and Gregg Dal
Ponte is contracted to provide advisory services to the
company. As of 1 April 2017 the fees paid to Gregg Dal
Ponte under his consulting agreement with EROAD have
been lowered. Consequently, this agreement is no longer
considered a material contractual relationship.
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 2017, 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. Five meetings
of the Finance, Risk and Audit Committee were held during the
financial year ended 31 March 2017.
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. Steven Newman attended all
meetings by invitation of the members of the Committee.
The current members of the Finance, Risk and Audit
Committee are Anthony Gibson (Chairman), Michael Bushby
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, Gregg Dal Ponte and Steven Newman.
Steven Newman attended both meetings during FY 2017 by
invitation of the members of the Committee. All members
of the Remuneration, Talent and Nomination Committee are
independent directors, except Steven Newman who is an
Executive Director.
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
Gregg Dal Ponte
10
10
10
10
10
7
10
10
10
9
10
7
-
5
5
5
-
-
-
5
3
4
5
-
-
-
2
2
-
-
-
-
2
2
2
-
20
2.0 GOVERNANCE BOARD PROCESSES
The Board held 10 meetings during the year ended 31 March
2017. 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.
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 (including both
full time and part time employees) as at 31 March 2016 and 31
March 2017:
2016
2017
Women
Men Women
Men
1
2
61
4
6
137
1
2
85
5
6
149
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 2017:
Michael Bushby
Candace Kinser
Sean Keane
Anthony Gibson
Gregg Dal Ponte
Total
NZ$
76,792
49,061
49,061
49,061
36,750
260,725
The maximum total financial sum payable by the Company by
way of directors’ fees is $350,000 per annum as approved by
shareholders at the 2016 annual general meeting.
21
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 2017 of $551,499.
In addition to this fixed remuneration, Steven Newman also
received performance based at-risk components of $89,525.
Steven Newman, in his capacity as an executive director, does
not receive remuneration as a director of the company.
Gregg Dal Ponte, acting in his capacity as a consultant to the
Company, received consulting fees for the year ended 31 March
2017 of $65,365.
No director of any EROAD subsidiary receives or retains any
remuneration or other benefits in their capacity as a director of
that subsidiary.
EXECUTIVE MANAGEMENT REMUNERATION
The Remuneration, Talent and Nomination Committee is
responsible for reviewing the remuneration of the Company’s
senior employees in consultation with EROAD’s Chief
Executive Officer.
The remuneration packages of senior employees 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 senior employees 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
employees to share in the long term success of the Company
and share purchase plans intended to encourage the retention
of senior employees and increase the alignment between the
interests of management and shareholders
EMPLOYEE REMUNERATION
The Company and its subsidiaries have employees in two
countries where remuneration market levels differ. The
overseas remuneration amounts are converted into New
Zealand dollars. Of the employees noted in the table below
17% are employed by EROAD in the United States of America.
During the year, a number of employees, not being directors of
the Company and its subsidiaries, received remuneration and
other benefits that exceeded NZ$100,000 in value as follows:
2.0 GOVERNANCE NZ$
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
200,001 – 210,000
230,001 – 240,000
240,001 – 250,000
260,001 – 270,000
270,001 – 280,000
340,001 – 350,000
380,000 – 390,000
TOTAL
Number of Employees
10
17
12
8
6
1
6
6
1
2
4
1
1
1
1
1
78
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. Once each calendar year,
performance evaluations take 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.
22
2.0 GOVERNANCE 3.0
FINANCIAL
PERFORMANCE
23
Financial Review
The Group’s result reflects continued revenue growth across all markets with total revenues of $32.8m,
an increase of 25% compared to the prior years $26.2m. Total Contracted Units grew by 30% to 48,041
at 31 March 2017.
PERFORMANCE INDICATORS
50,000
40,000
30,000
20,000
10,000
-
35.0
30.0
25.0
20.0
15.0
10.0
5.0
-
60.0
50.0
40.0
30.0
20.0
10.0
-
TOTAL CONTRACTED UNITS
48,041
11,088
36,953
11,091
25,862
11,530
14,332
6,612
7,720
3,769
3,951
2012
2013
2014
2015
2016
2017
REVENUE ($Millions)
32.8
26.2
17.6
10.0
6.2
2.9
2012
2013
2014
2015
2016
2017
FUTURE CONTRACTED INCOME ($Millions)
Commercial Market
Established Market
5.9
11.5
2.7
29.9
19.5
8.7
49.8
8.2
39.8
2012
2013
2014
2015
2016
2017
Total Contracted Units is a measure that
represents Units on Depot and Units that
have been dispatched pending installation.
Total Contracted Units is a non-GAAP
measure that EROAD management uses to
track sales growth.
Future Contracted Income is a non-GAAP
measure which represents future hardware
and SaaS revenue under non-cancellable
long-term agreements for installed units.
Refer to Note 5 of the Financial Statements.
Retention Rate
2012
100%
2013
99.5%
2014
99.3%
2015
99.2%
2016
97.1%
2017
99.0%
Retention Rate is a non-GAAP measure that represents the number of Units installed at the beginning of the period and retained on Depot at the
end of the period as a percentage of the number of Units on Depot at the beginning of that period. A unit ceases to be on Depot if the contract is
terminated and the Unit is returned to EROAD.
24
3.0 FINANCIAL PERFORMANCE
FIVE YEAR SUMMARY
($'000)
Revenue
2013
2014
2015
2016
2017
6,209
9,964
17,550
26,165
32,764
EBITDA before
non-operating costs1
1,782
4,029
5,038
5,687
7,056
Depreciation
(1,684)
(2,320)
(3,560)
(5,813)
(8,086)
Amortisation
(353)
(648)
(1,140)
(1,676)
(3,992)
EBIT before
non-operating costs
(255)
1,062
338
(1,802)
(5,021)
Net financing costs
(43)
(42)
758
491
(236)
Net Profit
before listing costs
(298)
1,020
1,096
(1,311) (5,257)
Total Assets
14,812
31,595
71,310 66,835 73,062
Net Assets
1,592
11,549
51,763
50,718 45,556
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.
2017 FINANCIAL PERFORMANCE:
Revenue
Revenues of $32.8m were 25% higher than the prior year. Our
Established Market contributed $28.7m of this revenue, whilst
our Commercial Market contributed $4.1m.
Our Established Market continued to show strong and steady
growth adding 9,487 units to end the year with 41,939
Contracted Units (29% increase). Our Commercial Market of
North America added 1,601 units to end the year with 6,102
Contracted Units (36% increase). Sales in North America were
modest in FY17 due to customer uncertainty around the ELD
mandate. Total Contracted Units for the Group were 48,041 at
31 March 2017, an increase of 30% on the prior year.
Operating Expenses
Operating expenses of $25.7m were up 26% compared
to prior year which is broadly in line with the increase in
revenues. Part of the increase relates to increased costs of
providing our SaaS platform which is directly attributable to
increased volume. In addition the Group incurred significant,
but one-off, consultancy and market research costs during
the period in order to validate both the market opportunity
and our strategy in North America. We have continued to
invest in getting the right people in the right places to enable
25
us to execute on our US strategy in FY18, including the key
hire of Norm Ellis as the President of our North American
business. Moving forward we would expect operating costs to
continue to increase, but at a slower rate than revenue, thus
delivering leverage to our financial results.
Depreciation and Amortisation
Depreciation of $8.1m has increased by 39% on the prior
period. Depreciation largely relates to the depreciation of
leased hardware and lease establishment costs which have
increased due to both volume and timing of additions and
customers upgrading to our Gen2 units. Amortisation of
intangible assets of $4.0m has increased significantly on the
prior period, part of which relates to the higher capitalised
development and software assets as the group continued
to invest significantly in development activities to address
the significant opportunities in both markets. In addition,
as discussed earlier in this report the Group changed its
amortisation method during the period which resulted in a
$1.4m increase in the amortisation charge for the period.
