ANNUAL REPORT
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
REGIONAL EXPRESS HOLDINGS LIMITED
FOREWORD
LIM KIM HAI
EXECUTIVE CHAIRMAN
REGIONAL EXPRESS VALUE STATEMENT
What does it profit a company if it gains the whole world and loses its soul
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
Management Committee if special assistance or
consideration is needed.
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.
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.
REGIONAL HEADWINDS
The financial year under review is characterised by extreme
global turmoil and tensions. The major tsunamis that hit
the world covered the complete spectrum of all the major
risks to worldwide peace and stability: terrorism (ISIS),
health (Ebola), economy (collapse of several currencies
and economies including Greece, Russia and Iran) and
wars (Crimea, Ukraine, Sudan, Yemen to name a few).
Australia too is not spared, and even suffered a rare ISIS-
related attack. On the economic front, the conditions
continued to worsen with commodity prices continuing to
soften and retail being morose. Unemployment rose for
the year.
With such weak business sentiments, the expected
bottoming of Rex’s decline in passenger numbers did not
materialise and the year saw another decline albeit much
smaller than previous years. This resulted in the Group’s
Profit before Tax declining by 13% to $9.3 million. While
this is not a good outcome, the Rex Group can still lay
claim to being one of only five listed carriers worldwide to
have made uninterrupted profits over the last 12 years.
While the current conditions are not rosy, the Group is
quietly confident that its inherent strength will enable it to
ride through the uncertain path ahead. There are also some
good prospects of growth especially in North Queensland
where Rex now has a formidable coverage after winning
the Queensland Government regulated routes tender.
Leveraging on our economies of scale, Rex will expand
further into the Cape and Torres Straits.
I again see another year ahead with headwinds and
tailwinds. I believe that with our strong balance sheet,
ultra-efficient operations and nimble management, we will
be the best positioned to overcome the challenges and
take advantage of the opportunities.
Lim Kim Hai
Executive Chairman
28 August 2015
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This annual report covers both Regional Express Holdings Limited as an
individual entity and the consolidated entity comprising Regional Express
Holdings Limited and its subsidiaries.
The Group’s functional and presentation currency is AUD ($).
DIRECTORS
Lim Kim Hai
The Hon. John Sharp
Lee Thian Soo
Neville Howell
Chris Hine
James Davis
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, AMDP Centre
50 Bridge Street
Sydney, NSW 2000
BANKER
Westpac Banking Corporation
AUDITOR
Deloitte Touche Tohmatsu
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5 PART I
DIRECTORS’ REPORT
27 PART II
FINANCIAL STATEMENTS
65 PART III
REGULATORY REPORTS
26 AUDITOR’S INDEPENDENCE
DECLARATION
66 INDEPENDENT AUDITOR’S
REPORT
68 CORPORATE GOVERNANCE
STATEMENT
75 ASX ADDITIONAL
INFORMATION
28 CONSOLIDATED STATEMENT
OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE
INCOME
29 CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
30 CONSOLIDATED STATEMENT
OF CASH FLOWS
31 CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
32 NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
64 DIRECTORS’ DECLARATION
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 2015.
The names and particulars of the directors of Rex during or since the end of the financial year are:
LIM KIM HAI
Executive Chairman
THE HON. JOHN SHARP
Deputy Chairman and Independent Director
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, 23 November 2011 and 27 November 2013.
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.
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 in August 2002. He has been the
Executive Chairman of the Rex Group of companies
since July 2003.
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
since 2001 has been a director of Airbus Group,
Australia Pacific. He has retired as Chairman of the
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 has been a member of the
University of Wollongong Vice Chancellor’s Advisory
Board. He is also currently a director of the Tudor
House Foundation. 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 in 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.
6
DIRECTORS’ REPORT
PART I Directors’ Report
Auditor’s Independence Declaration
5-26
26
DIRECTORS’ REPORT
LEE THIAN SOO
Non-Executive Director
Appointed 27 June 2003 and re-appointed 16
November 2006, 25 November 2009 and 27
November 2012.
NEVILLE HOWELL
Chief Operating Officer
Appointed 1 July 2014 as Executive Director and re-
appointed 26 November 2014.
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 in August 2002.
Mr. Howell has over 34 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, Mr. Howell 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.
Mr. Howell 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. He 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 Mr. Howell was
responsible for all facets of the Company’s
flight operations and all operational matters
affecting the safety of flight operations. Mr.
Howell became Chief Operating Officer in
July 2014. As Chief Operating Officer he is
responsible for Regional Express operations
including
continuing
airworthiness, maintenance control, airport
operations and the human factors group.
operations,
flight
CHRIS HINE
Group Flight Operations Advisor,
Chairman’s Office
Appointed 1 March 2011 as Executive Director and
re-appointed 23 November 2011. Appointed 1 July
2014 as Non-Executive Director and re-appointed
26 November 2014. Appointed Executive Director 18
May 2015.
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 is the Group Flight Operations
Advisor, Chairman’s Office. Prior to his current
role he was the Chief Operating Officer and
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).
JAMES DAVIS
Independent Director
Appointed 26 August 2004 as Executive Director.
Appointed 23 November 2011 as an Independent
Director and re-appointed 26 November 2014.
Appointed Managing Director on 27 May 2008 and
retired 1 July 2011.
RONALD BARTSCH
Independent Director
Appointed 23 November 2010 and re-appointed 23
November 2011 and 26 November 2014.
GARRY FILMER
Alternate Director to Chris Hine
Appointed 1 March 2012 as Executive Director and
re-appointed 27 November 2012. He was appointed
Alternate Director to Mr. Chris Hine on 30 June 2014.
Mr. Davis has a degree in Aeronautical
Mr. Bartsch has over 35 years experience
Engineering and commenced his aviation
career with the Civil Aviation Safety Authority
(CASA) before obtaining his Air Transport
Pilot Licence. He subsequently flew 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 became 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 is currently
Chairman of the Regional Aviation Association
of Australia (RAAA).
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’s AOC and
manager of the CASA Sydney Airline Transport
Field Office.
has
In addition, Mr. Bartsch is an experienced
pilot and has extensive legal and regulatory
experience. Mr. Bartsch
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.
He is an aviation specialist member of the
Administrative Appeals Tribunal and author of
several publications including Aviation Law in
Australia and International Aviation Law.
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. He retired from the position of
Chief Operating Officer with effect from 1 July
2014. As Chief Operating Officer Mr. Filmer was
responsible for Regional Express operations
including
continuing
airworthiness, maintenance control, airport
operations and the human factors group.
operations,
flight
7
8
REGIONAL EXPRESS HOLDINGS LIMITEDDIRECTORS’ REPORT
02
SENIOR MANAGEMENT EXECUTIVES
The names and particulars of the senior management executives of Rex during or since the end of the financial year are:
NEVILLE HOWELL
Chief Operating Officer
WARRICK LODGE
IRWIN TAN
General Manager,
Network Strategy & Sales
General Manager,
Corporate Services
is a member of
Neville
the Rex
Management Committee. A description
of his qualifications, skills and experience
is included on page 7.
include
pricing,
scheduling,
Warrick manages a team responsible
for
revenue
management, sales and commercial
analysis. His duties
the
monitoring of network performance and
analysis of both existing and new market
opportunities. Warrick has more than 23
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’s background was originally
in
genetic research after graduating with
in biotechnology
first class honours
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
professionals
(IT)
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).
DALE HALL
PNG YEOW TAT
PAUL FISHER
General Manager,
Deputy General Manager,
Engineering
Engineering
General Manager,
Flight Operations and Chief Pilot
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.
Paul has over 25 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 14 years for both
Hazelton Airlines and Regional
Express. Prior to his role as GM
Flight Operations (GMFO) and Chief
Pilot, Paul served in various roles
within the Training and Checking
department along with being the
Adelaide Flight Operations Manager,
Flight Standards Manager and the
Training & Checking Manager /
Duty Chief Pilot. He holds a number
of Civil Aviation Safety Authority
(CASA) delegations. As GMFO he
is responsible for all facets of the
Company’s flight operations and
all operational matters affecting the
safety of flight operations.
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
in June
Organisations
2013. He is a member of the Rex
Management Committee.
(AMOs)
9
10
REGIONAL EXPRESS HOLDINGS LIMITEDDIRECTORS’ REPORT 03 DIRECTORSHIPS OF OTHER LISTED COMPANIES
08 FORMER PARTNERS OF THE AUDIT FIRM
During the year under review, no directors appointed as at 30 June 2015 served as a director with any other company listed on the
ASX.
No directors or officers in Rex or the Group have been a partner or director of Deloitte Touche Tohmatsu, the Group’s auditor.
04 DIRECTORS’ SHAREHOLDINGS
09 COMPANY SECRETARIES
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.
Mr. Irwin Tan holds the position of Rex Company Secretary. A description of his qualifications, skills and experience is included on
page 9.
Directors
Lim Kim Hai
The Hon. John Sharp
Lee Thian Soo
Neville Howell
Chris Hine
James Davis
Ronald Bartsch
Garry Filmer
Fully paid ordinary shares
direct interest
Fully paid ordinary shares
indirect interest
Share options
18,651,346
50,000
7,722,181
22,203
176,034
200,866
-
22,247
5,755,513
150,000
3,727,181
-
-
-
-
-
-
-
-
-
-
-
-
-
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 financial year was the provision of air services principally for the transportation of passengers
and freight.
05 DIRECTORS’ MEETINGS
The following table sets out the number of directors’ meetings (including meetings of committees of directors) held during the financial
year and the number of meetings attended by each director (while they were a director or committee member). During the financial
year, 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
Lee Thian Soo
Neville Howell
Chris Hine
James Davis
Ronald Bartsch
Garry Filmer
Board
Remuneration &
Nomination Committee
Audit & Corporate
Governance Committee
Safety & Risk
Management Committee
4
4
4
3
4
4
4
4
-
2
-
2
-
-
-
2
-
-
2
-
2
2
-
-
-
-
-
4
-
-
-
-
-
4
4
-
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 21 to 24.
07 SHARES UNDER OPTION OR ISSUED ON EXERCISE OF OPTIONS
No options were granted or exercised in financial year 2015.
