Facing Turbulence
ANNUAL REPORT
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013
REGIONAL EXPRESS HOLDINGS LIMITED
Regional Express Value Statement
What does it profit a company if it gains the whole world and loses its soul
Customer
We are committed to providing our customers with safe and
reliable air transportation with heartfelt hospitality.
As a regional carrier, we constantly strive to keep fares low
through our commitment to simplicity, efficiency and good
value.
We are committed to treating our customers as individuals
and will respond to all their comments and complaints.
Community
Rex is mindful of the tremendous social and economic impact
its services have on the regional communities and works in
partnership with these communities to balance their needs
against Rex commercial imperatives.
We are also committed to giving back to the regional
communities by supporting worthwhile charitable causes
which are focused on helping the less fortunate.
We are committed to preserving the environment to the
measure of our capabilities.
Contractors
We believe that our suppliers are partners in our business.
In all our dealings with suppliers we will seek to be fair and
honest and will strive to work only with like-minded suppliers.
Company
Staff members are part of the Rex family. This comes with
both privileges and responsibilities.
We expect every staff member to take ownership of issues
encountered:
• Ownership means that if something is wrong then it is
everyone’s job to fix it.
• Matters that cannot be handled by the staff member
ought to be pursued further with senior management.
• Staff have the right to make mistakes if they act in the
best interest of the customer and the company.
We strive to be a learning organisation where we actively seek
to identify issues no matter how small in order to continually
transform ourselves to a better organisation:
• This entails a culture where issues are highlighted as
learning experiences even though they may place our
colleagues in a bad light.
• An excellent airline is one that is outstanding in a
thousand small ways.
We believe that we can only count on ourselves for our
continued success:
• All staff members must embrace the ‘can do’ and ‘will
do’ spirit that has been the defining characteristic of our
initial success.
• Hard work is the cornerstone of our work ethic.
• All staff share in the profits and so all staff are expected
to contribute his/her fair share.
We value open communication and will strive to create an
environment that removes barriers to communication:
• Staff members have a right to be heard regardless of
their position.
• Staff members are encouraged to contact directly the
members of the Management Committee and Board if
they see the need.
We respect the dignity of each staff member and will treat
each other with respect and fairness:
• The customer does not always come first and we
will stand by our staff member if the customer is
unreasonable.
• While we can be single-minded in tackling issues and
problems, we will focus on the issue and not the person.
• We accept that staff members may have different talents
and capabilities and will strive to fit the job to the person
rather than the other way around.
•
Important decisions concerning staff matters are always
referred to the Management Committee to ensure
transparency, fairness and consistency.
We are committed to standing behind our staff members and
their families and will do all we can to help them in their times
of special need:
• We believe in the value of the family and will strive to
create a working environment that is supportive of the
family.
• All staff members have the right to appeal to the
if special assistance or
Management Committee
consideration is needed.
Capital
Rex believes that its shareholders’ interest is best served
by pursuing a path of steady but sustainable growth of its
earnings.
We believe that maximizing shareholders’ returns in the long
term is not incompatible with our duties and responsibilities
towards our other stakeholders outlined above.
Facing Turbulence
For the second year running, Rex is the most
profitable airline in Australia. This would ordinarily
be grounds for much jubilation but instead we
at Rex are all too painfully aware that this pole
position is an aberration arising from one of the
most toxic environments ever to face aviation in
Australia.
Indeed for Rex, we barely had time to celebrate
our 10 year anniversary and record profit in FY 12,
when we saw sales plunge almost immediately
from 1 July 2012 after the Federal Government’s
carbon tax was implemented, together with a
whole host of policies hostile to regional aviation.
Minister Albanese’s claim that the impact of the
carbon tax would be little more than the cost
of a cup of coffee became the understatement
of the aviation year, when both businesses and
households cut back on flying due to the rising
costs in the economy.
Rex ended the year with profits down 45% and
passenger numbers down 6.8%. At least we
could still make a profit of $19 million with our
net earnings double that of Qantas.
is a very efficient,
formidable and
Rex
operationally excellent airline. However there is
little we can do when the Federal Government
appears to be hell-bent on destroying regional
aviation and along with it, pretty much the rest
of the economy.
The Board believes that Australia continues to
have great potential under good governance and
has authorised an unprecedented $50 million
capital expenditure in the FY 14 to be ready for
the expected upswing. I hope next year when I
write this foreword I can bring more cheer and
hope.
Lim Kim Hai
Executive Chairman
29 August 2013
FOREWORD
corporate
information
This annual report covers both Regional Express Holdings Limited as
an individual entity and the consolidated entity comprising Regional
Express Holdings Limited and its subsidiaries.
The Group’s functional and presentation currency is AUD ($).
Directors
Lim Kim Hai
The Hon. John Sharp
James Davis
Chris Hine
Lee Thian Soo
Ronald Bartsch
Garry Filmer
Company Secretaries
Irwin Tan
Benjamin Ng
Registered Office
81 – 83 Baxter Road
Mascot, NSW 2020
(Ph): 02 9023 3555
(Fax): 02 9023 3599
Share Registry
Link Market Services Limited
Level 12, 680 George Street
Sydney, NSW 2000
Solicitor
Baker & McKenzie
Level 27, AMP Centre
50 Bridge Street
Sydney, NSW 2000
Banker
Westpac Banking Corporation
Auditor
Deloitte Touche Tohmatsu
contents
PART I Directors’ Report
Auditor’s Independence Declaration
4 - 23
24
26 - 69
PART II Financial Statements
Consolidated Statement of Profit or Loss
28
Consolidated Statement of Profit or Loss and Other Comprehensive Income 29
30
Consolidated Statement of Financial Position
31
Consolidated Statement of Cash Flows
32
Consolidated Statement of Changes in Equity
33 - 68
Notes to the Financial Statements
69
Directors’ Declaration
PART III Regulatory Reports
Independent Auditor’s Report
Corporate Governance Statement
ASX Additional Information
70 - 79
72 - 73
74 - 78
80
Photo by Karen Scrimes
directors’ report
01
BOARD OF DIRECTORS
In compliance with the provisions of the Corporations Act 2001, the directors of Regional Express Holdings Limited (‘Rex’)
submit herewith the annual report for Rex and its consolidated entities (the ‘Group’) for the financial year (FY) ended 30 June
2013.
The names and particulars of the directors of Rex during or since the end of the FY are:
1. LIm KIm HAI
Executive Chairman
Appointed 27 June 2003 and re-appointed
16 November 2006, 25 November 2009 and
27 November 2012
Mr. Lim started his career as a Defence Engineer specialising in underwater warfare.
After 10 years he left to start his own business. Currently he has a portfolio of
investment and business interests in diverse sectors and countries. He is also the
Chairman of a biomedical company in Singapore, Lynk Biotechnologies Pte Ltd as
well as Chairman of WooWorld Pte Ltd, a supplier of mobile games and content to
telecommunication companies in Japan and South East Asia.
Mr. Lim obtained his Masters in Electronics Engineering from the prestigious ‘Grande Ecoles’ engineering colleges in France
where he was sent on a French Government scholarship. He later returned to France to complete a Masters of Public
Administration at the elite Ecole Nationale d’Administration in Paris on a Singapore Government scholarship. Mr. Lim also has
a Masters of Business Administration from the National University of Singapore.
Mr. Lim was one of the founding shareholders and directors of Rex.
2. THE HON. JOHN SHARp
Deputy Chairman and
Independent Director
Appointed 14 April 2005 and re-appointed
19 November 2008 and 23 November 2011
The Honourable John Sharp is an aviator, having been a licensed pilot of both fixed wing
and rotary wing aircraft. Mr. Sharp was a member of the House of Representatives of
the Commonwealth Parliament for 14 years (1984 – 1998). He retired from the House
of Representatives in 1998 and established his own high level aviation and transport
consulting company. Mr. Sharp is a former Chairman of the Aviation Safety Foundation
of Australia and a director of Australian Aerospace, a wholly-owned subsidiary of
European Aeronautics Defence and Space (EADS) representing Airbus (the aircraft manufacturer of ATR, CASA, Eurocopter
and Astrium satellites). He has recently retired as Chairman of Parsons Brinkerhoff Advisory Board, an engineering and design
company operating throughout Australia and the region. He is also Chairman of Power and Data Corporation Pty Limited and
Chairman of Pel-Air Aviation Pty Ltd. Mr. Sharp is a Trustee and Board Member of John McKeown House, Honorary Federal
Treasurer, National Party of Australia and has retired as Chairman of Winifred West Schools Foundation. He is a member of
the University of Wollongong Vice Chancellor’s Advisory Board. Recently, he was appointed a director of the Flight Safety
Foundation following his receipt of the Foundation’s Presidential Citation for Aviation Safety; the first Australian to receive this
award. Mr. Sharp’s extensive experience of aviation, regional air services and as the former Federal Minister for Transport and
Regional Development in the Federal Government, adds significantly to the expertise and standing of the Board.
3. JAmES DAvIS
Independent Director
Appointed 26 August 2004 as Executive
Director and re-appointed 23 November
2011 as an Independent Director.
Appointed Managing Director on 27 May
2008 and retired 1 July 2011
Mr. Davis has a degree in Aeronautical Engineering and commenced his aviation
career with the Civil Aviation Safety Authority (CASA) before obtaining his Air
Transport Pilot Licence. He has flown with airlines in Australia and overseas for 26
years, accumulating some 12,500 flying hours. He joined Hazelton Airlines in 1999 as
Flight Operations and Standards Manager and later Chief Pilot. He has been with Rex
since its beginning in 2002, occupying the positions of Executive General Manager
Operations, Managing Director Operations, Chief of Staff of the Chairman’s Office and
Managing Director. Mr. Davis is a former Chairman of the Australian Airline Pilot Academy Pty Ltd (AAPA) and a former Director
of Rex Group companies Pel-Air Aviation Pty Ltd and Air Link Pty Ltd. He currently sits on the Board of the Regional Aviation
Association of Australia (RAAA) as Vice Chairman.
4. GARRY FILmER
Chief Operating Officer
Appointed 1 March 2012 as Executive
Director and re-appointed 27 November
2012
Mr. Filmer is a Licensed Aircraft Maintenance Engineer with over 36 years experience
and has been involved in Regional Airline and Maintenance Repair Organisation
management over the last 20 years, holding positions such as Engineering Manager
and General Manager Engineering. He joined Rex in 2007 as Engineering Advisor in
the Chairman’s Office and as a member of the Engineering Management Committee
was involved in the coordination of projects such as the management of Ground Support Equipment, review of engineering
resources and the recruitment of staff. He became General Manager Engineering in June 2008 and then Chief Operating
Officer in March 2012. As Chief Operating Officer Mr. Filmer is responsible for Regional Express operations including flight
operations, continuing airworthiness, maintenance control, airport operations and the human factors group.
4
5
3
6
7
1
2
5. CHRIS HINE
Chief Operating Officer
until 29 February 2012 and subsequently on
extended leave since 12 March 2012.
Appointed 1 March 2011 as Executive
Director and re-appointed 23 November
2011
Mr. Hine has over 20 years of aviation experience including 15 years as a First Officer
and Captain of Metroliner and Saab 340 aircraft and is a well-accomplished and
knowledgeable instructor. He has been with the Company since its inception in
August 2002 and prior to his role as Chief Operating Officer was General Manager
Flight Operations and Chief Pilot. Prior to Rex he worked for Kendell Airlines from
1995 during which time he held various Check and Training Captain positions. As
Chief Operating Officer he was responsible for the Company’s operations including
flight operations, maintenance control, airport operations and the human factors group. Mr. Hine has also had experience
as a lecturer in Cockpit Systems Management for the Bachelor of Applied Science (Civil Aviation) degree at the University of
South Australia. He was the Chairman of the Australian Airline Pilot Academy Pty Ltd (AAPA).
6. RONALD BARTSCH
Independent Director
Appointed 23 November 2010 and re-
appointed 23 November 2011
Mr. Bartsch has over 30 years experience in the aviation industry in a variety of
senior operational, safety and regulatory roles. He was head of safety and regulatory
compliance for Qantas Airways’ Limited AOC and manager of the CASA Sydney
Airline Transport Field Office.
In addition, Mr. Bartsch is an experienced pilot and has extensive legal and regulatory experience. Mr. Bartsch has formal
qualifications in law, education and science, and is the author of the definitive legal textbook on aviation law. Mr. Bartsch is
an international aviation safety consultant and senior visiting fellow with the Department of Aviation at the University of New
South Wales.
7. LEE THIAN SOO
Non-Executive Director
Appointed 27 June 2003 and re-appointed
16 November 2006, 25 November 2009 and
27 November 2012
Mr. Lee has extensive international business experience and currently is the Chairman
and owner of a company supplying specialty medical devices, systems and drugs to
healthcare institutions in the ASEAN region. He is also on the board of a biomedical
company and a mobile/internet gaming company.
Mr. Lee was one of the founding shareholders and directors of Rex.
6
7
DIRECTORS’ REPORTREGIONAL EXPRESS HOLDINGS LIMITEDDIRECTORS’ REPORTREGIONAL EXPRESS HOLDINGS LIMITED 02
SENIOR mANAGEmENT EXECUTIvES
The names and particulars of the senior management executives of Rex during or since the end of the FY are:
GARRY FILmER
Chief Operating Officer
DALE HALL
General Manager, Engineering
Garry is a member of the Rex Management Committee. A description of his
qualifications, skills and experience is included on page 6.
Dale has over 32 years of aviation engineering experience. He began his career
as an apprentice in the Royal Australian Air Force where he served for nine years.
He then spent the next 17 years in the industry working in turbine engine and
component overhaul facilities, on and offshore gas and petroleum helicopter
industries and maintaining aero-medical charter aircraft. Dale joined Kendell
Airlines in 1999 as a Licensed Aircraft Maintenance Engineer and held the
position of a Technical Support Engineer with both Kendell and Rex. In late 2006
Dale was appointed as a Maintenance Controller for Rex and took up the position
of Maintenance Control Manager in 2007. In March 2012, he was appointed
GM Engineering and Chairman of the Australian Airline Pilot Academy (AAPA).
As GM Engineering, he became Part 145 Accountable Manager for both Rex
and Air Link Approved Maintenance Organisations (AMOs) in June 2013. He is a
member of the Rex Management Committee.
WARRICK LODGE
General Manager, Network Strategy & Sales
Warrick manages a team responsible for scheduling, pricing, revenue management,
sales and commercial analysis. His duties include the monitoring of network
performance and analysis of both existing and new market opportunities. Warrick
has more than 20 years of regional airline experience in the specialised areas of
scheduling, pricing and revenue management and held the position of Manager
Network Planning with Kendell Airlines, having joined that company in 1992.
Warrick has been with Rex since its inception in 2002 and is also a member of the
Rex Management Committee.
IRWIN TAN
General Manager, Corporate Services
Irwin’s background was originally in genetic research after graduating with first
class honours in biotechnology from the University of New South Wales in
Sydney. Irwin left the field of genetic research when he joined Morrison Express
Logistics in 1999 and then Singapore Airlines in 2001. He was later transferred to
Singapore Airlines Cargo as an executive where he took on various appointments
in product development, advertising, sales and airline alliances before taking on
the role of Regional Marketing Manager in South West Pacific in 2003. Irwin joined
Rex in July 2005 and was appointed the Company Secretary on 7 September
2005. Irwin is also a member of the Rex Management Committee.
mAYOORAN THANABALASINGHAm
General Manager, Information Technology and Communications
Mayooran completed his Associate Diploma of Electrical Engineering / Computer
Engineering in 2001. He commenced with Rex in April 2004 and leads a team
of Information Technology (IT) professionals responsible for ensuring day-to-
day operations of the airline. With over 11 years experience and an extensive
background in information technology, Mayooran has managed a range of
IT projects and initiatives for Rex including the Internet Booking Engine, the
Amend Booking Engine and Web Check-in. Mayooran is a member of the Rex
Management Committee and a Director of the Australian Airline Pilot Academy
(AAPA).
NEvILLE HOWELL
General Manager, Flight Operations and Chief Pilot
Neville has over 32 years of aviation experience and has been with the Company
since its inception in August 2002. He has operated the Saab 340 as a First Officer
and Captain for over 18 years for both Hazelton Airlines and Regional Express.
Prior to his role as GM Flight Operations (GMFO) and Chief Pilot, Neville was
Manager Training & Checking and Deputy Chief Pilot. He is an extensively qualified
and experienced simulator and aircraft instructor and has held positions as both
Training and Check Captain. Neville was the Chief Flying Instructor and Chief Pilot
for the first integrated pilot training academy in Australia and has provided cadet
pilot training for both domestic and international carriers. Neville is a qualified
lecturer in a number of aviation subjects and has a Diploma of Aviation. He holds
a number of Civil Aviation Safety Authority (CASA) delegations and has done since
1984. As GMFO he is responsible for all facets of the Company’s flight operations
and all operational matters affecting the safety of flight operations. Neville is a
member of the Rex Management Committee.
pNG YEOW TAT
Deputy General Manager, Engineering
Tat has been in aviation engineering for more than 30 years and has many years
of experience in various senior management positions. He graduated with an
Honours Degree in Electrical and Electronic Engineering from the UK. Tat joined
Rex in mid 2007 as the Logistics Advisor and subsequently as the Engineering
Advisor in the Chairman’s Office. He is a member of the Rex Engineering
Management Committee and a member of the Rex Management Committee. As
Deputy GM Engineering, he became Part 145 Alternate Accountable Manager
for both Rex and Air Link Approved Maintenance Organisations (AMOs) in June
2013.
8
9
DIRECTORS’ REPORTREGIONAL EXPRESS HOLDINGS LIMITEDDIRECTORS’ REPORTREGIONAL EXPRESS HOLDINGS LIMITED 03
DIRECTORSHIpS OF OTHER LISTED COmpANIES
09
COmpANY SECRETARIES
During the year under review, no directors appointed as at 30 June 2013 served as a director with any other company listed
on the ASX.
Mr. Irwin Tan holds the position of Rex Company Secretary. A description of his qualifications, skills and experience is
included on page 8.
Mr. Benjamin Ng, having completed his Bachelor of Science followed by an MBA in the UK, started his career with the
German multi-national chemical company, Henkel in Malaysia. In his eight years with Henkel/Cognis, he held various positions
ranging from sales, marketing, business analysis and cost controlling. In 2001, he was posted to headquarters in Germany
for just over a year where he was cost controller for the Asia Pacific Region. Upon his return to Malaysia, he headed up the
controlling department of Cognis for three years. Benjamin joined Rex in April 2006 and was appointed Company Secretary
on 10 October 2007.