2017
2016
Earnings Per Share - Ordinary (cents)
(8.82)
(1.84)
Earnings Per Share - Diluted (cents)
(8.81)
(1.84)
Net Tangible Assets per Security
$0.28
$0.46
2017 FINANCIAL POSITION AND CASH FLOW
Property, Plant & Equipment
Additions to Property, Plant and Equipment amounted to
$10.7m, down 12% on prior year. $10.2m of the additions
related to the increase in Leased Assets reflecting the growth
in Contracted Units. Capital expenditure of $0.5m on other
fixed assets was 68% lower than the comparative period
which included fit-out costs for our US office.
After depreciation the net increase in Property, Plant and
Equipment for the period was $2.4m.
Development Assets
The Group continued to invest significantly in research
and development activities, reaching peak levels in FY17
with $8.7m of development costs capitalised in the period,
up 8% on the prior year. A significant amount of the
investment in the year was focussed toward completing
our ELD product for the North American market, which
was launched in March 2017.
After amortisation the net increase in Development Assets
for the period was $5.4m.
3.0 FINANCIAL PERFORMANCE
Cash flow
The Groups overall cash position has decreased by $6.9m
over the period.
Cash inflows from operating activities were $6.6m an
increase of 94% on the prior year. Strong operating cash
inflows from our Established Market were partly offset by
$4m operating cash outflows in our Commercial Market and
$4m expensed research and development activities.
Cash outflows from investing activities totalled $19.9m,
$10.5m of payments for property, plant and equipment, most
of which relates to funding hardware units and related lease
establishment costs, and $9.4m relating to development and
software intangibles.
The Group had $6.3m of cash inflows from financing activities
with the $6m being drawn on our funding facilities and
a further $0.3m received from directors repaying loans
advanced to them at the time of the initial public offering.
DIVIDEND
Consistent with its dividend policy the Company does not
intend to pay a final dividend for the year ended 31 March 2017.
RESEARCH AND DEVELOPMENT
RESEARCH &
DEVELOPMENT
ASSET*
MARCH 2017
$9m
$1m
$16m
* Excludes software,
trademarks and patents
NA
NZ
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.
26
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
2727
Directors’
Responsibility Statement
In the opinion of the Directors of EROAD Limited, the consolidated financial statements
and notes, on pages 29 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 2017.
For and on behalf of the Board of Directors:
Michael Bushby
29 May 2017
Steven Newman
29 May 2017
28
3.0 FINANCIAL PERFORMANCE
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2017
Continuing operations
Revenue
Expenses
Earnings before interest, taxation, depreciation and amortisation
Depreciation
Amortisation
Earnings before interest and taxation
Finance income
Finance expense
Net financing costs
Profit/(loss) before tax
Income tax (expense)/benefit
Profit/(loss) from continuing operations
Profit/(loss) after tax for the year attributable to the shareholders
Other comprehensive income
Total comprehensive income/(loss) for the year
Earnings per share - Basic (cents)
Earnings per share - Diluted (cents)
GROUP
31 March 2017
31 March 2016
Notes
$
$
32,763,801
26,164,570
(25,707,729)
(20,477,298)
7,056,072
5,687,272
(8,085,688)
(5,812,543)
(3,991,636)
(1,676,471)
(5,021,252)
(1,801,742)
100,283
(336,358)
(236,075)
735,836
(244,959)
490,877
(5,257,327)
(1,310,865)
(16,829)
211,351
(5,274,156)
(1,099,514)
(5,274,156)
(1,099,514)
(233,688)
(47,986)
(5,507,844)
(1,147,500)
(8.82)
(8.81)
(1.84)
(1.84)
2
12
13
6
6
7
9
9
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
29
3.0 FINANCIAL PERFORMANCE • CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2017
CURRENT ASSETS
Cash and cash equivalents*
Restricted bank account*
Trade and other receivables
Finance lease receivable
Loan to directors
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
Borrowings
Deferred revenue
Total Non-Current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Share capital
Translation reserve
Retained earnings
TOTAL SHAREHOLDERS' EQUITY
GROUP
31 March 2017
31 March 2016
Notes
$
$
10
10
11
5
12
13
5
8
15
14
17
15
17
9
934,486
9,208,289
6,800,780
498,142
-
361,912
7,873,012
5,504,668
5,112,645
294,678
279,996
456,881
17,803,609
19,521,880
23,763,937
28,662,777
906,265
1,925,352
55,258,331
21,361,280
23,268,959
730,599
1,952,706
47,313,544
73,061,940
66,835,424
-
5,632,175
9,243,383
2,656,518
1,201,002
18,773,078
7,029,304
1,743,824
8,773,128
1,002,305
3,261,460
5,558,453
3,378,928
920,078
14,121,224
-
1,995,719
1,995,719
27,506,206
16,116,943
45,555,734
50,718,481
58,965,367
(343,389)
(13,066,244)
45,555,734
58,819,932
(109,701)
(7,991,750)
50,718,481
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
*Comparative period balances have been reclassified to align with current period presentation. Refer to Consolidated Statement of Cash Flows for details.
Chairman, 29 May 2017
Executive Director, 29 May 2017
30
3.0 FINANCIAL PERFORMANCE • CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2017
GROUP
Share Capital
Retained Earnings
Translation Reserve
Notes
$
$
$
Total
$
Balance at 1 April 2015
58,819,932
(6,995,241)
(61,715)
51,762,976
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
Balance at 31 March 2016
Balance as at 1 April 2016
Profit after tax for the period
Other comprehensive income
Total comprehensive Income for the period, net of tax
Equity settled share-based payments
Share capital issued
9
9
-
-
-
-
-
(1,099,514)
-
(1,099,514)
-
(47,986)
(47,986)
(1,099,514)
(47,986)
(1,147,500)
103,005
-
-
-
103,005
-
58,819,932
(7,991,750)
(109,701)
50,718,481
58,819,932
(7,991,750)
(109,701)
50,718,481
-
-
-
(5,274,156)
-
(5,274,156)
-
(233,688)
(233,688)
(5,274,156)
(233,688)
(5,507,844)
145,435
-
199,662
-
-
-
345,097
-
Balance at 31 March 2017
58,965,367
(13,066,244)
(343,389)
45,555,734
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
31
3.0 FINANCIAL PERFORMANCE • CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2017
Cash flows from operating activities*
Cash received from customers
Payments to suppliers and employees
Interest received/ (paid)
Tax paid
GROUP
31 March 2017
31 March 2016
Notes
$
$
29,722,231
22,145,020
(22,952,847)
(18,923,527)
(236,075)
490,877
94,969
(288,163)
Net cash inflow from operating activities
23
6,628,278
3,424,207
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
Loan from /(repayment) directors
Net cash outflow from financing activities
(10,488,345)
(12,035,246)
(9,385,454)
(9,129,347)
(19,873,799)
(21,164,593)
6,026,999
1,002,305
279,996
-
6,306,995
1,002,305
Net increase/(decrease) in cash held
(6,938,526)
(16,738,081)
Cash at beginning of the financial period
7,873,012
24,611,093
Closing cash and cash equivalents (net of overdrafts)
10
934,486
7,873,012
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
* In the current period, EROAD has reclassified restricted cash balances to be excluded from cash and cash equivalents. Restricted bank accounts
are now presented separately from cash and cash equivalents on the face of the Statement of Financial Position and as a result movements in
restricted bank accounts are excluded from the Statement of Cash Flows. Comparative amounts have been restated to align with the current year’s
presentation, resulting in an increase to cash flows from operations of $4,001,891 in the comparative period.
32
3.0 FINANCIAL PERFORMANCE • CONSOLIDATED FINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2017
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 transport industry.
The financial statements for the Group are for the period ended 31 March 2017.
The financial statements were authorised for issue by the directors on 29 May 2017.
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 29 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.
Comparative Figures
Where a change in presentation of the financial statements has been made during the period, comparative
statements and notes have been restated to align with current year presentation.
Change in presentation of Restricted Bank Accounts
In the current period, EROAD has reclassified restricted cash balances to be excluded from cash and cash
equivalents. Restricted bank accounts are now presented separately from cash and cash equivalents on the
face of the Statement of Financial Position and as a result movements in restricted bank accounts are excluded
from the Statement of Cash Flows. Comparative amounts have been restated to align with the current year’s
presentation.