11
12
REGIONAL EXPRESS HOLDINGS LIMITEDDIRECTORS’ REPORT 11 ORGANISATION & GROUP STRUCTURES
REGIONAL EXPRESS AIRLINE ORGANISATION STRUCTURE
REGIONAL EXPRESS GROUP HOLDINGS STRUCTURE
Regional Express
Holdings Limited
ACN 099 547 270
Rex Freight & Charter
Pty Limited
ACN 065 221 356
Rex Investment
Holdings Pty Limited
ACN 101 317 677
100%
100%
Pel-Air Aviation
Pty Limited
Australian Airline Pilot
Academy Pty Limited
100%
AVIEX
Pty Limited
Regional Express
Pty Limited
ACN 101 325 642
100%
Air Link
Pty Limited
ACN 000 872 613
ACN 002 858 013
ACN 128 392 469
ACN 121 873 363
VAA
Pty Limited
ACN 140 726 941
Holds an Air Operator’s Certificate (AOC)
13
14
REGIONAL EXPRESS HOLDINGS LIMITEDDIRECTORS’ REPORT 12 REVIEW OF OPERATIONS
SUMMARY
At the opening of financial year 2015 the Rex Regular Public Transport (RPT) network serviced 36 airports throughout South Australia,
Victoria, Tasmania, New South Wales and Queensland. At the close of financial year 2015 the number of airports serviced by Rex
increased by 47% to 53 airports, with essential regional air services operating from Adelaide, Melbourne, Sydney, Brisbane, Townsville
and Cairns to 47 metropolitan and regional centres.
The sharp increase in routes was due to the start of operations on 1 January 2015 of all five Queensland State Government regulated
routes which Rex had bid for in an open competitive tender which closed on 27 June 2014. The regulated routes are contracted to
Rex for five years from 2015 to 2020 with a two-year extension option.
Capitalising on its significant presence and economies of scale in Northern Queensland, Rex announced its intention to provide reliable
and affordable air services to the Cape and the Torres Straits. It started the first such service to the Northern Peninsula Area (Bamaga)
on 30 March 2015 with a daily weekday return service.
In early December 2014 the Civil Aviation Safety Authority (CASA) issued to Rex an Area Air Operator’s Certificate (AAOC). The Rex
AAOC covers all of Australia and provides Rex with the flexibility to expand its vast Regular Passenger Transport (RPT) regional
network without the need for CASA to approve each new port. This was a very important milestone for Rex and is a reflection of the
confidence that CASA places in Rex’s safety management systems. Rex is the only independent regional airline in Australia that has
been awarded an AAOC.
Rex continued to work in collaboration with many regional airports and local councils. During financial year 2015 partnership
agreements were either renewed or entered into with the regional councils that own and operate the following regional airports:
Armidale, Bamaga (NPA), Bathurst, Broken Hill, Ballina, Ceduna, Coober Pedy, Grafton, Lismore, Mildura, Narrandera, Newcastle,
Parkes, Port Lincoln, Taree, Whyalla and Wagga Wagga.
There were no partnership agreements during the financial year with the following regional airports: Albury, Burnie, Dubbo, Griffith,
Kangaroo Island, King Island, Merimbula, Moruya, Mount Gambier, Orange or any of the regional airports associated with the
Queensland regulated routes.
In May 2015 Rex and Thomas Global Systems announced the successful first deliveries of the new avionic plug-and-play LCD cockpit
display units for Rex’s Saab 340 fleet which were developed jointly by the two companies. Rex is the first regional operator in the world
to reap the benefits of the LCD cockpit avionics display retrofit solution.
The Rex pilot cadet programme (AAPA) continues to supply budding First Officers
(FO) to meet demand within the Rex Group. This financial year saw an additional 18
cadets transition to the rank of FO which now takes the number of cadets on-line
in the Group to 112. This represents approximately 90% of the FO workforce as at
30 June 2015. Since the inception of the Rex pilot cadet programme, a total of 141
cadets have graduated from AAPA to become FOs and some now hold the rank of
Captain.
The Pilot In Command Under Supervision (PICUS) Programme has gained further
momentum and continues to mature, meeting the demands of the Group’s current
and future Command requirements. The PICUS programme saw 13 Captains
checked to line in this reporting period and we are projecting a further 14 Captains
in the financial year 2016. Since its inception, we have seen a total of 28 Captains
produced as a result of the PICUS programme which is testament to the success
of the programme and commitment Rex has in actively controlling its future Captain
requirements.
Thomas Global Systems Director Customer Service
Gerald Timmermans (L) presenting the LCD avionic
display unit to Rex Continuing Airworthiness Manager
Richard Taylor (R)
MATERIAL RISK AND RISK MANAGEMENT
The Company recognises that it has a responsibility to conduct its activities in an environmentally and socially responsible manner.
The Group’s Environmental Management Program available on the Rex website details the Environmental Management Program
(EMP), incorporating the group’s environmental policy, targets, prevention of pollution, management strategies to mitigate the risk of
environmental impact and continuous environmental improvement (ASX Recommendation 7.4).
Like all Australian airlines, the Company is subject to economic risks. The Company identifies the following risks that could adversely
affect the entity’s prospects for future financial years (ASX Recommendation 7.1):
•
•
Fuel price increases – The Company has mitigated against this risk by hedging its total fuel requirement. In June 2015 the Rex
Group took advantage of the recent fall in Brent Crude price and hedged its total fuel requirement for financial year 2016. The
fuel hedge is expected to deliver fuel cost savings of approximately $4.5M compared to financial year 2015’s fuel bill which
already had a $1.85M fuel hedge saving over the financial year 2014 cost.
Foreign exchange rates – The Group’s financial risk is essentially in US dollars (USD) exposure and hence its main objective is
to minimise the impact of USD fluctuation on its operations. With significant purchases in spares in prior years, the Group’s
exposure to USD expenditure is not very significant.
The Company is also aware of the potential risk of the loss of pilots. In financial year 2008 the aviation world was hit with a world wide
pilot shortage that resulted in Rex’s pilot ranks being decimated, losing 50% (annualised) of its pilots in the fiscal year ending June
2008. In response, the Company began its own pilot cadet training programme which has been operating successfully for eight years
from its pilot training academy AAPA in Wagga Wagga NSW. The success of the cadet pilot programme is clearly demonstrated in
the exceptionally low attrition rates over the past three financial years.
70
60
50
40
30
20
10
0
)
%
(
e
t
a
R
n
o
i
t
a
n
g
i
s
e
R
57
48
40
20
18
15
9
7
5
16
16
15
14
13
10
15
13
11
22
17
17
12
11
12
11
10
4
6 6 5
FY 06
FY 07 FY 08 FY 09
FY 10 FY 11 FY 12
FY 13
FY 14 FY 15
Yearly Average
Captain
FO
The Saab 340 Full Flight Simulator (FFS) located at AAPA completed its first year of service. The FFS performed beyond our
expectations and proved to be reliable in meeting our operational demands. The FFS has now absorbed up to 50% of our pilot
training requirements and provided greater operational efficiencies for initial and recurrent training. CASA renewed the Flight Simulator
Qualification Certificate until April 2016.
Pilot attrition rate for the past 10 years
Rex’s Saab 340 Full Flight Simulator (FFS) installed at the Group’s Australian Airline Pilot Academy in Wagga Wagga NSW
15
16
REGIONAL EXPRESS HOLDINGS LIMITEDDIRECTORS’ REPORT
ROUTE NETWORK DEVELOPMENTS
From late October 2014 Rex significantly reduced capacity on several of its NSW marginal routes in what was a very wide ranging
network review. The necessary review was due to reducing demand on several routes on the NSW network that required capacity
to be rationalised.
The arrangements affected Taree, Grafton, Lismore and Newcastle with capacity reduced to better match demand. To further improve
operating efficiencies the Grafton and Lismore services to Sydney were linked, as were the Newcastle and Taree services to Sydney.
The late October 2014 network changes also saw Rex keep its promises to the Broken Hill community with whom it entered into a
partnership agreement at the opening of financial year 2015. This involved Rex providing the community with a direct early morning
flight from Broken Hill to Sydney and a direct evening return from Sydney to Broken Hill to facilitate same day return travel from Broken
Hill. This was an addition to two existing services between Broken Hill and Sydney via either Dubbo or Mildura.
With effect from 1 January 2015, Rex
the five
commenced operations on
Queensland regulated routes. The five
routes are:
- Northern 1 Route from Townsville to
Winton to Longreach and return;
- Northern 2 Route from Townsville to
Hughenden to Richmond to Julia Creek
to Mount Isa and return;
The graphs below set out the evolution in monthly passenger carriage and monthly passenger revenue over the last eight financial
years.
- Gulf Route from Cairns to Normanton
to Mornington
to
Burketown to Doomadgee to Mount Isa
and return;
(Gununa)
Island
- Western 1 Route from Brisbane to
Brisbane West Wellcamp (Toowoomba)
to St George
to
Thargomindah and
return; and
to Cunnamulla
- Western 2 Route from Brisbane to
Brisbane West Wellcamp (Toowoomba)
to Charleville to Quilpie to Windorah to
Birdsville to Bedourie to Boulia to Mount
Isa and return.
Rex’s Queensland routes
Rex previously held the regulated route contracts for the Northern 1 and 2 Routes meaning that from 1 January 2015 Rex commenced
operations to 16 new Queensland airports. In addition, Rex commenced limited weekend RPT services between Cairns and Townsville
in order to connect the two bases for both operational and commercial benefits.
In February 2015 Rex and the Northern
Peninsula Area Regional Council (NPARC)
announced that they had developed
a beneficial working arrangement that
resulted in Rex commencing a new RPT
air service between NPA airport (Bamaga)
and Cairns with effect from 30 March
2015 comprising of five return flights
each week.
Rex had previously announced that it was
prepared to fill the void left by the collapse
of Skytrans at the beginning of January
2015 and invited interested Cape York
community to express their interest. The
decision to commence services between
NPA airport and Cairns was a direct
result of NPARC’s willingness to forge a
mutually beneficial working relationship
with Rex to ensure the sustainability of
a safe, reliable and reasonably priced air
service for the NPA region.
Rex received a warm welcome at Bamaga (NPA) airport for the launch of services to Cairns on 30 March
2015
With effect from 25 May 2015 Rex commenced a direct RPT service between Cairns and Mount Isa with four return services each
week. This followed significant lobbying from businesses and individual travellers wanting direct flights between Cains and Mount Isa,
a service that was lost since the collapse of Skytrans.
17
18
REGIONAL EXPRESS HOLDINGS LIMITEDDIRECTORS’ REPORT
FLEET CHANGES
During the reporting period, Rex took delivery of one Saab 340B aircraft to help with the company’s expansion in Queensland. The
aircraft used to belong to Vincent Aviation before it went into administration. The acquisition brought the total number of Saab 340
aircraft in the Rex Group to 52, with 40 of them fully paid for in cash and the rest with a two-year remaining mortgage.