10
pRINCIpAL ACTIvITIES
The Group’s principal activity during the FY was air transportation of passengers and freight.
04
DIRECTORS’ SHAREHOLDINGS
The following table sets out each director’s relevant interest in shares and options of Rex as at the date of this report. No
debentures or rights exist.
Directors
Lim Kim Hai
The Hon. John Sharp
James Davis
Chris Hine
Lee Thian Soo
Ronald Bartsch
Garry Filmer
Fully paid ordinary shares
direct interest
18,480,630
150,000
200,866
172,205
7,722,181
-
15,166
Fully paid ordinary shares
indirect interest
5,755,513
250,000
-
-
3,727,181
-
-
Share options
-
-
-
-
-
-
-
05
DIRECTORS’ mEETINGS
The following table sets out the number of directors’ meetings (including meetings of committees of directors) held during
the FY and the number of meetings attended by each director (while they were a director or committee member). During
the FY, 4 Board meetings, 2 Remuneration and Nomination Committee meetings, 2 Audit and Corporate Governance
Committee meetings and 4 Safety and Risk Management Committee meetings were held.
Directors
No. of Meetings Held:
Attendance:
Lim Kim Hai
The Hon. John Sharp
James Davis
Chris Hine
Lee Thian Soo
Ronald Bartsch
Garry Filmer
Remuneration
& Nomination
Committee
Audit & Corporate
Governance
Committee
Safety & Risk
management Committee
Board
4
4
4
4
4
4
3
4
2
-
2
2
-
-
-
-
2
-
2
-
-
2
-
-
4
-
-
4
1
-
3
-
06
REmUNERATION OF DIRECTORS AND SENIOR mANAGEmENT
Information about the remuneration of directors and senior management is set out in the remuneration report of this directors’
report, on pages 19 to 22.
07
SHARES UNDER OpTION OR ISSUED ON EXERCISE OF OpTIONS
No options were granted or exercised in FY 2013.
08
FORmER pARTNERS OF THE AUDIT FIRm
No directors or officers in Rex or the Group have been a partner or director of Deloitte Touche Tohmatsu, the Group’s
auditor.
10
11
DIRECTORS’ REPORTREGIONAL EXPRESS HOLDINGS LIMITEDDIRECTORS’ REPORTREGIONAL EXPRESS HOLDINGS LIMITED 11
ORGANISATION & GROUp STRUCTURES
Executive Chairman
Lim Kim Hai
Internal Audit
Special Projects
Productivity Committee
Board/Company Secretariat
Chairman’s Office
Network Strategy &
Sales
Warrick Lodge
General Manager
Scheduling
Yield
Sales
Engineering
Dale Hall
General Manager
Png Yeow Tat
Dy General Manager
Heavy Maintenance
Line Maintenance
Logistics
Engineering Quality
Assurance
Engineering
Admin
Operations
Garry Filmer
Chief Operating Officer
IT & Communications
Mayooran Thanabalasingam
General Manager
Corporate Services
Irwin Tan
General Manager
IT Department
Call Centre
Finance
Administration
Human Resources
Legal
Corporate
Communications
Continuing Airworthiness
Richard Taylor
Continuing Airworthiness
Manager
Technical Services
Flight Operations
Neville Howell
General Manager/Chief Pilot
Human Factors
Russell Higgins
General Manager
Airports
David Brooksby
National Airports Manager
Training & Checking
Paul Fisher
Manager, Training &
Checking
Flight Crew
Network Operations
Crew Resources
Safety
Compliance & Quality
Assurance
Security
Sydney
Melbourne
Adelaide
Townsville
Outports
Regional Express Airline Organisation Structure
Regional Express
Holdings Limited
ACN 099 547 270
Regional Express
pty Limited
Rex Freight & Charter
pty Limited
Rex Investment
Holdings pty Limited
ACN 101 325 642
ACN 065 221 356
ACN 101 317 677
100%
Air Link
pty Limited
100%
100%
pel-Air Aviation
pty Limited
Australian Airline pilot
Academy pty Limited
ACN 000 872 613
ACN 002 858 013
ACN 128 392 469
vAA
pty Limited
ACN 140 726 941
Holds an AOC
Regional Express Group Holding Structure
12
REvIEW OF OpERATIONS
SUmmARY
The Group continued to work in collaboration with many regional communities throughout the Rex passenger network
and there were numerous partnership agreements with regional airports and local councils that were both entered into or
renewed.
At the beginning of the year under review, partnership agreements were renewed with the regional councils that own and
operate the following regional airports: Broken Hill, Bathurst, Ballina, Ceduna, Coober Pedy, Grafton, Griffith, Lismore,
Mildura, Narrandera, Newcastle, Parkes, Taree and Wagga Wagga.
The Broken Hill partnership agreement was terminated in December 2012 and there were no partnership agreements during
the FY with the following regional airports: Albury, Burnie, Dubbo, Kangaroo Island, King Island, Merimbula, Moruya, Mount
Gambier, Orange, Port Lincoln and Whyalla.
The flight cancellation rate for the FY was 0.66%. This rate is slightly higher than last FY and our usual cancellation rate of
0.2%. As with the final few months of the last FY the higher rate of cancellations was influenced by Captain resources due
to leave and sickness.
The Pilot attrition rate for the FY was lower than historical averages; with the lowest number of resignations in seven years.
However due to the increased Rex Cadet numbers in the First Officer ranks, Captains made up a higher percentage of the
overall pilot attrition. Another 17 Cadets from the Australian Airline Pilot Academy (AAPA) commenced employment with Rex
during the year through the successful Cadet Programme, bringing the total number of Rex cadets on-line in the group to
106 as at 30 June 2013, including six Flying Instructors at AAPA and seven who have joined Pel-Air. The deployment within
the group saw four upgrading to the rank of Captain and 95 flying as First Officers by the end of the FY.
Last FY saw the introduction of the Pilot In Command Under Supervision Programme (PICUSP) which was ratified by the
Civil Aviation Safety Authority (CASA). The programme provides specific training and personal development for First Officers
(especially the Cadet First Officers who do not have the requisite Command hours) to meet with regulatory requirements
to become Captains. In the first half of this FY, four First Officers from the Cadet Programme have successfully attained
Command (Captain) positions across the Group. PICUSP is gaining momentum and there are currently 39 enrolled in the
programme as at 30 June 2013. As the programme matures it will provide added protection to our Captain establishment
requirements for the Group.
12
13
DIRECTORS’ REPORTREGIONAL EXPRESS HOLDINGS LIMITEDDIRECTORS’ REPORTREGIONAL EXPRESS HOLDINGS LIMITED 12
REvIEW OF OpERATIONS (CONTINUED)
During the year Rex actively recruited overseas for suitable direct entry Captains. Six from the USA are now already flying
as Captains for Rex while nine European Captains have been shortlisted and are due to commence their training at the start
of the next FY.
During the FY Rex signed an agreement for the acquisition of a Saab 340 Full Flight Simulator (FFS) with FlightSafety
International. The FFS is the youngest of its type in the world. The simulator will be installed at the Australian Airline Pilot
Academy (AAPA) in Wagga Wagga. A purpose built training facility will be constructed at AAPA to accommodate the
simulator and will boast the latest training technology to ensure effective pilot training. Plans for the building are well under
way and construction is planned to be completed by October 2013.
Pel-Air’s provision of fixed wing services to Air Ambulance Victoria progressed into the second year of operations. Mission
tasking and flying hours progressively increased with greater familiarity with and improvement to the operations. Likewise,
the fast jet support service provision to the Australian Defence Force moved into steady-state operations.
Turboprop charters using the Saab aircraft remained steady throughout the year with Saab charters operated by Rex crew
when demand exceeded Pel-Air’s capability.
Over at AAPA, the Rex Cadet Programme continued with 17 cadets graduating in the FY. As at 30 June 2013, AAPA
has enrolled a total of 155 cadets under Rex’s Cadet Programme and graduated a total of 124. This FY also saw AAPA
continue its partnership with the Alpha Aviation Group for the training of international students, with 70 graduating since the
programme’s inception.
Air Link has continued to carry out regular and ad hoc charters, as well as FIFO for the resource sector. Air Link Engineering
continues to carry out external aircraft maintenance.
ROUTE NETWORK DEvELOpmENTS
On 9 July 2012 Rex commenced a range of new air services for the cities of Mildura and Broken Hill. Mildura was re-
connected with direct flights to Adelaide and Sydney, in addition to two daily return flights to Broken Hill. The latter saw
its flights to Sydney boosted from two to three return flights each week day and a revised flight schedule that enables
professionals from Sydney to make a day return trip to Broken Hill. In addition, Broken Hill, for the first time, received a new
air service to Melbourne via Mildura.
In November 2012 Rex was awarded all eight NSW intrastate Air Transport licences that it was previously holding. This
conferred on Rex the sole right to continue to operate on these routes for the next licence period of March 2013 until March
2018.
The list of licensed NSW routes awarded to Rex:
• Bathurst to Sydney
• Broken Hill to Sydney
• Grafton to Sydney
• Merimbula to Sydney
• Moruya to Sydney
• Narrandera to Sydney
• Parkes to Sydney
• Taree to Sydney
From April 2013 Rex redeployed services from the Dubbo to Sydney route to the Wagga Wagga to Sydney route. This was
in response to a material step-change in operating costs at Dubbo regional airport that were associated with airport security
screening. This followed a decision by Dubbo City Council (DCC) that required Rex passengers to be screened and to pay
screening charges of about $9.00 per departing passenger which equates to an additional cost of some $300,000.00 per
year for a requirement that is only legally applicable to the QantasLink Q-400 operated services that newly commenced on
the Dubbo to Sydney route from March 2013.
With effect from April 2013, the number of Rex services between Dubbo and Sydney were reduced from 82 weekly services
to 73 weekly services, equating to a reduction in annual seats of some 16,000. The Dubbo to Sydney cutbacks saw week
day services reduced from seven return services to six return services and the reduction of nine weekly services were all
linked to peak Sydney airport slots which were reallocated to Rex’s Wagga Wagga to Sydney route.
The tables below set out the evolution in monthly passenger carriage and monthly passenger revenue over the last eight
FYs.
Rex Monthly Passengers - Total Network
140
120
s
d
n
a
s
u
o
h
T
100
80
60
40
20
0
s
n
o
i
l
l
i
M
$18
$16
$14
$12
$10
$8
$6
$4
$2
$0
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
Rex Monthly Revenue - Total Network
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
14
15
DIRECTORS’ REPORTREGIONAL EXPRESS HOLDINGS LIMITEDDIRECTORS’ REPORTREGIONAL EXPRESS HOLDINGS LIMITED 12
REvIEW OF OpERATIONS (CONTINUED)
FLEET CHANGES
During the reporting period, Air Link sold one Piper Chieftain.
During the reporting period, Rex signed an agreement to purchase four Saab 340Bplus model aircraft on or before the
expiry of their leases in July 2013 and March 2014. This brings the total number of Saab 340Bplus model aircraft that Rex
has committed to purchase at lease expiry in FY 2014 to eight.
In May 2013 AAPA purchased a Reims Cessna 150 Aerobat aircraft in support of the Alpha Aviation contract.
ImpROvING pRODUCTIvITY
The Group’s Productivity Committee continued its efforts throughout the year with the launch of its ninth consecutive
productivity drive. The committee ended the year with a total realised savings of over $3.9M.
ENTERpRISE AGREEmENTS (EA)
All Rex EA and the Regional Express Airlines Services Collective Agreements were successfully voted in and approved by
Fair Work Australia in 2012. The next rounds of negotiations are due to commence in February 2014.
OpERATIONAL AND SERvICE STANDARDS
In FY 2013 Rex continued to deliver exceptional on-time performance and service reliability. As reported by the BITRE, Rex
recorded 85.8% on-time departure performance which ranked Rex as the top performing Australian airline in FY 2013.
In addition, Rex completed FY 2013 with a low cancellation rate of 0.7% which bettered all Australian airlines with the
exception of the traditional Skywest Airlines network in Western Australia that excludes the ATR operations for Virgin
Australia.
Airline
QantasLink
Qantas
Jetstar
Virgin Australia
Virgin ATR Operations
Skywest*
Tiger Airways
On Time Departure
Cancellation Rate (%)
FY 2013
FY 2012
FY 2013
FY 2012
1st
6th
2nd
8th
3rd
4th
7th
5th
3rd
7th
2nd
8th
4th
6th
5th
1st
0.7%
2.5%
1.6%
1.3%
1.7%
2.4%
0.2%
1.2%
0.4%
2.0%
1.7%
1.6%
1.3%
1.5%
0.2%
0.5%
*Skywest incorporated into Virgin Regional Airlines effective 7 May 2013
Rex again received both national and international recognition this FY through several accolades.
COmmUNITY INvOLvEmENT
Rex is mindful of the tremendous social and economic
impact its services have on regional communities and
works in partnership with these communities to balance
their needs against Rex's commercial imperatives. We are
also committed to giving back to regional communities by
supporting worthwhile charitable causes which are focused
on helping the less fortunate.
Throughout the year, Rex contributed over a quarter of a
million dollars in sponsorships to worthy charitable and
community projects across our network, giving back to
regional communities to the measure of our capabilities.
The causes that Rex have supported include the Julia
Creek Dirt n Dust Festival, House With No Steps, the Chad
Hancock Cancer Foundation for Young Adults and Kidney
Health Australia. We have also provided support to several
Rotary Club fundraisers and Relay for Life events across the
network.
Proceeds from the Rex Open Day were presented to Can Assist and Country Hope
by Rex GM Network Strategy & Sales Warrick Lodge. Marie Papworth (left) is from
Can Assist and Chris Blake (right) is from Country Hope.
In August 2012, Rex celebrated its 10th anniversary of operations with an open day in Wagga Wagga. All proceeds from the
open day were donated to Country Hope and Can Assist, two charities based in Wagga Wagga. The 10th anniversary was
also marked by the production of a coffee table book entitled The Rex Story: The First 10 Years. All profits from the sale of
this book also go towards supporting these two organisations.
Past management of Hazelton, Kendell & Rex – (L-R): Geoff Breust (Kendell GM
1988-97, Kendell CEO 1997-2000 & Rex MD 2004-07), James Davis (Hazelton
Chief Pilot 2001-02 & Rex MD 2008-11), Max Hazelton (Hazelton founder &
CEO 1953-95), Garry Filmer (Rex COO from 2012), Lim Kim Hai (Rex Executive
Chairman from 2003), Michael Jones (Rex CEO 2002-03), Andrew Drysdale
(Hazelton CEO 1999-2002), Greg Russell (Hazelton MD 1996-1998), Chris Hine
(Rex Chief Pilot & GM Flight Ops 2002-11 & Rex COO 2011-12).
Balloons giveaway at the Rex Open Day.
On 1 July 2013, Aviation Week and Space Technology
ranked Rex as the Top Performing Airline in the Asia-
Pacific region and second for all carriers worldwide, in a
study based on performance categories covering liquidity,
financial health, earnings performance, fuel management
and capital efficiency over the 2012 calendar year. This result is a continuation of Rex’s solid performance in previous years,
where since 2009 Rex was ranked as the world’s top performing regional airline, a category which no longer exists as of
the 2013 rankings.
TOP PERFORMING AIRLINE
ASIA-PACIFIC 2013
TOP PERFORMING
Regional airline 2009-12
Rex was also ranked as the Best Domestic Airline for Customer Satisfaction for the months of July
2012 and August 2012 in the Roy Morgan Customer Satisfaction Awards. In July, Rex received an
88% satisfaction rating in the surveys, ranking ahead of Qantas, Jetstar, Virgin Australia and Tiger
Airways. In the subsequent month of August, Rex received an 86% rating, ranking ahead of Virgin
Australia, Qantas and Jetstar.
16
17
DIRECTORS’ REPORTREGIONAL EXPRESS HOLDINGS LIMITEDDIRECTORS’ REPORTREGIONAL EXPRESS HOLDINGS LIMITED 13
CHANGES IN STATE OF AFFAIRS
17
DIvIDENDS
In late June 2013 Rex received its CASA CASR Part 145 and Part 147 engineering approvals. The 145 is an approval of
our engineering facilities and operations to carry out aircraft maintenance under the new CASA CASR regulations. The 147
approval is to carry out engineering training including some aircraft type training which we were previously not approved to
do.
All divisions of the Rex Flight Operations Group are confronted with significant Regulatory Reform mandated by CASA. This
reform program will be rolled out over the next three years and is designed to modernise CASA rules and regulations which
will affect Australia’s aviation industry. Rex has assigned project managers to facilitate the implementation of these reforms
across the Rex Group.
TENDERS
Pel-Air previously submitted a bid for a Commonwealth of Australia tender for Replacement for Air Defence Targets
(JP66) and Pel-Air’s bid was preferred. After prolonged negotiations however, an agreement could not be reached and
the Commonwealth of Australia terminated the tender for JP66 without award of contract. Pel-Air continues to be the
contractor for Fast Jet support to the Australian Defence Force under a contract secured in 2011.
During the year, Pel-Air participated in several tender submissions for Fly In, Fly Out charters and secured a short-term
contract to provide air charter services to Coober Pedy, South Australia.
14
SUBSEQUENT EvENTS
On 1 July 2013, Rex purchased, at a steep discount, the entire Saab 340 spare parts holdings from Pinnacle Airlines in the
USA which had over 215,000 items including engines, propellers and undercarriages.
On 2 July 2013, Rex took ownership of seven of the 25 leased Saab 340Bplus model aircraft bringing the total owned Saab
aircraft in the fleet to 33.
On 3 July 2013, Rex signed an agreement to purchase eight Saab 340Bplus model aircraft off lease on or before expiry of
their leases in March 2014.
15
FUTURE DEvELOpmENTS
In respect of the FY ended 30 June 2012, a fully franked dividend of 9.0 cents per share was paid to the holders of fully paid
ordinary shares on 30 November 2012.
In respect of the FY ended 30 June 2013, the Directors have recommended no dividends to be paid out in view of the
planned substantial investments in FY 2014 namely:
• purchase of Saab 340Bplus aircraft coming off lease;
• purchase of the entire spares holdings of Pinnacle airlines comprising over 215,000 line items;
• purchase of a full flight simulator;
• construction of a purpose built building to house the simulator.
18
INDEmNIFICATION OF OFFICERS AND AUDITORS
During the FY, the Company paid a premium in respect of a contract insuring the directors of the Company (as named above),
the company secretaries (as named above), and all executive officers of the Company and of any related body corporate
against a liability incurred as such a director, secretary or executive officer to the extent permitted by the Corporations Act
2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.