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:
33
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 • SUMMARY OF SIGNIFICANT GROUP ACCOUNTING POLICIES (CONTINUED)
• Note 5: assessment of whether a long-term rental agreement is a finance or operating lease (also refer note
(d)).
• Note 8: recognition of deferred tax assets: availability of future taxable profit against which carry forward tax
losses can be used.
• Notes 13: impairment testing for intangible assets, key assumptions underlying recoverable amounts,
including the recoverability of development costs.
(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 purchase 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 statement of comprehensive income. 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.
34
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.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities
and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on
different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets
and liabilities will be realised simultaneously.
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 the statement of comprehensive income.
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
35
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 • SUMMARY OF SIGNIFICANT GROUP ACCOUNTING POLICIES (CONTINUED)
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.
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.
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.
36
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 • SUMMARY OF SIGNIFICANT GROUP ACCOUNTING POLICIES (CONTINUED)
(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.
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
16 - 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 statement of comprehensive income 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 statement of
comprehensive income when incurred.
Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated
impairment losses.
37
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 • SUMMARY OF SIGNIFICANT GROUP ACCOUNTING POLICIES (CONTINUED)
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.
Amortisation
Amortisation is recognised in the statement of comprehensive income on a straight line basis over the estimated
useful life of intangible asset. The estimated useful lives for the current and comparative periods are as follows:
Patents
Development Hardware & Platform
Development Products
Software
10–20 years
7–15 years
5–10 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 the statement of comprehensive income.
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.
38
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 • SUMMARY OF SIGNIFICANT GROUP ACCOUNTING POLICIES (CONTINUED)
Share-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.
(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 statement of comprehensive income.
Estimated recoverable amount of receivables carried at amortised cost are 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 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 2017, 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 2018 with early adoption permitted.
A significant majority of the Group’s revenue is lease revenue which is excluded from the scope of the standard.
Management have performed a preliminary review other revenue streams such as outright hardware sales and
monthly Software as a Service Fees and do not believe that pattern of revenue recognition will change significantly
under the new standard.
39
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 • SUMMARY OF SIGNIFICANT GROUP ACCOUNTING POLICIES (CONTINUED)
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. Management does not expect a significant change to the way in which the Group
measures its financial statements as a result, but has not yet performed a full assessment.
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. At 31 March 2017, the Group had non-cancellable operating lease commitments of $3.2m, however the Group has
not yet performed a full assessment as to what extent these commitments will result in the recognition of an asset
and a liability for future payments and how this will affect the Group’s financial statements. The Group leases its
hardware units on long-term rental agreements, as lessor is substantially the same under the new standard we do
not anticipate a significant change to the way we account for such arrangements.
There are a number of other new or amended standards that are effective for annual period beginning on or after
1 April 2017 that are not expected to have a significant impact on the Group’s consolidated financial statements.
NOTE 2 • EXPENSES
Personnel expenses
Administrative and other operating expenses
Auditor's remuneration - KPMG
Tax compliance services - KPMG
Tax advisory services - KPMG
Health & Safety and IT Advisory - KPMG
Operating lease expense
Directors fees
GROUP
2017
Notes
$
2016
$
4
11,182,925
9,040,428
8,897,960
6,594,544
169,125
114,622
19,312
93,124
145,000
140,315
-
52,672
16
24
987,708
964,843
260,725
223,975
During the year the costs expensed in Research and Development was $3,974,137 (2016: $3,535,466).
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.
40
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 (loss)
before tax, which is the measure reported to the chief operating decision maker.
Development Markets
Commercial Markets
Established Markets
2017
$
2016
$
2017
$
2016
$
2017
$
2016
$
Revenue ₁
-
-
4,080,434
2,176,606
35,632,591
25,873,395
Net profit (loss) before taxation
(3,974,137)
(3,535,466)
(4,900,066)
(4,035,980)
3,666,839
6,721,587
Total assets
Depreciation
Amortisation
271,268
-
-
-
-
-
5,007,590
4,668,683
72,394,933
66,869,139
(1,038,134)
(767,405)
(7,220,885)
(5,209,657)
-
-
(3,991,636)
(1,676,471)
₁ Revenue from Established Markets includes R&D Grant Income of $845,813 (2016: $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
Total profit before tax for reportable segments
Profit before tax for other segments
Elimination of inter-segment profit
Consolidated net profit (loss) before taxation
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
41
2017
$
2016
$
39,713,025
28,050,001
(6,949,224)
(1,885,431)
32,763,801
26,164,570
(5,207,364)
(849,859)
-
-
(49,963)
(461,006)
(5,257,327)
(1,310,865)
(8,259,019)
(5,977,062)
173,331
164,519
(8,085,688)
(5,812,543)
77,673,792
71,537,822
-
-
(4,611,852)
(4,702,398)
73,061,940
66,835,424
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 capitalised lease establishment costs
Annual leave
Performance bonus
Share-based payments
Salaries and wages capitalised
Total personnel expenses
GROUP
2017
$
2016
$
28,261,731
23,442,964
4,080,434
2,176,606
421,636
545,000
32,763,801
26,164,570
49,940,994
42,120,404
3,104,861
2,906,581
287,124
333,853
53,332,979
45,360,838
GROUP
2017
$
2016
$
16,979,730
15,751,116
285,786
167,106
1,039,370
686,424
345,097
103,005
(7,467,058)
(7,667,223)
11,182,925
9,040,428
42
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
2017
$
2016
$
10,791,554
8,185,884
10,346,171
8,062,245
-
-
21,137,725
16,248,129
During the period $26,316,354 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 (2016:
$20,776,453).
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
2017
$
2016
$
2017
$
2016
$
2017
$
2016
$
Not later than one year
542,355
329,811
44,213
35,133
498,142
294,678
Later than one year not later
than five years
944,988
770,354
38,723
39,755
906,265
730,599
Later than five years
-
-
-
-
-
-
1,487,343
1,100,165
82,936
74,888
1,404,407
1,025,277
During the period $789,749 (2016: $926,965) was recognised as revenue in the statement of comprehensive
income in relation to long-term rentals accounted for as finance leases. The net impact of finance leases
recognised in the statement of comprehensive income was $673,548 (2016: $727,984)
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
2017 is $58,538,888 (2016: $48,010,715). The Group expects the profile of future recognition of this income to be
consistent with the profile of the future minimum lease payments for the hardware element of this income which
is outlined above for operating leases.
43
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
Foreign exchange losses
Net financing costs
NOTE 7 • INCOME TAX EXPENSE
(a) Reconciliation of effective tax rate
Profit/(Loss) before income tax
GROUP
2017
$
2016
$
100,283
649,419
-
86,417
100,283
735,836
(200,775)
(2,285)
(135,583)
(242,674)
(336,358)
(244,959)
(236,075)
490,877
GROUP
2017
$
2016
$
(5,257,327)
(1,310,865)
Income tax using the Company's domestic tax rate of 28%
(1,472,051)
(367,043)
Non-deductible expense/(non-assessable income)
35,978
79,472
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
At 31 March 2017 there were no imputation credits available to shareholders (2016: Nil)
1,442,356
10,546
71,297
4,923
16,829
(211,351)
-
-
-
-
16,829
16,829
(211,351)
(211,351)
44
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
2017
$
2016
$
6,856,761
4,961,509
(400,099)
125,688
(2,947,973)
(1,915,689)
340,619
232,840
126,384
70,479
(2,050,340)
(1,522,121)
1,925,352
1,952,706
The movement in temporary differences has been recognised in profit or loss. Deferred tax assets have been
recognised at a rate of either 28% or 35% at which they are expected to be realised.
Movement in temporary differences during the period:
Balance
31 March 17
Recognised
in profit
or loss
Under/(over)
from prior
periods
Currency
Translation
Balance
31 March 16
Movement
in Period
Balance
31 March 15
GROUP
$
$
$
$
$
$
$
Tax loss carry forward
6,856,761
1,580,074
311,766
3,412
4,961,509
3,095,304
1,866,205
Property, plant and
equipment
Deferred development
expenditure
Provisions and
accruals
Equity-settled share-
based payments
(400,099)
(174,505)
(334,461)
(16,821)
125,688
149,976
(24,288)
(2,947,973)
(1,032,284)
-
-
(1,915,689)
(1,588,808)
(326,881)
340,619
80,182
27,147
450
232,840
43,558
189,282
126,384
55,905
-
-
70,479
28,841
41,638
Revenue recognition
(2,050,340)
(498,472)
(32,181)
2,434
(1,522,121)
(1,425,919)
(96,202)
Total
1,925,352
10,900
(27,729)
(10,525)
1,952,706
302,952
1,649,754
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 of the New Zealand Group. Determining the extent to which losses will be utilised requires
judgement.