ENTERPRISE AGREEMENTS (EA)
Rex EA and the Airline Services Collective Agreement expired on 30 June 2014. Negotiations commenced early in the second half of
the financial year. The Flight Attendant’s Enterprise Agreement was voted in late 2014 with the three remaining agreements still under
negotiation in the period under review.
OPERATIONAL AND SERVICE STANDARDS
In financial year 2015 Rex continued to deliver industry leading on-time performance and service reliability. As reported by the Bureau
of Infrastructure, Transport and Regional Economics (BITRE), Rex recorded 88.22% on-time departure performance which ranked
Rex as the top performing regional airline and the second best performing Australian airline. For the calendar year 2014, Rex was
ranked as the best performing Australian airline by BITRE.
In addition, Rex completed financial year 2015 with an exceptionally low cancellation rate of 0.28%, the lowest cancellation rate of all
Australian airlines, with its main competitor QantasLink, having a cancellation rate of 700% higher.
Airline
FY 2015
FY 2014
FY 2015
FY 2014
On-Time Departure
Cancellation Rate (%)
QantasLink
Virgin Australia Regional
Qantas
Virgin Australia
Jetstar
Tigerair
2nd
5th
4th
1st
3rd
6th
7th
1st
5th
3rd
2nd
4th
6th
7th
0.3%
2.1%
1.4%
1.2%
1.8%
1.4%
0.9%
0.5%
2.5%
1.3%
1.3%
1.5%
1.9%
2.2%
Financial year 2015 saw Rex yet again receiving recognition by its customers as
a leading airline.
In December 2014 Rex was voted in the Australian Traveller People’s Choice
Awards as the ‘Best Australian Regional Airline’ for the third time ahead of four
other finalists. Rex won the same category in 2011 and 2013 and was a finalist
in 2012.
The Australian Traveller website posted: “Traditionally, our two regional mainstays,
QantasLink and Rex fight it out for this title, but this year Rex has a clean victory
by a huge 44 per cent.”
Rex Chief Operating Officer Neville Howell with the ‘Best
Australian Regional Airline’ award at the 2014 Australian
Traveller People’s Choice Awards.
Photo courtesy of Australian Traveller
COMMUNITY INVOLVEMENT
Throughout financial year 2015 Rex contributed over $300,000 in
sponsorships to worthy charitable and community projects across our
network.
Rex is proud to be able to directly give back to the local communities
we service through corporate partnerships, flight sponsorship, and
very importantly, by providing fare assistance to residents in our
regional ports for travel to capital cities for medical attention.
Just some of the causes and events supported by Rex during financial
year 2015 are:
• Parkes Elvis Festival
•
Eden Whale Festival
• Royal Institute for Deaf and Blind Children
• Birdsville Big Red Bash
• King Island Show
•
Julia Creek Dirt n Dust Festival
• NAIDOC Week
• Bush to Boarding program
• Heart of Australia
• Casino Beef Week
Winner of Rex flights Betty Dukes at the Friends Who Care
fundraiser for the palliative care ward at Grafton Base Hospital.
Photo courtesy of Friends Who Care
Jarlym Ned with his catch of the day at the 2015 Doomadgee Police
Fishing Competition.
Photo courtesy of Doomadgee Police
13 CHANGES IN STATE OF AFFAIRS
The Rex Group took advantage of the recent fall in Brent Crude price and hedged its total fuel requirement for financial year 2016. The
fuel hedge is expected to deliver fuel cost savings of approximately $4.5M compared to financial year 2015’s fuel bill which already
had a $1.85M fuel hedge saving over the financial year 2014 cost.
14 SUBSEQUENT EVENTS
Rex had been heavily solicited by businesses and individuals to start a competitive air service on the Cairns to Townsville route since
Virgin Australia’s exit in January 2014. In response, Rex undertook a market sounding exercise to gauge business community support
for Rex and the level of prevailing dissatisfaction with the incumbent monopoly. On 6 July 2015 Rex commenced three return flights
each weekday from Cairns to Townsville, adding some 60,000 seats on the route with 34 weekly flights. Rex had begun a modest
weekend service between the two destinations on 3 January 2015.
The Group, with strong support from Cobar Management Pty Ltd (CSA), commenced RPT services between Cobar and Dubbo using
Air Link’s Beechcraft 1900D aircraft with connections to Sydney after that on Rex’s regular services. Services commenced on 31
August 2015.
The Company has been in negotiations on the Airline Services Collective Agreement since April 2014. Agreement with unions and
employee representatives has now been reached and was issued to staff for a vote for the period 13 August 2015 until 30 August
2015.
19
20
REGIONAL EXPRESS HOLDINGS LIMITEDDIRECTORS’ REPORT 15 FUTURE DEVELOPMENTS
Rex intends to grow services in the Cape York and Torres Strait area, capitalising on its significant presence and economies of scale
it now has in Northern Queensland.
The Rex Group also sees great potential in its pilot academy given the worldwide demand for new pilots is estimated by Boeing to be
in excess of 20,000 per year. The Rex Group has been in discussions with several airlines for pilot training collaboration.
The Rex Group intends to bid for the Western Australia (WA) Government regulated routes from Perth. If successful, Rex will operate
for the first time in WA from March 2016.
16 ENVIRONMENTAL REGULATIONS
During financial year 2015 Rex continued to be an active participant in programs aimed at maximising energy efficiency and reducing
greenhouse gas emissions in accordance with the National Greenhouse Energy Reporting Act 2007 (NGER).
Rex is due to submit its 6th NGER report to the Clean Energy Regulator in October 2015.
17 DIVIDENDS
In respect of financial year ended 30 June 2015, the Board recommends the deferral of the decision to pay dividends to November
2015, to be announced at the Company’s Annual General Meeting, due to uncertain trading conditions.
• Share Gift Plan
Rex established the share gift plan (effective from financial year 2006) for its executive directors and eligible employees. The plan
is offered to EA groups that opt for the plan, and all non-EA 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-
EA employees). The plan 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.
During the financial year, the Group bought back 2,033,269 fully paid ordinary shares for the share gift scheme.
DIRECTOR AND SENIOR MANAGEMENT DETAILS
The following persons acted as directors of the Company during or since the end of the financial year:
Lim Kim Hai (Chairman)
The Hon. John Sharp (Deputy Chairman)
Lee Thian Soo
Neville Howell
Chris Hine
James Davis
Ronald Bartsch
Garry Filmer
18 INDEMNIFICATION OF OFFICERS AND AUDITORS
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 financial year and since the end of the financial year:
Neville Howell (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)
Png Yeow Tat (Deputy General Manager, Engineering)
Paul Fisher (General Manager, Flight Operations & Chief Pilot)
During the financial year, 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 financial year, 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.
REMUNERATION POLICY
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.
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
The profit share incentive scheme, established nine years ago continues to award eligible employees a share of Rex’s profit
before tax (PBT) based on an agreed percentage (excluding contributions from subsidiaries and associates) for the financial
year 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 continues to offer this to all non-Enterprise Agreement (EA)
employees who are not the subject of an adverse recommendation by the Remuneration and Nomination Committee.
21
22
REGIONAL EXPRESS HOLDINGS LIMITEDDIRECTORS’ REPORT 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:
VALUE OF OPTIONS ISSUED TO DIRECTORS AND EXECUTIVES
No options lapsed, were granted or were exercised during the financial year 2015.
RELATIONSHIP BETWEEN THE REMUNERATION POLICY AND COMPANY PERFORMANCE
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
Directors/Executives
FY
$
$
$
$
$
$
$
In addition to the profit share and share gift schemes that apply to all non-EA staff, a Key Manager bonus, fixed by the Remunerations
and Nominations Committee, was given to selected members of executive management based on an assessment of the recipient’s
performance during the year. The bonus amount was reduced from previous years given the reduction in the company’s profits.
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 2015:
%
Consisting
of options
%
Total
$
EXECUTIVE DIRECTORS
LIM KIM HAI (1)
Executive Chairman
CHRIS HINE (2)
Alternate Director to Garry Filmer
NEVILLE HOWELL (3)
Chief Operating Officer
NON-EXECUTIVE DIRECTORS
JOHN SHARP
Deputy Chairman
LEE THIAN SOO
Non-Executive Director
RONALD BARTSCH
Non-Executive Director
JAMES DAVIS
Non-Executive Director
GARRY FILMER (4)
Alternate Director to Chris Hine
SENIOR MANAGEMENT EXECUTIVES
2015
2014
2015
2014
-
-
70,317
88,325
2015
203,634
-
-
-
83
308
2014
171,709
31,386
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
90,000
90,000
30,000
30,000
35,000
35,000
31,308
30,000
-
-
-
-
-
-
-
-
55,312
308
168,606
26,386
WARRICK LODGE
2015
161,914
308
GM, Network Strategy & Sales
2014
157,373
26,386
IRWIN TAN
2015
176,914
308
GM, Corporate Services
2014
172,373
26,386
MAYOORAN THANABALASINGHAM
2015
166,914
308
GM, ITC
2014
162,373
26,386
DALE HALL
GM, Engineering
2015
165,164
231
2014
161,094
26,386
PAUL FISHER (5)
2015
179,260
29,250
GM, Flight Operations & Chief Pilot
PNG YEOW TAT
2015
142,483
308
Deputy GM, Engineering
2014
138,487
26,386
TOTAL
2015
2014
1,508,220
31,329
1,405,340
189,785
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,680
8,178
18,380
16,046
8,550
8,325
-
-
3,325
3,237
2,974
2,775
-
-
1,052
173
3,156
3,277
-
-
-
-
-
-
-
-
5,284
15,837
1,106
4,219
15,411
15,078
16,836
16,092
15,886
15,416
15,713
15,329
2,692
2,677
2,779
3,173
2,692
3,159
2,414
2,951
17,122
4,487
13,565
13,802
2,372
2,611
139,726
22,750
130,115
22,240
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
78,049
3,561
100,320
3,537
3,353
229,015
225,771
-
-
-
-
-
-
-
-
98,550
98,325
30,000
30,000
38,325
38,237
34,282
32,775
3,164
3,000
65,174
218,048
3,242
3,074
3,242
3,074
3,242
3,074
2,906
2,755
183,567
204,588
200,079
221,098
189,042
210,408
186,428
208,515
3,336
233,455
2,853
2,705
161,581
183,991
25,522
1,727,547
24,596
1,772,076
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%
0%
(1) Lim Kim Hai undertook to forfeit his Director’s fee since November 2008 in response to the global economic crisis and continued to do so in this reporting period in the light of the continuing difficult environment.
(2) Chris Hine became a Non-Executive Director on 1 July 2014. He was appointed Executive Director and Group Flight Operations Advisor on 18 May 2015.