The Company has not otherwise, during or since the FY, except to the extent permitted by law, indemnified or agreed to
indemnify an officer or auditor of the Company or of any related body corporate against a liability incurred as such an officer
or auditor.
19
REmUNERATION REpORT
REmUNERATION AND NOmINATION COmmITTEE
Rex’s board of directors has established a Remuneration and Nomination Committee for the purpose of determining and
reviewing compensation arrangements for the directors and the senior management executives of the Group. This committee
has a process for performance evaluation of the board, its committees and key executives of Rex. The committee’s role is
to assess the appropriateness of the nature and amount of remuneration of directors and senior management executives
on a periodic basis.
In early July 2013 Air Link completed the CASA assessments required to transition to CASR Part 42 and 145. It is expected
that these approvals will be granted in the first quarter.
REmUNERATION pOLICY
The iPad installation project throughout the Saab fleet continues and is expected to be completed in 2014. This initiative will
improve communication and data access flow while bringing other operational efficiencies to the pilots. The iPads with 3G
connectivity will store the full suite of company manuals and have the capability to generate performance data for take-off
and landing. In addition, the iPads will provide automatic transfer of all engine trend data analysis to engineering.
Remuneration levels are set to enable Rex and its subsidiaries to attract and retain appropriately qualified and experienced
directors and senior management executives, who will create sustainable value for shareholders and other stakeholders.
They also fairly and responsibly reward directors and senior management, having regard to the performance of the Group,
the performance of the individual and the external compensation environment.
16
ENvIRONmENTAL REGULATIONS
Rex continues to be an active participant in programs aimed at maximising energy efficiency and reducing Greenhouse
gas emissions in accordance with the Energy Efficient Opportunities Act 2006 (EEO) and the National Greenhouse Energy
Reporting Act 2007 (NGER).
Since its registration with the EEO program in November 2007, five public reports on the initiatives undertaken by Rex have
been made available on the Rex website at www.rex.com.au
Since its registration with the NGER program in January 2009, Rex has submitted four NGER reports and the fifth report is
due in October 2013.
REmUNERATION STRUCTURE
In accordance with best practice corporate governance, a distinction has been drawn between the remuneration structure of
Rex’s non-executive directors and that of its senior management executives. This enables Rex to maintain the independence
of non-executive directors and reward senior management executives for their performance of duties and their dedication.
Rex has set in place a remuneration model for all staff which calls for staff accepting a lower fixed annual salary increase in
exchange for a profit share and a share plan.
• Profit Share Incentive Plan
Rex has established a profit share incentive scheme which has run for seven FYs. Under this scheme, eligible employees
are awarded a share of Rex’s profit before tax (PBT) based on an agreed percentage (excluding contributions from
subsidiaries and associates) for the FY immediately preceding the award. The profit share is allocated on an equal share
basis. Permanent part time employees receive an amount proportional to their employment hours. The Board decided
that this plan will be offered to all non-Enterprise Bargaining Agreement (EBA) employees who are not the subject of an
adverse recommendation by the Remuneration and Nomination Committee.
• Share Gift Plan
Rex has established the share gift plan for its executive directors and eligible employees. The share plan, which has run
from FY 2006, was offered to all the EBA groups. In FY 2013, two groups, namely the pilots and the engineers agreed as
part of the EBA to receive the share gift whilst the Airline Services EBA staff and flight attendants opted not to receive the
share gift in lieu of higher base salaries. The pilot’s EBA also allows that each individual can choose between receiving the
share gift or receiving the equivalent value in cash. The Board decided that this plan will also be offered to all non-EBA
18
19
DIRECTORS’ REPORTREGIONAL EXPRESS HOLDINGS LIMITEDDIRECTORS’ REPORTREGIONAL EXPRESS HOLDINGS LIMITED 19
REmUNERATION REpORT (CONTINUED)
employees who are not the subject of an adverse recommendation by the Remuneration and Nomination Committee.
This plan is not based on any performance measures (other than eligibility for non-EBA employees) as it was established
to show its recognition of employees’ contribution to Rex by providing an opportunity to share in its future growth and
profitability and to align the interests of the employees more closely with the interests of the shareholders. As such, the
share gift plan entitles eligible employees to a fixed value of shares in exchange for a percentage of their base salaries.
Therefore there are no vesting conditions attached to the share gift.
DIRECTOR AND SENIOR mANAGEmENT DETAILS
The following persons acted as directors of the Company during or since the end of the FY:
Lim Kim Hai (Chairman)
The Hon. John Sharp (Deputy Chairman)
James Davis
Chris Hine
Lee Thian Soo
Ronald Bartsch
Garry Filmer
REmUNERATION OF DIRECTORS AND SENIOR mANAGEmENT
The directors and other nominated key management personnel received the following amounts as compensation for their
services as directors and executives of the Company and/or the Group during the year:
Short-term benefits
post
employment
benefits
Long-
term
benefits
Share-based
payments
Cash
profit
sharing
& other
bonuses
Cash
salary
& fees
Non-
monetary
pension &
super-
annuation
Long
service
leave
Options
& rights
Share
gift
provision
FY
$
$
$
$
$
$
%
Consisting
of options
%
Total
$
2013
2012
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
Directors/Executives
EXECUTIVE DIRECTORS
LIm KIm HAI (1)
Executive Chairman
CHRIS HINE (2)
2013
31,391
2,542
Chief Operating Officer (up to 29 Feb 2012)
2012
195,369
51,927
The term ‘senior management’ is used in this remuneration report to refer to the following persons. Except as noted, the
named persons held their current position for the whole of the FY and since the end of the FY:
GARRY FILmER (3)
2013
164,439
62,771
Chief Operating Officer (from 1 March 2012)
2012
141,529
51,927
Garry Filmer (Chief Operating Officer)
Warrick Lodge (General Manager, Network Strategy & Sales)
Irwin Tan (General Manager, Corporate Services / Company Secretary)
Mayooran Thanabalasingham (General Manager, Information Technology and Communications)
Dale Hall (General Manager, Engineering)
Neville Howell (General Manager, Flight Operations & Chief Pilot)
Png Yeow Tat (Deputy General Manager, Engineering)
NON-EXECUTIVE DIRECTORS
JOHN SHARp
Deputy Chairman
LEE THIAN SOO
Non-Executive Director
RONALD BARTSCH
Non-Executive Director
JAmES DAvIS (4)
Non-Executive Director
SENIOR MANAGEMENT EXECUTIVES
WARRICK LODGE
GM, Network Strategy & Sales
IRWIN TAN
GM, Corporate Services
mAYOORAN THANABALASINGHAm
GM, ITC
DALE HALL
GM, Engineering
NEvILLE HOWELL (5)
GM, Flight Operations & Chief Pilot
pNG YEOW TAT (6)
Deputy GM, Engineering
TOTAL
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
90,000
90,000
29,039
25,000
35,000
35,000
29,038
31,005
-
-
-
-
-
-
-
-
153,530
52,771
149,600
51,927
166,606
52,771
154,600
51,927
157,568
52,771
149,600
51,927
155,725
52,771
137,087
51,927
167,515
57,771
50,286
-
135,104
32,543
40,557
-
20
(1) Lim Kim Hai undertook to forfeit his Director’s fee in November 2008 in response to the global economic crisis and continued to
(3) Garry Filmer was appointed as Chief Operating Officer & Director with effect from 1 March 2012.
do so in this reporting period in the light of the continuing difficult environment.
(4) James Davis retired as Managing Director on 1 July 2011. He remains a member of the Board as a Director.
(2) Chris Hine was appointed as Chief Operating Officer & Director with effect from 1 March 2011. He relinquished this position on
(5) Neville Howell was appointed as a member of the Rex Management Committee from 1 March 2012.
1 March 2012 and commenced Long Service Leave from 12 March 2012.
(6) Png Yeow Tat was appointed as a member of the Rex Management Committee from 1 March 2012.
2013
1,314,955 366,711
-
117,967
15,277
2012
1,199,633 311,562
-
125,166
13,714
-
-
24,092
1,839,002
20,417
1,670,491
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,054
186
-
3,471
40,644
19,226
3,233
-
3,360
273,115
14,919
16,481
-
-
8,100
8,100
-
-
3,150
3,150
2,614
2,250
14,211
17,101
15,025
17,516
14,454
17,101
14,309
16,081
15,131
4,510
-
-
-
-
-
-
-
-
2,559
2,440
2,646
2,524
2,563
2,442
2,295
2,188
2,777
887
13,000
2,251
3,650
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,685
244,814
2,600
212,537
-
-
-
-
-
-
-
98,100
98,100
29,039
25,000
38,150
38,150
31,652
3,157
36,412
2,995
2,900
226,066
223,968
2,995
240,043
2,900
229,467
2,995
230,351
2,900
223,970
2,685
227,785
2,600
209,883
3,630
246,824
-
55,683
2,636
185,534
-
44,207
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
21
DIRECTORS’ REPORTREGIONAL EXPRESS HOLDINGS LIMITEDDIRECTORS’ REPORTREGIONAL EXPRESS HOLDINGS LIMITED
19
REmUNERATION REpORT (CONTINUED)
21
NON-AUDIT SERvICES
vALUE OF OpTIONS ISSUED TO DIRECTORS AND EXECUTIvES
No options lapsed, were granted or were exercised during the FY 2013.
RELATIONSHIp BETWEEN THE REmUNERATION pOLICY AND COmpANY pERFORmANCE
In addition to the profit share and share gift schemes that apply to all non-EBA staff, Garry Filmer also received an additional
Key Manager bonus as he is part of executive management. The Key Manager bonus amount given to each member of
executive management was fixed by the Remuneration Committee on a discretionary basis, based on an assessment of
the recipient's performance during the year. Senior management executives also received a share gift as set out in Note 28
of the financial statements.
RELATIONSHIp BETWEEN THE REmUNERATION pOLICY AND COmpANY pERFORmANCE
The tables below set out summary information about the Group’s earnings and movements in shareholder wealth for the
five years to June 2013:
Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined
in Note 30 to the financial statements.
The directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by another person
or firm on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001.
The directors are of the opinion that the services as disclosed in Note 30 to the financial statements do not compromise the
external auditor’s independence, based on advice received from the Audit Committee, for the following reasons:
• all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity
of the auditor, and
• none of the services undermine the general principles relating to auditor independence as set out in Code of Conduct
APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards
Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for
the company, acting as advocate for the company or jointly sharing economic risks and rewards.
30 June 2013
$’000
30 June 2012
$’000
30 June 2011
$’000
30 June 2010
$’000
30 June 2009
$’000
22
ROUNDING OFF OF AmOUNTS
Revenue
Net profit before tax
Net profit after tax
258,311
19,177
14,018
273,145
35,077
25,497
238,488
24,095
17,593
228,843
26,254
24,627
250,963
30,789
22,982
30 June 2013
30 June 2012
30 June 2011
30 June 2010
30 June 2009
Share price at start of year
Share price at end of year
Interim dividend
Final dividend1,2
Basic earnings per share
Diluted earnings per share
$1.07
$1.125
-
-
12.8 cps
12.8 cps
$0.83
$1.07
-
9.0cps
23.1cps
23.1cps
$1.005
$0.83
-
7.1cps
15.8cps
15.8cps
$0.80
$1.005
-
6.6 cps
22.2 cps
22.2 cps
$1.06
$0.80
-
-
20.4 cps
20.4 cps
1 The final dividend is per share fully franked and after corporate tax of 30%.
2 Declared after the balance date and reflected in the financial statements of the year of payment.
KEY TERmS OF EmpLOYmENT CONTRACTS
Employment contracts between the senior management executives and the Group do not have a specified duration. A
notice of four weeks must be given for senior management executives to terminate their contract. There are no extraordinary
termination payments set out in the contracts of the senior management executives of the Group.
20
pROCEEDINGS ON BEHALF OF THE COmpANY
Regional Express Holdings Limited (Rex) commenced legal proceedings against Dubbo City Council (DCC) in the fourth
quarter of the FY in the Land and Environment Court New South Wales. Rex is opposed to two decisions made by Dubbo
City Council, namely that on 22 October 2012 DCC decided to conduct security screening services at Dubbo airport on
a full cost recovery basis to be charged to all regular passenger transport operators using the airport, that is, Rex and
QantasLink; and that on 23 February 2013 DCC made the decision to adopt a fee to be charged to those airlines for the
security screening services. By law, aircraft which are under 20,000kg MTOW operating RPT services are not required to
be screened. It is Rex’s view that DCC failed to comply with the requirements of due process and procedural fairness in
reaching each decision, and in respect of the second decision, failed to comply with the statutory process required pursuant
to ss 608, 610D and 610F of the Local Government Act 1993.
The Company is a company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance
with that Class Order amounts in the Directors’ Report and the Financial Statements are rounded off to the nearest thousand
dollars, unless otherwise indicated.
Signed in accordance with a resolution of directors made pursuant to s.298 (2) of the Corporations Act 2001.
On behalf of the Directors
Garry Filmer
Chief Operating Officer
Sydney, 29 August 2013
22
23
DIRECTORS’ REPORTREGIONAL EXPRESS HOLDINGS LIMITEDDIRECTORS’ REPORTREGIONAL EXPRESS HOLDINGS LIMITED Deloitte Touche Tohmatsu
A.B.N. 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
DX 10307SSE
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
The Board of Directors
Regional Express Holdings Limited
81 – 83 Baxter Road
MASCOT NSW 2020
29 August 2013
Dear Board Members
Regional Express Holdings Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of
independence to the directors of Regional Express Holdings Limited.
As lead audit partner for the audit of the financial statements of Regional Express Holdings Limited for the financial year
ended 30 June 2013, I declare that to the best of my knowledge and belief, there have been no contraventions of:
(i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii) any applicable code of professional conduct in relation to the audit.
This page has been intentionally left blank
Yours sincerely
DELOITTE TOUCHE TOHMATSU
Catherine Hill
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
24
Auditor’s independence declArAtionreGionAl eXpress HoldinGs liMited
financial statements
26
27
FINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITED CONSOLIDATED STATEmENT OF pROFIT OR LOSS
CONSOLIDATED STATEmENT OF pROFIT OR LOSS AND OTHER COmpREHENSIvE INCOmE
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013
Profit after tax
2013
$’000
14,018
2012
$’000
25,497
Other comprehensive income for the year, net of income tax
-
-
Total profit and other comprehensive income for the year
14,018
25,497
Notes to the financial statements are included on pages 33 to 68
Passenger revenue
Freight revenue
Charter revenue
Other passenger services and amenities
Other revenue
Total revenue
Finance income
Other gains and losses
Flight and port operation costs (excluding fuel)
Fuel costs
Salaries and employee-related costs
Selling and marketing costs
Engineering and maintenance costs
Office and general administration costs
Finance costs
Depreciation and amortisation
Total costs and expenses
profit before income tax
Income tax expense
profit after tax
profit attributable to:
Members of the parent
Earnings per share (cents per share)
Basic
Diluted
Notes to the financial statements are included on pages 33 to 68
Note
2013
$’000
2012
$’000
207,884
960
37,869
2,550
9,048
258,311
214,751
982
45,488
2,789
9,135
273,145
1,987
1,580
1,902
1,207
(48,947)
(38,603)
(94,164)
(5,412)
(31,887)
(6,530)
(1,531)
(15,949)
(243,023)
(48,719)
(38,560)
(93,645)
(5,359)
(29,919)
(7,312)
(1,531)
(15,810)
(240,855)
5
5
6
5
5
5
19,177
35,077
7
(5,159)
(9,580)
14,018
25,497
14,018
14,018
25,497
25,497
20
20
12.8
12.8
23.1
23.1
28
29
FINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITED
CONSOLIDATED STATEmENT OF FINANCIAL pOSITION
CONSOLIDATED STATEmENT OF CASH FLOWS
AS AT 30 JUNE 2013
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013
Current assets
Cash and bank balances
Trade and other receivables
Available for sale investments carried at fair value – shares
Inventories
Total current assets
Non-current assets
Other financial assets
Other receivables
Property, plant and equipment
Aircraft
Other property, plant and equipment
Goodwill and other intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Unearned revenue
Borrowings
Current tax payable
Provisions
Other liabilities
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserved shares
Retained earnings
Share-based payments reserve
Other reserves
Total equity
Notes to the financial statements are included on pages 33 to 68
Note
2013
$’000
2012
$’000
26
8
9
10
8
11
12
13
16
14
7
15
16
14
15
7
17
18
19
18
18
44,155
18,652
10
13,218
76,035
43,272
13,219
10
11,946
68,447
11
7,002
11
7,038
93,409
75,261
8,311
183,994
260,029
100,739
75,937
7,399
191,124
259,571
22,691
19,446
2,235
990
7,483
11
52,856
19,595
19,189
2,042
6,265
7,716
37
54,844
22,864
2,579
789
26,232
79,088
25,100
2,031
897
28,028
82,872
180,941
176,699
71,959
(1,439)
108,155
676
1,590
180,941
71,959
(1,816)
103,960
1,006
1,590
176,699
Receipts from customers
Payments to suppliers, employees and others
Interest paid
Income tax paid
Net cash flows from operating activities
Interest received
Proceeds from disposal of property, plant and equipment
Payments for property, plant and equipment - aircraft and other
Payments for property, plant and equipment - software
Net cash flows used in investing activities
Dividends paid
Share buy-back
Shares purchased as reserve shares
Salary sacrifice - payment for shares
Repayment of borrowings - non-related parties
Net cash flows used in financing activities
Net increase in cash held
Cash at the beginning of the financial year
Note
26 (B)
2013
$’000
279,690
(246,979)
(2,390)
(10,542)
19,779
1,987
480
(8,635)
(549)
(6,717)
(9,823)
-
2012
$’000
299,283
(249,426)
(2,573)
(5,525)
41,759
1,580
3,541
(10,253)
(30)
(5,162)
(7,806)
(2,700)
(316)
3
(2,043)
(12,179)
-
7
(1,858)
(12,357)
883
24,240
43,272
19,032
Cash at the end of the financial year
26 (A)
44,155
43,272
Notes to the financial statements are included on pages 33 to 68
30
31
FINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITED
CONSOLIDATED STATEmENT OF CHANGES IN EQUITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEmENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013
Attributable to equity holders of the Company
Issued
capital
$’000
74,659
-
-
-
-
(2,700)
-
-
-
71,959
71,959
-
-
-
-
-
-
-
-
-
71,959
Reserved
shares
$’000
Retained
earnings
$’000
(2,358)
-
-
-
-
-
535
7
-
(1,816)
(1,816)
-
-
-
-
(316)
690
3
-
-
(1,439)
86,269
25,497
-
25,497
(7,806)
-
-
-
-
103,960
103,960
14,018
-
14,018
(9,823)
-
-
-
-
-
108,155
Share-
based
payments
reserve
$’000
607
-
-
-
-
-
(535)
-
934
1,006
1,006
-
-
-
-
-
(690)
-
(549)
909
676
General
reserve
$’000
1,590
-
-
-
-
-
-
-
-
1,590
1,590
-
-
-
-
-
-
-
-
-
1,590
Total
equity
$’000
160,767
25,497
-
25,497
(7,806)
(2,700)
-
7
934
176,699
176,699
14,018
-
14,018
(9,823)
(316)
-
3
(549)
909
180,941
At 1 July 2011
Profit for the year
Other comprehensive income (net of tax)
Total comprehensive income for the year
Dividends paid
Share buy-back
Share gift issued - gift
Share gift issued - salary sacrifice
Share gift plan provision
At 30 June 2012
At 1 July 2012
Profit for the year
Other comprehensive income (net of tax)
Total comprehensive income for the year
Dividends paid
Shares purchased as reserve shares
Share gift issued - gift
Share gift issued - salary sacrifice
Share gift - transfer to provision on amendment of EBA
Share gift plan provision
At 30 June 2013
Notes to the financial statements are included on pages 33 to 68
Note
Content
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
General Information
Application of New and Revised Accounting Standards
Significant Accounting Policies
Critical Accounting Judgements and Key Sources of Estimation Uncertainty
Revenues and Expenses
Profit for the Year
Income Tax
Trade and Other Receivables
Inventories
Other Financial Assets
Property, Plant and Equipment
Goodwill and Other Intangible Assets
Trade and Other Payables
Borrowings
Provisions
Other Liabilities
Issued Capital
Reserves and Other Reserves
Retained Earnings
Earnings Per Share
Dividends
Commitments for Expenditure
Contingent Liabilities and Contingent Assets
Subsidiaries
Acquisition of Businesses
Notes to the Consolidated Statement of Cash Flows
Financial Instruments
Key Management Personnel Compensation
Related Party Transactions
Remuneration of Auditors
Events After the Reporting Period
Segment Information
Parent Entity Disclosures
32
33
FINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITED
1 January 2013
30 June 2014
Key requirements of these six Standards are described below.