The Group has $5,342,575 of tax losses for which no deferred tax asset was recognised (2016: Nil). These tax
losses do not have an expiry date.
45
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.
GROUP
At 31 March 2015
Number of
ordinary shares
Issue price
$
Issued Capital
$
60,000,000
58,819,932
Issue of shares to staff under LTI/LTS schemes
168,864
$3.64
Held in trust as treasury stock
614,378
(614,378)
At 31 March 2016
60,168,864
58,819,932
Issue of shares to staff under LTI/LTS schemes
76,796
$2.83
Held in trust as treasury stock
217,678
(72,243)
At 31 March 2017
60,245,660
58,965,367
At 31 March 2017 there was 60,245,660 authorised and issued ordinary shares (2016: 60,168,864). 416,783 (2016:
391,296) 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 2017 was based on the profit attributable
to ordinary shareholders of ($5,274,156) (2016: ($1,099,514)). The weighted number of ordinary shares was
59,777,568 (2016: 59,777,568) for basic earnings per share and 59,854,159 for diluted earnings per share (2016:
59,777,568).
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.
NOTE 10 • CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
Cash and bank
GROUP
2017
$
2016
$
934,486
7,873,012
934,486
7,873,012
In the current period, EROAD has reclassified restricted cash balances to be excluded from cash and cash equivalents.
Restricted bank accounts are now presented separately from cash and cash equivalents on the face of the Statement of
Financial Position and as a result movements in restricted bank accounts are excluded from the Statement of Cash Flows.
Comparative amounts have been restated to align with the current year’s presentation. The restricted bank relates to Road
Users tax collected from clients due for payment to the appropriate government agency.
46
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 • TRADE AND OTHER RECEIVABLES
Trade receivables
Provision for doubtful debts
Prepayments and other receivables
GROUP
2017
$
2016
$
3,484,027
2,319,312
(21,634)
(18,684)
3,462,393
2,300,628
3,338,387
2,812,017
6,800,780
5,112,645
(a) Credit risk
The ageing of the Group’s Trade receivables at the reporting date was as follows:
GROUP
Not past due
Past due 1-30 days
Past due 31-60 days
Past due over 61 days
Gross
2017
$
2,270,080
704,548
229,225
280,174
3,484,027
Allowance for
doubtful debts
2017
$
(167)
(773)
(773)
(19,921)
(21,634)
Gross
2016
$
1,266,487
796,959
102,126
153,740
2,319,312
NOTE 12 • PROPERTY, PLANT AND EQUIPMENT
Leased
equipment
Plant and
equipment
Leasehold
improvements
Motor
vehicles
Office
equipment
Computers
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
47
Allowance for
doubtful debts
2016
$
(51)
(2,086)
(2,207)
(14,340)
(18,684)
Total
$
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 • PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Leased
equipment
Plant and
equipment
Leasehold
improvements
Motor
vehicles
Office
equipment
Computers
Total
GROUP
$
$
$
$
$
$
$
Year ended 31 March 2017
Opening net book
amount
Additions
Disposals
18,735,454
90,216
725,706
489,273
548,215
772,416
21,361,280
10,195,049
-
71,192
-
3,559
123,608
101,391
172,861
10,667,660
-
(90,627)
(24,736)
-
(115,363)
Depreciation charge
(7,136,241)
(33,210)
(132,703)
(142,712)
(184,719)
(456,103)
(8,085,688)
Depreciation
recovered
Effect of movement
in exchange rates
Closing net book
amount
Cost
Accumulated
depreciation
-
(75,286)
-
-
-
34,919
6,238
-
41,157
(17,415)
(313)
(8,231)
(3,864)
(105,109)
21,718,976
128,198
579,147
414,148
438,158
485,310
23,763,937
40,607,259
347,920
1,105,111
806,152
937,004
2,525,003
46,328,449
(18,888,283)
(219,722)
(525,964)
(392,004)
(498,846)
(2,039,693)
(22,564,512)
Net book amount
21,718,976
128,198
579,147
414,148
438,158
485,310
23,763,937
Included in the Leased equipment is equipment under construction to be leased of $4,711,866 (2016: $4,243,191).
Change in estimates
During the period the Group conducted a review of the expected useful life of its leased equipment. The Group
determined that hardware assets (excluding Tubo’s) were generally lasting two standard 36-month cycles, and
therefore the expected useful life of the equipment was increased from 5 years to 6 years. Conversely the Group
determined that the expected useful life of trailer units (Tubo’s) should be reduced from 5 years to 3 years.
Unlike other hardware assets which are generally installed in-cab, Tubo’s are installed externally and subject to
greater wear and tear. The change in estimate was approved by the Directors in March 2017 and will be applied
prospectively, as a result there was no material impact on the current periods results.
48
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 • INTANGIBLE ASSETS
GROUP
$
$
$
$
Patents
Trade Marks
Development
Software
Total
$
Year ended 31 March 2016
Opening net book amount
Additions
Amortisation charge
Closing net book amount
Cost
Accumulated amortisation
Net book amount
15,351
-
(350)
15,001
17,800
(2,799)
15,001
32,576
13,984,074
1,784,082
15,816,083
-
-
7,997,846
(1,156,871)
1,131,501
9,129,347
(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
GROUP
$
$
$
$
Patents
Trade Marks
Development
Software
Total
$
Year ended 31 March 2017
Opening net book amount
Additions
Amortisation charge
Closing net book amount
Cost
Accumulated amortisation
Net book amount
15,001
-
(350)
14,651
17,800
(3,149)
14,651
32,576
20,825,049
2,396,333
23,268,959
-
-
8,655,609
729,845
9,385,454
(3,283,232)
(708,054)
(3,991,636)
32,576
26,197,426
2,418,124
28,662,777
32,576
32,685,614
4,006,859
36,742,849
-
(6,488,188)
(1,588,735)
(8,080,072)
32,576
26,197,426
2,418,124
28,662,777
Change in estimates
Following the annual review of intangible asset amortisation methods and expected useful lives, the Group
deemed it was appropriate to change the method and expected useful life of Development assets. The previous
amortisation policy was for an upfront per-unit amortisation charge to be recognised in the statement of
comprehensive income in the period hardware units were first dispatched to customers. The Group has changed
this estimate to a straight-line method of amortisation to better reflect the rental and subscription nature of our
business. As a result of the review the expected useful life of development assets were also amended to be 5 to 15
years (previously 5 to 7 years). The impact of these changes resulted in a $1,399,391 increase to the amortisation
charge recognised in the statement of comprehensive income in the current period.
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.
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).
49
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 13 • INTANGIBLE ASSETS (CONTINUED)
Recoverability of development costs
Included in the carrying amount of development costs at 31 March 2017 is an amount of $13,770,509 relating to
our North American CGU. Management note unit sales within the North American CGU were lower than originally
expected due to uncertainty in the market in relation to the ELD mandate, as a result management has carried
out an impairment test.
The recoverable amount of the North American CGU that these corporate assets relate to was estimated based
on the present value of future cash flows expected to be derived from the CGU (value in use). Key assumptions
included forecasted cash flow growth, a pre-tax discount rate of 15% and a terminal growth rate of 1.5%. The
recoverable amount of the CGU was estimated to be higher than its carrying value and no impairment was required.
NOTE 14 • TRADE PAYABLES AND ACCRUALS
Trade creditors
Sundry accruals
NOTE 15 • BORROWINGS
Current borrowings
Secured bank loan
Non-Current borrowings
Secured bank loan
GROUP
2017
$
2016
$
1,658,383
1,277,086
3,973,792
1,984,374
5,632,175
3,261,460
GROUP
2017
$
2016
$
-
1,002,305
7,029,304
-
7,029,304
1,002,305
During the year ended 31 March 2017, the Company increased the size of its Committed Cash Advance Facility
from $10,000,000 to $15,000,000 of which $7,029,304 was drawn at 31 March 2017 (2016: $1,002,305). There is a
covenant that requires net cash plus available limit to exceed $5,000,000 at all times, which in effect restricts the
accessible facility to $10,000,000.