(3) Neville Howell was appointed Director & Chief Operating Officer on 1 July 2014.
(4) Garry Filmer stepped down from his position as Chief Operating Officer on 1July 2014. He remains as an Alternate Director to Chris Hine.
(5) Paul Fisher was appointed General Manager, Flight Operations & Chief Pilot on 1 July 2014.
23
Revenue
Net profit before tax
Net profit after tax
Share price at start of year
Share price at end of year
Interim dividend
Final dividend 1, 2
Basic earnings per share
Diluted earnings per share
30 June 2015
$’000
30 June 2014
$’000
30 June 2013
$’000
30 June 2012
$’000
30 June 2011
$’000
256,217
9,296
6,672
253,336
10,662
7,725
258,311
19,177
14,018
273,145
35,077
25,497
238,488
24,095
17,593
30 June 2015
$’000
30 June 2014
$’000
30 June 2013
$’000
30 June 2012
$’000
30 June 2011
$’000
$0.75
$1.04
-
-
6.2 cps
6.2 cps
$1.125
$0.75
-
-
7.0 cps
7.0 cps
$1.07
$1.125
-
-
12.8cps
12.8cps
$0.83
$1.07
-
9.0cps
23.1cps
23.1cps
$1.005
$0.83
-
7.1cps
15.8cps
15.8cps
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
No proceedings have been brought on behalf of the Group, nor has any application been made in respect of the Group under s.237
of the Corporations Act 2001.
21 NON-AUDIT SERVICES
Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are outlined in Note
26 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 26 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.
24
REGIONAL EXPRESS HOLDINGS LIMITEDDIRECTORS’ REPORT
22 ROUNDING OFF OF AMOUNTS
AUDITOR’S INDEPENDENCE DECLARATION
The Company is a company of the kind referred to in ASIC Class Order 98/100, 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
Neville Howell
Chief Operating Officer
Sydney, 28 August 2015
The Board of Directors
Regional Express Holdings Limited
81 – 83 Baxter Road
MASCOT NSW 2020
28 August 2015
Dear Board Members
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
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
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 2015, 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.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
BJ Pollock
Partner
Chartered Accountants
25
-26-
26
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
REGIONAL EXPRESS HOLDINGS LIMITEDDIRECTORS’ REPORT
CONSOLIDATED STATEMENT
OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
Passenger revenue
Freight revenue
Charter revenue
Other passenger services and amenities
Other revenue
Total revenue
Finance income
Other (loss) / income
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
Note
2015
$’000
2014
$’000
204,261
202,316
1,027
763
34,750
36,072
2,427
2,530
13,752
11,655
256,217
253,336
849
1,115
(1,166)
339
(42,198)
(45,914)
(36,883)
(40,338)
(99,964)
(95,818)
(6,310)
(5,388)
(36,683)
(33,038)
(6,520)
(6,983)
(2,171)
(1,703)
(15,875)
(14,946)
(246,604)
(244,128)
9,296
10,662
(2,624)
(2,937)
6,672
7,725
4
4
4
4
4
4
4
5
Total comprehensive income
6,672
7,725
Profit attributable to:
Members of the parent
Earnings per share (cents per share)
Basic
Diluted
Notes to the financial statements are included on pages 32 to 63.
6,672
7,725
6,672
7,725
16
16
6.2
7.0
6.2
7.0
28
FINANCIAL STATEMENTS
PART II Financial Statements
Consolidated Statement of
Profit or Loss and Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
Notes to the Financial Statements
Directors’ Declaration
27 - 64
28
29
30
31
32 - 63
64
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CASH FLOWS
AS AT 30 JUNE 2015
Current assets
Cash and bank balances
Trade and other receivables
Inventories
Current tax assets
Total current assets
Non-current assets
Other receivables
Available for sale investments carried at fair value – shares
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
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 32 to 63.
Note
22
6
7
6
8
9
10
11
12
5
13
12
13
5
14
15
15
15
Note
22 (B)
2015
$’000
2014
$’000
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
23,360
21,967
Receipts from customers
11,742
17,286
Payments to suppliers, employees and others
20,170
19,372
96
-
Interest paid
Income tax paid
55,368
58,625
Net cash flows from operating activities
7,966
7,937
Proceeds from disposal of property, plant and equipment
10
10
Payments for property, plant and equipment - aircraft and other
125,987
134,079
Net cash flows used in investing activities
Payments for property, plant and equipment – software
Interest received
83,707
80,461
7,893
8,113
225,563
230,600
Shares purchased as reserve shares
Salary sacrifice - payment for shares
280,931
289,225
Repayment of borrowings – non-related parties
Net cash flows used in financing activities
23,127
26,029
Net increase/(decrease) in cash held
18,208
18,954
9,200
8,648
Cash at the beginning of the financial year
-
237
5,418
6,934
Cash at the end of the financial year
22 (A)
2015
$’000
287,363
(259,324)
(2,926)
(1,442)
23,671
849
1,408
(13,912)
(128)
(11,783)
(1,847)
-
(8,648)
(10,495)
2014
$’000
275,422
(254,593)
(2,483)
(3,201)
15,145
1,115
-
(34,093)
(147)
(33,125)
(477)
3
(3,734)
(4,208)
1,393
(22,188)
21,967
23,360
44,155
21,967
Notes to the financial statements are included on pages 32 to 63.
55,953
60,802
26,229
35,429
1,115
2,615
2,793
1,278
30,137
39,322
86,090
100,124
194,841
189,101
72,024
72,024
(2,273)
(1,182)
122,552
115,880
948
789
1,590
1,590
194,841
189,101
29
30
REGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
Attributable to equity holders of the Company
Note
Content
At 1 July 2013
Profit for the year
Other comprehensive income (net of tax)
Total comprehensive income for the year
Shares issued
Shares purchased as reserve shares
Share gift issued - gift
Share gift issued - salary sacrifice
Share gift plan provision
At 30 June 2014
At 1 July 2014
Profit for the year
Other comprehensive income (net of tax)
Total comprehensive income for the year
Issued
capital
$’000
Reserved
shares
$’000
Retained
earnings
$’000
Share-based
payments
reserve
$’000
General
reserve
$’000
Total
equity
$’000
71,959
(1,439)
108,155
676
1,590
180,941
-
-
7,725
-
-
7,725
-
-
-
-
-
-
-
-
7,725
-
-
7,725
65
-
-
-
-
65
-
(477)
-
-
-
(477)
-
731
-
(632)
-
99
-
3
-
-
-
3
-
-
-
745
-
745
72,024
(1,182)
115,880
789
1,590
189,101
72,024
(1,182)
115,880
789
1,590
189,101
-
-
6,672
-
-
6,672
-
-
-
-
-
-
-
-
6,672
-
-
6,672
Shares purchased as reserve shares
-
(1,847)
-
-
-
(1,847)
Share gift issued - gift
Share gift plan provision
At 30 June 2015
-
756
-
(634)
-
122
-
-
-
793
-
793
72,024
(2,273)
122,552
948
1,590
194,841
Notes to the financial statements are included on pages 32 to 63.
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
General Information
Application of New and Revised Accounting Standards
Critical Accounting Judgements and Key Sources of Estimation Uncertainty
Revenues and Expenses
Income Tax
Trade and Other Receivables
Inventories
Property, Plant and Equipment
Goodwill and Other Intangible Assets
Trade and Other Payables
Unearned Revenue
Borrowings
Provisions
Issued Capital
Reserves and Other Reserves
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
Significant Accounting Policies
31
32
REGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTS
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 Group are the provision of air services principally for the transportation of
passengers and freight.
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.
02 APPLICATION OF NEW AND REVISED ACCOUNTING STANDARDS
The carrying amount of goodwill at the balance date was $7,133 thousand (2014: $7,133 thousand) with no impairment loss
recognised during the current financial year.
At the date of authorisation of the financial statements, the Standards and Interpretations listed below were in issue but not yet
effective. The potential impact of the new or revised Standards and Interpretations has not yet been determined.
STANDARDS AND INTERPRETATIONS IN ISSUE NOT YET EFFECTIVE
FAIR VALUE OF DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS
As described in Note 23, 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.
Effective for annual reporting
periods beginning on or after
Expected to be initially applied in
the financial year ending
USEFUL LIVES OF PROPERTY, PLANT AND EQUIPMENT
As described in Note 30 (S), the Group reviews the estimated useful lives of property, plant and equipment at the end of each reporting
period. During the current year, it is determined that the useful lives of property, plant and equipment correctly reflected the rate at
which the assets are consumed.
AASB 9 ‘Financial Instruments’, (amendment issued in 2010, 2013 and 2014)
1 January 2018
31 December 2018
AASB 15 ‘Revenue from Contracts with Customers’ and AASB 2014-5 ‘Amendments to
Australian Accounting Standards arising from AASB 15’
1 January 2017
31 December 2017
AASB 2014-9 ‘Amendments to Australian Accounting Standards – Equity Method in Separate
Financial Statements’
1 January 2016
31 December 2016
AASB 2015-1 ‘Amendments to Australian Accounting Standards – Annual Improvements to
Australian Accounting Standards 2012-2014 Cycle’
1 January 2016
31 December 2016
AASB 2015-2 ‘Amendments to Australian Accounting Standards – Disclosure Initiative:
Amendments to AASB 101’
1 January 2016
31 December 2016
AASB 2015-3 ‘Amendments to Australian Accounting Standards arising from the Withdrawal of
AASB 1031 Materiality’
1 July 2015
31 December 2016
In the current year, the Group has applied all amendments to AASBs and new Interpretation issued by the Australian Accounting
Standards Board (AASB) that are mandatorily effective for an accounting period that begins on or after 1 July 2014, and therefore
relevant for the current year end.
03 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF
ESTIMATION UNCERTAINTY
In the application of the Group’s accounting policies, which are described in Note 30, the directors are required to make judgments,
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
33
34
REGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTS
04 REVENUES AND EXPENSES
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2015
Other revenue
Grant - Department of Transport
Training income
Engineering services
Insurance claim
Other income
Finance income
Interest
Other (loss) / income
Net foreign currency gain/(loss)
Loss on disposal of property, plant and equipment
Salaries and employee-related costs
2015
$’000
2014
$’000
05 INCOME TAX
INCOME TAX RECOGNISED IN PROFIT OR LOSS
Income tax expense comprises:
2015
$’000
2014
$’000
6,082
3,017
Current tax expense
1,109
2,448
2,347
3,300
123
168
Deferred tax expense relating to the origination and reversal of temporary
differences
1,515
489
144
82
Total income tax expense
2,624
2,937
5,056
5,088
13,752
11,655
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:
849
1,115
Profit before tax from operations
9,296
10,662
849
1,115
Income tax expense calculated at 30%
(1,116)
358
Tax on non deductible expense/(non assessable income)
(50)
(19)
(1,166)
339
Previously unrecognised and unused tax losses and tax offsets now recognised as
deferred tax assets
2,789
(13)
3,199
14
(152)
(276)
2,624
2,937
Wages and salaries (including bonus – profit share scheme)
(91,205)
(87,663)
Workers’ compensation costs
Superannuation costs - defined contribution plan
Expense of share-based payments
Office and general administrative costs
Bad debts (written-off)/recovered
Finance costs
Interest on bank borrowings and finance leases
less: amounts amortised over future contract periods
Interest expense
The weighted average interest rate on borrowings is 9.1% per annum, and 5.1% per annum for finance leases.