01
GENERAL INFORmATION
Regional Express Holdings Limited (the Company) is listed on the Australian Securities Exchange (Trading under symbol
‘REX’), incorporated and operating in Australia. The Company’s registered office and its principal place of business is at 81
– 83 Baxter Road, Mascot, NSW 2020, Australia. Principal activities of the Company and its subsidiaries are described in
Note 32.
02
AppLICATION OF NEW AND REvISED ACCOUNTING STANDARDS
At the date of authorisation of the financial statements, the Standards and Interpretations listed below were in issue but not
yet effective.
Standards and Interpretations issued not yet effective
Effective for annual reporting
periods beginning on or after
Expected to be initially applied
in the financial year ending
1 January 2015
30 June 2016
1 January 2013
30 June 2014
Standard/Interpretation
AASB 9 ‘Financial Instruments’, and the relevant amending
standards
AASB 10 ‘Consolidated Financial Statements’, AASB 2011-7
‘Amendments to Australian Accounting Standards arising from the
Consolidation and Joint Arrangements Standards’
AASB 11 ‘Joint Arrangements’ and AASB 2011-7 ‘Amendments to
Australian Accounting Standards arising from the Consolidation
and Joint Arrangements Standards’
AASB 12 ‘Disclosure of Interests in Other Entities’ and AASB
2011-7 ‘Amendments to Australian Accounting Standards arising
from the Consolidation and Joint Arrangements Standards’
AASB 13 ‘Fair Value Measurement’ and AASB 2011-8
‘Amendments to Australian Accounting Standards arising from
AASB 13’
AASB 119 ‘Employee Benefits’(2011) and AASB 2011-10
‘Amendments to Australian Accounting Standards arising from
AASB 119 (2011)’
AASB 127 ‘Separate Financial Statements’ (2011) and AASB
2011-7 ‘Amendments to Australian Accounting Standards arising
from the Consolidation and Joint Arrangements Standards’
AASB 128 ‘Investments in Associates and Joint Ventures’(2011)
and AASB 2011-7 ‘Amendments to Australian Accounting
Standards arising from the Consolidation and Joint Arrangements
Standards’
AASB 2011-4 ‘Amendments to Australian Accounting Standards
to Remove Individual Key Management Personnel Disclosure
Requirements’
1 January 2013
30 June 2014
1 January 2013
30 June 2014
1 January 2013
30 June 2014
1 January 2013
30 June 2014
1 January 2013
30 June 2014
1 July 2013
30 June 2014
AASB 2012-2 ‘Amendments to Australian Accounting Standards –
Disclosures – Offsetting Financial Assets and Financial Liabilities’
1 January 2013
30 June 2014
AASB 2012-3 ‘Amendments to Australian Accounting Standards –
Disclosures – Offsetting Financial Assets and Financial Liabilities’
1 January 2014
30 June 2015
AASB 2012-5 ‘Amendments to Australian Accounting Standards
arising from Annual Improvements 2009-2011 Cycle’
AASB 2012-10 ‘Amendments to Australian Accounting Standards
– Transition Guidance and Other Amendments’
1 January 2013
30 June 2014
1 January 2013
30 June 2014
A number of Australian Accounting Standards and Interpretations are in issue but are not effective for the current year end.
The following existing Group accounting policies will change on adoption of these pronouncements:
• AASB 9 issued in December 2009 introduces new requirements for the classification and measurement of financial
assets. AASB 9 amended in December 2010 includes the requirements for the classification and measurement of
financial liabilities and for derecognition.
Key requirements of AASB 9 are described as follows:
o AASB 9 requires all recognised financial assets that are within the scope of AASB 139 ‘Financial Instruments: Recognition
and Measurement’ to be subsequently measured at amortised cost or fair value. Specifically, debt investments that
are held within a business model whose objective is to collect the contractual cash flows, and that have contractual
cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at
amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are
measured at their fair value at the end of subsequent accounting periods. In addition, under AASB 9, entities may
make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held
for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.
The directors anticipate that the application of AASB 9 in the future may have an impact on amounts reported in respect of
the Group’s financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of the effect
of AASB 9 until a detailed review has been completed.
•
In August 2011, a package of six Standards on consolidation, joint arrangements, associates and disclosures was
issued, including AASB 10, AASB 11, AASB 12, AASB 127 (2011), AASB 128 (2011) and AASB 2011-7.
o AASB 10 replaces the parts of AASB 127 ‘Consolidated and Separate Financial Statements’ that deal with consolidated
financial statements. Interpretation 112 ‘Consolidation – Special Purpose Entities’ will be withdrawn upon the effective
date of AASB 10. Under AASB 10, there is only one basis for consolidation, that is control. In addition, AASB 10
includes a new definition of control that contains three elements: (a) power over an investee, (b) exposure, or rights,
to variable returns from its involvement with the investee, and (c) the ability to use its power over the investee to affect
the amount of the investor’s returns. Extensive guidance has been added in AASB 10 to deal with complex scenarios.
o AASB 11 replaces AASB 131 ‘Interests in Joint Ventures’. AASB 11 deals with how a joint arrangement of which two
or more parties have joint control should be classified. Interpretation 113 ‘Jointly Controlled Entities – Non-monetary
Contributions by Venturers’ will be withdrawn upon the effective date of AASB 11. Under AASB 11, joint arrangements
are classified as joint operations or joint ventures, depending on the rights and obligations of the parties to the
arrangements. In contrast, under AASB 131, there are three types of joint arrangements: jointly controlled entities,
jointly controlled assets and jointly controlled operations. In addition, joint ventures under AASB 11 are required to
be accounted for using the equity method of accounting, whereas jointly controlled entities under AASB 131 can be
accounted for using the equity method of accounting or proportionate accounting.
o AASB 12 is a disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements,
associates and/or unconsolidated structured entities. In general, the disclosure requirements in AASB 12 are more
extensive than those in the current standards.
o AASB 2011-7 contains consequential amendments to a range of Australian Accounting Standards and Interpretations
in light of the issuance of the 5 Standards above. These six standards are effective for annual periods beginning on or
after 1 January 2013 with earlier application permitted provided all of these standards are applied at the same time.
The directors anticipate that the application of these six standards will not have an impact on amounts reported in the
consolidated financial statements.
• AASB 13 establishes a single source of guidance for fair value measurements and disclosures about fair value
measurements. The Standard defines fair value, establishes a framework for measuring fair value, and requires disclosures
about fair value measurements. The scope of AASB 13 is broad; it applies to both financial instrument items and non-
financial instrument items for which other Australian Accounting Standards require or permit fair value measurements and
disclosures about fair value measurements, except in specified circumstances. In general, the disclosure requirements
in AASB 13 are more extensive than those required in the current standards. For example, quantitative and qualitative
disclosures based on the three-level fair value hierarchy currently required for financial instruments only under AASB 7
‘Financial Instruments: Disclosures’ will be extended by AASB 13 to cover all assets and liabilities within its scope.
AASB 13 is effective for annual periods beginning on or after 1 January 2013, with earlier application permitted.
The directors anticipate that AASB 13 will be adopted in the Group’s consolidated financial statements for the annual period
ending 30 June 2014 and that the application of the new Standard may affect the amounts reported in the financial statements
and result in more extensive disclosures in the financial statements.
• The amendments to AASB 132 clarify existing application issues relating to the offset of financial assets and financial
liabilities requirements. Specifically, the amendments clarify the meaning of ‘currently has a legally enforceable right of
set-off’ and ‘simultaneous realisation and settlement’.
34
35
FINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITED 02
AppLICATION OF NEW AND REvISED ACCOUNTING STANDARDS(CONTINUED)
The amendments to AASB 7 require entities to disclose information about rights of offset and related arrangements (such
as collateral posting requirements) for financial instruments under an enforceable master netting agreement or similar
arrangement.
• The amendments to AASB 7 are effective for annual periods beginning on or after 1 January 2013 and interim periods
within those annual periods. The disclosures should be provided retrospectively for all comparative periods. However, the
amendments to AASB 132 are not effective until annual periods beginning on or after 1 January 2014, with retrospective
application required.
The directors anticipate that the application of these amendments to AASB 132 and AASB 7 may result in more disclosures
being made with regard to offsetting financial assets and financial liabilities in the future.
• The Annual Improvements to AASBs 2009 – 2011 Cycle include a number of amendments to various AASBs. The
amendments are effective for annual periods beginning on or after 1 January 2013. Amendments to AASBs include:
o
o
amendments to AASB 116 ‘Property, Plant and Equipment’; and
amendments to AASB 132 ‘Financial Instruments: Presentation’.
The amendments to AASB 116 clarify that spare parts, stand-by equipment and servicing equipment should be classified as
property, plant and equipment when they meet the definition of property, plant and equipment in AASB 116 and as inventory
otherwise. The directors do not anticipate that the amendments to AASB 116 will have a significant effect on the Group’s
consolidated financial statements.
The amendments to AASB 132 clarify that income tax relating to distributions to holders of an equity instrument and to
transaction costs of an equity transaction should be accounted for in accordance with AASB 112 ‘Income Taxes’. The
directors anticipate that the amendments to AASB 132 will have no effect on the Group’s consolidated financial statements
as the Group has already adopted this treatment.
Other than as noted above, the adoption of the various Australian Accounting Standards and Interpretations in issue but
not yet effective will not impact the Group’s accounting policies. However, the pronouncements will result in changes to
information currently disclosed in the financial statements. The Group does not intend to adopt any of these pronouncements
before their effective dates.”
03
SIGNIFICANT ACCOUNTING pOLICIES
(A) STATEmENT OF COmpLIANCE
These financial statements are general purpose financial statements which have been prepared in accordance with the
Corporations Act 2001, Accounting Standards and Interpretations, and comply with other requirements of the law. The
financial statements include the consolidated financial statements of the Group. For the purpose of preparing the consolidated
statements, the Company is a for-profit entity.
Accounting Standards include Australian Accounting Standards. Compliance with Australian Accounting Standards ensures
that the financial statements and notes of the Group comply with International Financial Reporting Standards (‘IFRS’).
The financial statements were authorised for issue by the directors on 29 August 2013.
(B) BASIS OF pREpARATION
The consolidated financial statements have been prepared on the basis of historical cost, except for the revaluation of certain
financial instruments that are measured at revalued amounts or fair values, as explained in the accounting policies below.
Historical cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in
Australian dollars, unless otherwise noted.
The Company is a company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance
with that Class Order, amounts in the financial statements are rounded off to the nearest thousand dollars, unless otherwise
indicated.
(C) BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the
Company (its subsidiaries) (referred to as ‘the Group’ in these financial statements). Control is achieved where the Company
has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statement of
profit or loss and other comprehensive income from the effective date of acquisition and up to the effective date of disposal,
as appropriate. Total comprehensive income of subsidiaries is attributed to the owner of the Company and to the non-
controlling interests even if this results in the non-controlling interests having a deficit balance.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line
with those used by other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
Changes in the Group’s ownership interests in subsidiaries that do not result in the Group’s losing control are accounted for
as equity transactions. The carrying amounts of the Group’s interests and the non-controlling interests are adjusted to reflect
the changes in their relative interests in the subsidiaries. Any differences between the amount by which the non-controlling
interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to
owners of the Company.
When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the
aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying
amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. When assets of
the subsidiary are carried at revalued amounts or fair values and the related cumulative gain or loss has been recognised in
other comprehensive income and accumulated in equity, the amounts previously recognised in other comprehensive income
and accumulated in equity are accounted for as if the Company had directly disposed of the relevant assets (i.e. reclassified
to profit or loss or transferred directly to retained earnings as specified by applicable Standards). The fair value of any
investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition
for subsequent accounting under AASB 139 ‘Financial instruments: Recognition and Measurement’ or, where applicable, the
cost on initial recognition of an investment in an associate or jointly controlled entity.
(D) REvENUE
Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for rebates and other
similar allowances.
RENDERING OF SERvICES
Revenue from providing air passenger and freight services is recognised when the relevant flights are made.
DIvIDEND AND INTEREST INCOmE
Dividend from investments is recognised when the shareholder’s right to receive payment has been established provided that
it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably.
Interest income from or financial assets is recognised when it is probable that the economic benefits will flow to the Group
and the amount of revenue can be measured reliably.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable,
which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that
asset’s net carrying amount on initial recognition.
(E) BORROWING COSTS
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that
necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets,
until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets
is deducted from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
(F) CASH AND CASH EQUIvALENTS
Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are
readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
Bank overdrafts are shown within borrowings in current liabilities in the consolidated statement of financial position.
(G) FOREIGN CURRENCIES
The individual financial statements of each Group entity are presented in its functional currency being the currency of the
primary economic environment in which the entity operates. For the purpose of the consolidated financial statements, the
results and financial position of each entity are expressed in Australian dollars (‘$’), which is the functional currency of the
Group and the presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional
currency are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance date, monetary
36
37
FINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITED 03
SIGNIFICANT ACCOUNTING pOLICIES (CONTINUED)
items denominated in foreign currencies are retranslated at the rates prevailing at the balance date. Non-monetary items
carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the
fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not
retranslated.
Exchange differences are recognised in profit or loss in the period in which they arise except for exchange differences on
transactions entered into in order to hedge certain foreign currency risks (refer to Note 27).
(H) DERIvATIvE FINANCIAL INSTRUmENTS
The Group is only authorised by the Board to enter into forward contracts for the purchase of US dollars (USD) and is only
authorised to purchase amounts not exceeding the annual USD requirements of the Group. The Group does not engage in
any derivative financial instruments speculatively.
The Group enters into forward contracts where it agrees to buy specified amounts of USD in the future at a predetermined
exchange rate. The objective is to match the contract with anticipated future cash flows from sales and purchases in USD,
to protect the consolidated entity against the possibility of loss from future exchange rate fluctuations. The forward exchange
contracts are usually no longer than 12 months. Further details of these USD contracts are disclosed in Note 27 to the
financial statements.
The USD contracts are initially recognised at fair value at the date the contract is entered into and are subsequently remeasured
to their fair value at each reporting date. The resulting gain or loss is recognised in profit or loss immediately unless the foreign
currency contracts are designated and effective as a hedging instrument, in which event, the timing of the recognition in profit
or loss depends on the nature of the hedge relationship.
The fair value of USD contracts are classified as a non-current asset or a non-current liability if the remaining maturity of the
hedge relationship is more than 12 months and as a current asset or a current liability if the remaining maturity of the hedge
relationship is less than 12 months.
USD contracts not designated into an effective hedge relationship are classified as a current asset or a current liability.
HEDGE ACCOUNTING
Hedges of foreign exchange risk on highly probable forecast transactions or firm commitments are accounted for as cash
flow hedges.
At the inception of the hedge relationship the entity documents the relationship between the USD contract and hedged item,
along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the
inception of the hedge and on an ongoing basis, the Group documents whether the USD contract that is used in a hedging
relationship is highly effective in offsetting changes in fair values or cash flows of the hedged item attributable to the hedged
risk.
Note 27 contains details of the fair values of the USD contracts used for hedging purposes. Movements in the hedging
reserve in equity are also detailed in Note 18.
Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is
sold, terminated, or exercised, or no longer qualifies for hedge accounting. The adjustment to the carrying amount of the
hedged item arising from the hedged risk is included in profit or loss from that date.
CASH FLOW HEDGE
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are
recognised in other comprehensive income and accumulated under the heading of cash flow hedge reserve. The gain or loss
relating to the ineffective portion is recognised immediately in profit or loss as part of other gains and losses.
Amounts deferred in equity are recycled in profit or loss in the periods when the hedged item is recognised in profit or loss.
However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial
liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement
of the cost of the asset or liability.
Hedge accounting is discontinued when the Group revokes the hedging relationship, the hedging instrument expires or is
sold, terminated, or exercised, or no longer qualifies for hedge accounting. Any cumulative gain or loss deferred in equity at
that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When
a forecast transaction is no longer expected to occur, the cumulative gain or loss that was deferred in equity is recognised
immediately in profit or loss.
(I) EmpLOYEE BENEFITS
A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave,
and sick leave when it is probable that settlement will be required and they are capable of being measured reliably.
Liabilities recognised in respect of short term employee benefits are measured at their nominal values using the remuneration
rate expected to apply at the time of settlement.
Liabilities recognised in respect of long term employee benefits are measured as the present value of the estimated future
cash outflows to be made by the Group in respect of services provided by employees up to reporting date.