Each drawdown has a maximum 365 day term and the facility itself has an end date of 31 July 2018. The interest
rate is variable based on the banks CCAF Prime Rate on the date of each individual drawdown plus a margin of
1.75%. The facility is secured by the present value of all present and after acquired property of EROAD Limited
including the value of its long-term rental agreements. The Company has the ability to re-draw amounts until the
end of the term of the facility, as a result the loan has been classified as non-current.
EROAD Limited also has an overdraft of a $1,000,000 facility of which $873 has been drawn at 31 March 2017
(2016: 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.
50
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 • BORROWINGS (CONTINUED)
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 2017.
The Group has positive operating cash flows which funds the day-to-day servicing and support of its existing
customer base. The Group plans to fund future research and development spend with excess operating cash
flows of the business, whilst looking to fund the capex needed for future growth in leased units with additional
debt funding facilities. The additional debt facilities will fund the capex based on the increased future contracted
income the Group will secure when entering into new long-term rental agreements.
Terms and debt repayment schedule
Nominal
Interest
Year of
Maturity
2017
Face
Value
$
2017
Carrying
amount
$
2016
Face
Value
$
2016
Carrying
Amount
$
GROUP
Secured bank loan
5.30%
2018
7,029,304
7,029,304
1,002,305
1,002,305
7,029,304
7,029,304
1,002,305
1,002,305
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
2017
$
2016
$
903,871
899,783
2,076,278
2,625,674
239,009
608,901
3,219,158
4,134,358
987,708
964,843
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 $583,116.
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 prepayments of operating lease revenue, these amounts
are initially deferred and recognised in the statement of comprehensive income over the life of the rental
agreement.
51
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17 • DEFERRED REVENUE (CONTINUED)
Opening balance
Amounts deferred during the period
Amount recognised in the Statement of Comprehensive Income
GROUP
2017
$
2016
$
5,374,647
7,395,392
2,866,842
3,107,355
(3,841,147)
(5,128,100)
4,400,342
5,374,647
At 31 March 2017, $2,656,518 is expected to be recognised in the statement of comprehensive income in the next
financial period and has been classified as current in the balance sheet (2016: $3,378,928).
NOTE 18 • FINANCIAL RISK MANAGEMENT
The 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 note 1.
The Group holds the following financial instruments:
GROUP
Financial assets
Cash and cash equivalents
Restricted bank account
Trade receivables
Other receivables
Finance Lease receivables
Financial liabilities
Borrowings
Employee entitlements
Trade and other payables
Payable to NZTA
2017
2016
$
$
$
$
Loans and
receivables
Other
amortised cost
Loans and
receivables
Other
amortised cost
934,486
9,208,289
3,484,027
193,926
1,404,407
15,225,135
-
-
-
-
-
-
7,873,012
5,504,668
2,319,312
250,986
1,025,277
16,973,255
-
-
-
-
-
-
-
-
-
-
-
-
7,029,304
1,201,002
5,632,175
9,243,383
23,105,864
-
-
-
-
-
1,002,305
920,078
3,261,460
5,558,453
10,742,296
52
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 • FINANCIAL RISK MANAGEMENT (CONTINUED)
(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 or 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.
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:
1 year or less
Over
1 to 5 years
Over
5 years
GROUP 2017
Non-derivative financial liabilities
Borrowings
Employee entitlements
Trade and other payables
Payable to NZTA
$
-
$
7,029,304
1,201,002
5,632,175
9,243,383
-
-
-
16,076,560
7,029,304
$
-
-
-
-
-
Total
contractual
cash flows
Carrying
amount of
liabilities
$
$
7,029,304
7,029,304
1,201,002
1,201,002
5,632,175
5,632,175
9,243,383
9,243,383
23,105,864
23,105,864
53
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 • FINANCIAL RISK MANAGEMENT (CONTINUED)
GROUP 2016
Non-derivative financial liabilities
Borrowings
Employee entitlements
Trade and other payables
Payable to NZTA
1 year or less
$
1,002,305
920,078
3,261,460
5,558,453
10,742,296
Over
1 to 5 years
Over
5 years
$
-
-
-
-
-
$
-
-
-
-
-
Total
contractual
cash flows
Carrying
amount of
liabilities
$
$
1,002,305
1,002,305
920,078
920,078
3,261,460
3,261,460
5,558,453
5,558,453
10,742,296
10,742,296
(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
2017
2016
$
0.93
0.71
$
0.90
0.69
The Group’s exposure to foreign currency risk at the reporting date was as follows (all amounts are denominated
in New Zealand Dollars):
2017
Cash and cash equivalents
Trade receivables
2016
Cash and cash equivalents
Trade receivables
AUD
USD
$
$
188,363
132,039
34,189
316,526
AUD
USD
$
$
45,399
1,293,415
28,409
217,475
54
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
2017
2016
Carrying
amount
Carrying
amount
%
$
%
$
5.30
7,029,304
4.95 1,002,305
7,029,304
1,002,305
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 2017
$
$
$
$
$
$
$
$
Cash and cash equivalents
(9,375)
(9,375)
9,375
9,375
(9,345)
(9,345)
9,345
9,345
Trade receivables
(22,473)
(22,473)
22,473
22,473
-
-
-
-
Borrowings
-
-
-
-
70,293
70,293
(70,293)
(70,293)
Total increase/ (decrease)
(31,848)
(31,848)
31,848
31,848
60,949
60,949 (60,949)
(60,949)
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
Trade receivables
(15,006)
(15,006)
15,006
15,006
-
-
-
-
Borrowings
-
-
-
-
10,023
10,023
(10,023)
(10,023)
Total increase/ (decrease)
(104,686)
(104,686)
104,686
104,686
(123,754)
(123,754)
123,754
123,754
(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.
55
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 18 • FINANCIAL RISK MANAGEMENT (CONTINUED)
(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.
NOTE 19 • SHARE-BASED PAYMENTS
At 31 March 2017, the Group had the following share-based payment arrangements:
EROAD LTI Plan (equity-settled)
Eligible employees are invited to purchase EROAD shares under the EROAD LTI plan. 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.
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 disclosed in the table below.
EROAD LTS Plan (equity-settled)
During the period EROAD granted shares to certain senior executives in recognition of their long-term service to
the Company. Shares issued under the scheme are held in trust for the employee until vesting date. Provided the
employees were still employed by EROAD at 31 March 2017, 47% of the shares granted under the scheme will be
transferred from the trust to the employee on 1 June 2017. Provided the employees were still employed by EROAD
at 31 March 2018, 53% of the shares granted under the scheme will be transferred from the trust to the employee
on 1 June 2018.
If the employee leaves between 1 April 2016 and 31 March 2018, there is a good-leaver clause that may result in
the shares vesting to the employee, provided that the “”good leaver”” criteria is met. Due to this clause the full fair
value of shares granted to employees under this scheme has been recognised in the statement of comprehensive
income in the year ended 31 March 2017.
56
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 19 • SHARE-BASED PAYMENTS (CONTINUED)
Grant date/
employees entitled
Shares
granted
Vesting
conditions
Vesting
period
2014
2015
2016
Shares granted to
key management
personnel
EROAD LTI Plan
51,171
69,896
53,725
• 3 years service from grant date
3 years
EROAD LTS Plan
-
-
76,796
• Employees performance equal or greater
than the Company’s as determined by
remuneration committee
• Enterprise value must double by end of
restrictive period
• Must be continue to be employed on 31 March
2017 (47% of shares granted) and 31 March
2018 (53% of shares granted) or meet “good
leaver” criteria.
1-2 years
Shares granted to
other employees
EROAD LTI Plan
171,261
98,968
121,032
• 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
222,432
168,864
251,553
Measurement of fair value
The fair value of the shares issued under the EROAD LTI and EROAD LTS plans during the year ended 31 March
2017 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 EROAD LTI scheme to reflect the non-vesting market
condition.