Depreciation and amortisation
Depreciation and amortisation of property, plant and equipment
Amortisation of development costs and software
Impairment
Impairment expense
Lease payments included in consolidated statement of profit or loss
Included in flight and port operation costs
Minimum lease payments – operating lease
(968)
(1,023)
The applicable effective tax rates are as follows:
28.2%
27.5%
(6,998)
(6,387)
(793)
(745)
(99,964)
(95,818)
(108)
13
(108)
13
(2,926)
(2,483)
755
780
(2,171)
(1,703)
(15,527)
(14,659)
(348)
(287)
(15,875)
(14,946)
-
(57)
-
(57)
-
(4,410)
-
(4,410)
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.
The following current and deferred tax amounts have been recognised in the statement of financial position.
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
2015
$’000
2014
$’000
-
-
237
237
4,611
4,611
(7,404)
(7,404)
5,157
5,157
(6,435)
(6,435)
Net deferred tax liabilities
(2,793)
(1,278)
35
36
REGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTS
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 on receivables
Balance at the end of the year
Ageing of impaired trade receivables
60 - 90 days
90 - 120 days
120+ days
Total
07 INVENTORIES
Current
Consumable spares at cost
2015
$’000
2014
$’000
4
13
82
388
86
401
283
312
(31)
(8)
-
(23)
(31)
(31)
-
-
-
-
(31)
(31)
(31)
(31)
2015
$’000
2014
$’000
20,170
19,372
Taxable and deductible temporary differences arise from the following:
Opening
balance
$’000
Charged to
income
$’000
Charged to
equity
$’000
Acquisitions /
disposals
$’000
Exchange
differences
$’000
Changes in
tax rate
$’000
Closing
balance
$’000
At 30 June 2015
Gross deferred tax liabilities
Inventories
Other items
Gross deferred tax assets
Employee-related provisions
Provision for doubtful debts
(4,339)
(1,087)
-
-
-
-
(5,426)
(2,096)
118
-
-
-
-
(1,978)
(6,435)
(969)
-
-
-
-
(7,404)
2,482
9
89
-
-
-
-
2,571
-
-
-
-
-
9
Other items
2,666
(635)
-
-
-
-
2,031
5,157
(546)
-
-
-
-
4,611
Net deferred tax
(1,278)
(1,515)
-
-
-
-
(2,793)
At 30 June 2014
Gross deferred tax liabilities
Inventories
Other items
Gross deferred tax assets
(3,969)
(370)
-
-
-
-
(4,339)
(2,263)
167
-
-
-
-
(2,096)
(6,232)
(203)
-
-
-
-
(6,435)
Employee-related provisions
2,631
(149)
-
-
-
-
2,482
Provision for doubtful debts
3
6
-
-
-
-
9
Other items
2,809
(143)
-
-
-
-
2,666
5,443
(286)
-
-
-
-
5,157
Net deferred tax
(789)
(489)
-
-
-
-
(1,278)
Deferred tax assets of $291 thousand (2014: $449 thousand) from tax losses have not been brought to accounts as assets.
06 TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Provision for doubtful debts
Sundry debtors and other debtors
Prepayments
Deposits and other assets
Non-current
Other receivables – at amortised cost
2015
$’000
2014
$’000
7,347
9,515
(31)
(31)
7,316
9,484
2,789
1,521
1,597
6,125
40
156
11,742
17,286
7,966
7,937
7,966
7,937
37
38
REGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTS
08 PROPERTY, PLANT AND EQUIPMENT
At 30 June 2015
Aircraft
Other property, plant and equipment
Rotable assets
Engines
Plant and equipment
Land and buildings
Leasehold improvements
Motor vehicles
Furniture and fittings
Computer equipment
Opening gross
carrying amount
$’000
Additions
$’000
Disposals
$’000
Closing gross
carrying amount
$’000
193,917
2,053
(26)
195,944
56,348
9,570
(2,616)
63,302
8,527
698
(3,703)
5,522
12,804
943
(2,795)
10,952
31,212
198
(1,499)
29,911
1,274
53
-
1,327
2,350
86
-
2,436
1,365
9
(302)
1,072
2,164
302
(339)
2,127
Other property, plant and equipment
116,044
11,859
(11,254)
116,649
Total property, plant and equipment
309,961
13,912
(11,280)
312,593
At 30 June 2014
Aircraft
Other property, plant and equipment
Rotable assets
Engines
Plant and equipment
Land and buildings
Leasehold improvements
Motor vehicles
Furniture and fittings
Computer equipment
144,427
49,490
-
193,917
50,796
5,578
(26)
56,348
8,527
-
-
8,527
8,977
3,860
(33)
12,804
29,822
1,390
-
31,212
1,368
53
(147)
1,274
2,353
-
(3)
2,350
1,335
38
(8)
1,365
2,024
139
1
2,164
Other property, plant and equipment
105,202
11,058
(216)
116,044
Total property, plant and equipment
249,629
60,548
(216)
309,961
At 30 June 2015
Aircraft
Other property, plant and equipment
Rotable assets
Engines
Plant and equipment
Land and buildings
Leasehold improvements
Motor vehicles
Furniture and fittings
Computer equipment
Opening accumulated
depreciation and
impairmen
$’000
Disposals
$’000
Depreciation
charge for the year
$’000
Closing accumulated
depreciation and
impairment
$’000
(59,838)
-
(10,119)
(69,957)
(16,149)
2,578
(2,401)
(15,972)
(3,746)
1,954
(582)
(2,374)
(6,830)
2,804
(1,059)
(5,085)
(3,902)
88
(769)
(4,583)
(1,063)
-
(91)
(1,154)
(1,040)
-
(183)
(1,223)
(1,054)
286
(112)
(880)
(1,799)
339
(211)
(1,671)
Other property, plant and equipment
(35,583)
8,049
(5,408)
(32,942)
Total property, plant and equipment
(95,421)
8,049
(15,527)
(102,899)
At 30 June 2014
Aircraft
Other property, plant and equipment
Rotable assets
Engines
Plant and equipment
Land and buildings
Leasehold improvements
Motor vehicles
Furniture and fittings
Computer equipment
(51,018)
-
(8,820)
(59,838)
(13,231)
7
(2,925)
(16,149)
(3,143)
-
(603)
(3,746)
(6,009)
33
(854)
(6,830)
(3,153)
-
(749)
(3,902)
(1,060)
147
(150)
(1,063)
(857)
3
(186)
(1,040)
(928)
8
(134)
(1,054)
(1,560)
(1)
(238)
(1,799)
Other property, plant and equipment
(29,941)
197
(5,839)
(35,583)
Total property, plant and equipment
(80,959)
197
(14,659)
(95,421)
39
40
REGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTS
At 30 June 2015
Aircraft
Other property, plant and equipment
Rotable assets
Engines
Plant and equipment
Land and buildings
Leasehold improvements
Motor vehicles
Furniture and fittings
Computer equipment
Other property, plant and equipment
Opening net
carrying amount
$’000
Closing net
carrying amount
$’000
134,079
125,987
40,199
4,781
5,974
27,310
211
1,310
311
365
80,461
47,330
3,148
5,867
25,328
173
1,213
192
456
83,707
Total property, plant and equipment
214,540
209,694
At 30 June 2014
Aircraft
Other property, plant and equipment
Rotable assets
Engines
Plant and equipment
Land and buildings
Leasehold improvements
Motor vehicles
Furniture and fittings
Computer equipment
Other property, plant and equipment
93,409
134,079
37,565
5,384
2,968
26,669
308
1,496
407
464
75,261
40,199
4,781
5,974
27,310
211
1,310
311
365
80,461
09 GOODWILL AND OTHER INTANGIBLE ASSETS
At 30 June 2015
Cost
Accumulated amortisation
Net carrying amount
Total goodwill and intangible assets
Reconciliation
At 1 July 2014, net of accumulated amortisation
Additions
Amortisation at 30 June 2015
At 30 June 2015, net of accumulated amortisation
Total goodwill and intangible assets
At 30 June 2014
Cost
Accumulated amortisation
Net carrying amount
Total goodwill and intangible assets
Reconciliation
At 1 July 2013, net of accumulated amortisation
Additions
Impairment
Amortisation at 30 June 2014
At 30 June 2014, net of accumulated amortisation
Total goodwill and intangible assets
Goodwill
$’000
Software and
development costs
$’000
7,133
2,276
-
(1,516)
7,133
760
7,893
7,133
980
-
128
-
(348)
7,133
760
7,893
7,133
2,157
-
(1,177)
7,133
980
8,113
7,190
1,121
-
146
(57)
-
-
(287)
7,133
980
8,113
IMPAIRMENT TESTING OF GOODWILL AND NON-CURRENT ASSETS
Identification of an asset’s Cash Generating Unit (CGU) involves judgment on how management monitors the Group’s operations
and how decisions to acquire and dispose of the Group’s assets and operations are made. During the current year, management
reassessed its CGU and identified the following CGUs for the purposes of assessing the carrying value of the Group’s assets:
Total property, plant and equipment
168,670
214,540
No impairment loss has been recognised over items of property plant and equipment for the year ended 30 June 2015 (2014: nil).
• Regional Express Holdings Limited (REX)
• Pel-Air Aviation Pty Limited (Pel-Air)
• Air Link Pty Limited (Air Link)
Goodwill has been allocated for impairment testing purposes to the individual cash generating units as follows:
Air Link
Pel-Air
2015
$’000
518
6,615
7,133
2014
$’000
518
6,615
7,133
The recoverable amount of the Air Link CGU was fair value less cost to sell. Cost to sell has been estimated at 10% of the fair value
of the aircraft. The fair value of Air Link has been determined based on sales price per industry database and independent valuations
of similar aircraft.
The recoverable amount of the REX and Pel-Air CGUs has been determined based on value-in-use calculations.