Payments to defined contribution retirement benefits plans are recognised as an expense when employees have rendered
service entitling them to the contributions.
(J) FINANCIAL ASSETS
Investments are recognised and derecognised on trade date where the purchase or sale of an investment is under a contract
whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially
measured at fair value, net of transaction costs except for those financial assets classified as at fair value through profit or loss
which are initially measured at fair value.
Other financial assets are classified into the following specified categories: financial assets ‘at fair value through profit or loss’,
‘available-for-sale’ financial assets, and ‘loans and receivables’. The classification depends on the nature and purpose of the
financial assets and is determined at the time of initial recognition.
EFFECTIvE INTEREST mETHOD
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest
income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts
through the expected life of the financial asset, or, where appropriate, a shorter period, to the net carrying amount on initial
recognition.
Income is recognised on an effective interest rate basis for debt instruments other than those financial assets ‘at fair value
through profit or loss’.
FINANCIAL ASSETS AT FAIR vALUE THROUGH pROFIT OR LOSS
Financial assets are classified as financial assets at fair value through profit or loss where the financial asset:
(i)
has been acquired principally for the purpose of selling in the near future;
(ii)
pattern of short-term profit-taking; or
is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual
(iii)
is a derivative that is not designated and effective as a hedging instrument.
Financial assets at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in profit
or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset.
Fair value is determined in the manner described in Note 27.
AvAILABLE-FOR-SALE FINANCIAL ASSETS
Certain shares and redeemable notes held by the Group are classified as being available-for-sale and are stated at fair
value. Fair value is determined in the manner described in Note 27. Gains and losses arising from changes in fair value are
recognised directly in the investments revaluation reserve with the exception of impairment losses, interest calculated using
the effective interest method and foreign exchange gains and losses on monetary assets which are recognised directly in
profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously
recognised in the investments revaluation reserve is included in profit or loss for the period.
Dividends on available-for-sale equity instruments are recognised in profit and loss when the Group’s right to receive payments
is established.
LOANS AND RECEIvABLES
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active
market are classified as ‘loans and receivables’. Loans and receivables are measured at amortised cost using the effective
interest method less impairment.
Interest is recognised by applying the effective interest rate.
ImpAIRmENT OF FINANCIAL ASSETS
Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each balance
date. Financial assets are impaired where there is objective evidence that as a result of one or more events that occurred after
the initial recognition of the financial asset the estimated future cash flows of the investment have been impacted. For financial
assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the
present value of estimated future cash flows, discounted at the original effective interest rate.
38
39
FINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITED 03
SIGNIFICANT ACCOUNTING pOLICIES (CONTINUED)
The carrying amount of financial assets including uncollectible trade receivables is reduced by the impairment loss through
the use of an allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance
account. Changes in the carrying amount of the allowance account are recognised in profit or loss.
With the exception of available-for-sale equity instruments, if, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the
previously recognised impairment loss is reversed through profit or loss to the extent the carrying amount of the investment
at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not
been recognised.
In respect of available-for-sale equity instruments, any subsequent increase in fair value after an impairment loss is recognised
directly in equity.
(K) FINANCIAL LIABILITIES AND EQUITY INSTRUmENTS
CLASSIFICATION OF DEBT OR EQUITY
Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual
arrangement. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting
all of its liabilities. Equity Instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.
FINANCIAL LIABILITIES
Financial liabilities are classified as either financial liabilities ‘at fair value through profit or loss’ or other financial liabilities.
FINANCIAL LIABILITIES AT FAIR vALUE THROUGH pROFIT OR LOSS
Financial liabilities at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in profit
or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability. Fair value is
determined in the manner described in Note 27.
OTHER FINANCIAL LIABILITIES
Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest
expense recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments
through the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial
recognition.
(L) GOODWILL
Goodwill acquired in a business combination is carried at cost established at date of the acquisition of the business less
accumulated impairment losses if any.
For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (CGUs), or groups
of CGUs, expected to benefit from the synergies of the business combination. CGUs (or groups of CGUs) to which goodwill
has been allocated are tested for impairment annually, or more frequently if events or changes in circumstances indicate that
goodwill might be impaired.
If the recoverable amount of the CGU (or group of CGUs) is less than the carrying amount of the CGU (or groups of CGUs),
the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the CGU (or groups of CGUs)
and then to the other assets of the CGU (or groups of CGUs) pro-rata on the basis of the carrying amount of each asset in
the CGU (or groups of CGUs). An impairment loss recognised for goodwill is recognised immediately in profit or loss and is
not reversed in a subsequent period.
On disposal of an operation within a CGU, the attributable amount of goodwill is included in the determination of the profit
or loss on disposal of the operation.
(m) GOvERNmENT GRANTS
Government grants are assistance by the government in the form of transfers of resources to the Group in return for past
or future compliance with certain conditions relating to the operating activities of the entity. Government grants include
government assistance where there are no conditions specifically relating to the operating activities of the Group other than
the requirement to operate in certain regions or industry sectors.
Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions
attaching to them and that the grants will be received. Government grants are recognised in profit or loss on a systematic
basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to
compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct or
otherwise acquire non-current assets are recognised as deferred revenue in the statement of financial position and transferred
to profit or loss on a systematic and rational basis over the useful lives of the related assets.
Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving
immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which
they become receivable.
The benefit of a government loan at a below-market rate of interest is treated as a government grant, measured as the
difference between proceeds received and the fair value of the loan based on prevailing market interest rates.
Government assistance which does not have conditions attached specifically relating to the operating activities of the entity
is recognised in accordance with the accounting policies above.
(N) ImpAIRmENT OF OTHER TANGIBLE AND INTANGIBLE ASSETS OTHER THAN GOODWILL
At each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not
generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-
generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate
assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-
generating units for which a reasonable and consistent allocation basis can be identified.
Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually
and whenever there is an indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying
amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised in profit or
loss immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation
decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the
revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the
carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating
unit) in prior years. A reversal of an impairment loss is recognised in profit or loss immediately, unless the relevant asset is
carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase.
(O) TAXATION
Income tax expense represents the sum of the tax currently payable and deferred tax.
CURRENT TAX
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the
consolidated [statement of profit or loss and other comprehensive income/statement of profit or loss] because of items of
income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group’s
liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting
period.
DEFERRED TAX
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated
financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are
generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible
temporary differences to the extent that it is probable that taxable profits will be available against which those deductible
temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference
arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a
transaction that affects neither the taxable profit nor the accounting profit.
40
41
FINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITED 03
SIGNIFICANT ACCOUNTING pOLICIES (CONTINUED)
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and
associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference
and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from
deductible temporary differences associated with such investments and interests are only recognised to the extent that it is
probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they
are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it
is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is
settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of
the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow
from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of
its assets and liabilities.
Deferred tax liabilities and assets are offset when there is a legally enforceable right to set off current tax assets against current
tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
For the purposes of measuring deferred tax liabilities and deferred tax assets for investment properties that are measured
using the fair value model, the carrying amounts of such properties are presumed to be recovered entirely through sale, unless
the presumption is rebutted. The presumption is rebutted when the investment property is depreciable and is held within a
business model whose objective is to consume substantially all of the economic benefits embodied in the investment property
over time, rather than through sale. The directors reviewed the Group's investment property portfolios and concluded that
none of the Group's investment properties are held under a business model whose objective is to consume substantially all
of the economic benefits embodied in the investment properties over time, rather than through sale. Therefore, the directors
have determined that the ‘sale’ presumption set out in the amendments to AASB 12 is not rebutted. As a result, the Group
has not recognised any deferred taxes on changes in fair value of the investment properties as the Group is not subject to
any income taxes on disposal of its investment properties.
CURRENT AND DEFERRED TAX FOR THE pERIOD
Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other
comprehensive income or directly in equity, in which case the current and deferred tax are also recognised in other
comprehensive income or directly in equity, respectively. Where current tax or deferred tax arises from the initial accounting
for a business combination, the tax effect is included in the accounting for the business combination.
(p) INTANGIBLE ASSETS
INTANGIBLE ASSETS ACQUIRED SEpARATELY
Intangible assets with finite lives that are acquired separately are recorded at cost less accumulated amortisation and
impairment losses. Amortisation is charged on a straight-line basis over their estimated useful lives. The estimated useful
life and amortisation method is reviewed at the end of each annual reporting period, with any changes in these accounting
estimates being accounted for on a prospective basis. Intangible assets with indefinite lives that are acquired separately are
carried at cost less accumulated impairment losses.
A summary of the policies applied to the Group’s finite intangible assets is as follows:
Intangible asset
Amortisation method used
Computer software
4 years straight line
Impairment test / recoverable amount testing
where an indicator of impairment exists
(Q) INvENTORIES
Inventories are valued at the lower of cost and net realisable value. Costs of inventories are determined on a first in first out
basis. Net realisable value represents the estimated selling price less all estimated costs of completion and costs necessary
to make the sale.
(R) LEASING
Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards incidental
to ownership to the lessee. All other leases are classified as operating leases.
GROUp AS LESSOR
Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct
costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and
recognised on a straight line basis over the lease term.
GROUp AS LESSEE
Assets held under finance leases are initially recognised at their fair value or, if lower, at amounts equal to the present value
of the minimum lease payments, each determined at the inception of the lease. The corresponding liability to the lessor is
included in the statement of financial position as a finance lease obligation.
Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant
rate of interest on the remaining balance of the liability. Finance charges are recognised immediately in profit and loss, unless
they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group’s general
policy on borrowing costs. Refer to Note 3E. Contingent rentals are recognised as expenses in the periods in which they are
incurred. Finance leased assets are amortised on a straight line basis over the estimated useful life of the asset.
Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another
systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability.
The aggregate benefits of incentives are recognised as a reduction of rental expense on a straight-line basis, except where
another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are
consumed.
(S) pROpERTY, pLANT AND EQUIpmENT
Land and buildings, plant and equipment, leasehold improvements and equipment under finance lease are stated at cost
less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the
item. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting
the amounts payable in the future to their present value as at the date of acquisition.
Depreciation is provided on property, plant and equipment, including freehold buildings but excluding land. Depreciation is
calculated on a straight line basis so as to write off the net cost of each asset over its expected useful life to its estimated
residual value. Leasehold improvements are depreciated over the period of the lease or estimated useful life, whichever is the
shorter, using the straight line method. The estimated useful lives, residual values and depreciation method are reviewed at
the end of each annual reporting period, with the effect of any changes recognised on a prospective basis.
The rates applied are as follows:
Aircraft
Building
Computer Equipment
Furniture & Fittings
Leasehold Improvements
Motor Vehicles
Plant & Equipment
Rotable Assets
15,000 to 60,000 hours
20 to 30 years
4 to 5 years
8 to 10 years
over the unexpired lease period
7 years
8 years
5 to 20 years
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected
to arise from the continued use of the asset. Any gain or loss arising in the disposal or retirement of an item of property, plant
and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is
recognised in profit or loss.
42
43
FINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITED 03
SIGNIFICANT ACCOUNTING pOLICIES (CONTINUED)
04
CRITICAL ACCOUNTING JUDGEmENTS AND KEY SOURCES OF ESTImATION UNCERTAINTY
(T) pROvISIONS
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is
probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the
obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at
reporting date, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using
the cashflows estimated to settle the present obligation, its carrying amount is the present value of those cashflows (where
the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party,
the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the
receivable can be measured reliably.
(U) SHARE-BASED pAYmENTS
Equity-settled share-based payments with employees and others providing similar services are measured at the fair value of
the equity instrument at the grant date. Details regarding the determination of the fair value of the equity-settled share-based
transactions are set out in Note 18.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis
over the vesting period, based on the Group’s estimate of shares that will eventually vest with and corresponding to increase
in equity.
Equity-settled share-based payment transactions with other parties other than employees are measured at the fair value of
the goods and services received, except where the fair value cannot be estimated reliably, in which case they are measured
at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty
renders the service.
For cash-settled share-based payments, a liability is recognised for the goods or services acquired, measured initially at the
fair value of the liability. At the end of each reporting period until the liability is settled, and the date of settlement, the fair value
of the liability is measured, with any changes in fair value recognised in profit or loss for the year.
Share-based payments for which this is a choice of equity-settled or cash-settled are accounted for as cash-settled share-
based payment.
(v) GOODS AND SERvICES TAX
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:
i. where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of
acquisition of an asset or as part of an item of expense; or
ii. for receivables and payables which are recognised inclusive of GST.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.
Cash flows are included in the statement of cash flows on a gross basis. The GST component of cash flows arising from
In the application of the Group’s accounting policies, which are described in Note 3, the directors are required to make
judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent
from other sources. The estimates and associated assumptions are based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision
and future periods if the revision affects both current and future periods.
CRITICAL JUDGEmENTS IN AppLYING THE ENTITY’S ACCOUNTING pOLICIES
The following are the critical judgements (apart from those involving estimations, which are dealt with below), that management
has made in the process of applying the Group’s accounting policies and that have the most significant effect on the amounts
recognised in the financial statements:
EmpLOYEE ENTITLEmENTS
Management judgement is applied in determining the following key assumptions used in the calculation of long service leave
at balance date:
•
•
future increases in wages and salaries;
future on-cost rates; and
• experience of employee departures and period of service.
KEY SOURCES OF ESTImATION UNCERTAINTY
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the balance
date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the
next financial year:
ImpAIRmENT OF GOODWILL
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which
goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to
arise from the cash-generating unit and a suitable discount rate in order to calculate present value.
The carrying amount of goodwill at the balance date was $7,190 thousand (2012: $7,190 thousand) with no impairment loss
recognised during the current financial year.
FAIR vALUE OF DERIvATIvES AND OTHER FINANCIAL INSTRUmENTS
As described in Note 27, management uses their judgment in selecting an appropriate valuation technique for financial
instruments not quoted in an active market. Valuation techniques commonly used by market practitioners are applied. For
derivative financial instruments, assumptions are made based on quoted market rates adjusted for specific features of the
instrument.
44
45
FINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITED 05
REvENUES AND EXpENSES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013
Finance income
Interest
Other revenue
Training income
Engineering services
Insurance claim
Grant – Department of Transport
Other income
Salaries and employee-related costs
Wages and salaries (excluding bonus – profit share scheme)
Bonus – profit share scheme
Workers’ compensation costs
Superannuation costs - defined contribution plan
Expense of share-based payments
Finance costs
Interest on bank overdrafts and loans
less: amounts amortised over future contract periods
Interest expense
The weighted average capitalisation rate on funds borrowed generally is 9.1% per annum
(2012: 9.1%)
Depreciation and amortisation
Depreciation and amortisation
Amortisation of development costs and software
Lease payments included in consolidated statement of profit or loss
Included in flight and port operation costs
Minimum lease payments – operating lease
Office and general administrative costs
Bad debts
2013
$’000
2012
$’000
1,987
1,580
1,987
1,580
3,297
3,881
327
354
366
230
2,900
2,941
2,158
1,729
9,048
9,135
(85,017)
(83,818)
(1,458)
(2,369)
(923)
(822)
(5,857)
(5,702)
(909)
(934)
(94,164)
(93,645)
2,390
2,573
(859)
(1,042)
(1,531)
(1,531)
(15,790)
(15,704)
(159)
(106)
(15,949)
(15,810)
(7,337)
(7,470)
(7,337)
(7,470)
-
(191)
-
(191)
06
pROFIT FOR THE YEAR
GAINS AND LOSSES
Profit for the year has been arrived at after crediting the following gains:
Net gain on disposal of property, plant and equipment
Net foreign currency gain
07
INCOmE TAX
INCOmE TAX RECOGNISED IN pROFIT OR LOSS
2013
$’000
156
1,746
1,902
2012
$’000
599
608
1,207
Income tax expense comprises:
Current tax expense
Deferred tax expense/(income) relating to the origination and reversal of temporary
differences
Total income tax expense
2013
$'000
2012
$'000
5,267
9,330
(108)
250
5,159
9,580
The prima facie income tax expense on pre-tax accounting profit from operations reconciles to
the income tax expense in the financial statements as follows:
Profit before tax from operations
19,177
35,077
Income tax expense calculated at 30%
Tax on non deductible expense/(non assessable income)
Previously unrecognised and unused tax losses and tax offsets now recognised as deferred tax
assets
5,753
10,523
(15)
94
(579)
(1,037)
5,159
9,580
The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on
taxable profits under Australian tax law. There has been no change in the corporate tax rate when compared with the
previous reporting period.
46
47
FINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITED
07
INCOmE TAX (CONTINUED)
The following current and deferred tax balances have been recognised in the statement of financial position.
Taxable and deductible temporary differences arise from the following:
Current tax assets and liabilities
Current tax payable
Income tax attributable:
Parent entity
Deferred tax balances
Deferred tax assets comprise:
Temporary differences
Deferred tax liabilities comprise:
Temporary differences
2013
$'000
2012
$'000
990
6,265
990
6,265
5,443
5,225
5,443
5,225
(6,232)
(6,122)
(6,232)
(6,122)
Net deferred tax assets/(liabilities)
(789)
(897)
30 June 2013
Gross deferred tax liabilities
Inventories
Other items
Opening
balance
$'000
(3,588)
(2,534)
Charged
to
income
$'000
Charged
to equity
$'000
Acquisitions
/ disposals
$'000
Exchange
differences
$'000
Changes
in tax
rate
$'000
(381)
-
-
-
-
271
-
-
-
-
Closing
balance
$'000
(3,969)
(2,263)
(6,122)
(110)
-
-
-
-
(6,232)
Gross deferred tax assets
Employee-related provisions
2,799
(168)
-
-
-
-
2,631
Provision for doubtful debts
3
-
-
-
-
-
3
Other items
2,423
5,225
386
-
-
-
-
2,809
218
-
-
-
-
5,443
Net deferred tax
(897)
108
-
-
-
-
(789)
30 June 2012
Gross deferred tax liabilities
Inventories
Other items
(3,117)
(1,294)
(471)
-
-
-
-
(1,240)
-
-
-
-
(3,588)
(2,534)
(4,411)
(1,711)
-
-
-
-
(6,122)
Gross deferred tax assets
Employee-related provisions
Provision for doubtful debts
Other items
2,256
4
1,504
543
-
-
-
-
2,799
(1)
-
-
-
-
3
919
-
-
-
-
3,764
1,461
-
-
-
-
2,423
5,225
Net deferred tax
(647)
(250)
-
-
-
-
(897)
Deferred tax assets of $717 thousand (2012: $1,298 thousand) from tax losses have not been brought to accounts as
assets.