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
Vested during the period
Outstanding at 31 March
GROUP
2017
2016
221,027
251,553
(33,103)
(51,309)
388,168
214,726
168,864
(162,563)
-
221,027
During the year-ended 31 March 2017 an amount of $345,097 (2016: $103,005) was recognised as an expense
within the statement of comprehensive income in relation to share-based payments.
57
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS NOTE 20 • CAPITAL COMMITMENTS
There are no capital expenditure commitments as at 31 March 2017 (2016: Nil).
NOTE 21 • CONTINGENT LIABILITIES
There are no contingent liabilities to report at 31 March 2017 (2016: 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 (2016: 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 trade payables and accruals
Net cash from operating activities
NOTE 24 • RELATED PARTY TRANSACTIONS
The subsidiaries of the Company are:
GROUP
2017
$
2016
$
(5,274,157)
(1,099,514)
27,355
(211,351)
12,077,324
7,489,014
111,409
12,216,088
(36,582)
7,241,081
(1,688,135)
(1,283,894)
(379,130)
94,969
(714,911)
(288,163)
(974,305)
(2,020,745)
2,632,948
1,590,353
(313,653)
(2,717,360)
6,628,278
3,424,207
Company
Country of Incorporation
Interest %
Principal activity
EROAD Financial Services Ltd
New Zealand
EROAD LTI Trustee Limited
New Zealand
EROAD (Australia) Pty Limited
Australia
EROAD Inc
United States of America
100
100
100
100
Financing activities within group
LTI Scheme Trustee
Transport Technology & SaaS
Transport Technology & SaaS
Key management personnel compensation comprised:
Short-term employee benefits
Share-based payments
(a) Loans to key management personnel
There have been no loans to management personnel.
2017
$
2016
$
2,118,780
2,179,797
71,040
45,079
2,189,820
2,224,876
58
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 24 • RELATED PARTY TRANSACTIONS (CONTINUED)
(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 (Chair)
Anthony Gibson
Sean Keane
Candace Kinser
Gregg Dal Ponte
2017
2016
$
$
76,792
76,792
49,061
49,061
49,061
49,061
49,061
49,061
36,750
-
260,725
223,975
The following additional fees were paid to certain Directors for additional consultancy work provided to the Company:
Gregg Dal Ponte
2017
2016
$
$
65,365
65,365
-
-
(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 were secured, interest free and repayable upon the earlier of two years from the drawndown date or the
date on which a Director ceases to hold any shares. In accordance with the loan agreements, all loans were repaid
in full during the year ended 31 March 2017.
Michael Bushby (Chair)
Anthony Gibson
Sean Keane
Candace Kinser
(e) Remuneration of Executive Director
Salary and bonus
Share-based payments
59
2017
2016
$
$
-
-
-
-
69,999
69,999
69,999
69,999
-
279,996
2017
2016
$
$
641,024
622,572
35,440
35,440
676,464
658,012
3.0 FINANCIAL PERFORMANCE • NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.0 FINANCIAL PERFORMANCE • INDEPENDENT AUDITOR’S REPORT
Independent
Independent
Auditor’s Report
Auditor’s Report
To the shareholders of EROAD Limited
To the shareholders of EROAD Limited
Report on the consolidated financial statements
Report on the consolidated financial statements
Opinion
Opinion
In our opinion, the accompanying consolidated
financial statements of EROAD Limited (the
In our opinion, the accompanying consolidated
company) and its subsidiaries (the Group) on pages
financial statements of EROAD Limited (the
29 to 59:
company) and its subsidiaries (the Group) on pages
29 to 59:
i. present fairly in all material respects the
i. present fairly in all material respects the
Group’s financial position as at 31 March 2017
and its financial performance and cash flows for
Group’s financial position as at 31 March 2017
the year ended on that date; and
and its financial performance and cash flows for
the year ended on that date; and
ii. comply with New Zealand Equivalents to
International Financial Reporting Standards.
ii. comply with New Zealand Equivalents to
International Financial Reporting Standards.
We have audited the accompanying consolidated
financial statements which comprise:
We have audited the accompanying consolidated
financial statements which comprise:
— the consolidated statement of financial
position as at 31 March 2017;
— the consolidated statement of financial
position as at 31 March 2017;
— the consolidated statement of comprehensive
income, statement of changes in equity and
— the consolidated statement of comprehensive
statement of cash flows for the year then
income, statement of changes in equity and
ended; and
statement of cash flows for the year then
ended; and
— notes, including a summary of significant
accounting policies and other explanatory
— notes, including a summary of significant
information.
accounting policies and other explanatory
information.
Basis for opinion
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (“ISAs (NZ)”).
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (“ISAs (NZ)”).
opinion.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised) Code of
Ethics for Assurance Practitioners issued by the New Zealand Auditing and Assurance Standards Board and the
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised) Code of
International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA
Ethics for Assurance Practitioners issued by the New Zealand Auditing and Assurance Standards Board and the
Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements and the
International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA
IESBA Code.
Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements and the
IESBA Code.
Our responsibilities under ISAs (NZ) are further described in the Auditor’s Responsibilities for the Audit of the
consolidated financial statements section of our report.
Our responsibilities under ISAs (NZ) are further described in the Auditor’s Responsibilities for the Audit of the
consolidated financial statements section of our report.
Our firm has also provided other services to the group in relation to tax compliance, tax advisory, health and
safety and IT advisory. Subject to certain restrictions, partners and employees of our firm may also deal with
Our firm has also provided other services to the group in relation to tax compliance, tax advisory, health and
the Group on normal terms within the ordinary course of trading activities of the business of the Group. These
safety and IT advisory. Subject to certain restrictions, partners and employees of our firm may also deal with
matters have not impaired our independence as auditor of the Group. The firm has no other relationship with,
the Group on normal terms within the ordinary course of trading activities of the business of the Group. These
or interest in, the Group.
matters have not impaired our independence as auditor of the Group. The firm has no other relationship with,
or interest in, the Group.
© 2017 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity.
© 2017 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss
entity.
60
3.0 FINANCIAL PERFORMANCE • INDEPENDENT AUDITOR’S REPORT
Scoping
The scope of our audit is designed to ensure that we perform adequate work to be able to give an opinion on
the consolidated financial statements as a whole, taking into account the structure of the Group, the financial
reporting systems, processes and controls, and the industry in which it operates.
The context for our audit is set by the Group's major activities in the financial year ended 31 March 2017.
Materiality
The scope of our audit was influenced by our application of materiality. Materiality helped us to determine
the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both
individually and on the consolidated financial statements as a whole. The materiality for the consolidated
financial statements as a whole was set at $327,000 determined with reference to a benchmark of Group total
revenues. We chose the benchmark because, in our view, this is a key measure of the Group’s performance.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the consolidated financial statements in the current period. We summarise below those matters and
our key audit procedures to address those matters in order that the shareholders as a body may better
understand the process by which we arrived at our audit opinion. Our procedures were undertaken in the
context of and solely for the purpose of our statutory audit opinion on the consolidated financial statements as
a whole and we do not express discrete opinions on separate elements of the consolidated financial
statements.
The key audit matter
How the matter was addressed in our audit
Development asset capitalisation and impairment ($26.2m)
Refer to note 13 of the consolidated financial
statements.
The Group has reported a development asset of
$26.2m (2016: $20.8m). We have focussed on this
development asset due to the inherent judgement
involved in its valuation.
The Group has continued to scale its existing
software for large customer volumes and
developed proprietary software applications for
specific use in a number of markets. This
significant investment requires judgement as to
whether the largely internal costs should be
expensed or capitalised.
The Group expects to secure significant volumes
of new customer contracts, in particular, in the
US. This will require significant capital
expenditure to manufacture the volume of in-
vehicle hardware units to support this forecasted
demand. A critical factor in assessing the
development asset valuation is the Group’s ability
Our procedures included the following:
— Understanding the nature and background of the
activities that are capitalised to the development
asset;
— Assessing whether the costs capitalised during the
year comply with the accounting framework;
— Inquiring of the key financial, legal, and engineering
personnel to confirm the development projects
capitalised are consistent with our understanding of
the business strategy; and
— Consideration of the appropriateness of useful life
and amortisation model applied.