41
42
REGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTS
KEY ASSUMPTIONS
The value-in-use valuations of REX and Pel-Air use cash flow projections based on financial budgets approved by the Board covering
a 5 year forecast period, and a terminal value based upon an extrapolation of cash flows beyond the 5 year period using a constant
growth rate which does not exceed the long term inflation rate. The cash flows are based on management’s expectations regarding
the market, fleet plans, including the purchase of aircraft and operating costs. The discount rate applied reflects the weighted average
cost of capital based on the risk-free rate for ten year Australia government bonds adjusted for a risk premium to reflect the risk of
the specific CGU.
The following key assumptions were used in determining the value-in-use:
Key Assumptions
(i) Discount rate
(ii) Revenue growth
(iii) Fuel cost escalation
(iv) Operating cost escalation
REX CGU
12.0%
2.0%
1.0%
2.0%
Pel-Air CGU
12.0%
1.5%
1.0%
2.5%
(i) Post-tax discount rate applied to the cash flow projections.
(ii) Revenue growth based on historical experience and market conditions, fleet plans and competitor behaviour.
(iii) The fuel cost escalation has been set with regard to the prevailing purchase price of fuel to the extent fuel costs cannot be
i recovered from customers.
(iv) Operating cost escalation has been estimated with regard to CPI adjustment for domestic costs and prevailing spot rate for
overseas purchases.
As a result of the impairment testing performed at the CGU level, the Group assessed that the recoverable amount was greater
than carrying amount and no impairment loss on these CGU’s has been recognised in the current year (2014: an impairment of $57
thousand was recognised in respect of the goodwill allocated to the Air Link CGU).
SENSITIVITY ANALYSIS
The Group has performed a sensitivity analysis by considering reasonable changes in key assumptions, including discount rate,
revenue growth, operating cost escalation and fuel cost escalation.
The changes in the following table to assumptions used in the impairment review would, in isolation, lead to the following headroom/
(potential impairment) in the year ended 30 June 2015. In reality, a change in one assumption could be accompanied by a change in
another assumption, which may increase or decrease the net impact of the recoverable amount of the CGU.
Post tax discount rate %
Revenue %
Operating cost %
Fuel %
REX
Pel-Air
Increase/
Decrease by
0.5%
0.5%
0.5%
0.5%
Increase
$’000
(4,417)
10,006
(25,001)
(1,187)
Decrease
$’000
10,131
(4,297)
29,464
6,085
Increase
$’000
(1,620)
6,772
(2,615)
1,294
Decrease
$’000
4,698
(3,913)
5,281
1,456
10 TRADE AND OTHER PAYABLES
Current
Trade payables
Other payables
Total
2015
$’000
13,785
9,342
23,127
2014
$’000
13,146
12,883
26,029
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.
11 UNEARNED REVENUE
Current
Unearned passenger and charter revenue
Unearned training revenue
Total
12 BORROWINGS
Current
Loan facility
Finance leases
Non-current
Loan facility
Finance leases
2015
$’000
17,718
490
18,208
Effective
interest rate %
9.1%
5.1%
9.1%
5.1%
2015
$’000
2,676
6,524
9,200
17,740
8,489
26,229
2014
$’000
18,753
201
18,954
2014
$’000
2,448
6,200
8,648
20,416
15,013
35,429
The loan facility was used by a subsidiary, VAA Pty Ltd, to fund a number of aircraft assets. The loan is repayable over 10 years from
July 2011 to June 2021.
The finance leases were for purchase of 12 Saab aircraft and are repayable over 40 months from April 2014 to July 2017. The aircraft
has been part of the operational fleet and was acquired at their lease end in March 2014.
The liabilities are secured over the assets being funded, the carrying value of which exceeds the outstanding liabilities.
43
44
REGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTS
13 PROVISIONS
Current
Employee benefits
Profit share, bonus, pilot share gift
Annual leave and long service leave
Non-current
Employee benefits
Long service leave
Total employee benefits provisions
Profit share, bonus, pilot share gift
Balance at the beginning of the year
Arising during the year
Utilised
Balance at the end of the year
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
14 ISSUED CAPITAL
Fully paid ordinary shares
Balance at 1 July
Shares issued
Balance at 30 June
2015
$’000
2,786
2,632
5,418
1,115
6,533
2,821
2014
$’000
2,821
4,113
6,934
2,615
9,549
3,112
233
1,831
(268)
2,786
6,728
4,428
(7,409)
3,747
(2,122)
2,821
6,950
6,732
(6,954)
6,728
2015
No. ’000
$’000
No. ’000
$’000
2014
110,155
72,024
110,090
71,959
-
-
65
65
110,155
72,024
110,155
72,024
Share units held as reserved shares by subsidiary company was 1,594,063 (2014: 550,796).
15 RESERVED SHARES AND SHARE-BASED PAYMENTS RESERVE
Reserved share account represents on market purchase of shares by the Group which is eventually granted to executives and
employees as part of their remuneration.
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 and into issued capital when the shares are issued. Rex has established the share gift plan
for its executive directors and eligible employees since FY2006.
The board decided that this plan will be offered to EA groups that opt for the plan, and all non-EA 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.
16 EARNINGS PER SHARE
Basic earnings per share
Basic earnings per share
Diluted earnings per share
Diluted earnings per share
BASIC EARNINGS PER SHARE
2015
Cents per share
2014
Cents per share
6.2
6.2
7.0
7.0
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
2015
$’000
2014
$’000
6,672
7,725
6,672
7,725
2015
No. ‘000
2014
No. ‘000
Weighted average number of ordinary shares for the purpose of basic EPS
108,457
109,946
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
2015
$’000
2014
$’000
6,672
7,725
6,672
7,725
2015
No. ‘000
2014
No. ‘000
Weighted average number of ordinary shares for the purpose of diluted EPS
108,457
109,946
17 DIVIDENDS
In respect of financial year ended 30 June 2015, the Board recommends the deferral of the decision to pay dividends to November
2015, to be announced at the Company’s Annual General Meeting, due to uncertain trading conditions.
Fully franked dividends paid in respect of the past financial years ended 30 June, were:
Adjusted franking account balance
Franking credit / (debit) recognised that will arise from income tax payable/(recoverable) as at
the end of financial year
2015
$’000
2014
$’000
35,048
32,371
(96)
237
45
46
REGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTS
18 COMMITMENTS FOR EXPENDITURE
(A) CAPITAL EXPENDITURE COMMITMENTS
Property, plant and equipment
Later than one year and not later than five years
20 SUBSIDIARIES
2015
$’000
2014
$’000
Name of entity
Parent entity
6,200
-
Regional Express Holdings Limited
6,200
-
The Group has undertaken to construct an office and catering facility next to the Group’s head office on Baxter Road.
(B) FINANCE LEASE LIABILITIES
The Group purchased some aircraft under finance leases. The lease term is 40 months from April 2014 to July 2017. The Group takes
ownership of the aircraft at the end of the lease terms. The Group’s obligations under the finance leases are secured by the lessors’
title to the leased aircraft.
Interest rates are fixed at 5.1% per annum.
The fair value of the finance lease liabilities is approximately equal to their carrying amount.
Minimum lease payments
Present value of minimum lease payments
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
AVIEX Pty Ltd (refer to Note 21)
Country of incorporation
Ownership Interest
2015
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
100
100
100
100
100
100
2014
%
100
100
100
100
100
100
100
-
Not later than one year
Later than one year and not later than five years
Less future finance charges
Present value of minimum lease payments
Included in the consolidated financial statements as (Note 12)
Current borrowings
Non-current borrowings
2015
$’000
7,144
8,771
15,915
(902)
15,013
2014
$’000
7,140
15,919
23,059
(1,846)
21,213
2015
$’000
6,524
8,489
15,013
-
15,013
6,524
8,489
15,013
2014
$’000
6,200
15,013
21,213
-
21,213
6,200
15,013
21,213
19 CONTINGENT LIABILITIES AND CONTINGENT ASSETS
There are no contingent liabilities nor contingent assets as at 30 June 2015 (2014: nil).
Regional Express Holdings Limited is the head entity within the tax-consolidated group. These subsidiary companies are members of
the tax-consolidated group.
21 ACQUISITION OF BUSINESS
The Group acquired AVIEX Pty Ltd (“AVIEX”) on 30 June 2015. AVIEX is in the business of providing licensed aircraft maintenance and
repair.
The purchase consideration was $100 thousand whereas AVIEX’s net assets amounted to $114 thousand as at 30 June 2015. This
resulted in a gain on purchase amounting to $14 thousand, which is included in the consolidated statement of profit or loss and other
comprehensive income.
As AVIEX was acquired on 30 June 2015, there is no post acquisition profit or revenue included in the consolidated statement of
profit or loss and other comprehensive income. The Group’s consolidated statement of financial position includes AVIEX’s assets and
liabilities as at 30 June 2015.
47
48
REGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTS
22 NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
23 FINANCIAL INSTRUMENTS
(A) RECONCILIATION OF CASH AND CASH EQUIVALENTS
(A) CAPITAL RISK MANAGEMENT
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:
Cash and bank balances
2015
$’000
23,360
(B) RECONCILIATION OF PROFIT FOR THE PERIOD TO NET CASH FLOWS FROM OPERATING ACTIVITIES
2014
$’000
21,967
2014
$’000
7,725
14,946
57
11
745
2015
$’000
6,672
15,875
-
-
793
67
(49)
50
19
-
23
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 2014.
The capital structure of the Group consists of debt as disclosed in Note 12. Equity attributable to equity holders of the parent
comprises issued capital, reserves as disclosed in Notes 14, 15 respectively, and retained earnings.
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.
During the financial year 2014, the Group finalised the purchase of 25 latest generation Saab 340Bplus aircraft. These aircraft were
originally operating in the Rex fleet under a lease. The acquisition was partly funded by operating cash flows with the rest from bank
finance leases repayable over 40 months from April 2014 to July 2017.
(849)
(1,115)
The net cash position at the end of the financial year was as follows:
5,515
(798)
-
(3,335)
(6,153)
65
Financial assets
Debt (i)
1,515
489
Cash and cash equivalents
2015
$’000
2014
$’000
(35,429)
(44,077)
23,360
21,967
(333)
(753)
Excess of cash and cash equivalents over debt / (net debt)
(12,069)
(22,110)
(1,820)
2,793
Equity (ii)
194,841
(3,016)
(513)
-
190
Excess cash / (Net debt) to equity ratio
23,671
15,145
(i) Debt is defined as long- and short-term borrowings, as detailed in Note 12.
(ii) Equity includes all capital and reserves of the Group that are managed as capital.