48
49
FINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITED
08
TRADE AND OTHER RECEIvABLES
Current
Trade receivables
Provision for doubtful debts
2013
$’000
2012
$’000
8,472
7,901
(8)
(8)
8,464
7,893
09
INvENTORIES
Current
Consumable spares at cost
10
OTHER FINANCIAL ASSETS
Sundry debtors and other debtors
2,366
2,138
Prepayments
Deposits and other assets
3,994
2,892
3,828
296
18,652
13,219
Non-current
Investments carried at fair value
2013
$'000
2012
$'000
13,218
11,946
2013
$’000
2012
$’000
11
11
Trade receivables are non-interest bearing and are generally on 30 day terms. A provision for doubtful debts is made
when there is objective evidence that a trade receivable is impaired. The amount of the provision has been measured as
the difference between the carrying amount of the trade receivables and the estimated future cash flows expected to be
received from the relevant debtors. The Group has provided fully for all receivables deemed irrecoverable based on historical
experience.
Before accepting new customers, the Group assesses the potential customer’s credit quality and defines credit limits by
customer. Limits attributed to customers are reviewed regularly.
Majority of the Group’s revenue is derived from sales made through credit cards where counterparties are either banks or
the credit card companies.
Ageing of past due but not impaired
60 - 90 days
90 - 120 days or more
Total
Average age (days)
Movement in the provision for doubtful debts
Balance at the beginning of the year
Impairment losses written back on receivables
Balance at the end of the year
Ageing of impaired trade receivables
60 - 90 days
90 - 120 days
120+ days
Total
Non-current
Trade receivables – at amortised cost
2013
$’000
2012
$’000
84
50
310
174
394
224
268
169
(8)
(38)
-
30
(8)
(8)
-
-
-
-
(8)
(8)
(8)
(8)
2013
$’000
2012
$’000
7,002
7,038
7,002
7,038
50
51
FINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITED
11
pROpERTY, pLANT AND EQUIpmENT
2013
$’000
2012
$’000
RECONCIlIATIONS
Aircraft
At cost
Accumulated depreciation and impairment
Net carrying value
Other property, plant and equipment
Rotable assets
At cost
Accumulated depreciation and impairment
Net carrying value
Leasehold improvements
At cost
Accumulated depreciation and impairment
Net carrying value
Motor vehicles
At cost
Accumulated depreciation and impairment
Net carrying value
Furniture and fittings
At cost
Accumulated depreciation and impairment
Net carrying value
Computer equipment
At cost
Accumulated depreciation and impairment
Net carrying value
Plant and equipment – ground service equipment
At cost
Accumulated depreciation and impairment
Net carrying value
Land and buildings
At cost
Accumulated depreciation and impairment
Net carrying value
Engines
At cost
Accumulated depreciation and impairment
Net carrying value
Other property, plant and equipment
Total other property, plant and equipment
At cost
Accumulated depreciation and impairment
Net carrying value
Total property, plant and equipment
At cost
Accumulated depreciation and impairment
Net carrying value
144,427
141,837
(51,018)
(41,098)
93,409
100,739
50,796
46,985
(13,231)
(10,506)
37,565
36,479
1,368
1,273
(1,060)
(912)
308
361
2,353
2,410
(857)
(696)
1,496
1,714
1,335
1,314
(928)
(781)
407
533
2,024
2,408
(1,560)
(1,289)
464
1,119
8,977
8,647
(6,009)
(5,209)
2,968
3,438
29,822
28,729
(3,153)
(2,423)
26,669
26,306
8,527
8,527
(3,143)
(2,540)
5,384
5,987
105,202
100,293
(29,941)
(24,356)
75,261
75,937
249,629
242,130
(80,959)
(65,454)
168,670
176,676
Opening
net carrying
value
$’000
100,739
36,479
361
1,714
533
1,119
3,438
26,306
5,987
Additions
$’000
Disposals
$’000
Reclassification
$’000
Depreciation
charge for
the year
$’000
Closing net
carrying
value
$’000
2,865
4,104
103
-
13
139
318
1,093
-
(38)
(281)
(6)
(2)
-
-
(2)
-
-
-
-
-
(26)
-
(522)
26
-
-
(10,157)
(2,737)
(150)
(190)
(139)
(272)
(812)
(730)
(603)
93,409
37,565
308
1,496
407
464
2,968
26,669
5,384
176,676
8,635
(329)
(522)
(15,790)
168,670
112,163
34,195
2,978
4,887
506
1,787
646
616
3,648
26,942
5,229
46
139
28
819
572
101
683
(2,917)
(1,263)
(3)
-
(21)
-
(1)
-
-
-
-
-
-
-
-
-
-
600
(10,222)
(2,600)
(191)
(191)
(141)
(315)
(782)
(737)
(525)
100,739
36,479
361
1,714
533
1,119
3,438
26,306
5,987
185,732
10,253
(2,942)
(663)
(15,704)
176,676
2013
Aircraft
Rotable assets
Leasehold improvements
Motor vehicles
Furniture and fittings
Computer equipment
Plant and equipment – ground
service equipment
Land and buildings
Engines
Total property, plant and
equipment
2012
Aircraft
Rotable assets
Leasehold improvements
Motor vehicles
Furniture and fittings
Computer equipment
Plant and equipment – ground
service equipment
Land and buildings
Engines
Total property, plant and
equipment
No impairment loss has been recognised over items of property plant and equipment for the year ended 30 June 2013 (2012:
nil). Computer equipment is reclassified to computer software and disclosed in Note 12. The reclassification for FY 2012 is
due to an aircraft being split into its component parts and reclassified as engines and inventory.
52
53
FINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITED
12
GOODWILL AND OTHER INTANGIBLE ASSETS
13
TRADE AND OTHER pAYABLES
At 30 June 2013
Cost
Accumulated amortisation and impairment
Net carrying amount
Total goodwill and other intangible assets
Reconciliation
At 1 July 2012, net of accumulated amortisation
Additions
Reclassification
Amortisation at 30 June 2013
At 30 June 2013, net of accumulated amortisation
Total goodwill and other intangible assets
At 30 June 2012
Cost
Accumulated amortisation and impairment
Net carrying amount
Total goodwill and other intangible assets
Reconciliation
At 1 July 2011, net of accumulated amortisation
Additions
Amortisation at 30 June 2012
At 30 June 2012, net of accumulated amortisation
Total goodwill and intangible assets
Goodwill
$’000
Software and
Development Cost
$’000
7,190
2,011
-
(890)
7,190
1,121
8,311
7,190
209
-
549
-
522
-
(159)
7,190
1,121
8,311
7,190
940
-
(731)
7,190
209
7,399
7,190
285
-
30
-
(106)
7,190
209
7,399
During the financial year, the Group assessed the recoverable amount of goodwill and determined that there was no
impairment of goodwill.
Goodwill has been allocated for impairment testing purposes to the individual cash generating units as follows:
Air Link ($’000) – Charter
Air Link ($’000) – Passenger routes
Pel-Air ($’000)
Total ($’000)
58
518
6,614
7,190
Current
Trade payables
Other payables
Total
2013
$’000
13,595
9,096
22,691
2012
$’000
11,833
7,762
19,595
Trade payables are non-interest bearing and are normally settled on 7 to 30-day terms. Other payables are non-interest
bearing and have an average term of 7 to 30 days.
14
BORROWINGS
Current
Loan facility
Non-current
Loan facility
Effective
interest rate %
2013
$’000
9.1%
2,235
2012
$’000
2,042
9.1%
22,864
25,100
The loan facility was used by VAA Pty Ltd to fund a number of aircraft assets. The liabilities are secured over the assets
being funded the value of which exceeds the outstanding liability. The loan is repayable over 10 years from July 2012 to
June 2021.
15
pROvISIONS
Current
Employee benefits
Profit share and bonus
Annual leave and long service leave
Non-current
Employee benefits
Long service leave
Total employee benefits provisions
2013
$’000
2012
$’000
3,112
3,616
4,371
4,100
7,483
7,716
2,579
2,031
10,062
9,747
2013
$’000
2012
$’000
6,131
4,522
6,832
7,311
(6,013)
(5,702)
6,950
6,131
pEL-AIR
Pel-Air was purchased by the Group in the financial periods 2006 (50%) and 2007 (50%). The recoverable amount of
the Pel-Air cash-generating unit has been determined based on a 5% revenue growth with 2.5% cost escalation and
appropriate capital investment, and a value in use calculation which uses cash flow projections based on financial budgets
approved by management covering a five-year period, and a discount rate of 12.5% p.a. Cash flows beyond that five year
period are extrapolated using a steady 2.5% p.a. growth rate.
Annual leave and long service leave
Balance at the beginning of the year
Arising during the year
Utilised
Balance at the end of the year
AIR LINK
Air Link is a regional passenger airline that was acquired by the Group in the 2006 financial year. The recoverable amount of
the Air Link cash-generating unit is determined based on a 5% revenue growth with 2.5% cost escalation and appropriate
capital investment, and a value in use calculation which uses cash flow projections based on financial budgets approved
by management covering a five-year period and a discount rate of 12.5% p.a. Cash flows beyond that five year period are
extrapolated using a steady 2.5% p.a. growth rate.
54
55
FINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITED
16
OTHER LIABILITIES
Current
Unearned passenger and charter revenue
18
RESERvES AND OTHER RESERvES
2013
$’000
2012
$’000
19,446
19,189
Share-based payments reserve
General reserve
Reserved shares
Unearned training revenue
11
37
17
ISSUED CApITAL
Fully paid ordinary shares
2013
$’000
71,959
2012
$’000
71,959
Reserved shares
Balance at 1 July
Purchase of shares on market
Share gift issued - gift
Share gift issued - salary sacrifice
Balance at 30 June
2013
$’000
2012
$’000
(1,439)
(1,816)
676
1,006
1,590
1,590
827
780
(1,816)
(2,358)
(316)
-
690
535
3
7
(1,439)
(1,816)
Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to share capital from 1 July
1998. Therefore, the Company does not have a limited amount of authorised capital and issued shares do not have a par value.
Reserved shares are ordinary shares in the Company which are re-acquired for later payment as employee share-based payment awards
and are deducted from equity.
Fully paid ordinary shares
Balance at 1 July
Share buy-back
Cost of share buy-back
Balance at 30 June
2013
2012
No. ’000
$’000
No. ’000
$’000
110,090
71,959
112,902
74,659
-
-
(2,812)
(2,693)
-
-
-
(7)
110,090
71,959
110,090
71,959
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
During the Financial Year 2008, the Group executed a publicly announced share buy-back programme. All the shares purchased under
the programme are cancelled. During the current year, no shares were bought back (2012: 2,812,139).
Share units held as reserved shares by subsidiary company was 616,684 (2012: 953,992).
Share-based payments reserve
Balance at 1 July
Share gift issued
Share gift - transfer to provision on amendment of EBA
Share gift plan provision
Balance at 30 June
1,006
607
(690)
(535)
(549)
-
909
934
676
1,006
The share-based payments reserve arises on the grant of shares to executives and employees under the employee share gift plan.
Amounts are transferred out of the reserve when the shares are issued. Rex has established the share gift plan for its executive directors
and eligible employees since FY 2006.
During FY 2013, 2 groups namely the Flight Attendants and the Airline Services EBA staff opted not to receive share gift in lieu of higher
base salaries. Pilots may elect to take cash payment in lieu of the share gift.
The board decided that this plan will be offered to all non-EBA employees who are not the subject of an adverse recommendation by
the Remuneration and Nomination Committee. This plan is not based on any performance measures as it was established to show its
recognition of employees’ contribution to Rex by providing an opportunity to share in its future growth and profitability and to align the
interests of the employees more closely with the interests of the shareholders.
Eligible employees who accept an offer of shares under the share plan will be entitled to receive the equivalent of 2% of their base salary
in shares each financial year. Such shares will be issued to eligible employees on the relevant award dates. Non eligible employees are
given the opportunity to salary sacrifice amounts to acquire Rex shares, with allocation of shares equal to 2% of the their base salary.
General reserve
Balance at 1 July
Balance at 30 June
Total other reserves
2013
$’000
2012
$’000
1,590
1,590
1,590
1,590
1,590
1,590
The general reserve is used from time to time to transfer profits from retained profits. There is no policy of regular transfer.
56
57
FINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITED
19
RETAINED EARNINGS
Balance at 1 July
Dividends provided for or paid (Note 21)
Net profit for the year
Balance at 30 June
20
EARNINGS pER SHARE
Basic earnings per share
Basic earnings per share
Diluted earnings per share
Diluted earnings per share
2013
$’000
2012
$’000
103,960
86,269
(9,823)
(7,806)
14,018
25,497
108,155
103,960
2013
Cents per share
2012
Cents per share
12.8
12.8
23.1
23.1
Basic earnings per share
The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share (EPS) are as follows:
Net profit
Earnings used in the calculation of basic EPS
2013
$’000
2012
$’000
14,018
25,497
14,018
25,497
2013
No.’000
2012
No.’000
Weighted average number of ordinary shares for the purpose of basic EPS
109,387
110,179
Diluted earnings per share
The earnings and weighted average number of ordinary shares used in the calculation of diluted earnings per share (EPS) are as follows:
Net profit
Earnings used in the calculation of diluted EPS
2013
$’000
2012
$’000
14,018
25,497
14,018
25,497
2013
No.’000
2012
No.’000
Weighted average number of ordinary shares for the purpose of diluted EPS
109,387
110,179
21
DIvIDENDS
2013
2012
Cents
per share
Total
$’000
Cents
per share
Total
$’000
Unrecognised amounts
Dividends on fully paid ordinary shares proposed for approval
at AGM:
Fully franked final dividend
-
-
9.0
9,823
In respect of financial year ended 30 June 2013, the directors have recommended no dividends to be paid out in view of
the planned substantial investments in FY 2014 namely:
• purchase of Saab 340Bplus aircraft coming off lease;
• purchase of the entire spares holdings of Pinnacle airlines comprising over 215,000 line items;
• purchase of a flight simulator;
• construction of a building to house the simulator.
Fully franked dividends paid in respect of the past financial years ended 30 June, were:
• FY 2011, 6.0 cents per share, paid on 30 November 2011
• FY 2010, 6.6 cents per share, paid on 30 November 2010
• FY 2009, nil
Adjusted franking account balance
2013
$’000
2012
$’000
29,170
22,838
Franking credit that will arise from income tax payable as at the end of financial year
990
6,265
Impact on franking account balance of dividends not recognised
-
(4,246)
22
COmmITmENTS FOR EXpENDITURE
The Group’s commitments as at end of the financial year are as follows:
(A) Capital Expenditure Commitments
property, plant and equipment – aircraft
Not longer than one year
(B) Non-Cancellable Operating Lease Commitments
Not longer than one year
Longer than one year and not longer than five years
2013
$’000
31,599
31,599
4,483
-
4,483
2012
$’000
5,774
5,774
7,278
3,979
11,257
58
59
FINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITED
23
CONTINGENT LIABILITIES AND CONTINGENT ASSETS
26
NOTES TO THE CONSOLIDATED STATEmENT OF CASH FLOWS
As at 30 June 2013, no contingent liabilities or assets existed.
(A) RECONCIlIATION OF CASh AND CASh EquIVAlENTS
For the purposes of the statement of cash flows, cash and cash equivalents include cash on hand and in banks and
investments in money market instruments, net of outstanding bank overdrafts. Cash and cash equivalents at the end of the
financial year as shown in the statement of cash flows is reconciled to the related items in the statement of financial position
as follows:
Ownership interest
Country of
incorporation
2013
%
2012
%
Cash and bank balances
2013
$’000
44,155
2012
$’000
43,272
24
SUBSIDIARIES
Name of entity
Parent entity
Regional Express Holdings Limited
Subsidiaries
Regional Express Pty Limited
Rex Freight & Charter Pty Limited
Rex Investment Holdings Pty Limited
Air Link Pty Limited
Pel-Air Aviation Pty Limited
Australian Airline Pilot Academy Pty Limited
VAA Pty Ltd
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Regional Express Holdings Limited is the head entity within the tax-consolidated group. These subsidiary companies are
members of the tax-consolidated group.
25
ACQUISITION OF BUSINESSES
No business was acquired during the financial year.
(B) RECONCIlIATION OF PROFIT FOR ThE PERIOD TO NET CASh FlOWS FROM OPERATING ACTIVITIES
Profit for the year
Depreciation and amortisation
Share-based payment
Difference in market value on share-based payment
Unrealised foreign exchange (gain)/loss
Gain on disposal of non-current assets
Movement in bad debt provision
Interest received and receivable
Increase in receivables
Increase in inventories
Increase/(decrease) in deferred tax
Increase/(decrease) in current tax
Increase in trade payables
Increase in provisions
Decrease in other liabilities
(C) FINANCING FACIlITIES
2013
$’000
2012
$’000
14,018
25,497
15,949
15,810
865
803
44
131
315
(34)
(156)
(599)
-
(30)
(1,987)
(1,580)
(5,999)
(3,869)
(1,272)
(904)
(108)
250
(5,275)
3,805
3,096
229
315
2,908
(26)
(658)
19,779
41,759
Maximum facilities available and reviewed annually:
Loan facility
Merchant prepayments
Tape negotiations authority
Letter of credit
Set off
Guarantee
2013
Used
$’000
Limit
$’000
2012
Used
$’000
Limit
$’000
25,100
25,281
27,142
27,306
-
12,500
-
11,500
-
2,900
2,900
2,900
1,619
1,809
1,475
1,809
-
1,000
-
1,000
2,551
4,170
2,310
3,950
Exposure mitigation - Cash
-
3,600
-
3,380
Credit card
78
620
415
620
29,348
51,880
34,242
52,465
The facilities are secured by the Group’s operating cash flows and properties located in Adelaide, New South Wales at Don
Kendell Drive Forest Hill, and Robey Street Mascot.
60
61
FINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITED
27
FINANCIAL INSTRUmENTS
(A) CAPITAl RISk MANAGEMENT
The Group manages its capital to ensure that the entities in the Group will be able to continue as a going concern while
maximising the return to stakeholders.
The Group’s overall strategy remains unchanged from 2012.
The capital structure of the Group consists of debt as disclosed in Note 14. Equity attributable to equity holders of the parent
comprises issued capital, reserves and retained earnings as disclosed in Notes 17, 18 and 19 respectively.
Operating cash flows are used to acquire assets required for the Group’s operations, tax, dividends, share buy-backs and
repayment of maturing debt. The Group’s policy is to borrow centrally only if required.