We assessed management’s impairment testing of the
development asset by obtaining the supporting model
and assessing the methodology and key assumptions
made:
— Future cash flow forecasts: we evaluated the
Directors’ future cash flow forecasts including a
61
2
3.0 FINANCIAL PERFORMANCE • INDEPENDENT AUDITOR’S REPORT
The key audit matter
How the matter was addressed in our audit
to fund this capital expenditure and therefore,
secure the opportunity in the US.
review of management’s North American 2018
budget. We tested the underlying values used in the
calculations by comparing the Directors’ forecast to
the latest three year strategic plan. Furthermore,
where appropriate, we benchmarked key inputs to
historical actuals;
— Discount rates: for assessing the discount rates used
by the Directors, we used a range of acceptable
discount rates, which is based on our view of various
economic indicators;
— Long term growth rates: we compared the rates
applied by management to published rates;
— We challenged the key assumptions by performing
sensitivity analysis in order to ascertain the extent
of change in those assumptions required to result in
an impairment of the development assets;
— We reviewed the external advice management has
obtained in respect of the market strategy to be
adopted in the US and held discussions with the
Directors to confirm our understanding of the
Group’s strategy; and
— We reconfirmed our understanding of the US
telematics industry and country specific regulation
obtained during our visits to the EROAD Oregon
operations in previous years through interviews held
with relevant members of the US management
team.
Revenue ($32.8m)
The Group’s revenue consists of only a few
revenue streams out of which the most significant
is leasing revenue.
Leasing revenue is revenue derived from renting
the in-vehicle hardware units to customers. These
contracts span more than one accounting period
(typically three years). The majority of revenue in
respect of the hardware rental is treated as
operating lease revenue and is recorded evenly,
each month, over the contractual term.
The determination of a contract as an operating
lease is dependent on multiple factors. These
factors determine whether the Group receives the
economic benefit of the hardware. A key factor in
this determination is management’s assessment of
the working life of the in-vehicle hardware units,
which are at least six years for eHubo’s. When
comparing the six year life to the three year
contract term, operating lease classification is
appropriate.
Our procedures included the following:
— Assessing the Group’s operating lease revenue
recognition policy for compliance with the relevant
accounting framework;
— Reviewing any changes or new contractual terms
and conditions entered into with customers during
the period, and consideration of the potential
impact on revenue recognition applied in the
period;
— Assessing the appropriateness of the 6 year useful
life applied to the eHubo units by examining the
physical historical performance and time the units
have operated for;
— Selection of a sample of revenue contracts
operating during the year and agreeing the sample
back to the contract terms, assessing the revenue
recognition based on the contractual terms and
62
3
3.0 FINANCIAL PERFORMANCE • INDEPENDENT AUDITOR’S REPORT
The key audit matter
How the matter was addressed in our audit
We focused on this area because there are
currently more than forty eight thousand
hardware units contracted of which the majority
are treated as operating leases.
agreeing the revenue to cash received from the
customer;
— Checking a sample of new customer installations
and transactions immediately prior to and after year
end to confirm revenue has been recognised in their
respective financial years.
Other Information
The Directors, on behalf of the Group, are responsible for the other information included in the entity’s
Annual Report. Other information includes the Directors Declaration and the other information included in the
Annual Report. Our opinion on the financial statements does not cover any other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to read the other information,
once received, and, in doing so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the audit or otherwise appears materially misstated. If,
based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have received the Directors Declaration and have nothing
to report in regards to it. The Annual Report is expected to be made available to us after the date of this
Independent Auditor's Report and we will report the matters identified, if any, to the Directors.
Use of this Independent Auditor’s Report
This report is made solely to the shareholders as a body. Our audit work has been undertaken so that we might
state to the shareholders those matters we are required to state to them in the Independent 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 shareholders as a body for our audit work, this report, or any of the opinions we have
formed.
Responsibilities of the Directors for the consolidated financial
statements
The Directors, on behalf of the Group, are responsible 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;
— implementing necessary internal control to enable the preparation of a consolidated set of financial
statements that is fairly presented and free from material misstatement, whether due to fraud or error;
and
— assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting unless they either intend to
liquidate or to cease operations, or have no realistic alternative but to do so.
63
4
3.0 FINANCIAL PERFORMANCE • INDEPENDENT AUDITOR’S REPORT
Auditor’s Responsibilities for the Audit of the consolidated financial
statements
Our objective is:
— to obtain reasonable assurance about whether the consolidated financial statements as a whole are free
from material misstatement, whether due to fraud or error; and
— to issue an Independent Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs NZ will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
A further description of our responsibilities for the audit of these consolidated financial statements is located
at the External Reporting Board (XRB) website at:
https://www.xrb.govt.nz/Site/Auditing_Assurance_Standards/Current_Standards/Page1.aspx
This description forms part of our Independent Auditor’s Report.
Ross Buckley
For and on behalf of
KPMG
Auckland
29 May 2017
64
5
“The Health & Safety at Work Act is the biggest
change we’ve seen in the industry for a very
long time. EROAD is the best thing since sliced
bread. It’s fantastic being able to see where
the guys are and what they’re doing.”
Deborah O’Brien
Managing Director, Phillips & O’Brien
Wellington
4.0
REGULATORY
DISCLOSURES
66
Director
Disclosures
DIRECTORS
The persons who held office as directors of EROAD Limited
at any time during the year ended 31 March 2017, are as
follows:
Michael Bushby Chairman, Non-Executive, Independent
Sean Keane - resigned as of 5 May 2017
• 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
Steven Newman Chief Executive Officer
• Director, Triple T Consulting Limited
Candace Kinser Non-Executive, Independent
Anthony Gibson Non-Executive, Independent
Gregg Dal Ponte Non-Executive, Non-Independent*
Sean Keane was a non-executive, independent director of
EROAD Limited and EROAD Financial Services Limited at 31
March 2017 but resigned from the Board effective 5 May 2017
*Gregg Dal Ponte is considered to be an Independent Director as
of 1 April 2017 due to an amendment to his consulting agreement
with EROAD.
SUBSIDIARY COMPANY DIRECTORS
The persons who held office as directors of subsidiary
companies at 31 March 2017 are as follows:
EROAD Financial Services Limited (New Zealand)
Anthony Gibson
EROAD (Australia) Pty Limited (Australia)
Michael Bushby, Steven Newman
EROAD Inc. (USA)
Michael Bushby, Steven Newman
EROAD LTI Trustee Limited (New Zealand)
Anthony Gibson, Candace 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 2017
are as follows:
Michael Bushby
• Director, Lowelly Pty Limited
• Director, 45 Mimosa Pty Limited
• Strategic Advisor, WSP Australia
6767
• Director, SLK Asset Management Limited
Anthony Gibson
• Chief Executive Officer, Ports of Auckland Limited
• Director, North Tugz Limited
• Director, AMG Consulting Limited
• Director, Seafuels Limited
• Director, Waikato Freight Hub Limited
Candace Kinser
• Non-Executive Director, Talent International Limited
(Australia)
• Director, Kinser Trustee Limited
• Director, Longhorn Investments Limited
• Director, Sagitas Consulting Limited
• Independent Director, Livestock Improvement
Corporation Limited
• Chapter Director and Advisory Board Member, 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
Gregg Dal Ponte
• Director of Regulatory Compliance, Oregon Trucking
Association, Inc
*Notice given by Candace Kinser during the year ended 31 March
2017.
4.0 REGULATORY DISCLOSURES The following details included in the Company’s interests
register as at 31 March 2016 have been removed as at 31
March 2017:
• Michael Bushby is no longer General Manager
Infrastructure Services, Ventia Pty Limited or a Director
of Gateway Motorway Services Pty Limited, Brisbane
Motorway Services Pty Limited, Delron Cleaning Limited,
Delron Group Facility Services Pty Limited, Infocus
Infrastructure Management Pty Limited, Leighton Boral
Amey NSW Pty Limited, Leighton Boral Amey QLD Pty
Limited or Roads Australia Pty Limited.
• Candace Kinser is no longer a director of Quotable Value
Limited.