(B) CATEGORIES OF FINANCIAL INSTRUMENTS
-6.2%
2015
$’000
189,101
-11.7%
2014
$’000
18,111
19,098
23,360
21,967
10
10
58,556
70,106
Maximum facilities available and reviewed annually:
Loan facility (fund aircraft purchases)
20,423
20,635
22,864
23,064
2015
Used
$’000
Limit
$’000
2014
Used
$’000
Limit
$’000
15,081
19,733
21,213
22,712
Financial assets
Loans and receivables
Cash and bank balances
200
2,900
-
2,900
Available-for-sale financial assets
-
559
-
1,809
-
1,000
-
1,000
3,442
3,937
2,576
2,687
45
620
362
620
39,191
49,384
47,015
54,792
Financial liabilities
Amortised cost
(C) FINANCIAL RISK MANAGEMENT OBJECTIVES
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.
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 derivative financial instruments, for speculative
purposes. The Treasury function, which co-ordinates the hedging of foreign currency risks, is managed by the Group’s Corporate
Services Department and reports regularly to the Board and Audit and Corporate Governance Committee.
49
50
Profit for the year
Depreciation and amortisation
Goodwill impairment
Loss on disposal of other financial assets
Share-based payment
Unrealised foreign exchange (gain)/loss
Loss on disposal of non-current assets
Movement in bad debt provision
Interest received and receivable
Decrease/(increase) in receivables
Increase in inventories
Increase in issued capital
Increase in deferred tax
Decrease in current tax
Increase/(decrease) in trade payables
Decrease in provisions
Increase in other liabilities
Net cash flows from operating activities
(C) FINANCING FACILITIES
Leases (fund aircraft purchases)
Tape negotiations authority
Letter of credit
Set off
Guarantee
Credit card
REGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTS
(D) FOREIGN CURRENCY RISK MANAGEMENT
LIQUIDITY AND INTEREST RISK TABLES
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
Used
$’000
Limit
$’000
Assets
Used
$’000
Limit
$’000
2,419
3,185
-
-
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 13 million for engine care and maintenance
• USD 4 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.
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.
2015
Non-interest bearing
Interest bearing
2014
Non-interest bearing
Interest bearing
1 month
$’000
1-3 months
$’000
3 months to a year
$’000
1-5 years
$’000
5+ years
$’000
23,127
-
-
-
-
964
1,929
8,679
26,501
4,431
24,091
1,929
8,679
26,501
4,431
26,029
-
-
-
-
964
1,929
8,679
33,645
8,863
26,993
1,929
8,679
33,645
8,863
The interest-bearing liabilities have a weighted average effective interest rate of 9.1% per annum for the 10-year bank loan (FY2012 to
FY2021), and 5.1% per annum for the 40-month bank finance leases (FY2014 to FY2017).
The Group does not hold any other derivative financial instruments at year end.
(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.
24 KEY MANAGEMENT PERSONNEL COMPENSATION
2015
$’000
2014
$’000
The aggregate compensation made to directors and other members of key management personnel of the Group is set out below:
Profit or loss
32
33
The Group’s sensitivity to foreign currency has remained constant.
FORWARD FOREIGN EXCHANGE CONTRACTS
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 12 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 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 22.
Short-term benefits
Post-employment benefits
Other long-term benefits
Share-based payment
2015
$
2014
$
1,539,549
1,595,125
139,726
130,115
22,750
25,522
22,240
24,596
1,727,547
1,772,076
25 RELATED PARTY TRANSACTIONS
(A) EQUITY INTERESTS IN SUBSIDIARIES
Details of interests in subsidiaries are disclosed in Note 20 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 24 to the consolidated financial statements.
(II) LOANS TO KEY MANAGEMENT PERSONNEL
There have been no loans made to key management personnel.
(III) OTHER TRANSACTIONS WITH RELATED PARTIES
During the financial year, the Group sold land and building to a director-related entity, Greatland Development Pty Limited, on
commercial terms.
51
52
REGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTS
(IV) 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
Neville Howell
Key management personnel:
Warrick Lodge
Irwin Tan
Dale Hall
Balance at
1 July 2014
Additions / (Disposals)
during the year
Balance at
30 June 2015
24,236,143
170,716
24,406,859
200,000
-
200,000
11,449,362
-
11,449,362
200,866
-
200,866
176,034
-
176,034
17,971
4,276
22,247
17,423
4,780
22,203
143,529
4,381
147,910
19,313
4,381
23,694
33,513
3,928
37,441
Mayooran Thanabalasingham
71,891
4,381
76,272
Paul David Fisher
Png Yeow Tat
27,286
4,508
31,794
13,967
3,855
17,822
During the financial year, no options were granted to (2014: nil), nor exercised (2014: nil) by key management personnel for ordinary
Rex shares. No options remained unpaid or to be exercised at the year end.
26 REMUNERATION OF AUDITORS
Audit and review of the consolidated financial statements
Other non-audit services - tax compliance
The auditor of the Group is Deloitte Touche Tohmatsu.
27 EVENTS AFTER THE REPORTING PERIOD
2015
$’000
265,000
68,560
333,560
2014
$’000
270,500
74,900
345,400
28 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.
In the current year, management reassess the reporting segments under AASB 8, and concluded that the training segment reported
in prior financial statements should now be included in the regular public transport segment. This is consistent with the basis on
which information is currently presented to and reviewed by the chief operating decision maker of the Group. The Group’s reportable
segments under AASB 8 are therefore as follows:
• Regular public transport
• Charter
Prior period balances have been restated as a result of the change in reportable segment. 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:
Revenue
2015
$’000
221,467
34,750
256,217
2014
$’000
217,264
36,072
253,336
Continuing operations
Regular public transport
Charter
Finance income
Other (loss)/income
Central administration costs and directors’ salaries
Finance costs
Profit before tax
Income tax expense
Consolidated segment revenue and profit
256,217
253,336
Segment result
2015
$’000
16,292
2,012
18,304
849
(1,166)
(6,520)
(2,171)
9,296
(2,624)
6,672
2014
$’000
15,606
2,288
17,894
1,115
339
(6,983)
(1,703)
10,662
(2,937)
7,725
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 and liabilities by reportable operating segment as at the end of the year:
On 6 July 2015, Rex commenced three return flights each weekday from Cairns to Townsville, adding some 60,000 seats on the route
with 34 weekly flights. Rex had begun a modest weekend service between the two destinations on 3 January 2015.
The Group, with strong support from Cobar Management Pty Ltd (CSA), commenced RPT services between Cobar and Dubbo using
Air Link’s Beechcraft 1900D aircraft with connections to Sydney after that on Rex’s regular services. Services commenced on 31
August 2015.
Continuing operations
Regular public transport assets
Charter assets
Total assets
Other segment information for the year is as follows:
Continuing operations
Regular public transport
Charter
53
Assets
2015
$’000
205,064
75,867
280,931
2014
$’000
210,536
78,689
289,225
Liabilities
2015
$’000
45,232
40,858
86,090
Depreciation and amortisation
Additions to non-current assets
2015
$’000
10,063
5,812
15,875
2014
$’000
9,150
5,796
14,946
2015
$’000
13,553
487
14,040
2014
$’000
63,956
36,168
100,124
2014
$’000
58,864
1,830
60,694
54
REGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTS
29 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
2015
$’000
2014
$’000
40,840
36,852
162,561
166,417
203,401
203,269
44,642
43,477
591
2,000
45,233
45,477
72,024
72,024
85,119
84,928
709
524
316
316
158,168
157,792
191
2,839
-
-
191
2,839
30 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 28 August 2015.
(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 (including structured entities)
controlled by the Company and its subsidiaries. Control is achieved when the Company:
• has power over the investee;
• is exposed, or has rights, to variable returns from its involvement with the investee; and
• has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or
more of the three elements of control listed above. When the Company has less than a majority of the voting rights of an investee,
it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the
investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company’s voting
rights in an investee are sufficient to give it power, including:
• the size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;
(C) GUARANTEES ENTERED INTO BY THE PARENT ENTITY IN RELATION TO THE DEBTS OF ITS SUBSIDIARIES
• potential voting rights held by the Company, other vote holders or other parties;
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 29 (A) and (B).
(D) CONTINGENT LIABILITIES OF THE PARENT ENTITY
As at 30 June 2015, no contingent liabilities or assets existed (2014: nil).
(E) COMMITMENTS FOR THE ACQUISITION OF PROPERTY, PLANT AND EQUIPMENT BY THE PARENT ENTITY
As at 30 June 2015, the parent entity has undertaken to construct an office and catering facility next to the Group’s head office on
Baxter Road. Construction commenced in July 2015.
• rights arising from other contractual arrangements; and any additional facts and circumstances that indicate that the
Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be
made, including voting patterns at previous shareholders’ meetings.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses
control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in
the consolidated statement of profit or loss and other comprehensive income from the date the Company gains control until the date
when the Company ceases to control the subsidiary. Profit or loss and each component of other comprehensive income are attributed
to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the
owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the
Group’s accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions
between members of the Group are eliminated in full on consolidation.
Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries 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 difference 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, a gain or loss is recognised in profit or loss and 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. All amounts previously
recognised in other comprehensive income in relation to that subsidiary are accounted for as if the Group had directly disposed of the
related assets or liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity as specified/
permitted by applicable AASBs). 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, when applicable, the cost on initial
recognition of an investment in an associate or a joint venture.
55
56
REGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTS
(D) REVENUE
HEDGE ACCOUNTING
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, charter 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.
(F) CASH AND CASH EQUIVALENTS
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 23 contains details of the fair values of the USD contracts used for hedging purposes. Movements in the hedging reserve in
equity if any, are detailed in Note 15.
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.
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.
(I) EMPLOYEE BENEFITS
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 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 23).
(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 23 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.
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.
(J) FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual provisions of the
instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition
or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are
added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised
immediately in profit or loss.
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’.
57
58
REGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTS FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
(K) FINANCIAL LIABILITIES AND EQUITY INSTRUMENTS CLASSIFICATION OF DEBT OR EQUITY
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;
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.
(ii) is a part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of
short- term profit-taking; or
FINANCIAL LIABILITIES
(iii) is a derivative that is not designated and effective as a hedging instrument.
Financial liabilities are classified as either financial liabilities ‘at fair value through profit or loss’ or other financial liabilities.
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 23.
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 23. 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
When an available for sale asset is considered to be impaired, cumulative gains/losses previously recognised in other comprehensive
income are reclassified to profit or loss in the period.
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.
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.