GEARING RATIO
The Group’s Board reviews the capital structure on a semi-annual basis. As a part of this review the Board considers the
cost of capital and the risks associated with each class of capital. The Board will balance its overall capital structure through
the payment of dividends, new share issue and share buy-backs as well as the issue of new debt or the redemption of
existing debt.
Following a successful tender, the Group was awarded the contract to provide fixed wing air ambulance aircraft to Ambulance
Victoria. The Group took on a $30 million loan facility to acquire and equip 4 King Air B200C aircraft to fulfill the requirements
of the contract. The Group drew down $26 million of the facility during the financial year 2010, and $4 million during the
financial year 2011. At the end of the financial year 2011, the loan was fully paid back and replaced by a $29 million loan
facility which is fixed-interest bearing and repayable over 10 years from July 2012 to June 2021.
The net cash position at the end of the financial year was as follows:
Financial assets
Debt (i)
Cash and cash equivalents
Excess of cash and cash equivalents over debt/(net debt)
Equity (ii)
Net debt to equity ratio
(i) Debt is defined as long- and short-term borrowings, as detailed in Note 14.
(ii) Equity includes all capital and reserves of the Group that are managed as capital.
2013
$’000
2012
$’000
(25,099)
(27,142)
44,155
43,272
19,056
16,130
180,941
176,699
10.5%
9.1%
derivative financial instruments, for speculative purposes. The Treasury function, which co-ordinates the hedging of foreign
currency risks, is managed by the Group’s Finance Department and reports regularly to the Board and Audit and Corporate
Governance Committee.
(D) FOREIGN CuRRENCY RISk MANAGEMENT
The Group undertakes certain transactions denominated in USD, hence exposures to exchange rate fluctuations arise.
Exchange rate exposures are managed using forward foreign exchange contracts.
The carrying amount of the Group’s foreign currency denominated monetary assets and monetary liabilities at the end of
the financial year is as follows:
Liabilities
Assets
2013
USD’000
2012
USD’000
2013
USD’000
2012
USD’000
3,136
1,749
-
252
FOREIGN CURRENCY SENSITIvITY ANALYSIS
The Group is mainly exposed to USD for the following main purchases, approximate amounts per annum are:
• USD 15 million for engineering purchases
• USD 12 million for engine care and maintenance
• USD 8 million for operating leases
• USD 5 million for airline reservation systems usage
• USD 1 million for aircraft insurance policies
The Group is also exposed to fuel price risk which is nominally denominated in USD. The Group does not consider that this
is a foreign currency risk as the final cost of fuel in AUD forms the basis for the determination of the fuel levy which is charged
to the passenger when deemed necessary.
The following table details the Group’s sensitivity to a 10% increase and 10% decrease in the Australian Dollar against the
USD. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their
translation at the period end for a 10% change in foreign currency rates. A positive number indicates an increase in profit
or loss and other equity where the Australian Dollar strengthens against the respective currency. For a weakening of the
Australian Dollar against the respective currency there would be an equal and opposite impact on the profit and other equity,
and the balances below would be negative.
Profit or loss
2013
$’000
2012
$’000
34
14
The Group’s sensitivity to foreign currency has increased due to the increase in USD denominated monetary liabilities.
(B) CATEGORIES OF FINANCIAl INSTRuMENTS
FORWARD FOREIGN EXCHANGE CONTRACTS
Financial assets
Loans and receivables
Cash and bank balances
Available-for-sale financial assets
Financial liabilities
Amortised cost
2013
$’000
2012
$’000
21,660
17,365
44,155
43,272
21
21
47,790
46,737
(C) FINANCIAl RISk MANAGEMENT OBJECTIVES
The Group’s financial risk is essentially in US dollars (USD) exposure and hence its main objective is to minimize the impact
of USD fluctuation on its operations through spot purchases and/or hedges of the USD currency. The use of these financial
instruments is governed by the Group’s policy approved by the Board of Directors, which provides written principles on
foreign exchange risk. Compliance with policies and exposure limits is reviewed by the Audit and Corporate Governance
Committee and the Board on an ongoing basis. The Group does not enter into trade or financial instruments, including
The Group may enter into forward foreign exchange contracts to manage the risk associated with anticipated sales and
purchase transactions up to twelve months and up to 100% of the exposure generated. Basis adjustments are made to the
carrying amounts of non-financial hedged items when the anticipated sale or purchase transaction takes place.
(E) INTEREST RATE RISk MANAGEMENT
The Group has very little exposure to interest rate risk as its borrowings detailed in Note 14 are at a fixed interest rate. As
such the Group does not hedge its interest rate exposure. The Group’s exposures to interest rates on financial assets and
financial liabilities are detailed in the liquidity risk management section of this note.
(F) CREDIT RISk MANAGEMENT
The Group has limited exposure to credit risk as the majority of its revenue is derived from sales made through credit cards
where counterparties are either banks or the credit card companies. The disputes to the credit card charges amount to less
than $50,000 a year.
The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties
having similar characteristics. The credit risk on liquid funds and derivative financial instruments is limited because the
counterparties are banks with high credit-ratings assigned by international credit-rating agencies.
(G) lIquIDITY RISk MANAGEMENT
Ultimate responsibility for liquidity risk management rests with the Board of Directors, who has built an appropriate liquidity
62
63
FINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITED
27
FINANCIAL INSTRUmENTS (CONTINUED)
28
KEY mANAGEmENT pERSONNEL COmpENSATION
risk management framework for the management of the Group’s short, medium and long-term funding and liquidity
management requirements. The Group’s operating activities generate positive annual cash flow. The Group tries to maintain
a $10 million cash balance by the end of each financial year. As and when required, the Group uses financing facilities as
detailed in Note 26.
The aggregate compensation made to directors and other members of key management personnel of the Group is set out
below:
2013
$
2012
$
1,681,666
1,511,195
117,967
125,166
15,277
13,714
24,092
20,417
1,839,002
1,670,491
LIQUIDITY AND INTEREST RISK TABLES
The following tables detail the Group’s remaining contractual maturity for its non-derivative financial liabilities. The amounts
disclosed are based on the contractual undiscounted principal and interest cash flows of financial liabilities based on the
earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows.
Short-term benefits
Post-employment benefits
Other long-term benefits
Share-based payment
Weighted
average
effective
interest rate
%
2013
1 month
$’000
1-3 months
$’000
3 months
to a year
$’000
1-5 years
$’000
5+ years
$’000
29
RELATED pARTY TRANSACTIONS
(A) EquITY INTERESTS IN SuBSIDIARIES
Non-interest bearing
-
22,691
-
-
-
-
Interest bearing
9.1%
369
739
3,324
17,726
13,294
23,060
739
3,324
17,726
13,294
2012
Details of interests in subsidiaries are disclosed in Note 24 to the consolidated financial statements.
(B) TRANSACTIONS WITh kEY MANAGEMENT PERSONNEl
(i) KeY ManageMenT PerSOnnel cOMPenSaTiOn
Details of key management personnel compensation are disclosed in Note 28 to the consolidated financial statements.
Non-interest bearing
-
19,595
-
-
-
-
Interest bearing
9.1%
369
739
3,324
17,726
17,726
(ii) lOanS TO KeY ManageMenT PerSOnnel
There have been no loans made to key management personnel.
19,964
739
3,324
17,726
17,726
The following table details the Group’s expected maturity for its non-derivative financial assets. The amounts disclosed
are based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those
assets except where the Group anticipates that the cash flow will occur in a different period.
Weighted
average
effective
interest rate
%
1 month
$’000
1-3 months
$’000
3 months
to a year
$’000
1-5 years
$’000
5+ years
$’000
2013
Non-interest bearing
-
39
77
341
1,004
119
Interest bearing
5.0%
69
106
648
3,687
1,550
108
183
989
4,691
1,669
2012
Non-interest bearing
-
39
78
347
1,300
121
Interest bearing
5.0%
24
64
395
2,692
1,575
63
142
742
3,992
1,696
The Group does not hold any other derivative financial instruments.
(h) FAIR VAluE OF FINANCIAl INSTRuMENTS
The Directors consider that the carrying amounts of the financial assets and financial liabilities recorded at the amortised
cost in the financial statements approximate their fair values.
(iii) KeY ManageMenT PerSOnnel eQuiTY HOlDingS
The following table details the shareholdings (total of direct and indirect shareholdings) of directors and key management
personnel in the Group:
Directors:
Lim Kim Hai
The Hon. John Sharp
Lee Thian Soo
James Davis
Chris Hine
Garry Filmer
Key management personnel:
Warrick Lodge
Irwin Tan
Dale Hall
Balance at
1 July 2012
Shares gifted
during the year
Balance at
30 June 2013
24,236,143
-
24,236,143
400,000
-
400,000
11,449,362
-
11,449,362
200,866
-
200,866
169,458
3,247
172,705
12,654
2,512
15,166
137,853
2,802
140,655
13,637
2,802
16,439
28,425
2,512
30,937
Mayooran Thanabalasingham
66,215
2,802
69,017
Neville Hodge
Png Yeow Tat
11,998
3,058
15,056
8,972
2,466
11,438
During the financial year, no options were granted to (2012: nil), nor exercised (2012: nil) by key management personnel for
ordinary Rex shares. No options remained unpaid or to be exercised at the year end.
64
65
FINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITED
30
REmUNERATION OF AUDITORS
Audit and review of the consolidated financial statements
Other non-audit services - tax compliance
2013
$
256,000
37,800
293,800
2012
$
248,000
69,010
317,010
The auditor of the Group is Deloitte Touche Tohmatsu.
31
EvENTS AFTER THE REpORTING pERIOD
On 1 July 2013, Rex purchased, at a steep discount, the entire Saab 340 spare parts holdings from Pinnacle Airlines in the
USA which had over 215,000 items including engines, propellers and undercarriages.
On 2 July 2013, Rex took ownership of seven of the 25 leased Saab 340Bplus model aircraft bringing the total owned Saab
aircraft in the fleet to 33.
On 3 July 2013, Rex signed an agreement to purchase eight Saab 340Bplus model aircraft off lease on or before expiry of
their leases in March 2014.
32
SEGmENT INFORmATION
AASB 8 requires operating segments to be identified on the basis of internal reports about components of the Group that
are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess
its performance.
Information reported to the Group's Chief Executive Officer for the purposes of resource allocation and assessment of
performance is more specifically focused on the category of customer for each type of service. The Group's reportable
segments under AASB 8 are therefore as follows:
• Regular public transport
• Charter
• Training
The accounting policies of the reportable segments are the same as the Group's accounting policies.
The following is an analysis of the Group’s revenue and results by reportable operating segment for the year:
Continuing operations
Regular public transport
Charter
Training
Finance income
Other gains and losses
Central administration costs and directors’ salaries
Finance costs
Profit before tax
Income tax expense
Revenue
Segment result
2013
$’000
2012
$’000
2013
$’000
2012
$’000
216,656
223,771
20,586
37,062
37,869
45,488
2,825
4,214
3,786
3,886
(62)
(143)
258,311
273,145
23,349
41,133
1,987
1,580
1,987
1,580
1,902
1,207
1,902
1,207
(6,530)
(7,312)
(1,531)
(1,531)
19,177
35,077
(5,159)
(9,580)
Consolidated segment revenue and profit
262,200
275,932
14,018
25,497
The revenue reported above represents revenue generated from external customers. There were no intersegment sales.
Segment result represents the profit earned by each segment without allocation of central administration costs and directors’
salaries. This is the measure reported to the chief operating decision maker for the purposes of resource allocation and
assessment of segment performance.
The following is an analysis of the Group’s assets by reportable operating segment as at the end of the year:
Continuing operations
Regular public transport assets
Charter assets
Training assets
Total assets
Other segment information for the year is as follows:
Continuing operations
Regular public transport
Charter
Training
2013
$’000
171,941
79,637
8,451
260,029
2012
$’000
169,630
81,367
8,574
259,571
Depreciation and amortisation
Additions to non-current assets
2013
$’000
9,702
5,977
270
2012
$’000
9,682
5,824
304
15,949
15,810
2013
$’000
6,670
2,439
75
9,184
2012
$’000
5,153
5,084
46
10,283
66
67
FINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITED
DIRECTORS’ DECLARATION
The directors declare that:
(a) in the directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as
and when they become due and payable;
(b) the attached financial statements are in compliance with International Financial Reporting Standards, as stated in
Note 3 to the consolidated financial statements;
(c) in the directors’ opinion, the attached financial statements and notes thereto are in accordance with the Corporations
Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and
performance of the consolidated entity; and
(d) the directors have been given the declarations required by s.295A of the Corporations Act 2001.
At the date of this declaration, the Company is within the class of companies affected by ASIC Class Order 98/1418. The
nature of the deed of cross guarantee is such that each company which is party to the deed guarantees to each creditor
payment in full of any debt in accordance with the deed of cross guarantee.
In the directors’ opinion, there are reasonable grounds to believe that the Company and the companies to which the ASIC
Class Order applies, as detailed in Note 33 to the financial statements will, as a group, be able to meet any obligations or
liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee.
Signed in accordance with a resolution of the directors made pursuant to s.295 (5) of the Corporations Act 2001.
On behalf of the Directors
Garry Filmer
Chief Operating Officer
Sydney, 29 August 2013
33
pARENT ENTITY DISCLOSURES
(A)
Financial position
Assets
Current assets
Non-current assets
Total assets
Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Equity
Issued capital
Retained earnings
Share-based payments reserve
General reserve
Total equity
(B)
Financial performance
Profit for the year
Other comprehensive income
Total comprehensive income
2013
$’000
2012
$’000
61,994
54,645
139,175
148,422
201,169
203,067
44,343
48,186
2,000
1,500
46,343
49,686
71,959
71,959
82,090
80,332
461
316
774
316
154,826
153,381
11,666
21,116
-
-
11,666
21,116
(C)
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
During the financial year 2011, the parent entity entered into a deed of cross guarantee in relation to the debts of Pel-Air Aviation Pty
Ltd, Rex Freight and Charter Pty Ltd, Rex Investment Holdings Pty Ltd and Australian Airline Pilot Academy Pty Ltd.
By entering into the deed, the wholly owned entities have been relieved from the requirements to prepare a financial report and
directors’ report under Class Order 98/1418 (as amended) issued by the Australian Securities and Investments Commission (‘ASIC’).
The above companies represent a ‘Closed Group’ for the purposes of the Class Order, and as there are no other parties to the Deed of
Cross Guarantee that are controlled by Regional Express Holdings Limited, they also represent the ‘Extended Closed Group’.
The statement of profit or loss and other comprehensive income and statement of financial position of the ‘Closed Group’ can be found
in the consolidated statement of profit or loss and other comprehensive income and statement of financial position along with the note
on Regional Express Holdings Limited as parent found in Note 33 (A) and (B).
(D)
Contingent liabilities of the parent entity
As at 30 June 2013, no contingent liabilities or assets existed (2012: nil).
(E)
Commitments for the acquisition of property, plant and equipment by the parent entity
As at 30 June 2013, the parent entity has commitment of USD28,900 thousand for aircraft acquisition payable within one year
(2012: USD5,950 thousand).
68
69
FINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTSREGIONAL EXPRESS HOLDINGS LIMITED
regulatory reports
70
71
REGULATORY REPORTSREGIONAL EXPRESS HOLDINGS LIMITEDREGULATORY REPORTSREGIONAL EXPRESS HOLDINGS LIMITED Deloitte Touche Tohmatsu
A.B.N. 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1220 Australia
DX 10307SSE
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
Independent Auditor’s Report
to the Members of Regional Express Holdings Limited
Report on the Financial Report
We have audited the accompanying financial report of Regional Express Holdings Limited, which comprises the state-
ment of financial position as at 30 June 2013, the statement of comprehensive income, the statement of cash flows and
the statement of changes in equity for the year ended on that date, notes comprising a summary of significant account-
ing policies and other explanatory information, and the directors’ declaration of the consolidated entity, comprising the
company and the entities it controlled at the year’s end or from time to time during the financial year as set out on pages
28 to 69.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a true and fair view
in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as
the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view
and is free from material misstatement, whether due to fraud or error. In Note 2, the directors also state, in accordance
with Accounting Standard AASB 101 Presentation of Financial Statements, that the consolidated financial statements
comply with International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance
with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating
to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free
from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material
misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers
internal control, relevant to the company’s preparation of the financial report that gives a true and fair view, in order to
design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
72
Auditor’s Independence Declaration
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We con-
firm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of
Regional Express Holdings Limited, would be in the same terms if given to the directors as at the time of this auditor’s
report.
Opinion
In our opinion:
(a) the financial report of Regional Express Holdings Limited is in accordance with the Corporations Act 2001,
including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2013 and of its performance
for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) the consolidated financial statements also comply with International Financial Reporting Standards as disclosed in
Note 2.
Report on the Remuneration Report
We have audited the Remuneration Report included in Note 19 of the directors’ report for the year ended 30 June
2013. The directors of the company are responsible for the preparation and presentation of the Remuneration Report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
Opinion
In our opinion the Remuneration Report of Regional Express Holdings Limited for the year ended 30 June 2013,
complies with section 300A of the Corporations Act 2001.
DELOITTE TOUCHE TOHMATSU
Catherine Hill
Partner
Chartered Accountants
Sydney, 29 August 2013
73
INDEPENDENT AUDITOR’S REPORTREGIONAL EXPRESS HOLDINGS LIMITEDINDEPENDENT AUDITOR’S REPORTREGIONAL EXPRESS HOLDINGS LIMITED
CORpORATE GOvERNANCE STATEmENT
The Board is committed to sound corporate governance to ensure shareholder expectations are met and that Regional
Express Holdings (the Company) is in compliance with the Australian Securities Exchange (ASX) Corporate Governance
Council’s Principles of Good Corporate Governance and Best Practice Recommendations (ASX Recommendations).
As required by the ASX Listing Rules this statement sets out the extent to which the Company has complied with the ASX
Recommendations during the financial year to 30 June 2013 and identifies any of the ASX Recommendations not followed
and the reason why the Company has not adopted the ASX Recommendations. This statement adopts the ordering and
numbering of the ASX Recommendations.
pRINCIpLE 1: LAY SOLID FOUNDATION FOR mANAGEmENT AND OvERSIGHT
The Board has adopted a charter that details the roles and responsibilities of the Board and its members and their relationship
with the Management Committee to achieve the objectives of delivering shareholder value. The Board’s Charter, Board
Committee Charters, Continuous Disclosure Policy and Code of Conduct are available for access by shareholders and the
general public in the corporate governance section of the Company’s website (ASX Recommendation 1.1).