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.
Directors’ relevant interests
The following directors held relevant interests in the following
ordinary shares in the Company as at 31 March 2017:
Name
Steven Newman*
Michael Bushby
Sean Keane
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.
6868
4.0 REGULATORY DISCLOSURES %
0.1
1.93
1.78
7.15
4.0 REGULATORY DISCLOSURES
Shareholder
Information
ANNUAL SHAREHOLDERS’ MEETING
The Company’s 2017 annual shareholders’ meeting will be
held at QBE Stadium, Stadium Drive, Albany, Auckland on
Thursday, 3 August 2017 commencing at 4:45pm.
DISTRIBUTION OF SHAREHOLDERS AND HOLDINGS
Holding Range
Number
of holders
%
Number of
ordinary shares
1 to 999
134
12.09
61,801
1,000 to 4,999
508
45.85
1,161,359
5,000 to 9,999
10,000 to 49,999
50,000 to 99,999
100,000 and over
172
212
33
49
15.52
19.13
2.98
4.42
1,070,596
4,306,490
2,336,506
3.88
51,308,908
85.17
Total
1108
100
60,245,660
100
The details set out above were as at 18 May 2017..
As disclosed in Note 19 of the Financial Statements, there
were 294,042 performance shares on issue for the benefit of
employees as at 31 March 2017. The Company only has one
class of shares on issue, ordinary shares, and these shares are
quoted on the NZX Main Board.
69
69
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 2017, were as
follows:
Substantial
product holder
Date of
Notice
Number of
shares
% of shares
on issue at 31
March 2017
Steven Newman
(includes NMC
Trustees Limited’s
relevant interest)
NMC Trustees Limited
as trustee of the NMC
Investment Trust
Commonwealth Bank
of Australia
Colonial First State
Asset Management
27/5/2016
16,059,466
26.657%
27/5/2016
15,999,194
26.557%
13/12/2016
4,494,716
7.461%
11/8/2015
3,033,133
5.041%
The total number of ordinary shares (being the only class of
quoted voting products) on issue in the Company as at
31 March 2017 was 60,245,660.
PRINCIPAL SHAREHOLDERS
The names and holdings of the twenty largest registered
shareholders in the Company as at 18 May 2017 were:
Shareholdings larger than 1% held through New Zealand
Central Securities Depository Limited (NZCSD) as at
18 May 2017 were:
Holder Name
Shares
%
Holder Name
New Zealand Central Securities Depository
Limited
16,409,725
27.23
Citibank Nominees (New Zealand) Limited -
NZCSD
Holding
%
5,073,354
8.4
NMC Trustees Limited
FNZ Custodians Limited
15,999,195
26.55
3,204,791
5.31
Accident Compensation Corporation - NZCSD
2,974,958
BNP Paribas Nominees (NZ) Limited - NZCSD
2,826,367
4.9
4.7
David Murray Jarrett & Julie Patricia Jarrett &
Vlatkovich & Mcgowan Trustee Company Limited
1,801,000
2.98
HSBC Nominees (New Zealand) Limited A/C
State Street - NZCSD
1,639,390
2.7
HSBC Nominees (New Zealand) Limited -
NZCSD
1,369,336
2.3
Hsbc Nominees A/C Nz Superannuation Fund
Nominees Limited - Nzcsd
936,588
1.6
Andrew Bowker
Brendon Thomas
951,131
1.57
915,425
1.51
Jbwere (NZ) Nominees Limited
650,764
1.08
John Grant Sinclair
Matu Trust Limited
650,225
1.07
631,890
1.04
SLK Asset Management Limited
603,996
1
Alister Moss
600,000
0.99
JB Were (NZ) Nominees Limited
584,317
0.96
Anthony Gibson
Paul Geoffrey Hewlett & Catherine Patricia Carter
& Hoffman Trustees Limited
Jarred Blair Clayton
Somac Holdings Limited
563,065
0.93
556,725
0.92
453,155
0.75
407,806
0.67
First NZ Capital Securities Limited
402,840
0.66
Nicholas Moor
Bruce Wilson & Stephanie Wilson & SW Trust
Services (Thirteen) Limited
Nicholas Raymond Scott & Trustee Services
Limited
360,209
0.59
305,704
0.5
300,030
0.49
7070
4.0 REGULATORY DISCLOSURES Other
Information
NZX WAIVERS
No waivers were sought from the NZX within the 12-month
period prior to 31 March 2017.
DISCIPLINARY ACTION TAKEN BY THE NZX
The NZX has not taken any disciplinary action against the
company during the year ended 31 March 2017.
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 2017 was $169,125. The amount of fees payable to
KPMG for non-audit work during the year ended 31 March
2017 was $227,058.
DONATIONS
The company and its subsidiaries made donations totaling
$1,597.43 during the year ended 31 March 2017.
CREDIT RATING
The company does not currently have a credit rating.
71
4.0 REGULATORY DISCLOSURES 5.0
GLOSSARY
72
5.0 GLOSSARY
Glossary
Annualised Recurring Revenue
Monthly Recurring Revenue recognised or expected to be recognised in the month of March multiplied by 12.
Auditor
KPMG
Companies Act
Companies Act 1993
Company
Depot
EBIT before
non-operating costs
Ehubo and Ehubo2
EROAD Limited
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 first and second generation electronic distance recorder which replaces mechanical hubo-
dometers. Ehubo is a trade mark registered in New Zealand
Electronic Logging Device
(ELD)
An electronic solution that synchronises with a vehicle engine to automatically record driving time and
hours of service records.
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.
FMCSA
FY
Group
Federal Motor Carrier Safety Administration
Financial year ended 31 March
EROAD Limited and its subsidiaries
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.
73
5.0 GLOSSARY
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.
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.
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.
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.
74
COMPANY TIMELINE
2000–2007
• EROAD founded
• R & D begins
• EROAD electronic distance recorder obtains New Zealand patent
• CEO Steven Newman joins the company.
EROAD begins commercialising its vision to become a global GPS tolling provider
• Field trials of Ehubo, EROAD’s electronic distance recorder
• EROAD launches a network-wide GPS/cellular-based road charging system – a world first
• EROAD implements the first electronic RUC service in New Zealand
• NZTA and MOT approve Ehubo (for trucks) and Tubo (for trailers)
• EROAD wins at the NZ Hi-Tech Awards
• EROAD implements the first mobile RUC application – for management and purchase using any
web-enabled device
• EROAD undertakes first commercial pilot in North America of a GPS/cellular-based road
charging platform
• Ranked fifth on the New Zealand Green 50 list
• Ranked 10th on Deloitte Technology Fast500 Asia Pacific
• EROAD ranks 9th on Deloitte Fast50
• Finalist in Emerging Company of the Year, NZ Hi-Tech Awards 2013
• Included on Deloitte Technology Fast500 Asia Pacific 2013
• EROAD launches commercial services in North America and Australia
• Lists on the NZX Main Board Included on Deloitte Technology Fast500 Asia Pacific 2014
• Included on Deloitte Fast50 – Regional Winner
• EROAD electronic weight mile tax solution received independent unqualified opinion from
Oregon Secretary of State Audits Division
• Launches NZ Transport Agency-approved electronic logbook in New Zealand
• EROAD launches electronic IFTA service in North America
• Launches electronic logbook in North America
• Included on Deloitte Technology Fast500 Asia Pacific 2015
• Launch of Ehubo2 in New Zealand, its NZ Transport-Agency approved second-generation electronic
distance recorder
• Included on Deloitte Technology Fast500 Asia Pacific 2016
• Launches ELD (electronic logging device) in North America
• Launches mobile DVIR product, Inspect, in New Zealand
• Finalist, Best Hi-Tech Technology Solution for the Public Sector, NZ Hi-Tech Awards 2017
• Finalist, Most Innovative Hardware Product, NZ Hi-Tech Awards 2017
• Finalist, Most Innovative Hi-Tech Service, NZ Hi-Tech Awards 2017
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
75
Directory
EROAD
NEW ZEALAND
260 Oteha Valley Road
Albany, Auckland, 0632
USA
7654 SW Mohawk Street
Tualatin, OR 97062
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
76
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EROAD.COM