DERECOGNITION OF FINANCIAL ASSETS
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the
financial asset and substantially all the risks and rewards of ownership of the asset to another party. If the Group neither transfers nor
retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its
retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks
and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a
collateralised borrowing for the proceeds received.
On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration
received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated
in equity is recognised in profit or loss.
On derecognition of a financial asset other than in its entirety (e.g. when the Group retains an option to repurchase part of a transferred
asset), the Group allocates the previous carrying amount of the financial asset between the part it continues to recognise under
continuing involvement, and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the
transfer. The difference between the carrying amount allocated to the part that is no longer
recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to
it that had been recognised in other comprehensive income is recognised in profit or loss. A cumulative gain or loss that had been
recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer
recognised on the basis of the relative fair values of those parts.
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 23.
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.
59
60
REGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTS 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
(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.
Income tax expense represents the sum of the tax currently payable and deferred tax.
GROUP AS LESSEE
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.
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.
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
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 30E. 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
Engines
Furniture & Fittings
15,000 to 60,000 hours
20 to 30 years
4 to 5 years
10 to 20 years
8 to 10 years
Leasehold Improvements
over the unexpired lease period
Motor Vehicles
Plant & Equipment
Rotable Assets
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.
(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).
61
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REGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTS
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.
DIRECTORS’ DECLARATION
The directors declare that:
(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 15.
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.
(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
(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 30
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 29 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.
ii. for receivables and payables which are recognised inclusive of GST.
On behalf of the Directors
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 investing and
financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows.
Neville Howell
Chief Operating Officer
Sydney, 28 August 2015
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REGIONAL EXPRESS HOLDINGS LIMITEDFINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
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
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 statement of financial position as at 30 June 2015, the statement of profit or loss and
other 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 accounting 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 64.
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 30, 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
-66-
66
REGULATORY REPORTS
PART III Regulatory Reports
Independent Auditor’s Report
Corporate Governance Statement
ASX Additional Information
65 - 71
66 - 67
68 - 73
75
REGULATORY REPORTS
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 2015 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 those of the Management Committee
to achieve the objectives of delivering shareholder value. The Board regularly reviews the division of functions between the Board
and management to ensure that it continues to be appropriate to the needs of the company (ASX Recommendation 1.1). The
Remuneration and Nomination Committee undertake appropriate checks before appointing a person, or putting forward to security
holders a candidate for election, as a director. The biography of each director standing for election or re-election is expressly mentioned
in the Notice of Meeting of the company’s AGM (ASX Recommendation 1.2). The Directors and Management Committee have a clear
understanding of their roles and responsibilities and of the company’s expectations of them as set out in their employment contracts
(ASX Recommendation 1.3). The Company Secretaries are integral in advising the Board and its committees on governance matters,
ensuring that board and committee policy and procedures and followed, and helping to organise and minuting discussions of board
and committee meetings (ASX Recommendation 1.4).
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. The performance of the Management Committee was reviewed in
financial year 2015 (ASX Recommendation 1.6).
The Board’s Charter, Board Committee Charters, Share Trading Policy, 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 3.5).
PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE
The Remuneration and Nomination Committee has been established by the Board of the Company (ASX recommendation 2.1) 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;
• it reviews and advises the Board on the composition of the Board and its Committees;
• it reviews the performance of the Board, the chairman of the Board, the executive and non-executive directors, and other
individual members of the Board; and
• 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 three members. The Committee is currently made up of two independent 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 Remuneration and Nomination Committee has a formal charter which is available on the Company’s website.
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 Director’s Report.
67
68
REGIONAL EXPRESS HOLDINGS LIMITEDREGULATORY REPORTS Below is the Rex Board skills matrix outlining the skills that the board currently has (ASX Recommendation 2.2):
The Board is responsible for the management of the affairs of the Company and its subsidiaries (the Group), including:
LIM
KIM HAI
JOHN
SHARP
LEE
THIAN
SOO
RONALD
BARTSCH
JAMES
DAVIS
CHRIS
HINE
NEVILLE
HOWELL
GARRY
FILMER*
BUSINESS / ENTREPRENEURIAL
EXPERIENCE
POLITICAL EXPERIENCE
CORPORATE GOVERNANCE
SAFETY AND RISK
MANAGEMENT
FINANCE
LEGAL
REGULATORY KNOWLEDGE
AND EXPERIENCE
INDUSTRY EXPERIENCE
PILOT
*Alternate Director to Chris Hine
ENGINEERING KNOWLEDGE
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
The membership of the Board during the year ended 30 June 2015, including independence status was as follows (ASX
Recommendation 2.3):
Director
Lim Kim Hai
Status
Executive Chairman
The Hon. John Sharp
Deputy Chairman and Independent Director
Lee Thian Soo
Non-Executive 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, 23
November 2011 and 27 November 2013.
Appointed 27 June 2003 and re-appointed 16 November 2006, 25
November 2009 and 27 November 2012.
Neville Howell
Chief Operating Officer
Appointed 1 July 2014 and re-appointed 26 November 2014.
Chris Hine
Executive Director &
Group Flight Operations Advisor
James Davis
Independent Director
Ronald Bartsch
Independent Director
Appointed 1 March 2011 and re-appointed 23 November 2011 as
Executive Director. Appointed 26 November 2014 as Non-Executive
Director. Appointed 18 May 2015 as Executive Director and Group
Flight Operations Advisor.
Appointed 26 August 2004 as Executive Director and re-appointed 23
November 2011 and 26 November 2014 as Independent Director.
Appointed 23 November 2010 and re-appointed 23 November 2011
and 26 November 2014.
Garry Filmer
Alternate Director to Chris Hine
Appointed 1 March 2012 and re-appointed 27 November 2012.
The Board acknowledges the ASX Recommendation that a majority of the Board should be independent directors (ASX Recommendation
2.4). Although the Board has only three directors out of eight (including alternate director Garry Filmer) 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 2.5). 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. The Board acknowledges that if the Chair is not an independent director, the Deputy Chairman should be an
independent director, which is the case.
(A) Strategic and Financial Performance
• Developing and approving the corporate strategy.
• Evaluating, approving and monitoring the strategic and financial plans and objectives of the Group.
• Evaluating, approving and monitoring the annual budgets and business plans.
• 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.
• Approving and monitoring the Group’s risk framework, including (but not limited to) systems of risk management and internal
control.
• Approving and, with the assistance and advice of the Risk Management Committee, monitoring compliance with the Group’s
risk.
The Charters of both committees are available on the Company’s website.
69
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REGIONAL EXPRESS HOLDINGS LIMITEDREGULATORY REPORTS (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.
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 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.
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 4.1).
• 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 Board believes that its members have the appropriate skill set and knowledge to effectively perform their roles as directors without
requiring further professional development. Our board members have a vast wealth of experience in the aviation industry and beyond
as a majority of them have aircraft pilot qualifications.
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 (ASX Recommendation 1.3). 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 1.5).
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 31.6%. There were thirteen women
holding management 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 (2014-2015) 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.
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 4.1).
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 4.2).
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.
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 (ASX
Recommendation 4.3).
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 Recommendation 5.1). 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
(ASX Recommendation 6.3). 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 Board acknowledges the ASX recommendation of facilitating effective two-way communication with investors. Shareholders are
able to contact the company through the company secretaries.
The Company acknowledges that some security holders prefer the speed, convenience and environmental friendliness of electronic
communications over more traditional methods of communication. To this end the company provides its security holders with the option
of receiving either a hard or soft copy of its annual report and notice of meeting for its Annual General Meeting (ASX Recommendation
6.4).
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.
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REGIONAL EXPRESS HOLDINGS LIMITEDREGULATORY REPORTS The Board acknowledges the ASX recommendation to have the Committee composed of a majority of independent directors and
chaired by an independent director and have at least three members (ASX Recommendation 7.1).
The Committee is currently made up of two independent directors. The Board feels that the directors in the Safety and Risk Management
Committee will make decisions that are in the best interests of the shareholders in their duties as Safety and Risk Management
Committee members and directors of the company. The Board also feels at this stage that two members are sufficient for the Safety
and Risk Management Committee given the size of the company and Board.
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).
Being an airline, Rex is required by the Civil Aviation Safety Authority to have a safety and compliance department. Staffed by
approximately 14 full time equivalent employees, this department conducts internal audits of all Rex’s operations including flight
operations, engineering and airport operations. The head of this department, the GM Human Factors, has a direct reporting line to the
Board and Chairman (ASX Recommendation 7.3).
The Company has outlined its main material risk sources that could adversely affect the entity’s prospects for future financial years and
has explained how these risks are managed in the Directors’ Report (ASX Recommendations 7.1 and 7.4).
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
Recommendation 8.2 and 8.3).
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74
REGIONAL EXPRESS HOLDINGS LIMITEDREGULATORY REPORTS ASX ADDITIONAL INFORMATION AS AT 15 SEPTEMBER 2015
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
110,154,375 fully paid ordinary shares are held by 2,340 individual shareholders.
All issued ordinary shares carry one vote per share and carry the rights to dividends.
Distribution of holders of equity securities
Fully Paid Ordinary Shares
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
Investors
731
1,107
220
216
58
2,332
371
Securities
402,042
3,016,797
1,751,897
6,536,296
98,447,343
110,154,375
93,309
Fully Paid
Number
18,898,346
16,234,094
7,722,181
7,454,362
7,454,362
5,755,513
Twenty largest holders of quoted equity securities
Fully Paid
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
LAY KHIM NG
CITICORP NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
ANACACIA PTY LTD
STRATEGIC VALUE PTY LTD
REX INVESTMENT HOLDINGS PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA)
LIMITED-GSCO ECA
MR MICHAEL KARL KORBER
MASTAR PTY LIMITED
PACIFIC CUSTODIANS PTY LIMITED
SCJ PTY LTD
MR THIAN SONG TJOA
BRAZIL FARMING PTY LTD
ROPER CRESCENT INVESTMENTS PTY LTD
ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD
75
Number
18,898,346
16,234,094
7,722,181
7,454,362
7,454,362
5,755,513
3,727,181
3,036,567
2,998,934
2,273,255
2,259,573
1,687,961
1,364,308
919,343
900,000
869,888
800,000
800,000
700,000
697,774
633,681
Issued Capital (%)
0.36
2.74
1.59
5.93
89.37
100.00
0.09
Percentage
17.16
14.74
7.01
6.77
6.77
5.22
Percentage
17.16
14.74
7.01
6.77
6.77
5.22
3.38
2.76
2.72
2.06
2.05
1.53
1.24
0.83
0.82
0.79
0.73
0.73
0.64
0.63
0.61
REGIONAL EXPRESS HOLDINGS LIMITED