The performance of each Management Committee member is evaluated against goals and objectives at least once a year
with the assistance of the Remuneration and Nomination Committee (ASX Recommendation 1.2). The performance of the
Management Committee was reviewed in FY 2013 (ASX Recommendation 1.3).
pRINCIpLE 2: STRUCTURE THE BOARD TO ADD vALUE
The skills, experience and expertise relevant to the position of director held by each director in office at the date of the annual
report are set out in the Directors’ Report.
The membership of the Board during the year ended 30 June 2013, including independence status was as follows:
Director
Lim Kim Hai
Status
Executive Chairman
The Hon. John Sharp
Deputy Chairman and Independent Director
James Davis
Independent Director
Garry Filmer
Chris Hine
Chief Operating Officer (from 1 March 2012)
Executive Director
Chief Operating Officer (until 29 February
2012)
Executive Director
Lee Thian Soo
Non-Executive Director
Ronald Bartsch
Independent Director
Date of Appointment
Appointed 27 June 2003 and re-appointed 16 November 2006,
25 November 2009 and 27 November 2012.
Appointed 14 April 2005 and re-appointed 19 November 2008
and 23 November 2011.
Appointed 26 August 2004 as Executive Director and re-
appointed 23 November 2011.
Appointed 1 March 2012 and re-appointed 27 November 2012.
Appointed 1 March 2011 and re-appointed 23 November 2011.
Appointed 27 June 2003 and re-appointed 16 November 2006,
25 November 2009 and 27 November 2012.
Appointed 23 November 2010 and re-appointed 23 November
2011.
The Board feels that James Davis's recent prior role as Managing Director will not affect the independence of his decision
making as a Director and as such has deemed him independent. The Board acknowledges the ASX Recommendation that
a majority of the Board should be independent directors (ASX Recommendation 2.1). Although the Board has only three
directors out of seven that qualify as independent non-executive directors, Lee Thian Soo is non-executive and is only
considered non-independent by virtue of his share ownership. The Board believes that every director on the current Board
will make decisions in the best interests of all shareholders and in accordance with their duties as directors.
The Board also acknowledges that it is desirable that the Chairman be an independent director and for his role to be
segregated from that of the Chief Executive Officer (ASX Recommendations 2.2 and 2.3), however, the Board views the
Chairman’s history of leadership of the Company as an advantage, both at the management level and at the Board level.
This has resulted in performance that matches the best airlines in the world.
• Determining the Company's dividend policy, the operation of the Company's dividend re-investment plan (if any), and
the amount and timing of all dividends.
• Evaluating, approving and monitoring major capital expenditure, capital management and all major acquisitions,
divestitures and other corporate transactions, including the issue of securities of the Company.
• Approving all accounting policies, financial reports and material reporting and external communications by the Group.
• Appointment of the Chairman of the Company.
(b) Executive management
• Appointing, monitoring, managing the performance of the Chief Operating Officer or Managing Director and other
executive directors.
• Managing succession planning for the executive directors and such other key management positions which may be
identified from time to time.
• Appointing the Company Secretary.
• With the advice and assistance of the Remuneration & Nomination Committee, reviewing and approving the performance
and remuneration of the individual Board members and policies with respect to remuneration of any employees.
(c) Audit
• Upon the recommendation of the Audit and Corporate Governance Committee, appointing the external auditor and
determining its remuneration and terms of appointment.
• Ensuring that effective audit and regulatory compliance programmes are in place to protect the Group's assets and
shareholder value.
• Approving and monitoring the Group's audit framework. Approving and, with the assistance and advice of the Audit and
Governance Committee, monitoring compliance with the Group's audit policies and protocol.
• Monitoring the Group's operations in relation to, and compliance with relevant regulatory and legal requirements.
(d) Corporate Governance
At least once per year the Board will, with the assistance and advice of the Audit and Corporate Governance Committee,
review the performance and effectiveness of the Company's corporate governance policies and procedures and, if
appropriate, amend those policies and procedures as necessary.
The Board will review and approve all disclosures related to any departures from the ASX Principles of Good Corporate
Governance.
• The Board will review and approve the public disclosure of any of the Group's policies and procedures.
• The Board will supervise the public disclosure of all matters that the law and ASX Listing Rules require to be publicly
disclosed, consistent with the Continuous Disclosure Compliance Policy approved by the Board.
• The Board will approve the appointment of directors to committees established by the Board.
• The Board will approve and monitor delegations of authority.
(e) Risk management
The Company recognises that the management of business and economic risk is an integral part of its operations and
has for many years integrated risk management processes into its operations to ensure continuity of the business and to
minimise any impact on its performance. The Board has established a sound system of risk oversight and management
and internal control which involve the Safety and Risk Management Committee and the Audit and Corporate Governance
Committee.
• Ensuring that effective risk management programmes are in place to protect the Group's assets and shareholder value.
The Board is responsible for the management of the affairs of the Company and its subsidiaries (the Group), including:
• Approving and monitoring the Group's risk framework, including (but not limited to) systems of risk management and
(a) Strategic and Financial performance
• Developing and approving the corporate strategy.
internal control.
• Approving and, with the assistance and advice of the Risk Management Committee, monitoring compliance with the
Group's risk.
• Evaluating, approving and monitoring the strategic and financial plans and objectives of the Group.
The Charters of both committees are available on the Company’s website.
• Evaluating, approving and monitoring the annual budgets and business plans.
74
75
REGULATORY REPORTSREGIONAL EXPRESS HOLDINGS LIMITEDREGULATORY REPORTSREGIONAL EXPRESS HOLDINGS LIMITED CORpORATE GOvERNANCE STATEmENT (CONTINUED)
(f) Strategic planning
• The Board will be actively and regularly involved in strategic planning.
• Strategic planning will be based on the identification of opportunities and the full range of business risks that will
determine which of those opportunities are most worth pursuing.
• The Board will, on an ongoing basis, review how the strategic environment is changing, what key business risks and
opportunities are appearing, how they are being managed and what, if any, modifications in strategic direction should
be adopted.
(g) performance Evaluation
• At least once per year the Board will, with the advice and assistance of the Remuneration and Nomination Committee,
review and evaluate the performance of the Board, each Board Committee, and each individual director against the
relevant Charters, corporate governance policies, and agreed goals and objectives (ASX Recommendation 2.5).
• Following each review and evaluation the Board will consider how to improve its performance.
• The Board will agree and set the goals and objectives for the Board and its Committees each year, and if necessary,
amend the relevant Charters and policies.
• With the advice and assistance of the Remuneration and Nomination Committee, the Board will review and approve the
remuneration of the Company's executive and non-executive directors.
The evaluation of the Board, its committees and directors was carried out during the financial year as set out above.
A Director of the Company is entitled to seek independent professional advice (including, but not limited to, legal, accounting
and financial advice) at the Company's expense on any matter connected with the discharge of his or her responsibilities,
in accordance with the procedures and subject to the conditions set out in the Board Charter.
The Remuneration and Nomination Committee has been established by the Board of the Company (ASX recommendations
2.4 and 8.1) and applies to the Company and its subsidiaries to support and advise the Board in fulfilling its responsibilities
to shareholders, employees and other stakeholders of the Company by endeavouring to ensure that:
• the directors and senior management of the Group are remunerated fairly and appropriately;
• the Group's remuneration policies and outcomes strike an appropriate balance between the interests of the Company's
shareholders, and rewarding and motivating the Group's executives and employees in order to secure the long term
benefits of their energy and loyalty;
• the human resources policies and practices are consistent with and complementary to the strategic direction and
objectives of the Company as determined by the Board;
• review and advise the Board on the composition of the Board and its Committees;
• review the performance of the Board, the chairman of the Board, the executive and non-executive directors, and other
individual members of the Board; and
• ensure that proper succession plans are in place for consideration by the Board.
This Committee is chaired by the Hon. John Sharp and has one other member, James Davis. The Committee had two
meetings during the financial year attended by all members of the Committee. Descriptions of the members’ qualifications,
skills and experience are included in the Directors’ Report.
The Board acknowledges the ASX recommendations to have the Committee compose of a majority of independent directors
and have at least 3 members.
The Committee is currently made up of two directors. The Board feels at this stage that two members are sufficient for
the Remuneration and Nomination committee given the size of the Company and Board. The Board also feels that James
Davis, while not considered an independent director due to him holding an executive position up till 1 July 2011, will still
make decisions that are in the best interests of the shareholders in his duty as Remuneration and Nomination committee
member. Having had first hand experience working with the members of the Management Committee and various members
of the Company’s management, during his three years as Managing Director, he would be in the best position to make
recommendations to the Board based on those experiences.
The Remuneration and Nomination Committee has a formal Charter which is available on the Company’s website.
pRINCIpLE 3: pROmOTE ETHICAL AND RESpONSIBLE DECISION mAKING
Directors and the Management Committee are required to maintain the highest legal, moral and ethical standards of
conduct. The Board has adopted the Code of Conduct which provides guidance to all staff on compliance with legal and
other obligations (ASX Recommendation 3.1).
The Company has established a Share Trading Policy. Under this policy, Directors and Management Committee are
prohibited from trading in securities of the Company without prior approval from the Board.
The Company employs all staff on their merits and is committed to recognising and valuing the contributions of staff from
diverse backgrounds. The Company has established a Diversity Policy (ASX Recommendation 3.2).
The Company does not believe in an affirmative action policy and setting of artificial targets for staff of various backgrounds
(gender, religious, cultural, racial etc) but rather in ensuring that all staff are able to develop to their full extent of their
capabilities and contributions (ASX Recommendation 3.3).
The Company was compliant with the Workplace Gender Equality Act 2012 as reported by the Workplace Gender Equality
Agency.
As at the end of the reporting period the proportion of female employees in the Company was 33%. There were nine
women holding key manager positions in the Company. There were no female Board members or Management Committee
members (ASX Recommendation 3.4).
In accordance with the requirements of the Workplace Gender Equality Act 2012 (Act), Regional Express Holdings Limited
lodged its annual public report (2013) with the Workplace Gender Equality Agency (Agency).
To access a copy of the report refer to the Rex website under Corporate and Social Responsibilities.
Details on the reporting process can be located at the Workplace Gender Equality Website: www.wgea.gov.au
The Code of Conduct, Share Trading Policy and Diversity Policy are available on the Company’s website
(ASX Recommendation 3.5).
pRINCIpLE 4: SAFEGUARD INTEGRITY IN FINANCIAL REpORTING
The Audit and Corporate Governance Committee has been established by the Board of the Company (ASX
recommendation 4.1) to assist the Board in fulfilling its commitment to ensure the integrity of the Company’s financial reports
and Corporate Governance policies:
• assisting the Board in fulfilling its oversight responsibilities for the financial reporting process, the system of internal
control relating to all matters affecting the Group’s financial performance, the audit process, and the Company’s process
for monitoring compliance with laws and regulations and the code of conduct;
• advising the Board on good governance standards and appropriate corporate governance policies for the Group; and
• critically reviewing the Group's performance against its corporate governance policies.
This Committee is chaired by Lee Thian Soo and has one other member, the Hon. John Sharp. Descriptions of the members’
qualifications, skills and experience are included in the Directors’ Report. The Committee had two meetings during the
financial year attended by all members of the Committee.
The Board acknowledges the ASX recommendations to have the Committee composed of a majority of independent
directors, chaired by an independent director and have at least three members (ASX Recommendation 4.2).
The Committee is currently made up of two non-executive directors of which one is independent. The non-independent
director, who is also the chair of the committee, is only considered non-independent by virtue of his share ownership. The
Board feels that the directors in the audit committee will make decisions that are in the best interests of the shareholders in
their duties as audit committee members and directors of the company. The Board also feels at this stage that two members
are sufficient for the audit committee given the size of the company and Board.
The Audit and Corporate Governance Committee has a formal Charter which is available on the Company’s website (ASX
Recommendation 4.3).
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REGULATORY REPORTSREGIONAL EXPRESS HOLDINGS LIMITEDREGULATORY REPORTSREGIONAL EXPRESS HOLDINGS LIMITED CORpORATE GOvERNANCE STATEmENT (CONTINUED)
pRINCIpLE 5: mAKE TImELY AND BALANCED DISCLOSURE
The Company complies with the continuous disclosure obligations of the ASX Listing Rules and, in doing so, immediately
notifies the market of any material price sensitive information. The Company has adopted and implemented a Continuous
Disclosure Policy which sets out the procedure for the identification of material price sensitive information and reporting of
such information to the company secretaries for review (ASX Recommendations 5.1 and 5.2). The Continuous Disclosure
Policy is available on the Company’s website.
pRINCIpLE 6: RESpECT THE RIGHTS OF SHAREHOLDERS
It is the Company’s policy that the principal communication with shareholders apart from the Company website is the
provision of the Annual Report, including the Financial Statements, half-yearly investor briefings and the Annual General
Meeting (and any extraordinary meetings held by the Company). Shareholders are encouraged to participate in half-yearly
investor briefings either by attendance or by dialling in through the Company’s teleconferencing facilities and are invited
to put questions to the Chairman of the Board in that forum. The Company’s website provides additional information
and greater detail about the Company, including ASX and media releases and access to statements regarding corporate
governance related matters (ASX Recommendation 6.1).
The directors have ensured that the Company’s External Auditor attends all Annual General Meetings and is available to
answer shareholders’ questions about the conduct of the audit and the preparation and content of the Auditor’s report
thereon.
pRINCIpLE 7: RECOGNISE AND mANAGE RISK
The Company has integrated risk management processes into its operations to ensure continuity of the business and to
minimise any impact on its performance.
The Board has established policies for a sound system of risk oversight and management and internal control which involve
the Safety and Risk Management Committee (Recommendation 7.1).
The Safety and Risk Management Committee has been established by the Board of the Company and applies to the
Company and its subsidiaries to support and advise the Board in fulfilling its responsibilities to shareholders, employees and
other stakeholders of the Company by:-
• assisting the Board in fulfilling its development, oversight and review responsibilities for the safety culture and safety
management processes as defined by the separate safety policies published for each Air Operator Certificate holder
within the Group; and
• implementing and supervising the Group’s operational risk assessment framework.
The Committee is chaired by Ronald Bartsch. James Davis is the other Board member on the Committee. Descriptions of
the members’ qualifications, skills and experience are included in the Directors’ Report.
The Safety and Risk Management Committee has a formal Charter which sets out the responsibilities of the Committee
as well as the Company’s policies on risk oversight and management. The Charter is available on the Company’s website.
The Board reviews the safety and risk management report prepared by the Group’s Safety Manager at each Board meeting
(ASX Recommendation 7.2).
The Chief Operating Officer and the General Manager (GM) Corporate Services who oversees the finance department,
provide written assurance to the Board as to the integrity of the financial statements and that they are founded on a sound
system of risk management and internal controls which are operating effectively and efficiently (ASX Recommendation 7.3).
The Board acknowledges the ASX Recommendation to have the Chief Executive Officer and Chief Financial Officer provide
this statement to the Board. The Board believes that it is appropriate for Chief Operating Officer and GM Corporate Services
to provide the statement.
pRINCIpLE 8: REmUNERATE FAIRLY AND RESpONSIBLY
The Board has established a Remuneration and Nomination Committee. The membership, responsibilities and number
of meetings held have been set out under Principle 2. Also set out under Principle 2 is the explanation as to why the
membership of the Committee differs from the ASX Recommendations.
Details of the Board and Management Committee remuneration structures are contained in the Remuneration Report (ASX
Recommendations 8.2 and 8.3).
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REGULATORY REPORTSREGIONAL EXPRESS HOLDINGS LIMITED ASX ADDITIONAL INFORmATION AS AT 23 SEpTEmBER 2013
This is required by the ASX, but falls outside of the audit opinion and therefore has no impact on the audit report issued.
NUmBER OF HOLDERS OF EQUITY SECURITIES
Ordinary share capital
110,089,430 fully paid ordinary shares are held by 2,933 individual shareholders.
All issued ordinary shares carry one vote per share and carry the rights to dividends.
DISTRIBUTION OF HOLDERS OF EQUITY SECURITIES
Investors
823
1,401
325
327
57
2,933
295
Fully paid Ordinary Shares
Securities
471,288
3,923,071
2,669,849
9,462,469
93,562,753
110,089,430
60,870
1 - 1,000
1,001 - 5, 000
5,001 - 10, 000
10, 001 - 100, 000
100, 001 and over
Total
Unmarketable Parcels
SUBSTANTIAL SHAREHOLDERS
Ordinary Shareholders
Mr Kim Hai Lim
Mr Joe Tiau Tjoa
Thian Soo Lee
Ming Yew See Toh & Hui Ing Tjoa
Joo Chye Chua
Ms Hui Ling Tjoa
TWENTY LARGEST HOLDERS OF QUOTED EQUITY SECURITIES
Ordinary Shareholders
Mr Kim Hai Lim
Mr Joe Tiau Tjoa
Thian Soo Lee
Ming Yew See Toh & Hui Ing Tjoa
Joo Chye Chua
Ms Hui Ling Tjoa
Citicorp Nominees Pty Limited
Lay Khim Ng
RBC Investor Services Australia Nominees Pty Limited
Rex Investment Holdings Pty Limited
Mr Thian Song Tjoa
Strategic Value Pty Ltd
SCJ Pty Ltd
Strategic Value Pty Ltd
Mastar Pty Limited
Brazil Farming Pty Ltd
Jowong Pty Limited
Gwynvill Trading Pty Limited
Phillip Securities Pte Ltd
HSBC Custody Nominees (Australia) Limited
Rex Investment Holdings Pty Limited
80
Issued Capital (%)
0.43
3.56
2.43
8.60
84.99
100.00
0.06
percentage
16.79%
14.75%
7.01%
6.77%
6.77%
5.23%
percentage
16.79%
14.75%
7.01%
6.77%
6.77%
5.23%
3.77%
3.39%
2.00%
1.45%
1.14%
0.93%
0.91%
0.85%
0.82%
0.81%
0.77%
0.73%
0.72%
0.71%
0.56%
Photo by Maikha Ly
Fully paid
Number
18,480,630
16,234,094
7,722,181
7,454,362
7,454,362
5,755,513
Fully paid
Number
18,480,630
16,234,094
7,722,181
7,454,362
7,454,362
5,755,513
4,144,968
3,727,181
2,201,755
1,598,095
1,254,727
1,028,658
1,000,000
932,615
900,000
890,000
846,950
800,000
790,940
776,622
617,652
REGULATORY REPORTSREGIONAL EXPRESS HOLDINGS LIMITED
Photo by Tim Ongley of TOP Imagery
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